UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 1-5137
FIELDCREST CANNON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0586036
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
326 East Stadium Drive
EDEN, NC 27288
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number (910) 627-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, $1 Par Value New York Stock Exchange
$3.00 Series A Convertible
Preferred Stock, $.01 Par Value The Nasdaq SmallCap Market
6% Convertible Subordinated
Debentures Due 2012 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 and (2) has been subject to such
filing requirements for the past 90 days. Yes x . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. (x)
The aggregate market value of voting stock held by non-affiliates of the
registrant was $184,363,769 as of March 1, 1995.
NUMBER OF SHARES OUTSTANDING AT MARCH 1, 1995
Common Stock 8,823,852
DOCUMENTS INCORPORATED BY REFERENCE
Part II incorporates information by reference from the annual report to
shareowners for the year ended December 31, 1994. Part III incorporates
information by reference from the proxy statement for the annual meeting of
shareowners to be held on April 24, 1995.
Total pages 71
Page 1
Exhibit Index page 13
PART I
Item 1. Business
General
The registrant was incorporated under the laws of Delaware in 1953.
The registrant operates a single segment business in the textile
industry and is principally involved in the manufacture and sale of
home furnishing products.
The registrant and its consolidated subsidiaries design, manufacture
and market a broad range of household textile products consisting of
towels, sheets, blankets, comforters and bath rugs. The registrant is
vertically integrated in that it buys the basic raw materials
consisting principally of cotton and synthetic fibers and manufactures
a finished consumer product. These products are marketed primarily by
the Company's own sales and marketing staff and distributed nationally
to customers for ultimate retail sale. Customers consist principally
of department stores, chain stores, mass merchants, specialty home
furnishing stores, catalog warehouse clubs and other retail outlets,
and institutional, government and contract accounts.
In 1994 nearly all of the registrant's total sales were comprised of
home furnishings products. Approximately 90% of the Company's 1994
net sales were from sales of products carrying the registrant's
principal brand names of "Fieldcrest," "Royal Velvet," "Charisma,"
"St. Marys," "Cannon," "Monticello," "Royal Family," and "Caldwell";
the remaining 10% were from sales of private label products.
On November 24, 1993 a newly formed and wholly owned subsidiary of the
Company completed a tender offer for all of the outstanding shares of
Amoskeag Company ("Amoskeag") for a cash price of $40 per share, or an
aggregate of approximately $141.9 million including certain costs.
The acquisition has been accounted for as a purchase by the Company
for the net assets of Amoskeag held for sale at their net realizable
values and as the purchase of treasury stock. Amoskeag owned
3,606,400 shares of the Company's common stock which was assigned a
cost of $117.2 million after an allocation of $24.7 million to the net
assets of Amoskeag. The operating assets of Amoskeag consist
primarily of the Bangor and Aroostook Railroad ("BAR") and certain
real estate properties. During 1994 the BAR's operating income of $3
million was excluded from the Company's consolidated income statement
and $1.6 million of interest costs of the Company were allocated to
the assets held for sale. On March 17, 1995 the Company sold the BAR
for approximately $20 million of cash and $8 million of note
receivables.
Page 2
Raw Materials
The registrant's basic raw materials are cotton and synthetic fibers.
These materials are generally available from a wide variety of
sources, and no significant shortage of such materials is currently
anticipated. The registrant uses significant quantities of cotton
which is subject to ongoing price fluctuations. The registrant in the
ordinary course of business may arrange for purchase commitments with
vendors for future cotton requirements.
Patents and Licenses
The registrant holds various patents and licenses resulting from
company-sponsored research and development, and others are obtained
that are deemed advantageous to company operations. The registrant is
only partially dependent upon such patents and licenses in certain
product lines, and the loss of any exclusiveness in these areas would
not materially adversely affect overall profitability.
Seasonality in the Company's Business
Primarily because the Company's retail customers have higher sales in
the second half of the calendar year, the Company also experiences
greater sales volume in the last three quarters of the calendar year.
It is likely that the Company's operating performance in the first
quarter of a given calendar year will be less favorable than operating
performance in the last three quarters.
