<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 3, 1998
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 16, 1998, 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 $3,452,723,292.
Number of shares of the registrant's Common Stock, par value
$1 per share, outstanding as of March 16, 1998: 66,001,538 shares.
Documents Incorporated by Reference:
Registrant's Proxy Statement relating to its Annual Meeting of
Stockholders to be held on May 14, 1998 - Part III.
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PART I
Item 1. Business.
Overview
Liz Claiborne, Inc. designs and markets an extensive range of fashion
apparel and accessories, with versatile collections appropriate to wearing
occasions ranging from casual to dressy, and fragrances. The Company's portfolio
of marks includes the DANA BUCHMAN, DANA B. & KAREN, LIZ CLAIBORNE, LIZSPORT,
LIZWEAR, LIZ & CO., ELISABETH, JH COLLECTIBLES, EMMA JAMES, VILLAGER, FIRST
ISSUE, RUSS and CRAZY HORSE brands for women and the CLAIBORNE brand for men.
Products licensed to carry the Company's marks include women's shoes, home
furnishings, outerwear, swimwear, optics, sunglasses, watches, and men's
tailored clothing. In addition, in January 1998, the Company consummated a
license agreement with an affiliate of Donna Karen International, Inc. to
design, produce, market and sell men's and women's sportswear, jeanswear, and
activewear products under the DKNY(R) JEANS and DKNY(R) ACTIVE trademarks and
logos.
Products are manufactured to the Company's specifications in the United
States and abroad and are marketed through leading department and specialty
stores and other channels in the United States, Canada, Europe, Asia, and
Central and South America. Although they offer a wide array of styles, all of
the Company's lines share the common characteristics of innovative fashion and
exceptionally high quality and value. The Company believes that it is the
largest "better" women's sportswear and dress company in the United States.
Generally, the Company's sportswear products are conceived and marketed as
"designer" items, but are priced in the "better" apparel range.
At February 27, 1998, the Company's order book reflected unfilled customer
orders for approximately $747 million of merchandise (including DKNY(R) JEANS
products), as compared to approximately $690 million at February 28, 1997.
Order book data at any given date is materially affected by the timing of
recording orders and of shipments. Accordingly, order book data should not be
taken as indicative of eventual actual shipments or net sales, or as providing
meaningful period-to-period comparisons. Substantially all orders will be
filled within the 1998 fiscal year. There are no seasonal factors affecting
the backlog disclosed above.
As used herein, the term the "Company" refers to Liz Claiborne, Inc., a
Delaware corporation, together with its consolidated subsidiaries, and its
predecessor New York corporation (incorporated in 1976).
Narrative Description of Business
In order to reach a broad spectrum of consumers, the Company offers an
array of products under its portfolio of brands through a variety of
distribution channels at a broad range of price points. The Company seeks in its
product offerings to provide versatility to its consumers, in terms of
individual items, price points and overall collections of items.
In January 1998, the Company eliminated its Special Sizes Unit and
realigned its ELISABETH and petite businesses as stand-alone operating units.
Currently, the Company's women's "better" sportswear product lines are organized
into the Casual Unit (consisting of "misses" LIZSPORT, LIZWEAR and LIZ & CO.
product); the COLLECTION Division (consisting of "misses" COLLECTION and STUDIO
(casual careerwear) product); the ELISABETH Division (consisting of "misses" and
petite ELISABETH and ELISABETH-LIZ & Co. large-sized sportswear product); and
the Petite Unit (consisting of petite sizings for each of the LIZSPORT, LIZWEAR,
LIZ & Co. and COLLECTION product lines).
Substantially all products in each sportswear collection are sold as
separate items. Collections are structured, however, through the use of related
styles, color schemes and fabrics, to enable the consumer to assemble outfits
consisting of separate items which are designed to be worn together. By offering
similar or related styles, color schemes and fabrics over an extended period,
the Company intends to provide the consumer with a wardrobe which can be
coordinated with other Company items from season to season.
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The following is a comparison of net sales by product/division for each of the
five fiscal years ended January 3, 1998.
<TABLE>
<CAPTION>
(Dollars in millions)
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Casual(1) ....................................... $ 708.5 $ 607.6 $ 555.9 $ 610.2 $ 695.6
Special Sizes(2) ............................... 440.0 410.3 344.7 364.8 397.0
Collection and Studio ........................... 182.8 209.7 207.1 238.1 274.3
---------- ---------- ---------- ---------- ----------
Total Better Women's Sportswear ........ 1,331.3 1,227.6 1,107.7 1,213.1 1,366.9
Accessories and Other Non-Apparel ............... 314.1 297.5 330.4 368.1 344.3
Outlet Stores ................................... 228.6 193.8 155.0 140.1 122.4
Dana Buchman .................................... 189.5 188.7 136.2 112.9 90.2
Retail Specialty Stores ......................... 182.9 199.7 195.0 150.0 114.4
Men's Sportswear and Furnishings ................ 145.7 121.6 113.1 101.7 80.7
Special Markets(3)............................... 104.0 77.3 81.3 111.6 78.7
Dresses ......................................... 89.0 105.3 123.0 121.9 130.0
---------- ---------- ---------- ---------- ----------
2,585.1 2,411.5 2,241.7 2,319.4 2,327.6
Intercompany Sales Elimination .................. (172.5) (194.0) (160.1) (156.5) (123.3)
---------- ---------- ---------- ---------- ----------
Net Sales .............................. $ 2,412.6 $ 2,217.5 $ 2,081.6 $ 2,162.9 $ 2,204.3
========== ========== ========== ========== ==========
Net Sales by Geographic Areas
Domestic ........................................ $ 2,273.3 $ 2,092.3 $ 1,943.4 $ 2,039.9 $ 2,091.0
International ................................... 139.3 125.2 138.2 123.0 113.3
---------- ---------- ---------- ---------- ----------
Net Sales .............................. $ 2,412.6 $ 2,217.5 $ 2,081.6 $ 2,162.9 $ 2,204.3
========== ========== ========== ========== ==========
</TABLE>
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1. Casual: Liz & Co., Lizsport, Lizwear
2. Special Sizes: Elisabeth, Liz Claiborne Petites
3. Special Markets: Emma James, First Issue, Russ, Villager, Crazy Horse
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The Casual Unit offers "misses" casual sportswear under three of the
Company's trademarks. The LIZSPORT Division offers all-American sportswear,
including twill products, for less formal work settings and casual occasions.
The LIZWEAR Division offers denim and denim-related sportswear, including twills
and fashion coordinates. The LIZ & CO. Division offers versatile career and
casual knitwear. As a result of the realignment of the Company's petite
businesses, as of January 1998, the Casual Unit's products are offered in petite
sizes under the Company's Petite Unit.
The COLLECTION Division offers "misses" professional careerwear with
desk-to-dinner versatility under the LIZ CLAIBORNE trademark and casual
careerwear under the STUDIO trademark. As a result of the realignment of the
Company's petite businesses, as of January 1998, the COLLECTION Division's
products are offered in petite sizes under the Company's Petite Unit.
The DANA BUCHMAN Division offers collections for the women's "bridge"
market (the market between the "better" and designer markets) under the
Company's DANA BUCHMAN trademark and casual wear under the Company's
DANA B. & KAREN trademark, and dresses under both trademarks. In September 1997,
the Company introduced a line of "upscale" specialty store products under the
Company's DANA BUCHMAN LUXE trademark; shipping commenced in February 1998. The
Division offers products with elegant styling in distinctive fabrics, in
"misses", large and petite sizes.
The ELISABETH Division, which until January 1998 was part of the Special
Sizes Unit, offers large-sized classic careerwear, weekend casual and wardrobe
basics in "plus" sizes (including petite proportions) under the Company's
ELISABETH and ELISABETH-LIZ & CO. trademarks.
The Dresses Division offers dresses and suits providing day-into-evening
versatility under the Company's LIZ CLAIBORNE COLLECTION trademark in
both the "misses" and petite size ranges, large-sized dresses under the
ELISABETH trademark and special occasion dresses under the LIZ NIGHT trademark.
The Menswear Division offers men's business-casual wear, sportswear and
furnishings (dress shirts and ties) under the CLAIBORNE trademark.
Each of the above Divisions presented four seasonal collections during
1997, except that the DANA BUCHMAN Division presented three, and the Dresses
Division presented five, seasonal collections.
The Accessories Group offers a wide variety of products through its
Handbag/Small Leather Goods, Fashion Accessories and Jewelry Divisions,
primarily under the LIZ CLAIBORNE trademark. These offerings mirror major
fashion trends and complement many of the Company's other product lines. In
March 1998, the Accessories Group introduced a line of accessories bearing the
DANA BUCHMAN trademark, with shipping anticipated to commence in June 1998.
The Company's Cosmetics Division offers fragrance and bath and body-care
products under the LIZ CLAIBORNE, REALITIES, VIVID, CLAIBORNE FOR MEN, CURVE,
and, commencing in the third quarter of 1997, LIZSPORT and CLAIBORNE SPORT
trademarks.
The Special Markets Unit offers updated career and casual clothing under
four Company trademarks: EMMA JAMES ("upper-moderate" priced related separates
for the casual workplace, sold in department stores nationally), VILLAGER
("popular" priced relaxed separates for soft career and weekend dressing, sold
in regional department stores), FIRST ISSUE ("value" priced relaxed career and
everyday wear, sold exclusively in Sears department stores), and RUSS ("budget"
priced casual separates, sold in Wal-Mart stores and other mass merchandisers).
The EMMA JAMES line first shipped in January 1997. The RUSS line first shipped
to Wal-Mart stores in January 1997. In the third quarter of 1997, the Company
announced that it was repositioning its CRAZY HORSE brand ("moderate" priced
casual separates) to be sold exclusively at J.C. Penney stores; shipping is
expected to commence by the third quarter of 1998. See "Competition; Certain
Risks."
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In January 1998, the Company consummated a license agreement with an
affiliate of Donna Karan International, Inc. to design, produce, market and
sell men's and women's sportswear, jeanswear and activewear products under the
DKNY(R) JEANS and DKNY(R) ACTIVE trademarks and logos. DKNY(R) JEANS products
were first shipped in the first quarter of 1998, and DKNY(R) ACTIVE products are
anticipated to be shipped in the first quarter of 1999.
In March 1998, the Company announced plans to launch a line of women's
apparel under the JH COLLECTIBLES trademark, which will consist of clothing for
all occasions, ranging from relaxed office attire to stylish weekend wear. The
Company expects the line to be available in department stores beginning Spring
1999.
Sales and Marketing
The Company's wholesale sales are made primarily to department, specialty
and chain store customers throughout the United States. Retail sales are also
made through the Company's own retail stores and outlet stores, as well as to
international customers, direct-mail catalog companies, military exchanges and
other outlets. The Company continues to evaluate its methods of doing business
internationally. At 1997 year-end, LIZ CLAIBORNE products were being sold in
over 70 markets outside the United States. The Company expects to continue
expansion within these markets and to expand to additional markets.
The Company currently operates a total of 113 prototype and presentational
specialty retail stores, located throughout the United States, which carry
solely Company products: 52 LIZ CLAIBORNE stores, 53 ELISABETH large-size
apparel stores, 7 CLAIBORNE mens' stores and one DANA BUCHMAN store. These
stores typically range in size from 2,000 square feet to 12,000 square feet. The
LIZ CLAIBORNE flagship store, an approximately 17,000 square foot facility, is
located on Fifth Avenue in New York City. The Company's retail stores enable it
to more closely track sales and other product data, obtain market information
and experiment with new products, visual presentation and ideas for enhancing
customer service. This information is used to help the Company's wholesale
customers respond more quickly to consumer preferences.
In Canada, the Company operates a wholesale business which sells primarily
to department store chains and specialty stores. During 1997, the Company
continued its LIZ CLAIBORNE and DANA BUCHMAN product distribution in Canada and
its expansion into the moderate market. During 1997, the Company continued to
operate in Western Europe, principally through leased departments, or
concessions, with a concentration in the United Kingdom and Spain, with
wholesale distribution in Denmark, Belgium, Ireland and France; the Company
plans to further expand wholesale distribution in international markets. In
other international markets, the Company has continued to add retail licenses
with third parties; at year-end 1997, these operations were comprised of 117
stores and dedicated department store shop-in-shops in 24 countries.
Approximately 87% of 1997 sales were made to the Company's 100 largest
customers. Except for Dillard's Department Stores, Inc., which accounted for
approximately 12% of 1997 and 11% of 1996 sales, no single customer accounted
for more than 6% of 1997 or 1996 sales. However, certain of the Company's
customers are under common ownership; when considered together as a group under
common ownership, sales to the eight department store customers which were owned
at year-end 1997 by The May Department Stores Company accounted for
approximately 19% of 1997 and 18% of 1996 sales, and sales to the seven
department store customers which were owned at year-end 1997 by Federated
Department Stores, Inc. accounted for approximately 17% of 1997 and 1996 sales.
See Note 8 of Notes to Consolidated Financial Statements. Many major department
store groups make centralized buying decisions; accordingly, any material change
in the Company's relationship with any such group could have a material adverse
effect on the Company's operations. The Company expects that its largest
customers will continue to account for a significant percentage of its sales.
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Sales to the Company's department and specialty store customers are made
primarily through the Company's New York City showrooms.
Orders from the Company's customers generally precede the related shipping
periods by several months. The Company's largest customers discuss with the
Company retail trends and their plans regarding their anticipated levels of
total purchases of Company products for future seasons. These discussions are
intended to assist the Company in planning the production and timely delivery of
its products. The Company continually monitors retail sales in order to assess
directly consumer response to its products.
The Company has implemented and continues to expand in-stock reorder
programs in several divisions to enable customers to reorder certain items for
quick delivery. See "Manufacturing." During 1997, the Company continued the
expansion of LIZRIM, an inventory replenishment system installed at a number of
its retail customers.
In 1997, the Company continued to expand its LIZEDGE program, an in-store
marketing and merchandising program designed to enhance the way the Company's
products appear on the selling floor and to encourage multiple item, regular
price sales. As part of this expansion, the Company's retail store customers
designated certain of their employees as LIZEDGE "consultants," who "ring the
register," merchandise the selling floor and establish one-on-one relationships
with consumers. In addition, in 1997, the Company's Accessories Group introduced
the Accessories' LIZEDGE Program, a similar servicing and maintenance program.
In 1997, the Company expanded its LIZVIEW program, a program designed to
enhance the presentation of the Company's product on retail selling floors
generally through the use of proprietary fixturing and layouts. At year-end
1997, over 600 LIZVIEW shops were installed in more than 350 stores,
representing over 900,000 square feet of upgraded selling space. The Company has
requests for more than 1,400 additional LIZVIEW installations and anticipates
that approximately 500 will be installed during 1998.
The Company spent approximately $31 million on national advertising in
1997, compared with approximately $23 million in 1996. Current plans call for
1998 advertising expenditures of approximately $33 million. The Company
maintains cooperative advertising programs under which it generally shares the
costs of each customer's advertising and promotional expenditures, up to a
stated percentage of the customer's purchases. The Company incurred costs under
the cooperative advertising programs of approximately $58 million in respect of
1997 sales.
In the fourth quarter of 1997, the Company launched a consumer website
featuring fashion, retail and corporate information regarding LIZ CLAIBORNE
product. During 1998, the Company plans to expand the website to include
information specific to the ELISABETH and CLAIBORNE product lines.
The Company currently operates 102 outlet stores, virtually all of which
are located in "outlet centers" comprised primarily of manufacturer-operated
stores.
Manufacturing
The Company does not own any product manufacturing facilities; all of its
products are manufactured in accordance with its specifications through
arrangements with independent suppliers.
A very substantial portion of the Company's sales is represented by
products produced abroad, mainly in the Far East, the Caribbean and Central
America. The Company also sources in the United States and other regions. The
Company does not itself own quota and therefore must obtain quota from its
suppliers and vendors. During 1997, the Company's products were manufactured by
several hundred suppliers. The Company's products are currently manufactured in
approximately 30 different countries, including China, the Dominican Republic,
Sri Lanka, Saipan, South Korea, the United States, and Hong Kong. The Company
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continually seeks additional suppliers throughout the world for its sourcing
needs. The Company's largest supplier of finished products manufactured less
than 6.5% of the Company's purchases of finished products during 1997.
Approximately 30% of the Company's 1997 purchases of finished products were
manufactured by its ten largest suppliers, as compared to 28% of 1996 and 1995
purchases. The Company expects that the percentage of production represented by
its largest suppliers will continue to increase in light of the Company's
ongoing worldwide factory certification initiative, under which the Company is
planning to allocate even larger portions of its production requirements to
suppliers which appear to have superior capacity, quality (of product and
operations) and financial resources. The Company's purchases from its suppliers
are affected through individual purchase orders specifying the price and
quantity of the items to be produced. Generally, the Company does not have any
long-term, formal arrangements with any of the suppliers which manufacture its
products. The Company believes that it is the largest customer of many of its
manufacturing suppliers and considers its relations with such suppliers to be
satisfactory.
During 1997, most of the Company's fabrics, trimmings and other materials
were obtained in bulk from various foreign and domestic suppliers. Where the
Company purchases completed product "packages" from its contractors, the
contractor is itself responsible to purchase all necessary raw materials and
other product components. Inasmuch as the Company intends to continue to move
towards purchasing an increasing portion of its products as "packages," the
Company continues its development of a group of "approved suppliers" to supply
raw materials and other product components directly to its contractors; the
Company anticipates purchasing a substantial portion of its products as
"packages" in 1998. During 1997, the raw materials used in Company products were
purchased from several hundred suppliers, located in the United States, South
Korea, Taiwan, Hong Kong, Japan and Italy. Approximately 30% of the Company's
expenditures for raw materials during 1997 and 28% during 1996 were accounted
for by its five largest raw material suppliers, with no single raw material
supplier accounting for more than 8% of 1997 raw material purchases. Generally,
the Company does not have any long-term, formal arrangements with any supplier
of raw materials. To date, the Company has experienced little difficulty in
satisfying its raw material requirements and considers its sources of supply
adequate.
The Company operates under substantial time constraints in producing each
of its collections. See "Sales and Marketing." In order to deliver, in a timely
manner, merchandise which reflects current tastes, the Company attempts to
schedule a substantial portion of its materials and manufacturing commitments
relatively late in the production cycle, thereby favoring suppliers able to make
quick adjustments in response to changing production needs. However, in order to
secure necessary materials and manufacturing facilities, the Company must make
substantial advance commitments, often as much as seven months prior to the
receipt of firm orders from customers for the items to be produced. The Company
continues to seek to reduce the time required to move products from design to
the customer.
If the Company should misjudge its ability to sell its products, it could
be faced with substantial outstanding fabric and/or manufacturing commitments,
resulting in excess merchandise inventories. See "Competition; Certain Risks".
For example, the Company was left with significant excess merchandise inventory
positions during 1993 and into the first half of 1994 due to the Company's
increased 1993 commitments compared to 1992 and the decreased demand for certain
of the Company's apparel at retail.
The Company's arrangements with foreign suppliers are subject to the risks
of doing business abroad, including currency fluctuations and revaluations,
restrictions on the transfer of funds and, in certain parts of the world,
political, economic and currency instability. The Company's operations have not
been materially affected by any such factors to date. However, due to the large
portion of the Company's products which are produced abroad, any substantial
disruption of its relationships with its foreign suppliers could adversely
affect the Company's operations.
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Import and Import Restrictions
Virtually all of the Company's merchandise imported into the United States
is subject to United States duties. In addition, bilateral agreements between
the major exporting countries and the United States impose quotas that limit the
amount of certain categories of merchandise that may be imported into the United
States. The majority of such agreements contain "consultation" clauses which
allow the United States, under certain circumstances, to impose unilateral
restrictions on the importation of certain categories of merchandise that are
not subject to specified limits under the terms of an agreement. These bilateral
agreements have been negotiated under the framework of the MultiFiber
Arrangement ("MFA"), which has been in effect since 1974. The United States, a
participant in international negotiations known as the "Uruguay Round," ratified
legislation enacting and implementing the various agreements of the Uruguay
Round, effective January 1, 1995, including the Uruguay Round Agreement on
Textiles and Clothing which requires World Trade Organization member countries
to phase out textile and apparel quotas in three stages over a ten year period.
In addition, it regulates trade in non-integrated textile and apparel quotas
during the ten year transition period. However, even with respect to integrated
textile and apparel quota categories, the United States remains free to
establish numerical restraints in response to a particular product being
imported in such increased quantities as to cause (or threaten) serious damage
to the relevant domestic industry. United States legislation implementing the
Uruguay Round also changes the rule of origin for many textiles and apparel
products effective July 1, 1996, with certain minor exceptions. This change
would determine country of origin based on "assembly" for most textile and
apparel products. The Uruguay Round also incorporates modest duty reductions for
textile and apparel products over a ten year staging schedule. This will likely
result in a modification of current patterns of international trade with respect
to apparel and textiles. In addition, there are various United States
initiatives pending concerning the trading status of certain countries, which,
if enacted, would likely increase the cost of doing business in such countries.
See "Item 7. -- Management's Discussion and Analysis of Financial Condition and
Results of Operations".
In addition, each of the countries in which the Company's products are sold
have laws and regulations regarding import restrictions and quotas. Because the
United States and other countries in which the Company's products are
manufactured and sold may, from time to time, impose new quotas, duties,
tariffs, surcharges or other import controls or restrictions, or adjust
presently prevailing quota allocations or duty or tariff rates or levels, the
Company maintains a program of intensive monitoring of import and quota-related
developments. The Company seeks continually to minimize its potential exposure
to import and quota-related risks through, among other measures, allocation of
production to merchandise categories that are not subject to quota pressures,
adjustments in product design and fabrication, shifts of production among
countries and manufacturers, as well as through geographical diversification of
its sources of supply.
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 textile agreements, could adversely affect the Company's operations.
Trademarks
The Company utilizes a variety of trademarks in connection with its
products, including LIZ CLAIBORNE, LIZ, CLAIBORNE, LIZWEAR, LIZSPORT, LIZ
CLAIBORNE COLLECTION, LIZ NIGHT, LIZ CLAIBORNE STUDIO, its LC logomark, its
triangular logomark, DANA BUCHMAN, DANA B. & KAREN, DANA BUCHMAN LUXE,
ELISABETH, LIZ & CO., LEATHER CO., EMMA JAMES, FIRST ISSUE, RUSS, VILLAGER,
CRAZY HORSE, REALITIES, VIVID, CURVE and CLAIBORNE SPORT. In February 1997, the
Company acquired several trademarks from JH Collectibles,Inc.,including JH
COLLECTIBLES, JH and JUNIOR HOUSE; the Company has announced plans to launch a
line of women's apparel under the JH COLLECTIBLES trademark in 1999. In January
1998, the Company licensed exclusive rights in the Western Hemisphere to the
DKNY(R) JEANS and DKNY(R) ACTIVE trademarks and logos for men's and women's
sportswear, jeanswear and activewear.
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See "Item 1.--Business-Narrative Description of Business." The Company has
registered or applied for registration of a multitude of trademarks for use on
apparel and apparel-related products, including accessories, cosmetics and
jewelry in the United States as well as numerous foreign territories. The
Company also has a number of design patents. The Company regards its trademarks
and other proprietary rights as valuable assets and believes that they have
significant value in the marketing of its products. The Company vigorously
protects its trademarks and other intellectual property rights against
infringement.
Licensing
The Company has eleven license arrangements pursuant to which third party
licensees produce merchandise under the Company's trademarks in accordance with
designs furnished or approved by the Company, the present terms of which (not
including renewal terms) expire at various dates through 2010. Current licenses
cover women's career, career-casual, casual and sport shoes; home furnishing
products; women's outerwear and rainwear apparel; women's swimwear and related
merchandise; women's and men's ophthalmic frames for prescription eyewear;
women's and men's sunglasses and readers; women's watches; men's tailored
clothing; men's accessories; tabletop products; and boys' apparel. Each of the
licenses provides for the payment to the Company of a percentage of the
licensee's sales of the licensed products against a guaranteed minimum royalty
which generally increases over the term of the agreement.
Competition; Certain Risks
The apparel and related product markets are highly competitive, both within
the United States and abroad.
The Company's ability to successfully compete depends on a number of
factors, including the Company's ability to effectively anticipate, gauge and
respond to changing consumer demands and tastes, to translate market trends into
appropriate, saleable product offerings relatively far in advance, and to
operate within substantial production and delivery constraints. In addition,
consumer and customer acceptance and support (especially by the Company's
largest customers) depend upon, among other things, product, value and service.
The Company believes that, based on sales, it is among the largest apparel
companies operating in the United States. Although the Company is unaware of any
comprehensive trade statistics, it believes, based on its knowledge of the
market and available trade information, that measured by sales, it is the
largest "better" women's sportswear and dress company in the United States.
Commencing in 1996, a number of apparel companies began distribution of new
collections of women's "better" sportswear through the department store channel
of distribution.
In addition to the competitive factors described above, the Company's
business, including its revenues and profitability, is influenced by and subject
to a number of factors which are inherently uncertain and therefore difficult to
predict, including the general retail environment and general economic
conditions; the Company's relationships with its customers, especially its major
department store customers; the Company's ability to correctly judge the level
of its fabric and/or merchandise commitments; the Company's ability to
effectively distribute its products within its targeted markets (including
distribution through wholesale accounts and Company operated retail stores and
concession locations); and the chance of substantial disruption of the Company's
relationships with its suppliers, manufacturers and employees. See also the
competitive and risk factors discussed under the headings "Sales and Marketing"
and "Manufacturing".
The Company from time to time reviews its possible entry into new markets.
The entry into new markets (including the development and launch of new product
categories), such as the Company's entry into the moderate market, is
accompanied by risks inherent in any new business and may require methods of
operations and
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marketing strategies different from those employed in the Company's other
businesses. Certain new businesses may be lower margin businesses and may
require the Company to achieve significant cost efficiencies. In addition, new
markets may involve buyers, store customers and/or competitors different from
the Company's historical buyers, customers and competitors.
