<PAGE> 1
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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 27, 1998
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)
<TABLE>
<S> <C>
DELAWARE 36-3361804
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
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 24, 1998: 66,408,559 shares of Class A
Common Stock, $.01 par value, and 5,684,276 shares of Class B Common Stock, $.01
par value.
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<PAGE> 2
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet --
June 27, 1998 (Unaudited) and December 31, 1997............. 2
Condensed Consolidated Statement of Earnings (Unaudited) for
the Three and Six Months Ended June 27, 1998 and June 30,
1997........................................................ 3
Condensed Consolidated Statement of Cash Flows (Unaudited)
for the Six Months Ended June 27, 1998 and June 30,
1997........................................................ 4
Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 17
Item 6. Exhibits and Reports on Form 8-K............................ 17
</TABLE>
1
<PAGE> 3
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JUNE 27, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents (including restricted cash)..... $ 8,000 $ 16,100
Notes and accounts receivable (less allowance for possible
losses of $11,800 and $11,900, respectively)........... 134,200 98,100
Inventories
Finished goods......................................... 607,900 570,400
Work in process........................................ 235,300 212,300
Materials and supplies................................. 69,800 64,800
---------- ----------
Total inventories................................. 913,000 847,500
Due from receivable financing subsidiary.................. 59,300 --
Other..................................................... 63,700 53,900
---------- ----------
Total current assets.............................. 1,178,200 1,015,600
---------- ----------
Property, Plant and Equipment............................... 1,183,800 1,232,200
Less accumulated depreciation............................. 734,900 717,800
---------- ----------
Net property, plant and equipment................. 448,900 514,400
---------- ----------
Other Assets
Goodwill (less accumulated amortization of $324,700 and
$311,400, respectively)................................ 699,600 712,900
Deferred income taxes..................................... 31,200 30,300
Other..................................................... 228,600 209,900
---------- ----------
Total other assets................................ 959,400 953,100
---------- ----------
$2,586,500 $2,483,100
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt...................... $ 21,600 $ 28,200
Trade accounts payable.................................... 98,900 234,100
Other accounts payable and accrued expenses............... 274,800 262,900
---------- ----------
Total current liabilities......................... 395,300 525,200
---------- ----------
Noncurrent Liabilities
Long-term debt............................................ 1,343,800 1,192,800
Other..................................................... 334,500 343,000
---------- ----------
Total noncurrent liabilities...................... 1,678,300 1,535,800
---------- ----------
Common Stockholders' Equity................................. 512,900 422,100
---------- ----------
$2,586,500 $2,483,100
========== ==========
</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 27, JUNE 30, JUNE 27, JUNE 30,
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................... $628,000 $640,700 $1,085,200 $1,141,700
Cost of sales................................ 421,400 474,500 730,900 832,700
-------- -------- ---------- ----------
Gross earnings..................... 206,600 166,200 354,300 309,000
Selling, general and administrative
expenses................................... 97,200 107,200 180,300 190,900
Goodwill amortization........................ 6,700 6,700 13,300 13,400
-------- -------- ---------- ----------
Operating earnings................. 102,700 52,300 160,700 104,700
Interest expense............................. (26,800) (21,100) (51,500) (40,000)
Other expense -- net......................... (4,600) (4,200) (300) (6,000)
-------- -------- ---------- ----------
Earnings before income tax
expense.......................... 71,300 27,000 108,900 58,700
Income tax expense........................... 6,000 7,000 12,400 16,100
-------- -------- ---------- ----------
Net earnings....................... $ 65,300 $ 20,000 $ 96,500 $ 42,600
======== ======== ========== ==========
Earnings per common share.................... $ .91 $ .27 $ 1.34 $ .56
======== ======== ========== ==========
Earnings per common share-assuming
dilution................................... $ .90 $ .26 $ 1.33 $ .55
======== ======== ========== ==========
Average common shares........................ 72,000 75,200 71,900 75,800
======== ======== ========== ==========
Average common shares-assuming dilution...... 72,800 76,100 72,500 76,900
======== ======== ========== ==========
</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 27, JUNE 30,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.............................................. $ 96,500 $ 42,600
Adjustments to reconcile to net cash used for operating
activities:
Depreciation and amortization.......................... 57,000 76,700
Deferred income tax expense (benefit).................. (900) 3,000
Increase in working capital............................ (309,700) (224,400)
Other-net.............................................. (30,500) (28,100)
--------- ---------
Net cash used for operating activities............ (187,600) (130,200)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures...................................... (16,100) (34,500)
Proceeds from sale of denim production facility........... 35,400 --
Other-net................................................. 13,300 (2,500)
--------- ---------
Net cash provided by (used for) investing
activities...................................... 32,600 (37,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds under line-of-credit agreements.................. 639,600 525,100
Payments under line-of-credit agreements.................. (380,200) (223,600)
Principal payments on long-term debt and capital leases... (116,100) (4,100)
Common stock issued....................................... 6,600 10,900
Common stock repurchased.................................. (3,000) (138,000)
--------- ---------
Net cash provided by financing activities......... 146,900 170,300
--------- ---------
Net increase (decrease) in Cash and cash equivalents
(including restricted cash)............................... (8,100) 3,100
Cash and cash equivalents (including restricted cash) at
beginning of period....................................... 16,100 18,700
--------- ---------
Cash and cash equivalents (including restricted cash) at end
of period................................................. $ 8,000 $ 21,800
========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 6
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The condensed consolidated financial statements contained herein should be
read in conjunction with the consolidated financial statements and related
notes contained in the Annual Report on Form 10-K, as amended by a Form
10-K/A, of Fruit of the Loom, Inc. (the "Company") for the year ended
December 31, 1997. The information furnished herein reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results of operations of
the interim periods. Operating results for the three and six months ended
June 27, 1998 are not necessarily indicative of results that may be expected
for the full year.
