<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1998
REGISTRATION NO. 333-59817
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WESTPOINT STEVENS INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2200 36-3498354
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
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507 WEST TENTH STREET
WEST POINT, GEORGIA 31833
(706) 645-4000
(Address, including zip code, and telephone number, including area code of
Registrants' principal executive offices)
CHRISTOPHER N. ZODROW, ESQ.
VICE PRESIDENT AND SECRETARY
WESTPOINT STEVENS INC.
507 West Tenth Street
West Point, Georgia 31833
(706) 645-4000
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------
COPIES TO:
HOWARD CHATZINOFF, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, NY 10153-0119
(212) 310-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 4, 1998
PROSPECTUS
$1,000,000,000
OFFER TO EXCHANGE ITS 7 7/8% SENIOR NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING 7 7/8% SENIOR NOTES DUE 2005
AND ITS 7 7/8% SENIOR NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING 7 7/8% SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
-----------------------
WestPoint Stevens Inc., a Delaware corporation (the "Company") hereby offers
(the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange (i) $1,000 principal amount of its 7 7/8%
Senior Notes due 2005 (the "Senior Notes due 2005"), registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this prospectus is a part, for each $1,000
principal amount of its outstanding 7 7/8% Senior Notes due 2005 (the "Old
Senior Notes due 2005"), of which $525,000,000 principal amount is outstanding
and (ii) $1,000 principal amount of its 7 7/8% Senior Notes due 2008 (the
"Senior Notes due 2008" and together with the Senior Notes due 2005, the
"Exchange Securities"), registered under the Securities Act, pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 7 7/8% Senior Notes due 2008 (the "Old
Senior Notes due 2008" and together with the Old Senior Notes due 2005, the "Old
Securities"), of which $475,000,000 principal amount is outstanding,
respectively. The form and terms of the Exchange Securities are the same as the
form and terms of the Old Securities except that (i) the Exchange Securities
will have been registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof and (ii) holders of the Exchange
Securities will not be entitled to certain rights of holders of Old Securities
under the Registration Rights Agreements (as defined). The Old Securities and
the Exchange Securities are referred to herein collectively as the "Securities."
The Exchange Securities will evidence the same debt as the Old Securities (which
they replace) and will be issued under and be entitled to the benefits of the
Indentures that govern the Securities, each dated as of June 9, 1998
(collectively, the "Indentures") by and between the Company and The Bank of New
York, as trustee. See "The Exchange Offer" and "Description of Securities."
The Company will accept for exchange any and all Old Securities validly
tendered and not withdrawn prior to 5:00 p.m., New York City time on
, 1998, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain
customary conditions. See "The Exchange Offer."
The Old Securities were sold by the Company on June 9, 1998 to Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., NationsBanc
Montgomery Securities LLC, BNY Capital Markets, Inc., First Chicago Capital
Markets, Inc. and Scotia Capital Markets (collectively, the "Initial
Purchasers") in a transaction not registered under the Securities Act in
reliance upon an exemption under the Securities Act (the "Initial Offering").
The Initial Purchasers subsequently placed the Old Securities with qualified
institutional buyers in reliance on Rule 144A under the Securities Act and in
offshore transactions to Non-U.S. persons in reliance on Regulation S under the
Securities Act. Accordingly, the Old Securities may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Securities are
being offered hereunder in order to satisfy the obligations of the Company under
the Registration Rights Agreements entered into among the Company and the
Initial Purchasers in connection with the Initial Offering. See "The Exchange
Offer."
The Senior Notes due 2005 will mature on June 15, 2005 and the Senior Notes
due 2008 will mature on June 15, 2008. Interest on the Securities is payable in
cash semiannually in arrears on June 15 and December 15 of each year, commencing
December 15, 1998. The Securities will be redeemable, in whole or in part, at
any time, at the option of the Company at 100% of the principal amount thereof
plus the Make-Whole Premium (as defined) plus accrued and unpaid interest, if
any, to the date of purchase. In the event of a Change of Control Triggering
Event (as defined), the Company will make an offer to purchase the Securities
then outstanding at a purchase price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase. See
"Description of the Securities."
The Securities will rank pari passu in right of payment with all existing
and future unsecured and unsubordinated indebtedness of the Company and senior
in right of payment to all subordinated indebtedness of the Company. The
Securities will rank pari passu in right of payment with each other. As of March
31, 1998, on a pro forma basis for the Refinancing (as defined) and the
application of the proceeds therefrom, the Company would have had $343.8 million
of secured indebtedness outstanding and the claims of holders of the Securities
would have been structurally subordinated to $62.2 million of indebtedness and
other liabilities of the Company's subsidiaries. See "Description of the
Securities."
(Continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
The date of this Prospectus is , 1998
<PAGE> 3
(cover page continued)
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Securities issued pursuant
to the Exchange Offer in exchange for Old Securities may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Securities are acquired in the ordinary course of such holder's
business and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Securities. See "The Exchange
Offer -- Resale of the Exchange Securities." Holders of Old Securities wishing
to accept the Exchange Offer must represent to the Company, as required by the
Registration Rights Agreements, that such conditions have been met. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange
Securities for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange
Securities received in exchange for Old Securities where such Old Securities
were acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer. Holders of Old Securities not
tendered and accepted in the Exchange Offer will continue to hold such Old
Securities and will be entitled to all the rights and benefits and will be
subject to the limitations applicable thereto under the Indentures and with
respect to transfer under the Securities Act. See "The Exchange Offer."
There has not previously been any public market for the Old Securities or
the Exchange Securities. The Company does not intend to list the Exchange
Securities on any securities exchange or to seek approval for quotation through
any automated quotation system. There can be no assurance that an active market
for the Exchange Securities will develop. See "Risk Factors -- Absence of a
Public Market Could Adversely Affect the Value of Exchange Securities."
Moreover, to the extent that Old Securities are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Securities could be adversely affected.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD SECURITIES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE
EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
i
<PAGE> 4
(cover page continued)
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE EXCHANGE SECURITIES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY
FORM. EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM," THE COMPANY
EXPECTS THAT THE EXCHANGE SECURITIES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL
BE REPRESENTED BY A GLOBAL NOTE (AS DEFINED), WHICH WILL BE DEPOSITED WITH, OR
ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME OR
IN THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE
REPRESENTING THE EXCHANGE SECURITIES WILL BE SHOWN ON, AND TRANSFERS THEREOF
WILL BE EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER
THE INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN CERTIFICATED FORM WILL BE
ISSUED IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER LIMITED CIRCUMSTANCES AS SET
FORTH IN THE INDENTURE. SEE "BOOK-ENTRY; DELIVERY AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE SECURITIES ARE NOT TO CONSTRUE THE
CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR
SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE SECURITIES. THE COMPANY
IS NOT MAKING ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE EXCHANGE
SECURITIES REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER
APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS.
------------------------
ii
<PAGE> 5
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED IN THIS PROSPECTUS MAY CONSTITUTE
FORWARD-LOOKING STATEMENTS FOR PURPOSES OF THE SECURITIES ACT AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SUCH FORWARD-LOOKING
STATEMENTS MAY INVOLVE UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL
RESULTS AND PERFORMANCE OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM FUTURE
RESULTS OR PERFORMANCE EXPRESSED OR IMPLIED BY SUCH STATEMENTS. CAUTIONARY
STATEMENTS REGARDING THE RISKS ASSOCIATED WITH SUCH FORWARD-LOOKING STATEMENTS
INCLUDE, WITHOUT LIMITATION, THOSE STATEMENTS INCLUDED UNDER "RISK FACTORS,"
"SUMMARY," "BUSINESS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE HEREIN. SUCH RISKS AND
UNCERTAINTIES MAY BE ATTRIBUTABLE TO IMPORTANT FACTORS WHICH INCLUDE BUT ARE NOT
LIMITED TO THE FOLLOWING: PRODUCT MARGINS MAY VARY FROM THOSE PROJECTED; RAW
MATERIAL PRICES MAY VARY FROM THOSE ASSUMED; ADDITIONAL RESERVES MAY BE REQUIRED
FOR BAD DEBTS, RETURNS, ALLOWANCES, GOVERNMENTAL COMPLIANCE COSTS, OR
LITIGATION; THERE MAY BE CHANGES IN THE PERFORMANCE OF FINANCIAL MARKETS OR
FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES; UNANTICIPATED NATURAL DISASTERS
COULD HAVE A MATERIAL IMPACT UPON RESULTS OF OPERATIONS; THERE MAY BE CHANGES IN
THE GENERAL ECONOMIC CONDITIONS WHICH AFFECT CUSTOMER PAYMENT PRACTICES OR
CONSUMER SPENDING; COMPETITION FOR RETAIL AND WHOLESALE CUSTOMERS, PRICING AND
TRANSPORTATION OF PRODUCTS MAY VARY FROM TIME TO TIME DUE TO SEASONAL VARIATIONS
OR OTHERWISE; CUSTOMER PREFERENCES FOR OTHER COMPANIES' PRODUCTS CAN BE AFFECTED
BY COMPETITION, OR GENERAL MARKET DEMAND FOR DOMESTIC OR IMPORTED GOODS OR THE
QUANTITY, QUALITY, PRICE OR DELIVERY TIME OF SUCH GOODS; THERE COULD BE AN
UNANTICIPATED LOSS OF A MATERIAL CUSTOMER, OR A MATERIAL LICENSE; THE
AVAILABILITY AND PRICE OF RAW MATERIALS COULD BE AFFECTED BY WEATHER, DISEASE,
ENERGY COSTS OR OTHER FACTORS; EFFORTS TO AVOID ADVERSE EFFECTS DUE TO COMPUTER
SYSTEMS FAILING TO FUNCTION PROPERLY WITH RESPECT TO DATES IN THE YEAR 2000 AND
BEYOND COULD MEET WITH VARYING DEGREES OF SUCCESS IN OPERATIONS AND IN
TRANSACTIONS WITH CUSTOMERS, SUPPLIERS AND FINANCIAL INSTITUTIONS; AND THE
ABILITY TO PROJECT RISK FACTORS MAY VARY. IN ADDITION, CONSIDERATION SHOULD BE
GIVEN TO ANY OTHER RISKS AND UNCERTAINTIES DISCUSSED IN OTHER DOCUMENTS FILED BY
THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. SEE "RISK
FACTORS--FORWARD-LOOKING STATEMENTS."
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. THE
COMPANY DOES NOT INTEND TO UPDATE THESE CAUTIONARY STATEMENTS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The reports, proxy statements and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should be available at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048, and 5000
West Madison Street, Suite 1400, Chicago, Illinois 60621 and at the offices of
the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Securities being offered hereby. This Prospectus does not contain all the
information set forth in the Exchange Offer Registration Statement. For further
information with respect to the Company and the Exchange Offer, reference is
made to the Exchange Offer Registration Statement. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to herein are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange Offer
Registration Statement, reference is made to such exhibits for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
iii
<PAGE> 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents (and the amendments thereto) have been filed by the
Company (File No. 0-21496) and are incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1997 (the "Form 10-K");
(ii) The Company's Quarterly Report on Form 10-Q for its fiscal
quarter ended March 31, 1998; and
(iii) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 10 filed with the Commission
pursuant to Section 12 of the Exchange Act on July 1, 1993, and the
Amendment to the Registration Statement on Form 10/A filed on June 2, 1994,
including any other amendment or report filed for the purpose of updating
such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering shall be deemed to be incorporated herein by
reference and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
incorporated herein or in any other subsequently filed document that also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus. Subject
to the foregoing, all information appearing in this Prospectus is qualified in
its entirety by the information appearing in the documents incorporated by
reference herein.
Copies of all documents incorporated by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents), will be provided without charge to each person, including
any beneficial owner to whom a copy of this Prospectus has been delivered upon
the written or oral request of such person. Requests for such copies should be
directed to WestPoint Stevens Inc., 507 West Tenth Street, West Point, Georgia
31833, Attention: Secretary, telephone: (706) 645-4000.
iv
<PAGE> 7
SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus and is qualified by the more detailed information set forth
elsewhere in or incorporated by reference to this Prospectus, which should be
read in its entirety. Unless otherwise indicated, capitalized terms used in this
Prospectus Summary have the respective meanings ascribed to them elsewhere in
this Prospectus. The information contained in this Prospectus contains
forward-looking statements which involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. See
"Cautionary Note Regarding Forward-Looking Statements" on page iii.
THE COMPANY
OVERVIEW
The Company is the nation's leading manufacturer and marketer of bed and
bath home fashions ("Home Fashions") products. Management believes that the
Company is the low-cost producer in the Home Fashions industry in the United
States and that it is able to achieve significantly higher operating margins
than its competitors as a result of its strong consumer marketing programs,
well-known brand names, low-cost production, sophisticated distribution systems
and strong customer relationships.
The Company is the largest producer in the domestic sheet and pillowcase
markets and shares leadership in the domestic bath towel market. The Company has
positioned itself as a single-source supplier to retailers of bed and bath
products, offering a broad assortment of products across multiple price points.
The breadth of the Company's products and price points allows it to provide a
comprehensive product offering for each major distribution channel, including
chain and department stores, mass merchants and specialty bed and bath stores.
The Company's products include decorative sheets and towels, designer sheets and
accessories, institutional sheets and towels, blankets, private label sheets and
towels, bedskirts, bedspreads, comforters, duvet covers, drapes, valances, throw
pillows, shower curtains and table covers in a variety of fabrics and a wide
assortment of colors and patterns.
The Company markets its products under well-known and long-established
trademarks, brand names and private labels, which it uses as merchandising tools
to assist its customers in coordinating their product offerings and
differentiating their products from those of their competitors. The Company, for
example, is one of the major suppliers of the Martha Stewart bed and bath
product collection sold at Kmart stores nationwide. The Company's trademarks
include ATELIER MARTEX(R), MARTEX(R), UTICA(R), STEVENS(R), LADY PEPPERELL(R)
and VELLUX(R). In addition, the Company manufactures and sells certain products
pursuant to licensing agreements under designer names that include, among
others, Ralph Lauren Home Collection, Sanderson, Star Wars, Designers Guild and
Esprit.
BUSINESS STRATEGY
The Company's business strategy is to strengthen its leadership in the Home
Fashions market by increasing brand name awareness, remaining the low-cost
producer in the industry, leveraging technology to provide superior customer
service, developing innovative products, entering into new business lines and
expanding its international presence.
Increasing Brand Name Awareness -- The Company's marketing programs are
increasingly important in creating sales and profit growth. The Company's
overall advertising strategy is to maintain the strong brand image of all of its
lines, while highlighting innovative products and important line extensions. The
Company targets specific market segments through national consumer magazines and
retailer catalogs, and over the past three years has significantly raised its
investment in consumer advertising. The MARTEX(R) campaign, for example,
unveiled in 1995 and entitled "The Bare Necessities," set a new standard for the
industry. This successful campaign generated more than 200 million impressions
via consumer magazines, sharply increased
1
<PAGE> 8
consumer brand recognition of MARTEX(R) and received numerous advertising and
industry awards, including the Gold Medallion award from the American Marketing
Effectiveness Council.
Remaining the Low-Cost Producer -- Over the past five years, the Company
has made approximately $522 million of capital expenditures and intends to
invest an additional $145 million in 1998 to further modernize and expand its
facilities. Management believes that this capital spending program has firmly
established the Company as the industry's low-cost producer, enabling it to
provide quality products at attractive price points. The capital expenditures
have been used to, among other things, replace older looms with wider, faster,
more efficient air jet looms, replace ring spinning with open-end and air jet
spinning, modernize with high speed dyeing, printing and finishing equipment,
and further automate the Company's cut and sew operations. In addition, the
Company's digital rendering technology takes computer assisted design (CAD)
product designs and digitally transforms them, thereby eliminating many steps in
traditional product development, and further converts the product designs into
room settings.
Leveraging Technology to Provide Superior Customer Service -- The Company
is committed to developing and maintaining integral relationships with its
customers through "Strategic Partnering," a program designed to improve
customers' operating results by leveraging the Company's merchandising,
manufacturing and inventory management systems. The Company uses Electronic Data
Interchange ("EDI"), "Quick Response" and "Vendor Managed Inventory"
replenishment programs and point-of-sale data to assist its customers' inventory
management. New systems connect the Company's sales, merchandising,
manufacturing and administrative operations, permitting customers to place
orders and allowing the Company to fill, track and bill orders electronically
with its customers. In addition, the Company employs the latest available retail
warehouse and shelf space management technology to minimize inventory and
maximize floor stock turnover for its customers.
Developing Innovative Products -- The Company is a leader in the industry
in product innovation. The Company, for example, created the wrinkle-free cotton
sheet category, in which it maintains the leading market share. The Company also
created the VELLUX(R) blanket, for which it is the only worldwide supplier, and
was the first domestic manufacturer to supply Jacquard sheeting to the Home
Fashions industry. In addition to offering important growth opportunities,
innovative new products provide value to consumers, increase sales and margins
for retail customers, and enhance profitability for the Company. To consumers
seeking finer fashion products in the luxury category, ATELIER MARTEX(R), the
Company's premium luxury brand, continues to enjoy favorable consumer acceptance
following rapid growth in 1995 and 1996. The innovations from this line, which
include the introduction of unique styling techniques, have now been introduced
in other Company brands and private label programs.
Entering into New Business Lines -- The Company continues to identify new
attractive business lines and has recently expanded its infant bedding and
independent soft window treatment segments. For example, the Company has
recently introduced a BABY MARTEX(TM) line of infant bedding, including sheets,
blankets and bumper pads. The Company anticipates continued growth from these
categories as it applies its product innovation, manufacturing and marketing
expertise.
Expanding its International Presence -- The Company distributes its
products internationally with emphasis on the Canadian and European markets. In
January 1997, the Company acquired P.J. Flower & Co. Limited, a British company
that manufactures, markets and distributes bed and bath linens and related home
furnishings products in Europe. P.J. Flower & Co. Limited, which was recently
renamed WestPoint Stevens (Europe) Limited, has recently added licensed products
to its core offerings, including the Ralph Lauren Home Collection in the Western
European market and Designers Guild in international markets. The Company's
strategy is to increase its penetration of international markets.
The Company is a Delaware corporation with its principal executive offices
located at 507 West Tenth Street, West Point, Georgia 31833. The Company's
telephone number at such address is (706) 645-4000.
2
<PAGE> 9
THE FINANCING TRANSACTIONS
The issuance of the Old Securities was part of a series of financing
transactions (the "Financing Transactions") pursuant to which the Company
intends to reduce interest expense, extend debt maturities and improve financial
flexibility. The components of the Financing Transactions are the consummation
of (i) the issuance of the Old Securities, (ii) the purchase (the "Tender
Offers") of the Company's outstanding 8 3/4% Senior Notes due 2001 (the "8 3/4%
Senior Notes") and the outstanding 9 3/8% Senior Subordinated Debentures due
2005 (the "9 3/8% Senior Subordinated Debentures"), (iii) the redemption (the
"Redemption") of the Company's 9% Sinking Fund Debentures due 2017 and (iv) the
refinancing (the "Refinancing") of the Company's Senior Credit Facility with an
amended and restated $550 million secured revolving Credit Facility (the "Senior
Credit Facility"). The issuance of the Old Securities, the Refinancing and the
Tender Offers were consummated on June 9, 1998. The Redemption was consummated
on July 9, 1998.
3
<PAGE> 10
THE INITIAL OFFERING
The Initial Offering....... The Old Securities were sold by the Company on June
9, 1998 (the "Initial Offering") to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Goldman, Sachs
& Co., NationsBanc Montgomery Securities LLC, BNY
Capital Markets, Inc., First Chicago Capital
Markets, Inc. and Scotia Capital Markets
(collectively, the "Initial Purchasers") pursuant
to a Purchase Agreement dated June 3, 1998 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold all of the Old Securities to
qualified institutional buyers in reliance on Rule
144A under the Securities Act or to Non-U.S.
persons in offshore transactions in reliance on
Regulation S under the Securities Act.
Registration Rights
Agreement................ Pursuant to the Purchase Agreement, the Company and
the Initial Purchasers entered into Registration
Rights Agreements dated as of June 9, 1998 (the
"Registration Rights Agreements"), which grant the
holders of the Old Securities certain exchange and
registration rights. The Exchange Offer is intended
to satisfy such exchange and registration rights
which terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
Securities Offered......... $525,000,000 aggregate principal amount of 7 7/8%
Senior Notes due 2005 of the Company (the "Senior
Notes due 2005") and $475,000,000 aggregate
principal amount of 7 7/8% Senior Notes due 2008 of
the Company (the "Senior Notes due 2008 and
together with the Senior Notes due 2005, the
"Exchange Securities").
The Exchange Offer......... The Company is offering to exchange (i) $1,000
principal amount of Senior Notes due 2005 for each
$1,000 principal amount of Old Senior Notes due
2005 and (ii) $1,000 principal amount of Senior
Notes due 2008 for each $1,000 principal amount of
Old Senior Notes due 2008, that are properly
tendered and accepted. As of the date hereof,
$1,000,000,000 aggregate principal amount of Old
Securities are outstanding. The Company will issue
the Exchange Securities to holders on or promptly
after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Securities issued pursuant to the Exchange Offer in
exchange for Old Securities may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder which is
an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act;
provided, that such Exchange Securities are
acquired in the ordinary course of such holder's
business and that such holder does not intend to
participate and has no arrangement or understanding
with any person to participate in the distribution
of such Exchange Securities.
Any Participating Broker-Dealer that acquired Old
Securities for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives Exchange
Securities for its own account pursuant to the
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale
of such Exchange Securities. The Letter of
4
<PAGE> 11
Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection
with resales of Exchange Securities received in
exchange for Old Securities where such Old
Securities were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The Company
has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for
use in connection with any such resale. See "Plan
of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Securities cannot rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date............ 5:00 p.m., New York City time, on ,
1998 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
Accrued Interest on the
Exchange Securities and
the Old Securities....... Each Exchange Security will bear interest from its
issuance date. Holders of Old Securities that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the
issuance date of the Exchange Securities. Such
interest will be paid with the first interest
payment on the Exchange Securities. Interest on the
Old Securities accepted for exchange will cease to
accrue upon issuance of the Exchange Securities.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Old Securities........... Each holder of Old Securities wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof (or, in the case of a book-entry transfer,
transmit an Agent's Message (as defined) in lieu
thereof), in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile (or Agent's message), together with the
Old Securities and any other required documentation
to the Exchange Agent (as defined) at the address
set forth herein. By executing the Letter of
Transmittal (or transmitting an Agent's Message),
each holder will represent to the Company that,
among other things, the Exchange Securities
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such Exchange Securities, whether
or not such person is the holder, that neither the
holder nor any such other person has any
5
<PAGE> 12
arrangement or understanding with any person to
participate in the distribution of such Exchange
Securities and that neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company. See
"The Exchange Offer -- Purpose and Effect of the
Exchange Offer" and "-- Procedures for Tendering."
Untendered Old
Securities............... Following the consummation of the Exchange Offer,
holders of Old Securities eligible to participate
but who do not tender their Old Securities will not
have any further exchange or registration rights
and such Old Securities will continue to be subject
to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Securities
could be adversely affected. See "Risk
Factors -- Lack of Public Market; Volatility;
Restrictions on Resale."
Consequences of Failure to
Exchange................. The Old Securities that are not exchanged pursuant
to the Exchange Offer will remain restricted
securities. Accordingly, such Old Securities may be
resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange."
Shelf Registration
Statement................ If any holder of the Old Securities (other than any
such holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has satisfied certain conditions relating to
the provision of information to the Company for use
therein, the Company has agreed to register the Old
Securities on a shelf registration statement (the
"Shelf Registration Statement") and to use its best
efforts to cause it to be declared effective by the
Commission as promptly as practical on or after the
consummation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Old Securities held by any such
holders.
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Securities are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering its Old Securities, either make
appropriate arrangements to register ownership of
the Old Securities in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time.
Guaranteed Delivery
Procedures............... Holders of Old Securities who wish to tender their
Old Securities and whose Old Securities are not
immediately available or who cannot deliver their
Old Securities (or comply with the procedures for
book-entry transfer), the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or
6
<PAGE> 13
transmit an Agent's message in lieu thereof) prior
to the Expiration Date must tender their Old
Securities according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old
Securities and Delivery
of Exchange Securities... The Company will accept for exchange any and all
Old Securities which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange
Securities issued pursuant to the Exchange Offer
will be delivered promptly following the Expiration
Date. See "The Exchange Offer -- Terms of the
Exchange Offer."
Certain U.S. Federal Income
Tax Considerations....... For a discussion of material U.S. federal income
tax considerations relating to the exchange of the
Exchange Securities for the Old Securities, see
"Certain U.S. Federal Income Tax Considerations."
Use of Proceeds............ There will be no cash proceeds to the Company from
the issuance of the Exchange Securities pursuant to
the Exchange Offer. See "Use of Proceeds."
Exchange Agent............. The Exchange Agent is The Bank of New York. The
address and telephone and facsimile numbers of the
Exchange Agent are set forth under "The Exchange
Offer -- Exchange Agent" and in the Letter of
Transmittal.
7
<PAGE> 14
SUMMARY OF THE TERMS OF THE SECURITIES
The Exchange Offer applies to the Old Securities. The form and terms of the
Exchange Securities are identical in all material respects to the form and terms
of the Old Securities, except that (i) the Exchange Securities will have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and (ii) holders of the Exchange Securities
will not be entitled to certain rights of holders of Old Securities under the
Registration Rights Agreements, which rights will terminate upon consummation of
the Exchange Offer. The Exchange Securities will evidence the same debt as the
Old Securities (which they replace) and will be issued under and be entitled to
the benefits of the Indenture. For further information and for definitions of
certain capitalized terms used below, see "Description of the Securities."
Securities Offered......... $525,000,000 aggregate principal amount of 7 7/8%
Senior Notes due 2005 and $475,000,000 aggregate
principal amount of 7 7/8% Senior Notes due 2008
(together, the "Securities").
Maturity Date.............. June 15, 2005 and June 15, 2008, respectively.
Interest Payment Dates..... June 15 and December 15, commencing December 15,
1998.
Ranking.................... The Securities will rank pari passu in right of
payment with all existing or future unsecured and
unsubordinated indebtedness of the Company and
senior in right of payment to all subordinated
indebtedness of the Company. The Securities will
rank pari passu in right of payment with each
other. As of March 31, 1998, pro forma for the
Financing Transactions and the application of the
proceeds therefrom, the Company would have had
$343.8 million of secured indebtedness outstanding
and the claims of holders of the Securities would
have been structurally subordinated to $62.2
million of indebtedness and other liabilities of
the Company's subsidiaries. See "Description of the
Securities."
Optional Redemption........ The Securities will be redeemable, in whole or in
part, at any time at the option of the Company at
100% of the principal amount thereof plus the
Make-Whole Premium plus accrued and unpaid
interest, if any, to the date of purchase.
"Description of the Securities -- Optional
Redemption."
Change of Control
Triggering Event......... Following the occurrence of a Change of Control
Triggering Event, the Company will be required to
make an offer to purchase the Securities at a price
equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of
purchase. See "Description of the
Securities -- Change of Control Triggering Event."
Certain Covenants.......... The indentures under which the Securities were
issued (the "Indentures") limit (i) the incurrence
of additional indebtedness by the Company and the
Restricted Subsidiaries, (ii) consolidations,
mergers and transfers of all or substantially all
of the Company's and the Restricted Subsidiaries'
assets, (iii) the ability of the Company and the
Restricted Subsidiaries to incur liens, (iv) the
designation of certain subsidiaries as Unrestricted
Subsidiaries and (v) the entry of the Company and
the Restricted Subsidiaries into certain sale and
leaseback transactions. These covenants are subject
to certain exceptions and qualifications. See
"Description of the Securities."
Each of the Indentures provides that, so long as no
Default has occurred and is continuing after the
Securities have been assigned Investment Grade
Ratings (as defined herein) by any two of the
Ratings Agencies (as defined herein) and
notwithstanding that the Securities may thereafter
cease to be of Investment Grade Ratings, the
Company
8
<PAGE> 15
will be released from its obligations to comply
with certain of the covenants and provisions
described therein. See "Description of the
Securities -- Certain Covenants."
RISK FACTORS
See "Risk Factors" on page 12 for a discussion of certain factors which
should be considered before tendering Old Securities in exchange for Exchange
Securities. The risk factors are generally applicable to the Old Securities as
well as the Exchange Securities.
9
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The summary historical financial data presented below for each year in the
five year period ended December 31, 1997 were derived from the audited
Consolidated Financial Statements of the Company and its subsidiaries, and
should be read in conjunction therewith, including the notes thereto and other
information contained herein. The summary historical financial data presented
below for the three months ended March 31, 1998 and March 31, 1997 were derived
from the Condensed Consolidated Financial Statements (Unaudited) of the Company
and its subsidiaries, and should be read in conjunction therewith, including the
notes thereto and other information contained herein.
The pro forma unaudited interest expense data gives effect to the Financing
Transactions as if such transactions had been consummated on April 1, 1997. The
as adjusted balance sheet as of March 31, 1998 gives effect to the Financing
Transactions as if they occurred on March 31, 1998. The pro forma unaudited
consolidated financial data do not purport to represent what the Company's
actual financial position and results of operations would have been had such
events occurred on the aforementioned dates and should not serve as a forecast
of the Company's financial position and results of operations for any future
periods. The pro forma adjustments are based upon currently available
information and upon certain assumptions that management believes are reasonable
under the circumstances. These pro forma unaudited consolidated financial data
should be read in conjunction with the Company's Consolidated Financial
Statements, Condensed Consolidated Financial Statements and the notes thereto
included elsewhere herein.
The summary financial data should be read in conjunction with "The
Financing Transactions," "Capitalization," "Selected Historical Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993(1)
------------ ------------ ------- ------- ------- ------- -------
(UNAUDITED)
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $ 398.7 $ 357.1 $1,657.5 $1,501.8 $1,418.2 $1,346.9 $1,267.5
Cost of goods sold................... 299.2 267.9 1,237.7 1,129.4 1,059.1 1,015.0 945.9
------------ ------------ ------- ------- ------- ------- -------
Gross earnings....................... 99.5 89.2 419.8 372.4 359.1 331.9 321.6
Selling, general and administrative
expenses........................... 55.1 50.7 204.9 183.9 180.4 175.1 170.7
Restructuring expense................ -- -- -- -- -- -- 178.0
Amortization of excess reorganization
value.............................. -- -- -- -- 152.4 203.3 190.2
------------ ------------ ------- ------- ------- ------- -------
Operating earnings(2)................ 44.4 38.5 214.9 188.5 26.3 (46.5) (217.3)
Interest expense..................... 25.7 23.4 102.2 94.5 93.5 94.2 90.4
Other expense-net.................... 0.4 0.8 2.5 3.0 3.2 13.0 18.2(3)
------------ ------------ ------- ------- ------- ------- -------
Income (loss) from continuing
operations before income tax
expense (benefit) and extraordinary
items.............................. 18.3 14.3 110.2 91.0 (70.4) (153.7) (325.9)
Income tax expense (benefit)......... 6.6 5.3 40.9 33.0 31.9 20.0 (44.1)
------------ ------------ ------- ------- ------- ------- -------
Net income (loss) from continuing
operations before extraordinary
items.............................. $ 11.7 $ 9.0 $ 69.3 $ 58.0 $(102.3) $(173.7) $(281.8)
============ ============ ======= ======= ======= ======= =======
OTHER FINANCIAL DATA:(4)
EBITDA(5)............................ $ 64.8 $ 56.3 $ 286.6 $ 257.4 $ 248.0 $ 231.0 $ 222.1
EBITDA margin(6)..................... 16.2% 15.8% 17.3% 17.1% 17.5% 17.2% 17.5%
Depreciation and other
amortization(7).................... $ 20.4 $ 17.8 $ 71.7 $ 68.9 $ 69.3 $ 74.2 $ 71.2
Capital expenditures(8).............. 19.4 44.8 159.6 95.3 93.5 92.4 80.7
</TABLE>
10
<PAGE> 17
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
MARCH 31,
1998
----------------------------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C>
PRO FORMA FINANCIAL DATA:(4)
EBITDA(5)................................................... $295.1
Interest expense(9)......................................... 98.0
Ratio of earnings to fixed charges(10)...................... 2.1x
Ratio of EBITDA to interest expense......................... 3.0x
Ratio of total debt to EBITDA............................... 4.6x
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------
AS
ACTUAL ADJUSTED
-------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 200.2 $ 248.6
Total assets................................................ 1,316.4 1,321.4
Total debt.................................................. 1,234.0 1,343.8
Total stockholders' equity (deficit)........................ (437.9) (488.5)
</TABLE>
- ---------------
(1) The results for the year ended December 31, 1993 include restructuring
expense of $178.0 million pretax. The charge related to (i) the closing and
consolidation of certain facilities; (ii) the write-off of certain
equipment; and (iii) severance, outplacement and other costs associated
with plant closures and overhead reductions.
(2) Operating earnings (loss) for the year ended December 31, 1995 includes
amortization of excess reorganization value of $152.4 million, for the year
ended December 31, 1994 includes amortization of excess reorganization
value of $203.3 million and for the year ended December 31, 1993 includes
restructuring expense of $178.0 million and amortization of excess
reorganization value of $190.2 million.
(3) Includes minority interest in loss of consolidated subsidiary of $10.5
million.
(4) Includes financial data for continuing operations only, unless otherwise
disclosed.
(5) EBITDA represents operating earnings (loss) plus the sum of depreciation,
amortization of excess reorganization value, goodwill amortization and
restructuring expense. EBITDA and the EBITDA ratios are not measures of
performance or financial condition under generally accepted accounting
principles, but are presented to provide additional information related to
debt service capability. EBITDA should not be considered in isolation or as
a substitute for other measures of financial performance or liquidity under
generally accepted accounting principles.
(6) EBITDA margin represents EBITDA as a percentage of net sales for the
periods presented.
(7) Excludes amortization of excess reorganization value.
(8) Includes (i) continuing operations capital expenditures for the three
months ended March 31, 1998 and 1997 of $19.4 million and $34.4 million,
respectively, and for the years ended December 31, 1997, 1996, 1995, 1994
and 1993 of $148.9 million, $94.9 million, $92.4 million, $84.5 million and
$76.9 million, respectively, (ii) capital expenditures for the Whitmire
facility before its transfer to continuing operations from discontinued
operations, for the three months ended March 31, 1997 of $0.3 million and
for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 of $0.6
million, $0.4 million, $1.1 million, $7.9 million and $3.8 million,
respectively, and (iii) the amount allocated to property, plant and
equipment related to the purchase of towel manufacturing facilities from
the Bibb Company for the three months ended March 31, 1997 and for the year
ended December 31, 1997 of $10.1 million and $10.1 million, respectively.
