UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended April 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______________________ to _______________________
(Amended by Exch Act Rel No. 312905. Eff 4/26/93.)
Commission File Number: 333-58059
Cluett American Corp.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2397044
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
48 West 38th Street New York, NY 10018
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, Including Area Code 212-984-8900
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 registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
No stock is held by any non-affiliates of the registrant as of April 3, 1999
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of April 3, 1999 and
December 31, 1998 F-1
Condensed Consolidated Statements of Operations for the thirteen weeks
ended April 3, 1999 and March 28, 1998 F-2
Condensed Consolidated Statements of Cash Flows for the thirteen weeks
ended April 3, 1999 and March 28, 1998 F-3
Notes to Condensed Consolidated Financial Statements - April 3, 1999 F-4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Item 6. Exhibits and Reports on Form 8-K 6
SIGNATURES 9
<PAGE>
<TABLE>
Cluett American Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars In Thousands, except per share data)
April 3, December 31,
1999 1998
-----------------------------
(Unaudited) (Note 1)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................... $ 481 $ 2,868
Accounts receivable, net........................................... 47,034 46,786
Inventories ....................................................... 84,110 74,599
Prepaid expenses and other current assets.......................... 3,426 3,972
----------------------------
Total current assets.................................................. 135,051 128,225
Property, plant and equipment, net.................................... 48,303 48,124
Pension assets........................................................ 31,883 31,383
Deferred financing fees............................................... 11,247 11,198
Other noncurrent assets............................................... 1,822 1,845
============================
Total assets.......................................................... $228,306 $220,775
============================
Liabilities and stockholder's deficit Current liabilities:
Accounts payable and accrued expenses.............................. $ 37,292 $ 42,439
Short-term debt and current portion of long-term debt.............. 15,466 10,248
Income taxes payable............................................... 1,537 1,475
----------------------------
Total current liabilities............................................. 54,295 54,162
Due to parent......................................................... 28,291 27,974
Long-term debt and capital lease obligations.......................... 244,536 235,681
Dividends payable..................................................... 2,303 605
Other non-current liabilities......................................... 140 111
Senior exchangeable preferred stock, cumulative, $.01 par value:
authorized 4,950,000, issued and outstanding 530,730 shares
(liquidation preference of $53,035)................................ 51,288 51,288
Stockholder's deficit:
Common stock, $1 par value: authorized, issued and outstanding 1,000
shares.......................................................... 1 1
Additional paid-in capital......................................... 115,218 116,919
Accumulated deficit................................................ (267,097) (264,933)
Other comprehensive income (loss).................................. (669) (1,033)
----------------------------
Total stockholder's deficit........................................... (152,547) (149,046)
============================
Total liabilities and stockholder's deficit........................... $ 228,306 $ 220,775
============================
See accompanying notes.
F-1
</TABLE>
<PAGE>
<TABLE>
Cluett American Corp. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars In Thousands)
Thirteen weeks ended
April 3, March 28,
1999 1998
------------------------------
<S> <C> <C>
Net sales................................................................. $81,099 $92,355
Cost of goods sold........................................................ 57,387 63,906
-------------------------------
Gross profit.............................................................. 23,712 28,449
Selling, general and administrative expenses.............................. 19,297 19,530
Facility closing and reengineering costs.................................. - 940
-------------------------------
Operating income.......................................................... 4,415 7,979
Interest expense, net..................................................... 6,287 3,811
Other expense, net........................................................ 15 10
-------------------------------
(Loss) income before reorganization costs and income taxes................ (1,887) 4,158
Bankruptcy reorganization costs........................................... - 1,535
-------------------------------
(Loss) income before provision for income taxes........................... (1,887) 2,623
Provision for income taxes................................................ 278 282
===============================
Net (loss) income ........................................................ $(2,165) $2,341
===============================
See accompanying notes.
F-2
</TABLE>
<PAGE>
<TABLE>
Cluett American Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
Thirteen weeks ended
April 3, March 28,
1999 1998
------------------------------
<S> <C> <C>
Operating activities
Net (loss) income ................................................. $(2,165) $2,341
Adjustment to reconcile net (loss) income to net cash and cash
equivalents used in operating activities:
Depreciation and amortization................................... 2,827 2,106
Loss on disposal................................................ 12 718
Changes in operating assets and liabilities:
Accounts receivable............................................. (66) (4,269)
Inventories..................................................... (9,054) 586
Prepaid expenses and other current assets....................... 574 1,156
Pension and other noncurrent assets............................. (891) (495)
Accounts payable and accrued expenses........................... (5,391) (3,401)
Income taxes payable............................................ 62 (451)
Other liabilities............................................... 439 (427)
Effect of changes in foreign currency........................... (59) -
----------------------------
Net cash and cash equivalents used in operating activities......... (13,712) (2,136)
Investing activities
Purchase of fixed assets........................................... (2,555) (2,649)
Proceeds on disposal of fixed assets............................... 1 465
----------------------------
Net cash and cash equivalents used in investing activities......... (2,554) (2,184)
Financing activities
Principal payments on long term debt (Note 4)...................... (650) (288)
Net borrowings under line-of-credit agreement (Note 4)............. 14,524 4,799
Principal payments on capital leases............................... (4) -
----------------------------
Net cash and cash equivalents provided by financing activities..... 13,870 4,511
Effect of foreign currency translation............................. 9 -
----------------------------
Net change in cash and cash equivalents............................ (2,387) 191
Cash and cash equivalents at beginning of period................... 2,868 10,019
============================
Cash and cash equivalents at end of period......................... $ 481 $10,210
============================
See accompanying notes.
F-3
</TABLE>
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Cluett
American Corp. and Subsidiaries, (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the thirteen-week period ended April 3, 1999 are
not necessarily indicative of the operating results that may be expected for the
year ending December 31, 1999.
The Balance Sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the annual consolidated financial statements
and footnotes of the Company, included in the Annual Report on Form 10-K, for
the year ended December 31, 1998, filed with the Securities and Exchange
Commission on March 29, 1999.
The consolidated financial statements include all subsidiary companies of the
Company. Significant intercompany transactions have been eliminated in
consolidation.
The Company uses a 5-4-4 week fiscal quarter whereby the fiscal quarter ends on
the Saturday nearest the end of the calendar quarter, which accordingly was
April 3, 1999 and March 28, 1998, respectively.
