UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
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, 1994
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
$3.00 Series A Convertible
Preferred Stock, $.01 Par Value The Nasdaq SmallCap Market
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 $184,363,769 as of March 1, 1995.
NUMBER OF SHARES OUTSTANDING AT MARCH 1, 1995
Common Stock 8,823,852
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates information by reference from the annual report to
shareowners for the year ended December 31, 1994. Part III incorporates
information by reference from the proxy statement for the annual meeting of
shareowners to be held on April 24, 1995.
Total pages 71
Page 1
Exhibit Index page 13
<PAGE>
PART I
Item 1. Business
General
The registrant was incorporated under the laws of Delaware in 1953.
The registrant operates a single segment business in the textile
industry and is principally involved in the manufacture and sale of
home furnishing products.
The registrant and its consolidated subsidiaries design, manufacture
and market a broad range of household textile products consisting of
towels, sheets, blankets, comforters and bath rugs. The registrant is
vertically integrated in that it buys the basic raw materials
consisting principally of cotton and synthetic fibers and manufactures
a finished consumer product. These products are marketed primarily by
the Company's own sales and marketing staff and distributed nationally
to customers for ultimate retail sale. Customers consist principally
of department stores, chain stores, mass merchants, specialty home
furnishing stores, catalog warehouse clubs and other retail outlets,
and institutional, government and contract accounts.
In 1994 nearly all of the registrant's total sales were comprised of
home furnishings products. Approximately 90% of the Company's 1994
net sales were from sales of products carrying the registrant's
principal brand names of "Fieldcrest," "Royal Velvet," "Charisma,"
"St. Marys," "Cannon," "Monticello," "Royal Family," and "Caldwell";
the remaining 10% were from sales of private label products.
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
for 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 was assigned a
cost of $117.2 million after an allocation of $24.7 million to the net
assets of Amoskeag. The operating assets of Amoskeag consist
primarily of the Bangor and Aroostook Railroad ("BAR") and certain
real estate properties. During 1994 the BAR's operating income of $3
million was excluded from the Company's consolidated income statement
and $1.6 million of interest costs of the Company were allocated to
the assets held for sale. On March 17, 1995 the Company sold the BAR
for approximately $20 million of cash and $8 million of note
receivables.
Page 2
<PAGE>
Raw Materials
The registrant's basic raw materials are cotton and synthetic fibers.
These materials are generally available from a wide variety of
sources, and no significant shortage of such materials is currently
anticipated. The registrant uses significant quantities of cotton
which is subject to ongoing price fluctuations. The registrant in the
ordinary course of business may arrange for purchase commitments with
vendors for future cotton requirements.
Patents and Licenses
The registrant holds various patents and licenses resulting from
company-sponsored research and development, and others are obtained
that are deemed advantageous to company operations. The registrant is
only partially dependent upon such patents and licenses in certain
product lines, and the loss of any exclusiveness in these areas would
not materially adversely affect overall profitability.
Seasonality in the Company's Business
Primarily because the Company's retail customers have higher sales in
the second half of the calendar year, the Company also experiences
greater sales volume in the last three quarters of the calendar year.
It is likely that the Company's operating performance in the first
quarter of a given calendar year will be less favorable than operating
performance in the last three quarters.
The registrant carries normal inventory levels to meet delivery
requirements of customers, and customer returns of merchandise shipped
are not material. Payment terms on customer invoices are generally 30
to 60 days.
Customers
The registrant's customers consist principally of department stores,
chain stores, specialty stores, mass merchants, warehouse clubs, other
retail outlets and institutional, government and contract accounts.
For the year ended December 31, 1994, the Company's five largest
customers accounted for approximately 38% of net sales. Sales to one
customer (Wal-Mart Stores and its affiliates) represented 18.3% of
total sales of the Company. Although management of the Company
believes that the Company's relationship with Wal-Mart is excellent
and the loss of this customer is unlikely, the loss of Wal-Mart as a
customer would have a material adverse effect on the Company's
business. No other single customer accounted for more than 10% of net
sales in 1994.
Page 3
<PAGE>
Order Backlog
The registrant had normal unfilled order backlogs as of December 31,
1994 and 1993 amounting to approximately $94 million and $87 million,
respectively. The majority of these unfilled orders are shipped
during the first quarter of the subsequent fiscal year.
The increase in unfilled orders in 1994 compared to 1993 is believed
to be primarily due to the timing of new orders. Unfilled orders
have become less of an indicator of future sales as customers have
trended toward placing orders as stock is required. Many orders are
placed using electronic data interchange, and the Company has filled
such orders on a quick response basis.
Government Contracts
No material portion of the business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of
the Government.
Competition
The home furnishing textile industry continues to be highly
competitive. Among the registrant's competitors are a number of
domestic and foreign companies with significant financial resources,
experience, manufacturing capabilities and brand name identity.
The registrant competes with numerous other domestic manufacturers in
each of its principal markets. The domestic towel, sheet, blanket and
bath rug markets are each comprised of three to five principal
manufacturers (including the registrant) and several smaller domestic
manufacturers.
The registrant's principal methods of competition are price, design,
service and product quality. The Company believes that large, low-
cost producers with established brand names, efficient distribution
networks and good customer service will profit in this competitive
environment. The Company's ability to operate profitably in this
environment will depend substantially on continued market acceptance
of the Company's products and the Company's efforts to control costs
and produce new and innovative products in response to competitive
pressures and changes in consumer demand.
Environmental Controls
The registrant does not anticipate that compliance with federal, state
and local provisions that have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating to
the protection of the environment, will have a material effect upon
the capital expenditures, earnings and competitive position of the
registrant and its subsidiaries.
Page 4
<PAGE>
Employees
Total employment of the Company and its subsidiaries was 13,926 as of
December 31, 1994. Approximately 29% of the Company's hourly
employees are subject to collective bargaining agreements with the
Amalgamated Clothing and Textile Workers Union or the United Textile
Workers of America.
Foreign Sales
The registrant is not currently engaged in significant operations in
foreign countries. Approximately 6% of the registrant's consolidated
net sales were exported to foreign customers in 1994 and 1993.
Item 2. Properties
The registrant has 19 principal manufacturing plants, all located in the
United States; 13 are in North Carolina, 1 in South Carolina, 1 in
Georgia, 3 in Alabama and 1 in Virginia. In addition, there are 22
warehousing and distribution centers located in the manufacturing
states, plus Texas and California. The manufacturing/warehousing and
distribution centers aggregate a floor area of approximately 17,281,000
square feet. All of the facilities are owned except: (1) 2 locations
totaling approximately 618,000 square feet, title to which is held by
the Development Authorities that issued the Industrial Development Bonds
which were issued to finance the facilities; and (2) 5 locations,
totaling approximately 415,000 square feet, where the machinery and
equipment is owned and the buildings are under a long-term lease. Title
to the facilities financed by Industrial Revenue Bonds as described
above will be transferred to the registrant upon the retirement of such
bonds. Such facilities therefore are accounted for as being owned by
the registrant.
The registrant owns corporate administrative buildings in Eden, North
Carolina, which contain approximately 96,000 square feet. The principal
marketing headquarters and certain executive offices (totaling
approximately 64,000 square feet) are located in New York City under
long-term leases.
All other properties owned or controlled by the registrant aggregate
approximately 500,000 square feet and are used for miscellaneous support
services or for sales and marketing.
Plants and equipment of the registrant are considered to be in excellent
condition; substantial capital expenditures for new plants,
modernization and improvements have been made in recent years. The
plants generally operate on either a three shift basis for a five-day
week or a four shift basis for a seven-day week during 50 weeks a year
except during periods of curtailment. In the opinion of the registrant,
all plants and properties are adequately covered by insurance.
Page 5
<PAGE>
Item 3. Legal Proceedings
The registrant is involved in various claims and lawsuits incidental to
its business. In the opinion of the registrant based in part on the
advice of legal counsel, however, the outcome of these suits will not
have a material effect on the registrant's financial position.
Page 6
<PAGE>
Identification of Executive Officers of the Registrant
<TABLE>
<CAPTION>
Date from
Which Officers
Age at Have Served in
Name 3/31/95 Positions Held Present Capacities
<S> <C> <C> <C>
James M. Fitzgibbons 60 Chairman of the Board Chairman of the Board and
and Chief Executive Chief Executive Officer: 1990
Officer and Director Director: 1985
Chris L. Kametches 59 Senior Vice President Senior Vice President: 1990
Robert E. Dellinger 50 Vice President Vice President: 1989
M. Kenneth Doss 55 Vice President Vice President: 1988
and Secretary General Counsel: 1985
Secretary: 1986
Kevin M. Finlay 45 Vice President Vice President: 1993
Osborne L. Raines 54 Vice President Vice President: 1985
Thomas R. Staab 52 Vice President and Vice President: 1992
Chief Financial Officer Chief Financial Officer: 1994
Clifford D. Paulsen 51 Controller Controller: 1992
</TABLE>
None of the executive officers are related by blood, marriage or adoption
to any other executive officer of the registrant or any director or
executive officer of a parent, subsidiary, or affiliate of the registrant.
With the exception of Mr. Fitzgibbons each executive officer has been
employed by the registrant for more than five years. Prior to becoming
Chief Executive Officer and Chairman of the Board of Directors of the
registrant on October 15, 1990, Mr. Fitzgibbons was President of Amoskeag
Company and was previously an executive officer of Amoskeag Company for
more than five years.
Page 7
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Incorporated by reference from the market and dividend data section of the
1994 Annual Report to Shareowners, page 22.
Item 6. Selected Financial Data
Selected financial and statistical data for the years 1990 to 1994
appearing in the line items "Net sales", "Income (loss) from continuing
operations", "Per share of common stock: Primary income (loss) from
continuing operations" and "Fully diluted income (loss)", "Total assets",
"Long-term obligations" and "Dividends" are incorporated by reference from
the 1994 Annual Report to Shareowners, page 39.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated by reference from the 1994 Annual Report to Shareowners, pages
19 through 22.
Item 8. Consolidated Financial Statements and Supplementary Data
Incorporated by reference from the 1994 Annual Report to Shareowners, pages
23 through 38.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Page 8
<PAGE>
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons of
the Registrant
Information regarding the Directors is incorporated herein by reference
from the registrant's proxy statement for the annual meeting of shareowners
to be held on April 24, 1995, pages 2 and 3.
For information regarding the Executive Officers of the registrant, see
Part I at page 7.
Item 11. Executive Compensation
Incorporated herein by reference from sections of the registrant's proxy
statement for the annual meeting of shareowners to be held on April 24,
1995 entitled "Compensation of Directors", pages 6 and 7 and "Executive
Compensation", pages 7 through 14.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference from the section of the registrant's proxy
statement for the annual meeting of shareowners to be held on April 24,
1995 entitled "Security Ownership", pages 4 through 6.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference from the registrant's proxy statement for
the annual meeting of shareowners to be held April 24, 1995, pages 7 and 8,
entitled "Executive Compensation".
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(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 17 are filed as part of this annual report. Exhibit numbers
(10)1. through (10)12. represent 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.
Page 9
<PAGE>
FIELDCREST CANNON, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) 1 & 2)
Page Numbers of the
Annual report to
Shareowners
Consolidated statement of financial position at 25
December 31, 1994 and 1993
Consolidated statement of income and retained earnings 24
for each of the three years in the period ended
December 31, 1994
Consolidated statement of cash flows for each of the 26
three years in the period ended December 31, 1994
Notes to consolidated financial statements 27-37
Report of independent auditors 38
No schedules are filed 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.
The consolidated financial statements listed in the above index which
are included in the Annual Report to Shareowners of Fieldcrest Cannon, Inc.
for the year ended December 31, 1994 are hereby incorporated by reference.
With exception of the pages listed in the above index and the Items
referred to in Part II, Items 5, 6, 7 and 8, the 1994 Annual Report to
Shareowners is not to be deemed filed as part of this report.
Page 10
<PAGE>
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.
March 8, 1995 By:/s/ James M. Fitzgibbons
James. M. Fitzgibbons, Chairman of
the Board of Directors and Chief
Executive Officer (Principal
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the registrant
and in the capacities on the dates indicated.
/s/ James. M. Fitzgibbons March 8, 1995
James M. Fitzgibbons, Chairman of the Board
of Directors and Chief Executive Officer
(Principal Executive Officer)
/s/ M. Kenneth Doss March 8, 1995
M. Kenneth Doss
Vice President and Secretary
/s/ Thomas R. Staab March 8, 1995
Thomas R. Staab
Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Clifford D. Paulsen March 8, 1995
Clifford D. Paulsen
Controller (Principal Accounting Officer)
/s/ Tom H. Barrett March 8, 1995
Tom H. Barrett
Director
Page 11
<PAGE>
/s/ William E. Ford March 8, 1995
William E. Ford
Director
/s/ John C. Harned March 8, 1995
John C. Harned
Director
/s/ S. Roger Horchow March 8, 1995
S. Roger Horchow
Director
/s/ Charles G. Horn March 8, 1995
Charles G. Horn
Director
/s/ W. Duke Kimbrell March 8, 1995
W. Duke Kimbrell
Director
/s/ C. J. Kjorlien March 8, 1995
C. J. Kjorlien
Director
Page 12
<PAGE>
EXHIBIT INDEX TO
ANNUAL REPORT ON FORM 10-K FOR
FIELDCREST CANNON, INC.
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Page Number
Exhibit or Incorporation
Number Description by Reference to
<S> <C> <C>
(3) 1. Restated Certificate of Incorporation, Exhibit 3-1 to the
as amended to date. Registrant's Registration
Statement on Form S-3
filed on February 18,
1994.
2. Amended and Restated By-Laws of the Registrant Exhibit 3-1 to Report on
as amended to November 24, 1993. Form 8-K Filed on
December 9, 1993.
(4) 1. Rights Agreement, dated as of November 24, 1993, Exhibit 1 to the
between the Registrant and The First National Registrant's Registration
Bank of Boston, which includes as Exhibit A the Statement on Form 8-A
Form of Rights Certificate of Designations, as filed December 3, 1993.
