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 July 1, 1995
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 d Yes X No .
The number of shares of Registrant's Common Stock, par value $1.00 per
share, outstanding at August 11, 1995 was 75,001,113.
<PAGE>
<TABLE>
<CAPTION>
(2)
PAGE
NUMBER
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of July 1, 1995 and
December 31, 1994 3
Consolidated Statements of Income for the Six and Three
Month Periods Ended July 1, 1995 and July 2, 1994 4
Consolidated Statements of Cash Flows for the Six
Month Periods Ended July 1, 1995 and July 2, 1994 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE 15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(3)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands except share data)
(Unaudited)
July 1, December 31,
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 51,896 $ 71,419
Marketable securities 245,716 258,932
Accounts receivable - trade 168,582 159,766
Inventories 393,770 423,003
Deferred income tax benefits 28,989 32,547
Other current assets 76,379 76,864
Total current assets 965,332 1,022,531
PROPERTY AND EQUIPMENT - NET 237,404 236,560
OTHER ASSETS 29,422 30,571
$ 1,232,158 $ 1,289,662
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 98,691 $ 138,581
Accrued expenses 156,382 156,924
Income taxes payable 4,460 7,894
Total current liabilities 259,533 303,399
LONG-TERM DEBT 1,175 1,227
DEFERRED INCOME TAXES 1,513 2,052
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 16,875 --
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 41,389 56,714
Retained earnings 1,179,089 1,164,850
Cumulative translation adjustment (1,853) (1,637)
1,306,844 1,308,146
Common stock in treasury, at cost, 13,025,916 shares in 1995 and
11,214,688 shares in 1994 (353,782) (325,162)
Total stockholders' equity 953,062 982,984
$ 1,232,158 $ 1,289,662
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(4)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(All amounts in thousands, except per common share data)
(Unaudited)
Six Months Ended Three Months Ended
(26 Weeks) (27 Weeks)
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $ 1,001,925 $ 1,031,411 $ 474,849 $ 490,043
Cost of goods sold 633,160 674,881 298,151 321,133
GROSS PROFIT 368,765 356,530 176,698 168,910
Selling, general & administrative expenses 303,289 293,537 152,883 146,594
OPERATING INCOME 65,476 62,993 23,815 22,316
Investment and other income-net 6,131 5,739 3,207 2,879
INCOME BEFORE PROVISION
FOR INCOME TAXES 71,607 68,732 27,022 25,195
Provision for income taxes 26,500 25,400 10,000 9,300
NET INCOME $ 45,107 $ 43,332 $ 17,022 $ 15,895
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 75,466 78,834 74,857 78,817
EARNINGS PER COMMON SHARE $0.60 $0.55 $0.23 $0.20
DIVIDENDS PAID PER COMMON SHARE $0.23 $0.23 $0.11 $0.11
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(5)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
Six Months Ended
(26 Weeks) (27 Weeks)
July 1, July 2,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,107 $ 43,332
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 19,600 17,053
Other - net (539) (1,073)
Change in current assets and liabilities:
(Increase) decrease in accounts receivable (8,816) 14,756
Decrease in inventories 29,233 53,124
Decrease (increase) in deferred
income tax benefits 1,836 (846)
Decrease in other current assets 485 1,120
(Decrease) in accounts payable (39,890) (49,851)
(Decrease) in accrued expenses (8,955) (2,968)
(Decrease) in income taxes payable (3,434) (5,093)
Net cash provided by operating activities 34,627 69,554
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (152,765) (97,402)
Sales of investment instruments 170,855 63,021
Purchases of property and equipment (20,464) (33,122)
Purchases of trademarks (1,547) (1,541)
Other-net 2,513 (1,238)
Net cash used in investing activities (1,408) (70,282)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (52) (51)
Proceeds from exercise of common stock options -- 471
Proceeds from sale of put warrants 1,550 1,572
Dividends paid (16,995) (17,740)
Repurchase of common stock (37,029) (8,231)
Net cash used in financing activities (52,526) (23,979)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (216) (392)
NET CHANGE IN CASH AND CASH EQUIVALENTS (19,523) (25,099)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 71,419 104,720
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 51,896 $ 79,621
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 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. 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, in
the fourth quarter of 1994. The remaining balance of the restructuring
liability as of July 1, 1995 was $22.0 million. Of the $8.0 million
expended for restructuring costs, $4.9 million was related to severance
costs, $1.4 million to losses on contracts and write-offs of certain
assets, and $1.7 million to other miscellaneous costs. Substantially all of
the remaining liabilities should be paid or settled by the second quarter
of 1996. First Issue accounted for $33.3 million of first half 1995 sales,
as compared with $28.7 million in 1994 and incurred an operating loss of
$7.1 million in the first half of 1995, as compared with a loss of $6.4
million in 1994. The Company is in the process of converting to other
Company-operated retail formats (or closing) its remaining 52 First Issue
locations.
