<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-21496
WESTPOINT STEVENS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3498354
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
507 WEST TENTH STREET
WEST POINT, GEORGIA 31833
(Address of principal executive offices, including Zip Code)
(706) 645-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- --------
Common shares outstanding at April 30, 1999: 55,683,442 shares of Common Stock,
$.01 par value.
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets:
March 31, 1999 (Unaudited) and
December 31, 1998 3
Condensed Consolidated Statements of
Income (Unaudited); Three Months
Ended March 31, 1999 and March 31, 1998 4
Condensed Consolidated Statements of Cash
Flows (Unaudited); Three Months
Ended March 31, 1999 and Three
Months Ended March 31, 1998 5
Condensed Consolidated Statements of
Stockholders' Equity (Deficit) (Unaudited);
Three Months Ended March 31, 1999 6
Notes to Condensed Consolidated Financial
Statements (Unaudited) 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
2
<PAGE> 3
WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents .................... $ 468 $ 527
Accounts receivable .......................... 87,383 70,086
Inventories .................................. 417,814 381,022
Prepaid expenses and other current assets .... 18,500 18,051
----------- -----------
Total current assets .............................. 524,165 469,686
Property, Plant and Equipment, net ................ 767,095 776,939
Other Assets
Deferred financing fees ...................... 20,416 21,102
Prepaid pension and other assets ............. 52,423 52,257
Goodwill ..................................... 70,804 71,227
----------- -----------
$ 1,434,903 $ 1,391,211
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Senior Credit Facility ....................... $ 105,355 $ 60,400
Accrued interest payable ..................... 23,740 4,777
Trade accounts payable ....................... 64,958 85,908
Other accounts payable and accrued liabilities 147,031 140,423
----------- -----------
Total current liabilities ......................... 341,084 291,508
Long-Term Debt .................................... 1,275,000 1,275,000
Noncurrent Liabilities
Deferred income taxes ........................ 241,766 236,328
Other liabilities ............................ 74,477 75,827
----------- -----------
Total noncurrent liabilities ...................... 316,243 312,155
Stockholders' Equity (Deficit) .................... (497,424) (487,452)
----------- -----------
$ 1,434,903 $ 1,391,211
=========== ===========
</TABLE>
See accompanying notes
3
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WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales ................................................ $441,517 $398,706
Cost of goods sold ....................................... 328,038 299,185
-------- --------
Gross earnings ...................................... 113,479 99,521
Selling, general and administrative expenses ............. 64,185 55,088
-------- --------
Operating earnings .................................. 49,294 44,433
Interest expense ......................................... 24,254 25,704
Other expense, net ....................................... 590 401
-------- --------
Income before income tax expense .................... 24,450 18,328
Income tax expense ....................................... 8,825 6,625
-------- --------
Net income .......................................... $ 15,625 $ 11,703
======== ========
Basic net income per common share ........................ $ .28 $ .20
======== ========
Diluted net income per common share ...................... $ .27 $ .19
======== ========
Basic average common shares outstanding .................. 55,876 58,919
Dilutive effect of stock options and stock bonus plan 1,677 1,991
-------- --------
Diluted average common shares outstanding ................ 57,553 60,910
======== ========
</TABLE>
See accompanying notes
4
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WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 15,625 $ 11,703
Adjustment to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and other amortization ...... 22,973 20,353
Deferred income taxes .................... 7,458 5,529
Changes in working capital ............... (47,334) (34,539)
Other - net .............................. (537) 389
--------- ---------
Net cash provided by (used for) operating activities (1,815) 3,435
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................... (12,799) (19,382)
Net proceeds from sale of assets ............... 102 209
--------- ---------
Net cash used for investing activities .............. (12,697) (19,173)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Senior Credit Facility:
Borrowings ............................... 254,000 232,500
Repayments ............................... (209,045) (182,469)
Principal payments on long-term debt ........... -- (3,750)
Net proceeds from Trade Receivables Program .... -- (7,835)
Purchase of common stock for treasury .......... (31,665) (31,549)
Proceeds from issuance of common stock ......... 1,163 1,281
--------- ---------
Net cash provided by financing activities ........... 14,453 8,178
--------- ---------
Net decrease in cash and cash equivalents ........... (59) (7,560)
Cash and cash equivalents at beginning of period .... 527 17,433
--------- ---------
Cash and cash equivalents at end of period .......... $ 468 $ 9,873
========= =========
</TABLE>
See accompanying notes
5
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WESTPOINT STEVENS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK
AND CAPITAL
IN ACCUMULATED
EXCESS OF OTHER
COMMON PAR TREASURY STOCK ACCUMULATED COMPREHENSIVE
SHARES VALUE SHARES AMOUNT DEFICIT INCOME (LOSS) TOTAL
--------- ----------- ------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998..................... 70,862 $343,437 (14,577) $(242,844) $(585,115) $(2,930) $(487,452)
Comprehensive income:
Net income................................ - - - - 15,625 - 15,625
Foreign currency translation adjustment... 302 802
--------
Comprehensive income......................... 15,927
--------
Exercise of management stock options
including tax benefit..................... 224 2,640 (41) (1,178) - - 1,462
Issuance of stock pursuant to Stock
Bonus Plan including tax benefit.......... - 1,676 242 2,628 - - 4,304
Purchase of treasury shares.................. - - (1,158) (31,665) - - (31,665)
--------- -------- ------- -------- --------- ------- --------
Balance, March 31, 1999........................ 71,086 $347,753 (15,534) $(273,059) $(569,490) $(2,628) $(497,424)
========= ======== ======= ========== ========= ======= =========
</TABLE>
See accompanying notes
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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 only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three month period ended March 31, 1999 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1999.
