-----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, i1SSCMbA3Kv2Y4YPCQy7EakbliIAQhGVkcWoucTjl4JBP4aJwCudMBpYJHR/IM5f iuyu9/j7Tm1phmt9JyknXg== 0000089498-94-000008.txt : 19941007 0000089498-94-000008.hdr.sgml : 19941007 ACCESSION NUMBER: 0000089498-94-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19940702 FILED AS OF DATE: 19940930 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHAW INDUSTRIES INC CENTRAL INDEX KEY: 0000089498 STANDARD INDUSTRIAL CLASSIFICATION: 2273 IRS NUMBER: 581032521 STATE OF INCORPORATION: GA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06853 FILM NUMBER: 94551062 BUSINESS ADDRESS: STREET 1: 616 E WALNUT AVE STREET 2: P O DRAWER 2128 CITY: DALTON STATE: GA ZIP: 30720 BUSINESS PHONE: 4042783812 MAIL ADDRESS: STREET 1: 616 E WALNUT AVE STREET 2: P O DRAWER 2128 CITY: DALTON STATE: GA ZIP: 30720 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended July 2, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________ to __________ Commission File Number 1-6853 Shaw Industries, Inc. (Exact name of registrant as specified in its charter) Georgia 58-1032521 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 616 East Walnut Avenue, Dalton, Georgia 30720 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: 706/278-3812 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of Each Exchange Title of Each Class On Which Registered Common Stock, No Par Value The New York Stock Exchange $1.11 Stated Value The Pacific Stock Exchange Rights to Purchase Series A Participating Preferred Stock The New York Stock Exchange $.50 Stated Value The Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF ACT: None Indicate by check mark whether the registrant (1) has filed all reports required to be filled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports and (2) has been subject to such filing requirements for the past 90 days. Yes(x) No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (x) Aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing sales price on The New York Stock Exchange on September 15, 1994 was: $ 1,678,772,693. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Title of Each Class Outstanding at September 15, 1994 Common Stock, No Par Value 139,314,302 Shares DOCUMENTS INCORPORATED BY REFERENCE 1994 Annual Report to Shareholders --- Part II. Definitive Proxy Statement for the 1994 Annual Meeting of Shareholders on October 31, 1994 --- Part III. PART I Item I. Business Shaw Industries, Inc. ("Shaw" or the "Company") is the world's largest carpet manufacturer. Shaw designs and manufactures approximately 1,600 styles of tufted and woven carpet for residential and commercial use under the PHILADELPHIA, TRUSTMARK, CABIN CRAFTS, SHAW COMMERCIAL CARPETS, STRATTON, NETWORX, SHAWMARK, EVANS BLACK, SALEM, SUTTON, KOSSET, CROSSLEY, ABINGDON, REDBOOK, MINSTER, INVICTA and TERZA trade names and under certain private labels. The Company's manufacturing operations are fully integrated from the processing of yarns through the finishing of carpet. The Company's carpet is sold in a broad range of prices, patterns, colors and textures with the majority of its sales in the medium to high retail price range. Shaw sells its products to retailers, distributors and commercial users throughout the United States, Canada, Mexico, Australia and the United Kingdom and, to a lesser degree, exports to additional overseas markets. On July 12, 1993, the Company formed a joint venture through which it acquired an interest in Capital Carpet Industries, Pty., Ltd., Melbourne, Victoria, Australia, and Invicta Group Industries, Pty., Ltd., Braybrook, Victoria, Australia (together, "CCI"), enabling the Company to participate in a government-supported rationalization of the Australian carpet industry. On November 4, 1993, the Company acquired the remaining interest in the joint venture. Until November 4, 1993, the investment was accounted for using the equity method, and accordingly, the Company included its share of CCI's income in other income. Subsequent to November 4, 1993, the results of operations of CCI are included in the Company's consolidated financial statements. On September 10, 1993, the Company acquired Abingdon Carpets, Gwent, Wales. Abingdon is a British producer of medium-priced tufted carpets and carpet yarns. The acquisition has been accounted for as a purchase transaction, and accordingly, the results of operations of Abingdon are included in the Company's consolidated financial statements since September 10, 1993. On May 31, 1994, the Company entered into an agreement to form a joint venture with Grupo Industrial Alfa, S.A. de C.V. of Monterrey, Mexico, for the manufacture, distribution and marketing of carpets, rugs and related products in Mexico and South America. The Company acquired a fify-one percent interest in Terza, S.A. de C.V., and accordingly, the subsidiary is included in consolidation at July 2, 1994 and the results of operations of Terza are included in the Company's consolidated financial statements since May 31, 1994. Geographical information about the Company's sales, operating profit and identifiable assets is incorporated by reference to page 1 19 of Exhibit 13 to this report. The results of the acquired operations in fiscal 1994 did not have a material effect on the Company's net income. Products and Marketing Substantially all carpet manufactured by the Company is tufted carpet made from nylon and polypropylene yarn. In the tufting process, yarn is inserted by multiple needles into a synthetic backing, forming loops which may be cut or left uncut, depending on the desired texture or construction. According to industry estimates, tufted carpet accounted for over 91% of unit volume shipments of carpet manufactured in the United States during calendar 1993. Substantially all carpet manufactured in the United States is made from synthetic fibers, with nylon accounting for 65.2% of the total, polypropylene 24.9%, polyester 9.4% and wool 0.5%. During fiscal 1994, the Company processed approximately 95% of its requirements for carpet yarn in its own yarn processing facilities. The Company believes that its significant investment in modern, state-of-the-art equipment has been an important factor in achieving and maintaining its leadership position in the marketplace. During the past five fiscal years, the Company has invested approximately $782 million in property additions. The Company continually seeks opportunities for increasing its sales volume and market share. For example, the Company continues to expand its product lines of carpet manufactured from polypropylene fiber, including fibers produced by the Company's own extrusion equipment. The Company also has a manufacturing facility for the production of carpet tiles for the commercial market. The overall level of sales in the carpet industry is influenced by a number of factors, including consumer confidence and spending for durable goods, interest rates, turnover in housing, the condition of the residential construction industry and the overall strength of the economy. The marketing of carpet is influenced significantly by current trends in style and fashion, principally color trends. The Company believes it has been a leader in the development of color technology in the carpet industry and that its dyeing facilities are among the most modern and versatile in the industry. The Company maintains an in-house product development department to identify developing color and style trends which are expected to affect its customers' buying decisions. In 1994 this department was further strengthened by the completion of the Shaw Industries Research and Development Center. This state-of-the-art complex includes a 75,000 square foot pilot plant featuring sample extrusion, yarn processing, tufting, dyeing, coating and shearing equipment, and three fiber and dye development laboratories. 2 Sales and Distribution The Company's products are marketed domestically by approximately 1,050 salaried sales personnel in its various marketing divisions directly to retailers and distributors and to large national accounts through the Company's National Accounts Division. The Company's ten (10) regional customer service centers and six (6) redistribution centers, along with its centralized management information system, enable it to provide prompt delivery of its products to both its retail customers and wholesale distributors. The Company's substantial investment in management information systems permits efficient production scheduling and control of inventory levels. The Company sells to approximately 37,250 retailers and national accounts located throughout the United States and Canada. Retailers and national accounts, on a combined basis, accounted for approximately 86% of the Company's carpet sales for fiscal 1994. Shaw also sells to approximately 100 wholesale distributors. Approximately 4% of the Company's carpet sales in fiscal 1994 were to distributors. Sales of Shaw products in foreign markets, including the sales of foreign subsidiaries, accounted for approximately 10% of total sales in fiscal 1994. No single customer accounted for more than 2% of the Company's sales during fiscal 1994. Competition The carpet industry is highly competitive with more than 200 companies engaged in the manufacture and sale of carpet in the United States. Carpet manufacturers also face competition from the hard surface floorcovering industry. The principal methods of competition within the carpet industry are quality, style, price and service. The Company believes its strategically located regional customer service centers and redistribution centers provide a competitive advantage to the Company by enabling it to supply carpet on a timely basis to customers. The Company's long- standing practice in investing in modern, state-of-the-art equipment contributes significantly to its ability to compete effectively on the basis of quality, style and price. Raw Materials The principal raw materials used by the Company are nylon fiber and filament, and synthetic backing; additional raw materials include polyester, polypropylene and wool fibers and filaments, jute, latex and dye. During fiscal 1994, the Company experienced no significant shortages of raw materials. Employees At July 2, 1994, the Company had approximately 24,200 full- 3 time employees. In the opinion of management, employee relations are good. Employees are involved in the Quality Improvement Process begun in 1985, a program designed to improve the Company's products and services through education and training. None of the Company's employees in the United States are represented by unions. Employees of foreign subsidiaries are represented by unions. Environmental Matters Management believes the Company is currently in compliance in all material respects with applicable federal, state and local statutes and ordinances regulating the discharge of materials into the environment and otherwise relating to the protection of the environment. Management does not believe the Company will be required to expend any material amounts in order to remain in compliance with these laws and regulations or that compliance will materially affect its capital expenditures, earnings or competitive position. Patents, Trademarks, etc. Patent protection has not been significant to the Company's business although the Company does hold several patents covering machinery used in a specific carpet coloring process. 