FIELDCREST CANNON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following summary income statement sets forth the percentage relationship
that certain costs and expenses and other items in the income statement bear to
net sales (dollars in millions).
1996 1995 1994
Amount Percent Amount Percent Amount Percent
NET SALES $1,092.5 100.0% $1,095.2 100.0% $1,063.7 100.0%
Cost of sales 956.6 87.6 966.6 88.3 898.4 84.5
Selling, general and administrative 105.4 9.6 108.2 9.9 94.8 8.9
Restructuring charges 8.1 .7 20.5 1.8 -- --
OPERATING INCOME (LOSS) 22.4 2.1 (.1) -- 70.5 6.6
Interest expense 26.8 2.5 27.6 2.5 23.3 2.2
Other (income) expense, (5.6) (.5) .1 -- .9 .1
INCOME (LOSS) BEFORE INCOME TAXES 1.2 .1 (27.8) (2.5) 46.3 4.3
Federal and state income taxes (benefit) .1 -- (12.1) (1.1) 15.6 1.4
NET INCOME (LOSS) $ 1.1 .1% $ (15.7) (1.4)% $ 30.7 2.9%
13
FIELDCREST CANNON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
1996 COMPARED TO 1995
Net sales for 1996 were $1,092.5 million compared to $1,095.2 million for 1995,
a decrease of .2%. The decline was primarily due to the sale of the Blanket
Division in November 1996. Net sales increased 1.3% after excluding Blanket
Division sales for both periods. The increase in sales other than blankets was
due primarily to volume increases. Gross profit margins increased from 11.7% in
1995 to 12.4% in 1996 primarily because of reduced manufacturing costs
associated with the new towel weaving facility in Phenix City, Alabama and the
outsourcing of the Bed Division yarn production. These cost reductions were
partially offset by $4.1 million of equipment relocation and training costs
related to the consolidation and closing of two towel facilities.
Selling, general and administrative expenses as a percent of sales decreased
from 9.9% in 1995 to 9.6% in 1996. The decrease was due primarily to lower
advertising and other selling expenses. These lower expenses were partially
offset by higher costs related to the outsourcing of the Company's information
technology services and functions in August 1996.
Operating income for 1996 was reduced $8.1 million by restructuring charges of
$3.6 million for closing a towel weaving plant and a yarn manufacturing plant
and $4.5 million for employee termination benefits and disposal costs related to
the sale of certain Blanket Division assets. See Note 2 of the Notes to
Consolidated Financial Statements. Before the restructuring charges, operating
income in 1996 was $30.5 million, or 2.8% of sales, compared to $20.4 million,
or 1.9% of sales, in 1995.
Net interest expense decreased $.8 million in 1996. The decrease was primarily
due to $2.1 million of interest income received with refunds of federal income
taxes during 1996. Excluding the effects of the interest income, interest
expense increased due to higher average debt and interest rates during 1996.
Other income of $5.6 million related primarily to the sale of two warehouse
distribution centers and a towel yarn facility that were no longer used by the
Company.
The effective income tax rate was 9.7% in 1996 compared to an effective income
tax benefit of 43.5% in 1995. See Note 11 of the Notes to Consolidated Financial
Statements.
Net income was $1.1 million, or a loss of $.38 per share after $4.5 million of
preferred dividends, in 1996 compared to a loss of $15.7 million, or $2.28 per
share, in 1995. Excluding the effects of the restructuring charges, net income
was $6.1 million, or $.18 per share, in 1996, compared to a loss of $3.6
million, or $.91 per share, in 1995.
1995 COMPARED TO 1994
Net sales for 1995 were $1,095.2 million compared to $1,063.7 million for 1994,
an increase of 3%. The $31.5 million increase includes $47.0 million of
furniture coverings from the Sure Fit business acquired in January 1995. The
1.5% decrease in sales, after adjusting for the Sure Fit acquisition, was due to
lower volumes which were only partially offset by price increases implemented in
the last half of 1994 and during 1995. The volume decline occurred in the second
half of the year and is attributed primarily to weakness in retail sales. Gross
profit margins decreased from 15.5% in 1994 to 11.7% in 1995 primarily because
of higher raw material prices and lower mill activity.
Selling, general and administrative expenses as a percent of sales increased
from 8.9% in 1994 to 9.9% in 1995. The increase was due primarily to increased
advertising and other selling expenses.
Operating income for 1995 was also reduced by $20.5 million of restructuring
charges resulting from the reorganization of the Company's New York operations,
which included severance and termination benefits for 54 employees, a related
voluntary early retirement program, which was accepted by 87 employees and
closing two yarn mills. See Note 2 of the Notes to Consolidated Financial
Statements. The reorganization of the New York office and related early
retirement program are expected to reduce pre-tax annual costs by approximately
$8 million. The Company has contracted to purchase yarn from outside vendors and
expects annual pre-tax savings of $8 to $9 million. Before the restructuring
charges, operating income in 1995 was $20.4 million, or 1.8% of sales, compared
to $70.5 million, or 6.6% of sales, in 1994.
14
FIELDCREST CANNON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest expense increased $4.3 million in 1995. The increase was due to higher
rates under the revolver and an increase in average debt outstanding. Debt
increased during 1995 because of the Sure Fit acquisition and the Company's
increased level of capital expenditures. In 1994 the Company allocated $1.6
million of interest costs to the Amoskeag assets held for sale.
An income tax benefit equal to 43.5% of the 1995 pre-tax loss was recognized in
1995, compared to an effective income tax rate of 33.6% on pre-tax income in
1994. A $1.7 million favorable settlement of prior years income taxes in 1994
reduced the 1994 effective tax rate by 3.7%. See Note 11 of the Notes to
Consolidated Financial Statements.
