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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): SEPTEMBER 10, 1997
PILLOWTEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
TEXAS 1-11756 75-2147728
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
4111 MINT WAY, DALLAS, TEXAS 75237
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 333-3225
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On September 11, 1997, Pillowtex Corporation, a Texas corporation,
filed a Current Report on Form 8-K dated September 10, 1997 (the "Form 8-K")
with the Securities and Exchange Commission. This Amendment No. 1 to the Form
8-K hereby amends and restates in their entirety Items 5 and 7 of the Form 8-K.
ITEM 5. OTHER EVENTS.
GENERAL
On September 10, 1997, Pillowtex Corporation (the "Company"), a wholly
owned subsidiary of the Company ("Newco"), and Fieldcrest Cannon, Inc.
("Fieldcrest") entered into an agreement (the "Merger Agreement") pursuant to
which, on the terms and subject to the conditions set forth therein, Newco will
be merged with and into Fieldcrest (the "Merger"), and Fieldcrest will thereby
become a wholly owned subsidiary of the Company. A copy of the Merger
Agreement is filed as Exhibit 2.1 hereto and is incorporated herein by this
reference.
On September 11, 1997, the Company issued a press release announcing
the Merger. A copy of the press release is filed as Exhibit 99.1 hereto and is
incorporated herein by this reference.
THE MERGER
Conversion of Fieldcrest Shares. At the effective time of the Merger
(the "Effective Time"), each outstanding share of Common Stock, par value $1.00
per share, of Fieldcrest ("Fieldcrest Common Stock") will be converted into a
right to receive total consideration valued at $34.00, consisting of (i) $27.00
in cash and (ii) a number (the "Conversion Number") of shares of Common Stock,
par value $0.01 per share, of the Company ("Pillowtex Common Stock") equal to
the quotient obtained by dividing $7.00 by the average of the closing sales
prices per share of Pillowtex Common Stock on the New York Stock Exchange (the
"NYSE") for each of the 20 consecutive trading days immediately preceding the
fifth trading day prior to the date (the "Closing Date") on which the Merger is
consummated (the "Determination Price"), except that, absent an election by the
Company as described below, the Conversion Number will not be more than 0.333
or less than 0.269. If the Determination Price is less than $21.00, the
Company will have the right to elect to increase the cash portion of such
consideration and/or the Conversion Number such that the sum of (i) the cash
portion of such consideration and (ii) the product of (a) the Conversion Number
and (b) the Determination Price equals $34.00 and, if the Company does not so
elect, Fieldcrest will have the right to terminate the Merger Agreement.
At the Effective Time, each outstanding share of $3.00 Series A
Convertible Preferred Stock, par value $0.01 per share, of Fieldcrest, other
than shares converted into Fieldcrest Common Stock prior to the Merger, will be
converted into a right to receive total consideration valued at $58.12,
consisting of (i) a cash payment equal to the
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product of (a) the amount of the cash payment to be made on account of each
share of Fieldcrest Common Stock converted in the Merger and (b) 1.7094 and
(ii) a number of shares of Pillowtex Common Stock equal to the product of (a)
the Conversion Number and (b) 1.7094.
Treatment of Fieldcrest Options. Each holder of an outstanding option
(a "Fieldcrest Option") to purchase shares of Fieldcrest Common Stock may,
prior to the Effective Time, elect to receive for each share of Fieldcrest
Common Stock subject to such Fieldcrest Option an amount in cash equal to the
difference between $34.00 and the per share exercise price of such Fieldcrest
Option. At the Effective Time, each outstanding Fieldcrest Option, other than
Fieldcrest Options in respect of which the above-described election was made,
will be assumed by the Company and will constitute an option to purchase, in
lieu of each share of Fieldcrest Common Stock previously subject thereto, a
number of shares of Pillowtex Common Stock (increased to the nearest whole
share) equal to the product of (i) the number of shares of Fieldcrest Common
Stock subject to such Fieldcrest Option immediately prior to the Effective Time
and (ii) a conversion number (the "Option Conversion Number") equal to the
quotient obtained by dividing $34.00 by the Determination Price, at an exercise
price per share of Pillowtex Common Stock (increased to the nearest whole cent)
equal to the exercise price per share of Fieldcrest Common Stock subject to
such Fieldcrest Option immediately prior to the Effective Time divided by the
Option Conversion Number. The Option Conversion Number will not be more than
1.619 or less than 1.308, except that, if the Company elects to increase the
Conversion Number as described above, the Option Conversion Number will be
increased such that the product of (a) the Option Conversion Number and (b) the
Determination Price equals $34.00.