(9) The pro forma interest expense for the twelve months ended March 31, 1998
reflects a reduction of interest expense of approximately $6.5 million
reflecting the Financing Transactions as if they occurred on April 1, 1997.
The Company's amortization of debt issuance costs, which are included in
other expense -- net will also be reduced approximately $1.3 million
annually after the Financing Transactions are consummated.
(10) For purposes of this ratio, "earnings" consist of earnings before income
taxes and fixed charges, and "fixed charges" consist of interest expense
and the portion of rents representative of an interest factor. The ratio of
earnings to fixed charges is computed by adding earnings before income
taxes and fixed charges and dividing by fixed charges.
11
<PAGE> 18
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, the following factors should be carefully considered before
tendering Old Securities in exchange for Exchange Securities. The risk factors
set forth below are generally applicable to the Old Securities as well as the
Exchange Securities.
SUBSTANTIAL LEVERAGE
The Company is, and after the consummation of the Financing Transactions
will continue to be, highly leveraged. After giving effect to the Financing
Transactions, including the issuance of the Old Securities and the use of
proceeds therefrom, the Company will have total pro forma indebtedness of
approximately $1,343.8 million and a ratio of total pro forma indebtedness to
total pro forma capitalization of 1.6:1 at March 31, 1998 (as if the Financing
Transactions and such use of proceeds had occurred on such date).
The Company currently has incurred, and after the consummation of the
Financing Transactions will continue to incur, significant annual cash interest
expense in connection with its obligations under its long-term indebtedness. On
a pro forma basis, after giving effect to the Financing Transactions, the ratio
of earnings to fixed charges for the three and twelve months ended March 31,
1998 would have been 1.7:1 and 2.1:1, respectively. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The degree to which the Company is leveraged could have important
consequences to holders of the Securities, including, but not limited to, the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes will be restricted; (ii) a significant
portion of the Company's cash flow from operations must be dedicated to the
payment of principal and interest on its indebtedness, thereby reducing the
funds available to the Company for its operations; (iii) certain of the
Company's borrowings are and will continue to be at variable rates of interest,
which could result in higher interest expense in the event of an increase in
interest rates; and (iv) such indebtedness contains financial and restrictive
covenants, the failure to comply with which may result in an event of default
which, if not cured or waived, could have a material adverse effect on the
Company. See "Description of Certain Other Indebtedness."
The degree to which the Company is leveraged could also affect its ability
to compete effectively and could limit its business opportunities. If the
Company's cash flow and capital resources are insufficient to fund its debt
service obligations, the Company may be forced to reduce or delay capital
expenditures, sell assets or seek to obtain additional equity capital or to
refinance or restructure its indebtedness. There can be no assurance that the
Company's cash flow and capital resources will be sufficient for payment of
principal of, and premiums, if any, and interest on its indebtedness in the
future, or that any such alternative measures would be successful or would
permit the Company to meet its debt service obligations.
RESTRICTIVE COVENANTS
The Company's Senior Credit Facility contains a number of covenants that
impose certain operating and financial restrictions on the Company and its
subsidiaries, including, without limitation, limitations on indebtedness, liens,
guarantees and restricted payments. In addition, the Company is required under
its Senior Credit Facility to maintain financial ratios and levels with respect
to a minimum consolidated net worth (as defined in the Senior Credit Facility),
a current ratio and a ratio of EBITDA (as defined in the Senior Credit Facility)
to interest expense. There can be no assurance that the Company will be able to
comply with such covenants or restrictions in the future. The Company's ability
to comply with such covenants and other restrictions may be affected by events
beyond its control, including prevailing economic, financial and industry
conditions. The breach of any such covenant or restriction could result in a
default under the Senior Credit Facility that would permit the lenders
thereunder to declare all amounts outstanding thereunder to be immediately due
and payable, together with accrued and unpaid interest. See "Description of
Certain Other Indebtedness."
12
<PAGE> 19
RANKING; ASSET ENCUMBRANCES
The Securities rank pari passu in right of payment with all existing and
future unsecured and unsubordinated indebtedness and senior in right of payment
to all indebtedness of the Company subordinated to the Securities by their
terms. The Securities rank pari passu in right of payment with each other. As of
March 31, 1998 pro forma for the Financing Transactions, the Company would have
had $343.8 million of secured indebtedness outstanding and the claims of holders
of the Securities would have been structurally subordinated to $62.2 million of
indebtedness and other liabilities of the Company's subsidiaries. Assuming
consummation of the Financing Transactions as of March 31, 1998, the Company's
outstanding borrowings under the Senior Credit Facility would have been
approximately $343.8 million, and the Company would have had approximately
$180.6 million available for borrowing under the revolving credit facility
thereunder. The obligations under the Senior Credit Facility are secured by
substantially all of the assets of the Company. In the event of a bankruptcy,
liquidation or reorganization of the Company or any default in the payment of
any indebtedness under the Senior Credit Facility or other secured indebtedness,
holders of such secured indebtedness will be entitled to payment in full from
the proceeds of all assets of the Company pledged to secure such indebtedness
prior to any payment of such proceeds to holders of Securities. Consequently,
there can be no assurance that the Company will have sufficient funds to make
payments to holders of Securities. See "Description of Certain Other
Indebtedness" and "Description of the Securities."
Direct creditors of a subsidiary of the Company, although not holders of
Senior Indebtedness (as defined) of the Company, will have a direct claim on the
assets of such subsidiary, prior to the claims of holders of the Securities.
Therefore, all existing and future liabilities (if any) of the Company's
subsidiaries will be effectively senior to the Securities. See "Description of
the Securities."
LOSSES AND ACCUMULATED DEFICIT
The Company emerged from bankruptcy in September 1992 and adopted "Fresh
Start" reporting. At March 31, 1998, the Company had an accumulated deficit of
$613.3 million primarily due to the amortization from 1992 to 1995 of excess
reorganization value of $656.4 million after minority interest, the loss on
extinguishment of debt of $80.7 million after income taxes and restructuring
expenses of $117.8 million after minority interest and income taxes in 1993. The
Company has reported net income in each quarter subsequent to the complete
amortization of excess reorganization value in the third quarter of 1995.
SEASONALITY AND CYCLICALITY
Traditionally, the Home Fashions industry has been seasonal, with peak
sales seasons in the summer and fall. In accordance with industry practice, the
Company increases its inventory levels during the first six months of the year
to meet customer demands for the summer and fall peak seasons. The Home Fashions
industry has also traditionally been cyclical, and the Company's performance may
be negatively affected by downturns in consumer spending.
RISK OF LOSS OF MATERIAL CUSTOMER OR LICENSE
The Company's products are sold to mass merchants, chain stores, department
stores, specialty stores and institutional buyers. The Company's six largest
customers accounted for approximately 52% of the net sales of the Company during
the fiscal year ended December 31, 1997. During 1997, sales to Dayton Hudson
Corporation (including its Target Stores and Mervyn's divisions) were 13% and
sales to Kmart Corporation were 10% of the net sales of the Company,
respectively. Although the Company has no reason to believe that it will lose
the business of any of its largest customers, a loss of any of its largest
accounts (or a material portion of any thereof) would have an adverse effect
upon the Company's business, which could be material. A portion of the Company's
sales are derived from licensed designer brands. The license agreements for the
Company's designer brands generally are for a term of two or three years; some
of the licenses are automatically renewable for additional periods, provided
that certain sales thresholds set forth in such license agreements are met. No
single license has accounted for more than 11% of the Company's total sales
volume during any of the past five fiscal years. The loss of a significant
license could have an adverse effect upon the
13
<PAGE> 20
Company's business, which could be material. The following are the expiration
dates for the licensing agreements discussed above: Ralph Lauren Home
Collection, December 31, 2000; Sanderson, March 31, 1999; Star Wars, September
30, 2001 and Esprit, December 31, 2000.
RAW MATERIALS
The principal raw materials used by the Company in the manufacture of its
products are cotton of various grades and staple lengths and polyester in staple
and filament form. Although the Company has been able to acquire sufficient
quantities of cotton for its operations in the past, any shortage in the cotton
supply by reason of weather, disease or other factors, or a significant increase
in the price of cotton, could adversely affect its operations. The price of
man-made fibers such as polyester is influenced by demand, manufacturing
capacity and costs, petroleum prices, cotton prices and the cost of polymers
used in producing man-made fibers. Any significant prolonged petrochemical
shortages could significantly affect the availability of man-made fibers and
cause a substantial increase in demand for cotton, resulting in decreased
availability and, possibly, increased price and could adversely affect the
Company's operations.
COMPETITION
The Home Fashions industry is highly competitive. The Company competes on
the basis of price, quality and customer service, among other factors. In the
sheet and towel markets, the Company competes primarily with Fieldcrest Cannon,
Inc., a wholly-owned subsidiary of Pillowtex Corporation, and Springs
Industries, Inc. In the other bedding and accessories markets, the Company
competes with many companies, some of which are smaller in size than the
Company. The Company does not believe that there is any significant foreign
competition with its current domestic operations. There can be no assurance,
however, that if such foreign competition develops the Company will effectively
compete. The Company's future success will depend to a significant extent upon
its ability to remain the low-cost producer and to remain competitive in the
areas of marketing, product development, price, quality, brand names,
manufacturing capabilities, distribution and order processing. There can be no
assurance that the Company will be able to compete effectively in any of these
areas; any failure to compete effectively could adversely affect its sales and,
accordingly, its operations.
ENVIRONMENTAL AND EMPLOYEE SAFETY AND HEALTH MATTERS
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 has also been named as a potentially responsible party
at several sites under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, and similar state laws which impose strict,
and in certain circumstances joint and several, liability for response costs and
natural resource damages. The Company's operations also 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 of such laws and
regulations will adversely affect its operations, there can be no assurance that
such regulatory requirements will not become more stringent in the future or
that it will not incur significant costs in the future to comply with such
requirements.
PRINCIPAL STOCKHOLDER
As of March 10, 1998, Holcombe T. Green, Jr., the Chairman of the Board and
Chief Executive Officer of the Company, beneficially owned 18,541,498 shares of
Common Stock (constituting approximately 30.2% of the outstanding Common Stock),
including 17,408,306 shares held directly by WPS Investors L.P., of which HTG
Corp., a company owned by Mr. Green, is general partner. As a result of his
beneficial ownership of Common Stock and his positions with the Company, Mr.
Green will continue to be able to have significant influence on the Company and
on matters subject to vote by the Company's stockholders.
14
<PAGE> 21
TRADE RECEIVABLES PROGRAM
Substantially all of the accounts receivable of the Company are transferred
by the Company to the Receivables Subsidiary (as defined) pursuant to the Trade
Receivables Program (as defined). The Receivables Subsidiary then transfers some
or all of the accounts receivable to a trust, which issues certificates
representing beneficial interests in the accounts receivable. Such certificates
are sold to third party investors. The Receivables Subsidiary retains an
interest in the equity of the trust. However, the Trade Receivables Program is
structured in such a manner that the Receivables Subsidiary generally bears all
losses on the accounts receivable prior to any losses being borne by investors
in the Trade Receivables Program. The Company makes certain representations and
warranties to the Receivables Subsidiary and the Receivables Subsidiary makes
certain representations and warranties to the trust, in each case, as to the
nature and characteristics of the accounts receivable being transferred, but no
representations and warranties are made as to the ultimate collectibility of
such accounts receivable. The Company does not otherwise guarantee or insure the
Receivables Subsidiary or the trust against any losses with respect to the
accounts receivable. The Company's accounts receivable generally will not secure
the Senior Credit Facility or be directly available to satisfy the obligations
of the Company until all obligations of the Receivables Subsidiary under any
Trade Receivables Facility (as defined) to which it is a party are satisfied in
full. Thereafter, the Company's accounts receivable will secure the Senior
Credit Facility or may be used to obtain additional financing as permitted by
clause (i) under "Description of the Securities -- Certain
Covenants -- Limitations on Additional Indebtedness." See "Description of
Certain Other Indebtedness."
ABSENCE OF PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE SECURITIES
The Old Securities were issued to, and the Company believes are currently
owned by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Securities. The Old
Securities have not been registered under the Securities Act and will be subject
to restrictions on transferability to the extent that they are not exchanged for
Exchange Securities by holders who are entitled to participate in the Exchange
Offer. The market for Old Securities not tendered for exchange in the Exchange
Offer is likely to be more limited than the existing market for such Securities.
The holders of Old Securities (other than any such holder that is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act) who are
not eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Company is required to file a Shelf Registration
Statement (as defined) with respect to such Old Securities and to use its best
efforts to cause it to be declared effective by the Commission as promptly as
practicable on or after the consummation of the Exchange Offer. The Exchange
Securities will constitute a new issue of securities with no established trading
market. There can be no assurance regarding the future development of a market
for the Exchange Securities, or the ability of holders of the Exchange
Securities to sell their Exchange Securities or the price at which such holders
might be able to sell their Exchange Securities. If such a market were to
develop, the Exchange Securities could trade at prices that may be higher or
lower than their principal amount, depending on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. The Company does not intend to list the Exchange Securities
on any national securities exchange or seek the admission thereof to trading in
the National Association of Securities Dealers Automated Quotation System. The
Initial Purchasers have advised the Company that they currently intend to make a
market in the Exchange Securities, but they are not obligated to do so and may
discontinue such market making at any time. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer and the pendency of
the Shelf Registration Statement. Accordingly, no assurance can be given that an
active public or other market will develop for the Exchange Securities or as to
the liquidity of the trading market for the Exchange Securities. If a trading
market does not develop or is not maintained, holders of Exchange Securities may
experience difficulty in reselling the Exchange Securities or may be unable to
sell them at all. If a market for the Exchange Securities develops, any such
market making may be discontinued at any time.
15
<PAGE> 22
FAILURE TO EXCHANGE OLD SECURITIES
Exchange Securities will be issued in exchange for Old Securities only
after timely receipt by the Exchange Agent of such Old Securities, a properly
completed and duly executed Letter of Transmittal (or Agent's Message) and all
other required documentation. Therefore, holders of Old Securities desiring to
tender such Old Securities in exchange for Exchange Securities should allow
sufficient time to ensure timely delivery. Neither the Exchange Agent nor the
Company is under any duty to give notification of defects or irregularities with
respect to tenders of Old Securities for exchange. Old Securities that are not
tendered or are tendered but not accepted will, following consummation of the
Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, certain
registration rights under the Registration Rights Agreements will terminate. In
addition, any holder of Old Securities who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Securities may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each Participating
Broker-Dealer that receives Exchange Securities for its own account in exchange
for Old Securities, where such Old Securities were acquired by such
Participating Broker-Dealer as a result of market-making activities or any other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. See "Plan of
Distribution." To the extent that Old Securities are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Securities could be adversely affected. See "The Exchange Offer."
RESALES OF NEW SECURITIES
The Company is making the Exchange Offer in reliance upon interpretations
by the staff of the Commission, as set forth in no-action letters issued to
third parties. Based on such interpretations, the Company believes that Exchange
Securities issued pursuant to the Exchange Offer in exchange for Old Securities
may be offered for resale, resold or otherwise transferred by holders thereof
(other than a holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Securities are acquired in the ordinary course of such holder's
business and that such holder, other than a broker-dealer, has no arrangement or
understanding with any person to engage or participate in a distribution of such
Exchange Securities. However, the Company has not sought its own no-action
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the Exchange Offer as in such other
circumstances. Each holder of Old Securities, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage or
participate in, a distribution of the Exchange Securities and has no arrangement
or understanding to engage or participate in a distribution of the Exchange
Securities. If any holder is an affiliate of the Company or is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the Exchange Securities to be acquired pursuant to the Exchange
Offer, such holder (i) may not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Securities for its
own account in exchange for Old Securities pursuant to the Exchange Offer must
acknowledge that such Exchange Securities were acquired by such broker-dealer as
a result of market-making activities or other trading activities and that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Old Securities that were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will make this
Prospectus available to broker-dealers for use in connection with any such
resale. See "The Exchange Offer -- Resales of New Securities."
16
<PAGE> 23
FORWARD-LOOKING STATEMENTS
This Offering Memorandum contains certain forward-looking statements
concerning the Company's existing and contemplated operations, economic
performance and financial condition. These statements are based upon a number of
assumptions and estimates which are inherently subject to uncertainties and
contingencies, many of which are beyond the control of the Company, including
the level of consumer spending for merchandise manufactured by the Company,
competition among department and specialty stores, management's ability to
predict consumer tastes, merchandise brands and mix, the effectiveness of
planned advertising, marketing and promotional campaigns, appropriate inventory
management, realization of planned synergies, private brand sales and effective
cost containment. See "Cautionary Notice Regarding Forward-Looking Statements."
17
<PAGE> 24
THE FINANCING TRANSACTIONS; USE OF PROCEEDS
The issuance of the Old Securities was part of the Financing Transactions
pursuant to which the Company intends to reduce interest expense, extend debt
maturities and improve financial flexibility. The components of the Financing
Transactions are the consummation of (i) the issuance of the Old Securities,
(ii) the Tender Offers, (iii) the Redemption and (iv) the Refinancing.
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreements.
The Company will not receive any cash proceeds from the issuance of the Exchange
Securities offered hereby. In consideration for issuing the Exchange Securities
contemplated in this Prospectus, the Company will receive Old Securities in like
principal amount, the form and terms of which are the same as the forms and
terms of the Exchange Securities (which replace the Old Securities), except as
otherwise described herein. The Old Securities surrendered in exchange for
Exchange Securities will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Securities will not result in any increase
or decrease in the indebtedness of the Company. As such, no effect has been
given to the Exchange Offer in the pro forma statements or capitalization
tables.
The following table illustrates the estimated sources and uses of funds in
the Financing Transactions, assuming consummation of the Financing Transactions
on June 1, 1998. The actual amounts may vary from those shown below.
<TABLE>
<CAPTION>
AMOUNT
------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS
Sale of Old Securities................................. $1,000.0
Borrowings under the Senior Credit Facility............ 364.4
-------
Total............................................. $1,364.4
=======
USES OF FUNDS
Repayment of the existing senior credit facility....... $ 217.4
Tender for the 8 3/4% Senior Notes..................... 400.0
Tender for the 9 3/8% Senior Subordinated Debentures... 550.0
Redemption of the 9% Sinking Fund Debentures........... 71.2
Tender and Redemption premiums......................... 60.4
Accrued interest....................................... 41.7
Transaction fees and expenses.......................... 23.7
-------
Total............................................. $1,364.4
=======
</TABLE>
18
<PAGE> 25
CAPITALIZATION
The following table sets forth the consolidated capitalization and total
indebtedness of the Company as of March 31, 1998 and the as adjusted
consolidated capitalization of the Company as of March 31, 1998, as adjusted to
give effect to the consummation of the Financing Transactions as if they had
occurred in their entirety on such date. The table should be read in conjunction
with the Consolidated Financial Statements and the Condensed Consolidated
Financial Statements of the Company and the notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-----------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
<S> <C> <C>
Short-term indebtedness:
Senior Credit Facility........................ $ 87.7 $ 68.8(1)
Current portion of long-term debt............. 3.8 --(2)
------- -------
Total short-term indebtedness............ 91.5 68.8
------- -------
Long-term indebtedness:
Senior Credit Facility........................ 125.0 275.0(1)(3)
8 3/4% Senior Notes........................... 400.0 --(4)
9 3/8% Senior Subordinated Debentures......... 550.0 --(5)
9% Sinking Fund Debentures.................... 67.5 --(2)
Securities offered hereby..................... -- 1,000.0(6)
------- -------
Total long-term indebtedness............. 1,142.5 1,275.0
------- -------
Total indebtedness................................. $1,234.0 $1,343.8
======= =======
Total stockholders' equity (deficit)............... $(437.9) $(488.5)(7)(8)
======= =======
Total capitalization............................... $ 796.1 $ 855.3
======= =======
</TABLE>
- ---------------
(1) Reflects borrowings under the $550 million Senior Credit Facility that the
Company entered into concurrently with the consummation of the Offering.
(2) Reflects the Redemption.
(3) Reflects the Company's intention that at least $275 million of borrowings
under the $550 million Senior Credit Facility that the Company entered into
concurrently with the consummation of the Offering would remain outstanding
during the next twelve months.
(4) Reflects the retirement of all of the outstanding 8 3/4% Senior Notes
pursuant to the Tender Offers. At June 9, 1998, the holders of approximately
96% of the 8 3/4% Senior Notes had tendered their notes and consents.
(5) Reflects the retirement of all of the outstanding 9 3/8% Senior Subordinated
Debentures pursuant to the Tender Offers. At June 9, 1998, the holders of
approximately 96% of the 9 3/8% Senior Subordinated Debentures had tendered
their notes and consents.
(6) Reflects the issuance of the Securities prior to the Initial Purchasers'
discount.
(7) Reflects the extraordinary loss incurred as a result of the repayment of the
existing senior credit facility, the retirement of the 8 3/4% Senior Notes
and the 9 3/8% Senior Subordinated Debentures and the redemption of the 9%
Sinking Fund Debentures.
(8) For the period from April 1, 1998 through June 2, 1998, the Company
repurchased 701,500 shares of its common stock at an approximate value of
$22,667,000.
19
<PAGE> 26
PRO FORMA UNAUDITED FINANCIAL DATA
The following pro forma unaudited consolidated financial statements present
the Company's pro forma condensed consolidated balance sheet as of March 31,
1998 and the Company's pro forma condensed consolidated statements of income for
the year ended December 31, 1997 and for the three months ended March 31, 1998
giving effect to (1)(a) the sale of $525 million aggregate principal amount of
Senior Notes due 2005, (b) the sale of $475 million aggregate principal amount
of Senior Notes due 2008, (c) the incurrence of revolving borrowings under the
Senior Credit Facility, (d) the application of the proceeds from (a), (b) and
(c) to (i) repayment of existing bank debt and other long-term debt and (ii)
payment of related transaction fees and expenses, (2) the write-off of certain
unamortized deferred financing fees, (3) the repayment of debt with the proceeds
from the sale of Alamac and (4) the income tax effects of the preceding
transactions, all as if they had occurred, for purposes of the pro forma
unaudited condensed consolidated balance sheet, as of March 31, 1998 and, for
purposes of the pro forma unaudited condensed consolidated statements of income,
as of the beginning of the respective periods presented.
These pro forma unaudited consolidated statements of income do not purport
to represent what the Company's actual results of operations would have been had
such events occurred on the aforementioned dates and should not serve as a
forecast of the Company's results of operations for any future periods.
The pro forma adjustments are based upon currently available information
and upon certain assumptions that management believes are reasonable under the
circumstances. These pro forma unaudited consolidated financial statements
should be read in conjunction with the Company's Consolidated Financial
Statements, Condensed Consolidated Financial Statements and the Notes thereto
included elsewhere herein.
20
<PAGE> 27
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1998
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......................... $ 9,873 $ 1,343,789(1) $ 9,873
(1,343,789)(2)
Accounts Receivable................................ 102,239 102,239
Inventories........................................ 376,325 376,325
Prepaid expenses and other current assets.......... 19,337 19,337
---------- ----------- ----------
Total current assets................................. 507,774 -- 507,774
Property, Plant and Equipment, net................... 705,743 705,743
Other Assets
Deferred financing fees............................ 18,262 22,745(2) 23,262
(17,745)(3)
Prepaid pension and other assets................... 47,645 47,645
Goodwill........................................... 36,988 36,988
---------- ----------- ----------
$1,316,412 $ 5,000 $1,321,412
========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility............................. $ 87,714 $ (87,714)(2) $ --
Current portion of long-term debt.................. 3,750 (3,750)(2) --
New Senior Credit Facility......................... 68,789(1) 68,789
Accrued interest payable........................... 25,734 (25,734)(2) --
Trade accounts payable............................. 58,970 58,970
Other accounts payable and accrued liabilities..... 131,373 131,373
---------- ----------- ----------
Total current liabilities............................ 307,541 (48,409) 259,132
Long-Term Debt....................................... 1,142,500 (1,142,500)(2) --
Senior Notes:
Due 2005........................................... 525,000(1) 525,000
Due 2008........................................... 475,000(1) 475,000
New Senior Credit Facility........................... 275,000(1) 275,000
Noncurrent Liabilities
Deferred income taxes.............................. 222,318 (22,085)(2) 193,845
(6,388)(3)
Other liabilities.................................. 81,971 81,971
---------- ----------- ----------
Total noncurrent liabilities......................... 304,289 (28,473) 275,816
Stockholders' Equity (Deficit)....................... (437,918) (39,261)(2) (488,536)
(11,357)(3)
---------- ----------- ----------
(50,618)
-----------
$1,316,412 $ 5,000 $1,321,412
========== =========== ==========
</TABLE>
21
<PAGE> 28
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(1) To record proceeds from the Financing Transactions consisting of (a)
borrowings under the Senior Credit Facility and (b) $525 million from the
sale of the Senior Notes due 2005 and $475 million from the sale of the
Senior Notes due 2008. The pro forma adjustment to record the proceeds is
summarized as follows (in thousands of dollars):
<TABLE>
<S> <C> <C>
Cash................................................. $1,343,789
New Senior Credit Facility........................... $343,789
Senior Notes due 2005................................ 525,000
Senior Notes due 2008................................ 475,000
</TABLE>
(2) Proceeds from the Financing Transactions are used to (a) retire existing
debt of $1,234 million and accrued interest payable of $25.7 million and (b)
pay costs of the Financing Transactions -- tender and call premiums of $61.4
million and discount and expenses of $22.7 million. Costs of the tender and
call premiums of $61.4 million are expensed net of applicable income tax
benefits of $22.1 million.
<TABLE>
<S> <C> <C>
Cash................................................ $1,343,789
Other assets........................................ $ 22,745
Accrued interest payable............................ 25,734
Indebtedness:
Current........................................... 91,464
Long-term......................................... 1,142,500
Deferred income taxes............................... 22,085
Retained earnings (deficit)......................... 39,261
</TABLE>
(3) To write off unamortized deferred debt fees on existing indebtedness of
$17.7 million less related income tax benefits of $6.4 million.
22
<PAGE> 29
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C>
Net sales.............................................. $1,657,511 $1,657,511
Cost of goods sold..................................... 1,237,657 1,237,657
---------- ----------
Gross earnings....................................... 419,854 419,854
Selling, general and administrative expenses........... 204,981 204,981
---------- ----------
Operating earnings................................... 214,873 214,873
Interest expense....................................... 102,172 $(4,760)(1) 97,412
Other expense -- net................................... 2,461 (1,292)(2) 1,169
---------- ------- ----------
Income from continuing operations before income tax
expense........................................... 110,240 6,052 116,292
Income tax expense..................................... 40,962 2,239(3) 43,221
---------- ------- ----------
Income from continuing operations.................... $ 69,258 $ 3,813 $ 73,071
========== ======= ==========
Basic net income per share............................. $ 1.14 $ 1.20
========== ==========
Diluted net income per share........................... $ 1.11 $ 1.17
========== ==========
Basic average common shares outstanding................ 61,078 61,078
Dilutive effect of stock options and stock bonus
plan.............................................. 1,576 1,576
---------- ----------
Diluted average common shares outstanding.............. 62,654 62,654
========== ==========
</TABLE>
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------ ----------- ---------
<S> <C> <C> <C>
Net sales............................................. $398,706 $398,706
Cost of goods sold.................................... 299,185 299,185
-------- --------
Gross earnings...................................... 99,521 99,521
Selling, general and administrative expenses.......... 55,088 55,088
-------- --------
Operating earnings.................................. 44,433 44,433
Interest expense...................................... 25,704 $(1,469)(1) 24,235
Other expense -- net.................................. 401 (322)(2) 79
-------- ------- --------
Income before income tax expense.................... 18,328 1,791 20,119
Income tax expense.................................... 6,625 645(3) 7,270
-------- ------- --------
Net income.......................................... $ 11,703 $ 1,146 $ 12,849
======== ======= ========
Basic net income per share............................ $ .20 $ .22
======== ========
Diluted net income per share.......................... $ .19 $ .21
======== ========
Basic average common shares outstanding............... 58,919 58,919
Dilutive effect of stock options and stock bonus
plan............................................. 1,991 1,991
-------- --------
Diluted average common shares outstanding............. 60,910 60,910
======== ========
</TABLE>
23
<PAGE> 30
NOTES TO THE CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
(1) To adjust interest expense as follows (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
INTEREST RATE DECEMBER 31, 1997 MARCH 31, 1998
------------- ----------------- ------------------
<S> <C> <C> <C>
Senior Credit Facility:
Revolver............................... 6.5% $16,635 $ 4,921
Facility Fee........................... .25% 1,375 329
Senior Notes due 2005.................... 7.875% 41,344 9,882
Senior Notes due 2008.................... 7.875% 37,406 8,941
Amortization of Original Issue
Discount............................... 652 162
------- -------
$97,412 $24,235
======= =======
</TABLE>
Pro forma interest expense has been calculated based on the Company's
average month-end debt balances for the year ended December 31, 1997 and
for the three months ended March 31, 1998, adjusted as of the beginning of
such period for the Financing Transactions and the proceeds from the sale
of Alamac. Based on this computation, the average amount outstanding under
the Revolver for the year ended December 31, 1997 was $255.9 million and
for the three months ended March 31, 1998 was $316.8 million.
(2) For the year ended December 31, 1997, to reduce other expense -- net for the
$3.4 million amortization of deferred financing fees and to include
amortization of deferred financing fees of $2.1 million related to the
Financing Transactions. For the three months ended March 31, 1998, to reduce
other expense -- net for the $0.8 million amortization of deferred financing
fees and to include amortization of deferred financing fees of $0.5 million
related to the Financing Transactions.
(3) To adjust income tax expense for the tax effect of pro forma adjustments.
24
<PAGE> 31
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical financial data presented below for each year in the
five year period ended December 31, 1997 were derived from the audited
Consolidated Financial Statements of the Company and its subsidiaries, and
should be read in conjunction therewith, including the notes thereto and other
information contained herein. The selected historical financial data presented
below for the three months ended March 31, 1998 and March 31, 1997 were derived
from the Condensed Consolidated Financial Statements (Unaudited) of the Company
and its subsidiaries, and should be read in conjunction therewith, including the
notes thereto and other information contained herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993(1)
---- ---- ---- ---- ---- ---- -------
(UNAUDITED)
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 398.7 $ 357.1 $1,657.5 $1,501.8 $1,418.2 $1,346.9 $1,267.5
Cost of goods sold.............. 299.2 267.9 1,237.7 1,129.4 1,059.1 1,015.0 945.9
------- ------- ------- ------- ------- ------- -------
Gross earnings.................. 99.5 89.2 419.8 372.4 359.1 331.9 321.6
Selling, general and
administrative expenses....... 55.1 50.7 204.9 183.9 180.4 175.1 170.7
Restructuring expense........... -- -- -- -- -- -- 178.0
Amortization of excess
reorganization value.......... -- -- -- -- 152.4 203.3 190.2
------- ------- ------- ------- ------- ------- -------
Operating earnings(2)........... 44.4 38.5 214.9 188.5 26.3 (46.5) (217.3)
Interest expense................ 25.7 23.4 102.2 94.5 93.5 94.2 90.4
Other expense -- net............ 0.4 0.8 2.5 3.0 3.2 13.0 18.2(3)
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations before income tax
expense (benefit) and
extraordinary items........... 18.3 14.3 110.2 91.0 (70.4) (153.7) (325.9)
Income tax expense (benefit).... 6.6 5.3 40.9 33.0 31.9 20.0 (44.1)
------- ------- ------- ------- ------- ------- -------
Net income (loss) from
continuing operations before
extraordinary items........... $ 11.7 $ 9.0 $ 69.3 $ 58.0 $(102.3) $(173.7) $(281.8)
======= ======= ======= ======= ======= ======= =======
OTHER FINANCIAL DATA:(4)
EBITDA(5)....................... $ 64.8 $ 56.3 $ 286.6 $ 257.4 $ 248.0 $ 231.0 $ 222.1
EBITDA margin(6)................ 16.2% 15.8% 17.3% 17.1% 17.5% 17.2% 17.5%
Depreciation and other
amortization(7)............... $ 20.4 $ 17.8 $ 71.7 $ 68.9 $ 69.3 $ 74.2 $ 71.2
Capital expenditures(8)......... 19.4 44.8 159.6 95.3 93.5 92.4 80.7
Ratio of EBITDA to interest
expense....................... 2.5x 2.4x 2.8x 2.7x 2.7x 2.5x 2.5x
Ratio of total debt to EBITDA... -- -- 4.1x 4.3x 4.6x 4.7x 5.0x
Ratio of earnings to fixed
charges(9).................... 1.6x 1.5x 2.0x 1.8x 0.4x -- --
Deficiency in earnings available
to cover fixed charges........ -- -- -- -- $ 70.4 $ 153.7 $ 325.9
BALANCE SHEET DATA:
Working capital................. $ 200.2 $ 82.2 $ 212.2 $ 140.9 $ 115.7 $ 122.7 $ 159.7
Total assets.................... 1,316.4 1,306.8 1,286.1 1,157.0 1,143.0 1,270.2 1,512.9
Total debt...................... 1,234.0 1,231.0 1,187.7 1,099.0 1,148.0 1,083.0 1,112.5
Total stockholders' equity
(deficit)..................... (437.9) (435.7) (423.0) (450.4) (505.9) (337.2) (140.3)
</TABLE>
25
<PAGE> 32
- ---------------
(1) The results for the year ended December 31, 1993 include restructuring
expense of $178.0 million pretax. The charge related to (i) the closing and
consolidation of certain facilities; (ii) the write-off of certain
equipment; and (iii) severance, outplacement and other costs associated
with plant closures and overhead reductions.
(2) Operating earnings (loss) for the year ended December 31, 1995 includes
amortization of excess reorganization value of $152.4 million, for the year
ended December 31, 1994 includes amortization of excess reorganization
value of $203.3 million and for the year ended December 31, 1993 includes
restructuring expense of $178 million and amortization of excess
reorganization value of $190.2 million.
(3) Includes minority interest in loss of consolidated subsidiary of $10.5
million.
(4) Includes financial data for continuing operations only, unless otherwise
disclosed.
(5) EBITDA represents operating earnings (loss) plus the sum of depreciation,
amortization of excess reorganization value, goodwill amortization and
restructuring expense. EBITDA and the EBITDA ratios are not measures of
performance or financial condition under generally accepted accounting
principles, but are presented to provide additional information related to
debt service capability. EBITDA should not be considered in isolation or as
a substitute for other measures of financial performance or liquidity under
generally accepted accounting principles.
