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, 1995
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, 1995
Common Stock 8,846,959
Total pages 10<PAGE>
Exhibit Index page 9
PART 1. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FIELDCREST CANNON, INC.
Consolidated statement of financial position
March 31, December 31,
Dollars in thousands 1995 1994
Assets
<S> <C> <C>
Cash $ 4,312 $ 5,885
Accounts receivable 170,128 170,001
Inventories (note 3) 263,611 213,994
Net assets held for sale - 24,000
Other prepaid expenses and current assets 3,527 3,793
Total current assets 441,578 417,673
Plant and equipment, net 322,261 314,726
Deferred charges and other assets 61,128 50,266
Total assets $824,967 $782,665
Liabilities and shareowners' equity
Accounts and drafts payable $ 54,989 55,533
Federal and state income taxes 4,018 2,268
Deferred income taxes 19,651 21,988
Accrued liabilities 69,381 53,958
Current portion of long-term debt 1,118 1,465
Total current liabilities 149,157 135,212
Senior long-term debt 132,291 107,744
Subordinated long-term debt 210,000 210,000
Total long-term debt 342,291 317,744
Deferred income taxes 43,471 42,859
Other non-current liabilities 54,896 55,648
Total liabilities 589,815 551,463
Shareowners' equity:
Preferred Stock, $.01 par value,
10,000,000 authorized, 1,500,000 issued
and outstanding March 31, 1995 and
December 31, 1994 (aggregate liquidation
preference of $75,000) 15 15
Common Stock, $1 par value,
25,000,000 authorized, 12,458,819 issued
March 31, 1995 and 12,360,252
December 31, 1994 12,459 12,360
Additional paid in capital 218,185 216,772
Retained earnings 121,718 119,280
Excess purchase price for Common Stock
acquired and held in treasury -
3,606,400 shares (117,225) (117,225)
Total shareowners' equity 235,152 231,202
Total liabilities and shareowners' equity $824,967 $782,665
/TABLE
<PAGE>
See accompanying notes
(2)
FIELDCREST CANNON, INC.
Consolidated statement of income and retained earnings
<TABLE>
<CAPTION> Three Months
ended March 31
Dollars in thousands, except per share data 1995 1994
<S> <C> <C>
Net sales $257,009 $232,285
Cost of sales 214,025 194,893
Selling, general and administrative 26,702 22,344
Restructuring charges 3,924 -
Total operating costs and expenses 244,651 217,237
Operating income 12,358 15,048
Other deductions (income):
Interest expense 6,802 5,848
Other, net (144) 115
Total other deductions 6,658 5,963
Income before income taxes 5,700 9,085
Federal and state income taxes 2,137 3,589
Net Income 3,563 5,496
Preferred dividends (1,125) (1,125)
Earnings on common 2,438 4,371
Amount added to retained earnings 2,438 4,371
Retained earnings, beginning of period 119,280 93,035
Retained earnings, end of period $121,718 $ 97,406
Net income per common share $ .28 $ .51
Fully diluted income per common share $ .28 $ .47
Average primary shares outstanding 8,806,975 8,623,723
Average fully diluted shares outstanding 8,807,863 14,015,893
</TABLE>
See accompanying notes<PAGE>
(3)
FIELDCREST CANNON, INC.
