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Alba Waldensian Inc – ‘10-Q’ for 10/3/99

On: Wednesday, 11/17/99 · For: 10/3/99 · Accession #: 3292-99-15 · File #: 1-06150

  As Of                Filer                Filing    For·On·As Docs:Size

11/17/99  Alba Waldensian Inc               10-Q       10/03/99    5:82K

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      14     79K 
 2: EX-3.(I)    Restated Certificate of Incorporation                  7±    33K 
 3: EX-3.(II)   By-Laws                                                6±    25K 
 4: EX-10       Material Contracts                                     2±     7K 
 5: EX-27       Financial Data Schedule                                1      6K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on FORM 8-K Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations
1	1st Page - Filing Submission
2	Item 1. Financial Statements
10	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
12	Item 6. Exhibits and Reports on FORM 8-K

10-Q 1st Page of 14 TOC ↑Top Previous Next ↓Bottom Just 1st
 
UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20459

 FORM 10-Q
(Mark one)                                                                      

[X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934                                                                     

For The Quarterly Period Ended October 3, 1999                                  

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934                                                                     

For the transition period from            to                                    

Commission file number 1-6150                                                   

 ALBA-WALDENSIAN, INC.
(Exact name of registrant as specified in its Charter)
Delaware                                             56-0359780       
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)                                               

 P.O. Box 100, Valdese, N.C. 28690
(Address of principal executive offices)(Zip code)

(828) 879-6500
Registrant's telephone number, including area code

NONE
Former  name,  former  address and former  fiscal  year,  if changed  since last
report.                                                                         

Indicate by check mark whether  registrant (1) has filed all reports required to
be filed by section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. YES X NO                                     

As of November 8, 1999, the number of common shares outstanding was 3,246,045.  

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PART I.  FINANCIAL INFORMATION                                                  

Item 1.  Financial Statements                                                   

                                                                [Download Table]


                              ALBA-WALDENSIAN, INC.                             
                           Consolidated Balance Sheets                          
                                    ($000's)                                    
                                   (Unaudited)                                  

                                                        October 3,  December 31,
                                                              1999          1998
                                                              ----          ----

ASSETS                                                                          
CURRENT ASSETS:                                                                 
                                                                                
Cash                                                           $94           $15
Accounts receivable, net of allowance for                                       
 doubtful accounts of $342 and $260, respectively           10,496         6,426
Inventories:                                                                    
  Materials and supplies                                     4,506         3,076
  Work-in-process                                            9,349         7,048
  Finished goods                                             3,257         3,498
                                                             -----         -----
Total Inventories                                           17,112        13,622
                                                            ------        ------

Deferred income taxes                                          906           906
Prepaid expenses and other                                     842           602
                                                               ---           ---
Total Current Assets                                        29,450        21,571
                                                            ------        ------

PROPERTY AND EQUIPMENT                                      45,284        37,441
Less: accumulated depreciation                            (21,356)      (19,559)
                                                           -------       ------ 
Net Property and Equipment                                  23,928        17,882
                                                            ------        ------

OTHER ASSETS:                                                                   
Notes receivable                                                 0            13
Trademarks and patents                                         379           427
Excess of cost over net assets acquired, net                 6,444         6,886
                                                             -----         -----
                                                             6,823         7,326
                                                             -----         -----

TOTAL ASSETS                                               $60,201       $46,779
                                                            ======        ======
<FN>                                                                            
See notes to consolidated financial statements.                                 
</FN>                                                                           

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                              ALBA-WALDENSIAN, INC.                                           
                           Consolidated Balance Sheets                                        
                          ($000's except share amounts)                                       

                                                                      October 3,  December 31,
                                                                            1999          1998
                                                                            ----          ----
                                                                     (Unaudited)              

LIABILITIES AND STOCKHOLDERS' EQUITY                                                          
CURRENT LIABILITIES:                                                                          
                                                                                              
Current maturities of long-term debt                                      $1,525          $852
Accounts payable                                                          3,580          2,989
Accrued expenses                                                           1,688         2,842
                                                                           -----         -----
Total Current Liabilities                                                  6,793         6,683

LONG-TERM DEBT (Note 3)                                                   19,079         8,383
DEFERRED COMPENSATION                                                        210           200
DEFERRED INCOME TAX LIABILITY                                              1,864         1,864
                                                                           -----         -----
Total Liabilities                                                         27,946        17,130
                                                                          ------        ------

STOCKHOLDERS' EQUITY:                                                                         
Common stock - authorized 5,000,000 shares,  $2.50 par value; issued:  3,773,000              
 and 2,829,834 shares in 1999 and 1998 respectively; outstanding:                             
 3,246,045 and 2,361,231 in 1999 and 1998, respectively                    9,433         7,075
Additional paid-in capital                                                 4,466         6,823
Retained earnings                                                         21,089        18,436
                                                                          ------        ------
                                                                          34,988        32,334
Less treasury stock - at cost                                                                 
  (526,955 and 468,603 shares, respectively)                             (2,733)       (2,685)
                                                                          -----         ----- 
Total Stockholders' Equity                                                32,255        29,649
                                                                          ------        ------
TOTAL LIABILITIES AND                                                                         
 STOCKHOLDERS' EQUITY                                                    $60,201       $46,779
                                                                          ======        ======