Effective January 1, 1999, the Company adopted Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use and the impact on its financial statements was immaterial. 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, 1998.
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, 1999 and December 31, 1998
(in thousands of dollars):
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
[S] [C] [C]
Finished goods $204,923 $170,896
Work in progress 163,142 160,995
Raw materials and supplies 56,022 59,466
LIFO reserve (6,273) (10,335)
--------- --------
$417,814 $381,022
========= ========
7
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WESTPOINT STEVENS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. INDEBTEDNESS AND FINANCIAL ARRANGEMENTS
Indebtedness is as follows (in thousands of dollars):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
Short-term indebtedness
Senior Credit Facility
Revolver $ 105,355 $ 60,400
========== ==========
Long-term indebtedness
Senior Credit Facility
Revolver $ 275,000 $ 275,000
7 7/8% Senior Notes due 2005 525,000 525,000
7 7/8% Senior Notes due 2008 475,000 475,000
---------- ----------
$1,275,000 $1,275,000
========== ==========
</TABLE>
At March 31, 1999 and December 31, 1998, $145.0 million of accounts receivable
had been sold pursuant to a trade receivables program (the "Trade Receivables
Program") and the sale is reflected as a reduction of accounts receivable in the
accompanying Condensed Consolidated Balance Sheets.
8
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WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YEAR 2000
General Description of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in similar normal business
activities.
In 1994, the Company began a company-wide project to replace all existing
information systems with improved systems launched from a newer technology
infrastructure and, as a by-product, make the new systems Year 2000 compliant.
The Company presently believes that with replacements and modifications of
existing software and certain hardware, the Year 2000 Issue can be mitigated.
However, if such modifications and replacements are not made, or are not
completed on a timely basis, the Year 2000 Issue could have a material impact on
the operations of the Company.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing and implementation. To date, the
Company has completed its assessment of all systems that could be significantly
affected by the Year 2000. The completed assessment indicated that most of the
Company's significant information technology systems could be affected. That
assessment also indicated that in some cases software and hardware (embedded
chips) used in production and manufacturing systems (hereafter also referred to
as operating equipment) were also at risk. Affected systems included automated
assembly lines and related robotics technologies used in various aspects of the
manufacturing process. However, based on a review of its product line, the
Company determined that none of the products it has sold and will continue to
sell required remediation to be Year 2000 compliant. Accordingly, the Company
does not believe that the Year 2000 Issue presents a material exposure as it
relates to the Company's products. In addition, the Company has gathered
information about the Year 2000 compliance status of its significant customers,
suppliers and subcontractors and continues to monitor their compliance.
Status of Progress in Becoming Year 2000 Compliant
The Company is on schedule with its plan for addressing the Year 2000 Issue. By
March 1, 1999, the Company had determined that 95% of its systems were Year 2000
compliant and has completed an assessment, remediation and testing of its most
critical systems. All implementation is expected to be completed by June 30,
1999. The Company will include the Year 2000 Issue as part of its disaster
recovery testing throughout the remainder of 1999.
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WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 (CONTINUED)
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000 Issue
The Company has surveyed key production, non-production, service, utility and
communication suppliers to determine their state of readiness. Responses
indicate most key vendors plan to be compliant in a timely manner. EDI
interfaces with suppliers are being tested, and early results indicate the
Company's supplier interfaces and procurement systems are compliant. However,
there can be no assurance that suppliers' systems, or their suppliers' systems,
upon which the Company relies, will be ready in a timely manner and will not
have a material effect on the Company.
The Company has surveyed key customers who electronically interface with the
Company via EDI to determine their state of readiness and plan for testing
compliant interfaces. Responses received from a majority of key customers
indicate that they expect to be compliant and able to test compliant interfaces.
However, there can be no assurance that all customers' systems, upon which the
Company relies, will be ready in a timely manner and will not have a material
effect on the Company.
