-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PPG5S3S9qfaC7whNPRtAlbRnQXwdR2cVrpHZcdM6j47dvruUcaWs0qd1LWI7Uwkh B2qA3UbifC9DIamvYQfxig== 0000035469-95-000009.txt : 19951103 0000035469-95-000009.hdr.sgml : 19951103 ACCESSION NUMBER: 0000035469-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951102 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIELDCREST CANNON INC CENTRAL INDEX KEY: 0000035469 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILLS, COTTON [2211] IRS NUMBER: 560586036 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05137 FILM NUMBER: 95586642 BUSINESS ADDRESS: STREET 1: 326 E STADIUM DRIVE CITY: EDEN STATE: NC ZIP: 27288 BUSINESS PHONE: 9196273000 FORMER COMPANY: FORMER CONFORMED NAME: FIELDCREST MILLS INC DATE OF NAME CHANGE: 19860807 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-5137 FIELDCREST CANNON, INC. (Exact name of registrant as specified in its charter) DELAWARE 56-0586036 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 326 East Stadium Drive Eden, N.C. 27288 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (910) 627-3000 Former name, former address and former fiscal year, if changed since last report 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 and (2) has been subject to such filing requirements for the past 90 days. Yes x . No . Number of shares outstanding October 31, 1995 Common Stock 8,912,727 Total pages 12 Exhibit Index Page 11 PART 1. FINANCIAL INFORMATION FIELDCREST CANNON, INC. Consolidated statement of financial position
September 30 December 31, Dollars in thousands 1995 1994 Assets Cash $ 5,871 $ 5,885 Accounts receivable 178,573 170,001 Inventories (note 3) 257,993 213,994 Net assets held for sale - 24,000 Other prepaid expenses and current assets 3,170 3,793 Total current assets 445,607 417,673 Plant and equipment, net 341,177 314,726 Deferred charges and other assets 63,075 50,266 Total assets $849,859 $782,665 Liabilities and shareowners' equity Accounts and drafts payable $ 61,843 $ 55,533 Federal and state income taxes - 2,268 Deferred income taxes 21,936 21,988 Accrued liabilities 70,204 53,958 Current portion of long-term debt 768 1,465 Total current liabilities 154,751 135,212 Senior long-term debt 155,158 107,744 Subordinated long-term debt 210,000 210,000 Total long-term debt 365,158 317,744 Deferred income taxes 43,871 42,859 Other non-current liabilities 52,777 55,648 Total liabilities 616,557 551,463 Shareowners' equity: Preferred Stock, $.01 par value, 10,000,000 authorized, 1,500,000 issued and outstanding September 30, 1995 and December 31, 1994 (aggregate liquidation preference of $75,000) 15 15 Common Stock, $1 par value, 25,000,000 authorized, 12,519,127 issued September 30, 1995 and 12,360,252 December 31, 1994 12,519 12,360 Additional paid in capital 220,084 216,772 Retained earnings 117,909 119,280 Excess purchase price for Common Stock acquired and held in treasury - 3,606,400 shares (117,225) (117,225) Total shareowners' equity 233,302 231,202 Total liabilities and shareowners' equity $849,859 $782,665 /TABLE See accompanying notes (2) FIELDCREST CANNON, INC. Consolidated statement of income and retained earnings
For the three months For the nine months Dollars in thousands, ended September 30 ended September 30 except per share data 1995 1994 1995 1994 Net sales $280,524 $279,283 $810,581 $766,364 Cost of sales 240,388 235,025 693,075 644,248 Selling, general and administrative 26,342 24,092 78,688 70,069 Restructuring charges 7,082 - 15,536 - Total operating costs and expenses 273,812 259,117 787,299 714,317 Operating income 6,712 20,166 23,282 52,047 Other deductions (income): Interest expense 6,807 5,776 20,290 17,287 Other, net 29 495 (115) 898 Total other deductions 6,836 6,271 20,175 18,185 Income (loss) before income taxes (124) 13,895 3,107 33,862 Federal and state income taxes (benefit) (109) 5,419 1,103 13,206 Net income (loss) (15) 8,476 2,004 20,656 Preferred dividends (1,125) (1,125) (3,375) (3,375) Earnings (loss) on common (1,140) 7,351 (1,371) 17,281 Amount added to (subtracted from) retained earnings (1,140) 7,351 (1,371) 17,281 Retained earnings, beginning of period 119,049 102,965 119,280 93,035 Retained earnings, end of period $117,909 $110,316 $117,909 $110,316 Net income (loss) per common share $ (.13) $ .84 $ (.15) $ 1.99 Fully diluted income (loss) per common share $ (.13) $ .68 $ (.15) $ 1.71 Average primary shares outstanding 8,912,817 8,722,222 8,860,070 8,679,958 Average fully diluted shares outstanding 8,912,817 14,111,662 8,860,293 14,070,155 /TABLE See accompanying notes (3) FIELDCREST CANNON, INC. Consolidated statement of cash flows
