-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bL5s5hwo/jVSvAcdAOofr6pg/FyWDlyYzv0NI0PwBLeGHb5eDZ6+irm9n+YigV7b JP6FpYdnp/QcNcxFkxDI2g== 0000950103-94-003386.txt : 19940824 0000950103-94-003386.hdr.sgml : 19940824 ACCESSION NUMBER: 0000950103-94-003386 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940709 FILED AS OF DATE: 19940823 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARNACO GROUP INC /DE/ CENTRAL INDEX KEY: 0000801351 STANDARD INDUSTRIAL CLASSIFICATION: 2320 IRS NUMBER: 954032739 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10857 FILM NUMBER: 94545691 BUSINESS ADDRESS: STREET 1: 90 PARK AVE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126611300 FORMER COMPANY: FORMER CONFORMED NAME: W ACQUISITION CORP /DE/ DATE OF NAME CHANGE: 19861117 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 9, 1994 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________. Commission File Number: 1-4715 The Warnaco Group, Inc. (Exact name of registrant as specified in its charter) Delaware 95-4032739 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 90 Park Avenue New York, New York 10016 (Address of registrant's principal executive offices) (212) 661-1300 (Registrant's telephone number, including area code) Copies of all communications to: The Warnaco Group, Inc. 90 Park Avenue New York, New York 10016 Attention: Vice President and General Counsel Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares outstanding of the registrant's Class A Common Stock as of August 19, 1994 is as follows: 21,010,521. PART I -- FINANCIAL INFORMATION Item 1. Financial Statements THE WARNACO GROUP, INC. Consolidated Condensed Balance Sheets (in thousands of dollars)
July 9, January 8, 1994 1994 -------- -------- (unaudited) Assets Current assets: Cash (restricted $164 and $886, respectively)................................ $ 4,743 $ 4,651 Accounts receivable -- net................................................... 152,332 126,507 Inventories: Finished goods............................................................. 139,933 120,203 Work in process............................................................ 54,567 65,285 Raw materials.............................................................. 53,935 54,015 -------- -------- Total inventories......................................................... 248,435 239,503 Other current assets........................................................... 28,173 22,148 -------- -------- Total current assets...................................................... 433,683 392,809 -------- -------- Property, plant and equipment (net of accumulated depreciation of $68,676 and $65,257, respectively)........................... 78,917 73,636 Other assets: Intangibles and other assets -- net.......................................... 276,380 222,188 -------- -------- $788,980 $688,633 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Notes payable................................................................ $ 4,758 $ 5,819 Borrowing under revolving credit facility.................................... 180,876 100,523 Current portion of long-term debt............................................ 52,030 49,171 Accounts payable and accrued liabilities..................................... 87,577 112,557 Federal and other income taxes............................................... 1,673 2,778 -------- -------- Total current liabilities................................................. 326,914 270,848 -------- -------- Long-term debt................................................................. 243,938 245,518 Other long-term liabilities.................................................... 18,198 13,132 Stockholders' equity: Preferred Stock; $.01 par value.............................................. -- -- Common Stock; $.01 par value................................................. 210 202 Capital in excess of par value............................................... 338,098 315,270 Cumulative translation adjustment............................................ (797) 279 Accumulated deficit............................................................ (129,178) (147,225) Notes receivable for common stock issued....................................... (8,403) (9,391) -------- -------- Total stockholders' equity................................................ 199,930 159,135 -------- -------- $788,980 $688,633 ======== ========
This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. THE WARNACO GROUP, INC. Consolidated Condensed Statements of Operations (unaudited) (in thousands of dollars except share data)
Quarter ended Six months ended ------------------------------ ------------------------------ July 9, 1994 July 3, 1993 July 9, 1994 July 3, 1993 ------------ ------------ ------------ ------------ Net revenues................................. $ 190,302(1) $ 158,329 $ 338,033(1) $ 315,079 Cost of goods sold........................... 133,312 110,234 230,667 212,187 ----------- ----------- ----------- ----------- Gross profit................................. 56,990 48,095 107,366 102,892 Selling, administrative and general expenses. 38,846 31,831 69,106 64,621 ----------- ----------- ----------- ----------- Income before interest and income taxes...... 18,144 16,264 38,260 38,271 Interest expense............................. 8,308 10,283 15,713 20,188 ----------- ----------- ----------- ----------- Income before income taxes................... 9,836 5,981 22,547 18,083 Provision for income taxes................... 750 462 1,500 1,812 ----------- ----------- ----------- ----------- Income from continuing operations............ 9,086 5,519 21,047 16,271 Cumulative effect of change in method of accounting for postretirement benefits..... -- -- -- (10,500) Loss on California earthquake................ -- -- (3,000) -- ----------- ----------- ----------- ----------- Net income................................... $ 9,086 $ 5,519 $ 18,047 $ 5,771 =========== =========== =========== =========== Net income applicable to common stockholders............................... $ 9,086 $ 5,519 $ 18,047 $ 5,771 =========== =========== =========== =========== Income (loss) per common share: Income from continuing operations.......... $ 0.44 $ 0.28 $ 1.03 $ 0.82 Cumulative effect of change in method of accounting for postretirement benefits... -- -- -- (0.53) Loss on California earthquake................ -- -- (0.15) -- ----------- ----------- ----------- ----------- Net income per common share.................. $ 0.44 $ 0.28 $ 0.88 $ 0.29 =========== =========== =========== =========== Weighted average number of common shares outstanding......................... 20,835,560 19,886,362 20,357,371 19,884,040 =========== =========== =========== ===========
