-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WuEEiZpTxtyJ2U0CEc3A+16taTrBzQ6Poju7M2OuH66X8cxS7DOfI8GXq7GaVC8W TnEnagp+fmvOiaPD8jrnyQ== 0000950117-96-000515.txt : 19960522 0000950117-96-000515.hdr.sgml : 19960522 ACCESSION NUMBER: 0000950117-96-000515 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960406 FILED AS OF DATE: 19960521 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARNACO GROUP INC /DE/ CENTRAL INDEX KEY: 0000801351 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [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: 96570467 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 THE WARNACO GROUP, INC. 10-Q ________________________________________________________________________________ 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 APRIL 6, 1996 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 May 6, 1996 is as follows: 51,823,062. ________________________________________________________________________________ PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS OF DOLLARS)
APRIL 6, JANUARY 6, 1996 1996 ---------- ----------- (UNAUDITED) ASSETS Current assets: Cash (restricted $100 and $886, respectively)..................................... $ 5,256 $ 6,162 Accounts receivable -- net...................................................... 183,694 156,607 Inventories: Finished goods.................................................................... 244,567 214,252 Work in process................................................................... 82,295 77,940 Raw materials..................................................................... 70,557 64,274 ---------- ----------- Total inventories............................................................ 397,419 356,466 Other current assets................................................................... 29,649 23,148 ---------- ----------- Total current assets......................................................... 616,018 542,383 Property, plant and equipment, (net of accumulated depreciation of $85,223 and $81,051, respectively)........................................................................ 112,387 106,325 Intangibles and other assets -- net.................................................. 292,767 290,421 ---------- ----------- $1,021,172 $ 939,129 ---------- ----------- ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Borrowing under revolving credit facility......................................... $ 140,807 $ 51,033 Borrowing under foreign credit facilities......................................... 6,534 -- Current portion of long-term debt................................................. 31,469 26,700 Accounts payable and accrued liabilities.......................................... 123,384 149,950 Accrued income taxes.............................................................. 5,671 5,231 ---------- ----------- Total current liabilities.................................................... 307,865 232,914 ---------- ----------- Long-term debt......................................................................... 189,211 194,301 Other long-term liabilities............................................................ 11,648 11,613 Stockholders' equity: Preferred Stock; $.01 par value................................................... -- -- Common Stock; $.01 par value...................................................... 521 521 Capital in excess of par value.................................................... 568,505 567,965 Cumulative translation adjustment................................................. (4,257) (3,745) Accumulated deficit............................................................... (35,302) (46,896) Treasury stock, at cost........................................................... (5,000) (5,000) Notes receivable for common stock issued and unearned stock compensation.......... (12,019) (12,544) ---------- ----------- Total stockholders' equity................................................... 512,448 500,301 ---------- ----------- $1,021,172 $ 939,129 ---------- ----------- ---------- -----------
This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 2 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED -------------------------- APRIL 6, APRIL 8, 1996 1995 ----------- ----------- (UNAUDITED) Net revenues....................................................................... $ 206,480 $ 195,156 Cost of goods sold................................................................. 133,571 128,332 ----------- ----------- Gross profit....................................................................... 72,909 66,824 Selling, administrative and general expenses....................................... 40,561 41,335 ----------- ----------- Income before interest and income taxes............................................ 32,348 25,489 Interest expense................................................................... 7,195 8,360 ----------- ----------- Income before income taxes......................................................... 25,153 17,129 Provision for income taxes......................................................... 9,935 6,509 ----------- ----------- Net income......................................................................... $ 15,218 $ 10,620 ----------- ----------- ----------- ----------- Net income per common share........................................................ $ 0.29 $ 0.26 ----------- ----------- ----------- ----------- Weighted average number of common shares outstanding............................... 53,240,235 41,395,979 ----------- ----------- ----------- -----------