4. 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.
<PAGE>
<TABLE>
<CAPTION>
(7)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following are summaries of available-for-sale securities:
(Dollars in thousands)
July 1, 1995
Gross Estimated
Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Tax exempt notes and bonds $ 242,988 $ 450 $ (526) $ 242,912
U.S. & foreign government securities 11,680 85 (85) 11,680
Collateralized mortgage obligations 7,122 -- (931) 6,191
Total debt securities 261,790 535 (1,542) 260,783
Equity securities 2,527 -- (808) 1,719
$ 264,317 $ 535 $ (2,350) $ 262,502
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands)
December 31,1994
Gross Estimated
Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Tax exempt notes and bonds $ 309,126 $ 83 $ (3,060) $ 306,149
U.S. & foreign government securities 11,323 -- (905) 10,418
Collateralized mortgage obligations 8,569 3 (1,785) 6,787
Total debt securities 329,018 86 (5,750) 323,354
Equity securities 2,528 -- (588) 1,940
$ 331,546 $ 86 $ (6,338) $ 325,294
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands)
July 1, 1995
Estimated
Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 114,483 $ 114,199
Due after one year through three years 125,113 125,288
Due after three years 22,194 21,296
261,790 260,783
Equity securities 2,527 1,719
$ 264,317 $ 262,502
</TABLE>
<PAGE>
(8)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At July 1, 1995, and December 31, 1994, the above investments included
$15,067,000 and $64,422,000, respectively, of tax exempt notes and
bonds which are classified as cash and cash equivalents and equity
securities which are included in other assets in the consolidated
balance sheets.
For the six month period ended July 1, 1995, gross realized gains and
(losses) on sales of available-for-sale securities totaled $381,000 and
($93,000), respectively. For the six month period ended July 2, 1994,
gross realized gains and (losses) on sales of available-for-sale
securities totaled $686,000 and ($9,000), respectively. The net
adjustment to unrealized holding gains and losses on available-for-sale
securities for the six month periods ended July 1, 1995 and July 2,
1994, was a credit of $2,932,000 (net of $1,722,000 in deferred income
taxes) and a charge of $5,745,000 (net of $3,374,000 in deferred income
taxes), respectively, which were included in retained earnings. As of
July 1, 1995 and December 31, 1994, the fair value adjustment for
available-for-sale securities was a charge of $1,007,000 (net of
$592,000 in deferred income taxes) and a charge of $3,939,000 (net of
$2,313,000 in deferred income taxes), respectively, included in
retained earnings.
5. 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 and consist of the following:
<TABLE>
<CAPTION>
(Dollars in thousands)
July 1, December 31,
1995 1994
----- ----
<S> <C> <C>
Raw materials $ 63,630 $ 55,724
Work-in-process 23,389 21,527
Finished goods 306,751 345,752
------- -------
$393,770 $423,003
======== ========
</TABLE>
<TABLE>
<CAPTION>
6. Property and equipment - net
(Dollars in thousands)
July 1, December 31,
1995 1994
----- ----
<S> <C> <C>
Land and buildings $124,323 $123,746
Machinery and equipment 122,813 117,686
Furniture and fixtures 53,486 50,518
Leasehold improvements 127,185 117,104
------- -------
427,807 409,054
Less: Accumulated depreciation
and amortization 190,403 172,494
------- -------
$237,404 $236,560
======== ========
</TABLE>
<PAGE>
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. In February 1995, 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, if exercised, commit the Company to purchase a total of
1,000,000 shares of its Common Stock in September, October and December
1995 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 $16.9 million obligation to buy back
1,000,000 shares of Common Stock has been charged to capital in excess of
par value and recorded as Put Warrants.
