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 5, 1997 TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ...............to......................
Commission file number 0-9831
LIZ CLAIBORNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2842791
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1441 Broadway, New York, New York 10018
(Address of principal executive offices) (Zip Code)
(212) 354-4900
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days Yes X No.
The number of shares of Registrant's Common Stock, par value $1.00
per share, outstanding at August 15, 1997 was 69,944,296.
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NUMBER
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of July 5, 1997 and
December 28, 1996 ........................................... 3
Consolidated Statements of Income for the Six and Three Month Periods
Ended July 5, 1997 and June 29, 1996 ........................ 4
Consolidated Statements of Cash Flows for the Six Month Periods
Ended July 5, 1997 and June 29, 1996 ........................ 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
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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 5, December 28,
ASSETS 1997 1996
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CURRENT ASSETS:
Cash and cash equivalents $ 137,730 $ 322,881
Marketable securities 323,644 205,855
Accounts receivable - trade 204,536 158,168
Inventories 327,807 349,427
Deferred income tax benefits 31,311 31,555
Other current assets 76,084 74,212
Total current assets 1,101,112 1,142,098
PROPERTY AND EQUIPMENT - NET 216,242 223,284
OTHER ASSETS 32,118 17,368
$1,349,472 $ 1,382,750
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 114,119 $ 163,666
Accrued expenses 148,866 152,241
Income taxes payable 4,339 10,762
Total current liabilities 267,324 326,669
DEFERRED INCOME TAXES 7,237 8,253
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 42,102 27,336
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 29,080 38,577
Retained earnings 1,434,015 1,382,247
Cumulative translation adjustment (3,093) (4,311)
1,548,221 1,504,732
Common stock in treasury, at cost, 17,810,356 shares in 1997 and
17,212,585 shares in 1996 (515,412) (484,240)
Total stockholders' equity 1,032,809 1,020,492
$1,349,472 $ 1,382,750
The accompanying notes to consolidated financial statements are an
integral part of these statements.
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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
(27 Weeks) (26 Weeks)
July 5, June 29, July 5, June 29,
1997 1996 1997 1996
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NET SALES $ 1,134,456 $ 1,057,153 $ 537,900 $ 500,595
Cost of goods sold 691,296 653,307 326,061 307,991
GROSS PROFIT 443,160 403,846 211,839 192,604
Selling, general & administrative expenses 338,094 317,288 169,595 159,632
OPERATING INCOME 105,066 86,558 42,244 32,972
Investment and other income-net 7,787 7,198 3,688 3,398
INCOME BEFORE PROVISION
FOR INCOME TAXES 112,853 93,756 45,932 36,370
Provision for income taxes 41,800 35,200 17,000 13,700
NET INCOME $ 71,053 $ 58,556 $ 28,932 $ 22,670
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 70,778 73,246 70,616 73,085
NET INCOME PER COMMON SHARE $1.00 $0.80 $0.41 $0.31
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.
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LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
Six Months Ended
(27 Weeks) (26 Weeks)
July 5, June 29,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 71,053 $ 58,556
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 23,994 17,936
Other - net 2,726 2,049
Change in current assets and liabilities:
(Increase) in accounts receivable (46,368) (55,073)
Decrease in inventories 21,620 31,673
(Increase) in deferred income tax benefits (317) (1,454)
(Increase) in other current assets (1,872) (2,432)
(Decrease) in accounts payable (49,547) (21,168)
(Decrease) in accrued expenses (25,506) (12,313)
(Decrease) in income taxes payable (6,423) (6,027)
Net cash (used in) provided by operating activities (10,640) 11,747
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (281,998) (218,342)
Sales of investment instruments 165,678 223,226
Purchases of property and equipment (12,021) (11,618)
Purchase of trademark (3,750) --
Other - net (1,666) 5,262
Net cash used in investing activities (133,757) (1,472)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options 7,602 6,724
Proceeds from sale of put warrants 2,942 1,601
Dividends paid (15,827) (16,352)
Repurchase of common stock (36,689) (37,684)
Net cash used in financing activities (41,972) (45,711)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,218 10
NET CHANGE IN CASH AND CASH EQUIVALENTS (185,151) (35,426)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 322,881 54,722
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 137,730 $ 19,296
The accompanying notes to consolidated financial statements are an
integral part of these statements.