Effective January 1, 1998, the Company changed its year end from December 31
to a 52 or 53 week year ending on the Saturday nearest December 31. All
quarterly reporting periods are prepared on a 4-4-5 accounting cycle with
each quarter ending on the Saturday nearest the calendar quarter end.
2. No dividends were declared on the Company's common stock for the six-month
periods ended June 27, 1998 and June 30, 1997.
3. The Company's effective income tax rate of 11.4% and 27.4%, respectively, for
the first six months of 1998 and 1997 differed from the Federal statutory
rate of 35% primarily due to the impact of foreign earnings, certain of which
are taxed at lower rates than in the United States, partially offset by
goodwill amortization, a portion of which is not deductible for Federal
income taxes, and state income taxes.
4. In 1995, management announced plans to close certain manufacturing operations
and to take other actions to reduce costs and improve operations. As a
result, the Company recorded charges of approximately $372,900,000
($287,400,000 after tax) related to impairment write-downs of goodwill, costs
associated with the closing or realignment of certain domestic manufacturing
facilities and attendant personnel reductions and charges related to
inventory write-downs and valuations, foreign operations and other corporate
issues.
During the first quarter of 1997, the Company finalized certain of the
estimates recorded in connection with the above noted charges. As a result of
finalizing these estimates, earnings before income tax expense for the first
quarter of 1997 were increased by $7,500,000; these amounts were recorded as
a reduction to selling, general and administrative expenses.
5
<PAGE> 7
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
A rollforward of the 1995 special charges from December 31, 1997 through June
27, 1998 is presented below (in thousands of dollars):
<TABLE>
<CAPTION>
RESERVE RESERVE
BALANCE BALANCE
DECEMBER 31, CASH INCOME OTHER JUNE 27,
1997 PAYMENTS (EXPENSE) ACTIVITY 1998
----------------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Impairment write-down of
goodwill......................... $ -- $ -- $ -- $ -- $ --
Closing or realignment of
manufacturing operations:
Loss on disposal of closed
facilities, improvements and
equipment..................... 200 200 -- -- --
Changes in estimates of insurance
liabilities................... 14,000 -- -- -- 14,000
Costs related to expected
increases in workers'
compensation and health and
welfare costs................. 5,200 4,900 -- -- 300
Costs related to termination of
certain lease obligations..... 1,000 -- -- -- 1,000
Costs related to severance of the
hourly workforce.............. -- -- -- -- --
Other............................ 2,700 -- -- -- 2,700
------- ------ ------ ------ -------
23,100 5,100 -- -- 18,000
Severance.......................... 200 200 -- -- --
Other asset write-downs, valuation
reserves and other reserves...... 3,900 -- -- -- 3,900
Changes in estimates of certain
retained liabilities of former
subsidiaries..................... 16,200 1,400 -- -- 14,800
Termination of management
agreement........................ -- -- -- -- --
------- ------ ------ ------ -------
$43,400 $6,700 $ -- $ -- $36,700
======= ====== ====== ====== =======
</TABLE>
6
<PAGE> 8
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
In the fourth quarter of 1997, the Company recorded charges for costs related
to the closing and disposal of a number of domestic manufacturing and
distribution facilities, impairment of manufacturing equipment and other
assets and certain European manufacturing and distribution facilities, and
other costs associated with the Company's world-wide restructuring of
manufacturing and distribution facilities. These and other special charges
totalled $441,700,000 ($372,200,000 after tax). Following is a summary of the
1997 special charges and related reserve balances at December 31, 1997 (in
thousands of dollars):
<TABLE>
<CAPTION>
RESERVE
1997 CASH OTHER BALANCE
SPECIAL PAYMENTS ACTIVITY DECEMBER 31,
CHARGES IN 1997 IN 1997 1997
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Closing and disposal of U.S manufacturing and
distribution facilities
Loss on sale of facilities, improvements
and equipment:
Sewing, finishing and distribution
facilities............................ $ 66,600 $ -- $ -- $ 66,600
Impairment of mills to be sold.......... 75,400 -- -- 75,400
Lease residual guarantees............... 61,000 -- -- 61,000
Other equipment......................... 29,600 -- 22,100 7,500
-------- ------ ------- --------
232,600 -- 22,100 210,500
Severance costs............................ 8,400 -- -- 8,400
Other accruals............................. 10,400 -- -- 10,400
-------- ------ ------- --------
251,400 -- 22,100 229,300
-------- ------ ------- --------
Impairment of European manufacturing and
distribution facilities
Impairment of long lived assets............ 42,800 -- 42,800 --
Other accruals............................. 1,300 -- -- 1,300
-------- ------ ------- --------
44,100 -- 42,800 1,300
-------- ------ ------- --------
Pro Player incentive compensation
agreement.................................. 22,000 -- -- 22,000
-------- ------ ------- --------
Other asset write-downs and reserves
Inventory valuation provisions............. 49,800 -- -- 49,800
Other accruals............................. 53,800 7,400 9,200 37,200
-------- ------ ------- --------
103,600 7,400 9,200 87,000
-------- ------ ------- --------
Changes in estimates of certain retained
liabilities of former subsidiaries......... 20,600 -- 8,000 12,600
-------- ------ ------- --------
Total pretax charges............... $441,700 $7,400 $82,100 $352,200
======== ====== ======= ========
</TABLE>
7
<PAGE> 9
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
A rollforward of the 1997 special charges from December 31, 1997 through June
27, 1998 is presented below (in thousands of dollars):
<TABLE>
<CAPTION>
RESERVE RESERVE
BALANCE BALANCE
DECEMBER 31, CASH INCOME OTHER JUNE 27,
1997 PAYMENTS (EXPENSE) ACTIVITY 1998
------------ -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Closing and disposal of U.S.
