<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 June 30, 1995
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 July 31, 1995: 69,190,956 shares of Class A Common
Stock, $.01 par value and 6,690,976 shares of Class B Common Stock, $.01 par
value.
<PAGE> 2
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheet; June 30,
1995 (Unaudited) and December 31, 1994 2
Condensed Consolidated Statement of Earnings (Unaudited); Three and Six Months Ended June
30, 1995 and 1994 3
Condensed Consolidated Statement of Cash Flows (Unaudited); Six Months Ended June 30, 1995
and 1994 4
Notes to Condensed Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
--------------- ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents (including
restricted cash) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,800 $ 49,400
Notes and accounts receivable
(less allowance for possible losses
of $25,500 and $20,700, respectively) . . . . . . . . . . . . . . . . 454,500 295,600
Inventories
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620,200 496,200
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,200 141,500
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . 47,700 39,100
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,300 54,800
-------------- ---------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 1,353,700 1,076,600
-------------- ---------------
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 1,601,900 1,531,400
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . 531,200 473,200
-------------- ---------------
Net property, plant and equipment . . . . . . . . . . . . . . . . 1,070,700 1,058,200
-------------- ---------------
Other Assets
Goodwill (less accumulated amortization
of $261,200 and $242,400, respectively) . . . . . . . . . . . . . . . 947,100 965,800
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,500 62,900
-------------- ---------------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . 1,015,600 1,028,700
-------------- ---------------
$ 3,440,000 $ 3,163,500
============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current Liabilities
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . $ 17,900 $ 23,100
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 68,100 113,300
Other accounts payable and accrued expenses . . . . . . . . . . . . . . . 248,700 195,400
-------------- ---------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 334,700 331,800
-------------- ---------------
Noncurrent Liabilities
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,640,600 1,440,200
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 52,700 43,400
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . 222,500 222,300
-------------- ---------------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . 1,915,800 1,705,900
-------------- ---------------
Common Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . 1,189,500 1,125,800
-------------- ---------------
$ 3,440,000 $ 3,163,500
============== ===============
</TABLE>
See accompanying notes.
2
<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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1995 1994 1995 1994
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $ 724,800 $ 635,200 $ 1,253,000 $ 1,073,400
Cost of sales . . . . . . . . . . . . . . . . . . . 513,800 444,400 880,000 736,800
------------- ------------- ------------ -------------
Gross earnings . . . . . . . . . . . . . . . . 211,000 190,800 373,000 336,600
Selling, general and
administrative expenses . . . . . . . . . . . . . 99,000 90,300 191,900 161,700
Goodwill amortization . . . . . . . . . . . . . . . 9,400 9,000 18,800 16,700
------------- ------------- ------------ -------------
Operating earnings . . . . . . . . . . . . . . 102,600 91,500 162,300 158,200
Interest expense . . . . . . . . . . . . . . . . . (30,700) (23,800) (59,100) (44,900)
Other income - net . . . . . . . . . . . . . . . . 2,200 4,500 400 2,300
------------- ------------- ------------ -------------
Earnings before income tax expense . . . . . . 74,100 72,200 103,600 115,600
Income tax expense . . . . . . . . . . . . . . . . 34,400 33,500 47,400 51,800
------------- ------------- ------------ -------------
Net earnings . . . . . . . . . . . . . . . . . $ 39,700 $ 38,700 $ 56,200 $ 63,800
============= ============= ============ =============
Earnings per common share . . . . . . . . . . . . . $ .52 $ .51 $ .74 $ .84
============= ============= ============ =============
Average common shares outstanding . . . . . . 76,000 76,000 76,000 76,000
============= ============= ============ =============
</TABLE>
See accompanying notes.