Certain amounts in the prior year financial statements and footnotes have been
reclassified to conform to the current year presentation.
2. Inventories
Inventories consist of the following:
<TABLE>
April 3, December 31,
1999 1998
------------------ -----------------
(Dollars In Thousands)
<S> <C> <C>
Finished goods $67,671 $60,134
Work in process 5,344 4,189
Raw materials and supplies 11,095 10,276
================== =================
$84,110 $74,599
================== =================
</TABLE>
F-4
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
3. Comprehensive Income
Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income" establishes new rules for reporting comprehensive income
and its components. SFAS 130 is effective for fiscal year beginning after
December 15, 1997, and was adopted by the Company for the fiscal year beginning
January 1, 1998. There was no impact on net income or shareholders' equity from
the adoption of the statement.
For the periods ending April 3, 1999 and March 28, 1998, accumulated other
comprehensive income as shown in the consolidated balance sheets was comprised
of foreign currency translation adjustments, which prior to the adoption was
reported separately in shareholders' equity. The components of comprehensive
income (loss), for these periods were as follows:
<TABLE>
Thirteen
Weeks Ended
April 3, 1999 March 28,1998
--------------- ---------------
(Dollars In Thousands)
<S> <C> <C>
Net income (loss) $(2,165) $2,341
Foreign currency translation adjustment 364 (718)
=============== ===============
Comprehensive income (loss) $(1,801) $1,623
=============== ===============
</TABLE>
F-5
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Segment Data
The Company identifies its reportable segments based on the segment's product
offerings. For the quarter ended April 3, 1999, the Company conducted its
business through two principal segments: the Sock Group and the Shirt Group.
During the fiscal year ended December 31, 1998, management decided to exit the
Burberrys and the Yves Saint Laurent ("YSL") businesses. Consequently, the
Company has entered into agreements to terminate the Burberrys and YSL license
agreements and will no longer distribute products under these brands after June
30, 1999. Because of the termination of these license agreements, the financial
results of these brands have been restated and reported under the All Other
segment. For financial reporting purposes, the dress shirt business under the
Kenneth Cole trademark (previously reported under the Designer Group) was
consolidated into the Shirt Group financial results and the sock business under
the Kenneth Cole trademark was consolidated into the Sock Group financial
results. The Kenneth Cole business began operations during the second quarter of
1998, therefore, there were no adjustments to prior year's first quarter segment
results for this brand. During the second quarter, the Company plans to restate
both the Sock Group and Shirt Group prior year's financial results for the
addition of the Kenneth Cole brand.
<TABLE>
April 3, 1999 March 28, 1998
------------- --------------
(Dollars In Thousands)
<S> <C> <C> <C>
Net Sales
Sock $34,138 $36, 193
Shirt 45,017 49,536
All Other 3,702 8,659
Intersegment (1,758) (2,033)
------- -------
81,099 92,355
====== ======
Operating Income excluding facility
closing and reengineering costs
Sock 4,522 4,906
Shirt 285 4,503
All Other (392) (490)
----- -----
4,415 8,919
===== =====
Depreciation and Amortization
Sock 1,510 1,335
Shirt 922 761
All Other -- --
-- --
2,432 2,096
===== =====
Identifiable Assets
Sock 78,614 74,561
Shirt 101,886 101,313
All Other 4,864 16,113
----- ------
$185,364 $191,987
======== ========
</TABLE>
F-6
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
4. Segment Data (Continued)
Reconciliation of Reportable Segments Net Sales, Operating Income and
Identifiable Assets
<TABLE>
April 3, 1999 March 28, 1998
------------- --------------
(Dollars In Thousands)
<S> <C> <C>
Net Sales
Total net sales for reportable segments $ 79,155 $ 85,729
Other net sales 3,702 8,659
Elimination of intersegment net sales (1,758) (2,033)
------- -------
Total consolidated net sales 81,099 92,355
====== ======
Operating Profit (Loss)
Total operating profit or loss
for reportable segments 4,807 9,409
Other operating profit or loss -- (531)
Unallocated amounts:
Corporate income (expense) (392) 41
Facility closing and reengineering costs -- (940)
----- -----
Total operating profit (loss) 4,415 7,979
===== =====
Depreciation and Amortization
Total D&A for reportable segments 2,432 2,096
Adjustments 395 10
---- --
2,827 2,106
===== =====
Assets
Total assets for reportable segments 180,500 175,874
All other assets 4,864 16,113
Unallocated amounts:
Deferred finance costs 11,247 --
Pension assets 31,883 30,726
Other unallocated amounts (188) 595
----- -----
Consolidated total $228,306 $223,308
======== ========
</TABLE>
F-7
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Guarantor Subsidiaries
The Company's payment obligations under the Senior Credit Facility and the
Senior Subordinated Notes (the "Notes") are fully and unconditionally guaranteed
on a joint and several basis by its principal domestic subsidiaries: Cluett
Peabody & Co., Inc., Great American Knitting Mills, Inc., Cluett Designer Group
Inc., Consumer Direct Corporation and Arrow Factory Stores Inc. (collectively
the "Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries is a direct or
indirect wholly-owned subsidiary of the Company. The Company's payment
obligations under the Senior Credit Facility and the Notes are not guaranteed by
the foreign operating subsidiaries Cluett, Peabody Canada Inc. and Arrow de
Mexico S.A. de C.V. (collectively the "Non-Guarantor Subsidiaries"). The
obligation of each Guarantor Subsidiary under its Guarantee of the Notes is
subordinated to such subsidiary's obligation under its guarantee of the Senior
Credit Facility.
Presented below is condensed consolidating financial information for the
Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. In the
Company's opinion, separate financial statements and other disclosures
concerning each of the Guarantor Subsidiaries would not provide additional
information that is material to investors. Therefore, the Guarantor Subsidiaries
are consolidated in the presentation below. Investments in subsidiaries are
accounted for by the Company using the equity method of accounting. Earnings
(losses) of subsidiaries are, therefore, reflected in the Parent Company's
investments in and advances to/from subsidiaries account and earnings (losses).
The elimination entries eliminate investments in subsidiaries, the related
stockholder's deficit and other intercompany balances and transactions.
