UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 11-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the fiscal year ended December 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from _______to _______
Commission file number: 000-49835
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Pillowtex Corporation 401(k) Plan for Salaried Employees
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Pillowtex Corporation
One Lake Circle Drive
Kannapolis, North Carolina 28081
401(k) PLAN FOR SALARIED EMPLOYEES
Financial Statements and Supplemental Schedule
December 31, 2001 and 2000
(With Independent Auditors' Report Thereon)
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Table of Contents
Page
Independent Auditors' Report 1
Statements of Net Assets Available for Benefits - December 31, 2001 and 2000 2
Statements of Changes in Net Assets Available for Benefits -
Years ended December 31, 2001 and 2000 3
Notes to Financial Statements 4
Schedule
Schedule H, 4i - Schedule of Assets Held at End of Year - December 31, 2001 9
Independent Auditors' Report
The Employee Benefits Committee
Pillowtex Corporation 401(k) Plan for Salaried Employees:
We have audited the accompanying statements of net assets available for benefits
of the Pillowtex Corporation 401(k) Plan for Salaried Employees as of December
31, 2001 and 2000, and the related statements of changes in net assets available
for benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Pillowtex
Corporation 401(k) Plan for Salaried Employees as of December 31, 2001 and 2000,
and the changes in net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, line 4i -
Schedule of Assets Held at End of Year is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements for
the year ended December 31, 2001, and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ KPMG LLP
Charlotte, North Carolina
June 21, 2002
1
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
Assets 2001 2000
--------- --------
Investments, at fair value (note 3):
Mutual funds $ 46,801,254 54,729,396
Common stock - Pillowtex Corporation (note 8) -- 128,702
Participant loans 2,091,658 2,174,657
---------- ----------
Total investments 48,892,912 57,032,755
Cash 616,875 369,613
Contributions receivable (note 1) -- 244,051
---------- ----------
Net assets available for benefits $ 49,509,787 57,646,419
========== ==========
See accompanying notes to financial statements.
2
PILLOWTEX FIELDCREST CANNON
401(k) PLAN FOR SALARIED EMPLOYEES
Statements of Changes in Net Assets Available for Benefits
Years ended December 31, 2001 and 2000
2001 2000
------- -------
Additions to net assets attributed to:
Investment income (note 3):
Net depreciation in fair value of investments $ (6,444,754) (886,048)
Interest and dividends 1,252,985 1,538,420
------------ ----------
Total investment income (loss) (5,191,769) 652,372
------------ ----------
Contributions (note 1):
Participant 3,403,016 3,781,704
Employer 1,016,526 996,877
------------ ----------
Total contributions 4,419,542 4,778,581
------------ ----------
Other additions:
Plan assets transferred from other plan (note 1) -- 7,851,573
Other transfers (note 6) 261,050 30
------------ ----------
Total additions (reductions) (511,177) 13,282,556
------------ ----------
Deductions from net assets attributed to:
Benefits paid to participants 7,456,132 10,437,341
Administrative expenses 169,323 137,116
------------ ----------
Total deductions 7,625,455 10,574,457
------------ ----------
Net increase (decrease) (8,136,632) 2,708,099
Net assets available for benefits:
Beginning of year 57,646,419 54,938,320
------------ ----------
End of year $ 49,509,787 57,646,419
============ ==========
See accompanying notes to financial statements.
3
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Notes to Financial Statements
December 31, 2001 and 2000
(1) Description of the Plan
The following description of the Pillowtex Corporation (the Company)
401(k) Plan for Salaried Employees (the Plan) provides only general
information. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
(a) General
The Plan is a defined contribution profit sharing plan covering
all full-time salaried employees of the Company. The Plan is
subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
(b) Plan Merger
On January 1, 2000, the salaried participants of the Pillowtex
Corporation 401(k) Plan were merged with the participants of the
Pillowtex Fieldcrest Cannon 401(k) Plan for Salaried Employees.
The merger resulted in the transfer of $7,851,573 of assets from
the Pillowtex Corporation 401(k) Plan. The name of the new plan
was changed to Pillowtex Corporation 401(k) Plan for Salaried
Employees.
(c) Contributions
Each year participants may contribute up to 20% of pre-tax annual
compensation, as defined by the Plan. Participants may elect to
invest their contributions in any of the available investment
funds. Under the Tax Reform Act of 1986, a participating
employee's annual contribution is limited to certain amounts as
set forth by the Internal Revenue Code (IRC).
The Company matches 70% of employee contributions up to 2% of
participants' eligible compensation and 20% of employee
contributions on the next 4% of eligible compensation (2% prior to
April 1, 2000 plan amendment.)
(d) Participant Accounts
Each participant's account is credited with the participant's and
Company's contributions and is allocated their share of Plan
earnings and administrative expenses based on participant account
balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the
participant's account.
(e) Vesting
A participant's matching Company contribution account balance
became 100% vested if the participant was participating in the
Plan on December 31, 1999 as a result of the Plan merger.
Participants who enrolled in the Plan subsequent to this date are
immediately vested in their contributions and vest in the
Company's contributions plus actual earnings thereon over a
four-year period at 25% per year.