Exhibit B the Form of Rights Certificate, and as
Exhibit C the Summary of Rights to Purchase
Preferred Stock.
2. Indenture dated as of March 15, 1987, relating to Exhibit 4.9 to the
the Registrant's 6% Convertible Subordinated Registrant's Registration
Debentures Due 2012 between the Registrant and Statement on Form S-3
Wachovia Bank and Trust Company, N.A., (No. 33-12436) filed on
including the form of debenture. March 6, 1987.
3. Indenture dated as of June 1, 1992, relating to Exhibit 4.7 of
the Senior Subordinated Debentures Due 2004, Amendment No. 1 to the
between the Registrant and First Union National Registrant's Registration
Bank, as Trustee, including the form of Statement on Form S-3
debenture. (No. 33-47348) filed on
June 3, 1992.
4. Amended and Restated Revolving Credit Exhibit 4-4 to Report
Agreement dated as of March 10, 1994 by and on Form 10-K for
among the Registrant, The First National Bank fiscal year ending
of Boston as agent, Continental Bank N.A., December 31, 1993.
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
5. First Amendment to the Restated Revolving 17-22
Credit Agreement dated as of March 10, 1994 by
and among the Registrant, The First National
Bank of Boston as agent, Continental Bank N.A.,
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
Page 13
<PAGE>
6. Second Amendment to the Restated Revolving 23-33
Credit Agreement dated as of March 10, 1994 by
and among the Registrant, The First National
Bank of Boston as agent, Continental Bank N.A.,
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
7. Third Amendment to the Restated Revolving 34-45
Credit Agreement dated as of March 10, 1994 by
and among the Registrant, The First National
Bank of Boston as agent, Continental Bank N.A.,
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
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 14
<PAGE>
Page Number
Exhibit or Incorporation
Number Description by Reference to
(10) 1. Amended and Restated Director Stock Option Exhibit A to the
Plan of the Registrant approved by the Registrant's proxy
stockholders of the Corporation on April 28, statement for the annual
1992. meeting of shareowners
held on April 28, 1992.
2. Stock Option Agreement between the Registrant Exhibit 4.1 to the
and James M. Fitzgibbons dated as of September Registrant's Registration
11, 1991. Statement on Form S-8
filed on December 23,
1991.
3. Employee Retention Agreement between Registrant Exhibit 10.2 to Report
and James M. Fitzgibbons effective as of on Form 10-Q for the
July 9, 1993. quarter ended September
30, 1993.
4. Employment Agreement between the Registrant Exhibit 10-2 to Report
and Charles G. Horn dated as of January 1, on Form 10-K for fiscal
1988. year ending December
31, 1988.
5. Instrument of Amendment dated October 23, Exhibit 10-3 to Report
1989, between the Registrant and Charles G. on Form 10-K for fiscal
Horn, amending Exhibit 10-4 above. year ending December
31, 1989.
6. Instrument of Amendment dated July 23, 1993 by Exhibit 10.1 to Report
and between the Registrant and Charles G. Horn, on Form 10-Q for the
amending the employment agreement between the quarter ended September
Registrant and Charles G. Horn dated as of 30, 1993.
January 1, 1988.
7. Employee Retention Agreement between the Exhibit 10.4 to Report
Registrant and Chris L. Kametches effective on Form 10-Q for the
as of July 9, 1993. quarter ended September
30, 1993.
8. Instrument of Amendment dated July 29, 1993 Exhibit 10.5 to Report
between the Registrant and Chris L. Kametches, on Form 10-Q for the
amending Exhibit 10.7 above. quarter ended September
30, 1993.
9. Employee Retention Agreement between the Exhibit 10.9 to Report
Registrant and Robert E. Dellinger effective on Form 10-K for fiscal
as of July 9, 1993. year ending December 31,
1993.
10. Instrument of Amendment dated July 29, 1993 Exhibit 10.10 to Report
between the Registrant and Robert E. Dellinger, on Form 10-K for fiscal
amending Exhibit 10.9 above. year ending December 31,
1993.
Page 15
<PAGE>
11. Form of Employee Retention Agreement between Exhibit 10.6 to Report
the Registrant and other executive officers of on Form 10-Q for the
the Registrant effective as of July 9, 1993. quarter ended September
30, 1993.
12. Form of Instrument of Amendment dated July 29, Exhibit 10.7 to Report
1993 between the Registrant and other executive on Form 10-Q for the
officers of the Registrant, amending Exhibit 10.11 quarter ended September
above. 30, 1993.
(11) Computation of Primary and Fully Diluted Net Income 46 - 48
(Loss) per Share.
(13) 1994 Annual Report to Shareowners. 49 - 69
(21) Subsidiaries of the Registrant. 70
(23) Consent of independent auditors. 71
Page 16
<PAGE>
</TABLE>
FIRST AMENDMENT
to
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
dated as of March 10, 1994
This FIRST AMENDMENT (the "Amendment"), dated as of May 31, 1994,
is by and among FIELDCREST CANNON, INC., a Delaware corporation (the
"Company"), the lenders listed on the signature pages hereto (the
"Lenders"), CONTINENTAL BANK N. A., PHILADELPHIA NATIONAL BANK and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, as lead managers for the Lenders
(collectively, the "Lead Managers"), and THE FIRST NATIONAL BANK OF BOSTON,
as agent for the Lenders (the "Agent").
WHEREAS, the Company, the Lenders, the Lead Managers and the
Agent are parties to that certain Third Amended and Restated Revolving
Credit Agreement, dated as of March 10, 1994 (the "Credit Agreement"); and
WHEREAS, the Company, the Lenders, the Lead Managers and the
Agent have agreed, subject to the terms and conditions set forth herein, to
amend certain provisions of the Credit Agreement as set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(section mark)1. CERTAIN DEFINED TERMS. Capitalized terms
which are used herein without definition and which are defined in
the Credit Agreement shall have the same meanings herein as in the
Credit Agreement.
(section mark)2. AMENDMENT TO CREDIT AGREEMENT. (a) Section
1 of the Credit Agreement is hereby amended by adding the following new
definition in the appropriate place in the alphabetical sequence
thereof:
Letter of Credit Bank. With respect to those Letters of
Credit outstanding on May 31, 1994, FNBB and, with respect to
each Letter of Credit requested thereafter, FNBB or, at the
request of the Company and with the consent of the Agent, any
other Lender that agrees, in its sole and absolute discretion, to
issue such Letter of Credit pursuant to and in accordance with
the provisions of this Agreement.
(b) Section 1 of the Credit Agreement is hereby further amended
by deleting the word "Agent" where it appears in the definition of Uniform
Customs and substituting therefor the phrase "Letter of Credit Bank".
(c) Section 2.10.1 of the Credit Agreement is hereby, amended by
deleting the word "Agent" each place where it appears in such section, and
substituting therefor in each such place the phrase "Letter of Credit
Bank".
17
<PAGE>
(d) Section 2.10.2 of the Credit Agreement is hereby amended by
deleting such section in its entirety, and substituting therefor the
following:
(section mark)2.10.2. Reimbursement Obligation of the
Company. In order to induce the Letter of Credit Bank to
issue, extend and renew each Letter of Credit and the Lenders
to participate therein, the Company hereby agrees to
reimburse or pay to the Agent, for the account of the Letter
of Credit Bank or (as the case may be) the Lenders, with
respect to each Letter of Credit issued, extended or renewed
by the Letter of Credit Bank hereunder,
(a) except as otherwise expressly provided in
(section mark)2.10.2(b) and (c) hereof, on each date that any
draft presented under such Letter of Credit is honored by the Letter
of Credit Bank, or the Letter of Credit Bank otherwise makes a payment
with respect thereto, (i) the amount paid by the Letter of Credit Bank
under or with respect to such Letter of Credit, and (ii) the
amount of any taxes, fees, charges or other costs and expenses
whatsoever incurred by the Letter of Credit Bank or any Lender in
connection with any payment made by the Letter of Credit Bank or
any Lender under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not the termination) of
the Revolving Credit Loan Commitment Amount to an amount less
than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the
benefit of the Lenders and the Letter of Credit Bank as cash
collateral for all Reimbursement Obligations, and
(c) upon the termination of the Revolving Credit Loan
Commitment Amount, or the acceleration of the Reimbursement
Obligations with respect to all Letters of Credit in accordance
with (section mark)11 hereof, an amount equal to the then Maximum
Drawing Amount on all Letters of Credit, which amount shall be held by
the Agent for the benefit of the Lenders and the Letter of Credit
Bank as cash collateral for all Reimbursement Obligations.
Each such payment shall be made to the Agent at it's head
office referred to in (section mark)4.2 hereof in
immediately available funds. Interest on any and all
amounts remaining unpaid by the Company under this (section
mark)2.10.2 at any time from the date such amounts become due
and payable (whether as stated in this (section
mark)2.10.2 by acceleration or otherwise) until payment in
full (whether before or after judgment) shall be payable to
the Letter of Credit Bank or (as the case may be) the
Lenders, on demand at the rate specified in (section mark)4.1
hereof for overdue principal on the Loans.
(e) Section 2.10.3 of the Credit Agreement as hereby amended by
deleting such section in its entirety, and substituting therefor the
following:
(section mark)2.10.3. Letter of Credit Payments. If any
draft shall be presented or other demand for payment shall
be made under any Letter of Credit, the Letter of Credit
Bank shall notify the Company of the date and amount of the
draft
18
<PAGE>
presented or demand for payment and of the date and time when
it expects to pay such draft or honor such demand for
payment. If the Company fails to reimburse the Letter of
Credit Bank as provided in (section mark)2.10.2 hereof on or
before the date that such draft is paid or other payment is
made by the Letter of Credit Bank, the Letter of Credit Bank
may at any time thereafter notify the Lenders of the amount
of any such Unpaid Reimbursement Obligation. No later than
3:00 p.m. (Boston time) on the Business Day next following
the receipt of such notice, each Lender shall make
available to the Agent, at its head office referred to in
(section mark)4.2 hereof, in immediately available funds and
for the benefit of the Letter of Credit Bank, such Lender's
Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of
(a) the average, computed for the period referred to in
clause (c) below, of the weighted average interest rate paid
by the Letter of Credit Bank for federal funds acquired by
the Letter of Credit Bank during each day included in such
period, times (b) the amount equal to such Lender's
Commitment Percentage of such Unpaid Reimbursement
Obligation, times (c) a fraction, the numerator of which
is the number of days that elapse from and including the
date the Letter of Credit Bank paid the draft presented
for honor or otherwise made payment to the date on which
such Lender's Commitment Percentage of such Unpaid
Reimbursement obligation shall become immediately available
to the Letter of Credit Bank, and the denominator of which
is 360. The responsibility of the Letter of Credit Bank to
the Company and the Lenders shall be only to determine that
the documents (including each draft) delivered under each
Letter of Credit in connection with such presentment shall
be in conformity in all material respects with such Letter of
Credit.
(f) Section 2.10.4 of the Credit Agreement is hereby amended by
deleting the word "Agent" each place where it appears in such section, and
substituting therefor in each such place the phrase "Letter of Credit
Bank".
(g) Section 2.10.5 of the Credit Agreement is hereby amended by
deleting the word "Agent" each place where it appears in such section, and
substituting therefor in each such place the phrase "Letter of Credit
Bank".
(h) Section 2.10.6 of the Credit Agreement is hereby amended by
deleting the second sentence of such section in its entirety, and
substituting therefor the following:
In addition, the Company shall pay to the Letter of Credit Bank
for its own account, at such time or times as such charges are
customarily made by the Letter of Credit Bank, its standard
processing, negotiating, amendment and administrative fees,
including, without limitation, reasonable legal fees and all fees
in respect of capital costs incurred by the Letter of Credit Bank
in connection with such Letters of Credit (each of the foregoing
fees shall be referred to herein, collectively, as the "Letter of
Credit Fees").
(i) Section 4.2 of the Credit Agreement is hereby amended by
inserting immediately following the phrase "any Letter of Credit Fee" where
such phrase appears in
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the second line thereof the following:
(other than any Letter of Credit Fee payable by the
Company pursuant to the second sentence of (section
mark)2.10.6 hereof, which payment shall be made by the Company
directly to the applicable Letter of Credit Bank in
immediately available funds)
(section mark)3. REPRESENTATIONS AND WARRANTIES. The
Company hereby represents and warrants to the Lenders as follows:
(a) Representations and Warranties. The representations
and warranties contained in (section mark)6 of the Credit Agreement were
true and correct in all material respects when made. The
representations and warranties contained in (section mark)6 of the
Credit Agreement, as amended hereby, are true and correct on the date
hereof.
(b) Enforceability. The execution and delivery by the Company
of this Amendment, and the performance by the Company of this Amendment and
the Credit Agreement, as amended hereby, are within the corporate powers of
the Company and have been duly authorized by all necessary corporate action
on the part of the Company. This Amendment and the Credit Agreement, as
amended hereby, are valid and legally binding obligations of the Company,
enforceable in accordance with their terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting the enforcement of creditors' rights in general.
(c) No Default. No Default or Event of Default has occurred and
is continuing and no Default or Event of Default will exist after the
execution and delivery of this Amendment or after the consummation of the
transactions contemplated hereby.
(section mark)4. EFFECTIVENESS. This Amendment shall become
effective as of the date hereof upon satisfaction of each of the
conditions precedent set forth in this (section mark)4:
(a) Delivery. The Company and Lenders constituting the Majority
A Lenders shall have executed and delivered this Amendment.
(b) Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Amendment and all documents
incident hereto shall be satisfactory in form and substance to the Agent,
and the Agent shall have received all information and such counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
(section mark)5. MISCELLANEOUS PROVISIONS. (a) Except as
otherwise expressly provided by this Amendment, all of the terms,
conditions and provisions of the Credit Agreement shall remain the
same. It is declared and agreed by each of the parties hereto that
the Credit Agreement, as amended hereby, shall continue in full force
and effect, and that this Amendment and such Credit Agreement shall be
read and construed as one instrument.
