FIELDCREST CANNON, INC. AND SUBSIDIARIES
Consolidated Financial Statements
As of December 31, 1996 and January 3, 1998 and for
years ended December 31, 1995 and 1996, and
periods ended December 18, 1997 and January 3, 1998
(With Independent Auditors' Reports Thereon)
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
Independent Auditors' Reports..........................................1
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and January 3, 1998................................................3
Consolidated Statements of Operations
and Retained Earnings for the years ended
December 31, 1995 and 1996, and periods ended
December 18, 1997 and January 3, 1998..............................4
Consolidated Statements of Cash Flows for the
years ended December 31, 1995 and 1996, and periods
ended December 18, 1997 and January 3, 1998........................5
Notes to Consolidated Financial Statements...........................6
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors and Shareowner
Fieldcrest Cannon, Inc.:
We have audited the accompanying consolidated balance sheet of Fieldcrest
Cannon, Inc. and subsidiaries (a wholly-owned subsidiary of Pillowtex
Corporation) (Successor Company) as of January 3, 1998, and the related
consolidated statements of operations and retained earnings, and cash flows
for the period from December 19, 1997 to January 3, 1998. We have also
audited the accompanying consolidated statements of operations and retained
earnings, and cash flows for the period from January 1, 1997 to December 18,
1997 of Fieldcrest Cannon, Inc. and subsidiaries (Predecessor Company).
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 financial position of the
Successor Company at January 3, 1998, and the results of their operations and
their cash flows for the period from December 19, 1997 to January 3, 1998,
and the results of their operations and their cash flows of the Predecessor
Company for the period from January 1, 1997 to December 18, 1997, in
conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, Fieldcrest
Cannon, Inc. and subsidiaries was acquired by Pillowtex Corporation as of
December 19, 1997 in a business combination accounted for as a purchase. As
a result of the application of purchase accounting, the consolidated
financial statements of Fieldcrest Cannon, Inc. and subsidiaries as of
January 3, 1998 and for the period from December 19, 1997 to January 3, 1998
are presented on a different basis than those for the period from January 1,
1997 to December 18, 1997 and, therefore, are not directly comparable.
/s/ KPMG Peat Marwick LLP
Greensboro, North Carolina
February 5, 1998
The Shareowner and
Board of Directors of
Fieldcrest Cannon, Inc.
We have audited the accompanying consolidated balance sheet of Fieldcrest
Cannon, Inc. and subsidiaries as of December 31, 1996, and the related
consolidated statements of operations and retained earnings, and cash flows
for each of the two 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. and subsidiaries at December 31, 1996, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young, L.L.P.
Greensboro, North Carolina
January 31, 1997
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and January 3, 1998
(Dollars in thousands, except for par value data)
Predecessor Successor
----------------- ---------------
December 31, 1996 January 3, 1998
----------------- ---------------
ASSETS
Current assets:
Cash $ 4,647 4,581
Accounts receivable, less allowances of $7,693 in 1996
and $9,847 in 1997, principally trade 154,511 154,350
Inventories 216,165 222,291
Assets held for sale - 32,614
Other prepaid expenses and current assets 2,489 3,498
--------- ---------
Total current assets 377,812 417,334
--------- ---------
Plant and equipment, net 323,838 389,572
Intangible assets, net 10,881 193,853
Deferred charges and other assets 55,962 18,908
--------- ---------
Total assets $ 768,493 1,019,667
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts and drafts payable $ 63,910 65,448
Deferred income taxes 18,212 22,129
Accrued liabilities 61,172 79,787
Current portion of long-term debt 5,508 720
--------- ---------
Total current liabilities 148,802 168,084
--------- ---------
Senior long-term debt 107,746 11,320
Subordinated long-term debt 203,750 95,126
--------- ---------
Total long-term debt 311,496 106,446
Due to Pillowtex - 459,173
Deferred income taxes 38,291 56,522
Other non-current liabilities 54,149 54,143
--------- ---------
Total non-current liabilities 403,936 676,284
--------- ---------
Total liabilities 552,738 844,368
--------- ---------
Commitments (notes 7 and 8)
Shareowners' equity:
Preferred stock, $.01 par value. Authorized 10,000,000 shares;
issued and outstanding 1,500,00 shares in 1996. 15 -
Common stock, $1 par value in 1996 and $.01 par value in 1997.