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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.
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.
2. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share."
Under SFAS No. 128, the presentation of both Basic and Diluted Earnings per
Share is required on the Income Statement for periods ending after December
15, 1997, at which time restatement for prior periods will be required. Had
the provisions of SFAS No. 128 been in effect at the beginning of 1997, the
Company would have reported Basic and Diluted Earnings per Share for the
quarter and six month period ended July 5, 1997 of $.41 and $1.00,
respectively, and Basic and Diluted Earnings per Share for the quarter
ended June 29, 1996 of $.31 and Basic and Diluted Earnings per Share for
the six month period ended June 29, 1996 of $.80 and $.79, respectively.
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LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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3. The following are summaries of available-for-sale marketable securities and maturities:
(Dollars in thousands)
July 5, 1997
Gross Estimated
Unrealized Fair
Cost Gains Losses Value
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Tax exempt notes and bonds $ 445,762 $ 1,465 $ (320) $ 446,907
Collateralized mortgage obligations 3,755 -- (247) 3,508
$ 449,517 $ 1,465 $ (567) $ 450,415
(Dollars in thousands)
December 28,1996
Gross Estimated
Unrealized Fair
Cost Gains Losses Value
Tax exempt notes and bonds $ 354,392 $ 357 $ (288) $ 354,461
Commercial paper 148,651 -- -- 148,651
U.S. & foreign government securities 12,877 74 (272) 12,679
Collateralized mortgage obligations 7,112 -- (442) 6,670
523,032 431 (1,002) 522,461
Equity securities 236 -- (39) 197
$ 523,268 $ 431 $ (1,041) $ 522,658
(Dollars in thousands)
July 5, 1997
Estimated
Fair
Cost Value
Due in one year or less $ 178,316 $ 178,698
Due after one year through three years 267,013 267,690
Due after three years 4,188 4,027
$ 449,517 $ 450,415
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(8)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At July 5, 1997, the above investments included $126,771,000 of tax
exempt notes and bonds which are classified as cash and cash
equivalents. At December 28, 1996, the above investments included
$316,606,000 of tax exempt notes and bonds and commercial paper which
are classified as cash and cash equivalents and equity securities which
are included in other long-term assets in the consolidated balance
sheets.
For the six month period ended July 5, 1997, gross realized gains and
(losses) on sales of available-for-sale securities totaled $327,000 and
($721,000), respectively. For the six month period ended June 29, 1996,
gross realized gains and (losses) on sales of available-for-sale
securities totaled $1,503,000 and ($117,000), respectively. The net
adjustment to unrealized holding gains and losses on available-for-sale
securities for the six month periods ended July 5, 1997 and June 29,
1996, was a credit of $947,000 (net of $561,000 in deferred income
taxes) and a charge of $1,261,000 (net of $786,000 in deferred income
taxes), respectively, which were included in retained earnings.
4. 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:
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(Dollars in thousands)
July 5, December 28,
1997 1996
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Raw materials $ 31,528 $ 28,198
Work in process 18,545 17,209
Finished goods 277,734 304,020
$327,807 $349,427
5. Property and equipment - net
(Dollars in thousands)
July 5, December 28,
1997 1996
Land and buildings $124,146 $124,125
Machinery and equipment 145,133 138,620
Furniture and fixtures 57,437 55,022
Leasehold improvements 129,239 126,956
455,955 444,723
Less: Accumulated depreciation
and amortization 239,713 221,439
$216,242 $223,284
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LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. In the first half of 1997, in connection with its stock repurchase program,
the Company sold new put warrants in privately negotiated transactions
based on the then-current market price of the common stock. In addition,
warrants on 500,000 shares of common stock expired unexercised. The new
warrants, if exercised, will require the Company to purchase up to a total
of 750,000 shares of its common stock in September, November and December
1997, on the respective expiration dates of the warrants. The proceeds of
$2.9 million from the sale of the new put warrants have been credited to
capital in excess of par value. The Company's potential $42.1 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. Subsequent to
July 5, 1997, warrants on 250,000 shares of common stock, expiring in
January 1998, were sold with proceeds of $937,000, and warrants on 250,000
shares expired unexercised. The net effect of the subsequent items is an
increase in the Company's potential obligation to buy back common stock to
$44.6 million.
