Exhibit 99.2
CONTACT: Linda J. Wachner Robert D. Siegfried
(212) 370-8205 Kekst and Company
(212) 521-4832
William S. Finkelstein
(212) 370-8287
FOR IMMEDIATE RELEASE
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WARNACO REACHES AGREEMENT WITH LEAD BANKS
FOR REFINANCING TO AUGUST 2002;
IMPLEMENTS STRATEGIC OPERATING INITIATIVES
AND COMMENTS ON OUTLOOK FOR FISCAL 2000
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AGREEMENT WILL EXTEND $500 MILLION TRADE CREDIT FACILITY
AND $600 MILLION BRIDGE LOAN TO AUGUST 2002;
NO MATERIAL DEBT MATURITIES OR AMORTIZATION SCHEDULED FOR 2000
OR 2001 FISCAL YEARS
LEAD BANKS WITH $1.7 BILLION SHARE OF $2.9 BILLION DEBT FACILITIES COMMITTED
TO TRANSACTION; EXPECTED TO CLOSE IN SEPTEMBER 2000
OPERATING INITIATIVES EXPECTED TO ACHIEVE ANNUALIZED COST SAVINGS OF
$42 MILLION PER YEAR;
ANTICIPATES Q2 2000 AFTER-TAX CHARGE OF $60 TO $70 MILLION AND
REVISES 2000 OPERATING EARNINGS GUIDANCE TO
RANGE OF $0.26 TO $0.36 PER DILUTED SHARE BEFORE CHARGES AND INVESTMENT GAINS
NEW YORK, NEW YORK, JULY 20, 2000 --The Warnaco Group, Inc. (NYSE:WAC)
today announced that it has received commitments from its lead banks to
amend and extend up to $2.9 billion of existing financing facilities
through August 12, 2002. The commitments from holders of approximately $1.7
billion of the Company's worldwide debt facilities were received from The
Bank of Nova Scotia, Salomon Smith Barney, Inc., Citibank, N.A., Morgan
Guaranty Trust Company of New York, Commerzbank, A.G. and Societe Generale.
The agreements, which are subject to various closing conditions described
below, are expected to close in September 2000 and will mature not earlier
than August 12, 2002. The Company said that the contractual maturities of
its longer-term debt, including its $450 Million Revolving Credit Facility
due November 17, 2004, are unaffected by the transactions. At June 30,
2000, Warnaco had funded balance sheet debt in its various financing
facilities of approximately $1.4 billion.
When completed, the agreements will extend the maturities through August
12, 2002 of the $500 million Trade Credit and $600 million Bridge Loan
facilities, which presently have contractual maturities in July and October
2000, respectively. Warnaco said that upon satisfaction of the closing
conditions to and completion of the planned transactions, the Company will
have no material debt maturing prior to August 2002. In the interim period,
prior to closing, Warnaco will utilize bilateral trade facilities,
including a supplemental trade credit facility with The Bank of Nova
Scotia, for its normal trade and letter of credit requirements. The amended
financing facilities will be secured by assets owned by Warnaco and its
subsidiaries. Warnaco also said that there are no requirements for
modification of the Company's remaining private or public debt.
The Company said that it anticipates taking an after-tax charge in the
second quarter of 2000 of approximately $60 to $70 million in connection
with the global operating initiatives recently launched. These initiatives
are expected to create cost efficiencies through plant consolidations,
workforce reductions, and consolidation of finance and manufacturing
organizations within the Company. Commenting on the outlook for Warnaco's
2000 fiscal year, the Company said that it expects to report operating
earnings for the 2000 fiscal year, before charges and investment gains, in
the range of $0.26 to $0.36 per diluted share with a commensurate reduction
in anticipated earnings for the second quarter of 2000. The revised outlook
anticipates increased interest expense and the amortization of transaction
fees relating to the new financing agreements when completed, additional
markdowns in connection with further inventory reductions, adverse impacts
on certain Sportswear brands on account of discounted pricing by
competitors, lower sales resulting from negative publicity arising from and
related to the Calvin Klein trademark litigation and costs associated with
such litigation. Warnaco said that it will announce actual results for the
second quarter of 2000 on or about August 4, 2000 as previously scheduled.
On June 26, 2000, in response to litigation commenced by Calvin Klein, Inc.
against Warnaco in May 2000, the Company filed an Answer in federal court
(in New York) which the Company believes demonstrates that the litigation
is without merit. Warnaco also filed a lawsuit on June 26, 2000 against
Calvin Klein, Inc. and Calvin Klein, personally, seeking damages for their
ongoing and intentional failure to live up to their obligations with
respect to Warnaco, which is the co- owner of the Calvin Klein Trademarks.
