UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 1-5137
FIELDCREST CANNON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0586036
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
326 East Stadium Drive
EDEN, NC 27288
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number (910) 627-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, $1 Par Value New York Stock Exchange
6% Convertible Subordinated
Debentures Due 2012 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes x . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. (x)
The aggregate market value of voting stock held by non-affiliates of the
registrant was $239,582,429 as of March 1, 1994.
NUMBER OF SHARES OUTSTANDING AT MARCH 1, 1994
Common Stock 8,579,767
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates information by reference from the annual report to
shareowners for the year ended December 31, 1993. Part III incorporates
information by reference from the proxy statement for the annual meeting of
shareowners to be held on May 16, 1994.
Total pages 39
Page 1
Exhibit Index page 32<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
(as amended October 6, 1994)
Management's Discussion and Analysis
RESULTS OF OPERATIONS
The following summary income statement from continuing operations
sets forth the percentage relationship that certain costs and
expenses and other items in the income statement bear to net
sales (dollars in millions).
<TABLE>
<CAPTION>
1993 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Net sales $1,000.1 100.0% $981.8 100.0%
Cost of sales 834.7 83.5 818.7 83.4
Selling, general and
administrative 101.8 10.2 102.2 10.4
Restructuring charges 10.0 1.0 - -
Operating income 53.6 5.3 60.9 6.2
Interest expense 27.7 2.7 34.1 3.5
Other (income) expense, net (1.0) (.1) .2 -
Income from continuing operations
before income taxes,
extraordinary charge and
accounting changes 26.9 2.7 26.6 2.7
Federal and state income
taxes 11.9 1.2 10.9 1.1
Income from continuing operations
before extraordinary charge
and accounting changes $15.0 1.5% $ 15.7 1.6%
</TABLE>
<TABLE>
CAPTION
<PAGE>
2
1991
Amount Percent
<S> <C> <C>
Net sales $960.6 100.0%
Cost of sales 828.6 86.3
Selling, general and
administrative 92.4 9.6
Restructuring charges - -
Operating income 39.6 4.1
Interest expense 37.0 3.8
Other (income) expense, net (1.0) (.1)
Income from continuing operations
before income taxes,
extraordinary charge and
accounting changes 3.6 .4
Federal and state income
taxes 2.2 .3
Income from continuing operations
before extraordinary charge
and accounting changes $ 1.4 .1%
</TABLE>
1993 compared to 1992
Net sales from continuing operations in 1993 increased to
$1,000.1 million in 1993, compared to $981.8 million in 1992.
The 1.9% increase was due primarily to increased volume.
Although there were some improvements in sales mix, average
selling prices in 1993 were lower than 1992.
Operating income as a percent of sales was 5.3% in 1993
compared to 6.2% in 1992. Operating income was reduced 1.0% in
1993 due to $10 million of restructuring charges and .2% in 1992
by $2 million of nonrecurring items (see Note 4 of the Notes to
Consolidated Financial Statements). The restructuring charges
for 1993 include $8 million for the cost of a voluntary early
retirement program which was accepted by 184 employees and
severance for additional staff reductions, and $2 million for
direct non-recurring expenses incurred by the Company in
evaluating the purchase of the capital stock of Amoskeag Company
("Amoskeag"). These expenses did not contribute to the ultimate
consummation of the tender offer to acquire Amoskeag. The
acquisition of Amoskeag was accounted for as a purchase of
treasury stock and is not expected to affect future operating
income. Before these adjustments operating income as a percent
of sales was 6.3% in 1993 compared to 6.4% in 1992. Despite the
increase in sales volume, operating income has not risen due to
continued competitive pressures on selling prices.
Selling, general and administrative expenses as a percent of<PAGE>
sales decreased from 10.4% in 1992 to 10.2% in 1993. The 1992
expenses include $2 million of costs related to the consolidation
of certain sales offices in New York City. Without these costs,
selling, general and administrative expenses as a percent of
sales during 1992 and 1993 would have been approximately the
same.
2
Interest expense decreased $6.4 million in 1993. The
redemption of $100 million of 13.5% Debentures in July 1992 with
the proceeds from the sale of 1.5 million shares of Common Stock
and $85 million of 11.25% Debentures reduced interest expenses by
approximately $2.5 million and the remaining $3.9 million
reduction of interest expense was primarily due to a reduction of
debt with the proceeds from the sale of the carpet and rug
division in July 1993.
The effective income tax rate was 44.3% in 1993, compared to
41.0% in 1992. The increase in the effective income tax rate is
due primarily to the increase in the federal statutory income tax
rate from 34% to 35% and a related $1.4 million non-cash expense
to adjust existing deferred tax balances arising from differences
in the book and tax bases of the Company's assets and
liabilities. See Note 14 of the Notes to Consolidated Financial
Statements.
Income from continuing operations before accounting changes
was $15.0 million or $1.24 per share in 1993 compared to $15.7
million or $1.39 per share in 1992. Income from the discontinued
carpet and rug division was $3.2 million or $.27 per share in
1993 compared to $4.7 million or $.42 per share in 1992. The
carpet and rug division was sold in July 1993 and a $15.1 pre-tax
gain on the disposition increased net income $9.2 million or $.78
per share. The Company adopted FAS 106, "Employers' Accounting
for Postretirement Benefits other than Pensions" and FAS 109,
"Accounting for Income Taxes", effective January 1, 1993. The
cumulative effect of these accounting changes reduced 1993 net
income by $70.3 million or $5.99 per share. After the effect of
accounting changes a net loss of $42.9 million, or $3.70 per
share, was incurred in 1993.
Significant changes in the Company's capital structure
occurred during 1993 as a result of the sale of the carpet and
rug division, the issuance of 1.5 million shares of convertible
preferred stock and the acquisition of 3.6 million shares of the
Company's common stock with the purchase of Amoskeag. Assuming
that all of these transactions had occurred as of the beginning
of 1993 and excluding the non-recurring restructuring charges and
income tax adjustment referred to above, proforma 1993 income
from continuing operations was $2.15 per common share. For
additional information see Note 11 of the Notes to Consolidated
Financial Statements.<PAGE>
3
1992 compared to 1991
Net sales from continuing operations in 1992 increased to
$981.8 million, compared to $960.6 million in 1991. This
improvement in bed and bath product sales represents a 2.2%
increase over 1991 sales.
Operating income as a percent of sales increased to 6.2%
compared to 4.1% in 1991.
Higher operating income in the bed and bath division resulted
principally from lower cotton costs, increased sales volume and
related higher mill activity levels. Results for 1992 include a
$3.5 million pre-tax charge to provide for the cost of closing
and disposing of a towel manufacturing facility in York, South
Carolina. Production from this facility has been transferred to
other Company towel plants without a reduction in overall towel
production capacity. The Company also recognized a $1.5 million
pre-tax credit in 1992 from the adjustment of reserves
established in 1990 for discontinuing the automatic blanket
operations which were no longer required. The combined effect of
the two non-recurring items reduced operating income by $2.0
million and net income by $1.2 million, or $.11 per share. An
increase in wages and other cost increases were partially offset
by savings realized from the Company's cost reduction efforts.
Selling, general and administrative expenses as a percent of
sales increased from 9.6% in 1991 to 10.4% in 1992. The increase
was due primarily to higher selling expenses experienced during
1992 including $2 million of costs related to the consolidation
of certain sales offices in New York City.
Interest expense decreased $2.8 million in 1992 due primarily
to the redemption of the 13.5% Debentures on July 10, 1992 with
the proceeds from the sale of both 1.5 million shares of Common
Stock at $17.75 per share and $85 million of 11.25% Debentures.
Interest expense was also reduced by the repayment of other debt
with cash flows from operating activities.
The effective income tax rate was 41.0% in 1992, compared to
61.0% in 1991. The decrease in the effective income tax rate is
due primarily to basis adjustments in acquired companies which
did not change with increases or decreases in pre-tax income
under APB 11. For additional information see Note 14 of the<PAGE>
Notes to Consolidated Financial Statements.
Income from continuing operations before extraordinary charge
was $15.7 million or $1.39 per share in 1992 compared to $1.4
million or $.13 per share in 1991. Income from the discontinued
carpet and rug division was $4.7 million or $.42 per share in
1992 compared to $1.8 million or $.17 per share in 1991. A
prepayment premium of $5.4 million on the early retirement of the
Company's 13.5% Debentures and the write-off of approximately
$3.0 million of deferred financing costs related to the
Debentures and the old revolving credit facility resulted in an
after-tax extraordinary charge of $5.2 million, or $.46 per
share. Net income after discontinued operations and the
extraordinary charge was $15.2 million, or $1.35 per share.
4
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements are for working
capital, principally inventory and accounts receivable, and
capital expenditures. The Company historically has financed
these requirements, including its working capital requirements
which follow a seasonal pattern, with funds generated from its
operations and through borrowings under its revolving credit
agreements.
The table below summarizes for the continuing business of the
Company cash provided by operating and financing activities and
cash used for additions to plant and equipment.