(1) Menswear sales on discontinued brands (Dior, Nicklaus and Puritan) were lower by $20 million for the second quarter and $35 million for the six months. All charges associated with discontinued brands were recorded as a non-recurring expense in the fourth quarter of 1993. Intimate apparel sales include Calvin Klein men's underwear, which was acquired on March 14, 1994. On a pro forma basis, as though Calvin Klein businesses were acquired at the beginning of the second quarter of 1993, revenues for that quarter would have been $10.7 million higher and net income for that quarter would not have been materially impacted from the reported amounts in the above statement. This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. THE WARNACO GROUP, INC. Consolidated Condensed Statements of Cash Flow (unaudited) Increase (Decrease) in Cash (in thousands of dollars)
Quarter ended ---------------------------- July 9, 1994 July 3, 1993 ----------- ----------- Cash flow from operations: Net income (loss)............................................................ $ 18,047 $ 5,771 Non cash items included in net income: Depreciation and amortization.............................................. 9,365 10,413 Interest................................................................... 545 1,953 Loss on California earthquake.............................................. 3,000 Cumulative effect of change in method of accounting for postretirement benefits................................................... -- 10,500 Income taxes paid............................................................ (2,605) (1,587) Other changes in operating accounts.......................................... (59,655) (62,561) Other........................................................................ (6,889) (10,629) -------- -------- Cash used in operations........................................................ (38,192) (46,140) -------- -------- Cash flow from investing activities: Net proceeds from sale of fixed assets....................................... 115 448 Purchase of property, plant & equipment...................................... (9,882) (6,791) Payment for purchase of Calvin Klein underwear businesses and trademarks..... (33,103) -- -------- -------- Cash used in investing activities.............................................. (42,870) (6,343) -------- -------- Cash flow from financing activities: Borrowings (repayments) under revolving credit facilities.................... 81,056 58,020 Net proceeds from the sale of Class A common stock and repayment of notes receivable from employees......................................... 988 751 Repayments of debt........................................................... (9,111) (9,397) Proceeds from other financings............................................... 8,626 5,593 Increase in deferred financing costs......................................... (405) (3,062) -------- -------- Cash provided from financing activities........................................ 81,154 51,905 -------- -------- Increase (decrease) in cash.................................................... 92 (578) Cash at beginning of period.................................................... 4,651 3,763 -------- -------- Cash at end of period.......................................................... $ 4,743 $ 3,185 ======== ======== Other changes in operating accounts: Accounts receivable.......................................................... $(18,001) $ (9,006) Inventories.................................................................. (3,898) (11,812) Other current assets......................................................... (6,025) (9,217) Accounts payable and accrued liabilities..................................... (33,231) (34,338) Income taxes payable......................................................... 1,500 1,812 -------- -------- $(59,655) $(62,561) ======== ======== Supplemental disclosure of cash flow information: In the month of March, Warnaco completed the acquisition of Calvin Klein underwear businesses and trademarks: Fair value of assets acquired.............................................. $ 69,191 Issuance of common stock in conjunction with the Calvin Klein acquisition................................................ (22,836) Liabilities assumed........................................................ (13,252) -------- Cash paid.................................................................. $ 33,103 ========
This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. THE WARNACO GROUP, INC. Notes to Consolidated Condensed Financial Statements 1. In the opinion of the Company, the accompanying consolidated condensed financial statements contained all the adjustments (all of which were of a normal recurring nature) necessary to present fairly the financial position of the Company as of July 9, 1994 as well as its results of operations and cash flows for the periods ended July 9, 1994 and July 3, 1993. Operating results for interim periods may not be indicative of results for the full fiscal year. 2. Certain amounts for prior periods have been reclassified to be comparable with the current period presentation. 3. In the first quarter of 1994, there was a $3.0 million non-operating charge related to the January 1994 California earthquake. 4. On March 14, 1994, the Company acquired the Calvin Klein worldwide businesses and trademarks for men's underwear, a worldwide license for Calvin Klein men's accessories and the Calvin Klein worldwide businesses and trademarks for women's intimate apparel upon the expiration of an existing license on December 31, 1994. 5. On June 8, 1994, the Company amended its Credit Agreement to increase the maximum amount of borrowing available under its revolving loan facility from $200 million to $235 million to provide flexibility for future growth. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations STATEMENT OF OPERATIONS (selected data) (amounts in millions of dollars)
Quarter ended Six months ended ------------------------------ ------------------------------ 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Net revenues................................. $190.3(1) $158.3 $338.0(1) $315.1 Cost of goods sold........................... 133.3 110.2 230.6 212.2 ------ ------ ------ ------ Gross profit................................. 57.0 48.1 107.4 102.9 % to net revenues.......................... 30.0% 30.4% 31.8% 32.7% Selling, administrative and general.......... 38.8 31.8 69.1 64.6 ------ ------ ------ ------ Income before interest and income taxes...... 18.2 16.3 38.3 38.3 % to net revenues.......................... 9.5% 10.3% 11.3% 12.2% Interest expense............................. 8.3 10.3 15.7 20.2 Provision for income taxes................... 0.8 0.5 1.5 1.8 ------ ------ ------ ------ Income from continuing operations............ $ 9.1 $ 5.5 $ 21.1 $ 16.3 ====== ====== ====== ====== (1) Menswear sales on discontinued brands (Dior, Nicklaus and Puritan) were lower by $20 million for the second quarter and $35 million for the six months. All charges associated with discontinued brands were recorded as a non-recurring expense in the fourth quarter of 1993. Intimate apparel sales include Calvin Klein men's underwear, which was acquired on March 14, 1994. On a pro forma basis, as though Calvin Klein businesses were acquired at the beginning of the second quarter of 1993, revenues for that quarter would have been $10.7 million higher and net income for that quarter would not have been materially impacted from the reported amounts in the above statement.
