Warnaco Reports Third Quarter and Year-to-Date 2003 Results.Business Editors NEW YORK--(BUSINESS WIRE)--Nov. 12, 2003 The Warnaco Group The Warnaco Group, Inc. is an American fashion corporation. It is based out of New York City. The company had annual revenues in 2004 of over $1.4 billion USD. The company owns several brands, such as: Warner's, Olga, Lejaby, Rasurel, part of Calvin Klein, Catalina, Speedo, and , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : WRNC WRNC Wexford Ridge Neighborhood Center (Wisconsin) ) today announced third quarter and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. results for the period ended October October: see month. 4, 2003. Warnaco emerged from bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most on February February: see month. 4, 2003, and therefore the Company's reported year-to-date results reflect the eight-month period commencing on February 4, 2003 and ending October 4, 2003. For the third quarter of fiscal 2003, net revenues were $303.1 million, the net loss was $6.7 million and the net loss per share was $0.15. For the eight-month period ended October 4, 2003, net revenues were $949.8 million, net income was $7.5 million and net income per share was $0.17 (see Schedule 1). In addition, in the third quarter the Company: -- Extended its license with Polo/Ralph Lauren Lauren as a surname may refer to:
sportswear for an additional ten years through 2018; -- Scheduled three product launches: Lejaby Rose, Olga's Christina Christina (krĭstē`nə), 1626–89, queen of Sweden (1632–54), daughter and successor of Gustavus II. From her father's death (1632) until 1644 she was under a regency headed by Chancellor Axel Oxenstierna. and Olga Petites; -- Named Larry Lar´ry n. 1. Same as Lorry, or Lorrie. Rutkowski as its Senior Vice President - Finance and Chief Financial Officer; -- Continued the consolidation of its manufacturing and distribution operations, resulting in a restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $5.2 million; and -- Introduced Nautica Nautica may refer to:
and re-launched Speedo Lifeguard swimwear. This press release includes financial information on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis as if the Company had emerged from bankruptcy at the beginning of fiscal 2002 (see Schedule 2). The Company believes that this presentation of pro forma information is important because it is useful to investors in comparing the Company's results with prior periods. The pro forma adjustments reflect (i) the elimination of bankruptcy-related fees and expenses; (ii) the elimination of expenses and income related to the Company's bankruptcy reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. (e.g., the cancellation cancellation (See: cancel) CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob. of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. and other fresh start accounting adjustments); (iii) the elimination of restructuring charges related to actions initiated prior to the Company's emergence from bankruptcy, which will continue through the end of fiscal 2003; (iv) adjustments to depreciation and amortization expense to reflect the fair value of the Company's assets as determined at February 4, 2003; (v) adjustments to interest expense to reflect the Company's new debt structure; and (vi) adjustments to the Company's income tax expense to reflect the Company's post-emergence tax status. See Schedules 5, 6, 7 and 8 for a summary of pro forma adjustments for each period presented. On a pro forma basis, for the third quarter of fiscal 2003, net revenues totaled $303.1 million, the loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the was $0.3 million and the loss per share from continuing operations was $0.01. On a pro forma basis, for the first nine months of fiscal 2003, net revenues totaled $1.06 billion, income from continuing operations was $31.6 million and income per share from continuing operations was $0.70. Income from continuing operations excludes the results of the Company's A.B.S. by Allen Al·len , Edgar 1892-1943. American anatomist who is noted for his studies of hormones and for the discovery (1923) of estrogen. Schwartz Schwartz is a Canadian spices brand. It is also a common surname and may refer to:
Third Quarter Results On a pro forma basis, as if the Company had emerged from bankruptcy at the beginning of fiscal 2002, for the three months ended October 4, 2003: -- Net revenues totaled $303.1 million, down 8.6% from $331.5 million in the third quarter of fiscal 2002. Net revenues for the third quarter of fiscal 2002 included $9.8 million of net revenues associated with business units that were sold or discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: during fiscal 2002 (primarily the Company's outlet outlet /out·let/ (-let) a means or route of exit or egress. pelvic outlet the inferior opening of the pelvis. retail stores). Excluding net revenues from these sold and discontinued business units, net revenues for the third quarter of fiscal 2003 declined by 5.8% compared to the third quarter of fiscal 2002; -- Gross profit was $92.6 million. Gross profit for the third quarter of fiscal 2002 includes $11.1 million of distribution and other product-related expenses that were reported in cost of goods sold. Commencing February 4, 2003 (the date the Company emerged from bankruptcy), the Company classifies these items as selling, general and administrative ("SG&A") expenses. To meaningfully compare gross margin for the third quarter of this year to the third quarter of the prior year, the change in classification of these expenses should be considered. Adjusting the third quarter of fiscal 2002 to reflect this change, gross profit for the third quarter of fiscal 2003 was $92.6 million, or 30.5% of net revenues, compared to $106.4 million, or 32.1% of net revenues, in the third quarter of fiscal 2002. The decline in gross profit was primarily due to lower revenues and associated profit margins with businesses targeted for repair or repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. and lower margins generally. Speedo's gross profit also declined relative to last year's third quarter because last year's results reflected the elimination of reserves in the third quarter of fiscal 2002 which were no longer required; -- SG&A expenses totaled $88.0 million, or 29.0% of net revenues, compared to $79.9 million, or 24.1% of net revenues, in the third quarter of fiscal 2002. SG&A expenses for the third quarter of fiscal 2003 include certain product-related expenses that were included in cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold in the third quarter of fiscal 2002. As adjusted for this change in classification, SG&A expenses declined $3.0 million due to lower sales volumes and expense management initiatives. In addition, SG&A expenses for the third quarter of fiscal 2003 include $2.0 million of non-cash stock based compensation expense related to restricted stock and stock options granted during fiscal 2003; -- Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. totaled $4.6 million, or 1.5% of net revenues, compared to $15.4 million, or 4.7% of net revenues, in fiscal 2002; -- Interest expense declined by $1.4 million to $6.0 million, compared to $7.4 million in fiscal 2002, due primarily to lower interest rates and a decrease in debt; -- Loss from continuing operations was $0.3 million, or $0.01 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to income from continuing operations of $4.8 million, or $0.10 per diluted share, in fiscal 2002; and -- EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become was $12.1 million, or 4.0% of net revenues, compared to $24.1 million, or 7.3% of net revenues, in the third quarter of fiscal 2002. The Company utilizes the measure EBITDA in addition to operating income to assess its business results. For a discussion