<TABLE>
(CAPTION>
(Dollars in thousands)
1993 1992
<S> <C> <C>
Cash provided by:
Net income (loss) $(42,931) $ 15,250
Cumulative effect of accounting changes 70,305 -
Extraordinary charge from early retirement of debt - 5,179
Premium paid on early retirement of debt - (5,400)
(Income) from discontinued operations (12,408) (4,739)
Depreciation and amortization 31,539 31,370
Deferred income taxes 2,329 4,826
Working capital, excluding effects of disposition
of discontinued operations (20,764) (6,306)
Other 1,726 (2,348)
Financing activities (89,513) (50,507)
Total cash provided (used) (89,513) (63)
Cash used for:
Additions to plant and equipment 21,594 20,687
Acquisition of net assets held for sale 32,536 -
Other, including sale of plant and equipmnt (12,621) (3,955)
Total cash used 41,509 16,732
Increase (decrease) in cash from
continuing operations (131,022) (16,795)
Cash provided by discontinued<PAGE>
operations 130,222 12,122
Increase (Decrease) in cash $ (800) $ (4,673)
</TABLE>
Working capital requirements increased in 1993 primarily
because accounts receivables increased by $13.1 million and
inventories increased by $10.6 million after excluding the
effects of disposition of discontinued operations. Cash provided
by working capital increased in 1992 primarily because accounts
receivables decreased $10.8 million and accounts payable and
accrued liabilities increased by $1.0 million.
5
On November 24, 1993 the Company completed a tender offer for
all of the outstanding shares of Amoskeag for an aggregate of
approximately $141.7 million. The purchase was financed with
$72.4 million of net proceeds from the issuance of 1.5 million
shares of $3.00 Convertible Preferred Stock and the balance with
borrowings under the Company's revolving credit facility. The
preferred stock has an annual dividend requirement of $4.5
million. Amoskeag owned 3,606,400 shares of the Company's common
stock which has been assigned a cost of $117.2 million and
treated as the purchase of treasury stock. The remaining assets
of Amoskeag have been valued at their net realizable value. At
December 31, 1993, such assets held for sale totalled $32.5
million and are expected to be a source of cash during 1994.
Total debt as a percent of total capitalization (long-term
debt, short-term debt and shareowners' equity) was 61% at
December 31, 1993, compared to 57% at the end of 1992.
Capital expenditures totalled $21.6 million in 1993 compared
to $20.7 million spent in 1992. The Company also entered into
operating lease agreements with a financial institution for
certain new manufacturing and warehouse equipment having a fair
market value of approximately $8 million in 1993 and $9 million
in 1992. Capital expenditures for 1994 are expected to be
approximately $50 million. Included in the 1994 expenditures is
the start of a three-year $90 million capital project for a new
weaving plant at the Company's Columbus, Ga./Phoenix City, Ala.
towel mill. It is anticipated that financing of future capital
expenditures will be provided by cash flows from operations,
borrowings under the Company's revolving credit facility, and,
possibly, the sale of long-term debt or equity securities.
The Company's revolving credit facility allows the Company to
borrow up to $150 million. The Company elected to reduce the
facility to $150 million from $235 million in November 1993
because of reduced borrowing requirements. The Company uses its
revolving credit facility for long-term debt purposes and its
seasonal borrowing requirements during the year. Short-term
borrowings are required during the year to finance seasonal
increases in inventories and receivables. The Company has an<PAGE>
interest rate cap covering a total notional principal amount of
$50 million to hedge a portion of its exposure to changes in the
cost of its variable rate revolving credit debt. The $.5 million
cost of the interest rate cap is being amortized over the three
year life of the agreement ending in the first quarter of 1996.
The cap agreement provides for a quarterly payment to the Company
when the reference 3-month Euromarket-based rate exceeds the 6%
cap rate. No payments were received during 1993.
At December 31, 1993, the revolving credit facility was
secured by a first lien on substantially all of the Company's
assets and bore interest, at the Company's option, at the prime
rate fixed by The First National Bank of Boston plus 1%, or at a
Euromarket-based rate plus 2.5%. In March 1994 the revolving
credit facility was amended to reduce the interest rate on
borrowings, at the Company's option, to the prime rate fixed by
The First National Bank of Boston, or at a Euromarket-based rate
plus 1%. The amendment also extended the facility through
January 6, 1998 and removed the lien on the Company's plant and
equipment.
6
The revolving credit facility requires, among other things,
that the Company maintain certain financial ratios with regard to
working capital, interest coverage, funded debt and net worth.
It also limits the amount of dividends that may be paid by the
Company during any twelve-month period to the lesser of 40% of
the Company's net income during the immediately preceding twelve
months or $15 million and contains additional financial covenants
which may further restrict the ability of the Company to pay
dividends. The agreement places restrictions on the Company's
ability to incur debt or liens, to make certain investments and
to effect certain mergers, consolidations or sales of assets or
changes in control.
At December 31, 1993, borrowings under the $150 million
revolving term debt agreement totalled $76.4 million and $73.6
million of the facility was available and unused.
As of December 31, 1993 the Company lowered its discount rate
from 8.25% to 7.25% for valuing its accumulated pension benefit
obligations under FAS 87, "Employers' Accounting for Pensions"
and its accumulated postretirement health care and life insurance
benefit obligations under FAS 106, "Employers' Accounting for
Postretirement Benefits other than Pensions". The lower discount
rate of 7.25% results in a higher value for the calculated
obligations and will result in higher expenses in 1994 than would
have been provided with the previous 8.25% discount rate. The
increase in expense is not expected to materially affect the
Company's future operating results or financial condition.
Item 8. Consolidated Financial Statements and Supplementary Data
(as amended October 8, 1994 to revise the Consolidated
Statement of Cash Flows and notes 4 and 8 of Notes to
the Consolidated Financial Statements).
QUARTERLY DATA (Unaudited)<PAGE>
Data in millions, except per share information
<TABLE>
<CAPTION>
1993 quarter ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net sales $203.9 $256.5 $256.7 $282.9
Gross profit 36.9 39.3 43.0 46.3
Operating income 11.9 14.0 7.5 20.2
Income (loss) from continuing operations
before accounting changes 2.7 4.1 (.5) 8.7
Income and gain on sale from
discontinued operations 1.0 3.0 8.4 -
Cumulative effect of accounting
changes (70.3) - - -
Net income (loss) (66.6) 7.1 7.9 8.7
Primary earnings (loss) per share from
continuing operations before
accounting changes .22 .34 (.04) .77
Primary earnings per share from
discontinued operations .09 .25 .69 -
Primary earnings (loss) per share from
cumulative effect of accounting
changes (5.86) - - -
Primary earnings per share (5.55) .59 .65 .77
Fully diluted earnings per share - .55 .60 .67
</TABLE>
7
<TABLE>
<CAPTION>
1992 quarter ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net sales 212.4 $255.3 $243.2 $270.9
Gross profit 33.9 40.0 43.8 45.3
Operating income 8.8 16.3 18.3 17.5
Income (loss) from continuing operations
before extraordinary charge (.1) 4.2 5.8 5.8
Income from discontinued operations .7 1.2 .8 2.0
Extraordinary charge-early retirement
of debt - (5.2) - -
Net income .6 .2 6.6 7.8
Primary earnings per share from
continuing operations before
extraordinary charge - .39 .48 .48
Primary earnings per share from
discontinued operations .06 .12 .07 .17
Primary earnings per share from
extraordinary charge-early retirement
of debt - (.49) - -
Primary earnings per share .06 .02 .55 .65
Fully diluted earnings per share .06 - .52 .61
</TABLE>
Quarterly earnings per share amounts presented do not equal the
annual earnings per share amount due to the purchase of treasury
shares during 1993 and the issuance of shares during 1992.<PAGE>
The first quarter of 1993 includes the cumulative effect of the
changes in accounting principles related to the Company's accounting
for income taxes and post-retirement benefits other than pensions,
effective January 1, 1993, which reduced net income by $70.3 million
or $5.86 per share. Fully diluted earnings per share are not
presented for the quarter as the effects are anti-dilutive.
The third quarter of 1993 includes restructuring charges of $10
million which reduced after-tax income from continuing operations by
$6.1 million and $1.4 million of additional income taxes due to the
increase in the statutory federal income tax rate. These items
reduced income from continuing operations and net income by $7.5
million, or $.62 per share. Discontinued operations for the third
quarter of 1993 includes a gain from disposition of the carpet and rug
division which increased income by $9.2 million, or $.76 per primary
share.
The second quarter of 1992 included an extraordinary charge for
early retirement of debt which reduced net income for the quarter by
$5.2 million, or $.49 per primary share. Fully diluted earnings per
share for the quarter are not presented as the effects are anti-
dilutive.
The fourth quarter of 1992 included a $3.5 million pre-tax charge
for closing and disposing of a towel manufacturing facility and a $1.5
million pre-tax credit from adjustment of reserves established in 1990
for discontinuing the automatic blanket operations which were no
longer required. The combined effect of the two non-recurring items
reduced net income for the quarter by $1.2 million, or $.10 per share.
