<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 1-11756
PILLOWTEX CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-2147728
(State of incorporation) (IRS Employer Identification No.)
4111 Mint Way
Dallas, Texas 75237
(Address of principal executive offices) (Zip Code)
(214) 333-3225
(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes / X / No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at October 20, 1997
Common Stock, $0.01 par value 10,786,819
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
INDEX
Part I - Financial Information Page No.
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of
December 28, 1996 and September 27, 1997 3
Consolidated Statements of Earnings for the three months
ended September 28, 1996 and September 27, 1997 4
Consolidated Statements of Earnings for the nine months
ended September 28, 1996 and September 27, 1997 5
Consolidated Statements of Cash Flows for the nine months
ended September 28, 1996 and September 27, 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
Index to Exhibits 17
2
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 28, 1996 and September 27, 1997
(Dollars in thousands, except for par value)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1996 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 20 34
Receivables:
Trade, less allowance for doubtful accounts of
$2,346 in 1996 and $2,428 in 1997. . . . . . . . . 78,482 100,376
Other. . . . . . . . . . . . . . . . . . . . . . . . 4,480 3,977
Inventories. . . . . . . . . . . . . . . . . . . . . 133,495 150,084
Prepaid expenses . . . . . . . . . . . . . . . . . . 2,613 4,150
Deferred income taxes. . . . . . . . . . . . . . . . 2,567 2,699
----------- -----------
Total current assets. . . . . . . . . . . . . . . 221,657 261,320
Property, plant and equipment, less accumulated
depreciation of $43,720 and $52,065 in 1996
and 1997, respectively. . . . . . . . . . . . . . . . 94,267 98,916
Intangible assets, at cost less accumulated
amortization of $3,843 and $4,988 in 1996 and
1997, respectively. . . . . . . . . . . . . . . . . . 57,113 56,094
Other assets. . . . . . . . . . . . . . . . . . . . . . 2,677 2,838
----------- -----------
$ 375,714 419,168
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . $ 45,481 50,699
Accrued expenses. . . . . . . . . . . . . . . . . . . 22,156 25,253
Current portion of long-term debt . . . . . . . . . . 1,868 1,553
Income taxes payable. . . . . . . . . . . . . . . . . 1,646 2,581
----------- -----------
Total current liabilities. . . . . . . . . . . . . 71,151 80,086
Long-term debt, net of current portion. . . . . . . . . 194,851 218,806
Deferred income taxes . . . . . . . . . . . . . . . . . 9,708 9,499
Shareholders' equity:
Preferred stock, $0.01 par value; authorized
20,000,000 shares; none issued and outstanding. . . - -
Common stock, $0.01 par value; authorized 30,000,000
shares; 10,617,722 and 10,786,819 shares issued
and outstanding in 1996 and 1997, respectively. . . 106 108
Additional paid-in capital. . . . . . . . . . . . . . 58,427 60,825
Retained earnings . . . . . . . . . . . . . . . . . . 41,665 50,316
Currency translation adjustment . . . . . . . . . . . (194) (472)
----------- -----------
Total shareholders' equity . . . . . . . . . . . . 100,004 110,777
----------- -----------
$ 375,714 419,168
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended September 28, 1996 and September 27, 1997
(In thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . $ 143,791 151,977
Cost of goods sold. . . . . . . . . . . . . . . . . . . 119,476 125,425
----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . 24,315 26,552
Selling, general and administrative expenses. . . . . . 10,614 10,112
----------- -----------
Earnings from operations . . . . . . . . . . . . . 13,701 16,440
Interest expense. . . . . . . . . . . . . . . . . . . . 3,664 4,921
----------- -----------
Earnings before income taxes . . . . . . . . . . . 10,037 11,519
Income taxes. . . . . . . . . . . . . . . . . . . . . . 3,915 4,469
----------- -----------
Net earnings. . . . . . . . . . . . . . . . . . . . . . $ 6,122 7,050
=========== ===========
Earnings per common share . . . . . . . . . . . . . . . $ .58 .66
=========== ===========
Weighted average common shares. . . . . . . . . . . . . 10,618 10,744
=========== ===========
Dividends declared per common share . . . . . . . . . . $ .05 .06
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Nine Months Ended September 28, 1996 and September 27, 1997
