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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 April 4, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ____
Commission file number: 1-11756
PILLOWTEX CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-2147728
(State of incorporation) (IRS Employer Identification No.)
4111 Mint Way
Dallas, Texas 75237
(Address of principal executive offices) (Zip Code)
(214) 333-3225
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at April 30, 1998
Common Stock, $0.01 par value 14,045,022
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PILLOWTEX CORPORATION AND SUBSIDIARIES
INDEX
Part I - Financial Information Page No.
Item 1. Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets as of
January 3, 1998 and April 4, 1998 3
Consolidated Statements of Earnings for the three months
ended March 29, 1997 and April 4, 1998 4
Consolidated Statements of Cash Flows for the three months
ended March 29, 1997 and April 4, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
Index to Exhibits 16
-2-
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 3, 1998 and April 4, 1998
(Dollars in thousands, except for par value)
(Unaudited)
1997 1998
ASSETS ----------- -----------
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 4,604 $ 2,399
Receivables:
Trade, less allowance for doubtful accounts of
$14,770 and $15,400 in 1997 and 1998,
respectively. . . . . . . . . . . . . . . . . . . 221,185 233,533
Other . . . . . . . . . . . . . . . . . . . . . . . 16,468 14,491
Inventories . . . . . . . . . . . . . . . . . . . . 359,751 384,398
Assets held for sale. . . . . . . . . . . . . . . . 32,614 7,705
Prepaid expenses. . . . . . . . . . . . . . . . . . 6,335 5,667
----------- -----------
Total current assets . . . . . . . . . . . . . . 640,957 648,193
Property, plant and equipment, less accumulated
depreciation of $55,871 and $67,724 in 1997
and 1998, respectively. . . . . . . . . . . . . . . . 488,841 497,788
Intangible assets, at cost less accumulated
amortization of $5,111 and $6,661 in 1997
and 1998, respectively. . . . . . . . . . . . . . . . 258,867 259,240
Other assets. . . . . . . . . . . . . . . . . . . . . . 21,521 23,520
----------- -----------
$1,410,186 $1,428,741
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . $ 111,202 $ 96,740
Accrued expenses . . . . . . . . . . . . . . . . . . 113,575 105,823
Deferred income taxes. . . . . . . . . . . . . . . . 16,068 17,256
Current portion of long-term debt. . . . . . . . . . 5,616 12,234
----------- -----------
Total current liabilities. . . . . . . . . . . . 246,461 232,053
Long-term debt, net of current portion. . . . . . . . . 785,383 807,474
Deferred income taxes . . . . . . . . . . . . . . . . . 66,340 71,638
Noncurrent liabilities. . . . . . . . . . . . . . . . . 52,413 51,412
----------- -----------
Total liabilities. . . . . . . . . . . . . . . . 1,150,597 1,162,577
Series A reedemable convertible preferred stock,$.01
par value; 65,000 shares issued and outstanding. . . 62,882 62,935
Shareholders' equity:
Preferred stock, $0.01 par value; authorized
20,000,000 shares; only Series A issued. . . . . . - -
Common stock, $0.01 par value; authorized 30,000,000
shares; 13,967,715 and 14,036,759 shares issued
and outstanding in 1997 and 1998, respectively . . 140 140
Additional paid-in capital . . . . . . . . . . . . . 151,095 153,351
Retained earnings. . . . . . . . . . . . . . . . . . 46,328 50,584
Currency translation adjustment. . . . . . . . . . . (856) (846)
----------- -----------
Total shareholders' equity . . . . . . . . . . . 196,707 203,229
----------- -----------
$1,410,186 $1,428,741
=========== ===========
See accompanying notes to consolidated financial statements.