Consolidated statement of cash flows
<TABLE>
<CAPTION>
Three Months
ended March 31
Dollars in thousands 1995 1994
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income $ 3,563 $ 5,496
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,753 7,588
Deferred income taxes 612 2,429
Other 1,277 1,028
Change in current assets and liabilities,
excluding effects of acquisition of Sure Fit:
Accounts receivable 8,563 17,821
Inventories (32,319) (33,594)
Other prepaid expenses and current assets 501 (720)
Accounts payable and accrued liabilities 7,361 (8,877)
Federal and state income taxes 1,750 2,699
Deferred income taxes (2,337) (1,444)
Net cash used in operating activities (3,276) (7,574)
Cash flows from investing activities:
Additions to plant and equipment (14,712) (3,339)
Proceeds from disposal of plant and equipment 460 178
Proceeds from net assets held for sale 20,184 -
Purchase of Sure Fit, net of cash acquired (27,300) -
Net cash used in investing activities (21,368) (3,161)
Cash flows from financing activities:
Increase in revolving debt 24,947 18,840
Payments on long-term debt (751) (6,132)
Dividends paid on preferred stock (1,125) (1,125)
Net cash provided by financing activities 23,071 11,583
Increase (decrease) in cash (1,573) 848
Cash at beginning of year 5,885 3,865
Cash at end of period $ 4,312 $ 4,713
</TABLE>
(4)
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
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, 1995 and the related results of
operations for the three months ended March 31, 1995 and
1994. The unaudited consolidated financial statements should
be read in conjunction with the Company's Form 10-K for the
year ended December 31, 1994.
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
Common share.
3. Inventories
Inventories are classified as follows:
<TABLE>
<CAPTION>
March 31, December 31,
(In thousands) 1995 1994
<S> <C> <C>
Finished goods $139,133 $109,423
Work in process 74,017 65,375
Raw materials and supplies 50,461 39,196
$263,611 $213,994
</TABLE>
At March 31, 1995 approximately 69% of the inventories were
valued on the last-in, first-out method (LIFO).
4. Sale of Bangor and Aroostook Railroad
In March 1995 the Company sold the Bangor and Aroostook
Railroad for $20 million of cash and $8 million of notes
receivable. Cash proceeds were used to reduce borrowings
under the Company's revolving credit facility.<PAGE>
(5)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition
The Company's debt (including the current portion of long-term
debt) increased $24.2 million during the first quarter of 1995.
Debt was reduced by $20 million from cash proceeds from the sale
of the Bangor and Aroostook Railroad and increased by $27 million
from the acquisition of the Sure Fit furniture coverings business
of UTC Holdings. After excluding the effects of the acquisition
of Sure Fit, inventories increased $32.3 million due to normal
seasonal inventory build-up during the quarter. Capital
expenditures totaled $14.7 million for the quarter compared to
$3.3 million for the first quarter of 1994. Included in the 1995
capital expenditures is $9.1 million for the $90 million capital
project for the new weaving plant at the Company's Columbus,
GA/Phoenix City, Ala. towel mill. Capital expenditures for 1995
are expected to be in the $50-$55 million range. At March 31,
1995, approximately $75.8 million of the Company's $195 million
revolving credit facility was available and unused. 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, 1995 vs. Quarter Ended March 31, 1994
Net sales for the first quarter of 1995 were $257.0 million
compared to $232.3 million in the first quarter of 1994, an
increase of 11%. The $24.7 million increase includes $13.4
million of furniture coverings from the Sure Fit business
acquired in January 1995. The increase in revenues, after
adjusting for the Sure Fit acquisition, was due approximately
equally to volume increases and price increases implemented
during the last half of 1994.
Gross profit margins increased from 16.1% to 16.7% in the first
quarter 1995. The increase was less than the sales price
increases due to higher raw material and labor costs and lower
mill activity. Additional cost increases in cotton and other raw
materials have caused the Company to implement further price
increases on its products beginning in the second quarter of
1995.
Selling, general and administrative expenses increased as a
percentage of sales from 9.6% to 10.4% in the first quarter of
1995 compared to the same quarter of 1994. The increase was due
primarily to increased advertising and other selling expenses.
In the first quarter of 1995 the Company announced a<PAGE>
reorganization of its New York operations and the relocation of
sales, marketing and design personnel to Kannapolis, N.C. In
conjunction with the
(6)
reorganization, the Company will offer a voluntary early
retirement
program for all of its eligible salaried employees. The Company
expects to incur pre-tax costs in the range of $10 to $12
million, or $.71 to $.85 per share after tax, as a result of
these actions. Annual pre-tax savings of $6 to $8 million, or
$.42 to $.57 per share after tax, are anticipated. A pre-tax
charge of $3.9 million, or $.28 per share after tax, was accrued
in the first quarter of 1995 for employee severance and
termination benefits related to the reorganization. The
remaining costs for relocation and the voluntary early retirement
program will be incurred later in the year.
