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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8941
FRUIT OF THE LOOM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3361804
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5000 Sears Tower,
233 South Wacker Drive,
Chicago, Illinois 60606
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code:
(312) 876-1724
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
Class A Common Stock, $.01 par value New York Stock Exchange
7% Debentures Due 2011 American Stock Exchange
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
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Yes X No
As of March 10, 1994, there were outstanding 69,108,749 shares
of the Registrant's Class A Common Stock, par value $.01 per
share, and 6,690,976 shares of the Registrant's Class B Common
Stock, par value $.01 per share. The aggregate market value of
the Registrant's Class A Common Stock held by nonaffiliates at
March 10, 1994 was approximately $2,017,000,000.
Documents Incorporated by Reference
Part III incorporates by reference information from the proxy
statement for the Annual Meeting of Stockholders to be held on
May 17, 1994.
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FRUIT OF THE LOOM, INC.
1993 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . . . 14
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of
Security Holders (None) . . . . . . . . . . . 20
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . 20
Item 6. Selected Financial Data . . . . . . . . . . . . . . 22
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . 24
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . . . . . 33
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure (None) . . . . . . . . . . . . . . . 82
PART III
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . . 82
Item 11. Executive Compensation . . . . . . . . . . . . . . 85
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . 85
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . 85
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K . . . . . . . . . . . . 89
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PART I
ITEM 1. BUSINESS
Fruit of the Loom, Inc. ("Fruit of the Loom" or the
"Company") is a leading international basic apparel company,
emphasizing branded products for consumers ranging from infants
to senior citizens. It is the largest domestic producer of
underwear and of activewear for the imprinted market, selling
products principally under the FRUIT OF THE LOOM , BVD , SCREEN
STARS , BEST , MUNSINGWEAR and WILSON brand names. The Company
sells licensed sports apparel for major American sports leagues,
professional players and many American colleges and universities
under the SALEM , SALEM SPORTSWEAR AND OFFICIAL FAN brand
names. The Company manufactures and markets men's and boys'
basic and fashion underwear, activewear, casualwear, licensed
sports apparel, women's and girls' underwear, infants' and
toddlers' apparel and family socks. Activewear consists
primarily of screen print T-shirts and fleecewear and also
includes casualwear (principally a broad range of lightweight
knit tops and fleece styles sold directly to retailers) and
licensed sports apparel. The Company is a fully integrated
manufacturer, performing its own spinning, knitting, cloth
finishing, cutting, sewing and packaging. Management believes
that the Company is the low cost producer in the markets it
serves. Management considers the Company's primary strengths to
be its excellent brand recognition, low cost production, strong
relationships with mass merchandisers and discount chains and its
ability to effectively service its customer base.
The Company manufactures and markets underwear and
activewear (which both include T-shirts) as part of the basic
retail product. Management believes that consumer awareness of
the value and excellent quality at competitive prices of FRUIT OF
THE LOOM brand products will benefit the Company in the current
retail marketplace where consumers are more value conscious.
During the last five calendar years, the Company has been
the market leader in men's and boys' underwear, with an annual
market share ranging from approximately 39% to 41%. In 1993, the
Company's share in the men's and boys' underwear market was
approximately 40% compared to an approximate 31% share for its
closest competitor.
The Company offers a broad array of men's and boys'
underwear, including: briefs, boxer shorts, T-shirts and
A-shirts, colored and "high fashion" (as well as RIBBED WHITES )
underwear. It sells all-cotton and cotton-blend underwear under
the FRUIT OF THE LOOM and BVD brand names. Products sold under
the BVD brand name are priced higher than those sold under the
FRUIT OF THE LOOM brand name and are generally designed to appeal
to a more premium market. The Company also manufactures and
markets boys' decorated underwear (generally with pictures of
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licensed movie or cartoon characters) under the FUNPALS brand
name. The Company manufactures and markets men's and boys'
underwear bearing the MUNSINGWEAR and KANGAROO trademarks as
well as certain activewear bearing the MUNSINGWEAR trademark in
the United States and certain foreign markets.
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ITEM 1. BUSINESS - (Continued)
Management believes the Company is the largest of the
approximately 70 domestic activewear manufacturers that supply
screen printers and that it has a market share of approximately
34% of the screen print T-shirt market. The Company produces and
sells blank shirts and fleecewear under the SCREEN STARS brand
name and premium fleecewear and T-shirts under the FRUIT OF THE
LOOM and BEST labels. These products are manufactured in a
variety of styles and colors and are sold to distributors, screen
printers and specialty retailers, who generally apply a screen
print prior to sale at retail. Product quality, delivery
responsiveness and price are important factors in the sale of
activewear. Management believes that the Company's recent
capacity additions and its low cost position afford it a
competitive advantage in this market.
The Company markets casualwear under the FRUIT OF THE LOOM,
BVD and MUNSINGWEAR brands. There are separate Spring and Fall
lines with updated color selections for each of the men's,
women's, boys' and girls' categories. A national marketing
program includes national advertising and local cooperative
advertising, promotions and in-store merchandising. The
casualwear market is fragmented and has no dominant brands.
The continued expansion of the FRUIT OF THE LOOM casualwear
line including the introduction in 1993 of twenty new styles with
more fashion treatments, color selections and heavier fabric
combined with sixty-three new styles for 1994 which emphasize
casualwear tailored specifically for ladies and girls will,
management believes, contribute significantly to casualwear sales
growth.
In February 1993, the Company and Wilson Sporting Goods
Company announced an exclusive licensing agreement for the
Company to manufacture and market a complete line of sweatshirts
and sweatpants, T-shirts, shorts and other athletic activewear
featuring the WILSON brand in the United States and Mexico. The
Company began shipping WILSON brand activewear products in
January of 1994.
In November 1993, the Company acquired Salem Sportswear
Corporation (the "Salem Acquisition"), a Delaware corporation
("Salem") for approximately $157,600,000, including approximately
$23,000,000 of Salem debt which was repaid by the Company. Salem
is a leading domestic designer, manufacturer and marketer of
sports apparel under licenses granted by the National Basketball
Association, Major League Baseball, the National Football League,
the National Hockey League, professional players, many American
colleges and universities and the World Cup '94. Salem sells a
wide variety of quality sportswear, including T-shirts,
sweatshirts, shorts and light outerwear. For the fiscal year
ended August 31, 1992 Salem Sportswear had sales of approximately
$119,800,000.
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In January 1994, the Company acquired Artex Manufacturing
Co., Inc. ("Artex") for approximately $44,500,000, or
approximately book value, (the "Artex Acquisition"). Artex
operates as Jostens Sportswear and manufactures and sells a wide
variety of decorated sportswear primarily to retail stores and
college bookstores under the JOSTENS label and to mass merchants
under the ARTEX label. Jostens Sportswear pioneered the dual
license concept of combining cartoon characters with major
professional sports leagues and is currently one of only three
companies to have dual license agreements. Jostens Sportswear
has licenses from all the major professional sports leagues as
well as from The Walt Disney Company, United Feature Syndicate
for PEANUTS and Warner Bros. for Looney Tunes . For the fiscal
year ended June 30, 1993 Jostens Sportswear had sales of
approximately $76,000,000.
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ITEM 1. BUSINESS - (Continued)
In March 1994, the Company entered into a contract to
purchase certain assets of the Gitano Group, Inc. ("Gitano") for
approximately $100,000,000. Gitano designs, manufactures,
arranges for the manufacture of, distributes and sells women's,
men's and children's jeanswear, sportswear and other apparel.
Gitano also provides marketing services and licenses the
production and sale of a variety of accessories and other
products bearing the Gitano name.
The Company produces women's briefs, high thigh briefs and
bikinis and girls' briefs, in white and colors, under the FRUIT
OF THE LOOM brand name. The Company introduced its women's and
girls' lines in 1984 using the branded, packaged product strategy
that it had successfully employed in the men's and boys' market.
The Company's products are packaged, typically three to a pack,
making them convenient for the merchant to handle and display.
During the last five calendar years, in the highly fragmented
women's and girls' underwear market, the Company was one of the
branded market leaders with a market share ranging from
approximately 11% to 17%. In 1993, the Company's share in the
women's and girls' underwear market was approximately 14%,
compared to a market share of 24% for the largest competing
brand.
The Company has a licensing agreement with Warnaco Inc.
whereby Warnaco Inc. manufactures and sells bras, slips,
camisoles, tap pants and other products under the FRUIT OF THE
LOOM brand name in North America.
The Company entered the family sock market in mid-1986
through acquisitions and management believes the Company is now
one of the two largest domestic manufacturers and that no
manufacturer has more than a 12% market share. Sales of FRUIT OF
THE LOOM branded socks in 1993 were 40.8% higher than in 1992.
Marketing and Distribution
The Company sells its products to over 21,000 customers,
including all major discount and mass merchandisers, wholesale
clubs and screen printers. The Company also sells to many
department, specialty, drug and variety stores, national chains,
supermarkets and sports specialty stores. The Company's products
are sold by a nationally organized direct sales force of
full-time employees. Underwear, activewear and hosiery are
shipped from the Company's fourteen primary distribution centers
to over 82,000 customer locations.
Management believes that one of the Company's primary
strengths is its excellent relationships with mass merchandisers
and discount chains. These retailers accounted for approximately
62% of the men's and boys' underwear and approximately 59% of the
women's and girls' underwear sold in the United States in 1993,
up from approximately 56% and 52%, respectively, in 1989. The
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Company supplied approximately 53% of the men's and boys'
underwear and approximately 20% of the women's and girls'
underwear sold by discount and mass merchandisers in the United
States in 1993.
Sales to one customer amounted to approximately 13.4%, 11.8%
and 9.6% of consolidated net sales in 1993, 1992 and 1991,
respectively. Additionally, sales to a second customer amounted
to approximately 12.3%, 10.2% and 8.8% of consolidated net sales
in 1993, 1992 and 1991, respectively. Management does not feel
the loss of any one customer would adversely affect its business
as a large percentage of these sales would shift to other outlets
due to the high degree of brand awareness and consumer loyalty to
the Company's products. The Company's business is seasonal to
the extent that approximately 55% of annual sales occur in the
second and third quarters. Sales are generally the lowest in the
first quarter.
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ITEM 1. BUSINESS - (Continued)
International Operations
The Company sells activewear through its foreign operations,
principally in the United Kingdom, continental Europe and Canada.
The Company's approach has been to establish production in
foreign markets by both acquiring existing manufacturing
facilities and building new plants in order to decrease the
impact of foreign currency fluctuations on international sales
and to better serve these markets. The Company has established
manufacturing plants in Canada, the Republic of Ireland, Northern
Ireland (United Kingdom), Mexico and Honduras as a means of
accomplishing these objectives. Since 1989, the Company's
international sales of activewear have almost tripled. Sales from
international operations during 1993 were $249,800,000,
substantially all of which were generated from products
manufactured at the Company's foreign facilities. These
international sales accounted for approximately 13.3% of the
Company's net sales in 1993. Management believes international
sales will continue to be a source of growth for the Company,
particularly on the European continent. This growth will depend
on continued demand for the Company's products in diverse
international marketplaces. See "Business Segment and Major
Customer Information" in the Notes to Consolidated Financial
Statements.
Manufacturing
Principal manufacturing operations consist of spinning,
knitting, cloth finishing, cutting, sewing and packaging. The
Company's licensed sportswear is generally produced by applying
decorative images, most often by screen printing or embroidery,
to blank garments. The Company knits yarn into fabric using a
multiple-knitting technique that produces long tubes of fabric
corresponding in weight and diameter to various sizes and styles
required to make underwear and activewear. All of the Company's
products are either bleached to remove the ecru color of natural
cotton or dyed for colored products. To achieve certain colors,
the fabric must be bleached and dyed.
Computer controlled die cutting is used in all areas where
management believes it is more efficient. Fabric is distributed
to employees operating individual sewing machines. To increase
efficiency, each employee specializes in a particular function,
such as sewing waistbands on briefs. Quality checkpoints occur
at many intervals in the manufacturing process, and each garment
is inspected prior to packaging.
Competition
All of the Company's markets are highly competitive.
Competition in the underwear and activewear markets is generally
based upon quality, price and delivery. Certain of the Company's
domestic competitors utilize foreign manufacturing facilities to
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supply product to the domestic markets. The Company's vertically
integrated manufacturing structure allows it to produce high
quality products at costs which management believes are generally
lower than those of its competitors. Management also believes
the Company's ability to deliver its products rapidly gives it a
significant competitive advantage. In response to market
conditions, the Company, from time to time, reviews and adjusts
its product offerings and pricing structure. Where appropriate,
the Company uses contract manufacturing to further minimize its
costs. Such contract manufacturing accounted for less than 5% of
the Company's total production in 1993.
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ITEM 1. BUSINESS - (Continued)
Licensing and Trademarks
The Company owns the FRUIT OF THE LOOM, BVD, SCREEN STARS,
BEST and certain other trademarks, which are registered in the
United States and in many foreign countries. These trademarks
are used on men's, women's and children's underwear and
activewear marketed by the Company.
The Company licenses properties from different companies for
its decorated underwear products. Among the characters licensed
are: THE LITTLE MERMAID , BEAUTY AND THE BEAST , 101
DALMATIANS , DINOSAURS , BARNEY THE DINOSAUR and BATMAN
RETURNS . The Company also licenses the MUNSINGWEAR and KANGAROO
trademarks for use on its men's and boys' underwear and certain
activewear. The Company has a license to use the WILSON brand on
its sweatshirts and sweatpants, T-shirts, shorts and other
athletic activewear.
In addition, the Company owns the SALEM, SALEM SPORTSWEAR,
OFFICIAL FAN, BABY SALEM and ARTEX trademarks. The Company
licenses properties, including team insignia, images of
professional athletes and college logos, from the National
Basketball Association, Major League Baseball, the National
Football League, the National Hockey League, professional
players' associations and certain individual players, many
American colleges and universities and the World Cup '94. These
owned and licensed trademarks are used on sports apparel,
principally T-shirts, shorts, sweatshirts and jerseys, marketed
by the Company.
Imports
In 1993, imports accounted for approximately 19.6% (39.3%
including Section 9802) of the men's and boys' underwear market
and approximately 33.8% (74.1% including Section 9802) of the
women's and girls' underwear market. For activewear, imports
accounted for approximately 35% of the market in 1992, which is
the latest period for which information is available.
Management does not believe that direct imports presently
pose a significant threat to any of its businesses. United
States tariffs along with quotas, implemented under an
international agreement known as the Multifiber Arrangements
(MFA), limit the growth of imports and increase the cost of
imported apparel. The MFA quota system will be phased out over
ten years, beginning in 1995, if the Uruguay Round/GATT agreement
is adopted by the United States Congress. Management is studying
the impact of the MFA phase out on each aspect of the Company's
United States manufacturing process.
Management does not believe that the elimination of quotas
and tariffs with Mexico under the North American Free Trade
Agreement (NAFTA) will adversely effect the Company. To the
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contrary, the elimination of Mexican tariffs on the Company's
United States manufactured products will enhance its sales in
that market. Imports from Mexico are expected to rise more
rapidly under NAFTA. However, the strict rule of origin, which
generally requires apparel to be made from North American spun
yarn, and North American Knit or woven fabric, should prevent
Mexico from becoming an export platform for low-wage
manufacturers from outside the region.
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ITEM 1. BUSINESS - (Concluded)
Imports - (Concluded)
Likewise, imports from the Caribbean and Central American
nations likely will continue to rise more rapidly than imports
from other parts of the world. This is because Section 9802
(previously Section 807) of the United States tariff schedule
grants preferential quotas when made and cut fabrics are used,
and duty is paid only on the value added outside the United
States. United States apparel and textile manufacturers will
continue to use Section 9802 to compete with direct imports.
Employees
The Company employs approximately 35,000 persons.
Approximately 2,700 employees are covered by collective
bargaining agreements.
Miscellaneous
Materials and Supplies. Materials and supplies used by the
Company are available in adequate quantities. The primary raw
materials used in the manufacturing processes are cotton and
polyester. The Company periodically enters into futures
contracts as hedges for its purchases of cotton for inventory.
Other. The Company was incorporated under the laws of the
state of Delaware in 1985. The principal executive offices of
the Company are located at 233 South Wacker Drive, 5000 Sears
Tower, Chicago, Illinois 60606, telephone (312)876-1724. As used
in this Annual Report on Form 10-K, the term "the Company" refers
to Fruit of the Loom, Inc. and its subsidiaries, together with
its predecessor, Northwest Industries, Inc. ("Northwest"), unless
otherwise stated or indicated by the context. Market share data
contained herein are for domestic markets and are based upon
information supplied to the company by the National Purchase
Diary, which management believes to be reliable.
ITEM 2. PROPERTIES
The Company has properties and facilities aggregating
approximately 17,000,000 square feet of usable space, of which
approximately 7,000,000 square feet of facilities are under
leases expiring through 2013. Management believes that the
Company's facilities and equipment are in good condition and that
the Company's properties, facilities and equipment are adequate
for its current operations. The Company has invested
approximately $1.1 billion in capacity expansion and plant
modernization programs during the past eight calendar years.
Capital spending, primarily to enhance distribution capabilities,
is expected to approximate $150,000,000 to $175,000,000 in 1994.
Management believes that these prior investments, together with
planned capital expenditures, will allow the Company to
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accommodate current and anticipated sales growth and remain a low
cost producer in the next several years.
Set forth below is a summary of the principal facilities
owned or leased by the Company:
<TABLE>
<CAPTION>
No. of Square Feet
Primary Use Locations Owned Leased
<S> <C> <C> <C>
Manufacturing . . . . . . . . . . . . . 49 6,850,000 2,579,000
Warehouse and distribution . . . . . . . 52 3,056,000 4,021,000
Sales and administration . . . . . . . . 28 53,000 418,000
</TABLE>
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ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in certain
legal proceedings and have retained liabilities, including
certain environmental liabilities, such as those under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, its regulations and similar state
statutes ("Superfund Legislation") in connection with the sale of
certain discontinued operations, some of which were significant
generators of hazardous waste. The Company's retained liability
reserves at December 31, 1993 related to discontinued operations,
consisting primarily of certain environmental reserves of
approximately $46,200,000 reflect management's belief that the
Company will recover at least $28,600,000 from insurance and
other sources. Management and outside environmental consultants
evaluate, on a site-by-site basis, the extent of environmental
damage, the type of remediation that will be required and the
Company's proportionate share of those costs. The Company's
retained liability reserves related to discontinued operations
principally pertain to ten specifically identified environmental
sites. Four sites individually represent more than 10% of the
net reserve and in the aggregate represent approximately 67% of
the net reserve. Management believes they have adequately
estimated the impact of remediating identified sites, the
expected contribution from other potentially responsible parties
and recurring costs for managing sites. Management currently
estimates actual payments before recoveries to range from
approximately $8,500,000 to $17,700,000 annually between 1994 and
1997 and $22,000,000 in total subsequent to 1997. Only the long-
term monitoring costs of approximately $7,500,000, primarily
scheduled to be paid in 1998 and beyond, have been discounted.
The discount rate used was 10%. The undiscounted aggregate long-
term monitoring costs, to be paid over approximately the next 20
years, is approximately $19,500,000. Management believes that
adequate reserves have been established to cover potential claims
based on facts currently available and current Superfund
Legislation. The Company has provided the foregoing information
in accordance with the recently issued Staff Accounting Bulletin
92.
Generators of hazardous wastes which were disposed of at
offsite locations which are now superfund sites are subject to
claims brought by state and Federal regulatory agencies under
Superfund Legislation and by private citizens under Superfund
Legislation and common law theories. Since 1982, the United
States Environmental Protection Agency (the "EPA") has actively
sought compensation for response costs and remedial action at
offsite disposal locations from waste generators under the
Superfund Legislation, which authorizes such action by the EPA
regardless of fault, legality of original disposal or ownership
of a disposal site. The EPA's activities under the Superfund
Legislation can be expected to continue during 1994 and future
years.
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In February 1986, the Company completed the sale of stock of
its then wholly owned subsidiary, Universal Manufacturing
Corporation ("Universal"), to MagneTek, Inc., ("MagneTek"). At
the time of the sale there was a suit pending against Universal
and Northwest by L.M.P. Corporation ("LMP"). The suit (the "LMP
Litigation") alleged that Universal and Northwest fraudulently
induced LMP to sell its business to Universal and then suppressed
the development of certain electronic lighting ballasts in breach
of the agreement of sale, which required Universal to pay to LMP
a percentage of the net profits from such business from 1982
through 1986. Two additional plaintiffs, Stevens Luminoptics
Partnership and Calmont Technologies Inc., joined the litigation
in 1986. In December 1989 and January 1990, a jury returned
certain verdicts against Universal and also returned verdicts in
favor of Northwest and on certain issues in favor of Universal.
A judgment totalling $25,800,000, of which $7,500,000 represented
punitive damages, reflecting these verdicts was entered by the
Alameda County, California Superior Court in January 1990 against
Universal.
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ITEM 3. LEGAL PROCEEDINGS - (Continued)
In April 1992, the California Court of Appeals reversed the
$25,800,000 judgment against Universal and affirmed those
verdicts favorable to Universal and Northwest. In July 1992, the
California Supreme Court denied the plaintiffs' petition for
review. The case has been remanded to the trial court where it
is schedule to be retried beginning in March 1994.
In March 1988, a class action suit entitled Endo et al. v.
Albertine, et al. was filed in the United States District Court
for the Northern District of Illinois (the "District Court")
against the Company, its then directors, certain of its then
executive officers, its then underwriters and the Company's
current and former independent auditors in connection with the
Company's initial public offering of Class A Common Stock and
certain debt securities in March 1987. The suit alleges, among
other things, violations of Federal and state securities laws
against all of the defendants, as well as breaches of fiduciary
duties by the director and officer defendants, and seeks
unspecified damages.
Motions to dismiss the complaint were filed by all
defendants. In December 1990, a magistrate judge recommended
that the District Court dismiss all of the plaintiffs' claims
with prejudice. On January 29, 1993, the District Court adopted
in part and rejected in part the magistrate judge's
recommendation for dismissal of the complaint. As a result, the
litigation will continue as to various remaining counts of the
complaint. Both the defendants and the plaintiffs recently filed
motions for summary judgment. It is uncertain as to when rulings
on these motions will be issued. Management and the Board of
Directors believe that this suit is without merit and intend to
continue to defend themselves vigorously in this litigation.
On December 23, 1993, James J. Locke, as Trustee of Locke
Family Trust, and I. Jack Saline filed a lawsuit against the
Company and certain of its then officers and directors, including
William Farley and John B. Holland in the District Court. The
lawsuit was then amended to add additional plaintiffs. The
lawsuit was filed as a class action, but the issue of class
certification has not yet been addressed by the parties or the
court. The plaintiffs claim that all of the defendants engaged in
conduct violating Section 10b of the Securities Exchange Act of
1934, as amended (the "Act"), and that Mr. Farley and Mr. Holland
also violated Section 20a of the Act. According to the
plaintiffs, beginning before June 1992 and continuing through
early June 1993, the Company, with the knowledge and assistance
of the individual defendants, issued positive public statements
about its expected sales increases and growth through 1993 and
afterwards. They also allege that beginning in approximately
mid-1992 and continuing afterwards, the Company's business was
not as strong and its growth prospects were not as certain as
represented. The plaintiffs further allege that during the end
of 1992 and beginning of 1993, certain of the individual
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defendants traded the stock of the Company while in the
possession of material, non-public information. The plaintiffs
ask for unspecified amounts as compensatory damages, pre-judgment
and post-judgment interest, attorneys' fees, expert witness fees
and costs and ask the District Court to impose a constructive
trust on the proceeds of the individual defendants' trades to
satisfy any potential judgment. Although the lawsuit is at a
preliminary stage, the Company believes that this suit is without
merit and intends to defend itself vigorously in this litigation.
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ITEM 3. LEGAL PROCEEDINGS - (Concluded)
Management believes, based on information currently
available, that the ultimate resolution of the aforementioned
litigation will not have a material adverse effect on the
financial condition or operations of the Company.
In March 1992, the Company received a refund of
approximately $60,000,000 relating to Federal income taxes plus
interest paid by Northwest. However, in September 1992, the
Internal Revenue Service (the "IRS") issued a statutory notice of
deficiency in the amount of approximately $7,300,000 for the
taxable years from which the March 1992 refund arose, exclusive
of interest which would have accrued from the date the IRS
asserted the tax was due until payment, presently a period of
about 24 years. Based on discussions with tax counsel, the
Company believes that the asserted legal basis for the IRS's
position in this matter is without merit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
William Farley, an executive officer and director of the
Company, holds 100% of the common stock of Farley Inc. ("FI").
William Farley and FI together own all of the Class B Common
Stock of the Company outstanding. See "Consolidated Statement of
Common Stockholders' Equity" in the Notes to Consolidated
Financial Statements. William Farley also owns 318,000 shares of
the Class A Common Stock of the Company. As of March 10, 1994,
there were 2,798 holders of record of the Class A Common Stock of
the Company.
Common Stock Prices and Dividends Paid
The Company's Class A Common Stock is listed on the New York
Stock Exchange. Prior to December 3, 1993, the Company's Class A
Common Stock was listed on the American Stock Exchange. The
following table sets forth the high and low market prices of the
Class A Common Stock for 1993 and 1992:
<TABLE>
<CAPTION>
Market Prices
1993 1992
High Low High Low
<S> <S><C> <S><C> <S><C> <S><C>
1st Quarter . . . . . . . . . $ 49-1/4 $ 40 $ 37-1/2 $ 26-5/8
2nd Quarter . . . . . . . . . 43-1/2 29-3/4 38-5/8 29-3/8
3rd Quarter . . . . . . . . . 34 27-3/4 44-1/2 31-3/4
4th Quarter . . . . . . . . . 38-1/8 22-7/8 49-5/8 41-1/2
</TABLE>
<PAGE>
<PAGE> 21
No dividends were declared on the Company's common stock
issues during 1993 or 1992. The Company does not currently
anticipate paying any dividends in 1994. For restrictions on the
present or future ability to pay dividends, see "Long-Term Debt"
in the Notes to Consolidated Financial Statements.
<PAGE>
<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
(In Millions, Except Per Share Data)
<TABLE>
<CAPTION> Year Ended December 31,
1993 1992 1991 1990 1989
<S> <S><C> <S><C> <S><C> <S><C> <S><C>
Earnings Statement Data<F1>:
Net sales . . . . . . . . . . . . . . . $ 1,884.4 $ 1,855.1 $ 1,628.1 $ 1,426.8 $ 1,320.9
Gross earnings . . . . . . . . . . . . 647.4 660.3 525.6 506.6 439.1
Operating earnings . . . . . . . . . . 381.5 409.9 319.3 300.3 264.4
Interest expense . . . . . . . . . . . 72.7 82.1 114.9 129.4 124.4
Earnings before income tax expense,
extraordinary items and cumulative
effect of change in accounting principle 367.1 319.9 201.0 148.6 130.5
Earnings before extraordinary items
and cumulative effect of change
in accounting principle . . . . . . 212.8<F2> 188.5 111.0<F3> 77.1<F4> 72.0<F5>
Earnings per common share before
extraordinary items and cumulative
effect of change in accounting principle:
Primary . . . . . . . . . . . . . . 2.80<F2> 2.48 1.60<F3> 1.25<F4> 1.17<F5>
Fully diluted . . . . . . . . . . . 2.80<F2> 2.48 1.55<F3> 1.18<F4> 1.11<F5>
Average common shares outstanding
Primary . . . . . . . . . . . . . . 76.0 76.0 69.4<F6><F7> 61.9 61.8
Fully diluted . . . . . . . . . . . 76.0 76.0 72.8<F6> 67.3 67.3
Year Ended December 31,
1993 1992 1991 1990 1989
Balance Sheet Data:
Total assets . . . . . . . . . . . . . $ 2,734.0 $ 2,281.9 $ 2,114.9 $ 2,151.2 $ 1,878.1
Long-term debt . . . . . . . . . . . . 1,194.0 756.3 811.2<F6><F7> 1,014.4 988.1
Deferred and noncurrent income taxes . 51.0 49.1 167.4 156.3 130.8
Other noncurrent liabilities . . . . . 191.5 187.9 77.3 67.5 82.5
Common stockholders' equity . . . . . . 1,047.0 855.0 688.7<F6><F7> 417.9 326.5
<PAGE>
<PAGE> 23
<FN>
<F1> This information should be read in conjunction with "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and the Financial Statements and
Supplementary Data.