To date, the Company is not aware of any third party with a Year 2000 Issue that
will materially impact the Company's results of operations, liquidity or capital
resources. However, the Company has no means of ensuring that third parties will
be Year 2000 ready. The inability of third parties to complete their Year 2000
resolution process in a timely fashion could materially impact the Company.
Costs, Risks and Contingency Plans for the Year 2000 Issue
The Company has and will continue to utilize both internal and external
resources to reprogram, or replace, test and implement the software and
operating equipment for Year 2000 modifications. The total cost of the Year 2000
project is estimated at $650,000 and is being funded through operating cash
flows. Of that amount, the Company estimates it has incurred approximately
$600,000 to date, related to all phases of the Year 2000 project and not related
to the systems improvement project started in 1994.
The Company has a high dependence on computer processes such as electronic order
and shipment information that automatically drive business processes, bar codes
that cannot be reproduced manually, and machinery containing advanced technology
requiring computerized controls. The Company's business transaction volume is
concentrated among a few customers who also have a high dependence upon
computers.
10
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WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 (CONTINUED)
Costs, Risks and Contingency Plans for the Year 2000 Issue (continued)
Management of the Company believes it has an effective program in place to
address the Year 2000 Issue in a timely manner, however, in the event that the
Company does not complete all necessary remaining phases of the Year 2000
program, the Company may experience some difficulties in operating its
equipment. In addition, disruptions in the economy generally resulting from Year
2000 Issues could have a material effect upon the Company.
The Company is updating its contingency plans based on the current status of its
progress toward becoming Year 2000 compliant. Contingency plans will continue to
address potential needs during the actual transition of operations on January 1,
2000. In addition, the Company is planning the development of a Year 2000
business continuity plan for its critical business functions which will include
potential failure by critical third parties to address the Year 2000 Issue.
The costs of the Year 2000 project and the date on which management of the
Company believes it will complete Year 2000 modifications are based on
management's best estimates, which are derived utilizing numerous assumptions of
future events, including the continued availability of certain resources and
other factors. However, there can be no assurance 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.
11
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WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 1999
The table below is a summary of the Company's operating results for the three
months ended March 31, 1999 and March 31, 1998 (in millions of dollars and as
percentages of net sales).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales.............................................................. $441.5 $398.7
Gross earnings......................................................... $113.5 $ 99.5
Operating earnings..................................................... $ 49.3 $ 44.4
Interest expense....................................................... $ 24.3 $ 25.7
Net income............................................................. $ 15.6 $ 11.7
Gross margins.......................................................... 25.7% 25.0%
Operating margins...................................................... 11.2% 11.1%
</TABLE>
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WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 1999 (CONTINUED)
NET SALES. Net sales for the three months ended March 31, 1999 increased $42.8
million, or 10.7%, to $441.5 million compared with net sales of $398.7 million
for the three months ended March 31, 1998. Excluding the sales of Liebhardt
Mills, which was acquired during the fourth quarter of 1998, net sales increased
7.2%. The increase in net sales resulted primarily from higher unit volume in
the 1999 period compared with the 1998 period and the acquisition of Liebhardt
Mills.
GROSS EARNINGS/MARGINS. Gross earnings for the three months ended March 31, 1999
of $113.5 million increased $14 million, or 14%, compared with $99.5 million for
the same period of 1998 and reflect gross margins of 25.7% in the 1999 period
and 25% in the 1998 period. Gross earnings and margins increased in the first
quarter of 1999 primarily as a result of the increase in unit volume and a
better mix of products sold.
OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
increased by $9.1 million, or 16.5%, in the first quarter of 1999 compared
with the same period last year, and as a percentage of net sales represent
14.5% in the 1999 period and 13.8% in the 1998 period. The increase in
selling, general and administrative expenses in the first quarter of 1999 was
due primarily to the acquisition of Liebhardt Mills along with higher
advertising expense and warehousing/shipping expense related to the higher
unit volume.
Operating earnings for the three months ended March 31, 1999 were $49.3 million,
or 11.2% of sales, and increased $4.9 million, or 10.9%, compared with operating
earnings of $44.4 million, or 11.1% of sales, for the same period of 1998. 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, 1999 of
$24.3 million decreased $1.4 million compared with interest expense for the
three months ended March 31, 1998. The decrease was due primarily to lower
interest rates as a result of the refinancing transactions in the second quarter
of 1998 offset somewhat by higher average debt levels in the 1999 first quarter
compared with the corresponding 1998 average debt levels.
OTHER EXPENSE, NET. Other expense, net in the first quarter of 1999 of $0.6
million increased $0.2 million compared with the 1998 period and consists
primarily of the amortization of deferred financing fees of $0.7 million in the
1999 period and $1 million in the 1998 period less certain miscellaneous income
items in both years.
