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 October 1, 1994
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............... to .................
Commission file number: 0-9831
LIZ CLAIBORNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2842791
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1441 Broadway, New York, New York 10018
(Address of principal executive offices) (Zip Code)
(212) 354-4900
(Registrant's telephone number, including area code)
Indicate by check 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 .
The number of shares of Registrant's Common Stock, par value
$1.00 per share, outstanding at 11/10/94 was 77,957,228.
(2)
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL INFORMATION
Consolidated Balance Sheets as of October 1, 1994
and December 25, 1993 ............................. 3
Consolidated Statements of Income for the Nine
and Three Month Periods Ended October 1, 1994
and September 25, 1993 ........................... 4
Consolidated Statements of Cash Flows
for the Nine Month Periods Ended
October 1, 1994 and September 25, 1993 ............ 5
Notes to Consolidated Financial Statements .......... 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..... 10-14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................... 15
Item 6. Exhibits and Reports on Form 8-K.................... 16
SIGNATURE ..................................................... 17
<PAGE>
<TABLE> (3)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION> (All amounts in thousands except share data)
(Unaudited)
October 1, December 25,
<S> ASSETS 1994 1993
CURRENT ASSETS: <C> <C>
Cash and cash equivalents $ 45,010 $ 104,720
Marketable securities 190,899 204,571
Accounts receivable - trade 299,105 174,435
Inventories 365,576 436,593
Deferred income tax benefits 18,090 15,065
Other current assets 67,608 69,055
Total current assets 986,288 1,004,439
PROPERTY AND EQUIPMENT - NET 232,733 202,068
OTHER ASSETS 31,311 29,831
$1,250,332 $1,236,338
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 87,952 $ 141,126
Accrued expenses 126,876 97,765
Income taxes payable 12,771 15,547
Total current liabilities 227,599 254,438
LONG-TERM DEBT 1,258 1,334
DEFERRED INCOME TAXES 785 2,275
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 13,450 --
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
authorized shares - 50,000,000,
issued shares - none -- --
Common stock, $1 par value,
authorized shares - 250,000,000,
issued shares - 88,218,617 88,219 88,219
Capital in excess of par value 44,580 56,699
Retained earnings 1,179,540 1,123,413
Cumulative translation adjustment (1,948) (1,279)
1,310,391 1,267,052
Common stock in treasury, at cost
9,959,283 shares in 1994 and
9,371,217 shares in 1993 (303,151) (288,761)
Total stockholders' equity 1,007,240 978,291
$1,250,332 $1,236,338
The accompanying notes to consolidated financial statements are an integral
part of these statements.
/TABLE
<PAGE>
<TABLE> (4)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(All dollar amounts in thousands, except per common share data)
<CAPTION>
(Unaudited)
Nine Months Ended Three Months Ended
(40 Weeks) (39 Weeks)
Oct. 1,Sept. 25, Oct. 1,Sept. 25,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
NET SALES $1,648,199$1,660,156 $616,788 $621,894
Cost of goods sold 1,065,261 1,078,963 390,380 412,613
GROSS PROFIT 582,938 581,193 226,408 209,281
Selling, general &
administrative expenses 454,649 419,311 161,112 151,337
OPERATING INCOME 128,289 161,882 65,296 57,944
Investment and other
income-net 8,630 13,008 2,891 4,214
INCOME BEFORE PROVISION FOR
INCOME TAXES AND CUMULATIVE
EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 136,919 174,890 68,187 62,158
Provision for income taxes 50,700 64,500 25,300 23,900
INCOME BEFORE CUMULATIVE
EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 86,219 110,390 42,887 38,258
Cumulative effect of a
change in the method of
accounting for income
taxes -- 1,643 -- --
NET INCOME $ 86,219$ 112,033 $ 42,887 $ 38,258
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 78,686,66681,973,34678,380,02281,388,596
EARNINGS PER COMMON SHARE:
INCOME BEFORE CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING
PRINCIPLE $1.10 $1.35 $0.55 $0.47
Cumulative effect of a change
in the method of accounting
for income taxes -- .02 -- --
NET INCOME $1.10 $1.37 $0.55 $0.47
DIVIDENDS PAID PER COMMON SHARE $0.34 $0.33 $0.11 $0.11
The accompanying notes to consolidated financial statements are an integral part of these
statements.
