<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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
incorporation or organization) Identification No.)
5000 SEARS TOWER,
233 SOUTH WACKER DRIVE,
CHICAGO, ILLINOIS 60606
(Address of principal executive offices, including Zip Code)
(312) 876-1724
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common shares outstanding at October 31, 1994: 69,148,049 shares of Class A
Common Stock, $.01 par value and 6,690,976 shares of Class B Common Stock, $.01
par value.
<PAGE>
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FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheet; September
30, 1994 (Unaudited) and December 31, 1993 3
Condensed Consolidated Statement of Earnings
(Unaudited); Three and Nine Months Ended
September 30, 1994 and 1993 4
Condensed Consolidated Statement of Cash Flows
(Unaudited); Nine Months Ended September 30,
1994 and 1993 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE>
<PAGE> 3
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
ASSETS (Unaudited)
Current Assets
<S> <S> <C> <S> <C>
Cash and cash equivalents (including
restricted cash) $ 19,500 $ 74,200
Notes and accounts receivable
(less allowance for possible losses
of $16,900 and $16,100, respectively) 382,600 239,700
Inventories
Finished goods 510,400 454,500
Work in process 151,300 94,000
Materials and supplies 34,000 25,600
Other 46,200 54,700
Total current assets 1,144,000 942,700
Property, Plant and Equipment 1,426,700 1,233,900
Less accumulated depreciation 440,900 367,900
Net property, plant and equipment 985,800 866,000
Other Assets
Goodwill (less accumulated amortization
of $233,100 and $207,200, respectively) 995,600 895,300
Other 51,000 30,000
Total other assets 1,046,600 925,300
$ 3,176,400 $ 2,734,000
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 28,600 $ 34,000
Trade accounts payable 83,900 78,100
Other accounts payable and accrued expenses 208,800 138,400
Total current liabilities 321,300 250,500
Noncurrent Liabilities
Long-term debt 1,408,500 1,194,000
Deferred income taxes 52,200 51,000
Other 226,100 191,500
Total noncurrent liabilities 1,686,800 1,436,500
Common Stockholders' Equity 1,168,300 1,047,000
$ 3,176,400 $ 2,734,000
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 4
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <S> <C> <S> <C> <S><C> <S><C>
Net sales $ 640,400 $ 484,200 $ 1,713,800 $ 1,436,100
Cost of sales 438,900 309,100 1,175,700 910,500
Gross earnings 201,500 175,100 538,100 525,600
Selling, general and administrative expenses 93,900 60,500 255,600 182,600
Goodwill amortization 9,200 6,200 25,900 18,600
Operating earnings 98,400 108,400 256,600 324,400
Interest expense (25,700) (18,300) (70,600) (54,400)
Other income (expense) - net 800 (2,900) 3,100 (8,200)
Earnings before income tax expense,
extraordinary item and cumulative
effect of change in accounting principle 73,500 87,200 189,100 261,800
Income tax expense 33,300 38,600 85,100 110,700
Earnings before extraordinary item and
cumulative effect of change
in accounting principle 40,200 48,600 104,000 151,100
Extraordinary item - loss on early
retirement of debt -- (8,600) -- (8,600)
Earnings before cumulative effect
of change in accounting principle 40,200 40,000 104,000 142,500
Cumulative effect of change in
accounting for income taxes -- -- -- 3,400
Net earnings $ 40,200 $ 40,000 $ 104,000 $ 145,900
Earnings per common share:
Earnings before extraordinary item and cumulative
effect of change in accounting principle $ .53 $ .64 $ 1.37 $ 1.99
Extraordinary item - loss on early
retirement of debt -- (.11) -- (.11)
Cumulative effect of change in accounting
for income taxes -- -- -- .04
Net earnings $ .53 $ .53 $ 1.37 $ 1.92
Average common shares outstanding 76,000 76,000 76,000 76,000
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 5
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
Cash Flows from Operating Activities
<S> <S> <C> <S><C>
Net earnings $ 104,000 $ 145,900
Adjustments to reconcile to net cash
provided by (used for) operating activities:
Extraordinary item - loss on early
retirement of debt -- 8,600
