-----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, N7d6aNPDt43DyEkRPHTDIMVgWd82rHDtIvCua93/6mYuOLIqxIt/8FtQS5fU11d2 Wqrkh9w3x3WSqiqkZmqEcQ== 0000887124-96-000002.txt : 19960629 0000887124-96-000002.hdr.sgml : 19960629 ACCESSION NUMBER: 0000887124-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960504 FILED AS OF DATE: 19960614 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NINE WEST GROUP INC /DE CENTRAL INDEX KEY: 0000887124 STANDARD INDUSTRIAL CLASSIFICATION: 3140 IRS NUMBER: 061093855 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11161 FILM NUMBER: 96581089 BUSINESS ADDRESS: STREET 1: 9 W BROAD ST CITY: STAMFORD STATE: CT ZIP: 06902 BUSINESS PHONE: 3145798812 MAIL ADDRESS: STREET 1: 11933 WESTLINE INDUSTRIAL DRIVE STREET 2: 11933 WESTLINE INDUSTRIAL DRIVE CITY: ST LOUIS STATE: MO ZIP: 63146 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the thirteen weeks ended May 4, 1996 Commission File No. 1-11161 Nine West Group Inc. (Exact name of Registrant as specified in its charter) Delaware 06-1093855 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 9 West Broad Street Stamford, Connecticut 06902 (Address of principal executive offices) (Zip Code) (314) 579-8812 (Registrant's telephone number, including area code) 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 --- --- Number of shares of Common Stock, $.01 par value, outstanding as of the close of business on June 12, 1996: 35,622,209. 1 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- Item 1 Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Income - Thirteen weeks ended May 4, 1996 and April 29, 1995 3 Condensed Consolidated Balance Sheets - May 4, 1996 and February 3, 1996 4 Condensed Consolidated Statements of Cash Flows - Thirteen weeks ended May 4, 1996 and April 29, 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION Item 1 Legal Proceedings 15 Item 5 Other Information 15 Item 6 Exhibits and Reports on Form 8-K 15 Signatures 16 Exhibit Index 17 2 NINE WEST GROUP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Thirteen Weeks Ended May 4 April 29 1996 1995 (In thousands except per share data) Net revenues......................... $355,068 $170,531 Cost of goods sold................... 202,277 92,212 -------- -------- Gross profit....................... 152,791 78,319 Selling, general and administrative expenses............. 115,819 54,988 Amortization of acquisition goodwill, trademarks and trade names.......... 2,391 - -------- -------- Operating income................... 34,581 23,331 Interest expense - net............... 9,967 91 Other income - net................... 468 235 -------- -------- Income before income taxes......... 25,082 23,475 Income tax expense................... 10,032 9,425 -------- -------- Net income......................... $ 15,050 $ 14,050 ======== ======== Weighted average common shares outstanding.................. 36,572 34,810 -------- -------- Earnings per common share............ $ 0.41 $ 0.40 ======== ======== The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements. 3 NINE WEST GROUP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS May 4 February 3 1996 1996 (Unaudited) ASSETS (In thousands except share data) Current Assets: Cash........................................... $ 28,484 $ 20,782 Accounts receivable - net...................... 58,022 78,867 Inventories - net.............................. 412,691 396,676 Deferred income taxes.......................... 43,686 46,088 Assets held for sale........................... 32,013 31,118 Prepaid expenses and other current assets...... 14,543 18,249 ---------- ---------- Total current assets........................ 589,439 591,780 Property and equipment - net...................... 118,196 136,719 Deferred income taxes............................. 21,932 21,658 Goodwill.......................................... 231,639 233,149 Trademarks and trade names........................ 145,124 146,053 Other assets...................................... 29,226 30,733 ---------- ---------- Total assets............................... $1,135,556 $1,160,092 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable............................... $ 126,484 $ 139,731 Accrued expenses and other current liabilities. 109,812 134,737 Current portion of long-term debt.............. 20,000 20,000 ---------- ---------- Total current liabilities................... 256,296 294,468 Long-term debt.................................... 454,000 471,000 Other non-current liabilities..................... 71,766 66,298 ---------- ---------- Total liabilities........................... 782,062 831,766 ---------- ---------- Stockholders' Equity: Common stock($0.01 par value, 100,000,000 shares authorized; 35,569,214 and 35,240,052 shares issued and outstanding)........................ 355 352 Warrants......................................... 57,600 57,600 Additional paid-in capital....................... 141,710 131,595 Retained earnings................................ 153,829 138,779 ---------- ---------- Total stockholders' equity.................. 353,494 328,326 ---------- ---------- Total liabilities and stockholders' equity. $1,135,556 $1,160,092 ========== ========== The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements. 4 NINE WEST GROUP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Thirteen Weeks Ended May 4 April 29 1996 1995 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................................ $ 15,050 $ 14,050 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................... 8,176 2,318 Provision for losses on accounts receivable........ 4,005 (408) Provision for losses on inventory.................. (93) (2,602) Loss on disposal of property and equipment......... 238 57 Deferred income taxes.............................. 2,128 1,050 Changes in assets and liabilities: Increase in balance of accounts receivable sold. 11,921 - Accounts receivable............................. 4,919 3,339 Inventory....................................... (17,282) 9,335 Prepaid expenses and other assets............... 1,762 (2,054) Accounts payable................................ (13,247) (2,738) Accrued expenses and other liabilities.......... (14,303) (3,477) --------- -------- Net cash provided by operating activities............. 3,274 18,870 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment................... (8,199) (12,487) Proceeds from sale of property and equipment.......... 19,773 - Net increase in other assets.......................... (264) (250) --------- -------- Net cash provided (used) by investing activities...... 11,310 (12,737) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) under financing agreements.. 18,000 (3,900) Repayments of debt.................................... (35,000) - Net proceeds from issuance of stock................... 10,118 3,515 --------- -------- Net cash used by financing activities................. (6,882) (385) --------- -------- NET INCREASE IN CASH.................................. 7,702 5,748 CASH, BEGINNING OF PERIOD............................. 20,782 4,256 --------- -------- CASH, END OF PERIOD................................... $ 28,484 $ 10,004 ========= ======== The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements. 5 NINE WEST GROUP INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of Nine West Group Inc. (the "Company"), its wholly-owned subsidiaries and its controlled-interest joint ventures. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of such periods. All intercompany transactions and balances have been eliminated from the financial statements for the periods presented. The results of operations for the thirteen weeks ended May 4, 1996 are not necessarily indicative of the results to be expected for the full year ending February 1, 1997. On May 23, 1995, the Company consummated its acquisition (the "Acquisition") of the footwear business of The United States Shoe Corporation (the "Footwear Group"). Financial information for the thirteen weeks ended May 4, 1996 (the "First Quarter of 1996") is not comparable to financial information for the thirteen weeks ended April 29, 1995 (the "First Quarter of 1995") as the Acquisition was not consummated until May 23, 1995. During the second quarter of fiscal 1995, the Company changed its fiscal year from December 31 to a 52/53-week period ending on the Saturday closest to January 31. The financial statement information with respect to the First Quarter of 1995 included in this Quarterly Report has been restated to reflect the results of operations of the Company for the thirteen-week period which began on January 29, 1995 and ended on April 29, 1995. Certain information and disclosures normally included in the notes to condensed consolidated financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosures are adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements contained in the Annual Report on Form 10-K of the Company for the 53 weeks ended February 3, 1996. 