SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1998
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 1-11812
STARTER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-0872266
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 James Street, New Haven, Connecticut 06513
----------------------------------------------
(Address of principal executive offices, including zip code)
(203) 781-4000
--------------
(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 |_|
27,889,578 shares of common stock, $.01 par value, were outstanding as of May 1,
1998.
<PAGE>
INDEX
STARTER CORPORATION
Page Number
-----------
PART I Financial Information
ITEM 1 Consolidated Financial Statements (unaudited)
Consolidated balance sheets - March 31, 1998,
December 31, 1997 and March 31, 1997 3-4
Consolidated statements of operations - Three months
ended March 31, 1998 and March 31, 1997 5
Consolidated statements of cash flows - Three months
ended March 31, 1998 and March 31, 1997 6
Notes to consolidated financial statements -
March 31, 1998 7
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II Other Information
ITEM 6 Exhibits and Report on Form 8-K 17
Signature 18
2
<PAGE>
STARTER CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997 March 31, 1997
-------------- ----------------- --------------
(unaudited) (note) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,046 $ 149 $ 330
Accounts receivable - trade, less allowance
for doubtful accounts of $3,700 at March
31, 1998, $3,800 at December 31, 1997
and $3,600 at March 31, 1997 35,539 38,424 38,052
Inventories 76,704 71,940 70,555
Prepaid expenses and other assets 10,631 11,888 9,180
Current deferred income taxes -- -- 8,565
--------- --------- ---------
Total current assets 125,920 122,401 126,682
Plant and equipment 36,258 36,197 35,218
Less accumulated depreciation (10,440) (9,691) (7,911)
--------- --------- ---------
Plant and equipment, net 25,818 26,506 27,307
Other assets 16,315 11,614 12,045
--------- --------- ---------
Total assets $ 168,053 $ 160,521 $ 166,034
========= ========= =========
</TABLE>
See accompanying notes.
3
<PAGE>
STARTER CORPORATION
CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share data )
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997 March 31, 1997
-------------- ----------------- --------------
(unaudited) (note) (unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 47,783 $ 41,624 $ 34,547
Accounts payable 16,182 16,600 7,245
Accrued commissions 2,146 1,830 1,120
Accrued licensing fees 10,362 4,788 3,366
Accrued expenses 19,347 14,482 6,905
Accrued advertising 6,349 8,181 4,921
Current portion of long-term debt 939 939 1,851
--------- --------- ---------
Total current liabilities 103,107 88,444 59,955
Long-term debt, less current portion 4,469 4,642 4,959
--------- --------- ---------
Total liabilities 107,575 93,086 64,914
Stockholders' equity:
Convertible Preferred Stock (par value $.01)
5,000,000 authorized shares -- -- --
Common Stock (par value $.01)
50,000,000 shares authorized; issued
27,886,049 at March 31, 1998,
27,872,232 at December 31, 1997 and
27,849,902 at March 31, 1997 279 279 278
Additional paid in capital 82,812 82,774 82,685
Retained earnings (deficit) (22,613) (15,618) 18,157
--------- --------- ---------
Total stockholders' equity 60,478 67,435 101,120
--------- --------- ---------
Total liabilities and stockholders' equity $ 168,053 $ 160,521 $ 166,034
========= ========= =========
</TABLE>
Note: The consolidated balance sheet at December 31, 1997 has been derived from
the audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes.
4
<PAGE>
STARTER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
Three Months Ended
March 31
1998 1997
---- ----
Net sales $ 59,036 $ 61,724
Cost of sales 42,497 43,752
------------ ------------
Gross profit 16,539 17,972
Royalty income 954 559
Selling, general and administrative expenses 23,392 22,794
------------ ------------
Loss from operations (5,899) (4,263)
Other income - net 422 9
------------ ------------
Loss before interest expense
and income taxes (5,477) (4,254)
Interest expense 1,393 1,016
------------ ------------
Loss before income taxes (6,870) (5,270)
Income taxes (benefit) 125 (2,108)
------------ ------------
Net loss ($ 6,995) ($ 3,162)
============ ============
Basic and diluted loss per share ($ 0.25) ($ 0.11)
============ ============
Weighted - average common shares 27,879,141 27,807,094
============ ============
See accompanying notes.
