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The following is an excerpt from a 10-K SEC Filing, filed by TEXFI INDUSTRIES INC on 6/1/1999.
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Item 1. Business.

Texfi Industries, Inc. ("the Company") was incorporated in Delaware in 1963. The Company manufactures and markets a diverse line of textile products from a variety of raw materials, including natural and synthetic materials. The Company's executive offices are located at 1430 Broadway, 13th Floor, New York, New York, 10018, telephone (212) 930-7200.

The Company's only division, Texfi Blends, operates four manufacturing facilities located in Rocky Mount, Fayetteville, and Haw River, North Carolina and Jefferson, Georgia, providing an aggregate of 1,165,000 square feet of manufacturing facilities. The division's sales and marketing headquarters are in New York City, with branch offices or agents in other major cities throughout the United States and Europe. Texfi Blends manufactures products made from textured polyester, flame-retardant polyester, and blends of polyester, rayon, and wool which are sold worldwide to the menswear, womenswear and childrenswear apparel, uniform, home furnishings, and export markets. During its 1998 fiscal year, the Company merged its weaving operations located at its Fayetteville, North Carolina facility into its Rocky Mount, North Carolina facility. The Company incurred $526,000 in employee-related severance and benefit costs which were segregated as a restructuring charge.

Prior to October 1997, the Company operated its Texfi Narrow Fabrics division which manufactured products from polyester, nylon and rubber that were sold domestically to the intimate apparel, insert apparel, medical and automotive markets. On November 1, 1996, the Company restructured its narrow fabrics operations, closing this division's woven narrow fabrics' facility in Graham, North Carolina and consolidating the remaining division assets into its knitted narrow fabrics' Asheboro, North Carolina facility. As a result, the Company recorded an initial $3.3 million restructuring charge during fiscal 1996 which consisted of a $2.5 million write-down of property, plant and equipment and inventory to net realizable value and $800,000 in other various restructuring costs. During fiscal 1997, the Company proceeded to liquidate a majority of the Graham facility assets and placed for sale its remaining knitted narrow fabrics business. On October 3, 1997, the Company sold its knitted narrow fabrics business, excluding trade and factor accounts receivable, for $7.7 million, which generated a gain of $3.8 million. Also during the fourth quarter of fiscal 1997, the Company recorded an additional $3.3 million in restructuring charges to write-down the assets of the Graham facility to net realizable value. Finally, in fiscal 1998, the Company incurred an additional $415,000 in restructuring charges associated with the liquidation of the remaining Texfi Narrow Fabrics division assets which included a $133,000 post-closing sale adjustment, a $152,000 write-down of property, plant and equipment to net realizable value, and $130,000 in various other restructuring costs.

During fiscal 1996, the Company discontinued the operations at its Kingstree Knit Apparel division. During the fourth quarter of fiscal 1997, the Company liquidated the remaining inventory related to this division and recorded a loss from discontinued operations of $1.0 million after reserves. The fiscal 1998 loss on disposal of discontinued operations of $1.9 million is primarily related to the loss on sale of property, plant, and equipment remaining from the Kingstree Knit Apparel division's operations at prices less than recorded value, plus associated liquidation costs. As of October 30, 1998, the Company has approximately $368,000 of Kingstree Knit Apparel division assets still held for disposal.


The Company accounted for its interest in Rival Sport, LLC ("Rival"), a joint venture which was formed in February 1997 between the Company and NHL Enterprises in order to market and source a branded line of hockey-related apparel, using the equity method. During fiscal 1997, the Company invested $4.9 million in Rival, which recorded sales of $259,000 and a net loss of $3.2 million.

On December 18, 1997 the Company divested its interest in Rival by selling its 50% ownership interest to an entity affiliated with certain of the Company's then executive officers. The Company received a secured $4.5 million ten-year note which bore interest at 5.0% per annum, payable at maturity. In the first quarter of fiscal 1998, the Company determined that as a result of continued and anticipated future losses at Rival and in light of the terms of the note there had been a permanent impairment to its net investment in Rival and accordingly restated its financial records as of October 31, 1997 to reflect a reserve of $3.4 million against its net investment in Rival.

During the first quarter of fiscal 1998, the Company invested $1.2 million in Rival. Also in the first quarter of fiscal 1998, the Company recorded an additional $1.1 million impairment against its net investment in Rival, thus reserving the full value of the note. Subsequent to year-end, management was informed that the note may be of no collectible value.


