<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
THE WARNACO GROUP, INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
.................................................................
2) Aggregate number of securities to which transaction
applies:
.................................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it was
determined):
.................................................................
4) Proposed maximum aggregate value of transaction:
.................................................................
5) Total fee paid:
.................................................................
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
.................................................................
2) Form, Schedule or Registration Statement No.:
.................................................................
3) Filing Party:
.................................................................
4) Date Filed:
.................................................................
<PAGE>
THE WARNACO GROUP, INC.
90 PARK AVENUE
NEW YORK, NEW YORK 10016
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
The 1995 Annual Meeting of the stockholders of The Warnaco Group, Inc. will
be held at the Four Seasons Hotel, New York, 57 East 57th Street, New York, NY
on May 11, at 10:00 a.m. for the following purposes:
1. To elect two directors for a term to expire at the 1998 Annual
Meeting of the stockholders.
2. To consider and vote upon a proposed amendment to the Company's
Restated Certificate of Incorporation, approved and declared advisable by
the Company's Board of Directors, which would increase the authorized
number of shares of the Company's Common Stock from 65,000,000 shares to
130,000,000 shares.
3. To transact such other business as may properly come before the
meeting and any and all adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 4, 1995, as
the record date for the determination of the stockholders entitled to notice of
and to vote at the meeting and at any adjournment or postponement thereof.
Stockholders are invited to attend the meeting. Whether or not you expect
to attend, WE URGE YOU TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the meeting, you may
vote your shares in person, which will revoke any previously executed proxy.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the meeting, you must obtain a letter from the broker, bank
or other nominee confirming your beneficial ownership of the shares and bring it
to the meeting. In order to vote your shares at the meeting, you must obtain
from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By order of the Board of Directors,
STANLEY P. SILVERSTEIN,
Secretary
New York, New York
April 14, 1995
<PAGE>
THE WARNACO GROUP, INC.
90 PARK AVENUE
NEW YORK, NEW YORK 10016
------------------------
PROXY STATEMENT
------------------------
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of The Warnaco Group, Inc., a
Delaware corporation (the 'Company'), for the 1995 Annual Meeting of the
stockholders of the Company on May 11, 1995. The Notice of Annual Meeting, this
proxy statement and the accompanying proxy are first being mailed on or about
April 14, 1995 to stockholders of record as of the close of business on April 4,
1995. You can ensure that your shares are voted at the meeting by signing,
dating and promptly returning the enclosed proxy in the envelope provided.
Sending in a signed proxy will not affect your right to attend the meeting and
vote in person. You may revoke your proxy at any time before it is voted by
notifying the Company's Transfer Agent, Chemical Bank, 450 W. 33rd St., 15th
Floor, New York, NY 10001 in writing, or by executing a subsequent proxy, which
revokes your previously executed proxy.
The Company's principal executive offices are located at 90 Park Avenue,
New York, New York 10016.
VOTING OF PROXIES
Proxies will be voted as specified by the stockholders. Where specific
choices are not indicated, proxies will be voted for proposals 1 and 2. Under
the Delaware General Corporation Law, the Company's Restated Certificate of
Incorporation (the 'Charter') and the Company's Bylaws, (i) a plurality of the
votes of the outstanding shares of Common Stock entitled to vote and present, in
person or by properly executed proxy, will be required to elect a nominated
director, and (ii) the affirmative vote of the holders of at least a majority of
the outstanding shares of Common Stock entitled to vote will be required in
order to approve the proposed amendment to the Company's Restated Certificate of
Incorporation which would increase the authorized number of shares of Common
Stock from 65,000,000 shares to 130,000,000 shares. Abstentions, broker
non-votes or, in the case of proposal 1 only, instructions on the accompanying
proxy card to withhold authority to vote for the nominated directors will result
in such proposal or proposals receiving fewer votes. In the case of proposal 1
only, however, abstentions and broker non-votes will be considered present for
purposes of verifying a quorum. Ernst & Young has audited the financial
statements of the Company since 1986. Representatives of Ernst & Young are
expected to attend the 1995 Annual Meeting, where they will have the opportunity
to make a statement if they wish to do so and will be available to answer
appropriate questions from the stockholders.
Stockholders will not be entitled to appraisal rights in connection with
any of the matters to be voted on at the Annual Meeting.
<PAGE>
1. ELECTION OF DIRECTORS
At the meeting, two directors are to be elected to serve for a term to
expire at the 1998 Annual Meeting of the stockholders. The nominees for these
positions are Mr. Stewart A. Resnick and Mr. William S. Finkelstein. Information
regarding the Board's nominees for director are set forth on page 2. Information
regarding the four directors whose terms expire in 1996 and 1997 is set forth on
page 3.
The accompanying proxy will be voted for the election of the Board's
nominees unless contrary instructions are given. If one or more of the Board's
nominees is unable to serve, which is not anticipated, the persons named as
proxies intend to vote, unless the number of nominees is reduced by the Board of
Directors, for such other person or persons as the Board of Directors may
designate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS, WHICH IS
DESIGNATED AS PROPOSAL NO. 1 ON THE ENCLOSED PROXY CARD.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS FOR A THREE-YEAR TERM
TO EXPIRE AT THE 1998 ANNUAL MEETING OF THE STOCKHOLDERS
Mr. Stewart A. Resnick, 58, has been a Director of the Company since May
1992 and has served as the Chairman and Chief Executive Officer of Franklin Mint
Corporation since 1985. Mr. Resnick is also Chairman of the Board of Roll
International Corporation, a company which through various divisions and
affiliates has interests in the flowers-by-wire, agriculture, transportation and
real estate businesses. Mr. Resnick is a member of the Board of Trustees of Bard
College in New York, the Acquisitions Committee of the National Gallery in
Washington, D.C. and Co-Chairman of the Marketing Department Advisory Board and
member of the Management Education Council of The Wharton School at the
University of Pennsylvania.