Cumulative effect of change in
accounting for income taxes -- (3,400)
Depreciation and amortization 111,400 87,800
Deferred income taxes 4,000 17,800
Increase in working capital (129,500) (255,600)
Other-net 23,700 (32,700)
Net cash provided by (used for)
operating activities 113,600 (31,600)
Cash Flows from Investing Activities
Capital expenditures (182,500) (210,900)
Less amount attributable to capital leases 36,200 2,900
Capital expenditures (146,300) (208,000)
Acquisition of Gitano (90,800) --
Acquisition of Pro Player (56,500) --
Acquisition of Artex (45,000) --
Other-net 1,700 8,200
Net cash used for investing activities (336,900) (199,800)
Cash Flows from Financing Activities
Net borrowings under long-term credit agreements 198,400 670,800
Principal payments on long-term debt
and capital leases (30,500) (78,600)
Decrease in short-term notes payable -- (37,100)
Prepayment of long-term debt -- (82,300)
Refinancing of long-term debt -- (234,400)
Other-net 700 (4,300)
Net cash provided by financing activities 168,600 234,100
Net (decrease) increase in Cash and cash
equivalents (including restricted cash) (54,700) 2,700
Cash and cash equivalents (including restricted
cash) at beginning of period 74,200 57,400
Cash and cash equivalents (including restricted
cash) at end of period $ 19,500 $ 60,100
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 6
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. No dividends were declared on the Company's common stock for the three and
nine month periods ended September 30, 1994 and 1993.
2. In late January 1994 the Company acquired Artex Manufacturing Co., Inc.
("Artex") for approximately $45,000,000 (the "Artex Acquisition"). In late
March 1994 the Company acquired certain assets of the Gitano Group, Inc.
("Gitano") for approximately $90,800,000 (the "Gitano Acquisition"). In
August 1994 the Company acquired Pro Player, Inc. (formerly Daniel Young
International Corporation) ("Pro Player"), which does business under the
PRO PLAYER brand, for approximately $56,500,000, including approximately
$14,200,000 of Pro Player debt which was repaid by the Company (the "Pro
Player Acquisition", and together with the Artex Acquisition and the Gitano
Acquisition, the "Acquisitions"). The principals of Pro Player, who are
also key employees, may also be entitled to receive compensation based in
part on the attainment of certain levels of operating performance by the
acquired entity. The Acquisitions were accounted for using the purchase
method of accounting. Accordingly, the purchase prices were preliminarily
allocated to assets and liabilities based on their estimated fair values as
of the date of the Acquisitions. The cost in excess of the net assets
acquired in the Acquisitions was approximately $126,200,000 and is being
amortized over periods ranging from 15 to 20 years. The results of
operations of Artex, Gitano and Pro Player are not material in relation to
the Company's consolidated financial statements and, therefore, pro forma
financial information has not been presented.
3. Reference is made to "Part II. Other Information - Item 1. Legal
Proceedings" in this Quarterly Report on Form 10-Q wherein is reported
information concerning the LMP Litigation (as hereinafter defined). In
October 1994 a verdict of approximately $96,000,000 was rendered by a jury
against Universal (as hereinafter defined). The Company is obligated to
indemnify Universal for damages incurred in this case.
Management of the Company believes that the jury's decision is incorrect
and is contrary to the evidence. Based on discussions with counsel,
management believes that the court committed numerous errors during the
trial including: allowing the jury to consider claims that, as a matter of
law, should have been dismissed; allowing the jury to consider a
speculative damage theory; and failing to follow rulings of the California
Court of Appeals in a prior appeal in this case, which reversed a prior
judgment for the plaintiffs. Accordingly, management of the Company
believes, based on information currently available, that the judgment will
not stand on appeal.
