-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, L6IkE+aFmYPkxU7GxDzA/mOPrBD4zmadeFyOVJnAmzMM/f/+dxyrk4VmhRd1PLyw VGE5+TVGioekr50X5BL7Zw== 0000950168-95-000294.txt : 19950414 0000950168-95-000294.hdr.sgml : 19950414 ACCESSION NUMBER: 0000950168-95-000294 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950411 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBA WALDENSIAN INC CENTRAL INDEX KEY: 0000003292 STANDARD INDUSTRIAL CLASSIFICATION: KNITTING MILLS [2250] IRS NUMBER: 560359780 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06150 FILM NUMBER: 95528210 BUSINESS ADDRESS: STREET 1: 201 ST GERMAIN AVE SW STREET 2: P O BOX 100 CITY: VALDESE STATE: NC ZIP: 28690 BUSINESS PHONE: 7048742191 MAIL ADDRESS: STREET 1: P O BOX 100 CITY: VALDESE STATE: NC ZIP: 28690 10-K 1 ALBA-WALDENSIAN 10-K #80782 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ____________________________ FORM 10-K {x} ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 {TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from..................... to ......................... Commission file number 1-6150 ALBA-WALDENSIAN, INC. (Exact name of registrant as specified in its charter) DELAWARE 56-0359780 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 201 St. Germain Avenue, S.W. P.O. Box 100 Valdese, North Carolina 28690 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 704-874-2191 Securities registered pursuant to Section 12 (b) of the Act: COMMON STOCK ($2.50 PAR VALUE) AMERICAN STOCK EXCHANGE ( Title of class) (Name of exchange on which registered) Securities registered pursuant to Section to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((Section Mark).229.405 of this chapter) 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. { } State the aggregate market value of the voting stock held by the non-affiliates of the registrant: Approximately $9,701,719 as of February 27, 1995. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 1,863,153 shares of Common Stock ($2.50 par value) as of February 27, 1995. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's Annual Report for the fiscal year ended December 31, 1994 are incorporated by reference into Parts I and II. Portions of the Company's Proxy Statement for the 1994 Annual Meeting of Stockholders are incorporated by reference into Parts I and III. Page 1 of 27 pages (including exhibits) The Exhibit Index is located on page 24. PART I Item 1. Business. General Development of Business Alba-Waldensian, Inc., (the "Company" manufactures a variety of knitted apparel and health care products in four plants in Valdese, North Carolina and markets the products through four divisions, the Consumer Products Division, the Health Products Division, the Alba Direct Division and the Byford Apparel Division. In 1992 the Company purchased the inventory and the rights to the name in the US for Byford apparel. The Company imports high quality socks and sweaters from various locations overseas and markets them under the Byford name to specialty and better department stores. Also in 1992, the Company began to search for a suitable acquisition for its Health Products Division and on November 30, 1994 acquired the Pulsitate Anti-Embolism Systems (P. A. S.(Register Mark)) business from Baxter Healthcare Corporation. The purchase consisted mainly of inventory and the rights to the P. A. S. (Register Mark) name. The Company has been involved for many years as a supplier of an Anti-Embolism Compression Stocking which is a component of the P.A.S.(Register Mark) product. In February of 1994 the Company created AWI Retail, Inc., to market products directly to the consumer through retail outlet stores. AWI Retail Inc., is a wholly owned subsidiary of the Company and is part of the Alba Direct Division. AWI opened its first outlet store in November 1994 in Branson, Missouri. As discussed in more detail below, from 1990 through 1992 the Company consolidated and restructured certain of its operations and has greatly reduced or eliminated certain products and product lines. During 1991, the Company stopped the manufacture of men's socks. Also, during 1990 the Company completed the removal of certain unprofitable product lines, including tights and men's 2 underwear. As a result of these moves, two production facilities were closed and remaining operations were combined into the existing plants. One of the closed facilities (the Waldensian plant) was sold in March 1992 and the other facility (the Pauline plant) was sold in 1990. In 1993, the Company developed a process to knit a seamless bra which was introduced to the market in 1994. This same process will be used to manufacture tank tops and body suits which will be introduced in 1995. The Company also plans to introduce a control version of these garments in the second half of 1995. Financial Information About Industry Segments The Company is in a single line of business: the manufacturing, processing, importing and selling of knitted products, which consists of several classes. Accordingly, no segment information is presented. Principal Products The principal products of the Company's four Divisions are described below. For additional discussion of the current status of each Division and its products, please see the Company's 1994 Annual Report to Shareholders, which contains information expressly incorporated herein by reference. Consumer Products Division Products manufactured and sold by this Division include women's intimate apparel and women's hosiery products. Intimate apparel includes stretch bikinis, briefs and bodywear, as well as specially 3 designed briefs for maternity wear. Women's hosiery products include sheer stockings, pantyhose, and trouser socks, primarily for large-size women and the maternity market. The Company has developed a process which makes it possible to knit bras, tank tops and body suits in seamless knitting equipment. This design technology, which has a patent pending, has allowed the company to significantly broaden its product offerings. The seamless knit bra was introduced in 1994 and the tank tops and body suits will be introduced in 1995. The Company uses state of the art computer-controlled circular-knitting technology. In addition, a significant portion of the Company's consumer products, including its women's intimate apparel, are produced on fine gauge full-fashion knitting equipment. Such equipment produces apparel that management believes is better fitting and therefore more comfortable. Management believes that, due to the limited availability of such equipment, few companies have the ability to produce a significant volume of these full-fashioned products. The Company did not renew for 1995 the license acquired from Kayser-Roth Corporation in 1990 for No-Nonsense (Register Mark), or the license acquired from Leslie Fay Company in 1992 for the Leslie Fay (Register Mark) name, both used in connection with women's hosiery products. Management's decision to terminate both license agreements was based on the fact that the licenses no longer provided value for the Company and that both agreements had a high minimum royalty payment. Instead, the Company plans to put renewed emphasis on placing its All Day Long (Register Mark) brand in department stores. 4 Health Products Division Products manufactured and sold by this division are designed to assist in healthcare. They include anti-embolism stockings and pulsitate anti-embolism systems, an intermittent pneumatic compression device, both of which are designed to improve circulation and reduce the incidence of deep vein thrombosis; sterile wound dressings such as pre-saturated gauze, petrolatum and xeroform gauze, non-adhering dressings and gauze strips and XX-Span(Register Mark) dressing retainers, an extensible net tubing designed to hold dressings in place without the use of adhesive tape. All dressing products are used in wound care therapy, particularly for the treatment of burns. In addition, this division manufactures knitted stockinette in a variety of sizes which is used under fracture casts or sterile packaged for use as a supplemental drape in surgical procedures. Heel and elbow pads are XX-Span(Register Mark) sleeves with an inner soft foam pad used to reduce pressure and the incidence of decubitus ulcers. Other products include slip-resistant patient treads, which are knitted, soft patient footwear with slip resistant soles to help prevent patient falls while keeping feet warm even while in bed; knitted arm sleeves, which provide protection to the skin of patients with poor circulation; blood filter sleeves which are a component used in blood filtering systems manufactured by others; and mesh panties, inexpensive stretch pants used to hold maternity pads or incontinent pads in place. Byford Apparel Division The Byford division imports and markets a broad range of quality men's hosiery and sweaters. For the most part, Byford's socks are imported from the Byford mill in Leicester, England and supplemented 5 with domestic sources. Sourcing for Byford sweaters is more broadly based, with products coming from Coats Viyella mills in the UK, mills in the Far East, and domestic sweater producers. The men's hosiery incorporates fully reciprocated and reinforced heels and toes. Alba Direct Division Alba Direct distributes products from the Consumer Products Division, Byford Apparel Division, and Health Products Division to the independent specialty retail class of trade via telemarketing. Alba Direct has developed export customers in Japan and Turkey and is the primary group responsible for developing the Company's Consumer export business. In February of 1994, the Company created AWI Retail, Inc. to market products directly to the consumer through one of the fastest growing channels of distribution, the retail outlet store. AWI Retail, Inc. is a wholly owned subsidiary of the Company and operates as part of the Alba Direct Division. AWI opened its first outlet store in November of 1994 in Branson, Missouri and will sell products from the Company's Consumer Products and Byford Apparel Divisions. Methods of Distribution The Consumer Products Division markets its products directly to chain store organizations, which sell them under their own labels, and to several companies that market nationally advertised brands. The Company's products are sold throughout the United States through salaried and commissioned salesmen. Byford products are marketed primarily through men's specialty stores, both chains and independents. 6 Products of the Health Products Division for use in hospitals are marketed to major distributors by the Company's sales representatives. These products are sold both under private label and under the company's own Life Span(Register Mark) Label. Alba Direct distributes branded Consumer Products and Health Products to the independent retail trade through telemarketing. Sales offices are located in Valdese, N.C. and in New York. Total expenses for marketing and selling of all products from the Company's continuing operations was 10.0% of sales in 1994, compared to 12.0% in 1993. The decrease from 1993 was mainly due to better cost control and the absence of incurred costs associated with a repackaging project and expenses related to the Leslie Fay(Register Mark) line. (See Management's Discussion and Analysis of Financial Conditions and Results of Operations in the Company's 1994 Annual Report to Shareholders, which is incorporated herein by reference.) Manufacturing From the 1920's to the 1940's, women's silk stockings were knitted to the shape of the leg on fine gauge full-fashion machines and were seamed up the back (because silk is an inelastic yarn). The introduction of stretch nylon yarn in the early 1950's made it feasible to knit seamless stockings and, later, pantyhose on tubular knitting machines. When this occurred, the industry considered fine gauge full-fashion knitting equipment obsolete and production of this equipment here and in Europe ceased. Much existing equipment was destroyed and none has been manufactured since. However, in the mid-1950's, the Company developed a technique for producing stretch, one-size fits all panty products for women on this full- fashion knitting equipment. After some years of marketing development, the stretch panty product became quite successful, and, subsequently, the Company began using the same equipment to produce children's leotards and tights, and, later, men's underwear. During 1989 and 1990, men's underwear, children's leotards and tights were discontinued. Today the Company manufactures 7 regular, plus-size and maternity panties on the full fashion knitting machines. In past years, the Company sought and acquired a significant number of fine gauge full-fashion knitting machines and also developed a substantial supply of spare parts. As a result, management believes that the Company now owns more fine gauge full-fashion knitting machines than any other manufacturer. Company technicians have developed the capability of rebuilding and refurbishing the equipment to meet new equipment efficiency and quality standards. The Company, through its training programs, has developed a corps of professional mechanics and knitters to continue efficient operation of these machines. The Company's present complement of full fashion knitting equipment is more than sufficient to produce the volume of its present full fashion sales, and it can produce or has produced any machine parts required for continuing operation of these machines. The balance of the company's products are manufactured on equipment generally available to the industry (even though some equipment is modified by the Company). The Company anticipates that capital expenditures for 1995 will be approximately $2,300,000 for the renovation of existing plant for replacement of older equipment and for the purchase of new knitting equipment to increase capacities. Financial Information About Classes of Similar Products The Company is in a single line of business: manufacturing, processing and selling knitted products, consisting of several classes. The table below illustrates sales as a percentage of net dollar volume from continuing operations for each product class for each of the Company's last five years: 1994 1993 1992 1991 1990 Women's Intimate Apparel 40.2% 37.4% 43.8% 48.6% 44.3% Men's Wear 4.3 5.5 0.0 0.0 0.0 Women's Hosiery Products 17.4 19.2 19.1 15.7 19.0 Men's Hosiery 7.9 7.3 1.0 1.2 9.7 Health Products 30.2 30.6 36.1 34.5 27.0 100.0% 100.0% 100.0% 100.0% 100.0% 8 (Bullet) Women's intimate apparel consists of regular size bras, briefs and bodywear as well as maternity and plus size briefs. (Bullet) Mens wear consists of Byford Sweaters. (Bullet) Women's hosiery products consist of regular maternity and plus-size panty hose, as well as trouser socks and thigh high hose. (Bullet) Men's hosiery consist of Byford socks and consumer products Toesies (Service Mark). (Bullet) Health products consist of stockinettes, treads, arm sleeves, mesh panties, anti-embolism stockings, P.A.S. (Service Mark) sterile wound dressings, heel pads and elbow pads. Discontinued products are eliminated for the purpose of this table. The remaining sales percentages of each class were restated after this elimination to represent sales of each class as a percentage of net dollar volume from continuing product lines. New Products or Segments The Company maintains an active research and development department that continually evaluates new products and process. Management also evaluates new products, business opportunities, and acquisitions on an on-going basis and could encounter an opportunity which would require substantial investment in the future. Such investments occurred in 1994 with the acquisition of the pulsitate anti-embolism business from Baxter Healthcare Corporation and in 1995 with the acquisition of the Balfour Health Products Division from Kayser-Roth Corporation. (See "Management 's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1994 Annual Report to Shareholders). 