3
<PAGE> 5
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In thousands of dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1995 1994
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,200 $ 63,800
Adjustments to reconcile to net cash
used for operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 82,900 72,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 9,300 1,300
Increase in working capital . . . . . . . . . . . . . . . . . . (300,400) (149,400)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,000) 8,000
----------- ----------
Net cash used for operating activities . . . . . . . . . . . (159,000) (4,300)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (65,800) (99,100)
Acquisition of Gitano . . . . . . . . . . . . . . . . . . . . . . . -- (98,100)
Acquisition of Artex . . . . . . . . . . . . . . . . . . . . . . . . -- (44,600)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,300 (23,200)
----------- ----------
Net cash used for investing activities . . . . . . . . . . . (60,500) (265,000)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt . . . . . . . . . . . . 203,400 223,700
Principal payments on long-term debt
and capital leases . . . . . . . . . . . . . . . . . . . . . . . (13,800) (24,500)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 200
----------- ----------
Net cash provided by financing activities . . . . . . . . . 189,900 199,400
----------- ----------
Net decrease in Cash and cash
equivalents (including restricted cash) . . . . . . . . . . . . (29,600) (69,900)
Cash and cash equivalents (including restricted
cash) at beginning of period . . . . . . . . . . . . . . . . . . 49,400 74,200
----------- ----------
Cash and cash equivalents (including restricted
cash) at end of period . . . . . . . . . . . . . . . . . . . . . $ 19,800 $ 4,300
=========== ==========
</TABLE>
See accompanying notes.
4
<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 six month periods ended June 30, 1995 and 1994.
2. In December 1993, in connection with a transaction with Acme Boot
Company, Inc. ("Acme Boot") through which the Company received
approximately $72,900,000 in cash proceeds for its investment in Acme
Boot, the Company guaranteed, on an unsecured basis, the repayment of
debt incurred or created under Acme Boot's bank credit facility (the
"Acme Boot Credit Facility"). The Acme Boot Credit Facility provides
for up to $30,000,000 of loans and letters of credit subject to a
borrowing base and is secured by first liens on substantially all
assets of Acme Boot and its subsidiaries.
In April 1995, Acme Boot entered into an additional secured credit
facility with its bank lender (the "New Acme Credit Agreement"). The
New Acme Credit Agreement provides for up to $40,000,000 in
borrowings and initially expires in January 1996, with an extension to
January 1997 at the option of Acme Boot. In April 1995, Acme Boot used
approximately $25,400,000 under this facility to repurchase certain of
its debt, preferred stock and common stock. Additional borrowings
under the New Acme Credit Agreement may only be used to repurchase
certain of the debt, preferred stock and common stock issues of Acme
Boot. The New Acme Credit Agreement is secured by a second lien on
substantially all of the assets (which are approximately $77,000,000
at June 30, 1995) of Acme Boot and its subsidiaries. In addition, the
Company has guaranteed, on an unsecured basis, repayment of debt
incurred or created under the New Acme Credit Agreement. In exchange
for the additional guarantee, the Company received $6,000,000 of
initial liquidation preference of Acme Boot's Series C 10% Redeemable
Junior Preferred Stock (the "Junior Preferred Stock").
The Acme Boot Credit Facility and the New Acme Credit Agreement
provide that no dividends may be paid in cash on the Junior Preferred
Stock subject to certain tests. The Junior Preferred Stock carries
voting rights representing in the aggregate 5% of the total voting
power of Acme Boot so long as any of Acme Boot's 12 1/2% Series B
Preferred Stock (the "Acme 12 1/2% Preferred Stock") is outstanding.
The Acme 12 1/2% Preferred Stock currently carries voting rights
representing in the aggregate 25% of the total voting power of Acme
Boot. If none of the Acme 12 1/2% Preferred Stock is outstanding, the
Junior Preferred Stock will carry voting rights representing 25% of
the total voting power of Acme Boot.
5
<PAGE> 7
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONCLUDED)
(UNAUDITED)
3. 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, 1994.
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.
6
<PAGE> 8
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 June 30, 1995
and the Company's Annual Report on Form 10-K for the year ended December 31,
1994.