7. On June 27, 1997, 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 2, 1997 to stockholders of record at the
close of business on August 8, 1997.
8. For the six months ended July 5, 1997 and June 29, 1996, the Company made
income tax payments of $52,834,000 and $43,407,000, respectively. For the
six months ended July 5, 1997 and June 29, 1996, the Company made interest
payments of $61,000 and $107,000, respectively.
9. The Company enters into foreign exchange contracts to hedge transactions
denominated in foreign currencies for periods of less than one year 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 and are accounted for as part of the underlying
transaction. As of July 5, 1997, the Company had contracts maturing through
September 1997 to sell 4,000,000 Canadian dollars and contracts maturing
through October 1997 to sell 1,500,000 British pounds sterling. The
aggregate U.S. dollar value of the foreign exchange contracts is
approximately $5,376,000. Unrealized gains and losses for outstanding
foreign exchange contracts were not material at July 5, 1997.
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LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
On a period to prior year comparable period ("period-to-period") basis, net
sales for the second quarter of 1997 increased $37 million, or 7.5%, over the
second quarter of 1996, and net sales for the first half of 1997 (27 weeks)
increased $77 million, or 7.3%, over the first half of 1996 (26 weeks). The net
sales results principally reflected increased net sales of women's sportswear,
men's sportswear and furnishings and the Company's outlet operations, partially
offset by lower net sales of dresses.
The second quarter increase in women's sportswear reflected a 10% increase in
the net sales of the Casual Unit, to $154 million, due to higher unit volume,
partially offset by an 11% decrease in the net sales of the Collection Division,
to $34 million, due to planned lower unit volume, reflecting weakness in demand.
Net sales of new product offerings accounted for $14 million of the 1997 second
quarter net sales increase: $9 million of net sales of Curve for women and Curve
for men, the Company's latest fragrances initially shipped in July 1996, and $5
million of net sales of Elisabeth/Liz & Co. the large size casual knitwear line
first shipped in September 1996. As previously reported, the Company is
exploring entry into a licensing arrangement covering its fragrance business.
Net sales of the outlet operations increased 17%, to $59 million, principally
reflecting additional stores (89 at 1997 second quarter end as compared with 79
a year earlier) and improved store productivity. Net sales of men's sportswear
and furnishings increased 24%, to $33 million, due to higher unit volume and, to
a lesser degree, higher average unit selling prices. These net sales increases
were moderated by a 30% decrease in dress sales, to $20 million, due to lower
unit volume and, to a lesser degree, lower average unit selling prices,
reflecting weakness in demand. Net sales of the Company's domestic retail stores
decreased 17%, to $37 million, principally reflecting weakness in demand for
Collection and Elisabeth product and dresses within a generally soft environment
for women's apparel specialty stores. Effective with the 1997 fiscal year, the
Company lowered its internal transfer pricing for goods sold by its wholesale
divisions to its domestic retail stores to a cost basis. The change reduced the
net sales figures reported by the wholesale divisions and increased the gross
margin dollars and percentage of the domestic retail operations. This change had
no effect on the Company's consolidated results and did not have any material
effect on the divisional disclosures contained herein.
The 1997 first half increase in women's sportswear principally reflected a 16%
increase in the net sales of the Casual Unit, to $348 million, due to higher
unit volume, partially offset by a 23% decrease in the net sales of the
Collection Division, to $86 million, due to planned lower unit volume,
reflecting weakness in demand. Net sales of new product offerings accounted for
$30 million of the 1997 first half net sales increase: $20 million of net sales
of Curve and $10 million of net sales of Elisabeth/Liz & Co. Sales of Curve more
than offset the continuing decline in net sales of the Company's ongoing
fragrance products. Net sales of the outlet operations increased 26%, to $102
million, principally reflecting additional stores and improved store
productivity. Net sales of men's sportswear and furnishings increased 24%, to
$64 million, due in equal parts to higher average unit selling prices and higher
unit volume. Net sales of the Dana Buchman Division increased 10%, to $96
million, due to higher unit volume. These net sales increases were moderated by
a 20% decrease in dress sales, to $51 million, due to lower unit volume and, to
a lesser degree, lower average unit selling prices.