of EBITDA, see "Use of EBITDA and Pro Forma Financial Information." For a reconciliation of income from continuing operations to EBITDA, see Schedule 2. Joe Gromek, President and Chief Executive Officer, stated: "We continued to progress toward achieving our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategic goals during the third quarter. During the quarter we hired Larry Rutkowski as CFO See Chief Financial Officer. , which solidified so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. our executive team. We also continued our renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. emphasis on design innovation in our intimate apparel businesses, which we believe will address the softness in that business unit. Additionally, we are encouraged by the response to our new CK Jeanswear offerings, and we believe that our design team will have a positive impact on this business going forward. Furthermore, we are delighted to have extended our relationship with Polo/Ralph Lauren. This new agreement, which follows the strengthening of our relationship with Phillips-Van Heusen and the addition of new CK, Calvin Klein Noun 1. Calvin Klein - United States fashion designer noted for understated fashions (born in 1942) Calvin Richard Klein, Klein and Nautica swimwear licenses, brings to our fold another significant opportunity. As we look ahead, our priorities are to balance initiatives aimed at capitalizing on the heritage of our brands with further efforts to streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. operations. We believe this strategy will allow us to increase our market share in our principal business segments while providing us with a strong operating platform." Year-to-Date Results On a pro forma basis, as if the Company had emerged from bankruptcy at the beginning of fiscal 2002, for the first nine months of fiscal 2003: -- Net revenues totaled $1.06 billion, down 3.8% from $1.10 billion in the first nine months of fiscal 2002. Net revenues for the first nine months of fiscal 2002 included $42.6 million of net revenues associated with business units that were sold or discontinued during fiscal 2002 (sold and discontinued business units include the Company's outlet retail stores, GJM GJM Golden Jubilee Medal GJM Gay Japanese Male , Penhaligon's Penhaligon's is an English perfume house. It was founded in the late 1860's by William Henry Penhaligon. History In the late 1860's, William Henry Penhaligon left his native Penzance on the picturesque south west coast of England, and came to London to establish himself , IZKA, Weight Watchers, Fruit of the Loom and Ubertech). Excluding net revenues from these sold and discontinued business units, net revenues were essentially flat for the first nine months of fiscal 2003 compared to the first nine months of fiscal 2002; -- Gross profit was $349.9 million, or 32.9% of net revenues. Gross profit for the first nine months of fiscal 2002 includes $34.4 million of distribution and other product-related expenses that were reported in cost of goods sold. Commencing February 4, 2003 (the date the Company emerged from bankruptcy), the Company classifies these items as SG&A expenses. To meaningfully compare gross margin for the nine-month period of this year to the nine-month period of the prior year, the change in classification of these expenses should be considered. Adjusting the first nine months of fiscal 2002 to reflect this change, gross profit for the first nine months of fiscal 2003 was $349.9 million, or 32.9% of net revenues, compared to $364.5 million, or 33.0% of net revenues, for the first nine months of fiscal 2002. The decline in gross profit primarily reflects lower sales volume; -- SG&A expenses totaled $280.7 million, or 26.4% of net revenues, compared to $257.3 million, or 23.3% of net revenues, in the first nine months of fiscal 2002. SG&A expenses for the first nine months of fiscal 2003 include certain product-related costs that were included in cost of goods sold in the first nine months of fiscal 2002. As adjusted for this change in classification, SG&A expenses declined by $11.0 million due to lower sales volumes and expense management initiatives. In addition, SG&A expenses for the first nine months of fiscal 2003 include $4.4 million of non-cash stock based compensation expense related to restricted stock awards and stock options granted in fiscal 2003; -- Operating income totaled $69.2 million, or 6.5% of net revenues, compared to $72.8 million, or 6.6% of net revenues, in fiscal 2002; -- Interest expense declined by $5.7 million to $18.4 million, compared to $24.1 million in fiscal 2002, due to lower interest rates and a decrease in debt; -- Income from continuing operations increased 8.1% to $31.6 million, compared to $29.2 million in fiscal 2002; -- Diluted income per share from continuing operations increased by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 7.7% to $0.70, compared to $0.65 in the first nine months of fiscal 2002; and -- EBITDA was $96.7 million, or 9.1% of net revenues, compared to $98.3 million, or 8.9% of net revenues, in the first nine months of fiscal 2002. For a discussion of EBITDA, see "Use of EBITDA and Pro Forma Financial Information." For a reconciliation of income from continuing operations to EBITDA, see Schedule 2. The Company noted the following balance sheet highlights at October 4, 2003: -- Inventory declined by $82.6 million, or 22.1%, to $290.6 million, compared to $373.2 million at October 5, 2002. The decrease in inventory primarily reflects improved inventory management and, to a lesser extent, the closing of the Company's remaining outlet retail stores in the fourth quarter of fiscal 2002; -- Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying decreased $4.2 million, or 2.0%, to $202.7 million, compared to $206.9 million at October 5, 2002. The decrease in accounts receivable reflects lower sales volume partially offset by a greater percentage of the Company's third quarter revenue occurring at the end of the third quarter of fiscal 2003; and -- Cash, including restricted cash, increased $17.0 million to $43.9 million at October 4, 2003, compared to $26.9 million at February 4, 2003 (the date the Company emerged from bankruptcy). Debt decreased $35.3 million to $211.2 million at October 4, 2003, compared to $246.5 million at February 4, 2003. At October 4, 2003, improvements in cash and reduction of debt totaled $52.3 million since the Company's emergence from bankruptcy. Larry Rutkowski, Senior Vice President - Finance and Chief Financial Officer, commented: "Our disciplined balance sheet and expense management strategies served us well during the year-to-date period. In a challenging retail environment, on a pro forma basis, for the nine months we achieved a 33 basis point increase in our profit margin from continuing operations and a 7.7% rise in income per share from continuing operations. At the same time, we improved working capital management, as evidenced by our reduction in inventory and receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed , as well as increased cash levels versus the prior year period. Also, demonstrating our enhanced financial flexibility is our ability to maintain no outstanding balances on our revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and our conservative debt to capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. ratio of 29%." "We also continued to progress toward rationalizing our infrastructure," continued Mr. Rutkowski. "At quarter end, we had exited our remaining U.S. based manufacturing facilities, which resulted in us taking a third quarter restructuring charge, and we continue to expand our use of lower cost third party contractors. Also, on November November: see month. 