Authorized 25,000,000 shares in 1996 and 100 shares
in 1997; issued 12,738,894 shares in 1996 and issued and
outstanding 100 shares in 1997. 12,739 -
Additional paid in capital 224,611 174,905
Retained earnings 95,615 394
Treasury stock, 3,606,400 common shares at cost (117,225) -
--------- ---------
Total shareowners' equity 215,755 175,299
--------- ---------
Total liabilities and shareowners' equity $ 768,493 1,019,667
========= =========
THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
3
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
Years ended December 31, 1995 and 1996, and periods ended
December 18, 1997 and January 3, 1998
(Amounts in thousands, except for per share data)
Predecessor Successor
------------------------------------------ -------------
Year ended
December 31, Jan. 1, 1997 Dec. 19, 1997
------------------------ through through
1995 1996 Dec. 18, 1997 Jan. 3, 1998
---------- --------- ------------- -------------
Net sales $1,095,193 1,092,496 1,050,121 40,048
Cost of sales 966,642 956,522 900,475 33,422
Selling, general and administrative 108,194 105,405 121,820 3,542
Restructuring charges 20,469 8,130 - -
---------- --------- --------- ------
Total operating costs and expenses 1,095,305 1,070,057 1,022,295 36,964
---------- --------- --------- ------
Operating income (loss) (112) 22,439 27,826 3,084
---------- --------- --------- ------
Other deductions (income):
Interest expense 27,630 26,869 23,519 2,327
Other, net 67 (5,604) (6,027) -
---------- --------- --------- ------
Total other deductions 27,697 21,265 17,492 2,327
---------- --------- --------- ------
Income (loss) before income taxes (27,809) 1,174 10,334 757
Federal and state income taxes (benefits) (12,084) 114 3,844 363
---------- --------- --------- ------
Net income (loss) (15,725) 1,060 6,490 394
Preferred stock dividends (4,500) (4,500) (4,125) -
---------- --------- --------- ------
Earnings (loss) on common $ (20,225) (3,440) 2,365 394
========== ========= ========= ======
Amount added to (subtracted from)
retained earnings (20,225) (3,440) 2,365 394
Retained earnings, beginning 119,280 99,055 95,615 -
---------- --------- --------- ------
Retained earnings, ending $ 99,055 95,615 97,980 394
========== ========= ========= ======
Basic earnings (loss) per common share $ (2.28) (.38) .26
Diluted earnings (loss) per common share $ (2.28) (.38) .26
Average basic common shares outstanding 8,860 9,018 9,200
========== ========= =========
Average diluted common shares outstanding 8,860 9,018 9,261
========== ========= =========
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
4
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995 and 1996, and periods ended
December 18, 1997 and January 3, 1998
(Dollars in thousands)
Predecessor Successor
--------------------------------------------- --------------
Year ended
December 31, Jan. 1, 1997 Dec. 19, 1997
-------------------------- through through
1995 1996 Dec. 18, 1997 Jan. 3, 1998
----------- ----------- ------------- --------------
Cash flows from operating activities:
Net income (loss) $ (15,725) 1,060 6,490 394
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 31,746 36,678 33,602 1,681
Deferred income taxes (6,779) (1,565) 14,952 1,036
Other 1,597 (3,409) (1,818) -
Changes in operating assets and liabilities, excluding
effects of acquisition of Sure Fit and sale
of Blanket Division inventories:
Accounts receivable 10,579 13,601 8,322 (2,330)
Inventories 3,125 (10,004) 9,811 389
Other prepaid expenses and current assets 582 957 (569) -
Accounts payable and accrued liabilities 4,990 3,083 5,499 (4,009)
Federal and state income taxes (2,268) - (11,629) (673)
---------- ---------- --------- ---------
Net cash provided by (used in) operating activities 27,847 40,401 64,660 (3,512)
---------- ---------- --------- ---------
Cash flows from investing activities:
Additions to plant and equipment (64,153) (33,386) (68,954) (2,314)
Proceeds from disposal of plant and equipment 1,218 15,483 3,442 -
Proceeds from sale of Blanket Division inventories
and equipment - 26,189 - -
Proceeds from sale of net assets held for sale 23,241 - - 1,700
Purchase of Sure Fit, net of cash acquired (27,300) - - -
---------- ---------- --------- ---------
Net cash provided by (used in) investing activities (66,994) 8,286 (65,512) (614)
---------- ---------- --------- ---------
Cash flows from financing activities:
Increase (decrease) in revolving debt 48,298 (46,816) 18,379 -
Proceeds from issuance of other long-term debt - 3,610 - -
Payments on long-term debt (1,469) (5,499) (10,917) (841)
Borrowings from parent company - - - 4,967
Payment of deferred loan costs - - (2,176) -
Proceeds from issuance of common stock 57 41 - -
Dividends paid on preferred stock (4,500) (4,500) (4,500) -
---------- ---------- --------- ---------
Net cash provided by (used in) financing activities 42,386 (53,164) 786 4,126
---------- ---------- --------- ---------
Net increase (decrease) in cash 3,239 (4,477) (66) -
Cash at beginning of period 5,885 9,124 4,647 4,581
--------- ---------- --------- ---------
Cash at end of period $ 9,124 4,647 4,581 4,581
========= ========== ========= =========
Supplemental disclosures of cash flow information is as follows:
Interest paid $ 25,471 $ 26,150 $ 24,113 $ 3,121
========= ========== ========= =========
Income taxes paid (refunded) $ 2,848 $ (5,958) $ 515 $ -
========= ========== ========= =========
THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
5
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except per share data)
(1) GENERAL
Fieldcrest Cannon, Inc. and subsidiaries ("the Company") is a North
American designer, manufacturer and marketer of home textile products,
offering a full line of sheets, towels, bath rugs and other home textile
products. Sales are primarily to domestic department stores, mass
retailers, specialty stores and large chain stores. Sales to one
customer (Wal-Mart and its affiliates) represented 16.6% of net sales in
1995, 21.2% of net sales in 1996, 25.1% of net sales for the period
January 1, 1997 through December 18, 1997 and 31.9% of net sales for the
period December 19, 1997 through January 3, 1998.
