<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION Exhibit Index
Washington, D.C. 20549 is on Page __
FORM 10-K/A1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994 OR
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 of (I.R.S. Employer
incorporation or organization) Identification Number)
1441 Broadway, New York, New York 10018
--------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-354-4900
Securities registered pursuant to Section 12(b) of the Act:
Title of class Name of each exchange on which registered
-------------- -----------------------------------------
Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Based upon the closing sale price on the New York Stock Exchange
composite tape on March 1, 1995, the aggregate market value of the registrant's
Common Stock, par value $1 per share, held by non-affiliates of the registrant
on such date was approximately $1,194,724,797.
Number of shares of the registrant's Common Stock, par value $1 per
share, outstanding as of March 1, 1995: 75,640,645 shares.
------------------------------------
Documents Incorporated by Reference:
Registrant's Proxy Statement relating to its Annual Meeting of
Stockholders to be held on May 11, 1995 - Part III.
<PAGE> 2
This Amendment No. 1 to the Annual Report on Form 10-K of Liz Claiborne, Inc.
(the "Company") for the fiscal year ended December 31, 1994 filed with the
S.E.C. by EDGAR on March 31, 1995 is being filed to correct the inadvertent
omission of the name of the Company's independent public accountants, Arthur
Andersen LLP, from the Report of Independent Public Accountants on page F-2 and
the Consent of Independent Public Accountants in Exhibit 23, to clarify the
filing of Exhibit 10(t) with the 1994 Annual report and to renumber the
undertakings filed as Exhibit 28 in the original filing as Exhibit 29.
- 2 -
<PAGE> 3
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
<TABLE>
<CAPTION>
PAGE REFERENCE
--------------
1994 FORM 10-K
--------------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets of December 31, 1994
and December 25, 1993 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 31, 1994 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 31, 1994 F-5
Consolidated Statements of Cash Flows for the
Three Fiscal Years Ended December 31, 1994 F-6
Notes to Consolidated Financial Statements F-7 to F-17
UNAUDITED QUARTERLY RESULTS F-18
</TABLE>
NOTE: Schedules other than those referred to above and parent
company condensed financial statements have been omitted as
inapplicable or not required under the instructions contained
in Regulation S-X or the information is included elsewhere in
the financial statements or the notes thereto.
- 3 -
<PAGE> 4
3. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C> <C>
3(a) - Restated Certificate of Incorporation of Registrant
(incorporated herein by reference from Exhibit 3(a) to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 26, 1993).
3(b) - By-laws of Registrant, as amended (incorporated herein by
reference from Exhibit 3(b) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 26, 1992 [the
"1992 Annual Report"]).
4(a) - Specimen certificate for Registrant's Common Stock, par value
$1.00 per share (incorporated herein by reference from Exhibit
4(a) to the 1992 Annual Report).
4(b) - Rights Agreement, dated December 7, 1988, as amended, between
Registrant and First Chicago Trust Company of New York, as
Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d) to
Registrant's Report on Form 8-A dated January 29, 1991).
4(b)(i) - Amendment to Rights Agreement, dated March 1990, between
Registrant and First Chicago Trust Company of New York, as
Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d)(i) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 30, 1989 [the "1989 Annual Report"]).
4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992,
between Registrant and First Chicago Trust Company of New York,
as Rights Agent (incorporated herein by reference from Exhibit
4(b)(ii) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1991 [the "1991 Annual Report"]).
10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder,
which are incorporated herein by this reference.
10(b)+ - Liz Claiborne, Inc. 1981 Stock Option Plan (incorporated herein
by reference from Exhibit 10(p) of Registrant's Registration
Statement on Form S-1, Registration No. 2-71806, in the form
it was declared effective).
10(b)(i)+ - Amendment to the 1981 Stock Option Plan (incorporated herein by
reference from Exhibit 10(b)(i) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1988
[the "1988 Annual Report"]).
</TABLE>
- ----------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 4 -
<PAGE> 5
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C> <C>
10(c)+ - Amended form of Option Agreement under Liz Claiborne, Inc. 1981
Stock Option Plan (incorporated herein by reference from
Exhibit 10(q) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 26, 1981).
10(d)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated
herein by reference from Exhibit 10(hh) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1983
[the "1983 Annual Report"]).
10(d)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein
by reference from Exhibit 10(d)(i) to the 1988 Annual Report).
10(e)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock
Option Plan (the "1984 Option Plan") (incorporated herein by
reference from Exhibit 10(nn) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29, 1984).
10(e)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan
(incorporated herein by reference from Exhibit 10(e)(i) to the
1992 Annual Report).
10(f)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended
and restated (incorporated herein by reference from Exhibit
10(f) to the 1989 Annual Report).
10(f)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz
Claiborne, Inc. and IDS Trust Company (incorporated herein by
reference from Exhibit 10(b) to Registrant's Quarterly Report
on Form 10-Q for the period ended July 2, 1994).
10(g)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein
by reference from Exhibit 10(g) to the 1992 Annual Report).
10(g)(i)+ - Amendments Nos. 3 and 4 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 26, 1993
[the "1993 Annual Report"]).
10(g)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report
on Form 10-Q for the period ended July 2, 1994).
10(h)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement
Plan (the "Profit-Sharing Plan") (incorporated herein by
reference from Exhibit 10(h) to the 1992 Annual Report).
10(i) - Trust Agreement related to the Profit-Sharing Plan
(incorporated herein by reference from Exhibit 10(jj) to the
1983 Annual Report).
</TABLE>
- ---------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 5 -
<PAGE> 6
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C> <C>
10(i)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(i)(i) to the 1993 Annual
Report).
10(i)(ii) - Amendment No. 3 to the Profit-Sharing Plan (incorporated herein
by reference from Exhibit 10(a) to Registrant's Quarterly
Report on Form 10-Q for the period ended October 1, 1994).
10(j) - Collective Bargaining Agreement, dated June 1, 1991, between
New York Skirt and Sportswear Association, Inc. (of which
Registrant is a member) and International Ladies' Garment
Workers' Union, Amalgamated Ladies' Garment Cutters' Union,
Local 10, I.L.G.W.U. and Blouse, Skirt and Sportswear Workers'
Union, Local 23-25, I.L.G.W.U (incorporated herein by reference
from Exhibit 10(j) to the 1992 Annual Report).
