<PAGE> 1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): DECEMBER 19, 1997
PILLOWTEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
TEXAS 1-11756 75-2147728
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
4111 MINT WAY, DALLAS, TEXAS 75237
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 333-3225
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<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) The historical financial statements of Fieldcrest filed as Exhibit
99.3 hereto are incorporated herein by reference.
(b) The pro forma financial information required by Item 7(b) of Form 8-K
is filed as Exhibit 99.4 hereto and is incorporated herein by reference.
(c) Exhibits:
--------
Exhibit
Number Exhibit
------- -------
2.1 Agreement and Plan of Merger, dated as of
September 10, 1997, by and among Pillowtex
Corporation, Pegasus Merger Sub, Inc., and
Fieldcrest Cannon, Inc. (incorporated by
reference to Appendix A to the Joint Proxy
Statement/Prospectus forming a part of
Pillowtex Corporation's Registration Statement
on Form S-4 (No. 333-36663) (the "S-4
Registration Statement"))
2.2 Amendment to Agreement and Plan of Merger,
dated as of September 23, 1997, by and among
Pillowtex Corporation, Pegasus Merger Sub,
Inc., and Fieldcrest Cannon, Inc.
(incorporated by reference to Appendix A to
the Joint Proxy Statement/Prospectus forming a
part of the Form S-4 Registration Statement)
3.1 * Restated Articles of Incorporation of Pillowtex, as
amended
4.1 * Indenture, dated as of December 18, 1997, among
Pillowtex Corporation, the guarantors listed on the
signature page thereto, and Norwest Bank Minnesota,
National Association, as Trustee
4.2 * Supplemental Indenture, dated as of December 19, 1997,
among Pillowtex Corporation, the guarantors listed on
the signature page thereto, and Norwest Bank Minnesota
National Association, as Trustee
10.1 * Amended and Restated Credit Agreement, dated as of
December 19, 1997, among Pillowtex Corporation,
certain Lenders named therein, and NationsBank of
Texas, N.A., as Administrative Agent
10.2 * Term Credit Agreement, dated as of December 19, 1997,
among Pillowtex Corporation, certain Lenders named
herein, and NationsBank of Texas, N.A., as
Administrative Agent
10.3 Preferred Stock Purchase Agreement, dated as of
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. (incorporated by reference to Exhibit 10.2
to Pillowtex Corporation's Current Report on Form 8-K
dated September 10, 1997, as amended by a Form 8-K/A
(Amendment No. 1) dated September 10, 1997)
10.4 Amendment No. 1 to the Preferred Stock Purchase
Agreement, dated as of November 21, 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. (incorporated by reference to
Exhibit 10.1 to Pillowtex Corporation's Current Report
on Form 8-K dated November 21, 1997)
-2-
<PAGE> 3
10.5* Purchase Agreement, dated December 15, 1997, among Pillowtex
Corporation, the guarantors listed on the signature page thereto,
and NationsBanc Montgomery Securities, Inc. and Bear, Stearns &
Co. Inc.
10.6* Purchase Agreement Supplement, dated December 19, 1997, among
Pillowtex Corporation, the guarantors listed on the signature
page thereto, and NationsBank Montgomery Securities, Inc. and
Bear, Stearns & Co. Inc.
10.7* Registration Rights Agreement, dated as of December 18, 1997,
among Pillowtex Corporation, the guarantors listed on the
signature page thereto, and NationsBanc Montgomery Securities,
Inc. and Bear, Stearns & Co. Inc.
10.8* Registration Rights Agreement Supplement, dated as of December
19, 1997, among Pillowtex Corporation, the guarantors listed on
the signature page thereto, and NationsBanc Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
99.1* Press release, dated December 19, 1997, issued by Pillowtex
Corporation
99.2 Audited Financial Statements of Pillowtex Corporation as of
December 30, 1995 and December 28, 1996 and for each of the years
in the three-year period ended December 28, 1996 (incorporated by
reference to pages F-1 through F-24 in Pillowtex Corporation's
Annual Report on Form 10-K for the fiscal year ended December 28,
1996) and Unaudited Financial Statements of Pillowtex Corporation
as of September 27, 1997 and for the three months and nine months
ended September 27, 1997 and September 28, 1996 (incorporated by
reference to pages 3 through 11 in Pillowtex Corporation's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 27, 1997)
99.3 Audited Financial Statements of Fieldcrest Cannon, Inc. as of and
for the fiscal years ended December 31, 1995 and December 31,
1996 (incorporated by reference to pages 18 through 34 in
Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1996) and Unaudited Financial
Statements of Fieldcrest Cannon, Inc. as of September 30, 1997
and for the nine months ended September 30, 1997 and September
30, 1996 (incorporated by reference to pages 2 through 5 in the
Fieldcrest Cannon, Inc.'s Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1997)
99.4** Unaudited Pro Forma Combined Financial Information of Pillowtex
- --------------------------
* Previously filed.
** Filed herewith.
-3-
<PAGE> 4
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, hereunto duly authorized.