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WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 1999 (CONTINUED)
INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to state income taxes and nondeductible items.
NET INCOME. Net income for the first quarter of 1999 was $15.6 million, or $.27
per share diluted, compared with net income of $11.7 million, or $.19 per share
diluted, for the same period of last year.
Diluted per share amounts are based on 57.6 million and 60.9 million average
shares outstanding for the 1999 and 1998 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.
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. At April 30,
1999, the maximum commitment under the Senior Credit Facility was $575 million
and the Company had unused borrowing availability under the Senior Credit
Facility totaling approximately $190 million. The Senior Credit Facility
contains covenants which, among other things, limit indebtedness and require
the maintenance of certain financial ratios and minimum net worth as defined.
The Company has commitments to increase the bank revolver with its current
banks from $575 million to $800 million, and the transaction is expected to be
completed in the second quarter of 1999. The conditions of the increased
revolver will continue as previously stated, including the revolver expiration
date of November 30, 2004. The increased borrowing availability is to support
the Company's growth plans and strategy in the future, if required.
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 $147.5 million
in 1998 on capital expenditures and intends to invest approximately $175 million
in 1999 including the recently announced approximate 12% increase in towel
capacity approved by the Company's Board of Directors. The Board of Directors
also approved the payment of an initial quarterly cash dividend of $.02 per
share.
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WESTPOINT STEVENS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
During the first three months of 1999, the Company purchased approximately 1.2
million shares under its various stock repurchase programs, at an average
price of $27.33 per share. In February 1999, the Board of Directors approved
the purchase of up to three million additional shares of the Company's common
stock, subject to the Company's debt limitations, which brings the total
shares that have been approved for purchase to nineteen million shares. At
March 31, 1999, approximately 3.8 million shares remained to be purchased
under these programs.
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, 1999 and December 31, 1998, $145 million had been
sold under this program and the sale is reflected as a reduction of accounts
receivable in the accompanying Condensed Consolidated Balance Sheets. The cost
of the Trade Receivables Program in 1999 is estimated to total approximately
$7.6 million, compared with $6.5 million in 1998, and will be charged to
selling, general and administrative expenses.
Debt service requirements for interest payments in 1999 are estimated to total
approximately $101.8 million (excluding amounts related to the Trade Receivables
Program) compared with interest payments of $107.7 million in 1998. The
Company's long-term indebtedness has no scheduled principal payment requirement
during 1999.
Management believes that cash from the Company's operations and borrowings under
its credit agreement will provide the funding necessary to meet the Company's
anticipated requirements for capital expenditures and operating expenses and to
enable it to meet its anticipated debt service requirements.
15
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WESTPOINT STEVENS INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and non-hazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. Certain of the Company's facilities (including certain facilities no
longer owned or utilized by the Company) have been cited or are being
investigated with respect to alleged violations of such laws and regulations.
The Company believes that it has adequately provided in its financial statements
for any expenses and liabilities that may result from such matters. The Company
also is insured with respect to certain of such matters. The Company's
operations are governed by laws and regulations relating to employee safety and
health which, among other things, establish exposure limitations for cotton
dust, formaldehyde, asbestos and noise, and regulate chemical and ergonomic
hazards in the workplace. Although the Company does not expect that compliance
with any such laws and regulations will adversely affect the Company's
operations, there can be no assurance such regulatory requirements will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such requirements.
The Company and its subsidiaries are involved in various other legal
proceedings, both as plaintiff and as defendant, which are normal to its
business.
It is the opinion of management that the aforementioned actions and claims, if
determined adversely to the Company, will not have a material adverse effect on
the financial condition or operations of the Company taken as a whole.
16
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WESTPOINT STEVENS INC.
PART II - OTHER INFORMATION (CONTINUED)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the quarter
ended March 31, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<S> <C>
10.1 Amendment dated February 11, 1999 to the
WestPoint Stevens 1995 Key Employee Stock
Bonus Plan (as amended).
10.2 Second Amendment dated February 11, 1999 to the
WestPoint Stevens Inc. Supplemental Retirement Plan.
10.3 Letter Amendment Agreement, dated as of March 16, 1999
among the Company, WestPoint Stevens (UK) Limited,
WestPoint Stevens (Europe) Limited, NationsBank, N.A.,
as agent and other financial institutions party thereto.
27 Financial Data Schedule (for SEC use only)
</TABLE>
b.) No report on Form 8-K was filed by the Company during the quarter
ended March 31, 1999.
17
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WESTPOINT STEVENS INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
WESTPOINT STEVENS INC.
