-----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, DIuusS76blFV22axwKVtyRGJ86QBawcg1+0XUD36RnvrTv6x6VKSxC4jXsxR03ES SsU0YadjspOX40VKCVgWEw== 0000950134-98-001025.txt : 19980212 0000950134-98-001025.hdr.sgml : 19980212 ACCESSION NUMBER: 0000950134-98-001025 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971219 ITEM INFORMATION: FILED AS OF DATE: 19980211 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: 8-K/A SEC ACT: SEC FILE NUMBER: 001-11756 FILM NUMBER: 98532719 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 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 8-K/A (Amendment No. 1) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): DECEMBER 19, 1997 PILLOWTEX CORPORATION (Exact Name of Registrant as Specified in its Charter) TEXAS 1-11756 75-2147728 (State of (Commission (IRS Employer Incorporation) File Number) Identification No.) 4111 MINT WAY, DALLAS, TEXAS 75237 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (214) 333-3225 - -------------------------------------------------------------------------------- 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) The historical financial statements of Fieldcrest filed as Exhibit 99.3 hereto are incorporated herein by reference. (b) The pro forma financial information required by Item 7(b) of Form 8-K is filed as Exhibit 99.4 hereto and is incorporated herein by reference. (c) Exhibits: -------- Exhibit Number Exhibit ------- ------- 2.1 Agreement and Plan of Merger, dated as of September 10, 1997, by and among Pillowtex Corporation, Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc. (incorporated by reference to Appendix A to the Joint Proxy Statement/Prospectus forming a part of Pillowtex Corporation's Registration Statement on Form S-4 (No. 333-36663) (the "S-4 Registration Statement")) 2.2 Amendment to Agreement and Plan of Merger, dated as of September 23, 1997, by and among Pillowtex Corporation, Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc. (incorporated by reference to Appendix A to the Joint Proxy Statement/Prospectus forming a part of the Form S-4 Registration Statement) 3.1 * Restated Articles of Incorporation of Pillowtex, as amended 4.1 * Indenture, dated as of December 18, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and Norwest Bank Minnesota, National Association, as Trustee 4.2 * Supplemental Indenture, dated as of December 19, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and Norwest Bank Minnesota National Association, as Trustee 10.1 * Amended and Restated Credit Agreement, dated as of December 19, 1997, among Pillowtex Corporation, certain Lenders named therein, and NationsBank of Texas, N.A., as Administrative Agent 10.2 * Term Credit Agreement, dated as of December 19, 1997, among Pillowtex Corporation, certain Lenders named herein, and NationsBank of Texas, N.A., as Administrative Agent 10.3 Preferred Stock Purchase Agreement, dated as of September 10, 1997, by and among Pillowtex Corporation, Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo (UK) Partners III, L.P. (incorporated by reference to Exhibit 10.2 to Pillowtex Corporation's Current Report on Form 8-K dated September 10, 1997, as amended by a Form 8-K/A (Amendment No. 1) dated September 10, 1997) 10.4 Amendment No. 1 to the Preferred Stock Purchase Agreement, dated as of November 21, 1997, by and among Pillowtex Corporation, Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo (UK) Partners III, L.P. (incorporated by reference to Exhibit 10.1 to Pillowtex Corporation's Current Report on Form 8-K dated November 21, 1997) -2- 3 10.5* Purchase Agreement, dated December 15, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBanc Montgomery Securities, Inc. and Bear, Stearns & Co. Inc. 10.6* Purchase Agreement Supplement, dated December 19, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBank Montgomery Securities, Inc. and Bear, Stearns & Co. Inc. 10.7* Registration Rights Agreement, dated as of December 18, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBanc Montgomery Securities, Inc. and Bear, Stearns & Co. Inc. 10.8* Registration Rights Agreement Supplement, dated as of December 19, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBanc Montgomery Securities, Inc. and Bear, Stearns & Co. Inc. 99.1* Press release, dated December 19, 1997, issued by Pillowtex Corporation 99.2 Audited Financial Statements of Pillowtex Corporation as of December 30, 1995 and December 28, 1996 and for each of the years in the three-year period ended December 28, 1996 (incorporated by reference to pages F-1 through F-24 in Pillowtex Corporation's Annual Report on Form 10-K for the fiscal year ended December 28, 1996) and Unaudited Financial Statements of Pillowtex Corporation as of September 27, 1997 and for the three months and nine months ended September 27, 1997 and September 28, 1996 (incorporated by reference to pages 3 through 11 in Pillowtex Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 1997) 99.3 Audited Financial Statements of Fieldcrest Cannon, Inc. as of and for the fiscal years ended December 31, 1995 and December 31, 1996 (incorporated by reference to pages 18 through 34 in Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1996) and Unaudited Financial Statements of Fieldcrest Cannon, Inc. as of September 30, 1997 and for the nine months ended September 30, 1997 and September 30, 1996 (incorporated by reference to pages 2 through 5 in the Fieldcrest Cannon, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997) 