<PAGE>
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 AND EXCHANGE ACT OF 1934
For the Quarter Ended May 5, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-5400
FARAH INCORPORATED
(Exact name of registrant as specified in its charter)
Texas 74-1061146
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8889 Gateway West, El Paso, Texas 79925
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (915) 593-4444
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 and 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 .
As of June 5, 1995 there were outstanding 10,132,291 shares of the
registrant's common stock, no par value, which is the only class of common or
voting stock of the registrant.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FARAH INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
QUARTER AND SIX MONTHS ENDED MAY 5, 1995 AND MAY 6, 1994
(Unaudited)
Quarter Ended Six Months Ended
May 5, May 6, May 5, May 6,
1995 1994 1995 1994
(Thousands of dollars except per share data)
<S> <C> <C> <C> <C>
Net sales $56,782 66,170 106,731 117,440
Cost of sales 44,408 46,702 81,546 82,588
Gross profit 12,374 19,468 25,185 34,852
Selling, general
and administrative expenses 17,618 15,129 32,052 28,017
Operating income (loss) (5,244) 4,339 (6,867) 6,835
Other income (expense):
Interest expense (1,121) (855) (1,812) (1,542)
Interest income 311 179 508 359
Foreign currency
transaction gains 168 37 343 112
Other, net 28 76 42 79
(614) (563) (919) (992)
Income (loss) before
provision (benefit)
for income taxes (5,858) 3,776 (7,786) 5,843
Provision (benefit) for
income taxes (2,026) 246 (2,699) 302
Net income (loss) (3,832) 3,530 (5,087) 5,541
Retained earnings:
Beginning 13,246 5,707 14,501 3,696
Ending $9,414 9,237 9,414 9,237
Net income (loss) per share $(0.38) 0.41 (0.50) 0.66
Weighted average shares of common
stock (all periods) and common
stock equivalents (income periods
only) outstanding 10,125,186 8,704,973 10,110,649 8,453,298
</TABLE>
<PAGE>
<TABLE>
FARAH INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MAY 5, 1995 AND NOVEMBER 4, 1994
(Unaudited)
May 5, November 4,
1995 1994
(Thousands of dollars)
<S> <C> <C>
Assets
Current assets:
Cash $2,038 2,372
Trade receivables, net 29,699 36,931
Inventories:
Raw materials 14,135 11,625
Work in process 17,523 16,949
Finished goods 49,382 46,628
81,040 75,202
Other current assets 15,189 9,414
Total current assets 127,966 123,919
Note receivable 5,758 5,910
Property, plant and equipment, net 29,802 22,872
Other non-current assets 5,453 5,350
$168,979 158,051
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $36,723 18,184
Current installments of long-term debt 828 874
Trade payables 16,908 22,306
Other current liabilities 12,108 15,171
Total current liabilities 66,567 56,535
Long-term debt, excluding current installments 11,581 5,170
Other non-current liabilities 3,140 3,103
Deferred gain on sale of building 6,266 7,282
Shareholders' equity:
Common stock, no par value, $.01 stated value,
authorized 20,000,000 shares; issued 10,163,566
in 1995 and 10,116,616 in 1994 46,019 46,018
Additional paid-in capital 29,303 28,497
Cumulative foreign currency translation adjustment (1,322) (1,066)
Minimum pension liability adjustment (1,880) (1,880)
Retained earnings 9,414 14,501
81,534 86,070
Less: Treasury stock, 36,275 shares in
1995 and 1994, at cost 109 109
Total shareholders' equity 81,425 85,961
$168,979 158,051
</TABLE>
<PAGE>
<TABLE>
FARAH INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MAY 5, 1995 AND MAY 6, 1994
(Unaudited) May 5, May 6,
1995 1994
(Thousands of dollars)
<S> <C> <C>
Cash flows from (used in) operating activities:
Net income (loss) ($5,087) 5,541
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 1,789 1,866
Amortization of deferred gain on building sale (1,016) (1,016)
Deferred income taxes (2,805) (825)
Decrease (increase) in:
Trade receivables 7,232 (4,082)
Inventories (6,338) (11,322)
Other current assets (2,970) (1,162)
Increase (decrease) in:
Trade payables (5,398) (2,472)
Other current liabilities (2,563) 2,554
Net cash used in operating activities (17,156) (10,918)
Cash flows used in investing activities:
Purchases of property, plant and equipment (7,069) (2,414)
Net cash used in investing activities (7,069) (2,414)
Cash flows from (used in) financing activities:
Net change in revolving credit facility 16,875 (15,362)
Proceeds from issuance of debt 7,357 773
Repayment of long-term debt (858) (2,585)
Receipts from sale of common stock 807 29,499
Other (34) (39)
Net cash from financing activities 24,147 12,286
Foreign currency translation adjustment (256) 528
Net decrease in cash flow (334) (518)
Cash, beginning of year 2,372 2,007
Cash, end of period $2,038 1,489
Supplemental cash flow disclosures:
Interest paid 1,605 1,582
Income taxes paid 1,683 319
Assets acquired through direct financing loans
or capital leases 1,530 267
Exchange of debentures 1,673
-
</TABLE>
<PAGE>
FARAH INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The attached condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. As a result, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. The Company believes that the disclosures made are
adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes included in the
Company's 1994 Annual Report on Form 10-K.