9 Sources and Availability of Raw Materials The principal raw materials used by the Company in its manufacturing processes include various types of yarn, chemicals for dyeing and finishing and for impregnating medical products and packaging materials for all products. The Company acquires these materials from a number of sources and is not dependent on any one source for a significant amount of its raw materials. The Company anticipates no material change in either the availability or the cost of its raw materials. Patents and Licenses The only material patents held by the Company are (1) for pantyhose with a terry crotch insert, which expired in 1992; (2) for a device used to warm wet dressings; and (3) for a process covering the manufacture of dressings. The latter two patents expire in 2002. The Company or its subsidiary, Pilot Research Corporation, holds numerous other patents that, because of obsolescence or other reasons, are not material to the Company's current operations. The Company licensed the No-Nonsense(Register Mark) Trademark in 1990 for an initial term of 3 years and seven months with renewal options after the expiration date. The Company also licensed the Leslie Fay(Register Mark) trademark in 1992 for an initial term of three years. Management decided to terminate both license agreements at the end of 1994. Management's decision was based on the fact that these licenses no longer provided value for the Company and that the agreements carried a high minimum royalty payment. 10 Seasonality Sales tend to be fairly even throughout the year. For a tabular presentation of unaudited summary financial information on a quarterly basis, see the Company's 1994 Annual Report to Shareholders, which information is incorporated herein by reference. Working Capital Differences resulting from seasonal fluctuations have not been sufficient to materially affect the Company's working capital requirements. The Company sells merchandise on consignment only on a limited basis. Returns are permitted when the quality of merchandise sold is below acceptable standards or when an error in completing an order occurs. The number and amounts of returns during fiscal 1994 did not have a material effect on working capital of the Company. Due to the various approaches to manufacturing and distribution used by the industry, the Company is not aware of any industry-wide norms relating to sale and delivery requirements. In Novemver 1994, working capital was adversely affected by the purchase of inventory related to the pulsitate anti-embolism system from Baxter Healthcare Corporation. This purchase was financed through short-term borrowings under a line of credit which management intends to convert to a long term note in 1995 with an amortization of 5 years. Significant Customers Baxter Healthcare Corporation is the only customer that represents ten percent or greater of the Company's sales volume for the years ended in 1994, 1993 and 1992. 11 1994 1993 1992 Baxter Healthcare Corporation $12,902,722 $13,610,937 $11,074,280 Percentage of sales 22.8% 26.8% 27.3% While the loss of Baxter Healthcare Corporation would have a material adverse effect on the business of the Company, management believes that, because of the number of departments within this company to which it sells, the likelihood of a material amount of sales loss is reduced. Government Contracts The Company did not have any business in 1994 subject to renegotiation of profits or termination of contracts at the election of the government. Backlog The Company's backlog of firm orders at December 31, 1994 and 1993 was $2,173,893 and $2,526,727. A majority of the Company's orders are for delivery within 30 to 60 days. The backlog figures, therefore, are not normally indicative of orders for the remainder of the year. Competition In addition to meeting the demands of the normal hosiery and intimate apparel markets, the Company specializes in producing garments for the hard-to-fit woman. Consumer products are sold on a 12 private label basis through the nation's retail chains and national brands. Health care products for use in hospitals are marketed under private label to major distributors, supported by commissioned sales representatives. In addition, health care products for use in the home have been introduced under private label and under the Company's own Life Span(Register Mark) label. Byford products are primarily marketed under the Byford name. The Company encounters substantial competition in the sale of its products from numerous competitors, a few of which are known to have larger sales and capital resources than the Company. Management is unable to estimate the number of the Company's competitors or its relative position among them. Management believes that the principal methods of competition in the markets in which the Company competes include price, delivery, performance, service and the ability to bring to the market innovative products. Management believes that the Company is competitive with respect to these factors but is unable to identify specific positive and negative aspects of the Company's business pertaining to such factors. (See also" Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1994 Annual Report to Shareholders). Research and Development The Company estimates that in 1994 it spent $376,008 in company-sponsored research and development projects through the Company's Research and Development Department and its wholly owned subsidiary, Pilot Research Corporation. This compares to $340,663 in 1993 and $186,542 in 1992. The Company did not participate in 1994, 1993 or 1992 in any material customer sponsored research activities relating to the development or the improvement of existing products, services or techniques. 13 Environmental Regulations In the opinion of management, the Company and its subsidiaries are in substantial compliance with present federal, state and local regulations regarding the discharge of materials into the environment. Capital expenditures required to be made in order to achieve such compliance have had no material effect upon the earnings or competitive position of the Company or its subsidiaries. Management believes that continued compliance will require no material expenditures. Government Regulation The Company is subject to various regulations relating to the maintenance of safe working conditions and manufacturing practices. In addition, certain of the products manufactured by the Health Products Division are subject to the requirements of the Food and Drug Administration with respect to environmentally controlled facilities. Management believes that it is currently in compliance with all such regulations. Employees The Company had 847 employees as of December 31, 1994. Item 2. Properties. The Company's principal physical properties are listed below: 14 Approximate Square Name Location Footage Use Alba Valdese, NC 157,000 Knitting, Yarn Processing & Finishing Knitting Valdese, NC 18,000 Knitting (intimate apparel) John Louis Valdese, NC 178,300 Finishing Pineburr Valdese, NC 81,000 Knitting (hosiery & health care products) Mainstreet Valdese, NC 69,000 Finishing Office Valdese, NC 52,000 Corporate headquarters Offices New York City 2,488 Sales Offices AWI Retail Branson, MO 1,760 Retail Store All plants are of brick and steel construction, and most areas have been air conditioned. All have been maintained in working condition. The Company leases its New York City office and its Branson, MO retail store. The rest of the Company's physical properties are held in fee simple, subject to encumbrances that are described in Note 4 of Notes to Consolidated Financial Statements in the Company's 1994 Annual Report to Shareholders, which information is incorporated herein by reference. 15 Item 3. Legal Proceedings. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or which any of its properties is subject. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. The information called for by this item appears beneath the heading "Stock Prices and Dividend Information" in the Company's 1994 Annual Report to Shareholders, which information is incorporated herein by reference. The Company's $2.50 par value Common Stock is registered and traded on the American Stock Exchange under the symbol "AWS". The Board of Directors has no formal policy with respect to the payment of dividends and no such dividends have been declared or paid during the past three fiscal years. 16 Item 6. Selected Financial Data. The information called for by this item appears beneath the heading "Five-Year Selected Financial Data" in the Company's 1994 Annual Report to Shareholders , which information is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Conditions and Operations The information called for by this item appears beneath the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 1994 Annual Report to Shareholders, which information is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The information called for by this item appears in the Company's 1994 Annual Report to Shareholders, which information is incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. 17 PART III Item 10. Directors and Executive Officers of the Registrant. The information regarding Directors called for by this item appears beneath the heading "Information about Directors and Nominees for Director" in the Company's Proxy Statement for the 1995 Annual Meeting of Shareholders, which information is incorporated herein by reference. Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the Company's fiscal year end. Executive Officers The following table sets forth certain information about the Company's executive officers: Name Position with "the Company" Thomas F. Schuster 52 President and Chief Executive Officer Donald R. Denne 57 Senior Vice President and President of the Health Products Division Thomas I. Nail 47 Treasurer, Secretary and Chief Financial Officer Robert F. Fumento 48 Vice President and President of the Consumer Products Division James Douglas Dickson 38 Assistant Secretary Warren R. Nesbit 42 Vice President Charles D. Poteat 51 Vice President The following paragraphs set forth information concerning each executive officer's business experience: 18 Mr. Thomas F. Schuster has been President and Chief Executive Officer of the Company since August, 1992 and served as Executive Vice President and Chief Operating Officer from February, 1992 to August 1992. Prior to joining the Company, he was an Independent Consultant from 1989 until 1992, President of US Operations for a division of Coats Viyella (British Corporation) from 1987 through 1989, and President and CEO of The Great American Knitting Mills Division of Cluett Peabody, 1983 - 1986. Prior to this Mr. Schuster held an equity position with Hartmann Luggage Company, and progressively more responsible marketing positions with various large organizations. Mr. Schuster holds a B. A. degree from Tufts University and an M.B.A. from Harvard Business School. Mr. Donald R. Denne joined the Company in 1987 as a Corporate Vice President and President of the Health Products Division. Prior to joining the Company, Mr. Denne served as Vice President of Marketing for General Medical Corporation, Vice President of Health Products for Work Wear Corporation, and Vice President for Business Planning for American Hospital Supply. Mr. Thomas I. Nail joined the Company as Chief Financial Officer in March of 1994. He was elected as Secretary and Treasurer of the Corporation in May of 1994. Prior to joining the Company, Mr. Nail served as Vice President of Finance and as a member of the Board of Directors of Burke Mills, Inc. for approximately six years. Mr. Nail served as Controller of Intercomp Wire and Cable, a subsidiary of Insilco, Inc. from 1985 to 1987. Mr. Nail has a degree in Business from Auburn University. Mr. Robert F. Fumento was elected Vice President of the Company and President of the Consumer Division in August , 1992. Prior to joining the Company, Mr. Fumento served as President of No-Nonsense Division of Exquisite Form. From 1984 until 1989, Mr. Fumento served as Vice President, General Manager for the Apparel Division of Totes, Inc. Prior to this he served in various marketing and sales management positions following the receipt of his B.B.A. from Villanova University in 1968. Mr. James Douglas Dickson joined the Company in 1994 as Corporate Controller. He was elected Assistant Secretary on December 15, 1994. Prior to joining the Company, Mr. Dickson served as Controller of Hickorycraft, Inc., a division of Masco Corporation from 1987 to 1994 and as Division Controller of Sealed Air Corporation from 1982 to 1987. Mr. Dickson holds a B.B.A. from the University of Georgia and is a Certified Management Accountant. Mr. Warren Nesbit joined the Company in December, 1985 as Director of Human Resources. He was named Vice President of Human Resources in 1990 and elected to serve as a Corporate Vice President in 1993. Mr. Nesbit served as Vice President of Industrial Relations with Marion Manufacturing, in Marion, North Carolina prior to joining the Company. He held various Manufacturing and human resource responsibilities with Burlington Industries from 1978 to 1984. Mr. Nesbit is a graduate of the University of North Carolina. Mr. Charles D. Poteat joined the Company in June, 1993 as Vice President of Operations. He was elected to the additional position of Corporate Vice President in December, 1993. From February, 1992 until June 1993, Mr. Poteat was Senior Vice President, Manufacturing , Cooper, Inc. and from 1977 to 1989, Vice President, Manufacturing of Kayser-Roth Hosiery, Inc. Mr. Poteat is a graduate of the University of North Carolina. The Company's officers are elected for a one year term at the annual meeting of the Board of Directors. 