-----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, Q8MWEwruYRp+xigYud3wm/NVUpZC6mqsZ81iKprD3yiiSYXKiWhP78F0HC2TT244 En0xg+5zdm0J2m9zz25lOg== 0000035469-96-000016.txt : 19961113 0000035469-96-000016.hdr.sgml : 19961113 ACCESSION NUMBER: 0000035469-96-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 96658976 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, 1996 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.) One Lake Drive Kannapolis, NC 28081 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code 704-939-2000 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, 1996 Common Stock 9,087,192 Total pages 22 Exhibit Index Page 11 PART 1. FINANCIAL INFORMATION FIELDCREST CANNON, INC. Consolidated statement of financial position
September 30 December 31, Dollars in thousands 1996 1995 Assets Cash $ 11,800 $ 9,124 Accounts receivable 163,956 168,112 Inventories (note 3) 264,386 228,167 Other prepaid expenses and current assets 1,077 3,446 Total current assets 441,219 408,849 Plant and equipment, net 332,532 342,285 Deferred charges and other assets 59,241 61,812 Total assets $832,992 $812,946 Liabilities and shareowners' equity Accounts and drafts payable $ 59,053 $ 54,274 Deferred income taxes 16,977 17,593 Accrued liabilities 70,156 67,725 Current portion of long-term debt 6,930 780 Total current liabilities 153,116 140,372 Senior long-term debt 169,998 155,262 Subordinated long-term debt 203,750 210,000 Total long-term debt 373,748 365,262 Deferred income taxes 37,743 40,475 Other non-current liabilities 54,696 51,406 Total liabilities 619,303 597,515 Shareowners' equity: Preferred Stock, $.01 par value, 10,000,000 authorized, 1,500,000 issued and outstanding September 30, 1996 and December 31, 1995 (aggregate liquidation preference of $75,000) 15 15 Common Stock, $1 par value, 25,000,000 authorized, 12,693,592 issued September 30, 1996 and 12,560,826 December 31, 1995 12,694 12,561 Additional paid in capital 223,799 221,025 Retained earnings 94,406 99,055 Excess purchase price for Common Stock acquired and held in treasury - 3,606,400 shares (117,225) (117,225) Total shareowners' equity 213,689 215,431 Total liabilities and shareowners' equity $832,992 $812,946
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 1996 1995 1996 1995 Net sales $285,221 $280,524 $812,995 $810,581 Cost of sales 249,568 240,388 706,482 693,075 Selling, general and administrative 28,253 26,342 78,406 78,688 Restructuring charges 4,500 7,082 8,130 15,536 Total operating costs and expenses 282,321 273,812 793,018 787,299 Operating income 2,900 6,712 19,977 23,282 Other deductions (income): Interest expense 7,160 6,807 21,496 20,290 Other, net 97 29 519 (115) Total other deductions 7,257 6,836 22,015 20,175 Income (loss) before income taxes (4,357) (124) (2,038) 3,107 Federal and state income taxes (benefit) (1,634) (109) (764) 1,103 Net income (loss) (2,723) (15) (1,274) 2,004 Preferred dividends (1,125) (1,125) (3,375) (3,375) Earnings (loss) on common (3,848) (1,140) (4,649) (1,371) Amount added to (subtracted from) retained earnings (3,848) (1,140) (4,649) (1,371) Retained earnings, beginning of period 98,254 100,195 99,055 100,426 Retained earnings, end of period $ 94,406 $ 99,055 $ 94,406 $ 99,055 Net income (loss) per common share $ (.43) $ (.13) $ (.52) $ (.15) Fully diluted income (loss) per common share $ (.43) $ (.13) $ (.52) $ (.15) Average primary shares outstanding 9,044,250 8,912,817 9,002,815 8,860,070 Average fully diluted shares outstanding 9,044,250 8,912,817 9,003,562 8,860,293
See accompanying notes (3) FIELDCREST CANNON, INC. Consolidated statement of cash flows
Nine Months ended September 30 Dollars in thousands 1996 1995 Increase (decrease) in cash Cash flows from operating activities: Net income $ (1,274) $ 2,004 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,979 23,595 Deferred income taxes (2,732) 1,012 Other 8,625 (2,043) Change in current assets and liabilities, excluding effects of acquisition of Sure Fit: Accounts receivable 4,156 118 Inventories (36,219) (26,701) Other prepaid expenses and current assets 2,369 858 Accounts payable and accrued liabilities 7,210 15,038 Federal and state income taxes - (2,268) Deferred income taxes (616) (52) Net cash provided by operating activities 8,498 11,561 Cash flows from investing activities: Additions to plant and equipment (21,035) (49,761) Proceeds from disposal of plant and equipment 3,911 1,206 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 (17,124) (54,970) Cash flows from financing activities: Increase in revolving debt 11,826 48,179 Proceeds from issuance of long-term debt 3,610 - Payments on long-term debt (800) (1,466) Proceeds from sale of common stock 41 57 Dividends paid on preferred stock (3,375) (3,375) Net cash provided by financing activities 11,302 43,395 Increase (decrease) in cash 2,676 (14) Cash at beginning of year 9,124 5,885 Cash at end of period $ 11,800 $ 5,871