<PAGE>
<PAGE> 7
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
The Company is currently in the process of filing various post trial
motions to overturn or reduce the judgment and, absent a satisfactory
resolution, intends to vigorously appeal this verdict. Accordingly,
management of the Company cannot presently determine the ultimate effects,
if any, on the Company's financial statements.
4. In September 1994, the Company entered into a six year operating lease
agreement, primarily for certain machinery and equipment. The total cost
of the assets to be covered by the lease is limited to $200,000,000. The
total cost of assets under lease as of September 30, 1994 was approximately
$25,000,000. The lease provides for a substantial residual value guarantee
by the Company at the termination of the lease and includes purchase and
renewal options at fair market values.
5. In the third quarter of 1993, the Company recorded an after-tax
extraordinary charge of approximately $8,600,000 ($.11 per share) in
connection with the refinancing of certain indebtedness under preexisting
secured domestic bank agreements (the "Credit Agreements") and the
redemption of its 12-3/8% Senior Subordinated Debentures due 2003 (the "12-
3/8% Notes"). The extraordinary charge consisted 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.
6. Effective January 1, 1993, the Company recorded the cumulative effect of an
accounting change related to the initial adoption of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS No. 109")
resulting in a $3,400,000 ($.04 per share) benefit in the first quarter of
1993. Under SFAS No. 109, the liability method is used in accounting for
income taxes.
7. In March 1992, the Company received a refund of approximately $60,000,000
relating to Federal income taxes paid by Northwest Industries, Inc.
("Northwest", of which the Company is the successor corporation) plus
interest thereon applicable to the tax years 1964-1968. 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 27 years. In October 1994 the
United States Tax Court ruled in favor of the Company in the above case.
The IRS time period for appeal will expire February 5, 1995.
<PAGE>
<PAGE> 8
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - Concluded
(Unaudited)
8. The condensed consolidated financial statements contained herein should be
read in conjunction with the consolidated financial statements and related
notes contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 (the "Form 10-K").
The information furnished herein reflects all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results of the interim periods and is
not necessarily indicative of results for the entire year.
The Company uses the last-in, first-out ("LIFO") method of accounting for
the majority of inventories for financial reporting purposes. Interim
determinations of LIFO inventories are necessarily based on management's
estimates of year-end inventory levels and costs. Subsequent changes in
these estimates, including the final year-end LIFO determination, and the
effect of such changes on earnings are recorded in the interim periods in
which they occur.
<PAGE>
<PAGE> 9
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
condensed consolidated financial statements for the period ended September 30,
1994 and the Company's Annual Report on Form 10-K for the year ended December
31, 1993.
The table below sets forth selected operating data (in millions of dollars and
as percentages of net sales) of the Company.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
<S> <S> <C> <S> <C> <S> <C> <S> <C>
Net sales $ 640.4 $ 484.2 $ 1,713.8 $ 1,436.1
Gross earnings $ 201.5 $ 175.1 $ 538.1 $ 525.6
Gross margin 31.5% 36.2% 31.4% 36.6
Operating earnings $ 98.4 $ 108.4 $ 256.6 $ 324.4
Operating margin 15.4% 22.4% 15.0% 22.6
</TABLE>
Net Sales
Net sales increased 32.3% and 19.3%, respectively, in the third quarter and
first nine months of 1994 compared to the same periods of 1993. The increase in
net sales in the three months ended September 30, 1994 was primarily due to the
results of the Company's new licensed sports apparel line, principally as a
result of the acquisitions of Salem Sportswear Corporation ("Salem") in November
1993, Artex in January 1994 and Pro Player in August 1994, and volume increases
in certain of the Company's existing businesses reflecting improved demand and
the introduction of new programs and products in 1994. In addition, the 1994
results include the operations of Gitano, the assets of which were acquired in
March 1994. The increase in net sales in the nine months ended September 30,
1994 was principally due to the acquisitions of Salem, Artex, Gitano and Pro
Player and volume increases in international, casualwear and activewear
operations. These increases were partially offset by the negative effects of
lower selling prices (principally for domestic activewear in the first six
months of 1994).
