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SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549



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FORM 10-Q



|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



| |  | For the quarterly period ended April 26, 2003
| |  | ---------------------------------------------



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



Commission File Number 333-88212



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COLLINS & AIKMAN FLOORCOVERINGS, INC.

(Exact name of registrant as specified in its charter)



|Delaware                                                       |  | 58-2151061                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



|311 Smith Industrial Boulevard, Dalton, Georgia |  | 30721     
|----------------------------------------------- |  | ----------
|(Address of principal executive offices)        |  | (Zip Code)



Registrants telephone number: (706) 259-9711



---



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



Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ̈No  x



The Registrant
had 1,000 shares of Common Stock, par value $.01 per share, issued and outstanding as of June 6, 2003.



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COLLINS
& AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES



INDEX



|               |  |                       |  |                                                                                              |  | Page No.
|-------------- |  | --------------------- |  | -------------------------------------------------------------------------------------------- |  | --------
|              
|Part I.        |  | Financial Information |  |                                                                                             
|              
|               |  | Item 1.               |  | Financial Statements                                                                         |  |         
|              
|               |  |                       |  | Consolidated Statements of OperationsThirteen Weeks Ended April 26, 2003 and April 27, 2002 |  | 3       
|              
|               |  |                       |  | Consolidated Balance SheetsAs of January 25, 2003 and April 26, 2003                        |  | 4       
|              
|               |  |                       |  | Consolidated Statements of Stockholders EquityThirteen Weeks Ended April 26, 2003          |  | 5       
|              
|               |  |                       |  | Consolidated Statements of Cash FlowsThirteen Weeks Ended April 26, 2003 and April 27, 2002 |  | 6       
|              
|               |  |                       |  | Notes to Consolidated Financial Statements                                                   |  | 7       
|              
|               |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations        |  | 21      
|              
|               |  | Item 3.               |  | Quantitative and Qualitative Disclosures and Market Risk                                     |  | 27      
|              
|               |  | Item 4.               |  | Controls and Procedures                                                                      |  | 28      
|              
|Part II.       |  | Other Information     |  |                                                                                             
|              
|               |  | Item 1.               |  | Legal Proceedings                                                                            |  | 28      
|              
|               |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                             |  | 28      
|              
|Signature      |  | 29                   
|              
|Certifications |  | 30                   





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PART 1FINANCIAL INFORMATION



Item 1. Financial Statements



COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and In Thousands)



|                                                                                 |  | Thirteen Weeks Ended |       
|-------------------------------------------------------------------------------- |  | -------------------- | ------
|                                                                                 |  | April 27, 2002       |       
|Net Sales                                                                        |  | $                    | 66,417
|                                                                                 |  |                      |       
|Cost of Goods Sold                                                               |  |                      | 43,101
|Selling, General & Administrative Expenses                                       |  |                      | 17,355
|                                                                                 |  |                      |       
|                                                                                 |  |                      | 60,456
|                                                                                 |  |                      |       
|Operating Income                                                                 |  |                      | 5,961 
|Minority Interest in Income (Loss) of Subsidiary                                 |  |                      | 16    
|Equity in Earnings of Affiliate                                                  |  |                      | 476   
|Net Interest Expense                                                             |  |                      | 8,499 
|                                                                                 |  |                      |       
|Loss Before Income Taxes and Cumulative Effect of Change in Accounting Principle |  |                      | (2,078
|Income Tax Benefit                                                               |  |                      | (730  
|                                                                                 |  |                      |       
|Loss Before Cumulative Effect of Change in Accounting Principle                  |  |                      | (1,348
|Cumulative Effect of Change in Accounting Principle                              |  |                      | (3,240
|                                                                                 |  |                      |       
|Net Loss                                                                         |  | $                    | (4,588
|                                                                                 |  |                      |       



The accompanying notes
are an integral part of these consolidated financial statements.



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COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands)



|                                                                                                                 |  | January 25, 2003 |         |   | April 26, 2003 |  
|---------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | -------------- | -
|                                                                                                                 |  |                  |         |   | (Unaudited)    |  
|ASSETS                                                                                                           |  |                  |         |   |                |  
|CURRENT ASSETS:                                                                                                  |  |                  |         |   |                |  
|Cash and cash equivalents                                                                                        |  | $                | 20,907  |   |                | $
|Accounts receivable, net of allowance of $865 and $876 in fiscal 2002 and 2003, respectively                     |  |                  | 38,527  |   |                |  
|Inventories                                                                                                      |  |                  | 35,721  |   |                |  
|Deferred tax assets                                                                                              |  |                  | 1,863   |   |                |  
|Prepaid expenses and other                                                                                       |  |                  | 1,699   |   |                |  
|                                                                                                                 |  |                  |         |   |                |  
|Total current assets                                                                                             |  |                  | 98,717  |   |                |  
|PROPERTY, PLANT, AND EQUIPMENT, net                                                                              |  |                  | 66,258  |   |                |  
|DEFERRED TAX ASSETS                                                                                              |  |                  | 870     |   |                |  
|GOODWILL                                                                                                         |  |                  | 98,378  |   |                |  
|OTHER INTANGIBLE ASSETS, net                                                                                     |  |                  | 43,100  |   |                |  
|OTHER ASSETS                                                                                                     |  |                  | 11,090  |   |                |  
|                                                                                                                 |  |                  |         |   |                |  
|TOTAL ASSETS                                                                                                     |  | $                | 318,413 |   |                | $
|                                                                                                                 |  |                  |         |   |                |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                             |  |                  |         |   |                |  
|CURRENT LIABILITIES:                                                                                             |  |                  |         |   |                |  
|Accounts payable                                                                                                 |  | $                | 15,919  |   |                | $
|Accrued expenses                                                                                                 |  |                  | 18,714  |   |                |  
|Current portion of long-term debt                                                                                |  |                  | 12,105  |   |                |  
|                                                                                                                 |  |                  |         |   |                |  
|Total current liabilities                                                                                        |  |                  | 46,738  |   |                |  
|OTHER LIABILITIES, including post-retirement benefit obligation                                                  |  |                  | 5,529   |   |                |  
|LONG-TERM DEBT, net of current portion                                                                           |  |                  | 218,666 |   |                |  
|MINORITY INTEREST                                                                                                |  |                  | 330     |   |                |  
|COMMITMENTS AND CONTINGENCIES                                                                                    |  |                  |         |   |                |  
|STOCKHOLDERS EQUITY:                                                                                            |  |                  |         |   |                |  
|Common stock: $.01 par value per share, 1,000 shares authorized, issued, and outstanding in fiscal 2002 and 2003 |  |                  |        |   |                |  
|Paid-in capital                                                                                                  |  |                  | 72,648  |   |                |  
|Retained deficit                                                                                                 |  |                  | (23,480 | ) |                |  
|Accumulated other comprehensive loss                                                                             |  |                  | (2,018  | ) |                |  
|                                                                                                                 |  |                  |         |   |                |  
|                                                                                                                 |  |                  | 47,150  |   |                |  
|                                                                                                                 |  |                  |         |   |                |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                       |  | $                | 318,413 |   |                | $
|                                                                                                                 |  |                  |         |   |                |  



The accompanying notes
are an integral part of these consolidated financial statements.



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COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE THIRTEEN WEEKS ENDED APRIL 26, 2003

(Unaudited and In Thousands, Except Share Amounts)



|                                        |  | Common Stock |  |        |   |                |   |                            | Accumulated Other Comprehensive Income (Loss) |   |                                        |   | 
|--------------------------------------- |  | ------------ |  | ------ | - | -------------- | - | -------------------------- | --------------------------------------------- | - | -------------------------------------- | - | 
|                                        |  | Shares       |  | Amount |   | Paid-inCapital |   | Retained Earnings(Deficit) |                                               |   | Foreign CurrencyTranslation Adjustment |   | 
|BALANCE, January 25, 2003               |  | 1,000        |  | $      |  |                | $ | 72,648                     |                                               | $ | (23,480                                | ) | 
|Net loss                                |  |             |  |        |  |                |   |                           |                                               |   | (97                                    | ) | 
|Dividend to Tandus Group, Inc.          |  |             |  |        |  |                |   |                           |                                               |   | (586                                   | ) | 
|Foreign currency translation adjustment |  |             |  |        |  |                |   |                           |                                               |   |                                       |   | 
|                                        |  |              |  |        |   |                |   |                            |                                               |   |                                        |   | 
|BALANCE, April 26, 2003                 |  | 1,000        |  | $      |  |                | $ | 72,648                     |                                               | $ | (24,163                                | ) | 
|                                        |  |              |  |        |   |                |   |                            |                                               |   |                                        |   | 



The accompanying notes
are an integral part of these consolidated financial statements.