The registrant carries normal inventory levels to meet delivery
requirements of customers, and customer returns of merchandise shipped
are not material. Payment terms on customer invoices are generally 30
to 60 days.
Customers
The registrant's customers consist principally of department stores,
chain stores, specialty stores, mass merchants, warehouse clubs, other
retail outlets and institutional, government and contract accounts.
For the year ended December 31, 1994, the Company's five largest
customers accounted for approximately 38% of net sales. Sales to one
customer (Wal-Mart Stores and its affiliates) represented 18.3% of
total sales of the Company. Although management of the Company
believes that the Company's relationship with Wal-Mart is excellent
and the loss of this customer is unlikely, the loss of Wal-Mart as a
customer would have a material adverse effect on the Company's
business. No other single customer accounted for more than 10% of net
sales in 1994.
Page 3
Order Backlog
The registrant had normal unfilled order backlogs as of December 31,
1994 and 1993 amounting to approximately $94 million and $87 million,
respectively. The majority of these unfilled orders are shipped
during the first quarter of the subsequent fiscal year.
The increase in unfilled orders in 1994 compared to 1993 is believed
to be primarily due to the timing of new orders. Unfilled orders
have become less of an indicator of future sales as customers have
trended toward placing orders as stock is required. Many orders are
placed using electronic data interchange, and the Company has filled
such orders on a quick response basis.
Government Contracts
No material portion of the business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of
the Government.
Competition
The home furnishing textile industry continues to be highly
competitive. Among the registrant's competitors are a number of
domestic and foreign companies with significant financial resources,
experience, manufacturing capabilities and brand name identity.
The registrant competes with numerous other domestic manufacturers in
each of its principal markets. The domestic towel, sheet, blanket and
bath rug markets are each comprised of three to five principal
manufacturers (including the registrant) and several smaller domestic
manufacturers.
The registrant's principal methods of competition are price, design,
service and product quality. The Company believes that large, low-
cost producers with established brand names, efficient distribution
networks and good customer service will profit in this competitive
environment. The Company's ability to operate profitably in this
environment will depend substantially on continued market acceptance
of the Company's products and the Company's efforts to control costs
and produce new and innovative products in response to competitive
pressures and changes in consumer demand.
Environmental Controls
The registrant does not anticipate that compliance with federal, state
and local provisions that have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating to
the protection of the environment, will have a material effect upon
the capital expenditures, earnings and competitive position of the
registrant and its subsidiaries.
Page 4
Employees
Total employment of the Company and its subsidiaries was 13,926 as of
December 31, 1994. Approximately 29% of the Company's hourly
employees are subject to collective bargaining agreements with the
Amalgamated Clothing and Textile Workers Union or the United Textile
Workers of America.
Foreign Sales
The registrant is not currently engaged in significant operations in
foreign countries. Approximately 6% of the registrant's consolidated
net sales were exported to foreign customers in 1994 and 1993.
Item 2. Properties
The registrant has 19 principal manufacturing plants, all located in the
United States; 13 are in North Carolina, 1 in South Carolina, 1 in
Georgia, 3 in Alabama and 1 in Virginia. In addition, there are 22
warehousing and distribution centers located in the manufacturing
states, plus Texas and California. The manufacturing/warehousing and
distribution centers aggregate a floor area of approximately 17,281,000
square feet. All of the facilities are owned except: (1) 2 locations
totaling approximately 618,000 square feet, title to which is held by
the Development Authorities that issued the Industrial Development Bonds
which were issued to finance the facilities; and (2) 5 locations,
totaling approximately 415,000 square feet, where the machinery and
equipment is owned and the buildings are under a long-term lease. Title
to the facilities financed by Industrial Revenue Bonds as described
above will be transferred to the registrant upon the retirement of such
bonds. Such facilities therefore are accounted for as being owned by
the registrant.
The registrant owns corporate administrative buildings in Eden, North
Carolina, which contain approximately 96,000 square feet. The principal
marketing headquarters and certain executive offices (totaling
approximately 64,000 square feet) are located in New York City under
long-term leases.
All other properties owned or controlled by the registrant aggregate
approximately 500,000 square feet and are used for miscellaneous support
services or for sales and marketing.