(In thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . $ 335,770 370,633
Cost of goods sold. . . . . . . . . . . . . . . . . . . 280,272 305,674
----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . 55,498 64,959
Selling, general and administrative expenses. . . . . . 31,170 33,728
----------- -----------
Earnings from operations . . . . . . . . . . . . . 24,328 31,231
Interest expense. . . . . . . . . . . . . . . . . . . . 10,279 13,957
----------- -----------
Earnings before income taxes . . . . . . . . . . . 14,049 17,274
Income taxes. . . . . . . . . . . . . . . . . . . . . . 5,495 6,702
----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . $ 8,554 10,572
=========== ===========
Earnings per common share . . . . . . . . . . . . . . . $ .81 .99
=========== ===========
Weighted average common shares. . . . . . . . . . . . . 10,618 10,669
=========== ===========
Dividends declared per common share . . . . . . . . . . $ .15 .18
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 28, 1996 and September 27, 1997
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . . . $ 8,554 10,572
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization. . . . . . . . . . . 9,440 10,642
Deferred income taxes. . . . . . . . . . . . . . . 1,447 (341)
Provision for doubtful accounts. . . . . . . . . . (11) 585
Loss (gain) on disposal of property, plant and
equipment . . . . . . . . . . . . . . . . . . . . 5 (1,153)
Changes in operating assets and liabilities:
Trade receivables. . . . . . . . . . . . . . . . (21,371) (22,535)
Inventories. . . . . . . . . . . . . . . . . . . (28,075) (17,659)
Accounts payable . . . . . . . . . . . . . . . . 2,666 (258)
Accrued expenses . . . . . . . . . . . . . . . . 49 3,244
Other assets and liabilities . . . . . . . . . . (1,134) (1,297)
----------- -----------
Net cash used in operating activities . . . . (28,430) (18,200)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment . 17 1,723
Purchases of property, plant and equipment. . . . . . (2,981) (13,891)
Other . . . . . . . . . . . . . . . . . . . . . . . . (112) -
----------- -----------
Net cash used in investing activities . . . . (3,076) (12,168)
----------- -----------
Cash flows from financing activities:
Increase in checks not yet presented for payment. . . 6,068 5,617
Retirement of long-term debt. . . . . . . . . . . . . (18,566) (1,709)
Borrowings on revolving credit loans. . . . . . . . . 110,000 104,450
Repayments of revolving credit loans. . . . . . . . . (64,800) (79,100)
Dividends paid. . . . . . . . . . . . . . . . . . . . (1,592) (1,276)
Proceeds from stock option exercises. . . . . . . . . - 2,400
----------- -----------
Net cash provided by financing activities . . 31,110 30,382
Net change in cash and cash equivalents . . . . . . . . (396) 14
Cash and cash equivalents at beginning of period. . . . 411 20
----------- -----------
Cash and cash equivalents at end of period. . . . . . . $ 15 34
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . $ 11,885 10,721
=========== ===========
Income taxes. . . . . . . . . . . . . . . . . . . . $ 2,928 6,871
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands of dollars)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Pillowtex
Corporation and subsidiaries (the 'Company') include all adjustments,
consisting only of normal, recurring adjustments and accruals, which are,
in the opinion of management, necessary for fair presentation of the
results of operations and financial position. The unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements included in the Company's annual report on Form 10-K
filed with the Securities and Exchange Commission on March 17, 1997 for the
fiscal year ended December 28, 1996.
(2) INVENTORIES
Inventories consisted of the following at December 28, 1996 and September
27, 1997:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Finished goods $ 56,085 65,491
Work-in-process 33,436 37,460
Raw materials 41,955 44,005
Supplies 2,019 3,128
-------- --------
$133,495 150,084
======== ========
</TABLE>
(3) EARNINGS PER COMMON SHARE
Earnings per share is based on the weighted average number of common shares
outstanding and equivalent shares from dilutive stock options, if any. As
of September 28, 1996 and September 27, 1997, there were stock options
outstanding for 510,865 and 570,390 common shares, respectively. Stock
options are excluded from the calculations since they have no material
dilutive effect on per share data.