<PAGE>
<PAGE> 10
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Gross Earnings
Gross earnings increased 15.1% and 2.4%, respectively, in the third quarter and
first nine months of 1994 compared to the same periods of 1993. The gross
margins were 31.5% and 31.4%, respectively, in the third quarter and first nine
months of 1994 compared to 36.2% and 36.6%, respectively, in the same periods of
1993. The increase in gross earnings is primarily due to the sales volume
increase. The decrease in gross margins was primarily due to the effect of
lower prices and promotional activities and other general cost increases,
including cotton cost increases. In addition, the gross margin in the first nine
months of 1994 was adversely impacted by the unfavorable effects of reduced
operating schedules for certain of the Company's facilities in the beginning of
the first quarter of 1994 and costs associated with rehiring and retraining
workers in the first six months of 1994.
Operating Earnings
Operating earnings decreased 9.2% compared to the third quarter of 1993 while
the operating margin decreased seven percentage points to 15.4% of net sales for
the quarter ended September 30, 1994. For the first nine months of 1994,
operating earnings decreased 20.9% compared to the same period in 1993 while the
operating margin decreased 7.6 percentage points to 15% for the first nine
months of 1994. The decreases in operating earnings for both periods resulted
from higher selling, general and administrative expenses in 1994, as the
increase in selling, general and administrative expenses more than offset the
increase in gross earnings. Selling, general and administrative expenses
increased to 14.7% and 14.9% of net sales, respectively, in the third quarter
and first nine months of 1994 compared to 12.5% and 12.7% of net sales,
respectively, in the same periods of 1993. Higher selling and other
administrative costs arose both from the acquisitions of Salem, Artex, Gitano
and Pro Player and from the Company's continuing effort to improve customer
service by making investments in added distribution capabilities, computer
systems and other infrastructure required to service customers more effectively.
The increases in selling, general and administrative expenses also include
higher royalty costs in 1994, principally due to the acquisitions of the Salem,
Artex and Pro Player licensed sports apparel operations.
Interest Expense
Interest expense for the third quarter and first nine months of 1994 increased
40.4% and 29.8%, respectively, from the same periods of 1993. These increases
were principally attributable to the effect of higher debt levels in 1994 which
more than offset the effects of lower average interest rates on the Company's
debt instruments during the first six months of 1994. Higher debt levels were
primarily due to the acquisitions of Salem, Artex, Gitano and Pro Player which
were financed through borrowings under the Company's $800,000,000 revolving line
of credit (the "New Credit Agreement"), and higher working capital levels.
<PAGE>
<PAGE> 11
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Other Income (Expense) - Net
Included in other income (expense) - net in the third quarter and first nine
months of 1994 is $6,000,000 and $14,800,000, respectively, of service fee
income from Gitano's operations which represents Gitano's transition to a
marketing organization from a manufacturing base. These revenues are not
expected to recur after the third quarter of 1994. This was partially offset by
$5,000,000 and $8,500,000 in the third quarter and first nine months of 1994,
respectively, of legal expenses pertaining to litigation related to retained
liabilities of former subsidiaries. In addition, other income (expense) - net
in the third quarter and first nine months of 1994 includes approximately
$1,200,000 and $4,100,000, respectively, of deferred debt fee amortization and
bank fees. Other income (expense) - net for the third quarter and first nine
months of 1993 includes approximately $1,700,000 and $6,700,000, respectively,
of deferred debt fee amortization and bank fees.
Income Taxes
The effective income tax rate for the third quarter and first nine months of
1994 and 1993 differed from the Federal statutory rate of 35% and 34% in 1994
and 1993, respectively, primarily due to the impact of goodwill amortization, a
portion of which is not deductible for Federal income tax purposes, state income
taxes and the provision for interest related to prior years' taxes.