Mr. William S. Finkelstein, 46, has been a Director and Chief Financial
Officer of the Company since April 13, 1995, a Senior Vice President of the
Company since May 1992, and Controller of the Company since November 1988. Mr.
Finkelstein served as Vice President of Finance of the Company's Activewear and
Olga Divisions from March 1988 until his appointment as Controller of the
Company. Mr. Finkelstein served as Vice President and Controller of SPI
Pharmaceuticals Inc. from February 1986 to March 1988 and held various financial
positions, including Assistant Corporate Controller with Max Factor and Company,
between 1977 and 1985. Mr. Finkelstein also serves as a Director of Authentic
Fitness Corporation and Herman's Sporting Goods, Inc.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE;
TERMS TO EXPIRE AT THE 1997 ANNUAL MEETING OF THE STOCKHOLDERS
Mrs. Linda J. Wachner, 49, has been a Director, President and Chief
Executive Officer of the Company since August 1987, and the Chairman of the
Board since August 1991. Mrs. Wachner was a Director and President of the
Company from March 1986 to August 1987. Mrs. Wachner has been Chairman and Chief
Executive Officer of Authentic Fitness Corporation since May 1990. Mrs. Wachner
held various positions, including President and Chief Executive Officer, with
Max Factor and Company from December 1978 to October 1984. Mrs. Wachner also
serves as a Director of The Travelers Inc. and Authentic Fitness Corporation.
Mr. Andrew G. Galef, 62, has been a Director of the Company since March
1986, and served as Chairman of the Board of Directors of the Company until
August 1991. Mr. Galef has been President of
2
<PAGE>
The Spectrum Group, Inc., a private investment and management firm, since its
incorporation in California in 1978. Mr. Galef has been the Chairman of the
Board of MagneTek, Inc., an electrical products manufacturer, since July 1984
and has been Chief Executive Officer of MagneTek, Inc. since September 1993. Mr.
Galef has served as the Chairman of the Board of Exide Corporation, a maker of
industrial, commercial and automotive batteries, from July 1982 until June 1989.
Mr. Galef has served as a director of Petco Animal Supplies, a retail animal
food and supplies company, since 1988. Mr. Galef served as Chairman of the Board
of Grantree Corporation, a furniture rental company, from 1987 to April 1992. In
March 1991, Grantree Corporation filed for bankruptcy under Chapter 11 of the
United States Bankruptcy Code and emerged from bankruptcy in March 1992. Mr.
Galef served as the Chairman of the Board of Aviall, Inc., an aviation support
and aircraft parts distribution company, and its predecessor company, from 1979
to 1985.
TERMS TO EXPIRE AT THE 1996 ANNUAL MEETING OF THE STOCKHOLDERS
Mr. Joseph A. Califano, Jr., 63, has been a Director of the Company since
March 1992. Mr. Califano is Chairman and President of the Center on Addiction
and Substance Abuse at Columbia University. He is a director of Authentic
Fitness Corporation, Automatic Data Processing, Inc., Chrysler Corporation,
Kmart Corporation, New York and New England Telephone Companies, and The
Travelers Inc. Mr. Califano is a trustee of New York University, Georgetown
University and the Twentieth Century Fund, and a Governor of New York Hospital.
He serves as Chairman of the Board of the Institute for Social and Economic
Policy in the Middle East at the Kennedy School of Government at Harvard
University and a member of the governing council of the Institute of Medicine of
the National Academy of Sciences. Mr. Califano served as Secretary of the United
States Department of Health, Education and Welfare from 1977 to 1979. He was
Special Assistant for Domestic Affairs to the President of the United States for
the period from 1965 to 1969. He is the author of nine books.
Mr. Robert D. Walter, 65, has been a Director of the Company since January
1987. Mr. Walter was a Vice President and Chief Financial Officer of the Company
from June 1986 to February 1988 pursuant to a consulting contract. Mr. Walter
served successively as Treasurer, Vice President and Chief Accounting Officer,
and Senior Vice President and Chief Financial Officer and Member of the Office
of the Chairman of Norton Simon Inc., a diversified consumer products company,
from 1971 to 1983. Since 1983, Mr. Walter has served as a consultant to several
companies and non-profit organizations, including TLC Group, the New York
Mission Society and the National Health Foundation. Mr. Walter also serves as a
Director of Authentic Fitness Corporation.
COMMITTEES OF THE BOARD -- BOARD MEETINGS
The Board of Directors held six meetings in 1994. All of the Directors
attended at least 75% of the meetings of the Board and the respective Committees
of the Board of which they were a member during 1994.
The Board of Directors has the following standing committees:
AUDIT COMMITTEE
The Audit Committee, which met four times in 1994, recommends the
appointment of the Company's external auditors and meets with both internal and
external auditors to review the scope of their audits and the results thereof.
In addition, the Audit Committee reviews and comments on the
3
<PAGE>
proposed plans of the internal and external auditors, audit fee proposals,
financial statements and other documents submitted to shareholders and
regulators and reviews the internal control policies and procedures of the
Company.