5
<PAGE>
STARTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
Cash flows from operating activities
Net loss ($ 6,995) ($ 3,162)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Depreciation and amortization 892 997
Provision for bad debts 150 22
Changes in operating assets and liabilities:
Accounts receivable 2,735 18,912
Inventories (4,764) 6,886
Prepaid expenses and other assets 1,257 (641)
Accounts payable and accrued expenses 8,503 (23,183)
------------ ------------
Net cash provided (used) by operating activities 1,779 (169)
Cash flows from investing activities
Purchase of property, plant and equipment (61) (530)
Other, net (1,638) (535)
------------ ------------
Net cash used by investing activities (1,699) (1,065)
Cash flows from financing activities
Repayment of long-term borrowings (173) (1,341)
Net borrowings (repayments) on credit
arrangements 6,159 (119)
Net proceeds from sale of common stock 37 29
Loan refinancing costs (3,206)
------------ ------------
Net cash provided (used) by financing activities 2,817 (1,431)
------------ ------------
Net increase (decrease) in cash 2,897 (2,665)
Cash and cash equivalents - beginning of period 149 2,995
------------ ------------
Cash and cash equivalents - end of period $ 3,046 $ 330
============ ============
See accompanying notes.
6
<PAGE>
STARTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1998
1) Basis of Presentation
The accompanying unaudited consolidated financial statements of Starter
Corporation (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission. Accordingly, they do not include all 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.
The Company has experienced, and expects to continue to experience, variability
in net sales and net income (loss) from quarter to quarter. Therefore, the
results of the interim periods presented herein are not necessarily indicative
of the results to be expected for any other interim period or the full year.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1997 included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
2) Inventories
Inventories were as follows (in thousands):
March 31 December 31 March 31
1998 1997 1997
---- ---- ----
Raw materials $ 17,490 $ 18,627 $ 14,609
Finished goods 59,214 53,313 55,946
--------- --------- ---------
$ 76,704 $ 71,940 $ 70,555
========= ========= =========
7
<PAGE>
3) Other Assets
Other assets are as follows (in thousands):
March 31 December 31 March 31
1998 1997 1997
---- ---- ----
Goodwill $ 5,451 $ 5,552 $ 6,240
Trademarks 1,740 1,789 1,925
Capitalized Software 4,530 2,712 385
Deferred income taxes -- -- 1,568
Other 4,594 1,561 1,927
--------- --------- ---------
$ 16,315 $ 11,614 $ 12,045
========= ========= =========
4) Credit Arrangement
On March 31, 1998 the Company's three year secured revolving credit facility
(the "credit facility") was amended to provide for, among other items, an
increase in permitted overadvances, increased advance rates and the elimination
of certain financial covenants. The $130,000,000 credit facility provides for a
seasonal increase up to a maximum $160,000,000 from April 1 through January 15
of each year; however, obligations outstanding under the credit facility can not
exceed $85,000,000 for a period of 30 days during the first quarter of each
year. Borrowings under the credit facility are subject to various limitations
based upon eligible receivables and inventory, as defined in the credit
facility, of the Company and its subsidiaries. Additionally, the credit facility
provides for permitted overadvances of $22,000,000 to fund seasonal working
capital requirements from January 1 to October 15 of each year. From October 15,
1998 to December 31, 1998 the permitted overadvance decreases to $7,500,000.
Under terms of the credit facility, the Chairman and Chief Executive Officer of
the Company (the "guarantor"), who is also the majority stockholder of the
Company, has guaranteed up to $22,000,000 of the credit facility. The guarantee
may be terminated upon written notice to the banks by the guarantor. However, it
is not the intent of the guarantor to terminate the guarantee during 1998. Any
reduction in the guarantee will simultaneously reduce dollar for dollar the
amount of any permitted overadvance. The credit facility, which expires on March
31, 2001, contains a covenant requiring minimum net worth of $45 million plus
50% of the Company's cumulative net income, if any, for each fiscal year ending
on or after December 31, 1998. The covenant is to be tested annually at the end
of each fiscal year of the Company. The credit facility further places
restrictions on distributions, mergers and asset acquisitions, as defined in the
credit facility, and requires the Company to enter into interest rate protection
arrangements satisfactory to the banks for a notional amount of $35,000,000. The
credit facility also contains customary events of default, as defined in the
credit facility. The termination of the guarantee by the guarantor is an event
of default under the credit facility.
8
<PAGE>
Management expects that the Company will be able to comply with the terms of the
credit facility throughout 1998. In 1997 the Company began a plan to reduce
selling, general and administrative expenses. Cost containment initiatives under
the plan are expected to result in reduced costs during 1998 via reductions in
the Company's workforce, reduction in unprofitable outlet operations, more cost
effective marketing initiatives and other spending reductions. Management
expects that these cost containment initiatives together with the amended credit
facility will provide sufficient liquidity for operations through 1998.