Net loss from continuing operations of $15.7 million, or $2.28 per share, was
incurred in 1995 compared to net income of $30.7 million, or $3.02 per share, in
1994. The loss before restructuring charges was $3.6 million, or $.91 per share,
in 1995 compared to income of $29.0 million, or $2.82 per share, in 1994 after
excluding the favorable settlements of prior years income taxes of $1.7 million
from 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements are for working capital, principally
inventory and accounts receivable, and capital expenditures. The Company
historically has financed these requirements, including its working capital
requirements which follow a seasonal pattern, with funds generated from its
operations and through borrowings under its revolving credit agreements.
The table below summarizes the Company cash provided by operating and financing
activities and cash provided by (used in) investing activities.
(Dollars in thousands) 1996 1995
CASH PROVIDED (USED):
Net income (loss) $ 1,060 $(15,725)
Depreciation and amortization 36,678 31,746
Deferred income taxes (2,184) (2,384)
Working capital, excluding
effects of acquisition of Sure
Fit and sale of Blanket
Division inventories 8,256 12,613
Other (3,409) 1,597
Financing activities (53,164) 42,386
TOTAL CASH PROVIDED (USED) (12,763) 70,233
CASH USED FOR:
Additions to plant and equipment (33,386) (64,153)
Sale of plant and equipment 15,483 1,218
Proceeds from sale of Blanket
Division inventories and
equipment 26,189 --
Proceeds from net assets held
for sale -- 23,241
Purchase of Sure Fit, net of
cash acquired -- (27,300)
TOTAL CASH PROVIDED BY
(USED IN) INVESTING ACTIVITIES 8,286 (66,994)
INCREASE (DECREASE) IN CASH $ (4,477) $ 3,239
Working capital requirements decreased in 1996 primarily because accounts
receivables decreased $13.6 million in connection with the closing of the
Blanket Division operations. Working capital requirements decreased in 1995
primarily because accounts receivables decreased $10.6 million.
Total debt as a percent of total capitalization (long-term debt, short-term debt
and shareowners' equity) was 60% at December 31, 1996, compared to 63% at the
end of 1995.
Capital expenditures totalled $33.4 million in 1996 compared to $64.2 million
spent in 1995. Capital expenditures for 1997 are expected to be approximately
$70 million. Included in the 1995 capital expenditures is $37.2 million for a
new weaving plant at the Company's Columbus, Ga./Phenix City, Ala. towel mill
which was completed during 1996. It is anticipated that financing of future
capital expenditures will be provided by cash flows from operations, borrowings
under the Company's revolving credit facility, and, possibly, the sale of
long-term debt or equity securities.
The Company's revolving credit facility in place during 1996 allowed the Company
to borrow up to $195 million through January 3, 1998. Effective January 30,
1997, the Company refinanced its existing revolving credit facility with a new
revolving credit facility which allows the Company to borrow up to $200 million
through January 30, 2002. Outstanding letters of credit reduce the availability
under the revolving credit facility by $12.6 million. The Company uses its
revolving credit facility for long-term debt purposes and its seasonal borrowing
requirements during the year. Short-term borrowings are required during the year
to finance seasonal increases in inventories and receivables.
15
FIELDCREST CANNON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The new revolving credit facility requires, among other things, that the Company
maintain certain financial ratios with regard to interest coverage and funded
debt. It allows payment of $4.5 million of preferred dividends annually, but
does not allow dividends on Common Stock. The agreement also places restrictions
on the Company's ability to incur debt or liens, to make certain investments and
to effect certain mergers, consolidations or sales of assets or changes in
control.
At December 31, 1996, borrowings under the $195 million revolving term debt
agreement totalled $95.7 million. Interest rates on the replaced revolving term
debt were, at the Company's option, at the prime rate, or at a Euromarket-based
rate plus 2.25%. The borrowing rate decreased to a Euromarket-based rate plus 2%
on January 31, 1997 under the new facility.
MARKET AND DIVIDEND DATA
The Company's Common Stock is listed on the New York Stock Exchange (trading
symbol: FLD). At December 31, 1996, there were 1,953 shareholders of record of
Common Stock. See Note 6 of the Notes to Consolidated Financial Statements
regarding restrictions on the payment of dividends. No dividends were paid on
Common Stock during the last two years. The high and low sale prices on the New
York Stock Exchange composite tape for the last two years were as shown below:
Market price
Common Stock
Quarter, 1996 High Low
1st $ 21 1/2 $16 3/8
2nd 22 1/4 19 1/4
3rd 20 1/8 13 1/2
4th 16 12 7/8
Quarter, 1995
1st $ 25 3/8 $19 7/8
2nd 24 1/8 19 3/4
3rd 24 7/8 21 1/4
4th 22 1/4 15 3/4
QUARTERLY DATA (UNAUDITED)
Data in millions, except per share information
1996 quarter ended March 31 June 30 Sept. 30 Dec. 31
Net sales $250.0 $277.8 $285.2 $279.5
Gross profit 34.9 36.0 35.7 29.4
Operating income 6.1 11.0 2.9 2.5
Net income (loss) (.7) 2.1 (2.7) 2.3
Primary earnings (loss) per share (.20) .11 (.43) .13
Fully diluted earnings (loss) per share (.20) .11 (.43) .13
1995 quarter ended March 31 June 30 Sept. 30 Dec. 31
Net sales $257.0 $273.1 $280.5 $284.6
Gross profit 43.0 34.4 40.1 11.1
Operating income (loss) 12.4 4.2 6.7 (23.4)
Net income (loss) 3.6 (1.6) -- (17.7)
Primary earnings (loss) per share .28 (.30) (.13) (2.11)
Fully diluted earnings (loss) per share .28 (.30) (.13) (2.11)
FIELDCREST CANNON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Annual earnings for 1996 were reduced by pre-tax restructuring charges of $8.1
million which reduced net income by $5.1 million or $.56 per share. Quarterly
earnings for 1996 were reduced by restructuring charges of $3.6 million, or $.25
per share, and $4.5 million, or $.31 per share, for the first and third
quarters, respectively. The restructuring charges in the first quarter were
related to the closing of two towel mills. The third quarter charges were the
result of closing the Blanket facilities in Eden, North Carolina. Net income in
the fourth quarter was increased $3.8 million, or $.42 per share, by pre-tax
gains of $6.1 million related primarily to sale of two warehouse distribution
centers and a towel yarn facility that were no longer used by the Company.