2. The foregoing financial information reflects all adjustments (which
consist only of normal recurring adjustments) which are, in the opinion of
management, necessary to present a fair statement of the financial
position and the results of operations and cash flows for the interim
periods.
<PAGE>
FARAH INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Consolidated sales for the second quarter and first six months of fiscal
1995 decreased by $9,388,000 (14.2%) and $10,709,000 (9.1%) compared to the same
periods in 1994. Sales decreased at Farah U.S.A. by 22% in the second quarter
and by 18% in the first six months. Sales were comparable at Value Slacks, and
increased at Farah International by 25% for the quarter and 39% for the first
six months.
Farah U.S.A. sales for the second quarter of fiscal 1995 were
$41,087,000 compared to $52,969,000 in the second quarter of 1994. For the first
six months of fiscal 1995, sales were $77,421,000 compared to $94,279,000 in the
same period of 1994. Unit sales decreased by 20% and 16% in the second quarter
and first six months, respectively, while the average unit sales price declined
by 3% in both periods. A comparison of sales by product line is as follows:
<TABLE>
% of Sales % Increase/(Decrease)
Quarter Six Months Quarter Six Months
Price Price
Per Per
1995 1994 1995 1994 Units Unit Units Unit
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savane 50% 58% 53% 57% -36% 2% -25% 3%
Farah 25% 27% 23% 26% -28% 0% -27% -6%
Private Label 18% 7% 16% 8% 110% -4% 76% -5%
John Henry 7% 8% 8% 9% -36% 11% -26% 4%
</TABLE>
Sales at Farah U.S.A. in the second quarter of 1995 were adversely
affected by several factors. Retail sales continued to be soft placing
competitive and promotional pressures on the Company which resulted in lower
sales volume and prices. The Company's second quarter results were also
adversely impacted by the start up of new laundry and finishing facilities in
Mexico and Costa Rica, as well as a new cutting room and cloth warehouse in
El Paso. The Company was unable to deliver all of its orders because of
transitional issues encountered in the start up process which resulted in
additional markdowns due to late shipments. Another factor affecting second
quarter sales was the inability of the Company's computer to process a large
number of Electronic Data Interchange (EDI) orders scheduled for shipment on
the last day of the second quarter. This resulted in approximately $4,125,000
of sales which were anticipated to be recorded in the second quarter being
delayed to the third quarter. New computer hardware is expected to be in place
in the third quarter of 1995. In addition, the overall average unit sales price
decreased as a result of a higher proportion of private label sales which
carry a lower average unit sales price compared to the Company's branded
product.
Sales at Farah International were $12,497,000 in the second quarter of
1995 compared to $10,022,000 in the second quarter of 1994. For the first six
months of fiscal 1995 sales were $21,817,000 compared to $15,677,000 in 1994.
Unit volume was up 18% in the second quarter and 30% in the first six months.