Amounts outstanding under the credit facility accrue interest at either the
bank's base rate plus 1% or at LIBOR plus 3%, at the Company's option. The
Company is required to pay a 2% fee on the face amount of each letter of credit
issued under the credit facility and an annual fee, which can range from .375%
to .5% percentage points, as defined in the credit facility, on the credit
facility. In addition, the Company was required to pay a transaction fee of 2%
on the maximum available credit facility to the banks in connection with the
amended agreement. The credit facility is secured by substantially all of the
Company's assets.
At March 31, 1998, $47,783,000 is outstanding under this facility, $24,314,000
has been committed under letters of credit for vendors' orders for which the
Company will become liable at the time these orders are shipped and $20,854,000
is available for additional borrowing.
5) Income taxes
The Company's income tax expense for the first quarter of 1998 consists
primarily of minimum state taxes. At December 31, 1997, the Company recorded a
deferred tax asset valuation allowance against deferred tax assets previously
recorded, as the Company believed it is more likely than not that such deferred
tax assets will not be utilized in the near term.
6) Contingencies
The Company is a party to various lawsuits incidental to its business which
management believes will not have a material adverse effect on the Company's
financial position, results of operations or cash flows.
7) Reclassifications
Certain 1997 amounts have been reclassified to conform with the 1998
presentation.
9
<PAGE>
8) Recent Accounting Pronouncements
The Company adopted Financial Accounting Standard Board (FASB) Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" as of December 31,
1997. The adoption of this standard had no impact on the previously reported
loss per share for first quarter of 1997.
On January 1, 1998, the Company adopted FASB Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". There were no differences
between comprehensive loss and net loss for the three months ended March 31,
1998 and 1997.
10
<PAGE>
ITEM 2
STARTER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's business is seasonal with higher sales reported in the second half
of the year due to the higher price points of a significant portion of the
Company's products which are sold during the fall and holiday seasons. The
seasonality of the Company's business also affects borrowings under the
Company's revolving credit facility. The amount outstanding under the revolving
credit facility fluctuates as a result of seasonal demands for the Company's
products. Traditional quarterly fluctuations in the Company's business may vary
in the future depending upon, among other things, changes in order cycles and
product mix.
The Company's business is vulnerable to a number of factors beyond its control.
These include: (1) player strikes, (2) owner lockouts, (3) work stoppages, (4)
the granting of additional licenses to competitors, some of which have greater
financial resources and manufacturing capabilities than the Company, and (5)
changes in consumer tastes and enthusiasm for spectator sports. The Company's
business can also be affected by other matters which impact the retail
marketplace, including increased credit and inventory exposure, consolidation
and resulting decline in the number of retailers and other cyclical economic
factors. The Company seeks to minimize inventory exposure by encouraging
retailers to place orders five to six months in advance of the date products are
scheduled to be delivered. This provides the Company with better information to
purchase product for its reorder business.
A substantial portion of the Company's products are manufactured through
arrangements with independent contractors located in foreign countries. In
addition, the Company's import operations are subject to constraints imposed by
bilateral textile agreements between the United States and a number of foreign
countries. The agreements impose quotas on the amount and type of goods which
can be imported into the United States from these countries. The Company's
operations may be adversely affected by political instability resulting in the
disruption of trade from foreign countries in which the Company's contractors
and suppliers are located, the imposition of additional regulations relating to
imports, or duties and taxes and other charges on imports. The Company is unable
to predict whether any additional regulations, duties, taxes, quotas or other
charges may be imposed on the importation of its products. The assessment of any
of these items could result in increases in the cost of such imports and affect
the sales or profitability of the Company. In addition, the failure of one or
more manufacturers to ship some or all of the Company's orders could impact the
Company's ability to deliver products to its customers on time. Delays in
delivery could result in missing
11
<PAGE>
certain retailing seasons with respect to some or all of the Company's products
or could otherwise adversely affect the Company.
This discussion contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Actual results could differ
materially from those set forth in such statements due to various factors. Such
factors include product demand and market acceptance risks, the effect of
changing economic conditions, the impact of competitive products and pricing
risks associated with product development and the effect of the Company's
accounting policies and other risk factors detailed above.