See accompanying notes (4) FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1996 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, 1996 and the related results of operations for the three and nine months ended September 30, 1996 and 1995. The unaudited consolidated financial statements should be read in conjunction with the Company's Form 10-K for the year ended December 31, 1995. 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) 1996 1995 Finished goods $128,389 $117,776 Work in process 83,016 72,315 Raw materials and supplies 52,981 38,076 $264,386 $228,167
At September 30, 1996 approximately 72% 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 $14.6 million during the first nine months of 1996. Debt increased primarily because inventories increased $36.2 million due to normal seasonal inventory build-up. Capital expenditures totaled $21.0 million for the first nine months of 1996 compared to $49.8 million for the first nine months of 1995. Included in the 1996 and 1995 capital expenditures are $7.0 million and $27.9 million, respectively, for the new weaving plant at the Company's Columbus, GA/Phenix City, Ala. towel mill. Capital expenditures for 1996 are expected to be approximately $35 million. At September 30, 1996, approximately $28.0 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 revolving credit facility, and, possibly, the sale of long-term debt or equity securities. During the third quarter the Company reached an agreement and on October 3, 1996 signed a definitive agreement to sell certain Blanket Division inventories and equipment to Pillowtex Corporation for $30 million in cash. The transaction includes a long-term trademark license royalty agreement under which Pillowtex will sell blankets and throws, bed pillows and mattress pads with Fieldcrest Cannon's brands and other marks. The Company is liquidating the remaining assets. The purchase price is subject to changes in inventory levels from June 30, 1996. The transaction will result in closing the Blanket Division facilities in Eden, N.C., and a workforce reduction of approximately 750 employees. The transaction is expected to take place by the end of 1996. Proceeds from the sale of the Blanket Division assets will be used to reduce debt and for reinvestment in the Company's core businesses which have historically earned higher margins than the blanket business. The Company's revolving credit facility requires, among other things, that the Company maintain certain financial ratios. The Company met all of its financial covenants as of September 30, 1996. The Company currently expects that operating results in the fourth quarter of 1996 will exceed the financial ratios required by the covenants for the fourth quarter. If this does not occur, the Company would 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. (6) Changes in Results of Operations Quarter Ended September 30, 1996 vs. Quarter Ended September 30, 1995 Net sales for the third quarter of 1996 were $285.2 million compared to $280.5 million in the third quarter of 1995, an increase of 2%. The increase in revenues was due primarily to volume increases. Gross profit margins decreased from 14.3% in the third quarter of 1995 to 12.5% in the third quarter of 1996. The decrease in margins reflects lower mill activity, higher cotton costs and $1.7 million of equipment relocation and employee training costs related to the consolidation and closing of two towel facilities. Selling, general and administrative expenses increased as a percentage of sales from 9.4% to 9.9% in the third quarter of 1996 compared to the same quarter of 1995. The increase was due primarily to higher costs related to the outsourcing of the Company's information technology services and functions to the Lockheed Martin Corporation in August 1996. The higher level of information technology expenses is expected to continue. In the third quarter of 1996 operating income was reduced by pre- tax restructuring charges of $4.5 million for employee termination benefits and facility disposal costs related to the sale of certain Blanket Division assets to Pillowtex Corporation. In the third quarter of 1995 operating income was reduced by pre- tax restructuring charges of $7.1 million related to a voluntary early retirement program and the reorganization of the Company's New York operations. Operating income as a percentage of sales decreased to 1.0% in the third quarter of 1996 from 2.4% in the third quarter of 1995. The decrease was due to lower gross profit margins and increased selling, general and administrative expenses. Interest expense increased $.4 million in the third quarter of 1996 as compared to the third quarter of 1995 due primarily to higher rates under the revolver and