2. INVENTORIES Inventories are valued at the lower of cost or market. Approximately 63% of inventory values were determined by using the FIFO (first in, first out) method of valuation as of May 4, 1996; the remainder was determined by using the weighted average cost method. Inventory is comprised of (in thousands): Raw materials............................................... $ 24,621 Work in process............................................. 3,460 Finished goods.............................................. 384,610 -------- Total inventory........................................ $412,691 ======== 6 3. CASH FLOWS Cash paid for income taxes was $6.4 million and $2.0 million for the First Quarter of 1996 and 1995, respectively. Cash paid for interest was $9.9 million and $117,000 for the First Quarter of 1996 and 1995, respectively. 4. ACQUISITION In connection with the Acquisition, the Company assumed and included, in the allocation of the acquisition cost, accruals for involuntary severance and termination benefits of $8.6 million and relocation costs of $8.2 million. These severance and relocation costs were incurred as a result of the Company's integration plan announced during fiscal 1995. The integration plan relates to the elimination of 295 administrative positions that have become duplicative through the combination of operations and process efficiencies realized, and relocation of certain Footwear Group functional and operational employees. Of these 295 position reductions, approximately 204 were eliminated by May 4, 1996, with the remaining reductions to be substantially completed during the remainder of 1996. As of May 4, 1996, approximately $4.1 million ($2.2 million during the First Quarter of 1996) of severance and termination benefits and $4.6 million ($400,000 during the First Quarter of 1996) of relocation costs had been paid and charged against these liabilities. These accruals are subject to adjustment. Any liability recorded in excess of total costs incurred will be recorded as an adjustment to goodwill. Any costs incurred in excess of the liability recorded will be included in the determination of net income. The following unaudited pro forma condensed combined summary of operations (the "Pro Forma Summary") gives effect to the Acquisition as if such transaction had occurred at the beginning of the period presented. The Pro Forma Summary has been prepared utilizing the historical financial statements of the Footwear Group. Pro forma adjustments include the amortization of goodwill, trademarks and trade names, additional interest expense in connection with debt incurred to finance the Acquisition, the elimination of operating results with respect to discontinued brands, the elimination of operating results with respect to assets held for sale, the elimination of expenses associated with contracts not acquired, and the elimination of transactions between the Footwear Group and its former parent company. The Pro Forma Summary excludes the one-time increase in cost of goods sold attributable to the fair value of inventory over the FIFO cost as required by the purchase method of accounting. 13-weeks Ended April 29, 1995 -------------- (in thousands, except per share amounts) Net revenues...................................... $323,297 Net loss.......................................... (4,007) Loss per common share............................. $ (0.12) The foregoing Pro Forma Summary should not be considered indicative of actual results that would have occurred had the Acquisition been consummated on the date or for the period indicated, and does not purport to be indicative of results of operations as of any future date or for any period. 7 5. BUSINESS RESTRUCTURING AND INTEGRATION CHARGES During fiscal 1995, the Company began the implementation of its planned business restructuring and integration activities related to the Acquisition. While some of the costs associated with the restructuring and integration of the Footwear Group into the Company are reflected in the allocation of the acquisition cost of the Footwear Group, the Company incurred and accrued expenses for restructuring and integration costs of $51.9 million in the fourth quarter of 1995 (the "Restructuring Charge"). The major components of the Restructuring Charge are: (1) severance and termination benefits of $7.7 million; (2) write-down of assets, principally leasehold improvements, of $14.6 million; (3) accruals for lease and other contract terminations of $7.0 million; (4) inventory valuation adjustments of $10.4 million; and (5) other integration and consolidation costs of $12.2 million. The Restructuring Charge reflects plans to restructure international sourcing operations located in Italy, Korea and the Far East, and the consolidation and integration of various corporate and business unit operations and support functions. In relation to the Company's restructuring of its retail operations, the plan includes the elimination of duplicate product lines, the closing of approximately 40 of the Company's under performing Banister retail stores and conversion of a number of stores to other nameplates or formats during fiscal 1996, and the termination of the Company's agreement with Burlington Coat Factory for its operation of 84 leased shoe departments during 1996. Total cash outlays related to this charge are estimated at approximately $22.0 million, of which $7.7 million has been paid through May 4, 1996, including $3.3 million paid during the First Quarter of 1996. The Restructuring Charge balance at May 4, 1996 of $27.3 million is included in accrued expenses and other current liabilities. During the First Quarter of 1996, the Company continued its planned business restructuring and integration activities. The following table shows the activity recorded against the major components of the Restructuring Charge accrual through May 4, 1996: Other Severance Lease and Integration and Asset Contract Inventory and Termination Write- Termination Valuation Consolidation (in thousands) Benefits Downs Costs Adjustments Costs Total --------- ------- ----------- ----------- ------------ ------ 1995 Provision.............. $7,650 $14,620 $7,046 $10,423 $12,161 $51,900 1995 Activity............... 836 14,620 235 - 4,253 19,944 --------- ------ ----------- ----------- ------------ ------ February 3, 1996 balance.... 6,814 - 6,811 10,423 7,908 31,956 First Quarter 1996 activity. 922 - 692 1,485 1,561 4,660 --------- ------ ----------- ----------- ------------ ------ May 4, 1996 balance $5,892 $ - $6,119 $ 8,938 $ 6,347 $27,296 ========= ====== =========== =========== ============ ======
In connection with the restructuring of its international sourcing operations, the Company has substantially completed the liquidation of its sourcing offices located in the Far East and began to source substantially all of its Far East production through its new agency arrangement. In connection with the restructuring of its retail operations the Company has completed 17 of its 40 planned Banister retail store closings through May 4, 8 1996. The remaining 23 planned Banister retail store closings are expected to be substantially completed by the end of 1996. During the First Quarter of 1996, the Company also closed 16 of its leased departments operating within Burlington Coat Factory stores, and on May 10, 1996 entered into an agreement with a third party to liquidate the remaining 68 Burlington leased departments. The Company anticipates that the Burlington liquidation will be substantially completed by the end of the second quarter of 1996. Severance and termination benefits relate to approximately 475 employees, of whom 420 were store managers and associates, 50 were engaged in manufacturing positions, principally related to the liquidation of the Company's Far East office, and five were management employees. As of May 4, 1996, approximately 165 employees had been terminated, with approximately $1.8 million of severance and termination benefits being paid and charged against the liability ($922,000 during the First Quarter). The remaining separations are expected to be substantially completed during the remainder of 1996. 6. SALE/LEASEBACK TRANSACTION During the First Quarter of 1996, the Company consummated the sale (for $20.3 million) and leaseback of its distribution facility located in West Deptford, New Jersey. The lease has been classified as an operating lease. The cost and accumulated depreciation associated with this facility of approximately $16.4 million and $2.0 million, respectively, have been removed from the property and equipment accounts. The net gain realized on the sale of approximately $5.3 million (net of transaction costs) has been deferred and will be credited to income as rent expense adjustments over the 20-year initial lease term. Payments under the lease will approximate $1.7 million annually. 