-----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, f0NkmlGfdol8N79shrPUThrV4M5AMyNUv+15jrv2qQE+ftky0+6/D0KFrNDqTxrI N6KjgmXvnbizenPAQnaE+g== 0000089498-95-000009.txt : 19950605 0000089498-95-000009.hdr.sgml : 19950605 ACCESSION NUMBER: 0000089498-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950512 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06853 FILM NUMBER: 95537652 BUSINESS ADDRESS: STREET 1: 616 E WALNUT AVE STREET 2: P O DRAWER 2128 CITY: DALTON STATE: GA ZIP: 30720 BUSINESS PHONE: 7062783812 MAIL ADDRESS: STREET 1: 616 E WALNUT AVE STREET 2: P O DRAWER 2128 CITY: DALTON STATE: GA ZIP: 30720 10-Q 1 FORM 10-Q, 4/1/95 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 1995 ------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 incorporation or organization) (I.R.S. Employer Identification No.) 616 E. WALNUT AVENUE, DALTON, GEORGIA 30720 - - ----------------------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) (706) 278-3812 Registrant's telephone number, including area code NOT APPLICABLE Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x . No ______. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: May 8, 1995 - 135,726,502 shares SHAW INDUSTRIES, INC. FORM 10- Q APRIL 1, 1995 I N D E X PART I - FINANCIAL INFORMATION PAGE NUMBER --------------------- ----------- Consolidated Balance Sheets - April 1, 1995 and December 31, 1994 3-4 Consolidated Statements of Income and Retained Earnings - For the Three Months Ended April 1, 1995 and April 2, 1994 5 Consolidated Statements of Cash Flows - For the Three Months Ended April 1, 1995 and April 2, 1994 6 Notes to Consolidated Financial Statements 7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations 9-10 PART II - OTHER INFORMATION 11 ----------------- SIGNATURES 12 -2- PART 1 - ITEM ONE - FINANCIAL INFORMATION SHAW INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS April 1, 1995 December 31, 1994 CURRENT ASSETS: Cash and cash equivalents $42,425,000 $34,365,000 Accounts and notes receivable, less allowance for doubtful accounts and discounts of $16,628,000 and $17,925,000 355,216,000 350,128,000 Inventories - Raw materials 248,655,000 236,579,000 Work-in-process 33,546,000 22,902,000 Finished goods 242,731,000 238,670,000 -------------- -------------- 524,932,000 498,151,000 Prepaid expenses 44,422,000 39,585,000 -------------- -------------- TOTAL CURRENT ASSETS 966,995,000 922,229,000 PROPERTY, PLANT AND EQUIPMENT, at cost: Land and land improvements 26,937,000 29,329,000 Building and leasehold improvements 267,017,000 258,119,000 Machinery and equipment 866,969,000 842,975,000 Construction in progress 27,077,000 44,336,000 -------------- -------------- 1,188,000,000 1,174,759,000 Less - Accumulated depreciation 539,407,000 518,581,000 -------------- -------------- 648,593,000 656,178,000 GOODWILL 105,423,000 106,960,000 OTHER ASSETS 21,859,000 12,011,000 -------------- -------------- TOTAL ASSETS $1,742,870,000 $1,697,378,000 ============== ============== -3- LIABILITIES AND SHAREHOLDERS' INVESTMENT April 1, 1995 December 31, 1994 CURRENT LIABILITIES: Current maturities of long-term debt $ 21,584,000 $ 40,898,000 Accounts payable 198,088,000 150,023,000 Accrued liabilities 129,056,000 113,970,000 -------------- -------------- TOTAL CURRENT LIABILITIES 348,728,000 304,891,000 LONG-TERM DEBT, less current maturities above 656,880,000 612,061,000 DEFERRED INCOME TAXES 45,454,000 45,972,000 OTHER LIABILITIES 12,880,000 12,179,000 MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY - 9,250,000 SHAREHOLDERS' INVESTMENT: Preferred Stock, 250,000 shares authorized, no shares issued - - Common stock, no par, $1.11 stated value, authorized 500,000,000 shares; issued and outstanding: 135,724,502 at April 1, 1995 and 137,017,402 shares at December 150,655,000 152,090,000 31, 1994 Paid-in capital 99,710,000 118,635,000 Foreign currency translation adjustment 2,256,000 (1,815,000) Retained earnings 426,307,000 444,115,000 -------------- -------------- Total Shareholders' Investment 678,928,000 713,025,000 TOTAL LIABILITIES AND SHAREHOLDERS' -------------- -------------- INVESTMENT $1,742,870,000 $1,697,378,000 ============== ==============