an increase in average debt outstanding. The effective income tax rate was 37.5% for the third quarters of 1996 and 1995. A net loss, after the effect of the restructuring charges, of $2.7 million, or $.43 per share after preferred dividends, was incurred in the third quarter of 1996, compared to a net loss of $15 thousand, or $.13 per share after preferred dividends, in the third quarter of 1995. Nine Months Ended September 30, 1996 vs. Nine Months Ended September 30, 1995 Net sales for the first nine months of 1996 were $813.0 million compared to $810.6 million in the first nine months of 1995. The increase in revenues was due primarily to volume increases. (7) Gross profit margins decreased from 14.5% in the first nine months of 1995 to 13.1% in the first nine months of 1996. The decrease was due primarily to lower mill activity, higher raw material prices and $3.3 million of equipment relocation and employee training costs related to the consolidation and closing of two towel facilities. Selling, general and administrative expenses decreased as a percentage of sales from 9.7% to 9.6% in the first nine months of 1996 compared to the first nine months of 1995. The decrease was due primarily to lower payroll costs associated with the New York office reorganization and the early retirement program implemented during 1995 which were partially offset by higher information technology expenses in the third quarter of 1996. Pre-tax restructuring charges of $8.1 million in the first nine months of 1996 include $3.6 million for closing a towel weaving plant and a yarn manufacturing plant as a part of the Company's ongoing consolidation effort to utilize assets more effectively and $4.5 million for employee termination benefits and disposal costs related to sale of certain Blanket Division assets. The restructuring charges of $15.5 million in the first nine months of 1995 relate to the reorganization of the Company's New York operations and a voluntary early retirement program. Operating income as a percentage of sales decreased to 2.5% in the first nine months of 1996 from 2.9%. The decrease was due to lower gross margins which were partially offset by a decrease in selling, general and administrative expenses and a lower level of restructuring charges. Interest expense increased $1.2 million the first nine months of 1996 as compared to the first nine months of 1995 due primarily to an increase in average debt outstanding. The effective income tax rate was 37.5% for the first nine months of 1996 and 1995. A net loss, after the effect of the restructuring charges of $1.3 million, or $.52 per share was incurred for the first nine months of 1996 compared to net income of $2.0 million, a $.15 loss per share after preferred dividends, for the first nine months of 1995. Forward-Looking Statements Certain statements in management's financial discussion and analysis above contain forward-looking information, including the statements under the discussion of changes in financial condition relating to continued compliance with the financial covenants under the Company's revolving credit facility. Actual results and trends could differ materially from those that are reflected in such statements due to a variety of important factors, including changes in the Company's product sales mix and market conditions for bed and bath products. (8) Item 6. Exhibits and Reports on Form 8-K (a). Exhibits 10.1 Sixth Amendment to Third Amended and Restated Revolving Credit Agreement dated October 9, 1996. 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, 1996. (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 12, 1996 (10) EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR FIELDCREST CANNON, INC. FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Exhibit Page Number Description Number (10.1) Sixth Amendment to Third Amended and Restated Revolving Credit Agreement dated October 9, 1996 12 - 21 (11) Computation of Primary and Fully Diluted Net Income Per Share 22 /TABLE (11) -1- SIXTH AMENDMENT to THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT This SIXTH AMENDMENT (the "Amendment"), dated as of October 9, 1996, is by and among FIELDCREST CANNON, INC., a Delaware corporation (the "Company"), the lenders listed on the signature pages hereto (the "Lenders"), BANK OF AMERICA ILLINOIS (formerly known as Continental Bank N.A.), CORESTATES BANK, N.A. (formerly known as Philadelphia National Bank) and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as lead managers for the Lenders (collectively, the "Lead Managers"), and THE FIRST NATIONAL BANK OF BOSTON, as agent for the Lenders (the "Agent"). WHEREAS, the Company, the Lenders, the Lead Managers and the Agent are parties to that certain Third Amended and Restated Revolving Credit Agreement, dated as of March 10, 1994, as amended (as so amended, the "Credit Agreement"); and WHEREAS, the Company, the Lenders, the Lead Managers and the Agent have agreed, subject to the terms and conditions set forth herein, to amend certain provisions of the Credit Agreement as set forth herein; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. CERTAIN DEFINED TERMS. Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement. 2. AMENDMENT OF CREDIT AGREEMENT. (a) Section 1 of the Credit Agreement is hereby amended by adding the following new definitions in the appropriate places in the alphabetical sequence thereof: Blanket Sale. The sale by the Company to Pillowtex Corporation of certain inventory and equipment related to the Company's manufacture and sale of blankets by its Blanket Division. Blanket Sale Expense Amount. For any fiscal quarter of the Company, the aggregate amount of idle plant costs incurred by the Company as normal operating expenses during such fiscal quarter as a result of the Blanket Sale and the closing of all or a portion of the Company's blanket manufacturing facilities in Eden, North Carolina, as such amount is identified by the Company to the Agent in a manner satisfactory to the Agent in all respects. -12- -2- Blanket Sale Restructuring Charge. An amount equal to the one-time charge against Consolidated Net Income of the Company and its Subsidiaries for the fiscal quarter of the Company ending September 30, 1996 incurred as a result of the Blanket Sale and the closing of all or a portion of the Company's blanket manufacturing facilities located in Eden, North Carolina, as such amount is reflected in the consolidated financial statements of the Company and its Subsidiaries for such fiscal period; provided that in no event shall the Blanket Sale Restructuring Charge include the Blanket Sale Expense Amount. (b) The definition of "Applicable Margin" set forth in 1 of the Credit Agreement is hereby amended by deleting such definition in its entirety, and substituting therefor the following: Applicable Margin. For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the Applicable Margin shall be the applicable percentage set forth below with respect to the Company's Interest Coverage Ratio (calculated as described below), as determined at the end of the fiscal period of the Company and its Subsidiaries ending immediately prior to the applicable Rate Adjustment Period: Interest Coverage Commitment EuroRate C/D Rate Letter of Ratio Fee Amounts Amounts Credit Fees
Less than or equal 0.500% 2.250% 2.375% 2.250% to 0.50 to 1.00 Greater than 0.50 to 0.500% 2.000% 2.125% 2.000% 1.00 and less than or equal to 1.00 to 1.00 Greater than 1.00 to 0.500% 1.750% 1.875% 1.750% 1.00 and less than or equal to 1.50 to 1.00 Greater than 1.50 0.375% 1.500% 1.625% 1.500% to 1.00
Notwithstanding the foregoing, (a) for the period commencing on January 15, 1996 through the date immediately preceding the first Adjustment Date to occur after December 29, 1995, the Applicable Margin shall be deemed to be the highest Applicable Margin set forth above and (b) if the Company fails to deliver any Compliance Certificate pursuant to 7.5(d) hereof then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date immediately preceding the Adjustment Date which occurs immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be deemed to be the highest Applicable Margin set forth above. For purposes of calculating the Interest Coverage Ratio in order to determine the Applicable Margin, the Blanket Sale -13- -3- Expense Amount shall not be added to Consolidated Net Income as provided in clause (h) of the definition of Consolidated Net Income. (c) The definition of "Consolidated Net Income" set forth in 1 of the Credit Agreement is hereby amended by deleting such definition in its entirety, and substituting therefor the following: Consolidated Net Income. The consolidated net income (or net deficit) of the Company and its Subsidiaries for any period, after deduction of all expenses, taxes, and other proper charges, all as determined in accordance with Generally Accepted Accounting Principles. In addition, there shall be added to Consolidated Net Income for each fiscal period an amount equal to the Cotton Writedown Charge, if any, for such fiscal period, as determined on an after-tax basis, and there shall be subtracted from Consolidated Net Income for such period an amount equal to the aggregate amount of reversals of Cotton Writedown Charges from prior fiscal periods, as determined on an after-tax basis, made in accordance with Generally Accepted Accounting Principles reflecting the consumption of the cotton to which the Cotton Writedown Charges from the prior fiscal periods relate, all as determined in accordance with Generally Accepted Accounting Principles; provided that for purposes of determining Consolidated Net Income in order to determine Consolidated