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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
December 16, 1999
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Date of Report (Date of earliest event reported)
THE WARNACO GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 1-10857 95-4032739
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(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
90 Park Avenue, New York, New York 10016
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(Address of principal executive offices) (Zip Code)
(212) 661-1300
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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This amended current report on Form 8-K/A is being filed by The Warnaco
Group, Inc., a Delaware corporation ("Warnaco"), amending a current report on
Form 8-K filed January 18, 2000, relating to the merger of A Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary of Warnaco, and Authentic
Fitness Corporation, a Delaware corporation ("Authentic Fitness").
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of Businesses Acquired
The financial statements of Authentic Fitness are hereby incorporated by
reference to the Annual Report of Authentic Fitness on Form 10-K for the year
ended July 3, 1999 and the Quarterly Report of Authentic Fitness on Form 10-Q
for the quarterly period ended October 2, 1999.
(b) Pro Forma Financial Information
The following unaudited pro forma combined financial statements (the
"Unaudited Pro Forma Information") have been derived from the application of pro
forma adjustments to the combined historical financial statements of Warnaco and
Authentic Fitness. The Unaudited Pro Forma Information gives effect to the
Merger as if the Merger had occurred on (a) October 2, 1999 for purposes of the
Unaudited Pro Forma Combined Balance Sheet and (b) January 4, 1998 for purposes
of the Unaudited Pro Forma Combined Statements of Income for the year ended
January 2, 1999 and for the nine months ended October 2, 1999. The Unaudited Pro
Forma Combined Statements of Income combine Warnaco's results for its fiscal
year ended January 2, 1999 with Authentic Fitness' results for the twelve months
ended January 2, 1999 and Warnaco's results for the nine months ended October 2,
1999 with Authentic Fitness' results for the nine months ended October 2, 1999.
The Unaudited Pro Forma Combined Balance Sheet combines Warnaco's and Authentic
Fitness' historical balance sheets as of October 2, 1999 and reflects pro forma
adjustments giving effect to the merger as if it had occurred on that date. The
pro forma adjustments to the Unaudited Pro Forma Financial Information are
described in the accompanying notes thereto. The Unaudited Pro Forma Information
is presented for informational purposes only and does not purport to represent
what the financial position or results of operations for the combined companies
would actually have been had the Merger occurred on the dates specified or to
project the financial position or results of operations for the combined
companies at any future date or for any future periods.
The Unaudited Pro Forma Financial Information, including the notes thereto,
should be read in conjunction with the historical consolidated financial
statements and consolidated condensed financial statements of Warnaco and
Authentic Fitness, including the notes thereto.
The merger is being accounted for using the purchase method of accounting.
The purchase price for the outstanding common stock of Authentic Fitness,
including estimated fees and expenses related to the Merger, has been allocated
to the assets and liabilities of Authentic Fitness based upon Warnaco's
preliminary estimates of the fair value of the assets acquired and the
liabilities assumed and is subject to adjustment. The remaining purchase price
has been allocated to the excess of cost over the fair value of the net assets
acquired ("Goodwill"), which is included in intangible and other assets, net in
the Unaudited Pro Forma Combined Balance Sheet.
The allocation of purchase price is subject to revision when additional
information concerning the asset and liability valuations becomes available.
Accordingly, the final purchase price allocation could be different from the
amounts reflected in the Unaudited Pro Forma Information. Final allocation of
the
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purchase price to intangibles, other then goodwill, and other assets or
liabilities could vary the related amortization period of the excess of cost
over the fair value of the net assets acquired, which is currently expected to
be forty years.
The Unaudited Pro Forma Information gives effect only to the adjustments set
forth in the accompanying notes thereto and does not reflect Warnaco
management's estimated $15 million of anticipated cost savings and other
benefits as a result of the Merger.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE NINE MONTHS ENDED OCTOBER 2, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
AUTHENTIC -----------------------
WARNACO FITNESS DEBIT CREDIT COMBINED
---------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues .......................................... $1,508,452 $ 337,020 $ 13,397 (6) $ $1,832,075
Cost of goods sold .................................... 979,612 204,608 13,397 (6) 1,170,823
Selling, administrative and general expenses .......... 323,839 83,864 6,635 (3) 934 (2) 413,404
---------- ---------- ---------- ---------- ----------
Operating income ...................................... 205,001 48,548 20,032 14,331 247,848
Interest expense ...................................... 56,381 11,360 23,441 (4) 91,889
707 (5)
---------- ---------- ---------- ---------- ----------
Income before income taxes and minority interest ...... 148,620 37,188 44,180 14,331 155,959
Provision for income taxes ............................ 53,503 14,503 9,551 (7) 58,455
