-----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, O/k/Bk7UeLpqxfWDeK5NZjiTJLV/F1oAI99q2DnNtziO4KpjDIBGLVHCPc2pNNcb ODMQtaEwY43C+D/RxIevUA== 0000950117-03-002509.txt : 20030611 0000950117-03-002509.hdr.sgml : 20030611 20030610214128 ACCESSION NUMBER: 0000950117-03-002509 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030611 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030611 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARNACO GROUP INC /DE/ CENTRAL INDEX KEY: 0000801351 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', CHILDREN'S & INFANTS' UNDERGARMENTS [2340] IRS NUMBER: 954032739 STATE OF INCORPORATION: DE FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10857 FILM NUMBER: 03739769 BUSINESS ADDRESS: STREET 1: 90 PARK AVE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126611300 MAIL ADDRESS: STREET 1: 90 PARK AVENUE STREET 2: 26TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 FORMER COMPANY: FORMER CONFORMED NAME: W ACQUISITION CORP /DE/ DATE OF NAME CHANGE: 19861117 8-K 1 a35531.txt THE WARNACO GROUP, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): June 11, 2003 (June 10, 2003) The Warnaco Group, Inc. ----------------------- (Exact Name of Registrant as Specified in Charter) Delaware -------- (State or Other Jurisdiction of Incorporation) 1-10857 95-4032739 ------- ---------- (Commission File Number) (IRS Employer Identification No.) 90 Park Avenue New York, NY 10016 ------------ ----- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 661-1300 Not Applicable -------------- (Former name or former address, if changed since last report) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) Exhibits. Exhibit No. Description ----------- ----------- 99.1 Unaudited pro forma consolidated condensed financial information and other financial information Item 9 / Item 12. Regulation FD Disclosure / Results of Operations & Financial Condition. As previously disclosed, in connection with a financing undertaken by The Warnaco Group, Inc. (the "company"), the company provided certain financial and other information to potential financing sources and furnished such information in Current Reports on Form 8-K dated May 29, 2003 and June 2, 2003, respectively. The company updated such information to reflect the actual terms of the financing and is providing the information to the potential financing sources. The company is furnishing the information herewith as Exhibit 99.1 to this Form 8-K. Such information is incorporated herein by reference. In accordance with general instruction B.2 and B.6 of Form 8-K, the information in this report, including the exhibit, is furnished pursuant to Item 9 and Item 12 and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise be subject to the liability of that section. SIGNATURE 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 hereunto duly authorized. THE WARNACO GROUP, INC. Date: June 10, 2003 By: /s/ Jay A. Galluzzo ------------------- Name: Jay A. Galluzzo Title: Vice President and General Counsel EXHIBIT INDEX Exhibit No. Description 99.1 Unaudited pro forma consolidated condensed financial information and other financial information
EX-99 3 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION The Warnaco Group, Inc. (the "company") emerged from bankruptcy on February 4, 2003 and, pursuant to American Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code ("SOP 90-7"), adopted fresh start accounting. Fresh start accounting principles provide, among other things, that the company make a determination of its reorganization value and allocate such reorganization value to the fair value of its assets in accordance with the provisions of Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"). The company engaged an independent third party appraisal firm to assist it in determining its reorganization value. The reorganization value of the company as approved by the bankruptcy court was $750.0 million. Using the work of valuation specialists the company allocated the reorganization value to the fair value of its tangible assets, finite lived intangible assets and indefinite lived intangible assets in accordance with the provisions of SFAS 141. The company's historical financial information is taken from information previously filed with the SEC. The unaudited pro forma consolidated condensed statement of operations data in the following tables for the fiscal year ended January 4, 2003 ("Fiscal 2002"), the three month period ended April 6, 2002 ("First Quarter of Fiscal 2002"), the three month period ended July 6, 2002 ("Second Quarter of Fiscal 2002"), the three month period ended October 5, 2002 ("Third Quarter of Fiscal 2002"), the three month period ended January 4, 2003 ("Fourth Quarter of Fiscal 2002") and the one month period January 5, 2003 to February 4, 2003 (the date the company emerged from bankruptcy) combined with the two month period February 5, 2003 to April 5, 2003 ("First Quarter of Fiscal 2003") is adjusted to reflect the following as if each had been completed at the beginning of Fiscal 2002; (a) the implementation of the company's plan of reorganization and its emergence from bankruptcy, including adjustments to: (i) reflect fresh start accounting; (ii) eliminate reorganization items related to the bankruptcy; (iii) reflect the elimination of interest expense related to certain foreign debt subject to standstill agreements which principal was repaid as part of the company's reorganization; and (iv) record income taxes at normalized post-emergence rates; and (b) new debt in an aggregate principal amount of $210.0 million and the application of the proceeds thereof to repay outstanding principal of $200.9 million of the company's Second Lien Notes due February 4, 2008, accrued interest on the Second Lien Notes of approximately $2.0 million, and expenses related to the new debt of approximately $7.1 million. The pro forma financial information does not purport to be indicative of the company's operating results. The information in this report should be read in conjunction with the company's historical information appearing in its previous filings with the SEC. THE WARNACO GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