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COLLINS & AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and In Thousands)



|                                                                            |  | Thirteen Weeks Ended |         
|--------------------------------------------------------------------------- |  | -------------------- | --------
|                                                                            |  | April 27,2002        |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |                      |         
|Net loss                                                                    |  | $                    | (4,588  
|                                                                            |  |                      |         
|Adjustments to reconcile net loss to net cash used by operating activities: |  |                      |         
|Depreciation and leasehold amortization                                     |  |                      | 1,900   
|Amortization of other intangible assets                                     |  |                      | 971     
|Amortization and write-off of deferred financing fees                       |  |                      | 1,748   
|Deferred income tax expense (benefit)                                       |  |                      | (649    
|Equity in earnings of affiliate                                             |  |                      | (476    
|Minority interest in income (loss) of subsidiary                            |  |                      | 16      
|Cumulative effect of change in accounting principle                         |  |                      | 3,240   
|Changes in operating assets and liabilities:                                |  |                      |         
|Accounts receivable                                                         |  |                      | (785    
|Inventories                                                                 |  |                      | (6,526  
|Accounts payable                                                            |  |                      | 3,154   
|Accrued expenses                                                            |  |                      | (25     
|Other, net                                                                  |  |                      | (1,034  
|                                                                            |  |                      |         
|Total adjustments                                                           |  |                      | 1,534   
|                                                                            |  |                      |         
|Net cash used by operating activities                                       |  |                      | (3,054  
|                                                                            |  |                      |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |                      |         
|Equity distribution from affiliate                                          |  |                      | 553     
|Additions to property, plant, and equipment                                 |  |                      | (1,300  
|                                                                            |  |                      |         
|Net cash used in investing activities                                       |  |                      | (747    
|                                                                            |  |                      |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                       |  |                      |         
|Proceeds from issuance of long-term debt                                    |  |                      | 175,000 
|Repayments of long-term debt                                                |  |                      | (125,133
|Cash dividends to Tandus Group, Inc.                                        |  |                      | (1,837  
|Financing costs                                                             |  |                      | (6,398  
|                                                                            |  |                      |         
|Net cash provided by (used in) financing activities                         |  |                      | 41,632  
|                                                                            |  |                      |         
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                     |  |                      | 37,831  
|CASH AND CASH EQUIVALENTS, beginning of period                              |  |                      | 6,234   
|                                                                            |  |                      |         
|CASH AND CASH EQUIVALENTS, end of period                                    |  | $                    | 44,065  
|                                                                            |  |                      |         



The accompanying notes
are an integral part of these consolidated financial statements.



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COLLINS
& AIKMAN FLOORCOVERINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



1. General



The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto
included in the Companys Form 10-K which was filed with the Securities and Exchange Commission on April 25, 2003. The accompanying unaudited consolidated financial statements, in the opinion of management, include all adjustments necessary for
fair presentation. All such adjustments are of a normal and recurring nature.



2. Organization



Based on
annual sales and product brands, Collins & Aikman Floorcoverings, Inc. (the Company), a Delaware corporation, is a leading manufacturer of floorcovering products for the North American specified commercial carpet market. The
Companys floorcovering products include (i) vinyl-backed six-foot roll carpet and modular carpet tile, and (ii) high style tufted and woven broadloom carpet. The Company designs, manufactures and markets its C&A, Monterey and Crossley
brands for a wide variety of end markets, including corporate offices, education, healthcare, government facilities and retail stores. Because of the Companys diversity of its end markets, management believes its business tends to be less
cyclical than that of many of its competitors, which rely more heavily on the corporate market. The ability to provide a package of product offerings in various forms, coupled with flexible distribution channels, allows the Company to
provide a wide array of floorcovering solutions for each of its customers. The Company is headquartered in Georgia, with additional locations in California, Canada, the United Kingdom, and Asia.



The Company is a wholly-owned subsidiary of Tandus Group, Inc.
(Tandus), formerly known as CAF Holdings, Inc. Subsequent to a recapitalization transaction on January 25, 2001, a majority of Tanduss outstanding capital stock is controlled by investment funds managed by Oaktree Capital
Management, LLC and Banc of America Capital Investors.



3.
Reclassifications



Certain prior period
amounts have been reclassified to conform to the current periods presentation.



4. Cash and Cash Equivalents



Cash and cash equivalents include all cash balances and investments with an original maturity of three months or less.



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5. Inventories



Net inventory balances are summarized below
(in thousands):



|                |  | January 25, 2003 |        | April 26, 2003
|--------------- |  | ---------------- | ------ | --------------
|                |  |                  |        | (Unaudited)   
|Raw materials   |  | $                | 16,085 |               
|Work in process |  |                  | 5,309  |               
|Finished goods  |  |                  | 14,327 |               
|                |  |                  |        |               
|                |  | $                | 35,721 |               
|                |  |                  |        |               



6. Revenue
Recognition



Revenue is recognized when
carpet products and related accessories are shipped. The terms for these sales are FOB shipping point. For product installations subject to customer approval, revenue is recognized upon acceptance by the customer.



The Company provides installation services to customers
utilizing independent third-party contractors. The billings and expenses for these services are included in net sales and cost of goods sold, respectively, in the accompanying consolidated statements of operations. These billings and expenses were
$2.4 million and $1.9 million for the thirteen weeks ended April 26, 2003 and April 27, 2002, respectively.



7. Accrued Expenses



Accrued expenses are summarized below (in thousands):



|                              |  | January 25, 2003 |        | April 26, 2003
|----------------------------- |  | ---------------- | ------ | --------------
|                              |  |                  |        | (Unaudited)   
|Payroll and employee benefits |  | $                | 5,466  |               
|Accrued taxes                 |  |                  | 390    |               
|Customer claims               |  |                  | 1,817  |               
|Accrued interest              |  |                  | 7,892  |               
|Customer deposits             |  |                  | 515    |               
|Accrued professional fees     |  |                  | 1,412  |               
|Other                         |  |                  | 1,222  |               
|                              |  |                  |        |               
|                              |  | $                | 18,714 |               
|                              |  |                  |        |               



8. Goodwill and Other
Intangible Assets



In June 2001, the
Financial Accounting Standards Board (FASB) finalized SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires the use of the purchase method of accounting and
prohibits the use of the pooling-of-interest method of accounting for business combinations. SFAS No. 141 also requires the recognition of acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS
No. 141 applies to all business combinations initiated after June 30, 2001 and for purchase combinations completed on or after July 1, 2001.



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SFAS No. 142 requires, among other things, that companies no longer amortize goodwill, but instead test
goodwill for impairment at least annually. In addition, SFAS No. 142 requires companies to identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized
intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS No. 142. SFAS No. 142, which
the Company adopted January 27, 2002, applies to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. The Company expects to evaluate goodwill for impairment during the fourth
quarter of each year.



In connection with the adoption
of SFAS No. 142, the Company obtained independent appraisals to determine the fair values of these intangible assets as of January 27, 2002 and compared their fair values with their carrying values. The Company determined that the goodwill
associated with Crossley Carpet Mills Limited (Crossley) was impaired based upon the fair values compared to the carrying value. A goodwill impairment charge of $3.2 million was recorded retroactively to January 27, 2002 as a cumulative
effect of a change in accounting principle for goodwill impairment in accordance with SFAS No. 142.



This non-cash goodwill impairment charge does not impact the Companys liquidity, cash flow or its compliance with financial or other covenants under
its credit agreement or other contractual arrangements.



Goodwill and other intangible assets and related amortization are summarized below (in thousands):



|                             |  | April 26, 2003       |       
|---------------------------- |  | -------------------- | ------
|                             |  | Gross CarryingAmount |       
|Amortized intangible assets: |  |                      |       
|Non-compete                  |  | $                    | 12,000
|Patent                       |  |                      | 27,000
|Supply Agreement             |  |                      | 8,000 
|                             |  |                      |       
|Total                        |  | $                    | 47,000
|                             |  |                      |       



The patent is being
amortized over an eleven-year period using the straight-line method. The non-compete is being amortized over a seven-year period using the double-declining balance method. The supply agreement is being amortized over a three-year period using the
straight-line method.



|Unamortized intangible assets: |  |                                     |       
|------------------------------ |  | ----------------------------------- | ------
|Trade name                     |  | $                                   | 23,613
|                               |  |                                     |       
|                               | 
|                               |  |                                     |       
|                               |  | Thirteen Weeks Ended April 26, 2003
|Aggregate amortization expense |  | $                                   | 1,528 
|                               |  |                                     |       



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|Estimated amortization expense: |  |   |      
|------------------------------- |  | - | -----
|Fiscal 2003                     |  | $ | 6,229
|Fiscal 2004                     |  | $ | 5,122
|Fiscal 2005                     |  | $ | 3,224
|Fiscal 2006                     |  | $ | 2,455
|Fiscal 2007                     |  | $ | 2,455