/TABLE
<PAGE>
<TABLE> (5)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION> (All dollar amounts in thousands)
(Unaudited)
Nine Months Ended
(40 Weeks) (39 Weeks)
Oct. 1, Sept. 25,
<S> 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net income $ 86,219 $112,033
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 26,340 24,808
Non-current deferred income taxes (1,490) (1,444)
Cumulative effect of a change in
accounting for income taxes -- (1,643)
Tax benefit on exercise of stock options 97 990
Change in current assets and liabilities:
(Increase) in accounts receivable (124,670) (121,322)
Decrease (increase) in inventories 71,017 (20,600)
(Increase) in deferred
income tax benefits (1,147) (3,088)
Decrease (increase) in other current assets 1,447 (8,093)
(Decrease) in accounts payable (53,174) (34,990)
Increase in accrued expenses 29,111 10,549
(Decrease) in income taxes payable (2,776) (2,865)
Net cash provided by (used in)
operating activities 30,974 (45,665)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (98,712) (275,068)
Sales of investment instruments 107,705 409,980
Purchases of property and equipment (56,583) (61,921)
Purchase of trademarks (2,181) (980)
Other-net 56 1,310
Net cash (used in) provided by
investing activities (49,715) 73,321
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (76) (75)
Proceeds from exercise of common stock options 471 3,242
Dividends paid (26,541) (26,614)
Proceeds from sale of put warrants 1,572 1,188
Repurchase of common stock (15,712) (63,002)
Net cash used in
financing activities (40,286) (85,261)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (683) (47)
NET CHANGE IN CASH AND CASH EQUIVALENTS (59,710) (57,652)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 104,720 130,721
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,010 $ 73,069
The accompanying notes to consolidated financial statements are an integral part of these
statements.
/TABLE
<PAGE>
(6)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed consolidated financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted from this report,
as is permitted by such rules and regulations; however, the
Company believes that the disclosures are adequate to make
the information presented not misleading. It is suggested
that these condensed financial statements be read in
conjunction with the financial statements and the notes
thereto included in the Company's latest annual report.
2. In the opinion of management, the information furnished
reflects all adjustments, all of which are of a normal
recurring nature, necessary for a fair presentation of the
results for the reported interim periods. Certain items
previously reported in specific captions in the accompanying
financial statements have been reclassified to conform with
the current year's classifications. Results of operations
for interim periods are not necessarily indicative of results
for the full year.
3. The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" as of the
beginning of fiscal 1994. In accordance with SFAS No.115,
prior period financial statements have not been restated to
reflect the change in accounting principle. The effect as of
December 26, 1993 of adopting SFAS No.115 was an increase in
the opening balance of stockholders' equity of $2,848,000
(net of $1,673,000 in deferred income taxes) to reflect the
net unrealized holding gains on securities classified as
available-for-sale which were previously carried at amortized
cost. This increase in stockholders' equity was included in
retained earnings.
<PAGE>
(7)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
The following is a summary of available-for-sale securities:
<CAPTION> (Dollars in thousands)
Dec. 25,
October 1, 1994 1993
Gross Estimated
Unrealized Fair
<S> Cost Gains Losses Value Cost
Tax exempt notes <C> <C> <C> <C> <C>
and bonds $202,257 $5 $(2,102) $200,160 $278,033
U.S. & foreign
government securities 11,079 -- (888) 10,191 10,619
Commercial paper 10,706 -- -- 10,706 --
Collateralized mortgage
obligations 7,153 -- (1,694) 5,459 8,201
Total debt securities 231,195 5 (4,684) 226,516 296,853
Equity securities 2,528 -- (397) 2,131 5,000
$233,723 $5 $(5,081) $228,647 $301,853
(Dollars in thousands)
October 1, 1994
Estimated
Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 77,553 $ 76,303
Due after one year through
three years 143,630 141,933
Due after three years 10,012 8,280
231,195 226,516
Equity securities 2,528 2,131
$233,723 $228,647
</TABLE>
At October 1, 1994, the above investments include $24,911,000 of
tax exempt notes and bonds as well as the commercial paper which
are classified as cash and cash equivalents and equity securities
which are included in other long-term assets in the consolidated
balance sheets.