Results of Operations
The Company had a net loss of $36.9 million for the year ended December 31, 1997
as a result of rapid unexpected deterioration in the athletic apparel industry
during 1997 and the resulting decreases in sales levels and margins. These
decreases resulted in the inability of the Company to recover its fixed selling,
general and administrative expenses which had increased significantly in 1997
due to investments made in anticipation of growth in sales. In 1996 and 1997,
the Company made investments and built an infrastructure to support a business
that had experienced growth in the past and was expected to continue to grow. In
addition to anticipated general growth arising from the industry as a whole, the
Company believed that its acquisitions provided a vehicle to support further
increases in its market share. The market place began to soften in the last half
of 1997 and, at that time, the Company began a plan to reduce selling, general
and administrative expenses. Several changes were made in the management team,
including the elimination of several positions. The cost containment initiatives
are expected to result in reduced costs during 1998 via reductions in the
Company's workforce, reductions in unprofitable outlet store operations, more
cost effective marketing initiatives and other spending reductions. The majority
of these cost reductions will not be realized until the second half of 1998.
However, there can be no assurance such cost containment initiatives will result
in the Company's return to profitability.
12
<PAGE>
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items in the Company's consolidated
statements of operations.
Quarter Ended March 31,
1998 1997
---- ----
Net sales 100% 100%
Cost of sales (72.0) (70.9)
Gross profit 28.0 29.1
Royalty income 1.6 .9
Selling, general and
administrative expenses (39.6) (36.9)
----- -----
Loss from operations (10.0) (6.9)
Other income - net .7 --
Interest expense (2.3) (1.6)
----- -----
Loss before income taxes (11.6) (8.5)
Income taxes (benefit) .2 (3.4)
----- -----
Net loss (11.8%) (5.1%)
===== =====
Net sales for the quarter ended March 31, 1998 were $59.0 million, as compared
to $61.7 million for the quarter ended March 31, 1997, a 4.4% decrease primarily
related to reduced outerwear and accessory volume.
Gross profit for the quarter ended March 31, 1998 was $16.5 million, as compared
to $18.0 million for the quarter ended March 31, 1997. The gross profit margin
as a percentage of sales during the first quarter of 1998 decreased to 28% as
compared to 29.1% for the first quarter of 1997. The decrease is primarily
related to increased distribution costs and production variances as a percentage
of net sales.
Royalty income for the quarter ended March 31, 1998 increased to $1.0 million as
compared to $.6 million for the quarter ended March 31, 1997, primarily as a
result of the addition of new domestic licensees.
Selling, general and administrative expenses increased to $23.4 million or 39.6%
of net sales for the quarter ended March 31, 1998, as compared to $22.8 million
or 36.9% for the quarter ended March 31, 1997. The increased selling, general
and administrative costs of $.6 million primarily relate to increased royalties
associated with increased licensed sales during the first
13
<PAGE>
quarter of 1998 and employee severance costs associated with the Company's
continuing cost containment initiatives.
Other income of $.4 million during the first quarter of 1998 relates to gains
associated with the disposition of certain investments.
Interest expense for the quarter ended March 31, 1998 increased to $1.4 million
as compared to $1.0 million for the quarter ended March 31, 1997 primarily due
to increased interest rates and increased average borrowings needed to finance
operations.
Liquidity and Capital Resources
The Company's working capital at March 31, 1998 was $22.8 million as compared to
$34.0 million at December 31, 1997 and $66.7 million at March 31, 1997. The
decrease from December 31 is primarily attributable to the loss for the quarter
ended March 31, 1998. Cash generated by operations for the first three months of
1998 was $1.8 million primarily as a result of increases in current liabilities.
On March 31, 1998 the Company's three year secured revolving credit facility
(the "credit facility") was amended to provide for, among other items, an
increase in permitted overadvances, increased advance rates and the elimination
of certain financial covenants. The $130,000,000 credit facility provides for a
seasonal increase up to a maximum $160,000,000 from April 1 through January 15
of each year; however, obligations outstanding under the credit facility can not
exceed $85,000,000 for a period of 30 days during the first quarter of each
year. Borrowings under the credit facility are subject to various limitations
based upon eligible receivables and inventory, as defined in the credit
facility, of the Company and its subsidiaries. Additionally, the credit facility
provides for permitted overadvances of $22,000,000 to fund seasonal working
capital requirements from January 1 to October 15 of each year. From October 15,
1998 to December 31, 1998 the permitted overadvance decreases to $7,500,000.
Under terms of the credit facility, the Chairman and Chief Executive Officer of
the Company (the "guarantor"), who is also the majority stockholder of the
Company, has guaranteed up to $22,000,000 of the credit facility. The guarantee
may be terminated upon written notice to the banks by the guarantor. However, it
is not the intent of the guarantor to terminate the guarantee during 1998. Any
reduction in the guarantee will simultaneously reduce dollar for dollar the
amount of any permitted overadvance. The credit facility, which expires on March
31, 2001, contains a covenant requiring minimum net worth of $45 million plus
50% of the Company's cumulative net income, if any, for each fiscal year ending
on or after December 31, 1998. The covenant is to be tested annually at the end
of each fiscal year of the Company. The credit facility further places
restrictions on distributions, mergers and asset acquisitions, as defined in the
credit facility, and requires the Company to enter into interest rate protection
arrangements satisfactory to the banks for a notional amount of $35,000,000. The
credit facility
14
<PAGE>
also contains customary events of default, as defined in the credit facility.
