-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IMfl569VkkTIl2dYMEaorB12eo8XWXOegUCbr7xulKBbEwduhNX/1z1RgzoCl5nN etLrwQ85h8VdSzpdRfXC0A== 0000089498-96-000007.txt : 19960329 0000089498-96-000007.hdr.sgml : 19960329 ACCESSION NUMBER: 0000089498-96-000007 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951230 FILED AS OF DATE: 19960328 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHAW INDUSTRIES INC CENTRAL INDEX KEY: 0000089498 STANDARD INDUSTRIAL CLASSIFICATION: CARPETS AND RUGS [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: 96540267 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-K 1 FORM 10-K FOR 1995 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 December 30, 1995 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 March 15, 1996 was: $1,332,896,623 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 March 15, 1996 Common Stock, No Par Value 137,146,418 Shares DOCUMENTS INCORPORATED BY REFERENCE 1995 Annual Report to Shareholders --- Part II. Definitive Proxy Statement for the 1996 Annual Meeting of Shareholders on April 25, 1996 --- Part III. PART I Item I. Business Shaw Industries, Inc. ("Shaw" or the "Company") is the world's largest carpet manufacturer based on both revenue and volume of production. Shaw designs and manufactures approximately 2,300 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 and INVICTA 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 May 31, 1994, the Company formed a joint venture (the "Terza 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 primarily in Mexico and South America. The Company originally acquired a 51 percent interest in the Terza Joint Venture for $14,050,000, and accordingly, the joint venture's financial statements were consolidated with the Company's financial statements at December 31, 1994. Effective January 1, 1995, the Company sold a 2 percent interest in the Terza Joint Venture for $550,000 reducing its interest to 49 percent. As a result, the Company's investment in the Terza Joint Venture is being accounted for using the equity method. The deconsolidation of the Terza Joint Venture had an insignificant effect on the Company's consolidated total assets and net sales as of and for the year ended December 30, 1995. On January 9, 1995, the Company acquired through its wholly owned subsidiary, Carpets International (U.K.) Plc, substantially all the operating assets of the Carpets Division of Coats Viyella Plc for approximately $29,503,000. The acquisition was accounted for as a purchase, and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on management's estimate of their fair values as of the acquisition date. In December 1995, the Company announced a new retail and contract distribution strategy and subsequently executed letters of intent to acquire a company which owns and franchises residential floorcovering centers throughout the United States, as well as several commercial carpet contractors. In February 1996, the Company initiated this new distribution program by completing certain of these transactions. The Company believes that, by combining the resources of the manufacturer and retailer and developing a contract distribution network, it can provide a full range of products and services to more effectively meet the needs of the end-users of both residential and commercial carpet products at significantly improved margins. The Company, based upon its international growth which began in 1993 and continued into 1995, is now positioned to supply the Australian, Pacific Rim and European markets with high quality products. For 1995 and 1994, international operations accounted for 12.6 percent and 10.4 percent of the Company's net sales, respectively. As a result of its foreign expansion, the Company has limited exposure to fluctuations in foreign currency exchange rates on its intercompany payables. The Company may employ foreign exchange contracts when, in the normal course of business, they are determined to effectively manage and reduce such exposure. Geographical information about the Company's sales, operating profit and identifiable assets is incorporated by reference to pages 19 and 20 of Exhibit 13 to this report Products and Marketing Substantially all carpet manufactured by the Company is tufted carpet made from nylon, polypropylene yarn and wool. 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 91.4% of unit volume shipments of carpet manufactured in the United States during 1995. Substantially all carpet manufactured in the United States is made from synthetic fibers, with nylon accounting for 63.6% of the total, polypropylene 28.5%, polyester 7.5% and wool 0.4%. During 1995, 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 $696 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 for the Company and 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 Company's international operations are also impacted by the markets in which they operate. 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. This department is strengthened by the Company's 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. Sales and Distribution The Company's products are marketed domestically by approximately 940 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 warehouse facilities and eight (8) 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 41,230 retailers, distributors and national accounts located throughout the United States, Australia, Mexico, the United Kingdom and Canada. Retailers and national accounts, on a combined basis, accounted for approximately 91.8% of the Company's carpet sales for 1995. Shaw also sells to approximately 100 wholesale distributors. Approximately 8.2% of the Company's carpet sales in 1995 were to distributors. Sales of Shaw products in foreign markets, including the sales of foreign subsidiaries, accounted for approximately 12.6% of total sales in 1995. No single customer accounted for more than 2% of the Company's sales during 1995. 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. According to industry estimates, carpet accounts for approximately 72% of the total United States production of all flooring types. The principal methods of competition within the carpet industry are quality, style, price and service. The Company believes its strategically located regional warehouse facilities and redistribution centers provide a competitive advantage 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 1995, the Company experienced no significant shortages of raw materials. Employees At December 30, 1995, the Company had approximately 25,000 full-time employees. In the opinion of management, employee relations are good. Employees are involved in the Quality Improvement Process, which began in 1985 as 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. Certain 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. The Company continued its commitment to the environment during 1995. Because of this commitment to finding new ways of using mill waste, the Company is agressively pursuing an environmentally friendly use for all of its waste products. For example, future possibilities for use of fiber reinforced concrete include road and bridge construction, military applications, building foundations, tile, brick and concrete blocks. 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. Item 2. Properties The Company's executive offices are located in Dalton, Georgia. At December 30, 1995, the Company operated additional facilities as follows: Domestic Facilities Alabama Redistribution, yarn spinning and yarn extrusion Michigan Redistribution Missouri Redistribution Florida Redistribution North Carolina Redistribution, primary backing manufacturing Ohio Redistribution Pennsylvania Redistribution Virginia Redistribution California Warehousing Colorado Warehousing Illinois Warehousing Massachusetts Warehousing Minnesota Warehousing New Jersey Warehousing Texas Warehousing Washington Warehousing Georgia Administrative, distribution, carpet manufacturing, yarn processing, yarn spinning, tufting, dyeing, coating, finishing, rug manufacturing, sample manufacturing, warehousing, design center and research and development center. Tennessee Carpet manufacturing, yarn spinning Foreign Facilities (facilities are located in or near the areas listed) Bradford, England Tufting, weaving, coating, yarn processing, distribution and administrative offices Gwent, Wales Yarn extrusion, yarn processing Victoria, Australia Yarn extrusion, yarn processing, tufting, dyeing, coating, distribution and administrative offices Cork, Ireland Wool spinning Donaghadee, N. Ireland Tufting, dyeing and finishing During 1995, two domestic yarn spinning facilities and a yarn spinning facility in Australia were closed. The operations of these facilities have been phased out. The Company maintains leased warehouses and customer service facilities in or near Dallas; Los Angeles (2); Seattle; San Francisco; Chicago; Minneapolis; Boston; and Cranbury, New Jersey. Each leased warehouse facility includes a sales showroom. The Company believes that current facilities are adequately insured and well maintained, substantially used and provide adequate production capacity for current and anticipated future operations. Item 3. 