(6) EBITDA margin represents EBITDA as a percentage of net sales for the
periods presented.
(7) Excludes amortization of excess reorganization value.
(8) Includes (i) continuing operations capital expenditures for the three
months ended March 31, 1998 and 1997 of $19.4 million and $34.4 million,
respectively, and for the years ended December 31, 1997, 1996, 1995, 1994
and 1993 of $148.9 million, $94.9 million, $92.4 million, $84.5 million and
$76.9 million, respectively, (ii) capital expenditures for the Whitmire
facility before its transfer to continuing operations from discontinued
operations, for the three months ended March 31, 1997 of $0.3 million and
for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 of $0.6
million, $0.4 million, $1.1 million, $7.9 million and $3.8 million,
respectively, and (iii) the amount allocated to property, plant and
equipment related to the purchase of towel manufacturing facilities from
the Bibb Company for the three months ended March 31, 1997 and for the year
ended December 31, 1997 of $10.1 million and $10.1 million, respectively.
(9) For purposes of this ratio, "earnings" consist of earnings before income
taxes and fixed charges, and "fixed charges" consist of interest expense
and the portion of rents representative of an interest factor. The ratio of
earnings to fixed charges is computed by adding earnings before income
taxes and fixed charges and dividing by fixed charges.
26
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
On August 27, 1997 the Company closed a transaction pursuant to which
WestPoint Stevens sold its Alamac Knit Fabrics subsidiary (other than cash,
accounts receivable of approximately $42.5 million and a yarn mill located in
Whitmire, S.C.) to Dyersburg Corporation for approximately $126 million. The
Whitmire facility was transferred from the Alamac Knit Fabrics subsidiary to the
Company to support the Company's expansion of its sheeting production capacity.
As a result of the transaction, the Company now accounts for the Alamac Knit
Fabrics subsidiary as a discontinued operation and the accompanying financial
statements have been adjusted and restated accordingly.
In February 1998 the Board of Directors declared a two-for-one stock split
of its common stock payable on March 2, 1998 in the form of a 100% stock
dividend to stockholders of record on February 16, 1998. Outstanding shares,
stock purchases and earnings per share comparisons for all periods have been
restated to reflect the stock split.
The Company has determined that it will need to modify or replace portions
of its software so that its computer systems will function properly with respect
to dates in the year 2000 and beyond. The Company's comprehensive Year 2000
initiative is being managed by a team of internal staff and outside consultants.
The team's activities are designed to ensure that there is no adverse effect on
the Company's core business operations and that transactions with customers,
suppliers, and financial institutions are fully supported. The Company is well
underway with these efforts. In 1994 the Company began a company-wide
manufacturing and distribution systems redesign and implementation project
(including customer service, sales, product costing and inventory controls)
which is expected to be completed in early 1999. These new systems, which are
Year 2000 compliant, replace substantially all of the Company's internal
manufacturing and distribution systems. The Company's business application
programs are currently compliant or will be made compliant through the Year 2000
initiative. The few remaining non-compliant programs are to be brought into
compliance by the vendors that will supply the programs or through modifications
by internal staff. The majority of the Year 2000 initiative is scheduled to be
completed by December 31, 1998, with a few software programs scheduled to be
replaced in early 1999.
The Company also has initiated discussions with its significant suppliers,
large customers and financial institutions to ensure that those parties have
appropriate plans to remediate Year 2000 issues where their systems interface
with the Company's systems or otherwise impact its operations. The Company is
assessing the extent to which its operations are vulnerable should those
organizations fail to remediate properly their computer systems. The Company is
following up with critical suppliers and customers concerning their plans and
progress in addressing the Year 2000 problem. The costs of the Year 2000
initiative are not expected to be material to the Company's results of
operations or financial position and are being expensed as incurred.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1997
Net Sales. Net sales for the three months ended March 31, 1998 increased
$41.6 million, or 11.7% to $398.7 million compared with net sales of $357.1
million for the three months ended March 31, 1997. The
27
<PAGE> 34
increase in net sales resulted primarily from higher unit volume in the 1998
period compared with the 1997 period.
Gross Earnings/Margins. Gross earnings for the three months ended March
31, 1998 of $99.5 million increased $10.3 million, or 11.5%, compared with $89.2
million for the same period of 1997 and reflect gross margins of 25% in both the
1998 and 1997 periods. Gross earnings increased in the first quarter of 1998
primarily as a result of the increase in unit volume. Gross margins of 25% were
unchanged from last year primarily as a result of lower raw material costs
offsetting cost increases related to depreciation expense and wages.
Operating Earnings/Margins. Selling, general and administrative expenses
increased by $4.4 million, or 8.6%, in the first quarter of 1998 compared with
the same period last year, and as a percentage of net sales represent 13.8% in
1998 and 14.2% in 1997. The increase in selling, general and administrative
expenses in the first quarter of 1998 was due primarily to acquisitions along
with higher warehousing and shipping expense.
Operating earnings for the three months ended March 31, 1998 were $44.4
million, or 11.1% of sales, and increased $5.9 million, or 15.4%, compared with
operating earnings of $38.5 million, or 10.8% of sales, for the same period of
1997. The increase resulted from the increase in gross earnings offset somewhat
by the increase in selling, general and administrative expenses discussed above.
Interest Expense. Interest expense for the three months ended March 31,
1998 of $25.7 million increased $2.3 million compared with interest expense for
the three months ended March 31, 1997. The increase was due primarily to higher
average debt levels in the 1998 first quarter compared with the corresponding
1997 average debt levels.
Other Expense-Net. Other expense-net in the first quarter of 1998 of $0.4
million decreased $0.4 million compared with the 1997 period and consists
primarily of the amortization of deferred financing fees of $1 million in both
periods 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 and nondeductible
items.
Income from Continuing/Discontinued Operations. Income from continuing
operations for the first quarter of 1998 was $11.7 million, or $.19 per share
diluted, compared with net income from continuing operations of $9 million, or
$.14 per share diluted, for the same period of last year.
Income from discontinued operations for the first quarter of 1997 was $1.1
million, or $.02 per share diluted.
Net Income. Net income for the first quarter of 1998 was $11.7 million, or
$.19 per share diluted, compared with net income of $10.1 million, or $.16 per
share diluted, for the same period of last year.
Diluted per share amounts are based on 60.9 million and 63.7 million
average shares outstanding for the 1998 and 1997 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.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net Sales. Net sales for the year ended December 31, 1997 increased $155.7
million, or 10.4%, to $1,657.5 million compared with net sales of $1,501.8
million for the year ended December 31, 1996. The increase in net sales resulted
primarily from higher unit volume (including acquisitions) in the 1997 period
compared with the 1996 period.
Gross Earnings/Margins. Gross earnings for the year ended December 31,
1997 of $419.8 million increased $47.4 million, or 12.7%, compared with $372.4
million for the same period of 1996 and reflect gross margins of 25.3% in the
1997 period compared with 24.8% in the 1996 period. Gross earnings and margins
increased in 1997 primarily as a result of the increase in unit volume and lower
raw material costs.
28
<PAGE> 35
Operating Earnings/Margins. Selling, general and administrative expenses
increased by $21.1 million, or 11.5%, for the year ended December 31, 1997,
compared with the same period of 1996, and as a percentage of net sales
represent 12.4% in 1997 and 12.2% in 1996. The increase in selling, general and
administrative expenses for 1997 was due primarily to acquisitions along with
higher warehousing/shipping and advertising expenses.
Operating earnings for the year ended December 31, 1997 were $214.9
million, or 13% of sales, and increased $26.4 million, or 14%, compared with
operating earnings of $188.5 million, or 12.6% of sales, for the year ended
December 31, 1996. The increase resulted from the increase in gross earnings
offset somewhat by the increase in selling, general and administrative expenses
discussed above.
Interest Expense. Interest expense for the year ended December 31, 1997 of
$102.2 million increased $7.7 million compared with interest expense for the
year ended December 31, 1996. The increase was due primarily to higher average
debt levels in the 1997 period compared with the corresponding 1996 average debt
levels.
Other Expense-Net. Other expense-net for the year ended December 31, 1997
decreased $0.5 million compared with the same period in 1996. Included in other
expense-net for the years ended December 31, 1997 and 1996 are the amortization
of deferred financing fees of $3.9 million in each period 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 and nondeductible
items.
Income from Continuing/Discontinued Operations. Income from continuing
operations for the year ended December 31, 1997 was $69.3 million, or $1.11 per
share diluted, compared with income from continuing operations of $58 million,
or $.91 per share diluted, for the year ended December 31, 1996.
Income from discontinued operations for the year ended December 31, 1997
was $2.6 million, or $.04 per share diluted, compared with a loss from
discontinued operations of $0.3 million for the year ended December 31, 1996.
Gain on Sale of Discontinued Operations. During the third quarter of 1997
the Company recorded a gain on the sale of its Alamac Knit Fabrics subsidiary of
$6.1 million, or $.10 per share diluted.
Net Income. Net income for the year ended December 31, 1997 was $78
million, or $1.25 per share diluted, compared with net income of $57.7 million,
or $.91 per share diluted, for the year ended December 31, 1996.
Diluted per share amounts are based on 62.7 million and 63.7 million
average shares outstanding for the 1997 and 1996 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.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net Sales. Net sales for the year ended December 31, 1996 increased $83.6
million, or 5.9%, to $1,501.8 million compared with net sales of $1,418.2
million for the year ended December 31, 1995. The increase in net sales resulted
primarily from higher unit volume in the 1996 period compared with the 1995
period.
Gross Earnings/Margins. Gross earnings for the year ended December 31,
1996 of $372.4 million increased $13.3 million, or 3.7%, compared with $359.1
million for the same period of 1995 and reflect gross margins of 24.8% in the
1996 period compared with 25.3% in the 1995 period. Gross earnings increased in
1996 primarily as a result of the increase in unit volume, offset somewhat by a
wage increase effective the beginning of the second quarter, higher raw material
costs, and production challenges due to high customer demand and capacity
constraints in the last half of 1996.
Operating Earnings/Margins. Selling, general and administrative expenses
increased by $3.5 million, or 1.9%, for the year ended December 31, 1996
compared with the same period of 1995, and as a percentage of net sales
represent 12.2% in 1996 and 12.7% in 1995. The increase in selling, general and
administrative
29
<PAGE> 36
expenses in 1996 was due primarily to higher warehousing/shipping and
advertising expenses, offset somewhat by lower selling and trade receivables
program expenses.
Operating earnings were $188.5 million for the year ended December 31, 1996
compared with operating earnings of $26.3 million for the same period of 1995
which includes the amortization of excess reorganization value of $152.4
million. Operating earnings increased as a result of the increase in gross
earnings offset somewhat by the increase in selling, general and administrative
expenses, and the decrease in amortization of excess reorganization value which
was completely amortized as of September 30, 1995.
Interest Expense. Interest expense for the year ended December 31, 1996 of
$94.5 million increased $1 million compared with interest expense for the year
ended December 31, 1995. The increase was due primarily to higher average debt
levels in the 1996 period compared with the corresponding 1995 average debt
levels offset somewhat by lower interest rates on the Company's variable rate
bank debt.
Other Expense-Net. Other expense-net for the year ended December 31, 1996
decreased $0.2 million compared with the same period in 1995. Included in other
expense-net for the years ended December 31, 1996 and 1995 are the amortization
of deferred financing fees of $3.9 million in each period 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.
Income from Continuing/Discontinued Operations. Income from continuing
operations for the year ended December 31, 1996 was $58 million, or $.91 per
share diluted. For the year ended December 31, 1995, the loss from continuing
operations was $102.3 million, or $1.57 per share diluted, including
amortization of excess reorganization value of $152.4 million, or $2.34 per
share diluted.
Loss from discontinued operations for the year ended December 31, 1996 was
$0.3 million. For the year ended December 31, 1995, the loss from discontinued
operations was $27.5 million, or $.42 per share diluted, including amortization
of excess reorganization value of $25.3 million, or $.38 per share diluted.
Net Income. Net income for the year ended December 31, 1996 was $57.7
million, or $.91 per share diluted. For the year ended December 31, 1995, the
net loss was $129.8 million, or $1.99 per share diluted, including amortization
of excess reorganization value of $177.7 million, or $2.72 per share diluted.
Excess reorganization value was completely amortized in 1995.
Diluted per share amounts are based on 63.7 million and 65.4 million
average 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 year
ended December 31, 1996 were $188.5 million, or 12.6% of sales, and increased
$9.8 million, or 5.5%, compared with operating earnings (before the amortization
of excess reorganization value) of $178.7 million, or 12.6% of sales, for the
same period of 1995. The increase resulted from the increase in gross earnings
offset somewhat by the increase in selling, general and administrative expenses
discussed above.
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.
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. The maximum
commitment under the Senior Credit Facility is $550 million, and the Company
estimates that it would have had approximately $158.4 million of unused
borrowing availability on June 1, 1998, assuming consummation of the Financing
Transactions on that date.
30
<PAGE> 37
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. Interest under the Senior Credit Facility will be payable
either at the base rate of Nationsbank, N.A. or at LIBOR plus a margin, such
margin depending upon the Company's ratio of EBITDA (as defined therein) to cash
interest expenses. See "Description of Certain Other Indebtedness -- Senior
Credit Facility."
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 $160 million in
1997 on capital expenditures, including the purchase in February 1997 of towel
manufacturing facilities from the Bibb Company, and intends to invest an
additional $145 million in 1998.
In February 1998 the Board of Directors declared a two-for-one stock split
of its common stock payable on March 2, 1998 in the form of a 100% stock
dividend to stockholders of record on February 16, 1998. Outstanding shares,
stock purchases and earnings per share comparisons for all periods have been
restated to reflect the stock split.
During the first three months of 1998, the Company purchased approximately
1.3 million shares (on a split basis) under its various stock repurchase
programs, at an average price of $23.92 per share. During 1997 the Company
purchased approximately 3.4 million shares (on a split basis) under the various
stock repurchase programs, at an average price of $19.64 per share. In August
1997 the Board of Directors approved the purchase of up to 6.0 million
additional shares of the Company's common stock (on a split basis), subject to
the Company's debt limitations, which brings the total shares that have been
approved for purchase to 16.0 million shares (on a split basis). At March 31,
1998, approximately 4.5 million shares (on a split basis) remained to be
purchased.
Cash contributions to the Company's pension plans in 1998 are estimated to
total approximately $3 million, compared with actual cash contributions in 1997
of $17.3 million.
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 March 31, 1998, December 31, 1997 and December 31, 1996,
$103.9 million, $111.8 million and $133 million, respectively, had been sold
under this program and the sale is reflected as a reduction of accounts
receivable in the Company's Consolidated Balance Sheets. The cost of the Trade
Receivables Program in 1998 is estimated to total approximately $7 million,
compared with $7.6 million in 1997, and will be charged to selling, general and
administrative expenses.
Prior to the consummation of the Financing Transactions, debt service
requirements for interest payments in 1998 are estimated to total approximately
$108 million (excluding amounts related to the Trade Receivables Program)
compared with payments of $107.4 million in 1997. Debt service requirements in
1998 related to required principal amortization total approximately $3.8
million.
On April 29, 1998, the Company announced the Tender Offers and consent
solicitations for all of its outstanding 8 3/4% Senior Notes and its 9 3/8%
Senior Subordinated Debentures. The purchase price for the 8 3/4% Senior Notes
and 9 3/8% Senior Subordinated Debentures was based on a fixed spread of 0.375%
and 0.500%, respectively, over the yield of the 5 5/8% of U.S. Treasury Notes
due November 30, 1998, on the second business day prior to the expiration date.
On June 9, 1998, utilizing the proceeds from the issuance of the Old Securities,
the Company consummated the Tender Offer for each series of notes, retiring
approximately 96% of each series of notes. On July 9, 1998, the Company redeemed
all of its outstanding 9% Sinking Fund Debentures due 2017.
Management believes that cash from the Company's operations and borrowings
under its credit agreements 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.
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<PAGE> 38
BUSINESS
The Company is engaged directly and indirectly through its subsidiaries in
the manufacture, marketing and distribution of Home Fashions products. The
Company manufactures and markets Home Fashions products for distribution to
chain and department stores, mass merchants and specialty stores. Home Fashions
products are manufactured and distributed under owned trademarks and pursuant to
various licensing agreements. See "-- Trademarks and Licenses." The Company's
management estimates that it has the largest market share in the domestic sheet
and pillowcase market and shares leadership in the domestic bath towel market.
Such estimates are calculated by the Company based on United States government
data, publicly available information about the Company's competitors and
information in trade publications.
PRODUCTS
The Company manufactures and markets a broad range of bed and bath
products, including decorative, private label and institutional sheets and
towels, designer sheets and accessories, blankets, bedskirts, bedspreads,
comforters, duvet covers, drapes, valances, throw pillows, shower curtains and
table covers. Such products are made from a variety of fabrics, such as
chambray, twill, sateen, flannel, linen, cotton and cotton blends and are
available in a wide assortment of colors and patterns. The Company has
positioned itself as a single-source supplier to retailers of bed and bath
products, offering a broad assortment of products across multiple price points.
Such product and price point breadth allows the Company to provide a
comprehensive product offering for each major distribution channel.
TRADEMARKS AND LICENSES
The Company's products are marketed under well-known and firmly established
trademarks, brand names and private labels. The Company uses trademarks, trade
names and private labels as merchandising tools to assist its customers in
coordinating their product offerings and differentiating their products from
those of their competitors. The Company's trademarks include ATELIER MARTEX(R),
MARTEX(R), UTICA(R), STEVENS(R), LADY PEPPERELL(R) and VELLUX(R). In addition,
certain products are manufactured and sold pursuant to licensing agreements
under designer names that include, among others, Ralph Lauren Home Collection,
Sanderson, Star Wars, Designers Guild and Esprit. The license agreements for the
Company's designer brands generally are for a term of two or three years; some
of the licenses are automatically renewable for additional periods, provided
that certain sales thresholds set forth in the license agreements are met. No
single license has accounted for more than 11% of the Company's total sales
volume during any of the last five fiscal years. The following are the
expiration dates for the licensing agreements discussed above: Ralph Lauren Home
Collection, December 31, 2000; Sanderson, March 31, 1999; Star Wars, September
30, 2001 and Esprit, December 31, 2000.
MARKETING
The Company is committed to developing and maintaining integral
relationships with its customers through "Strategic Partnering," a program
designed to improve customers' operating results by leveraging the Company's
merchandising, manufacturing and inventory management skills. "Strategic
Partnering" includes Electronic Data Interchange direct electronic entry
systems, Quick Response and Vendor Managed Inventory customer delivery programs
and point-of-sale processing. The Company incorporates Strategic Partnering into
its planning, manufacturing and shipping systems, in order to enable it to
efficiently and economically anticipate and respond to customers' inventory
requirements. As a result, the Company is better able to plan and forecast its
own production and inventory requirements. Sales of the Company's products are
conducted through a divisional format consisting of the Fashion Brands, Mass
Brands and International divisions. Within each domestic division, sales are
conducted by business units consisting of marketing, merchandising, management
information systems, finance and sales staff members under the supervision of an
account executive. Business units are linked by a centralized manufacturing
logistics and planning group and designer and administration groups. Each
business unit focuses on one of the following channels of distribution: mass
merchants; department and specialty stores; custom brands; Ralph Lauren; health
and hospitality institutions; international and other independent channels to
service specialized areas, including freestanding window
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treatments, blankets and baby bedding. This organization allows the Company to
tailor its services and resources to the different requirements of each channel
of distribution and customer.
The Company works closely with its major customers to assist them in
merchandising and promoting its products to the consumer. In addition, the
Company periodically meets with its customers in an effort to maximize product
exposure and sales and to jointly develop merchandise assortments and plan
promotional events specifically tailored to the customer. The Company provides
merchandising assistance with store layouts, fixture designs, advertising and
point-of-sale displays. A national consumer and trade advertising campaign and
comprehensive internet web site have served to enhance brand recognition. The
Company also provides its customers with suggested customized advertising
materials designed to increase its product sales.
Approximately 86% of the Company's sales are made to retail establishments
in the United States, including chain and department stores, mass merchants, and
specialty bed and bath stores. Finished products are distributed to retailers
directly from the Company's plants. Distribution to hospitals and other
healthcare establishments account for most of the remaining portion of the
Company's sales. Certain institutional products also are sold directly and
through distributors to major hotel and motel chains, and to laundry supply
businesses. In addition to domestic sales, the Company distributes its products
for eventual sale to certain foreign markets, principally Canada, Mexico, the
United Kingdom, continental Europe, the Middle East and the Far East.
International operations accounted for less than 5% of the total revenues of the
Company in 1997.
In addition, certain products of the Company are sold through WestPoint
Stevens Stores Inc., a wholly-owned subsidiary of the Company ("WestPoint
Stores"). WestPoint Stores currently consists of 43 geographically dispersed,
value-priced outlets throughout the United States and in Canada, some of which
are located in factory outlet shopping centers. The products sold in WestPoint
Stores are first quality (including overstocks), seconds, discontinued items and
other products.
INVENTORY MANAGEMENT, ELECTRONIC COMMUNICATION AND DELIVERY
The Company uses EDI, Quick Response and Vendor Managed Inventory
replenishment programs, point-of-sale data and the latest available technology
in retail warehouse and shelf space management to minimize inventory and
maximize floor stock turnover for its customers. The Company's EDI system allows
customers to place orders, and allows the Company to fill, track and bill
orders, all by computer. This system enables the Company to ship products on a
Quick Response basis so that customers can maintain lower inventories and react
rapidly to changes in product demand. In addition, the Company is using Vendor
Managed Inventory and dedicating certain manufacturing facilities to servicing
key strategic customers. The Company anticipates that these programs will result
in lower transportation expense and reduced distribution complexities for its
customers. Through the use of the Nielsen Spaceman III category management
program, the Company supports its customers' efforts to improve operating
results through efficient inventory and shelf space management. The Company's
objective is to provide its customers with 100% delivery reliability in terms of
order quantities and delivery schedules. The Company believes that the use of
in-house transportation has enabled the Company to maintain a high level of
on-time delivery.
SEASONALITY; INVENTORY
Traditionally, the Home Fashions industry has been seasonal, with peak
sales seasons in the summer and fall. In accordance with industry practice, the
Company increases its inventory levels during the first six months of the year
to meet customer demands for the summer and fall peak seasons. The Company's
commitment to EDI, Quick Response, and Vendor Managed Inventory, however, has
facilitated a more even distribution of products throughout the calendar year.
CUSTOMERS
The Company is pursuing strategic relationships with key merchandisers. An
important component of the Company's strategy is to increase its share of shelf
and floor space by strengthening its partnership with its
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customers. The Company is working closely with retailers and is sharing
information and business practices with them to improve service and achieve
higher profitability for both the retailer and the Company.
The Company's Home Fashions products are sold to chain stores, including,
among others, J.C. Penney Company, Inc. ("J.C. Penney"), and Sears Roebuck &
Co., Inc. ("Sears"); mass merchants such as Wal-Mart Stores, Inc. ("Wal-Mart"),
Kmart Corporation ("Kmart") and Target Stores (a division of Dayton Hudson
Corporation); and department and specialty stores, including Federated
Department Stores and Mervyn's (also a division of Dayton Hudson Corporation).
The above named customers, which are the Company's six largest customers,
accounted for approximately 52% of the net sales of the Company during the
fiscal year ended December 31, 1997. In 1997 sales to Dayton Hudson Corporation
were 13% of the net sales of the Company and sales to Kmart were 10% of the net
sales of the Company. Each of such customers has purchased goods from the
Company in each of the last 10 years.
MANUFACTURING
The Company currently uses the latest manufacturing and distribution
equipment and technologies in its mills. Management therefore believes that the
Company is one of the most efficient manufacturers in the Home Fashions
industry. Over the past five years, the Company has spent approximately $522
million to modernize its manufacturing and distribution systems, approximately
$160 million which was spent during 1997, including the purchase in February
1997 of towel manufacturing facilities from the Bibb Company. The capital
expenditures have been used to, among other things, replace older looms with
wider, faster, more efficient air jet looms, replace ring spinning with open-end
and air jet spinning, modernize with high speed multicolor printing equipment,
and further automate the Company's cut and sew operations. New air jet looms
produce at higher speeds than older looms, yielding fewer defects, requiring
less maintenance and providing cleaner and safer working environments. Using air
jet technology, compressed air propels the filling yarn at high speeds, with
robotics handling fabric cutting and tucking. The Company's new open-end
spinning machines use computerized monitors and sensors which track and analyze
the work, streamline information gathering and detect defects immediately, to
improve yarn quality. The Company intends to invest approximately $145 million
in capital improvements in 1998, which includes the addition of new wide air jet
looms, the continued conversion of the Company's older narrow looms to higher
speed, wider air jet looms, construction of new and expanded distribution
centers and installation of dyeing and finishing equipment, and automated
fabricating equipment and distribution management systems which will further
eliminate labor-intensive and costly manufacturing steps and improve
distribution efficiency and expand capacity. These capital programs have
resulted, and are expected to continue to result, in improved product quality,
increased efficiency and capacity, lower costs and quicker response time to
customer orders. The Company (including its subsidiaries) owns and utilizes 23
manufacturing facilities located primarily in the Southeastern United States and
leases a manufacturing facility in England.
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DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
SENIOR CREDIT FACILITY
On June 9, 1998, the Company entered into an amended Senior Credit Facility
with certain lenders (collectively, the "Banks"). The Senior Credit Facility
consists of a revolving credit facility in the aggregate principal amount of up
to $550,000,000 (the "Revolver"). Interest under the Senior Credit Facility is
payable either at the base rate of Nationsbank, N.A. or at LIBOR plus a margin,
such margin depending upon the Company's ratio of EBITDA (as defined therein) to
cash interest expense. The Company will pay a facility fee in an amount equal to
0.25% of each Bank's commitment under the Revolver. The loans under the Senior
Credit Facility will be secured by the pledge of substantially all the stock of
the Company's subsidiaries and a first priority lien on substantially all of the
assets of the Company and its subsidiaries, other than accounts receivable of
the Company sold to the Receivables Subsidiary (as defined).
The Revolver contains a number of customary covenants including, among
others, restrictions on the incurrence of indebtedness, liens, and guarantees.
Certain provisions will require the Company to maintain a minimum consolidated
net worth (as defined), a minimum current ratio and a minimum interest coverage
ratio. The Company will be permitted to make restricted payments in an amount up
to 50% of net income after March 31, 1998, plus other adjustments.
TRADE RECEIVABLES PROGRAM
The Company, through a "bankruptcy remote" receivables subsidiary
("Receivables Subsidiary"), has a trade receivables program ("Trade Receivables
Program") which provides for the sale of accounts receivable, on a revolving
basis. At March 31, 1998 and December 31, 1997 and 1996, $103.9 million, $111.8
million and $133.0 million, respectively, had been sold under this program and
the sale is reflected as a reduction of accounts receivable in the accompanying
Consolidated Balance Sheets. The Trade Receivables Program was financed through
the issuance of (a) $115.0 million of Floating Rate Class A Trade Receivables
Participation Certificates ("Class A Certificates"); (b) $18.0 million of
Floating Rate Class B Trade Receivables Participation Certificates ("Class B
Certificates"); and (c) $27.0 million of Investor Revolving Certificates. The
Class A Certificates and Class B Certificates bear interest at LIBOR plus 0.270%
and LIBOR plus 0.570%, respectively, and the Investor Revolving Certificates
bear interest at LIBOR plus 0.375%. The expected final payment date of amounts
outstanding under the Trade Receivables Program is May 18, 1999, but earlier
termination could occur upon the occurrence of certain defined events. The cost
of the Trade Receivables Program is charged to selling and administrative
expense.
The Trade Receivables Program requires the Company and Receivables
Subsidiary to perform certain servicing obligations with respect to the existing
and future accounts receivable sold by the Company. The Company is not subject
to any financial covenants under the Trade Receivables Program, but the
documentation for the Trade Receivables Program provides for early termination
of the Trade Receivables Program and early payment of the securities issued
thereunder upon certain events, which include the incurrence of losses or
delinquencies on the receivables in excess of certain levels or the bankruptcy
or insolvency of the Company. See "Risk Factors -- Trade Receivables Program."
THE 8 3/4% SENIOR NOTES AND 9 3/8% SENIOR SUBORDINATED DEBENTURES
The approximately $15.4 million aggregate principal amount of 8 3/4% Senior
Notes not redeemed pursuant to the Tender Offers will be general unsecured
obligations of the Company and will rank senior in right of payment to the
approximately $22.8 million aggregate principal amount of 9 3/8% Senior
Subordinated Debentures not redeemed pursuant to the Tender Offers and pari
passu in right of payment with all Senior Indebtedness of the Company. The
9 3/8% Senior Subordinated Debentures will be general unsecured obligations of
the Company and subordinate in right of payment to the 8 3/4% Senior Notes and
all other existing and future Senior Indebtedness of the Company pari passu with
any future senior subordinated indebtedness and senior to any future
subordinated indebtedness of the Company.
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The 8 3/4% Senior Notes bear interest at the rate of 8 3/4% per annum,
payable semi-annually on June 15 and December 15 of each year. They are
redeemable, in whole or in part at any time on or after December 15, 1998, at
the option of the Company, at the redemption prices set forth therein, together
with accrued and unpaid interest to the date of redemption. The 9 3/8% Senior
Subordinated Debentures bear interest at the rate of 9 3/8% per annum, payable
semiannually on June 15 and December 15 of each year. They are redeemable, in
whole or in part at any time on or after December 15, 1998, at the option of the
Company, at the redemption prices set forth therein, together with accrued and
unpaid interest to the date of the redemption.
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DESCRIPTION OF THE SECURITIES
The Exchange Securities offered hereby will be issued as a separate series
under the Indenture governing the Senior Notes due 2005 and the Indenture
governing the Senior Notes due 2008 (collectively the "Indentures") each dated
as of June 9, 1998 between the Company and The Bank of New York, as trustee (the
"Trustee"). The form and terms of the Exchange Securities are the same as the
form and terms of the Old Securities (which they replace) except that (i) the
Exchange Securities will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof and (ii)
holders of the Exchange Securities will not be entitled to certain rights of
holders of Old Securities under the Registration Rights Agreements, including
the provisions providing for an increase in the interest rate on the Old
Securities in certain circumstances relating to the timing of the Exchange
Offer, which rights will terminate when the Exchange Offer is consummated. The
Old Securities issued in the Initial Offering and the Exchange Securities
offered hereby are referred to collectively as the "Securities."
The terms of the Securities include those stated in the Indentures and
those made part of the Indentures by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), as in effect on the date of the
Indentures. The Securities are subject to all such terms and Holders of the
Securities are referred to the Indentures and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Indentures
does not purport to be complete and is qualified in its entirety by reference to
the Indentures, including the definitions therein of certain terms used below.
The definitions of certain capitalized terms used in the following summary are
set forth under "-- Certain Definitions." Securities that remain outstanding
after consummation of the Exchange Offer and the applicable Exchange Securities
will be treated as a single class of Securities under the applicable Indenture.
GENERAL
The Senior Notes due 2005 will be senior obligations of the Company limited
to $525 million in aggregate principal amount. The Senior Notes due 2005 will
bear interest at the rate of 7 7/8% per annum, payable semiannually in arrears
on June 15 and December 15 in each year to Holders of record of the Senior Notes
due 2005 at the close of business on the June 1 or December 1 next preceding the
interest payment date. Interest will initially accrue from the date of original
issuance and the first interest payment date will be December 15, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Senior Notes due 2005 mature on June 15, 2005 and will be issued only in
registered form without coupons in denominations of $1,000 and integral
multiples thereof.
The Senior Notes due 2008 will be senior obligations of the Company limited
to $475 million in aggregate principal amount. The Senior Notes due 2008 will
bear interest at the rate of 7 7/8% per annum, payable semi-annually in arrears
on June 15 and December 15 in each year to Holders of record of the Senior Notes
due 2008 at the close of business on the June 1 or December 1 next preceding the
interest payment date. Interest will initially accrue from the date of original
issuance and the first interest payment date will be December 15, 1998. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Senior Notes due 2008 mature on June 15, 2008 and will be issued only in
registered form without coupons in denominations of $1,000 and integral
multiples thereof.
Holders of Securities must surrender the Securities to the applicable
Paying Agent to collect principal payments. The Company will pay principal and
interest by check and will mail interest checks to a holder's registered
address. Each Trustee initially will act as Paying Agent and Registrar under the
applicable Indenture. The Company may change the Paying Agent or Registrar
without prior notice to the Holders of Securities.
OPTIONAL REDEMPTION
The Securities will be redeemable, in whole or in part, at the option of
the Company at 100% of the principal amount thereof plus the Make-Whole Premium,
together with all accrued and unpaid interest thereon. The Securities are not
subject to redemption through the operation of a sinking fund.
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If less than all of the Securities are to be redeemed at any time,
selection of such Securities for redemption will be made by the applicable
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are then listed or, if the Securities
are not then listed on a national securities exchange, on pro rata basis, by lot
or by such method as the applicable Trustee shall deem fair and appropriate.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days prior to the redemption date to each Holder of the applicable
Securities to be redeemed at its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
a principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. On and after
the redemption date, interest will cease to accrue on the applicable Securities
or portions thereof called for redemption.
RANKING
The Securities will rank pari passu in right of payment with all existing
or future unsubordinated indebtedness of the Company and senior to all
subordinated indebtedness of the Company. The Senior Notes due 2005 and Senior
Notes due 2008 will rank pari passu in right to payment with each other. As of
March 31, 1998, claims of holders of the Securities would have been structurally
subordinated to $62.2 million of indebtedness and other liabilities of the
Company's subsidiaries. See "Risk Factors -- Ranking; Asset Encumbrances."
CERTAIN COVENANTS
Each of the Indentures (unless otherwise noted) provides that the covenants
set forth below will be applicable to the Company and the Restricted
Subsidiaries; provided, however, that if no Default has occurred and is
continuing, after the ratings assigned to an applicable issue of Securities by
any two of the Rating Agencies are equal to or higher than BBB- and Baa3, or the
equivalents thereof, as applicable (the "Investment Grade Ratings"), and
notwithstanding that such Securities may later cease to have an Investment Grade
Rating, the Company and the Restricted Subsidiaries will not be subject to the
provisions of the Indenture governing such Securities described under
"Limitation on Additional Indebtedness," clause (b) of the first paragraph and
clause (c) of the second paragraph of "Limitation on Designations of
Unrestricted Subsidiaries," and clause (v) of the first paragraph of
"Consolidations, Mergers and Sales of Assets."