The average unit sales price increased 6% and 7% respectively in the second
quarter and first six months. Sales at Farah U.K. were up 18% in the second
quarter and 34% for the first six months due to the introduction of new
products, increased promotional sales and higher private label sales. Sales at
Farah Australia and New Zealand combined were up 41% for the quarter and 54% for
the first six months. This increase resulted mainly from an increase in sales of
Savane and Private Label products. Also favorably impacting U.S. Dollar sales
was the effect of the weakening U.S. Dollar compared to the British Pound
Sterling and the Australian Dollar. The average exchange rate of the British
Pound Sterling was approximately 7% higher in the second quarter of 1995
<PAGE>
compared to the same period in 1994. This rate was 6% higher for the first six
months of fiscal 1995 compared to 1994. The average exchange rate of the
Australian Dollar was approximately 3% and 8% higher in the second quarter and
first six months of 1995, respectively, compared to the same period in 1994. The
higher exchange rate resulted in higher sales when translated into U.S. Dollars.
Sales at Value Slacks were $3,198,000 in the second quarter of 1995
compared to $3,179,000 in the second quarter of 1994. In the first six months
of 1995 sales were $7,493,000 compared to $7,484,000 in 1994. Same store sales
in the U.S. were up 11% in the second quarter of 1995 compared to 1994. The
Company continues to close stores in Puerto Rico while opening new stores in
the United States. In the second quarter of 1995 the Company had 28 U.S.
stores and 5 Puerto Rican stores in operation compared to 24 U.S. stores and 9
Puerto Rican stores in the second quarter of 1994.
Consolidated gross profit decreased by $7,094,000 (36.4%) in the second
quarter of 1995 compared to the second quarter of 1994. In the first six months,
gross profit decreased by $9,667,000 (27.7%) in 1995 compared to 1994.
At Farah U.S.A. gross profit as a percent of sales was 16% and 18% in the
second quarter and first six months of fiscal 1995 compared to 27% in both
periods of 1994. As previously discussed, transitional problems related to the
start up of new laundry, finishing and cutting facilities prevented the Company
from delivering all of its orders resulting in higher inventory quantities and
larger markdowns than normal. Additional manufacturing costs were also incurred
in the second quarter of 1995 due to the start up of the new facilities. Margins
were also lower in the second quarter and first six months of 1995 as a result
of the higher percentage of private label sales which carry a lower margin
and higher promotional sales activities. Partially offsetting these increased
costs was the favorable effect of the devaluation of the Mexican Peso.
At Farah International, gross profit as a percent of sales was down from
35% in the second quarter of 1994 to 33% in the second quarter of 1995. In the
first six months of fiscal 1995 gross profit as a percent of sales was 34%
compared to 36% in the same period of 1994. Higher promotional sales, combined
with a higher percentage of private label sales and manufacturing inefficiencies
in the Irish factories, reduced the gross profit percent.
At Value Slacks gross profit as a percent of sales increased from 49% to
51% in the second quarter of 1994 compared to 1995 and from 47% to 52% in the
first six months of 1994 compared to 1995. The shift in sales to U.S. stores
from Puerto Rican stores had a favorable impact on margins, as overall margins
earned are higher at U.S. locations. Margins were also up as a result of
increased sales of certain higher margin casual and Savane product.
Selling, general and administrative expenses ("SG&A") as a percent of
sales increased from 22.9% in the second quarter of 1994 to 31.0% in the second
quarter of 1995. In the first six months SG&A as a percent of sales increased
from 23.9% to 30.0%. SG&A was 29% at Farah U.S.A. in the second quarter of 1995
compared to 20% in 1994 and 28% for the first six months of 1995 compared to 21%
in 1994. The increase was primarily attributable to higher advertising expenses
at Farah U.S.A., which were $1,500,000 higher in the second quarter of 1995
compared to 1994 and $1,100,000 higher for the six month period. As a percent of
Farah U.S.A. sales, advertising was 5.5% higher in the second quarter of 1995
than 1994. In addition, higher systems implementation costs, combined with the
effect of fixed costs that did not decrease in relation to the lower sales
levels, increased the SG&A percent to sales. At Farah International SG&A as a
percent of sales was comparable in the second quarter and first six months of
1995 compared to 1994. At Value Slacks, SG&A as a percent of sales increased
from 56% to 59% for the quarter, and from 49% to 53% for the first six months.