PILLOWTEX CORPORATION
By: /s/ J. Mark Kirkpatrick
-------------------------------------
J. Mark Kirkpatrick
Vice President and Treasurer
Dated: February 11, 1998
-4-
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of September 10, 1997, by and among Pillowtex
Corporation, Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc. (incorporated by
reference to Appendix A to the Joint Proxy Statement/Prospectus forming a part of
Pillowtex Corporation's Registration Statement on Form S-4 (No. 333-36663) (the
"S-4 Registration Statement"))
2.2 Amendment to Agreement and Plan of Merger, dated as of September 23, 1997, by and
among Pillowtex Corporation, Pegasus Merger Sub, Inc., and Fieldcrest Cannon, Inc.
(incorporated by reference to Appendix A to the Joint Proxy Statement/Prospectus
forming a part of the Form S-4 Registration Statement)
3.1 * Restated Articles of Incorporation of Pillowtex, as amended
4.1 * Indenture, dated as of December 18, 1997, among Pillowtex Corporation, the guarantors
listed on the signature page thereto, and Norwest Bank Minnesota, National Association,
as Trustee
4.2 * Supplemental Indenture, dated as of December 19, 1997, among Pillowtex Corporation, the
guarantors listed on the signature page thereto, and Norwest Bank Minnesota, National
Association, as Trustee
10.1 * Amended and Restated Credit Agreement, dated as of December 19, 1997, among Pillowtex
Corporation, certain Lenders named therein, and NationsBank of Texas, N.A., as
Administrative Agent
10.2 * Term Credit Agreement, dated as of December 19, 1997, among Pillowtex Corporation,
certain Lenders named herein, and NationsBank of Texas, N.A., as Administrative Agent
10.3 Preferred Stock Purchase Agreement, dated as of 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. (incorporated by reference to Exhibit 10.2 to Pillowtex
Corporation's Current Report on Form 8-K dated September 10, 1997, as amended by a Form
8-K/A (Amendment No. 1) dated September 10, 1997)
10.4 Amendment No. 1 to the Preferred Stock Purchase Agreement, dated as of November 21, 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. (incorporated by reference to
Exhibit 10.1 to Pillowtex Corporation's Current Report on Form 8-K dated November 21, 1997)
10.5 * Purchase Agreement, dated December 15, 1997, among Pillowtex Corporation, the
guarantors listed on the signature page thereto, and NationsBanc Montgomery Securities,
Inc. and Bear, Stearns & Co. Inc.
10.6 * Purchase Agreement Supplement, dated December 19, 1997, among Pillowtex Corporation,
the guarantors listed on the signature page thereto, and NationsBank Montgomery Securities,
Inc. and Bear, Stearns & Co. Inc.
10.7 * Registration Rights Agreement, dated as of December 18, 1997, among Pillowtex
Corporation, the guarantors listed on the signature page thereto, and NationsBanc
Montgomery Securities, Inc. and Bear, Stearns & Co. Inc.
10.8 * Registration Rights Agreement Supplement, dated as of December 19, 1997, among Pillowtex
Corporation, the guarantors listed on the signature page thereto, and NationsBanc Montgomery
Securities, Inc. and Bear, Stearns & Co. Inc.
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
99.1 * Press release, dated December 19, 1997, issued by Pillowtex Corporation
99.2 Audited Financial Statements of Pillowtex Corporation as of December 30, 1995 and December 28,
1996 and for each of the years in the three-year period ended December 28, 1996 (incorporated
by reference to pages F-1 through F-24 in Pillowtex Corporation's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996) and Unaudited Financial Statements of Pillowtex
Corporation as of September 27, 1997 and for the three months and nine months ended
September 27, 1997 and September 28, 1996 (incorporated by reference to pages 3 through 11
in Pillowtex Corporation's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 27, 1997)
99.3 Audited Financial Statements of Fieldcrest Cannon, Inc. as of and for the fiscal years ended
December 31, 1995 and December 31, 1996 (incorporated by reference to pages 18 through
34 in Fieldcrest Cannon, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 1996) and Unaudited Financial Statements of Fieldcrest Cannon, Inc. as of
September 30, 1997 and for the nine months ended September 30, 1997 and September 30,
1996 (incorporated by reference to pages 2 through 5 in the Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997)
99.4 ** Unaudited Pro Forma Combined Financial Information of Pillowtex
</TABLE>
- --------------------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 99.4
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF PILLOWTEX
<PAGE> 2
GENERAL
On December 19, 1997, a wholly owned subsidiary ("Newco") of Pillowtex
Corporation ("Pillowtex") was merged with and into Fieldcrest Cannon, Inc.