Warnaco's court papers state that Warnaco is the co- owner of the Calvin
Klein Trademark Trust, the beneficial owner of the Calvin Klein Trademarks
for underwear and sleepwear, and is the licensee until 2044 of the Calvin
Klein Trademarks for jeanswear. The case, including Warnaco's lawsuit
against Calvin Klein and Calvin Klein, Inc., has been set for trial in
federal court on January 16, 2001. The Company said that it would not
comment on pending litigation beyond the pleadings that have been filed in
the cases.
Linda Wachner, chairman and chief executive officer of Warnaco, said, "We
are fully engaged and committed to achieving enhanced financial performance
as quickly as possible. Since 1986, Warnaco has enjoyed continued growth.
We have managed this company over the years to ensure that there is more
than adequate cash flow to support our businesses and this is serving us
well in the difficult business environment affecting the apparel industry
in general. We expect to maintain substantial free cash flow over each of
the next four years. We also expect that the operating initiatives that
have been implemented should result in substantial improvement in operating
earnings in 2001. Our new financing agreements, which reflect the support
of our lead banks, and the operational initiatives that we are announcing
today are a cornerstone for the Company."
Mrs. Wachner emphasized that these initiatives should benefit the Company
and its constituents by:
o creating operating efficiencies through strategic initiatives that the
Company launched in recent weeks including consolidation of nine
distribution centers into three central distribution centers in
Europe; reduction in Warnaco's worldwide employment workforce by
approximately 10%; consolidation of the Authentic Fitness and Warnaco
manufactur ing organizations; centralization of worldwide finance and
manufacturing responsibilities while maintaining sales and marketing
business units in key countries; and consolidation of manufacturing
for Intimate Apparel through the closing of three manufacturing
facilities and one cutting facility;
o creating annualized pre-tax savings estimated at $42 million per year
going forward which will begin to be realized upon completion of the
initiatives in the fourth quarter of 2000; and
o creating a stable capital and operating environment in which the
Company can add meaningful future earnings through its leading market
share, preeminent brands and successful acquisition of Authentic
Fitness.
Warnaco said that the bank commitment letter will be filed on Form 8-K with
the Securities and Exchange Commission. The Company said that the closing
of the new facility agreements are subject to customary financing
conditions, to the completion of bank debt amendments by the holders of the
Company's committed and bilateral financing facilities including approval
of the amendments by the requisite lenders, the execution of appropriate
documentation, the satisfactory completion of confirmatory due diligence by
the bank agents, and the absence of any material adverse change in Warnaco
and its subsidiaries taken as a whole. Warnaco said it also expects to
receive on or prior to July 27, 2000, a limited waiver, through September
30, 2000, of compli ance with financial covenants in certain of its
existing debt facilities.
The Warnaco Group, Inc., headquartered in New York, is a leading
manufacturer of intimate apparel, menswear, jeanswear, swimwear, men's and
women's sportswear, better dresses, fragrances and accessories sold under
such brands as Warner's(R), Olga(R), Fruit of the Loom(R) bras, Van
Raalte(R), Lejaby(R), Weight Watchers(R), Bodyslimmers(R), Izka(R), Chaps
by Ralph Lauren(R), Calvin Klein(R) men's, women's, and children's
underwear, men's accessories, and men's, women's, junior women's and
children's jeans, Speedo(R)/Authentic Fitness(R) men's, women's and
children's swimwear, sportswear and swimwear accessories, Polo by Ralph
Lauren (R) women's and girls' swimwear, Oscar de la Renta(R), Anne Cole
Collection(R), Cole of Califor nia(R) and Catalina(R) swimwear, A.B.S.(R)
Women's sportswear and better dresses and Penhaligon's(R) fragrances and
accessories.
This press release contains forward-looking statements, which are subject
to certain risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the forward-looking
statements. Factors that could cause actual results to differ materially
from those expressed or implied in such forward-looking statements include
the ability of the Company to satisfy the conditions and requirements of
financing commitments accepted by the Company, the effect of worldwide,
regional and country general economic conditions, the overall level of
consumer spending, the performance of the Company's products within the
prevailing retail environment, competitive pricing pressures, consumer
preferences including acceptance of both new designs and newly- introduced
product lines, financial difficulties encountered by customers, inflation,
merchandise supply constraints, interest rate movements and access to
capital. Consequently, all of the forward-looking statements made in this
press release are qualified by these and other factors, risks and
uncertainties. Readers are also directed to consider other risks and
uncertainties discussed in documents filed by the Company with the
Securities and Exchange Commission.