4
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Notes to Financial Statements
December 31, 2001 and 2000
(f) Payment of Benefits
Upon normal retirement at age 65, death, disability, early
retirement or termination of employment, the participant's vested
benefits are paid to the member employee or his beneficiary in the
form of a lump sum distribution.
(g) Participants' Loans
A participant may borrow from his fund accounts a minimum of $500
up to a maximum of the lesser of $50,000 or 50% of his account
balance. Loan transactions are treated as a transfer from (to) the
investment fund to (from) the loan fund. Loan terms range from 1-5
years or up to 10 years for the purchase of a primary residence.
The loans are secured by the balance in the participant's account
and bear interest at a fixed rate equal to prime plus 1% at the
inception of the loan. Principal and interest are paid ratably
through payroll deductions.
(h) Investment Options
At December 31, 2001, a participant could elect any of the
following eight investment options:
Schwab Institutional Advantage Money Market Fund - The fund seeks
maximum current income by investing primarily in a diversified
portfolio of high quality short-term debt securities of major U.S.
banks and corporations. Strong Government Securities Fund - The
fund seeks current income with moderate share-price fluctuation by
investing primarily in U.S. government obligations.
Gabelli Westwood Balanced Fund - The fund seeks capital
appreciation and current income by investing between 30% and 70%
of assets in common stocks or convertible securities issued by
seasoned companies with above-average historical earnings growth,
or by smaller companies with outstanding potential for capital
appreciation. It may invest the balance in investment-grade U.S.
dollar or foreign currency-denominated debt. The fund invests at
least 25% in fixed income senior securities and up to 25% in
foreign securities.
Vanguard Windsor II Fund - The fund seeks long-term growth of
capital by investing primarily in undervalued stocks of medium and
large companies, characterized by above-average dividend yields
and below-average price/earnings ratios relative to the stock
market.
INVESCO Dynamics Fund - The fund seeks capital appreciation by
investing primarily in common stocks of domestic companies with
management emphasizing short-term factors when selecting
securities, including current information about a company,
investor interest, price movements of the company's securities,
general market and monetary conditions.
Julius Baer International Equity Fund - The fund seeks long-term
capital appreciation by investing at least 65% of assets in
securities issued in at least three foreign countries, and may
include the securities of issuers in emerging markets. The fund
may also invest in U.S. or foreign debt, including low investment
grade bonds.
5
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Notes to Financial Statements
December 31, 2001 and 2000
Schwab S&P 500 Fund - The fund seeks to track the total return
performance of stocks that compose the S&P 500 index. The fund
normally invests 80% of assets in common stocks that compose the
index. It buys and sells stocks primarily to match the index, to
invest cash from share purchases or to obtain cash for redemption
of shares. Janus Growth & Income Fund - The fund seeks long-term
growth of capital and current income. The fund will invest in a
combination of equity and fixed-income securities, with at least
25% of assets in growth securities and 25% in fixed-income
securities. The fixed-income securities consist primarily of
investment grade debt, though it may hold up to 35% of assets in
debt rated below BBB. The fund may invest without limit in foreign
securities and may engage in options and futures strategies.
The following three funds were no longer available as investment
options at December 31, 2001:
Neuberger Berman Partners Fund - The fund seeks capital growth by
investing primarily in common stocks of established companies with
management focusing on securities that it believes are undervalued
based on low price/earnings ratios, consistent cash flow, and
support from asset values.
GAM International Fund - The fund seeks long-term capital
appreciation by investing at least 65% of assets in securities
issued in at least three foreign countries. It invests primarily
in equity securities but may also invest up to 5% of assets in
debt securities.
Common Stock - Pillowtex Corporation - See Note 8 regarding the
cancellation of the Pillowtex Corporation common stock.
(2) Summary of Accounting Policies
(a) Basis of Accounting
The financial statements of the Plan are prepared in accordance
with accounting principles generally accepted in the United States
of America.
(b) Investment Valuation and Income Recognition
The Plan's investments in mutual funds and common stock are stated
at fair value (See Note 8 regarding the cancellation of the
Pillowtex Corporation common stock). The mutual fund investments
are valued at quoted market prices that represent the asset values
of shares held by the Plan at year end.
The participant loans are valued at their outstanding balances,
which approximate fair value. Purchases and sales of securities
are recorded on a trade-date basis. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date.
6
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Notes to Financial Statements
December 31, 2001 and 2000
(c) Administrative Expenses
Administrative expenses include trustee and investment manager
fees that are distributed from Plan assets by the Trustee. Certain
other administrative expenses are paid by the Plan including
accounting, legal and audit fees and other administrative services
effective for fiscal year 2001. Prior to fiscal year 2001, such
expenses were paid by the Company.
(d) Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amount of net assets available for benefits
and changes therein. Actual results could differ from those
estimates.
(e) Benefit Payments
Benefits are recorded when paid.