Annual earnings for 1995 were reduced by pre-tax restructuring charges of $20.5
million which increased the net loss by $12.1 million, or $1.37 per share.
Quarterly earnings for 1995 were reduced by restructuring charges of $3.9
million, or $.28 per share; $4.5 million, or $.32 per share; $7.1 million, or
$.53 per share; and $4.9 million or $.23 per share for the first, second, third
and fourth quarters, respectively. The restructuring charges during the first
three quarters were related to the reorganization of the Company's New York
operations and a related early retirement program. The fourth quarter charges
were the result of closing two yarn mills.
Quarterly earnings per share amounts presented for 1996 and 1995 do not equal
the annual 1996 and 1995 earnings per share amount due to issuance of shares
during the year.
17
FIELDCREST CANNON, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Year Ended December 31
Dollars in thousands, except per share data
1996 1995 1994
Net sales $1,092,496 $1,095,193 $1,063,731
Cost of sales (notes 2, 3) 956,522 966,642 898,437
Selling, general and administrative 105,405 108,194 94,756
Restructuring charges (note 2) 8,130 20,469 --
Total operating costs and expenses 1,070,057 1,095,305 993,193
Operating income (loss) 22,439 (112) 70,538
OTHER DEDUCTIONS (INCOME):
Interest expense 26,869 27,630 23,268
Other, net (5,604) 67 987
Total other deductions 21,265 27,697 24,255
Income (loss) before income taxes 1,174 (27,809) 46,283
Federal and state income taxes (benefits) (note 11) 114 (12,084) 15,538
Net income (loss) 1,060 (15,725) 30,745
Preferred dividends (4,500) (4,500) (4,500)
Earnings (loss) on common $ (3,440) $ (20,225) $ 26,245
Amount added to (subtracted from) retained earnings (3,440) (20,225) 26,245
Retained earnings, January 1 99,055 119,280 93,035
Retained earnings, December 31 $ 95,615 $ 99,055 $ 119,280
Primary earnings (loss) per common share $ (.38) $ (2.28) $ 3.02
Fully diluted earnings (loss) per common share (note 1) $ -- $ -- $ 2.51
Average primary shares outstanding 9,023,958 8,875,360 8,696,015
Average fully diluted shares outstanding 14,413,901 14,264,504 14,085,905
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
18
FIELDCREST CANNON, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At December 31,
Dollars in thousands, except per share data
1996 1995
ASSETS
Cash $ 4,647 $ 9,124
Accounts receivable less allowances of $7,693 in 1996 and $8,162 in 1995, principally
trade 154,511 168,112
Inventories (note 3) 216,165 228,167
Other prepaid expenses and current assets 2,489 3,446
TOTAL CURRENT ASSETS 377,812 408,849
Plant and equipment, net (notes 4, 7) 323,838 342,285
Deferred charges and other assets 66,843 61,812
TOTAL ASSETS $ 768,493 $ 812,946
LIABILITIES AND SHAREOWNERS' EQUITY
Accounts and drafts payable $ 63,910 $ 54,274
Deferred income taxes 18,212 17,593
Accrued liabilities (note 5) 61,172 67,725
Current portion of long-term debt 5,508 780
TOTAL CURRENT LIABILITIES 148,802 140,372
Senior long-term debt (note 6) 107,746 155,262
Subordinated long-term debt (note 6) 203,750 210,000
Total long-term debt 311,496 365,262
Deferred income taxes 38,291 40,475
Other non-current liabilities 54,149 51,406
TOTAL NON-CURRENT LIABILITIES 403,936 457,143
TOTAL LIABILITIES 552,738 597,515
Commitments (notes 7, 9, 10)
Preferred Stock, $.01 par value (note 8)
Shares authorized: 10,000,000
Shares issued: 1,500,000
(aggregate liquidation preference of $75,000) 15 15
Common Stock, $1 par value (note 8)
Shares authorized: 25,000,000
Shares issued, 1996: 12,738,894 12,739
Shares issued, 1995: 12,560,826 12,561
Additional paid in capital 224,611 221,025
Retained earnings 95,615 99,055
Excess purchase price for Common Stock acquired and held in treasury -- 3,606,400
shares (117,225) (117,225)
TOTAL SHAREOWNERS' EQUITY 215,755 215,431
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $ 768,493 $ 812,946
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
19
FIELDCREST CANNON, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended December 31,
Dollars in thousands
1996 1995 1994
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income (loss) $ 1,060 $(15,725) $ 30,745
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 36,678 31,746 29,828
Deferred income taxes (2,184) (2,384) 7,677
Other (3,409) 1,597 (8,178)
Change in current assets and liabilities, excluding effects of acquisition of
Sure Fit and sale of Blanket Division inventories:
Accounts receivable 13,601 10,579 (5,582)
Inventories (10,004) 3,125 (4,160)
Current deferred income taxes 619 (4,395) 7,189
Other prepaid expenses and current assets 957 582 (1,302)
Accounts payable and accrued liabilities 3,083 4,990 (17,870)
Federal and state income taxes -- (2,268) 2,006
NET CASH PROVIDED BY OPERATING ACTIVITIES 40,401 27,847 40,353
Cash flows from investing activities:
Additions to plant and equipment (33,386) (64,153) (51,929)
Proceeds from disposal of plant and equipment 15,483 1,218 1,815
Proceeds from sale of Blanket Division inventories and equipment 26,189 -- --
Proceeds from sale of net assets held for sale -- 23,241 --
Purchase of Sure Fit, net of cash acquired -- (27,300) --
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 8,286 (66,994) (50,114)
Cash flows from financing activities:
Increase (decrease) in revolving debt (46,816) 48,298 17,798
Proceeds from issuance of other long-term debt 3,610 -- 10,000
Payments on long-term debt (5,499) (1,469) (11,597)
Proceeds from issuance of common stock 41 57 80
Dividends paid on preferred stock (4,500) (4,500) (4,500)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (53,164) 42,386 11,781
Net increase (decrease) in cash (4,477) 3,239 2,020
Cash at beginning of year 9,124 5,885 3,865
Cash at end of year $ 4,647 $ 9,124 $ 5,885
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest expense $ 26,150 $ 25,471 $ 23,871
Income tax payments (refunds) (5,958) 2,848 5,381
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
20
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain prior
year items have been reclassified to conform to the 1996 presentation.
