EX-99 4 s644940.txt EXHIBIT 99.2 EXHIBIT 99.2 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - Chapter 11 In re Case Nos. 01-41643 (RLB) THE WARNACO GROUP, INC., et al., through 01-41680 (RLB) -- --- Debtors. (Jointly Administered) - - - - - - - - - - - - - - - - - - - - - - - - - - - MONTHLY OPERATING STATEMENT OF DEBTORS-IN-POSSESSION FOR JULY 8, 2001 TO AUGUST 4, 2001 Address of Debtors-in-Possession: -------------------------------- The Warnaco Group, Inc. 90 Park Avenue New York, New York 10016 Monthly Disbursements: $121,882 -------- Address of Attorneys for Debtors-in-Possession: ---------------------------------------------- Sidley Austin Brown & Wood 875 Third Avenue New York, New York 10022 Monthly Operating Loss: $ (15,989) ---------- The undersigned, having reviewed the attached report and being familiar with the financial affairs of The Warnaco Group, Inc., ("Warnaco"), and certain of Warnaco's subsidiaries, each a debtor and debtor-in-possession herein (collectively, the "Debtors"), verifies under the penalty of perjury that the information contained therein is complete, accurate and truthful to the best of my knowledge. The undersigned also verifies that, to the best of my knowledge, all insurance policies, including workers compensation and disability insurance, have been paid currently. Date: October 18, 2001 By: /s/ Philip Terenzio ----------------------- Philip Terenzio Senior Vice President Chief Financial Officer Indicate if this is an amended statement by checking here. Amended Statement ___________ THE WARNACO GROUP, INC., et al. (DEBT0RS-IN-POSSESSION) STATEMENT OF OPERATIONS (In Thousands)
Month Ended 2 Months Ended August 4, 2001 August 4, 2001 ------------------ ------------------- Net revenues $ 98,559 $ 222,038 Cost of goods sold 83,384 212,090 Selling, general and administrative expenses 27,212 81,979 ------------------ ------------------- Operating loss (12,037) (72,031) Interest expense, net 4,118 10,631 Other expense, net (166) 2,401 ------------------ ------------------- Loss before reorganization costs and income taxes (15,989) (85,063) Reorganization costs 4,475 47,407 Income taxes provision (benefit) (145) (1,712) ------------------ ------------------- Net loss $ (20,319) $ (130,758) ================== =================== EBITDAR (See Note 1) $ (4,732) $ (15,484) ================== ===================
THE WARNACO GROUP, INC., et al. (DEBTORS-IN-POSSESSION) BALANCE SHEET AUGUST 4, 2001 (In Thousands) ASSETS Current assets: Cash $ 20,528 Receivables, net 130,159 Inventories, net 363,629 Prepaid expenses and other current assets 29,533 ----------------- Total current assets 543,849 Property, plant and equipment, net 222,222 Trademark, goodwill and other, net 1,032,518 Investment in affiliates 155,644 Intercompany receivables, net 28,071 Deferred income taxes 139,618 ----------------- Total Assets 2,121,922 ================= LIABILITIES AND SHAREHOLDERS' DEFICIT Current Liabilities: Short-term debt - Accounts payable 52,448 Other current liabilities 57,570 Deferred income taxes 4,531 ----------------- Total current liabilities 114,549 ----------------- Long-term debt 203,382 Other long-term liabilities 18,377 Deferred income taxes - Liabilities subject to compromise 2,242,676 Total Liabilities 2,578,984 Redeemable Preferred Securities - Shareholders' deficit (457,062) ----------------- Total Liabilities and Shareholders' deficit $ 2,121,922 =================
THE WARNACO GROUP, INC., et al. (DEBTORS-IN-POSSESSION) STATEMENT OF CASH FLOWS (In Thousands) Month Ended 2 Months Ended August 4, 2001 August 4, 2001 ------------------- ---------------------- Operating activities: Net loss $ (20,319) $ (130,758) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 7,518 15,427 Non-cash interest expense 522 652 Non-cash equity forward adjustment - 3,708 Non-cash reorganization costs 1,696 40,653 Change in operating assets and liabilities: Receivables, net 7,211 21,849 Inventories (10,959) 9,553 Accounts payable 772 55,126 Change in pre-petition liabilities (3,557) (3,557) Prepaid expenses and other current assets and liabilities 1,935 (14,953) Change in other long-term and non-operating liabilities (723) 2,711 Other, net - - ------------------- ---------------------- Net cash provided by operating activities (15,904) 411 ------------------- ---------------------- Investing activities: Capital expenditures, net of disposals 10 (1,238) ------------------- ---------------------- Net cash used in investing activities 10 (1,238) ------------------- ---------------------- Financing activities: Net repayments under Pre-petition Credit Facilities 4,380 6,105 Net borrowing under DIP Credit Facilities 19,460 203,382 Deferred financing - DIP - (12,200) Deferred financing - Other - (192) Net change in intercompany accounts (5,228) (212,391) ------------------- ---------------------- Net cash provided by financing activities 18,612 (15,296) ------------------- ---------------------- Effect of cash due to currency translation (174) (109) ------------------- ---------------------- Net decrease in cash and cash equivalents 2,524 (13,756) Cash and cash equivalents at beginning of period 18,004 34,284 ------------------- ---------------------- Cash and cash equivalents at end of period $ 20,528 $ 20,528 =================== ======================