10(k) - Collective Bargaining Agreement, dated September 1, 1991,
between the Joint Board of Shirt, Leisurewear, Robe, Glove and
Rainwear Workers Union of Amalgamated Clothing Workers of
America and Liz Claiborne Accessories (incorporated herein by
reference from Exhibit 10(k) to the 1991 Annual Report).
10(l) - Executive Liability and Indemnification Policy No. 81035379F,
with Chubb Group of Insurance Companies (incorporated herein
by reference from Exhibit 10(l) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994 [the
"1994 Annual Report"]).
10(l)(i) - Description of Excess Coverage Directors and Officers
Liability Insurance Policy No. ZKA9400406, with Lloyds of
London (incorporated herein by reference from Exhibit 10(l)(i)
to the 1994 Annual Report).
10(m)+ - Description of 1994 Salaried Employee Incentive Bonus Plan
(incorporated herein by reference from Exhibit 10(m) to the
1994 Annual Report).
10(n) - Lease, dated as of January 1, 1990 for premises located at 1441
Broadway, New York, New York between Liz Claiborne, Inc. and
Lechar Realty Corp. (incorporated herein by reference from
Exhibit 10(n) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 1990).
10(o)+ - Liz Claiborne, Inc. Outside Directors' 1991 Stock Ownership
Plan (the "Directors Plan") (incorporated herein by reference
from Exhibit 10(o) to the 1991 Annual Report).
10(o)(i)+ - Amendment No. 1 to the Directors Plan (incorporated herein by
reference from Exhibit 10(o)(i) to the 1993 Annual Report).
10(p)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan")
(incorporated herein by reference from Exhibit 10(p) to the
1991 Annual Report).
</TABLE>
- ---------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 6 -
<PAGE> 7
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C> <C>
10(p)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by
reference from Exhibit 10(p)(i) to the 1993 Annual Report).
10(q)+ - Form of Option Agreement under the 1992 Plan for premium-priced
options (incorporated herein by reference from Exhibit 10(q)
to the 1992 Annual Report).
10(r)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(s)+ - Description of unfunded deferred compensation arrangement for
Jerome A. Chazen (incorporated herein by reference from
Exhibit 10(s) to the 1992 Annual Report).
10(t)+* - Description of Supplemental Life Insurance Plans.
10(u)+ - Description of unfunded death/disability benefits for certain
executives (incorporated herein by reference from Exhibit 10(u)
to the 1992 Annual Report).
10(v)+ - Form of the Liz Claiborne Section 162(m) Cash Bonus Plan
(incorporated herein by reference from Exhibit 10(v) to the
1994 Annual Report).
10(w)+ - Liz Claiborne Supplemental Executive Retirement Plan
(incorporated herein by reference from Exhibit 10(w) to the 1994
Annual Report).
10(x)+ - Employment Agreement dated as of May 9, 1994, between Liz
Claiborne, Inc. and Paul R. Charron (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report
on Form 10-Q for the period ended April 2, 1994).
10(y)+ - Agreement dated as of January 2, 1995, between Liz Claiborne,
Inc. and Harvey Falk (incorporated herein by reference from
Exhibit 10(y) to the 1994 Annual Report).
21 - List of Registrant's Subsidiaries (incorporated by reference
from Exhibit 21 to the 1994 Annual Report).
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
29* - Undertakings.
</TABLE>
(b) Reports on Form 8-K.
Not applicable.
- ---------------------------------------------------------------------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 7 -
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Amendment to the Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
on April 3, 1995.
LIZ CLAIBORNE, INC.
By /s/ Roberta S. Karp
---------------------------------
Vice President and
General Counsel
- 8 -
<PAGE> 9
INDEX
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
December 31, 1994 and December 25, 1993 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 31, 1994 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 31, 1994 F-5
Consolidated Statements of Cash Flows
for the Three Fiscal Years Ended December 31, 1994 F-6
Notes to Consolidated Financial Statements F-7 to F-17
UNAUDITED QUARTERLY RESULTS F-18
</TABLE>
NOTE: Schedules other than those referred to above and parent
company condensed financial statements have been omitted as
inapplicable or not required under the instructions contained
in Regulation S-X or the information is included elsewhere in
the financial statements or the notes thereto.
F-1
<PAGE> 10
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Liz Claiborne, Inc.:
We have audited the accompanying consolidated balance sheets of Liz Claiborne,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1994 and
December 25, 1993, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended December 31, 1994. These financial statements referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Liz Claiborne, Inc. and
subsidiaries as of December 31, 1994 and December 25, 1993, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
As explained in Note 1 to the consolidated financial statements, effective
December 27, 1992, the Company changed its method of accounting for income
taxes.