The Company operates in the textile industry and is principally involved in the
manufacture and sale of home furnishings products. These sales are primarily to
domestic department stores, mass retailers, specialty stores and large chain
stores. Sales to one customer (Wal-Mart Stores and its affiliates) represented
21.2%, 16.6% and 18.3% of total sales of the Company in 1996, 1995 and 1994,
respectively.
USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES -- Inventories are valued at the lower of cost, determined
principally on a last-in, first-out basis, or market.
DEPRECIATION -- Buildings, machinery and equipment are depreciated for financial
reporting purposes on the straight line method over the estimated useful lives
of these assets. Depreciation for tax purposes is provided on an accelerated
basis.
REVENUE RECOGNITION -- Revenue from product sales is recognized at the time
ownership of the goods transfers to the customer.
DEFERRED FINANCING FEES -- Debt financing fees are amortized over the term of
the related debt.
INCOME PER COMMON SHARE -- Primary earnings per common share is based on net
income after preferred dividend requirements and the weighted average number of
shares of Common Stock outstanding during the year and common stock equivalents
attributable to outstanding stock options. Fully diluted earnings per common
share are calculated assuming conversion, when dilutive, of the 6% convertible
subordinated sinking fund debentures and the $3 Series A Convertible Preferred
Stock. Fully diluted income per common share for 1996 and 1995 are not presented
as effects are anti-dilutive.
ACCOUNTING FOR STOCK-BASED COMPENSATION -- The Company accounts for its
stock-based compensation in accordance with Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees." Under APB 25,
compensation expense is determined on the measurement date and compensation
expense, if any, is measured based on the award's intrinsic value, the excess of
the market price of the stock over the exercise price on the measurement date.
21
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(2) RESTRUCTURING CHARGES
In March 1996 the Company announced the closing of a towel weaving facility and
yarn manufacturing facility. In September 1996, the Company sold certain Blanket
Division inventories and equipment to Pillowtex Corporation which resulted in
closing the Blanket facilities in Eden, N.C. As a result of these actions the
company incurred restructuring charges of $8.1 million in 1996. The
restructuring charges include $3.6 million for employee termination benefits,
substantially all of which has been paid, and the write-down of weaving and yarn
equipment associated with closing the towel facilities and $4.5 million for
Blanket Division employee termination benefits and the write-down of certain
Blanket Division real estate which the Company intends to dispose of during
1997.
During 1995 the Company reorganized its New York operations and relocated sales,
marketing and design personnel to Kannapolis, N.C. In conjunction with the
reorganization, the Company offered a voluntary early retirement program to its
salaried employees. In December 1995 the Company announced the closing of two
yarn mills and agreed to sell a warehouse. As a result of these actions the
Company incurred restructuring charges of $20.5 million in 1995. The
restructuring charges include approximately $15.6 million primarily for
severance and termination benefits for 54 employees, the voluntary early
retirement program which was accepted by 87 employees and lease costs in
connection with the New York reorganization and $4.4 million for the write-down
of yarn equipment and $.5 million for termination benefits associated with
closing the yarn mills. These charges increased the 1995 loss by $12.1 million,
or $1.37 per share. At December 31, 1996, substantially all charges have been
incurred.
(3) INVENTORIES
Inventories are valued at the lower of cost or market and consisted of the
following at December 31:
1996 1995
Finished goods $104,092 $117,776
Work in progress 68,668 72,315
Raw materials and supplies 43,405 38,076
Total $216,165 $228,167
Approximately 69% of the inventories at year-end 1996 and 73% at year-end 1995
were valued on the last-in, first-out method (LIFO). If the first-in, first-out
method of accounting had been used, inventories would have been greater by
approximately $45 million and $49 million at December 31, 1996 and 1995,
respectively. The LIFO reserve decreased $3.4 million in 1996 and increased $9.2
million in 1995. In 1996, reduction in LIFO inventory quantities had the effect
of increasing net income by approximately $.6 million, or $.07 per share.