<F2> Includes a pretax gain of $67.3 ($.55 per share on both a
primary and fully diluted basis) from the Company's
investment in Acme Boot Company, Inc. ("Acme Boot").
Excluding this gain, earnings per share were $2.25 on both a
primary and fully diluted basis.
<F3> Includes the effect of a court ordered refund of Federal
income taxes of $10.5, plus interest of $49.4, ($.57 per
share on both a primary and fully diluted basis), a pretax
charge of $10.2 ($.12 per share on both a primary and fully
diluted basis) for certain obligations and other matters
related to former subsidiaries and a pretax charge of $39.2
($.45 per share on both a primary and fully diluted basis)
to write down the Company's investment in Acme Boot to its
then market value.
<F4> Includes a pretax charge of $16.3 ($.17 and $.16 per share
on a primary and fully diluted basis, respectively) for
certain obligations and other matters related to former
subsidiaries. Excluding this charge, earnings per share
were $1.42 and $1.34 on a primary and fully diluted basis,
respectively.
<F5> Includes a pretax charge of $8.5 ($.09 and $.08 per share on
a primary and fully diluted basis, respectively) for certain
obligations and other matters related to former
subsidiaries. Excluding this charge, earnings per share
were $1.26 and $1.19 on a primary and fully diluted basis,
respectively.
<F6> In May 1991, the Company completed the underwritten primary
offering of 7.5 shares of its Class A Common Stock (the
"Stock Offering"). The Company used the proceeds of
approximately $101.5 from the Stock Offering to reduce
borrowings under its domestic bank agreements.
<F7> In July 1991, the Company called for redemption all of its
6-3/4% Convertible Subordinated Debentures due March 1, 2002
(the "Debentures") totaling $59.9. The Debentures were
converted into Class A Common Stock of the Company at a
conversion price of $11.25 per share. Approximately 5.3
shares were issued in the conversion (the "Conversion").
</TABLE>
<PAGE>
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The table below sets forth selected operating data (in
millions of dollars and as percentages of net sales) of the
Company:
<TABLE>
<CAPTION> Year Ended December 31,
1993 1992 1991
<S> <S> <C> <S><C> <S> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $ 1,884.4 $ 1,855.1 $ 1,628.1
Gross earnings . . . . . . . . . . . . . . . . . $ 647.4 $ 660.3 $ 525.6
Gross margin . . . . . . . . . . . . . . . . . . 34.4% 35.6% 32.3%
Operating earnings . . . . . . . . . . . . . . . $ 381.5 $ 409.9 $ 319.3
Operating margin . . . . . . . . . . . . . . . . 20.2% 22.1% 19.6%
</TABLE>
Operations
1993 Compared to 1992
Net sales increased 1.6% in 1993 from 1992. The increased net
sales for 1993 as compared to 1992 are due to volume increases in
casualwear, international activewear and underwear combined with
price increases (principally for domestic activewear and
casualwear). These increases more than offset the adverse
effects of volume declines in domestic activewear, unfavorable
foreign currency exchange rate comparisons on international sales
between the two periods and increased sales of promotional and
closeout merchandise in 1993. In the international operations,
the Company's approach has been to establish production in
foreign markets by both acquiring existing manufacturing
facilities and building new plants in order to better serve these
markets. Management believes international unit sales will
continue to be a source of growth for the Company, particularly
on the European continent. However, any such growth is subject
to the risk that the Company's products in diverse international
marketplaces will not be widely accepted.
Gross earnings decreased 2.0% in 1993 as compared to 1992.
The gross margin was 34.4% in 1993 as compared to 35.6% in 1992.
The decrease in gross earnings in 1993 is due primarily to the
unfavorable effects of operating certain plants on reduced
production schedules in response to lower than expected consumer
demand, inventory valuation adjustments and unfavorable changes
in product mix due to promotions and closeouts. These decreases
more than offset the favorable effects of the sales price and
volume increases discussed above and lower raw material costs.
Operating earnings decreased 6.9% compared to 1992 and the
operating margin decreased 1.9 percentage points to 20.2% in
<PAGE>
<PAGE> 25
1993. The decreases are due to lower gross earnings and gross
margin as well as higher selling, general and administrative
expenses. Selling, general and administrative expenses increased
to 12.7% of net sales in 1993 compared to 12.1% in the prior
year. The spending increase is primarily attributable to
increased selling expenses resulting from increased royalty
payments and increased shipping expenses. The shipping expense
increase results from a shift in product mix to more casualwear
and an increased number of shipments as customer order patterns
have changed to include an increased number of smaller quantity
shipments.
<PAGE>
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Operations - (Continued)
1993 Compared to 1992 - (Continued)
Interest expense for 1993 decreased 11.4% from 1992. Lower
interest expense is principally attributable to the effect of
lower interest rates on the Company's debt instruments which more
than offset the effects of higher average debt levels during
1993. The lower interest rates are principally due to the
Company's refinancing of its 10-3/4% Notes (as hereinafter
defined) with a 7-7/8% senior note issue in the fourth quarter of
1992. In addition, lower average prime and LIBOR interest rates
on the Company's variable rate debt instruments in 1993 as
compared to 1992 contributed to the lower average interest rates.
In 1993 the Company received approximately $72,900,000 from
Acme Boot representing the entire unpaid principal and
liquidation preference (including accrued interest and dividends)
on its investment in the securities of the affiliate. The
Company recorded a pretax gain of $67,300,000 related to the
investment in Acme Boot upon the receipt of the above mentioned
proceeds. See "Related Party Transactions" in the Notes to
Consolidated Financial Statements.
The effective income tax rate before extraordinary items and
cumulative effect of change in accounting for 1993 and 1992
differed from the Federal statutory rate of 35% and 34%,
respectively, primarily due to the impact of goodwill
amortization, which is not deductible for Federal income tax
purposes, state income taxes and the provision for interest
related to prior years' taxes.
In 1993 the Company recorded an extraordinary charge of
$8,700,000 ($.11 per share) in connection with the refinancing of
its bank credit agreements and the redemption of its 12-3/8%
Senior Subordinated Debentures due 2003 (the "12-3/8% Notes").
The extraordinary charge consists principally of the non-cash
write-off of the related unamortized debt expense on the bank
credit agreements, the 12-3/8% Notes and other debt issues and
the premiums paid in connection with the early redemption of the
12-3/8% Notes, both net of income tax benefits.
In 1992, the Company redeemed all of its $280,000,000
principal amount of 10-3/4% Senior Subordinated Notes due July
15, 1995 (the "10-3/4% Notes"). The Company recorded an
extraordinary charge of approximately $9,900,000 ($.13 per share)
in connection with the redemption of the 10-3/4% Notes, which
consisted principally of the premiums paid in connection with the
early redemption of the 10-3/4% Notes and the non-cash write-off
of the related unamortized debt expense, both net of income tax
benefits.
<PAGE>
<PAGE> 27
In the first quarter of 1993, the Company recorded the
cumulative effect of an accounting change related to the adoption
of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", ("Statement No. 109") resulting in
a $3,400,000 ($.04 per share) benefit.
<PAGE>
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Operations - (Continued)
1993 Compared to 1992 - (Concluded)
Earnings per share before extraordinary items and cumulative
effect of change in accounting principle were $2.80 for 1993
compared to $2.48 for 1992, a 12.9% increase. Net earnings per
share in 1993 were $2.73 and include an $.11 extraordinary charge
related to the early retirement of debt and a $.04 benefit
related to the cumulative effect of a change in accounting for
income taxes. Included in earnings per share before
extraordinary items and cumulative effect of change in accounting
principle and net earnings per share in 1993 is the effect of a
gain related to the Company's investment in Acme Boot of $.55 per
share.
Management believes that the relatively moderate rate of
inflation over the past few years has not had a significant
impact on the Company's sales or profitability.
1992 Compared to 1991
Net sales increased 13.9% in 1992 from 1991 primarily due to
higher unit shipments and price increases in both activewear and
underwear. The sales growth was driven by aggressive marketing
campaigns for underwear products, expanded distribution for
activewear (particularly in casualwear and in Europe) and
continued new product introductions in activewear.
Gross earnings increased 25.6% in 1992 compared to 1991.
The gross margin was 35.6% in 1992 compared to 32.3% in 1991.
Price increases (principally effected in the first quarter of
1992), manufacturing efficiencies (due to higher plant
utilization), lower raw material costs and the continuing shift
within the activewear line to higher margin products favorably
impacted the gross earnings and gross margin in 1992.
Operating earnings increased 28.4% compared to 1991 and the
operating margin increased 2.5 percentage points to 22.1% in
1992. The increase is due to the higher gross earnings and gross
margin and was slightly offset by higher selling, general and
administrative expenses. Selling, general and administrative
expenses increased to 12.1% of net sales in 1992 compared to
11.1% the prior year. The increase is primarily attributable to
higher advertising costs and increased selling and shipping costs
attributable to higher unit volume.
Interest expense for 1992 decreased 28.5% from 1991. Lower
interest expense is principally attributable to the effect of
lower interest rates on the Company's variable rate debt
instruments due to lower average prime and LIBOR interest rates
in 1992 compared to 1991. Interest expense has also been reduced
<PAGE>
<PAGE> 29
by lower debt levels in 1992 compared to 1991. Debt levels have
been reduced from their 1991 levels as a result of the strong
operating cash flows of the Company, the use of proceeds from the
Stock Offering to repay a portion of the Company's bank debt and
the Conversion.
<PAGE>
<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Operations - (Concluded)
1992 Compared to 1991 - (Concluded)
The effective income tax rate on earnings before
extraordinary items and cumulative effect of change in accounting
principle for 1992 and 1991 differed from the Federal statutory
rate of 34% primarily due to the impact of goodwill amortization,
which is not deductible for Federal income tax purposes, state
income taxes and the provision for interest related to prior
years' taxes. The tax rate in 1991 was also reduced by the
effect of the Federal tax refund from prior years and was
increased for the nondeductible portions of the special charges
and writedowns discussed below.
Earnings before extraordinary items and cumulative effect of
change in accounting principle per share on both a primary and
fully diluted basis were $2.48 for 1992 compared to $1.60 and
$1.55, respectively, for 1991. The increased net earnings in
1992 were partially offset by the dilutive effect on earnings per
share in 1992 of the greater average number of shares outstanding
after the Stock Offering and, for primary earnings per share, the
dilutive effect of the Conversion. See "Statement of Common
Stockholders' Equity" in the Notes to Consolidated Financial
Statements. Included in net earnings per share in 1991 are the
effect of a court ordered refund of Federal income taxes (plus
interest) of $.57 per share, special charges related to former
subsidiaries of $.12 per share and a write down of the Company's
investment in Acme Boot to its then market value, resulting in a
charge to earnings of $.45 per share.
Liquidity and Capital Resources
Funds generated from the Company's operations are the major
internal source of liquidity and are supplemented by funds
derived from capital markets including its bank facilities. The
Company has available for the funding of its operations an
$800,000,000 revolving demand line of credit. As of March 10,
1994 approximately $299,700,000 was available and unused under
this facility.
During 1993, approximately $262,500,000 was spent on capital
additions. Capital spending, primarily to enhance distribution
capabilities, is anticipated to approximate $150,000,000 to
$175,000,000 in 1994.
In December 1993, the Company completed the issuance of
$150,000,000 of notes due 2003 and $150,000,000 of debentures due
2023 (collectively, the "Offering"). The net proceeds of the
Offering of approximately $294,000,000 were used to repay amounts
outstanding under the New Credit Agreement (hereinafter defined)
<PAGE>
<PAGE> 31
and will be available for general corporate purposes, which may
include acquisitions.
In November 1993 the Company completed the Salem
Acquisition. The total funds required to acquire Salem,
including the repayment of certain debt of Salem and the fees and
expenses of the Salem Acquisition, totalled approximately
$157,600,000. Such funds were provided from borrowings under the
New Credit Agreement. The Company does not have any present
agreements or understandings with regard to future acquisitions
other than the Artex Acquisition completed in January 1994 and
the contract to acquire certain assets of Gitano entered into in
March 1994 which are described below.
<PAGE>
<PAGE> 32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Concluded)
Liquidity and Capital Resources - (Concluded)
In January 1994 the Company completed the Artex Acquisition.
The total funds required to acquire Artex totalled approximately
$44,500,000. Such funds were provided from borrowings under the
New Credit Agreement.
In March 1994 the Company entered into a contract to
purchase certain assets of Gitano for approximately $100,000,000.
The total funds required to acquire Gitano will be provided from
borrowings under the New Credit Agreement.
Management believes the funding available to it is
sufficient to meet anticipated requirements for capital
expenditures, working capital and other needs.
The Company's debt instruments, principally its bank
agreements, contain covenants restricting its ability to sell
assets, incur debt, pay dividends and make investments and
requiring the Company to maintain certain financial ratios. See
"Long-Term Debt" in the Notes to Consolidated Financial
Statements.
<PAGE>
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
Report of Ernst & Young, Independent Auditors . . . . . . 34
Consolidated Balance Sheet - December 31, 1993 and 1992 . 35
Consolidated Statement of Earnings for Each of the Years
Ended December 31, 1993, 1992 and 1991 . . . . . . . . 37
Consolidated Statement of Cash Flows for Each of the
Years Ended December 31, 1993, 1992 and 1991 . . . . . 38
Notes to Consolidated Financial Statements . . . . . . . . 40
Supplementary Data (Unaudited) . . . . . . . . . . . . . . 80
Financial Statement Schedules:
Schedule V - Property, Plant and Equipment . . . . . . 91
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant and Equipment . . . . 92
Schedule VIII - Valuation and Qualifying Accounts . . . 93
Schedule IX - Short-Term Borrowings . . . . . . . . . . 94
Schedule X - Supplementary Income Statement
Information . . . . . . . . . . . . . . . . . . . . . 95
Note: All other schedules are omitted because they are not
applicable or not required.
<PAGE>
<PAGE> 34
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Directors of
Fruit of the Loom, Inc.
We have audited the accompanying consolidated balance sheet
of Fruit of the Loom, Inc. and Subsidiaries as of December 31,
1993 and 1992, and the related consolidated statements of
earnings and cash flows for each of the three years in the period
ended December 1993. Our audits also included the financial
statement schedules listed in the Index at Item 14(a). These
financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Fruit of the Loom, Inc. and
Subsidiaries at December 31, 1993 and 1992, and the consolidated
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as
whole, present fairly in all material respects the information
set forth therein.
As discussed in the Notes to Consolidated Financial
Statements, the Company changed its method of accounting for
income taxes in 1993.
ERNST & YOUNG
Chicago, Illinois
February 12, 1994
<PAGE>
<PAGE> 35
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION> December 31,
1993 1992
ASSETS (In thousands of dollars)
<S> <S><C> <S> <C>
Current Assets
Cash and cash equivalents (including restricted cash) . . . . . . . . . . $ 74,200 $ 57,400
Notes and accounts receivable (less allowance for possible
losses of $16,100,000 and $14,300,000, respectively) . . . . . . . . . 239,700 233,400
Inventories
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454,500 308,300
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,000 85,300
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . 25,600 21,400
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,700 37,800
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 942,700 743,600
Property, Plant and Equipment
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,100 8,200
Buildings, structures and improvements . . . . . . . . . . . . . . . . . . 325,200 248,200
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 867,900 673,600
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . 31,700 47,600
1,233,900 977,600
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . 367,900 290,500
Net property, plant and equipment . . . . . . . . . . . . . . . . 866,000 687,100
Other Assets
Goodwill (less accumulated amortization of $207,200,000
and $181,400,000, respectively) . . . . . . . . . . . . . . . . . . . 895,300 810,800
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 40,400
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . 925,300 851,200
$ 2,734,000 $ 2,281,900
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term notes payable . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 65,100
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . 34,000 123,100
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 78,100 80,500
Accrued payroll and vacation pay . . . . . . . . . . . . . . . . . . . . . 25,700 26,500
Accrued pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,700 18,600
Accrued insurance obligations . . . . . . . . . . . . . . . . . . . . . . 15,500 12,500
Accrued advertising and promotion . . . . . . . . . . . . . . . . . . . . 15,400 24,300
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,300 11,600
Other accounts payable and accrued expenses . . . . . . . . . . . . . . . 48,800 71,400
Total current liabilities . . . . . . . . . . . . . . . . . . . . 250,500 433,600
Noncurrent Liabilities
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,194,000 756,300
Net deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 51,000 49,100
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,500 187,900
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . 1,436,500 993,300
Common Stockholders' Equity
Common stock and capital in excess of par value, $.01 par value;
authorized, Class A, 200,000,000 shares, Class B,
30,000,000 shares; issued and outstanding:
Class A Common Stock, 69,032,919 and 68,843,592
shares, respectively . . . . . . . . . . . . . . . . . . . . . . . 459,600 454,000
Class B Common Stock, 6,690,976 and 6,710,128
shares, respectively . . . . . . . . . . . . . . . . . . . . . . . 4,400 4,400
<PAGE>
<PAGE> 36
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,300 412,800
Currency translation adjustments . . . . . . . . . . . . . . . . . . . . . (37,300) (16,200)
Total common stockholders' equity . . . . . . . . . . . . . . . . 1,047,000 855,000
$ 2,734,000 $ 2,281,900
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 37
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In thousands, except per share data)
<S> <S> <C> <S> <C> <S> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,884,400 $ 1,855,100 $ 1,628,100
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . 1,237,000 1,194,800 1,102,500
Gross earnings . . . . . . . . . . . . . . . . . . . . . . . 647,400 660,300 525,600
Selling, general and administrative expenses . . . . . . . . . 240,100 225,000 181,400
Goodwill amortization . . . . . . . . . . . . . . . . . . . . . 25,800 25,400 24,900
Operating earnings . . . . . . . . . . . . . . . . . . . . . 381,500 409,900 319,300
Interest expense . . . . . . . . . . . . . . . . . . . . . . . (72,700) (82,100) (114,900)
Gain on Acme Boot investment . . . . . . . . . . . . . . . . . 67,300 -- --
Other expense-net . . . . . . . . . . . . . . . . . . . . . . . (9,000) (7,900) (3,400)
Earnings before income tax expense
extraordinary items and cumulative effect
of change in accounting principle . . . . . . . . . . . 367,100 319,900 201,000
Income tax expense . . . . . . . . . . . . . . . . . . . . . . 154,300 131,400 90,000
Earnings before extraordinary items and cumulative
effect of change in accounting principle . . . . . . . . 212,800 188,500 111,000
Extraordinary items - loss on early
retirement of debt and debt redemption . . . . . . . . . (8,700) (9,900) --
Earnings before cumulative effect of change
in accounting principle . . . . . . . . . . . . . . . . 204,100 178,600 111,000
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . . . . 3,400 -- --
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ 207,500 $ 178,600 $ 111,000
Earnings per common share:
Primary:
Earnings before extraordinary items and cumulative
effect of change in accounting principle . . . . . $ 2.80 $ 2.48 $ 1.60
Extraordinary items . . . . . . . . . . . . . . . . . . (.11) (.13) --
Cumulative effect of change in accounting for
income taxes . . . . . . . . . . . . . . . . . . . .04 -- --
Net earnings per common share . . . . . . . . . . . . . $ 2.73 $ 2.35 $ 1.60
Average common shares outstanding . . . . . . . . . . . 76,000 76,000 69,400
Fully diluted:
Earnings before extraordinary items and cumulative
effect of change in accounting principle . . . . . $ 2.80 $ 2.48 $ 1.55
Extraordinary items . . . . . . . . . . . . . . . . . . (.11) (.13) --
Cumulative effect of change in
accounting for income taxes . . . . . . . . . . . . .04 -- --
Net earnings per common share . . . . . . . . . . . . . $ 2.73 $ 2.35 $ 1.55
Average common shares outstanding . . . . . . . . . . . 76,000 76,000 72,800
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 38
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
(In thousands of dollars)
<S> <S><C> <S><C> <S><C>
Cash Flows from Operating Activities
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . $ 207,500 $ 178,600 $ 111,000
Adjustments to reconcile to net cash provided
by operating activities:
Extraordinary items . . . . . . . . . . . . . . . . . . 8,700 9,900 --
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . . (3,400) -- --
Depreciation and amortization . . . . . . . . . . . . . 121,600 107,500 99,500
Deferred income taxes . . . . . . . . . . . . . . . . . 30,200 (9,200) 19,400
Gain on Acme Boot investment . . . . . . . . . . . . . . (67,300) -- --
Writedown of investment in Acme Boot . . . . . . . . . . -- -- 39,200
Decrease (increase) in notes and accounts receivable . . 14,200 (35,100) (58,500)
Decrease (increase) in income taxes and interest
receivable . . . . . . . . . . . . . . . . . . . . . . -- 59,900 (59,900)
(Increase) decrease in inventories . . . . . . . . . . . (130,700) (83,100) 75,600
(Decrease) increase in trade accounts payable . . . . . (6,000) 31,100 20,700
Other working capital changes. . . . . . . . . . . . . . (29,700) (38,600) (36,300)
Net payments on retained liabilities
related to former subsidiaries . . . . . . . . . . . . (38,600) (30,500) (8,200)
Other-net . . . . . . . . . . . . . . . . . . . . . . . (16,700) (20,200) 15,200
Net cash provided by operating activities . . . . . . 89,800 247,500 217,700
Cash Flows from Investing Activities
Capital expenditures . . . . . . . . . . . . . . . . . . . . (262,500) (188,900) (74,300)
Less amount attributable to capital leases . . . . . . . . . 2,900 -- 21,300
Capital expenditures . . . . . . . . . . . . . . . . . (259,600) (188,900) (53,000)
Acquisition of Salem . . . . . . . . . . . . . . . . . . . . (157,600) -- --
Net proceeds from Acme Boot investment . . . . . . . . . . . 72,900 -- --
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . 8,400 (3,900) 2,500
Net cash used for investing activities . . . . . . . . (335,900) (192,800) (50,500)
Cash Flows from Financing Activities
(Decrease) increase in short-term notes payable . . . . . . (65,100) 17,500 (147,100)
Net proceeds from issuance of long-term debt . . . . . . . . 782,400 337,900 11,600
Refinancing of long-term debt . . . . . . . . . . . . . . . (267,900) -- --
Principal payments on long-term debt and capital
leases . . . . . . . . . . . . . . . . . . . . . . . . . (100,700) (100,100) (162,000)
Prepayment of long-term debt . . . . . . . . . . . . . . . . (82,300) (280,000) --
Debt redemption premiums . . . . . . . . . . . . . . . . . . (3,300) (11,500) --
Net proceeds from issuance of common stock . . . . . . . . . 1,700 7,600 102,200
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . (1,900) (100) (100)
Net cash provided by (used for) financing activities . 262,900 (28,700) (195,400)
Net increase (decrease) in cash and cash
equivalents (including restricted cash) . . . . . . . . . . 16,800 26,000 (28,200)
Cash and cash equivalents (including restricted
cash) at beginning of year . . . . . . . . . . . . . . . . . 57,400 31,400 59,600
Cash and cash equivalents (including restricted
cash) at end of year . . . . . . . . . . . . . . . . . . . . $ 74,200 $ 57,400 $ 31,400
</TABLE>
<PAGE>
<PAGE> 39
See accompanying notes.
<PAGE>
<PAGE> 40
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial
statements of the Company include the accounts of the Company and
all of its subsidiaries. All material intercompany accounts and
transactions have been eliminated.
Inventories. Inventory costs include material, labor and
factory overhead. Inventories are stated at the lower of cost or
market (net realizable value). Approximately 78.9% and 78.6% of
year-end inventory amounts at December 31, 1993 and 1992,
respectively, are determined using the last-in, first-out cost
method. If the first-in, first-out method had been used, such
inventories would have been $29,400,000 and $3,500,000 higher
than reported at December 31, 1993 and 1992, respectively. The
remainder of the inventories are determined using the first-in,
first-out method.
Property, Plant and Equipment. Property, plant and
equipment is stated at cost. Depreciation, which includes
amortization of assets under capital leases, is based on the
straight-line method over the estimated useful lives of
depreciable assets. Interest costs incurred in the construction
or acquisition of property, plant and equipment are capitalized.
Goodwill. Goodwill is amortized using the straight-line
method over periods ranging from 20 to 40 years.
Pre-operating Costs. Pre-operating costs associated with
the start-up of significant new production facilities are
deferred and amortized over three years.
Futures Contracts. The Company periodically enters into
futures contracts as hedges for its purchases of cotton for
inventory. Gains and losses on these hedges are matched to
inventory purchases and charged or credited to cost of sales as
such inventory is sold.
Forward Contracts. The Company has entered into forward
contracts to cover its principal and interest obligations on
foreign currency denominated bank loans of certain of its foreign
subsidiaries. The original discount on these contracts is
amortized over the life of the contract and serves to reduce the
effective interest cost of these loans. At December 31, 1993 and
1992, the Company had contracts maturing in 1994 and 1993,
totaling $22,800,000 and $55,200,000, respectively. In addition,
the Company had entered into forward contracts to cover the
future obligations of certain foreign subsidiaries for certain
inventory and fixed asset purchases. At December 31, 1992, the
Company had contracts which matured in 1993 totaling
approximately $10,000,000.
<PAGE>
<PAGE> 41
The fair value of the Company's foreign currency exchange
forward contracts was estimated based on quoted market prices of
comparable contracts. At December 31, 1993 and 1992, the fair
value of the Company's forward contracts approximated their face
value.
<PAGE>
<PAGE> 42
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Summary of Significant Accounting Policies - (Concluded)
Deferred Grants. Commencing in 1987 and during 1993 and
1992, the Company negotiated grants from the governments of the
Republic of Ireland and of Northern Ireland. The grants are
being used for employee training, the acquisition of property and
equipment and other governmental business incentives such as
general employment. Employee training grants are recognized in
income in the year in which the costs to which they relate are
incurred by the Company. Grants for the acquisition of property
and equipment are netted against the related capital expenditure.
Grants for property and equipment under operating leases are
amortized to income as a reduction of rents paid. Unamortized
amounts netted against fixed assets under these grants at
December 31, 1993 and 1992, were $28,500,000 and $27,700,000,
respectively. At December 31, 1993 and 1992, the Company has a
contingent liability to repay, in whole or in part, grants
received of approximately $43,500,000 and $42,100,000,
respectively, in the event that the Company does not meet defined
average employment levels or terminates operations in the
Republic of Ireland or Northern Ireland.