4 Item 2. Properties Shaw's executive offices are located in Dalton, Georgia. The principal facilities operated by Shaw and described below are owned except as otherwise noted: Approximate Principal Products Location Sq. Ft. or Functions Dalton, Georgia 46,700 Executive headquarters Dalton, Georgia 145,000 Administrative offices Dalton, Georgia 114,600 Administrative offices Dalton, Georgia 229,500 Administrative offices and distribution Dalton, Georgia 309,800 Administrative offices and distribution Dalton, Georgia 291,000 Administrative offices and distribution Dalton, Georgia 235,500 Administrative offices and distribution Dalton, Georgia 372,700 Administrative offices and distribution Cartersville, Georgia 138,900 Administrative offices and warehousing Dalton, Georgia 601,000 Distribution Dalton, Georgia 400,000 Distribution Dalton, Georgia 303,200 Distribution Dalton, Georgia 371,600 Distribution Ringgold, Georgia 649,100 Distribution Ringgold, Georgia 224,200 Distribution Andalusia, Alabama 1,119,000 Yarn extrusion Thomson, Georgia 258,300 Yarn extrusion Valley Head, Alabama(1) 160,000 Yarn processing Bainbridge, Georgia 450,000 Yarn processing Blue Ridge, Georgia(4) 75,100 Yarn processing Calhoun, Georgia 262,100 Yarn processing Chatsworth, Georgia(2) 36,800 Yarn processing Chatsworth, Georgia 117,200 Yarn processing Lafayette, Georgia 131,900 Yarn processing Milledgeville, Georgia 78,600 Yarn processing Rome, Georgia 40,600 Yarn processing Decatur, Tennessee(1) 151,000 Yarn processing Eton, Georgia 423,000 Yarn processing and tufting Stevenson, Alabama 441,000 Yarn spinning Chatsworth, Georgia 188,300 Yarn spinning Dallas, Georgia 138,500 Yarn spinning Dalton, Georgia 241,600 Yarn spinning Ellijay, Georgia 157,100 Yarn spinning Fitzgerald, Georgia 250,000 Yarn spinning Newnan, Georgia 289,000 Yarn spinning 5 Approximate Principal Products Location Sq. Ft. or Functions Tifton, Georgia 142,500 Yarn spinning Toccoa, Georgia 139,000 Yarn spinning Trenton, Georgia 192,300 Yarn spinning Trenton, SC 169,500 Yarn spinning South Pittsburg, TN 187,900 Yarn spinning Cartersville, Georgia 317,600 Tufting, dyeing & coating Cartersville, Georgia 171,800 Tufting, dyeing & coating Dalton, Georgia 650,240 Tufting, dyeing & coating Dalton, Georgia 461,000 Tufting, dyeing & coating Dalton, Georgia 326,000 Tufting, dyeing & coating Dalton, Georgia 354,900 Tufting, dyeing & coating Dalton, Georgia 579,600 Tufting, dyeing & coating Dalton, Georgia 376,200 Tufting & printing Ringgold, Georgia 201,000 Tufting Dalton, Georgia 150,000 Dyeing Dalton, Georgia 267,000 Dyeing and coating Dalton, Georgia 231,300 Printing, foaming & warehousing Cartersville, Georgia(3) 192,000 Carpet tile manufacturing Cartersville, Georgia 255,200 Contract carpet manufacturing Charlotte, N.C. 112,400 Backing manufacturing Ringgold, Georgia(5) 248,000 Finishing and rug manufacturing Winchester, Tennessee 320,600 Carpet manufacturing Chickamauga, Georgia(2) 219,500 Sample manufacturing and warehousing Dalton, Georgia 197,680 Sample manufacturing and warehousing Dalton, Georgia(2) 103,100 Sample manufacturing and warehousing Dalton, Georgia 147,200 Sample manufacturing and warehousing Dalton, Georgia (2) 154,800 Sample manufacturing and warehousing Dalton, Georgia (2) 45,200 Carpet store Dalton, Georgia 55,000 Design Center Dalton, Georgia 85,000 Research and Development Center Bradford, England 746,000 Tufting, weaving, coating, distribution and 6 Approximate Principal Products Location Sq. Ft. or Functions administrative offices. Gwent, Wales 265,000 Yarn extrusion, yarn processing, tufting, dyeing and coating Victoria, Australia 1,425,000 Yarn extrusion, yarn processing, tufting, dyeing, coating, distribution and administrative offices Monterrey, Mexico 288,000 Yarn processing, tufting, dyeing, coating, distribution and adminstrative offices. (1) Leased from Industrial Development Boards. (2) Subject to a lease expiring in calendar year 1994. (3) Subject to a lease expiring in calendar year 1995. (4) Subject to a lease expiring in calendar year 1997. (5) Subject to a lease expiring in calendar year 2007. Shaw maintains leased warehouses and customer service facilities in or near Dallas; Los Angeles (2); Seattle; San Francisco; Denver; Chicago; Minneapolis; Boston; and, Cranbury, New Jersey. Each leased warehouse facility includes a sales showroom. The Company also maintains redistribution centers in Orlando, Florida; Columbus, Ohio; Kernersville, North Carolina; Mechanicsburg, Pennsylvania; St. Louis, Missouri; and, Fredericksburg, Virginia. Management of the Company believes all of its properties are suitable and adequate for its current operations and are substantially utilized. 7 Item 3. Legal Proceedings From time to time the Company is subject to claims and suits arising in the course of its business. In April 1993, the Company became a defendant in certain litigation alleging personal injury resulting from personal exposure to volatile organic compounds found in carpet produced by the Company. The complaints seek injunctive relief and unspecified money damage on all claims. The Company has denied any liability. In May 1993, the Company became a defendant in certain litigation alleging violation of both federal and state laws relating to unfair competition. The complaint seeks an injunction regarding the unfair competition claims and money damages. The Company has denied any liability. The Company believes that is has meritorious defenses in these suits and that the litigation will not have a material adverse effect on the Company's financial condition or results of operations. The Company will vigorously defend these suits. In June 1994, the Company and several other carpet manufacturers received grand jury subpoenas from the Antitrust Division of the United States Department of Justice relating to an investigation of the industry. The Company believes that once this investigation is completed it will not have a material adverse effect on the Company's financial condition or results of operations. At the end of fiscal year 1994, there were no other pending legal proceedings to which the Company was a party or to which any of its property was subject which, in the opinion of management, were likely to have a material adverse effect on the Company's business, financial condition or results of operations. Item 4. Submission of Matters to Vote of Security Holders Not applicable. 8 Item 4(A). Executive Officers of the Registrant Officer Name Age Since Position J. C. Shaw 64 1967 Chairman of the Board of Directors Robert E. Shaw 63 1967 President and Chief Executive Officer and Director William C. Lusk, Jr. 59 1971 Senior Vice President and Treasurer and Director W. Norris Little 63 1978 Senior Vice President, Operations and Director Vance D. Bell 43 1983 Vice President, Marketing Joseph M. DeVittorio 59 1992 Vice President, Corporate Planning Bennie M. Laughter 43 1986 Vice President, Secretary and General Counsel Carl P. Rollins 51 1991 Vice President Douglas H. Hoskins 59 1978 Controller Messrs. J. C. Shaw and Robert E. Shaw are brothers. There are no other family relationships among any of the executive officers of the Company. Officers of the Company are elected annually by the Board of Directors. All of the executive officers of the Company except for Mr. Devittorio and Mr. Rollins have served as executive officers for the Company for more than the past five years. Mr. DeVittorio joined the Company in October 1992, as a Vice President. Prior to joining the Company, Mr. DeVittorio was Senior Vice President and General Manager of Allied Signal's Fibers Division. Mr. Rollins joined the Company in June, 1991, as a Vice President. Prior to June, 1991, Mr. Rollins had been engaged in the private practice of law with the firm of McCamy, Phillips, Tuggle, Rollins & Fordham, in Dalton, Georgia. 9 PART II Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters The high and low sales prices for the Company's common stock as reported by the New York Stock Exchange and the amount of dividends paid by quarter for the last two fiscal years are set forth on page 2 of Exhibit 13. Reference is made to Note 2 of Notes to Consolidated Financial Statements on page 13 of Exhibit 13 for information concerning restrictions on the payment of cash dividends. At September 1, 1994, there were 2,184 holders of record of the Company's common stock. Item 6. Selected Financial Data This information is set forth on pages 3-4 of the Exhibit 13 under the caption "Ten Year Financial Review." Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This information is set forth on pages 5-6 of Exhibit 13 to this report. Item 8. Financial Statements and Supplementary Data This information is set forth on pages 7-21 of Exhibit 13. Item 9. Disagreements on Accounting and Financial Disclosure None. 10 PART III Item 10. Directors and Executive Officers of the Registrant Information concerning directors is incorporated by reference to "Election of Class of Directors" on pages 3-6 of the Proxy Statement for the 1994 Annual Meeting of Shareholders. Reference is also made to Item 4(A) of Part I of this report, "Executive Officers of the Registrant," which information is incorporated herein. Item 11. Executive Compensation This information is incorporated by reference to "Executive Compensation" on pages 6-11 of the Proxy Statement for the 1994 Annual Meeting of Shareholders. Item 12. Security Ownership of Certain Beneficial Owners and Management This information is incorporated by reference to "Voting Rights and Principal Shareholders" and "Election of Directors" on pages 1- 2 and 3-6 respectively, of the Proxy Statement for the 1994 Annual Meeting of Shareholders. 11 PART IV Item 13. Certain Relationships and Related Transactions This information is incorporated by reference to "Certain Relationships" on page 5 of the Proxy Statement for the 1994 Annual Meeting of Shareholders. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements Exhibit 13, a copy of which is filed with this Form 10-K, contains the balance sheets as of July 2, 1994, and July 3, 1993, the related statements of income, shareholders' investment and cash flows for each of the three years in the period ended July 2, 1994, and the related report of Arthur Andersen LLP. These financial statements and the report of Arthur Andersen LLP. are incorporated herein by reference. The financial statements, incorporated by reference, include the following: - Balance Sheets -- July 2, 1994, and July 3, 1993. - Statements of Income and Statements of Shareholders' Investment for the years ended July 2, 1994, July 3, 1993, and June 27, 1992. - Statements of Cash Flows for the years ended July 2, 1994, July 3, 1993, and June 27, 1992. - Notes to Financial Statements -- July 2, 1994, July 3, 1993, and June 27, 1992. 2. Financial Statement Schedules - Report of Independent Public Accountants as to Schedules: Schedule Number V Property, Plant and Equipment for the Years Ended July 2, 1994, July 3, 1993, and June 27, 1992. VI Accumulated Depreciation and Amortization of Property, Plant and Equipment for the Years Ended July 2, 1994, July 3, 1993, and June 27, 1992. 12 VIII Valuation and Qualifying Accounts for the Years Ended July 2, 1994, July 3, 1993, and June 27, 1992. IX Aggregate Short-term Borrowings for the Years Ended July 2, 1994, July 3, 1993, and June 27, 1992. 13 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Shaw Industries, Inc.: We have audited, in accordance with generally accepted auditing standards, the financial statements of Shaw Industries, Inc. included in this annual report to shareholders on Form 10-K and have issued our report thereon dated August 8, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. Schedules V, VI, VIII, and IX are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state, in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Atlanta, Georgia August 8, 1994 SCHEDULE V SHAW INDUSTRIES, INC. PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED JULY 2, 1994, JULY 3, 1993, AND JUNE 27, 1992 Balance at Beginning Additions, Balance at of Year at Cost Retirements End of Year YEAR ENDED JUNE 27, 1992 (a): Land and land improvements $ 12,470,000 $ 2,521,000 $ 0 $ 14,991,000 Buildings 112,697,000 50,260,000 (50,000) 162,907,000 Machinery and equipment 444,972,000 77,541,000 (22,000) 522,491,000 Leasehold improvements 2,030,000 1,774,000 0 3,804,000 Construction in progress 28,424,000 (13,860,000) 0 14,564,000 $ 600,593,000 $ 118,236,000 $ (72,000)$ 718,757,000 YEAR ENDED JULY 3, 1993 (b): Land and land improvements $ 14,991,000 $ 2,497,000 $ (4,000)$ 17,484,000 Buildings 162,907,000 30,185,000 0 193,092,000 Machinery and equipment 522,491,000 119,133,000 (544,000) 641,080,000 Leasehold improvements 3,804,000 88,000 0 3,892,000 Construction in progress 14,564,000 5,314,000 0 19,878,000 $ 718,757,000 $ 157,217,000 $ (548,000)$ 875,426,000 YEAR ENDED JULY 2, 1994: Land and land improvements $ 17,484,000 $ 10,771,000 $ (59,000)$ 28,196,000 Buildings 193,092,000 34,489,000 (521,000) 227,060,000 Machinery and equipment 641,080,000 110,412,000 (7,584,000) 743,908,000 Leasehold improvements 3,892,000 951,000 (11,000) 4,832,000 Construction in progress 19,878,000 94,745,000 (19,000) 114,604,000 $ 875,426,000 $ 251,368,000 $ (8,194,000)$ 1,118,600,000 (a) 1992 additions are primarily the result of the acquisition of Salem Carpet Mills, Inc. (b) 1993 additions are primarily the result of the acquisition of certain of the carpet fiber manufacturing facilities of Amoco Fabrics and Fibers Company. /TABLE