8
Consolidated Statement of Income and Retained Earnings
<TABLE>
<CAPTION>
Year Ended December 31 1993 1992
Dollars in thousands, except per share data
<S> <C> <C>
Net sales $1,000,107 $981,773
Cost of sales (notes 4, 5) 834,701 818,729
Selling, general and administrative 101,843 102,189
Restructuring charges (note 4) 10,000 -
Total operating costs and expenses 946,544 920,918
Operating income 53,563 60,855
Other deductions (income):
Interest expense 27,659 34,149
Other, net (975) 130
Total other deductions 26,684 34,279
Income before income taxes 26,879 26,576
Federal and state income taxes (note 14) 11,913 10,886<PAGE>
Income from continuing operations before
extraordinary charge and accounting changes 14,966 15,690
Income from discontinued operations 3,201 4,739
Gain from disposition of
discontinued operations 9,207 -
Extraordinary charge - early
retirement of debt - (5,179)
Cumulative effect of accounting changes (70,305) -
Net income (loss) (42,931) 15,250
Preferred dividends (463) -
Earnings (loss) on common $(43,394) $ 15,250
Amount added to (subtracted from)
retained earnings (43,394) 15,250
Retained earnings, January 1 136,429 121,179
Retained earnings, December 31 $ 93,035 $136,429
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Income (loss) per common share:
Primary from continuing operations before
extraordinary charge and accounting changes $ 1.24 $ 1.39
Income from discontinued operations .27 .42
Gain from disposition of discontinued operations .78 -
Extraordinary charge - (.46)
Cumulative effect of accounting changes (5.99) -
Primary earnings per common share $ (3.70) $ 1.35
Fully diluted before extraordinary
charge (note 1) $ - $ 1.78
Fully diluted after extraordinary charge
and accounting changes (note 1) $ - $ -
Average primary shares outstanding 11,732,505 11,256,461
Average fully diluted shares outstanding 11,733,276 14,082,678
</TABLE>
The Notes to consolidated financial statements are an
integral part of the Consolidated financial statements.
9
Consolidated Statement of Income and Retained Earnings
<TABLE>
<CAPTION>
Year Ended December 31 1991
Dollars in thousands, except per share data
<S> <C>
Net sales $960,663
Cost of sales (notes 4, 5) 828,634
Selling, general and administrative 92,416
Restructuring charges (note 4) - <PAGE>
Total operating costs and expenses 921,050
Operating income 39,613
Other deductions (income):
Interest expense 36,998
Other, net (959)
Total other deductions 36,039
Income before income taxes 3,574
Federal and state income taxes (note 14) 2,179
Income from continuing operations before
extraordinary charge and accounting changes 1,395
Income from discontinued operations 1,770
Gain from disposition of
discontinued operations -
Extraordinary charge - early
retirement of debt -
Cumulative effect of accounting changes -
Net income (loss) 3,165
Preferred dividends -
Earnings (loss) on common $ 3,165
Amount added to (subtracted from)
retained earnings 3,165
Retained earnings, January 1 118,014
Retained earnings, December 31 $121,179
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Income (loss) per common share:
Primary from continuing operations before
extraordinary charge and accounting changes $ .13
Income from discontinued operations .17
Gain from disposition of discontinued operations -
Extraordinary charge -
Cumulative effect of accounting changes -
Primary earnings per common share $ .30
Fully diluted before extraordinary
charge (note 1) $ .30
Fully diluted after extraordinary charge
and accounting changes (note 1) $ .30
Average primary shares outstanding 10,422,810
Average fully diluted shares outstanding 10,423,490
</TABLE>
The Notes to consolidated financial statements are an
integral part of the Consolidated financial statements.
9
Consolidated Statement of Financial Position<PAGE>
<TABLE>
<CAPTION>
At December 31, 1993 1992
Dollars in thousands
<S> <C> <C>
ASSETS
Cash $ 3,865 $ 4,665
Accounts receivable less allowances of $12,161
in 1993 and $15,942 in 1992, principally trade 164,419 181,056
Inventories (note 5) 209,834 244,321
Deferred tax assets - 23,202
Net assets held for sale 32,536 -
Other prepaid expenses and current assets 2,491 7,303
Total current assets 413,145 460,547
Plant and equipment, net (notes 6, 9) 294,277 372,432
Deferred charges and other assets 33,024 31,012
Total assets $740,446 $863,991
LIABILITIES AND SHAREOWNERS' EQUITY
Accounts and drafts payable $ 61,365 $ 69,399
Federal and state income taxes 262 3,627
Deferred income taxes 14,799 -
Accrued liabilities (note 7) 65,996 66,592
Short-term debt (note 8) - 14,056
Current portion of long-term debt 8,397 10,293
Total current liabilities 150,819 163,967
Senior long-term debt (note 8) 84,611 143,419
Subordinated long-term debt (note 8) 210,000 210,000
Total long-term debt 294,611 353,419
Deferred income taxes 35,182 41,484
Other non-current liabilities 66,504 20,643
Total non-current liabilities 396,297 415,546
Total liabilities 547,116 579,513
Commitments (notes 9, 12, 13)
Preferred Stock, $.01 par value (note 10)
Shares authorized: 10,000,000
Shares issued, 1993: 1,500,000
(aggregate liquidation preference
of $75,000) 15 -
Common Stock, $1 par value (note 10)
Shares authorized: 25,000,000
Shares issued, 1993: 12,186,167 12,186 8,339
Shares issued, 1992: 8,338,941
Class B Common Stock, $1 par value (note 10)
Shares authorized: 15,000,000
Shares issued, 1992: 3,635,114 - 3,635
Additional paid in capital 212,799 136,075
Minimum pension liability adjustment (7,480) -
Retained earnings 93,035 136,429
Excess purchase price for Common Stock acquired
and held in treasury - 3,606,400 shares (117,225) -
Total shareowners' equity 193,330 284,478
Total liabilities and shareowners' equity $ 740,446 $863,991
</TABLE>
The Notes to Consolidated financial statements are an
integral part of the Consolidated financial statements.
10
Consolidated Statement of Cash Flows<PAGE>
<TABLE>
<CAPTION>
For the years ended December 31, 1993 1992 1991
Dollars in thousands
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $(42,931)$ 15,250 $ 3,165
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting changes for
FAS 106 and 109 70,305 - -
Extraordinary charge for early retirement of debt - 5,179 -
Premium paid on early retirement of debt - (5,400) -
Income and gain on sale from discontinued operations (12,408) (4,739) (1,770)
Depreciation and amortization 31,539 31,370 29,982
Deferred income taxes 2,329 4,826 3,156
Other 1,726 (2,348) (1,977)
Change in current assets and liabilities, excluding
effects of disposition of discontinued operations:
Accounts receivable (13,132) 10,821 (3,697)
Inventory (10,637) (8,614) (31,902)
Current deferred income taxes (3,971) (1,699) (895)
Other prepaid expenses and current assets 1,638 1,737 (5,647)
Accounts payable and accrued liabilities 8,700 984 (4,853)
Federal and state income taxes (3,362) 3,077 550
Net cash provided by (used in) continuing
operating activities 29,796 50,444 (13,888)
Cash provided by (used in) discontinued operations (17,405) 12,122 13,700
Net cash provided by (used in) operating activities 12,391 62,566 (756)
Cash flows from investing activities:
Additions to plant and equipment (21,594) (20,687) (32,541)
Acquisition of net assets held for sale (32,536) - -
Proceeds from disposals of plant and equipment 12,621 3,955 3,554
Proceeds from disposition of discontinued
operations 147,627 - -
Net cash provided by (used in) investing
activities 106,118 (16,732) (28,987)
Cash flows from financing activities:
Increase (decrease) in revolving debt and
other short-term debt (59,899) (46,684) 35,727
Proceeds from issuance of other long-term debt - 82,450 -
Payments on long-term debt (14,811)(111,497) (10,346)
Proceeds from issuance of common stock 339 25,224 -
Purchase of treasury stock (117,225) - -
Proceeds from issuance of preferred stock 72,375 - -
Dividends paid (88) - -
Net cash provided by (used in)
financing activities (119,309) (50,507) 25,381
Net decrease in cash (800) (4,673) (3,794)
Cash at beginning of year 4,665 9,338 13,132
Cash at end of year $ 3,865 $ 4,665 $ 9,338
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest expense $30,163 $44,266 $44,225
Income tax payments 23,239 5,559 1,431
Noncash investing and financing activities:
Vendor financing for equipment purchases - - 8,459
</TABLE>
The Notes to Consolidated financial statements are an
integral part of the Consolidated financial statements.<PAGE>
11
Notes to Consolidated Financial Statements
Tabular Amounts in thousands except per share
(1) Significant Accounting Policies
Basis of presentation - The consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. Certain prior year items have been
reclassified to conform to the 1993 presentation.
The Company operates in the textile industry and is
principally involved in the manufacture and sale of home
furnishings products. These sales are primarily to department
stores, mass retailers, specialty stores and large chain stores.
Sales to one customer (Wal-Mart Stores and its affiliates)
represented 17.4%, 16.0% and 15.5% of total sales of the Company
in 1993, 1992 and 1991, respectively.
Inventories - Inventories are valued at the lower of cost,
determined principally on a last-in, first-out basis, or market.
Depreciation - Buildings, machinery and equipment are
depreciated for financial reporting purposes on the straight line
method over the estimated useful lives of these assets.
Depreciation for tax purposes is provided on an accelerated
basis.
Deferred financing fees - Debt financing fees are amortized
over the term of the related debt.
Interest rate caps - The Company has a program to reduce its
exposure to changes in the cost of its variable rate borrowings
by the use of interest rate cap agreements. The cost of the
interest rate cap agreement is deferred and amortized as interest
expense over the periods covered by the agreement.