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 is has meritorious defenses 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 this suit. 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. In December 1995, the Company learned that it was one of six carpet companies named as additional defendants in a pending antitrust suit filed in United States District Court in Rome, Georgia. The amended complaint alleges price-fixing regarding certain types of carpet products in violation of Section 1 of the Sherman Act. The Company believes the suit is spurious and without merit, and that once completed, it will not have a material adverse effect on the Company's financial condition or results of operations. In February 1996, a jury in Greensboro, North Carolina returned a verdict against the Company in litigation brought by four former employees of Salem Carpet Mills, acquired by the Company in 1992, alleging age discrimination and sex discrimination in employment decisions with regard to such employees. The verdict is now under review by the trial judge and may subsequently be appealed by either party after judgement is entered. The Company believes that the litigation will not have a material adverse effect on the Company's financial condition or results of operations. At the end of fiscal year 1995, 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. Item 4(A). Executive Officers of the Registrant
Name Age Officer Position Since Robert E. Shaw 64 1967 Chairman, Chief Executive Officer and Director W. Norris Little 64 1978 President and Chief Operating Officer and Director William C. Lusk, Jr. 60 1971 Senior Vice President, Treasurer and Director Vance D. Bell 44 1983 Vice President, Marketing Kenneth G. Jackson 38 1996 Vice President and Chief Financial Officer Carl P. Rollins 52 1991 Vice President, Administration Bennie M. Laughter 44 1986 Vice President, Secretary and General Counsel Douglas H. Hoskins 61 1978 Controller
Officers of the Company are elected annually by the Board of Directors. All of the executive officers of the Company except for Mr.Jackson and Mr. Rollins have served as executive officers for the Company for more than the past five years. 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. Mr. Jackson joined the Company in February 1996. Prior to February 1996, Mr. Jackson had been a partner with Arthur Andersen LLP in Atlanta, Georgia. 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 23 of Exhibit 13. Reference is made to Note 2 of Notes to Consolidated Financial Statements on page 12 of Exhibit 13 for information concerning restrictions on the payment of cash dividends. At March 4, 1996, there were 4,159 holders of record of the Company's common stock. Item 6. Selected Financial Data This information is set forth on page 1 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 2 - 4 of Exhibit 13 to this report. Item 8. Financial Statements and Supplementary Data This information is set forth on pages 5 - 24 of Exhibit 13. Item 9. Disagreements on Accounting and Financial Disclosure None. 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 1996 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 7 - 14 of the Proxy Statement for the 1996 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 1996 Annual Meeting of Shareholders. 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 1996 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 December 30, 1995 and December 31, 1994, the related statements of income, shareholders' investment and cash flows for each of the three years in the period ended December 30, 1995, 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 -- December 30, 1995 and December 31, 1994 Statements of Income for the years ended December 30, 1995, December 31, 1994 and January 1, 1994. Statements of Shareholders' Investment for the years ended December 30, 1995, December 31, 1994 and January 1, 1994. Statements of Cash Flows for the years ended December 30, 1995, December 31, 1994 and January 1, 1994. 2. Financial Statement Schedules Report of Independent Public Accountants on Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts for the Years Ended December 30, 1995, December 31, 1994 and January 1, 1994. 3. Exhibits incorporated by reference or filed with this report. Number Description 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. 33-51714).] 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) Restated Articles of Incorporation, filed as, Exhibit 3(a), and the Bylaws of Registrant, filed as Exhibit 3(b), 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. [Incorporated herein by reference to the Registrant's July 2, 1994 Form 10-K filed with the Securities and Exchange Commission (File No. 1-6853).] 10(c), 10(d), 10(e) and 10(f) Reserved 10(g) Credit Agreement dated November 30, 1994, between Registrant and Nationsbank of Georgia, National Association, regarding a $600,000,000 revolving credit facility. [Incorporated herein by reference to the Registrant's December 31, 1994 Form 10-K filed with the Securities and Exchange Commission (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 (File No. 1-6853).] 11 Computation of Earnings per Share for the fiscal years ended December 30, 1995, December 31, 1994 and January 1, 1994. 13 Items Incorporated by Reference from the 1995 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 1995.
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: March 28, 1996 By: /s/ ROBERT E. SHAW Robert E. Shaw Chairman, Chief Executive Officer and Director 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: March 28, 1996 /s/ ROBERT E. SHAW Robert E. Shaw Chairman, Chief Executive Officer and Director (Principal Executive Officer) Date: March 28, 1996 /s/ J.C. SHAW J.C. Shaw Chairman Emeritus and Director Date: March 28, 1996 /s/ W. NORRIS LITTLE W. Norris Little President and Chief Operating Officer and Director Date: March 28, 1996 /s/ WILLIAM C. LUSK, JR. William C. Lusk, Jr. Sr. Vice President, Treasurer and Director (Principal Financial and Accounting Officer) Date: March 28, 1996 /s/ ROBERT R. HARLIN Robert R. Harlin Director Date: March 28, 1996 /s/ THOMAS G. COUSINS Thomas G. Cousins Director Date: March 28, 1996 /s/ S. TUCKER GRIGG S. Tucker Grigg Director Date: March 28, 1996 /s/ CLIFFORD M. KIRTLAND, JR. Clifford M. Kirtland, Jr. Director Date: March 28, 1996 /s/ J. HICKS LANIER J. Hicks Lanier Director Date: March 28, 1996 /s/ R. JULIAN McCAMY R. Julian McCamy Director 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 the annual report to shareholders incorporated by reference in this Form 10-K and have issued our report thereon dated February 19, 1996. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states, 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 February 19, 1996 SCHEDULE II SHAW INDUSTRIES, INC. VALUATION AND QUALIFYING ACCOUNTS DECEMBER 30, 1995, DECEMBER 31, 1994 AND JANUARY 1, 1994 $ in thousands Additions Balance at Charged to Beginning Costs and Balance at of Year Expenses Deductions End of Year YEAR ENDED JANUARY 1, 1994: Allowance for doubtful accounts and discounts $ 14,821 $ 98,230 $ 100,000 $ 13,051 YEAR ENDED DECEMBER 31, 1994: Allowance for doubtful accounts and discounts $ 13,051 $ 112,978 $ 108,104 $ 17,925 YEAR ENDED DECEMBER 30, 1995: Allowance for doubtful accounts and discounts $ 17,925 $ 110,541 $ 113,720 * $ 14,746 * Deductions for December 30, 1995 include $1,018,000 related to the deconsolidation of the Terza Joint Venture.
EX-11 2 EXHIBIT 11, 1995 FORM 10-K SHAW INDUSTRIES, INC. EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS FOR THE YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 and JANUARY 1, 1994 (In Thousands, Except Share Data) 1995 1994 1993 PRIMARY: Weighted average common shares outstanding 135,872 141,432 142,946 Additional shares assuming exercise of stock options 506 1,051 1,977 Average common shares outstanding, as adjusted 136,378 142,483 144,923 Income before extraordinary item and accounting change $64,381 $130,389 $117,636 Extraordinary item, net of tax benefit - (3,363) - Cumulative effect of accounting change, net of tax benefit (12,077) - - Net income $52,304 $127,026 $117,636 Earnings per Common Share: Income before extraordinary item and accounting change $0.47 $0.92 $0.81 Extraordinary item, net of tax benefit - (0.02) - Cumulative effect of accounting change, net of tax benefit (0.09) - - Net income $0.38 $0.89 $0.81 FULLY DILUTED: Weighted average common shares outstanding 135,872 141,432 142,946 Additional shares assuming exercise of stock options 506 1,058 2,371 Average common shares outstanding, as adjusted 136,378 142,490 145,317 Income before extraordinary item and accounting change $64,381 $130,389 $117,636 Extraordinary item, net of tax benefit - (3,363) - Cumulative effect of accounting change, net of tax benefit (12,077) - - Net income $52,304 $127,026 $117,636 Earnings per Common Share: Income before extraordinary item and accounting change $0.47 $0.92 $0.81 Extraordinary item, net of tax beneift - (0.02) - Cumulative effect of accounting change, net of tax benefit (0.09) - - Net income $0.38 $0.89 $0.81 Note: Adjusted for a two-for-one stock split effected in the form of a stock dividend in December 1993.