HISTORICAL PRO PRO FORMA FISCAL FORMA FISCAL 2002 ADJUSTMENTS 2002 ---- ----------- ---- (IN MILLIONS OF DOLLARS) Net revenues...................................... $1,493.0 $ -- $1,493.0 Cost of goods sold................................ 1,052.7 (22.1)(a) 1,030.6 -------- ------- -------- Gross profit...................................... 440.3 22.1 462.4 Selling, general and administrative expenses...... 411.0 (31.2)(b) 379.8 Reorganization items.............................. 116.7 (116.7)(c) -- Amortization of sales order backlog............... -- -- (d) -- -------- ------- -------- Operating income (loss)........................... (87.4) 170.0 82.6 Investment income, net............................ 0.1 -- 0.1 Interest expense.................................. 22.0 9.6 (e) 31.6 -------- ------- -------- Income (loss) before provision for income taxes and cumulative effect of change in accounting principle....................................... (109.3) 160.4 51.1 Provision for income taxes........................ 53.9 (33.5)(f)(g) 20.4 -------- ------- -------- Income (loss) before cumulative effect of change in accounting principle......................... (163.2) 193.9 30.7 Cumulative effect of change in accounting principle....................................... (801.6) 801.6 (f) -- -------- ------- -------- Net income (loss)................................. $ (964.8) $ 995.5 $ 30.7 -------- ------- -------- -------- ------- --------
- --------- (a) Upon the adoption of fresh start accounting, the company changed its inventory accounting policies to expense certain design, procurement, receiving and other product related costs as incurred. As a result of this change, the pro forma adjustment eliminates $24.4 million of design, procurement, receiving and other product related costs previously capitalized that were reflected in cost of goods sold for Fiscal 2002, offset by $2.3 million of inventory costs that would have been expensed in Fiscal 2002. (b) Eliminates historical depreciation and amortization expenses of $57.4 million, records depreciation and amortization expense of $34.5 million based upon the fair value of the company's assets and eliminates lease expenses of $8.3 million related to certain leases settled as part of the company's bankruptcy in accordance with fresh start accounting. (c) Eliminates reorganization items of $116.7 million. (d) The company valued its sales order backlog as part of its determination of the fair value of its assets in connection with its adoption of fresh start accounting. The amortization of sales order backlog is a non-recurring charge and is not expected to have a continuing effect on the company's results of operations after it is fully amortized in the fiscal year ended January 3, 2004 ("Fiscal 2003") and, as a result, has been excluded from the pro forma statement of operations. The amortization of this backlog will be $12.6 million for Fiscal 2003. (e) Reflects interest expense of $18.6 million on new debt in an aggregate principal amount of $210.0 million, offset by the elimination of interest expense of $9.8 million on certain foreign debt agreements subject to standstill agreements that was paid as part of the company's plan of reorganization and reflects interest expense of $0.8 million on certain leases settled in connection with the company's bankruptcy. Although the company's average borrowings in the First Quarter of Fiscal 2003 have been substantially lower than its average borrowings in the First Quarter of Fiscal 2002, no adjustment has been made to interest expense for the lower level of borrowings. (f) Eliminates cumulative effect of change in accounting principle relating to goodwill and intangible assets of $801.6 million net of income tax benefit of $53.5 million as goodwill and intangible assets would have been recorded at fair value in connection with the adoption of fresh start accounting at the beginning of Fiscal 2002. (g) Adjusts income tax provision to reflect an estimated income tax rate of 40%. THE WARNACO GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
HISTORICAL PRO PRO FORMA FIRST QUARTER FORMA FIRST QUARTER OF FISCAL 2002 ADJUSTMENTS OF FISCAL 2002 -------------- ----------- -------------- (IN MILLIONS OF DOLLARS) Net revenues....................................... $ 410.0 $ -- $410.0 Cost of goods sold................................. 291.6 (3.4)(a) 288.2 ------- ------ ------ Gross profit....................................... 118.4 3.4 121.8 Selling, general and administrative expenses....... 102.1 (9.8)(b) 92.3 Reorganization items............................... 15.5 (15.5)(c) -- Amortization of sales order backlog................ -- -- (d) -- ------- ------ ------ Operating income................................... 0.8 28.7 29.5 Interest expense................................... 7.0 3.3 (e) 10.3 ------- ------ ------ Income (loss) before provision for income taxes and cumulative effect of change in accounting principle........................................ (6.2) 25.4 19.2 Provision for income taxes......................... 49.9 (42.3)(f)(g) 7.6 ------- ------ ------ Income (loss) before cumulative effect of change in accounting principle............................. (56.1) 67.7 11.6 Cumulative effect of change in accounting principle........................................ (801.6) 801.6 (f) -- ------- ------ ------ Net income (loss).................................. $(857.7) $869.3 $ 11.6 ------- ------ ------ ------- ------ ------