19 Item 11. Executive Compensation. The information called for by this item appears under the heading "Executive Compensation" in the definitive Proxy Statement for the Company's 1995 Annual Meeting of Shareholders, which information is incorporated by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information called for by this item appears under the heading "Voting Securities and Principal Security Holders" in the Company's Proxy Statement for the 1995 Annual Meeting of Shareholders, which information is incorporated herein by reference. Item 13. Certain Relationships and Transactions. The information called for by this item appears under the heading "Information About Directors and Nominees for Directors" in the definitive Proxy Statement for the Company's 1995 Annual Meeting of Shareholders, which information is incorporated by reference. 20 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) The following are filed as a part of this report: (1) Financial statements filed: (i) The following consolidated financial statements of the Company and its subsidiaries included in the Company's 1994 Annual Report are incorporated herein by reference to the Annual Report as indicated Consolidated Balance Sheets - December 31, 1994 and 1993. Consolidated Statements of Income - Years ended December 31, 1994, 1993, and 1992. Consolidated Statements of Stockholders' Equity- Years ended December 31, 1994, 1993, and 1992. Consolidated Statements of Cash Flows - Years ended December 31, 1994, 1993, and 1992. Summary of Significant Accounting Policies Notes to Consolidated Financial Statements. (2) Financial Statement Schedules filed: Report of Independent Certified Public Accountants on Financial Statement Schedule (page S-1 of this report) Schedule II (Valuation and Qualifying Accounts) (page S-2 of this report) All other schedules are omitted as the required information is inapplicable or is present in the financial statements or related notes thereto. (3) Exhibits filed: 3.1 Certificates of Incorporation, as amended, which is incorporated herein by reference to Exhibit 3.1 of the Company's 1986 Annual Report on Form 10-K. 3.1.1 Amendment to Certificate of Incorporation adopted by shareholders which is incorporated herein by reference to Exhibit 3.1 of the Company's 1987 Annual Report on Form 10-K. 3.2 Bylaws, which are incorporated herein by reference to Exhibit 3.2 of the Company's 1986 Annual Report on form 10-K. 4.1 Specimen certificate of common stock, which is incorporated herein by reference to Exhibit 4 of the Company's Registration Statement on Form S-2 (No. 2-83186). 21 4.2 Notes and Security Agreements (2) dated March 5, 1982 in favor of Wachovia ($5,000,000 and $1,8000,000, respectively), which are incorporated herein by reference to Exhibit 10.11 of the Company's Registration Statement on Form S-2 (No. 2-83186). and Brixton International Associates, which is incorporated by reference to Exhibit 10-24 of the Company's Registration Statement on Form S-2(No. 2-83186) 4.3 Undertaking of the Company to file exhibits pursuant to Item 601 (b) (4)(iii)(A) of Regulation S-K, which is incorporated herein by reference to Exhibit 28 of the Company's 1986 Annual Report on Form 10-K. 10.5 Office Lease dated March 16, 1982 between the Company and Empire State Building Company, which is incorporated by reference to Exhibit 10.25 of the Company's Registration Statement on Form S-2 (No. 2-83186) * 10.6 Deferred Compensation Agreement between the Company and William Schubert dated April 1, 1976, which is incorporated by reference to Exhibit 10.30 of the Company's Registration Statement on Form S-2(No. 2-83186). *10.7 Deferred Compensation Agreement between the Company and William D. Schubert dated December 18, 1984, which is incorporated by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1984. *10.8 1983 Key Employee Incentive Stock Option Plan which is incorporated herein by reference to Exhibit 10 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1983. *10.9 Management Incentive Plan, which is incorporated herein by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1984. *10.10 1989 Non-Qualified Deferred Compensation Plan, which is incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the year ended December 31, 1988. *10.11 1989 Management Incentive Plan which is incorporated herein by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the year ended December 31, 1988. *10.12 1992 Non-Qualified Stock Option Plan for Non-Employee Directors which is incorporated herein by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. *10.13 1993 Long Term Performance Plan which is incorporated herein by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 13 1994 Annual Report to Shareholders . 21 List of Subsidiaries of the Company 23.1 Consent of Independent Auditors, Deloitte & Touche LLP 23.2 Consent of Independent Certified Public Accountants, BDO Seidman 27. Financial Data Schedule (filed in electronic format only). This Schedule is furnished for the information of the Commission and is not deemed to be "filed". * Identifies compensation plans. b. Reports on Form 8-K: No reports on Form 8-K were filed during the last quarter of the year ended December 31, 1994. 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. ALBA-WALDENSIAN, INC. Date : April 5, 1995 By /s/ Thomas F. Schuster Thomas F. Schuster Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated /s/ Paul H. Albritton, Jr. /s/William M. Cousins, Jr. Paul H. Albritton, Director William M. Cousins, Jr. Director April 5, 1995 April 5, 1995 /s/Clyde Wm. Engle /s/James M. Fawcett, Jr. Clyde Wm. Engle, Director James M. Fawcett, Jr. , Director April 5, 1995 April 5, 1995 /s/C. Alan Forbes /s/Thomas I. Nail C. Alan Forbes, Director Thomas I, Nail April 5, 1995 Treasurer and Secretary (Chief Financial and Accounting Officer) April 5, 1995 /s/Glenn J. Kennedy /s/Joseph C. Minio Glenn J. Kennedy, Director Joseph C. Minio, Director April 5, 1995 April 5, 1995 /s/Lee M. Mortenson Lee N. Mortenson, Director April 5, 1995 23 ALBA-WALDENSIAN, INC. INDEX TO EXHIBITS Annual Report on Form 10-K Commission File No. For the fiscal year ended December 31, 1994 1-6150 Exhibit Number Exhibit 13 1994 Annual Report to Shareholders 21 Subsidiaries of the Company as of December 31, 1994 23.1 Consent of Independent Auditors, Deloitte & Touche LLP 23.2 Consent of Independent Certified Public Accountants, BDO Seidman 27 Financial Data Schedule (filed in electronic format only) EX-13 2 EXHIBIT 13 ALBA-WALDENSIAN, INC. 1994 Annual Report Net Sales ($ in Millions) (Chart- Net Sales appears here plot points are as followed) 1990 1991 1992 1993 1994 41.9 39.7 40.6 50.9 56.5 PROFITABLY GROWTH SALES FINANCIAL HIGHLIGHTS Net Sales Gross Margin ($ in millions) (Chart - Net Sales chart appears (Chart - Gross Margin chart appears here plot points are as followed) here plot points are as followed) 1990 1991 1992 1993 1994 1990 1991 1992 1993 1994 41.9 39.7 40.6 50.9 56.5 21.1% 22.8% 25.1% 26.5% 25.2% Earnings ($ in millions) (Chart - Earnings chart appears here plot points are as followed) 1990 1991 1992 1993 1994 Actual Net Income 1.4 1.4 1.6 1.7(1) 2.0 $984.478 Earnings Per Share Sales Per Employee (Chart - Earnings Per Share Chart (Chart - Sales Per Emplyee Chart appears here plot points are appears here plot points are as followed) as followed)
1990 1991 1992 1993 1994 Actual Earnings 1990 1991 1992 1993 1994 0.77 0.77 0.86 0.91(2) 1.05 per Share 44,000 46,000 51,000 58,000 67,000 0.54
(1) 1993 Proforma/actual shows net income and estimated and net income before the two special charges to income in 1993. (2) 1993 Proforma/actual shows actual earnings per share and estimated earnings per share before the two special charges to earnings in 1993. CORPORATE MISSION PROFITABLY GROW SALES (Photograph - of employee working) (Photograph - of employee working) (Photograph - of employee working) STRATEGY HUSTLE ! OR GET OUT OF THE WAY (Photograph - of employee working) (Photograph - of employee working) (Photograph - of employee working TACTICS INNOVATE! OR ABDICATE (Page number appears in leaf) 1 To Our Shareholders 1994 was a banner year for Alba-Waldensian, as the company continued to fulfill its primary corporate mission of Profitably Growing Sales. Total corporate sales grew 11.1% from $50,855,377 in 1993 to $56,506,566 in 1994. Net profits after taxes nearly doubled, increasing from $984,478 last year to $1,945,876 in 1994 - an increase of 97.7%. We are pleased to note that sales hit a record high, profits were the highest they've been in the past 11 years, and productivity - as measured by sales per employee - rose nearly 16% to $67,000. As our business was profitably growing however, we faced a new challenge - one of a labor shortage. Unemployment in Burke County fell to a record low and, as a result, Alba suffered manpower shortages throughout the year. This not only inhibited our ability to produce enough to ship all of our orders complete and on time, but it also resulted in a significant amount of unbudgeted turnover- related expenses - excessive overtime and training costs. We are in the process of dealing with our labor shortage problems by installing automated hosiery packaging equipment to free up additional personnel and by increasing our use of outside contractors to sew and package product for us. On a division by division basis, Alba Health Products sales grew modestly during the year while their profits increased by a dramatic 37%. This increase in bottom line profits was due to a combination of improved gross profit margins and a very tight reign on spending. In December, the (Photograph - Thomas F. Schuster) Health Products Division acquired the Pulsatile Anti embolism System Business from Baxter, thereby doubling their business in vascu lar care products. The Alba Health CareProducts Division has long been associated with the P.A.S. business as a component supplier and therefore understands the business and how to run it. In short, it was exactly the kind of acquisition we've been looking for. The Health Products Division is continuing to look for suitable acquisitions as part of their strategy to accelerate the growth of their profitable business segment through acquisition as well as internal growth. The Consumer Products Division was hit the hardest by the on-going labor shortages during the year. In spite of this, they grew their sales to record levels and were solidly profitable throughout the year. (Page number appears in leaf)2 Alba Direct had another record year with their sales growing 37% and their profits growing nearly 61%. Our Byford Division suffered problems which became apparent in the first quarter of the year as inventories got out of balance and their fall sweater line proved to be very poorly designed. These problems were quickly addressed by bringing Ralph Doernberg, Byford's previous CFO, back to run the division as president. At the same time, Ms. Claudia Herzog joined the division as vice president in charge of design and product development. The results of their combined efforts are already being felt as inventories come into line and Ms. Herzog's design expertise bears fruit with dramatically improved lines of both socks and sweaters. Helping us to accomplish our many goals is Thomas Nail, who joined Alba as Chief Financial Officer in March, 1994, replacing Van Irwin who resigned. Tom brought a wealth of varied experience to Alba and quickly proved himself to be a valued member of our management group. All in all, Alba-Waldensian did a good job in 1994 of coping with the many growth-related problems that were inevitable. Alba is quickly going through the transition from being a big, small company to a small, big company. Our primary challenge as we go through this change is to cope with our growth and hold our spending in line, particularly overhead-related spending. We think we're uniquely positioned to meet these challenges because of the backgrounds of the members of the top management group. Everyone started out in a large corporate environment for their "basic training" and then moved on to hold increasingly responsible positions with smaller companies. This means that our management group is able to take the best things that they learned in big companies and combine them with the sense of "get it done" so necessary in a smaller company environment. Our intent to keep things simple is reflected in our corporate credo: CORPORATE MISSION: PROFITABLY GROW SALES; STRATEGY: HUSTLE! OR GET OUT OF THE WAY; TACTICS: INNOVATE! OR ABDICATE. 