22
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(4) PLANT AND EQUIPMENT
Plant and equipment is stated at cost and consisted of the following at December
31:
1996 1995
Land $ 2,794 $ 5,376
Buildings 207,909 213,205
Equipment 383,118 404,277
Plant additions in progress 16,467 24,903
Total 610,288 647,761
Accumulated depreciation (286,450) (305,476)
Net plant and equipment $ 323,838 $ 342,285
(5) ACCRUED LIABILITIES
Accrued liabilities were as follows at December 31:
1996 1995
Salaries and other compensation $10,630 $ 9,749
Pension, medical and other
employee benefit plans 15,672 22,937
Advertising expense 3,579 4,301
Interest expense 3,629 4,267
Other 27,662 26,471
Total $61,172 $67,725
23
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(6) DEBT
Long-term debt at December 31 was as follows:
1996 1995
SENIOR LONG-TERM DEBT:
Revolving term debt $ 95,706 $142,522
Industrial development bonds,
due 2021 10,000 10,000
Industrial revenue bonds, due
in installments through 2002 2,740 3,520
TOTAL SENIOR LONG-TERM DEBT 108,446 156,042
Less current portion 700 780
NET SENIOR LONG-TERM DEBT 107,746 155,262
SUBORDINATED LONG-TERM DEBT:
6% convertible subordinated
sinking fund debentures due
1997 to 2012 123,558 125,000
11.25% senior subordinated
debentures due 2002 to 2004 85,000 85,000
TOTAL SUBORDINATED LONG-TERM
DEBT 208,558 210,000
Less current portion 4,808 --
Net subordinated long-term debt 203,750 210,000
TOTAL LONG-TERM DEBT $311,496 $365,262
The Company's revolving credit facility allowed the Company to borrow up to $195
million through January 3, 1998. Effective January 30, 1997, the Company
replaced its existing revolving credit facility with a new revolving credit
facility which allows the Company to borrow up to $200 million through January
30, 2002. Accordingly, borrowings under the revolving credit facility are
classified as long-term debt. Interest rates on the replaced revolving term debt
were, at the Company's option, at the prime rate fixed by The First National
Bank of Boston, or at a Euromarket-based rate plus 2.25%. The borrowing rate
decreased to a Euromarket-based rate plus 2% on January 31, 1997 under the new
facility. The average interest rate on the revolving term debt was 7.8% on
December 31, 1996.
The new revolving credit facility is secured by a first lien on substantially
all of the Company's accounts receivable, inventories and general intangibles
and requires, among other things, that the Company maintain certain financial
ratios with regard to interest coverage and funded debt. It allows payment of
$4.5 million of preferred dividends annually, but does not allow dividends on
Common Stock. The revolving term debt agreement also places restrictions on the
Company's ability to incur debt or liens, to make certain investments and to
effect certain mergers, consolidations or sales of assets or changes in control.
The Company's 6% Convertible Subordinated Sinking Fund Debentures are
convertible into shares of Common Stock of the Company at a conversion price of
$44.25 per share.
At December 31, 1996, the fair value of the Company's 6% Convertible
Subordinated Debentures was $93.6 million compared to a carrying value of $123.6
million and the fair value of the 11.25% Subordinated Debentures was $88.2
million compared to a carrying value of $85 million. The fair value of the
debentures is based on quoted market prices. Differences between fair value and
carrying value of the Company's other debt were not significant.
The aggregate principal and sinking fund payments required to be made on
long-term debt during each of the five years subsequent to December 31, 1996
are: 1997, $5.5 million; 1998, $7.0 million; 1999, $6.6 million; 2000, $6.6
million and 2001, $6.6 million.
24
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(7) LEASE OBLIGATIONS
The Company leases certain real estate and equipment under various operating
leases. Listed below are the future minimum rental payments required under these
operating leases with noncancelable terms in excess of one year at December 31,
1996.
Real
Estate Equipment Total
1997 $ 5,596 $ 5,950 $11,546
1998 4,634 5,847 10,481
1999 3,547 5,077 8,624
2000 3,017 4,513 7,530
2001 2,919 3,393 6,312
Subsequent years 22,130 4,520 26,650
Net minimum lease payments $41,843 $ 29,300 $71,143
Total rental expense for all operating leases was $20.6 million, $22.0 million,
and $20.2 million for 1996, 1995 and 1994, respectively.
(8) SHAREOWNERS' EQUITY
In November 1993 the Company's shareowners authorized 10 million shares of
undesignated preferred stock and the issuance of up to 1.8 million shares of
preferred stock. On November 24, 1993, the Company sold 1.5 million shares of
$3.00 Series A Convertible Preferred Stock ("$3.00 Preferred Stock") in a
private offering and received net proceeds of $72.4 million. Each $3.00
Preferred Stock share is convertible into 1.7094 shares of Common Stock,
equivalent to a conversion price of $29.25 on the $50 offering price. Annual
dividends are $3.00 per share and are cumulative. The $3.00 Preferred Stock may
be redeemed at the Company's option on or after September 1, 2004, in whole or
in part, at $50 per share plus accrued and unpaid dividends. In the event the
Company's 11.25% Senior Subordinated Debentures are not outstanding or have been
defeased the $3.00 Preferred Stock may be redeemed, in whole or in part, at the
option of the Company, at a redemption price of $51.50 per share beginning as of
September 10, 1998 and at premiums declining to the $50 liquidation preference
by September 2004.
25
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(8) SHAREOWNERS' EQUITY (CONTINUED)
On November 24, 1993, the Board of Directors adopted a Stockholder Rights Plan
and declared a dividend of one preferred stock purchase right ("right") for each
outstanding share of the Company's Common Stock. Similar rights have been, and
generally will be, issued in respect of Common Stock subsequently issued. Each
right becomes exercisable, upon the occurrence of certain events, for one one-
hundredth of a share of Series B Junior Participating Preferred Stock, $.01 par
value, at a purchase price of $80 or, in certain circumstances, Common Stock or
other securities, cash or other assets having a then current market price (as
defined and subject to adjustment) equal to twice such purchase price. Under the
Stockholder Rights Plan, 500,000 shares of Series B Junior Participating
Preferred Stock have been reserved. The rights currently are not exercisable and
will be exercisable only if a person or group acquires beneficial ownership of
15% or more of the Company's outstanding shares of Common Stock. The rights,
which expire on December 6, 2003, are redeemable in whole, but not in part, at
the Company's option at any time for a price of $.02 per right.
