SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended January 29, 1995 Commission file number: 1-724
PHILLIPS-VAN HEUSEN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1166910
(State of incorporation) (IRS Employer
Identification No.)
1290 Avenue of the Americas
New York, New York 10104
(Address of principal executive offices)
212-541-5200
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $1.00 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether 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 and (2) has been subject to such filing
requirements for at least 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. ( )
The aggregate market value of the voting stock of registrant held by
nonaffiliates of the registrant as of April 17, 1995 was approximately
$408,000,000.
Number of shares of Common Stock outstanding as of April 17, 1995:
26,656,616.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K
Document in which incorporated
Registrant's 1994 Annual Report to Stockholders Parts I and II
for the Fiscal Year Ended January 29, 1995
Registrant's Proxy Statement Part III
for the Annual Meeting of
Stockholders to be held on June 13, 1995
<PAGE>
PART I
Item 1. Business
General Overview
Phillips-Van Heusen Corporation (the "Company") is a vertically
integrated manufacturer, marketer and retailer of men's, women's and
children's apparel and footwear. The Company's products include shirts,
sweaters and shoes and, to a lesser extent, neckwear, furnishings, bottoms,
outerwear and leather and canvas accessories. The Company's principal brand
names include "Van Heusen", the best-selling dress shirt brand in the United
States; "Bass", the leading casual shoe brand in the United States; and
"Geoffrey Beene", the best-selling designer dress shirt label in the United
States. The Company is also a leading manufacturer and distributor of private
label shirts and sweaters.
On January 24, 1995, the Company signed a binding agreement to acquire
the Apparel Group of Crystal Brands, Inc. ("Crystal Brands"). This
transaction was completed on February 17, 1995, and in connection therewith,
the Company acquired ownership of the "Izod", "Gant" and "Salty Dog" brand
names. The Company believes this acquisition will enhance its strategy of
marketing branded products both at wholesale and retail.
On January 24, 1995, the Company also entered into a licensing agreement
to make and market "Jantzen" branded men's sweaters (the number-one selling
sweater in the United States), sport shirts and related bottoms.
Wholesale distribution consists of the marketing and sale of the
Company's products to major department stores, specialty and independent
retailers, chain stores and catalog merchants. The Company's wholesale
customers for branded and designer apparel include May Co., Federated,
JCPenney, Macy's and Younkers. Wholesale customers for its private label
shirts include JCPenney, Mervyn's, Lord & Taylor, Lands' End, Sears and
Target, while wholesale customers for the Company's private label sweaters and
golf apparel include Lands' End, JCPenney, Broadway Stores and Sears. The
Company's customers for footwear include May Co., Dillard's, Macy's and Dayton
Hudson. In fiscal 1994, no one customer accounted for more than 10% of the
Company's sales.
Through its retail operations, the Company sells its products directly to
consumers in 872 Company-owned stores operated in five different formats
located primarily in manufacturers' outlet malls. At the end of fiscal 1994,
these formats were Van Heusen, Geoffrey Beene, Bass, Cape Isle Knitters and
Windsor Shirt. See "Acquisition of the Apparel Group of Crystal Brands" for a
discussion regarding the acquisition of additional stores and the conversion
plan for the Company's Cape Isle Knitters and Windsor Shirt stores.
The Company believes that its growth in recent years has been due in
large part to its strategy of developing multiple channels of distribution for
its merchandise. These channels include an increasing number of Company-owned
outlet stores as well as the Company's wholesale customers. These diverse
channels have enabled the Company to strengthen the competitive position of
its brands and to extend its brands into new product lines. The Company also
believes that the continued enhancement and expanded use of its inventory
management and electronic data interchange systems and refinement of its
promotional and advertising activities has resulted and will continue to
result in further strengthening of its brand images, decreased risks of excess
production and more efficient utilization of its production facilities and
outside suppliers.
According to research conducted by the NPD Consumer Purchase Panel, the
Company's "Van Heusen" shirt brand is the best-selling dress shirt brand in
the United States men's dress shirt market, and the Company's "Geoffrey Beene"
shirt brand is the best-selling men's designer dress shirt in the United
States. Including its branded, designer and private label offerings, the
Company believes its overall share of the United States men's dress shirt
market is the largest of any single company.
1
<PAGE>
In addition to the Company's success with marketing dress shirts, the
Company in recent years has extended its major brand product offerings to
sportswear. With the acquisition of the "Izod", "Gant" and "Salty Dog"
labels, and the license to manufacture and market "Jantzen" branded sweaters,
sport shirts and bottoms, it is expected that sportswear will continue to
increase as a percentage of the Company's sales.
The Company was incorporated in the State of Delaware in 1976 as the
successor to a business begun in 1881, and, with respect to Bass, a business
begun in 1876. The Company's principal executive offices are located at 1290
Avenue of the Americas, New York, New York 10104; its telephone number is
(212) 541-5200.
Retail Development
The decision to develop and expand its own retail operations, concurrent
with the growth of the manufacturers' outlet retailing industry, has permitted
the Company to position itself as a major value-oriented retailer. The
Company's retail operations have enabled it to increase sales by offering its
products in geographic markets where they were not previously widely
available, selling to consumers who favor value-oriented retailers and selling
products bearing its brand names and designer labels that are not marketed to
its wholesale customers.
Critical to the Company's retailing strategy was the choice of
manufacturers' ("factory") outlet centers as the venue to pursue its retailing
business. Manufacturers' outlet centers, usually located in tourist/vacation
areas or on major highways to these areas, provide a large customer base with
significant disposable income and a positive attitude toward shopping and a
base of business in locations that limit conflict with the Company's wholesale
customers. The development of manufacturers' outlet centers is a key
component to the success of the Company. The success of a new outlet mall is
heavily dependent on its location and the attraction of a well known group of
tenants and, therefore, the Company actively cooperates with developers in the
site and tenant selection processes. The Company believes that as a result of
its strong presence and success in manufacturers' outlet retailing, developers
seek and welcome the Company's input into such processes.
The Company's stores provide the opportunity to liquidate excess and
out-of-date inventory and factory "seconds", thereby substantially reducing
the need to sell such merchandise to discounters or jobbers at severely marked
down prices. The ability to control the sale of such merchandise also
prevents the damage to the image of the Company's brands which can result when
they are sold by discounters with inferior presentation and advertising.
The Company has developed a retail component for each of its branded
products which has enhanced the Company's ability to reach a broad array of
consumers for its products. At the same time, it has allowed the Company to
expand its brands to other compatible products not carried in its regular
wholesale lines. The Company's success in expanding the types of products
available under its brand names has led to an increase in the product lines
available in its store formats and has enabled the Company to offer in its
stores additional products which are not available in the Company's wholesale
product lines. For example, the Company now offers men's and women's
sportswear and accessories in many of its Bass stores, has continued
increasing the number of its stores offering Geoffrey Beene women's wear and
plans to expand on its offering of Bass Kids apparel merchandise in 1995.
The Company's retail formats are managed to allow each to enjoy its own
focus without infringing on the other formats, thereby enabling all formats to
co-exist in one outlet center. Thus, even though Van Heusen, Windsor Shirt
and Geoffrey Beene stores each carry the same type of men's apparel products,
each targets and markets to a different consumer base: Van Heusen - the
American brand, moderate price and moderate fashion consumer; Windsor Shirt -
the better traditional consumer; and Geoffrey Beene - the better fashion
2
<PAGE>
forward consumer. In addition, all aspects of each retail format - store
design, presentation, sales personnel, packaging, product and price -
reinforce the Company's focus on value-oriented retailing to that particular
store format's target consumer.
The Company's retail stores show a high level of profitability resulting
from low overhead and staffing costs, low rental and common area maintenance
charges, short-term leases enabling exit from poorly performing stores, the
elimination of accounts receivable carrying costs as all sales are for cash or
on third party credit cards, high inventory turnover rates and low fixturing
costs. Stores in each of the Company's formats are typically profitable
within a year of opening. This is in contrast to traditional mall stores
which typically undergo a significant start-up period before becoming
profitable. Immediate cash flow generation is an important advantage of
outlet mall stores over traditional mall stores, as is the ability to build
and open stores in a comparatively short period of time.
Wrinkle-Free Dress Shirts
During fiscal 1994, the Company began marketing wrinkle-free dress shirts
to its wholesale customers and in its own retail stores. While increased
advertising and higher production costs associated with introducing this
product negatively impacted the Company's earnings in 1994, the Company
believes these earnings pressures will be less severe in the future due to
lower overall production costs. The Company believes that a niche market for
non wrinkle-free dress shirts will exist, and, therefore, the Company plans to
continue marketing both wrinkle-free and non wrinkle-free dress shirts for the
foreseeable future.
Acquisition of the Apparel Group of Crystal Brands
On February 17, 1995, the Company acquired the Apparel Group of Crystal
Brands which added "Izod", "Gant" and "Salty Dog" to the Company's roster of
highly regarded brands. The Company plans to market sportswear products under
these labels both at wholesale and retail. "Izod" and "Gant" products are
sold at many better department stores in the United States including Lord and
Taylor, Macy's, Belk's, Dillard's and May Co. In connection with the
acquisition, the Company acquired 88 outlet stores which market apparel under
the various labels acquired from Crystal Brands. The Company plans to convert
substantially all of these stores in fiscal 1995 to stores which will market
apparel under either the "Izod" or "Gant" label, although several of the
acquired stores will either be converted to other store formats which the
Company operates, or will be closed. In addition, the Company plans to
convert substantially all of its Cape Isle Knitters and Windsor Shirt private
label retail stores into stores which will market apparel under the "Izod" and
"Gant" labels, respectively. The Company believes that stores which sell
products under a known brand name offer the Company higher profit margins,
faster inventory turnover and greater opportunity to expand the product
offerings in those stores.
Wholesale Distribution
While much of the Company's focus has been on developing the retail
aspect of its business, it has also placed significant emphasis on
strengthening its wholesale distribution. For example, to provide its
customers with products covering a full range of price points and styles, the
Company has designed new branded and designer dress shirts. The Company
developed the "Editions" sub-brand under the "Van Heusen" label to cover the
price point just above typical private label shirts. The Company also markets
Bass dress shirts which are designed as a traditionally styled American line.
In addition, the Company has strengthened its private label operations by
increasing its design staff, developing additional private label offerings and
focusing on high volume accounts. The Company believes that by expanding its
product offerings, it enables its wholesale customers to market to consumers
brand name, designer and private label dress shirts at various price points.
3
<PAGE>
In fiscal 1994, the Company continued to expand usage of its electronic
data interchange system. This quick response system provides a computer link
between the Company and its wholesale customers that enables both the customer
and the Company to track sales, inventory and shipments. Use of the system
also reduces the amount of time it takes a customer to determine its inventory
needs and order replenishment merchandise and for the Company to respond to
the customer's order.
The Company believes that these efforts have helped strengthen its
relationships with its wholesale customers, at the same time as the Company
has enhanced the image and increased the exposure of its products.
Apparel Business
The marketing of the Company's apparel products is currently conducted
principally under the following labels: "Van Heusen", "Geoffrey Beene",
"Bass", "Jantzen", "Izod", "Gant" and "Salty Dog". The Company also markets
various private label apparel products. The Company manufactures dress shirts
and sweaters in the Company's facilities in the United States, Puerto Rico and
the Caribbean Basin. Additional dress shirts and sweaters, and all of the
other sportswear and accessories which the Company markets, are sourced
through contractors throughout the world, but primarily in the Far East.
Van Heusen
"Van Heusen" is the best-selling men's dress shirt brand in the United
States, according to research conducted by the NPD Consumer Purchase Panel.
In addition to the "Van Heusen" label, branded products are marketed under the
sub-brands "417", "Hennessy", "Players", "Over Easy", "Corporate Casual",
"Winter-weights" and "Editions."
"Van Heusen" branded dress and sport shirts are marketed at wholesale in
the moderate to better price range to major department stores and men's
specialty stores nationwide, including May Co., Frederick Atkins, JCPenney,
Younkers and Mervyns.
During fiscal 1994, the Company continued to expand its offering of Van
Heusen "Corporate Casual" dress shirts. These shirts have a more casual
appearance and have a softer feel than regular dress shirts. The trend in the
United States to more casual work attire leads the Company to believe that the
overall demand for casual work attire, or "Friday Wear", will continue to
increase.
In addition, wholesale marketing of Van Heusen apparel includes knit
sport shirts and sweaters, and golf apparel which is marketed under the "Van
Heusen Players" label. Major customers include JCPenney and Broadway Stores.
Van Heusen outlet stores offer a full collection of first quality men's
traditional, classic and contemporary dress furnishings (including dress
shirts, belts, hosiery and neckwear), men's sportswear (including sports
shirts, sweaters and bottoms) and ladies sportswear (including coordinates and
separates) and men's and women's activewear. Other than men's dress shirts,
sport shirts and sweaters, such apparel is not marketed or produced for sale
to the Company's wholesale customers.
The product mix targeted for Van Heusen stores is intended to satisfy the
key apparel needs of men from dress furnishings to casual wear, and of women
for casual wear. Van Heusen stores' merchandising strategy is focused on
achieving a classic and/or updated traditional look in a range of primarily
moderate price points. Target customers represent the broadest spectrum of
the American consumer.