1994 was a tough year for all of Alba's people, primarily because our continuing labor shortages forced everyone to work long, often tedious hours of overtime. I'm happy to report that the Alba team responded in an absolutely magnificent way and we once again thank each and every one of them for their efforts throughout 1994. (Signature - Thomas F. Schuster) THOMAS F. SCHUSTER PRESIDENT AND CHIEF EXECUTIVE OFFICER (Page number appears in leaf)3 Trademark TM (Logo - Albahealth) 1994 was a record year for Alba's Health Products Division. Sales growth was limited to 2.2%, reflecting the affect in the market place of on-going confusion and consolidation among health care providers. In spite of this minimal sales growth however, profits grew by 37%, the result of increased gross profit margins and tight controls on spending throughout the year. Alba's Health Products are sold throughout the United States, Canada, Australia, England, Germany, Sweden and Denmark under the company's Life-Span(R) and ALBAhealthTM brands, as well as customer private label. During 1994, distribution of Alba Health Products was significantly improved by adding 14 new customers, all of whom are expected to show meaningful growth next year. This expanded distribution is consistent with the division's goal of allowing all health care providers access to our products through their distributor of choice. Alba Health Products are manufactured in the company's Valdese, North Carolina facilities, taking advantage of Alba's advanced knitting technology and expertise. These products include anti-embolism stockings, orthopedic stockinette, knitted footwear, and a variety of specialty items. Additionally, a line of specialty wound care dress- ings are manufactured in Alba's clean room facilities which meet all Food and Drug Administration requirements. During the year, the (Photograph - socks) division's safety footwear lineof Terry-TreadsTM, Fashion-Treads(R) and Safe-T-TreadsTM grew its sales and attained over a 40% market share. The lines' broad range of styles, sizes and colors fits every customer need and with fall prevention a primary safety concern of all health care providers, the market for this product line continues to increase. Day-TreadsTM are designed for short term wear by patients using same day surgery facilities or outpatient facilities, a fast growing segment of the total market. They provide the same safety features as the division's regular Treads and are bulk packaged to further reduce unit cost, thus supporting the universal goal of health care providers - to deliver lower cost care. As a result of the division's continued high level of service, quality, innovative new products and sales (Page number appears in leaf)4 and marketing support, our largest customer for Treads, Baxter Healthcare Hospitex Division, recognized Alba as their 1994 Supplier of the Year. The division's anti-embolism stockings had exceptional growth in Germany in 1994 as the European market rebounded from a soft prior year. Likewise, the new cost effective Life-Span(R) line was well received by all US customers. The division's Life-Span(R) stockings and other products including the ALBAhealthTM brand of dressings were introduced to expanded distribution in the United States, Canada and Puerto Rico during the year. With 200 styles of sterile and bulk stockinette, the division's offering is one of the largest in the industry and sales increased 5% in 1994. This growth came from custom ORprocedure manufacturers, and the expanded group of distributors. Thedivision's Heel and Elbow pads, XX-Span(R) dressing retainers, arm sleeves and other specialty products grew 4% in 1994. Perhaps the most significant event to impact the division during the year was the December 1st acquisition of the Pulsatile Anti-embolism System (P.A.S.(R)) from Baxter Healthcare. This dynamic system for the treatment and prevention of deep vein thrombosis nicely complements our anti-embolism compression stocking business. It's a business we know and understand and in fact have been involved with for a number of years. The net result will be that our sales in the vascular care market will more than double in 1995 as a result of this acquisition. Continuing the division's growth through expanded distribution and further acquisitions will continue to be our primary strategic thrust in 1995 and beyond. In summary, 1994 was a challenging but rewarding year for the division. The on-going dialog on a new healthcare system continues to result in significant consolidations within the industry. Healthcare providers and their product suppliers are merging in an accelerated rate, thereby reducing the customer base for medical product manufacturers. However, being positioned as a provider of (Photograph - healthcare product) relatively low cost medical consumable products means that our ulti mate customer base - the patient - will continue to grow in the years ahead and we remain highly confident about the division's future. (Page number appears in leaf)5 The Consumer Products Division of Alba Waldensian manufactures and markets a wide variety of knitted apparel products, primarily using state-of-the-art computer controlled circular knitting machines. Product lines include intimate apparel and sheer hosiery in regular size, queensize and maternity size, marketed on a branded and private label basis. (Photograph - Woman in intimate apparel) Alba's distribution channels continued to move upscale during the year and an increased emphasis on department store and specialty store distribution began to pay off. Major new accounts such as Price Club, BJ's and Bon Ton stores were added during 1994, resulting in incremental new volume for the company. Sales in all segments of our business finished well ahead of prior year and standard gross profit margin improved 13%, while spending as a percent of sales was reduced by 33%. (Photograph - Woman in intimate apparel) By category, sales of intimate apparel increased 24.9% and our maternity business increased by 12.2% over 1993. Although the sheer hosiery business was difficult as consumer preference has continued shifting away from sheer hosiery toward tights and trouser socks and competitors cut prices to prop up sagging sales, this segment of our business finished 5.9% ahead. In total, the division's sales increased over 16% for the year and were solidly profitable. Private Label In addition to our branded business, the private label segment has remained a key component of the division's overall strategy. Private label intimate apparel programs have been expanded in all classes of trade, including major department store groups. The continued development of this portion of our business is important, not only for the volume and profit it generates but also for the business relationships that it helps us to develop. (Page number appears in leaf)6 New Products New products are the life blood of our business and the division's commitment to providing quality products that consumers demand and offering them at value prices is foremost in our product development plans. 1994 saw the introduction of many new and more profitable products. During the year, the US Patent Office approved our patent application for the division's seamless, stretch bra which is knit on circular knitting equipment. This patent approval allows us to protect this revolutionary product from competitive copy-cats. The process which is utilized to knit these bras has further led to the development of tank tops and teddies, thereby significantly broadening Alba's product assortment at retail. Currently, the R&D group is refining control versions of these products which will be brought to market early next year as the "second round". Other The division's Electronic Data Interchange (EDI) capabilities provide it with a direct link to our major retail customers for efficiently and quickly processing orders. Major retailers order on a daily basis rather than monthly, which smoothes order and merchandise flow through our distribution center. This requires however, that we have inventory readily available for each of our major accounts. Emphasis has therefore been increased on improving forecasting techniques to bring inventory down to minimum acceptable levels while servicing customer needs. Further, as new products are introduced into the line, it becomes increasingly important to plan the demise of older products which have become tired and need replacing. New procedures have been implemented to prevent the build-up of inventory on those products which have (Photograph - Woman in intimate apparel) been planned for discontinuation. Effectively han dling this process allows us to keep our inventories clean on an on going basis. (Page number appears in leaf)7 (Logo - Byford) Byford Apparel has now completed its second year as a division of Alba- Waldensian and continues to make progress toward developing the department store class of trade, while maintaining its rich and long heritage of specialty store- based British tradition. Byford recently cele (Photograph - Man trying on socks) brated its 75th anniversary and is today a world-wide brand. In the United States, Byford prod ucts were first intro duced in 1923. Byford designs and markets better men's socks and sweaters and focuses on three separate target markets - department stores, better specialty stores, and the fast emerging golf trade. Alternative markets, such as corporate premium sales and catalogs, are also being successfully developed by the company. Byford socks are sourced primarily from the D. Byford Mill in Leicester, England, while their sweater sourcing is more broadly based with products coming from the United Kingdom, the Far East and the United States. Due to a variety of factors, it became apparent in the first quarter of the year that Byford was developing problems in the areas of weak design and unbalanced inventories. Therefore, two personnel changes were made. First, Ralph M. Doernberg joined the division as president. Secondly, Claudia Herzog joined as vice president in charge of product development and design. As the year progressed, their influence began to be felt in terms of much improved design in both the sock and sweater lines and inventories quickly coming under control. The new "Made in America" line of Byford socks, targeted at the department store class of trade, was introduced in the first half of the year. Due to quality and design issues, it met with only limited success and is currently being totally redesigned and sourced for a relaunch during the latter part of the first quarter of 1995. This line will continue to be popularly priced and will compete for main-stream department store business. The division continues to place a great deal of emphasis on this collection as a means of significantly expanding its presence within the department store class of trade throughout the United States. Although there were some rocky times in the first part of 1994, the Byford/Alba-Waldensian marriage is still considered to be a good one and the corporation looks forward to a significantly improved results in 1995. (Page number appears in leaf)8 Alba Direct Alba Direct is the telemarketing arm of AlbaWaldensian, selling both consumer and medical specialty products to over 2400 independent retailers throughout the country. The division had a strong year and finished 1994 more than 37% ahead of prior year with profits out-pacing sales gains. This dramatic growth in volume reflects strong development of its export business, primarily to Japan, and the addition of All Day Long(R) bras and panties to their product offerings. Alba Direct's operating strategy is to provide its many independent retail customers with exceptional service, including the shipping of orders within 48 hours of receipt. (Photograph - Woman working at computer) Alba Direct opened an outlet store in Branson, MO in late 1994 to test the feasibility of selling Alba product direct to consumers. The Branson facility will carry all of Alba's products including hosiery, bras, panties, teddies, maternity products, and Byford socks and sweaters. This store gives us an entry into one of the fastest growing retail channels. Telemarketing has consistently proven to be a low cost, low investment, high return method of achieving profitable new distribution and sales. (Page number appears in leaf)9 CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993