F-8
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
APRIL 3, 1999
<TABLE>
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $ -- $ 315 $ 166 $ -- $ 481
Accounts receivable, net....... -- 40,851 6,183 -- 47,034
Inventories (Note 2)........... -- 69,790 14,320 -- 84,110
Prepaid expenses and other
current assets.............. -- 2,620 806 -- 3,426
-- ----- --- -- -----
Total current assets.............. -- 113,576 21,475 -- 135,051
Investment in subsidiaries........ (88,495) -- -- 88,495 --
Intercompany receivable (payable) 15,000 (15,000) -- -- --
Property, plant and equipment, net -- 46,297 2,006 -- 48,303
Pension assets.................... -- 31,883 -- -- 31,883
Deferred financing fees........... -- 11,247 -- -- 11,247
Other noncurrent assets........... -- 1,002 820 -- 1,822
-- ----- --- -- -----
Total assets...................... $ (73,495) $ 189,005 $ 24,301 $ 88,495 $ 228,306
======== ======= ====== ====== =======
Current liabilities:
Accounts payable and accrued
expenses.................... -- 34,120 3,172 -- 37,292
Short-term debt and current
portion of long-term debt... -- 7,800 7,666 -- 15,466
Income taxes payable........... -- 1,330 207 -- 1,537
-- ----- --- -- -----
Total current liabilities......... -- 43,250 11,045 -- 54,295
Due to parent..................... 28,291 28,291
Long-term debt and capital lease
obligations.................... -- 244,300 236 -- 244,536
Dividends payable................. 2,303 -- -- -- 2,303
Other non-current liabilities..... -- 140 -- -- 140
Senior exchangeable preferred
stock, cumulative, $.01 par
value: authorized 4,950,000,
issued and outstanding 530,730
shares (liquidation preference
of $53,035)
51,288 -- -- -- 51,288
Stockholder's deficit............. (127,086) (126,976) 13,020 88,495 (152,547)
--------- --------- ------ ------ ---------
Total liabilities and
stockholder's deficit.......... $ (73,495) $ 189,005 $ 24,301 $ 88,495 $ 228,306
======== ======= ====== ====== =======
</TABLE>
F-9
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $ -- $ 2,396 $ 472 $ -- $ 2,868
Accounts receivable, net....... -- 42,599 4,187 -- 46,786
Inventories (Note 2)........... -- 63,158 11,441 -- 74,599
Prepaid expenses and other
current assets.............. -- 3,168 804 -- 3,972
-- ----- --- -- -----
Total current assets.............. -- 111,321 16,904 -- 128,225
Investment in subsidiaries........ (86,330) -- -- 86,330 --
Intercompany receivable (payable)
15,000 (15,000) -- -- --
Property, plant and equipment, net
-- 46,112 2,012 -- 48,124
Pension assets.................... -- 31,383 -- -- 31,383
Deferred financing fees........... -- 11,198 -- -- 11,198
Other noncurrent assets........... -- 1,012 833 -- 1,845
-- ----- --- -- -----
Total assets...................... $ (71,330) $ 186,026 $ 19,749 $ 86,330 $ 220,775
======== ======= ====== ====== =======
Liabilities and stockholder's deficit Current liabilities:
Accounts payable and accrued
expenses.................... $ -- $ 37,781 $ 4,658 $ -- $ 42,439
Short-term debt and current
portion of long-term debt... -- 6,600 3,648 -- 10,248
Income taxes payable........... -- 1,268 207 -- 1,475
-- ----- --- -- -----
Total current liabilities......... -- 45,649 8,513 -- 54,162
Due to parent..................... -- 27,974 -- -- 27,974
Long-term debt and capital lease
obligations.................... -- 235,450 231 -- 235,681
Dividends payable................. 605 -- -- -- 605
Other non-current liabilities..... -- 111 -- -- 111
Senior exchangeable preferred
stock, cumulative, $.01 par
value: authorized 4,950,000,
issued and outstanding 530,730 shares
liquidation preference of $53,035) 51,288 -- -- -- 51,288
Stockholder's deficit............. (123,223) (123,158) 11,005 86,330 (149,046)
--------- --------- ------ ------ ---------
Total liabilities and
stockholder's deficit.......... $ (71,330) $ 186,026 $ 19,749 $ 86,330 $ 220,775
======== ======= ====== ====== =======
</TABLE>
F-10
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
APRIL 3, 1999
<TABLE>
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net sales............................. $ -- $ 73,295 $ 7,804 $ -- $ 81,099
Cost of goods sold.................... -- 51,490 5,897 -- 57,387
-- ------ ----- -- ------
Gross profit.......................... -- 21,805 1,907 -- 23,712
Selling, general and administrative
expenses........................... -- 17,268 2,029 -- 19,297
-- ------ ----- -- ------
Operating income...................... -- 4,537 (122) -- 4,415
Loss on investments in subsidiaries .. (2,165) -- -- 2,165 --
Interest expense, net................. -- 6,169 118 -- 6,287
Other expense, net.................... -- 15 -- -- 15
-- -- -- -- --
Income before reorganization costs
and income taxes................... (2,165) (1,647) (240) 2,165 (1,887)
Bankruptcy reorganization costs....... -- -- -- -- --
-- -- -- -- --
Income (loss) before provision for
income taxes....................... (2,165) (1,647) (240) 2,165 (1,887)
Provision for income taxes............ -- 226 52 -- 278
-- --- -- -- ---
Net loss.............................. $(2,165) $ (1,873) $ (292) $ 2,165 $ (2,165)
======= ======= ===== ===== =======
</TABLE>
F-11
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
MARCH 28, 1998
<TABLE>
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net sales............................. $ -- $ 82,242 $ 10,113 $ -- $ 92,355
Cost of goods sold.................... -- 56,715 7,191 -- 63,906
-- ------ ----- -- ------
Gross profit.......................... -- 25,527 2,922 -- 28,449
Selling, general and administrative
expenses........................... -- 17,122 2,408 -- 19,530
Facility closing and reengineering
costs.............................. -- 940 -- -- 940
-- --- -- -- ---
Operating income...................... -- 7,465 514 -- 7,979
Income on investment in subsidiaries.. 2,341 -- -- (2,341) --
Interest expense, net................. -- 3,042 769 -- 3,811
Other (income) expense, net........... -- (143) 153 -- 10
-- ----- --- -- --
Income before reorganization costs
and income taxes................... 2,341 4,566 (408) (2,341) 4,158
Bankruptcy reorganization costs....... -- 1,535 -- -- 1,535
-- ----- -- -- -----
Income (loss) before provision for
income taxes....................... 2,341 3,031 (408) (2,341) 2,623
Provision for income taxes............ -- 248 34 -- 282
-- --- -- -- ---
Net income (loss).....................$ 2,341 $ 2,783 $ (442) $ (2,341) $ 2,341
===== ===== ===== ======= =====
</TABLE>
F-12
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
APRIL 3, 1999
<TABLE>
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)....................... $ (2,165) $ (1,873) $ (292) $ 2,165 $ (2,165)
Adjustment to reconcile net income
(loss) to net cash and cash equivalents
provided by (used in) operating
activities:
Loss on investments in subsidiaries... 2,165 -- -- (2,165) --
Depreciation and amortization......... -- 2,748 79 -- 2,827
Loss on disposal of assets............ -- 12 -- -- 12
Changes in operating assets and -- (10,467) (3,919) -- (14,386)
-- -------- ------- -- --------
liabilities.............................