The Company manufactures woven finished fabrics for the apparel and home furnishings markets.

The approximate percentage of total revenue contributed by each of the Company's product groups is as follows:

                                 1998              1997              1996
Woven finished fabrics          100.0%             90.9%             87.5%
Narrow fabrics                     --               9.1              12.5
                                100.0%            100.0%            100.0%

The Company ceased manufacture of narrow knitted and woven fabrics in fiscal 1997.


During 1998 and 1997, the Company's business exhibited seasonality, primarily due to temporary plant shutdowns during the Christmas/New Year's holiday season. As a result, sales have been and are expected to be lower during the first half of the fiscal year while working capital requirements increase in anticipation of higher second half sales. Working capital is comprised chiefly of inventories and accounts receivable. Inventories are reported at the lower of cost or market value with cost being determined primarily by the first-in, first-out method. Market value is based on replacement cost or net realizable value, as appropriate. The majority of accounts receivable are due from certain financial institutions with which the Company has entered into factoring agreements.


At October 30, 1998, the Company had a $30,469,000 backlog of orders believed to be firm, as compared to a $43,776,000 backlog at October 31, 1997. The current backlog of orders is expected to be filled prior to the end of fiscal 1999.



In fiscal 1998, the Company's products were sold to more than 1,000 customers, which were primarily domestic manufacturers of apparel and home furnishings, as well as medical suppliers and retailers. Sales to the 10 largest customers represented approximately 35.5% of total sales, but no one customer accounted for more than 6% of total sales. The Company does not believe that the loss of any one of its customers would have a material adverse effect on the Company.


The Company's products are sold through a sales force of 18 full-time, salaried account executives and 10 independent, commissioned sales representatives, the latter of whom may sell products of other manufacturers, including some competitors of the Company. The Company maintains its primary sales office in New York City. The Company's production is determined in large part by customer contracts received by its sales force. As part of its marketing effort, the Company continually works to develop new products and processes and improve existing products and processes, but expenditures for these activities are not financially identifiable.

In order to improve its customer service capabilities, the Company utilizes computerized networks with many of its customers to provide "quick response" for more competitive product deliveries. By providing these customers with certain direct inventory information, the Company believes that the customers' inventory requirements and inventory carrying costs can be reduced.


The textile and apparel industry is highly competitive with a large number of domestic and foreign manufacturers, none of which dominates the market for any of the Company's product lines. The Company competes on the basis of styling, price, product performance and customer service.

U.S. producers, including the Company, are significantly affected by competition from foreign manufacturers. Rules under the General Agreement on Trade and Tariffs ("GATT") would eliminate restrictions on imports of textiles and apparel after a ten-year transition period. The North American Free Trade Agreement ("NAFTA") between the United States, Canada and Mexico has created the world's largest free-trade zone. The Agreement contains safeguards for the U.S. textile industry, including a rule of origin requirement that products be processed in one of the three countries in order to benefit from NAFTA. There can be no assurance that either NAFTA or GATT will not adversely affect the Company.

Because of the absence of published information regarding sales of competing products by other manufacturers, some of which are privately owned companies or divisions or subsidiaries of large companies, it is not possible to determine precisely the market shares of the Company and its competitors for the Company's various products.


The Company purchases from outside suppliers natural and synthetic fibers and dyes and chemicals for use in its fabric manufacturing operations. The Company purchases virtually all of its textured polyester yarns from the leading independent domestic supplier of such yarns. The Company has not experienced a significant shortage of raw materials and believes that such supplies will continue to be available.



As of October 30, 1998, the Company had approximately 1,100 employees with whom it considers its relationship to be good.


Although the Company pursues improvements in the quality, style and performance of its products, research and development expenditures have not accounted for a material portion of the Company's total operating costs.


The Company believes that it is in substantial compliance with federal, state and local provisions regulating the release of materials into the environment, or otherwise relating to the protection of the environment.

The existence of groundwater contaminants primarily of a type often found in commonly used industrial solvents was discovered at one of the Company's facilities. This facility has not been operated by the Company since 1980 and has been sold to another party. The State of North Carolina has issued a permit to discharge treated groundwater, and treatment systems have been installed to complete groundwater remediation. The Company's cost to monitor and maintain the treatment system will be approximately $54,000 annually until the site is remediated. In addition, there may be other potential environmental conditions at the site to be addressed, and the remedial plan does not cover these conditions; however, management does not believe that the cost of taking corrective action will have a material adverse effect on the Company's financial condition.

