<PAGE>
<PAGE>
________________________________________________________________________________
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 JULY 5, 1997
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 1-4715
------------------------
THE WARNACO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 95-4032739
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
</TABLE>
90 PARK AVENUE
NEW YORK, NEW YORK 10016
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(212) 661-1300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
COPIES OF ALL COMMUNICATIONS TO:
THE WARNACO GROUP, INC.
90 PARK AVENUE
NEW YORK, NEW YORK 10016
ATTENTION: VICE PRESIDENT AND GENERAL COUNSEL
------------------------
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 _______
The number of shares outstanding of the registrant's Class A Common Stock
as of August 15, 1997 is as follows: 52,111,441.
________________________________________________________________________________
<PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 5, JANUARY 4,
1997 1997
---------- ----------
(UNAUDITED)
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
Current Assets:
Cash............................................................................. $ 10,391 $ 11,840
Accounts receivable -- net....................................................... 234,413 211,038
Inventories:
Finished goods.............................................................. 283,803 227,929
Work in process............................................................. 83,355 76,445
Raw materials............................................................... 96,398 82,944
---------- ----------
Total inventories...................................................... 463,556 387,318
Other current assets.................................................................. 46,927 40,313
---------- ----------
Total current assets................................................... 755,287 650,509
Property, plant and equipment, (net of accumulated depreciation of $96,975 and
$85,244, respectively).............................................................. 129,715 121,537
Other assets:
Intangibles and other assets -- net.............................................. 384,372 370,898
---------- ----------
$1,269,374 $1,142,944
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowing under revolving credit facility........................................ $ -- $ 146,960
Borrowing under foreign credit facilities........................................ 21,925 19,185
Current portion of long-term debt................................................ 11,886 49,281
Accounts payable and accrued liabilities......................................... 177,668 224,272
Accrued income taxes............................................................. 465 195
---------- ----------
Total current liabilities.............................................. 211,944 439,893
---------- ----------
Long-term debt........................................................................ 542,918 215,805
Other long-term liabilities........................................................... 11,550 11,532
Stockholders' equity:
Preferred Stock; $.01 par value.................................................. -- --
Common Stock; $.01 par value..................................................... 528 524
Capital in excess of par value................................................... 582,517 575,691
Cumulative translation adjustment................................................ (2,525) (3,307)
Accumulated deficit.............................................................. (42,673) (69,667)
Treasury stock, at cost.......................................................... (17,387) (12,030)
Notes receivable for common stock issued and unearned stock compensation......... (17,498) (15,497)
---------- ----------
Total stockholders' equity............................................. 502,962 475,714
---------- ----------
$1,269,374 $1,142,944
---------- ----------
---------- ----------
</TABLE>
This statement should be read in conjunction with the accompanying
Notes to Consolidated Condensed Financial Statements.
2
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- --------------------
JULY 5, JULY 6, JULY 5, JULY 6,
1997 1996 1997 1996
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues..................................................... $290,204 $222,805 $541,730 $429,285
Cost of goods sold (a)........................................... 190,899 175,568 349,683 309,139
-------- -------- -------- --------
Gross profit..................................................... 99,305 47,237 192,047 120,146
Selling, administrative and general expenses (b)................. 60,480 123,770 113,694 164,331
-------- -------- -------- --------
Income (loss) before interest and income taxes................... 38,825 (76,533) 78,353 (44,185)
Interest expense................................................. 10,702 7,721 20,515 14,916
-------- -------- -------- --------
Income (loss) before provision (benefit) for income taxes........ 28,123 (84,254) 57,838 (59,101)
Provision (benefit) for income taxes............................. 10,968 (28,772) 22,557 (18,837)
-------- -------- -------- --------
Net income (loss)................................................ $ 17,155 $(55,482) $ 35,281 $(40,264)
-------- -------- -------- --------
-------- -------- -------- --------
Net income (loss) per share...................................... $ 0.32 $ (1.03) $ 0.65 $ (0.75)
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares of common stock outstanding.... 54,283 53,890 54,182 53,565
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
- ------------
(a) Includes $26,254,000 of non-recurring items in the three and six month
periods ended July 6, 1996. See Note 2 to Consolidated Condensed Financial
Statements.
(b) Includes $81,262,000 of non-recurring and special items in the three and
six month periods ended July 6, 1996. See Note 2 to Consolidated Condensed
Financial Statements.
