-----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, AkdUhU9u9La1/A4Aho2mTWTQgU7lEsTO7FYws+aCcCDj7q9Kp2PRiadRR1EuEhUx dbEfcIhgMd5PHthGK1aZMw== 0000912057-96-008881.txt : 19970508 0000912057-96-008881.hdr.sgml : 19970508 ACCESSION NUMBER: 0000912057-96-008881 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILLOWTEX CORP CENTRAL INDEX KEY: 0000896265 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96559158 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 FORM 10-Q - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- 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 March 30, 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 April 25, 1996 Common Stock, $0.01 par value 10,617,722 - - -------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------- PILLOWTEX CORPORATION AND SUBSIDIARIES INDEX Part I - Financial Information Page No. Item 1. Interim Financial Statements: Consolidated Balance Sheets as of March 30, 1996 and December 30, 1995 3 Consolidated Statements of Earnings for the three months ended March 30, 1996 and April 1, 1995 4 Consolidated Statements of Cash Flows for the three months ended March 30, 1996 and April 1, 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 9 Signature 10 Index to Exhibits 11 PILLOWTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 30, 1996 and December 30, 1995 (Dollars in thousands, except par value) (Audited, except as noted)
ASSETS 1996 1995 ---------- ---------- (Unaudited) Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . $ 207 411 Receivables: Trade, less allowance for doubtful accounts of $2,141 and $2,195 in 1996 and 1995, respectively . . . . . . 60,128 71,684 Other . . . . . . . . . . . . . . . . . . . . . . . . . 4,836 2,284 Inventories . . . . . . . . . . . . . . . . . . . . . . . 119,821 107,404 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . 1,870 1,644 Deferred income taxes . . . . . . . . . . . . . . . . . . 2,449 2,419 ---------- ---------- Total current assets. . . . . . . . . . . . . . . . . . 189,311 185,846 Property, plant, and equipment, less accum. depreciation of $36,100 and $33,411 in 1996 and 1995, respectively . . 82,037 84,567 Intangible assets, at cost, less accumulated amortization of $2,822 and $2,500 in 1996 and 1995, respectively . . . 51,298 51,779 Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,509 2,518 ---------- ---------- 325,155 324,710 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable. . . . . . . . . . . . . . . . . . . . . $ 36,094 42,090 Accrued expenses. . . . . . . . . . . . . . . . . . . . . 20,136 21,137 Current portion of long-term debt . . . . . . . . . . . . 11,564 11,916 Income taxes payable. . . . . . . . . . . . . . . . . . . 372 575 ---------- ---------- Total current liabilities . . . . . . . . . . . . . . . 68,166 75,718 Long-term debt, net of current portion . . . . . . . . . . 160,789 153,472 Deferred income taxes. . . . . . . . . . . . . . . . . . . 7,704 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 . . . . . . . . . . . . . . . . . . . . 30,076 29,666 Currency translation adjustment . . . . . . . . . . . . . (113) (209) ---------- ---------- Total shareholders' equity. . . . . . . . . . . . . . . 88,496 87,990 ---------- ---------- $ 325,155 324,710 ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements. PILLOWTEX CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Three Months Ended March 30, 1996 and April 1, 1995 (In thousands, except for per share data) (Unaudited)
1996 1995 ---------- ---------- Net sales. . . . . . . . . . . . . . . . . . . . . . . . . $ 100,794 94,740 Cost of goods sold . . . . . . . . . . . . . . . . . . . . 85,226 78,286 ---------- ---------- Gross profit . . . . . . . . . . . . . . . . . . . . . . 15,568 16,454 Selling, general and administrative expenses . . . . . . . 10,614 10,571 ---------- ---------- Earnings from operations . . . . . . . . . . . . . . . . 4,954 5,883 Interest expense . . . . . . . . . . . . . . . . . . . . . 3,398 3,936 ---------- ---------- Earnings before income taxes . . . . . . . . . . . . . . 1,556 1,947 Income taxes . . . . . . . . . . . . . . . . . . . . . . . 615 785 ---------- ---------- Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 941 1,162 ---------- ---------- ---------- ---------- Net earnings per common share and common share equivalent . . . . . . . . . . . . . . . . . . . . $ .09 .11 ---------- ---------- ---------- ---------- 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 Three Months Ended March 30, 1996 and April 1, 1995 (Dollars in thousands) (Unaudited)