Income Taxes. Effective January 1, 1993, the Company
adopted Statement No. 109. Under Statement No. 109, the
liability method is used in accounting for income taxes. Prior
to the adoption of Statement No. 109 income tax expense was
determined using the deferred method.
Pension Plans. The Company maintains pension plans which
cover substantially all employees. The plans provide for
benefits based on an employee's years of service and
compensation. The Company funds the minimum contributions
required by the Employee Retirement Income Security Act of 1974.
Acquisition of Salem
In November 1993 the Company acquired Salem for
approximately $157,600,000, including approximately $23,900,000
of Salem debt which was repaid by the Company. The Salem
Acquisition has been accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated
preliminarily to assets and liabilities based on their estimated
fair values as of the date of the Salem Acquisition. A final
allocation of the purchase price will be made during 1994. The
cost in excess of the net assets acquired was approximately
$112,000,000 and is being amortized over 20 years. Salem's
results of operations have been included in the Company's
consolidated financial statements since November 1993. Salem's
operations are not material in relation to the Company's
consolidated financial statements and pro forma financial
information has therefore not been presented.
<PAGE>
<PAGE> 43
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents. Short-term investments (consisting primarily of
certificates of deposit, overnight deposits or Eurodollar
deposits) totaling $16,100,000 and $31,100,000 were included in
cash and cash equivalents at December 31, 1993 and 1992,
respectively. These investments were carried at cost, which
approximated quoted market value.
Included in short-term investments at December 31, 1993 and
1992 was $6,400,000 and $13,800,000, respectively, of restricted
cash collateralizing domestic and certain foreign subsidiaries'
letters of credit and bank loans of certain of the Company's
foreign subsidiaries.
<PAGE>
<PAGE> 44
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Short-Term Notes Payable
In August 1993, the Company entered into a new unsecured
bank agreement (the "New Credit Agreement"). See "Long-Term
Debt." Certain indebtedness of the Company under preexisting
secured domestic bank agreements was refinanced with the proceeds
of loans under the New Credit Agreement and the preexisting bank
agreements were terminated at that time.
Prior to August 1993, the Company's domestic bank agreements
consisted of revolving lines of credit, bank term loans (the"Term
Loan Facilities"), a special purpose loan, a capital expenditure
facility (the "Capital Expenditure Facility") and a letter of
credit facility (collectively, the "Credit Agreements"). All
borrowings under the Credit Agreements represented loans to the
Company's principal operating subsidiary.
Under the Credit Agreements, the Company had $350,000,000
available for the funding of its operations under revolving lines
of credit (the "Revolving Credit Facilities"). The Revolving
Credit Facilities were scheduled to expire on June 30, 1995. At
December 31, 1992, the Company had borrowed, under its Revolving
Credit Facilities, approximately $163,600,000 of which
$100,000,000 was classified as long-term debt as a result of the
Company's refinancing of this debt on a long-term basis in
February 1993. The carrying amounts of the Company's borrowings
under the Revolving Credit Facilities approximated their fair
value at December 31, 1992. Borrowings under the Revolving
Credit Facilities bore interest at a rate approximating the prime
rate (6% at December 31, 1992) or, at the election of the
Company, at a rate approximating one percentage point over LIBOR
(approximately 3.5% at December 31, 1992). The weighted average
interest rate for borrowings outstanding at December 31, 1992 was
approximately 5%. Borrowings under the Revolving Credit
Facilities were due on demand and were collateralized under the
terms of the Credit Agreements. The Credit Agreements were
refinanced during 1993.
<PAGE>
<PAGE> 45
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Long-Term Debt
(In thousands of dollars)
<TABLE>
<CAPTION> December 31,
Interest Rate 1993 1992
<S> <C> <S><C> <C>
Senior Secured
Revolving Credit Facilities, maturing 1995 . . . . . . Variable<F1> $ -- 100,000
Term Loan Facilities, maturing 1993-1995 . . . . . . . Variable<F2> -- 123,800
Fixed rate debt, maturing 2011<F3> . . . . . . . . . . 12.6% -- 70,300
Capital Expenditure Facility, maturing 1993-1995 . . . Variable<F4> -- 44,100
Old Domestic Facility Loan, maturing 1993-1998 . . . . Variable<F5> -- 41,900
Foreign Facility Loans, maturing 1993-1995 . . . . . . Variable<F6> 22,100 53,600
Capitalized lease obligations, maturing
1993-2013<F7> . . . . . . . . . . . . . . . . . . 2.74-12.25% 90,700 100,200
Total senior secured . . . . . . . . . . . . . . 112,800 533,900
Senior Unsecured
New Credit Agreement, maturing 1996 . . . . . . . . . Variable<F8> 329,900 --
New Term Loan, maturing 1998 . . . . . . . . . . . . . Variable<F9> 40,000 --
Fixed rate debt, maturing 1999<F10> . . . . . . . . . 7.97% 249,000 248,800
Fixed rate debt, maturing 2003<F11> . . . . . . . . . 6.61 148,800 --
Fixed rate debt, maturing 2008 . . . . . . . . . . . . 6.97 128,400 --
Fixed rate debt, maturing 2011<F12> . . . . . . . . . 12.6 71,100 --
Fixed rate debt, maturing 2023<F13> . . . . . . . . . 7.49 148,000 --
Total Senior Unsecured . . . . . . . . . . . . . . 1,115,200 248,800
Senior Subordinated, maturing 1993-2003<F14> . . . . . . . 12.6% -- 96,700
Total . . . . . . . . . . . . . . . . . . . . . . . . 1,228,000 879,400
Less current maturities . . . . . . . . . . . . . . . . . . (34,000) (123,100)
Total long-term debt . . . . . . . . . . . . . . . . . . . $ 1,194,000 $ 756,300
<PAGE>
<PAGE> 46
<FN>
<F1> See "Short-Term Notes Payable."
<F2> Interest ranged from 4.13% to 6.0% during 1993 and from
4.44% to 7.25% during 1992.
<F3> Net of unamortized discount of $54,700 in 1992 (nominal rate
7%).
<F4> Interest ranged from 4.13% to 6.0% in 1993 and from 4.44% to
7.25% during 1992.
<F5> Interest ranged from 4.49% to 6.0% during 1993 and from
4.74% to 6.18% during 1992.
<F6> Interest ranged from .5% to 9.15% during 1993 and from 1.81%
to 9.15% during 1992. (These rates are net of discount
amortization. The Company has entered into forward
contracts that fix the dollar amount of interest that has to
be paid.)
<F7> Represents the present value of future rentals on capitalized
leases. The capitalized leases are secured by the related
property under lease.
<F8> Interest ranged from 3.38% to 6.0% during 1993.
<F9> Interest ranged from 4.12% to 6.0% during 1993.
<F10> Net of unamortized discount of $1,000 and $1,200,
respectively in 1993 and 1992 (nominal rate 7.875%).
<F11> Net of unamortized discount of $1,200 in 1993 (nominal
rate 6.5%).
<F12> Net of unamortized discount of $53,900 in 1993 (nominal
rate 7%).
<F13> Net of unamortized discount of $2,000 in 1993 (nominal
rate 7.375%).
<F14> Net of unamortized discount of $500 in 1992 (nominal
rate 12.375%).
</TABLE>
<PAGE>
<PAGE> 47
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Long-Term Debt - (Continued)
The New Credit Agreement provides the Company with an
$800,000,000 revolving line of credit which expires in August
1996 and includes a letter of credit facility. At December 31,
1993 approximately $59,800,000 of letters of credit were issued
under the New Credit Agreement to secure certain insurance and
debt obligations reflected in the accompanying Consolidated
Balance Sheet. Borrowings under the New Credit Agreement bear
interest at a rate approximating the prime rate (6% at December
31, 1993) or, at the election of the Company, at rates
approximating LIBOR (3.25% at December 31, 1993) plus 30 basis
points. The Company also pays a facility fee (the "Facility
Fee") under the New Credit Agreement equal to 20 basis points on
the aggregate commitments thereunder. Interest rates and the
Facility Fee are subject to increase or decrease based upon the
Company's unsecured debt rating. The weighted average interest
rate for borrowings outstanding under the New Credit Agreement at
December 31, 1993 was approximately 4.3%. Borrowings under the
New Credit Agreement are guaranteed by certain of the Company's
subsidiaries.
In August 1993, the Company's wholly-owned subsidiary, Fruit
of the Loom Canada, Inc. issued an unsecured senior note due 2008
(the "Canadian Note") in a private placement transaction with
certain insurance companies. The Canadian Note is fully
guaranteed by the Company and its principal operating
subsidiaries and ranks pari passu in right of payment with the
New Credit Agreement.
In 1993, the Company redeemed its 12-3/8% Notes. The
Company recorded an extraordinary charge in 1993 of approximately
$8,700,000 ($.11 per share) relating to the early extinguishment
of debt, primarily in connection with the refinancing of the
Credit Agreements and the redemption of the 12-3/8% Notes. The
extraordinary charge consists principally of the non-cash write-
off of the related unamortized debt expense on the Credit
Agreements, the 12-3/8% Notes and other debt issues and the
premiums paid in connection with the early redemption of the 12-
3/8% Notes, both net of income tax benefits.
In 1993, the Company issued $150,000,000 principal amount of
its 6-1/2% Notes due 2003 (the "6-1/2% Notes") and $150,000,000
principal amount of its 7-3/8% Debentures due 2023 (the "7-3/8%
Debentures"). The 6-1/2% Notes and the 7-3/8% Debentures will
mature November 15, 2003 and November 15, 2023, respectively, and
may not be redeemed by the Company prior to maturity. The 6-1/2%
Notes and the 7-3/8% Debentures are general, unsecured
obligations of the Company. However, the obligations of the
Company under the New Credit Agreement and the Canadian Note are
guaranteed by certain of the Company's subsidiaries and such debt
<PAGE>
<PAGE> 48
effectively ranks ahead of the 6-1/2% Notes and the 7-3/8%
Debentures with respect to such guarantees.
In addition to refinancing its Revolving Credit Facilities
under the New Credit Agreement, the Company also refinanced its
Term Loan Facilities and its Capital Expenditure Facility. Under
the terms of the Credit Agreements, the Company had a term loan
which required quarterly principal payments with final maturity
at June 30, 1995. The Company also had an additional
$100,000,000 term loan which had a final maturity of June 30,
1995. Borrowings under the Term Loan Facilities were
collateralized under the terms of the Credit Agreements on a pari
passu basis with borrowings under the Revolving Credit
Facilities. All borrowings under the Term Loan Facilities were
repaid through borrowings under the New Credit Agreement in 1993.
<PAGE>
<PAGE> 49
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Long-Term Debt - (Continued)
Under the Credit Agreements, the Company originally had a
Capital Expenditure Facility of up to $75,000,000 to be drawn
down at various times prior to March 31, 1991, if necessary, to
finance capital expenditures. At December 31, 1992, $44,100,000
was outstanding under the Capital Expenditure Facility and no
additional borrowings were available under this facility. The
Capital Expenditure Facility required quarterly principal
payments which commenced in June 1991 with final maturity
scheduled on June 30, 1995. All borrowings under the Capital
Expenditure Facility were repaid through borrowings under the New
Credit Agreement in 1993.
Under the Credit Agreements, the Company had a letter of
credit facility of $75,000,000. At December 31, 1992
approximately $71,300,000 of letters of credit were issued under
this facility to secure certain insurance and debt obligations
reflected in the accompanying Consolidated Balance Sheet. These
letters of credit were refinanced through the New Credit
Agreement in 1993.
During 1993, the Company entered into a new facility loan
(the "New Term Loan") which replaced a previous loan (the "Old
Domestic Facility Loan"), the borrowings under which were secured
by one of the Company's domestic facilities. At December 31,
1993 $40,000,000 was outstanding under the New Term Loan and no
additional borrowings were available under this facility. The
New Term Loan matures in December 1998 and is unsecured. The New
Term Loan bears interest at a rate approximating one-eighth of a
percentage point over the prime rate or, at the election of the
Company, at a rate approximating seven-eighths of a percentage
point over LIBOR. Interest rates are subject to increase or
decrease based upon the Company's unsecured debt rating. The
weighted average interest rate for borrowings outstanding under
the New Term Loan at December 31, 1993 was approximately 4.1%.
At December 31, 1992, $41,900,000 was outstanding under the
Old Domestic Facility Loan and no additional borrowings were
available under this facility. The Old Domestic Facility Loan
required semi-annual principal payments with final maturity at
July 15, 1998. The Old Domestic Facility Loan bore interest at a
rate approximating two and one-half percentage points over the
rate on certain United States Treasury securities or 1.3
percentage points over LIBOR at the election of the Company.
The Company has an agreement with an institutional lender to
provide funding to certain of the Company's foreign subsidiaries
(the "Foreign Facility Loans"). At December 31, 1993 and 1992,
$22,100,000 and $53,600,000, respectively, was outstanding under
this agreement. The Foreign Facility Loans require semi-annual
principal payments which commenced in 1992. In 1993, the Foreign
<PAGE>
<PAGE> 50
Facility Loans bore interest at effective rates ranging from
approximately .5% to 9.2%. The Foreign Facility Loans are
secured by letters of credit issued under the New Credit
Agreement, restricted cash balances and inventory, receivables
and fixed assets of certain foreign subsidiaries.
<PAGE>
<PAGE> 51
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Long-Term Debt - (Concluded)
In 1992, the Company issued $250,000,000 principal amount of
its 7-7/8% Senior Notes Due 1999 (the "7-7/8% Notes"). The 7-
7/8% Notes will mature on October 15, 1999 and may not be redeemed
by the Company prior to maturity. The 7-7/8% Notes are general,
unsecured obligations of the Company and rank pari passu in right
of payment with all existing and future senior obligations of the
Company. However, the obligations of the Company under the New
Credit Agreement and the Canadian Note are guaranteed by certain
of the Company's subsidiaries and such debt effectively ranks
ahead of the 7-7/8% Notes with respect to such guarantees.
In 1992, the Company redeemed all of its 10-3/4% Notes. The
redemption was funded through borrowings under the Credit
Agreements and the proceeds from the issuance of the 7-7/8%
Notes. The Company recorded an extraordinary charge of
approximately $9,900,000 ($.13 per share) in connection with the
redemption of the 10-3/4% Notes, which consisted principally of
the premiums paid in connection with the early redemption of the
10-3/4% Notes and the non-cash write-off of the related
unamortized debt expense, both net of income tax benefits.
The New Credit Agreement imposes certain limitations on, and
requires compliance with covenants from, the Company and its
subsidiaries including, among other things: (i) maintenance of
certain financial ratios and compliance with certain financial
tests and limitations; (ii) limitations on incurrence of
additional indebtedness and granting of certain liens and
guarantees; and (iii) restrictions on mergers, sale and leaseback
transactions, asset sales and investments. The New Credit
Agreement also allows the Company to pay dividends on its common
stock so long as, among other things, the aggregate amount of
such dividends paid since August 16, 1993 does not exceed the sum
of $75,000,000 and fifty percent of the Company's consolidated
net earnings since June 30, 1993.
The New Credit Agreement provides for the acceleration of
amounts outstanding thereunder should any person or entity other
than William Farley, or any person or entity controlled by
William Farley, control more than 50% of the voting stock or
voting rights associated with such stock of the Company.
The aggregate amount of scheduled annual maturities of
long-term debt for each of the next five years is: $34,000,000 in
1994; $22,600,000 in 1995; $343,900,000 in 1996; $22,500,000 in
1997; and $50,300,000 in 1998.
Cash payments of interest on debt were $67,100,000,
$89,700,000 and $124,100,000 in 1993, 1992 and 1991,
respectively. These amounts exclude amounts capitalized.
<PAGE>
<PAGE> 52
The fair values of the Company's non-publicly traded long-
term debt were estimated using discounted cash flow analyses,
based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements. Fair values for
publicly traded long-term debt were based on quoted market
prices. At December 31, 1993 and 1992, the fair value of the
Company's long-term debt was approximately $1,305,800,000 and
$928,700,000, respectively.
<PAGE>
<PAGE> 53
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Contingent Liabilities
The Company and its subsidiaries are involved in certain
legal proceedings and have retained liabilities, including
certain environmental liabilities, such as those under Superfund
Legislation, in connection with the sale of certain discontinued
operations, some of which were significant generators of
hazardous waste. The Company's retained liability reserves at
December 31, 1993 related to discontinued operations, consisting
primarily of certain environmental reserves of approximately
$46,200,000, reflect management's belief that the Company will
recover at least $28,600,000 from insurance and other sources.
Management and outside environmental consultants evaluate, on a
site-by-site basis, the extent of environmental damage, the type
of remediation that will be required and the Company's
proportionate share of those costs. The Company's retained
liability reserves related to discontinued operations principally
pertain to ten specifically identified environmental sites. Four
sites individually represent more than 10% of the net reserve and
in the aggregate represent approximately 67% of the net reserve.
Management believes they have adequately estimated the impact of
remediating identified sites, the expected contribution from
other potentially responsible parties and recurring costs for
managing sites. Management currently estimates actual payments
before recoveries to range from approximately $8,500,000 to
$17,700,000 annually between 1994 and 1997 and $22,000,000 in
total subsequent to 1997. Only the long-term monitoring costs of
approximately $7,500,000, primarily scheduled to be paid in 1998
and beyond, have been discounted. The discount rate used was
10%. The undiscounted aggregate long-term monitoring costs, to
be paid over approximately the next 20 years, is approximately
$19,500,000. Management believes that adequate reserves have
been established to cover potential claims based on facts
currently available and current Superfund Legislation. The
Company has provided the foregoing information in accordance with
the recently issued Staff Accounting Bulletin 92.
Generators of hazardous wastes which were disposed of at
offsite locations which are now superfund sites are subject to
claims brought by state and Federal regulatory agencies under
Superfund Legislation and by private citizens under Superfund
Legislation and common law theories. Since 1982, the EPA has
actively sought compensation for response costs and remedial
action at offsite disposal locations from waste generators under
the Superfund Legislation, which authorizes such action by the
EPA regardless of fault, legality of original disposal or
ownership of a disposal site. The EPA's activities under the
Superfund Legislation can be expected to continue during 1994 and
future years.
In August 1991, two creditors of a former subsidiary, Lone
Star (a wholly owned subsidiary of Lone Star Technologies, Inc.,
<PAGE>
<PAGE> 54
a publicly owned company) brought suit against the Company in the
Superior Court of the State of Delaware. In this suit, the
creditors sought damages of approximately $13,100,000, plus
interest, against the Company for what they alleged was the
remaining liability under certain leases. In January 1993, the
superior Court of Delaware issued an Opinion and Order finding
that the leases were in default, but made no findings as to the
amount of damages. The Company appealed the ruling and on June
4, 1993 the Supreme Court of Delaware entered an order affirming
the Opinion and Order of the Superior Court of Delaware issued in
January 1993. In December 1993, the Company paid the lessors
approximately $9,500,000 in settlement of this suit.
<PAGE>
<PAGE> 55
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Contingent Liabilities - (Continued)
In February 1986, the Company completed the sale of stock of
its then wholly owned subsidiary, Universal, to MagneTek. At the
time of the sale there was a suit pending against Universal and
Northwest by LMP. The suit alleged that Universal and Northwest
fraudulently induced LMP to sell its business to Universal and
then suppressed the development of certain electronic lighting
ballasts in breach of the agreement of sale, which required
Universal to pay to LMP a percentage of the net profits from such
business from 1982 through 1986. Two additional plaintiffs,
Stevens Luminoptics Partnership and Calmont Technologies Inc.,
joined the litigation in 1986. In December 1989 and January
1990, a jury returned certain verdicts against Universal and also
returned verdicts in favor of Northwest and on certain issues in
favor of Universal. A judgment totalling $25,800,000, of which
$7,500,000 represented punitive damages, reflecting these
verdicts was entered by the Alameda County, California Superior
Court in January 1990 against Universal.
In April 1992, the California Court of Appeals reversed the
$25,800,000 judgment against Universal and affirmed those
verdicts favorable to Universal and Northwest. In July 1992, the
California Supreme Court denied the plaintiffs' petition for
review. The case has been remanded to the trial court where it
is scheduled to be retried beginning in March 1994.
Pursuant to the stock purchase agreement (the "Stock
Purchase Agreement") under which Universal was sold, the Company
agreed to indemnify MagneTek for a two-year period following the
sale of Universal for certain contingent liabilities. MagneTek
brought suit against the Company for declaratory and other relief
in connection with the indemnification under the Stock Purchase
Agreement. In April 1992, the Los Angeles County, California
Superior Court found that the Company was obligated by the Stock
Purchase Agreement to indemnify MagneTek for any liability that
may be assessed against MagneTek or Universal in the LMP
Litigation and to reimburse MagneTek for, among other things, its
costs and expenses in defending that case. The court entered a
judgment requiring the Company to reimburse and indemnify
MagneTek in two stages: currently, to reimburse MagneTek for
costs of defense and related expenses in the LMP Litigation, plus
costs of litigating the indemnity case with the Company; and at a
later date, if and when any liability in the LMP Litigation is
finally determined or a settlement is reached in that case, to
reimburse and/or indemnify MagneTek for that amount as well. In
1993 the Company paid approximately $9,600,000 in settlement of
its obligations to MagneTek related to the litigation expenses
incurred by MagneTek.
In March 1988, a class action suit entitled Endo et al. v.
Albertine, et al. was filed in the District Court against the
<PAGE>
<PAGE> 56
Company, its then directors, certain of its then executive
officers, its then underwriters and the Company's current and
former independent auditors in connection with the Company's
initial public offering of Class A Common Stock and certain debt
securities in March 1987. The suit alleges, among other things,
violations of Federal and state securities laws against all of
the defendants, as well as breaches of fiduciary duties by the
director and officer defendants, and seeks unspecified damages.
<PAGE>
<PAGE> 57
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Contingent Liabilities - (Concluded)
Motions to dismiss the complaint were filed by all
defendants. In December 1990, a magistrate judge recommended
that the District Court dismiss all of the plaintiffs' claims
with prejudice. In January 1993, the District Court adopted in
part and rejected in part the magistrate judge's recommendation
for dismissal of the complaint. As a result, the litigation will
continue as to various remaining counts of the complaint. Both
the defendants and the plaintiffs recently filed motions for
summary judgment. It is uncertain as to when rulings on these
motions will be issued. Management and the Board of Directors
believe that this suit is without merit and intend to continue to
defend themselves vigorously in this litigation.
On December 23, 1993, James J. Locke, as Trustee of Locke
Family Trust, and I. Jack Saline filed a lawsuit against the
Company and certain of its then officers and directors, including
William Farley and John B. Holland in the District Court. The
lawsuit was then amended to add additional plaintiffs. The
lawsuit was filed as a class action, but the issue of class
certification has not yet been addressed by the parties or the
court. The plaintiffs claim that all of the defendants engaged in
conduct violating Section 10b of the Securities Exchange Act of
1934 and that Mr. Farley and Mr. Holland also violated Section
20a of the Act. According to the plaintiffs, beginning before
June 1992 and continuing through early June 1993, the Company,
with the knowledge and assistance of the individual defendants,
issued positive public statements about its expected sales
increases and growth through 1993 and afterwards. They also
allege that beginning in approximately mid-1992 and continuing
afterwards, the Company's business was not as strong and its
growth prospects were not as certain as represented. The
plaintiffs further allege that during the end of 1992 and
beginning of 1993, certain of the individual defendants traded
the stock of the Company while in the possession of material,
non-public information. The plaintiffs ask for unspecified
amounts as compensatory damages, pre-judgment and post-judgment
interest, attorneys' fees, expert witness fees and costs and ask
the District Court to impose a constructive trust on the proceeds
of the individual defendants' trades to satisfy any potential
judgment. Although the lawsuit is at a preliminary stage, the
Company believes that this suit is without merit and intends to
defend itself vigorously in this litigation.
Management believes, based on information currently
available, that the ultimate resolution of the aforementioned
litigation will not have a material adverse effect on the
financial condition or operations of the Company.
In 1992, the Company was named in a suit seeking to enforce
the terms of a former subsidiary's lease on which the Company was
<PAGE>
<PAGE> 58
contingently obligated. The Company paid approximately
$17,500,000 in 1992 in settlement of the suit and its contingent
obligations under the lease.
In connection with the Company's transaction with Acme Boot
during 1993, the Company guaranteed, on an unsecured basis, the
repayment of debt incurred or created by Acme Boot under Acme
Boot's bank credit facility. See "Related Party Transactions."
At December 31, 1993 Acme Boot's bank credit facility provides
for up to $30,000,000 of loans and letters of credit subject to a
borrowing base. Acme Boot's bank credit facility is secured by
first liens on substantially all of the assets of Acme Boot and
its subsidiaries (which are approximately $80,000,000 at December
31, 1993). At December 31, 1993 approximately $9,000,000 in
loans and letters of credit were outstanding under Acme Boot's
bank credit facility.
<PAGE>
<PAGE> 59
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Lease Commitments
The Company and its subsidiaries lease certain
manufacturing, warehousing and other facilities and equipment.
The leases generally provide for the lessee to pay taxes,
maintenance, insurance and certain other operating costs of the
leased property. The leases on most of the properties contain
renewal provisions.
Following is a summary of future minimum payments under
capitalized leases and under operating leases that have initial
or remaining noncancelable lease terms in excess of one year at
December 31, 1993 (in thousands of dollars):
<TABLE>
<CAPTION>
Capitalized Operating
Year Ending December 31, Leases Leases
<S> <S> <C> <S><C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,500 $ 9,600
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,800 7,200
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,800 5,700
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 3,900
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200 2,600
Years subsequent to 1998 . . . . . . . . . . . . . . . . . . . 61,900 5,100
Total minimum lease payments . . . . . . . . . . . . . . . . . . 137,200 $ 34,100
Imputed interest . . . . . . . . . . . . . . . . . . . . . . . . (46,500)
Present value of minimum capitalized lease payments . . . . . . . 90,700
Current portion . . . . . . . . . . . . . . . . . . . . . . . . . (11,900)
Long-term capitalized lease obligations . . . . . . . . . . . . . $ 78,800
</TABLE>
Assets recorded under capital leases are included in Property,
Plant and Equipment as follows (in thousands of dollars):
<TABLE>
<CAPTION>
December 31,
1993 1992
<S> <S><C> <S><C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,200 $ 1,300
Buildings, structures and improvements . . . . . . . . . . . . 39,000 37,600
Machinery and equipment . . . . . . . . . . . . . . . . . . . 94,200 94,200
134,400 133,100
Accumulated depreciation . . . . . . . . . . . . . . . . . . . (67,600) (56,500)
$ 66,800 $ 76,600
</TABLE>
<PAGE>
<PAGE> 60
Rental expense for operating leases amounted to $11,600,000,
$9,100,000 and $8,200,000 in 1993, 1992 and 1991, respectively.