This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 3 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW INCREASE (DECREASE) IN CASH (IN THOUSANDS OF DOLLARS)
THREE MONTHS ENDED ----------------------- APRIL 6, APRIL 8, 1996 1995 -------- ----------- (UNAUDITED) Cash flow from operations: Net income............................................................................. $ 15,218 $ 10,620 Non-cash item included in net income: Depreciation and amortization..................................................... 4,336 5,061 Income taxes paid...................................................................... (434) (912) Other changes in operating accounts.................................................... (91,690) (57,391) Other.................................................................................. 1,272 (398) -------- ----------- Cash used in operations.................................................................. (71,298) (43,020) -------- ----------- Cash flow from investing activities: Net proceeds from sale of fixed assets................................................. 148 5,319 Purchase of property, plant & equipment................................................ (8,048) (5,952) Payment for purchase of acquired assets................................................ (14,000) (5,000) Repurchase of Calvin Klein license -- Canada......................................... -- (6,200) -------- ----------- Cash used in investing activities........................................................ (21,900) (11,833) -------- ----------- Cash flow from financing activities: Borrowing under revolving credit facilities............................................ 96,308 58,140 Net proceeds from the sale of Class A common stock, exercise of stock options and repayment of notes receivable from employees........................................ 540 305 Repayments of debt..................................................................... (321) (3,070) Dividends paid......................................................................... (3,624) -- Increase in deferred financing costs................................................... (611) -- -------- ----------- Cash provided from financing activities.................................................. 92,292 55,375 -------- ----------- Increase (decrease) in cash.............................................................. (906) 522 Cash at beginning of period.............................................................. 6,162 3,791 -------- ----------- Cash at end of period.................................................................... $ 5,256 $ 4,313 -------- ----------- -------- ----------- Other changes in operating accounts: Accounts receivable.................................................................... $(21,087) $ 560 Inventories............................................................................ (40,953) (31,581) Other current assets................................................................... (6,280) (10,615) Accounts payable and accrued liabilities............................................... (24,244) (16,700) Accrued income taxes................................................................... 874 945 -------- ----------- $(91,690) $ (57,391) -------- ----------- -------- -----------
This statement should be read in conjunction with the accompanying Notes to Consolidated Condensed Financial Statements. 4 THE WARNACO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company, the accompanying consolidated condensed financial statements contain all the adjustments (all of which were of a normal recurring nature) necessary to present fairly the financial position of the Company as of April 6, 1996 as well as its results of operations and cash flows for the periods ended April 6, 1996 and April 8, 1995. Operating results for interim periods may not be indicative of results for the full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended January 6, 1996. 2. Certain amounts for prior periods have been reclassified to be comparable with the current period presentation. 3. On February 9 1996, the Company acquired substantially all of the assets (including certain subsidiaries) comprising the GJM Group of Companies ('GJM') from Cygne Design Inc. GJM is a private label manufacturer of women's lingerie and sleepwear. The purchase price consisted of a cash payment of $12,500,000 and a cash payment of $1,500,000 due upon the satisfactory completion of an audit of the net assets acquired. The purchase price is subject to adjustment as determined by the audit of the balance sheet of the acquired assets. The preliminary allocation of purchase price to the estimated fair value of the assets acquired is summarized below (in millions of dollars): Accounts receivable............................................... $10.7 Inventories....................................................... 7.7 Prepaid expenses.................................................. 1.4 Property, plant and equipment..................................... 2.9 Goodwill and other................................................ 7.5 ----- 30.2 Accounts payable and liabilities assumed.......................... (16.2) ----- Total purchase price......................................... $14.0 ----- -----