Limitation on Additional Indebtedness. The Indentures provide that the
Company will not, and will not permit any of the Restricted Subsidiaries to,
incur any Indebtedness (including any Acquired Indebtedness) except for:
(a) the Securities;
(b) Indebtedness (including letters of credit) of the Company and the
Restricted Subsidiaries under the Senior Credit Facility in an aggregate
principal amount not to exceed $800 million;
(c) Indebtedness of the Company and the Restricted Subsidiaries
incurred pursuant to Interest Rate Protection Obligations and foreign
exchange contracts, currency swaps or similar agreements;
(d) Indebtedness between and among the Company and the Restricted
Subsidiaries or between and among any of the Restricted Subsidiaries;
(e) Capitalized Lease Obligations and Purchase Money Indebtedness of
the Company and the Restricted Subsidiaries, in each case with respect to
the acquisition after the Issue Date of Productive Assets;
(f) Indebtedness of the Company and the Restricted Subsidiaries
resulting from the endorsement of negotiable instruments in the ordinary
course of business;
(g) replacements, renewals, refinancings and extensions of
Indebtedness outstanding on the Issue Date (other than any Indebtedness to
be repaid or retired with the net proceeds from the sale of the
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Securities) and Indebtedness incurred or permitted in compliance with
clauses (a), (e) and (i) of this covenant; provided that the principal
amount of Indebtedness incurred pursuant to this clause (g) (or, if such
Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness) shall not exceed
the sum of the principal amount of Indebtedness so refinanced (or, if such
Indebtedness provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness, plus any accreted
value attributable thereto since the original issuance of such
Indebtedness), plus the amount of any premium required to be paid in
connection with such replacement, renewal, refinancing or extension
pursuant to the terms of such Indebtedness or the amount of any premium
reasonably determined by the Company or the Restricted Subsidiary, as
applicable, as necessary to accomplish such replacement, renewal,
refinancing or extension by means of a tender offer or privately negotiated
purchase, plus the amount of fees and expenses in connection therewith;
(h) unsecured Indebtedness of the Company and the Restricted
Subsidiaries not exceeding $100 million in aggregate principal amount
outstanding at any time;
(i) Indebtedness of the Company and the Restricted Subsidiaries
secured by a Lien on accounts receivable of the Company and the Restricted
Subsidiaries in an aggregate principal amount not to exceed 85% of the face
amount of outstanding accounts receivable of the Company and such
Restricted Subsidiaries; and
(j) other Indebtedness of the Company and the Restricted Subsidiaries,
if at the time of and after giving pro forma effect to the incurrence of
such Indebtedness (including the application of the proceeds thereof) and
any Asset Acquisitions and any Asset Sales that occurred during the period
beginning four full fiscal quarters immediately prior to such incurrence as
though such events occurred on the first day of such period, the
Consolidated EBITDA Coverage Ratio for such four fiscal quarter period of
the Company is equal to or greater than 1.75:1.0.
For purposes of determining compliance with this "Limitation on Additional
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness permitted by this
covenant, the Company in its sole discretion shall classify such item of
Indebtedness and only be required to include the amount of such Indebtedness as
one of such types.
Limitation on Consolidations, Mergers and Sales of Assets. The Indentures
provide that the Company will not, and will not permit any of the Restricted
Subsidiaries to, consolidate with or merge with or into any other Person or
sell, assign, convey, lease or transfer all or substantially all of its
properties and assets in a single transaction or through a series of
transactions, if such transaction or series of transactions would result in a
sale, conveyance, lease, transfer or other disposition of all or substantially
all of the properties and assets of the Company and the Restricted Subsidiaries,
taken as a whole, unless: (i) the resulting, surviving or transferee Person (the
"surviving entity") shall be a corporation organized and existing under the laws
of the United States or any State thereof or the District of Columbia; (ii) the
surviving entity shall expressly assume, by supplemental indentures executed and
delivered to the Trustees, in form and substance reasonably satisfactory to such
Trustees, all of the obligations of the Company under the Indentures and the
Securities and the Registration Rights Agreements; (iii) immediately after
giving effect to such transaction or series of transactions on a pro forma basis
(including, without limitation, giving effect to any Indebtedness incurred or
anticipated to be incurred in connection with or in respect of such transaction
or series of transactions), no Default shall have occurred and be continuing
under the Indentures; (iv) the Company or the surviving entity (if the
transaction or series of transactions involves the Company) shall have delivered
to the Trustees under the Indentures an Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, conveyance, transfer or
lease and, if supplemental indentures are required in connection with such
transaction or series of transactions, each such supplemental indenture complies
with this covenant and that all conditions precedent in the Indentures relating
to the transaction or series of transactions have been satisfied; and (v) the
Company or the surviving entity (if the transaction or series of transactions
involves the Company) shall immediately after giving effect to such transaction
or series of transactions on pro forma basis (including, without limitation,
giving effect to any Indebtedness incurred or anticipated to be incurred in
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connection with or in respect of the transaction or series of transactions) be
permitted to incur $1.00 of additional Indebtedness under clause (j) of the
"Limitation on Additional Indebtedness" covenants and other applicable
restrictions on additional Indebtedness.
Upon any consolidation or merger of the Company or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing,
in which the Company is not the continuing corporation, the successor
corporation formed by such a consolidation or into which the Company is merged
or to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the applicable
Indenture and the Securities and the Registration Rights Agreements, with the
same effect as if such successor corporation had been named as the Company
therein; and thereafter, except in the case of (a) a lease or (b) any sale,
assignment, conveyance, transfer, lease or other disposition to a Restricted
Subsidiary of the Company, the Company shall be discharged from all obligations
and covenants under the Indentures and the Securities.
The Indentures will provide that for all purposes of the Indentures and the
Securities (including the provision of this covenant and the covenants described
in "-- Limitation on Additional Indebtedness" and "-- Limitations on Liens"),
Subsidiaries of any Surviving Entity shall, upon such transaction or series of
related transactions, become Restricted Subsidiaries unless and until designated
as Unrestricted Subsidiaries pursuant to and in accordance with "-- Limitation
on Designations of Unrestricted Subsidiaries."
Limitation on Liens. The Indentures provide that the Company and the
Restricted Subsidiaries will not, directly or indirectly, incur any consensual
Lien to secure Indebtedness, other than Permitted Liens, upon any of their
property or assets owned or acquired on or after the Issue Date unless (i) where
such Lien secures Indebtedness ranking pari passu with the applicable
Securities, excluding Indebtedness under the Senior Credit Facility, all
payments due under the applicable Indenture and the applicable Securities are
secured on an equal and ratable basis with the obligations so secured until such
time as such obligation is no longer secured by a Lien, or (ii) where such Lien
secures Subordinated Indebtedness, the applicable Securities are secured by a
Lien on such property or assets that is senior in priority to the Lien securing
such Subordinated Indebtedness. Any Lien which secures the Securities shall
automatically and unconditionally be released upon the release or discharge of
the Lien which resulted in the creation of such Lien with respect to the
applicable Securities, except a discharge or release by or as a result of
foreclosure on the subject collateral.
Limitation on Designations of Unrestricted Subsidiaries. The Indentures
provide that the Company may designate after the Issue Date any Subsidiary as an
"Unrestricted Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Company would be permitted under the Indentures to incur $1.00
of additional Indebtedness pursuant to clause (j) of the covenant described
under "-- Limitation on Additional Indebtedness" at the time of such
Designation (assuming the effectiveness of such Designation).
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indentures.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the applicable Trustee together with an officer's
certificate certifying compliance with the foregoing provisions. Any Receivables
Subsidiary shall at all times be an Unrestricted Subsidiary and each of WPSI
Inc. and Alamac Sub Holdings Inc. shall initially constitute an Unrestricted
Subsidiary.
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Limitation on Sale and Leaseback Transactions. The Indentures provide that
the Company will not, and will not permit any of the Restricted Subsidiaries to,
enter into after the Issue Date any arrangement with any Person providing for
the leasing to the Company or any such Restricted Subsidiary of any real or
tangible personal property (except for leases between or among the Company and
any of the Restricted Subsidiaries), which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person in
contemplation of such leasing (a "Sale/Leaseback Transaction"), unless (a) the
Company or such Restricted Subsidiary would be entitled under either clause (f)
or would be entitled under clause (j) of the covenant described under
"-- Limitation on Additional Indebtedness" to incur Indebtedness in an amount
equal to the Attributable Indebtedness with respect to such arrangement and (b)
the gross proceeds of any such sale are at least equal to the Fair Market Value
of such property.
EVENTS OF DEFAULT
The following are Events of Default ("Events of Default") under the
Indentures:
(a) default in the payment of any interest on the Securities when it
becomes due and payable, and continuance of any such default for a period
of 30 days; or
(b) default in the payment of the principal of, or premium, if any, on
the Securities issued thereunder, when due, at maturity, upon redemption,
pursuant to an offer to purchase required under the applicable Indenture
pursuant to the Change of Control provisions or otherwise, by acceleration
or otherwise; or
(c) the Company fails to comply with any of its obligations described
under "-- Consolidation, Merger, Sale of Assets, Etc." or "-- Change of
Control;" or
(d) the Company fails to perform or observe any other term, covenant
or agreement contained in the applicable Securities or Indenture (other
than a default specified in (a), (b) or (c) above) for a period of 45 days
after written notice of such failure requiring the Company to remedy the
same shall have been given (x) to the Company by the applicable Trustee or
(y) to the Company and the applicable Trustee by the holders of 25% in
aggregate principal amount of the applicable Securities then outstanding;
or
(e) default or defaults under one or more agreements, indentures or
instruments under which the Company or any Restricted Subsidiary then has
outstanding Indebtedness in excess of $25 million individually or in the
aggregate and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults results in the acceleration of the
maturity of such Indebtedness; or
(f) one or more judgments, orders or decrees for the payment of money
in excess of $25 million (to the extent not covered by insurance), either
individually or, in an aggregate amount, shall be entered against the
Company or any Restricted Subsidiary or any of their respective properties
and shall not be paid, discharged or fully bonded and there shall have been
a period of 60 days during which a stay of enforcement of such judgment or
order, by reason of pending appeal or otherwise, shall not be in effect; or
(g) certain events of bankruptcy or insolvency with respect to the
Company or any Significant Subsidiary shall have occurred.
If an Event of Default (other than an Event of Default specified in clause
(g) above with respect to the Company) occurs and is continuing, then the
Holders of at least 25% in aggregate principal amount of the applicable
Securities outstanding may, by written notice, and the applicable Note Trustee
upon the request of the Holders of not less than 25% in aggregate principal
amount of the applicable Securities outstanding shall, declare the principal of,
premium, if any, and accrued interest on, all the applicable Securities to be
due and payable immediately. Upon any such declaration such amounts shall become
due and payable immediately. If an Event of Default specified in clause (g)
above with respect to the Company occurs and is continuing, then the principal
of, premium, if any, and accrued interest on, all the Securities shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of either Trustee or any Holder of either Securities. In the
event of an acceleration because an Event of Default set forth in clause (e)
above
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has occurred and is continuing, such acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of Default
pursuant to clause (e) shall be remedied, cured by the Company or such
Restricted Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the acceleration with respect thereto.
After a declaration of acceleration, the Holders of a majority in aggregate
principal amount of the applicable issue of outstanding Securities may, by
notice to the applicable Trustee, rescind such declaration of acceleration if
all existing Events of Default have been cured or waived, other than nonpayment
of principal of, premium, if any, and accrued interest on such Securities, that
has become due solely as a result of the acceleration thereof, and if the
rescission of acceleration would not conflict with any judgment or decree. Past
defaults under an Indenture (except a default in the payment of the principal
of, premium, if any, or interest on any Security issued thereunder or in respect
of a covenant or a provision which cannot be modified or amended without the
consent of all holders of such Securities) may be waived by the Holders of a
majority in aggregate principal amount of the applicable issue of outstanding
Securities.
No Holder of any Security has any right to institute any proceeding with
respect to the applicable Indenture or any remedy thereunder, unless the Holders
of at least 25% in aggregate principal amount of the applicable issue of
outstanding Securities have made written request, and offered reasonable
indemnity, to the applicable Trustee to institute such proceeding as Trustee,
such Trustee has failed to institute such proceeding within 60 days after
receipt of such notice and such Trustee has not within such 60-day period
received directions inconsistent with such written request by holders of a
majority in aggregate principal amount of the applicable issue of Securities.
Such limitations do not apply, however, to a suit instituted by a Holder of a
Security for the enforcement of the payment of the principal of, premium, if
any, or accrued interest on, such Security on or after the respective due dates
expressed in such Security.
During the existence of an Event of Default under the Indentures, the
applicable Trustee is required to exercise such rights and powers vested in it
under the applicable Indenture and use the same degree of care and skill in its
exercise thereof as a prudent Person would exercise under the circumstances in
the conduct of such Person's own affairs. Subject to the provisions of the
Indentures relating to the duties of the Trustee, in case an Event of Default
shall occur and be continuing under an Indenture, the applicable Trustee is not
under any obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to such Trustee reasonable security or indemnity. Subject to
certain provisions of the Indentures concerning the rights of the Trustees, the
Holders of a majority in aggregate principal amount of the applicable issue of
outstanding Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustees under the
Indentures, or exercising any trust, or power conferred on the Trustees.
CHANGE OF CONTROL TRIGGERING EVENT
In the event of a Change of Control Triggering Event (the date of such
occurrence being the "Change of Control Date"), the Company will notify the
Holders in writing of such occurrence and will make an offer to purchase (the
"Change of Control Offer"), on a business day (the "Change of Control Payment
Date") not later than 90 days following the Change of Control Date, all
Securities then outstanding at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Payment Date. Notice of a Change of Control Offer shall be mailed by the
Company to the Holders not less than 30 days nor more than 45 days before the
Change of Control Payment Date. The Change of Control Offer is required to
remain open for at least 20 business days and until the close of business on the
Change of Control Payment Date. It is anticipated that a Change of Control will
constitute an event of default under the Senior Credit Facility, which will
allow the Banks to accelerate their loans and to require the Company to prepay
all of its obligations under the Senior Credit Facility. A Change of Control
will not constitute an event of default under any other Indebtedness of the
Company.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other applicable securities laws
or regulations and any applicable requirements of any securities exchange on
which the Securities are listed, in connection with the repurchase of Securities
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pursuant to a Change of Control Offer, and any violation of the provisions of
the Indenture relating to such Change of Control Offer occurring as a result of
such compliance, shall not be deemed a Default under the Indenture. Neither the
Board of Directors nor a Trustee may waive the Company's obligations to
repurchase the applicable issue of Securities upon a Change of Control
Triggering Event.
There can be no assurance that the Company will have sufficient funds to
purchase the Securities upon a Change of Control Triggering Event. With respect
to the sale of assets, the phrase "all or substantially all" as used in the
Indentures (including as set forth under "-- Certain Covenants -- Limitations on
Consolidations, Mergers and Sale of Assets") varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under New York law (which will govern the Indentures) and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person, and,
therefore, the ability of the holders of Securities to require a purchaser of
the assets of the Company to assume all of the Company's obligations under the
Indentures may be uncertain.
REPORTS
Pursuant to the Indentures, the Company will file with each Trustee, within
15 days after filing with the Commission, copies of the annual and quarterly
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) which the Company files with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. If the Company is no longer subject to these periodic
reporting requirements of the Exchange Act, it will nonetheless continue to file
reports with, each Trustee as if it were subject to such periodic reporting
requirements. Regardless of whether the Company is required to furnish such
reports to its stockholders pursuant to the Exchange Act, the Company shall
cause such reports containing financial information to be mailed to the holders
of the Securities within 15 days after filing such report with the Commission.
Such financial information shall include annual reports containing consolidated
financial statements and notes thereto, together with an opinion thereon
expressed by an independent public accounting firm, management's discussion and
analysis of financial condition and results of operations as well as quarterly
reports containing unaudited condensed consolidated financial statements for the
first three quarters of each fiscal year.
DEFEASANCE
The Company may at any time terminate all of its obligations with respect
to an Indenture ("defeasance"), except for certain obligations, including those
regarding any trust established for a defeasance and obligations to register the
transfer or exchange of the Securities issued thereunder, to replace mutilated,
destroyed, lost or stolen Securities issued thereunder and to maintain agencies
in respect of the Securities issued thereunder. The Company may at any time
terminate its obligations under certain covenants set forth in an Indenture,
some of which are described under "-- Certain Covenants" above, and any omission
to comply with such obligations shall not constitute a Default with respect to
the Securities ("covenant defeasance"). In order to exercise either defeasance
or covenant defeasance, the Company must irrevocably deposit in trust, for the
benefit of the Holders with the applicable Trustee money or U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient to
pay the principal of, premium, if any, and interest on the Senior Notes to
redemption or maturity and comply with certain other conditions, including the
delivery of an opinion as to certain tax matters.
SATISFACTION AND DISCHARGE
The Company may discharge an Indenture, which will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange of
Securities issued thereunder) as to all outstanding Securities issued
thereunder, when either (a) all such Securities theretofore authenticated and
delivered (except lost, stolen or destroyed Securities which have been replaced
or paid) have been delivered to the applicable Trustee for cancellation; or
(b)(i) all such Securities not theretofore delivered to the applicable Trustee
for cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the applicable Trustee as trust funds
in trust for the purpose an amount of money sufficient to
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pay and discharge the entire indebtedness on such Securities not theretofore
delivered to such Trustee for cancellation, for principal, premium, if any, and
accrued interest to the date of maturity or redemption; and (ii) the Company has
delivered irrevocable instructions to the applicable Trustee to apply the
deposited money toward the payment of such Securities at maturity or the
redemption date, as the case may be. In addition, the Company must deliver an
Officers' Certificate and an Opinion of Counsel to the applicable Trustee
stating that all conditions precedent to satisfaction and discharge have been
complied with.
CONSENTS, WAIVERS AND MODIFICATIONS
From time to time, the Company, when authorized by resolutions of its Board
of Directors, and the Trustees may, without the consent of the Holders of the
Securities, amend, waive or supplement an Indenture or the Securities issued
thereunder for certain specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies, maintaining the qualification of the
Indentures under the Trust Indenture Act, or making any change that does not
adversely affect the rights of any Holder of Securities issued thereunder;
provided, however, that the Company shall have delivered to the Trustees an
Opinion of Counsel stating that such change does not materially and adversely
affect the rights of any such Securityholder. Other amendments and modifications
of the Indentures or the Securities may be made by the Company and Trustees with
the consent of the Holders of not less than a majority of the outstanding
aggregate principal amount of the applicable issue of Securities; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each outstanding Senior Note due 2005 or Senior Note due 2008, as the
case may be, affected thereby, (i) reduce the principal amount of, extend the
fixed maturity of, or alter the redemption provisions of such Securities, (ii)
change the currency in which such Securities or any premium or the interest
thereon is payable, (iii) reduce the percentage in outstanding principal amount
of such Securities which must consent to an amendment, supplement or waiver or
consent to take any action under such Securities or the applicable Indenture,
(iv) impair the right to institute suit for the enforcement of any payment on or
with respect to such Securities, (v) upon the occurrence of a Change of Control,
alter the Company's obligation to purchase such Securities in accordance with
the applicable Indenture or waive any default in the performance thereof, (vi)
waive a default in payment with respect to such Securities, (vii) reduce or
change the rate or time for payment of interest on such Securities, or (viii)
affect the ranking of such Securities.
REGARDING THE TRUSTEE
The Bank of New York will serve as Senior Note due 2005 Trustee under the
Senior Note due 2005 Indenture and as Senior Note due 2008 Trustee under the
Senior Note due 2008 Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in each of the
Indentures (except as noted). Reference is made to the Indentures for the full
definition of all such terms, as well as any other capitalized terms used herein
for which no definition is provided.
"8 3/4% Senior Notes" means the Company's 8 3/4% Senior Notes due 2001.
"9 3/8% Senior Subordinated Debentures" means the Company's 9 3/8% Senior
Subordinated Debentures due 2005.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition of such Person, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such Person's becoming a
Restricted Subsidiary or such acquisition.
"Affiliate" means, with respect to any specified Person, any other Person
which, directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting
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securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) or Investment by the
Company or any Restricted Subsidiary to or in any other Person, or purchase or
acquisition of Capital Stock, by the Company or any of its Restricted
Subsidiaries of any other Person, in either case pursuant to which such other
Person shall become a Restricted Subsidiary of the Company or any of the
Restricted Subsidiaries or shall be merged with or into the Company or any of
the Restricted Subsidiaries or (ii) any acquisition by the Company or any of the
Restricted Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
or other disposition to any Person other than the Company or a Restricted
Subsidiary, in one transaction or a series of related transactions (including by
way of sale and leaseback), of (i) any Capital Stock of any Restricted
Subsidiary or (ii) any other property or asset of the Company or any Restricted
Subsidiary outside of the ordinary course of business. The term "Asset Sale"
shall not include (a) any sale by the Company of its Capital Stock, (b) sales of
inventory, rental assets and real estate held for sale in the ordinary course of
business in accordance with past practices, (c) Capitalized Lease Obligations or
(d) sales of receivables as contemplated by the Trade Receivables Facility.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the applicable, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors of the Company, and to be in full force and effect on the date of
such certification, and delivered to the applicable Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
partnership interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, any Person, whether outstanding
on the Issue Date or issued after the Issue Date, and any and all rights,
warrants or options exchangeable for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the Indentures, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) investments in direct obligations of the
United States government maturing within one year of the date of acquisition,
(ii) investments in certificates of deposit and money market deposits maturing
within one year of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States, any State
thereof, the District of Columbia or any foreign jurisdiction having capital,
surplus and undivided profits aggregating in excess of $200 million, (iii)
repurchase obligations with a term of not more than 90 days for direct
obligations of the United States government or entered into with a bank meeting
the qualifications described in clause (ii) above, (iv) investment in commercial
paper given the highest rating by Standard & Poor's and Moody's and maturing not
more than one year from the date of acquisition, (v) investments in mutual funds
which invest exclusively in items described in (i)-(iv) above and (vi) demand
deposit accounts maintained in the ordinary course of business.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is
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exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; or (b)
the Company consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person or any person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation or its parent corporation and/or (2) cash,
securities and other property in an amount which could be paid by the Company as
a Restricted Payment under the applicable Indenture and (ii) immediately after
such transaction no "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the total
Voting Stock of the surviving or transferee corporation or its parent
corporation, as applicable; or (c) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board (together
with any new directors whose election by the Board or whose nomination for
election by the stockholders of the Company was approved by a vote of a majority
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board then in
office.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline.
"Consolidated Adjusted Net Income" means, for any period, the consolidated
net income (or loss) of the Company and the Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the extent included
in calculating such net income, by excluding, without duplication, (i) all
extraordinary gains or losses, (ii) the net income of any Person combined with
the Company or one of the Restricted Subsidiaries on a "pooling of interests"
basis attributable to any period prior to the date of combination, (iii) any
gain or loss realized upon the termination of any employee pension benefit plan
(on an after-tax basis), (iv) gains in respect of any Asset Sales by the Company
or one of the Restricted Subsidiaries (on an after-tax basis), (v) the net
income of any Restricted Subsidiary to the extent that the declaration of
dividends or the making of distributions by that Restricted Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, law, rule or governmental regulations applicable to that Restricted
Subsidiary or its stockholders, (vi) the effect of any charge taken in
connection with the Financing Transactions, (vii) the amortization of goodwill,
(viii) the non-cash portion of any income taxes accrued in accordance with GAAP
for such period and (ix) all non-cash extraordinary, unusual or non-recurring
charges for which no cash accrual is required.
"Consolidated EBITDA" means, for any period, the Consolidated Adjusted Net
Income of the Company and the Restricted Subsidiaries for such period increased
to the extent deducted in determining Consolidated Adjusted Net Income by the
sum of: (i) all income taxes of the Company and the Restricted Subsidiaries paid
or accrued in accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or non-recurring gains or losses); (ii)
all interest expense of the Company and the Restricted Subsidiaries paid or
accrued for such period (including amortization of original issue discount and
interest with respect to Capitalized Lease Obligations); (iii) the aggregate
amount of cash dividends and other distributions declared, or paid on Capital
Stock other than Common Stock of the Company and the Restricted Subsidiaries for
the period; (iv) depreciation expense of the Company and the Restricted
Subsidiaries; (v) amortization expense of the Company and the Restricted
Subsidiaries including, without limitation, amortization of capitalized debt
issuance costs; and (vi) any other non-cash charges of the Company and the
Restricted Subsidiaries to the extent deducted in determining the Consolidated
Adjusted Net Income of the Company, all determined on a consolidated basis in
accordance with GAAP.
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"Consolidated EBITDA Coverage Ratio" means the ratio of (i) Consolidated
EBITDA of the Company for the four full fiscal quarters for which financial
statements are available that immediately precede the date of the transaction or
other circumstances giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio (the "Transaction Date") to (ii) the sum of (a) all interest
expense of the Company and the Restricted Subsidiaries paid or accrued
(including amortization of original issue discount and interest with respect to
Capitalized Lease Obligations) and (b) the aggregate amount of cash dividends
and other distributions declared or paid on Disqualified Stock of the Company
and the Restricted Subsidiaries, in each case for such four full fiscal quarter
period. For purposes of this definition, if the Transaction Date occurs prior to
the date on which the Company's consolidated financial statements for the four
full fiscal quarters subsequent to the Issue Date are first available,
"Consolidated EBITDA" and the items referred to in the preceding clause (ii)
shall be calculated after giving effect on a pro forma basis as if the
applicable issue of Securities outstanding on the Transaction Date were issued
on the first day of such four full fiscal quarter period. In addition to and
without limitation of the foregoing, for purposes of this definition,
"Consolidated EBITDA" and the items referred to in the preceding clause (ii)
shall be calculated after giving effect on a pro forma basis for the period of
such calculation to (i) the incurrence of any Indebtedness of the Company or any
of the Restricted Subsidiaries at any time during the period (the "Reference
Period") (A) commencing on the first day of the four full fiscal quarter period
for which financial statements are available that precedes the Transaction Date
and (B) ending on and including the Transaction Date, including, without
limitation, the incurrence of the Indebtedness giving rise to the need to make
such calculation, as if such incurrence occurred on the first day of the
Reference Period; and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or any of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring Acquired Indebtedness) occurring during the
Reference Period and any retirement of Indebtedness in connection with such
Asset Sales, as if such Asset Sale or Asset Acquisition and/or retirement
occurred on the first day of the Reference Period. Furthermore, in calculating
the denominator (but not the numerator) of the Consolidated EBITDA Coverage
Ratio, (1) interest on Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to accrue at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements. If the
Company or any of the Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, this definition shall give effect to the
incurrence of such guaranteed Indebtedness as if the Company or Restricted
Subsidiary had directly incurred such guaranteed Indebtedness.
"Debt Securities" means any debt securities (including any guarantee of
such securities) issued by the Company and/or any Restricted Subsidiary in
connection with a public offering (whether or not underwritten) or a private
placement (provided such private placement is underwritten for resale pursuant
to Rule 144A, Regulation S or otherwise under the Securities Act or sold on an
agency basis by a broker-dealer or one of its Affiliates to 10 or more
beneficial holders).
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable (in each case, other than into
common stock of the Company), pursuant to a sinking fund obligation or
otherwise, or is exchangeable for Indebtedness, or is redeemable at the option
of the holder thereof, in whole or in part, on or prior to the final Maturity
Date of the specified Security. Notwithstanding the foregoing, in no event shall
Capital Stock that is considered Disqualified Stock solely by reason of such
Capital Stock being convertible at the option of the holder of such capital
stock into other Capital Stock (other than Disqualified Stock) constitute
Disqualified Stock.
"Duff & Phelps" means Duff and Phelps Credit Rating Co. and its successors.
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"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination. The Company may, by notice to the applicable Trustee, elect to
use GAAP principles as in effect on the date of such election.
"Holder" or "Securityholder" means the Person in whose name a Security is
registered on the Registrar's books, as the context requires.
"incur" means, with respect to any Indebtedness, to directly or indirectly
create, incur, assume, unconditionally guarantee or in any manner become liable
for such Indebtedness, whether contingently or otherwise, provided that neither
the accrual of interest nor the acquisition of original issue discount shall be
considered an incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all obligations for borrowed money, (ii) all obligations evidenced by bonds,
Securities, notes or other similar instruments, (iii) all Capitalized Lease
Obligations, (iv) all obligations issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement which purchase price is due more than six months
from the date of incurrence (but excluding trade accounts payable arising in the
ordinary course of business), (v) all obligations issued or contracted for as
payment in consideration of the purchase by such Person of the stock or
substantially all the assets of another Person or a merger or consolidation,
(vi) all obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transactions entered into in the
ordinary course of business, (vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons and all dividends of other Persons for
the payment of which, in either case, such Person is directly or indirectly
responsible or liable as obligor, guarantor or otherwise and (viii) all
obligations of the type referred to in clauses (i) through (vii) of other
Persons which are secured by any Lien on any property or asset of such Person,
the amount of such obligation being deemed to be the lesser of the value of such
property or asset or the amount of the obligation so secured. For purposes of
the "Limitation on Additional Indebtedness" covenant, "Indebtedness" shall
include all Capital Stock that is (i) in the case of any Restricted Subsidiary,
not common stock of such Restricted Subsidiary and (ii) Disqualified Stock of
the Company.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars and similar agreements.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, or
preference or other security agreement of any kind or nature whatsoever. For
purposes of the Indenture, a Person shall be deemed to own subject to a Lien any
property which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to Indebtedness of such Person.
"Make-Whole Premium" means, with respect to any Security at any Redemption
Date, the excess, if any, of (a) the aggregate present value of the sum of the
principal amount and premium of such Securities, discounted on a semi-annual
bond equivalent basis from such Redemption Date to June 15, 2005 in the case of
the Senior Notes due 2005, or to June 15, 2008 in the case of the Senior Notes
due 2008, at a per annum interest equal to the sum of the Treasury Yield
(determined on the Business Day immediately preceding the date of such
redemption or declaration of accelerated payment) plus (i) 37.5 basis points, in
the case of the
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Senior Notes due 2005 and (ii) 50.0 basis points, in the case of the Senior
Notes due 2008, over (b) the aggregate principal amount of the Security being
redeemed or paid.
"Maturity Date" means, with respect to any Security, the date on which any
principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Permitted Liens" means (a) Liens on property of (or on shares of Capital
Stock or debt securities of) a Person existing at the time such Person (i) is
merged into or consolidated with the Company or any Restricted Subsidiary or
(ii) becomes a Restricted Subsidiary; provided, however, that such Liens were in
existence prior to the contemplation of such merger, consolidation or
acquisition and do not secure any property or assets of the Company or any
Restricted Subsidiary other than the property or assets subject to the Liens
prior to such merger, consolidation or acquisition; (b) Liens existing on the
Issue Date; (c) Liens in favor of the Company or Liens on any property or assets
of a Subsidiary (or on shares of Capital Stock or debt securities of a
Subsidiary) in favor of the Company or any Restricted Subsidiary; (d) Liens
resulting from the deposit of cash or notes in connection with contracts,
tenders or expropriation proceedings, or to secure workers' compensation, surety
or appeal bonds, costs of litigation when required by law, public and statutory
obligations, obligations under franchise arrangements entered into in the
ordinary course of business and other obligations of a similar nature arising in
the ordinary course of business; (e) Liens securing Indebtedness under the
Senior Credit Facility; (f) Liens securing Indebtedness consisting of
Capitalized Lease Obligations, Purchase Money Indebtedness, mortgage financings,
industrial revenue bonds or other monetary obligations, in each case incurred
solely for the purpose of financing all or any part of the purchase price or
cost of construction or installation of assets used in the business of the
Company or the Restricted Subsidiaries, or repairs, additions or improvements to
such assets; provided, however, that (I) such Liens secure Indebtedness in an
amount not in excess of the original purchase price or the original cost of any
such assets or repair, addition or improvement thereto (plus an amount equal to
the reasonable fees and expenses in connection with the incurrence of such
Indebtedness), (II) such Liens do not extend to any other assets of the Company
or any of the Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets (and
improvements thereto or thereon) repaired, added to or improved), (III) the
incurrence of such Indebtedness is permitted by "-- Certain
Covenants -- Limitation on Additional Indebtedness" above and (IV) such Liens
attach prior to 270 days after such purchase, construction, installation,
repair, addition or improvement; (g) Liens to secure any refinancings (or
successive refinancings), in whole or in part, of any Indebtedness secured by
Liens referred to in the clauses above so long as such Lien does not extend to
any other property (other than improvements thereto); (h) Liens securing letters
of credit entered into in the ordinary course of business and consistent with
past business practice; (i) Liens on and pledges of the capital stock of any
Unrestricted Subsidiary; (j) Liens arising from the rendering of a judgment or
order against the Company or any Restricted Subsidiary that does not give rise
to an Event of Default; (k) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any Restricted Subsidiary in the ordinary course of
business; (l) Liens arising out of any sale of accounts receivable in the
ordinary course to or by a Receivables Subsidiary; (m) Liens on acquired
property or assets of a Restricted Subsidiary to secure Indebtedness of such
Restricted Subsidiary (other than Indebtedness evidenced by Disqualified Stock)
or a guarantee thereof; provided, however, that such Liens were not created in
contemplation of such acquisition; (n) Liens to secure the Indebtedness
described in clause (i) under "-- Certain Covenants -- Limitation on Additional
Indebtedness"; and (o) Liens on assets of Restricted Subsidiaries to secure
Indebtedness of the Company and the Restricted Subsidiaries (other than Debt
Securities).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Productive Assets" means assets of a kind used or usable in the business
of the Company and the Restricted Subsidiaries.
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"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary (i) issued to finance or refinance (including any
extensions or renewals) the purchase or construction of any assets of the
Company or any Restricted Subsidiary or (ii) secured by a Lien on any assets of
the Company or any Restricted Subsidiary where the lender's sole recourse is to
the assets so encumbered in either case to the extent (a) the purchase or
construction costs for such assets are included as an asset on the balance sheet
of the Company in accordance with GAAP and (b) the purchase or construction of
such assets is not part of any acquisition of a Person or a business unit.
"Rating Agencies" means (i) Standard & Poor's, (ii) Moody's and (iii) Duff
& Phelps.
"Rating Category" means (i) with respect to Standard & Poor's, any of the
following categories: BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's, any of the following categories: Ba,
B, Caa, Ca, C and D (or equivalent successor categories); and (iii) with respect
to Duff & Phelps BB, B, CCC and D (or equivalent successor categories). In
determining whether the rating of the applicable Securities has decreased by one
or more gradations, gradations within Rating Categories (+ and - for Standard &
Poor's; 1, 2 and 3 for Moody's; or + and - for Duff & Phelps) shall be taken
into account (e.g., with respect to Standard & Poor's, a decline in a rating
from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one
gradation).