1996 1995 ---------- --------- Cash flows from operating activities: Net earnings. . . . . . . . . . . . . . . . . . . . . . . $ 941 1,162 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization . . . . . . . . . . . . . 3,242 2,875 Deferred income taxes . . . . . . . . . . . . . . . . . 142 (467) Provision for doubtful accounts . . . . . . . . . . . . 31 172 Loss on disposal of property, plant, and equipment. . . 5 1 Changes in assets and liabilities: Trade receivables . . . . . . . . . . . . . . . . . . 11,534 20,256 Inventories . . . . . . . . . . . . . . . . . . . . . (12,386) (23,914) Accounts payable. . . . . . . . . . . . . . . . . . . (1,647) 7,159 Accrued expenses. . . . . . . . . . . . . . . . . . . (946) (3,541) Other assets and liabilities. . . . . . . . . . . . . (2,925) (727) ---------- --------- Net cash provided by (used in) operating activities. (2,009) 2,976 ---------- --------- Cash flows from investing activities: Proceeds from sale of property, plant, and equipment. . . 15 10 Purchases of property, plant, and equipment . . . . . . . (773) (2,546) Payments for businesses purchased . . . . . . . . . . . . (59) (1,773) ---------- --------- Net cash used in investing activities. . . . . . . . (817) (4,309) ---------- ---------- Cash flows from financing activities: Net borrowings (payments) on revolving credit loans . . . 19,600 (2,050) Increase (decrease) in checks not yet presented for payment. . . . . . . . . . . . . . . . . . . . . . . . . (4,016) 3,780 Principal payments on long-term debt. . . . . . . . . . . (12,432) (262) Dividends paid. . . . . . . . . . . . . . . . . . . . . . (531) - Debt issuance costs . . . . . . . . . . . . . . . . . . . - (281) ---------- ---------- Net cash provided by financing activities. . . . . . 2,621 1,187 ---------- ---------- Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . 1 3 ---------- ---------- Net change in cash and cash equivalents. . . . . . . . . . (204) (143) Cash and cash equivalents at beginning of period . . . . . 411 571 ---------- ---------- Cash and cash equivalents at end of period . . . . . . . . $ 207 428 ---------- ---------- ---------- ---------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 4,853 4,610 Income taxes . . . . . . . . . . . . . . . . . . . . . . 1,138 1,370
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 financial statements to the current period classifications. The consolidated financial statements should be read in conjunction with the 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 March 30, 1996 and December 30, 1995:
1996 1995 ---------- ---------- Finished goods . . . . . . . . . . . . . . . . . . . $ 50,132 37,670 Work-in-process. . . . . . . . . . . . . . . . . . . 34,142 35,980 Raw materials. . . . . . . . . . . . . . . . . . . . 33,548 31,851 Supplies . . . . . . . . . . . . . . . . . . . . . . 1,999 1,903 ---------- ---------- $ 119,821 107,404 ---------- ---------- ---------- ----------
(3) Earnings per Common Share Earnings per common 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 March 30, 1996 and April 1, 1995, there were stock options outstanding for 554,616 and 363,941 common shares, respectively. Stock options are excluded from the calculations since they have no material dilutive effect on per share data. (4) Acquisitions In the first quarter of 1996 and fiscal year ended December 30, 1995, the Company made payments and capitalized certain costs related to acquisitions completed in 1994. 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 financial statements and notes thereto for the fiscal year ended December 30, 1995. RESULTS OF OPERATIONS NET SALES. Net sales for the three months ended March 30, 1996 increased $6,054,000 (6.4%) to $100,794,000 compared to $94,740,000 for the same period in 1995, due to additional sales of core products in the Pillowtex Division. GROSS PROFIT. The gross profit percentage for the first quarter ended March 30, 1996 decreased to 15.4% compared to 17.4% for the first quarter of 1995. This decline was due to a number of factors, including higher raw materials costs, several days of manufacturing disruption caused by bad weather, promotional pricing and a slower than expected phase-in of the Company's new cotton yarn spinning facility in Newton, North Carolina. SG&A. Selling, general and administrative ("SG&A") expenses for the three months ended March 30, 1996 increased slightly, by $43,000 (.4%) to $10,614,000 from $10,571,000 for the same period in 1995. SG&A expenses decreased as a percentage of sales to 10.5% in the first quarter of 1996 as compared to 11.2% for the same period in 1995. This percentage decrease reflects the Company's continuing efforts to contain SG&A expenses. INTEREST. Interest expense for the first quarter of 1996 decreased $538,000 (13.7%) to $3,398,000 from $3,936,000 for the same period in 1995, due principally to lower debt levels, reduced carrying costs on lower inventory and decreased average interest rates. NET EARNINGS. Net earnings for the three months ended March 30, 1996 decreased $221,000 (19.0%) to $941,000, or $.09 per share, compared to net earnings of $1,162,000, or $.11 per share, for the same period in 1995. Net earnings for the three months ended March 30, 1996 decreased as a percentage of sales to .9% from 1.2% for the same period in 1995. LIQUIDITY AND CAPITAL RESOURCES As of March 30, 1996, the outstanding principal balance under the Company's $150,000,000 secured revolving credit facility was $85,200,000, with $11,212,000 committed to outstanding letters of credit and unused availability was $53,588,000. 