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ -----------------------------
1995 1994 1995 1994
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 724.8 $ 635.2 $ 1,253.0 $ 1,073.4
Gross earnings $ 211.0 $ 190.8 $ 373.0 $ 336.6
Gross margin 29.1% 30.0% 29.8% 31.4%
Operating earnings $ 102.6 $ 91.5 $ 162.3 $ 158.2
Operating margin 14.2% 14.4% 13.0% 14.7%
</TABLE>
NET SALES
Net sales increased 14.1% and 16.7%, respectively, in the second quarter and
first six months of 1995 compared to the same periods of 1994. The increase in
net sales in the second quarter was primarily due to volume increases in
consumer packaged goods reflecting improved demand, combined with the inclusion
of the results of Pro Player Inc. ("Pro Player"), which was acquired in August
1994. Price increases in all of the Company's businesses also contributed to
the sales increase. In addition, the inclusion of the revenues of the
Company's jeans and sportswear subsidiary, Gitano Fashions Limited ("Gitano"),
the assets of which were acquired in late March 1994, now reflect Gitano's
transition to a traditional wholesale operation from a marketing service
organization in late 1994. These increases were partially offset by lower unit
volume of the Company's activewear and casualwear T-shirt products as well as
certain of the Company's licensed sports apparel businesses which have been
adversely affected by reduced consumer demand caused by labor issues in certain
of the professional sports leagues. The increased net sales in the six months
ended June 30, 1995 were principally due to the Gitano and Pro Player
acquisitions, volume increases in underwear and international operations and
price increases in all of the Company's businesses. These increases were
partially offset by the aforementioned lower volume in activewear and
casualwear T-shirt and certain licensed sports apparel products.
GROSS EARNINGS
Gross earnings increased 10.6% and 10.8%, respectively, in the second quarter
and first six months of 1995 compared to the same periods of 1994. The gross
margins were 29.1% and 29.8%, respectively, in the second quarter and first six
months of 1995 compared to 30% and 31.4%, respectively, in the same periods of
1994. The increase in gross earnings for both comparisons is primarily due to
the effect of the sales volume increase and price increases.
7
<PAGE> 9
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
The gross margins for both comparisons have been negatively affected by higher
raw material costs and other general cost increases. Higher sales of closeouts
and discontinued products, principally in the Company's casualwear and licensed
sports apparel businesses as a result of the Company's decision to eliminate a
number of product offerings in the fourth quarter of 1994, also had a negative
impact on gross margin. In addition, a higher proportion of lower margin
Gitano and casualwear products and an unfavorable product mix in international
operations contributed to the gross margin decline. These decreases were
partially offset by price increases.
OPERATING EARNINGS
Operating earnings increased 12.1% compared to the second quarter of 1994 while
the operating margin decreased .2 percentage points to 14.2% of net sales for
the quarter ended June 30, 1995. For the first six months of 1995, operating
earnings increased 2.6% compared to the same period of 1994 while the operating
margin decreased 1.7 percentage points to 13% for the first half of 1995. The
increase in operating earnings for both periods resulted from higher gross
earnings in 1995 which more than offset the increase in selling, general and
administrative expenses. Higher selling, general and administrative costs
arose from the inclusion of the Gitano and Pro Player operations acquired at
various dates in 1994 and which operations include proportionally higher
selling expenses as compared to the Company's consumer packaged goods and
activewear operations. In addition, higher selling, general and administrative
expenses resulted from higher shipping costs as a result of higher unit volume
and new distribution locations. The increase in selling, general and
administrative expenses also includes non-recurring charges in the first
quarter of 1995, related to the curtailment of selling and marketing
activities in Mexico, and non-recurring charges in the second quarter of 1995,
related to the closing of Gitano's New York office and the consolidation of all
Gitano related management functions into the Company's existing operations.
These increases were partially offset by lower selling, general and
administrative expenses as a result of reductions in royalty and other expenses
due to the weakness in certain of the Company's licensed sports apparel
businesses. Selling, general and administrative expenses were 13.7% and 15.3%
of net sales in the second quarter and first six months of 1995, respectively,
compared to 14.2% and 15.1% of net sales, respectively, in the same periods of
1994.
INTEREST EXPENSE
Interest expense for the second quarter and first six months of 1995 increased
29.0% and 31.6%, respectively, from the same periods of 1994. The increase was
primarily due to the effect of higher debt levels in 1995. Higher debt levels
in 1995 were due principally to the acquisition of Pro Player in August 1994,
higher working capital levels in 1995 and, in the first three months of 1995,
the effect of higher debt levels resulting from the acquisition of Gitano in
March 1994.
8
<PAGE> 10
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONTINUED)
INCOME TAXES
The effective income tax rate for the second quarter and first six months of
1995 and 1994 differed from the Federal statutory rate of 35% 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.
EARNINGS PER SHARE
Earnings per share were $.52 for the second quarter of 1995 compared to $.51
for the prior year period, a 2% increase. For the six months ended June 30,
1995, earnings per share decreased 11.9% to $.74 from $.84 for the same period
of 1994.