Plants and equipment of the registrant are considered to be in excellent
condition; substantial capital expenditures for new plants,
modernization and improvements have been made in recent years. The
plants generally operate on either a three shift basis for a five-day
week or a four shift basis for a seven-day week during 50 weeks a year
except during periods of curtailment. In the opinion of the registrant,
all plants and properties are adequately covered by insurance.
Page 5
Item 3. Legal Proceedings
The registrant is involved in various claims and lawsuits incidental to
its business. In the opinion of the registrant based in part on the
advice of legal counsel, however, the outcome of these suits will not
have a material effect on the registrant's financial position.
Page 6
Identification of Executive Officers of the Registrant
Date from
Which Officers
Age at Have Served in
Name 3/31/95 Positions Held Present Capacities
James M. Fitzgibbons 60 Chairman of the Board Chairman of the Board and
and Chief Executive Chief Executive Officer: 1990
Officer and Director Director: 1985
Chris L. Kametches 59 Senior Vice President Senior Vice President: 1990
Robert E. Dellinger 50 Vice President Vice President: 1989
M. Kenneth Doss 55 Vice President Vice President: 1988
and Secretary General Counsel: 1985
Secretary: 1986
Kevin M. Finlay 45 Vice President Vice President: 1993
Osborne L. Raines 54 Vice President Vice President: 1985
Thomas R. Staab 52 Vice President and Vice President: 1992
Chief Financial Officer Chief Financial Officer: 1994
Clifford D. Paulsen 51 Controller Controller: 1992
None of the executive officers are related by blood, marriage or adoption
to any other executive officer of the registrant or any director or
executive officer of a parent, subsidiary, or affiliate of the registrant.
With the exception of Mr. Fitzgibbons each executive officer has been
employed by the registrant for more than five years. Prior to becoming
Chief Executive Officer and Chairman of the Board of Directors of the
registrant on October 15, 1990, Mr. Fitzgibbons was President of Amoskeag
Company and was previously an executive officer of Amoskeag Company for
more than five years.
Page 7
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
Incorporated by reference from the market and dividend data section of the
1994 Annual Report to Shareowners, page 22.
Item 6. Selected Financial Data
Selected financial and statistical data for the years 1990 to 1994
appearing in the line items "Net sales", "Income (loss) from continuing
operations", "Per share of common stock: Primary income (loss) from
continuing operations" and "Fully diluted income (loss)", "Total assets",
"Long-term obligations" and "Dividends" are incorporated by reference from
the 1994 Annual Report to Shareowners, page 39.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated by reference from the 1994 Annual Report to Shareowners, pages
19 through 22.
Item 8. Consolidated Financial Statements and Supplementary Data
Incorporated by reference from the 1994 Annual Report to Shareowners, pages
23 through 38.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
Page 8
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons of
the Registrant
Information regarding the Directors is incorporated herein by reference
from the registrant's proxy statement for the annual meeting of shareowners
to be held on April 24, 1995, pages 2 and 3.
For information regarding the Executive Officers of the registrant, see
Part I at page 7.
Item 11. Executive Compensation
Incorporated herein by reference from sections of the registrant's proxy
statement for the annual meeting of shareowners to be held on April 24,
1995 entitled "Compensation of Directors", pages 6 and 7 and "Executive
Compensation", pages 7 through 14.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference from the section of the registrant's proxy
statement for the annual meeting of shareowners to be held on April 24,
1995 entitled "Security Ownership", pages 4 through 6.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference from the registrant's proxy statement for
the annual meeting of shareowners to be held April 24, 1995, pages 7 and 8,
entitled "Executive Compensation".
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1.
and 2. Financial statements and financial statement schedules
The financial statements and schedules listed in the accompanying
index to financial statements are filed as part of this annual
report.
3. Exhibits
The exhibits listed as applicable on the accompanying Exhibit Index
at page 17 are filed as part of this annual report. Exhibit numbers
(10)1. through (10)12. represent management contracts or
compensatory plans or arrangements required to be filed as an
exhibit by Item 601 of Regulation S-K.
(b) Reports on Form 8-K
None.