SCHEDULE VI SHAW INDUSTRIES, INC. ACCUMULATED DEPRECIATION AND AMORTIZATION PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED JULY 2, 1994, JULY 3, 1993, AND JUNE 27, 1992 Additions Balance at Charged to Beginning Costs and Balance at of Year Expenses Retirements End of Year YEAR ENDED JUNE 27, 1992: Land and land improvements $ 1,323,000 $ 182,000 $ 0 $ 1,505,000 Buildings 21,394,000 4,481,000 (7,000) 25,868,000 Machinery and equipment 242,872,000 58,415,000 (9,000) 301,278,000 Leasehold improvements 539,000 89,000 0 628,000 $ 266,128,000 $ 63,167,000 $ (16,000)$ 329,279,000 YEAR ENDED JULY 3, 1993: Land and land improvements $ 1,505,000 $ 257,000 $ 0 $ 1,762,000 Buildings 25,868,000 5,693,000 0 31,561,000 Machinery and equipment 301,278,000 66,870,000 (281,000) 367,867,000 Leasehold improvements 628,000 170,000 0 798,000 $ 329,279,000 $ 72,990,000 $ (281,000)$ 401,988,000 YEAR ENDED JULY 2, 1994: Land and land improvements $ 1,762,000 $ 366,000 $ 0 $ 2,128,000 Buildings 31,561,000 7,127,000 0 38,688,000 Machinery and equipment 367,867,000 76,337,000 (5,038,000) 439,166,000 Leasehold improvements 798,000 256,000 (11,000) 1,043,000 $ 401,988,000 $ 84,086,000 $ (5,049,000)$ 481,025,000 /TABLE
SCHEDULE VIII SHAW INDUSTRIES, INC. VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED JULY 2, 1994, JULY 3, 1993, AND JUNE 27, 1992 Additions Balance at Charged to Beginning Costs and Balance at of Year Expenses Deductions End of Year YEAR ENDED JUNE 27, 1992: Allowance for doubtful accounts and discounts $ 5,941,000 $ 58,804,000 $ 55,461,000 $ 9,284,000 YEAR ENDED JULY 3, 1993: Allowance for doubtful accounts and discounts $ 9,284,000 $ 91,418,000 $ 86,360,000 $ 14,342,000 YEAR ENDED JULY 2, 1994: Allowance for doubtful accounts and discounts $ 14,342,000 $ 107,179,000 $ 103,066,000 $ 18,455,000 /TABLE
SCHEDULE IX SHAW INDUSTRIES, INC. AGGREGATE SHORT-TERM BORROWINGS FOR THE YEARS ENDED JULY 2, 1994, JULY 3, 1993, AND JUNE 27, 1992 Average Weighted Weighted Maximum Amount Average Average Amount Outstanding Interest Balance at Interest Outstanding During Rate During End of Year Rate During Year Year (a) Year (b) YEAR ENDED JUNE 27, 1992 $ 45,000,000 4.43% $ 45,000,000 $ 22,917,000 4.9% YEAR ENDED JULY 3, 1993 $ 20,000,000 3.63% $ 170,000,000 $ 72,500,000 4.2% YEAR ENDED JULY 2, 1994 $ 135,000,000 3.60% $ 135,000,000 $ 53,333,000 3.6% (a) The average amount outstanding during the year was computed by dividing the total of month-end outstanding principal balances by the number of months that balances were outstanding at month-end. (b) The weighted average interest rate during the year was computed by dividing the actual interest expenses related to short-term borrowings by average short-term debt outstanding. /TABLE Number Description 3. Exhibits incorporated by reference or filed with this report. 3(a) Amended and Restated Articles of Incorporation. [Incorporated herein by reference to Exhibit 3(a) to Registrant's Registration Statement filed with the Commission on December 28, 1993, (File No. 33-51719).] 3(b) Bylaws. [Incorporated herein by reference to Exhibit 3(b) to Registrant's Registration Statement filed with the Commission on December 28, 1993, (File No. 33-51719).] 4(a) Specimen form of Common Stock Certificate. [Incorporated herein by reference to Exhibit 2 to Registrant's Report on Form 8-A filed with the Securities and Exchange Commission on May 12, 1989 (File No. 1-6853).] 4(b) Articles II, V and VI of the Restated Articles of Incorporation, as amended, contained in Exhibit 3(a), and Articles Two and Seven and Section 8.1 of the Bylaws of Registrant, contained in Exhibit 3(b), and Statement of Designation, Preferences and Rights of Series A Participating Preferred Stock, filed as Exhibit 3(c), are incorporated herein by reference. 4(c) Rights Agreement dated as of April 10, 1989, between Registrant and Citizens and Southern Trust Company (Georgia), N.A., as Rights Agent. [Incorporated herein by reference to Exhibit 1 to Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 1989 (File No. 1-6853).] 10(a) Reserved 10(b)* Deferred Compensation Plan and form of Deferred Compensation Agreement of Registrant as adopted in April, 1980. 10(c) Reserved 10(d) Reserved 10(e) Reserved 10(f) Reserved 10(g) Loan Agreement dated February 1, 1991, between Registrant and The Citizens and Southern National Bank, regarding a $200,000,000 revolving credit facility. [Incorporated herein by reference to Exhibit 10(g) to Registrant's Report on Form 10-K for the fiscal year ended June 29, 1991 (File No. 1- 6853).] 10(h)* 1987 Incentive Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to Registrant's 1987 Proxy Statement, dated September 22, 1987 (File No. 1-6853).] 10(i) Reserved 10(j)* 1989 Discounted Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to Registrant's 1989 Proxy Statement, dated September 21, 1989 (File No. 1-6853).] 10(k)* 1992 Incentive Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to Registrant's 1992 Proxy Statement, dated September 18, 1992 (File No.1- 6853).] 11 Computation of Earnings per Share for the fiscal years ended July 2, 1994, July 3, 1993 and June 27, 1992. 13 Items Incorporated by Reference From the 1994 Annual Report to Shareholders. 21 List of Subsidiaries. 23 Consent of independent public accountants. 27 Financial Data Schedule. * Compensatory plan or management contract required to be filed as an exhibit to Item 14(c) of Form 10-K. (b) No reports on Form 8-K were filed during the last quarter of fiscal 1994. 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. SHAW INDUSTRIES, INC. Date: September 28, 1994 By: /S/ROBERT E. SHAW Robert E. Shaw President and 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. Date: September 28, 1994 /S/ ROBERT E. SHAW Robert E. Shaw President, Chief Executive Officer and Director Date: September 28, 1994 /S/ J. C. SHAW J. C. Shaw Chairman of the Board of Directors Date: September 28, 1994 /S/ WILLIAM C. LUSK, JR. William C. Lusk, Jr. Sr. VP, Treasurer and Director (Principal Financial and Accounting Officer) Date: September 28, 1994 /S/ W. NORRIS LITTLE W. Norris Little Senior VP, Operations and Director Date: September 28, 1994 /S/ ROBERT R. HARLIN Robert R. Harlin Director Date: September 28, 1994 /S/ THOMAS G. COUSINS Thomas G. Cousins Director Date: September 28, 1994 /S/ S. TUCKER GRIGG S.Tucker Grigg Director Date: September 28, 1994 /S/ CLIFFORD M. KIRTLAND, Jr. Clifford M. Kirtland, Jr. Director Date: September 28, 1994 /S/ J. HICKS LANIER J. Hicks Lanier Director Date: September 28, 1994 /S/ R. JULIAN McCAMY R. Julian McCamy Director Exhibit Page Number Description Number 3(a) Amended and Restated Articles of Incorporation. [Incorporated herein by reference to Exhibit 3(a) to Registrant's Registration Statement filed with the Commission on December 28, 1993, (File No. 33-51719).] 3(b) Bylaws. [Incorporated herein by reference to Exhibit 3(b) to Registrant's Registration Statement filed with the Commission on December 28, 1993, (File No. 33-51719).] 4(a) Specimen form of Common Stock Certificate. [Incorporated herein by reference to Exhibit 2 to Registrant's Report on Form 8-A filed with the Securities and Exchange Commission on May 12, 1989 (File No. 1-6853).] 4(b) Articles II, V and VI of the Restated Articles of Incorporation, as amended, contained in Exhibit 3(a), and Articles Two and Seven and Section 8.1 of the Bylaws of Registrant, contained in Exhibit 3(b), and Statement of Designation, Preferences and Rights of Series A Participating Preferred Stock, filed as Exhibit 3(c), are incorporated herein by reference. 4(c) Rights Agreement dated as of April 10, 1989, between Registrant and Citizens and Southern Trust Company (Georgia), N.A., as Rights Agent. [Incorporated herein by reference to Exhibit 1 to Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 1989 (File No. 1-6853).] 10(a) Reserved 10(b)* Deferred Compensation Plan and form of Deferred Compensation Agreement of Registrant as adopted in April, 1980. 10(c) Reserved 10(d) Reserved 10(e) Reserved 10(f) Reserved 10(g) Loan Agreement dated February 1, 1991, between Registrant and The Citizens and Southern National Bank, regarding a $200,000,000 revolving credit facility. [Incorporated herein by reference to Exhibit 10(g) to Registrant's Report on Form 10-K for the fiscal year ended June 29, 1991 (File No. 1- 6853).] 10(h)* 1987 Incentive Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to Registrant's 1987 Proxy Statement, dated September 22, 1987 (File No. 1-6853).] 10(i) Reserved 10(j)* 1989 Discounted Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to Registrant's 1989 Proxy Statement, dated September 21, 1989 (File No. 1-6853).] 10(k)* 1992 Incentive Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to Registrant's 1992 Proxy Statement, dated September 18, 1992 (File No.1- 6853).] 11 Computation of Earnings per Share for the fiscal years ended July 2, 1994, July 3, 1993 and June 27, 1992. 13 Items Incorporated by Reference From the 1994 Annual Report to Shareholders. 21 List of Subsidiaries. 23 Consent of independent public accountants. 27 Financial Data Schedule. * Compensatory plan or management contract required to be filed as an exhibit to Item 14(c) of Form 10-K. (b) No reports on Form 8-K were filed during the last quarter of fiscal 1994. EX-10 2 EXHIBIT 10(b) SHAW INDUSTRIES, INC. DEFERRED COMPENSATION PLAN The Board of Directors of Shaw Industries, Inc. (the "Company") hereby recognizes that it is in the best interests of the Company to provide incentive for highly compensated key employees to remain in the employ of the Company, to reward such employees for outstanding service and to provide a system of benefits that will assist the Company to attract and retain the services of additional key employees. The Board of Directors hereby determines that in order to achieve these goals, the Company should adopt a deferred compensation plan to provide for the payment of benefits to certain key employees selected by the Board of Directors upon their retirement, death or disability, provided they have remained in the employ of the Company until the occurrence of such an event. Consequently, the following deferred compensation plan (the "Plan") is hereby approved and adopted. l. Name of the Plan. This Plan, as now enacted and as hereafter amended, shall be known as the Shaw Industries, Inc. Deferred Compensation Plan. 2. Purpose of Plan. The purposes of the Plan are to retain the services of highly compensated key employees for the Company, to reward them for outstanding performances in the past, to encourage them to continue to devote their full attention and efforts to the growth and profitability of the Company and to recruit new key employees for the Company. 3. Determination of Eligibility. The Board of Directors of the Company, or its designated Compensation Committee, shall have the right to determine those key employees who shall be eligible to participate in the Plan. The Board of Directors or such committee, which shall hereafter collectively be referred to as the "Board", shall have the further right and authority to enter into agreements with such designated employees pursuant to the Plan and to modify, alter or terminate such agreements with the consent or approval of the affected employees. 