ARTHUR ANDERSEN LLP
New York, New York
February 20, 1995
F-2
<PAGE> 11
CONSOLIDATED BALANCE SHEETS
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
ALL AMOUNTS IN THOUSANDS EXCEPT SHARE DATA DECEMBER 31, 1994 DECEMBER 25, 1993
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 71,419 $ 104,720
Marketable securities 258,932 204,571
Accounts receivable - trade 159,766 174,435
Inventories 423,003 436,593
Deferred income tax benefits 32,547 15,065
Other current assets 76,864 69,055
---------- ----------
Total current assets 1,022,531 1,004,439
---------- ----------
PROPERTY AND EQUIPMENT - NET 236,560 202,068
OTHER ASSETS 30,571 29,831
---------- ----------
$1,289,662 $1,236,338
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 138,581 $ 141,126
Accrued expenses 156,924 97,765
Income taxes payable 7,894 15,547
---------- ----------
Total current liabilities 303,399 254,438
---------- ----------
LONG-TERM DEBT 1,227 1,334
DEFERRED INCOME TAXES 2,052 2,275
COMMITMENTS AND CONTINGENCIES
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 56,714 56,699
Retained earnings 1,164,850 1,123,413
Cumulative translation adjustment (1,637) (1,279)
---------- ----------
1,308,146 1,267,052
Common stock in treasury, at cost - 11,214,688 shares
in 1994 and 9,371,217 shares in 1993 (325,162) (288,761)
---------- ----------
Total stockholders' equity 982,984 978,291
---------- ----------
$1,289,662 $1,236,338
========== ==========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 12
CONSOLIDATED STATEMENTS OF INCOME
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER COMMON SHARE DATA DECEMBER 31, DECEMBER 25, DECEMBER 26,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $2,162,901 $2,204,297 $2,194,330
Cost of goods sold 1,407,694 1,453,381 1,364,214
---------- ---------- ----------
GROSS PROFIT 755,207 750,916 830,116
Selling, general and administrative expenses 604,421 568,286 507,541
Restructuring charge 30,000 -- --
---------- ---------- ----------
OPERATING INCOME 120,786 182,630 322,575
Investment and other income - net 10,663 16,151 19,349
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES AND CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 131,449 198,781 341,924
Provision for income taxes 48,600 73,500 123,100
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 82,849 125,281 218,824
Cumulative effect of a change in the method
of accounting for income taxes -- 1,643 --
---------- ---------- ----------
NET INCOME $ 82,849 $ 126,924 $ 218,824
========== ========== ==========
EARNINGS PER COMMON SHARE:
INCOME BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE $ 1.06 $ 1.54 $ 2.61
Cumulative effect of a change in the method
of accounting for income taxes -- .02 --
---------- ---------- ----------
NET INCOME PER COMMON SHARE $ 1.06 $ 1.56 $ 2.61
========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ .45 $ .44 $ .39
========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 13
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Common Stock
----------------------- Capital in Cumulative
Number of Excess of Retained Translation
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment
--------- ------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1991 88,218,617 $88,219 $50,493 $ 854,003 $ --
Net income -- -- -- 218,824 --
Exercise of stock options and
related tax benefits -- -- 5,035 (6,033) --
Cash dividends paid -- -- -- (32,514) --
Translation adjustment -- -- -- -- (1,410)
Purchase of 3,133,837 shares
of common stock -- -- -- -- --
---------- ------- ------- ---------- -------
BALANCE, DECEMBER 26, 1992 88,218,617 88,219 55,528 1,034,280 (1,410)
Net income -- -- -- 126,924 --
Exercise of stock options and
related tax benefits -- -- 1,171 (2,134) --
Cash dividends paid -- -- -- (35,657) --
Translation adjustment -- -- -- -- 131
Purchase of 4,179,800 shares
of common stock -- -- -- -- --
---------- ------- ------- ---------- -------
BALANCE, DECEMBER 25, 1993 88,218,617 88,219 56,699 1,123,413 (1,279)
Net income -- -- -- 82,849 --
Exercise of stock options and
related tax benefits -- -- 15 (134) --
Cash dividends paid -- -- -- (35,304) --
Effect of a change in accounting
for available-for-sale securities,
net of tax -- -- -- 2,848 --
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- (6,787) --
Translation adjustment -- -- -- -- (358)
Purchase of 1,960,300 shares of
common stock -- -- -- -- --
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- (2,035) --
---------- ------- ------- ---------- -------
BALANCE, DECEMBER 31, 1994 88,218,617 $88,219 $56,714 $1,164,850 $(1,637)
========== ======= ======= ========== =======
<CAPTION>
Common
Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Treasury Total
-------- -----
<S> <C> <C>
BALANCE, DECEMBER 28, 1991 $ (83,116) $ 909,599
Net income -- 218,824
Exercise of stock options and
related tax benefits 19,312 18,314
Cash dividends paid -- (32,514)
Translation adjustment -- (1,410)
Purchase of 3,133,837 shares
of common stock (115,038) (115,038)
--------- ---------
BALANCE, DECEMBER 26, 1992 (178,842) 997,775
Net income -- 126,924
Exercise of stock options and
related tax benefits 6,687 5,724
Cash dividends paid -- (35,657)
Translation adjustment -- 131
Purchase of 4,179,800 shares
of common stock (116,606) (116,606)
--------- ---------
BALANCE, DECEMBER 25, 1993 (288,761) 978,291
Net income -- 82,849
Exercise of stock options and
related tax benefits 431 312
Cash dividends paid -- (35,304)
Effect of a change in accounting
for available-for-sale securities,
net of tax -- 2,848
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- (6,787)
Translation adjustment -- (358)
Purchase of 1,960,300 shares of
common stock (39,591) (39,591)
Issuance of common stock under
restricted stock and employment
agreements, net 2,759 724
--------- ---------
BALANCE, DECEMBER 31, 1994 $(325,162) $ 982,984
========= =========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 14
CONSOLIDATED STATEMENTS OF CASH FLOWS
Liz Claiborne, Inc. and Subsidiaries
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
DECEMBER 31, DECEMBER 25, DECEMBER 26,
ALL DOLLAR AMOUNTS IN THOUSANDS 1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 82,849 $ 126,924 $ 218,824
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 35,039 32,278 28,500
Other-net 513 (5,231) 1,685
Change in current assets and liabilities:
Decrease (increase) in accounts receivable - trade 14,669 25,748 (54,273)
Decrease (increase) in inventories 13,590 (50,714) (63,887)
(Increase) in deferred income tax benefits (15,169) (1,403) (3,592)
(Increase) decrease in other current assets (7,809) (13,671) 2,391
(Decrease) increase in accounts payable (2,545) 2,388 (1,413)
Increase in accrued expenses 59,159 10,435 5,519
(Decrease) in income taxes payable (7,653) (6,562) (1,459)
--------- --------- ---------
Net cash provided by operating activities 172,643 120,192 132,295
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (181,739) (375,748) (468,569)
Disposals of investment instruments 121,713 466,069 456,012
Purchases of property and equipment (70,594) (91,407) (34,749)
Purchase of trademarks (3,193) (1,817) (7,588)
Other - net 2,935 4,336 (138)
--------- --------- ---------
Net cash (used in)/provided by investing activities (130,878) 1,433 (55,032)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (107) (100) (181)
Proceeds from exercise of common stock options 297 4,553 13,509
Dividends paid (35,304) (35,657) (32,514)
Purchase of common stock (39,591) (116,606) (115,038)
--------- --------- ---------
Net cash used in financing activities (74,705) (147,810) (134,224)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (361) 184 (1,513)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (33,301) (26,001) (58,474)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 104,720 130,721 189,195
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 71,419 $ 104,720 $ 130,721
========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Liz Claiborne,
Inc. and its wholly-owned subsidiaries (the "Company"). All intercompany
balances and transactions have been eliminated in consolidation. The Company
is primarily engaged in the design and marketing of a broad range of apparel,
accessories, shoes and fragrances.
CASH EQUIVALENTS
All highly liquid investments with a remaining maturity of three months or less
at the date of acquisition are classified as cash equivalents.
MARKETABLE SECURITIES
At December 31, 1994, investments are stated at market in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" which was adopted by the
Company at the beginning of the 1994 fiscal year. Prior year's financial
statements have not been restated to reflect the change in accounting method.