The members of the Audit Committee are Mr. Califano, Mr. Resnick and Mr.
Walter.
PENSION COMMITTEE
The Pension Committee, which met four times in 1994, reviews and makes
recommendations concerning the Company's pension, profit sharing and other
employee benefit plans, recommends the appointment of the Plan Accountant and
Plan Actuary for the Company's pension and profit sharing plans and consults
with the persons so appointed.
The members of the Pension Committee are Mr. Resnick, Mrs. Wachner and Mr.
Walter.
COMPENSATION COMMITTEE
The Compensation Committee, which met five times in 1994, reviews and
approves the remuneration arrangements for the officers and directors of the
Company. The Committee also reviews and recommends new executive compensation or
stock plans in which the officers and/or directors are eligible to participate,
including the granting of stock options.
The members of the Compensation Committee are Mr. Califano, Mr. Galef and
Mr. Walter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the members of the Compensation Committee are Mr. Califano,
Mr. Galef and Mr. Walter. Mr. Walter was an officer of the Company from June
1986 to February 1988 pursuant to a consulting contract.
Mr. Galef is the sole stockholder of and serves as President and a Director
of The Spectrum Group, Inc. ('Spectrum'). Spectrum and the Company are parties
to an agreement pursuant to which Spectrum has agreed to render consulting and
advisory services to the Company through May 1996. The agreement provides for
annual fees of $350,000 (plus cost of living increases), with total payments not
to exceed $500,000 including expenses, payable in equal monthly installments.
Payments to Spectrum during fiscal 1994 aggregated $500,000.
In addition, pursuant to the Company's Amended and Restated 1988 Employee
Stock Purchase Plan, through 1991 Mr. Galef acquired 1,020,000 shares of the
Company's Common Stock in exchange for a non-recourse, non-interest bearing
note. Such shares were acquired at their then fair market value. The largest
aggregate amount of such indebtedness outstanding during 1994 was $2,378,000 and
the amount of such indebtedness outstanding as of March 31, 1995 was $356,746.
Mr. Califano, Mr. Finkelstein and Mr. Walter are directors and Mrs. Wachner
is the Chairman of the Board of Directors and Chief Executive Officer of
Authentic Fitness Corporation. Throughout the fiscal year, the Company provided
certain services to Authentic Fitness Corporation. Such services included
occupancy services related to leased facilities, transportation services,
computer service and laboratory, testing and other services, all of which were
charged at the Company's cost. The total amount charged to Authentic Fitness
Corporation by the Company for such services during 1994 was approximately $6.3
million.
4
<PAGE>
The Company purchases certain design and development services and occupancy
services related to leased facilities from Authentic Fitness Corporation. All
services are charged at Authentic Fitness Corporation's cost. The total amount
paid by the Company to Authentic Fitness Corporation for such services was $1.6
million in fiscal 1994. In addition, the Company purchased certain inventory
from Authentic Fitness Corporation, which totaled approximately $2.5 million in
1994. In 1994, the Company purchased certain machinery and equipment from
Authentic Fitness Corporation which amounted to $1.4 million.
The Company sold certain inventory to Authentic Fitness Corporation which
totaled approximately $2.4 million in 1994.
In 1994, Authentic Fitness Corporation acquired certain trademarks and
trade names from the Company for approximately $6.6 million, a purchase price
determined at arms-length on the basis of an independent third-party appraisal.
The Company believes that the terms of the relationships and transactions
described above are at least as favorable to the Company as could have been
obtained from an unaffiliated third party.
COMPENSATION OF DIRECTORS
The Company does not pay any additional remuneration to employees for
serving as directors. For purposes of directors' compensation, Mr. Galef is
deemed an employee of the Company. Directors of the Company who are not
employees currently receive an annual retainer fee of $20,000 plus fees of
$1,500 per day for attendance at meetings of the Board of Directors and $1,000
per day for attendance at meetings of its committees. Directors of the Company
are also reimbursed for out-of-pocket expenses.
The Company also maintains The Warnaco Group, Inc. 1993 Non-Employee
Director Stock Plan (the 'Director Stock Plan'). Pursuant to this plan, each
non-employee director will be granted an option to purchase 30,000 shares of the
Company's common stock upon first becoming a director, and will be granted an
option to purchase 10,000 shares immediately following each subsequent annual
meeting of stockholders. The exercise price of all options granted under the
plan will be 100% of the fair market value of the underlying shares on the date
of grant of the option.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 31, 1995, by each
of the Company's directors and nominees, all
5
<PAGE>
directors and officers as a group and each person who is known by the Company to
beneficially own five percent or more of any class of the Company's voting
securities.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------------------------
NUMBER PERCENT
NAME OF SHARES OF SHARES
- ---------------------------------------------------------------------- ------------------- --------------
<S> <C> <C>
DIRECTORS, NOMINEES AND OFFICERS(a)
Linda J. Wachner(b)................................................... 6,727,000 16.1%
Dariush Ashrafi(c).................................................... 198,000 *
William S. Finkelstein................................................ 214,000 *
Stanley P. Silverstein................................................ 68,400 *
Joseph A. Califano, Jr.(d)............................................ 42,000 *
Andrew G. Galef....................................................... 872,700 2.1%
Stewart A. Resnick(d)................................................. 80,000 *
Robert D. Walter(d)................................................... 80,000 *
All directors and officers as a group (8 persons).....................