4. Amount of Benefits. The Board shall have the sole and exclusive right to determine the amount of deferred compensation to be paid to any designated employee pursuant to the Plan; however, unless specifically approved by a majority of the members of the Board of Directors (excluding the votes of any members of the Board who may be beneficiaries of such a proposal), the maximum amount payable to any employee under this plan (the "Benefit Amount") shall not exceed twice the Annual Benefit Amount as defined. Unless otherwise specified by the Board, the Annual Benefit Amount shall be equal to the average of the three highest years of income for the designated employee for the last five years prior to retirement, death or total disability. 5. Payment of Benefits. The Board shall determine the appropriate method of payment for each employee under the Plan, but the typical method of payment shall constitute payment of the aggregate Benefit Amount in 120 equal monthly installments over the 10 year period following the employee's death, retirement or total disability. The Board is hereby specifically authorized, in its discretion, to negotiate for a more rapid payment, on a discounted basis, if it determines that such an accelerated method of payment is in the best interests of the Company and the employee. The basis and amount of any discount shall be determined by the Board, in its discretion, subject to the agreement of the employee or his designated beneficiary, executors, heirs or personal representatives. 6. Early Retirement. Upon the mutual agreement of an employee participating in the Plan and the Board, such an employee who elects to take early retirement may receive benefits under the Plan on such terms as the Board and such employee may determine. 7. Forfeiture of Benefits. Benefits to be received by designated employees under the Plan are forfeitable. In the event that the employee should at any time voluntarily resign from the Company or be terminated for cause (as defined), all benefits payable to such employee under the Plan shall immediately terminate and the Company shall have no obligation to pay any amounts under this Plan to such employee. As used in this Plan and in any agreement between the Company and designated employee, the term "cause" shall mean acts of gross negligence or willful or wanton disregard for duties; conviction of a crime involving moral turpitude; or the commission or omission of any other acts deemed by the Board to be inimical to the best interest of the Company. The determination of "cause" shall be made solely by the Board, in its exclusive discretion, and its determination shall be final and binding. 8. Method of Funding. Nothing contained in this Plan shall create any obligation on the part of the Company to fund its obligations under this Plan or to establish a separate or segregated fund for its obligations under this Plan. 9. Evidence of Agreement. The Company and each designated employee shall enter into an agreement containing the terms of the Plan as set forth above and such other terms and conditions as the Board shall deem necessary or appropriate. 10. Termination. The Board shall have the right to amend, modify or terminate this Plan at any time in its sole discretion. DEFERRED COMPENSATION AGREEMENT This Agreement is made and entered into this ____________ day of ________________, 19 _____ between ____________________ (the "Employee") and SHAW INDUSTRIES, INC., a Georgia corporation ("Shaw"). Employee is currently employed by Shaw as __________________(title) and in such capacity and others has rendered valuable services to Shaw which have been of outstanding merit and which have contributed to the growth and development of Shaw. The Board of Directors of Shaw, in recognition of such past services and as an incentive to assure that the Employee will continue his best efforts on behalf of Shaw, now desires, together with the Employee, to provide for certain deferred compensation of the Employee to take effect on the employee's death, retirement or total disability as set forth herein. Therefore, in consideration of the services performed by the Employee for Shaw in the past and in consideration and contemplation of services to be performed by the Employee for Shaw in the future, the Employee and Shaw hereby agree as follows: l. Definition. (a) "Annual Benefit Amount" shall mean the average annual gross compensation of the Employee for the three highest years of income over the five years of service immediately preceding the Determination Date. In the event that the Determination Date occurs on a date other than the last day of Shaw's fiscal year, the Annual Gross Compensation for the year in which the Determination Date occurs shall be equal to the annualized amount of the Employee's actual gross salary through the Determination Date plus any bonus or other incentive compensation paid or accrued through the Determination Date. (b) "Benefit Amount" shall mean the number obtained by multiplying the Annual Benefit Amount by a factor of 2. (c) "Cause" shall mean conduct by the Employee consisting of gross negligence, wanton or willful disregard of his duties, conviction of a crime involving moral turpitude or any other act or omission determined by the Board of Directors to be inimical to the best interests of Shaw. The determination of cause shall be made by the Board, solely in its discretion,and its determination shall be final and binding. (d) "Designated Beneficiary" shall mean the person or persons specified as beneficiary or beneficiaries by the Employee in writing to Shaw. If, at the Employee's death, the named beneficiary or all beneficiaries shall not be alive, the term Designated Beneficiary shall mean the estate of the deceased Employee acting through his administrator, executor or personal representative. (e) "Determination Date" shall mean the earlier of: (i) retirement, whether upon early retirement approved by Shaw, at normal retirement age established by Shaw or at such later date as the employee may retire, (ii) the date of the determination of total disability (as herein defined) by the Board of Directors of Shaw or (iii) death. (f) "Benefit Period". Unless otherwise specified herein, the Benefit Period shall mean the ten year period commencing with the first day of the month following the Determination Date. (g) "Total Disability" shall mean total and permanent disability of the Employee such that he is unable to perform his duties in a manner satisfactory to Shaw as determined in a resolution by the Board of Directors of Shaw whose decision shall be final and binding. Employee hereby consents to be examined by such physicians as Shaw may request to assist Shaw in determining whether total disability has occurred. 2. Benefits. (a) Retirement. If the Employee shall continue in Shaw's employ until his normal retirement date established by Shaw then upon his normal retirement date, or such later date as the Employee shall actually retire, Shaw shall pay the Employee the Benefit Amount as herein defined during the Benefit Period as herein defined, commencing on the first day of the month next following his retirement and continuing on a monthly basis thereafter for a total of 120 monthly payments. In the event of the Employee's death after retirement but prior to completion of the payment of the Benefit Amount, the remaining payments shall be paid to such person or persons as the Employee shall Save designated in writing to Shaw. During the Benefit Period, Employee shall, at Shaw's request, be available at mutually agreeable times to provide consultation and advice to Shaw, but Employee shall not be required to travel away from his residence for purposes of such consultation unless all expenses incurred by him are paid by Shaw. Also during the Benefit Period, without the prior consent of Shaw, Employee shall not offer his services as a consultant to any other carpet manufacturer or own more than ten percent of stock of or be employed in an executive capacity by any other carpet manufacturer which competes with Shaw. Payments to the Employee of the Benefit Amount are conditioned upon his fulfillment of these obligations and if Employee should materially breach any of the foregoing requirements, the Board of Directors of Shaw may suspend or eliminate any future payments. The determination by the Board of Directors of Shaw of a material breach shall be final and conclusive. (b) Total Disability. In the event the Employee becomes totally disabled as herein defined while employed by Shaw, the Board of Directors of Shaw may by resolution terminate the active services of Employee. In such event Shaw shall pay the full Benefit Amount to the Employee over the Benefit Period, as such terms are herein defined, in equal monthly payments as described in Paragraph 2(a) above or as may be mutually agreed upon as provided in Paragraph 2(d) below. If the Employee should die after the onset of total disability but prior to retirement, the Employee shall be deemed to have retired at death and payments of the Benefit Amount originally determined at the onset of total disability shall be continued for the remainder of the Benefit Period established at the time of total disability to the Designated Beneficiary. (c) Death. If the Employee should die while employed by Shaw prior to his normal retirement date, Shaw shall pay to such person or persons designated in writing by the Employee Benefit Amount during the Benefit Period in equal monthly payments as described in Paragraph 2(a) above as those terms are herein defined. (d) Lump Sum or Modified Payments. At any time after the retirement, death or disability of the Employee, Shaw and the Employee or, in the event of the Employee's death, the Designated Beneficiary may agree upon a more accelerated method of payment, or a lump sum payment of all the unpaid balance of the Benefit Amount, discounted to present value by any method mutually satisfactory to the parties. 3. Other Benefits. Nothing contained in this Agreement shall be construed to alter, impair or affect the rights of the Employee to participate in any pension, profit-sharing or other benefit plan now or hereafter adopted by Shaw. 4. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Employee and his personal representative, heirs, and executors and to Shaw and its successors and assigns. 5. Entire Agreement. This Agreement constitutes the sole and entire agreement between the parties concerning the subject matter hereof and may be altered or amended only in writing and signed by the party against whom enforcement of this agreement may be sought. 6. Governing Law. This Agreement shall be construed and enforced in accordance with Georgia Law. 7. Relationship Between the Parties. This Agreement shall not be construed as an employment agreement between the Employee and Shaw nor shall any provision hereof restrict Shaw's right to modify or terminate the services of the Employee. IN WITNESS WHEREOF, Shaw and the Employee have each duly executed this Agreement the day and year written above. _________________________(Seal) Employee SHAW INDUSTRIES, INC. BY:____________________________ DESIGNATED BENEFICIARY I hereby designate ___________________________, my_________________, as my beneficiary under the foregoing agreement, reserving the right to change said beneficiary at any time by written notice to Shaw. If at my death the person or persons named above do not survive me, then I designate my estate as the beneficiary under the foregoing agreement. ________________________________ Employee ________________________________ DATE EX-11 3
SHAW INDUSTRIES,INC. EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS FOR THE YEARS ENDED JULY 2, 1994, JULY 3, 1993 and JUNE 27, 1992 (In Thousands, Except Per Share Data) 1994 1993 1992 PRIMARY: Weighted average common shares outstanding 143,485 137,854 121,296 Additional shares assuming exercise of stock options 1,620 2,456 3,591 Average common shares outstanding, as adjusted 145,105 140,310 124,887 Net income $129,172 $100,623 $58,045 Primary earnings per common share $0.89 $0.72 $0.46 FULLY DILUTED: Weighted average common shares outstanding 143,485 137,854 121,296 Additional shares assuming exercise of stock options 1,651 2,786 3,719 Average common shares outstanding, as adjusted 145,136 140,640 125,015 Net income $129,172 $100,623 $58,045 Fully diluted earnings per common share $0.89 $0.72 $0.46 Note: Adjusted for two-for-one stock splits effected in the form of a stock dividend in December 1993 and March 1992.