EX-13 3 EXHIBIT 13, 1995 FORM 10-K Ten-Year Financial Review (Dollars in 000s except share data) 1995 1994 1993 1992 1991 Net Sales $ 2,869,828 $ 2,788,527 $ 2,476,282 $ 2,035,962 $ 1,618,923 Cost of Sales 2,319,894 2,187,439 1,963,206 1,641,404 1,341,312 Selling, General and Administrative Expenses 393,868 366,189 301,790 240,192 188,363 Nonrecurring Plant Shutdown Costs 6,967 - - - - Interest, Net 41,901 30,022 24,107 26,083 30,973 Other Expense (Income), Net 443 (4,922) (2,530) 324 (74) Income Before Income Taxes, Equity in Income of Joint Venture, Extraordinary Item and Accounting Change 106,755 209,799 189,709 127,959 58,349 As a Percentage of Net Sales 3.7% 7.5% 7.7% 6.3% 3.6% Effective Tax Rate 40.8% 37.9% 38.0% 38.5% 38.3% Income Before Equity in Income of Joint Venture, Extraordinary Item and Accounting Change 63,152 130,389 117,636 78,695 35,985 Equity in Income of Joint Venture 1,229 - - - - Extraordinary Item - (3,363) - - - Accounting Change (12,077) - - - - Net Income 52,304 127,026 117,636 78,695 35,985 As a Percentage of Net Sales 1.8% 4.6% 4.8% 3.9% 2.2% As a Percentage of Average Total Assets 3.1% 8.1% 8.8% 7.7% 4.5% As a Percentage of Average Invested Capital 3.9% 10.7% 12.1% 10.5% 6.2% As a Percentage of Average Shareholders' Investment 7.4% 17.7% 17.5% 16.1% 12.8% Earnings Per Share: Primary and Fully Diluted 0.38 0.89 0.81 0.59 0.32 Cash Dividends Per Share 0.30 0.22 0.18 0.15 0.125 Property Additions (including acquisitions) 93,805 187,045 174,635 191,830 48,230 Depreciation and Amortization 91,083 84,898 82,416 67,414 62,075 Weighted Average Shares Outstanding: Primary 136,378,493 142,483,289 144,922,740 132,422,293 113,018,088 Fully Diluted 136,378,493 142,489,938 145,317,217 132,596,479 113,220,148 At Year-End: Working Capital 641,445 617,338 437,445 448,089 290,305 Current Ratio 3.5 3.0 2.2 2.6 2.5 Property, Plant and Equipment, Net 631,990 656,178 551,873 453,276 344,182 Total Assets 1,662,783 1,697,378 1,454,266 1,223,439 816,874 Total Long-Term Debt 627,130 612,061 317,914 281,742 235,424 Shareholders' Investment 710,189 713,025 723,830 619,977 358,643 Total Invested Capital* 1,337,319 1,325,086 1,041,744 901,719 594,067 Shareholders' Investment Per Share $ 5.22 $ 5.20 $ 5.04 $ 4.38 $ 2.89 $ * 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.
1990 1989 1988 1987 1986 Net Sales $ 1,658,771 $ 1,266,142 $ 1,120,163 $ 753,378 $ 624,453 Cost of Sales 1,348,808 1,017,084 905,305 613,002 498,616 Selling, General and Administrative Expenses 179,381 138,708 126,500 81,134 69,305 Nonrecurring Plant Shutdown Costs - - - - - Interest, Net 35,026 20,828 23,776 11,305 5,641 Other Expense (Income), Net (483) (640) (145) (172) (525) Income Before Income Taxes, Equity in Income of Joint Venture, Extraordinary Item and Accounting Change 96,039 90,162 64,727 48,109 51,416 As a Percentage of Net Sales 5.8% 7.1% 5.8% 6.4% 8.2% Effective Tax Rate 38.0% 38.4% 37.8% 42.5% 47.1% Income Before Equity in Income of Joint Venture, Extraordinary Item and Accounting Change 59,515 55,567 40,285 27,666 27,191 Equity in Income of Joint Venture - - - - - Extraordinary Item - - - - - Accounting Change - - - - - Net Income 59,515 55,567 40,285 27,666 27,191 As a Percentage of Net Sales 3.6% 4.4% 3.6% 3.7% 4.4% As a Percentage of Average Total Assets 8.0% 9.4% 8.1% 6.7% 9.6% As a Percentage of Average Invested Capital 11.1% 12.7% 10.7% 8.9% 12.7% As a Percentage of Average Shareholders' Investment 29.1% 29.4% 25.4% 19.0% 19.7% Earnings Per Share: Primary and Fully Diluted 0.50 0.46 0.33 0.21 0.20 Cash Dividends Per Share 0.125 0.10 0.083 0.078 0.044 Property Additions (including acquisitions) 116,739 144,308 30,362 114,882 45,991 Depreciation and Amortization 60,734 38,600 41,866 27,361 21,796 Weighted Average Shares Outstanding: Primary 118,909,198 120,135,363 123,830,721 131,969,354 136,233,599 Fully Diluted 118,909,198 120,135,363 123,830,721 131,969,354 136,233,599 At Year-End: Working Capital 260,644 224,443 199,458 194,754 149,916 Current Ratio 2.4 2.3 3.0 2.8 3.3 Property, Plant and Equipment, Net 341,266 293,030 192,194 193,237 107,384 Total Assets 790,935 690,202 496,374 500,609 325,263 Total Long-Term Debt 376,499 292,763 205,775 228,203 103,298 Shareholders' Investment 201,667 207,434 170,309 147,139 144,158 Total Invested Capital* 576,166 500,197 376,084 375,342 247,456 Shareholders' Investment Per Share $ 1.87 $ 1.73 $ 1.39 $ 1.09 $ 1.09 *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. EXHIBIT 13, PAGE 1
SHAW INDUSTRIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's business, as well as the U.S. 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 international operations are also impacted by the economic climates of the markets in which they operate (primarily the United Kingdom, Australia and Mexico). Sales prices and demand were stable in the U.S. in 1995, but weakened in the international markets of the United Kingdom and Australia. Margins declined in the U.S. and internationally due to higher production costs. The Company expanded its operations in the United Kingdom in January 1995 by acquiring substantially all of the operating assets of the Carpets Division of Coats Viyella Plc (the "CV Acquisition") for approximately $29.5 million. Effective January 1, 1995, the Company reduced its interest in the Terza Joint Venture in Mexico from 51 percent to 49 percent. As a result, the Company's investment in the Terza Joint Venture is being accounted for using the equity method. The deconsolidation of the Terza Joint Venture had an insignificant effect on the Company's consolidated financial statements for 1995. In December 1995, the Company announced a new retail and contract distribution strategy and subsequently executed letters of intent to acquire a company which owns and franchises residential floorcovering centers throughout the United States, as well as several commercial carpet contractors. In February 1996, the Company initiated this new distribution program by completing certain of these transactions. The Company believes that, by combining the resources of the manufacturer and retailer and developing a contract distribution network, it can provide a full range of products and services to more effectively meet the needs of end-users of both residential and commercial carpet products at significantly improved margins. LIQUIDITY AND CAPITAL RESOURCES At December 30, 1995, the Company had working capital of $641.4 million, an increase of $24.1 million, or 3.9 percent, over working capital of $617.3 million at December 31, 1994. Cash and cash equivalents decreased $2.9 million to $31.5 million at December 30, 1995. Cash flow provided by operating activities was $161.2 million for 1995, principally net income of $52.3 million adjusted for depreciation and amortization of $91.1 million, compared to $88.6 million in 1994. While net income decreased in 1995, operating cash flow increased primarily due to decreases in other current assets and a net increase in accounts payable and accrued expenses. Cash used in investing activities consisted of additions to property, plant and equipment of $67.3 million and the CV Acquisition for $29.5 million. Cash was used in financing activities to fund payments on debt of $35.0 million, cash dividends of $40.8 million and stock repurchases of $20.6 million, offset by an increase in long-term debt of $33.8 million. The Company has continued to maintain a strong working capital position. Effective use of capital and the Company's ability to generate cash flow from operations has enabled it to invest in technologies which reduce production costs and generate operating margins that have historically exceeded industry averages and has enabled the Company to be a preeminent force in the carpet industry. During 1995, accounts payable decreased 23.8 percent due to the timing of purchases, while accrued liabilities increased 24.1 percent due to the CV Acquisition and increases in various accruals. Capital expenditures for property, plant and equipment necessary to maintain the Company's facilities in a modern state-of-the-art condition were $67.3 million, excluding the CV Acquisition. Management anticipates capital expenditures and capitalized lease obligations of approximately $60 million in 1996 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 flows from operations and, if appropriate, through additional sources of long-term capital. The Company's primary source of financing is an unsecured revolving credit agreement with a banking syndicate which provides for borrowings of up to $620.0 million and expires in December 1997. Interest on borrowings under this facility is currently based on LIBOR, which was 5 7/16 percent at December 30, 1995. At December 30, 1995, borrowings outstanding under this credit facility were $519.0 million. In addition, the Company maintains revolving credit facilities in the United Kingdom and Australia with $31.1 million and $59.1 million, respectively, available and outstanding at December 30, 1995. The Company believes that available borrowings under its existing credit agreements, available cash and internally generated funds will be sufficient to support its working capital, capital expenditure and debt service requirements for the foreseeable future. In addition, the Company believes it could expand its revolving credit and long-term bank facilities, if necessary. EXHIBIT 13, PAGE 2 INFLATION The Company's manufacturing costs and operating expenses are affected by price changes. The costs of fiber and other raw materials increased slightly in 1995 and 1994, and decreased in 1993. 