<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 March 31, 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 April 30, 1995: 69,170,456 shares of Class A Common
Stock, $.01 par value and 6,690,976 shares of Class B Common Stock, $.01 par
value.
<PAGE>
<PAGE> 2
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheet; March 31,
1995 (Unaudited) and December 31, 1994 3
Condensed Consolidated Statement of Earnings
(Unaudited); Three Months Ended March 31,
1995 and 1994 4
Condensed Consolidated Statement of Cash Flows
(Unaudited); Three Months Ended March 31,
1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
<PAGE> 3
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (including restricted cash) $ 27,400 $ 49,400
Notes and accounts receivable (less allowance for
possible losses of $22,700 and $20,700, respectively) 328,500 295,600
Inventories
Finished goods 610,800 496,200
Work in process 171,900 141,500
Materials and supplies 44,800 39,100
Other 47,300 54,800
Total current assets 1,230,700 1,076,600
Property, Plant and Equipment 1,575,500 1,531,400
Less accumulated depreciation 502,800 473,200
Net property, plant and equipment 1,072,700 1,058,200
Other Assets
Goodwill (less accumulated amortization
of $251,800 and $242,400, respectively) 956,500 965,800
Other 67,600 62,900
Total other assets 1,024,100 1,028,700
$ 3,327,500 $ 3,163,500
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 23,600 $ 23,100
Trade accounts payable 98,300 113,300
Other accounts payable and accrued expenses 213,000 195,400
Total current liabilities 334,900 331,800
Noncurrent Liabilities
Long-term debt 1,578,400 1,440,200
Deferred income taxes 47,900 43,400
Other noncurrent liabilities 221,000 222,300
Total noncurrent liabilities 1,847,300 1,705,900
Common Stockholders' Equity 1,145,300 1,125,800
$ 3,327,500 $ 3,163,500
</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
March 31,
1995 1994
<S> <C> <C>
Net sales $ 528,200 $ 438,200
Cost of sales 366,200 292,400
Gross earnings 162,000 145,800
Selling, general and administrative expenses 92,900 71,400
Goodwill amortization 9,400 7,700
Operating earnings 59,700 66,700
Interest expense (28,400) (21,100)
Other expense - net (1,800) (2,200)
Earnings before income tax expense 29,500 43,400
Income tax expense 13,000 18,300
Net earnings $ 16,500 $ 25,100
Earnings per common share $ .22 $ .33
Average common shares outstanding 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> Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 16,500 $ 25,100
Adjustments to reconcile to net cash
used for operating activities:
Depreciation and amortization 40,300 34,100
Deferred income taxes 4,500 600
Increase in working capital (173,200) (105,500)
Other-net 300 (500)
Net cash used for operating activities (111,600) (46,200)
Cash Flows from Investing Activities
Capital expenditures (33,200) (39,700)
Acquisition of Gitano -- (100,000)
Acquisition of Artex -- (44,500)
Other-net (5,000) (21,200)
Net cash used for investing activities (38,200) (205,400)
Cash Flows from Financing Activities
Net proceeds from issuance of long-term debt 130,600 202,900
Principal payments on long-term debt
and capital leases (2,900) (6,900)
Other 100 --
Net cash provided by financing activities 127,800 196,000
Net decrease in Cash and cash
equivalents (including restricted cash) (22,000) (55,600)
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 $ 27,400 $ 18,600
</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
month periods ended March 31, 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. Proceeds from the New Acme Credit Agreement will be
used to repurchase certain subordinated debt, preferred stock and common
stock of Acme Boot. In April 1995 Acme Boot used approximately
$25,600,000 under this facility to repurchase certain of its debt,
preferred stock and common stock. The New Acme Credit Agreement is secured
by a second lien on substantially all of the assets (which are
approximately $77,000,000 at March 31, 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.
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.
<PAGE>
<PAGE> 7
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements - (Concluded)
(Unaudited)
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> 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 March 31, 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
March 31,
1995 1994
<S> <C> <C>
Net sales $ 528.2 $ 438.2
Gross earnings $ 162.0 $ 145.8
Gross margin 30.7% 33.3%
Operating earnings $ 59.7 $ 66.7
Operating margin 11.3% 15.2%
</TABLE>
Net Sales
Net sales increased 20.5% in the first quarter of 1995 compared to the same
period of 1994. The increase in net sales in the first quarter was primarily
due to the inclusion of the results of the Company's jeans and sportswear
subsidiary, Gitano Fashions Limited ("Gitano"), the assets of which were
acquired in late March 1994 and Pro Player Inc. ("Pro Player"), which was
acquired in August 1994. In addition, volume increases in underwear and
international operations reflecting improved demand and price increases in all
of the Company's businesses contributed to the sales increase.