"Rating Date" means the date which is 90 days prior to the earlier of (i) a
Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention by the Company to effect a Change of Control.
"Rating Decline" means the occurrence of the following on, or within 90
days after, the earlier of (i) the occurrence of a Change of Control and (ii)
the date of public notice of the occurrence of a Change of Control or of the
public notice of the intention of the Company to effect a Change of Control
(which period shall be extended so long as the rating of the applicable
Securities is under publicly announced consideration for possible downgrading by
any two of the Rating Agencies): (a) in the event that the applicable Securities
have an Investment Grade Rating, the rating of the applicable Securities by two
of such Rating Agencies shall be reduced below Investment Grade, or (b) in the
event the applicable Securities are rated below Investment Grade by two of such
Rating Agencies on the Rating Date, the rating of the applicable Securities by
any of two Rating Agencies shall be decreased by one or more gradations
(including gradations within Rating Categories as well as between Rating
Categories).
"Receivables Subsidiary" means a bankruptcy-remote Subsidiary of the
Company party to a Trade Receivables Facility. The term "bankruptcy remote"
means that the Receivables Subsidiary's charter and by-laws and certain other
documentation relating to a Trade Receivables Facility will contain provisions
that are intended to prevent such Subsidiary from becoming subject to a
voluntary or involuntary bankruptcy proceeding. These provisions may include a
requirement of one or more directors who are not otherwise affiliated with the
Company.
"Redemption Date" means, with respect to any Security to be redeemed, the
date fixed by the Company for such redemption pursuant to the applicable
Indenture and Securities.
"Restricted Subsidiaries" means all of the Company's existing and future
Subsidiaries that are not designated Unrestricted Subsidiaries on the Issue Date
or in accordance with the covenant "Limitation on Designations of Unrestricted
Subsidiaries."
"Senior Credit Facility" means the Amended and Restated Credit Agreement
dated as of June 9, 1998, among the Company, the financial institutions party
thereto in their capacities as lenders thereunder and Nationsbank, N.A., as
Administrative Agent for the banks, as the same may be amended from time to time
and increased in compliance with the covenant "Limitation on Incurrence of
Additional Indebtedness", and any agreement evidencing (whether initial or
successive) one or more refinancings, modifications, replacements, renewals,
restatements, refundings, deferrals, extensions, substitutions, supplements,
reissuances or resales thereof.
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"Significant Subsidiary" means, at any particular time, any Restricted
Subsidiary that (a) accounted for more than 10% of the consolidated revenues or
Consolidated EBITDA of the Company and the Restricted Subsidiaries on a
consolidated basis for the most recently completed fiscal year of the Company or
(b) was the owner of more than 10% of the consolidated assets of the Company and
the Restricted Subsidiaries on a consolidated basis as at the end of such fiscal
year, all as shown on the consolidated financial statements of the Company and
the Restricted Subsidiaries for such fiscal year.
"Standard & Poor's" means Standard & Poor's Ratings Service and its
successors.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the applicable Securities.
"Subsidiary" means, with respect to any Person, (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such Person, or (ii) any other Person of which at
least a majority of voting interest is at the time, directly or indirectly,
owned by such Person.
"Tender Offer Documents" means the Offer to Purchase dated April 29, 1998
relating to the 8 3/4% Senior Notes and 9 3/8% Senior Subordinated Debentures,
as the same may be amended or supplemented from time to time (other than the
Minimum Condition and Supplemental Indenture Condition set forth therein).
"Trade Receivables Facility" means the arrangements entered into or that
may be entered into by the Company or one or more of its Subsidiaries pursuant
to which the Company or one or more of its Subsidiaries may either transfer to
any other Person or grant a security interest in any trade or other receivables
(whether now existing or arising in the future) and any assets related to such
trade or other receivables including, without limitation, all collateral
securing such trade or other receivables and shall include any contributions of
trade or other receivables and related assets in exchange for the capital stock
of the Receivables Subsidiary and other capital contributions of trade or other
receivables and related assets to the Receivables Subsidiary.
"Treasury Yield" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the date
fixed for redemption (or, if such Statistical Release is no longer published,
any publicly available source of similar data)) most nearly equal to the then
remaining average life of the Securities; provided, that if the average life of
the Securities is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury yield shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the average life of the Securities
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such on the Issue Date and any other Subsidiary designated as such pursuant to
and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries." Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof to vote
in the election of members of the board of directors of such Person.
"Wholly Owned Subsidiary" means any Restricted Subsidiary, 100% of the
Capital Stock of which (other than shares of Capital Stock representing any
director's qualifying shares of investments by foreign nationals mandated by
applicable law not in any event to exceed 5% of the total outstanding Capital
Stock) is owned by the Company, by a Wholly Owned Restricted Subsidiary or by
the Company and a Wholly Owned Restricted Subsidiary.
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BOOK-ENTRY; DELIVERY AND FORM
Securities offered and sold to "qualified institutional buyers" ("QIBs") in
reliance on Rule 144A under the Securities Act will be represented by a single,
permanent Global Security in a definitive, fully registered book-entry form (the
"Rule 144A Global Security," and together with the Regulation S Global Security
(as defined below), the "Global Securities") which will be registered in the
name of Cede & Co., as nominee of DTC and deposited on behalf of purchasers of
the Securities represented thereby with a custodian for DTC for credit to the
respective accounts of the purchasers (or to such other accounts as they may
direct) at DTC.
Securities (a) originally purchased by or transferred to Accredited
Investors (as defined under "Notice to Investors") who are not QIBs or (b) held
by QIBs who elect to take physical delivery of their certificates instead of
holding their interest through the Rule 144A Global Security (and which are thus
ineligible to trade through DTC) (collectively referred to herein as the
"Non-Global Purchasers") will be issued in fully registered form ("Certificated
Securities"). Upon the transfer of such Certificated Securities to a QIB or in
an offshore transaction under Rule 903 or 904 under Regulation S, such
Certificated Securities will, unless such Global Security has previously been
exchanged in whole for Certificated Securities, be exchanged for an interest in
a Global Security upon delivery of appropriate certifications to the Trustee.
For a description of the restrictions on the transfer of Certificated Securities
and any interest in the Rule 144A Global Security, see "Notice to Investors."
Securities offered and sold in reliance on Regulation S will initially be
represented by a single, permanent Global Security in definitive, fully
registered book-entry form (the "Regulation S Global Security") which will be
registered in the name of Cede & Co., as nominee of DTC and deposited on behalf
of the purchasers of the Securities represented thereby with a custodian for DTC
for credit to the respective accounts of the purchasers (or to such other
accounts as they may direct at the Euroclear System ("Euroclear") or Cedel Bank,
societe anonyme ("Cedel"). Prior to the 40th day after the later of the
commencement of the Offering and the Issue Date, interests in the Regulation S
Global Security may only be held through Euroclear or Cedel.
The Global Securities. The Company expects that pursuant to procedures
established by DTC (a) upon deposit of the Global Securities, DTC or its
custodian will credit on its internal system portions of the Global Securities,
which shall be comprised of the corresponding respective amount of the Global
Securities to the respect accounts of persons who have accounts with such
depositary and (b) ownership of the Securities will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC or its nominee (with respect to interests of Participants (as defined
below) and the records of Participants (with respect to interests of persons
other than Participants). Such accounts initially will be designated by or on
behalf of the Initial Purchasers and ownership of beneficial interests in the
Global Securities will be limited to persons who have accounts with DTC
("Participants") or person who hold interests through Participants. QIBs may
hold their interests in the Global Securities directly through DTC if they are
Participants in such system, or indirectly through organizations which are
Participants in such system.
Investors may hold their interests in the Regulation S Global Security
directly through Cedel or Euroclear, if they are participants in such systems,
or indirectly through organizations which are participants in such systems.
Beginning 40 days after the later of the commencement of the Offering and the
Issue Date (but not earlier), investors may also hold such interests through
organizations other than Cedel or Euroclear that are Participants in the DTC
system. Cedel and Euroclear will hold such interests in the Regulation S Global
Security on behalf of their participants through customers' securities accounts
in their respective names on the books of their respective depositaries, which
in turn will hold such interest in the Regulation S Global Security in
customers' securities accounts in the depositaries' names on the books of DTC.
So long as DTC or its nominee is the registered owner or holder of any of
the Securities, DTC or such nominee will be considered the sole owner or holder
of such Securities represented by the Global Securities for all purposes under
the Indenture and under the Securities represented thereby. No beneficial owner
of an interest in the Global Securities will be able to transfer such interest
except in accordance with the applicable procedures of DTC in addition to those
provided for under the Indenture.
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Payments of the principal of, premium (if any) and interest (including
Additional Interest, if any) on the Global Securities will be made to DTC or its
nominee, as the case may be, as the registered owner thereof. None of the
Company, the Trustee or any Paying Agent under the Indenture will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium, if any, and interest (including Additional Interest,
if any) on the Global Securities will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the Global Securities as shown on the records of DTC or
its nominee. The Company also expects that payments by Participants to owners of
beneficial interests in the Global Securities held through such Participants
will be governed by standing instructions and customary practice as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payment will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a Certificated Security for any reason, including
to sell Securities to persons in states which require physical delivery of such
securities or to pledge such securities, such holder must transfer its interest
in the Global Securities in accordance with the normal procedures of DTC and in
accordance with the procedures set forth in the Indenture.
Before the 40th day after the later of the commencement of the Offering and
the Issue Date, transfers by an owner of a beneficial interest in the Regulation
S Global Security to a transferee who takes delivery of such interest through
the Rule 144A Global Security will be made only in accordance with the
applicable procedures and upon receipt by the Trustee and the Company of a
written certification from the transferor of the beneficial interest in the form
provided in the Indenture to the effect that such transfer is being made to a
person whom the transferor reasonably believes is a QIB within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A.
Transfers by an owner of a beneficial interest in the Rule 144A Global Note
to a transferee who takes delivery of such interest through the Regulation S
Global Note, whether before, on or after the 40th day after the later of the
commencement of the Offering and the Issue Date, will be made only upon receipt
by the Trustee and the Company of a certification to the effect that such
transfer is being made in accordance with Regulation S. Transfers of
Certificated Securities held by institutional "accredited investors" to persons
who will hold beneficial interests in the Rule 144A Global Security or the
Regulation S Global Security will be subject to certifications provided by the
Trustee.
Any beneficial interest in one of the Global Securities that is transferred
to a person who takes delivery in the form of an interest in the other Global
Security will, upon transfer, cease to be an interest in such Global Security
and become an interest in the other Global Security and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Security for as long as
it remains such an interest.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Securities (including the presentation of Securities for
exchange as described below) only at the direction of one or more Participants
to whose account the DTC interests in the Rule 144A Global Security are credited
and only in respect of the aggregate principal amount of as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Rule 144A
Global Security for Certificated Securities, which it will distribute to its
Participants and which will be legended as set forth under the heading "Notice
to Investors."
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and facilitate the
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clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global
Securities among Participants of DTC, Euroclear and Cedel, they are under no
obligation to perform such procedures, and such procedures may be discontinued
at any time. None of the Company, the Trustee, Registrar or the Paying Agent
will have any responsibility for the performance by DTC, Euroclear or Cedel or
their respective direct or indirect Participants of their respective obligations
under the rules and procedures governing their operations.
Certificated Securities. Interests in Global Securities will be exchanged
for Certificated Securities if (i) DTC notifies the Company that it is unwilling
or unable to continue as depositary for the Rule 144A Global Securities, or DTC
ceases to be a "Clearing Agency" registered under the Exchange Act, and a
successor depositary is not appointed by the Company within 90 days, or (ii) an
Event of Default has occurred and is continuing with respect to the applicable
Securities. Upon the occurrence of any of the events described in the preceding
sentence, the Company will cause the appropriate Certificated Securities to be
delivered.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Securities were originally sold by the Company on June 9, 1998 to
the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Old Securities to qualified institutional
buyers in reliance on Rule 144A under the Securities. As a condition to the
Purchase Agreement, the Company and the Initial Purchasers entered into the
Registration Rights Agreements on June 9, 1998, the date of the Initial Offering
(the "Issue Date").
The Registration Rights Agreements provide that: (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Company
will file the Exchange Offer Registration Statement with the Commission on or
prior to 60 days after the Issue Date, (ii) unless the Exchange Offer would not
be permitted by applicable law or Commission policy, the Company will use its
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days after the Issue Date and
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its best
efforts to issue, on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement was declared effective by the Commission,
Exchange Notes in exchange for all Notes tendered prior thereto in the Exchange
Offer. The Exchange Offer is being made to satisfy certain of the contractual
obligations of the Company under the Registration Rights Agreements and the
Purchase Agreement.
If the Company fails to issue Exchange Securities in exchange for all Old
Securities properly tendered and not withdrawn in the Exchange Offer within 30
business days of the effective date of the Exchange Offer Registration Statement
(a "Registration Default"), then the Company shall pay as liquidated damages
additional interest ("Additional Interest") on the Securities as to which the
Registration Default exists as set forth herein. If a Registration Default
exists with respect to the Securities, the interest rate on such Securities will
increase, with respect to the first 90-day period (or portion thereof) while a
Registration Default is continuing immediately following the occurrence of such
Registration Default, .25% per annum, such interest rate increasing by an
additional .25% per annum at the beginning of each subsequent 90-day period (or
portion thereof) while a Registration Default is continuing until all
Registration Defaults have been cured, up to a maximum rate of Additional
Interest of 1.00% per annum. Upon the issuance of Exchange Securities in
exchange for all Securities properly tendered and not withdrawn in the Exchange
Offer, Additional Interest as a result of the Registration Default shall cease
to accrue (but any accrued amount shall be payable) and the interest rate on the
Securities will revert to the original rate.
Following the consummation of the Exchange Offer, holders of the Old
Securities who were eligible to participate in the Exchange Offer but who did
not tender their Old Securities will not have any further registration rights
and such Old Securities will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Old Securities could
be adversely affected.
If (i) the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy, (ii) the Exchange Offer is not for any other reason consummated within
180 days after the Issue Date, (iii) any holder of Securities notifies the
Company within a specified time period that (a) due to a change in law or policy
it is not entitled to participate in the Exchange Offer, (b) due to a change in
law or policy it may not resell the Exchange Securities acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such holder or (c) it is a broker-dealer and owns
Securities acquired directly from the Company or an affiliate of the Company, or
(iv) the holders of a majority in aggregate principal amount of the Securities
may not resell the Exchange Securities acquired by them in the Exchange Offer to
the public without restriction under the Securities Act and without restriction
under applicable blue sky or state securities laws, the Company will file with
the Commission a shelf registration statement to cover resales of the Transfer
Restricted Notes (as defined herein) by the holders hereto. The Company will use
its best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission.
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For purposes of the foregoing, "Transfer Restricted Securities" means each
Security until (i) the date on which such Security has been exchanged by a
person other than a broker-dealer referred to in (ii) below for an Exchange
Security in the Exchange Offer, (ii) following the exchange by a broker-dealer
in the Exchange Offer of a Note for an Exchange Security, the date on which such
Exchange Security is sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, as amended or supplemented, (iii) the
date on which such Security has been effectively registered under the Securities
Act and disposed of in accordance with the shelf registration statement, (iv)
the date on which such Security is eligible for distribution to the public
pursuant to Rule 144(k) under the Securities Act (or any similar provision then
in force, but not Rule 144A under the Securities Act), (v) the date on which
such Security shall have been otherwise transferred by the holder thereof and a
new Security not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of such Security shall not
require registration or qualification under the Securities Act or any similar
state law then in force or (vi) such Security ceases to be outstanding.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Securities validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount of
Exchange Securities in exchange for each $1,000 principal amount of outstanding
Old Securities accepted in the Exchange Offer. Holders may tender some or all of
their Old Securities pursuant to the Exchange Offer. However, Old Securities may
be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Securities are the same as the form and
terms of the Old Securities except that (i) the Exchange Securities bear a
different CUSIP Number from the Old Securities, (ii) the Exchange Securities
have been registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the Exchange
Securities will not be entitled to certain rights under the Registration Rights
Agreements, including the provisions providing for an increase in the interest
rate on the Old Securities in certain circumstances relating to the timing of
the Exchange Offer, all of which rights will terminate when the Exchange Offer
is terminated. The Exchange Securities will evidence the same debt as the Old
Securities and will be entitled to the benefits of the respective Indentures.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Securities being tendered. As of the date of this Prospectus, $1,000,000,000
aggregate principal amount of Old Securities were outstanding.
Holders of Old Securities do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law or the Indentures in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old
Securities when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders for the purpose of receiving the Exchange Securities from the Company.
If any tendered Old Securities are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Securities will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Securities in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Securities pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "-- Fees and Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Securities, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
Any such extension, delay in acceptance, termination or amendment will be
followed promptly by oral (confirmed in writing) or written notice thereof to
the Exchange Agent and by making a public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Company may choose to
make any public announcement and subject to applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a press release to an appropriate news
agency.
INTEREST ON THE EXCHANGE SECURITIES
The Exchange Securities will bear interest from their date of issuance.
Holders of Old Securities that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
Exchange Securities. Such interest will be paid with the first interest payment
on the Exchange Securities on December 15, 1998. Interest on the Old Securities
accepted for exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Securities is payable semi-annually on each
December 15 and June 15, commencing on December 15, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Securities may tender such Old Securities in the
Exchange Offer. For a holder to validly tender Old Securities pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents must be received by the Exchange Agent at the
address set forth under "Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date. In addition, prior to 5:00 p.m., New York City time, on
the Expiration Date, either (a) certificates for tendered Old Securities must be
received by the Exchange Agent at such address or (b) such Old Securities must
be transferred pursuant to the procedures for book-entry transfer described
below (and a confirmation of such tender received by the Exchange Agent,
including an Agent's Message if the tendering holder has not delivered a Letter
of Transmittal). The term "Agent's Message" means a message, transmitted by the
book-entry transfer facility, The Depository Trust Company (the "Book-Entry
Transfer Facility"), to and received by the Exchange Agent and forming a part of
a book-entry confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the tendering participant that such
participant has received and agrees to be bound by the Letter of Transmittal and
that the Company may enforce such Letter of Transmittal against such
participant.
By tendering, each holder of Old Securities will represent to the Company
that, among other things, (i) the Exchange Securities to be acquired by such
holder of Old Securities in connection with the Exchange Offer are being
acquired by such holder in the ordinary course of business of such holder, (ii)
such holder is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate in the distribution
of the Exchange Securities, (iii) except as otherwise disclosed in writing, such
holder is not an "affiliate," as defined in Rule 405 under the Securities Act,
of the Company, and (iv) such
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holder acknowledges and agrees that any person participating in the Exchange
Offer with the intention or for the purpose of distributing the Exchange
Securities must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale of the
Exchange Securities acquired by such person and cannot rely on the position of
the Staff of the Commission set forth in the no-action letters that are
discussed under "Resale of the Exchange Securities." In addition, by accepting
the Exchange Offer, such holder (i) will represent and warrant that, if such
holder is a Participating Broker-Dealer, such Participating Broker-Dealer
acquired the Old Securities for its own account as a result of market-making
activities or other trading activities and has not entered into any arrangement
or understanding with the Company or any "affiliate" of the Company (within the
meaning of Rule 405 under the Securities Act) to distribute the Exchange
Securities to be received in the Exchange Offer, and (ii) acknowledges that, by
receiving Exchange Securities for its own account in exchange for Old
Securities, where such Old Securities were acquired as a result of market-making
activities or other trading activities, such Participating Broker-Dealer will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Securities.
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD SECURITIES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD SECURITIES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Securities are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a recognized participant in the Securities
Transfer Agent Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchange Medallion Program (each, a "Medallion
Signature Guarantor"), unless the Old Securities tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of a member firm of a registered national securities exchange, a member
of the NASD or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Securities listed therein, such Old Securities must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old
Securities with the signature thereon guaranteed by a Medallion Signature
Guarantor.
If the Letter of Transmittal or any Old Securities or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
offices of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence
satisfactory to the Company of their authority to so act must be submitted with
the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Securities at the Book-Entry Transfer Facility for the
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purpose of facilitating the Exchange Offer, and, subject to the establishment
thereof, any financial institution that is a participant in the Book-Entry
Transfer Facility's system may make book-entry delivery of Old Securities by
causing such Book-Entry Transfer Facility to transfer such Old Securities into
the Exchange Agent's account with respect to the Old Securities in accordance
with the Book-Entry Transfer Facility's procedures for such transfer. Although
delivery of the Old Securities may be effected through book-entry transfer into
the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate
Letter of Transmittal properly completed and duly executed with any required
signature guarantee (or, in the case of book-entry transfer, an Agent's Message
in lieu thereof) and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Securities and withdrawal of tendered Old
Securities will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Securities not properly tendered or any Old Securities
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole discretion
to waive any defects, irregularities or conditions of tender as to particular
Old Securities. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Securities must be cured within such time as
the Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Securities, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Securities will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Old Securities received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available, (ii) who cannot deliver their Old
Securities, the Letter of Transmittal (or, in the case of book-entry transfer,
an Agent's Message) or any other required documents to the Exchange Agent or
(iii) who cannot complete the procedures for book-entry transfer (including
delivery of an Agent's Message), prior to the Expiration Date, may effect a
tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Old Securities and the principal amount
of Old Securities tendered, stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Securities (or a
confirmation of book-entry transfer of such Securities into the Exchange
Agent's account at the Book-Entry Transfer Facility), and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's
Message), as well as the certificate(s) representing all tendered Old
Securities in proper form for transfer (or a confirmation of book-entry
transfer of such Old Securities into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by
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the Letter of Transmittal are received by the Exchange Agent within three
New York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Securities according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Securities in the Exchange Offer, a letter or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Securities to be withdrawn (the
"Depositor"), (ii) identify the Old Securities to be withdrawn (including the
certificate number(s) and principal amount of such Old Securities, or, in the
case of Old Securities transferred by book-entry transfer, the name and number
of the account at the Book-Entry Transfer Facility to be credited), (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Old Securities were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Securities register the
transfer of such Old Securities into the name of the person withdrawing the
tender and (iv) specify the name in which any such Old Securities are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Old Securities so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Securities
will be issued with respect thereto unless the Old Securities so withdrawn are
validly re-tendered. Any Old Securities which have been tendered but which are
not accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Securities may be re-
tendered by following one of the procedures described above under "-- Procedures
for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Securities for, any Old
Securities, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Old Securities, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer, or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
is not satisfied, the Company may (i) refuse to accept any Old Securities and
return all tendered Old Securities to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Securities tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw such
Old Securities (see "-- Withdrawal of
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Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Old Securities which have not
been withdrawn.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal, and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
THE BANK OF NEW YORK
101 Barclay Street, (7 East) THE BANK OF NEW YORK
New York, New York 10286 101 Barclay Street
Attention: Carolle Montreuil Corporate Trust Services Window
Reorganization Section Ground Level
New York, New York 10286
Attention: Carolle Montreuil
Reorganization Section
</TABLE>
By Facsimile for Eligible Institutions:
(212) 815-6339
Confirmed by Telephone:
(212) 815-3738
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Securities will be recorded at the same carrying value as the
Old Securities as reflected in the Company's accounting records on the date of
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. Certain expenses of the Exchange Offer will be
amortized over the term of the Exchange Securities.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Securities that are not exchanged for Exchange Securities pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such Old
Securities may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) so long as the Old Securities are eligible for resale pursuant
to Rule 144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act in a transaction meeting the requirements of
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Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel reasonably acceptable to the Company), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
RESALE OF THE EXCHANGE SECURITIES
With respect to resales of Exchange Securities, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Securities, whether or not such person is the holder (other than a
person that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who receives Exchange Securities in exchange for Old
Securities in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the Exchange Securities, will be
allowed to resell the Exchange Securities to the public without further
registration under the Securities Act and without delivering to the purchasers
of the Exchange Securities a prospectus that satisfies the requirements of
Section 10 of the Securities Act. However, if any holder acquires Exchange
Securities in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Securities, such holder cannot
rely on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Securities for its own account in exchange for Old Securities, where
such Old Securities were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that, by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. For
a description of the procedures for such resales by Participating
Broker-Dealers, see "Plan of Distribution."
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Securities for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange
Securities received in exchange for Old Securities where such Old Securities
were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any Participating Broker-Dealer for use in connection with any such
resale. In addition, until , 1998 (90 days after the commencement of
the Exchange Offer), all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Securities by Participating Broker-Dealers. Exchange Securities received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
Participating Broker-Dealer and/or the purchasers of any such Exchange
Securities. Any Participating Broker-Dealer that resells the Exchange Securities
that were received by it for its own account pursuant to the Exchange Offer and
any broker or dealer that participates in a distribution of such Exchange
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Exchange Securities and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the acquisition, ownership and disposition of the
Securities, as well as the exchange of Old Securities for Exchange Securities.
Unless the context otherwise requires, all references to Securities includes the
Exchange Securities for purposes of this discussion. This discussion is a
summary for general information only and does not consider all aspects of U.S.
federal income taxation that may be relevant to the purchase, ownership and
disposition of the Securities by a prospective investor in light of such
investor's personal circumstances. This discussion also does not address the
U.S. federal income tax consequences of ownership of Securities not held as
capital assets within the meaning of Section 1221 of the U.S. Internal Revenue
Code of 1986, as amended (the "Code"), or the U.S. federal income tax
consequences to investors subject to special treatment under the U.S. federal
income tax laws, such as dealers in securities or foreign currency, tax-exempt
entities, financial institutions, insurance companies, persons that hold the
Securities as part of a "straddle," a "hedge" or a "conversion transaction,"
persons that have a "functional currency" other than the U.S. dollar, and
investors in pass-through entities. This discussion is generally limited to the
tax consequences to initial holders that purchase the Securities at the "issue
price." For this purpose, the "issue price" of a Security is the first price at
which a substantial part of the Securities are sold for money (excluding sales
to bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers). In addition, this
discussion does not describe any tax consequences arising under U.S. federal
gift and estate taxes (except to the limited extent set forth below under
"Non-U.S. Holders") or under the tax laws of any state, local or foreign
jurisdiction.
This discussion is based upon the Code, existing regulations thereunder,
and current administrative rulings and court decisions. All of the foregoing is
subject to change, possibly on a retroactive basis, and any such change could
affect the continuing validity of this discussion.
U.S. HOLDERS
The following discussion is limited to certain material U.S. federal income
tax consequences relevant to a Holder of a Security that is (i) a citizen or
resident (as defined in Section 7701(b)(1) of the Code) of the United States,
(ii) a corporation organized under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate, the income of which
is subject to U.S. federal income tax regardless of the source or (iv) a trust
with respect to which a court within the United States is able to exercise
primary supervision over its administration and one or more United States
persons have the authority to control all of its substantial decisions (a "U.S.
Holder"). Certain material U.S. federal income tax consequences relevant to a
holder other than a U.S. Holder are discussed separately below under the heading
"Non-U.S. Holders."
Stated Interest
Interest paid on a Security will be taxable to a U.S. Holder as ordinary
income at the time it accrues or is received in accordance with such holder's
method of accounting for U.S. federal income tax purposes. The interest rate on
the Securities is subject to increase in certain circumstances, including if the
Securities are not registered with the Commission within prescribed time
periods. The Company intends to treat the possibility that the Company will pay
such additional interest as subject to either a remote or incidental
contingency, within the meaning of applicable Treasury regulations and,
therefore, the Company believes that such additional interest will be taxable to
U.S. Holders at the time it accrues or is received in accordance with each such
holder's method of accounting.
Market Discount
If a Security is acquired at a "market discount," some or all of any gain
realized upon a sale, other disposition, or payment at maturity (or earlier) of
such Security, or some or all of the proceeds of a partial principal repayment
before maturity of such Security, may be treated as ordinary income, as
described below. For this purpose, "market discount" is the excess, if any, of
the stated redemption price at maturity over the purchase price, subject to a
statutory de minimis exception. Unless a U.S. Holder has elected to include
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market discount in income as it accrues, any gain realized on a disposition of
such a Security (other than in connection with certain nonrecognition
transactions) or payment at maturity (or earlier), or some or all of the
proceeds of a partial repayment before maturity, will generally be treated as
ordinary income to the extent of the market discount accrued during the period
the Security was held. Such a U.S. Holder may also be required to defer
deductions for any interest paid on indebtedness allocable to that Security
until such income is realized.
Bond Premium
In general, if a Security is purchased at a price exceeding the principal
amount of that Security, the Security has "bond premium." A U.S. Holder may
generally elect to amortize bond premium over the remaining term of that
Security (or, in certain circumstances, until an earlier call date).
An election to amortize premium will apply to amortizable bond premium on
all Securities and other taxable debt securities held by the electing U.S.
Holder on or after the beginning of the U.S. Holder's first taxable year to
which the election applies, and may be revoked only with the consent of the
Internal Revenue Service.
Exchange Offer
The exchange of Securities for the Exchange Securities pursuant to the
Exchange Offer should not be a taxable exchange for U.S. federal income tax
purposes. As a result, there should be no U.S. federal income tax consequences
to U.S. Holders exchanging the Securities for the Exchange Securities pursuant
to the Exchange Offer. A U.S. Holder should have the same adjusted basis and
holding period in the Exchange Securities as it had in the Securities
immediately before the exchange.
Sale, Exchange or Redemption of the Securities
Upon the sale, exchange or redemption of a Security, a U.S. Holder
generally will recognize gain or loss equal to the difference between (i) the
amount realized on the disposition (other than amounts attributable to accrued
interest not yet taken into income) and (ii) the U.S. Holder's tax basis in the
Security. A U.S. Holder's tax basis in a Security generally will equal the cost
of the Securities to the U.S. Holder. Such gain or loss will generally
constitute capital gain or loss.
Recently enacted legislation revised the holding period and tax rates
applicable to certain capital gains. For non-corporate U.S. Holders, long-term
capital gain from the sale or exchange of a Security is taxed at different rates
depending upon whether the holding period is more than one year but not more
than 18 months, or more than 18 months. U.S. Holders are advised to consult
their tax advisors concerning the new provisions on the taxation of capital
gains.
Backup Withholding and Information Reporting
Under the Code, a U.S. Holder of a Security may be subject, under certain
circumstances, to information reporting and/or backup withholding at a 31% rate
on payments of interest on, or the gross proceeds from disposition of, a
Security. This withholding applies only if a U.S. Holder (i) fails to furnish
its social security or other taxpayer identification number ("TIN") within a
reasonable time after it is requested, (ii) furnishes an incorrect TIN, (iii)
fails to report interest or dividends properly, or (iv) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is a correct number and that the Holder is not
subject to backup withholding. Any amount withheld from a payment to a U.S.
Holder under the backup withholding rules is allowable as a credit (and may
entitle such holder to a refund) against such holder's U.S. federal income tax
liability, provided that the required information is furnished to the IRS.
Certain persons are exempt from backup withholding, including corporations and
financial institutions. Holders of Securities should consult their tax advisors
as to their qualification for an exemption from backup withholding and the
procedure for obtaining such an exemption.
65
<PAGE> 72
NON-U.S. HOLDERS
The following discussion is limited to certain material U.S. federal income
tax consequences relevant to a Holder of a Security that is not a U.S. Holder (a
"Non-U.S. Holder"). This discussion does consider all aspects of U.S. federal
income and estate taxation that may be relevant to the purchase, ownership or
disposition of the Securities by a Non-U.S. Holder in light of such holder's
particular circumstances, including holding the Securities through a
partnership. For example, persons who are partners in foreign partnerships or
beneficiaries of foreign trusts or estates and who are subject to U.S. federal
income tax because of their own status, such as U.S. residents or foreign
persons engaged in a trade or business in the United States, may be subject to
U.S. federal income tax even though the foreign partnership, trust or estate is
not itself subject to U.S. federal income tax on the disposition of its
Securities. In addition, persons who hold the Securities through hybrid entities
(i.e., entities that are fiscally transparent for U.S. tax purposes but not for
foreign law purposes) may not be entitled to any applicable treaty benefits. For
purposes of the following discussion, interest and gain on the sale, exchange or
other disposition of the Securities will be considered "U.S. trade or business
income" if such income or gain is (i) effectively connected with the conduct of
a U.S. trade or business or (ii) in the case of a resident of a country with
which the United States has an income tax treaty, attributable to a U.S.
permanent establishment (or to a fixed base) in the United States.
Stated Interest
Generally, any interest (including Additional Interest) paid to a Non-U.S.
Holder of a Security that is not U.S. trade or business income will not be
subject to U.S. federal income tax if the interest qualifies as "portfolio
interest." Interest on the Securities will qualify as portfolio interest if the
Non-U.S. Holder (i) does not actually or constructively own 10% or more of the
total voting power of all voting stock of the Company; (ii) is not a "controlled
foreign corporation" with respect to which the Company is a "related person"
within the meaning of the Code; (iii) is not a bank extending credit pursuant to
a loan agreement entered into in the ordinary course of its trade or business;
and (iv) the beneficial owner, under penalty of perjury, certifies that it is
not a U.S. person and such certificate provides the beneficial owner's name and
address.
The gross amount of interest paid to a Non-U.S. Holder that does not
qualify for the portfolio interest exception and that is not U.S. trade or
business income will be subject to U.S. withholding tax at the rate of 30%,
unless a U.S. income tax treaty reduces or eliminates withholding. U.S. trade or
business income will be taxed on a net basis at regular U.S. federal income tax
rates rather than the 30% withholding rate. To claim the benefit of a tax treaty
or to claim exemption from withholding because the income is U.S. trade or
business income, the Non-U.S. Holder must provide a properly executed Form 1001
or 4224 (or such successor forms as the IRS designates), as applicable, prior to
the payment of interest. These forms must be periodically updated. Under
newly-finalized regulations, not currently in effect, the Forms 1001 and 4224
will be replaced by Form W-8. Also under these newly-finalized regulations, a
Non-U.S. Holder who is claiming the benefits of a tax treaty may be required to
obtain a U.S. taxpayer identification number and to provide certain documentary
evidence issued by foreign governmental authorities to prove residence in the
foreign country. Certain special procedures are provided in these
newly-finalized regulations for payments through qualified intermediaries. These
newly-finalized regulations are effective January 1, 2000. However, valid
withholding certificates that are held on December 31, 1999 (including Forms
1001, 4224 and W-8) will remain valid until the earlier of December 31, 2000 or
the expiration date of the certificate under the rules currently in effect.
NON-U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
APPLICATION OF THE CERTIFICATION REQUIREMENTS IN THE NEWLY-FINALIZED
REGULATIONS.