Income taxes - The Company adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
(FAS 109), effective January 1, 1993. Under FAS 109, deferred
income taxes are recognized, at enacted tax rates, to reflect the
future income tax effect of reported differences between the book
and tax bases of the Company's assets and liabilities, assuming
they will be realized and settled, respectively, at the amount
reported in the Company's financial statements. See Note 14 for
additional information.
Income per common share - Primary earnings per common share is
based on net income after preferred dividend requirements and the
weighted average number of shares of Common Stock and Class B
Common Stock outstanding during the year and common stock
equivalents attributable to outstanding stock options. Fully
diluted earnings per common share are calculated assuming
conversion, when dilutive, of the 6% convertible subordinated<PAGE>
sinking fund debentures and the $3 Series A Convertible Preferred
Stock. Fully diluted income from continuing operations and net
income per common share for 1993 and 1992 are not presented as
effects are anti-dilutive.
12
(2) Discontinued Operations
On July 30, 1993 the Company completed the sale of its carpet
and rug operations to Mohawk Industries, Inc. Accordingly, the
carpet and rug results have been classified as discontinued
operations in the Statement of Income for all periods presented.
Results of operations for the carpet and rug operations include
an allocation of corporate interest based on net assets. The
sale resulted in a $15.1 million pre-tax gain which increased
after-tax net income by $9.2 million, or $.78 per share, in 1993.
Summary financial results for the discontinued operations are as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C>
<C>
Net sales $144,301 $235,506 $251,773
Operating income 9,957 16,214 12,692
Interest expense 3,688 7,184 8,479
Income before income taxes 5,964 9,031 4,231
Income from discontinued
operations 3,201 4,739 1,770
</TABLE>
(3) Acquisition and Merger with Amoskeag Company
On November 24, 1993 a newly formed and wholly owned
subsidiary of the Company completed a tender offer for all of the
outstanding shares of Amoskeag Company ("Amoskeag") for a cash
price of $40 per share, or an aggregate of approximately $141.9
million including certain costs. The acquisition has been
accounted for as a purchase by the Company of the net assets of
Amoskeag held for sale at their net realizable values and as the
purchase of treasury stock. Amoskeag owned 3,606,400 shares of
the Company's common stock which has been assigned a cost of
$117.2 million after a preliminary allocation of $24.7 million to
the net assets of Amoskeag. The Company is in the process of
selling all of the operating assets of Amoskeag and the valuation
includes anticipated costs during a one year disposal period.
These assets are primarily the Bangor and Aroostook Railroad and
certain real estate properties.
(4) Restructuring Charges
Concurrent with the purchase of the capital stock of Amoskeag
Company the Company implemented a number of programs to reduce
overhead and cut costs in 1993. As a result of this process,
restructuring charges were incurred in 1993 which reduced pre-tax
operating income by $10 million. The restructuring charges
include $8 million for the cost of a voluntary early retirement
program which was accepted by 184 employees and severance for
additional staff reductions, and $2 million for direct non-
recurring expenses incurred by the Company in evaluating the
purchase of the capital stock of Amoskeag Company. These
expenses did not contribute to the ultimate consummation of the
tender offer to acquire Amoskeag Company. These charges reduced<PAGE>
net income by $6.1 million, or $.52 per share.
Results for 1992 include a $3.5 million pre-tax charge to
provide for the cost of closing and disposing of a towel
manufacturing facility in York, South Carolina. Production from
this facility has been transferred to other Company towel plants
without a reduction in overall towel production capacity. The
Company also reduced the reserves it established in 1990 to
provide for discontinuing its automatic blanket facility by
recognizing a pre-tax credit of $1.5 million in 1992. The
combined effect of the non-recurring items reduced net income for
the year by $1.2 million, or $.11 per share. 13
(5) Inventories
Inventories are valued at the lower of cost or market and
consisted of the following at December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Finished goods $110,223 $120,274
Work in progress 65,025 82,509
Raw materials and supplies 34,586 41,538
Total $209,834 $244,321
</TABLE>
Approximately 76% of the inventories at year-end 1993 and 79% at
year-end 1992 were valued on the last-in, first-out method
(LIFO). If the first-in, first-out method of accounting had been
used, inventories would have been greater by approximately $33
million and $39 million at December 31, 1993 and 1992,
respectively. The LIFO reserve for continuing operations
increased $2.8 million in 1993 and decreased $9.6 million in
1992.
(6) Plant and equipment
Plant and equipment is stated at cost and consisted of the
following at December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land $ 5,978 $ 8,408
Buildings 181,409 230,491
Equipment 366,333 447,274
Plant additions in progress 18,707 11,931
Total 572,427 698,104
Accumulated depreciation (278,150) (325,672)
Net plant and equipment $294,277 $372,432
</TABLE>
(7) Accrued Liabilities
Accrued liabilities were as follows at December 31:
TABLE
<PAGE>
<CAPTION>
1993 1992
<S> <C> <C>
Salaries and other compensation $14,177
$16,241
Pension, medical and other employee
benefit plans 22,058
16,256
Advertising expense 1,987
3,071
Interest expense 3,375
3,954
Other 24,399
27,070
Total $65,996
$66,592
</TABLE>
14
(8) Debt
Short-term debt at December 31, 1992, of $14.1 million was
borrowed under a $25 million bank credit facility for the purpose
of financing the purchase of raw cotton and wool. The facility
was repaid and cancelled during 1993.
Long-term debt at December 31 was as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Senior long-term debt:
Revolving term debt $ 76,426 $122,269
Industrial revenue bonds, due in installments
through 2002 11,085 14,485
10.5% promissory note, due in installments
and repaid in January 1994 5,497 10,962
9.65% vendor financing - 5,996
Total senior long-term debt 93,008 153,712
Less current portion 8,397 10,293
Net Senior long-term debt 84,611 143,419
Subordinated long-term debt:
6% convertible subordinated sinking fund debentures
due 1997 to 2012 125,000 125,000
11.25% senior subordinated debentures due
2002 to 2004 85,000 85,000
Total subordinated long-term debt 210,000 210,000
Total long-term debt $294,611 $353,419
</TABLE>
The Company's revolving credit facility allows the Company to
borrow up to $150 million through January 3, 1996. Accordingly,
borrowings under the revolving credit facility are classified as
long-term debt. The Company elected to reduce the facility to
$150 million from $235 million in November 1993 because of
reduced borrowing requirements. Interest rates on the revolving
term debt are, at the Company's option, at the prime rate fixed
by The First National Bank of Boston plus 1%, or at a Euromarket-
based rate plus 2.5%. The average interest rate on the revolving<PAGE>
term debt was 6.3% on December 31, 1993.
The Company has a program to reduce its exposure to changes in
the cost of its variable rate revolving credit borrowings by the
use of interest rate cap agreements. At December 31, 1993 the
Company has an interest rate cap covering a total notional
principal amount of $50 million. The $.5 million cost of the
interest rate cap is being amortized over the three year life of
the agreement ending in the first quarter of 1996. The cap
agreement provides for a quarterly payment to the Company when
the reference 3-month Euromarket based rate exceeds the 6% cap
rate.
The revolving credit facility is secured by a first lien on
substantially all of the Company's assets and requires, among
other things, that the Company maintain certain financial ratios
with regard to working capital, interest coverage, funded debt
and net worth. It also limits the amount of dividends that may
be paid by the Company to the lesser of 40% of the Company's net
income during the immediately preceding twelve months or $15
million and contains additional financial covenants which may
further restrict the ability of the Company to pay dividends.
The revolving term debt agreement also places restrictions on the
Company's ability to incur debt or liens, to make certain
investments and to effect certain mergers, consolidations or
sales of assets or changes in control.
15
On June 25, 1992, the Company sold $85 million of 11.25%
Senior Subordinated Debentures due 2004. The proceeds of this
offering plus additional amounts from a Common Stock offering
were used to redeem the $100 million 13.5% Senior Subordinated
Debentures due 2001. A prepayment premium of $5.4 million on the
early retirement of the 13.5% debentures and the write-off of
approximately $3.0 million of deferred financing costs related to
the debentures and the old revolving credit facility resulted in
an after-tax extraordinary charge of $5.2 million, or $.46 per
share.
The Company's 6% Convertible Subordinated Sinking Fund
Debentures are convertible into shares of Common Stock of the
Company at a conversion price of $44.25 per share.
At December 31, 1993, the fair value of the Company's 6%
Convertible Subordinated Debentures was $103.4 million compared
to a carrying value of $125 million and the fair value of the
11.25% Subordinated Debentures was $94.4 million compared to a
carrying value of $85 million. The fair value of the debentures
is based on quoted market prices. Differences between fair value
and carrying value of the Company's other debt were not
significant.
The aggregate principal and sinking fund payments required to
be made on long-term debt during each of the five years
subsequent to December 31, 1993 are: 1994, $8.4 million; 1995,
$2.3 million; 1996, $78.0 million; 1997, $7.8 million and 1998,
$7.8 million.
(9) Lease Obligations
The Company leases certain real estate and equipment under
various operating leases. Listed below are the future minimum
rental payments required under these operating leases with
noncancelable terms in excess of one year at December 31, 1993.