8. On June 22, 1995, the Company's Board of Directors declared a quarterly
cash dividend on the Company's Common Stock at the rate of $0.1125 per
share, to be paid on September 5, 1995 to stockholders of record at the
close of business on August 11, 1995. The liability for the declared
dividend of approximately $8.4 million is included in accrued expenses as
of July 1, 1995.
9. For the six months ended July 1, 1995 and July 2, 1994, the Company made
income tax payments of $27,916,000 and $32,196,000, respectively. For the
six months ended July 1, 1995 and July 2, 1994, the Company made interest
payments of $132,000 and $165,000, respectively.
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 July 1, 1995, the Company had contracts
maturing in 1995 and 1996 to purchase at contracted forward rates
61,991,000 Japanese yen and to sell 53,500,000 Canadian dollars and
9,300,000 British sterling. The aggregate U.S. dollar value of all foreign
exchange contracts is approximately $53,632,000. Unrealized gains and
losses for outstanding foreign exchange contracts were not material at July
1, 1995.
<PAGE>
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the 1995 second quarter decreased $15 million, or 3%, on a period
to prior year comparable period ("period-to-period") basis. This result included
a 16% decrease in domestic net sales of Misses and Petite COLLECTION, LIZSPORT
and LIZWEAR (collectively, "Sportswear"), to $185 million, and a 26% decrease in
domestic net sales of the Moderate Division (consisting of RUSS, THE VILLAGER,
and CRAZY HORSE brands), to $17 million, due primarily to unit volume declines
reflecting conservative inventory planning and continued weakness in demand.
Average unit selling prices for Sportswear decreased, reflecting slightly
lowered initial selling prices in an effort to help maintain market share,
weakness in demand and changes in product mix. Also contributing to the result
were decreases in the net sales of dresses (16%, to $28 million) and ELISABETH
(12%, to $32 million), due primarily to a unit volume decline resulting from a
lower level of off-price shipments, and cosmetics (26%, to $13 million), due
primarily to unit volume declines as a result of weakness in demand. These
declines were offset in part by a 47% sales increase within the Retail
Operations (consisting of the Company's LIZ CLAIBORNE, ELISABETH, DANA BUCHMAN,
First Issue and international retail stores and leased departments), to $53
million, as a result of the opening of new domestic retail stores (119 at 1995
second quarter end as compared with 83 at 1994 second quarter end) and European
retail leased departments. In late 1994, the Company announced plans to phase
out of the First Issue retail store business and to close or convert its 77
First Issue locations to other Company-operated retail formats. As of August 14,
1995, 15 of such locations have been converted to an ELISABETH format, 7 to a
LIZ CLAIBORNE format, including a petite store and one to a CLAIBORNE men's
format; two stores have been closed. This phase out is expected to be completed
by the second quarter of 1996. First Issue accounted for $16 million of second
quarter 1995 sales, as compared with $15 million in 1994. See Note 3 of Notes to
Consolidated Financial Statements. Net sales gains were also posted by menswear
(26%, to $27 million) and shoes (23%, to $17 million), due primarily to unit
volume increases, and DANA BUCHMAN (8%, to $28 million), due primarily to higher
average unit prices. In May 1995, the Company reached an agreement in principle
to license its shoe business; the transaction is scheduled to close in the third
quarter. Net sales of the outlet operations increased 17%, to $38 million,
reflecting the opening of new locations (64 at 1995 second quarter end as
compared with 57 at 1994 second quarter end).
Net sales for the 1995 first half (26 weeks) decreased $29 million, or 3%, from
the 1994 first half (27 weeks). This result included a 13% decrease in domestic
net sales of Sportswear, to $419 million, and a 28% decrease in domestic net
sales of the Moderate Division, to $36 million, due primarily to unit volume
declines reflecting conservative inventory planning and continued weakness in
demand. Average unit selling prices for Sportswear decreased, reflecting
slightly lowered initial selling prices in an effort to help maintain market
share, weakness in demand and changes in product mix. Also contributing to the
result were decreases in the net sales of ELISABETH (13%, to $65 million) and
accessories (7%, to $81 million), due primarily to unit volume declines. These
decreases were offset in part by sales increases within the Retail Operations
(44%, to $95 million), due to the opening of new domestic retail stores and
European retail leased departments, menswear (19%, to $50 million), due in equal
parts to higher average unit prices and higher unit volume, and DANA BUCHMAN
(14%, to $59 million), due primarily to higher unit volume. Net sales of the
outlet operations increased 11%, to $64 million, reflecting the opening of new
locations. Shoes accounted for $39 million of first half 1995 sales, as compared
with $35 million in 1994.