At December 25, 1993, investments are stated at cost, which approximates market
value. Gains and losses on investment transactions are recognized when
realized based on settlement dates. Unrealized gains and losses are included
in retained earnings until realized. Dividends on equity securities are
recorded in income based on payment dates. Interest is recognized when earned.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out for wholesale
operations and retail method for retail and outlet operations) or market.
PROPERTY AND EQUIPMENT - NET
Property and equipment is stated at cost less accumulated depreciation and
amortization. Buildings and building improvements are depreciated using the
straight-line method over their estimated useful lives of 20 to 39 1/2 years.
Machinery and equipment and furniture and fixtures are depreciated using the
straight-line method over their estimated useful lives of five to seven years.
Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful lives of the assets.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of non-U.S. subsidiaries have been translated at
year-end exchange rates. Revenues and expenses have been translated at average
rates of exchange in effect during the year. Resulting translation adjustments
have been recorded as a separate component of stockholders' equity. Gains and
losses on translation of intercompany investments in foreign subsidiaries of a
long-term nature are also included in this component of stockholders' equity.
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts to hedge transactions
denominated in foreign currencies for periods 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.
Transaction gains and losses included in income were not significant in fiscal
1994, 1993 and 1992. As of December 31, 1994, the Company had contracts
maturing through May 1996 to purchase at contracted forward rates 1,977,485,000
Spanish pesetas and to sell 27,500,000 Canadian dollars and 9,700,000 British
sterling. The aggregate U.S. dollar value of all foreign exchange contracts is
approximately $50,000,000 at year end 1994, as compared with approximately
$42,000,000 at year end 1993. Unrealized gains and losses for outstanding
foreign exchange contracts were not material at December 31, 1994 and December
25, 1993.
REVENUE RECOGNITION
Revenue within wholesale operations is recognized at the time merchandise is
shipped from the Company's distribution centers. Retail and outlet store
revenues are recognized at the time of sale.
CHANGE IN ACCOUNTING PRINCIPLES - INCOME TAXES
The Company adopted the provisions of SFAS No. 109 "Accounting for Income
Taxes" as of the beginning of fiscal 1993. The effect of this accounting
change in fiscal 1993 was an increase in net income of $1,643,000, or $.02 per
common share.
EARNINGS PER COMMON SHARE
Earnings per common share have been computed using the weighted average number
of shares outstanding during each period. The inclusion of shares subject to
unexercised stock options would not have a material dilutive effect.
FISCAL YEAR
In 1994, the Company changed its fiscal year to the Saturday closest to
December 31 from the last Saturday in December. This change had no effect on
the 1994 year end date. The 1994 fiscal year reflects a 53-week period, while
the 1993 and 1992 fiscal years each reflect a 52-week period.
PRIOR YEARS' RECLASSIFICATION
Certain items previously reported in specific captions in the accompanying
financial statements have been reclassified to conform with the current year's
classifications.
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 2
RESTRUCTURING CHARGE
In December 1994, the Company recorded a $30.0 million restructuring charge.
The amount includes $16.8 million related to the phase out of its First Issue
business, $10.2 million for the streamlining of operating and administrative
functions and $3.0 million for the restructuring of its Moderate Division.
Principal items included in the charge are estimated contract termination
costs, severance and related benefits for staff reductions, losses on contracts
and the write-off of certain assets. This charge reduced net income by $18.9
million, or $.24 per common share. The remaining balance of the restructuring
liability as of December 31, 1994 was $28,163,000. The majority of these
liabilities should be paid or settled during the 1995 fiscal year.
NOTE 3
MARKETABLE SECURITIES
The Company adopted the provisions of SFAS No. 115 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 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.
The following are summaries of available-for-sale marketable securities and
maturities:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------------------------------------------------------
Gross Unrealized
--------------------- Estimated DECEMBER 25, 1993
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value Cost
---- ----- ------ ---------- ----
<S> <C> <C> <C> <C> <C>
Tax exempt notes and bonds................ $309,126 $83 $(3,060) $306,149 $278,033
U.S. & foreign government securities...... 11,323 -- (905) 10,418 10,619
Collateralized mortgage obligations....... 8,569 3 (1,785) 6,787 8,201
-------- --- ------- -------- --------
329,018 86 (5,750) 323,354 296,853
Equity securities......................... 2,528 -- (588) 1,940 5,000
-------- --- ------- -------- --------
$331,546 $86 $(6,338) $325,294 $301,853
======== === ======= ======== ========
<CAPTION>
DECEMBER 31, 1994
----------------------------
Estimated
(DOLLARS IN THOUSANDS) Cost Fair Value
- ---------------------- ---- ----------
<S> <C> <C>
Due in one year or less................... $126,411 $124,898
Due after one year through three years.... 191,197 188,896
Due after three years..................... 11,410 9,560
-------- --------
329,018 323,354
Equity securities ........................ 2,528 1,940
-------- --------
$331,546 $325,294
======== ========
</TABLE>
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
At December 31, 1994 the above investments include $64,422,000 of tax exempt
notes and bonds which are classified as cash and cash equivalents and equity
securities which are included in other long-term assets in the consolidated
balance sheets. At December 25, 1993 the above investments include $92,282,000
of tax exempt notes and bonds which are classified as cash and cash
equivalents.
For the year ended December 31, 1994, gross realized gains and (losses) on
sales of available-for-sale securities totaled $674,000 and ($412,000),
respectively. The net of tax adjustment to unrealized gains and losses on
available-for-sale securities for the 1994 year was a charge of $6,787,000 (net
of $3,986,000 in deferred income taxes) which was included in retained
earnings. As of December 31, 1994, the fair value adjustment for
available-for-sale securities was a charge of $3,939,000 (net of $2,313,000 in
deferred income taxes) which reflects the net unrealized loss included in
retained earnings.
NOTE 4
INVENTORIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 25,
Inventories are summarized as follows: 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,724 $ 56,560
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,527 24,006
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,752 356,027
-------- --------
$423,003 $436,593
======== ========
</TABLE>
NOTE 5
PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
DECEMBER 31, DECEMBER 25,
Property and equipment consists of the following: 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $123,746 $ 67,049
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,686 99,644
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,518 39,489
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,104 99,802
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 38,491
-------- --------
409,054 344,475
Less-accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 172,494 142,407
-------- --------
$236,560 $202,068
======== ========
</TABLE>
The Company's land and building located in Mount Pocono, Pennsylvania is
pledged as collateral against long-term debt of $1,227,000.
