-----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, T1tIcB99mnwM03pKZBRB+UmOUQLoqhoZFZNcFGdKQ9gqDVX6j9qDHtn10m2lRAZX n/Ln4uRB+6clw/O3Rcbd2g== 0000035469-97-000012.txt : 19970815 0000035469-97-000012.hdr.sgml : 19970815 ACCESSION NUMBER: 0000035469-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660758 BUSINESS ADDRESS: STREET 1: ONE LAKE DRIVE CITY: KANNAPOLIS STATE: NC ZIP: 28081 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 June 30, 1997 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 Circle 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 July 31, 1997 Common Stock 9,226,084 Total pages 12 Exhibit Index Page 11 PART 1. FINANCIAL INFORMATION FIELDCREST CANNON, INC. Consolidated statement of financial position
June 30, December 31, Dollars in thousands 1997 1996 Assets Cash $ 4,637 $ 4,647 Accounts receivable 158,322 154,511 Inventories (note 3) 215,850 216,165 Other prepaid expenses and current assets 2,692 2,489 Total current assets 381,501 377,812 Plant and equipment, net 331,203 323,838 Deferred charges and other assets 67,362 66,843 Total assets $780,066 $768,493 Liabilities and shareowners' equity Accounts and drafts payable $ 55,047 $ 63,910 Deferred income taxes 20,259 18,212 Accrued liabilities 62,178 61,172 Current portion of long-term debt 6,970 5,508 Total current liabilities 144,454 148,802 Senior long-term debt 119,157 107,746 Subordinated long-term debt 197,500 203,750 Total long-term debt 316,657 311,496 Deferred income taxes 41,521 38,291 Other non-current liabilities 53,511 54,149 Total liabilities 566,143 552,738 Shareowners' equity: Preferred Stock, $.01 par value, 10,000,000 authorized, 1,500,000 issued and outstanding June 30, 1997 and December 31, 1996 (aggregate liquidation preference of $75,000) 15 15 Common Stock, $1 par value, 25,000,000 authorized, 12,832,484 issued June 30, 1997 and 12,738,894 issued December 31, 1996 12,832 12,739 Additional paid in capital 226,077 224,611 Retained earnings 102,224 95,615 Excess purchase price for Common Stock acquired and held in treasury - 3,606,400 shares (117,225) (117,225) Total shareowners' equity 223,923 215,755 Total liabilities and shareowners' equity $780,066 $768,493 /TABLE See accompanying notes (2) FIELDCREST CANNON, INC. Consolidated statement of income and retained earnings
For the three months For the six months ended June 30 ended June 30 Dollars in thousands, except per share data 1997 1996 1997 1996 Net sales $270,760 $277,803 $533,669 $527,774 Cost of sales 225,400 241,802 452,555 456,914 Selling, general and administrative 29,657 25,036 56,168 50,153 Restructuring charges - - - 3,630 Total operating costs and expenses 255,057 266,838 508,723 510,697 Operating income 15,703 10,965 24,946 17,077 Other deductions (income): Interest expense 6,296 7,281 12,558 14,336 Other, net (1,450) 282 (1,674) 422 Total other deductions 4,846 7,563 10,884 14,758 Income before income taxes 10,857 3,402 14,062 2,319 Federal and state income taxes 4,016 1,276 5,203 870 Net income 6,841 2,126 8,859 1,449 Preferred dividends (1,125) (1,125) (2,250) (2,250) Earnings (loss) on common 5,716 1,001 6,609 (801) Amount added to (subtracted from) retained earnings 5,716 1,001 6,609 (801) Retained earnings, beginning of period 96,508 97,253 95,615 99,055 Retained earnings, end of period $102,224 $ 98,254 $102,224 $ 98,254 Net income (loss) per common share $ .62 $ .11 $ .72 $ (.09) Fully diluted income (loss) per common share $ .55 $ .11 $ .72 $ (.09) Average primary shares outstanding 9,192,108 9,001,981 9,168,698 8,982,100 Average fully diluted shares outstanding 14,441,325 9,001,981 9,169,449 8,983,219 /TABLE See accompanying notes (3) FIELDCREST CANNON, INC. Consolidated statement of cash flows
Six Months ended June 30 Dollars in thousands 1997 1996 Increase (decrease) in cash Cash flows from operating activities: Net income $ 8,859 $ 1,449 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,499 17,853 Deferred income taxes 3,230 2,255 Other (1,780) 6,989 Change in current assets and liabilities, excluding effects of acquisition of Sure Fit: Accounts receivable (3,811) (13,795) Inventories 315 (26,220) Other prepaid expenses and current assets (203) 1,415 Accounts payable and accrued liabilities (7,857) 18,307 Deferred income taxes 2,047 954 Net cash provided by operating activities 18,299 9,207 Cash flows from investing activities: Additions to plant and equipment (26,635) (15,362) Proceeds from disposal of plant and equipment 3,069 2,637 Net cash (used in) investing activities (23,566) (12,725) Cash flows from financing activities: Increase in revolving debt 11,766 7,478 Payments on long-term debt (4,259) (415) Proceeds from sale of common stock - 41 Dividends paid on preferred stock (2,250) (2,250) Net cash provided by financing activities 5,257 4,854 Increase (decrease) in cash (10) 1,336 Cash at beginning of year 4,647 9,124 Cash at end of period $ 4,637 $ 10,460