-3-
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended March 29, 1997 and April 4, 1998
(Amounts in thousands, except for per share data)
(Unaudited)
1997 1998
---------- ----------
Net sales. . . . . . . . . . . . . . . . . . . . . . . . $ 113,763 $ 366,375
Cost of goods sold . . . . . . . . . . . . . . . . . . . 95,057 302,455
---------- ----------
Gross profit. . . . . . . . . . . . . . . . . . . . 18,706 63,920
Selling, general and administrative expenses . . . . . . 11,664 36,112
Restructuring charge . . . . . . . . . . . . . . . . . . - 1,539
---------- ----------
Earnings from operations. . . . . . . . . . . . . . 7,042 26,269
Interest expense . . . . . . . . . . . . . . . . . . . . 4,344 16,795
---------- ----------
Earnings before income taxes. . . . . . . . . . . . 2,698 9,474
Income taxes . . . . . . . . . . . . . . . . . . . . . . 1,047 3,839
---------- ----------
Net earnings. . . . . . . . . . . . . . . . . . . . 1,651 5,635
Preferred dividends. . . . . . . . . . . . . . . . . . . - 486
---------- ----------
Earnings available for common shareholders. . . . . $ 1,651 $ 5,149
========== ==========
Basic earnings per common share. . . . . . . . . . . . . $ .16 $ .37
========== ==========
Weighted average common shares outstanding - basic . . . 10,618 13,999
========== ==========
Diluted earnings per common share. . . . . . . . . . . . $ .15 $ .33
========== ==========
Weighted average common shares outstanding - diluted . . 10,696 16,974
========== ==========
See accompanying notes to consolidated financial statements.
-4-
PILLOWTEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 29, 1997 and April 4, 1998
(Dollars in thousands)
(Unaudited)
1997 1998
---------- ----------
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . . . . $ 1,651 $ 5,635
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization . . . . . . . . . . . 3,495 13,970
Restructuring charge. . . . . . . . . . . . . . . . - 1,539
Deferred income taxes . . . . . . . . . . . . . . . (318) 8,193
Provision for doubtful accounts . . . . . . . . . . 180 414
Loss (gain) on disposal of property, plant and
equipment. . . . . . . . . . . . . . . . . . . . . 4 (12)
Changes in operating assets and liabilities, net
of businesses acquired:
Trade receivables. . . . . . . . . . . . . . . . 7,440 (15,324)
Inventories. . . . . . . . . . . . . . . . . . . (14,219) (25,290)
Accounts payable . . . . . . . . . . . . . . . . (5,839) 248
Accrued expenses . . . . . . . . . . . . . . . . 1,847 6,847
Other assets and liabilities . . . . . . . . . . (2,384) (6,278)
---------- ----------
Net cash used in operating activities . . . . (8,143) (10,058)
---------- ----------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment . . 190 2,315
Proceeds from disposal of assets held for sale. . . . . - 34,027
Purchases of property, plant and equipment. . . . . . . (5,600) (22,591)
Payments for businesses purchased, net of cash acquired - (19,747)
---------- ----------
Net cash used in investing activities . . . . (5,410) (5,996)
---------- ----------
Cash flows from financing activities:
Increase (decrease) in checks not yet presented for
payment . . . . . . . . . . . . . . . . . . . . . . . 3,433 (14,749)
Borrowings on revolving credit loans. . . . . . . . . . 11,300 125,600
Repayments of revolving credit loans. . . . . . . . . . - (95,000)
Retirement of long-term debt. . . . . . . . . . . . . . (523) (1,985)
Net refund of debt issuance costs . . . . . . . . . . . - 77
Dividends paid. . . . . . . . . . . . . . . . . . . . . (637) (910)
Payment on conversion of convertible debt . . . . . . . - (210)
Proceeds from exercise of stock options . . . . . . . . - 1,026
---------- ----------
Net cash provided by financing activities . . 13,573 13,849
---------- ----------
Net change in cash and cash equivalents . . . . . . . . . 20 (2,205)
Cash and cash equivalents at beginning of period. . . . . 20 4,604
---------- ----------
Cash and cash equivalents at end of period. . . . . . . . $ 40 $ 2,399
========== ==========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . . $ 1,266 $ 10,765
========== ==========
Income taxes. . . . . . . . . . . . . . . . . . . . . $ 2,603 $ (7,245)
========== ==========
See accompanying notes to consolidated financial statements.
