<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 OCTOBER 2, 1999
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 75237
Dallas, Texas (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(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 November 12, 1999
----- --------------------------------
Common Stock, $.01 par value 14,320,378
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
INDEX
Part I - Financial Information Page No.
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of January 2, 1999 and
October 2, 1999 3
Consolidated Statements of Operations for the three months
ended October 3, 1998 and October 2, 1999 4
Consolidated Statements of Operations for the nine months
ended October 3, 1998 and October 2, 1999 5
Consolidated Statements of Cash Flows for the nine months
ended October 3, 1998 and October 2, 1999 6
Notes to Consolidated Financial Statements
7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 23
Signature 24
Index to Exhibits 25
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 2, 1999 AND OCTOBER 2, 1999
(DOLLARS IN THOUSANDS, EXCEPT FOR PAR VALUE)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1998 1999
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,561 $ 7,669
Receivables:
Trade, less allowances of $21,117 and $27,911 in 1998
and 1999, respectively 246,348 325,033
Other 13,124 15,428
Inventories 434,281 460,824
Assets held for sale 4,058 4,481
Prepaid expenses 3,785 9,043
------------ -----------
Total current assets 707,157 822,478
Property, plant and equipment, less accumulated depreciation of
$98,737 and $134,937 in 1998 and 1999, respectively 629,205 646,643
Intangible assets, at cost, less accumulated amortization of $11,866 and
$17,528 in 1998 and 1999, respectively 289,829 291,056
Other assets 27,963 26,602
------------ -----------
$ 1,654,154 $ 1,786,779
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 127,575 183,741
Accrued expenses 96,250 81,311
Deferred income taxes 22,978 25,495
Current portion of long-term debt 12,421 19,512
Notes payable to banks - 12,200
Long-term debt currently being renegotiated (Note 6) - 626,082
------------ -----------
Total current liabilities 259,224 948,341
Long-term debt, less current portion (Note 6) 944,493 399,582
Deferred income taxes 96,013 90,256
Noncurrent liabilities 53,434 49,789
------------ -----------
Total liabilities 1,353,164 1,487,968
Series A redeemable convertible preferred stock, $0.01 par value; 65,000
shares issued and outstanding, including accrued dividends (Note 7) 63,057 72,199
Shareholders' equity:
Preferred stock, $0.01 par value; authorized 20,000,000 shares;
only Series A issued - -
Common stock, $0.01 par value; authorized 55,000,000 shares;
14,126,595 and 14,320,378 shares issued and outstanding
in 1998 and 1999, respectively 141 142
Additional paid-in capital 155,811 157,067
Retained earnings 83,650 71,443
Currency translation adjustment (1,669) (1,160)
Deferred compensation - (880)
------------ -----------
Total shareholders' equity 237,933 226,612
------------ -----------
$ 1,654,154 $ 1,786,779
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 3, 1998 AND OCTOBER 2, 1999
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Net sales $ 419,799 $ 415,806
Cost of goods sold 342,062 371,555
Provision for inventory write-down (Note 4) - 4,900
------------ -----------
Gross profit 77,737 39,351
Selling, general and administrative expenses 34,171 33,220
Provision for asset impairments (Note 4) - 2,000
------------ -----------
Earnings from operations 43,566 4,131
Interest expense 19,122 21,263
------------ -----------
Earnings (loss) before income taxes 24,444 (17,132)
Income taxes 9,422 (6,053)
------------ -----------
Net earnings (loss) 15,022 (11,079)
Preferred dividends and accretion 540 9,526
------------ -----------
Earnings (loss) available for common shareholders $ 14,482 $ (20,605)
============ ===========
Basic earnings (loss) per common share $ 1.03 $ (1.45)
============ ===========
Weighted average common shares outstanding - basic 14,122 14,184
============ ===========
Diluted earnings (loss) per common share $ .87 $ (1.45)
============ ===========
Weighted average common shares outstanding - diluted 17,619 14,184
============ ===========
Dividends declared per common share $ .06 $ .06
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED OCTOBER 3, 1998 AND OCTOBER 2, 1999
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Net sales $ 1,118,220 $ 1,146,781
Cost of goods sold 922,227 984,757
Provision for inventory write-down (Note 4) - 4,900
------------ -----------
Gross profit 195,993 157,124
Selling, general and administrative expenses 96,055 92,457
Provision for asset impairments (Note 4) - 2,000
Restructuring charge 1,539 -
------------ -----------
Earnings from operations 98,399 62,667
Interest expense 52,920 60,464
------------ -----------
Earnings before income taxes 45,479 2,203
Income taxes 17,731 1,255
------------ -----------
Net earnings 27,748 948
Preferred dividends and accretion 1,567 10,602
------------ -----------
Earnings (loss) available for common shareholders $ 26,181 $ (9,654)
============ ===========
Basic earnings (loss) per common share $ 1.86 $ (.68)
============ ===========
Weighted average common shares outstanding - basic 14,068 14,172
============ ===========
Diluted earnings (loss) per common share $ 1.63 $ (.68)
============ ===========
Weighted average common shares outstanding - diluted 17,672 14,172
============ ===========
Dividends declared per common share $ .18 $ .18
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED OCTOBER 3, 1998 AND OCTOBER 2, 1999
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 27,748 $ 948
Adjustments to reconcile net earnings to net cash
Used in operating activities:
Depreciation and amortization........................................... 40,187 43,184
Deferred income taxes................................................... 23,581 1,825
Accretion on debt instruments........................................... 854 1,552
Provision for asset impairment - 2,000
Provision for doubtful accounts......................................... 1,264 873
Amortization of deferred compensation................................... - 312
Loss on disposal of property, plant and equipment....................... 52 65
Changes in operating assets and liabilities:
Trade receivables.................................................... (42,627) (79,605)
Other receivables.................................................... (10,082) 4,711
Inventories.......................................................... (37,562) (26,140)
Prepaids............................................................. 2,248 (3,797)
Other Assets......................................................... (6,950) 2,542
Accounts payable..................................................... 4,692 55,504
Accrued expenses..................................................... (13,500) (20,153)
Other assets and liabilities......................................... (1,878) (3,646)
---------- ----------
Net cash used in operating activities........................... (11,973) (19,829)
---------- ----------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment......................... 2,779 472
Purchases of property, plant and equipment.................................. (89,660) (73,622)
Proceeds from disposal of assets held for sale.............................. 35,335 -
Payments for businesses purchased........................................... (90,029) -
---------- ----------
Net cash used in investing activities........................... (141,575) (73,150)
---------- ----------
Cash flows from financing activities:
Increase (decrease) in checks not yet presented for payment................. (6,905) 599
Borrowings on revolving credit loans........................................ 369,100 346,098
Repayments of revolving credit loans........................................ (291,500) (233,928)
Proceeds from the issuance of other long-term debt.......................... 100,000 -
Retirement of long-term debt................................................ (13,205) (13,657)
Payments of debt issuance costs............................................. (1,617) (56)
Dividends paid (4,063) (4,011)
Proceeds from exercise of stock options..................................... 2,229 43
---------- ----------
Net cash provided by financing activities....................... 154,039 95,087
---------- ----------
Net change in cash and cash equivalents......................................... 491 2,108
Cash and cash equivalents at beginning of period................................ 4,604 5,561
---------- ----------
Cash and cash equivalents at end of period...................................... $ 5,095 $ 7,669
========== ==========
Supplemental disclosures of cash flow information: Cash paid (received) during
the period for:
Interest.................................................................. $ 47,835 $ 47,718
========== ==========
Income taxes $ (4,597) $ 812
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN THOUSANDS)
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Pillowtex Corporation, which is referred to in this report as "Parent,"
and its subsidiaries, which are collectively with Parent, referred to
in this report as 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. Results of operations for interim
periods may not be indicative of future results. The unaudited
consolidated financial statements should be read in conjunction with
the audited consolidated financial statements included in the Company's
annual report on Form 10-K, as filed with the Securities and Exchange
Commission on March 30, 1999 for the fiscal year ended January 2, 1999.
The consolidated financial statements include the results of The
Leshner Corporation ("Leshner") from its date of acquisition, July 28,
1998. Certain reclassifications have been made to conform prior year
financial statements to the current period classifications.
The Company is organized by functional responsibilities and operates as
a single segment.
(2) COMPREHENSIVE INCOME
Comprehensive income consists of net earnings (loss) and foreign
currency translation adjustments and aggregates $14.4 million and $26.8
million for the three and nine month periods ended October 3, 1998,
respectively. For the three and nine month periods ended October 2,
1999 comprehensive income (loss) aggregates $(10.7) million and $1.5
million, respectively.
(3) INVENTORIES
Inventories consisted of the following at January 2, 1999 and October
2, 1999:
<TABLE>
<CAPTION>
January 2 October 2
1998 1999
------------ ------------
<S> <C> <C>
Finished goods $ 218,439 $ 227,878
Work-in-process 134,428 150,714
Raw materials 58,306 55,935
Supplies 23,108 26,297
------------ ------------
$ 434,281 $ 460,824
============ ============
</TABLE>
(4) PROVISION FOR INVENTORY AND OTHER IMPAIRMENTS
During the third quarter of 1999, the Company recorded a $4.9 million
pre-tax non-cash charge to reduce certain blanket inventory to net
realizable value. The Company also recorded a $2.0 million non-cash
charge to adjust the carrying value of the Opelika facility, which was
closed in the first quarter of 1999, to an estimated fair market value.
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES IN THOUSANDS)
(UNAUDITED)
(5) EARNINGS PER SHARE
The following table reconciles the numerators and denominators of basic
and diluted earnings (loss) per share for the three and nine month
periods ended October 3, 1998 and October 2, 1999. The potentially
dilutive effects of stock options, convertible notes and convertible
preferred stock were excluded from the computation of diluted earnings
per share for the periods ended October 2, 1999 because inclusion would
have been antidilutive. Options to purchase 466,000 shares of common
stock at prices ranging from $33.50 to $46.50 were outstanding during
the three and nine month periods ending October 3, 1998 and were not
included in the computation of diluted earnings per share because their
inclusion would have been antidilutive.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 3, 1998 October 3, 1998
----------------------- ---------------------
Earnings Shares Earnings Shares
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Basic - earnings available for common shareholders $ 14,482 14,122 $ 26,181 14,068
Effect of dilutive securities:
Stock options - 155 - 232
Convertible debentures 256 633 1,106 663
Convertible preferred stock 540 2,709 1,567 2,709
---------- ------ ---------- ------
Diluted - earnings available for common shareholders $ 15,278 17,619 $ 28,854 17,672
========== ====== ========== ======
<CAPTION>
Three Months Ended Nine Months Ended
October 2, 1999 October 2, 1999
----------------------- ---------------------
Earnings Shares Earnings Shares
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Basic - earnings (loss) available for common
shareholders $ (20,605) 14,184 $ (9,654) 14,173
Effect of dilutive securities:
Stock options - - - -
Convertible debentures - - - -
Convertible preferred stock - - - -
---------- ------ ---------- ------
Diluted - earnings available for common shareholders $ (20,605) 14,184 $ (9,654) 14,173
========== ====== ========== ======
</TABLE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
January 2, October 2,
1999 1999
----------- -----------
<S> <C> <C>
Credit Facilities:
Revolving credit facility $ 182,800 $ 282,770
Tranche A term loan 125,000 121,250
Tranche B term loan 223,750 222,062
9% Senior subordinated notes 155,000 185,000
10% Senior subordinated notes 155,000 125,000
6% Convertible debentures (net of
unamortized discount of $14.5 million). 88,594 85,649
Industrial revenue bonds 17,218 17,949
Other Notes 9,552 5,496
----------- -----------
956,914 1,045,176
Less:
Long-term debt currently
being renegotiated - 626,082
Current portion of long-term debt 12,421 19,512
----------- -----------
$ 944,493 $ 399,582
=========== ===========
</TABLE>
In December 1997, in connection with the Fieldcrest Cannon acquisition, the
Company entered into new senior Secured revolving credit and term loan
facilities (the "Facilities") with a group of financial and institutional
investors (the "Lending Group") for which Bank of America acts as the agent.
The Facilities consisted of a $350.0 million revolving credit facility (the
"Revolver") and a $250.0 million term loan facility (the "Term Loan"). The
Term Loan consisted of a $125.0 million Tranche A Term Loan (the "Tranche A
Term Loan") and a $125.0 million Tranche B Term Loan (the "Tranche B Term
Loan"). Effective July 28, 1998, the Company amended the Facilities by
increasing the Tranche B Term Loan to $225.0 million. The increase occurred
in conjunction with the acquisition of Leshner, allowing the Company to fund
the transaction and reduce borrowings under the Revolver. The Revolver and
the Tranche A Term Loan expire December 31, 2003, and the Tranche B Term Loan
expires December 31, 2004. The Revolver includes $55.0 million of
availability for letters of credit. At October 2, 1999, $36.7 million of
letters of credit were outstanding. Subsequent to the end of the third fiscal
period, the Revolver was amended to permit the Company to use for working
capital purposes a $30.5 million portion of the Revolver previously held as a
contingency reserve, thereby increasing the availability under that facility.
Amounts outstanding under the Revolver and the Tranche A Term Loan bear
interest at a rate based upon the London Interbank Offered Rate plus 3.00%.
The Tranche B Term Loan bears interest on a similar basis to the Tranche A
Term Loan, plus an additional margin of 0.50%. These rates are subject to
increase or decrease based upon the Company's ratio of funded debt to
earnings before interest, taxes, depreciation and amortization ("EBITDA"), as
measured on a trailing 12 month basis, at the end of each fiscal quarter. The
weighted average annual interest rate on outstanding borrowings under the
various senior credit facilities during the first three quarters of 1999 was
7.3% and the effective rate at October 2, 1999 was 7.5%.