(b) This Amendment is intended to take effect as an agreement
under seal and shall be construed according to and governed by the laws of
the Commonwealth of
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Massachusetts.
(c) This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
instrument. In making proof of this Amendment it shall not be necessary to
produce or account for more than one counterpart signed by each party
hereto by and against which enforcement hereof is sought.
(d) The Company hereby agrees to pay to the Agent, on demand by
the Agent, all reasonable out-of-pocket costs and expenses incurred or
sustained by the Agent in connection with the preparation of this Amendment
and the documents referred to herein (including reasonable legal fees).
IN WITNESS WHEREOF, the parties have executed this First
Amendment as of the date first above written.
FIELDCREST CANNON, INC.
By:/s/ T. R. Staab
Title: Vice President and Chief
Financial Officer
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
By:/s/ Mitchell B. Feldman
Title: Director
THE FIRST NATIONAL BANK OF
BOSTON
By:/s/ Mitchell B. Feldman
Title: Director
CONTINENTAL BANK N. A., individually
and as Lead Manager
By:/s/ Wayne H. Riess
Title: Vice President
21
<PAGE>
PHILADELPHIA NATIONAL BANK,
individually and as Lead Manager
(incorporated as CoreStates Bank, N. A.)
By:/s/ James P. Richards
Title: Vice President
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, individually and as
Lead Manager
By:/s/ Richard J. Rizzo, Jr.
Title: Vice President
BANK OF MONTREAL
By:/s/ Michael J. Love
Title: Director
MELLON BANK, N. A.
By:/s/ Frederick W. Okie, Jr.
Title: Vice President
22
SECOND AMENDMENT AND CONSENT
to
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
dated as of March 10, 1994
This SECOND AMENDMENT AND CONSENT (the "Amendment"), dated as of
December 30, 1994, is by and among FIELDCREST CANNON, INC., a Delaware
corporation (the "Company"), the lenders listed on the signature pages
hereto (the "Lenders"), BANK OF AMERICA ILLINOIS (formerly known as
Continental Bank N.A.), CORESTATES BANK, N.A. (formerly known as
Philadelphia National Bank) and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as lead managers for the Lenders (collectively, the "Lead
Managers"), and THE FIRST NATIONAL BANK OF BOSTON, as agent for the Lenders
(the "Agent").
WHEREAS, the Company, the Lenders, the Lead Managers and the
Agent are parties to that certain Third Amended and Restated Revolving
Credit Agreement, dated as of March 10, 1994, as amended (as so amended,
the "Credit Agreement"); and
WHEREAS, the Company, the Lenders, the Lead Managers and the
Agent have agreed, subject to the terms and conditions set forth herein, to
amend certain provisions of the Credit Agreement as set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(section mark)1. CERTAIN DEFINED TERMS. Capitalized terms
which are used herein without definition and which are defined in
the Credit Agreement shall have the same meanings herein as in the
Credit Agreement.
(section mark)2. AMENDMENT TO CREDIT AGREEMENT.
(a) Section 1 of the Credit Agreement is hereby amended by
adding the following new definitions in the appropriate places in the
alphabetical sequence thereof:
Encee Security Agreement. The Security Agreement, dated as
of December 30, 1994, between Encee and the Agent, for the
benefit of the Lenders and the Agent, and satisfactory to the
Lenders and the Agent in all respects, as the same may be amended
and in effect from time to time.
Fieldcrest Financing. Fieldcrest Cannon Financing, Inc., a
Delaware corporation and wholly-owned Subsidiary of the Company.
Fieldcrest Licensing. Fieldcrest Cannon Licensing, Inc., a
Delaware corporation and wholly-owned Subsidiary of Fieldcrest
Financing.
23
<PAGE>
Fieldcrest Transportation. Fieldcrest Cannon
Transportation, Inc., a Delaware corporation and a wholly-owned
Subsidiary of the Company.
Fieldcrest Financing Guaranty. The Guaranty, dated as of
December 30, 1994, from Fieldcrest Financing to the Lenders and
the Agent and satisfactory to the Lenders and the Agent in all
respects, as the same may be amended and in effect from time to
time.
Fieldcrest Licensing Guaranty. The Guaranty, dated as of
December 30, 1994, from Fieldcrest Licensing to the Lenders and
the Agent and satisfactory to the Lenders and the Agent in all
respects, as the same may be amended and in effect from time to
time.
Fieldcrest Transportation Guaranty. The Guaranty, dated as
of December 30, 1994, from Fieldcrest Transportation to the
Lenders and the Agent and satisfactory to the Lenders and the
Agent in all respects, as the same may be amended and in effect
from time to time.
Fieldcrest Financing Security Agreement. The Security
Agreement, dated as of December 30, 1994, between Fieldcrest
Financing and the Agent, for the benefit of the Lenders and the
Agent, and satisfactory to the Lenders and the Agent in all
respects, as the same may be amended and in effect from time to
time.
Fieldcrest Licensing Security Agreement. The Security
Agreement, dated as of December 30, 1994, between Fieldcrest
Licensing and the Agent, for the benefit of the Lenders and the
Agent, and satisfactory to the Lenders and the Agent in all
respects, as the same may be amended and in effect from time to
time.
Fieldcrest Licensing Trademark Assignment. The Trademark
Collateral Security and Pledge Agreement, dated as of December
30, 1994, between Fieldcrest Licensing and the Agent, for the
benefit of the Lenders and the Agent, as the same may be amended
and in effect from time to time.
Fieldcrest Transportation Security Agreement. The Security
Agreement, dated as of December 30, 1994 between Fieldcrest
Transportation and the Agent, for the benefit of the Lenders and
the Agent, and satisfactory to the Lenders and the Agent in all
respects, as the same may be amended and in effect from time to
time.
(b) Section 1 of the Credit Agreement is hereby further amended
by deleting the definitions of Collateral, Revolving Credit Commitment
Amount, and Security Documents in their entirety, and substituting
therefore the following:
Collateral. All of the property, rights and interests of
the Company, FCC Canada, Crestfield Cotton, Encee, Fieldcrest
Financing, Fieldcrest Licensing and Fieldcrest Transportation
that are or are intended to be subject to the security interests
created by the Security Documents.
Revolving Credit Commitment Amount. $160,000,000, less the
aggregate
24
<PAGE>
amount, if any, by which the same has been reduced
pursuant to (section mark)2.4 hereof.
Security Documents. The Security Agreement, the Crestfield
Cotton Guaranty, the FCC Canada Guaranty, the Subsidiary
Guaranty, the Fieldcrest Financing Guaranty, the Fieldcrest
Licensing Guaranty, the Fieldcrest Transportation Guaranty, the
Crestfield Cotton Security Agreement, the Subsidiary Security
Agreement, the Encee Security Agreement, the Fieldcrest Financing
Security Agreement, the Fieldcrest Licensing Security Agreement,
the Fieldcrest Transportation Security Agreement, the Trademark
Assignment, the Fieldcrest Licensing Trademark Assignment and the
Agency Agreements, and any and all instruments and documents
required to be delivered pursuant thereto, in each case as
originally executed, or if amended, restated, modified or
supplemented, as so amended, restated, modified or supplemented.
(c) Section 1 of the Credit Agreement is hereby further
amended by deleting "(section mark)5(e)" where it appears in clause
(iii) of the definition of Accounts Receivable, and substituting
therefor "(section mark)5(h)".
(d) Section 1 of the Credit Agreement is hereby further
amended by deleting "(section mark)5(e)" where it appears in clause
(ii) of the definition of Net Security Value of Inventory, and
substituting therefor "(section mark)5(h)".
(e) Section 5 of the Credit Agreement is hereby amended by
deleting clause (d) in it entirety, and substituting therefor the
following:
(d) The Lender Obligations shall also be guarantied by each
of Encee, Fieldcrest International and St. Mary's pursuant to the
Subsidiary Guaranty. The obligations of Encee under the
Subsidiary Guaranty shall be secured by a blanket first lien on
certain assets of Encee, whether now owned or hereafter acquired
by Encee, pursuant to the terms of the Encee Security Agreement.
(f) Section 5 of the Credit Agreement is hereby further amended
by designating clause (e) thereof as clause (h) and inserting after clause
(d) thereof the following new clauses:
(e) The Lender Obligations shall also be guaranteed by
Fieldcrest Financing pursuant to the Fieldcrest Financing
Guaranty. The obligations of Fieldcrest Financing under the
Fieldcrest Financing Guaranty shall be secured by a blanket first
lien on all assets of Fieldcrest Financing, whether now owned or
hereafter acquired by Fieldcrest Financing, pursuant to the terms
of the Fieldcrest Financing Security Agreement.
(f) The Lender Obligations shall also be guaranteed by
Fieldcrest Licensing pursuant to the Fieldcrest Licensing
Guaranty. The obligations of Fieldcrest Licensing under the
Fieldcrest Licensing Guaranty shall be secured by a blanket first
lien on all assets of Fieldcrest Licensing, whether now owned or
hereafter acquired by Fieldcrest Licensing pursuant to the terms
of the Fieldcrest Licensing Security Agreement.
25
<PAGE>
(g) The Lender Obligations shall also be guaranteed by the
Fieldcrest Transportation pursuant to the Fieldcrest
Transportation Guaranty. The obligations of Fieldcrest
Transportation under the Fieldcrest Transportation Guaranty shall
be secured by a blanket first lien on all assets (other than
motor vehicles) of Fieldcrest Transportation, whether now owned
or hereafter acquired by Fieldcrest Transportation, pursuant to
the terms of the Fieldcrest Transportation Security Agreement.
(g) Section 8.3(d) of the Credit Agreement is hereby amended by
inserting on line six thereof after the amount "$20,000,000" the phrase ",
except that loans to any of Crestfield Cotton, FCC Canada, Encee,
Fieldcrest Financing, Fieldcrest Licensing and Fieldcrest Transportation
shall not be subject to such dollar limitation,".
(h) Section 8.6 of the Credit Agreement is hereby amended by
deleting the last sentence thereof in its entirety, and substituting
therefor the following:
The Company will not sell, lease or otherwise dispose of assets
except for (i) sales of inventory in the ordinary course of
business, (ii) sales of assets (other than Collateral) in arms-
length transactions for cash and for fair and reasonable value,
and (iii) transfers of assets to Subsidiaries of the Company,
provided that (A) such Subsidiary is a guarantor of the Lender
Obligations, (B) all such assets which constitute Collateral are
transferred to such Subsidiary subject to the Agent's lien
thereon and (C) such Subsidiary grants to the Agent, for the
benefit of the Agent and the Lenders, a first perfected lien on
all of such transferred assets.
(i) Section 8.8 of the Credit Agreement is hereby amended by
deleting "(p)" where it appears therein, and substituting therefor "(q)".
(j) Schedule 1.1 to the Credit Agreement is hereby amended by
deleting such schedule in its entirety, and substituting therefor the
Schedule 1.1 attached hereto.
(k) Schedule 6.1 to the Credit Agreement is hereby amended by
deleting such schedule its entirety, and substituting therefor the Schedule
6.1 attached hereto.
(section mark)3. CONSENT. The Lenders hereby consent to the
transfer by the Company on or prior to the date hereof of certain
assets of the Company, including without limitation, Collateral, to
each of Encee, Fieldcrest Transportation, Fieldcrest Financing and
Fieldcrest Licensing, provided that all assets constituting
Collateral which are transferred to such entities are and shall
remain subject to the first priority security interest of the
Agent, for the benefit of the Lenders and the Agent, granted
pursuant to the Security Documents.
(section mark)4. AFFIRMATION BY THE COMPANY AND THE GUARANTORS.
(a) The Company hereby ratifies and confirms all of the Lender
Obligations, including, without limitation, the Loans, and the Company
hereby affirms its absolute and unconditional promise to pay to the
Lenders the Loans and all other amounts due under the Credit Agreement as
amended hereby. The Company hereby confirms that the Lender
26
<PAGE>
Obligations are and remain secured pursuant to the Security
Documents to which the Company is a party.
(b) Each of Crestfield Cotton, FCC Canada, Encee, Fieldcrest
International and St. Mary's hereby acknowledges the provisions of this
Amendment and hereby reaffirms its absolute and unconditional guaranty of
the Company's payment and performance of the Lender Obligations to the
Banks as more fully described in the Guaranty to which such Person is a
party. Each of Crestfield Cotton and FCC Canada hereby confirms that its
obligations under the Guaranty to which it is a party are and remain
secured pursuant to the Security Documents to which it is a party.
(section mark)5. REPRESENTATIONS AND WARRANTIES. The
Company hereby represents and warrants to the Lenders as follows:
(a) Representations and Warranties. The representations
and warranties contained in (section mark)6 of the Credit Agreement
were true and correct in all material respects when made. The
representations and warranties contained in (section mark)6 of the
Credit Agreement, as amended hereby, are true and correct on the date
hereof.
(b) Enforceability. The execution and delivery by the Company
of this Amendment and all other instruments and agreements required to be
executed and delivered by the Company in connection with the transactions
contemplated hereby or referred to herein (collectively, the "Amendment
Documents"), and the performance by the Company of the Amendment Documents
and the Credit Agreement, as amended hereby, are within the corporate
powers of the Company and have been duly authorized by all necessary
corporate action on the part of the Company. Each of the Amendment
Documents and the Credit Agreement, as amended hereby, are valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting the enforcement of
creditors' rights in general.
(c) No Default. No Default or Event of Default has occurred and
is continuing and no Default or Event of Default will exist after the
execution and delivery of this Amendment or after the consummation of the
transactions contemplated hereby.
(section mark)6. EFFECTIVENESS. This Amendment shall become
effective as of the date hereof upon satisfaction of each of the
conditions precedent set forth in this (section mark)6:
(a) Delivery. The Company, the Lenders and the
guarantors referred to in (section mark)3(b) hereof shall have
executed and delivered this Amendment.