Operating income as a percentage of sales decreased to 4.8% in
the first quarter of 1995 from 6.5% in the first quarter of 1994.
The decrease was due to the $3.9 million of restructuring charges
described above and the increase in selling, general and
administrative expenses.
Interest expense increased $1.0 million in the first quarter of
1995 as compared to the first quarter of 1994 due primarily to an
increase in average debt outstanding.
The effective income tax rate was 37.5% for the first quarter of
1995 compared to 39.5% for the first quarter of 1994. The annual
effective income tax rate for 1994 was 37.3% before favorable
prior years tax settlements which reduced the 1994 annual rate to
33.6%.
Net income for the first quarter of 1995 was $3.6 million, or
$.28 per common share, compared to $5.5 million, or $.51 per
common share, in the first quarter of 1994.
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 Per Share.
(b). Reports on Form 8-K<PAGE>
The Registrant did not file any reports to the
Commission on Form 8-K for the quarter ended March 31,
1995.
(7)
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, 1995<PAGE>
(8)
<TABLE>
<CAPTION>
EXHIBIT INDEX TO
QUARTERLY REPORT ON FORM 10-Q FOR
FIELDCREST CANNON, INC.
FOR THE QUARTER ENDED MARCH 31, 1995
Exhibit Page
Number Description Number
<S> <C> <C>
(11) Computation of Primary and Fully
Diluted Net Income Per Share 10
/TABLE
<PAGE>
(9)
<TABLE>
<CAPTION>
Exhibit 11
Computation of Primary and Fully Diluted Net Income Per Share
For the three months
ended March 31
1995 1994
<S> <C> <C>
Average shares outstanding 8,794,159 8,603,330
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 12,816 20,393
Average shares and equivalents
outstanding, primary 8,806,975 8,623,723
Average shares outstanding 8,794,159 8,603,330
Add shares giving effect to the
conversion of the convertible
subordinated debentures (1) 2,824,859
Add shares giving effect to the
conversion of the convertible
preferred stock (1) 2,564,103
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 13,704 23,601
Average shares and equivalents
outstanding, assuming full
dilution 8,807,863 14,015,893
Primary Earnings
Net income $3,563,000 $ 5,496,000
Preferred dividends (1,125,000) (1,125,000)
Earnings on Common $2,438,000 $ 4,371,000
Primary earnings per common share $ .28 $ .51
Fully Diluted Earnings <PAGE>
Earnings on Common $2,438,000 $ 4,371,000
Add convertible subordinated
debenture interest, net of taxes (1) 1,144,000
Add convertible preferred dividends (1) 1,125,000
Net income $2,438,000 $ 6,640,000
Fully diluted earnings per Common share $ .28 $ .47
(1) The assumed conversion of the Registrant's Convertible Subordinated Debentures
and Convertible Preferred Stock for the three months ended March 31, 1995
would have an anti-dilutive effect for the computation of earnings per share;
therefore, conversion has not been assumed for this period.
(10)<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,312
<SECURITIES> 0
<RECEIVABLES> 170,128
<ALLOWANCES> 0
<INVENTORY> 263,611
<CURRENT-ASSETS> 441,578
<PP&E> 322,261
<DEPRECIATION> 0
<TOTAL-ASSETS> 824,967
<CURRENT-LIABILITIES> 149,157
<BONDS> 342,291
<COMMON> 12,459
0
15
<OTHER-SE> 222,678
<TOTAL-LIABILITY-AND-EQUITY> 824,967
<SALES> 257,009
<TOTAL-REVENUES> 257,009
<CGS> 214,025
<TOTAL-COSTS> 214,025
<OTHER-EXPENSES> 30,626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,802
<INCOME-PRETAX> 5,700
<INCOME-TAX> 2,137
<INCOME-CONTINUING> 3,563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,563
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