On December 19, 1997, the Company and Pillowtex Corporation and
subsidiaries ("Pillowtex") entered into a merger agreement. Under the
merger agreement, Pillowtex acquired the net assets of the Company for
$318,822,000 in cash and issuance of 3,175,181 shares of Pillowtex
common stock valued at $89,708,000. Pillowtex assumed Company
liabilities of $375,779,000. Following consummation of the merger, the
Company became a wholly-owned subsidiary of Pillowtex.
At January 3, 1998, the $459,173,000 due to Pillowtex primarily
represents the push-down of Pillowtex's incremental borrowings incurred
as a result of the acquisition of the Company on December 19, 1997. The
amount due to Pillowtex is due on January 3, 2000 and bears interest,
payable quarterly, at either the lower of the bank's prime rate plus 1%
or the maximum rate of nonusurious interest permitted from day-to-day by
applicable law (9% at January 3, 1998). Interest expense in the
accompanying consolidated statement of operations for the period from
December 19, 1997 to January 3, 1998 includes $1,770,000 on the amount
due to Pillowtex.
For financial reporting purposes, the years ended December 31, 1995 and
1996, and the period January 1, 1997 to December 18, 1997 are presented
on a historical cost basis and are referred to herein as the
"Predecessor". The period December 19, 1997 to January 3, 1998 is
presented on a purchase accounting basis and is referred to as the
"Successor".
The acquisition has been accounted for as a purchase transaction in
accordance with Accounting Principles Board Opinion No. 16 which
requires that the aggregate purchase price (which includes early call
premiums on the 11.25% Senior Subordinated Debentures, cost of financial
advisor, legal, accounting and other
6 (Continued)
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except per share data)
professional fees and qualifying accruals for severance and related
costs) be allocated to the assets acquired and liabilities assumed of
the Predecessor based upon their respective fair values at the date of
acquisition and are reflected in the consolidated financial statements
of the Successor under the push-down method of accounting. As a result,
the consolidated financial information as of January 3, 1998 and the
period from the acquisition date of December 19, 1997 through January 3,
1998 included in the consolidated financial statements and notes
thereto, is presented on a different cost basis from that included in
Predecessor financial statements and notes thereto and therefore is not
comparable.
As of January 3, 1998, the estimated fair values assigned to certain
assets acquired and liabilities assumed (primarily fixed assets and
intangibles) are based upon preliminary estimates, which are subject
to change upon completion of an independent valuation. Management
does not expect the estimated values to change materially upon
completion of the valuation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial
statements of Fieldcrest Cannon, Inc. and its wholly-owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) INVENTORIES
For financial reporting, inventories are valued at the lower of
cost, determined principally on a last-in, first-out basis
("LIFO"), or market.
(c) PROPERTY, PLANT AND EQUIPMENT
Depreciation for financial reporting purposes is provided
generally using the straight-line method in amounts sufficient to
amortize the cost of the assets over their estimated useful lives
as follows:
Estimated
Useful Life
-----------
Buildings and improvements 15-33 years
Machinery and equipment 12-15 years
Data processing equipment 5 years
Furniture and fixtures 5- 8 years
7 (Continued)
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except per share data)
(d) INTANGIBLE ASSETS
At January 3, 1998, intangible assets consist primarily of
goodwill recorded in connection with the Company's acquisition by
Pillowtex. Amortization is provided using the straight-line
method, all of which is over the estimated useful life of 40 years.
The Company assesses the recoverability of goodwill by determining
whether the amortization of the asset balance over its remaining
life can be recovered through undiscounted future operating cash
flows of the acquired operation. The amount of impairment, if
any, is measured based on projected discounted future operating
cash flows.
(e) DEFERRED CHARGES AND OTHER ASSETS
Predecessor deferred charges and other assets consist principally
of prepaid pension asset, miscellaneous notes receivable and
deferred loan costs. Successor deferred charges and other assets
consist principally of miscellaneous notes receivable. For
Predecessor financial reporting, deferred loan costs were
amortized over the term of the related loans on the effective
interest method.
(f) INCOME TAXES
Deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred taxes
of a change in tax rates is recognized in income in the period
that includes the enactment date. Beginning on December 19, 1997,
the Company is included in the consolidated federal tax returns filed
by Pillowtex. Current federal income taxes are calculated on a
separate return basis and remitted to or from Pillowtex.