1994 1993 ASSETS CURRENT ASSETS: Cash................................................................................................. $ 103,952 $ 960,516 Accounts receivable (net of allowance for uncollectible accounts of $180,000 in 1994 and $194,000 in 1993 (Note 3)...................................................................................... 7,426,654 7,197,978 Refundable income taxes (Note 7)..................................................................... 127,394 76,133 Notes receivable..................................................................................... 30,080 41,669 Inventories (Note 1)................................................................................. 17,264,180 14,148,626 Deferred income tax asset (Note 7)................................................................... 298,010 402,435 Prepaid expenses and other........................................................................... 151,236 133,788 Total current assets................................................................................. 25,401,506 22,961,145 PROPERTY AND EQUIPMENT (Notes 2, 3, and 4): Land................................................................................................. 139,744 139,744 Buildings............................................................................................ 7,154,717 7,135,374 Machinery and equipment.............................................................................. 19,807,849 18,253,100 Total property and equipment......................................................................... 27,102,310 25,528,218 Less accumulated depreciation and amortization....................................................... (15,497,062) (14,054,565) Net Property and equipment........................................................................... 11,605,248 11,473,653 OTHER ASSETS: Notes receivable..................................................................................... 77,995 85,318 Trademarks and patents............................................................................... 324,654 368,230 Cash surrender value of life insurance (net of loans against policies of $101,591 in 1994 and $143,164 in 1993).................................................................................. 320,325 335,422 Total other assets................................................................................... 722,974 788,970 Total assets......................................................................................... $ 37,729,728 $ 35,223,768 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings and lines of credit (Note 3)................................................... $ 1,178,062 $ -- Current maturities of long-terms debt (Note 4)....................................................... 500,000 550,000 Current maturities of capital lease obligations (Note 2)............................................. 113,526 177,887 Accounts payable..................................................................................... 2,587,875 2,763,647 Accrued Expenses: Payroll and profit-sharing......................................................................... 689,983 620,972 Property and payroll taxes......................................................................... 102,939 133,234 Group health claims -- estimated................................................................... 150,000 150,000 Other.............................................................................................. 213,060 272,269 Total current liabilities............................................................................ 5,535,445 4,668,009 LONG-TERM DEBT (Note 4).............................................................................. 1,000,000 1,500,000 CAPITAL LEASE OBLIGATIONS (Note 2)................................................................... 58,069 277,087 DEFERRED COMPENSATION................................................................................ 344,391 450,365 DEFERRED INCOME TAX LIABILITY (Note 7)............................................................... 1,698,369 1,347,794 Total liabilities.................................................................................... 8,636,274 8,243,255 Commitments (Notes 2, 3, 4, 5, 8 and 10)............................................................. -- -- STOCKHOLDERS' EQUITY (Notes 3 and 5): Common stock -- authorized 3,000,000 shares, $2.50 par value; issued: 1,886,580 shares in 1994 and 1993; outstanding: 1,863,153 and 1,838,528 shares in 1994 and 1993, respectively................... 4,716,450 4,716,450 Additional paid-in capital........................................................................... 9,182,158 9,182,158 Retained earnings.................................................................................... 15,361,763 13,426,272 Total................................................................................................ 29,260,371 27,324,880 Less treasury stock -- at cost (23,427 and 48,052 shares in 1994 and 1993, respectively)............. (166,917) (344,367) Total stockholders' equity........................................................................... 29,093,454 26,980,513 Total liabilities and stockholders' equity........................................................... $ 37,729,728 $ 35,223,768
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. (Page number appears in a leaf)10 CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 NET SALES (Note 6)...................................................................... $56,506,566 $50,855,377 $40,567,425 COST OF SALES........................................................................... 42,252,186 37,376,874 30,380,066 GROSS MARGIN............................................................................ 14,254,380 13,478,503 10,187,359 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 9)................................... 11,007,734 11,594,258 8,136,491 OPERATING INCOME........................................................................ 3,246,646 1,884,245 2,050,868 OTHER INCOME (EXPENSE): Interest expense........................................................................ (274,739) (247,821) (235,480) Interest income......................................................................... 57,863 65,380 155,903 Gain on sale of property and equipment.................................................. 27,992 83,598 11,138 Cost associated with unconsummated acquisition.......................................... -- (428,652) -- Other................................................................................... 91,781 78,353 85,929 Total other income (expense), net....................................................... (97,103) (449,142) 17,490 INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE........................................................ 3,149,543 1,435,103 2,068,358 PROVISION FOR INCOME TAXES (Note 7)..................................................... 1,203,667 450,625 726,838 INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE....................... 1,945,876 984,478 1,341,520 CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN ACCOUNTING FOR INCOME TAXES (Note 7)...... -- -- 226,245 NET INCOME.............................................................................. $ 1,945,876 $ 984,478 $ 1,567,765 INCOME PER COMMON SHARE DATA: Income before cumulative effect of change in accounting principle....................... $ 1.05 $ .54 $ .74 Cumulative effect on prior years of change in accounting for income taxes.......................................................................... -- -- .12 NET INCOME PER COMMON SHARE............................................................. $ 1.05 $ .54 $ .86
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
ADDITIONAL COMMON PAID-IN RETAINED TREASURY STOCK SHARES* AMOUNT CAPITAL EARNINGS SHARES AMOUNT BALANCE AT JANUARY 1, 1992........................ 1,886,580 $4,716,450 $9,182,158 $10,994,430 (68,302) $(604,175) Net income........................................ 1,567,765 Exercise of stock options......................... (34,150) 5,000 64,150 BALANCE AT DECEMBER 31, 1992...................... 1,886,580 4,716,450 9,182,158 12,528,045 (63,302) (540,025) Net income........................................ 984,478 Exercise of stock options......................... (86,251) 15,250 195,658 BALANCE AT DECEMBER 31, 1993...................... 1,886,580 4,716,450 9,182,158 13,426,272 (48,052) (344,367) Net income........................................ 1,945,876 Exercise of stock options......................... (10,385) 24,625 177,450 BALANCE AT DECEMBER 31, 1994...................... 1,886,580 $4,716,450 $9,182,158 $15,361,763 (23,427) $(166,917) TOTAL BALANCE AT JANUARY 1, 1992........................ $24,288,863 Net income........................................ 1,567,765 Exercise of stock options......................... 30,000 BALANCE AT DECEMBER 31, 1992...................... 25,886,628 Net income........................................ 984,478 Exercise of stock options......................... 109,407 BALANCE AT DECEMBER 31, 1993...................... 26,980,513 Net income........................................ 1,945,876 Exercise of stock options......................... 167,065 BALANCE AT DECEMBER 31, 1994...................... $29,093,454
*DENOTES SHARES ISSUED. SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. (Page number appears in a leaf)11 CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 OPERATING ACTIVITIES: Net income............................................................................... $ 1,945,876 $ 984,478 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization.......................................................... 1,736,576 1,731,808 Provision for bad debts................................................................ 74,933 654,205 Gain on sale of property and equipment................................................. (27,992) (83,598) Increase in deferred income taxes...................................................... 455,000 221,762 Provision for inventory obsolescence................................................... 579,997 434,000 Cumulative effect of change in accounting principle.................................... -- -- Changes in operating assets and liabilities providing (using) cash: Accounts receivable................................................................. (303,611) (3,084,953) Refundable income taxes............................................................. (51,260) 45,118 Inventories......................................................................... (3,695,551) (3,819,867) Prepaid expenses and other.......................................................... (14,967) 146,003 Accounts payable.................................................................... (175,772) 1,752,881 Accrued and other liabilities....................................................... (21,088) 255,816 Deferred compensation............................................................... (105,974) (106,768) Net cash provided by (used in) operating activities...................................... 396,167 (869,115) INVESTING ACTIVITIES: Capital expenditures..................................................................... (1,918,638) (1,719,170) Proceeds from sale of property, plant and equipment...................................... 4,250 24,505 Proceeds from notes receivable........................................................... 31,530 232,276 Loans made............................................................................... -- -- Net cash used in investing activities.................................................... (1,882,858) (1,462,389) FINANCING ACTIVITIES: Proceeds from borrowings under line of credit agreement.................................. 1,178,062 -- Proceeds from issuance of long-term debt................................................. -- 4,000,000 Principal payments on long-term debt and leases.......................................... (715,000) (2,366,683) Cash proceeds from exercise of stock options............................................. 167,065 75,000 Net cash provided by (used in) financing activities...................................... 630,127 1,708,317 NET INCREASE (DECREASE) IN CASH.......................................................... (856,564) (623,187) CASH AT BEGINNING OF YEAR................................................................ 960,516 1,583,703 CASH AT END OF YEAR...................................................................... $ 103,952 $ 960,516 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the year for: Interest............................................................................... $ 259,222 $ 249,499 Income taxes........................................................................... $ 801,917 $ 327,139 1992 OPERATING ACTIVITIES: Net income............................................................................... $ 1,567,765 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization.......................................................... 1,679,237 Provision for bad debts................................................................ 55,122 Gain on sale of property and equipment................................................. (11,138) Increase in deferred income taxes...................................................... 311,017 Provision for inventory obsolescence................................................... 76,000 Cumulative effect of change in accounting principle.................................... (226,245) Changes in operating assets and liabilities providing (using) cash: Accounts receivable................................................................. (46,045) Refundable income taxes............................................................. 5,449 Inventories......................................................................... (501,322) Prepaid expenses and other.......................................................... (218,221) Accounts payable.................................................................... 56,314 Accrued and other liabilities....................................................... (525,962) Deferred compensation............................................................... (88,364) Net cash provided by (used in) operating activities...................................... 2,133,607 INVESTING ACTIVITIES: Capital expenditures..................................................................... (1,326,091) Proceeds from sale of property, plant and equipment...................................... 108,500 Proceeds from notes receivable........................................................... 29,258 Loans made............................................................................... (20,000) Net cash used in investing activities.................................................... (1,208,333) FINANCING ACTIVITIES: Proceeds from borrowings under line of credit agreement.................................. -- Proceeds from issuance of long-term debt................................................. -- Principal payments on long-term debt and leases.......................................... (921,409) Cash proceeds from exercise of stock options............................................. 30,000 Net cash provided by (used in) financing activities...................................... (891,409) NET INCREASE (DECREASE) IN CASH.......................................................... 33,865 CASH AT BEGINNING OF YEAR................................................................ 1,549,838 CASH AT END OF YEAR...................................................................... $ 1,583,703 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during the year for: Interest............................................................................... $ 240,794 Income taxes........................................................................... $ 410,272