The Facilities contain a number of financial affirmative and negative covenants
which, among other things, require maintenance
<PAGE>
of a funded debt to EBITDA ratio and a fixed charge coverage ratio, and
require the Company to maintain a minimum tangible net worth. Other covenants
restrict, among other things, the Company's ability to incur additional debt,
grant liens, engage in transactions with affiliates, make loans, advances and
investments, pay dividends and other distributions to shareholders, dispose
of assets, effect mergers, consolidations and dissolutions, and make certain
changes in its business.
On October 2, 1999, the Company was not in compliance with certain financial
covenants under the Facilities, as amended. The Company has obtained a waiver of
such non-compliance through December 7, 1999. The Company is currently in
discussions with the Lending Group to obtain a permanent waiver of such
non-compliance and to amend the financial covenants contained in the Facilities.
However, no assurance can be given that the Lending Group will grant a permanent
waiver or agree to a further extension of the temporary waiver or that the
Company will reach agreement with respect to any such amendment by the
expiration of the temporary waiver, or as to the terms of any such waiver or
amendment.
In the event that the Lending Group does not grant a permanent waiver or
further extend the existing waiver, there would exist an event of default
under the Facilities, and, as a result, the Lending Group would not be
obligated to make additional advances under the Revolver. Additionally, the
Lending Group would be entitled to declare all principal of and interest on
advances under the Facilities immediately due and payable and would have the
right to block payments on substantially all other long-term indebtednes of
the Company. Also, cross-defaults may occur under the instruments governing
substantially all of the Company's other long-term indebtedness.
As a result of the above circumstances, the Company has classified all of the
debt affected by the non-compliance and related waiver as current. At October
2, 1999, the long-term debt payable within one year was $19.5 million and the
debt which has been classified as current due to the term of the temporary
waiver totaled $626.1 million. If the Company obtains suitable amendments of
the financial covenants in the Facilities, then that portion of the debt due
after one year from the Company's next reported balance sheet date would be
reclassified as long-term on the Company's next reported financial statements.
As permitted under the terms of the Facilities, in May 1999, the Company entered
into a $20.0 million senior unsecured revolving credit facility in order to
obtain additional working capital availability. On July 27, 1999, the senior
unsecured facility was amended to increase the amount of funds available to
$35.0 million and to extend the original maturity date.
Availability under this bank line of credit was $22.8 million at October 2,
1999. On November 15, 1999, the senior unsecured facility was again amended to
further extend the maturity date to December 7, 1999. The senior unsecured
facility is guaranteed on a senior basis by the Company's domestic subsidiaries.
The Company is required to pay interest on any amounts borrowed under the senior
unsecured facility at a rate which is based upon the London Interbank Offered
Rate plus 4.0% or the prime rate plus 2.5%, at the Company's option. The senior
unsecured facility matures upon termination by the Company at any time or
otherwise at the earliest of: a) any increase in the commitment under the
Facilities, the issuance of any capital stock by the Company or its domestic
subsidiaries, or other specified events; or b) December 7, 1999. The Company is
currently in discussions with the lender under the unsecured revolving credit
facility to further extend the maturity date; however, no assurance can be given
that the Company and such Lender will reach agreement with respect to any such
amendment, or as to the terms of any such amendment.
As a result of the Fieldcrest Cannon acquisition, the $104.2 million
aggregate principal amount of 6% Convertible Subordinated Debentures due 2012
of Fieldcrest Cannon (the "Fieldcrest Debentures") outstanding at October 2,
1999, are convertible, at the option of the holder, into a combination of
cash and the Company's common stock. At October 2, 1999, if all outstanding
Fieldcrest Debentures were converted, the resulting cash component to be paid
to the debtholders would have been approximately $63.6 million. The Company
recently notified the holders of the Fieldcrest Debentures that, given the
current status of the Company's discussions with the Lending Group and
certain other matters, it is not practicable or prudent for payments to be made
in respect of the Fieldcrest Debentures at this time and have advised such
holders that they will be offered the opportunity to rescind their surrender
for conversion and regain possession of their Fieldcrest Debentures.
Based upon current and anticipated levels of operations, and aggressive
efforts to reduce inventories and accounts receivable, the Company
anticipates that its cash flow from operations, together with amounts
available under the Revolver and the unsecured revolving credit facility,
will be adequate to meet its anticipated cash requirements in the foreseeable
future if it is able to achieve appropriate waivers of amendments of its
senior credit facilities. In addition to cash requirements for operations,
cash requirements may increase to meet the potential payment obligations
under the Fieldcrest Debentures. If a substantial amount of the Fieldcrest
Debentures were presented to the Company, the Company may not have adequate
funds to meet this payment obligation. In the event that such amounts are not
sufficient for future cash requirements, the Company may be required to
reduce planned capital expenditures or seek additional financing. The Company
can provide no assurances that financing would be available or, if available,
offered on terms acceptable to the Company.
(7) REDEEMABLE CONVERTIBLE PREFERRED STOCK
Under the terms of the Company's Series A Redeemable Convertible Preferred Stock
("Series A Preferred Stock"), beginning January 1, 2000, the rate at which
dividends will accrue may increase to 7% or 10% depending on the Company's
earnings per share for the 1999 fiscal year. The Company will also be required
to pay a one-time cumulative dividend in Series A Preferred Stock, from the
issue date through December 31, 1999, equal to the difference between the
dividends calculated at the 3% rate and dividends calculated at either the 7% or
10% rate if the fiscal year 1999 earnings per share are less than the
pre-determined targets. The Company has determined that it is probable that
earnings per share for the 1999 fiscal year will not meet the lowest
pre-determined target and that the dividend rate for the Series A Preferred
Stock will increase to 10% beginning January 1, 2000. Accordingly, the Company
recorded a one-time cumulative stock dividend of 8,980 Series A Preferred Shares
(or $9.0 million) for the quarter ended October 2, 1999 to effectively adjust
the dividend rate on the Series A Preferred Stock from the date of issuance
through the end of the third quarter. The Company expects to record incremental
preferred dividends in the fourth
<PAGE>
quarter of 1999 of 1,145 preferred shares (or $1.1 million) on account of the
increase in the preferred dividend rate to 10%. Regularly scheduled quarterly
dividends on the Series A Preferred Stock may be paid in cash or in kind at
the Company's option through December 19, 2002, and thereafter may be paid
only in cash. The Company intends to pay the quarterly dividend due on
December 31, 1999 in additional Series A Preferred Stock.
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following table presents condensed consolidating financial
information for the Company, segregating the Parent and guarantor
subsidiaries from non-guarantor subsidiaries (in thousands). The
guarantor subsidiaries are wholly owned subsidiaries of the Parent and
the 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
provide relevant material additional information.
<TABLE>
<CAPTION>
January 2, 1999
----------------------------------------------------------------------------
Non-
Guarantor Guarantor
Financial Position Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------------ ------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
- -------
Trade receivables $ - $ 240,909 $ 5,439 $ - $ 246,348
Receivable from affiliates 746,839 - - (746,839) -
Inventories - 424,563 9,718 - 434,281
Other current assets - 25,946 582 - 26,528
------------- ------------- ------------ ------------ ------------
Total current assets 746,839 691,418 15,739 (746,839) 707,157
Property, plant and equipment, net 565 627,114 1,526 - 629,205
Intangible, net 19,102 268,478 2,249 - 289,829
Other assets 382,558 17,898 - (372,493) 27,963
------------- ------------- ------------ ------------ ------------
Total assets $ 1,149,064 $ 1,604,908 $ 19,514 $ (1,119,332) $ 1,654,154
============= ============= ============ ============ ============
Liabilities and Shareholders' Equity:
- -------------------------------------
Accounts payable and accrued
liabilities $ 6,425 $ 212,823 $ 4,577 $ - $ 223,825
Payables to affiliates - 744,000 2,839 (746,839) -
Other current liabilities 8,318 27,002 79 - 35,399
------------- ------------- ------------ ------------ ------------
Total current liabilities 14,743 983,825 7,495 (746,839) 259,224
Noncurrent liabilities 833,331 260,082 527 - 1,093,940
------------- ------------- ------------ ------------ ------------
Total liabilities 848,074 1,243,907 8,022 (746,839) 1,353,164
Redeemable convertible preferred
Stock 63,057 - - - 63,057
Shareholders' equity 237,933 361,001 11,492 (372,493) 237,933
------------- ------------- ------------ ------------ ------------
Total liabilities and
shareholders' equity $ 1,149,064 $ 1,604,908 $ 19,514 $ (1,119,332) $ 1,654,154
============= ============= ============ ============ ============
</TABLE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
October 2, 1999
-----------------------------------------------------------------------------------
Non-
Guarantor Guarantor
Financial Position Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------------ ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets:
- -------
Trade receivables $ - $ 319,361 $ 5,672 $ - $ 325,033
Receivable from affiliates 751,474 - - (751,474) -
Inventories - 445,803 15,021 - 460,824
Other current assets - 36,690 (69) - 36,621
----------- ----------- ----------- ------------- -----------
Total current assets 751,474 794,860 20,624 (751,474) 822,478
Property, plant and equipment, net 494 644,684 1,465 - 646,643
Intangible, net 16,805 271,968 2,283 - 291,056
Other assets 492,385 18,439 - (484,222) 26,602
----------- ----------- ----------- ------------- -----------
Total assets $ 1,261,158 $ 1,736,945 $ 24,372 $ (1,235,696) $ 1,786,779
=========== =========== =========== ============= ===========
Liabilities and Shareholders' Equity:
- -------------------------------------
Accounts payable and accrued
liabilities $ 13,895 $ 247,408 $ 3,914 $ - $ 265,052
Payables to affiliates - 744,000 7,474 (751,474) -
Other current liabilities 642,348 40,859 82 - 683,289
----------- ----------- ----------- ------------- -----------
Total current liabilities 656,243 1,032,102 11,470 (751,474) 948,341
Noncurrent liabilities 306,104 232,980 543 - 539,627
----------- ----------- ----------- ------------- -----------
Total liabilities 962,347 1,265,082 12,013 (751,474) 1,487,968
Redeemable convertible preferred
Stock 72,199 - - - 72,199
Shareholders' equity 226,612 471,863 12,359 (484,222) 226,612
----------- ----------- ----------- ------------- -----------
Total liabilities and
shareholders' equity $ 1,261,158 $ 1,736,945 $ 24,372 $ (1,235,696) $ 1,786,779
=========== =========== =========== ============= ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
Three Months Ended October 3, 1998
-----------------------------------------------------------------------------------
Non-
Guarantor Guarantor
Results of Operations Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------------------- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 414,387 $ 6,802 $ (1,390) $ 419,799
Cost of goods sold - 337,189 6,263 (1,390) 342,062
----------- ----------- ----------- ----------- -----------
Gross profit (loss) - 77,198 539 - 77,737
Selling, general and administrative (1,422) 35,232 361 - 34,171
----------- ----------- ----------- ----------- -----------
Earnings (loss) from operations 1,422 41,966 178 - 43,566
Equity in earnings of subsidiaries 14,216 - - (14,216) -
Interest expense 182 18,945 (5) - 19,122
----------- ----------- ----------- ----------- -----------
Earnings (loss) before income taxes 15,456 23,021 183 (14,216) 24,444
Income taxes 434 9,000 (12) - 9,422
----------- ----------- ----------- ----------- -----------
Net earnings (loss) 15,022 14,021 195 (14,216) 15,022
Preferred dividends 540 - - - 540
----------- ----------- ----------- ----------- -----------
Earnings (loss) available for
Common shareholders $ 14,482 $ 14,021 $ 195 $ (14,216) $ 14,482
=========== =========== =========== =========== ===========
<CAPTION>
Three Months Ended October 2, 1999
-----------------------------------------------------------------------------------
Non-
Guarantor Guarantor
Results of Operations Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------------------- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 410,720 $ 7,262 $ (2,176) $ 415,806
Cost of goods sold - 366,497 7,234 (2,176) 371,555
Provision for inventory write-down - 4,900 4,900
----------- ----------- ------------ ------------ ------------
Gross profit - 39,323 28 - 39,351
Selling, general and administrative (1,817) 34,801 236 - 33,220
Provision for asset impairment - 2,000 - - 2,000
----------- ----------- ------------ ------------ ------------
Earnings (loss) from operations 1,817 2,522 (208) - 4,131
Equity in earnings of subsidiaries (12,054) - - 12,054 -
Interest expense (income) 316 20,950 (3) - 21,263
----------- ----------- ------------ ------------ ------------
Earnings (loss) before income taxes (10,553) (18,428) (205) 12,054 (17,132)
Income taxes 526 (6,537) (42) - (6,053)
----------- ----------- ------------ ------------ ------------
Net earnings (loss) (11,079) (11,891) (163) 12,054 (11,079)
Preferred dividends 9,526 - - - 9,526
----------- ----------- ------------ ------------ ------------
Earnings (loss) available for
common shareholders $ (20,605) $ (11,891) $ (163) $ 12,054 $ (20,605)
=========== =========== ============ ============ ============
</TABLE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended October 3, 1998
-----------------------------------------------------------------------------------
Non-
Guarantor Guarantor
Results of Operations Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------------------- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 1,102,979 $ 18,087 $ (2,846) $ 1,118,220
Cost of goods sold - 907,542 17,531 (2,846) 922,227
----------- ------------ ------------ ------------ ------------
Gross profit - 195,437 556 - 195,993
Selling, general and administrative (3,294) 98,230 1,119 - 96,055
Restructuring charges - 1,539 - - 1,539
----------- ------------ ------------ ------------ ------------
Earnings (loss) from operations 3,294 95,668 (563) - 98,399
Equity in earnings of subsidiaries 25,759 - - (25,759) -
Interest expense 234 52,694 (8) - 52,920
----------- ------------ ------------ ------------ ------------
Earnings (loss) before income taxes 28,819 42,974 (555) (25,759) 45,479
Income taxes 1,071 16,778 (118) - 17,731
----------- ------------ ------------ ------------ ------------
Net earnings (loss) 27,748 26,196 (437) (25,759) 27,748
Preferred dividends 1,567 - - - 1,567
----------- ------------ ------------ ------------ ------------
Earnings (loss) available for
Common shareholders $ 26,181 $ 26,196 $ (437) $ (25,759) $ 26,181
=========== ============ ============ ============ ============
<CAPTION>
Nine Months Ended October 2, 1999
-----------------------------------------------------------------------------------
Non-
Guarantor Guarantor
Results of Operations Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------------------- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 1,130,107 $ 20,973 $ (4,299) $ 1,146,781
Cost of goods sold - 969,066 19,990 (4,299) 984,757
Provision for inventory write-down - 4,900 - - 4,900
----------- ------------ ------------ ------------ ------------
Gross profit - 156,141 983 - 157,124
Selling, general and administrative (3,904) 95,726 636 - 92,457
Provision for asset impairment - 2,000 - - 2,000
----------- ------------ ------------ ------------ ------------
Earnings from operations 3,904 58,415 347 - 62,667
Equity in earnings (loss) of
subsidiaries (1,852) - - 1,852 -
Interest expense (income) (403) 60,887 (20) - 60,464
----------- ------------ ------------ ------------ ------------
Earnings (loss) before income taxes 2,455 (2,472) 367 1,852 2,203
Income taxes 1,508 (262) 9 - 1,255
----------- ------------ ------------ ------------ ------------
Net earnings (loss) 947 (2,210) 358 1,852 948
Preferred dividends 10,601 - - - 10,601
----------- ------------ ------------ ------------ ------------
Earnings (loss) available for
common shareholders $ (9,654) $ (2,210) $ 358 $ 1,852 $ (9,654)
=========== ============ ============ ============ ============
</TABLE>
<PAGE>
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended October 3, 1998
------------------------------------------------------------------------------------
Non-
Guarantor Guarantor
Cash Flows Parent Subsidiaries Subsidiaries Eliminations Consolidated
---------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
Operating activities $ 20,371 $ (33,730) $ 1,386 $ - $ (11,973)
Cash provided by (used in)
Investing activities (112,767) (28,766) (42) - (141,575)
Cash provided by (used in)
Financing activities 92,396 62,993 (1,350) 154,039
----------- ------------ ------------ ------------ ------------
Net change in cash and cash
Equivalents - 497 (6) - 491
Cash and cash equivalents at
Beginning of year - 4,590 14 - 4,604
----------- ------------ ------------ ------------ ------------
Cash and cash equivalents at
End of period $ - $ 5,087 $ 8 $ - $ 5,095
=========== ============ ============ ============ ============
<CAPTION>
Nine Months Ended October 2, 1999
------------------------------------------------------------------------------------
Non-
Guarantor Guarantor
Cash Flows Parent Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
Operating activities $ 10,090 $ (26,038) $ (3,881) $ - $ (19,829)
----------- ------------ ------------ ------------ ------------
Cash provided by (used in)
Investing activities 71 (73,149) (72) - (73,150)
Cash provided by (used in)
Financing activities (10,161) 101,435 3,813 - 95,087
----------- ------------ ------------ ------------ ------------
Net change in cash and cash
Equivalents - 2,248 (140) - 2,108
Cash and cash equivalents at
Beginning of year - 5,554 7 - 5,561
----------- ------------ ------------ ------------ ------------
Cash and cash equivalents at
End of period $ - $ 7,802 $ (133) $ - $ 7,669
=========== ============ ============ ============ ============
</TABLE>
<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 January 2, 1999.