(3) Investments
Investments as of December 31, 2001 and 2000 are summarized as follows:
2001 2000
------------------ ------------------
Investments at fair value:
Schwab Institutional Advantage Money Market Fund $ 10,582,054 * 9,955,245 *
Strong Government Securities Fund 3,316,892 * 2,236,084
Gabelli Westwood Balanced Fund 8,861,202 * 10,455,783 *
Vanguard Windsor II Fund 14,956,299 * 13,002,607 *
Nueberger Berman Partners Fund -- 4,088,150 *
INVESCO Dynamics Fund 8,328,051 * 14,623,703 *
Julius Baer International Equity Fund 247,292 --
GAM International Fund -- 367,824
Schwab S&P 500 Fund 199,203 --
Janus Growth & Income Fund 310,261 --
Common Stock - Pillowtex Corporation -- 128,702
Participant Loans 2,091,658 2,174,657
------------------ ------------------
$ 48,892,912 57,032,755
================== ==================
*Represents 5% or more of total net assets available for benefits.
7
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Notes to Financial Statements
December 31, 2001 and 2000
The components of net depreciation in fair value of investments for the
years ended December 31, 2001 and 2000 as determined and reported by the
Plan Trustee are as follows:
2001 2000
------------------ ------------------
Net appreciation (depreciation) in fair value of investments:
Mutual funds $ (6,327,138) 587,637
Common stock - Pillowtex Corporation (117,616) (1,473,685)
------------------ ------------------
$ (6,444,754) (886,048)
================== ==================
(4) Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time, and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become vested to the extent of the
balance in their account.
(5) Income Tax Status
The Internal Revenue Service has determined and informed the Company by
letter dated February 18, 1997 that the Plan and the related trust are
designed in accordance with applicable requirements of the IRC. The Plan
has been amended since receiving the determination letter. However, the
Plan administrator and Plan's management believe that the Plan is
designed and is currently operating in compliance with the applicable
requirements of the IRC.
(6) Other Transfers
Assets are transferred between the Plan and the Pillowtex Corporation
401(k) Plan for Hourly Employees for participants who have transferred
between the hourly and salaried payrolls of the Company.
(7) Related Party Transactions
Certain Plan investments are shares of common stock of Pillowtex
Corporation and units of a money market fund managed by The Charles
Schwab Trust Company. The Charles Schwab Trust Company is the trustee as
defined by the Plan. Therefore, these transactions qualify as
party-in-interest.
(8) Subsequent Event - Cancellation of Pillowtex Corporation Common Stock
On November 14, 2000 (Petition Date), the Company and substantially all
of its domestic subsidiaries, including Fieldcrest Cannon, Inc., filed
voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court (Court) for
the District of Delaware. On May 1, 2002, the Court confirmed the
Company's Joint Plan of Reorganization (Plan), which went into effect on
May 24, 2002. In accordance with the Plan, all common stock of Pillowtex
Corporation that was issued and outstanding immediately prior to the
Petition Date was cancelled without consideration to the stockholders,
including all shares held by the Pillowtex Corporation (the Company)
401(k) Plan for Salaried Employees. Accordingly, the value of those
shares has been written down to zero in the accompanying statement of net
assets available for benefits at December 31, 2001.
8
Schedule
PILLOWTEX CORPORATION
401(k) PLAN FOR SALARIED EMPLOYEES
Schedule H, 4i - Schedule of Assets Held at End of Year
December 31, 2001
Description of Units/ Current
Identity of issue investments shares value
- --------------------------------------- --------------------- ----------- -------------
Schwab Institutional Advantage Money
Market Fund* Money market fund 10,582,054 $ 10,582,054
Strong Government Securities Fund Mutual fund 307,404 3,316,892
Gabelli Westwood Balanced Fund Mutual fund 806,297 8,861,202
Vanguard Windsor II Fund Mutual fund 584,459 14,956,299
INVESCO Dynamics Fund Mutual fund 522,790 8,328,051
Julius Baer International Equity Fund Mutual fund 11,883 247,292
Schwab S&P 500 Fund Mutual fund 11,267 199,203
Janus Growth & Income Fund Mutual fund 10,352 310,261
Common Stock - Pillowtex Corporation* Common stock 389,303 --
Participant Loans* (a) Loans to participants -- 2,091,658
------------
Total investments $ 48,892,912
============
*Party-in-interest
(a) Interest rates range from 5.75% to 10.5%.
See accompanying independent auditors' report.
9
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Employee Benefits Committee which administers the Plan has duly caused
this annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
PILLOWTEX CORPORATION 401(K) PLAN FOR SALARIED
EMPLOYEES
By Employee Benefits Committee Appointed
Pursuant to the Plan:
Date: June 28, 2002 /s/ Donald Mallo
--------------------------------------------
Donald Mallo, Committee Member
Date: June 28, 2002 /s/ Janet F. Earnhardt
--------------------------------------------
Janet F. Earnhardt, Committee Member
Date: June 28, 2002 /s/ Henry T. Pollock
--------------------------------------------
Henry T. Pollock, Committee Member
Date: June 28, 2002 /s/ John F. Sterling
--------------------------------------------
John F. Sterling, Committee Member
Date: June 28, 2002 /s/ D. L. Sumner
--------------------------------------------
D. L. Sumner, Committee Member
Exhibit Index
Exhibit
Number Document Description
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23.1 Consent of Independent Auditors