This increase in SG&A was attributable to costs incurred at new store locations,
higher travel expenses and higher advertising costs for increased sales
promotions.
<PAGE>
Other expense, net, was $51,000 higher in the second quarter of 1995
compared to the second quarter of 1994. Net interest expense was higher in 1995
due to higher borrowings on the Company's revolving credit facility. This
increase was partially offset by higher currency gains related to the
strengthening of the U.S. Dollar compared to the Mexican Peso. For the
first six months, other expense was lower by $73,000 due mainly to the strength-
ening of the U.S. Dollar compared to the Mexican Peso.
An income tax benefit was recorded in the second quarter and first six
months of 1995 compared to an expense in the same periods of 1994. During the
first six months of 1995, an additional deferred tax asset of approximately
$2,805,000 was recorded. The Company continues to believe that future earnings
will be sufficient to make realization of this deferred tax asset more likely
than not. In 1994 the effective tax rate was lower than statutory rates
due to the effect of recognition of net operating loss carryforwards.
Financial Condition
The Company's primary credit agreement ("Credit Agreement") provides up to
$45,000,000 of credit through June 1, 1996. Farah U.S.A., Value Slacks and Farah
U.K. are parties to the Credit Agreement. Availability under the agreement is
limited by formulas derived from accounts receivable, inventory and fixed
assets. As of May 5, 1995, usage under the agreement was $37,266,000 and
available credit was $7,734,000.
In the first quarter of 1995, the Company entered into a $10,000,000 lease
line of credit which will be used to finance the purchase of laundry, finishing,
sewing and cutting equipment in Mexico, Costa Rica and the United States.
Usage under this line totaled $6,803,000 as of May 5, 1995.
The Credit Agreement contains certain financial covenants. Compliance with
the profitability covenant was waived by the lender for the fiscal quarter
ended May 5, 1995. Management believes, based on its discussions with its
lender, that it will be able to obtain an amendment to eliminate the existing
profitability covenant or to establish a new covenant. In the event the agree-
ments are not amended, management will endeavor to obtain waivers from its
lender if it fails to comply with any covenants in the future. However,
there can be no assurance such waivers will be obtained.
Net cash used in operations in the first six months of 1995 was
approximately $17 million as a result of higher inventory levels, a decrease in
trade payables and accrued expenses and the operating loss incurred. The higher
inventories were due to lower than expected sales and the decrease in trade
payables and accrued expenses was due to payments of higher than normal year-end
accrued expenses and accounts payable balances in the ordinary course of
business. These uses of funds were financed through accounts receivable
collections and increases in short-term borrowings.
Capital expenditures through May 5, 1995 approximated $8,599,000.
Expenditures were mainly for building improvements; sewing, laundry, cutting and
warehousing equipment; and computer systems. As of May 5, 1995 the Company had
commitments for future capital expenditures of approximately $1,820,000.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.51 Amendment No. 13 dated March 7, 1995 to Accounts
Financing Agreement dated August 2, 1990 between
Congress Financial Corporation (Southwest) and
Farah U.S.A., Inc.
Exhibit 10.52 Amendment No. 14 dated April 5, 1995 to Accounts
Financing Agreement dated August 2, 1990 between
Congress Financial Corporation (Southwest) and
Farah U.S.A., Inc.
Exhibit 11 Statement regarding computation of net income
(loss) per share.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which
the report is filed.
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.
FARAH INCORPORATED
Date: June 19, 1995 /s/ James C. Swaim
James C. Swaim
Executive Vice President
Principal Financial Officer
/s/ Russell G. Gibson
Russell G. Gibson
Principal Accounting Officer
<PAGE>
FARAH INCORPORATED AND SUBSIDIARIES
FORM 10-Q INDEX TO EXHIBITS
May 5, 1995
Page
Description Number
Exhibit 10.51 Amendment No. 13 dated March 7, 1995 to Accounts 12
Financing Agreement dated August 2, 1990 between
Congress Financial Corporation (Southwest) and
Farah U.S.A., Inc.