The changes in the
carrying amount of goodwill for the period ended April 26, 2003 are as follows (in thousands):



|                                     |  | FLOORCOVERINGSSEGMENT |        | EXTRUSIONSEGMENT |   | TOTAL
|------------------------------------ |  | --------------------- | ------ | ---------------- | - | -----
|Balance as of January 25, 2003       |  | $                     | 92,747 |                  | $ | 5,631
|Goodwill acquired during the quarter |  |                       |       |                  |   |     
|Impairment loss                      |  |                       |       |                  |   |     
|                                     |  |                       |        |                  |   |      
|Balance as of April 26, 2003         |  | $                     | 92,747 |                  | $ | 5,631
|                                     |  |                       |        |                  |   |      



9. Stock Based Compensation



At April 26, 2003, the Company has one stock-based
employee compensation plan, which is described more fully in Note 14 of the audited consolidated financial statements included in the Companys Form 10-K which was filed with the Securities and Exchange Commission on April 25, 2003. The Company
accounts for this plan under the recognition and measurement principles of APB opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. The Company will account for these options as variable options and will
record expenses based on increases and decreases in the fair market value of the Companys common stock at the end of each reporting period. These options vest only upon the achievement of certain earnings targets, as defined. As of April 26,
2003 and April 27, 2002, the Company has not recorded any expense as the Company has not achieved its earnings targets and the fair market value of the Companys common stock has not increased from the date of grant. The following table
illustrates the effect on net income if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to the stock-based employee compensation (in thousands).



|                                                                                                                                |  | Thirteen Weeks Ended |       
|------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ------
|                                                                                                                                |  | April 27,2002        |       
|Net loss as reported                                                                                                            |  | $                    | (4,588
|Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of
tax |  |                      | (11   
|                                                                                                                                |  |                      |       
|Proforma net loss                                                                                                               |  | $                    | (4,599
|                                                                                                                                |  |                      |       



10. Recent Accounting
Pronouncements



In June 2001, the FASB approved the
issuance of SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 establishes accounting standards for the recognition and measurement of legal obligations associated with the retirement of tangible long-lived assets.
SFAS No. 143 became effective for the Company on January 26, 2003 and requires recognition of a liability for an asset retirement obligation in the period in which it is incurred. SFAS No. 143 did not have a material impact on the Companys
financial statements.



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In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt; FASB Statement No. 44, Accounting for Intangible Assets of
Motor Carriers; FASB Statement No. 64, Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements; and amends FASB Statement No. 13, Accounting for Leases. SFAS No. 145 addresses the treatment of gains and losses
related to debt extinguishments and should only be classified as extraordinary items if they meet certain criteria. The provisions of this statement are effective beginning May 15, 2002. The financial statements included herein reflect the adoption
of SFAS No. 145 as of the beginning of the Companys fiscal year. Prior year financial statements have also been restated to reflect the adoption of SFAS No. 145.



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated With Exit or Disposal Activities.
SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). This statement requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the
liability is incurred. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. SFAS No. 146 did not have a material impact on the Companys
financial statements.



In December 2002, the SFAS issued SFAS
No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure- an Amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change due to the fair value based method of accounting for stock-based employee compensation. Additionally, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method after December 15, 2002. The Company has adopted the applicable disclosure provisions of SFAS No. 148.



11. Long-Term Debt



During the thirteen weeks ended April 26, 2003, the Company prepaid $10.0 million of its term debt with cash accumulated
from operations. In connection with these term debt prepayments, the Company recorded the write-off of a pro-rata share of deferred financing costs associated with the term debt. The amount of this expense was $0.2 million and is reflected in
interest expense in the consolidated statement of operations.



The Company was in compliance with all covenants as of April 26, 2003.



Total net interest expense was $5.4 million and $8.5 million for the thirteen weeks ended April 26, 2003 and April 27, 2002 respectively, which included minimal interest income.



12. Segment Information



The Company has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. This
statement addresses reporting of operating segment information and disclosures about products, services, geographic areas, and major customers. Management has reviewed the requirements of SFAS No. 131 concluding that the Company operates its
business as two reportable segments: Floorcoverings and Extrusion.



Accounting policies of the segments are the same as those described in the summary of significant accounting policies. Performance of the segments is evaluated on Adjusted EBITDA which represents earnings before interest, taxes,
depreciation, amortization and the cumulative effect of change in accounting principle, plus Chroma Systems Partners (Chroma) cash dividends and the minority interest in income of subsidiary, less equity in earnings of Chroma.



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The Floorcoverings segment represents all floorcoverings products. These products are six-foot roll
carpet, modular carpet tile and tufted and woven broadloom carpet. The Extrusion segment represents the Companys extrusion plant which was acquired on May 8, 2002. Products in this segment are nylon or polypropylene extruded yarn.



No single customer amounted to or exceeded 10.0% of the Floorcovering
segments sales for any period presented. The Extrusion segments largest customer accounted for 79.6% of sales in the thirteen weeks ended April 26, 2003, as a result of a supply agreement with the seller.



A non-cash goodwill impairment charge of $3.2 million was recorded in the
Floorcoverings segment. The charge was recorded retroactively to January 27, 2002 as a cumulative effect of change in accounting principle.



The table below provides certain unaudited financial information by segment (in thousands):



|                                  |  | Thirteen Weeks Ended
|--------------------------------- |  | --------------------
|                                  |  | April 27, 2002      
|Net Sales to External Customers   |  |                     
|Floorcoverings                    |  | $                   
|Extrusion                         |  |                     
|                                  |  |                     
|Total Sales to External Customers |  | $                   
|                                  |  |                     



|                      |  | Thirteen Weeks Ended
|--------------------- |  | --------------------
|                      |  | April 27, 2002      
|Adjusted EBITDA       |  |                     
|Floorcoverings        |  | $                   
|Extrusion             |  |                     
|                      |  |                     
|Total Adjusted EBITDA |  | $                   
|                      |  |                     



|                                                    |  | Thirteen Weeks Ended |       
|--------------------------------------------------- |  | -------------------- | ------
|                                                    |  | April 27, 2002       |       
|Net loss                                            |  | $                    | (4,588
|Cumulative effect of change in accounting principle |  |                      | 3,240 
|Income taxes                                        |  |                      | (730  
|Net interest expense                                |  |                      | 8,499 
|Depreciation                                        |  |                      | 1,900 
|Amortization                                        |  |                      | 971   
|Chroma cash dividends                               |  |                      | 553   
|Equity in earnings in Chroma                        |  |                      | (476  
|Minority interest in income (loss) of subsidiary    |  |                      | 16    
|                                                    |  |                      |       
|Adjusted EBITDA                                     |  | $                    | 9,385 
|                                                    |  |                      |       



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##### Table of Contents

|                          |  | As of January 25,2003 |         | As of April 26,2003
|------------------------- |  | --------------------- | ------- | -------------------
|Consolidated Assets       |  |                       |         |                    
|Floorcoverings            |  | $                     | 280,418 |                    
|Extrusion                 |  |                       | 37,995  |                    
|                          |  |                       |         |                    
|Total Consolidated Assets |  | $                     | 318,413 |                    
|                          |  |                       |         |                    



13. Investment in Affiliate



Monterey Carpets, Inc. has a one-half ownership
interest in Chroma, which operates a carpet dyeing and finishing plant. Because the Company does not exercise control over the partnership, the Company accounts for its interest in the partnership under the equity method of accounting. The unaudited
condensed financial information of Chroma for the thirteen weeks ended April 26, 2003 and April 27, 2002 and as of April 26, 2003 and January 25, 2003, are summarized below (in thousands):



|                                        |  | As of January 25,2003 |        | As of April 26,2003
|--------------------------------------- |  | --------------------- | ------ | -------------------
|Current Assets                          |  | $                     | 1,939  |                    
|Non-current Assets                      |  |                       | 8,433  |                    
|                                        |  |                       |        |                    
|Total Assets                            |  | $                     | 10,372 |                    
|                                        |  |                       |        |                    
|                                        |  |                      
|Current Liabilities                     |  | $                     | 921    |                    
|Long Term Debt                          |  |                       | 5,066  |                    
|Partners Capital                       |  |                       | 4,385  |                    
|                                        |  |                       |        |                    
|Total Liabilities and Partners Capital |  | $                     | 10,372 |                    
|                                        |  |                       |        |                    



|                       |  | Thirteen WeeksEnded
|---------------------- |  | -------------------
|                       |  | April 27,2002      
|Net Sales              |  | $                  
|Cost of Goods Sold     |  |                    
|                       |  |                    
|Gross Profit           |  |                    
|Income from Operations |  |                    
|Net Income             |  |                    





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##### Table of Contents

14. Comprehensive Income



Comprehensive income (loss) is as follows (in thousands):



|                                         |  | Thirteen Weeks Ended |       
|---------------------------------------- |  | -------------------- | ------
|                                         |  | April 27,2002        |       
|Net loss                                 |  | $                    | (4,588
|Other Comprehensive Income:              |  |                      |       
|Foreign Currency Translation Adjustments |  |                      | 144   
|                                         |  |                      |       
|Comprehensive income (loss)              |  | $                    | (4,444
|                                         |  |                      |       



15. Acquisitions



On May 8, 2002, CAF Extrusion, Inc., a wholly-owned subsidiary, acquired a
yarn extrusion manufacturing plant located in Calhoun, Georgia. In addition, CAF Extrusion, Inc. purchased the real property on which the plant is located from a third party. The acquisition was funded from cash on hand. The cash purchase price was
$34.8 million plus $0.3 million for acquisition related expenses and consisted of $2.4 million for the land and building, $1.4 million for inventory, $17.7 million for machinery and equipment, $5.6 million for goodwill, and $8.0 million for a supply
agreement which will be amortized over its term of three years. The acquisition has been accounted for by the purchase method and, accordingly, the results of operations of CAF Extrusion, Inc. have been included in the Companys consolidated
financial statements from May 8, 2002.