<TABLE>
<CAPTION>
Real
Estate Equipment Total
S> <C> <C> <C
<PAGE>
1994 $ 4,334 $8,535 $12,869
1995 4,588 7,546 12,134
1996 4,132 5,942 10,074
1997 3,655 5,387 9,042
1998 3,194 4,920 8,114
Subsequent years 25,936 7,588 33,524
Net minimum lease payments $45,839 $39,918 $85,757
</TABLE>
Total continuing operations rental expense for all operating
leases was $18.9 million, $17.5 million, and $16.0 million for
1993, 1992 and 1991, respectively.
16
(10) Shareowners' Equity
In November 1993 the Company's shareowners authorized 10
million shares of undesignated preferred stock and the
issuance of up to 1.8 million shares of preferred stock. On
November 24, 1993, the Company sold 1.5 million shares of
$3.00 Series A Convertible Preferred Stock ("$3.00 Preferred
Stock") in a private offering and received net proceeds of
$72.4 million. Each $3.00 Preferred Stock share is
convertible into 1.7094 shares of Common Stock, equivalent to
a conversion price of $29.25 on the $50 offering price.
Annual dividends are $3.00 per share and are cumulative. The
$3.00 Preferred Stock may be redeemed at the Company's option
on or after September 1, 2004, in whole or in part, at $50
per share plus accrued and unpaid dividends.
In the event the Company's 11.25% Senior Subordinated
Debentures are not outstanding or have been defeased the
$3.00 Preferred Stock may be redeemed, in whole or in part,
at the option of the Company, at a redemption price of $51.50
per share beginning as of September 10, 1998 and at premiums
declining to the $50 liquidation preference by September
2004.<PAGE>
16
On November 24, 1993, the Board of Directors adopted a
Stockholder Rights Plan and declared a dividend of one preferred
stock purchase right ("right") for each outstanding share of the
Company's Common Stock. Similar rights have been, and generally
will be, issued in respect of Common Stock subsequently issued.
Each right becomes exercisable, upon the occurrence of certain
events, for one one-hundredth of a share of Series B Junior
Participating Preferred Stock, $.01 par value, at a purchase
price of $80 or, in certain circumstances, Common Stock or other
securities, cash or other assets having a then current market
price (as defined and subject to adjustment) equal to twice such
purchase price. Under the Stockholder Rights Plan, 500,000
shares of Series B Junior Participating Preferred Stock have been
reserved. The rights currently are not exercisable and will be
exercisable only if a person or group acquires beneficial
ownership of 15% or more of the Company's outstanding shares of
Common Stock. The rights, which expire on December 6, 2003, are
redeemable in whole, but not in part, at the Company's option at
any time for a price of $.02 per right.
Following the acquisition of Amoskeag the Company converted
all shares of Class B Common Stock held by Amoskeag into an
equivalent number of shares of Common Stock. Under the Company's
Certificate of Incorporation, all remaining shares of Class B
Common Stock were automatically converted into an equivalent
number of shares of Common Stock, and no additional shares of
Class B Common Stock may be issued in the future without the
prior approval of the holders of Common Stock.
The Company has a Director Stock Option Plan which was adopted
by the Board of Directors and approved by the shareowners. Under
the option plan, an annual grant of an option for 1,000 shares of
Common Stock is awarded to each person who is a Director on the
fifth business day after the annual meeting of shareowners. <PAGE>
Options to Directors who are also employees of the Company are
incentive stock options and to all others are nonqualified
options. The price per share is the fair market value on the
date each option is granted. Options may be exercised up to
seven years from the date of grant, but no option may be
exercised during the six-month period following its grant except
in the case of death or disability. Prior to an amendment and
restatement of the plan in 1992, options were granted with a one-
year life and for 3,000 shares. The amendment also extended the
life of the options granted in 1991 to an expiration date of
1998. Under the option plan, 500,000 shares of Common Stock have
been reserved for awards. The following is an analysis of
options under the Director Stock Option Plan:
<TABLE>
<CAPTION> Number of Option
Shares Price
<S> <C> <C>
Outstanding, January 1, 1991 36,000 $19.00
Awarded 36,000 13.00
Cancelled (39,000) $19.00- 13.00
Outstanding, January 1, 1992 33,000 13.00
Awarded 12,000 17.625
Exercised (3,000) 13.00
Outstanding, January 1, 1993 42,000 17.625-13.00
Awarded 12,000 23.625
Exercised (21,000) 23.625-13.00
Cancelled (6,000) 23.625-13.00
Outstanding and exercisable at December 31, 1993 27,000 $23.625-13.00
Available for grant at December 31, 1993 449,000
</TABLE>
17
On September 11, 1991, the Board of Directors approved the
grant of a nonqualified stock option to purchase 20,000 shares of
Common Stock to the Company's chief executive officer. The per
share price is $14.875, the fair market value on that date. This
option became exercisable on January 1, 1992, and expires on
September 10, 1998.<PAGE>
17
The Company has a Long-Term Incentive Plan (the Plan) which
was adopted by the Board of Directors and approved by the
shareowners in 1988. Under the Plan, employees who are senior
executives of the Company may be awarded shares of Common Stock
without cost to the employee. The fair market value of the
shares at the date of award is accounted for as deferred
compensation and is amortized over the restricted period. At
December 31, 1993, unamortized deferred compensation of $.6
million is included in shareowners'
equity as a reduction of additional paid in capital. Awards
under the Plan are vested after the employee completes four years
of continuous employment beginning with the year for which the
award is made. Vesting occurs prior to completion of four years
of employment if the employee dies while employed, reaches normal
retirement or becomes disabled. Under the Plan, 650,000 shares
of Common Stock have been reserved for awards. The following is
an analysis of shares of restricted stock under the Long-term
Incentive Plan:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Number of Shares:
Outstanding at beginning of year 156,526 145,877 165,600
Awarded 75,000 50,000 35,000
Cancelled (4,450) (2,430)
(7,583)
Issued (115,402) (36,921)
(47,140)
Outstanding at end of year 111,674 156,526 145,877<PAGE>
Available for grant at end of year 324,548 45,098 92,668
Market value on date of grant for shares
granted during year $18.75 $15.375 $6.00
</TABLE>
Awards under the Plan will be 70,000 shares in 1994.
Transactions with respect to common stock and additional paid in
capital during the three years ended December 31, 1993, were as
follows:
<TABLE>
<CAPTION>
Common Stock
Shares Amount
<S> <C> <C>
Balance 12/31/90 6,753,486 $6,753
Restricted shares awarded 35,000 35
Restricted shares cancelled (7,583) (8)
Earned compensation,
restricted stock - -
Exchange of shares 7,184 8
Balance 12/31/91 6,788,087 6,788
Restricted shares awarded 50,000 50
Restricted shares cancelled (2,430) (2)
Earned compensation,
restricted stock - -
Director stock option exercised 3,000 3
Sale of stock 1,500,000 1,500
Exchange of shares 284 -
Balance 12/31/92 8,338,941 8,339
</TABLE>
18
<TABLE>
<CAPTION>
Additional
Class B Paid in
Common Stock Capital
Shares Amount Amount
<S> <C> <C>
Balance 12/31/90 3,642,582 $3,643 $110,830
Restricted shares awarded - - (35)
Restricted shares cancelled - - 8
Earned compensation,
restricted stock - - 768
Exchange of shares (7,184) (8) -
Balance 12/31/91 3,635,398 3,635 111,571
Restricted shares awarded - - (50)
Restricted shares cancelled - - 2
Earned compensation,
restricted stock - - 831
Director stock option exercised - - 36
Sale of stock - - 23,685<PAGE>
Exchange of shares (284) - -
Balance 12/31/92 3,635,114 3,635 136,075
</TABLE/>
18
</TABLE>
<TABLE>
<CAPTION>
Common Stock
Shares Amount
<S> <C> <C>
Shares issued to employee
savings plans 120,562 120
Restricted shares awarded 75,000 75
Restricted shares cancelled (4,450) (4)
Earned compensation,
restricted stock - -
Director Stock options exercised 21,000 21<PAGE>
Net proceeds from sale of
preferred stock in excess of
par value - -
Exchange or conversion of shares 3,635,114 3,635
Balance 12/31/93 12,186,167 $12,186
</TABLE>
<TABLE>
<CAPTION>
Additional
Class B Paid in
Common Stock Capital
Shares Amount Amount
<S> <C> <C>
Shares issued to employee
savings plans - - 2,883
Restricted shares awarded - - (75)
Restricted shares cancelled - - 4
Earned compensation,
restricted stock - - 1,126
Director Stock options exercised - - 426
Net proceeds from sale of
preferred stock in excess of
par value - - 72,360
Exchange or conversion of shares (3,635,114) (3,635) -
Balance 12/31/93 $ - $ - $212,799
</TABLE>
19
Total shares of Common Stock outstanding as of December 31,
1993 are reduced to 8,579,767 shares by 3,606,400 shares of<PAGE>
treasury stock acquired with the acquisition of Amoskeag. The
$117.2 million cost of the treasury stock reduces total
shareowners' equity.
(11) Pro Forma Earnings Information (unaudited)
On November 24, 1993 the Company acquired 3,606,400 shares
of common stock as treasury shares with the acquisition of
Amoskeag and sold 1.5 million shares of $3 Series A Convertible
Preferred Stock in a private offering for $72.4 million. On July
30, 1993 the Company sold its carpet and rug operations for
approximately $120 million after income taxes and expenses.