(b) Restated A Notes. The Company shall have duly authorized,
executed and delivered to each of the Lenders a restated A Note in
substantially the form of Exhibit A attached hereto (collectively, the
"Restated A Notes"), with appropriate insertions, one Restated A Note being
payable to the order of each Lender in a principal amount equal to such
Lender's Commitment as amended hereby.
(c) Subsidiary Documents. Fieldcrest Financing shall have duly
authorized,
27
<PAGE>
executed and delivered to the Lenders and the Agent, as
applicable, the Fieldcrest Financing Guaranty and the Fieldcrest
Financing Security Agreement. Fieldcrest Licensing shall have duly
authorized, executed and delivered to the Lenders and the Agent, as
applicable, the Fieldcrest Licensing Guaranty, the Fieldcrest Licensing
Security Agreement and the Fieldcrest Licensing Trademark
Assignment. Fieldcrest Transportation shall have duly authorized,
executed and delivered to the Lender and the Agent, the Fieldcrest
Transportation Guaranty and the Fieldcrest Transportation Security
Agreement. Encee shall have duly authorized, executed and delivered
to the Lender and the Agent, the Encee Security Agreement.
(d) Pledged Stock and Intercompany Notes. The Company shall
have delivered to the Agent in pledge, for the benefit of the Agent and the
Lenders, (i) certificates for all shares of the capital stock of Fieldcrest
Financing and Fieldcrest Transportation, together with stock powers duly
executed by the Company in blank and (ii) all promissory notes executed and
delivered by any of Fieldcrest Financing, Fieldcrest Licensing and
Fieldcrest Transportation (collectively, the "New Subsidiaries") on or
prior to the date hereof in favor of the Company, endorsed in favor of the
Agent. Fieldcrest Financing shall have delivered to the Agent in pledge,
for the benefit of the Agent and the Lenders, (i) certificates for all
shares of the capital stock of Fieldcrest Licensing, together with stock
powers duly executed by Fieldcrest Financing in blank, and (ii) all
promissory notes executed and delivered by Fieldcrest Licensing and the
Company on or prior to the date hereof in favor of Fieldcrest Financing,
endorsed in favor of the Agent.
(e) Validity of Liens.
The Security Documents to which each of the New Subsidiaries and Encee is a
party shall be effective to create in favor of the Agent a legal, valid and
enforceable first security interest in and lien upon the Collateral
described therein. All filings, recordings, deliveries of instruments and
other actions necessary or desirable in the opinion of the Agent to protect
and preserve such security interests shall have been duly effected. The
Agent shall have received evidence thereof in form and substance
satisfactory to the Agent.
(f) Perfection Certificates and UCC Search Results.
The Agent shall have received from each of the New Subsidiaries and Encee a
completed and fully executed Perfection Certificate and the results of UCC
searches with respect to the Collateral, indicating no liens other than
Permitted Liens and otherwise in form and substance satisfactory to the
Agent.
(g) Certified Copies of Corporate Documents.
Each of the Lenders shall have received from each of New Subsidiaries and
Encee a copy, certified by a duly authorized officer of such Person to be
true and complete on the date hereof, of each of (i) its charter or other
incorporation documents as in effect on such date of certification, and
(ii) its by-laws as in effect on such date.
(h) Corporate, Action.
All corporate action necessary for the valid execution, delivery and
performance by each of the New Subsidiaries and Encee of the Loan Documents
to which it is or is to become a party shall have been duly and effectively
taken, and evidence thereof satisfactory to the Lenders shall have been
provided to each of the Lenders.
28
<PAGE>
(i) Incumbency Certificates.
Each of the Lenders shall have received from each of the New Subsidiaries
and Encee an incumbency certificate, dated as of the date hereof, signed by
a duly authorized officer of such Subsidiary, and giving the name and
bearing a specimen signature of each individual who shall be authorized:
(i) to sign, in the name and on behalf of each of such Subsidiary, each of
the Loan Documents to which such Subsidiary is or is to become a party; and
(ii) to give notices and to take other action on its behalf under the Loan
Documents to which it is a party.
(j) Certificates of Insurance. The Agent shall have received
(i) a certificate of insurance from an independent insurance broker dated
as of the date hereof, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing the insurance obtained
in accordance with the provisions of the Security Documents to which the
New Subsidiaries and Encee are parties and (ii) certified copies of all
policies evidencing such insurance (or certificates therefore signed by the
insurer or an agent authorized to bind the insurer).
(k) Opinion of Counsel. Each of the Lenders and the Agent shall
have received a favorable legal opinion addressed to the Lenders and the
Agent, dated as of the date hereof, in form and substance satisfactory to
the Lenders and the Agent, from M.K. Doss, general counsel to the Company
and its Subsidiaries.
(l) Payment of Fees. The Company shall have paid to each of the
Lenders an amendment fee equal to $5,000 per Lender.
(m) Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Amendment and all documents
incident hereto shall be satisfactory in form and substance to the Agent,
and the Agent shall have received all information and such counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
(section mark)7. CONCERNING THE RESTATED A NOTES. The
parties hereto hereby agree that from and after the delivery by the
Company of the Restated A Notes to the Lenders, such Restated A Notes
shall constitute the A Notes referred to in the Loan Documents.
Promptly upon the delivery to the Lenders of the Restated A Notes, the
Lenders shall return the superseded A Notes to the Company.
(section mark)8. MISCELLANEOUS PROVISIONS. (a) Except as
otherwise expressly provided by this Amendment, all of the terms,
conditions and provisions of the Credit Agreement shall remain the
same. It is declared and agreed by each of the parties hereto that
the Credit Agreement, as amended hereby, shall continue in full force
and effect, and that this Amendment and such Credit Agreement shall be
read and construed as one instrument. The consent granted
hereunder is limited to the specific matters referred to herein and
the Lenders shall not have any obligation to issue any further consent
with respect to the subject matter of this consent or any other
matter.
(b) This Amendment is intended to take effect as an agreement
under seal and shall be construed according to and governed by the laws of
the Commonwealth of
29
<PAGE>
Massachusetts.
(c) This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
instrument. In making proof of this Amendment it shall not be necessary to
produce or account for more than one counterpart signed by each party
hereto by and against which enforcement hereof is sought.
(d) The Company hereby agrees to pay to the Agent, on demand by
the Agent, all reasonable out-of-pocket costs and expenses incurred or
sustained by the Agent in connection with the preparation of this Amendment
and the documents referred to herein (including reasonable legal fees).
30
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date first above written.
FIELDCREST CANNON, INC.
By:/s/ T. R. Staab
Title: Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
By:/s/ Mitchell B. Feldman
Title: Director
THE FIRST NATIONAL BANK OF
BOSTON
By:/s/ Mitchell B. Feldman
Title: Director
BANK OF AMERICA ILLINOIS,
individually and as Lead Manager
By:/s/ Wayne H. Riess
Title: Vice President
CORESTATES BANK, N.A.,
individually and as Lead Manager
By:/s/ James P. Richards
Title: Vice President
31
<PAGE>
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, individually and as
Lead Manager
By:/s/ Richard J. Rizzo, Jr.
Title: Vice President
BANK OF MONTREAL
By:/s/ Michael J. Love
Title: Director
MELLON BANK, N. A.
By:/s/ Frederick W. Okie, Jr.
Title: Vice President
Each of the undersigned joins in this Amendment for purposes of
(section mark)3(b) hereof.
CRESTFIELD COTTON COMPANY
By:/s/ T. R. Staab
Title: Vice President
FCC CANADA, INC.
By:/s/ T. R. Staab
Title: Vice President
ENCEE, INC.
By:/s/ T. R. Staab
Title: Vice President and Treasurer
32
<PAGE>
FIELDCREST CANNON
INTERNATIONAL, INC.
By:/s/ T. R. Staab
Title: Vice President and Treasurer
ST. MARY'S, INC.
By:/s/ T. R. Staab
Title: Vice President and Treasurer
33
THIRD AMENDMENT
to
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
dated as of March 10, 1994
This THIRD AMENDMENT (the "Amendment"), dated as of January 27,
1995, is by and among FIELDCREST CANNON, INC., a Delaware corporation (the
"Company"), the lenders listed on the signature pages hereto (the
"Lenders"), BANK OF AMERICA ILLINOIS (formerly known as Continental Bank
N.A.), CORESTATES BANK, N.A. (formerly known as Philadelphia National Bank)
and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as lead managers for the
Lenders (collectively, the "Lead Managers"), and THE FIRST NATIONAL BANK OF
BOSTON, as agent for the Lenders (the "Agent").
WHEREAS, the Company, the Lenders, the Lead Managers and the
Agent are parties to that certain Third Amended and Restated Revolving
Credit Agreement, dated as of March 10, 1994, as amended (as so amended,
the "Credit Agreement"); and
WHEREAS, the Company, the Lenders, the Lead Managers and the
Agent have agreed, subject to the terms and conditions set forth herein, to
amend certain provisions of the Credit Agreement as set forth herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(section mark)1. CERTAIN DEFINED TERMS. Capitalized terms
which are used herein without definition and which are defined in
the Credit Agreement shall have the same meanings herein as in the
Credit Agreement.
(section mark)2. AMENDMENT TO CREDIT AGREEMENT.
(a) Section 1 of the Credit Agreement is hereby amended by
adding the following new definitions in the appropriate places in the
alphabetical sequence thereof:
Assignment of Acquisition Documents. The collateral
assignment of all of the Company's and Fieldcrest Sure Fit's
right, title and interest to and under the Sure Fit Acquisition
Documents, in form and substance satisfactory to the Lenders.
Fieldcrest Sure Fit. Fieldcrest Cannon Sure Fit, Inc.,
a Delaware corporation and wholly-owned Subsidiary of the
Company.
Fieldcrest Sure Fit Guaranty. The Guaranty, dated as
of January 27, 1995, from Fieldcrest Sure Fit to the Lenders and
the Agent and satisfactory to the Lenders and the Agent in all
respects, as the same may be amended and in effect from time to
time.
34
<PAGE>
Fieldcrest Sure Fit Security Agreement. The Security
Agreement, dated as of January 27, 1995, between Fieldcrest Sure
Fit and the Agent, for the benefit of the Lenders and the Agent,
and satisfactory to the Lenders and the Agent in all respects, as
the same may be amended and in effect from time to time.
Purchase Agreement. The Asset Purchase Agreement dated
as of January 20, 1995 by and among the Company, UTC Holdings,
Inc. and Bank of America Illinois, including all exhibits and
schedules thereto and any amendments thereto delivered to the
Agent prior to January 27, 1995, and assigned by the Company to
Fieldcrest Sure Fit pursuant to the Assignment and Assumption of
Purchase Agreement dated as of January 20, 1995 by and between
the Company and Fieldcrest Sure Fit.
Secured Guarantors. FCC Canada, Crestfield Cotton,
Encee, Fieldcrest Financing, Fieldcrest Licensing, Fieldcrest
Transportation and Fieldcrest Sure Fit.
Sure Fit Acquisition. The acquisition by Fieldcrest
Sure Fit, pursuant to the Sure Fit Acquisition Documents of
certain of the properties and assets used by UTC Holdings, Inc.
to conduct its business of manufacturing home furniture covers.
Sure Fit Acquisition Documents. The Purchase Agreement
and all other agreements and documents required to be entered
into or delivered pursuant to the Purchase Agreement or in
connection with the Sure Fit Acquisition.
(b) Section 1 of the Credit Agreement is hereby further
amended by deleting the definitions of Collateral, Revolving Credit
Commitment Amount, and Security Documents in their entirety, and
substituting therefor the following:
Accounts Receivable. All rights (provided, however,
that "bill and hold" items as reflected on the Company's and each
of the Secured Guarantors' books and records would be included
only to the extent of 87.5% thereof and "price load" items as
reflected on the Company's and each of the Secured Guarantors'
books and records would be eliminated in their entirety) to
payment for goods sold or for services rendered, in each case in
the ordinary course of business by or owing to the Company or any
of the Secured Guarantors which in accordance with Generally
Accepted Accounting Principles are properly classified as
accounts receivable; provided, however, that such rights would be
included only if:
(i) they are good and collectible and not subject to
setoff, claims by the account debtor or other offset of
any kind all as determined by the Company or such Secured
Guarantor, as applicable, in accordance with established
practices consistently applied;
35
<PAGE>
(ii) they are payable and outstanding not more than
thirty (30) days after the date on which payment is
required to be made in accordance with established
practices consistently applied; and
(iii) they are rights in which the Agent has a
valid and perfected first priority security interest
(unless such security interest has been released by the
Agent pursuant to (section mark)5(i) hereof).
In no event shall there be included in Accounts Receivable
any rights to payment arising from any source or under any
circumstances other than those specified above in this
definition. The Company and each of the Secured Guarantors
specifically acknowledges that the receivables carried on its
books as the following do not constitute Accounts Receivable:
(A) "other receivables consisting of product liability and
property tax amounts", (B) "master notes", representing amounts
due from finance companies, (C) "trade note receivables",
representing monies due from delinquent accounts set up on
extended payment term notes, and (D) "other receivables" or
"miscellaneous receivables", representing, but not limited to,
unbilled storage, vendor receivables and miscellaneous non-trade
sales.
Collateral. All of the property, rights and interests of
the Company, FCC Canada, Crestfield Cotton, Encee, Fieldcrest
Financing, Fieldcrest Licensing, Fieldcrest Transportation and
Fieldcrest Sure Fit that are or are intended to be subject to the
security interests created by the Security Documents.