EBIT and Consolidated EBITDA: (a) the foregoing calculations in this sentence pertaining to Cotton Writedown Charges and reversals of Cotton Writedown Charges from prior periods shall be made using Cotton Writedown Charges and reversals of Cotton Writedown Charges from prior periods determined on a pre-tax basis; (b) there shall be added to Consolidated Net Income, for the fiscal period in which the Company adopted the accounting standards set forth in Financial Accounting Standard Board's Statement Nos. 106 and 109, an aggregate amount equal to the one-time non-cash accounting charges against Consolidated Net Income taken as a result of the adoption by the Company of the accounting standards set forth therein; (c) there shall be added to Consolidated Net Income for the fiscal quarters ending March 31, 1995, June 30, 1995 and September 30, 1995 an amount equal to the Restructuring Charge, as determined on a pre-tax basis, provided, that in no event shall the aggregate amount added to Consolidated Net Income pursuant to this clause (c) exceed $15,536,000; (d) there shall be added to Consolidated Net Income for the fiscal quarter ending December 31, 1995 an amount equal to the Yarn Spinning Charge, as determined on a pre-tax basis, -14- -4- provided that in no event shall the aggregate amount added to Consolidated Net Income pursuant to this clause (d) exceed $5,000,000; (e) there shall be added to Consolidated Net Income for the fiscal quarter ending March 31, 1996, an amount equal to the Mill Closing Restructuring Charge, as determined on a pre-tax basis, provided that in no event shall the aggregate amount added to Consolidated Net Income pursuant to this clause (e) exceed $5,000,000; (f) there shall be added to Consolidated Net Income for the fiscal quarters ending March 31, 1996, June 30, 1996, September 30, 1996 and December 31, 1996 an amount equal to the Mill Closing Expenses Amount for such fiscal quarter, as determined on a pre-tax basis, provided that in no event shall the aggregate amount added to Consolidated Net Income for the combined four quarter fiscal period pursuant to this clause (f) exceed $3,200,000; (g) there shall be added to Consolidated Net Income for the fiscal quarter ended September 30, 1996, an amount equal to the Blanket Sale Restructuring Charge, as determined on a pre-tax basis, provided that in no event shall the aggregate amount added to Consolidated Net Income pursuant to this clause (g) exceed $4,500,000; and (h) there shall be added to Consolidated Net Income for each of the fiscal quarters of the Company ended during the period commencing on January 1, 1997 and ending on December 31, 1998 an amount equal to the Blanket Sale Expense Amount for such fiscal quarter, as determined on a pre-tax basis, provided that in no event shall the aggregate amount added to Consolidated Net Income for the combined four quarter fiscal period ended December 31, 1997 exceed $1,000,000 and in no event shall the aggregate amount added to Consolidated Net Income for the combined four quarter fiscal period ended December 31, 1998 exceed $1,000,000; all as determined in accordance with Generally Accepted Accounting Principles. 3. WAIVER. (a) Section 8.6 of the Credit Agreement provides that the Company will not sell, lease or otherwise dispose of its assets except for (i) sales of inventory in the ordinary course of business, and (ii) sales of assets (other than Collateral) in arm's-length transactions for cash and for fair and reasonable value. The Company has requested that the Lenders waive the above-described provision of 8.6 of the Credit Agreement solely to the extent necessary to permit the Blanket Sale to the extent that the assets sold in such sale constitute Collateral. In response to the Company's request, the Lenders hereby waive the above-described provisions of 8.6 of the Credit Agreement solely to the extent necessary to permit the Blanket Sale, provided that the foregoing waiver shall be effective only if (i) the Blanket Sale is -15- -5- consummated in accordance with the terms and conditions set forth in a purchase and sale agreement which has been delivered to the Agent and which is satisfactory to the Agent in all respects (the "Purchase Agreement"), (ii) only the inventory and equipment of the Company which are used by its Blanket Division in connection with the manufacture and sale of blankets in the ordinary course of its business (the "Purchased Assets") are sold by the Company pursuant to the Purchase Agreement, (iii) the Company receives, upon the consummation of the Blanket Sale in accordance with the terms of the Purchase Agreement (the "Closing Date"), cash in an amount not less than $30,000,000 plus or minus any change in the value of inventory of the Blanket Division, as valued on the basis of standard cost, from June 30, 1996 to the Closing