EX-13 4 EXHIBIT 13 SHAW INDUSTRIES, INC. ITEMS INCORPORATED BY REFERENCE FROM THE 1994 ANNUAL REPORT TO SHAREHOLDERS Page 1. Stock Prices and Dividends Paid Information 2 2. Selected Financial Data - Ten Year Financial Review 3-4 3. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-6 4. Financial Statements and Supplementary Data 7-21 Shaw Industries, Inc. Stock Information High and low stock prices and cash dividends paid by fiscal quarter (after giving effect to two-for-one stock splits effected in the form of stock dividends in December 1993 and March 1992). 1994 1993 1992 Dividends Paid (Cents) High Low High Low High Low 1994 1993 1992 1st Quarter 24 5/8 16 14 10 1/4 9 5/8 8 4.50 3.75 3.12 2nd Quarter 25 1/2 20 1/8 15 1/2 10 1/4 8 7//8 6 1/8 4.50 3.75 3.13 3rd Quarter 25 17 7/8 19 3/4 14 7/8 14 3/8 8 1/2 5.50 4.50 3.75 4th Quarter 22 1/2 15 3/4 19 7/8 14 1/8 14 9 7/8 5.50 4.50 3.75 Total 20.00 16.50 13.75 On September 1, 1994, there were 2,184 holders of record of the Company's common stock.
2 10 YEAR FINANCIAL REVIEW SHAW INDUSTRIES, INC. (Dollars in 000's except per share data) 1994 1993 1992 1991 1990 Net Sales $ 2,630,034 $ 2,320,810 $ 1,751,285 $ 1,607,757 $ 1,475,390 Cost of Sales $ 2,070,915 $ 1,851,126 $ 1,424,951 $ 1,339,569 $ 1,182,980 Selling, General and Administrative Expenses $ 326,291 $ 280,529 $ 206,548 $ 180,094 $ 159,573 Interest Expense, Net $ 25,154 $ 26,520 $ 25,402 $ 34,878 $ 27,150 Other Expenses (Income) $ (4,326) $ (361) $ 164 $ (279) $ (237) Income Before Income Taxes $ 212,000 $ 162,996 $ 94,220 $ 53,495 $ 105,924 As a Percentage of Net Sales 8.1 % 7.0 % 5.4 % 3.3 % 7.2 % Effective Tax Rate 37.4 % 38.3 % 38.4 % 38.2 % 38.2 % Income Before Extraordinary Item $ 132,535 $ 100,623 $ 58,045 $ 33,051 $ 65,443 Extraordinary Item $ (3,363) $ -- $ -- $ -- $ -- Net Income $ 129,172 $ 100,623 $ 58,045 $ 33,051 $ 65,443 As a Percentage of Net Sales 4.9 % 4.3 % 3.3 % 2.1 % 4.4 % As a Percentage of Average Total Assets 8.7 % 8.5 % 6.1 % 4.1 % 9.8 % As a Percentage of Average Invested Capital 12.9 % 11.9 % 8.7 % 6.0 % 14.2 % As a Percentage of Average Shareholders' Investment 18.7 % 17.9 % 17.5 % 14.9 % 31.0 % Earnings Per Share: Primary and Fully Diluted $ 0.89 $ 0.72 $ 0.46 $ 0.29 $ 0.53 Cash Dividends Per Share $ 0.20 $ 0.165 $ 0.138 $ 0.125 $ 0.113 Property Additions $ 251,368 $ 157,217 $ 118,236 $ 87,459 $ 167,732 Depreciaton and Amortization $ 86,518 $ 73,580 $ 63,167 $ 59,279 $ 46,311 Weighted Average Shares Outstanding: Primary 145,104,828 140,310,268 124,887,450 114,478,396 123,907,712 Fully Diluted 145,136,362 140,639,848 125,015,030 115,275,232 123,907,712 At Year-End: Working Capital $ 404,715 $ 433,947 $ 392,848 $ 256,700 $ 258,053 Current Ratio 1.8 2.3 2.4 2.2 2.1 Property, Plant and Equipment, Net $ 637,575 $ 473,438 $ 389,478 $ 334,465 $ 308,186 Total Assets $ 1,682,148 $ 1,280,410 $ 1,090,055 $ 813,519 $ 793,505 Total Long-Term Debt $ 382,192 $ 248,309 $ 316,077 $ 357,319 $ 304,375 Shareholders' Investment $ 710,100 $ 670,048 $ 457,334 $ 205,946 $ 237,403 Total Invested Capital* $ 1,092,292 $ 918,357 $ 773,411 $ 563,265 $ 541,778 Shareholders' Investment Per Share $ 5.08 $ 4.68 $ 3.47 $ 1.91 $ 1.98 *The sum of shareholders' investment and long-term debt. NOTE: All share data have been adjusted for two-for-one stock splits effected in the form of stock dividends in December 1993, March 1992, May 1989 and May 1986. 3 10 YEAR FINANCIAL REVIEW-CONTINUED 1989 1988 1987 1986 1985 Net Sales $ 1,175,962 $ 958,288 $ 694,203 $ 550,024 $ 519,472 Cost of Sales $ 947,062 $ 778,233 $ 559,377 $ 439,697 $ 412,626 Selling, General and Administrative Expenses $ 130,129 $ 107,425 $ 72,150 $ 62,494 $ 54,520 Interest Expense, Net $ 22,379 $ 18,915 $ 8,042 $ 4,679 $ 5,869 Other Expenses (Income) $ (572) $ (218) $ (306) $ (299) $ (184) Income Before Income Taxes $ 76,964 $ 53,933 $ 54,940 $ 43,453 $ 46,641 As a Percentage of Net Sales 6.5 % 5.6 % 7.9 % 7.9 % 9.0 % Effective Tax Rate 38.1 % 37.3 % 48.0 % 44.5 % 44.5 % Income Before Extraordinary Item $ 47,618 $ 33,792 $ 28,545 $ 24,095 $ 25,881 Extraordinary Item -- -- $ -- $ -- $ -- Net Income $ 47,618 $ 33,792 $ 28,545 $ 24,095 $ 25,881 As a Percentage of Net Sales 4.0 % 3.5 % 4.1 % 4.4 % 5.0 % As a Percentage of Average Total Assets 8.8 % 7.4 % 8.9 % 9.4 % 11.4 % As a Percentage of Average Invested Capital 12.4 % 10.5 % 12.3 % 12.7 % 15.8 % As a Percentage of Average Shareholders' Investment 27.9 % 21.8 % 19.4 % 18.3 % 23.0 % Earnings Per Share: Primary and Fully Diluted $ 0.39 $ 0.27 $ 0.21 $ 0.18 $ 0.19 Cash Dividends Per Share $ 0.092 $ 0.079 $ 0.063 $ 0.041 $ 0.035 Property Additions $ 25,796 $ 109,320 $ 54,733 $ 32,659 $ 20,518 Depreciaton and Amortization $ 39,235 $ 33,975 $ 24,033 $ 18,788 $ 16,075 Weighted Average Shares Outstanding: Primary 121,228,256 127,197,968 134,116,696 136,348,384 136,394,464 Fully Diluted 121,228,256 127,197,968 134,116,696 136,348,384 136,394,464 At Year-End: Working Capital $ 210,434 $ 201,225 $ 141,679 $ 118,345 $ 96,458 Current Ratio 2.5 2.4 2.5 2.9 2.8 Property, Plant and Equipment, Net $ 187,385 $ 200,985 $ 126,431 $ 95,861 $ 83,796 Total Assets $ 538,001 $ 546,253 $ 362,756 $ 278,911 $ 236,115 Total Long-Term Debt $ 196,515 $ 230,027 $ 104,806 $ 63,716 $ 51,284 Shareholders' Investment $ 184,735 $ 157,115 $ 152,600 $ 141,218 $ 122,662 Total Invested Capital* $ 381,250 $ 387,142 $ 257,406 $ 204,934 $ 173,946 Shareholders' Investment Per Share $ 1.54 $ 1.28 $ 1.16 $ 1.04 $ 0.90
4 Shaw Industries, Inc. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition, Liquidity and Capital Resources The Company's business, as well as the United States' carpet industry in general, is cyclical in nature and is significantly affected by general economic conditions. The level of carpet sales tends to reflect fluctuations in consumer spending for durable goods and, to a lesser extent, fluctuations in interest rates and new housing starts. Sales and customer order unit levels during fiscal 1994 were higher than in fiscal 1993 as the Company, the carpet industry and the general economy continued to rebound. Specifically, the Company had a 13.3 percent increase in fiscal 1994 net sales over fiscal 1993 principally related to a volume increase in shipments. Recent international acquisitions were a contributing factor to this increase in volume. The industry business activity for 1994 was reflective of the general economy and moved ahead at a reasonable growth rate. During fiscal 1994, working capital decreased $29.2 million and cash decreased $34.9 million. The principal source of cash was provided by operating activities in the amount of $146.2 million, principally from net income of $129.2 million and depreciation and amortization of $86.5 million. Financing activities also provided cash in the amount of $43.6 million, which principally resulted from additional borrowings of $170.0 million from the revolving credit agreement and an increase in net borrowings of short-term notes payable of $115.0 million, offset by net long- term debt payments of $138.2 million, purchases of treasury stock of $69.7 million, capital lease payments of $6.5 million and the payment of cash dividends of $28.7 million. The principal cash flow items used in investing activities were for additions to property, plant and equipment of $164.2 million and investments in business assets acquired of $63.6 million. 5 The Company's liquidity condition remains strong. Conservation of capital and the maintenance of a strong balance sheet have enabled the Company to become a preeminent force in the carpet industry. During 1994, the Company elected to prepay notes payable with interest rates of 9.48% to 10.49%. An extraordinary charge of $3,363,000 (net of income tax benefit of $2,150,000) was incurred as a result of this early retirement. The Company replaced this debt with borrowings under the revolving credit agreement at LIBOR-based rates providing for substantial future interest savings. Capital expenditures (including capital lease obligations, but not including acquisitions in 1994) for incremental additions and modifications to plant and equipment necessary to maintain the facilities in a modern, state-of-the-art condition were $164.6 million for fiscal 1994. Management anticipates capital expenditures and capitalized lease obligations of approximately $130.0 million during fiscal 1995 to maintain its facilities and to expand and upgrade its tufting, dyeing, finishing, yarn processing, distribution, transportation and materials handling equipment to meet anticipated increases in sales volume and to improve efficiency. These expenditures will be funded through cash flow from operations and, if appropriate, through additional sources of long-term capital. The Company has short-term credit lines with banks aggregating $300.0 million, of which $165.0 million was unused at July 2, 1994. The Company believes it could expand its line of credit and long-term bank facilities, if necessary. Inflation The Company's manufacturing costs and operating expenses are affected by price changes. The costs of fiber and other raw materials decreased in fiscal 1992, 1993 and 1994 from the levels experienced in fiscal 1991. The Company has historically mitigated inflationary effects by passing price changes along to its customers and by continually developing and implementing more cost-effective manufacturing and other operational procedures. The Company's ability to mitigate the effects of price changes will depend on market factors. Results of Operations - Fiscal 1994 Compared to Fiscal 1993 Net sales increased $309,224,000, or 13.3 percent, to $2,630,034,000 in fiscal 1994, primarily as a result of an increase in the volume of shipments. Results for fiscal 1994 included incremental sales of $139,378,000 attributable to recent international acquisitions. The results of the acquired operations did not have a material effect on the Company's net income in 1994. Gross profit margins as a percentage of net sales increased 1.1 percent to 21.3 percent for fiscal 1994 from 20.2 percent for fiscal 1993 principally as a result of an increase in the efficiency relationship of volume