Page 9
FIELDCREST CANNON, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14(a) 1 & 2)
Page Numbers of the
Annual report to
Shareowners
Consolidated statement of financial position at 25
December 31, 1994 and 1993
Consolidated statement of income and retained earnings 24
for each of the three years in the period ended
December 31, 1994
Consolidated statement of cash flows for each of the 26
three years in the period ended December 31, 1994
Notes to consolidated financial statements 27-37
Report of independent auditors 38
No schedules are filed because the required information is not
applicable or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
financial statements and notes thereto.
The consolidated financial statements listed in the above index which
are included in the Annual Report to Shareowners of Fieldcrest Cannon, Inc.
for the year ended December 31, 1994 are hereby incorporated by reference.
With exception of the pages listed in the above index and the Items
referred to in Part II, Items 5, 6, 7 and 8, the 1994 Annual Report to
Shareowners is not to be deemed filed as part of this report.
Page 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FIELDCREST CANNON, INC.
March 8, 1995 By:/s/ James M. Fitzgibbons
James. M. Fitzgibbons, Chairman of
the Board of Directors and Chief
Executive Officer (Principal
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the registrant
and in the capacities on the dates indicated.
/s/ James. M. Fitzgibbons March 8, 1995
James M. Fitzgibbons, Chairman of the Board
of Directors and Chief Executive Officer
(Principal Executive Officer)
/s/ M. Kenneth Doss March 8, 1995
M. Kenneth Doss
Vice President and Secretary
/s/ Thomas R. Staab March 8, 1995
Thomas R. Staab
Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Clifford D. Paulsen March 8, 1995
Clifford D. Paulsen
Controller (Principal Accounting Officer)
/s/ Tom H. Barrett March 8, 1995
Tom H. Barrett
Director
Page 11
/s/ William E. Ford March 8, 1995
William E. Ford
Director
/s/ John C. Harned March 8, 1995
John C. Harned
Director
/s/ S. Roger Horchow March 8, 1995
S. Roger Horchow
Director
/s/ Charles G. Horn March 8, 1995
Charles G. Horn
Director
/s/ W. Duke Kimbrell March 8, 1995
W. Duke Kimbrell
Director
/s/ C. J. Kjorlien March 8, 1995
C. J. Kjorlien
Director
Page 12
EXHIBIT INDEX TO
ANNUAL REPORT ON FORM 10-K FOR
FIELDCREST CANNON, INC.
FOR THE YEAR ENDED DECEMBER 31, 1994
Page Number
Exhibit or Incorporation
Number Description by Reference to
(3) 1. Restated Certificate of Incorporation, Exhibit 3-1 to the
as amended to date. Registrant's Registration
Statement on Form S-3
filed on February 18,
1994.
2. Amended and Restated By-Laws of the Registrant Exhibit 3-1 to Report on
as amended to November 24, 1993. Form 8-K Filed on
December 9, 1993.
(4) 1. Rights Agreement, dated as of November 24, 1993, Exhibit 1 to the
between the Registrant and The First National Registrant's Registration
Bank of Boston, which includes as Exhibit A the Statement on Form 8-A
Form of Rights Certificate of Designations, as filed December 3, 1993.
Exhibit B the Form of Rights Certificate, and as
Exhibit C the Summary of Rights to Purchase
Preferred Stock.
2. Indenture dated as of March 15, 1987, relating to Exhibit 4.9 to the
the Registrant's 6% Convertible Subordinated Registrant's Registration
Debentures Due 2012 between the Registrant and Statement on Form S-3
Wachovia Bank and Trust Company, N.A., (No. 33-12436) filed on
including the form of debenture. March 6, 1987.
3. Indenture dated as of June 1, 1992, relating to Exhibit 4.7 of
the Senior Subordinated Debentures Due 2004, Amendment No. 1 to the
between the Registrant and First Union National Registrant's Registration
Bank, as Trustee, including the form of Statement on Form S-3
debenture. (No. 33-47348) filed on
June 3, 1992.
4. Amended and Restated Revolving Credit Exhibit 4-4 to Report
Agreement dated as of March 10, 1994 by and on Form 10-K for
among the Registrant, The First National Bank fiscal year ending
of Boston as agent, Continental Bank N.A., December 31, 1993.