In connection with the
transaction, CAF Extrusion, Inc. entered into a three-year supply agreement with the seller of the manufacturing plant. CAF Extrusion, Inc. will be a non-exclusive supplier to the seller, and is to make available certain quantities of product at
predetermined prices defined in the supply agreement, which is adjusted quarterly to reflect changes in the actual manufacturing costs.



Through this acquisition, the Company expects to have a portion of its primary raw material internally produced at significantly lower costs than the
Company has historically procured from the open market. In addition, the lower cost raw material will allow each operating brand to expand its focus into additional markets.



16. Condensed Consolidating Financial Statements



The 9.75% Notes of the Company are guaranteed by certain of the Companys domestic subsidiaries. Separate consolidated
financial statements of the guarantor subsidiaries have not been presented because management believes that such information would not be material to investors. However, condensed consolidating financial information as of April 26, 2003 and January
25, 2003, and for each of the thirteen weeks ended April 27, 2002 and April 26, 2003 are presented. The condensed consolidating financial information of the Company and its subsidiaries are as follows:



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Guarantor Financial Statements

Condensed Consolidating Statements of Operations

For the Thirteen Weeks Ended April 26,
2003



(Unaudited and In Thousands)



|                                           |  | Issuer |        |   | GuarantorSubsidiaries |   |        | Non- GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal |       
|------------------------------------------ |  | ------ | ------ | - | --------------------- | - | ------ | -------------------------- |  | - | ------------ | - |  | ----------------- | ------
|Net Sales                                  |  | $      | 43,687 |   |                       | $ | 21,324 |                            |  | $ | 11,206       |   |  | $                 | (4,648
|                                           |  |        |        |   |                       |   |        |                            |  |   |              |   |  |                   |       
|Cost of Goods Sold                         |  |        | 27,043 |   |                       |   | 16,391 |                            |  |   | 9,546        |   |  |                   | (4.648
|Selling, General & Administrative Expenses |  |        | 12,195 |   |                       |   | 4,713  |                            |  |   | 2,078        |   |  |                   |      
|                                           |  |        |        |   |                       |   |        |                            |  |   |              |   |  |                   |       
|                                           |  |        | 39,238 |   |                       |   | 21,104 |                            |  |   | 11,624       |   |  |                   | (4,648
|                                           |  |        |        |   |                       |   |        |                            |  |   |              |   |  |                   |       
|Operating Income (Loss)                    |  |        | 4,449  |   |                       |   | 220    |                            |  |   | (418         | ) |  |                   |      
|Minority Interest in Loss of Subsidiary    |  |        |       |   |                       |   |       |                            |  |   | (16          | ) |  |                   |      
|Equity in Earnings of Affiliate            |  |        |       |   |                       |   | 361    |                            |  |   |             |   |  |                   |      
|Net Interest Expense                       |  |        | 5,374  |   |                       |   |       |                            |  |   | 32           |   |  |                   |      
|                                           |  |        |        |   |                       |   |        |                            |  |   |              |   |  |                   |       
|Income (Loss) Before Income Taxes          |  |        | (925   | ) |                       |   | 581    |                            |  |   | (434         | ) |  |                   |      
|Income Tax Expense (Benefit)               |  |        | (367   | ) |                       |   | (348   | )                          |  |   | 34           |   |  |                   |      
|                                           |  |        |        |   |                       |   |        |                            |  |   |              |   |  |                   |       
|Net Income (Loss)                          |  | $      | (558   | ) |                       | $ | 929    |                            |  | $ | (468         | ) |  | $                 |      
|                                           |  |        |        |   |                       |   |        |                            |  |   |              |   |  |                   |       





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Guarantor
Financial Statements

Condensed Consolidating Statement of Operations

For the Thirteen Weeks Ended April 27, 2002



(Unaudited and In Thousands)



|                                                                                          |  | Issuer |        |   | Guarantor Subsidiaries |   | Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated Total |       
|----------------------------------------------------------------------------------------- |  | ------ | ------ | - | ---------------------- | - | -------------------------- |  | - | ------------ | - |  | ------------------ | ------
|Net Sales                                                                                 |  | $      | 42,821 |   |                        | $ | 15,491                     |  | $ | 11,005       |   |  | $                  | (2,900
|                                                                                          |  |        |        |   |                        |   |                            |  |   |              |   |  |                    |       
|Cost of Goods Sold                                                                        |  |        | 26,663 |   |                        |   | 10,103                     |  |   | 9,235        |   |  |                    | (2,900
|Selling, General & Administrative Expenses                                                |  |        | 11,456 |   |                        |   | 4,378                      |  |   | 1,521        |   |  |                    |      
|                                                                                          |  |        |        |   |                        |   |                            |  |   |              |   |  |                    |       
|                                                                                          |  |        | 38,119 |   |                        |   | 14,481                     |  |   | 10,756       |   |  |                    | (2,900
|                                                                                          |  |        |        |   |                        |   |                            |  |   |              |   |  |                    |       
|Operating Income                                                                          |  |        | 4,702  |   |                        |   | 1,010                      |  |   | 249          |   |  |                    |      
|Minority Interest in Income of Subsidiary                                                 |  |        |       |   |                        |   |                           |  |   | 16           |   |  |                    |      
|Equity in Earnings of Affiliate                                                           |  |        |       |   |                        |   | 476                        |  |   |             |   |  |                    |      
|Net Interest Expense                                                                      |  |        | 8,495  |   |                        |   |                           |  |   | 4            |   |  |                    |      
|                                                                                          |  |        |        |   |                        |   |                            |  |   |              |   |  |                    |       
|(Loss) Income Before Income Taxes and Cumulative Effect of Change in Accounting
Principle |  |        | (3,793 | ) |                        |   | 1,486                      |  |   | 229          |   |  |                    |      
|Income Tax (Benefit) Expense                                                              |  |        | (1,366 | ) |                        |   | 603                        |  |   | 33           |   |  |                    |      
|                                                                                          |  |        |        |   |                        |   |                            |  |   |              |   |  |                    |       
|(Loss) Income Before Cumulative Effect of Change in Accounting Principle                  |  |        | (2,427 | ) |                        |   | 883                        |  |   | 196          |   |  |                    |      
|Cumulative Effect of Change in Accounting Principle                                       |  |        |       |   |                        |   |                           |  |   | (3,240       | ) |  |                    |      
|                                                                                          |  |        |        |   |                        |   |                            |  |   |              |   |  |                    |       
|Net (Loss) Income                                                                         |  | $      | (2,427 | ) |                        | $ | 883                        |  | $ | (3,044       | ) |  | $                  |      
|                                                                                          |  |        |        |   |                        |   |                            |  |   |              |   |  |                    |       



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Guarantor Financial Statements