("Fieldcrest") pursuant to an Agreement and Plan of Merger, dated as of
September 10, 1997 (the "Merger Agreement"), among Pillowtex, Newco, and
Fieldcrest. At the effective time (the "Effective Time") of such merger (the
"Merger"), among other things, on the terms set forth in the Merger Agreement
(i) each then-outstanding share of Common Stock, par value $1.00 per share, of
Fieldcrest ("Fieldcrest Common Stock") was converted into the right to receive
total consideration consisting of (a) a cash payment in an amount equal to
$27.00 and (b) 0.269 shares of Common Stock, par value $0.01 per share, of
Pillowtex ("Pillowtex Common Stock"), (ii) each then-outstanding share of $3.00
Series A Convertible Preferred Stock, par value $0.01 per share, of Fieldcrest
was converted into the right to receive total consideration consisting of (a) a
cash payment in an amount equal to $46.15 and (b) 0.4598286 shares of Pillowtex
Common Stock, and (iii) each then-outstanding share of Common Stock, par value
$0.01 per share, of Newco was converted into one share of Common Stock, par
value $0.01 per share, of Fieldcrest (as the surviving corporation in the
Merger). Immediately following the Merger, Pillowtex owned 100% of the
outstanding capital stock of Fieldcrest.
Pillowtex financed the Merger and, simultaneously with the closing of
the Merger, refinanced certain indebtedness of Pillowtex and Fieldcrest through
a combination of (i) borrowings under new senior revolving credit and term loan
facilities (the "New Pillowtex Bank Facilities"), (ii) the issuance and sale of
new senior subordinated debt securities (the "New Pillowtex Subordinated
Notes"), and (iii) the issuance and sale of shares of Series A Redeemable
Convertible Preferred Stock, par value $0.01 per share, of Pillowtex (the
"Pillowtex Preferred Stock").
PRO FORMA CAPITALIZATION
The following table sets forth the historical capitalization of each of
Pillowtex and Fieldcrest as of September 27, 1997 and September 30, 1997,
respectively, and the pro forma capitalization of Pillowtex as of September 27,
1997, adjusted to give effect to the consummation of the Merger and the
Financing Transactions, as if such transactions had been consummated on
September 27, 1997. As used herein, the term "Financing Transactions" means (i)
initial borrowings under the New Pillowtex Bank Facilities of $149.0 million
under a $350.0 million revolving credit facility (the "Revolver") and $250.0
million under a $250.0 million term loan facility (the "Term Loan"), (ii) the
issuance and sale of $185.0 million aggregate principal amount of New Pillowtex
Subordinated Notes, (iii) the issuance and sale of 65,000 shares of Pillowtex
Preferred Stock, (iv) the repayment of all amounts outstanding under Pillowtex's
and Fieldcrest's existing bank credit facilities, and (v) the satisfaction and
discharge of all indebtedness represented by Fieldcrest's 11.25% Senior
Subordinated Debentures due 2002 to 2004 pursuant to an irrevocable deposit of
amounts sufficient to provide for the redemption thereof.
The pro forma information set forth below is presented for illustrative
purposes only and is not necessarily indicative of what Pillowtex's actual
consolidated capitalization would have been had the foregoing transactions been
consummated on September 27, 1997, nor does it give effect to (i) any
transactions other than the foregoing transactions and those discussed in the
Notes to Unaudited Pro Forma Combined Financial Information of Pillowtex
contained elsewhere herein or (ii) Pillowtex's or Fieldcrest's respective
results of operations since September 27, 1997 and September 30, 1997,
respectively. Accordingly, the pro forma information set forth below does not
purport to be indicative of Pillowtex's consolidated capitalization as of the
Effective Time, the date hereof, or any future date.
The following table should be read in conjunction with the historical
financial statements of Pillowtex and Fieldcrest and the unaudited pro forma
combined financial information and the related notes contained elsewhere herein.
<PAGE> 3
CAPITALIZATION
SEPTEMBER 27, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------- PRO FORMA
PILLOWTEX FIELDCREST COMBINED
--------- ---------- --------
<S> <C> <C> <C>
Short-term debt:
Current portion of long-term debt .............................. $ 1,553 $ 4,697 $ 6,250
----------- ----------- -----------
Total short-term debt ........................................ 1,553 4,697 6,250
Long-term debt:
Revolving credit borrowings .................................... 86,350 100,000 148,956
Senior bank term A ............................................. -- -- 125,000
Senior bank term B ............................................. -- -- 125,000
New Pillowtex Subordinated Notes .............................. -- -- 185,000
Existing Pillowtex Subordinated Notes .......................... 125,000 -- 125,000
Fieldcrest 6% Convertible Subordinated Debentures .............. -- 112,500 93,864 (a)
Fieldcrest 11.25% Senior Subordinated Debentures ............... -- 85,000 --
Deed of Trust Note ............................................. 2,199 -- 2,199
PEDFA Industrial Revenue Bonds ................................. 2,310 -- 2,310
MBFC Industrial Revenue Bonds .................................. 2,760 -- 2,760
Industrial Development Bonds due 2021 .......................... -- 10,000 10,000
Industrial Revenue Installment Bonds due 2002 .................. -- 1,320 1,320
Other long-term debt ........................................... 187 -- 187
----------- ----------- -----------
Total long-term debt ......................................... 218,806 308,820 821,596
----------- ----------- -----------
Total debt ................................................. 220,359 313,517 827,846
Pillowtex Series A Redeemable Convertible Preferred Stock,
$0.01 par value, 200,000 shares authorized,
65,000 shares issued and outstanding (as adjusted) ............. -- -- 62,882
Shareholders' equity:
Preferred Stock, $0.01 par value, 20,000,000 shares
authorized, none issued and outstanding (Pillowtex
historical); $0.01 par value, 10,000,000 shares
authorized, 1,500,000 shares issued and outstanding
(Fieldcrest historical); $0.01 par value, 20,000,000
shares authorized, none issued and outstanding (as adjusted) ... 15 -- --
Common Stock, $0.01 par value, 30,000,000 shares authorized,
10,786,819 shares issued and outstanding (Pillowtex
historical); $0.01 par value, 25,000,000 shares authorized,
12,850,002 shares issued and outstanding (Fieldcrest
historical); $0.01 par value, 30,000,000 shares authorized,
13,963,348 shares issued and outstanding (as adjusted) ......... 108 12,850 140
Additional paid-in capital ....................................... 60,825 226,758 150,539
Retained earnings ................................................ 50,316 106,923 49,348 (b)
Treasury stock, 3,606,400 shares (Fieldcrest historical);
0 shares (as adjusted) ......................................... -- (117,225) --
Currency translation adjustment .................................. (472) -- (472)
----------- ----------- -----------
Total shareholders' equity ..................................... 110,777 229,321 199,555
----------- ----------- -----------
Total capitalization ....................................... $ 331,136 $ 542,838 $ 1,090,283
=========== =========== ===========
Ratio of total debt to total capitalization ................ 66.55% 57.76% 75.93%(c)
=========== =========== ===========
</TABLE>
- -----------------
(a) Reflects an adjustment to record the Fieldcrest 6% Convertible Debentures
due 2012 at fair market value.