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 1995 Compared To 1994 Net sales increased $81.3 million, or 2.9 percent, to $2,869.8 million in 1995. After excluding sales in 1994 related to the Terza Joint Venture, sales increased 4.0 percent. The increase was primarily attributable to incremental net sales of $134.1 million related to the CV Acquisition, offset by declines in net sales at the Company's other foreign operations. Gross margin as a percent of net sales decreased 2.4 percent to 19.2 percent for 1995, compared to 21.6 percent in 1994, primarily due to increased production costs, competitive price pressures and lower production volumes at the Company's international operations. Selling, general and administrative expenses for 1995 were $393.9 million, or 13.7 percent of net sales, compared to $366.2 million, or 13.1 percent of net sales, in 1994. Additionally, 1995 results include nonrecurring plant shutdown costs of $4.4 million related to the closure of two domestic yarn spinning mills and $2.6 million related to the closure of a yarn spinning mill in Australia. Interest expense, net, increased $11.9 million, or 39.6 percent, as a result of higher average borrowings due primarily to stock repurchases and the CV Acquisition, offset in part by lower average interest rates on the Company's borrowings. The effective income tax rate for 1995 was 40.8 percent compared to 37.9 percent in 1994, as a result of lower taxable income which increased the effect of permanent tax differences. Effective January 1, 1995, the Company changed its 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 to better control the sample order process. The cumulative effect of the change was to decrease net income for 1995 by $12.1 million, or $.09 per share, net of income tax benefit. 1994 Compared To 1993 Net sales increased $312.2 million, or 12.6 percent, to $2,788.5 million in 1994 compared to 1993. The increase was primarily attributable to incremental net sales of $163.5 million related to international acquisitions and an increase in the volume of domestic shipments, offset in part by lower prices caused by increased competition. Gross margin as a percent of net sales increased .9 percent to 21.6 percent in 1994, compared to 20.7 percent in 1993, as increases in the efficiency relationship of volume and fixed costs outweighed higher raw materials costs. Selling, general and administrative expenses for 1994 were $366.2 million, or 13.1 percent of net sales, compared to $301.8 million, or 12.2 percent of net sales, in 1993. The .9 percent increase as a percent of net sales was primarily due to continuing aggressive efforts to increase sales in an increasingly competitive environment. Interest expense, net, increased $5.9 million, or 24.5 percent, as a result of significantly higher borrowings due primarily to stock repurchases and international acquisitions which were offset somewhat by lower average interest rates on the Company's borrowings. The effective income tax rate for 1994 was 37.9 percent, compared to 38.0 percent in 1993. During 1994, the Company recorded an extraordinary loss of $3.4 million, net of income tax benefit, related to the early repayment of certain term notes payable. EXHIBIT 13, PAGE 3 NONRECURRING PLANT SHUTDOWN COSTS In 1995, the Company closed two of its domestic yarn spinning mills. As a result, the Company recorded a charge of $4.4 million related primarily to termination benefits for 591 employees and to recording affected property, plant and equipment at net realizable value. The production of these two mills has been consolidated with the Company's other yarn spinning facilities. The Company did not experience any disruption to its consolidated operations. The Company expects to realize future savings as a result of the consolidation of these facilities. Also in 1995, the Company closed a yarn spinning mill in Australia and recorded a charge of $2.6 million. The charge primarily related to termination benefits for 127 employees and writedowns of property, plant and equipment to net realizable value. FOREIGN OPERATIONS Beginning in early 1993 and continuing into 1995, the Company has expanded its operations through acquisitions in Australia, the United Kingdom and Mexico. The Company's primary foreign operations are conducted through its United Kingdom and Australian subsidiaries, where the functional currencies are British pounds and Australian dollars, respectively. International operations accounted for approximately 12.6 percent, 10.4 percent and 3.9 percent of the Company's net sales in 1995, 1994 and 1993, respectively. Fluctuations in foreign currency exchange rates create limited exposures which can impact the Company's operating results due to its intercompany payables. The Company may employ foreign currency forward exchange contracts when, in the normal course of business, they are determined to effectively manage and reduce such exposure. The Company does not enter into foreign currency forward exchange contracts for speculative trading purposes. NEW ACCOUNTING PRONOUNCEMENT The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes, among other things, accounting standards for the impairment of long-lived assets and certain identifiable intangibles. The Company will adopt the new standard in 1996. The Company has not determined the impact of the adoption on the 1996 financial statements or results of operations. OUTLOOK The Company will continue to be affected by general economic conditions including consumer spending, fluctuations in interest rates, new housing starts and international economic climates. Fiscal 1996 is expected to be a challenging year for the Company and the carpet industry. The Company views 1996 as a year of opportunity in light of the recent acquisitions of retail floor covering centers and commercial contractors. EXHIBIT 13, PAGE 4 CONSOLIDATED STATEMENTS OF INCOME For Years Ended December 30, 1995, December 31, 1994 and January 1, 1994 1995 1994 1993* ------------------ ------------------ ----------------- Net Sales $ 2,869,828,000 $ 2,788,527,000 $ 2,476,282,000 Costs and Expenses: Cost of sales 2,319,894,000 2,187,439,000 1,963,206,000 Selling, general and administrative 393,868,000 366,189,000 301,790,000 Nonrecurring plant shutdown costs 6,967,000 - - Interest, net 41,901,000 30,022,000 24,107,000 Other expense (income), net 443,000 (4,922,000) (2,530,000) ------------------ ------------------ ----------------- Income Before Income Taxes 106,755,000 209,799,000 189,709,000 Provision for Income Taxes 43,603,000 79,410,000 72,073,000 Income Before Equity in Income of Joint Venture, ------------------ ------------------ ----------------- Extraordinary Item and Accounting Change 63,152,000 130,389,000 117,636,000 Equity in Income of Joint Venture 1,229,000 - - ------------------ ------------------ ----------------- Income Before Extraordinary Item and Accounting Change 64,381,000 130,389,000 117,636,000 Extraordinary Item, net of tax benefit - (3,363,000) - Cumulative Effect of Accounting Change, net of tax benefit (12,077,000) - - ------------------ ------------------ ----------------- Net Income $ 52,304,000 $ 127,026,000 $ 117,636,000 ================== ================== ================= Earnings Per Common Share : Primary and Fully Diluted Basis- Before Extraordinary Item and Accounting Change $ 0.47 $ 0.91 $ 0.81 Extraordinary Item - (0.02) - Cumulative Effect of Accounting Change (0.09) - - ------------------ ------------------ ----------------- Net Income $ 0.38 $ 0.89 $ 0.81 ================== ================== ================= Weighted Average Shares Outstanding: Primary 136,378,493 142,483,289 144,922,740 Fully Diluted 136,378,493 142,489,938 145,317,217 The accompanying notes are an integral part of these consolidated financial statements. *Fifty-three week period.