RESULTS OF OPERATIONS
NET SALES. Net sales were $415.8 million for the three months ended October 2,
1999, representing a decrease of $4.0 million, or 1.0%, as compared to $419.8
million for the three months ended October 3, 1998. Net sales for the nine
months ended October 2, 1999 increased by $28.6 million, or 2.6%, to $1,146.8
million from $1,118.2 million for the same period of the prior year. The
increase in net sales due to the acquisition of Leshner on July 28, 1998 is
approximately $10.0 million and $56.0 million for the three and nine months
ended October 2, 1999, respectively.
GROSS PROFIT. Gross profit margins decreased to 9.5% for the three months
ended October 2, 1999 from 18.5% for the three months ended October 3, 1998.
Gross profit margin for the nine months ended October 2, 1999 decreased to
13.7% from 17.5% for the same period in the prior year. The declines in gross
profit margin are primarily due to higher costs, unabsorbed overhead expenses
related to the installation of new computer systems and equipment and a
charge of $4.9 million for inventory write-down. The earnings for the quarter
and year-to-date were negatively impacted by higher than planned costs
associated with certain marketing initiatives and by lower margin sales due
to a combination of higher costs, primarily in unabsorbed overhead, and to a
lower average selling price due to a change in sales mix pursuant to the
inventory reduction program.
The Company is critically reviewing all areas of its operations and taking
aggressive action to improve operating results. The Company has imposed
tighter control over sales and marketing programs which have adversely
affected profit margins in 1999, and will continue to focus on decreasing
inventory and accounts receivable and controlling operating costs
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). SG&A expenses decreased $1.0
million to $33.2 million for the three months ended October 2, 1999, compared to
$34.2 million for the three months ended October 3, 1998. As a percentage of net
sales, SG&A expenses decreased to 8.0% for the three months ended October 2,
1999 from 8.1% for the three months ended October 3, 1998. SG&A expenses
decreased by $3.6 million from $96.1 million, or 8.6% of net sales, for the nine
months ended October 3, 1998 to $92.5 million, or 8.1% of net sales, for the
same period this year.
PROVISION FOR ASSET IMPAIRMENTS. During the third quarter of 1999, the
Company recorded a pre-tax $2.0 million non-cash charge to adjust the
carrying value of the Opelika facility, which was closed in the first quarter
of 1999, to an estimated fair market value.
INTEREST EXPENSE. Interest expense increased $2.2 million to $21.3 million
for the three months ended October 2, 1999, compared to $19.1 million for the
three months ended October 3, 1998. Interest expense for the nine month
period ended October 2, 1999 increased $7.5 million to $60.5 million from
$53.0 million for the nine month period ended October 3, 1998. The increase
is primarily due to additional debt incurred in connection with the Leshner
acquisition, capital expenditures in connection with the Company's plant
upgrades, higher working capital requirements, and the payment of waiver and
amendment fees to the Company's senior lenders aggregating $2.0 million.
Average interest rates for the three month period ended October 2, 1999
declined to 8.1% from 8.4% for the period ended October 3, 1998. Average
interest rates for the nine month period ended October 2, 1999 also declined
to 8.0% from 8.4% for the same period last year.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In December 1997, in connection with the Fieldcrest Cannon acquisition, the
Company entered into new senior revolving credit and term loan facilities
(the "Facilities") with a group of financial and institutional investors (the
"Lending Group") for which Bank of America acts as the agent. The Facilities
consisted of a $350.0 million revolving credit facility (the "Revolver") and
a $250.0 million term loan facility (the "Term Loan"). The Term Loan
consisted of a $125.0 million Tranche A Term Loan (the "Tranche A Term Loan")
and a $125.0 million Tranche B Term Loan (the "Tranche B Term Loan").
Effective July 28, 1998, the Company amended the Facilities by increasing the
Tranche B Term Loan to $225.0 million. The increase occurred in conjunction
with the acquisition of Leshner, allowing the Company to fund the transaction
and reduce borrowings under the Revolver. The Revolver and the Tranche A Term
Loan expire December 31, 2003, and the Tranche B Term Loan expires December
31, 2004. The Revolver includes $55.0 million of availability for letters of
credit. At October 2, 1999, $36.7 million of letters of credit were
outstanding. Subsequent to the end of the third fiscal period, the Revolver
was amended to permit the Company to use for general working capital
purposes, a $30.5 million portion of the Revolver previously held as a
contingency reserve thereby increasing the availability under that facility.
Amounts outstanding under the Revolver and the Tranche A Term Loan bear
interest at a rate based upon the London Interbank Offered Rate plus 3.00%.
The Tranche B Term Loan bears interest on a similar basis to the Tranche A
Term Loan, plus an additional margin of .50%. These rates are subject to
increase or decrease based upon the Company's ratios of funded debt to
earnings before interest, taxes, depreciation and amortization ("EBITDA") at
the end of each fiscal quarter. The weighted average annual interest rate on
outstanding borrowings under the various senior credit facilities during the
first three quarters of 1999 was 7.3% and the effective rate at October 2,
1999 was 7.5%.
The Facilities contain a number of financial affirmative and negative
covenants which, among other things, require maintenance of a funded debt to
EBITDA ratio and a fixed charge coverage ratio, and require the Company to
maintain a minimum tangible net worth. Other covenants restrict, among other
things, the Company's ability to incur additional debt, grant liens, engage
in transactions with affiliates, make loans, advances and investments, pay
dividends and other distributions to shareholders, dispose of assets, effect
mergers, consolidations and dissolutions, and make certain changes in its
business.
On October 2, 1999, the Company was not in compliance with certain financial
covenants under the Facilities, as amended. The Company has obtained a waiver
of such non-compliance through December 7, 1999. The Company is currently in
discussions with the Lending Group to obtain a permanent waiver of such
non-compliance and to amend the financial covenants contained in the
Facilities. However, no assurance can be given that the Lending Group will
grant a permanent waiver or agree to a further extension of the temporary
waiver or that the Company will reach agreement with respect to any such
amendment by the expiration of the existing waiver, or as to the terms of any
such waiver or amendment.
As a result of the above circumstances, the Company has classified all of the
debt affected by the non-compliance and related waiver as current. At October
2, 1999, the long-term debt payable within one year was $19.5 million and the
debt which has been classified as current due to the term of the temporary
waiver totaled $626.1 million. If the Company obtains suitable amendments of
the financial covenants in the Facilities, then that portion of the debt due
after one year from the Company's next reported balance sheet date would be
reclassified as long-term on the Company's next reported financial statements.
As permitted under the terms of the Facilities, in May 1999, the Company
entered into a $20.0 million senior unsecured revolving credit facility in
order to obtain additional working capital availability. On July 27, 1999,
the senior unsecured facility was amended to increase the amount of funds
available to $35.0 million and to extend the original maturity date.
Availability under this bank line of credit was $22.8 million at October 2,
1999. On November 15, 1999, the senior unsecured facility was again amended
to further extend the maturity date. The senior unsecured facility is
guaranteed on a senior basis by the Company's domestic subsidiaries. The
Company is required to pay interest on any amounts borrowed under the senior
unsecured facility at a rate which is based upon the London Interbank Offered
Rate plus 4.0% or the prime rate plus 2.5%, at the Company's option. The
senior unsecured facility matures upon termination by the Company at any time
or otherwise at the earliest of: a) any increase in the commitment under the
Facilities, the issuance of any capital stock by the Company or its domestic
subsidiaries, or other specified events; or b) December 7, 1999. The Company
is currently in discussions with the lender under the unsecured
<PAGE>
revolving credit facility to further extend the maturity date; however, no
assurance can be given that the Company and such Lender will reach agreement
with respect to any such amendment, or as to the terms of any such amendment.
In the event that the Lending Group does not grant a permanent waiver or
further extend the existing waiver, there would exist an event of default
under the Facilities, and, as a result, the Lending Group would not be
obligated to make additional advances under the Revolver, and would be
entitled to declare all principal of and interest on advances under the
Facilities immediately due and payable and would have the right to block
payments on substantially all other long-term indebtednes of the Company. In
addition, there might also occur cross-defaults under the instruments
governing substantially all of the Company's other long-term indebtedness.
The debt outstanding under the Revolver as of October 2, 1999 was $23.2
million higher than at July 3, 1999. This increase was due primarily to the
net loss for the period of $11.1 million, and an increase in accounts
receivable of $58.4 million during the third fiscal quarter. The earnings for
the quarter were negatively impacted by higher than planned costs associated
with certain marketing initiatives and by lower margin sales due to a
combination of higher costs, primarily in unabsorbed overhead, and to a lower
average selling price due to a change in sales mix pursuant to the inventory
reduction program. Consolidated inventory was reduced by $43.5 million before
a charge of $4.9 million in the third fiscal quarter. The increase in
accounts receivable was due, in part, to a seasonal increase in sales, but
also due to a substantial increase in the number of day's sales in accounts
receivable, which is attributable to slower collections. As of October 2,
1999, the Company's total debt had increased approximately $89.7 million from
the period ending October 3, 1998 due primarily to higher inventory levels in
order to assure product supply during the production and warehousing system
implementations and to accelerated capital expenditure.projects. The Company
expects to reduce borrowings for working capital for the remainder of 1999
primarily by reducing inventory and accounts receivable; however, the Company
can give no assurance that it will be able to reduce inventory or receivables
as planned.
As a result of the Fieldcrest Cannon acquisition, the $100.0 million
aggregate principal amount of 6% Convertible Subordinated Debentures due 2012
of Fieldcrest Cannon (the "Fieldcrest Debentures") outstanding at October 2,
1999, are convertible, at the option of the holder, into a combination of
cash and the Company's common stock. At October 2, 1999, if all outstanding
Fieldcrest Debentures were converted, the resulting cash component to be paid
to the debtholders would have been approximately $61.0 million. The Company
recently notified the holders of the Fieldcrest Debentures that, given the
current status of the Company's discussions with the Lending Group and
certain other matters, it is not practicable or prudent for payments to be
made in respect of the Fieldcrest Debentures at this time and have advised
such holders that they will be offered the opportunity to rescind their
surrender for conversion and regain possession of their Fieldcrest Debentures.