Income from continuing operations was reduced $6.1 million in
1993 by a $10 million pre-tax restructuring charge and $1.4
million by an income tax adjustment for the increase in federal
income tax rates. Set forth below are unaudited proforma
earnings per share assuming the transactions had occurred as of
the beginning of 1993 and excluding the non-recurring items
incurred during 1993:
<TABLE>
<CAPTION>
Primary Fully Diluted
<S> <C> <C>
Income from continuing operations
before accounting changes $2.15 $1.97
Average common shares
outstanding (thousands) 8,477 13,866
</TABLE>
The computation of proforma income per share includes dividends
on the 1.5 million shares of preferred stock, reduced interest
expense from reducing the revolving credit facility by $120
million from the net proceeds from the sale of the carpet and rug
operations, and increased interest from additional borrowings
under the revolving credit facility of $68 million for the
acquisition of Amoskeag. Historical income from continuing
operations before the non-recurring items was $22.5 million, or
$1.88 per primary share and $1.82 on a fully diluted basis.
(12) Employee Pension and Savings Plans
The Company has trusteed pension plans covering essentially
all employees. The plans provide pension benefits that are based
on the employees' compensation and service. The Company's policy
is to fund amounts required by applicable regulations.
Pension expense amounted to $13.2 million in 1993, $6.1
million in 1992 and $7.6 million in 1991. Net pension expense
for 1993, 1992 and 1991 consisted of the following components:
19<PAGE>
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost (benefits earned during the
period) $ 8,802 $ 8,631 $ 8,781
Interest cost on projected benefit obligation 15,124 13,938 12,674
Actual return on assets (20,985) (5,161)
(32,091)
Net amortization and deferral 4,023 (11,293) 18,194
Curtailment and special termination benefits 6,263 - -
Net pension cost $13,227 $ 6,115 $ 7,558
</TABLE>
During 1993 the Company recognized a curtailment loss with the
sale of its carpet and rug division and special termination
benefits from a voluntary early retirement program.
The table below sets forth the plans' funded status at December
31:
<TABLE>
<CAPTION>
1993
1992
Assets Exceed Accumulated Assets
Exceed
Accumulated Benefits
Accumulated
Benefits Exceed Assets Benefits
<C> <C> <C>
Projected benefit obligation:
Vested benefits $64,460 $148,022 $167,235
Non-vested benefits 2,559 6,255 7,599
Accumulated benefit obligation 67,019 154,277 174,834
Additional amounts related to
projected compensation levels - 6,801 11,352
Total projected benefit obligation 67,019 161,078
186,186
Plan assets at fair value,
primarily publicly traded stocks
and bonds 69,266 144,164
184,057
Plan assets over (under) projected
benefit obligation 2,247 (16,914)
(2,129)
Unrecognized net (gain) loss 13,293 19,917
15,346
Unrecognized net transition assets (2,747) (854)
(4,624)
Unrecognized prior service cost 158 3,552
5,198
Adjustment required to recognize
minimum liability - (15,814)
-
Net pension asset (liability)
recognized in the Consolidated
Statement of Financial Position $12,951 $(10,113) $<PAGE>
13,791
</TABLE>
Assumptions used in determining the funded status of the pension
plans were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Discount rate 7.25% 8.25% 8.5%
Increase in compensation levels 4.5% 5.5% 5.5%
Expected long-term rate of return
on assets 9% 9% 9%
</TABLE>
20
For the pension plan with accumulated benefits in excess of
assets at December 31, 1993, the Consolidated Statement of
Financial Position reflects an additional pension liability of
$15.8 million, a long-term intangible asset of $3.6 million and a
reduction of shareowners' equity of $7.5 million, net of deferred
tax benefits.
The Company also sponsors employee savings plans which cover
substantially all employees. The Company amended the plans for
1993 to provide a Company match of 70% of employee contributions
up to two percent of compensation and a match of 20% of employee
contributions for the next two percent of compensation. The
matching formula may be changed yearly at the discretion of the
Company. The match is contributed quarterly in Common Stock of
the Company. Expense of the Company match was $3.0 million in
1993.
(13) Postretirement Health Care and Life Insurance Benefits
The Company adopted FAS 106, "Employers' Accounting for
Postretirement Benefits other than Pensions", effective January
1, 1993. The cumulative effect on prior years of the accounting
change was charged to income in 1993 which resulted in a pre-tax
charge of $35.1 million and reduced net income by $21.8 million,
or $1.86 per share.
The Company provides medical insurance premium assistance
and life insurance benefits to retired employees. The medical
premium assistance payments are at a fixed dollar amount based on
the retiree's years of service. Essentially all of the Company's
employees become eligible for these benefits when they reach
retirement age while working for the Company. The Company's
policy is to fund the plans as benefits are paid.
The table below sets forth the plans' combined status at
December 31:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Accumulated postretirement
benefit obligation -
Retirees $24,224 $23,452
Fully eligible active participants 9,897 10,273<PAGE>
Other active participants 6,298 6,477
Total 40,419 40,202
Plan assets - -
Accumulated postretirement
benefit obligations in excess
of plan assets at December 31 40,419 40,202
Unrecognized net gain (loss) (2,163) -
Transition obligation recognized
January 1, 1993 as a cumulative
effect of an accounting change - (35,123)
Accrued postretirement benefit cost
recognized in the Consolidated
Statement of Financial Position
at December 31 $38,256 $ 5,079
</TABLE>
The discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% as of December 31,
1993 and 8.25% as of December 31, 1992. Medical premium
assistance payments are at a fixed dollar amount based on the
retiree's years of service and, therefore, the plan is not
affected by a health care cost trend rate assumption.
21
Net periodic postretirement benefit cost for 1993 included the
following components:
<TABLE>
<CAPTION>
<S> <C>
Service Cost (benefits earned during the period) $ 974
Interest cost on projected benefit obligation 3,033
Net amortization and deferral (93)
Curtailment gain (1,850)
Net periodic postretirement benefit cost $ 2,064
</TABLE>
During 1993 the Company recognized a curtailment gain with
the sale of its carpet and rug division.
Prior to 1993, the expense associated with these benefits
was recognized on a cash basis when the benefits were paid. The
payments amounted to $6.2 million in 1992 and $5.0 million in
1991.
(14) Income taxes
The Company adopted FAS 109, "Accounting for Income Taxes",
effective January 1, 1993. The cumulative effect on prior years
of the accounting change was charged to net income in 1993 which
reduced net income by $48.5 million, or $4.13 per share.
The adoption of FAS 109 changes the Company's method of
accounting for income taxes from the deferred method (APB 11) to
an asset and liability approach. Previously, the Company
deferred the past income tax effects of timing differences
between financial reporting and taxable income. The asset and
liability approach requires the recognition of deferred income
tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
Under FAS 109, assets and liabilities acquired in purchase
business combinations are assigned their fair values, and
deferred taxes are provided for the lower or higher tax bases.
Under APB 11, values were assigned net-of-tax. In adopting FAS
109, the Company adjusted the carrying amounts of assets and
liabilities acquired in the Cannon and Bigelow acquisitions in<PAGE>
1986 and reduced deferred income tax liabilities to reflect the
then current federal tax rate of 34% as opposed to the higher
federal tax rates that were in effect when the deferred taxes
originated. The carrying amounts have subsequently been adjusted
to reflect the increase in the federal tax rate to 35%.
At December 31, 1993, the Company had $51.3 million of
deferred tax assets and $101.3 million of deferred income tax
liabilities which have been netted for presentation purposes.
The significant components of these amounts as shown on the
balance sheet are as follows:
<TABLE>
<CAPTION>
12/31/93
Current Noncurrent
Liability Liability
<S> <C> <C>
Depreciation $ - $51,805
Inventory Valuation 35,961
Deferred compensation 95 (1,659)
Accruals and allowances (16,952) (12,294)
Operating loss and tax credit
carryover (4,305) -
Other - (2,670)
Total deferred tax liabilities $14,799 $35,182
</TABLE>
22
The provision for income taxes for continuing operations
included in the Consolidated Statement of Income and Retained
Earnings consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current
Federal $ 5,483 $ 7,408 $1,000
State 1,130 952 -
Deferred
Federal 4,605 1,741 818
State 695 785 361
Total income taxes on
income from continuing operations
before extraordinary charge and
accounting charges $11,913 $10,886 $2,179
</TABLE>
A tax benefit of $3.2 million was recognized on the $8.4 million
pre-tax charge for early retirement of debt occurring in 1992.
The income tax effect of items which altered the Company's
effective income tax rate from the statutory federal rate were as
follows:
<TABLE>
<CAPTION>
1993 1992
Amount Percent Amount Percent
<S> <C> <C> <C> <C>
Tax at statutory rate $ 9,408 35.0% $ 9,035 34.0%
State taxes, net 1,186 4.4 1,147 4.3
Basis adjustments in<PAGE>
acquired companies - - 612 2.3
Effect of tax rate change 1,400 5.2 - -
Other (81) (.3) 92 .4
Net taxes $11,913 44.3% $10,886 41.0%
</TABLE>
<TABLE>
<CAPTION>
1991
Amount Percent
<S> <C> <C>
Tax at statutory rate $1,215 34.0%
State taxes, net 82 2.3
Basis adjustments in
acquired companies 612 17.1
Effect of tax rate change - -
Other 270 7.6
Net taxes $2,179 61.0%
</TABLE>
23
Prior to the adoption of FAS 109, the tax effects of timing
differences were as follows:
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Depreciation $ 2,515 $ 2,808
Deferred compensation (129) 327
Accruals and allowances (1,339) 2,132
Accruals related to
acquisitions - 1,227
Increase (reduction) in
deferred taxes due to net
operating loss and tax
credit carryovers 586 (867)
Alternative minimum tax - (4,526)
Other 893 78
Total deferred tax provision $2,526 $ 1,179
</TABLE>
The Company has an alternative minimum tax credit carryforward of
$4.3 million which may be carried forward indefinitely.<PAGE>
23
REPORT OF INDEPENDENT AUDITORS
The Shareowners and
Board of Directors of
Fieldcrest Cannon, Inc.