manufacturing and distribution
facilities
Loss on sale of facilities,
improvements and equipment:
Sewing, finishing and
distribution facilities...... $ 66,600 $ -- $ -- $ 600 $ 66,000
Impairment of mills to be
sold......................... 75,400 -- -- 200 75,200
Lease residual guarantees...... 61,000 -- -- -- 61,000
Other equipment................ 7,500 -- -- -- 7,500
-------- ------- ------ ------- --------
210,500 -- -- 800 209,700
Severance costs..................... 8,400 3,200 -- -- 5,200
Other accruals...................... 10,400 4,300 -- -- 6,100
-------- ------- ------ ------- --------
229,300 7,500 -- 800 221,000
-------- ------- ------ ------- --------
Impairment of European manufacturing
and distribution facilities
Impairment of long lived assets... -- -- -- -- --
Other accruals.................... 1,300 -- -- -- 1,300
-------- ------- ------ ------- --------
1,300 -- -- -- 1,300
-------- ------- ------ ------- --------
Pro Player incentive compensation
agreement......................... 22,000 -- -- -- 22,000
-------- ------- ------ ------- --------
Other asset write-downs and reserves
Inventory valuation provisions.... 49,800 600 5,100 13,800 30,300
Other accruals.................... 37,200 12,500 -- 400 24,300
-------- ------- ------ ------- --------
87,000 13,100 5,100 14,200 54,600
-------- ------- ------ ------- --------
Changes in estimates of certain
retained liabilities of former
subsidiaries...................... 12,600 -- -- -- 12,600
-------- ------- ------ ------- --------
Total pretax charges...... $352,200 $20,600 $5,100 $15,000 $311,500
======== ======= ====== ======= ========
</TABLE>
The Other Activity in 1997 represents assets written off. The Other Activity
in the first six months of 1998 principally consisted of sales of inventory
which had been written down as part of the 1997 special charges. Amounts
received for the inventory sold were in excess of amounts estimated,
resulting in reductions in cost of sales and increases to earnings before
income tax expense of $5,100,000 in the first six months of 1998,
substantially all of which occurred in the first quarter of 1998.
5. The Company and its subsidiaries are involved in certain legal proceedings
and have retained liabilities, including certain environmental liabilities,
such as those under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, its regulations and similar state
statutes ("Superfund Legislation"), in connection with the sale of certain
discontinued operations, some of which were significant generators of
hazardous waste. The Company and its subsidiaries have also retained certain
liabilities related to the sale of products in connection with the sale of
certain discontinued operations. The Company's retained liability reserves at
June 27, 1998 related to discontinued operations consist primarily of certain
environmental reserves of approximately $41,300,000 and product liability
8
<PAGE> 10
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
reserves of approximately $16,400,000. The Company has recorded receivables
related to these liabilities of approximately $13,800,000, which management
believes will be recovered from insurance and other sources. Management
believes that adequate reserves have been established to cover potential
claims based on facts currently available and current Superfund Legislation.
Generators of hazardous wastes which were disposed of at offsite locations
which are now superfund sites are subject to claims brought by state and
Federal regulatory agencies under Superfund Legislation and by private
citizens under Superfund Legislation and common law theories. Since 1982, the
United States Environmental Protection Agency (the "EPA") has actively sought
compensation for response costs and remedial action at offsite disposal
locations from waste generators under the Superfund Legislation, which
authorizes such action by the EPA regardless of fault, legality of original
disposal or ownership of a disposal site. The EPA's activities under the
Superfund Legislation can be expected to continue during the remainder of
1998 and future years.
In June 1994, pursuant to authorization from the Company's Board of
Directors, the Company guaranteed a loan from a bank in an amount up to
$12,000,000 to Mr. William Farley, the Company's Chairman and Chief Executive
Officer. In exchange for the guarantee the Company receives an annual fee
from Mr. Farley equal to 1% of the value of the loan covered by the
guarantee. The guarantee is secured by a second lien on certain shares of the
Company held by the bank for other loans made to Mr. Farley.
On November 20, 1997, the Board of Directors, excluding Mr. Farley and other
employee Directors, upon recommendation of a Special Committee of the Board
of Directors, comprised of Messrs. Al Askari and Wolfson, guaranteed a bank
loan to Mr. Farley in the amount of $26,000,000. The proceeds of this loan
were used by Mr. Farley to purchase all of the Zero Coupon Convertible
Subordinated Debentures due 2012 of Farley Inc. held by non-affiliated third
parties. Mr. Farley owns 100% of Farley Inc. In consideration of the
guarantee, Mr. Farley pays the Company an annual guarantee fee equal to
1 1/8% of the outstanding principal balance of the loan. The loan is secured
by a second lien on 2,507,512 shares of Class B Common Shares of the Company
held by Mr. Farley and the assets held for the benefit of Mr. Farley under
the Company's Senior Executive Officer Deferred Compensation Trust. The loan
matures on November 19, 1998. The Special Committee received an opinion from
an independent financial advisor that the terms of the transaction are
commercially reasonable.