The termination of the guarantee by the guarantor is an event of default under
the credit facility.
Management expects that the Company will be able to comply with the terms of the
credit facility throughout 1998. In 1997 the Company began a plan to reduce
selling, general and administrative expenses. Cost containment initiatives under
the plan are expected to result in reduced costs during 1998 via reductions in
the Company's workforce, reduction in unprofitable outlet operations, more cost
effective marketing initiatives and other spending reductions. Management
expects that these cost containment initiatives together with the amended credit
facility will provide sufficient liquidity for operations through 1998.
Amounts outstanding under the credit facility accrue interest at either the
bank's base rate plus 1% or at LIBOR plus 3%, at the Company's option. The
Company is required to pay a 2% fee on the face amount of each letter of credit
issued under the credit facility and an annual fee, which can range from .375%
to .5% percentage points, as defined in the credit facility, on the credit
facility. In addition, the Company was required to pay a transaction fee of 2%
on the maximum available credit facility to the banks in connection with the
amended agreement. The credit facility is secured by substantially all of the
Company's assets.
At March 31, 1998, $47,783,000 is outstanding under this facility, $24,314,000
has been committed under letters of credit for vendors' orders for which the
Company will become liable at the time these orders are shipped and $20,854,000
is available for additional borrowing.
Cash generated from operations, together with the Company's existing revolving
credit agreement, is expected, under conditions, to be sufficient to finance the
Company's planned operations in 1998.
Year 2000 Conversion
The Company recognizes the need to ensure that its systems, applications and
hardware will recognize and process transactions for the year 2000 and beyond.
In continuing efforts to become more productive and competitive, the Company has
begun to replace significant portions of its software and some of its hardware
so that its computer systems will function properly with respect to dates
related to the year 2000 and beyond. The Company also has initiated discussions
with its significant suppliers, customers and financial institutions to ensure
that those parties have appropriate plans to remediate Year 2000 issues when
their systems interface with the Company's systems or may otherwise impact
operations. The Company is assessing the extent to which its operations are
vulnerable should those organizations fail to properly remediate their computer
systems.
15
<PAGE>
The Company's comprehensive system conversion initiative, which encompasses the
Year 2000 issues, is being managed by a team of experienced internal and
external professionals. 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 initiative encompasses all business systems, including
administrative, manufacturing and distribution equipment that utilize
microprocessors. Project completion is expected by early 1999. While the Company
believes its plans are adequate to address its Year 2000 concerns, many factors
could affect its ultimate success including, but not limited to the continued
availability of outside resources and sufficient financing. The project is not
expected to exceed $10 million in cost, some of which has been capitalized.
Through March 31, 1998 the Company has incurred costs of $5,000,000 related to
the project. This cost range is based on management's best estimates, which were
derived utilizing assumptions about future events. The results could differ
materially from those anticipated subject to uncertainties regarding the
availability of resources and the impact of the issue on key suppliers and
customers among others.
16
<PAGE>
Part II - Other Information
Item 6: Exhibits and reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no Reports on Form 8-K filed during the quarter ended
March 31, 1998.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARTER CORPORATION
DATE: May 13, 1998 /s/ Sean T. Smith
---------------------------------------
Sean T. Smith.
Controller and Chief Accounting Officer
18
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Descriptions Number
- ------ ------------ ------
27 Financial Data Schedule 21
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Starter Corporation for the quarter ended March 31,
1998, as set forth in its quarterly report on Form 10-Q for such quarter, 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,046
<SECURITIES> 0
<RECEIVABLES> 39,239
<ALLOWANCES> 3,700
<INVENTORY> 76,704
<CURRENT-ASSETS> 125,920
<PP&E> 36,258
<DEPRECIATION> 10,440
<TOTAL-ASSETS> 168,053
<CURRENT-LIABILITIES> 103,107
<BONDS> 4,469
0
0
<COMMON> 279
<OTHER-SE> 60,199
<TOTAL-LIABILITY-AND-EQUITY> 168,053
<SALES> 59,036
<TOTAL-REVENUES> 59,990
<CGS> 42,297
<TOTAL-COSTS> 23,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,393
<INCOME-PRETAX> (6,870)
<INCOME-TAX> 125
<INCOME-CONTINUING> (6,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,995)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