In the first quarter of 1993, the Company recorded the cumulative effect of an
accounting change related to the adoption of SFAS No. 109 resulting in a
$3,400,000 ($.04 per share) benefit.
Extraordinary Item
In the third quarter of 1993, the Company recorded an after-tax extraordinary
charge of approximately $8,600,000 ($.11 per share) in connection with the
refinancing of the Credit Agreements and the redemption of the 12-3/8% Notes.
The extraordinary charge consisted 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.
Earnings Per Share
Earnings per share before extraordinary item and cumulative effect of change in
accounting principle were $.53 for the third quarter of 1994 compared to $.64
for the prior year period, a 17.2% decrease. For the first nine months of 1994,
earnings per share before extraordinary item and cumulative effect of change in
accounting principle decreased 31.2% to $1.37 from $1.99 for the same period of
1993. Net earnings per share in 1993 were $1.92 and included 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.
<PAGE>
<PAGE> 12
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Effects of Inflation
Management believes that the moderate rate of inflation over the past few years
has not had a significant impact on the Company's sales or profitability.
Liquidity and Capital Resources
Funds generated from the Company's operations are the major source of liquidity
and are supplemented by funds derived from capital markets including bank
facilities. During 1994, the Company obtained bank revolving lines of credit
for certain of its foreign operations and separate letter of credit facilities
to replace certain letters of credit under the New Credit Agreement.
In connection with the verdict in the LMP Litigation, the Company posted a bond
on November 9, 1994 in an amount equal to one and one-half times the value of
the judgment as collateral for the judgment during the pendency of an appeal of
the verdict. In order to obtain the bond, a $73,000,000 letter of credit was
required and reduced the Company's availability under its revolving lines of
credit.
The Company has available for the funding of its operations approximately
$818,000,000 of revolving lines of credit. As of November 11, 1994
approximately $220,200,000 was available and unused under these facilities.
Net cash provided by operating activities in the nine months ended September 30,
1994 was $113,600,000. Net cash used for operating activities in the nine
months ended September 30, 1993 was $31,600,000. The primary components of cash
provided by operating activities in the first nine months of 1994 were net
earnings from operations plus depreciation and amortization of $215,400,000
partially offset by an increase in working capital of $129,500,000. The primary
components of cash used for operating activities in the first nine months of
1993 were an increase in working capital of $255,600,000 partially offset by net
earnings from operations plus depreciation and amortization of $233,700,000.
The working capital increases in the first nine months of 1994 and 1993 were
principally driven by higher accounts receivable ($110,900,000 and $78,300,000,
respectively) and higher inventories ($91,900,000 and $153,200,000,
respectively). The increases in accounts receivable and inventory in the first
nine months of 1994 and 1993 reflect the seasonality of the Company's business
and the Company's ongoing efforts to improve customer service and, in the 1994
period, the effect of the acquisitions of Salem, Artex, Gitano and Pro Player.
<PAGE>
<PAGE> 13
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Liquidity and Capital Resources - (Concluded)
Net cash used for investing activities in the nine months ended September 30,
1994 and 1993 was $336,900,000 and $199,800,000, respectively. Capital
expenditures, net of amounts attributable to capital leases of $36,200,000 and
$2,900,000 in 1994 and 1993, respectively, were $146,300,000 and $208,000,000 in
the first nine months of 1994 and 1993, respectively. In the first nine months
of 1994 the Company spent approximately $192,300,000 on the acquisitions of
Artex, Gitano and Pro Player, the funds for which were provided by borrowings
under the New Credit Agreement. Capital spending for the full year ended
December 31, 1994, primarily to increase distribution and yarn manufacturing
capabilities, is anticipated to approximate $225,000,000 to $250,000,000.
Net cash provided by financing activities in the nine months ended September 30,
1994 and 1993 was $168,600,000 and $234,100,000, respectively, and consisted
principally of borrowings under the Company's bank credit agreements.