Net cash and cash equivalents used in
operating activities.................... -- (9,580) (4,132) -- (13,712)
Investing activities
Purchase of fixed assets................ -- (2,550) (5) -- (2,555)
Proceeds on disposal of fixed assets.... -- -- 1 -- 1
-- -- - -- -
Net cash and cash equivalents used in
investing activities.................... -- (2,550) (4) -- (2,554)
Financing activities
Proceeds on the credit facility......... -- 10,699 3,825 -- 14,524
Principal payments on long term debt.... -- (650) -- -- (650)
Principal payments on capital leases.... -- -- (4) -- (4)
-- -- --- -- ---
Net cash and cash equivalents provided
by financing activities................. -- 10,049 3,821 -- 13,870
Effect of foreign currency translation.. -- -- 9 -- 9
-- -- - -- -
Net change in cash and cash equivalents. -- (2,081) (306) -- (2,387)
Cash and cash equivalents at beginning -- 2,396 472 -- 2,868
-- ----- --- -- -----
of year.................................
Cash and cash equivalents at end of $ -- $ 315 $ 166 $ -- $ 481
== === === == ===
period..................................
</TABLE>
F-13
<PAGE>
Cluett American Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
MARCH 28, 1998
<TABLE>
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)..................... $ 2,341 $ 2,783 $ (442) $ (2,341) $ 2,341
Adjustment to reconcile net income
(loss) to net cash and cash
equivalents provided by (used in)
operating activities:
Gain on investment in subsidiaries.. (2,341) -- -- 2,341 --
Depreciation and amortization....... -- 2,025 81 -- 2,106
Loss on sale of fixed assets........ -- 718 -- -- 718
Changes in operating assets and -- (4,347) (2,954) -- (7,301)
-- ------- ------- -- -------
liabilities...........................
Net cash and cash equivalents used in
operating activities.................. -- 1,179 (3,315) -- (2,136)
Investing activities
Purchase of fixed assets.............. -- (2,606) (43) -- (2,649)
Proceeds on disposal of fixed assets.. -- 465 -- -- 465
-- --- -- -- ---
Net cash and cash equivalents used in
investing activities.................. -- (2,141) (43) -- (2,184)
Financing activities
Principal payments on long term debt
(Note 4).............................. -- (288) -- -- (288)
Net borrowings under line-of-credit
agreement (Note 4).................... -- 1,566 3,233 -- 4,799
-- ----- ----- -- -----
Net cash and cash equivalents
provided by financing activities...... -- 1,278 3,233 -- 4,511
Net change in cash and cash -- 316 (125) -- 191
equivalents...........................
Cash and cash equivalents at
beginning of year..................... -- 9,551 468 -- 10,019
-- ----- --- -- ------
Cash and cash equivalents at end of
period................................ $ -- $ 9,867 $ 343 $ -- $ 10,210
== ===== === == ======
</TABLE>
F-14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations: Thirteen weeks ended April 3, 1999 vs. March 28, 1998
The following table is derived from the Company's Consolidated Statements of
Operations and sets forth, for the period indicated, net sales, gross profit,
operating income, interest expense, bankruptcy reorganization costs and net
income (loss) of the Company:
<TABLE>
<S> <C> <C>
Thirteen weeks ended
April 3, March 28,
1999 1998
------------------------------
(Dollars In Thousands)
Net sales................................................................. $81,099 $92,355
Gross profit.............................................................. 23,712 28,449
Operating income ......................................................... 4,415 7,979
Interest expense ......................................................... 6,287 3,811
Bankruptcy reorganization costs........................................... -- 1,535
Net income(loss).......................................................... $(2,165) $2,341
</TABLE>
Net Sales: For the first quarter 1999, net sales decreased $11.3 million with
$6.6 million of the decline coming from reportable segments and the balance from
the winddown of the terminated YSL and Burberrys licenses. The decline from the
reportable segments relates to the Sock Group, which was down $2.0 million in
net sales, and the Shirt Group, which was down the balance. The Sock Group
decline relates to a soft holiday season which left inventory levels at the
retailer higher than normal, reducing reorders in the first quarter. In
addition, approximately $1.0 million of this year-over-year decline was due to
lower off-price and irregular sales. The Shirt Group decline relates, in equal
proportions, to the loss of the Mercantile business (i.e. acquired by Dillards
in 1998), shipment timing between quarters, a softness in staple dress shirt
demand at one of its key accounts and reduced sales volumes at another key
account following a new program sell-in during the first quarter 1998. Net sales
in the All Other segment were down $5.0 million from the prior year reflecting
management's decision in 1998 to exit the YSL and Burberrys businesses. Net
sales of $3.7 million for the first quarter 1999, represent the continuing
liquidation of the inventory associated with these businesses. The cost of the
liquidation was reserved for in 1998.
Gross Profit: For the first quarter 1999, gross profit decreased $4.7 million
compared with gross profit for the first quarter 1998. The Sock Group improved
its first quarter gross margin from 32.1% to 34.6% of net sales year over year.
This $0.2 million improvement resulted from favorable cotton prices, lower
airfreight and improved manufacturing efficiencies. The Shirt Group's gross
margin decreased from 28.9% of net sales to 26.4% for the same period in 1998.