At December 31, 1996, the Company has the Employee Stock Option Plan and the
Director Stock Option Plan. The Employee Stock Option Plan was adopted by the
Board of Directors and approved by the shareowners in 1995. Under the Employee
Plan, options granted may be either incentive or nonqualified stock options and
are granted at not less than the fair market value of the Company's Common Stock
at the time of grant. Options generally become exercisable in four equal annual
installments commencing one year from the date of grant and expire ten years
from such date. Under the plan, 435,000 shares of Common Stock have been
reserved for awards. Any shares subject to an option which expires or is
terminated unexercised as to such shares may again be subject to an option
granted under the plan. During 1996 and 1995, respectively, options to purchase
37,500 and 400,400 shares of Common Stock were awarded at an average exercise
price of $18.75 and $22.17. At December 31, 1996, there are 36,075 shares
available for future grants.
The Director Stock Option Plan was adopted by the Board of Directors and
approved by the shareowners. Under the Directors's plan, an annual grant of an
option to purchase 2,000 shares of Common Stock is awarded to each non-employee
Director on the fifth business day after the annual meeting of shareowners.
Options to non-employee Directors are nonqualified options. The price per share
is the fair market value of the Company's Common Stock on the grant date.
Options vest when awarded and expire seven years from the grant date, but no
option may be exercised during the six-month period following its grant except
in the case of death or disability. Under the plan, 500,000 shares of Common
Stock have been reserved for awards. During 1996 and 1995, respectively, options
to purchase 14,000 and 16,000 shares of Common Stock were awarded at an exercise
price of $20.625 and, $22.125. At December 31, 1996, there are 418,000 shares
available for future grants.
26
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(8) SHAREOWNERS' EQUITY (CONTINUED)
The Company accounts for these plans in accordance with APB Opinion 25,
"Accounting for Stock Issued to Employees," and related interpretations instead
of the alternative fair value accounting provided for under FASB No. 123,
"Accounting for Stock-Based Compensation." Because the exercise price of the
stock options is not less than the market price of the underlying stock on the
date of grant, no compensation expense is recognized under APB 25. Had
compensation costs for the Company's two Plans been determined based on the fair
value at the grant dates for awards under those Plans consistent with the method
of FASB Statement 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
1996 1995
Net income (loss):
As reported $1,060 $(15,725)
Pro forma 6 (16,553)
Earnings per share:
As reported (.38) (2.28)
Pro forma (.50) (2.37)
The above pro forma amounts have been determined as if all grants after December
31, 1994 have been accounted for on the fair value method.
The following schedule summarizes the Plans' stock option activity for the three
years ended December 31, 1996:
Weighted
Number of Average
Shares Exercise Price
Outstanding,
January 1, 1994 27,000 $ 16.17
Awarded 8,000 25.63
Exercised (5,000) 16.05
Outstanding,
January 1, 1995 30,000 18.70
Awarded 416,400 22.17
Exercised (4,000) 14.16
Canceled (9,800) 22.67
Outstanding,
January 1, 1996 432,600 22.16
Awarded 51,500 19.26
Exercised (2,000) 20.63
Canceled (36,175) 22.36
Outstanding,
December 31, 1996 445,925 21.74
Options exercisable:
December 31, 1994 30,000
December 31, 1995 40,000
December 31, 1996 149,750
Weighted-average fair value of options granted during the year:
1995 $ 12.43
1996 $ 9.12
The Black-Scholes option pricing model was used to calculate the fair value of
each option based on the following assumptions for 1995 and 1996, respectively;
risk-free interest rates 6.8 and 6.0 percent; no dividend yield for both years;
expected lives of 6 and 6 years; and volatility of 48 and 40 percent.
As of December 31, 1996, the 445,925 options outstanding under the Plans have
exercise prices between $13.00 and $25.63 and a weighted average remaining
contractual life of 7.5 years.
27
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(8) SHAREOWNERS' EQUITY (CONTINUED)
On September 11, 1991, the Board of Directors approved the grant of a
nonqualified stock option to purchase 20,000 shares of Common Stock to the
Company's chief executive officer. The per share price is $14.875, the fair
market value on that date. This option became exercisable on January 1, 1992,
and expires on September 10, 1998.
The Company has a Long-Term Incentive Plan (the Plan). Under the Plan, employees
who are senior executives of the Company may be awarded shares of Common Stock
without cost to the employee. The fair market value of the shares at the date of
award is accounted for as deferred compensation and is amortized over the
restricted period. At December 31, 1996, unamortized deferred compensation of
$.2 million is included in shareowners'equity as a reduction of additional paid
in capital. Awards under the Plan are vested after the employee completes four
years of continuous employment beginning with the year for which the award is
made. Vesting occurs prior to completion of four years of employment if the
employee dies while employed, reaches normal retirement or becomes disabled.
Under the Plan, 650,000 shares of Common Stock have been reserved for awards.
The following is an analysis of shares of restricted stock under the Long-term
Incentive Plan:
1996 1995 1994
Number of Shares:
Outstanding at
beginning of year 141,146 151,111 111,674
Awarded -- 70,000 70,000
Cancelled (4,241) (5,460) --
Issued (52,030) (74,505) (30,563)
Outstanding at end of
year 84,875 141,146 151,111
Available for grant at
end of year 194,249 190,008 254,548
Market value on date of
grant for shares
granted during year -- $ 22.00 $ 28.625
Transactions with respect to common stock and additional paid in capital during
the three years ended December 31, 1996, were as follows:
Additional
Paid in
Common Stock Capital
Shares Amount Amount
Balance 12/31/93 12,186,167 $12,186 $212,799
Shares issued to
employee savings
plans 99,085 99 2,571
Restricted shares
award 70,000 70 (70)
Earned
compensation,
restricted stock -- -- 1,431
Preferred stock
issuance expense -- -- (73)
Director stock
options exercised 5,000 5 114
Balance 12/31/94 12,360,252 12,360 216,772
Shares issued to
employee savings
plans 132,034 132 2,563
Restricted shares
awarded 70,000 70 (70)
Restricted shares
cancelled (5,460) (5) 5
Earned
compensation,
restricted stock -- -- 1,684
Director stock
options exercised 4,000 4 71
Balance 12/31/95 12,560,826 12,561 221,025
Shares issued to
employee savings
plans 180,309 180 2,959
Restricted shares
cancelled (4,241) (4) (104)
Earned
compensation,
restricted stock -- -- 692
Director stock
options exercised 2,000 2 39
Balance 12/31/96 12,738,894 $12,739 $224,611
Total shares of Common Stock outstanding as of December 31, 1996 are reduced to
9,132,494 shares by 3,606,400 shares of treasury stock acquired with the
acquisition of Amoskeag. The $117.2 million cost of the treasury stock reduces
total shareowners' equity.