----------------------
Registrant
Dated: May 13, 1999 /s/ Morgan M. Schuessler
---------------------------------
Morgan M. Schuessler
Executive Vice President-Finance
and Chief Financial Officer
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WESTPOINT STEVENS INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER NUMBER
- ------- ------
<S> <C> <C>
10.1 Amendment dated February 11, 1999 to the
WestPoint Stevens 1995 Key Employee Stock
Bonus Plan (as amended).
10.2 Second Amendment dated February 11, 1999
to the WestPoint Stevens Inc. Supplemental
Retirement Plan.
10.3 Letter Amendment Agreement, dated as of
March 16, 1999 among the Company, WestPoint
Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, NationsBank, N.A., as agent and other
financial institutions party thereto.
27 Financial Data Schedule (for SEC use only)
</TABLE>
19
<PAGE> 1
Exhibit 10.1
AMENDMENT TO THE
WESTPOINT STEVENS INC.
1995 KEY EMPLOYEE STOCK BONUS PLAN
(As Amended)
THIS AMENDMENT to the WestPoint Stevens Inc. 1995 Key Employee Stock Bonus
Plan (As Amended) is made the 11th day of February, 1999, by WestPoint Stevens
Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Plan for the benefit of its eligible
employees;
WHEREAS, the Company's Board of Directors has the authority to amend or
modify the Plan at any time and in any respect with certain limitations as
stated in the Plan; and
WHEREAS, the Company desires to amend the Plan as provided herein; and
WHEREAS, the Board of Directors of the Company, acting within its
authority, has approved the amendment of the Plan as provided herein;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 7 of the Plan is amended in its entirety to read as follows:
7. Within the first 90 days of each Performance Year (or, in the
case of the initial Performance Year, within 90 days of the date
the Plan is approved by the Board), the Committee shall establish
a vesting schedule that shall apply to the Bonus Awards granted
for that Performance Year provided, however, that not less than
10% of the shares subject to each Bonus Award shall become vested
as of January 1 of the year immediately following the Performance
Year and on January 1 of each succeeding year. If a Participant
terminates employment with the Company (i) as a result of death,
Disability, Retirement, termination without "cause" or with "good
reason" (as such terms may be defined in a written employment
agreement between the Participant and the Company), or (ii) due to
other circumstances approved by the Committee, the unvested
portion of any Bonus Award granted to the Participant shall become
fully vested and nonforfeitable. If a Participant terminates
employment due to any other circumstances, the
<PAGE> 2
unvested portion of any Bonus Award granted to the
Participant shall be forfeited. In the event of a Change in
Control of the Company, all outstanding Bonus Awards
shall become fully vested and nonforfeitable.
Notwithstanding anything herein to the contrary, the
Committee in its sole discretion may at any time
accelerate the vesting of any and all outstanding Bonus
Awards.
2. Section 9 of the Plan is amended in its entirety to read as follows:
9. Delivery of Shares
The shares of Common Stock subject to a Bonus
Award shall be delivered to the Participant as soon as
practicable after (i) the Committee has determined that
the performance Target for the Performance Year has
been achieved, and (ii) such shares have become vested
in accordance with Section 7. All fractional shares shall
be reduced to cash of equal Fair Market Value.
3. Section 10 of the Plan is amended in its entirety to read as follows:
10. [Reserved]
4. Except as specified herein, the Plan shall remain in full force and
effect.
<PAGE> 1
EXHIBIT 10.2
SECOND AMENDMENT TO THE
WESTPOINT STEVENS INC.
SUPPLEMENTAL RETIREMENT PLAN
THIS SECOND AMENDMENT to the WestPoint Stevens Inc. Supplemental
Retirement Plan (the "Plan") is made the 11th day of February, 1999, by
WestPoint Stevens Inc. (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the Plan to provide supplemental retirement
benefits to a select group of management or highly compensated employees of the
Company; and
WHEREAS, Section 7.1 of the Plan provides that the Company has the right
to amend the Plan at any time and from time to time in any fashion, subject to
the limitations stated therein; and
WHEREAS, the Company previously adopted the First Amendment to the Plan
for the purpose of limiting the amount of compensation that may be taken into
account for purposes of determining a participant's accrued benefit under the
Plan; and
WHEREAS, the Company now desires to further amend the Plan to clarify
certain provisions added by the First Amendment:
NOW, THEREFORE, the Plan is amended as follows:
1. Section 4.1 of the Plan is amended effective January 1, 1996 by
adding a new subsection 4.1(c) to read as follows:
(c) Notwithstanding subsection (a)(1) or anything in the Pension
Plan to the contrary, effective January 1, 1996, the compensation
taken into account under the Plan for any Plan year (including Plan
Years beginning prior to January 1, 1996) shall not exceed the lesser
of (i) $300,000 or (ii) one-hundred twenty percent (120%) of the
Participant's base salary. The provisions of this subsection (c) shall
not reduce any Participant's Accrued Benefit determined as of August
15, 1996 without regard to this subsection (c). In addition, the
provisions of this subsection (c) shall not apply to Holcombe T.