11, 2003, we announced that we would sell our A.B.S. by Allen Schwartz business unit, which, as previously indicated, represents a non-core asset of our Company." Fiscal 2003 Guidance The Company provided the following earnings guidance for fiscal 2003 in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with its second quarter earnings release. On August 11, 2003, the Company expected, on a pro forma basis as if the Company had emerged from bankruptcy at the beginning of fiscal 2002, EBITDA to range between $130 million and $140 million and net income to range between $44 million and $50 million, compared to EBITDA for fiscal 2002 of $117.2 million and net income of $30.7 million. Adjusting for discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. (the Company's A.B.S. by Allen Schwartz business unit and certain retail stores) the guided range for fiscal 2003 pro forma EBITDA would be $126 million to $136 million and the guided range for pro forma net income would be $41.6 million to $47.6 million. Adjusted for discontinued operations, fiscal 2002 pro forma EBITDA was $113.1 million and pro forma net income was $28.2 million. For a reconciliation of income from continuing operations to EBITDA, see Schedule 4. Based on the Company's most recent results, the Company's business is performing within this guidance and consistent with the bottom of the adjusted ranges provided. The Company notes that it is cautious in its outlook and continues to face certain challenges (particularly in its Intimate Apparel and CK Jeanswear categories), which may cause the Company to revise its projections downward for fiscal 2003. Subsequent Events Following the end of the third quarter of fiscal 2003, the Company: -- Announced the extension of its Speedo endorsement A signature on a Commercial Paper or document. An endorsement on a negotiable instrument, such as a check or a promissory note, has the effect of transferring all the rights represented by the instrument to another individual. contract with swimming world record holder Michael Phelps For the American biophysicist, see . Michael Fred Phelps II (born June 30, 1985 in Baltimore, Maryland) is an American swimmer and World Record Holder in several events. through 2009; -- Entered into an exclusive worldwide licensing agreement to market and produce the new collection of JLO by Jennifer Lopez JLO by Jennifer Lopez owned by singer, actress and dancer Jennifer Lopez, is a brand that has been licensed for a term by Warnaco Group. Her line is the most successful of any artists' in history and includes many different types of clothing for young women, including jeans, lingerie. JLO JLO Jennifer Lopez JLO Journal of Laryngology and Otology JLO Junior League of Ogden JLO Junior League of Omaha JLO Junior League of Odessa JLO Junior League of Olympia JLO Junior League of Owensboro JLO Junior League of Ocala , which will launch in fall 2004, expands the Company's portfolio of intimate apparel brands and reflects the Company's continuing efforts to introduce fresh, new fashion at retail; and -- Entered into an agreement to sell its A.B.S. by Allen Schwartz business unit to Allen Schwarz Schwarz is a common surname, derived from the German schwarz, meaning black. It may refer to: People
million in cash and the assumption of up to $2 million in liabilities. The sale is not expected to have a material effect on the Company's financial position or results of operations. The operating results of the A.B.S. by Allen Schwartz business unit are included in discontinued operations in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. financial schedules. In addition, at the end of the third quarter of fiscal 2003, the Company entered into a ten-year variable interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. agreement whereby the Company effectively converted the interest rate on $50 million aggregate principal amount of its fixed rate 8 7/8% Senior Notes due 2013 to a floating interest rate, thereby reducing current interest costs while retaining $160 million aggregate principal amount of its Senior Notes at a fixed rate. Use of EBITDA and Pro Forma Financial Information The Company evaluates its operating results based on EBITDA, which it defines as net income before interest expense, income taxes, depreciation and amortization expense. The Company's pro forma information, including pro forma EBITDA, gives effect to the reorganization as if it had occurred at the beginning of fiscal 2002 and, as a result, has been adjusted to exclude the effects of the Company's reorganization. Additionally, pro forma EBITDA excludes the results of discontinued operations. The Company is presenting EBITDA to enhance the reader's understanding of its operating results. EBITDA is provided because the Company believes it is an important measure of financial performance commonly used to determine the value of companies and to define standards for borrowing from institutional lenders. The Company's senior secured credit agreement includes covenants that are based on and use EBITDA as a component of the calculations. During Fiscal 2001 and 2002, the Company sold assets, wrote down impaired assets Impaired Asset An asset with a market value that is worth less than its book value. Notes: If the sum of all estimated future cash flows is less than the carrying value of the asset, then the asset would be considered impaired and would have to be written down to its fair , recorded an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge related to the adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142 and ceased amortizing goodwill and certain intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. that had been previously amortized. The Company also recorded adjustments to its fixed and intangible assets in connection with its emergence from bankruptcy and the adoption of fresh start accounting as of February 4, 2003. As a result, depreciation and amortization expense, which is included in net income (loss), has decreased significantly from the amounts recorded in prior periods. Accordingly, the Company believes that an evaluation of its operating results is not complete without considering the effect of depreciation and amortization on those results. Readers should not construe construe v. to determine the meaning of the words of a written document, statute or legal decision, based upon rules of legal interpretation as well as normal meanings. EBITDA either as an alternative to net income, an indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the Company's operating performance, or an alternative to cash flows from operating activities as a measure of the Company's liquidity, as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . The Company may calculate EBITDA differently than other companies. The Company has presented financial information on a pro forma basis. The Company believes that the consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the Company's plan of reorganization, the adoption of fresh start reporting and the recent offering of Senior Notes are significant events and, therefore, the presentation of pro forma financial information giving effect to these events provides material information that is useful to investors in comparing the Company's results with prior and future periods. This press release was furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to the Securities and Exchange Commission and may be accessed at the following Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the location: www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. , as well as through the Company's website: www.warnaco.com. About The Warnaco Group, Inc. The Warnaco Group, Inc., headquartered in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , is a leading manufacturer of intimate apparel, menswear mens·wear also men's wear n. Clothing for men. menswear Noun clothing for men menswear n → confección f de caballero , jeanswear, swimwear, men's and women's