OTHER 5% STOCKHOLDERS
Fayez Sarofim & Co.(e) ............................................... 2,276,000 5.5%
2907 Two Houston Center
Houston, TX 77010
Oppenheimer Group, Inc.(f) ........................................... 6,926,201 16.6%
Oppenheimer Tower
World Financial Tower
New York, NY 10281
FMR Corp.(g) ......................................................... 3,786,100 9.1%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ------------------
* Less than 1%
(a) The business address of each of the directors, nominees and officers is c/o
The Warnaco Group, Inc., 90 Park Avenue, New York, New York 10016. The
number of shares beneficially owned by the following officers includes
vested but unexercised options in the following amounts: Mrs. Wachner,
2,900,000; Mr. Finkelstein, 86,000 and Mr. Silverstein, 42,000.
(b) Includes 50,000 shares of Common Stock held by the Linda J. Wachner
Charitable Trust of which Mrs. Wachner is the Trustee. Mrs. Wachner has the
sole power to vote and no power to dispose of such 50,000 shares.
(c) Mr. Ashrafi resigned as a director and officer of the Company on April 13,
1995. The number of shares beneficially owned by Mr. Ashrafi includes
vested but unexercised options in the amount of 86,000.
(d) Includes vested but unexercised options to purchase 40,000 shares of
common stock granted pursuant to the Director Stock Plan.
(e) Information based on a Schedule 13G dated February 14, 1995, which
reflects the collective beneficial ownership of shares of Common Stock by
Fayez Sarofim & Co. and its wholly-owned subsidiary, Sarofim Trust Co.,
each of which is an investment advisor, as well as by Fayez S. Sarofim
individually. According to the Schedule 13G, Fayez S. Sarofim has the sole
power to vote and
(Footnotes continued on following page)
6
<PAGE>
dispose of 500,000 of such shares, Fayez Sarofim & Co. has neither the
sole power to vote nor the sole power to dispose of any of such shares and
Fayez Sarofim & Co. and Fayez S. Sarofim each have the shared power to
vote 1,347,380 of such shares and the shared power to dispose of 1,776,000
of such shares.
(f) Information based on a Schedule 13G dated February 1, 1995 filed by
Oppenheimer Group, Inc., ('Group') with the Securities and Exchange
Commission on behalf of Oppenheimer & Co., L.P., the parent company of
Group, and certain of Group's subsidiary companies, including Oppenheimer
Capital, a registered investment adviser, and/or certain investment
advisory clients or discretionary accounts of such subsidiary companies,
reporting their collective beneficial ownership of the shares of Common
Stock set forth in the table. According to the Schedule 13G, neither Group
nor Oppenheimer Capital has the sole power to vote or dispose of any of
such shares, Group has the shared power to vote and dispose of all of such
shares and Oppenheimer Capital has the shared power to vote and dispose of
6,806,176 of such shares.
(g) Information based on a Schedule 13G dated February 10, 1995 filed by FMR
Corp. ('FMR') with the Securities and Exchange Commission on behalf of FMR
and Edward C. Johnson, 3rd, Chairman of FMR. According to the Schedule
13G, each of FMR and Edward C. Johnson, 3rd, through its control of
Fidelity Management & Research Company ('Fidelity') and certain registered
investment companies (the 'Funds'), has the sole power to vote or direct
the vote of 422,600 (none in the case of Edward C. Johnson, 3rd), of such
shares, the shared power to vote or direct the vote of none of such
shares, the sole power to dispose or direct the disposition of 3,786,100
of such shares and the shared power to dispose or direct the disposition
of none of such shares. The sole power to vote or direct the voting of the
shares owned directly resides with the Funds' Board of Trustees. One of
such Funds, Fidelity Contrafund, owns 2,337,300 of such shares.
CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS
Pursuant to the Company's Amended and Restated 1988 Employee Stock Purchase
Plan, through 1991 the individuals discussed below acquired shares of the
Company's Common Stock in exchange for notes payable to the Company. In the case
of Messrs. Finkelstein and Silverstein, such notes were full recourse and, in
the case of Mr. Galef and Mrs. Wachner, such notes were non-recourse and non-
interest-bearing. The largest aggregate amount of indebtedness outstanding
during fiscal 1994 was $368,740 for Mr. Finkelstein, $23,988 for Mr.
Silverstein, $2,378,000 for Mr. Galef and $6,016,000 for Mrs. Wachner. The
aggregate amount of indebtedness outstanding and the rate of interest thereon,
if applicable, as of March 30, 1995, were $293,790 and 8.6% for Mr. Finkelstein,
$15,230 and 8% for Mr. Silverstein, $356,745 for Mr. Galef and $5,971,430 for
Mrs. Wachner.
Mr. Galef is the sole stockholder of and serves as President and a Director
of The Spectrum Group, Inc. ('Spectrum'). Spectrum and the Company are parties
to an agreement pursuant to which Spectrum has agreed to render consulting and
advisory services to the Company through May 1996. The agreement provides for
annual fees of $350,000 (plus cost of living increases), with total payments not
to exceed $500,000 including expenses, payable in equal monthly installments.
Payments to Spectrum during fiscal 1994 aggregated $500,000.
In 1990, the Company sold substantially all of the assets of its Activewear
Division to Authentic Fitness Corporation. Pursuant to such transaction, the
Company acquired and until March 10, 1995 owned common stock representing
approximately 3% of Authentic Fitness Corporation's fully diluted equity. Mrs.