28
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(9) EMPLOYEE PENSION AND SAVINGS PLANS
The Company has trusteed pension plans covering essentially all employees. The
plans provide pension benefits that are based on the employees' compensation and
service. The Company's policy is to fund amounts required by applicable
regulations.
Pension expense amounted to $5.6 million in 1996, $8.2 million in 1995 and $6.9
million in 1994. Net pension expense for 1996, 1995 and 1994 consisted of the
following components:
1996 1995 1994
Service cost (benefits
earned during the
period) $ 8,103 $ 6,530 $ 8,076
Interest cost on
projected benefit
obligation 19,034 17,572 16,668
Actual return on
assets (33,209) (52,465) 4,845
Net amortization and
deferral 11,637 34,197 (22,703)
Special termination
benefits -- 2,359 --
Net pension cost $ 5,565 $ 8,193 $ 6,886
The Company recognized special termination benefits from a voluntary early
retirement program in 1995.
The table below sets forth the plans' funded status at December 31:
1996 1995
Projected benefit obligation:
Vested benefits $250,242 $243,767
Non-vested benefits 7,075 6,265
Accumulated benefit obligation 257,317 250,032
Additional amounts related to
projected compensation levels 7,507 8,121
Total projected benefit
obligation 264,824 258,153
Plan assets at fair value,
primarily publicly traded
stocks and bonds 278,376 253,378
Plan assets over (under)
projected benefit obligation 13,552 (4,775)
Unrecognized net loss 15,442 31,752
Unrecognized net transition
assets (534) (1,556)
Unrecognized prior service cost 2,141 2,470
Net pension asset recognized in
the Consolidated Statement of
Financial Position $ 30,601 $ 27,891
Assumptions used in determining the funded status of the pension plans were as
follows:
1996 1995 1994
Discount rate 7.75 % 7.25 % 8.6 %
Increase in compensation
levels 4.5 % 4.5 % 4.5 %
Expected long-term rate of
return on assets 9 % 9 % 9 %
The Company also sponsors employee savings plans which cover substantially all
employees. The Company provides a match of 70% of employee contributions up to
two percent of compensation and a match of 20% of employee contributions for the
next two percent of compensation. The matching formula may be changed yearly at
the discretion of the Company. The match is contributed quarterly in Common
Stock of the Company. Expense of the Company match was $3.1 million in 1996,
$2.7 million in 1995 and $2.7 million in 1994.
29
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(10) POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
The Company provides medical insurance premium assistance and life insurance
benefits to retired employees. The medical premium assistance payments are at a
fixed dollar amount based on the retiree's years of service. Essentially all of
the Company's employees become eligible for these benefits when they reach
retirement age while working for the Company. The Company's policy is to fund
the plans as benefits are paid.
The table below sets forth the plans' combined status at December 31:
1996 1995
Accumulated postretirement
benefit obligation --
Retirees $26,089 $25,057
Fully eligible active
participants 7,441 8,892
Other active participants 4,802 5,838
Total 38,332 39,787
Unrecognized net gain (loss) 225 (1,422)
Accrued postretirement benefit
cost recognized in the
Consolidated Statement of
Financial Position at December
31 $38,557 $38,365
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% as of December 31, 1996 and 7.25% as of December 31, 1995.
Medical premium assistance payments are at a fixed dollar amount based on the
retiree's years of service and, therefore, the plan is not affected by a health
care cost trend rate assumption.
Net periodic postretirement benefit cost for 1996, 1995 and 1994 included the
following components:
1996 1995 1994
Service Cost (benefits
earned during the
period) $ 903 $ 818 $ 979
Interest cost on projected
benefit obligation 2,748 2,945 2,820
Net amortization and
deferral 109 (171) 206
Net periodic
postretirement benefit
cost $3,760 $3,592 $ 4,005
30
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(11) INCOME TAXES
At December 31, 1996, the Company had $51.6 million of deferred tax assets and
$108.1 million of deferred income tax liabilities which have been
netted for presentation purposes. The significant components of these amounts as
shown on the balance sheet are as follows:
12/31/96 12/31/95
Current Noncurrent Current Noncurrent
Liability Liability Liability Liability
Depreciation $ 576 $ 52,574 $ 636 $ 52,899
Inventory valuation 36,882 -- 35,924 --
Deferred compensation -- (5,400) (360) (5,031)
Accruals and allowances (16,264) (1,123) (16,401) (4,129)
Operating loss and credit carryforwards (4,973) -- (2,155) --
Other 1,991 (7,760) (51) (3,264)
Total deferred tax liabilities $ 18,212 $ 38,291 $ 17,593 $ 40,475
The provision for income taxes included in the Consolidated Statement of Income
and Retained Earnings consisted of the following:
1996 1995 1994
Current
Federal $(1,582) $ (5,611) $ 5,397
State 131 306 56
Deferred
Federal 2,055 (3,977) 8,327
State (490) (2,802) 1,758
Total income taxes on
income $ 114 $(12,084) $15,538
31
FIELDCREST CANNON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular Amounts in thousands except per share
(11) INCOME TAXES (CONTINUED)
The income tax effect of items which altered the Company's effective income tax
rate from the statutory federal rate were as follows:
1996 1995 1994
Amount Percent Amount Percent Amount Percent
Tax at statutory rate $ 411 35.0% $ (9,733) 35.0% $16,199 35.0%
State taxes, net (233 ) (19.8) (1,623) 5.8 2,037 4.4
Tax credits (36 ) (3.1) (543) 2.0 (567) (1.2)
Prior years tax settlements -- -- -- -- (1,714) (3.7)
Other (28 ) (2.4) (185) .7 (417) (.9)
Net taxes $ 114 9.7% $(12,084) 43.5% $15,538 33.6%
At December 31, 1996, the Company has net operating loss carryforwards of $51.2
million for state income tax purposes that expire in 2000 through 2011 and
alternative minimum tax credit carryforwards of $2.7 million.