sportswear and accessories sold under such owned and licensed brands as Warner's(R), Olga(R), Lejaby(R), Body Nancy Nancy (näNsē`), city (1990 pop. 102,410), capital of Meurthe-et-Moselle dept., NE France, on the Meurthe River and the Marne-Rhine Canal. It is the administrative, economic, and educational center of Lorraine. Ganz The Ganz (Ganz vállalatok, "Ganz companies") electric works in Budapest is probably best known for the manufacture of tramcars, but was also a pioneer in the application of three-phase alternating current to electric railways. (TM), Chaps Ralph Lauren Ralph Lauren (born Ralph Lifschitz on October 14, 1939) is an American fashion designer and business executive. Life Ralph J. Lauren was born in the New York City borough of The Bronx to Ashkenazi Jewish immigrants Fraydl (Kotlar) and Frank Lifshitz, a house (R), Calvin Klein(R) men's and women's underwear, men's accessories, men's, women's, junior women's and children's jeans and women's and juniors swimwear, Speedo(R) men's, women's and children's swimwear, sportswear and swimwear accessories, Anne Anne, British princess Anne (Anne Elizabeth Alice Louise), 1950–, British princess, only daughter of Queen Elizabeth II and Prince Philip, duke of Edinburgh. She was educated at Benenden School. Cole(R), Cole of California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). (R), Catalina Catalina may refer to: In geography:
FORWARD-LOOKING STATEMENTS forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , that reflect, when made, the Company's expectations or beliefs concerning future events that involve risks and uncertainties, including general economic conditions affecting the apparel industry, changing fashion trends, pricing pressures which may cause the Company to lower its prices, increases in the prices of raw materials the Company uses, changing international trade regulation and elimination of quotas on imports of textiles textiles, all fabrics made by weaving, felting, knitting, braiding, or netting, from the various textile fibers (see fiber). Types of Textiles and apparel, the Company's history of losses, the changes in the Company's senior management team, the Company's ability to protect its intellectual property rights, the Company's dependency dependency In international relations, a weak state dominated by or under the jurisdiction of a more powerful state but not formally annexed by it. Examples include American Samoa (U.S.) and Greenland (Denmark). on a limited number of customers, the Company's dependency on the reputation of its brand names, the Company's exposure to conditions in overseas markets, the competition in the Company's markets, the Company's recent emergence from bankruptcy, the comparability of financial statements for periods before and after the Company's adoption of fresh start accounting, the Company's history of insufficient in·suf·fi·cient adj. 1. Not sufficient. 2. Incapable of proper functioning. disclosure controls and procedures and internal controls and restated financial statements, the Company's future plans concerning guidance regarding its results of operations, the effect of the SEC's investigation, the effect of local laws and regulations, shortages of supply of sourced goods or interruptions in the Company's manufacturing, the Company's level of debt, the Company's ability to obtain additional financing, the restrictions on the Company's operations imposed by its revolving credit facility and the indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the senior notes and the Company's ability to service its debt. All statements other than statements of historical fact included in this press release are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These forward-looking statements may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result," or other similar words and phrases Words and Phrases® A multivolume set of law books published by West Group containing thousands of judicial definitions of words and phrases, arranged alphabetically, from 1658 to the present. . Forward-looking statements and the Company's plans and expectations are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, and the Company's business in general is subject to certain risks that could affect the value of its stock.
Schedule 1
THE WARNACO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding per share data)
(Unaudited)
Quarter Year-to-Date
---------------------- ---------------------------------
Successor Predecessor Successor
Company Company Company Predecessor Company
---------------------- ---------------------------------
For the For the For the For the
Three Three Eight Nine
Months Months Months For the One Months
Ended Ended Ended Month Ended Ended
October October October February 4, October
4, 2003 5, 2002 4, 2003 2003 5, 2002
--------- ----------- --------- ----------- ----------
Net revenues $303,059 $331,463 $949,821 $112,739 $1,104,744
Cost of
goods
sold 210,499 237,183 644,574 68,083 782,600
--------- ----------- --------- ---------- ----------
Gross profit 92,560 94,280 305,247 44,656 322,144
Selling,
general and
administrative
expenses 88,146 84,576 251,929 34,322 282,367
Restructuring
items (a) 5,242 - 11,382 - -
Reorganization
items - 21,122 - 29,922 79,207
Amortization of
sales order
backlog 1,967 - 11,800 - -
--------- ----------- --------- ----------- ---------
Operating
income
(loss) (2,795) (11,418) 30,136 (19,588) (39,430)
Gain on
cancellation of
pre-petition
indebtedness - - - (1,692,696) -
Fresh start
adjustments - - - (765,726) -
Other (income)
loss, net (904) - (2,232) 359 -
Interest
expense 5,988 4,283 15,838 1,887 14,340
--------- ----------- --------- ----------- ---------
Income (loss)
from
continuing
operations
before
provision
(benefit) for
income taxes (7,879) (15,701) 16,530 2,436,588 (53,770)
Provision
(benefit) for
income taxes (1,336) 2,544 8,456 78,150 49,839
--------- ----------- --------- ----------- ---------
Income (loss)
from
continuing
operations (6,543) (18,245) 8,074 2,358,438 (103,609)
Discontinued
operations
(b) (117) 2,614 (559) 99 (141)
Cumulative
effect of
change in
accounting
principle (net
of income tax
benefit of
$53,513) - - - - (801,622)
--------- ----------- --------- ---------- ---------
Net income
(loss) $(6,660) $(15,631) $7,515 $2,358,537 $(905,372)
========= =========== ========= =========== ========
Basic income
(loss) per
common share:(c)
Continuing
operations
income (loss)
before
accounting
change $(0.15) $(0.34) $0.18 $44.51 $(1.96)
Discontinued
operations
income (loss)
before
accounting
change - 0.05 (0.01) - (0.00)
Cumulative
effect of
accounting
change - - - - (15.14)
--------- ----------- --------- ----------- ---------
Net income
(loss) $(0.15) $(0.30) $0.17 $44.51 $(17.10)
========= =========== ========= =========== =========
Diluted income
(loss) per
common share:(c)
Continuing
operations
income (loss)
before
accounting
change $(0.15) $(0.34) $0.18 $44.51 $(1.96)
Discontinued
operations
income (loss)
before
accounting
change (0.00) 0.05 (0.01) 0.00 (0.00)
Cumulative
effect of
accounting
change - - - - (15.14)
--------- ----------- --------- ----------- ----------
Net income
(loss) $(0.15) $(0.30) $0.17 $44.51 $(17.10)
========= =========== ========= =========== ==========
Weighted average number
of shares outstanding
used in
computing
income (loss)
per share: (c)
Basic 45,065 52,936 45,028 52,990 52,936
========= =========== ========= =========== ==========
Diluted 45,065 52,936 45,186 52,990 52,936
========= =========== ========= =========== ==========
(a) Restructuring items for the third quarter and eight month periods
ended October 4, 2003 include contract termination costs of $0 and
$2.5 million, employee termination costs, related legal fees and
other items of $2.6 million and $6.1 million and the writedown of
fixed assets and other facility shutdown costs of $2.6 million and
$2.7 million, respectively.