(g) STOCK OPTION PLANS
Prior to fiscal year 1996, the Predecessor accounted for its stock
option plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, and related interpretations. Accordingly,
compensation expense was recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise
price. At the beginning of fiscal year 1996, the Predecessor
adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
which permits
8 (Continued)
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except per share data)
entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma
net income and pro forma earnings per share disclosures for
employee stock option grants made in 1995 and future years as if
the fair-value based method defined in SFAS No. 123 had been
applied. The Predecessor has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
All outstanding options were retired as part of the merger with
Pillowtex and the Successor has no option plans in existence.
(h) REVENUE RECOGNITION
Revenue from product sales is recognized at the time ownership of
the goods transfers to the customer. Reserves for sales returns
and allowances are recorded in the same accounting period as the
related revenues.
(i) EARNINGS (LOSS) PER SHARE
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings Per Share,
effective January 3, 1998. This statement requires the
calculation of basic and diluted earnings per share. Basic
earnings per share is computed by dividing the income available
for common stockholders by the weighted-average number of shares
outstanding during the period. Diluted earnings per share is also
computed by dividing income available for common stockholders by
the weighted-average number of shares outstanding plus the number
of additional shares that would have been outstanding if the
dilutive potential common shares had been issued. In addition, in
computing the dilutive effect of convertible securities, the
numerator is adjusted to add back (a) any convertible preferred
dividends and (b) the after-tax amount of interest recognized in
the period associated with any convertible debt. All prior period
earnings (loss) per share amounts have been restated to reflect
the requirements of this statement.
Earnings (loss) per share information for the Successor is not
meaningful and therefore is not presented.
(j) USE OF ESTIMATES
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make
9 (Continued)
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except per share data)
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
(k) SEGMENT REPORTING
In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
AND RELATED INFORMATION, effective for periods beginning after
December 15, 1997. The purpose of this standard is to disclose
disaggregated information which provides information about the
operating segments an enterprises engages is consistent with the
way management reviews financial information to make decisions
about the enterprise's operating matters. The Company will comply
with the requirements of this standard for fiscal year 1998.
(l) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO
BE DISPOSED OF
The Company adopted the provisions of SFAS No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF, on January 1, 1996. This statement requires that
long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash
flows expected to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this statement
did not have a material impact on the Company's financial position,
results of operations, or liquidity.
(m) RECLASSIFICATIONS
Certain amounts in the prior period consolidated financial
statements have been reclassified to conform to the 1997
presentation.
10 (Continued)
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
(3) RESTRUCTURING CHARGES
During 1995, the Predecessor relocated its New York sales, marketing
and design personnel to Kannapolis, North Carolina, announced the
closing of the two yarn mills and sold a warehouse. As a result of
these actions, the Predecessor incurred restructuring charges of
$20.5 million. The restructuring charges include approximately $15.6
million for severance and termination benefits, voluntary early
retirement benefits and lease termination costs; $4.4 million for the
write-down of yarn equipment; and $.5 million for termination
benefits associated with closing the yarn mills. Substantially all
charges were subsequently incurred.
In 1996, the Predecessor announced the closing of a towel weaving
facility and yarn manufacturing facility and sold certain Blanket
Division inventories and equipment which resulted in closing the
Blanket facilities in Eden, North Carolina. As a result of these
actions, the Predecessor incurred restructuring charges of $8.1
million which included $3.6 million for employee termination
benefits, substantially all of which was paid as of December 31,
1996, 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 Predecessor disposed of during
1997.
(4) INVENTORIES
Inventories consisted of the following:
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Finished goods $ 104,092 113,491
Work-in-progress 68,668 81,752
Raw materials and supplies 43,405 27,048
---------- -------
Total $ 216,165 222,291
========== =======
Approximately 69% of Predecessor's inventories were valued on the
LIFO method. If the FIFO method of accounting had been used,
inventories would have been greater by approximately $45,000,000 at
December 31, 1996. In 1996, reduction in LIFO inventory quantities
had the effect of increasing net income by approximately $600,000.
At January 3, 1998, approximately 65% of inventories were valued on
the LIFO method. Successor's inventory values were adjusted to fair
market value as of
(Continued)
11
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
December 19, 1997. Accordingly, LIFO inventory values as of January
3, 1998 approximate FIFO inventory values.
(5) PLANT AND EQUIPMENT
Plant and equipment is stated at cost and consisted of the following:
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Land $ 2,794 7,113
Buildings 207,909 120,542
Equipment 383,118 215,156
Plant additions in progress 16,467 48,178
---------- -------
Total 610,288 390,989
Accumulated depreciation (286,450) (1,417)
---------- -------
Net plant and equipment $ 323,838 389,572
========== =======
Successor costs have been established based upon internal estimates
and will be finalized as independent valuations are obtained.