<PAGE>
<PAGE> 61
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Stock Plans
At December 31, 1993 and 1992, approximately 1,546,600 and
1,653,000 shares, respectively, of Class A Common Stock were
reserved for issuance under the Company's 1987 Stock Option Plan
(the "Plan"). Under the terms of the Plan, options may be
granted to eligible employees of the Company, its parent and its
subsidiaries at a price not less than the market price on the
date of grant. Option shares must be exercised within the period
prescribed by the Compensation Committee of the Board of
Directors at the time of grant but not later than ten years and
one day from the date of grant. The Plan provides for the
granting of qualified and nonqualified stock options.
The following summarizes the activity of the Plan for 1993:
<TABLE>
<CAPTION>
Option Price Shares
Per Share Under Option
<S> <C> <S> <C> <C>
Outstanding at December 31, 1992 . . . . . . . . . $6-3/8 to $35-3/4 1,176,000
Options granted . . . . . . . . . . . . . . . . . . $28-1/2 to $47-5/8 448,200
Options exercised . . . . . . . . . . . . . . . . . $6-3/8 to $20-1/4 (106,300)
Options canceled . . . . . . . . . . . . . . . . . $31-7/8 (2,500)
Outstanding at December 31, 1993 . . . . . . . . . $6-3/8 to $47-5/8 1,515,400
Exercisable at December 31, 1993 . . . . . . . . . $6-3/8 to $41-3/8 1,088,200
</TABLE>
In 1993, the Company's stockholders approved the Company's
Directors' Stock Option Plan (the "Directors' Plan"). The
Directors' Plan provides for the issuance of options to purchase
up to 175,000 shares of Class A Common Stock, which shares are
reserved and available for purchase upon the exercise of options
granted under the Directors' Plan. Only directors who are not
employees of the Company, any parent or subsidiary of the Company
or Farley Industries, Inc. ("FII") are eligible to participate in
the Directors' Plan. The Directors' Plan is administered by the
Company's Board of Directors. Under the Directors' Plan each
non-employee director is initially granted an option to purchase
7,500 shares of Class A Common Stock (the "Initial Options"). On
the date of each annual meeting at which such person is elected
or after which the person continues as a non-employee director,
such non-employee director shall be granted an option to purchase
2,500 shares of Class A Common Stock (the "Annual Options"). The
options are exercisable at a price per share equal to the fair
market value per share of the Class A Common Stock on the date of
grant. Option shares must be exercised not later than ten years
from the date of grant and do not become exercisable until the
first anniversary of the date of grant.
<PAGE>
<PAGE> 62
The following summarizes the activity of the Directors' Plan
for 1993:
<TABLE>
<CAPTION> Option Price Shares
Per Share Under Option
<S> <C> <C> <C>
Initial Options granted . . . . . . . . . . . . . . $31-1/4 to $42 45,000
Annual Options granted . . . . . . . . . . . . . . $36-5/8 12,500
Outstanding at December 31, 1993 . . . . . . . . . $31-1/4 to $42 57,500
Exercisable at December 31, 1993 . . . . . . . . . $42 37,500
</TABLE>
<PAGE>
<PAGE> 63
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Stock Plans - (Concluded)
In 1992, the Company established the 1992 Executive Stock
Option Plan (the "1992 Plan"). The 1992 Plan provides for the
issuance of options to purchase up to 975,000 shares of Class A
Common Stock, which shares are reserved and available for
purchase upon the exercise of stock options granted under the
1992 Plan. The 1992 Plan is administered by the Compensation
Committee of the Board of Directors. In 1992, options to
purchase 975,000 shares of Class A Common Stock were granted
under the 1992 Plan to two directors of the Company who are also
employees of the Company. The options are exercisable at a price
of $28.88 per share (which was the closing price of the Class A
Common Stock on the date of grant). Pursuant to the terms of the
grants, options for the shares vest (subject to acceleration
under certain circumstances) as follows: (i) one-third of the
options granted vest immediately upon grant; (ii) one-third of
the options granted vest if the closing price of the Class A
Common Stock reaches or exceeds $45 per share for 90 consecutive
days within six years from the date of grant; and (iii) the
remaining one-third of the options granted vest if the closing
price of the Class A Common Stock reaches or exceeds $60 per
share for 90 consecutive days within six years from the date of
grant. All vested options expire 10 years and one day after the
date of grant. Options which do not vest because the Company's
stock price has not reached the targeted price levels for vesting
expire six years after the date of grant. As of December 31,
1993, 325,000 of these options are exercisable and none of these
options have been exercised or canceled.
In July 1991, the Company granted an option to purchase
50,000 shares of the Class A Common Stock to a director of the
Company who is also an employee of FII at a purchase price of
$10.25 per share. The exercise period of the option terminates
ten years and one day from the date of grant. At the date of
grant the market price of the Class A Common Stock was $15 and,
accordingly, the Company recorded a charge to earnings of
approximately $200,000 in 1991. As of December 31, 1993, none of
these options have been exercised or canceled.
At December 31, 1993 and 1992, approximately 268,000 and
280,000 shares, respectively, of Class A Common Stock were
reserved for issuance under the Company's 1989 Stock Grant Plan.
Under the terms of this plan, eligible employees of the Company,
its parent and its subsidiaries are awarded shares, subject to
forfeitures or certain restrictions which generally expire three
years from the date of the grant. Shares are awarded in the name
of the employee, who has all the rights of a shareholder, subject
to the above mentioned restrictions. The Company canceled 3,900
previously issued shares during 1993. The Company granted
approximately 15,900 shares to eligible employees during 1993.
<PAGE>
<PAGE> 64
At December 31, 1993 and 1992, approximately 344,900 and
396,700 shares, respectively, of Class A Common Stock were
reserved for issuance under the Company's 1987 Long-Term Bonus
Plan. Under the terms of this plan, eligible employees of the
Company's operating subsidiary participate in cash and stock
bonus pools for four year plan periods. Awards under this plan
are payable in a combination of cash and stock. No new four year
plan period began subsequent to December 31, 1990. The Company
issued approximately 51,800 shares to eligible employees during
1993.
<PAGE>
<PAGE> 65
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Consolidated Statement of Common Stockholders' Equity
<TABLE>
<CAPTION> Year Ended December 31,
1993 1992 1991
(in thousands)
Common Shares
<S> <S> <C> <S><C> <S><C>
Balance, beginning of period . . . . . . . . . . . . . . . . . 75,554 74,794 61,713
Class A shares issued upon exercise of options . . . . . . . . 106 701 121
Class A shares issued under long-term bonus plan . . . . . . . 52 45 58
Class A shares issued under stock grant plan-net . . . . . . . 12 14 77
Class A shares issued in the Stock Offering . . . . . . . . . -- -- 7,500
Class A shares issued in the Conversion . . . . . . . . . . . -- -- 5,325
Balance, end of period . . . . . . . . . . . . . . . . . . . . 75,724 75,554 74,794
Common Stock and Capital in Excess of Par Value
Balance, beginning of period . . . . . . . . . . . . . . . . . $ 458,400 $ 441,200 $ 278,100
Class A shares issued upon exercise of options . . . . . . . . 2,400 15,100 1,700
Class A shares issued under long-term bonus plan . . . . . . . 2,400 1,500 700
Class A shares issued under stock grant plan-net . . . . . . . 700 600 600
Class A shares issued in the Stock Offering . . . . . . . . . -- -- 100,500
Class A shares issued in the Conversion . . . . . . . . . . . -- -- 59,400
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 -- 200
Balance, end of period . . . . . . . . . . . . . . . . . . . . $ 464,000 $ 458,400 $ 441,200
Retained Earnings
Balance, beginning of period . . . . . . . . . . . . . . . . . $ 412,800 $ 234,200 $ 123,200
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . 207,500 178,600 111,000
Balance, end of period . . . . . . . . . . . . . . . . . . . . $ 620,300 $ 412,800 $ 234,200
Currency Translation Adjustments
Balance, beginning of period . . . . . . . . . . . . . . . . . $ (16,200) $ 13,300 $ 16,600
Translation adjustments-net . . . . . . . . . . . . . . . . . (21,100) (29,500) (3,300)
Balance, end of period . . . . . . . . . . . . . . . . . . . . $ (37,300) $ (16,200) $ 13,300
</TABLE>
Holders of Class A Common Stock are entitled to receive, on
a cumulative basis, the first dollar per share of dividends
declared. Thereafter, holders of Class A Common Stock and Class
B Common Stock will share ratably in any dividends declared.
Each share of Class A Common Stock is entitled to one vote and
each share of Class B Common Stock is entitled to five votes.
The Class B Common Stock is convertible into the Class A Common
Stock on a share for share basis.
In May 1991, the Company completed the Stock Offering. The
proceeds were used by the Company to prepay its $38,000,000
special purpose term loan, which was obtained in March 1991, and
to prepay $63,500,000 of its Term Loan Facilities. FI and
William Farley combined also sold 5,250,000 shares in the Stock
Offering.
<PAGE>
<PAGE> 66
In July 1991, the Company called for redemption all of its
Debentures due March 1, 2002 totaling $59,900,000. All of the
Debentures were converted into Class A Common Stock of the
Company at a conversion price of $11.25 per share. Approximately
5,325,000 shares were issued in the Conversion.
<PAGE>
<PAGE> 67
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Consolidated Statement of Common Stockholders' Equity -
(Concluded)
As a result of the Stock Offering, other issuances of Class
A Common Stock (primarily through the Conversion) during 1991 and
the disposition of certain shares by FI during 1991, 1992 and
1993, approximately 9.3% of the Company's common stock at
December 31, 1993 is held by FI and William Farley. Because
these affiliates hold all of the Class B Common Stock of the
Company outstanding, which has five votes per share, they control
approximately 33% of all voting rights of the Company. All
actions submitted to a vote of stockholders are voted on by
holders of Class A Common Stock and Class B Common Stock voting
together as a single class, except for the election of directors.
With respect to the election of directors, holders of the Class A
Common Stock vote as a separate class and are entitled to elect
25% of the total number of directors constituting the entire
Board of Directors and, if not a whole number, then the holders
of the Class A Common Stock are entitled to elect the nearest
higher whole number of directors that is at least 25% of the
total number of directors. If, at the record date for any
stockholder meeting at which directors are elected, the number of
shares of Class B Common Stock outstanding is less than 12.5% of
the total number of shares of both classes of common stock
outstanding, then the holders of Class A Common Stock would vote
together with the holders of Class B Common Stock to elect the
remaining directors to be elected at such meeting, with the
holders of Class A Common Stock having one vote per share and the
holders of Class B Common Stock having five votes per share. At
December 31, 1993, FI and William Farley's combined ownership of
Class B Common Stock is approximately 8.8% of the total common
stock of the Company outstanding. As a result, Mr. Farley does
not have the sole ability to elect those members of the Company's
Board of Directors who are not separately elected by the holders
of the Company's Class A Common Stock.
Business Segment and Major Customer Information
The Company operates in only one business segment consisting
of the manufacturing and marketing of basic apparel. Sales to
one customer amounted to approximately 13.4%, 11.8% and 9.6% of
consolidated net sales in 1993, 1992 and 1991, respectively.
Additionally, sales to a second customer amounted to
approximately 12.3%, 10.2% and 8.8% of consolidated net sales in
1993, 1992 and 1991, respectively.
<PAGE>
<PAGE> 68
Sales, operating earnings and identifiable assets are as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
Net Sales
<S> <S><C> <S><C> <S><C>
Domestic . . . . . . . . . . . . . . . . . . . $ 1,634,600 $ 1,616,800 $ 1,453,600
Foreign . . . . . . . . . . . . . . . . . . . 249,800 238,300 174,500
Total . . . . . . . . . . . . . . . . . . . . $ 1,884,400 $ 1,855,100 $ 1,628,100
Operating Earnings
Domestic . . . . . . . . . . . . . . . . . . . $ 368,900 $ 388,100 $ 317,400
Foreign . . . . . . . . . . . . . . . . . . . 29,800 36,100 13,100
General corporate expenses . . . . . . . . . . (17,200) (14,300) (11,200)
Total . . . . . . . . . . . . . . . . . . . . $ 381,500 $ 409,900 $ 319,300
</TABLE>
<PAGE>
<PAGE> 69
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Business Segment and Major Customer Information - (Concluded)
<TABLE>
<CAPTION> December 31,
1993 1992 1991
Identifiable Assets
<S> <S> <C> <S><C> <S><C>
Domestic . . . . . . . . . . . . . . . . . . . $ 2,390,700 $ 1,985,200 $ 1,773,400
Foreign . . . . . . . . . . . . . . . . . . . 300,500 278,100 271,400
Corporate . . . . . . . . . . . . . . . . . . 42,800 18,600 70,100
Total . . . . . . . . . . . . . . . . . . . . $ 2,734,000 $ 2,281,900 $ 2,114,900
</TABLE>
Corporate assets presented above consist primarily of cash
and other short-term investments, deferred financing costs, the
investment in Acme Boot in 1992 and 1991 and, in 1991, income
taxes and interest receivable.
Pension Plans
Pension expense was $5,500,000, $4,900,000 and $3,000,000 in
1993, 1992 and 1991, respectively. The net pension expense is
comprised of the following (in thousands of dollars):
<TABLE>
<CAPTION> Year Ended December 31,
1993 1992 1991
Components:
<S> <S> <C> <S><C> <S> <C>
Service cost - benefits earned during the period . . . . . . $ 7,700 $ 7,000 $ 6,000
Interest cost on projected benefit obligation . . . . . . . 10,800 9,600 8,400
Return on assets:
Actual gain . . . . . . . . . . . . . . . . . . . . . . (5,900) (11,600) (26,900)
Deferred actuarial (losses) gains . . . . . . . . . . . (5,800) 1,200 16,800
Amortization of unrecognized January 1, 1987 net
transition asset . . . . . . . . . . . . . . . . . . . . (1,300) (1,300) (1,300)
Net periodic pension cost . . . . . . . . . . . . . $ 5,500 $ 4,900 $ 3,000
Assumptions:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . 9% 9% 9%
Rates of increase in compensation levels . . . . . . . . . . 5-8% 5-8% 5-8%
Expected long-term rate of return on assets . . . . . . . . 10% 10% 10%
</TABLE>
The following table sets forth the funded status of the plans
and amounts recognized in the Company's Consolidated Balance
Sheet (in thousands of dollars):
<PAGE>
<PAGE> 70
<TABLE>
<CAPTION> December 31,
1993 1992
Actuarial present value of benefit obligations:
<S> <S><C> <S><C>
Vested benefits . . . . . . . . . . . . . . . . . . . . . . $ 106,000 $ 78,300
Non-vested benefits . . . . . . . . . . . . . . . . . . . . 10,600 7,600
Accumulated benefit obligation . . . . . . . . . . . . . 116,600 85,900
Effect of projected future salary increases . . . . . . . . 50,500 34,100
Projected benefit obligation . . . . . . . . . . . . . . . . . . 167,100 120,000
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . 125,100 122,100
Plan assets (less than) in excess of projected
benefit obligation . . . . . . . . . . . . . . . . . . . . . (42,000) 2,100
Unrecognized loss (gain) . . . . . . . . . . . . . . . . . . . . 33,300 (9,400)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . (200) (200)
Unrecognized net transition asset at end of period . . . . . . . (9,800) (11,100)
Unfunded accrued pension cost at end of period . . . . . . . . . $ (18,700) $ (18,600)
</TABLE>
<PAGE>
<PAGE> 71
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Pension Plans - (Concluded)
The discount rate for purposes of determining the funded
status of the plans at December 31, 1993 and 1992 was 7.75% and
9%, respectively.
Plan assets, which are primarily invested in United States
Government and corporate debt securities, equity securities, real
estate and fixed income insurance contracts, are commingled in a
master trust which includes the assets of the pension plans of
substantially all affiliated companies controlled directly and
indirectly by William Farley (the "Master Trust"). Plan assets,
except those that are specifically identified to a particular
plan, are shared by all of the plans in the Master Trust
("Allocated Assets"). Any gains and losses associated with the
Allocated Assets are spread among each of the plans based on each
plan's respective share of the total Allocated Assets' market
value. The Company's plan assets represent approximately 51.8%
and 32.7% of the Master Trust Allocated Assets at December 31,
1993 and 1992, respectively.
Included in the Master Trust Allocated Assets at December
31, 1993 and 1992 were 647,852 and 1,007,860 shares,respectively,
(with a cost of $5,100,000 and $7,900,000, respectively, and a
market value of $15,600,000 and $49,000,000, respectively) of
the Company's Class A Common Stock. Also included in the Master
Trust Allocated Assets at December 31, 1991 was $7,000,000
principal amount (with a market value of $400,000) of West Point
Acquisition Corp. 18.75% Subordinated Increasing Rate Notes due
April 6, 1996. West Point Acquisition Corp. was formerly a
majority owned subsidiary of FI. Such debentures were sold by
the Master Trust in 1992 for approximately $1,600,000.
As of December 31, 1993 and 1992, the Master Trust holds
348,000 shares (with a cost of $7,700,000 and a market value of
$8,400,000 and $16,900,000, respectively) of the Company's Class
A Common Stock that is specifically identified to the retirement
plans of FI. Any change in market value associated with these
shares is allocated entirely to the FI plans and does not effect
the Master Trust Allocated Assets.
Depreciation Expense
Depreciation expense, including amortization of capital
leases, approximated $84,300,000, $67,800,000 and $58,900,000 in
1993, 1992 and 1991, respectively.
<PAGE>
<PAGE> 72
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Income Taxes
Income taxes are included in the Consolidated Statement of
Earnings as follows (in thousands of dollars):
<TABLE>
<CAPTION> Year Ended December 31,
1993 1992 1991
<S> <S> <C> <S> <C> <S> <C>
Income tax expense on earnings
before extraordinary items and cumulative
effect of change in accounting principle . . . $ 154,300 $ 131,400 $ 90,000
Extraordinary items . . . . . . . . . . . . . . . (4,700) (5,100) --
Cumulative effect of change in
accounting for income taxes . . . . . . . . . (3,400) -- --
Total income tax expense . . . . . . . . . . . $ 146,200 $ 126,300 $ 90,000
</TABLE>
Included in earnings before extraordinary items and
cumulative effect of change in accounting principle are foreign
earnings of $17,000,000, $34,600,000 and $16,600,000, in 1993,
1992 and 1991, respectively.
The components of income tax expense (benefit) related to
earnings before extraordinary items and cumulative effect of
change in accounting principle were as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <S> <C> <S> <C> <S> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . $ 111,100 $ 124,100 $ 59,500
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,100 9,700 6,900
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,900 6,800 4,200
Total current . . . . . . . . . . . . . . . . . . . . . . 124,100 140,600 70,600
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,500 (9,000) 19,000
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800 (400) 800
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . (100) 200 (400)
Total deferred . . . . . . . . . . . . . . . . . . . . . . 30,200 (9,200) 19,400
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 154,300 $ 131,400 $ 90,000
</TABLE>
<PAGE>
<PAGE> 73
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Income Taxes - (Continued)
Deferred income taxes related to earnings before
extraordinary items and cumulative effect of change in accounting
principle were as follows (in thousands of dollars):
<TABLE>
<CAPTION> Year Ended December 31,
1993 1992 1991
<S> <S> <C> <S> <C> <S><C>
Payments on certain obligations of former subsidiaries . . $ 13,500 $ 9,900 $ 4,300
Depreciation and amortization . . . . . . . . . . . . . . 10,300 5,700 7,000
Interest on income taxes receivable, net of tax refund . . -- (16,900) 6,300
Interest on prior years' taxes . . . . . . . . . . . . . -- 3,600 3,700
Writedown of investment in Acme Boot . . . . . . . . . . . -- -- (4,800)
Provision for certain obligations of former subsidiaries . -- -- (1,500)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . 6,400 (11,500) 4,400
Deferred income tax expense (benefit) . . . . . . . . $ 30,200 $ (9,200) $ 19,400
</TABLE>
The income tax rate on earnings before extraordinary items
and cumulative effect of change in accounting principle differed
from the Federal statutory rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Federal statutory rate . . . . . . . . . . . . . . . . . . . 35.0% 34.0% 34.0%
Goodwill amortization . . . . . . . . . . . . . . . . . . . 2.5 2.7 4.2
State income taxes, net of Federal tax benefit . . . . . . . 2.1 1.9 2.3
Interest on prior years' taxes . . . . . . . . . . . . . . . 2.1 1.9 2.3
Income taxes receivable . . . . . . . . . . . . . . . . . . -- -- (5.2)
Writedown of investment in Acme Boot . . . . . . . . . . . . -- -- 4.2
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . .3 .6 3.0
Effective rate . . . . . . . . . . . . . . . . . . . . . 42.0% 41.1% 44.8%
</TABLE>
<PAGE>
<PAGE> 74
Deferred income taxes are provided for temporary differences
between income tax and financial statement recognition of
revenues and expenses. Deferred tax liabilities (assets) are
comprised of the following (in thousands of dollars):
<TABLE>
<CAPTION> December 31,
1993
<S> <S> <C>
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . $ 92,100
Items includible in future tax years . . . . . . . . . . . . . . . . . . . 21,000
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . 113,100
Accrued employee benefit expenses . . . . . . . . . . . . . . . . . . . . (18,300)
Acquired tax benefits and basis differences . . . . . . . . . . . . . . . (14,400)
Allowance for possible losses on receivables . . . . . . . . . . . . . . . (5,800)
Inventory valuation reserves . . . . . . . . . . . . . . . . . . . . . . . (4,800)
Items deductible in future tax years . . . . . . . . . . . . . . . . . . . (18,800)
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . (62,100)
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . $ 51,000
</TABLE>
<PAGE>
<PAGE> 75
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Income Taxes - (Concluded)
Effective January 1, 1993, the Company recorded the
cumulative effect of a change in accounting principle related to
the initial adoption of Statement No. 109 resulting in a
$3,400,000 ($.04 per share) benefit.
The Company paid the IRS approximately $28,300,000 in 1993
in settlement of Federal income tax assessments for the tax
periods ended December 31, 1984 and July 31, 1985 (the final
predecessor tax periods). This amount included approximately
$14,800,000 of accrued interest. The Company had previously
established reserves for these matters and these payments did not
have an impact on the current year's tax provision.
The IRS previously asserted income tax deficiencies,
excluding statutory interest which accrues from the date the tax
was due until payment, for the Company of approximately
$93,000,000 for the years 1978-1980 and $15,400,000 for the years
1981-1983. The Company had protested the IRS's asserted tax
deficiencies for these six years with respect to a number of
issues and also had raised certain affirmative tax issues that
bear on these years. Settlement agreements with respect to all
the 1978-1980 and 1981-1983 protested and affirmative issues
resulted in the Company receiving a refund of approximately
$5,900,000, including interest, in January 1993.
In an unrelated matter, the IRS declined to seek United
States Supreme Court review of a decision by the United States
Court of Appeals for the Third Circuit which reversed a lower
court ruling and directed the lower court to order a refund to
the Company of approximately $10,500,000 in Federal income taxes
collected from a predecessor of the Company, plus approximately
$49,400,000 in interest. The Company received the full refund of
approximately $60,000,000 in March 1992. However, in September
1992 the IRS issued a statutory notice of deficiency in the
amount of approximately $7,300,000 for the taxable years from
which the March 1992 refund arose, exclusive of interest which
would accrue from the date the IRS asserted the tax was due until
payment, presently a period of about 24 years. Based on
discussions with tax counsel, the Company believes that the
asserted legal basis for the IRS's position in this matter is
without merit and that the ultimate resolution will not have a
material effect on the financial condition or the operations of
the Company.
Cash payments for income taxes were $137,500,000,
$131,600,000 and $80,200,000 in 1993, 1992 and 1991,
respectively.
Other Expense-Net
<PAGE>
<PAGE> 76
Included in other expense-net in 1993, 1992 and 1991 is
deferred debt fee amortization and bank fees of approximately
$7,900,000, $10,100,000 and $9,000,000, respectively. Other
expense-net in 1991 includes interest income of $49,400,000 on a
court-ordered refund of Federal income taxes. See "Income
Taxes." Other expense-net in 1991 also includes charges of
$10,200,000 to provide for certain obligations and other matters
related to former subsidiaries and $39,200,000 to write down the
Company's investment in Acme Boot to its then market value. See
"Related Party Transactions."
<PAGE>
<PAGE> 77
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Earnings Per Share
Primary earnings per share are based on the weighted average
number of common shares and equivalents outstanding during the
year. Fully diluted earnings per share, for those periods prior
to the Conversion, further assumed the conversion of the
Debentures into Class A Common Stock and an increase in earnings
to eliminate the after tax equivalent of interest expense on the
Debentures.
Related Party Transactions
Under the terms of a management agreement between FII and
the Company, FII provides the Company, to the extent that the
Company may request, (i) general management services which
include, but are not limited to, financial management, legal,
tax, accounting, corporate development, human resource and
personnel advice; (ii) investment banking services in connection
with the acquisition or disposition of the assets or operations
of a business or entity; (iii) financing services in connection
with the arrangement by FII of public or private debt (including
letter of credit facilities); and (iv) other financial,
accounting, legal and advisory services rendered outside the
ordinary course of the Company's business. FII is owned and
controlled by Mr. Farley; its approximately 60 employees provide
services to companies owned or controlled by Mr. Farley,
including the Company. Certain of the executive officers of the
Company, including Mr. Farley for periods prior to December 31,
1991, are employed by, and receive their compensation from, FII.
These officers devote their time as needed to those companies
owned and controlled by Mr. Farley and, accordingly, do not
devote full time to any single company, including the Company.
In consideration for investment banking and financing
services, the Company pays FII fees established by FII and
determined to be reasonable by FII in relation to (i) the size
and complexity of the transaction; and (ii) the fees customarily
charged by other advisors for similar investment banking and
financing services; provided, such fees shall not exceed two
percent of the total consideration paid or received by the
Company or two percent of the aggregate amount available for
borrowing or use under the subject agreement or facility. Fees
for investment banking and financing services are generally
payable to FII upon the closing of the subject transaction or
agreement.
Effective January 1993, the Company entered into a new
management agreement (the "Management Agreement") with FII
pursuant to which FII agreed to render substantially similar
services to the Company as under the prior management agreements.
Under the terms of a management agreement, the Company pays a fee
<PAGE>
<PAGE> 78
to FII based on FII's cost of providing management services. The
Company also paid a financing fee to FII during 1992 under the
terms of a management agreement. The Company paid FII
$9,900,000 in 1993 and $9,300,000 in 1992, of which approximately
none and $2,300,000 was capitalized as deferred financing costs
in 1993 and 1992, respectively. It is anticipated that the
Company will enter into a management agreement for 1994 under
substantially the same terms and conditions as the Management
Agreement.
<PAGE>
<PAGE> 79
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Concluded)
Related Party Transactions - (Concluded)
Concurrently with entering into the management agreement
with FII in 1992, the Company's Board of Directors determined to
employ Mr. Farley directly as Chairman and Chief Executive
Officer of the Company. Mr. Farley did not receive compensation
in 1993 or 1992 from FII for his services as Chairman and Chief
Executive Officer of the Company.
In consideration for general management services rendered
prior to 1992, the Company paid FII an annual fee, subject to
certain limitations imposed by the Company's Board of Directors,
based on a percentage of net sales, which fees were limited to
$10,000,000 in 1991. For the year ended December 31, 1991 the
Company paid management service fees to FII of approximately
$10,000,000. No financing fees were charged to the Company by FII
in 1991.