This $3.0 million drop was caused by a combination of volume shortfalls,
improved make in the shirts without a corresponding price increase and lower
manufacturing efficiencies versus the prior year. The balance of the gross
profit decline relates to the terminated licenses.
Operating Income: The Company's operating income declined to $4.4 million from
$8.0 million for the thirteen weeks ended April 3, 1999, primarily due to the
Shirt Group's reduced net sales volume and gross margin deterioration discussed
above.
Interest expense: Interest expense increased $2.5 million for the thirteen weeks
ended April 3, 1999 as a result of higher debt levels existing after the
Recapitalization which was completed on May 18, 1998.
Bankruptcy Reorganization Costs: The Company's bankruptcy proceedings concluded
in May 1998. As a result, there were no Bankruptcy reorganization costs for the
thirteen weeks ended April 3, 1999. For the thirteen weeks ended March 28, 1998,
bankruptcy reorganization costs represented professional fees accrued.
Net (Loss) income: Net (loss) income for the thirteen weeks ended April 3, 1999
decreased $4.5 million to a loss of $2.2 million from income of $2.3 million for
the same period in 1998. This reduction was primarily related to the decline in
the Shirt Group's operating profit and the Company's overall increased interest
expense.
1
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
In a continuing effort to reduce operating costs and increase efficiencies, the
Company anticipates incurring restructuring costs between $750,000 and $850,000,
during the second quarter 1999, as a result of the consolidation of certain
administrative operations of the Canadian division into the U.S. Wholesale
division. This consolidation is expected to yield annual cost savings of
approximately $600,000.
Liquidity and Capital Resources
The Company's primary cash requirements are to fund the Company's working
capital needs, primarily inventory and accounts receivable, the purchase of
property and equipment and payment of debt service requirements related to the
Company's financing agreements. The Company has a Senior Credit Facility
comprised of three loans, including a revolving credit facility under which the
Company may, at its option, borrow and repay amounts within certain limits. The
total amount available to the Company under the revolving credit facility is
$50.0 million, subject to certain customary drawing conditions; the revolving
credit facility matures in 2004. Interest for borrowings under the revolving
credit facility is based on either, at the Company's option, LIBOR plus 250
basis points or the Alternative Base rate plus 150 basis points. The Company
believes that its borrowing capacity under this facility plus internally
generated funds are adequate to fund its capital expenditures and its working
capital and debt service requirements.
The Senior Credit Facility (which was amended on December 18, 1998 and March 19,
1999) is secured by virtually all domestic assets of the Company and its
domestic subsidiaries and contains a number of covenants that, among other
things, restrict the ability of the Company and its subsidiaries, other than
pursuant to specified exceptions, to dispose of assets, incur additional
indebtedness, incur guarantee obligations, repay other indebtedness, pay
dividends, create liens on assets, enter into leases, make investments, loans or
advances, make acquisitions, engage in mergers or consolidations, make capital
expenditures, enter into sale and leaseback transactions, change the nature of
their business or engage in certain transactions with subsidiaries and
affiliates and otherwise restrict corporate activities. In addition, under the
Senior Credit Facility the Company is required to comply with specified
financial ratios and tests, including minimum fixed charge coverage and interest
coverage ratios and maximum leverage ratios, including a senior leverage ratio
and a total leverage ratio, each of which is tested as of the last day of each
fiscal quarter of the Company. As of April 3, 1999, the Company complied with
all financial and non-financial covenants.
The Company typically makes capital expenditures related primarily to the
maintenance and improvement of manufacturing facilities and equipment
modernization. Net capital spending in both the first thirteen weeks of 1999 and
1998 was $2.6 million. The Company anticipates overall capital spending levels
for 1999 year to be approximately $9.3 million. The Company's principal sources
of cash to fund these capital requirements are net cash provided by operating
activities as well as borrowings, if needed, under its Senior Credit Facility.
Net cash used by operations for the thirteen weeks ended April 3, 1999 was $13.7
million, as compared to $2.1 million for the same period in the prior year. The
significant increase in cash used by operations was primarily due to an
inventory build at the Sock Group and the Shirt Group, where inventory levels
were $5.1 million and $9.1 million higher than the prior-year period levels,
respectively. The Sock Group inventory increase relates to the rollout of new
programs, the timing of inventory sales between fiscal quarters and a sales
volume shortfall in the first quarter of 1999. There are no prior season
inventory issues at the Sock Group.
Increased inventory levels at the Shirt Group are largely attributable to the
timing of sales between fiscal quarters and the early receipt of goods from
foreign suppliers, as well as new program rollouts. The remaining $3.0 million
increase results from a sales volume shortfall in the first quarter, 1999 and
excess prior-season merchandise; a net reduction in inventory at the Cluett
Designer Group in the first quarter 1999 partially offset the increases noted
above.
Also contributing to the increased use of cash during the first quarter 1999 was
the swing in net income, from a positive $2.3 million in the first quarter 1998
to a negative $2.2 million for the same period in 1999, and a $2.0 million
year-over-year reduction in accounts payable and accrued expenses. The change in
net income is discussed in detail above and the reduced payables are volume
related.
For the thirteen weeks ended April 3, 1999, net cash used by investing
activities was $2.6 million compared with $2.2 million for the thirteen weeks
ended March 28, 1998. Net cash provided by financing activities was $13.9
million for the thirteen weeks ended April 3, 1999 compared with $4.5 million
for the thirteen weeks ended March 28, 1998. The increase in net cash provided
by financing activities resulted from borrowings made under the Senior Credit
Facility to support seasonal working capital needs.
2
<PAGE>
Year 2000 Risk
As is more fully described in the Company's Annual Report filed on Form 10-K for
the fiscal year ended December 31, 1998, the Company has undertaken various
initiatives intended to ensure that its computer equipment and software will
function properly with respect to dates in the year 2000 and thereafter. Based
upon its identification and assessment efforts to date, the Company believes
that certain of the computer equipment and software it currently uses will
require replacement or modification. In addition, in the ordinary course of
replacing computer equipment and software, the Company attempts to obtain
replacements that it believes are Year 2000 compliant. Utilizing both internal
and external resources to identify and assess needed Year 2000 remediation, the
Company currently anticipates that its Year 2000 identification, assessment,
remediation, and testing efforts, will be completed by June 30, 1999, and that
such efforts will be completed prior to any currently anticipated impact on its
computer equipment and software.