(6) ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Salaries and other compensation $ 10,630 29,545
Pension, medical and other employee
benefit plans 15,672 10,454
Advertising expense 3,579 3,700
Interest expense 3,629 2,026
Other 27,662 34,062
--------- -------
Total $ 61,172 79,787
========= =======
(Continued)
12
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
(7) DEBT
Long-term debt consisted of the following:
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Senior long-term debt:
Revolving long-term debt $ 95,706 -
Industrial development bonds, due 2021 10,000 10,000
Industrial revenue bonds, due in
installments through 2002 2,740 2,040
--------- -------
Total senior long-term debt 108,446 12,040
Less current portion 700 720
--------- -------
Net senior long-term debt 107,746 11,320
--------- -------
Subordinated long-term debt:
6% convertible subordinated sinking fund
debentures due 1999 to 2012 123,558 95,126
11.25% senior subordinated debentures due
2002 to 2004 85,000 -
--------- -------
Total subordinated long-term debt 208,558 95,126
Less current portion 4,808 -
--------- -------
Net subordinated long-term debt 203,750 95,126
--------- -------
Total long-term debt $ 311,496 106,446
========= =======
The $10 million Industrial Development Bonds are collateralized by a
standby letter of credit issued by Pillowtex and bear interest at a
variable rate which approximates the LIBOR interbank rate (5.95% at
January 3, 1998).
The 6% Convertible Subordinated Sinking Fund Debentures were
convertible into shares of the Predecessor Company Common Stock at a
conversion price of $44.25 per share. Effective December 19, 1997,
the Company's Convertible Subordinated Debentures became convertible
into $610.20 of cash and 6.08 shares of Pillowtex Corporation Common
Stock for each $1,000 of aggregate principal amount.
The carrying value of the 6% Convertible Subordinated Sinking Fund
Debentures was adjusted to fair market value as of December 19, 1997,
and a $17.4 million discount is being amortized by the Successor to
interest expense over the remaining life of the debentures on the
effective interest method.
(Continued)
13
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
At January 3, 1998, the carrying value of the Company's debt
approximated its fair market value. The fair value of the
Convertible Subordinated Debentures was based on quoted market prices.
Pillowtex's senior revolving credit and term loan facilities are
guaranteed by each of the domestic subsidiaries of Pillowtex
including the Company, and are secured by first priority liens on all
of the capital stock of each domestic subsidiary of Pillowtex and by
65% of the capital stock of Pillowtex's foreign subsidiaries.
Pillowtex has also granted a first priority security interest in all
of its presently unencumbered and future domestic assets and
properties and all presently unencumbered and future domestic assets
and properties of each of its subsidiaries. The term loan facility
is subject to mandatory prepayment from all net cash proceeds of
asset sales and debt issuances of Pillowtex (except as specifically
provided), 50% of the net cash proceeds of equity issuances by
Pillowtex or any of its subsidiaries, and 75% of Excess Cash Flow (as
defined).
The aggregate principal and sinking fund payments required to be made
on long-term debt during each of the five years subsequent to January
3, 1998 and thereafter are:
Year Ending Amount
----------- ------
1998 $ 720
1999 5,090
2000 5,090
2001 5,165
2002 5,000
Thereafter 86,101
In connection with the acquisition of the Successor by Pillowtex as
discussed in Note 1, the revolving credit facility and the 11.25%
Senior Subordinated Debentures were repaid.
(Continued)
14
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
(8) 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 January 3, 1998.
Real
Estate Equipment Total
------ --------- -----
1998 $ 3,752 8,662 12,414
1999 3,017 8,313 11,330
2000 2,240 7,833 10,073
2001 2,140 6,300 8,440
2002 1,881 4,520 6,401
Subsequent years 7,994 9,946 17,940
--------- ------ ------
Net minimum lease payments $ 21,024 45,574 66,598
========= ====== ======
Total rental expense for all operating leases was $22,000,000 for
1995, $20,600,000 for 1996, $15,600,000 for the period January 1,
1997 through December 18, 1997, and $700,000 for the period December
19, 1997 through January 3, 1998.
(9) SHAREOWNERS' EQUITY
In connection with the acquisition of the Predecessor by Pillowtex,
1,500,000 shares of $3.00 Series A Convertible Preferred Stock with
annual dividends of $3.00 and 12,850,520 shares of $1 par value
common stock were purchased and retired. In addition, the
Successor's capital of 100 shares of common stock with a $.01 par
value are wholly-owned by Pillowtex. The Successor's additional
paid-in capital of $174,905,000 represents Pillowtex's capitalization
of the Company on the date of acquisition.
The Predecessor had an Employee Stock Option Plan under which
incentive or nonqualified stock options were granted at not less than
the fair market value of the Common Stock at the time of grant.
Options generally were exercisable in four equal annual installments
commencing one year from the date of grant and expired ten years from
such date. For the years ended December 31, 1995 and 1996 and the
period from January 1, 1997 to December 18, 1997, respectively,
options to purchase 400,400, 37,500 and 17,600 shares of Common Stock
were awarded at a weighted-average exercise price of $22.17, $18.75
and $16.25, respectively. All outstanding options were retired as part
of the Merger with Pillowtex and the successor has no option plans in
existence.