Based upon current and anticipated levels of operations, and aggressive
efforts to reduce inventories and accounts receivable, the Company
anticipates that its cash flow from operations, together with amounts
available under the Revolver and the unsecured revolving credit facility,
will be adequate to meet its anticipated cash requirements in the foreseeable
future if it is able to achieve appropriate waivers of amendments of its
senior credit facilities. In addition to cash requirements for operations,
cash requirements may increase to meet the potential payment obligations
under the Fieldcrest Debentures. If a substantial amount of the Fieldcrest
Debentures were presented to the Company, the Company may not have adequate
funds to meet this payment obligation. In the event that such amounts are not
sufficient for future cash requirements, the Company may be required to
reduce planned capital expenditures or seek additional financing. The Company
can provide no assurances that financing would be available or, if available,
offered on terms acceptable to the Company.
On October 2, 1999, the Company's working capital position was adversely
affected by the reclassification of long-term debt required under EITF 86-30
(See Note 6). This reclassification resulted in the Company reporting a
working capital deficit of $125.9 million and a working capital ratio of 0.87
to 1 compared to working capital of $447.9 million and a working capital
ratio of 2.73 to 1 on July 3, 1999. This decrease in working capital is
mainly attributable to the previously mentioned re-classification of all its
debt as current (See Note 6). Net cash provided by operating activities has
decreased $7.8 million from a use of $12.0 million during the first nine
months of Fiscal 1998 to a use of ($19.8) million during the first nine
months of Fiscal 1999.
Under the terms of the Company's Series A Redeemable Convertible Preferred
Stock ("Series A Preferred Stock"), beginning January 1, 2000, the rate at
which dividends will accrue may increase to 7% or 10% depending on the
Company's earnings per share for the 1999 fiscal year. The Company will also
be required to pay a one-time cumulative dividend in Series A Preferred
<PAGE>
Stock, from the issue date through December 31, 1999, equal to the difference
between the dividends calculated at the 3% rate and dividends calculated at
either the 7% or 10% rate if the fiscal year 1999 earnings per share are less
than the pre-determined targets. The Company has determined that it is
probable that earnings per share for the 1999 fiscal year will not meet the
lowest pre-determined target and that the dividend rate for the Series A
Preferred Stock will increase to 10% beginning January 1, 2000. Accordingly,
the Company recorded a one-time cumulative stock dividend of 8,980 Series A
Preferred Shares (or $9.0 million) for the quarter ended October 2, 1999 to
effectively adjust the dividend rate on the Series A Preferred Stock from the
date of issuance through the end of the third quarter. The Company expects to
record incremental preferred dividends in the fourth quarter of 1999 of 1,145
preferred shares (or $1.1 million) on account of the increase in the
preferred dividend rate to 10%. Regularly scheduled quarterly dividends on
the Series A Preferred Stock may be paid in cash or in kind at the Company's
option through December 19, 2002, and thereafter may be paid only in cash.
The Company intends to pay the quarterly dividend due on December 31, 1999 in
additional Series A Preferred Stock.
NEW ACCOUNTING STANDARDS
In June 1998, SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, was issued. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. As
amended by SFAS No. 137, the provisions of SFAS No. 133 are effective for
financial statements for fiscal years beginning after June 15, 2000, although
early adoption is allowed. The Company has not determined the financial
impact of adopting this SFAS and has not determined if it will adopt its
provisions prior to its effective date.
YEAR 2000 CONSIDERATIONS
GENERAL
Many existing computer programs use only two digits to identify a year in the
date field. These programs, if not corrected, could fail or create incorrect
results by or at the Year 2000. This could disrupt the Company's operations
and those of its suppliers and customers. This "Year 2000" issue is believed
to affect virtually all companies and organizations, including the Company.
PILLOWTEX'S READINESS
SYSTEMS REPLACEMENT PROJECT. In 1995, the Company began a project to improve
its access to business information through common integrated computing and
reporting systems. In 1996, before the Company acquired Fieldcrest Cannon,
Fieldcrest Cannon had begun a similar project. Each of the Company and
Fieldcrest Cannon had decided to use systems using software applications
primarily developed by Oracle Corporation. These applications replace many of
the accounting, reporting, and manufacturing systems that are, or previously
had been, used at the Company and Fieldcrest Cannon. Also, the Company and
Fieldcrest Cannon have identified certain other payroll, manufacturing and
warehousing systems to be replaced with software applications from other
vendors. The Company believes that the software applications purchased for
these projects are Year 2000 compliant.
The Company's systems replacement project is expected to be completed toward
the end of 1999. The Oracle software development is complete. The financial
application was substantially completed in October 1998. The Company's
payroll conversion was completed during early 1999. The development and
implementation of the manufacturing and warehousing applications requires
unique customization to meet the specific needs of each plant. This process
has been completed at a substantial number of the Company's facilities and is
continuing at the remaining facilities into the fourth quarter of 1999.
YEAR 2000 PLAN. The Company has developed a specific plan to help ensure that
the Company is not negatively affected by Year 2000 problems. The plan is
divided into the following components:
(1) Information Technology Systems;
(2) Information Technology Infrastructure;
<PAGE>
(3) Process Control and Instrumentation; and
(4) Third party suppliers and customers.
Each component includes the following six general phases:
(1) inventory Year 2000 items;
(2) assign priorities to identified items;
(3) assess the impact of items determined not to be Year 2000
compliant;
(4) convert or replace material items that are determined not to
be Year 2000 compliant;
(5) test material items; and
(6) design and implement contingency and business continuation
plans for each location.
The Company hired a consultant in 1999 to review the Company's Year 2000 plan
and suggest improvements. The Company identified the most important issues as
the safety of individuals, safety of property and the environment, and the
Company's ability to manufacture and ship its products. Recommendations
communicated to the Company in the second quarter of 1999 have been
implemented where appropriate.
The inventory and priority assessment phases were completed with respect to
each component of the Year 2000 plan in May 1998. As further described below,
the remainder of the Year 2000 plan with respect to each component was
substantially completed during the third quarter of 1999. However, the
Company will continue to monitor, review, and perform testing in each phase
through the end of 1999.
INFORMATION TECHNOLOGY SYSTEMS. Information Technology Systems include mostly
applications software. The Company is remediating its applications software
mostly through its systems replacement project. Other non-compliant
applications software is being converted internally through custom
programming or will be replaced by the software supplier. Except for the
Company's pillow and pad operations, the conversion phase of Information
Technology Systems was completed during the third quarter of 1999. The
conversion phase of information technology Systems for the Company's pillow
and pad operations is expected to be completed during the fourth quarter of
1999. The testing of converted software is ongoing and will continue through
the end of 1999. Vendor software replacements and upgrades were completed
during the second and third quarters of 1999 for the majority of the plant
conversions. The testing of converted software will be conducted as the
software is replaced and will continue through the end of the year.
Contingency planning with respect to Information Technology Systems is
ongoing, but the high level planning was completed during the second quarter
of 1999. Detailed refinement of these plans will continue into the fourth
quarter, as other system conversions are completed.
INFORMATION TECHNOLOGY INFRASTRUCTURE. Information Technology Infrastructure
includes hardware and systems software other than applications software. The
Year 2000 plan for Information Technology Infrastructure is on schedule.
Substantially all of the changes to Information Technology Infrastructure are
complete, and the Company is now in the testing phase which will continue
through the end of the year. Contingency planning with respect to Information
Technology Infrastructure is ongoing. Development and enhancement will
continue through the end of the year.
PROCESS CONTROL AND INSTRUMENTATION. The Process Control and Instrumentation
component involves the hardware, software, and associated embedded computer
chips that are used in the operation of the Company's facilities. The Year
2000 plan with respect to this component is in place. A significant portion
of the Process Control and Instrumentation vendors have responded to
questionnaires indicating their equipment is Year 2000 compliant. Less than
5% of those vendors who have responded have reported non-compliance. The
non-compliant systems are prioritized and have been, or will be, remediated.
The Company is following up with those vendors who have not responded to the
questionnaires. A significant portion of the contingency planning with
respect to this component was completed during the third quarter of 1999.
<PAGE>
THIRD PARTY SUPPLIERS AND CUSTOMERS. The third party component of the Year
2000 plan involves identifying and prioritizing critical business partners at
the direct interface level and communicating with them about their plans and
progress in addressing the Year 2000 issue. Detailed evaluations of the most
important third parties are substantially completed. The Company is
developing contingency plans based upon these evaluations. Contingency
planning will continue with the Company's business partners throughout 1999.
The Company believes the development and implementation of this component of
the Year 2000 plan is on schedule.
COSTS TO ADDRESS THE BUSINESS SYSTEM REPLACEMENTS AND YEAR 2000
As of October 2, 1999, the Company's cumulative direct expenditures on the
systems replacement project were approximately $86.1 million. A portion of
these costs relate to expenditures made prior to the acquisition of
Fieldcrest Cannon. The Company estimates that direct expenditures will
approximate an additional $7.1 million to complete the systems replacement in
the fourth fiscal quarter of 1999. The installation of various manufacturing
components of the new Information Technology Systems required certain plant
shut-downs and generated substantial manufacturing inefficiencies resulting
in increased manufacturing costs, unabsorbed overhead costs and delayed,
missed, product shipments. These costs are difficult to quantify precisely
and are not included in the direct expenditures cited above. Expenses to
complete remediation are not expected to significantly impact the Company's
results of operations or financial position. The Company believes that it
will have sufficient operating cash flows for any remaining costs related to
the systems replacement project and the Year 2000 plan. The Company does not
expect that these costs will materially affect its liquidity or financial
condition; however, the Company can make no assurance that the actual costs
will not exceed those estimated above or that it will have available
liquidity to fund any such additional costs.
RISKS ASSOCIATED WITH THE COMPANY'S YEAR 2000 ISSUES
The Company's failure to resolve Year 2000 issues on or before December 31,
1999 could result in system failures or miscalculations causing disruption in
operations, including, among other things, a temporary inability to process
transactions, send invoices, send and/or receive e-mail and voice mail, or
engage in similar normal business activities. Additionally, failure of third
parties, upon whom the Company's business relies, to timely remediate their
Year 2000 issues could result in disruption of the Company's supply of
materials and parts, late, missed or unapplied payments, temporary
disruptions in order processing and other general problems related to the
Company's daily operations. While the Company believes the Year 2000 Plan
will adequately address the Company's internal Year 2000 issues, until the
Company receives responses from all significant business partners, the
overall risks associated with the Year 2000 issue remain difficult to
accurately assess and quantify. Therefore, the Company cannot be certain that
the Year 2000 issue will not have a material adverse effect on the Company
and its operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This filing contains certain forward-looking statements. Such statements are
based upon the beliefs and assumptions of, and on information available to,
the Company's management. Because such forward-looking statements are subject
to various risks and uncertainties, results may differ materially from those
expressed in or implied by such statements. Many of the factors that will
determine these results are beyond the Company's ability to control or
predict. Factors which could affect the Company's future results and could
cause results to differ materially from those expressed in or implied by such
forward-looking statements are discussed under the caption "Cautionary
Statement Regarding Forward-Looking Statements" in the Company's Annual
Report on Form 10-K for its fiscal year ended January 2, 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Third Amendement to Term Credit Agreement dated as of
May 5, 1999
10.2 Fourth Amendment to Term Credit Agreement dated as of
October 8, 1999
10.3 Fourth Amendment to Amended and Restated Credit Agreement
dated as of October 8, 1999
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
<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.
DATE: November 16, 1999 PILLOWTEX CORPORATION
(Registrant)
/s/ John C. Macaulay
----------------------------------
John C. Macaulay
Senior Vice President - Finance
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
TO BE REVISED
<TABLE>
<CAPTION>
Exhibit Method of Filing
------- -----------------------------------
<S> <C> <C>
10.1 Third Amendment to Term Credit Agreement dated as of May 5, 1999 Filed herewith electronically
10.2 Fourth Amendment to Term Credit Agreement dated as of October 8, 1999 Filed herewith electronically
10.3 Fourth Amendment to Amended and Restated Credit Agreement dated as of
October 8, 1999 Filed herewith electronically
27.1 Financial Data Schedule Filed herewith electronically
</TABLE>
<PAGE>
EXHIBIT 10.1
THIRD AMENDMENT TO
TERM CREDIT AGREEMENT
THIS THIRD AMENDMENT TO TERM CREDIT AGREEMENT (this "Third Amendment"),
dated as of May 5, 1999, is entered into among PILLOWTEX CORPORATION, a Texas
corporation (the "Borrower"), the institutions listed on the signature pages
hereof (collectively, the "Lenders"), and NATIONSBANK, N.A. (successor by merger
to NationsBank of Texas, N.A.), as Administrative Agent (in said capacity, the
"Administrative Agent").
BACKGROUND
A. The Borrower, the Lenders and the Administrative Agent are parties
to that certain Term Credit Agreement, dated as of December 19, 1997, as amended
by that certain First Amendment to Term Credit Agreement, dated as of June 19,
1998, and that certain Second Amendment to Term Credit Agreement, dated as of
July 28, 1998 (the "Credit Agreement"; the terms defined in the Credit Agreement
and not otherwise defined herein shall be used herein as defined in the Credit
Agreement).
B. Borrower, the Lenders and the Administrative Agent desire to make
certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Borrower, the
Lenders and the Administrative Agent covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is hereby amended by adding the
defined term "1999 Senior Subordinated Notes" thereto in proper alphabetical
order to read as follows:
"1999 Senior Subordinated Notes" means those certain Senior
Subordinated Notes due 2009 in an aggregate principal amount not to exceed
$125,000,000, the terms of which shall have been approved in writing by the
Determining Lenders under this Agreement and the Determining Lenders as
defined in and under the Amended and Restated Credit Agreement."