For a discussion of the Company's information system upgrade project,
including efforts to assure Year 2000 compliance, and the risks associated with
such efforts, see "Item 7-- Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000/Information Systems Upgrade."
Employees
At January 3, 1998, the Company had approximately 7,300 full-time
employees, as compared with approximately 7,100 full-time employees at December
28, 1996. The Company considers its relations with its employees to be
satisfactory and to date has not experienced any interruption of operations due
to labor disputes.
The Company is bound by a national collective bargaining agreement with the
Union of Needletrades, Industrial and Textile Employees (UNITE), agreements with
various locals and a Jobbers Agreement with UNITE. These agreements cover
approximately 1,800 of the Company's full-time employees and expire on May 31,
2000. Most of the union-represented employees are employed in the eight
warehouse and distribution facilities the Company operates in New Jersey,
Pennsylvania and Alabama.
Item 2. Properties.
The Company's showrooms and executive offices, as well as its sales,
merchandising and design staffs, are located at 1441 Broadway, New York, New
York, where the Company leases approximately 276,000 square feet under a master
lease which expires at the end of 2001 and contains certain renewal options and
rights of first refusal for additional space. The Company currently leases
office space at two other buildings in New York City covering approximately
29,000 and 93,000 square feet (with terms expiring in 2003 and 2013,
respectively).
The Company owns its approximately 450,000 square foot principal New Jersey
warehouse and distribution facility located at One Claiborne Avenue, North
Bergen, New Jersey. This facility also houses the Company's production and
certain other administrative personnel. The Company also owns an approximately
300,000 square foot office facility at this location. The Company presently
leases approximately 912,000 square feet in six other New Jersey warehouse and
distribution facilities, the current terms of which expire through 2008. The
Company also owns an approximately 313,000 square foot warehouse and
distribution facility located on 80 acres in Mt. Pocono, Pennsylvania, and is in
the process of expanding this facility to include an additional 319,000 square
foot warehouse and distribution facility. The Company leases pursuant to
industrial development financing an approximately 290,000 square foot warehouse
and distribution facility located on a 124 acre site in Montgomery, Alabama. The
Company also leases showroom, warehouse and office space in various other
domestic and international locations. The Company leases space for its 113
retail specialty stores (aggregating approximately 493,000 square feet in
various malls) and for its 102 outlet stores (aggregating approximately 922,000
square feet). The Company is seeking to sell its approximately 270,000 square
foot facility in Augusta, Georgia (located on a 98-acre site and previously used
in connection with a dyeing and finishing joint venture).
The Company believes that its existing facilities are well maintained, in
good operating condition and, upon occupancy of additional space, will be
adequate for its present level of operations. See Note 8 of Notes to
Consolidated Financial Statements.
- 10 -
<PAGE> 11
Item 3. Legal Proceedings.
Various legal actions are pending against the Company, including the
following:
The Company and certain of its present and former officers and directors
are defendants in 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 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 Company's 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 December 1995, the Company moved to dismiss that
complaint. The motion was argued in May 1996 and has not yet been decided.
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 former and
present 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 shareholders, 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 with 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 in this Item are
without merit and intends to vigorously defend these actions. Although the
outcome of any such litigation or claim cannot be determined with certainty,
management is of the opinion that the final outcome of these litigations should
not have a material adverse effect on the Company's results of operations or
financial position. See Note 8 of Notes to Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year covered by this report.
- 11 -
<PAGE> 12
Executive Officers of the Registrant.
Information as to the executive officers of the Company is set forth below:
<TABLE>
<CAPTION>
Name Age Position(s)
<S> <C> <C>
Paul R. Charron 55 Chairman of the Board and Chief Executive
Officer
Denise V. Seegal 44 President
Jorge L. Figueredo 37 Senior Vice President - Human Resources
Samuel M. Miller 60 Senior Vice President - Finance, Chief
Financial Officer
John R. Thompson 46 Senior Vice President - Service, Systems and
Reengineering, Chief Information Officer
Robert J. Zane 58 Senior Vice President - Manufacturing and
Sourcing
</TABLE>
Executive officers serve at the discretion of the Board of Directors.
Mr. Charron joined the Company as Vice Chairman and Chief Operating
Officer, and became a Director, in 1994. In 1995, Mr. Charron became President
(a position he held until October 1996) and Chief Executive Officer of the
Company. In 1996, Mr. Charron became Chairman of the Board of the Company. Prior
to joining the Company, Mr. Charron served as Executive Vice President of VF
Corporation, an apparel manufacturer, from 1993 to 1994, and as a Group Vice
President of VF Corporation from 1988 to 1993.
Ms. Seegal joined the Company in 1996 as President. Prior to joining the
Company, Ms. Seegal served as President of the CK Men's and Women's divisions of
Calvin Klein, Inc. from 1994 to 1996 and as President of the DKNY divisions of
the Donna Karan Company from 1989 to 1994.
Mr. Figueredo joined the Company in 1984 as Administrator, Warehouse
Employee Relations and served in various management positions thereafter. In
1992, Mr. Figueredo was promoted to Vice President, Human Resources Operations.
In 1994, Mr. Figueredo was promoted to Senior Vice President - Human Resources.
Mr. Miller, a certified public accountant, joined the Company in 1988 as
Senior Vice President - Finance, Chief Financial and Accounting Officer, after
more than sixteen years in various senior financial positions within the apparel
industry.
Mr. Thompson joined the Company in 1995 as Senior Vice President of
Service, Systems and Reengineering, Chief Information Officer. Prior to joining
the Company, Mr. Thompson served as Executive Vice President for Business
Systems/Logistics and Chief Information Officer of Goody's Family Clothing,
Inc., an apparel retailer, from 1993 to 1995. From 1991 to 1993, Mr. Thompson
was Vice President Business Systems and Management Information Systems for Lee
Apparel Company, an apparel manufacturer. Mr. Thompson also served as Vice
President of Marketing and Sales of Quick Response Services, Inc., an
information management services company, from 1987 to 1991.
Mr. Zane joined the Company in 1995 as Senior Vice President -
Manufacturing and Sourcing. Prior to joining the Company, Mr. Zane owned and
operated Medallion Tekstil, a private label manufacturing company he founded in
1989. Prior to that, Mr. Zane was Vice President, Sourcing at Bernard Chaus,
Inc. and Executive Vice President at Murjani International, Inc.
- 12 -
<PAGE> 13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The Company's Common Stock trades on the New York Stock Exchange ("NYSE")
under the symbol LIZ. The table below sets forth the high and low closing sale
prices of the Common Stock (based on the NYSE composite tape) for the periods
indicated.
<TABLE>
<CAPTION>
Calendar Period High Low
--------------- ---- ---
<S> <C> <C>
1997:
1st Quarter 45 3/4 38 1/4
2nd Quarter 48 13/16 43 5/8
3rd Quarter 57 43 3/4
4th Quarter 57 3/16 39 3/4
1996:
1st Quarter 35 5/8 26 3/8
2nd Quarter 37 3/4 33 1/4
3rd Quarter 37 5/8 28 1/8
4th Quarter 45 36 1/4
</TABLE>
On March 3, 1998, the closing sale price of the Company's Common Stock was
$50 5/8. As of March 3, 1998, the approximate number of record holders of
Common Stock was 9,409.
The Company has paid regular quarterly cash dividends since May 1984.
Quarterly dividends for the last two fiscal years were paid as follows:
<TABLE>
<CAPTION>
Calendar Period Dividends Paid per Common Share
--------------- -------------------------------
<S> <C>
1997:
1st Quarter $.1125
2nd Quarter $.1125
3rd Quarter $.1125
4th Quarter $.1125
1996:
1st Quarter $.1125
2nd Quarter $.1125
3rd Quarter $.1125
4th Quarter $.1125
</TABLE>
The Company plans to continue paying quarterly cash dividends on its Common
Stock. The amount of any such dividend will depend on the Company's earnings,
financial position, capital requirements and other relevant factors.
In December 1989, the Board of Directors first authorized the repurchase,
as market and business conditions warranted, of the Company's Common Stock for
cash in open market purchases and privately negotiated transactions. From time
to time thereafter, the Board has authorized additional repurchases. As of March
16, 1998, the Company had expended, or had commitments to expend through the
sale of put warrants (see Note 8 of Notes to Consolidated Financial Statements),
approximately $887 million of the $975 million authorized under its stock
repurchase program, covering an aggregate of 27.4 million shares.
- 13 -
<PAGE> 14
Item 6. Selected Financial Data.
The following table sets forth certain information regarding the Company's
operating results and financial position and is qualified in its entirety by the
consolidated financial statements and notes thereto which appear elsewhere
herein:
(All dollar amounts in thousands except per common share data)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 2,412,601 $ 2,217,518 $ 2,081,630 $ 2,162,901 $ 2,204,297
Gross profit 969,658 876,435 790,701 755,207 750,916
Net income 184,644 155,665 126,914 82,849* 126,924**
Working capital 729,763 815,429 757,199 717,905 748,667
Total assets 1,305,285 1,382,750 1,329,243 1,289,662 1,236,338
Stockholders'
equity 921,627 1,020,492 988,226 982,984 978,291
Per common share data:
Basic earnings 2.65 2.15 1.69 1.06* 1.56**
Diluted earnings 2.63 2.14 1.69 1.05* 1.55**
Book value at
year end 13.94 14.37 13.41 12.77 12.41
Dividends paid .45 .45 .45 .45 .44
Weighted average
common shares
outstanding 69,619,167 72,396,130 75,002,861 78,526,724 81,509,120
Weighted average
common shares
and share
equivalents
outstanding 70,191,115 72,845,100 75,299,746 78,550,547 81,648,719
</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.
All earnings per share have been restated to reflect the adoption of
Statement of Financial Accounting Standards No. 128 "Earnings per Share."
- 14 -
<PAGE> 15
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The following table sets forth items in the Consolidated Statements of Income as
a percent of net sales and the percentage change of those items as compared to
the prior year.
<TABLE>
<CAPTION>
PERCENT OF NET YEAR TO YEAR
SALES PERCENTAGE CHANGE
- --------------------------------------------------------------------------------
FISCAL YEARS 1997 1996 1995 1997 VS. 1996 VS.
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0% 8.8% 6.5%
Cost of goods sold 59.8 60.5 62.0 7.6 3.9
----- ----- -----
GROSS PROFIT 40.2 39.5 38.0 10.6 10.8
Selling, general and
administrative expenses 28.7 28.9 28.8 7.9 6.9
----- ----- -----
OPERATING INCOME 11.5 10.6 9.2 18.1 23.4
Investment and other
income-net .7 .6 .6 10.4 11.4
----- ----- -----
INCOME BEFORE PROVISION
FOR INCOME TAXES 12.2 11.2 9.8 17.7 22.6
Provision for income
taxes 4.5 4.2 3.7 16.2 22.6
----- ----- -----
NET INCOME 7.7% 7.0% 6.1% 18.6% 22.7%
===== ===== =====
</TABLE>
The Company's net sales for 1997 (53 weeks) were $2.41 billion, compared to
$2.22 billion in 1996 (52 weeks) and $2.08 billion in 1995 (52 weeks). The 1997
results reflected increased net sales of better casual women's sportswear, men's
sportswear and Special Markets product as well as increased net sales of the
outlet operations, partially offset by lower net sales of COLLECTION product and
dresses as well as lower net sales of the retail operations.
The 1997 net sales results reflected an 8% increase in the sales of the
Company's better women's sportswear lines, comprised of: a 17% increase in the
net sales of Casual product, to $708 million, and a 7% increase in the net sales
of Special Sizes product, to $440 million, due in each case to higher unit
volume, partially offset by a 13% decrease in the net sales of the COLLECTION
product, to $183 million, due to planned lower unit volume, reflecting weakness
in demand. New product offerings accounted for $58 million of the net sales
increase: $28 million of net sales of LIZSPORT and CLAIBORNE SPORT, the
Company's latest fragrances (initially shipped in July 1997), $20 million of net
sales of ELISABETH/LIZ & CO. (initially shipped in September 1996) and $10
million of net sales of CURVE for women and CURVE for men (initially shipped in
July 1996). Sales of the SPORT and CURVE fragrances more than offset the
continuing decline in net sales of the Company's ongoing fragrance products. Net
sales of men's sportswear and furnishings increased 20%, to $146 million, due
primarily to
- 15 -
<PAGE> 16
Results of Operations
continued
higher unit volume and, to a lesser extent, higher average unit selling prices.
Net sales of Special Markets product increased 35%, to $104 million, due to
higher unit volume. Net sales of the outlet operations increased 18%, to $229
million, reflecting additional stores (97 at 1997 year end as compared with 82
at 1996 year end) and the inclusion of one extra week in 1997. The 1997 net
sales increase was moderated by a 15% decrease in dress sales, to $89 million,
due to planned lower unit volume, reflecting weakness in demand, and a 12%
decrease in net sales of the Company's domestic retail stores, to $145 million,
principally reflecting weakness in demand for 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 1996 net sales results reflected an 11% increase in the sales of the
Company's better sportswear lines, comprised of: a 9% increase in the net sales
of Casual product, to $608 million, due in equal parts to higher unit volume and
higher average unit selling prices; a 19% increase in the net sales of Special
Sizes product, to $410 million, due to a significant increase in unit volume,
with 31% of the increase due to the new LIZ & CO. petite line and, to a lesser
extent, the additional product required by the Company's new ELISABETH stores
(61 at 1996 year end as compared with 51 at 1995 year end), notwithstanding
lower net sales of petite COLLECTION product; and a 1% increase in the net sales
of COLLECTION product, to $210 million, reflecting the inclusion of the expanded
STUDIO line, offset by a 12% decrease in the net sales of misses COLLECTION
product due to weakness in demand. Net sales of DANA BUCHMAN product increased
39%, to $189 million, due to higher unit volume, with approximately 45% of the
increase relating to the introduction of the DANA B. & KAREN line. Net sales of
the outlet operations increased 25%, to $194 million, reflecting improved store
productivity and new store openings (82 at 1996 year end as compared with 76 at
1995 year end). Net sales of men's sportswear and furnishings increased 8%, to
$122 million, due to higher unit volume. The 1996 net sales increase was
moderated by a 14% decrease in dress sales, to $105 million, due in equal parts
to lower unit volume and lower average unit selling prices, reflecting weakness
in demand. Approximately 18% of the 1996 net sales increase was attributable to
the change in trade terms (from 10% to 8%, the prevailing standard in the
industry), effective as of January 1, 1996.
Gross profit margins were 40.2% in 1997, compared to 39.5% in 1996 and
38.0% in 1995. Gross profit dollars increased $93 million, or 10.6%, in 1997 and
$86 million, or 10.8%,in 1996. The 1997 results principally reflected the larger
percentage of net sales represented by the Cosmetics Division and outlet
operations (generally higher margin businesses), higher margins within those
businesses, and better margins on close-out sales. The improvement in cosmetics
margins reflected initial shipments of the Company's SPORT fragrances in the
second half of the year. Gross margins for Special Markets product increased
significantly, due to a higher proportion of regular price sales. The overall
gross margin improvement was moderated by lower margins within the ELISABETH and
COLLECTION Divisions due to a lower proportion of regular price sales.
Approximately one-half of the 1996 improvement in gross margin percentage
was due to the change in trade terms referred to above. The 1996 gross profit
results also reflected higher initial gross margins due in part to a larger
proportion of product shipped by ocean vessel transport as compared to more
costly air transport. Overall margins were favorably impacted by significant
margin improvements in the outlet operations, as well as higher margins within,
and a higher proportion of net sales represented by, the DANA BUCHMAN Division
and the Cosmetics Division (both of which are higher margin businesses). The
- 16 -
<PAGE> 17
Results of Operations
continued
improvements in gross margin percentage were moderated by lower margins realized
on dress sales, lower margins within the Special Markets Unit (principally
reflecting the repositioning of the brands), and lower margins within the
Company's domestic retail store operations due to higher store markdowns.
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.
Selling, general and administrative ("SG&A") expenses increased $51
million, or 7.9%, in 1997 over 1996, compared with an increase of $41 million,
or 6.9%, in 1996 over 1995. These expenses represented 28.7% of net sales in
1997, compared to 28.9% in 1996 and 28.8% in 1995. The 1997 dollar increase
principally reflected the continued expansion of the Company's brand enhancing
activities (including a national advertising campaign and in-store service and
presentation program), and marketing expenses related to the introduction of the
new SPORT fragrances. Additional expenses associated with the expansion of the
Company's outlet operations, incremental expenses related to the higher sales
volume in certain divisions, and the additional week included in the 1997 fiscal
year, also contributed to the SG&A increase. The increase was moderated by
continuing expense reduction initiatives.
The 1996 dollar increase in SG&A expenses principally reflected the
continued expansion of the Company's brand enhancing activities described above,
the costs of which were funded through the redeployment of funds generated as a
result of the change in trade terms, and marketing expenses related to the
introduction of the new CURVE fragrances. Additional expenses associated with
the expansion of the Company's DANA BUCHMAN Division and the Company's domestic
retail stores and outlet operations, as well as incremental expenses related to
the higher sales volume in certain divisions, also contributed to the SG&A
increase. The increase was partially offset by continuing expense reduction
initiatives. The Company's former shoe and watch businesses together accounted
for approximately $1 million and $10 million of 1996 and 1995 direct expenses,
respectively, prior to the license of such businesses to third parties.
Investment and other income-net increased on a year-to-year basis by $1.5
million in each of 1997 and 1996, reflecting in each case an increase in the
Company's average investment portfolio, notwithstanding the Company's ongoing
stock repurchase program. The 1996 increase was moderated by various other
income and expense items.
As a result of the factors described above, the Company's income before
provision for income taxes increased on a year-to-year basis 18% in 1997,
compared with 23% in 1996. These results included losses within the Special
Markets Unit (although the 1997 losses were significantly lower than those in
1996). The provision for income taxes reflected the changes in pre-tax income
and a decrease in the effective tax rate from 37.5% in 1996 to 37.0% in 1997.
Net income expressed as a percentage of net sales was 7.7% in 1997,
compared with 7.0% in 1996 and 6.1% in 1995. These increases were principally
due to higher operating margins.
- 17 -
<PAGE> 18
Results of Operations
continued
The earnings per common share computations reflected a lower number of
average outstanding shares on a period-to-period basis as a result of the
Company's ongoing stock repurchase program. Earnings per common share were
computed in accordance with Statement of Financial Accounting Standards No. 128
"Earnings per Share" (see Notes 1 and 13 of Notes to Consolidated Financial
Statements).
The retail environment remains intensely competitive and highly
promotional, and the tone of business continues to be challenging. During 1997,
the Company completed the first phase of a comprehensive business transformation
effort, including process reengineering and profit improvement programs. The
Company is currently implementing the second phase of the program and has
established certain new goals including the continuation of cost reduction
programs, improvements in the Company's operating margins and return on
operating capital, and enhanced customer and consumer responsiveness
initiatives. Over the past few years, the Company has licensed a number of
product categories to third parties; management continues to explore entry into
a licensing arrangement covering its cosmetics business. Management believes
that ongoing product improvements, as well as the Company's stepped up marketing
activities, will continue to enhance customer and consumer response to its
product offerings, resulting in continued growth in 1998.
Financial Position, Capital Resources and Liquidity
Net cash provided by operating activities was $145 million in 1997,
compared to $238 million in 1996 and $222 million in 1995. The year-to-year
decrease in 1997 primarily reflects a change in inventory levels ($47 million
increase in 1997 compared to a decrease of $44 million in 1996), and changes in
other current assets and current liabilities, offset in part by higher net
income.
Net cash used in investing activities was $57 million in 1997, compared to
net cash provided by investing activities of $156 million in 1996 and net cash
used in investing activities of $134 million in 1995. The fluctuations in net
cash used in and provided by investing activities are related to the net
purchases of investments of $13 million in 1997, compared to net disposals of
$176 million in 1996 and net purchases of $118 million in 1995 as well as
changes in the level of capital expenditures on a year-to-year basis.
Net cash used in financing activities was $274 million in 1997, compared to
$123 million in 1996 and $104 million in 1995. The changes in net cash used in
financing activities principally reflects the amount expended in the Company's
stock repurchase program, partially offset by the proceeds from the exercise of
stock options and the sale of put warrants. As of March 3, 1998, the Company had
expended or committed to expend, through the sale of put warrants (see Note 8 of
Notes to Consolidated Financial Statements), approximately $887 million of the
$975 million authorized under its stock repurchase program, covering an
aggregate of 27.4 million shares.
The increase in 1997 year end inventory levels over the prior year end
reflected earlier receipt of spring merchandise across substantially all of the
Company's wholesale apparel divisions and an increase in the inventory levels of
an in-stock reorder program within certain divisions. Lower average inventory
levels had a positive impact on the Company's 1997 inventory turnover rate.
The Company's anticipated capital expenditures for 1998 currently
approximate $80 million. These expenditures consist primarily of the information
systems upgrade discussed below, the technological upgrading and expansion of
the Company's distribution facilities (including certain building and equipment
expenditures) and the expansion of the retail and outlet operations. 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, were $470 million at
year end 1997 and $270 million at year end 1996. The Company expects to be able
to continue to adjust these lines as required.
- 18 -
<PAGE> 19
Results of Operations
continued
Year 2000/Information Systems Upgrade
Many existing computer systems and software products, including several
used by the Company, accept only two digit entries in the date code field.
Beginning in the year 2000, and in certain instances prior to the year 2000,
these date code fields will need to accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, the Company's date
critical functions may be materially adversely affected unless these computer
systems and software products are or become able to accept four digit entries
("year 2000 compliant").
In 1996, the Company commenced a comprehensive upgrade of its management
information systems, which involves substantial changes to the Company's present
hardware and software, and is expected to provide certain competitive benefits
and also result in the Company's information systems being year 2000 compliant
upon completion. The planning stage of this project was recently completed and
the systems development and pilot implementation stages are currently in
progress. Management currently expects that full implementation of the project
will involve a commitment of approximately $50-$60 million over the four year
period ending with year end 1999. Approximately $40-$45 million of such amount
is in the form of capital expenditures, while the remaining $10-$15 million is
being expensed as incurred. As of January 3, 1998, capital expenditures related
to the project totaled $11 million and an additional $4 million had been
expensed as incurred. The Company's financial systems were upgraded for year
2000 compliance during 1997. Project purchases of approximately $20 million are
included in the anticipated 1998 capital expenditures, and approximately $5
million in project associated expenses are expected to be incurred in 1998. The
testing and the initial implementation phases of a significant portion of the
project are currently expected to be completed during the first six months of
1998. The Company expects that with the completion of the project, the year 2000
issue will not pose significant operational problems. There can be no assurance,
however, that the Company's systems will be rendered year 2000 compliant in a
timely manner, or that the Company will not incur significant unforeseen
additional expenses to assure such compliance. Failure to successfully complete
and implement the upgrade project on a timely basis could have a material
adverse effect on the Company's operations.
The Company has begun formal communications with all of its suppliers and
customers to determine the extent to which the Company is vulnerable to those
third parties' failure to remediate their own year 2000 issues. The Company's
estimated project costs and timetables are based on presently available
information, and include the Company's assessment of the abilities of third
parties to address the issue effectively. There can be no assurance, however,
that the systems of other companies on which the Company's processes rely will
be timely converted, or that a failure to successfully convert by another
company, or a conversion that is incompatible with the Company's systems, would
not have an impact on the Company's operations.
Certain Interest Rate and Foreign Currency Risks
The Company has no long-term debt, and finances its capital needs through
available capital and future earnings. The Company's exposure to market risk for
changes in interest rates relates primarily to the Company's investment
portfolio. The Company, by policy, mitigates its exposure by limiting maturity
and placing its investments with high credit quality issuers and limits the
amount of credit exposure to any one issuer. To ensure liquidity, the portfolio
includes only marketable securities readily tradable in an active market. The
table below presents amortized cost amounts and related weighted average yields
by year of maturity for the Company's investment portfolio as of January 3,
1998:
- 19 -
<PAGE> 20
Results of Operations
continued
<TABLE>
<CAPTION>
1998 1999 2000 Total
---------------- ---------------- ---------------- ----------------
(Dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
- ---------------------- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax exempt securities $172,949 4.04% $114,276 4.15% $4,435 4.22% $291,660 4.09%
Taxable securities 52,675 5.71 -- -- -- -- 52,675 5.71
-------- -------- ------ --------
$225,624 4.43% $114,276 4.15% $4,435 4.22% $344,335 4.34%
======== ======== ====== ========
</TABLE>
The Company reduces the risks associated with changes in foreign currency
rates by entering into foreign exchange forward 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.
The table below presents the amount of contracts outstanding, contract rates and
unrealized gains as of January 3, 1998:
<TABLE>
<CAPTION>
U.S. Dollar Contract Unrealized
(Dollars in thousands) Amount Rate Gain
- ---------------------- ----------- -------- ----------
<S> <C> <C> <C>
Canadian dollars $1,466 .7328 $54
British pounds sterling $ 410 1.6419 $ 1
</TABLE>
Inflation
The rate of inflation over the past few years has not had a significant
impact on the Company's sales and profitability.
********************
Statements contained herein that relate to the Company's future
performance, including, without limitation, statements with respect to the
Company's anticipated results for any portion of fiscal 1998, 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 1997 Annual Report on Form 10-K,
including, without limitation, those set forth under the heading "Business -
Competition; Certain Risks."
Item 8. Financial Statements and Supplementary Data.
Information called for by this Item 8 is included following the "Index to
Consolidated Financial Statements and Schedules" appearing at the end of this
Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
- 20-
<PAGE> 21
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information with respect to Executive Officers of the Company is set forth
in Part I of this Annual Report on Form 10-K.
Information with respect to Directors of the Company which is called for by
this Item 10 is incorporated by reference to the information set forth under the
heading "Election of Directors" in the Company's Proxy Statement relating to its
1998 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A (the
"Company's 1998 Proxy Statement").