The Company completed the sale of the stock of Acme Boot at
book value, which approximated fair market value, to an affiliate
in June 1987 for an aggregate of $38,400,000 of cash and
preferred stock and subordinated debentures of the affiliate.
The Company recognized no earnings in 1992 or 1991 related to its
investment in the securities of the affiliate because of the
inability of the affiliate to make payments under the terms of
the securities. In the fourth quarter of 1991, the Company
recognized a pretax charge of $39,200,000 in other expense-net to
write down its investment in Acme Boot to its then market value.
In the fourth quarter of 1993, the Company received approximately
$72,900,000 from Acme Boot representing the entire unpaid
principal and liquidation preference (including accrued interest
and dividends) on its investment in the securities of the
affiliate. The Company recorded a pretax gain of approximately
$67,300,000 in connection with the investment in Acme Boot upon
the receipt of the above mentioned proceeds. See "Contingent
Liabilities."
<PAGE>
<PAGE> 80
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA
Quarterly Financial Summary (Unaudited)
(In millions of dollars, except per share amounts)
<TABLE>
<CAPTION>
Quarter Total
First Second Third Fourth Year
1993
<S> <S><C> <S><C> <S><C> <S><C> <S> <C>
Net sales . . . . . . . . . . . . . . . . . $ 428.9 $ 523.0 $ 484.2 $ 448.3 $ 1,884.4
Gross earnings . . . . . . . . . . . . . . 157.7 192.8 175.1 121.8 647.4
Operating earnings . . . . . . . . . . . . 94.3 121.7 108.4 57.1 381.5
Earnings before extraordinary items
and cumulative effect of change in
accounting principle . . . . . . . . . 44.1 58.4 48.6 61.7 212.8
Net earnings . . . . . . . . . . . . . . . 47.5<F1> 58.4 40.0<F2> 61.6<F3> 207.5
Earnings per common share before
extraordinary items and
cumulative effect of change
in accounting principle . . . . . . . .58<F1> .77 .64<F2> .81<F3> 2.80
Quarter Total
First Second Third Fourth Year
1992
Net sales . . . . . . . . . . . . . . . . . $ 423.3 $ 534.1 $ 451.2 $ 446.5 $ 1,855.1
Gross earnings . . . . . . . . . . . . . . 143.6 185.9 162.2 168.6 660.3
Operating earnings . . . . . . . . . . . . 85.8 122.8 100.1 101.2 409.9
Earnings before extraordinary items
and cumulative effect of change
in accounting principle . . . . . . . 36.1 57.0 46.4 49.0 188.5
Net earnings . . . . . . . . . . . . . . . 36.1 57.0 46.4 39.1<F4> 178.6
Earnings per common share before
extraordinary items
and cumulative effect of change
in accounting principle . . . . . . . . .48 .75 .61 .64<F4> 2.48
<PAGE>
<PAGE> 81
<FN>
<F1> In the first quarter of 1993, the Company recorded the
cumulative effect of a change in accounting principle
related to the adoption of Statement No. 109 resulting in a
$3.4 ($.04 per share) benefit.
<F2> In connection with the refinancing of the Credit Agreements
and the redemption of the 12-3/8% Notes in the third quarter
of 1993, the Company recorded an extraordinary charge of
approximately $8.6 ($.11 per share) which consists
principally of the non-cash write-off of the related
unamortized debt expense on the Credit Agreements and the
12-3/8% Notes and the premiums paid in connection with the
early redemption of the 12-3/8% Notes, both net of income tax
benefits.
<F3> In the fourth quarter of 1993, the Company recorded a pretax
gain of approximately $67.3 ($.55 per share) related to its
investment in Acme Boot.
<F4> In connection with the redemption of the 10-3/4% Notes in
the fourth quarter of 1992, the Company recorded an
extraordinary charge of approximately $9.9 ($.13 per share)
which consists principally of the premiums paid in
connection with the early redemption of the 10-3/4% Notes and
the non-cash write-off of the related unamortized debt
expense, both net of income tax benefits.
</TABLE>
<PAGE>
<PAGE> 82
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of December 31,
1993 were as follows:
Name Age Position
William Farley 51 Chairman of the Board
and Chief Executive Officer
John B. Holland 61 President and Chief Operating
Officer
Richard C. Lappin 49 Vice-Chairman of the Board
Richard M. Cion 50 Senior Executive Vice
President-
Corporate Development
Michael F. Bogacki 39 Vice President and Controller
Kenneth Greenbaum 49 Vice President and General
Counsel
Burgess D. Ridge 49 Vice President-Administration
Earl C. Shanks 37 Vice President and Treasurer
Officers serve at the discretion of the Board of Directors.
Messrs. Farley (for periods prior to January 1, 1992), Lappin,
Cion, O'Hara, Bogacki, Greenbaum, Ridge and Shanks are employed
by FII which provides management services to companies owned or
controlled by Mr. Farley. They devote their time to those
companies as needed and, accordingly, do not devote full time to
any single company, including the Company. Certain of the
executive officers, as noted below, are also executive officers
of FI and VBQ, Inc. ("VBQ"), formerly a defense contractor and an
affiliate of FI. Certain of the executive officers, as noted
below, were also executive officers of Valley Fashions Corp.
(formerly West Point Acquisition Corp.). During 1992, FI and
Valley Fashions Corp. emerged from bankruptcy proceedings and VBQ
became the subject of a Chapter 7 liquidation.
William Farley. Mr. Farley has been Chairman of the Board
and Chief Executive Officer of the Company since May 1985.
During the past five years, Mr. Farley has also been Chairman and
Chief Executive Officer of FII. He has held substantially
similar positions with FI since 1982, VBQ since 1984, West Point-
Pepperell, Inc. ("West Point") from April 1989 until October 1992
and Valley Fashions Corp. from March 1989 until October 1992.
<PAGE>
<PAGE> 83
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -
(Continued)
John B. Holland. Mr. Holland has been a director of the
Company since November 1992 and President of the Company since
May 1992. Mr. Holland has served as Chief Operating Officer of
the Company for more than the past five years. Mr. Holland
served as Vice Chairman of West Point from April 1989 until
September 1992 and as a director of West Point from April 1989
until September 1992. Mr. Holland served as Vice Chairman of
Valley Fashions Corp. from March 1989 until June 1990. Mr.
Holland is also a director of Dollar General Corp. and First
Kentucky National Corp.
Richard C. Lappin. Mr. Lappin has been a director of the
Company since December 1990 and Vice Chairman of the Company
since October 1991. Mr. Lappin has been President and Chief
Operating Officer of FII since February 1991. From October 1989
to February 1991, Mr. Lappin served in various capacities with
FI, including President and Chief Executive Officer of the
Doehler Jarvis and Southern Fastening Systems divisions of FI.
From 1988 to October 1989, Mr. Lappin served as President of the
North American Operations of the Champion Spark Plug Company, a
manufacturer of automotive products.
Richard M. Cion. Mr. Cion has been Senior Executive Vice
President of the Company since June 1990, of FII since February
1990 and of West Point from February 1990 until October 1992.
Mr. Cion was also a director of West Point from April 1989 until
October 1992. Mr. Cion served as a director of Valley Fashions
Corp. from April 1989 until June 1992. Mr. Cion was also Senior
Executive Vice President of Valley Fashions Corp. from March 1992
until October 1992. From April 1988 to February 1990, Mr. Cion
was a Managing Director with Drexel Burnham Lambert Incorporated,
an investment banking firm.
Paul M. O'Hara. Mr. O'Hara has been Executive Vice
President and Chief Financial Officer of the Company, FII and FI
since April 1988, West Point from April 1989 until November 1992
and Valley Fashions Corp from March 1989 until November 1992.
Mr. O'Hara resigned from the Company effective March 1, 1994.
Michael F. Bogacki. Mr. Bogacki has been Corporate
Controller of the Company, FII and FI since October 1988. Mr.
Bogacki was appointed Vice President of FII in November 1989, of
the Company in May 1990 and of FI in June 1990. In June 1991,
Mr. Bogacki was appointed Assistant Secretary of the Company.
Mr. Bogacki was Corporate Controller of Valley Fashions Corp.
from March 1989 until November 1992. Mr. Bogacki was also Vice
President of Valley Fashions Corp. from June 1991 until November
1992.
Kenneth Greenbaum. Mr. Greenbaum has served as Vice
President, General Counsel and Secretary of the Company, FII and
FI for more than the past five years. Mr. Greenbaum was Vice
<PAGE>
<PAGE> 84
President of West Point from April 1989 until November 1992. Mr.
Greenbaum served as Vice President of Valley Fashions Corp. from
March 1989 until November 1992. During the past five years, Mr.
Greenbaum has been General Counsel of VBQ.
Burgess D. Ridge. Mr. Ridge was Assistant Treasurer of the
Company, FII and FI from before 1989 until October 1991. Mr.
Ridge was appointed Vice President Administration of FII and FI
in August 1991 and of the Company in October 1991.
<PAGE>
<PAGE> 85
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -
(Concluded)
Earl C. Shanks. Mr. Shanks served as Vice President-Taxes
and Assistant Secretary of the Company, FII and FI from May 1986
until June 1991. In June 1991, Mr. Shanks became Treasurer of the
Company, FII, FI and VBQ. Mr. Shanks was Vice President and
Assistant Secretary of West Point from April 1989 until November
1992. Mr. Shanks served as Vice President-Taxes and Assistant
Secretary of Valley Fashions Corp. from March 1989 until June
1991. Mr. Shanks was Vice President and Treasurer of Valley
Fashions Corp. from June 1991 until November 1992. During the
past five years Mr. Shanks has been Vice President-Taxes of VBQ.
Information relating to the directors of the Company is set
forth in the Registrant's proxy statement for its Annual Meeting
of Stockholders to be held on May 17, 1994 (the "Proxy
Statement") to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A of the Securities Exchange
Act of 1934, as amended, and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth
in the Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended, and is hereby incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information relating to the security ownership of certain
beneficial owners and management is set forth in the Proxy
Statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the Securities Exchange Act of
1934, as amended, and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the terms of a management agreement between FII and
the Company, FII provides the Company, to the extent that the
Company may request, (i) general management services which
include, but are not limited to, financial management, legal,
tax, accounting, corporate development, human resource and
personnel advice; (ii) investment banking services in connection
with the acquisition or disposition of the assets or operations
of any business or entity; (iii) financing services in connection
with the arrangement by FII of public or private debt (including
letter of credit facilities); and (iv) other financial,
accounting, legal and advisory services rendered outside the
ordinary course of the Company's business. FII is owned and
controlled by Mr. Farley; its approximately 60 employees provide
services to companies owned or controlled by Mr. Farley,
<PAGE>
<PAGE> 86
including the Company. Certain of the executive officers of the
Company, including Mr. Farley for periods prior to December 31,
1991, are employed by, and receive their compensation from, FII.
These officers devote their time as needed to those companies
owned and controlled by Mr. Farley and, accordingly, do not
devote full time to any single company, including the Company.
<PAGE>
<PAGE> 87
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
(Concluded)
In consideration for investment banking and financing
services, the Company pays FII fees established by FII and
determined to be reasonable by FII in relation to (i) the size
and complexity of the transaction; and (ii) the fees customarily
charged by other advisors for similar investment banking and
financing services; provided, such fees shall not exceed two
percent of the total consideration paid or received by the
Company or two percent of the aggregate amount available for
borrowing or use under the subject agreement or facility. Fees
for investment banking and financing services are generally
payable to FII upon the closing of the subject transaction or
agreement.
Effective January 1993, the Company entered into a new
management agreement (the "Management Agreement") with FII
pursuant to which FII agreed to render substantially similar
services to the Company as under the prior management agreement.
Under the terms of a management agreement, the Company pays a fee
to FII based on FII's cost of providing management services. The
Company also paid a financing fee to FII during 1992 under the
terms of a management agreement. The Company paid FII
$9,900,000 in 1993 and $9,300,000 in 1992, of which approximately
none and $2,300,000 was capitalized as deferred financing costs
in 1993 and 1992, respectively. It is anticipated that the
Company will enter into a management agreement for 1994 under
substantially the same terms and conditions as the Management
Agreement.
Concurrently with entering into the new management agreement
with FII in 1992, the Company's Board of Directors determined to
employ Mr. Farley directly as Chairman and Chief Executive
Officer of the Company. Mr. Farley did not receive compensation
in 1993 or 1992 from FII for his services as Chairman and Chief
Executive Officer of the Company.
In consideration for general management services rendered
prior to 1992, the Company paid FII an annual fee, subject to
certain limitations imposed by the Company's Board of Directors,
based on a percentage of net sales, which fees were limited to
$10,000,000 in 1991. For the year ended December 31, 1991 the
Company paid management service fees to FII of approximately
$10,000,000. No financing fees were charged to the Company by FII
in 1991.
The Company completed the sale of the stock of Acme Boot at
book value, which approximated fair market value, to an affiliate
in June 1987 for an aggregate of $38,400,000 of cash and
preferred stock and subordinated debentures of the affiliate.
The Company recognized no income in 1992 or 1991 related to its
investment in the securities of the affiliate because of the
inability of the affiliate to make payments under the terms of
the securities. In the fourth quarter of 1991, the Company
<PAGE>
<PAGE> 88
recognized a pretax charge of $39,200,000 in other expense-net to
write down its investment in Acme Boot to its then market value.
In the fourth quarter of 1993, the Company received approximately
$72,900,000 from Acme Boot representing the entire unpaid
principal and liquidation preference (including accrued interest
and dividends) on its investment in the securities of the
affiliate. The Company recorded a pretax gain of approximately
$67,300,000 in connection with the investment in Acme Boot.
Information relating to certain relationships and related
transactions is set forth in the Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A
of the Securities Exchange Act of 1934, as amended, and is hereby
incorporated by reference.
<PAGE>
<PAGE> 89
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Financial statements, financial statement schedules and
exhibits
1. Financial Statements
The financial statements listed in the index to Financial
Statements and Supplementary Data on page 33 are filed as
part of this Annual Report.
2. Financial Statement Schedules
The schedules listed in the index to Financial Statements
and Supplementary Data on page 33 are filed as part of this
Annual Report.
3. Exhibits
The exhibits listed in the Index to Exhibits on page 96 are
filed as part of this Annual Report.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the fourth quarter of
1993.
<PAGE>
<PAGE> 90
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Chicago, State of
Illinois, on March 21, 1994.
FRUIT OF THE LOOM, INC.
BY: MICHAEL F. BOGACKI
(Michael F. Bogacki
Vice President and Controller)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in the
capacities indicated on March 21, 1994.
Name Capacity
WILLIAM FARLEY Chairman of the Board and
(William Farley) Chief Executive Officer
(Principal Executive
Officer) and Director
MICHAEL F. BOGACKI Vice President and
(Michael F. Bogacki) Controller (Principal
Accounting and Financial
Officer)
OMAR Z. AL ASKARI Director
(Omar Z. Al Askari)
DENNIS S. BOOKSHESTER Director
(Dennis S. Bookshester)
JOHN B. HOLLAND Director
(John B. Holland)
LEE W. JENNINGS Director
(Lee W. Jennings)
HENRY A. JOHNSON Director
(Henry A. Johnson)
RICHARD C. LAPPIN Director
(Richard C. Lappin)
A. LORNE WEIL Director
(A. Lorne Weil)
SIR BRIAN G. WOLFSON Director
(Sir Brian G. Wolfson)
<PAGE>
<PAGE> 91
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
<TABLE>
<CAPTION>
Balance at Other Balance at
Beginning Additions at Changes - End of
Classification of Period Cost Retirements add (deduct)<F1> Period
<S> <S> <C> <S> <C> <S> <C> <S> <C> <S><C>
1993
Land . . . . . . . . . . . . . . . $ 8,200 $ 1,200 $ (300) $ -- $ 9,100
Buildings, structures and
improvements . . . . . . . . . 248,200 77,600 (600) -- 325,200
Machinery and equipment . . . . . 673,600 199,600 (9,000) 3,700 867,900
Construction in progress . . . . . 47,600 (15,900) -- -- 31,700
$ 977,600 $ 262,500 $ (9,900) $ 3,700 $ 1,233,900
1992
Land . . . . . . . . . . . . . . . $ 6,700 $ 2,100 $ (100) $ (500) $ 8,200
Buildings, structures and
improvements . . . . . . . . . 222,000 34,200 (1,800) (6,200) 248,200
Machinery and equipment . . . . . 574,400 108,300 (3,200) (5,900) 673,600
Construction in progress . . . . . 3,300 44,300 -- -- 47,600
$ 806,400 $ 188,900 $ (5,100) $ (12,600) $ 977,600
1991
Land . . . . . . . . . . . . . . . $ 6,500 $ 200 $ (100) $ 100 $ 6,700
Buildings, structures and
improvements . . . . . . . . . 187,800 36,900 (4,000) 1,300 222,000
Machinery and equipment . . . . . 527,400 57,700 (12,200) 1,500 574,400
Construction in progress . . . . . 23,800 (20,500) -- -- 3,300
$ 745,500 $ 74,300 $ (16,300) $ 2,900 $ 806,400
<FN>
<F1> Principally currency translation adjustments and, in 1993,
the Salem Acquisition.
</TABLE>
<PAGE>
<PAGE> 92
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
<TABLE>
<CAPTION>
Balance at Additions Other Balance at
Beginning Charged to Changes - End of
of Period Costs and Expenses Retirements add (deduct)<F1> of Period
1993
<S> <S><C> <S> <C> <S><C> <S><C> <S><C>
Buildings, structures and
improvements . . . . . . . . . . $ 51,700 $ 14,500 $ (200) $ -- $ 66,000
Machinery and equipment . . . . . . 238,800 69,800 (6,600) (100) 301,900
$ 290,500 $ 84,300 $ (6,800) $ (100) $ 367,900
1992
Buildings, structures and
improvements . . . . . . . . . . $ 41,300 $ 12,400 $ (1,600) $ (400) $ 51,700
Machinery and equipment . . . . . . 186,500 55,400 (1,800) (1,300) 238,800
$ 227,800 $ 67,800 $ (3,400) $ (1,700) $ 290,500
1991
Buildings, structures and
improvements . . . . . . . . . . $ 32,300 $ 11,300 $ (2,400) $ 100 $ 41,300
Machinery and equipment . . . . . . 145,000 47,600 (6,300) 200 186,500
$ 177,300 $ 58,900 $ (8,700) $ 300 $ 227,800
<FN>
<F1> Principally currency translation adjustments.
</TABLE>
<PAGE>
<PAGE> 93
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
<TABLE>
<CAPTION>
Balance at Additions Balance
Beginning Charged to Charged to at End
Description: of Period Costs and Expense Other Accounts<F1> Deductions<F2> of Period
Year Ended December 31, 1993:
Reserves deducted from assets
to which they apply:
<S> <S><C> <S><C> <S> <C> <S><C> <S><C>
Accounts Receivable allowances:
Doubtful accounts . . . . . . . . . . $ 10,800 $ 4,100 $ 2,800 $ 5,200 $ 12,500
Sales discounts, returns, and
allowances . . . . . . . . . . . . 3,500 3,600 -- 3,500 3,600
$ 14,300 $ 7,700 $ 2,800 $ 8,700 $ 16,100
Year Ended December 31, 1992:
Reserves deducted from assets
to which they apply:
Accounts Receivable allowances:
Doubtful accounts . . . . . . . . . . $ 11,400 $ 5,100 $ 600 $ 6,300 $ 10,800
Sales discounts, returns, and
allowances . . . . . . . . . . . . 2,800 900 -- 200 3,500
$ 14,200 $ 6,000 $ 600 $ 6,500 $ 14,300
Year Ended December 31, 1991:
Reserves deducted from assets
to which they apply:
Accounts Receivable allowances:
Doubtful accounts . . . . . . . . . . $ 9,100 $ 6,900 $ 1,800 $ 6,400 $ 11,400
Sales discounts, returns, and
allowances . . . . . . . . . . . . 1,100 2,100 -- 400 2,800
$ 10,200 $ 9,000 $ 1,800 $ 6,800 $ 14,200
<FN>
<F1> Recoveries of bad debts and, in 1993, the Salem Acquisition.
<F2> Bad debts written off and allowances and discounts taken by
customers.
</TABLE>
<PAGE>
<PAGE> 94
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
<TABLE>
<CAPTION>
Maximum Average
Weighted Amount Amount Weighted
Balance at Average Outstanding Outstanding Interest
Category of Aggregate End of Interest During the During the Rate During
Short-term Borrowings Period Rate<F1> Period Period<F1> the Period
<S> <S> <C> <C> <S><C> <S><C> <C>
Year Ended December 31, 1993 . . . . . $ -- -- $ 311,800 $ 203,600 4.2%
Year Ended December 31, 1992 . . . . . $ 65,100 5.0% $ 180,100 $ 65,700 5.1%
Year Ended December 31, 1991 . . . . . $ 47,900 6.8% $ 245,000 $ 151,100 8.4%
<FN>
<F1> Average borrowings were determined by using the average of
month-end balances, and the average interest rates were
based on the weighted average interest rates for all short-
term borrowings.
</TABLE>
<PAGE>
<PAGE> 95
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
Item<F1> 1993 1992 1991
<S> <S> <C> <S> <C> <S> <C>
Maintenance and Repairs . . . . . . . . . $ 39,600 $ 39,200 $ 30,400
Advertising Costs . . . . . . . . . . . . $ 52,800 $ 62,500 $ 52,400
<FN>
<F1> Items omitted do not exceed 1% of total sales, or are
disclosed elsewhere herein.
</TABLE>
<PAGE>
<PAGE> 96
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
(Item 14(a)(3) and 14(c))
Sequential
Description page
number
3(a)* - Restated Certificate of Incorporation of the
Company and Certificate of Amendment of the
Restated Certificate of Incorporation of the
Company (incorporated herein by reference to
Exhibit 3 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993).
3(b)* - By-Laws of the Company (incorporated herein by
reference to Exhibit 4(b) to the Company's
Registration Statement on Form S-2, Reg. No.
33-8303 (the "S-2")).
4(a)* - $800,000,000 Credit Agreement dated as of August
16, 1993, among the several banks and other
financial institutions from time to time parties
thereto (the "Lenders"), Bankers Trust Company, a
New York banking corporation, as administrative
agent for the Lenders thereunder, Chemical Bank,
National Bank of North Carolina N.A., The Bank of
New York and the Bank of Nova Scotia, as co-agents.
(incorporated herein by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-3,
Reg. No. 33-50567 (the "1993 S-3")).
4(b)* - Subsidiary Guarantee Agreements dated as of August
16, 1993 by each of the guarantors signatory
thereto in favor of the beneficiaries referred to
therein (incorporated herein by reference to
Exhibit 4.4 to the 1993 S-3).
10(a)* - Fruit of the Loom 1989 Stock Grant Plan dated
January 1, 1989 (incorporated herein by reference
to Exhibit 10(b) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1988).
10(b)* - Fruit of the Loom 1987 Stock Option Plan
(incorporated herein by reference to Exhibit 10(b)
to the S-2).
10(c)* - Fruit of the Loom, Inc. Stock Option Agreement for
Richard C. Lappin (incorporated herein by reference
to Exhibit 10(d) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991).
10(d)* - Fruit of the Loom 1992 Executive Stock Option Plan
(incorporated herein by reference to the Company's
Registration Statement on Form S-8, Reg. No. 33-
57472).
10(e)* - Fruit of the Loom, Inc. Directors' Stock Option
Plan (incorporated herein by reference to the
Company's Registration Statement on Form S-8, Reg.
No. 33-50499).
<PAGE>
<PAGE> 97
10(f)* - Agreement and Plan of Merger, dated as of October
11, 1993, by and among Salem Sportswear
Corporation, Fruit of the Loom, Inc.and FTL
Acquisition Corp. (incorporated herein by reference
to Exhibit 2.1 to the 1993 S-3).
10(g) - Purchase Agreement dated as of February 28, 1994 98
among The Gitano Group, Inc., each of the direct
and indirect subsidiaries of Gitano and Fruit of
the Loom, Inc.
11 - Computation of Earnings Per Common Share. 133
22 - Subsidiaries of the Company. 135
24 - Consent of Ernst & Young. 138
* Document is available at the Public Reference Section of the
Securities and Exchange Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 (Commission file #1-8941).
The Registrant has not listed or filed as Exhibits to this
Annual Report certain instruments with respect to long-term debt
representing indebtedness of the Company and its subsidiaries
which do not individually exceed 10% of the total assets of the
Registrant and its subsidiaries on a consolidated basis.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Registrant
agrees to furnish such instruments to the Securities and Exchange
Commission upon request.
<PAGE>
<PAGE> 98
EXHIBIT 10(g)
PURCHASE AGREEMENT
AGREEMENT dated as of February 28, 1994 among THE GITANO
GROUP, INC., a Delaware corporation having an office at 1411
Broadway, New York, New York 10018 ("Gitano"); each of the direct
and indirect subsidiaries of Gitano signatory hereto (such
subsidiaries being referred to herein as the "Subsidiaries" and,
together with Gitano, as "SELLER"); and FRUIT OF THE LOOM, INC.,
a Delaware corporation having an office at 233 South Wacker
Drive, 5000 Sears Tower, Chicago, Illinois 60606 ("BUYER").
R E C I T A L S :
This Agreement sets forth the terms and conditions upon
which BUYER agrees to purchase from SELLER, and SELLER agrees to
sell to BUYER, the business of SELLER as presently conducted (the
"Business"), including substantially all of its assets, free and
clear of all Liens (as defined below) and debt, and certain
executory contracts.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants set forth herein, the parties agree as follows:
1. Definitions
The following terms, as used herein, have the following
meanings:
"Accounts Receivable" means all accounts receivable of
SELLER arising in the ordinary course of the Business
from SELLER's marketing services program (known as the
"advanced integration program"), the sale of goods at
wholesale and SELLER's licensing activities, excluding
all such accounts receivable that are more than 90 days
past due.
"Additional Designated Contract" has the meaning
assigned to that term in Section 2(c).
"Agreement" means this Purchase Agreement, including
all exhibits and schedules hereto.
"Approval Order" means an order of the Bankruptcy
Court, in form and substance reasonably satisfactory to
BUYER, approving and authorizing SELLER to enter into
this Agreement and to consummate the transactions
contemplated hereby, ordering that (i) the Assets sold to
BUYER pursuant to this Agreement shall be free and clear
of all Liens, such Liens to attach to the Purchase Price
payable pursuant to Section 3; provided, however, that
such Liens shall not attach to any portion of the
Purchase Price to be returned to BUYER as a result of the
adjustments set forth in Sections 3(b), 3(c) or 3(d);
(ii) BUYER has acted in good faith within the context of
Section 363(m) of the Bankruptcy Code; (iii) BUYER is not
acquiring any of SELLER's liabilities except as expressly
provided in this Agreement; (iv) except with respect to
claims expressly assumed by BUYER pursuant to this
Agreement, all Persons are enjoined from in any way
pursuing BUYER by suit or otherwise, to recover on any
claim which it had, has or may have against SELLER; (v)
all Designated Contracts (other than Additional
<PAGE>
<PAGE> 99
Designated Contracts referred to in clause (B) of the
second paragraph of Section 2(c)) shall be rejected by
SELLER and all Assigned Contracts shall be assumed by
SELLER and assigned to BUYER pursuant to Section 365 of
the Bankruptcy Code (in each case in accordance with
Section 2(c)); and (vi) the caption of the Chapter 11
petitions filed by The Gitano Group, Inc., Gitano
Licensing, Inc., the Gitano Manufacturing Group, Inc. and
Gitano Sportswear LTD. shall be amended so as to
eliminate from the names of such entities the name
"Gitano" or any name similar to such name or any variants
or abbreviations of such name (e.g., such caption may
read: The XYZ Group, Inc., f/k/a The Gitano Group, Inc.;
XYZ Licensing, Inc., f/k/a Gitano Licensing, Inc.; The
XYZ Manufacturing Group, Inc., f/k/a The Gitano
Manufacturing Group, Inc.; and XYZ Sportswear LTD., f/k/a
Gitano Sportswear LTD., respectively).