(b) Reflects a charge of $968, net of income tax benefit, for the write off of
Pillowtex unamortized debt issuance costs.
(c) Including the Pillowtex Preferred Stock together with total debt, the ratio
would be 81.70%.
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
<PAGE> 4
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF PILLOWTEX
The following unaudited pro forma combined financial statements of
Pillowtex give effect to the consummation of the Merger and the Financing
Transactions, as if such transactions had been consummated: (i) on September 27,
1997, in the case of the Unaudited Pro Forma Combined Balance Sheet at September
27, 1997 and (ii) on December 31, 1995, the first day of Pillowtex's 1996 fiscal
year, in the case of the Unaudited Pro Forma Combined Statement of Operations
for the fiscal year ended December 28, 1996 and the nine months ended September
27, 1997. As used herein, the term "Financing Transactions" means (i) initial
borrowings under the New Pillowtex Bank Facilities of $149.0 million under the
Revolver and $250.0 million under the Term Loan, (ii) the issuance and sale of
$185.0 million aggregate principal amount of New Pillowtex Subordinated Notes,
(iii) the issuance and sale of 65,000 shares of Pillowtex Preferred Stock, (iv)
the repayment of all amounts outstanding under Pillowtex's and Fieldcrest's
existing bank credit facilities, and (v) the satisfaction and discharge of all
indebtedness represented by Fieldcrest's 11.25% Senior Subordinated Debentures
Due 2002 to 2004 pursuant to an irrevocable deposit of amounts sufficient to
provide for the redemption thereof.
The following unaudited pro forma combined financial information is
presented for illustrative purposes only and is not necessarily indicative of
what Pillowtex's actual financial position or results of operations would have
been had the foregoing transactions been consummated on such dates, nor does it
give effect to (i) any transactions other than the foregoing transactions and
those described in the accompanying Notes to Unaudited Pro Forma Combined
Financial Information of Pillowtex, (ii) Pillowtex's or Fieldcrest's results of
operations since September 27, 1997 and September 30, 1997, respectively, or
(iii) one-time charges of approximately $7.5 million, including approximately
$2.0 million of cash charges, expected to result from the Merger and the
integration of the operations of Pillowtex. Although the following unaudited pro
forma combined financial information gives effect to assumed annual cost savings
of $21.6 million, it does not give effect to certain additional annual cost
savings expected to be achieved following consummation of the Merger. The pro
forma combined financial information does not purport to be indicative of
Pillowtex's financial position or results of operations as of the date of the
closing of the Merger or for any period ended on the date of the closing of the
Merger, as of the date hereof or for any period ending on the date hereof, or as
of or for any future date or period.
The following unaudited pro forma combined financial information is based
upon the historical financial statements of Pillowtex and Fieldcrest and should
be read in conjunction with such historical financial statements and the related
notes. In the preparation of the following unaudited pro forma combined
financial information, it has been generally assumed that the historical value
of Fieldcrest's assets and liabilities approximates the fair value thereof
(except as described in the accompanying Notes to Unaudited Pro Forma Combined
Financial Information of Pillowtex), as an independent valuation has not been
completed. Pillowtex will be required to determine the fair value of the assets
and liabilities of Fieldcrest (including intangible assets) as of the Effective
Time. Although such determination of fair value is not presently expected to
result in values that are materially greater or less than the values assumed in
the preparation of the following unaudited pro forma combined financial
information, there can be no assurance with respect thereto.
