-----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, N5CxRTj8IJGRYXU7U+0F0eGyL04in6pfjTCzVy+uKKq1TKHVR/55M87S1GPcwrqa nnIDw1pyu3MDtVGtXQSQFQ== 0000896265-96-000019.txt : 19961023 0000896265-96-000019.hdr.sgml : 19961023 ACCESSION NUMBER: 0000896265-96-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961022 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILLOWTEX CORP CENTRAL INDEX KEY: 0000896265 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED TEXTILE PRODUCTS [2390] IRS NUMBER: 752147728 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11756 FILM NUMBER: 96646439 BUSINESS ADDRESS: STREET 1: 4111 MINT WAY CITY: DALLAS STATE: TX ZIP: 75237 BUSINESS PHONE: 2143333225 MAIL ADDRESS: STREET 1: 4111 MINT WAY CITY: DALLAS STATE: TX ZIP: 75237 FORMER COMPANY: FORMER CONFORMED NAME: PILLOWTEX CORP DATE OF NAME CHANGE: 19930125 10-Q 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended September 28, 1996 Commission file number: 1-11756 PILLOWTEX CORPORATION (Exact name of registrant as specified in its charter) TEXAS 75-2147728 (State of incorporation) (IRS Employer Identification No.) 4111 Mint Way Dallas, Texas 75237 (Address of principal executive offices) (Zip Code) (214) 333-3225 (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS Outstanding at October 16, 1996 Common Stock, $0.01 par value 10,617,722 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PILLOWTEX CORPORATION AND SUBSIDIARIES INDEX Part I - Financial Information Page No. Item 1. Unaudited Interim Financial Statements: Consolidated Balance Sheets as of September 28, 1996 and December 30, 1995 3 Consolidated Statements of Earnings for the three months ended September 28, 1996 and September 30, 1995 4 Consolidated Statements of Earnings for the nine months ended September 28, 1996 and September 30, 1995 5 Consolidated Statements of Cash Flows for the nine months ended September 28, 1996 and September 30, 1995 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 10 Signature 11 Index to Exhibits 12 PILLOWTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 28, 1996 and December 30, 1995 (Dollars in thousands, except par value) (Unaudited)
ASSETS 1996 1995 ----------- ---------- Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . $ 15 411 Receivables: Trade, less allowance for doubtful accounts of $2,055 and $2,195 in 1996 and 1995, respectively . . . 93,048 71,684 Other . . . . . . . . . . . . . . . . . . . . . . . . . 5,309 2,284 Inventories . . . . . . . . . . . . . . . . . . . . . . . 135,487 107,404 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . 2,134 1,644 Deferred income taxes . . . . . . . . . . . . . . . . . . 2,831 2,419 ---------- ---------- Total current assets. . . . . . . . . . . . . . . . . . 238,824 185,846 Property, plant and equipment, less accum. depreciation of $41,233 and $33,411 in 1996 and 1995, respectively . . 79,006 84,567 Intangible assets, at cost, less accum. amortization of $3,478 and $2,500 in 1996 and 1995, respectively. . . . . 50,338 51,779 Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,502 2,518 ---------- ---------- $ 370,670 324,710 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable. . . . . . . . . . . . . . . . . . . . . $ 50,476 42,090 Accrued expenses. . . . . . . . . . . . . . . . . . . . . 21,067 21,137 Current portion of long-term debt . . . . . . . . . . . . 11,476 11,916 Income taxes payable. . . . . . . . . . . . . . . . . . . 3,018 575 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . 86,037 75,718 Long-term debt, net of current portion . . . . . . . . . . 180,200 153,472 Deferred income taxes. . . . . . . . . . . . . . . . . . . 9,391 7,530 Shareholders' equity: Preferred stock, $0.01 par value; authorized 20,000,000 shares; none issued and outstanding. . . . . . . . . . . - - Common stock, $0.01 par value; authorized 30,000,000 shares; 10,617,722 shares issued and outstanding . . . . 106 106 Additional paid-in capital. . . . . . . . . . . . . . . . 58,427 58,427 Retained earnings . . . . . . . . . . . . . . . . . . . . 36,628 29,666 Currency translation adjustment . . . . . . . . . . . . . (119) (209) ---------- ---------- Total shareholders' equity. . . . . . . . . . . . . . . 95,042 87,990 ---------- ---------- $ 370,670 324,710 ========== ==========
See accompanying notes to consolidated financial statements. PILLOWTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Three Months Ended September 28, 1996 and September 30, 1995 (In thousands, except per share data) (Unaudited)