(Continued)
15
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
The Predecessor had a Director Stock Option Plan under which an
annual grant of an option to purchase 2,000 shares of Common Stock
was awarded to each non-employee Director on the fifth business day
after the annual meeting of the shareowners at the fair market value
of the Company's Common Stock on the grant date. Options vested when
awarded and expired seven years from the grant date, but no option
could be exercised during the six month period following its grant
except in the case of death or disability. For the years ended
December 31, 1995 and 1996 and the period from January 1, 1997 to
December 18, 1997, respectively, options to purchase 16,000, 14,000
and 14,000 shares of Common Stock were awarded at a weighted-average
exercise price of $22.125, $20.625 and $17.25, respectively.
The Predecessor accounted for these plans in accordance with APB
Opinion 25. 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 was recognized. Had compensation
costs for the Predecessor'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 Predecessor's net income
(loss) and earnings (loss) per share would have been reduced to the
pro forma amounts indicated below:
Jan. 1, 1997
to
1995 1996 Dec. 18, 1997
---- ---- -------------
Net income (loss):
As reported $ (15,725) 1,060 6,490
Pro forma (16,553) 6 5,513
Basic and diluted earnings (loss) per share:
As reported (2.28) (.38) .26
Pro forma (2.37) (.50) .15
Pro forma net income (loss) and basic and diluted earnings (loss) per
share reflect only options granted since December 31, 1994. Therefore,
the full impact of calculating the Employee Stock Option Plan's
compensation cost for stock options under SFAS No. 123 is not reflected
in the pro forma net income (loss) and basic and diluted earnings (loss)
per share amounts presented above because compensation cost is reflected
over the options' vesting period of four years and compensation cost for
options granted prior to January 1, 1995 is not considered.
(Continued)
16
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
The following schedule summarizes the Predecessor's stock option plan
activity through December 18, 1997:
Number of Weighted Average
Shares Exercise Price
--------- ----------------
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
Awarded 31,600 16.69
Canceled (62,225) 22.38
--------
Outstanding December 18, 1997 415,300 21.17
========
Options exercisable were 149,750 at December 31, 1996 and 219,975 at
December 18, 1997 and the weighted average exercise price of those
options was $21.57 and $21.25, respectively.
The per share weighted-average fair value of stock options granted during
1995 was $12.43, during 1996 was $9.12 and during the period January 1,
1997 to December 18, 1997 was $8.12.
The Black-Scholes option pricing method was used to calculate the fair
value of each option based on the following assumptions for 1995, 1996
and the period from January 1, 1997 to December 18, 1997, respectively;
risk-free interest rates 6.8%, 6.0% and 6.0%; no dividend yield for any
period; expected lives for all periods of 6 years; and volatility of
48%, 40% and 40%.
As of December 18, 1997, the 415,300 options outstanding under the Plans
had exercise prices between $13.00 and $25.63 and a weighted-average
remaining contractual life of 6.8 years.
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 exercise price is
$14.875, the quoted market value on that date. This option became
exercisable on January 1, 1992, and expires on September 10, 1998.
(Continued)
17
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
The Predecessor had a Long-Term Incentive Plan ("the Plan") under which
senior executives may be awarded shares of Common Stock without cost to
the employee. The quoted market value of the shares at the date of
award is accounted for as deferred compensation and is amortized over
the restricted period. 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 or upon a change of control of the
Company.
The following is an analysis of shares of restricted stock under the Long-
Term Incentive Plan:
Jan. 1, 1997
to
1995 1996 Dec. 18, 1997
---- ---- -------------
Number of shares:
Outstanding at beginning of period 151,111 141,146 84,875
Awarded 70,000 - 15,000
Canceled (5,460) (4,241) (3,434)
Issued (74,505) (52,030) (41,693)
------- ------- -------
Outstanding at end of period 141,146 84,875 54,748
------- ------- -------
Available for grant at end of period 190,008 194,249 182,683
======= ======= =======
Quoted market value on date of grant
for shares granted during the period $ 22.00 - 16.25
======= ======= =======
(Continued)
18
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
Transactions with respect to Common Stock and additional paid in capital
of the Predecessor during the years ended December 31, 1995 and 1996 and
the period January 1, 1997 to December 18, 1997 were as follows:
Additional
Common Stock Paid-in
Shares Amount Capital Amount
------ ------ --------------
Balance December 31, 1994 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 canceled (5,460) (5) 5
Earned compensation, restricted
stock - - 1,684
Director stock options exercised 4,000 4 71
---------- --------- -------
Balance December 31, 1995 12,560,826 12,561 221,025
Shares issued to employee savings
plans 180,309 180 2,959
Restricted shares canceled (4,241) (4) (104)
Earned compensation, restricted
stock - - 692
Director stock options exercised 2,000 2 39
---------- --------- -------
Balance December 31, 1996 12,738,894 12,739 224,611
Shares issued to employee savings
plans 99,542 100 1,946
Restricted shares awarded 15,000 15 229
Restricted shares canceled (3,434) (4) (72)
Earned compensation, restricted
stock - - 243
Shares issued upon conversion of
debentures 518 1 23
---------- --------- -------
Balance December 18, 1997 12,850,520 $ 12,851 226,980
========== ========= =======
Total shares of Common Stock outstanding as of December 18, 1997 are
reduced to 9,244,120 shares by 3,606,400 shares of treasury stock
acquired with the acquisition of Amoskeag. The $117,225,000 cost of the
treasury stock reduces total shareowners' equity.