See accompanying notes (4) FIELDCREST CANNON, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 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 June 30, 1997 and the related results of operations for the three and six months ended June 30, 1997 and 1996. The unaudited consolidated financial statements should be read in conjunction with the Company's Form 10-K for the year ended December 31, 1996. 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. In February, 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of earnings per share for these quarters is not expected to be material. 3. Inventories Inventories are classified as follows:
June 30, December 31, (In thousands) 1997 1996 Finished goods $107,731 $104,092 Work in process 63,364 68,668 Raw materials and supplies 44,755 43,405 $215,850 $216,165 At June 30, 1997 approximately 66% of the inventories were valued on the last-in, first-out method (LIFO). /TABLE (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 $6.6 million during the first six months of 1997. Capital expenditures totaled $26.6 million for the first six months of 1997 compared to $15.4 million for the first six months of 1996. Capital expenditures for 1997 are expected to be approximately $70 million. At June 30, 1997, approximately $80.0 million of the Company's $200 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. Changes in Results of Operations Quarter Ended June 30, 1997 vs. Quarter Ended June 30, 1996 Net sales for the second quarter of 1997 were $270.8 million compared to $277.8 million in the second quarter of 1996, a decrease of 2%. Excluding the effects of the sales during 1996 of the Company's Blanket Division, sales in the second quarter of 1997 increased 2%. The increase in revenues was due primarily to volume increases. Gross profit margins increased from 13.0% in the second quarter of 1996 to 16.8% in the second quarter of 1997. The increase reflects lower raw material costs, the benefits of recently completed capital projects, and continued emphasis on cost reduction programs. Operating income for the second quarter of 1996 was reduced $1.6 million by 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 9.0% to 11.0% in the second quarter of 1997 compared to the same quarter of 1996. The increase was due primarily to higher information technology expenses associated with implementation of new enterprise information systems and higher advertising expenses. Other income for the second quarter of 1997 included a pretax gain of $1.5 million, or $.10 per share, related to the sale of real estate no longer used by the Company. (6) Interest expense decreased $1.0 million in the second quarter of 1997 as compared to the second quarter of 1996 due primarily to a decrease in average debt outstanding. Total debt declined $49.5 million from June 30, 1996 to June 30, 1997, a result of the sale of the Blanket Division and lower inventory levels. Inventories at June 30, 1997 were $12.7 million lower than June 30, 1996, after excluding blanket inventories. The effective income tax rate was 37.0% for the second quarter of 1997 compared to 37.5% for the second quarter of 1996. Net income was $6.8 million, or $.62 per share after preferred dividends, in the second quarter of 1997, compared to net income of $2.1 million, or $.11 per share after preferred dividends, in the second quarter of 1996. Six Months Ended June 30, 1997 vs. Six Months Ended June 30, 1996 Net sales for the first six months of 1997 were $533.7 million compared to $527.8 million in the first six months of 1996. Excluding the effects of the sales during 1996 of the Company's Blanket Division, sales in 1997 increased 6%. The increase in revenues was due primarily to volume increases. Gross profit margins increased from 13.4% in the first six months of 1996 to 15.2% in the first six months of 1997. The increase reflects lower raw material costs, the benefits of recently completed capital projects, and continued emphasis on cost reduction programs. Operating income for the six months ended June 30, 1996 was reduced $1.6 million