Exhibit 10.52 Amendment No. 14 dated April 5, 1995 to Accounts 15
Financing Agreement dated August 2, 1990 between
Congress Financial Corporation (Southwest) and
Farah U.S.A., Inc.
Exhibit 11 Statement regarding computation of net income 19
(loss) per share.
Exhibit 27 Financial Data Schedule 20
EXHIBIT 10.51
AMENDMENT NO. 13 TO FINANCING AGREEMENTS
FARAH U.S.A., INC.
8889 Gateway West
El Paso, Texas 79925
March 7. 1995
Congress Financial Corporation (Southwest)
1201 Main Street, Suite 1625
Dallas, Texas 75250
Gentlemen:
Congress Financial Corporation (Southwest) ("Lender"), Farah U.S.A., Inc.
("Farah USA"), Value Clothing Company, Inc. ("Value Clothing"), Farah
Manufacturing (U.K.) Limited ("Farah UK"), and together with Farah USA and Value
Clothing, individually and collectively, ("Borrowers") have entered into
financing arrangements pursuant to the Accounts Financing Agreement [Security
Agreement], dated as of August 2, 1990, between Lender and Farah USA and various
supplements thereto, as amended pursuant to Amendment No. 1 to Financing
Agreements, dated November 5, 1990, Amendment No. 2 to Financing Agreements,
dated February 11, 1991, Amendment No. 3 to Financing Agreements, dated January
29, 1992, Amendment No. 4 to Financing Agreements dated June 25, 1992, Amendment
No. 5 to Financing Agreements, dated August 31, 1992, Amendment No. 6 to
Financing Agreements, dated September 4, 1992, Amendment No. 7 to Financing
Agreements, dated September 16, 1992, Amendment No. 8 to Financing Agreements,
dated as of May 7, 1993, Amendment No. 9 to Financing Agreements, dated July 16,
1993, Amendment No. 10 to Financing Agreements, dated November 3, 1993,
Amendment No. 11 to Financing Agreements, dated as of February 9, 1994,
Amendment No. 12 to Financing Agreements, dated as of July 14, 1994 and as
amended pursuant to the letter agreement dated as of October 28, 1992
(collectively, as so amended and as amended hereby, the "Accounts Agreement",
and together with all supplements thereto, including, but not limited to, the
Covenant Supplement to Accounts Financing Agreement [Security Agreement] dated
as of August 2, 1990 (the "Covenant Supplement"), the Trade Financing Agreement
Supplement to Accounts Financing Agreement [Security Agreement] dated as of
August 2, 1990 (the "Trade Financing Supplement"), and all other agreements,
documents and instruments at any time executed and/or delivered in connection
with any of the foregoing or related thereto, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, collectively, the "Financing Agreements"), which Financing Agreements
include, inter alia, the guarantees of all obligations of Borrowers, and Value
Clothing and Farah UK to Lender by each of Farah Incorporated, Farah
International, Inc., Value Slacks, Inc., Farah Sales Corp., Farah Manufacturing
Company, Inc., Farah Manufacturing Company of New Mexico, Inc., Farah Clothing
Company, Inc., a Texas corporation, FTX, Inc., Radco Sportswear, Inc., Farah
Manufacturing Services, Inc., Farah Clothing Company, Inc., a Delaware
corporation formerly known as Farah Licensing Company and Corporacion
Farah-Costa Rica S.A. (individually and collectively "Guarantors"), and the
General Security Agreement, dated August 2, 1990, by Farah Incorporated in favor
of Congress (the "Farah Inc. Security Agreement Borrowers and Guarantors have
requested certain amendments to the Financing Agreements and Lender is willing
to agree to such amendments subject to the terms and conditions set forth
herein. By this Agreement, Lender, Borrowers and Guarantors desire and intend to
set forth the terms of such financing arrangements and evidence such amendments.
In consideration of the foregoing and the respective agreements and
covenants contained herein, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein shall have the meaning
assigned thereto in the other Financing Agreements, unless otherwise defined
herein.
2. Amendment to Maximum Credit for Farah UK Loans. Notwithstanding anything
to the contrary contained herein or in any of the Financing Agreements, except
in Lender's discretion, the aggregate unpaid principal amount of the loans or
other financial accommodations outstanding at any one time by Lender to Farah UK
shall not exceed U.S. $5,000,000.