For the nine month period ended October 1, 1994, gross realized
gains and (losses) on sales of available-for-sale securities
totaled $686,000 and ($81,000), respectively. The net adjustment
to unrealized holding gains and losses on available-for-sale
securities for the nine month period was a charge of $6,046,000
which was included in retained earnings.
<PAGE>
(8)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Inventories are stated primarily at the lower of cost (first-
in, first-out) or market and consist of the following:
<TABLE> (Dollars in thousands)
<CAPTION> October 1, December 25,
1994 1993
<S> <C> <C>
Raw materials $ 49,149 $ 56,560
Work-in-process 25,902 24,006
Finished goods 290,525 356,027
$365,576 $436,593
</TABLE>
5. Property and equipment - net
<TABLE> (Dollars in thousands)
<CAPTION> October 1, December 25,
1994 1993
<S> <C> <C>
Land and buildings $123,284 $ 67,049
Machinery and equipment 113,353 99,644
Furniture and fixtures 47,950 39,489
Leasehold improvements 114,249 99,802
Construction in progress -- 38,491
398,836 344,475
Less: Accumulated depreciation
and amortization 166,103 142,407
$232,733 $202,068
</TABLE>
6. In April and June 1994, in connection with its previously
announced stock repurchase program, the Company sold put
warrants in privately negotiated transactions based on the
then-current market price of the Common Stock. The warrants
obligated the Company to purchase a total of 800,000 shares of
its Common Stock in July, October and December 1994 on the
respective expiration dates. The proceeds of $1.6 million
from the sale of the put warrants have been recorded in
capital in excess of par value. The Company's potential $18.5
million obligation to buy back 800,000 shares of Common Stock
has been charged to capital in excess of par value and
recorded as Put Warrants. As of October 1, 1994 the Company's
potential obligation under these put warrants was reduced to
$13.5 million as a result of the Company's purchase of 200,000
shares for approximately $5.0 million from a holder of such
warrants. Subsequent to October 1, 1994 the Company's
potential obligation under these put warrants was further
reduced to $8.4 million as a result of the Company's purchase
of 200,000 additional shares for approximately $5.0 million
from a holder of such warrants.
7. On October 13, 1994, the Company's Board of Directors declared
a quarterly cash dividend on the Company's Common Stock at the
rate of $.1125 per share, to be paid on December 5, 1994, to
stockholders of record at the close of business on November
11, 1994.<PAGE>
(9)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. For the nine months ended October 1, 1994 and September 25,
1993, the Company made income tax payments of $55,500,000 and
$70,412,000, respectively. For the nine months ended October
1, 1994 and September 25, 1993, the Company made interest
payments of $250,000 and $120,000, respectively. As of
October 1, 1994, the fair value adjustment for available-for-
sale securities was a charge of $3,198,000 (which reflects an
unrealized loss net of $1,878,000 in deferred income taxes)
included in retained earnings.
9. The Company adopted the provisions of SFAS No. 109 "Accounting
for Income Taxes" as of the beginning of fiscal 1993. SFAS
No. 109 requires a change from the deferred method to the
asset and liability method of accounting for income taxes.
The cumulative effect on prior years of this accounting change
is reflected in the consolidated statement of income for the
nine months ended September 25, 1993 as a one-time increase in
net income of $1,643,000, or $.02 per share.