(Continued)
19
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
There were no Common Stock transactions during the period December 19,
1997 to January 3, 1998.
(10) EMPLOYEE PENSION AND SAVINGS PLAN
The Company has trusteed pension plans covering substantially 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 $8,193,000 in 1995, $5,565,000 in 1996,
$2,353,000 for the period January 1, 1997 to December 18, 1997, and
$103,000 for the period December 19, 1997 to January 3, 1998. Net
pension expense consisted of the following components:
Predecessor Successor
------------------------------------ -------------
Year
Ended December 31, Jan. 1, 1997 Dec. 19, 1997
--------------------- through through
1995 1996 Dec. 18, 1997 Jan. 3, 1998
---- ---- ------------- -------------
Service cost (benefits earned
during the period) $ 6,530 8,103 6,626 288
Interest cost on projected
benefit obligation 17,572 19,034 19,064 829
Actual return on assets (52,465) (33,209) (36,811) (1,600)
Net amortization and
deferral 34,197 11,637 13,474 586
Special termination benefits 2,359 - - -
-------- ------- ------- ------
Net pension cost $ 8,193 5,565 2,353 103
======== ======= ======= ======
The Predecessor recognized special termination benefits from a voluntary
early retirement program in 1995.
(Continued)
20
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
The table below sets forth the plans' funded status:
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Projected benefit obligation:
Vested benefits $ 250,242 284,152
Non-vested benefits 7,075 6,853
---------- -------
Accumulated benefit obligation 257,317 291,005
Additional amounts related to projected
compensation levels 7,507 6,741
---------- -------
Total projected benefit obligation 264,824 297,746
Plan assets at fair value, primarily
publicly traded stocks and bonds 278,376 299,480
---------- -------
Plan assets over projected benefit
obligation 13,552 1,734
Unrecognized net loss 15,442 -
Unrecognized net transition assets (534) -
Unrecognized prior service cost 2,141 -
---------- -------
Net pension asset recognized in the
Consolidated Balance Sheets $ 30,601 1,734
========== =======
Assumptions used in determining the funded status of the pension plans were
as follows:
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Discount rate 7.75% 7.0%
Increase in compensation levels 4.5 % 4.5%
Expected long-term rate of return
on assets 9.0 % 9.0%
The Company also sponsors employee savings plans which cover
substantially all employees. The Company provides a match of 70% of
employee contributions up to 2% of compensation and a match of 20% of
employee contributions for the next 2% of compensation. The matching
formula may be changed yearly at the discretion of the Company. Prior
to October 1, 1997, the match was contributed quarterly in Common Stock
of the Company. The match from October 1, 1997 to January 3, 1998 was
paid in cash. Expense of the Company match was $2,700,000 in 1995,
$3,100,000 in 1996, $2,700,000 for the period January 1, 1997 to
(Continued)
21
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
December 18, 1997 and $100,000 for the period December 19, 1997 to
January 3, 1998.
(11) 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:
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Accumulated postretirement benefit
obligation:
Retirees $ 26,089 26,724
Fully eligible active participants 7,441 7,688
Other active participants 4,802 4,936
--------- ------
Total 38,332 39,348
Unrecognized net gain 225 -
--------- ------
Accrued postretirement benefit cost
recognized in the Consolidated
Balance Sheets $ 38,557 39,348
========= ======
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.75% as of December 31, 1996 and 7.0% as of
January 3, 1998. 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.
(Continued)
22
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
Net periodic postretirement benefit cost included the following components:
Predecessor Successor
------------------------------------ -------------
Year
Ended December 31, Jan. 1, 1997 Dec. 19, 1997
--------------------- through through
1995 1996 Dec. 18, 1997 Jan. 3, 1998
---- ---- ------------- -------------
Service cost (benefits earned
during the period) $ 818 903 793 35
Interest cost on projected
benefit obligation 2,945 2,748 2,628 114
Net amortization and deferral (171) 109 - -
------ ----- ----- ---
Net periodic postretirement
benefit cost $3,592 3,760 3,421 149
====== ===== ===== ===
(12) INCOME TAXES
The components of income tax expense (benefit) are as follows:
Predecessor Successor
------------------------------------ -------------
Year
Ended December 31, Jan. 1, 1997 Dec. 19, 1997
--------------------- through through
1995 1996 Dec. 18, 1997 Jan. 3, 1998
---- ---- ------------- -------------
U.S. Federal - current $ (5,611) (1,582) (11,327) (591)
U.S. Federal - deferred (3,977) 2,055 14,870 910
State and foreign taxes -
current 306 131 219 (82)
State and foreign taxes -
deferred (2,802) (490) 82 126
-------- ----- ------ ----
$(12,084) 114 3,844 363
======== ====== ====== ====
(Continued)
23
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
A reconciliation of income tax expense (benefit) computed using the U.S.