3. General Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrowers and Guarantors to Lender pursuant to the Financing Agreements,
each of Borrowers and Guarantors hereby represents, warrants and covenants with
and to Lender as follows (which representations, warranties and covenants are
continuing and shall survive the execution and delivery hereof and shall be
incorporated into and made a part of the Financing Agreements):
(a) No Event of Default exists on the date of this Amendment; and
(b) This Amendment has been duly executed and delivered by Borrowers and
Guarantors and is in full force and effect as of the date hereof, and the
agreements and obligations of Borrowers and Guarantors contained herein
constitute legal, valid and binding obligations of Borrowers and Guarantors
enforceable against Borrowers and Guarantors in accordance with their respective
terms.
4. Conditions Precedent. The effectiveness of the other terms and
conditions contained herein against Lender shall be subject to the satisfaction
of each of the following:
(a) receipt by Lender of each of the following, in form and substance
satisfactory to Lender and its counsel:
(i) an original of this Amendment, duly authorized, executed and delivered
by Borrowers and Guarantors: and
(ii) such agreements from participants as may be required to effectuate the
terms and provisions of this Amendment: and
(b) all representations and warranties contained herein, in the Accounts
Agreement and in the other Financing Agreements shall be true and correct in all
respects; and
(c) no Event of Default shall have occurred and no event shall
have occurred or condition be existing which, with notice or passage of time or
both, would constitute an Event of Default.
<PAGE>
5. General.
(a) The parties hereto acknowledge, confirm, and agree that the
failure of any of Borrowers or any of Guarantors, to comply with the covenants,
conditions and agreements contained herein or in any other agreement, document
or instrument by any of such parties at any time executed in connection herewith
shall constitute an Event of Default under the Financing Agreements.
(b) Except as modified pursuant hereto, no other changes to the
Financing Agreements are intended or implied and in all other respects the
Financing Agreements are hereby specifically ratified, restated and confirmed by
all parties hereto as of the effective date hereof. To the extent of conflict
between the terms of this Agreement and other Financing Agreements, the terms of
this Agreement shall control.
(c) The parties hereto shall execute and deliver such additional
documents and take such additional action as may be necessary or desirable to
effectuate the provisions and purposes of this Agreement.
FARAH U.S.A., INC.
By: /s/ James C. Swaim
Title: Treasurer
FARAH MANUFACTURING (U.K.) LIMITED
By: /s/ Helmut H. Meinel
Title: Director
ACKNOWLEDGED AND AGREED:
FARAH INCORPORATED
FARAH INTERNATIONAL, INC.
VALUE SLACKS, INC.
FARAH MANUFACTURING SERVICES, INC.
FARAH MANUFACTURING COMPANY, INC.
FARAH MANUFACTURING COMPANY
OF NEW MEXICO, INC.
RADCO SPORTSWEAR, INC.
CORPORACION FARAH-COSTA RICA S.A.
FARAH CLOTHING COMPANY, INC., a
Delaware corporation
By: /s/ James C. Swaim
Title: Treasurer
<PAGE>
FTX, INC.
By: /s/ Thomas H. Ludwick
Title: Treasurer
ACKNOWLEDGED AND AGREED:
CONGRESS FINANCIAL CORPORATION
( SOUTHWEST )
By: Marc M. Galovic, Jr.
Title: Vice President
EXHIBIT 10.52
AMENDMENT NO. 14 TO FINANCING AGREEMENTS
FARAH U.S.A., INC.