The accompanying notes are an integral part of these consolidated financial statements. -4- SHAW INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) THREE MONTHS THREE MONTHS ENDED ENDED April 1, 1995 April 2, 1994 NET SALES $676,550,000 $620,126,000 COSTS AND EXPENSES: Cost of sales 559,469,000 493,928,000 Selling expense 69,494,000 53,496,000 General and administrative expense 28,366,000 26,750,000 ------------ ----------- 657,329,000 574,174,000 ------------ ----------- OPERATING INCOME 19,221,000 45,952,000 OTHER EXPENSE (INCOME): Interest expense 10,925,000 6,615,000 Interest income (151,000) (192,000) ------------ ----------- Interest, net 10,774,000 6,423,000 Miscellaneous, net (940,000) (675,000) ------------ ----------- Total 9,834,000 5,748,000 ------------ ----------- INCOME BEFORE INCOME TAXES 9,387,000 40,204,000 PROVISION FOR INCOME TAXES 4,107,000 14,879,000 ------------ ----------- NET INCOME BEFORE EQUITY IN JOINT VENTURE AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 5,280,000 25,325,000 EQUITY IN JOINT VENTURE (803,000) - ------------ ----------- INCOME BEFORE CUMULATIVE EFFECT OF ACCCOUNTING CHANGE 4,477,000 25,325,000 CUMULATIVE EFFECT OF ACCOUNTING CHANGE (less applicable income taxes of $7,885,000) 12,077,000 - ------------ ----------- NET INCOME (LOSS) $ (7,600,000) $25,325,000 ============ =========== EARNINGS PER COMMON SHARE: Income before cumulative effect of accounting change $0.03 $0.17 Cumulative effect of accounting change (0.09) - ------------ ----------- Net Income (Loss) $(0.06) $0.17 ============ =========== RETAINED EARNINGS: Beginning of period $444,115,000 $348,234,000 Add - net income (loss) (7,600,000) 25,325,000 Deduct - dividends paid 10,195,000 7,910,000 Deduct - adjustment in equity of joint venture 13,000 - ------------ ----------- End of period $426,307,000 $365,649,000 ============ ===========
The accompanying notes are an integral part of these consolidated financial statements. -5- SHAW INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS THREE MONTHS (UNAUDITED) ENDED ENDED April 1, 1995 April 2, 1994 OPERATING ACTIVITIES: Net Income (Loss) $ (7,600,000) $25,325,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 21,229,000 21,143,000 Provision for doubtful accounts 1,748,000 3,558,000 Cumulative effect of accounting change 12,077,000 - Change in assets and liabilities: Accounts receivable (24,029,000) (27,848,000) Inventories (36,332,000) (54,629,000) Prepaid expenses (10,849,000) (15,608,000) Trade accounts payable 50,863,000 25,901,000 Other accrued liabilities 22,715,000 16,968,000 Deferred income taxes 24,000 2,827,000 Other, net (1,443,000) (2,712,000) ----------- ----------- Total Adjustments 36,003,000 (30,400,000) ----------- ----------- Net Cash Provided by (Used in) Operating Activities 28,403,000 (5,075,000) INVESTING ACTIVITIES: Additions to property, plant and equipment (33,482,000) (42,908,000) ----------- ----------- Net Cash Used in Investing Activities (33,482,000) (42,908,000) FINANCING ACTIVITIES: Increase in long-term debt 43,694,000 (8,427,000) Increase in short-term notes payable - 65,000,000 Dividends paid (10,195,000) (7,910,000) Purchase and retirement of common stock (20,590,000) - Proceeds from sale of stock 230,000 948,000 ----------- ----------- Net Cash Provided by Financing Activities 13,139,000 49,611,000 NET INCREASE IN CASH 8,060,000 1,628,000 CASH AT BEGINNING OF PERIOD 34,365,000 32,739,000 ----------- ----------- CASH AT END OF PERIOD $42,425,000 $34,367,000 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for - Interest $10,162,000 $3,509,000 Income taxes $(2,010,000) $12,052,000
The accompanying notes are an integral part of these consolidated financial statements. -6- SHAW INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APRIL 1, 1995 (UNAUDITED) --------------------------------------------------------------- 1. The financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. These financial statements should be read in conjunction with the financial statements and related notes contained in the 1994 Annual Report on Form 10-K. In the opinion of management, the financial statements contain all adjustments necessary to present fairly the financial position as of April 1, 1995 and the results of operations for the three months then ended and cash flows for the three months then ended. These adjustments were of a normal recurring nature, other than the accounting change