Gross profit margins increased on a period-to-period basis to 39.4% from 38.5%
in the second quarter, and to 39.1% from 38.2% in the first half, of 1997. Gross
profit dollars increased on a period-to-period basis by 10.0% in the second
quarter, and 9.7% in the first half, of 1997. These results principally
reflected better margins on close-out sales, improved margins within the outlet
operations and the larger percentage of sales represented by the Cosmetics
Division (generally a higher margin business). Cosmetics margins were higher,
reflecting the increased net sales level as compared with the prior period's
highly depressed level. Gross margins for men's sportswear and furnishings also
improved, reflecting a higher proportion of regular price sales. The overall
gross margin improvement was moderated by lower margins within the Dress and
Dana Buchman Divisions due, to a lower proportion of regular price sales, and
for the Elisabeth line, reflecting lower initial selling prices, principally due
to product mix. The improvement in first half margins was moderated by lower
margins within the Collection and Studio lines due to a lower proportion of
regular price sales.
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") and/or retaliatory duties,
quotas or other trade sanctions, which, if enacted, would increase the cost of
products purchased from suppliers in such countries. The PRC's MFN treatment was
renewed in July 1997 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 increases in selling, general and administrative ("SG&A")
expenses were $10 million, or 6.2%, and $21 million, or 6.6%, for the second
quarter and first half of 1997, respectively. SG&A expenses expressed as a
percentage of net sales were 31.5% and 31.9% for the second quarter, and 29.8%
and 30.0% for the first half, of 1997 and 1996, respectively. The dollar
increases principally reflected marketing expenses related to the new Curve
fragrances and continued expansion of the Company's brand enhancing activities
(including a national advertising campaign and in-store service and presentation
program). Additional expenses associated with the expansion of the Dana Buchman
Division and outlet operations also contributed to the SG&A dollar increases.
The first half increases reflected the additional week in the 1997 first quarter
. These increases were partially offset by continuing expense reduction
initiatives.
The period-to-period increases in investment and other income-net principally
reflected increases in the Company's investment portfolio, notwithstanding the
ongoing stock repurchase program, moderated by a reduction in the rate of return
realized on the investment portfolio.
As a result of the factors described above, the Company's income before
provision for income taxes increased on a period-to-period basis 26.3% for the
second quarter, and 20.4% for the first half, of 1997. These results included
continuing operating losses within the Special Markets Unit. The provisions for
income taxes reflected the changes in pre-tax income and a decrease in the
effective tax rate in 1997; as a result, net income increased 27.6% and 21.3%
for the second quarter and first half of 1997, respectively.
The earnings per common share computation reflected 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 intensely competitive and highly promotional, and
the tone of business continues to be challenging. The Company is continuing the
process of implementing a comprehensive business transformation effort which
includes process reengineering and profit improvement programs. Management
believes, that based on trends, in fall and holiday bookings, the Company will
continue to report improved sales and earnings in the third and fourth quarters
of 1997.
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FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
Net cash used in operating activities was $11 million through July 5, 1997,
compared to net cash provided by operating activities of $12 million through
June 29, 1996, primarily due to a larger decrease in accounts payable and
accrued expenses, partially offset by higher net income. Net cash used in
investing activities was $134 million in 1997, compared to $1 million in 1996.
The fluctuations in net cash used in investing activities were primarily related
to the net increase or decrease in marketable securities on a period-to-period
basis. Net cash used in financing activities was $42 million in 1997, compared
to $46 million in 1996, principally reflecting higher proceeds from the sales of
put warrants and exercise of stock options. As of August 15, 1997, the Company
had expended, or committed to expend through the sale of put warrants (see Note
6 of Notes to Consolidated Financial Statements), approximately $666 million of
the $675 million authorized under its stock repurchase program, covering an
aggregate of 23 million shares.