- --------- (a) Upon the adoption of fresh start accounting, the company changed its inventory accounting policies to expense certain design, procurement, receiving and other product related costs as incurred. As a result of this change, the pro forma adjustment eliminates $4.5 million of design, procurement, receiving and other product related costs previously capitalized that were reflected in cost of goods sold for the First Quarter of Fiscal 2002, offset by $1.1 million of inventory costs that would have been expensed in the First Quarter of Fiscal 2002. (b) Eliminates historical depreciation and amortization expense of $13.8 million, records depreciation and amortization expense of $8.1 million based on the fair value of the company's assets and eliminates lease expense of $4.1 million related to certain leases settled as part of the company's bankruptcy in accordance with fresh start accounting. (c) Eliminates reorganization items of $15.5 million. (d) The company valued its sales order backlog as part of its determination of the fair value of its assets in connection with its adoption of fresh start accounting. The amortization of sales order backlog is a non-recurring charge and is not expected to have a continuing effect on the company's results of operations after it is fully amortized in Fiscal 2003 and, as a result, has been excluded from the pro forma statement of operations. The amortization of this backlog will be $12.6 million for Fiscal 2003. (e) Reflects interest expense of $4.6 million on new debt in an aggregate principal amount of $210.0 million, offset by the elimination of interest expense of $1.6 million on certain foreign debt agreements subject to standstill agreements that was paid as part of the company's plan of reorganization and reflects interest expense of $0.3 million on certain leases settled in connection with the company's bankruptcy. Although the company's average borrowings in the First Quarter of Fiscal 2003 have been substantially lower than its average borrowings in the First Quarter of Fiscal 2002, no adjustment has been made to interest expense for the lower level of borrowings. (f) Eliminates cumulative effect of change in accounting principle relating to goodwill and intangible assets of $801.6 million net of income tax benefit of $53.5 million as goodwill and intangible assets would have been recorded at fair value in connection with the adoption of fresh start accounting at the beginning of Fiscal 2002. (g) Adjusts income tax provision to reflect an estimated income tax rate of 40%. THE WARNACO GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
HISTORICAL PRO PRO FORMA SECOND QUARTER OF FORMA SECOND QUARTER OF FISCAL 2002 ADJUSTMENTS FISCAL 2002 ----------- ----------- ----------- (IN MILLIONS OF DOLLARS) Net revenues.................................... $381.8 $ -- $381.8 Cost of goods sold.............................. 265.9 (3.8)(a) 262.1 ------ ------ ------ Gross profit.................................... 115.9 3.8 119.7 Selling, general and administrative expenses.... 100.6 (10.6)(b) 90.0 Reorganization items............................ 42.6 (42.6)(c) -- Amortization of sales order backlog............. -- -- (d) -- ------ ------ ------ Operating income (loss)......................... (27.3) 57.0 29.7 Interest expense................................ 3.1 3.2 (e) 6.3 ------ ------ ------ Income (loss) before provision for income taxes......................................... (30.4) 53.8 23.4 Provision for income taxes...................... 1.6 7.8 (f) 9.4 ------ ------ ------ Net income (loss)............................... $(32.0) $ 46.0 $ 14.0 ------ ------ ------ ------ ------ ------
- --------- (a) Upon the adoption of fresh start accounting, the company changed its inventory accounting policies to expense certain design, receiving and other product related costs as incurred. As a result of this change, the pro forma adjustment eliminates $4.2 million of design, receiving and other product related costs previously capitalized that were reflected in cost of goods sold for the Second Quarter of Fiscal 2002, offset by $0.4 million of inventory costs that would have been expensed in the Second Quarter of Fiscal 2002. (b) Eliminates historical depreciation and amortization expense of $15.2 million, records depreciation and amortization expense of $8.7 million based on the fair value of the company's assets and eliminates lease expense of $4.1 million related to certain leases settled as part of the company's bankruptcy in accordance with fresh start accounting. (c) Eliminates reorganization items of $42.6 million. (d) The company valued its sales order backlog as part of its determination of the fair value of its assets in connection with its adoption of fresh start accounting. The amortization of sales order backlog is a non-recurring charge and is not expected to have a continuing effect on the company's results of operations after it is fully amortized in Fiscal 2003 and, as a result, has been excluded from the pro forma statement of operations. The amortization of this backlog will be $12.6 million for Fiscal 2003. (e) Reflects interest expense of $4.6 million on new debt in an aggregate principal amount of $210.0 million, offset by the elimination of interest expense of $1.6 million on certain foreign debt agreements subject to standstill agreements that was paid as part of the company's plan of reorganization and reflects interest expense of $0.2 million on certain leases settled in connection with the company's bankruptcy. Although the company's average borrowings in the three months ending July 5, 2003 are projected to be substantially lower than its average borrowings in the Second Quarter of Fiscal 2002, no adjustment has been made to interest expense for the lower level of borrowings. (f) Adjusts income tax provision to reflect an estimated income tax rate of 40%. THE WARNACO GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
HISTORICAL PRO FORMA THIRD QUARTER PRO FORMA THIRD QUARTER OF FISCAL 2002 ADJUSTMENTS OF FISCAL 2002 -------------- ----------- -------------- (IN MILLIONS OF DOLLARS) Net revenues........................................ $345.5 $ -- $345.5 Cost of goods sold.................................. 246.2 (1.0)(a) 245.2 ------ ------ ------ Gross profit........................................ 99.3 1.0 100.3 Selling, general and administrative expenses........ 87.0 (4.7)(b) 82.3 Reorganization items................................ 21.1 (21.1)(c) -- Amortization of sales order backlog................. -- -- (d) -- ------ ------ ------ Operating income (loss)............................. (8.8) 26.8 18.0 Interest expense.................................... 4.3 3.1 (e) 7.4 ------ ------ ------ Income (loss) before provision for income taxes..... (13.1) 23.7 10.6 Provision for income taxes.......................... 2.5 1.7 (f) 4.2 ------ ------ ------ Net income (loss)................................... $(15.6) $ 22.0 $ 6.4 ------ ------ ------ ------ ------ ------