This statement should be read in conjunction with the accompanying
Notes to Consolidated Condensed Financial Statements.
3
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------------
JULY 5, JULY 6,
1997 1996
------------ ------------
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<S> <C> <C>
Cash flow from operations:
Net income (loss)............................................................... $ 35,281 $ (40,264)
Non-cash items included in net income (loss):
Depreciation and amortization.............................................. 15,260 13,025
Amortization of unearned stock compensation................................ 1,500 870
Increase in deferred tax assets -- net..................................... -- (18,721)
Non cash portion of non-recurring items.................................... -- 87,069
Income taxes paid............................................................... (3,688) (1,112)
Other changes in operating accounts............................................. (144,161) (120,346)
------------ ------------
Net cash used in operations before non-recurring items............................... (95,808) (79,479)
Payment of accruals related to exiting the Hathaway business, consolidating and
realigning the intimate apparel division and other items....................... (3,462) --
------------ ------------
Net cash used in operations.......................................................... (99,270) (79,479)
Cash flow from investing activities:
Net proceeds from sale of fixed assets.......................................... 437 175
Purchase of property, plant & equipment......................................... (20,309) (12,329)
Payment for purchase of acquired assets and acquisition accruals................ (10,768) (12,500)
Increase in intangible and other assets......................................... (7,073) (12,378)
------------ ------------
Net cash used in investing activities................................................ (37,713) (37,032)
------------ ------------
Cash flow from financing activities:
Borrowing under revolving credit facilities..................................... 164,211 128,371
Net proceeds from the exercise of options and payment of notes receivable from
employees...................................................................... 3,329 1,177
Repayment of debt............................................................... (18,713) (6,923)
Dividends paid.................................................................. (7,805) (7,264)
Purchase of treasury stock...................................................... (5,357) --
Increase in deferred financing costs............................................ (131) (87)
------------ ------------
Net cash provided from financing activities.......................................... 135,534 115,274
------------ ------------
Increase (decrease) in cash.......................................................... (1,449) (1,237)
Cash at beginning of period..................................................... 11,840 6,162
------------ ------------
Cash at end of period........................................................... $ 10,391 $ 4,925
------------ ------------
------------ ------------
Other changes in operating accounts:
Accounts receivable............................................................. (23,375) (21,362)
Inventories..................................................................... (76,238) (29,742)
Other current assets............................................................ (6,614) (10,297)
Accounts payable and accrued liabilities........................................ (43,624) (59,297)
Accrued income taxes............................................................ 3,958 821
Other........................................................................... 1,732 (469)
------------ ------------
$(144,161) $(120,346)
------------ ------------
------------ ------------
</TABLE>
This statement should be read in conjunction with the accompanying
Notes to Consolidated Condensed Financial Statements.
4
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles and
Securities and Exchange Commission rules and regulations for interim financial
information. Accordingly, they do not contain all of the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of the Company, the accompanying consolidated
condensed financial statements contain all the adjustments (all of which were of
a normal recurring nature, except as discussed in Note 2 below) necessary to
present fairly the financial position of the Company as of July 5, 1997 as well
as its results of operations and cash flows for the periods ended July 5, 1997
and July 6, 1996. Operating results for interim periods may not be indicative of
results for the full fiscal year. For further information, refer to the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended January 4, 1997. Certain
amounts for prior periods have been reclassified to be comparable with the
current period presentation.
NOTE 2 -- STRATEGIC ACTIONS IN 1996
The acquisition of the GJM businesses in February, 1996 significantly added
to the Company's low cost manufacturing capacity, and resulted in an immediate
expansion of product lines. The Company subsequently undertook a strategic
review of its businesses and manufacturing facilities. The acquisitions of
Bodyslimmers and Lejaby, later in 1996, were also considered. As a result of
this review, the Company took the following steps (described below) which
resulted in total non-recurring charges in the second quarter of fiscal 1996 as
summarized below (in millions):
<TABLE>
<CAPTION>
SECOND
QUARTER
-------
<S> <C>
Loss related to the sale of the Hathaway business.................................... $ 48.4
Charge for the consolidation and realignment of the intimate apparel division........ 46.4
Other items.......................................................................... 12.7
-------
107.5
Less: Income tax benefits............................................................ 37.7
-------
$ 69.8
-------
-------
</TABLE>
The losses reported in the second quarter of fiscal 1996 above include
inventory markdowns directly attributable to the decision to exit the Hathaway
business and consolidation and realignment of the intimate apparel division.
