<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
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 0-21496
WESTPOINT STEVENS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3498354
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
507 WEST TENTH STREET
WEST POINT, GEORGIA 31833
(Address of principal executive offices, including Zip Code)
(706) 645-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Common shares outstanding at July 29, 1996: 31,345,358 shares of Common Stock,
$.01 par value.
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets:
June 30, 1996 (Unaudited) and
December 31, 1995 3
Condensed Consolidated Statements of
Operations (Unaudited); Three and
Six Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash
Flows (Unaudited); Six Months
Ended June 30, 1996 and 1995 5
Condensed Consolidated Statements of
Stockholders' Equity (Deficit) (Unaudited);
Six Months Ended June 30, 1996 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
2
<PAGE> 3
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents......................................... $ 5,663 $ 7,987
Accounts receivable............................................... 85,780 82,933
Inventories....................................................... 349,546 320,468
Prepaid expenses and other current assets......................... 11,203 19,506
------------ ------------
Total current assets................................................... 452,192 430,894
Property, Plant and Equipment, net..................................... 676,934 684,185
Other Assets
Deferred financing fees........................................... 25,048 26,987
Investments and other assets...................................... 873 902
------------ ------------
$ 1,155,047 $ 1,142,968
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility............................................ $ 101,000 $ 73,000
Accrued interest payable.......................................... 6,015 6,643
Trade accounts payable............................................ 51,246 75,020
Other accounts payable and accrued liabilities.................... 169,464 160,532
------------ ------------
Total current liabilities.............................................. 327,725 315,195
Long-Term Debt......................................................... 1,075,000 1,075,000
Noncurrent Liabilities
Deferred income taxes............................................. 142,493 136,755
Other liabilities................................................. 110,668 121,955
------------ ------------
Total noncurrent liabilities........................................... 253,161 258,710
Stockholders' Equity (Deficit)......................................... (500,839) (505,937)
------------ ------------
$ 1,155,047 $ 1,142,968
============ ============
</TABLE>
See accompanying notes
3
<PAGE> 4
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
----------------------------- -----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales............................................. $ 420,931 $ 396,540 $ 803,978 $ 772,747
Cost of goods sold.................................... 329,446 307,353 623,236 595,554
--------- --------- --------- ---------
Gross earnings................................... 91,485 89,187 180,742 177,193
Selling, general and administrative expenses.......... 51,247 51,231 101,528 102,218
Amortization of excess reorganization value........... - 59,223 - 118,446
--------- --------- --------- ---------
Operating earnings (loss)........................ 40,238 (21,267) 79,214 (43,471)
Interest expense...................................... 25,739 25,563 51,374 50,924
Other expense, net.................................... 660 804 1,350 1,470
--------- --------- --------- ---------
Income (loss) from operations before
income tax expense.......................... 13,839 (47,634) 26,490 (95,865)
Income tax expense.................................... 5,125 4,600 9,800 9,000
--------- --------- --------- ---------
Net income (loss)................................ $ 8,714 $ (52,234) $ 16,690 $(104,865)
========= ========= ========= =========
Net income (loss) per common share.................... $ .27 $ (1.59) $ .52 $ (3.17)
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding.................... $ 31,877 32,833 31,913 33,039
========= ========= ========= =========
</TABLE>
See accompanying notes
4
<PAGE> 5
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................. $ 16,690 $(104,865)
Adjustment to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Amortization of excess reorganization value................... - 118,446
Depreciation and other amortization........................... 40,055 43,544
Deferred income taxes......................................... 6,056 7,425
Changes in working capital.................................... (47,979) (101,125)
Other - net................................................... (9,276) (1,752)