Note 1 - Basis of Presentation On June 11, 2001 (the "Petition Date"), Warnaco and certain of its subsidiaries (each a "Debtor" and, collectively, the "Debtors") commenced these cases (the "Chapter 11 Cases") each by filing a petition for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. Secs. 101-1330, as amended (the "Bankruptcy Code"), in the United States Bankruptcy Court for the Southern District of New York (the "Court"). Warnaco and all except one of its 38 U.S. subsidiaries are Debtors in these Chapter 11 Cases, together with one of Warnaco's Canadian subsidiaries, Warnaco of Canada Company ("Warnaco Canada"). The remainder of Warnaco's Foreign Subsidiaries are not debtors in these Chapter 11 Cases, nor are they subject to foreign bankruptcy or insolvency proceedings. The case numbers for the Chapter 11 Cases, which are being jointly administered, are 01-41643 through 01-41680 (RLB). The Debtors are managing their businesses and properties as debtors-in-possession. The accompanying unaudited condensed financial statements of the Debtors have been presented in accordance with the American Institute of Certified Public Accountants Statements of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" (SOP 90-7), and have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which principles, except as otherwise disclosed, assume that assets will be realized and liabilities will be discharged in the ordinary course of business. As a result of the Chapter 11 Cases and circumstances relating to the chapter 11 filings, including the Debtors debt structure and current economic conditions, such realization of assets and liquidation of liabilities are subject to significant uncertainty. While under the protection of chapter 11, the Debtors may sell or otherwise dispose of assets, and liquidate or compromise liabilities, for amounts other than those reflected in the financial statements. Additionally, the amounts reported in the unaudited condensed balance sheet could materially change because of changes in business strategies and the effects of any proposed plan of reorganization. The appropriateness of using the going concern basis is dependent upon, among other things, confirmation of a plan or plans of reorganization, future profitable operations, the ability to comply with the terms of the Debtors' debtor-in-possession financing facility, and the ability to generate sufficient cash from operations and financing arrangements to meet obligations. In the Chapter 11 Cases, substantially all unsecured liabilities as of the Petition Date are subject to compromise or other treatment under a plan or plans of reorganization which must be confirmed by the Bankruptcy Court after obtaining the requisite amount of votes by affected parties. For financial reporting purposes, those liabilities and obligations, which treatment and satisfaction are dependent on the outcome of the Chapter 11 Cases, have been segregated and classified as liabilities subject to compromise under the reorganization proceedings in the consolidated balance sheets. Generally, all actions to enforce or otherwise effect repayment of pre-petition liabilities as well as all pending litigation against the Debtors are stayed while the Debtors continue their business operations as debtors-in-possession. Unaudited schedules have been filed by the Debtors with the Bankruptcy Court setting forth the assets and liabilities of the Debtors as of the Petition Date as reflected in the Debtors' accounting records. The ultimate amount of and settlement terms for such liabilities are subject to a confirmed plan(s) of reorganization and accordingly are not presently determinable. Under the Bankruptcy Code, the Debtors may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts and other pre-petition executory contracts, subject to Bankruptcy Court approval. Claims for damages resulting from the rejection of real estate leases and other executory contracts may be subject to bar dates. The Debtors will analyze their leases and executory contracts