Sale, Exchange or Redemption of Securities
Except as described below and subject to the discussion of backup
withholding below, any gain realized by a Non-U.S. Holder on the sale, exchange
or redemption of a Security generally will not be subject to U.S. federal income
tax, unless (i) the gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who holds the Security
as a capital asset and is present in the
66
<PAGE> 73
United States for 183 days or more during the taxable year of the disposition or
(iii) the Non-U.S. Holder is subject to rules applicable to certain former
citizens and residents of the United States.
Federal Estate Tax
Securities held (or treated as held) by an individual who is a Non-U.S.
Holder at the time of his or her death will not be subject to U.S. federal
estate tax, provided the individual did not actually or constructively own 10%
or more of the total voting power of all voting stock of the Company and
provided income on the Securities was not U.S. trade or business income.
Information Reporting and Backup Withholding
The Company must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to U.S. withholding tax or that is exempt from
withholding pursuant to a tax treaty or the portfolio interest exception. Copies
of these information returns also may be made available under the provisions of
a specific treaty or agreement to the tax authorities of the country in which
the Non-U.S. Holder resides. In the case of interest (including original issue
discount, if any) paid to Non-U.S. Holders, information reporting and backup
withholding (at a rate of 31%) does not apply to such payments if the holder
makes the requisite certification or has otherwise established an exemption
(provided that neither the payor nor its paying agent has actual knowledge that
the holder is a U.S. Holder or that the conditions of any other exemption are
not, in fact, satisfied).
Backup withholding and information reporting likewise do not apply to the
Company's payments of principal on the Securities to a Non-U.S. Holder, if the
holder certifies as to its non-U.S. status under penalty of perjury or otherwise
establishes an exemption (provided that neither the Company nor its paying agent
has actual knowledge that the holder is a U.S. Holder or that the conditions of
any other exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of Securities to or
through the U.S. office of any broker, U.S. or foreign, are subject to
information reporting and possible backup withholding unless the owner certifies
as to its non-U.S. status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. Holder or that the conditions of any other exemption are not,
in fact, satisfied.
The payment of the proceeds from the disposition of a Security to or
through a non-U.S. office of a non-U.S. broker that is not a "U.S. related
person" will not be subject to information reporting or backup withholding. For
this purpose, a "U.S. related person" is a foreign person with certain
enumerated relationships with the U.S.
In the case of the payment of proceeds from the disposition of Securities
to or through a non-U.S. office of a broker that is either a U.S. person or a
U.S. related person, the regulations require information reporting on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding does not apply to payments made through foreign offices of a broker
that is not a U.S. person or a U.S. related person (absent actual knowledge that
the payee is a U.S. Holder).
Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY,
EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX
CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF THE SECURITIES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
67
<PAGE> 74
LEGAL MATTERS
The validity of the Exchange Securities being offered hereby and certain
other legal matters in connection with the Offering are being passed upon for
the Company by Weil, Gotshal & Manges LLP.
EXPERTS
The consolidated financial statements (and schedule incorporated by
reference) of WestPoint Stevens Inc. as of December 31, 1997 and 1996, and for
each of the three years in the period ended December 31, 1997, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing and
incorporated by reference elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.
68
<PAGE> 75
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Condensed Consolidated Balance Sheets (Unaudited)...........
F-2
Condensed Consolidated Statements of Income (Unaudited).....
F-3
Condensed Consolidated Statements of Cash Flows
(Unaudited)...............................................
F-4
Condensed Consolidated Statements of Stockholders' Equity
(Deficit)(Unaudited)......................................
F-5
Notes to Condensed Consolidated Financial Statements
(Unaudited)...............................................
F-6
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995
Report of Ernst & Young LLP, Independent Auditors...........
F-9
Consolidated Balance Sheets.................................
F-10
Consolidated Statements of Income...........................
F-12
Consolidated Statements of Stockholders' Equity (Deficit)...
F-13
Consolidated Statements of Cash Flows.......................
F-14
Notes to Consolidated Financial Statements..................
F-15
</TABLE>
F-1
<PAGE> 76
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 9,873 $ 17,433
Accounts receivable....................................... 102,239 92,990
Inventories............................................... 376,325 340,818
Prepaid expenses and other current assets................. 19,337 22,227
---------- ----------
Total current assets........................................ 507,774 473,468
Property, Plant and Equipment, net.......................... 705,743 707,151
Other Assets
Deferred financing fees................................... 18,262 19,231
Prepaid pension and other assets.......................... 47,645 49,033
Goodwill.................................................. 36,988 37,223
---------- ----------
$1,316,412 $1,286,106
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility.................................... $ 87,714 $ 37,683
Current portion of long-term debt......................... 3,750 3,750
Accrued interest payable.................................. 25,734 6,820
Trade accounts payable.................................... 58,970 75,655
Other accounts payable and accrued liabilities............ 131,373 137,382
---------- ----------
Total current liabilities................................... 307,541 261,290
Long-Term Debt.............................................. 1,142,500 1,146,250
Noncurrent Liabilities
Deferred income taxes..................................... 222,318 217,178
Other liabilities......................................... 81,971 84,402
---------- ----------
Total noncurrent liabilities................................ 304,289 301,580
Stockholders' Equity (Deficit).............................. (437,918) (423,014)
---------- ----------
$1,316,412 $1,286,106
========== ==========
</TABLE>
See accompanying notes
F-2
<PAGE> 77
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $398,706 $357,101
Cost of goods sold.......................................... 299,185 267,872
-------- --------
Gross earnings............................................ 99,521 89,229
Selling, general and administrative expenses................ 55,088 50,718
-------- --------
Operating earnings........................................ 44,433 38,511
Interest expense............................................ 25,704 23,409
Other expense, net.......................................... 401 784
-------- --------
Income from continuing operations before income tax
expense................................................ 18,328 14,318
Income tax expense.......................................... 6,625 5,343
-------- --------
Income from continuing operations........................... 11,703 8,975
Income from discontinued operations......................... -- 1,133
-------- --------
Net income................................................ $ 11,703 $ 10,108
======== ========
Basic net income per common share:
Continuing operations..................................... $ .20 $ .14
Discontinued operations................................... -- .02
-------- --------
Net income per common share............................... $ .20 $ .16
======== ========
Diluted net income per common share:
Continuing operations..................................... $ .19 $ .14
Discontinued operations................................... -- .02
-------- --------
Net income per common share............................... $ .19 $ .16
======== ========
Basic average common shares outstanding..................... 58,919 62,118
Dilutive effect of stock options and stock bonus plan..... 1,991 1,572
-------- --------
Diluted average common shares outstanding................... 60,910 63,690
======== ========
</TABLE>
See accompanying notes
F-3
<PAGE> 78
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 11,703 $ 10,108
Adjustment to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and other amortization.................... 20,353 19,899
Deferred income taxes.................................. 5,529 5,793
Changes in working capital............................. (34,539) (55,047)
Other -- net........................................... 389 (15,303)
--------- ---------
Net cash provided by (used for) operating activities........ 3,435 (34,550)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (19,382) (35,181)
Net proceeds from sale of assets.......................... 209 73
Purchase of businesses.................................... -- (57,170)
--------- ---------
Net cash used for investing activities...................... (19,173) (92,278)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Senior Credit Facility:
Borrowings............................................. 232,500 454,460
Repayments............................................. (186,219) (322,412)
Net proceeds from Trade Receivables Program............... (7,835) (4,977)
Purchase of common stock for treasury..................... (31,549) (2,315)
Proceeds from issuance of stock........................... 1,281 3,044
--------- ---------
Net cash provided by financing activities................... 8,178 127,800
--------- ---------
Net increase (decrease) in cash and cash equivalents........ (7,560) 972
Cash and cash equivalents at beginning of period............ 17,433 14,029
--------- ---------
Cash and cash equivalents at end of period.................. $ 9,873 $ 15,001
========= =========
</TABLE>
See accompanying notes
F-4
<PAGE> 79
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK AND MINIMUM
CAPITAL IN TREASURY STOCK PENSION
COMMON EXCESS OF ------------------- ACCUMULATED LIABILITY
SHARES PAR VALUE SHARES AMOUNT DEFICIT ADJUSTMENT TOTAL
------ ------------ ------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997.... 70,296 $337,069 (10,895) $(134,223) $(625,047) $(813) $(423,014)
Exercise of management stock
options including tax
benefit................... 169 1,670 (7) -- -- -- 1,670
Issuance of stock pursuant
to Stock Bonus Plan
including tax benefit..... -- 851 212 2,421 -- -- 3,272
Purchase of treasury
shares.................... -- -- (1,319) (31,549) -- -- (31,549)
Net income.................. -- -- -- -- 11,703 -- 11,703
------ -------- ------- --------- --------- ----- ---------
Balance, March 31, 1998....... 70,465 $339,590 (12,009) $(163,351) $(613,344) $(813) $(437,918)
====== ======== ======= ========= ========= ===== =========
</TABLE>
See accompanying notes
F-5
<PAGE> 80
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 month period ended March 31, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. 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,
1997.
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 March 31, 1998 and December 31,
1997 (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
Finished goods.............................................. $189,872 $154,539
Work in progress............................................ 141,928 139,410
Raw materials and supplies.................................. 55,245 58,876
LIFO reserve................................................ (10,720) (12,007)
-------- --------
$376,325 $340,818
======== ========
</TABLE>
3. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS
Indebtedness is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Short-term indebtedness
Senior Credit Facility Revolver........................... $ 87,714 $ 37,683
9% Sinking Fund Debentures due 2017....................... 3,750 3,750
---------- ----------
$ 91,464 $ 41,433
========== ==========
Long-term indebtedness
Senior Credit Facility Revolver........................... $ 125,000 $ 125,000
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....................... 67,500 71,250
---------- ----------
$1,142,500 $1,146,250
========== ==========
</TABLE>
F-6
<PAGE> 81
WESTPOINT STEVENS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS -- (CONTINUED)
At March 31, 1998 and December 31, 1997, $103.9 million and $111.8 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.
4. DISCONTINUED OPERATIONS
On August 27, 1997 the Company closed a transaction pursuant to which
WestPoint Stevens sold its subsidiaries AIH Inc., Alamac Knit Fabrics, Inc. and
Alamac Enterprises Inc. (collectively, "Alamac Knit Fabrics subsidiary" or
"Alamac"), other than cash, accounts receivable of approximately $42.5 million
and a yarn mill located in Whitmire, S.C., to Dyersburg Corporation for
approximately $126 million. The Whitmire facility was transferred by the Company
to Home Fashions to support the Company's expansion of its sheeting production
capacity. As a result of the transaction, the Company now reports the Alamac
Knit Fabrics subsidiary as a discontinued operation and the accompanying
financial statements have been adjusted and restated accordingly.
The condensed consolidated statements of income relating to the
discontinued operations are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,1997
--------------
<S> <C>
Net sales................................................... $61,690
Gross earnings.............................................. 7,845
Operating earnings.......................................... 3,610
Interest expense............................................ 1,992
Income from discontinued operations before income tax
expense................................................... 1,740
Income tax expense.......................................... 607
Income from discontinued operations......................... $ 1,133
</TABLE>
5. SUBSEQUENT EVENT
On April 29, 1998, the Company announced cash tender offers and consent
solicitations for all of its outstanding 8 3/4% Senior Notes due 2001 (the
"Notes") and its 9 3/8% Senior Subordinated Debentures due 2005 (the
"Debentures"). The purchase price for the Notes and Debentures will be based on
a fixed spread of 37.5 basis points and 50.0 basis points, respectively, over
the yield of the 5 5/8% U.S. Treasury Notes due November 30, 1998, on the second
business day prior to the expiration date. The tender offers are expected to
remain open until 12:00 midnight New York City time on May 27, 1998, unless they
are extended. WestPoint Stevens expects to purchase the tendered notes with the
proceeds from one or more series of newly issued debt securities. The tender
offer for each series of notes is contingent, among other things, upon the
holders of a majority of each series of notes tendering their notes and
consenting to the indenture amendments and upon the Company's ability to issue
new debt, at acceptable terms and conditions, to raise financing to pay for the
tender offers. The tender offer for each series of notes is also conditioned
upon the satisfaction of the conditions of the other offer.
F-7
<PAGE> 82
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-8
<PAGE> 83
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND STOCKHOLDERS
WESTPOINT STEVENS INC.
We have audited the accompanying consolidated balance sheets of WestPoint
Stevens Inc. as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity (deficit), and cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
WestPoint Stevens Inc. at December 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1997 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Columbus, Georgia
February 5, 1998
F-9
<PAGE> 84
WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $ 17,433 $ 14,029
Accounts receivable (less allowances of $21,894 and
$22,861, respectively)................................. 92,990 66,949
Inventories............................................... 340,818 299,651
Prepaid expenses and other current assets................. 22,227 14,939
---------- ----------
Total current assets.............................. 473,468 395,568
Property, Plant and Equipment
Land...................................................... 6,463 8,271
Buildings and improvements................................ 270,360 276,935
Machinery and equipment................................... 779,867 737,253
Leasehold improvements.................................... 11,257 13,902
---------- ----------
1,067,947 1,036,361
Less accumulated depreciation and amortization............ (360,796) (330,393)
---------- ----------
Net property, plant and equipment................. 707,151 705,968
Other Assets
Deferred financing fees................................... 19,231 23,108
Prepaid pension and other assets.......................... 49,033 32,355
Goodwill.................................................. 37,223 --
---------- ----------
Total other assets................................ 105,487 55,463
---------- ----------
$1,286,106 $1,156,999
========== ==========
</TABLE>
See accompanying notes.
F-10
<PAGE> 85
WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility.................................... $ 37,683 $ 24,000
Current portion of long-term debt......................... 3,750 --
Accrued interest payable.................................. 6,820 6,525
Accounts payable.......................................... 75,655 73,475
Other accrued liabilities................................. 137,382 150,715
---------- ----------
Total current liabilities......................... 261,290 254,715
Long-Term Debt.............................................. 1,146,250 1,075,000
Noncurrent Liabilities
Deferred income taxes..................................... 217,178 179,057
Other liabilities......................................... 84,402 98,625
---------- ----------
Total noncurrent liabilities...................... 301,580 277,682
Stockholders' Equity (Deficit)
Common Stock and capital in excess of par value:
Common Stock, $.01 par value; 75,000,000 shares
authorized; 70,296,310 and 69,414,500 shares issued,
respectively.......................................... 337,069 329,394
Accumulated deficit....................................... (625,047) (703,068)
Treasury stock; 10,895,242 and 7,711,098 shares at cost,
respectively........................................... (134,223) (70,316)
Minimum pension liability adjustment, net of taxes of $478
and $3,763, respectively............................... (813) (6,408)
---------- ----------
Total stockholders' equity (deficit).............. (423,014) (450,398)
---------- ----------
$1,286,106 $1,156,999
========== ==========
</TABLE>
See accompanying notes.
F-11
<PAGE> 86
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Net sales............................................. $1,657,511 $1,501,795 $ 1,418,157
Cost of goods sold.................................... 1,237,657 1,129,386 1,059,044
---------- ---------- -----------
Gross earnings.............................. 419,854 372,409 359,113
Selling, general and administrative expenses.......... 204,981 183,891 180,391
Amortization of excess reorganization value........... -- -- 152,446
---------- ---------- -----------
Operating earnings.......................... 214,873 188,518 26,276
Interest expense...................................... 102,172 94,505 93,488
Other expense-net..................................... 2,461 2,976 3,154
---------- ---------- -----------
Income (loss) from continuing operations
before income tax expense................. 110,240 91,037 (70,366)
Income tax expense.................................... 40,982 33,085 31,970
---------- ---------- -----------
Income (loss) from continuing operations.............. 69,258 57,952 (102,336)
Income (loss) from discontinued operations............ 2,625 (287) (27,512)
Gain on sale of discontinued operations............... 6,138 -- --
---------- ---------- -----------
Net income (loss)........................... $ 78,021 $ 57,665 $ (129,848)
========== ========== ===========
Basic net income (loss) per common share:
Continuing operations............................... $ 1.14 $ .92 $ (1.57)
Discontinued operations............................. .04 -- (.42)
Gain on sale of discontinued operations............. .10 -- --
---------- ---------- -----------
Net income (loss) per common share.................. $ 1.28 $ .92 $ (1.99)
========== ========== ===========
Diluted net income (loss) per common share:
Continuing operations............................... $ 1.11 $ .91 $ (1.57)
Discontinued operations............................. .04 -- (.42)
Gain on sale of discontinued operations............. .10 -- --
---------- ---------- -----------
Net income (loss) per common share.................. $ 1.25 $ .91 $ (1.99)
========== ========== ===========
Basic average common shares outstanding............... 61,078 62,656 65,398
Dilutive effect of stock options and stock
bonus plan....................................... 1,576 1,018 --
---------- ---------- -----------
Diluted average common shares outstanding............. 62,654 63,674 65,398
========== ========== ===========
</TABLE>
See accompanying notes.
F-12
<PAGE> 87
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK MINIMUM
AND CAPITAL TREASURY STOCK PENSION
COMMON IN EXCESS OF ------------------- ACCUMULATED LIABILITY
SHARES PAR VALUE SHARES AMOUNT DEFICIT ADJUSTMENT TOTAL
------ ------------ ------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995.............. 34,319 $324,393 (663) $ (6,794) $(630,885) $(23,914) $(337,200)
Stock split effected as a stock
dividend.......................... 34,319 -- (662) -- -- -- --
------ -------- ------- --------- --------- -------- ---------
Balance, January 1, 1995, as
restated............................ 68,638 324,393 (1,325) (6,794) (630,885) (23,914) (337,200)
Exercise of management stock options
including tax benefit............. 556 3,490 -- -- -- -- 3,490
Purchase of treasury shares......... -- -- (3,917) (34,257) -- -- (34,257)
Redemption of purchase rights....... -- (33) -- -- -- -- (33)
Net loss............................ -- -- -- -- (129,848) -- (129,848)
Change in minimum pension liability
adjustment........................ -- -- -- -- -- (8,089) (8,089)
------ -------- ------- --------- --------- -------- ---------
Balance, December 31, 1995............ 69,194 327,850 (5,242) (41,051) (760,733) (32,003) (505,937)
Exercise of management stock options
including tax benefit............. 220 1,532 -- -- -- -- 1,532
Issuance of stock pursuant to Stock
Bonus Plan including tax
benefit........................... -- 12 116 1,226 -- -- 1,238
Purchase of treasury shares......... -- -- (2,585) (30,491) -- -- (30,491)
Net income.......................... -- -- -- -- 57,665 -- 57,665
Change in minimum pension liability
adjustment........................ -- -- -- -- -- 25,595 25,595
------ -------- ------- --------- --------- -------- ---------
Balance, December 31, 1996............ 69,414 329,394 (7,711) (70,316) (703,068) (6,408) (450,398)
Exercise of management stock options
including tax benefit............. 882 7,367 (13) -- -- -- 7,367
Issuance of stock pursuant to Stock
Bonus Plan including tax
benefit........................... -- 308 198 2,240 -- -- 2,548
Purchase of treasury shares......... -- -- (3,369) (66,147) -- -- (66,147)
Net income.......................... -- -- -- -- 78,021 -- 78,021
Change in minimum pension liability
adjustment........................ -- -- -- -- -- 5,595 5,595
------ -------- ------- --------- --------- -------- ---------
Balance, December 31, 1997............ 70,296 $337,069 (10,895) $(134,223) $(625,047) $ (813) $(423,014)
====== ======== ======= ========= ========= ======== =========
</TABLE>
See accompanying notes.
F-13
<PAGE> 88
WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss)..................................... $ 78,021 $ 57,665 $(129,848)
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Amortization of excess reorganization value....... -- -- 177,675
Depreciation and other amortization............... 77,225 76,988 80,379
Gain on sale of discontinued operations........... (6,138) -- --
Deferred income taxes............................. 34,508 26,153 26,172
Changes in assets and liabilities excluding the
effect of acquisitions, dispositions and the
Trade Receivables Program:
Accounts receivable............................. 1,566 3,939 (2,694)
Inventories..................................... (54,024) 20,817 (23,105)
Prepaid expenses and other current assets....... (6,760) 4,567 (5,522)
Accrued interest payable........................ 283 (118) 113
Accounts payable and other accrued
liabilities.................................. (18,113) (10,046) 15,971
Other-net....................................... (22,976) (8,964) (34,398)
----------- --------- ---------
Total adjustments............................ 5,571 113,336 234,591
----------- --------- ---------
Net cash provided by operating activities.............. 83,592 171,001 104,743
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................. (152,137) (99,943) (102,197)
Net proceeds from sale of business................... 120,840 -- --
Net proceeds from sale of assets..................... 1,081 1,098 3,066
Purchase of businesses............................... (57,170) -- --
----------- --------- ---------
Net cash used for investing activities................. (87,386) (98,845) (99,131)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Senior Credit Facility:
Borrowings........................................ 1,177,299 645,500 564,500
Repayments........................................ (1,088,616) (694,500) (499,500)
Net proceeds from Trade Receivables Program.......... (21,233) 12,045 (391)
Proceeds from issuance of Common Stock............... 5,895 1,332 2,600
Purchase of Common Stock for treasury................ (66,147) (30,491) (34,257)
Payment of deferred taxes............................ -- -- (32,500)
Redemption of purchase rights........................ -- -- (33)
----------- --------- ---------
Net cash provided by (used for) financing activities... 7,198 (66,114) 419
----------- --------- ---------
Net increase in cash and cash equivalents.............. 3,404 6,042 6,031
Cash and cash equivalents at beginning of period....... 14,029 7,987 1,956
----------- --------- ---------
Cash and cash equivalents at end of period............. $ 17,433 $ 14,029 $ 7,987
=========== ========= =========
</TABLE>
See accompanying notes.
F-14
<PAGE> 89
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
BUSINESS. WestPoint Stevens Inc. (the "Company") is a manufacturer and
marketer of bed and bath products, including sheets, pillowcases, comforters,
blankets, bedspreads, towels and related products. The Company conducts its
operations in the consumer home fashions (bed and bath products) industry.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of the
Company include the accounts of the Company and all of its subsidiaries. All
material intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES. The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CONCENTRATIONS OF CREDIT RISK. Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash investments and trade accounts receivable.
The Company maintains cash and cash equivalents and certain other financial
instruments with various financial institutions. The Company performs periodic
evaluations of the relative credit standing of those financial institutions that
are considered in the Company's investment strategy.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base. However, as of December 31, 1997, substantially all of the Company's
receivables were from companies in the retail industry.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents. Short-term investments (consisting primarily of commercial paper
and certificates of deposit) totaling approximately $17 million and $14 million
are included in cash and cash equivalents at December 31, 1997 and 1996,
respectively. These investments are carried at cost, which approximates market
value.
INVENTORIES. Inventory costs include material, labor and factory overhead.
Inventories are stated at the lower of cost or market (net realizable value). At
December 31, 1997 and 1996, approximately 84% and 85%, respectively, of the
Company's inventories are valued at the lower of cost or market using the
"dollar value" last-in, first-out ("LIFO") method. The remainder of the
inventories (approximately $53.4 million and $44.1 million at December 31, 1997
and 1996, respectively) are valued at the lower of cost (substantially first-in,
first-out method) or market.
Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Finished goods.............................................. $154,539 $134,690
Work in progress............................................ 139,410 114,140
Raw materials and supplies.................................. 58,876 71,038
LIFO reserve................................................ (12,007) (20,217)
-------- --------
$340,818 $299,651
======== ========
</TABLE>
PROPERTY, PLANT AND EQUIPMENT. As a result of the adoption of Fresh Start
reporting, as of September 30, 1992, property, plant and equipment were adjusted
to their estimated fair values and historical accumulated depreciation was
eliminated. Additions since September 30, 1992 are stated at cost.
F-15
<PAGE> 90
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES -- (CONTINUED)
Depreciation is computed over estimated useful lives using the
straight-line method for financial reporting purposes and accelerated methods
for income tax reporting. Depreciation expense was approximately $76.5 million,
$77.0 million, and $80.4 million in the years ended December 31, 1997, 1996 and
1995, respectively.
Estimated useful lives for property, plant and equipment are as follows:
<TABLE>
<S> <C>
Buildings and improvements.................................. 10 to 40 Years
Machinery and equipment..................................... 3 to 18 Years
Leasehold improvements...................................... Lease Terms
</TABLE>
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCATED TO IDENTIFIABLE ASSETS
("EXCESS REORGANIZATION VALUE"). In September 1992, the Company completed a
"prepackaged" plan of reorganization (the "Plan") and in accordance with SOP
90-7 the Company established a new basis of accounting ("Fresh Start"). In Fresh
Start reporting, the Company's assets and liabilities were adjusted to their
fair values as of September 30, 1992. The excess of the reorganization value
over the value of identifiable assets, $637.5 million, was reported as Excess
Reorganization Value at September 30, 1992. Excess Reorganization Value has been
amortized on a straight-line basis over three years and was fully amortized by
September 1995.
HEDGING TRANSACTIONS. The Company engages in hedging activities within the
normal course of its business. Management has been authorized to manage exposure
to price fluctuations relevant to the purchase of cotton through the use of a
variety of derivative nonfinancial instruments. Derivative nonfinancial
instruments require or permit settlement by the delivery of commodities and
include exchange traded commodity futures contracts and options. Gains and
losses on these hedges, which were not material at December 31, 1997 and 1996,
are deferred and subsequently recognized in income as cost of goods sold in the
same period as the hedged item. The Company does not hold or issue derivative
instruments for trading purposes.
INCOME TAXES. The Company accounts for income taxes under Statement No.
109, Accounting for Income Taxes. Under Statement 109, deferred income taxes are
provided at the enacted marginal rates on the differences between the financial
statement and income tax bases of assets and liabilities.
PENSION PLANS. The Company has defined benefit pension plans covering
essentially all employees. The benefits are based on years of service and
compensation. The Company's practice is to fund amounts which are required by
the Employee Retirement Income Security Act of 1974.
The Company also sponsors an employee savings plan covering eligible
employees who elect to participate. Participants in this plan make contributions
as a percent of earnings. The Company matches certain amounts of employee
contributions (see Note 3 "Employee Benefit Plans -- Retirement Savings Plan").
OTHER EMPLOYEE BENEFITS. The Company accounts for post-retirement and
post-employment benefits in accordance with Statement No. 106, Employer's
Accounting for Post Retirement Benefits Other Than Pensions, and Statement No.
112, Employer's Accounting for Postemployment Benefits.
STOCK BASED COMPENSATION. The Company grants stock options for a fixed
number of shares in accordance with certain of its benefit plans. The Company
accounts for stock option grants in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees, and, accordingly, recognizes no
compensation expense for the stock option grants if the exercise price is equal
to or more than the fair value of the shares at the date of grant.
FAIR VALUE DISCLOSURES. Cash and cash equivalents: The carrying amounts
reported in the balance sheets for cash and cash equivalents approximates its
fair value.
F-16
<PAGE> 91
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES -- (CONTINUED)
Accounts receivable and accounts payable: The carrying amounts reported in
the balance sheets for accounts receivable and accounts payable approximate
their fair value.
Long-term and short-term debt: The fair value of the Company's outstanding
debt is estimated based on the quoted market prices for the same issues or on
the current rates offered to the Company for debt of similar issues. The fair
value of the $1,188 million and $1,099 million of outstanding debt at December
31, 1997 and 1996 was approximately $1,235 million and $1,127 million,
respectively.
ACQUISITIONS AND GOODWILL. The Company's acquisitions are accounted for
under the purchase method of accounting. Under the purchase method of
accounting, the results of operations of the acquired businesses are included in
the accompanying consolidated financial statements as of their respective
acquisition dates. The assets and liabilities of acquired businesses are
included based on an allocation of the purchase price. The excess of the
purchase price over identified assets is classified as goodwill and is amortized
on a straight-line basis over a forty year period.
During the year ended December 31, 1997, the Company acquired certain
manufacturing facilities and other operations for approximately $57 million. The
assets acquired consisted of property and equipment, inventories and other
related assets. The excess of the purchase price over the assets acquired was
approximately $38 million.
Pro forma results have not been presented as they are not significantly
different than reported amounts.
IMPAIRMENT OF LONG-LIVED ASSETS. Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of,
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement 121 in
the first quarter of 1996, and the effect of adoption was not material.
COMMON STOCK. On February 2, 1998, the Board of Directors declared a
two-for-one split of the Company's common stock, effected in the form of a stock
dividend payable on March 2, 1998 to stockholders of record on February 16,
1998. All agreements concerning stock options and other commitments payable in
shares of the Company's common stock provide for the issuance of additional
shares due to the declaration of the stock split. This stock split has been
reflected in the Consolidated Statements of Stockholders' Equity (Deficit) at
January 1, 1995. All references to number of shares, except shares authorized,
and to per share information in the accompanying consolidated financial
statements have been adjusted to reflect the stock split on a retroactive basis.
ACCOUNTING POLICIES NOT YET ADOPTED. In June 1997, the Financial
Accounting Standards Board issued Statement No. 130, Reporting Comprehensive
Income, and Statement No. 131, Disclosures About Segments of an Enterprise and
Related Information. Statement 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. Statement 131 generally requires that companies
report segment information for operating segments which are revenue producing
components and for which separate financial information is produced internally.
The Company plans to adopt Statement 130 and Statement 131 in 1998, but has
not yet completed its analysis of the impact, if any, that these statements may
have on its financial statements.
EARNINGS PER COMMON SHARE. In 1997, the Financial Accounting Standards
Board issued Statement No. 128, Earnings per Share. Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very
F-17
<PAGE> 92
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES -- (CONTINUED)
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to the Statement 128 requirements.
2. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS
Indebtedness is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Short-term indebtedness
Senior Credit Facility Revolver........................... $ 37,683 $ 24,000
9% Sinking Fund Debentures due 2017....................... 3,750 --
---------- ----------
$ 41,433 $ 24,000
========== ==========
Long-term indebtedness
Senior Credit Facility Revolver........................... $ 125,000 $ 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....................... 71,250 75,000
---------- ----------
$1,146,250 $1,075,000
========== ==========
</TABLE>
The Company's Senior Credit Facility with certain lenders (collectively,
the "Banks") consists of a $349.6 million revolving credit facility ("Revolver")
due May 23, 2001. The Company has included $125 million of Revolver in long-term
debt at December 31, 1997 because the Company intends that at least that amount
would remain outstanding during 1998. Availability under the Senior Credit
Facility was reduced by approximately $27.2 million of outstanding letters of
credit at December 31, 1997.
At the option of the Company, interest under the Senior Credit Facility
will be payable either at the prime rate or at LIBOR plus 1.25%. Upon the
Company achieving certain ratios of EBITDA (as defined) to cash interest
expense, interest rates can be reduced up to 0.5%. Based on the achievement of
certain ratios of EBITDA for the period ended September 30, 1997, the interest
rates under this facility were reduced .25% to LIBOR plus 1% at December 31,
1997. The Company pays a commitment fee in an amount equal to 0.375% of the
unused portion of each Bank's commitment under the Revolver. The loans under the
Senior Credit Facility are secured by the pledge of all the stock of the
Company's material subsidiaries and a first priority lien on substantially all
of the assets of the Company, other than the Company's accounts receivable.
The 8 3/4% Senior Notes due 2001 (the "Notes") are general unsecured
obligations of the Company and rank senior in right of payment to the 9 3/8%
Senior Subordinated Debentures due 2005 (the "Debentures") and pari passu in
right of payment with all indebtedness of the Company under the Senior Credit
Facility and all other existing or future Senior Indebtedness of the Company.
The Debentures are general unsecured obligations of the Company and subordinate
in right of payment to the Notes and all other existing and future Senior
Indebtedness of the Company, including indebtedness under the Senior Credit
Facility, pari passu with any future senior subordinated indebtedness and senior
to any future subordinated indebtedness of the Company.
The Notes bear interest at the rate of 8 3/4% per annum, payable
semi-annually on June 15 and December 15 of each year. The Notes are redeemable,
in whole or in part at any time on or after December 15, 1998, at the option of
the Company, at the redemption prices, as defined, together with accrued and
unpaid interest to the date of redemption. The Debentures bear interest at the
rate of 9 3/8% per annum, payable semi-annually on June 15 and December 15 of
each year. The Debentures are redeemable, in whole or in part at any time on or
F-18
<PAGE> 93
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS -- (CONTINUED)
after December 15, 1998, at the option of the Company, at the redemption prices,
as defined, together with accrued and unpaid interest to the date of the
redemption.
In addition, in the event of a Change of Control (as defined), the Company
will be obligated to make an offer to redeem a holder's Notes or Debentures at a
redemption price of 101% of the principal amount thereof plus accrued and unpaid
interest thereon to the date of redemption. The Company may also redeem each of
the Notes or Debentures upon a Change of Control at a redemption price equal to
the greater of 101% of the principal amount thereof, together with accrued
interest thereon to the date of redemption or 100% of the principal amount
thereof, plus a Make-Whole Premium (as defined).
The Company's credit agreements contain a number of customary covenants
including, among others, restrictions on the incurrence of indebtedness,
transactions with affiliates, and certain asset dispositions. Certain provisions
require the Company to maintain certain financial ratios, such as a minimum
current ratio, and a minimum interest coverage ratio. A minimum consolidated net
worth, as defined, is also mandated. At December 31, 1997, the Company could
make restricted payments aggregating approximately $27.4 million.
The Company, through a "bankruptcy remote" receivables subsidiary
("Receivables Subsidiary"), has a trade receivables program ("Trade Receivables
Program") which provides for the sale of accounts receivable, on a revolving
basis. At December 31, 1997 and 1996, $111.8 million and $133 million,
respectively, had been sold under this program and the sale is reflected as a
reduction of accounts receivable in the accompanying Consolidated Balance
Sheets. The Trade Receivables Program was financed through the issuance of (a)
$115 million of Floating Rate Class A Trade Receivables Participation
Certificates ("Class A Certificates"); (b) $18 million of Floating Rate Class B
Trade Receivables Participation Certificates ("Class B Certificates"); and (c)
$27 million of Investor Revolving Certificates. The Class A Certificates and
Class B Certificates bear interest at LIBOR plus .27% and LIBOR plus .57%,
respectively, and the Investor Revolving Certificates bear interest at LIBOR
plus .375%. The expected final payment date of amounts outstanding under the
Trade Receivables Program is May 18, 1999, but earlier termination could occur
upon the occurrence of certain defined events. The cost of the Trade Receivables
Program is charged to selling and administrative expense.
The Trade Receivables Program requires the Company and Receivables
Subsidiary to perform certain servicing obligations with respect to the existing
and future trade receivables sold by the Company. The Company is not subject to
any financial covenants under the Trade Receivables Program, but the
documentation for the Trade Receivables Program provides for early termination
of the Trade Receivables Program and early payment of the securities issued
thereunder upon certain events, which include the incurrence of losses or
delinquencies on the receivables in excess of certain levels or the bankruptcy
or insolvency of the Company.