and fixed costs. Selling, general and administrative expenses increased $45,762,000 or 16.3 percent in fiscal 1994 compared to fiscal 1993, and increased .3 percent to 12.4 percent of net sales. The increase in percentage of net sales is due substantially to aggressive sales efforts to increase sales. Interest expense, net, decreased $1,366,000 to $25,154,000 and decreased .2 percent to 1.0 percent of net sales. The effective income tax rate decreased .9 percent to 37.4 percent for fiscal 1994 compared to fiscal 1993 primarily due to deferred tax adjustments. Results of Operations - Fiscal 1993 Compared to Fiscal 1992 Net sales increased $569,525,000, or 32.5 percent, to $2,320,810,000 in fiscal 1993, primarily as a result of an increase in the volume of shipments. Results for fiscal 1993 included incremental sales of $415,413,000 attributable to acquisitions. Gross profit margins as a percentage of net sales increased 1.6 percent to 20.2 percent for fiscal 1993 compared to 18.6 percent for fiscal 1992 principally as a result of an increase in the efficiency relationship of volume and fixed costs. Selling, general and administrative expenses increased $73,981,000 or 35.8 percent in fiscal 1993 compared to fiscal 1992, and increased .3 percent to 12.1 percent of net sales. The increase in percentage of net sales is due substantially to continued sales efforts to increase sales in a weak economy. Interest expense, net, increased $1,118,000 to $26,520,000 in fiscal 1993 compared to fiscal 1992 due principally to additional borrowings. The effective income tax rate was 38.3 percent in fiscal 1993 compared to 38.4 percent in fiscal 1992. 6 CONSOLIDATED BALANCE SHEETS SHAW INDUSTRIES, INC. July 2, 1994 and July 3, 1993 1994 1993 ASSETS Current Assets: Cash $ 12,597,000 $ 47,545,000 Accounts and notes receivable, less allowance for doubtful accounts and discounts of $18,455,000 in 1994 and $14,342,000 in 1993 367,613,000 307,241,000 Inventories: Raw materials 240,726,000 191,684,000 Work-in-process 36,110,000 24,066,000 Finished goods 249,302,000 185,977,000 526,138,000 401,727,000 Prepaid expenses 24,507,000 4,080,000 Total current assets 930,855,000 760,593,000 Property, Plant and Equipment, at cost: Land and land improvements 28,196,000 17,484,000 Buildings and leasehold improvements 231,892,000 196,984,000 Machinery and equipment 743,908,000 641,080,000 Construction in progress 114,604,000 19,878,000 1,118,600,000 875,426,000 Less - Accumulated depreciation 481,025,000 401,988,000 637,575,000 473,438,000 Goodwill and Other Assets 113,718,000 46,379,000 $ 1,682,148,000 $ 1,280,410,000
7 1994 1993 LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Notes payable $ 135,000,000 $ 20,000,000 Current maturities of long-term debt 40,579,000 69,648,000 Accounts payable 225,368,000 140,044,000 Accrued liabilities 125,193,000 96,954,000 Total current liabilities 526,140,000 326,646,000 Long-Term Debt, less current maturities 382,192,000 248,309,000 Deferred Income Taxes 38,095,000 26,700,000 Other Liabilities 11,831,000 8,707,000 Minority Interest In Consolidated Subsidiary 13,790,000 - Commitments and Contingencies Shareholders' Investment: Preferred stock; 250,000 shares authorized, no shares - - Common stock, no par, $1.11 stated value, authorized 500,000,000 shares; issued 139,868,162 shares at July 2, 1994 and 71,551,798 shares at July 3, 1993 155,254,000 79,423,000 Paid-in capital 159,192,000 293,608,000 Foreign currency translation adjustment (2,488,000) 131,000 Retained earnings 398,212,000 297,754,000 710,170,000 670,916,000 Less - Unearned compensation 70,000 868,000 710,100,000 670,048,000 $ 1,682,148,000 $ 1,280,410,000 The accompanying notes are an integral part of these consolidated financial statements.
8 CONSOLIDATED STATEMENTS OF INCOME For Years Ended July 2, 1994, July 3, 1993 and June 27, 1992 1994 1993 1992 Net Sales $2,630,034,000 $2,320,810,000 $1,751,285,000 Costs and Expenses: Cost of sales 2,070,915,000 1,851,126,000 1,424,951,000 Selling, general and administrative 326,291,000 280,529,000 206,548,000 2,397,206,000 2,131,655,000 1,631,499,000 Operating Income 232,828,000 189,155,000 119,786,000 Other Expenses (Income): Interest expense 25,911,000 27,280,000 25,538,000 Interest income (757,000) (760,000) (136,000) Interest, net 25,154,000 26,520,000 25,402,000 Miscellaneous, net (4,326,000) (361,000) 164,000 20,828,000 26,159,000 25,566,000 Income Before Income Taxes, Minority Interest and Extraordinary Item 212,000,000 162,996,000 94,220,000 Provision for Income Taxes 79,386,000 62,373,000 36,175,000 Income Before Minority Interest and Extraordinary Item 132,614,000 100,623,000 58,045,000 Minority Interest in Consolidated Subsidiary (79,000) - - Income Before Extraordinary Item 132,535,000 100,623,000 58,045,000 Extraordinary Loss on Early Extinguishment of Debt (net of income tax benefit of $2,150,000) (3,363,000) - - Net Income $ 129,172,000 $ 100,623,000 $ 58,045,000 Earnings Per Common Share: Primary and Fully Diluted Basis- Income Before Extraordinary Item $ 0.91 $ 0.72 $ 0.46 Extraordinary Item (0.02) - - Net Income $ 0.89 $ 0.72 $ 0.46 Weighted Average Shares Outstanding: Primary 145,104,828 140,310,268 124,887,450 Fully diluted 145,136,362 140,639,848 125,015,030 The accompanying notes are an integral part of these consolidated financial statements.
9 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT For Years Ended July 2,1994, July 3, 1993 and June 27, 1992 Common Stock Paid-In Equity Adjustmen Retained Unearned Shares Amount Capital From Translation Earnings Compensation Balance, June 29, 1991 26,924,800 $ 29,887,000 $ - $ - $ 178,523,000 $ (2,464,000) Net income - - - - 58,045,000 - Issuance of stock in a public offering 4,062,500 4,509,000 130,315,000 - - - Issuance of two-for-one stock split 30,987,300 34,396,000 (34,396,000) - - - Issuance of stock in merger 2,874,852 3,191,000 66,525,000 - - - Amortization of unearned compensation - - - - - 798,000 Exercise of stock options 1,131,000 1,255,000 3,431,000 - - - Cash dividends paid ($.138 per share) - - - - (16,681,000) - Balance, June 27, 1992 65,980,452 73,238,000 165,875,000 - 219,887,000 (1,666,000) Net income - - - - 100,623,000 - Issuance of stock in a public offering 4,471,500 4,964,000 120,251,000 - - - Exercise of discounted stock options 144,298 160,000 120,000 - - - Exercise of stock options 956,850 1,062,000 4,003,000 - - - Adjustment to stock issued in merger (1,302) (1,000) (30,000) - - - Foreign currency translation adjustment - - - 131,000 - - Tax benefit on disqualified dispositions of stock options - - 3,389,000 - - - Amortization of unearned compensation - - - - - 798,000 Cash dividends paid ($.165 per share) - - - - (22,756,000) - Balance, July 3, 1993 71,551,798 79,423,000 293,608,000 131,000 297,754,000 (868,000) Net income - - - - 129,172,000 - Purchase and retirement of common stock (4,195,700) (4,657,000) (65,074,000) - - - Exercise of discounted stock options 60,186 67,000 (66,000) - - - Exercise of stock options 554,900 616,000 1,091,000 - - - Issuance of two-for-one stock split 71,754,831 79,648,000 (79,648,000) - - - Issuance of stock in acquisiti 142,147 157,000 6,288,000 - - - Foreign currency translation adjustment - - - (2,619,000) - - Tax benefit on disqualified dispositions of stock options - - 2,993,000 - - - Amortization of unearned compensation - - - - - 798,000 Cash dividends paid ($.200 per share) - - - - (28,714,000) - Balance, July 2, 1994 139,868,162 $ 155,254,000 $ 159,192,000 $ (2,488,000) $ 398,212,000 $ (70,000) The accompanying notes are an integral part of these consolidated financial statements. 10 /TABLE
CONSOLIDATED STATEMENTS OF CASH FLOWS For Years Ended July 2, 1994, July 3, 1993 and June 27, 1992 1994 1993 1992 Operating Activities: Net Income $ 129,172,000 $ 100,623,000 $ 58,045,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 86,518,000 73,580,000 63,167,000 Provision for doubtful accounts 14,909,000 11,444,000 5,778,000 Stock option compensation expense 798,000 798,000 798,000 Changes in assets and liabilities, net of acquisitions: Accounts and notes receivable (22,031,000) (70,414,000) (42,105,000) Inventories (83,181,000) 37,629,000 (40,167,000) Accounts payable 49,192,000 10,505,000 (39,871,000) Accrued liabilities 1,953,000 11,097,000 7,518,000 Deferred income taxes 4,731,000 878,000 (2,483,000) Other, net (35,859,000) 1,311,000 8,070,000 Total Adjustments 17,030,000 76,828,000 (39,295,000) Net Cash Provided by Operating Activities 146,202,000 177,451,000 18,750,000 Investing Activities: Additions to property, plant and equipment (164,227,000) (56,661,000) (50,712,000) Business assets acquired (63,642,000) (110,778,000) - Proceeds from disposition of property, plant and equipment 3,145,000 267,000 69,000 Purchase of Salem Carpet Mills, Inc. - - (2,100,000) Net Cash Used In Investing Activities (224,724,000) (167,172,000) (52,743,000) Financing Activities: Borrowings from revolving credit agreement 170,000,000 5,000,000 45,000,000 Repayments on revolving credit agreement - - (120,000,000) Principal payments on long-term debt (138,167,000) (57,560,000) (23,557,000) Principal payments under capital lease obligations (6,522,000) (8,686,000) (5,416,000) Net borrowings (payments) on short-term notes payable 115,000,000 (25,000,000) 21,050,000 Purchase and retirement of common stock (69,731,000) - - Exercise of stock options 1,708,000 4,350,000 4,686,000 Dividends paid (28,714,000) (22,756,000) (16,681,000) Net proceeds from sale of common stock - 125,215,000 134,824,000 Net Cash Provided by Financing Activities 43,574,000 20,563,000 39,906,000 Net (Decrease) Increase in Cash (34,948,000) 30,842,000 5,913,000 Cash at the Beginning of Year 47,545,000 16,703,000 10,790,000 Cash at End of Year $ 12,597,000 $ 47,545,000 $ 16,703,000 Supplemental disclosures of cash flow information: Cash paid during the year for - Interest $ 25,698,000 $ 32,578,000 $ 19,821,000 Income taxes $ 75,300,000 $ 58,241,000 $ 37,793,000 Non-cash capital lease obligations $ 378,000 $ 3,492,000 $ 2,369,000 The accompanying notes are an integral part of these consolidated financial statements.
