UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 N/A
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 July 31, 1994
Common Stock 8,704,885
Total Pages 9 <PAGE>
PART 1. FINANCIAL INFORMATION (as amended October 6, 1994 to
revise the consolidated statement of financial position and
consolidated statement of cash flows)
FIELDCREST CANNON, INC.
Consolidated statement of financial position
<TABLE>
<CAPTION>
June 30, December 31,
Dollars in thousands 1994 1993
<S> <C> <C>
Assets
Cash $ 4,701 $ 3,865
Accounts receivable net, principally trade 152,746 164,419
Inventories (note 3) 254,883 209,834
Net assets held for sale 31,191 32,536
Other prepaid expenses and current assets 3,278 2,491
Total current assets 446,799 413,145
Plant and equipment, net 290,849 294,277
Deferred charges and other assets 32,164 33,024
Total assets $769,812 $740,446
Liabilities and shareowners' equity
Accounts and drafts payable $55,988 $61,365
Federal and state income taxes 2,688 262
Deferred income taxes 18,461 14,799
Accrued liabilities 57,613 65,996
Current portion of long-term debt 2,150 8,397
Total current liabilities 136,900 150,819
Senior long-term debt 119,938 84,611
Subordinated long-term debt 210,000 210,000
Total long-term debt 329,938 294,611
Deferred income taxes 33,185 35,182
Other non-current liabilities 64,080 66,504
Total liabilities 564,103 547,116
Shareowners' equity:
Preferred Stock, $.01 par value,
10,000,000 authorized, 1,500,000 issued
and outstanding June 30, 1994 and
December 31, 1993 (aggregate liquidation
preference of $75,000) 15 15
Common Stock, $1 par value,
25,000,000 authorized, 12,311,285 issued
June 30, 1994 and 12,186,167
December 31, 1993 12,311 12,186
Additional paid in capital 215,123 212,799
Minimum pension liability adjustment (7,480) (7,480)
Retained earnings 102,965 93,035
Excess purchase price for Common Stock
acquired and held in treasury -
3,606,400 shares (117,225) (117,225)
Total shareowners' equity 205,709 193,330
Total liabilities and shareowners' equity $769,812 $740,446
/TABLE
<PAGE>
See accompanying notes
(2)
FIELDCREST CANNON, INC.
Consolidated statement of income and retained earnings
<TABLE>
<CAPTION
For the three months For the six months
Dollars in thousands, ended June 30 ended June 30
except per share data 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $254,796 $256,525 $487,081 $460,465
Cost of sales 214,330 217,216 409,223 384,297
Selling, general and administrative 23,633 25,308 45,977 50,267
Total operating costs and expenses 237,963 242,524 455,200 434,564
Operating income 16,833 14,001 31,881 25,901
Other deductions (income):
Interest expense 5,663 7,619 11,511 15,167
Other, net 288 (411) 403 (410)
Total other deductions 5,951 7,208 11,914 14,757
Income from continuing operations
before income taxes,
and accounting changes 10,882 6,793 19,967 11,144
Federal and state income taxes 4,198 2,672 7,787 4,341
Income from continuing operations
before accounting changes 6,684 4,121 12,180 6,803
Income from discontinued
operations - 2,971 - 4,021
Cumulative effect of accounting
changes - - - (70,305)
Net income (loss) 6,684 7,092 12,180 (59,481)
Preferred dividends (1,125) - (2,250) -
Earnings (loss) on Common 5,559 7,092 9,930 (59,481)
Amount added to (subtracted from)
retained earnings 5,559 7,092 9,930 (59,481)
Retained earnings, beginning
of period 97,406 69,856 93,035 136,429
Retained earnings, end of period $102,965 $ 76,948 $102,965 $ 76,948
Income (loss) per common share:
Income from continuing operations
before accounting changes $ .64 $ .34 $ 1.15 $ .56
Income from discontinued
operations - .25 - .34
Cumulative effect of accounting
changes - - - (5.83)
Net income (loss) per
common share $ .64 $ .59 $ 1.15 $ (4.93)
Fully diluted income (loss)
per common share $ .56 $ .55 $ 1.03 $ -<PAGE>
Average primary shares outstanding 8,693,930 12,107,973 8,658,828 12,053,853
Average fully diluted shares
outstanding 14,082,915 14,936,485 14,049,404 14,880,588
</TABLE>
See accompanying notes
(3)
FIELDCREST CANNON, INC.