Inventories at July 5, 1997 were $328 million, down from $349 million at 1996
year end and $362 million at June 29, 1996. The reduced inventory level
principally reflected a reduction of ongoing inventory within the outlet
operations and certain wholesale apparel and non-apparel divisions, a reduction
of close-out inventory, and planned lower inventory of the Collection and Dress
Divisions due to weakness in demand.
The Company's anticipated capital expenditures for 1997 currently approximate
$50 million, of which $12 million has been expended through July 5, 1997. These
expenditures consist primarily of the expansion of the Company's distribution
facilities, including certain building and equipment expenses and renovation of
New York showrooms and offices. The Company has recently commenced
implementation of a significant information systems upgrade project, which will
involve substantial changes to the Company's present hardware and software
systems that the Company expects to provide certain competitive benefits and
render its information systems "Year 2000" compliant. Management currently
expects that full implementation of this project will involve a commitment of
approximately $45-$60 million over the next three years; approximately $7
million of such amount is included in the Company's $50 million anticipated
capital expenditures for 1997 referred to above. Capital 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 through the issuance of letters of
credit, were $450 million as of July 5, 1997. The Company expects to be able to
adjust these lines as required.
Statements contained herein that relate to the Company's future performance,
including, without limitation, statements with respect to the Company's
anticipated results for the remainder of fiscal 1997, shall be deemed
forward-looking statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, as a number of factors affecting the
Company's business and operations could cause actual results to differ
materially from those contemplated by the forward-looking statements. Those
factors include the overall level of consumer spending and the performance of
the Company's products within the prevailing retail environment, as well as such
other factors as are set forth in the Company's 1996 Annual Report on Form 10-K,
including, without limitation, those set forth under the heading "Business -
Competition; Certain Risks". As previously announced, the Company has introduced
a new upper-moderate label and has repositioned its moderate brands under its
recently designated Special Markets Unit. The Company's efforts to date within
the moderate market (which is generally a lower margin business) have generally
not been profitable. This business is accompanied by certain risks, including
risks associated with generating acceptance by new customers (including mass
merchants) of new product lines and the general risks inherent with any such
expansion.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and certain of its present and former 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 defendants' 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 August 1995,
the Court granted that motion, again with leave to amend, on the grounds that
the Ressler complaint failed to comply with pleading requirements of the Federal
Rules of Civil Procedure. However, the Court rejected the contention that
scienter had not been adequately pled. In response to the defendants' motion for
reconsideration of that latter point, the Court indicated that the Company could
present the scienter issue again in moving to dismiss a new amended complaint.
In October 1995, a second amended complaint was filed in the Ressler action. In
December 1995, the defendants moved to dismiss that 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 certain of the Company's directors and two of its
former Vice Chairmen. The complaints contain allegations that the individual
defendants breached their fiduciary obligations to the Company and its
stockholders, committed corporate mismanagement and wasted corporate assets in
connection with the Company's stock repurchase program and the defense of
pending legal proceedings, and were unjustly enriched 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 motion is
pending.
The Company believes that the litigations described above 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 1997 Annual Meeting of Stockholders held on May 15, 1997, the
stockholders of the Company (i) ratified the appointment of Arthur Andersen LLP
as independent public accountants of the Company for the fiscal year ending
January 3, 1998 (the number of affirmative votes cast was 63,271,197, the number
of negative votes cast was 29,202 and the number of abstentions was 83,628), and
(ii) elected the following nominees to the Company's Board of Directors:
Votes
Nominee For Withheld
Ann M. Fudge 62,568,307 816,320
Paul E Tierney, Jr. 62,570,212 814,415
There were no broker non-votes with respect to any matter acted upon at the
Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule as of July 5, 1997.
(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 18, 1997 BY /s/ Samuel M. Miller
--------------------
SAMUEL M. MILLER
Senior Vice President - Finance
Chief Financial and Accounting Officer
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<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUL-05-1997
<CASH> 137,730
<SECURITIES> 323,644
<RECEIVABLES> 204,536
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0
0
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