---------- ---------
Net cash provided by (used for) operating activities.................... 5,546 (38,327)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................... (33,163) (32,694)
Net proceeds from sale of assets................................... 316 2,484
---------- ---------
Net cash used for investing activities.................................. (32,847) (30,210)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Senior Credit Facility:
Borrowings.................................................... 276,500 263,000
Repayments.................................................... (248,500) (189,500)
Net proceeds from Trade Receivables Program........................ 10,055 11,654
Purchase of common stock for treasury.............................. (13,971) (18,928)
Proceeds from issuance of stock.................................... 893 2,417
Redemption of purchase rights...................................... - (33)
---------- ---------
Net cash provided by financing activities............................... 24,977 68,610
---------- ---------
Net increase (decrease) in cash and cash equivalents.................... (2,324) 73
Cash and cash equivalents at beginning of period........................ 7,987 1,956
---------- ---------
Cash and cash equivalents at end of period.............................. $ 5,663 $ 2,029
========== =========
</TABLE>
See accompanying notes
5
<PAGE> 6
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK
AND CAPITAL
IN
EXCESS OF TREASURY STOCK
COMMON PAR -------------------- ACCUMULATED
SHARES VALUE SHARES AMOUNTS DEFICIT
-------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995............................... 34,597 $327,850 (2,621) $ (41,051) $(760,733)
Exercise of management stock
options including tax benefit..................... 75 1,093 - - -
Issuance of stock pursuant to Stock
Bonus Plan including tax benefit............... - 16 60 1,270 -
Purchase of treasury shares......................... - - (688) (13,971) -
Net income.......................................... - - - - 16,690
------- -------- ------ --------- ---------
Balance, June 30, 1996................................... 34,672 $328,959 (3,249) $ (53,752) $(744,043)
======= ======== ====== ========= =========
<CAPTION>
MINIMUM
PENSION
LIABILITY
ADJUSTMENT TOTAL
---------- -----------
<S> <C> <C>
Balance, December 31, 1995............................... $ (32,003) $ (505,937)
Exercise of management stock
options including tax benefit..................... - 1,093
Issuance of stock pursuant to Stock
Bonus Plan including tax benefit............... - 1,286
Purchase of treasury shares......................... - (13,971)
Net income..........................................
- 16,690
--------- ----------
Balance, June 30, 1996................................... $ (32,003) $ (500,839)
========= ==========
</TABLE>
See accompanying notes
6
<PAGE> 7
WESTPOINT STEVENS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three and
six month periods ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the annual report on Form 10-K for WestPoint
Stevens Inc. (the "Company") for the year ended December 31, 1995.
2. INVENTORIES
The Company uses the last-in, first-out ("LIFO") method of accounting for
substantially all inventories for financial reporting purposes. Interim
determinations of LIFO inventories are necessarily based on management's
estimates of year- end inventory levels and costs. Subsequent changes in these
estimates, including the final year-end LIFO determination, and the effect of
such changes on earnings are recorded in the interim periods in which they
occur.
Inventories consisted of the following at June 30, 1996 and December 31, 1995
(in thousands of dollars):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ---------------
<S> <C> <C>
Finished goods $168,898 $145,790
Work in progress 128,974 123,878
Raw materials and supplies 73,685 68,138
LIFO reserve (22,011) (17,338)
-------- --------
$349,546 $320,468
======== ========
</TABLE>
7
<PAGE> 8
WESTPOINT STEVENS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS
Indebtedness is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- ----------------
<S> <C> <C>
Short-term indebtedness
Senior Credit Facility
Revolver $ 101,000 $ 73,000
=========== ===========
Long-term indebtedness
Senior Credit Facility
Revolver $ 50,000 $ 50,000
8-3/4% Senior Notes due 2001 400,000 400,000
9-3/8% Senior Subordinated Debentures
due 2005 550,000 550,000
9% Sinking Fund Debentures due 2017 75,000 75,000
----------- -----------
$ 1,075,000 $ 1,075,000
=========== ===========
</TABLE>
At June 30, 1996 and December 31, 1995, $131 million and $121 million,
respectively, of accounts receivable had been sold pursuant to a trade
receivables program (the "Trade Receivables Program") and the sale is reflected
as a reduction of accounts receivable in the accompanying Condensed
Consolidated Balance Sheets.