The Unaudited Pro Forma Combined Balance Sheet at September 27, 1997 is
based upon Pillowtex's financial position at September 27, 1997 and upon
Fieldcrest's financial position at September 30, 1997. The Unaudited Pro Forma
Combined Statement of Operations for the fiscal year ended December 28, 1996 is
based upon Pillowtex's results of operations for its fiscal year ended December
28, 1996 and upon Fieldcrest's results of operations for its fiscal year ended
December 31, 1996. The Unaudited Pro Forma Combined Statement of Operations for
the nine months ended September 27, 1997 is based upon Pillowtex's results of
operations for the nine months ended September 27, 1997 and upon Fieldcrest's
results of operations for the nine months ended September 30, 1997.
The home textiles and furnishings industry is seasonal in nature, with a
higher proportion of sales and earnings usually being generated in the third and
fourth quarters of the fiscal year than in other periods. Because of this
seasonality and other factors, results of operations for interim periods are not
necessarily indicative of results of operations for an entire fiscal year.
<PAGE> 5
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
BALANCE SHEET
SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------- -----------------------------------
PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash ......................................... $ 34 $ 5,475 $ --(2) $ 5,509
Accounts receivable .......................... 104,353 170,071 -- 274,424
Inventories .................................. 150,084 202,064 19,000(1) 371,148
Prepaid expenses and other current assets .... 6,849 2,218 -- 9,067
----------- ----------- ----------- -----------
Total current assets ....................... 261,320 379,828 19,000 660,148
Property, plant, and equipment, net ............ 98,916 342,392 50,000(1) 491,308
Goodwill, net .................................. 45,683 6,495 186,544(1) 238,722
Other assets, net .............................. 13,249 60,764 (44,129)(1) 46,447
(1,600)(3)
18,163(4)
----------- ----------- ----------- -----------
Total assets ............................. $ 419,168 $ 789,479 $ 227,978 $ 1,436,625
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................... $ 50,699 $ 63,893 $-- $ 114,592
Accrued expenses ........................... 25,253 69,435 5,318(1) 99,374
(632)(3)
Current portion of long-term debt .......... 1,553 4,697 -- 6,250
Deferred income taxes ...................... 2,581 20,593 1,266(1) 24,440
----------- ----------- ----------- -----------
Total current liabilities ................ 80,086 158,618 5,952 244,656
Long-term debt ................................. 218,806 308,820 293,970(2)(4) 821,596
Deferred income taxes .......................... 9,499 39,758 4,984(1) 54,241
Other non-current liabilities .................. -- 52,962 733(1) 53,695
----------- ----------- ----------- -----------
Total liabilities ........................ 308,391 560,158 305,639 1,174,188
Redeemable convertible preferred stock ......... -- -- 62,882(5) 62,882
Shareholders' equity:
Preferred stock .............................. -- 15 (15)(6) --
Common stock ................................. 108 12,850 (12,818)(6) 140
Additional paid-in capital ................... 60,825 226,758 (137,044(6) 150,539
Retained earnings ............................ 50,316 106,923 (106,923(6) 49,348
(968)(3)
Treasury stock ............................... -- (117,225) 117,225(6) --
Currency translation adjustment .............. (472) -- -- (472)
----------- ----------- ----------- -----------
Total shareholders' equity ............... 110,777 229,321 (140,543) 199,555
----------- ----------- ----------- -----------
Total liabilities and shareholders' equity $ 419,168 $ 789,479 $ 227,978 $ 1,436,625
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
<PAGE> 6
\ UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 28, 1996
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------- -------------------------------
PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED
-------------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Net sales............................................ $ 490,655 $ 1,092,496 $ -- $ 1,583,151
Cost of goods sold................................... 411,048 956,522 3,713 (7) 1,364,368
(6,915) (8)
----------- ----------- ---------- -----------
Gross profit....................................... 79,607 135,974 3,202 218,783
Selling, general, and administrative expenses........ 41,445 105,405 (530) (1) 136,434
412 (7)
(14,644) (8)
4,825 (7)
(479) (9)
Restructuring charges................................ -- 8,130 -- 8,130
----------- ----------- ---------- -----------
Earnings from operations........................... 38,162 22,439 13,618 74,219
Nonoperating (income) expense:
Interest expense................................... 13,971 26,869 22,606 (10) 63,446
Other income, net.................................. -- (5,604) -- (5,604)
----------- ----------- ---------- -----------
Total nonoperating expense..................... 13,971 21,265 22,606 57,842
----------- ----------- ---------- -----------
Earnings before income taxes and extraordinary items 24,191 1,174 (8,988) 16,377
Income taxes......................................... 9,459 114 (1,198) (11) 8,375
----------- ----------- ---------- -----------
Earnings before extraordinary items................ 14,732 1,060 (7,790) 8,002
Preferred dividends.................................. -- (4,500) 2,550 (12) (1,950)
----------- ----------- ---------- -----------
Earnings (loss) before extraordinary
items applicable to common stock................. $ 14,732 $ (3,440) $ (5,240) $ 6,052
=========== =========== ========== ===========
Primary earnings per share:
Earnings (loss) before extraordinary items......... $ 1.39 $ (0.38) $ 0.44
============== ============== ==============
Weighted average common shares outstanding......... 10,617,722 9,023,958 13,794,251 (13)
=========== =========== ===========
Fully diluted earnings per share:
Earnings (loss) before extraordinary items ........ $ -- $ 0.44
=========== ==============
Weighted average common shares outstanding......... 14,413,901 13,794,251 (13)
=========== ===========
OTHER OPERATING DATA:
Depreciation and amortization...................... $ 12,775 $ 36,678 $ 57,394