99.4** Unaudited Pro Forma Combined Financial Information of Pillowtex - -------------------------- * Previously filed. ** Filed herewith. -3- 4 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, hereunto duly authorized. PILLOWTEX CORPORATION By: /s/ J. Mark Kirkpatrick ------------------------------------- J. Mark Kirkpatrick Vice President and Treasurer Dated: February 11, 1998 -4- 5 INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT - ------- ------- 2.1 Agreement and Plan of Merger, dated as of September 10, 1997, by and among Pillowtex Corporation, Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc. (incorporated by reference to Appendix A to the Joint Proxy Statement/Prospectus forming a part of Pillowtex Corporation's Registration Statement on Form S-4 (No. 333-36663) (the "S-4 Registration Statement")) 2.2 Amendment to Agreement and Plan of Merger, dated as of September 23, 1997, by and among Pillowtex Corporation, Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc. (incorporated by reference to Appendix A to the Joint Proxy Statement/Prospectus forming a part of the Form S-4 Registration Statement) 3.1 * Restated Articles of Incorporation of Pillowtex, as amended 4.1 * Indenture, dated as of December 18, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and Norwest Bank Minnesota, National Association, as Trustee 4.2 * Supplemental Indenture, dated as of December 19, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and Norwest Bank Minnesota, National Association, as Trustee 10.1 * Amended and Restated Credit Agreement, dated as of December 19, 1997, among Pillowtex Corporation, certain Lenders named therein, and NationsBank of Texas, N.A., as Administrative Agent 10.2 * Term Credit Agreement, dated as of December 19, 1997, among Pillowtex Corporation, certain Lenders named herein, and NationsBank of Texas, N.A., as Administrative Agent 10.3 Preferred Stock Purchase Agreement, dated as of September 10, 1997, by and among Pillowtex Corporation, Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo (UK) Partners III, L.P. (incorporated by reference to Exhibit 10.2 to Pillowtex Corporation's Current Report on Form 8-K dated September 10, 1997, as amended by a Form 8-K/A (Amendment No. 1) dated September 10, 1997) 10.4 Amendment No. 1 to the Preferred Stock Purchase Agreement, dated as of November 21, 1997, by and among Pillowtex Corporation, Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo (UK) Partners III, L.P. (incorporated by reference to Exhibit 10.1 to Pillowtex Corporation's Current Report on Form 8-K dated November 21, 1997) 10.5 * Purchase Agreement, dated December 15, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBanc Montgomery Securities, Inc. and Bear, Stearns & Co. Inc. 10.6 * Purchase Agreement Supplement, dated December 19, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBank Montgomery Securities, Inc. and Bear, Stearns & Co. Inc. 10.7 * Registration Rights Agreement, dated as of December 18, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBanc Montgomery Securities, Inc. and Bear, Stearns & Co. Inc. 10.8 * Registration Rights Agreement Supplement, dated as of December 19, 1997, among Pillowtex Corporation, the guarantors listed on the signature page thereto, and NationsBanc Montgomery Securities, Inc. and Bear, Stearns & Co. Inc.
6 99.1 * Press release, dated December 19, 1997, issued by Pillowtex Corporation 99.2 Audited Financial Statements of Pillowtex Corporation as of December 30, 1995 and December 28, 1996 and for each of the years in the three-year period ended December 28, 1996 (incorporated by reference to pages F-1 through F-24 in Pillowtex Corporation's Annual Report on Form 10-K for the fiscal year ended December 28, 1996) and Unaudited Financial Statements of Pillowtex Corporation as of September 27, 1997 and for the three months and nine months ended September 27, 1997 and September 28, 1996 (incorporated by reference to pages 3 through 11 in Pillowtex Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 1997) 99.3 Audited Financial Statements of Fieldcrest Cannon, Inc. as of and for the fiscal years ended December 31, 1995 and December 31, 1996 (incorporated by reference to pages 18 through 34 in Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1996) and Unaudited Financial Statements of Fieldcrest Cannon, Inc. as of September 30, 1997 and for the nine months ended September 30, 1997 and September 30, 1996 (incorporated by reference to pages 2 through 5 in the Fieldcrest Cannon, Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997) 99.4 ** Unaudited Pro Forma Combined Financial Information of Pillowtex
- -------------------------- * Previously filed. ** Filed herewith. EX-99.4 2 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION 1 EXHIBIT 99.4 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF PILLOWTEX 2 GENERAL On December 19, 1997, a wholly owned subsidiary ("Newco") of Pillowtex Corporation ("Pillowtex") was merged with and into Fieldcrest Cannon, Inc. ("Fieldcrest") pursuant to an Agreement and Plan of Merger, dated as of September 10, 1997 (the "Merger Agreement"), among Pillowtex, Newco, and Fieldcrest. At the effective time (the "Effective Time") of such merger (the "Merger"), among other things, on the terms set forth in the Merger Agreement (i) each then-outstanding share of Common Stock, par value $1.00 per share, of Fieldcrest ("Fieldcrest Common Stock") was converted into the right to receive total consideration consisting