<PAGE>
RESULTS OF OPERATIONS (continued)
Gross profit dollars increased on a period-to-period basis 4.6% in the second
quarter, and 3.4% in the first half, of 1995. Gross profit margins increased on
a period-to-period basis to 37.2% from 34.5% in the second quarter, and to 36.8%
from 34.6% in the second half, of 1995. These margin improvements reflect a
rebound in margins from depressed prior period levels within the outlet
operations and the ELISABETH, Liz & Co., and Dress Divisions; a slight
improvement in Sportswear margins; and Moderate margins which remain at
depressed levels notwithstanding significant improvement over prior period
levels. Margins were also favorably impacted by the larger percentage of sales
represented by, and improved margins within, DANA BUCHMAN (which is generally a
higher margin business). These margin gains generally reflect lower markdowns as
a result of lower excess inventory positions. The margin improvement was
partially offset by margin declines within the cosmetics and accessories
businesses, due primarily to changes in sales mix, as well as margin erosion
within First Issue, as inventory is liquidated during the phase-out period.
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 1995 for an additional year. In light of
the very substantial portion of the Company's products which are 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 3.3% and 4.3% for the first half and second quarter of
1995, respectively. SG&A expenses expressed as a percentage of net sales were
30.3% and 28.5% for the first six months and 32.2% and 29.9% for the second
quarter, respectively, of 1995 and 1994. These results reflect the continued
expansion of the Company's outlets and the Retail Operations ($17.8 million
increase for the first half, and $9.3 million increase for the second quarter,
of 1995), partially offset by lowered expense levels across substantially all of
the remaining divisions, as a number of expense reduction initiatives continue
to be implemented. The 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 substantially all divisions reduced their
period-to-period SG&A levels, the percentage decrease in sales slightly outpaced
the percentage decrease in expense levels at several divisions.
The period-to-period increase in investment and other income - net was primarily
due to higher rates of return realized on the Company's investment portfolio,
which decreased slightly as a result of the Company's ongoing stock repurchase
program.
As a result of the factors described above, the Company's income before
provision for income taxes increased on a period-to-period basis 4.2% for the
first half, and 7.3% for the second quarter, of 1995. These results included
continuing operating losses within the Retail Operations and the Moderate
Division. The provisions for income taxes reflect the changes in pre-tax income.
As a result of the above, net income increased on a period-to-period basis.
<PAGE>
RESULTS OF OPERATIONS (continued)
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.
The retail environment remains highly promotional, and the tone of business
continues to be difficult. Forward merchandise commitments continue to be
planned on a conservative basis, particularly for Sportswear. The Company
continues the process of implementing a comprehensive process reengineering and
profit improvement initiative, and has announced a number of three-year goals
for this project. The Company continues to expect that earnings for the 1995
year will show improvement over 1994, although any such improvement will be
moderated by continuing losses within the Retail Operations and Moderate
Division.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities was $34.6 million through July 1,
1995, compared to $69.6 million provided by operating activities through July 2,
1994, primarily because of an increase in accounts receivable of $8.8 million in
1995, compared to a decrease of $14.8 million in 1994, as well as a decrease in
inventories of $29.2 million against a comparable decrease of $53.1 million in
1994, offset in part by a smaller decrease in accounts payable in 1995 compared
to 1994. Net cash used in investing activities was $1.4 million in 1995 compared
to $70.3 million in 1994. The fluctuations in net cash used in investing
activities is related to changes in marketable securities and capital
expenditures on a period-to-period basis. Net cash used in financing activities
was $52.5 million in 1995 compared to $24.0 million in 1994, reflecting $37.0
million expended in the Company's stock repurchase program in 1995 compared to
$8.2 million in 1994. As of August 11, 1995, the Company had expended or
committed to expend approximately $446 million of the $450 million authorized
under that program, covering an aggregate of 17.1 million shares.