EXHIBIT 13, PAGE 5 CONSOLIDATED BALANCE SHEETS December 30, 1995 and December 31, 1994 1995 1994 -------------------- ----------------- ASSETS Current Assets: Cash and cash equivalents $ 31,453,000 $ 34,365,000 -------------------- ----------------- Accounts receivable, less allowance for doubtful accounts and discounts of $14,746,000 in 1995 and $17,925,000 in 1994 345,443,000 350,128,000 Inventories - Raw materials 232,693,000 236,579,000 Work-in-process 25,330,000 22,902,000 Finished goods 231,189,000 238,670,000 -------------------- ----------------- 489,212,000 498,151,000 -------------------- ----------------- Other current assets 36,403,000 39,585,000 -------------------- ----------------- Total current assets 902,511,000 922,229,000 -------------------- ----------------- Property, Plant and Equipment, at cost: Land and land improvements 27,173,000 29,329,000 Buildings and leasehold improvements 269,715,000 258,119,000 Machinery and equipment 914,126,000 842,975,000 Construction in progress 22,986,000 44,336,000 -------------------- ----------------- 1,234,000,000 1,174,759,000 Less - Accumulated depreciation and amortization 602,010,000 518,581,000 -------------------- ----------------- 631,990,000 656,178,000 -------------------- ----------------- Goodwill, net 104,280,000 106,960,000 -------------------- ----------------- Investment in Joint Venture 15,513,000 - -------------------- ----------------- Other Assets 8,489,000 12,011,000 -------------------- ----------------- TOTAL ASSETS $ 1,662,783,000 $ 1,697,378,000 ==================== ================= EXHIBIT 13, PAGE 6 1995 1994 -------------------- ----------------- LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Current maturities of long-term debt $ 5,305,000 $ 40,898,000 Accounts payable 114,326,000 150,023,000 Accrued liabilities 141,435,000 113,970,000 -------------------- ----------------- Total current liabilities 261,066,000 304,891,000 -------------------- ----------------- Long-Term Debt, less current maturities 627,130,000 612,061,000 -------------------- ----------------- Deferred Income Taxes 51,000,000 45,972,000 -------------------- ----------------- Other Liabilities 13,398,000 21,429,000 -------------------- ----------------- Commitments and Contingencies 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: 135,956,602 shares at December 30, 1995 and 137,017,402 shares at December 31, 1994 150,913,000 152,090,000 Paid-in capital 101,718,000 118,635,000 Cumulative translation adjustment 1,895,000 (1,815,000) Retained earnings 455,663,000 444,115,000 -------------------- ----------------- Total shareholders' investment 710,189,000 713,025,000 -------------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 1,662,783,000 $ 1,697,378,000 ==================== =================
EXHIBIT 13, PAGE 7 The accompanying notes are an integral part of these consolidated financial statements. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT For Years Ended December 30, 1995, December 31, 1994 and January 1, 1994 Common Stock Paid-In Cumulative Retained Unearned Shares Amount Capital Translation Earnings Compensation Adjustment ----------- ------------- ------------- ------------- ------------- ------------ Balance, December 26, 1992 70,754,848 $ 78,538,000 $ 286,703,000 $ - $ 256,329,000 $ (1,267,000) Net income - - - - 117,636,000 - Issuance of stock in acquisition 142,147 157,000 6,288,000 - - - Issuance of two-for-one stock split 71,754,831 79,648,000 (79,648,000) Exercise of stock options 970,636 1,079,000 3,898,000 Purchase and retirement - - - of common stock (100,000) (111,000) (3,282,000) Cumulative translation adjustment - - - (594,000) - - Tax benefit on disqualified dispositions of stock options - - 3,389,000 - - - Amortization of unearned compensation - - - - - 798,000 Cash dividends paid ($.18 per share) - - - - (25,731,000) - Balance, January 1, 1994 143,522,462 159,311,000 217,348,000 (594,000) 348,234,000 (469,000) ----------- ------------- ------------- ------------- ------------- ------------ Net income - - - - 127,026,000 - Purchase and retirement of common stock (7,173,300) (7,962,000) (102,427,000) - - - Exercise of discounted stock options 102,840 114,000 (475,000) - - - Exercise of stock options 565,400 627,000 814,000 - - - Cumulative translation adjustment - - - (1,221,000) - - Tax benefit on disqualified dispositions of stock options - - 3,375,000 - - - Amortization of unearned compensation - - - - - 469,000 Cash dividends paid ($.22 per share) - - - - (31,145,000) - ----------- ------------- ------------- ------------- ------------- ------------ Balance, December 31, 1994 137,017,402 152,090,000 118,635,000 (1,815,000) 444,115,000 - Net income - - - - 52,304,000 - Purchase and retirement of common stock (1,384,200) (1,537,000) (19,053,000) - - - Exercise of stock options 323,400 360,000 2,136,000 - - - Cumulative translation adjustment - - - 3,710,000 - - Cash dividends paid ($.30 per share) - - - - (40,756,000) - ----------- ------------- ------------- ------------- ------------- ------------ Balance, December 30, 1995 135,956,602 $ 150,913,000 $ 101,718,000 $ 1,895,000 $ 455,663,000 $ - =========== ============= ============= ============= ============= ============ The accompanying notes are an integral part of these consolidated financial statements. EXHIBIT 13, PAGE 8
SHAW INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Years Ended December 30, 1995, December 31, 1994 and January 1, 1994 1995 1994 1993 * OPERATING ACTIVITIES: Net Income $ 52,304,000 $ 127,026,000 $ 117,636,000 --------------------- ----------------- ------------- Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization 91,083,000 84,898,000 82,416,000 Provision for doubtful accounts 8,629,000 12,747,000 12,987,000 Deferred income taxes 5,028,000 (1,457,000) 1,717,000 Cumulative effect of accounting change 12,077,000 - - Extraordinary loss on early extinguishment of debt - 3,363,000 - Stock option compensation expense - 469,000 798,000 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (21,137,000) (44,132,000) (24,846,000) Inventories 2,456,000 (45,664,000) (18,306,000) Accounts payable (32,899,000) (16,341,000) 8,376,000 Accrued liabilities 28,277,000 (9,769,000) 18,846,000 Other, net 15,429,000 (22,512,000) (16,537,000) --------------------- ----------------- ------------- Total Adjustments 108,943,000 (38,398,000) 65,451,000 --------------------- ----------------- ------------- Net Cash Provided by Operating Activities 161,247,000 88,628,000 183,087,000 --------------------- ----------------- ------------- INVESTING ACTIVITIES: Increase in property, plant and equipment (67,257,000) (148,904,000) (97,709,000) Acquisition of business assets (29,503,000) (8,386,000) (72,908,000) Investment in joint venture (3,500,000) (10,001,000) - Deconsolidation of joint venture (3,828,000) - - --------------------- ----------------- ------------- Net Cash Used in Investing Activities (104,088,000) (167,291,000) (170,617,000) --------------------- ----------------- ------------- FINANCING ACTIVITIES: Borrowings under revolving credit agreement 30,000,000 389,143,000 5,000,000 Repayment of revolving credit agreement (35,000,000) - - Borrowings on other long-term debt 3,779,000 - 45,000,000 Repayment of long-term debt - (142,887,000) (68,627,000) Net payments on short-term debt - (20,000,000) (40,000,000) Cash paid to retire debt - (5,513,000) - Purchase and retirement of common stock (20,590,000) (110,389,000) (3,393,000) Payment of cash dividends (40,756,000) (31,145,000) (25,731,000) Proceeds from exercise of stock options 2,496,000 1,080,000 4,977,000 --------------------- ----------------- ------------- Net Cash (Used in) Provided by Financing Activities (60,071,000) 80,289,000 (82,774,000) --------------------- ----------------- ------------- CASH AND CASH EQUIVALENTS: Net change (2,912,000) 1,626,000 (70,304,000) Beginning of period 34,365,000 32,739,000 103,043,000 --------------------- ----------------- ------------- End of period $ 31,453,000 $ 34,365,000 $ 32,739,000 ===================== ================= ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for - Interest $ 41,751,000 $ 31,451,000 $ 28,712,000 Income taxes $ 36,874,000 $ 64,308,000 $ 79,826,000 Noncash capital lease obligations $ 3,450,000 $ 1,667,000 $ 2,896,000 The accompanying notes are an integral part of these consolidated financial statements. * Fifty-three week period. EXHIBIT 13, PAGE 9