of (a) a cash payment in an amount equal to $27.00 and (b) 0.269 shares of Common Stock, par value $0.01 per share, of Pillowtex ("Pillowtex Common Stock"), (ii) each then-outstanding share of $3.00 Series A Convertible Preferred Stock, par value $0.01 per share, of Fieldcrest was converted into the right to receive total consideration consisting of (a) a cash payment in an amount equal to $46.15 and (b) 0.4598286 shares of Pillowtex Common Stock, and (iii) each then-outstanding share of Common Stock, par value $0.01 per share, of Newco was converted into one share of Common Stock, par value $0.01 per share, of Fieldcrest (as the surviving corporation in the Merger). Immediately following the Merger, Pillowtex owned 100% of the outstanding capital stock of Fieldcrest. Pillowtex financed the Merger and, simultaneously with the closing of the Merger, refinanced certain indebtedness of Pillowtex and Fieldcrest through a combination of (i) borrowings under new senior revolving credit and term loan facilities (the "New Pillowtex Bank Facilities"), (ii) the issuance and sale of new senior subordinated debt securities (the "New Pillowtex Subordinated Notes"), and (iii) the issuance and sale of shares of Series A Redeemable Convertible Preferred Stock, par value $0.01 per share, of Pillowtex (the "Pillowtex Preferred Stock"). PRO FORMA CAPITALIZATION The following table sets forth the historical capitalization of each of Pillowtex and Fieldcrest as of September 27, 1997 and September 30, 1997, respectively, and the pro forma capitalization of Pillowtex as of September 27, 1997, adjusted to give effect to the consummation of the Merger and the Financing Transactions, as if such transactions had been consummated on September 27, 1997. As used herein, the term "Financing Transactions" means (i) initial borrowings under the New Pillowtex Bank Facilities of $149.0 million under a $350.0 million revolving credit facility (the "Revolver") and $250.0 million under a $250.0 million term loan facility (the "Term Loan"), (ii) the issuance and sale of $185.0 million aggregate principal amount of New Pillowtex Subordinated Notes, (iii) the issuance and sale of 65,000 shares of Pillowtex Preferred Stock, (iv) the repayment of all amounts outstanding under Pillowtex's and Fieldcrest's existing bank credit facilities, and (v) the satisfaction and discharge of all indebtedness represented by Fieldcrest's 11.25% Senior Subordinated Debentures due 2002 to 2004 pursuant to an irrevocable deposit of amounts sufficient to provide for the redemption thereof. The pro forma information set forth below is presented for illustrative purposes only and is not necessarily indicative of what Pillowtex's actual consolidated capitalization would have been had the foregoing transactions been consummated on September 27, 1997, nor does it give effect to (i) any transactions other than the foregoing transactions and those discussed in the Notes to Unaudited Pro Forma Combined Financial Information of Pillowtex contained elsewhere herein or (ii) Pillowtex's or Fieldcrest's respective results of operations since September 27, 1997 and September 30, 1997, respectively. Accordingly, the pro forma information set forth below does not purport to be indicative of Pillowtex's consolidated capitalization as of the Effective Time, the date hereof, or any future date. The following table should be read in conjunction with the historical financial statements of Pillowtex and Fieldcrest and the unaudited pro forma combined financial information and the related notes contained elsewhere herein. 3 CAPITALIZATION SEPTEMBER 27, 1997 (IN THOUSANDS, EXCEPT SHARE DATA)
HISTORICAL ----------------------------- PRO FORMA PILLOWTEX FIELDCREST COMBINED --------- ---------- -------- Short-term debt: Current portion of long-term debt .............................. $ 1,553 $ 4,697 $ 6,250 ----------- ----------- ----------- Total short-term debt ........................................ 1,553 4,697 6,250 Long-term debt: Revolving credit borrowings .................................... 86,350 100,000 148,956 Senior bank term A ............................................. -- -- 125,000 Senior bank term B ............................................. -- -- 125,000 New Pillowtex Subordinated Notes .............................. -- -- 185,000 Existing Pillowtex Subordinated Notes .......................... 125,000 -- 125,000 Fieldcrest 6% Convertible Subordinated Debentures .............. -- 112,500 93,864 (a) Fieldcrest 11.25% Senior Subordinated Debentures ............... -- 85,000 -- Deed of Trust Note ............................................. 2,199 -- 2,199 PEDFA Industrial Revenue Bonds ................................. 2,310 -- 2,310 MBFC Industrial Revenue Bonds .................................. 2,760 -- 2,760 Industrial Development Bonds due 2021 .......................... -- 10,000 10,000 Industrial Revenue Installment Bonds due 2002 .................. -- 1,320 1,320 Other long-term debt ........................................... 187 -- 187 ----------- ----------- ----------- Total long-term debt ......................................... 218,806 308,820 821,596 ----------- ----------- ----------- Total debt ................................................. 