7. SUBSEQUENT EVENTS On June 5, 1996, the Company consummated the settlement (the "Settlement") of its previously reported post-closing balance sheet dispute with The United States Shoe Corporation ("U.S. Shoe"), a subsidiary of Luxottica Group S.p.A. ("Luxottica"). Pursuant to the Settlement, U.S. Shoe was obligated to pay to the Company the sum of $25.0 million, which will be recorded as a reduction in goodwill. In addition to settling the post-closing balance sheet dispute, the Company, U.S. Shoe and Luxottica agreed that the Company would repurchase, for a price of $67.5 million, the warrants to purchase 3.7 million of its shares of common stock (the "Common Stock")issued by the Company to U.S. Shoe in connection with the consummation of the Acquisition (the "Warrants"). The Warrants were exercisable for shares of Common Stock at a price of $35.50 per share. The net payment by the Company to U.S. Shoe of $42.5 million was financed by the Company under its existing revolving credit facility. As part of the Settlement, the Company reassigned to U.S. Shoe two license agreements which had been transferred to it in connection with the Acquisition relative to the "Capezio" trademark, which is owned by U.S. Shoe. These two license agreements pertain to products which do not relate to the Company's principal businesses and which generate insignificant revenue to the Company. The Company will retain in perpetuity all of the other license agreements relative to the trademark "Capezio" originally assigned to it in connection with the Acquisition, and the license to produce and market "Capezio" footwear. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements of the Company and the Notes thereto included in Item 1 of this report. All references to "First Quarter of 1996" and "First Quarter of 1995" are to the Company's thirteen-week periods ended May 4, 1996 and April 29, 1995, respectively. On May 23, 1995, the Company consummated its acquisition (the "Acquisition") of the footwear business of The United States Shoe Corporation (the "Footwear Group"). Financial information for the thirteen weeks ended May 4, 1996 (the "First Quarter of 1996") is not comparable to financial information for the thirteen weeks ended April 29, 1995 (the "First Quarter of 1995") as the Acquisition was not consummated until May 23, 1995. During the second quarter of fiscal 1995, the Company changed its fiscal year from December 31 to a 52/53-week period ending on the Saturday closest to January 31. The financial statement information with respect to the First Quarter of 1995 included in this Quarterly Report has been restated to reflect the results of operations of the Company for the thirteen-week period which began on January 29, 1995 and ended on April 29, 1995. RESULTS OF OPERATIONS The following table sets forth the Company's condensed consolidated statements of income in thousands of dollars and as a percentage of net revenues for the First Quarter of 1996 and First Quarter of 1995. Thirteen Weeks Ended May 4 April 29 (in thousands of dollars) 1996 1995 ---------------- ---------------- (Unaudited) Net revenues............................... $355,068 100.0% $170,531 100.0% Cost of goods sold......................... 202,277 57.0 92,212 54.1 -------- ----- -------- ----- Gross profit............................ 152,791 43.0 78,319 45.9 Selling, general and administrative expenses................... 115,819 32.6 54,988 32.2 Amortization of acquisition goodwill, trademarks and trade names................ 2,391 0.7 - - -------- ----- -------- ----- Operating income........................ 34,581 9.7 23,331 13.7 Interest expense - net..................... 9,967 2.8 91 0.1 Other income - net......................... 468 0.2 235 0.2 -------- ----- -------- ----- Income before income taxes.............. 25,082 7.1 23,475 13.8 Income tax expense......................... 10,032 2.9 9,425 5.6 -------- ----- -------- ----- Net income.............................. $ 15,050 4.2% $ 14,050 8.2% ======== ===== ======== ===== 10 THIRTEEN WEEKS ENDED MAY 4, 1996 COMPARED TO THIRTEEN WEEKS ENDED APRIL 29, 1995 NET REVENUES. Net revenues were $355.1 million in the First Quarter of 1996 compared to $170.5 million in the First Quarter of 1995, an increase of $184.6 million, or 108.2%. Net revenues of the Company's wholesale division increased by $97.8 million, or 98.4%, of which $91.1 million is attributable to the net revenues of the Footwear Group and $6.7 million is attributable to the increase in net revenues of the Company's wholesale brands that were marketed by the Company prior to the Acquisition. Sales through the Company's retail stores increased $86.8 million, or 121.9%. A substantial portion of this increase is attributable to the 425 Footwear Group retail stores acquired by the Company in connection with the Acquisition and the opening (net of closings) of 134 additional domestic and foreign retail stores by the Company. Comparable store sales (including the sales of the acquired Footwear Group stores, had they been acquired as of the beginning of the comparable period of the prior year) increased 3.0% for the First Quarter of 1996. Comparable store sales do not include the results of the leased departments operating within Burlington Coat Factory stores, which will be closed during 1996. Comparable store sales include the net revenues of all stores open for an entire month during the comparable current year and prior year periods. During the First Quarter of 1996, wholesale net revenues accounted for 55.5% of the Company's consolidated net revenues, while retail operations accounted for the remaining 44.5%. GROSS PROFIT. Gross profit was $152.8 million in the First Quarter of 1996, an increase of $74.5 million, or 95.1%, from $78.3 million in the First Quarter of 1995. Gross profit as a percentage of net revenues decreased to 43.0% in the First Quarter of 1996 from 45.9% in the First Quarter of 1995. The decrease in gross profit as a percentage of net revenues is primarily attributable to the Acquisition as the Footwear Group's gross margins are lower than the Company's margins prior to the Acquisition. SELLING, GENERAL & ADMINISTRATIVE EXPENSES. Selling, general and administrative ("SG&A") expenses (excluding the amortization of goodwill, trademarks and trade names related to the Acquisition) were $115.8 million in the First Quarter of 1996, compared to $55.0 million in the First Quarter of 1995, an increase of $60.8 million, or 110.5%. SG&A expense expressed as a percentage of net revenues rose to 32.6% in the First Quarter of 1996 from 32.2% in the First Quarter of 1995. The increase is due primarily to the higher level of SG&A expenses, expressed as a percentage of net revenues, of the Footwear Group and the increase in the Company's retail operations as compared to its wholesale operations. The Company's retail operations have a higher expense level as a percentage of net revenues than its wholesale operations. OPERATING INCOME. Operating income was $34.6 million, or 9.7% of net revenues, for the First Quarter of 1996 compared to $23.3 million, or 13.7% of net revenues, for the First Quarter of 1995. The reduction in operating income as a percentage of net revenues is attributable to the factors discussed above and the amortization of goodwill, trademarks and trade names related to the Acquisition. INTEREST EXPENSE - NET. Interest expense - net was $10.0 million in the First Quarter of 1996 compared to $91,000 in the First Quarter of 1995, an increase of $9.9 million. The increased expense is due to approximately $520 million in average term loans and revolving credit loans outstanding during the 11 First Quarter of 1996 as a result of borrowings required to finance the Acquisition and meet the Company's working capital requirements. NET INCOME. Net income for the First Quarter of 1996 was $15.1 million, or $0.41 per share, compared to net income of $14.1 million, or $0.40 per share, for the First Quarter of 1995. LIQUIDITY AND CAPITAL RESOURCES The Company relies primarily upon cash flow from operations and borrowings under its credit agreement (the "Credit Agreement") to finance its operations and expansion. Cash provided by operating activities was $3.3 million for the First Quarter of 1996, compared to $18.9 million for the First Quarter of 1995. This decrease in First Quarter 1996 cash flow from operations as compared to the First Quarter as of 1995 is due primarily to: (1) additional working capital requirements as a result of the Acquisition and the Company's expansion; (2) $2.6 million of severance and relocation payments made in connection with the Acquisition; and (3) $3.3 million of payments made in connection