(b) Discontinued operations includes the results of the Company's
A.B.S. by Allen Schwartz business unit and certain
Speedo/Authentic Fitness retail stores for which the Company
determined that it will not seek lease renewals.
(c) Income (loss) per share and weighted average shares of the
Predecessor Company are based on historical shares outstanding and
do not reflect the cancellation of the Company's Class A common
stock and the issuance of 45 million shares of new common stock in
connection with the Company's emergence from bankruptcy on
February 4, 2003. Due to the cancellation of the Predecessor's
Class A common stock and the issuance of 45 million shares of new
common stock by the Successor in connection with the Company's
emergence from bankruptcy on February 4, 2003, net income (loss)
per share of the Successor will not be comparable to net income
(loss) per share of the Predecessor.
Schedule 2
THE WARNACO GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding per share data)
(Unaudited)
For the Three For the Nine Months
Months Ended Ended
------------------- -----------------------
October October October October
4, 5, 4, 5,
2003 (a) 2002 (b) 2003 (c) 2002 (d)
---------------------------------------------
Net revenues $303,059 $331,463 $1,062,560 $1,104,744
Cost of goods
sold 210,499 236,218 712,657 774,677
--------- --------- ----------- -----------
Gross profit 92,560 95,245 349,903 330,067
Selling,
general and
administrative
expenses 87,963 79,869 280,666 257,269
--------- --------- ----------- -----------
Operating
income 4,597 15,376 69,237 72,798
Other (income)
loss, net (904) - (1,873) -
Interest
expense 5,988 7,432 18,405 24,054
--------- --------- ----------- -----------
Income (loss)
from
continuing
operations
before
provision
for
income
taxes (487) 7,944 52,705 48,744
Provision
(benefit) for
income taxes (195) 3,178 21,082 19,498
--------- --------- ----------- -----------
Income (loss)
from
continuing
operations $(292) $4,766 $31,623 $29,246
========= ========= =========== ===========
Basic income
(loss) per
common share
from continuing
operations: $(0.01) $0.11 $0.70 $0.65
========= ========= =========== ===========
Diluted income
(loss) per
common share
from continuing
operations: $(0.01) $0.10 $0.70 $0.65
========= ========= =========== ===========
Weighted average
number of
shares
outstanding
used in computing income (loss)
per share from continuing
operations:
Basic 45,065 45,065 45,028 45,028
========= ========= =========== ===========
Diluted 45,065 46,101 45,186 45,186
========= ========= =========== ===========
----------------------------------------------------------------------
Reconciliation of pro forma income (loss) from continuing operations
to pro forma EBITDA:
Income (loss)
from
continuing
operations $(292) $4,766 $31,623 $29,246
Provision
(benefit) for
income taxes (195) 3,178 21,082 19,498
Interest
expense 5,988 7,432 18,405 24,054
Depreciation
and
amortization 6,591 8,697 25,546 25,453
--------- --------- ----------- -----------
Pro forma
EBITDA $12,092 $24,073 $96,656 $98,251
========= ========= =========== ===========
To present the statements of operations as if the Company had emerged
from bankruptcy at the beginning of fiscal 2002, the Company has made
pro forma adjustments:
(a) See Schedule 5 for pro forma adjustments for the third quarter of
fiscal 2003.
(b) See Schedule 6 for pro forma adjustments for the third quarter of
fiscal 2002.
(c) See Schedule 7 for pro forma adjustments for the nine months of
fiscal 2003.
(d) See Schedule 8 for pro forma adjustments for the nine months of
fiscal 2002.
Schedule 3
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
October 4, February 4, October 5,
2003 2003 2002
----------- ----------- -----------
(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash $43,855 $20,706 $95,858
Restricted cash - 6,200 -
Accounts receivable,
net 202,695 213,048 206,887
Inventories, net 290,572 348,033 373,170
Other current assets 38,767 30,890 26,793
Assets held for sale and
assets of discontinued
operations 24,046 1,485 112
----------- ----------- -----------
Total current assets 599,935 620,362 702,820
----------- ----------- -----------
Property, plant and
equipment, net 105,269 129,357 180,333
Intangible and other
assets 417,220 414,230 99,197
----------- ----------- -----------
TOTAL ASSETS $1,122,424 $1,163,949 $982,350
=========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities not subject
to compromise:
Current liabilities:
Current portion of
long-term debt $- $5,050 $7,762
Revolving credit
facility - 39,200 -
Other current
liabilities 223,920 255,818 218,016
Liabilities of
discontinued
operations 2,172 - -
----------- ----------- -----------
Total current
liabilities 226,092 300,068 225,778
----------- ----------- -----------
Long-term debt:
Second Lien Notes due
2008 - 200,942 -
Senior Notes due 2013 210,000 - -
Other 1,178 1,260 1,420
Other long-term
liabilities 163,757 158,131 35,883
Liabilities subject to
compromise - - 2,482,339
Total stockholders'
equity (deficiency) 521,397 503,548 (1,763,070)
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,122,424 $1,163,949 $982,350
=========== =========== ===========
Supplemental Information:
Debt $211,178 $246,452
Cash (including
restricted cash) 43,855 26,906
Schedule 4
THE WARNACO GROUP, INC.