220,359 313,517 827,846 Pillowtex Series A Redeemable Convertible Preferred Stock, $0.01 par value, 200,000 shares authorized, 65,000 shares issued and outstanding (as adjusted) ............. -- -- 62,882 Shareholders' equity: Preferred Stock, $0.01 par value, 20,000,000 shares authorized, none issued and outstanding (Pillowtex historical); $0.01 par value, 10,000,000 shares authorized, 1,500,000 shares issued and outstanding (Fieldcrest historical); $0.01 par value, 20,000,000 shares authorized, none issued and outstanding (as adjusted) ... 15 -- -- Common Stock, $0.01 par value, 30,000,000 shares authorized, 10,786,819 shares issued and outstanding (Pillowtex historical); $0.01 par value, 25,000,000 shares authorized, 12,850,002 shares issued and outstanding (Fieldcrest historical); $0.01 par value, 30,000,000 shares authorized, 13,963,348 shares issued and outstanding (as adjusted) ......... 108 12,850 140 Additional paid-in capital ....................................... 60,825 226,758 150,539 Retained earnings ................................................ 50,316 106,923 49,348 (b) Treasury stock, 3,606,400 shares (Fieldcrest historical); 0 shares (as adjusted) ......................................... -- (117,225) -- Currency translation adjustment .................................. (472) -- (472) ----------- ----------- ----------- Total shareholders' equity ..................................... 110,777 229,321 199,555 ----------- ----------- ----------- Total capitalization ....................................... $ 331,136 $ 542,838 $ 1,090,283 =========== =========== =========== Ratio of total debt to total capitalization ................ 66.55% 57.76% 75.93%(c) =========== =========== ===========
- ----------------- (a) Reflects an adjustment to record the Fieldcrest 6% Convertible Debentures due 2012 at fair market value. (b) Reflects a charge of $968, net of income tax benefit, for the write off of Pillowtex unamortized debt issuance costs. (c) Including the Pillowtex Preferred Stock together with total debt, the ratio would be 81.70%. See accompanying Notes to Unaudited Pro Forma Combined Financial Information. 4 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF PILLOWTEX The following unaudited pro forma combined financial statements of Pillowtex give effect to the consummation of the Merger and the Financing Transactions, as if such transactions had been consummated: (i) on September 27, 1997, in the case of the Unaudited Pro Forma Combined Balance Sheet at September 27, 1997 and (ii) on December 31, 1995, the first day of Pillowtex's 1996 fiscal year, in the case of the Unaudited Pro Forma Combined Statement of Operations for the fiscal year ended December 28, 1996 and the nine months ended September 27, 1997. As used herein, the term "Financing Transactions" means (i) initial borrowings under the New Pillowtex Bank Facilities of $149.0 million under the Revolver and $250.0 million under the Term Loan, (ii) the issuance and sale of $185.0 million aggregate principal amount of New Pillowtex Subordinated Notes, (iii) the issuance and sale of 65,000 shares of Pillowtex Preferred Stock, (iv) the repayment of all amounts outstanding under Pillowtex's and Fieldcrest's existing bank credit facilities, and (v) the satisfaction and discharge of all indebtedness represented by Fieldcrest's 11.25% Senior Subordinated Debentures Due 2002 to 2004 pursuant to an irrevocable deposit of amounts sufficient to provide for the redemption thereof. The following unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of what Pillowtex's actual financial position or results of operations would have been had the foregoing transactions been consummated on such dates, nor does it give effect to (i) any transactions other than the foregoing transactions and those described in the accompanying Notes to Unaudited Pro Forma Combined Financial Information of Pillowtex, (ii) Pillowtex's or Fieldcrest's results of operations since September 27, 1997 and September 30, 1997, respectively, or (iii) one-time charges of approximately $7.5 million, including approximately $2.0 million of cash charges, expected to result from the Merger and the integration of the operations of Pillowtex. Although the following unaudited pro forma combined financial information gives effect to assumed annual cost savings of $21.6 million, it does not give effect to certain additional annual cost savings expected to be achieved following consummation of the Merger. The pro forma combined financial information does not purport to be indicative of Pillowtex's financial position or results of operations as of the date of the closing of the Merger or for any period ended on the date of the closing of the Merger, as of the date hereof or for any period ending on the date hereof, or as of or for any future date or period. The following unaudited pro forma combined financial information is based upon the historical financial statements of Pillowtex and Fieldcrest and should be read in conjunction with such historical financial statements and the related notes. In the preparation of the following unaudited pro forma combined financial information, it has been generally assumed that the historical value of Fieldcrest's assets and liabilities approximates the fair value thereof (except as described in the accompanying Notes to Unaudited Pro Forma Combined Financial Information of Pillowtex), as an independent valuation has not been completed. Pillowtex will be required to determine the fair value of the assets and liabilities of Fieldcrest (including intangible assets) as of the Effective Time. Although such determination of fair value is not presently expected to result in values that are materially