<FN>                                                                                          
See notes to consolidated financial statements.                                               
</FN>                                                                                         

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                              ALBA-WALDENSIAN, INC.                                                   
                      Consolidated Statements of Operations                                           
                                   (Unaudited)                                                        
                        ($000's except per share amounts)                                             

                                                Three Month Periods Ended     Nine Month Periods Ended
                                              Oct. 3,         Sept. 27,    Oct. 3,      Sept. 27,     
                                                 1999              1998       1999           1998     

                                                                                                      
Net sales                                     $19,292           $18,904    $59,739        $54,914     
Cost of sales                                  14,138            13,239     43,152         40,261     
                                               ------            ------     ------         ------     
Gross margin                                    5,154             5,665     16,587         14,653     
Selling, general and                                                                                  
 administrative expense                         3,578             3,368     10,431          9,633     
                                                -----             -----     ------          -----     
Operating income                                1,576             2,297      6,156          5,020     
                                                -----             -----      -----          -----     

Interest expense                                  368               227        999            612     
Other expenses                                     81                83        127            174     
                                                   --                --        ---            ---     
Total other expenses                             449                310      1,126            786     
                                                 ---                ---      -----            ---     

Income before income taxes                      1,127             1,987      5,030          4,234     
Provision for income taxes                        377               755      1,746          1,609     
                                                  ---               ---      -----          -----     
Net income                                       $750            $1,232     $3,284         $2,625     
                                                 ====            ======     ======          =====     

Net income per common share                                                                           
         - Basic                                 $.23              $.39     $1.04            $.76     
         - Diluted                               $.23              $.37       $.99           $.74     

Weighted average number of shares                                                                     
  of common stock outstanding                                                                         
         - Basic                                3,198             3,140      3,158         3,438      
         - Diluted                              3,331             3,326      3,329          3,545     

<FN>                                                                                                  
See notes to consolidated financial statement                                                         
</FN>                                                                                                 

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                                                         ALBA-WALDENSIAN, INC.                                              
                                            Consolidated Statements of Stockholders' Equity                                 
                                                              (Unaudited)                                                   
                                                     ($000's except share amounts)                                          

                                                          Additional                                                        
                                   Common                    Paid-In       Retained            Treasury Stock               
                                   Shares       Amount       Capital       Earnings         Shares          Amount    Total 
                                   ------       ------       -------       --------         ------          ------    ----- 
                                                                                                                            
Balance at January 1, 1998      1,886,580       $4,716        $9,182        $13,651       (19,177)          $(137)  $27,412 
Purchase of Treasury Stock                                                               (310,500)         (2,521)   (2,521)
Exercise of Stock Options                                                        (8)        3,600              26        18 
Dividends Paid                                                                 (118)                                   (118)
Net Income                                                                    2,625                                   2,625 
                                                                              -----                                   ----- 
Balance at Sept. 27, 1999       1,886,580       $4,716        $9,182        $16,150     (326,077)        $(2,632)   $27,416 
                                =========        =====         =====         ======      =======           =====     ====== 

Balance at January 1, 1999      2,829,834       $7,075        $6,823        $18,436     (468,603)        $(2,685)   $29,649 
Purchase of Treasury Stock                                                               (30,900)           (604)      (604)
Exercise of Stock Options                                                      (215)     130,536             556        341 
Dividends Paid                                                                 (416)                                   (416)
Stock Split                       943,166        2,358        (2,357)                   (157,988)                         1 
Net Income                                                                    3,284                                   3,284 
                                                                              -----                                   ----- 

Balance at Oct. 3, 1999         3,773,000       $9,433        $4,466        $21,089     (526,955)        $(2,733)   $32,255 
                                =========        =====         =====         ======      =======           =====     ====== 

<FN>                                                                                                                        
See notes to consolidated financial statements.                                                                             
</FN>                                                                                                                       

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                                                         ALBA-WALDENSIAN, INC.                            
                                                 Consolidated Statements of Cash Flows                    
                                                              (Unaudited)                                 
                                                               ($000's)                                   

                                                                        Nine Month Periods Ended          
                                                                         Oct. 3,                Sept. 27, 
                                                                            1999                      1998
                                                                            ----                      ----
OPERATING ACTIVITIES:                                                                                     
                                                                                                          
 Net income                                                              $ 3,284                   $ 2,624
  Adjustments to reconcile net income (loss)                                                              
   to net cash provided by operating activities:                                                          
    Depreciation and amortization                                          2,287                     1,847
    Provision for bad debts                                                   90                       135
    Loss on disposal of property                                               2                         2
    Provision for inventory obsolescence                                   1,178                     1,161
  Changes in operating assets and liabilities providing (using) cash:                                     
     Accounts receivable                                                 (4,165)                   (3,035)
     Refundable Income Taxes                                                (69)                        --
     Inventories                                                         (4,669)                   (1,182)
     Prepaid expenses and other                                            (169)                     (251)
    Accounts payable                                                         590                      (93)
    Accrued expenses and other liabilities                                 (696)                       930
    Income taxes payable                                                   (460)                       496
    Deferred compensation                                                     10                         1
                                                                              --                         -
Net cash (used in) provided by operating activities                      (2,787)                     2,635
                                                                          -----                      -----