(b) 2.5(e) of the Credit Agreement is hereby amended to read as
follows:
"(e) Prepayment from Issuance of Institutional Debt. Concurrently
with the receipt of Net Cash Proceeds from the issuance of Institutional
Debt by the Borrower after the Agreement Date (other than (i) the Net Cash
Proceeds from the issuance of any Subordinated Debt which are used to repay
the Bridge Notes and (ii) up to $100,000,000 in aggregate amount of Net
Cash Proceeds from the issuance of the 1999 Senior Subordinated Notes), the
Borrower shall prepay the Facility A Term Loan Advances and the Facility B
Term Loan Advances in an amount equal to the lesser of (a) 100% of such Net
Cash Proceeds (which with respect to the 1999 Senior Subordinated Notes
shall be 100% of Net Cash Proceeds in excess of $100,000,000) or (b) an
amount, if any, which would result in the Leverage Ratio being less than
4.00 to 1 after such prepayment. Each such prepayment shall be applied pro
rata to all of the unpaid scheduled installment payments of the Facility A
Term Loan Advances and the Facility B Term Loan Advances, in each case pro
rata based upon the respective principal amounts of such installment
payments then unpaid."
<PAGE>
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct on and as of
the date hereof as made on and as of such date;
(b) no event has occurred and is continuing which constitutes a
Default or an Event of Default;
(c) the Borrower has full power and authority to execute and
deliver this Third Amendment, and this Third Amendment constitutes the
legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, except as enforceability may be
limited by applicable Debtor Relief Laws and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law) and except as rights to indemnity may be limited by
federal or state securities laws;
(d) neither the execution, delivery and performance of this Third
Amendment nor the consummation of any transactions contemplated herein will
conflict with any Law, the articles of incorporation, bylaws or other
governance document of the Borrower or any of its Subsidiaries, or any
indenture, agreement or other instrument to which the Borrower or any of
its Subsidiaries or any of their respective property is subject; and
(e) no authorization, approval, consent, or other action by,
notice to, or filing with, any governmental authority or other Person
(including the Board of Directors of the Borrower), is required for the
execution, delivery or performance by the Borrower of this Third Amendment
or the acknowledgment of this Third Amendment by any Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This Third Amendment shall be
effective as of May 5, 1999, subject to the following:
(a) the Administrative Agent shall receive counterparts of this
Third Amendment executed by all of the Lenders;
(b) the Administrative Agent shall receive counterparts of this
Third Amendment executed by the Borrower and acknowledged by each
Guarantor;
(c) the Administrative Agent shall have received an opinion of
counsel to the Borrower covering the matters set forth in Sections 2.4(c),
(d) and (e) of this Third Amendment;
(d) the Administrative Agent shall have received from the
Borrower, for the account of each Lender, an amount equal to the product of
(i) 0.10% multiplied by (ii) by the sum of (A) the Facility A Term Loan
Advances and Facility B Term Loan Advances owed to each Lender and (B) the
product of each Lender's Specified Percentage multiplied by the Commitment
(as defined in the Amended and Restated Credit Agreement); and
(e) the Administrative Agent shall receive, in form and substance
satisfactory to the Administrative Agent and its counsel, such other
documents, certificates and instruments as the Administrative Agent shall
reasonably require.
4. GUARANTOR ACKNOWLEDGMENT. By signing below, each of the Guarantors
(a) acknowledges, consents and agrees to the execution and delivery of this
Third Amendment, (b) acknowledges and agrees that its obligations in respect of
its Subsidiary Guaranty are not released, diminished, waived, modified, impaired
or affected in any manner by this Third Amendment or any of the provisions
contemplated herein and (c) ratifies and confirms its obligations under its
<PAGE>
Subsidiary Guaranty, and (d) acknowledges and agrees that it has no claims or
offsets against, or defenses or counterclaims to, its Subsidiary Guaranty as a
result of this Third Amendment.
5. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Third Amendment, each reference
in the Credit Agreement to "this Agreement", "hereunder", or words of like
import shall mean and be a reference to the Credit Agreement, as amended by
this Third Amendment.
(b) The Credit Agreement, as amended by this Third Amendment, and
all other Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed.
6. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Administrative Agent in connection with the
preparation, reproduction, execution and delivery of this Third Amendment and
the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under the Credit Agreement, as amended by
this Third Amendment).
7. EXECUTION IN COUNTERPARTS. This Third Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same
instrument.
8. GOVERNING LAW: BINDING EFFECT. This Third Amendment shall be
governed by and construed in accordance with the laws of the State of Texas
(without regard to the principles of conflicts of laws) and the United States of
America, and shall be binding upon the Borrower and each Lender and their
respective successors and assigns.
9. HEADINGS. Section headings in this Third Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Third Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS THIRD
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
as the date first above written.
PILLOWTEX CORPORATION
By: s/ Ronald M. Wehtje
Name: Ronald M. Wehtje
Title: Senior Vice President and
Chief Financial Officer
NATIONSBANK, N.A. (successor by merger to
NationsBank of Texas, N.A.), as
<PAGE>
Administrative Agent and as a Lender
By: Suzanne B. Smith
Vice President
BANK OF AMERICA NT&SA
By:
Name:
Title:
THE BANK OF NOVA SCOTIA
ATLANTA AGENCY
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
COMERICA BANK
By:
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:
Name:
Title:
BANK ONE, TEXAS, N.A.
By:
Name:
Title:
<PAGE>
BANKBOSTON, N.A.
By:
Name:
Title:
BHF-BANK AKTIENGESELLSCHAFT
By:
Name:
Title:
By:
Name:
Title:
FIRST UNION NATIONAL BANK
By:
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By:
Name:
Title:
By:
Name:
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By:
Name:
Title:
By:
Name:
Title:
THE BANK OF NEW YORK
By:
<PAGE>
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENE
By:
Name:
Title:
By:
Name:
Title:
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
By:
Name:
Title:
By:
Name:
Title:
FLEET BANK, N.A.
By: Stephen M. Leavenworth
Name:
Title: Vice President
THE FUJI BANK, LIMITED
By:
Name:
Title:
NATIONAL BANK OF CANADA
By:
Name:
Title:
By:
Name:
Title:
NATIONAL CITY BANK OF KENTUCKY
By: Don R. Pullen
Name:
Title: Vice President
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
Name:
Title:
BANK POLSKA KASA OPIEKI, S.A. - PEKAO S.A.
GROUP, NEW YORK BRANCH
By:
Name:
Title:
GUARANTY FEDERAL BANK, F.S.B.
By:
Name:
Title:
BANKERS TRUST COMPANY
By:
Name:
Title:
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By:
Name:
Title:
SENIOR DEBT PORTFOLIO
By:
Name:
Title:
AERIES FINANCE LTD.
By:
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.
By: TCW ASSET MANAGEMENT COMPANY,
its Investment Manager
By:
Name:
Title:
DEEP ROCK & COMPANY
By:
<PAGE>
Name:
Title:
KZH CRESCENT LLC
By:
Name:
Title:
CYPRESSTREE INVESTMENT PARTNERS I,
LTD.
By: CypressTree Investment Management
Company, Inc., as Portfolio Manager
By:
Name:
Title:
VAN KAMPEN CLO I, LIMITED
By: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By:
Name:
Title:
BALANCED HIGH-YIELD FUND I LTD.
By: BHF-BANK AKTIENGESELLSCHAFT,
acting through its New York Branch as
attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: INDOSUEZ CAPITAL, as Portfolio
Advisor
By:
Name:
Title:
VAN KAMPEN SENIOR INCOME TRUST
By:
Name:
Title:
<PAGE>
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
By: INDOSUEZ CAPITAL, as Portfolio
Advisor
By:
Name:
Title:
CYPRESSTREE INSTITUTIONAL FUND, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Member
By:
Name:
Title:
CYPRESSTREE INVESTMENT FUND, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Member
By:
Name:
Title:
KZH CYPRESSTREE-1 LLC
By:
Name:
Title:
OXFORD STRATEGIC INCOME FUND
By: Eaton Vance Management, as
Investment Advisor
By:
Name:
Title:
VAN KAMPEN CLO II, LIMITED
By: Van Kampen Management, Inc.,
as Collateral Manager
By:
Name:
Title:
CAPTIVA FINANCE, LTD.
By:
Name:
Title:
<PAGE>
CAPTIVA II FINANCE, LTD.
By:
Name:
Title:
MOUNTAIN CAPITAL CLO I LTD.
By:
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By:
Name:
Title:
BALANCED HIGH-YIELD FUND II LTD.
By: BHF-Bank Aktiengesellschaft, acting
through its New York Branch, as
attorney-in-fact
By:
Name:
Title:
By:
Name:
Title:
KZH CRESCENT-3 LLC
By:
Name:
Title:
FREMONT FINANCIAL CORPORATION
By:
Name:
Title:
THE DAI-ICHI KANGYO BANK
LIMITED, NEW YORK BRANCH
By:
Name:
Title:
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW ADVISERS (BERMUDA), LTD., as
General Partner
By:
<PAGE>
Name:
Title:
By: TCW INVESTMENT MANAGEMENT
COMPANY, as Investment Adviser
By:
Name:
Title:
PROVIDENT CBO I, LIMITED
By: Provident Investment Management, LLC
By:
Name:
Title:
ACKNOWLEDGED AND AGREED:
PILLOWTEX, INC.
PTEX HOLDING COMPANY
PILLOWTEX MANAGEMENT SERVICES COMPANY
BEACON MANUFACTURING COMPANY
MANETTA HOME FASHIONS, INC.
TENNESSEE WOOLEN MILLS
FIELDCREST CANNON, INC.
CRESTFIELD COTTON COMPANY
ENCEE, INC.
FCC CANADA, INC.
FIELDCREST CANNON FINANCING, INC.
FIELDCREST CANNON LICENSING, INC.
FIELDCREST CANNON INTERNATIONAL, INC.
FIELDCREST CANNON SURE FIT, INC.
FIELDCREST CANNON TRANSPORTATION, INC.
ST. MARYS, INC.
AMOSKEAG COMPANY
AMOSKEAG MANAGEMENT CORPORATION
DOWNEAST SECURITIES CORPORATION
BANGOR INVESTMENT COMPANY
MOORE'S FALLS CORPORATION
THE LESHNER CORPORATION
LESHNER OF CALIFORNIA, INC.
OPELIKA INDUSTRIES, INC.
By: Ronald M. Wehtje
Title: Senior Vice Presidnet
and Chief Financial Officer
<PAGE>
EXHIBIT 10.2
FOURTH AMENDMENT TO
TERM CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO TERM CREDIT AGREEMENT (this "Fourth Amendment"),
dated as of October 8, 1999, to be effective as of October 1, 1999, is entered
into among PILLOWTEX CORPORATION, a Texas corporation (the "Borrower"), the
institutions listed on the signature pages hereof that are parties to the Credit
Agreement defined below (collectively, the "Lenders"), and BANK OF AMERICA, N.A.
(formerly known as NationsBank, N.A., successor by merger to NationsBank of
Texas, N.A.), as Administrative Agent (in said capacity, the "Administrative
Agent").
BACKGROUND
A. The Borrower, the Lenders and the Administrative Agent are parties
to that certain Term Credit Agreement, dated as of December 19, 1997, amended by
a First Amendment to Term Credit Agreement, dated as of June 19, 1998, a Second
Amendment to Term Credit Agreement, dated as of July 28, 1998, and a Third
Amendment to Term Credit Agreement dated as of May 5, 1999 (the "Credit
Agreement"; the terms defined in the Credit Agreement and not otherwise defined
herein shall be used herein as defined in the Credit Agreement).
B. The Borrower, the Lenders and the Administrative Agent desire to
make certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Borrower, the
Lenders and the Administrative Agent covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) SECTION 1.1 of the Credit Agreement is hereby amended by deleting
the definition of Applicable Base Rate Margin in its entirety and substituting
the following in lieu thereof:
"APPLICABLE BASE RATE MARGIN" means the following per annum
percentages, applicable in the following situations:
<TABLE>
<CAPTION>
Facility A Facility B
Term Loan Term Loan
Applicability Advances Advances
------------- ---------- ----------
<S> <C> <C> <C>
(a) The Leverage Ratio is greater than or 1.500% 2.000%
equal to 6.00 to 1
(b) The Leverage Ratio is less than 6.00 to 1 1.250% 1.750%
but greater than or equal to 5.50 to 1
(c) The Leverage Ratio is less than 5.50 to 1 1.000% 1.500%
but greater than or equal to 5.00 to 1
(d) The Leverage Ratio is less than 5.00 to 1 0.750% 1.250%
but greater than or equal to 4.50 to 1
(e) The Leverage Ratio is less than 4.50 to 1 0.500% 1.000%
but greater than or equal to 4.00 to 1
-1-
<PAGE>
(f) The Leverage Ratio is less than 4.00 to 1 0.250% 1.000%
but greater than or equal to 3.50 to 1
(g) The Leverage Ratio is less than 3.50 to 1 0.000% 1.000%
</TABLE>
The Applicable Base Rate Margin payable by the Borrower on the Base Rate
Advances outstanding hereunder shall be subject to reduction or increase,
as applicable and as set forth in the table above, according to the
performance of the Borrower as tested by using the Leverage Ratio
calculated (i) if not in respect of an Acquisition, as of the end of each
fiscal quarter or (ii) if in respect of an Acquisition, upon receipt of a
Compliance Certificate as required under SECTION 7.6(iii) hereof; PROVIDED,
that each adjustment in the Base Rate Basis as a result of a change in the
Applicable Base Rate Margin shall be effective (A) if not in respect of an
Acquisition, on the date which is two Business Days following receipt by
the Administrative Agent of the financial statements required to be
delivered pursuant to SECTION 6.1 or 6.2 hereof, as applicable, and the
corresponding Compliance Certificate required pursuant to SECTION 6.3
hereof, and (B) if in respect of an Acquisition, on the closing date of
such Acquisition. If such financial statements and Compliance Certificate
are not received by the Administrative Agent by the date required, the
Applicable Base Rate Margin shall be increased to the Applicable Base Rate
Margin next higher than the Applicable Base Rate Margin currently in effect
until such time as such financial statements and Compliance Certificate are
received. Notwithstanding anything herein to the contrary, the Applicable
Base Rate Margin from and including October 1, 1999 until the date which is
two Business Days following receipt by the Administrative Agent of the
financial statements and Compliance Certificate for the 1999 Fiscal Year
shall be calculated as if the Leverage Ratio is greater than or equal to
6.00 to 1."