greater or less than the values assumed in the preparation of the following unaudited pro forma combined financial information, there can be no assurance with respect thereto. The Unaudited Pro Forma Combined Balance Sheet at September 27, 1997 is based upon Pillowtex's financial position at September 27, 1997 and upon Fieldcrest's financial position at September 30, 1997. The Unaudited Pro Forma Combined Statement of Operations for the fiscal year ended December 28, 1996 is based upon Pillowtex's results of operations for its fiscal year ended December 28, 1996 and upon Fieldcrest's results of operations for its fiscal year ended December 31, 1996. The Unaudited Pro Forma Combined Statement of Operations for the nine months ended September 27, 1997 is based upon Pillowtex's results of operations for the nine months ended September 27, 1997 and upon Fieldcrest's results of operations for the nine months ended September 30, 1997. The home textiles and furnishings industry is seasonal in nature, with a higher proportion of sales and earnings usually being generated in the third and fourth quarters of the fiscal year than in other periods. Because of this seasonality and other factors, results of operations for interim periods are not necessarily indicative of results of operations for an entire fiscal year. 5 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION BALANCE SHEET SEPTEMBER 27, 1997 (IN THOUSANDS)
HISTORICAL PRO FORMA ---------------------------- ----------------------------------- PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED ----------- ---------- ----------- ----------- ASSETS Current assets: Cash ......................................... $ 34 $ 5,475 $ --(2) $ 5,509 Accounts receivable .......................... 104,353 170,071 -- 274,424 Inventories .................................. 150,084 202,064 19,000(1) 371,148 Prepaid expenses and other current assets .... 6,849 2,218 -- 9,067 ----------- ----------- ----------- ----------- Total current assets ....................... 261,320 379,828 19,000 660,148 Property, plant, and equipment, net ............ 98,916 342,392 50,000(1) 491,308 Goodwill, net .................................. 45,683 6,495 186,544(1) 238,722 Other assets, net .............................. 13,249 60,764 (44,129)(1) 46,447 (1,600)(3) 18,163(4) ----------- ----------- ----------- ----------- Total assets ............................. $ 419,168 $ 789,479 $ 227,978 $ 1,436,625 =========== =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable ........................... $ 50,699 $ 63,893 $-- $ 114,592 Accrued expenses ........................... 25,253 69,435 5,318(1) 99,374 (632)(3) Current portion of long-term debt .......... 1,553 4,697 -- 6,250 Deferred income taxes ...................... 2,581 20,593 1,266(1) 24,440 ----------- ----------- ----------- ----------- Total current liabilities ................ 80,086 158,618 5,952 244,656 Long-term debt ................................. 218,806 308,820 293,970(2)(4) 821,596 Deferred income taxes .......................... 9,499 39,758 4,984(1) 54,241 Other non-current liabilities .................. -- 52,962 733(1) 53,695 ----------- ----------- ----------- ----------- Total liabilities ........................ 308,391 560,158 305,639 1,174,188 Redeemable convertible preferred stock ......... -- -- 62,882(5) 62,882 Shareholders' equity: Preferred stock .............................. -- 15 (15)(6) -- Common stock ................................. 108 12,850 (12,818)(6) 140 Additional paid-in capital ................... 60,825 226,758 (137,044(6) 150,539 Retained earnings ............................ 50,316 106,923 (106,923(6) 49,348 (968)(3) Treasury stock ............................... -- (117,225) 117,225(6) -- Currency translation adjustment .............. (472) -- -- (472) ----------- ----------- ----------- ----------- Total shareholders' equity ............... 110,777 229,321 (140,543) 199,555 ----------- ----------- ----------- ----------- Total liabilities and shareholders' equity $ 419,168 $ 789,479 $ 227,978 $ 1,436,625 =========== =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Combined Financial Information. 6 \ UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 28, 1996 (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
HISTORICAL PRO FORMA ------------------------------- ------------------------------- PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED -------------- -------------- --------------- ------------ Net sales............................................ $ 490,655 $ 1,092,496 $ -- $ 1,583,151 Cost of goods sold................................... 411,048 956,522 3,713 (7) 1,364,368 (6,915) (8) ----------- ----------- ---------- ----------- Gross profit....................................... 79,607 135,974 3,202 218,783 Selling, general, and administrative expenses........ 41,445 105,405 (530) (1) 136,434 412 (7) (14,644) (8) 4,825 (7) (479) (9) Restructuring charges................................ -- 8,130 -- 8,130 ----------- ----------- ---------- ----------- Earnings from operations........................... 38,162 22,439 13,618 74,219 Nonoperating (income) expense: Interest expense................................... 13,971 26,869 22,606 (10) 63,446 Other income, net.................................. -- (5,604) -- (5,604) ----------- ----------- ---------- ----------- Total nonoperating expense..................... 