Geoffrey Beene
The Company markets dress shirts under the "Geoffrey Beene" label through
a licensing agreement with that designer. The licensing agreement terminates
4
<PAGE>
on December 31, 1996, but has renewal options which allow the Company to
extend the agreement through December 31, 2011. "Geoffrey Beene" dress shirts
are the best-selling men's designer dress shirts in the United States,
according to NPD Consumer Purchase Panel research. Consistent with the
increase in the demand for casual work attire, the Company has also expanded
its marketing of Geoffrey Beene casual dress shirts. Geoffrey Beene shirts
are sold in the upper moderate to better price range to major department
stores and men's specialty stores nationwide, including Frederick Atkins,
Federated, Macy's and May Co. During fiscal 1994, the Company also expanded
on its fiscal 1993 introduction of "Geoffrey Beene" men's sweaters.
Geoffrey Beene stores offer a distinctive collection of men's "Geoffrey
Beene" labelled designer products, including dress and sport shirts, neckwear,
furnishings, outerwear, bottoms and sportswear. As with Van Heusen outlet
stores, the products sold in Geoffrey Beene stores, other than "Geoffrey
Beene" dress shirts, consist of products which are not also sold through the
Company's wholesale distribution channels.
Through their product mix, the Geoffrey Beene stores seek to meet the
full needs of men's wardrobes (excluding suits) from dress furnishings to
casual wear. The merchandising strategy is focused on an upscale, fashion
forward consumer in the upper moderate price range.
During fiscal 1994, the Company increased the number of its stores
offering "Geoffrey Beene" women's wear. Stores offering these products carry
a full line of women's casual apparel bearing the designer's name. The
Company plans to continue expanding the number of stores offering this product
in the future.
Bass
The Company's marketing of apparel under the "Bass" label began in 1992
and has been continuously expanded since that time.
"Bass" casual dress shirts, marketed at wholesale to major department
stores including Federated, Macy's and Frederick Atkins, are sold in the upper
moderate to better price range.
Until July 1992, the Company's Bass outlet stores had marketed only
footwear. Since that time, the Company has introduced apparel and accessories
consistent with the Bass "lifestyle" into many of its Bass stores. As a
further extension of its "Bass" apparel products, the Company introduced a
line of "Bass Kids" apparel merchandise in fiscal 1994. The Company plans to
expand this product offering into more of its stores in fiscal 1995.
Jantzen
On January 24, 1995, the Company entered into a licensing agreement to
make and market "Jantzen" branded men's sweaters, sport shirts (including golf
apparel) and related bottoms. The licensing agreement expires January 31,
2000 but, under certain conditions, the Company may extend the agreement for
an additional five years. "Jantzen" is the best-selling sweater in the United
States according to NPD Consumer Purchase Panel research, and is sold in the
moderate to better price range. Major customers for "Jantzen" branded apparel
are department and specialty stores including Belk's, Mercantile, Steinbach's
and Younkers. The Company believes that the licensing agreement further
strengthens the Company's position as the leading sweater and golf apparel
supplier in the United States.
Izod
"Izod" branded apparel products consist of men's and women's sportswear
(including sweaters) and golf apparel. These products are marketed in the
upper moderate to better price range to major retailers including JCPenney,
May Co., Macy's and Lord and Taylor. In addition, golf apparel is marketed to
golf pro shops and golf resort retail stores.
5
<PAGE>
The Company's retail business offering Izod products will feature stores
marketing men's and women's active inspired casual sportswear. Target
customers will generally be brand loyalists who expect quality and fashion at
reasonable prices. Stores in this format are expected to begin operating in
the second half of fiscal 1995.
Gant/Salty Dog
"Gant" branded apparel consists of a collection of men's sportswear,
including woven and knit tops and bottoms. The "Gant" brand represents a true
American classic offering of men's sportswear designed for comfort and relaxed
fit. "Gant" products are marketed in the better price range to major
retailers including Dillards, Belk's, May Co., Macy's and Lord and Taylor.
"Salty Dog", a sub-brand of "Gant", is used to market casual sportswear with a
pre-washed, more casual appearance.
The Company's Gant outlet stores will offer fine quality knit and woven
shirts, sweaters, pants and shorts, outerwear and accessories for men. The
"Gant" line incorporates several quality sportswear "lifestyles". Included
are rugged, spectator-active and Friday casual wear products, all of which
maintain detailed construction and the highest quality fabrics. Stores in
this format are expected to begin operating in the second half of fiscal 1995.
Private Label Apparel
Private label programs offer the retailer the ability to create its own
line of exclusive merchandise and give the retailer control over distribution
of the product. The Company's customers work with the Company's designers to
develop shirts in the styles, sizes and cuts which the customers desire to
sell in their stores with their particular store names or private labels.
Private label programs offer the consumer quality product and offer the
retailer the opportunity to enjoy higher margins. Private label products,
however, do not have the same level of consumer recognition as branded
products and private label manufacturers do not generally provide retailers
with the same services and support as branded manufacturers.
The Company markets at wholesale men's dress shirts under private labels
to major national retail chains, department stores and catalog merchants,
including JCPenney, Mervyns, Lord & Taylor, Lands' End, Sears and Marshalls.
Private label sport shirts are marketed to major retailers including K-Mart,
Wal-Mart, Target, Sears and JCPenney. Private label sweaters and golf apparel
are marketed to traditional department and specialty stores, national retail
chains and catalog merchants, including JCPenney, Broadway Stores, Sears and
Lands' End. The Company also markets shirts to companies in service
industries, including major airlines and food chains. The Company believes it
is one of the largest marketers of private label shirts in the United States.
The Company currently markets private label apparel in two retail store
formats: Windsor Shirt and Cape Isle Knitters. Windsor Shirt stores offer a
full line of men's traditional and fashionable apparel, including dress
shirts, neckwear, bottoms, sportswear, hosiery and accessories. Cape Isle
Knitters stores offer a select line of men's and women's knitwear products,
including sweaters and knit tops, both being complemented with pants and
shorts, and hosiery. Both the Windsor Shirt and Cape Isle Knitters stores
offer merchandise in the moderate to upper moderate price range. See
"Acquisition of the Apparel Group of Crystal Brands" for a discussion of the
Company's plan to convert its Windsor Shirt and Cape Isle Knitters stores.
Competition in the Apparel Industry
The apparel industry is highly competitive due to its fashion
orientation, its mix of large and small producers, the flow of imported
merchandise and the wide diversity of retailing methods. Competition has been
exacerbated by the recent consolidations and closings of major department
store groups. Based on the variety of the apparel marketed by the Company and
6
<PAGE>
the various channels of distribution it has developed, the Company believes it
is well-positioned in the industry, although the Company has many diverse
competitors in both manufacturing and retailing.
The Company's apparel wholesale divisions experience competition in
branded, designer and private label products. Some of the larger dress shirt
competitors include: Bidermann Industries ("Arrow" brand); Salant Corporation
("Perry Ellis" and "John Henry" brands); Warnaco ("Hathaway" brand); Smart
Shirt (private label shirt division of Kellwood); Capital Mercury (private
label shirts); and Oxford Industries (private label shirts). Some of the
larger sportswear competitors include: Warnaco ("Chaps" brand); Nautica
Enterprises ("Nautica" brand); and Tommy Hilfiger. For sweaters, the
Company's brands compete for department store floor space with private label
sweaters. While several apparel manufacturers currently operate outlet
stores, management believes that none offers a similar selection of product in
the variety of formats offered by the Company.
Footwear Business
The Company's footwear business consists of the manufacture and marketing
of a full line of traditional men's, women's and children's casual shoes under
the "Bass" brand name in the moderate to better price range. During fiscal
1994, the Company also introduced a line of men's dress shoes. Various
sub-brands are utilized, the most important ones being "Weejun", "Sunjun" and
"Compass." "Bass" is the leading brand of casual shoes in the United States,
according to research conducted by Footwear Market Insights ("FMI"), based on
pairs of shoes sold. FMI's research shows "Bass" branded footwear with a 5.9%
share of the casual shoe market.
Bass' traditional wholesale customers are major department stores and
specialty shoe stores throughout the United States, including Federated, May
Co., Dillard's, Macy's and Dayton Hudson. In 1992, Bass began marketing its
footwear internationally and is now selling footwear to leading retailers in
Europe, Canada, South America and Asia.
All footwear carried in the Bass wholesale line is designed "in-house."
Additional styles which are sold only in the Company's Bass stores are
designed both "in-house" and by third parties. The Company operates
manufacturing facilities in the United States, Puerto Rico and the Dominican
Republic. Additional footwear is sourced through manufacturers primarily
located in the Far East and Brazil.
Company operated Bass stores located in manufacturers' outlet malls
typically carry an assortment of "Bass" shoes, in the moderate to upper
moderate price range, as well as complementary products not sold to wholesale
customers. The Company also operates several "image" stores, located
primarily in large upscale regional malls, typically offering a narrower
assortment of "Bass" shoes than that carried in Bass outlet stores.
Bass' merchandising strategy is focused on achieving an American classic
look which emphasizes classic and traditional footwear design. The stores
emphasize the design interpretation "The Look That Never Wears Out" in
creating an image for its products.
Competition in the Shoe Industry
The shoe industry is characterized by fragmented competition.
Consequently, retailers and consumers have a wide variety of choices regarding
brands, style and price. However, over the years, Bass has maintained its
important position in the traditional casual footwear market. The Company's
primary competitors include Dexter, Rockport, Timberland, Sperry and Sebago.
The Company believes, however, that it manufactures a more extensive line of
footwear for both genders and in a broader price range than any of its
competitors.
7
<PAGE>
Currently, Bass outlet stores have few direct footwear competitors.
Dexter and, to an even lesser extent, Timberland are the most prominent casual
footwear companies that are competing in the outlet environment. However,
multi-branded outlet footwear retailers, such as U.S. Shoe and Famous
Footwear, compete on price and assortment.
Merchandise Design, Manufacturing and Product Procurement
The apparel and footwear merchandise manufactured by the Company as well
as the vast majority of its sourced products are planned and designed through
the efforts of its various merchandise/product development groups. These
groups consist of designers, product line builders and merchants who consider
consumer taste, fashion, history and the economic environment when creating a
product plan for a particular season. Apparel and footwear product lines are
developed primarily for two major selling seasons, spring and fall. However,
certain of the Company's product lines require more frequent introductions of
new merchandise.
The process from initial design to finished product varies greatly, but
generally spans nine to 12 months prior to each selling season. Raw materials
and production commitments are generally made four to 12 months prior to
production and quantities are finalized at that time. In addition, sales are
monitored regularly at both the retail and wholesale levels and modifications
in production can be made both to increase or reduce availability. The
Company's substantial efforts in the area of quick response to sales trends
(through the expanded use of its electronic data interchange system) maximize
its inventory flexibility and minimize production overruns.
Shirts and sweaters are manufactured in the Company's domestic apparel
manufacturing facilities in Alabama, Arkansas and Puerto Rico. The Company
also operates facilities in Costa Rica, Guatemala and Honduras. Additionally,
the Company contracts for apparel merchandise with vendors principally in the
Far East, Middle East and Caribbean areas which meet its quality and cost
requirements. Footwear is manufactured in the Company's factories located in
Maine, Puerto Rico and the Dominican Republic. In addition, the Company
contracts for footwear merchandise which meet its requirements from overseas
vendors, principally in Brazil and the Far East.
The Company's foreign offices, located principally in Hong Kong, Korea,
Taiwan, Singapore, Brazil and throughout Central America, enable the Company
to monitor the quality of the goods manufactured by, and the delivery
performance of, its suppliers. The Company continually seeks additional
suppliers throughout the world for its sourcing needs and places its orders in
a manner designed to limit the risk that a disruption of production at any one
facility could cause a serious inventory problem. The Company has experienced
no significant production delays or difficulties in importing goods. However,
from time to time the Company has incurred added costs by shipping goods by
air freight in order for it to meet certain delivery commitments to its
customers. The Company's purchases from its suppliers are effected through
individual purchase orders specifying the price and quantity of the items to
be produced. 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 its suppliers to be satisfactory.
No single supplier is critical to the Company's production needs, and the
Company believes that an ample number of alternative suppliers exist should
the Company need to secure additional or replacement production capacity.
The Company purchases raw materials, including shirting fabric, buttons,
thread, labels, yarn, piece goods and leather, from domestic and foreign
sources based on quality, pricing (including quotas and duties) and
availability factors. The Company believes it is one of the largest procurers
of shirting fabric world-wide and purchases the majority of its shirting
fabric from overseas manufacturers, due, in part, to decreased domestic
production. The Company monitors factors affecting textile production and
8
<PAGE>
imports and remains flexible in order to exploit advantages in obtaining
materials from different suppliers and different geographic regions. Rawhide
leather for "Bass" footwear is procured mainly from domestic suppliers. The
leather used in "Bass" shoes is a by-product of beef production and its
availability has remained stable over the past several years as a result of
the stability of the beef market. Bass monitors the leather market and makes
purchases on the spot market or through blanket contracts with suppliers as
price trends dictate. No single supplier of raw materials is critical to the
Company's production needs and the Company believes that an ample number of
alternative suppliers exist should the Company need to secure additional or
replacement raw materials.
Advertising and Promotion
The Company has used national advertising to communicate the Company's
marketing message since the 1920's. The Company believes that this effort has
helped create strong brand awareness and a high recognition factor among
American consumers and has contributed to the overall success of the Company.
The Company advertises primarily in national print media including fashion,
entertainment/human interest, business, men's, women's and sports magazines.