with the Restructuring Charge. Working capital was $333.1 million at May 4, 1996, compared to $297.3 million at February 3, 1996. Working capital increased during the First Quarter of 1996 due to: (1) a $16.1 million increase in inventory to support wholesale backlog requirements and inventory required for new stores; (2) a $13.2 million order decrease in accounts payable; and (3) a $24.9 million decrease in accrued expenses and other current liabilities. These working capital increases were partially offset by a $20.9 million decrease in accounts receivable attributable to the accounts receivable securitization program. Working capital may vary from time to time as a result of seasonal requirements, the timing of factory shipments and the Company's "open stock" and "quick response" wholesale programs, which require an increased investment in inventories. Total cash outlays related to the Restructuring Charge are estimated at approximately $22.0 million, of which $3.3 million was paid during the First Quarter of 1996, bringing total payments through May 4, 1996 to $7.7 million. In connection with the Acquisition, the Company assumed and included in the allocation of the acquisition cost of the Footwear Group: (1) accruals for involuntary severance and termination benefits of $8.6 million; and (2) relocation costs of $8.2 million. As of May 4, 1996, approximately $4.1 million and $4.6 million of severance and termination benefits, and relocation costs, respectively, had been charged against these liabilities ($2.2 million and $400,000 of severance and termination benefits, and relocation costs, respectively, were charged during the First Quarter of 1996). The Company anticipates that the remaining cash outlays relating to these actions will be substantially completed in fiscal 1996. On May 23, 1995, the Company entered into a $700.0 million Credit Agreement which included term loans of: (1) a $400.0 million, six and one-half year, quarterly amortizing term loan; and (2) a $150.0 million, non-amortizing term loan. Subsequent to the Acquisition, the Company entered into several transactions that permanently reduced the commitments undet the Credit Agreement by an aggregate of $96.0 million. These transactions included: (1) proceeds of $71.0 million from an accounts receivable securitization program; (2) proceeds of $20.0 million from the sale and leaseback of the Company's West Deptford, New Jersey distribution facility during the First Quarter of 1996; and (3) the scheduled principal repayment of $5.0 million against the amortizing term loan. 12 In addition to the term loans, the Company may borrow up to $150.0 million on a revolving basis and through letters of credit. As of June 12, 1996, $88.0 million of borrowings and $31.7 million of letters of credit were outstanding on a revolving basis and $30.3 million was available for future borrowing. The collective effect of the aforementioned transactions has reduced the Company's senior secured credit commitment from $700.0 million to $604.0 million. Amounts outstanding under the Credit Agreement are secured by substantially all assets of the Company, excluding receivables related to the Receivables Facility, and bear interest, at the Company's option, at rates based on Citibank's base rate or the Eurodollar index rate. Borrowings under the Credit Agreement will become unsecured should the Company reach an "investment grade" rating on its long term indebtedness. The Company has entered into interest rate hedge agreements to reduce the impact on interest expense from fluctuating interest rates on variable rate debt. The weighted average interest rate on borrowings outstanding as of May 4, 1996 was approximately 6.92%. The $42.5 million net payment made by the Company to U.S. Shoe on June 5, 1996, in connection with the settlement of the post-closing balance sheet dispute and the repurchase by the Company, of the Warrants was financed under its existing revolving credit facility. On June 13, 1996 the Company announced that it is making a private offering of $175.0 million principal amount of Convertible Subordinated Notes due 2003. The Company will grant to the initial purchasers the option to purchase up to an additional $26,250,000 principal amount of notes solely to cover over - - -allotments. The Notes will be convertible into Nine West common stock at a fixed conversion price per share to be determined, subject to adjustment in certain circumstances. The Notes will be redeemable by Nine West on or after July 1, 1999 at declining redemption prices. The Company intends to use the net proceeds to repay a portion of the borrowings outstanding under its Credit Agreement. Capital expenditures totaled $8.2 million and $12.5 million in the First Quarter of 1996 and 1995, respectively. Capital expenditures in the First Quarter of 1996 relate primarily to the Company's store expansion and remodeling programs. Capital expenditures in the First Quarter of 1995 relate primarily to the Company's store expansion and remodeling programs and the construction and equipping of a 170,000 square foot addition to its New Jersey distribution center, which commenced in October 1994 and was completed in June 1995 at a total cost of approximately $7.8 million. Capital expenditures with respect to warehouse expansion totaled $5.1 million in the First Quarter of 1995. The Company estimates that its capital expenditures for fiscal 1996 will be between $55.0 million and $60.0 million, primarily for the on-going expansion of its retail operations, equipment for its distribution and manufacturing facilities, and international expansion. The actual amount of the Company's capital expenditures depends in part on requirements related to the integration of the Footwear Group into the Company, the number of new stores opened, the number of stores remodeled and the amount of any construction allowances the Company may receive from the landlords of its new stores. The opening and success of new stores will be dependent upon, among other things, general economic and business conditions affecting consumer spending, the availability of desirable locations and the negotiation of acceptable lease terms for new locations. As of June 12, 1996, the Company had commitments for approximately $17.2 million of capital expenditures, related to commitments as of such date to open 121 retail stores, 13 84 of which are intended to be opened during the remainder of fiscal 1996. The Company expects that its current cash, cash flow anticipated to be generated from operations and availability under its revolving credit facility will be sufficient to fund its planned store openings, growth and expansion, business restructuring and integration of the Footwear Group, and other operating cash needs for at least the next twelve months. SEASONALITY The Company's footwear and accessories are marketed primarily for each of the four seasons, with the highest volume of products sold during the last three fiscal quarters. The Company's retail operations, however, generally experience their weakest results in the first quarter. Because the timing of shipments of products for any season may vary from year to year, the results for any particular quarter may not be indicative of results for the full year. The Company has not had significant overhead and other costs generally associated with large seasonal variations. INFLATION The Company believes that the relatively moderate rate of inflation over the past few years has not had a significant impact on the Company's revenues or profitability. In the past, the Company has been able to maintain its profit margins during inflationary periods. 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 5, 1996, the Company consummated the settlement (the "Settlement") of its previously reported post-closing balance sheet dispute with The United States Shoe Corporation ("U.S. Shoe"), a subsidiary of Luxottica Group S.p.A. ("Luxottica"). Pursuant to the Settlement, U.S. Shoe was obligated to pay to the Company the sum of $25.0 million. The $25.0 settlement will be recorded as a reduction in Goodwill. In addition to settling the post-closing balance sheet dispute, the Company and U.S. Shoe agreed that the Company would repurchase, for a price of $67.5 million, the warrants to purchase 3.7 million of its shares of common stock (the "Common Stock")issued by the Company to U.S. Shoe in connection with the consummation of the Acquisition (the "Warrants"). The Warrants were exercisable for shares of Common Stock at a price of $35.50 per share. The net payment by the Company to U.S. Shoe of $42.5 million was financed by the Company under its existing revolving credit facility. As part of the Settlement, the Company reassigned to U.S. Shoe two license agreements which had been transferred to it in connection with the Acquisition relative to the "Capezio" trademark, which is owned by U.S. Shoe. These two license agreements pertain to products which do not relate to the Company's principal businesses and which generate insignificant revenue to the Company. The Company will retain in perpetuity all of the other license agreements relative to the trademark "Capezio" originally assigned to it in connection with the Acquisition, and the license to produce and market "Capezio" footwear. The Company has been named as a defendant in various actions and proceedings, including actions brought by certain terminated employees, arising from its ordinary business activities. Although the liability that could arise with respect to these actions cannot be accurately predicted, in the opinion of the Company, any such liability will not have a material adverse effect on its financial position. ITEM 5. OTHER INFORMATION On June 13, 1996, the Company issued a press release which is attached hereto as exhibit 99 and is incorporated by reference herein. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: See Index to Exhibits (b) Reports on 8-K: None 15 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 thereunto duly authorized. Nine West Group Inc. (Registrant) By: /s/ Robert C. Galvin -------------------- Robert C. Galvin Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Date: June 13, 1996 16 INDEX TO EXHIBITS Exhibit Number Exhibit - - ------ ------- *2.1.2 Amendment to Asset Purchase Agreement and Settlement Agreement, dated as of May 29, 1996, by and among the Registrant, Luxottica Group S.p.A. and The United States Shoe Corporation. *10.19.2 Amendment No. 2 to the Credit Agreement, dated as of May 29, 1996, among the Registrant, Citibank, N.A. and Merrill Lynch Capital Corporation, as agents. *11 Computation of earnings per share. *99 Press Release of the Registrant, dated June 13, 1996. *Filed herewith 17 EX-2 2 EXHIBIT 2.1.2 AMENDMENT TO ASSET PURCHASE AGREEMENT AND SETTLEMENT AGREEMENT AGREEMENT, dated as of May 29, 1996 (this "Amendment and Settlement") by and among NINE WEST GROUP INC., a Delaware corporation ("Nine West"), LUXOTTICA GROUP S.P.A., an Italian corporation ("Luxottica Group") and THE UNITED STATES SHOE CORPORATION, an Ohio corporation ("U.S. Shoe"); W I T N E S S E T H: WHEREAS: A. Nine West and U.S. Shoe are parties to the Asset Purchase Agreement, dated as of March 15, 1995, as amended by the Amendment to Asset Purchase Agreement dated as of May 23, 1995 (as so amended, the "Agreement") and U.S. Shoe is an indirect, wholly-owned subsidiary of Luxottica Group; B. A subsidiary of Nine West, Footwear Acquisition Corp., a Delaware corporation, was a party to the Agreement but was dissolved prior to the date hereof; C. All capitalized terms used herein that are not defined herein but which are defined in the Agreement shall have the respective meanings given to them therein; D. The parties have agreed on an amount that shall be payable, upon and subject to the terms and conditions of this Amendment and Settlement, by U.S. Shoe to Nine West, as part of the consummation (the "Closing") of the transactions contemplated by this Amendment and Settlement on the closing date (the "Closing Date") referred to herein, as the final and complete payment contemplated by Section 2.3 of the Agreement, entitled "Post-Closing Adjustment"; E. The parties have also agreed that, in lieu of the transactions contemplated by Section 6.26 of the Agreement, Nine West shall, upon and subject to the terms and conditions of this Amendment and Settlement, at the Closing on the Closing Date, purchase from U.S. Shoe all of the Parent Warrants; and F. The parties desire to reflect and implement the aforesaid agreements and related matters and to amend the Agreement accordingly; 1 NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other valuable consideration the receipt and adequacy whereof is hereby duly acknowledged, the parties hereto agree as follows: 1. Settlement of Post-Closing Adjustment Dispute. (a) Subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, U.S. Shoe shall be obligated to pay to Nine West at the Closing on the Closing Date the sum of Twenty-Five Million Dollars ($25,000,000)(the "Post-Closing Purchase Price Settlement Payment"). Such obligation to make the Post-Closing Purchase Price Settlement Payment shall be in lieu of the payment, if any, that would otherwise have been required to have been made by either U.S. Shoe or Nine West pursuant to the first or second sentence of subsection 2.3(c) of the Agreement and shall also be in lieu of the payment of interest referred to in the third sentence thereof. (b) Effective upon the making of the Post-Closing Purchase Price Settlement Payment in the manner specified in Section 3 of this Amendment and Settlement, Nine West, on the one hand, and Luxottica Group and U.S. Shoe on the other hand, mutually release and discharge each other and their respective subsidiaries, affiliates, officers, directors, agents and representatives, and their respective successors, assigns, heirs and legal representatives, of and from any and all claims, causes of action, suits, debts, liabilities, obligations, costs, expenses, accounts, controversies and/or demands of any kind whatsoever, at law or in equity, direct or indirect, known or unknown, discovered or undiscovered, which relate in any way, directly or indirectly, to, or arise in connection with, the "Closing Balance Sheet" delivered by Nine West to U.S. Shoe on or about July 7, 1995 pursuant to Section 2.3 of the Agreement, or which were raised or could have been raised in the process contemplated by Section 2.3 of the Agreement concerning the determination of the Closing Net Worth of the Footwear Business, or which could have been made or can be made as a claim for indemnity under Section 7.2(c) or Section 7.3(c) of the Agreement, each entitled "Breach of Representation, Warranty, etc." on the basis of any alleged misrepresentation or breach of warranty, the subject matter of which was, could have been or would have been made the basis for a claim in such process contemplated by Section 2.3 of the Agreement, it being understood and agreed that the foregoing is not intended to restrict or prohibit claims for indemnities under such subsections of Article VII made on other bases or under any other subsections of Article VII or other claims that may be made under other provisions of the Agreement. (c) Effective upon the making of the Post-Closing Purchase Price Settlement Payment in the manner specified in Section 3 of this Amendment and 2 Settlement, Section 2.3 of the Agreement shall be deemed to have become inapplicable and no longer of any force or effect and none of the parties hereto shall thereafter have any obligation to any of the others thereunder, and Article VII of the Agreement shall be deemed amended to the extent necessary to give effect to the provisions of subparagraph (b) above. 2. Purchase by Nine West of Parent Warrants. (a) Subject to the satisfaction of the conditions precedent set forth in Section 5 hereof, Nine West shall at the Closing on the Closing Date purchase from U.S. Shoe and U.S. Shoe shall sell, transfer and assign to Nine West (the "Warrant Sale") all of the Parent Warrants for a purchase price (the "Warrant Purchase Price") of Sixty-Seven Million Five Hundred Thousand Dollars ($67,500,000), payable as set forth in Section 3 below. U.S. Shoe shall at the Closing on the Closing Date execute a written instrument of transfer in favor of Nine West, in the form of the Form of Assignment attached to Warrant Certificate No. 1 dated May 23, 1995 representing all of the Parent Warrants, and deliver it with such Warrant Certificate to Nine West, against concurrent payment to it of the Warrant Purchase Price in the manner specified in Section 3 below. (b) Effective upon the consummation of the Warrant Sale pursuant to this Amendment and Settlement, Section 6.26 of the Agreement shall be deemed to have become inapplicable and no longer of any force or effect, and none of the parties hereto shall thereafter have any obligation to any of the others thereunder. Luxottica Group and U.S. Shoe also confirm that, effective upon the consummation of the Warrant Sale pursuant to this Amendment and Settlement, the claims made in the letter dated February 13, 1996 from U.S. Shoe to Nine West with respect to the registration of the Warrants for sale to the public pursuant to Section 6.26 of the Agreement shall be irrevocably released without the necessity of any further action or the execution and delivery of any instrument. 