Net revenues increased 20.2% from $158.3 million in the second quarter of 1993 to $190.3 million in the second quarter of 1994. Net revenues for the six months ended July 9, 1994 increased 7.3% from $315.1 million in the first half of 1993 to $338.0 million in the 1994 period. Intimate Apparel division net revenues increased 40.3% in the second quarter of 1994 to $141.4 million from $100.8 million in the second quarter of 1993. Included in these revenues are sales of Calvin Klein men's underwear, which was acquired on March 14, 1994, of $15 million. Excluding the Calvin Klein sales, Intimate Apparel revenues are up over 25% in the quarter. For the six months, Intimate Apparel revenues increased 22.2% to $240.5 million from $196.8 million for the same period last year. Menswear division net revenues in the second quarter of 1994 of $39.4 million are 19.4% lower than the $48.9 million recorded in the second quarter of 1993, due primarily to $20 million lower sales in the discontinued brands which include Dior shirts and ties, Puritan and Nicklaus. Excluding the discontinued brands, Menswear revenues are up over 36% due to a 36% increase in the Chaps brands and a 71% increase in Hathaway. Menswear division net revenues for the six months of $80.8 million are 20.7% lower than the $101.9 million recorded last year, due to $35 million lower sales in the discontinued brands. Excluding the discontinued brands, Menswear revenues are up over 20% for the first half with Chaps up over 30%. Gross profit increased 18.5% from $48.1 million in the second quarter of 1993 to $57.0 million in the second quarter of 1994. Gross profit as a percentage of net revenues decreased slightly from 30.4% in the second quarter of 1993 to 30.0% in the second quarter of 1994. Gross profit for the first six months of 1994 increased 4.3% from $102.9 million in the first half of 1993 to $107.4 million in the first half of 1994. Gross profit as a percentage of net revenues decreased from 32.7% for the first half of 1993 to 31.8% for the first half of 1994, attributable to the higher mix of Fruit of the Loom, Calvin Klein and Victoria's Secret sales. Selling, administrative and general expense increased from $31.8 million (20.1% of net revenues) in the second quarter of 1993 to $38.8 million (20.4% of net revenues) in the second quarter of 1994. Selling, administrative and general expenses increased from $64.6 million (20.5% of net revenues) in the first six months of 1993 to $69.1 million (20.4% of net revenues) for the first six months of 1994. The decrease in selling, administrative and general expenses as a percentage of net revenues reflects the reduction in menswear division operating costs, partially offset by higher marketing expenses in Intimate Apparel. Interest expense decreased 19.2% from $10.3 million in second quarter of 1993 to $8.3 million in the second quarter of 1994. The decrease in interest expense reflects the refinancing of the Company's debt, that was concluded in October 1993, which lowered the Company's cost of borrowing by 150 basis points, as well as the Company's investment grade rating achieved in May, 1994, from Standard and Poor's Corporation, which further reduced the cost of borrowings by another 37 1/2 basis points to LIBOR plus 7/8%. Interest expense for the six months of 1994 decreased 22.2% from $20.2 million in the first half of 1993 to $15.7 million. The provision for income taxes for all periods primarily reflects accruals for taxes of foreign subsidiaries and accruals for state and local income taxes. Income from continuing operations increased 64.6% from $5.5 million in the second quarter of 1993 to $9.1 million in the second quarter of 1994. For the six months ended in 1994, income from continuing operations increased 29.4% from $16.3 million in the first half of 1993 to $21.0 million. The increases in income from continuing operations reflect the increased operating income and decreased interest expense noted above. The first quarter of 1994 includes a loss on the California earthquake of $3.0 million, the deductible portion of the Company's insurance policy relating to the January 17th California earthquake which temporarily shut down the Olga distribution center. All other costs are expected to be fully recovered from insurance. The first quarter of 1993 includes a one-time non-cash expense of $10.5 million for the cumulative effect of a change in the method of accounting for employee postretirement benefits which was recorded in accordance with the provisions of Statement on Financial Accounting Standards No. 106 ("FAS No. 106"). The adoption of FAS No. 106 is not expected to have a material impact on the results of operations in any future period. Net income for the second quarter of 1994 increased 64.6% to $9.1 million compared to $5.5 million for the second quarter of 1993. Net income for the first six months of 1994 after the $3.0 million one-time charge was $18.0 million, an increase of 213% compared to a net income for the first six months of 1993 of $5.8 million after the $10.5 million FAS 106 one-time charge noted above. Capital Resources and Liquidity The Company's liquidity requirements arise primarily from its debt service requirements and the funding of the Company's working capital needs, primarily inventory and accounts receivable. The Company's borrowing requirements are seasonal, with peak working capital needs generally arising at the end of the second quarter and during the third quarter of the fiscal year. The Company typically generates nearly all of its operating cash flow in the fourth quarter of the fiscal year reflecting third and fourth quarter shipments and the sale of inventory built during the first half of the fiscal year. During the second quarter of 1994, the Company secured an additional $35 million of revolving credit with its bank group. The increase in borrowing capability will be used to support growth in the Company's net revenues in future periods. Cash used by operating activities in the first half of 1994 was $38.2 million, which is $7.9 million favorable, compared to a use of $46.1 million in the comparable 1993 period. The favorableness resulted from the higher net income and a more efficient use of inventory which decreased quarter to quarter. The use of cash in the first half is attributable to a seasonal requirement of working capital to support second half revenue growth. The Company believes that funds available under its existing credit arrangements and cash flow to be generated from future operations will be sufficient to meet working capital and capital expenditure needs of the Company, including interest and principal payments on outstanding debt obligations, for the foreseeable future. PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 3.1 Restated Certificate of Incorporation of the Company. (Incorporated herein by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1, File No. 33-45877). 3.2 By-Laws of the Company. (Incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1, File No. 33-45877). 4.1 Registration Rights Agreement, dated as of March 14, 1994 between the Company and Calvin Klein, Inc. ("CKI"). (Incorporated herein by reference to Exhibit 4.1 to the Company's Form 10-Q filed May 24, 1994.) 10.1 Credit Agreement dated as of July 16, 1993 (the "U.S. $55,000,000 Credit Agreement") among Warnaco Inc., The Bank of Nova Scotia, as agent, and certain other lenders named therein. (Incorporated herein by reference to Exhibit 10.1 to the Company's Form 10-Q filed May 24, 1994.) 10.2 Amendment No. 1 to the U.S. $55,000,000 Credit Agreement dated as of October 14, 1993. (Incorporated herein by reference to Exhibit 10.2 to the Company's Form 10-Q filed May 24, 1994.) 10.3 Amendment No. 2 to the U.S. $55,000,000 Credit Agreement dated as of November 5, 1993. (Incorporated herein by reference to Exhibit 10.3 to the Company's Form 10-Q filed May 24, 1994.) 10.4 Amendment No. 3 to the U.S. $55,000,000 Credit Agreement dated as of January 7, 1994. (Incorporated herein by reference to Exhibit 10.4 to the Company's Form 10-Q filed May 24, 1994.) 10.5 Amendment No. 4 to the U.S. $55,000,000 Credit Agreement dated as of April 25, 1994. (Incorporated herein by reference to Exhibit 10.5 to the Company's Form 10-Q filed May 24, 1994.) 10.6 Amendment No. 5 to the U.S. $55,000,000 Credit Agreement dated as of August 12, 1994. 10.7 Acquisition Agreement dated March 14, 1994 by and among CKI, the Company and Warnaco Inc. (Incorporated herein by reference to Exhibit 10.6 to the Company's Form 10-Q filed May 24, 1994.) 10.8 U.S. $500,000,000 Credit Agreement dated as of October 14, 1993 (the "U.S. $500,000,000 Credit Agreement") among the Company, Warnaco Inc., The Bank of Nova Scotia, as co-managing agent and paying agent, Citicorp U.S.A., as co-managing agent and documentation and collateral agent, and certain other lenders named therein. (Incorporated herein by reference to Exhibit 10-1 to the Company's Form 10-Q filed November 16, 1993). 10.9 Amendment No. 1 to the U.S. $500,000,000 Credit Agreement, dated June 8, 1994. 10.10 Employment Agreement, dated as of January 6, 1991, between the Company and Linda J. Wachner. (Incorporated herein by reference to Exhibit 10.7 to the Company's Registration Statement on Form S-1, File No. 33-45877). 10.11 Incentive Compensation Plan. (Incorporated herein by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1, File No. 33-45877). 10.12 1991 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1, File No. 33-45877). 10.13 Amended and Restated 1988 Employee Stock Purchase Plan, as amended. (Incorporated herein by reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1, File No. 33-45877). 10.14 Warnaco Employee Retirement Plan. (Incorporated herein by reference to Exhibit 10.11 to the Company's Registration Statement on Form S-1, File No. 33-45877). 10.15 Executive Management Agreement dated as of May 9, 1991 between the Company, Warnaco and The Spectrum Group, Inc. (Incorporated herein by reference to Exhibit 10.13 to the Company's Registration Statement on Form S-1, File No. 33-45877). 10.16 1993 Stock Plan for non-employee directors. (Incorporated herein by reference to the Company's Proxy Statement for its 1994 Annual Meeting of Shareholders). 10.17 Amended and Restated 1993 Stock Plan. (Incorporated herein by reference to the Company's Proxy Statement for its 1994 Annual Meeting of Shareholders). 10.18 The Warnaco Group, Inc. Supplemental Incentive Compensation Plan. (Incorporated herein by reference to the Company's Proxy Statement for its 1994 Annual Meeting of Shareholders). 11.1 Earnings per share. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE WARNACO GROUP, INC. Date: August 23, 1994 By: /s/ DARIUSH ASHRAFI -------------------------------- Dariush Ashrafi Director, Senior Vice President and Chief Financial Officer Principal Financial Officer Date: August 23, 1994 By: /s/ WILLIAM S. FINKELSTEIN -------------------------------- William S. Finkelstein Senior Vice President and Corporate Controller Principal Accounting Officer EX-10.6 2 [CONFORMED COPY] FIFTH AMENDMENT TO CREDIT AGREEMENT This FIFTH AMENDMENT TO CREDIT AGREEMENT, dated as of August 12, 1994 (this "Amendatory Agreement"), among WARNACO INC. (the "Borrower"), the various financial institutions signatories hereto (the "Lenders") and THE BANK OF NOVA SCOTIA, as agent (the "Agent") for the Lenders, W I T N E S S E T H: WHEREAS, the Borrower, the Lenders and the Agent are parties to a Credit Agreement, dated as of July 16, 1993 (as amended or otherwise modified to the date hereof, the "Existing Credit Agreement"); WHEREAS, the Borrower has requested that the Lenders amend the Existing Credit Agreement in certain respects; and WHEREAS, the Lenders have agreed, subject to the terms and conditions hereinafter set forth, to amend the Existing Credit Agreement in certain respects as provided below (the Existing Credit Agreement, as so amended by this Amendatory Agreement, being referred to as the "Credit Agreement"); NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto agree as follows: PART I DEFINITIONS SUBPART 1.1. Certain Definitions. The following terms (whether or not underscored) when used in this Amendatory Agreement shall have the following meanings (such meanings to be equally applicable to the singular and plural form thereof): "Agent" is defined in the preamble. "Amendatory Agreement" is defined in the preamble. "Amendment No. 5" is defined in Subpart 3.1. "Borrower" is defined in the preamble. "Credit Agreement" is defined in the third recital. "Existing Credit Agreement" is defined in the first recital. "Fifth Amendment Effective Date" is defined in Subpart 3.1. "Lenders" is defined in the preamble. SUBPART 1.2. Other Definitions. Terms for which meanings are provided in the Existing Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used in this Amendatory Agreement with such meanings. PART II AMENDMENTS TO THE EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Fifth Amendment Effective Date, the Existing Credit Agreement is hereby amended in accordance with Subparts 2.1 through 2.2; except as so amended, the Existing Credit Agreement shall continue in full force and effect. SUBPART 2.1. Amendments to Article I. Article I of the Existing Credit Agreement is hereby amended in accordance with Subparts 2.1.1 through 2.1.2. SUBPART 2.1.1. Section 1.1 of the Existing Credit Agreement is hereby amended by inserting the following definitions in such Section in the appropriate alphabetical sequence: "Amendment No. 5" means the Fifth Amendment, dated as of August __, 1994, to this Agreement among the Borrower, the Lenders and the Agent. "Fifth Amendment Effective Date" is defined in Subpart 3.1 of Amendment No. 5. SUBPART 2.1.2. Section 1.1 of the Existing Credit Agreement is hereby further amended as follows: (a) the definition of "Initial Percentage" is hereby deleted in its entirety; (b) the definition of "Letter of Credit Availability" is hereby amended in its entirety to read as follows: "`Letter of Credit Availability' means, at any time, $50,000,000 minus the aggregate amount of all Letter of Credit Outstandings."; (c) the definition of "Loan Commitment Amount" is hereby amended in its entirety to read as follows: "`Loan Commitment Amount' means $30,000,000, as such amount may be reduced by Section 2.2."; and (d) the definition of "Percentage" is hereby amended in its entirety to read as follows: "`Percentage' means, relative to any Lender, the percentage set forth opposite its signature hereto or set forth in a Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to the terms hereof or a Lender Assignment Agreement executed by such Lender and its Assignee Lender and delivered pursuant to Section 11.11." SUBPART 2.2. Amendments to Article II. Article II of the Existing Credit Agreement is hereby amended in accordance with Subpart 2.2.1. SUBPART 2.2.1. Clause (a)(i) of Section 2.1.3 of the Existing Credit Agreement is hereby amended by deleting the figure "$55,000,000" appearing therein, and inserting "$80,000,000" in place thereof. PART III CONDITIONS TO EFFECTIVENESS SUBPART 3.1. Fifth Amendment Effective Date. This Amendatory Agreement (and the amendments and modifications contained herein) shall become effective, and shall thereafter be referred to as "Amendment No. 5", on the date (the "Fifth Amendment Effective Date") when all of the conditions set forth in this Subpart 3.1 have been satisfied. SUBPART 3.1.1. Execution of Counterparts. The Agent shall have received counterparts of this Amendatory Agreement, duly executed and delivered on behalf of the Borrower and the Required Lenders. SUBPART 3.1.2. Legal Details, etc. All documents executed or submitted pursuant hereto shall be satisfactory in form and substance to the Agent and its counsel. The Agent and its counsel shall have received all information and such counterpart originals or such certified or other copies or such materials, as the Agent or its counsel may reasonably request, and all legal matters incident to the transactions contemplated by this Amendatory Agreement shall be satisfactory to the Agent and its counsel. PART IV MISCELLANEOUS SUBPART 4.1. Cross-References. References in this Amendatory Agreement to any Part or Subpart are, unless otherwise specified or otherwise required by the context, to such Part or Subpart of this Amendatory Agreement. SUBPART 4.2. Loan Document Pursuant to Existing Credit Agreement. This Amendatory Agreement is a Loan Document executed pursuant to the Existing Credit Agreement and shall be construed, administered and applied in accordance with all of the terms and provisions of the Existing Credit Agreement. SUBPART 4.3. Successors and Assigns. This Amendatory Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SUBPART 4.4. Counterparts. This Amendatory Agreement may be executed by the parties hereto in several counterparts, each of which when executed and delivered shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SUBPART 4.5. Governing Law. THIS AMENDATORY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Amendatory Agreement to be executed by their respective officers as of the day and year first above written. WARNACO INC. By /s/ Dariush Ashrafi -------------------------------- Title: Senior Vice President/ Chief Financial Officer THE BANK OF NOVA SCOTIA, as Agent, as Issuer and as Lender By /s/ Terry K. Fryett -------------------------------- Title: Vice President MITSUI NEVITT CAPITAL CORPORATION By /s/ Peter Nevitt -------------------------------- Title: President SOCIETE GENERALE, NEW YORK BRANCH By /s/ John W. Stelwagon -------------------------------- Title: Vice President EX-10.9 3 EXHIBIT 10.9 AMENDMENT NO. 1 Dated as of June 8, 1994 This AMENDMENT No. 1 among WARNACO INC., a Delaware corporation (the "Borrower"), THE WARNACO GROUP, INC., a Delaware corporation the financial institutions parties to the Credit Agreement referred to below (the "Lenders"), THE BANK OF NOVA SCOTIA ("Scotiabank") and CITICORP USA, INC. ("Citicorp"), as Managing Agents (the "Managing