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 6
INCOME TAXES
<TABLE>
<CAPTION>
The provisions for income taxes are as follows:
FISCAL YEARS ENDED
(DOLLARS IN THOUSANDS)
-----------------------------------------------------
(53 weeks) (52 weeks) (52 weeks)
December 31, December 25, December 26,
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,117 $ 63,273 $105,485
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,962 4,139 4,527
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,950 12,250 19,800
-------- -------- --------
59,029 79,662 129,812
Deferred - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,429) (6,162) (6,712)
-------- -------- --------
$ 48,600 $ 73,500 $123,100
======== ======== ========
</TABLE>
Liz Claiborne, Inc. and its U.S. subsidiaries file a consolidated federal
income tax return. Deferred income tax benefits and deferred income taxes
represent the tax effects of revenues and expenses which are recognized for tax
purposes in different periods from those used for financial statement purposes.
The net deferred tax benefit primarily reflects the capitalization of certain
overhead expenses in inventory for income tax purposes, taxes provided on
unremitted earnings of foreign subsidiaries, the effects of different
depreciation rates used for financial statement and tax purposes and, for the
year ended December 31, 1994, a restructuring charge. The current income tax
provisions have not been reduced by $15,000 in 1994, $1,171,000 in 1993 and
$4,805,000 in 1992, of tax benefits arising from the exercise of nonqualified
stock options. These amounts have been credited to capital in excess of par
value.
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
The effective income tax rate differs from the statutory federal income tax
rate as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
DECEMBER 31, DECEMBER 25, DECEMBER 26,
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax provision at statutory rate . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 34.0%
State and local income taxes, net of federal benefit . . . . . . . . . . . . . . . 4.4 4.0 3.8
Tax-exempt interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.3) (1.5) (1.3)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) (0.5) (0.5)
---- ---- ----
37.0% 37.0% 36.0%
==== ==== ====
</TABLE>
The components of net deferred taxes arising from temporary differences as of
December 31, 1994 and December 25, 1993 were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------
DECEMBER 31, 1994 DECEMBER 25, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSET TAX LIABILITY TAX ASSET TAX LIABILITY
<S> <C> <C> <C> <C>
Inventory valuation. . . . . . . . . . . . . . . . . . . . . . . . $ 14,515 $ -- $ 13,140 $ --
Unremitted earnings from foreign subsidiaries . . . . . . . . . . . -- 12,906 -- 12,617
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . 9,857 -- -- --
Unrealized investment losses . . . . . . . . . . . . . . . . . . . 2,313 -- -- --
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (6,749) -- (5,701)
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,862 (4,105) 1,925 (4,641)
-------- -------- -------- --------
$ 32,547 $ 2,052 $ 15,065 $ 2,275
======== ======== ======== ========
</TABLE>
Management believes that the deferred tax benefits will be fully realized
through future taxable income and reversals of deferred tax liabilities.
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 7
COMMITMENTS, CONTINGENCIES
AND OTHER MATTERS
The Company leases office, showroom, warehouse/distribution and retail space,
transportation equipment, computers and other equipment under various
noncancellable operating lease agreements which expire through January 2009.
Rental expense for 1994, 1993 and 1992 was approximately $67,208,000,
$56,664,000 and $46,591,000, respectively.
At December 31, 1994, the minimum aggregate rental commitments were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
FISCAL YEAR OPERATING LEASES FISCAL YEAR OPERATING LEASES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,689 1998. . . . . . . . . . . . . . . . . . . . . $ 40,365
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,167 1999. . . . . . . . . . . . . . . . . . . . . 39,325
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,461 Thereafter. . . . . . . . . . . . . . . . . . 137,550
</TABLE>
Certain rental commitments have renewal options extending through the year
2027. Some of these renewals are subject to adjustments in future periods.
Many of the leases call for additional charges, some of which are based upon
various escalations and, in the case of outlet and retail leases, the gross
sales of the individual stores above base levels.
At December 31, 1994, the Company had entered into commitments for the purchase
of raw materials and for the production of finished goods totaling
approximately $587,328,000.
In the normal course of business, the Company extends credit, on open account,
to its retail store customers, after a credit analysis based on a number of
financial and other criteria. In recent years, a number of corporate groups
which include certain of the Company's largest department store customers have
been involved in highly leveraged financial transactions and certain of these
customers have filed for protection under Chapter 11 of the Federal Bankruptcy
Code. In 1994, two corporate groups of department store customers accounted
for 17% and 11%, respectively, of net sales. In 1993, two corporate groups of
department store customers accounted for 18% and 11%, respectively, of net
sales. In 1992, three corporate groups of department store customers accounted
for 18%, 11% and 10%, respectively, of net sales. Subsequent to December 31,
1994, two corporate groups of department store customers merged to become a
single corporate group which would have accounted for 16% of net sales in 1994.
The Company does not believe that this concentration of sales and credit risks
represents a material risk of loss with respect to its financial position as of
December 31, 1994.
The Company is a party to several pending legal proceedings and claims.
Although the outcome of such actions cannot be determined with certainty,
management is of the opinion that the final outcome should not have a material
adverse effect on the Company's results of operations or financial position.
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 8
LINES OF CREDIT
As of December 31, 1994, the Company had bank lines of credit aggregating
$282,000,000 which were available to cover letters of credit issued by the
banks and direct borrowings. The Company has not used these facilities for
direct borrowings.
At December 31, 1994 and December 25, 1993, the Company had outstanding letters
of credit of $204,113,000 and $184,294,000, respectively.
NOTE 9
STOCK PLANS
In April 1981, February 1984 and March 1992, the Company adopted plans under
which nonqualified options to acquire shares of common stock may be granted to
officers, other key employees and directors selected by the plans'
administrative committee. Payment by option holders upon exercise of an option
may be made in cash or, with the consent of the committee, by delivering
previously acquired shares of Company common stock. Stock appreciation rights
may be granted in connection with all or any part of any option granted under
the plans, and may also be granted without a grant of a stock option. The
grantee of a stock appreciation right has the right, with the consent of the
committee, to receive either in cash or in shares of common stock, an amount
equal to the appreciation in the fair market value of the covered shares from
the date of grant to the date of exercise. Options and rights are exercisable
over a period of time designated by the committee (but not prior to one year
from the date of grant) and are subject to such other terms and conditions as
the committee determines. Vesting schedules will be accelerated upon merger of
the Company or the happening of certain other events. Options and rights may
not be transferred during the lifetime of a holder.