Brand awareness is further supplemented by the Company's co-op advertising
program through which the Company and individual retailers combine their
efforts and share the cost of store radio, television and newspaper
advertisements and in-store advertising and promotional events featuring the
Company's branded products.
The Company relies upon local outlet mall developers to promote traffic
for their centers. Outlet center developers employ multiple formats including
signage (highway billboards, off-highway directional signs, on-site signage
and on-site information centers), print advertising (brochures, newspapers and
travel magazines), direct marketing (to tour bus companies and travel agents),
radio and television, and special promotions.
Trademarks
The Company has the exclusive right to use the "Gant", Izod" and "Salty
Dog" names in most countries, the "Van Heusen" name in North, Central and
South America as well as the Philippines, and the exclusive world-wide right
to use "Bass" for footwear. The Company has registered or applied for
registration of numerous other trademarks for use on a variety of items of
apparel and footwear and apparel and footwear-related products and owns many
foreign trademark registrations. It presently has pending a number of
applications for additional trademark registrations. 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.
Licensing
The Company has various agreements under which it licenses the use of its
brand names. The Company is licensing the "Van Heusen" name for apparel
products in Canada and in most of the South and Central American countries.
In the United States, the Company currently licenses the use of the "Van
Heusen" name for various products that it does not manufacture or source,
including boy's apparel, sleepwear, eyeglasses, neckwear and other accessories
and is exploring the possibility of licensing the name for use on other
products. The Company licenses the use of the "Bass" name for footwear in
Hong Kong, Japan, Europe and Latin America, and for neckwear in the United
States. The Company licenses the use of the "Gant" name for outerwear and
dress furnishings in the United States. The Company licenses the use of the
"Izod" name for infants, toddlers and childrens clothing, as well as "big and
tall" apparel, in the United States, and for men's and women's sportswear in
Canada. The Company plans to continue expanding its world-wide licensing
efforts under the "Gant", "Izod", "Salty Dog" and other trademarks which were
acquired from Crystal Brands.
9
<PAGE>
Retail Stores
As of January 29, 1995, the Company operated 872 stores in five different
formats: Van Heusen, Bass, Geoffrey Beene, Windsor Shirt and Cape Isle
Knitters. The Company's stores are located primarily in manufacturers' outlet
malls, except for the Bass "image" stores. Store layouts and designs differ
among the five retail formats in order to maximize the effectiveness of the
product and pricing strategy directed toward each format's specific target
customer.
In connection with the Crystal Brands acquisition, the Company acquired
88 outlet stores which market apparel under the various labels acquired from
Crystal Brands. The Company plans to convert substantially all of these
stores in fiscal 1995 to stores which will market apparel under either the
"Izod" or "Gant" label, although several of the acquired stores will either be
converted to other store formats which the Company operates, or will be
closed. In addition, the Company plans to convert substantially all of its
Cape Isle Knitters and Windsor Shirt private label retail stores into stores
which will market apparel under the "Izod" and "Gant" labels, respectively.
The Company believes that stores which sell products under a known brand name
offer the Company larger profit margins, faster inventory turnover and greater
opportunity to expand the product offerings in those stores.
Manufacturers' outlet malls are a growing segment of the retail industry,
and the Company is a leading operator of outlet mall stores. Other branded
apparel manufacturers who have entered the outlet mall sector include Ralph
Lauren, Liz Claiborne, Bugle Boy, J. Crew, Jockey, Donna Karan, Sara Lee,
Jones New York, Nautica, Tommy Hilfiger, Calvin Klein and Anne Klein.
The following table sets forth the number of openings and closings of the
Company's retail stores by fiscal year since 1990 and the number of stores
operated at the end of each fiscal year:
Fiscal Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1991 1990
Store openings:. . . . . . . . . . . . 139 126 116 126 166 (1)
Store closings:. . . . . . . . . . . . 47 51 47 40 40
Total stores operated at year end: . . 872 780 705 636 550
(1) Includes 46 Windsor Shirt stores acquired during fiscal 1990.
The Company plans to continue to expand the number of outlet stores which
it operates. To continue this expansion, the Company must be able to open
multiple stores in new malls, "back-fill" its store formats in a sufficient
number of existing outlet malls and/or develop new store formats. The primary
short-term source of the Company's retail expansion will, in addition to the
stores acquired from Crystal Brands, be the opening of multiple store formats
in new malls. There are currently approximately 22 new malls scheduled to
open in 1995 and the Company intends to feature several store formats in
almost all of them. A large portion of the retail expansion will come from
these new malls and existing mall expansions. In addition, retail expansion
will come from "back-filling", which entails adding one or more of the
Company's store formats to malls in which the Company already operates stores
in one or more other formats. Future growth will also come from the
development of new store formats, such as the Geoffrey Beene stores offering
casual apparel for women which opened late in the summer of 1993. The
addition of these, as well as any other new formats will provide the Company
with the opportunity to increase the number of stores the Company operates in
existing and new malls. Performance of all stores is reviewed on a regular
basis and poorly performing stores are closed when appropriate.
10
<PAGE>
The Company maintains a real estate department which works with the store
planning and design department in opening new stores. The real estate
department locates appropriate sites based on information regarding area
demographics, model store size, available lease arrangements and projected
volume and operating returns. In preparation for opening, the store planning
and design department coordinates interior plans with landlords, division
heads, contractors and developers. As construction is completed, a project
manager supervises fixture installation as well as ensures the quality
workmanship demanded by the Company. Field management then begins the
merchandising process. All of these efforts culminate with the opening of
each new store.
The retail distribution strategy has evolved to allow the Company the
opportunity to market directly to consumers while limiting the disruption of
sales to the Company's traditional wholesale customers by locating primarily
in manufacturers' outlet malls in locations such as tourist destination areas.
As a leading outlet retailer, the Company has the ability to secure favorable
lease terms and locations for its stores.
The Company's plans with respect to expansion are frequently reviewed and
revised in light of changing conditions. It is possible that not all of the
plans described above will be completed and that other projects may be added.
Tariffs and Import Restrictions
A substantial portion of the Company's products are manufactured by
contractors located outside the United States. These products are imported
and are subject to United States Customs laws, which impose tariffs as well as
import quota restrictions established by the Department of Commerce. However,
a significant portion of the Company's apparel products are imported from its
Caribbean Basin manufacturing facilities and are therefore eligible for
certain duty-advantaged programs commonly known as "807 Programs." While
importation of goods from certain countries from which the Company obtains
goods may be subject to embargo by United States Customs authorities if
shipments exceed quota limits, the Company closely monitors import quotas and
can, in most cases, shift production to contractors located in countries with
available quotas or to domestic manufacturing facilities. The existence of
import quotas has, therefore, not had a material effect on the Company's
business.
Employees
As of January 29, 1995, the Company employed approximately 10,000 persons
on a full-time basis and approximately 3,800 persons on a part-time basis. Of
the approximately 13,800 persons employed by the Company, 65% are employed in
the apparel business, 32% are employed in the footwear business and 3% are
corporate employees. Approximately 4% of the Company's total employees are
represented for the purpose of collective bargaining by three different
unions. Additional persons, some represented by these three unions, are
employed from time to time based upon the Company's manufacturing schedules
and retailing seasonal needs. The Company believes that its relations with
its employees are satisfactory.
11
<PAGE>
Item 2. Properties
The Company maintains its principal executive offices at 1290 Avenue of
the Americas, New York, New York, occupying approximately 80,000 square feet
under a sub-lease which expires on December 30, 1998. The Company also
maintains an administrative facility in Bridgewater, New Jersey, where the
Company occupies a building of approximately 153,000 square feet under a lease
which expires on July 30, 2007. The following tables summarize the other
manufacturing facilities, warehouses and distribution centers, administrative
offices and retail stores of the Company as of January 29, 1995:
Apparel Business
Square Feet of
Floor Space (000's)
Owned Leased Total
Manufacturing Facilities . . . . . . . . . . . . . . 333 277 610
Warehouses and Distribution Centers. . . . . . . . . 1,360 537 1,897
Administrative . . . . . . . . . . . . . . . . . . . 16 52 68
Retail Stores. . . . . . . . . . . . . . . . . . . . 4 1,995 1,999
1,713 2,861 4,574
Footwear Business
Owned Leased Total
Manufacturing Facilities . . . . . . . . . . . . . . 274 115 389
Warehouses and Distribution Centers. . . . . . . . . 127 185 312
Administrative . . . . . . . . . . . . . . . . . . . 20 135 155
Retail Stores. . . . . . . . . . . . . . . . . . . . 9 1,388 1,397
430 1,823 2,253
Leases for these apparel and footwear facilities have expiration dates
through December 2003. Information with respect to minimum annual rental
commitments under leases in which the Company is a lessee is incorporated
herein by reference to the note entitled "Leases" in the Notes to Consolidated
Financial Statements incorporated by reference in Item 8 of this report.
Item 3. Legal Proceedings
The Company is a party to certain litigation which, in the Company's
judgment based in part on the opinion of legal counsel, will not have a
material adverse effect on the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
None.
12
<PAGE>
Executive Officers of the Registrant
The following table sets forth certain information concerning the
Company's Executive Officers:
Name Position Age
Bruce J. Klatsky Chairman; President; Chief Executive Officer;
Director 46
Irwin W. Winter Vice President, Finance; Chief Financial Officer;
Director 61
Walter T. Rossi Chairman, PVH Retail Group 52
Allen E. Sirkin Chairman, PVH Wholesale Group 52
Mark Weber Vice President; Group President, The
Sportswear Group 46
Mr. Bruce J. Klatsky has been employed by the Company in various
capacities over the last 23 years, and has been President of the Company since
1987. Mr. Klatsky has served as a director of the Company since 1985 and was
named Chief Executive Officer in June of 1993 and Chairman of the Board of
Directors in June of 1994.
Mr. Irwin W. Winter joined the Company in July 1987 as Vice President,
Finance and Chief Financial Officer. Mr. Winter has served as a director of
the Company since 1987.
Mr. Walter T. Rossi joined the Company in November of 1992 as Chairman,
PVH Retail Group. For more than the last five years prior to joining the
Company, he served as Chairman and CEO of Mervyn's, a division of Dayton
Hudson.
Mr. Allen E. Sirkin has been employed by the Company since 1985. From
1988 to 1990, he was President of The Van Heusen Company and The Designer
Group. He has served as Chairman, The PVH Apparel Group since 1990.
Mr. Mark Weber has been employed by the Company in various capacities
over the last 23 years, has been Vice President of the Company since 1988 and
was recently named Group President, The Sportswear Group.
13
<PAGE>
PART II
Item 5. Market for Registrant's Common Stock and Related Security Holder
Matters
Information with respect to the market for the Company's common stock and
related security holder matters which appears under the heading "Selected
Quarterly Financial Data" in the 1994 Annual Report to Stockholders, is
incorporated herein by reference.
Item 6. Selected Financial Data
Selected Financial Data which appears under the heading "Eight Year
Financial Summary" in the 1994 Annual Report to Stockholders, is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations which appears under the heading "Financial Review" in the 1994
Annual Report to Stockholders, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, which appear in the 1994 Annual
Report to Stockholders, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
14
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 is incorporated herein by reference
to the section entitled "Election of Directors" of the Company's proxy
statement for the Annual Meeting of Stockholders to be held on June 13, 1995.
Item 11. Executive Compensation
Information with respect to Executive Compensation is incorporated herein
by reference to the sections entitled "Executive Compensation", "Compensation
Committee Report on Executive Compensation" and "Performance Graph" of the
Company's proxy statement for the Annual Meeting of Stockholders to be held on
June 13, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to the Security Ownership of Certain Beneficial
Owners and Management is incorporated herein by reference to the section
entitled "Security Ownership of Certain Beneficial Owners and Management" of
the Company's proxy statement for the Annual Meeting of Stockholders to be
held on June 13, 1995.
Item 13. Certain Relationships and Related Transactions
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to the sections entitled
"Election of Directors" and "Compensation of Directors" of the Company's proxy
statement for the Annual Meeting of Stockholders to be held on June 13, 1995.
15
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) The following consolidated financial statements are incorporated by
reference in Item 8 of this report:
Consolidated Statements of Income--Years Ended January 29, 1995,
January 30, 1994 and January 31, 1993
Consolidated Balance Sheets--January 29, 1995 and January 30, 1994
Consolidated Statements of Cash Flows--Years Ended January 29, 1995,
January 30, 1994 and January 31, 1993
Consolidated Statements of Changes in Stockholders' Equity--
Years Ended January 29, 1995, January 30, 1994 and January 31, 1993
Notes to Consolidated Financial Statements
(a)(2) See page F-1 for a listing of financial statement schedules submitted
as part of this report.
(a)(3) The following exhibits are included in this report:
Exhibit
Number
3.1 Certificate of Incorporation (incorporated by reference to Exhibit
5 to the Company's Annual Report on Form 10-K for the fiscal year
ended January 29, 1977).
3.2 Amendment to Certificate of Incorporation, filed June 27, 1984
(incorporated by reference to Exhibit 3B to the Company's Annual
Report on Form 10-K for the fiscal year ended February 3, 1985).
3.3 Amendment to Certificate of Incorporation, filed June 2, 1987
(incorporated by reference to Exhibit 3(c) to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1988).
3.4 Amendment to Certificate of Incorporation (incorporated by
reference to Exhibit 3.4 to the Company's Annual Report on Form
10-K for the fiscal year ended January 30, 1993).