Notes to Consolidated Financial Statements December 30, 1995, December 31, 1994 and January 1, 1994 Note 1 Summary of Accounting Policies Principles of Consolidation - The consolidated financial statements include the accounts of Shaw Industries, Inc. and subsidiaries (the "Company"). All significant intercompany balances and transactions are eliminated in consolidation. Nature of Business - The Company manufactures and distributes carpet in a broad range of prices, patterns, colors and textures for residential and commercial use. The Company markets its products to floorcovering retailers, distributors and contractors throughout the United States, Canada, Australia, Mexico and the United Kingdom. Fiscal Period - The Company's fiscal year-end is the Saturday closest to December 31. The results of operations for 1995 and 1994 were based on a 52-week year. For 1993, results of operations were based on a 53-week year. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition - Revenues are recognized when goods are shipped. Cash and Cash Equivalents - The Company considers all investments with an original maturity of three months or less to be cash equivalents. Inventory Valuation - 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 uses the last-in, first-out (LIFO) method of valuing substantially all of its domestic inventories to more properly match current costs against current revenues, thereby reducing the effects of price changes on earnings. If LIFO inventories were valued at current costs, the inventory amounts would have been $9,992,000 and $5,598,000 lower than those reported at December 30, 1995 and December 31, 1994, respectively. Although current replacement cost for inventories was less than LIFO carrying value at December 30, 1995, the Company's management believes that the carrying value will be recovered through profit margins on future sales. The Company's foreign inventories, representing approximately 16.8 percent of total inventories, are valued at the lower of first-in, first-out (FIFO) cost or market. Property, Plant and Equipment - Property, plant and equipment is recorded at cost. Renewals and betterments are capitalized; maintenance and repairs are charged to expenses as incurred. 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 39 years for buildings and 5 to 14 years for machinery and equipment). Leasehold improvements are amortized over the terms of the related leases. Goodwill - 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. The amount of goodwill considered realizable, however, could be reduced in the near term if changes occur in anticipated conditions. Accumulated amortization was $6,210,000 and $3,692,000 at December 30, 1995 and December 31, 1994, respectively. Accrued Liabilities - Accrued liabilities include $24,879,000 and $21,149,000 for workers' compensation claims and $26,375,000 and $22,328,000 for returns and allowances at December 30, 1995 and December 31, 1994, respectively. Employee Benefits - The Company's Retirement Savings Plan provides, among other things, for voluntary contributions by domestic employees not to exceed 15 percent of their gross salaries and wages. The Company provides matching contributions of 25 to 50 percent based on the employee's contribution percentage. During 1995, 1994 and 1993, the Company contributed $9,356,000, $8,936,000 and $9,229,000, 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 1995, 1994 and 1993, the Company provided $1,425,000, $2,564,000, and $2,122,000, respectively, under the plan. These amounts have been recorded as other liabilities in the accompanying balance sheets. Earnings Per Share - Earnings per share have been computed based upon the weighted average shares and 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 split effected in the form of a stock dividend in December 1993. Foreign Currency Translation - The financial statements of the Company's foreign subsidiaries are translated into United States currency in accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation." Assets and liabilities are translated into United States dollars at period-end exchange rates. Income and expense items are translated at average rates of exchange prevailing during the period. Translation adjustments are accumulated as a separate component of shareholders' investment. Gains and losses which result from foreign currency transactions are included in the accompanying statements of income. EXHIBIT 13, PAGE 10 Accounting Change - Effective January 1, 1995, the Company changed its 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. The cumulative effect of the change was to decrease net income for the year ended December 30, 1995 by $12,077,000, or $.09 per share, net of tax benefit of $7,885,000. Nonrecurring Plant Shutdown Costs - During 1995, the Company closed two of its domestic yarn spinning mills and one yarn spinning mill in Australia. As a result, the Company recorded a charge of $4,360,000 related to the domestic plant closings and $2,607,000 related to the foreign plant closing. These charges related primarily to termination benefits and to recording affected property, plant and equipment at net realizable value. New Accounting Pronouncement - The Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes, among other things, accounting standards for the impairment of long-lived assets and certain identifiable intangibles. The Company will adopt the new standard in 1996. The Company has not determined the impact of adoption on the 1996 financial statements or results of operations. Reclassifications - Certain prior year amounts have been reclassified to conform to the 1995 presentation. EXHIBIT 13, PAGE 11 Notes to Consolidated Financial Statements Note 2 Long-Term Debt Long-term debt presented in the accompanying consolidated balance sheets at December 30, 1995 and December 31, 1994 consisted of the following (000s omitted): 1995 1994 - --------------------------------------------------------------------------------- ---------------- ----------------- Revolving credit agreement at LIBOR-based rate, due in fiscal 1998 $519,000 $524,000 Revolving loan facility, United Kingdom, at LIBOR-based rate, due in fiscal 1997 59,108 50,473 Revolving loan facility, Australia, at LIBOR-based rate, due in fiscal 1997 31,060 28,072 Other 18,403 40,997 Capitalized lease obligations (Note 5) 4,864 9,417 - --------------------------------------------------------------------------------- ---------------- ----------------- 632,435 652,959 Less: current maturities (5,305) (40,898) - --------------------------------------------------------------------------------- ---------------- ----------------- $627,130 $612,061 ================ =================
The domestic revolving credit agreement provides for borrowings of up to $620,000,000. The borrowings bear interest at variable rates equal to the London Interbank Offered Rate (LIBOR) plus margins ranging from 0.150 percent to 0.625 percent, depending on the Company's consolidated funded debt to earnings ratios, as defined. Fees associated with the domestic revolving credit agreement include a facility fee on the committed amount ranging from 0.10 percent to 0.20 percent. At December 30, 1995, $519,000,000 was outstanding under the revolving credit agreement. The LIBOR rate at December 30, 1995 was 5 7/16 percent. The Company also has revolving loan facilities through which its foreign subsidiaries obtain funds necessary for operations. The repayment of these revolving loan facilities is guaranteed by the Company. The domestic revolving credit agreement contains covenants which, among other provisions, (i) limit the Company's ability to incur indebtedness or assume liens, (ii) limit the payment of cash dividends and repurchases of common stock, (iii) limit new indebtedness and lease obligations, and (iv) require the Company to satisfy certain ratios related to net worth, debt-to-equity and interest coverage. At December 30, 1995, retained earnings of $20,424,000 are available for the payment of cash dividends. The foreign revolving loan facilities have covenants that are no more restrictive than those of the domestic revolving credit agreement. At December 30, 1995, the Company was in compliance with the terms of these agreements. In 1994, the Company elected to exercise its option to prepay certain 9.48 percent, 9.31 percent and 10.49 percent term notes payable. An extraordinary charge of $3,363,000, net of income tax benefit of $2,150,000, was incurred as a result of the early extinguishment of the notes payable. The aggregate annual maturities of long-term debt, including the capitalized lease obligations, as of December 30, 1995 are as follows: 1996 - $5,305,000; 1997 - $91,772,000; 1998 - $533,236,000; 1999 - $2,113,000; 2000 - $9,000. The following is presented with respect to amounts outstanding under revolving credit agreements in 1995 and 1994 (000s omitted): Revolving Credit: 1995 1994 - ---------------------------------------- -------- -------- Available at year-end $710,168 $698,544 Unused at year-end 101,000 99,119 EXHIBIT 13, PAGE 12 Notes to Consolidated Financial Statements Note 3 Shareholders' Investment Under the Company's 1987 and 1992 Incentive Stock Option Plans, 8 million and 6 million shares of common stock, respectively, 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 following is a summary of stock option information for the 1987 and 1992 Incentive Stock Option Plans: 1995 1994 - ------------------------------------------------------------------------------- Options outstanding, beginning of year 2,828,900 3,142,900 Options granted 1,939,200 325,000 Options exercised (323,400) (565,400) Options canceled (144,600) (73,600) Options outstanding, end of year 4,300,100 2,828,900 Option price range per share $2.07 - $17.02 $2.07 - $17.02 Options exercisable, end of year 51,200 200,700 Options available for grant 4,421,000 6,215,800 - ------------------------------------------------------------------------------- The Company's 1989 Discounted Stock Option Plan provided 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 and all 880,000 had been exercised at December 31, 1994. The difference between the option price and market price at the date of grant was amortized over the option period resulting in compensation expense of $469,000 in 1994 and $798,000 in 1993. 