4. On May 3, 1996 the Company entered into an agreement in principle to buy Lejaby S.A./Euralis S.A. ('Lejaby'), a leading European intimate apparel manufacturer. The terms of the transaction and the allocation of purchase price to the net assets acquired are subject to the completion of a definitive purchase agreement. 5. On May 6, 1996, after a careful evaluation of the Company's men's dress shirt operations, the Company announced that it decided to cease manufacturing and marketing the Hathaway brand. The Company expects to record a loss on the shutdown of the Hathaway operations of approximately $55 million ($37 million after income tax benefits) in the second quarter of fiscal 1996, comprising primarily a write-down of assets, liquidation of inventory and accounts receivable and severance costs. In addition, the Company will consolidate certain intimate apparel manufacturing, distribution and administrative operations in the United States and Europe. The consolidations are expected to result in a charge of approximately $38 million ($25 million after income tax benefits) in the second quarter of fiscal 1996, comprising primarily a write-down of asset values, accruals of lease and other contractual obligations and severance costs. 5 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)
THREE MONTHS ENDED ---------------------- APRIL 6, APRIL 8, 1996 1995 -------- -------- Net revenues................................................................................ $206.5 $195.2 Cost of goods sold.......................................................................... 133.6 128.3 -------- -------- Gross profit................................................................................ 72.9 66.8 % to net revenues......................................................................... 35.3% 34.2% Selling, administrative and general......................................................... 40.6 41.3 -------- -------- Income before interest and income taxes..................................................... 32.3 25.5 % to net revenues......................................................................... 15.7% 13.1% Interest expense............................................................................ 7.2 8.4 Provision for income taxes.................................................................. 9.9 6.5 -------- -------- Net income.................................................................................. $ 15.2 $ 10.6 -------- -------- -------- --------
Following a comprehensive evaluation the Company's men's dress shirt business, the Company decided to cease manufacturing and marketing the Hathaway brand. The decision will result in the sale of the business or the cessation of operations at those facilities where Hathaway is produced. As a result, the Company will record a loss on the shutdown of the Hathaway operations of approximately $55 million ($37 million after income tax benefits) in the second quarter of fiscal 1996, comprising primarily a write-down of assets, liquidation of inventory and accounts receivable and severance costs. In addition, the Company will consolidate certain intimate apparel manufacturing, distribution and administrative operations in the United States and Europe. The consolidations are expected to result in a charge of approximately $38 million ($25 million after income tax benefits) in the second quarter of fiscal 1996, comprising primarily a write-down of asset values, accruals of lease and other contractual obligations and severance costs. Net revenues in the first quarter of fiscal 1996 were $206.5 million, 5.8% higher than the $195.2 million recorded in the first quarter of fiscal 1995. Intimate apparel division net revenues increased 7.1% in the first quarter of fiscal 1996 to $156.8 million from $146.4 million in the first quarter of fiscal 1995. Net revenues for the first quarter of fiscal 1995 include $24.4 million more sales for Victoria Secret and Avon, excluding these items intimate apparel net revenues increased 30.7% in the first quarter of fisal 1996 compared to fiscal 1995. The increase is a result of a 101% increase in Calvin Klein, a 13.2% increase in Warner's and Olga domestic sales due to successful launch of Van Raalte and the Speedo sports bra and an increase of 22.7% in international net revenues. In addition, the company acquired GJM in February 1996, which generated $8.5 million in net revenues in the first quarter of fiscal 1996. Menswear division net revenues increased 2.2% to $42.7 million from the $41.8 million in the first quarter of fiscal 1995 attributable to an increase in Calvin Klein accessories net revenues. Gross profit increased 9.1% to $72.9 million in the first quarter of fiscal 1996 from $66.8 million recorded in the first quarter of fiscal 1995. Gross profit as a percentage of net revenues increased to 35.3% in the first quarter of fiscal 1996 from 34.2% in the first quarter of fiscal 1995. The increase in gross profit and gross profit as a percentage of net