Wachner is the Chairman of the Board, Chief Executive Officer and a significant
7
<PAGE>
stockholder, and Messrs. Califano, Finkelstein and Walter are directors, of
Authentic Fitness Corporation. Throughout the fiscal year, the Company provided
certain services to Authentic Fitness Corporation. Such services included
occupancy services related to leased facilities, transportation services,
computer service and laboratory, testing and other services, all of which were
charged at the Company's cost. The total amount paid by Authentic Fitness
Corporation to the Company for such services during 1994 was $6.3 million.
The Company purchases certain design and development services and occupancy
services related to leased facilities from Authentic Fitness Corporation. All
services are charged at Authentic Fitness Corporation's cost. The total amount
paid by the Company to Authentic Fitness Corporation for such services was $1.6
million in fiscal 1994. In addition, the Company purchased certain inventory
from Authentic Fitness Corporation, which totaled approximately $2.5 million in
1994. In 1994, the Company purchased certain machinery and equipment from
Authentic Fitness Corporation, which amounted to $1.4 million.
The Company sold certain inventory to Authentic Fitness Corporation which
totaled approximately $2.4 million in fiscal 1994.
In 1994, Authentic Fitness Corporation acquired certain trademarks and
trade names from the Company for approximately $6.6 million, a purchase price
determined at arms-length on the basis of an independent third-party appraisal.
The Company believes that the terms of the relationships and transactions
described above are at least as favorable to the Company as could have been
obtained from an unaffiliated third party.
COMPENSATION OF EXECUTIVE OFFICERS
Set forth below are tables prescribed by the proxy rules of the Securities
and Exchange Commission which present compensation information for the Company's
chief executive officer and the three other most highly compensated executive
officers whose aggregate salary and bonus exceeded $100,000 in 1994 (the 'Named
Executives'). The Company has no executive officers other than the Named
Executives.
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table discloses compensation paid or to be paid to the Named
Executives with respect to each of the three fiscal years ended January 2, 1993,
January 8, 1994 and January 7, 1995.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ----------------------- -------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
YEAR SALARY BONUS SATION AWARD SARS PAYOUTS SATION
---- ---------- ---------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Linda J. Wachner .............. 1994 $2,423,749 $2,800,000(a) (b) -- 0 -- --
Chairman, President and Chief 1993 2,360,028 0 (b) -- 1,400,000 -- --
Executive Officer 1992 1,860,028 1,300,000 (b) -- 500,000 -- --
Dariush Ashrafi(c) ............ 1994 317,187 482,729(a) (b) -- 0 -- --
Former Senior Vice President, 1993 282,812 226,000 (b) -- 150,000 -- --
Chief Financial Officer 1992 250,000 226,875 (b) -- 48,000 -- --
William S. Finkelstein ........ 1994 287,448 451,532(a) (b) -- 0 -- --
Senior Vice President, Chief 1993 245,431 175,000 (b) -- 150,000 -- --
Financial Officer 1992 225,000 175,812 (b) -- 48,000 -- --
Stanley P. Silverstein ........ 1994 221,229 262,448(a) (b) -- 0 -- --
Vice President, General 1993 203,750 129,000 (b) -- 90,000 -- --
Counsel and Secretary 1992 194,167 129,500 (b) -- 16,000 -- --
</TABLE>
- ------------------
(a) See Compensation Committee Report on Excecutive Compensation -- 1994
Compensation and Compensation of the Chief Executive Officer on pages 13
and 14.
(b) Other Annual Compensation was less than the lesser of $50,000 and 10% of
such officer's annual salary and bonus for such year.
(c) See note (c) under 'Stock Ownership of Certain Beneficial Owners and
Management' on page 6.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1994 to
the Named Executives.
<TABLE> POTENTIAL REALIZABLE VALUE AT
<CAPTION> ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTIONS TERM
------------------------------------------------------ ----------------------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS/
SECURITIES SARS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES OR BASE
OPTIONS/SARS IN FISCAL PRICE EXPIRATION
GRANTED (#) YEAR ($/SHARE) DATE 0% 5% 10%
------------ -------------- --------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Linda J. Wachner............... 0 N/A N/A N/A N/A N/A N/A
Dariush Ashrafi................ 0 N/A N/A N/A N/A N/A N/A
William S. Finkelstein......... 0 N/A N/A N/A N/A N/A N/A
Stanley P. Silverstein......... 0 N/A N/A N/A N/A N/A N/A
</TABLE>
9
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information on option/SAR exercises in fiscal
1994 by the Named Executives and values of such officers' unexercised options at
January 7, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
--------------- ------------ --------------- -------------------
<S> <C> <C> <C> <C>
Linda J. Wachner........................... 0 0 1,900,000/0 $187,560/$0
Dariush Ashrafi............................ 0 0 61,500/136,500 $4,688/$14,063
William S. Finkelstein..................... 0 0 61,500/136,500 $4,688/$14,063
Stanley P. Silverstein..................... 0 0 30,500/75,500 $2,813/$8,438
</TABLE>
PENSION PLAN
The following table sets forth the annual pension benefits payable at age
65 pursuant to the Company's Employee Retirement Plan which provides such
pension benefits to all qualified personnel based on the average of the highest
six (increasing to ten years by the year 1999 and fifteen years by the year
2004) consecutive calendar years' compensation multiplied by the years of
credited service. Such benefits payable are expressed as straight-life annuity
amounts and are not subject to reduction for social security or other offset.
The credited years of service as of January 7, 1995 for the Named Executives
are: Mrs. Wachner, eight years, eight months; Mr. Finkelstein, six years, ten
months; and Mr. Silverstein, ten years, nine months. The current remuneration
covered by the Company's Retirement Plan for each such individual is $150,000,
which amounts are included in the Summary Compensation Table under 'Salary' and
'Bonus.'