The Company has negotiated grants from the governments of the Republic of
Ireland, Northern Ireland and Germany. The grants are being used for employee
training, the acquisition of property and equipment and other governmental
business incentives such as general employment. At June 27, 1998, the Company
had a contingent liability to repay, in whole or in part, grants received of
approximately $61,500,000 in the event that the Company does not meet defined
average employment levels or terminates operations in the Republic of
Ireland, Northern Ireland and Germany.
In connection with the Company's transaction with Acme Boot Company, Inc.
("Acme Boot") during 1993, the Company guaranteed, on an unsecured basis, the
repayment of debt incurred by Acme Boot under Acme Boot's bank credit
facility (the "Acme Boot Credit Facility"). Farley Inc. owns 100% of the
common stock of Acme Boot. At June 27, 1998, the Acme Boot Credit Facility
provided for up to $30,000,000 of loans and letters of credit. The Acme Boot
Credit Facility is secured by first liens on substantially all of the assets
of Acme Boot and it subsidiaries. At June 27, 1998, approximately $28,900,000
in loans and letters of credit were outstanding under the Acme Boot Credit
Facility.
Also, 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 $37,000,000 in borrowings and expires in
August 1998. In April 1995, Acme Boot used approximately $25,400,000 under
this facility to repurchase certain of its debt, preferred stock and common
stock. In November 1995, Acme
9
<PAGE> 11
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
Boot used approximately $11,300,000 under this facility to repurchase
substantially all of the remaining portions of its publicly held debt,
preferred stock and common stock. The New Acme Credit Agreement is secured by
a second lien on substantially all of the assets 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 Company has fully
reserved for the amount of 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 5% of the total
voting power of Acme Boot so long as any of Acme Boot's 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. At June 27, 1998, approximately $36,700,000
remained outstanding under the New Acme Credit Agreement. In addition,
through June 27, 1998, the Company has loaned Acme Boot $9,000,000 to provide
Acme Boot with supplemental working capital. These loans were made in the
form of demand notes payable and are senior to all other outstanding
indebtedness of Acme Boot.
As a result of the operating performance of Acme Boot and management's
assessment of existing facts and circumstances of Acme Boot's financial
condition, the Company increased its reserve by $32,000,000 from $35,000,000
to $67,000,000 at the end of the third quarter of 1997 to fully reserve the
Company's exposure under the Acme Boot guarantees.
In June 1998, Acme Boot entered into agreements with unrelated parties for
the sale of certain assets and its business. Financing for the sale of the
business was completed in July 1998, at which time the Company satisfied the
Acme Boot guarantees. As a result of the aforementioned transaction, the
Company had the ability to more precisely estimate its probable liability
under the Acme Boot guarantees. Therefore, the Company reduced its estimate
of the probable liability by $6,400,000 to $60,600,000. Accordingly, Other
expense -- net for the three and six months ended June 27, 1998 in the
accompanying condensed consolidated statement of earnings includes income of
$6,400,000 related to this reduction in expected liability.
On July 1, 1998, the New England Health Care Employees Pension Fund filed a
purported class action on behalf of all those who purchased Fruit of the
Loom, Inc. Class A Common Stock and publicly traded options between July 24,
1996 and September 5, 1997 (the "Class Period") against the Company and
William Farley, Bernhard Hansen, Richard C. Lappin, G. William Newton,
Burgess D. Ridge, Larry K. Switzer and John D. Wigodsky, each of whom is a
current or former officer of the Company, in the United States District Court
for the Western District of Kentucky. The plaintiff claims that the
defendants engaged in conduct violating Section 10(b) of the Securities
Exchange Act of 1934, as amended (the "Act"), and that the Company and Mr.
Farley are also liable under Section 20(a) of the Act. According to the
plaintiff, during the Class Period, the Company, with the knowledge and
assistance of the individual defendants, issued misleading positive public
statements about the Company's condition and prospects, causing the plaintiff
and the class to buy Company stock at artificially inflated prices. The
plaintiff also alleges that during the Class Period, the individual
defendants sold stock of the Company while possessing material non-public
information. The plaintiff asks for unspecified amounts as damages, interest
and costs and ancillary relief. Management believes that the suit is without
merit, and management and the Company intend to defend it vigorously.
Management believes, based on information currently available, that the
ultimate resolution of this litigation will not have a material adverse
affect on the financial condition or results of the operations of the
Company, but the ultimate resolution of the suit, if unfavorable, could be
material to the results of operations of a particular future period.
10
<PAGE> 12
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
In August 1994, the Company acquired Pro Player, Inc. ("Pro Player") for
approximately $55,700,000, including approximately $14,200,000 of Pro Player
debt which was repaid by the Company. The principals of Pro Player, who are
also key employees of that business, may also be entitled to receive
compensation up to a maximum of $47,100,000, based in part on the attainment
of certain levels of operating performance by the acquired entity in 1998 and
1999. In the fourth quarter of 1997, the Company recorded a $22,000,000
charge related to this compensation agreement, based on its assessment of the
probability that Pro Player's operating performance would result in such
amount being earned. During the three and six months ended June 27, 1998, the
Company recorded an additional $1,700,000 and $3,300,000, respectively,
representing the amount earned during these periods. These charges are
included in selling, general, and administrative expenses in the accompanying
condensed consolidated statement of earnings.