We have audited the accompanying consolidated statement of
financial position of Fieldcrest Cannon, Inc. as of December 31,
1993 and 1992, and the related consolidated statements of income
and retained earnings, and cash flows for each of the three years
in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that<PAGE>
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Fieldcrest Cannon, Inc. at December 31,
1993 and 1992, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted
accounting principles.
As explained in Notes 13 and 14 to the consolidated financial
statements, effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."
ERNST & YOUNG
Greensboro, North Carolina
January 28, 1994
24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K (as amended October 6, 1994)
(a) 1.
and 2. Financial statements and financial statement schedules
The financial statements and schedules listed in the
accompanying index to financial statements are filed as
part of this annual report.
3. Exhibits
The exhibits listed as applicable on the accompanying
Exhibit Index at page 32 are filed as part of this annual
report. Exhibit numbers (10)1. through (10)12. represent<PAGE>
management contracts or compensatory plans or arrangements
required to be filed as an exhibit by Item 601 of
Regulation S-K.
(b) Reports on Form 8-K
None.
25
FIELDCREST CANNON, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) 1 & 2)
Page
Numbers
to this
Amended
Form
10-K
<PAGE>
Consolidated statement of financial position at 10
December 31, 1993 and 1992
Consolidated statement of income and retained 9
earnings for each of the three years in the
period ended December 31, 1993
Consolidated statement of cash flows for each 11
of the three years in the period ended
December 31, 1993
Notes to consolidated financial statements 12-23
Report of independent auditors 24
Schedules for each of the three years in the period
ended December 31, 1993:
V - Consolidated plant and equipment 27
VI - Consolidated accumulated depreciation of 28
plant and equipment
IX - Short-term borrowings 29
X - Supplementary income statement information 30
All other schedules are omitted because the required
information is not applicable or is not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the financial statements and
notes thereto.
26
FIELDCREST CANNON, INC.
SCHEDULE V - CONSOLIDATED PLANT AND EQUIPMENT
(In Thousands)
<TABLE>
<CAPTION>
Balance at Balance
at
Beginning of Additions Retirements Close
of
Classification Year at Cost or Sales Year
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:<PAGE>
Land $ 8,408 $ 76 $ (2,506) $
5,978
Buildings 230,491 3,299 (52,381)
181,409
Equipment 447,274 11,558 (92,499)
366,333
Plant Additions in Process 11,931 9,882 (3,106)
18,707
Total $698,104 $24,815 $(150,492)(1)
$572,427
Year Ended December 31, 1992:
Land $ 8,408 $ 24 $ (24) $
8,408
Buildings 225,861 8,779 (4,149)
230,491
Equipment 434,723 23,547 (10,996)
447,274
Plant Additions in Process 19,199 (7,268) -
11,931
Total $688,191 $25,082 $(15,169)
$698,104
Year Ended December 31, 1991:
Land $ 8,555 $ 54 $ (201) $
8,408
Buildings 224,923 6,031 (5,093)
225,861
Equipment 402,670 38,140 (6,087)
434,723
Plant Additions in Process 19,429 (230) -
19,199
Total $655,577 $43,995 $(11,381)
$688,191
</TABLE>
(1) In 1993 the Company sold its carpet and rug operations.
Depreciation is provided on a straight-line basis on estimated<PAGE>
useful lives; buildings - 15 to 33 years; equipment - 5 to 15
years.
27
FIELDCREST CANNON, INC.
SCHEDULE VI - CONSOLIDATED ACCUMULATED DEPRECIATION
OF PLANT AND EQUIPMENT
(In Thousands)
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning of Charged Retirements Close of
Classification Year to Income or Sales Year
<S> <C> <C> <C> <C>
Year Ended December 31, 1993:
Buildings $ 95,170 $ 8,945 $(20,183) $ 83,932
Equipment 230,502 25,093 (61,377) 194,218
Total $325,672 $34,038 $(81,560)(1) $278,150
Year Ended December 31, 1992:
Buildings $ 88,206 $ 9,115 $ (2,151) $ 95,170
Equipment 211,799 27,901 (9,198) 230,502
Total $300,005 $37,016 $(11,349) $325,672
Year Ended December 31, 1991:
Buildings $ 81,871 $ 9,015 $(2,680) $ 88,206
Equipment 190,104 27,136 (5,441) 211,799
Total $271,975 $36,151 $(8,121) $300,005
</TABLE>
(1) In 1993 the Company sold its carpet and rug operations.<PAGE>
28
FIELDCREST CANNON, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In Thousands)
<TABLE>
<CAPTION>
Maximum
amount
outstanding at
Balance at any month-end
end of during the
period period
<S> <C> <C>
(1) Notes payable to lenders :
1993 $ -0- $174,550
1992 $ 14,056 $175,638
1991 $165,564 $165,564
</TABLE>
<TABLE>
<CAPTION>
Average Weighted
amount average
outstanding interest
during the rate during
period (2) the period (2)
<S> <C> <C>
(1)
Notes payable to lenders :
1993 $32,804 6.12%
1992 $57,312 6.46%
1991 $36,654 8.54%
</TABLE>
(1) Notes payable represent seasonal borrowing requirements
during the year under the Company's revolving credit facility and<PAGE>
during 1993 and 1992 bank borrowings to finance the purchase of
raw cotton and wool. The revolving credit facility is also
utilized for long-term financing. Effective May 6, 1992, the
Company obtained a new revolving credit facility which allowed
the Company to borrow up to $235 million through January 3, 1996.
The Company elected to reduce the facility to $150 million from
$235 million in November 1993 because of reduced borrowing
requirements. The new facility replaced a $235 million bank term
debt agreement that would have matured December 31, 1992.
Accordingly, borrowings under the revolving credit facility were
classified as long-term debt in 1993 and 1992 and as short-term
debt in 1991. Interest rates on the revolving term debt were, at
the Company's option, at the prime rate fixed by The First
National Bank of Boston plus 1%, or at a Euromarket-based rate
plus 2.5%. The average interest rate on the revolving term debt
was 6.3% on December 31, 1993.
(2) The average amount outstanding during the period was
computed by averaging the month-end balances during the year.
The weighted average interest rate was computed by dividing the
interest expense by the average daily amount outstanding.
29
FIELDCREST CANNON, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
(In Thousands)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
1993 1992
1991
<S> <C> <C>
Advertising Costs $16,547 $17,652
$17,625
Maintenance and repairs $20,892 $19,555
$16,890
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferrals (1) (1)
(1)<PAGE>
Taxes, other than payroll and
income taxes (1) (1)
(1)
Royalties (1) (1)
(1)
</TABLE>
(1) Less than 1% of total sales
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIELDCREST CANNON, INC.<PAGE>
By: /s/ Thomas R. Staab
Thomas R. Staab
Vice President and
Chief Financial
Officer
October 5, 1994
31
EXHIBIT INDEX TO
ANNUAL REPORT ON FORM 10-K FOR
FIELDCREST CANNON, INC.
FOR THE YEAR ENDED DECEMBER 31, 1993
Page Number
Exhibit or Incorporation
Number Description by Reference to
(3) 1. Restated Certificate of Exhibit 3-1 to
Incorporation, as amended the Registrant's
to date. Registration
Statement on
Form S-3 filed on
February 18, 1994.
2. Amended and Restated By-Laws Exhibit 3-1 to
of the Registrant as amended Report on
to November 24, 1993. Form 8-K Filed on
December 9, 1993.
(4) 1. Rights Agreement, dated as of Exhibit 1 to the
November 24, 1993, between the Registrant's
Registrant and The First Registration
National Bank of Boston, Statement on Form
which includes as Exhibit A filed December
the Form of Rights Certificate 3, 1993.
of Designations, as Exhibit B the
Form of Rights Certificate, and
as Exhibit C the Summary
of Rights to Purchase Preferred Stock.<PAGE>
2. Indenture dated as of March 15, Exhibit 4.9 to the
1987, relating to the Registrant's
Registrant's 6% Convertible Registration
Subordinated Debentures due Statement on Form
2012 between the Registrant S-3
and Wachovia Bank and Trust (No. 33-12436)
Company, N.A., including filed on
the form of debenture. March 6, 1987.
3. Indenture dated as of June 1, Exhibit 4.7 of
1992 relating to the Senior Amendment No. 1
Subordinated Debentures Due to the Registrant's
2004, between the Registrant Registration
and First Union National Statement on Form S-
Bank, as Trustee, including 3 (No. 33-47348)
the form of debenture. filed on June 3,
1992.