8
<PAGE> 9
WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations: Three and Six Months Ended June 30, 1996
The table below sets forth net sales, gross earnings, operating earnings
(loss), interest expense and net income (loss) of the Company for the three and
six months ended June 30, 1996 and 1995 (in millions of dollars and as
percentages of net sales).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales:
Home Fashions Division.................. $ 362.5 $ 336.5 $ 690.0 $ 651.2
Alamac Knits Division................... 58.5 60.0 114.0 121.5
------- ------- ------- -------
Total................................... $ 421.0 $ 396.5 $ 804.0 $ 772.7
Gross earnings............................... $ 91.4 $ 89.2 $ 180.7 $ 177.2
Operating earnings (loss).................... $ 40.2 $ (21.3) $ 79.2 $ (43.5)
Interest expense............................. $ 25.8 $ 25.5 $ 51.4 $ 50.9
Net income (loss)............................ $ 8.7 $ (52.2) $ 16.7 $(104.8)
Gross margin................................. 21.7% 22.5% 22.5% 22.9%
Operating earnings before amortization of
excess reorganization value:
Home Fashions Division............ $ 39.0 $ 36.8 $ 76.6 $ 69.8
Alamac Knits Division............. 1.2 1.2 2.6 5.2
------- ------- ------- -------
Total............................. $ 40.2 $ 38.0 $ 79.2 $ 75.0
Operating margins before amortization of
excess reorganization value:
Home Fashions Division............ 10.8% 10.9% 11.1% 10.7%
Alamac Knits Division............. 2.1% 1.9% 2.3% 4.3%
Total............................. 9.6% 9.6% 9.9% 9.7%
</TABLE>
9
<PAGE> 10
WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1996
NET SALES. Net sales for the three months ended June 30, 1996 increased $24.5
million, or 6.2%, to $421 million compared with net sales of $396.5 million for
the three months ended June 30, 1995. Home Fashions Division net sales of
$362.5 million were $26 million, or 7.7%, higher than net sales for the second
quarter of 1995, and resulted primarily from higher unit volume in the 1996
period compared with the 1995 period. Alamac Knits Division net sales of $58.5
million were $1.5 million, or 2.5%, lower than net sales for the second quarter
of 1995, and resulted primarily from lower pricing in the 1996 period compared
with the 1995 period.
GROSS EARNINGS/MARGINS. Gross earnings for the three months ended June 30,
1996 of $91.4 million increased $2.2 million, or 2.6%, compared with $89.2
million for the same period of 1995 and reflect gross margins of 21.7% in the
1996 period compared with 22.5% in the 1995 period. Gross earnings increased
in the second quarter of 1996 primarily as a result of the increase in Home
Fashions Division volume offset somewhat by a wage increase effective at the
beginning of the second quarter, higher raw material costs and lower Alamac
Knits Division pricing compared with the same period last year. 1996 gross
margins decreased slightly compared with last year primarily as a result of the
wage increase and higher raw material costs.
OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses were
unchanged in the second quarter of 1996 compared with the same period last
year, and as a percentage of net sales represent 12.2% in 1996 and 12.9% in
1995. Lower selling and trade receivables program expenses offset higher
warehousing/shipping and administrative expenses in the second quarter of 1996
compared with the same period last year.
Operating earnings were $40.2 million in the second quarter of 1996 compared
with an operating loss of $21.3 million for the second quarter of 1995 which
includes the amortization of excess reorganization value of $59.2 million.
Operating earnings increased as a result of the increase in gross earnings and
the complete amortization of excess reorganization value in 1995 as discussed
herein.
INTEREST EXPENSE. Interest expense for the three months ended June 30, 1996 of
$25.8 million increased $0.3 million compared with interest expense for the
three months ended June 30, 1995. The increase is due primarily to higher
average debt levels in the 1996 second quarter compared with the corresponding
1995 average debt levels offset somewhat by lower interest rates on the
Company's variable rate bank debt.
10
<PAGE> 11
WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1996 (CONTINUED)
OTHER EXPENSE, NET. Other expense, net in the second quarter of 1996 of $0.7
million decreased $0.1 million compared with the 1995 period and consists
primarily of the amortization of deferred financing fees of $0.9 million less
certain miscellaneous income items.
INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to state income taxes, nondeductible items and the
effects of amortization of excess reorganization value in 1995.
NET INCOME. The net income for the second quarter of 1996 was $8.7 million, or
$.27 per share. In the second quarter of 1995, the net loss was $52.2 million,
or $1.59 per share, including amortization of excess reorganization value of
$59.2 million, or $1.80 per share. Excess reorganization value was completely
amortized in 1995.
Per share amounts are based on 31.9 million and 32.8 million average common and
common equivalent shares outstanding for the 1996 and 1995 periods,
respectively. The decrease in the average shares outstanding was primarily the
result of the purchase by the Company of shares under the stock repurchase
programs.
OPERATING EARNINGS BEFORE CERTAIN CHARGES. Operating earnings for the three
months ended June 30, 1996 were $40.2 million, or 9.6% of sales, and increased
$2.2 million, or 6%, compared with operating earnings (before the amortization
of excess reorganization value) of $38 million, or 9.6% of sales, for the same
period of 1995. The increase resulted from the increase in gross earnings
discussed above. Home Fashions Division operating earnings for the second
quarter of 1996 increased 5.9% to $39 million compared with $36.8 million for
the same period of 1995 and reflect operating margins of 10.8% in 1996 and
10.9% in 1995. Alamac Knits Division operating earnings for the second quarter
of 1996 were $1.2 million and were unchanged compared with the second quarter
of 1995.