6. As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("FAS 130"). FAS 130
establishes new rules for the reporting and display of comprehensive income
and its components. The adoption of FAS 130 had no impact on the Company's
Net earnings or Common stockholders' equity. Rather, FAS 130 requires foreign
currency translation adjustments, minimum pension liability adjustments and
unrealized gains or losses on available-for-sale securities, all of which
were reported separately in Common stockholders' equity prior to adoption, to
be included in new disclosures related to comprehensive income.
For the second quarter of 1998 and 1997, comprehensive income totalled
$64,900,000 and $17,900,000, respectively. For the first six months of 1998
and 1997, comprehensive income totalled $84,200,000 and $26,800,000,
respectively. The principal differences from reported net income were second
quarter reductions of $400,000 in 1998 and $2,300,000 in 1997 and six-month
reductions of $12,300,000 in 1998 and $15,200,000 in 1997 related to foreign
currency translation adjustments resulting from the financial statement
translation of the accounts of certain of the Company's foreign operations
from local currencies to the U.S. dollar. These adjustments reflect the
strengthening of the U.S. dollar with respect to the currencies of a number
of Western European countries where the Company has made long-term operating
commitments.
7. The following table sets forth the computation of basic and diluted earnings
per common share (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -------------------
JUNE 27, JUNE 30, JUNE 27, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NUMERATOR
Net earnings...................................... $65,300 $20,000 $96,500 $42,600
======= ======= ======= =======
DENOMINATOR
For basic earnings per common share --
Weighted average shares outstanding............. 72,000 75,200 71,900 75,800
Effect of dilutive employee stock options......... 800 900 600 1,100
------- ------- ------- -------
For diluted earnings per common share --
Weighted average shares outstanding and assumed
conversions.................................. 72,800 76,100 72,500 76,900
======= ======= ======= =======
Earnings per common share:
Basic........................................... $ .91 $ .27 $ 1.34 $ .56
======= ======= ======= =======
Diluted......................................... $ .90 $ .26 $ 1.33 $ .55
======= ======= ======= =======
</TABLE>
11
<PAGE> 13
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward Looking Information
The Company desires to provide investors with meaningful and useful
information. Therefore, this Quarterly Report on Form 10-Q contains certain
statements which describe the Company's beliefs concerning future business
conditions and the outlook for the Company, based on currently available
information. Wherever possible, the Company has identified these "forward
looking" statements (as defined in Section 21E of the Securities Exchange Act of
1934) by words such as "anticipates," "believes," "estimates," "expects" and
similar expressions. These forward looking statements are subject to risks,
uncertainties and other factors which could cause the Company's actual results,
performance or achievements to differ materially from those expressed in, or
implied by, these statements. These risks, uncertainties and other factors
include, but are not limited to, the following: the financial strength of the
retail industry (particularly the mass merchant channel), the level of consumer
spending for apparel, demand for the Company's activewear screenprint products,
the competitive pricing environment within the basic apparel segment of the
apparel industry, the Company's ability to develop, market and sell new
products, the Company's effective income tax rate, the Company's ability to
successfully move labor-intensive segments of the manufacturing process outside
of the United States, the success of planned advertising, marketing and
promotional campaigns, international activities and the resolution of legal
proceedings and other contingent liabilities. The Company assumes no obligation
to update publicly any forward looking statements, whether as a result of new
information, future events or otherwise.
Results of Operations
The following discussion should be read in conjunction with the
accompanying condensed consolidated financial statements and related notes for
the period ended June 27, 1998 and the Company's consolidated financial
statements and related notes contained in the Company's Annual Report on Form
10-K, as amended by a Form 10-K/A, for the year ended December 31, 1997.
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 27, JUNE 30, JUNE 27, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales................................... $628.0 $640.7 $1,085.2 $1,141.7
Gross earnings.............................. 206.6 166.2 354.3 309.0
Gross margin................................ 32.9% 25.9% 32.6% 27.1%
Operating earnings.......................... 102.7 52.3 160.7 104.7
Operating margin............................ 16.4% 8.2% 14.8% 9.2%
</TABLE>
SPECIAL CHARGES
During the first quarter of 1998, the Company sold certain inventory which
had been written down as part of the 1997 special charges. Amounts received for
the inventory sold were in excess of amounts estimated, resulting in reductions
in cost of sales and increases to earnings before income tax expense of
$5,100,000 in the first six months of 1998, substantially all of which occurred
in the first quarter of 1998.
In connection with the transfer of substantially all of its sewing
operations to offshore locations, and the related increase in the use of foreign
contract manufacturers, the Company is in the process of completing enhanced
inventory control procedures. Until such time as such procedures are completed,
the Company remains subject to increased risks regarding the management of its
inventory. These risks, such as inventory shrinkage and obsolescence, could
result in the Company incurring additional write-downs, however, the
12
<PAGE> 14
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
Company believes it has adequate reserves for these potential write-downs.
Although the Company is not currently aware of any facts that would require any
substantial write-down of its inventory, there can be no assurance that
write-downs will not be recognized in the future.