Green, Jr., Joseph L. Jennings, Jr., Thomas J. Ward, Morgan M.
Schuessler and William F. Crumley.
2. Except as specified herein, the Plan shall remain in full force and
effect.
<PAGE> 1
EXHIBIT 10.3
[NATIONSBANK LETTERHEAD]
March 16, 1999
WESTPOINT STEVENS INC.
507 West Tenth Street
WestPoint, Georgia 31833
Attention: Mr. Morgan M. Schuessler
Re: Revision of Definition of "Maximum Restricted Payment Amount"
and Minimum Net Worth Covenant
Dear Sirs:
Reference is made to that certain Second Amended and Restated Credit Agreement,
dated as of June 9, 1998, among WestPoint Stevens Inc. ("Borrower"), WestPoint
Stevens (UK) Limited and WestPoint Stevens (Europe) Limited (the "Foreign
Borrowers"), the various banks and lending institutions party thereto (the
"Banks"), and NationsBank, N.A. as agent (the "Agent") for the Banks (as
amended from time to time, the "Credit Agreement"). Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.
By their signatures below, the Borrower, the Foreign Borrowers and the Required
Banks hereby agree that the existing definition of "Maximum Restricted Payment
Amount" in Section 1.1 of the Credit Agreement shall be amended to read in its
entirety as follows:
"Maximum Restricted Payment Amount" means the sum of (i) $99,210,000,
plus (ii) 50% of the Consolidated Net Income from and after March 31, 1998
until any relevant measurement date, plus (iii) the Net Cash Proceeds
received by the Borrower from the exercise of stock warrants or options by
employees or former employees of the Borrower in respect of Capital Stock
of the Borrower from and after March 31, 1998, plus (iv) $21,790,978
(representing the Net Cash Proceeds received by Alamac Sub Holdings Inc.
from the sale of its facility located in Whitmire, South Carolina), and (v)
beginning with the fiscal quarter ending nearest December 31, 1998, minus
the lesser of $65,000,000 or 50% of the Consolidated Net Income from and
after October 1, 1998 until any relevant measurement date.
Member FDIC
<PAGE> 2
WestPoint Stevens Inc.
March 16, 1999
Page 2
By their signatures below, the Borrower, the Foreign Borrowers and the Required
Banks hereby agree that Section 7.11(a) be amended to read in its entirety as
follows:
Minimum Consolidated Net Worth. Have a Consolidated Net Worth as
of the last day of each fiscal quarter of not less than (i)
$190,000,000, (ii) increased on a cumulative basis as of the end of
each fiscal quarter of the Consolidated Parties, commencing with the
fiscal quarter ending June 30, 1998, by an amount equal to forty
percent (40%) of Consolidated Net Income (to the extent positive) for
the fiscal quarter then ended, and (iii) further increased on a
cumulative basis as of the end of each fiscal quarter of the
Consolidated Parties beginning with the fiscal quarter ending nearest
December 31, 1998 by an amount equal to the lesser of (A) fifty
percent (50%) of Consolidated Net Income (to the extent positive) for
each such fiscal quarter or (B) $65,000,000.
By their signatures below, each of the Subsidiary Guarantors acknowledges and
consents to this revision in the definition of "Maximum Restricted Payment
Amount" and each Subsidiary Guarantor agrees that this revision does not
operate to reduce or discharge any of such Subsidiary's obligations under any
of the Collateral Documents.
Until this letter agreement shall have been executed by the Borrower, the
Foreign Borrowers, the Subsidiary Guarantors, and the Required Banks, it shall
not be effective in revising either the definition of "Maximum Restricted
Payment Amount" or Section 7.11(a). Except for the revision to the definition
of "Maximum Restricted Payment Amount" and the revision of Section 7.11(a)
effected hereby upon the execution of this letter agreement by the Borrower,
the Foreign Borrowers, the Subsidiary Guarantors, and the Required Banks, the
Credit Agreement shall remain in full force and effect.
Please execute this letter agreement and cause each of the Foreign Borrowers
and the Subsidiary Guarantors to execute this letter agreement, and return such
completed signature pages to the Agent at your earliest convenience.
Sincerely,
NATIONSBANK, N.A., in its capacity
as the Agent
By: /s/ David H. Dinkins
-------------------------------
David H. Dinkins
Title: Vice President
----------------------------
ACKNOWLEDGED AND AGREED:
WESTPOINT STEVENS INC.
By: /s/ MORGAN M. SCHUESSLER
---------------------------------------
Morgan M. Schuessler
Title: Executive Vice President - Finance
and Chief Financial Officer
------------------------------------
[Signatures Continued]
<PAGE> 3
WestPoint Stevens Inc.