---------- ---------- ---------- ---------- ----------
Income before minority interest ....................... 95,117 22,685 44,180 23,882 97,504
Minority interest ..................................... 7 7
---------- ---------- ---------- ---------- ----------
Net income ............................................ $ 95,117 $ 22,692 $ 44,180 $ 23,882 $ 97,511
========== ========== ========== ========== ==========
Basic earnings per common share ....................... $ 1.68 $ 1.13 $ 1.73
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Diluted earnings per common share ..................... $ 1.65 $ 1.10 $ 1.70
========== ========== ==========
Shares used in computing earnings per share:
Basic .............................................. 56,463 20,056 56,463
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Diluted ............................................. 57,497 20,556 57,497
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</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Statements of Income.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME(1)
FOR THE YEAR ENDED JANUARY 2, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
AUTHENTIC ---------------------------
WARNACO FITNESS DEBIT CREDIT COMBINED
---------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net revenues ................................................. $1,950,251 $ 375,521 $ 12,492 (6) $ $2,313,280
Cost of goods sold ........................................... 1,413,036 224,838 12,492 (6) 1,625,382
Selling, administrative and general expenses ................. 451,640 102,065 8,846 (3) 867 (2) 561,684
---------- ---------- ---------- ---------- ----------
Operating income ............................................. 85,575 48,618 21,338 13,359 126,214
Interest expense ............................................. 63,790 13,565 31,255 (4) 109,552
942 (5)
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Income before income taxes and cumulative effect of
change in accounting principle ............................ 21,785 35,053 53,535 13,359 16,662
Provision for income taxes ................................... 7,688 12,573 12,734 (7) 7,527
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Income before cumulative effect of change in
accounting principle ...................................... $ 14,097 $ 22,480 $ 53,535 $ 26,093 $ 9,135
========== ========== ========== ========== ==========
Basic earnings per common share before accounting change ..... $ 0.23 $ 1.04 $ 0.15
========== ========== ==========
Diluted earnings per common share before accounting change ... $ 0.22 $ 1.02 $ 0.14
========== ========== ==========
Shares used in computing earnings per share:
Basic ..................................................... 61,362 21,719 61,362
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Diluted ................................................... 63,005 21,994 63,005
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</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Statements of Income.
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NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME
1. The accompanying Unaudited Pro Forma Combined Statement of Income for the
year ended January 2, 1999 is based upon the historical results of Warnaco
for the fiscal year then ended and the historical results of Authentic
Fitness for the twelve months ended January 2, 1999. The Unaudited Pro Forma
Combined Statement of Income for the nine months ended October 2, 1999 is
based upon the historical results of operations of Warnaco and Authentic
Fitness for the nine months then ended. The Unaudited Pro Forma Combined
Statements of Income have been prepared assuming that the Merger had been
consummated using the purchase method of accounting as of January 4, 1998.
2. Reflects the elimination of historical amortization of Authentic Fitness
related to the excess of cost over the fair value of the net assets acquired
included in the historical Statements of Income of approximately $0.9
million and $0.9 million for the twelve months ended January 2, 1999 and
nine months ended October 2, 1999, respectively.
3. Reflects amortization in the amount of approximately $8.8 million and $6.6
million for the fiscal year ended January 2, 1999 and for the nine months
ended October 2, 1999, respectively, using the straight-line method over
forty years related to the excess of cost over fair value of net assets
acquired and intangible assets of approximately $353.9 million related to
the acquisition of Authentic Fitness by Warnaco.
4. Reflects interest expense on additional financing ($437.1 million) necessary
to complete the Merger of approximately $31.3 million and $23.4 million for
the year ended January 2, 1999 and nine months ended October 2, 1999,
respectively. The funds to consummate the Merger were provided by members of
the Company's bank credit group. The bank loan matures in October 2000 and
bears interest at the Eurodollar rate plus 1% (approximately 7.15% at
January 1, 2000). For each quarter point change in the interest rate on
this variable rate obligation, the impact on net income would be
approximately $1.1 million and $0.8 million for the year ended January 2,
1999 and nine months ended October 2, 1999, respectively. The impact on
fully diluted earnings per share would be $0.02 and $0.01 for the year ended
January 2, 1999 and nine months ended October 2, 1999, respectively.
5. Reflects amortization of deferred financing costs related to additional
financing necessary to complete the Merger of approximately $0.9 million
and $0.7 million for the year ended January 2, 1999 and nine months
ended October 2, 1999, respectively. Deferred financing fees of $4.9
million are amortized over the life of the related debt.
6. Reflects the elimination of intercompany sales.
7. Reflects the income tax effect of pro forma adjustments, excluding
amortization of goodwill, at Warnaco's incremental tax rate of 39.55%.