8889 Gateway West
El Paso, Texas 79925
April 5, 1995
Congress Financial Corporation (Southwest)
1201 Main Street, Suite 1625
Dallas, Texas 75250
Gentlemen:
Congress Financial Corporation (Southwest) ("Lender"), Farah U.S.A.,
Inc. ("Farah USA"), Value Clothing Company, Inc. ("Value Clothing"), Farah
Manufacturing (U.K.) Limited ("Farah UK"), and together with Farah USA and Value
Clothing, individually and collectively, ("Borrowers") have entered into
financing arrangements pursuant to the Accounts Financing Agreement [Security
Agreement], dated as of August 2, 1990, between Lender and Farah USA and various
supplements thereto, as amended pursuant to Amendment No. 1 to Financing
Agreements, dated November 5, 1990, Amendment No. 2 to Financing Agreements,
dated February 11, 1991, Amendment No. 3 to Financing Agreements, dated January
29, 1992, Amendment No. 4 to Financing Agreements dated June 25, 1992, Amendment
No. 5 to Financing Agreements, dated August 31, 1992, Amendment No. 6 to
Financing Agreements, dated September 4, 1992, Amendment No. 7 to Financing
Agreements, dated September 16, 1992, Amendment No. 8 to Financing Agreements,
dated as of May 7, 1993, Amendment No. 9 to Financing Agreements, dated July 16,
1993, Amendment No. 10 to Financing Agreements, dated November 3, 1993,
Amendment No. 11 to Financing Agreements, dated as of February 9, 1994,
Amendment No. 12 to Financing Agreements, dated as of July 14, 1994, Amendment
No. 13 to Financing Agreements, dated as of March 7, 1995 and as amended
pursuant to the letter agreement dated as of October 28, 1992 (collectively, as
so amended and as amended hereby, the "Accounts Agreement", and together with
all supplements thereto, including, but not limited to, the Covenant Supplement
to Accounts Financing Agreement [Security Agreement] dated as of August 2, 1990
(the "Covenant Supplement"), the Trade Financing Agreement Supplement to
Accounts Financing Agreement [Security Agreement] dated as of August 2, 1990
(the "Trade Financing Supplement"), and all other agreements, documents and
instruments at any time executed and/or delivered in connection with any of the
foregoing or related thereto, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, collectively,
the ("Financing Agreements"), which Financing Agreements include, inter alia,
the guarantees of all obligations of Borrowers, and Value Clothing and Farah UK
to Lender by each of Farah Incorporated, Farah International, Inc., Value Slacks
Inc., Farah Manufacturing Company, Inc., Farah Manufacturing Company of New
Mexico, Inc., FTX, Inc., Radco Sportswear, Inc., Farah Manufacturing Services,
Inc., Farah Clothing Company, Inc., a Delaware corporation, and Corporacion
Farah-Costa Rica S.A. (individually and collectively "Guarantors"), and the
General Security Agreement, dated August 2, 1990, by Farah Incorporated in favor
of Congress (the "Farah Inc. Security Agreement"). Borrowers and Guarantors have
requested certain amendments to the Financing Agreements and Lender is willing
to agree to such amendments subject to the terms and conditions set forth
herein. By this Agreement, Lender, Borrowers and Guarantors desire and intend to
set forth the terms of such financing arrangements and evidence such amendments.
<PAGE>
In consideration of the foregoing and the respective agreements and
covenants contained herein, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein shall have the meaning
assigned thereto in the other Financing Agreements, unless otherwise defined
herein.
2. Amendments to Definitions.
(a) Maximum Credit. All references to the term "Maximum Credit" in the
Financing Agreements shall be deemed and each such reference is amended to mean,
as of any time, the amount equal to $45,000,000 as reduced, automatically and
without further action by any party hereto, by an amount equal to the aggregate
amount of the loans outstanding as of such time made by Lender to Farah UK
pursuant to the terms of the Financing Agreements.
(b) Renewal Date. All references to the term "Renewal Date" in the
Financing Agreements shall be deemed and each such reference is amended to mean:
"June 1, 1996".
3. General Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrowers and Guarantors to Lender pursuant to the Financing Agreements,
each of Borrowers and Guarantors hereby represents, warrants and covenants with
and to Lender as follows (which representations, warranties and covenants are
continuing and shall survive the execution and delivery hereof and shall be
incorporated into and made a part of the Financing Agreements):
(a) No Event of Default exists on the date of this Amendment; and
(b) This Amendment has been duly executed and delivered by
Borrowers and Guarantors and is in full force and effect as of the date hereof,
and the agreements and obligations of Borrowers and Guarantors contained herein
constitute legal, valid and binding obligations of Borrowers and Guarantors
enforceable against Borrowers and Guarantors in accordance with their respective
terms.