Excluding amounts related to the Revolver, maturities of long-term debt for
1998, 1999 and 2000 are $3.75 million per year, $403.75 million in 2001, and
$3.75 million in 2002.
F-19
<PAGE> 94
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. EMPLOYEE BENEFIT PLANS
PENSION PLANS
Pension expense related to the Company's defined benefit plans, is
comprised of the following (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during period................. $ 7,138 $ 8,244 $ 6,174
Interest cost on projected benefit obligation.............. 24,410 24,255 23,757
Deferred actuarial gains (losses).......................... 24,580 (1,170) 33,038
-------- -------- --------
Subtotal................................................... 56,128 31,329 62,969
Actual returns on plan assets.............................. (53,483) (22,276) (49,969)
-------- -------- --------
Total defined benefit plan expense......................... $ 2,645 $ 9,053 $ 13,000
======== ======== ========
Actuarial assumptions for pension expense:
Discount rate............................................ 8.25% 7.25% 8.5%
Average rate of increase in compensation levels.......... 3.5% 4% 4%
Expected long-term rate of return on plan assets......... 10% 10% 8.5%
</TABLE>
The following table sets forth the funded status of the Company's pension
plans and amounts recognized in the accompanying Consolidated Balance Sheets at
December 31, 1997 and 1996 (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1997 1996
----------- --------------------------
ASSETS ASSETS ACCUMULATED
EXCEED EXCEED BENEFITS
ACCUMULATED ACCUMULATED EXCEED
BENEFITS BENEFITS ASSETS
----------- ----------- -----------
<S> <C> <C> <C>
Actuarial present value of projected benefit
obligation:
Vested............................................... $286,334 $ 85,620 $200,902
Nonvested............................................ 8,259 3,835 5,706
-------- -------- --------
Accumulated benefit obligation......................... 294,593 89,455 206,608
Effect of projected future salary increases............ 16,408 -- 16,918
-------- -------- --------
Projected benefit obligation........................... 311,001 89,455 223,526
Plan assets at fair value.............................. 331,396 102,718 197,174
-------- -------- --------
Projected benefit obligation less than (in excess of)
plan assets.......................................... 20,395 13,263 (26,352)
Unrecognized net actuarial losses...................... 21,740 15,458 27,089
Minimum pension liability adjustment................... (1,291) -- (10,171)
-------- -------- --------
Pension related asset (liability) included in
Consolidated Balance Sheets.......................... $ 40,844 $ 28,721 $ (9,434)
======== ======== ========
Actuarial assumptions for funded status information:
Discount rate........................................ 7.75% 8.25% 8.25%
Average rate of increase in compensation levels...... 3.5% -- 3.5%
</TABLE>
At December 31, 1997, the Company changed the discount rate to 7.75% from
8.25% which increased the projected benefit obligation by approximately $20.5
million. At December 31, 1996, the Company changed the
F-20
<PAGE> 95
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
discount rate to 8.25% from 7.25% which decreased the projected benefit
obligation by approximately $38.5 million.
The provisions of Financial Accounting Standards Board Statement No. 87,
Employee Accounting for Pensions, require recognition in the balance sheet of an
additional minimum liability for pension plans with accumulated benefits in
excess of plan assets. At December 31, 1997 and 1996, minimum pension liability
adjustments of $1.3 million ($0.8 million after related income taxes) and $10.2
million ($6.4 million after related income taxes), respectively, are included in
the accompanying Consolidated Balance Sheets.
Plan assets are primarily invested in United States Government and
corporate debt securities, equity securities and fixed income insurance
contracts. At December 31, 1997 and 1996, the Company's pension plans held Notes
and Debentures of the Company with a market value of $14.2 million and $17.0
million, respectively.
RETIREMENT SAVINGS PLAN
The Company matches fifty percent of each employee's before-tax
contributions up to two percent of the employee's compensation. Company
contributions may be made either in cash or in shares of Common Stock of the
Company. During 1997, 1996 and 1995, the Company charged $2.2 million, $2.4
million and $2.4 million, respectively, to expense in connection with the 401(k)
Plan.
OTHER POST-RETIREMENT BENEFIT PLANS
In addition to sponsoring defined benefit pension plans, the Company
sponsors various defined benefit post-retirement plans that provide health care
and life insurance benefits to certain current and future retirees. All such
post-retirement benefit plans are unfunded. The following table presents the
status of post-retirement plans (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.................................................. $17,164 $17,815
Fully eligible active plan participants................... 242 209
Other active plan participants............................ 111 87
Unrecognized net gain..................................... 4,559 4,627
------- -------
Accrued post-retirement benefit obligation.................. $22,076 $22,738
======= =======
</TABLE>
Net periodic post-retirement benefit plans expense is not material during
the three year period ended December 31, 1997.
As of December 31, 1997, the actuarial assumptions include a discount rate
of 7.75% and a medical care trend rate of 7.8% for 1998, grading down to 6% by
2000. These trend rates reflect the Company's prior experience and management's
expectation of future rates. Increasing the assumed health care cost trend rates
by one percentage point in each year would increase the accumulated
post-retirement benefit plans obligations as of December 31, 1997 by
approximately $0.5 million, and the aggregate service and interest cost
components of net periodic post-retirement benefit cost for the year ended
December 31, 1997 by an immaterial amount.
F-21
<PAGE> 96
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. OTHER EXPENSE -- NET
Included in "Other expense-net" in the accompanying Consolidated Statements
of Operations for each of the years in the three year period ended December 31,
1997, 1996 and 1995, are the amortization and write-off of deferred financing
fees of $3.9 million less certain miscellaneous income items.
5. INCOME TAXES
The Company accounts for income taxes under Statement 109. Under Statement
109, deferred income taxes are provided at the enacted marginal rates on the
difference between the financial statement and income tax bases of assets and
liabilities. Deferred income tax provisions or benefits are based on the change
in the deferred tax assets and liabilities from period to period.
The total provision (benefit) for income taxes consisted of the following
(in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current
Federal............................................. $ 2,945 $ 957 $ 2,311
State............................................... 5,302 630 2,475
Foreign............................................. 461 621 (145)
Deferred.............................................. 37,247 30,492 25,809
------- ------- -------
$45,955 $32,700 $30,450
======= ======= =======
</TABLE>
Income tax expense (benefit) is included in the financial statements as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Continuing operations................................. $40,982 $33,085 $31,970
Discontinued operations............................... 1,368 (385) (1,520)
Gain on sale of discontinued operations............... 3,605 -- --
------- ------- -------
$45,955 $32,700 $30,450
======= ======= =======
</TABLE>
Income tax expense (benefit) differs from the statutory federal income tax
rate of 35% for the following reasons (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Income tax expense (benefit) at federal statutory
income tax rate.................................... $43,391 $31,628 $(34,789)
State income taxes (net of effect of federal income
tax)............................................... 2,264 1,183 1,586
Interest on prior years' taxes....................... -- -- 2,051
Amortization of Excess Reorganization Value.......... -- -- 62,187
Other-net............................................ 300 (111) (585)
------- ------- --------
Income tax expense................................... $45,955 $32,700 $ 30,450
======= ======= ========
</TABLE>
F-22
<PAGE> 97
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES -- (CONTINUED)
Components of the net deferred income tax liability are as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Basis differences resulting from reorganization........... $(137,783) $(108,634)
Accelerated depreciation.................................. (69,620) (75,930)
Income taxes related to prior years, including interest... (16,989) (18,755)
Nondeductible expenses.................................... (44,774) (42,503)
Other..................................................... (1,716) (4,715)
Deferred tax assets:
Reserves for litigation, environmental, employee benefits
and other.............................................. 45,244 62,057
Other..................................................... 8,460 9,423
--------- ---------
$(217,178) $(179,057)
========= =========
</TABLE>
At December 31, 1997, the Company has estimated operating loss
carryforwards ("NOLs") expiring in 2004-2009 of approximately $301 million
available to reduce future federal taxable income. Due to the ownership change
which occurred September 16, 1992 in connection with a reorganization, the
utilization of NOLs generated prior to this date are subject to limitation under
Internal Revenue Code Section 382.
During prior years, the Internal Revenue Service (the "Service") issued
Revenue Agent's Reports to Cluett, Peabody & Co., Inc., J. P. Stevens & Co.,
Inc., and West Point -- Pepperell, Inc. asserting income tax deficiencies and
additions to tax totaling approximately $89 million related to tax years 1979
and 1982 through 1989. This amount did not include interest which accrues from
the dates the taxes were due until the dates of the payments. During 1995, the
Company reached agreements with the Service concerning all of the Revenue
Agent's Reports. As a result, the Company made payments in December 1995,
totaling approximately $33 million, which includes interest of approximately $19
million that was tax deductible. This liability had been accrued in previous
periods and, accordingly, no additional income tax expense has been recognized
in 1995 related to the agreements.
6. STOCKHOLDERS' EQUITY
STOCK OPTIONS
The Company has granted stock options under various stock plans to key
employees and to non-employee directors. Also the Company granted certain
contractual stock options which were not granted pursuant to any plan. The
Omnibus Stock Incentive Plan (the "Omnibus Stock Plan") an amendment and
restatement of the 1993 Management Stock Option Plan covers approximately 5.4
million shares of Common Stock, and also replaced the 1994 Non-Employee
Directors Stock Option Plan after the 300,000 shares of Common Stock authorized
under that plan had been granted. The Omnibus Stock Plan allows for six
categories of incentive awards: options, stock appreciation rights, restricted
shares, deferred shares, performance shares and performance units. Key employees
are granted options under the various plans at terms (purchase price, expiration
date and vesting schedule) established by a committee of the Board of Directors.
Options granted either in accordance with contractual arrangements or pursuant
to the various plans have been at a price which is approximately equal to fair
market value on the date of grant. Such options are exercisable on the date of
grant for a period of ten years. The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB
25) and related Interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value accounting provided for
under
F-23
<PAGE> 98
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCKHOLDERS' EQUITY -- (CONTINUED)
Statement No. 123, Accounting for Stock-Based Compensation, requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted using the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1997, 1996 and 1995,
respectively: risk-free interest rates of 6.1%, 6.2% and 7%; no dividend yield;
volatility factors of the expected market price of the Company's common stock of
.25, .29 and .29; and a weighted-average expected life of the option of 8 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Pro forma
stock based compensation costs resulted in 1997 pro forma net income of $75.5
million (or pro forma diluted net income per share of $1.20), 1996 pro forma net
income of $57.2 million (or pro forma diluted net income per share of $.90) and
1995 pro forma net loss of $130.2 million (or pro forma diluted net loss per
share of $1.99).
Changes in outstanding options were as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
(IN THOUSANDS) WEIGHTED
--------------------------------- AVERAGE
QUALIFIED OPTION PRICE
PLANS CONTRACTUAL TOTAL PER SHARE
--------- ----------- ----- ------------
<S> <C> <C> <C> <C>
Options outstanding at December 31, 1994.......... 1,626 1,020 2,646 $ 6.11
Granted......................................... 188 -- 188 $ 7.48
Exercised and terminated........................ (76) (500) (576) $ 4.73
----- ----- ----- ------
Options outstanding at December 31, 1995.......... 1,738 520 2,258 $ 6.57
Granted......................................... 1,776 -- 1,776 $13.34
Exercised and terminated........................ (134) (110) (244) $ 6.07
----- ----- ----- ------
Options outstanding at December 31, 1996.......... 3,380 410 3,790 $ 9.78
Granted......................................... 1,176 20 1,196 $20.07
Exercised and terminated........................ (514) (390) (904) $ 7.15
----- ----- ----- ------
Options outstanding at December 31, 1997.......... 4,042 40 4,082 $13.37
===== ===== ===== ======
</TABLE>
At December 31, 1997, options for 2,146,270 shares were exercisable.
STOCK BONUS PLAN
During 1995, the Company's Board of Directors approved the WestPoint
Stevens Inc. 1995 Key Employee Stock Bonus Plan (the "Stock Bonus Plan")
covering 1,000,000 shares of the Company's Common
F-24
<PAGE> 99
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCKHOLDERS' EQUITY -- (CONTINUED)
Stock. Under the Stock Bonus Plan, the Company may grant bonus awards of shares
of Common Stock to key employees based on the Company's achievement of targeted
earnings levels during the Company's fiscal year. For 1997, 1996 and 1995,
respectively, bonus awards were deemed earned by forty-seven, fifty-three and
thirty-nine employees covering an aggregate of 398,456 shares, 643,464 shares
and 676,936 shares of Common Stock. The Stock Bonus Plan provides for vesting of
the bonus awards of 20 percent in the year of award and 20 percent in each of
the next four years if the employee continues employment with the Company. The
Company charged $4.4 million, $3.4 million and $1.4 million to expense in 1997,
1996 and 1995, respectively, in connection with the Stock Bonus Plan.
7. LEASE COMMITMENTS
The Company's operating leases, including sublease arrangements with
divested operations, consist of land, sales offices, manufacturing equipment,
warehouses and data processing equipment with expiration dates at various times
during the next thirteen years. Some of the operating leases stipulate that the
Company can (a) purchase the properties at their then fair market values or (b)
renew the leases at their then fair rental values. Some of the Company's leases,
principally sales office space and manufacturing equipment, are sublet to others
under leases expiring over the next four years.
The following is a schedule, by year, of future minimum lease payments as
of December 31, 1997 under operating leases, including sublease arrangements,
that have initial or remaining noncancelable lease terms in excess of one year
(in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1998........................................................ $ 25,404
1999........................................................ 23,987
2000........................................................ 17,318
2001........................................................ 12,571
2002........................................................ 9,650
Years subsequent to 2002.................................... 22,336
--------
Total minimum lease payments................................ 111,266
Minimum sublease rentals.................................... (9,680)
--------
Net minimum lease payments required for operating leases.... $101,586
========
</TABLE>
The following schedule shows the composition of total rental expense for
all operating leases, except those with terms of one month or less that were not
renewed (in thousands of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Minimum lease payments...................................... $30,662 $40,217 $42,070
Less sublease rentals....................................... (3,986) (4,761) (7,464)
------- ------- -------
Rent expense................................................ $26,676 $35,456 $34,606
======= ======= =======
</TABLE>
8. LITIGATION AND CONTINGENT LIABILITIES
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
F-25
<PAGE> 100
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LITIGATION AND CONTINGENT LIABILITIES -- (CONTINUED)
Company) have been cited or are being investigated with respect to alleged
violations of such laws and regulations. The Company is cooperating fully with
relevant parties and authorities in all such matters. 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 of 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.
9. CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
(In thousands of dollars)
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest...................................... $107,410 $102,565 $101,195
======== ======== ========
Income taxes.................................. $ 9,444 $ 5,733 $ 4,433
======== ======== ========
</TABLE>
10. DISCONTINUED OPERATIONS
On August 27, 1997 the Company closed a transaction pursuant to which
WestPoint Stevens sold its subsidiaries AIH Inc., Alamac Knit Fabrics, Inc. and
Alamac Enterprises Inc. (collectively, "Alamac Knit Fabrics subsidiary" or
"Alamac"), other than cash, accounts receivable of approximately $42.5 million
and a yarn mill located in Whitmire, S.C., to Dyersburg Corporation for
approximately $126 million. The Whitmire facility was transferred by the Company
to Home Fashions to support the Company's expansion of its sheeting production
capacity. As a result of the transaction, the Company now accounts for the
Alamac Knit Fabrics subsidiary as a discontinued operation and the accompanying
financial statements have been adjusted and restated accordingly.
F-26
<PAGE> 101
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. DISCONTINUED OPERATIONS -- (CONTINUED)
Data relative to Alamac Knit Fabrics subsidiary is as follows (in thousands
of dollars):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
PERIOD ENDED ------------------------
AUGUST 27, 1997 1996 1995
--------------- ---------- ----------
<S> <C> <C> <C>
Net sales............................................... $162,428 $222,019 $231,721
======== ======== ========
Operating earnings before amortization of excess
reorganization value.................................. $ 9,189 $ 7,051 $ 3,962
======== ======== ========
Operating earnings (loss)............................... $ 9,189 $ 7,051 $(21,267)
======== ======== ========
Net income (loss)....................................... $ 2,625 $ (287) $(27,512)
======== ======== ========
Gain on sale, net of taxes of $3,605.................... $ 6,138
========
Capital expenditures, including capital leases.......... $ 3,237 $ 4,998 $ 9,757
======== ======== ========
Amortization of excess reorganization value............. $ 25,229
========
Depreciation and other amortization..................... $ 5,501 $ 8,059 $ 11,117
======== ======== ========
</TABLE>
11. MAJOR CUSTOMER INFORMATION
The Company's consumer home fashions products are sold primarily to
domestic chain stores, mass merchants, department and specialty stores. Sales to
two customers as a percent of net sales, amounted to approximately 13% and 10%
for the year ended December 31, 1997. Sales to three customers as a percent of
net sales, amounted to approximately 13%, 12% and 10% for the year ended
December 31, 1996. Sales to three customers as a percent of net sales, amounted
to approximately 12%, 12% and 11% for the year ended December 31, 1995. During
1997, 1996 and 1995, the Company's six largest customers accounted for
approximately 52%, 55% and 54%, respectively, of the Company's net sales.
F-27
<PAGE> 102
WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
------------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
- ----------------------------------
Net sales............................................... $357.1 $395.8 $459.0 $445.6
Gross earnings.......................................... 89.2 96.2 122.1 112.3
Operating earnings...................................... 38.5 43.1 69.2 64.1
Income from continuing operations....................... 9.0 10.7 26.5 23.1
Income from discontinued operations..................... 1.1 1.1 0.4 --
Gain on sale of discontinued operations................. -- -- 6.1 --
------ ------ ------ ------
Net income.............................................. 10.1 11.8 33.0 23.1
Basic net income per common share (1):
Continuing operations................................. .14 .18 .43 .39
Discontinued operations............................... .02 .01 .01 --
Gain on sale of discontinued operations............... -- -- .10 --
------ ------ ------ ------
Net income per common share........................... .16 .19 .54 .39
Diluted net income per common share (1):
Continuing operations................................. .14 .17 .42 .38
Discontinued operations............................... .02 .01 .01 --
Gain on sale of discontinued operations............... -- -- .10 --
------ ------ ------ ------
Net income per common share........................... .16 .18 .53 .38
YEAR ENDED DECEMBER 31, 1996
- ----------------------------------
Net sales............................................... $327.5 $362.5 $412.7 $399.1
Gross earnings.......................................... 82.8 85.4 106.5 97.7
Operating earnings...................................... 37.6 39.0 59.3 52.6
Income from continuing operations....................... 8.3 9.1 22.2 18.4
Income (loss) from discontinued operations.............. (0.3) (0.4) (0.5) 0.9
------ ------ ------ ------
Net income.............................................. 8.0 8.7 21.7 19.3
Basic net income (loss) per common share (1):
Continuing operations................................. .13 .14 .36 .29
Discontinued operations............................... (.01) -- (.01) .02
------ ------ ------ ------
Net income per common share........................... .12 .14 .35 .31
Diluted net income (loss) per common share (1):
Continuing operations................................. .13 .14 .35 .29
Discontinued operations............................... (.01) -- (.01) .02
------ ------ ------ ------
Net income per common share........................... .12 .14 .34 .31
</TABLE>
- ---------------
(1) Net income (loss) per common share calculations for each of the quarters is
based on the average common shares outstanding for each period.
F-28
<PAGE> 103
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE INITIAL PURCHASERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION TO BUY, THE SECURITIES
OFFERED HEREBY IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL, IN ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Cautionary Notice Regarding Forward-
Looking Statements................... iii
Available Information.................. iii
Incorporation of Certain Documents by
Reference............................ iv
Summary................................ 1
Risk Factors........................... 12
The Financing Transactions; Use of
Proceeds............................. 18
Capitalization......................... 19
Pro Forma Unaudited Financial Data..... 20
Selected Historical Consolidated
Financial Data....................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 27
Business............................... 32
Description of Certain Other
Indebtedness......................... 35
Description of the Securities.......... 37
Exchange Offer......................... 55
Plan of Distribution................... 63
Certain U.S. Federal Income Tax
Considerations....................... 64
Legal Matters.......................... 68
Experts................................ 68
Index to Financial Statements.......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$1,000,000,000
WESTPOINT STEVENS INC.
7 7/8% SENIOR NOTES DUE 2005
AND
7 7/8% SENIOR NOTES DUE 2008
-----------------------
PROSPECTUS
-----------------------
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 104
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(1) Section 145 of Delaware General Corporation Law. Section 145 of the
Delaware General Corporation Law ("DGCL") provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not, in and of itself, create a
presumption that his conduct was unlawful.
Section 145 of the DGCL also provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon adjudication
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of Delaware or such other court shall deem
proper.
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
Any such indemnification (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth above. Such determination shall be made:
(i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or
proceeding; or
(ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel
in a written opinion; or
(iii) by the stockholders.
Section 145 of the DGCL permits a Delaware business corporation to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and
II-1
<PAGE> 105
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify such person.
(2) By-law Provisions on Indemnity. Article V of the Amended and Restated
By-laws of the Company, as the same may be amended from time to time (the
"By-laws"), sets forth the extent to which the Company's directors and officers
may be indemnified by the Company against liabilities which they may incur while
serving in such capacity. Article V generally provides that the Company shall
indemnify the directors and officers of the Company who are or were a party to
any threatened, pending, or contemplated action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was a director or officer of the Company or of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, or
by reason of any action alleged to have been taken or omitted in such capacity,
against expenses (including attorneys' fees and disbursements), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection therewith, provided that the applicable standard of conduct set forth
in Section 145 of DGCL was met and, provided further that such indemnification
shall be limited to expenses (including attorneys' fees and disbursements)
actually and reasonably incurred in the case of an action or suit by or in the
right of the Company to procure a judgment in its favor. Subject to the
procedures for indemnification of directors and officers set forth in the
By-laws, the indemnification of the Company's directors and officers provided
for therein is in all other respects substantially similar to that provided for
in Section 145 of the DGCL. Any such indemnification shall continue as to a
person who has ceased to be a director or officer of the Company and shall inure
to the benefit of the heirs, executors, and administrators of such person.
(3) Indemnification Agreements. In addition, each of the directors and the
executive officers of the Company is entitled to indemnification from the
Company pursuant to separate agreements (the "Indemnification Agreements")
between the Company and such persons.
The Company has in effect insurance policies covering all of the Company's
directors and officers in certain instances where by law they may not be
indemnified by the Company.
The above discussion of the By-laws of the Company and of the
Indemnification Agreements and of Section 145 of the Delaware Code is not
intended to be exhaustive and is qualified in its entirety by such By-laws,
Indemnification Agreements and the Delaware Code.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company as
disclosed above, the Company has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
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3(a) -- Restated Articles of Incorporation of the Company.*
(b) -- Amended and Restated By-laws of WestPoint Stevens Inc., as
currently in effect, incorporated by reference to the
Post-Effective Amendment No. 1 to Registration Statement on
Form S-1 (Commission File No. 33-77726) filed by the Company
with the Securities and Exchange Commission on May 19, 1994.
4(a) -- Indenture for the 7 7/8% Senior Notes due 2005 dated as of
June 9, 1998, between the Company and The Bank of New York,
as trustee.*
(b) -- Form of Old 7 7/8% Senior Notes due 2005 (included in
Exhibit 4(a)).*
(c) -- Form of Exchange 7 7/8% Senior Notes due 2005 (included in
Exhibit 4(a)).*
(d) -- Registration Rights Agreement dated as of June 9, 1998 among
the Company and the Initial Purchasers with respect to the
Senior Notes due 2005.*
(e) -- Indenture for the 7 7/8 Senior Notes due 2008 and 7 7/8
Senior Notes due 2008, dated as of June 9, 1998, between the
Company and The Bank of New York, as Trustee.*
(f) -- Form of Old 7 7/8% Senior Notes due 2008 (included in
Exhibit 4(e)).*
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(g) -- Form of Exchange 7 7/8% Senior Notes due 2008 (included in
Exhibit 4(e)).*
(h) -- Registration Rights Agreement dated as of June 9, 1998 among
the Company and the Initial Purchasers with respect to the
Senior Notes due 2008.*
5 -- Opinion of Weil, Gotshal & Manges LLP, as to the validity of
the Exchange Notes to be issued by the Company.**
10.1 -- Indenture, dated as of December 10, 1993, between the
Company and First Trust National Association, as trustee,
for the 8 3/4% Senior Notes due 2001, incorporated by
reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.2 -- Form of 8 3/4% Senior Notes due 2001 (included in the
Indenture filed as Exhibit 10.1), incorporated by reference
to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.3 -- Indenture, dated as of December 10, 1993, between the
Company and The Bank of New York, as trustee, for the 9 3/8%
Subordinated Debentures due 2005, incorporated by reference
to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.4 -- Form of 9 3/8% Subordinated Debentures due 2005 (included in
the Indenture filed as Exhibit 10.3), incorporated by
reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.5 -- Rights Agreement, dated as of September 16, 1992, between
the Company, The Bank of New York, as rights agent, as
amended by Amendment No. 1 to Rights Agreement, dated as of
March 12, 1993, and Amendment No. 2 to Rights Agreement,
dated as of December 10, 1993, incorporated by reference to
the Registration Statement on Form 10/A (Commission File No.
0-21496) filed by the Company on January 6, 1994.
10.6 -- Form of Restated Plan Registration Rights Agreement dated as
of May 7, 1993, among the Company and the Existing Holders
(as defined therein), incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company on July 1, 1993.
10.7 -- Form of Registration Rights Agreement, dated as of May 7,
1993, among the Company and the Purchaser (as defined
therein) incorporated by reference to Exhibit 1 to the Form
of Securities Purchase Agreement filed as Exhibit 10.13 to
the Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company with the Commission on July 1,
1993.
10.8 -- Amended and Restated Credit Agreement, dated as of May 7,
1993, by and among West Point-Pepperell, Inc., the banks
listed on the signature pages thereof, Bankers Trust
Company, as administrative agent, and The Chase Manhattan
Bank, N.A., Citicorp USA, Inc., NationsBank of North
Carolina, Inc., The Bank of New York and The Bank of Nova
Scotia, as co-agents, incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by Valley Fashions Corp. with the Commission
on July 1, 1993.
10.9 -- Employment Agreement, dated as of March 8, 1993, between
West Point-Pepperell, Inc. and Holcombe T. Green, Jr.,
together with Letter, dated as of March 8, 1993, from the
Company to Holcombe T. Green, Jr., incorporated by reference
to the Registration Statement on Form 10 (Commission File
No. 0-21496) filed by Valley Fashions Corp. (since renamed
WestPoint Stevens Inc.) with the Commission on July 1, 1993.
10.10 -- Employment Agreement, dated as of April 1, 1993, between
West Point-Pepperell, Inc. and Morgan M. Schuessler,
together with Letter, dated as of April 1, 1993, from the
Company to Morgan M. Schuessler, incorporated by reference
to the Registration Statement on Form 10 (Commission File
No. 0-21496) filed by Valley Fashions Corp. (since renamed
WestPoint Stevens Inc.) with the Commission on July 1, 1993.
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10.11 -- Employment Agreement, dated as of February 1, 1993, between
West Point-Pepperell, Inc. and Joseph L. Jennings, Jr.,
incorporated by reference to the Registration Statement on
Form 10 (Commission File No. 0-21496) filed by the Company
with the Commission on July 1, 1993.
10.12 -- Employment Agreement, dated as of March 8, 1993, between
West Point-Pepperell, Inc. and Thomas J. Ward, incorporated
by reference to the Registration Statement on Form 10
(Commission File No. 0-21496) filed by the Company with the
Commission on July 1, 1993.
10.13 -- Form of directors and officers Indemnification Agreement
with West Point-Pepperell, Inc., incorporated by reference
to the Registration Statement on Form S-1 (Commission File
No. 33-69858) filed by the Company with the Commission on
October 1, 1993.
10.14 -- 1993 Management Stock Option Plan, incorporated by reference
to the Registration Statement on Form 10 (Commission File
No. 0-21496) filed by the Company with the Commission on
July 1, 1993.
10.15 -- Description of 1993 Senior Management Incentive Plan,
incorporated by reference to the Company's 1994 Proxy
Statement (Commission File No. 0-21496) filed by the Company
with the Commission.
10.16 -- West Point-Pepperell, Inc. Supplemental Retirement Plan for
Eligible Executives, as amended, incorporated by reference
to the Schedule 14D-9 dated November 3, 1988 (Commission
File No. 1-4490) filed by West Point-Pepperell, Inc. with
the Commission.
10.17 -- West Point-Pepperell, Inc. Supplemental Executive Retirement
Plan, as amended, incorporated by reference to the Schedule
14D-9 dated November 3, 1988 (Commission File No. 1-4490)
filed by West Point-Pepperell, Inc. with the Commission.
10.18 -- Indenture, dated as of March 1, 1987, between J.P. Stevens &
Co., Inc. and The Bank of New York, as trustee, for the 9%
Sinking Fund Debentures due 2017 including the First and
Second Supplemental Indentures thereto, incorporated be
reference to the Registration Statement on Form S-1
(Commission File No. 33-69858) filed by the Company with the
Commission on October 1, 1993.
10.19 -- Credit Agreement, dated as of December 1, 1993, among Valley
Fashions Corp., Bankers Trust Company as Administrative
Agent, the Co-Agents parties thereto and the other financial
institutions parties thereto as amended on December 10,
1993, incorporated by reference to the Annual Report on Form
10-K for the fiscal year ended December 31, 1993 (Commission
File No. 0-21496) filed by the Company with the Commission.
10.20 -- Revolving Certificate Purchase Agreement, dated as of
December 1, 1993, among WPS Receivables Corporation, the
Company, the Co-Agents and Revolving Purchasers named
therein, Bankers Trust Company, as Administrative Agent, and
NationsBank of North Carolina, N.A., as Agent, incorporated
by reference to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (Commission File No.
0-21496) filed by the Company with the Commission.
10.21 -- Amendment No. 1 to the Revolving Certificate Purchase
Agreement, dated as of December 10, 1993, among WPS
Receivables Corporation, the Company, the Co-Agents and
Revolving Purchasers named therein, Bankers Trust Company,
as Administrative Agent, and NationsBank of North Carolina,
N.A., as Agent, incorporated by reference to the Annual
Report on Form 10-K for the fiscal year ended December 31,
1993 (Commission File No. 0-21496) filed by the Company with
the Commission.
10.22 -- Pooling and Servicing Agreement, dated as of December 10,
1993, among WPS Receivables Corporation, as Transferor, the
Company, as the initial Servicer, and Chemical Bank, as
Trustee, incorporated by reference to the Current Report on
Form 8-K (Commission File No. 0-21496) filed by the Company
with the Commission on December 10, 1993.
10.23 -- Receivables Purchase Agreement, dated as of December 10,
1993, among WPS Receivables Corporation, as Purchaser, and
the Company and Alamac Knit Fabrics, Inc., as Sellers,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on December 10, 1993.
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10.24 -- Form of Securities Purchase Agreement, dated as of March 12,
1993, among the Company, New Street Capital Corporation,
Magten Asset Management Corporation and each Other Holder
(as defined therein), incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company with the Commission on July 1,
1993.
10.25 -- Amended and Restated Credit Agreement dated November 23,
1994, among the Company, NationsBank of North Carolina, N.A.
as Administrative Agent, the Co-Agents parties thereto and
the other financial institutions parties thereto,
incorporated by reference to the Annual Report on Form
10-K/A for the fiscal year ended December 31, 1994
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.26 -- WestPoint Stevens Inc. 1994 Non-Employee Directors Stock
Option Plan, incorporated by reference to the Annual Report
on Form 10-K/A for the fiscal year ended December 31, 1994
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.27 -- Amended and Restated Pooling and Servicing Agreement, dated
as of May 27, 1994, among WPS Receivables Corporation, the
Company and Chemical Bank, incorporated by reference to the
Registration Statement on Form S-1, Amendment No. 2
(Commission File No. 33-76956) filed by WPS Receivables
Corporation with the Commission on May 24, 1994.
10.28 -- Revolving Certificate Purchase Agreement, dated as of May
27, 1994, among WPS Receivables Corporation, the Company,
the Co-Agents and Revolving Purchasers named therein,
Bankers Trust Company, as Administrative Agent, and
NationsBank of North Carolina, N.A., as Agent, incorporated
by reference to the Registration Statement on Form S-1,
Amendment No. 3 (Commission File No. 33-76956) filed by WPS
Receivables Corporation with the Commission on May 16, 1994.
10.29 -- Amended and Restated Receivables Purchase Agreement, dated
as of May 27, 1994, among WPS Receivables Corporation, as
Purchaser, and the Company and Alamac Knit Fabrics, Inc., as
Sellers, incorporated by reference to the Registration
Statement on Form S-1, Amendment No. 3 (Commission File No.
33-76956) filed by WPS Receivables Corporation with the
Commission on May 16, 1994.
10.30 -- Series 1994-1 Supplement, dated as of May 27, 1994, to the
Amended and Restated Pooling and Servicing Agreement, among
WPS Receivables Corporation, the Company and Chemical Bank,
incorporated by reference to the Registration Statement on
Form S-1, Amendment No. 3 (Commission File 33-76956) filed
by WPS Receivables Corporation with the Commission on May
16, 1994.
10.31 -- Series 1994-R Supplement, dated as of May 27, 1994, to the
Amended and Restated Pooling and Servicing Agreement, among
WPS Receivables Corporation, the Company and Chemical Bank,
incorporated by reference to the Registration Statement on
Form S-1, Amendment No. 3 (Commission File No. 33-76956)
filed by WPS Receivables Corporation with the Commission on
May 16, 1994.
10.32 -- WestPoint Stevens Inc. Amended and Restated 1994
Non-Employee Directors Stock Option Plan, incorporated by
reference to the Form 10-Q for the quarterly period ended
June 30, 1995 (Commission File No. 0-21496) filed by the
Company with the Commission on August 9, 1995.
10.33 -- Description of Senior Management Incentive Plan,
incorporated by reference to the Company's 1995 Proxy
Statement (Commission File No. 0-21496) filed by the Company
with the Commission on April 7, 1995.
10.34 -- WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan,
incorporated by reference to the Registration Statement Form
S-8 (Registration No. 33-95580) filed by the Company on
August 11, 1995.
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10.35 -- Credit Agreement dated December 4, 1995, among Alamac Knit
Fabrics, Inc., as Borrower, Alamac Enterprises Inc. and AIH
Inc., as Guarantors, the Lenders identified therein and
NationsBank, N.A., as agent, incorporated by reference to
the Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (Commission File No. 0-21496) filed by the
Company with the Commission.