revenues reflects the higher mix of Calvin Klein sales and manufacturing efficiencies in the intimate apparel division. Selling, administrative and general expenses decreased to $40.6 million (19.6% of net revenues) from the $41.3 million (21.2% of net revenues) recorded in the first quarter of fiscal 1995. The decrease 6 in selling, administrative and general expense in dollars and as a percentage of net revenues is due primarily to the continued efforts to control costs and the leverage of the higher Calvin Klein sales. Interest expense decreased 13.9% in the first quarter of fiscal 1996 to $7.2 million from $8.4 million recorded in the first quarter of fiscal 1995 reflecting the use of the proceeds from the Company's October 1995 public offering to reduce outstanding debt. The provision for income taxes for the first quarter of fiscal 1996 was $9.9 million compared to $6.5 million in the first quarter of fiscal 1995. The Company's effective tax rate for the first quarter of fiscal 1996 was 39.5% compared to 38% for the first quarter of fiscal 1995. The increase in effective tax rate in 1996 compared to 1995 reflects the realization of tax benefits in 1995 of certain state net operating loss carryforwards. Net income for the first quarter of 1996 was $15.2 million an increase of 43.3% over the $10.6 million reported last year. The increased net income reflects the improved operating income and lower interest expense partially offset by higher income taxes, as noted above. CAPITAL RESOURCES AND LIQUIDITY On May 11, 1995, consistent with the Company's goal of providing increased shareholder value, the Company declared its initial quarterly cash dividend of $0.07 per share. The Company has since declared five successive quarterly cash dividends of $0.07 per share. On February 9, 1996 the Company purchased substantially all of the assets, including certain subsidiaries, of the GJM Group of Companies ('GJM'), from Cygne Design Inc. GJM is a private label manufacturer of women's lingerie and sleepwear. The purchase price consisted of a cash payment of $12,500,000 and a cash payment of $1,500,000 due upon the satisfactory completion of an audit of the net assets acquired. The purchase price is subject to adjustment as determined by the audit of the balance sheet of the acquired assets. On May 3, 1996 the Company entered into an agreement in principle to purchase Lejaby S.A./Euralis S.A. ('Lejaby'), a leading European intimate apparel manufacturer. The terms of the acquisition are subject to the completion of a definitive purchase agreement. The Company expects to close this transaction by June 30, 1996. 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. Cash used in operations in the first quarter of fiscal 1996 was $71.3 million compared to a use of $43.0 million in the comparable 1995 period. The use of cash in the first quarter of the Company's fiscal year is a result of seasonal increases in working capital, primarily inventory and accounts receivable. The increase in inventory is primarily in intimate apparel with increases in Calvin Klein inventory to support sales increases, Warner's basic goods inventory which has contributed to an improvement in service levels to our customers and GJM, a newly acquired division, which the Company acquired in 1996. 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 dividends and interest and principal payments on outstanding debt obligations for the next twelve months and for the next several years. 7 PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 11.1 -- Earnings per share. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the first quarter of fiscal 1996.
8 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: May 21, 1996 By: /s/ WILLIAM S. FINKELSTEIN ----------------------------- William S. Finkelstein Director, Senior Vice President and Chief Financial Officer Principal Financial and Accounting Officer Date: May 21, 1996 By: /s/ WALLIS H. BROOKS ----------------------------- Wallis H. Brooks Vice President and Corporate Controller 9 EX-11 2 EXHIBIT 11.1 THE WARNACO GROUP, INC. Calculation of Net Income Per Share
Three Months Ended ----------------------------- April 6, April 8, 1996 1995 ----------- ----------- Net income $15,218,000 $10,620,000 =========== =========== Net income per share $0.29 $0.26 =========== =========== Weighted average number of shares of common stock outstanding: Class A common stock issued 49,122,262 37,499,492 Shares issued in underwritten public offering -- -- Shares of restricted stock issued 320,000 -- Shares issued upon exercise of options 19,115 -- Common stock equivalents - using the Treasury stock method 4,065,458 4,183,087 Less: Treasury stock held (286,600) (286,600) ----------- ----------- Weighted average number of shares of common stock outstanding 53,240,235 41,395,979 =========== ===========
EX-27 3 ARTICLE 5 FDS 1ST QTR 1996 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THE WARNACO GROUP, INC. FOR THE QUARTER ENDED APRIL 6, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-04-1997 JAN-07-1996 APR-06-1996 5,256 0 185,595 1,901 397,419 616,018 197,610 85,223 1,021,172 307,865 189,211 0 0 521 511,927 1,021,172 206,480 206,480 133,571 133,571 40,561 0 7,195 25,153 9,935 15,218 0 0 0 15,218 .29 .29
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