4. Conditions Precedent. The effectiveness of the other terms and
conditions contained herein against Lender shall be subject to the satisfaction
of each of the following:
(a) receipt by Lender of each of the following, in form and substance
satisfactory to Lender and its counsel:
(i) an original of this Amendment, duly authorized, executed and delivered
by Borrowers and Guarantors; and
(ii) such agreements from participants as may be required to effectuate the
terms and provisions of this Amendment; and
(b) all representations and warranties contained herein, in the Accounts
Agreement and in the other Financing Agreements shall be true and correct in all
respects; and
(c) no Event of Default shall have occurred and no event shall have
occurred or condition be existing which, with notice or passage of time or both,
would constitute an Event of Default.
<PAGE>
5. General.
(a) The parties hereto acknowledge, confirm, and agree that the
failure of any of Borrowers or any of Guarantors, to comply with the covenants,
conditions and agreements contained herein or in any other agreement, document
or instrument by any of such parties at any time executed in connection herewith
shall constitute an Event of Default under the Financing Agreements.
(b) Except as modified pursuant hereto, no other changes to the
Financing Agreements are intended or implied and in all other respects the
Financing Agreements are hereby specifically ratified, restated and confirmed by
all parties hereto as of the effective date hereof. To the extent of conflict
between the terms of this Agreement and other Financing Agreements, the terms of
this Agreement shall control.
(c) The parties hereto shall execute and deliver such additional
documents and take such additional action as may be necessary or desirable to
effectuate the provisions and purposes of this Agreement.
FARAH U.S.A., INC.
By: /s/ James C. Swaim
Title: Treasurer
FARAH MANUFACTURING (U.K.) LIMITED
By: /s/ Helmut H. Meinel
Title: Director
VALUE CLOTHING COMPANY, INC.
By: /s/ James C. Swaim
Title: Treasurer
ACKNOWLEDGED AND AGREED:
FARAH INCORPORATED
FARAH INTERNATIONAL, INC.
VALUE SLACKS, INC.
FARAH MANUFACTURING SERVICES, INC.
FARAH MANUFACTURING COMPANY, INC.
FARAH MANUFACTURING COMPANY
OF NEW MEXICO, INC.
RADCO SPORTSWEAR, INC.
CORPORACION FARAH-COSTA RICA S.A.
FARAH CLOTHING COMPANY, INC., a
Delaware corporation
By: /s/ James C. Swaim
Title: Treasurer
<PAGE>
FTX, INC.
By: /s/ Thomas H. Ludwick
Title: Treasurer
ACKNOWLEDGED AND AGREED:
CONGRESS FINANCIAL CORPORATION
( SOUTHWEST )
By: Edward Franco
Title: Vice President
Exhibit 11
FARAH INCORPORATED AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
Net income per share is based on weighted average shares of common stock and
common stock equivalents outstanding. Stock options are included as common stock
equivalents under the treasury stock method, where dilutive. Additional dilution
from the Company's convertible subordinated debentures, which are not common
stock equivalents, is not material. Net loss per share is based only on weighted
average shares of common stock outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000034501
<NAME> FARAH INCORPORATED
<MULTIPLIER> 1000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-04-1994
<PERIOD-END> MAY-05-1995
<EXCHANGE-RATE> 1
<CASH> 2,038
<SECURITIES> 0
<RECEIVABLES> 29,699
<ALLOWANCES> 673
<INVENTORY> 81,040
<CURRENT-ASSETS> 127,966
<PP&E> 59,411
<DEPRECIATION> 29,609
<TOTAL-ASSETS> 168,979
<CURRENT-LIABILITIES> 66,567
<BONDS> 1,663
<COMMON> 46,019
0
0
<OTHER-SE> 35,624
<TOTAL-LIABILITY-AND-EQUITY> 168,979
<SALES> 106,731
<TOTAL-REVENUES> 106,731
<CGS> 81,546
<TOTAL-COSTS> 113,598
<OTHER-EXPENSES> 893
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,812
<INCOME-PRETAX> (7,786)
<INCOME-TAX> (2,699)
<INCOME-CONTINUING> (5,087)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,087)
<EPS-PRIMARY> (0.50)
<EPS-DILUTED> (0.50)
</TABLE>