In September 1994 the Company entered into a six year operating lease agreement,
primarily for certain machinery and equipment. The total cost of the assets to
be covered by the lease is limited to $200,000,000. The total cost of assets
under lease as of September 30, 1994 was approximately $25,000,000. The lease
provides for a substantial residual value guarantee by the Company at the
termination of the lease and includes purchase and renewal options at fair
market values.
Management believes the funding available to the Company is sufficient to meet
anticipated requirements for capital expenditures, working capital and other
needs.
The Company's debt instruments, principally the New Credit Agreement, contain
covenants restricting the Company's ability to sell assets, incur debt, pay
dividends and make investments and requiring the Company to maintain certain
financial ratios.
<PAGE>
<PAGE> 14
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to that portion of "Item 3. LEGAL PROCEEDINGS" in the
Company's Form 10-K wherein is reported information concerning litigation
involving Universal Manufacturing Corporation ("Universal"), a former subsidiary
of Northwest, and L.M.P. Corporation ("LMP") (the "LMP Litigation") which
information is hereby incorporated by reference herein. 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. In October 1994 a jury in
Alameda County, California Superior Court returned a verdict of approximately
$96,000,000 against Universal in the LMP Litigation. The jury verdict related
to breach of contract and fraud included approximately $6,000,000 for punitive
damages. The Company is obligated to indemnify Universal for damages incurred
in this case.
Management of the Company believes that the jury's decision is incorrect and is
contrary to the evidence. Based on discussions with counsel, management
believes that the court committed numerous errors during the trial including:
allowing the jury to consider claims that, as a matter of law, should have been
dismissed; allowing the jury to consider a speculative damage theory; and
failing to follow rulings of the California Court of Appeals in a prior appeal
in this case, which reversed a prior judgment for the plaintiffs. Accordingly,
management of the Company believes, based on information currently available,
that the judgment will not stand on appeal.
The Company is currently in the process of filing various post trial motions to
overturn or reduce the judgment and, absent a satisfactory resolution, intends
to vigorously appeal this verdict. Accordingly, management of the Company
cannot presently determine the ultimate effects, if any, on the Company's
financial statements.
<PAGE>
<PAGE> 15
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION - CONCLUDED
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
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, NationsBank 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 Agreement 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).
27 Financial Data Schedules
* 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 No. 1-8941).
The Registrant has not listed nor filed as an Exhibit to this Quarterly Report
certain instruments with respect to long-term debt representing indebtedness of
the Registrant and its subsidiaries which do not 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.
b. Reports on Form 8-K
No report on Form 8-K was filed by the Registrant during the quarter ended
September 30, 1994.
<PAGE>
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FRUIT OF THE LOOM, INC.
(Registrant)
Date: November 14, 1994 LARRY K. SWITZER
Larry K. Switzer
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer
and duly authorized to sign
on behalf of Registrant)
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the Company's third
quarter report on Form 10-Q and is qualified in
its entirety by reference to such financial
statements.
<MULTIPLIER> 1,000
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<S> <C>
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<PERIOD-TYPE> 9-MOS
<CASH> 19,500
<SECURITIES> 0
<RECEIVABLES> 399,500
<ALLOWANCES> 16,900
<INVENTORY> 695,700
<CURRENT-ASSETS> 1,144,000
<PP&E> 1,426,700
<DEPRECIATION> 440,900
<TOTAL-ASSETS> 3,176,400
<CURRENT-LIABILITIES> 321,300
<BONDS> 1,408,500
0
0
<COMMON> 466,500
<OTHER-SE> 701,800
<TOTAL-LIABILITY-AND-EQUITY> 3,176,400
<SALES> 1,713,800
<TOTAL-REVENUES> 1,713,800
<CGS> 1,175,700
<TOTAL-COSTS> 1,175,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<PAGE>
<INTEREST-EXPENSE> 70,600
<INCOME-PRETAX> 189,100
<INCOME-TAX> 85,100
<INCOME-CONTINUING> 104,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,000
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
</TABLE>