Treatment of Fieldcrest SARs. Pursuant to the Merger Agreement, each
holder of an outstanding stock appreciation right issued by Fieldcrest (a
"Fieldcrest SAR") will be paid, at or immediately prior to the Effective Time,
a cash amount equal to the product of (i) the difference between $34.00 and the
grant price of such Fieldcrest SAR and (ii) the number of shares subject to
such Fieldcrest SAR.
Treatment of Fieldcrest Convertible Debentures. Fieldcrest's 6.0%
Convertible Debentures due 2012 (the "Fieldcrest Convertible Debentures"),
which are convertible into shares of Fieldcrest Common Stock at a conversion
price of $44.25 per share, will remain outstanding immediately after the
Effective Time. As a result of the Merger, Fieldcrest Convertible Debentures
will become convertible into the same consideration that the holder of the
number of shares of Fieldcrest Common Stock into which such Fieldcrest
Convertible Debentures might have been converted immediately prior to the
Merger would be entitled to receive in the Merger. For example, a Fieldcrest
Convertible Debenture having an aggregate principal amount of $1,000 will
become convertible into (i) a cash payment equal to the product of (a) the
amount of the cash payment to be made on account of each share of Fieldcrest
Common Stock converted in the merger and (b) 22.60 and (ii) number of shares of
Pillowtex Common Stock equal to the product of (a) the Conversion Number and
(b) 22.60.
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Consequences of Failure to Obtain Approval of Issuance of Pillowtex
Shares. The Merger Agreement provides that, if the Company's shareholders fail
to approve the issuance of Pillowtex Common Stock and Pillowtex Preferred Stock
(as hereinafter defined) in connection with the Merger and related financing
transactions, (i) the consideration to be paid to holders of Fieldcrest Common
Stock will be a cash payment in an amount equal to $34.00 per share, (ii) the
consideration to be paid to holders of Fieldcrest Preferred Stock will be a
cash payment in an amount equal to $58.12 per share, (iii) each holder of an
Option will receive for each share of Fieldcrest Common Stock subject to such
Option an amount in cash equal to the difference between $34.00 and the per
share exercise price at such Option, and (iv) the conditions described in
clauses (ii) and (iv) of the immediately following paragraph will be
inapplicable. However, Charles M. Hansen, Jr., Chairman of the Board and Chief
Executive Officer of the Company, and Mary R. Silverthorne, a director of the
Company, beneficially own, in the aggregate, 52.9% of the currently outstanding
shares of Pillowtex Common Stock and each of them has separately informed the
Company that he or she intends to vote his or her shares of Pillowtex Common
Stock for the approval of the issuance of shares of Pillowtex Common Stock and
Pillowtex Preferred Stock in connection with the Merger and related financing
transactions. Accordingly, the approval by the Company's shareholders of the
issuance of shares of Pillowtex Common Stock and Pillowtex Preferred Stock in
connection with the Merger and related financing transactions is expected to
occur.
Conditions to the Merger. The obligations of the Company and
Fieldcrest to consummate the Merger are conditioned upon, among other things,
(i) approval and adoption of the Merger Agreement by Fieldcrest's stockholders;
(ii) approval by the Company's shareholders of the issuance of shares of
Pillowtex Common Stock and Pillowtex Preferred Stock in connection with the
Merger and related financing transactions; (iii) the absence of any order or
injunction that prohibits the consummation of the Merger; (iv) the shares of
Pillowtex Common Stock to be issued in connection with the Merger having been
authorized for listing on the NYSE, subject to official notice of issuance; (v)
a Registration Statement on Form S-4 having been declared effective by the
Securities and Exchange Commission and not being subject to any stop order or
proceeding seeking the same; and (vi) the waiting period pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, having
expired or been terminated. There can be no assurance that such conditions
will be satisfied.