7
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands of dollars)
(4) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following is summarized condensed consolidating financial information
for the Company, segregating Pillowtex Corporation (the 'Parent') and
guarantor subsidiaries from non-guarantor subsidiaries. The guarantor
subsidiaries are wholly owned subsidiaries of the Company and guarantees
are full, unconditional and joint and several. Separate financial
statements of the guarantor subsidiaries are not presented because
management believes that these financial statements would not be material
to investors.
<TABLE>
<CAPTION>
December 28, 1996 September 27, 1997
-------------------------------------- --------------------------------------
Parent and Non- Parent and Non-
Guarantor Guarantor Guarantor Guarantor
Financial Position Subsidiaries Subsidiaries Consolidated Subsidiaries Subsidiaries Consolidated
------------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
------------------------------
Receivables:
Trade $ 73,439 5,043 78,482 96,862 3,514 100,376
Affiliates 4,283 - - 757 - -
Inventories 125,803 7,692 133,495 142,509 7,575 150,084
Other current assets 8,944 736 9,680 10,438 422 10,860
------------ ------------ ------------ ------------ ------------ ------------
Total current assets 212,469 13,471 221,657 250,566 11,511 261,320
Property, plant and equipment,
net 91,381 2,886 94,267 96,453 2,463 98,916
Intangible assets 54,454 2,659 57,113 53,522 2,572 56,094
Other assets 2,677 - 2,677 2,838 - 2,838
------------ ------------ ------------ ------------ ------------ ------------
Total assets $ 360,981 19,016 375,714 403,379 16,546 419,168
============ ============ ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
------------------------------
Accounts payable and accrued
liabilities $ 64,534 3,103 67,637 72,445 3,507 75,952
Accounts payable - affiliates - 4,283 - - 757 -
Other current liabilities 3,347 167 3,514 3,841 293 4,134
------------ ------------ ------------ ------------ ------------ ------------
Total current liabilities 67,881 7,553 71,151 76,286 4,557 80,086
Noncurrent liabilities 203,928 631 204,559 227,892 413 228,305
Shareholders' equity 89,172 10,832 100,004 99,201 11,576 110,777
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
shareholders' equity $ 360,981 19,016 375,714 403,379 16,546 419,168
============ ============ ============ ============ ============ ============
</TABLE>
8
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands of dollars)
(4) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended September 28, 1996 Three Months Ended September 27, 1997
-------------------------------------- --------------------------------------
Parent and Non- Parent and Non-
Guarantor Guarantor Guarantor Guarantor
Results of Operations Subsidiaries Subsidiaries Consolidated Subsidiaries Subsidiaries Consolidated
--------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 137,086 6,705 143,791 144,210 7,767 151,977
Cost of goods sold 113,540 5,936 119,476 118,710 6,715 125,425
------------ ------------ ------------ ------------ ------------ ------------
Gross profit 23,546 769 24,315 25,500 1,052 26,552
Selling, general and administrative 10,200 414 10,614 9,797 315 10,112
------------ ------------ ------------ ------------ ------------ ------------
Earnings from operations 13,346 355 13,701 15,703 737 16,440
Interest expense (income) 3,667 (3) 3,664 4,923 (2) 4,921
------------ ------------ ------------ ------------ ------------ ------------
Earnings before income taxes 9,679 358 10,037 10,780 739 11,519
Income taxes 3,806 109 3,915 4,377 92 4,469
------------ ------------ ------------ ------------ ------------ ------------
Net earnings $ 5,873 249 6,122 6,403 647 7,050
============ ============ ============ ============ ============ ============
</TABLE>
9
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands of dollars)
(4) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended September 28, 1996 Nine Months Ended September 27, 1997
-------------------------------------- --------------------------------------
Parent and Non- Parent and Non-
Guarantor Guarantor Guarantor Guarantor
Results of Operations Subsidiaries Subsidiaries Consolidated Subsidiaries Subsidiaries Consolidated
--------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 312,639 23,131 335,770 351,546 19,087 370,633
Cost of goods sold 258,554 21,718 280,272 288,561 17,113 305,674
------------ ------------ ------------ ------------ ------------ ------------
Gross profit 54,085 1,413 55,498 62,985 1,974 64,959
Selling, general and administrative 29,987 1,183 31,170 32,717 1,011 33,728
------------ ------------ ------------ ------------ ------------ ------------
Earnings from operations 24,098 230 24,328 30,268 963 31,231
Interest expense (income) 10,296 (17) 10,279 13,962 (5) 13,957