Gross Earnings
Gross earnings increased 11.1% in the first three months of 1995 compared to the
same period of 1994. The gross margin was 30.7% in the first three months of
1995 compared to 33.3% in the same period of 1994. The increase in gross
earnings is primarily due to the effect of the sales volume increase. The gross
margin has been negatively impacted by higher raw material costs and other
general cost increases. Higher sales of closeouts and discontinued products in
the Company's casualwear and licensed sports apparel businesses as a result of
the Company's product line reduction implemented in the fourth quarter also had
a negative impact on gross margin. In addition, lower margin Gitano products
and an unfavorable product mix in international operations contributed to the
gross margin decline. These decreases were partially offset by price increases.
<PAGE>
<PAGE> 9
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Operating Earnings
Operating earnings decreased 10.5% compared to the first quarter of 1994 while
the operating margin decreased 3.9 percentage points to 11.3% of net sales for
the quarter ended March 31, 1995. The decrease in operating earnings resulted
from higher selling, general and administrative expenses in 1995 which more than
offset the increase in gross earnings. Higher selling, general and
administrative costs arose from the inclusion of the Gitano and Pro Player
operations acquired in 1994 and which businesses include a higher proportion of
selling expenses. In addition, higher selling, general and administrative
expenses resulted 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 increase in selling, general and administrative expenses also includes non-
recurring charges related to the curtailment of selling and marketing activities
in Mexico. Selling, general and administrative expenses increased to 17.6% of
net sales in the first quarter of 1995 compared to 16.3%of net sales in the same
period of 1994.
Interest Expense
Interest expense for the first quarter of 1995 increased 34.6% from the same
period of 1994. The increase was primarily attributable to the effect of higher
debt levels in 1995. Higher debt levels in 1995 were due principally to the
acquisitions of Gitano and Pro Player in 1994 and higher working capital levels
in 1995.
Income Taxes
The effective income tax rate for the first quarter 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 $.22 for the first quarter of 1995 compared to $.33 for
the prior year period, a 33.3% decrease.
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.
<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)
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. The Company has available for the funding of its operations
approximately $856,400,000 of revolving lines of credit. As of May 12, 1995
approximately $52,400,000 was available and unused under these facilities.
Net cash used for operating activities in the three months ended March 31, 1995
and 1994 was $111,600,000 and $46,200,000, respectively. The primary components
of cash used for operating activities in the first three months of 1995 and 1994
were increases in working capital of $173,200,000 and $105,500,000,
respectively. The working capital increases in the first quarter of 1995 and
1994 were driven by higher inventories ($150,700,000 and $90,800,000,
respectively) and higher accounts receivable ($32,800,000 and $53,000,000,
respectively). The increases in inventory and accounts receivable in the first
three months of 1995 and 1994 reflect the seasonality of the Company's business
as it enters its peak selling season and the Company's ongoing efforts to
improve customer service. 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 to meet increased consumer demand.
Net cash used for investing activities in the three months ended March 31, 1995
and 1994 was $38,200,000 and $205,400,000, respectively. Capital expenditures
were $33,200,000 and $39,700,000 in the first three months of 1995 and 1994,
respectively. In the first three months of 1994 the Company spent approximately
$144,500,000 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.
Net cash provided by financing activities in the three months ended March 31,
1995 and 1994 was $127,800,000 and $196,000,000, 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 March 31, 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.
<PAGE>
<PAGE> 11
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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).
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 March
31, 1995.
<PAGE>
<PAGE> 12
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: May 15, 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)
<PAGE>
<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.
<MULTIPLIER> 1,000
<CAPTION>
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<CASH> 27,400
<SECURITIES> 0
<RECEIVABLES> 351,200
<ALLOWANCES> 22,700
<INVENTORY> 827,500
<CURRENT-ASSETS> 1,230,700
<PP&E> 1,575,500
<DEPRECIATION> 502,800
<TOTAL-ASSETS> 3,327,500
<CURRENT-LIABILITIES> 334,900
<BONDS> 1,578,400
0
0
<COMMON> 470,900
<OTHER-SE> 674,400
<TOTAL-LIABILITY-AND-EQUITY> 3,327,500
<SALES> 528,200
<TOTAL-REVENUES> 528,200
<CGS> 366,200
<TOTAL-COSTS> 366,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,400
<INCOME-PRETAX> 29,500
<INCOME-TAX> 13,000
<INCOME-CONTINUING> 16,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,500
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