MERGER FINANCING
In order to finance the Merger and the repayment of certain
indebtedness of Fieldcrest, refinance the existing senior bank credit facility
of the Company, and provide working capital for the combined enterprise that
will result from the Merger, the Company (i) has negotiated and entered into
(a) a commitment letter with NationsBank of Texas, N.A. providing for new
senior revolving credit and term loan facilities (the "New Pillowtex Bank
Facilities Commitment") and (b) a preferred stock purchase agreement with
Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and
Apollo (UK) Partners III, L.P., providing for the issuance and sale of 65,000
shares of
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Series A Redeemable Convertible Preferred Stock, par value $0.01 per share
("Pillowtex Preferred Stock"), of the Company (the "Pillowtex Preferred Stock
Commitment" and, together with the New Pillowtex Bank Facilities Commitment,
the "Primary Financing Commitments"), and (ii) proposes to issue and sell new
subordinated debt securities (the "New Pillowtex Subordinated Notes"). The
terms of the financings contemplated by the Primary Financing Commitments and
anticipated terms of the New Pillowtex Subordinated Notes are briefly
summarized below. Such summaries of the Primary Financing Commitments are
qualified in their entirety by reference to the full text thereof, copies of
which are attached as Exhibits 10.1 and 10.2 hereto and are incorporated herein
by this reference.
New Pillowtex
Bank Facilities . . . . . . . . . . . . The New Pillowtex Bank Facilities
Commitment provides for, on the
terms and subject to the
conditions set forth therein, (i)
a $350.0 million revolving credit
facility (including $40.0 million
for standby and commercial letters
of credit and up to $15.0 million
for swing line loans) and (ii) a
$250.0 million term loan facility,
consisting of a $125.0 million
tranche A term loan and a $125.0
million tranche B term loan (such
facilities being referred to
herein collectively as the "New
Pillowtex Bank Facilities"). A
copy of the New Pillowtex Bank
Facilities Commitment is filed as
Exhibit 10.1 hereto and is
incorporated herein by this
reference.
Sale of Pillowtex Preferred
Stock . . . . . . . . . . . . . . . . . The Pillowtex Preferred Stock
Commitment provides for, on the
terms and subject to the
conditions set forth therein, the
issuance and sale to Apollo
Investment Fund III, L.P., Apollo
Overseas Partners III, L.P., and
Apollo (UK) Partners III, L.P. of
65,000 shares of Pillowtex
Preferred Stock for approximately
$65.0 million. A copy of the
Pillowtex Preferred Stock
Commitment is filed as Exhibit
10.2 hereto and is incorporated
herein by this reference.
Sale of New Pillowtex
Subordinated Notes . . . . . . . . . . The Company intends to issue and
sell, on or prior to the Closing
Date, up to $150.0 million
aggregate principal amount of New
Pillowtex Subordinated Notes.
Although the specific terms of the
New Pillowtex Subordinated Notes
have not yet been established, (i)
for purposes of the pro forma
financial information presented
below, the principal
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thereof is assumed to bear
interest at a rate of 9 3/8% per
annum, payable semi-annually in
arrears, (ii) the New Pillowtex
Subordinated Notes are expected to
be due and payable in full in
2007, and (iii) the indenture or
other instrument under which the
New Pillowtex Subordinated Notes
are to be issued is expected to
contain affirmative, restrictive,
and financial covenants and to
specify events of default
generally comparable to the
covenants and events of default
contained and specified in the
indenture under which the
Company's existing 10% Senior
Subordinated Notes Due 2006 (the
"Existing Pillowtex Subordinated
Notes") were issued.
In addition to the Primary Financing Commitments, the Company has
negotiated and entered into a commitment letter with NationsBridge L.L.C.
providing for a standby bridge loan facility (the "Standby Bridge Loan Facility
Commitment" and, together with the Primary Financing Commitments, the
"Financing Commitments"). The Standby Bridge Loan Facility Commitment provides
for, on the terms and subject to the conditions set forth therein, a standby
bridge loan facility (the "Standby Bridge Loan Facility") pursuant to which up
to $150.0 million will be available to the Company to finance the Merger and
complete the related refinancings to the extent that less than $135.0 million
aggregate principal amount of New Pillowtex Subordinated Notes shall have been
issued and sold as of the Closing Date. The Company presently does not intend
to utilize the Standby Bridge Loan Facility. In the event it becomes necessary
to utilize the Standby Bridge Loan Facility, borrowings thereunder would
initially be evidenced by senior subordinated bridge notes. The terms of such
bridge notes would be less favorable to the Company than the anticipated terms
of the New Pillowtex Subordinated Notes. Interest on such bridge notes would
be payable at a floating rate higher than the fixed rate of interest expected
to be borne by the New Pillowtex Subordinated Notes, which floating rate would
increase at specified intervals as long as such notes were outstanding (subject
to certain limitations). The bridge notes would mature one year from the date
of issuance and, if not repaid in full, could, subject to certain conditions,
be satisfied at that time through the issuance and delivery of senior
subordinated rollover notes with a maturity of nine years. Interest on such
rollover notes would also be payable at a floating rate which would increase at
specified intervals (subject to certain limitations).