Date, and (iv) no Default or Event of Default exists on the Closing Date or shall exist after giving effect to the sale of the Purchased Assets and the waiver set forth herein. The Company shall deliver to the Agent on the Closing Date a certificate as to the matters set forth in clauses (i) through (iv) above. (b) Except as expressly set forth herein, all of the terms and conditions of the Credit Agreement remain in full force and effect. The waiver contained in clause (a) of this 3 shall operate solely with respect to the matters described herein and shall not impair any right or power accruing to any Lender, including, without limitation, upon the occurrence or continuance of any Default or Event of Default under the Credit Agreement. 4. RELEASE OF COLLATERAL. Each of the Lenders hereby authorizes and directs the Agent to take all such actions as are necessary to release as of record its security interest, for the benefit of the Lenders, in the Purchased Assets which are sold by the Company pursuant to and in accordance with the Purchase Agreement, provided that the Agent may only release its security interest in the Purchased Assets after or concurrently with the sale of such assets by the Company on the Closing Date and provided further that the Agent shall have received prior to any release of its security interest as provided herein a certificate of the Company in accordance with 3(a) hereof. 5. AFFIRMATION BY THE COMPANY AND THE GUARANTORS. (a) The Company hereby ratifies and confirms all of the Lender Obligations, including, without limitation, the Loans, and the Company hereby affirms its absolute and unconditional promise to pay to the Lenders the Loans and all other amounts due under the Credit Agreement as amended hereby. The Company hereby confirms that the Lender Obligations are and remain secured pursuant to the Security Documents to which the Company is a party. (b) Each of Crestfield Cotton, FCC Canada, Encee, Fieldcrest International, St. Mary's, Fieldcrest Transportation, Fieldcrest Financing, Fieldcrest Licensing and Fieldcrest Sure Fit hereby acknowledges the provisions of this Amendment and hereby reaffirms -16- -6- its absolute and unconditional guaranty of the Company's payment and performance of the Lender Obligations to the Banks as more fully described in the Guaranty to which such Person is a party. Each of the Secured Guarantors hereby confirms that its obligations under the Guaranty to which it is a party are and remain secured pursuant to the Security Documents to which it is a party. 6. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to the Lenders as follows: (a) Representations and Warranties. The representations and warranties contained in 6 of the Credit Agreement were true and correct in all material respects when made. The representations and warranties contained in 6 of the Credit Agreement, as amended hereby, are true and correct on the date hereof. (b) Enforceability. The execution and delivery by the Company and the Secured Guarantors of this Amendment and all other instruments and agreements required to be executed and delivered by the Company and the Secured Guarantors, as the case may be, in connection with the transactions contemplated hereby or referred to herein (collectively, the "Amendment Documents"), and the performance by the Company and the Secured Guarantors of the Amendment Documents and the Credit Agreement, as amended hereby, are within the corporate powers of the Company and the Secured Guarantors, as the case may be, and have been duly authorized by all necessary corporate action on the part of the Company and the Secured Guarantors, as the case may be. Each of the Amendment Documents and the Credit Agreement, as amended hereby, are valid and legally binding obligations of the Company and the Secured Guarantors, as the case may be, enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights in general. (c) No Default. No Default or Event of Default has occurred and is continuing and no Default or Event of Default will exist after the execution and delivery of this Amendment or after the consummation of the transactions contemplated hereby. 7. EFFECTIVENESS. This Amendment shall become effective upon satisfaction of each of the following conditions precedent on or prior to December 31, 1996: (a) Delivery. The Company, the Lenders, the Agent and the guarantors referred to in 5(b) hereof shall have executed and delivered this Amendment. (b) Proceedings and Documents. All proceedings in connection with the transactions contemplated by this Amendment and all documents incident hereto shall be satisfactory in form and substance to the Agent, and the Agent shall have received all -17- -7- information and such counterpart originals or certified or other copies of such documents as the Agent may reasonably request. 