1996 1995 ---------- ---------- Net sales. . . . . . . . . . . . . . . . . . . . . . . . . $ 143,791 146,824 Cost of goods sold . . . . . . . . . . . . . . . . . . . . 119,476 122,459 ---------- ---------- Gross profit . . . . . . . . . . . . . . . . . . . . . . 24,315 24,365 Selling, general and administrative expenses . . . . . . . 10,614 11,766 ---------- ---------- Earnings from operations . . . . . . . . . . . . . . . . 13,701 12,599 Interest expense . . . . . . . . . . . . . . . . . . . . . 3,664 4,690 ---------- ---------- Earnings before income taxes . . . . . . . . . . . . . . 10,037 7,909 Income taxes . . . . . . . . . . . . . . . . . . . . . . . 3,915 3,171 ---------- ---------- Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 6,122 4,738 ========== ========== Net earnings per common share and common share equivalent . . . . . . . . . . . . . . . . . . . . $ .58 .45 ========== ========== Weighted average common shares and common share equivalents outstanding. . . . . . . . . . . . . . . . . 10,618 10,618 ========== ==========
See accompanying notes to consolidated financial statements. PILLOWTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Nine Months Ended September 28, 1996 and September 30, 1995 (In thousands, except per share data) (Unaudited)
1996 1995 ---------- ---------- Net sales. . . . . . . . . . . . . . . . . . . . . . . . . $ 335,770 332,352 Cost of goods sold . . . . . . . . . . . . . . . . . . . . 280,272 275,407 ---------- ---------- Gross profit . . . . . . . . . . . . . . . . . . . . . . 55,498 56,945 Selling, general and administrative expenses . . . . . . . 31,170 32,315 ---------- ---------- Earnings from operations . . . . . . . . . . . . . . . . 24,328 24,630 Interest expense . . . . . . . . . . . . . . . . . . . . . 10,279 12,964 ---------- ---------- Earnings before income taxes . . . . . . . . . . . . . . 14,049 11,666 Income taxes . . . . . . . . . . . . . . . . . . . . . . . 5,495 4,678 ---------- ---------- Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 8,554 6,988 ========== ========== Net earnings per common share and common share equivalent . . . . . . . . . . . . . . . . . . . . $ .81 .66 ========== ========== Weighted average common shares and common share equivalents outstanding. . . . . . . . . . . . . . . . . 10,618 10,618 ========== ==========
See accompanying notes to consolidated financial statements. PILLOWTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 28, 1996 and September 30, 1995 (Dollars in thousands) (Unaudited)
1996 1995 ---------- ---------- Cash flows from operating activities: Net earnings. . . . . . . . . . . . . . . . . . . . . . . $ 8,554 6,988 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization . . . . . . . . . . . . . 9,440 8,767 Deferred income taxes . . . . . . . . . . . . . . . . . 1,447 1,484 Provision for doubtful accounts . . . . . . . . . . . . (11) 460 Gain on disposal of property, plant and equipment . . . 5 15 Changes in assets and liabilities: Trade receivables . . . . . . . . . . . . . . . . . . (21,371) (21,000) Inventories . . . . . . . . . . . . . . . . . . . . . (28,075) (28,390) Accounts payable. . . . . . . . . . . . . . . . . . . 2,666 2,011 Accrued expenses. . . . . . . . . . . . . . . . . . . 49 4,626 Other assets and liabilities. . . . . . . . . . . . . (1,137) (1,747) ---------- ---------- Net cash used in operating activities. . . . . . . . (28,433) (26,786) ---------- ---------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment . . . 17 48 Purchases of property, plant and equipment. . . . . . . . (2,981) (8,630) Payments for businesses purchased . . . . . . . . . . . . (112) (1,454) ---------- ---------- Net cash used in investing activities. . . . . . . . (3,076) (10,036) ---------- ---------- Cash flows from financing activities: Net borrowings on revolving credit loans. . . . . . . . . 45,200 29,150 Increase in checks not yet presented for payment. . . . . 6,068 8,763 Principal payments on long-term debt. . . . . . . . . . . (18,566) (1,514) Dividends paid. . . . . . . . . . . . . . . . . . . . . . (1,592) - Proceeds from long-term debt. . . . . . . . . . . . . . . - 645 Debt issuance costs . . . . . . . . . . . . . . . . . . . - (319) ---------- ---------- Net cash provided by financing activities. . . . . . 31,110 36,725 ---------- ---------- Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . 3 20 ---------- ---------- Net change in cash and cash equivalents. . . . . . . . . . (396) (77) Cash and cash equivalents at beginning of period . . . . . 411 571 ---------- ---------- Cash and cash equivalents at end of period . . . . . . . . $ 15 494 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 11,885 12,168 Income taxes . . . . . . . . . . . . . . . . . . . . . . 2,928 2,829