(b) SECTION 1.1 of the Credit Agreement is hereby amended by
deleting the definition of Applicable LIBOR Rate Margin in its entirety and
substituting the following in lieu thereof:
"APPLICABLE LIBOR RATE MARGIN" means the following per annum
percentages, applicable in the following situations:
<TABLE>
<CAPTION>
Facility A Facility B
Term Loan Term Loan
Applicability Advances Advances
------------- ---------- ----------
<S> <C> <C> <C>
(a) The Leverage Ratio is greater than or equal 3.000% 3.500%
to 6.00 to 1
(b) The Leverage Ratio is less than 6.00 to 1 2.750% 3.250%
but greater than or equal to 5.50 to 1
(c) The Leverage Ratio is less than 5.50 to 1 2.500% 3.000%
but greater than or equal to 5.00 to 1
(d) The Leverage Ratio is less than 5.00 to 1 2.250% 2.750%
but greater than or equal to 4.50 to 1
-2-
<PAGE>
(e) The Leverage Ratio is less than 4.50 to 1 2.000% 2.500%
but greater than or equal to 4.00 to 1
(f) The Leverage Ratio is less than 4.00 to 1 1.750% 2.500%
but greater than or equal to 3.50 to 1
(g) The Leverage Ratio is less than 3.50 to 1 1.500% 2.500%
but greater than or equal to 3.00 to 1
(h) The Leverage Ratio is less than 3.00 to 1 1.250% 2.500%
</TABLE>
The Applicable LIBOR Rate Margin payable by the Borrower on the LIBOR
Advances outstanding hereunder shall be subject to reduction or increase,
as applicable and as set forth in the table above, according to the
performance of the Borrower as tested by using the Leverage Ratio
calculated (i) if not in respect of an Acquisition, as of the end of each
fiscal quarter or (ii) if in respect of an Acquisition, upon receipt of a
Compliance Certificate as required under SECTION 7.6(iii) hereof; PROVIDED,
that each adjustment in the LIBOR Basis as a result of a change in the
Applicable LIBOR Rate Margin shall be effective (A) if not in respect of an
Acquisition, on the date which is two Business Days following receipt by
the Administrative Agent of the financial statements required to be
delivered pursuant to SECTION 6.1 or 6.2 hereof, as applicable, and the
corresponding Compliance Certificate required pursuant to SECTION 6.3
hereof, and (B) if in respect of an Acquisition, on the closing date of
such Acquisition. If such financial statements and Compliance Certificate
are not received by the Administrative Agent by the date required, the
Applicable LIBOR Rate Margin shall be increased to the Applicable LIBOR
Rate Margin next higher than the Applicable LIBOR Rate Margin currently in
effect until such time as such financial statements and Compliance
Certificate are received. Notwithstanding anything herein to the contrary,
the Applicable LIBOR Rate Margin from and including October 1, 1999 until
the date which is two Business Days following receipt by the Administrative
Agent of the financial statements and Compliance Certificate for the 1999
Fiscal Year shall be calculated as if the Leverage Ratio is greater than or
equal to 6.00 to 1."
(c) SECTION 7.11 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.11 MAXIMUM LEVERAGE RATIO. At the end of each
Fiscal Quarter occurring below or occurring during the periods indicated
below, the Borrower shall not permit the Leverage Ratio to be greater than
the ratio set forth below opposite such Fiscal Quarter or the period in
which such Fiscal Quarter occurs:
<TABLE>
<CAPTION>
Fiscal Quarter or Period Ratio
------------------------ -----
<S> <C>
Third Fiscal Quarter of Fiscal Year 1999 6.10 to 1
Fourth Fiscal Quarter of Fiscal Year 1999 6.35 to 1
First Fiscal Quarter of Fiscal Year 2000 6.00 to 1
Second Fiscal Quarter of Fiscal Year 2000 5.75 to 1
Third Fiscal Quarter of Fiscal Year 2000 5.25 to 1
-3-
<PAGE>
Fourth Fiscal Quarter of Fiscal Year 2000 4.75 to 1
From and including the First Fiscal Quarter of 4.25 to 1
Fiscal Year 2001 and thereafter
</TABLE>
(d) SECTION 7.12 of the Credit Agreement is hereby amended to read as
follows:
"SECTION 7.12 Minimum Fixed Charge Coverage Ratio. At the
end of each Fiscal Quarter occurring below or occurring during the periods
indicated below, the Borrower shall not permit the Fixed Charge Coverage
Ratio to be less than the ratio set forth below opposite such Fiscal
Quarter or the period in which such Fiscal Quarter occurs:
<TABLE>
<CAPTION>
Fiscal Quarter or Period Ratio
------------------------ -----
<S> <C>
Third Fiscal Quarter of Fiscal Year 1999 1.10 to 1
From and including the Fourth Quarter of 1.00 to 1
Fiscal Year 1999 through and including the
Second Fiscal Quarter of Fiscal Year 2000
From and including the Third Fiscal Quarter 1.10 to 1"
of Fiscal Year 2000 and thereafter
</TABLE>
(e) Section 11.6(d) of the Credit Agreement is hereby amended by
amending clause (ii) thereof set forth in the first provision of said Section as
follows:
"(ii) no such assignment (including any simultaneous assignment pursuant to
the Amended and Restated Credit Agreement), other than to an Affiliate of a
Lender or to an existing Lender hereunder, shall be in an amount less than
$5,000,000, unless the portion of the Advances (and the Commitment under
and as defined in the Amended and Restated Credit Agreement) of a Lender is
less than $5,000,000, in which case such assignment may be in the aggregate
amount of the Advances owed to such Lender under this Agreement and the
amount of such Lender's Specified Percentage of the Commitment (as defined
in and determined pursuant to the Amended and Restated Credit Agreement)
(provided, however, notwithstanding anything herein to the contrary, in no
event shall the portion of the Advances owed to any Lender and retained by
such Lender under this Agreement and/or the portion of the Commitment (as
defined in the Amended and Restated Credit Agreement) retained by such
Lender be less than $1,000,000),"
(f) The Compliance Certificate is hereby amended to be in the form of
Exhibit D attached to this Fourth Amendment.
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct on and as of the
date hereof as made on and as of such date;
(b) no event has occurred and is continuing which constitutes a Default
or an Event of Default;
(c) the Borrower has full power and authority to execute and deliver
this Fourth Amendment, and this Fourth Amendment constitutes the legal, valid
and binding obligation of the Borrower, enforceable in accordance with its
terms, except as enforceability may be limited by
-4-
<PAGE>
applicable Debtor Relief Laws and by general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law) and
except as rights to indemnity may be limited byfederal or state securities
laws;
(d) neither the execution, delivery and performance of this Fourth
Amendment nor the consummation of any transactions contemplated herein will
conflict with any Law, the articles of incorporation, bylaws or other
governance document of the Borrower or any of its Subsidiaries, or any
indenture, agreement or other instrument to which the Borrower or any of its
Subsidiaries or any of their respective property is subject; and
(e) no authorization, approval, consent, or other action by, notice to,
or filing with, any governmental authority or other Person (including the Board
of Directors of the Borrower or any Guarantor), is required for the execution,
delivery or performance by the Borrower of this Fourth Amendment or the
acknowledgment of this Fourth Amendment by any Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This Fourth Amendment shall be
effective as of October 1, 1999, subject to the following:
(a) the Administrative Agent shall receive counterparts of this Fourth
Amendment executed and/or consented to by the Required Lenders (as defined in
the Intercreditor Agreement);
(b) the representations and warranties set forth in Section 2 of this
Fourth Amendment shall be true and correct;
(c) the Administrative Agent shall receive counterparts of this Fourth
Amendment executed by the Borrower and acknowledged by each Guarantor; and
(d) the Administrative Agent shall receive, in form and substance
satisfactory to the Administrative Agent and its counsel, such other documents,
certificates and instruments as the Administrative Agent shall reasonably
require.
4. GUARANTOR ACKNOWLEDGMENT. By signing below, each of the Guarantors
(i) acknowledges, consents and agrees to the execution and delivery of this
Fourth Amendment, (ii) acknowledges and agrees that its obligations in respect
of its Subsidiary Guaranty are not released, diminished, waived, modified,
impaired or affected in any manner by this Fourth Amendment or any of the
provisions contemplated herein, (iii) ratifies and confirms its obligations
under its Subsidiary Guaranty, and (iv) acknowledges and agrees that it has no
claims or offsets against, or defenses or counterclaims to, its Subsidiary
Guaranty as a result of this Fourth Amendment.
5. AMENDMENT FEE. So long as this Fourth Amendment becomes effective,
the Borrower covenants and agrees to pay an amendment fee to the Lenders which
execute and deliver this Fourth Amendment to the Administrative Agent (or its
counsel) not later than 5:00 p.m., Dallas time, October 8, 1999 in an amount
equal to the product of (a) 0.15% multiplied by (b) with respect to each Lender
which is owed Facility A Term Loan Advances or Facility B Term Loan Advances,
the aggregate amount of Facility A Term Loan Advances and Facility B Term Loan
Advances owed to such Lender. Such amendment fee shall be paid in immediately
available funds and shall be due and payable to each Lender eligible for payment
pursuant to the preceding sentence no later than two Business Days after the
date the conditions set forth in Section 3 of this Fourth Amendment have been
satisfied. The Borrower agrees that the failure to pay the amendment fee
provided in this Section 5 shall be an Event of Default under Section 8.1(b)(ii)
of the Credit Agreement.
-5-
<PAGE>
6. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Fourth Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", or words of like import
shall mean and be a reference to the Credit Agreement, as amended by this Fourth
Amendment.
(b) The Credit Agreement, as amended by this Fourth Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
7. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Administrative Agent in connection with the
preparation, reproduction, execution and delivery of this Fourth Amendment and
the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under the Credit Agreement, as amended by
this Fourth Amendment).
8. EXECUTION IN COUNTERPARTS. This Fourth Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same
instrument.
9. GOVERNING LAW: BINDING EFFECT. This Fourth Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon the Borrower and each Lender and their respective
successors and assigns.
10. HEADINGS. Section headings in this Fourth Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Fourth Amendment for any other purpose.
11. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FOURTH
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
===============================================================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
===============================================================================
IN WITNESS WHEREOF, the parties hereto have executed this Fourth
Amendment as the date first above written.
PILLOWTEX CORPORATION
By: Jaime Vasquez
Name:
Title: VP/Treasurer
BANK OF AMERICA, N.A. (formerly known as NationsBank,
N.A., successor by merger to NationsBank
-6-
<PAGE>
of Texas, N.A.), as Administrative Agent and as a Lender
By: Deirdre B. Doyle
Principal
THE BANK OF NOVA SCOTIA
ATLANTA AGENCY
By: (not signed)
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: (signature illegible)
Name:
Title: Vice President
COMERICA BANK
By: Mark B. Grover
Name:
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: Robert Ivosevich
Name:
Title: Senior Vice President
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: Carol Polasky
Name:
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: J. Mearns
Name:
Title: VP & Manager
BANK ONE, TEXAS, N.A.
By: (signature illegible)
Name:
Title: Vice President
BANKBOSTON, N.A.
By: Stephen Y. McGehee
-7-
<PAGE>
Name:
Title: Managing Director
BHF (USA) CAPITAL CORPORATION
By: Michael Pellerito
Name:
Title: Assistant Vice President
By: Perry Forman
Name:
Title: Vice President
FIRST UNION NATIONAL BANK
By: Roger Pelz
Name:
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: William S. Richardson
Name:
Title: Duly Authorized Signatory
COPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH
By: Theodore W. Cox
Name:
Title: Vice President
By: (signature illegible)
Name:
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By: Robert Petersen
Name:
Title: Vice President
By:
Name:
Title:
THE BANK OF NEW YORK
-8-
<PAGE>
By: (not signed)
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE
By: Anthony Rock
Name:
Title: Vice President
By: Marcus Edward
Name:
Title: Vice President
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
By: John G. Taylor
Name:
Title: Vice President
By: Stephen W. Hipp
Name:
Title: Senior Associate
FLEET BANK, N.A.
By: Alfred Bonfantini
Name:
Title: Senior Vice President
THE FUJI BANK, LIMITED
By: Teiji Teramoto
Name:
Title: Vice President & Manager
NATIONAL BANK OF CANADA
By: Bill Handley
Name:
Title: Vice President
By: Larry Sears
Name:
Title: Vice President & Manager
-9-
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By: Tom Gurbach
Name:
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: B. Ross Smead
Name:
Title: Vice President
BANK POLSKA KASA OPIEKI, S.A. - PEKAO S.A. GROUP, NEW
YORK BRANCH
By: Hussein B. El-Tawil
Name:
Title: Vice President
GUARANTY FEDERAL BANK, F.S.B.