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 $75,400,000. The Company believes that cash flow generated from operations and funds available under the credit facilities will be sufficient to satisfy working capital and financing needs for the foreseeable future. GOVERNMENT REGULATIONS In past years, the Company has dealt with a variety of import issues, including the early China quota closing for imports of finished down comforters, comforter shells and comforter covers. The Company lessened its reliance on China imports by manufacturing more product in the United States and Canada and by sourcing goods in other countries. In addition, in 1995 a change was made in the import regulations regarding down comforter shells which are not generally manufactured in the United States. The Company believes that no import quota restrictions for shells will remain after July 1, 1996, which would enable the Company to import shells as needed and thereby reduce inventory carrying costs. Products that the Company imports from China currently receive preferential tariff treatment accorded goods from countries granted "most favored nation" status. Under the Trade Act of 1974, the President of the United States is authorized, upon making specified findings, to waive certain restrictions that would otherwise render China ineligible for most favored nation treatment. The President has waived these provisions each year since 1979. However, in response to recent trade and military activities by China, Congress may encourage the President to reconsider the renewal of most favored nation status for China in June of 1996 and no assurance can be given that China will continue to enjoy this status in the future. Raw materials and finished products entering the United States from China without the benefit of most favored nation treatment would be subject to significantly higher duty rates. However, the Company believes that the loss of China's most favored nation status is not likely to have a material adverse effect on the Company's business, financial condition or results of operations. FORWARD-LOOKING INFORMATION Statements contained in this Form 10-Q for the quarter ended March 30, 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 involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. 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, and 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 10 Second Amendment to Credit Agreement, dated as of March 30, 1996, between Pillowtex Corporation and NationsBank of Texas, N.A. 27 Financial Data Schedule (b) Reports on Form 8-K The Company did not file any report on Form 8-K during the period covered by this report. 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 (DATE) May 10, 1996 INDEX TO EXHIBITS
Exhibit Method of Filing - - ------- ------------------------------ 10 Second Amendment to Credit Agreement, dated as of March 30, 1996, between Pillowtex Corporation and NationsBank of Texas, N.A. . . . . . . . . . . . . . Filed herewith electronically 27 Financial Data Schedule. . . . . . . . . Filed herewith electronically
EX-10 2 EXHIBIT 10 SECOND AMENDMENT TO CREDIT AGREEMENT THIS AMENDMENT is entered into as of March 30, 1996, between PILLOWTEX CORPORATION, a Texas corporation ("Borrower"), the Lenders that have executed this amendment, and NATIONSBANK OF TEXAS, N.A., as Agent for Lenders. Borrower, the Lenders named on the signature pages below, and Agent are party to the Credit Agreement (as renewed, extended, and amended and subject to applicable consents and waivers, the "Credit Agreement") dated as of December 1, 1994, providing for a $90,000,000 Term Loan and a $150,000,000 Revolving Facility. Upon and subject to the terms of this amendment, Borrower, Agent, and Lenders have agreed, among other things, to change the calculation of the Borrowing Base for March through August in 1996, to amend certain financial covenants in the Credit Agreement, to add and amend certain provisions in the Credit Agreement in response to a change in Borrower s accounting periods, and to permit Borrower to create certain new Subsidiaries and transfer assets to them subject to Lenders Liens that have been limited as described in this amendment. Accordingly, for adequate and sufficient consideration, Borrower, Lenders, and Agent agree as follows: 1. TERMS AND REFERENCES. Unless otherwise stated in this amendment (a) terms defined in the Credit Agreement have the same meanings when used in this amendment and (b) references to "Sections," "Schedules," and "Exhibits" are to the Credit Agreement's sections, schedules, and exhibits. 