Net Security Value of Inventory. The net value of inventory
of the Company and the Secured Guarantors (but excluding (i)
inventory of the Company or any of the Secured Guarantors which
is not located within the United States of America, (ii)
inventory as to which appropriate Uniform Commercial Code
financing statements showing the Company or a Secured Guarantor
as debtor and the Agent as secured party have not been filed in
the proper filing office or offices in order to perfect the
Agent's security interest therein (unless such security interests
have been released by the Agent pursuant to (section mark)5(i)
hereof), (iii) inventory of the Company or any of the Secured
Guarantors which is held by the Company or such Secured Guarantor on
property (other than retail stores) leased by the Company or such
Secured Guarantor unless the Agent has received (A) a waiver from the
lessor of such leased property and, if any, any sublessor
thereof, in form and substance satisfactory to the Agent or (B)
evidence satisfactory to the Agent that no such waiver is
required to assure the priority of the Agent's lien on such
inventory over any interest of such lessor or sublessor in such
inventory, and (iv) inventory which has been shipped to a
customer of the Company or such Secured Guarantor on a
consignment basis) at standard cost as determined utilizing the
"First-in First-out" method of accounting as reflected on the
Company's or such Secured Guarantor's books and records in
accordance with established practices consistently applied, less
50% of "work-in-process" as reflected in the Company's or such
Secured Guarantor's books and records, and less 100% of each of
(x) the amount included therein classified as "expense supplies",
(y) "markdown reserve inventory" and (z) "manufacturing
supplies", in each case as reflected on the Company's or such
Secured Guarantor's books and records, but in no event an amount
greater than $225,000,000.
36
<PAGE>
Revolving Credit Commitment Amount. $195,000,000, less the
aggregate amount, if any, by which the same has been reduced
pursuant to (section mark)2.4 hereof.
Security Documents. The Security Agreement, the Crestfield
Cotton Guaranty, the FCC Canada Guaranty, the Subsidiary
Guaranty, the Fieldcrest Financing Guaranty, the Fieldcrest
Licensing Guaranty, the Fieldcrest Transportation Guaranty, the
Fieldcrest Sure Fit Guaranty, the Crestfield Cotton Security
Agreement, the Subsidiary Security Agreement, the Encee Security
Agreement, the Fieldcrest Financing Security Agreement, the
Fieldcrest Licensing Security Agreement, the Fieldcrest
Transportation Security Agreement, the Fieldcrest Sure Fit
Security Agreement, the Assignment of Acquisition Documents, the
Trademark Assignment, the Fieldcrest Licensing Trademark
Assignment and the Agency Agreements, and any and all instruments
and documents required to be delivered pursuant thereto, in each
case as originally executed, or if amended, restated, modified or
supplemented, as so amended, restated, modified or supplemented.
(c) Section 5 of the Credit Agreement is hereby amended by
designating clause (h) thereof as clause (i) and inserting after clause (g)
thereof the following new clause:
(h) The Lender Obligations shall also be guaranteed by
Fieldcrest Sure Fit pursuant to the Fieldcrest Sure Fit Guaranty.
The obligations of Fieldcrest Sure Fit under the Fieldcrest Sure
Fit Guaranty shall be secured by a first lien on certain assets
of Fieldcrest Sure Fit, whether now owned or hereafter acquired
by Fieldcrest Sure Fit, pursuant to the terms of the Security
Documents to which Fieldcrest Sure Fit is a party.
(d) Section 6.7 of the Credit Agreement is hereby amended by
deleting the first sentence thereof in its entirety, and substituting
therefor the following:
Except for the assets of the Company and its Subsidiaries which
are held for sale on the Effective Date (as disclosed to the
Lenders prior to the Effective Date), the Company and its
Subsidiaries are engaged exclusively in the design, manufacture
and marketing of blankets, throws, bedspreads, sheets,
comforters, towels, bath rugs, shower curtains, bed accessories,
bath accessories, furniture throws, casual slipcovers,
traditional slipcovers and coordinated accessories, kitchen
textile products, sales yarn, greige goods, finished goods,
promotional textile products and material handling and storage
products and commission finishing of textile goods and in the
operation of retail stores with respect to the foregoing and
other businesses directly related thereto.
(e) Section 6 of the Credit Agreement is further amended by
inserting the following new subsection:
(section mark)6.25. Sure Fit Acquisition Documents.
The Company has heretofore furnished to the Agent true,
complete and correct copies of the Sure Fit
Acquisition Documents (including schedules, exhibits and
annexes thereto). None of the Sure Fit Acquisition
Documents has subsequently been amended,
supplemented, or modified (other than the amendments to
the Purchase Agreement delivered to the
37
<PAGE>
Agent on or prior to January 27, 1995) and constitute the
complete understanding among the parties thereto in
respect to the matters and transactions covered thereby.
The representations and warranties of the Seller (as
defined in the Purchase Agreement), the Company and
Fieldcrest Sure Fit contained in each of the Sure Fit
Acquisition Documents were true and correct in all material
respects when made and the Agent may rely on such
representations and warranties as if they were incorporated
herein.
(f) Section 7.3 of the Credit Agreement is hereby amended by
deleting the text of such section in its entirety, and substituting
therefor the following:
The Company shall use the proceeds of the Loans and obtain
Letters of Credit solely for general corporate purposes and to
finance the Sure Fit Acquisition, provided that the portion of
such proceeds used to finance the Sure Fit Acquisition shall not
exceed $30,000,000 in the aggregate.
(g) Section 8.3(d) of the Credit Agreement is hereby amended by
deleting the text of such section in its entirety, and substituting
therefor the following:
(d) Investments existing on the Effective Date in any
Person which is a Subsidiary of the Company or future Investments
in any such Person, provided that any such future Investments
shall be limited to loans to a Subsidiary evidenced by a
promissory note of such Subsidiary, that the aggregate of such
future Investments at any one time shall not exceed $20,000,000,
except that loans to any of the Secured Guarantors shall not be
subject to such dollar limitation, and that such promissory note
shall be pledged to the Agent on behalf of the Lenders and,
provided, further, that the sum of the aggregate principal amount
of Indebtedness of Amoskeag to the Company under (section
mark)8.1(g) hereof plus, without duplication, the aggregate amount
of Investments made by the Company in Amoskeag pursuant to
(section mark)(section mark)8.3(d) and (h) hereof shall not exceed
$5,000,000 at any time;
(h) Section 8.6 of the Credit Agreement is hereby amended by
inserting in the fourth line thereof after the words "(other than the
acquisition of assets in the ordinary course of business) except" the
clause "(A) the Sure Fit Acquisition and (B)".
(i) Schedule 1.1 to the Credit Agreement is hereby amended by
deleting such schedule in its entirety, and substituting therefor the
Schedule 1.1 attached hereto.
(j) Schedule 6.1 to the Credit Agreement is hereby amended by
deleting such schedule in its entirety, and substituting therefor the
Schedule 6.1 attached hereto.
(section mark)3. CONSENT. The Lenders hereby consent to
the assignment by the Company, on or prior to the date hereof, of the
Purchase Agreement and each of the other Sure Fit Acquisition
Documents to Fieldcrest Sure Fit, pursuant to the terms of the Credit
Agreement, as amended hereby, including without limitation the
condition that all assets constituting Collateral which are
transferred to Fieldcrest Sure Fit are and shall remain subject to the
first priority security interest of the Agent, for the benefit of the
Lenders and the Agent, granted pursuant to the Security Documents. The
Lenders further consent to the assignment by
38
<PAGE>
Fieldcrest Sure Fit, on or prior to the date hereof, of the
trademarks and trademark applications transferred to Fieldcrest Sure
Fit pursuant to the Sure Fit Acquisition Documents to Fieldcrest
Licensing, pursuant to the terms of the Assignment of Trademarks dated
as of January 20, 1995 by and between Fieldcrest Sure Fit and
Fieldcrest Licensing and the terms of the Credit Agreement, as
amended hereby, including without limitation the condition that all
assets constituting Collateral which are transferred to Fieldcrest
Licensing are and shall remain subject to the first priority security
interest of the Agent, for the benefit of the Lenders and the Agent,
granted pursuant to the Security Documents.
(section mark)4. AFFIRMATION BY THE COMPANY AND THE GUARANTORS.
(a) The Company hereby ratifies and confirms all of the Lender
Obligations, including, without limitation, the Loans, and the Company
hereby affirms its absolute and unconditional promise to pay to the Lenders
the Loans and all other amounts due under the Credit Agreement as amended
hereby. The Company hereby confirms that the Lender Obligations are and
remain secured pursuant to the Security Documents to which the Company is a
party.
(b) Each of Crestfield Cotton, FCC Canada, Encee, Fieldcrest
International, St. Mary's, Fieldcrest Transportation, Fieldcrest Financing
and Fieldcrest Licensing hereby acknowledges the provisions of this
Amendment and hereby reaffirms its absolute and unconditional guaranty of
the Company's payment and performance of the Lender Obligations to the
Banks as more fully described in the Guaranty to which such Person is a
party. Each of Crestfield Cotton, FCC Canada, Encee, Fieldcrest
Transportation, Fieldcrest Financing and Fieldcrest Licensing hereby
confirms that its obligations under the Guaranty to which it is a party are
and remain secured pursuant to the Security Documents to which it is a
party.
(section mark)5. REPRESENTATIONS AND WARRANTIES. The
Company hereby represents and warrants to the Lenders as follows:
(a) Representations and Warranties. The representations
and warranties contained in (section mark)6 of the Credit Agreement were
true and correct in all material respects when made. The
representations and warranties contained in (section mark)6 of the
Credit Agreement, as amended hereby, are true and correct on the date
hereof.
(b) Enforceability. The execution and delivery by the Company
of this Amendment and all other instruments and agreements required to be
executed and delivered by the Company in connection with the transactions
contemplated hereby or referred to herein (collectively, the "Amendment
Documents"), and the performance by the Company of the Amendment Documents
and the Credit Agreement, as amended hereby, are within the corporate
powers of the Company and have been duly authorized by all necessary
corporate action on the part of the Company. Each of the Amendment
Documents and the Credit Agreement, as amended hereby, are valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting the enforcement of
creditors' rights in general.
39
<PAGE>
(c) No Default. No Default or Event of Default has occurred and
is continuing and no Default or Event of Default will exist after the
execution and delivery of this Amendment or after the consummation of the
transactions contemplated hereby.
(section mark)6. EFFECTIVENESS. This Amendment shall become
effective as of the date hereof upon satisfaction of each of the
conditions precedent set forth in this (section mark)6:
(a) Delivery. The Company, the Lenders and the
guarantors referred to in (section mark)3(b) hereof shall have
executed and delivered this Amendment.
(b) Restated A Notes. The Company shall have duly authorized,
executed and delivered to each of the Lenders a restated A Note in
substantially the form of Exhibit A attached hereto (collectively, the
"Restated A Notes"), with appropriate insertions, one Restated A Note being
payable to the order of each Lender in a principal amount equal to such
Lender's Commitment as amended hereby.
(c) Fieldcrest Sure Fit Documents. (i) Fieldcrest Sure Fit
shall have duly authorized, executed and delivered to the Lenders and the
Agent, as applicable, the Fieldcrest Sure Fit Guaranty and the Fieldcrest
Sure Fit Security Agreement.
(ii) Each of Fieldcrest Sure Fit and the Company shall have
executed and delivered the Assignment of Acquisition Documents
and the Seller (as defined in the Purchase Agreement) shall have
consented thereto.
(d) Pledged Stock and Intercompany Notes. The Company shall
have delivered to the Agent in pledge, for the benefit of the Agent and the
Lenders, (i) certificates for all shares of the capital stock of Fieldcrest
Sure Fit, together with stock powers duly executed by the Company in blank
and (ii) all promissory notes executed and delivered by Fieldcrest Sure Fit
on or prior to the date hereof in favor of the Company, endorsed in favor
of the Agent.
(e) Consummation of Sure Fit Acquisition; Sure Fit Acquisition
Documents. The Sure Fit Acquisition shall have been duly consummated on
the Closing Date in all materials respects in accordance with the Sure Fit
Acquisition Documents, and after giving effect thereto, Fieldcrest Sure Fit
shall own the assets conveyed to it therein free and clear of all liens,
security interests and encumbrances (other than as permitted under the
Credit Agreement). The purchase price of the assets acquired pursuant to
the Sure Fit Acquisition shall not exceed $30,000,000 in the aggregate.
The Company shall have furnished to the Agent true, correct and complete
copies of the Sure Fit Acquisition Documents.
(f) Consents, Etc. The Agent shall have received from the
Company and Fieldcrest Sure Fit evidence satisfactory to the Agent that all
necessary third party consents, approvals, authorizations, declarations or
filings including, to the extent needed, filings under the Hart-Scott-
Rodino Antitrust Improvements Act, and consents and approvals of any
creditors of the Company shall have been obtained or made.
(g) Validity of Liens. The Security Documents to which
Fieldcrest Sure Fit is a party shall be effective to create in favor of the
Agent, for the benefit of itself and the
40
<PAGE>
Lenders, a legal, valid and enforceable first security interest in
and lien upon the Collateral described therein. All filings,
recordings, deliveries of instruments and other actions necessary or
desirable in the opinion of the Agent to protect and preserve such
security interests shall have been duly effected The Agent shall
have received evidence thereof in form and substance
satisfactory to the Agent.
(h) Perfection Certificates and UCC Search Results.
The Agent shall have received from Fieldcrest Sure Fit a completed and
fully executed Perfection Certificate and the results of UCC searches with
respect to the Collateral, indicating no liens other than Permitted Liens
and otherwise in form and substance satisfactory to the Agent.
(i) Certified Copies of Corporate Documents.
Each of the Lenders shall have received from Fieldcrest Sure Fit a copy,
certified by a duly authorized officer of such Person to be true and
complete on the date hereof, of each of (i) its charter or other
incorporation documents as in effect on such date of certification, and
(ii) its by-laws as in effect on such date.
(j) Corporate Action.
All corporate action necessary for the valid execution, delivery and
performance by each of the Company and Fieldcrest Sure Fit of the Loan
Documents and the Sure Fit Acquisition Documents to which it is or is to
become a party shall have been duly and effectively taken, and evidence
thereof satisfactory to the Lenders shall have been provided to each of the
Lenders.
(k) Incumbency Certificate.
Each of the Lenders shall have received from Fieldcrest Sure Fit an
incumbency certificate, dated as of the date hereof, signed by a duly
authorized officer of Fieldcrest Sure Fit, and giving the name and bearing
a specimen signature of each individual who shall be authorized: (i) to
sign, in the name and on behalf of each of Fieldcrest Sure Fit, each of the
Loan Documents and the Sure Fit Acquisition Documents to which Fieldcrest
Sure Fit is or is to become a party; and (ii) to give notices and to take
other action on its behalf under the Loan Documents to which it is a party.