Nine Months ended September 30 Dollars in thousands 1995 1994 Increase (decrease) in cash Cash flows from operating activities: Net income $ 2,004 $ 20,656 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,595 22,473 Deferred income taxes 1,012 (1,297) Other (2,043) 3,088 Change in current assets and liabilities, excluding effects of acquisition of Sure Fit: Accounts receivable 118 (4,519) Inventories (26,701) (37,634) Other prepaid expenses and current assets 858 (797) Accounts payable and accrued liabilities 15,038 (11,395) Federal and state income taxes (2,268) 3,236 Deferred income taxes (52) 6,709 Net cash provided by operating activities 11,561 520 Cash flows from investing activities: Additions to plant and equipment (49,761) (26,672) Proceeds from disposal of plant and equipment 1,206 1,547 Proceeds from net assets held for sale 20,885 - Purchase of Sure Fit, net of cash acquired (27,300) - Net cash (used in) investing activities (54,970) (25,125) Cash flows from financing activities: Increase in revolving debt 48,179 29,062 Proceeds from issuance of long-term debt - 10,000 Payments on long-term debt (1,466) (11,082) Proceeds from sale of common stock 57 80 Dividends paid on preferred stock (3,375) (3,375) Net cash provided by financing activities 43,395 24,685 Increase (decrease) in cash (14) 80 Cash at beginning of year 5,885 3,865 Cash at end of period $ 5,871 $ 3,945
See accompanying notes (4) FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 1. Basis of Presentation The consolidated financial statements are unaudited. In the opinion of management all adjustments, consisting only of normal recurring items, have been made which are necessary to show a fair presentation of the financial position of the Company at September 30, 1995 and the related results of operations for the three and nine months ended September 30, 1995 and 1994. The unaudited consolidated financial statements should be read in conjunction with the Company's Form 10-K for the year ended December 31, 1994. 2. Income Per Common Share Reference is made to Exhibit 11 to this Form 10-Q for a computation of primary and fully-diluted net income per Common share. 3. Inventories Inventories are classified as follows:
September 30, December 31, (In thousands) 1995 1994 Finished goods $133,068 $109,423 Work in process 85,798 65,375 Raw materials and supplies 39,127 39,196 $257,993 $213,994
At September 30, 1995 approximately 75% of the inventories were valued on the last-in, first-out method (LIFO). (5) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Changes in Financial Condition The Company's debt (including the current portion of long-term debt) increased $46.7 million during the first nine months of 1995. Debt was reduced by $22.1 million from cash proceeds from the sale of the Bangor and Aroostook Railroad and other assets and increased by $27.3 million from the acquisition of the Sure Fit furniture coverings business of UTC Holdings. After excluding the effects of the acquisition of Sure Fit, inventories increased $26.7 million due to normal seasonal inventory build- up. Capital expenditures totaled $49.8 million for the first nine months of 1995 compared to $26.7 million for the first nine months of 1994. Included in the 1995 capital expenditures is $27.9 million for the $86 million capital project for the new weaving plant at the Company's Columbus, GA/Phenix City, Ala. towel mill. Capital expenditures for 1995 are expected to be in the $60-$65 million range. At September 30, 1995, approximately $42.6 million of the Company's $195 million revolving credit facility was available and unused. It is anticipated that financing of future capital expenditures will be provided by cash flows from operations, borrowings under the Company's existing and new credit facilities, and, possibly, the sale of long-term debt or equity securities. The Company's revolving credit facility requires, among other things, that the Company maintain certain financial ratios and also limits the amount of dividends that may be paid. The Company met all of its financial covenants as of September 30, 1995. As more fully discussed in the "Changes in Results of Operations" section, the Company currently expects that operating results in the fourth quarter of 1995 may be significantly lower than the fourth quarter of 