11
<PAGE> 12
WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: SIX MONTHS ENDED JUNE 30, 1996
NET SALES. Net sales for the six months ended June 30, 1996 increased $31.3
million, or 4%, to $804 million compared with net sales of $772.7 million for
the six months ended June 30, 1995. Home Fashions Division net sales of $690
million were $38.8 million, or 5.9%, higher than net sales for the first six
months of 1995, and resulted primarily from higher unit volume in the 1996
period compared with the 1995 period. Alamac Knits Division net sales of $114
million were $7.5 million, or 6.2%, lower than net sales for the first six
months of 1995, and resulted primarily from lower unit volume and pricing in
the 1996 period compared with the 1995 period.
GROSS EARNINGS/MARGINS. Gross earnings for the six months ended June 30, 1996
of $180.7 million increased $3.5 million, or 2%, compared with $177.2 million
for the same period of 1995 and reflect gross margins of 22.5% in the 1996
period compared with 22.9% in the 1995 period. Gross earnings increased in the
first six months of 1996 primarily as a result of the increase in Home Fashions
Division volume offset somewhat by a wage increase effective the beginning of
the second quarter, higher raw material costs and lower Alamac Knits Division
volume and pricing compared with the same period last year. 1996 gross margins
decreased slightly compared with last year primarily as a result of the wage
increase and higher raw material costs.
OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
decreased $0.7 million, or 0.7%, in the first six months of 1996 compared with
the same period last year, and as a percentage of net sales represent 12.6% in
1996 and 13.2% in 1995. The decrease in the first six months of 1996 is due
primarily to lower selling and trade receivables program expenses offset
somewhat by higher warehousing/shipping and administrative expenses.
Operating earnings were $79.2 million in the first six months of 1996 compared
with an operating loss of $43.5 million for the first six months of 1995 which
includes the amortization of excess reorganization value of $118.4 million.
Operating earnings increased as a result of the increase in gross earnings,
decrease in selling, general and administrative expenses and the complete
amortization of excess reorganization value in 1995 as discussed herein.
INTEREST EXPENSE. Interest expense for the six months ended June 30, 1996 of
$51.4 million increased $0.5 million compared with interest expense for the six
months ended June 30, 1995. The increase is due primarily to higher average
debt levels in the 1996 first six months compared with the corresponding 1995
average debt levels offset somewhat by lower interest rates on the Company's
variable rate bank debt.
12
<PAGE> 13
WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: SIX MONTHS ENDED JUNE 30, 1996 (CONTINUED)
OTHER EXPENSE, NET. Other expense, net in the first six months of 1996 of $1.4
million decreased $0.1 million compared with the 1995 period and consists
primarily of the amortization of deferred financing fees of $1.9 million less
certain miscellaneous income items.
INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to state income taxes, nondeductible items and the
effects of amortization of excess reorganization value in 1995.
NET INCOME. The net income for the first six months of 1996 was $16.7 million,
or $.52 per share. In the first six months of 1995, the net loss was $104.8
million, or $3.17 per share, including amortization of excess reorganization
value of $118.4 million, or $3.58 per share. Excess reorganization value was
completely amortized in 1995.
Per share amounts are based on 31.9 million and 33 million average common and
common equivalent shares outstanding for the 1996 and 1995 periods,
respectively. The decrease in the average shares outstanding was primarily the
result of the purchase by the Company of shares under the stock repurchase
programs.
OPERATING EARNINGS BEFORE CERTAIN CHARGES. Operating earnings for the six
months ended June 30, 1996 were $79.2 million, or 9.9% of sales, and increased
$4.2 million, or 5.7%, compared with operating earnings (before the
amortization of excess reorganization value) of $75 million, or 9.7% of sales,
for the same period of 1995. The increase resulted from the increase in gross
earnings and decrease in selling, general and administrative expenses discussed
above. Home Fashions Division operating earnings for the first six months of
1996 increased 9.8% to $76.6 million compared with $69.8 million for the same
period of 1995 and reflect operating margins of 11.1% in 1996 and 10.7% in
1995. Alamac Knits Division operating earnings for the first six months of
1996 were $2.6 million compared with $5.2 million for the first six months of
1995. The increase in Home Fashions Division operating earnings more than
offset the decrease in Alamac Knits Division operating earnings.