13,971 21,265 22,606 57,842 ----------- ----------- ---------- ----------- Earnings before income taxes and extraordinary items 24,191 1,174 (8,988) 16,377 Income taxes......................................... 9,459 114 (1,198) (11) 8,375 ----------- ----------- ---------- ----------- Earnings before extraordinary items................ 14,732 1,060 (7,790) 8,002 Preferred dividends.................................. -- (4,500) 2,550 (12) (1,950) ----------- ----------- ---------- ----------- Earnings (loss) before extraordinary items applicable to common stock................. $ 14,732 $ (3,440) $ (5,240) $ 6,052 =========== =========== ========== =========== Primary earnings per share: Earnings (loss) before extraordinary items......... $ 1.39 $ (0.38) $ 0.44 ============== ============== ============== Weighted average common shares outstanding......... 10,617,722 9,023,958 13,794,251 (13) =========== =========== =========== Fully diluted earnings per share: Earnings (loss) before extraordinary items ........ $ -- $ 0.44 =========== ============== Weighted average common shares outstanding......... 14,413,901 13,794,251 (13) =========== =========== OTHER OPERATING DATA: Depreciation and amortization...................... $ 12,775 $ 36,678 $ 57,394 EBITDA(14)......................................... 50,937 59,117 131,613
See accompanying Notes to Unaudited Pro Forma Combined Financial Information. 7 UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 27, 1997 (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
HISTORICAL PRO FORMA ------------------------------ ------------------------------- PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED ----------- ------------ ------------- ------------ Net sales ............................................... $ 370,633 $ 820,635 $ -- $ 1,191,268 Cost of goods sold ...................................... 305,674 695,615 2,784 (7) 998,887 (5,186)(8) ------------ ------------ --------- ------------ Gross profit .......................................... 64,959 125,020 2,402 192,381 Selling, general, and administrative expenses ........... 33,728 85,563 (398)(1) 111,520 310 (7) (10,983)(8) 3,619 (7) (319)(9) ------------ ------------ --------- ------------ Earnings from operations .............................. 31,231 39,457 10,173 80,861 Nonoperating (income) expense: Interest expense ...................................... 13,957 18,708 19,970 (10) 52,635 Other income, net ..................................... -- (2,021) -- (2,021) ------------ ------------ ---------- ------------ Total nonoperating expense ........................ 13,957 16,687 19,970 50,614 ------------ ------------ ---------- ------------ Earnings before income taxes and extraordinary items .. 17,274 22,770 (9,797) 30,247 Income taxes ............................................ 6,702 8,087 (1,412)(11) 13,377 ------------ ------------ ---------- ------------ Earnings before extraordinary items ................... 10,572 14,683 (8,385) 16,870 Preferred dividends ..................................... -- (3,375) 1,912 (12) (1,463) ------------ ------------ ---------- ------------ Earnings before extraordinary items applicable to common stock ..................................... $ 10,572 $ 11,308 $ (6,473) $ 15,407 ============ ============ ========== ============ Primary earnings per share: Earnings before extraordinary items ................... $ 0.99 $ 1.23 $ 1.11(13) =============== =============== =============== Weighted average common shares outstanding ............ 10,669,225 9,204,171 16,554,087 ============ ============ ============ Fully diluted earnings per share: Earnings before extraordinary items ................... $ 1.23 $ 1.11(13) =============== =============== Weighted average common shares outstanding ............ 9,247,477 16,554,087 ============ ============ OTHER OPERATING DATA: Depreciation and amortization ......................... $ 10,642 $ 26,241 $ 42,879 EBITDA(14) ............................................ 41,873 65,698 123,740
See accompanying Notes to Unaudited Pro Forma Combined Financial Information. 8 NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (1) In connection with the Merger, at the Effective Time each then-outstanding share of Fieldcrest Common Stock was converted into the right to receive total consideration consisting of $27.00 in cash and 0.269 shares of Pillowtex Common Stock and each then-outstanding share of Fieldcrest Preferred Stock was converted into a right to receive total consideration consisting of $46.15 in cash and 0.4598286 shares of Pillowtex Common Stock. For purposes of the unaudited pro forma combined financial information contained herein, the fair market value of Pillowtex Common Stock is assumed to be $28.36 per share, which is the average closing market price of the Pillowtex Common Stock for the four consecutive trading days immediately preceding December 19, 1997 (i.e., the closing date of the Merger). The aggregate purchase price assumed to be paid by Pillowtex in connection with the acquisition of Fieldcrest pursuant to the Merger is summarized below. ISSUANCE OF PILLOWTEX COMMON STOCK: Number of shares of Fieldcrest Common Stock outstanding at the Effective Time 9,243,602 Conversion ratio 0.269 --------------- Number of shares of Pillowtex Common Stock assumed to be issued to holders of Fieldcrest Common Stock in connection with the Merger 2,486,529 --------------- Number of shares of Fieldcrest Preferred Stock outstanding at the Effective Time 1,500,000 Conversion ratio (rounded to the nearest