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. (Page number appears in a leaf)12 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 OPERATIONS -- Alba-Waldensian, Inc. (the Company) manufactures and sells an extensive line of knitted apparel products as well as a variety of surgical products for the health care industry. PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Pilot Research Corp., Alba-Waldensian Export Corp., and AWI Retail, Inc. All significant intercompany accounts and transactions have been eliminated. CASH AND CASH EQUIVALENTS -- The Company considers short-term investments with original maturities of less than three months to be equivalent to cash. INVENTORIES -- Inventories are stated at the lower of cost (first-in, first-out "FIFO" basis) or market. PROPERTY AND DEPRECIATION AND AMORTIZATION -- Property and equipment are stated at cost. Betterments are capitalized. Maintenance and repairs are expensed as incurred. The provision for depreciation is primarily based on the straight-line method calculated to extinguish the costs of the respective assets over their estimated useful lives which range from seven to forty years for buildings and improvements and three to twenty years for furniture, fixtures, machinery and equipment. Assets under capital leases are amortized in accordance with the Company's normal depreciation policy for owned assets or over the lease term if shorter. INTANGIBLE ASSETS -- The costs of acquired trademarks and patents are amortized using the straight-line method over their estimated useful lives of approximately seventeen years. REVENUE RECOGNITION -- The Company recognizes revenue when goods are shipped. RESEARCH AND DEVELOPMENT -- The Company sponsores research and development projects through its research and development department and its wholly owned subsidiary, Pilot Research Corporation. Expenditures for research and development are expensed as incurred. The Company spent approximately $376,000, $341,000 and $187,000 for research and development in 1994, 1993 and 1992, respectively. INCOME TAXES -- The Company adopted prospectively Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) in 1992, which required a change from the deferred method to the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. CONCENTRATION OF CREDIT RISK -- Financial instruments which potentially subject the Company to concentrations of credit risk consist of trade receivables. Any such risk is limited due to the Company's large number of customers and their geographic dispersion, except as discussed in Note 6. NET INCOME PER COMMON SHARE -- Net income per common share is calculated on the weighted average number of shares of common stock outstanding (1,848,671 in 1994, 1,826,190 in 1993 and 1,818,949 in 1992). When dilutive, outstanding options to purchase common stock are considered. The effect on earnings per share of dilutive stock options was not material. DEFERRED COMPENSATION -- The Company has agreements with several of its officers providing for the deferral of a portion of their annual compensation until their retirement from the Company. The agreements allow for payment of the deferred amounts over a ten-year period beginning on the retirement date. Compensation expense is being recognized over the period of active employment. The liability represents the present value of future payments as of December 31, 1994 and 1993 (Page number appears in a leaf)13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 GROUP HEALTH INSURANCE -- The Company is self-insured as to group health insurance for its employees. The Company accrues an amount for estimated claims incurred but not reported. PROFIT-SHARING PLAN -- The Company sponsors a profit-sharing plan which covers substantially all employees. Contributions to the plan are funded annually. RECLASSIFICATION -- Certain 1993 and 1992 amounts have been reclassified to conform with 1994 classifications. 1. INVENTORIES Inventories at December 31, 1994 and 1993 include:
1994 1993 Materials and supplies............. $ 3,377,562 $ 2,548,836 Work-in-process.................... 5,945,246 5,870,073 Finished goods..................... 7,941,372 5,729,717 Total.............................. $17,264,180 $14,148,626
During 1994, the Company recorded allowances for inventory obsolescence of approximately $580,000 related to the writedown of close-out and obsolete raw material and finished goods. In addition, the Company acquired $2,040,000 in inventory from Baxter Healthcare on December 1, 1994 that was financed by short-term borrowings (See Note 3). 2. LEASES The Company leases certain computer equipment under capital leases. Such equipment is included in property and equipment as of December 31, 1994 and 1993 and is summarized as follows:
1994 1993 Machinery and equipment.................... $549,039 $847,757 Less accumulated amortization.............. 375,912 453,180 Net equipment under capital leases......... $173,127 $394,577
The future minimum lease payments under capital and other equipment operating leases having initial or remaining noncancellable lease terms in excess of one year are summarized as follows:
OPERATING CAPITAL YEAR LEASES LEASES 1995....................................... $195,887 $133,706 1996....................................... 134,776 60,413 1997....................................... 116,033 -- 1998....................................... 36,991 -- 1999....................................... 24,851 -- Total minimum lease payments............... $508,538 194,119 Less amount representing interest.......... 25,524 Present value of net minimum lease payments.................................. 171,595 Less current maturities of capital lease obligations............................... 113,526 Noncurrent maturities of capital lease obligations............................... $ 58,069
Total rental expense for all operating leases was $240,846 in 1994, $232,347 in 1993 and $191,554 in 1992. 3. SHORT-TERM BORROWINGS AND LINES OF CREDIT The Company has an agreement with a bank which provides a seasonal line of credit of up to $3,000,000 (of which $1,821,938 was unused at December 31, 1994) with interest at the bank's prime rate. Indebtedness under this agreement is collateralized by equipment and accounts receivable. The Company also has established a $1,000,000 line of credit to support the issuance of import letters of credit which matured December 31, 1994. The loan agreements contain covenants, the most restrictive of which state that dividends will not exceed net income less debt service payments and that fixed asset additions will not exceed $2,500,000 per year. (Page number appears in a leaf)14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 The following relates to aggregate short-term borrowings in 1994, 1993 and 1992:
1994 1993 1992 Amount outstanding at December 31............................ $1,178,062 -- -- Maximum amount outstanding at any month end................. $1,178,062 $2,150,000 $400,000 Average amount outstanding (based on weighted daily average balances)............. 59,326 $ 733,836 $ 55,972 Weighted average interest rate during the year............... 6.98% 6.08% 6.40% Weighted average interest rate at December 31................ 7.00% -- --
The weighted average interest rate during the year was computed by dividing total short-term interest expense for the year by the weighted average amount outstanding during the year. 4. LONG-TERM DEBT Long-term debt at December 31, 1994 and 1993 is comprised of the following:
1994 1993 Equipment Term Loan, due $125,000 quarterly through December 31, 1997 plus interest at 6.30%....................... $1,500,000 $2,000,000 Industrial Revenue Bond, paid February 1, 1994, plus interest at 66% of quoted prime rate (6.00% at December 31, 1993)................................... -- 50,000 Total.................................... 1,500,000 2,050,000 Less current maturities.................. 500,000 550,000 Long-term debt........................... $1,000,000 $1,500,000
A substantial portion of the Company's property and equipment is pledged as collateral for the long-term debt. Maturities of long-term debt, exclusive of capital lease obligations, over the next three years are as follows: YEAR 1995................................................ $ 500,000 1996................................................ 500,000 1997................................................ 500,000 Total............................................... $1,500,000
5. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS In June, 1993, the Company adopted the 1993 Long Term Performance Plan (the 1993 Plan), which includes both qualified and nonqualified option provisions and stock appreciation rights and restricted, performance and other stock-based awards. Under the 1993 Plan, the Compensation Committee of the Board of Directors is authorized to grant stock awards to purchase up to 250,000 shares of the Company's common stock at prices equal to the fair value of the stock on the dates of grant. The 1993 Plan replaced the 1983 Employee Stock Option Plan (the 1983 Plan), which provided for the granting of 100,000 shares of the Company's stock. The 1993 Plan options are exercisable over a period determined by the Compensation Committee at the date of grant, beginning five months after the date of grant. The 1983 Plan qualified and nonqualified options are exercisable at the rate of 25% per year, beginning one year from the date of grant. At December 31, 1994, options to purchase 33,000 shares were exercisable. The Company has adopted the 1992 Nonqualified Stock Option Plan for Nonemployee Directors (the 1992 Plan). Under the 1992 Plan, each nonemployee director was granted options to purchase 2,000 shares of the Company's common stock at prices equal to the fair value of the stock on the dates of grant. Options to purchase an aggregate of 16,000 shares were granted December 14, 1993 and are exercisable any time after the grant date and before the expiration date (December 14, 1998). (Page number appears in a leaf)15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 Transactions involving the Plans are summarized as follows:
OPTION SHARES QUALIFIED NONQUALIFIED Outstanding at January 1, 1992.................. 69,000 25,000 Granted........................... 36,000 15,000 Exercised......................... (5,000) -- Expired and/or cancelled.......... (25,000) (15,000) Outstanding at December 31, 1992................ 75,000 25,000 Granted........................... 37,500 16,000 Exercised......................... (15,250) -- Outstanding at December 31, 1993................ 97,250 41,000 Granted........................... 50,000 -- Exercised......................... (20,250) (4,375) Expired and/or cancelled.......... (18,500) (625) Outstanding at December 31, 1994................ 108,500 36,000 OPTION PRICES PER SHARE: 1992 Granted........................... $ 7.25-$8.25 $7.625 Exercised......................... $ 6.125 -- Expired and/or cancelled.......... $ 6.00-$9.125 $7.50-$7.625 1993 Granted........................... $ 8.625-$10.00 $7.94 Exercised......................... $ 6.125-$7.625 -- 1994 Granted........................... $10.625-$11.250 -- Exercised......................... $ 6.125-$7.625 $6.50-$7.62 Expired and/or cancelled.......... $ 6.125-$8.625 --
6. MAJOR CUSTOMERS The Company's single line of business is considered to be the manufacture, processing and sale of knitted products. Sales to Baxter Healthcare Corporation (representing 10% or more of net sales) totaled $12,902,722, $13,610,937, $11,074,280 in 1994, 1993 and 1992, respectively. 7. INCOME TAXES In prior years, the Company was subject to alternative minimum tax. These amounts are allowed as credits against regular income tax in future years when the regular tax expense exceeds the alternative minimum tax expense. During 1994, the Company utilized approximately $117,000 of these alternative minimum tax credits to reduce income taxes. In addition, general business tax credits totaling approximately $182,000 were also used to reduce 1994 federal income taxes. Approximately $24,000 of available alternative minimum tax credit carryovers were not utilized in 1994 and are available to offset future federal income taxes. Components of the income tax provision for 1994, 1993 and 1992 included:
1994 1993 1992 Current: Federal......................... $ 632,667 $210,968 $415,821 State........................... 116,000 17,895 -- Total current.................... 748,667 228,863 415,821 Deferred: Federal......................... 438,000 196,513 226,982 State........................... 17,000 25,249 84,035 Total deferred................... 455,000 221,762 311,017 Total provision for income taxes........................... $1,203,667 $450,625 $726,838
The approximate tax effect of each type of temporary difference and carryforward that gave rise to the Company's deferred income tax assets and liabilities for 1994 and 1993 under SFAS 109 are as follows:
1994 ASSETS LIABILITIES TOTAL Current: Receivables................ $ 49,766 $ -- $ 49,766 Inventories................ 249,563 -- 249,563 Prepaid expenses........... -- (1,459) (1,459) Vacation pay............... 140 -- 140 Total current............... 299,469 (1,459) 298,010 Noncurrent: Property................... -- (1,922,664) (1,922,664) Deferred compensation...... 164,833 -- 164,833 Insurance reserve.......... 54,900 -- 54,900 Deferred revenue........... -- (19,352) (19,352) Alternative minimum tax credit carryforward....... 23,914 -- 23,914 Total noncurrent............ 243,647 (1,942,016) (1,698,369) Total current and noncurrent................. $543,116 $(1,943,475) $(1,400,359)
(Page number appears in a leaf)16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1993 ASSETS LIABILITIES TOTAL Current: Receivables................ $ 55,004 $ -- $ 55,004 Inventories................ 180,656 -- 180,656 Prepaid expenses........... -- (15,587) (15,587) Vacation pay............... 466 -- 466 General business credit carryforward.............. 181,896 -- 181,896 Total current............... 418,022 (15,587) 402,435 Noncurrent: Property................... -- (1,883,366) (1,883,366) Deferred costs............. 157,015 -- 157,015 Deferred compensation...... 204,078 -- 204,078 Insurance reserve.......... 54,945 -- 54,945 Deferred revenue........... -- (21,380) (21,380) Alternative minimum tax credit carryforward....... 140,914 -- 140,914 Total noncurrent............ 556,952 (1,904,746) (1,347,794) Total current and noncurrent................. $974,974 $(1,920,333) $ (945,359)
The Company has not provided valuation allowances for the deferred tax assets as no conditions exist that require such allowances. The income tax provision differs from the amount computed by applying the federal statutory income tax rate of 34% to pre-tax income. The computed amount is reconciled to total income tax expense as follows:
1994 1993 1992 Federal income tax at statutory rate................. $1,070,845 $487,935 $ 703,242 State income taxes, net of federal benefit................ 87,780 28,475 55,463 Restoration of general business credits due to IRS settlement..................... -- (51,751) (101,970) Prior year income tax associated with IRS settlement and adjustments.................... -- -- 64,575 Change, net of premiums paid and proceeds, in officers' life insurance values............... (6,323) (4,149) (6,916) Expenses which are not deductible for income tax purposes................... 22,923 13,323 12,444 All other....................... 28,442 (23,208) -- Total provision for income taxes................... $1,203,667 $450,625 $ 726,838
8. EMPLOYEE BENEFITS The Company has an employee salary deferral plan covering substantially all employees which allows participants to defer from 2% to 10% of their salaries with the Company contributing 40% of the participant's contribution. Contribution expense related to this plan for the years ended December 31, 1994, 1993 and 1992 was $171,030, $156,277,and $126,531, respectively. 9. SUPPLEMENTARY INCOME STATEMENT DATA Reportable expenses in excess of 1% of operating revenues are as follows:
1994 1993 1992 Royalties..................... $369,284 $ 600,320 $ 264,801 Advertising and promotions................... $522,156 725,514 529,453
10. SUBSEQUENT EVENT On March 6, 1995, the Company purchased the Balfour Health Care Division and manufacturing facility in Rockwood, Tennessee from Kayser-Roth Corporation for approximately $14.5 million, subject to post-closing adjustments. It is anticipated that, the acquisition of Balfour will add approximately $15 million in annual sales to the Company. The company financed 100% of the acquisition price with a revolving loan agreement provided by a major bank. The acquisition will be accounted for using the purchase method of accounting. The excess of the purchase price over the estimated fair value of the net assets acquired (goodwill) of $8.721 million will be amortized on a straight line basis over its estimated life. The purchase price allocation is based on preliminary estimates of the fair value of the net assets acquired and is subject to adjustment. (Page number appears in a leaf)17 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Alba-Waldensian, Inc. Valdese, North Carolina We have audited the accompanying consolidated balance sheet of Alba-Waldensian, Inc. and subsidiaries as of December 31, 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for the year 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 audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alba-Waldensian, Inc. and subsidiaries at December 31, 1994, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. BDO SEIDMAN Greensboro, North Carolina February 8, 1995, except for Note 10 which is as of March 6, 1995 (Page number appears in a leaf)18 INDEPENDENT AUDITORS' REPORT Board of Directors Alba-Waldensian, Inc. Valdese, North Carolina We have audited the accompanying consolidated balance sheet of Alba-Waldensian, Inc. and subsidiaries as of December 31, 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 1993. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Alba-Waldensian, Inc. and subsidiaries as of December 31, 1993, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Notes 1 and 8 to the consolidated financial statements, in 1992 the Company changed its method of accounting for income taxes effective January 1, 1992 to conform with Statement of Financial Accounting Standards No. 109. DELOITTE & TOUCHE LLP Hickory, NC February 11, 1994 (Page number appears in a leaf)19 STOCK PRICES AND DIVIDEND INFORMATION
SALES PRICE OF COMMON SHARES SALES PRICE OF COMMON SHARES HIGH 1994 LOW HIGH 1993 LOW First Quarter......................... 11 3/4 9 7/8 10 7 3/4 Second Quarter........................ 12 1/8 9 3/4 10 5/8 8 3/8 Third Quarter......................... 12 1/8 10 5/8 10 1/4 8 1/2 Fourth Quarter........................ 11 3/8 10 1/2 10 7/8 8 1/2 DIVIDENDS PER SHARE First Quarter......................... $ -- $ -- Second Quarter........................ $ -- $ -- Third Quarter......................... $ -- $ -- Fourth Quarter........................ $ -- $ --
SEE NOTE 3 TO THE CONSOLIDATED FINANCIAL STATEMENTS CONCERNING RESTRICTIONS ON THE PAYMENT OF DIVIDENDS. CLASSES OF PRODUCTS
YEARS WOMEN'S WOMEN'S MEN'S ENDED HOSIERY INTIMATE HOSIERY HEALTH DECEMBER 31, PRODUCTS PRODUCTS PRODUCTS MEN'S WEAR PRODUCTS 1990 19.0% 44.3% 9.7% -- 27.0% 1991 15.7% 48.6% 1.2% -- 34.5% 1992 19.1% 43.8% 1.0% -- 36.1% 1993 19.2% 37.4% 7.3% 5.5% 30.6% 1994 17.4% 40.2% 7.9% 4.3% 30.2%
NOTE: AMOUNTS REPRESENT PERCENTAGES OF ANNUAL NET SALES. FIVE-YEAR SELECTED FINANCIAL DATA
IN THOUSANDS EXCEPT FOR PER SHARE AMOUNT 1994 1993 1992 1991 SELECTED FINANCIAL DATA: Net sales...................................................................... $56,506 $50,855 $40,567 $39,728 Gross margin................................................................... 14,254 13,479 10,187 9,072 Income before income taxes and cumulative effect of a change in accounting principle.................................................................... 3,150 1,435 2,068 2,074 Provision for income taxes..................................................... 1,204 451 727 665 Income before cumulative effect of a change in accounting principle............ 1,946 984 1,341 1,409 Cumulative effect on prior years of a change in accounting for income taxes................................................................. -- -- 226 -- Net income..................................................................... 1,946 984 1,567 1,409 Income per common share: Income before cumulative effect of a change in accounting principle.......... 1.05 .54 .74 .77 Cumulative effect on prior years of a change in accounting for income taxes.............................................................. -- -- .12 -- Net income per common share.................................................. 1.05 .54 .86 .77 At Year End: Total assets................................................................. $37,730 $35,224 $30,586 $29,767 Long-term debt and capital lease obligations................................. 1,058 1,777 505 872 SELECTED SUPPLEMENTARY FINANCIAL DATA Property and equipment: Net investment............................................................... $11,605 $11,474 $11,475 $11,982 Current additions............................................................ 1,919 1,719 1,326 1,844 Depreciation................................................................. 1,693 1,688 1,614 1,483 Other: Working capital.............................................................. $19,866 $18,293 $15,922 $13,529 Stockholders' equity......................................................... 29,093 26,981 25,887 24,289 Stockholders' equity per common share........................................ 15.73 14.78 14.23 13.36 Weighted average number of shares of common stock outstanding................ 1,849 1,826 1,819 1,818 1990 SELECTED FINANCIAL DATA: Net sales...................................................................... $41,852 Gross margin................................................................... 8,834 Income before income taxes and cumulative effect of a change in accounting principle.................................................................... 1,710 Provision for income taxes..................................................... 302 Income before cumulative effect of a change in accounting principle............ 1,408 Cumulative effect on prior years of a change in accounting for income taxes................................................................. -- Net income..................................................................... 1,408 Income per common share: Income before cumulative effect of a change in accounting principle.......... .77 Cumulative effect on prior years of a change in accounting for income taxes.............................................................. -- Net income per common share.................................................. .77 At Year End: Total assets................................................................. $28,386 Long-term debt and capital lease obligations................................. 910 SELECTED SUPPLEMENTARY FINANCIAL DATA Property and equipment: Net investment............................................................... $11,569 Current additions............................................................ 2,566 Depreciation................................................................. 1,275 Other: Working capital.............................................................. $12,420 Stockholders' equity......................................................... 22,880 Stockholders' equity per common share........................................ 12.59 Weighted average number of shares of common stock outstanding................ 1,818
SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" IN THIS REPORT FOR A DISCUSSION OF CERTAIN FACTORS WHICH AFFECT THE COMPARABILITY OF THE INFORMATION REFLECTED ABOVE. (Page number appears in a leaf)20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table details the items in the Consolidated Statements of Income as a percentage of sales for 1994, 1993, and 1992.
PERCENTAGE OF SALES YEAR ENDED DECEMBER 31, 1994 1993 1992 Net Sales............................. 100.0% 100.0% 100.0% Cost of Sales......................... 74.8 73.5 74.9 Gross Margin.......................... 25.2 26.5 25.1 Selling, General and Administrative... 19.5 22.7 20.0 Operating Income...................... 5.7 3.8 5.1 Other Income (Expense), Net........... (.2) (1.0 ) 0.0 Income Before Income Taxes............ 5.5 2.8 5.1 Provision for Income Taxes (including cumulative effect adjustment in 1992)................. 2.1 .9 1.2 Net Income............................ 3.4% 1.9 % 3.9 %
Net sales for 1994 increased $5,651,189 or 11.1% as compared to an increase of $10,287,952 or 25.4% in 1993. Net sales increased over 1993 primarily as a result of increased sales to existing customers and a shifting of customers to higher value added products. The Company experienced increases in sales of its intimate apparel, ladies hosiery, surgical footwear, stockinette, Byford socks and in its telemarketing operations. Alba's Factory Outlet store, which opened in late November and was not fully operational in 1994, had no significant impact on net sales. The Byford Division, which was purchased in Decemeber of 1992 accounted for 15.7% of the 25.4% increase in 1993 net sales over 1992. The Company also experienced increases in sales of intimate apparel, ladies hosiery, surgical footwear, stockinette, and the Telemarketing operations. Gross margin declined in 1994 to 25.2% as compared to 26.5% in 1993. Major factors that affected gross margins. The Byford Division closed-out and marked down excess inventories, resulting in a gross margin decline for the division from 34.9% in 1993 to 23.5% in 1994. Allowances for obsolences of approximately $580,000 were recorded in 1994 to account for such markdown and close-outs. Also, the Valdese, NC area experienced an unemployment rate of less than 3%, causing excess overtime, training and out sourcing for sewing and packaging product. Although overall gross margins declined, the Health Products and Telemarketing divisions gross margins improved. Gross margins in 1993 improved slightly from 1992, primarily due to sales of higher margin Byford products. Selling, General and Administrative expenses as a percentage of sales decreased from 22.8% in 1993 to 19.5% in 1994. In 1993 the bankruptcy of a major retailer caused a charge to Bad Debts of 1.1% of sales and costs associated with the Leslie Fay(Register mark) line were not repeated in 1994. Also, in 1994 management placed special emphasis on controlling S, G & A costs. Interest expense was $275,000 in 1994, $248,000 in 1993 and $235,000 in 1992. Short term interest rates began to rise in 1994 and averaged 6.98% for 1994 as compared to average rates of 6.06% in 1993 and 6.40% in 1992. Average borrowings under the short term revolver were $57,000 in 1994 as compared to $734,000 in 1993 and $56,000 in 1992. Borrowings under the short term revolver did not occur in 1994 until November 30, at which time the company used its line of credit to finance the $2,040,000 purchase of the Baxter Healthcare Systems P.A.S.