INVESTING ACTIVITIES:                                                                                     
 Capital expenditures                                                    (4,067)                   (2,383)
 Proceeds from notes receivable                                               18                         1
                                                                              --                         -
Net cash used in investing activities                                    (4,049)                   (2,382)
                                                                          -----                     ------
FINANCING ACTIVITIES:                                                                                     
 Net borrowings under line                                                                                
  of credit agreement                                                      7,861                     6,245
 Principal payments notes and Capital Leases                               (927)                   (9,951)
 Payment of dividends                                                      (416)                     (118)
 Proceeds from Issuance of Long Term Debt                                    660                     3,664
 Cash proceeds for issuance of stock options                                 343                        18
 Repurchase of capital stock                                               (605)                   (2,521)
                                                                           -----                   -------
Net cash provided by (used in) financing activities                        6,916                   (2,663)
                                                                           -----                   -------

NET INCREASE (DECREASE) IN CASH                                               80                   (2,410)
CASH AT BEGINNING OF PERIOD                                                   15                     2,416
                                                                              --                     -----
CASH AT END OF PERIOD                                                       $ 95                       $ 6
                                                                              ==                         =

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                                                         ALBA-WALDENSIAN, INC.                            
                                                 Consolidated Statements of Cash Flows                    
                                                              (Unaudited)                                 
                                                               ($000's)                                   

                                                                             Nine Month Periods Ended     
                                                                         Oct. 3,                 Sept. 27,
                                                                            1999                      1998
                                                                            ----                      ----

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                        

  Cash paid during the period for:                                                                        
                                                                                                          
    Interest                                                                $899                      $563
    Income taxes                                                          $2,275                    $1,128

<FN>                                                                                                      
During the first nine months of 1999, the Company acquired production  equipment                          
totaling  $3,776,000  through capital lease financing as compared to $713,000 of                          
production equipment acquired through capital lease financing in 1988                                     

See notes to consolidated financial statements.                                                           
</FN>                                                                                                     

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 ALBA-WALDENSIAN, INC.
Notes to Consolidated Financial Statements
 (Unaudited)

1.       SUBSEQUENT EVENT                                                       

         On November 8, 1999,  the Company  signed a definitive  agreement  (the
"Merger  Agreement")  under which Tefron U.S.  Holding Corp.  ("Tefron U.S."), a
wholly-owned  subsidiary  of  Tefron,  Ltd.,  will,  subject  to the  conditions
therein,  acquire  the  Company  for $18.50 per share in cash.  Tefron  will pay
approximately  $62 million for the Company's  common shares.  Including  assumed
debt  (see Note 3),  the  transaction  has a total  value of  approximately  $83
million.                                                                        

         Under the terms of the agreement, which was unanimously approved by the
boards of directors of both the Company and Tefron, Ltd., AWS Acquisition Corp.,
a  wholly-owned  subsidiary of Tefron U.S.,  has made a tender offer for 100% of
the Company's  outstanding shares.  Pursuant to the Merger Agreement,  following
the consummation of the tender offer, AWS Acquisition  Corp. will be merged (the
"Merger")  into  Alba-Waldensian  and each  share of Company  common  stock then
outstanding  will be converted into the right to receive  $18.50.  In connection
with the  execution  of the  Merger  Agreement,  each of  Alba-Waldensian's  two
largest  shareholders  have  entered  into a  Support  Agreement  (the  "Support
Agreement")  pursuant to which, among other things, they have agreed to tender a
majority of the  outstanding  shares of the Company into the tender  offer.  The
tender offer is  conditioned  on the valid tender of a majority of the Company's
outstanding  shares,  expiration  of the  applicable  waiting  period  under the
Hart-Scott-Rodino  Antitrust  Improvements  Act,  and  other  customary  closing
conditions.  It is anticipated that the transaction  will be consummated  before
year-end 1999.                                                                  

2.       UNAUDITED FINANCIAL INFORMATION                                        

         In the opinion of the Company, the accompanying  unaudited consolidated
financial  statements  contain all  adjustments  necessary to present fairly the
financial  position as of October 3, 1999, and the results of operations for the
three and nine month periods ended October 3, 1999 and September 27, 1998. These
unaudited financial  statements should be read in conjunction with the Company's
most recent audited financial statements.                                       

         The results of operations for the interim  periods are not  necessarily
indicative of the results to be expected for the full year.                     

         All per share and weighted average share  information for 1998 has been
restated to reflect the 3 for 2 stock  split  effected on November  16, 1998 and
the 4 for 3 stock split effected June 4, 1999.                                  

3.       FINANCING                                                              

         On May 14, 1998,  the Company  entered  into a  three-year  $21,000,000
financing  facility with a major bank composed of up to a $15,000,000  revolving
loan,  based upon levels of accounts  receivable and  inventories,  a $3,000,000
term loan and a $3,000,000 credit line to fund future capital expenditures.  The
new facility bears interest at Prime plus 0.5% (or at the option of the Company,
portions  of the  facility  may be priced at LIBOR plus 2.25%) and is secured by
substantially all of the assets of the Company.                                 