Awards under the 1992 plan may also be made in the form of incentive stock
options, dividend equivalent rights, restricted stock, unrestricted stock and
performance shares. To date, no stock appreciation rights, incentive stock
options, dividend equivalent rights, unrestricted stock or performance shares
have been granted under the plans. Exercise prices for awards under the plans
are determined by the committee; to date, all stock options have been granted
at an exercise price not less than the fair market value of the underlying
shares on the date of grant.
The 1992 plan provides initially for the issuance of up to 2,500,000 shares of
common stock with respect to options, stock appreciation rights and other
awards granted under the plan, and provides that the Board of Directors may
increase such number by an amount equal to 1% of the common stock outstanding
as of January 1, 1994 and each January 1st thereafter. At December 31, 1994,
there were available for future grant 1,955,609 shares under the 1992 plan.
The 1992 plan expires in 2002. The 1984 and 1981 plans have expired. All
awards made under the 1984 and 1981 plan prior to their respective termination
dates remain in effect in accordance with the terms of their plans.
Since January 1990, the Company has delivered treasury shares upon the exercise
of stock options. The difference between the cost of the treasury shares, on a
first-in, first-out basis, and the exercise price of the options has been
reflected in retained earnings.
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
Changes in common shares under option for the three fiscal years in the period
ended December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------- --------------------------- --------------------------
PRICE RANGE PRICE RANGE PRICE RANGE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year....... 3,728,249 $19.00-$58.50 3,698,417 $15.13-$58.50 2,470,469 $15.00-$49.50
Granted................. 123,000 15.75- 25.63 1,125,575 19.00- 42.38 2,088,425 33.88- 58.50
Exercised............... (13,496) 21.00- 22.00 (244,196) 15.13- 40.00 (682,530) 15.00- 40.00
Cancelled............... (1,387,332) 20.13- 58.50 (851,547) 15.50- 58.50 (177,947) 15.50- 49.00
---------- ------------- --------- ------------- --------- -------------
End of year............. 2,450,421 $15.75-$58.50 3,728,249 $19.00-$58.50 3,698,417 $15.13-$58.50
========== ============= ========= ============= ========= =============
Exercisable at
end of year........... 1,019,674 $19.00-$49.50 892,529 $22.00-$49.50 679,152 $15.13-$49.50
========== ============= ========= ============= ========= =============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
On January 3, 1995, 1,025,975 nonqualified options to acquire shares of common
stock were granted to officers and other key employees with an exercise price
of $17.13.
In May 1994, the Compensation Committee of the Board of Directors granted
85,000 shares of common stock in connection with the hiring of a key executive.
These shares are subject to restrictions on transfer and subject to risk of
forfeiture until earned by continued employment. The restrictions expire on
the last day of each of the Company's fiscal years, 1994 through 2001, at the
rate of 10,000 shares of common stock per year through the year 2000 and 15,000
shares of common stock in the year 2001. The expiration of the restrictions
may be accelerated if the market value of the common stock attains certain
predetermined levels.
In 1992, options were granted to certain of the Company's senior officers at a
price of $58.50 per share, representing 150% of the market price at the date of
grant. At December 31, 1994, 100,000 of these options were outstanding; they
will become exercisable on October 21, 1998 and expire on October 21, 2000,
subject to certain exceptions.
In November 1991, the Company adopted an outside directors' stock ownership
plan under which non-employee directors automatically receive, as part of their
annual retainer, shares of common stock with a value of $10,000 on each January
1. The shares so issued are nontransferable for a period of three years
following the grant date, subject to certain exceptions. In 1994, 3,087 shares
of common stock were issued under this plan. Not more than one twentieth of
one percent (0.05%) of the shares of common stock outstanding from time to time
may be issued under the plan, which will expire in 2002.
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 10
PROFIT-SHARING RETIREMENT,
SAVINGS AND DEFERRED COMPENSATION PLANS
The Company adopted a noncontributory, defined contribution profit-sharing
retirement plan in January 1983. The plan covers all eligible U.S. employees
who are 21 years of age with one or more years of service and who are not
covered by collective bargaining agreements. The plan pays benefits based on
an employee's vested account balance in accordance with qualification rules set
out in the plan. Vesting begins at 20% after two years of service, and from
the 3rd through 6th years, vesting increases by 20% each year until full
vesting occurs. Each year, profit-sharing contributions, if any, are
determined by the Board of Directors. The Company's 1994, 1993 and 1992 plan
contribution expenses, which are included in selling, general and
administrative expenses, were $6,166,000, $5,646,000 and $5,431,000,
respectively.
The Company adopted a 401(k) savings plan effective January 1985. The plan
covers all eligible U.S. employees who are 21 years of age with one or more
years of service and who are not covered by collective bargaining agreements.
The plan pays benefits based on an employee's vested account balance.
Participants may contribute from 1% to 15% of their salary on a before - tax
basis. Such contributions are fully and immediately vested. Vesting of the
Company's matching contribution is on the same basis as the profit sharing
retirement plan. The Company's 1994, 1993 and 1992 plan contribution expenses,
which are included in selling, general and administrative expenses, were
$2,658,000, $2,352,000 and $1,944,000, respectively.
The Company has established an unfunded deferred compensation arrangement for a
senior executive which will accrue for up to four years at the rate of $375,000
per year commencing on January 1, 1993. The accrued amount, plus interest,
will be payable upon retirement.
The Company has adopted a supplemental retirement plan for executives whose
benefits under the profit-sharing retirement plan and the savings plan are
constrained by the operation of certain Internal Revenue Code limitations. The
supplemental plan provides a benefit equal to the difference between the
contribution that would be made for an executive under the two tax-qualified
plans absent such limitations and the actual contribution under those plans.
Supplemental benefits accrued vest on the same schedule applicable under the
tax-qualified plans. The supplemental plan is not funded. Eligible executives
employed on August 5, 1993 were credited with a retroactive supplemental plan
benefit for the prior years in which the legal limitations had affected their
tax-qualified plan benefits. The Company's plan expense, which are included
in selling, general and administrative expenses, were $362,000 and $773,000 in
1994 and 1993, respectively.
NOTE 11
STOCKHOLDER RIGHTS PLAN
The Company has adopted a Stockholder Rights Plan under which one preferred
stock purchase right is attached to each share of common stock outstanding.