Condensed Consolidating Balance Sheets

April 26, 2003



(Unaudited and In Thousands)



|                                                         |  | Issuer |         |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal |        
|-------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------------------------- |  | - | ------------ | - |  | ----------------- | -------
|ASSETS                                                   |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|CURRENT ASSETS:                                          |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|Cash and cash equivalents                                |  | $      | 369     |   |                       | $ |                          |  | $ | 570          |   |  | $                 |       
|Accounts receivable, net                                 |  |        | 21,648  |   |                       |   | 12,313                    |  |   | 8,105        |   |  |                   |       
|Inventories                                              |  |        | 23,007  |   |                       |   | 9,533                     |  |   | 11,342       |   |  |                   |       
|Deferred tax assets                                      |  |        | 1,505   |   |                       |   | 457                       |  |   | 97           |   |  |                   |       
|Prepaid expenses and other                               |  |        | 1,059   |   |                       |   | 388                       |  |   | 906          |   |  |                   | 457    
|                                                         |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|Total current assets                                     |  |        | 47,588  |   |                       |   | 22,691                    |  |   | 21,020       |   |  |                   | 457    
|PROPERTY, PLANT AND EQUIPMENT, net                       |  |        | 33,192  |   |                       |   | 23,301                    |  |   | 9,545        |   |  |                   |       
|DEFERRED TAX ASSETS                                      |  |        |        |   |                       |   | 649                       |  |   | 1,554        |   |  |                   | (1,805 
|GOODWILL                                                 |  |        | 62,386  |   |                       |   | 35,992                    |  |   |             |   |  |                   |       
|OTHER INTANGIBLE ASSETS, net                             |  |        | 36,123  |   |                       |   | 5,448                     |  |   |             |   |  |                   |       
|INVESTMENT IN SUBSIDIARIES                               |  |        | 60,171  |   |                       |   |                          |  |   |             |   |  |                   | (60,171
|OTHER ASSETS                                             |  |        | 8,278   |   |                       |   | 797                       |  |   | 26           |   |  |                   |       
|                                                         |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|TOTAL ASSETS                                             |  | $      | 247,738 |   |                       | $ | 88,878                    |  | $ | 32,145       |   |  | $                 | (61,519
|                                                         |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                     |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|CURRENT LIABILITIES:                                     |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|Accounts payable                                         |  | $      | 11,098  |   |                       | $ | 4,029                     |  | $ | 4,782        |   |  | $                 | (21    
|Accrued expenses                                         |  |        | 5,314   |   |                       |   | 6,695                     |  |   | 2,424        |   |  |                   | 457    
|Current portion of long-term debt                        |  |        | 732     |   |                       |   |                          |  |   | 186          |   |  |                   |       
|                                                         |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|Total current liabilities                                |  |        | 17,144  |   |                       |   | 10,724                    |  |   | 7,392        |   |  |                   | 436    
|INTERCOMPANY (RECEIVABLE) PAYABLE                        |  |        | (29,439 | ) |                       |   | 10,063                    |  |   | 19,355       |   |  |                   | 21     
|OTHER LIABILITIES, including post- retirement obligation |  |        | 7,107   |   |                       |   |                          |  |   | 117          |   |  |                   | (1,805 
|LONG-TERM DEBT, net of current portion                   |  |        | 216,146 |   |                       |   |                          |  |   | 2,786        |   |  |                   |       
|MINORITY INTEREST                                        |  |        |        |   |                       |   |                          |  |   |             |   |  |                   | 313    
|STOCKHOLDERS EQUITY                                     |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|Preferred stock                                          |  |        |        |   |                       |   |                          |  |   | 133          |   |  |                   | (133   
|Common stock                                             |  |        |        |   |                       |   | 2,056                     |  |   | 6,061        |   |  |                   | (8,117 
|Paid-in capital                                          |  |        | 72,648  |   |                       |   | 49,699                    |  |   | 2,365        |   |  |                   | (52,064
|Retained earnings (deficit)                              |  |        | (34,659 | ) |                       |   | 16,336                    |  |   | (5,768       | ) |  |                   | (72    
|Accumulated other comprehensive loss                     |  |        | (1,209  | ) |                       |   |                          |  |   | (296         | ) |  |                   | (98    
|                                                         |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|                                                         |  |        | 36,780  |   |                       |   | 68,091                    |  |   | 2,495        |   |  |                   | (60,484
|                                                         |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY               |  | $      | 247,738 |   |                       | $ | 88,878                    |  | $ | 32,145       |   |  | $                 | (61,519
|                                                         |  |        |         |   |                       |   |                           |  |   |              |   |  |                   |        





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Guarantor
Financial Statements

Condensed Consolidating Balance Sheets

January 25, 2003



(In Thousands)



|                                                         |  | Issuer |         |   | Guarantor Subsidiaries |   | Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | Consolidated Total |        
|-------------------------------------------------------- |  | ------ | ------- | - | ---------------------- | - | -------------------------- |  | - | ------------ | - |  | ------------------ | -------
|ASSETS                                                   |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|CURRENT ASSETS:                                          |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|Cash and cash equivalents                                |  | $      | 19,047  |   |                        | $ |                           |  | $ | 1,860        |   |  | $                  |       
|Accounts receivable, net                                 |  |        | 20,332  |   |                        |   | 10,507                     |  |   | 7,688        |   |  |                    |       
|Inventories                                              |  |        | 17,544  |   |                        |   | 8,245                      |  |   | 9,932        |   |  |                    |       
|Deferred tax assets                                      |  |        | 1,310   |   |                        |   | 461                        |  |   | 92           |   |  |                    |       
|Prepaid expenses and other                               |  |        | 467     |   |                        |   | 222                        |  |   | 1,010        |   |  |                    |       
|                                                         |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|Total current assets                                     |  |        | 58,700  |   |                        |   | 19,435                     |  |   | 20,582       |   |  |                    |       
|PROPERTY, PLANT AND EQUIPMENT, net                       |  |        | 32,791  |   |                        |   | 23,902                     |  |   | 9,565        |   |  |                    |       
|DEFERRED TAX ASSETS                                      |  |        | 10      |   |                        |   | 356                        |  |   | 1,482        |   |  |                    | (978   
|GOODWILL                                                 |  |        | 62,386  |   |                        |   | 35,992                     |  |   |             |   |  |                    |       
|OTHER INTANGIBLE ASSETS, net                             |  |        | 36,997  |   |                        |   | 6,103                      |  |   |             |   |  |                    |       
|INVESTMENT IN SUBSIDIARIES                               |  |        | 60,171  |   |                        |   |                           |  |   |             |   |  |                    | (60,171
|OTHER ASSETS                                             |  |        | 8,777   |   |                        |   | 2,287                      |  |   | 26           |   |  |                    |       
|                                                         |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|TOTAL ASSETS                                             |  | $      | 259,832 |   |                        | $ | 88,075                     |  | $ | 31,655       |   |  | $                  | (61,149
|                                                         |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|LIABILITIES AND STOCKHOLDERS EQUITY                     |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|CURRENT LIABILITIES:                                     |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|Accounts payable                                         |  | $      | 7,808   |   |                        | $ | 3,475                      |  | $ | 4,636        |   |  | $                  |       
|Accrued expenses                                         |  |        | 9,625   |   |                        |   | 7,001                      |  |   | 2,088        |   |  |                    |       
|Current portion of long-term debt                        |  |        | 10,868  |   |                        |   |                           |  |   | 1,237        |   |  |                    |       
|                                                         |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|Total current liabilities                                |  |        | 28,301  |   |                        |   | 10,476                     |  |   | 7,961        |   |  |                    |       
|INTERCOMPANY (RECEIVABLE) PAYABLE                        |  |        | (28,766 | ) |                        |   | 10,437                     |  |   | 18,329       |   |  |                    |       
|OTHER LIABILITIES, including post- retirement obligation |  |        | 6,380   |   |                        |   |                           |  |   | 127          |   |  |                    | (978   
|LONG-TERM DEBT, net of current portion                   |  |        | 215,991 |   |                        |   |                           |  |   | 2,675        |   |  |                    |       
|MINORITY INTEREST                                        |  |        |        |   |                        |   |                           |  |   |             |   |  |                    | 330    
|STOCKHOLDERS EQUITY:                                    |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|Preferred stock                                          |  |        |        |   |                        |   |                           |  |   | 133          |   |  |                    | (133   
|Common stock                                             |  |        |        |   |                        |   | 2,056                      |  |   | 6,061        |   |  |                    | (8,117 
|Paid-in capital                                          |  |        | 72,648  |   |                        |   | 49,699                     |  |   | 2,365        |   |  |                    | (52,064
|Retained earnings (deficit)                              |  |        | (33,513 | ) |                        |   | 15,407                     |  |   | (5,285       | ) |  |                    | (89    
|Accumulated other comprehensive loss                     |  |        | (1,209  | ) |                        |   |                           |  |   | (711         | ) |  |                    | (98    
|                                                         |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|                                                         |  |        | 37,926  |   |                        |   | 67,162                     |  |   | 2,563        |   |  |                    | (60,501
|                                                         |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY               |  | $      | 259,832 |   |                        | $ | 88,075                     |  | $ | 31,655       |   |  | $                  | (61,149
|                                                         |  |        |         |   |                        |   |                            |  |   |              |   |  |                    |        





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Guarantor
Financial Statements