10.36 -- Amendment Agreement dated December 4, 1995 among the
Company, NationsBank, N.A., The Bank of New York, The First
National Bank of Boston, The First National Bank of Chicago,
The Nippon Credit Bank, Ltd., Wachovia Bank of Georgia,
N.A., Trust Company Bank, AmSouth Bank of Alabama and ABN
AMRO Bank, N.V., incorporated by reference to the Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (Commission File No. 0-21496) filed by the Company with
the Commission.
10.37 -- Form of directors and officers Indemnification Agreement
with the Company, incorporated by reference to the Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (Commission File No. 0-21496) filed by the Company with
the Commission.
10.38 -- WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan
(As Amended), incorporated by reference to the Annual Report
on Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.39 -- Tax Settlement Form 870-AD between WestPoint Stevens Inc.
(successor-in-interest to Cluett, Peabody and Co., Inc.) and
the Internal Revenue Service dated December 11, 1995,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission.
10.40 -- Tax Settlement Form 870-AD between WestPoint Stevens Inc.
(successor-in-interest to West Point-Pepperell, Inc.) and
the Internal Revenue Service dated August 29, 1995,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission.
10.41 -- Tax Settlement Form 870-AD between J.P. Stevens & Co., Inc.
and the Internal Revenue Service dated August 29, 1995,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission.
10.42 -- Second Amendment and Waiver Agreement dated as of January
23, 1997, among the Company, NationsBank, N.A. (formerly
known as NationsBank of North Carolina, N.A.), the Bank of
New York, The First National Bank of Boston, The First
National Bank of Chicago, The Nippon Credit Bank, Ltd.,
Wachovia Bank of Georgia, N.A., SunTrust Bank, Atlanta
(formerly known as Trust Company Bank), AmSouth Bank of
Alabama, and ABN AMRO Bank, N.V., incorporated by reference
to the Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1996 (Commission File No. 0-21496) filed
by the Company with the Commission.
10.43 -- Credit Agreement dated as of January 23, 1997, among
WestPoint Stevens (UK) Limited, P.J. Flower & Co. Limited,
as the Borrowers, the Company as Guarantor, the several
lenders identified on the signature pages thereto and such
other lenders as may from time to time become a party
thereto and NationsBank, N.A., as agent for the Lenders,
incorporated by reference to the Annual Report on Form
10-K/A for the fiscal year ended December 31, 1996
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.44 -- First Amendment to the WestPoint Stevens Inc. Supplemental
Retirement Plan dated as of September 6, 1996, incorporated
by reference to the Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1996 (Commission File No.
0-21496) filed by the Company with the Commission.
10.45 -- Employment Agreement effective January 1, 1997 between the
Company and Joseph L. Jennings superseding the Employment
Agreement of February 1, 1993, incorporated by reference to
the Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996 (Commission File No. 0-21496) filed by the
Company with the Commission.
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10.46 -- WestPoint Stevens Inc. Omnibus Stock Incentive Plan,
incorporated by reference to the Company's 1997 Proxy
Statement for the fiscal year ended December 31, 1996
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.47 -- Second Amendment Agreement, dated as of May 22, 1997, by and
among Alamac Knit Fabrics, Inc., as Borrower, Alamac
Enterprises Inc. and AIH Inc., as Guarantors, the Lenders
identified therein and NationsBank, N.A., as Agent,
incorporated by reference to the Form 10-Q for the quarterly
period ended June 30, 1997 (Commission File No. 0-21496)
filed by the Company with the Commission.
10.48 -- Third Amendment Agreement, dated as of May 22, 1997, among
the Company, as Borrower, NationsBank, N.A. (formerly known
as NationsBank of North Carolina, N.A.), The Bank of New
York, The First National Bank of Boston, The First National
Bank of Chicago, Scotiabank Inc., Wachovia Bank of Georgia,
N.A., SunTrust Bank, Atlanta, AmSouth Bank of Alabama, and
ABN AMRO Bank, N.V., incorporated by reference to the Form
10-Q for the quarterly period ended June 30, 1997
(Commission File No. 0-21496) filed by the Company with the
Commission.
10.49 -- Stock Purchase Agreement by and among Dyersburg Corporation,
as Purchaser, Alamac Sub Holdings Inc., as Seller, AIH Inc.
and Company dated as of July 15, 1997, incorporated by
reference to the Current Report on Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on
September 11, 1997.
10.50 -- Supplemental Agreement relating to Phase II Environmental
Investigation among Alamac Sub Holdings Inc., AIH Inc.,
Company and Dyersburg Corporation dated as of July 15, 1997,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on September 11, 1997.
10.51 -- Amendment to Stock Purchase Agreement among Alamac Sub
Holdings Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 15, 1997, incorporated by reference to
the Current Report on Form 8-K (Commission File No. 0-21496)
filed by the Company with the Commission on September 11,
1997.
10.52 -- Supplemental Environmental Indemnity among Alamac Sub
Holdings, Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 20, 1997, incorporated by reference to
the Current Report on Form 8-K (Commission File No. 0-21496)
filed by the Company with the Commission on September 11,
1997.
10.53 -- Second Supplemental Environmental Indemnity among Alamac Sub
Holdings Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 27, 1997, incorporated by reference to
the Current Report on Form 8-K (Commission File No. 0-21496)
filed by the Company with the Commission on September 11,
1997.
10.54 -- Assignment and Assumption Agreement among Company (the
"Assignor"), Alamac Knit Fabrics, Inc. (the "Assignee") and
Dyersburg Corporation dated as of August 27, 1997,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on September 11, 1997.
10.55 -- Letter of Amendment Agreement, dated as of July 18, 1997, by
and among Alamac Knit Fabrics, Inc., as Borrower, Alamac
Enterprises Inc. and AIH Inc., as Guarantors, the Lenders
identified therein and NationsBank, N.A., as Agent,
incorporated by reference to the Form 10-Q for the quarterly
period ended September 30, 1997 (Commission File No.
0-21496) filed by the Company with the Commission.
10.56 -- Letter Amendment Agreement, dated as of July 22, 1997, among
the Company, as Borrower, NationsBank, N.A. (formerly known
as NationsBank of North Carolina, N.A.), The Bank of New
York, BankBoston, N.A. (formerly known as The First National
Bank of Boston), The First National Bank of Chicago,
Scotiabank Inc., Wachovia Bank of Georgia, N.A., SunTrust
Bank, Atlanta, AmSouth Bank of Alabama and ABN AMRO Bank,
N.A., incorporated by reference to the Form 10-Q for the
quarterly period ended September 30, 1997 (Commission File
No. 0-21496) filed by the Company with the Commission.
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10.57 -- Letter Amendment Agreement, dated as of August 5, 1997, among the Company, as Borrower, NationsBank,
10.58 -- Termination of Commitments and Release of Liens dated August 27, 1997, by and among Alamac Knit
Fabrics, Inc., as Borrower, Alamac Enterprises Inc. and AIH Inc., as Guarantors, the Lenders
identified therein and NationsBank, N.A., as Agent, incorporated by reference to the Form 10-Q for
the quarterly period ended September 30, 1997 (Commission File No. 0-21496) filed by the Company with
the Commission.
10.59 -- Second Amended and Restated Credit Agreement, dated as of June 9, 1998, among the Company, WestPoint
Stevens (UK) Limited, WestPoint Stevens (Europe) Limited, NationsBank, N.A., as agent, and the other
financial institutions party thereto.*
10.60 -- Letter Amendment Agreement, dated as of June 30, 1998, among the Company, WestPoint Stevens (UK)
Limited, WestPoint Stevens (Europe) Limited, NationsBank, N.A., as agent and the other financial
institutions party thereto.*
12.1 -- Statement Re: Computation of Ratios of Earnings to Fixed Charges.*
12.2 -- Statement Re: Pro Forma Computation of Ratios of Earnings to Fixed Charges.*
23(a) -- Consent of Ernst & Young LLP.*
23(b) -- Consent of Weil, Gotshal & Manges LLP (included in the opinion filed as Exhibit 5 to this
Registration Statement).**
24 -- Power of Attorney.*
25(a) -- Statement of Eligibility and Qualification of The Bank of New York, as Trustee, on Form T-1 with
respect to the 7 7/8% Senior Notes due 2005.*
25(b) -- Statement of Eligibility and Qualification of The Bank of New York, as Trustee, on Form T-1 with
respect to the Senior Notes due 2008.*
99.1 -- Form of Letter of Transmittal.*
99.2 -- Form of Notice of Guaranteed Delivery.*
99.3 -- Form of Instructions to Registered Holders and/or Book-Entry Facility Participant from Beneficial
Owner.*
99.4 -- Form of Exchange Agent Agreement.*
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* Previously filed.
** Filed herewith.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate
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<PAGE> 112
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by a registrant
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in West Point, Georgia, on
this 4th day of August, 1998.
WESTPOINT STEVENS INC.
By: /s/ THOMAS J. WARD
-----------------------------------
THOMAS J. WARD
PRESIDENT AND CHIEF
OPERATING OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons on
behalf of the Registrant named below and in the capacities indicated, on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman and Chief Executive August 4, 1998
- --------------------------------------------- Officer and Director (Principal
HOLCOMBE T. GREEN, JR. Executive Officer)
* Executive Vice President/Finance August 4, 1998
- --------------------------------------------- and Chief Financial Officer
MORGAN M. SCHUESSLER (Principal Financial Officer)
* Controller (Principal Accounting August 4, 1998
- --------------------------------------------- Officer)
J. NELSON GRIFFITH
* Vice Chairman of the Board August 4, 1998
- ---------------------------------------------
JOSEPH L. JENNINGS, JR.
* Director August 4, 1998
- ---------------------------------------------
HUGH M. CHAPMAN
* Director August 4, 1998
- ---------------------------------------------
M. KATHERINE DWYER
</TABLE>
II-10
<PAGE> 114
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director August 4, 1998
- ---------------------------------------------
JOHN G. HUDSON
* Director August 4, 1998
- ---------------------------------------------
CHARLES W. MCCALL
* Director August 4, 1998
- ---------------------------------------------
GERALD B. MITCHELL
* Director August 4, 1998
- ---------------------------------------------
JOHN F. SORTE
* Director August 4, 1998
- ---------------------------------------------
PHILLIP SIEGEL
/s/ Christopher N. Zodrow
- ------------------------------------------
CHRISTOPHER N. ZODROW
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE> 115
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
3(a) -- Restated Articles of Incorporation of the Company.*.........
(b) -- Amended and Restated By-laws of WestPoint Stevens Inc., as
currently in effect, incorporated by reference to the
Post-Effective Amendment No. 1 to Registration Statement on
Form S-1 (Commission File No. 33-77726) filed by the Company
with the Securities and Exchange Commission on May 19,
1994. ......................................................
4(a) -- Indenture for the 7 7/8% Senior Notes due 2005 dated as of
June 9, 1998, between the Company and The Bank of New York,
as trustee.*................................................
(b) -- Form of Old 7 7/8% Senior Notes due 2005 (included in
Exhibit 4(a)).*.............................................
(c) -- Form of Exchange 7 7/8% Senior Notes due 2005 (included in
Exhibit 4(a)).*.............................................
(d) -- Registration Rights Agreement dated as of June 9, 1998 among
the Company and the Initial Purchasers with respect to the
Senior Notes due 2005.*.....................................
(e) -- Indenture for the 7 7/8 Senior Notes due 2008 and 7 7/8
Senior Notes due 2008, dated as of June 9, 1998, between the
Company and The Bank of New York, as Trustee.*..............
(f) -- Form of Old 7 7/8% Senior Notes due 2008 (included in
Exhibit 4(e)).*.............................................
(g) -- Form of Exchange 7 7/8% Senior Notes due 2008 (included in
Exhibit 4(e)).*.............................................
(h) -- Registration Rights Agreement dated as of June 9, 1998 among
the Company and the Initial Purchasers with respect to the
Senior Notes due 2008.*.....................................
5 -- Opinion of Weil, Gotshal & Manges LLP, as to the validity of
the Exchange Notes to be issued by the Company.**...........
10.1 -- Indenture, dated as of December 10, 1993, between the
Company and First Trust National Association, as trustee,
for the 8 3/4% Senior Notes due 2001, incorporated by
reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (Commission File No. 0-21496)
filed by the Company with the Commission. ..................
10.2 -- Form of 8 3/4% Senior Notes due 2001 (included in the
Indenture filed as Exhibit 10.1), incorporated by reference
to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-21496) filed by the
Company with the Commission. ...............................
10.3 -- Indenture, dated as of December 10, 1993, between the
Company and The Bank of New York, as trustee, for the 9 3/8%
Subordinated Debentures due 2005, incorporated by reference
to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (Commission File No. 0-21496) filed by the
Company with the Commission. ...............................
10.4 -- Form of 9 3/8% Subordinated Debentures due 2005 (included in
the Indenture filed as Exhibit 10.3), incorporated by
reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (Commission File No. 0-21496)
filed by the Company with the Commission. ..................
10.5 -- Rights Agreement, dated as of September 16, 1992, between
the Company, The Bank of New York, as rights agent, as
amended by Amendment No. 1 to Rights Agreement, dated as of
March 12, 1993, and Amendment No. 2 to Rights Agreement,
dated as of December 10, 1993, incorporated by reference to
the Registration Statement on Form 10/A (Commission File No.
0-21496) filed by the Company on January 6, 1994. ..........
10.6 -- Form of Restated Plan Registration Rights Agreement dated as
of May 7, 1993, among the Company and the Existing Holders
(as defined therein), incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company on July 1, 1993. .............
</TABLE>
<PAGE> 116
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
10.7 -- Form of Registration Rights Agreement, dated as of May 7,
1993, among the Company and the Purchaser (as defined
therein) incorporated by reference to Exhibit 1 to the Form
of Securities Purchase Agreement filed as Exhibit 10.13 to
the Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company with the Commission on July 1,
1993. ......................................................
10.8 -- Amended and Restated Credit Agreement, dated as of May 7,
1993, by and among West Point-Pepperell, Inc., the banks
listed on the signature pages thereof, Bankers Trust
Company, as administrative agent, and The Chase Manhattan
Bank, N.A., Citicorp USA, Inc., NationsBank of North
Carolina, Inc., The Bank of New York and The Bank of Nova
Scotia, as co-agents, incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by Valley Fashions Corp. with the Commission
on July 1, 1993. ...........................................
10.9 -- Employment Agreement, dated as of March 8, 1993, between
West Point-Pepperell, Inc. and Holcombe T. Green, Jr.,
together with Letter, dated as of March 8, 1993, from the
Company to Holcombe T. Green, Jr., incorporated by reference
to the Registration Statement on Form 10 (Commission File
No. 0-21496) filed by Valley Fashions Corp. (since renamed
WestPoint Stevens Inc.) with the Commission on July 1,
1993. ......................................................
10.10 -- Employment Agreement, dated as of April 1, 1993, between
West Point-Pepperell, Inc. and Morgan M. Schuessler,
together with Letter, dated as of April 1, 1993, from the
Company to Morgan M. Schuessler, incorporated by reference
to the Registration Statement on Form 10 (Commission File
No. 0-21496) filed by Valley Fashions Corp. (since renamed
WestPoint Stevens Inc.) with the Commission on July 1,
1993. ......................................................
10.11 -- Employment Agreement, dated as of February 1, 1993, between
West Point-Pepperell, Inc. and Joseph L. Jennings, Jr.,
incorporated by reference to the Registration Statement on
Form 10 (Commission File No. 0-21496) filed by the Company
with the Commission on July 1, 1993. .......................
10.12 -- Employment Agreement, dated as of March 8, 1993, between
West Point-Pepperell, Inc. and Thomas J. Ward, incorporated
by reference to the Registration Statement on Form 10
(Commission File No. 0-21496) filed by the Company with the
Commission on July 1, 1993. ................................
10.13 -- Form of directors and officers Indemnification Agreement
with West Point-Pepperell, Inc., incorporated by reference
to the Registration Statement on Form S-1 (Commission File
No. 33-69858) filed by the Company with the Commission on
October 1, 1993. ...........................................
10.14 -- 1993 Management Stock Option Plan, incorporated by reference
to the Registration Statement on Form 10 (Commission File
No. 0-21496) filed by the Company with the Commission on
July 1, 1993. ..............................................
10.15 -- Description of 1993 Senior Management Incentive Plan,
incorporated by reference to the Company's 1994 Proxy
Statement (Commission File No. 0-21496) filed by the Company
with the Commission. .......................................
10.16 -- West Point-Pepperell, Inc. Supplemental Retirement Plan for
Eligible Executives, as amended, incorporated by reference
to the Schedule 14D-9 dated November 3, 1988 (Commission
File No. 1-4490) filed by West Point-Pepperell, Inc. with
the Commission. ............................................
</TABLE>
<PAGE> 117
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
10.17 -- West Point-Pepperell, Inc. Supplemental Executive Retirement
Plan, as amended, incorporated by reference to the Schedule
14D-9 dated November 3, 1988 (Commission File No. 1-4490)
filed by West Point-Pepperell, Inc. with the Commission. ...
10.18 -- Indenture, dated as of March 1, 1987, between J.P. Stevens &
Co., Inc. and The Bank of New York, as trustee, for the 9%
Sinking Fund Debentures due 2017 including the First and
Second Supplemental Indentures thereto, incorporated be
reference to the Registration Statement on Form S-1
(Commission File No. 33-69858) filed by the Company with the
Commission on October 1, 1993. .............................
10.19 -- Credit Agreement, dated as of December 1, 1993, among Valley
Fashions Corp., Bankers Trust Company as Administrative
Agent, the Co-Agents parties thereto and the other financial
institutions parties thereto as amended on December 10,
1993, incorporated by reference to the Annual Report on Form
10-K for the fiscal year ended December 31, 1993 (Commission
File No. 0-21496) filed by the Company with the
Commission. ................................................
10.20 -- Revolving Certificate Purchase Agreement, dated as of
December 1, 1993, among WPS Receivables Corporation, the
Company, the Co-Agents and Revolving Purchasers named
therein, Bankers Trust Company, as Administrative Agent, and
NationsBank of North Carolina, N.A., as Agent, incorporated
by reference to the Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 (Commission File No.
0-21496) filed by the Company with the Commission. .........
10.21 -- Amendment No. 1 to the Revolving Certificate Purchase
Agreement, dated as of December 10, 1993, among WPS
Receivables Corporation, the Company, the Co-Agents and
Revolving Purchasers named therein, Bankers Trust Company,
as Administrative Agent, and NationsBank of North Carolina,
N.A., as Agent, incorporated by reference to the Annual
Report on Form 10-K for the fiscal year ended December 31,
1993 (Commission File No. 0-21496) filed by the Company with
the Commission. ............................................
10.22 -- Pooling and Servicing Agreement, dated as of December 10,
1993, among WPS Receivables Corporation, as Transferor, the
Company, as the initial Servicer, and Chemical Bank, as
Trustee, incorporated by reference to the Current Report on
Form 8-K (Commission File No. 0-21496) filed by the Company
with the Commission on December 10, 1993. ..................
10.23 -- Receivables Purchase Agreement, dated as of December 10,
1993, among WPS Receivables Corporation, as Purchaser, and
the Company and Alamac Knit Fabrics, Inc., as Sellers,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on December 10, 1993. ...........................
10.24 -- Form of Securities Purchase Agreement, dated as of March 12,
1993, among the Company, New Street Capital Corporation,
Magten Asset Management Corporation and each Other Holder
(as defined therein), incorporated by reference to the
Registration Statement on Form 10 (Commission File No.
0-21496) filed by the Company with the Commission on July 1,
1993. ......................................................
10.25 -- Amended and Restated Credit Agreement dated November 23,
1994, among the Company, NationsBank of North Carolina, N.A.
as Administrative Agent, the Co-Agents parties thereto and
the other financial institutions parties thereto,
incorporated by reference to the Annual Report on Form
10-K/A for the fiscal year ended December 31, 1994
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
10.26 -- WestPoint Stevens Inc. 1994 Non-Employee Directors Stock
Option Plan, incorporated by reference to the Annual Report
on Form 10-K/A for the fiscal year ended December 31, 1994
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
10.27 -- Amended and Restated Pooling and Servicing Agreement, dated
as of May 27, 1994, among WPS Receivables Corporation, the
Company and Chemical Bank, incorporated by reference to the
Registration Statement on Form S-1, Amendment No. 2
(Commission File No. 33-76956) filed by WPS Receivables
Corporation with the Commission on May 24, 1994. ...........
10.28 -- Revolving Certificate Purchase Agreement, dated as of May
27, 1994, among WPS Receivables Corporation, the Company,
the Co-Agents and Revolving Purchasers named therein,
Bankers Trust Company, as Administrative Agent, and
NationsBank of North Carolina, N.A., as Agent, incorporated
by reference to the Registration Statement on Form S-1,
Amendment No. 3 (Commission File No. 33-76956) filed by WPS
Receivables Corporation with the Commission on May 16,
1994. ......................................................
10.29 -- Amended and Restated Receivables Purchase Agreement, dated
as of May 27, 1994, among WPS Receivables Corporation, as
Purchaser, and the Company and Alamac Knit Fabrics, Inc., as
Sellers, incorporated by reference to the Registration
Statement on Form S-1, Amendment No. 3 (Commission File No.
33-76956) filed by WPS Receivables Corporation with the
Commission on May 16, 1994. ................................
10.30 -- Series 1994-1 Supplement, dated as of May 27, 1994, to the
Amended and Restated Pooling and Servicing Agreement, among
WPS Receivables Corporation, the Company and Chemical Bank,
incorporated by reference to the Registration Statement on
Form S-1, Amendment No. 3 (Commission File 33-76956) filed
by WPS Receivables Corporation with the Commission on May
16, 1994. ..................................................
10.31 -- Series 1994-R Supplement, dated as of May 27, 1994, to the
Amended and Restated Pooling and Servicing Agreement, among
WPS Receivables Corporation, the Company and Chemical Bank,
incorporated by reference to the Registration Statement on
Form S-1, Amendment No. 3 (Commission File No. 33-76956)
filed by WPS Receivables Corporation with the Commission on
May 16, 1994. ..............................................
10.32 -- WestPoint Stevens Inc. Amended and Restated 1994
Non-Employee Directors Stock Option Plan, incorporated by
reference to the Form 10-Q for the quarterly period ended
June 30, 1995 (Commission File No. 0-21496) filed by the
Company with the Commission on August 9, 1995. .............
10.33 -- Description of Senior Management Incentive Plan,
incorporated by reference to the Company's 1995 Proxy
Statement (Commission File No. 0-21496) filed by the Company
with the Commission on April 7, 1995. ......................
10.34 -- WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan,
incorporated by reference to the Registration Statement Form
S-8 (Registration No. 33-95580) filed by the Company on
August 11, 1995. ...........................................
10.35 -- Credit Agreement dated December 4, 1995, among Alamac Knit
Fabrics, Inc., as Borrower, Alamac Enterprises Inc. and AIH
Inc., as Guarantors, the Lenders identified therein and
NationsBank, N.A., as agent, incorporated by reference to
the Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (Commission File No. 0-21496) filed by the
Company with the Commission. ...............................
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
10.36 -- Amendment Agreement dated December 4, 1995 among the
Company, NationsBank, N.A., The Bank of New York, The First
National Bank of Boston, The First National Bank of Chicago,
The Nippon Credit Bank, Ltd., Wachovia Bank of Georgia,
N.A., Trust Company Bank, AmSouth Bank of Alabama and ABN
AMRO Bank, N.V., incorporated by reference to the Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (Commission File No. 0-21496) filed by the Company with
the Commission. ............................................
10.37 -- Form of directors and officers Indemnification Agreement
with the Company, incorporated by reference to the Annual
Report on Form 10-K for the fiscal year ended December 31,
1995 (Commission File No. 0-21496) filed by the Company with
the Commission. ............................................
10.38 -- WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan
(As Amended), incorporated by reference to the Annual Report
on Form 10-K for the fiscal year ended December 31, 1995
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
10.39 -- Tax Settlement Form 870-AD between WestPoint Stevens Inc.
(successor-in-interest to Cluett, Peabody and Co., Inc.) and
the Internal Revenue Service dated December 11, 1995,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission. .....
10.40 -- Tax Settlement Form 870-AD between WestPoint Stevens Inc.
(successor-in-interest to West Point-Pepperell, Inc.) and
the Internal Revenue Service dated August 29, 1995,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission. .....
10.41 -- Tax Settlement Form 870-AD between J.P. Stevens & Co., Inc.
and the Internal Revenue Service dated August 29, 1995,
incorporated by reference to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission. .....
10.42 -- Second Amendment and Waiver Agreement dated as of January
23, 1997, among the Company, NationsBank, N.A. (formerly
known as NationsBank of North Carolina, N.A.), the Bank of
New York, The First National Bank of Boston, The First
National Bank of Chicago, The Nippon Credit Bank, Ltd.,
Wachovia Bank of Georgia, N.A., SunTrust Bank, Atlanta
(formerly known as Trust Company Bank), AmSouth Bank of
Alabama, and ABN AMRO Bank, N.V., incorporated by reference
to the Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1996 (Commission File No. 0-21496) filed
by the Company with the Commission. ........................
10.43 -- Credit Agreement dated as of January 23, 1997, among
WestPoint Stevens (UK) Limited, P.J. Flower & Co. Limited,
as the Borrowers, the Company as Guarantor, the several
lenders identified on the signature pages thereto and such
other lenders as may from time to time become a party
thereto and NationsBank, N.A., as agent for the Lenders,
incorporated by reference to the Annual Report on Form
10-K/A for the fiscal year ended December 31, 1996
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
10.44 -- First Amendment to the WestPoint Stevens Inc. Supplemental
Retirement Plan dated as of September 6, 1996, incorporated
by reference to the Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1996 (Commission File No.
0-21496) filed by the Company with the Commission. .........
</TABLE>
<PAGE> 120
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
10.45 -- Employment Agreement effective January 1, 1997 between the
Company and Joseph L. Jennings superseding the Employment
Agreement of February 1, 1993, incorporated by reference to
the Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996 (Commission File No. 0-21496) filed by the
Company with the Commission. ...............................
10.46 -- WestPoint Stevens Inc. Omnibus Stock Incentive Plan,
incorporated by reference to the Company's 1997 Proxy
Statement for the fiscal year ended December 31, 1996
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
10.47 -- Second Amendment Agreement, dated as of May 22, 1997, by and
among Alamac Knit Fabrics, Inc., as Borrower, Alamac
Enterprises Inc. and AIH Inc., as Guarantors, the Lenders
identified therein and NationsBank, N.A., as Agent,
incorporated by reference to the Form 10-Q for the quarterly
period ended June 30, 1997 (Commission File No. 0-21496)
filed by the Company with the Commission. ..................
10.48 -- Third Amendment Agreement, dated as of May 22, 1997, among
the Company, as Borrower, NationsBank, N.A. (formerly known
as NationsBank of North Carolina, N.A.), The Bank of New
York, The First National Bank of Boston, The First National
Bank of Chicago, Scotiabank Inc., Wachovia Bank of Georgia,
N.A., SunTrust Bank, Atlanta, AmSouth Bank of Alabama, and
ABN AMRO Bank, N.V., incorporated by reference to the Form
10-Q for the quarterly period ended June 30, 1997
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
10.49 -- Stock Purchase Agreement by and among Dyersburg Corporation,
as Purchaser, Alamac Sub Holdings Inc., as Seller, AIH Inc.
and Company dated as of July 15, 1997, incorporated by
reference to the Current Report on Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on
September 11, 1997. ........................................
10.50 -- Supplemental Agreement relating to Phase II Environmental
Investigation among Alamac Sub Holdings Inc., AIH Inc.,
Company and Dyersburg Corporation dated as of July 15, 1997,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on September 11, 1997. ..........................
10.51 -- Amendment to Stock Purchase Agreement among Alamac Sub
Holdings Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 15, 1997, incorporated by reference to
the Current Report on Form 8-K (Commission File No. 0-21496)
filed by the Company with the Commission on September 11,
1997. ......................................................
10.52 -- Supplemental Environmental Indemnity among Alamac Sub
Holdings, Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 20, 1997, incorporated by reference to
the Current Report on Form 8-K (Commission File No. 0-21496)
filed by the Company with the Commission on September 11,
1997. ......................................................
10.53 -- Second Supplemental Environmental Indemnity among Alamac Sub
Holdings Inc., AIH Inc., Company and Dyersburg Corporation
dated as of August 27, 1997, incorporated by reference to
the Current Report on Form 8-K (Commission File No. 0-21496)
filed by the Company with the Commission on September 11,
1997. ......................................................
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
10.54 -- Assignment and Assumption Agreement among Company (the
"Assignor"), Alamac Knit Fabrics, Inc. (the "Assignee") and
Dyersburg Corporation dated as of August 27, 1997,
incorporated by reference to the Current Report on Form 8-K
(Commission File No. 0-21496) filed by the Company with the
Commission on September 11, 1997. ..........................
10.55 -- Letter of Amendment Agreement, dated as of July 18, 1997, by
and among Alamac Knit Fabrics, Inc., as Borrower, Alamac
Enterprises Inc. and AIH Inc., as Guarantors, the Lenders
identified therein and NationsBank, N.A., as Agent,
incorporated by reference to the Form 10-Q for the quarterly
period ended September 30, 1997 (Commission File No.
0-21496) filed by the Company with the Commission. .........
10.56 -- Letter Amendment Agreement, dated as of July 22, 1997, among
the Company, as Borrower, NationsBank, N.A. (formerly known
as NationsBank of North Carolina, N.A.), The Bank of New
York, BankBoston, N.A. (formerly known as The First National
Bank of Boston), The First National Bank of Chicago,
Scotiabank Inc., Wachovia Bank of Georgia, N.A., SunTrust
Bank, Atlanta, AmSouth Bank of Alabama and ABN AMRO Bank,
N.A., incorporated by reference to the Form 10-Q for the
quarterly period ended September 30, 1997 (Commission File
No. 0-21496) filed by the Company with the Commission. .....
10.57 -- Letter Amendment Agreement, dated as of August 5, 1997,
among the Company, as Borrower, NationsBank, N.A. (formerly
known as NationsBank of North Carolina, N.A.), The Bank of
New York, BankBoston, N.A. (formerly known as The First
National Bank of Boston), The First National Bank of
Chicago, Scotiabank Inc., Wachovia Bank of Georgia, N.A.,
SunTrust Bank, Atlanta, AmSouth Bank of Alabama, and ABN
AMRO Bank, N.V., incorporated by reference to the Form 10-Q
for the quarterly period ended September 30, 1997
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
10.58 -- Termination of Commitments and Release of Liens dated August
27, 1997, by and among Alamac Knit Fabrics, Inc., as
Borrower, Alamac Enterprises Inc. and AIH Inc., as
Guarantors, the Lenders identified therein and NationsBank,
N.A., as Agent, incorporated by reference to the Form 10-Q
for the quarterly period ended September 30, 1997
(Commission File No. 0-21496) filed by the Company with the
Commission. ................................................
10.59 -- Second Amended and Restated Credit Agreement, dated as of
June 9, 1998, among the Company, WestPoint Stevens (UK)
Limited, WestPoint Stevens (Europe) Limited, NationsBank,
N.A., as agent, and the other financial institutions party
thereto.*...................................................
10.60 -- Letter Amendment Agreement, dated as of June 30, 1998, among
the Company, WestPoint Stevens (UK) Limited, WestPoint
Stevens (Europe) Limited, NationsBank, N.A., as agent and
the other financial institutions party thereto.*............
12.1 -- Statement Re: Computation of Ratios of Earnings to Fixed
Charges.*
12.2 -- Statement Re: Pro Forma Computation of Ratios of Earnings to
Fixed Charges.*
23(a) -- Consent of Ernst & Young LLP.*..............................
23(b) -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 5 to this Registration
Statement).**...............................................
24 -- Power of Attorney.*.........................................
25(a) -- Statement of Eligibility and Qualification of The Bank of
New York, as Trustee, on Form T-1 with respect to the 7 7/8%
Senior Notes due 2005.*.....................................
</TABLE>
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<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C> <C> <C>
25(b) -- Statement of Eligibility and Qualification of The Bank of
New York, as Trustee, on Form T-1 with respect to the Senior
Notes due 2008.*............................................
99.1 -- Form of Letter of Transmittal.*.............................
99.2 -- Form of Notice of Guaranteed Delivery.*.....................
99.3 -- Form of Instructions to Registered Holders and/or Book-Entry
Facility Participant from Beneficial Owner.*................
99.4 -- Form of Exchange Agent Agreement.*..........................
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
<PAGE> 1
EXHIBIT 5
August 4, 1998
WestPoint Stevens Inc.
507 West Tenth Street
West Point, Georgia 31833
Ladies and Gentlemen:
We have acted as counsel to WestPoint Stevens Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act of 1933, as amended, of a Registration Statement on Form S-4 (the
"Registration Statement"), with respect to $525,000,000 aggregate principal
amount of the Company's 7 7/8% Senior Notes Due 2005 and $475,000,000 aggregate
principal amount of the Company's 7 7/8% Senior Notes due 2008 (collectively,
the "Exchange Securities"), each to be issued under an Indenture, dated as of
June 9, 1998 (collectively, the "Indentures"), between the Company and The Bank
of New York, as trustee (the "Trustee").
In so acting, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Registration Statement, the
Indentures, the forms of Exchange Securities set forth in the Indentures and
such corporate records, agreements, documents and other instruments, and such
certificates or comparable documents of public officials and of officers and
representatives of the Company and have made such inquiries of such officers
and representatives as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Company. In addition, we have assumed that the Exchange
Securities will be executed and delivered substantially in the form examined by
us.
<PAGE> 2
WestPoint Stevens Inc.
August 4, 1998
Page 2
Based on the foregoing, and subject to the qualifications stated herein,
we are of the opinion that the Exchange Securities have been duly authorized
for issuance and, when duly executed by the Company, authenticated by the
Trustee pursuant to the terms of the Indentures and delivered in exchange for
securities of like tenor and principal amount in accordance with the terms of
the Indentures and as contemplated by the Registration Statement, will be
validly issued and will constitute the legal, valid and binding obligations of
the Company entitled to the benefits of the respective Indentures in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
The opinions expressed herein are limited to the laws of the State of New
York, the corporate laws of the State of Delaware and the federal laws of the
United States, and we express no opinion as to the effect on the matters
covered by this opinion of the laws of any other jurisdiction.
We hereby consent to the filing of a copy of this opinion with the
Commission as an exhibit to the Registration Statement and to any and all
references to our firm under the caption "Legal Matters" in the prospectus
that is part of the Registration Statement.
Very truly yours,
WEIL, GOTSHAL & MANGES LLP