by 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 9.5% to 10.5% in the first six months of 1997 compared to the first six months of 1996. The increase was due primarily to higher information technology expenses associated with implementation of new enterprise information systems and higher advertising expenses. Pre-tax restructuring charges of $3.6 million in the first six months of 1996 relate to 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. Interest expense decreased $1.8 million the first six months of 1997 as compared to the first six months of 1996 due primarily to a decrease in average debt outstanding. The decreased debt resulted from the sale of the Blanket Division in 1996 and lower inventory levels. The effective income tax rate was 37.0% for the first six months of 1997 compared to 37.5% for the first six months of 1996. (7) Net income for the first six months of 1997 was $8.9 million, or $.72 per share after preferred dividends, compared to net income after the effect of the restructuring charges of $1.4 million, or a loss of $.09 per share after preferred dividends, for the first six months of 1996. In February, 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of earnings per share for these quarters is not expected to be material. PART II. OTHER INFORMATION FIELDCREST CANNON, INC. Item 4. Submission of Matters to a Vote of Security Holders (a). The Company held its Annual Meeting of Stockholders on April 22, 1997. (b). Not applicable. (c). Holders of Common Stock (one vote per share) voted at this meeting on the following matters, which were set forth in full in the Registrant's Proxy statement dated March 28, 1997. I. Election of Directors:
Votes Nominee: For Withheld James M. Fitzgibbons 7,742,269 9,436 William E. Ford 7,735,603 16,102 John C. Harned 7,739,138 12,567 Noah T. Herndon 7,750,000 1,705 S. Roger Horchow 7,739,015 12,690 W. Duke Kimbrell 7,742,905 8,800 C. J. Kjorlien 7,735,348 16,357 Alexandra Stoddard 7,734,542 17,163
(8) II. Selection of Independent Auditors:
Votes For 7,810,134 Against 62,039 Abstain 14,502
(d). Not applicable 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 June 30, 1997. (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: August 14, 1997 (10) EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR FIELDCREST CANNON, INC. FOR THE QUARTER ENDED JUNE 30, 1997
Exhibit Page Number Description Number (11) Computation of Primary and Fully 12 Diluted Net Income Per Share /TABLE (11) Exhibit 11 Computation of Primary and Fully Diluted Net Income Per Share
For the three months For the six months ended June 30 ended June 30 1997 1996 1997 1996 Average shares outstanding 9,186,209 8,992,496 9,164,151 8,973,663 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 5,899 9,485 4,547 8,437 Average shares and equivalents outstanding, primary 9,192,108 9,001,981 9,168,698 8,982,100 Average shares outstanding 9,186,209 8,992,496 9,164,151 8,973,663 Add shares giving effect to the conversion of the convertible subordinated debentures 2,683,615 (1) (1) (1) Add shares giving effect to the conversion of the convertible preferred stock 2,564,100 (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 7,401 9,485 5,298 9,556 Average shares and equivalents outstanding, assuming full dilution 14,441,325 9,001,981 9,169,449 8,983,219 Primary Earnings Net income $ 6,841,000 $ 2,126,000 $ 8,859,000 $ 1,449,000 Preferred dividends (1,125,000) (1,125,000) (2,250,000) (2,250,000) Earnings (loss) on Common $ 5,716,000 $ 1,001,000 $ 6,609,000 $ (801,000) Primary earnings (loss) per common share $ .62 $ .11 $ .72 $ (.09) Fully Diluted Earnings Earnings (loss) on Common $ 5,716,000 $ 1,001,000 $ 6,609,000 $ (801,000) Add convertible subordinated debenture interest, net of taxes 1,087,000 (1) (1) (1) Add convertible preferred dividends 1,125,000 (1) (1) (1) Net income (loss) $ 7,928,000 $ 1,001,000 $ 6,609,000 $ (801,000) Fully diluted earnings (loss) per Common share $ .55 $ .11 $ .72 $ (.09) (1) The assumed conversion of the Registrant's Convertible Subordinated Debentures and Convertible Preferred Stock for the three months ended June 30, 1996 and six months ended June 30, 1997 and 1996 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 6-MOS DEC-31-1997 JUN-30-1997 4,637 0 158,322 0 215,850 381,501 331,203 0 780,066 144,454 316,657 0 15 12,832 211,076 780,066 533,669 533,669 452,555 452,555 56,168 0 12,558 14,062 5,203 8,859 0 0 0 8,859 .72 .72
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