EFFECTS OF INFLATION
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on its sales or profitability.
13
<PAGE> 14
WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are expected to be cash from its
operations and funds available under the Senior Credit Facility. At July 29,
1996, the maximum commitment under the Senior Credit Facility was approximately
$350 million and the Company had unused borrowing availability under the Senior
Credit Facility totaling approximately $185 million. The Senior Credit
Facility contains covenants which, among other things, limit indebtedness and
require the maintenance of certain financial ratios and minimum net worth as
defined.
The Company's principal uses of cash for the next several years will be
operating expenses, capital expenditures and debt service requirements related
primarily to interest payments. The Company spent approximately $102 million
in 1995 on capital expenditures and intends to invest approximately $90
million in 1996.
During the first six months of 1996 the Company purchased approximately 0.7
million shares under the various stock repurchase programs, at an average price
of $20.31 per share. At June 30, 1996, approximately 1.2 million shares
remained to be purchased.
Anticipated cash contributions in 1996 to the Company's pension plans are
estimated to total approximately $21 million compared with actual contributions
in 1995 of $14.4 million, including the effect of the changes in the actuarial
assumptions relating to the Company's pension plans.
The Company, through a "bankruptcy remote" receivables subsidiary, has a Trade
Receivables Program which provides for the sale of accounts receivable, on a
revolving basis. At June 30, 1996 and December 31, 1995, $131 million and
$121 million, respectively, had been sold under this program and the sale is
reflected as a reduction of accounts receivable in the accompanying Condensed
Consolidated Balance Sheets. The cost of the Trade Receivables Program in 1996
is estimated to total approximately $8 million and will be charged to selling,
general and administrative expenses.
Debt service requirements for interest payments in 1996 are estimated to total
approximately $104 million (excluding amounts related to the Trade Receivables
Program) compared with interest payments of $101.2 million in 1995. There are
no debt service requirements in 1996 related to scheduled principal
amortization.
14
<PAGE> 15
WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Upon emergence from bankruptcy on September 16, 1992, the Company experienced
an "ownership change," within the meaning of Section 382 of the Internal
Revenue Code (the "Code"), that resulted in an annual limitation on the
Company's prospective utilization of its net operating loss ("NOL")
carryforwards. Since such ownership change, the Company has experienced
significant transfers of shares of Common Stock by five-percent stockholders
(within the meaning of the Code). As a result, it is possible that future
events (such as the purchase or sale of shares by five-percent stockholders)
may cause the Company to experience a second ownership change. In that event,
the Company's prospective utilization of its NOLs may be further limited.
Management believes that cash from the Company's operations and borrowings
under its credit agreement will provide the funding necessary to meet the
Company's anticipated requirements for capital expenditures and operating
expenses and to enable it to meet its anticipated debt service requirements.
15
<PAGE> 16
WESTPOINT STEVENS INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 12, 1995, the United States District Court, Eastern District of North
Carolina, granted final approval of the settlement of a class action lawsuit
against J. P. Stevens & Co., Inc.("Stevens"). The action involved claims of
racial discrimination in hiring, promotion and placement dating to the late
1960's. West Point - Pepperell, Inc., predecessor to the Company, assumed
liability for this litigation upon its acquisition of Stevens. The settlement
requires payment of $20 million to the class, payable in three equal
installments, plus certain other fees and costs. Payments of the first two
installments have been made; the remaining installment is due January 1, 1997.
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and non-hazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. Certain of the Company's facilities (including certain facilities
no longer owned or utilized by the Company) have been cited or are being
investigated with respect to alleged violations of such laws and regulations.
The Company believes that it has adequately provided in its financial
statements for any expenses and liabilities that may result from such matters.
The Company also is insured with respect to certain of such matters. The
Company's operations are governed by laws and regulations relating to employee
safety and health which, among other things, establish exposure limitations for
cotton dust, formaldehyde, asbestos and noise, and regulate chemical and
ergonomic hazards in the workplace. Although the Company does not expect that
compliance with any such laws and regulations will adversely affect the
Company's operations, there can be no assurance such regulatory requirements
will not become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such requirements.
The Company and its subsidiaries are involved in various other legal
proceedings, both as plaintiff and as defendant, which are normal to its
business.