one-hundredth) 0.46 --------------- Number of shares of Pillowtex Common Stock assumed to be issued to holders of Fieldcrest Preferred Stock in connection with the Merger 690,000 --------------- Total shares of Pillowtex Common Stock assumed to be issued in connection with the Merger 3,176,529 =============== AGGREGATE PURCHASE PRICE: Cash assumed to be paid to holders of Fieldcrest Common Stock (9,243,602 shares at $27.00 per share) $ 249,577,000 Cash assumed to be paid to holders of Fieldcrest Preferred Stock (1,500,000 shares at $46.15 per share) 69,225,000 Assumed fair value of Pillowtex Common Stock assumed to be issued in connection with the Merger (3,176,529 shares at $28.36 per share) 90,086,000 Severance costs assumed to be incurred in connection with the Merger 13,021,000 (a) Settlement of Fieldcrest Options and Fieldcrest SARs 6,774,000 (b) Early call premium on Fieldcrest 11.25% Senior Subordinated Debentures 4,782,000 Financial advisors, legal, accounting, and other professional fees 13,606,000 --------------- Aggregate purchase price $ 447,071,000 ===============
9 ALLOCATION OF PURCHASE PRICE: Aggregate purchase price $ 447,071,000 Less net book value of assets acquired 229,321,000 -------------- Excess of cost over net book value of assets acquired 217,750,000 Less adjustments to record assets and liabilities acquired at fair market value: Inventory 19,000,000 (c) Property, plant, and equipment 50,000,000 (d) Goodwill (6,495,000) (e) Other assets (44,129,000) (f) Accrued expenses (5,318,000) (g) Deferred income taxes - current (1,266,000) (h) Long-term debt 18,636,000 (i) Deferred income taxes - noncurrent (4,984,000) (h) Noncurrent liabilities ( 733,000) (j) 24,711,000 -------------- -------------- Excess of cost over fair market value of net assets $ 193,039,000 acquired (k) ==============
- -------------- (a) Reflects severance costs to be incurred in connection with the Merger in accordance with EITF 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination." (b) Reflects the settlement of the outstanding options to purchase shares of Fieldcrest Common Stock (the "Fieldcrest Options") and outstanding stock appreciation rights issued by Fieldcrest (the "Fieldcrest SARs") in connection with the Merger. (c) Reflects principally the elimination of Fieldcrest's last-in, first-out reserve, together with certain offsetting adjustments necessary to state inventory at fair market value. (d) Reflects a preliminary adjustment to fair value of Fieldcrest's property, plant, and equipment. The preliminary adjustment is based upon internal estimates and is allocated as follows: Land $ 5,000,000 Buildings 20,000,000 Machinery and Equipment 25,000,000 ------------- $ 50,000,000 =============
(e) Reflects the elimination of Fieldcrest's existing goodwill of $6,495,000. The reversal of the related amortization was $530,000 for the year ended December 28, 1996 and $398,000 for the nine months ended September 27, 1997. (f) Reflects an adjustment to record the (i) preliminary fair value remeasurement of Fieldcrest's pension asset resulting in a reduction of $27,087,000, (ii) elimination of the asset related to the Fieldcrest licensing agreement with Pillowtex of $10,393,000, (iii) write-off of the unamortized balance of debt issuance costs related to Fieldcrest's bank credit facility, Fieldcrest's 11.25% Senior Subordinated Debentures Due 2002 (the "11.25% Senior Subordinated Debentures"), and Fieldcrest's 6% Convertible Debentures due 2012 (the "Fieldcrest Convertible Debentures") of $4,649,000 and (iv) preliminary fair value adjustment related to notes receivable of $2,000,000. (g) Reflects the adjustment to record miscellaneous reserves of $5,318,000 charged to pre-Merger earnings. (h) To record a $6,250,000 deferred tax liability related to the temporary difference between the financial statement carrying amount and the tax basis of the Fieldcrest acquired assets as adjusted 10 at an assumed income tax rate of 35.0% for the years in which those differences are expected to be recovered or settled. (i) Reflects the adjustment to record the Fieldcrest Convertible Debentures at an amount that approximates the market value of the Fieldcrest Convertible Debentures on December 19, 1997, (i.e., the closing date of the Merger). The discount of $18,636,000 will be amortized to interest expense using the interest method over the remaining life of the Fieldcrest Convertible Debentures. (j) Reflects the preliminary fair value remeasurement of Fieldcrest's liability for post-retirement benefits other than pension ("OPEB") of $733,000. (k) Upon completion of its determination of fair values, Pillowtex may identify intangible assets (such as trade names) to which a portion of the purchase price should be allocated. Pillowtex believes that the amortization period for such identifiable intangible assets will also be 40 years. (2) Reflects the adjustment to record the following: Initial borrowings under the New Pillowtex Bank Facilities $398,956,000 Gross proceeds from the issuance and sale of the New Pillowtex Subordinated Notes 185,000,000 Gross proceeds from the issuance and sale of Pillowtex Preferred Stock 65,000,000 Cash assumed to be paid to holders of Fieldcrest Common Stock (9,243,602 shares at $27.00 per share) (249,577,000) Cash assumed to be paid to holders of Fieldcrest Preferred Stock (1,500,000 shares at $46.15 per share) (69,225,000) Repayment of Pillowtex's revolving credit facility (86,350,000) Repayment of Fieldcrest's revolving credit facility (100,000,000) Satisfaction and discharge of Fieldcrest's 11.25% Senior Subordinated Debentures (85,000,000) Severance costs assumed to be incurred in connection with the Merger (see note 1(a)) (13,021,000) Settlement of Fieldcrest Options and Fieldcrest SARs (see note 1(b)) (6,774,000) Early call premium on Fieldcrest 11.25% Senior Subordinated Debentures (4,782,000) Financial advisors, legal, accounting, and other professional fees (34,227,000) ------------ $ -- ============