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 obtained from capital markets including bank
facilities. In May 1995, the Company entered into a $155,000,000 short-term
revolving commitment (the "Short Term Facility") to supplement its existing
revolving lines of credit. The Short-Term Facility expires in May 1996 and no
borrowings are outstanding under this facility. The Company has available for
the funding of its operations approximately $1,026,300,000 of revolving lines
of credit. As of August 10, 1995 approximately $265,200,000 was available and
unused under these facilities.
Net cash used for operating activities in the six months ended June 30, 1995
and 1994 was $159,000,000 and $4,300,000, respectively. The primary components
of cash used for operating activities in the first six months of 1995 and 1994
were increases in working capital of $300,400,000 and $149,400,000,
respectively. The working capital increases in the first half of 1995 and 1994
were caused by higher accounts receivable ($158,900,000 and $144,600,000,
respectively) and higher inventories ($154,300,000 and $87,300,000,
respectively). The increases in accounts receivable and inventory in the first
six months of 1995 and 1994 reflect the seasonality of the Company's business,
as it is in its peak selling period. The increase in inventory in 1995 was
also the result of higher raw material costs and an increase in heavier weight
apparel carried in inventory.
Net cash used for investing activities in the six months ended June 30, 1995
and 1994 was $60,500,000 and $265,000,000, respectively. Capital expenditures
were $65,800,000 and $99,100,000 in the first six months of 1995 and 1994,
respectively. In the first six months of 1994 the Company spent approximately
$142,700,000 on the acquisitions of Artex Manufacturing Co., Inc. and Gitano,
the funds for which were provided by borrowings under the Company's bank
facilities. Capital spending, primarily to enhance distribution and yarn
manufacturing capabilities and to establish and support offshore assembly
operations, is anticipated to approximate $125,000,000 to $140,000,000 in 1995.
9
<PAGE> 11
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (CONCLUDED)
LIQUIDITY AND CAPITAL RESOURCES - (CONCLUDED)
Net cash provided by financing activities in the six months ended June 30, 1995
and 1994 was $189,900,000 and $199,400,000, respectively, and consisted
principally of borrowings under the Company's bank facilities.
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 June 30, 1995 was approximately $92,000,000.
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 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.
10
<PAGE> 12
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on May 16, 1995. Three proposals
were submitted to stockholders as described in the Company's Proxy Statement
dated April 7, 1995 and were voted upon and approved by the stockholders at the
meeting. The table below briefly describes the proposals and results of the
stockholder votes.
<TABLE>
<CAPTION>
Votes Votes Authority Broker
in Favor Opposed Abstain Withheld Nonvotes
-------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Proposal to elect the following
nine directors:
Elected by holders of Class A
Common Stock:
Omar Z. Al Askari 59,021,551 -- -- 527,071 --
Dennis S. Bookshester 59,031,513 -- -- 517,109 --
Lee W. Jennings 59,073,701 -- -- 474,921 --
Elected by holders of Class A and
Class B Common Stock:
William Farley 92,526,254 -- -- 477,248 --
John B. Holland 92,554,176 -- -- 449,326 --
Henry A. Johnson 92,516,016 -- -- 487,486 --
Richard C. Lappin 92,494,203 -- -- 509,299 --
A. Lorne Weil 92,488,633 -- -- 514,869 --
Sir Brian Wolfson 92,527,691 -- -- 475,811 --
Proposal to approve the
Company's 1995 Executive
Incentive Compensation Plan 76,941,002 8,318,383 314,380 -- 7,429,737
Proposal to approve the
Company's 1995 Non-Employee
Directors' Stock Plan 79,363,761 5,861,898 347,506 -- 7,430,337
</TABLE>
11
<PAGE> 13
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,
N.A. (Carolinas), 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).
10(a) Management Agreement between Farley Industries, Inc. and the
Company dated as of January 1, 1995.
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 June
30, 1995.
12
<PAGE> 14
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: August 14, 1995 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)
13
<PAGE> 1
EXHIBIT 10(a)
FARLEY INDUSTRIES
MANAGEMENT AGREEMENT
FOR FRUIT OF THE LOOM, INC.
This Management Agreement (the "Agreement") is made as of January 1, 1995
by and among Farley Industries, Inc., a Delaware corporation ("FII"), and Fruit
of the Loom, Inc., a Delaware corporation ("FOL") and each of its subsidiaries
(FOL and its subsidiaries are referred to herein, individually and
collectively, as the "Company").