Condensed Consolidating Statements of Cash Flows

For the Thirteen Weeks Ended April 26, 2003



(Unaudited and In Thousands)



|                                                    |  | Issuer |         |   | Guarantor Subsidiaries |   |        | Non-Guarantor Subsidiaries |  |   | Consolidated Total |  
|--------------------------------------------------- |  | ------ | ------- | - | ---------------------- | - | ------ | -------------------------- |  | - | ------------------ | -
|CASH FLOWS FROM OPERATING ACTIVITIES                |  | $      | (6,500  | ) |                        | $ | (1,508 | )                          |  | $ | (116               | )
|                                                    |  |        |         |   |                        |   |        |                            |  |   |                    |  
|CASH FLOWS FROM INVESTING ACTIVITIES:               |  |        |         |   |                        |   |        |                            |  |   |                    |  
|Equity distribution from affiliate                  |  |        |        |   |                        |   | 1,878  |                            |  |   |                   |  
|Additions to property, plant, and equipment         |  |        | (1,581  | ) |                        |   | (370   | )                          |  |   | (95                | )
|                                                    |  |        |         |   |                        |   |        |                            |  |   |                    |  
|Net cash (used in) provided by investing activities |  |        | (1,581  | ) |                        |   | 1,508  |                            |  |   | (95                | )
|                                                    |  |        |         |   |                        |   |        |                            |  |   |                    |  
|CASH FLOWS FROM FINANCING ACTIVITIES:               |  |        |         |   |                        |   |        |                            |  |   |                    |  
|Proceeds from issuance of long-term debt            |  |        | 1,500   |   |                        |   |       |                            |  |   |                   |  
|Repayments of long-term debt                        |  |        | (11,500 | ) |                        |   |       |                            |  |   | (1,079             | )
|Cash dividends to Tandus Group, Inc.                |  |        | (586    | ) |                        |   |       |                            |  |   |                   |  
|Financing costs                                     |  |        | (11     | ) |                        |   |       |                            |  |   |                   |  
|                                                    |  |        |         |   |                        |   |        |                            |  |   |                    |  
|Net cash used in financing activities               |  |        | (10,597 | ) |                        |   |       |                            |  |   | (1,079             | )
|                                                    |  |        |         |   |                        |   |        |                            |  |   |                    |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS             |  |        | (18,678 | ) |                        |   |       |                            |  |   | (1,290             | )
|CASH AND CASH EQUIVALENTS, beginning of period      |  |        | 19,047  |   |                        |   |       |                            |  |   | 1,860              |  
|                                                    |  |        |         |   |                        |   |        |                            |  |   |                    |  
|CASH AND CASH EQUIVALENTS, end of period            |  | $      | 369     |   |                        | $ |       |                            |  | $ | 570                |  
|                                                    |  |        |         |   |                        |   |        |                            |  |   |                    |  





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Guarantor
Financial Statements

Condensed Consolidating Statement of Cash Flows

For the Thirteen Weeks Ended April 27, 2002



(Unaudited and In Thousands)



|                                                    |  | Issuer |          |   | Guarantor Subsidiaries |   |      | Non-Guarantor Subsidiaries |  |   | Consolidated Total |  
|--------------------------------------------------- |  | ------ | -------- | - | ---------------------- | - | ---- | -------------------------- |  | - | ------------------ | -
|CASH FLOWS FROM OPERATING ACTIVITIES                |  | $      | (1,744   | ) |                        | $ | (533 | )                          |  | $ | (777               | )
|                                                    |  |        |          |   |                        |   |      |                            |  |   |                    |  
|CASH FLOWS FROM INVESTING ACTIVITIES:               |  |        |          |   |                        |   |      |                            |  |   |                    |  
|Equity distribution from affiliate                  |  |        |         |   |                        |   | 553  |                            |  |   |                   |  
|Additions to property, plant and equipment          |  |        | (1,137   | ) |                        |   | (62  | )                          |  |   | (101               | )
|                                                    |  |        |          |   |                        |   |      |                            |  |   |                    |  
|Net cash (used in) provided by investing activities |  |        | (1,137   | ) |                        |   | 491  |                            |  |   | (101               | )
|                                                    |  |        |          |   |                        |   |      |                            |  |   |                    |  
|CASH FLOWS FROM FINANCING ACTIVITIES:               |  |        |          |   |                        |   |      |                            |  |   |                    |  
|Proceeds from issuance of long-term debt            |  |        | 175,000  |   |                        |   |     |                            |  |   |                   |  
|Repayments of long-term debt                        |  |        | (125,000 | ) |                        |   |     |                            |  |   | (133               | )
|Cash dividends to Tandus Group, Inc                 |  |        | (1,837   | ) |                        |   |     |                            |  |   |                   |  
|Financing costs                                     |  |        | (6,398   | ) |                        |   |     |                            |  |   |                   |  
|                                                    |  |        |          |   |                        |   |      |                            |  |   |                    |  
|Net cash provided by (used in) financing activities |  |        | 41,765   |   |                        |   |     |                            |  |   | (133               | )
|                                                    |  |        |          |   |                        |   |      |                            |  |   |                    |  
|NET CHANGE IN CASH AND CASH EQUIVALENTS             |  |        | 38,884   |   |                        |   | (42  | )                          |  |   | (1,011             | )
|CASH AND CASH EQUIVALENTS, beginning of period      |  |        | 2,271    |   |                        |   | 49   |                            |  |   | 3,914              |  
|                                                    |  |        |          |   |                        |   |      |                            |  |   |                    |  
|CASH AND CASH EQUIVALENTS, end of period            |  | $      | 41,155   |   |                        | $ | 7    |                            |  | $ | 2,903              |  
|                                                    |  |        |          |   |                        |   |      |                            |  |   |                    |  





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



The following discussion and analysis of the financial condition and results of operations should be read in conjunction with and is
qualified in its entirety by reference to the Companys consolidated financial statements and the accompanying notes. Except for historical information, the discussions in this section contain forward-looking statements that involve risks and
uncertainties. Future results could differ materially from these discussed below for many reasons. See Forward-Looking Statements.



GENERAL



Based on annual sales and product brands, Collins & Aikman Floorcoverings, Inc. (the Company), a Delaware corporation, is
a leading manufacturer of floorcovering products for the North American specified commercial carpet market. The Companys floorcovering products include (i) vinyl-backed six-foot roll carpet and modular carpet tile and (ii) high style tufted
and woven broadloom carpet. The Company designs, manufactures and markets its C&A, Monterey and Crossley brands under the Tandus Group name for a wide variety of end markets, including corporate offices, education, healthcare,
government facilities and retail stores. Because of the Companys diversity of its end markets, management believes its business tends to be less cyclical than that of many of its competitors, which rely more heavily on the corporate market.
The ability to provide a package of product offerings in various forms, coupled with flexible distribution channels, allows the Company to provide a wide array of floorcovering solutions for each of its customers. The Company is
headquartered in Georgia, with additional locations in California, Canada, the United Kingdom, and Asia.



The Company is a wholly-owned subsidiary of Tandus Group, Inc. (Tandus), formerly known as CAF Holdings, Inc. Subsequent to a
recapitalization transaction on January 25, 2001, a majority of Tanduss outstanding capital stock is controlled by investment funds managed by Oaktree Capital Management, LLC and Banc of America Capital Investors.



During the thirteen weeks ended April 26, 2003, the Company
prepaid $10.0 million of the term loan. In connection with the term debt prepayments, the Company recorded the write-off of a pro-rata share of deferred financing costs associated with the term debt. The amount of these expenses was $0.2 million and
are reflected in interest expense in the consolidated statement of operations.



On May 8, 2002, CAF Extrusion, Inc., a wholly-owned subsidiary, acquired a yarn extrusion manufacturing plant located in Calhoun, Georgia. In addition, CAF Extrusion, Inc. purchased the real property
on which the plant is located from a third party. The acquisition was funded from cash on hand. The cash purchase price was $34.8 million plus $0.3 million for acquisition related expenses and consisted of $2.4 million for the land and building,
$1.4 million for inventory, $17.7 million for machinery and equipment and $5.6 million for goodwill, and $8.0 million for a supply agreement which will be amortized over its term of three years. The acquisition has been accounted for by the purchase
method and, accordingly, the results of operations of CAF Extrusion, Inc. have been included in the Companys consolidated financial statements from May 8, 2002.



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RESULTS OF OPERATIONS



The following table sets forth certain operating results as a percentage of net sales for the periods indicated:



|                                           |  | Thirteen Weeks Ended |  
|------------------------------------------ |  | -------------------- | -
|                                           |  | April 27,2002        |  
|                                           |  | (unaudited)          |  
|Net Sales                                  |  | 100.0                | %
|Cost of Goods Sold                         |  | 64.9                 |  
|                                           |  |                      |  
|Gross Profit                               |  | 35.1                 |  
|Selling, General & Administrative Expenses |  | 26.1                 |  
|                                           |  |                      |  
|Operating Income                           |  | 9.0                  |  
|Net Interest Expense                       |  | 12.8                 |  
|Net Loss                                   |  | (6.9                 | )



RESULTS OF OPERATIONS



Thirteen Weeks Ended April 26, 2003 As Compared with Thirteen Weeks
Ended April 27, 2002



Net Sales.Net sales for
the thirteen weeks ended April 26, 2003 were $71.6 million, an increase of 7.8% from the $66.4 million for the thirteen weeks ended April 27, 2002. The increase in net sales in the thirteen weeks ended April 26, 2003 was due to net sales of $7.8
million generated by the extrusion operation acquired May 8, 2002, partially offset by the slow demand throughout the specified commercial market in the United States. In particular, demand in the corporate office market has been slow since 2001.
For the thirteen weeks ended April 26, 2003, the Companys sales to the corporate office market decreased by 17.7% as compared to the prior year. This decrease was partially offset by a 2.4% increase in the institutional end markets when
compared to the prior year.