3.5 Amendment to Certificate of Incorporation (incorporated by
reference to Exhibit 3.5 to the Company's Annual Report on Form 10-
K for the fiscal year ended January 30, 1993).
3.6 By-Laws of PVH (incorporated by reference to Exhibit 6 to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 29, 1977).
3.7 Amendment to Section 4 of Article II of the By-Laws of PVH
(incorporated by reference to Exhibit 28.3 to the Company's Report
on Form 8-K filed on September 5, 1987).
4.1 Specimen of Common Stock certificate (incorporated by reference to
Exhibit 4 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1981).
4.2 Preferred Stock Purchase Rights Agreement (the "Rights Agreement"),
dated June 10, 1986 between PVH and The Chase Manhattan Bank, N.A.
(incorporated by reference to Exhibit 3 to the Company's Quarterly
Report as filed on Form 10-Q for the period ended May 4, 1986).
4.3 Amendment to the Rights Agreement, dated March 31, 1987 between PVH
and The Chase Manhattan Bank, N.A. (incorporated by reference to
Exhibit 4(c) to the Company's Annual Report on Form 10-K for the
year ended February 2, 1987).
16
<PAGE>
Exhibit
Number
4.4 Supplemental Rights Agreement and Second Amendment to the Rights
Agreement, dated as of July 30, 1987, between PVH and The Chase
Manhattan Bank, N.A. (incorporated by reference to Exhibit (c)(4)
to the Company's Schedule 13E-4, Issuer Tender Offer Statement,
dated July 31,1987).
4.5 Credit Agreement, dated as of December 16, 1993, among PVH, Bankers
Trust Company, The Chase Manhattan Bank, N.A., Citibank, N.A., The
Bank of New York, Chemical Bank and Philadelphia National Bank, and
Bankers Trust Company, as agent (incorporated by reference to
Exhibit 4.5 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 30, 1994).
4.6 First Amendment, dated as of February 13, 1995, to the Credit
Agreement dated as of December 16, 1993.
4.7 Note Agreement, dated October 1, 1992, among PVH, The Equitable
Life Assurance Society of the United States, Equitable Variable
Life Insurance Company, Unum Life Insurance Company of America,
Nationwide Life Insurance Company, Employers Life Insurance Company
of Wausau and Lutheran Brotherhood (incorporated by reference to
Exhibit 4.21 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1993).
4.8 Indenture, dated as of November 1, 1993, between PVH and The Bank
of New York, as Trustee (incorporated by reference to Exhibit 4.01
to the Company's Registration Statement on Form S-3 (Reg. No. 33-
50751) filed on October 26, 1993).
*10.1 1987 Stock Option Plan, including all amendments through March 30,
1993 (incorporated by reference to Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended January 30,
1994).
*10.2 1973 Employees' Stock Option Plan (incorporated by reference to
Exhibit 1 to the Company's Registration Statement on Form S-8 (Reg.
No. 2-72959) filed on July 15, 1981).
*10.3 Supplement to 1973 Employees' Stock Option Plan (incorporated by
reference to the Company's Prospectus filed pursuant to Rule 424(c)
to the Registration Statement on Form S-8 (Reg. No. 2-72959) filed
on March 31, 1982).
*10.4 Phillips-Van Heusen Corporation Special Severance Benefit Plan
(incorporated by reference to the Company's Report on Form 8-K
filed on January 16, 1987).
*10.5 Phillips-Van Heusen Corporation Capital Accumulation Plan
(incorporated by reference to the Company's Report on Form 8-K
filed on January 16, 1987).
*10.6 Phillips-Van Heusen Corporation Amendment to Capital Accumulation
Plan (incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the fiscal year ended February 2,
1987).
*10.7 Form of Agreement amending Phillips-Van Heusen Corporation Capital
Accumulation Plan with respect to individual participants
(incorporated by reference to Exhibit 10(1) to the Company's
Annual Report on Form 10-K for the fiscal year ended January 31,
1988).
17
<PAGE>
Exhibit
Number
*10.8 Phillips-Van Heusen Corporation Supplemental Defined Benefit Plan,
dated January 1, 1991, as amended and restated on June 2, 1992
(incorporated by reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1993).
*10.9 Phillips-Van Heusen Corporation Supplemental Savings Plan, dated as
of January 1, 1991 and amended and restated as of January 1, 1992
(incorporated by reference to Exhibit 10.29 to the Company's Annual
Report on Form 10-K for the fiscal year ended February 2, 1992).
10.10 Asset Sale Agreement, dated January 24, 1995, Among the Company and
Crystal Brands, Inc., Crystal Apparel, Inc., Gant Corporation,
Crystal Sales, Inc., Eagle Shirtmakers, Inc., and Crystal Brands
(Hong Kong) Limited (incorporated by reference to Exhibit 1 to the
Company's Report on Form 8-K dated March 6, 1995).
*10.11 Agreement, dated as of April 28, 1993, between Bruce J. Klatsky,
Lawrence S. Phillips and the Company.
*10.12 Non-Incentive Stock Option Agreement, dated as of April 28, 1993,
between the Company and Bruce J. Klatsky. Non-Incentive Stock
Option Agreement, dated as of December 3, 1993, between the Company
and Bruce J. Klatsky (reload of April 28, 1993 Non-Incentive Stock
Option Agreement).
*10.13 Amendment, dated December 6, 1993, to the Agreement, dated April
28, 1993, between Bruce J. Klatsky, Lawrence S. Phillips and the
Company.
*10.14 Consulting and non-competition agreement, dated February 14, 1995,
between the Company and Lawrence S. Phillips.
*10.15 Form of Restricted Stock Plan, effective as of April 18, 1995.
11. Statement re: Computation of Earnings Per Share.
13. Sections of the 1994 Annual Report to Stockholders for the fiscal
year ended January 29, 1995 which are included in Parts I and II of
this Form 10-K. These sections are Selected Quarterly Financial
Data, Eight Year Financial Summary, Financial Review and the
consolidated financial statements.
21. Subsidiaries of the Company.
23. Consent of Independent Auditors.
27. Financial Data Schedule
(b) Reports filed on Form 8-K filed during the fourth quarter of 1994:
Form 8-K dated January 24, 1995
Item 5. Other Item - The Company enters into a binding agreement to
acquire the Apparel Group of Crystal Brands, Inc. subject to
approval from a Federal Bankruptcy Court.
(c) Exhibits: See (a)(3) above for a listing of the exhibits included as part
of this report.
(d) Financial Statement Schedules: See page F-1 for a listing of the
financial statement schedules submitted as part of this report.
18
<PAGE>
(e) The Company agrees to furnish to the Commission upon request a copy of
each agreement with respect to long-term debt where the total amount of
securities authorized thereunder does not exceed 10% of the total
consolidated assets of the Company.
* Management contract or compensatory plan or arrangement required to be
identified pursuant to Item 14(a) of this report.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PHILLIPS-VAN HEUSEN CORPORATION
By: Bruce J. Klatsky
Bruce J. Klatsky
Chairman, President, Chief
Executive Officer and Director
Date: April 19, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
Bruce J. Klatsky Chairman, President, Chief Executive April 19, 1995
Bruce J. Klatsky Officer and Director (Principal
Executive Officer)
Irwin W. Winter Vice President, Finance and April 18, 1995
Irwin W. Winter Director (Principal Financial
Officer)
Emanuel Chirico Vice President and Controller April 20, 1995
Emanuel Chirico (Principal Accounting Officer)
Edward H. Cohen Director April 18, 1995
Edward H. Cohen
Estelle Ellis Director April 18, 1995
Estelle Ellis
Joseph B. Fuller Director April 20, 1995
Joseph B. Fuller
Maria Elena Lagomasino Director April 20, 1995
Maria Elena Lagomasino
Harry N.S. Lee Director April 20, 1995
Harry N.S. Lee
Bruce Maggin Director April 20, 1995
Bruce Maggin
Ellis E. Meredith Director April 18, 1995
Ellis E. Meredith
Steven L. Osterweis Director April 18, 1995
Steven L. Osterweis
William S. Scolnick Director April 20, 1995
William S. Scolnick
Peter J. Solomon Director April 20, 1995
Peter J. Solomon
20<PAGE>
FORM 10-K-ITEM 14(a)(2)
PHILLIPS-VAN HEUSEN CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule of Phillips-Van
Heusen Corporation and subsidiaries is included herein:
Schedule II - Valuation and Qualifying Accounts. . . . . . . . F-2
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
F-1
SCHEDULE II
PHILLIPS-VAN HEUSEN CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year Ended January 29, 1995
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expense Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts:
Allowance for doubtful
accounts. . . . . . . . . . . . $2,171,067 $508,862(a) $277,676(b) $1,341,067(c) $1,616,538
(a) Provisions for doubtful accounts.
(b) Recoveries of doubtful accounts previously written off.
(c) Primarily uncollectible accounts charged against the allowance provided
therefor.
</TABLE>
F-2
<PAGE>
SCHEDULE II - (Continued)
PHILLIPS-VAN HEUSEN CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year Ended January 30, 1994
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expense Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Allowances deducted from
asset accounts:
Allowance for discounts . . . . . $ 19,000 $ - $ - $ 19,000(a)$ -
Allowance for doubtful
accounts. . . . . . . . . . . . 2,311,500 79,228(b) 224,594(c) 444,255(d) 2,171,067
$ 2,330,500 $ 79,228 $224,594 $463,255 $2,171,067
(a) Allowance reversed since no discounts were given to customers in 1993.
(b) Provisions for doubtful accounts.
(c) Recoveries of doubtful accounts previously written off.
(d) Primarily uncollectible accounts charged against the allowance provided
therefor.
</TABLE>
F-3
<PAGE>
SCHEDULE II - (Continued)
PHILLIPS-VAN HEUSEN CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
Year Ended January 31, 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expense Accounts Deductions of Period
<S> <C> <C> <C> <C> <C>
Allowances deducted from
asset accounts:
Allowance for discounts . . . . . $ 7,500 $ 21,245(a) $ - $ 9,745(b) $ 19,000
Allowance for doubtful
accounts. . . . . . . . . . . . 2,269,500 859,385(c) 96,074(d) 913,459(e) 2,311,500
$ 2,277,000 $ 880,630 $ 96,074 $ 923,204 $2,330,500
(a) Provision for discounts, deducted from gross sales.
(b) Cash discounts allowed to customers.
(c) Provisions for doubtful accounts.
(d) Recoveries of doubtful accounts previously written off.
(e) Primarily uncollectible accounts charged against the allowance provided
therefor.
</TABLE>
F-4<PAGE>
EXHIBIT 11
PHILLIPS-VAN HEUSEN CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Primary:
Income before extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . . $ 30,015 $ 43,252 $37,881
Extraordinary loss, net of tax. . . . . . . . . . . . . . . . . . . . . . . . . - (11,394) -
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,015 31,858 37,881
Preferred stock dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 2,138
Net income, common shares. . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,015 $ 31,858 $35,743
Common shares and common share equivalents:
Weighted average number of shares outstanding. . . . . . . . . . . . . . . . 26,563 26,142 23,766
Shares issuable upon exercise of dilutive common stock options,
net of shares assumed to be repurchased (at the average
period market price) out of proceeds obtained therefrom . . . . . . . . . 591 964 1,487
Total common shares and common share equivalents . . . . . . . . . . . . . . 27,154 27,106 25,253
Income per common share and common share equivalents before
extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 1.11 $ 1.60 $ 1.42
Extraordinary loss per common share and common share equivalents. . . . . . . . - (0.42) -
Net income per common share and common share equivalents . . . . . . . . . .$ 1.11 $ 1.18 $ 1.42
Fully diluted:
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,015 $ 31,858 $37,881
Total common shares and common share equivalents (see above). . . . . . . . . . 27,154 27,106 25,253
Additional shares issuable upon:
Conversion of redeemable preferred stock . . . . . . . . . . . . . . . . . . - - 1,314
Exercise of dilutive common stock options, net of shares
assumed to be repurchased (at the greater of average period or
period end market price) . . . . . . . . . . . . . . . . . . . . . . . . . . 4 18 26
Total common shares and common share equivalents assuming
full dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,158 27,124 26,593
Net income per common share and common share equivalents. . . . . . . . .$ 1.11 $ 1.18 $ 1.42
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following table lists all of the subsidiaries of the Company and the
jurisdiction of incorporation of each subsidiary. Except as otherwise
indicated, each subsidiary does business under its corporate name indicated in
the table.
Name State or Other Jurisdiction of Incorporation
G. H. Bass Franchises Inc. Delaware
G. H. Bass Caribbean Inc. Delaware
Caribe M&I Ltd. Cayman Islands
GHB (Far East) Limited Hong Kong
Van Heusen Transportation
Corporation Delaware
Tejidos De Coamo, Inc. Delaware
Envoy Pacific Limited Hong Kong
Towell Import & Export Limited Hong Kong
Abese Limited Hong Kong
Confecciones Imperio, S.A. Costa Rica
Camisas Modernas, S.A. Guatemala
G. H. Bass Comercio
Exportacacao Ltda. Brazil
PVH Retail Corp. Delaware
Windsor Shirt Company Pennsylvania
<PAGE>
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report on Form
10-K of Phillips-Van Heusen Corporation of our report dated March 14, 1995,
included in the Annual Report to Stockholders of Phillips-Van Heusen
Corporation.
Our audits also included the financial statement schedules of Phillips-Van
Heusen Corporation listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth herein.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-50751), Registration Statement (Form S-8 No.