and may assume or reject leases and contracts. Such rejections could result in additional liabilities subject to compromise. In addition, the unaudited condensed financial statements do not contain all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Debtors, the accompanying condensed financial statements contain all adjustments (all of which were of a normal recurring nature) necessary to present fairly the financial position of the Debtors as of August 4, 2001 as well as its results of operations and cash flows for the one-month period ended August 4, 2001. As the monthly process to close the books and records of the Debtors is based on a non-calendar month-end, the accompanying financial statements include ten business days of the pre-petition period. It would be unduly burdensome to exclude the impact of the pre-petition activities for this ten-day period from the Debtor's financial position, results of operations or cash flows. Pursuant to SOP 90-7, revenues and expenses, realized gains and losses, and provisions for losses resulting from the reorganization of the business are reported in the Consolidated Statement of Operations separately as reorganization items. Professional fees are expensed as incurred. Interest expense is reported only to the extent that it will be paid during the cases or that it is probable that it will be an allowed claim. Reorganization items include the following: Month Ended 2 Months Ended August 4, 2001 August 4, 2001 -------------------- --------------------- Asset write-offs $ 1,436 40,393 Professional Fees 3,039 7,014 -------------------- --------------------- $ 4,475 $ 47,407 ==================== ===================== The Debtors have reduced stockholders' equity by $42,507 from its reported consolidated 2000 balances to reflect the effects of certain errors discovered in its recording of intercompany pricing arrangements and its recording of accounts payable and accrued liabilities. The Debtors' management and Board of Directors are reviewing the circumstances surrounding the errors and have not yet finalized their review; therefore, the amount of the restatement is preliminary and subject to change. EBITDAR reflects earnings before interest, taxes, depreciation, amortization, reorganization costs and adjustments. Adjustments consist of $41,410 relating to changes in the Company's reserve methodology for accounts receivable, inventory and other items. Note 2 - Sale of Accounts Receivable Effective with the commencement of the Chapter 11 Cases, the Debtors terminated their accounts receivable securitization agreement. Consequently, none of the Debtors' trade receivables are securitized as of August 4, 2001. The termination of such agreement did not have a material impact on the statement of operations or cash flows. Note 3 - Long Term Debt On June 11, 2001, the Debtors entered into a Debtor-in-Possession Financing Agreement (the "DIP") with a group of banks, which was approved by the Bankruptcy Court in an interim amount of $375,000,000. On July 9, 2001, the Bankruptcy Court approved the full amount of $600,000,000. The DIP provides for a $375,000,000 (which includes a Letter of Credit facility of up to $200,000,000) non-amortizing revolving credit facility (Tranche A) and a $225,000,000 reducing revolving credit facility (Tranche B). The Tranche A loans will bear interest at either the London International Bank Offering Rate (LIBOR) plus 2.75% or at the Citibank N.A. Base Rate plus 1.75%. The Tranche B loans will bear interest at LIBOR plus 3.75%. In addition, the fees for the undrawn amounts are .50% for the Tranche A and .75% for the Tranche B. Commencing on June 30, 2002, the Tranche B facility will be reduced by $50,000,000 and thereafter by $25,000,000 per quarter in each case reduced by mandatory prepayments. Both the Tranche A and Tranche B loans terminate on the earlier of two years from the closing date or the effective date of a plan of reorganization. The DIP contains restrictive covenants including, among other things, the maintenance of minimum earnings before interest, taxes, depreciation and amortization and restructuring expenses ("EBITDAR"), limitations on annual capital expenditures, the prohibition on paying dividends and the incurrence of additional indebtedness. The maximum borrowings under the Tranche A facility are limited to 75% of eligible accounts receivable and 25% to 67% of eligible inventory. The balance outstanding as of August 4, 2001 is $203,381,979. The DIP is secured by substantially all assets of the Debtors. Note 4 - Liabilities Subject to Compromise The principal categories of obligations classified as liabilities subject to compromise to