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 one one-hundredth 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. The Company's board of directors has approved a stock repurchase plan whereby the Company's management is authorized to repurchase up to an additional 7,380,748 shares of the Company's common stock. For the year ended December 30, 1995, a total of 1,384,200 shares of the Company's common stock had been purchased and retired at a cost of $20,590,000. In 1995, the Company's board of directors approved a dividend reinvestment plan whereby all holders of record of the Company's common stock are eligible to participate. The plan provides a method of investing cash dividends and optional cash payments in shares of the Company's common stock. All costs associated with administering the plan are paid by the Company. EXHIBIT 13, PAGE 13 Notes to Consolidated Financial Statements Note 4 Income Taxes In, 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 bases 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 (000s omitted): Current: 1995 1994 1993 - ------------------------------------------------------------------------------- Federal $45,579 $59,254 $61,142 State 6,907 10,656 11,032 Foreign - 2,558 - - ------------------------------------------------------------------------------- 52,486 72,468 72,174 Foreign operating loss carryforwards (10,688) - - Deferred 1,805 6,942 (101) - ------------------------------------------------------------------------------- $43,603 $79,410 $72,073 - ------------------------------------------------------------------------------- The differences between the Federal statutory income tax rate and the Company's effective tax rate were as follows: 1995 1994 1993 - -------------------------------------------------------------------------------- Federal statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefit 4.4 3.9 3.8 Other, net 1.4 (1.0) (.8) - -------------------------------------------------------------------------------- 40.8% 37.9% 38.0% ================================================================================ EXHIBIT 13, PAGE 14 Note 4 Income Taxes (cont) Components of the net deferred income tax liability at December 30, 1995 and December 31, 1994 are shown below (000s omitted): 1995 1994 - -------------------------------------------------------------------------------- Deferred income tax assets: Accrued advertising expenses not currently deductible $ 4,221 $3,587 Reserve for cash discounts and bad debts 4,850 6,291 Employee benefit accruals not currently deductible 20,893 16,491 Reserve for returns and allowances 10,526 9,211 Foreign net operating loss carryforwards 14,345 3,657 Other 2,490 3.291 - -------------------------------------------------------------------------------- 57,325 42,528 - -------------------------------------------------------------------------------- Deferred income tax liabilities: Book basis of inventory over tax basis (14,054) (13,274) Sample costs (2,073) (7,362) Book basis of property, plant and equipment over tax basis (56,405) (50,229) Other (4,499) (3,812) - -------------------------------------------------------------------------------- (77,031) (74,677) - -------------------------------------------------------------------------------- $(19,706) $(32,149) ================================================================================ The Company has recorded a deferred tax asset of $14,345,000 for income tax loss carryforwards related to its foreign operations. Realization is dependent on generating sufficient future taxable income at the related foreign operations. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced. EXHIBIT 13, PAGE 15 Notes to Consolidated Financial Statements Note 5 Commitments and Contingencies 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. The Company will vigorously defend this suit. 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. In December 1995, the Company learned that it was one of six carpet companies named as additional defendants in a pending antitrust suit filed in the United States District Court in Rome, Georgia. The amended complaint alleges price-fixing regarding certain types of carpet products in violation of Section 1 of the Sherman Act. The Company believes that the suit is spurious and without merit, and that once completed, it will not have a material adverse effect on the Company's financial condition or results of operations. In February 1996, a jury in Greenboro, North Carolina, returned a verdict against the Company in litigation brought by four former employees of Salem Carpet Mills, acquired by the Company in 1992, alleging age discrimination and sex discrimination in employment decisions made with regard to such employees. The verdict is now under review by the trial judge and may subsequently be appealed by either party after judgment is entered. The Company believes that the litigation 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 $57,113,000 at December 30, 1995 and $53,663,000 at December 31, 1994. 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 $45,218,000 and $34,777,000 at December 30, 1995 and December 31, 1994, 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 December 30, 1995, future minimum lease payments for all capital and operating leases exceeding one year were as follows (000s omitted): Capital Operating Total Future Leases Leases Payments - -------------------------------------------------------------------------------- 1996 3,692 19,412 23,104 1997 1,183 14,635 15,818 1998 520 9,256 9,776 1999 50 6,250 6,300 2000 9 4,022 4,031 2001 and thereafter - 4,509 4,509 - -------------------------------------------------------------------------------- Total Payments 5,454 $58,084 63,538 ============================== Less: amount representing interest 590 - -------------------------------------------------------------------------------- Present value of capitalized lease payments with a weighted average interest rate of 8.25% $4,864 ================================================================================ Rental payments under noncancelable operating leases were $32,187,000, $30,389,000 and $27,486,000 in 1995, 1994 and 1993, respectively. At December 30, 1995, the Company had commitments to purchase certain capital assets of approximately $22,000,000. EXHIBIT 13, PAGE 16 Notes to Consolidated Financial Statements Shaw Industries, Inc. Note 6 Financial Instruments The carrying amount and fair value of the Company's financial instruments are as follows (000s omitted): December 30, 1995 December 31, 1994 Carrying Fair Carrying Fair Amount Value Amount Value ------------------------------------------------------- Debt: Revolving credit agreements $609,168 $609,168 $602,545 $602,545 Other obligations 23,267 23,267 50,414 50,414 Foreign currency exchange contract - - - (4,390) REVOLVING CREDIT AGREEMENTS: The carrying values of the revolving credit agreements approximate their fair values due to the floating market interest rates charged on those agreements. OTHER OBLIGATIONS: The carrying values of other obligations approximate their fair values due to the interest rates charged on those agreements: either floating market rates or fixed rates which approximated market rates available at December 30, 1995 and December 31, 1994. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Company may employ foreign currency exchange contracts when, in the normal course of business, they are determined to effectively manage and reduce foreign currency exchange rate fluctuation risk. As of December 30, 1995, the Company had no foreign currency exchange contracts outstanding. At December 31, 1994, one contract was outstanding to purchase Mexican pesos at the spot rate on the contract date through which the Company had effectively hedged approximately $14,100,000 of U.S. dollar- denominated net liabilities of its Mexican joint venture. The market value gain resulting from the contract offset the exchange rate loss at December 31,1994. The contract expired in January 1995, at which time the counter party fully performed under the terms of the contract. EXHIBIT 13, PAGE 17 Notes to Consolidated Financial Statements Shaw Industries, Inc. Note 7 Acquisitions On March 31, 1993, the Company acquired all of the outstanding stock of Kosset Carpets, Ltd., Bradford, England ("Kosset") for approximately $19,043,000 in cash. The acquistion 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"). 