2. AMENDMENTS. The Credit Agreement is amended as follows effective as of the date of this amendment. (a) Section 1.1 is amended to entirely amend and replace the following defined terms: Borrowing Base means, at any time, the sum of (a) 80% of Eligible Accounts plus (b) an amount equal to (i) 60% of Eligible Inventory for fiscal months of March through August during 1996, or (ii) 50% of Eligible Inventory for all other times. Excess-Cash Flow means -- for any Person, for any period, and without duplication -- the remainder of EBITDA minus (a) Taxes actually paid in cash, minus (b) all Permitted-Capital Expenditures, minus (c) cash dividends if permitted under Section 9.9, minus (d) the scheduled current portion of principal (including, without limitation, the principal component of Capital Leases) paid or due during that period on the Companies' Funded Debt, minus (e) interest expense during that period on the Companies' Debt (including, without limitation, the interest component under Capital Leases), minus (f) increases (or plus decreases) in Working Capital during that period, minus (g) net cash proceeds of asset sales included in the calculation of EBITDA to the extent those proceeds have been applied as mandatory prepayments of the Term Loan under Section 3.2(f)(i), minus (h) voluntary prepayments of the Term Loan under Section 3.2(e). Loan Papers means (a) this agreement, certificates and reports delivered under this agreement, and exhibits and schedules to this agreement, (b) all agreements, documents, and instruments in favor of Agent or Lenders (or Agent on behalf of Lenders) ever delivered under this agreement or otherwise delivered in connection with all or any part of the Obligations other than Assignment and Assumption Agreements, (c) any contract entered into between Borrower and any Lender or Affiliate of any Lender under (whether or not in excess of the minimum dollar requirements of) Section 8.12, (d) all LCs and LC Agreements, (e) the letter agreement described in Section 4.2, and (f) all renewals, extensions, and restatements of, and amendments and supplements to, any of the foregoing. Realmac means Realmac, Inc., a North Carolina corporation that was merged into Buyer Beacon after the Closing Date. (b) Section 1.1 is amended to add the following new defined terms: fiscal month means (a) for any period before December 31, 1994, a calendar month, and (b) thereafter, a period of four, five, or six weeks having seven days in each week ending on a Saturday and that otherwise approximates a calendar-monthly period. The fiscal-month ends for 1996 through 2001 are described on Schedule 1.1(c). Reference to a fiscal month by the name of a calendar month means the fiscal month that encompasses the most of that calendar month (e.g., the fiscal month of January 1996 ends on February 3, 1996). fiscal quarter means (a) for any period before December 31, 1994, a calendar quarter, and (b) thereafter, any quarter of a fiscal year ending on the last day of a fiscal month (e.g., the third fiscal quarter in 1996 ends on September 26, 1996). The fiscal-quarter ends for 1996 through 2001 are indicated on Schedule 1.1(c) by asterisks. fiscal year means (a) for any period before December 31, 1994, a calendar year, and (b) thereafter, Borrower's fiscal year for accounting and Tax purposes, which consists of 52- or 53-week period beginning on the first day after the end of the immediately preceding fiscal year and ending on the Saturday nearest to the December 31 following that first day. References to a fiscal year with a number corresponding to any calendar year means the fiscal year ending on the Saturday nearest to December 31 during that calendar year (e.g., fiscal year 1999 ends on January 1, 2000). Holdco means Ptex Holding Company, a Delaware corporation and a direct Subsidiary of Borrower. Newco means Pillowtex, Inc., a Delaware corporation and a direct Subsidiary of Borrower. Operating Lease means a lease or sublease that is not a Capital Lease. Trustco means Pillowtex Management Services Company, a Delaware business trust, a direct Subsidiary of Holdco, and an indirect Subsidiary of Borrower. (c) Section 3.2(d) is entirely amended as follows: (d) Term Loan Principal. The Principal Debt under the Term Loan is due and payable in installments on the last Business Day of each of the fiscal months of March, June, September, and December -- commencing September 30, 1995, and ending December 28, 2001 -- in accordance with the following amortization table:
Fiscal Quarterly Annual Year(s) Installment Amount --------- ----------- ----------- 1995 $2,500,000 $ 5,000,000 1996-1997 $2,500,000 $10,000,000 1998-2000 $3,750,000 $15,000,000 2001 $5,000,000 $20,000,000