Item 11. Executive Compensation.
Information called for by this Item 11 is incorporated by reference to the
information set forth under the heading "Executive Compensation" in the
Company's 1998 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information called for by this Item 12 is incorporated by reference to the
information set forth under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" in the Company's 1998
Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Information called for by this Item 13 is incorporated by reference to the
information set forth under the headings "Election of Directors" and "Executive
Compensation-Employment Arrangements" in the Company's 1998 Proxy Statement.
- 21 -
<PAGE> 22
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
PAGE REFERENCE
--------------
1997 FORM 10-K
--------------
MANAGEMENT'S REPORT AND REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS F-2 to F-3
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of January 3, 1998
and December 28, 1996 F-4
Consolidated Statements of Income for the
Three Fiscal Years Ended January 3, 1998 F-5
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended January 3, 1998 F-6 to F-7
Consolidated Statements of Cash Flows for the
Three Fiscal Years Ended January 3, 1998 F-8
Notes to Consolidated Financial Statements F-9 to F-21
UNAUDITED QUARTERLY RESULTS F-22
2. Schedules.
SCHEDULE II -- Valuation and Qualifying Accounts F-23
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.
- 22 -
<PAGE> 23
3. Exhibits.
Exhibit
No. Description
- ------- -----------
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 period
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 as of 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 Exhibits 1 and 2
to Registrant's Form 8-A dated December 21, 1988).
4(b)(i) - Amendment No. 1 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) - Appointment of Rights Agent, dated as of January 24, 1992,
between Registrant and First Chicago Trust Company of New
York, as Rights Agent under the Rights Agreement (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. 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(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein
by reference from Exhibit 10(d)(i) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1988).
10(c)+ - 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(c)(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).
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 23 -
<PAGE> 24
Exhibit
No. Description
- ------- -----------
10(d)+ - 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(d)(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(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g) to the 1992 Annual
Report).
10(e)(i)+ - Amendment Nos. 3 and 4 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g)(i) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
26, 1993 [the "1993 Annual Report"]).
10(e)(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(e)(iii)+ - Amendment No. 6 to the Savings Plan (incorporated herein by
reference from Exhibit 10(e)(iii) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996 [the "1996 Annual Report"]).
10(e)(iv)+ - Amendment No. 7 to the Savings Plan (incorporated herein by
reference from Exhibit 10(e)(iv) to the 1996 Annual Report.
10(e)(v)+* - Amendment No. 8 to the Savings Plan.
10(f)+ - 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(g) - Trust Agreement related to the Profit-Sharing Plan
(incorporated herein by reference from Exhibit 10(jj) to the
1983 Annual Report).
10(g)(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(g)(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(g)(iii)+ - Amendment No. 4 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 July 1,
1995).
10(g)(iv)+ - Amendment No. 5 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(g)(iv) to the 1996 Annual
Report).
10(h)* - National Collective Bargaining Agreement, made and entered
into as of June 1, 1997, by and between Liz Claiborne, Inc.
and the Union of Needletrades, Industrial and Textile
Employees (UNITE) for the period June 1, 1997 through May 31,
2000.
10(h)(i)* - Jobbers Agreement, made and entered into as of June 1, 1997,
by and between Liz Claiborne, Inc. and the Union of
Needletrades, Industrial and Textile Employees (UNITE) for
the period June 1, 1997 through May 31, 2000.
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
* Filed herewith
- 24 -
<PAGE> 25
Exhibit
No. Description
- ------- -----------
10(i) + - Executive Liability and Indemnification Policy No.
8103-53-79G, with Chubb Group of Insurance Companies (the
"Insurance Policy") (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(i)(i)+* - Summary of Extension of the Insurance Policy.
10(j) - Excess Coverage Directors and Officers Liability Insurance
Policy No. 483-73-56, with National Union Fire Insurance
Company of Pittsburgh, PA (the "Excess Policy") (incorporated
herein by reference from Exhibit 10(j) to the 1996 Annual
Report).
10(j)(i)* - Summary of Extension of the Excess Policy.
10(k)+* - Description of Liz Claiborne, Inc. 1997 Salaried Employee
Incentive Bonus Plan.
10(l) - Lease, dated as of January 1, 1990 for premises located at
1441 Broadway, New York, New York between Registrant and
Lechar Realty Corp. (incorporated herein by reference from
Exhibit 10(n) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 1990).
10(m)+ - Liz Claiborne, Inc. Amended and Restated Outside Directors'
1991 Stock Ownership Plan (the "Outside Directors' 1991 Plan")
(incorporated herein by reference from Exhibit 10(m) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995 [the "1995 Annual Report"]).
10(m)(i)+ - Form of Option Agreement under the Outside Directors' 1991
Plan (incorporated herein by reference from Exhibit 10(m)(i)
to the 1996 Annual Report).
10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992
Plan") (incorporated herein by reference from Exhibit 10(p) to
the 1991 Annual Report).
10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by
reference from Exhibit 10(p)(i) to the 1993 Annual Report).
10(n)(ii)+* - Amendment No. 2 to the 1992 Plan.
10(o)+ - 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(p)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(q)+ - Form of Option Grant Certificate under the 1992 Plan
(incorporated herein by reference from Exhibit 10(q) to the
1996 Annual Report).
10(r)+ - Form of Restricted Career Share Agreement under the 1992 Plan
(incorporated herein by reference from Exhibit 10(a) to
Registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1995).
10(s)+* - Form of Restricted Transformation Share Agreement under the
1992 Plan.
10(t)+* - Description of Supplemental Life Insurance Plans.
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
* Filed herewith.
- 25 -
<PAGE> 26
Exhibit
No. Description
- ------- -----------
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, Inc. Supplemental Executive Retirement Plan (as
amended and restated effective as of January 1, 1997)
(incorporated herein by reference from Exhibit 10(w) to the
1996 Annual Report).
10(x)+ - The Liz Claiborne, Inc. Bonus Deferral Plan (incorporated
herein by reference from Exhibit 10(x) to the 1996 Annual
Report).
10(y)+ - Employment Agreement dated as of May 9, 1994, between
Registrant and Paul R. Charron (the "Employment Agreement")
(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)(i)+ - Amendment to the Employment Agreement, dated as of November
20, 1995, between Registrant and Paul R. Charron (incorporated
herein by reference from Exhibit 10(x)(i) to the 1995 Annual
Report).
10(y)(ii)+ - Amendment to the Employment Agreement, dated as of September
19, 1996, between Registrant and Paul R. Charron (including
the Liz Claiborne Retirement Income Accumulation Plan for the
benefit of Mr. Charron)(incorporated herein by reference from
Exhibit 10(y)(ii) to the 1996 Annual Report).
10(z)+ - Employment Agreement dated as of September 26, 1996 between
Registrant and Denise V. Seegal (incorporated herein by
reference from Exhibit 10(z) to the 1996 Annual Report).
10(aa)+ - Agreements dated as of May 15, 1996 and May 17, 1996, between
Registrant and Jerome A. Chazen (incorporated herein by
reference from Exhibit 10(aa) to the 1996 Annual Report).
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
27.1* - Financial Data Schedule for 1996.
27.2* - Financial Data Schedule for 1997 interim periods.
27.3* - Financial Data Schedule for 1996 interim periods.
99* - Undertakings.
(b) Reports on Form 8-K.
Not applicable.
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
* Filed herewith.
- 26 -
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized, on April 2, 1998.
LIZ CLAIBORNE, INC.
By /s/Samuel M. Miller
----------------------------
Samuel M. Miller,
Senior Vice President-Finance,
Chief Financial Officer/
Principal Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Annual Report on Form 10-K has been signed below by the following
persons on behalf of the registrant and in the capacities indicated, on April 2,
1998.
Signature Title
--------- -----
/s/Paul R. Charron Chairman of the Board, Chief Executive Officer
- -------------------------- and Director/Principal Executive Officer
Paul R. Charron
/s/Lee Abraham
- --------------------------
Lee Abraham Director
/s/Bernard W. Aronson
- --------------------------
Bernard W. Aronson Director
/s/Eileen H. Bedell
- --------------------------
Eileen H. Bedell Director
/s/Ann M. Fudge
- --------------------------
Ann M. Fudge Director
/s/J. James Gordon
- --------------------------
J. James Gordon Director
/s/Kenneth P. Kopelman
- --------------------------
Kenneth P. Kopelman Director
/s/Kay Koplovitz
- --------------------------
Kay Koplovitz Director
/s/Paul E. Tierney, Jr.
- --------------------------
Paul E. Tierney, Jr. Director
- 27 -
<PAGE> 28
INDEX
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Page
Number
------
MANAGEMENT'S REPORT AND REPORT
OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 to F-3
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
January 3, 1998 and December 28, 1996 F-4
Consolidated Statements of Income for the
Three Fiscal Years Ended January 3, 1998 F-5
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended January 3, 1998 F-6 to F-7
Consolidated Statements of Cash Flows
for the Three Fiscal Years Ended January 3, 1998 F-8
Notes to Consolidated Financial Statements F-9 to F-21
UNAUDITED QUARTERLY RESULTS F-22
SCHEDULE II -- Valuation and Qualifying Accounts F-23
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> 29
MANAGEMENT'S REPORT
The management of Liz Claiborne Inc. is responsible for the preparation,
objectivity and integrity of the consolidated financial statements and other
information contained in this Annual Report. The consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and include some amounts that are based on management's informed
judgments and best estimates.
To help assure that financial information is reliable and assets are
safeguarded, management maintains a system of internal controls and procedures
which it believes is effective in accomplishing these objectives. These controls
and procedures are designed to provide reasonable assurance, at appropriate
costs, that transactions are executed and recorded in accordance with
management's authorization.
The independent public accountants have audited the Company's consolidated
financial statements as described in their report. In the course of their
audits, the independent public accountants have developed an overall
understanding of the Company's accounting and financial controls and have
conducted other tests as they considered necessary to support their opinion on
the financial statements. The independent public accountants report their
findings and recommendations to management and the Audit Committee of the Board
of Directors. Control procedures are implemented or revised as appropriate to
respond to these recommendations. There have not been any material control
weaknesses brought to the attention of management or the Audit Committee during
the periods covered by the report of the independent public accountants.
However, in as much as the independent public accountants' audits consisted of
selected tests of control policies and procedures and did not cover the entire
system of internal control, they would not necessarily disclose all weaknesses
which might exist.
The Audit Committee, which consists solely of non-management directors,
meets with the independent public accountants, internal auditors and management
periodically to review their respective activities and the discharge of their
respective responsibilities. Both the independent public accountants and the
internal auditors have unrestricted access to the Audit Committee, with or
without management, to discuss the scope and results of their audits and any
recommendations regarding the system of internal controls.
/s/ Paul R. Charron /s/ Samuel Miller
Paul R. Charron Samuel M. Miller
Chairman of the Board Senior Vice President Finance,
and Chief Executive Officer Chief Financial Officer
F-2
<PAGE> 30
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 January 3, 1998 and
December 28, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended January 3, 1998. These financial statements 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.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index of financial
statements are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
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 January 3, 1998 and December 28, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 3, 1998 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
New York, New York
February 22, 1998
F-3
<PAGE> 31
CONSOLIDATED BALANCE SHEETS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
ALL AMOUNTS IN THOUSANDS EXCEPT SHARE DATA JANUARY 3, 1998 DECEMBER 28, 1996
--------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 138,185 $ 322,881
Marketable securities 221,343 205,855
Accounts receivable - trade 181,303 158,168
Inventories 396,249 349,427
Deferred income tax benefits 31,647 31,555
Other current assets 88,693 74,212
----------- -----------
Total current assets 1,057,420 1,142,098
----------- -----------
PROPERTY AND EQUIPMENT - NET 214,624 223,284
OTHER ASSETS 33,241 17,368
----------- -----------
$ 1,305,285 $ 1,382,750
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 173,812 $ 163,666
Accrued expenses 138,816 152,241
Income taxes payable 15,029 10,762
----------- -----------
Total current liabilities 327,657 326,669
----------- -----------
DEFERRED INCOME TAXES 10,542 8,253
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 45,459 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 30,731 38,577
Retained earnings 1,541,894 1,382,247
Cumulative translation adjustment (2,673) (4,311)
----------- -----------
1,658,171 1,504,732
Common stock in treasury, at cost - 22,120,305
shares in 1997 and 17,212,585 shares in 1996 (736,544) (484,240)
----------- -----------
Total stockholders' equity 921,627 1,020,492
----------- -----------
$ 1,305,285 $ 1,382,750
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
F-4
<PAGE> 32
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 JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
NET SALES $2,412,601 $2,217,518 $2,081,630
Cost of goods sold 1,442,943 1,341,083 1,290,929
---------- ---------- ----------
GROSS PROFIT 969,658 876,435 790,701
Selling, general and administrative expenses 692,363 641,720 600,471
---------- ---------- ----------
OPERATING INCOME 277,295 234,715 190,230
Investment and other income - net 15,849 14,350 12,884
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 293,144 249,065 203,114
Provision for income taxes 108,500 93,400 76,200
---------- ---------- ----------
NET INCOME $ 184,644 $ 155,665 $ 126,914
========== ========== ==========
NET INCOME PER COMMON SHARE:
Basic $ 2.65 $ 2.15 $ 1.69
========== ========== ==========
Diluted $ 2.63 $ 2.14 $ 1.69
========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ .45 $ .45 $ .45
========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
F-5
<PAGE> 33
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock
------------------- Capital in Cumulative Common
Number of Excess of Retained Translation Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment Treasury Total
---------- ------ ---------- -------- ----------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 88,218,617 $88,219 $ 56,714 $ 1,164,850 $(1,637) $(325,162) $982,984
Net income -- -- -- 126,914 -- -- 126,914
Exercise of stock options and
related tax benefits -- -- 27 (132) -- 659 554
Cash dividends paid -- -- -- (33,627) -- -- (33,627)
Proceeds from sale of put warrants -- -- 3,617 -- -- -- 3,617
Reclassification of put warrant
obligations -- -- (25,283) -- -- -- (25,283)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- 4,549 -- -- 4,549
Translation adjustment -- -- -- -- 381 -- 381
Purchase of 3,749,900 shares of
common stock -- -- -- -- -- (74,800) (74,800)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- (7,229) -- 10,166 2,937
---------- ------- -------- ----------- ------- --------- --------
BALANCE, DECEMBER 30, 1995 88,218,617 88,219 35,075 1,255,325 (1,256) (389,137) 988,226
Net income -- -- -- 155,665 -- -- 155,665
Exercise of stock options and
related tax benefits -- -- 1,719 1,778 -- 11,070 14,567
Cash dividends paid -- -- -- (32,318) -- -- (32,318)
Proceeds from sale of put warrants -- -- 3,836 -- -- -- 3,836
Reclassification of put warrant
obligations, net -- -- (2,053) -- -- -- (2,053)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- (991) -- -- (991)
Translation adjustment -- -- -- -- (3,055) -- (3,055)
Purchase of 3,211,462 shares of
common stock -- -- -- -- -- (107,617) (107,617)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- 2,788 -- 1,444 4,232
---------- ------- -------- ----------- ------- --------- --------
BALANCE, DECEMBER 28, 1996 88,218,617 88,219 38,577 1,382,247 (4,311) (484,240) 1,020,492
</TABLE>
F-6
<PAGE> 34
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock
------------------ Capital in Cumulative Common
Number of Excess of Retained Translation Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment Treasury Total
---------- ------ ---------- -------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1996 88,218,617 $88,219 $ 38,577 $ 1,382,247 $(4,311) $(484,240) $ 1,020,492
Net income -- -- -- 184,644 -- -- 184,644
Exercise of stock options and
related tax benefits -- -- 3,670 638 -- 14,564 18,872
Cash dividends paid -- -- -- (31,162) -- -- (31,162)
Proceeds from sale of put warrants -- -- 6,607 -- -- -- 6,607
Reclassification of put warrant
obligations, net -- -- (18,123) -- -- -- (18,123)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- 1,347 -- -- 1,347
Translation adjustment -- -- -- -- 1,638 -- 1,638
Purchase of 5,382,600 shares of
common stock -- -- -- -- -- (264,852) (264,852)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- 4,180 -- (2,016) 2,164
---------- ------- -------- ----------- ------- --------- -----------
BALANCE, JANUARY 3, 1998 88,218,617 $88,219 $ 30,731 $ 1,541,894 $(2,673) $(736,544) $ 921,627
========== ======= ======== =========== ======= ========= ===========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
F-7
<PAGE> 35
CONSOLIDATED STATEMENTS OF CASH FLOWS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
JANUARY 3, DECEMBER 28, DECEMBER 30,
ALL DOLLAR AMOUNTS IN THOUSANDS 1998 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 184,644 $ 155,665 $ 126,914
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 46,024 42,850 39,043
Other-net 8,103 6,452 7,524
Change in current assets and liabilities:
(Increase) decrease in accounts receivable - trade (23,135) (32,115) 33,713
(Increase) decrease in inventories (46,822) 43,936 12,362
(Increase) in deferred income tax benefits (888) (676) (416)
(Increase) decrease in other current assets (14,481) 3,498 (846)
Increase in accounts payable 10,146 24,866 219
(Decrease) in accrued expenses (22,809) (4,323) (1,587)
Increase (decrease) in income taxes payable 4,267 (1,886) 4,754
--------- --------- ---------
Net cash provided by operating activities 145,049 238,267 221,680
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (370,546) (348,646) (344,626)
Disposals of investment instruments 357,162 524,323 227,119
Purchases of property and equipment (34,037) (23,337) (34,357)
Purchases of trademarks (3,750) -- (2,595)
Proceeds from sale of certain shoe division assets -- -- 17,872
Other-net (6,027) 3,828 2,102
--------- --------- ---------
Net cash (used in) provided by investing activities (57,198) 156,168 (134,485)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options 15,222 12,878 537
Dividends paid (31,162) (32,318) (33,627)
Purchase of common stock, net of put warrant premiums (258,245) (103,781) (71,183)
--------- --------- ---------
Net cash used in financing activities (274,185) (123,221) (104,273)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,638 (3,055) 381
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (184,696) 268,159 (16,697)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 322,881 54,722 71,419
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 138,185 $ 322,881 $ 54,722
========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
F-8
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Liz Claiborne, Inc. is primarily engaged in the design and marketing of a broad
range of apparel, accessories and fragrances. The Company's products are sold
principally in the United States. 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 consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts in the financial
statements and related notes. Actual results could differ from those estimates.
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
Investments are stated at market. The estimated fair value of the marketable
securities is based on quoted prices in an active market. Gains and losses on
investment transactions are determined using the specific identification method
and are recognized in income 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 (using the first-in, first-out
method) 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 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.
TRADEMARKS
Trademarks are amortized on a straight-line basis over their estimated useful
lives of 25 years and amounted to $16.1 million in 1997 and $13.1 million in
1996. These amounts are included in other assets on the consolidated balance
sheets.
F-9
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
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 loans with foreign subsidiaries of a long-term
investment nature are also included in this component of stockholders' equity.
FOREIGN EXCHANGE FORWARD CONTRACTS
The Company enters into foreign exchange forward 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. Transaction gains
and losses included in income were not significant in fiscal 1997, 1996 and
1995. As of January 3, 1998, the Company had forward contracts maturing through
March 1998 to sell 2,000,000 Canadian dollars and 250,000 British pounds
sterling. The aggregate U.S. dollar value of the foreign exchange contracts was
approximately $1,900,000 at year end 1997, as compared with approximately
$9,800,000 at year end 1996. Unrealized gains and losses for outstanding foreign
exchange forward contracts were not material at January 3, 1998 and December 28,
1996.
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. All revenue is net of returns.
ADVERTISING AND PROMOTION
All costs associated with advertising and promoting products are expensed when
the advertising takes place. Costs associated with cooperative advertising
programs, under which the Company generally shares the costs of each customer's
advertising and promotional expenditures up to a stated percentage of the
customer's purchases, are expensed when the related revenues are recognized.
Advertising and promotion expenses were $89 million in 1997, $73 million in 1996
and $43 million in 1995.
EARNINGS PER COMMON SHARE
Earnings per common share have been computed in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which was
adopted by the Company at the end of the 1997 fiscal year, using the weighted
average number of shares outstanding during each period. Shares subject to
unexercised stock options and put warrants were included in the diluted earnings
per share calculation using the treasury stock method (see Note 13 of Notes to
Consolidated Financial Statements). The earnings per common share for each
period presented have been restated to reflect the adoption of SFAS No. 128.
F-10
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to December 31. The 1997
fiscal year reflects a 53-week period, while the 1996 and 1995 fiscal years each
reflects 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.
NOTE 2
LICENSING COMMITMENTS
In January 1998, the Company consummated a license agreement with an affiliate
of Donna Karan International, Inc. to design, produce, market and sell men's and
women's sportswear, jeanswear and activewear products under the "DKNY(R) JEANS"
and "DKNY(R) ACTIVE" marks and logos. Under the agreement, the Company is
obligated to pay a royalty equal to a percentage of net sales of the "DKNY(R)
JEANS" and "DKNY(R) ACTIVE" products. The initial term of the license agreement
is for 15 years through December 31, 2012, with an option to renew for an
additional 15 year period, if certain sales thresholds are met. Subject to the
terms of the license agreement, aggregate minimum royalties for the initial 15
year term total $152 million.
NOTE 3
LICENSE AGREEMENTS
Effective June 30, 1995, the Company entered into an agreement with a third
party to operate under license the shoe business formerly operated by the
Company's Shoe Division. As part of the transaction, the Company received $18.0
million in cash, plus other consideration valued at $4.9 million, in exchange
for inventory and other assets. In 1996, the Company also licensed its watch
business. The Shoe and Watch Divisions had combined net sales of $47.1 million
in 1995, prior to the license agreements. The operating results of the shoe and
watch businesses for each period were not material to the Company's overall
operating results.
F-11
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 4
MARKETABLE SECURITIES
The following are summaries of available-for-sale marketable securities and
maturities:
<TABLE>
<CAPTION>
JANUARY 3, 1998
----------------------------------------------
Gross Unrealized Estimated
-----------------
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value
- ---------------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Tax exempt notes and bonds .. $291,659 $ 863 $ -- $292,522
Commercial paper ............ 52,676 -- -- 52,676
-------- ------ -------- --------
344,335 863 -- 345,198
Equity securities ........... 3,567 670 -- 4,237
-------- ------ -------- --------
$347,902 $1,533 $ -- $349,435
======== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 28, 1996
--------------------------------------------------
Gross Unrealized Estimated
--------------------
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value
- ---------------------- ---- ----- ------ ----------
<S> <C> <C> <C> <C>
Tax exempt notes and bonds .............. $354,392 $ 357 $ (288) $354,461
Commercial paper ........................ 148,651 -- -- 148,651
U.S. and 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
======== ======= ========= ========
</TABLE>
<TABLE>
<CAPTION>
JANUARY 3, 1998
--------------------
Estimated
(DOLLARS IN THOUSANDS) Cost Fair Value
- ---------------------- ---- ----------
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . $225,624 $225,746
Due after one year through three years . . . 118,711 119,452
-------- --------
344,335 345,198
Equity securities . . . . . . . . . . . . . . . . 3,567 4,237
-------- --------
$347,902 $349,435
======== ========
</TABLE>
These investments include $128,092,000 in 1997 and $316,606,000 in 1996 of tax
exempt notes and bonds and commercial paper which are classified as cash and
cash equivalents.
F-12
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
For the fiscal years 1997, 1996 and 1995, gross realized gains on
available-for-sale securities totaled $891,000, $1,881,000 and $956,000,
respectively, and gross realized losses totaled $1,185,000, $491,000 and
$1,167,000, respectively. The adjustment to unrealized gains and losses on
available-for-sale securities which was included in retained earnings was a
credit of $1,347,000 (net of $796,000 in deferred income taxes) and a charge of
$991,000 (net of $645,000 in deferred income taxes) in fiscal 1997 and 1996,
respectively.
NOTE 5
INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
(DOLLARS IN THOUSANDS) 1998 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials .......... $ 27,924 $ 28,198
Work in process ........ 16,020 17,209
Finished goods ......... 352,305 304,020
-------- --------
$396,249 $349,427
======== ========
</TABLE>
NOTE 6
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
(DOLLARS IN THOUSANDS) 1998 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Land and buildings ............................. $125,538 $124,125
Machinery and equipment ........................ 153,040 138,620
Furniture and fixtures ......................... 59,869 55,022
Leasehold improvements ......................... 131,730 126,956
-------- --------
470,177 444,723
Less-accumulated depreciation and amortization . 255,553 221,439
-------- --------
$214,624 $223,284
======== ========
</TABLE>
F-13
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 7
INCOME TAXES
The provisions for income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------
(53 WEEKS) (52 WEEKS) (52 WEEKS)
JANUARY 3, DECEMBER 28, DECEMBER 30,
(DOLLARS IN THOUSANDS) 1998 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal .......... $ 86,210 $76,898 $57,617
Foreign .......... 2,450 2,055 3,003
State and local .. 14,400 14,300 9,300
-------- ------- -------
103,060 93,253 69,920
Deferred - net ........ 5,440 147 6,280
-------- ------- -------
$108,500 $93,400 $76,200
======== ======= =======
</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, costs and expenses which are recognized for tax
purposes in different periods from those used for financial statement purposes.
The current income tax provisions exclude $3,670,000 in 1997, $1,719,000 in 1996
and $27,000 in 1995, arising from the exercise of nonqualified stock options.
These amounts have been credited to capital in excess of par value.