33-59602), Registration Statement (Form S-3 No. 33-46770), Registration
Statement (From S-8 No. 33-59602), Registration Statement (Form S-8 No.
33-38698), Post-Effective amendment No. 1 to the Registration Statement
(Form S-8 No. 33-24057), Post-Effective amendment No. 2 to the Registration
Statement (Form S-8 No. 2-73803), Post-Effective amendment No. 4 to the
Registration Statement (Form S-8 No. 2-72959), Post-Effective amendment No. 6
to the Registration Statement (Form S-8 No. 2-64564), and Post-Effective
amendment No. 13 to the Registration Statement (Form S-8 No. 2-47910), of
Phillips-Van Heusen Corporation and in the related Prospectuses of our report
dated March 14, 1995, with respect to the consolidated financial statements
and schedules of Phillips-Van Heusen Corporation included in this Form 10-K
for the year ended January 29, 1995.
ERNST & YOUNG LLP
New York, New York
April 28, 1995
FIRST AMENDMENT
FIRST AMENDMENT, dated as of February 13, 1995
(this "Amendment"), among PHILLIPS-VAN HEUSEN CORPORATION
(the "Borrower"), the financial institutions party to the
Credit Agreement referred to below on the date hereof and
immediately before giving effect to this Amendment (the
"Existing Banks"), BANKERS TRUST COMPANY, as agent (in such
capacity, the "Agent") for the Banks, each of the lenders
listed on Schedule A hereto (the "New Banks"), CORESTATES
BANK, N.A. (the "Replaced Bank") and THE FIRST NATIONAL BANK
OF BOSTON (the "Replacement Bank"). All capitalized terms
used herein and not otherwise defined shall have the meanings
specified in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Borrower, the Existing Banks and the
Agent are parties to the Credit Agreement, dated as of
December 16, 1993 (as modified, supplemented or amended prior
to the date hereof, the "Credit Agreement");
WHEREAS, the Replacement Bank will replace the
Replaced Bank under the Credit Agreement, and the Replaced
Bank will cease to be a Letter of Credit Issuer under the
Credit Agreement;
WHEREAS, the Borrower has entered into an Asset
Sale Agreement, dated as of January 24, 1995, among Crystal
Brands, Inc. ("Crystal Brands"), Crystal Apparel, Inc., Gant
Corporation, Crystal Sales, Inc., Eagle Shirtmakers, Inc.,
Crystal Brands (Hong Kong) Limited and the Borrower (the
"Asset Sale Agreement") relating to the acquisition by the
Borrower of the Apparel Group of Crystal Brands (the
"Acquisition");
WHEREAS, in connection with the Acquisition, the
Borrower desires to add the New Banks as Banks under the
Credit Agreement and to make certain modifications to the
Credit Agreement;
<PAGE>
WHEREAS, in connection with the Acquisition,
certain trade letters of credit issued by Citibank, N.A. for
the account of the Apparel Group of Crystal Brands will cease
to be for the account of Crystal Brands and the reimbursement
obligations with respect thereto will be assumed by the
Borrower, and the Borrower, Citibank, N.A., and the other
parties hereto desire that such letters of credit become
Trade Letters of Credit under the Credit Agreement;
WHEREAS, subject to the terms and conditions
hereof, the parties hereto desire to amend the Credit
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the mutual
premises contained herein and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
I. Addition of Replacement Bank. On and after
the Part I Amendment Effective Date (as defined below), the
following amendments and modifications to the Credit
Agreement shall be effective:
1. The Replaced Bank hereby sells and assigns to
the Replacement Bank without recourse and without
representation or warranty (other than as expressly
provided herein), and the Replacement Bank hereby
purchases and assumes from the Replaced Bank, all rights
and obligations with respect to the Revolving Commitment
of the Replaced Bank and all rights and obligations with
respect to the Letter of Credit Commitment of the
Replaced Bank. On and after the Part I Amendment
Effective Date, the Replaced Bank's Revolving Commitment
and Letter of Credit Commitment will be zero and the
Replacement Bank's Revolving Commitment and Letter of
Credit Commitment will be as set forth in Schedule B
hereto.
2. On and after the Part I Amendment Effective
Date, the Credit Agreement shall be amended by deleting
Schedule I thereto in its entirety and by inserting in
lieu thereof a new Schedule I in the form of Schedule B
attached hereto. Promptly after the Part I Amendment
Effective Date, the Borrower will issue a new Note to
the Replacement Bank, dated the Part I Amendment
Effective Date, and the Replaced Bank will return its
Note to the Borrower.
-2-
<PAGE>
3. On and after the Part I Amendment Effective
Date, Schedule II to the Credit Agreement shall be
amended by deleting such Schedule in its entirety and
inserting in lieu thereof a new Schedule II in the form
of Schedule C hereto. The address of the Replacement
Bank shall be as set forth on Schedule C hereto, or at
such other address as the Replacement Bank may hereafter
notify the other parties to the Credit Agreement in
writing.
4. On and after the Part I Amendment Effective
Date, Schedule IX to the Credit Agreement shall be
amended by deleting such Schedule in its entirety and
inserting in lieu thereof a new Schedule IX in the form
of Schedule D hereto.
5. The Replaced Bank (i) represents and warrants
that it is the legal and beneficial owner of the
interest being sold and assigned by it hereunder and
that such interest is free and clear of any adverse
claim; (ii) makes no representation or warranty and
assumes no responsibility with respect to any
statements, warranties or representations made in or in
connection with the Credit Agreement or the other Credit
Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the
Credit Agreement or the other Credit Documents or any
other instrument or document furnished pursuant thereto;
and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial
condition of the Borrower or any of its Subsidiaries or
the performance or observance by the Borrower of any of
its obligations under the Credit Agreement or the other
Credit Documents to which they are a party or any other
instrument or document furnished pursuant thereto.
6. The Replacement Bank (i) confirms that it has
received a copy of the Credit Agreement and the other
Credit Documents, together with copies of the financial
statements referred to therein and such other documents
and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this
Amendment; (ii) agrees that it will, independently and
without reliance upon the Agent, the Existing Banks, the
Replaced Bank or any other Bank and based on such
documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions
in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible
-3-
<PAGE>
Transferee; (iv) appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise
such powers under the Credit Agreement and the other
Credit Documents as are delegated to the Agent by the
terms thereof, together with such powers as are
reasonably incidental thereto; and (v) agrees that it
will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement
are required to be performed by it as a Bank.
7. On the Part I Amendment Effective Date, (x) the
Replacement Bank shall acquire all of the Commitment and
outstanding Loans of, and participations in Letters of
Credit by, the Replaced Bank and, in connection
therewith, shall pay to the Replaced Bank in respect
thereof an amount equal to the sum of (a) an amount
equal to the principal of, and all accrued but unpaid
interest on, all outstanding Loans of the Replaced Bank,
and (b) an amount equal to such Replaced Bank's Letter
of Credit Percentage of all Unpaid Drawings that have
been funded by the Replaced Bank, together with all then
unpaid interest with respect thereto at such time and
(y) the Borrower shall pay to the Replaced Bank all
accrued but unpaid Fees payable to the Replaced Bank.
Upon the Part I Amendment Effective Date, the payment of
amounts referred to in clauses (x) and (y) above and
delivery to the Replacement Bank of the appropriate Note
executed by the Borrower, the Replacement Bank shall
become a Bank under the Credit Agreement and the
Replaced Bank shall cease to constitute a Bank
thereunder, except with respect to indemnification
provisions under the Credit Agreement, which shall
survive as to the Replaced Bank.
8. On and after the Part I Amendment Effective
Date, all Letters of Credit issued by the Replaced Bank
will (i) cease to be Letters of Credit under the Credit
Agreement, (ii) cease to be participated in by the Banks
and (iii) be governed by and subject to the terms of an
agreement or agreements to be entered into by the
Replaced Bank and the Borrower.
II. Consummation of the Acquisition. On and after
the Part II Amendment Effective Date (as defined below), the
following amendments and modifications to the Credit
Agreement shall be effective:
1. On and as of the Part II Amendment Effective
Date, each of the New Banks hereby assumes a Revolving
-4-
<PAGE>
Commitment and a Letter of Credit Commitment in an amount set
forth opposite such Bank's name on Schedule E hereto.
2. On the Part II Amendment Effective Date, the
Credit Agreement shall be further amended by deleting
Schedule I thereto in its entirety and by inserting in lieu
thereof a new Schedule I in the form of Schedule E attached
hereto. Promptly after the Part II Amendment Effective Date,
the Borrower will issue an appropriate Note to each Bank in
conformity with the requirements of Section 1.06 of the
Credit Agreement (which Notes shall be in exchange for the
Notes currently held by the Banks in the case of each Bank
other than the New Banks).
3. On and after the Part II Amendment Effective
Date, Schedule II to the Credit Agreement shall be amended by
deleting such Schedule in its entirety and inserting in lieu
thereof a new Schedule II in the form of Schedule F hereto.
The address of each New Bank shall be as set forth on
Schedule F hereto, or at such other address as any New Bank
may hereafter notify the other parties to the Credit
Agreement in writing.
4. Each of the New Banks (i) confirms that it has
received a copy of the Credit Agreement and the other Credit
Documents, together with copies of the financial statements
referred to therein and such other documents and information
as it has deemed appropriate to make its own credit analysis
and decision to enter into this Amendment; (ii) agrees that
it will, independently and without reliance upon the Agent,
the Existing Banks or any other Bank and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) appoints
and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Agreement
and the other Credit Documents as are delegated to the Agent
by the terms thereof, together with such powers as are
reasonably incidental thereto; and (iv) agrees that it will
perform in accordance with their terms all of the obligations
which by the terms of the Credit Agreement are required to be
performed by it as a Bank.
5. On the Part II Amendment Effective Date, (i)
each New Bank shall become a "Bank" under, and for all
purposes of, the Credit Agreement and the other Credit
Documents, (ii) the Borrower shall pay to all Banks all
accrued but unpaid Fees and (iii) the Borrower shall repay
-5-
<PAGE>
and reborrow all Loans such that all Loans are owing to the
Banks (including the New Banks) on a pro rata basis after
giving effect to the Commitments of the New Banks.
6. Section 2.01(b) of the Credit Agreement is
hereby amended by deleting the reference to "5,000,000" found
on the seventh line thereof and inserting in lieu thereof the
following new number:
"$8,000,000."
7. Section 10 of the Credit Agreement is hereby
amended by deleting the definition of "Maturity Date" found
therein in its entirety and inserting in lieu thereof the
following new definition:
"'Maturity Date' shall mean February 13, 1999."
8. Section 10 of the Credit Agreement is hereby
amended by deleting the reference to "$5,000,000" found on
the fifth line of the proviso in the definition of "Standby
Letter of Credit" therein and inserting in lieu thereof the
following new number:
"$8,000,000."
9. Section 10 of the Credit Agreement is hereby
amended by deleting the definition of "Available Total
Revolving Commitment" in its entirety and inserting in lieu
thereof the following new definition in appropriate
alphabetical order:
"'Available Total Revolving Commitment' shall
mean (i) for the period from and including October
16 to and including June 30 of each year, the
lesser of (x) the Total Revolving Commitment and
(y) $185,000,000, and (ii) for the period from and
including July 1 to and including October 15 of
each year, the Total Revolving Commitment."
10. On and after the Part II Amendment Effective
Date, Schedule IX to the Credit Agreement shall be further
amended by deleting such Schedule in its entirety and
inserting in lieu thereof a new Schedule IX in the form of
Schedule G hereto.
11. The parties hereto agree that on and as of the
Part II Amendment Effective Date all trade letters of credit
issued by Citibank, N.A. for the account of the Apparel Group
-6-
<PAGE>
of Crystal Brands, to the extent outstanding on such date and
reimbursement obligations with respect to which are assumed
by the Borrower pursuant to the Asset Sale Agreement,
including any extension or renewal thereof, shall constitute
a "Letter of Credit" and a "Trade Letter of Credit" for all
purposes of the Credit Agreement, issued, for purposes of
Section 2.03(a) thereof, on the Part II Amendment Effective
Date. The Borrower represents and warrants that (i) the
aggregate stated amount of all such trade letters of credit
does not exceed $40,000,000 and (ii) all such letters of
credit would be permitted to be issued under the Credit
Agreement on the Part II Amendment Effective Date after
giving effect to this Amendment. Within two Business Days
following the Part II Amendment Effective Date, the Borrower
shall deliver to the Agent and each of the Banks a schedule
setting forth all of such trade letters of credit.
III. Miscellaneous Provisions.
1. The provisions of Part I hereof shall become
effective on the date (the "Part I Amendment Effective Date")
on which the Borrower, each of the Existing Banks (including
the Replaced Bank) and the Replacement Bank shall have
executed and delivered a counterpart of this Amendment.
2. Subject to the last sentence of this Section
III(2), the provisions of Part II of this Amendment shall
become effective on the date (the "Part II Amendment
Effective Date") upon the occurrence of the following:
(a) the Part I Amendment Effective Date shall have
occurred, and each of the New Banks shall have executed
and delivered a counterpart of this Amendment;
(b) the execution and delivery of new Notes to
each of the Banks, dated the Part II Amendment Effective
Date;
(c) prior to or contemporaneously with the
occurrence of the Part II Amendment Effective Date, the
Borrower shall have consummated the Acquisition and
delivered to the Agent a certificate of an officer of
the Borrower certifying such;
(d) the receipt by the Agent of a legal opinion
from counsel to the Borrower satisfactory in form and
substance to the Agent;
-7-
<PAGE>
(e) the receipt by the Agent of a certificate of
an officer of the Borrower certifying that after giving
effect to this Amendment no Default or Event of Default
exists and all representations and warranties contained
in the Credit Agreement and in the other Credit
Documents are true and correct in all material respects;
and
(f) the receipt by the Agent of such other certi-
ficates and documents as it shall reasonably request.