10. The Company enters into foreign exchange contracts to hedge
transactions denominated in foreign currencies for periods of
up to 18 months and to hedge expected payment of intercompany
transactions with its non-U.S. subsidiaries. Gains and losses
on contracts which hedge specific foreign currency denominated
commitments are recognized in the period in which the
transaction is completed. As of October 1, 1994, the Company
had contracts maturing in 1994 and 1995 to purchase at
contracted forward rates 731,377,000 Spanish pesetas and
390,000 Dutch guilders and to sell 48,500,000 Canadian dollars
and 8,900,000 British sterling. The aggregate U.S. dollar
value of all foreign exchange contracts is approximately
$55,000,000, approximately $5,700,000 of which are for a
period in excess of one year. Unrealized gains/losses for
outstanding foreign exchange contracts were not material as of
October 1, 1994.<PAGE>
(10)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The period to prior year comparable period ("period-to-period")
decrease in net sales for the 1994 third quarter was $5 million, or
1% (rounded to the nearest million and percent, as are all figures
in the Results of Operations section of this Item 2). This
included an 8% decline in net sales of Misses and Petite
sportswear, to $289 million, reflecting lower average unit selling
prices due primarily to changes in product mix. The net sales
result also reflected an 11% decline in LIZ & CO. sales, to $24
million, due in substantially equal parts to lower unit volume and
lower average unit selling prices, as well as a decrease of 9% in
ELISABETH sales, to $37 million, due to lower average initial
selling prices. The net sales declines were offset in part by
sales increases in accessories (22%, to $54 million), menswear
(47%, to $28 million) and in DANA BUCHMAN (14%, to $33 million), as
well as in products of the RUSS, THE VILLAGER and CRAZY HORSE
Divisions (collectively, the "Russ Divisions"), with sales
increasing 20%, to $34 million. These sales increases primarily
reflected higher unit volume, although more than half of the
menswear increase was due to higher average unit selling prices as
a result of a higher proportion of regular price sales. In
addition, sales of the Company's FIRST ISSUE, LIZ CLAIBORNE,
ELISABETH and DANA BUCHMAN stores, and international retail
operations (collectively, the "retail operations") increased 29%,
to $33 million, due to the opening of new domestic retail stores
(97 at 1994 third quarter end as compared with 67 at 1993 third
quarter end) and European retail leased departments. Sales of the
Company's outlet stores increased on a period-to-period basis 16%,
to $42 million, due to the opening of new stores (61 at 1994 third
quarter end as compared with 55 at 1993 third quarter end). Net
sales for the third quarter have historically been higher than
those of the second quarter, reflecting seasonal fluctuations.
Net sales for the nine months of 1994 (40 weeks) were $12 million,
or 1%, lower than those for the 1993 nine month period (39 weeks).
The 1994 first quarter included the shipment of certain Spring
merchandise delayed from fiscal 1993. The 1994 nine month results
included a 9% decline in net sales of Misses and Petite sportswear,
to $794 million, reflecting significantly lower average unit
selling prices required primarily to liquidate excess prior season
inventory during the first half of 1994. Contributing to the
decrease was a decline in LIZ & CO. sales (18%, to $59 million) due
primarily to lower unit volume. The net sales declines were offset
in part by sales increases in the Russ Divisions (an increase of
$32 million, to $86 million), as well as in menswear (31%, to $70
million), accessories (13%, to $142 million) and DANA BUCHMAN (22%,
to $85 million). These increases primarily reflected higher<PAGE>
(11)
RESULTS OF OPERATIONS (continued)
unit volume, although more than half of the menswear increase was
due to higher average unit selling prices as a result of a higher
proportion of regular price sales. In addition, sales of the
retail operations increased 35%, to $98 million, and outlet sales
increased 12%, to $100 million, reflecting in each case the opening
of additional stores and leased departments.
On a period-to-period basis, gross profit dollars remained constant
for the nine month period and increased 8% for the third quarter.
The quarterly increase was due to an improvement in margins due to
lower markdowns on excess inventory, offset in part by lower sales
volume. Gross profit expressed as a percentage of net sales
increased to 35.4% for the first nine months and 36.7% for the
third quarter of 1994 from 35.0% and 33.7% for the comparable
periods. These higher gross margin percentages reflect margin
improvements from depressed prior period levels within the Dress
and Menswear Divisions, due in each case to a higher proportion of
regular price sales. In addition, the gross profit percentages
were favorably impacted by the higher proportion of the Company's
net sales represented by the Accessories, DANA BUCHMAN and Jewelry
Divisions (each of which generally experience higher gross margins
than the other wholesale apparel divisions). These increases were
offset by severely depressed margins within the Russ Divisions
(which are lower margin businesses) due to a very low proportion of
regular price sales, and the higher proportion of the Company's net
sales represented by these Divisions, as well as a decrease in
margins of the Cosmetics Division due to product mix. In addition,
gross margins for the nine month period reflected margin erosion
within the Misses and Petite sportswear group and the ELISABETH
Division, principally due to a lower proportion of regular price
sales, primarily reflecting the liquidation of excess prior year
inventory.