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)
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax provision at statutory rate .................. 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit ..... 3.2 3.7 3.0
Tax-exempt interest income ............................... (2.2) (2.7) (3.2)
Other-net ................................................ 1.0 1.5 2.7
------ ------ ------
37.0% 37.5% 37.5%
====== ====== ======
</TABLE>
F-14
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
The components of net deferred taxes arising from temporary differences as of
January 3, 1998 and December 28, 1996 are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) JANUARY 3, 1998 DECEMBER 28, 1996
- -------------------------------------------------------------------------------------------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSET TAX LIABILITY TAX ASSET TAX LIABILITY
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Inventory valuation ............................... $ 18,257 $ -- $13,301 $ --
Unremitted earnings from foreign subsidiaries ..... -- 15,733 -- 14,342
Accounts receivable valuation ..................... 4,156 -- 5,805 --
Unrealized investment (gains)/losses .............. (567) -- 229 --
Depreciation ...................................... -- (6,852) -- (5,933)
Other-net ......................................... 9,801 1,661 12,220 (156)
-------- ------- ------- -------
$ 31,647 $10,542 $31,555 $ 8,253
======== ======= ======= =======
</TABLE>
Management believes that the deferred tax benefits will be fully realized
through future taxable income and reversals of deferred tax liabilities.
NOTE 8
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
The Company leases office, showroom, warehouse/distribution and retail space,
computers and other equipment under various noncancellable operating lease
agreements which expire through December 2013. Rental expense for 1997, 1996 and
1995 was approximately $77,278,000, $74,685,000 and $74,902,000, respectively.
At January 3, 1998, the minimum aggregate rental commitments are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
FISCAL YEAR OPERATING LEASES
- --------------------------------------------------------------------------------
<S> <C>
1998........................................................... $ 53,917
1999........................................................... 51,127
2000........................................................... 47,404
2001........................................................... 45,665
2002 .......................................................... 29,327
Thereafter..................................................... 119,640
</TABLE>
Certain rental commitments have renewal options extending through the year 2030.
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 January 3, 1998, the Company had entered into commitments for the purchase of
raw materials and for the production of finished goods totaling approximately
$696,450,000.
In 1997, in connection with its stock repurchase program, the Company sold put
warrants on 1.65 million shares of common stock in privately negotiated
transactions based on the then-current market price of the common stock. The
warrants give the holders the right at maturity to require the Company to
repurchase shares of its common stock at specified prices. The Company has the
option to settle in cash or shares of common stock. In 1997, warrants on
1,463,000 shares of common stock expired unexercised, and warrants on 37,500
shares of common stock were exercised. Warrants on an additional 900,000 shares
remained outstanding at January 3,
F-15
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
1998; if exercised, these warrants will require the Company to purchase up to
900,000 shares of its common stock at various dates ranging from January 15
through August 17, 1998, with strike prices ranging from $42.61 to $53.25.
Subsequent to January 3, 1998, warrants on 250,000 shares of common stock,
expiring in July 1998, were sold with proceeds of $.9 million, and warrants on
250,000 shares of common stock were exercised. In 1996, the Company sold put
warrants on 1.25 million shares of common stock. As of December 28, 1996,
warrants on 1.5 million shares of common stock had expired unexercised or were
terminated and warrants on an additional 750,000 shares remained outstanding,
and expired at various dates ranging from March 25 through July 30, 1997, with
strike prices ranging from $33.19 to $39.78. The proceeds from the sale of put
warrants of $6.6 million in 1997 and $3.8 million in 1996 have been recorded in
capital in excess of par value. The Company's potential obligations of $45.5
million in 1997 and $27.3 million in 1996 to buy back 900,000 and 750,000
shares, respectively, of common stock have been charged to capital in excess of
par value and reflected as put warrants on the consolidated balance sheets.
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 the past, 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. Subsequently, certain customers have emerged from protection under Chapter
11. In 1997, three corporate groups of department store customers accounted for
19%, 17% and 12%, respectively, of net sales. In 1996 and 1995, three corporate
groups of department store customers accounted for 18%, 17% and 11%,
respectively, of net sales. The Company does not believe that this concentration
of sales and credit risk represents a material risk of loss with respect to its
financial position as of January 3, 1998.
At January 3, 1998, the Company had approximately 25% of its work force covered
by collective bargaining agreements. The agreements currently in effect will
expire in 2000.
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.
NOTE 9
LINES OF CREDIT
As of January 3, 1998, the Company had bank lines of credit aggregating
$470,000,000 which were available to cover letters of credit issued by the
banks. The lines of credit expire at various dates in 1998.
At January 3, 1998 and December 28, 1996, the Company had outstanding letters of
credit of $243,200,000 and $195,567,000, respectively. These letters of credit,
which have terms ranging from one to ten months, collateralize the Company's
obligations to third parties for the purchase of inventory. The fair value of
these letters of credit approximates contract values.
NOTE 10
STOCK PLANS
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for its stock-based
compensation plans, which are described below. Accordingly, no compensation cost
has been recognized for its fixed stock option grants. Had compensation costs
for the Company's stock option grants been determined based on the fair value at
the grant dates for awards under these plans in accordance with SFAS No. 123
"Accounting for Stock-Based Compensation," the Company's net income and earnings
per share would have been reduced to the pro forma amounts as follows:
F-16
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------
(Dollars in thousands except per common share data) (53 WEEKS) (52 WEEKS) (52 WEEKS)
- --------------------------------------------------- JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income:
As reported ......................................... $ 184,644 $ 155,665 $ 126,914
Pro forma ........................................... $ 180,698 $ 153,918 $ 125,960
Basic earnings per share:
As reported ......................................... $ 2.65 $ 2.15 $ 1.69
Pro forma ........................................... $ 2.60 $ 2.13 $ 1.68
Diluted earnings per share:
As reported ......................................... $ 2.63 $ 2.14 $ 1.69
Pro forma ........................................... $ 2.57 $ 2.11 $ 1.67
</TABLE>
For this purpose, the fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in 1997, 1996 and 1995,
respectively: dividend yield of 1% for all years, expected volatility of 34%,
34% and 35%, risk free interest rates of 6.2%, 5.4% and 7.8% and expected lives
of four years.
In 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 ("the 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 or performance shares have been granted
under the plan. Exercise prices for awards under the plan are determined by the
committee; to date, all stock options have been granted at an exercise price not
less than the quoted 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 January 3, 1998, there were
available for future grant 2,810,098 shares under the 1992 plan. The 1992 plan
expires in 2002. The 1984 plan has expired; awards made thereunder prior to its
termination remain in effect in accordance with their terms.
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.
Changes in common shares under option for the three fiscal years in the period
ended January 3, 1998 are summarized as follows:
F-17
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------- ------------------------------- ---------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year......... 2,175,923 $26.34 2,581,870 $26.83 2,450,421 $32.06
Granted................... 840,960 39.38 726,900 27.73 1,085,875 17.32
Exercised................. (557,842) 27.12 (486,484) 26.74 (30,502) 25.48
Cancelled................. (250,731) 29.66 (646,363) 29.56 (923,924) 29.57
--------- ----- -------- ----- -------- ------
End of year.............. 2,208,310 $30.73 2,175,923 $26.34 2,581,870 $26.83
========= ====== ========= ====== ========= ======
Exercisable at
end of year............. 723,927 $23.28 493,098 $30.87 829,253 $35.19
========= ====== ========= ====== ========= ======
Weighted average fair
value of options granted
during the year........... $13.08 $ 8.93 $ 6.43
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about options outstanding at January
3, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------------------------------- --------------------------------------
Weighted Average
Range of Outstanding Remaining Weighted Average Exercisable at Weighted Average
Exercise Prices at Jan. 3, 1998 Contractual Life Exercise Price Jan. 3, 1998 Exercise Price
--------------- --------------- ---------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
$15.00 - $25.00 743,841 3.5 years $19.19 535,856 $18.36
25.01 - 35.00 456,799 7.9 years 27.15 60,383 27.39
35.01 - 60.00 1,007,670 7.5 years 40.87 127,688 41.98
- --------------------------------------------------------------------------------------------------------------------------------
$15.00 - $60.00 2,208,310 6.2 years $30.73 723,927 $23.28
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
On January 6, 1998, nonqualified options to acquire 878,600 shares of common
stock were granted to officers and other key employees with an exercise price of
$41.125.
F-18
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
In January 1996 and June 1995, the committee granted 43,500 and 416,000 shares,
respectively, of common stock to a group of key executives. As of January 3,
1998, 380,100 of these shares remained outstanding. These shares are subject to
restrictions on transfer and subject to risk of forfeiture until earned by
continued employment. The restrictions expired in 1998 due to the total return
on the Company's common stock exceeding that of a predetermined group of
competitors. The unearned compensation was amortized over a period of three
years in anticipation of the accelerated expiration of the restrictions. On
January 6, 1998, the committee granted 341,350 additional shares of common
stock, subject to the full vesting of the shares granted in 1996 and 1995, to a
group of key executives. These shares are subject to similar conditions and
restrictions as those granted in 1996 and 1995, including the accelerated
expiration of the restrictions if the total return on the common stock of the
Company exceeds that of a predetermined group of competitors.
In May 1994, the committee 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. The expiration of the restrictions may be accelerated if the
market value of the common stock attains certain predetermined levels or upon
the happening of certain other events. In 1996, one-third of the then 65,000
unvested restricted shares (or 21,665 shares) vested in accordance with the
accelerated vesting provisions of the employment agreement. The remaining shares
where scheduled to vest at the rate of 6,667 shares of common stock per year
through the year 2000 and 10,000 shares in the year 2001. The unearned
compensation related to all restricted stock grants as of January 3, 1998 and
December 28, 1996 was $939,000 and $4,622,000, respectively, and is included in
retained earnings on the consolidated balance sheets. During 1997, the common
stock attained the predetermined level which will allow the remaining shares to
vest on January 2, 1999.
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 January 3, 1998, 50,000 of these options remained outstanding; they
will become exercisable on October 21, 1998 and expire on October 21, 2000,
subject to certain exceptions.
The Company's outside directors' stock ownership plan provides non-employee
directors, as part of their annual retainer, shares of common stock with a value
of $15,000 on the first business day of each fiscal year. The shares so issued
are nontransferable for a period of three years following the grant date,
subject to certain exceptions. In 1997, 1,701 shares of common stock were issued
under this plan. This plan also provides each non-employee director a grant of
options to purchase 1,000 shares of common stock on the first business day of
each fiscal year. Not more than one half of one percent (0.50%) of the shares of
common stock outstanding from time to time may be issued under the plan, which
will expire in 2006.
NOTE 11
PROFIT-SHARING RETIREMENT,
SAVINGS AND DEFERRED COMPENSATION PLANS
The Company's noncontributory, defined contribution profit-sharing retirement
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, except that for employees
commencing employment after December 31, 1996, vesting will be on a "cliff"
(100%) basis after a period of five years of service. Each year, profit-sharing
contributions, if any, are determined by the Board of Directors. The Company's
1997, 1996 and 1995 plan contribution expense, which is included in selling,
general and administrative expenses, was $5,888,000, $5,590,000 and $5,572,000,
respectively.
F-19
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The Company's 401(k) savings 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. Subject to Internal Revenue Code limitations,
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 (equal to 50% of the first 5% contributed by the
participant) 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. The
Company's 1997, 1996 and 1995 plan contribution expense, which is included in
selling, general and administrative expenses, was $2,181,000, $2,016,000 and
$2,044,000, respectively.
The Company has a supplemental retirement plan for executives whose benefits
under the profit-sharing retirement plan and the savings plan are expected to be
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. The
plan also allows participants to defer up to 15% of their salary. Supplemental
benefits attributable to participant deferrals are fully vested at all times and
the balance of a participant's benefits vests on the same basis as the matching
contribution under the Company's 401(k) plan and profit-sharing retirement plan.
Under a separate bonus deferral plan participants may defer up to 100% of their
annual bonus. These supplemental plans are not funded. The Company's expenses
related to these plans, which are included in selling, general and
administrative expenses, were $1,462,000, $889,000 and $405,000 in 1997, 1996
and 1995, respectively.
In 1996, the Company established an unfunded deferred compensation arrangement
for a senior executive which accrues over a six year period as of the first day
of each fiscal year beginning in 1996, based on an amount equal to 15% of the
sum of the senior executive's base salary and bonus. The accrued amount plus
earnings will become fully vested on December 28, 2002, provided the senior
executive is the Chairman of the Board and Chief Executive Officer of the
Company on such date. This arrangement also provides for the deferral of an
amount equal to the portion of the executive's base salary that exceeds $1
million. The deferred amount plus earnings will be fully vested at all times.
NOTE 12
STOCKHOLDER RIGHTS PLAN
The Company has 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.
F-20
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 13
EARNINGS PER COMMON SHARE
The following is an analysis of the differences between basic and diluted
earnings per common share in accordance with SFAS No. 128 "Earnings per Share."
<TABLE>
<CAPTION>
January 3, December 28, December 30,
(In thousands) 1998 1996 1995
---------------------- -------- -------- ------
<S> <C> <C> <C>
Net income $184,644 $155,665 $126,914
-------- -------- --------
Weighted average common
shares outstanding 69,619 72,396 75,003
Effect of dilutive securities:
Stock options 483 411 126
Put warrants 89 38 171
-------- -------- --------
Weighted average common
shares and common share
equivalents 70,191 72,845 75,300
======== ======== ========
</TABLE>
NOTE 14
CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
During fiscal 1997, 1996 and 1995, the Company made income tax payments of
$98,425,000, $94,632,000, and $65,590,000, respectively. Non-cash investing
activities which are not included in the consolidated statements of cash flows
for 1995 include a direct financing lease receivable with a disposition of
property and equipment of $1,120,000 and a reversal of the remaining direct
financing lease receivable and acquisition of property and equipment of
$9,738,000.
NOTE 15
ACCRUED EXPENSES
Accrued expenses at January 3, 1998 and December 28, 1996 consisted of the
following:
<TABLE>
<CAPTION>
JANUARY 3, DECEMBER 28,
(DOLLARS IN THOUSANDS) 1998 1996
- ------------------------------------------------------------------
<S> <C> <C>
Payroll and bonuses $ 35,761 $ 42,065
Taxes, other than taxes on income 9,988 9,432
Employee benefits 17,048 16,784
Advertising 10,248 17,042
Common stock in transit -- 2,420
Other 65,771 64,498
-------- --------
$138,816 $152,241
======== ========
</TABLE>
F-21
<PAGE> 49
UNAUDITED QUARTERLY RESULTS
Unaudited quarterly financial information for 1997 and 1996 is set forth in the
table below:
<TABLE>
<CAPTION>
March June September December
---------------------- --------------------- --------------------- ---------------------
All dollar amounts in thousands (14 weeks) (13 weeks)
except per common share data 1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $596,556 $556,558 $537,900 $500,595 $685,920 $622,102 $592,225 $538,263
Gross profit 231,321 211,242 211,839 192,604 283,729 254,120 242,769 218,469
Net income 42,121 35,886 28,932 22,670 66,604 56,223 46,987 40,886
Basic earnings per common share $ .59 $ .49 $ .41 $ .31 $ .95 $ .78 $ .70 $ .57
Diluted earnings per common share $ .59 $ .49 $ .41 $ .31 $ .95 $ .78 $ .70 $ .57
Dividends paid per common share $ .11 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-22
<PAGE> 50
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
ADDITIONS
------------------------------
(In thousands)
(1) (2)
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES -DESCRIBE - DESCRIBE END OF PERIOD
- ----------------------------------- ---------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 3, 1998:
Accounts Receivable - allowance for
doubtful accounts $2,430 $ 551 $ -- $ 390(A) $2,591
------ ------ ---------- ------ ------
YEAR ENDED DECEMBER 28, 1996:
Accounts Receivable - allowance for
doubtful accounts $3,727 $ 896 $ -- $2,193(A) $2,430
------ ------ ---------- ------ ------
YEAR ENDED DECEMBER 30, 1995:
Accounts Receivable - allowance for
doubtful accounts $1,316 $2,814 $ -- $ 403(A) $3,727
------ ------ ---------- ------ ------
</TABLE>
NOTES:
(A) Uncollectible accounts written off, less recoveries.
F-23
<PAGE> 51
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------
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 period
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 as of 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 Exhibits 1 and 2
to Registrant's Form 8-A dated December 21, 1988).
4(b)(i) - Amendment No. 1 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) - Appointment of Rights Agent, dated as of January 24, 1992,
between Registrant and First Chicago Trust Company of New
York, as Rights Agent under the Rights Agreement (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. 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(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein
by reference from Exhibit 10(d)(i) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1988).
10(c)+ - 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(c)(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).
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
<PAGE> 52
Exhibit
No. Description
- ------- -----------
10(d)+ - 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(d)(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(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g) to the 1992 Annual
Report).
10(e)(i)+ - Amendment Nos. 3 and 4 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g)(i) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 26, 1993 [the "1993 Annual Report"]).
10(e)(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(e)(iii)+ - Amendment No. 6 to the Savings Plan (incorporated herein by
reference from Exhibit 10(e)(iii) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28,
1996 [the "1996 Annual Report"]).
10(e)(iv)+ - Amendment No. 7 to the Savings Plan (incorporated herein by
reference from Exhibit 10(e)(iv) to the 1996 Annual Report).
10(e)(v)+* - Amendment No. 8 to the Savings Plan.
10(f)+ - 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(g) - Trust Agreement related to the Profit-Sharing Plan
(incorporated herein by reference from Exhibit 10(jj) to the
1983 Annual Report).
10(g)(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(g)(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(g)(iii)+ - Amendment No. 4 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 July 1,
1995).
10(g)(iv)+ - Amendment No. 5 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(g)(iv) to the 1996 Annual
Report).
10(h)* - National Collective Bargaining Agreement, made and entered
into as of June 1, 1997, by and between Liz Claiborne, Inc.
and the Union of Needletrades, Industrial and Textile
Employees (UNITE) for the period June 1, 1997 through May 31,
2000.
10(h)(i)* - Jobbers Agreement, made and entered into as of June 1, 1997,
by and between Liz Claiborne, Inc. and the Union of
Needletrades, Industrial and Textile Employees (UNITE) for the
period June 1, 1997 through May 31, 2000.
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
* Filed herewith.
<PAGE> 53
Exhibit
No. Description
- ------- -----------
10(i) + - Executive Liability and Indemnification Policy No.
8103-53-79G, with Chubb Group of Insurance Companies (the
"Insurance Policy") (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(i)(i)+* - Summary of Extension of the Insurance Policy.
10(j) - Excess Coverage Directors and Officers Liability Insurance
Policy No. 483-73-56, with National Union Fire Insurance
Company of Pittsburgh, PA (the "Excess Policy")(incorporated
herein by reference from Exhibit 10(j) to the 1996 Annual
Report).
10(j)(i)* - Summary of Extension of the Excess Policy.
10(k)+* - Description of Liz Claiborne, Inc. 1997 Salaried Employee
Incentive Bonus Plan.
10(l) - Lease, dated as of January 1, 1990 for premises located at
1441 Broadway, New York, New York between Registrant and
Lechar Realty Corp. (incorporated herein by reference from
Exhibit 10(n) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 1990).
10(m)+ - Liz Claiborne, Inc. Amended and Restated Outside Directors'
1991 Stock Ownership Plan (the "Outside Directors' 1991 Plan")
(incorporated herein by reference from Exhibit 10(m) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 30, 1995 [the "1995 Annual Report"]).
10(m)(i)+ - Form of Option Agreement under the Outside Directors' 1991
Plan (incorporated herein by reference from Exhibit 10(m)(i)
to the 1996 Annual Report).
10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992
Plan") (incorporated herein by reference from Exhibit 10(p) to
the 1991 Annual Report).
10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by
reference from Exhibit 10(p)(i) to the 1993 Annual Report).
10(n)(ii)+* - Amendment No. 2 to the 1992 Plan.
10(o)+ - 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(p)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(q)+ - Form of Option Grant Certificate under the 1992 Plan
(incorporated herein by reference from Exhibit 10(q) to the
1996 Annual Report).
10(r)+ - Form of Restricted Career Share Agreement under the 1992 Plan
(incorporated herein by reference from Exhibit 10(a) to
Registrant's Quarterly Report on Form 10-Q for the period
ended September 30, 1995).
10(s)+* - Form of Restricted Transformation Share Agreement under
the 1992 Plan.
10(t)+* - Description of Supplemental Life Insurance Plans.
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
* Filed herewith.
<PAGE> 54
Exhibit
No. Description
- ------- -----------
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, Inc. Supplemental Executive Retirement Plan (as
amended and restated effective as of January 1,
1997)(incorporated herein by reference from Exhibit 10(w) to
the 1996 Annual Report).
10(x)+ - The Liz Claiborne, Inc. Bonus Deferral Plan (incorporated
herein by reference from Exhibit 10(x) to the 1996 Annual
Report).
10(y)+ - Employment Agreement dated as of May 9, 1994, between
Registrant and Paul R. Charron (the "Employment Agreement")
(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)(i)+ - Amendment to the Employment Agreement, dated as of November
20, 1995, between Registrant and Paul R. Charron (incorporated
herein by reference from Exhibit 10(x)(i) to the 1995 Annual
Report).
10(y)(ii)+ - Amendment to the Employment Agreement, dated as of September
19, 1996 between Registrant and Paul R. Charron (including the
Liz Claiborne Retirement Income Accumulation Plan for the
benefit of Mr. Charron)(incorporated herein by reference from
Exhibit 10(y)(ii) to the 1996 Annual Report).
10(z)+ - Employment Agreement dated as of September 26, 1996, between
Registrant and Denise V. Seegal (incorporated herein by
reference from Exhibit 10(z) to the 1996 Annual Report).
10(aa)+ - Agreements dated as of May 15, 1996 and May 17, 1996, between
Registrant and Jerome A. Chazen (incorporated herein by
reference from Exhibit 10(aa) to the 1996 Annual Report).
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
27.1* - Financial Data Schedule for 1996.
27.2* - Financial Data Schedule for 1997 interim periods.
27.3* - Financial Data Schedule for 1996 interim periods.
99* - Undertakings.
(b) Reports on Form 8-K.
Not applicable.
- --------------------------------------------------------------------------------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
* Filed herewith.
<PAGE> 1
Exhibit 10(e)(v)
AMENDMENT NO. 8
TO THE
LIZ CLAIBORNE SAVINGS PLAN
(As Amended and Restated Effective January 1, 1987)
The Liz Claiborne Savings Plan as amended and restated
effective January 1, 1987 (the "Plan") is hereby further amended in the
following respects:
(1) The fourth sentence of Section 3.10 is restated to read as
follows:
"Notwithstanding the provisions of Sections 4.3 or 4.4, at the time the Rollover
Account is first established, the Member may elect to have his Rollover Account
allocated among the Investment Funds provided for in Section 4.2 in such
increments as the Plan Administrator may from time to time permit (in 10%
increments from July 1, 1994 to December 31, 1996 and in 25% increments prior to
July 1, 1994), without regard to the manner in which his other Accounts are
invested, provided any requirements or restrictions, if any, that from time to
time the Committee may prescribe in connection with one or more Investment Funds
on an equitable and practicable basis, are satisfied; thereafter, reallocation
of account balances (including the Rollover Account) may be made only in
accordance with the provisions of Section 4.3."
(2) Section 4.3 is restated, other than Section 4.3.1, to read as
follows:
"A Member may, by giving notice on the Appropriate Form within such time as, and
reflecting those requirements or restrictions, if any, that from time to time,
the Committee may prescribe, designate the proportion of the then existing
balance of his Accounts which shall be invested in each Investment Fund as of
any Valuation Date (Entry Date prior to July 1, 1994), with a single designation
to control for all of his Accounts; provided that the percentage of such
interest to be invested in any such Investment Fund as of such date shall be in
such increments as the Plan Administrator may from time to time permit (in 10%
increments from July 1, 1994 to December 31, 1996 and in 25% increments prior to
July 1, 1994). A Member may change his election as of any Valuation Date (Entry
Date prior to July 1, 1994) by filing a new designation on the Appropriate Form,
at such time as, and reflecting those requirements or restrictions, if any, that
from time to time, the Committee may prescribe."
(3) Section 4.4 is restated to read as follows:
"A Member may, by giving notice on the Appropriate Form within such time as, and
reflecting those requirements or restrictions, if any, that from time to time,
the Committee
<PAGE> 2
may prescribe, designate the proportion of his share in contributions for each
Plan Year which shall be allocated to and invested in each Investment Fund, with
a single designation to control for his Tax-Saver and Matching Contributions
(and any Qualified Nonelective Contributions which may be made for him);
provided that the percentage of such share to be invested in any such Investment
Fund shall be in such increments as the Plan Administrator may from time to time
permit (in 10% increments from July 1, 1994 to December 31, 1996 and in 25%
increments prior to July 1, 1994). Any election under this Section 4.4 shall
continue in effect until changed by filing a new designation. A Member may
change his election as of any Valuation Date (Entry Date prior to July 1, 1994)
by filing a new designation on the Appropriate Form prior to such date, within
such time as, and reflecting those requirements or restrictions, if any, that
from time to time, the Committee may prescribe. If a Member shall fail to give
timely and complete written instructions, his Tax-Saver and Matching
Contributions (and his Qualified Nonelective Contributions, if any) shall be
invested, in such Investment Fund as the Committee may direct (in the Money
Market Fund prior to July 7, 1994)."
(4) A new sentence is added at the end of Section 4.7.3 to read as
follows:
"The Committee may proscribe any one or more Investment Funds from being subject
to such allocation in order to conform to the practices and provisions of any
such Investment Fund, or on any other basis so long as it is equitable and
practicable."
(5) A new Section is added at the end of Section 7.3 to read as
follows:
" 7.3.5 Allocation Among Investment Funds. Any withdrawal from
a Member's Account pursuant to this Article VII shall be allocated among the
Investment Funds in which any such Account is invested in accordance with
Section 4.7.3."
(6) A new sentence is added at the end of Section 16.5 to read as
follows:
"The Committee may proscribe any one or more Investment Funds from being subject
to such allocation in order to conform to the practices and provisions of any
such Investment Fund, or on any other basis so long as it is equitable and
practicable."
2
<PAGE> 3
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed by its duly authorized officer the 12th day of March, 1998.
LIZ CLAIBORNE, INC.