ANNUAL BENEFITS PAYABLE AT AGE 65
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
AVERAGE COMPENSATION --------------------------------------------------------------
(BEST 6 YEARS) 5 10 15 20 25 30
- ------------------------------------------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000........................................ $ 7,222 $14,445 $21,667 $28,890 $36,112 $43,334
$150,000........................................ 11,222 22,445 33,667 44,890 56,112 67,334
$200,000........................................ 11,222 22,445 33,667 44,890 56,112 67,334
$250,000........................................ 11,222 22,445 33,667 44,890 56,112 67,334
$300,000........................................ 11,222 22,445 33,667 44,890 56,112 67,334
</TABLE>
EMPLOYMENT AGREEMENT
In 1991, the Company entered into an employment agreement with Mrs. Wachner
(the 'Employment Agreement'), which sets forth the terms and conditions of Mrs.
Wachner's employment. The Employment Agreement, which will terminate on January
6, 2000, unless extended, provides for
10
<PAGE>
Mrs. Wachner's employment as Chairman, President and Chief Executive Officer at
an annual base salary, which was initially established at $1.8 million per year
(subject to adjustment for changes in the cost of living) as well as certain
other benefits and reimbursement of expenses. The contract provides for
increases in the rate of base salary from time to time, as determined by the
Company. In accordance with this provision, Mrs. Wachner's base salary for 1994
was $2.4 million. Her base salary in prior years was as set forth in the table
on page 9. The contract also provides that Mrs. Wachner will receive an annual
bonus based upon the Company's achievement of an annually increasing minimum
EBITDA (earnings before interest, taxes, depreciation and amortization). Under
this bonus arrangement, Mrs. Wachner is entitled to receive a bonus in the
amount by which EBITDA exceeds the threshold EBITDA for such year, subject to a
maximum bonus amount of $1.3 million. Threshold EBITDAs were established at the
time the contract was entered into and increase annually from the initial date
of the arrangement: for 1994 the threshold was $115 million and for 1995 the
threshold is $125 million. The Employment Agreement also provides for
supplemental bonuses in the Company's discretion. The Employment Agreement
specifically permits Mrs. Wachner to spend reasonable time managing her own
affairs as well as the business of Authentic Fitness Corporation, a public
company, which purchased substantially all of the assets of the Company's
Activewear Division in 1990 and of which Mrs. Wachner is the Chairman of the
Board and Chief Executive Officer.
Under the Employment Agreement, Mrs. Wachner will be entitled to certain
severance benefits if the Company terminates her employment other than for
'cause' or if Mrs. Wachner terminates her employment for 'good reason.' The
definition of good reason may include a change of control of the Company. If the
Company terminates Mrs. Wachner's employment without cause or if Mrs. Wachner
terminates her employment for good reason, she would be entitled to receive a
lump sum payment equal to five times the sum of her highest annual base salary
and the highest annual bonus paid to her. In the event that any amount of
benefit paid to Mrs. Wachner becomes subject to the excise tax imposed under
Section 4999 of the Internal Revenue Code, the Company will pay to Mrs. Wachner
an additional amount such that after the payment of all income and excise taxes,
she will be in the same after-tax position as if no excise tax had been imposed.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administering the executive compensation plans and programs of the Company and
for making recommendations to the Board of Directors regarding the compensation
of and benefits provided to the Chief Executive Officer and the other executive
officers. The names of the Committee members are set forth below this report.
GENERAL POLICIES REGARDING COMPENSATION OF EXECUTIVE OFFICERS
In establishing compensation and benefit levels for executive officers, the
Committee seeks to (1) attract and retain individuals of superior ability and
managerial talent (2) motivate executive officers to increase Company
performance primarily for the benefit of its shareholders but also for the
benefit of its customers and other constituencies, and (3) reward executives for
exceptional individual contributions to the achievement of the Company's
business objectives. To these ends, the Company's executive compensation package
consists of salary, variable annual cash compensation (bonus) and stock-based
long-term incentive awards.
Base Salary. Salary levels generally are determined based on the
Committee's subjective assessment of prevailing levels among the Company's
competitors. The Company's competitors, for this purpose,
11
<PAGE>
include certain of the companies included in the industry peer group index used
for comparison with the Company's performance in the performance graph following
this report, as well as other companies with which, in the Committee's view, the
Company competes for executive talent. These companies may include nonpublic
companies and companies in related industries such as retailing or general
apparel manufacturing.
In general, the Committee attempts to set base salaries at levels that will
attract and retain highly qualified individuals. In selected cases, the
Committee may feel that excellent executive talent may only be attracted and
retained by compensation in excess of prevailing levels among the Company's
competitors. As the Company has only four executive officers, and in view of the
considerations enumerated below under '1994 Compensation' and 'Compensation of
the Chief Executive Officer,' the Committee believes that base salaries at the
high end of the range for the competitor group for all executive officers, and
Mrs. Wachner in particular, are appropriate.
In making such judgments regarding the appropriate level for any particular
officer, as well as in determining which companies should form the comparison
group for this purpose, the Committee from time to time may consult with
independent compensation consultants. However, the Committee ultimately reviews
the case of each executive officer individually, relying heavily on the
recommendations of the Chief Executive Officer as well as on their own
subjective judgment. The Committee did not engage outside consultants during
1994.