described below in note 4. The results of operations for the three months ended April 1, 1995 are not necessarily indicative of the results to be expected for the year ending December 30, 1995. The Company uses the last-in, first-out (LIFO) method of valuing substantially all of 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 inventories would have been $1,481,000 and $9,050,000 lower at April 1, 1995 and at April 2, 1994, respectively. Certain of the Company's physical inventories are taken on a weekly, monthly or quarterly basis and the Company computes the LIFO inventory amount on a quarterly basis after considering anticipated prices, quantities and product mix as of year-end. 2. The weighted average number of shares used in computing earnings per share for the three months ended April 1, 1995 and April 2, 1994 were as follows: Three Months Ended April 1, 1995 April 2, 1994 Primary 136,031,579 * 145,302,546 Fully diluted 136,031,579 * 145,305,967 * The effect of common stock equivalents was antidilutive in the first quarter of 1995 and is therefore not included in the weighted average number of shares. -7- 3. On May 31, 1994, the Company entered ito 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 slightly over a 50 percent interest in Terza, S.A. de C.V. and, accordingly, the subsidiary is included in consolidation at December 31, 1994 and the results of operations of Terza were included in the Company's financial statements from May 31, 1994 through December 31, 1994. In the first quarter of 1995, the Company sold approximately one percent of its stock in Terza, reducing its interest to 49.8 percent. Therefore, beginning January 1, 1995, this investment is accounted for by the equity method. On January 9, 1995, the Company acquired through its wholly owned subsidiary, Carpets International (U.K.) Plc, substantially all of the operating assets of the Carpets Division of Coats Viyella Plc for approximately $29.4 million. On March 1, 1995, the Company announced that its Mexican joint venture had acquired some of the carpet manufacturing assets of Tapetes Luxor, S.A. de C.V. and Corporacion Santa Rosa, S.A. de C.V. for approximately $13 million. 4. As of January 1, 1995, the Company changed the method of accounting for sample costs from expensing sample costs that exceed the estimated net realizable value when shipped to expensing that portion of sample costs as they are produced. This change was made in recognition of an increasing number of samples placed with customers that do not result in future sales and in order to place more controls over the sample order process. The cumulative effect of the change on prior years was to decrease the net income for the quarter ended April 1, 1995 by $12,077,000 ($.09 per share). -8- SHAW INDUSTRIES, INC. ITEM TWO-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. The Company's financial condition and results of operations reflect the continuing stability of the domestic economy and the recovering global economy. Of the 9.1 percent increase in net sales for the first quarter of 1995 over 1994, domestic growth was 4.8 percent. The Company's recent international acquisitions contributed the remaining sales growth in the first quarter of 1995. During the first quarter of 1995, working capital increased $929,000 and cash and cash equivalents increased $8.1 million. The principal source of cash was provided by operating activities of $28.4 million, reflecting primarily depreciation and amortization of $21.2 million and the cumulative effect of an accounting change of $12.1 million which was offset in part by a net loss of $7.6 million. Cash from operating activities was used in part to fund increases in inventories and receivables. Financing activities provided cash of $13.1 million. Additional long-term borrowings of $43.7 million exceeded purchases of common stock of $20.6 million and the payment of cash dividends of $10.2 million. Investing activities consisted of cash used for purchases of property, plant and equipment of $33.5 million. The Company's liquidity remains strong. Effective use of capital and the Company's ability to generate excess cash flows from operations has enabled it to invest in technologies which reduce production costs, to generate margins that exceed industry averages and to be a