Consolidated statement of cash flows
<TABLE>
<CAPTION>
Six Months
ended June 30
Dollars in thousands 1994 1993
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $ 12,180 $(59,481)
Adjustments to reconcile net income to
net cash provided by operating activities:
Cumulative effect of accounting changes - 70,305
Income from discontinued operations - (4,021)
Depreciation and amortization 15,119 16,279
Deferred income taxes (1,997) 1,768
Other 471 1,019
Change in current assets and liabilities, excluding
effects of disposition of discontinued operations:
Accounts receivable 11,673 (8,355)
Inventories (45,049) (30,744)
Other prepaid expenses and current assets (787) 1,363
Accounts payable and accrued liabilities (13,760) (13,389)
Federal and state income taxes 2,426 (3,624)
Deferred income taxes 3,662 1,278
Net cash (used in) continuing
operating activities (16,062) (27,602)
Cash used in discontinued operations - (10,177)
Net cash provided by (used in)
operating activities (16,062) (37,779)
Cash flows from investing activities:
Additions to plant and equipment (12,441) (3,390)
Proceeds from disposal of plant and equipment 1,084 9,042
Proceeds from net assets held for sale 1,345 -
Net cash provided by (used in)
investing activities (10,012) 5,652 <PAGE>
Cash flows from financing activities:
Increase in revolving debt and
other short-term debt 39,612 38,225
Proceeds from issuance of common stock 80 39
Payments on long-term debt (10,532) (5,789)
Dividends paid (2,250) -
Net cash provided by financing activities 26,910 32,475
Cash used in discontinued operations - (10,177)
Net increase in cash 836 348
Cash at beginning of year 3,865 4,665
Cash at end of period $ 4,701 $ 5,013
</TABLE>
See accompanying notes
(4)
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 1994 and the related results of
operations for the three and six months ended June 30, 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 Common 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<PAGE>
Inventories are classified as follows:
<TABLE>
<CAPTION>
June 30, December
31,
(In thousands) 1994 1993
<S> <C> <C>
Finished goods $139,630
$110,223
Work in process 76,882
65,025
Raw materials and supplies 38,371
34,586
$254,883
$209,834
</TABLE>
At June 30, 1994 approximately 76% of the inventories were
valued on the last-in, first-out method (LIFO).
(5)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition
The Company's debt (including short-term borrowings) increased
$29.1 million during the first six months of 1994. Inventories
increased $45.0 million due to normal seasonal inventory build-up
and to meet anticipated higher customer orders for the last half
of the year. Decreases in accounts receivable of $11.7 million
and cash flows from other operating activities provided the
remaining cash necessary to fund the inventory build-up. Capital
expenditures totaled $12.4 million for the first six months of
1994 compared to $3.4 million for the first six months of 1993.
At June 30, 1994, approximately $34.0 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<PAGE>
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.
On July 19, 1994, the Company sold $10 million of taxable revenue
bonds under the Alabama State Industrial Development Authority.
The proceeds were used to pay a portion of the cost of the new
weaving plant located in Phoenix City, Alabama. The bonds mature
on July 1, 2021 and bear an initial interest rate of 4.75% which
fluctuates on a weekly basis. The Company has purchased a letter
of credit to secure these bonds which reduced the loan
availability under the $150 million revolving credit facility by
the $10 million.
A letter of intent was signed on June 24, 1994 to sell the Bangor
and Aroostock Railroad Company. Proceeds from the anticipated
sale will be used to reduce borrowings under the revolving credit
facility. At this time no definitive agreement has been signed
and no assurance can be given that such agreement will occur.
Changes in Results of Operations
Quarter Ended June 30, 1994 vs. Quarter Ended June 30, 1993
Net sales from continuing operations in the second quarter of
1994 were $254.8 million compared to $256.5 million in the second
quarter of 1993, a decrease of .7%. The $1.7 million decrease
follows a 14% increase in sales reported in the first quarter of
1994. The decrease is due primarily to lower unit shipments to
the mass merchant and promotional sales distribution channels.
(6)
Selling, general and administrative expenses decreased as a
percentage of sales from 9.9% to 9.3% in the second 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 and lower bad debt
expense.
Operating income as a percentage of sales increased to 6.6% in
the second quarter of 1994 from 5.5% in the second quarter of
1993. The improvement resulted primarily from the lower selling,
general and administrative expenses and higher mill activity
levels.
Interest expense was $1.9 million less in the second quarter of
1994 due to the reduction of debt with the proceeds from sale of
the carpet and rug division in July 1993 and lower borrowing
rates.
Income from continuing operations was $6.7 million, or $.64 per
common share after preferred dividends, in the second quarter of<PAGE>
1994 compared to $4.1 million, or $.34 per common share, in the
second quarter of 1993.
Six Months Ended June 13, 1994 vs. Six Months Ended June 30, 1993
Net sales from continuing operations for the first six months of
1994 were $487.1 million compared to $460.5 million for the
corresponding period last year, an increase of 6%. The $26.6
million increase was due primarily to increased volume. The
Company, along with others in the industry, recently announced
price increases for its products for the last half of the year
after several years without any general selling price increases.
The price increases reflect recent increases in cotton and
polyester market prices and other cost increases.
Selling, general and administrative expenses decreased as a
percentage of sales from 10.9% to 9.4% in the first six months of
1994 compared to the same period 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.
Operating income as a percentage of sales increased to 6.5% in
the first six months of 1994 from 5.6% in the first six months of
1993. The improvement resulted primarily from the lower selling,
general and administrative expenses and higher mill activity
levels.
Interest expense was $3.7 million less in the first six months of
1994 due to the reduction of debt with the proceeds from sale of
the carpet and rug division in July 1993 and lower borrowing
rates.
Income from continuing operations before accounting changes was
$12.2 million, or $1.15 per common share after preferred
dividends, in the first six months of 1994 compared to $6.8
million, or $.56 per common share, in the first six months of
1994.
(7)
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 six
months of 1993 net income by $70.3 million, or $5.83 per common
share, but had no cash impact.
Net income for the first six months of 1994 was $12.2 million, or
$1.15 per common share after preferred dividends, compared to a
loss of $59.5 million, or $4.93 per common share, in the first
six months of 1993.<PAGE>
(8)
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.<PAGE>
FIELDCREST CANNON, INC.
(Registrant)
BY: (signed) T. R. Staab
T. R. Staab
Vice President
and Chief Financial Officer
Date: October 6, 1994
(9)<PAGE>