1994. If this should occur, the Company will be in violation at the end of the fourth quarter of certain of the above covenants but believes it can modify the covenants for future periods through an amendment of the facility. The Company expects to incur increased interest rates on the amended facility; however, the Company does not believe the resulting incremental interest expense would materially increase the Company's overall cost of borrowed funds. Changes in Results of Operations Quarter Ended September 30, 1995 vs. Quarter Ended September 30, 1994 Net sales for the third quarter of 1995 were $280.5 million compared to $279.3 million in the third quarter of 1994, an increase of .4%. The increase includes $12.6 million of furniture coverings from the Sure Fit business acquired in January 1995. After adjusting for the Sure Fit acquisition, sales in the third quarter of 1995 were 4% less than the same period of 1994. The decline was due to a decline in volume which more than offset the price increases implemented during the last twelve months. (6) Gross profit margins decreased from 15.8% in the third quarter of 1994 to 14.3% in the third quarter of 1995. The decrease was due primarily to higher raw material costs, reduced sales volumes and lower mill activity. Selling, general and administrative expenses increased as a percentage of sales from 8.6% to 9.4% in the third quarter of 1995 compared to the same quarter of 1994. The increase was due primarily to increased advertising and other selling expenses. Pre-tax restructuring charges of $7.1 million, or $.53 per share after tax, were accrued in the third quarter of 1995. The charges were primarily for a voluntary early retirement program offered to salaried employees and estimated costs of subleasing the Company's New York office space. This completes the restructuring begun during the first half of 1995 when the Company reorganized its New York operations and relocated sales, marketing and design personnel to Kannapolis, N.C. Total cost of the restructuring was $15.5 million, or $1.13 per share after tax, for the first nine months of 1995. Annual pre-tax savings of $8 million, or $.58 per share after tax, are anticipated from the restructuring. Operating income as a percentage of sales decreased to 2.4% in the third quarter of 1995 from 7.2% in the third quarter of 1994. The decrease was due to the $7.1 million of restructuring charges described above, reduced mill activity and higher raw material costs which were not fully recovered by price increases. While the Company expects to generate positive earnings in the fourth quarter of 1995, operating results are expected to be significantly lower compared to the fourth quarter of 1994. Results are expected to be impacted by a continuation in the softness in retail sales, higher raw material costs (which will not be fully recovered by price increases implemented in the second and third quarters), a recent wage settlement which gave one additional holiday in the fourth quarter and higher promotional inventories in the Bed Division. Interest expense increased $1.0 million in the third quarter of 1995 as compared to the third quarter of 1994 due to higher rates under the revolver and an increase in average debt outstanding. The third quarter income tax benefit reflects an adjustment to a year-to-date effective tax rate of 35.5% compared to 39.0% in the third quarter of 1994. The lower effective tax rate for 1995 was due primarily to the decrease in pre-tax income. The annual effective income tax rate for 1994 was 37.3% before favorable prior years tax settlements which reduced the 1994 annual rate to 33.6%. A net loss, after the effect of the restructuring charges, of $15 thousand, or $.13 per share after preferred dividends, was incurred in the third quarter of 1995, compared to net income of $8.5 million, or $.84 per share, in the third quarter of 1994. (7) Nine Months Ended September 30, 1995 vs. Nine Months Ended September 30, 1994 Net sales for the first nine months of 1995 were $810.6 million compared to $766.4 million in the first nine months of 1994, an increase of 6%. The $44.2 million increase includes $38.1 million of furniture coverings from the Sure Fit business acquired in January 1995. The .8% increase in revenues, after adjusting for the Sure Fit acquisition, was due primarily to price increases implemented during the last twelve months, offset by volume declines during the third quarter of 1995. Gross profit margins