By: /s/ Samuel Miller
------------------------
ATTEST: Senior Vice President Finance
Chief Financial Officer
/s/ Nicholas J. Rubino
- -------------------------------
Vice President-Deputy General Counsel
3
<PAGE> 1
Exhibit 10(h)
NATIONAL COLLECTIVE BARGAINING AGREEMENT
By and Between:
LIZ CLAIBORNE, INC. AND
UNION OF NEEDLETRADES, INDUSTRIAL AND TEXTILE EMPLOYEES
(UNITE)
Effective: June 1, 1997
Expires: May 31, 2000
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1: UNION RESPONSIBILITY - 2 -
ARTICLE 2: BARGAINING UNIT AND UNION RECOGNITION - 2 -
ARTICLE 3: UNION MEMBERSHIP - 4 -
ARTICLE 4: EMPLOYER'S OBLIGATIONS - 5 -
ARTICLE 5: AFTER ACQUIRED AND NEW FACILITIES - 5 -
ARTICLE 6: TRIAL PERIOD - 6 -
ARTICLE 7: HIRING RATES AND MINIMUM WAGE SCALES - 6 -
ARTICLE 8: CHANGE IN LEGAL MINIMUMS - 7 -
ARTICLE 9: COST OF LIVING ADJUSTMENT - 7 -
ARTICLE 10: JOB SECURITY/HANDLING AND DISTRIBUTION OF PRODUCT - 8 -
ARTICLE 11: CHANGE IN PAY SYSTEMS - 9 -
ARTICLE 12: WAGE INCREASES - 9 -
ARTICLE 13: CHECK-OFF - 10 -
ARTICLE 14: NO DISCRIMINATION - 10 -
ARTICLE 15: EMPLOYMENT STANDARDS - 11 -
ARTICLE 16: HEALTH AND SAFETY - 11 -
ARTICLE 17: HOURS OF WORK AND OVERTIME - 13 -
ARTICLE 18: TEMPORARY EMPLOYEES - 13 -
ARTICLE 19: HOLIDAYS, PERSONAL DAYS/PAID TIME OFF AND SICK DAYS - 14 -
ARTICLE 20: BEREAVEMENT PAY - 15 -
ARTICLE 21: SHOP STEWARD - 16 -
- i -
<PAGE> 3
ARTICLE 22: SENIORITY/LAYOFF - 16 -
ARTICLE 23: WORK ASSIGNMENTS - 16 -
ARTICLE 24: DISCHARGES - 16 -
ARTICLE 25: LEAVES OF ABSENCE - 17 -
ARTICLE 26: TIME CLOCK - 18 -
ARTICLE 27: RIGHT TO VISIT SHOP - 18 -
ARTICLE 28: EMPLOYEE BENEFIT FUNDS - 19 -
ARTICLE 29: DENTAL PLAN - 24 -
ARTICLE 30: DISABILITY - 24 -
ARTICLE 31: GRIEVANCES AND ARBITRATION - 25 -
ARTICLE 32: NO STRIKE/NO LOCKOUT PLEDGES - 27 -
ARTICLE 33: NO REDUCTION OF WAGES OR OTHER BENEFITS - 28 -
ARTICLE 34: STRUCK WORK-LABOR DISPUTE CROSSING PICKET LINES - 28 -
ARTICLE 35: TEMPORARY APPOINTMENT TO UNION STAFF - 29 -
ARTICLE 36: CONFORMITY TO LAW - 29 -
ARTICLE 37: JURY DUTY - 29 -
ARTICLE 38: UNION ACTIVITIES - 30 -
ARTICLE 39: JOINT LABOR-MANAGEMENT COMMITTEE - 30 -
ARTICLE 40: VACATIONS - 30 -
ARTICLE 41: CUTTING - 30 -
ARTICLE 42: REPORTING PAY - 31 -
ARTICLE 43: 401(k) PLAN - 31 -
- ii -
<PAGE> 4
ARTICLE 44: NO WAIVER - 31 -
ARTICLE 45: MANAGEMENT RIGHTS - 32 -
ARTICLE 46: DURATION OF AGREEMENT - 33 -
- iii -
<PAGE> 5
THIS AGREEMENT is made and entered into as of this June 1, 1997 by and between
LIZ CLAIBORNE INC., (hereinafter designated as the "Company") and the Union of
Needletrades, Industrial and Textile Employee (hereinafter designated as the
"Union" or "UNITE").
W I T N E S S E T H:
WHEREAS, the Company is engaged in an integrated process of production, handling
and distribution of garments; and
WHEREAS, the Employer owns or leases and operates several distributions centers
and samplerooms in which the Union represents the majority of the employees
employed by the Employer, and the Employer recognizes the Union as the exclusive
bargaining representative of its warehouse and sampleroom employees; and;
WHEREAS, the various distribution centers and samplerooms have been governed by
separate collective bargaining agreements covering individual facilities; and
WHEREAS, to provide uniformity of conditions and ease of administration, the
parties choose to consolidate the separate bargaining units and collective
bargaining agreements into a national multi-plant agreement, to be supplemented
by local agreements covering specific facilities; and
WHEREAS, the Employer and the Union are parties to a Jobber's Agreement which
governs, among other things, the Employer's use of contractors to produce its
garments but does not govern the terms and conditions of employment of any of
the employees of the Employer; and
WHEREAS, the parties desire to cooperate in establishing conditions which will
tend to secure a living wage, fair conditions and standards of employment and to
provide for a fair and peaceful adjustment of all disputes so as to secure
uninterrupted operation of work.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1: UNION RESPONSIBILITY
1.1 The Union shall have the sole responsibility for administering and enforcing
this Agreement and for obtaining compliance with its terms. The sole persons
authorized or having the power to act as agents of the Union, or to bind the
Union legally with respect to matters arising out of this Agreement or arising
out of the relations between the Employer and the Union, or to subject the Union
to any liability whatever by reason of any acts or omissions is the President of
the Union and the managers of the signatory
<PAGE> 6
Locals thereof or such substitute or additional persons as the Union may
hereafter formally designate by written notice to the Employer. The Union shall
not be responsible for the acts or omissions of any other person, including
members and employees of the Union.
ARTICLE 2: BARGAINING UNIT AND UNION RECOGNITION
2.1 The scope of the bargaining unit covers the following distribution centers
and samplerooms presently located at:
1 Claiborne Avenue, North Bergen, NJ
4 Emerson Lane, Secaucus, New Jersey
10 Oxford Drive, Moonachie, New Jersey
1441 Broadway and 1450 Broadway, New York, New York
1 Liz Way, Mt. Pocono, Pennsylvania
151 Folmer Parkway, Montgomery, Alabama
15 Thatcher Road, Dayton, New Jersey
2.2 The bargaining unit consist of all distribution center and sampleroom
employees, including cutters and related crafts, employed by the Employer at the
covered facilities. Local supplemental agreements may further define the
bargaining unit at specific facilities. It is agreed that the Union represents a
majority of said employees and that during the term of this Agreement the Union
shall be the sole and exclusive bargaining representative of all employees in
the bargaining unit as hereinabove described. Office, clerical, supervisory and
executive employees, as well as any employees who may be employed at the retail
facility at any location, are excluded from the provisions hereof.
2.3 "Workers" or "employees" as used in this Agreement means those employees
covered by the bargaining unit as well as those who may be hereinafter included.
2.4 This Agreement shall be the National Agreement. There shall be Supplemental
Agreements which govern certain terms and conditions of employment at individual
facilities. In case of conflict between this National Agreement and a
Supplemental Agreement, the Supplemental Agreement shall govern. Any dispute
unresolved as to whether a conflict exists between the National and a
Supplemental Agreement or whether a particular dispute is subject to resolution
under the provisions of the National or a Supplemental Agreement shall be
subject to arbitration pursuant to Article 31 of this National Agreement.
ARTICLE 3: UNION MEMBERSHIP
<PAGE> 7
3.1 Good standing membership in the Union shall be a condition of employment
with the Employer for all bargaining unit employees who have such membership on
the date of execution of this Agreement; it shall also be a condition of
employment with the Employer for all other bargaining unit employees on and
after the thirtieth (30th) day following the execution or effective date of this
Agreement, or on or after the thirtieth (30th) day following the beginning of
their employment, whichever is the later. If the foregoing is prohibited by law,
then at the corresponding time all employees shall be required as a condition of
employment (unless prohibited by law) to pay to the Union a service charge to
reimburse it for the cost of negotiating and administering this agreement.
3.2 Good standing membership in the Union for purposes of this Article means
such membership in the Union through membership in any affiliate of UNITE.
3.3 In the event that paragraph 3.1 may not be lawfully applied, all employees
shall be informed by the Employer of the existence of this Agreement and the
terms thereof and shall be advised by the Employer that, in its opinion, good
labor-management relations are and will be best served and promoted if such
employees become and remain members of the Union. The Employer agrees to
implement and promote this provision by posting copies of the following notice
near all time clocks and in other prominent places such as bulletin boards in
its plants:
"NOTICE TO ALL EMPLOYEES"
This plant is being operated under the terms of an agreement with the Union of
Needletrades, Industrial and Textile Employees, AFL-CIO. All wages, hours and
other conditions of employment are regulated by the terms of this agreement.
Good labor management relations will be best served and promoted, in our
opinion, if all our employees covered by this agreement become and remain
members of this Union.
Signed:
Name of Employer:
ARTICLE 4: EMPLOYER'S OBLIGATIONS
4.1 All of the terms and provisions of this Agreement shall be binding upon the
Employer and upon its subsidiaries, successors and assigns. In the event the
Employer sells or transfers its business to another, it shall nevertheless
continue to be liable for the complete performance of the terms and provisions
of this Agreement by the purchaser or transferee until the purchaser or
transferee expressly, in writing, assumes such performance and agrees to be
fully bound by the terms and provisions of this Agreement.
<PAGE> 8
ARTICLE 5: AFTER ACQUIRED AND NEW FACILITIES
This National Agreement shall be binding on those presently existing facilities
described in paragraph 2 above as well as all future facilities operated by and
either owned or leased by the Employer, including manufacturing facilities, but
not including retail stores. This agreement shall be binding on facilities
acquired by merger, acquisition or consolidation two (2) years after such
acquisition, merger or consolidation. Local conditions for any future or
after-acquired facility shall be negotiated between the Employer and the Union.
ARTICLE 6: TRIAL PERIOD
The first thirty (30) calendar days of employment for newly-hired employees
shall be deemed their trial period during which time they may be discharged
without regard to cause. The trial period may be extended for another fourteen
(14) calendar days with the written consent of the Union. Upon the expiration of
the trial period, the newly-hired employee will be deemed a regular employee.
The trial period shall not be abused by the Employer and any claim of abuse
shall be the subject of arbitration hereunder.
ARTICLE 7: HIRING RATES AND MINIMUM WAGE SCALES
7.1 The hiring rates in effect in the various facilities and job
classifications, if any shall be set forth in the local Supplemental Agreements.
7.2 All hiring rates at all facilities covered by this agreement shall increase
$0.25 effective June 7, 1999. The hiring rates may not be decreased. They may
increase only upon mutual agreement of the parties.
7.3 Upon satisfactory completion of the trial period, an employee shall receive
an additional $0.25 per hour.
7.4 All employees who have completed their trial period as of June 1, 1997 shall
receive at least $0.25 an hour above the newly-established minimum wage rate in
Paragraph 7.3.
ARTICLE 8: CHANGE IN LEGAL MINIMUMS
If, during the term of this Agreement, a new applicable federal or state minimum
wage law is enacted or becomes effective which
<PAGE> 9
increases the applicable minimum wage hereunder, then the minimum wage set forth
herein shall be automatically increased so that such minimum wage shall be no
less than 15% above any newly-established state or federally mandated legal
minimum
ARTICLE 9: COST OF LIVING ADJUSTMENT
Should the cost of living, as reflected in the U.S. Consumer Price Index for the
period of June 1997 through November 1998 increase eight and one-half (8.5%)
percent over the consumer Price Index for May 1997, as published in June 1997,
then the regular hourly wages of all employees shall be increased ten cents
($0.10) per hour. Additionally, hourly increases of five cents ($0.05) per hour
shall be paid for each additional increase in the cost of living of one-half of
one percent (.5%). Cost of living increases payable under this provision shall
not exceed twenty-five cents ($0.25) per hour. Rises in the consumer Price Index
shall be measured over an eighteen (18) month period, as set forth above, by
utilizing the consumer Price Indices for the Urban Wage Earners and clerical
workers, U.S. Cities, Average, printed and released in the months of July 1997
through December 1998. Wage increases due hereunder shall be effective January
4, 1999.
ARTICLE 10: JOB SECURITY/HANDLING AND DISTRIBUTION OF PRODUCT
10.1 To protect the job security of the employees of the Employer and to
preserve labor standards among workers who are employed in the integrated
process of production of the Employer's garments, the parties agree to the
following:
10.1.1 No employee shall be involuntarily permanently laid off as a direct
result of the Employer's use of a third party contractor to distribute its
product.
10.1.2 To the extent permitted by law, the Employer may engage a third party
contractor to perform functions covered by this Agreement only if it uses its
best efforts to select a third party contractor which either has or is willing
to enter into a collective bargaining relationship with the Union or an
affiliate thereof. In any event, the Employer may engage a third party
contractor to operate a distribution facility entirely dedicated to the
distribution of the Employer's products for a period in excess of two (2) years
only if such third party contractor has a collective bargaining relationship
with UNITE or an affiliate thereof from the inception of the engagement.
10.2 Subject to the protections set forth above, nothing contained herein or in
any Local Supplement shall be deemed to restrain the Employer in its
determination as to the methods or means by which its products are handled and
distributed, including, but not limited to, the allocation of products and
functions among the
<PAGE> 10
Employer's facilities or the use of facilities not owned, leased or operated by
the Employer.
ARTICLE 11: CHANGE IN PAY SYSTEMS
The Employer reserves the right to change the method of payment for some of the
general distribution or quality assurance time employees to an incentive system.
Employees on the incentive system shall not be paid less than their current
hourly rate. The Union may assert reasonable challenges to the fairness of the
proposed incentive system. Any disputes regarding the implementation of such
systems may be submitted to the arbitrator for resolution.
ARTICLE 12: WAGE INCREASES
12.1 The wage increases for employees shall be as follows:
Effective June 2, 1997, employees shall receive a wage increase of $0.75 per
hour.
Effective June 1, 1998, employees shall receive a wage increase of $0.50 per
hour.
Effective June 7, 1999, employees shall receive a wage increase of $0.50 per
hour.
12.2 To correct market-created inequities and to promote greater uniformity
among facilities, the employees at the Mt. Pocono, PA and Montgomery, AL
facilities shall receive a raise of $0.25 effective June 2, 1997 in addition to
any other wage increases.
12.3 Any employee who would receive a greater wage increase under the wage
increase formula agreed upon between Locals 23-25 and 10 and the New York Skirt
and Sportswear Association for the collective bargaining agreement effective
June 1, 1997 shall receive such greater wage increase instead of the increase
set forth in Article 12.1.
ARTICLE 13: CHECK-OFF
13.1 Subject to the requirements of law concerning authorization and assignment
by the employees individually, the Employer shall deduct membership dues (which
shall be deemed to include periodic fixed dues, initiation fees and assessments)
or, to the extent permitted by law, service charges, from the earnings of its
employees monthly and transmit the same to the Union within 48 hours thereafter.
13.2 The Employer agrees to honor check-off authorizations for political
contributions to the UNITE Campaign Committee and AFL-CIO
<PAGE> 11
COPE from employees who are members of the Union.
13.3 Sums deducted by the Employer under the provisions of Paragraphs 13.1 and
13.2 this Article shall be kept separate and apart from general funds of the
Employer and shall be held in trust by the Employer for the benefit of the
Union, the UNITE Campaign Committee, and AFL-CIO COPE, as the case may be.
ARTICLE 14: NO DISCRIMINATION
The Employer shall not discriminate against any employee on the basis of race,
creed, religion, color, national origin, sex, age, sexual orientation,
citizenship status, disability, veteran's status or membership in or activities
on behalf of the Union, unless required by this Agreement. The Employer,
however, shall not employ children or adolescents where such employment is
prohibited by an applicable federal or state law or regulation.
ARTICLE 15: EMPLOYMENT STANDARDS
15.1 All wages, earnings, overtime and holiday pay shall be paid on the day they
were customarily paid, but no later than the Friday following the week in which
they were earned.
15.2 The Employer shall not charge an employee for any damage to materials
unless caused willfully.
15.3 The Employer shall supply necessary machines and tools to its employees.
15.4 No officer of the Employer, supervisory employee or any other person
outside of the bargaining unit shall perform any work covered by this Agreement,
except as specified in Article 18 or in the event of unexpected absenteeism, an
emergency, or for training purposes.
15.5 All paid breaks shall be fifteen (15) minutes.
15.6 Employees may elect to receive their pay by having the Employer make a
direct deposit to the employee's designated account.
ARTICLE 16: HEALTH AND SAFETY
16.1 The Employer shall fully comply with all standards, laws and regulations of
health, sanitation and safety, including all regulations of the local fire
department.
16.2 The Employer shall provide an adequate number of drinking fountains.
Restrooms and work areas shall be kept in a clean,
<PAGE> 12
sanitary condition, and will be well-lighted and heated. Air conditioning shall
be maintained in the Employer's facilities where it currently exists.
16.3 A worker may refuse to perform work which he reasonably believes would pose
a serious threat of injury or illness.
16.4 The Employer shall be exclusively responsible for health, safety and
sanitation conditions in its shop. Neither the Union nor its agents or
representatives shall be liable for any job-related injury, illness or death.
16.5 The Joint Labor-Management Committee set forth in Article 39 shall address
issues of health and safety and may make recommendations for the correction of
unsafe or harmful conditions and practices and may make recommendations for
rules and procedures to prevent accidents and disease and for the promotion of
the health, safety and sanitation of the workers.
16.5.1 The Employer shall facilitate limited safety training of employees by, at
the Union's request: 1) providing one day's paid leave of absence per year to
one employee in each shop designated by the Union to attend health and safety
training, and 2) permitting all employees to participate in one paid hour per
year of safety training in the shop during working time. The parties shall
schedule such training at a mutually convenient time. This safety-training
paragraph does not diminish in anyway the Employer's responsibility to provide a
safe and healthful workplace under this Agreement. The Union will provide such
training only to the extent feasible and is not obligated to provide such
training.
ARTICLE 17: HOURS OF WORK AND OVERTIME
The provisions governing hours of work and overtime, including overtime
premiums, in the 1994-1997 agreements covering the individual facilities and the
practices developed thereunder shall continue.
ARTICLE 18: TEMPORARY EMPLOYEES
18.1 The Employer, from time to time, may have the need for additional temporary
employees. Such temporary employees shall not be employed by the Employer for
longer than thirty (30) consecutive days.
18.2 Temporary employees shall not be considered to be in the bargaining unit.
The temporary employees shall be informed of their temporary status when hired
and shall acknowledge the same in writing, a copy of which shall be provided to
the Union.
18.3 In the event that a temporary employee remains employed beyond the thirty
(30) day period, then such employee shall be placed in
<PAGE> 13
the bargaining unit and benefit fund contributions for that employee shall be
paid retroactively form the original date of hire. Union obligations for such
employee shall be computed on the basis of the original date of hire.
18.4 The Employer shall not employ temporary employees if any of the bargaining
unit employees performing such work are on layoff. The Employer agrees that the
job security and earning opportunities shall not be diminished for the regular
bargaining unit employees when temporary employees are used. The Employer shall
not abuse its right to use temporary employees to avoid hiring regular
bargaining unit employees.
ARTICLE 19: HOLIDAYS, PERSONAL DAYS/PAID TIME OFF AND SICK DAYS
19.1 Each Supplemental Agreement shall set forth the number of designated
holidays and sick days, personal days or paid days off that shall be granted.
Employees shall be eligible for holidays at time of hire and those employees who
have completed their trial period shall be eligible for paid time off, sick
days, personal days or paid days off.
19.2 Employees may refrain from working one (1) additional day each year on a
national or ethnic holiday of their choice, but without pay.
19.3 An employee shall not be eligible for holiday pay if:
19.3.1 He or she is absent from work on the work day immediately before or after
the holiday, except for a justifiable cause, which shall include absence from
work when the shop is not in operation; or
19.3.2 He or she becomes disabled and the holiday falls on a day beyond the
sixtieth (60th) day after the said employee last worked in the shop.
19.4 When personal days are provided, they must be scheduled with the approval
of the Employer. Sick days and/or personal days may be taken in one-half (1/2)
day increments.
19.5 Employees shall be paid for unused sick days, personal days and paid days
off at the end of the applicable leave year. The local Supplemental Agreements
shall set forth the system for accruing days off, that is, calendar year,
contract year or anniversary date.
19.6 The Employer shall not count any compensated time off as absences for
disciplinary purposes.
19.7 Holiday pay shall be paid at an employee's regular hourly rate. When an
incentive system is in effect, the applicable local Supplemental Agreement shall
set forth the computation for holidays and other paid days off, which shall not
be lower than the extant holiday rate.
19.8 When a holiday falls during an employee's vacation, the employee shall
receive the holiday pay and shall not be charged a vacation day for that day.
<PAGE> 14
ARTICLE 20: BEREAVEMENT PAY
20.1 An employee who has successfully completed his trial period shall be
granted paid time off at the holiday rate for bereavement leave in the event of
a death in his/her immediate family.
20.2 Except in those facilities in which employees enjoy more favorable
benefits, bereavement leave shall be:
20.2.1 For the death of parents or legal guardians, children (including adopted
and step children), siblings or spouse, three (3) days.
20.2.2 For the death of grand-parents, grand-children, mother/father-in-law or
son/daughter-in-law, one (1) day.
20.3 Bereavement leave may be taken on any scheduled work day(s) within a
reasonable time after the employee is notified of the death. In the case of a
three (3) day benefit, the days taken must be continuous. The Employer may
require documentation for the basis for the leave promptly after the leave
period.
ARTICLE 21: SHOP STEWARD
There shall be in the facility of the Employer Shop Steward(s) designated by the
Union. The Shop Steward(s) shall be compensated by the Employer for time
unavoidably lost during working hours in the process of adjusting grievances.
For purposes of layoff only, shop Steward(s) shall have super-seniority over
other bargaining unit employees.
ARTICLE 22: SENIORITY/LAYOFF
The provisions governing seniority and lay off in the 1994-97 agreements
covering individual facilities and the practices developed thereunder shall
continue.
ARTICLE 23: WORK ASSIGNMENTS
The provisions governing transfers, promotions, job classifications,
cross-training and job postings in the 1994-97 agreements covering individual
facilities and the practices developed thereunder shall continue.
ARTICLE 24: DISCHARGES AND DISCIPLINE
<PAGE> 15
24.1 No employee shall be discharged without just and sufficient cause, except
during his trial period. If the discharge or disciplinary act is found to be
unjustified, the employee shall be reinstated and may be compensated for his
loss of earnings during the period of such discharge or disciplinary act.
24.2 All disciplinary notices, including those for absences, shall be of no
effect one year after the occurrence.
24.3 The Employer shall inform the Union of all discipline imposed on an
employee, including verbal warnings.
ARTICLE 25: LEAVES OF ABSENCE
25.1 The Employer shall grant reasonable leaves of absence to employees for a
justifiable cause. Except as may be required by law, the Employer is not
required to grant a leave for a period of less than five (5) consecutive work
days. Employees on leaves of absence shall not lose any job rights and shall be
entitled to return to their regular job prior to such absence.
25.2 RETURN FROM MILITARY SERVICE - Any employee who has been conscripted,
inducted or drafted into the military service of the United States Government,
shall, upon termination of such service, be restored to his former position or
to a position of like seniority status and pay provided he applied for
re-employment within ninety (90) days after the date of his discharge.
25.3 FAMILY LEAVE - The Employer shall grant, upon request of the Union, up to
six (6) months' leave of absence without pay to male and female employees for
the birth or adoption of a child or for the care of a seriously ill family
member or live-in partner (hereinafter "Family Leave"). The Employer may hire a
provisional employee for a period not to exceed six (6) months to take the place
of any employee who is on Family Leave. Upon the date of hire, the Employer
shall give the Union and the provisional employee notice of the employee's
provisional status. During such period, provisional employees shall be entitled
to all the rights of regular employees under this Agreement. The Employer may
retain a provisional employee as long as such action does not displace the
employee on Family Leave or any other regular employee.
An employee on Family Leave shall be entitled to return to his or her regular
job prior to such absence, or an equivalent position, and, subject to the
foregoing, shall not lose any rights or privileges under this Agreement.
25.4 The Employer may require proper medical certification for leaves relating
to an employee's own serious health condition, or for the care of a seriously
ill family member or live-in partner.
ARTICLE 26: TIME CLOCK
<PAGE> 16
The Employer shall maintain an adequate number of time clocks on its premises,
and each employee covered by this Agreement shall punch his or her time card
before starting work and at the completion of work and before and after lunch.
ARTICLE 27: RIGHT TO VISIT SHOP
Duly authorized representatives of the Union, including engineers and
accountants, shall have the right to visit the premises of the Employer at
reasonable times for the purpose of ascertaining whether the provisions of this
Agreement are being complied with. Such visits shall be conducted so as not to
cause interference with operations. In addition, the Employer shall provide
access to relevant accounting books and records as the Union may reasonably
request in order to ascertain whether the provisions of this Agreement are
being complied with.
ARTICLE 28: EMPLOYEE BENEFIT FUNDS
28.1 The Employer shall pay monthly to the Union an amount equivalent to a
percentage, as described in the applicable Supplemental Agreement, of each total
gross weekly payroll (before deduction for federal, state or local taxes) of all
bargaining unit employees (whether Union or non-Union employees, and whether
regular or trial period employees) employed in its facility. All payments shall
be due on the tenth (10th) day of the following month. Such payments shall be
allocated towards the following Funds:
28.1.1 Towards the ILGWU National Retirement Fund, a trust fund established by
collective agreement for the purpose of providing pensions or annuities on
retirement or death of employees.