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 formed a joint venture (the "Terza 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 primarily in Mexico and South America. The Company originally acquired a 51 percent interest in the Terza Joint Venture for $14,050,000, and accordingly, the joint venture's financial statements were consolidated with the Company's financial statements at December 31, 1994 and for the period from the acquisition date to December 31, 1994. Effective January 1, 1995, the Company sold a 2 percent interest in the Terza Joint Venture for $550,000 reducing its interest to 49 percent. As a result, the Company's investment in the Terza Joint Venture is being accounted for using the equity method. The deconsolidation of the Terza Joint Venture had an insignificant effect on the Company's consolidated total assets and net sales as of and for year ended December 30, 1995. In January 1995, the Company increased its operations in the United Kingdom by acquiring substantially all of the operating assets of the Carpets Division of Coats Viyella Plc for approximately $29,503,000. Pro forma presentation of operations after giving retroactive effect to these acquisitions is not provided as these acquisitions were not material to require such presentation. EXHIBIT 13, PAGE 18 Notes to Consolidated Financial Statements Note 8 - Information about the Company's Foreign Operations The following information is presented regarding the Company's consolidated foreign operations for the years ended December 30, 1995, December 31, 1994 and January 1, 1994 (000s omitted). 1995 - --------------------------------------------- ----------------- ----------------- ---------------- ----------------- Adjustments and Domestic Foreign Eliminations Consolidated Consolidated - --------------------------------------------- ----------------- ----------------- ---------------- ----------------- Sales to unaffiliated customers $2,509,443 $360,385 $ -- $2,869,828 ============================================= ================= ================= ================ ================= Operating profit (loss) $ 168,500 $(19,401) $ -- $ 149,099 ============================================= ================= ================= ================ Interest expense (41,901) Miscellaneous expense, net (443) ----------------- Income before income taxes $ 106,755 ================= Identifiable assets $1,504,756 $292,850 $(134,823) $1,662,783 ============================================= ================= ================= ================ ================= 1994 - ------------------------------------- ---------------- ----------------- ---------------- ----------------- Adjustments and Domestic Foreign Eliminations Consolidated - --------------------------------------------- ---------------- ----------------- ---------------- ----------------- Sales to unaffiliated customers $2,498,090 $290,437 $ -- $2,788,527 ============================================ ================= ================ ================= ================= Operating profit $ 228,168 $ 6,731 $ -- $ 234,899 ============================================ ================= ================ ================= Interest expense, net (30,022) Miscellaneous income, net 4,922 ----------------- Income before income taxes $ 209,799 ================= Identifiable assets $1,439,260 $340,790 $(82,672) $1,697,378 ============================================ ================= ================ ================= ================= EXHIBIT 13, PAGE 19 Note 8 (Cont.) 1993 - --------------------------------------------- ----------------- ----------------- ---------------- ----------------- Adjustments and Domestic Foreign Eliminations Consolidated ============================================= ================= ================= ================ ================= Sales to unaffiliated customers $2,379,045 $97,237 $ -- $2,476,282 ============================================= ================= ================= ================ ================= Operating profit $ 207,373 $ 3,913 $ -- $ 211,286 ============================================= ================= ================= ================ Interest expense, net (24,107) Miscellaneous income, net 2,530 ----------------- Income before income taxes $ 189,709 ================= Identifiable assets $1,316,863 $247,322 $(109,919) $1,454,266 ============================================= ================= ================= ================ =================
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: net interest expense, net miscellaneous income, income taxes, equity in income of joint venture, the cumulative effect of an accounting change or the extraordinary item related to early extinguishment of debt. Identifiable assets are those assets of the Company that are identified with the operations in each geographic area, including goodwill. EXHIBIT 13, PAGE 20 Notes to Consolidated Financial Statements Note 9 Quarterly Financial Data (Unaudited) Summarized quarterly financial data for 1995, 1994 and 1993 is as follows (000s except per share amounts): 1995 Quarters First Second Third Fourth * Net Sales $676,550 $738,326 $748,364 $706,588 Gross Profit 117,081 144,516 142,716 145,621 Net Income (7,600) 18,673 21,905 19,326 Earnings Per Share - Primary and Fully Diluted (0.06) 0.14 0.16 0.14 1994 Quarters First Second Third Fourth ** Net Sales $620,126 $722,219 $734,100 $712,082 Gross Profit 126,198 165,926 156,880 152,084 Net Income 25,325 40,479 33,162 28,060 Earnings Per Share - Primary and Fully Diluted 0.17 0.28 0.24 0.20 1993 Quarters First Second Third Fourth **** Net Sales $519,318 $669,275 $649,516 $638,173 Gross Profit 100,507 145,574 137,301 129,694 Net Income 16,596 37,672 34,096 29,272 Earnings Per Share - Primary and Fully Diluted *** 0.12 0.26 0.24 0.20
* The first quarter net income and per share amounts for 1995 include a charge of $12,077,000, or $.09 per share, net of tax benefit, from the cumulative effect of a change in 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. * *The second quarter net income and per share amounts for 1994 include the effect of an extraordinary loss on early extinguishment of debt of $3,363,000, or $.02 per share, net of tax benefit. ***The sum of the 1993 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. ****Fourteen week period. EXHIBIT 13, PAGE 21 Notes To Consolidated Financial Statements Note 10 Subsequent Events In February 1996, the Company acquired certain companies for cash and common stock as part of its plan to develop a residential dealer and commercial contractor distribution network. EXHIBIT 13, PAGE 22 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 December 30, 1995 and December 31, 1994 and the related consolidated statements of income, shareholders' investment, and cash flows for each of the three years in the period ended December 30, 1995. 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 December 30, 1995 and December 31, 1994 and the results of their operations and their cash flows for each of the three years in the period ended December 30, 1995 in conformity with generally accepted accounting principles. As discussed in Note 1 of the Notes to Consolidated Financial Statements, effective January 1, 1995, the Company changed its method of accounting for sample costs. ARTHUR ANDERSEN LLP Atlanta, Georgia February 19, 1996 EXHIBIT 13, PAGE 23 Stock Information High and low stock prices and cash dividends paid by fiscal quarter (after giving effect to a two-for-one stock split effected in the form of a stock dividend in December 1993 ) 1995 1994 1993 High Low High Low High Low 1st Quarter 17 1/8 12 25 17 7/8 19 3/4 14 7/8 2nd Quarter 17 3/8 12 1/4 25 1/2 15 3/4 19 7/8 14 1/8 3rd Quarter 17 1/4 14 1/4 17 7/8 13 7/8 24 5/8 16 4th Quarter 16 3/8 12 5/8 15 3/4 12 7/8 25 1/2 20 1/8
Dividends Paid 1995 1994 1993 1st Quarter 7.50 cents 5.50 cents 4.50 cents 2nd Quarter 7.50 cents 5.50 cents 4.50 cents 3rd Quarter 7.50 cents 5.50 cents 4.50 cents 4th Quarter 7.50 cents 5.50 cents 4.50 cents Total 30.00 cents 22.00 cents 18.00 cents Number of Shareholders As of March 4, 1996, there were 4,159 holders of record of the Company's Common Stock. EXHIBIT 13, PAGE 24 EX-21 4 EXHIBIT 21, 1995 FORM 10-K EXHIBIT 21 Subsidiaries of the Registrant are Shaw Transport, Inc., a Georgia corporation; Shaw Financial Services, Inc., a Georgia Corporation; Bell-Mann, Inc., a Georgia corporation; Carpetland USA, Inc., an Indiana corporation; Carpets International, PLC., a United Kingdom corporation; and Capital Carpet Industries, Pty., Ltd., an Australian corporation. EX-23 5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 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 March 28, 1996 EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary information extracted from the consolidated balance sheet of Shaw Industriess, Inc. and subsidiaries as of December 30, 1995 and the related consoldiated statements of income, shareholders' investment and cash flows for the year ended December 30, 1995, and is qualified in its entirety by reference to such financial statements. YEAR DEC-30-1995 DEC-30-1995 31,453,000 0 345,443,000 (14,746,000) 489,212,000 902,511,000 1,234,000,000 602,010,000 1,662,783,000 261,066,000 0 150,913,000 0 0 559,276,000 1,662,783,000 2,869,828,000 2,869,828,000 2,319,894,000 2,319,894,000 392,649,000 8,629,000 41,901,000 106,755,000 43,603,000 63,152,000 0 0 (12,077,000) 52,304,000 .38 .38
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