The obligations of third parties under the Financing Commitments to
extend loans or purchase Pillowtex Preferred Stock, as the case may be, are
subject to various specified conditions. Because such conditions relate to
matters beyond the Company's control, there can be no assurance that such
conditions will be timely satisfied.
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SUMMARY PRO FORMA FINANCIAL INFORMATION
Giving effect to the Merger and the Financing Transactions as if such
transactions had been consummated on June 28, 1997, at such date, on a pro
forma combined basis, the Company would have had total assets of $1,403.0
million, total long-term debt of $805.2 million, and total shareholders' equity
of $184.7 million. Giving effect to the Merger and the Financing Transactions
as if such transactions had been consummated on December 31, 1995, the first
day of the Company's 1996 fiscal year, (a) for the fiscal year ended December
28, 1996, on a pro forma combined basis, the Company would have had earnings
before income taxes and extraordinary items of $21.3 million, earnings before
extraordinary items of $11.3 million, and earnings before extraordinary items
per share of $0.66 and (b) for the six months ended June 28, 1997, on a pro
forma combined basis, the Company would have had earnings before income taxes
and extraordinary items of $13.2 million, earnings before extraordinary items
of $7.2 million, and earnings before extraordinary items per share of $0.43.
As used herein, the term "Financing Transactions" means (i) estimated initial
borrowings under the New Pillowtex Bank Facilities of $427.2 million, (ii) the
issuance and sale of $135.0 million aggregate principal amount of New Pillowtex
Subordinated Notes resulting in estimated net proceeds of $131.4 million, (iii)
the issuance and sale of 65,000 shares of Pillowtex Preferred Stock resulting
in estimated net proceeds of $63.5 million, (iv) the repayment of all amounts
outstanding under the Company's and Fieldcrest's existing bank credit
facilities, and (v) the satisfaction and discharge of all indebtedness
represented by Fieldcrest's 11.25% Senior Subordinated Debentures Due 2002 to
2004 pursuant to an irrevocable deposit of amounts sufficient to provide for
the redemption thereof. Because the Standby Bridge Loan Facility is expected
to be drawn upon, if at all, only in the event that less than $135.0 million
aggregate principal amount of New Pillowtex Subordinated Notes shall have been
issued and sold as of the Closing Date, the foregoing pro forma information
assumes that no amounts will be borrowed thereunder.
If, in lieu of the issuance and sale of $135.0 million aggregate
principal amount of New Pillowtex Subordinated Notes, the Company were assumed
to have borrowed $135.0 million under the Standby Bridge Bank Facility, then
(i) for the year ended December 28, 1996, on a pro forma combined basis, the
Company would have had interest expense of $61.8 million, earnings before
income taxes and extraordinary items of $18.3 million, earnings before
extraordinary items of $9.5 million, and earnings before extraordinary items
per share of $0.54 and (ii) for the six months ended June 28, 1997, on a pro
forma combined basis, the Company would have had interest expense of $39.4
million, earnings before income taxes and extraordinary items of $8.9 million,
earnings before extraordinary items of $4.6 million, and earnings before
extraordinary items per share of $0.26.
The pro forma combined financial information presented above is for
illustrative purposes only and is not necessarily indicative of what the
Company's actual financial position or results of operations would have been
had the above-referenced transactions been consummated as of the
above-referenced dates or of the financial position or results of operations
that may be reported by the Company in the future. The pro forma
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combined financial information should be read in conjunction with the
historical financial statements of the Company and Fieldcrest, the related
notes, and the other information contained in the exhibits hereto. Certain
historical financial statements of the Company and Fieldcrest are filed as
Exhibits 99.2 and 99.3, respectively, hereto and are incorporated herein by
this reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits:
Exhibit
Number Exhibit
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2.1* Agreement and Plan of Merger, dated as of
September 10, 1997, by and among Pillowtex
Corporation, Pegasus Merger Sub, Inc., and
Fieldcrest Cannon, Inc.