------------ ------------ ------------ ------------ ------------ ------------
Earnings before income taxes 13,802 247 14,049 16,306 968 17,274
Income taxes 5,538 (43) 5,495 6,610 92 6,702
------------ ------------ ------------ ------------ ------------ ------------
Net earnings $ 8,264 290 8,554 9,696 876 10,572
============ ============ ============ ============ ============ ============
</TABLE>
10
<PAGE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands of dollars)
(4) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended September 28, 1996 Nine Months Ended September 27, 1997
-------------------------------------- --------------------------------------
Parent and Non- Parent and Non-
Guarantor Guarantor Guarantor Guarantor
Cash Flows Subsidiaries Subsidiaries Consolidated Subsidiaries Subsidiaries Consolidated
---------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities $ (31,944) 3,514 (28,430) (21,561) 3,361 (18,200)
Cash used in investing activities (3,051) (25) (3,076) (12,097) (71) (12,168)
Cash provided by (used in)
financing activities 34,596 (3,486) 31,110 33,672 (3,290) 30,382
------------ ------------ ------------ ------------ ------------ ------------
Net change in cash and cash
equivalents (399) 3 (396) 14 - 14
Cash and cash equivalents at
beginning of period 406 5 411 12 8 20
------------ ------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at
end of period $ 7 8 15 26 8 34
============ ============ ============ ============ ============ ============
</TABLE>
11
<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the attached
unaudited consolidated financial statements and notes thereto, and with the
Company's audited consolidated financial statements and notes thereto for the
fiscal year ended December 28, 1996.
RESULTS OF OPERATIONS
NET SALES. Net sales were $151,977,000 for the three months ended
September 27, 1997, representing an increase of $8,186,000 or 5.7% as compared
to $143,791,000 for the three months ended September 28, 1996. Net sales for
the nine months ended September 27, 1997 increased $34,863,000 or 10.4% to
$370,633,000 as compared to $335,770,000 for the same period in 1996. These
increases reflected strong mattress pad, fashion bedding and blanket sales, due
in part to the inclusion of the Fieldcrest blanket business acquired in 1996.
GROSS PROFIT. The gross profit percentage for the third quarter ended
September 27, 1997 increased to 17.5% from 16.9% for the third quarter of 1996.
For the nine months ended September 27, 1997, the gross profit increased to
17.5% from 16.5% for the same period in 1996. The gross margin improvement
resulted primarily from lower raw material costs and greater efficiencies
through improved utilization of plant capacities, generated by continued capital
investments in machinery and facilities. The Company also successfully
continued its cost reduction initiatives.
SG&A. Selling, general and administrative ('SG&A') expenses for the three
months ended September 27, 1997 decreased to $10,112,000 from $10,614,000 for
the same period in 1996, and decreased as a percentage of sales to 6.7% in the
third quarter of 1997 from 7.4% for the same period in 1996. For the nine
months ended September 27, 1997, SG&A expenses increased to $33,728,000 from
$31,170,000 for the same period in 1996. SG&A expenses as a percentage of sales
decreased to 9.1% for the nine-month period ended September 27, 1997 as compared
to 9.3% for the first nine months in 1996. SG&A for the three-month period ended
September 27, 1997 remained flat when compared to the same period in 1996. SG&A
for the nine-month period increased when compared with the same period in 1996
due primarily to higher compensation and travel costs. These increases were due
in part to the filling of new staff positions and positions which were vacant in
1996. SG&A as a percent of sales for the three and nine-month periods ended
September 27, 1997 continued to improve when compared to the same periods in
1996 reflecting the Company's commitment to containing these costs.
INTEREST. Interest expense for the third quarter of 1997 increased by
$1,257,000 or 34.3% to $4,921,000 from $3,664,000 for the same period in 1996.
Interest expense for the nine months ended September 27, 1997 increased by
$3,678,000 or 35.8% to $13,957,000 from $10,279,000 for the nine months ended
September 28, 1996, principally due to higher borrowings associated with
seasonal inventory increases, installation of new equipment and capital
improvements and increased average interest rates.
TAXES. The effective tax rate for the three months ended September 27,
1997 decreased to 38.8% compared to 39.0% for the three months ended September
28, 1996. The effective tax rate for the nine months ended September 27, 1997
decreased to 38.8% from 39.1% for the nine months ended September 28, 1996,
primarily due to lower state taxes.