RECONCILIATION OF PROJECTED PRO FORMA INCOME FROM
CONTINUING OPERATIONS TO PRO FORMA EBITDA (a)
(in millions)
(Unaudited)
For the
Projected Range Fiscal
for the Year
Fiscal Year Ended
Ending January January
3, 2004 4, 2003
--------------- ---------
Range
---------------
Low High Actual
------- ------- ---------
Income from continuing operations $41.6 $47.6 $28.2
Provision for income taxes 26.6 31.6 19.0
Interest expense 26.0 25.0 31.6
Depreciation and amortization
expense 31.8 31.8 34.3
------- ------- ---------
EBITDA $126.0 $136.0 $113.1
======= ======= =========
(a) Operating results do not include the results of the Company's
A.B.S. by Allen Schwartz business unit or the results of certain
retail stores which are accounted for as discontinued operations.
Discontinued operations are estimated to account for $4.0 million
of EBITDA for fiscal 2003 and accounted for $4.1 million of EBITDA
for fiscal 2002.
Schedule 5
THE WARNACO GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding per share data)
(Unaudited)
Pro
Forma
As Reported For
For The The
Three Three
Months Months
Ended Pro Ended
October Forma October
4, 2003 Adjustments 4, 2003
---------- ----------- --------
Net revenues $303,059 $- $303,059
Cost of goods sold 210,499 - 210,499
---------- -------- --------
Gross profit 92,560 - 92,560
Selling, general and
administrative expenses 88,146 (183)(a) 87,963
Restructuring items 5,242 (5,242)(b) -
Reorganization items - - -
Amortization of sales order
backlog 1,967 (1,967)(c) -
---------- -------- --------
Operating income (loss) (2,795) 7,392 4,597
Other (income ) expense (904) - (904)
Interest expense 5,988 - 5,988
---------- -------- --------
Loss from continuing
operations
before benefit for
income taxes (7,879) 7,392 (487)
Benefit for income taxes (1,336) 1,141 (d) (195)
---------- -------- --------
Loss from continuing
operations $(6,543) $6,251 $(292)
========== ======== ========
Basic loss per common share
from
continuing operations:(e) $(0.15) $(0.01)
========== ========
Diluted loss per common
share from
continuing operations:(e) $(0.15) $(0.01)
========== ========
Weighted average number of shares outstanding
used in computing loss per share from continuing
operations:
Basic 45,065 45,065
========== ========
Diluted 45,065 45,065
========== ========
----------------------------------------------------------------------
Reconciliation of pro forma loss from continuing operations to pro
forma EBITDA:
Pro forma loss from continuing
operations $(292)
Benefit for income taxes (195)
Interest expense 5,988
Depreciation and
amortization 6,591
---------
Pro forma EBITDA $12,092
=========
To present the statements of operations as if the Company had emerged
from bankruptcy at the beginning of fiscal 2002, the Company has made
pro forma adjustments to:
(a) Eliminate bankruptcy and reorganization related expenses incurred
in the third quarter and included in selling, general and
administrative expenses of $0.2 million.
(b) Eliminate restructuring items of $5.2 million related to actions
initiated prior to the Company's emergence from bankruptcy.
(c) Eliminate the amortization of sales order backlog. The
amortization of sales order backlog results from the Company's
adoption of fresh start accounting as of February 4, 2003. The
amortization of sales order backlog is a non-recurring charge and
is not expected to have a continuing effect on the Company's
results of operations after it is fully amortized in fiscal 2003.
(d) Adjust income tax benefit to reflect the Company's estimated
income tax rate of 40%.
(e) Pro forma loss per share from continuing operations is calculated
by dividing the loss from continuing operations by the weighted
average number of shares outstanding. Due to the cancellation of
the Predecessor's Class A common stock and the issuance of 45
million shares of new common stock by the Successor in connection
with the Company's emergence from bankruptcy on February 4, 2003,
pro forma loss per share from continuing operations of the
Successor for the three months ended October 4, 2003 will not be
comparable to the historical income (loss) per share from
continuing operations of the Predecessor.
Schedule 6
THE WARNACO GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding per share data)
(Unaudited)
Pro
As Forma
Reported For
For the the
Three Three
Months Months
Ended Pro Ended
October Forma October
5, 2002 Adjustments 5, 2002
--------- ----------- ---------
Net revenues $331,463 $- $331,463
Cost of goods sold 237,183 (965)(a) 236,218
--------- -------- ---------
Gross profit 94,280 965 95,245
Selling, general and administrative
expenses 84,576 (4,707)(b) 79,869
Reorganization items 21,122 (21,122)(c) -
--------- -------- ---------
Operating income (loss) (11,418) 26,794 15,376
Interest expense 4,283 3,149 (d) 7,432
--------- -------- ---------
Income (loss) from continuing operations before
provision for income taxes (15,701) 23,645 7,944
Provision for income taxes 2,544 634 (e) 3,178
--------- -------- ---------
Income (loss) from continuing
operations $(18,245) $23,011 $4,766
========= ======== =========
Basic income (loss) per common share from
continuing operations: (f) $(0.34) $0.11
========= =========
Diluted income (loss) per common share from
continuing operations: (f) $(0.34) $0.10
========= =========
Weighted average number of shares outstanding used in
computing income (loss) per share from continuing
operations:
Basic 52,936 45,065
========= =========
Diluted 52,936 45,926
========= =========
----------------------------------------------------------------------
Reconciliation of pro forma income from continuing operations to pro
forma EBITDA:
Pro forma income from continuing operations $4,766
Provision for income taxes 3,178
Interest expense 7,432
Depreciation and amortization 8,697
---------
Pro forma EBITDA $24,073
=========
To present the statements of operations as if the Company had emerged
from bankruptcy at the beginning of fiscal 2002, the Company has made
pro-forma adjustments to:
(a) Reflect the adoption of fresh start accounting and the change in
the Company's inventory accounting policies to expense certain
design, merchandising and other product related costs as incurred.
As a result of this change, the pro forma adjustment eliminates
$1.1 million of design, merchandising and other product related
costs previously capitalized that were reflected in cost of goods
sold for the third quarter of fiscal 2002, offset by $0.1 million
of inventory costs that would have been expensed in the third
quarter of fiscal 2002.