Agents") for the Lenders thereunder, Citicorp, as Documentation Agent (the "Documentation Agent") and Collateral Agent (the "Collateral Agent") for the Lenders thereunder and Scotiabank, as Paying Agent (the "Paying Agent") for the Lenders thereunder and as Swing Line Bank and an Issuing Bank thereunder. PRELIMINARY STATEMENTS: (1) The Borrower, Group, the Lenders, the Managing Agents, the Documentation Agent, the Collateral Agent and the Paying Agent have entered into a Credit Agreement dated as of October 14, 1993 (the "Credit Agreement"; the terms defined therein being used herein as therein defined unless otherwise defined herein). (2) The Borrower desires to increase the Revolving Credit Facility by $35,000,000, from $200,000,000 to $235,000,000, in order to accommodate its working capital needs and other corporate purposes, and accordingly has requested that the Lenders agree to such increase. (3) The Borrower desires to amend certain other provisions of the Credit Agreement, including, among other things, the tax provisions applicable to Lenders organized under the laws of a jurisdiction outside the United States. (4) The Lenders are, on the terms and conditions stated below, willing to grant the request of the Borrower and the Borrower and the Lenders have agreed to amend the Credit Agreement as hereinafter set forth. SECTION 1. Amendments to Credit Agreement. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, hereby amended as follows: (a) Section 2.01(d) is amended in full to read as follows: "(d) Clean-Down. Notwithstanding the provisions of Sections 2.01(b), 2.01(c) and 2.13, so long as the Collateral Release Date shall not have occurred, no Borrowings may be made under Section 2.01(b) or 2.01(c) and no Letters of Credit may be requested to be issued under Section 2.13 during the last 30 days of (i) the Fiscal Year ending on or about December 31, 1994 unless (A) the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding after giving effect to such Borrowing or the issuance of such Letter of Credit shall not exceed $115,000,000 or (B) there shall have been a period of at least 30 consecutive days during such Fiscal Year when the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding did not exceed $115,000,000, (ii) the Fiscal Year ending on or about December 31, 1995 unless (A) the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding after giving effect to such Borrowing or the issuance of such Letter of Credit shall not exceed $165,000,000 or (B) there shall have been a period of at least 30 consecutive days during such Fiscal Year when the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding did not exceed $165,000,000 and (iii) the Fiscal Year ending on or about December 31, 1996 and each Fiscal Year thereafter unless (A) the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding after giving effect to such Borrowing or the issuance of such Letter of Credit shall not exceed $130,000,000 or (B) there shall have been a period of at least 30 consecutive days during such Fiscal Year when the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding did not exceed $130,000,000." (b) Section 2.05(b)(v) is amended in full to read as follows: "(v) So long as the Collateral Release Date shall not have occurred, the Borrower shall (A) on the 30th day preceding the last day of the Fiscal Year ending on or about December 31, 1994, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances equal to the amount by which the aggregate principal amount of the Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances then outstanding exceeds $115,000,000, unless there shall have been a period of at least 30 consecutive days during such Fiscal Year when the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding did not exceed $115,000,000, (B) on the 30th day preceding the last day of the Fiscal Year ending on or about December 31, 1995, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances equal to the amount by which the aggregate principal amount of the Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances then outstanding exceeds $165,000,000, unless there shall have been a period of at least 30 consecutive days during such Fiscal Year when the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding did not exceed $165,000,000, and (C) on the 30th day preceding the last day of each subsequent Fiscal Year, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, Letter of Credit Advances and the Swing Line Advances equal to the amount by which the aggregate principal amount of the Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances then outstanding exceeds $130,000,000, unless there shall have been a period of at least 30 consecutive days during such subsequent Fiscal Year when the aggregate principal amount of Revolving Credit Advances, Letter of Credit Advances and Swing Line Advances outstanding did not exceed $130,000,000." (c) The first sentence of Section 2.11(e) is amended by (i) adding immediately after the words "or any successor" the words "or alternative", (ii) deleting the phrase "entitled to benefits under an income tax treaty to which the United States is a party that reduces the rate of" and substituting therefor the phrase "exempt from or is entitled to a reduced rate of United States" and (iii) deleting the phrase "or certifying that the income receivable pursuant to this Agreement or the Notes is effectively connected with the conduct of a trade or business in the United States" at the end thereof. (d) Section 8.07(c) is amended by (i) adding immediately after the words "The Paying Agent" in the first sentence thereof the phrase", acting for this purpose as the agent of the Borrower," and (ii) deleting the word "may" in the second sentence thereof and substituting therefor the word "shall". (e) Section 8.07(d) is amended by adding after the first sentence thereof the following sentence: "Such Assignment and Acceptance shall not become effective until the information contained therein is recorded in the Register by the