Accordingly, inventory markdowns, operating losses of Hathaway through July 6,
1996 (resulting from inventory liquidations at markdown prices) and settlement
of insurance claims related to the 1994 California earthquake and other claims
together aggregating $26.3 million are reflected in the Consolidated Condensed
Statement of Operations within cost of goods sold. The remaining $81.3 million,
consisting mainly of the write-down of assets to fair value, severance costs and
other employee costs, is included in selling, administrative and general
expenses. Additional charges totaling approximately $31.0 million, less income
tax benefits of approximately $12.0 million or $19.0 million net were recorded
in the third quarter of 1996. A complete description of the 1996 non-recurring
items is contained in Note 4 to the Consolidated Financial Statements contained
in the Company's Annual Report on Form 10-K for the fiscal year ended January 4,
1997.
NOTE 3 -- STOCK REPURCHASE PROGRAM
During the first half of fiscal 1997, the Company repurchased 162,800
shares of its common stock at a cost of $5.4 million under the repurchase
program. On May 14, 1997, the Company's Board of Directors authorized the
repurchase of 420,000 shares and authorized an additional 2 million share
repurchase. During the second quarter, the Company entered into equity option
arrangements to
5
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
purchase approximately one million shares of stock at an average price of
$33.00. These option arrangements expire between September 1997 and February
1998. At expiration, the Company has the choice of settling these arrangements
in stock, cash, or net shares. The purpose of the option arrangements is to
match cash flow which is generated in the fourth quarter to stock purchases
while locking in current prices.
NOTE 4 -- RESTRICTED STOCK
In May 1997, the Company's Board of Directors authorized the issuance of
122,210 shares of restricted stock to certain employees, including certain
officers and directors of the Company. The restricted shares vest ratably over
four years and will be fully vested in May 2001. The fair market value of the
restricted shares was approximately $3.6 million at the date of grant. The
Company will recognize compensation expense equal to the fair value of the
restricted shares over the vesting period.
NOTE 5 -- AMENDED BANK AGREEMENT
On August 12, 1997 the Company entered into an amended agreement which
extends through the year 2002. Under the terms of the amended agreement, the
Company will have available up to $900 million in a revolving credit facility
and lines of credit replacing the Company's existing $750 million in current
availability. The amended bank agreement has improved terms and conditions
including lowering the Company's borrowing rate and extending maturities.
Accordingly, $344.6 million of borrowings under the existing credit facilities
previously classified as current liabilities are now included in long term debt
in the accompanying July 5, 1997 balance sheet.
NOTE 6 -- NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, 'Earnings per Share,' which
requires the dual presentation of Basic and Diluted Earnings per Share.
Pro-forma Basic and Diluted Earnings per share calculated in accordance with the
standard would have been income of $0.69 and $0.65 respectively, for the six
months ended July 5, 1997 and a (loss) of $(0.79) and $(0.75), respectively, for
the six months ended July 6, 1996. The Company will adopt this standard as of
January 3, 1998 as required. Early adoption is not permitted.
6
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
STATEMENT OF OPERATIONS (SELECTED DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
JULY 5, JULY 6,
1997 1996
------------------ ------------------
(AMOUNTS IN MILLIONS OF DOLLARS)
(UNAUDITED)
<S> <C> <C>
Net revenues...................................................... $290.2 $222.8
Cost of goods sold, as reported................................... 190.9 175.6
Non-recurring items.......................................... -- (26.3)
------- -------
Gross profit before non-recurring items........................... 99.3 73.5
% of net revenues............................................ 34.2% 33.0%
Selling, administrative and general expenses, reported............ 60.5 123.8
Non-recurring items.......................................... -- (81.3)
------- -------
Before Non-recurring items................................... 60.5 42.5
------- -------
Income before interest and income taxes and non-recurring items... 38.8 31.0
% to net revenues............................................ 13.4% 13.9%
Interest expense.................................................. 10.7 7.7
Provision for income taxes........................................ 10.9 8.9
------- -------
Income before non-recurring items(1).............................. 17.2 14.3
Non-recurring items, net of income tax benefits................... -- (69.8)
------- -------
Net income (loss)................................................. $ 17.2 $(55.5)
------- -------
------- -------
<CAPTION>
SIX MONTHS ENDED
-----------------------------
JULY 5, JULY 6,
1997 1996
------- -------
(AMOUNTS IN MILLIONS OF DOLLARS)
(UNAUDITED)
<S> <C> <C>
Net revenues...................................................... $541.7 $429.3
Cost of goods sold, as reported................................... 349.7 309.1
Non-recurring items.......................................... -- (26.3)
------- -------
Gross profit before non-recurring items........................... 192.0 146.4
% of net revenues............................................ 35.5% 34.1%
Selling, administrative and general expenses, reported............ 113.7 164.3
Non-recurring items.......................................... -- (81.3)
------- -------
Before Non-recurring items................................... 113.7 83.1
------- -------
Income before interest and income taxes and non-recurring items... 78.3 63.3
% to net revenues............................................ 14.5% 14.8%
Interest expense.................................................. 20.5 14.9
Provision for income taxes........................................ 22.5 18.9
------- -------
Income before non-recurring items(1).............................. 29.5 35.3
Non-recurring items, net of income tax benefits................... -- (69.8)
------- -------
Net income (loss)................................................. $ 35.3 $(40.3)
------- -------
------- -------
</TABLE>
- ------------
(1) Net income was $0.32 per share and $0.65 per share for the three months and
six months ended July 5, 1997, compared to $0.27 per share and $0.55 per
share for the comparable 1996 periods before non-recurring items.