See accompanying notes to consolidated financial statements PILLOWTEX CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tables in thousands of dollars) (1) Basis of Presentation The accompanying unaudited consolidated financial statements include all adjustments, consisting of normal, recurring adjustments and accruals, which are, in the opinion of management, necessary for fair presentation of the results of operations and financial position. Certain reclassifications have been made to conform prior year consolidated financial statements to the current period classifications. The consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission on March 29, 1996 for the fiscal year ended December 30, 1995. (2) Inventories Inventories consisted of the following at September 28, 1996 and December 30, 1995:
1996 1995 ---------- ---------- Finished goods . . . . . . . . . . . . . . . . . . . $ 60,397 37,670 Work-in-process. . . . . . . . . . . . . . . . . . . 33,879 35,980 Raw materials. . . . . . . . . . . . . . . . . . . . 39,218 31,851 Supplies . . . . . . . . . . . . . . . . . . . . . . 1,993 1,903 ---------- ---------- $ 135,487 107,404 ========== ==========
(3) Earnings per Common Share Earnings per share and common share equivalent are based on the weighted average number of common shares outstanding and equivalent shares from dilutive stock options, if any. As of September 28, 1996 and September 30, 1995, there were stock options outstanding for 510,865 and 472,083 common shares, respectively. Stock options are excluded from the calculations since they have no material dilutive effect on per share data. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the attached consolidated financial statements and notes thereto, and with the Company's audited consolidated financial statements and notes thereto for the fiscal year ended December 30, 1995. RESULTS OF OPERATIONS NET SALES. Net sales were $143,791,000 for the three months ended September 28, 1996 representing a decrease of $3,033,000 or 2.1% as compared to $146,824,000 for the three months ended September 30, 1995. Net sales were $335,770,000 for the nine months ended September 28, 1996 representing an increase of $3,418,000 or 1.0% as compared to $332,352,000 for the same period in 1995. The year to date increase reflected strong bed pillow, mattress pad and fashion bedding sales, partially offset by lower blanket sales, in both the third quarter and first half of 1996. Management believes the shortfall in blanket sales was due primarily to retailers' decisions to place orders for blankets closer to the normal late fall selling season. GROSS PROFIT. The gross profit percentage for the third quarter ended September 28, 1996 increased to 16.9% from 16.6% for the third quarter of 1995, reflecting the positive trends in operating efficiencies and product mix. Gross profit margins decreased to 16.5% in the nine months ended September 28, 1996, from 17.1% in the nine months ended, September 30, 1995. The decline was due to several factors including (i) a shift in blanket sales mix towards lower average margin products, which management believes occurred primarily due to the decision of retailers of higher margin products to defer orders as described above, as well as an increase in sales of lower margin products and (ii) one-time costs incurred on the start-up of the Company's new cotton spinning facility, most of which occurred in the first six months of 1996. Management believes that the process of upgrading the yarn spinning facility is largely complete. SG&A. Selling, general and administrative ("SG&A") expenses for the three months ended September 28, 1996 decreased both in dollars, to $10,614,000 from $11,766,000 for the same period in 1995, and as a percentage of sales, to 7.4% in the third quarter of 1996 from 8.0% for the same period in 1995. SG&A expenses fell to $31,170,000 in the nine months ended September 28, 1996, from $32,315,000 in the nine months ended September 30, 1995, while as a percentage of sales, SG&A expenses decreased to 9.3% from 9.7% in the respective periods. These decreases reflected the continuing focus of the Company on containing these expenses. INTEREST. Interest expense for the third quarter of 1996 fell by $1,026,000 or 21.9% to $3,664,000 from $4,690,000 for the same period in 1995. Interest expense decreased to $10,279,000 in the nine months ended September 28, 