- --------- (a) Upon the adoption of fresh start accounting, the company changed its inventory accounting policies to expense certain design, receiving and other product related costs as incurred. As a result of this change, the pro forma adjustment eliminates $1.1 million of design, receiving and other product related costs previously capitalized that were reflected in cost of goods sold for the Third Quarter of Fiscal 2002, offset by $0.1 million of inventory costs that would have been expensed in the Third Quarter of Fiscal 2002. (b) Eliminates historical depreciation and amortization expense of $13.5 million, records depreciation and amortization expense of $8.8 million based on the fair value of the company's assets. (c) Eliminates reorganization items of $21.1 million. (d) The company valued its sales order backlog as part of its determination of the fair value of its assets in connection with its adoption of fresh start accounting. The amortization of sales order backlog is a non-recurring charge and is not expected to have a continuing effect on the company's results of operations after it is fully amortized in Fiscal 2003 and, as a result has been excluded from the pro forma statement of operations. The amortization of this backlog will be $12.6 million for Fiscal 2003. (e) Reflects interest expense of $4.6 million on new debt in an aggregate principal amount of $210.0 million, offset by the elimination of interest expense of $1.7 million on certain foreign debt agreements subject to standstill agreements that was paid as part of the company's plan of reorganization and reflects interest expense of $0.2 million on certain leases settled in connection with the company's bankruptcy. (f) Adjusts income tax provision to reflect an estimated income tax rate of 40%. THE WARNACO GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
HISTORICAL PRO PRO FORMA FOURTH QUARTER FORMA FOURTH QUARTER OF FISCAL 2002 ADJUSTMENTS OF FISCAL 2002 -------------- ----------- -------------- (IN MILLIONS OF DOLLARS) Net revenues........................................ $355.7 $ -- $355.7 Cost of goods sold.................................. 249.0 (13.9)(a) 235.1 ------ ------ ------ Gross profit........................................ 106.7 13.9 120.6 Selling, general and administrative expenses........ 121.3 (6.1)(b) 115.2 Reorganization items................................ 37.5 (37.5)(c) -- Amortization of sales order backlog................. -- -- (d) -- ------ ------ ------ Operating income (loss)............................. (52.1) 57.5 5.4 Investment income, net.............................. 0.1 0.1 Interest expense.................................... 7.7 (0.1)(e) 7.6 ------ ------ ------ Loss before provision (benefit) for income taxes.... (59.7) 57.6 (2.1) Provision (benefit) for income taxes................ (0.2) (0.6)(f) (0.8) ------ ------ ------ Net loss............................................ $(59.5) $ 58.2 $ (1.3) ------ ------ ------ ------ ------ ------
- --------- (a) Upon the adoption of fresh start accounting, the company changed its inventory accounting policies to expense certain design, receiving and other product related costs as incurred. As a result of this change, the pro forma adjustment eliminates $14.5 million of design, receiving and other product related costs previously capitalized that were reflected in cost of goods sold for the Fourth Quarter of Fiscal 2002, offset by $0.6 million of inventory costs that would have been expensed in the Fourth Quarter of Fiscal 2002. (b) Eliminates historical depreciation and amortization expense of $15.0 million, records depreciation and amortization expense of $8.9 million based on the fair value of the company's assets. (c) Eliminates reorganization items of $37.5 million. (d) The company valued its sales order backlog as part of its determination of the fair value of its assets in connection with its adoption of fresh start accounting. The amortization of sales order backlog is a non-recurring charge and is not expected to have a continuing effect on the company's results of operations after it is fully amortized in Fiscal 2003 and, as a result has been excluded from the pro forma statement of operations. The amortization of this backlog will be $12.6 million for Fiscal 2003. (e) Reflects interest expense of $4.7 million on new debt in an aggregate principal amount of $210.0 million, offset by the elimination of interest expense of $4.9 million on certain foreign debt agreements subject to standstill agreements that was paid as part of the company's plan of reorganization and reflects interest expense of $0.1 million on certain leases settled in connection with the company's bankruptcy. (f) Adjusts income tax provision to reflect an estimated income tax rate of 40%. THE WARNACO GROUP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
HISTORICAL ------------------------------------------------------------------- PREDECESSOR SUCCESSOR COMBINED ----------- --------- -------------- PRO FORMA JANUARY 5, 2003 TO FEBRUARY 5, 2003 FIRST QUARTER PRO FORMA FIRST QUARTER FEBRUARY 4, 2003 TO APRIL 5, 2003 OF FISCAL 2003 ADJUSTMENTS OF FISCAL 2003 ---------------- ---------------- -------------- ----------- -------------- (IN MILLIONS OF DOLLARS) Net revenues.............. $ 116.0 $326.3 $ 442.3 $ -- $442.3 Cost of goods sold........ 70.2 204.9 275.1 -- 275.1 --------- ------ --------- --------- ------ Gross profit.............. 45.8 121.4 167.2 167.2 Selling, general and administrative expenses................ 35.3 72.5 107.8 (1.4)(a) 106.4 Reorganization items...... 29.9 1.4 31.3 (31.3)(b) -- Amortization of sales order backlog........... -- 4.2 4.2 (4.2)(c) -- --------- ------ --------- --------- ------ Operating income (loss)... (19.4) 43.3 23.9 36.9 60.8 Reorganization items: Gain on cancellation of pre-petition indebtedness........ (1,692.7) -- (1,692.7) 1,692.7 (b) -- Fresh start adjustments......... (765.7) -- (765.7) 765.7 (b) -- Investment loss, net...... 0.4 0.1 0.5 -- 0.5 Interest expense.......... 1.9 4.4 6.3 0.7 (d) 7.0 --------- ------ --------- --------- ------ Income before provision for income taxes........ 2,436.7 38.8 2,475.5 (2,422.2) 53.3 Provision for income taxes................... 78.2 16.2 94.4 (73.1)(e) 21.3 --------- ------ --------- --------- ------ Net income................ $ 2,358.5 $ 22.6 $ 2,381.1 $(2,349.1) $ 32.0 --------- ------ --------- --------- ------ --------- ------ --------- --------- ------