(b) Eliminate historical depreciation and amortization expense of
$13.5 million, offset by fresh start depreciation and amortization
of $8.8 million based on the valuation of the Company's fixed and
intangible assets at fair value on the emergence date.
(c) Eliminate reorganization items of $21.1 million.
(d) Record interest expense on the Senior Notes at 8 7/8% for three
months of $4.6 million and interest of $0.2 million on certain
leases settled in connection with the Company's bankruptcy,
partially offset by the elimination of interest expense of $1.7
million related to certain foreign debt repaid in connection with
the Company's emergence from bankruptcy.
(e) Adjust income tax provision to reflect the Company's estimated
income tax rate of 40%.
(f) Pro forma income (loss) per share from continuing operations is
calculated by dividing the income (loss) from continuing
operations by the weighted average number of shares outstanding.
Due to the cancellation of the Predecessor's Class A common stock
and the issuance of 45 million shares of new common stock by the
Successor in connection with the Company's emergence from
bankruptcy on February 4, 2003, pro forma income (loss) per share
from continuing operations of the Successor for the three months
ended October 5, 2002 will not be comparable to the historical
income (loss) per share from continuing operations of the
Predecessor.
Schedule 7
THE WARNACO GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding per share data)
(Unaudited)
Fiscal 2003
---------------------
Successor Predecessor
Company Company
----------------------------------
As Pro
Reported Forma
For the For the
Eight As Reported Nine
Months For the One Months
Ended Month Ended Pro Ended
October February Forma October
4, 2003 4, 2003 Adjustments 4, 2003
--------- ----------- --------------------------
Net revenues $949,821 $112,739 $- $1,062,560
Cost of goods sold 644,574 68,083 - 712,657
--------- ----------- ------------ -----------
Gross profit 305,247 44,656 349,903
Selling, general and
administrative
expenses 251,929 34,322 (5,585)(a) 280,666
Restructuring items 11,382 - (11,382)(b) -
Reorganization
items - 29,922 (29,922)(c) -
Amortization of
sales order
backlog 11,800 - (11,800)(d) -
--------- ----------- ------------ -----------
Operating income
(loss) 30,136 (19,588) 58,689 69,237
Gain on cancellation
of pre-petition
indebtedness - (1,692,696) 1,692,696 (e) -
Fresh start
adjustments - (765,726) 765,726 (e) -
Other (income)
loss, net (2,232) 359 - (1,873)
Interest expense 15,838 1,887 680 (f) 18,405
--------- ----------- ------------ -----------
Income from continuing
operations before
before
provision for
income taxes 16,530 2,436,588 (2,400,413) 52,705
Provision for
income taxes 8,456 78,150 (65,524)(g) 21,082
--------- ----------- ------------ -----------
Income from
continuing
operations $8,074 $2,358,438 $(2,334,889) $31,623
========= =========== ============ ===========
Basic income per
common share from
continuing
operations:(h) $0.18 $0.70
========= ===========
Diluted income per common
share from
continuing
operations:(h) $0.18 $0.70
========= ===========
Weighted average number of shares
outstanding used in
computing income per share from
continuing operations:
Basic 45,028 45,028
========= ===========
Diluted 45,186 45,186
========= ===========
----------------------------------------------------------------------
Reconciliation of pro forma income from continuing operations to pro
forma EBITDA:
Pro forma income from
continuing operations $31,623
Provision for
income taxes 21,082
Interest expense 18,405
Depreciation and
amortization 25,546
-----------
Pro forma EBITDA $96,656
===========
To present the statements of operations as if the Company had emerged
from bankruptcy at the beginning of fiscal 2002, the Company has made
pro forma adjustments to:
(a) Eliminate historical depreciation and amortization expense for
January 2003 and record depreciation and amortization expense
based upon the fair value of the Company's assets of $1.4 million
and eliminate bankruptcy and reorganization related expenses
included in selling, general and administrative expenses of $4.2
million.
(b) Eliminate restructuring items of $11.4 million related to actions
initiated prior to the Company's emergence from bankruptcy.
(c) Eliminate reorganization items of $29.9 million.
(d) Eliminate the amortization of sales order backlog. The
amortization of sales order backlog results from the Company's
adoption of fresh start accounting as of February 4, 2003. The
amortization of sales order backlog is a non-recurring charge and
is not expected to have a continuing effect on the Company's
results of operations after it is fully amortized in fiscal 2003.
(e) Eliminate cancellation of debt of $1,692.7 million and fresh start
adjustments of $765.7 million.
(f) Record interest expense on the Senior Notes at 8 7/8% for the
month of January 2003 of $1.6 million, partially offset by the
elimination of interest expense of $0.9 million related to certain
foreign debt agreements subject to standstill agreements paid as
part of the Company's plan of reorganization.
(g) Adjust the income tax provision using the Company's estimated rate
of 40%.
(h) Pro forma income (loss) per share from continuing operations is
calculated by dividing the income (loss) from continuing
operations by the weighted average number of shares outstanding.
Due to the cancellation of the Predecessor's Class A common stock
and the issuance of 45 million shares of new common stock by the
Successor in connection with the Company's emergence from
bankruptcy on February 4, 2003, pro forma income (loss) per share
from continuing operations of the Successor for the nine months
ended October 4, 2003 will not be comparable to the historical
income (loss) per share from continuing operations of the
Predecessor.