1996 STRATEGIC ACTIONS (See Note 2 to Consolidated Condensed Financial
Statements)
Following the acquisition of the GJM business in February, 1996 which
significantly added to the Company's low cost manufacturing capacity, in
addition to an immediate expansion of product lines, the Company undertook a
strategic review of its businesses and manufacturing facilities. The
acquisitions of Bodyslimmers and Lejaby later in 1996, were also considered. As
a result of this review, the Company took the following steps which resulted in
total non-recurring charges in the second quarter of fiscal 1996 as summarized
below (in millions):
<TABLE>
<S> <C>
Loss related to the Hathaway business................................................ $ 48.4
Charge for the consolidation and realignment of the intimate apparel division........ 46.4
Other items.......................................................................... 12.7
------
Total charges........................................................................ 107.5
Less: Income tax benefits............................................................ 37.7
------
$ 69.8
------
------
</TABLE>
The total charge of $107.5 million for the second quarter and first six
months of 1996 has been included in cost of goods sold ($26.3) and selling,
administrative and general expenses ($81.3) in the accompanying consolidated
condensed statement of operations but has been separately reflected in the above
table for purposes of more meaningful comparisons.
7
<PAGE>
<PAGE>
In summary, the 1996 non-recurring charges for exiting the Hathaway
business and the Intimate Apparel Division consolidation and realignment and
other items total approximately $69.8 million, after income tax benefits of
$37.7 million, or $1.30 per share for both the second quarter and first six
months of fiscal 1996.
RESULTS OF OPERATIONS
Net revenues in the second quarter of fiscal 1997 were $290.2 million,
30.3% higher than the $222.8 million recorded in the second quarter of fiscal
1996. Net revenues for the six months ended July 5, 1997 were $541.7 million, an
increase of 26.2% over the $429.3 million recorded in the first half of fiscal
1996.
Intimate apparel division net revenues increased 29.4% to $214.0 million
from $165.4 million in the second quarter of fiscal 1996. The increase in net
revenues in the second quarter of fiscal 1997 compared to fiscal 1996 was
generated by a $25.3 million increase related to last year's acquisitions of
Lejaby, GJM and Bodyslimmers, a 28.5% increase in Calvin Klein worldwide
revenues, and a strong 9.4% increase in our Warner's/Olga U.S. business.
International shipments in the second quarter of fiscal 1997, including Calvin
Klein and Lejaby increased 76.9% to $68.3 million or 31.9% of total sales from
$38.6 million or 23.3% of total sales last year reflecting continuing expansion
outside the United States.
Menswear division net revenues increased 37.1% to $62.4 million in the
second quarter of fiscal 1997. The increase is attributable to a 63.7% increase
in Chaps by Ralph Lauren. Net revenues for the six months ended July 5, 1997
increased 24.6% to $109.9 million from $88.2 million in the first six months of
fiscal 1996. The increase for the six months primarily reflects an increase of
53% in Chaps by Ralph Lauren net revenues and 37% for Calvin Klein accessories
net revenues. Excluding the 1996 revenues from the Hathaway dress shirt
operations which were sold in November 1996, Menswear 1997 net revenues
increased by 61.7% for the quarter and 49.5% for the first half.