Cost of Goods Sold. Cost of
goods sold was $48.3 million for the thirteen weeks ended April 26, 2003 as compared to $43.1 million in the thirteen weeks ended April 27, 2002. This increase resulted from the inclusion of the recently acquired extrusion operation and the
underutilization of the Companys plants, offset in part by management cost reduction initiatives. As a percentage of sales, these costs were 67.5% and 64.9% for the thirteen weeks ended April 26, 2003 and April 27, 2002, respectively.



Selling, General and Administrative Expenses.Selling,
general and administrative expenses increased to $17.5 million, excluding other intangible assets amortization of $1.5 million, for the thirteen weeks ended April 26, 2003, an increase of 6.7% from $16.4 million in the thirteen weeks ended April 27,
2002, which excluded other intangible assets amortization of $1.0 million. This increase was primarily due to increased salary and benefits of $0.9 million and sampling costs of $0.2 million. A portion of the increased salary and benefits and
sampling costs are related to the Companys new selling strategy, which was implemented beginning January 26, 2003. As a percentage of sales, these expenses, excluding amortization, decreased to 24.4% from 24.7% in the prior year.



Interest Expense. Net interest expense for the thirteen weeks ended
April 26, 2003 and April 27, 2002 was $5.4 million and $8.5 million, respectively, which included minimal interest income. Included in interest expense are charges of $0.2 million and $2.6 million for the thirteen weeks ended April 26, 2003 and
April 27, 2002, respectively, to reflect the write-off of a pro-rata share of deferred financing costs associated with the prepayment of term debt during those periods. Excluding these charges, net interest expense would be $5.2 million for the
thirteen weeks ended April 26, 2003 and $5.9 million for the thirteen weeks ended April 27, 2002.





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Net Loss. Net loss for the thirteen weeks ended April 26, 2003 decreased to a net loss of $0.1
million from $4.6 million of net loss in the thirteen weeks ended April 27, 2002. This was due to the combined result of the factors described above and the $3.2 million non-cash charge for the cumulative effect of change in accounting principle in
the thirteen weeks ended April 27, 2002.



Adjusted EBITDA.Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and the cumulative effect of change in accounting principle, plus Chroma cash dividends and the minority interest in income (loss) of subsidiary, less equity
in earnings of Chroma. Adjusted EBITDA for the thirteen weeks ended April 26, 2003 increased 8.5% to $10.2 million from $9.4 million in the thirteen weeks ended April 27, 2002. As a percentage of sales, Adjusted EBITDA was 14.2% in the thirteen
weeks ended April 26, 2003 compared to 14.1% in the thirteen weeks ended April 27, 2002. Adjusted EBITDA is presented because it is commonly used by certain investors and analysts to analyze a companys ability to service debt. The Company
utilizes Adjusted EBITDA as (a) a benchmark for its annual budget and long range plan, (b) a valuation method for potential acquisitions, and (c) a measure to determine compliance with senior credit facility debt covenants. Adjusted EBITDA is not a
measure of financial performance under generally accepted accounting principles and should not be considered an alternative to operating income or net income as a measure of operating performance or to net cash provided by operating activities as a
measure of liquidity. Because Adjusted EBITDA is not calculated identically by all companies, the presentation in these statements may not be comparable to those disclosed by other companies.



A reconciliation of net loss to Adjusted EBITDA is as follows (in thousands):



|                                                    |  | Thirteen Weeks Ended |       
|--------------------------------------------------- |  | -------------------- | ------
|                                                    |  | April 27, 2002       |       
|Net loss                                            |  | $                    | (4,588
|Cumulative effect of change in accounting principle |  |                      | 3,240 
|Income taxes                                        |  |                      | (730  
|Net interest expense                                |  |                      | 8,499 
|Depreciation                                        |  |                      | 1,900 
|Amortization                                        |  |                      | 971   
|Chroma cash dividends                               |  |                      | 553   
|Equity in earnings in Chroma                        |  |                      | (476  
|Minority interest in income (loss) of subsidiary    |  |                      | 16    
|                                                    |  |                      |       
|Adjusted EBITDA                                     |  | $                    | 9,385 
|                                                    |  |                      |       



.





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LIQUIDITY AND CAPITAL RESOURCES



The Companys principal uses of cash have historically been for operating expenses, working capital, capital
expenditures and debt repayment. The Company has financed its cash requirements through internally generated cash flows, borrowings and the offering of the senior subordinated notes.



Net cash used by operating activities in the thirteen weeks ended April 26, 2003 was $8.1 million compared to net cash used
of $3.1 million in the thirteen weeks ended April 27, 2002. The change is due to a negative impact of $7.1 million in net working capital. A negative impact to net working capital of $5.1 million was attributable to the May 2002 acquisition of the
yarn extrusion plant. The Company invested in working capital initially for the extrusion facility and expects more level working capital requirements going forward.



Net cash used in investing activities in the thirteen weeks ended April 26, 2003 was $0.2 million compared to $0.7 million
in the thirteen weeks ended April 27, 2002. The decrease in cash used in investing activities was due to increased capital expenditures offset by higher distributions from the investment in Chroma. Capital expenditures for the thirteen weeks ended
April 26, 2003 were $2.0 million compared to $1.3 million for the thirteen weeks ended April 27, 2002.



Net cash used in financing activities in the thirteen weeks ended April 26, 2003 was $11.7 million compared to net cash provided of $41.6 million in the
thirteen weeks ended April 27, 2002. The decrease in cash provided by financing activities was due primarily to the issuance of the 9.75% Notes and repayment of a portion of the Senior Credit Facility with some of the proceeds during the thirteen
weeks ended April 27, 2002 and the prepayment of $10.0 million of the Companys term debt during the thirteen weeks ended April 26, 2003.



The Company has significant indebtedness which consists of $175.0 million in senior subordinated notes due 2010; a $109.0 million credit facility which,
at April 26, 2003 had an outstanding balance of $41.0 million in term loan borrowings; $0.6 million in sellers notes from the Companys July 1999 acquisition of Crossley; $0.5 million in purchase money indebtedness; $0.0 million in
revolving line of credit borrowings and $2.4 million in sinking funds bonds under Crossley. As of April 26, 2003, the Company had letters of credit issued against its revolving line of credit of $1.2 million. The Company was in compliance with all
covenants as of April 26, 2003.



During the thirteen weeks
ended April 26, 2003, the Company prepaid $10.0 million of term debt with cash generated from operations. In connection with these term debt prepayments, the Company recorded the write-off of a pro-rata share of deferred financing costs associated
with the term debt. These expenses totaled were $0.2 million and are reflected in interest expense in the consolidated statement of operations.



The Companys ability to make scheduled payments of principal, interest, or to refinance its indebtedness, depends on its future performance, which,
to a certain extent, is subject to general economic, financial, competitive, and other factors beyond its control. The Companys business may not generate sufficient cash flow from operations and future borrowings may not be available in an
amount sufficient to enable the Company to service its indebtedness or to make necessary capital expenditures. The Company periodically evaluates potential acquisitions of businesses, which complement its existing operations. Depending on various
factors, including, among others, the cash consideration required in such potential acquisitions, the Company may determine to finance any such transaction with existing sources of liquidity.



Management believes that cash generated by its operations and availability
under its $50.0 million revolving credit line will be sufficient to fund the Companys current commitments and planned requirements.





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EFFECTS OF INFLATION



The impact of inflation on the
Companys operations has not been significant in recent years. However, a high rate of inflation in the future may have an adverse effect on the Companys operating results.



SEASONALITY



The Company experiences seasonal fluctuations, with generally lower sales and gross profit in the first and fourth quarters of the fiscal
year and higher sales and gross profit in the second and third quarters of the fiscal year. The seasonality of sales and profitability is primarily a result of disproportionately higher education end market sales during the summer months.



RELIANCE ON PRIMARY THIRD-PARTY SUPPLIER OF NYLON YARN



E.I. DuPont de Nemours and Company
(DuPont) currently supplies a majority of the Companys requirements for nylon yarn, the principal raw material used in the Companys floorcovering products. The unanticipated termination or interruption of the supply
arrangement with DuPont could have a material adverse effect on the Company because of the cost and delay associated with shifting this business to another supplier. Historically, the Company has not experienced significant interruptions in the
supply of nylon yarn from DuPont.