-5-
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tables in thousands)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Pillowtex
Corporation and subsidiaries (the "Company") include all adjustments,
consisting only of normal, recurring adjustments and accruals, which are,
in the opinion of management, necessary for fair presentation of the
results of operations and financial position but 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 filed with the
Securities and Exchange Commission on April 3, 1998 for the fiscal year
ended January 3, 1998. The current year quarter represents the first full
quarter of operations that includes the results of Fieldcrest Cannon, Inc.
("Fieldcrest Cannon") which was acquired on December 19, 1997.
(2) INVENTORIES
Inventories consisted of the following at January 3, 1998 and April 4,
1998:
1997 1998
-------- --------
Finished goods $163,905 $186,319
Work-in-process 120,063 119,516
Raw materials 54,790 58,501
Supplies 20,993 20,062
-------- --------
$359,751 $384,398
======== ========
(3) EARNINGS PER SHARE
The following table reconciles the numerators and denominators of basic and
diluted earnings per share for the quarter ended April 4, 1998. There were
no material reconciling items for the quarter ended March 29, 1997.
Earnings Shares
-------- ------
Basic - earnings available for common shareholders $ 5,149 13,999
Effect of dilutive securities:
Stock options - 246
Convertible preferred stock 486 2,729
-------- ------
Diluted - earnings available for common shareholders
Plus assumed conversions $ 5,635 16,974
======== ======
(4) NEW ACCOUNTING STANDARD
During the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income".
Adoption of this statement did not have a material impact on the Company's
reported financial position, results of operations or cash flows since
comprehensive income is essentially the same
as net earnings.
-6-
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Supplemental Condensed Consolidating Financial Information
The following is summarized condensed consolidating financial information
for the Company, segregating the Parent and guarantor subsidiaries from
non-guarantor subsidiaries. The guarantor subsidiaries are wholly owned
subsidiaries of the Company and guarantees are full, unconditional and
joint and several.
January 3, 1998
------------------------------------------------------------------------
Non-
Guarantor Guarantor
Financial Position Parent Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------ ------------ ------------ ------------ ------------ ------------
Assets:
- -------------------------------------
Trade receivables $ - $ 216,869 $ 4,316 $ - $ 221,185
Receivable from affiliates 668,588 - - (668,588) -
Inventories - 351,720 8,031 - 359,751
Other current assets - 58,650 1,371 - 60,021
------------ ------------ ------------ ------------ ------------
Total current assets 668,588 627,239 13,718 (668,588) 640,957
Property, plant and equipment, net 657 485,975 2,209 - 488,841
Intangibles, net 24,256 232,112 2,499 - 258,867
Other assets 229,039 19,564 - (227,082) 21,521
------------ ------------ ------------ ------------ ------------
Total assets $ 922,540 $ 1,364,890 $ 18,426 $ (895,670) $ 1,410,186
============ ============ ============ ============ ============
Liabilities and Shareholders' Equity:
- -------------------------------------
Accounts payable and accrued
liabilities $ 85 $ 218,874 $ 5,818 $ - $ 224,777
Payables to affiliates - 668,000 588 (668,588) -
Other current liabilities - 21,591 93 - 21,684
------------ ------------ ------------ ------------ ------------
Total current liabilities 85 908,465 6,499 (668,588) 246,461
Noncurrent liabilities 675,000 228,550 586 - 904,136
------------ ------------ ------------ ------------ ------------
Total liabilities 675,085 1,137,015 7,085 (668,588) 1,150,597
Redeemable convertible preferred
stock 62,882 - - - 62,882
Shareholders' equity 184,573 227,875 11,341 (227,082) 196,707
------------ ------------ ------------ ------------ ------------
Total liabilities and
shareholders' equity $ 922,540 $ 1,364,890 $ 18,426 $ (895,670) $ 1,410,186
============ ============ ============ ============ ============
-7-
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Supplemental Condensed Consolidating Financial Information (Continued)
April 4, 1998