8. MISCELLANEOUS PROVISIONS. (a) Except as otherwise expressly provided by this Amendment, all of the terms, conditions and provisions of the Credit Agreement shall remain the same. It is declared and agreed by each of the parties hereto that the Credit Agreement, as amended hereby, shall continue in full force and effect, and that this Amendment and such Credit Agreement shall be read and construed as one instrument. The consent granted hereunder is limited to the specific matters referred to herein and the Lenders shall not have any obligation to issue any further consent with respect to the subject matter of this consent or any other matter. (b) This Amendment is intended to take effect as an agreement under seal and shall be construed according to and governed by the laws of the Commonwealth of Massachusetts. (c) This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought. (d) The Company hereby agrees to pay to the Agent, on demand by the Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by the Agent in connection with the preparation of this Amendment and the documents referred to herein (including reasonable legal fees). -18- -8- IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. FIELDCREST CANNON, INC. By: \s\ T. R. Staab Title: Vice President and Chief Financial Officer THE FIRST NATIONAL BANK OF BOSTON, as Agent By: \s\ Thomas R. Sommerfield Title: Division Executive THE FIRST NATIONAL BANK OF BOSTON By: \s\ Thomas R. Sommerfield Title: Division Executive BANK OF AMERICA ILLINOIS, individually and as Lead Manager By: \s\ Deidre B. Doyle Title: Vice President CORESTATES BANK, N. A., individually and as Lead Manager By: \s\ James P. Richards Title: Vice President -19- -9- FIRST UNION NATIONAL BANK OF NORTH CAROLINA, individually and as Lead Manager By: \s\ Kent Phillips Title: Vice President BANK OF MONTREAL By: \s\ Thomas H. Calder Title: Director MELLON BANK, N. A. By: \s\ Charles M. Staub Title: First Vice President Each of the undersigned joins in this Amendment for purposes of 5(b) hereof. CRESTFIELD COTTON COMPANY By: \s\ T. R. Staab Title: Vice President and Treasurer FCC CANADA, INC. By: \s\ T. R. Staab Title: Vice President and Treasurer ENCEE, INC. By: \s\ T. R. Staab Title: Vice President and Treasurer -20- -10- FIELDCREST CANNON INTERNATIONAL, INC. By: \s\ T. R. Staab Title: Vice President and Treasurer ST. MARY'S, INC. By: \s\ T. R. Staab Title: Vice President and Treasurer FIELDCREST CANNON TRANSPORTATION, INC. By: \s\ T. R. Staab Title: President FIELDCREST CANNON LICENSING, INC. By: \s\ John E. Setliff, Jr. Title: Vice President FIELDCREST CANNON FINANCING, INC. By: \s\ John E. Setliff, Jr. Title: Vice President FIELDCREST CANNON SURE FIT, INC. By: \s\ T. R. Staab Title: Vice President and Chief Financial Officer -21-
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 1996 1995 1996 1995 Average shares outstanding 9,038,795 8,884,750 8,995,373 8,842,362 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 5,455 28,067 7,442 17,708 Average shares and equivalents outstanding, primary 9,044,250 8,912,817 9,002,815 8,860,070 Average shares outstanding 9,038,795 8,884,750 8,995,373 8,842,362 Add shares giving effect to the conversion of the convertible subordinated debentures (1) (1) (1) (1) Add shares giving effect to the conversion of the convertible preferred stock (1) (1) (1) (1) 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 5,455 28,067 8,189 17,931 Average shares and equivalents outstanding, assuming full dilution 9,044,250 8,912,817 9,003,562 8,860,293 Primary Earnings Net income (loss) $(2,723,000) $ (15,000) $(1,274,000) $ 2,004,000 Preferred dividends (1,125,000) (1,125,000) (3,375,000) (3,375,000) Earnings (loss) on Common $(3,848,000) $(1,140,000) $(4,649,000) $(1,371,000) Primary earnings (loss) per common share $ (.43) $ (.13) $ (.52) $ (.15) Fully Diluted Earnings Earnings (loss) on Common $(3,848,000) $(1,140,000) $(4,649,000) $(1,371,000) Add convertible subordinated debenture interest, net of taxes (1) (1) (1) (1) Add convertible preferred dividends (1) (1) (1) (1) Net income (loss) $(3,848,000) $(1,140,000) $(4,649,000) $(1,371,000) Fully diluted earnings (loss) per Common share $ (.43) $ (.13) $ (.52) $ (.15) (1) The assumed conversion of the Registrant's Convertible Subordinated Debentures and Convertible Preferred Stock for the three months and nine months ended September 30, 1996 and 1995 would have an anti-dilutive effect for the computation of earnings per share; therefore, conversion has not been assumed for these periods.
(22) EX-27 2
5 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 11,800 0 163,956 0 264,386 441,219 332,532 0 832,992 153,116 373,748 0 15 12,694 200,980 832,992 812,995 812,995 706,482 706,482 85,536 0 21,496 (2,038) (764) (1,274) 0 0 0 (1,274) (.52) (.52)
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