(d) Section 4.4 is entirely amended as follows: 4.4 Commitment Fee. From and after the Closing Date, Borrower shall pay to Agent a commitment fee for Lenders according to each Lender's Commitment Percentage. The fee is payable as it accrues on the last Business Day of each of the fiscal months of March, June, September, and December -- commencing on the first of those dates that follows the date of this agreement -- and on the Revolving-Facility-Termination Date. Each payment of the fee is equal to the following, determined for the fiscal quarter (or portion of a fiscal quarter commencing on the date of this agreement or ending on the Revolving-Facility-Termination Date) preceding and including the date it is due: From the Closing Date until the Revolving-Facility-Termination Date, the product of the Applicable Percentage multiplied by the amount by which (i) the total Commitments for only the Revolving Facility exceed (ii) the sum of the average-daily Principal Debt under only the Revolving Notes plus the average-daily LC Exposure for standby LCs. (e) Section 5.2(d) is entirely amended as follows: (d) All of the other owned real property and plants and all of the other equipment and fixtures of each other present and future (whether under Sections 9.8 or 9.11 or otherwise) Company other than (i) in respect of any foreign Company the granting of Lender Liens by which would create a material Tax obligation for the Companies that would not otherwise exist (ii) the assets currently encumbered by Permitted Liens described as Items 7, 10, 11, and (to the extent the related documents prohibit the Lender Liens) 12 on Schedule 9.5, and (iii) equipment and fixtures in which that Company's interest arises solely under an Operating Lease; and (f) A new Section 5.5 is added as follows: 5.5 New Companies and Transfers of Assets. Contemporaneous with entering into the second amendment of this agreement, Borrower has formed Newco, Holdco, and Trustco for the purpose of, among other things, the transfer of certain assets and operations. (a) Transfers. As more particularly described in the documents described on Annex A to the second amendment to this agreement, Borrower has: (i) Transferred to Buyer Beacon (A) Borrower s interest in the plant and equipment at the Newton, North Carolina, yarn- production facility that is subject to the lease from Sanwa General Equipment Leasing, along with certain related receivables and general intangibles, and (B) Borrower's ownership of the real estate on which that facility is located; (ii) Transferred to Newco Borrower's other non-Texas manufacturing and sales assets and operations, along with certain related receivables and general intangibles, and all of the capital stock of Buyer Beacon, Manetta Home Fashions, Inc., and Tennessee Woolen Mills, Inc., in each case subject to the pre-existing Lender Liens (to the extent of those Lender Liens) already encumbering those assets and capital stock; (iii) Transferred to Trustco Borrower's Texas manufacturing and sales assets and operations, along with certain related receivables and general intangibles, in each case subject to the pre-existing Lender Liens (to the extent of those Lender Liens) already encumbering those assets; and (iv) Retained ownership of its other assets. (b) Additional Guaranties and Lender Liens. As required by Section 5.1, 5.2, 8.11, and 9.8 and possible other provisions in the Loan Papers (i) Newco, Holdco, and Trustco have all unconditionally guaranteed the full payment and performance of the Obligations, (ii) Borrower has created Lender Liens upon all of the issued and outstanding capital stock of Newco and Holdco, (iii) Holdco has created Lender Liens on all of the beneficial ownership of Trustco (which Agent and Lenders agree was not subject to Lender Liens at any time when owned by Borrower), and (iv) Buyer Beacon, Tennessee Woolen Mills, Inc., Newco, Holdco, and Trustco have (A) acknowledged in writing that all assets -- limited, in the case of Trustco, as provided in Section 5.5(c) below -- and capital stock transferred to them as described in Section 5.5(a) continue to be subject to pre-existing Lender Liens (to the extent of those Lender Liens) already encumbering those assets and stock and (B) have created Lender Liens upon all of their respective present and future accounts receivable, inventory, equipment, fixtures, real property, and plants. (c) Lien Limitation. Schedule 5.5 is a list of assets transferred by Borrower to Trustco. Notwithstanding any contrary provision in any Loan Paper other than Section 5.5(d), the Lender Liens on each asset or group of assets listed on Schedule 5.5 are limited -- effective as of March 30, 1996, immediately before those transfers to Trustco by Borrower -- so that they only secure an amount of the Obligations equal to the amount corresponding to Borrower's tax basis in each asset being transferred to Trustco, which tax basis is reflected on Schedule 5.5 by asset or groups of assets. The limitation in this Section 5.5(c) applies only to those assets and groups of assets and not to any other present or future assets now or in the future created or owned by Trustco. (d) No Lien Limitation. Notwithstanding Section 5.5(c) or any amounts described on Schedule 5.5, if at any time the second amendment to this agreement fails to become effective or the ratio of the Companies consolidated Funded Debt to EBITDA ever exceeds 4.50 to 1.00 or if a Default exists that has resulted in a termination of the commitments of