"Assets" has the meaning assigned to that term in
Section 2.
"Assigned Contracts" has the meaning assigned to that
term in Section 2(c).
"Assumed A/R Amount" has the meaning assigned to that
term in Section 3(b)(ii).
"Assumed Inventory Amount" has the meaning assigned to
that term in Section 3(b)(i).
"Assumed Obligations" has the meaning assigned to that
term in Section 4(b).
"Bankruptcy Code" means Title 11 of the United States
Code, commonly known as the Bankruptcy Code, as it may be
amended.
"Bankruptcy Court" means the United States Bankruptcy
Court for the District in which SELLER files the
Bankruptcy Petition.
"Bankruptcy Petition" has the meaning assigned to that
term in Section 5.
"Business" has the meaning assigned to that term in the
first paragraph of the Recitals hereof.
"Closing" means the closing of the purchase and sale of
the Assets pursuant to this Agreement.
"Closing Date" means the time and date of the Closing
determined pursuant to Section 5.
"Designated Contracts" has the meaning assigned to that
term in Section 2(c).
"Employment Agreements" has the meaning assigned to
that term in Section 7(e).
"Equipment" has the meaning assigned to that term in
Section 2(a)(i).
"Equipment Leases" has the meaning assigned to that
term in Section 7(e).
"Escrow Agent" means Kronish, Lieb, Weiner & Hellman,
counsel to SELLER.
"Escrow Agreement" means the escrow agreement dated as
of the date hereof among BUYER, SELLER and the Escrow
Agent in the form of Exhibit A hereto.
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<PAGE>
<PAGE> 100
"Foreign Subsidiaries" means the direct or indirect
wholly owned subsidiaries of Gitano listed on Schedule 1
hereto.
"G.G. Licensing" means G.G. Licensing, Inc., a Delaware
corporation.
"Gitano's Best Knowledge" means the conscious awareness
of facts or other information by Robert E. Gregory, Jr.,
Robert J. Pines, C. William Crain, Eddie Albert, Steven
M. Gerber, Wendy Nacht, George Soffron or Camillo
Faraone.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the related
regulations and published interpretations.
"Initial Designated Contracts" has the meaning assigned
to that term in Section 2(c).
"Inventory" has the meaning assigned to that term in
Section 2(a)(ii).
"Inventory Cost" means SELLER's aggregate standard cost
for each item of its Inventory (including work-in-
progress) on the Closing Date, "WIP Closing Value" means
SELLER's aggregate standard cost for each unit of its
work-in-progress included within the Inventory on the
Closing Date, "WIP Unit Number" means the number of units
of SELLER's work-in-progress included within the
Inventory on the Closing Date, and "WIP Average Cost"
means an amount equal to the WIP Closing Value divided by
the WIP Unit Number, in each case determined in
accordance with SELLER's letter to BUYER dated the date
hereof.
"Licenses" has the meaning assigned to that term in
Section 7(e).
"Lien" means any lien, security interest, pledge,
hypothecation, encumbrance or other interest or claim
(including but not limited to any and all "claims" as
defined in Section 101(5) of the Bankruptcy Code and any
and all rights and claims under any bulk transfer
statutes and similar laws) in or with respect to any of
the Assets (including but not limited to any options or
rights to purchase such Assets and any mechanic's or tax
liens), whether arising by agreement, by statute or
otherwise and whether arising prior to, on or after the
date of the filing by SELLER pursuant to Section 5 of the
Bankruptcy Petition.
"Net Accounts Receivable" means the amount of the
Accounts Receivable, net of reserves for returns,
allowances, chargebacks and doubtful accounts, as of the
Closing Date, determined in accordance with SELLER's past
practice consistently applied.
"Other Excluded Contracts" has the meaning assigned to
that term in Section 2(c).
"PBGC" means Pension Benefit Guaranty Corporation.
"Person" means any individual, corporation, partner-
ship, joint venture, trust, association, unincorporated
organization, other entity, or governmental body or
subdivision, agency, commission or authority thereof.
K:\CORP\MSF\GITANO\BNKR-SAL.8
<PAGE>
<PAGE> 101
"Real Property Leases" has the meaning assigned to that
term in Section 7(e).
"Scheduling Order" means an order of the Bankruptcy
Court, in form and substance reasonably satisfactory to
BUYER, (i) approving the Topping Fee and Sections 7(m),
12(d) and 17(l), (ii) approving such bidding procedures
as may be reasonably acceptable to BUYER, including,
without limitation, (x) that "higher and better" offers
for the Assets be filed with the Bankruptcy Court no
later than three days prior to the hearing to consider
the Approval Order and (y) that "higher and better"
offers must be fully financed and contain a cash purchase
price that exceeds the Purchase Price by $3,000,000,
(iii) scheduling a hearing to approve the Approval Order,
(iv) providing that notice of the hearing and the relief
requested in the Approval Order be given to all creditors
of SELLER, including, without limitation, all Persons
holding a Lien on any of the Assets, all licensees, the
PBGC, International Union, United Automobile, Aerospace
and Agricultural Implement Workers of America and its
Local 260, and all relevant taxing authorities, (v)
providing for publication of the hearing notice in the
Wall Street Journal, National Edition, (vi) requiring
SELLER to serve a notice upon each non-SELLER party to
each License that does not constitute an Initial
Designated Contract or an Additional Designated Contract
referred to in clause (A) of the second paragraph of
Section 2(c) in advance of the hearing to consider the
Approval Order, advising of the existence of any default
of SELLER under such License (whether monetary or
otherwise) and the dollar amount believed to be necessary
to cure such default, and (vii) providing that any non-
SELLER party to such a License who fails to timely file a
response alleging the existence of other defaults and/or
contesting the dollar amount believed to be necessary to
cure any default shall be forever barred from
subsequently asserting any claim or default that existed
under such License as of the date of the notice sent by
SELLER to the non-SELLER party.
"SELLER LCs" means all letters of credit for the
purchase of Inventory which have been issued on behalf of
SELLER and remain outstanding as of the Closing Date.
"Topping Fee" means a fee payable by SELLER to BUYER
equal to $1.5 million.
"Topping Fee Event" means a sale or other disposition
of Assets, Licenses, Real Property Leases or Equipment
Leases (whether in one or more transactions) to another
buyer pursuant to an order of the Bankruptcy Court in
which the amount of the consideration payable in respect
of the Assets, Licenses, Real Property Leases or
Equipment Leases in the aggregate is greater than the
Purchase Price payable by BUYER pursuant to Section 3.
2. Purchase and Sale
(a) Subject to the terms and conditions of this Agree-
ment, on the Closing Date SELLER shall sell, transfer, assign and
K:\CORP\MSF\GITANO\BNKR-SAL.8
<PAGE>
<PAGE> 102
deliver to BUYER, free and clear of any and all Liens, and BUYER
shall purchase and acquire from SELLER, all right, title and
interest of SELLER in and to the following assets (collectively,
the "Assets"), in each case as of the Closing Date:
(i) All furniture, machinery, equipment, furnishings,
operating equipment, supplies and tools, and all parts
thereof and accessions thereto, owned by SELLER
(collectively, the "Equipment");
(ii) All current first-quality jeans replenishment
inventory (including raw materials and other supplies,
work-in-progress, in-transit inventory and finished
goods), owned by SELLER, which is held for sale to
customers in the ordinary course of the Business (collec-
tively, the "Inventory"), including all returns after the
Closing Date;
(iii) all other inventory (in addition to the
Inventory) used or held for use by SELLER in the
Business;
(iv) Subject to Section 2(a)(iv), all of the names,
trademarks, trade names, service marks and copyrights,
logos, slogans and patents, if any, (including any and
all applications, registrations, extensions and renewals
thereof) owned by SELLER (excluding G.G. Licensing), as
set forth on Schedule 2(a)(iv) hereto, together with all
associated goodwill;
(v) All of the assets of G.G. Licensing (which consist
of the trademarks set forth on Schedule 2(a)(v) hereto),
subject to certain perpetual licenses referred to in such
Schedule;
(vi) All of the stock in each of the Foreign
Subsidiaries, provided that such Foreign Subsidiary is
either (A) designated by BUYER on Schedule 1 hereto or
(B) designated by BUYER by notice to SELLER at least one
business day prior to the hearing in the Bankruptcy Court
to consider the Approval Order (it being understood that
the stock and assets of any Foreign Subsidiary not so
designated will be excluded from the Assets);
(vii) All customer and mailing lists of SELLER, and
existing telephone numbers, telecopier numbers and telex
numbers used by SELLER at any of its places of business;
(viii) All outstanding Accounts Receivable of SELLER;
(ix) All outstanding orders for the purchase of goods
from SELLER (including orders under the advanced
integration program referred to in the definition of
"Accounts Receivable" in Section 1);
(x) All invoices, bills of sale and other instruments
and documents evidencing SELLER's title to Assets
(including those relating to SELLER LCs) that are in the
possession of SELLER;
(xi) All data processing systems, records, files, data
bases, and other papers and information of SELLER used in
connection with the Business or in any way relating to
the Assets;
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(xii) All stationery and other imprinted material and
office supplies, and packaging and shipping materials, of
SELLER;
(xiii) The name "Gitano" and all corporate and other
names (excluding "Regatta" and related names) used by
SELLER in the Business or which are the subject of any
filing by SELLER including in any jurisdictions in which
SELLER is registered as a domestic or foreign corporation
and all variations of the foregoing; and
(xiv) All rights of SELLER or any Foreign Subsidiary
designated on Schedule 1 hereto with respect to any
insurance policy to the extent covering liabilities of
any such Foreign Subsidiary or liabilities assumed by
BUYER and to the extent assignable to BUYER.
(b) Notwithstanding anything to the contrary contained
in this Agreement, the Assets do not include the following:
(i) The corporate seals, minute books, stock record
books and other corporate records having exclusively to
do with the corporate organization and capitalization of
SELLER;
(ii) Any tax or customs refunds to which SELLER is or
may be entitled (other than with respect to any tax or
customs paid by BUYER);
(iii) Shares of the capital stock of Gitano and each
direct or indirect subsidiary of Gitano, including the
Subsidiaries and the Foreign Subsidiaries (other than
those designated by BUYER to SELLER pursuant to Section
2(a)(vi)(A) or (B)).
(iv) The "Regatta" and related trademarks, together
with all license agreements relating to such trademarks;
(v) Any payments to which SELLER is or may be entitled
from any sale of assets, property or stock by SELLER
prior to the date hereof, including without limitation
the return of escrowed funds (excluding Accounts
Receivable outstanding as of the Closing Date);
(vi) SELLER's right, title and interest in, to and
under (including all amounts received or to be received
by SELLER pursuant to) (A) the Promissory Note Due
December 31, 1994 made by The Childrens' Place Retail
Stores Inc. in favor of Gitano in the principal amount of
$1.35 million, and (B) (x) the Settlement Agreement dated
as of November 1, 1993, among Gitano, certain of its
subsidiaries, Gypsy Imports, Inc. and Nessim Dabah, and
(y) the Stock Purchase Agreement and the license and
commission agreements, promissory notes, guaranties and
affidavits of confession referred to in such Settlement
Agreement.
(vii) All cash on hand and in bank accounts, prepaid
insurance, prepaid interest and other prepaid items and
deposits, of SELLER as of the Closing Date, including
without limitation any refund of insurance premiums paid
by SELLER, or dividends with respect to any insurance
policy the premiums for which were paid by SELLER (except
that BUYER shall be entitled to all right, title and
interest of SELLER in and to any leasehold improvements,
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prepaid rent and security deposits in respect of any
Lease assigned to it pursuant to Section 2(c)); and
provided that, if and to the extent that for payroll or
other corporate purposes the parties agree to include
cash on hand or in bank accounts within the Assets, the
Purchase Price shall be increased, dollar for dollar, by
the amount of cash so included;
(viii) All choses in action and causes of action,
claims and rights of recovery or setoff of every kind or
character of or for the benefit of SELLER arising out of
or in connection with the actions listed on Schedule
2(b)(viii) hereto or that otherwise do not relate to the
Assets, irrespective of the date on which any such cause
of action, claim or right may arise or accrue;
(ix) Accounting records (including workpapers, general
ledgers and financial statements) and tax returns, and
other business records and reports that do not relate to
the Assets;
(x) All right, title and interest of SELLER in, to and
under insurance policies (except to the extent provided
in Section 2(a)(xiv)), including without limitation
directors and officers insurance policies, and
indemnification agreements with directors and officers;
and
(xi) Any other assets (including rights) not
specifically enumerated in Sections 2(a) and 2(c).
(c) Concurrently with its execution of this Agreement,
BUYER has designated in the appropriate place on Schedule 7(e)
certain Real Property Leases, Equipment Leases, Licenses and
other agreements that BUYER desires SELLER to reject pursuant to
Section 365 of the Bankruptcy Code (each Real Property Lease,
Equipment Lease, License and other agreement so designated being
referred to as an "Initial Designated Contract") and certain Real
Property Leases and Equipment Leases (in addition to the Initial
Designated Contracts) that BUYER does not desire to assume
("Other Excluded Contracts"). At the Closing, BUYER shall
acquire all right, title and interest of SELLER in all Real
Property Leases, Equipment Leases and Licenses and other
agreements listed on Schedule 7(e) which are not Initial
Designated Contracts or Other Excluded Contracts (the "Assigned
Contracts"); provided that not less than five days prior to the
hearing on the Approval Order, BUYER, in its sole discretion, may
(i) designate as "Additional Designated Contracts" any contracts
listed on Schedule 7(e) (other than those to which G.G. Licensing
or any Foreign Subsidiary is a party) which do not constitute
Initial Designated Contracts and which BUYER wishes SELLER to
reject (such Additional Designated Contracts, together with the
Initial Designated Contracts, the "Designated Contracts"); and
(ii) designate as "Other Excluded Contracts" any contracts listed
on Schedule 7(e) (other than those to which G.G. Licensing or any
Foreign Subsidiary is a party) which do not already constitute
"Other Excluded Contracts" and which BUYER does not wish to
assume; and further provided that the Employment Agreements will
not be assumed by BUYER.
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SELLER shall cause (A) all Initial Designated Contracts
and all Additional Designated Contracts that are so designated by
BUYER in accordance with this Section 2(c) at least 12 hours
prior to the filing of the Bankruptcy Petition to be rejected
pursuant to the Approval Order, and (B) all other Additional
Designated Contracts to be rejected within 25 days after the
Closing; provided, that the foregoing shall not apply to any
License that constitutes a Designated Contract if the Bankruptcy
Court fails to agree to SELLER's request to reject such License,
in which event such License shall constitute an Assigned
Contract. In addition, if and to the extent the documents
described on Schedule 7(e)(iii)(A) are contracts of SELLER or to
the extent SELLER has any binding oral commitments to the parties
referenced on such schedule, they shall be rejected by SELLER as
of the Closing Date.
3. Purchase Price
(a) In consideration of the sale and transfer of the
Assets and the Assigned Contracts (in addition to the assumption
by BUYER of the Assumed Obligations pursuant to Section 4),
subject to the terms and conditions of this Agreement, BUYER
shall pay to SELLER an amount (the "Purchase Price") equal to
$100,000,000, subject to adjustment pursuant to Sections 3(b),
3(c) and 3(d). The Purchase Price shall be payable as follows:
(i) Concurrently with the execution of this Agreement,
BUYER shall pay to the Escrow Agent by federal funds wire
transfer the sum of $5,000,000, such sum (together with
any interest thereon, the "Deposit") to be held in escrow
subject to the terms of the Escrow Agreement;
(ii) On the Closing Date, BUYER shall pay to SELLER by
federal funds wire transfer the sum of $80,000,000;
(iii) On the Closing Date, the excess of (A) the
Purchase Price (before adjustment pursuant to Sections
3(b), 3(c) and 3(d)) over (B) the sum of the Deposit plus
the amount paid pursuant to Section 3(a)(ii) shall be
paid by federal funds wire transfer or a certified or
bank check payable to the order of SELLER to be deposited
in a debtor-in-possession account (the "Account") and to
be held in trust for BUYER, to the extent of the net
adjustments, if any, payable to BUYER pursuant to
Sections 3(b), 3(c) and 3(d);
(iv) Within 10 days after determination of the amount,
if any, of the net adjustments payable pursuant to
Sections 3(b) and 3(c), BUYER shall pay to SELLER as
additional Purchase Price the net amount, if any, by
which the Purchase Price is increased pursuant to Section
3(b), or SELLER shall pay to BUYER from the Account as a
reduction of the Purchase Price the net amount by which
the Purchase Price is reduced pursuant to Sections 3(b)
and 3(c). Such payment shall be made by federal funds
wire transfer or certified or bank check. Upon the
payment of the net adjustments pursuant to Sections 3(b)
and 3(c) in accordance with this Section 3(a)(iv) all
amounts held in the Account (other than any amount
specified in Section 3(d)) shall be released to SELLER.
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(b) (i) The parties acknowledge that the Purchase Price
is based upon the Inventory Cost being $13,900,000 (the "Assumed
Inventory Amount"). An agent designated by BUYER and an agent
designated by SELLER shall take a physical count of the Inventory
as of the Closing Date and, within 30 days thereafter, shall
produce a statement listing (A) the Inventory as of the Closing
Date, and (B) the WIP Closing Value, the WIP Unit Number, the WIP
Average Cost, and the Inventory Cost (which shall be final and
binding on the parties). If the Inventory Cost as so determined
exceeds the Assumed Inventory Amount, the Purchase Price shall be
increased by the dollar amount of such excess. If the Assumed
Inventory Amount exceeds the Inventory Cost as so determined, the
Purchase Price shall be reduced by the dollar amount of such
excess. Any such increase or reduction shall be paid in
accordance with Section 3(a)(iv).
(ii) The parties further acknowledge that the Purchase
Price is based upon the Net Accounts Receivable being $10,400,000
(the "Assumed A/R Amount"). Within 30 days after the Closing
Date, BUYER and SELLER shall jointly (A) determine the Net
Accounts Receivable and (B) produce a statement listing the Net
Accounts Receivable as so determined. If the Net Accounts
Receivable as so determined exceeds the Assumed A/R Amount, the
Purchase Price shall be increased by the dollar amount of such
excess. If the Assumed A/R Amount exceeds the Net Accounts
Receivable as of the Closing Date as so determined, the Purchase
Price shall be reduced by the dollar amount of such excess. Any
such increase or reduction shall be paid in accordance with
Section 3(a)(iv).
(iii) If, within the 30-day period following the Closing
Date, SELLER and BUYER (or their agents) are unable to jointly
determine the Inventory Cost or the Net Accounts Receivable in
accordance with Section 3(b)(i) or (ii), as the case may be,
either party may submit such determination to the Bankruptcy
Court.
(c) In the event of a material breach of any
representation or warranty made by SELLER in this Agreement or
any breach of the representation and warranty made by SELLER in
Section 7(g), BUYER shall have a period of 45 days following the
Closing Date to make a claim against SELLER with respect to such
breach, by sending to SELLER a written notice specifying the
nature of the breach and the dollar amount of loss, damage,
injury, diminution in value, cost or expense (collectively,
"Losses") incurred by BUYER as a result of such breach. If
SELLER does not object (in accordance with the following
sentence) to BUYER's claim, the Purchase Price shall be reduced
by the amount of such Losses and such reduction shall be paid in
accordance with Section 3(a)(iv). If SELLER notifies BUYER in
writing, within 10 days of receipt of BUYER's notice, that it
objects to the amount of such Losses or the nature of BUYER's
claim, the Bankruptcy Court shall determine the appropriate
adjustment, if any, to be made to the Purchase Price in respect
of such claim.
(d) The parties understand that, because the present
value of the benefit liabilities (within the meaning of Section
4001(a)(16) of the Employee Retirement Income Security Act of
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1974, as amended ("ERISA")) of SELLER's defined benefit plan (the
"Plan") may exceed the value of the assets of the Plan, SELLER
may have liability to the PBGC ("Termination Liability") in the
event of a termination of the Plan (as determined in accordance
with Title IV of ERISA and the regulations thereunder).
Accordingly, a portion of the Account mutually agreed to by the
parties (in an amount equal to the parties' estimate of possible
Termination Liability) shall be held in trust for BUYER until the
earliest to occur of the following: (i) BUYER or any of its
subsidiaries (including any subsidiary that acquires Assets or
the stock of which is acquired by BUYER pursuant to this
Agreement) shall be held to have liability to the PBGC for any
portion of the Termination Liability as a result of BUYER'S
acquisition of any of the Assets, in which case the amount of
such liability shall be released to BUYER and the remainder of
the amount held in the Account pursuant to this Section 3(d)
shall be released to SELLER; or (ii) SELLER shall have satisfied
BUYER that no grounds for such liability shall exist, or shall
have provided BUYER with indemnification reasonably satisfactory
to BUYER against any such liability, in which case the entire
amount held in the Account pursuant to this Section 3(d) shall be
released to SELLER; or (iii) following termination of the Plan it
is established pursuant to Section 4048(a) of ERISA that the date
of termination of the Plan is after the Closing Date, in which
case the entire amount held in the Account pursuant to this
Section 3(d) shall be released to SELLER.
3A. Interim Services and Removal of Assets from Gitano Premises
(a) The parties acknowledge that, although BUYER is not
assuming the lease of the premises occupied by SELLER in Dayton,
New Jersey (the "Dayton Facility"), BUYER will need a limited
period of time following the Closing to integrate the
distribution services provided by SELLER out of its Dayton
Facility into BUYER's own distribution facilities. Accordingly,
the parties agree that during the 90-day period following the
Closing (the "Interim Period") SELLER, to the extent reasonably
requested by BUYER, will use its reasonable efforts to receive
at, and distribute from, the Dayton Facility BUYER's goods in a
manner consistent with past practices. SELLER shall be paid
within 10 days of BUYER's receipt of SELLER's invoice for such
services in an amount equal to SELLER's cost of providing such
services plus 10%. SELLER shall perform such services as an
independent contractor and not as an agent for BUYER and shall
retain exclusive control over its work force. Until the
expiration of the Interim Period, SELLER shall provide BUYER and
its agents or representatives reasonable access to the Dayton
Facility for the purpose of removing Assets (including, without
limitation, racks, computer and other equipment and supplies and
inventory) remaining on the premises.
(b) If BUYER fails to designate Noel of Jamaica Ltd.
(the "Jamaican Subsidiary") pursuant to Section 2(a)(vi) and
thereby elects not to acquire the stock of the Jamaican
Subsidiary pursuant to this Agreement, then, during the Interim
Period, SELLER will use its reasonable efforts to cause the
Jamaican Subsidiary to complete the manufacture of all work-in-
progress included within the Inventory as of the Closing Date
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(there being no obligation to cut uncut raw materials) and to
deliver to BUYER, from time to time in accordance with SELLER's
past practice, finished goods from such work-in-progress (in such
sizes, styles and quantities as previously determined in
accordance with the Jamaica Subsidiary's production schedule),
and BUYER shall pay SELLER for such goods the amounts determined
in accordance with the letter from SELLER to BUYER referred to in
the definition of "Inventory Cost" in Section 1, subject to
adjustment at the end of the Interim Period as provided in such
letter; provided, that SELLER shall provide BUYER with the
appropriate documentation (including quota, if applicable) to
import such goods into the United States. SELLER shall safeguard
all uncut raw materials included within the Inventory on the
Closing Date in accordance with its past practice and deliver
such raw materials at BUYER's expense to such location in the
United States as BUYER may request before such final shipment is
made by SELLER.
(c) SELLER shall provide BUYER and its agents or
representatives access to the premises occupied by SELLER in
Edison, New Jersey during the 90-day period following the Closing
Date (excluding that portion of the premises not currently used
by SELLER), and to the premises occupied by SELLER at 1411
Broadway, New York, New York (on the 7th and 8th floors) during
the 45-day period following the Closing Date, for the purpose of
removing Assets therefrom, except that if SELLER ceases to have
the right to use any such premises at any time during such period
(provided that SELLER shall take all actions reasonably requested
by BUYER so as to continue to have such right during such post-
Closing period so long as SELLER is not required to pay for any
space not currently used by SELLER), SELLER shall give notice to
BUYER and SELLER shall arrange for the delivery of the Assets
located at such premises at BUYER's expense to such location in
the United States as BUYER may request.
(d) If and to the extent that following the Closing
Date, SELLER wishes to use (i) a portion of the premises
currently occupied by SELLER at 1411 Broadway, New York, New York
(or any other premises in such building) and BUYER (or any of its
subsidiaries) occupies any such premises or (ii) the services of
certain of BUYER's employees at any such premises, BUYER shall
reasonably cooperate with SELLER to accommodate such wishes for a
period of up to 180 days following the Closing Date so long as
doing so does not unreasonably interfere with BUYER's business
and SELLER reimburses BUYER for its costs to the extent allocable
to SELLER's usage of such employees.
4. Assumption of Liabilities; Letters of Credit
(a) Except as expressly set forth in this Section 4,
BUYER is not assuming, and shall have no responsibility or
obligation whatsoever for, any liability or other obligation of
SELLER, including, without limitation, any liability arising
under applicable federal or state environmental protection laws
and any liability arising under or in connection with any
collective bargaining agreement or pension plan maintained by
SELLER.
(b) At the Closing, BUYER shall assume all of SELLER's
obligations arising from and after the Closing Date under all of
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the Assigned Contracts. Prior to the assignment by SELLER to
BUYER of each of the Assigned Contracts, and as a condition to
SELLER's obligation to effect each such assignment, BUYER shall
pay all amounts required to cure all defaults under the Real
Property Leases, Equipment Leases and Licenses that constitute
Assigned Contracts so as to permit the assumption and assignment
of such Assigned Contracts pursuant to Section 365 of the
Bankruptcy Code (the amounts so paid to cure such defaults,
together with the other obligations to be assumed by BUYER
pursuant to this Section 4(b) and Section 4(d), being referred to
herein as "Assumed Obligations"), and BUYER shall not be entitled
to any reduction in the Purchase Price for any amounts required
to be so paid. SELLER does not assume any obligation whatsoever
to cure any existing default, or to make any payment due after
the date hereof, under the Real Property Leases, Equipment Leases
or Licenses which constitute Assigned Contracts.
(c) Schedule 4(c) lists all letters of credit for
Inventory issued on behalf of SELLER outstanding as of February
28, 1994. SELLER shall provide BUYER a list of all SELLER LCs
that will be outstanding on the Closing Date at least five
business days prior to the Closing Date. On the Closing Date,
BUYER shall (at BUYER's sole expense) comply with either of the
following clauses (i) or (ii):
(i) BUYER shall cause the SELLER LCs to be returned to
SELLER and canceled (and any collateral securing SELLER's
reimbursement obligations in respect of such SELLER LCs to be
refunded or returned to SELLER), by causing new letters of
credit to be issued to the beneficiaries of the SELLER LCs
and to be substituted therefor. Such new letters of credit
shall be issued by a United States bank acceptable to BUYER
(such as NationsBanc or Bankers Trust Company, acting through
its principal offices in the United States) (a "BUYER Bank").