EBITDA(14)......................................... 50,937 59,117 131,613
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
<PAGE> 7
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 27, 1997
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------ -------------------------------
PILLOWTEX FIELDCREST ADJUSTMENTS COMBINED
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales ............................................... $ 370,633 $ 820,635 $ -- $ 1,191,268
Cost of goods sold ...................................... 305,674 695,615 2,784 (7) 998,887
(5,186)(8)
------------ ------------ --------- ------------
Gross profit .......................................... 64,959 125,020 2,402 192,381
Selling, general, and administrative expenses ........... 33,728 85,563 (398)(1) 111,520
310 (7)
(10,983)(8)
3,619 (7)
(319)(9)
------------ ------------ --------- ------------
Earnings from operations .............................. 31,231 39,457 10,173 80,861
Nonoperating (income) expense:
Interest expense ...................................... 13,957 18,708 19,970 (10) 52,635
Other income, net ..................................... -- (2,021) -- (2,021)
------------ ------------ ---------- ------------
Total nonoperating expense ........................ 13,957 16,687 19,970 50,614
------------ ------------ ---------- ------------
Earnings before income taxes and extraordinary items .. 17,274 22,770 (9,797) 30,247
Income taxes ............................................ 6,702 8,087 (1,412)(11) 13,377
------------ ------------ ---------- ------------
Earnings before extraordinary items ................... 10,572 14,683 (8,385) 16,870
Preferred dividends ..................................... -- (3,375) 1,912 (12) (1,463)
------------ ------------ ---------- ------------
Earnings before extraordinary items applicable
to common stock ..................................... $ 10,572 $ 11,308 $ (6,473) $ 15,407
============ ============ ========== ============
Primary earnings per share:
Earnings before extraordinary items ................... $ 0.99 $ 1.23 $ 1.11(13)
=============== =============== ===============
Weighted average common shares outstanding ............ 10,669,225 9,204,171 16,554,087
============ ============ ============
Fully diluted earnings per share:
Earnings before extraordinary items ................... $ 1.23 $ 1.11(13)
=============== ===============
Weighted average common shares outstanding ............ 9,247,477 16,554,087
============ ============
OTHER OPERATING DATA:
Depreciation and amortization ......................... $ 10,642 $ 26,241 $ 42,879
EBITDA(14) ............................................ 41,873 65,698 123,740
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Information.
<PAGE> 8
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(1) In connection with the Merger, at the Effective Time each then-outstanding
share of Fieldcrest Common Stock was converted into the right to receive
total consideration consisting of $27.00 in cash and 0.269 shares of
Pillowtex Common Stock and each then-outstanding share of Fieldcrest
Preferred Stock was converted into a right to receive total consideration
consisting of $46.15 in cash and 0.4598286 shares of Pillowtex Common
Stock. For purposes of the unaudited pro forma combined financial
information contained herein, the fair market value of Pillowtex Common
Stock is assumed to be $28.36 per share, which is the average closing
market price of the Pillowtex Common Stock for the four consecutive trading
days immediately preceding December 19, 1997 (i.e., the closing date of the
Merger). The aggregate purchase price assumed to be paid by Pillowtex in
connection with the acquisition of Fieldcrest pursuant to the Merger is
summarized below.
<TABLE>
<S> <C>
ISSUANCE OF PILLOWTEX COMMON STOCK:
Number of shares of Fieldcrest Common Stock outstanding at the Effective Time 9,243,602
Conversion ratio 0.269
---------------
Number of shares of Pillowtex Common Stock assumed to be issued to holders of
Fieldcrest Common Stock in connection with the Merger 2,486,529
---------------
Number of shares of Fieldcrest Preferred Stock outstanding at the Effective Time 1,500,000
Conversion ratio (rounded to the nearest one-hundredth) 0.46
---------------
Number of shares of Pillowtex Common Stock assumed to be issued to holders of
Fieldcrest Preferred Stock in connection with the Merger 690,000
---------------
Total shares of Pillowtex Common Stock assumed to be issued in connection with the
Merger 3,176,529
===============
AGGREGATE PURCHASE PRICE:
Cash assumed to be paid to holders of Fieldcrest Common Stock (9,243,602 shares at
$27.00 per share) $ 249,577,000
Cash assumed to be paid to holders of Fieldcrest Preferred Stock (1,500,000 shares at
$46.15 per share) 69,225,000
Assumed fair value of Pillowtex Common Stock assumed to be issued in connection
with the Merger (3,176,529 shares at $28.36 per share) 90,086,000
Severance costs assumed to be incurred in connection with the Merger 13,021,000 (a)
Settlement of Fieldcrest Options and Fieldcrest SARs 6,774,000 (b)
Early call premium on Fieldcrest 11.25% Senior Subordinated Debentures 4,782,000
Financial advisors, legal, accounting, and other professional fees 13,606,000
---------------
Aggregate purchase price $ 447,071,000
===============
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
ALLOCATION OF PURCHASE PRICE:
Aggregate purchase price $ 447,071,000
Less net book value of assets acquired 229,321,000
--------------
Excess of cost over net book value of assets acquired 217,750,000
Less adjustments to record assets and liabilities acquired
at fair market value:
Inventory 19,000,000 (c)
Property, plant, and equipment 50,000,000 (d)
Goodwill (6,495,000) (e)
Other assets (44,129,000) (f)
Accrued expenses (5,318,000) (g)
Deferred income taxes - current (1,266,000) (h)
Long-term debt 18,636,000 (i)
Deferred income taxes - noncurrent (4,984,000) (h)
Noncurrent liabilities ( 733,000) (j) 24,711,000
-------------- --------------
Excess of cost over fair market value of net assets $ 193,039,000
acquired (k) ==============
</TABLE>
- --------------
(a) Reflects severance costs to be incurred in connection with the
Merger in accordance with EITF 95-3, "Recognition of
Liabilities in Connection with a Purchase Business
Combination."