Notwithstanding the foregoing, if for any reason the Part II
Amendment Effective Date shall not occur by February 28,
1995, then Part II of this Amendment will not thereafter
become effective without the prior written consent of each
Existing Bank, the Replacement Bank and the New Banks.
3. Except as expressly amended hereby, the terms
and conditions of the Credit Agreement shall remain unchanged
and in full force and effect.
4. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together
constitute one and the same instrument.
5. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Amendment as of the date first above written.
PHILLIPS-VAN HEUSEN CORPORATION
By
Title:
-8-
<PAGE>
BANKERS TRUST COMPANY,
Individually, and as Agent
By
Title:
THE CHASE MANHATTAN BANK, N.A.
By
Title:
CITIBANK, N.A.
By
Title:
THE BANK OF NEW YORK
By
Title:
CHEMICAL BANK
By
Title:
CORESTATES BANK, N.A.
By
Title:
-9-
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By
Title:
CIBC, INC.
By
Title:
UNION BANK
By
Title:
-10-
<PAGE>
SCHEDULE A
to
First Amendment
NEW BANKS
CIBC, Inc.
Union Bank
<PAGE>
SCHEDULE B
to
First Amendment
COMMITMENTS
Revolving Letter of Credit
Bank Commitment Commitment
BANKERS TRUST COMPANY $16,666,666.65 $25,000,000.00
THE BANK OF NEW YORK $16,666,666.65 $25,000,000.00
THE CHASE MANHATTAN
BANK, N.A. $16,666,666.65 $25,000,000.00
CHEMICAL BANK $16,666,666.65 $25,000,000.00
CITIBANK, N.A. $16,666,666.65 $25,000,000.00
THE FIRST NATIONAL
BANK OF BOSTON $16,666,666.65 $25,000,000.00
Total $100,000,000.00 $150,000,000.00
<PAGE>
SCHEDULE C
to
First Amendment
APPLICABLE LENDING OFFICES
Base Rate CD Rate
Bank Lending Office Lending Office
Bankers Trust Bankers Trust Company Bankers Trust Company
Company 130 Liberty Street 130 Liberty Street
New York, N.Y. 10006 New York, N.Y. 10006
Fax: (201) 250-1530 Fax: (212) 250-1530
Attn: Priscilla Newbury Attn: Priscilla Newbury
with a copy to: with a copy to:
Frank Russo Frank Russo
Eurodollar Letter of Credit
Lending Office Payment Office
Bankers Trust Company Bankers Trust Company
130 Liberty Street 130 Liberty Street
New York, N.Y. 10006 New York, N.Y. 10006
Fax: (201) 250-1530 Fax: (212) 250-1530
Attn: Priscilla Newbury Attn: Priscilla Newbury
with a copy to: with a copy to:
Frank Russo Frank Russo
Base Rate CD Rate
Bank Lending Office Lending Office
The Bank of The Bank of New York The Bank of New York
New York 530 Fifth Avenue 530 Fifth Avenue
New York, N.Y. 10036 New York, N.Y. 10036
Fax: (212) 852-4252 Fax: (212) 852-4252
Attn: Joanne M. Collett Attn: Joanne M. Collett
with a copy to: with a copy to:
Diana Rivera Diane Rivera
Eurodollar Letter of Credit
Lending Office Payment Office
The Bank of New York The Bank of New York
530 Fifth Avenue 530 Fifth Avenue
New York, N.Y. 10036 New York, N.Y. 10036
Fax: (212) 852-4252 Fax: (212) 852-4252
Attn: Joanne M. Collett Attn: Joanne M. Collett
with a copy to: with a copy to:
Diana Rivera Sal Calvera (Standby
Letters of Credit) or
Ivan Hernandez (Trade
Letters of Credit)
<PAGE>
SCHEDULE C
Base Rate CD Rate
Bank Lending Office Lending Office
The Chase Chase Manhattan Bank, Chase Manhattan Bank,
Manhattan N.A. N.A.
Bank, N.A. One Chase Manhattan One Chase Manhattan
Plaza Plaza
New York, N.Y. 10081 New York, N.Y. 10081
Fax: (212) 552-7075 Fax: (212) 552-7075
Attn: Ellen Gertzog Attn: Ellen Gertzog
with a copy to: with a copy to:
Elizabeth Iacoviello Elizabeth Iacoviello
Two Chase Manhattan Plaza Two Chase Manhattan Plaza
New York, NY 10081 New York, NY 10081
Fax: (212) 552-7375 Fax: (212) 552-7375
Eurodollar Letter of Credit
Lending Office Payment Office
Chase Manhattan Bank, Chase Manhattan Bank,
N.A. N.A.
One Chase Manhattan One Chase Manhattan
Plaza Plaza
New York, N.Y. 10081 New York, N.Y. 10081
Fax: (212) 552-7075 Fax: (212) 552-7075
Attn: Ellen Gertzog Attn: Ellen Gertzog
with a copy to: with a copy to:
Elizabeth Iacoviello Elizabeth Iacoviello
Two Chase Manhattan Plaza Two Chase Manhattan Plaza
New York, NY 10081 New York, NY 10081
Fax: (212) 552-7375 Fax: (212) 552-7375
Base Rate CD Rate
Bank Lending Office Lending Office
Chemical Chemical Bank Chemical Bank
Bank 270 Park Avenue 270 Park Avenue
New York, N.Y. 10017 New York, N.Y. 10017
Fax: (212) 270-1474 Fax: (212) 270-1474
Attn: Claire S. O'Connor Attn: Claire S. O'Connor
Eurodollar Letter of Credit
Lending Office Payment Office
Chemical Bank Chemical Bank
270 Park Avenue 270 Park Avenue
New York, N.Y. 10017 New York, N.Y. 10017
Fax: (212) 270-1474 Fax: (212) 270-1474
Attn: Claire S. O'Connor Attn: Claire S. O'Connor
<PAGE>
SCHEDULE C
Base Rate CD Rate
Bank Lending Office Lending Office
Citibank, Citibank, N.A. Citibank, N.A.
N.A. 399 Park Avenue 399 Park Avenue
New York, N.Y. 10043 New York, N.Y. 10043
Fax: (212) 559-7585 Fax: (212) 559-7585
Attn: Arnold Ziegel Attn: Arnold Ziegel
with a copy to: with a copy to:
Joseph Stein Joseph Stein
Eurodollar Letter of Credit
Lending Office Payment Office
Citibank, N.A. Citibank, N.A.
399 Park Avenue 399 Park Avenue
New York, N.Y. 10043 New York, N.Y. 10043
Fax: (212) 559-7585 Fax: (212) 559-7585
Attn: Arnold Ziegel Attn: Arnold Ziegel
with a copy to: with a copy to:
Joseph Stein Joseph Stein
Base Rate CD Rate
Bank Lending Office Lending Office
The First Bank of Boston Bank of Boston
National U.S. Corporate U.S. Corporate
Bank of 100 Federal Street 100 Federal Street
Boston Mail Stop: 01-21-01 Mail Stop: 01-21-01
Boston, MA 02110 Boston, MA 02110
Fax: (617) 434-6685 Fax: (617) 434-6685
Attn: Denise Shaw Attn: Denise Shaw
Eurodollar Letter of Credit
Lending Office Payment Office
Bank of Boston Bank of Boston
U.S. Corporate U.S. Corporate
100 Federal Street 100 Federal Street
Mail Stop: 01-21-01 Mail Stop: 01-21-01
Boston, MA 02110 Boston, MA 02110
Fax: (617) 434-6685 Fax: (617) 434-6685
Attn: Denise Shaw Attn: Denise Shaw
<PAGE>
SCHEDULE D
to
First Amendment
LETTER OF CREDIT ISSUERS AND ISSUANCE AMOUNTS
A. Standby Letters of Credit
Standby Letter of Maximum Standby Issuance
Credit Banks Amount
Citibank, N.A. $ 1,000,000
The Bank of New York 2,900,000
Chemical Bank 800,000
B. Trade Letters of Credit
Trade Letter of Maximum Trade Issuance
Credit Banks Amount
The Chase Manhattan Bank, N.A. $ 45,300,000
Citibank, N.A. 100,000,000
<PAGE>
SCHEDULE E
to
First Amendment
COMMITMENTS
Revolving Letter of Credit
Bank Commitment Commitment
BANKERS TRUST COMPANY $30,000,000 $30,000,000
THE BANK OF NEW YORK $ 25,000,000 $ 25,000,000
THE CHASE MANHATTAN
BANK, N.A. $ 25,000,000 $ 25,000,000
CHEMICAL BANK $ 25,000,000 $ 25,000,000
CITIBANK, N.A. $ 25,000,000 $ 25,000,000
THE FIRST NATIONAL
BANK OF BOSTON $ 25,000,000 $ 25,000,000
UNION BANK $ 25,000,000 $ 25,000,000
CIBC, INC. $ 20,000,000 $ 20,000,000
Total $200,000,000.00 $200,000,000.00
<PAGE>
SCHEDULE F
to
First Amendment
APPLICABLE LENDING OFFICES
Base Rate CD Rate
Bank Lending Office Lending Office
Bankers Bankers Trust Company Bankers Trust Company
Trust 130 Liberty Street 130 Liberty Street
Company New York, N.Y. 10006 New York, N.Y. 100066
Fax: (212) 250-1530/7351 Fax: (212) 250-1530/7351
Attn: Priscilla Newbury Attn: Priscilla Newbury
with a copy to: with a copy to:
Frank Russo Frank Russo
Eurodollar Letter of Credit
Lending Office Payment Office
Bankers Trust Company Bankers Trust Company
130 Liberty Street 130 Liberty Street
New York, N.Y. 10006 New York, N.Y. 100066
Fax: (212) 250-1530/7351 Fax: (212) 250-1530/7351
Attn: Priscilla Newbury Attn: Priscilla Newbury
with a copy to: with a copy to:
Frank Russo Frank Russo
Base Rate CD Rate
Bank Lending Office Lending Office
The Bank of The Bank of New York The Bank of New York
New York 530 Fifth Avenue 530 Fifth Avenue
New York, N.Y. 10036 New York, N.Y. 10036
Fax: (212) 852-4252 Fax: (212) 852-4252
Attn: Joanne M. Collett Attn: Joanne M. Collett
with a copy to: with a copy to:
Diana Rivera Diane Rivera
Eurodollar Letter of Credit
Lending Office Payment Office
The Bank of New York The Bank of New York
530 Fifth Avenue 530 Fifth Avenue
New York, N.Y. 10036 New York, N.Y. 10036
Fax: (212) 852-4252 Fax: (212) 852-4252
Attn: Joanne M. Collett Attn: Joanne M. Collett
with a copy to: with a copy to:
Diana Rivera Sal Calvera (Standby
Letters of Credit) or
Ivan Hernandez (Trade
Letters of Credit)
<PAGE>
SCHEDULE F
Base Rate CD Rate
Bank Lending Office Lending Office
The Chase Chase Manhattan Bank, Chase Manhattan Bank,
Manhattan N.A. N.A.
Bank, N.A. One Chase Manhattan One Chase Manhattan
Plaza Plaza
New York, N.Y. 10081 New York, N.Y. 10081
Fax: (212) 552-7075 Fax: (212) 552-7075
Attn: Ellen Gertzog Attn: Ellen Gertzog
with a copy to: with a copy to:
Elizabeth Iacoviello Elizabeth Iacoviello
Two Chase Manhattan Plaza Two Chase Manhattan Plaza
New York, NY 10081 New York, NY 10081
Fax: (212) 552-7375 Fax: (212) 552-7375
Eurodollar Letter of Credit
Lending Office Payment Office
Chase Manhattan Bank, Chase Manhattan Bank,
N.A. N.A.
One Chase Manhattan One Chase Manhattan
Plaza Plaza
New York, N.Y. 10081 New York, N.Y. 10081
Fax: (212) 552-7075 Fax: (212) 552-7075
Attn: Ellen Gertzog Attn: Ellen Gertzog
with a copy to: with a copy to:
Elizabeth Iacoviello Elizabeth Iacoviello
Two Chase Manhattan Plaza Two Chase Manhattan Plaza
New York, NY 10081 New York, NY 10081
Fax: (212) 552-7375 Fax: (212) 552-7375
Base Rate CD Rate
Bank Lending Office Lending Office
Chemical Chemical Bank Chemical Bank
Bank 270 Park Avenue 270 Park Avenue
New York, N.Y. 10017 New York, N.Y. 10017
Fax: (212) 270-1474 Fax: (212) 270-1474
Attn: Claire S. O'Connor Attn: Claire S. O'Connor
Eurodollar Letter of Credit
Lending Office Payment Office
Chemical Bank Chemical Bank
270 Park Avenue 270 Park Avenue
New York, N.Y. 10017 New York, N.Y. 10017
Fax: (212) 270-1474 Fax: (212) 270-1474
Attn: Claire S. O'Connor Attn: Claire S. O'Connor
<PAGE>
SCHEDULE F
Base Rate CD Rate
Bank Lending Office Lending Office
Citibank, Citibank, N.A. Citibank, N.A.