3. Net Payment by Nine West. At the Closing, the amount due from U.S. Shoe to Nine West in respect of the Post-Closing Purchase Price Settlement Payment and the amount due from Nine West to U.S. Shoe in respect of the Warrant Purchase Price shall be offset against each other, so that only a single payment shall be made at the Closing, from Nine West to U.S. Shoe, it being understood and agreed that the obligations of the parties arising under Sections 1 and 2 above are mutually dependent. Such payment shall be in the amount of Forty-Two Million Five Hundred Thousand Dollars ($42,500,000) and shall be made by wire transfer of immediately available funds to an account designated by U.S. Shoe (or such other method as shall be satisfactory to U.S. Shoe in its sole and absolute discretion). 3 4. Certain Trademark Matters. (a) At the Closing, Nine West shall re-assign and transfer to U.S. Shoe, and U.S. Shoe shall accept the re-assignment and transfer to it, of the Trademark License dated February 13, 1974, as amended, between U.S. Shoe and Ballet Makers, Inc. and the Trademark License dated July 1, 1991, as amended, between U.S. Shoe and The Lantis Corporation, each of which relates to the Capezio trademark, all pursuant to an instrument to be executed and delivered by them at the Closing in the form of Exhibit A annexed hereto and made part hereof (the "Capezio License Re-Assignment"). (b) At the Closing, U.S. Shoe and Nine West shall execute and deliver an amendment and restatement of the Capezio License Agreement dated as of May 23, 1995 entered into by them pursuant to the Agreement in the form of Exhibit B annexed hereto and made part hereof (the "Amendment to Capezio License Agreement"). (c) The parties hereto confirm and acknowledge the following with respect to the "Third Party Licenses," as such term is defined in the Capezio License Agreement, other than the two Third Party Licenses referred to in subparagraph (a) above (such remaining Third Party Licenses are hereinafter referred as the "Remaining Capezio Licenses"): (i) U.S. Shoe, as the owner of the "Capezio Name," as such term is defined in the Agreement, has been and continues to be responsible and entitled to maintain quality control of the goods and services covered by all licenses of the Capezio Name, including, without limitation, the Remaining Capezio Licenses, as part of its responsibility and right to do so in respect of the Capezio Name generally; (ii) Nine West confirms and acknowledges that U.S. Shoe has maintained an adequate quality level in respect of the Capezio Name as licensed under the Remaining Capezio Licenses and U.S. Shoe confirms, as stated above, its continuing obligation to do so; (iii) U.S. Shoe also confirms that, in formulating quality control standards with respect to goods similar to the goods covered by the Remaining Capezio Licenses (e.g., pocketbooks, small leather goods and children's footwear), U.S. Shoe will take into account any quality standards that Nine West may propose; (iv) Nine West's rights under the Remaining Capezio Licenses shall continue in perpetuity; and, 4 (v) If and when any of the Remaining Capezio Licenses shall expire or terminate without being renewed, Nine West shall be entitled to re - - -license the Capezio Name in respect, but only in respect, of the goods covered by any expired or terminated Remaining Capezio License to one or more licensees (which may be parties other than the licensees under expired or terminated Remaining Capezio Licenses), and may continue to do so as such new license agreements expire or terminate, all on such terms and conditions as Nine West shall determine and for Nine West's sole economic benefit, subject only to U.S. Shoe's continuing right and obligation to maintain quality control with respect to the goods covered by such license agreements. (d) At the Closing, U.S. Shoe and Nine West shall execute and deliver an amendment and restatement of the Other Acquired Intellectual Property License Agreement dated as of May 23, 1995 entered into by them pursuant to the Agreement in the form of Exhibit C annexed hereto and made part hereof (the "Amendment to Other A.I.P. License Agreement"). 5. Conditions Precedent; Closing; Closing Date. (a) (i) The obligation of U.S. Shoe to consummate the transactions contemplated by this Amendment and Settlement is subject to the condition precedent that it shall have received a consent (the "U.S. Shoe Bank Consent") to the execution and delivery of, and the consummation of the transactions contemplated by, this Amendment and Settlement, in form and substance satisfactory to it, under and pursuant to the Credit Agreement dated as of May 1, 1995, as thereafter amended, by and among its affiliate, Luxottica U.S. Holdings Corp., certain lenders and Credit Suisse, as agent for such lenders and, upon receiving the U.S. Shoe Bank Consent, U.S. Shoe shall immediately notify Nine West in writing of such receipt and confirm therein that such condition precedent has been satisfied. (ii) The obligation of Nine West to consummate the transactions contemplated by this Amendment and Settlement is subject to the condition precedent that it shall have received a consent (the "Nine West Bank Consent" and, together with the U.S. Shoe Bank Consent, the "Bank Consents") to the execution and delivery of, and the consummation of the transactions contemplated by, this Amendment and Settlement, in form and substance satisfactory to it, under and pursuant to the Credit Agreement dated as of May 23, 1995, as thereafter amended, by and among Nine West, certain lenders, and Citibank, N.A. and Merrill Lynch Capital Corporation, as agents for such lenders and, upon receiving the Nine West Bank Consent, Nine West shall immediately notify U.S. Shoe in writing of such receipt and confirm therein that such condition precedent has been satisfied. 5 (iii) U.S. Shoe and Nine West shall each diligently and continuously take all actions reasonably necessary and appropriate in order to obtain the U.S. Shoe Bank Consent and the Nine West Bank Consent, respectively, at the earliest possible date. (b) The Closing shall occur on and the Closing Date, as used herein, shall mean, the first business day following the first day on which U.S. Shoe and Nine West shall have each notified the other of the receipt of its Bank Consent pursuant to subparagraph (a) above and shall be held at the offices of Winston & Strawn, 200 Park Avenue, New York, New York 10166, at 10 a.m. or shall occur and be held at such other place and time of day as the parties may agree upon in writing. 6. Representations and Warranties. (a) U.S. Shoe represents and warrants to Nine West and Nine West represents and warrants to U.S. Shoe, that: (i) It has the requisite corporate power and authority to execute and deliver this Amendment and Settlement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Amendment and Settlement have been duly authorized by its board of directors and no other corporate proceeding is necessary to authorize this Amendment and Settlement or to consummate the transactions contemplated hereby. This Amendment and Settlement has been duly executed and delivered by it and constitutes a valid and binding obligation of it, enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, moratorium and other similar laws applicable to creditors' rights generally and by the application of equitable principles. (ii) None of the execution, delivery or performance of this Amendment and Settlement, nor the consummation of the transactions contemplated hereby, nor compliance by it with the terms hereof will: (A) conflict with or result in a breach of any of the provisions of its charter, by-laws or regulations; (B) require any filing by it with, or any permit, authorization or consent from, any court, administrative agency, or other governmental or regulatory authority, foreign or domestic, or from any third party, except: (x) any filings or reports required to be made under and pursuant to applicable securities laws or the rules and regulations of the New York Stock Exchange; and (y) the Bank Consent applicable to it; (C) after giving effect to its Bank Consent, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under, any note, bond, mortgage, indenture, lease, license, franchise, permit or other instrument or agreement to 6 which it is a party or by which it is bound or any of its assets are affected; or (D) violate any order, writ, injunction, decree, statute or ordinance, applicable to it. (b) U.S. Shoe represents and warrants to Nine West that it has, and upon consummation of the Warrant Sale pursuant to this Amendment and Supplement will convey to Nine West, valid and legal title to the Parent Warrants, subject to no security interest, pledge, lien or other encumbrance created by any action taken by it. 7. Asset Acquisition Statement. Set forth as Exhibit D annexed hereto and made part hereof is the "asset acquisition statement" referred to in Section 6.13 of the Agreement that is and shall be final and binding upon U.S. Shoe and Nine West. Nine West shall provide to U.S. Shoe within 45 days after the date of this Amendment