<TABLE>
<S> <C> <C>
YEAR 2000 INITIATIVE TIME FRAME PERCENT COMPLETE
Initial IT Systems Assessment December 1998 100%
Remediation and Testing of Central/Distributed Systems June 1999 75%
Remediation and Testing of Store/Distribution Systems June 1999 75%
Upgrades to Telephone/PBX/Other Systems December 1998 100%
EDI Trading Partner Conversions June 1999 85%
Identification, Assessment, Remediation, & Testing of
Desktop Systems June 1999 85%
Identification, Assessment & Testing of Non-IT Systems December 1998 100%
</TABLE>
The Company has also mailed letters to its significant vendors, service
providers and customers to determine the extent to which interfaces with such
entities are vulnerable to Year 2000 issues and whether the products and
services purchased from or by such entities are Year 2000 compliant. As of March
24, 1999, the Company had received responses from approximately 40% of such
third parties, and 100% of the companies that have responded have provided
written assurances that they expect to address all their significant Year 2000
issues on a timely basis.
The Company believes that the cost of its Year 2000 identification, assessment,
remediation, and testing efforts, as well as currently anticipated costs to be
incurred by the Company with respect to Year 2000 issues of third parties, will
not exceed $500,000, which expenditures will be funded from operating cash
flows. Such amount represents less than 3% of the Company's total actual and
anticipated IT expenditures for fiscal 1997 through fiscal 1999. As of May 5,
1999 the Company had incurred costs of approximately $400,000 related to its
Year 2000 identification, assessment, remediation, and testing efforts. All of
the $400,000 relates to analysis, repair, or replacement of existing software,
upgrades to existing software, or evaluation of information received from
significant vendors, service providers, or customers. Other non-Year 2000 IT
efforts have not been materially delayed or impacted by Year 2000 initiatives.
The Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation, and testing are
not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with customers, vendors, or others. Additionally, there can be no
assurance that the Year 2000 issues of other entities will not have a material
adverse impact on the Company's systems or results of operations.
The Company has begun, but not yet completed, a comprehensive analysis of the
operational problems and costs (including loss of revenues) that would be
reasonable likely to result from the failure by the Company and certain third
parties to complete efforts to achieve Year 2000 compliance on a timely basis. A
contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario, and such scenario has not yet been clearly
identified. The Company currently plans to complete such analysis and
contingency planning by December 31, 1999.
The Company has engaged an independent expert to evaluate its Year 2000
identification, assessment, remediation, and testing efforts.
3
<PAGE>
The costs of the Company's Year 2000 identification, assessment, remediation,
and testing efforts and the dates on which the Company believes it will complete
such efforts are based upon management's best estimates, which were derived
using numerous assumptions regarding future events, including the continued
availability of certain resources, third-party remediation plans, and other
factors. There can be no assurance that these estimates will prove to be
accurate and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in Year 2000 issues, the ability to identify, assess, remediate, and test all
relevant computer codes and imbedded technology, and similar uncertainties. In
addition, variability of definitions of "compliance with Year 2000" and the
myriad of different products and services, and combinations thereof, sold by the
Company may lead to claims whose impact on the Company is not currently
estimable. No assurance can be given that the aggregate cost of defending and
resolving such claims, if any, will not materially adversely affect the
Company's results of operations. Although some of the Company's agreements with
manufacturers and others from whom it purchases products for resale contain
provisions requiring such parties to indemnify the Company under some
circumstances, there can be no assurance that such indemnification arrangements
will cover all of the Company's liabilities and costs related to claims by third
parties related to the Year 2000 issue.
4
<PAGE>
Backlog and Seasonality
The amount of the Company's backlog orders at any particular time is
affected by a number of factors, including seasonality and scheduling of the
manufacturing and shipment of products. In general, the Company's electronic
data interchange ("EDI") system and vendor managed inventory systems have
resulted in shortened lead times between submission of purchase orders and
delivery and has lowered the level of backlog orders. Consequently, the Company
believes that the amount of its backlog is not an appropriate indicator of
future production levels.
The industries in which the Company operates are cyclical. Purchases of
apparel tend to decline during recessionary periods and also may decline at
other times. A recession in the general economy or uncertainties regarding
future economic prospects could affect consumer spending habits and could have
an adverse effect on the Company's results of operations. Weak sales and
resulting markdown requests from customers could also have a material adverse
effect on the Company's business, results of operations and financial condition.
The Company's business is seasonal, with higher sales and income during its
third and fourth quarters. The third and fourth quarters coincide with the
Company's two peak retail selling seasons: (i) the first season runs from the
start of the back-to-school and fall selling seasons, beginning in August and
continuing through September; and (ii) the second season runs from the start of
the Christmas selling season beginning with the weekend following Thanksgiving
and continuing through the week after Christmas.
Also contributing to the strength of the third quarter is the high volume of
fall shipments to wholesale customers which are generally more profitable than
spring shipments. The slower spring selling season at wholesale combines with
retail seasonality to make the first half of the year particularly weak.
Cautionary Statement Regarding Forward-Looking Statements
The Quarterly Report on Form 10-Q contains certain statements which describe the
Company's beliefs concerning future business conditions and the outlook for the
Company based on currently available information. The preceding Management's
Discussion and Analysis contains forward-looking statements regarding the
Company's performance, liquidity and the adequacy of its capital resources.
These forward looking statements are subject to risks, uncertainties and other
factors which could cause the Company's actual results, performance or
achievement to differ materially from those expressed in, or implied by these
statements. As a result, the Company cautions that the forward-looking
statements are qualified by the financial strength of the retail industry, the
risks of increased competition from other manufacturers of men's dress shirts
and socks, shifting consumer demand, changing consumer credit markets and
general economic conditions, hiring and retaining effective team members,
sourcing merchandise from domestic and international vendors, preparing for the
impact of year 2000, and other risks and uncertainties. Therefore, while
management believes that there is a reasonable basis for the forward-looking
statements, undue reliance should not be placed on those statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company has exposure to fluctuations in interest rates and foreign currency
exchange rates. The Company operates under a senior credit facility at variable
interest rates. Interest expense is primarily affected by the general level of
U.S. interest rates, LIBOR and European base rates. The Company is subject to
risk from sales and loans to its foreign subsidiary as well as sales, purchases
from third party customers, suppliers and creditors, denominated in foreign
currencies. Currently, the Company does not engage in any material derivative
type instruments in order to hedge against interest rate and Canadian foreign
currency exchange rate fluctuations. However, the Company feels it is limited in
its exposure of foreign currency exchange rate changes as most inventory
purchase contracts are denominated in US Dollars.