(l) Certificates of Insurance. The Agent shall have received
(i) a certificate of insurance from an independent insurance broker dated
as of the date hereof, identifying insurers, types of insurance, insurance
limits, and policy terms, and otherwise describing the insurance obtained
in accordance with the provisions of the Security Documents to which
Fieldcrest Sure Fit is a party and (ii) certified copies of all policies
evidencing such insurance (or certificates therefore signed by the insurer
or an agent authorized to bind the insurer).
(m) Opinions of Counsel. Each of the Lenders and the Agent
shall have received a favorable legal opinion addressed to the Lenders and
the Agent, dated as of the date hereof, in form and substance satisfactory
to the Lenders and the Agent, from M.K. Doss, general counsel to the
Company and its Subsidiaries. Each of the Lenders and the Agent shall have
received copies of the legal opinions delivered pursuant to the Sure Fit
Acquisition Documents, each providing that the Lenders and the Agent may
rely on such opinion.
41
<PAGE>
(n) Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Amendment and all documents
incident hereto shall be satisfactory in form and substance to the Agent,
and the Agent shall have received all information and such counterpart
originals or certified or other copies of such documents as the Agent may
reasonably request.
(section mark)7. CONCERNING THE RESTATED A NOTES. The
parties hereto hereby agree that from and after the delivery by the
Company of the Restated A Notes to the Lenders, such Restated A
Notes shall constitute the A Notes referred to in the Loan
Documents. Promptly upon the delivery to the Lenders of the
Restated A Notes, the Lenders shall return the superseded Restated A
Notes to the Company.
(section mark)8. MISCELLANEOUS PROVISIONS. (a) Except as
otherwise expressly provided by this Amendment, all of the terms,
conditions and provisions of the Credit Agreement shall remain the
same. It is declared and agreed by each of the parties hereto that
the Credit Agreement, as amended hereby, shall continue in full force
and effect, and that this Amendment and such Credit Agreement shall
be read and construed as one instrument. The consent granted
hereunder is limited to the specific matters referred to herein and
the Lenders shall not have any obligation to issue any further consent
with respect to the subject matter of this consent or any other
matter.
(b) This Amendment is intended to take effect as an agreement
under seal and shall be construed according to and governed by the laws of
the Commonwealth of Massachusetts.
(c) This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
instrument. In making proof of this Amendment it shall not be necessary to
produce or account for more than one counterpart signed by each party
hereto by and against which enforcement hereof is sought.
(d) The Company hereby agrees to pay to the Agent, on demand by
the Agent, all reasonable out-of-pocket costs and expenses incurred or
sustained by the Agent in connection with the preparation of this Amendment
and the documents referred to herein (including reasonable legal fees).
42
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Third
Amendment as of the date first above written.
FIELDCREST CANNON, INC.
By:/s/ T. R. Staab
Title: Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
By:/s/ Mitchell B. Feldman
Title: Director
THE FIRST NATIONAL BANK OF
BOSTON
By:/s/ Mitchell B. Feldman
Title: Director
BANK OF AMERICA ILLINOIS,
individually and as Lead Manager
By:/s/ Wayne H. Riess
Title: Vice President
CORESTATES BANK, N. A.,
individually and as Lead Manager
By: /s/ James P. Richard
Title: Vice President
43
<PAGE>
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, individually and as
Lead Manager
By:/s/ Richard J. Rizzo, Jr.
Title: Vice President
BANK OF MONTREAL
By:/s/ Michael J. Love
Title:
MELLON BANK, N. A.
By:/s/ Frederick W. Okie, Jr.
Title: Vice President
Each of the undersigned joins in this Third Amendment for
purposes of (section mark)3(b) hereof.
CRESTFIELD COTTON COMPANY
By:/s/ T. R. Staab
Title: Vice President
FCC CANADA, INC.
By:/s/ T. R. Staab
Title: Vice President
44
<PAGE>
ENCEE, INC.
By:/s/ T. R. Staab
Title: Vice President and Treasurer
FIELDCREST CANNON
INTERNATIONAL, INC.
By:/s/ T. R. Staab
Title: Vice President and Treasurer
ST. MARY'S, INC.
By:/s/ T. R. Staab
Title: Vice President and Treasurer
FIELDCREST CANNON
TRANSPORTATION, INC.
By:/s/ T. R. Staab
Title: President
FIELDCREST CANNON LICENSING,
INC.
By:/s/ John E. Setliff, Jr.
Title: Vice President
FIELDCREST CANNON FINANCING,
INC.
By:/s/ John E. Setliff, Jr.
Title: Vice President
45
Exhibit 11
Computation of Primary and Fully Diluted Net Income (Loss) Per Share
<TABLE>
<CAPTION>
For the three months For the twelve months
ended December 31 ended December 31
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Average shares outstanding 8,727,971 10,665,320 8,677,811 11,709,355
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 16,212 20,779 18,204 23,150
Average shares and equivalents
outstanding, primary 8,744,183 10,686,099 8,696,015 11,732,505
Average shares outstanding 8,727,971 10,665,320 8,677,811 11,709,355
Add shares giving effect to
the conversion of the
convertible subordinated
debentures 2,824,859 2,824,859 2,824,859 (1)
Add shares giving effect to the
conversion of the convertible
preferred stock 2,564,103 1,054,131 2,564,103 (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 16,212 20,111 19,132 23,921
Average shares and equivalents
outstanding, assuming full dilution 14,133,145 14,564,421 14,085,905 11,733,276
Primary Earnings
Income from continuing operations
before extraordinary charge
and accounting changes $10,089,000 $ 8,670,000 $30,745,000 $14,966,000
Income from discontinued
operations - - - 3,201,000
Gain from disposition of
discontinued operations - - - 9,207,000
Cumulative effect of accounting
changes - - - (70,305,000)
Net income (loss) $10,089,000 $ 8,670,000 $30,745,000 $(42,931,000)
Preferred dividends (1,125,000) (463,000) (4,500,000) (463,000)
Earnings (loss) on Common $ 8,964,000 $ 8,207,000 $26,245,000 $(43,394,000)
Page 46
<PAGE>
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
1994 1993 1994 1993
Primary earnings (loss) per share
Income from continuing operations
before extraordinary charge
and accounting changes $ 1.03 $ .77 $ 3.02 $ 1.24
Income from discontinued
operations - - - .27
Gain from disposition of
discontinued operations - - - .78
Cumulative effect of accounting
changes - - - (5.99)
Net income (loss) $ 1.03 $ .77 $ 3.02 $ (3.70)
Fully Diluted Earnings
Income from continuing operations
before extraordinary charge
and accounting change $ 8,964,000 $8,207,000 $26,245,000 $ 14,503,000
Add convertible subordinated
debenture interest, net of taxes 1,144,000 1,144,000 4,575,000 (1)
Add convertible preferred
dividends 1,125,000 463,000 4,500,000 (1)
Income from continuing operations
before and accounting changes
as adjusted 11,233,000 9,814,000 35,320,000 14,503,000
Income from discontinued
operations - - - 3,201,000
Gain from disposition of
discontinued operations - - - 9,207,000
Cumulative effect of accounting
changes - - - (70,305,000)
Net income (loss) $11,233,000 $9,814,000 $35,320,000 $(43,394,000)
Page 47
<PAGE>
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
1994 1993 1994 1993
Fully diluted earnings (loss)
per share
Income before accounting change $ .80 $ .67 2.51 $ (2)
Cumulative effect of accounting
change - - - (2)
Net income (loss) $ .80 $ .67 2.51 $ (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 is not presented as effects are anti-dilutive.
Page 48
<PAGE>
Results of
operations
Fieldcrest Cannon, Inc.
Management's discussion and analysis
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).
[CAPTION]
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,063.7 100.0 % $1,000.1 100.0 % $981.8 100.0 %
Cost of sales 898.4 84.5 834.7 83.5 818.7 83.4
Selling, general and administrative 94.8 8.9 101.8 10.2 102.2 10.4
Restructuring charges -- -- 10.0 1.0 -- --
Operating income 70.5 6.6 53.6 5.3 60.9 6.2
Interest expense 23.3 2.2 27.7 2.7 34.1 3.5
Other (income) expense, net .9 .1 (1.0) (.1) .2 --
Income from continuing operations
before income taxes, extraordinary
charge and accounting changes 46.3 4.3 26.9 2.7 26.6 2.7
Federal and state income taxes 15.6 1.4 11.9 1.2 10.9 1.1
Income from continuing operations
before extraordinary charge and
accounting changes $ 30.7 2.9 % $ 15.0 1.5 % $15.7 1.6 %
</TABLE>
1994 compared to
1993
Net sales from continuing operations in 1994 increased to $1.063.7 million
compared to $1,000.1 million in 1993. The 6.4% increase was due primarily to
increased volume and to a lesser extent to price increases implemented during
the third quarter of 1994. Increases in raw material and labor costs were not
fully recovered by the selling price increases and gross margins declined to
15.5% in 1994 compared to 16.5% in 1993. Additional selling price increases have
been announced for 1995 to offset these higher costs and the recent further
increases in the cost of cotton, the Company's primary raw material.
Selling, general and administrative expenses as a percent of sales decreased
from 10.2% in 1993 to 8.9% in 1994. 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 percent of sales was 6.6% in 1994 compared to 5.3% in
1993. Operating income was reduced 1.0% in 1993 due to $10 million of
restructuring charges (see Note 4 of the NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS). Before the restructuring charges operating income as a percent of
sales was 6.3% in 1993.
Interest expense decreased $4.4 million in 1994. The reduction of interest
expense was primarily due to lower average debt resulting from the reduction of
debt with the proceeds from the sale of the carpet and rug division in July
1993. In 1994 the Company allocated $1.6 million of interest costs to the
Amoskeag assets held for sale (see Note 3 of the NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS).
The effective income tax rate was 33.6% in 1994 compared to 44.3% in 1993. The
decrease in the effective income tax rate is due primarily to a $1.7 million
favorable settlement of prior years income taxes in 1994 and the unfavorable
$1.4 million effect of the federal tax rate increase in 1993. See Note 13 of the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
19
49
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
Income from continuing operations before accounting changes was $30.7 million or
$3.02 per share in 1994 compared to $15.0 million or $1.24 per share in 1993.
Income before non-recurring items was $29.0 millon, or $2.82 per share, in 1994
compared to $22.5, or $1.88 per share, in 1993 after excluding the favorable
settlements of prior years income taxes of $1.7 million from 1994, and the
pre-tax restructuring charge of $10 million and a $1.4 million tax adjustment
from 1993.
On February 27, 1995 the Company announced a reorganization of its New York
operations and the planned relocation during 1995 of the Bed, Bath and Blanket
Divisions' administrative, marketing and operations personnel to Kannapolis,
N.C. In conjunction with the move, it expects to offer a voluntary early
retirement program for all of the Company's eligible salaried employees. The
Company expects pre-tax costs in the range of $10 to $12 million, or $.71 to
$.85 per share, as a result of these actions. Annual pre-tax savings of $6 to $8
million, or $.47 to $.57 per share, are anticipated. Pre-tax costs of
approximately $3 to $4 million, or $.21 to $.28 per share, are expected to be
accrued in the first quarter of 1995 and the remaining costs for relocation and
the voluntary early retirement program will be incurred later in the year.
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.
These expenses did not contribute to the ultimate consummation of the tender
offer to acquire Amoskeag Company. The acquisition of Amoskeag Company was
accounted for as a purchase of treasury stock and is not expected to effect
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 did not increase due to continued competitive
pressures on selling prices.
Selling, general and administrative expenses as a percent of 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.
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 13 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.
20
50
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
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 Company. 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.
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) 1994 1993
<S> <C> <C>
Cash provided by:
Net income (loss) $ 30,745 $ (42,931)
Cumulative effect of
accounting changes -- 70,305
(Income) from discontinued
operations -- (12,408)
Depreciation and
amortization 29,828 31,539
Deferred income taxes 7,677 2,329
Working capital, excluding
effects of disposition of
discontinued operations (19,719) (20,764)
Other (8,178) 1,726
Financing activities 11,781 (119,309)
Total cash provided (used) 52,134 (89,513)
Cash used for:
Additions to plant and
equipment (51,929) (21,594)
Acquisition of net assets
held for sale -- (32,536)
Sale of plant and
equipment 1,815 12,621
Total cash (used) (50,114) (41,509)
Increase (decrease)
in cash from continuing
operations 2,020 (131,022)
Cash provided by
discontinued operations -- 130,222
Increase (decrease) in
cash $ 2,020 $ (800)
</TABLE>
Working capital requirements increased in 1994 primarily because of a $17.9
million decrease in accounts payable and accrued liabilities, a $5.6 million
increase in accounts receivable and a $4.2 million increase in inventories.
Working capital requirements increased in 1993 primarily because accounts
receivables increased $13.1 million and inventories increased by $10.6 million
after excluding the effects of disposition of discontinued operations.
On November 24, 1993 the Company completed a tender offer for all of the
outstanding shares of Amoskeag Company ("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 were valued at their estimated net
realizable value.
Total debt as a percent of total capitalization (long-term debt, short-term debt
and shareowners' equity) was 58% at December 31, 1994, compared to 61% at the
end of 1993.
Capital expenditures totalled $51.9 million in 1994 compared to $21.6 million
spent in 1993. 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 $3 million in 1994 and $8 million in
1993. Capital expenditures for 1995 are expected to be approximately $50
million. Included in the 1994 expenditures and the 1995 plans are costs of a
three-year $90 million capital project for a new weaving plant at the Company's
Columbus, Ga./Phenix 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.