Inventories at July 1, 1995 were $393.8 million, down from $423.0 million at
year-end, and up from $383.5 million at July 2, 1994. The July 1, 1995 inventory
level reflects the expansion of an in-stock reorder program in several divisions
and the addition of new stores within the Retail Operations, offset by a
reduction of ongoing inventory levels within the outlet operations.
The Company's anticipated capital expenditures for 1995 currently approximate
$45 million, of which $20.5 million has been expended through July 1, 1995.
These expenditures consist primarily of leasehold improvements of new stores and
leased departments for the Retail Operations, upgrading of management
information systems and the expansion of the Company's Alabama distribution
facility. These expenditures will be financed through available capital and
future earnings. Any 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 $282 million at July 1, 1995. The Company expects to
be able to adjust these lines as required.
<PAGE>
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 21, 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 plaintiff. 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 two former Vice Chairmen.
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 the 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>
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 1995 Annual Meeting of Stockholders held on May 11,
1995, the stockholders of the Company (i) approved a stockholder proposal
relating to the declassification of the Company's' Board of Directors (the
"Stockholder Proposal") (the number of affirmative votes cast was 35,812,246,
the number of negative votes cast was 19,645,427, the number of abstentions was
685,498 and the number of broker non-votes was 9,666,153), (ii) ratified the
appointment of Arthur Andersen LLP as independent public accountants of the
Company for the fiscal year ending December 30, 1995 (the number of affirmative
votes cast was 65,098,353, the number of negative votes cast was 193,606 and the
number of abstentions was 517,365), and (iii) elected the following nominees to
the Company's Board of Directors:
<TABLE>
<CAPTION>
Votes
Nominee For Withheld
<S> <C> <C>
Lee Abraham 65,066,895 742,429
Paul R. Charron 65,102,909 706,415
Sherwin Kamin 64,951,273 858,051
</TABLE>
Except with respect to the Stockholder Proposal, there were no broker non-votes
with respect to any matter acted upon at the Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) Amendment No. 4 to the Liz Claiborne Profit-Sharing Retirement Plan.
27 Financial Data Schedule as of July 1, 1995.
(b) The Company did not file any reports on Form 8-K in the quarter.
<PAGE>
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: August 14, 1995 BY /s/ Samuel M. Miller
--------------------
SAMUEL M. MILLER
Senior Vice President - Finance
Chief Financial and Accounting Officer
<PAGE>
EXHIBIT 10(a)
AMENDMENT NO. 4
TO THE
LIZ CLAIBORNE PROFIT-SHARING RETIREMENT PLAN
(As Amended and Restated Effective January 1, 1987)
The Liz Claiborne Profit-Sharing Plan (as amended and restated
effective January 1, 1987), is hereby further amended pursuant to Section 12.1
in the following respect:
Section 7.2.2 is amended, effective July 1, 1995, by adding
the phrase, "and, prior to July 1, 1995" "After December 31, 1988" in the second
sentence thereof, and by adding a sentence after the second sentence thereof to
read as follows:
Effective July 1, 1995, a Member may elect to have his entire
Distribution Account established under Section 6.2 distributed
to him as soon as practicable after any Valuation Date
following the later of (a) July 1, 1995 and (b) his
Termination of Employment, but no later than the Valuation
Date coincident with or immediately following his Normal
Retirement Date.
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed by its duly authorized officer, the 30 day of June, 1995.
LIZ CLAIBORNE, INC.
By: /s/ Jerome A. Chazen
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 51,896
<SECURITIES> 245,716
<RECEIVABLES> 168,582
<ALLOWANCES> 0
<INVENTORY> 393,770
<CURRENT-ASSETS> 965,332
<PP&E> 427,807
<DEPRECIATION> 190,403
<TOTAL-ASSETS> 1,232,158
<CURRENT-LIABILITIES> 259,533
<BONDS> 0
<COMMON> 88,219
0
0
<OTHER-SE> 864,843
<TOTAL-LIABILITY-AND-EQUITY> 1,232,158
<SALES> 1,001,925
<TOTAL-REVENUES> 1,001,925
<CGS> 633,160
<TOTAL-COSTS> 936,449
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131
<INCOME-PRETAX> 71,607
<INCOME-TAX> 26,500
<INCOME-CONTINUING> 45,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,107
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