March 16, 1999
Page 3
WESTPOINT STEVENS (UK) LIMITED
By: /s/ Morgan M. Schuessler
---------------------------------------------
Morgan M. Schuessler
Title: Director, Vice President & Treasurer
------------------------------------------
WESTPOINT STEVENS (EUROPE) LIMITED
By: /s/ Morgan M. Schuessler
---------------------------------------------
Morgan M. Schuessler
Title: Director, Vice President & Treasurer
------------------------------------------
WESTPOINT STEVENS STORES, INC.
By: /s/ Morgan M. Schuessler
---------------------------------------------
Morgan M. Schuessler
Title: Vice President & Treasurer
------------------------------------------
J.P. STEVENS & CO., INC.
By: /s/ Morgan M. Schuessler
---------------------------------------------
Morgan M. Schuessler
Title: Vice President & Treasurer
------------------------------------------
WESTPOINT-PEPPERELL ENTERPRISES, INC.
By: /s/ Edward J. Jones
---------------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
------------------------------------------
J.P. STEVENS ENTERPRISES, INC.
By: /s/ Edward J. Jones
---------------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
------------------------------------------
ALAMAC HOLDINGS INC.
By: /s/ Edward J. Jones
---------------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
------------------------------------------
[Signatures Continued]
<PAGE> 4
WestPoint Stevens Inc.
March 16, 1999
Page 4
ALAMAC SUB HOLDINGS INC.
By: /s/ EDWARD J. JONES
----------------------------------------
Edward J. Jones
Title: Vice President & Assistant Treasurer
-------------------------------------
NATIONSBANK, N.A., as a Bank
By:
----------------------------------------
Title:
-------------------------------------
THE BANK OF NEW YORK
By:
----------------------------------------
Title:
-------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By:
----------------------------------------
Title:
-------------------------------------
SCOTIABANC INC.
By:
----------------------------------------
Title:
-------------------------------------
WACHOVIA BANK, N.A.
By:
----------------------------------------
Title:
-------------------------------------
[Signatures Continued]
<PAGE> 5
WestPoint Stevens Inc.
March 16, 1999
Page 4
ALAMAC SUB HOLDINGS INC.
By:
----------------------------------------
Title:
-------------------------------------
NATIONSBANK, N.A., as a Bank
By: /s/ DAVID H. DINKINS
----------------------------------------
DAVID H. DINKINS
Title: Vice President
-------------------------------------
THE BANK OF NEW YORK
By:
----------------------------------------
Title:
-------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By:
----------------------------------------
Title:
-------------------------------------
SCOTIABANC INC.
By:
----------------------------------------
Title:
-------------------------------------
WACHOVIA BANK, N.A.
By:
----------------------------------------
Title:
-------------------------------------
[Signatures Continued]
<PAGE> 6
WestPoint Stevens Inc.
March 16, 1999
Page 4
ALAMAC SUB HOLDINGS INC.
By:
------------------------------
Title:
----------------------------
NATIONSBANK, N.A., as a Bank
By:
------------------------------
Title:
----------------------------
THE BANK OF NEW YORK
By: /s/ Robert F. Santoriello, Jr.
------------------------------
Robert F. Santoriello, Jr.
Title: Assistant Vice President
---------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By:
------------------------------
Title:
----------------------------
SCOTIABANC INC.
By:
------------------------------
Title:
----------------------------
WACHOVIA BANK, N.A.
By:
------------------------------
Title:
----------------------------
[Signatures Continued]
<PAGE> 7
WestPoint Stevens Inc.
March 16, 1999
Page 4
ALAMAC SUB HOLDINGS INC.
By:
--------------------------
Title:
------------------------
NATIONSBANK, N.A., as a Bank
By:
--------------------------
Title:
------------------------
THE BANK OF NEW YORK
By:
--------------------------
Title:
------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Kristen H. Hertel
--------------------------
Title: Vice President
--------------------------
SCOTIABANC INC.
By:
--------------------------
Title:
------------------------
WACHOVIA BANK, N.A.
By:
--------------------------
Title:
------------------------
[Signatures Continued]
<PAGE> 8
WestPoint Stevens, Inc.
March 16, 1999
Page 4
ALAMAC SUB HOLDINGS INC.
By:
------------------------------
Title:
---------------------------
NATIONSBANK, N.A., as a Bank
By:
------------------------------
Title:
---------------------------
THE BANK OF NEW YORK
By:
------------------------------
Title:
---------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By:
------------------------------
Title:
---------------------------
SCOTIABANC INC.
By: /s/
------------------------------
Title:
---------------------------
WACHOVIA BANK, N.A.
By:
------------------------------
Title:
---------------------------
[Signatures Continued]
<PAGE> 9
WestPoint Stevens Inc.
March 16, 1999
Page 4
ALAMAC SUB HOLDINGS INC.