         The loan agreement requires that the Company maintain certain levels of
tangible  net worth and fixed  charge  coverage  ratios as well as limiting  the
level of capital  expenditures  ($16.2  million in 1999) and  prohibiting  other
financing (in excess of $10.5 million in 1999).  At October 3, 1999, the Company
was in compliance with the covenants contained in the loan agreement.           

         During the first nine months of 1999, the Company secured $3,776,000 of
capital lease financing  covering the acquisition of machinery during 1999. This
facility  is secured by only the  acquired  machinery,  bears  interest at rates
varying  from 7.56% to 8.34% and provides for level  monthly  payments  over its
five-year term.                                                                 

         The Company's loan agreement with the bank includes  covenants that the
Company  shall not "enter into any merger or  consolidation"  or "enter into any
transaction  outside the ordinary course of the [Company's]  business," and also
provides  that the  occurrence  of a "Change of  Control"  (which  includes  the
acquisition  by any  person of the  right to vote a  majority  of the  Company's
common  stock)  constitutes  an event of default.  Therefore,  the purchase of a
majority of the outstanding  shares of the Company pursuant to the tender offer,
as well the consummation of the Merger  thereafter (See Note 1), will constitute
events of default under the credit agreement.  The execution and delivery of the
Merger  Agreement  and the  execution  and  delivery  of the  Support  Agreement
(pursuant  to which  Tefron  U.S.  acquired  the right to vote a majority of the
Company's outstanding shares, subject to the terms of pledge agreements covering
some of  those  shares)  may also  constitute  events  of  default  under  those
provisions.  The bank has  waived  any  events  of  default  resulting  from the
execution  and  delivery  of the Merger  Agreement  and the  Support  Agreement,
reserving its existing right to be paid off upon completion of the tender offer.
The  Company  anticipates  that Tefron U.S.  will cause the  Company's  existing
indebtedness  to be refinanced in connection  with the  completion of the tender
offer  or the  consummation  of  the  Merger;  however,  there  is no  financing
condition to the tender offer or the Merger.                                    

         Based upon the bank's  consent  to waive its rights to  accelerate  the
loan prior to the  completion  of the  tender  offer and the  written  financing
commitment  obtained  by Tefron,  the  Company  has  reflected  its bank debt as
long-term in the accompanying financial statements.                             

4.       DIVIDENDS                                                              

         The Company  declared a semi-annual  cash  dividend of $.075  ($0.05625
post-split)  per share  ($177,000)  on its common stock  payable on February 22,
1999 to shareholders of record on February 12, 1999.  Additionally,  the Company
increased its  semi-annual  cash dividend by 33% with the declaration of a $.075
per post-split  share  ($239,000) on its common stock payable on August 24, 1999
to shareholders of record on August 14, 1999. Under the Company's loan agreement
with a bank (see Note 3),  dividends  and  repurchases  of Company stock may not
exceed $4,000,000 during the three-year term of the loan. As of October 3, 1999,
dividends and repurchases of Company stock have totaled $3,917,000.             

5.       EARNINGS PER SHARE                                                     

                                                        [Enlarge/Download Table]


                      Nine Month Period Ended Sept. 27, 1998                                     
                                                                 Income         Shares  Per-Share
                                                            (Numerator)  (Denominator)     Amount
(000's, except per share amounts)                                                                

Basic EPS                                                                                        
                                                                                                 
  Net Income                                                     $2,625          3,438       $.76

Effect of Dilutive Securities                                                                    
  Stock Options                                                      --            107           

Diluted EPS                                                                                      
  Net Income                                                     $2,625          3,545       $.74

                      Nine Month Period Ended Oct. 3, 1999                                       
                                                                 Income         Shares  Per-Share
                                                            (Numerator)  (Denominator)     Amount
(000's, except per share amounts)                                                                

Basic EPS                                                                                        
  Net Income                                                     $3,284          3,158      $1.04

Effect of Dilutive Securities                                                                    
  Stock Options                                                      --            171         --

Diluted EPS                                                                                      
  Net Income                                                     $3,284          3,329       $.99

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6.                                                  SEGMENT INFORMATION         

         The following table contains  selected  information with respect to the
Company's business segments:                                                    

                                                                [Download Table]


                                     Nine Month Periods Ended     
                                         Oct. 4,         Sept. 27,
                                            1999              1998
($000's)                                                          
Consumer Products                                                 
                                                                  
Net sales                                $33,140           $30,921
Segment profit                             4,476             4,623
  % Net sales                              13.5%             15.0%
Segment assets                            36,008               N/A

Health Products                                                   
Net sales                                $26,599           $24,531
Segment profit                             5,535             3,857
  % Net sales                              20.8%             15.7%
Segment assets                            12,922               N/A

Segment profit -                                                  
  Consumer Products                       $4,476            $4,623
  Health Products                          5,535             3,857
                                           -----             -----
    Total segment profit                  10,011             8,480
General and administrative expenses        3,855             3,460
Other expense, net                         1,126               786
                                           -----               ---
Income before income taxes                $5,030            $4,234

<FN>                                                              
N/A = Information Not Available                                   
</FN>                                                             

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Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations                                                                   