Pursuant to the Rights Agreement covering the Stockholder Rights Plan, the
rights become exercisable ten days, subject to extension, after a party or
group acquires or makes a tender offer for 20% or more of the Company's common
stock. Each right entitles its holder, under certain circumstances, to buy
1/100 share of a newly created Series A Junior Participating Preferred Stock
for $85. If 20% of the Company's common stock is acquired by a party or group,
each right not owned by a 20%-or-more stockholder will entitle the holder to
purchase Company common stock having a market value of twice the exercise price
of the right. In addition, if the Company is involved in a merger or certain
other business combinations in which it is not the surviving corporation, each
right not owned by a 20%-or-more stockholder will entitle the holder to
purchase common stock of the surviving corporation having a market value of
twice the exercise price of the right. The rights, which expire on December
21, 1998 and do not have voting rights, may be redeemed by the Company at $.01
per right prior to their becoming exercisable.
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTE 12
CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
During fiscal 1994, 1993 and 1992, the Company made income tax payments of
$72,415,000, $84,689,000 and $127,230,000, respectively. Non-cash investing
and financing activities which are not included in the cash flow statements for
1994 and 1993 include a direct financing lease receivable with a disposition of
property and equipment of $1,177,000 and $4,348,000, respectively.
NOTE 13
ACCRUED EXPENSES
Accrued expenses at December 31, 1994 and December 25, 1993 consisted of the
following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
December 31, December 25,
1994 1993
------------ ------------
<S> <C> <C>
Payroll and bonuses......................................... $ 27,103 $20,588
Taxes, other than taxes on income........................... 8,190 6,080
Employee benefits........................................... 17,232 17,990
Advertising ................................................ 15,807 15,442
Restructuring liability..................................... 28,163 --
Treasury stock purchased.................................... 11,083 --
Other....................................................... 49,346 37,665
-------- -------
$156,924 $97,765
======== =======
</TABLE>
<PAGE> 26
UNAUDITED QUARTERLY RESULTS
Unaudited quarterly financial information for 1994 and 1993 is set forth in the
table below:
<TABLE>
<CAPTION>
March June September December
------------------ ----------------- ----------------- -------------------
All dollar amounts in thousands
except per common share data 1994 1993 1994 1993 1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $541,368 $531,347 $490,043 $506,915 $616,788 $621,894 $514,702 $544,141
Gross profit 187,620 191,781 168,910 180,131 226,408 209,281 172,269 169,723
Net income (loss) 27,437 42,681** 15,895 31,094 42,887 38,258 (3,370)* 14,891
Earnings (loss) per common share $ .35 $ .52** $ .20 $ .38 $ .55 $ .47 $ (.04)* $ .19
Dividends paid per common share $ .11 $ .10 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes the after tax effect of a restructuring charge of $18,900 ($30,000
pretax) or $.24 per common share in 1994.
** Includes a credit representing the cumulative effect of a change in the
method of accounting for income taxes of $1,643 or $.02 per common share in
1993.
<PAGE> 27
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- -------- ----------- ----
<S> <C> <C>
3(a) - Restated Certificate of Incorporation of Registrant (incorporated herein by reference
from Exhibit 3(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 26, 1993).
3(b) - By-laws of Registrant, as amended (incorporated herein by reference from Exhibit 3(b)
to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 26,
1992 [the "1992 Annual Report"]).
4(a) - Specimen certificate for Registrant's Common Stock, par value $1.00 per share
(incorporated herein by reference from Exhibit 4(a) to the 1992 Annual Report).
4(b) - Rights Agreement, dated December 7, 1988, as amended, between Registrant and First
Chicago Trust Company of New York, as Rights Agent (successor to The Chase Manhattan
Bank, N.A.) (incorporated herein by reference from Exhibit 4(d) to Registrant's Report
on Form 8-A dated January 29, 1991).
4(b)(i) - Amendment to Rights Agreement, dated March 1990, between Registrant and First Chicago
Trust Company of New York, as Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d)(i) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 30, 1989 [the "1989 Annual Report"]).
4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992, between Registrant and
First Chicago Trust Company of New York, as Rights Agent (incorporated herein by
reference from Exhibit 4(b)(ii) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 28, 1991 [the "1991 Annual Report"]).
10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder, which are incorporated
herein by this reference.
10(b)+ - Liz Claiborne, Inc. 1981 Stock Option Plan (incorporated herein by reference from
Exhibit 10(p) of Registrant's Registration Statement on Form S-1, Registration
No. 2-71806, in the form it was declared effective).
10(b)(i)+ - Amendment to the 1981 Stock Option Plan (incorporated herein by reference from
Exhibit 10(b)(i) to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988 [the "1988 Annual Report"]).
</TABLE>
______________________________________________________________________
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 46 -
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- -------- ----------- ----
<S> <C> <C>
10(c)+ - Amended form of Option Agreement under Liz Claiborne, Inc. 1981 Stock
Option Plan (incorporated herein by reference from Exhibit 10(q) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 26, 1981).
10(d)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated herein by
reference from Exhibit 10(hh) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1983 [the "1983 Annual
Report"]).
10(d)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein by
reference from Exhibit 10(d)(i) to the 1988 Annual Report).
10(e)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock Option
Plan (the "1984 Option Plan") (incorporated herein by reference from
Exhibit 10(nn) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1984).
10(e)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan (incorporated
herein by reference from Exhibit 10(e)(i) to the 1992 Annual Report).
10(f)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended and
restated (incorporated herein by reference from Exhibit 10(f) to the
1989 Annual Report).
10(f)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz Claiborne, Inc.
and IDS Trust Company (incorporated herein by reference from Exhibit
10(b) to Registrant's Quarterly Report on Form 10-Q for the period
ended July 2, 1994).
10(g)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein by
reference from Exhibit 10(g) to the 1992 Annual Report).
10(g)(i)+ - Amendments Nos. 3 and 4 to the Savings Plan (incorporated herein by
reference from Exhibit 10(g) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 26, 1993 [the "1993 Annual Report"]).
10(g)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by reference
from Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for
the period ended July 2, 1994).
</TABLE>
_____________________________________________________________________
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 47 -
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- -------- ----------- ----
<S> <C> <C>
10(h)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement Plan
(the "Profit-Sharing Plan") (incorporated herein by reference from
Exhibit 10(h) to the 1992 Annual Report).
10(i) - Trust Agreement related to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(jj) to the 1983 Annual Report).
10(i)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(i)(i) to the 1993 Annual Report).