The Company evaluated its market risks (floating interest rate, fixed interest
rate and currency risks) at the fiscal year ended December 31, 1998, which is
disclosed in the Company's annual report filed on Form 10-K. There has not been
any material change (adverse or favorable) in the risk factors identified since
the evaluation performed by the Company at December 31, 1998.
5
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are involved in various legal proceedings, both
as plaintiff and as defendant, which are normal to its business. It is the
opinion of management that the aforementioned actions and claims, if determined
adversely to the Company, will not have a material adverse effect on the
financial condition or operations of the Company taken as a whole.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the quarter
ended April 3, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) (1) Financial Statements
Included in Part I, Item 1
(2) Financial Statement Schedules
Schedule II - Valuation and Qualifying
Accounts
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been
omitted.
(3) List of Exhibits
(b) The Company did not file any reports on Form 8-K during the thirteen weeks
ended April 3, 1999
(c) Exhibits: See (a)(3) above for a listing of the exhibits included as part
of this report.
(d) Financial Statement Schedules: See (a)(1) and (a)(2) above for a listing
of the financial statements and schedules submitted as part of this
report.
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------------------------------------------------------------------------------
2.1 Third Amended plan of Reorganization of Cluett American Corp. and Cluett
American Investment Corp. (incorporated by reference to Exhibit 2.1 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
June 30, 1998).
2.2 Subscription Agreement dated as of March 30, 1998 among Bidermann
Industries U.S.A., Inc., Vestar Capital Partners III, L.P. and Alvarez &
Marsal, Inc. (incorporated by reference to Exhibit 2.2 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June 30,
1998).
2.3 Stockholders' Agreement dated as of May 18, 1998 among Cluett American
Investment Corp., Vestar Capital Partners III, L.P., A&M Investment
Associates #7, LLC, the Co-Investors named therein, the Original Equity
Holders named therein and the Management Investors named therein
(incorporated by reference to Exhibit 2.3 to the Company's Registration
Statement on Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).
2.4 Joinder Agreement dated as of June 30, 1998 among Cluett American
Investment Corp., Vestar Capital Partners III, L.P. and each other
signatory thereto (an "Additional Stockholder") (incorporated by reference
to Exhibit 2.4 to the Company's Registration Statement on Form S-4 (Reg.
No. 333-58059) filed on June 30, 1998).
3.1 Restated Certificate of Incorporation of Cluett American Corp.
(incorporated by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).
3.2 Bylaws of Cluett American Corp. (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-4 (Reg. No. 333-58059)
filed on June 30, 1998).
4.1 Indenture between Cluett American Corp. and The Bank of New York, as
Trustee (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June 30,
1998).
6
<PAGE>
4.2 Exchange Debenture Indenture between Cluett American Corp. and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
June 30, 1998).
4.3 Certificate of Designations of the 12 1/2% Senior Exchangeable Preferred
Stock Due 2010 (incorporated by reference to Exhibit 4.3 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June 30,
1998).
4.4 Form of 10 1/8% Senior Subordinated Notes Due 2008 (incorporated by
reference to Exhibit 4.4 to the Company's Registration Statement on Form
S-4 (Reg. No. 333-58059) filed on June 30, 1998).
4.5 Form of 10 1/8% Series B Senior Subordinated Notes Due 2008 (incorporated
by reference to Exhibit 4.5 to the Company's Registration Statement on Form
S-4 (Reg. No. 333-58059) filed on June 30, 1998).
4.6 Form of 12 1/2% Senior Exchangeable Preferred Stock Due 2010 (incorporated
by reference to Exhibit 4.6 to the Company's Registration Statement on Form
S-4 (Reg. No. 333-58059) filed on June 30, 1998).
4.7 Form of 12 1/2% Series B Senior Exchangeable Preferred Stock Due 2010
(incorporated by reference to Exhibit 4.7 to the Company's Registration
Statement on Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).
4.8 Note Registration Rights Agreement dated May 18, 1998 among Cluett American
Corp., NationsBanc Montgomery Securities LLC and NatWest Capital Markets
Limited (incorporated by reference to Exhibit 4.8 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June 30,
1998).
4.9 Preferred Stock Registration Rights Agreement dated May 18, 1998 among
Cluett American Corp., NationsBanc Montgomery Securities LLC and NatWest
Capital Markets Limited (incorporated by reference to Exhibit 4.9 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
June 30, 1998).
10.1 $160,000,000 Credit Agreement dated as of May 18, 1998 among Cluett
American Corp., as the Borrower, NationsBank, N.A., as Administrative Agent
and Collateral Agent, NationsBanc Montgomery Securities LLC, as Arranger
and Syndication Agent, and lenders (incorporated by reference to Exhibit
10.1 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
10.2 First Amendment to the Credit Agreement and Assignment dated May 27, 1998
by an among Cluett American Corp., Cluett American Investment Corp., Cluett
American Group, Inc. and certain subsidiaries, the Existing Lenders, New
Lenders, and agents (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
June 30, 1998).
10.2.1 Second Amendment to the Credit Agreement and Assignment dated as December
18, 1998 by an among Cluett American Corp., Cluett American Investment
Corp., Cluett American Group, Inc. and certain subsidiaries, the Existing
Lenders, New Lenders, and agents (incorporated by reference to Exhibit
10.2.1 to the Company's Annual Report on Form 10-K (Reg No. 333-58059)
filed on March 29, 1999).
10.2.2 Third Amendment to the Credit Agreement and Assignment dated as of March
19, 1999 by an among Cluett American Corp., Cluett American Investment
Corp., Cluett American Group, Inc. and certain subsidiaries, the Existing
Lenders, New Lenders, and agents (incorporated by reference to Exhibit
10.2.1 to the Company's Annual Report on Form 10-K (Reg No. 333-58059)
filed on March 29, 1999).
10.3 Security Agreement dated as of May 18, 1998 made by Cluett American Corp.,
Cluett American Investment Corp., Cluett American Group, Inc. and certain
Subsidiaries of Cluett American Investment Corp. in favor of NationsBank,
N.A. as agent (incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June 30,
1998).