Merger Transaction

         On November 8, 1999,  the Company  signed a definitive  Agreement  (the
"Merger  Agreement")  under which  Tefron U.S.  Holding  Corp.,  a  wholly-owned
subsidiary of Tefron, Ltd., will, subject to the conditions therein, acquire the
Company  for  $18.50  per  share  in cash.  See Note 1 of Notes to  Consolidated
Financial Statements, for further information regarding the Merger Agreement and
the transactions contemplated thereby.                                          

 Liquidity and Capital Resources

         We currently have a three-year  $21,000,000  financing  facility with a
major  bank (see Note 3 of Notes to  Consolidated  Financial  Statements).  This
financing  facility  provides a revolving loan of up to  $15,000,000,  depending
upon levels of accounts  receivable and  inventories,  a term loan of $3,000,000
and a capital expenditure line of $3,000,000.  In addition, the facility permits
the Company to secure other outside  financing of capital  expenditures of up to
$10,500,000 in 1999. We have secured a total commitment of $10,500,000 for lease
financing in 1999 with two major  financial  institutions  and through the third
quarter have funded $3,776,000 of capital expenditures under such leases.       

         Working  capital  continues  to be adequate  to support  the  Company's
operations.  On October 3, 1999,  the  Company had  current  working  capital of
$22,657,000  with a current ratio of 4.3 to 1. This is comparable to $14,888,000
or  3.2 to 1 at  December  31,  1998.  Working  capital  increased  during  1999
primarily due to a $4,070,000  increase in accounts receivable from an unusually
low level of $6,426,000 at December 31, 1998,  which  resulted from an unusually
large  payment  received a few days prior to year end, to a more normal level of
$10,496,000.  Also, inventories have increased by $3,490,000 from $13,622,000 to
$17,112,000,  partially due to the building of knitted  inventories as finishing
capacity was being  expanded  (see  Results of  Operations  below)  coupled with
higher levels of inactive  styles as a consequence of the shift of the Company's
business  into  more  fashion  oriented  markets.  Under  the  terms  of our new
financing  facility,  all of our  excess  cash  is  used  daily  to  reduce  the
outstanding balance on our revolving credit line. This results in increasing the
amount  available to borrow under the revolver  while at the same time providing
for the maximum  short-term  investment  return on the Company's  available cash
balances.  However,  this  results in our not  reporting  normal  levels of cash
(current  asset) which have been  utilized to  temporarily  reduce our revolving
credit line (long-term liability).  Availability under our revolving credit line
totaled $1,752,000 at October 3, 1999.                                          

         Liquidity  needs are  primarily  affected  by and  related  to  capital
expenditures and changes in the Company's business volume. During the first nine
months  of 1999,  these  needs  were  adequately  met  through  our $21  million
financing facility and $3,776,000 of lease financing.  Capital  expenditures for
the first nine months of 1999 totaled $7,843,000, reflecting continued expansion
of our seamless knitting capacity to meet the increasing demand for our seamless
products.  This level of capital  expenditures  compares to  $3,096,000  for the
first nine months of 1998.                                                      

         We intend to  continue to  aggressively  expand our  seamless  knitting
capacity in response to increasing  demand for our seamless women's apparel.  In
addition to the 66% capacity  increase in 1998, we have enough knitting machines
received or on order with scheduled  delivery dates in 1999 to further  increase
seamless knitting capacity 85% from beginning 1999 levels.  Capital expenditures
in 1999 may approximate  $16,000,000.  This level of investment in the future of
our Company will allow us to  capitalize  on the  expanding  demand for seamless
apparel.                                                                        

         Cash utilized in operating  activities was $2,787,000 in the first nine
months of 1999 as compared to  $2,635,000  of cash  generated in the  comparable
period of 1998.  This  decrease in cash  provided in 1999 was primarily due to a
net increase of $4,165,000 in accounts receivable from an unusually low level of
$6,426,000 at December 31, 1998,  which resulted from an unusually large payment
received a few days prior to year end, to $10,496,000 at October 4, 1999 coupled
with an increase in inventories of $4,669,000.                                  

         Net cash used in investing  activities  during the first nine months of
1999 was  $4,049,000  compared to $2,382,000  in 1998.  The cash used in each of
these two periods was primarily for capital  expenditures to expand  capacities,
and to replace and update plant and equipment.  In addition to the $4,067,000 of
cash expenditures to acquire  productive  equipment during the first nine months
of 1999, the Company also acquired $3,776,000 of equipment through capital lease
financing.  Financing activities in 1999 included $7,861,000 of funding from the
Company's  revolving  line of credit,  the  repurchase of 30,900  split-adjusted
shares  ($605,000) of the Company's  common stock and the payment of $416,000 in
cash dividends.                                                                 

         The Company  declared a  semi-annual  cash  dividend of $.075 per share
($.05625 per post-split  share) totaling $177,000 on its common stock payable on
February 22, 1999, to shareholders of record on February 12, 1999. Additionally,
the Company  increased its semi-annual cash dividend by 33% with the declaration
of a $.075 per post-split share ($239,000) on its common stock payable on August
24, 1999 to shareholders of record on August 14, 1999.  Under the Company's loan
agreement with a bank, dividends and repurchases of Company stock may not exceed
$4,000,000  during  the  three-year  term of the loan.  As of  October  3, 1999,
dividends and repurchases of Company stock have totaled $3,917,000.             