Lenders to extend credit under this agreement, then -- in any of those three events and automatically without further action by any Person -- the limitation of the Lender Liens in Section 5.5(c) no longer is effective and the Lender Liens on the assets and groups of assets described on Schedule 5.5 secure the full payment and performance of the full Obligations. (g) All references in Sections 7, 8, and 9 to each Company's corporate existence, qualification, good standing, corporate charter, and bylaws are modified in respect of Trustco to apply (to the extent applicable) to its trust existence, certificate of trust, and declaration of trust. (h) Section 7.2(a) is entirely amended as follows: (a) is (and after the Beacon Acquisition will be) duly qualified to transact business and is in good standing as a foreign corporation in each jurisdiction where the nature and extent of its business and properties require due qualification and good standing (each of which jurisdictions is identified on Schedule 6 as modified by Schedule 7.1). (i) Section 9.13 is entirely amended as follows: 9.13 Fiscal Year and Accounting Methods. No Company may change its fiscal year for accounting purposes or any material aspect of its method of accounting except (a) the Companies change, effective December 31, 1994, from having their fiscal months, quarters, and years as corresponding calendar periods to become instead fiscal months, fiscal quarters, and fiscal years, respectively, as defined in this agreement, and (b) to conform any new Subsidiary's accounting methods to Borrower's accounting methods. (j) Section 9.16 is entirely amended as follows: 9.16 Contingent Liabilities. No Company may endorse, guarantee, or otherwise become surety for, or contingently liable upon, the obligations of any Person except (a) endorsements of negotiable instruments in the ordinary course of business, (b) with respect to any LCs, (c) guaranties of any Company of Debt or Operating Leases of any Obligated Company, (d) contingent liabilities that exist on the Closing Date and are fully described on Schedule 9.2, and (e) contingent liabilities permitted in connection with a Permitted Acquisition. (k) Section 9.17 is entirely amended as follows: 9.17 Operating Leases. No Company may become obligated under any Operating Lease that would cause the total-Operating-Lease-payment obligations of all of the Companies -- without duplication for guaranties by any Company of another Company's Operating-Lease-payment obligations -- to exceed $12,000,000 during any fiscal year. (l) Section 10.3 is entirely amended as follows: 10.3 Funded Debt/EBITDA. The ratio of (a) the Companies' consolidated Funded Debt on the last day of any fiscal quarter to (b) their consolidated EBITDA for the 12-fiscal month period ending on that last day to ever exceed the lesser of either 3.00 to 1.00 if the Release Ratios are achieved or:
Period(s) Ratio -------------------------------------- ------------ Fiscal quarter ending 3/31/95 5.10 to 1.00 Each fiscal quarter ending 6/30/95 5.25 to 1.00 or 09/30/95 Fiscal quarter ending 12/30/95 3.50 to 1.00 Fiscal quarter ending 3/30/96 4.00 to 1.00
Fiscal quarter ending 6/29/96 4.25 to 1.00 Fiscal quarter ending 9/28/96 4.00 to 1.00 Each fiscal quarter ending 12/28/96, 2.75 to 1.00 3/29/97, 6/28/97, or 9/27/97 Each subsequent fiscal quarter 2.50 to 1.00
(m) The table in Section 10.4 is entirely amended as follows:
Period(s) Ratio -------------------------------------- ------------ Fiscal quarter ending 3/31/95 1.10 to 1.00 Two fiscal quarters ending 6/30/95 1.10 to 1.00 Three fiscal quarters ending 9/30/95 1.10 to 1.00 Four fiscal quarters ending 12/30/95 1.20 to 1.00 Four fiscal quarters ending each fiscal 1.10 to 1.00 quarter from 3/30/96 through 9/28/96 Four fiscal quarters ending each fiscal 1.20 to 1.00 quarter from 12/28/96 through 9/27/97 Four fiscal quarters ending each thereafter 1.25 to 1.00
(n) Item 6 on Schedule 9.8 is entirely amended as follows: 6. Loans or advances to, and investments in, another Obligated Company. (o) New Schedules 1.1(c), 5.5 , and 7.1 are added in the respective forms of the attached Schedules 1.1(c), 5.5, and 7.1. (p) Schedule 7.3 and Exhibits A-1 and D-3 are entirely amended in the respective forms of -- and all references in the Credit Agreement to Schedule 7.3 and Exhibits A-1 and D-3 are respectively changed to -- the attached Amended Schedule 7.3 and Amended Exhibits A-1 and D-3. 3. CONDITIONS PRECEDENT. Paragraph 2 above is not effective unless Agent receives (a) counterparts of this amendment executed by each Company listed below and by Agent and by all Lenders, and (b) each document and other item listed on the attached Annex A and indicated on that annex as being required to be delivered by the Amendment-Closing Date (as defined on that annex), in each case in form, substance, and number of counterparts as is reasonably acceptable to Agent and its special counsel. 