28.1.2 Towards the ILGWU Health Services Plan, a trust fund established by
collective agreement for the purpose of providing employees with drugs,
medications, and other health services.
28.1.3 Towards the ILGWU Eastern States Health and Welfare Fund, a trust fund
established by collective agreement for the purpose of providing employees with
health, welfare and recreation benefits and services.
28.1.4 The Employer shall contribute to substitute employee benefit funds as may
be required by local Supplemental Agreement.
28.2 In addition to the regular employer contribution to the Union relating to
the ILGWU Eastern States Health and Welfare fund
<PAGE> 17
required by this Article, the Employer shall pay monthly to the Union, as
additional employer contributions toward the ILGWU Eastern States Health and
Welfare Fund for cafeteria plan benefits, twenty three dollars ($23.00) for
individual coverage and an additional thirty-two ($32.00) dollars, for a total
of fifty-five ($55.00) dollars, for dependent coverage per month per eligible
employee. Such additional employer contributions due under this Paragraph shall
be paid to the Union in advance and no later than the first day of each month.
In addition to the regular reports and information the Employer is required to
provide to the Union pursuant to this Article, the Employer shall submit to the
Union together with such reports a special monthly report in the form prescribed
by the Health and Welfare Fund listing at least: (a) the name and Social
Security Number of each employee for whom the Employer is required to submit
additional contributions by virtue of the said Cafeteria Plan, and (b) the
amounts of additional employer contributions attributable to such individual
employee's contribution obligations. An eligible employee is an employee who is
eligible to receive hospital, medical, surgical and major medical benefits under
the ILGWU Eastern States Health and Welfare Fund solely in accordance with the
Amended By-Laws, Rules and Regulations of the Fund. In addition to any other
requirements which the Fund may establish concerning an employee's eligibility
to participate in and/or receive benefits from the Fund, it is also understood
that no contributions will be required for any employee or former employee of
the Employer who is participating in and/or receiving benefits from the Fund as
a result of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"). The Union shall provide the Employer with a copy of all benefit
enrollment forms for employees who have elected family coverage through the
Health and Welfare Fund. If those enrollment forms are not available on hard
copy, the Union shall provide the Employer with access to such data in whatever
form it is maintained. Additionally, the Union shall promptly supply copies of
enrollment forms reflecting a change in status to the Employer as soon as such
forms are completed.
28.3 If at any time during the life of this Agreement, as a result of government
mandated requirements, a benefit or a cost of any of the benefits shall be
increased, or a new benefit required, or the cost to any fund of providing
existing or new benefits is increased, the Union shall have the right to request
additional company contributions to cover the expense thereof.
28.4 The said Health and Welfare Fund shall continue to be maintained and
administered by the Board of Trustees in accordance with the by-laws or rules
and regulations adopted by the Board of Trustees for that purpose. The Employer
shall have no legal or equitable right, title, claim or interest in or to said
Fund, or the administration thereof. No individual employee shall have any legal
or equitable right, title or interest in, or claim against, his or any other
employer's payments towards the Health and Welfare Fund, or against said Fund,
except as may be provided by the by-laws or rules and regulations of said Fund.
28.5 The said Retirement Fund and the said Health Services Plan each shall be
administered in accordance with its by-laws or rules
<PAGE> 18
and regulations by a Board of Trustees. Each Board of Trustees shall be composed
of Union representatives and an equal number of representatives of employer
contributors to that Fund. In the event that the Board of Trustees shall be
deadlocked on any issue or matter arising in connection with its Fund, the same
shall be decided by a neutral person as set forth in the by-laws or rules and
regulations of said Fund, and his decision shall be final and binding. The
parties hereto hereby ratify, confirm and approve the composition and membership
of each Board of Trustees as now or hereafter constituted.
28.6 Each Board of Trustees mentioned in Paragraph 28.4 or 28.5 above shall
adopt and promulgate such by-laws or rules and regulations to effectuate the
purpose of its Fund as it may deem necessary and desirable, including the
detailed basis upon which payments from the Fund will be made, and shall have
the power to modify the same from time to time without notice, whenever it may
deem it necessary or desirable to do so. The parties hereby agree to be bound
thereby and they are hereby incorporated in and made part of this Agreement. It
is agreed that such Boards of Trustees may not increase the Company's level of
contribution during the term of this Agreement.
28.6.1 The Board of Trustees or other body administering
any of the benefit funds, except the ILGWU National Retirement Fund, is hereby
authorized and empowered, in its sole discretion and upon such basis as it deems
desirable, to transfer or mingle the assets of or to merge said Fund with any
other fund or funds now existing or hereafter established and provided for in a
collective agreement with UNITE or an affiliate thereof. In the event of such
mingling, transfer or merger, the amounts hereinabove provided to be allocated
towards the respective funds shall thereafter be paid over to the fund or funds
with which there has been such mingling, transfer or merger.
28.6.2 The Board of Trustees of the ILGWU National
Retirement Fund is hereby authorized and empowered, in its sole discretion and
upon such basis as it deems desirable, to transfer or mingle the assets of said
Fund or to merge said Fund with any other retirement fund or funds.
28.7 None of the monies paid into the Retirement Fund shall be used for any
purpose other than to provide for pensions or annuities on retirement or death
of employees and to pay the operating and administrative expenses thereof. The
monies of the other benefit funds shall be kept separate and apart from all
other monies except as allowed in Paragraphs 28.6.1 and 28.6.2.
28.8 Only the assets of each benefit fund shall be available for the payment of
the benefits provided by that benefit fund and only to the extent that such
benefit fund is financially able to make such payments.
28.9 The Employer shall have no legal or equitable right, title, claim or
interest in or to said Funds. No individual employee shall have any legal or
equitable right, title or interest in, or claim against, his or any other
employer's payments towards said Funds or against said Funds, except as may be
provided by the
<PAGE> 19
by-laws or rules and regulations of said Funds.
28.10 An annual audit of each Fund shall be made by accountants designated by
the Board of Trustees. A statement of the results of such audit shall be made
available for inspection by interested persons at the principal office of the
Fund and at such other places as may be designated by its Board of Trustees.
28.11 In the event benefit fund contributions are collected on behalf of a
health and welfare fund other than the Health and Welfare Fund listed in
Paragraph 28.1.3, the person who collected the contributions shall remit the
contributions to the proper health and welfare fund.
28.12 The Union or the Board of Trustees of a Fund, or both of them, shall be
proper parties-in-interest to enforce collection of payments due from the
Employer towards said Funds. Should the matter be submitted to arbitration and
the arbitrator find against the Employer, he may also order and direct the
Employer to pay interest at the current prime rate of interest as set by the
Amalgamated Bank of New York, 1710 Broadway, New York, New York. He may also
order and direct the Employer to pay the cost of investigation of payments due.
Should the matter be submitted to arbitration and the arbitrator find against
the Employer, the arbitrator may order and direct the Employer to pay the cost
of investigation together with reasonable attorneys' fees and other expenses
incurred in connection with the matter. In addition, the arbitrator may grant
such other relief as he deems appropriate under the circumstances.
28.13 The Union or the appropriate Board of Trustees or Boards of Trustees shall
have the right to enforce this Article, including the provisions pertaining to
delinquent contributions, by proceeding through arbitration or by instituting
appropriate action before a court or governmental agency or by pursuing any
other remedies provided by law or this Agreement.
ARTICLE 29: DENTAL PLAN
The Employer shall offer all bargaining unit employees the same dental plans on
the same terms as it offers to its non-unit employees. Premiums paid by
employees will remain for the duration of this Agreement at the levels in effect
on June 1, 1997. Employees who enroll must remain in the plan for a minimum two
year period.
ARTICLE 30: DISABILITY
Disability benefits currently in effect shall continue and shall be specified in
the applicable Supplemental Agreement.
<PAGE> 20
ARTICLE 31: GRIEVANCES AND ARBITRATION
31.1 Any and all disputes between the Union or any employees and the Employer
involving an alleged breach or issue of application or interpretation of this
Agreement or a local Supplemental Agreement shall be adjusted as follows:
31.1.1 The shop steward, together with a representative of the Union, shall
attempt to settle the matter with a representative of the Employer. No
adjustment shall be deemed binding on the Union unless approved by the Manager
of the Union or the designated Business Agent servicing the facility. Disputes
not specific to an employee or group of employees may be brought by a
representative of the aggrieved party.
31.1.2 A grievance is time barred if it is not submitted in writing to the
Employer within sixty (60) working days of the occurrence of the condition or
such time as the affected employee or the Union knew of the condition giving
rise to the grievance. In the case of a continuing violation, a remedy may be
granted for up to one year prior to the filing of the grievance. The time limit
for filing grievances shall not apply to disputes concerning payment of benefit
fund contributions or disputes regarding Article 10.
31.1.3 If they shall fail satisfactorily to dispose of any such grievance, the
matter shall be submitted to an arbitrator selected by mutual agreement from
the panel set forth herein. If the parties cannot agree on an arbitrator, they
shall select an arbitrator by alternately striking members of the panel. The
arbitrator who heard the previous case shall be struck first. The panel shall
consist of:
Daniel Brent
Robert Light
Joan Parker
John Sands
Arthur Stark
The arbitration panel and method of selecting a member of the panel for disputes
arising solely in the Alabama facility shall be set forth in the applicable
local supplement. The arbitrator shall base his decision on this Agreement
and/or the applicable local supplement and shall not alter or amend this
Agreement and/or a local supplement.
31.2 Either party desiring to use the arbitration procedure as herein provided
shall transmit a written notice to the other party no later than four (4) months
after the filing of the grievance. The award or decision of the arbitrator, in
addition to granting such other relief as the arbitrator may deem proper, may
contain provisions commanding affirmative acts or restraining acts and conduct
of the parties. If either party shall default in appearing before the
arbitrator, he is empowered nevertheless to take the proof of the party
appearing and render an award thereon. Any award or decision of the arbitrator
shall be final and binding and
<PAGE> 21
shall be enforceable by appropriate proceedings at law or in equity. His fee
shall be borne equally by the parties hereto.
31.2.1 The parties agree that any papers, notices or processes to
initiate or continue an arbitration hereunder may be served by mail, and all
papers, notices or processes in any application to a court to confirm or enforce
an arbitration award hereunder, including service of the papers conferring
jurisdiction of the parties upon the court, may be served by certified or
regular mail, directed to the last-known address of the Employer or the Union.
31.3 The procedure herein established for the adjustment of disputes shall be
the exclusive means for the determination of all disputes, complaints,
controversies, claims or grievances whatsoever, including the arbitrability of
any dispute. It is intended that this provision shall be interpreted as broadly
and inclusively as possible. Neither party shall institute any action or
proceeding in a court of law or equity, State or Federal, or before an
administrative tribunal, other than to compel arbitration, as provided in this
Agreement, or with respect to the award of an arbitrator. This provision shall
be a complete defense to and also grounds for a stay of any action or proceeding
instituted contrary to this Agreement.
31.4 Any dispute, complaint, controversy, claim or grievance hereunder which any
employee may have against the Employer may be instituted and processed only by
the Union in the manner herein provided. No employee shall have the right
individually to institute or process any action or proceeding with reference to
any dispute, complaint, controversy, claim or grievance, or to initiate or
compel arbitration in the event the Union fails or refuses to proceed with
arbitration.
ARTICLE 32: NO STRIKE/NO LOCKOUT PLEDGES
There shall be no strikes or lock-outs during the term of this Agreement for any
reason whatsoever, except as set forth in Article 34.
ARTICLE 33: NO REDUCTION OF WAGES OR OTHER BENEFITS
Wages and other terms and conditions of employment now existing or hereafter
established at any facility of the Employer shall not be lowered, except by
mutual agreement. Any custom or practice existing in a facility at the time of
the execution of this Agreement more favorable to the employees than the
provisions hereof shall be continued as heretofore.
<PAGE> 22
ARTICLE 34: STRUCK WORK-LABOR DISPUTE CROSSING PICKET LINES
34.1 To the extent that a contractor's manufacturing work involves the
integrated process of production of the Employer's garments, the Employer and
its contractors have a close unity of interest with each other and in any labor
dispute, and to such extent, the Employer and its contractors are not neutrals
with respect to each other but are jointly engaged in an integrated production
effort. Accordingly, to the extent permitted by law, it shall not be considered
a breach of this agreement on the part of the Union, any of its affiliates or on
the part of any employee if such worker refuses to cross any lawful picket line
recognized by the Union or its affiliates or to enter upon the lawfully picketed
premises of said contractor, either of his or her own volition or by direction
of the Union or the International or to refuse to handle garments from a
contractor with whom the Union or any of its affiliates has a lawful labor
dispute.
ARTICLE 35: TEMPORARY APPOINTMENT TO UNION STAFF
The Union shall have the right to appoint an employee to its staff on a
temporary basis, not to exceed nine (9) months, without said employee losing his
seniority rights.
ARTICLE 36: CONFORMITY TO LAW
36.1 If any provision of this Agreement or the enforcement or performance of
such provision is or shall at any time be determined to be contrary to law by or
enjoined by a court or administrative agency, then such provision shall not be
applicable or enforced or performed except to the extent permitted by law. The
Union and the Employer shall thereupon negotiate a substitute provision.
36.2 If any provision of this Agreement or its application is held invalid or
enjoined, the remainder of this Agreement shall not be affected thereby.
ARTICLE 37: JURY DUTY
An employee who has successfully completed his trial period and who
<PAGE> 23
is required on a non-voluntary basis to serve as a juror shall be paid his or
her full wage for a period not to exceed ten (10) working days once during each
year of this Agreement. Said employee shall be required to submit evidence as to
the length of jury service.
ARTICLE 38: UNION ACTIVITIES
38.1 Any employee who is called from his or her employment to serve on the
Union's Negotiating Committee shall be paid his or her full wage during the
entire time he or she shall serve on the Union's Negotiating Committee. A
maximum of one committee member for every twenty-five (25) bargaining unit
employees shall receive this benefit.
38.2 The Union shall have access to bulletin boards in the facilities.
ARTICLE 39: JOINT LABOR-MANAGEMENT COMMITTEE
The Employer and the Union shall designate an equal number of representatives to
form a Joint Labor-Management Committee. The Committee shall meet regularly at
least one (1) time per month. The Employer shall compensate employees at their
regular rate of pay for serving on the Committee during working time.
ARTICLE 40: VACATIONS
Each employee who has been employed ten (10) years shall receive a fourth week
of vacation paid by the Employer. Other aspects of vacation pay and time off
shall be set forth in the applicable local Supplemental Agreements.
ARTICLE 41: CUTTING
Any cutting and related tasks, such as marking, grading and digitizing, shall be
performed under the conditions specified in the Supplemental Agreement covering
employees represented by Local 10.
ARTICLE 42: REPORTING PAY
<PAGE> 24
Employees shall receive reporting (call-in) pay as set forth in the local
Supplement Agreements, which shall maintain the existing reporting pay benefit.
ARTICLE 43: 401(k) PLAN
The Employer shall provide access to a 401(k) plan for employees by
participating in the Textile Workers Pension Fund, National Plus 401(k) Plan.
The Employer's participation is on a non-contributory basis. The Employer shall
deduct voluntary employee contributions and forward such contributions in a
timely fashion to the Plan.
ARTICLE 44: NO WAIVER
The failure of either party to this Agreement to require strict performance of
any provision of the Agreement shall not be deemed a waiver or abandonment of
any of the rights or remedies provided herein for violation of the Agreement or
any provision thereof; nor shall it constitute a waiver or abandonment of any
right or remedy herein provided for a subsequent violation of any provision of
the Agreement.
ARTICLE 45: MANAGEMENT RIGHTS
All rights and prerogatives which may lawfully be exercised by management and
which are not specifically abridged or limited by this Agreement or the
applicable local Supplemental Agreement are reserved to the Employer.
ARTICLE 46: DURATION OF AGREEMENT
This Agreement shall be effective June 1, 1997 and continue in effect until
midnight of the 31st day of May, 2000. IN WITNESS WHEREOF, the parties have
hereunto set their hands and seals the year and date hereinabove written.
LIZ CLAIBORNE, INC.:
<PAGE> 25
By: /s/ John S. Moroz
UNION OF NEEDLETRADES INDUSTRIAL AND TEXTILE EMPLOYEES
By: /s/ Edgar Romney
Edgar Romney, Executive Vice President
By: /s/ Bruce Raynor
Bruce Raynor, Executive Vice President
LOCAL 10
By: /s/ Richard Rumelt
Richard Rumelt, Manager
LOCAL 23-25
By: /s/ Edgar Romney
Edgar Romney, Manager
LOCAL 99
By: /s/ Christine Kerber
Christine Kerber, Manager
SHIRT & LESIUREWEAR DIVISION, NEW YORK JOINT BOARD, LOCAL 150G/700
By: /s/ Olga Diaz
Olga Diaz, Manager
NORTHEAST DEPARTMENT, LOCAL 109
By: /s/ Sol Hoffman
Sol Hoffman, Director
SOUTHERN REGIONAL JOINT BOARD, LOCAL 310
By: /s/ Bruce Raynor
Bruce Raynor, Manager
<PAGE> 1
Exhibit 10(h)(i)
JOBBERS AGREEMENT
By and Between:
LIZ CLAIBORNE, INC. AND
UNION OF NEEDLETRADES, INDUSTRIAL AND TEXTILE EMPLOYEES
(UNITE)
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS 2
ARTICLE 2: SCOPE OF AGREEMENT 3
ARTICLE 3: COMPANY'S CONTINUING OBLIGATIONS--
SUCCESSORS AND SUBSIDIARIES 3
ARTICLE 4: CONTRACTORS 3
ARTICLE 5: STRUCK WORK--LABOR DISPUTE--
CROSSING PICKET LINES 6
ARTICLE 6: COMPANY'S RESPONSIBILITY FOR
CONTRACTORS' PAYMENTS 7
ARTICLE 7: EXAMINATION OF BOOKS AND RECORDS 9
ARTICLE 8: UNION LABEL 9
ARTICLE 9: BENEFIT FUNDS 10
ARTICLE 10: UNION AGENCY 15
ARTICLE 11: COUNCIL FOR AMERICAN FASHION 16
ARTICLE 12: LIQUIDATED DAMAGES 16
ARTICLE 13: ARBITRATION AND ADJUSTMENT
OF DISPUTES 17
ARTICLE 14: CODE OF CONDUCT 19
ARTICLE 15: CONFORMITY TO LAW--SAVING CLAUSE 20
ARTICLE 16: NO WAIVER 20
ARTICLE 17: TERM 21
(i)
<PAGE> 3
This AGREEMENT is made and entered into this day of May 1997, by
and between Liz Claiborne, Inc., hereinafter designated as the "Company" and the
Union of Needletrades, Industrial and Textile Employees, hereinafter designated
as "UNITE" or the "Union".
WHEREAS, the Company was a member of the New York Skirt and Sportswear
Association, Inc. (the "Association") for many years and was bound by the
collective bargaining agreements between the Association and Locals 23-25 and
Local 10, affiliates of UNITE, whose predecessor was the I.L.G.W.U. ( the
"Association Agreement"); and
WHEREAS, the Association Agreement governed, inter alia, relations
between the Company and the Union and its affiliates, including the Company's
use as a jobber of contractors to manufacture its garments as part of the
integrated process of production; and
WHEREAS, the Company has withdrawn from the Association and has
bargained individually with the Union and its affiliates; and
WHEREAS, the parties wish to preserve certain terms and conditions from
the Association Agreement; and
WHEREAS, the parties wish to cooperate in establishing conditions which
will tend to insure the stability of the industry and to provide methods for a
fair and peaceful adjustment of all disputes so as to secure uninterrupted
operation of work;
NOW, THEREFORE, the parties agree as follows:
1
<PAGE> 4
ARTICLE 1: DEFINITIONS
For the purposes of this Agreement, the following words are defined as
follows:
1.1 "Union" means Union of Needletrades, Industrial and Textile
Employees ("UNITE").
1.2 "Manufacturer" means one who manufactures all or part of its
garments in its inside shop and which may also produce its garments in
contractors' shops.
1.3 "Jobber" means one who does not manufacture garments in its own
shop but who has all of its garments produced (sewn, finished, pressed and
sometimes cut) by contractors and who may or may not employ cutters and/or
sample makers and/or distribution workers or others.
1.4 "Contractor" means one who produces garments from cut or uncut
goods for a manufacturer or jobber, including accessories, belts, covered
buttons, buckles, neckwear, artificial flowers, bias binding, tubular piping,
shoulder pads or embroideries, or who performs processing services, including
hemstitching, pleating and tucking, or performs cutting work, all of which are
part of the integrated process of production in the apparel and clothing
industry.
1.5 "Inside shop" means a shop, wherever situated, owned, operated, or
controlled by the Company in which it manufactures its garments.
1.6 "Outside system of production" means the system in the apparel and
clothing industry of having garments produced in contractors' shops.
1.7 "Jobbers Agreement" means this Agreement between the Company and
the Union.
1.8 "Union Contractor" means a contractor bound to a collective
bargaining agreement with UNITE or any of its affiliates.
2
<PAGE> 5
ARTICLE 2: SCOPE OF AGREEMENT
2.1 This Jobbers Agreement governs the overall relationship between the
Company and the Union including the Company's use of contractors to produce its
garments.
2.2 The terms and conditions of employment of the Company's bargaining
unit employees are not governed by this Agreement, but are governed by a
National Collective Bargaining Agreement, and local supplemental agreements
thereto.
ARTICLE 3: COMPANY'S CONTINUING OBLIGATIONS--SUCCESSORS AND
SUBSIDIARIES
All of the terms and provisions of this Agreement shall be binding upon
the Company and upon its subsidiaries, successors and assigns. In the event the
Company sells or transfers its business to another, it shall nevertheless
continue to be liable for the complete performance of the terms and provisions
of this Agreement by the purchaser or transferee until the purchaser or
transferee expressly, in writing, assumes such performance and agrees to be
fully bound by the terms and provisions of this Agreement.
ARTICLE 4: CONTRACTORS
4.1 The Union has a bona fide interest in the labor conditions existing
in all shops manufacturing garments and a close unity of interest exists among
the workers manufacturing garments regardless of the particular shops in which
they are employed.
3
<PAGE> 6
4.2 The Company and the contractors that manufacture garments or parts
thereof or otherwise perform work for it are closely allied and have a close
unity of interest with each other in the manufacture of garments, and in any
labor dispute, to the extent of any work performed on its garments, the Company
and its contractors are not "neutrals" with respect to each other but are
jointly engaged in an integrated process of production.
4.3 For the purpose of eliminating substandard labor conditions,
protecting the employment opportunities and labor standards of all workers
manufacturing garments for the Company, whether employed in inside shops or
contractors' shops, achieving greater employment stability and enforcing the
provisions of this Agreement, the Company agrees that it shall confine its
production to workers employed in its inside shops, if any, or in shops of
contractors in contractual relations with the Union or its affiliates.
4.4 Except as expressly limited by this Agreement, the determination of
quality, standards, price and availability, and all other terms of engagement of
contractors (which shall include the Company's Human Rights Standards of
Engagement), and revisions of same, are within the sole discretion of the
Company. Except as expressly limited by this Agreement, the Company has the sole
and exclusive right to retain and terminate the services of any contractor it
has engaged, and the foregoing shall not be subject to the arbitration
procedure.
4.5 The Company agrees to provide the Union with a copy of the terms of
engagement of all domestic contractors it has selected.
4.6 Whenever it shall appear that the Company gives work to or deals
with a "struck" contractor, the Company shall, upon notice to it, immediately
discontinue all dealings with such
4
<PAGE> 7
contractor and shall immediately withdraw work which has not been put into
production, and shall within five (5) days withdraw work which has been put
into production. Notwithstanding the foregoing, withdrawal shall be orderly
with due regard to the Company's seasonal and inventory requirements so as not
to unfairly affect the Company's competitive position.
4.7 Should the Company be found giving work to or dealing with a
non-Union contractor, the Company shall pay the Union an amount of damages equal
to twenty-five percent (25%) of the "gross amount" due to the contractor as
defined in Article 9.4 of this Agreement. Since it is difficult, if not
impossible, to ascertain the precise amount of damages payable under this
Article 4, the damages shall for all purposes be deemed liquidated damages.
4.8 So long as the Company maintains a "substantial level" of Union
employment either directly, or indirectly through Union contractors, the sole
and exclusive remedy for violations of 4.3 shall be the payment of liquidated
damages as provided under 4.7. "Substantial level" is defined as employment,
either directly, or indirectly through Union contractors, of at least five
hundred (500) Union jobs. Should such employment fall below a "substantial
level" for any calendar year, the arbitrator may order the Company to maintain a
"substantial level" of employment.
4.9 The Company shall inform non-Union domestic contractors to which it
is sending work: (i) of the Company's obligations under this Article, (ii) that
the Company will automatically accept that a contractor is in compliance with
the Company's Human Rights Standards of Engagement if that contractor has a
collective bargaining agreement with UNITE or any affiliate thereof, (iii) that
in the Company's opinion the contractor should enter into a
5
<PAGE> 8
collective bargaining agreement with UNITE or an affiliate thereof, and (iv)
that the Company may have to withdraw work from the contractor in the event the
contractor is engaged in a labor dispute with UNITE or any affiliate thereof.
4.10 Nothing contained in this Article shall be deemed to create or
enlarge any existing obligation to the workers employed in any contractor's
shop. Nothing herein shall be interpreted as making the Company responsible for
any of the acts of its contractors, except to the extent expressly set forth in
this Agreement.