------------------------------------------------------------------------
Non-
Guarantor Guarantor
Financial Position Parent Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------ ------------ ------------ ------------ ------------ ------------
Assets:
- -------------------------------------
Trade receivables $ - $ 230,103 $ 3,430 $ - $ 233,533
Receivable from affiliates 668,063 - - (668,063) -
Inventories - 376,167 8,231 - 384,398
Other current assets - 28,811 1,451 - 30,262
------------ ------------ ------------ ------------ ------------
Total current assets 668,063 635,081 13,112 (668,063) 648,193
Property, plant and equipment, net 635 495,073 2,080 - 497,788
Intangibles, net 19,747 237,004 2,489 - 259,240
Other assets 279,922 12,675 - (269,077) 23,520
------------ ------------ ------------ ------------ ------------
Total assets $ 968,367 $ 1,379,833 $ 17,681 $ (937,140) $ 1,428,741
============ ============ ============ ============ ============
Liabilities and Shareholders' Equity:
- -------------------------------------
Accounts payable and accrued
liabilities $ 13,817 $ 183,356 $ 5,390 $ - $ 202,563
Payables to affiliates - 668,000 63 (668,063) -
Other current liabilities 6,005 23,391 94 - 29,490
------------ ------------ ------------ ------------ ------------
Total current liabilities 19,822 874,747 5,547 (668,063) 232,053
Noncurrent liabilities 699,293 230,646 585 - 930,524
------------ ------------ ------------ ------------ ------------
Total liabilities 719,115 1,105,393 6,132 (668,063) 1,162,577
Redeemable convertible preferred
stock 62,935 - - - 62,935
Shareholders' equity 186,317 274,440 11,549 (269,077) 203,229
------------ ------------ ------------ ------------ ------------
Total liabilities and
shareholders' equity $ 968,367 $ 1,379,833 $ 17,681 $ (937,140) $ 1,428,741
============ ============ ============ ============ ============
-8-
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Supplemental Condensed Consolidating Financial Information (Continued)
Three Months Ended March 29, 1997
------------------------------------------------------------------------
Non-
Guarantor Guarantor
Results of Operations Parent Subsidiaries Subsidiaries Eliminations Consolidated
- --------------------- ------------ ------------ ------------ ------------ ------------
Net sales $ - $ 108,566 $ 5,971 $ (774) $ 113,763
Cost of goods sold - 90,151 5,680 (774) 95,057
------------ ------------ ------------ ------------ ------------
Gross profit - 18,415 291 - 18,706
Selling, general and administrative (707) 11,987 384 - 11,664
------------ ------------ ------------ ------------ ------------
Earnings (loss) from operations 707 6,428 (93) - 7,042
Interest expense (income) (444) 4,791 (3) - 4,344
------------ ------------ ------------ ------------ ------------
Earnings (loss) before income taxes 1,151 1,637 (90) - 2,698
Income taxes 403 678 (34) - 1,047
------------ ------------ ------------ ------------ ------------
Net earnings (loss) $ 748 $ 959 $ (56) $ - $ 1,651
============ ============ ============ ============ ============
Three Months Ended April 4, 1998
------------------------------------------------------------------------
Non-
Guarantor Guarantor
Results of Operations Parent Subsidiaries Subsidiaries Eliminations Consolidated
- --------------------- ------------ ------------ ------------ ------------ ------------
Net sales $ - $ 360,842 $ 6,184 $ (651) $ 366,375
Cost of goods sold - 297,524 5,582 (651) 302,455
------------ ------------ ------------ ------------ ------------
Gross profit - 63,318 602 - 63,920
Selling, general and administrative (201) 35,923 390 - 36,112
Restructuring charges - 1,539 - - 1,539
------------ ------------ ------------ ------------ ------------
Earnings from operations 201 25,856 212 - 26,269
Interest expense (income) (1,132) 17,928 (1) - 16,795
------------ ------------ ------------ ------------ ------------
Earnings before income taxes 1,333 7,928 213 - 9,474
Income taxes 467 3,357 15 - 3,839
------------ ------------ ------------ ------------ ------------
Net earnings 866 4,571 198 - 5,635
Preferred dividends 486 - - - 486
------------ ------------ ------------ ------------ ------------
Earnings available for common
shareholders $ 380 $ 4,571 $ 198 $ - $ 5,149
============ ============ ============ ============ ============
-9-
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Supplemental Condensed Consolidating Financial Information (Continued)