         On June 4, 1999,  we effected a 4 for 3 stock split in the form of a 33
1/3% stock dividend to  shareholders of record as of May 25, 1999. All per share
amounts and weighted average share information has been restated to reflect this
stock split                                                                     

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                                                        [Enlarge/Download Table]


                                                         Results of Operations                            

Items as a percentage of sales are reflected in the following table:                                      

                                               Three Month Periods Ended          Nine Month Periods Ended
                                          Oct. 3,        Sept. 27,              Oct. 3,         Sept. 27, 
                                             1999             1998                 1999              1998 
                                             ----             ----                 ----              ---- 
(%)                                                                                                       
                                                                                                          
Net sales                                   100.0            100.0                100.0             100.0 
Cost of sales                                73.3             70.0                 72.2              73.3 
                                             ----             ----                 ----              ---- 
Gross margin                                 26.7             30.0                 27.8              26.7 
Selling, general and                                                                                      
 administrative expenses                     18.5             17.8                 17.5              17.6 
                                             ----             ----                 ----              ---- 
Operating income                              8.2             12.2                 10.3               9.1 
Other expense, net                            2.3              1.7                  1.9               1.4 
                                              ---              ---                  ---               --- 
Income before income taxes                    5.9             10.5                  8.4               7.7 
Provision for income taxes                    2.0              4.0                  2.9               2.9 
                                              ---              ---                  ---               --- 
Net income                                    3.9              6.5                  5.5               4.8 


Three Month Periods Ended October 3, 1999 and September 27, 1998                

         1999 yielded  record  third  quarter  revenues  for the Company.  Third
quarter  earnings of $750,000  decreased  39.1% as compared to $1,232,000 in the
third quarter of 1998.  The  quarterly  earnings per share of 23 cents (23 cents
fully  diluted)  compared to 39 cents (37 cents fully  diluted) per share in the
third quarter of 1998. Third quarter earnings included a one-time pre-tax charge
of $258,000 (5 cents per share after tax) relating to severance costs associated
with the departure of the Company's  chief executive  officer in July.  Revenues
for the  1999-quarter  increased  2.1% reaching a third quarter  record level of
$19,292,000 as compared to $18,904,000 for the prior year.                      

         Net sales by  division  for the third  quarter of 1999  compared to the
third quarter of 1998 are set forth in the following table ($000's):            

                                                                [Download Table]


                   Three Month  Periods Ended                         
                       Oct. 3,      Sept. 27,   Increase/  % Increase/
                          1999           1998  (Decrease)   (Decrease)
                          ----           ----  ----------   ----------

                                                                      
Consumer Products      $10,549        $10,746      ($197)       (1.8%)
Health Products          8,743          8,158         585         7.2%
                         -----          -----         ---             
         Total         $19,292        $18,904        $388         2.1%

         Sales of Consumer Products decreased $197,000 during the third quarter,
or 1.8% over the comparable  quarter of 1998. This decrease  resulted  primarily
from the division having reached finishing  capacity limits for seamless women's
apparel.  Unanticipated  shifts in  demand  for  seamless  women's  apparel  has
required the  division to  introduce  new styles  requiring  different  types of
sewing for which the Company lacked adequate  capacity and which resulted in the
Company not being able to meet increased demand for certain styles. In response,
we are  substantially  increasing sewing capacity and expanding dyeing equipment
by 25 percent as well as increasing the efficiency of our dyeing facility.      

         Sales of Health Products  increased  $585,000 or 7.2% lead by increased
sales of treads and stockinettes.                                               

         Gross  margins  decreased in 1999 to 26.7% of net sales (30.0% in 1998)
primarily as the result of product mix shifts. During the third quarter of 1998,
the Company was producing  newly  developed  high volume,  high margin styles of
seamless women's apparel  requiring  minimal sewing such as tube tops,  bandeaus
and dresses.  In 1999, demand has shifted toward more complex garments requiring
higher levels of specialized sewing and finishing techniques.                   

         Selling, general and administrative expenses increased $210,000 or 6.2%
during the third  quarter of 1999,  reflective  of $258,000 of  severance  costs
associated with the departure of the Company's Chief Executive Officer in July. 

         Interest expense  increased as a result of higher  borrowings under the
revolving  line of  credit  agreement  to fund  increased  capital  expenditures
necessary to continue our  aggressive  expansion of productive  capacity to keep
pace with the increasing demand for our products.                               