(Register mark) The company plans to covert the short term financing to a long-term note in the first quarter of 1995. In general interest expense increased due to a higher average total debt in 1994. Other Income (Expense), (exclusive of Interest Income and Expenses) Net for 1994 reflected net other income of $119,773 as compared to a net other expense of $266,701 in 1993 and net other income of $97,067 in 1992. Other expense in 1993 included a write-off of $429,000 for costs related to an unconsummated acquisition. The Company continues to be faced with an unsettled retail environment. This trend, coupled with the fact that the Company is still primarily in the private label business with limited channels of distribution and is susceptible to replacement by branded products, increases the level of uncertainty about the level of sales in the future. However, management continues to search for alternate products and channels of distribution as well as aggressively pursuing branded products to combat this uncertainty in the marketplace. The Company is putting renewed (Page number appears in a leaf)21 MANAGEMENT'S DISCUSSION CONTINUED emphasis on placing its ALL DAY LONG(Register mark) brand in department stores to build its own brand. Management believes that the acquisition of Byford apparel and the renewed emphasis on the branded products are steps in the right direction. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity needs are primarily related to working capital required to support necessary increases in inventories, receivables and capital expenditures for plant and equipment renovations and expansions. These needs are being met by cash on hand, cash flow, and a short term line of credit of $3,000,000. The short term line of credit requires the Company to comply with certain restrictive covenants (see Note 3 to consolidated financial statements). These covenants permit the Company to fund capital expenditures at an adequate level to support current and future operations. Working capital increased by $1,572,925 over 1993. The increase over 1993 was primarily due to the P.A.S.(Register mark) inventories purchased from Baxter Healthcare Corporation. Cash provided by operating activities was $396,167 for 1994, compared to cash used of $869,115 in 1993 and cash provided of $2,133,607 in 1992. The cash provided by operations in 1994, was mainly the result of improved collection of accounts receivable during 1994. Net cash used in investing activities was $1,882,858 in 1994 compared to $1,462,389 in 1993 and $1,208,333 in 1992. The cash used in each of these years primarily was invested in capital expenditures to expand capacities, and to replace and update existing plant and equipment. Net cash provided by financing activities was $630,126 in 1994 compared to $1,708,317 in 1993 and to net cash used of $891,409 in 1992. Cash was provided in 1994 by short term debt and was used to finance the P.A.S.(Register mark) Business purchased from Baxter Healthcare Corporation. Anticipated capital expenditures for 1995 will be approximately $2,300,000 for the existing business. Capital expenditures will be made to renovate existing plant and equipment and to purchase new, more efficient knitting equipment. It is expected that cash required for capital expenditures will be provided by operations, supplemented by the Company's short term line of credit. SUBSEQUENT MATTERS On March 6, 1995 the Company purchased the Balfour Healthcare Division from Kayser-Roth Corporation for approximately $14.5 million, subject to post closing adjustments. The acquisition included Kayser-Roth's 258,000 square foot facility in Rockwood, Tennessee, all healthcare related machines, healthcare inventories, and healthcare accounts receivable. It is expected that the acquisition of Balfour will add approximately $15 million in annual sales to Alba's Health Products Division. Balfour manufactures and distributes component and finished tubular knit products. Their customers include manufacturers of surgical gowns and drape packs, and distributors of healthcare products. Products include gown cuffs, stockinette drapes, orthopedic stockinette for casting systems, patient footwear, infant caps, and specialty products. All products are produced in and shipped from the Rockwood facility, which has also manufactured Kayser-Roth athletic sock brands. Under a transition agreement Kayser-Roth will continue to manufacture sock products in the facility during a phase out period of approximately six months. The Company plans to integrate its Valdese Health Products Division manufacturing operations into the Rockwood facility, as Kayser-Roth phases out its sock production. The Valdese employees involved in the manufacture of Health Products will be absorbed into the Company's Consumer Products Division. The Company believes that the relocation of the Valdese Health Products manufacturing division to the Rockwood facility will help resolve the labor shortage the Company has experienced over the last few years. It is anticipated that capital expenditures of approximately $800,000 will be made for machinery to improve efficiencies and renovations to the building to accommodate the Valdese production. It is expected that cash required for capital expenditures will be provided by operations and supplemented by the Company's short term line of credit. OTHER The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" in 1992. See Summary of Significant Accounting Policies and Note 7 of the Notes to the Consolidated Financial Statements. (Page number appears in a leaf)22 QUARTERLY DATA (UNAUDITED)
QUARTERS ENDED (EXPRESSED IN THOUSANDS EXCEPT PER SHARE AMOUNTS) 1994 1993 DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, Net Sales........................ $ 13,667 $14,700 $ 14,744 $13,395 $ 13,308 $13,679 $11,870 Gross Margin..................... 3,175 4,063 3,782 3,234 3,723 3,702 2,967 Net Income....................... 264 792 549 341 16 568 98 Income per Common Share Data: Before Cumulative Effect of a Change in Accounting Principle.................... .14 .42 .30 .19 $ .01 $ .31 $ .05 Net Income..................... .14 .42 .30 .19 $ .01 $ .31 $ .05 Weighted Average Number of Shares of Common Stock Outstanding.... 1,854 1,852 1,849 1,839 1,834 1,825 1,823 MARCH 31, Net Sales........................ $11,998 Gross Margin..................... 3,087 Net Income....................... 302 Income per Common Share Data: Before Cumulative Effect of a Change in Accounting Principle.................... $ .17 Net Income..................... $ .17 Weighted Average Number of Shares of Common Stock Outstanding.... 1,823
1994 NOTE: SIGNIFICANT FOURTH QUARTER ADJUSTMENTS IN 1994 INCLUDED $202 INCREASE IN ALLOWANCE FOR INVENTORY OBSOLESCENCE ($125, NET OF INCOME TAXES). 1993 NOTE: SIGNIFICANT FOURTH QUARTER ADJUSTMENTS IN 1993 INCLUDED $556 BAD DEBT LOSSES AND $428 WRITE-OFF OF ACQUISITION COSTS ($382 AND $294, NET OF INCOME TAXES, RESPECTIVELY.) Left to right: Warren R. Nesbit, Thomas I. Nail, Charles D. Poteat, Thomas F. Schuster, Robert F. Fumento, Donald R. Denne (Page number appears in a leaf)23 CORPORATE MANAGEMENT THOMAS F. SCHUSTER CEO & President CLYDE WM. ENGLE Chairman of the Board DONALD R. DENNE Senior Vice President ROBERT F. FUMENTO Vice President JAMES DOUGLAS DICKSON, JR. Assistant Secretary Corporate Controller THOMAS I. NAIL Secretary-Treasurer & CFO WARREN R. NESBIT Vice President CHARLES D. POTEAT Vice President CORPORATE DIRECTORS TERM EXPIRING MAY 1995 CLYDE WM. ENGLE Chairman of the Board and Chief Executive Officer of Telco Capital Corporation Chicago, Illinois JOSEPH C. MINIO President Belle Haven Management Ltd. Greenwich, Connecticut THOMAS F. SCHUSTER President & Chief Executive Officer TERM EXPIRING MAY 1996 C. ALAN FORBES Management Consultant Charlotte, North Carolina LEE N. MORTENSON President and Chief Operating Officer & Director of Telco Capital Corporation Chicago, Illinois JAMES M. FAWCETT, JR. Registered Representative and Agent Equitable Financial Companies Chicago, Illinois TERM EXPIRING MAY 1997 PAUL H. ALBRITTON, JR. Management Consultant Raleigh, North Carolina WILLIAM M. COUSINS, JR. Management Consultant Jupiter, Florida GLENN J. KENNEDY Executive Vice President Acton Corporation Raleigh, North Carolina CORPORATE INFORMATION PRINCIPAL MARKET The Company's Common Stock is listed on American Stock Exchange TRANSFER AGENT - REGISTRAR First Union National Bank of North Carolina Charlotte, North Carolina NUMBER OF SHAREHOLDERS The number of holders of record of Alba's Common Stock on March 10, 1995 was approximately 376. ANNUAL MEETING Third Wednesday in May CORPORATE HEADQUARTERS Alba-Waldensian, Inc. Box 100 201 St. Germain, S.W. Valdese, North Carolina 28690 AUDITOR BDO Seidman Greensboro, North Carolina OFFER TO FURNISH FORM 10-K Upon written request of a shareholder, the Company will provide, without charge, a copy of its Annual Report on Form 10-K for the fiscal year 1994, including financial statements and schedules thereto required to be filed with the Securities and Exchange Commission. Requests should be directed to James Douglas Dickson, Jr., Alba-Waldensian, Inc., Post Office Box 100, Valdese, North Carolina 28690. (Page number appears in leaf)24 HISTORY OF ALBA-WALDENSIAN, INC. Waldensian Hosiery Mills began operating in Valdese, North Carolina in 1901, in a 40 x 80 foot building constructed of timber cut from the local farm lands. Twenty employees reported to work at this new company on May 8th that year. Over the last 94 years, Alba-Waldensian has grown into a multi-facility national company manufacturing a variety of innovative products for both domestic and international markets. Although the company began as a producer of women's knit hosiery products, in the mid-fifties the Company learned to knit women's stretch panties on their original full-fashion knitting equipment. Today, as things have progressed, the company uses state of the art technology in the form of high speed, computerized, circular knit machinery to knit stretch panties and pantyhose. In 1961, Waldensian Hosiery Mills merged with Alba Hosiery Mills to form the current Alba-Waldensian and in 1969 the corporation went public, listing its stock on the American Stock Exchange. In 1974, the company introduced a group of health products utilizing Alba's knitting expertise. This business has since grown considerably and today Alba is a leading manufacturer and marketer of products used in hospitals and nursing homes, with distribution throughout the United States, Canada, England, Europe and the Middle East. In 1989, the company formed Alba Direct, a telemarketing Division to sell the company's many products to small retail and export accounts. The company continued to diversify in 1992 with its acquisition of Byford Apparel, a leading marketer of English men's socks and sweaters. The company recognizes the influence of its Waldensian forefathers, who immigrated to Valdese, North Carolina from the Cottian Alps of Italy in 1893. With this keen sense of heritage and commitment to the future, Alba-Waldensian continues to build on its reputation for outstanding quality and service to its customers. EX-21 3 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT As of December 31, 1994 Percentage of Name Jurisdiction Stock Owned AWI Retail, Inc. North Carolina 100% Pilot Research Corp. North Carolina 100% Alba Export Corp. North Carolina 100% EX-23 4 EXHIBIT 23.1 Exhibit 23.1 INDEPENDENT AUDITORS' REPORT Alba-Waldensian, Inc. and Subsidiaries: We consent to the incorporation by reference in Registration Statement No. 33-15833 on Form S-8 of our reports dated February 11, 1994 appearing in or incorporated by reference in the Annual Report on Form 10-K of Alba-Waldensian, Inc. and subsidiaries for the year ended December 31, 1994. DELOITTE & TOUCHE LLP Hickory, North Carolina April 3, 1995 EX-23 5 EXHIBIT 23.2 Exhibit 23.2 Consent of Independent Certified Public Accountants Alba Waldensian, Inc. Valdese, NC North Carolina We hereby consent to the incorporation by reference in the Registration Statement No. 33-15833 on Form S-8 of our reports dated February 8, 1995, relating to the consolidated financial statements and schedules of Alba- Waldensian, Inc. incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Greensboro, North Carolina BDO Seidman April 5, 1995
Schedule II Alba-Waldensian, Inc. and Subsidiaries Valdese, North Carolina Valuation and Qualifying Accounts Balance at Charged to Reduction Balance Description/ Beginning of Cost and of at End Fiscal Year Ended Period Expenses Allowance of Period Year Ended December 31, 1994 Accounts Receivable-Allowance 194,000 74,933 88,933 180,000 for uncollectible accounts Notes Receivable-Allowance for 0 uncollectible accounts Inventory-Reserve for markdowns 149,000 579,997 343,797 385,200 Year Ended December 31, 1993 Accounts Receivable-Allowance 120,000 654,000 580,000 194,000 for uncollectible accounts Notes Receivable-Allowance for 43,000 43,000 0 uncollectible accounts Inventory-Reserve for markdowns 400,000 434,000 685,000 149,000 Year Ended December 31, 1992 Accounts Receivable-Allowance 164,000 13,000 57,000 120,000 for uncollectible accounts Notes Receivable-Allowance for 20,000 23,000 43,000 uncollectible accounts Inventory-Reserve for markdowns 500,000 76,000 176,000 400,000
S-2 EX-27 6 EXHIBIT 27.1
5 This schedule contains summary financial information extracted from the Consolidated Financial Statements of the Company for the year ended December 31, 1994 included in the Company's 1994 Annual Report to Shareholders and is qualified in its entirety by reference to such Annual Report. YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 103,952 0 7,426,654 0 17,264,180 25,401,506 27,102,310 15,497,062 37,729,728 5,535,445 1,000,000 4,716,450 0 0 0 37,729,728 56,506,566 56,684,202 42,252,186 53,259,920 0 0 274,739 3,149,543 1,203,667 1,945,876 0 0 0 1,945,876 1.05 1.05
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