It is the opinion of management that the aforementioned actions and claims, if
determined adversely to the Company, will not have a material adverse effect on
the financial condition or operations of the Company taken as a whole.
16
<PAGE> 17
WESTPOINT STEVENS INC.
PART II - OTHER INFORMATION (continued)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1996 Annual Meeting of Stockholders was held on May 15, 1996. At
the 1996 Annual Meeting, the following matters were voted upon by the
stockholders:
1. Election of two directors to serve for a term of three years.
2. Approval of the adoption of the Company's 1995 Key Employee Stock
Bonus Plan.
3. Ratification of appointment of Ernst & Young LLP, independent
certified public accountants, as auditors of the Company for fiscal
1996.
The following is a table setting forth the number of votes cast for, against or
withheld, as well as the number of abstentions and broker non votes, as to each
of the above matters:
1. Election of Directors
<TABLE>
<CAPTION>
Authority
Nominee For Withheld
--------------------- ------------------- ------------------
<S> <C> <C>
Gerald B. Mitchell 25,602,049 487,358
Phillip Siegel 25,599,896 489,511
</TABLE>
2. Approval of 1995 Key Employee Stock Bonus Plan
<TABLE>
<CAPTION>
For Against Abstain
------------------- ------------------ -------------------
<S> <C> <C>
24,739,294 941,970 126,517
</TABLE>
3. Appointment of Ernst & Young LLP
<TABLE>
<CAPTION>
For Against Abstain
------------------- ------------------ -------------------
<S> <C> <C>
26,065,927 14,753 8,727
</TABLE>
17
<PAGE> 18
WESTPOINT STEVENS INC.
PART II - OTHER INFORMATION (continued)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------ ------------------------------------------------------------------------------------------------
<S> <C>
10.41 WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan (as amended), incorporated by
reference to the Company's 1996 Proxy Statement (Commission File No. 0-21496) filed by the
Company with the Commission on April 3, 1996
11 Statement re: Computation of earnings per share
27 Financial Data Schedule (for SEC use only)
</TABLE>
b.) No report on Form 8-K was filed by the Company during the quarter ended
June 30, 1996.
18
<PAGE> 19
WESTPOINT STEVENS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 9, 1996 WESTPOINT STEVENS INC.
------------------------
Registrant
/s/ Morgan M. Schuessler
----------------------------------
Morgan M. Schuessler
Executive Vice President-Finance
and Chief Financial Officer
19
<PAGE> 20
WESTPOINT STEVENS INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Number
- ------ ------
<S> <C> <C>
10.41 WestPoint Stevens Inc. 1995 Key Employee Stock
Bonus Plan (as amended), incorporated by reference
To the Company's 1996 Proxy Statement (Commission
File No. 0-21496) filed by the Company with the
Commission on April 3, 1996 -
11 Statement re: Computation of earnings per share 21
27 Financial Data Schedule (for SEC use only) 22
</TABLE>
20
<PAGE> 1
WESTPOINT STEVENS INC.
EXHIBIT (11) - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 31,380 32,833 31,446 33,039
Shares issuable under 1995
Key Employee Stock Bonus Plan 50 - 64 -
Net effect of dilutive stock options
- based on the treasury stock
method using average market price 447 - 403 -
--------- -------- --------- ----------
Total 31,877 32,833 31,913 33,039
========= ======== ========= ==========
Net income (loss) $ 8,714 $(52,234) $ 16,690 $ (104,865)
========= ======== ========= ==========
Per share amount $ .27 $ (1.59) $ .52 $ (3.17)
========= ======== ========= ==========
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WESTPOINT STEVENS INC. FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,663
<SECURITIES> 0
<RECEIVABLES> 109,094
<ALLOWANCES> 23,314
<INVENTORY> 349,546
<CURRENT-ASSETS> 452,192
<PP&E> 976,900
<DEPRECIATION> 299,966
<TOTAL-ASSETS> 1,155,047
<CURRENT-LIABILITIES> 327,725
<BONDS> 1,075,000
0
0
<COMMON> 346
<OTHER-SE> (501,185)
<TOTAL-LIABILITY-AND-EQUITY> 1,155,047
<SALES> 803,978
<TOTAL-REVENUES> 803,978
<CGS> 623,236
<TOTAL-COSTS> 623,236
<OTHER-EXPENSES> 1,350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,374
<INCOME-PRETAX> 26,490
<INCOME-TAX> 9,800
<INCOME-CONTINUING> 16,690
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,690
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