By: Robert S. Hays
Name:
Title: Senior Vice President
KZH WATERSIDE LLC
By: Virginia Conway
Name:
Title: Authorized Agent
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: Payson F. Swaffield
Name:
Title: Vice President
AERIES FINANCE LTD.
By: INVESCO Senior Secured Management,
Inc., as Sub-Managing Agent
By: Gregory Stoeckle
Name:
Title: Authorized Signatory
CRESCENT/MACH I PARTNERS, L.P.
By: TCW ASSET MANAGEMENT COMPANY, its
-10-
<PAGE>
Investment Manager
By: J. Insull
Name:
Title: Vice President
Eaton Vance Institutional Senior Loan Fund
By: Eaton Vance Management as Investment Advisor
By: Payson F. Swaffield
Name:
Title: Vice President
CYPRESSTREE INVESTMENT PARTNERS I, LTD.,
By: CypressTree Investment Management Company,
Inc., as Portfolio Manager
By: Timothy M. Barns
Name:
Title: Managing Director
VAN KAMPEN CLO I, LIMITED
By: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By: Darvin D. Pierce
Name:
Title: Vice President
BALANCED HIGH-YIELD FUND I LTD.
By: BHF (USA) CAPITAL CORPORATION, acting
as attorney-in-fact
By: Michael Pellerito
Name:
Title: Assistant Vice President
By: Perry Forman
Name:
Title: Vice President
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: INDOSUEZ CAPITAL, as Portfolio Advisor
By: (not signed)
Name:
Title:
-11-
<PAGE>
VAN KAMPEN SENIOR INCOME TRUST
By: Darvin D. Pierce
Name:
Title: Vice President
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
By: INDOSUEZ CAPITAL, as Portfolio Advisor
By: (not signed)
Name:
Title:
CYPRESSTREE INSTITUTIONAL FUND, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Member
By: (not signed)
Name:
Title:
CYPRESSTREE INVESTMENT FUND, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Member
By: (not signed)
Name:
Title:
KZH CYPRESSTREE-1 LLC
By: Virginia Conway
Name:
Title: Authorized Agent
OXFORD STRATEGIC INCOME FUND
By: Eaton Vance Management, as
Investment Advisor
By: Payson F. Swaffield
Name:
Title: Vice President
VAN KAMPEN CLO II, LIMITED
By: Van Kampen Management, Inc.,
as Collateral Manager
By: Darvin D. Pierce
Name:
Title: Vice President
-12-
<PAGE>
CAPTIVA FINANCE, LTD.
By: John Cullinane
Name:
Title: Director
CAPTIVA II FINANCE, LTD.
By: John Cullinane
Name:
Title: Director
MOUNTAIN CAPITAL CLO I LTD.
By: Darren P. Riley
Name:
Title: Director
CANADIAN IMPERIAL BANK OF COMMERCE
By: (not signed)
Name:
Title:
BALANCED HIGH-YIELD FUND II LTD.
By: BHF (USA) CAPITAL CORPORATION, acting
as attorney-in-fact
By: Michael Pellerito
Name:
Title: Assistant Vice President
By: Perry Forman
Name:
Title: Vice President
KZH CRESCENT-3 LLC
By: Virginia Conway
Name:
Title: Authorized Agent
FREMONT FINANCIAL CORPORATION
By: Randolph M. Ross
Name:
Title: Vice President - Senior Portfolio Manager
-13-
<PAGE>
THE DAI-ICHI KANGYO BANK
LIMITED, NEW YORK BRANCH
By: Christopher Fahey
Name:
Title: Vice President
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW ADVISERS (BERMUDA), LTD., as General Partner
By: (signature illegible)
Name:
Title:
By: TCW INVESTMENT MANAGEMENT
COMPANY, as Investment Adviser
By: J. Insull
Name:
Title: VP
ACKNOWLEDGED AND AGREED:
PILLOWTEX, INC.
PTEX HOLDING COMPANY
PILLOWTEX MANAGEMENT SERVICES COMPANY
BEACON MANUFACTURING COMPANY
MANETTA HOME FASHIONS, INC.
TENNESSEE WOOLEN MILLS
FIELDCREST CANNON, INC.
CRESTFIELD COTTON COMPANY
ENCEE, INC.
FCC CANADA, INC.
FIELDCREST CANNON FINANCING, INC.
FIELDCREST CANNON LICENSING, INC.
FIELDCREST CANNON INTERNATIONAL, INC.
FIELDCREST CANNON SF, INC. (formerly known as Fieldcrest Cannon Sure Fit, Inc.)
FIELDCREST CANNON TRANSPORTATION, INC.
ST. MARYS, INC.
AMOSKEAG COMPANY
AMOSKEAG MANAGEMENT CORPORATION
DOWNEAST SECURITIES CORPORATION
BANGOR INVESTMENT COMPANY
MOORE'S FALLS CORPORATION
THE LESHNER CORPORATION
-14-
<PAGE>
LESHNER OF CALIFORNIA, INC.
OPELIKA INDUSTRIES, INC.
By: Jaime Vasquez
Name:
Title: VP/Treasurer
-15-
<PAGE>
EXHIBIT 10.3
FOURTH AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Fourth Amendment"), dated as of October 8, 1999, to be effective as of
October 1, 1999, is entered into among PILLOWTEX CORPORATION, a Texas
corporation (the "Borrower"), the institutions listed on the signature pages
hereof that are parties to the Credit Agreement defined below (collectively, the
"Lenders"), and BANK OF AMERICA, N.A. (formerly known as NationsBank, N.A.,
successor by merger to NationsBank of Texas, N.A.), as Administrative Agent (in
said capacity, the "Administrative Agent").
BACKGROUND
A. The Borrower, the Lenders and the Administrative Agent are parties
to that certain Amended and Restated Credit Agreement, dated as of December 19,
1997, amended by a First Amendment to Amended and Restated Credit Agreement,
dated as of June 19, 1998, a Second Amendment to Amended and Restated Credit
Agreement, dated as of July 28, 1998, and a Third Amendment to Amended and
Restated Credit Agreement dated as of March 12, 1999 (the "Credit Agreement";
the terms defined in the Credit Agreement and not otherwise defined herein shall
be used herein as defined in the Credit Agreement).
B. The Borrower, the Lenders and the Administrative Agent desire to
make certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the Borrower, the
Lenders and the Administrative Agent covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a.) SECTION 1.1 of the Credit Agreement is hereby amended by deleting
the definition of Applicable Base Rate Margin in its entirety and substituting
the following in lieu thereof:
"'APPLICABLE BASE RATE MARGIN' means the following per annum
percentages, applicable in the following situations:
Applicability Percentage
------------- ----------
(a) The Leverage Ratio is greater than or equal to 6.00 to 1 1.500%
(b) The Leverage Ratio is less than 6.00 to 1 but greater 1.250%
than or equal to 5.50 to 1
(c) The Leverage Ratio is less than 5.50 to 1 but greater 1.000%
than or equal to 5.00 to 1
(d) The Leverage Ratio is less than 5.00 to 1 but greater 0.750%
than or equal to 4.50 to 1
(e) The Leverage Ratio is less than 4.50 to 1 but greater 0.500%
than or equal to 4.00 to 1
-1-
<PAGE>
(f) The Leverage Ratio is less than 4.00 to 1 but greater 0.250%
than or equal to 3.50 to 1
(g) The Leverage Ratio is less than 3.50 to 1 0.000%
The Applicable Base Rate Margin payable by the Borrower on the Base Rate
Advances outstanding hereunder shall be subject to reduction or
increase, as applicable and as set forth in the table above, according
to the performance of the Borrower as tested by using the Leverage Ratio
calculated (i) if not in respect of an Acquisition, as of the end of
each fiscal quarter or (ii) if in respect of an Acquisition, upon
receipt of a Compliance Certificate as required under SECTION 7.6(iii)
hereof; PROVIDED, that each adjustment in the Base Rate Basis as a
result of a change in the Applicable Base Rate Margin shall be effective
(A) if not in respect of an Acquisition, on the date which is two
Business Days following receipt by the Administrative Agent of the
financial statements required to be delivered pursuant to SECTION 6.1 or
6.2 hereof, as applicable, and the corresponding Compliance Certificate
required pursuant to SECTION 6.3 hereof, and (B) if in respect of an
Acquisition, on the closing date of such Acquisition. If such financial
statements and Compliance Certificate are not received by the
Administrative Agent by the date required, the Applicable Base Rate
Margin shall be increased to the Applicable Base Rate Margin next higher
than the Applicable Base Rate Margin currently in effect until such time
as such financial statements and Compliance Certificate are received.
Notwithstanding anything herein to the contrary, the Applicable Base
Rate Margin from and including October 1, 1999 until the date which is
two Business Days following receipt by the Administrative Agent of the
financial statements and Compliance Certificate for the 1999 Fiscal Year
shall be calculated as if the Leverage Ratio is greater than or equal to
6.00 to 1."
(b.) SECTION 1.1 of the Credit Agreement is hereby amended by deleting
the definition of Applicable LIBOR Rate Margin in its entirety and substituting
the following in lieu thereof:
"'APPLICABLE LIBOR RATE MARGIN' means the following per annum
percentages, applicable in the following situations:
Applicability Percentage
------------- ----------
(a) The Leverage Ratio is greater than or equal to 6.00 to 1 3.000%
(b) The Leverage Ratio is less than 6.00 to 1 but 2.750%
greater than or equal to 5.50 to 1
(c) The Leverage Ratio is less than 5.50 to 1 but 2.500%
greater than or equal to 5.00 to 1
(d) The Leverage Ratio is less than 5.00 to 1 but 2.250%
greater than or equal to 4.50 to 1
(e) The Leverage Ratio is less than 4.50 to 1 but 2.000%
greater than or equal to 4.00 to 1
(f) The Leverage Ratio is less than 4.00 to 1 but 1.750%
greater than or equal to 3.50 to 1
(g) The Leverage Ratio is less than 3.50 to 1 but 1.500%
greater than or equal to 3.00 to 1
-2-
<PAGE>
(h) The Leverage Ratio is less than 3.00 to 1 1.250%
The Applicable LIBOR Rate Margin payable by the Borrower on the LIBOR
Advances outstanding hereunder shall be subject to reduction or increase,
as applicable and as set forth in the table above, according to the
performance of the Borrower as tested by using the Leverage Ratio
calculated (i) if not in respect of an Acquisition, as of the end of each
fiscal quarter or (ii) if in respect of an Acquisition, upon receipt of a
Compliance Certificate as required under SECTION 7.6(iii) hereof; PROVIDED,
that each adjustment in the LIBOR Basis as a result of a change in the
Applicable LIBOR Rate Margin shall be effective (A) if not in respect of an
Acquisition, on the date which is two Business Days following receipt by
the Administrative Agent of the financial statements required to be
delivered pursuant to SECTION 6.1 or 6.2 hereof, as applicable, and the
corresponding Compliance Certificate required pursuant to SECTION 6.3
hereof, and (B) if in respect of an Acquisition, on the closing date of
such Acquisition. If such financial statements and Compliance Certificate
are not received by the Administrative Agent by the date required, the
Applicable LIBOR Rate Margin shall be increased to the Applicable LIBOR
Rate Margin next higher than the Applicable LIBOR Rate Margin currently in
effect until such time as such financial statements and Compliance
Certificate are received. Notwithstanding anything herein to the contrary,
the Applicable LIBOR Rate Margin from and including October 1, 1999 until
the date which is two Business Days following receipt by the Administrative
Agent of the financial statements and Compliance Certificate for the 1999
Fiscal Year shall be calculated as if the Leverage Ratio is greater than or
equal to 6.00 to 1."
(c) The definition of "Fieldcrest Cannon Subordinated Debenture
Reserve" is hereby amended to read as follows:
"'FIELDCREST CANNON SUBORDINATED DEBENTURE RESERVE' means (a) for the
period from and including October 8, 1999 through and including
February 28, 2000, zero, and (b) for the period from and including
February 29, 2000 and thereafter, an amount equal to 50% of the aggregate
amount of cash consideration that may be requested, at any time of
determination, by the holders of Fieldcrest Cannon Subordinated Debentures
in respect of a conversion thereof."
(d) SECTION 7.11 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.11 MAXIMUM LEVERAGE RATIO. At the end of each Fiscal
Quarter occurring below or occurring during the periods indicated below,
the Borrower shall not permit the Leverage Ratio to be greater than the
ratio set forth below opposite such Fiscal Quarter or the period in which
such Fiscal Quarter occurs:
Fiscal Quarter or Period Ratio
------------------------ -----
Third Fiscal Quarter of Fiscal Year 1999 6.10 to 1
Fourth Fiscal Quarter of Fiscal Year 1999 6.35 to 1
First Fiscal Quarter of Fiscal Year 2000 6.00 to 1
Second Fiscal Quarter of Fiscal Year 2000 5.75 to 1
Third Fiscal Quarter of Fiscal Year 2000 5.25 to 1
Fourth Fiscal Quarter of Fiscal Year 2000 4.75 to 1
-3-
<PAGE>
From and including the First Fiscal Quarter 4.25 to 1"
of Fiscal Year 2001 and thereafter
(e) SECTION 7.12 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.12 MINIMUM FIXED CHARGE COVERAGE RATIO. At the end of each
Fiscal Quarter occurring below or occurring during the periods indicated below,
the Borrower shall not permit the Fixed Charge Coverage Ratio to be less than
the ratio set forth below opposite such Fiscal Quarter or the period in which
such Fiscal Quarter occurs:
Fiscal Quarter or Period Ratio
------------------------ -----
Third Fiscal Quarter of Fiscal Year 1.10 to 1
1999
From and including the Fourth Quarter 1.00 to 1
of Fiscal Year 1999 through and
including the Second Fiscal Quarter of
Fiscal Year 2000
From and including the Third Fiscal 1.10 to 1"
Quarter of Fiscal Year 2000 and
thereafter
(f) SECTION 11.6(d) of the Credit Agreement is hereby amended by
amending clause (ii) thereof set forth in the first PROVISO of said Section as
follows:
"(ii) no such assignment (including any simultaneous assignment pursuant to
the Term Credit Agreement), other than to an Affiliate of a Lender or to an
existing Lender hereunder, shall be in an amount less than $5,000,000,
unless the portion of the Commitment (and Advances under and as defined in
the Term Credit Agreement) of a Lender is less than $5,000,000, in which
case such assignment may be in the aggregate amount of such Lender's
Specified Percentage of the Commitment and the aggregate amount of Advances
(as defined in the Term Credit Agreement) owed to such Lender under the
Term Credit Agreement (provided, however, notwithstanding anything herein
to the contrary, in no event shall the portion of the Commitment retained
by any Lender under this Agreement and/or the portion of the Advances (as
defined in this Agreement and the Term Credit Agreement) retained by such
Lender be less than $1,000,000),"
(g) The Compliance Certificate is hereby amended to be in the form of
EXHIBIT D attached to this Fourth Amendment.