10(i)(ii) - Amendment No. 3 to the Profit-Sharing Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report on Form
10-Q for the period ended October 1, 1994).
10(j) - Collective Bargaining Agreement, dated June 1, 1991, between New York
Skirt and Sportswear Association, Inc. (of which Registrant is a
member) and International Ladies' Garment Workers' Union, Amalgamated
Ladies' Garment Cutters' Union, Local 10, I.L.G.W.U. and Blouse, Skirt
and Sportswear Workers' Union, Local 23-25, I.L.G.W.U (incorporated
herein by reference from Exhibit 10(j) to the 1992 Annual Report).
10(k) - Collective Bargaining Agreement, dated September 1, 1991, between the
Joint Board of Shirt, Leisurewear, Robe, Glove and Rainwear Workers
Union of Amalgamated Clothing Workers of America and Liz Claiborne
Accessories (incorporated herein by reference from Exhibit 10(k) to
the 1991 Annual Report).
10(l) - Executive Liability and Indemnification Policy No. 81035379F, with
Chubb Group of Insurance Companies (incorporated herein by reference
from Exhibit 10(l) of Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 [the "1994 Annual Report"]).
10(l)(i) - Description of Excess Coverage Directors and Officers Liability Insurance
Policy No. ZKA9400406, with Lloyds of London (incorporated herein by
reference from Exhibit 10(l)(i) to the 1994 Annual Report).
10(m)+ - Description of 1994 Salaried Employee Incentive Bonus Plan (incorporated
herein by reference from Exhibit 10(m) to the 1994 Annual Report).
10(n) - Lease, dated as of January 1, 1990 for premises located at 1441
Broadway, New York, New York between Liz Claiborne, Inc. and Lechar
Realty Corp. (incorporated herein by reference from Exhibit 10(n)
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990).
</TABLE>
_____________________________________________________________________
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 48 -
<PAGE> 30
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- -------- ----------- ----
<S> <C> <C>
10(o)+ - Liz Claiborne, Inc. Outside Directors' 1991 Stock Ownership Plan
(the "Directors Plan") (incorporated herein by reference from
Exhibit 10(o) to the 1991 Annual Report).
10(o)(i)+ - Amendment No. 1 to the Directors Plan (incorporated herein by
reference from Exhibit 10(o)(i) to the 1993 Annual Report).
10(p)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan")
(incorporated herein by reference from Exhibit 10(p) to the 1991
Annual Report).
10(p)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by reference
from Exhibit 10(p)(i) to the 1993 Annual Report).
10(q)+ - Form of Option Agreement under the 1992 Plan for premium-priced
options (incorporated herein by reference from Exhibit 10(q) to
the 1992 Annual Report).
10(r)+ - Form of Option Agreement under the 1992 Plan (incorporated herein
by reference from Exhibit 10(r) to the 1992 Annual Report).
10(s)+ - Description of unfunded deferred compensation arrangement for Jerome
A. Chazen (incorporated herein by reference from Exhibit 10(s) to
the 1992 Annual Report).
10(t)+* - Description of Supplemental Life Insurance Plans.
10(u)+ - Description of unfunded death/disability benefits for certain
executives (incorporated herein by reference from Exhibit 10(u) to
the 1992 Annual Report).
10(v)+ - Form of the Liz Claiborne Section 162(m) Cash Bonus Plan (incorporated
herein by reference from Exhibit 10(v) of the 1994 Annual Report).
10(w)+ - Liz Claiborne Supplemental Executive Retirement Plan (incorporated
herein by reference from Exhibit 10(w) of the 1994 Annual Report).
10(x)+ - Employment Agreement dated as of May 9, 1994, between Liz Claiborne,
Inc. and Paul R. Charron (incorporated herein by reference from
Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for
the period ended April 2, 1994).
</TABLE>
_____________________________________________________________________
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 49 -
<PAGE> 31
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- -------- ----------- ----
<S> <C> <C>
10(y)+ - Agreement dated as of January 2, 1995, between Liz Claiborne,
Inc. and Harvey Falk (incorporated herein by reference from
Exhibit 10(y) to the 1994 Annual Report).
21 - List of Registrant's Subsidiaries (incorporated herein by
reference from Exhibit 21 to the 1994 Annual Report).
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
29* - Undertakings.
</TABLE>
(b) Reports on Form 8-K.
Not applicable.
_____________________________________________________________________
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided in Item
14(a)(3).
- 50 -
<PAGE> 1
EXHIBIT 10(t)
DESCRIPTION OF SUPPLEMENTAL LIFE INSURANCE PLANS
Vice Presidents of the Liz Claiborne, Inc. (the "Company") receive universal
life insurance policies which provide coverage equal to two times annual base
salary. The Company pays the premiums on each policy during the employment
period, enabling the employee to have a paid-up life insurance policy at
retirement with a cash surrender value. Additionally, during 1994 the Chairman
of the Board and former Vice Chairman of the Board and President were each
covered under a $1 million term life insurance policy for which the Company
paid the premium on the policies. Both of these policies terminated effective
as of March 15, 1995.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
Registration Statements File Nos. 2-77590, 2-95258, 2-33661 and 33-51257.
ARTHUR ANDERSEN LLP
New York, New York
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LIZ CLAIBORNE, INC. FOR THE YEAR ENDED DECEMBER 31,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 71,419
<SECURITIES> 258,932
<RECEIVABLES> 159,766
<ALLOWANCES> 0
<INVENTORY> 423,003
<CURRENT-ASSETS> 1,022,531
<PP&E> 409,054
<DEPRECIATION> 172,494
<TOTAL-ASSETS> 1,289,662
<CURRENT-LIABILITIES> 303,399
<BONDS> 0
<COMMON> 88,219
0
0
<OTHER-SE> 894,765
<TOTAL-LIABILITY-AND-EQUITY> 1,289,662
<SALES> 2,162,901
<TOTAL-REVENUES> 2,162,901
<CGS> 1,407,694
<TOTAL-COSTS> 1,407,694
<OTHER-EXPENSES> 634,421
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 329
<INCOME-PRETAX> 131,449
<INCOME-TAX> 48,600
<INCOME-CONTINUING> 82,849
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,849
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
</TABLE>
<PAGE> 1
EXHIBIT 29
To Be Incorporated By Reference Into
Registration Statements on Forms S-8
(File Nos. 2-77590, 2-95258, 2-33661 and 33-51257)
UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the 1934 Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