(b) Reflects the settlement of the outstanding options to purchase
shares of Fieldcrest Common Stock (the "Fieldcrest Options")
and outstanding stock appreciation rights issued by Fieldcrest
(the "Fieldcrest SARs") in connection with the Merger.
(c) Reflects principally the elimination of Fieldcrest's last-in,
first-out reserve, together with certain offsetting
adjustments necessary to state inventory at fair market value.
(d) Reflects a preliminary adjustment to fair value of
Fieldcrest's property, plant, and equipment. The preliminary
adjustment is based upon internal estimates and is allocated
as follows:
<TABLE>
<S> <C>
Land $ 5,000,000
Buildings 20,000,000
Machinery and Equipment 25,000,000
-------------
$ 50,000,000
=============
</TABLE>
(e) Reflects the elimination of Fieldcrest's existing goodwill of
$6,495,000. The reversal of the related amortization was
$530,000 for the year ended December 28, 1996 and $398,000 for
the nine months ended September 27, 1997.
(f) Reflects an adjustment to record the (i) preliminary fair
value remeasurement of Fieldcrest's pension asset resulting in
a reduction of $27,087,000, (ii) elimination of the asset
related to the Fieldcrest licensing agreement with Pillowtex
of $10,393,000, (iii) write-off of the unamortized balance of
debt issuance costs related to Fieldcrest's bank credit
facility, Fieldcrest's 11.25% Senior Subordinated Debentures
Due 2002 (the "11.25% Senior Subordinated Debentures"), and
Fieldcrest's 6% Convertible Debentures due 2012 (the
"Fieldcrest Convertible Debentures") of $4,649,000 and (iv)
preliminary fair value adjustment related to notes receivable
of $2,000,000.
(g) Reflects the adjustment to record miscellaneous reserves of
$5,318,000 charged to pre-Merger earnings.
(h) To record a $6,250,000 deferred tax liability related to the
temporary difference between the financial statement carrying
amount and the tax basis of the Fieldcrest acquired assets as
adjusted
<PAGE> 10
at an assumed income tax rate of 35.0% for the years in which
those differences are expected to be recovered or settled.
(i) Reflects the adjustment to record the Fieldcrest Convertible
Debentures at an amount that approximates the market value of
the Fieldcrest Convertible Debentures on December 19, 1997,
(i.e., the closing date of the Merger). The discount of
$18,636,000 will be amortized to interest expense using the
interest method over the remaining life of the Fieldcrest
Convertible Debentures.
(j) Reflects the preliminary fair value remeasurement of
Fieldcrest's liability for post-retirement benefits other than
pension ("OPEB") of $733,000.
(k) Upon completion of its determination of fair values, Pillowtex
may identify intangible assets (such as trade names) to which
a portion of the purchase price should be allocated. Pillowtex
believes that the amortization period for such identifiable
intangible assets will also be 40 years.
(2) Reflects the adjustment to record the following:
<TABLE>
<S> <C>
Initial borrowings under the New Pillowtex Bank Facilities $398,956,000
Gross proceeds from the issuance and sale of the New Pillowtex
Subordinated Notes 185,000,000
Gross proceeds from the issuance and sale of Pillowtex
Preferred Stock 65,000,000
Cash assumed to be paid to holders of Fieldcrest Common Stock
(9,243,602 shares at $27.00 per share) (249,577,000)
Cash assumed to be paid to holders of Fieldcrest Preferred Stock
(1,500,000 shares at $46.15 per share) (69,225,000)
Repayment of Pillowtex's revolving credit facility (86,350,000)
Repayment of Fieldcrest's revolving credit facility (100,000,000)
Satisfaction and discharge of Fieldcrest's 11.25% Senior
Subordinated Debentures (85,000,000)
Severance costs assumed to be incurred in connection with the
Merger (see note 1(a)) (13,021,000)
Settlement of Fieldcrest Options and Fieldcrest SARs
(see note 1(b)) (6,774,000)
Early call premium on Fieldcrest 11.25% Senior Subordinated
Debentures (4,782,000)
Financial advisors, legal, accounting, and other professional fees (34,227,000)
------------
$ --
============
</TABLE>
(3) Reflects the adjustment to (a) write off the unamortized balance of
debt issuance costs related to the existing Pillowtex bank credit
facility of $1,600,000, (b) record the related tax benefit of $632,000
and (c) record a net reduction in retained earnings of $968,000.