Nine Month Periods Ended October 3, 1999 and September 27, 1998                 

         During the first nine months of 1999, the Company reached record levels
of revenues and earnings.  Revenues for the  1999-year to date period  increased
8.8%  reaching a first nine months  record level of  $59,739,000  as compared to
$54,914,000  for the same nine  months of the prior  year.  This  year's  record
nine-month  earnings of $3,284,000  increased 25.1% as compared to $2,625,000 in
the same nine  months of 1998.  The 1999  earnings  per share of $1.04 (99 cents
fully diluted) represented an increase of 33.8% (diluted) and was a record first
nine months for the Company as compared to 76 cents (74 cents fully diluted) per
share in the nine months of 1998.                                               

         Net sales by division for the first nine months of 1999 compared to the
first nine months of 1998 are set forth in the following table ($000's):        

                                                                [Download Table]


                   Nine Month  Periods Ended                         
                      Oct. 3,      Sept. 27,   Increase/  % Increase/
                         1999           1998  (Decrease)   (Decrease)
                         ----           ----  ----------   ----------

                                                                     
Consumer Products     $33,140        $30,383      $2,757         9.1%
Health Products        26,599         24,531       2,068         8.4%
                       ------         ------       -----             
         Total        $59,739        $54,914      $4,825         8.8%

         Sales of Consumer Products  increased  $2,757,000 during the first nine
months,  or 9.1% over the comparable nine months of 1998. This increase resulted
primarily from continuing  acceptance of the Company's  seamless women's apparel
as consumers continued to respond positively to the unsurpassed fit, comfort and
style of seamless intimates and combination innerwear/outerwear products.       

         Sales of Health Products increased $2,068,000 or 8.4% lead by increased
sales of treads and stockinettes.                                               

         Gross  margins  increased in 1999 to 27.8% of net sales (26.7% in 1998)
as the result of  increased  volume,  higher  margins on new styles of  seamless
women's  apparel  developed  after the third  quarter of 1998 and  tighter  cost
controls.                                                                       

         Selling,  general and administrative expenses increased 8.3% during the
nine months of 1999,  reflective of the higher  volumes but remained  relatively
constant as a  percentage  of net sales from 17.6% in 1998 to 17.5% in 1999.  In
order to support our significant increases in productive capacity and to further
improve  our  quick  response  research  and  development   strategy,   we  have
approximately doubled our spending for research and development from $648,000 in
1998 to  $1,292,000  in 1999.  Also included in the 1999 expenses is $258,000 of
severance  costs  associated with the departure of the Company's Chief Executive
Officer in July.                                                                

         Interest expense  increased as a result of higher  borrowings under the
revolving  line of  credit  agreement  to fund  increased  capital  expenditures
necessary to continue our  aggressive  expansion of productive  capacity to keep
pace with the increasing demand for our products.                               

FORWARD-LOOKING INFORMATION                                                     

         We  continue to expect the  long-term  growth of the  seamless  apparel
business to produce  outstanding revenue and earnings for Alba, however, we must
further develop and expand our manufacturing  processes and finishing capacities
to keep pace with the  marketplace's  demand for our  seamless  products and the
rapid expansion of our knitting  capacity.  Consumer  Products'  revenues in the
second  and  third  quarters  fell  short  of the  1st  quarter  as the  Company
experienced  delays in the  completion  of customer  orders caused by production
capacity  limitations and longer  production  cycles associated with certain new
technology  yarns and new product  designs.  While we are implementing the steps
necessary  to  shorten  these  production  processes  and  to  expand  finishing
capacity,  the  effect of certain  of these  efforts  may not be felt until late
1999.                                                                           

         Our Health Products  Division has performed well through the first nine
months of 1999 and we  anticipate  the Division to continue on its steady growth
pattern throughout the remainder of the year and into the year 2000.            

YEAR 2000 COMPLIANCE                                                            

         We have addressed the Year 2000 compliance  issues in three parts;  our
products, our internal systems and third-parties.                               

         Our  Products  - Year  2000  compliance  is not an issue for any of our
products.  None of our products,  women's  hosiery,  women's intimate apparel or
health products contains date-sensitive-electronic  components or date-sensitive
software.                                                                       

         Our Internal  Systems - All major systems within Alba will be Year 2000
compliant before year end. For operational  reasons,  in late 1996 we decided to
install  a new  integrated  manufacturing  and  financial  reporting  management
information system. This new system involved acquiring new system hardware,  new
PC-based local and wide-area  networks and the  standardization  of PC software.
All of these  hardware and  software  systems are Year 2000  compliant.  The new
system hardware, the new PC-based local area network,  wide-area network and the
new financial reporting system are now operational. The new manufacturing system
will  be  operational  by the  end  of  November  1999.  Additionally,  we  have
substantially   completed  our  review  of  all  other  date-sensitive   systems
throughout Alba with no material non-compliance problems noted. This review also
included non-information technology systems and equipment such as the electronic
components of our knitting and other manufacturing equipment.                   

         Third Parties - Like most all other  companies,  we are dependent  upon
our material  vendors,  suppliers and customers to ensure that we remain a going
concern.  We are unable to control the  actions of others with  respect to their
Year 2000 compliance.  However,  our material  suppliers,  service providers and
customers are mostly all very large  companies  within their own  industries and
have  much at stake in  ensuring  their  own  compliance.  We are  substantially
complete with our questioning  these third parties as to their  compliance plans
and to date have not been  advised  of any  major  non-compliance  problems.  We
expect to complete this process  during the fourth quarter and will then develop
contingency plans in indicated problem areas, as feasible.  The risks to Alba in
this area are obviously significant; for example, we could not operate without a
continuous  source of electricity to our  manufacturing  plants and there are no
realistic contingency  alternatives available.  Similarly,  there is very little
that we can do to  continue  sales to  customers  who  themselves  are unable to
operate due to their own failure to ensure Year 2000 compliance.                