Legislation which would further restrict the importation and/or
increase the cost of textiles and apparel produced abroad has
periodically been introduced in Congress. Although it is unclear
whether any new legislation will be enacted into law, it appears
likely that various new legislative or executive initiatives will
be proposed. These initiatives may include a reevaluation of the
trading status of certain countries, including Most Favored Nation
("MFN") treatment for the People's Republic of China ("PRC"),
which, if enacted, would increase the cost of products purchased
from suppliers in such countries. The PRC's MFN treatment was
renewed in July 1994 for an additional year. In light of the very
substantial portion of the Company's products which are <PAGE>
(12)
RESULTS OF OPERATIONS (continued)
manufactured by foreign suppliers, the enactment of new legislation
or the administration of current international trade regulations,
or executive action affecting international textile agreements,
could adversely affect the Company's operations.
The period-to-period dollar increases in selling, general and
administrative ("SG&A") expenses were 8% and 6% for the first nine
months and third quarter of 1994, respectively. The continued
expansion of the Company's retail operations, including the opening
of new domestic stores and the conversion to retail of much of the
Company's European business, accounted for more than half of such
increases. Also contributing to these increases were costs related
to the expansion of the Russ and DANA BUCHMAN Divisions and outlet
operations. In addition, the increase for the nine month period
reflected costs associated with the VIVID fragrance (introduced in
July 1993). SG&A expenses expressed as a percentage of net sales
were 27.6% and 25.3% for the first nine months and 26.1% and 24.3%
for the third quarter, respectively, of 1994 and 1993. These
percentage increases reflect the above factors, as well as the fact
that dollar expenses increased on an overall basis, notwithstanding
the decline in sales levels. Although certain wholesale apparel
divisions reduced their period-to-period SG&A levels, their
percentage decrease in sales slightly outpaced their percentage
decrease in expense levels.
The period-to-period decreases in investment and other income-net
were primarily due to lower rates of return realized on the
Company's investment portfolio. Contributing to the decrease for
the first nine months was a decrease in the Company's average
portfolio of cash equivalents and marketable securities (the
"investment portfolio"), reflecting in part the Company's stock
repurchase program; the third quarter decrease was partially offset
by an increase in the investment portfolio.
As a result of the factors described above, on a period-to-period
basis, the Company's income before provision for income taxes and
cumulative effect of a change in accounting principle declined 22%
for the first nine months and increased 10% for the third quarter
of 1994. These results include continuing operating losses within
the retail operations and the Russ Divisions. The provisions for
income taxes reflect the changes in pre-tax income and tax rates.
Net income decreased 23% for the first nine months and increased
12% for the third quarter of 1994.
The Company adopted the Financial Accounting Standards Board
Statement No. 109 "Accounting for Income Taxes" and changed its
method of accounting for income taxes as of the beginning of fiscal
1993. The cumulative effect on prior years of this accounting
change is reflected in the consolidated statement of income for the
nine months ended September 25, 1993 as a one-time increase in net
income of $1.6 million, or $.02 per share. Management believes
<PAGE>
(13)
RESULTS OF OPERATIONS (continued)
that the $18 million deferred tax benefit will be fully realized
through future taxable income and reversals of existing deferred
tax liabilities of $1 million.
The earnings per common share computations reflect a lower number
of outstanding shares on a period-to-period basis, as a result of
the Company's stock repurchase program.