11 Notes to Consolidated Financial Statements Shaw Industries, Inc. July 2, 1994, July 3, 1993 and June 27, 1992 Note 1 Summary of Accounting Policies The consolidated financial statements include the accounts of Shaw Industries, Inc. and subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The Company's fiscal year end, which is the Saturday closest to June 30, has been changed to the Saturday closest to December 31 effective in December 1994. Revenues are recognized when goods are shipped. Inventories are stated at the lower of cost or market. Cost includes materials, direct and indirect labor and factory overhead. Market with respect to raw materials is replacement cost and for work-in-process and finished goods is net realizable value. The Company primarily uses the last-in, first-out (LIFO) method of valuing its inventories in order to more properly match current costs against current revenues, thereby reducing the effects of inflation on earnings. If LIFO inventories were valued at current costs, the inventory amounts would have been $6,449,000 and $5,984,000 lower than those reported at July 2, 1994 and July 3, 1993, respectively. During 1993, inventory quantities were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at higher costs prevailing in prior years as compared with the cost of 1993 purchases, the effect of which increased cost of goods sold by approximately $1,033,000 and decreased net income by approximately $635,000, but did not affect earnings per share. Property, Plant and Equipment is recorded at cost. Renewals and betterments are capitalized; maintenance and repairs are charged to expenses as incurred. Maintenance and repairs expense for 1994, 1993 and 1992 was $78,492,000, $68,977,000 and $50,527,000, respectively. The cost and accumulated depreciation of property retired or otherwise disposed of are removed from the accounts and any gains or losses thereon are included in income. For financial reporting purposes, depreciation is computed using the straight-line method over the estimated useful lives of the assets (15 to 35 years for buildings and 5 to 14 years for machinery and equipment). Leasehold improvements are amortized over the terms of the leases. Costs in excess of the fair value of net assets of businesses acquired are recorded as goodwill and are amortized using the straight-line method over a period not to exceed 40 years. The recoverability of goodwill is periodically reviewed by management based on current and anticipated conditions. Accumulated amortization was $2,590,000 and $666,000 at July 2, 1994 and July 3, 1993, respectively. Accrued Liabilities include $19,640,000 and $15,692,000 for workers' compensation claims and $22,278,000 and $20,237,000 for returns and allowances at July 2, 1994 and July 3, 1993, respectively. Deferred Income Taxes are provided for temporary differences in recording various items for financial and income tax reporting purposes. The Company's Retirement Savings Plan provides, among other things, for voluntary contributions by employees not to exceed 15% of their gross salaries and wages and a 50% matching contribution by the Company for employees with three or more years of continuous employment. During 1994, 1993 and 1992, the Company contributed $8,612,000, $8,133,000 and $5,820,000, respectively, under the plan. The Company has a Deferred Compensation Plan for key personnel. The plan provides, among other things, for certain deferred compensation to become payable on the employee's death, retirement or total disability as set forth in the plan. During 1994, 1993 and 1992, the Company provided $2,243,000, $1,925,000, and $1,639,000, respectively, under the plan. These amounts have been recorded as Other Liabilities in the accompanying balance sheets. Earnings Per Share have been computed based upon the weighted average shares outstanding and include the number of dilutive common stock equivalents outstanding during the year. All Earnings Per Share and Shareholders' Investment amounts have been adjusted for the two-for-one stock splits effected in the form of stock dividends in December 1993 and March 1992. Certain prior year amounts have been reclassified to conform with the 1994 presentation. 12 Notes to Consolidated Financial Statements Shaw Industries, Inc. Note 2 Indebtedness Long-term debt presented in the accompanying consolidated balance sheets at July 2, 1994 and July 3, 1993 consisted of the following (000's omitted): 1994 1993 Revolving credit agreement at LIBOR based rate $300,000 $130,000 Revolving loan facility at LIBOR based rate 42,243 - Revolving loan facility at LIBOR based rate 24,608 - 9.48% term notes payable - 108,750 9.31% term notes payable - 8,000 10.49% term notes payable - 27,000 Term loan payable at LIBOR based rate - 15,080 Other 43,119 19,136 Capitalized lease obligations (Note 5) 12,801 9,991 422,771 317,957 Less - current maturities (40,579) (69,648) $382,192 $248,309 The Company elected to exercise its option to prepay the 9.48%, 9.31% and 10.49% term notes payable at June 30, 1994. An extraordinary charge of $3,363,000 (net of income tax benefit of $2,150,000) was incurred as a result of the early retirement of the notes payable. The revolving credit agreement was amended during 1994 to provide for borrowings of up to $300 million. This increase in availability was utilized to repay the term notes payable. The revolving credit agreement expires in fiscal year 2000. The LIBOR rate at July 2, 1994 was approximately 4.8%. The amended revolving credit agreement contains, among other provisions (1) restrictions as to creation or assumption of liens, payments of cash dividends and acquisitions of the Company's stock, (2) limitation as to new indebtedness and lease obligations, and (3) financial requirements as to minimum working capital ($200,000,000), current ratio of 1.75 and ratio of cash flow to fixed charges of 1.5 in 1994 (actual was 1.6) and 2.0 thereafter. Retained earnings of $82,289,000 are available for the payment of cash dividends and the acquisition of the Company's stock at July 2, 1994. The aggregate annual maturities of long-term debt, including the capitalized lease obligations, as of July 2, 1994 are as follows: 1995 - $40,579,000; 1996 - $73,962,000; 1997 - $4,416,000; 1998 - $76,555,000; 1999 - $75,235,000; 2000 and thereafter - $152,024,000. The carrying value of the Company's variable rate debt approximates fair market value. 13 Notes to Consolidated Financial Statements Shaw Industries, Inc. The following data is presented with respect to short-term notes payable under line-of-credit agreements in 1994 and 1993 (000's omitted): 1994 1993 Lines of credit - Available at year-end $300,000 $ 50,000 Unused at year-end $165,000 $ 30,000 Average borrowing for the year, determined on a monthly basis $ 53,330 $ 72,500 Maximum outstanding at any month-end $135,000 $170,000 Note 3 Shareholders' Investment Under the Company's 1987 Incentive Stock Option Plan, eight million shares of common stock are reserved for issuance at a price no less than the market value on the date granted. These options are exercisable over five years. Under the Company's 1992 Incentive Stock Option Plan, six million shares of common stock are reserved for issuance at a price no less than the market value on the date granted. These options are exercisable over five to ten years. The Company's 1989 Discounted Stock Option Plan provides for the issuance of up to 880,000 shares of common stock to key employees. Options for 880,000 shares were granted to three officers at $.25 per share. The difference between the option price and market price at the date of grant is being amortized over the option period. For 1994, 1993 and 1992 this expense was $798,000 for each year. Beginning in July 1990, 176,000 shares per year are exercisable for five years. During 1994, 176,000 shares were exercised, 352,000 shares were exercised in 1993, no shares were exercised in 1992 and 176,000 shares were exercised in 1991. During March 1989, the Company adopted a Shareholder Rights Plan and pursuant thereto declared a dividend of one Right for each outstanding share of common stock. When exercisable, each Right will entitle its holder to buy a fraction of a share of Series A Participating Preferred Stock at a price of $12.50 per share (the "Purchase Price"). If a person or group acquires or makes a tender or exchange offer to acquire 20% or more of the Company's common stock without the consent of the Company (an "Acquiring Shareholder"), the Rights will become exercisable and each Right will entitle the holder, other than the Acquiring Shareholder , to receive, upon payment of the Purchase Price, in lieu of preferred stock, a number of shares of common stock of the Company having a market value equal to twice the Purchase Price. The Rights may be redeemed by the Company under certain circumstances at a price of $.01 per Right. The Rights have no voting power and, until exercised, no dilutive effect on net income per common share. If not previously redeemed, the Rights will expire in April 1999. The Company has designated 200,000 shares, of the 250,000 shares of preferred stock authorized, as Series A Participating Preferred Stock for issuance upon exercise of the Rights. In December 1992, 4,471,500 shares of the Company's common stock were issued in a public offering. Net proceeds from the sale of the common stock of $125,215,000 were used to reduce short-term notes payable of $120,000,000 incurred to finance the acquisition of the polypropylene carpet fiber manufacturing operations of Amoco Fabrics and Fibers Company in September 1992, and the balance of the proceeds of $5,215,000 was used for working capital. 14 Notes to Consolidated Financial Statements Shaw Industries, Inc. The following is a summary of stock option information for the 1987 and 1992 Incentive Stock Option Plans (adjusted for the two-for-one stock splits effected in the form of stock dividends in December 1993 and March 1992): 1994 1993 Options outstanding, beginning of year 3,454,700 2,890,000 Options granted - 2,498,400 Options exercised (655,600) (1,913,700) Options canceled (171,200) (20,000) Options outstanding, end of year 2,627,900 3,454,700 Option price range per share $2.07 - $11.98 $2.07 - $11.98 Options exercisable, end of year 324,700 988,300 Options available for grant 6,540,800 6,369,600 Note 4 Income Taxes On July 4, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and liabilities are determined based on the difference between the financial accounting and tax accounting basis of assets and liabilities. Deferred tax assets or liabilities at the end of each period are determined using the currently enacted tax rate expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized. There was no cumulative effect resulting from the adoption. The provision for income taxes consisted of the following (000's omitted): 1994 1993 1992 Federal $69,791 $57,327 $34,441 State 8,098 6,572 3,942 77,889 63,899 38,383 Deferred (temporary differences shown) - Depreciation 4,777 60 2,892 Inventory valuation 1,475 (3,454) (3,546) Cash discounts and bad debts (265) 4,126 (2,212) Other (4,490) (2,258) 658 1,497 (1,526) (2,208) $79,386 $62,373 $36,175 15 Notes to Consolidated Financial Statements Shaw Industries, Inc. The differences between the Federal statutory income tax rate and the Company's effective tax rate were as follows: 1994 1993 1992 Federal statutory rate 35.0% 34.0% 34.0% State income taxes, net of Federal tax benefit 3.9 4.3 4.3 Other, net (1.5) - .1 37.4% 38.3% 38.4% Components of the net deferred income tax liability at July 2, 1994 and July 4, 1993 are shown below (000's omitted): 1994 1993 Deferred income tax assets: Accrued advertising expenses not currently deductible $ 