N.A. 399 Park Avenue 399 Park Avenue
New York, N.Y. 10043 New York, N.Y. 10043
Fax: (212) 559-7585 Fax: (212) 559-7585
Attn: Arnold Ziegel Attn: Arnold Ziegel
with a copy to: with a copy to:
Joseph Stein Joseph Stein
Eurodollar Letter of Credit
Lending Office Payment Office
Citibank, N.A. Citibank, N.A.
399 Park Avenue 399 Park Avenue
New York, N.Y. 10043 New York, N.Y. 10043
Fax: (212) 559-7585 Fax: (212) 559-7585
Attn: Arnold Ziegel Attn: Arnold Ziegel
with a copy to: with a copy to:
Joseph Stein Joseph Stein
Base Rate CD Rate
Bank Lending Office Lending Office
The First Bank of Boston Bank of Boston
National U.S. Corporate U.S. Corporate
Bank of 100 Federal Street 100 Federal Street
Boston Mail Stop: 01-21-01 Mail Stop: 01-21-01
Boston, MA 02110 Boston, MA 02110
Fax: (617) 434-6685 Fax: (617) 434-6685
Attn: Denise Shaw Attn: Denise Shaw
Eurodollar Letter of Credit
Lending Office Payment Office
Bank of Boston Bank of Boston
U.S. Corporate U.S. Corporate
100 Federal Street 100 Federal Street
Mail Stop: 01-21-01 Mail Stop: 01-21-01
Boston, MA 02110 Boston, MA 02110
Fax: (617) 434-6685 Fax: (617) 434-6685
Attn: Denise Shaw Attn: Denise Shaw
<PAGE>
SCHEDULE F
Base Rate CD Rate
Bank Lending Office Lending Office
CIBC, Inc. CIBC, Inc. CIBC, Inc.
2727 Paces Ferry Road, 2727 Paces Ferry Road,
Suite 1200 Suite 1200
Atlanta, GA 30339 Atlanta, GA 30339
Fax: (404) 319-4950 Fax: (404) 319-4950
Attn: Mary Fann Attn: Mary Fann
Eurodollar Letter of Credit
Lending Office Payment Office
CIBC, Inc. CIBC, Inc.
2727 Paces Ferry Road, 2727 Paces Ferry Road,
Suite 1200 Suite 1200
Atlanta, GA 30339 Atlanta, GA 30339
Fax: (404) 319-4950 Fax: (404) 319-4950
Attn: Mary Fann Attn: Mary Fann
Base Rate CD Rate
Bank Lending Office Lending Office
Union Bank Union Bank Union Bank
350 California Street 350 California Street
11th Floor 11th Floor
San Francisco, CA 94104 San Francisco, CA 94104
Fax: (415) 705-7111 Fax: (415) 705-7111
Attn: Cecilia M. Valente Attn: Cecilia M. Valente
Eurodollar Letter of Credit
Lending Office Payment Office
Union Bank Union Bank
350 California Street 350 California Street
11th Floor 11th Floor
San Francisco, CA 94104 San Francisco, CA 94104
Fax: (415) 705-7111 Fax: (415) 705-7111
Attn: Cecilia M. Valente Attn: Cecilia M. Valente
<PAGE>
SCHEDULE G
to
First Amendment
LETTER OF CREDIT ISSUERS AND ISSUANCE AMOUNTS
A. Standby Letters of Credit
Standby Letter of Maximum Standby Issuance
Credit Banks Amount
Citibank, N.A. $ 1,500,000
Bank of New York 2,900,000
Chemical Bank 800,000
B. Trade Letters of Credit
Maximum Trade Issuance
Trade Letter of Credit Banks Amount
Citibank, N.A. $125,000,000
The Chase Manhattan Bank, N.A. 69,800,000
AGREEMENT, dated as of April 28, 1993, among BRUCE J. KLATSKY
("Klatsky"), LAWRENCE S. PHILLIPS ("Phillips") and PHILLIPS-VAN
HEUSEN CORPORATION (the "Company"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to provide for an orderly
succession of the management of the Company;
NOW, THEREFORE, the parties hereto agree as follows:
1. Transition of Management. (a) Effective as of the Board
of Directors meeting scheduled for June 1, 1993, but no later than
June 2, 1993, Phillips shall resign as, and Phillips and the
Company shall cause Klatsky to be appointed as, the Chief Executive
Officer of the Company with all the duties, powers, rights,
privileges, responsibilities, perquisites, emoluments and
obligations customarily associated with and incident to such office
(the "CEO Powers").
(b) Effective as of June 7, 1994, (i) Phillips shall resign
as, and Phillips and the Company shall cause Klatsky to be
appointed as, the Chairman of the Board of Directors of the
Company, with all the duties, powers, rights, privileges,
responsibilities, perquisites, emoluments and obligations
customarily associated with and incident to such office (the
"Chairman Powers," and together with the CEO Powers, the "Powers"),
and (ii) Klatsky and the Company shall cause Phillips to be
appointed as Honorary Chairman or, at Phillips' election, Chairman
Emeritus of the Company.
(c) On or prior to January 28, 1995, Phillips shall relocate
his office and his assistant to facilities arranged and paid for by
the Company other than in the principal offices maintained by the
Company, and his office shall thereafter remain outside of such
principal office. Such office and assistant shall be paid for by
the Company.
2. Special Severance Benefit. The Company hereby agrees
that, among other things, any breach of the obligations to Klatsky
under Section 1 of this Agreement shall, with respect to Klatsky,
be a "Severance Event" under its Special Severance Benefit Plan
(the "Plan"), thereby entitling Klatsky to the full benefits
provided for in Section 5 thereof. The Plan is hereby amended by
adding the following to the end of the definition of "Severance
Event" appearing in Section 2 of the Plan:
"In addition to the foregoing and not in limitation
thereof, a Severance Event with respect to Bruce
Klatsky shall mean (a) the failure of the directors
of the Company duly to elect Mr. Klatsky as Chief
Executive Officer or Chairman of the Board of the
Company effective not later than June 2, 1993 and
June 7, 1994, respectively, and to continue him in
each of such positions so long as he is employed by
the Company, (b) subsequent to any election or re-
election as provided in the foregoing clause (a),
the directors appoint an officer or hire an
employee with authority equal or superior to the
authority of Mr. Klatsky, (c) the failure of
Lawrence S. Phillips to relocate his office on or
prior to January 28, 1995 to facilities other than
in the principal office maintained by the Company
or the failure of Mr. Phillips thereafter to
maintain his office outside of such principal
office or (d) the failure of the Company to
compensate Mr. Klatsky at a rate of at least
$750,000 per year and maintain the other terms and
conditions of his employment by the Company on no
less than substantially the same basis as currently
enjoyed by Mr. Klatsky in connection with his
employment by the Company."
3. Outstanding Options. The Company hereby amends all of
the options heretofore granted to Klatsky to provide that the
exercisability of all such options shall be accelerated, and all
such options shall be exercisable in full, in the event of the
occurrence of a "Severance Event" as defined in the Plan as the
same is amended pursuant to Section 2 hereof.
4. Contingent Bonus. To induce Klatsky to enter into this
Agreement, the Company hereby agrees to pay Klatsky a bonus (the
"Contingent Bonus") of $3,000,000, on the date, and subject to the
terms and conditions, provided for in this Section 4.
(a) Subject to the provisions of Section 4(c), the Contingent
Bonus shall be paid to Klatsky, without interest, on April 27, 1996
if Klatsky is employed by the Company on said date.
(b) Subject to the provisions of Section 4(c), the Contingent
Bonus shall be forfeited by Klatsky and shall not be paid in the
event that the employment of Klatsky with the Company terminates
prior to April 27, 1996.
(c) Notwithstanding any other provisions of this Section 4,
the Contingent Bonus will not be subject to forfeiture pursuant to
Section 4(b) and shall be paid promptly upon the termination of the
employment of Klatsky with the Company, (i) in the event of the
termination of his employment as a result of his death or his
"disability" (as hereinafter defined) or Klatsky's employment with
the Company is terminated by the Company without "cause" (as
hereinafter defined), (ii) in the event that Klatsky terminates his
2
<PAGE>
employment with the Company following the occurrence of a
"Severance Event" as defined in the Plan as the same is amended
pursuant to Section 2 hereof, or (iii) Klatsky terminates his
employment with the Company by written notice to the Company (the
"Termination Notice") as a result of his reasonable determination
that Phillips and/or the Company have acted or failed to act in
such a manner as to deny, limit or restrict to any significant
extent Klatsky's CEO Powers, at any time commencing on June 2,
1993, or his Chairman Powers, at any time commencing on June 7,
1994, provided that prior to giving the Termination Notice, Klatsky
has provided the Company with written notice of such determination
(the "Determination Notice") and the Company shall have within ten
days from receipt of such Determination Notice failed to cure the
condition which Klatsky is claiming is the cause of his
determination under this clause (iii).
(d) For purposes of this Agreement, (i) "disability" shall
mean the inability of Klatsky to perform the duties of the offices
to which he has been appointed, as determined by an independent
physician, due to any physical or psychological injury, illness or
disease and (ii) the Company shall have "cause" to terminate
Klatsky's employment only if (A) Klatsky shall engage in fraudulent
activities materially injurious to the Company or (B) Klatsky shall
be convicted of a felony under state or federal law.
(e) In the event that Klatsky shall have given the Company a
Determination Notice pursuant to clause (iii) of Section 4(c),
Klatsky shall be entitled, prior to giving a Termination Notice, to
submit the matter by written notice to the Company to an arbitrator
appointed pursuant to Section 10 hereof to determine (i) whether
Klatsky has the right, pursuant to said clause (iii), to terminate
his employment and (ii) whether the Company has cured the condition
of which Klatsky has complained. Klatsky shall not be under any
obligation to give a Termination Notice or to terminate his
employment notwithstanding the determination of the arbitrator or
his giving of a Determination Notice.
5. Special Bonus. To further induce Klatsky to enter into
this Agreement, the Company hereby agrees to pay Klatsky a special
bonus of $85,000 on or prior to June 2, 1993.
6. Special Option. To further induce Klatsky to enter into
this Agreement, the Company hereby grants to Klatsky an option
under the Company's 1987 Stock Option Plan to purchase 100,000
shares of the Company's common stock, $1.00 par value.
7. Continued Service by Phillips. Phillips shall continue
to be employed by the Company in the following capacities during
the dates indicated upon terms from time to time negotiated by
Phillips and the Company which, for the five year period commencing
June 7, 1994, shall not be less than the compensation (including in
compensation all payments made to Phillips under any of the
3
<PAGE>
Company's pension plans) and, subject to Section 1(c), perquisites
currently enjoyed by Phillips:
Date Office
April 27, 1993 to and including Chairman and Chief
June 1, 1993 Executive Officer
June 2, 1993 to and including Chairman
June 6, 1994
June 7, 1994 and thereafter Honorary Chairman or, at
Phillips' election,
Chairman Emeritus
and consultant
to the Chairman
8. Representation and Warranty. Klatsky hereby represents
and warrants to the Company and Phillips that he has not entered
into any agreement or understanding with Crystal Brands, Inc. to
become employed by or provide any services to such company.
9. Indemnification. The Company hereby agrees to indemnify
and hold Klatsky harmless from any loss, cost, expense, damage or
liability suffered or incurred by reason of Klatsky's breach of any
alleged agreement to become employed by or provide services to
Crystal Brands, Inc. or his refusal to sign any such written
agreement. If any event shall occur which may result in indemni-
fication hereunder, Klatsky shall give the Company prompt written
notice thereof. The Company shall, upon written notice to Klatsky
within 10 days of the Company's receipt of written notice from
Klatsky as herein provided, have the right at its expense to
control and assume the defense of the matter giving rise to
indemnification hereunder and to compromise or settle any such
matter. In the event that the Company shall fail to control and
assume the defense of any such matter, the Company shall pay all
costs and expenses (including reasonable attorneys' fees and costs)
incurred by Klatsky in connection with the defense of such matter.
10. Arbitration. Any determination requested by Klatsky
pursuant to Section 4(e) hereof and any dispute with respect to
Klatsky's exercise of his rights pursuant to Section 4(c)(iii)
hereof shall be determined by arbitration pursuant to the rules of
the American Arbitration Association (the "AAA"). Such arbitration
shall be conducted on an expedited basis in the City of New York by
one arbitrator appointed pursuant to the rules of the AAA. Any
award or decision made by such arbitrator shall be final and
binding on the parties hereto and may be entered in any court
having jurisdiction thereof. The Company shall pay or promptly
reimburse Klatsky for all fees and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred by
4
<PAGE>
Klatsky in connection with such arbitration unless it is determined
that Klatsky acted in bad faith in seeking or contesting such
arbitration. The Company shall be responsible for all of its own
fees and expenses incurred in connection with any such arbitration.
11. Expenses of Enforcement. The Company shall pay, or
reimburse Klatsky for, the expenses of his counsel in connection
with the enforcement of any of the provisions of this Agreement,
unless it is determined that Klatsky brought such action in bad
faith.
12. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
New York without reference to the conflicts of law provisions
thereof.
13. Understanding of Parties; No Waiver. This Agreement
contains the entire understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings with respect to the subject matter
hereof. No waiver shall be deemed to be made by any of the parties
to any of its rights hereunder unless that waiver shall be in a
writing signed by the waiving party and any such waiver shall only
be effective to the extent set forth therein.