In 1994, the Company has begun a far-reaching process of rebuilding
and restructuring. The Company is in the midst of conducting a
formal strategic review of its various operations. As a result,
certain operations are being reevaluated and management expects
that a number of action plans will be developed and implemented
over the near term. The tone of business remains mixed, and the
Company is continuing to plan forward merchandise commitments on a
conservative basis, particularly for the Misses and Petite
sportswear group. While the Company believes that apparel gross
margins for the fourth quarter of 1994 should show improvement over
the prior period level, weakness in demand for the Company's
offerings within the continuing difficult retail environment could
limit the extent of such improvement.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities was $31.0 million through
October 1, 1994, compared to $45.7 million used in operating
activities through September 25, 1993, primarily because of a large
reduction in the level of inventory from year end ($71.0 million)
compared to an increase in the inventory level for the prior year
period ($20.6 million), offset in part by lower net income in 1994
($25.8 million). Net cash used in investing activities was $49.7
million in 1994 as compared to net cash provided by investing
activities of $73.3 million in 1993, due primarily to purchases of
property and equipment of $57 million in 1994 and a $134.9 million
decrease in the Company's portfolio of marketable securities in
1993. Net cash used in financing activities was $40.3 million in
1994 compared to $85.3 million in 1993, reflecting a $47.6 million
reduction in the amount expended in the Company's stock repurchase
program. As of November 10, 1994, the Company had expended or
committed to expend approximately $378 million of the $400 million
authorized under that program, covering an aggregate of 13,025,000
shares.
Inventories at October 1, 1994 were $365.6 million, down from
$436.6 million and $406.5 million, at year end 1993 and September
25, 1993, respectively. On a period-to-period basis, the
inventory levels reflected decreases within the wholesale apparel
operations and Russ Divisions as well as the Shoe and Accessories
Divisions, offset in part by incremental inventories resulting from
the expansion of the retail and outlet operations. The existence
of excess inventory, which takes additional time to liquidate, in
the first half of 1994 has had a negative impact on the Company's
inventory turnover rate and gross margin during the period. <PAGE>
(14)
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY (continued)
The Company's anticipated capital expenditures for 1994 currently
approximate $70 million, of which $57 million had been expended at
October 1, 1994. These expenditures consist primarily of certain
building and equipment expenditures, including expansions of and
improvements to the Company's North Bergen, New Jersey office
facility, as well as a distribution facility in Montgomery,
Alabama, leasehold improvements of new stores and leased
departments for the Company's retail operations, and the upgrading
of data processing systems. The remaining expenditures will be
financed through available capital and future earnings. Increased
working capital needs will be met by current funds. Bank lines of
credit, which are available to finance import transactions and
direct borrowings, were decreased by the Company from $295 million
to $280 million during the third quarter to reduce excess lines.
The Company expects to be able to adjust these lines as required.
<PAGE>
(15)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of its officers and directors are parties
to several pending legal proceedings and claims, including an
action styled Ressler et al. vs. Liz Claiborne, Inc., et al.
pending in the United States District Court for the Eastern
District of New York. The plaintiffs seek compensatory damages on
behalf of a class of purchasers of the Company's Common Stock
during the period commencing September 1992 through and including
July 16, 1993, and allege that the defendants violated the federal
securities laws by, among other things, making misrepresentations
or omissions of material facts that artificially inflated the
market price of the Common Stock during the class period. An
earlier-filed lawsuit before the same court as Ressler, styled
Fishbaum vs. Chazen, et. al., made allegations similar to the
Ressler complaint and sought damages on behalf of a class of
purchasers of the Company's Common Stock for the period commencing
March 30, 1993, through and including July 16, 1993. An amended
complaint was filed in the Ressler action in May 1994 to add
Fishbaum as a plantiff. In June 1994, the Court granted the
Company's motion to dismiss the Fishbaum complaint, with leave to
amend, on the grounds that the complaint did not adequately set
forth the requisite element of scienter. In July 1994, the Company
moved to dismiss the Ressler complaint.
In April 1994, two stockholder derivative actions, which contain
substantially similar allegations, styled Goldberg Family Trust vs.
Chazen, et al. and Liz Claiborne, Inc., nominal defendant and Laz
Schneider vs. Chazen, et al. and Liz Claiborne, Inc., nominal
defendant, were brought in the Court of Chancery of the State of
Delaware against the Company's directors and its former Vice
Chairman. The complaints contain allegations of breach by the
directors of their fiduciary obligations to the Company and its
shareholders and corporate mismanagement, waste of corporate assets
in connection with the Company's stock repurchase program and the
defense of pending legal proceedings, and unjust enrichment in
connection with the sale of shares of the Company's Common Stock
between September 1992 and July 1993 by certain of its present and
former officers and directors. In July 1994, the Laz Schneider
action was consolidated into the Goldberg action. In August 1994,
the defendants moved to dismiss the consolidated complaint.