R E C I T A L S
WHEREAS, the Company desires to retain FII to provide the Company with
legal, financial, accounting and other management and advisory services for the
period January 1, 1995 through December 31, 1995 (the "Term of this
Agreement"); and
WHEREAS, FII has provided such services in the past and has agreed to
provide such services during the Term of this Agreement; and
WHEREAS, FII and the Company desire to enter into a written agreement
evidencing the foregoing.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. MANAGEMENT SERVICES
1.1 The Company hereby retains FII to provide the Company with such
general management services ("Management Services") as the Company may request,
and FII agrees to provide the Management Services during the Term of this
Agreement. The Management Services shall include the following:
(1) Financial advice and services, including, without limitation,
assistance with respect to matters such as cash management, treasury and
financial controls;
(2) Legal advice and services;
(3) Advice and services concerning foreign and domestic taxes,
including, without limitation, assistance in preparation of tax returns;
<PAGE> 2
(4) Auditing, accounting, and bookkeeping advice and services,
including, without limitation, assistance in preparation of financial
statements and disclosure documents related to reporting requirements
under state and federal securities laws;
(5) Corporate planning and corporate development advice and services;
(6) Human resources and personnel advice and services, including,
without limitation, administration of pension and other employee benefit
plans and compliance with state and federal labor laws;
(7) Public relations and press relations advice and services; and
(8) Such other advice and services necessitated by the ordinary
course of the Company's business, as the Company may reasonably request
from time to time.
Notwithstanding the foregoing, "Management Services" do not include any of the
services described in Articles 2, 3 or 4 hereof.
1.2 (a) In consideration of FII's provision of Management Services, the
Company agrees to pay FII a fee (the "Management Fee") in an amount equal to
the Cost of Management Services (as defined below) provided, however, that in
no event shall the Company be responsible for more than $8.6 million plus the
cost of benefits granted to FII employees under the 1995 Fruit of the Loom,
Inc. Executive Incentive Compensation Plan (which includes short-term bonus
payments, long-term bonus payments and supplemental executive retirement
program benefits) less FII Affiliate Management Fees (as defined below). For
purposes of this Agreement, the "Cost of Management Services" shall mean the
costs necessarily incurred by FII during 1995 in the proper performance of (i)
the Management Services and (ii) other management services performed for the
FII Affiliates (as hereinafter defined) (collectively, the "Services"). The
term "Cost of Management Services" shall include the following expenses
necessarily incurred by FII in connection with the performance of the Services:
(i) salaries, benefits and other compensation of FII's
officers (other than William Farley) and other FII
employees; provided, however, that payments related
to the 1995 Fruit of the Loom, Inc. Executive
Incentive Compensation Plan to such FII officers and
employees which relate to services provided in 1995
but which are not paid until 1996
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<PAGE> 3
shall be included within the Cost of Management
Services;
(ii) reasonable out-of-pocket transportation and traveling
expenses and long distance phone calls, facsimile and
messenger charges;
(iii) costs of materials, supplies and capital expenditures
incurred in the normal course of FII's business;
(iv) overhead or general expenses, including rental
charges;
(v) costs of outside services including those described
in Section 1.2(c) below; and
(vi) other costs incurred in the performance of Management
Services.
For purposes of this Agreement, the term "Cost of Management Services"
shall not include:
(i) salary, bonus and other compensation of William
Farley;
(ii) transportation, traveling, entertainment and any
other expenses of William Farley, other than (A) such
expenses incurred on behalf of FII Affiliates in the
ordinary course of their respective businesses and
(B) costs of providing office space, administrative
services and other customary services to William
Farley;
(iii) interest payments on borrowed money;
(iv) costs due to the gross negligence or willful
misconduct of FII or any of its officers, employees
or agents;
(v) costs of any item not specifically and expressly
included in the items set forth in this Section
1.2(a); or
(vi) costs in excess of $14 million, as such amount may be
increased or decreased to reflect any adjustment to
the anticipated $3.1 million of benefits to be
distributed to FII employees under the 1995 Fruit of
the Loom, Inc. Executive Incentive Compensation
Plan.
3
<PAGE> 4
For purposes of this Agreement, the term "FII Affiliate Management
Fees" shall mean the management fees and expense reimbursements paid to FII by
the FII Affiliates (as hereinafter defined, other than the Company) for
management services performed during 1995.