The Company has instituted a corporate policy statement on safety and environmental affairs to ensure that the Company and its divisions comply with federal, state and local regulatory standards relating to safety and environmental pollution controls. Included in this policy is a requirement for periodic compliance audits at each of the Company's facilities. The Company believes that costs to be expended now or in the future to ensure compliance with environmental and safety regulations will not have a material adverse impact on the financial condition of the Company.


The Company's ongoing operations are concentrated in a single industry, the manufacture and production of textiles.

YEAR 2000

The Company has focused considerable attention upon potential disruptions that could result from certain computer programs' inability to recognize the year 2000. See "YEAR 2000 IMPACT" in "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1998 Annual Report to Shareholders for information relating to this issue on the Company and the Company's efforts to address the issue.



Statements contained in the foregoing discussion and elsewhere in this report that are not based on historical fact are considered "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's present assumptions as to future trends, and changes in current economic trends, prevailing interest rates, the availability and cost of raw materials, laws affecting the Company's business and similar factors could affect the validity of such assumptions.

Item 2. Properties.

The following table sets forth the location and general character of the principal operating facilities of the Company, which contain approximately 1,165,000 square feet of floor space. All of these Company owned plants are in good operating condition. The plants operate three full eight-hour shifts per workday on a five-, six- or seven-day-per-week basis, depending upon market conditions and customer needs. The Company believes that its facilities are suitable for their present use and that it has adequate production capacity to support sales for fiscal 1999.

  Location of Plant                     Purpose                         Square Feet

Rocky Mount, NC **     Weaving, dyeing and finishing of synthetic         448,000
                       and blended fabrics
Fayetteville, NC **    Weaving, dyeing and finishing of polyester         218,000
Haw River, NC  **      Dyeing and finishing of polyester fabrics          320,000
Jefferson, GA          Yarn spinning and weaving                          179,000

** Pursuant to two separate loan and security agreements dated as of August 28, 1998, the Company granted to BackBay Capital, LLC a primary lien and BankBoston, N.A. as Agent, a secondary lien on these properties in order to secure the Company's obligations thereunder.

Item 3. Legal Proceedings.

The Company is a party as plaintiff or defendant to various legal actions that arose during the normal course of business. In the opinion of management, final disposition of these actions will not have a material effect on the Company's financial condition and results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable.


Item 4a. Executive Officers of the Registrant.

              All Positions and Offices with the Registrant Presently Held

           Name                   Age                 Registrant Presently Held
Andrew J. Parise, Jr.              51        Chairman of the Board, President, Chief
                                             Executive Officer, and Chief Operating
Robert P. Ambrosini                42        Chief Financial Officer, Executive Vice
                                             President, Finance, Director
Gerald A. Rubinfeld                53        President, Texfi Blends division
Joseph L. Drum                     50        Vice President, Manufacturing
Tim L. Courtney                    59        Vice President, Administration
Thomas M. Gilreath                 56        Corporate Controller, Assistant Secretary

Mr. Andrew J. Parise, Jr. was appointed President and Chief Operating Officer of the Company in November 1994 and Chairman of the Board of Directors and Chief Executive Officer in May 1999. He previously served as the Company's Blends Division President from 1992 to 1995 and the division's Executive Vice President from 1990 to 1992. He has been with the Company in various sales and operations positions since 1977.

Mr. Robert P. Ambrosini was appointed Chief Financial Officer and Executive Vice President of Finance on May 1, 1998. Prior to joining to the Company he held senior level financial positions with various public and privately held businesses

Mr. Gerald A. Rubinfeld was appointed President of the Company's Blends division in 1995. He joined the Company in 1984 as the Menswear Marketing Manager and has held various marketing positions.

Mr. Joseph L. Drum was appointed the Company's Blends Division Vice President, Manufacturing in 1999. He joined the Company in 1973 and has held a variety of operational and development positions during his tenure.

Mr. Tim L. Courtney was appointed the Company's Blends Division Vice President of Administration in 1994. He joined the Company in 1966 and has served in a variety of positions, including Director of Fiber and Yarn Procurement and VP of Marketing Services for the Blends Division.

Mr. Thomas M. Gilreath was appointed Corporate Controller and Assistant Secretary in 1994. He joined the Company in 1986.


Item 4(b). Other Information

Not applicable.