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET(1)
OCTOBER 2, 1999
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
AUTHENTIC ------------------------
WARNACO FITNESS DEBIT CREDIT COMBINED
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<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash ............................................... $ 13,857 $ 266 $ $ $ 14,123
Accounts receivable - net .......................... 324,379 79,865 4,615 (2) 399,629
Inventories ........................................ 630,305 95,322 6,321 (2) 719,306
Prepaid expenses and other current assets .......... 76,651 11,212 2,048 (2) 92 (2) 89,819
----------- ----------- ----------- ----------- -----------
Total current assets .......................... 1,045,192 186,665 2,048 11,028 1,222,877
Property, plant and equipment - net ..................... 262,245 51,038 2,193 (2) 311,090
Other assets:
Excess of cost over net assets acquired - net ...... 515,264 35,966 365,338 (2) 35,966 (2) 869,213
11,389 (2)
Other assets - net ................................. 363,399 33,848 4,936 (2) 3,152 (2) 399,829
798 (2)
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Total other assets ............................ 878,663 69,814 371,072 50,507 1,269,042
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$ 2,186,100 $ 307,517 $ 373,120 $ 63,728 $ 2,803,009
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowing under revolving credit facility .......... $ -- $ 67,819 $ $ 437,133 (2) $ 504,952
Current portion of long-term debt .................. 123,217 11,661 134,878
Accounts payable ................................... 475,205 61,806 537,011
Accrued liabilities ................................ 104,077 4,434 76 (2) 12,500 (2) 120,935
Deferred income taxes .............................. 38,356 2,325 2,325 (2) 38,356
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Total current liabilities ..................... 740,855 148,045 2,401 449,633 1,336,132
Long-term debt ..................................... 744,237 21,374 765,611
Other long-term liabilities ........................ 28,378 6,218 6,218 (2) 28,378
Minority interest .................................. 258 258
Company-Obligated Mandatorily Redeemable Convertible
Preferred Securities of Designer Finance Trust
Holding Solely Convertible Debentures ........... 102,637 -- 102,637
Stockholders' equity:
Common Stock, $0.01 par value ...................... 655 23 23 (2) 655
Additional paid-in capital ......................... 961,017 163,942 163,942 (2) 961,017
Accumulated other comprehensive income ............. 3,870 (1,175) 1,175 (2) 3,870
Retained earnings (Accumulated deficit) ............ (97,208) 13,153 13,153 (2) (97,208)
Treasury stock, at cost ............................ (285,696) (44,321) 44,321 (2) (285,696)
Unvested stock compensation ........................ (12,645) -- (12,645)
----------- ----------- ----------- ----------- -----------
Total stockholders' equity .................... 569,993 131,622 177,118 45,496 569,993
----------- ----------- ----------- ----------- -----------
$ 2,186,100 $ 307,517 $ 185,737 $ 495,129 $2,803,009
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</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Balance Sheet.
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NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
1. The Unaudited Pro Forma Combined Balance Sheet at October 2, 1999 represents
the historical consolidated balance sheets of Warnaco and Authentic Fitness
at October 2, 1999. The Unaudited Pro Forma Combined Balance Sheet has
been prepared assuming the Merger occurred as of October 2, 1999 using the
purchase accounting method.
2. Reflects the preliminary allocation of the $437.1 million purchase price to
the fair value of the net assets acquired and the liabilities assumed as
summarized below (in millions):
<TABLE>
<S> <C>
Purchase price (all of which was financed) .......... $ 437.1
Net assets acquired ................................. (131.6)
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305.5
Accounts receivable ................................. 4.6 (a)
Inventories ......................................... 6.3 (b)
Prepaid expenses and other current assets ........... 0.1 (c)
Property, plant and equipment ....................... 2.2 (d)
Excess of cost over net assets acquired ............. 36.0 (e)
Other assets ........................................ 3.1 (f)
Accounts payable and accrued liabilities ............ 7.6 (g)
Deferred tax impact ................................. (11.4)(h)
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Excess of cost over net assets acquired....... $ 354.0
=======
</TABLE>
In connection with the financing of the Merger, the Company incurred $4.9
million of deferred financing fees.
(a) represents the write-down of an insurance claim receivable to fair value
based upon Warnaco management's expected collectibilty
(b) represents the adjustment of inventory to conform to Warnaco's method
of inventory costing
(c) represents the write-off of certain prepaid expenses incurred by the
incorporated Authentic Fitness
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NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(d) represents the write-off of fixed assets and leasehold improvements
that were abandoned and taken out of service upon consumation of
the Merger
(e) represents the write-off of historical goodwill of Authentic Fitness
(f) represents the write-off of historical deferred financing fees of
Authentic Fitness
(g) represents estimated merger and direct costs of acquisition consisting
primarily of legal, accounting and other fees of approximately $12.5
million,
(h) represents the deferred tax impact of purchase accounting adjustments at
Warnaco's incremental tax rate of 39.55%.
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2. LIST OF EXHIBITS:
2.1 Consolidated Financial Statements of Authentic Fitness
Corporation (Incorporated herein by reference to Authentic
Fitness' Annual Report on Form 10-K for the fiscal year ended
July 3, 1999 and the Quarterly Report on Form 10-Q for the
quarterly period ended October 2, 1999).
23.1 Consent of Independent Accountants.
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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 hereunto duly authorized on the 29th day of February 2000.
THE WARNACO GROUP, INC.
By: /S/ WILLIAM S. FINKELSTEIN
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William S. Finkelstein
Senior Vice President and
Chief Financial Officer
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EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-51193) of The Warnaco Group, Inc. of our report
dated August 13, 1999 relating to the financial statements of Authentic Fitness
Corporation, which is incorporated by reference in the Current Report on
Form 8-K/A of The Warnaco Group, Inc. dated December 16, 1999.
PricewaterhouseCoopers LLP
Los Angeles, California
February 29, 2000