and Settlement, a schedule of payments made prior to March 15, 1996 with respect to the amounts set forth on Exhibit E annexed hereto (such amounts having been included in the tax purchase price set forth on Exhibit D annexed hereto agreed to by the parties). To the extent that any of such amounts were unpaid at March 15, 1996, Nine West shall provide to U.S. Shoe by April 1, 1997 a schedule of amounts paid by March 15, 1997. Nine West will continue to provide such information to U.S. Shoe by April 1 of each subsequent year as at the preceding March 15 until all of such amounts have been paid. 8. Publicity. Except as otherwise required by law or the rules of the New York Stock Exchange, for so long as the Agreement is in effect, neither Luxottica Group, nor U.S. Shoe, nor Nine West shall, nor shall they permit any of their Subsidiaries or affiliates to, issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Amendment and Settlement without the consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that: (i) the foregoing shall not prohibit or restrict appropriate communications between any party and its counsel, auditors, financial advisors and other representatives and agents in the ordinary course relating to such transactions; and (ii) the parties shall, promptly after the execution and delivery of this Amendment and Settlement, issue separate press releases relating to this Amendment and Settlement in form satisfactory to each party. 9. Efforts of Parties. 7 Each of the parties hereto shall, subject to the terms and conditions of the Agreement, comply with its obligations under Section 6.1 of the Agreement, and accordingly, shall take, or cause to be taken, all actions, and do, or cause to be done, all things necessary, proper or advisable under the Agreement and under applicable Contracts, laws and regulations, to consummate and make effective the transactions contemplated by the Agreement and will promptly cooperate with and furnish information to the other party or parties as is reasonably necessary or appropriate in order to cause or permit such transactions to occur as expeditiously as practicable, including, without limitation, with respect to the actions required by Section 6.6(b) of the Agreement with respect to the transfer of pension assets and related matters referred to therein. 10. Effect Upon Agreement. Except as otherwise expressly set forth herein, all terms and conditions of the Agreement shall remain in full force and effect. Upon the effectiveness of this Amendment and Settlement, each reference in the Agreement to "this Agreement," "hereunder," "herein," "hereof," "hereto," "hereinafter" or of like import shall mean and be a reference to the Agreement as amended hereby and each reference to the Agreement in any other document, instrument or agreement executed and delivered in connection or in accordance with the Agreement shall mean and be a reference to the Agreement as amended hereby. 11. Governing Law. This Amendment and Settlement shall be governed by and construed in accordance with the laws of the State of New York without regard to any applicable conflicts of laws principles. 12. Counterparts. This Amendment and Settlement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when a counterpart has been signed by each of the parties and delivered to each of the other parties, it being understood that all parties need not sign the same counterpart. 8 IN WITNESS WHEREOF, Nine West, Luxottica Group and U.S. Shoe have caused this Amendment and Settlement to be signed by their respective officers thereunto duly authorized as of the date first written above. NINE WEST GROUP INC. BY:___________________________________ Name: Title: LUXOTTICA GROUP S.P.A. BY:___________________________________ Name: Title: THE UNITED STATES SHOE CORPORATION BY:___________________________________ Name: Title: 9 Exhibits A Form of Re-Assignment by Nine West to U.S. Shoe of Capezio Trademark License Agreements with Ballet Makers, Inc. and The Lantis Corporation B Form of Amended and Restated Capezio License Agreement C Form of Amended and Restated Other Acquired Intellectual Property License Agreement D Final and Binding Form of Asset Acquisition Statement E Certain Amounts Included in Tax Purchase Price 10 EX-10 3 EXHIBIT 10.19.2 AMENDMENT NO. 2 TO THE CREDIT AGREEMENT AMONG NINE WEST GROUP INC., THE LENDERS PARTY THERETO, CITIBANK, N.A., as LETTER of CREDIT ISSUER, CITIBANK, N.A., as ADMINISTRATIVE AGENT, and MERRILL LYNCH CAPITAL CORPORATION, as AGENT AMENDMENT NO. 2 (the "Amendment"), dated as of May 29, 1996, by and among Nine West Group Inc., a Delaware corporation (the "Borrower"), the financial institutions party to the Credit Agreement defined below (the "Lenders"), Citibank, N.A., as issuer of letters of credit thereunder (the "Issuer"), Citibank, N.A., as administrative agent for the Lenders and the Issuer (in such capacity, the "Administrative Agent"), and Merrill Lynch Capital Corporation, as agent for the Lenders and the Issuer (in such capacity, the "Agent"). W I T N E S S E T H WHEREAS, the Borrower, the Lenders, the Issuer, the Administrative Agent and the Agent are party to a Credit Agreement, dated as of May 23, 1995 as amended by Amendment No. 1 thereto dated as of December 28, 1995 (as such Agreement may be further amended, the "Credit Agreement" and capitalized terms defined in the Credit Agreement and not otherwise defined herein having the meanings provided therein); and WHEREAS, the Borrower has requested that the Lenders amend the Credit Agreement to permit the Borrower to repurchase all of the warrants to purchase common stock of the Borrower issued by the Borrower to USSC pursuant to the Asset Purchase Agreement; and WHEREAS, the Lenders have agreed with the Borrower to amend the Credit Agreement to permit such repurchase upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Amendments to the Credit Agreement. Upon the satisfaction of the conditions in Section 3 of this Amendment relating to the effectiveness of this Section 1, the Credit Agreement is hereby amended as follows: a. Article I is amended by adding the definition of "USSC Warrants" immediately following the definition of "USSC" as follows: ""USSC Warrants" means the warrants to purchase the Borrower's Stock issued by the Borrower to USSC pursuant to the Asset Purchase Agreement." 1 a. Article VII is amended by deleting Section 7.4 in its entirety and substituting in its place the following: "7.4. Restricted Payments. The Borrower shall not and shall not permit any of the Guarantors to (a) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account or in respect of, or purchase, redeem or otherwise acquire for value, any of its Stock or Stock Equivalents other than (i) after the payment in full of all outstanding Facility 2 Term Loans and as long as no Event of Default is continuing, declarations and payments of dividends by the Borrower in respect of its outstanding common stock and purchases, redemptions and other acquisitions of Stock or Stock Equivalents of the Borrower, in an aggregate amount in any Fiscal Year not in excess of 25% of the Net Income of the Borrower for the previous Fiscal Year, (ii) declarations and payments of dividends by the Borrower in respect of its outstanding common stock paid in, and purchases, redemptions and other acquisitions of Stock or Stock Equivalents of the Borrower effected with Stock or Stock Equivalents of the Borrower in respect of which the Borrower has no purchase, redemption, retirement, defeasance or other acquisition obligation, (iii) declarations and payments of dividends and other distributions to the Borrower or any other Guarantor by any Guarantor, and (iv) the repurchase for $67,500,000 of all the USSC Warrants less $25,000,000 representing an adjustment to the purchase price of the Footwear Business pursuant to the Asset Purchase Agreement, or (b) purchase, redeem, prepay, defease or otherwise acquire for value or make any payment (other than required purchases, redemptions and other payments) on account or in respect of any principal amount of Indebtedness for Borrowed Money, now or hereafter outstanding, except (i) the Loans, (ii) in the case of a Guarantor, payments to the Borrower or any other Guarantor on account of any Indebtedness owing to the Borrower or such other Guarantor by such Guarantor and (iii) in connection with a refinancing of any Indebtedness permitted by Section 7.2." SECTION 2. Representations and Warranties. The Borrower hereby represents that (a) the execution, delivery and performance of this Amendment have been duly authorized by all necessary corporate action on the part of the Borrower and this Amendment constitutes a legal, valid and binding obligation of the Borrower, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights generally and to general principles of equity regardless of whether enforcement is sought in a proceeding in equity or at law, (b) before and after giving effect to this Amendment no Default or Event of Default will result therefrom and (c) the representations and warranties of the Borrower contained in Article IV of the Credit Agreement and of each Loan Party in the other Loan Documents to which it is a party are true and correct as of the date hereof as though made on such date, except to the extent such representations and warranties relate to an earlier date, in which case such representations and warranties were correct on and as of such earlier date. 2 SECTION 3. Condition to Effectiveness. The amendments in Section 1 hereof shall become effective on the date (the "Effective Date") when counterparts hereof shall have been executed by the Majority Lenders, the Administrative Agent, the Agent, the Issuer and the Borrower and acknowledged by each of the Guarantors. SECTION 4. Effect on the Credit Agreement. Except as amended hereby, the Credit Agreement and the other Loan Documents shall remain in full force and effect. SECTION 5. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together constitute one and the same agreement. SECTION 6. Governing Law. This Amendment shall be governed by and construed and enforced in accordance with the law of the State of New York. SECTION 7. Headings. Section headings in this Amendment are included herein for the convenience of reference only and shall not constitute part of this Amendment for any other purpose. SECTION 8. References. References herein and in the Loan Documents to the Credit Agreement are to the Credit Agreement as amended hereby. 3 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. NINE WEST GROUP INC. By:_______________________________ Title: CITIBANK, N.A., as Administrative Agent By:_______________________________ Title: MERRILL LYNCH CAPITAL CORPORATION, as Agent By:_______________________________ Title: CITIBANK, N.A., as Issuer By:_______________________________ Title: Lenders ------- CITIBANK, N.A. By:_______________________________ Title: 4 MERRILL LYNCH CAPITAL CORPORATION By:_______________________________ Title: BANK OF BOSTON CONNECTICUT By:_______________________________ Title: BANK ONE, INDIANAPOLIS, NA By:_______________________________ Title: CIBC INC. By:_______________________________ Title: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By:_______________________________ Title: By:_______________________________ Title: THE FIRST NATIONAL BANK OF CHICAGO By:_______________________________ Title: 5 THE INDUSTRIAL BANK OF JAPAN, LIMITED By:_______________________________ Title: MERCANTILE BANK OF ST. LOUIS, NA By:_______________________________ Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By:_______________________________ Title: BEAR, STEARNS GOVERNMENT SECURITIES, INC. By:_______________________________ Title: BANK OF NOVA SCOTIA By:_______________________________ Title: THE BANK OF NEW YORK By:_______________________________ Title: ARAB BANKING CORPORATION By:_______________________________ Title: 6 BANK OF AMERICA ILLINOIS By:_______________________________ Title: THE BOATMEN'S NATIONAL BANK OF ST. LOUIS By:_______________________________ Title: BANK OF TOKYO TRUST, LTD. By:_______________________________ Title: THE NIPPON CREDIT BANK, LTD. By:_______________________________ Title: THE SANWA BANK, LIMITED By:_______________________________ Title: THE SUMITOMO BANK, LIMITED By:_______________________________ Title: WELLS FARGO BANK By:_______________________________ Title: 7 AMSOUTH BANK By:_______________________________ Title: DAI-ICHI KANGYO BANK, LTD., NEW YORK BRANCH By:_______________________________ Title: DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCH By:_______________________________ Title: By:_______________________________ Title: THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By:_______________________________ Title: DEUTSCHE GENOSSENSCHAFTSBANK By:_______________________________ Title: By:_______________________________ Title: 8 DRESDNER BANK AG CHICAGO AND GRAND CAYMAN BRANCHES By:_______________________________ Title: By:_______________________________ Title: NATIONAL CITY BANK By:_______________________________ Title: BANK OF MONTREAL By:_______________________________ Title: UNION BANK By:_______________________________ Title: CREDIT LYONNAIS CAYMAN ISLAND BRANCH By:_______________________________ Title: THE YASUDA TRUST & BANKING CO., LTD. By:_______________________________ Title: 9 THE BANK OF TOKYO TRUST COMPANY By:_______________________________ Title: BANQUE PARIBAS By:_______________________________ Title: By:_______________________________ Title: CAISSE NATIONALE DE CREDIT AGRICOLE By:_______________________________ Title: BANK OF IRELAND By:_______________________________ Title: THE FUJI BANK, LTD. By:_______________________________ Title: ALLIED IRISH BANKS, p.l.c., NEW YORK BRANCH By:_______________________________ Title: By:_______________________________ Title: 10 THE SAKURA BANK, LIMITED By:_______________________________ Title: 11 ACKNOWLEDGEMENT Each of the undersigned consents to the foregoing Amendment and hereby confirms that its respective Guaranty shall continue to guaranty the Obligations of the Borrower pursuant to the Credit Agreement, as amended hereby. NINE WEST FOOTWEAR CORPORATION By:______________________ Name: Title: NINE WEST DISTRIBUTION CORPORATION By:________________________ Name: Title: NINE WEST BOOT CORPORATION By:________________________ Name: Title: NINE WEST MANUFACTURING CORPORATION By:________________________ Name: Title: COMMUNITY URBAN REDEVELOPMENT OF DUCK CREEK, INC. By:________________________ Name: Title: 12 EX-27 4
5 1,000 3-MOS FEB-01-1997 FEB-4-1996 MAY-4-1996 28,484 0 58,022 0 412,691 589,439 118,196 0 1,135,556 256,296 0 0 0 355 353,139 1,135,556 355,068 355,068 202,277 118,210 0 0 9,967 25,082 10,032 15,050 0 0 0 15,050 0.41 0.41
EX-99 5 NINE WEST GROUP INC. FOR IMMEDIATE RELEASE For further information contact: Robert C. Galvin Executive Vice President and Chief Financial Officer Nine West Group Inc. (203) 328-4373 NINE WEST GROUP INC. ANNOUNCES PRIVATE OFFERING OF $175,000,000 PRINCIPAL AMOUNT OF CONVERTIBLE SUBORDINATED NOTES STAMFORD, CONNECTICUT, June 13, 1996 - Nine West Group Inc. (NYSE Symbol: NIN) announced today that it is making a private offering of $175,000,000 principal amount of Convertible Subordinated Notes due 2003. The Company will grant to the initial purchasers the option to purchase up to an additional $26,250,000 principal amount of notes solely to cover over-allotments. The Notes will be convertible into Nine West common stock at a fixed conversion price per share to be determined, subject to adjustment in certain circumstances. The Notes will be redeemable by Nine West on or after July 1, 1999 at declining redemption prices. Nine West intends to use the net proceeds of the offering to repay a portion of the borrowings outstanding under its secured credit agreement. The Convertible Subordinated Notes to be offered by Nine West in the private placement have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent such registration or an applicable exemption from the registration requirements. Nine West Group Inc. is a leading designer, developer and marketer of women's footwear and accessories. Its nationally recognized brands are marketed in the "bridge" to "moderate" price ranges and include the flagship Nine West label, Amalfi, Bandolino, Calico, Easy Spirit, Enzo Angiolini, Evan Picone, 9 & Co., Pappagallo, Selby and Westies. Nine West Group markets its products through more than 7,000 department, specialty and independent stores, and today through 884 of its own domestic retail stores and 50 international retail stores. ### EX-11 6 EXHIBIT 11 EXHIBIT 11 NINE WEST GROUP INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (in thousands except per share data) Thirteen weeks ended May 4 April 29 ------- ------- PRIMARY EARNINGS PER SHARE: Earnings: Net income available for common stock $15,050 $14,050 ====== ====== Shares: Weighted average number of common shares outstanding 35,402 34,810 ====== ====== Primary earnings per share: Net income $ 0.43 $ 0.40 ====== ====== ADDITIONAL PRIMARY COMPUTATION Earnings: Net income available for common stock $15,050 $14,050 ====== ====== Shares: Weighted average number of common shares outstanding 35,402 34,810 Add: Net effect of dilutive stock options based on the treasury stock method using average market price 1,170 283 ------ ------ Weighted average number of shares outstanding including common stock equivalents 36,572 35,093 ====== ====== Primary earnings per share, as adjusted: Net income $ 0.41 $ 0.40 ====== ====== (1) Fully diluted earnings per common and common equivalent share are equal to primary earnings per share. 1 -----END PRIVACY-ENHANCED MESSAGE-----