By:
-------------------------------
Title:
----------------------------
NATIONSBANK, N.A., as a Bank
By:
-------------------------------
Title:
----------------------------
THE BANK OF NEW YORK
By:
-------------------------------
Title:
----------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By:
-------------------------------
Title:
----------------------------
SCOTIABANC INC.
By:
-------------------------------
Title:
----------------------------
WACHOVIA BANK, N.A.
By: /s/ REGINALD T. DAWSON
------------------------------
REGINALD T. DAWSON
Title: SVP
---------------------------
[Signatures Continued]
<PAGE> 10
WestPoint Stevens Inc.
March 16, 1999
Page 5
SOCIETE GENERALE
By:
------------------------------------
Title:
---------------------------------
ABN AMRO BANK, N.V.
By: /s/ By: /s/
------------------------------------ -------------------------------
Title: VICE PRESIDENT Title: VICE PRESIDENT
--------------------------------- ----------------------------
SUNTRUST BANK, ATLANTA
By:
------------------------------------
Title:
---------------------------------
By:
------------------------------------
Title:
---------------------------------
FIRST UNION NATIONAL BANK
By:
------------------------------------
Title:
---------------------------------
FLEET BANK, N.A.
By:
------------------------------------
Title:
---------------------------------
[Signatures Continued]
<PAGE> 11
WestPoint Stevens Inc.
March 16, 1999
Page 5
SOCIETE GENERALE
By:
------------------------------------
Title:
---------------------------------
ABN AMRO BANK, N.V.
By:
------------------------------------
Title:
---------------------------------
SUNTRUST BANK, ATLANTA
By: /s/ LAURA KAHN
------------------------------------
Laura Kahn
Title: SENIOR VICE PRESIDENT
---------------------------------
By:
------------------------------------
Title:
---------------------------------
FIRST UNION NATIONAL BANK
By:
------------------------------------
Title:
---------------------------------
FLEET BANK, N.A.
By:
------------------------------------
Title:
---------------------------------
[Signatures Continued]
<PAGE> 12
WestPoint Stevens Inc.
March 16, 1999
Page 5
SOCIETE GENERALE
By:
------------------------------------
Title:
---------------------------------
ABN AMRO BANK, N.V.
By:
------------------------------------
Title:
---------------------------------
SUNTRUST BANK, ATLANTA
By:
------------------------------------
Title:
---------------------------------
By:
------------------------------------
Title:
---------------------------------
FIRST UNION NATIONAL BANK
By: /s/ ROGER PELZ
------------------------------------
Roger Pelz
Title: Senior Vice President
---------------------------------
FLEET BANK, N.A.
By:
------------------------------------
Title:
---------------------------------
[Signatures Continued]
<PAGE> 13
WestPoint Stevens, Inc.
March 16, 1999
Page 5
SOCIETE GENERALE
By:
------------------------------
Title:
---------------------------
ABN AMRO BANK, N.V.
By:
------------------------------
Title:
---------------------------
SUNTRUST BANK, ATLANTA
By:
------------------------------
Title:
---------------------------
By:
------------------------------
Title:
---------------------------
FIRST UNION NATIONAL BANK
By:
------------------------------
Title:
---------------------------
FLEET BANK, N.A.
By: /s/ STEVEN NAVARRO
------------------------------
Steven Navarro
Title: SVP
---------------------------
[Signatures Continued]
<PAGE> 14
WestPoint Stevens Inc.
March 16, 1999
Page 6
AMSOUTH BANK
By: /s/
---------------------------------------
Title: Vice President
------------------------------------
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By:
----------------------------------------
Title:
-------------------------------------
By:
----------------------------------------
Title:
-------------------------------------
NATIONAL WESTMINSTER BANK PLC
By:
----------------------------------------
Title:
-------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999 AND THE CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 468
<SECURITIES> 0
<RECEIVABLES> 106,617
<ALLOWANCES> 19,234
<INVENTORY> 417,814
<CURRENT-ASSETS> 524,165
<PP&E> 1,222,992
<DEPRECIATION> 455,897
<TOTAL-ASSETS> 1,434,903
<CURRENT-LIABILITIES> 341,084
<BONDS> 1,275,000
0
0
<COMMON> 711
<OTHER-SE> (498,135)
<TOTAL-LIABILITY-AND-EQUITY> 1,434,903
<SALES> 441,517
<TOTAL-REVENUES> 441,517
<CGS> 328,038
<TOTAL-COSTS> 328,038
<OTHER-EXPENSES> 590
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,254
<INCOME-PRETAX> 24,450
<INCOME-TAX> 8,825
<INCOME-CONTINUING> 15,625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,625
<EPS-PRIMARY> .28
<EPS-DILUTED> .27
</TABLE>