(3) Reflects the adjustment to (a) write off the unamortized balance of debt issuance costs related to the existing Pillowtex bank credit facility of $1,600,000, (b) record the related tax benefit of $632,000 and (c) record a net reduction in retained earnings of $968,000. (4) Reflects the adjustment to record the following: Bank borrowings required to finance the Merger $ 398,956,000 Issuance and sale of the New Pillowtex Subordinated Notes 185,000,000 Repayment of Pillowtex's revolving credit facility (86,350,000) Repayment of Fieldcrest's revolving credit facility (100,000,000) Satisfaction and discharge of Fieldcrest's 11.25% Senior Subordinated Debentures (85,000,000) Discount of the Fieldcrest Convertible Debentures at fair market value (see note 1(i)) (18,636,000) ------------- $ 293,970,000 =============
Additionally, debt issuance costs of $18,163,000 were incurred in connection with the Merger. 11 (5) Reflects the issuance and sale of 65,000 shares of Pillowtex Preferred Stock at an offering price of $1,000 per share, net of offering costs of $2,118,000. (6) Reflects the (i) elimination of Fieldcrest's equity which will be canceled upon consummation of the Merger, (ii) issuance of 3,176,529 shares of Pillowtex Common Stock at a par value of $0.01 in connection with the Merger, and (iii) the related additional paid-in capital of $90,054,000, net of equity issuance costs of $340,000. (7) Reflects incremental depreciation and amortization expense as a result of the preliminary adjustment to fair value of Fieldcrest's property, plant, and equipment and the excess of cost over fair market value of the net assets acquired (see note 1) as follows:
Year Ended Nine Months Estimated December 28, Ended Useful Life 1996 September 27, 1997 ----------- ---- ------------------ Additional depreciation of Fieldcrest Merger property, plant, and equipment 8 to 20 years $ 4,125,000 $ 3,094,000 ============ =========== Amortization of excess of cost over fair value of net assets acquired 40 years $ 4,825,000 $ 3,619,000 ============ ===========
(8) Reflects the elimination of duplicate corporate expenses of $21,559,000 for the year ended December 28, 1996 and $16,169,000 for the nine months ended September 27, 1997. (9) Reflects the reversal of the amortization related to Pillowtex's debt issuance costs which have been written off in connection with the Merger (see note 3) of $479,000 for the year ended December 28, 1996 and $319,000 for the nine months ended September 27, 1997. (10) Reflects an adjustment to record additional interest expense, amortization of debt issuance costs, and the amortization of the discount on the Fieldcrest Convertible Debentures incurred in connection with the Merger. For each 1/8% change in the assumed effective interest rate on Pillowtex's floating-rate debt, interest expense would change by $672,000 and $481,000 for the year ended December 28, 1996 and the nine months ended September 27, 1997, respectively. (11) Reflects the income tax benefit related to the effects of the pro forma adjustments based upon an assumed composite income tax rate of 39.5%. (12) Reflects an adjustment to (i) reverse Fieldcrest's historical preferred stock dividends and (ii) record the dividends on the Pillowtex Preferred Stock assuming a 3% dividend rate as follows:
Year Ended Nine Months December 28, Ended 1996 September 27, 1997 ------------- ------------------ Reversal of historical Fieldcrest Preferred Stock dividends $ (4,500,000) $ (3,375,000) Addition of Pillowtex Preferred Stock dividends 1,950,000 1,463,000 ------------- ------------ $ (2,550,000) $ (1,912,000) ============= ============
If Pillowtex were to fail to attain specified earnings per share targets in 1999, dividends for fiscal years after 1999 would increase from the initial 3.0% rate to 7.0% or 10.0% and Pillowtex would be required to pay an additional dividend consisting of shares of Pillowtex Preferred Stock, in each case as described above. (13) The assumed conversion of the Fieldcrest Convertible Debentures and the Pillowtex Preferred Stock would have an anti-dilutive effect on earnings per share for the year ended December 28, 1996, and therefore has been excluded from the computation thereof. 12 The assumed conversion of the Fieldcrest Convertible Debentures would have an anti-dilutive effect on earnings per share for the nine months ended September 27, 1997, and therefore has been excluded from the computation thereof. (14) EBITDA is income before income taxes plus depreciation expense, amortization expense, and net interest expense. EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness; however, EBITDA should not be considered as an alternative to net income (as a measure of operating results) or to cash flows (as a measure of liquidity) computed in accordance with generally accepted accounting principles. In addition, EBITDA as presented herein may not be directly comparable to EBITDA as reported by other companies. -----END PRIVACY-ENHANCED MESSAGE-----