NET EARNINGS. Net earnings for the three months ended September 27, 1997
increased $928,000 or 15.2% to $7,050,000 or $.66 per share, compared to net
earnings of $6,122,000 or $.58 per share for the same period in 1996. As a
percentage of sales, net earnings for the three months ended September 27, 1997
increased to 4.7% from 4.3% for the same period in 1996. Net earnings for the
12
<PAGE>
<PAGE>
nine months ended September 27, 1997 increased $2,018,000 or 23.6% to
$10,572,000 or $.99 per share, from $8,554,000 or $.81 per share for the same
period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 27, 1997, the outstanding principal balance under the
Company's $175,000,000 secured revolving credit facility was $86,350,000, with
$9,861,000 committed to outstanding letters of credit, and $78,789,000 available
for other needs. The increase in borrowings in the third quarter of 1997 was due
primarily to the seasonal expansion of inventories and the installation of new
equipment and capital improvements at our production facilities.
The Company enters into interest rate swap agreements to minimize the risk
of fluctuations in interest rates. The Company currently has interest rate swap
agreements in place covering approximately $125,000,000 of indebtedness which
expire in November 2000, with an average interest rate of 9.62%.
On September 29, 1997, the Company paid a dividend of $.06 per share to
shareholders of record on September 15, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which specifies the computation, presentation and
disclosure requirements for earnings per share for entities with publicly held
common stock for both interim and annual periods ending after December 15, 1997.
Management of the Company does not expect the impact from adopting the
provisions of Statement No. 128 in fiscal year 1997 to be material.
As previously announced by the Company in its press release dated September
11, 1997 and its Form 8-K dated September 10, 1997, on September 10, 1997, the
Company, a wholly owned subsidiary of the Company ('Newco') and Fieldcrest
Cannon, Inc. ('Fieldcrest') entered into an agreement pursuant to which, on the
terms and subject to the conditions set forth therein, Newco will be merged with
and into Fieldcrest (the 'Merger'), and Fieldcrest will thereby become a wholly
owned subsidiary of the Company. The Merger, and the financing thereof, will
have a significant impact on the capitalization of the Company.
GOVERNMENT REGULATIONS
As of July 1, 1996, quota restrictions on down comforter shells imported
from China were eliminated, allowing the Company to import shells on an
unlimited and as-needed basis.
Products that the Company imports from China currently receive preferential
tariff treatment accorded goods from countries granted 'most favored nation'
status. Under the Trade Act of 1974, the President of the United States is
authorized, upon making specified findings, to waive certain restrictions that
would otherwise render China ineligible for most favored nation treatment. The
President has waived these provisions each year since 1979; however, no
assurance can be given that China will continue to enjoy this status. Raw
materials and finished products entering the United States from China without
the benefit of most favored nation treatment would be subject to significantly
higher duty rates. However, the Company believes that the loss of China's most
favored nation status is not likely to have a material adverse effect on the
Company's business, financial condition or results of operations.
13
<PAGE>
<PAGE>
FORWARD-LOOKING INFORMATION
This report and other reports and statements filed by the Company from time
to time with the Securities and Exchange Commission (collectively, 'SEC
Filings') contain or may contain certain forward-looking statements and
information that are based upon beliefs of, and information currently available
to, the Company's management. When used in SEC Filings, the words 'anticipate,'
'believe,' 'estimate,' 'future,' 'intend,' 'plan,' and similar expressions with
prospective connotations as they relate to the Company and its business identify
forward-looking statements. All forward-looking statements reflect the current
views of the Company with respect to future events and are subject to various
risks, uncertainties and assumptions relating to the Company and its operating
environment which may cause the actual results to vary significantly from those
anticipated. Specific factors that may cause the Company's actual results to
differ from those anticipated in forward-looking statements are discussed in the
Company's most recently filed Form 10-K.