Annual Bonus. The Committee generally believes that, at higher executive
levels, a greater percentage of an individual's total annual cash compensation
opportunity should consist of variable compensation tied to the Company's
performance. Mrs. Wachner has a bonus opportunity under her Employment Agreement
that is approximately 53% of base salary and is based on earnings before
interest, taxes, depreciation and amortization ('EBITDA'), as described below.
See also 'Employment Agreement' on pages 10 and 11. Annual bonus opportunities
for other executive officers range from 0% to 125% of base salary.
The Committee's practice with regard to awarding annual bonuses to
executive officers has been to review the Company's performance after the close
of the fiscal year, taking into account various measures of performance the
Committee has determined in its sole discretion to be appropriate under the
circumstances, and assigning such weight to any such factors as it determines to
be appropriate. The Committee focuses particularly on such factors as growth in
earnings (measured by earnings before interest and taxes ('EBIT') or EBITDA),
cash flow, inventory management and the development of innovative ideas in
determining whether or not bonuses are paid. The Committee also pays bonuses to
selected individuals on an ad hoc basis in connection with or in recognition of
special events or projects such as major acquisitions, financing and licensing
arrangements. In making all of such determinations, the Committee takes into
consideration and gives significant weight to the recommendations of the Chief
Executive Officer with respect to bonuses of executive officers other than
herself.
In 1994, the Committee recommended and the stockholders approved a
supplemental incentive compensation plan for all executive officers and other
senior management. The supplemental plan provides a formula-based arrangement
that is prospective in operation and rewards executive officers and selected
senior managers for the achievement of a return on equity to Company investors
that exceeds the industry median. The supplemental plan is designed to ensure
that amounts payable thereunder are fully deductible under Section 162(m) of the
Internal Revenue Code, as discussed below. Based on the recommendation of the
Chief Executive Officer, no awards were made under the supplemental incentive
compensation plan for fiscal 1994.
12
<PAGE>
Long-Term Incentive Compensation. Stock-based incentives, at the present
time consisting solely of stock options granted at 100% of the stock's fair
market value on the grant date, constitute the long-term portion of the
Company's executive compensation package. Stock options provide an incentive for
executives to increase the Company's stock price and therefore, the return to
the Company's shareholders. The Committee has not heretofore granted stock
appreciation rights ('SARs') or other stock-based awards, although it has the
authority to do so under the Company's stock option plans.
Limitations on Deductibility of Executive Compensation. Section 162(m) of
the Internal Revenue Code, enacted as part of the Revenue Reconciliation Act of
1993, limits the deductibility of compensation paid to certain executive
officers of the Company beginning with the Company's taxable year 1994. To
qualify for deductibility under Section 162(m), compensation in excess of
$1,000,000 per year paid to the Chief Executive Officer and the four other most
highly compensated executive officers at the end of such fiscal year generally
must be either (1) paid pursuant to a written binding contract in effect on
February 17, 1993 or (2) 'performance-based' compensation as determined under
Section 162(m). In order to be considered 'performance-based,' for this purpose,
compensation must be paid solely on account of the attainment of one or more
preestablished performance goals established by a committee of two or more
'outside directors,' pursuant to an arrangement that has been disclosed to and
approved by shareholders. Also, in order for an arrangement to give rise to
fully deductible 'performance-based' compensation, the terms of the arrangement
must preclude the exercise of any discretion in the administration of the plan
that would have the effect of increasing compensation paid thereunder.
The Committee generally intends to comply with the requirements for full
deductibility of executive compensation under Section 162(m). However, the
Committee will balance the costs and burdens involved in such compliance against
the value of the tax benefits to be obtained by the Company thereby, and may in
certain instances pay compensation that is not fully deductible if in its
determination such costs and burdens outweigh such benefits.
1994 COMPENSATION
The Committee increased base salaries for the executive officers named in
the Summary Compensation Table, other than Mrs. Wachner, by approximately 15 to
22% in 1994. In exercising its subjective discretion to authorize such
increases, the Committee considered salary levels of its competitors, as
described above, as well as the Company's strong financial performance, as
evidenced by continuing improvement in revenues and gains in earnings from
continuing operations (before nonrecurring expenses and income tax benefits) and
earnings per share.
The amounts shown as 1994 bonus in the Summary Compensation Table for the
three executive officers other than Mrs. Wachner reflect discretionary bonus
amounts awarded in 1994 based solely on special achievement in connection with
the successful completion of the acquisition of the worldwide trademarks, rights
and business of Calvin Klein Men's Underwear and Women's Intimate Apparel and
amounts awarded in 1995 under the Company's bonus plan for fiscal 1994, as
described above.
The Committee did not make any option grants to the named executives in
1994, reflecting the larger grants made in 1993.
13
<PAGE>
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mrs. Wachner's annual base salary and annual bonus are governed by the
Employment Agreement with the Company, described on pages 10 and 11. Pursuant to
the Employment Agreement, Mrs. Wachner's base salary was adjusted in 1994 to
reflect changes in the cost of living.
The Amount shown as 1994 bonus in the Summary Compensation Table reflects
$1.3 million Mrs. Wachner is entitled to receive pursuant to the bonus
arrangement in the Employment Agreement as well as a discretionary bonus award
of $1.5 million based solely on special achievement in connection with the
successful completion of the acquisition of the worldwide trademarks, rights and
business of Calvin Klein Men's Underwear and Women's Intimate Apparel.
Discretionary bonuses of this type were also paid to the other executive
officers named in the Summary Compensation Table, see pages 12 and 13.