preeminent force in the carpet industry. During the first quarter of 1995, accounts receivable and inventories increased by 1.5 percent and 5.4 percent, respectively. These increases are primarily attributable to the increase in sales and to international acquisitions. The allowance for doubtful accounts and discounts decreased slightly over levels at year-end. Accounts payable increased primarily as a result of the timing of purchases. Capital expenditures for incremental additions and modifications to plant and equipment necessary to maintain the facilities in a modern state-of-the-art condition were $33.5 million for the first quarter of 1995. Management anticipates capital expenditures and capitalized lease obligations of approximately $90 million during 1995 to maintain its facilities and to expand and upgrade its manufacturing and distribution 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 believes it could expand its lines of credit and long-term bank facilities, if necessary. Beginning in early 1993 and continuing in 1994, the Company has expanded its operations through acquisitions in Australia, the United Kingdom and Mexico. In the first quarter of 1995 and 1994, international operations accounted for approximately 14.0 percent and 10.5 percent of the Company's net sales, respectively. Goodwill recorded as a result of the acquisitions totals a cumulative amount of $67.5 million. As a result of its foreign acquisitions, the Company has exposure to fluctuations in foreign currency exchange rates on its intercompany payables and on certain other U.S. dollar denominated net liabilities of its foreign subsidiaries. The Company may employ foreign exchange contracts when, in the normal course of business, they are determined to effectively manage and reduce such exposure. Net foreign currency exchange rate fluctuation losses were approximately $733,000 for the first quarter of 1995. Foreign currency exchange rate fluctuation gains and losses were not material for the first quarter of 1994. -9- Results of Operations Three Months Ended April 1, 1995 Compared To Three Months ended April 2, 1994 Net sales increased $56,424,000, or 9.1 percent, to $676,550,000 in the first quarter of 1995, primarily as a result of an increase in the volume of shipments. Results for the 1995 first quarter included sales of $94,501,000 attributable to international acquisitions and the 1994 first quarter included sales of $64,989,000 attributable to international acquisitions. Gross profit margins as a percentage of net sales decreased 3.1 percent to 17.3 percent for the first quarter of 1995 from 20.4 percent for the first quarter of 1994 as a result of slightly higher raw material costs. Selling, general and administrative expenses increased $17,614,000 or 22.0 percent in 1995 compared to 1994, and increased 1.6 percent to 14.5 percent of net sales. With the continuing aggressive efforts to increase sales in an increasingly competitive sales environment, this increase in selling, general and administrative expenses as a percentage of net sales occurred with no one category of expense responsible for a significant portion of the increase. Interest expense, net, increased $4,351,000 to $10,774,000 as a result of additional borrowings and increased to 1.6 percent of net sales in 1995 compared to 1.0 percent in 1994. As of January 1, 1995, the Company changed the method of accounting for sample costs from expensing sample costs that exceed the estimated net realizable value when shipped to expensing that portion of sample costs as they are produced. This change was made in recognition of an increasing number of samples placed with customers that do not result in future sales and in order to place more controls over the sample order process. The cumulative effect of the change on prior years was to decrease the net income for the quarter ended April 1, 1995 by $12,077,000, net of applicable tax benefit of $7,885,000 ($.09 per share). Prior to the one time charge, net earnings were $4,477,000 compared to $25,325,000 last year. The effective income tax rate was 43.8 percent in the first quarter of 1995 compared to 37.0 percent in the first quarter of 1994. This increased effective rate is primarily due to a lower effective tax benefit from foreign operations. -10- PART II - OTHER