- --------- (a) Eliminates historical depreciation and amortization expense of $4.5 million for the one month period January 5, 2003 to February 4, 2003 and records depreciation and amortization expense of $3.1 million based upon the fair value of the company's assets in accordance with fresh start accounting. (b) Eliminates gain on cancellation of pre-petition debt of $1,692.7 million, fresh start adjustments of $765.7 million and other reorganization items of $31.3 million. (c) Eliminates the amortization of sales order backlog. The amortization of sales order backlog results from the company's adoption of fresh start accounting as of February 4, 2003. The amortization of sales order backlog is a non-recurring charge and is not expected to have a continuing effect on the company's results of operations after it is fully amortized in Fiscal 2003. (d) Reflects interest expense of $4.6 million on new debt in an aggregate principal amount of $210.0 million, offset by the elimination of interest expense on the Second Lien Notes of $3.1 million for the two month period February 5, 2003 to April 5, 2003, the elimination of interest expense of $0.9 million on certain foreign debt agreements subject to standstill agreements paid as part of the company's plan of reorganization and reflects interest expense of $0.1 million on certain leases settled in connection with the company's bankruptcy. Although the company's average borrowings in the First Quarter of Fiscal 2003 have been substantially lower than the company's average borrowings in the First Quarter of Fiscal 2002, no adjustment has been made to interest expense for the lower level of borrowings. (e) Adjusts the income tax provision using the company's estimated rate of 40%. SUMMARY CONSOLIDATED FINANCIAL DATA The historical consolidated data is derived from the company's audited consolidated financial statements as of and for Fiscal 2002 and the company's unaudited consolidated condensed financial statements as of April 5, 2003, and for the First Quarter of Fiscal 2002, the one month period January 5, 2003 to February 4, 2003 (the date the company emerged from bankruptcy), the two month period February 5, 2003 to April 5, 2003 and the First Quarter of Fiscal 2003. The summary pro forma financial data is derived from the company's "Unaudited Pro Forma Consolidated Condensed Financial Information" included in this report. The pro forma statement of operations data in the following table is adjusted to reflect the following as if each had been completed at the beginning of Fiscal 2002: (a) the implementation of the company's plan of reorganization and its emergence from bankruptcy, including adjustments to: (i) reflect fresh start accounting; (ii) eliminate reorganization items related to the bankruptcy; (iii) reflect the elimination of interest expense related to certain foreign debt subject to standstill agreements which principal was repaid as part of the company's reorganization; and (iv) record income taxes at normalized post-emergence rates; and (b) new debt in an aggregate principal amount of $210.0 million and the application of the proceeds thereof to repay outstanding principal of $200.9 million of the company's Second Lien Notes due February 4, 2008, accrued interest on the Second Lien Notes of approximately $2.0 million, and expenses related to the new debt of approximately $7.1 million. The adjusted consolidated balance sheet data as of April 5, 2003 reflects new debt in an aggregate principal amount of $210.0 million and the application of the proceeds thereof to repay outstanding principal of $200.9 million of the company's Second Lien Notes due February 4, 2008, accrued interest on the Second Lien Notes of approximately $2.0 million, and expenses related to the new debt of approximately $7.1 million. The pro forma financial information does not purport to be indicative of the company's operating results.
HISTORICAL PRO FORMA(a) ---------------------------------- ---------------------------------------------------------- COMBINED COMBINED COMBINED LAST TWELVE FIRST FIRST FIRST FIRST MONTHS FISCAL QUARTER QUARTER FISCAL QUARTER QUARTER ENDED YEAR OF FISCAL OF FISCAL YEAR OF FISCAL OF FISCAL APRIL 5, 2002 2002 2003 2002 2002 2003 2003 ---- ---- ---- ---- ---- ---- ---- (IN MILLIONS OF DOLLARS) (IN MILLIONS OF DOLLARS) STATEMENT OF OPERATIONS DATA: Net revenues.............. $1,493.0 $ 410.0 $ 442.3 $1,493.0 $410.0 $442.3 $1,525.3 Gross profit.............. 440.3 118.4 167.2 462.4 121.8 167.2 507.8 Selling, general and administrative expenses. 411.0 102.1 107.8 379.8 92.3 106.4 393.9 Amortization of sales order backlog(b).............. -- -- 4.2 -- -- -- -- Reorganization items...... 116.7 15.5 31.3 -- -- -- -- Operating income (loss)... (87.4) 0.8 23.9 82.6 29.5 60.8 113.9 Gain on cancellation of pre-petition indebtedness............ -- -- 1,692.7 -- -- -- -- Fresh start adjustments... -- -- 765.7 -- -- -- -- Investment income (loss).. 0.1 -- (0.5) 0.1 -- (0.5) (0.4) Interest expense.......... 22.0 7.0 6.3 31.6 10.3 7.0 28.3 Income (loss) before income taxes and cumulative effect of change in accounting principle.... (109.3) (6.2) 2,475.5 51.1 19.2 53.3 85.2 Provision for income taxes................... 53.9 49.9 94.4 20.4 7.6 21.3 34.1 Income (loss) before cumulative effect of change in accounting principle............... (163.2) (56.1) 2,381.1 30.7 11.6 32.0 51.1 Cumulative effect of change in accounting principle. (801.6) (801.6) -- -- -- -- -- Net income (loss)......... (964.8) (857.7) 2,381.1 30.7 11.6 32.0 51.1 Depreciation and amortization............ 57.4 13.8 14.6 34.5 8.1 9.0 35.4
AS OF APRIL 5, 2003 -------------------------------- HISTORICAL AS ADJUSTED(e) ---------- -------------- (IN MILLIONS OF DOLLARS) BALANCE SHEET DATA:(c) Cash....................................................... $ 26.4 $ 26.4 Working capital............................................ 366.0 366.0 Total assets............................................... 1,202.2 1,211.3 Senior secured revolving credit facility................... 61.0 61.0 Second Lien Notes due 2008................................. 200.9 -- New debt................................................... -- 210.0 Total debt(d).............................................. 266.9 276.0 Stockholders' equity....................................... 526.4 526.4 Total capitalization....................................... 793.3 802.4