The 1995 and 1997 restructuring activities are progressing as expected and
management currently anticipates completion of these activities by the end of
1999. There can be no assurance, however, that all activities will be completed
by the end of 1999.
NET SALES
Net sales decreased $12,700,000 or 2% in the second quarter and $56,500,000
or 5% in the first six months due to lower volume in retail (down 4% and 6%,
respectively) and activewear (down 2% and 7%, respectively). Retail comparisons
were unfavorable overall, but casualwear fleece sales were sharply higher in
both periods. In activewear, lower fleece sales were offset substantially in the
quarter and to a lesser extent in the first six months by improved T-shirt
sales. The impact on activewear sales of the December 1997 list price reduction
was essentially offset by the elimination of promotional programs. Second
quarter sales of sports licensed products improved slightly, while improved
sales in the six-month period included first quarter closeout sales. Volume
gains in Europe continued in the second quarter but were offset by the
translation impact of a stronger dollar in the first quarter.
GROSS EARNINGS
Gross earnings increased $40,400,000 or 24% in the second quarter and
$45,300,000 or 15% in the first six months. Gross margin improved 7.0 percentage
points to 32.9% for the quarter and 5.5 percentage points to 32.6% for the first
six months. Retail and activewear gross earnings and margin improved
substantially despite lower sales. The most significant factor in the margin
improvement was cost savings from the Company's offshore sewing and other cost
reduction initiatives. In addition, no activewear promotional programs were
offered in the first half of 1998, benefiting both gross earnings and gross
margin. Retail and activewear volume decreases and reductions in list prices on
activewear products in December 1997, however, reduced the rate of improvement
in consolidated gross earnings and margin. Sports & Licensing gross earnings
were slightly ahead of 1997, although gross margin declined slightly for the
first six months, and gross earnings and margin from European operations
improved principally due to cost reductions.
OPERATING EARNINGS
Operating earnings increased $50,400,000 or 96% in the second quarter and
$56,000,000 or 53% in the first six months. Operating margin improved 8.2
percentage points to 16.4% for the second quarter and 5.6 percentage points to
14.8% for the first six months. Gross earnings and margin improved as noted
above, while selling, general and administrative expense declined $10,000,000 or
9.3% in the second quarter and $10,600,000 or 5.6% for the first six months. The
decrease in selling, general and administrative expense in the second quarter
and six months represents reductions in advertising expense and personnel,
reduced distribution center depreciation, travel, samples and package design
costs, offset partially by the Pro Player incentive compensation charge and
increased costs for management information systems and communications resulting
from the shift of the Company's sewing and finishing operations to offshore
facilities from domestic facilities. In addition, the decrease in selling,
general and administrative expense for the six months reflected the recording of
compensation expense related to a performance share compensation plan for
certain executive officers in the first quarter of 1997. For the six months,
these favorable variances were partially offset by
13
<PAGE> 15
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
changes in estimates recorded in connection with the special charges taken in
1995 which were finalized in the first quarter of 1997 (reducing selling,
general and administrative expense by $7,500,000 in the first quarter of 1997).
Selling, general and administrative expense was 15.5% and 16.6% of sales in the
second quarter and first six months of 1998, respectively, compared with 16.7%
of sales for both periods in 1997.
INTEREST EXPENSE
Interest expense increased $5,700,000 or 27.0% in the second quarter and
$11,500,000 or 28.8% in the first six months. The increases were largely due to
a significantly higher average debt level, resulting principally from the LMP
settlement ($102,200,000 in the second half of 1997), purchases of the Company's
common stock, and a greater investment in working capital needed to better
service customers while the Company consolidates the offshore movement of its
sewing and finishing operations and realigns its domestic manufacturing and
distribution facilities.
OTHER EXPENSE -- NET
The unfavorable variance of $400,000 in other expense -- net compared with
the second quarter of 1997 largely reflected a loss on the sale of the Company's
denim manufacturing operation, a write-off of fees related to debt refinanced
and currency translation losses, substantially offset in total by the reduction
recorded in the liability related to the Acme Boot guarantees, all of which
occurred in the second quarter of 1998. Other expense -- net included losses
totalling $3,000,000 and $2,900,000 from sales of accounts receivable pursuant
to the Company's receivables purchase agreement in the second quarter of 1998
and 1997, respectively. The favorable variance of $5,700,000 in other
expense -- net compared with the first six months of 1997 also reflected gains
on the sale of two corporate airplanes in the first quarter of 1998. Other
expense -- net included losses totalling $6,100,000 and $5,500,000 from sales of
accounts receivable pursuant to the Company's receivables purchase agreement in
the first six months of 1998 and 1997, respectively.
INCOME TAXES
The Company's effective income tax rate of 11.4% and 27.4%, respectively,
for the first six months of 1998 and 1997 differed from the Federal statutory
rate of 35% primarily due to the impact of foreign earnings, certain of which
are taxed at lower rates than in the United States, partially offset by goodwill
amortization, a portion of which is not deductible for Federal income taxes, and
state income taxes. The Company's estimated annual effective tax rate for 1998
declined from 17.0% for the first quarter to 11.4% for the first six months,
reflecting the impact of a higher proportion of foreign earnings.
EARNINGS PER COMMON SHARE
Earnings per common share were $0.91 and $0.27 and earnings per common
share, assuming dilution, were $0.90 and $0.26 in the second quarter of 1998 and
1997, respectively. Earnings per common share were $1.34 and $0.56 and earnings
per common share, assuming dilution, were $1.33 and $0.55 in the first six
months of 1998 and 1997, respectively. Average common shares were reduced
compared with the second quarter and first six months of 1997 by the repurchase
of approximately 5,400,000 shares since January 1, 1997.