21
51
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
Liquidity and
capital resources
continued
On January 27, 1995 the Company purchased the Sure Fit furniture covering
business of UTC Holdings, Inc. The purchase price was $26.7 million subject to
adjustment for the change in Sure Fit's net assets from November 5, 1994 to
December 31, 1994. Sure Fit's 1994 sales are projected to be approximately $55
million and this transaction is expected to increase the Company's earnings per
share in 1995. With the acquisition, the Company amended its revolving credit
facility to permit the transaction and increased the line from $160 million to
$195 million. On December 13, 1994 the Company signed a definitive stock
purchase agreement to sell the Bangor and Aroostook Railroad for approximately
$24 million of cash and a $4 million note receivable. Proceeds from the
anticipated first quarter of 1995 sale will be used to reduce borrowings under
the revolving credit facility.
The Company's revolving credit facility allows the Company to borrow up to $195
million through January 3, 1998. 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 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 life
of the agreement ending 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 or 1994.
At December 31, 1994 the fair market value of the interest rate cap was $.9
million compared to a carrying value of $.3 million.
The revolving credit facility is secured by a first lien on substantially all of
the Company's accounts receivables and inventories and bears interest, at the
Company's option, at the prime rate fixed by The First National Bank of Boston,
or at a Euromarket-based rate plus 1%. In March 1994 the revolving credit
facility was amended and the previous lien on the Company's plant and equipment
was removed.
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, 1994, borrowings under the $160 million revolving term debt
agreement totalled $94.2 million and $55.8 million of the facility was available
and unused. A letter of credit to secure $10 million of industrial development
bonds of the Company reduces the availability under the revolving credit
facility by $10 million.
Market and
dividend data
The Company's Common Stock is listed on the New York Stock Exchange (trading
symbol: FLD). At December 31, 1994, there were 2,191 shareholders of record of
Common Stock. See Note 8 of the NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
regarding restrictions on the payment of dividends. No dividends were paid
during the last two years. The high and low sale prices on the New York Stock
Exchange composite tape for the last two years were as shown below:
<TABLE>
<CAPTION>
Market price Common Stock
Quarter, 1994 High Low
<S> <C> <C>
1st $34 3/8 $ 24 1/4
2nd 33 22 1/2
3rd 29 1/8 23 3/4
4th 27 3/4 23 3/8
Quarter, 1993
1st $27 $ 18 1/8
2nd 29 1/8 22
3rd 27 5/8 19 1/2
4th 27 1/2 23 3/4
</TABLE>
22
52
<PAGE>
Fieldcrest Cannon, Inc.
Management's discussion and analysis
Quarterly data
(Unaudited)
Data in millions, except per share information
<TABLE>
<CAPTION>
1994 quarter ended March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net sales $232.3 $254.8 $279.3 $297.3
Gross profit 37.4 40.5 44.2 43.2
Operating income 15.0 16.9 20.1 18.5
Net income 5.5 6.7 8.5 10.0
Primary earnings per share .51 .64 .84 1.03
Fully diluted earnings per share .47 .56 .68 .80
<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>
The fourth quarter of 1994 includes favorable settlements of prior years income
taxes of $1.7 million which increased net income by $1.7 million, or $.19 per
common share on a primary basis and $.12 per share on a fully diluted basis.
Quarterly earnings per share amounts presented do not equal the annual earnings
per share amount for 1993 due to the purchase of treasury shares during 1993.
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.
23
53
<PAGE>
Fieldcrest Cannon, Inc.
Consolidated statement of income and retained earnings
Year ended December 31
Dollars in thousands, except per share data
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C> <C>
Net sales $ 1,063,731 $ 1,000,107 $ 981,773
Cost of sales (notes 4, 5) 898,437 834,701 818,729
Selling, general and administrative 94,756 101,843 102,189
Restructuring charges (note 4) -- 10,000 --
Total operating costs and expenses 993,193 946,544 920,918
Operating income 70,538 53,563 60,855
Other deductions Interest expense 23,268 27,659 34,149
(income) Other, net 987 (975) 130
Total other deductions 24,255 26,684 34,279
Income before income taxes 46,283 26,879 26,576
Federal and state income taxes (note 13) 15,538 11,913 10,886
Net income (loss) Income from continuing operations before extraordinary
and retained charge and accounting changes 30,745 14,966 15,690
earnings 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) 30,745 (42,931) 15,250
Preferred dividends (4,500) (463) --
Earnings (loss) on common $ 26,245 $ (43,394) $ 15,250
Amount added to (subtracted from) retained earnings 26,245 (43,394) 15,250
Retained earnings, January 1 93,035 136,429 121,179
Retained earnings, December 31 $ 119,280 $ 93,035 $ 136,429
Income (loss) per common Primary from continuing operations before extraordinary
share charge and accounting changes $ 3.02 $ 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 $ 3.02 $ (3.70) $ 1.35
Fully diluted before extraordinary charge (note 1) $ 2.51 $ -- $ 1.78
Fully diluted after extraordinary charge and accounting
changes (note 1) $ 2.51 $ -- $ --
Average primary shares outstanding 8,696,015 11,732,505 11,256,461
Average fully diluted shares outstanding 14,085,905 11,733,276 14,082,678
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
24
54
<PAGE>
Fieldcrest Cannon, Inc.
Consolidated statement of financial position
At December 31,
Dollars in thousands, except per share data
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C> <C>
Assets
Current assets Cash $ 5,885 $ 3,865
Accounts receivable less allowances of $9,506 in 1994
and $12,161 in 1993, principally trade 170,001 164,419
Inventories (note 5) 213,994 209,834
Net assets held for sale 24,000 32,536
Other prepaid expenses and current assets 3,793 2,491
Total current assets 417,673 413,145
Other assets Plant and equipment, net (notes 6, 9) 314,726 294,277
Deferred charges and other assets 50,266 33,024
Total assets $ 782,665 $ 740,446
Liabilities and shareowners' equity
Current liabilities Accounts and drafts payable $ 55,533 $ 61,365
Federal and state income taxes 2,268 262
Deferred income taxes 21,988 14,799
Accrued liabilities (note 7) 53,958 65,996
Current portion of long-term debt 1,465 8,397
Total current liabilities 135,212 150,819
Non-current Senior long-term debt (note 8) 107,744 84,611
liabilities Subordinated long-term debt (note 8) 210,000 210,000
Total long-term debt 317,744 294,611
Deferred income taxes 42,859 35,182
Other non-current liabilities 55,648 66,504
Total non-current liabilities 416,251 396,297
Total liabilities 551,463 547,116
Commitments (notes 9, 11, 12)
Shareowners' equity 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 15
Common Stock, $1 par value (note 10)
Shares authorized: 25,000,000
Shares issued, 1994: 12,360,252 12,360 12,186
Shares issued, 1993: 12,186,167
Additional paid in capital 216,772 212,799
Minimum pension liability adjustment (note 11) -- (7,480)
Retained earnings 119,280 93,035
Excess purchase price for Common Stock acquired
and held in treasury -- 3,606,400 shares (117,225) (117,225)
Total shareowners' equity 231,202 193,330
Total liabilities and shareowners' equity $ 782,665 $ 740,446
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
25
55
<PAGE>
Fieldcrest Cannon, Inc.
Consolidated statement of cash flows
For the years ended December 31,
Dollars in thousands
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C> <C>
Cash flows from Increase (decrease) in cash
operating activities Net income (loss) $ 30,745 $ (42,931)
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 -- --
Premium paid on early retirement of debt -- --
Income and gain on sale from discontinued operations -- (12,408)
Depreciation and amortization 29,828 31,539
Deferred income taxes 7,677 2,329
Other (8,178) 1,726
Change in current assets and liabilities, excluding effects of
disposition of discontinued operations:
Accounts receivable (5,582) (13,132)
Inventories (4,160) (10,637)
Current deferred income taxes 7,189 (3,971)
Other prepaid expenses and current assets (1,302) 1,638
Accounts payable and accrued liabilities (17,870) 8,700
Federal and state income taxes 2,006 (3,362)
Net cash provided by continuing operating activities 40,353 29,796
Cash provided by (used in) discontinued operations -- (17,405)
Net cash provided by operating activities 40,353 12,391
Cash flows from Additions to plant and equipment (51,929) (21,594)
investing activities Acquisition of net assets held for sale -- (32,536)
Proceeds from disposals of plant and equipment 1,815 12,621
Proceeds from disposition of discontinued operations -- 147,627
Net cash provided by (used in) investing activities (50,114) 106,118
Cash flows from Increase (decrease) in revolving debt and other
financing activities short-term debt 17,798 (59,899)
Proceeds from issuance of other long-term debt 10,000 --
Payments on long-term debt (11,597) (14,811)
Proceeds from issuance of common stock 80 339
Purchase of treasury stock -- (117,225)
Proceeds from issuance of preferred stock -- 72,375
Dividends paid on preferred stock (4,500) (88)
Net cash provided by (used in) financing activities 11,781 (119,309)
Net increase Net increase (decrease) in cash 2,020 (800)
(decrease) in cash Cash at beginning of year 3,865 4,665
Cash at end of year $ 5,885 $ 3,865
Supplemental disclosures of cash flow information
Cash paid during Interest expense $ 23,871 $ 30,163
the year for Income tax payments 5,381 23,239
<CAPTION>
1992
<S> <C>
Cash flows from $ 15,250
operating activities --
5,179
(5,400)
(4,739)
31,370
4,826
(2,348)
10,821
(8,614)
(1,699)
1,737
984
3,077
50,444
12,122
62,566
Cash flows from (20,687)
investing activities --
3,955
--
(16,732)
Cash flows from (46,684)
financing activities 82,450
(111,497)
25,224
--
--
--
(50,507)
Net increase (4,673)
(decrease) in cash 9,338
$ 4,665
Cash paid during $ 44,266
the year for 5,559
</TABLE>
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
26
56
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 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 1994 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 18.3%,
17.4% and 16.0% of total sales of the Company in 1994, 1993 and 1992,
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 13 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 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.
Note 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.
Note 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 was assigned a cost
of $117.2 million after an 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. These assets are primarily the Bangor and Aroostook Railroad
("BAR") and certain real estate properties. During 1994 the BAR's operating
income of $3 million was excluded from the Company's consolidated income
statement and $1.6 million of interest costs of the Company were allocated to
the assets held for sale. On December 13, 1994 the Company signed a definitive
stock purchase agreement to sell the BAR for approximately $24 million of
cash and a $4 million note receivable.
27
57
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 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 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
Note 5:
Inventories
Inventories are valued at the lower of cost or market and consisted of the
following at December 31:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Finished goods $ 109,423 $ 110,223
Work in progress 65,375 65,025
Raw materials and supplies 39,196 34,586
Total $ 213,994 $ 209,834
</TABLE>
Approximately 74% of the inventories at year-end 1994 and 76% at year-end 1993
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 $40 million and $33 million at December 31, 1994 and 1993,
respectively. The LIFO reserve for continuing operations increased $6.8 million
and $2.8 million in 1994 and 1993, respectively.
Note 6:
Plant and equipment
Plant and equipment is stated at cost and consisted of the following at December
31:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land $ 5,796 $ 5,978
Buildings 184,902 181,409
Equipment 378,374 366,333
Plant additions in progress 40,509 18,707
Total 609,581 572,427
Accumulated depreciation (294,855) (278,150)
Net plant and equipment $ 314,726 $ 294,277
</TABLE>
28
58
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 7:
Accrued liabilities
Accrued liabilities were as follows at December 31:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Salaries and other compensation $11,291 $14,177
Pension, medical and other
employee benefit plans 18,359 22,058
Advertising expense 1,436 1,987
Interest expense 3,240 3,375
Other 19,632 24,399
Total $53,958 $65,996
</TABLE>
Note 8:
Debt
Long-term debt at December 31 was as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Senior long-term debt:
Revolving term debt $ 94,224 $ 76,426
Industrial development bonds,
due 2021 10,000 --
Industrial revenue bonds, due
in installments through
2002 4,985 11,085
10.5% promissory note, due in
installments and repaid
in January 1994 -- 5,497
Total senior long-term debt 109,209 93,008
Less current portion 1,465 8,397
Net senior long-term debt 107,744 84,611
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 $ 317,744 $ 294,611
</TABLE>
The Company's revolving credit facility allows the Company to borrow up to $160
million through January 3, 1998. Accordingly, borrowings under the revolving
credit facility are classified as long-term debt. 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, or at a Euromarket-based rate plus 1%. The
average interest rate on the revolving term debt was 7.1% on December 31, 1994.
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, 1994 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 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. At December 31, 1994 the interest rate cap fair market value was $.9
million compared to a carrying value of $.3 million. The fair value was provided
by the financial institution that sold the interest rate cap to the Company.
The revolving credit facility is secured by a first lien on substantially all of
the Company's accounts receivables and inventories 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.
29
59
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 8:
Debt
continued
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, 1994, the fair value of the Company's 6% Convertible
Subordinated Debentures was $93.8 million compared to a carrying value of $125
million and the fair value of the 11.25% Subordinated Debentures was $85 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, 1994
are: 1995, $1.5 million; 1996, $.8 million; 1997, $7.0 million; 1998, $101.2
million and 1999, $6.6 million.
Note 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,
1994.
<TABLE>
<CAPTION>
Real Equip-
Estate ment Total
<S> <C> <C> <C>
1995 $ 5,524 $ 9,155 $ 14,679
1996 5,129 7,689 12,818
1997 4,470 6,362 10,832
1998 3,941 4,714 8,655
1999 3,324 4,113 7,437
Subsequent years 23,389 2,762 26,151
Net minimum lease payments $ 45,777 $ 34,795 $ 80,572
</TABLE>
Total continuing operations rental expense for all operating leases was $20.2
million, $18.9 million, and $17.5 million for 1994, 1993 and 1992, respectively.
Note 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.
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
30
60
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 10:
Shareowners' equity
continued
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. 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,
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, January 1,
1994 27,000 23.625-13.00
Awarded 8,000 25.625
Exercised (5,000) 17.625-13.00
Outstanding and
exercisable at
December 31, 1994 30,000 $25.625-13.00
Available for grant at
December 31, 1994 441,000
</TABLE>
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.