Paying Agent." (f) Schedule 1 to the Credit Agreement is amended in full to read as set forth in Annex A hereto. SECTION 2. Consent. The parties hereto consent to the exchange of the Notes currently held by Restructured Obligations Backed by Senior Assets B.V. ("ROSA") and Stichting Restructured Obligations Backed by Senior Assets 2 ("ROSA2") with Notes substantially in the form of Exhibit C-l to the Credit Agreement, except that such Notes shall be payable to ROSA or ROSA2 or their registered assigns. Such Notes may not be exchanged for Notes in any other form, including, without limitation, at any time after an assignment by ROSA or ROSA2 pursuant to Section 8.07 of the Credit Agreement. Each such Note shall constitute a "Note" under the Credit Agreement for all purposes. SECTION 3. Conditions of Effectiveness. This Amendment shall become effective when, and only when, on or before June 8, 1994, the Documentation Agent shall have received (i) counterparts of this Amendment executed by the Borrower, Group and all of the Lenders or, as to any of the Lenders, advice satisfactory to the Documentation Agent that such Lenders have executed this Amendment, (ii) an amendment fee of 4 basis points calculated on the sum of the aggregate Revolving Credit Commitments outstanding (prior to giving effect to this Amendment) plus the outstanding Term Advances, payable to the Documentation Agent for the ratable benefit of the Lenders, (iii) a commitment fee of 12.5 basis points calculated on the amount of the increase in the Revolving Credit Commitments pursuant to this Amendment, payable to the Documentation Agent for the ratable benefit of the Lenders increasing their Revolving Credit Commitments, based on each such Lender's increase, and (iv) such other fees as may be set forth in that certain letter dated May 11, 1994 from the Managing Agents to the Borrower, payable to the Documentation Agent for the ratable benefit of the Managing Agents. Section 1 hereof shall become effective when, and only when, on or before June 8, 1994, the Documentation Agent shall have additionally received all of the following documents, each document (unless otherwise indicated) being dated the date of receipt thereof by the Documentation Agent (which date shall be the same for all such documents), in form and substance satisfactory to the Documentation Agent: (a) Certified copies of (i) the resolutions of the Board of Directors of (x) each of the Borrower and Group approving this Amendment and the matters contemplated hereby and (y) each other Guarantor evidencing approval of the Consent and the matters contemplated hereby and (ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Amendment, the Consent and the matters contemplated hereby and thereby. (b) A certificate of the Secretary or an Assistant Secretary of each of the Borrower, Group and the other Guarantors, certifying the names and true signatures of its officers authorized to sign this Amendment or the Consent and the other documents to be delivered hereunder. (c) If required by the Managing Agents, an amendment to each Mortgage, in form and substance satisfactory to the Managing Agents, duly executed by the Loan Party party to such Mortgage, and endorsements to American Land Title Association Lender's Extended Coverage title insurance policies in form and substance satisfactory to the Collateral Agent. (d) Counterparts of the Consent appended hereto (the "Consent"), executed by the Guarantors (other than Group). (e) A favorable opinion of Skadden, Arps, Slate, Meagher & Flom, counsel for the Loan Parties, to the effect that this Amendment and the Consent have been duly authorized, executed and delivered by the Loan Parties party thereto and as to the matters referred to in Section 4 hereof (other than subsection (e) thereof), and as to such other matters as any Lender through the Managing Agents may reasonable request. (f) A certificate signed by a duly authorized officer of the Borrower and Group stating that: (i) The representations and warranties contained in Section 4 hereof and in the Loan Documents, as amended hereby, are correct on and as of the date of such certificate as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a date other than the date of such certificate, and (ii) No event has occurred and is continuing that constitutes a Default. SECTION 4. Representations and Warranties of the Borrower. Each of Group and the Borrower represents and warrants as follows: (a) Each Loan Party (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. (b) The execution, delivery and performance of this Amendment of each Loan Party party hereto and of the Consent by each Loan Party party thereto and of the Loan Documents, as amended hereby, to which such Loan Party is or is to be a party, and the consummation of the transactions contemplated hereby and thereby, are within such Loan Party's corporate powers, have been dull authorized by all necessary corporate action, and do not (i) contravene such Loan Party's charter or by-laws, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934 and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created by the Collateral Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for the due execution, delivery, recordation, filing or performance of this Amendment or the Consent by any Loan Party party thereto, or of any of the Loan Documents, as amended hereby, to which such Loan Party is or is to be a party, or for the consummation of the transactions contemplated hereby or thereby. (d) This Amendment has been, and the Consent when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Amendment and each of the Loan Documents, as amended hereby, constitute, and the Consent when delivered hereunder will constitute, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms. (e) The Consolidated balance sheets of Group and its Subsidiaries as at January 2, 1993 and January 8, 1994, and the related Consolidated statements of operations, stockholders' equity (deficit) and cash flow of Group and its