INFORMATION ITEM ONE - LEGAL PROCEEDINGS From time to time the Company is subject to claims and suits arising in the course of its business. The Company is 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. The Company believes that it has meritorious defenses and that the litigation will not have a material adverse effect on the Company's financial condition or results of operations. In June 1994, the Company and several other carpet manufacturers received a grand jury subpoena 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. ITEM TWO - CHANGES IN SECURITIES None ITEM THREE - DEFAULTS UPON SENIOR SECURITIES None ITEM FOUR - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM FIVE - OTHER INFORMATION None ITEM SIX - EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits - Letter re change in accounting principle (Exhibit 18) Financial Data Schedule (Exhibit 27) (B) No reports on Form 8-K have been filed during the fiscal quarter ended April 1, 1995. -11- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized SHAW INDUSTRIES, INC. (The Registrant) DATE: May 12, 1995 /s/ Robert E. Shaw - - ----- ------------ ------------------ Robert E. Shaw President and Chief Executive Officer DATE: May 12, 1995 /s/ William C. Lusk, Jr. - - ----- ------------ ------------------------ William C. Lusk, Jr. Senior Vice President and Treasurer (Principal Financial Officer) -12- EX-18 2 LETTER RE ACCTING CHG 10-Q, 4/1/95 EXHIBIT 18 LETTER RE CHANGE IN ACCOUNTING PRINCIPLE May 10, 1995 Management and Board of Directors Shaw Industries, Inc. P.O. Box 2128 Dalton, GA 30722 Dear Gentlemen: This letter is written to meet the requirements of Regulation S-K calling for a letter from a registrant's independent accountants whenever there has been a change in accounting principle or practice. We have been informed that, as of January 1, 1995, the Company changed its method of accounting for carpet samples from expensing sample costs that exceed the estimated net realizable value when samples are shipped to expensing that portion of sample costs as they are produced. According to the management of the Company, this change was made in recognition of an increasing number of samples placed with customers that do not result in future sales and in order to place more controls over the sample order process. A complete coordinated set of financial and reporting standards for determining the preferability of accounting principles among acceptable alternative principles has not been established by the accounting profession. Thus, we cannot make an objective determination of whether the change in accounting described in the preceding paragraph is to a preferable method. However, we have reviewed the pertinent factors, including those related to financial reporting, in this particular case on a subjective basis, and our opinion stated below is based on our determination made in this manner. We are of the opinion that the Company's change in method of accounting is to an acceptable alternative method of accounting, which, based upon the reasons stated for the change and our discussions with you, is also preferable under the circumstances in this particular case. In arriving at this opinion, we have relied on the business judgment and business planning of your management. We have not audited the application of this change to the financial statements of any period subsequent to December 31, 1994. Further, we have not examined and do not expect to express any opinion with respect to your financial statements for the three months ended April 1, 1995. Very truly yours, Arthur Andersen LLP Atlanta, Georgia EX-27 3 FDS --
5 This schedule contains summary information extracted from the consolidated balance sheet of Shaw Industries, Inc. and subsidiaries as of April 1, 1995 and the related consolidated statements of income and cash flows for the quarter ended April 1, 1995 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-30-1995 APR-01-1995 42,425,000 0 371,844,000 16,628,000 524,932,000 966,995,000 1,188,000,000 539,407,000 1,742,870,000 348,728,000 656,880,000 150,655,000 0 0 528,273,000 1,742,870,000 676,550,000 676,550,000 559,469,000 559,469,000 0 1,748,000 10,774,000 9,387,000 4,107,000 5,280,000 0 0 12,077,000 (7,600,000) (0.06) (0.06)
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