ARTICLE 5: STRUCK WORK--LABOR DISPUTE--CROSSING PICKET LINES
The Company and its contractors have a close unity of interest with
each other and in any labor dispute, the Company and its contractors are not
neutrals with respect to each other but are jointly engaged in an integrated
production effort. Accordingly, the parties agrees, as follows:
a. The Company shall not, directly or indirectly, give any
work to or deal with any of its contractors engaged in the apparel and clothing
industry against which a lawful strike has been declared or approved by the
Union or any of its affiliates or with which any of them has a lawful labor
dispute. Whenever it shall appear that the Company is giving work to or is
dealing with a contractor against whom there is a lawful strike as set forth
above, the Company shall, upon notice to it, immediately discontinue all
dealings with such contractor and shall immediately withdraw work which has
not been put into production, and shall within five (5) days withdraw work
which has been put into production. Notwithstanding the foregoing,
6
<PAGE> 9
withdrawal shall be orderly with due regard to the Company's seasonal and
inventory requirements so as not to unfairly affect the Company's competitive
position.
b. To the extent permitted by law, it shall not be considered
a breach of this Agreement on the part of the Union or any of its affiliates or
on the part of any employee of any of its contractors performing part of the
integrated process of production of the Company's garments, if such worker
refuses to cross any lawful picket line recognized by the Union or any of its
affiliates or to enter upon the lawfully picketed premises of said contractor,
either of his or her own volition or by direction of the Union or any of its
affiliates.
ARTICLE 6: COMPANY'S RESPONSIBILITY FOR CONTRACTORS' PAYMENTS
To safeguard employment opportunities and labor standards and to
provide for the full payments of all amounts due to and/or on behalf of workers
who produce the Company's garments in its contractors' shops:
6.1 The Company shall pay each of its Union contractors an amount at
least sufficient to enable it to provide such workers with the wages, earnings,
overtime, and holiday pay and to pay benefit fund contributions provided in the
applicable collective bargaining agreement.
6.2 No part of the amount so paid by the Company to its contractor
shall be used by the contractor as payment for overhead and services. To insure
against diversion of monies intended for the workers, the Company shall, in
addition to the foregoing amount, pay to its contractor a reasonable amount for
overhead and/or services that shall be separately agreed upon between them or
their representatives.
7
<PAGE> 10
6.3 If the Company's contractor fails to pay the wages, earnings,
overtime, or holiday pay due to bargaining unit workers in its shop for work
produced for the Company, the latter shall be liable to its contractor's workers
for the payment of the foregoing. The Company's liability shall be limited to
such payment for ten (10) full days' work in every instance.
6.3.1 If the Company fails to pay its contractors on or before
the Tuesday following the week that such work was done, the Company's liability
for wages, earnings, overtime, and holiday pay shall be deemed extended beyond
ten (10) days by one (1) additional day for each additional day that such
workers were not so paid because the Company failed to make such required
payments to the contractor.
6.3.2 Where the workers in the shop of a contractor do not
receive their holiday pay on or before the Tuesday following the week in which
the holiday occurred, by reason of the fact that the shop was closed because of
lack of work, the liability of the Company for the ten (10) full working days
shall commence to run in every instance from the Tuesday following the day on
which production in such shop is resumed.
6.3.3 The Union shall give the Company notice of the
contractor's failure to make payments under this paragraph 6.3 as soon as
practicable.
6.4 The Union agrees that the provisions of this article do not in any
manner whatsoever bind the Company to any other agreement.
8
<PAGE> 11
ARTICLE 7: EXAMINATION OF BOOKS AND RECORDS
7.1 The Union, or accountants designated by it, may examine the
Company's books and records to determine compliance with this Agreement, except
as limited under 7.2. Such books and records shall be open to examination at
reasonable times upon reasonable notice to the Company.
7.2 If the Company agrees to pay the maximum cumulative damages for the
contract year, as set forth in Article 12, then the Union shall have no right to
examine records to establish liquidated damages.
ARTICLE 8: UNION LABEL
The Company shall affix the UNITE Union Label to all garments and
accessories manufactured by or for the Company by its inside shops, if any, and
Union contractors in accordance with the Union label rules, regulations and
procedures, which, together with any amendments thereof, shall be deemed
incorporated in this Agreement with the same force and effect as if fully set
forth herein. All such labels shall be purchased by the Company from the Union.
9
<PAGE> 12
ARTICLE 9: BENEFIT FUNDS
9.1 This Jobbers Agreement governs the benefit fund contributions paid
by the Company on behalf of the employees of its Union contractors. In the event
the Company contracts with a contractor that is party to a collective bargaining
agreement with the Union or an affiliate thereof, the terms of which do not
require the contractor to pay benefit fund contributions, the Company shall pay
to the funds designated below the amount required under the terms set forth
below. Any payment to the said funds shall neither bind nor commit the Company
to the terms of, nor make the Company party to any collective bargaining
agreement covering its contractors' employees.
9.2 The Company shall not be responsible for paying benefit fund
contributions based on work sent to Union contractors whose collective
bargaining agreements with Union affiliates require the contractor to pay
benefit fund contributions.
9.3 The term "Benefit Funds" is the collective designation of the
I.L.G.W.U. Eastern States Health and Welfare Fund; (hereafter "Eastern States
Health and Welfare Fund) Health and Vacation Fund of Amalgamated Ladies' Garment
Cutters' Union, Local 10; I.L.G.W.U. National Retirement Fund (hereafter
"Retirement Fund"); and I.L.G.W.U. Health Services Plan (hereafter "Health
Services Plan").
9.4 The term "gross amount", means the amount paid or due a contractor
for labor, overhead and services, regardless of the period for which payment is
made or due, on garments or items manufactured by it for the Company, whether or
not such contractor is under contract with any affiliate of the Union. With
respect to a contractor that is under contract with the
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<PAGE> 13
Union or any of its affiliates, said gross amount shall not include State
Unemployment Taxes, Federal Unemployment Taxes, Federal Social Security Taxes;
but it shall include, without exception, all other amounts paid or due to the
contractor.
9.5 The Company shall pay monthly to the Union* on behalf of the
Benefit Funds as follows:
9.5.1 As of: (i) June 1, 1997 a sum equivalent to ??%, (ii) effective
July 1, 1997, a sum equivalent to ??%, (iii) effective July 1, 1998, a sum
equivalent to ??%, and (iv) effective July 1, 1999, a sum equivalent to ??% of
the gross amount paid by or due from it to each of its contractors whose workers
are covered by a collective agreement with Local 23-25/Local 10.
9.5.2 As of: (i) June 1, 1997 a sum equivalent to ??%, (ii)
effective July 1, 1997, a sum equivalent to ??%, (iii) effective July 1, 1998, a
sum equivalent to ??%, and (iv) effective July 1, 1999, a sum equivalent to ??%
of the gross amount paid by or due from it to each of its contractors whose
workers are covered by a collective bargaining agreement with the Northeast
Department.
9.5.3 As of: (i) June 1, 1997, a sum equivalent to ??%, (ii)
effective July 1, 1997, a sum equivalent to ??%, (iii) effective July 1, 1998, a
sum equivalent to ??%, and (iv) effective July 1, 1999, a sum equivalent to ??%
of the gross amount paid by or due from it to each of its contractors whose
workers are covered by a collective bargaining agreement in effect with an
affiliate of the Union other than Local 23-25, Local 10 or the Northeast
Department.
- --------
* THE AMOUNTS TO BE CONTRIBUTED UNDER PARAGRAPH 9.5 SHALL BE THE SAME AS SET
FORTH IN THE ASSOCIATION AGREEMENT, WHICH AGREEMENT SHALL NOT BE REFERENCED
HEREIN. THIS FOOTNOTE SHALL BE DELETED ONCE THE AMOUNTS ARE DETERMINED AND
FILLED IN THE DESIGNATED SPACES.
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<PAGE> 14
9.6 The Company shall also pay monthly to the Union on behalf of the
Health and Welfare Funds, a sum equivalent to .30% of the gross amount paid by
or due from it to each of its Union contractors to enable the Funds to make
payment of the Company's share of federal social security taxes (FICA), on
certain benefits paid by the Funds to the workers eligible therefor.
9.6.1 If there is an increase in the Company's share of
federal social security taxes (FICA), the Company will pay such additional sum
to the Union to enable the Funds to make full payment of the Company's share of
federal social security taxes (FICA).
9.7 The aforesaid payments shall be allocated among and paid over by
the Union as set forth in Appendix "A."
9.8 Collection: The sums paid to the Union on behalf of and allocated
by it to the Benefit Funds shall be subject to a reasonable collection fee.
9.9 The Benefit Funds shall continue to be maintained and administered
in accordance with the by-laws or rules and regulations adopted for that purpose
and any amendments thereto. The Company shall have no legal or equitable right,
title, claim or interest in or to said funds or the administration thereof. No
individual employee or his beneficiaries shall have any legal or equitable
right, title or interest in, or claim against (i) his or any other employer's
payments toward the said funds, or (ii) against said funds, the trustees thereof
or their agent; or (iii) the Company or the Union except as may be provided by
the by-laws or rules and regulations of said funds.
12
<PAGE> 15
9.10 The Health Services Plan and Retirement Fund are trust funds
established by collective bargaining agreements and maintained in trust for the
purpose of providing employees with health and welfare benefits and services,
and in the case of the Retirement Fund, retirement benefits and services. Each
of the aforesaid funds is, and shall continue to be administered by a Board of
Trustees, the members of which shall be the trustees of said funds. Each Board
of Trustees shall be composed of Union representatives and an equal number of
representatives of employer-contributors to said Funds. If any Board of Trustees
shall be deadlocked on any issue or matter arising in connection with the Fund
it administers, the same shall be decided by a neutral person as set forth in
the by-laws or rules and regulations of said Fund, and his decision shall be
final and binding. The parties hereto hereby ratify, confirm and approve the
composition and membership of each Board of Trustees as now or hereafter
constituted. The Eastern States Health and Welfare Fund is a trust fund
established by collective bargaining agreement and maintained in trust, for the
purpose of providing employees with health, welfare and recreation benefits and
services.
9.11 An annual audit of the Eastern States Health and Welfare Fund, the
Retirement Fund and the Health Services Plan shall be made by accountants
designated by the body administering each Fund. A statement of the results of
such audit shall be made available for inspection by interested persons at the
principal office of the respective Benefit Funds and at such other places as may
be designated by the body administering each Fund.
9.12 The monies paid towards the Eastern States Health and Welfare
Fund, the Retirement Fund, and the Health Services Plan shall not be used for
any purpose other than to
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<PAGE> 16
provide for pensions or annuities on retirement or death of employees and
health, welfare and recreation services or benefits, and to pay the operating
and administrative expense thereof. The monies of said Funds shall be kept
separate and apart from all other monies.
9.12.1 The Board of Trustees or other body administering said
Benefit Funds is hereby authorized, in its sole discretion and upon such basis
as it deems desirable, and to the extent permitted by law, to transfer or mingle
the assets of or to merge any of said Benefit Funds with any other benefit fund
or funds now existing or hereafter established and provided for in a collective
bargaining agreement with the Union or an affiliate thereof. In the event of
such mingling, transfer or merger, the amounts hereinabove provided to be
allocated towards said funds shall be paid over to the fund or funds with which
there has been such mingling, transfer or merger.
9.12.2 The Union, the Board of Trustees of any of the Benefit
Funds, or any other body administering any of the Benefit Funds, or any of them,
shall be proper parties in interest to enforce collection of payments due from
the Company toward any of said funds.
9.12.3 The failure of the Company to pay the amounts due or to
file required statements with the Union shall be deemed a breach of this
Agreement. The Union may proceed under the arbitration provision of this
Agreement for an award against the Company directing payments and filing of
statements by the Company.
9.12.4 The arbitrator may also direct that the Company shall
pay to the appropriate Benefit Fund (i) interest at the rate of ten (10%)
percent per year on each monthly payment from the date when it becomes due, (ii)
the costs of investigations made to determine the amount due,
14
<PAGE> 17
and (iii) attorneys' fees and expenses in amounts fixed by him and other
expenses incurred by the Union or any Benefit Fund in connection with the
arbitration proceeding and which may reasonably be incurred by it in connection
with any action or proceeding to confirm his award.
9.13 Each Board of Trustees shall adopt and promulgate such by-laws or
rules and regulations to effectuate the purpose of the Fund which it administers
as it may deem necessary and desirable, including the detailed basis upon which
payments from the Fund will be made, and shall have the power to modify the same
from time to time. The parties hereto agree to be bound thereby and they are
hereby incorporated in and made part of this Agreement.
ARTICLE 10: UNION AGENCY
The parties agree that the sole persons authorized or having the power
to act as agents of the Union, or to bind the Union legally with respect to
matters arising out of this Agreement or arising out of the relations between
the Company and the Union, or to subject the Union to any liability whatever by
reason of any act or omission are the President of the Union and such additional
persons as the Union may formally designate by written notice to the Company.
The Union shall not be responsible for the acts or omissions of any other
person, including members and employees of the Union.
15
<PAGE> 18
ARTICLE 11: COUNCIL FOR AMERICAN FASHION
The Company shall contribute on an annual basis $29,500 dollars to the
Council For American Fashion Labor-Management Industry Development Fund ("CAF").
CAF is an industry wide labor management committee established to, among other
things: expand and improve working relationships between labor and management,
enhance economic development, improve technology, increase the competitiveness
of the industry and help resolve related industry problems.
ARTICLE 12: LIQUIDATED DAMAGES
12.1 Should the Company violate any provision of this Agreement where
it is difficult or impossible to ascertain the specific amount of damages
suffered by the Union, then the Company may be liable to the Union for
liquidated damages. In fixing these damages, there shall be taken into account
any advantages gained by the Company through its violation, any deprivation of
earnings suffered by workers, any institutional harm suffered by the Union and
such other factors as are fair under the circumstances.
12.2 If the Union and the Company are unable to agree upon the amount
of liquidated damages for such violation, then the matter shall be treated as a
dispute under Article 13, except that there shall be no dispute under Article 13
if the Company agrees to pay the maximum cumulative liquidated damages for the
contract year as provided in this Article. The proceeds of any such liquidated
damages shall be paid to the Union.
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<PAGE> 19
12.3 In consideration of the volume of employment in Union shops
provided by the Company directly and indirectly, the Union agrees to limit the
maximum cumulative liability of the Company for liquidated damages in any year
of the contract as follows:
June 1, 1997 to May 31, 1998 $2.5 million
June 1, 1998 to May 31, 1999 $2.5 million
June 1, 1999 to May 31, 2000 $2.5 million
Liquidated damages, if any, shall be paid by the Company within fourteen (14)
days of becoming due.
ARTICLE 13: ARBITRATION AND ADJUSTMENT OF DISPUTES
13.1 In the event either party believes that a breach of this Agreement
has occurred or a dispute arises over the interpretation or application of any
of the terms of this Agreement, the parties shall resolve the dispute as
follows. The aggrieved party shall submit its complaint in writing to the other
party. A meeting between the Company and the Union shall be held within five (5)
calendar days of the written complaint being submitted. If the dispute is not
resolved within that five (5) day period, either party may submit the dispute to
arbitration by written notice to the other party within forty-five (45) days
thereafter.
13.2 The parties have designated the following four (4) impartial
arbitrators to serve during the term of this Agreement: (i) John Sands, (ii)
Daniel Brent, (iii) Robert Light, and (iv) Joanne Parker. If either the Union or
the Company refers a matter to arbitration, the parties shall attempt to agree
on an impartial arbitrator from the four (4) arbitrators so chosen to hear the
17
<PAGE> 20
matter. If the parties fail to agree on the name of an impartial arbitrator
within ten (10) days from the date the request for arbitration was submitted by
the aggrieved party to the other party, then they shall select an arbitrator by
alternately striking members of the panel. The arbitrator who heard the previous
case shall be struck first. The parties shall alternate cases as to who shall
strike first.
13.3 The arbitrator shall not have the authority to alter or amend this
Agreement, or to substitute any new provision for an existing provision of this
Agreement, or to bind the Company to any other agreement.
13.4 The arbitrator may, in addition to the award of damages as
provided by this Agreement, command or restrain acts and conduct of the parties
in order to effectuate compliance with the terms of this Agreement. With regard,
however, to Article 4.3, 4.7 and 4.8 of this Agreement, the arbitrator shall not
be authorized nor empowered, and shall not under any circumstances whatsoever,
command or restrain any action, or provide any remedy except as expressly set
forth in Article 4.8 of this Agreement.
13.5 If either party shall default in appearing before the arbitrator,
after reasonable notice has been provided to the party, the arbitrator is
empowered nevertheless to take the proof of the party appearing and render an
award thereon. Any award or decision of the arbitrator shall be final and
binding and shall be enforceable by appropriate proceedings at law or in equity.
The arbitrator shall require witnesses to testify upon oath or affirmation upon
the request of either party. The arbitrator's fee shall be borne equally by the
parties hereto.
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<PAGE> 21
13.6 Any papers, notices or process to initiate or continue an
arbitration hereunder may be served by mail, and all papers, notices or
processes in any application to a court to confirm or enforce an arbitration
award hereunder, including the service of the papers conferring jurisdiction of
the parties upon the court, may be served by certified mail, in all cases
directed to the Company, Attention: General Counsel, 1441 Broadway, New York,
New York 10018, and to the Union, Attention: President, 1710 Broadway, New York,
New York 10019.
13.7 The procedure herein established for the adjustment of disputes
shall be the exclusive means for the determination of all disputes, complaints,
controversies, claims or grievances whatsoever, including the arbitrability of
any dispute. It is intended that this provision shall be interpreted as broadly
and inclusively as possible. Neither party shall institute any action or
proceeding in a court of law or equity, State or Federal, or before an
administrative tribunal, other than to compel arbitration, as provided in this
Agreement, or with respect to the award of an arbitrator. This provision shall
be a complete defense to and also grounds for a stay of any action or proceeding
instituted contrary to this Agreement.
ARTICLE 14: CODE OF CONDUCT
The Company is a signatory to the terms of Code of Conduct and
Monitoring procedures established by the Presidential Task Force on the Apparel
Industry and intends to comply with
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<PAGE> 22
same. This Article is not subject to enforcement under the arbitration
provisions of this Agreement or otherwise.
ARTICLE 15: CONFORMITY TO LAW - SAVING CLAUSE
15.1 The interpretation and enforcement of this Agreement shall be
governed by federal law and by the laws of the State of New York not
inconsistent therewith.
15.2 If any provision of this Agreement or the enforcement or
performance of such provision is or shall at any time be determined to be
contrary to law or enjoined by a court or administrative agency, then such
provision shall not be applicable or enforced or performed except to the extent
permitted by law. The Union and the Company shall thereupon negotiate a
substitute provision.
15.3 If any provision of this Agreement or its application to the
Company or any person or circumstance is held invalid or enjoined, the remainder
of this Agreement or the application of such provision to other circumstances
shall not be affected thereby.
ARTICLE 16: NO WAIVER
The failure of either party to this Agreement to require strict
performance of any provision of the Agreement shall not be deemed a waiver or
abandonment of any of the rights or remedies provided herein for violation of
the Agreement or any provision thereof; nor shall it
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<PAGE> 23
constitute a waiver or abandonment of any right or remedy herein provided for a
subsequent violation of any provision of the Agreement.
ARTICLE 17: TERM
This Agreement shall go into effect June 1, 1997 and shall continue in
effect up to and including May 31, 2000.
IN WITNESS WHEREOF, the parties have hereunto set their respective
hands and seals, and caused this Agreement to be signed by their respective
officials this _____ day of May, 1997.
LIZ CLAIBORNE, INC. UNION OF NEEDLETRADES, INDUSTRIAL
AND TEXTILE EMPLOYEES (UNITE)
By /s/ Roberta S. Karp By /s/ Bruce Raynor
------------------------------ ---------------------------------
By /s/ Edgar Romney
---------------------------------
21
<PAGE> 1
Exhibit 10(i)(i)
SUMMARY OF EXTENSION OF THE EXECUTIVE LIABILITY AND
INDEMNIFICATION POLICY NO. 8103-53-79G (THE "POLICY")
The Policy has been extended to August 11, 1999. The annual premium for the
period August 11, 1997 to August 11, 1998 is $273,000.
<PAGE> 1
EXHIBIT 10(j)(i)
SUMMARY OF EXTENSION OF THE EXCESS COVERAGE DIRECTORS AND OFFICERS
LIABILITY INSURANCE POLICY NO. 483-73-56 (THE "POLICY")
The Policy has been extended to August 11, 1998. The annual premium for the
period August 11, 1997 to August 11, 1998 is $90,000.
<PAGE> 1
Exhibit 10(k)
DESCRIPTION OF LIZ CLAIBORNE, INC. 1997 SALARIED
EMPLOYEE INCENTIVE BONUS PLAN
For the 1997 fiscal year, Liz Claiborne, Inc. maintained a bonus plan for full
time salaried employees under which bonuses were earned based upon a combination
of return on invested operating capital and earnings per share, as measured
against pre-established targets, and, as applicable, achievement of targeted
levels of divisional direct operating profit and/or departmental performance
considerations, subject to certain terms and conditions. A similar bonus plan is
anticipated for 1998.
<PAGE> 1
EXHIBIT 10(n)(ii)
AMENDMENT NO. 2 TO THE
LIZ CLAIBORNE, INC. 1992 STOCK INCENTIVE PLAN
WHEREAS, Liz Claiborne, Inc. (the "Company") has adopted the 1992 Stock
Incentive Plan (the "Plan");
WHEREAS, Section 3.1 of the Plan provides that the Plan may be amended
by the Board of Directors of the Company (the "Board");
WHEREAS, the Board has determined that it is in the best interests of
the Company and its stockholders to amend the Plan, effective as of March 12,
1998, in the manner contemplated below;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 1.2(a) of the Plan is amended by deleting the first three
sentences of such Section and substituting therefor the following:
"The Plan shall be administered by the Compensation Committee
(the "Committee") of the board of directors of the Company
(the "Board"), which shall consist of not less than two
directors. The members of the Committee shall be appointed by,
and serve at the pleasure of, the Board. To the extent
required for transactions under the Plan to qualify for the
exemptions available under Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934 (the
"1934 Act"), all actions relating to awards to persons subject
to Section 16 of the 1934 Act shall be taken by the Board
unless each person who serves on the Committee is a
"non-employee director" within the meaning of Rule 16b-3 or
such actions are taken by a sub-committee of the Committee (or
the Board) comprised solely of "non-employee directors"."
2. Section 2.3(d) of the Plan is amended by deleting the second
sentence of such Section.
3. Section 2.4(b) of the Plan is deleted in its entirety.
4. Section 3.6(b) is amended by deleting the words "(the "Tax Date")"
in the third sentence of such Section.
5. Section 3.6(b) is further amended by deleting the final sentence of
such Section.
<PAGE> 2
6. Except as otherwise amended hereby, the Plan is confirmed and
ratified in all respects.
IN WITNESS WHEREOF, Liz Claiborne, Inc. has caused this instrument to
be executed on this 12th day of March, 1998.
LIZ CLAIBORNE, INC.
By: /s/ Samuel Miller
----------------------
Senior Vice President Finance
Chief Financial Officer
ATTEST:
By: /s/ Nicholas J. Rubino
-------------------------------------
Vice President-Deputy General Counsel
<PAGE> 1
Exhibit 10(s)
RESTRICTED TRANSFORMATION SHARE AGREEMENT
RESTRICTED TRANSFORMATION SHARE AGREEMENT (the "Agreement"),
dated as of January 6, 1998, between LIZ CLAIBORNE, INC., a Delaware corporation
(the "Company"), and ____________________ (the "Grantee").
The Compensation Committee of the Board of Directors of the
Company (the "Committee") has determined that the objectives of the Company's
1992 Stock Incentive Plan (the "Plan") will be furthered by the grant to the
Grantee of __________ issued shares of Common Stock of the Company currently
held by the Company, subject to the terms, conditions and restrictions set out
in this Agreement (the "Restricted Transformation Shares").
Notwithstanding any provision hereof, this Agreement shall not
become effective until the Grantee shall have executed and delivered to the
Company this Agreement.
In consideration of the foregoing and of the mutual
undertakings set forth in this Agreement, the Company and the Grantee agree as
follows:
SECTION 1. ISSUANCE OF RESTRICTED TRANSFORMATION SHARES. As
soon as practicable after receipt from the Grantee of this executed Agreement,
the Company shall cause to be issued under the Plan in the name of the Grantee,
either represented by a stock certificate or book entry registration at the
Company's transfer agent, that number of shares of Common Stock
<PAGE> 2
set forth on the first page of this Agreement as Restricted Transformation
Shares. Such issuance shall be subject to this Agreement and the restrictions
set forth in Sections 2.1 and 6 hereof. No shares or certificates with respect
thereto shall be delivered to the Grantee until the Restricted Transformation
Shares represented thereby are free of restrictions as set forth in this
Agreement. Upon the issuance of shares, the Grantee shall have the rights of a
stockholder with respect to the Restricted Transformation Shares, subject to the
terms, conditions and restrictions set forth in this Agreement.
SECTION 2. RESTRICTIONS; VESTING.
2.1 Restricted Transformation Shares may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of prior to
vesting. These restrictions shall apply as well to any shares of Common Stock or
other securities of the Company which may be acquired by the Grantee in respect
of the Restricted Transformation Shares as a result of any stock split, stock
dividend, combination of shares or other change or any exchange,
reclassification or conversion of securities.
2.2. Unless sooner terminated pursuant to the terms hereof,
and subject to accelerated termination pursuant to Section 2.3, the restrictions
set forth in Section 2.1 shall expire on July 6, 2007, provided that the Grantee
is then and has at all times since the date of grant remained an employee of the
Company. For purposes of this Agreement, "Vesting Date" means July 6, 2007 and
any other date as of which Restricted Transformation Shares become vested
pursuant to Section 2.3, 3.2 or 4. As soon as practicable after a Vesting Date,
the
2
<PAGE> 3
Company shall deliver to the Grantee, subject to the provisions of Section 6, a
stock certificate representing the Restricted Transformation Shares which became
free of the restrictions set forth in Section 2.1 on the Vesting Date and
dividends thereon as described in Section 5. Shares which become vested shall
remain subject to Sections 6 and 7.