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct on and as of the
date hereof as made on and as of such date;
(b) no event has occurred and is continuing which constitutes a Default
or an Event of Default;
(c) the Borrower has full power and authority to execute and deliver
this Fourth Amendment, and this Fourth Amendment constitutes the legal, valid
and binding obligation of the Borrower, enforceable in accordance with its
terms, except as enforceability may be limited by applicable Debtor Relief Laws
and by general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law) and except as rights to indemnity may be
limited by federal or state securities laws;
-4-
<PAGE>
(d) neither the execution, delivery and performance of this Fourth
Amendment nor the consummation of any transactions contemplated herein will
conflict with any Law, the articles of incorporation, bylaws or other governance
document of the Borrower or any of its Subsidiaries, or any indenture, agreement
or other instrument to which the Borrower or any of its Subsidiaries or any of
their respective property is subject; and
(e) no authorization, approval, consent, or other action by, notice to,
or filing with, any governmental authority or other Person (including the Board
of Directors of the Borrower or any Guarantor), is required for the execution,
delivery or performance by the Borrower of this Fourth Amendment or the
acknowledgment of this Fourth Amendment by any Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This Fourth Amendment shall be
effective as of October 1, 1999, subject to the following:
(a) the Administrative Agent shall receive counterparts of this Fourth
Amendment executed and/or consented to by the Required Lenders (as defined in
the Intercreditor Agreement);
(b) the representations and warranties set forth in Section 2 of this
Fourth Amendment shall be true and correct;
(c) the Administrative Agent shall receive counterparts of this Fourth
Amendment executed by the Borrower and acknowledged by each Guarantor; and
(d) the Administrative Agent shall receive, in form and substance
satisfactory to the Administrative Agent and its counsel, such other documents,
certificates and instruments as the Administrative Agent shall reasonably
require.
4. GUARANTOR ACKNOWLEDGMENT. By signing below, each of the Guarantors
(i) acknowledges, consents and agrees to the execution and delivery of this
Fourth Amendment, (ii) acknowledges and agrees that its obligations in respect
of its Subsidiary Guaranty are not released, diminished, waived, modified,
impaired or affected in any manner by this Fourth Amendment or any of the
provisions contemplated herein, (iii) ratifies and confirms its obligations
under its Subsidiary Guaranty, and (iv) acknowledges and agrees that it has no
claims or offsets against, or defenses or counterclaims to, its Subsidiary
Guaranty as a result of this Fourth Amendment.
5. AMENDMENT FEE. So long as this Fourth Amendment becomes effective,
the Borrower covenants and agrees to pay an amendment fee to the Lenders which
execute and deliver this Fourth Amendment to the Administrative Agent (or its
counsel) not later than 5:00 p.m., Dallas time, October 8, 1999 in an amount
equal to the product of (a) 0.15% multiplied by (b) an amount equal to such
Lender's portion of the Revolving Credit Commitment. Such amendment fee shall
be paid in immediately available funds and shall be due and payable to each
Lender eligible for payment pursuant to the preceding sentence no later than two
Business Days after the conditions set forth in Section 3 of this Fourth
Amendment have been satisfied. The Borrower agrees that the failure to pay the
amendment fee provided in this Section 5 shall be an Event of Default under
SECTION 8.1(b)(ii) of the Credit Agreement.
6. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Fourth Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", or words of like import
shall mean and be a reference to the Credit Areement, as amended by this Fourth
Amendment.
-5-
<PAGE>
(b) The Credit Agreement, as amended by this Fourth Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
7. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Administrative Agent in connection with the
preparation, reproduction, execution and delivery of this Fourth Amendment and
the other instruments and documents to be delivered hereunder (including the
reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under the Credit Agreement, as amended by
this Fourth Amendment).
8. EXECUTION IN COUNTERPARTS. This Fourth Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same
instrument.
9. GOVERNING LAW: BINDING EFFECT. This Fourth Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon the Borrower and each Lender and their respective
successors and assigns.
10. HEADINGS. Section headings in this Fourth Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Fourth Amendment for any other purpose.
11. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FOURTH
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
- -------------------------------------------------------------------------------
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
as the date first above written.
PILLOWTEX CORPORATION
By: Jaime Vasquez
Title: VP/Treasurer
BANK OF AMERICA, N.A. (formerly known as NationsBank,
N.A., successor by merger to NationsBank of Texas,
N.A.), as Administrative Agent and as a Lender, Swing
Line Bank and Issuing Bank
By: Deirdre B. Doyle
Principal
THE BANK OF NOVA SCOTIA
ATLANTA AGENCY
By: (signature illegible)
Name:
-6-
<PAGE>
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: (signature illegible)
Name:
Title: Vice President
COMERICA BANK
By: Mark B. Grover
Name:
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
By: Robert Ivosevich
Name:
Title: Senior Vice President
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By: Carol Polasky
Name:
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: J. Mearns
Name:
Title: VP & Manager
BANK ONE, TEXAS, N.A.
By: (signature illegible)
Name:
Title: Vice President
BANKBOSTON, N.A.
By: Stephen Y. McGehee
Name:
Title: Managing Director
BHF (USA) CAPITAL CORPORATION
By: Michael Pelleritto
Name:
Title: Assistant Vice President
By: Perry Forman
-7-
<PAGE>
Name: Vice President
Title:
FIRST UNION NATIONAL BANK
By: Roger Pelz
Name:
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: William S. Richardson
Name:
Title: Duly Authorized Signatory
CO0PERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH
By: Theodore W. Cox
Name:
Title: Vice President
By: Edward Peyser
Name:
Title: Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By: Robert Petersen
Name:
Title: Vice President
By:
Name:
Title:
THE BANK OF NEW YORK
By: (not signed)
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE
By: Anthony Rock
Name:
-8-
<PAGE>
Title: Vice President
By: Marcus Edward
Name:
Title: Vice President
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
By: John G. Taylor
Name:
Title: Vice President
By: Stephen W. Hipp
Name:
Title: Senior Associate
FLEET BANK, N.A.
By: Alfred Bonfantini
Name:
Title: Senior Vice President
THE FUJI BANK, LTD. - HOUSTON AGENCY
By: (not signed)
Name:
Title:
NATIONAL BANK OF CANADA
By: Bill Handley
Name:
Title: Vice President
By: Larry Sears
Name:
Title: Vice President & Manager
NATIONAL CITY BANK OF KENTUCKY
By: Tom Gurbach
Name:
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: B. Ross Smead
-9-
<PAGE>
Name:
Title: Vice President
BANK POLSKA KASA OPIEKI, S.A. - PEKAO S.A. GROUP, NEW
YORK BRANCH
By: Hussein B. El-Tawil
Name:
Title: Vice President
GUARANTY FEDERAL BANK, F.S.B.
By: Robert S. Hays
Name:
Title: Vice President
CONSENTED TO BY:
KZH WATERSIDE LLC
By: Virginia Conway
Name:
Title: Authorized Agent
SENIOR DEBT PORTFOLIO
By: Payson F. Swaffied
Name:
Title: Vice President
AERIES FINANCE LTD.
By: Gregory Stoeckle
Name:
Title: Authorized Signatory
CRESCENT/MACH I PARTNERS, L.P.
By: (not signed)
Name:
Title:
EATON VANCE INSTITUTIONAL SENIOR LON FUND
By: Payson Swaffield
Name:
Title: Vice President
CYPRESSTREE INVESTMENT PARTNERS I, LTD.,
By: CypressTree Investment Management Company,
-10-
<PAGE>
Inc., as Portfolio Manager
By: (not signed)
Name:
Title:
VAN KAMPEN CLO I, LIMITED
By: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By: Darvin D. Pierce
Name:
Title: Vice President
BALANCED HIGH-YIELD FUND I LTD.
By: BHF (USA) CAPITAL CORPORATION,
acting as attorney-in-fact
By: Michael Pellerito
Name:
Title: Assistant Vice President
By: Perry Forman
Name:
Title: Vice President
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By: (not signed)
Name:
Title:
VAN KAMPEN SENIOR INCOME TRUST
By: Darvin D. Pierce
Name:
Title: Vice President
INDOSUEZ CAPITAL FUNDING IIA, LIMITED
By: Indosuez Capital Luxembourg, as
Collateral Manager
By: (not signed)
Name:
Title:
-11-
<PAGE>
CYPRESSTREE INSTITUTIONAL FUND, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Member
By: Timothy M. Barns
Name:
Title: Managing Director
CYPRESSTREE INVESTMENT FUND, LLC
By: CypressTree Investment Management
Company, Inc., its Managing Member
By: Timothy M. Barns
Name:
Title: Managing Director
KZH CYPRESSTREE-1 LLC
By: (signature illegible)
Name:
Title: Authorized Agent
OXFORD STRATEGIC INCOME FUND
By: Eaton Vance Management, as
Investment Advisor
By: Payson F. Swaffield
Name:
Title: Vice President
VAN KAMPEN CLO II, LIMITED
By: Van Kampen Management, Inc.,
as Collateral Manager
By: Darwin D. Pierce
Name:
Title: Vice President
CAPTIVA FINANCE, LTD.
By: (not signed)
Name:
Title:
CAPTIVA II FINANCE, LTD.
By: (not signed)
Name:
Title:
-12-
<PAGE>
MOUNTAIN CLO TRUST
By: (not signed)
Name:
Title:
CIBC, INC.
By: (not signed)
Name:
Title:
BALANCED HIGH-YIELD FUND II LTD.
By: BHF (USA) CAPITAL CORPORATION,
acting as attorney-in-fact
By: Michael Pellerito
Name:
Title: Assistant Vice President
By: Perry Forman
Name:
Title: Vice President
KZH CRESCENT-3 LLC
By: (signature illegible)
Name:
Title: Authorized Agent
FREMONT FINANCIAL CORPORATION
By: Randolph M. Ross
Name:
Title: Vice President - Senior Portfolio Manager
THE DAI-ICHI KANGYO BANK
LIMITED, NEW YORK BRANCH
By: Christopher Fahey
Name:
Title: Vice President
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW ADVISERS (BERMUDA), LTD.,
By: (not signed)
Name:
Title:
By: TCW INVESTMENT MANAGEMENT
-13-
<PAGE>
COMPANY, as Investment Manager
By: (not signed)
Name:
Title:
ACKNOWLEDGED AND AGREED:
PILLOWTEX, INC.
PTEX HOLDING COMPANY
PILLOWTEX MANAGEMENT SERVICES COMPANY
BEACON MANUFACTURING COMPANY
MANETTA HOME FASHIONS, INC.
TENNESSEE WOOLEN MILLS
FIELDCREST CANNON, INC.
CRESTFIELD COTTON COMPANY
ENCEE, INC.
FCC CANADA, INC.
FIELDCREST CANNON FINANCING, INC.
FIELDCREST CANNON LICENSING, INC.
FIELDCREST CANNON INTERNATIONAL, INC.
FIELDCREST CANNON SURE FIT, INC.
FIELDCREST CANNON TRANSPORTATION, INC.
ST. MARYS, INC.
AMOSKEAG COMPANY
AMOSKEAG MANAGEMENT CORPORATION
DOWNEAST SECURITIES CORPORATION
BANGOR INVESTMENT COMPANY
MOORE'S FALLS CORPORATION
THE LESHNER CORPORATION
LESHNER OF CALIFORNIA, INC.
OPELIKA INDUSTRIES, INC.
By: Jaime Vasquez
Title: VP/Treasurer
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR PILLOWTEX
CORPORATION AND ITS SUBSIDIARIES FOR THE NINE MONTHS ENDED OCTOBER 2, 1999
AND IS QUALIFIED IN ITS ENTIRETY TO SUCH UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> OCT-02-1999
<CASH> 7,669
<SECURITIES> 0
<RECEIVABLES> 368,372
<ALLOWANCES> 27,911
<INVENTORY> 460,824
<CURRENT-ASSETS> 822,478
<PP&E> 781,580
<DEPRECIATION> 134,937
<TOTAL-ASSETS> 1,786,779
<CURRENT-LIABILITIES> 948,341
<BONDS> 399,582
72,199
0
<COMMON> 142
<OTHER-SE> 228,790
<TOTAL-LIABILITY-AND-EQUITY> 1,786,779
<SALES> 1,146,781
<TOTAL-REVENUES> 1,146,781
<CGS> 984,757
<TOTAL-COSTS> 1,084,114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,464
<INCOME-PRETAX> 2,203
<INCOME-TAX> 1,255
<INCOME-CONTINUING> 948
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 948
<EPS-BASIC> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