(b) The Management Fee shall be payable as follows:
(i) One-twelfth of the estimated Management fee
($908,333) shall be payable on the first day of each
month during the Term of this Agreement (based upon
an estimated $10.9 million Management Fee for 1995);
and
(ii) within thirty days after the close of the 1995
calendar year, FII shall furnish to the Company a
statement (the "FII Statement") detailing the Cost of
Management Services. The FII Statement shall be
accompanied by a certificate signed by each of the
President and the Chief Financial Officer of FII
stating that the FII Statement is valid and correct
in accordance with the books and records of FII. The
Company and FII shall reconcile the amount of
payments made to FII pursuant to this Section 1.2(b)
with the amount of the Management Fee which is
payable based upon the Cost of Management Services
and FII Affiliate Management Fees. Upon such
reconciliation, FII or the Company, as the case may
be, shall provide such refunds or additional payments
as are then appropriate.
(c) FII shall keep full and detailed records of its costs
and expenses incurred during 1995. The Board of Directors of the Company shall
be afforded full access to all of FII's records, books, correspondence,
vouchers and similar data relating to its costs and expenses incurred during
1995. FII shall employ independent auditors and shall furnish the Company a
report in form satisfactory to the Company. If a disagreement occurs as to the
Cost of Management Services, the disagreement shall be submitted to Ernst &
Young whose decision shall be final and binding.
2. INVESTMENT BANKING SERVICES
2.1 In connection with the direct or indirect acquisition or
disposition by the Company of the assets or operations of any business or
entity, whether by purchase or sale of stock or assets, merger or
consolidation, or otherwise, FII agrees to provide appropriate investment
banking, financial, accounting, legal and other services for such transactions
("Investment Banking Services") as requested by the Company. Nothing in this
4
<PAGE> 5
Article 2 shall prohibit the Company from hiring any other third party advisers
to provide Investment Banking Services and this Agreement does not create an
exclusive right in favor of FII to perform such services.
2.2 In consideration of FII's provision of Investment Banking
Services, the Company shall pay a fee established by FII and determined by FII
to be reasonable in relation to (i) the size and complexity of the transaction,
and (ii) the fees customarily charged by other advisors for similar
Investment Banking Services; provided, such fee shall not exceed two percent
(2%) of the total consideration paid or received by the Company, as the case
may be, in the subject transaction. Fees for Investment Banking Services shall
be payable to FII upon the closing of the subject transaction.
2.3 If FII shall provide Investment Banking Services for a
transaction which is not consummated, FII shall establish a reasonable fee for
the services FII has provided, which may be based upon engagement or similar
fees other advisers in such or similar transactions received or would receive.
3. FINANCING SERVICES
3.1 In connection with the arrangement by the Company of public or
private debt financing (including letter of credit facilities), FII agrees to
provide financial, accounting, legal and other services for such transaction
("Financing Services") as requested by the Company. Nothing in this Article 3
shall prohibit the Company from hiring any other third party advisers to
provide Financing Services and this Agreement does not create an exclusive
right in favor of FII to perform such services.
3.2 In consideration of FII's provision of Financing Services, the
Company shall pay a fee established by FII and determined by FII to be
reasonable in relation to (i) the size and complexity of the transaction, and
(ii) the fees customarily charged by other advisors for similar Financing
Services; provided, such fee shall not exceed two percent (2%) of the aggregate
amount available for borrowing or use under the subject agreement or facility.
Fees for Financing Services shall be payable to FII upon the closing of the
subject agreement or facility.
3.3 If FII shall provide Financing Services for a financing which
is not consummated, FII shall establish a reasonable fee for the services FII
has provided, which may be based upon engagement or similar fees other advisers
in such or similar financing received or would receive.
5
<PAGE> 6
4. OTHER SERVICES
4.1 Fees for financial, accounting, legal and advisory services
rendered by FII to the Company outside the ordinary course of the Company's
business which do not come within the scope of Sections 2 or 3 hereof shall be
provided upon terms as agreed upon by the Company and FII in writing.
5. OTHER TERMS
5.1 FII Represents and warrants to the Company as follows:
(a) FII is a corporation duly organized and validly
existing under the laws of the State of Illinois with full corporate power and
authority to execute and deliver this Agreement. FII has the full legal right,
power and capacity, and all authority and approval required to execute and
deliver this Agreement and to perform its obligations hereunder.