4. CONDITIONS SUBSEQUENT. Borrower covenants with Agent and Lenders to deliver or cause to be delivered to Agent all documents and other items listed on the attached Annex A and indicated on that annex as being required to be delivered by the Post-Closing Date (as defined on that annex), in each case by no later than that Post-Closing Date. 5. PRO FORMA AND FINAL TAX BASIS. The tax-basis amounts reflected on the attached Schedule 5.5 are pro forma based upon Borrower s calculations as of March 27, 1996. As soon as practicable after the date of this amendment but by no later than April 15, 1996, Borrower shall recalculate all of the applicable tax-basis amounts as of March 30, 1996, and prepare, initial, and send to Agent to furnish to each Lender a replacement Schedule 5.5 that is final for purposes of the Loan Papers. However, that final Schedule 5.5 may not (a) include any assets other than the assets now reflected on the attached pro forma Schedule 5.5 except that receivables and inventory may vary upward by no more than 15% from the levels reflected on the attached pro forma Schedule 5.5 and (b) reflect total tax-basis amounts that vary downward by more than 15% from the total tax-basis amounts reflected on the attached pro forma Schedule 5.5. 6. RATIFICATIONS. Borrower (a) ratifies and confirms all provisions of the Loan Papers as amended by this amendment, (b) ratifies and confirms that all guaranties, assurances, and Liens granted, conveyed, or assigned to Agent or any Lender under the Loan Papers -- as they may have been renewed, extended, and amended -- are not released, reduced, or otherwise adversely affected by this amendment and continue to guarantee, assure, and secure full payment and performance of the present and future Obligations, and (c) agrees to perform those acts and duly authorize, execute, acknowledge, deliver, file, and record those additional documents, and certificates as Agent or Determining Lenders may request in order to create, perfect, preserve, and protect those guaranties, assurances, and Liens. 7. REPRESENTATIONS. Borrower represents and warrants to Agent and Lenders that as of the date of this amendment (a) all representations and warranties in the Loan Papers are true and correct in all material respects except to the extent that (i) any of them speak to a different specific date, (ii) the facts on which any of them were based have been changed by transactions contemplated or permitted by the Credit Agreement, or (iii) a change is reflected on the attached Schedule 7.1, and (b) no Material Adverse Event, Default, or Potential Default exists. 8. MISCELLANEOUS. All references in the Loan Papers to the "Credit Agreement" refer to the Credit Agreement as amended by this amendment. This amendment is a "Loan Paper" referred to in the Credit Agreement, and the provisions relating to Loan Papers in Sections 1 and 14 are incorporated in this amendment by reference. Except as specifically amended and modified in this amendment, the Loan Papers are unchanged and continue in full force and effect. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document. All counterparts must be construed together to constitute one and the same instrument. This amendment binds and inures to each of the undersigned and their respective successors and permitted assigns, subject to Section 14.10 of the Credit Agreement. This amendment and the other Loan Papers represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements by the parties. There are no unwritten oral agreements between the parties. Remainder of page intentionally blank. EXECUTED as of the date first stated above. PILLOWTEX CORPORATION, as Borrower By (Signature) /s/ Jeffrey D. Cordes (Name and Title) Jeffrey D. Cordes, Executive Vice President NATIONSBANK OF TEXAS, N.A., as Agent and Lender By (Signature) /s/ Lynn H. Mullin (Name and Title) Lynn H. Mullin, Senior Vice President BANK OF AMERICA ILLINOIS, as a Lender By (Signature) /s/ Claire Lui (Name and Title) Claire Liu, Vice President COMERICA BANK - TEXAS, as a Lender By (Signature) /s/ Melinda A. Chausse (Name and Title) Melinda A. Chausse, Vice President THE FIRST NATIONAL BANK OF BOSTON, as a Lender By (Signature) /s/ William C. Purinton (Name and Title) William C. Purinton , Vice President WELLS FARGO BANK, N.A., as a Lender By (Signature) /s/ Mary Jo Hoch (Name and Title) Mary Jo Hoch, Vice President THE BANK OF TOKYO, LTD., DALLAS AGENCY, as a Lender By (Signature) /s/ John M. Mearns (Name and Title) John M. Mearns, VP and Manager FIRST INTERSTATE BANK OF TEXAS, N.A., as a Lender By (Signature) /s/ Susan L. Coulter (Name and Title) Susan L. Coulter, Vice President BANK ONE, TEXAS, N.A., as a Lender By (Signature) /s/ Scott Rhea (Name and Title) Scott Rhea, Assistant Vice President THE BANK OF NOVA SCOTIA, as a Lender By (Signature) /s/ F.C.H. Ashby (Name and Title) F.C.H. Ashby, Senior Manager Loan Operations NBD BANK, as a Lender By (Signature) /s/ Larry E. Schuster (Name and Title) Larry E. Schuster, Authorized Agent To induce Agent and Lenders to enter into this