10.1** Commitment Letter, dated September 10, 1997,
by and between NationsBank of Texas, N.A.
and Pillowtex Corporation
10.2* Preferred Stock Purchase Agreement, dated as
of September 10, 1997, by and among Pillowtex
Corporation, Apollo Investment Fund III,
L.P., Apollo Overseas Partners III, L.P., and
Apollo (UK) Partners III, L.P.
99.1* Press release, dated September 11, 1997,
issued by Pillowtex Corporation
99.2 Audited Financial Statements of Pillowtex
Corporation as of and for the fiscal years
ended December 30, 1995 and December 28, 1996
(incorporated by reference to pages F-1
through F-24 in Pillowtex Corporation's
Annual Report on Form 10-K for the fiscal
year ended December 28, 1996 filed with the
Securities and Exchange Commission) and
Unaudited Financial Statements of Pillowtex
Corporation as of June 28, 1997 and for the
six months ended June 28, 1997 and June 29,
1996 (incorporated by reference to pages 3
through 14 in Pillowtex Corporation's
Quarterly Report
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* Previously filed.
** Filed herewith.
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on Form 10-Q for the fiscal quarter ended
June 28, 1997 filed with the Securities and
Exchange Commission)
99.3 Audited Financial Statements of Fieldcrest
Cannon, Inc. as of and for the fiscal years
ended December 31, 1995 and December 31, 1996
(incorporated by reference to pages 18
through 34 in Fieldcrest Cannon, Inc.'s
Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 filed with the
Securities and Exchange Commission) and
Unaudited Financial Statements of Fieldcrest
Cannon, Inc. as of June 30, 1997 and for the
six months ended June 30, 1997 and June 30,
1996 (incorporated by reference to pages 1
through 8 in Fieldcrest Cannon, Inc.'s
Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997 filed with the
Securities and Exchange Commission)
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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, hereunto duly authorized.
PILLOWTEX CORPORATION
By: /s/ John H. Karnes
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John H. Karnes
Vice President and General Counsel
Date: September 29, 1997
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
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2.1* Agreement and Plan of Merger, dated as of September
10, 1997, by and among Pillowtex Corporation,
Pegasus Merger Sub, Inc. and Fieldcrest Cannon,
Inc.
10.1** Commitment Letter, dated September 10, 1997, by and
between NationsBank of Texas, N.A. and Pillowtex
Corporation
10.2* Preferred Stock Purchase Agreement, dated as of
September 10, 1997, by and among Pillowtex
Corporation, Apollo Investment Fund III, L.P.,
Apollo Overseas Partners III, L.P., and Apollo (UK)
Partners III, L.P.
99.1* Press release, dated September 11, 1997, issued by
Pillowtex Corporation
99.2 Audited Financial Statements of Pillowtex
Corporation as of and for the fiscal years
ended December 30, 1995 and December 28, 1996
(incorporated by reference to pages F-1 through
F-24 in Pillowtex Corporation's Annual Report on
Form 10-K for the fiscal year ended December 28,
1996 filed with the Securities and Exchange
Commission) and Unaudited Financial Statements of
Pillowtex Corporation as of June 28, 1997 and for
the six months ended June 28, 1997 and June 29,
1996 (incorporated by reference to pages 3 through
14 in Pillowtex Corporation's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 28,
1997 filed with the Securities and Exchange
Commission)
99.3 Audited Financial Statements of Fieldcrest Cannon,
Inc. as of and for the fiscal years ended December
31, 1995 and December 31, 1996 (incorporated by
reference to pages 18 through 34 in Fieldcrest
Cannon, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 filed with the
Securities and Exchange Commission) and Unaudited
Financial Statements of Fieldcrest Cannon, Inc. as
of June 30, 1997 and for the six months ended June
30, 1997 and June 30, 1996 (incorporated by
reference to pages 1 through 8 in Fieldcrest
Cannon, Inc.'s Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1997 filed with
the Securities and Exchange Commission)
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* Previously filed.
** Filed herewith