- --------- (a) The pro forma financial information includes adjustments to reflect the company's results of operations as if the company had emerged from bankruptcy at the beginning of Fiscal 2002 and new debt in an aggregate principal amount of $210.0 million and the application of the proceeds thereof to repay outstanding principal of $200.9 million of the company's Second Lien Notes due February 4, 2008, accrued interest on the Second Lien Notes of approximately $2.0 million, and expenses related to the new debt of approximately $7.1 million had been completed at the beginning of Fiscal 2002. The adjustments to the historical financial formation are discussed in "Unaudited Pro Forma Consolidated Condensed Financial Information." (b) The company recorded intangible assets of $12.6 million related to the value of its sales order backlog in connection with the adoption of fresh start accounting. The company considers the amortization of the sales order backlog to be a non-recurring adjustment and, as a result, has excluded the amortization of the sales order backlog from the pro forma adjustments. (c) The as adjusted consolidated balance sheet data is derived from the company's unaudited consolidated condensed balance sheet as of April 5, 2003 and reflects adjustments on a pro forma basis giving effect to new debt in an aggregate principal amount of $210.0 million, and the application of the proceeds thereof to repay outstanding principal of $200.9 million of the company's Second Lien Notes due February 4, 2008, accrued interest on the Second Lien Notes of approximately $2.0 million, and expenses related to the new debt of approximately $7.1 million. (d) Total debt includes capital lease obligations of $1.3 million and $3.7 million in amounts payable related to the settlement of certain leases with GECC as part of the company's bankruptcy. (e) The as adjusted data reflects the new debt in an aggregate principal amount of $210.0 million, and the application of the proceeds thereof to repay outstanding principal of $200.9 million of the company's Second Lien Notes due February 4, 2008, accrued interest on the Second Lien Notes of approximately $2.0 million, and expenses related to the new debt of approximately $7.1 million. EBITDA AND OTHER DATA EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization. The company's pro forma statement of operations data and the other data set forth below, including EBITDA, give effect to the implementation of the company's plan of reorganization, its emergence from bankruptcy and new debt in an aggregate principal amount of $210.0 million, and the application of the proceeds to repay outstanding principal of $200.9 million of the company's Second Lien Notes due February 4, 2008, accrued interest on the Second Lien Notes of approximately $2.0 million, and expenses related to the new debt of approximately $7.1 million as if each had occurred at the beginning of Fiscal 2002. The company's senior secured revolving credit facility includes provisions that use EBITDA as a component of certain covenants. The company believes that information regarding EBITDA is useful to investors in evaluating the company. EBITDA is a non-GAAP financial measure and you should not construe EBITDA as an alternative to net income (loss), as an indicator of the company's operating performance, or as an alternative to cash flows from operating activities as a measure of the company's liquidity. The company may calculate EBITDA differently than other companies. A reconciliation of pro forma net income to Pro Forma EBITDA is set forth below:
PRO FORMA ----------------------------------------------------------------------------------------------- COMBINED COMBINED FIRST QUARTER SECOND THIRD FOURTH FIRST QUARTER LAST TWELVE FISCAL YEAR OF FISCAL QUARTER OF QUARTER OF QUARTER OF OF FISCAL MONTHS ENDED 2002 2002 FISCAL 2002 FISCAL 2002 FISCAL 2002 2003 APRIL 5, 2003 ---- ---- ----------- ----------- ----------- ---- ------------- (IN MILLIONS OF DOLLARS) EBITDA AND OTHER DATA: EBITDA.................... $117.2 $148.9 Total debt................ 276.0 (a) 276.0 Interest expense.......... 31.6 28.3 Total debt to EBITDA...... 2.35x 1.85x EBITDA to interest expense.................. 3.71x 5.26x RECONCILIATION OF NET INCOME TO EBITDA: Net income (loss)........... $ 30.7 $11.6 $14.0 $ 6.4 $(1.3) $32.0 $ 51.1 Provision (benefit) for income taxes............. 20.4 7.6 9.4 4.2 (0.8) 21.3 34.1 Interest expense.......... 31.6 10.3 6.3 7.4 7.6 7.0 28.3 Investment income (loss).. (0.1) -- -- -- (0.1) 0.5 0.4 ------ ----- ----- ------ ----- ----- ------ Operating income............ 82.6 29.5 29.7 18.0 5.4 60.8 113.9 Investment income (loss).. 0.1 -- -- -- 0.1 (0.5) (0.4) Depreciation and amortization............. 34.5 8.1 8.7 8.8 8.9 9.0 35.4 ------ ----- ----- ------ ----- ----- ------ EBITDA...................... $117.2 $37.6 $38.4 $26.8 $14.4 $69.3 $148.9 ------ ----- ----- ------ ----- ----- ------ ------ ----- ----- ------ ----- ----- ------
- --------- (a) Total debt reflects pro forma balance as of April 5, 2003. The company believes that the total debt balance as of January 4, 2003 is not meaningful because substantially all of the debt was subject to compromise in the company's bankruptcy. SUPPLEMENTAL UNAUDITED CONSOLIDATING CONDENSED FINANCIAL INFORMATION The following tables set forth supplemental unaudited consolidating condensed financial information as of April 5, 2003 and for the fiscal year ended January 4, 2003, the one month period January 5, 2003 to February 4, 2003 and the two month period February 5, 2003 to April 5, 2003 for (i) The Warnaco Group, Inc., (ii) Warnaco Inc., (iii) the subsidiaries that will guarantee the new debt (the "Guarantor Subsidiaries"), (iv) the subsidiaries other than the Guarantor Subsidiaries (the "Non-Guarantor Subsidiaries") and (v) The Warnaco Group, Inc. on a consolidated basis.