Federal statutory income tax rate of 35% of earnings (loss) before income
taxes to the actual provision (benefit) for income taxes follows:
Predecessor Successor
------------------------------------ -------------
Year
Ended December 31, Jan. 1, 1997 Dec. 19, 1997
--------------------- through through
1995 1996 Dec. 18, 1997 Jan. 3, 1998
---- ---- ------------- -------------
Expected tax at U.S.
statutory rate $ (9,733) 411 3,617 265
State and foreign taxes,
net of federal benefit (1,623) (233) 196 28
Foreign sales corporation
benefit - - (159) (7)
Equity in earnings in foreign
subsidiary - - 78 -
Nondeductible goodwill - - - 70
Nondeductible meals and
entertainment expenses - - 151 7
Tax credits (543) (36) (46) -
Other (185) (28) 7 -
-------- ---- ----- ---
$(12,084) 114 3,844 363
======== ==== ===== ===
(Continued)
24
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities.
Predecessor Successor
Dec. 31, 1996 Jan. 3, 1998
------------- ------------
Net deferred tax assets:
Accruals and allowances $ 16,264 16,392
Operating loss and credit carryforwards 4,973 6,657
Other - 80
--------- ------
Current deferred tax asset 21,237 23,129
--------- ------
Accrued employee benefits 5,400 1,347
Accruals and allowances 1,123 6,005
Other 7,760 6,295
--------- ------
Noncurrent deferred tax asset 14,283 13,647
--------- ------
Net deferred tax liabilities:
Depreciable assets (576) (313)
Inventory costs and reserves (36,882) (44,734)
Other (1,991) (211)
--------- ------
Current deferred tax liabilities (39,449) (45,258)
--------- ------
Noncurrent deferred tax liability -
depreciable assets (52,574) (70,169)
--------- ------
Net deferred tax liability $ (56,503) (78,651)
========= =======
(Continued)
25
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
(13) EARNINGS (LOSS) PER SHARE
The following table reconciles the numerators and denominators of the
basic and diluted per share computations for the years ended December
31, 1995 and 1996 and the period ended December 18, 1997:
Loss Shares Per-share
Year ended December 31, 1995: (numerator) (denominator) amount
----------------------------- ----------- ------------- ---------
Loss before preferred dividends $ (15,725)
Less: preferred dividends (4,500)
----------
Basic EPS:
Loss available for common shareholders (20,225) 8,860 $ (2.28)
=======
Effect of dilutive securities - -
---------- -----
Diluted EPS:
Loss available for common shareholders
plus assumed conversions $ (20,225) 8,860 $ (2.28)
========== ===== =======
Income (loss) Shares Per-share
Year ended December 31, 1996: (numerator) (denominator) amount
----------------------------- ------------- ------------- ---------
Income before preferred dividends $ 1,060
Less: preferred dividends (4,500)
--------
Basic EPS:
Loss available for common shareholders (3,440) 9,018 $ (0.38)
=======
Effect of dilutive securities - -
-------- ----
Diluted EPS:
Loss available for common shareholders
plus assumed conversions $ (3,440) 9,018 $ (0.38)
======== ===== =======
(Continued)
26
FIELDCREST CANNON, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Tables in thousands of dollars, except for per share data)
Income Shares Per-share
Year ended December 31, 1997: (numerator) (denominator) amount
----------------------------- ----------- ------------- ---------
Income before preferred dividends $ 6,490
Less: preferred dividends (4,125)
--------
Basic EPS:
Income available for common shareholders 2,365 9,200 $ 0.26
======
Effect of dilutive securities:
Stock options - 61
-------- -----
Diluted EPS:
Income available for common shareholders
plus assumed conversions $ 2,365 9,261 $ 0.26
======== ===== ======
(14) QUARTERLY DATA (UNAUDITED)
The table below sets forth the Company's quarterly information for 1996,
the period from January 1, 1997 to December 18, 1997 and the period from
December 19, 1997 to January 3, 1998:
Predecessor Successor
---------------------------------------------- -------------
1996 quarter end March 31 June 30 Sept. 30 Dec. 31
---------------- ---------- ------- -------- -------
Net sales $ 250,000 277,800 285,200 279,500
Gross profit 34,900 36,000 35,700 29,400
Operating income 6,100 11,000 2,900 2,400
Net income (loss) (700) 2,100 (2,700) 2,400
Basic earnings (loss) per
share (.20) .11 (.43) .13
Diluted earnings (loss) per share (.20) .11 (.43) .13
Oct. 1 to Dec. 19 to
1997 Periods March 31 June 30 Sept. 30 Dec. 18 Jan. 3
------------ ---------- ------- -------- --------- ----------
Net sales $ 262,900 270,800 287,000 229,500 40,000
Gross profit 35,800 45,400 43,900 24,600 6,600
Operating income (loss) 9,200 15,700 14,500 (11,600) 3,100
Net income (loss) 2,000 6,800 5,800 (8,100) 400
Basic earnings (loss) per
share .10 .62 .51 (.97)
Diluted earnings (loss) per share .10 .55 .47 (.97)
(Continued)
27