Liquidity and Capital Resources
Funds generated from the Company's operations are its major source of
liquidity and are supplemented by funds obtained from capital markets, including
bank facilities. The Company has available for the funding
14
<PAGE> 16
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
of its operations approximately $819,000,000 of revolving lines of credit. As of
August 7, 1998, approximately $205,400,000 was available and unused under these
facilities. A portion of the Company's revolving lines of credit totalling
approximately $200,000,000 will expire in September 1998. The Company expects to
pursue debt or equity capital market transactions in the near future in order to
reduce outstanding indebtedness under these facilities and provide additional
liquidity.
Net cash used for operating activities was $187,600,000 in the first six
months of 1998 compared with $130,200,000 in the first six months of 1997. The
primary factor in each period was the seasonal increase in working capital
($309,200,000 and $224,400,000 in 1998 and 1997, respectively) as the Company
prepared to enter its peak selling season. The increase in working capital in
the 1998 period also reflected a reduction in trade payables for advances of
$83,100,000 at December 31, 1997, owed to the ultimate purchaser of the
Company's receivables under its receivables purchase agreement. In addition, the
increase in working capital in the first six months of 1998 reflected
$59,300,000 due from the Company's unconsolidated receivable financing
subsidiary.
Investing activities generated $32,600,000 in the first six months of 1998
compared with net cash uses totalling $37,000,000 in the same 1997 period.
Capital expenditures in 1998 were $16,100,000, or $18,400,000 lower, and 1998
asset sales added $56,600,000 more in proceeds, than the same period last year.
Capital spending, primarily to support offshore assembly operations, is
anticipated to approximate $35,000,000 in 1998.
Net cash provided by financing activities totalled $146,900,000 in the
first six months of 1998 compared with $170,300,000 in the first six months of
1997. The Company borrowed $42,100,000 less under its bank credit facilities in
the first six months of 1998, at the same time payments on long-term debt and
capital leases were higher ($112,000,000), and proceeds from issuance of common
stock were lower ($4,300,000). Payments on long-term debt and capitalized leases
included repayment of a senior unsecured note of the Company's wholly-owned
subsidiary, Fruit of the Loom Canada, Inc., for $102,600,000 principal value.
Substantially offsetting these variances that reflected reductions in Net cash
provided by financing activities was a decrease of $135,000,000 in common stock
repurchases.
In November 1996, the Company's Board of Directors authorized the purchase
of up to $200,000,000 of the Company's common stock in open market and privately
negotiated transactions. Total purchases under the program through June 27, 1998
were 5,890,000 shares at an aggregate cost of $193,200,000.
In December 1996, the Company entered into a three-year receivables
purchase agreement whereby it can currently sell up to a $250,000,000 undivided
interest in a defined pool of its trade accounts receivable. The maximum amount
outstanding as defined under the agreement varies based upon the level of
eligible receivables. Under the agreement, approximately $353,000,000 of
receivables at June 27, 1998 and $183,000,000 of receivables at December 31,
1997 were sold to the Company's unconsolidated receivable financing subsidiary
reducing consolidated notes and accounts receivable. Proceeds of approximately
$250,000,000 and $214,500,000 from the ultimate purchaser at the respective
balance sheet dates were used to reduce amounts outstanding under the Company's
revolving lines of credit.
On July 11, 1997, the Company filed with the Securities and Exchange
Commission a shelf registration statement on Form S-3 (the "S-3 Registration
Statement") to register under the Securities Act of 1933, as amended, the sale
of up to $850,000,000 of its debt securities, preferred stock and Class A Common
Stock (collectively, the "Securities"). The S-3 Registration Statement does not
relate to any particular offering of Securities; rather, the S-3 Registration
Statement was filed to provide the Company with the flexibility to engage in
future offerings without the delay which could result from the filing of new
registration statements at that time. The types of Securities offered, and their
terms, will be determined prior to any particular offering.
15
<PAGE> 17
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- (CONTINUED)
The Company anticipates that the net proceeds from any future sale of the
Securities would be used for general corporate purposes, including, but not
limited to, working capital, capital expenditures, expansion of existing
properties, development of new projects, prepayment of outstanding indebtedness,
investments and acquisitions. The Board of Directors of the Company has
unanimously approved, and recommended that the stockholders of the Company
adopt, a proposed reorganization pursuant to which a Cayman Islands company
("FTL-Cayman") will become the parent holding company of the Company (the
"Reorganization"). After consummation of the Reorganization, FTL-Cayman will
continue to conduct the businesses (through direct and indirect subsidiaries,
including the Company) in which the Company is now engaged, and substantially
all of the businesses and subsidiaries of the Company located outside the United
States will be transferred to FTL-Cayman (or direct or indirect foreign
subsidiaries of FTL-Cayman), other than certain interests of the Company in
Canada, Germany, Italy and Mexico, along with the beneficial ownership of
certain trademarks. In connection with the Reorganization, FTL-Cayman has filed
a registration statement on Form S-4, File No. 333-46007, with the Securities
and Exchange Commission, which has not yet been declared effective. Until the
Reorganization is consummated, the Company does not anticipate the utilization
of the S-3 Registration Statement for purposes of meeting its liquidity needs
and instead anticipates using other means of financing, including the private
placement of debt securities, for such purposes.