RECENT ACCOUNTING
PRONOUNCEMENTS



In June 2001, the FASB
approved the issuance of SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 establishes accounting standards for the recognition and measurement of legal obligations associated with the retirement of tangible
long-lived assets. SFAS No. 143 became effective for the Company on January 26, 2003 and requires recognition of a liability for an asset retirement obligation in the period in which it is incurred. SFAS No. 143 did not have a material impact on the
Companys financial statements.



In April
2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145 rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt; FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers; FASB Statement No. 64, Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements; and amends FASB Statement No.
13, Accounting for Leases. SFAS No. 145 addresses the treatment of gains and losses related to debt extinguishments and should only be classified as extraordinary items if they meet certain criteria. The provisions of this statement are
effective beginning May 15, 2002. The financial statements included herein reflect the adoption of SFAS No. 145 as of the beginning of the Companys fiscal year. Prior year financial statements have also been restated to reflect the adoption of
SFAS No. 145.



In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated With Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring). This statement requires that a liability for a cost associated with an exit
or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early
application encouraged. SFAS No. 146 did not have a material impact on the Companys financial statements.





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In December
2002, the FASB issued SFAS No. 148, Accounting for Stock-Based CompensationTransition and Disclosurean Amendment of FASB Statement No. 123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. Additionally, SFAS No. 148 amends the disclosure requirements of SFAS No. 123
to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method after December 15, 2002. The Company has adopted the applicable
disclosure provisions of SFAS No.148.



CRITICAL ACCOUNTING
POLICIES



The Companys significant
accounting policies are more fully described in Note 3 to the audited consolidated financial statements included in the Companys Form 10-K which was filed with the Securities and Exchange Commission on April 25, 2003. Certain of the
Companys accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of
uncertainty and actual results could differ from these estimates. These judgments are based on the Companys historical experience, terms of existing contracts, current economic trends in the industry, information provided by the Companys
customers, and information available from outside sources, as appropriate. The Companys significant accounting policies include:



Revenue Recognition. Revenue is recognized when goods are shipped, which is when legal title passes to the customer. For product
installations subject to customer approval, revenue is recognized upon acceptance by the customer. The Company provides certain installation services to customers utilizing independent third-party contractors. The billings and expenses for these
services are included in net sales and cost of goods sold, respectively.



Impairment of Goodwill. The Company periodically evaluates acquired businesses for potential impairment indicators. Judgments regarding the existence of impairment indicators are based on legal factors, market
conditions and operational performance of the Companys acquired businesses. Future events could cause the Company to conclude that impairment indicators exist and that goodwill associated with acquired businesses is impaired. Any resulting
impairment loss could have a material adverse impact on the Companys financial condition and results of operations.



Accounts Receivable. The Company provides allowances for expected cash discounts, returns, claims and doubtful accounts based upon
historical experience and periodic evaluation of the financial condition of the Companys customers and the collectability of the Companys accounts receivable. If the financial condition of the Companys customers were to
deteriorate, resulting in an impairment of their ability to pay their debts, allowances recorded in the Companys financial statements may not be adequate.



Inventory Reserves. Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method. Reserves are established based on percentage markdowns applied to inventories aged for certain time periods and size of lot.



Allowance and/or reserve for product warranty and returns. Warranty reserve and allowance for product returns is established based
upon best estimates of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. While the Company believes that its warranty reserve and allowance for product returns is adequate and that the judgment
applied is appropriate based upon its historical experience for these items, actual amounts determined to be due and payable could differ and additional allowances may be required.



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FORWARD-LOOKING
STATEMENTS



The Company may from time to
time make written and oral forward-looking statements. Written forward-looking statements may appear in documents filed with the Securities and Exchange Commission, in press releases and in reports to shareholders. The Private Securities Litigation
Reform Act of 1995 contains a safe harbor for forward-looking statements. The Company relies on this safe harbor in making such disclosures. All statements contained in this Quarterly Report on Form 10-Q as to future expectations and financial
results including, but not limited to, statements containing the words plans, believes, intends, anticipates, expects, projects, should, will and similar
expressions, should be considered forward-looking statements subject to the safe harbor. The forward-looking statements are based on managements current beliefs and assumptions about expectations, estimates, strategies and projections for the
Company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in
such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise. The risks, uncertainties and assumptions regarding
forward-looking statements include, but are not limited to, product demand and market acceptance risks; product development risks, such as delays or difficulties in developing, producing and marketing new products; the impact of competitive
products, pricing and advertising constraints resulting from the financial condition of the Company, including the degree to which the Company is leveraged; cycles in the construction and renovation of commercial and institutional buildings; failure
to retain senior executives and other qualified personnel; unanticipated termination or interruption of the Companys arrangement with its primary third-party supplier of nylon yarn; debt service requirements and restrictions under credit
agreements and indentures; general economic conditions in the United States and in markets outside of the United States served by the Company; government regulations; risks of loss of material customers; environmental matters; and other risks
described in the Companys Securities and Exchange Commission filings.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. Although the Company is not subject to material foreign
currency exchange risk, it is exposed to changes in interest rates. Other than the 9.75% Notes, substantially all of the Companys debt is variable rate debt. Therefore, interest rate changes generally do not affect the fair market value of
such debt but do impact future earnings and cash flows, assuming other factors are held constant. Conversely, for fixed rate debt, interest changes do not impact future cash flow and earnings, but do impact the fair market value of such debt,
assuming other factors are held constant. At April 26, 2003, the Company had variable rate debt of $41.0 million and fixed rate debt of $178.9 million. The variable interest rate per annum applicable to borrowings under the Senior Credit Facility is
equal to the Companys choice of (a) an adjusted rate based upon LIBOR plus a Eurodollar margin or (b) an alternative base rate, as defined by the Senior Credit Facility, plus a base rate margin. The Eurodollar margin and the base rate margin
adjust quarterly on a sliding scale based on the Companys leverage ratio for the immediately preceding four fiscal quarters.



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Item 4. Controls and Procedures



Within 90 days prior to the date of filing of this report, the Company carried out an evaluation, under the supervision and with the participation of the Companys Chief Executive Officer and the Chief Financial Officer, of the
design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on this evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the
SECs rules and forms. The Chief Executive Officer and Chief Financial Officer also concluded that the Companys disclosure controls and procedures are effective in timely alerting them to material information relating to the Company
required to be included in the Companys periodic SEC filings. In connection with the new rules, the Company is in the process of further reviewing and documenting its disclosure controls and procedures, including its internal controls and
procedures for financial reporting, and may from time to time make changes designed to enhance their effectiveness and to ensure that the Companys systems evolve with its business.



There have been no significant changes in the Companys internal controls or in other factors that could
significantly affect internal controls subsequent to the date of this evaluation.



PART II Other Information



Item 1. Legal Proceedings



The Company from time to time is subject to claims and suits arising in the ordinary course of business, including workers compensation and product liability claims that may or may not be covered by insurance. The ultimate
outcome of all legal proceedings to which the Company is a party will not, in the opinion of the Companys management, based on the facts presently known to it, have a material adverse effect on the Companys financial condition or results
of operations.



The Company is subject to
federal, state, and local laws and regulations concerning the environment. In the opinion of the Companys management, based on the facts presently known to it, the ultimate outcome of any environmental matters is not expected to have a
material adverse effect on the Companys financial condition or results of operations.



Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits
| | --- |  | --------



99.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
200299.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002




| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------



|None |  | 
|---- |  | 





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SIGNATURE



Pursuant to
the requirement 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 on June 10, 2003.



|
|

COLLINS & AIKMAN FLOORCOVERINGS,
INC. (Registrant)By:

/s/    DARREL V. MCCAYDarrel V. McCayChief Financial Officer and Vice President(duly authorized officer and principalfinancial and accounting officer)


|
|

|
|

|
|





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CERTIFICATION



I, Edgar M. (Mac)
Bridger, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Collins & Aikman Floorcoverings, Inc.;
| | -- |  | --------------------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing of this quarterly report (the
Evaluation Date); and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors:
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weakness in internal controls; and
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | any fraud whether or not material, that involves management or other employees who have a significant role in the registrants internal controls;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date: June 10, 2003

|                             
|-----------------------------
|/s/    EDGAR M. (MAC)
BRIDGER
|Edgar M. (Mac) Bridger       
|Chief Executive Officer      



30



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##### Table of Contents



CERTIFICATION



I, Darrel V. McCay, certify
that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Collins & Aikman Floorcoverings, Inc.;
| | -- |  | --------------------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing of this quarterly report (the
Evaluation Date); and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors:
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weakness in internal controls; and
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | any fraud whether or not material, that involves management or other employees who have a significant role in the registrants internal controls;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date: June 10, 2003

|                                          
|------------------------------------------
|/s/    DARREL V.
MCCAY                    
|Darrel V. McCay                           
|Vice President and Chief Financial Officer

|
|

|
|

|
|



31