4,247 $ 4,067 Reserve for cash discounts and bad debts 5,768 5,503 Employee benefit accruals not currently deductible 18,257 15,732 Reserve for returns and allowances 8,682 7,872 36,954 33,174 Deferred income tax liabilities: Book basis of inventory over tax basis (17,795) (16,320) Property tax accrual ( 1,971) ( 2,073) Book basis of property, plant and equipment over tax basis (41,345) (36,568) Other - ( 2,720) (61,111) (57,681) $(24,157) $(24,507) 16 Notes to Consolidated Financial Statements Shaw Industries, Inc. Note 5 Commitments and Contingencies From time to time the Company is subject to claims and suits arising in the course of its business. In April 1993, the Company became a defendant in certain litigation alleging personal injury resulting from personal exposure to volatile organic compounds found in carpet produced by the Company. The complaints seek injunctive relief and unspecified money damages on all claims. The Company has denied any liability. In May 1993, the Company became a defendant in certain litigation alleging violation of both federal and state laws relating to unfair competition. The complaint seeks an injunction regarding the unfair competition claims and money damages. The Company has denied any liability. The Company believes that it has meritorious defenses in these suits and that the litigation will not have a material adverse effect on the Company's financial condition or results of operations. The Company will vigorously defend these suits. In June 1994, the Company and several other carpet manufacturers received grand jury subpoenas from the Antitrust Division of the United States Department of Justice relating to an investigation of the industry. The Company believes that once this investigation is completed it will not have a material adverse effect on the Company's financial condition or results of operations. The Company has entered into several capitalized leases for machinery and equipment, including computer equipment, at a cost of $49,415,000 at July 2, 1994 and $37,644,000 at July 3, 1993. These assets are amortized on a straight-line basis over the lease terms and amortization is included in depreciation expense. Accumulated amortization of capital lease cost was $30,926,000 and $25,219,000 at July 2, 1994 and July 3, 1993, respectively. The related obligations are included in long-term debt (Note 2). The Company also leases warehouses and showroom space, customer service centers and certain equipment under operating leases. At July 2, 1994, future minimum lease payments for all capital and operating leases exceeding one year were: Capital Operating Total Future Leases Leases Payments 1995 $ 8,036,000 $ 20,128,000 $28,164,000 1996 3,473,000 12,948,000 16,421,000 1997 2,109,000 8,729,000 10,838,000 1998 875,000 6,299,000 7,174,000 1999 171,000 2,954,000 3,125,000 Total payments 14,664,000 $ 51,058,000 $65,722,000 Less: amount representing interest 1,863,000 Present value of capitalized lease payments with a weighted average interest rate of 8.25% 12,801,000 Rental payments under noncancelable operating leases were $28,840,000, $25,422,000 and $16,537,000 in 1994, 1993 and 1992, respectively. 17 Notes to Consolidated Financial Statements Shaw Industries, Inc. Note 6 Acquisitions On May 29, 1992, the Company acquired Salem Carpet Mills, Inc. ("Salem") in accordance with the terms of a merger agreement announced on February 9, 1992. Pursuant to the terms of the merger, former Salem shareholders not electing to receive cash received .363 (unadjusted) of a share of the Company's common stock for each share of Salem common stock owned immediately prior to the merger. The aggregate value of the Company's common stock exchanged for the Salem common stock was $69,685,000. The holders of approximately 3% of Salem's common shares elected to receive cash of $7.98 per common share in the merger totalling approximately $2,100,000. The acquisition has been accounted for as a purchase transaction, and accordingly, the results of operations of Salem have been included in the accompanying financial statements since May 30, 1992. The purchase price was allocated to assets and liabilities based on their estimated fair value as of the date of the acquisition. The excess of the consideration paid over the estimated fair value of net assets acquired was $38,843,000 and has been recorded as goodwill and is being amortized on the straight-line basis over 40 years. The fair value of assets acquired and liabilities assumed was $158,833,000 and $125,860,000, respectively. The following table summarizes on a pro forma basis the consolidated results of operations as though Salem had been acquired on June 30, 1991 (000's except per share data): Unaudited Year Ended June 27, 1992 Net Sales $ 2,097,836 Net Income $ 55,487 Earnings Per Common Share - Primary and Fully Diluted $ .43 On September 25, 1992, the Company acquired Amoco Fabrics and Fibers Company's ("Amoco Fibers") polypropylene carpet fiber manufacturing facilities located in Andalusia, Alabama, and Bainbridge, Georgia, and inventories for approximately $91,606,000 in cash. The Company is now producing polypropylene carpet fiber at these facilities for both its own use and for sale to other manufacturers. The acquisition has been accounted for as a purchase transaction, and accordingly, the results of operations of Amoco Fibers have been included in the Company's financial statements since September 26, 1992. On March 31, 1993, the Company acquired all of the outstanding stock of Kosset Carpets, Ltd., Bradford, England for approximately $19,043,000 in cash. The acquisition has been accounted for as a purchase transaction, and accordingly, the results of operations of Kosset have been included in the accompanying financial statements since April 1, 1993. On July 12, 1993, the Company formed a joint venture through which it acquired an interest in Capital Carpet Industries, Pty., Ltd., Melbourne, Victoria, Australia, and Invicta Group Industries, Pty., Ltd., Braybrook, Victoria, Australia (together, "CCI"), enabling the Company to participate in a government-supported rationalization of the Australian carpet industry. On November 4, 1993, the Company acquired the remaining interest in the joint venture. Until November 4, 1993, the investment was accounted for using the equity method, and accordingly, the Company included its share of CCI's income in other income. Subsequent to November 4, 1993, the results of operations of CCI are included in the accompanying financial statements. On September 10, 1993, the Company acquired Abingdon Carpets, Gwent, Wales. Abingdon is a British producer of medium-priced tufted carpets and carpet yarns. The acquisition has been accounted for as a purchase transaction, and accordingly, the results of operations of Abingdon are included in the accompanying financial statements since September 10, 1993. On May 31, 1994, the Company entered into an agreement to form a joint venture with Grupo Industrial Alfa, S.A. de C.V. of Monterrey, Mexico, for the manufacture, distribution and marketing of carpets, rugs and related products in Mexico and South America. The Company acquired a fifty-one percent interest in Terza, S.A. de C.V., and accordingly, the subsidiary is included in consolidation at July 2, 1994 and the results of operations of Terza are included in the accompanying financial statements since May 31, 1994. The fiscal 1994 acquisitions did not have a material effect on the Company's results of operations. 18 Notes to Consolidated Financial Statements Shaw Industries, Inc. Note 7 Information About the Company's Foreign Operations The following information is presented regarding the Company's foreign operations for the year ended July 2, 1994. Foreign operations for fiscal years 1993 and 1992 were immaterial. (000's omitted) Adjustments and Domestic Foreign Eliminations Consolidated Sales to unaffiliated customers $2,417,469 $212,565 $ -- $2,630,034 Operating profit $ 224,207 $ 8,621 $ -- $ 232,828 Interest expense, net (25,154) Miscellaneous income, net 4,326 Income before income taxes $ 212,000 Identifiable assets $1,396,946 $318,409 $(33,207) $1,682,148 Sales and transfers between geographic areas and export sales are not material. Operating profit is total revenue less operating expenses. In computing operating profit, none of the following items have been added or deducted: interest expense, miscellaneous income, net income taxes and the extraordinary item related to early retirement of debt. Identifiable assets are those assets of the Company that are identified with the operations in each geographic area, including goodwill.
19 Notes to Consolidated Financial Statements Shaw Industries, Inc. Note 8 Quarterly Financial Data (Unaudited) Summarized quarterly financial data (000's except per share amounts) for 1994, 1993 and 1992 are as follows: 1994 Quarters First Second Third Fourth Net Sales $ 649,516 $ 638,173 $ 620,126 $ 722,219 Gross Profit 137,301 129,694 126,198 165,926 Net Income 34,096 29,272 25,325 40,479* Earnings Per Share - Primary and Fully Diluted 0.24 0.20 0.17 0.28* 1993 Quarters First Second Third Fourth Net Sales $ 546,822 $ 585,395 $ 519,318 $ 669,275 Gross Profit 108,714 114,889 100,507 145,574 Net Income 21,815 24,540 16,596 37,672 Earnings Per Share - Primary and Fully Diluted 0.16 0.18 0.12 0.26 1992 Quarters First Second Third Fourth Net Sales $ 436,817 $ 410,723 $ 403,948 $ 499,797 Gross Profit 78,930 76,449 69,934 101,021 Net Income 13,179 12,526 8,891 23,449 Earnings Per Share- Primary and Fully Diluted** 0.12 0.10 0.07 0.18 *The fourth quarter net income and per share amounts include the effect of an extraordinary loss on early extinguishment of debt of $3,363,000 or $.02 per share, net of applicable tax benefit. **The sum of the 1992 quarterly net earnings per share amounts is different from the annual net earnings per share amounts because of differences in the weighted average number of common shares outstanding used in the quarterly and annual computations.
20 Report of Independent Public Accountants To the Shareholders of Shaw Industries, Inc.: We have audited the accompanying consolidated balance sheets of Shaw Industries, Inc. (a Georgia corporation) and subsidiaries as of July 2, 1994 and July 3, 1993 and the related consolidated statements of income, shareholders' investment and cash flows for each of the three years in the period ended July 2, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Shaw Industries, Inc. and subsidiaries as of July 2, 1994 and July 3, 1993 and the results of their operations and their cash flows for each of the three years in the period ended July 2, 1994 in conformity with generally accepted accounting principles. Arthur Andersen LLP Atlanta, Georgia August 8, 1994 21 EX-21 5 EXHIBIT 21 The only subsidiaries of the Registrant are Shaw Transport, Inc., a Georgia corporation, Shaw Financial Services, Inc., a Georgia corporation, Carpets International, PLC., a United Kingdom corporation, Capital Carpet Industries, Pty., Ltd., an Australian corporation and Terza, S.A. de C.V., a Mexican corporation. EX-23 6 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included and incorporated by reference in this Form 10-K into the Company's previously filed Registration Statement File No. 33-45089. Arthur Andersen LLP Atlanta, Georgia September 28, 1994 EX-27 7
5 YEAR JUL-02-1994 JUL-02-1994 12,597,000 0 386,068,000 (18,455,000) 526,138,000 930,855,000 1,118,600,000 481,025,000 1,682,148,000 526,140,000 382,192,000 155,254,000 0 0 554,846,000 1,682,148,000 2,630,034,000 2,630,034,000 2,070,915,000 2,070,915,000 0 14,909,000 25,911,000 212,000,000 79,386,000 132,535,000 0 (3,363,000) 0 129,172,000 .89 .89
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