Joseph A. Califano, Jr.
Andrew G. Galef
Robert D. Walter
14
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below compares cumulative total return of
the Company, the NYSE Composite Index and a comparable industry index selected
by the Company as described below. The stock price performance shown on the
graph below is not necessarily indicative of future price performance.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Fiscal Year Ending
10/11/91 12/31/91 12/31/92 12/31/93 12/31/94
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Warnaco......................................................... 100 109 174 134 152
NYSE Market Index............................................... 100 107 112 127 125
Revised Industry Index.......................................... 100 116 144 103 103
Prior Industry Index............................................ 100 115 125 75 n/a
</TABLE>
The Industry Group is made up of the following Companies:
<TABLE>
<S> <C>
Fruit of the Loom Inc. Oxford Industries
Kellwood Co. Russell Corp.
Liz Claiborne Inc. VF Corp.
Nautica Enterprises Inc. (formerly State-O'-Maine, Inc.)
</TABLE>
15
<PAGE>
The Industry Group was revised for fiscal 1994 to exclude Crystal Brands,
Inc., which filed for protection under Chapter II of the United States
Bankruptcy Code and substantially all of its business was sold during 1994 and
early 1995. The Company has included Kellwood Co. retroactively to October 11,
1991.
2. INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
At the meeting, the stockholders will be asked to approve an amendment to
the Company's Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 65,000,000 to 130,000,000.
Currently, there are 41,734,192 shares of Common Stock outstanding and
outstanding options to acquire 4,487,000 additional shares of Common Stock.
The Board has determined that it is advisable to increase the authorized
number of shares of Common Stock in order to permit the Company to split the
existing shares of Common Stock should that become desirable and to provide the
Company with financial flexibility.
Decisions regarding future issuances of Common Stock will generally be made
by the Board of Directors without further stockholder approval. However, as of
the date of this Proxy Statement, with the exception of outstanding options, and
existing employee and director benefit plans, there are no arrangements,
understandings or agreements for the issuance of additional shares of Common
Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE INCREASE IN THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK, WHICH IS DESIGNATED AS PROPOSAL NO. 2 ON THE
ENCLOSED PROXY STATEMENT.
Outstanding Voting Securities
On April 4, 1995, the record date for the 1995 Annual Meeting, there were
outstanding and entitled to vote 41,734,192 shares of Common Stock of the
Company, entitled to one vote per share.
Solicitation of Proxies
The cost of soliciting proxies for the 1995 Annual Meeting will be borne by
the Company. In addition to solicitation by mail, solicitations may also be made
by personal interview, facsimile transmission, telegram and telephone. The
Company will use the services of Chemical Bank to assist in soliciting proxies
and expects to pay approximately $5,000 for such services. Arrangements will be
made with brokerage houses and other custodians, nominees and fiduciaries to
send proxies and proxy material to their principals, and the Company will
reimburse them for expenses in so doing. Consistent with the Company's
confidential voting procedure, directors, officers and other regular employees
of the Company, as yet undesignated, may also request the return of proxies by
telephone or telegram, or in person.
Annual Report
The Annual Report of the Company for the fiscal year ended January 7, 1995,
is being mailed to all stockholders with this proxy statement.
16
<PAGE>
Stockholder Proposals
In general, stockholder proposals intended to be presented at an Annual
Meeting, including proposals for the nomination of directors, must be received
by the Company 60 days in advance of the anniversary date of the immediately
preceding annual meeting, or by March 12, 1996, to be considered for the 1996
Annual Meeting. The requirements for submitting such proposals are set forth in
the Company's Bylaws.
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the 1995 Annual Meeting must be received by the
Company by December 13, 1995.
Other Matters
The Board of Directors does not know of any matter other than those
described in this proxy statement that will be presented for action at the
meeting. If other matters properly come before the meeting, the persons named as
proxies intend to vote the shares they represent in accordance with their
judgment.
17
<PAGE>
APPENDIX 1
PROXY CARD
PROXY
THE WARNACO GROUP, INC.
NEW YORK, NEW YORK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Linda J. Wachner, William S. Finkelstein
and Stanley P. Silverstein, and each of them acting solely, proxies with full
power of substitution and with all powers the undersigned would possess if
personally present, to represent and to vote at the Annual Meeting of
stockholders to be held on May 11, 1995 and at any adjournments or postponements
thereof, as designated on the reverse side hereof and in their discretion with
respect to any other matters as may properly come before such meeting, all of
the shares of Class A Common Stock of The Warnaco Group, Inc. held of record by
the undersigned as of the close of business on April 4, 1995.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
<PAGE>
This Proxy, when properly executed, will be voted Please mark
in the manner directed herein by the undersigned your votes
shareholder. If no direction is made, this Proxy as this
will be voted FOR Proposals 1 and 2.
____________
COMMON
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR ALL NOMINEES' IN ITEM 1 AND 'FOR'
ITEM 2.
1. ELECTION OF DIRECTORS
Proposal to elect Mr. Stewart A. Resnick
and Mr. William S. Finkelstein as directors
for a term of three years.
(Instruction: to withhold authority to vote
for either individual nominee, strike out his [ ] [ ]
name) FOR WITHHELD
2. Proposed Amendment to the Company's Restated
Certificate of Incorporation to increase the
authorized number of shares of common stock [ ] [ ] [ ]
from 65,000,000 to 130,000,000 shares. FOR AGAINST ABSTAIN
Signature(s)__________________________________________ Date__________________
Please sign exactly as name appears. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