4. Amended and Restated Revolving Exhibit 4-4 to
Credit Agreement dated as of Report on Form
March 10, 1994, by and among 10-K for the fiscal
the Registrant, The First year ending
National Bank of Boston as December 31, 1993
agent, Continental Bank N.A., filed on March 30,
Philadelphia National Bank, 1994.
and First Union National Bank
of North Carolina, as lead managers,
and certain lenders.
32
The registrant, by signing this Report, agrees to
furnish the Securities and Exchange Commission
upon its request a copy of any instrument which
defines the rights of holders of long-term debt of the
Registrant and all of its subsidiaries for which
consolidated or unconsolidated financial statements
are required to be filed, and which authorizes a total
amount of securities not in excess of 10% of the
total assets of the Registrant and its subsidiaries on
a consolidated basis.
Page Number
Exhibit or Incorporation
Number Description by Reference to
(10) 1. Amended and Restated Director Exhibit A to the
Stock Option Plan of the Registrant's proxy
Registrant approved by the statement for the
stockholders of the Corporation annual meeting of
on April 28, 1992. shareowners held
on April 28, 1992.
2. Stock Option Agreement between Exhibit 4.1 to the
the Registrant and James M. Registrant's
Fitzgibbons dated as of Registration
September 11, 1991. Statement on Form
S-8 filed on
December 23, 1991.
3. Employee Retention Agreement Exhibit 10.2 to
between the Registrant and Report on Form 10-<PAGE>
James M. Fitzgibbons effective Q for the quarter
as of July 9, 1993. ended September
30, 1993.
4. Employment Agreement between Exhibit 10-2 to
the Registrant and Charles G. Report on Form 10-
Horn dated as of January 1, K for fiscal year
1988. ending December
31, 1988.
5. Instrument of Amendment dated Exhibit 10-3 to
October 23, 1989, between the Report on Form 10-
Registrant and Charles G. Horn, K for fiscal year
amending Exhibit 10-4 above. ending December
31, 1989.
6. Instrument of Amendment dated Exhibit 10.1 to
July 23, 1993 by and between Report on Form 10-
the Registrant and Charles G. Q for the quarter
Horn, amending the employment ended September
agreement between the 30, 1993.
Registrant and Charles G. Horn
as of January 1, 1988.
7. Employee Retention Agreement Exhibit 10.4 to
between the Registrant and Report on Form
Chris L. Kametches effective 10-Q for the quarter
as of July 9, 1993. ended September
30, 1993.
33
Page Number
Exhibit or Incorporation
Number Description by Reference to
8. Instrument of Amendment dated Exhibit 10.5 to
July 29, 1993 between the Report on Form 10-
Registrant and Chris L. Q for the quarter
Kametches, amending Exhibit ended September
10.7 above. 30, 1993.
9. Employee Retention Agreement Exhibit 10-9 to
between the Registrant and Report on Form
Robert E. Dellinger effective 10-K for fiscal
as of July 9, 1993. year ending
December 31, 1993
filed on
March 30, 1994.
10. Instrument of Amendment dated Exhibit 10-10 to
July 29, 1993 between the Report on Form 10-
Registrant and Robert E. K for fiscal year
Dellinger, amending Exhibit ending December
10.9 above. 31, 1993
filed on
March 30, 1994.
11. Form of Employee Retention Exhibit 10.6 to
Agreement between the Report on Form 10-
Registrant and other executive Q for the quarter<PAGE>
officers of the Registrant ended September
effective as of July 9, 1993. 30, 1993.
12. Form of Instrument of Exhibit 10.7 to
Amendment dated July 29, 1993 Report on Form 10-
between the Registrant and Q for the quarter
other executive officers ended September
of the Registrant, amending 30, 1993.
Exhibit 10.11 above.
(11) Computation of Primary and 35 - 37
Fully Diluted Net Income (Loss)
per Share.
(13) 1993 Annual Report to Shareowners. Exhibit 13 to
Report on Form 10-K
for the fiscal year
ending December 31,
1993 filed on
March 30, 1994.
(21) Subsidiaries of the Registrant. 38
(23) Consent of independent auditors. 39
34
<TABLE>
<CAPTION>
Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share
For the three months For the twelve months
ended December 31 ended December 31
1993 1992 1993 1992
<S> <C> <C> <C> <C>
Average shares outstanding 10,665,320 11,974,055 11,709,355 11,233,615
Add shares assuming exercise of
options reduced by the number
of shares which could have been
purchased with the proceeds from
exercise of such options 20,779 11,823 23,150 11,846
Average shares and equivalents
outstanding, primary 10,686,099 11,985,878 11,732,505 11,256,461
Average shares outstanding 10,665,320 11,974,055 11,709,355 11,244,615
Add shares giving effect to
the conversion of the
convertible subordinated
debentures 2,824,859 2,824,859 (1) 2,824,859<PAGE>
Add shares giving effect to the
conversion of the convertible
preferred stock 1,054,131 - (1) -
Add shares assuming exercise of
options reduced by the number of
shares which could have been
purchased with the proceeds from
exercise of such options 20,111 12,741 23,921 13,204
Average shares and equivalents
outstanding, assuming full dilution 14,564,421 14,811,655 11,733,276 14,082,678
Primary Earnings
Income from continuing operations
before extraordinary charge
and accounting changes $ 8,670,000 $ 5,801,000 $ 14,966,000 $15,690,000
Income from discontinued
operations - 2,026,000 3,201,000 4,739,000
Gain from disposition of
discontinued operations - - 9,207,000 -
Extraordinary charge - - -
(5,179,000)
Cumulative effect of accounting
changes - - (70,305,000 -
35
Net income (loss) $ 8,670,000 $ 7,827,000 $(42,931,000 $15,250,000
Preferred dividends (463,000) - (463,000) -
Earnings (loss) on Common $ 8,207,000 $ 7,827,000 $(43,394,000) $15,250,000
</TABLE>
35
<TABLE>
<CAPTION> Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share (continued)
For the three months For the twelve months
ended December 31 ended December 31
1993 1992 1993 1992
<S> <C> <C> <C> <C>
Primary earnings (loss) per share<PAGE>
Income from continuing operations
before extraordinary charge
and accounting changes $ .77 $ .48 $ 1.24 $ 1.39
Income from discontinued
operations - .17 .27 .42
Gain from disposition of
discontinued operations - - .78 -
Extraordinary charge - - -
(.46)
Cumulative effect of accounting
changes - - (5.99) -
Net income (loss) $ .77 $ .65 $ (3.70) $ 1.35
Fully Diluted Earnings
Income from continuing operations
before extraordinary charge
and accounting change $ 8,207,000 $ 7,827,000 $ 14,503,000 $15,690,000
Add convertible subordinated
debenture interest, net of taxes 1,144,000 1,163,000 (1) 4,650,000
Add convertible preferred
dividends 463,000 - (1) -
Income from continuing operations
before extraordinary charge and
accounting changes as adjusted 9,814,000 6,964,000 14,503,000 20,340,000
Income from discontinued
operations - 2,026,000 3,201,000 4,739,000
Gain from disposition of
discontinued operations - - 9,207,000 -
Income before extraordinary charge
and accounting changes 9,814,000 8,990,000 26,911,000 25,079,000
Extraordinary charge - - -
(5,179,000)
Cumulative effect of accounting
changes - - (70,305,000 -
Net income (loss) $ 9,814,000 $ 8,990,000 $(43,394,000) $19,900,000
</TABLE>
36<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share (continued)
For the three months For the twelve months
ended December 31 ended December 31
1993 1992 1993 1992
<S> <C> <C> <C> <C>
Fully diluted earnings (loss)
per share
Income before extraordinary charge
and accounting change $ .67 $ .61 (2) $ 1.78
Extraordinary charge - - - (2)
Cumulative effect of accounting
change - - (2) -
Net income (loss) $ .67 $ .61 (2) $ (2)
</TABLE>
(1) The assumed conversion of the Registrant's Convertible
Subordinated Debentures and Convertible Preferred Stock for the
twelve months ended December 31, 1993 would have an anti-dilutive
effect for the computation of earnings per share; therefore
conversion has not been assumed for these periods.
(2) Fully diluted net income per share for the twelve months
ended December 31, 1993 and 1992 are not presented as effects are
anti-dilutive.<PAGE>
37
Exhibit 21
Subsidiaries of the Registrant
All of the subsidiaries of the Registrant, considered in the
aggregate as a single subsidiary, would not constitute a
significant subsidiary as of the end of the year covered by this
report.
38<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 28, 1994,
incorporated by reference in the Annual Report on Form 10-K of
Fieldcrest Cannon, Inc. for the year ended December 31, 1993 with
respect to the consolidated financial statements, as amended,
included in this Form 10-K/A.
Our audits also included the financial statement schedules of
Fieldcrest Cannon, Inc. listed in the accompanying index to
financial statements. These schedules are the responsibility of
the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in
relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8, Nos. 33-44703 and 33-44705 and
Form S-3, No. 33-52325) pertaining to the Director Stock Option
Plan of Fieldcrest Cannon, Inc., and James M. Fitzgibbons and the
$3.00 Series A Convertible Preferred Stock, respectively, and in
the related Prospectuses of our report dated January 28, 1994,
with respect to the consolidated financial statements and
schedules of Fieldcrest Cannon, Inc. included in this Form 10-K/A
for the year ended December 31, 1993.
ERNST & YOUNG
Greensboro, North Carolina
September 30, 1994<PAGE>
39<PAGE>