1996, from $12,964,000 in the nine months ended September 30, 1995. Interest expense fell due to lower borrowings and decreased average interest rates. TAXES. The effective tax rate for the third quarter of 1996 fell to 39.0% from 40.1% in 1995. The effective tax rate for the nine months ended September 28, 1996 decreased to 39.1% compared to 40.1% for the nine months ended September 30, 1995. These decreases were primarily due to lower state taxes. NET EARNINGS. Net earnings for the three months ended September 28, 1996 increased $1,384,000 or 29.2% to $6,122,000 or $.58 per share, compared to net earnings of $4,738,000 or $.45 per share in 1995. As a percentage of sales, net earnings for the three months ended September 28, 1996 increased to 4.3% from 3.2% for the same period in 1995. Net earnings increased by $1,566,000 or 22.4% to $8,554,000 in the nine months ended September 28, 1996 or $.81 per share from $6,988,000 or $.66 per share in 1995. As a percentage of sales, net earnings increased to 2.5% in the nine months ended September 28, 1996 from 2.1% in 1995. LIQUIDITY AND CAPITAL RESOURCES As of September 28, 1996, the outstanding principle balance under the Company's $150,000,000 secured revolving credit facility was $110,800,000 with $12,669,000 committed to outstanding letters of credit, and $26,531,000 available for other needs. Availability under the revolving credit facility is regulated by a borrowing base determined by reference to the Company's accounts receivable and inventory. The outstanding balance under the Company's $90,000,000 term loan was $70,400,000. The Company is currently negotiating an amendment to its revolving credit facility to increase the borrowing capacity thereunder. The Company believes that cash flow generated from operations, funds available under the credit facility and contemplated financing alternatives will be sufficient to satisfy working capital and financing needs, as well as dividend payments, for the foreseeable future. On September 26, 1996, the Company paid a dividend of $.05 per share to shareholders of record on September 11, 1996. The increase in borrowings in the third quarter of 1996 over the second quarter was due to seasonal expansion of blanket inventories and changes in the timing of blanket orders by retailers for the fall selling season. Inventory levels of core Pillowtex products, including pillows, mattress pads, down comforters, comforter covers and other bedding, declined significantly during the first nine months of 1996 as a result of beneficial changes in quota regulations and better inventory management. GOVERNMENT REGULATIONS As of July 1, 1996, quota restrictions on down comforter shells imported from China were eliminated, allowing the Company to import shells on an unlimited and as needed basis. FORWARD-LOOKING INFORMATION Statements contained in this Form 10-Q for the quarter ended September 28, 1996 that are not historical facts, including, but not limited to, statements found in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements and could differ materially from actual results. Among the factors that could cause actual results to differ materially are: adverse retail industry conditions, industry competition and other competitive factors, government regulation and possible future litigation, loss of material customers, seasonality of business, the termination of key license agreements, as well as the risks and uncertainties discussed in this Form 10-Q. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURE 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. (REGISTRANT) PILLOWTEX CORPORATION BY (SIGNATURE) /s/ Jeffrey D. Cordes (NAME AND TITLE) Jeffrey D. Cordes Executive Vice President and Chief Financial Officer (Principal Financial Officer) (DATE) October 22, 1996 INDEX TO EXHIBITS
Exhibit Method of Filing - ------- ----------------------------- 27 Financial Data Schedule . . . . . . . . . . . Filed herewith electronically
EX-27 2
5 This schedule contains summary financial information extracted from the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows found on pages 3, 5 and 6 of the Company's Form 10-Q for the nine months ended September 28, 1996, and is qualified in its entirety by reference to such consolidated financial statements. 1000 9-MOS DEC-28-1996 DEC-31-1995 SEP-28-1996 15 0 95,103 2,055 135,487 238,824 120,239 41,233 370,670 86,037 191,676 0 0 106 94,936 370,670 335,770 335,770 280,272 280,272 31,170 (11) 10,279 14,049 5,495 8,554 0 0 0 8,554 .81 .81
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