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## Management’s Discussion and Analysis of Results of Operations and Financial Condition 

(dollars in thousands) - continued - 

amounts due by the Company as a result of this calculation are paid monthly. The Company’s invest- ment in Fabrica and Chroma secures the Company's obligation to make the contingent payments. 

At December 29, 2001, the Company’s debt consisted of $34,737 of convertible subordinated deben- tures, $40,476 of subordinated notes, $93,033 of senior indebtedness, principally under the Company’s senior credit agreement. Annual sinking fund principal payments for the convertible subordinated debentures are $2,500 for the years of 2002 through 2011. The subordinated notes require semi-annual principal payments of approximately $2,381 each February and August with the final payment in February 2010. 

The Company’s senior credit arrangement provides revolving credit of up to $95,000 through March 2003 and a $22,657 term loan. During 2001, the Company failed to comply with certain covenants under the agreement. The Company's lenders amended the agreement and waived compliance until December 31, 2002, at which time the Company will be required to replace the existing agreement or obtain additional waivers. The Company has executed a commitment letter for replacement financing with a new lender, and expects to have the new financing in place during the first half of 2002. Financial covenants under the Company's debt arrangements currently do not permit the payment of dividends. 

The Company's accounts receivable securitization program was extended in June 2001 for an addi- tional year. The agreement provides up to $60,000 of funding. Under the agreement, a significant portion of the Company's accounts receivable are sold, on a revolving basis, to a special purpose wholly-owned subsidiary, which assigns such receivables to an independent issuer of receivables-backed commercial paper as security for amounts borrowed by the special purpose subsidiary. The Company retains the credit risks for the collectibility of receivables sold under the agreement. The accounts of the special purpose subsidiary are not consolidated in the Company's financial statements. Amounts sold under this agreement were $25,951 at December 29, 2001, and $40,400 at December 30, 2000. The Company anticipates that this agreement will be terminated and receivables sold will become part of the collateral for borrowings under any new senior credit agreement. 

Proceeds from the sale of assets were $6,564 in 2001, $20,008 in 2000 and $52,097 in 1999. The asset sales consisted primarily from the sale of the Company's textile knit fabrics and apparel and specialty yarn businesses in 1999 and the sale of machinery and equipment, dyeing facilities and real estate in 2000 and 2001. The assets sold in 2000 included $14,982 for machinery and equipment that were leased back under an operating lease for a period of four years at an annual lease cost of $2,900. The Company has an option to extend the lease for an additional year. 

Capital expenditures, including $6,829 of amounts committed at December 29, 2001, are expected to be below $13,000 in 2002. Capital expenditures in 2002 will be focused primarily on new technol- ogy to support the Company’s high-end residential and commercial business. Depreciation and amortization in the year 2002 is expected to be approximately $22,700. 

The Company expects to replace its senior credit agreement with a new credit facility in the first half of 2002 and believes that operating cash flows and the anticipated credit availability under any new credit arrangement would be adequate to finance the Company’s normal liquidity requirements. However, significant additional cash expenditures beyond such requirements, including the expected purchase contingency that is expected to become due in April 2003, would require supplemental financing or other sources of funding. Meeting the Company's liquidity requirements is dependent on the Company's ability to replace its senior credit facility and secure other funding sources. There can 