10.4 Pledge Agreement dated as of May 18, 1998 made by Cluett American Corp.,
Cluett American Investment Corp., Cluett American Group, Inc. and certain
Subsidiaries of Cluett American Investment Corp. in favor of NationsBank,
N.A., as agent (incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June 30,
1998).
10.5 Joinder Agreement dated as of May 18, 1998 by and between Bidermann
Tailored Clothing, Inc., and NationsBank, N.A., in its capacity as Agent
under that certain Credit Agreement dated as of May 18, 1998 (incorporated
by reference to Exhibit 10.5 to the Company's Registration Statement on
Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).
7
<PAGE>
10.6 CDN $15,000,000 Loan Agreement dated as of August 8, 1997 between Cluett,
Peabody Canada Inc., as the Borrower, and Congress Financial Corporation
(Canada), as Lender (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
June 30, 1998).
+10.7Employment Agreement dated March 7, 1997 by and between Great American
Knitting Mills, Inc. and James A. Williams (incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement on Form S-4/A (Reg.
No. 333-58059) filed on September 3, 1998).
+10.8Severance Agreement dated as of August 8, 1997 by and between Cluett,
Peabody & Co., Inc. and Phil Molinari (incorporated by reference to Exhibit
10.8 to the Company's Registration Statement on Form S-4/A (Reg. No.
333-58059) filed on September 3, 1998).
+10.9Severance Agreement dated as of May 5, 1997 by and between Great American
Knitting Mills, Inc. and William Sheely (incorporated by reference to
Exhibit 10.9 to the Company's Registration Statement on Form S-4/A (Reg.
No. 333-58059) filed on September 3, 1998).
+10.10 Severance Agreement dated as of May 5, 1997 by and between Great American
Knitting Mills, Inc. and Kathy Wilson (incorporated by reference to Exhibit
10.10 to the Company's Registration Statement on Form S-4/A (Reg. No.
333-58059) filed on September 3, 1998).
+10.11 Advisory Agreement dated May 18, 1998 among Cluett American Investment
Corp., Cluett American Corp. and Vestar Capital Partners (incorporated by
reference to Exhibit 10.11 to the Company's Registration Statement on Form
S-4/A (Reg. No. 333-58059) filed on September 3, 1998).
10.12Secured Promissory Note dated May 18, 1998 made by A&M Investment
Associates #7, LLC in favor of Cluett American Investment Corp.
(incorporated by reference to Exhibit 10.12 to the Company's Registration
Statement on Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).
10.13Form of Secured Promissory Note made by the Management Investors in favor
of Cluett American Investment Corp. (incorporated by reference to Exhibit
10.13 to the Company's Registration Statement on Form S-4/A (Reg. No.
333-58059) filed on September 3, 1998).
+10.14 Severance Agreement dated as of August 8, 1997 by and between Cluett,
Peabody & Co., Inc. and Robert Riesbeck (incorporated by reference to
Exhibit 10.14 to the Company's Registration Statement on Form S-4/A (Reg.
No. 333-58059) filed on October 15, 1998).
+10.15 Severance Agreement dated as of January 16, 1996 by and between Bidermann
Industries Corp. and Steven J. Kaufman (incorporated by reference to
Exhibit 10.15 to the Company's Registration Statement on Form S-4/A (Reg.
No. 333-58059) filed on October 15, 1998).
21 List of Subsidiaries (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
June 30, 1998).
24 Powers of Attorney (included on pages II-5--II-11) (incorporated by
reference to Exhibit 24 to the Company's Registration Statement on Form S-4
(Reg. No. 333-58059) filed on June 30, 1998).
*27 Financial Data Schedule (filed herewith as Exhibit 27)
99.1 Form of Note Letter of Transmittal (incorporated by reference to Exhibit
99.1 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
99.2 Form of Preferred Stock Letter of Transmittal (incorporated by reference to
Exhibit 99.2 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
99.3 Form of Note Notice of Guaranteed Delivery (incorporated by reference to
Exhibit 99.3 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
99.4 Form of Preferred Stock Notice of Guaranteed Delivery (incorporated by
reference to Exhibit 99.4 to the Company's Registration Statement on Form
S-4 (Reg. No. 333-58059) filed on June 30, 1998).
+ This is a management contract or compensatory plan or arrangement
* Filed herewith
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLUETT AMERICAN CORP.
Registrant
May _____, 1999 /s/ Bryan P. Marsal
---------------------------------------
Bryan P. Marsal
Director, President and Chief
Executive Officer
May _____, 1999 /s/ W. Todd Walter
---------------------------------------
W. Todd Walter
Vice President and Chief Financial
and Accounting Officer
9
<PAGE>
Item 6 (d). Financial Statement Schedules
SCHEDULE II
CLUETT AMERICAN CORP.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION BALANCE EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
Year Ended December 31, 1998:
Deductions from
asset accounts:
Allowance for
Doubtful Accounts $1,568 $ 227 $ -- $ 14 $ 1,781
Customer Allowances 6,894 1,810 -- 3,006 5,698
Inventory reserves 5,149 1,654 -- 3,789 3,014
----- ----- -- ----- -----
Total $13,611 $3,691 $ -- $ 6,809 $10,493
======= ====== === ======= =======
</TABLE>
(a) Provision for doubtful accounts.
(b) Recoveries of doubtful accounts previously written off.
(c) Primarily uncollectible accounts charged against the allowance
provided therefor.
(d) Primarily related to the liquidation of excess inventory
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001064435
<NAME> Cluett American Corp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Apr-03-1999
<CASH> 481
<SECURITIES> 0
<RECEIVABLES> 47,034
<ALLOWANCES> 0
<INVENTORY> 84,110
<CURRENT-ASSETS> 135,051
<PP&E> 48,303
<DEPRECIATION> 0
<TOTAL-ASSETS> 228,306
<CURRENT-LIABILITIES> 54,295
<BONDS> 0
0
51,288
<COMMON> 1
<OTHER-SE> (152,548)
<TOTAL-LIABILITY-AND-EQUITY> 228,306
<SALES> 81,099
<TOTAL-REVENUES> 81,099
<CGS> 57,387
<TOTAL-COSTS> 19,297
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,287
<INCOME-PRETAX> (1,887)
<INCOME-TAX> 278
<INCOME-CONTINUING> (2,165)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,165)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