FOR THE FISCAL YEAR ENDED JANUARY 4, 2003 ------------------------------------------------------------------------------------- THE WARNACO GROUP, GUARANTOR NON-GUARANTOR ELIMINATION INC. WARNACO INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED --------- ------------ ------------ ------------ ------- ------------ (IN THOUSANDS OF DOLLARS) Net revenues.................. $ -- $ 518,590 $ 650,449 $323,917 $1,492,956 Cost of goods sold............ -- 377,722 477,646 197,293 -- 1,052,661 --------- --------- --------- -------- ---------- ---------- Gross profit.................. -- 140,868 172,803 126,624 -- 440,295 Selling, general and administrative expenses...... -- 166,123 132,027 112,804 -- 410,954 Reorganization items.......... -- 100,437 2,735 13,510 -- 116,682 --------- --------- --------- -------- ---------- ---------- Operating income (loss)....... -- (125,692) 38,041 310 -- (87,341) Equity in income (loss) of subsidiaries................. (964,863) -- -- -- 964,863 -- Investment (income), net...... -- (62) -- -- -- (62) Interest expense.............. -- 22,048 -- -- -- 22,048 --------- --------- --------- -------- ---------- ---------- Income (loss) before provision for income taxes and cumulative effect of change in accounting principle...... (964,863) (147,678) 38,041 310 964,863 (109,327) Provision for income taxes.... -- (588) 42,982 11,520 -- 53,914 --------- --------- --------- -------- ---------- ---------- Loss before cumulative effect of a change in accounting principle.................... (964,863) (147,090) (4,941) (11,210) 964,863 (163,241) Cumulative effect of change in accounting principle, net.... -- (84,532) (651,663) (65,427) -- (801,622) --------- --------- --------- -------- ---------- ---------- Net loss...................... $(964,863) $(231,622) $(656,604) $(76,637) $ 964,863 $ (964,863) --------- --------- --------- -------- ---------- ---------- --------- --------- --------- -------- ---------- ----------
FOR THE PERIOD JANUARY 5, 2003 TO FEBRUARY 4, 2003 --------------------------------------------------------------------------------------- THE WARNACO GUARANTOR NON-GUARANTOR ELIMINATION GROUP, INC. WARNACO INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- ------------ ------------ ------------ ------- ------------ (IN THOUSANDS OF DOLLARS) Net revenues............... $ -- $ 25,673 $ 61,573 $28,714 $ -- $ 115,960 Cost of goods sold......... -- 15,268 39,667 15,279 -- 70,214 ----------- ----------- --------- ------- ----------- ----------- Gross profit............... -- 10,405 21,906 13,435 -- 45,746 Selling, general and administrative expenses... -- 14,591 10,741 9,981 -- 35,313 Reorganization items....... -- 29,922 -- -- -- 29,922 ----------- ----------- --------- ------- ----------- ----------- Operating income (loss).... -- (34,108) 11,165 3,454 -- (19,489) Gain on cancellation of pre-petition indebtedness.............. -- (1,567,721) (124,975) -- -- (1,692,696) Fresh start adjustments.... -- (765,726) -- -- -- (765,726) Equity in income (loss) of subsidiaries.............. 2,358,537 -- -- -- (2,358,537) -- Investment (income) loss, net....................... -- 359 -- -- -- 359 Interest expense........... -- 1,887 -- -- -- 1,887 ----------- ----------- --------- ------- ----------- ----------- Income before provision for income taxes.............. 2,358,537 2,297,093 136,140 3,454 (2,358,537) 2,436,687 Provision for income taxes..................... -- 77,603 -- 547 -- 78,150 ----------- ----------- --------- ------- ----------- ----------- Net income................. $ 2,358,537 $ 2,219,490 $ 136,140 $ 2,907 $(2,358,537) $ 2,358,537 ----------- ----------- --------- ------- ----------- ----------- ----------- ----------- --------- ------- ----------- -----------
FOR THE PERIOD FEBRUARY 5, 2003 TO APRIL 5, 2003 ----------------------------------------------------------------------------------- THE WARNACO GROUP, GUARANTOR NON-GUARANTOR ELIMINATION INC. WARNACO INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ------- ------------ ------------ ------------ ------- ------------ (IN THOUSANDS OF DOLLARS) Net revenues................... $ -- $81,457 $175,362 $69,505 $ -- $326,324 Cost of goods sold............. -- 55,168 111,618 38,132 -- 204,918 ------- ------- -------- ------- -------- -------- Gross profit................... -- 26,289 63,744 31,373 -- 121,406 Selling, general and administrative expenses....... -- 15,599 36,670 20,268 -- 72,537 Amortization of sales order backlog....................... -- 1,100 3,100 -- -- 4,200 Reorganization items........... -- 1,383 -- -- -- 1,383 ------- ------- -------- ------- -------- -------- Operating income............... -- 8,207 23,974 11,105 -- 43,286 Investment loss, net........... -- 35 -- -- -- 35 Equity in the income (loss) of subsidiaries.................. 22,639 -- -- -- (22,639) -- Interest expense............... -- 4,428 -- -- -- 4,428 ------- ------- -------- ------- -------- -------- Income before provision for income taxes.................. 22,639 3,744 23,974 11,105 (22,639) 38,823 Provision for income taxes..... -- 13,363 -- 2,821 -- 16,184 ------- ------- -------- ------- -------- -------- Net income (loss).............. $22,639 $(9,619) $ 23,974 $ 8,284 $(22,639) $ 22,639 ------- ------- -------- ------- -------- -------- ------- ------- -------- ------- -------- --------