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 its bank agreements,
contain covenants restricting the Company's ability to sell assets, incur debt,
pay dividends and make investments and require the Company to maintain certain
financial ratios.
Accounting Standards
In June 1997, the Financial Accounting Standards Board issued FAS 131,
Disclosures about Segments of an Enterprise and Related Information. FAS 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. FAS 131 is
effective for annual financial statements for fiscal years beginning after
December 15, 1997. Management has not completed its review of FAS 131.
In June 1998, the Financial Accounting Standards Board issued FAS 133,
Accounting for Derivative Instruments and Hedging Activities. The new Statement
requires all derivatives to be recorded on the balance sheet at fair value and
establishes "special accounting" for the following three different types of
hedges: hedges of changes in the fair value of assets, liabilities, or firm
commitments (referred to as fair value hedges); hedges of the variable cash
flows of forecasted transactions (cash flow hedges); and hedges of foreign
currency exposures of net investments in foreign operations. Though the
accounting treatment and criteria for each of the three types of hedges is
unique, they all result in offsetting changes in fair values or cash flows of
both the hedge and the hedged item being recognized in earnings in the same
period. Changes in fair value of derivatives that do not meet the criteria of
one of these three categories of hedges are included in income. The Statement is
effective for years beginning after June 15, 1999, but companies can early adopt
as of the beginning of any fiscal quarter that begins after June 1998.
Management has not completed its review of FAS 133.
16
<PAGE> 18
FRUIT OF THE LOOM, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 1, 1998, the New England Health Care Employees Pension Fund filed a
purported class action on behalf of all those who purchased Fruit of the Loom,
Inc. Class A Common Stock and publicly traded options between July 24, 1996 and
September 5, 1997 (the "Class Period") against the Company and William Farley,
Bernhard Hansen, Richard C. Lappin, G. William Newton, Burgess D. Ridge, Larry
K. Switzer and John D. Wigodsky, each of whom is a current or former officer of
the Company, in the United States District Court for the Western District of
Kentucky. The plaintiff claims that the defendants engaged in conduct violating
Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Act"),
and that the Company and Mr. Farley are also liable under Section 20(a) of the
Act. According to the plaintiff, during the Class Period, the Company, with the
knowledge and assistance of the individual defendants, issued misleading
positive public statements about the Company's condition and prospects causing
the plaintiff and the class to buy Company stock at artificially inflated
prices. The plaintiff also alleges that during the Class Period, the individual
defendants sold stock of the Company while possessing material non-public
information. The plaintiff asks for unspecified amounts as damages, interest and
costs and ancillary relief. Management believes that the suit is without merit,
and management and the Company intend to defend it vigorously. Management
believes, based on information currently available, that the ultimate resolution
of this litigation will not have a material adverse affect on the financial
condition or results of the operations of the Company, but the ultimate
resolution of the suit, if unfavorable, could be material to the results of
operations of a particular future period.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
<TABLE>
<S> <C>
4(a)* $900,000,000 Credit Agreement dated as of September 19,
1997, among the several banks and other financial
institutions from time to time parties thereto (the
"Lenders"), NationsBank, N.A., as administrative agent for
the Lenders thereunder, Chase Manhattan Bank, Bankers Trust
Company, The Bank of New York and the Bank of Nova Scotia,
as co-agents (incorporated herein by reference to Exhibit
4(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997).
4(b)* Rights Agreement, dated as of March 8, 1996 between Fruit of
the Loom, Inc. and Chase Mellon Shareholder Services,
L.L.C., Rights Agent (incorporated herein by reference to
Exhibit 4(c) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
27 Financial Data Schedule.
</TABLE>
- ---------------
* 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 individually
exceed 10% of the total assets of the Registrant and its subsidiaries on a
consolidated basis. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the
Registrant agrees to furnish such instruments to the Securities and Exchange
Commission upon request.
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended June 27, 1998.
17
<PAGE> 19
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)
LARRY K. SWITZER
------------------------------------------------------------------------------
Larry K. Switzer
Senior Executive Vice President
and Chief Financial Officer
(Principal Financial Officer
and duly authorized to sign
on behalf of Registrant)
Date: August 7, 1998
18
<PAGE> 20
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)
-------------------------
Larry K. Switzer
Senior Executive Vice
President
and Chief Financial
Officer
(Principal Financial
Officer
and duly authorized to
sign
on behalf of Registrant)
Date: August 7, 1998
<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-31-1998
<PERIOD-END> JUN-27-1998
<CASH> 8,000
<SECURITIES> 0
<RECEIVABLES> 146,000
<ALLOWANCES> 11,800
<INVENTORY> 913,000
<CURRENT-ASSETS> 1,178,200
<PP&E> 1,183,800
<DEPRECIATION> 734,900
<TOTAL-ASSETS> 2,586,500
<CURRENT-LIABILITIES> 395,300
<BONDS> 1,343,800
0
0
<COMMON> 325,600
<OTHER-SE> 187,300
<TOTAL-LIABILITY-AND-EQUITY> 2,586,500
<SALES> 1,085,200
<TOTAL-REVENUES> 1,085,200
<CGS> 730,900
<TOTAL-COSTS> 730,900
<OTHER-EXPENSES> 300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,500
<INCOME-PRETAX> 108,900
<INCOME-TAX> 12,400
<INCOME-CONTINUING> 96,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,500
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.33
</TABLE>