Three Months Ended March 29, 1997
------------------------------------------------------------------------
Non-
Guarantor Guarantor
Cash Flows Parent Subsidiaries Subsidiaries Eliminations Consolidated
- ---------- ------------ ------------ ------------ ------------ ------------
Cash provided by (used in) operating activities $ 438 $ (10,412) $ 1,831 $ - $ (8,143)
Cash provided by (used in) investing activities (10,708) 5,342 (44) - (5,410)
Cash provided by (used in) financing activities 10,270 5,066 (1,763) - 13,573
------------ ------------ ------------ ------------ ------------
Net change in cash and cash equivalents - (4) 24 - 20
Cash and cash equivalents at beginning of year - 12 8 - 20
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ - $ 8 $ 32 $ - $ 40
============ ============ ============ ============ ============
Three Months Ended April 4, 1998
------------------------------------------------------------------------
Non-
Guarantor Guarantor
Cash Flows Parent Subsidiaries Subsidiaries Eliminations Consolidated
- --------------------- ------------ ------------ ------------ ------------ ------------
Cash provided by (used in) operating activities $ 16,169 $ (26,949) $ 722 $ - $ (10,058)
Cash provided by (used in) investing activities (41,995) 36,033 (34) - (5,996)
Cash provided by (used in) financing activities 25,826 (11,289) (688) - 13,849
------------ ------------ ------------ ------------ ------------
Net change in cash and cash equivalents - (2,205) - - (2,205)
Cash and cash equivalents at beginning of year - 4,590 14 - 4,604
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ - $ 2,385 $ 14 $ - $ 2,399
============ ============ ============ ============ ============
-10-
PILLOWTEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) Supplemental Condensed Consolidating Financial Information (Continued)
Fieldcrest Cannon is also a guarantor subsidiary and is not included in the
consolidated financial statements for the three months ended March 29,1997.
Accordingly, the Fieldcrest Cannon consolidated financial statements for
the three months ended March 31, 1997 are included below:
Three Months Ended
Results of Operations March 31, 1997
--------------------- ------------------
Net sales $262,909
Cost of goods sold 227,155
---------
Gross profit 35,754
Selling, general and administrative 26,511
---------
Earnings from operations 9,243
Interest expense 6,262
Other, net (224)
---------
Earnings before income taxes 3,205
Income taxes 1,187
---------
Net earnings 2,018
Preferred dividends 1,125
---------
Earnings available for
common shareholders $ 893
=========
Three Months Ended
Cash Flows March 31, 1997
---------- ------------------
Cash provided by operating activities $ 12,766
Cash used in investing activities (5,192)
Cash used in financing activities (1,090)
---------
Net change in cash and cash equivalents 6,484
Cash and cash equivalents at beginning of year 4,647
---------
Cash and cash equivalents at end of year $ 11,131
=========
-11-
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 3, 1998.
RESULTS OF OPERATIONS
NET SALES. Net sales were $366.4 million for the three months ended April 4,
1998, representing an increase of $252.6 million or 222.1%, as compared to
$113.8 million for the three months ended March 29, 1997. This increase was
primarily due to the addition of sales from Fieldcrest Cannon, which was
acquired by the Company on December 19, 1997.
GROSS PROFIT. Gross profit margins increased to 17.4% for the three months
ended April 4, 1998 from 16.4% for the three months ended March 29, 1997. This
increase was primarily due to the significance of the Fieldcrest Cannon business
which achieved margins greater than the average of pre-merger Pillowtex for the
same period.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses increased $24.4 million to $36.1 million for the three months ended
April 4, 1998, compared to $11.7 million for the three months ended March 29,
1997. As a percentage of sales, selling, general and administrative expenses
decreased to 9.9% for the three months ended April 4, 1998 as compared to 10.3%
for the three months ended March 29, 1997. This reduction is primarily due to
higher sales volume and the success of cost-saving initiatives implemented in
conjunction with the Fieldcrest Cannon merger.