amendment, the undersigned jointly and severally (a) consent and agree to this amendment's execution and delivery, (b) ratify and confirm that all guaranties, assurances, and Liens granted, conveyed, or assigned to Agent or any Lender under the Loan Papers -- as they may have been renewed, extended, and amended -- are not released, diminished, impaired, reduced, or otherwise adversely affected by this amendment and continue to guarantee, assure, and secure the full payment and performance of all present and future Obligations, (c) agree to perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional guaranties, assignments, security agreements, deeds of trust, mortgages, and other agreements, documents, instruments, and certificates as Agent or Determining Lenders may reasonably deem necessary or appropriate in order to create, perfect, preserve, and protect those guaranties, assurances, and Liens, (d) represent and warrant to Agent and Lenders that (i) the value of the consideration received and to be received by the undersigned in respect of those guaranties, assurances, and Liens are reasonably worth at least as much as the liability and obligation the undersigned under them, (ii) that liability and obligation may reasonably be expected to directly or indirectly benefit the undersigned, and (iii) each undersigned is -- and after giving effect to those guaranties, assurances, Liens, and the Loan Papers, in light of all existing facts and circumstances (including, without limitation, collateral for and other obligors in respect of the Obligations and various components of it and various rights of subrogation and contribution), each undersigned will be -- Solvent, and (e) waive notice of acceptance of this consent and agreement, which consent and agreement binds the undersigned and their successors and permitted assigns and inures to Agent, Lenders, and their respective successors and permitted assigns. BEACON MANUFACTURING COMPANY (formerly Be-Ac, Inc., and the successor by merger with Realmac, Inc.), MANETTA HOME FASHIONS, INC., and TENNESSEE WOOLEN MILLS, INC. By (Signature) /s/ Jeffrey D. Cordes (Name and Title) Jeffrey D. Cordes, Executive Vice President or Vice President of each of above Company To induce Agent and Lenders to enter into this amendment, the undersigned jointly and severally (a) consent and agree to this amendment's execution and delivery, (b) ratify and confirm that the assignments, conveyances, and transfers to them by Borrower as contemplated in this amendment are in each case subject to the pre-existing Lender Liens (to the extent of those Lender Liens) already encumbering the assets assigned, conveyed, or transferred, which Lender Liens (except to the extent specifically limited in this amendment) continue to secure the full payment and performance of all present and future Obligations, (c) agree to perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional guaranties, assignments, security agreements, deeds of trust, mortgages, and other agreements, documents, instruments, and certificates as Agent or Determining Lenders may reasonably deem necessary or appropriate in order to create, perfect, preserve, and protect those Lender Liens, (d) represent and warrant to Agent and Lenders that (i) the value of the consideration received and to be received by the undersigned in respect of those Lender Liens are reasonably worth at least as much as the liability and obligation the undersigned under them, (ii) that liability and obligation may reasonably be expected to directly or indirectly benefit the undersigned, and (iii) each undersigned is -- and after giving effect to those Lender Liens and the Loan Papers, in light of all existing facts and circumstances (including, without limitation, collateral for and other obligors in respect of the Obligations and various components of it and various rights of subrogation and contribution), each undersigned will be -- Solvent, and (e) waive notice of acceptance of this consent and agreement, which consent and agreement binds the undersigned and their successors and permitted assigns and inures to Agent, Lenders, and their respective successors and permitted assigns. PILLOWTEX, INC. By (Signature) /s/ Norman J. Shuman (Name and Title) Norman J. Shuman, Secretary PTEX HOLDING COMPANY By (Signature) /s/ Norman J. Shuman (Name and Title) Norman J. Shuman, Secretary BEACON MANUFACTURING COMPANY, TENNESSEE WOOLEN MILLS, INC., and PILLOWTEX MANAGEMENT SERVICES COMPANY By (Signature) /s/ Jeffrey D. Cordes (Name and Title) Jeffrey D. Cordes, Executive Vice President or Vice President of each of above Company EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATION FOUND ON PAGE 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-28-1996 DEC-31-1995 MAR-30-1996 207 0 62,269 2,141 119,821 189,311 118,137 36,100 325,155 68,166 172,353 0 0 106 88,390 325,155 100,794 100,794 85,226 85,266 10,614 31 3,398 1,556 615 941 0 0 0 941 .09 .09
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