32
FIELDCREST CANNON, INC.
REPORT OF MANAGEMENT
The integrity and objectivity of the information presented in this Annual Report
are the responsibility of Fieldcrest Cannon, Inc. management. The financial
statements contained in this report were audited by Ernst & Young LLP
independent auditors, whose report appears on this page.
The Company maintains a system of internal controls which is independently
assessed on an ongoing basis through a program of internal audits. These
controls include the selection and training of the Company's employees,
organizational arrangements that provide a division of responsibilities and
communication programs explaining the Company's policies and standards. We
believe this system provides reasonable assurance that transactions are executed
in accordance with management's authorization; that transactions are
appropriately recorded to permit preparation of financial statements that, in
all material respects, are presented in conformity with generally accepted
accounting principles; and that assets are properly accounted for and
safeguarded against loss from unauthorized use.
The Board of Directors pursues its responsibilities for the financial statements
through its Audit Committee, which consists solely of directors who are neither
officers nor employees of the Company. The Audit Committee meets periodically
with the independent public accountants, the internal auditors and
representatives of management to discuss internal accounting control, auditing
and financial reporting matters.
Thomas R. Staab
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
REPORT OF INDEPENDENT AUDITORS
The Shareowners and
Board of Directors of
Fieldcrest Cannon, Inc.
We have audited the accompanying consolidated statement of financial position of
Fieldcrest Cannon, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of operations and retained earnings, and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Fieldcrest Cannon, Inc. at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Greensboro, North Carolina
January 31, 1997
33
FIELDCREST CANNON, INC.
SELECTED FINANCIAL AND STATISTICAL DATA
In thousands of dollars, except per share data
SUMMARY OF CONTINUING OPERATIONS (A) 1996 1995 1994 1993 1992
Net sales $1,092,496 $1,095,193 $1,063,731 $1,000,107 $981,773
Depreciation $ 35,180 $ 30,248 $ 28,779 $ 29,524 $ 29,480
Operating income (loss) 22,439(b) (112)(c) 70,538 53,563 60,855
Income (loss) from continuing operations 1,060(b) (15,725)(c) 30,745(d) 14,966(e) 15,690(f)
PER SHARE OF COMMON STOCK:
Primary income (loss) from continuing
operation $ (.38)(b) $ (2.28)(c) $ 3.02(d) $ 1.24(e) $ 1.39(f)
Fully diluted income (loss) --(b) --(c) 2.51(d) --(e) --(f)
Shareowners' equity 15.41 15.68 17.84 13.79 23.76
Number of employees 11,312 13,610 13,926 14,090 14,636
Number of shareholders 1,953 2,082 2,191 2,401 2,735
SUMMARY OF FINANCIAL POSITION
Capital expenditures $ 33,386 $ 64,153 $ 51,929 $ 21,594 $ 20,687
Working capital 229,010 268,477 282,461 262,326 296,580
Total assets 768,493 812,946 782,665 740,446 863,991
Long-term debt 311,496 365,262 317,744 294,611 353,419
Shareowners' equity 215,755 215,431 232,202 193,330 284,478
FINANCIAL RATIOS
Return on net sales .1% (1.4)% 2.9% 1.5% 1.6%
Return on average shareowners' equity .5 (7.0) 14.5 6.8 6.0
Return on average total assets .1 (2.0) 4.0 1.9 1.8
(a) On July 30, 1993, the Company completed the sale of
its carpet and rug operations. Accordingly, the
summary of continuing operations excludes the
discontinued carpet and rug operations for all
periods presented.
(b) Reflects pre-tax restructuring charges of $8.1
million which reduced 1996 income by $5.1 million,
or $.56 per common share. Fully diluted income per
share is not presented as effects are
anti-dilutive.
(c) Reflects pre-tax restructuring charges of $20.5
million which increased 1995 loss by $12.1 million,
or $1.37 per common share. Fully diluted income per
share is not presented as effects are
anti-dilutive.
(d) 1994 income was increased $1.7 million, or $.20 per
common share on a primary basis and $.12 per share
on a fully diluted basis, as a result of favorable
settlements of prior years income taxes.
(e) Reflects pre-tax restructuring charges of $10
million and income tax adjustments of $1.4 million
which reduced 1993 income from continuing
operations before accounting changes by $7.5
million, or $.64 per common share. The Company
adopted FAS 106, "Employers' Accounting for
Postretirement Benefits other than Pensions" and
FAS 109, "Accounting for Income Taxes", effective
January 1, 1993. The cumulative effect of these
accounting changes reduced 1993 net income by $70.3
million, or $5.99 per common share. Fully diluted
income per share is not presented as effects are
anti-dilutive. Financial ratios for 1993 are based
on income from continuing operations before
accounting changes.
(f) Before extraordinary charge for early retirement of
debt which reduced 1992 net income by $5.2 million,
or $.46 per common share. Fully diluted income per
share is not presented as effects are
anti-dilutive. Financial ratios for 1992 are based
on income from continuing operations before the
extraordinary charge.
34