Gross profit before non-recurring items increased 35.1% to $99.3 million in
the second quarter of fiscal 1997 from $73.5 million in the second quarter of
fiscal 1996. Gross profit as a percentage of net revenues increased 120 basis
points to 34.2% in the second quarter of fiscal 1997 from 33.0% in the second
quarter of fiscal 1996. Gross profit for the first six months of fiscal 1997
increased 31.2% to $192.0 million from $146.4 million in the first six months of
fiscal 1996. Gross profit as a percentage of net revenues increased 140 basis
points to 35.5% for the first six months of fiscal 1997 from 34.1% in 1996. The
increase in gross profit reflects the higher net revenues discussed above, and
the increase in gross profit as a percentage of net revenues for both the
quarter and the six months reflects the favorable mix of higher margin Lejaby
sales, manufacturing efficiencies and the positive impact of discontinuing the
Hathaway brand.
Selling, administrative and general expenses, before non-recurring items,
increased to $60.5 million (20.8% of net revenues) in the second quarter of
fiscal 1997 from the $42.5 million (19.1% of net revenues) recorded in the
second quarter of fiscal 1996. Selling, administrative and general expenses,
before non-recurring items, for the first six months of fiscal 1997 increased to
$113.7 million (21.0% of net revenues) from $83.1 million (19.4% of net
revenues) in fiscal 1996. The increase in selling, administrative and general
expenses in dollars and as a percentage of net revenues is due primarily to the
higher advertising costs to support the Calvin Klein and Marilyn Monroe brands,
and higher amortization of intangible assets.
Interest expense increased $3.0 million in the second quarter of fiscal
1997 to $10.7 million. Interest expense for the six months ended July 5, 1997
increased $5.6 million to $20.5 million from $14.9 million in the first six
months of fiscal 1996. The increase in 1997 interest expense for both the
quarter and six months is due mainly to interest costs attributable to the three
acquisitions completed in 1996.
The provision for income taxes for the second quarter of fiscal 1996 and
for the first six months of fiscal 1996 reflects income tax benefits of $37.7
million related to the exit from the Hathaway business and consolidation and
realignment of the intimate apparel division. The Company's effective tax rate
for all periods presented was 39% before non-recurring items.
Income before non-recurring items for the second quarter of fiscal 1997 was
$17.2 million, an increase of 19.8% from the $14.3 million for the second
quarter of fiscal 1996. Income before non-recurring items for the first six
months of fiscal 1997 increased 19.5% to $35.3 million from $29.5 million
8
<PAGE>
<PAGE>
in the first six months of fiscal 1996. The increase for both the quarter and
six months reflects the higher net revenues and operating income previously
discussed.
CAPITAL RESOURCES AND LIQUIDITY
On May 11, 1995, consistent with the Company's goal of providing increased
shareholder value, the Company declared a quarterly cash dividend of $0.07 per
share. The Company has since declared ten successive quarterly cash dividends.
In fiscal 1997, the Company increased its quarterly cash dividend from $0.07 per
share to $0.08 per share.
The Company's liquidity requirements arise primarily from its debt service
requirements and the funding of the Company's working capital needs, primarily
inventory and accounts receivable. The Company's borrowing requirements are
seasonal, with peak needs generally arising at the end of the second quarter and
during the third quarter of the fiscal year. The Company typically generates
nearly all of its operating cash flow in the fourth quarter of the fiscal year
reflecting third and fourth quarter shipments and the sale of inventory built
during the first half of the fiscal year.
Cash used in operations before the $3.5 million payment of accruals related
to exiting the Hathaway business, consolidating and realigning of the intimate
apparel division and other items was $95.8 million in the first half of fiscal
1997 compared to $79.5 million in the first half of fiscal 1996. The increase in
cash used in operating activities reflects higher working capital usage
primarily due to higher sales and seasonal increases in working capital,
primarily inventory.
Cash used in investing activities was $37.7 million for the first half of
fiscal 1997 compared to $37.0 million in the first half of fiscal 1996. Capital
expenditures were $20.3 million in the first half of fiscal 1997, compared to
$12.3 million in the first half of fiscal 1996. Payment for the purchase of
acquired assets includes $12.5 million related to the purchase of GJM in fiscal
1996 and $10.8 million related to the payment of acquisition accruals, primarily
Lejaby, in fiscal 1997.
Cash provided from financing activities was $135.5 on in the first half of
fiscal 1997 compared to $115.3 million in the first half of fiscal 1996.
