UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-5137
FIELDCREST CANNON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0586036
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
326 East Stadium Drive
Eden, N.C. 27288
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (910) 627-3000
Former name, former address and former fiscal year, if changed since
last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days. Yes x . No .
Number of shares outstanding April 30, 1994
Common Stock 8,671,152
Total pages 11
Exhibit Index page 9
<PAGE>
PART 1. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FIELDCREST CANNON, INC.
Consolidated statement of financial position
March 31, December 31,
Dollars in thousands 1994 1993
Assets
<S> <C> <C>
Cash $ 4,713 $ 3,865
Accounts receivable net, principally trade 146,598 164,419
Inventories (note 3) 243,428 209,834
Net assets held for sale 31,739 32,536
Other prepaid expenses and current assets 3,211 2,491
Total current assets 429,689 413,145
Plant and equipment, net 290,064 294,277
Deferred charges and other assets 32,450 33,024
Total assets $752,203 $740,446
Liabilities and shareowners' equity
Short-term debt $ 84,508 $ -
Accounts and drafts payable 49,283 61,365
Federal and state income taxes 2,961 262
Deferred income taxes 13,355 14,799
Accrued liabilities 69,201 65,996
Current portion of long-term debt 2,900 8,397
Total current liabilities 222,208 150,819
Senior long-term debt 18,308 84,611
Subordinated long-term debt 210,000 210,000
Total long-term debt 228,308 294,611
Deferred income taxes 37,611 35,182
Other non-current liabilities 64,976 66,504
Total liabilities 553,103 547,116
Shareowners' equity:
Preferred Stock, $.01 par value,
10,000,000 authorized, 1,500,000 issued
and outstanding March 31, 1994 and
December 31, 1993 (aggregate liquidation
(preferrence of $75,000) 15 15
Common Stock, $1 par value,
25,000,000 authorized, 12,277,552 issued
March 31, 1994 and 12,186,167
December 31, 1993 12,278 12,186
Additional paid in capital 214,106 212,799
Minimum pension liability adjustment (7,480) (7,480)
Retained earnings 97,406 93,035
Excess purchase price for Common Stock
acquired and held in treasury -
3,606,400 shares (117,225) (117,225)
Total shareowners' equity 199,100 193,330
Total liabilities and shareowners' equity $752,203 $740,446
</TABLE>
See accompanying notes
(2)
<PAGE>
FIELDCREST CANNON, INC.
Consolidated statement of income and retained earnings
<TABLE>
<CAPTION>
Three Months
ended March 31
Dollars in thousands, except per share data 1994 1993
<S> <C> <C>
Net sales $232,285 $203,940
Cost of sales 194,893 167,081
Selling, general and administrative 22,344 24,959
Total operating costs and expenses 217,237 192,040
Operating income 15,048 11,900
Other deductions (income):
Interest expense 5,848 7,548
Other, net 115 1
Total other deductions 5,963 7,549
Income from continuing operations before
income taxes and accounting changes 9,085 4,351
Federal and state income taxes 3,589 1,669
Income from continuing operations before
accounting changes 5,496 2,682
Income from discontinued operations - 1,050
Cumulative effect of accounting changes - (70,305)
Net income (loss) 5,496 (66,573)
Preferred dividends (1,125) -
Earnings (loss) on common 4,371 (66,573)
Amount added to (subtracted from) retained earnings 4,371 (66,573)
Retained earnings, beginning of period 93,035 136,429
Retained earnings, end of period $97,406 $69,856
Income (loss) per commmon share:
Income from continuing operations
before accounting changes $ .51 $ .22
Income from discontinued operations - .09
Cumulative effect of accounting changes - (5.86)
Net income (loss) per common share $ .51 $ (5.55)
Fully diluted income (loss) per common share $ .47 $
Average primary shares outstanding 8,623,723 11,999,731
Average fully diluted shares outstanding 14,015,890 11,999,831
</TABLE>
See accompanying notes
(3)
<PAGE>
FIELDCREST CANNON, INC.