2.3. (a) The following definitions shall apply in
this Agreement:
(1) "Competitor Group" shall mean (i) with respect to the First Three-Year
Performance Vesting Period, the apparel and related companies as
previously designated by the Committee and (ii) with respect to
subsequent Three-Year Performance Vesting Periods, such apparel and
related companies as shall be designated by the Committee, and shall
for all purposes hereunder include the Company.
(2) A "Three-Year Performance Vesting Period" shall mean each of the First
Three-Year Performance Vesting Period, the Second Three-Year
Performance Vesting Period and the Third Three-Year Performance Vesting
Period. The "First Three-Year Performance Vesting Period" shall be the
period commencing January 1, 1998 and ending December 31, 2000; the
"Second Three-Year Performance Vesting Period" shall be the period
commencing on January 1, 2001 and ending December 31, 2003; and the
"Third Three-Year Performance Vesting Period" shall be the period
commencing January 1, 2004 and ending December 31, 2006. Each
Three-Year Performance Vesting Period shall consist of sixteen (16)
separate three-year calculation periods (each a "Performance
3
<PAGE> 4
Period") which shall commence on each of the last eight Fridays of the
year preceding the first year of the Three-Year Performance Vesting
Period and on each of the first eight Fridays of the first calendar
year of such Three-Year Performance Vesting Period; provided, that if
any such Friday is a day on which major securities markets are not
open, the next preceding day on which such markets are open shall be
substituted.
(3) The "Final Value" for any company shall mean the Market Value (as
defined below) as of the last day of each Performance Period of the
number of shares of such company's capital stock which had a market
value of $100 as of the first day of such Performance Period, assuming
the reinvestment of any dividends paid with respect to such shares
during the Performance Period on a pre-tax basis in additional shares
of such company's capital stock and taking into account any stock
splits, reclassifications or any similar events; provided, that if any
company enters into bankruptcy reorganization during any Performance
Period in a Three-Year Performance Vesting Period, all Final Values of
such company shall be deemed to be $0.00 for all purposes hereunder.
The "Average Final Value" for any company shall mean the average of the
Final Values for such company for each Performance Period in a
Three-Year Performance Vesting Period. The "Market Value" of a share of
a company's capital stock shall be determined for any day as follows:
(i) if the shares are then listed or admitted to trading on a national
securities exchange, the closing sales price of such shares on such day
as reported on the consolidated transaction or other reporting system
for securities listed or traded on such exchange, or in case no such
reported sales take place on such day, the average of the last reported
high bid and low
4
<PAGE> 5
asked prices for the shares on such exchange; and (ii) if sales of the
shares are then reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), National Market System,
the closing sales price of the shares on such day as reported on the
NASDAQ, National Market System, or in case no such reported sales take
place on such day, the average of the last reported high bid and low
asked prices for the shares as reported on the NASDAQ, National Market
System; or (iii) if the shares are not then listed or admitted to
trading on a national securities exchange or if sales of the shares are
not then reported on the NASDAQ, National Market System, the average of
the last reported high bid and low asked prices for the shares in the
over-the-counter market, as reported by NASDAQ or the National
Quotation Bureau (or, if such prices are not so published by NASDAQ or
the National Quotation Bureau, as furnished by any New York Stock
Exchange member firm which is a market maker for such stock). In the
event the Market Value cannot be determined as aforesaid, the
Compensation Committee shall in good faith determine such value on such
basis as it considers appropriate. If a company included in the
Competitor Group at the beginning of a Three-Year Performance Vesting
Period is merged into or consolidated with, or acquired by, another
entity, its subsequent Market Value for purposes of this Agreement
shall be deemed to be the fair value at the transaction date of the
consideration received by a holder of a share of such company's common
stock, carried forward from such date to any subsequent date at a rate
of change equal to that of an index to be constructed and calculated
substantially as the Standard and Poor's 500 Index, but reflecting only
the performance of the shares of the remaining companies comprising the
Competitor Group during such interval.
5
<PAGE> 6
(b) Vesting of the Restricted Transformation Shares shall be
accelerated as of the last day of the final Performance Period for a
Three-Year Performance Vesting Period if (a) the Grantee has held the
Restricted Transformation Shares for at least 18 months during such
Three-Year Performance Vesting Period and holds such Shares at the end
of the last day of the final Performance Period of such Three-Year
Performance Vesting Period and (b) the Company's Average Final Value
for such Three-Year Performance Vesting Period ranks at or above the
50th percentile of the Average Final Values for all companies in the
Competitor Group; provided, that in no event shall Restricted
Transformation Shares vest with respect to any Three-Year Performance
Vesting Period if the average annual total shareholder return on the
Company's Common Stock during such Three-Year Performance Vesting
Period does not exceed the interest rate on a three-year Treasury
security acquired on the first business day of such Three-Year
Performance Vesting Period.
(c) If the Company's Average Final Value ranks at or above the
75th percentile of the Average Final Values for all of the companies in the
Competitor Group in a Three-Year Performance Vesting Period, all of the
Restricted Transformation Shares shall vest as of the last day of the final
Performance Period of such Three-Year Performance Vesting Period. If the
Company's Average Final Value ranks at the 50th percentile of the Average Final
Values for all companies in the Competitor Group in a Three-Year Performance
Vesting Period, one-half of the Restricted Transformation Shares shall vest as
of the last day of the final Performance Period of such Three-Year Performance
Vesting Period. If the Company's Average Final Value ranks above the 50th
percentile of the Average Final Values of all of the companies in the Competitor
6
<PAGE> 7
Group in a Three-Year Performance Vesting Period, but below the 75th percentile,
one-half of the Restricted Transformation Shares shall vest as of the last day
of the final Performance Period of such Three-Year Performance Vesting Period,
plus the number of Restricted Transformation Shares equal to the product of (i)
one-half of the Restricted Transformation Shares multiplied by (ii) a fraction,
the numerator of which is the difference between (1) the Company's Average Final
Value and (2) the Average Final Value for the 50th Percentile Company (as
defined) and the denominator of which is the difference between (1) the Average
Final Value for the 75th Percentile Company (as defined) and (2) the Average
Final Value for the 50th Percentile Company.
(d) For purposes of this Section 2.3, the company representing
the 50th percentile of the Average Final Values for all companies in the
Competitor Group (the "50th Percentile Company") shall be determined as follows:
(i) list all companies in order of Average Final Values;
(ii) multiply the number of companies in the Competitor Group
by 0.50, round any fractional result down to the next whole number, and
designate the result as "n";
(iii) the nth company, counting up from the bottom of the
list, represents the 50th percentile.
7
<PAGE> 8
The company representing the 75th percentile (the "75th Percentile Company")
shall be determined in the same manner but substituting 0.75 for 0.50. The
percentile rank of the Company among all companies in the Competitor Group
listed in order of Average Final Values shall be a percentage equal to (i) the
Company's rank in such list, counting up from the bottom, divided by (ii) the
number of companies in the Competitor Group, with the result rounded down to the
nearest whole number.
(e) Restricted Transformation Shares that do not vest at the
end of the final Performance Period a Three-Year Performance Vesting Period may
vest subsequently in accordance with the terms of this Agreement.
SECTION 3. TERMINATION OF EMPLOYMENT.
3.1 Except as provided in Section 3.2, effective upon
termination of the Grantee's employment with the Company for any reason, the
Company shall cancel the stock certificate or book-entry registration
representing any unvested Restricted Transformation Shares, and the Dividend
Escrow Account (as defined in Section 5) shall thereupon be terminated, it being
understood and agreed that Grantee shall not be entitled to any payment
whatsoever under this Agreement or provisions of the Plan relating to this
Agreement in connection with such cancellation and termination.
3.2 (a) For purposes of this Agreement, "Retirement" means
Grantee's ceasing to be employed by the Company and any of its affiliates on or
after the Grantee's 65th birthday, on or
8
<PAGE> 9
after the date on which Grantee has attained age 60 and completed at least six
years of Vesting Service (as defined in and determined under the Liz Claiborne
Profit Sharing Plan, as the same has been and may from time to time be amended)
or, if approved by the Compensation Committee of the Company's Board of
Directors, on or after the date Grantee has completed at least 20 years of
Vesting Service.
(b) For purposes of this Agreement, "Disability" shall mean
Grantee's total physical or mental inability to perform the usual duties of
employment with the Company or any affiliate, which inability continues for at
least six months.
(c) In the event that Grantee's employment with the Company
terminates during the course of any Performance Period for a Three-Year
Performance Vesting Period on account of Retirement, Disability or death,
Restricted Transformation Shares that are then unvested shall be subject to
vesting as of the last day of the final Performance Period of such Three-Year
Performance Vesting Period in accordance with the provisions of Section 2.3(c);
provided, however, that the number of Restricted Transformation Shares that
become vested in such circumstances shall be equal to the number that would
otherwise vest pursuant to Section 2.3(c) multiplied by a fraction, the
numerator of which is the number of months (including any fractional month)
elapsed in the Three-Year Performance Vesting Period prior to the Grantee's
employment termination and the denominator of which is 36.
9
<PAGE> 10
(d) In the event that Grantee's employment with the Company
terminates after December 31, 2006 and prior to July 6, 2007 on account of
Retirement, Disability or death, Restricted Transformation Shares that are then
unvested shall become vested on July 6, 2007.
SECTION 4. CHANGE IN CONTROL.
4.1 For purposes of this Agreement, "Change in Control" shall
have the meaning set forth in Section 3.7 of the Plan, but shall be deemed to
have occurred only if and after the event constituting such a Change in Control
results in the Company's Common Stock no longer being quoted on an established
market.
4.2 In the event that a Change in Control occurs more than six
months after the date hereof, the date of such Change in Control shall be
treated as though it were the final day of the final Performance Period of the
then current Three-Year Performance Vesting Period, and the performance rankings
described in Section 2.3(d) shall be determined accordingly; provided that the
Market Values of the Competitor Group (other than the Company) shall be based on
the eight Fridays before such date; and provided further that the Market Value
of the Company's Common Stock shall be determined based solely upon such Value
on the closing date of the change in control event. The number of Restricted
Transformation Shares that become vested as of such date shall be the greater
of:
(a) the number determined pursuant to Section 2.3(c), as
modified by the above provisions of Section 4.2; or
10
<PAGE> 11
(b) the excess of (i) over (ii) where:
(i) is a number equal to the product of (A)
the number of Restricted Transformation Shares originally
granted hereunder multiplied by (B) a fraction, the numerator
of which is the number of months (including any fractional
month) elapsed from January 1, 1998 to the date of Change in
Control and the denominator of which is 120; and
(ii) is the number of Restricted
Transformation Shares previously vested pursuant to Section
2.3(c).
Restricted Transformation Shares that do not vest pursuant to this Section 4.2
shall be forfeited.
SECTION 5. DIVIDENDS. Dividends that become payable on
Restricted Transformation Shares shall be held by the Company in escrow in
accordance with the provisions of this Agreement. In this connection, on each
Common Stock dividend payment date while any Restricted Transformation Shares
remain outstanding and restricted hereunder (each, a "RS Dividend Date"), the
Company shall be deemed to have reinvested any cash dividend otherwise then
payable on the Restricted Transformation Shares in a number of phantom shares of
Common Stock (including any fractional share) equal to the quotient of such
dividend divided by the Market Value of a share of Common Stock on such RS
Dividend Date and to have credited such
11
<PAGE> 12
shares to an unfunded book account in the Grantee's name (the "Dividend Escrow
Account"). As of each subsequent RS Dividend Date, the phantom shares then
credited to the Dividend Escrow Account shall be deemed to receive a dividend at
the then applicable dividend rate, which shall be reinvested in the same manner
in such account in the form of additional phantom shares. If any dividend
payable on any RS Dividend Date is paid in the form of Common Stock, then any
such stock dividend shall be treated as additional Restricted Transformation
Shares under this Agreement, with such additional Restricted Transformation
Shares being subject to the same vesting and other restrictions as the
Restricted Transformation Shares with respect to which dividends became payable,
and with any fractional share being treated as a cash dividend that is subject
to the escrow and reinvestment procedures in this Section 5. Any other non-cash
dividends credited with respect to Restricted Transformation Shares shall be
subject to the escrow and reinvestment procedures in this Section 5, and shall
be valued for purposes of this Section 5 at the fair market value thereof as of
the relevant RS Dividend Date, as determined by the Committee in its sole
discretion. At any Vesting Date, the Company shall deliver out of escrow to the
Grantee that whole number of shares of Common Stock equal to the whole number of
phantom shares then credited to the Dividend Escrow Account as the result of the
deemed investment and reinvestment in phantom shares of the dividends
attributable to the Restricted Transformation Shares on which restrictions lapse
at such Vesting Date. The value of any fractional share shall be paid in cash.
12
<PAGE> 13
SECTION 6. TRANSFERABILITY; STOCK OWNERSHIP REQUIREMENT. [FOR
INCLUSION IN AGREEMENTS FOR 5,000 SHARES AND UP:] Grantee and the Company
acknowledge as a common goal that Grantee will accumulate a personal holding of
unrestricted, unencumbered shares of Common Stock (either directly, or
indirectly through the Company's 401(k) Plan or Supplemental Executive
Retirement Plan or any similar plan hereafter adopted) having a market value at
any date of reference not less than the Grantee's then annual salary. Grantee
shall not (except for the withholding of shares to pay taxes in accordance with
Section 7) sell, transfer, give, pledge, deposit, alienate or otherwise encumber
or dispose of (as used in this Section 6, collectively "transfer") any shares of
Common Stock (or any securities issued as a dividend or distribution on such
shares, or in respect of such shares in connection with a recombination or
reclassification of the Common Stock) issued to Grantee pursuant hereto if,
following such transfer, Grantee would not be the beneficial owner of
unrestricted, unencumbered shares of Common Stock with a value not less than
Grantee's then annual salary. The Committee may in appropriate circumstances
waive the operation of the foregoing sentence; provided that if Grantee is not
an executive officer of the Company under the applicable regulations of the
Securities and Exchange Commission, such waiver may be granted by the Company's
Chief Executive Officer. [FOR INCLUSION IN ALL OTHER AGREEMENTS:] Grantee and
the Company acknowledge that as a common goal Grantee will accumulate a
significant personal holding of unrestricted, unencumbered shares of Common
Stock (either directly, or indirectly through the Company's 401(k) Plan or
Supplemental Executive Retirement Plan or any similar plan hereafter adopted).
13
<PAGE> 14
SECTION 7. WITHHOLDING TAXES. Whenever Restricted
Transformation Shares that have vested in accordance with the terms hereof is to
be delivered to the Grantee pursuant to Section 2.2, the Company shall be
entitled to require as a condition of such delivery that the Grantee remit to
the Company an amount sufficient in the opinion of the Company to satisfy all
federal, state and other governmental tax withholding requirements related to
the expiration of restrictions on such shares. The Company shall, upon the
written request of the Grantee, automatically withhold from delivery shares
having a Fair Market Value on the Vesting Date equal to the amount of tax to be
withheld. Fractional share amounts shall be settled in cash.
SECTION 8. NATURE OF PAYMENTS. The grant of the Restricted
Transformation Shares hereunder is in consideration of services to be performed
by the Grantee for the Company and constitutes a special incentive payment and
the parties agree that it is not to be taken into account in computing the
amount of salary or compensation of the Grantee for the purposes of determining
(i) any pension, retirement, profit-sharing, bonus, life insurance or other
benefits under any pension, retirement, profit-sharing, bonus, life insurance or
other benefit plan of the Company, or (ii) any severance or other amounts
payable under any other agreement between the Company and the Grantee.
SECTION 9. PLAN PROVISIONS TO PREVAIL. This Agreement is
subject to all of the terms and provisions of the Plan. Without limiting the
generality of the foregoing, by entering into this Agreement the Grantee agrees
that no member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any award thereunder or
14
<PAGE> 15
this Agreement. In the event that there is any inconsistency between the
provisions of this Agreement and of the Plan, the provisions of the Plan shall
govern.
SECTION 10. MISCELLANEOUS.
10.1 Section Headings. The Section headings contained herein
are for purposes of convenience only and are not intended to define or limit the
contents of the Sections.
10.2 Notices. Any notice given to the Company hereunder shall
be in writing and shall be addressed to the Company's Senior Vice President,
Finance and Chief Financial Officer, at One Claiborne Avenue, North Bergen, NJ
07047, or at such other address as the Company may hereafter designate to the
Grantee by notice as provided in this Section 10.2. Any notice given to the
Grantee hereunder shall be addressed to the Grantee at the address set forth
beneath his or her signature hereto, or at such other address as (s)he may
hereafter designate to the Company by notice as provided herein. A notice
hereunder shall be deemed to have been duly given when personally delivered or
mailed by registered or certified mail to the party entitled to receive it.
10.3 Successors and Assigns. This agreement shall be binding
upon and inure to the benefit of the parties hereto and the successors and
assigns of the Company and, to the extent consistent with Section 3.2 of this
Agreement, the heirs and personal representatives of the Grantee.
15
<PAGE> 16
10.4 Governing Law. This Agreement shall be interpreted,
construed and administered in accordance with the laws of the State of Delaware
as they apply to contracts made, delivered and to be wholly performed in the
State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
LIZ CLAIBORNE, INC.
ATTEST:________________________ By:____________________________
Title:__________________________
GRANTEE
Name:__________________________
Date:___________________________
16
<PAGE> 1
Exhibit 10(t)
DESCRIPTION OF SUPPLEMENTAL LIFE INSURANCE PLANS
Vice Presidents of 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 portable life insurance policy with a minimal
cash surrender value.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF
LIZ CLAIBORNE, INC.
Claiborne Limited Hong Kong
Liz Claiborne Cosmetics, Inc. Delaware
Liz Claiborne Accessories, Inc. Delaware
Liz Claiborne Accessories-Sales, Inc. Delaware
Liz Claiborne Export, Inc. Delaware
Liz Claiborne Foreign Holdings, Inc. Delaware
Liz Claiborne International Limited Hong Kong
Liz Claiborne (Israel) Ltd. Israel
Liz Claiborne (Italy) Ltd. Delaware
L. C. Licensing, Inc. Delaware
Liz Claiborne Sales, Inc. Delaware
Liz Claiborne-Texas, Inc. Delaware
LCI Investments, Inc. Delaware
LCI Holdings, Inc. Delaware
Liz Claiborne (Canada) Limited Canada
Liz Claiborne, S.A. Costa Rica
L.C. Caribbean Holdings, Inc. Delaware
Liz Claiborne Shoes, Inc. Delaware
L. C. Service Company, Inc. Delaware
Liz Claiborne Europe U.K.
LCI - Claiborne Limited Partnership New Jersey
Liz Claiborne do Brasil Industria E Comercio Ltda. Brazil
LC/QL Investments, Inc. Delaware
L.C. Dyeing, Inc. Delaware
L.C. Augusta, Inc. Delaware
Textiles Liz Claiborne Guatemala, S.A. Guatemala
Liz Claiborne (Malaysia) SDN.BHD Malaysia
Liz Claiborne B.V. Netherlands
L.C. Special Markets, Inc. Delaware
Liz Claiborne Foreign Sales Corporation US Virgin Islands
Liz Claiborne Operations (Israel) 1993 Limited Israel
Liz Claiborne GmbH Germany
Liz Claiborne De El Salvador, S.A., de C. V. El Salvador
L.C.I. Fragrances, Inc. Delaware
DB Newco, Inc. Delaware
LC Libra, LLC. Delaware
<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, 33-51257, 033-
63859, 333-09851 and 333-48423.
/s/ Arthur Andersen LLP
New York, New York
April 2, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000352363
<NAME> LIZ CLAIBORNE, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 138,185
<SECURITIES> 221,343
<RECEIVABLES> 181,303
<ALLOWANCES> 0
<INVENTORY> 396,349
<CURRENT-ASSETS> 1,057,420
<PP&E> 470,177
<DEPRECIATION> 255,553
<TOTAL-ASSETS> 1,305,285
<CURRENT-LIABILITIES> 327,657
<BONDS> 0
0
0
<COMMON> 88,219
<OTHER-SE> 833,408
<TOTAL-LIABILITY-AND-EQUITY> 1,305,285
<SALES> 2,412,601
<TOTAL-REVENUES> 2,412,601
<CGS> 1,442,943
<TOTAL-COSTS> 1,442,943
<OTHER-EXPENSES> 692,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 278
<INCOME-PRETAX> 293,144
<INCOME-TAX> 108,500
<INCOME-CONTINUING> 184,644
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,644
<EPS-PRIMARY> 2.65
<EPS-DILUTED> 2.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000352363
<NAME> LIZ CLAIBORNE, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-28-1996
<CASH> 322,881
<SECURITIES> 205,855
<RECEIVABLES> 158,168
<ALLOWANCES> 0
<INVENTORY> 349,427
<CURRENT-ASSETS> 1,142,098
<PP&E> 444,723
<DEPRECIATION> 221,439
<TOTAL-ASSETS> 1,382,750
<CURRENT-LIABILITIES> 326,669
<BONDS> 0
0
0
<COMMON> 88,219
<OTHER-SE> 932,273
<TOTAL-LIABILITY-AND-EQUITY> 1,382,750
<SALES> 2,217,518
<TOTAL-REVENUES> 2,217,518
<CGS> 1,341,083
<TOTAL-COSTS> 1,341,083
<OTHER-EXPENSES> 641,720
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> 249,065
<INCOME-TAX> 93,400
<INCOME-CONTINUING> 155,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155,665
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.14
<FN>
<F1>
THE EARNINGS PER SHARE INFORMATION HAS BEEN PREPARED IN ACCORDANCE WITH
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE", AND
THE BASIC AND DILUTED EARNINGS PER SHARE HAVE BEEN ENTERED IN PLACE OF PRIMARY
AND FULLY DILUTED, RESPECTIVELY. THE 1995 FISCAL YEAR EARNINGS PER SHARE WAS NOT
RESTATED DUE TO THE AMOUNT BEING THE SAME AS PREVIOUSLY REPORTED.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JAN-03-1998 JAN-03-1998 JAN-03-1998
<PERIOD-END> APR-05-1997 JUL-05-1997 OCT-04-1997
<CASH> 46,650 137,730 72,809
<SECURITIES> 362,153 323,644 249,099
<RECEIVABLES> 307,238 204,536 363,907
<ALLOWANCES> 0 0 0
<INVENTORY> 302,015 327,807 343,394
<CURRENT-ASSETS> 1,123,598 1,101,112 1,144,054
<PP&E> 449,385 455,955 461,128
<DEPRECIATION> 230,203 239,713 248,127
<TOTAL-ASSETS> 1,375,565 1,349,472 1,388,579
<CURRENT-LIABILITIES> 301,712 267,324 337,630
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 88,219 88,219 88,219
<OTHER-SE> 938,247 944,590 920,270
<TOTAL-LIABILITY-AND-EQUITY> 1,375,565 1,349,472 1,388,579
<SALES> 596,556 1,134,456 1,820,376
<TOTAL-REVENUES> 596,556 1,134,456 1,820,376
<CGS> 365,235 691,296 1,093,487
<TOTAL-COSTS> 365,235 691,296 1,093,487
<OTHER-EXPENSES> 168,499 338,094 520,400
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 31 61 118
<INCOME-PRETAX> 66,921 112,853 218,457
<INCOME-TAX> 24,800 41,800 80,800
<INCOME-CONTINUING> 42,121 71,053 137,657
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 42,121 71,053 137,657
<EPS-PRIMARY> .59 1.00 1.95
<EPS-DILUTED> .59 1.00 1.94
<FN>
<F1>THE EARNINGS PER SHARE INFORMATION HAS BEEN PREPARED IN ACCORDANCE WITH
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE", AND
THE BASIC AND DILUTED EARNINGS PER SHARE HAVE BEEN ENTERED IN PLACE OF PRIMARY
AND FULLY DILUTED, RESPECTIVELY.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-28-1996 DEC-28-1996
<PERIOD-END> MAR-30-1996 JUN-29-1996 SEP-28-1996
<CASH> 16,423 19,296 93,438
<SECURITIES> 288,342 376,376 219,072
<RECEIVABLES> 272,392 181,126 312,059
<ALLOWANCES> 0 0 0
<INVENTORY> 341,287 361,690 337,844
<CURRENT-ASSETS> 1,022,012 1,051,104 1,069,566
<PP&E> 448,172 447,747 449,762
<DEPRECIATION> 211,458 215,313 222,910
<TOTAL-ASSETS> 1,280,711 1,303,483 1,316,053
<CURRENT-LIABILITIES> 250,112 276,503 281,148
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 88,219 88,219 88,219
<OTHER-SE> 898,359 901,459 898,333
<TOTAL-LIABILITY-AND-EQUITY> 1,280,711 1,303,483 1,316,053
<SALES> 556,558 1,057,153 1,679,255
<TOTAL-REVENUES> 556,558 1,057,153 1,679,255
<CGS> 345,316 653,307 1,021,289
<TOTAL-COSTS> 345,316 653,307 1,021,289
<OTHER-EXPENSES> 157,656 317,288 484,953
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 57 107 157
<INCOME-PRETAX> 57,386 93,756 183,679
<INCOME-TAX> 21,500 35,200 68,900
<INCOME-CONTINUING> 35,886 58,556 114,779
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 35,886 58,556 114,779
<EPS-PRIMARY> .49 .80 1.58
<EPS-DILUTED> .49 .79 1.56
<FN>
<F1>THE EARNINGS PER SHARE INFORMATION HAS BEEN PREPARED IN ACCORDANCE WITH
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 "EARNINGS PER SHARE", AND
THE BASIC AND DILUTED EARNINGS PER SHARE HAVE BEEN ENTERED IN PLACE OF PRIMARY
AND FULLY DILUTED, RESPECTIVELY.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99
To Be Incorporated By Reference Into
Registration Statements on Forms S-8
(File Nos. 2-77590, 2-95258, 2-33661, 33-51257, 033-63859, 333-09851
and 333-48423)
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.