         We have not incurred and do not anticipate  that we will incur material
costs associated with the Year 2000 compliance  issue. Our operational  decision
in 1996 to replace our  manufacturing  and financial  reporting  systems had the
side benefit of eliminating most Year 2000 compliance issues for us.            

THIS  QUARTERLY  REPORT ON FORM 1O-Q,  INCLUDING ANY  INFORMATION  INCORPORTATED
THEREIN BY  REFERENCE,  MAY  CONTAIN,  IN  ADDITION TO  HISTORICAL  INFORMATION,
CERTAIN   FORWARD-LOOKING   STATEMENTS  THAT  INVOLVE   SIGNIFICANT   RISKS  AND
UNCERTAINTIES.  SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S BELIEF
AS  WELL AS  ASSUMPTIONS  MADE  BY,  AND  INFORMATION  CURRENTLY  AVAILABLE  TO,
MANAGEMENT  PURSUANT TO THE SAFE  HARBOR  PROVISIONS  OF THE PRIVATE  SECURITIES
LITIGATION  REFORM ACT OF 1995.  FORWARD-LOOKING  STATEMENTS  CAN  GENERALLY  BE
IDENTIFIED  AS SUCH  BECAUSE THE CONTEXT OF THE  STATEMENT  USUALLY WILL INCLUDE
WORDS SUCH AS "THE COMPANY BELIEVES";  OR "ANTICIPATES",  OR "EXPECTS"; OR WORDS
OF SIMILAR  IMPORT.  SIMILARLY,  STATEMENTS  THAT DESCRIBE THE COMPANY'S  FUTURE
PLANS, OBJECTIVES,  ESTIMATES OR GOALS ARE ALSO FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ADDRESS FUTURE EVENTS AND CONDITIONS CONCERNING CAPITAL EXPENDITURES,
EARNINGS, SALES, LIQUIDITY AND CAPITAL RESOURCES, AND ACCOUNTING MATTERS.       

THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR
IMPLIED BY, THE FORWARD-LOOKING  STATEMENTS CONTAINED HEREIN. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES  INCLUDE,  BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN ITEM 1  DESCRIPTION  OF BUSINESS;  AND  ELSEWHERE IN THE  COMPANY'S
ANNUAL  REPORT  ON FORM  1O-K  FOR THE  YEAR  ENDED  DECEMBER  31,  1998,  OR IN
INFORMATION  INCORPORATED THERIN BY REFERENCE, AS WELL AS FACTORS SUCH AS FUTURE
ECONOMIC CONDITIONS,  ACCEPTANCE BY CUSTOMERS OF THE COMPANY'S PRODUCTS, CHANGES
IN CUSTOMER  DEMAND,  LEGISLATIVE,  REGULATORY AND  COMPETITIVE  DEVELOPMENTS IN
MARKETS  IN  WHICH  THE  COMPANY  OPERATES  AND  OTHER  CIRCUMSTANCES  AFFECTING
ANTICIPATED  REVENUES AND COSTS. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE
PUBLICLY THE RESULT OF ANY REVISIONS TO THESE FORWARD  LOOKING  STATEMENTS  THAT
MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES  AFTER THE DATE OF THIS REPORT OR
TO REFLECT THE OCCURRENCE OF OTHER ANTICIPATED EVENTS.                          

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PART II.  OTHER INFORMATION                                                     

Item 6.   Exhibits and Reports on FORM 8-K                                      

a.       Exhibits                                                               

3(i) Amended and Restated Certificate of Incorporation of Alba-Waldensian,  Inc.
as of June 2, 1999                                                    
3(ii)Amended and Restated By-Laws of  Alba-Waldensian,  Inc. as of September 30,
1999                                                                  
10   Memorandum of Understanding between Alba-Waldensian, Inc. and Lee Mortenson
27   Financial Data Schedule (filed in electronic format only)                  

b.   Forms 8-K                                                                

None                                          
                                                       * * * * *

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                                                      SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned there unto duly authorized.                                         

 ALBA-WALDENSIAN, INC.

Date: November 17, 1999                        /s/ Glenn J. Kennedy             
                                  --------------------
                                          Vice President and Treasurer
                                          (Chief Financial Officer and
                                             Principal Accounting Officer)

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

EXHIBITS

 ITEM 6(a)

 FORM 10-Q

QUARTERLY REPORT

  For the quarter ended                                 Commission File Number
October 3, 1999                                                1-6150     

 ALBA-WALDENSIAN, INC.
 EXHIBIT INDEX

Exhibit No.                             Exhibit Description                     

3(i) Amended and Restated Certificate of Incorporation of Alba-Waldensian,  Inc.
as of June 2, 1999                                                    

3(ii)Amended and Restated By-Laws of  Alba-Waldensian,  Inc. as of September 30,
1999                                                                  

10   Memorandum of Understanding between Alba-Waldensian, Inc. and Lee Mortenson

27   Financial Data Schedule (electronic version only)

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Dates Referenced Herein and Documents Incorporated by Reference

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Filing Submission 0000003292-99-000015 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Alba Waldensian Inc – ‘10-Q’ for 10/3/99

On: Wednesday, 11/17/99 · For: 10/3/99 · Accession #: 3292-99-15 · File #: 1-06150

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