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, 1994, unamortized deferred
compensation of $1.2 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
31
61
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 10:
Shareowners' equity
continued
have been reserved for awards. The following is an analysis of shares of
restricted stock under the Long-term Incentive Plan:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Number of Shares:
Outstanding at
beginning of year 111,674 156,526 145,877
Awarded 70,000 75,000 50,000
Cancelled -- (4,450) (2,430)
Issued (30,563) (115,402) (36,921)
Outstanding at end of
year 151,111 111,674 156,526
Available for grant
at end of year 254,548 324,548 45,098
Market value on date
of grant for
shares granted
during year $28.625 $18.75 $15.375
</TABLE>
Awards under the Plan will be 70,000 shares in 1995.
Transactions with respect to common stock and additional paid in capital during
the three years ended December 31, 1994, were as follows:
<TABLE>
<CAPTION>
Additional
Class B Paid in
Common Stock Common Stock Capital
Shares Amount Shares Amount Amount
<S> <C> <C> <C> <C> <C>
Balance 12/31/91 6,788,087 $ 6,788 3,635,398 $3,635 $111,571
Restricted shares awarded 50,000 50 -- -- (50)
Restricted shares cancelled (2,430) (2) -- -- 2
Earned compensation, restricted stock -- -- -- -- 831
Director stock option exercised 3,000 3 -- -- 36
Sale of stock 1,500,000 1,500 -- -- 23,685
Exchange of shares 284 -- (284) -- --
Balance 12/31/92 8,338,941 8,339 3,635,114 3,635 136,075
Shares issued to employee savings plans 120,562 120 -- -- 2,883
Restricted shares awarded 75,000 75 -- -- (75)
Restricted shares cancelled (4,450) (4) -- -- 4
Earned compensation, restricted stock -- -- -- -- 1,126
Director stock options exercised 21,000 21 -- -- 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 (3,635,114) (3,635) --
Balance 12/31/93 12,186,167 12,186 -- -- 212,799
Shares issued to employee savings plans 99,085 99 -- -- 2,571
Restricted shares awarded 70,000 70 -- -- (70)
Earned compensation, restricted stock -- -- -- -- 1,431
Preferred stock issuance expense -- -- -- -- (73)
Director stock options exercised 5,000 5 -- -- 114
Balance 12/31/94 12,360,252 $12,360 -- $ -- $216,772
</TABLE>
32
62
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 10:
Shareowners' equity
continued
Total shares of Common Stock outstanding as of December 31, 1994 are reduced to
8,753,852 shares by 3,606,400 shares of treasury stock acquired with the
acquisition of Amoskeag. The $117.2 million cost of the treasury stock reduces
total shareowners' equity.
Note 11:
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 $6.9 million in 1994, $13.2 million in 1993 and $6.1
million in 1992. Net pension expense for 1994, 1993 and 1992 consisted of the
following components:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Service cost (benefits
earned during the
period) $ 8,076 $ 8,802 $ 8,631
Interest cost on
projected benefit
obligation 16,668 15,124 13,938
Actual return on
assets 4,845 (20,985) (5,161)
Net amortization and
deferral (22,703) 4,023 (11,293)
Curtailment and
special
termination
benefits -- 6,263 --
Net pension cost $ 6,886 $ 13,227 $ 6,115
</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.
33
63
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 11:
Employee pension
and savings plans
continued
The table below sets forth the plans' funded status at December 31:
<TABLE>
<CAPTION>
1994 1993
Assets Exceed Assets Exceed Accumulated
Accumulated Accumulated Benefits
Benefits Benefits Exceed Assets
<S> <C> <C> <C>
Projected benefit obligation:
Vested benefits $199,034 $64,460 $148,022
Non-vested benefits 6,058 2,559 6,255
Accumulated benefit obligation 205,092 67,019 154,277
Additional amounts related to projected compensation
levels 6,332 -- 6,801
Total projected benefit obligation 211,424 67,019 161,078
Plan assets at fair value, primarily publicly traded
stocks and bonds 208,170 69,266 144,164
Plan assets over (under) projected benefit obligation (3,254) 2,247 (16,914)
Unrecognized net (gain) loss 29,911 13,293 19,917
Unrecognized net transition assets (2,579) (2,747) (854)
Unrecognized prior service cost 2,798 158 3,552
Adjustment required to recognize minimum liability -- -- (15,814)
Net pension asset (liability) recognized in the
Consolidated Statement of Financial Position $26,876 $12,951 $(10,113)
</TABLE>
Assumptions used in determining the funded status of the pension plans were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Discount rate 8.6% 7.25% 8.25%
Increase in compensation
levels 4.5% 4.5% 5.5%
Expected long-term rate of
return on assets 9% 9% 9%
</TABLE>
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 of $4.8 million. At December 31, 1994, the assets in this
plan exceeded the accumulated benefits and the 1993 adjustment required to
recognize minimum liability was reversed.
The Company also sponsors employee savings plans which cover substantially all
employees. The Company amended the plans 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 in 1994 and
1993. 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 $2.7 million in 1994 and $3.0 million in 1993.
34
64
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 12:
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>
1994 1993
<S> <C> <C>
Accumulated postretirement
benefit obligation --
Retirees $ 23,592 $24,224
Fully eligible active
participants 8,020 9,897
Other active participants 4,728 6,298
Total 36,340 40,419
Plan assets -- --
Accumulated postretirement
benefit obligations in
excess of plan assets at
December 31 36,340 40,419
Unrecognized net gain (loss) 2,114 (2,163)
Accrued postretirement benefit
cost recognized in the
Consolidated Statement of
Financial Position at
December 31 $ 38,454 $38,256
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.6% as of December 31, 1994 and 7.25% as of December 31, 1993.
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.
Net periodic postretirement benefit cost for 1994 and 1993 included the
following components:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Service Cost (benefits earned
during the period) $ 979 $ 974
Interest cost on projected
benefit obligation 2,820 3,033
Net amortization and deferral 206 (93)
Curtailment gain -- (1,850)
Net periodic postretirement
benefit cost $ 4,005 $ 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.
Note 13:
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 changed 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
35
65
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 13:
Income taxes
continued
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 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 1993 federal tax rate to 35%.
At December 31, 1994, the Company had $43.3 million of deferred tax assets and
$108.1 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>
12/31/94 12/31/93
Current Noncurrent Current Noncurrent
Liability Liability Liability Liability
<S> <C> <C> <C> <C>
Depreciation $ -- $ 51,176 $ -- $ 51,805
Inventory Valuation 36,472 -- 35,961 --
Deferred compensation (392) (2,045) 95 (1,659)
Accruals and allowances (14,686) (6,439) (16,952) (7,513)
Operating loss and tax credit carryover -- -- (4,305) --
Adjustment from recognizing additional pension liability -- -- -- (4,781)
Other 594 (167) -- (2,670)
Total deferred tax liabilities $ 21,988 $ 42,859 $ 14,799 $ 35,182
</TABLE>
The provision for income taxes for continuing operations included in the
Consolidated Statement of Income and Retained Earnings for continuing operations
consisted of the following:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Current
Federal $ 5,397 $ 5,483 $ 7,408
State 56 1,130 952
Deferred
Federal 8,327 4,605 1,741
State 1,758 695 785
Total income taxes on income from continuing operations before
extraordinary charge and accounting changes $15,538 $11,913 $10,886
</TABLE>
36
66
<PAGE>
Fieldcrest Cannon, Inc.
Notes to consolidated financial statements
Tabular amounts in thousands except per share
Note 13:
Income taxes
continued
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>
1994 1993 1992
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Tax at statutory rate $16,199 35.0% $ 9,408 35.0% $ 9,035 34.0%
State taxes, net 2,037 4.4 1,186 4.4 1,147 4.3
Basis adjustments in acquired companies -- -- -- -- 612 2.3
Effect of tax rate change -- -- 1,400 5.2 -- --
Tax credits (567) (1.2) -- -- -- --
Prior years tax settlements (1,714) (3.7) -- -- -- --
Other (417) (.9) (81) (.3) 92 .4
Net taxes $15,538 33.6% $11,913 44.3% $10,886 41.0%
</TABLE>
Prior to the adoption of FAS 109, the tax effects of timing differences were as
follows:
<TABLE>
<CAPTION>
1992
<S> <C>
Depreciation $ 2,515
Deferred compensation (129)
Accruals and allowances (1,339)
Increase in deferred taxes due to net
operating loss and tax credit
carryovers 586
Other 893
Total deferred tax provision $ 2,526
</TABLE>
37
67
<PAGE>
Fieldcrest Cannon, Inc.
Report of
Management
The integrity and objectivity of the information presented in this Annual Report
are the responsibility of Fieldcrest Cannon, Inc. management. The financial
statements contained in this report were audited by Ernst & Young LLP
independent auditors, whose report appears on this page.
The Company maintains a system of internal controls which is independently
assessed on an ongoing basis through a program of internal audits. These
controls include the selection and training of the Company's employees,
organizational arrangements that provide a division of responsibilities and
communication programs explaining the Company's policies and standards. We
believe this system provides reasonable assurance that transactions are executed
in accordance with management's authorization; that transactions are
appropriately recorded to permit preparation of financial statements that, in
all material respects, are presented in conformity with generally accepted
accounting principles; and that assets are properly accounted for and
safeguarded against loss from unauthorized use.
The Board of Directors pursues its responsibilities for the financial statements
through its Audit Committee, which consists solely of directors who are neither
officers nor employees of the Company. The Audit Committee meets periodically
with the independent public accountants, the internal auditors and
representatives of management to discuss internal accounting control, auditing
and financial reporting matters.
(Signature of Thomas R. Staab appears here)
Thomas R. Staab
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
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, 1994 and 1993, 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, 1994. 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 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, 1994 and 1993, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
As explained in Notes 12 and 13 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."
(Signature of Ernst & Young LLP appears here)
Greensboro, North Carolina
February 1, 1995
38
68
<PAGE>
Fieldcrest Cannon, Inc.
Selected financial and statistical data
In thousands of dollars, except per share data
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Summary of Net sales $1,063,731 $1,000,107 $981,773 $960,663 $927,034
continuing Depreciation $ 28,779 $ 29,524 $ 29,480 $ 28,473 $ 26,118
operations (a) Operating income (loss) 70,538 53,563 60,855 39,613 (13,385)
Income (loss) from continuing
operations 30,745-b 14,966-c 15,690-d 1,395 (30,818)-e
Dividends on common stock -- -- -- -- 4,980
Per share of common stock:
Primary income (loss) from
continuing operation $ 3.02-b $ 1.24-c $ 1.39-d $ 0.13 $ (2.97)-e
Fully diluted income (loss) 2.51-b ---c ---d 0.13 (2.97)-e
Dividends -- -- -- -- 0.50
Shareowners' equity 17.84 13.79 23.76 23.33 23.01
Number of employees 13,926 14,090 14,636 14,935 15,873
Number of shareowners 2,191 2,401 2,735 2,980 3,099
Summary of financial Capital expenditures $ 51,929 $ 21,594 $ 20,687 $ 41,000 $ 80,706
position Working capital 282,461 262,326 296,580 138,227 286,707
Total assets 782,665 740,446 863,991 882,662 855,576
Long-term obligations 317,744 294,611 353,419 253,493 403,627
Shareowners' equity 232,202 193,330 284,478 243,173 239,240
Financial ratios Return on net sales 2.9% 1.5% 1.6% 0.1% (3.3)%
Return on average shareowners'
equity 14.5 6.8 6.0 0.6 (11.9)
Return on average total assets 4.0 1.9 1.8 0.2 (3.6)
</TABLE>
a On July 30, 1993 the Company completed the sale of its carpet and rug
operations. Accordingly, the summary of continuing operations excludes the
discontinued carpet and rug operations for all periods presented.
b 1994 income was increased $1.7 million, or $.20 per common share on a primary
basis and $.12 per share on a fully diluted basis, as a result of favorable
settlements of prior years income taxes.
c Reflects pre-tax restructuring charges of $10 million and income tax
adjustments of $1.4 million which reduced 1993 income from continuing
operations before accounting changes by $7.5 million, or $.64 per common
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 common share. Fully
diluted income per share is not presented as effects are anti-dilutive.
Financial ratios for 1993 are based on income from continuing operations
before accounting changes.
d Before extraordinary charge for early retirement of debt which reduced 1992
net income by $5.2 million ($.46 per common share). Fully diluted income per
share is not presented as effects are anti-dilutive. Financial ratios for 1992
are based on income from continuing operations before the extraordinary
charge.
e Reflects pre-tax charge of $31.5 million for discontinuing the automatic
blanket business which reduced 1990 net income by $19.5 million or $1.88 per
common share.
39
69
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.
Page 70
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Fieldcrest Cannon, Inc. of our report dated February 1, 1995,
included in the 1994 Annual Report to Shareholders of Fieldcrest Cannon,
Inc.
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., the Stock Option Agreement between 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 February
1, 1995, with respect to the consolidated financial statements incorporated
herein by reference in this Annual Report (Form 10-K) for the year ended
December 31, 1994.
ERNST & YOUNG LLP
Greensboro, North Carolina
March 29, 1995
Page 71
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,885
<SECURITIES> 0
<RECEIVABLES> 170,001
<ALLOWANCES> 0
<INVENTORY> 213,994
<CURRENT-ASSETS> 417,673
<PP&E> 314,726
<DEPRECIATION> 0
<TOTAL-ASSETS> 782,665
<CURRENT-LIABILITIES> 135,212
<BONDS> 317,744
<COMMON> 12,360
0
15
<OTHER-SE> 218,827
<TOTAL-LIABILITY-AND-EQUITY> 782,665
<SALES> 1,063,731
<TOTAL-REVENUES> 1,063,731
<CGS> 898,437
<TOTAL-COSTS> 898,437
<OTHER-EXPENSES> 94,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,268
<INCOME-PRETAX> 46,283
<INCOME-TAX> 15,538
<INCOME-CONTINUING> 30,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,745
<EPS-PRIMARY> 3.02
<EPS-DILUTED> 2.51
</TABLE>