decreased from 15.9% in the first nine months of 1994 to 14.5% in the first nine months of 1995. The decrease was due primarily to lower mill activity and higher raw material prices. Selling, general and administrative expenses increased as a percentage of sales from 9.1% to 9.7% in the first nine months of 1995 compared to the first nine months of 1994. The increase was due primarily to increased advertising and other selling expenses. Operating income as a percentage of sales decreased to 2.9% in the first nine months of 1995 from 6.8%. The decrease was due to the $15.5 million of restructuring charges related to the New York reorganization and early retirement program, reduced mill activity and higher raw material costs. Interest expense increased $3.0 million the first nine months of 1995 as compared to the first nine months of 1994 due to higher rates under the revolver and an increase in average debt outstanding. The effective income tax rate was 35.5% for the first nine months of 1995 compared to 39.0% for the first nine months of 1994. The lower effective tax rate for 1995 was due primarily to the decrease in pre-tax income. The annual effective income tax rate for 1994 was 37.3% before favorable prior years tax settlements which reduced the 1994 annual rate to 33.6%. Net income, after the effect of the restructuring charges, was $2.0 million, a $.15 loss per share after preferred dividends, for the first nine months of 1995 compared to net income of $20.7 million, or $1.99 per share, for the first nine months of 1994. (8) Item 6. Exhibits and Reports on Form 8-K (a). Exhibits 11. Computation of Primary and Fully Diluted Net Income Per Share. (b). Reports on Form 8-K The Registrant did not file any reports to the Commission on Form 8-K for the quarter ended September 30, 1995. (9) S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIELDCREST CANNON, INC. (Registrant) BY: /s/ T. R. Staab T. R. Staab Vice President and Chief Financial Officer Date: November 2, 1995 (10) EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR FIELDCREST CANNON, INC. FOR THE QUARTER ENDED SEPTEMBER 30, 1995 Exhibit Page Number Description Number
(11) Computation of Primary and Fully Diluted Net Income Per Share 12 /TABLE (11)
Exhibit 11 Computation of Primary and Fully Diluted Net Income Per Share For the three months For the nine months ended September ended September 30 1995 1994 1995 1994 Average shares outstanding 8,884,750 8,705,138 8,842,362 8,661,091 Add shares assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 28,067 17,084 17,708 18,867 Average shares and equivalents outstanding, primary 8,912,817 8,722,222 8,860,070 8,679,958 Average shares outstanding 8,884,750 8,705,138 8,842,362 8,661,091 Add shares giving effect to the conversion of the convertible subordinated debentures (1) 2,824,859 (1) 2,824,859 Add shares giving effect to the conversion of the convertible preferred stock (1) 2,564,100 (1) 2,564,100 Add shares assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 28,067 17,565 17,931 20,105 Average shares and equivalents outstanding, assuming full dilution 8,912,817 14,111,662 8,860,293 14,070,155 Primary Earnings Net income (loss) $ (15,000) $ 8,476,000 $ 2,004,000 $20,656,000 Preferred dividends (1,125,000) (1,125,000) (3,375,000) (3,375,000) Earnings (loss) on Common $(1,140,000) $ 7,351,000 $(1,371,000) $17,281,000 Primary earnings (loss) per common share $ (.13) $ .84 $ (.15) $ 1.99 Fully Diluted Earnings Earnings (loss) on Common $(1,140,000) $ 7,351,000 $(1,371,000) $17,281,000 Add convertible subordinated debenture interest, net of taxes (1) 1,144,000 (1) 3,431,000 Add convertible preferred dividends (1) 1,125,000 (1) 3,375,000 Net income (loss) $(1,140,000) $ 9,620,000 $(1,371,000) $24,087,000 Fully diluted earnings (loss) per Common share $ (.13) $ .68 $ (.15) $ 1.71 (1) The assumed conversion of the Registrant's Convertible Subordinated Debentures and Convertible Preferred Stock for the three months and six months ended September 30, 1995 would have an anti-dilutive effect for the computation of earnings per share; therefore, conversion has not been assumed for these periods.
(12) EX-27 2
5 1,000 U.S. DOLLARS 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 1 5,871 0 178,573 0 257,993 445,607 341,177 0 849,859 154,751 365,158 12,519 0 15 220,768 849,859 810,581 810,581 693,075 693,075 94,224 0 20,290 3,107 1,103 2,004 0 0 0 2,004 (.15) (.15)
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