(4) Reflects the adjustment to record the following:
<TABLE>
<S> <C>
Bank borrowings required to finance the Merger $ 398,956,000
Issuance and sale of the New Pillowtex Subordinated Notes 185,000,000
Repayment of Pillowtex's revolving credit facility (86,350,000)
Repayment of Fieldcrest's revolving credit facility (100,000,000)
Satisfaction and discharge of Fieldcrest's 11.25% Senior
Subordinated Debentures (85,000,000)
Discount of the Fieldcrest Convertible Debentures at
fair market value (see note 1(i)) (18,636,000)
-------------
$ 293,970,000
=============
</TABLE>
Additionally, debt issuance costs of $18,163,000 were incurred in
connection with the Merger.
<PAGE> 11
(5) Reflects the issuance and sale of 65,000 shares of Pillowtex Preferred
Stock at an offering price of $1,000 per share, net of offering costs
of $2,118,000.
(6) Reflects the (i) elimination of Fieldcrest's equity which will be
canceled upon consummation of the Merger, (ii) issuance of 3,176,529
shares of Pillowtex Common Stock at a par value of $0.01 in connection
with the Merger, and (iii) the related additional paid-in capital of
$90,054,000, net of equity issuance costs of $340,000.
(7) Reflects incremental depreciation and amortization expense as a result
of the preliminary adjustment to fair value of Fieldcrest's property,
plant, and equipment and the excess of cost over fair market value of
the net assets acquired (see note 1) as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months
Estimated December 28, Ended
Useful Life 1996 September 27, 1997
----------- ---- ------------------
<S> <C> <C> <C>
Additional depreciation of Fieldcrest
Merger property, plant, and
equipment 8 to 20 years $ 4,125,000 $ 3,094,000
============ ===========
Amortization of excess of cost over
fair value of net assets acquired 40 years $ 4,825,000 $ 3,619,000
============ ===========
</TABLE>
(8) Reflects the elimination of duplicate corporate expenses of
$21,559,000 for the year ended December 28, 1996 and $16,169,000 for
the nine months ended September 27, 1997.
(9) Reflects the reversal of the amortization related to Pillowtex's debt
issuance costs which have been written off in connection with the
Merger (see note 3) of $479,000 for the year ended December 28, 1996
and $319,000 for the nine months ended September 27, 1997.
(10) Reflects an adjustment to record additional interest expense,
amortization of debt issuance costs, and the amortization of the
discount on the Fieldcrest Convertible Debentures incurred in
connection with the Merger. For each 1/8% change in the assumed
effective interest rate on Pillowtex's floating-rate debt, interest
expense would change by $672,000 and $481,000 for the year ended
December 28, 1996 and the nine months ended September 27, 1997,
respectively.
(11) Reflects the income tax benefit related to the effects of the pro
forma adjustments based upon an assumed composite income tax rate of
39.5%.
(12) Reflects an adjustment to (i) reverse Fieldcrest's historical
preferred stock dividends and (ii) record the dividends on the
Pillowtex Preferred Stock assuming a 3% dividend rate as follows:
<TABLE>
<CAPTION>
Year Ended Nine Months
December 28, Ended
1996 September 27, 1997
------------- ------------------
<S> <C> <C>
Reversal of historical Fieldcrest Preferred Stock dividends $ (4,500,000) $ (3,375,000)
Addition of Pillowtex Preferred Stock dividends 1,950,000 1,463,000
------------- ------------
$ (2,550,000) $ (1,912,000)
============= ============
</TABLE>
If Pillowtex were to fail to attain specified earnings per share
targets in 1999, dividends for fiscal years after 1999 would increase
from the initial 3.0% rate to 7.0% or 10.0% and Pillowtex would be
required to pay an additional dividend consisting of shares of
Pillowtex Preferred Stock, in each case as described above.
(13) The assumed conversion of the Fieldcrest Convertible Debentures and
the Pillowtex Preferred Stock would have an anti-dilutive effect on
earnings per share for the year ended December 28, 1996, and therefore
has been excluded from the computation thereof.
<PAGE> 12
The assumed conversion of the Fieldcrest Convertible Debentures would
have an anti-dilutive effect on earnings per share for the nine months
ended September 27, 1997, and therefore has been excluded from the
computation thereof.
(14) EBITDA is income before income taxes plus depreciation expense,
amortization expense, and net interest expense. EBITDA is presented
because it is a widely accepted financial indicator of a company's
ability to service and/or incur indebtedness; however, EBITDA should
not be considered as an alternative to net income (as a measure of
operating results) or to cash flows (as a measure of liquidity)
computed in accordance with generally accepted accounting principles.
In addition, EBITDA as presented herein may not be directly comparable
to EBITDA as reported by other companies.