(b) This Agreement has been duly authorized, executed and
delivered by FII and constitutes a valid and legally binding agreement of FII,
enforceable against FII in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject as to enforceability to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(c) The execution and delivery by FII of this Agreement
and the performance of its obligations hereunder will not (i) require the
consent, waiver, order, registration, qualification, authorization or approval
of, from or with any governmental or regulatory authority, domestic or foreign,
or of any other individual, partnership, corporation, trust or other entity
(collectively, "Person"), (ii) conflict with or result in any breach or
violation of any of the terms or conditions or provisions of, or constitute
(or, with notice or lapse of time or both, constitute) a default under (1) the
Articles of Incorporation or By-laws of FII; (2) any federal, state, local or
foreign statute, regulation, order, judgment or decree of any court, arbitrator
or governmental or regulatory instrumentality applicable to FII or (3) any
instrument, contract or other agreement to which FII is a party or by or to
which FII is bound or subject.
(d) The budget previously presented to the Company by FII
is based on reasonable assumptions of management of FII as to the costs and
expenses to be incurred by FII during 1995.
6
<PAGE> 7
(e) FII is engaged in the business of providing
management services to the Company and "affiliates" (as such term is defined in
Section 15 of the Securities Act of 1933) of William Farley (collectively, the
"FII Affiliates") and does not conduct any other business or provide services
to any other Person.
5.2 The Company represents and warrants to FII as follows:
(a) The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware, with full power and
authority to execute and deliver this Agreement. The Company has the full
legal right, power and capacity, and all authority and approval required to
execute and deliver this Agreement and to perform all its obligations
hereunder.
(b) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and legally binding agreement
of the Company enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors rights generally and subject as to enforceability to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(c) The execution and delivery by the Company of this
Agreement and the performance of its obligations hereunder will not (i) require
the consent, waiver, order, registration, qualification, authorization or
approval of, from or with any governmental or regulatory authority, domestic or
foreign, or of any other person, (ii) conflict with or result in any breach or
violation of the terms or conditions or provisions of, or constitute (or, with
notice or lapse of time or both, constitute) a default under (1) the Articles
of Incorporation or By-laws of the Company, (2) any federal, state, local or
foreign statue, regulation, order, judgment or decree of any court, arbitrator
or governmental or regulatory instrumentality applicable to the Company, or (3)
any instrument, contract or other agreement to which the Company is a party or
by or to which the Company is bound or subject.
6. ADDITIONAL AGREEMENTS
During the term of this Agreement, FII shall engage in the business of
providing management services to FII Affiliates and shall not conduct any other
business or provide services to any other Person.
7
<PAGE> 8
7. OTHER TERMS
7.1 This Agreement expires on December 31, 1995, except Section 1.2,
7.3 and 7.6 shall survive.
7.2 The personnel of FII who provide services to the Company
hereunder will be designated solely by FII and shall remain employees of FII.
It is understood that neither FII nor any of its employees shall be required to
devote their energies full time to the provision of services hereunder and that
FII may and intends to furnish similar services to other FII Affiliates.
7.3 Except as otherwise provided herein or required under applicable
law, the Company and FII agree to maintain as confidential and not to disclose
to any third party any and all information provided by one party to the other
or otherwise obtained by one party from the other in the performance of this
Agreement (other than information which is a matter of public knowledge or has
otherwise become publicly available).
7.4 FII acknowledges that it and its personnel may, during the course
of provision of services hereunder, gain possession or control of books,
records, instruments, data and other information pertaining to the Company
which may prove necessary or desirable to the Company in connection with its
business (collectively, "Information"). Accordingly, FII agrees to provide the
Company, upon the Company's written request, full and complete access
(including access to persons or firms possessing Information), and all such
Information the Company may reasonably require in the conduct of its business,
including Information sought for audit, accounting, litigation or tax purposes
or proceedings. The Company agrees to provide FII with full and complete
access to any and all Company records, data (both financial and operational)
and persons which FII may reasonably require to perform the Management Services
contemplated by this Agreement.
7.5 FII and its personnel shall have no liability to the Company on
account of any advice or services which are rendered to the Company hereunder
if such advice or services were rendered in good faith; provided, this
limitation shall not apply to advice or actions deemed to have been grossly
negligent in a final judgment by a court of competent jurisdiction from which
no appeal can be or has been taken.