SUPPLEMENTAL UNAUDITED GUARANTOR CONSOLIDATING CONDENSED FINANCIAL INFORMATION -- (CONTINUED)
APRIL 5, 2003 ------------------------------------------------------------------------------------- THE WARNACO GUARANTOR NON-GUARANTOR ELIMINATION GROUP, INC. WARNACO INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- ------------ ------------ ------------ ------- ------------ (IN THOUSANDS OF DOLLARS) ASSETS Current assets: Cash.................................. $ -- $ 6,553 $ 358 $ 19,508 $ -- $ 26,419 Accounts receivable, net.............. -- -- 229,855 72,873 -- 302,728 Inventories, net...................... -- 98,529 137,783 79,320 -- 315,632 Prepaid expenses and other current assets............................... -- 8,177 8,062 14,196 -- 30,435 Assets held for sale.................. -- 271 -- 1,093 -- 1,364 Deferred income taxes................. -- 7,399 -- -- -- 7,399 -------- --------- -------- -------- ----------- ---------- Total current assets............... -- 120,929 376,058 186,990 -- 683,977 -------- --------- -------- -------- ----------- ---------- Property, plant and equipment -- net..... -- 70,688 20,932 31,069 3,384 126,073 Investments in subsidiaries.............. 771,639 558,800 -- -- (1,330,439) -- Other assets: Licenses, trademarks and other intangible assets, at cost, less accumulated amortization............. -- 178,927 166,300 15,187 -- 360,414 Deferred financing costs.............. -- 4,758 -- -- -- 4,758 Other assets.......................... -- 1,288 519 1,203 (134) 2,876 Reorganization value in excess of fair value of net assets.................. 24,066 -- -- -- -- 24,066 -------- --------- -------- -------- ----------- ---------- Total other assets................. 795,705 743,773 166,819 16,390 (1,330,573) 392,114 -------- --------- -------- -------- ----------- ---------- $795,705 $ 935,390 $563,809 $234,449 $(1,327,189) $1,202,164 -------- --------- -------- -------- ----------- ---------- -------- --------- -------- -------- ----------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt..... $ -- $ 3,755 $ 2 $ -- $ -- $ 3,757 Revolving credit facility............. -- 60,990 -- -- -- 60,990 Accounts payable...................... -- 47,883 27,306 25,529 -- 100,718 Accrued liabilities................... -- 58,192 13,454 47,778 -- 119,424 Accrued income tax payable............ -- 17,557 -- 15,581 -- 33,138 -------- --------- -------- -------- ----------- ---------- Total current liabilities.......... -- 188,377 40,762 88,888 -- 318,027 -------- --------- -------- -------- ----------- ---------- Long-term debt........................... -- 200,942 -- 1,246 -- 202,188 Intercompany accounts.................... 269,299 (342,450) 93,048 (23,147) 3,250 -- Deferred income taxes.................... -- 77,322 -- 6,359 -- 83,681 Other long-term liabilities.............. -- 71,852 25 19 -- 71,896 Commitments and contingencies Stockholders' equity: Successor preferred stock: $0.01 par value, 20,000,000 shares authorized........................... -- -- -- -- -- -- Series A preferred stock, $0.01 par value, 112,500 shares authorized as of April 5, 2003..................... -- -- -- -- -- -- Successor common stock: $.01 par value, 112,500,000 shares authorized, 44,999,973 issued and outstanding as of April 5, 2003..................... 450 100 100 100 (300) 450 Additional paid-in capital............ 508,437 748,900 405,900 152,700 (1,307,500) 508,437 Accumulated other comprehensive loss................................. -- (34) -- -- -- (34) Retained earnings (deficit)........... 22,639 (9,619) 23,974 8,284 (22,639) 22,639 Unearned stock compensation........... (5,120) -- -- -- -- (5,120) -------- --------- -------- -------- ----------- ---------- Total stockholders' equity......... 526,406 739,347 429,974 161,084 (1,330,439) 526,372 -------- --------- -------- -------- ----------- ---------- $795,705 $ 935,390 $563,809 $234,449 $(1,327,189) $1,202,164 -------- --------- -------- -------- ----------- ---------- -------- --------- -------- -------- ----------- ----------
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