14
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger, dated September 10, 1997, by and
among Pillowtex Corporation, Pegasus Merger Sub, Inc. and
Fieldcrest Cannon, Inc. (filed as Exhibit 2.1 to the Registrant's
current report on Form 8-K dated September 10, 1997, as amended,
and incorporated herein by reference)
10.1 Commitment Letter, dated September 10, 1997, by and between
NationsBank of Texas, N.A. and Pillowtex Corporation, regarding
the New Pillowtex Bank Facilities (filed as Exhibit 10.1 to the
Registrant's current report on Form 8-K dated September 10,
1997, as amended, and incorporated herein by reference)
10.2 Preferred Stock Purchase Agreement, dated September 10, 1997, by
and among Pillowtex Corporation, Apollo Investment Fund III,
L.P., Apollo Overseas Partners III, L.P., and Apollo (UK)
Partners III, L.P., (filed as Exhibit 10.2 to the Registrant's
current report on Form 8-K dated September 10, 1997, as amended,
and incorporated herein by reference)
27 Financial Data Schedule
99.1 Press release, dated September 11, 1997, issued by Pillowtex
Corporation (filed as Exhibit 99.1 to the Registrant's current
report on Form 8-K dated September 10, 1997, as amended, and
incorporated herein by reference)
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the quarter for which
this report is filed:
Current report on Form 8-K dated September 10, 1997 reporting under Item 5
of Form 8-K the Registrant's entering into an Agreement and Plan of
Merger relating to the acquisition of Fieldcrest Cannon, Inc.
15
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(REGISTRANT) PILLOWTEX CORPORATION
BY (SIGNATURE) /s/ Jeffrey D. Cordes
(NAME AND TITLE) Jeffrey D. Cordes
President, Chief Operating Officer and Director
(Principal Financial and Accounting Officer)
(DATE) October 24, 1997
16
<PAGE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Method of Filing
- ------- -----------------------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated September 10, 1997, by and
among Pillowtex Corporation, Pegasus Merger Sub, Inc. and
Fieldcrest Cannon, Inc. (filed as Exhibit 2.1 to the Registrant's
current report on Form 8-K dated September 10, 1997, as amended,
and incorporated herein by reference). . . . . . . . . . . . . . . .Previously Filed electronically
10.1 Commitment Letter, dated September 10, 1997, by and between
NationsBank of Texas, N.A. and Pillowtex Corporation, regarding the
New Pillowtex Bank Facilities (filed as Exhibit 10.1 to the
Registrant's current report on Form 8-K dated September 10, 1997,
as amended, and incorporated herein by reference). . . . . . . . . .Previously filed electronically
10.2 Preferred Stock Purchase Agreement, dated September 10, 1997, by
and among Pillowtex Corporation, Apollo Investment Fund III,L.P.,
Apollo Overseas Partners III, L.P., and Apollo (UK) Partners III,
L.P., (filed as Exhibit 10.2 to the Registrant's current report on
Form 8-K dated September 10, 1997, as amended, and incorporated
herein by reference) . . . . . . . . . . . . . . . . . . . . . . . .Previously filed electronically
27 Financial Data Schedule. . . . . . . . . . . . . . . . . . . . . . .Filed herewith electronically
99.1 Press release, dated September 11, 1997, issued by Pillowtex
Corporation (filed as Exhibit 99.1 to the Registrant's current
report on Form 8-K dated September 10, 1997, as amended, and
incorporated herein by reference). . . . . . . . . . . . . . . . . .Previously filed electronically
17
<PAGE>
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consoliated balance sheets, consolidated statements of operations and
consolidated statements of cash flow found on pages 3, 5 and 6 of the Company's
Form 10-Q for the nine months ended September 27, 1997, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-START> DEC-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 102,804
<ALLOWANCES> 2,428
<INVENTORY> 150,084
<CURRENT-ASSETS> 261,320
<PP&E> 150,981
<DEPRECIATION> 52,065
<TOTAL-ASSETS> 419,168
<CURRENT-LIABILITIES> 80,086
<BONDS> 220,359
0
0
<COMMON> 108
<OTHER-SE> 110,669
<TOTAL-LIABILITY-AND-EQUITY> 419,168
<SALES> 370,633
<TOTAL-REVENUES> 370,633
<CGS> 305,674
<TOTAL-COSTS> 305,674
<OTHER-EXPENSES> 33,728
<LOSS-PROVISION> 585
<INTEREST-EXPENSE> 13,957
<INCOME-PRETAX> 17,274
<INCOME-TAX> 6,702
<INCOME-CONTINUING> 10,572
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,572
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