Prior to issuance of the SELLER LCs, SELLER shall use
reasonable efforts to obtain the agreement of the
beneficiaries of the SELLER LCs to accept such new letters of
credit and BUYER shall provide such cooperation in connection
with such endeavor as SELLER may reasonably request.
(ii) BUYER shall (A) cause a Buyer Bank to issue letters
of credit in favor of the banks that have issued the SELLER
LCs (the "SELLER Banks") in amounts equal to the obligations
payable under the SELLER LCs, (B) cause such BUYER Bank to
enter into an agreement with the SELLER Banks providing for
the indemnification by letter of credit of the SELLER Banks
with respect to the SELLER LCs, pursuant to which the SELLER
Banks will agree not to seek reimbursement from SELLER with
respect to the SELLER LCs, and (C) enter into an agreement
with SELLER providing for the indemnification of SELLER by
BUYER with respect to the liabilities of SELLER under the
agreement described in clause (B) above, such letters of
credit and agreements to be in form and substance reasonably
satisfactory to SELLER and satisfactory to the SELLER Banks.
(d) On the Closing Date, BUYER shall register as
"importer of record" for all Inventory in transit upon receipt of
all necessary documentation (including, without limitation,
quota, if applicable), and BUYER shall assume all of SELLER's
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obligations for all costs, including customs and import duties
and taxes, to be incurred in connection with the import and
shipment of such Inventory into the United States.
5. Bankruptcy Filing; Obtaining of Approval Order; Closing
(a) Within five business days following the date hereof
and after giving reasonable advance notice to BUYER, SELLER
(excluding G.G. Licensing) shall file in the Bankruptcy Court a
voluntary petition for relief under the Bankruptcy Code (the
"Bankruptcy Petition"), together with an application to the
Bankruptcy Court for the Scheduling Order and the Approval Order
in forms reasonably satisfactory to the parties, which SELLER
shall diligently attempt to obtain (subject to its obligations
under the Bankruptcy Code).
(b) If the Approval Order is entered, then, subject to
the satisfaction or waiver by the parties of the conditions to
their respective obligations to effect the Closing, the Closing
shall take place at the offices of Kronish, Lieb, Wiener &
Hellman, 1114 Avenue of the Americas, New York, New York at 10:00
a.m. (New York City time) on the third business day after the
Bankruptcy Court has issued the Approval Order (the effectiveness
of which shall not have been stayed or, if stayed, such stay
shall no longer be in effect), or, if later, on the third
business day after the waiting period under the HSR Act shall
have expired or been terminated, or at such other place, date and
time as the parties may agree in writing.
6. Deliveries at Closing
(a) At the Closing, SELLER shall deliver, or cause to be
delivered (in addition to any other instruments required by this
Agreement to be delivered by SELLER at the Closing), to BUYER the
following (in form and substance reasonably satisfactory to
BUYER):
(i) a duly executed bill of sale transferring title to
all of the Assets to BUYER;
(ii) instruments of assignment sufficient to assign to
BUYER all of SELLER's right, title and interest in and to
the intangible property referred to on Schedules 2(a)(iv)
and 2(a)(v);
(iii) instruments of assignment sufficient to assign
to BUYER all of SELLER's right, title and interest in, to
and under the stock of each Foreign Subsidiary designated
by BUYER to SELLER pursuant to Section 2(a)(vi)(A) or
(B));
(iv) instruments of assignment sufficient to assign to
BUYER all of SELLER's right, title and interest in, to
and under the Assigned Contracts;
(v) a certified copy of the Approval Order;
(vi) possession of all of the Assets and all Equipment
and leasehold interests subject to Assigned Contracts;
(vii) such other instruments or documents as BUYER may
reasonably request to fully effect the transfer of the
Assets and to confer upon BUYER the benefits contemplated
by this Agreement;
(viii) notices executed by SELLER, addressed to (A)
each obligor with respect to the Accounts Receivable as
of the Closing Date and (B) each licensee with respect to
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Licenses that are Assigned Contracts, notifying such
obligor or licensee of the assignment to BUYER of such
Accounts Receivable or License, as the case may be, and
directing such obligor or licensee to make payment to
BUYER of such Accounts Receivable for which it is the
obligor or such fees payable under the License, as the
case may be;
(ix) such documents as BUYER may reasonably request in
connection with the consent or approval or filing
requirements to effect the change of the name of Gitano
and each subsidiary in their respective states of
incorporation and in the states and jurisdictions in
which they do business, including "doing business as"
designations, to eliminate the name "Gitano" or any name
similar to such name or any variants or abbreviations of
such name; and
(x) evidence reasonably satisfactory to BUYER of
compliance with the notice provisions set forth in the
Scheduling Order.
(b) At the Closing, BUYER shall deliver, or cause to be
delivered (in addition to any other instruments required by this
Agreement to be delivered by BUYER at the Closing), to SELLER the
following:
(i) the excess of the Purchase Price (before
adjustment pursuant to Section 3(b), 3(c) or 3(d)) over
the Deposit, payable in the manner described in Section
3(a); and
(ii) a duly executed assumption of liabilities in form
and substance reasonably satisfactory to SELLER, whereby
BUYER will assume and agree to pay, perform and discharge
the Assumed Obligations.
7. Representations, Warranties and Covenants of SELLER
Gitano represents and warrants (both as of the date of
this Agreement and as of the Closing Date) to, and agrees with,
BUYER as follows (such representations and warranties, except for
the representation and warranty set forth in Section 7(g), being
made to Gitano's Best Knowledge):
(a) Gitano and each of the Subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of the state of its incorporation. Each of the Foreign
Subsidiaries the stock of which is included within the Assets is
a corporation duly organized under the laws of the place of its
incorporation (it being acknowledged that such Foreign
Subsidiaries may not be in good standing). Gitano has no direct
or indirect active subsidiaries other than the Subsidiaries and
the Foreign Subsidiaries (and subsidiaries of the Foreign
Subsidiaries). No representation or warranty is made as to any
of the Foreign Subsidiaries (or its assets) except as to its due
organization and title to its stock as set forth in this Section
7(a) and Section 7(c). Between the date hereof and the Closing
Date, SELLER will use reasonable efforts to cause each of the
Foreign Subsidiaries designated by BUYER to SELLER pursuant to
Section 2(a)(vi)(A) or (B) to be in good standing provided that
SELLER shall not be required to incur substantial expenditures in
connection with such endeavor.
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(b) SELLER has the full right, power and authority to
enter into this Agreement and to sell, transfer, assign and
deliver the Assets to BUYER pursuant to this Agreement, subject
to obtaining the Approval Order. This Agreement has been duly
and validly executed and delivered by SELLER and, subject to
obtaining the Approval Order, constitutes a legal, valid and
binding obligation of SELLER, enforceable in accordance with its
terms.
(c) SELLER has good and marketable title to all of the
Assets and SELLER has possession of all of the tangible Assets.
Subject to obtaining the Approval Order, SELLER shall, at the
Closing, transfer and assign to BUYER good and marketable title
to each of the Assets, free and clear of all Liens.
(d) All of the Equipment is in all material respects in
good repair, ordinary wear and tear excepted.
(e) Schedule 7(e) lists (except as otherwise provided in
such Schedule) all material agreements to which SELLER or a
Foreign Subsidiary is a party and which are currently used by
SELLER in connection with the Business, consisting of the
following: (i) leases pursuant to which SELLER or a Foreign
Subsidiary leases real property used by it in connection with the
Business, as set forth on Schedule 7(e)(i) ("Real Property
Leases"), (ii) leases pursuant to which SELLER leases equipment
or other personal property or computer software used by it in
connection with the Business, as set forth on Schedule 7(e)(ii)
("Equipment Leases"), (iii) license agreements pursuant to which
SELLER licenses intangible property to third parties, as set
forth on Schedule 7(e)(iii) ("Licenses") and, to the extent they
constitute agreements, the agreements set forth on Schedule
7(e)(iii)(A), and (iv) employment or union agreements to which
SELLER is a party, as set forth on Schedule 7(e)(iv) ("Employment
Agreements"). Schedule 7(e)(i) and 7(e)(ii) also respectively
list for each of the Real Property Leases and Equipment Leases
the annual or monthly rental (as the case may be), the date
through which such rental has been paid, and the amount in
default through February 14, 1994. Copies of all written
agreements and written descriptions of all oral agreements listed
on Schedule 7(e) have been delivered to BUYER on or prior to the
date of this Agreement.
(f) Except as expressly set forth in this Section 7,
SELLER makes no representations or warranties of any kind or
nature as to the condition of the Assets (or any equipment or
leasehold improvements subject to Assigned Contracts). THE
ASSETS (AND ANY EQUIPMENT OR LEASEHOLD IMPROVEMENTS SUBJECT TO
ASSIGNED CONTRACTS) SHALL BE TRANSFERRED "AS IS" AND "WHERE IS"
AND SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
NATURE (EXCEPT AS SET FORTH HEREIN). NO STATUTORY OR OTHER
WARRANTIES AS TO THE CONDITION OF THE ASSETS OR THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE ASSETS
(OR SUCH EQUIPMENT OR LEASEHOLD IMPROVEMENTS) SHALL BE IMPLIED,
AND SELLER HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR
WARRANTY AS TO THE CONDITION OF THE ASSETS (OR SUCH EQUIPMENT OR
LEASEHOLD IMPROVEMENTS) OR THEIR MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
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(g) All Accounts Receivable as of the Closing Date will
be valid and existing and result from transactions in the
ordinary course of the Business. SELLER has not agreed (except
as set forth on Schedule 7(e)(iii)), and prior to the Closing
Date will not agree, to any reduction of any of such Accounts
Receivable. In the case of goods sold giving rise to such
Accounts Receivable, no defect in the quality of such goods will
cause either returns or chargebacks in excess of the portion of
the reserves, if any, that is allocated to returns and
chargebacks and included within the Net Accounts Receivable.
(h) All finished goods Inventory is current and of
"first quality" in accordance with SELLER's past practice. All
Inventory is owned by SELLER.
(i) SELLER (excluding G.G. Licensing) owns the
registered trademarks (including applications therefor) listed on
Schedule 2(a)(iv), subject to the Licenses and the other
restrictions described on such Schedule. G.G. Licensing owns the
registered trademarks (including applications therefor) listed on
Schedule 2(a)(v), subject to certain perpetual licenses referred
to on such Schedule. Schedules 2(a)(iv) and 2(a)(v) contain
accurate and complete lists of all of the registered trademarks
(including applications therefor) other than "Regatta" and
related trademarks owned by SELLER (excluding G.G. Licensing) and
G.G. Licensing, respectively. Except for the licensees and the
Licenses referred to on Schedules 2(a)(iv) and 2(a)(v) and except
as otherwise described on such Schedule, SELLER is not aware of
any other Person with rights to use the trademarks set forth on
Schedules 2(a)(iv) and 2(a)(v).
(j) Except for the rights, properties and other assets
of SELLER specifically excluded pursuant to Section 2(b) from the
Assets and SELLER's rights in, to and under the Real Property
Leases, Equipment Leases, Licenses and Employment Agreements that
will not constitute Assigned Contracts, the Assets, together with
SELLER's rights in, to and under the Assigned Contracts, include
all rights, properties and other assets necessary (assuming the
hiring of all or substantially all of SELLER's employees) to
permit the conduct of the Business in all material respects in
the same manner as the Business is conducted on the date of this
Agreement.
(k) As of the date of this Agreement, all of the
contracts listed in Schedules 7(e)(i), 7(e)(ii), 7(e)(iii) and
7(e)(iii)(A) (other than the Initial Designated Contracts) and,
as of the Closing Date, all of the Assigned Contracts are valid,
binding and enforceable in accordance with their terms, and are
in full force and effect. Except as set forth in Schedule 7(e)
and except for defaults of the type referred to in Section
365(b)(2) of the Bankruptcy Code, there are no defaults as of the
date of this Agreement (or events that, with notice or lapse of
time or both, would constitute a default) by SELLER or any other
party under any of the contracts listed on Schedules 7(e)(i),
7(e)(ii), 7(e)(iii) and 7(e)(iii)(A) (other than the Initial
Designated Contracts). No representation or warranty is made as
to whether any consent is required pursuant to any Real Property
Lease of any of the Foreign Subsidiaries by reason of the
transfer to BUYER of the stock of any such Foreign Subsidiaries.
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(l) Prior to the Closing Date, SELLER shall (x) maintain
all of the Equipment in good repair, ordinary wear and tear
excepted; and (y) conduct its business only in the ordinary
course and consistent with past practice (subject to the effect
of the Bankruptcy Petition to be filed by SELLER pursuant to
Section 5). In furtherance of and without limiting the
foregoing, SELLER shall not, without the prior written consent of
BUYER
(i) sell or dispose of Inventory except through arm's-
length sales in the ordinary course of business.
(ii) except in accordance with their terms, terminate,
allow to expire, renew or renegotiate, or (subject to the
last sentence of Section 4(b)) default in any of its
obligations under any contract listed on Schedules
7(e)(i), 7(e)(ii) and 7(e)(iii), other than the Initial
Designated Contracts and Real Property Leases not being
assumed by BUYER pursuant to this Agreement; or
(iii) dispose of or permit to lapse any rights to the
use of any trademarks or trademark applications or
registrations owned by SELLER (other than the "Regatta"
and related trademarks) which are currently used by
SELLER in the Business (it being acknowledged that
certain such trademarks are no longer used by SELLER); or
(iv) sell, transfer, mortgage, encumber or otherwise
dispose of any Assets, except (A) inventory in the
ordinary course of business or (B) in connection with
obtaining debtor-in-possession financing pursuant to
Section 364 of the Bankruptcy Code providing for up to $4
million of letters of credit for the purchase of goods in
connection with the Business; or
(v) agree to or make any commitment to take any
actions prohibited by this Section 7(1).
(m) From the date hereof and until the earlier of (i)
the denial of the Approval Order by the Bankruptcy Court and (ii)
the termination of this Agreement, SELLER shall not solicit
offers to acquire, or otherwise seek to sell, the Assets to any
party other than BUYER whether privately, through an auction or
otherwise except as contemplated by this Section 7(m). BUYER and
SELLER acknowledge and agree that obtaining the Approval Order as
contemplated by this Agreement will necessitate the good faith
consideration by SELLER of bona fide offers or expressions of
interest received from third parties. The parties further
acknowledge and agree that a principal purpose of the provisions
of this Agreement relating to the Topping Fee and the
reimbursement of expenses is to provide BUYER with compensation
if the process of considering such offers or expressions of
interest leads to a transaction with a third party. Accordingly,
prior to the issuance of the Approval Order, SELLER may (i)
respond to inquiries from third parties; (ii) review written
expressions of interest; (iii) enter into a confidentiality
agreement with such party and provide such party with access to
information, confidential or otherwise, relating to SELLER and
the Assets and, if such party requests, with information
concerning, or a term sheet summarizing, or a copy of, this
Agreement; and (iv) take any action in furtherance of the
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foregoing permitted by the Scheduling Order. SELLER shall
promptly (x) notify BUYER of the execution of a confidentiality
agreement with any party, (y) notify BUYER of any conversation
with, or inquiry or offer received from, potential bidders and
provide BUYER with a copy of any written communication sent to or
received from bidders or potential bidders and provide BUYER with
a copy of any information sent by SELLER to any potential bidder
and (z) provide BUYER with any sale documentation that is in
substantially final form and notify BUYER of the execution of
definitive sale documentation.
(n) Unless exempt under Section 1146(c) of the
Bankruptcy Code, SELLER shall pay any and all sales, transfer or
transaction taxes imposed by any taxing authority, including
without limitation, any state, county, municipality or other
subdivision thereof, in connection with the consummation of the
transactions contemplated by this Agreement.
(o) To the extent that the rights of SELLER under any
insurance policy described in Section 2(a)(xiv) are not
assignable to BUYER, SELLER shall take all actions reasonably
requested by BUYER and otherwise endeavor to provide BUYER with
the benefits of any such insurance policy; it being understood
that all costs and expenses incurred by SELLER in connection with
such actions and endeavors shall be borne by BUYER.
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8. Representations, Warranties and Covenants of BUYER
BUYER represents and warrants (both as of the date of
this Agreement and as of the Closing Date) to, and covenants
with, SELLER as follows:
(a) BUYER is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, with full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder.
(b) BUYER has taken all requisite corporate action in
order to authorize the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered
by BUYER and constitutes a legal, valid and binding obligation of
BUYER, enforceable in accordance with its terms.
(c) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will
(a) violate or result in a breach of or default under (i) any
provision of the certificate of incorporation or by-laws (or
other governing instrument) of BUYER, as currently in effect, or
(ii) any mortgage, indenture, contract, agreement, license,
franchise, permit, instrument, trust, power, judgment, decree,
order, ruling or federal or state statute or regulation to which
BUYER is presently a party or to which it or its properties may
be subject, (b) result in the creation or imposition of any lien,
claim, charge, restriction or encumbrance of any kind whatsoever
upon, or give to any other Person any interest or right
(including any right of termination or cancellation) in or with
respect to any properties, assets, business, agreements or
contracts of BUYER, or (c) require any consent, approval or
waiver of, filing with, or notification to any Person (including,
without limitation, any governmental or regulatory authority),
other than as required by the HSR Act.
(d) No investigation, action, suit or proceeding before
any court or any governmental or regulatory authority has been
commenced, and no investigation, action, suit or proceeding by
any governmental or regulatory authority has been threatened
(other than as described in Section 5), against BUYER or any of
its principals, officers or directors (i) seeking to restrain,
prevent, delay or change the transactions contemplated hereby or
(ii) questioning the validity or legality of this Agreement or
the transactions contemplated hereby or (iii) seeking damages in
connection with any such transactions.
(e) BUYER hereby acknowledges that, as of the date of
this Agreement, SELLER sells its Inventory to only one customer.
(f) BUYER hereby acknowledges that (i) BUYER has made
such investigation into the Assets, Assigned Contracts,
Designated Contracts and Other Excluded Contracts of SELLER, and
has been offered the opportunity to ask such questions of
appropriate officers of SELLER relating to the Assets, Assigned
Contracts, Designated Contracts and Other Excluded Contracts, as
BUYER deems appropriate to enter into this Agreement, and (ii)
except for the specific representations and warranties contained
in Section 7, BUYER is not relying on any representation or
warranty by SELLER or any other Person in entering into this
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Agreement (and will not rely on any other representation or
warranty in effecting the Closing).
8A. Covenants of BUYER and SELLER
BUYER and SELLER each hereby covenant as follows:
(a) SELLER shall give prompt notice to BUYER, and BUYER
shall give prompt notice to SELLER, of (i) the occurrence, or
failure to occur, of any event that would be likely to cause any
representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the
date of this Agreement to the Closing Date, and (ii) any failure
of BUYER or SELLER, as the case may be, to comply with or
satisfy, in any material respect, any covenant, condition or
agreement to be complied with or satisfied by it under this
Agreement.
(b) As promptly as practicable but in any event within
seven business days after the date of this Agreement, SELLER and
BUYER shall make any and all filings required to be made under
the HSR Act. SELLER and BUYER shall furnish each other such
necessary information and reasonable assistance as the other may
request in connection with the preparation of necessary filings
or submissions under the provisions of the HSR Act. SELLER and
BUYER shall supply each other with copies of all correspondence,
filings or communications, including file memoranda evidencing
telephonic conferences with representatives of either the Federal
Trade Commission ("FTC"), the Antitrust Division of the United
States Department of Justice ("Department of Justice"), or any
other governmental entity or members of their respective staffs,
with respect to the transactions contemplated by this Agreement,
except for documents filed pursuant to Item 4(c) of the
Notification and Report Form or communications regarding the
same.
(c)Following the date hereof SELLER shall give BUYER and
its authorized representatives, full access to its books and
records (and permit BUYER to make copies thereof) to the extent
relating to taxes or tax returns of the Business, as BUYER may
reasonably request, permit BUYER to make inspections thereof, and
cause SELLER's officers and advisors to furnish BUYER with such
financial, tax and other operating data and other information
with respect to the taxes or tax returns of the Business for
periods ending before or including the Closing Date as BUYER may
reasonably request. BUYER shall give SELLER and its authorized
representatives, access to its books and records (and permit
SELLER to make copies thereof), permit SELLER to make inspections
thereof, and cause BUYER's officers and advisors to furnish
SELLER with such financial, tax and other operating data and
other information with respect to the Business to the extent
relating to periods prior to or including the Closing Date as
SELLER may reasonably request. SELLER hereby agrees that it will
retain, until all appropriate statutes of limitation (including
any extensions) expire, copies of all tax returns, supporting
work schedules and other records or information which may be
relevant to such tax returns, except for such tax returns,
supporting work schedules and other records which BUYER shall
acquire as a consequence of this Agreement (provided, that SELLER
may elect not to retain any such copies if SELLER gives such
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copies or makes such copies available to BUYER), and that it will
not destroy or otherwise dispose of such materials without first
providing BUYER with a reasonable opportunity to review and copy
such materials.
(g) BUYER and SELLER shall cooperate with each other in
good faith in the preparation of any tax return or form required
to be filed with respect to the transactions contemplated hereby,
and BUYER shall provide such certificates as SELLER may
reasonably request, to minimize the tax liability of SELLER as
described in Section 7(n) (provided BUYER shall not be required
to take any action that increases BUYER's tax liability).
9. Conditions to BUYER's Obligation to Effect Closing
The obligation of BUYER to effect the Closing shall be
subject to the satisfaction, on or before the Closing Date, of
the following conditions, any one or more of which may be waived
by BUYER:
(a) (i) The representations and warranties of SELLER set
forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing
Date as though made at such time, (ii) SELLER shall have
performed and complied in all material respects with the
agreements contained in this Agreement required to be performed
and complied with by SELLER on or before the Closing, and (iii)
BUYER shall have received certificates to the effect set forth in
clauses (i) and (ii) above signed by the Chief Executive Officer
or the President of SELLER.
(b) The Bankruptcy Court shall have issued the
Scheduling Order and the Approval Order, the effectiveness of
which shall not have been stayed or, if stayed, such stay shall
no longer be in effect.
(c) The condition of the Assets shall not have
deteriorated in any material respect after the date hereof.
(d) No action or proceeding shall have been instituted
by any court or other governmental body, and, at what would
otherwise have been the Closing Date, remain pending before any
court or governmental body to restrain or prohibit BUYER's
acquisition of the Assets; nor shall any court or other
governmental body have notified any party to this Agreement that
BUYER's acquisition of the Assets would constitute a violation of
the laws of any jurisdiction or that it intends to commence an
action or proceeding to restrain or prohibit BUYER's acquisition
of the Assets, unless such court or other governmental body shall
have withdrawn such notice and abandoned such action or
proceeding.
(e) Any applicable waiting period under the HSR Act
shall have expired or been terminated.
(f) SELLER shall have complied with all requirements of
the Scheduling Order, including, without limitation, the notice
requirements with respect to the hearing on the Approval Order.
(g) Each lender (or, if applicable, any successor to
such lender) under (i) the Note Purchase Agreement, dated as of
September 20, 1989, as amended and restated to date, with respect
to the 9.88% Senior Secured Notes of Gitano due February 28, 1995
and (ii) the Credit Agreement, dated as of April 30, 1993, as
amended and restated to date, among Gitano, the guarantors named
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therein, the banks named therein (the "Banks") and The Chase
Manhattan Bank, N.A., as agent for the Banks shall have consented
to release the guarantee of SELLER's obligations to it by G.G.
Licensing and any Lien it may have against any Asset owned by
G.G. Licensing, so long as such Lien attaches to the portion of
the Purchase Price attributable to such Assets (other than any
amounts retained in trust for BUYER pursuant to Sections 3(b),
(c) or (d)).
10. Conditions to SELLER's Obligation to Effect Closing
The obligation of SELLER to effect the Closing shall be
subject to the satisfaction, on or before the Closing Date, of
the following conditions, any one or more of which may be waived
by SELLER:
(a) (i) The representations and warranties of BUYER set
forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing
Date as though made at such time, (ii) BUYER shall have performed
and complied in all material respects with the
agreements contained in this Agreement required to be performed
and complied with by BUYER on or before the Closing, and (iii)
SELLER shall have received certificates to the effect set forth
in clauses (i) and (ii) above signed by the Chief Executive
Officer or a Vice President of BUYER.
(b) The Bankruptcy Court shall have issued the Approval
Order, the effectiveness of which shall not have been stayed or,
if stayed, such stay shall no longer be in effect.
(c) Any applicable waiting period under the HSR Act
shall have expired or been terminated.
11. Employees
Schedule 11A lists, by department, the employees of
SELLER (other than direct labor). BUYER currently intends to
offer employment following the Closing Date on a fair trial basis
to all employees of SELLER who are within the departments
designated by BUYER on Schedule 11B. On or prior to the date of
the hearing at which the Bankruptcy Court will consider the
Approval Order, BUYER shall deliver to SELLER a final list of the
employees of each department of SELLER to whom BUYER agrees to
offer employment following the Closing Date on a fair trial basis
(and BUYER shall not be required to offer employment to any other
employees of SELLER). The provisions of this Section 11 shall
not obligate BUYER to continue the employment of any employee of
SELLER if after offering such person employment on a fair trial
basis BUYER elects to terminate such person's employment.
Nothing contained in this Agreement shall be construed to require
BUYER to assume any employment agreement, employee benefit plan
or other arrangement maintained by SELLER for the benefit of any
such employees or to which SELLER contributed or was obligated to
make payments. For the purposes hereof, if the benefits under
any vacation, disability, severance, insurance, or other similar
plan or program of BUYER is based on an employee's years of
service with BUYER (or its subsidiaries), then, for the purposes
of determining the eligibility for and vesting of (but not, in
the case of any pension, 401(k) or similar plan, the amount of)
benefits to which an employee of SELLER hired by BUYER following
the Closing is entitled under such plan or program, such
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employee's years of service with SELLER shall be counted toward
his or her years of service with BUYER (or its subsidiaries).
12. Termination; Effect of Termination
(a) This Agreement may be terminated before the Closing
occurs only as follows:
(i) By written agreement of SELLER and BUYER at any
time.
(ii) By BUYER, by notice to SELLER, if (A) the
Bankruptcy Petition shall not have been filed on or before
March 4, 1994, or (B) the Closing shall not have occurred for
any reason on or before April 4, 1994.
(iii) By SELLER, by notice to BUYER, if the Closing
shall not have occurred for any reason on or prior to the
tenth day following the issuance of the Approval Order or, if
later, on or prior to the third business day after the
waiting period under the HSR Act shall have expired or been
terminated.
(iv) By BUYER, by notice to SELLER, if one or more of
the conditions specified in Section 9 is not satisfied on the
Closing Date or if satisfaction of such a condition is or
becomes impossible.
(v) By SELLER, by notice to BUYER, if one or more of the
conditions specified in Section 10 is not satisfied on the
Closing Date or if satisfaction of such a condition is or
becomes impossible.