The Company believes that the litigations described in this
Item are without merit and intends to vigorously defend these
actions. Although the outcome of any such litigation or claim
cannot be determined with certainty, management is of the opinion
that the final outcome of these litigations should not have a
material adverse effect on the Company's results of operations or
financial position.
<PAGE>
(16)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) Amendment No. 3 to the Liz Claiborne Profit sharing
Plan
(b) The Company did not file any reports on Form 8-K in the
quarter
<PAGE>
<PAGE>
(17)
SIGNATURE
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.
LIZ CLAIBORNE, INC.
DATE: November 14, 1994 BY /s/Samuel M. Miller
SAMUEL M. MILLER
Senior Vice President - Finance
Chief Financial and Accounting
Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
10(a) Amendment No.3 to the
Liz Claiborne Profit
Sharing Plan
Exhibit 10(a)
AMENDMENT NO. 3
TO THE
LIZ CLAIBORNE PROFIT-SHARING RETIREMENT PLAN
(As Amended and Restated Effective January 1, 1987)
The Liz Claiborne Profit-Sharing Retirement Plan (as amended and
restated effective January 1, 1987), is hereby further amended
pursuant to Section 12.1 in the following respects:
1.Section 1.8 is amended, effective January 1, 1994, by adding,
"(one hundred fifty thousand dollars ($150,000) on or after January
1, 1994)" after "($200,000)" in the second sentence thereof.
2.Section 7.4 is amended, effective July 1, 1994, by restating the
first sentence thereof in its entirety to read as follows:
7.4Small Benefits. Notwithstanding the preceding provisions of
this Article VII, in the event that a Member's employment shall
terminate for any reason other than death, and if the vested
balance of his Account as of the Valuation Date coincident with or
next following the date on which his employment terminates does not
exceed (and did not exceed as of the date of any prior distribution
to him under the Plan) $3,500 (including, if applicable, a value
equal to zero), then such vested balance shall be distributed to
him in cash (if the balance is greater than zero) if his employment
terminated prior to July 1, 1994, as soon as practicable after such
Valuation Date, unless such Member elects to receive such
distribution as of any later Valuation Date within the same Plan
Year as the year in which his employment terminates, and if his
employment terminates on or after July 1, 1994, as soon as
practicable after the end of the Plan Year in which his employment
terminates, unless such Member elects to receive such distribution
as of any earlier Valuation Date coincident with or following the
date his employment terminates.
3.Section 12.1 is clarified, effective January 1, 1987, by adding,
"by resolution of its board of directors" immediately after "in
whole or in part" thereof.
4.Section 12.2 is clarified, effective January 1, 1987, by adding,
"by resolution of its board of directors" immediately after "in
whole or in part" in the first sentence thereof.
5.Section 12.4 is clarified, effective January 1, 1987, by adding,
", by written action," between "may" and "amend" in the second
sentence thereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer, the 13th day of October,
1994.
LIZ CLAIBORNE, INC.
By: /s/ Jerome A. Chazen
ATTEST:
/s/ Roberta S. Karp
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-01-1994
<CASH> 45,010
<SECURITIES> 190,899
<RECEIVABLES> 299,105
<ALLOWANCES> 0
<INVENTORY> 365,576
<CURRENT-ASSETS> 986,288
<PP&E> 398,836
<DEPRECIATION> 166,103
<TOTAL-ASSETS> 1,250,332
<CURRENT-LIABILITIES> 227,599
<BONDS> 0
<COMMON> 88,219
0
0
<OTHER-SE> 919,021
<TOTAL-LIABILITY-AND-EQUITY> 1,250,332
<SALES> 1,648,199
<TOTAL-REVENUES> 1,648,199
<CGS> 1,065,261
<TOTAL-COSTS> 1,065,261
<OTHER-EXPENSES> 454,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 251
<INCOME-PRETAX> 136,919
<INCOME-TAX> 50,700
<INCOME-CONTINUING> 86,219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,219
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