Borrowings under the Company's revolving credit agreements, which normally
increase during the first half of the fiscal year were $164.2 million in the
first half of fiscal 1997 compared to $128.4 million in the first half of fiscal
1996. The Company repurchased 162,800 shares of its common stock in the first
half of fiscal 1997 at a total purchase price of approximately $5.4 million. The
Company has purchased 412,800 shares of its common stock at a cost of $12.4
million under the current share repurchase program, or an average cost of
approximately $30 per share.
On August 12, 1997, the Company refinanced existing credit facilities of
$750 million, consisting of the remaining outstanding balance of a $200 million
term loan, a $250 million revolving credit facility, both maturing in 2000, a
$100 million, 364-day revolving credit facility and a $200 million trade credit
facility (the 'Predecessor Facilities') with amended credit facilities totaling
$900 million and consisting of a $600 million revolving credit facility maturing
in 2002 and a $300 million, trade credit facility (the 'Amended Facilities').
The Amended Facilities provide the Company with additional financing to support
the continued strong growth of its business and flexibility for acquisitions and
further share repurchases. The Amended Facilities have improved terms and
conditions compared to the Predecessor Facilities reflecting the Company's
continuing strong operating performance and credit profile, including lower
pricing, fewer restrictive covenants, no debt amortization and increased
flexibility. Accordingly, $344.6 million of borrowings under the Predecessor
Facilities previously classified as current liabililties are now classified as
long term debt in the accompanying July 5, 1997 balance sheet.
The Company believes that funds available under the Amended Facilities and
cash flow to be generated from future operations will be sufficient to meet
working capital and capital expenditure needs of the Company, including
dividends and interest and principal payments on outstanding debt obligations
for the next twelve months and for the next several years.
9
<PAGE>
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
11.1 -- Earnings per share.
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the second quarter of fiscal 1997.
10
<PAGE>
<PAGE>
SIGNATURES
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.
THE WARNACO GROUP, INC.
Date: August 18, 1997 By: /S/ WILLIAM S. FINKELSTEIN
...................................
WILLIAM S. FINKELSTEIN
DIRECTOR, SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER
Date: August 18, 1997 By: /S/ STANLEY P. SILVERSTEIN
...................................
STANLEY P. SILVERSTEIN
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
11
<PAGE>
<PAGE>
THE WARNACO GROUP INC.
CALCULATION OF INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- -----------------------
JULY 5, JULY 6, JULY 5, JULY 6,
1997 1996 1997 1996
-------- --------- -------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net income (loss).................................. $17,155 $(55,482) $35,281 $(40,264)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of shares outstanding
during the period:
Shares outstanding during the period.......... 49,809,312 49,431,416 49,809,312 49,431,416
Restricted shares issued during the period......... 84,607 73,346 42,303 36,673
Shares issued due to exercise of options...... 160,038 84,642 104,079 57,302
Add: common equivalent shares using the
treasury stock method....................... 4,928,891 4,586,720 4,875,854 4,326,089
Less: treasury stock.......................... (699,400) (286,600) (649,308) (286,600)
---------- ---------- ---------- ----------
Weighted average number of shares.................. 54,283,448 53,889,524 54,182,240 53,564,880
---------- ---------- ---------- ----------
Net income (loss) per share........................ $0.32 $(1.03) $0.65 $(0.75)
===== ====== ===== ======
</TABLE>
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jan-3-1998
<PERIOD-END> Jul-5-1997
<CASH> 10,391
<SECURITIES> 0
<RECEIVABLES> 239,144
<ALLOWANCES> 4,731
<INVENTORY> 463,556
<CURRENT-ASSETS> 755,287
<PP&E> 226,690
<DEPRECIATION> 96,975
<TOTAL-ASSETS> 1,269,374
<CURRENT-LIABILITIES> 211,944
<BONDS> 542,918
<COMMON> 528
0
0
<OTHER-SE> 502,434
<TOTAL-LIABILITY-AND-EQUITY> 1,269,374
<SALES> 541,730
<TOTAL-REVENUES> 541,730
<CGS> 349,683
<TOTAL-COSTS> 349,683
<OTHER-EXPENSES> 113,222
<LOSS-PROVISION> 472
<INTEREST-EXPENSE> 20,515
<INCOME-PRETAX> 57,838
<INCOME-TAX> 22,557
<INCOME-CONTINUING> 35,281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,281
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