(vi) By SELLER or BUYER, by notice to the other, at any
time prior to the entry of the Approval Order upon the
occurrence of a Topping Fee Event.
(b) If this Agreement is terminated by either or both of
SELLER and BUYER pursuant to Section 12(a)(i), 12(a)(ii),
12(a)(iii) or 12(a)(vi), or by BUYER pursuant to Section
12(a)(iv), or by SELLER pursuant to Section 12(a)(v), neither
party shall have any further obligation or liability under this
Agreement except as provided in this Section 12 and except for
those provisions expressly provided to survive the termination
hereof and except that the Deposit shall be refunded to BUYER.
(c) If the Closing does not occur by reason of a willful
default or intentional misrepresentation or breach of warranty by
BUYER (rather than the failure of one or more conditions
precedent to BUYER's obligations to effect the Closing), SELLER
may elect to retain the Deposit (A) on account of the Purchase
Price, (B) as monies to be applied to SELLER's damages, or (C) as
liquidated damages for such default. If SELLER elects so to
retain the Deposit as liquidated damages, neither party shall
have any further obligation or liability under this Agreement
except for those provisions expressly provided to survive the
termination hereof.
(d) If this Agreement is terminated in accordance with
Section 12(a)(vi) SELLER shall (i) make the payments provided for
in Section 17(l) and (ii) pay BUYER the Topping Fee. Any payment
by SELLER to BUYER of a Topping Fee shall be made promptly and in
no event later than 10 days after the Topping Fee Event. If
SELLER is obligated to make payment to BUYER pursuant to Section
17(l), such amounts shall be paid within 10 days following
receipt by SELLER of documentation of such amounts. The parties
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acknowledge that in determining the payments upon termination
provided for in this Section 12(d), BUYER and SELLER have taken
into account the fact that BUYER's damages arising from a failure
to consummate this transaction are not readily calculable. BUYER
and SELLER agree that this Section 12(d) is a reasonable and
appropriate method of determining damages and other compensation.
(e) Upon the termination of this Agreement prior to
Closing, BUYER shall immediately return to SELLER all financial,
operational and other information (and all copies thereof)
regarding SELLER provided by SELLER to BUYER.
13. Brokers
The parties hereto represent and warrant to each other
that they have not employed or dealt with any broker or finder in
connection with any transactions contemplated by this Agreement,
except for Kurt Salmon Associates, Inc., which shall be
compensated by SELLER.
14. Access; Confidentiality
(a) From and after the date hereof and until the
Closing, representatives of BUYER shall have the right, upon
reasonable notice and at reasonable times to visit and inspect
SELLER's premises and any other locations at which any of the
Assets are located and shall have the right to test, operate and
otherwise evaluate the Assets and their condition and to inspect,
examine and make copies of SELLER's books, accounts and records
to the extent that they relate to any of the Assets.
(b) SELLER will promptly deliver to BUYER copies of all
pleadings, motions, notices, statements, schedules, applications,
reports and other papers filed in SELLER's Chapter 11 case
relating to this Agreement or the transactions contemplated
hereby.
(c) BUYER confirms its obligations under the
confidentiality agreement previously signed by it with SELLER,
which obligations shall be deemed to be incorporated by reference
herein and made a part hereof.
15. Jurisdiction
The parties agree that the Bankruptcy Court shall retain
jurisdiction to resolve any controversy or claim arising out of
or relating to this Agreement, or the breach hereof.
16. Collection of Accounts Receivable; Mail
If, following the Closing, BUYER or SELLER shall collect
any accounts receivable belonging to, or receive any mail that
was intended for, the other party, the party collecting such
accounts receivable, or receiving such mail, shall hold the same
in trust and, in the case of accounts receivable, shall promptly
pay the same over to the party entitled thereto and, in the case
of mail, deliver such mail to the party for which it is intended
(in the case of mail intended for SELLER, BUYER shall deliver
such mail to SELLER'S counsel), and shall not be entitled to
apply any of such funds against any amounts due from the party
entitled to such accounts receivable.
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<PAGE> 122
17. Miscellaneous
(a) All notices, requests, demands, consents and other
communications required or permitted under this Agreement shall
be in writing and shall be considered to have been duly given
when (i) delivered by hand, (ii) sent by telecopier (with receipt
confirmed), provided that a copy is mailed (on the same date) by
certified or registered mail, return receipt requested, postage
prepaid, or (iii) received by the addressee, if sent by Express
Mail, Federal Express or other express delivery service (receipt
requested), or by first class certified or registered mail,
return receipt requested, postage prepaid, in each case to the
appropriate addresses and telecopier numbers set forth below (or
to such other addresses and telecopier numbers as a party may
from time to time designate as to itself by notice similarly
given to the other party in accordance herewith). A notice of
change of address shall not be deemed given until received by the
addressee.
If to BUYER, to it at:
Fruit of the Loom, Inc.
10 Sasco Hill Road
Fairfield, Connecticut 06430
Attention: Richard M. Cion
Telecopier No.: 203-254-2627
with a copies to:
Fruit of the Loom, Inc.
233 South Wacker Drive
5000 Sears Tower
Chicago, Illinois 60606
Attention: Kenneth Greenbaum, Esq.
Telecopier No.: 312-993-1749
and
Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Attention: Nancy E. Fuchs, Esq.
Telecopier No.: 212-836-8689
If to SELLER, to it at:
1411 Broadway
New York, New York 10018
Attention: Robert E. Gregory, Jr.,
Chairman and Chief Executive Officer
Telecopier No.: 212-768-3936
K:\CORP\MSF\GITANO\BNKR-SAL.8
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<PAGE> 123
with a copy to:
Kronish, Lieb, Weiner & Hellman
1114 Avenue of the Americas
New York, New York 10036
Attention: Peter J. Mansbach, Esq.
Telecopier No.: 212-997-3525
(b) No public release or announcement concerning the
transactions contemplated hereby shall be issued by BUYER or
SELLER without the prior consent (which shall not be unreasonably
withheld) of the other party, except as such release or
announcement may be required by law or the rules or regulations
of any United States or foreign securities exchange, in which
case each party shall allow the other party reasonable time to
comment on such release or announcement in advance of such
issuance.
(c) This Agreement and the instruments, agreements,
exhibits and other documents contemplated hereby supersede all
prior discussions and agreements between the parties with respect
to the matters contained herein, and this Agreement and the
instruments, agreements and other documents contemplated hereby
contain the entire agreement between the parties hereto with
respect to the transactions contemplated hereby.
(d) The representations and warranties of SELLER and
BUYER made pursuant to this Agreement shall survive for a period
of 45 days following the Closing.
(e) After the Closing, each of the parties hereto shall
hereafter, at the reasonable request of the other party hereto,
execute and deliver such other instruments of transfer or
assumption and further documents and agreements, and do such
further acts and things as may be necessary or expedient to carry
out the provisions of this Agreement.
(f) Any term or condition of this Agreement may be
waived at any time by the party thereto which is entitled to the
benefit thereof, but such waiver shall only be effective if
evidenced by a writing signed by such party. A waiver on one
occasion shall not be deemed to be a waiver of the same of any
other breach on a future occasion.
(g) Except as otherwise expressly provided herein, this
Agreement may be amended only by a writing signed by all the
parties hereto.
(h) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.
(i) This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be
assigned by any party hereto, without the prior written consent
of the other party, except that BUYER may assign this Agreement
to a direct or indirect wholly owned subsidiary of BUYER without
the prior written consent of SELLER, provided that no such
assignment shall relieve BUYER from its obligations and
liabilities hereunder. This Agreement is not made for the
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<PAGE> 124
benefit of any third party, and no third party shall be deemed to
be a beneficiary hereof.
(j) This Agreement shall be governed by the internal law
of the State of New York, without regard to the conflicts of law
principles thereof.
(k) The headings in this Agreement are for convenience
of reference only and should not be deemed a part of this
Agreement.
(l) Each of the parties hereto shall pay its own
expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby, except that
if this Agreement shall terminate for any reason (other than
because of BUYER'S breach of its obligations or because of a
breach of BUYER's representations and warranties hereunder),
SELLER shall upon such termination be obligated to reimburse
BUYER for up to $500,000 of its out-of-pocket expenses, including
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<PAGE> 125
legal, accounting and other expenses (excluding any commitment
fees paid to financing sources).
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed on the date first above written.
SELLER:
THE GITANO GROUP, INC.
AMERICO LIMITED
A.N. SURVIVOR CORP.
EVA JOIA INCORPORATED
G.G. LICENSING, INC.
GITANO LICENSING, LTD.
THE GITANO MANUFACTURING GROUP, INC.
GITANO SPORTSWEAR, LTD.
GLOBAL SOURCING, INC.
G.V. LICENSING, INC.
G.V. PRODUCTS CORP.
NOEL INDUSTRIES, INC.
NORTH AMERICAN UNDERWEAR COMPANY, INC.
THE ORIT CORPORATION
ORIT IMPORTS, INC.
ORIT MENSWEAR COMPANY, INC.
ORIT RETAIL HOLDING COMPANY, INC.
By:_____________________________
Name:
Title:
BUYER:
FRUIT OF THE LOOM, INC.
By:_____________________________
Name:
Title:
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<PAGE>
<PAGE> 126
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of March 14, 1994 to the
Purchase Agreement, dated as of February 28, 1994 (the "Purchase
Agreement"), among THE GITANO GROUP, INC., a Delaware corporation
having an office at 1411 Broadway, New York, New York 10018
("Gitano"); each of the direct and indirect subsidiaries of
Gitano signatory hereto (such subsidiaries being referred to
herein as the "Subsidiaries" and, together with Gitano, as
"SELLER"); and FRUIT OF THE LOOM, INC., a Delaware corporation
having an office at 233 South Wacker Drive, 5000 Sears Tower,
Chicago, Illinois 60606 ("BUYER"). Capitalized terms used but not
otherwise defined herein shall have the respective meanings
ascribed to such terms in the Purchase Agreement
R E C I T A L S :
Upon the terms and conditions of the Purchase Agreement,
BUYER has agreed to purchase from SELLER, and SELLER has agreed
to sell to BUYER, substantially all of the assets of SELLER,
including all the assets of G.G. Licensing (subject to certain
perpetual licenses referred to on Schedule 2(a)(v) of the
Purchase Agreement).
The parties wish to clarify their intentions with respect
to certain matters covered by the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. The definition of "Approval Order" in Section 1 is
hereby amended to add the following phrase after the words
"Assigned Contracts" in clause (v) on the 24th line of such
definition:
"(other than the Dayton Lease, the G.G. Licensing Agreements
and the G.G./Gitano Licensing Agreement to the extent of G.G.
Licensing's interest in the G.G./Gitano Licensing
Agreement)".
2. Section 1 is hereby amended to delete the definition
"Assigned Contracts" and replace it with the following:
" 'Assigned Contracts' means all Real Property Leases,
Equipment Leases and Licenses and other agreements listed on
Schedule 7(e) which are not Designated Contracts or Other
Excluded Contracts, including without limitation the G.G.
Licensing Agreements and G.G./Gitano Licensing Agreement."
3. Section 1 is hereby further amended to add the
following defined terms:
" 'Dayton Lease'" means the lease, dated March 20, 1991
between Isaac Heller and The Orit Corporation, as amended."
" 'G.G. Licensing Agreements' means the license
agreements listed on Schedule 2(a)(v) of the Purchase
Agreement between G.G. Licensing and New Accessories
Holdings, Inc. and G.G. Licensing and Hocalar B.V."
" 'G.G./Gitano Licensing Agreement' means the license
agreement, dated as of September 24, 1993, between G.G.
Licensing and Gitano Licensing, Ltd."
<PAGE>
<PAGE> 127
4. The definition of "Scheduling Order" in Section 1 is
hereby amended to insert in subsection (vi) the parenthetical
"(other than the G.G. Licensing Agreements)" immediately after
the phrase "requiring SELLER to serve a notice upon each non-
SELLER party to each License".
5. Section 2(c) of the Purchase Agreement is hereby
amended to delete the following phrase in lines 11 through 15 of
such section:
"all Real Property Leases, Equipment Leases and Licenses and
other agreements listed on Schedule 7(e) which are not
Initial Designated Contracts or Other Excluded Contracts (the
"Assigned Contracts");"
and to substitute in its place the phrase "Assigned Contracts
other than the Dayton Lease;".
6. Section 3A(a) of the Purchase Agreement is hereby
amended to delete the first two sentences of such Section and to
substitute in their place the following:
"The parties acknowledge that BUYER wishes to assume the
lease of the premises occupied by SELLER in Dayton, New
Jersey (the "Dayton Facility"). Subject to Section 4(b),
SELLER shall use all reasonable efforts to assign to BUYER
within 25 days after Closing all of SELLER's interest in and
to the Dayton Lease, at which time BUYER shall assume all of
SELLER's obligations arising under the Dayton Lease. The
parties agree that during the period (the "Interim Period")
commencing on the Closing Date and ending on the earlier of
(i) the 90th day following the Closing Date and (ii) the date
of the assignment to BUYER of the Dayton Lease, SELLER, to
the extent reasonably requested by BUYER, will use its
reasonable efforts to receive at, and distribute from, the
Dayton Facility BUYER's goods in a manner consistent with
past practices."
7. Section 4(b) is hereby amended to insert in the 3rd
line the parenthetical "(other than the Dayton Lease)"
immediately after the phrase "the Assigned Contracts".
8. Section 4(b) is hereby further amended to add the
following parenthetical in the 9th line of such Section after the
words "Assigned Contracts":
"(other than the Dayton Lease, the G.G. Licensing
Agreements and the G.G./Gitano Licensing Agreement to the
extent of G.G. Licensing's interest in such agreement)".
9. Schedule 7(e)(i) is hereby amended to delete the "X"
from the box marked by SELLER, therefore indicating that BUYER
wishes to assume the Dayton Lease pursuant to Section 3A(a).
10. Schedule 7(e)(iii) of the Purchase Agreement is
hereby amended to include the G.G. Licensing Agreements and the
G.G./Gitano Licensing Agreement.
11. The Purchase Agreement, as amended, hereby shall
continue in full force and effect.
<PAGE>
<PAGE> 128
IN WITNESS WHEREOF, the parties have executed and
delivered this Amendment No. 1 as of the date first above
written.
SELLER:
THE GITANO GROUP, INC.
AMERICO LIMITED
A.N. SURVIVOR CORP.
EVA JOIA INCORPORATED
GITANO LICENSING, LTD.
G.G. LICENSING, INC.
THE GITANO MANUFACTURING GROUP, INC.
GITANO SPORTSWEAR, LTD.
GLOBAL SOURCING, INC.
G.V. LICENSING, INC.
G.V. PRODUCTS CORP.
NOEL INDUSTRIES, INC.
NORTH AMERICAN UNDERWEAR COMPANY, INC.
THE ORIT CORPORATION
ORIT IMPORTS, INC.
ORIT MENSWEAR COMPANY, INC.
ORIT RETAIL HOLDING COMPANY, INC.
By:_____________________________
BUYER:
FRUIT OF THE LOOM, INC.
By:_____________________________
Name:
Title:
<PAGE>
<PAGE> 129
March 7, 1994
Via Facsimile and Certified Return Receipt Mail
The Gitano Group, Inc.
1411 Broadway
New York, New York 10018
Attention: Robert E. Gregory, Jr.
Chairman and Chief
Executive Officer
Dear Mr. Gregory:
Reference is made to that certain Purchase Agreement (the
"Agreement") dated as of February 28, 1994 among The Gitano
Group, Inc. ("Gitano"); each of the direct and indirect
subsidiaries of Gitano signatories to the Agreement (such
subsidiaries and Gitano being hereafter collectively referred to
as "Seller"); and Fruit of the Loom, Inc. ("Buyer"). Defined
terms used herein shall have the meanings assigned to such terms
in the Agreement unless the context otherwise requires.
Pursuant to Section 2(c) of the Agreement, Buyer hereby
notifies Seller that the following Licenses are hereby designated
as Additional Designated Contracts which Buyer does not wish to
assume and requests that Seller reject:
Schedule 7(e)(iii) Description
Item 18 License Agreement, dated as of August
25, 1987, between Gitano Licensing, Ltd.
and NuShoes, Inc. as modified by letters
dated July 17, 1992, February 17, 1993
and July 26, 1993 and an oral agreement
entered into in late 1993 regarding mens
and boys footwear.
<PAGE>
<PAGE> 130
The Gitano Group, Inc.
March 7, 1994
Page Two
Item 28 License Agreement, dated as of September
11, 1992, between Gitano Licensing, Ltd.
and the John Forsyth Company, Inc.
Please acknowledge receipt of this letter and Buyers request
that Seller reject the aforementioned Licenses by signing and
returning the enclosed copy of the letter.
Very truly yours,
FRUIT OF THE LOOM, INC.
By:
Kenneth Greenbaum
Vice President
Receipt Acknowledged:
THE GITANO GROUP, Inc.
By:
Its:
cc: Kronish, Lieb, Weiner & Hellman (Via Facsimile and Certified
Return Receipt)
1114 Avenue of the Americas
New York, New York 10036
Attention: Peter J. Mansbach, Esq.
Steven Gerber
Nancy E. Fuchs
<PAGE>
<PAGE> 131
March 10, 1994
Via Facsimile and Certified RRR
The Gitano Group, Inc.
1411 Broadway
New York, New York 10018
Attention: Robert E. Gregory, Jr.
Chairman and Chief
Executive Officer
Dear Mr. Gregory:
Reference is made to that certain Purchase Agreement (the
"Agreement") dated as of February 28, 1994 among The Gitano
Group, Inc. ("Gitano"); each of the direct and indirect
subsidiaries of Gitano signatories to the Agreement (such
subsidiaries and Gitano being hereafter collectively referred to
as "Seller"); and Fruit of the Loom, Inc. ("Buyer"). Defined
terms used herein shall have the meanings assigned to such terms
in the Agreement unless the context otherwise requires.
Pursuant to Section 2(a)(vi)(B) of the Agreement, Buyer
hereby notifies Seller that it hereby designates the stock of
Noel of Jamaica Ltd. as one of the Assets that Buyer will acquire
at the Closing.
<PAGE>
<PAGE> 132
The Gitano Group, Inc.
March 7, 1994
Page Two
Please acknowledge receipt of this letter by signing and
returning the enclosed copy of the letter.
Very truly yours,
FRUIT OF THE LOOM, INC.
By:
Kenneth Greenbaum
Vice President
Receipt Acknowledged:
THE GITANO GROUP, Inc.
By:
Its:
cc: Kronish, Lieb, Weiner & Hellman (Via Facsimile and Certified
RRR)
1114 Avenue of the Americas
New York, New York 10036
Attention: Peter J. Mansbach, Esq.
Steven Gerber
Nancy E. Fuchs
<PAGE>
<PAGE> 133
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES EXHIBIT 11
Computation of Earnings Per Common Share
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
<S> <S><C> <S><C> <S><C> <S> <C> <S> <C>
Primary:
Earnings available to common shares:
Earnings before extraordinary items and cumulative
effect of change in accounting principle $ 212,800 $ 188,500 $ 111,000 $ 77,100 $ 72,000
Extraordinary items (8,700) (9,900) -- -- --
Cumulative effect of change in accounting
for income taxes 3,400 -- -- -- --
Net earnings $ 207,500 $ 178,600 $ 111,000 $ 77,100 $ 72,000
Average common shares outstanding 76,000 76,000 69,400 61,900 61,800
Per Share:
Earnings before extraordinary items and cumulative
effect of change in accounting principle $ 2.80 $ 2.48 $ 1.60 $ 1.25 $ 1.17
Extraordinary items (.11) (.13) -- -- --
Cumulative effect of change in accounting
for income taxes .04 -- -- -- --
Net earnings $ 2.73 $ 2.35 $ 1.60 $ 1.25 $ 1.17
Fully Diluted:
Earnings available to common shares:
Earnings before extraordinary items and cumulative
effect of change in accounting principle $ 212,800 $ 188,500 $ 111,000 $ 77,100 $ 72,000
Add-interest on 6-3/4% convertible subordinated
debentures, net of tax -- -- 1,500 2,700 2,700
Adjusted earnings before extraordinary
items and cumulative effect of change
in accounting principle 212,800 188,500 112,500 79,800 74,700
Extraordinary items (8,700) (9,900) -- -- --
Cumulative effect of change in accounting
for income taxes 3,400 -- -- -- --
Adjusted net earnings $ 207,500 $ 178,600 $ 112,500 $ 79,800 $ 74,700
Common shares outstanding per primary computation 76,000 76,000 69,400 61,900 61,800
Add: shares issuable from assumed exercise of 6-3/4%
convertible debentures -- -- 3,000 5,300 5,300
Additional effect of outstanding options as determined
by the application of the treasury stock method -- -- 400 100 200
Total 76,000 76,000 72,800 67,300 67,300
Per Share:
Earnings before extraordinary items and cumulative
effect of change in accounting principle $ 2.80 $ 2.48 $ 1.55 $ 1.18 $ 1.11
Extraordinary items (.11) (0.13) -- -- --
Cumulative effect of change in accounting
<PAGE>
<PAGE> 134
for income taxes .04 -- -- -- --
Net earnings $ 2.73 $ 2.35 $ 1.55 $ 1.18 $ 1.11
</TABLE>
<PAGE>
<PAGE> 135
EXHIBIT 22
SUBSIDIARIES<F1> OF
FRUIT OF THE LOOM, INC.
Jurisdiction of
Incorporation
Union Underwear Company, Inc. New York
NWI Land Management Corporation Delaware
Subsidiaries of Union Underwear Company, Inc.
Aliceville Cotton Mill, Inc. Alabama
Apparel Outlet Stores, Inc. Delaware
Brundidge Shirt Corp. Alabama
The B.V.D. Licensing Corporation Delaware
Camp Hosiery Company, Inc. Tennessee
Fayette Cotton Mill, Inc. Alabama
Fruit of the Loom, Inc. (a New York corporation) New York
FTL Sales Company, Inc. New York
Greenville Manufacturing, Inc. Mississippi
Jet Sew Technologies, Inc. New York
Leesburg Knitting Mills, Inc. Alabama
Martin Mills, Inc. Louisiana
Panola Mills, Inc. Mississippi
Rabun Apparel, Inc. Georgia
Russell Hosiery Mills, Inc. North Carolina
Salem Sportswear Corporation Delaware
Sherman Warehouse Corporation Mississippi
Union Sales, Inc. Delaware
Union Yarn Mills, Inc. Alabama
Woodville Apparel Corporation Mississippi
Winfield Cotton Mill, Inc. Alabama
Whitmire Manufacturing, Inc. South Carolina
Fruit of the Loom Caribbean, Inc. Delaware
Fruit of the Loom Canada, Inc. Ontario
Fruit of the Loom Arkansas, Inc. Arkansas
Fruit of the Loom Texas, Inc. Texas
Fruit of the Loom Italy, S.r.l. Italy
AVX Management Co., Inc. Kentucky
Superior Acquisition Corporation Delaware
Superior Underwear Mill, Inc. New York
FOL International Republic of Ireland
[FN]
<F1> Excludes some subsidiaries which, if considered in the
aggregate as a single subsidiary, would not constitute a
"significant subsidiary" at December 31, 1993.
<PAGE>
<PAGE> 136
EXHIBIT 22
SUBSIDIARIES<F1> OF (Continued)
FRUIT OF THE LOOM, INC.-(Continued)
Jurisdiction of
Incorporation
Subsidiaries of Russell Hosiery Mills, Inc. (a North Carolina
corporation)
Leesburg Yarn Mills, Inc. Alabama
Subsidiaries of Camp Hosiery Company, Inc. (a Tennessee
corporation)
Russmont Hosiery Mill, Inc. North Carolina
Subsidiaries of Union Sales, Inc. (a Delaware corporation)
Fruit of the Loom Trading Company Delaware
Subsidiaries of Union Yarn Mills, Inc. (an Alabama corporation)
DeKalb Knitting Corporation Alabama
Subsidiaries of Superior Acquisition Corporation (a Delaware
corporation)
Prendas Tejidas de Mexico, S.A. de C.V. Mexico
Tejidos de Valle Hermosa, S.A. de C.V. Mexico
Confecciones dos Caminos, S.A. Honduras
Subsidiaries of FOL International (a Republic of Ireland
corporation)
W.P. McCarter & Co., Ltd. Republic of Ireland
Fruit of the Loom France, S.a.r.l. France
Fruit of the Loom GmbH Germany
Fruit of the Loom International, Ltd. Republic of Ireland
Fruit of the Loom International S.P. Z.0.0 Poland
Fruit of the Loom Investments, Ltd. United Kingdom
Fruit of the Loom Spain, S.A. Spain
Fruit of the Loom Benelux, S.A. Belgium
[FN]
<F1> Excludes some subsidiaries which, if considered in the
aggregate as a single subsidiary, would not constitute a
"significant subsidiary" at December 31, 1993.
<PAGE>
<PAGE> 137
EXHIBIT 22
SUBSIDIARIES<F1> OF (Concluded)
FRUIT OF THE LOOM, INC.-(Concluded)
Subsidiaries of Fruit of the Loom International, Ltd. (a Republic
of Ireland corporation)
McCarters Ireland, Ltd. Republic of Ireland
Subsidiaries of Fruit of the Loom Investments, Ltd. (a United
Kingdom corporation)
Fruit of the Loom, Ltd. United Kingdom
Fruit of the Loom Management Co., Ltd. United Kingdom
Fruit of the Loom Manufacturing Co., Ltd. United Kingdom
Subsidiaries of The Fruit of the Loom Trading Company (a Delaware
corporation)
Controladora Fruit of the Loom, S.A. de C.V. Mexico
Fruit of the Loom Sales Mexico, S.A. de C.V. Mexico
Subsidiaries of Controladora Fruit of the Loom, S.A. de C.V. (a
Mexico corporation)
Distribuidora Fruit of the Loom, S.A. de C.V. Mexico
[FN]
<F1> Excludes some subsidiaries which, if considered in the
aggregate as a single subsidiary, would not constitute a
"significant subsidiary" at December 31, 1993.
<PAGE>
<PAGE> 138
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statements (Forms S-8 Nos. 33-18250, 33-56214, 33-
57472 and 33-50499 and Forms S-3 Nos. 33-56376, 33-56378 and 33-
52023) pertaining to the Fruit of the Loom, Inc. 1987 Stock
Option Plan, the Richard C. Lappin Stock Option Plan, the 1992
Executive Stock Option Plan, the Fruit of the Loom, Inc.
Directors' Stock Option Plan, the registration of 800,000
shares of Class A Common Stock, 1,550,391 shares of Class A
Common Stock and 1,800,000 shares of Class A Common Stock and in
the related Prospectuses of our report dated February 12, 1994
with respect to the consolidated financial statements of Fruit of
the Loom, Inc. and subsidiaries included in the Annual Report
(Form 10-K) for the year ended December 31, 1993.
ERNST & YOUNG
Chicago, Illinois
March 16, 1994
<PAGE>
<PAGE> 139
March 21, 1994
OFICS Filer Support
SEC Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
Gentlemen:
Attached to this transmission please find Fruit of the Loom's
Annual Report on Form 10-K for the year ended December 31, 1993.
Hard copies of this document follow via special courier.
Sincerely,
John R. Carroll
Assistant Controller, Farley Industries
JRC/kd
Enclosures
<PAGE>