Schedule 8
THE WARNACO GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding per share data)
(Unaudited)
As Reported Pro Forma
For the Nine For the Nine
Months Ended Pro Months Ended
October 5, Forma October 5,
2002 Adjustments 2002
----------- ----------- ------------
Net revenues $1,104,744 $- $1,104,744
Cost of goods sold 782,600 (7,923)(a) 774,677
----------- --------- -----------
Gross profit 322,144 7,923 330,067
Selling, general and
administrative expenses 282,367 (25,098)(b) 257,269
Reorganization items 79,207 (79,207)(c) -
----------- --------- -----------
Operating income (loss) (39,430) 112,228 72,798
Interest expense 14,340 9,714 (d) 24,054
----------- --------- -----------
Income (loss) before
provision for income
taxes (53,770) 102,514 48,744
Provision for income
taxes 49,839 (30,341)(e) 19,498
----------- --------- -----------
Income (loss) from
continuing operations $(103,609) $132,855 $29,246
=========== ========= ===========
Basic income (loss) per common
share from
continuing
operations:(f) $(2.30) $0.65
=========== ===========
Diluted income (loss) per common
share from
continuing
operations:(f) $(2.30) $0.65
=========== ===========
Weighted average number of shares outstanding
used in
computing income (loss) per share from
continuing operations: *
Basic 45,065 45,028
=========== ===========
Diluted 45,065 45,186
=========== ===========
----------------------------------------------------------------------
Reconciliation of pro forma income from continuing operations to pro
forma EBITDA:
Pro forma income from continuing
operations $29,246
Provision for income
taxes 19,498
Interest expense 24,054
Depreciation and
amortization 25,453
-----------
Pro forma EBITDA $98,251
===========
To present the statements of operations as if the Company had emerged
from bankruptcy at the beginning of fiscal 2002, the Company has made
pro forma adjustments to:
(a) Reflect the adoption of fresh start accounting and the change in
the Company's inventory accounting policies to expense certain
design, merchandising and other product related costs as incurred.
As a result of this change, the pro forma adjustment eliminates
$9.0 million of design, merchandising and other product related
costs previously capitalized that were reflected in cost of goods
sold for the nine months ended October 5, 2002, offset by $1.1
million of inventory costs that would have been expensed in the
nine months ended October 5, 2002.
(b) Eliminate historical depreciation and amortization expense of
$42.4 million and eliminate lease expense of $8.2 million related
to certain leases settled as part of the Company's bankruptcy,
offset by fresh start depreciation and amortization of $25.5
million based on the valuation of the Company's fixed and
intangible assets at fair value on the emergence date.
(c) Eliminate reorganization items of $79.2 million.
(d) Record interest expense on the Senior Notes at 8 7/8% for nine
months of $13.9 million and interest expense of $0.7 million on
certain leases settled in connection with the Company's
bankruptcy, partially offset by elimination of interest expense of
$4.9 million related to certain foreign debt subject to standstill
agreements that was paid in connection with the Company's
emergence from bankruptcy.
(e) Adjust income tax provision to reflect the Company's estimated
income tax rate of 40%.
(f) Pro forma income (loss) per share from continuing operations is
calculated by dividing the income (loss) from continuing
operations by the weighted average number of shares outstanding.
Due to the cancellation of the Predecessor's Class A common stock
and the issuance of 45 million shares of new common stock by the
Successor in connection with the Company's emergence from
bankruptcy on February 4, 2003, pro forma income (loss) per share
from continuing operations of the Successor for the nine months
ended October 5, 2002 will not be comparable to the historical
income (loss) per share from continuing operations of the
Predecessor.
SCHEDULE 9
THE WARNACO GROUP, INC.
SEGMENT NET REVENUE AND OPERATING INCOME (LOSS) BY BUSINESS UNIT
(In thousands)
NET REVENUES
-------------------------------------------------
Three Months Ended
------------------------------------------------
October October
4, 5, Increase %
Net revenues: 2003 2002 (Decrease) Change
------------------- --------- ------------------
Intimate
Apparel Group $152,505 $156,661 (4,156) -2.7%
Sportswear
Group 112,002 138,248 (26,246) -19.0%
Swimwear Group 38,552 36,554 1,998 5.5%
------------------- --------- --------- --------
Net revenues $303,059 $331,463 $(28,404) -8.6%
=================== ========= ========= ========
OPERATING INCOME (LOSS)
-------------------------------------------------
Three Months Ended
-------------------------------------------------
October % of October % of
4, Net 5, Net
2003 Revenues 2002 Revenues
------------------- --------- --------- ---------
Operating income
(loss):
Intimate
Apparel Group $17,009 11.2% $18,564 11.8%
Sportswear
Group 10,373 9.3% 11,575 8.4%
Swimwear Group (8,576) -22.2% (3,876) -10.6%
------------------- --------- --------- --------
Group operating
income 18,806 6.2% 26,263 7.9%
Unallocated
corporate
expenses (13,391) -4.4% (16,333) -4.9%
Amortization of
intangibles (2,968) -1.0% (226) -0.1%
Restructuring
items (5,242) -1.7% - 0.0%
Reorganization
items - 0.0% (21,122) -6.4%
------------------- --------- --------- --------
Operating
income (loss) $(2,795) -0.9% $(11,418) -3.4%
=================== ========= ========= ========
NET REVENUES
-----------------------------------------------
Nine Months Ended
-----------------------------------------------
October 4, October 5, Increase %
Net revenues: 2003 (a) 2002 (Decrease) Change
-------------- ----------- ---------- ---------
Intimate Apparel
Group $438,458 $474,763 (36,305) -7.6%
Sportswear Group 323,182 355,989 (32,807) -9.2%
Swimwear Group 300,920 273,992 26,928 9.8%
-------------- ----------- --------- ---------
Net revenues $1,062,560 $1,104,744 $(42,184) -3.8%
============== =========== ========= =========
OPERATING INCOME (LOSS)
-----------------------------------------------
Nine Months Ended
-----------------------------------------------
% of
October 4, % of October 5, Net
2003 (a) Net Revenues 2002 Revenues
-------------- ------------ --------- ---------
Operating income
(loss):
Intimate Apparel
Group $47,986 10.9% $39,493 8.3%
Sportswear Group 26,029 8.1% 23,273 6.5%
Swimwear Group 44,319 14.7% 29,752 10.9%
-------------- ----------- --------- ---------
Group operating
income 118,334 11.1% 92,518 8.4%
Unallocated
corporate
expenses (52,924) -5.0% (52,063) -4.7%
Amortization of
intangibles (13,558) -1.3% (678) -0.1%
Restructuring
items (11,382) -1.1% - 0.0%
Reorganization
items (29,922) -2.8% (79,207) -7.2%
-------------- ----------- --------- ---------
Operating income
(loss) $10,548 1.0% $(39,430) -3.6%
============== =========== ========= =========
(a) The nine months ended October 4, 2003 includes the period January
5, 2003 to February 4, 2003 of the Predecessor combined with the
period February 5, 2003 to October 4, 2003 of the Successor.
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