Consolidated statement of cash flows
<TABLE>
<CAPTION>
Three Months
ended March 31
Dollars in thousands 1994 1993
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $ 5,496 $(66,573)
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of accounting changes - 70,305
Income from discontinued operations - (1,050)
Depreciation and amortization 7,588 7,917
Deferred income taxes 2,429 1,197
Change in current assets and liabilities:
Accounts receivable 17,821 28,172
Inventories (33,594) (49,059)
Other prepaid expenses and current assets (720) 795
Accounts payable and accrued liabilities (8,877) (3,226)
Federal and state income taxes 2,699 1,128
Deferred income taxes (1,444) (2,544)
Net assets held for sale 797 -
Other 231 99
Net cash provided by (used in)
operating activities (7,574) (12,839)
Cash flows from investing activities:
Additions to plant and equipment (3,339) (1,011)
Proceeds from disposal of plant and equipment 178 8,407
Net cash provided by (used in)
investing activities (3,161) 7,396
Cash flows from financing activities:
Increase in revolving debt and
other short-term debt 18,840 14,048
Proceeds from issuance of common stock - 39
Payments on long-term debt (6,132) (2,843)
Dividends paid (1,125) -
Net cash provided by financing activities 11,583 11,244
Cash used in discontinued operations - (5,342)
Net increase in cash 848 459
Cash at beginning of year 3,865 4,665
Cash at end of period $ 4,713 $ 5,124
</TABLE>
See accompanying notes
(4)
<PAGE>
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
1. Basis of Presentation
The consolidated financial statements are unaudited. In the
opinion of management all adjustments, consisting only of
normal recurring items, have been made which are necessary to
show a fair presentation of the financial position of the
Company at March 31, 1994 and the related results of
operations for the three months ended March 31, 1994 and
1993. The unaudited consolidated financial statements should
be read in conjunction with Form 10-K for the year ended
December 31, 1993.
2. Income Per Share
Reference is made to Exhibit 11 to this Form 10-Q for a
computation of primary and fully-diluted net income per
share.
3. Inventories
Inventories are classified as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1994 1993
<S> <C> <C>
Finished goods $132,259 $110,223
Work in process 74,614 65,025
Raw materials and supplies 36,555 34,586
$243,428 $209,834
</TABLE>
At March 31, 1994 approximately 78% of the inventories were
valued on the last-in, first-out method (LIFO).
(5)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition
Effective March 10, 1994, the Company amended its $150 million
revolving credit facility 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. The average interest rate on the revolving term debt
was 4.71% on March 31, 1994.
The Company's debt (including short-term borrowings) increased
$12.7 million during the first quarter of 1994. Inventories
increased $33.6 million due to normal seasonal inventory build-up
during the quarter. Decreases in accounts receivable of $17.8
million and cash flows from other operating activities provided
the remaining cash necessary to fund the inventory build-up
during the quarter. Capital expenditures totaled $3.3 million
for the quarter compared to $1.0 million for the first quarter of
1993. At March 31, 1994, approximately $54.7 million of the
Company's $150 million revolving credit facility was available
and unused. Capital expenditures for 1994 are expected to be
approximately $50 million compared to $21.6 million in 1993.
Included in the 1994 expenditures is the start of a $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.
Changes in Results of Operations
Quarter Ended March 31, 1994 vs. Quarter Ended March 31, 1993
Net sales from continuing operations for the first quarter of
1994 were $232.3 million compared to $203.9 million in the first
quarter of 1993, an increase of 14%. The $28.4 million increase
includes $4 million of Caldwell branded towel sales in Canada, a
line of towels acquired in March 1993. The increase in revenues
was due primarily to increased volume. Average selling prices
were lower in the first quarter of 1994 than in the first quarter
of 1993 due to continued competitive pressures on selling prices.
Selling, general and administrative expenses decreased as a
percentage of sales from 12.2% to 9.6% in the first quarter of
1994 compared to the same quarter of 1993. The decrease was due
primarily to reduced costs resulting from the voluntary early
retirement program implemented in late 1993, lower bad debt
expense and a decrease in other selling expenses.
(6)
<PAGE>
Operating income as a percentage of sales increased to 6.5% in
the first quarter of 1994 from 5.8% in the first quarter of 1993.
The improvement resulted from the decrease in selling, general
and administrative expenses which more than offset a decline in
gross margins. Continued competitive pressures on selling prices
caused the lower margins and reduced the benefits of the increase
in unit sales and the associated higher mill activity levels.