7.6 The Company agrees to indemnify and hold harmless FII, the
directors, officers, agents, employees, legal representatives and affiliates of
FII, and each Person, if any, controlling FII or any of its affiliates within
the meaning of Section 15 of the Securities Act of 1933 (an "Indemnified
Party"), from and against any and all losses, claims, damages and liabilities,
joint or several, caused by, related to or arising out of FII acting for
8
<PAGE> 9
or providing services to the Company pursuant to this Agreement, and to
reimburse any Indemnified Party for all reasonable expenses (including
Attorneys' fees) incurred by the Indemnified Party in connection with the
investigation, preparation or defense of any such action or claim, whether or
not in connection with any pending or threatened litigation, to which such
Indemnified Party is subject; provided, however, that the Company shall not
have any obligation for any such losses, claims, damages, liabilities or
expenses that are found, in a final judgment by a court of competent
jurisdiction from which no appeal can be or has been taken, to have resulted
principally from the Indemnified Party's bad faith, gross negligence or willful
misconduct. The Indemnified Party agrees to notify the Company promptly of the
assertion of any claim or the commencement of any action or proceeding relating
to this indemnity, but the Indemnified Party's failure to so notify the Company
shall not relieve the Company from any obligation or liability which the
Company may have pursuant to this Agreement to the extent that the Company has
not been prejudiced in any material respect by such failure. The Indemnified
Party shall have the right to retain counsel of its own choice to represent it
and such counsel shall, to the fullest extent consistent with its professional
responsibilities, cooperate with the Company and any counsel designated by the
Company. The Company shall not be liable under this Agreement for any
settlement of any claim against the Indemnified Party made without the
Company's written consent, which consent will not be unreasonably withheld.
The foregoing rights are in addition to any rights that the Indemnified Party
may have at common law or otherwise.
7.7 This Agreement shall be governed by and construed under the laws
of the State of Illinois.
7.8 This Agreement may be executed in one or more counterparts, each
of which will be deemed an original and which together shall constitute one and
the same instrument.
7.9 This Agreement sets forth the entire understanding of the parties
with respect to FII's rendering of the services which are the subject hereof.
Neither this Agreement nor any provision hereof may be modified, waived,
terminated or amended other than by the express written agreement of FII and
the Company.
7.10 This Agreement may not be assigned by either party without the
consent of the other but shall be binding upon and inure to the benefits of the
parties and their respective successor and assigns upon any assignment so
permitted.
7.11 In the event that any provision of this Agreement shall be held
to be, in whole or in part, void or unenforceable, the remaining provisions of
this Agreement, and the remaining
9
<PAGE> 10
portion of any provision held void or unenforceable in part, shall continue in
full force and effect.
7.12 Except as otherwise specifically provided herein, notices
required hereunder shall be deemed given when delivered personally, or when
deposited with a bonded overnight courier or five (5) days after being
deposited as registered or certified United States mail, postage prepaid, in
each case to the address of the party for whom intended at the principal
executive offices of such party set forth below, or at such other address as
such party may hereafter specify by written notice to the other.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their proper officers as of the date first written above.
FRUIT OF THE LOOM, INC. FARLEY INDUSTRIES, INC.
5000 Sears Tower 5000 Sears Tower
Chicago, Illinois 60606 Chicago, IL 60606
By: ________________________ By: _________________________
Vice President Vice President
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's quarterly report on Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 19,800
<SECURITIES> 0
<RECEIVABLES> 480,000
<ALLOWANCES> 25,500
<INVENTORY> 831,100
<CURRENT-ASSETS> 1,353,700
<PP&E> 1,601,900
<DEPRECIATION> 531,200
<TOTAL-ASSETS> 3,440,000
<CURRENT-LIABILITIES> 334,700
<BONDS> 1,640,600
<COMMON> 471,100
0
0
<OTHER-SE> 718,400
<TOTAL-LIABILITY-AND-EQUITY> 3,440,000
<SALES> 1,253,000
<TOTAL-REVENUES> 1,253,000
<CGS> 880,000
<TOTAL-COSTS> 880,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,100
<INCOME-PRETAX> 103,600
<INCOME-TAX> 47,400
<INCOME-CONTINUING> 56,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,200
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
</TABLE>