unrelated parties under the Chapter 11 Cases are identified below. The amounts below in total may vary significantly from the stated amount of proofs of claim that will be filed with the Bankruptcy Court, and may be subject to future adjustment depending on Bankruptcy Court action, further developments with respect to potential disputed claims, determination as to the value of any collateral securing claims, or other events. Additional claims may arise from the rejection of additional real estate leases and executory contracts by the Debtors. August 4, 2001 -------------------- (in thousands of dollars) U.S. bank debt $ 1,716,609 Canadian Revolver 17,819 Post Retirement Liabilities 8,890 Accrued prepetition interest 31,402 Mortgages/Capital lease obligations 5,442 Equity forward note 56,793 Other debt 18,905 Accounts payable 42,095 Trade drafts payable 224,118 Deferred compensation accrual 603 Company obligated manditorily redeemable convertible preferred securities ($120,000 par value) 120,000 -------------------- Excludes $160,376 of debt recorded by non-filed entities $ 2,242,676 ===================== Note 5 - Intercompany Receivables Intercompany balances would be eliminated, in accordance with generally accepted accounting principles, when the results of Warnaco (the parent company) are consolidated with all of its wholly owned subsidiaries. To the extent that intercompany notes constitute debt, the notes have been assigned to the Debtors' pre-petition secured lenders as collateral security for the pre-petition debt. Although recorded in the books and records as debt, for the most part, intercompany balances were accumulated over a number of years as Warnaco capitalized its subsidiaries and affiliates and, thus, may be considered equity investments in such subsidiaries and affiliates. As of August 4, 2001, the balance is comprised of the following: Month Ended August 4, 2001 -------------------- (in thousands) Intercompany accounts receivable - Non-debtor affilliates $ 28,071 ==================== Note 6 - Supplemental Financial Information During this period, the Debtors that are subsidiary of Warnaco paid gross wages of $13,750,904. All employee and employer payroll taxes are paid to the Debtors' payroll service provider, that in turn remits the funds to the taxing authorities. The Debtors paid the following taxes during the period: Paid (Received) Due ----------------- ----------------- Sales and use tax $ 648,268 $ (930,915) Customs duties 6,115,985 (705,197) State income tax 250,928 - Canada income tax - 1,342,184 Property tax 299,704 (393,164) GST tax 6,516 (88,737) ----------------- ----------------- $ 7,321,401 $ (775,829) ================= ================= (a) 2000 Refund Due.
THE WARNACO GROUP, INC., et al. (DEBTORS-IN-POSSESSION) STATEMENT OF OPERATIONS as of AUGUST 4, 2001 (In Thousands) Consolidation 2 Months Ended August 4, 2001 August 4, 2001 ------------------- ---------------- Net revenues $ 116,492 $ 263,345 Cost of goods sold 92,608 239,021 Selling, general and administrative expenses 34,163 99,550 ------------------- ---------------- Operating loss (10,279) (75,226) Interest expense, net 2,428 7,302 Other expense, net - 3,708 ------------------- ---------------- Loss before reorganization costs and income taxes (12,707) (86,236) Reorganization costs 4,475 47407 Income taxes provision (benefit) (1,092) (2,701) ------------------- ---------------- Net loss $ (16,090) $ (130,942) =================== ================ EBITDAR (1) $ (1,780) (14,542) =================== ================ (1) Earnings before interest, taxes, depreciation, amortization, reorganization costs and adjustments of $43,580. ASSETS Current assets: Cash $ 41,827 Receivables, net 347,198 Inventories, net 446,718 Prepaid expenses and other current asset 37,179 ------------------- Total current assets 872,922 Property, plant and equipment, net 257,354 Trademark, goodwill and other, net 1,168,915 Investment in affiliates 0 Intercompany Receivable, net 0 Deferred Income Taxes 139,614 ------------------- Total Assets $ 2,438,805 =================== LIABILITIES AND SHAREHOLDERS' DEFICIT Current Liabilities: Short-term debt $ - Accounts payable 72,094 Other current liabilities 87,501 Deferred income taxes 10,573 ------------------- Total current liabilities 170,168 ------------------- Long-term debt 203,382 Other long-term liabilities 18,905 Deferred income taxes 0 Liabilities subject to compromise 2,403,066 Intercompany receivable, net 0 ------------------- Total Liabilities 2,795,521 Redeemable Preferred Securities 0 Shareholders' deficit (356,716) ------------------- Total Liabilities and Shareholders' deficit $ 2,438,805 ===================