Subsidiaries for the fiscal years then ended, accompanied by an opinion of Ernst & Young, independent public accountants, copies of which have been furnished to each Lender, fairly present, the Consolidated financial condition of Group and its Subsidiaries as at such dates and the Consolidated results of the operations of Group and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis, and since January 2, 1993, there has been no Material Adverse Change. (f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or threatened before any court, governmental agency or arbitrator that (i) purports to affect the legality, validity or enforceability of this Amendment, the Consent or any other Loan Document, as amended hereby or the consummation of the transactions contemplated hereby or thereby or (ii) except as set forth on Schedule 4.01(i) to the Credit Agreement, is or would be reasonably likely to have a Material Adverse Effect. There has been no adverse change in the status, or financial effect on any Loan Party or any of their Subsidiaries, of the Disclosed Litigation from that described on Schedule 4.01(i) to the Credit Agreement on the date thereof or except as has been disclosed to the Agents and the Lenders. (g) The Collateral Documents and the pledge and assignment of the Collateral pursuant thereto create a valid and perfected first priority security interest in the Collateral, securing the payment of the Obligations of the Loan Parties under the Loan Documents, as amended hereby, all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken, and the execution, delivery and performance of this Amendment and the Consent do not adversely affect the aforesaid Liens created under such Collateral Documents. SECTION 5. Reference to and Effect on the Loan Documents. (a) Upon the effectiveness of Section 1 hereof, on and after the date hereof each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof " or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby. (b) Except as specifically amended above, the Credit Agreement and the Notes, and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Agreements and all of the Collateral described therein do and shall continue to secure the payment of all obligations of the Loan Parties under the Credit Agreement, the Notes and the other Loan Documents, in each case as amended hereby. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender either Managing Agent, the Documentation Agent, the Collateral Agent or the Paying Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 6. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 7. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. WARNACO INC. By______________________________________ Title: THE WARNACO GROUP, INC. By______________________________________ Title: THE BANK OF NOVA SCOTIA, as Managing Agent, Paying Agent, Swing Line Bank and an Issuing Bank By______________________________________ Title: CITICORP USA, INC., as Managing Agent, Documentation Agent and Collateral Agent By______________________________________ Title: Lenders THE BANK OF CALIFORNIA, N.A. By______________________________________ Title: THE BANK OF NEW YORK By______________________________________ Title: THE BANK OF NOVA SCOTIA By______________________________________ Title: CHEMICAL BANK By______________________________________ Title: CITICORP USA, INC. By______________________________________ Title: CREDIT SUISSE By______________________________________ Title: By______________________________________ Title: THE FUJI BANK, LTD. By______________________________________ Title: GENERAL ELECTRIC CAPITAL CORPORATION By______________________________________ Title: IBJ SCHRODER BANK AND TRUST CO. By______________________________________ Title: PROSPECT STREET SENIOR GROUP By______________________________________ Title: RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS B.V. By______________________________________ Title: STICHTING RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS 2 By______________________________________ Title: EX-11.1 4 EXHIBIT 11.1 THE WARNACO GROUP, INC. Calculation of Income (Loss) per Common Share (in thousands except share data)
Quarter ended Six months ended ------------------------------ ------------------------------ 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Income from continuing operations applic- able to Common Shareholders................ $ 9,086 $ 5,519 $ 21,047 $ 16,271 Cumulative effect of change in the method of accounting for postretirement benefits.. -- -- -- (10,500) Loss on earthquake........................... -- -- (3,000) -- ----------- ----------- ----------- ----------- Net income................................... $ 9,086 $ 5,519 $ 18,047 $ 5,771 =========== =========== =========== =========== Weighted average number of shares actually outstanding during the year................ 19,217,822 18,037,500 18,804,960 18,037,500 Add common equivalent shares as part of IPO(a)..................................... 1,671,737 1,848,862 1,552,412 1,846,540 ----------- ----------- ----------- ----------- Weighted average number of shares used in calculation of primary income per share..................................... 20,835,559 19,886,362 20,357,372 19,884,040 =========== =========== =========== =========== Income (Loss) per common share: Income from continuing operations applic- able to common shareholders................ $ 0.44 $ 0.28 $ 1.03 $ 0.82 Cumulative effect of change in the method of accounting for postretirement benefits................................. -- -- -- (0.53) Loss on earthquake......................... -- -- (0.15) -- ----------- ----------- ----------- ----------- Net income per common share.................. $ 0.44 $ 0.28 $ 0.88 $ 0.29 =========== =========== =========== =========== - ------------------ (a) Represents additional shares under the Employee Stock Plan and Company Option Plan for which portions of the exercisable price are below average price during the quarter.
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