Interest expense was $1.7 million less in the first quarter of
1994 due to the reduction of debt with the proceeds from the sale
of the carpet and rug division in July 1993 and lower borrowing
rates.
The effective income tax was 39.5% for the first quarter of 1994
compared to 38.4% for the first quarter of 1993. The increase
results primarily from the increase in the federal statutory
income tax rate from 34% to 35% which was enacted in the third
quarter of 1993.
Income from continuing operations before accounting changes was
$5.5 million, or $.51 per common share, in the first quarter of
1994 compared to $2.7 million, or $.22 per common share, in the
first quarter of 1993.
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 the accounting changes reduced the first
quarter of 1993 net income by $70.3 million, or $5.86 per common
share, but had no cash impact.
Net income for the first quarter of 1994 was $5.5 million, or
$.51 per common share, compared to a loss of $66.6 million, or
$5.55 per common share, in the first quarter of 1993.
PART II. OTHER INFORMATION
FIELDCREST CANNON, INC.
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
11. Computation of Primary and Fully Diluted Net
Income (Loss) Per Share.
(b). Reports on Form 8-K
The Registrant did not file any reports to the
Commission on Form 8-K for the quarter ended March 31,
1994.
(7)
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
FIELDCREST CANNON, INC.
(Registrant)
BY: (signed) T. R. Staab
T. R. Staab
Vice President and
Chief Financial Officer
Date: May 10, 1994
(8)
<PAGE>
EXHIBIT INDEX TO
QUARTERLY REPORT ON FORM 10-Q FOR
FIELDCREST CANNON, INC.
FOR THE QUARTER ENDED MARCH 31, 1994
Exhibit
Number Description Page Number
(11) Computation of Primary and Fully
Diluted Net Income Per Share 10
(9)
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share
For the three months
ended March 31
1994 1993
<S> <C> <C>
Average shares outstanding 8,603,330 11,976,398
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 20,393 23,333
Average shares and equivalents
outstanding, primary 8,623,723 11,999,731
Average shares outstanding 8,603,330 11,976,398
Add shares giving effect to the
conversion of the convertible
subordinated debentures 2,824,859 (1)
Add shares giving effect to the
conversion of the convertible
preferred stock 2,564,100 -
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 23,601 23,433
Average shares and equivalents
outstanding, assuming full
dilution 14,015,890 11,999,831
Primary Earnings
Income from continuing operations
before accounting changes $ 5,496,000 $ 2,682,000
Income from discontinued
operations - 1,050,000
Cumulative effect of accounting
changes - (70,305,000)
Net income (loss) 5,496,000 (66,573,000)
Preferred dividends (1,125,000) -
Earnings (loss) on Common $ 4,371,000 $(66,573,000)
</TABLE>
(10)
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share (continued)
For the three months
ended March 31
1994 1993
<S> <C> <C>
Primary earnings (loss) per common share
Income (loss) from continuing
operations before accounting changes $ .51 $ .22
Income from discontinued
operations - .09
Cumulative effect of accounting changes - (5.86)
Income (loss) $ .51 $ (5.55)
Fully Diluted Earnings
Earnings on Common from continuing
operations before accounting changes $4,371,000 $2,682,000
Add convertible subordinated
debenture interest, net of taxes 1,144,000 (1)
Add convertible preferred dividends 1,125,000 -
Income from continuing operations
before accounting changes as adjusted 6,640,000 2,682,000
Income from discontinued operations - 1,050,000
Income before accounting changes 6,640,000 3,732,000
Cumulative effect of accounting changes - (70,305,000)
Net income (loss) $6,640,000 $(66,573,000)
Fully diluted earnings (loss) per Common share
Income before accounting changes $ .47 $ .31
Cumulative effect of accounting changes - (2)
Net income (loss) $ .47 $ (2)
(1) The assumed conversion of the Registrant's Convertible Subordinated Debentures for the
three months ended March 31, 1993 would have an anti-dilutive effect for the computation
of earnings per share; therefore, conversion has not been assumed for this period.
(2) Fully diluted net income per share for the three months ended March 31, 1993 are not
presented as effects are anti-dilutive
</TABLE> (11)
<PAGE>