RESTRUCTURING CHARGE. The $1.5 million restructuring charge was related to
severance and other employee-related costs associated with the consolidation of
blanket production into facilities in Swannanoa, North Carolina and Westminster,
South Carolina.
INTEREST EXPENSE. Interest expense increased $12.5 million to $16.8 million for
the three months ended April 4, 1998, compared to $4.3 million for the three
months ended March 29, 1997. This increase was due to the additional debt and
higher interest rates incurred as a result of the Fieldcrest Cannon merger.
TAXES. The effective tax rate for the three months ended April 4, 1998
increased to 40.5% from 38.8% for the three months ended March 29, 1997 due to
nondeductible goodwill amortization connected with the Fieldcrest Cannon merger.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that its principal sources of liquidity will be cash
from its operations and funds available under its revolving credit facility. As
of April 4, 1998, the outstanding principal balance under the Company's $350.0
million revolving credit facility was $145.6 million, with $37.2 million
committed to outstanding letters of credit and $167.2 million available for
other needs. The debt outstanding under the revolving credit facility reflects
an increase of $30.6 million since January 3, 1998, and is due primarily to
normal working capital increases during the first half of the year, capital
expenditures, and expenditures relating to the Fieldcrest Cannon acquisition.
Based upon current and anticipated levels of operations, the Company believes
that its cash flow from operations, together with amounts available under the
revolving credit facility, will be adequate to meet its anticipated cash
requirements.
-12-
In January 1998, the Company terminated the swap agreement covering
approximately $125.0 million of indebtedness for a gain of approximately $1.0
million. The gain has been deferred and will be amortized as an adjustment to
interest expense over the remaining three-year term of the terminated swap
agreement. As of January 3, 1998 and April 4, 1998, the Company had
approximately $125.0 million and $250.0 million, respectively, of notional
amounts covered under fixed for floating rate swap agreements at average
interest rates of 9.54% and 5.56%, respectively.
On March 27, 1998, the Company paid a dividend of $.06 per share to common
shareholders of record on March 13, 1998. Additionally, the Company paid
preferred dividends of $69,000 during the first quarter of 1998.
NEW ACCOUNTING STANDARD
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, effective for periods beginning after
December 15, 1997. The purpose of this standard is to disclose disaggregated
information which provides information about the operating segments an
enterprise engages in, consistent with the way management reviews financial
information to make decisions about the enterprise's operating matters. The
Company will comply with the requirements of this standard for fiscal year 1998.
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 3, 1998, and under the caption "Risk Factors" in each
of the Joint Proxy Statement/Prospectus forming a part of the Company's
Registration Statement on Form S-4 (No. 333-36663) and the Prospectus forming a
part of the Company's Registration Statement on Form S-4 (No. 333-46209).
-13-
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
27.2 Financial Data Schedule
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the quarter for which
this report is filed:
1. Current report on Form 8-K dated December 19, 1997 and filed on January
6, 1998 reporting under Item 2 and Item 7 of Form 8-K certain information
concerning the Registrant's acquisition of Fieldcrest Cannon, Inc.,
including the incorporation by reference to financial statements of
Fieldcrest Cannon, Inc.
2. Current report on Form 8-K/A filed on February 11, 1998 amending the
Registrants Form 8-K dated December 19, 1997 to include under Item 7
unaudited proforma combined financial information of Pillowtex Corporation.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
(REGISTRANT) PILLOWTEX CORPORATION
BY (SIGNATURE) /s/ Jeffrey D. Cordes
Jeffrey D. Cordes
President, Chief Operating Officer and Director
(Principal Financial and Accounting Officer)
(DATE) May 19, 1998
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INDEX TO EXHIBITS
Exhibit Method of Filing
- ------- -----------------------------
27.1 Financial Data Schedule. . . . . . . . . . Filed herewith electronically
27.2 Restated Financial Data Schedules for
quarters ended March 29, 1997, June 28,
1997 and September 27, 1997. . . . . . . . Filed herewith electronically
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