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
5. First Amendment to the Restated Revolving 17-22
Credit Agreement dated as of March 10, 1994 by
and among the Registrant, The First National
Bank of Boston as agent, Continental Bank N.A.,
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
Page 13
6. Second Amendment to the Restated Revolving 23-33
Credit Agreement dated as of March 10, 1994 by
and among the Registrant, The First National
Bank of Boston as agent, Continental Bank N.A.,
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
7. Third Amendment to the Restated Revolving 34-45
Credit Agreement dated as of March 10, 1994 by
and among the Registrant, The First National
Bank of Boston as agent, Continental Bank N.A.,
Philadelphia National Bank, and First Union
National Bank of North Carolina, as lead
managers, and certain lenders.
The registrant, by signing this Report, agrees to
furnish the Securities and Exchange Commission
upon its request a copy of any instrument which
defines the rights of holders of long-term debt of the
Registrant and all of its subsidiaries for which
consolidated or unconsolidated financial statements
are required to be filed, and which authorizes a total
amount of securities not in excess of 10% of the
total assets of the Registrant and its subsidiaries on
a consolidated basis.
Page 14
Page Number
Exhibit or Incorporation
Number Description by Reference to
(10) 1. Amended and Restated Director Stock Option Exhibit A to the
Plan of the Registrant approved by the Registrant's proxy
stockholders of the Corporation on April 28, statement for the annual
1992. meeting of shareowners
held on April 28, 1992.
2. Stock Option Agreement between the Registrant Exhibit 4.1 to the
and James M. Fitzgibbons dated as of September Registrant's Registration
11, 1991. Statement on Form S-8
filed on December 23,
1991.
3. Employee Retention Agreement between Registrant Exhibit 10.2 to Report
and James M. Fitzgibbons effective as of on Form 10-Q for the
July 9, 1993. quarter ended September
30, 1993.
4. Employment Agreement between the Registrant Exhibit 10-2 to Report
and Charles G. Horn dated as of January 1, on Form 10-K for fiscal
1988. year ending December
31, 1988.
5. Instrument of Amendment dated October 23, Exhibit 10-3 to Report
1989, between the Registrant and Charles G. on Form 10-K for fiscal
Horn, amending Exhibit 10-4 above. year ending December
31, 1989.
6. Instrument of Amendment dated July 23, 1993 by Exhibit 10.1 to Report
and between the Registrant and Charles G. Horn, on Form 10-Q for the
amending the employment agreement between the quarter ended September
Registrant and Charles G. Horn dated as of 30, 1993.
January 1, 1988.
7. Employee Retention Agreement between the Exhibit 10.4 to Report
Registrant and Chris L. Kametches effective on Form 10-Q for the
as of July 9, 1993. quarter ended September
30, 1993.
8. Instrument of Amendment dated July 29, 1993 Exhibit 10.5 to Report
between the Registrant and Chris L. Kametches, on Form 10-Q for the
amending Exhibit 10.7 above. quarter ended September
30, 1993.
9. Employee Retention Agreement between the Exhibit 10.9 to Report
Registrant and Robert E. Dellinger effective on Form 10-K for fiscal
as of July 9, 1993. year ending December 31,
1993.
10. Instrument of Amendment dated July 29, 1993 Exhibit 10.10 to Report
between the Registrant and Robert E. Dellinger, on Form 10-K for fiscal
amending Exhibit 10.9 above. year ending December 31,
1993.
Page 15
11. Form of Employee Retention Agreement between Exhibit 10.6 to Report
the Registrant and other executive officers of on Form 10-Q for the
the Registrant effective as of July 9, 1993. quarter ended September
30, 1993.
12. Form of Instrument of Amendment dated July 29, Exhibit 10.7 to Report
1993 between the Registrant and other executive on Form 10-Q for the
officers of the Registrant, amending Exhibit 10.11 quarter ended September
above. 30, 1993.
(11) Computation of Primary and Fully Diluted Net Income 46 - 48
(Loss) per Share.
(13) 1994 Annual Report to Shareowners. 49 - 69
(21) Subsidiaries of the Registrant. 70
(23) Consent of independent auditors. 71
Page 16