14. Captions. The captions contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
15. Notices. All notices and communications hereunder shall
be in writing and shall be sent by registered or certified mail,
return receipt requested, addressed to the party for whom or for
which intended, in the case of the Company, to its then principal
office, or at such other address of which the Company shall have
given notice to the other parties hereto in the manner herein pro-
vided, and in the case of each of Klatsky and Phillips, at his
respective residence address as set forth in the records of the
Company or at such other address of which he shall have given
notice to the other parties hereto in the manner herein provided,
with a copy of all such notices and communications to be given
concurrently to Rosenman & Colin, 575 Madison Avenue, New York, New
York 10022, Attention: Edward H. Cohen, Esq. and Ruskin, Moscou,
Evans & Faltischek, P.C., 170 Old Country Road, Mineola, New York
11501, Attention: Raymond S. Evans, Esq.
16. Further Assurances. Each of the parties hereto shall
execute and deliver to the others such additional documents and
shall take such further actions as may be reasonably requested to
carry out the transactions contemplated by this Agreement,
including, without limitation, the giving of notice by the Company
to the participants in the Plan of the amendment to such Plan
5
<PAGE>
effected by Section 2 hereof. If the Plan is terminated or is
amended so as to adversely affect the rights of Klatsky thereunder
by reason of the amendments effected by Section 2 hereof, the
Company agrees to enter into an agreement reasonably satisfactory
to Klatsky which shall provide Klatsky with the rights to which he
is entitled under the Plan by reason of the amendments effected by
Section 2 hereof, but the Company shall not be required to enter
into an agreement which would provide Klatsky with any rights to
which he was entitled under the Plan without regard to the
amendments effected by Section 2 hereof.
17. Severability. In the event that any provision of this
Agreement shall be declared invalid or unenforceable, such
invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions of this Agreement, it being
hereby agreed that such provisions are severable and that this
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted.
18. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of and be binding upon the
company and its successors and assigns and each of Klatsky and
Phillips and their respective heirs, legal representatives,
successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
______________________________
Bruce J. Klatsky
______________________________
Lawrence S. Phillips
PHILLIPS-VAN HEUSEN CORPORATION
By___________________________
6
NON-INCENTIVE STOCK OPTION AGREEMENT, dated April 28, 1993,
between PHILLIPS-VAN HEUSEN CORPORATION (the "Company"), a Delaware
corporation, and BRUCE J. KLATSKY (the "Optionee").
1. The Company grants to the Optionee an option (the "Op-
tion") under the Phillips-Van Heusen Corporation 1987 Stock Option
Plan (the "Plan") to purchase from the Company all, but not less
than all, of an aggregate of 100,000 shares (the "Optioned Shares")
of the common stock, $1.00 par value, of the Company (the "Common
Stock"). The Option is not intended to be an incentive stock
option within the meaning of section 422A(b) of the Internal
Revenue Code of 1986 (the "Code") and this Agreement shall be
construed and interpreted in accordance with such intention.
2. The purchase price is $28.00 per share (the "Option
Price").
3. The Option shall not be assignable or transferable except
by will and/or by the laws of descent and distribution and, during
the life of the Optionee, the Option may be exercised only by him.
4. (a) Subject to the provisions of Section 4(c), the Option
shall only be exercisable during the twenty-day period commencing
on April 27, 1996 and ending on May 17, 1996.
(b) Subject to the provisions of Section 4(c), the Option
shall not become exercisable in the event that the employment of
the Optionee with the Company terminates prior to April 27, 1996.
(c) Notwithstanding any other provisions of this Section 4,
the Option shall become exercisable during the twenty-day period
commencing upon the termination of the Optionee's employment with
the Company (except that such period shall be three months after
the date of the qualification of a representative of his estate in
the event the Optionee's employment terminates by reason of death
or disability), if any of the following events shall occur: (i)
the failure of the directors of the Company duly to elect the
Optionee as Chief Executive Officer or Chairman of the Board of the
Company effective not later than June 2, 1993 and June 7, 1994,
respectively, and to continue him in each of such positions so long
as he is employed by the Company, (ii) subsequent to any election
or re-election as provided in the foregoing clause (i), the
directors appoint an officer or hire an employee with authority
equal or superior to the authority of the Optionee, (iii) the
failure of Lawrence S. Phillips to relocate his office on or prior
to January 28, 1995 to facilities other than in the principal
office maintained by the Company or Mr. Phillips' failure
thereafter to maintain his office outside of such principal office,
(iv) the failure of the Company to compensate the Optionee at a
rate of at least $750,000 per year and maintain the other terms and
conditions of his employment by the Company on no less than
substantially the same basis as currently enjoyed by the Optionee
in connection with his employment by the Company, (v) the termina-
tion of employment as a result of the Optionee's death or his
"disability" (as hereinafter defined) or the Optionee's employment
with the Company is terminated by the Company without "cause" (as
hereinafter defined) or (vi) the Optionee terminates his employment
with the Company pursuant to a "Termination Notice" given pursuant
to that certain Agreement, dated as of April 28, 1993, among the
Optionee, the Company and Lawrence S. Phillips.
2
<PAGE>
(d) For purposes of this Agreement, (i) "disability" shall
mean the inability of the Optionee to perform the duties of the
offices to which he has been appointed, as determined by an
independent physician, due to any physical or psychological injury,
illness or disease and (ii) the Company shall have "cause" to
terminate the Optionee's employment only if (A) the Optionee shall
engage in fraudulent activities materially injurious to the Company
or (B) the Optionee shall be convicted of a felony under state or
federal law.
5. Neither the Optionee nor the Optionee's legal represent-
atives, legatees or distributees shall be or be deemed to be the
holder of any shares of the Common Stock covered by the Option un-
less and until certificates for such shares have been issued. Upon
payment of the purchase price thereof, shares issued upon exercise
of the Option shall be fully paid and nonassessable.
6. In order to exercise the Option, the Optionee shall give
written notice of intent to exercise the Option to the Chief Fi-
nancial Officer of the Company accompanied by payment to the
Company of the amount of the aggregate Option Price for the
Optioned Shares. All or any portion of such payment may be made in
kind by the delivery of shares of the Common Stock having a fair
market value, on the date of delivery (as determined in the manner
set forth in paragraph C of Section 7 of the Plan), equal to the
portion of the Option Price so paid.
7. (a) Unless the shares to be issued upon the exercise of
the Option shall be registered prior to the issuance thereof under
3
<PAGE>
the Securities Act of 1933, the Optionee shall, as a condition of
the Company's obligation to issue such shares, give a representa-
tion in writing that he is acquiring such shares for his own ac-
count as an investment and not with a view to, or for sale in con-
nection with, the distribution of any thereof.
(b) In the event of the death of the Optionee, an additional
condition of exercising the Option shall be the delivery to the
Company of such tax waivers and other documents as the Committee
shall determine. The executors, administrators, legal repre-
sentatives, distributees and legatees of the Optionee are, after
the death of the Optionee, referred to as the Optionee with respect
to the Option.
(c) The Optionee shall, as an additional condition of exer-
cising the Option, make such arrangements with the Company with
respect to withholding as the Committee shall determine.
8. In the event that a dividend shall be declared upon the
Common Stock payable in shares of the Common Stock, the Optioned
Shares shall be adjusted by adding to each such share the number of
shares which would be distributable thereon if such share had been
outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend. In the event that the
outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation, whether
through reorganization, recapitalization, stock split-up, combina-
tion of shares, sale of assets, merger or consolidation in which
4
<PAGE>
the Company is the surviving corporation, then, there shall be
substituted for each Optioned Share the number and kind of shares
of stock or other securities into which each outstanding share of
the Common Stock shall be so changed, or for which each such share
shall be exchanged. In the event that there shall be any change,
other than as specified in this Section 8, in the number or kind
of outstanding shares of the Common Stock, or of any stock or other
securities into which the Common Stock shall have been changed, or
for which it shall have been exchanged, then, if the Committee
shall, in its sole discretion, determine that such change equitably
requires an adjustment in the number or kind of Optioned Shares,
such adjustment shall be made by the Committee and shall be
effective and binding for all purposes of this Agreement. In the
case of any such substitution or adjustment as provided for in this
Section 8, the Option Price for each Optioned Share shall be the
Option Price for all shares of stock or other securities which
shall have been substituted for such Optioned Share or to which
such share shall have been adjusted in accordance with the
provisions in this Section 8. No adjustment or substitution
provided for in this Section 8 shall require the Company to sell a
fractional share hereunder. In the event of the dissolution or
liquidation of the Company, or a merger, reorganization or consol-
idation in which the Company is not the surviving corporation,
then, except as otherwise provided in the second sentence of this
Section 8, the Option, to the extent not theretofore exercised,
shall terminate forthwith.
5
<PAGE>
9. The existence of the Option shall not affect in any way
the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganiza-
tions or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corpo-
rate act or proceeding whether of a similar character or otherwise.
10. As a condition of the granting of the Option, the Op-
tionee agrees, for himself and his personal representatives, that
any dispute or disagreement which may arise under or as a result of
or pursuant to this Agreement shall be determined by the Committee
acting under the Plan, in its sole discretion, and that any
interpretations by said Committee of the terms of this Agreement
shall be final, binding and conclusive.
11. In the event the Optionee shall at any time sell any of
the shares acquired upon the exercise of the Option, he shall give
written notice of the sale to the Chief Financial Officer of the
Company within ten days after the date of such sale, which notice
shall state the number of such shares sold and the amount received
upon such sale.
12. Nothing herein contained shall be deemed to confer upon
the Optionee any right to continue to be retained by the Company or
its subsidiaries, nor to interfere in any way with the right of
6
<PAGE>
the Company or its subsidiaries to terminate the retention of the
Optionee at any time.
13. This Agreement constitutes the entire agreement between
the Company and the Optionee with respect to the matters covered
hereby and may not be modified except by a written instrument
signed by or on behalf of the Company and the Optionee.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer, and the Optionee has ex-
ecuted this Agreement, as of the day and year first above written.
PHILLIPS VAN-HEUSEN CORPORATION
By Cynthia L. Tarantino
ACCEPTED AND AGREED TO:
Bruce J. Klatsky
Optionee
8
<PAGE>
NON-INCENTIVE STOCK OPTION AGREEMENT, dated December 3, 1993,
between PHILLIPS-VAN HEUSEN CORPORATION (the "Company"), a Delaware
corporation, and BRUCE J. KLATSKY (the "Optionee").
1. The Company grants to the Optionee an option (the "Op-
tion") under the Phillips-Van Heusen Corporation 1987 Stock Option
Plan (the "Plan") to purchase from the Company all, but not less
than all, of an aggregate of 100,000 shares (the "Optioned Shares")
of the common stock, $1.00 par value, of the Company (the "Common
Stock"). The Option is not intended to be an incentive stock
option within the meaning of section 422A(b) of the Internal
Revenue Code of 1986 (the "Code") and this Agreement shall be
construed and interpreted in accordance with such intention.
2. The purchase price is $33.25 per share (the "Option
Price").
3. The Option shall not be assignable or transferable except
by will and/or by the laws of descent and distribution and, during
the life of the Optionee, the Option may be exercised only by him.
4. (a) Subject to the provisions of Section 4(c), the Option
shall only be exercisable during the twenty-day period commencing
on April 27, 1996 and ending on May 17, 1996.
(b) Subject to the provisions of Section 4(c), the Option
shall not become exercisable in the event that the employment of
the Optionee with the Company terminates prior to April 27, 1996.
(c) Notwithstanding any other provisions of this Section 4,
the Option shall become exercisable during the twenty-day period
9
<PAGE>
commencing upon the termination of the Optionee's employment with
the Company (except that such period shall be three months after
the date of the qualification of a representative of his estate in
the event the Optionee's employment terminates by reason of death
or disability), if any of the following events shall occur: (i)
the failure of the directors of the Company duly to elect the
Optionee as Chief Executive Officer or Chairman of the Board of the
Company effective not later than June 2, 1993 and June 14, 1994,
respectively, and to continue him in each of such positions so long
as he is employed by the Company, (ii) subsequent to any election
or re-election as provided in the foregoing clause (i), the
directors appoint an officer or hire an employee with authority
equal or superior to the authority of the Optionee, (iii) the
failure of Lawrence S. Phillips to relocate his office on or prior
to January 28, 1995 to facilities other than in the principal
office maintained by the Company or Mr. Phillips' failure
thereafter to maintain his office outside of such principal office,
(iv) the failure of the Company to compensate the Optionee at a
rate of at least $750,000 per year and maintain the other terms and
conditions of his employment by the Company on no less than
substantially the same basis as currently enjoyed by the Optionee
in connection with his employment by the Company, (v) the termina-
tion of employment as a result of the Optionee's death or his
"disability" (as hereinafter defined) or the Optionee's employment
with the Company is terminated by the Company without "cause" (as
hereinafter defined) or (vi) the Optionee terminates his employment
10
<PAGE>
with the Company pursuant to a "Termination Notice" given pursuant
to that certain Agreement, dated as of April 28, 1993, among the
Optionee, the Company and Lawrence S. Phillips.
(d) For purposes of this Agreement, (i) "disability" shall
mean the inability of the Optionee to perform the duties of the
offices to which he has been appointed, as determined by an
independent physician, due to any physical or psychological injury,
illness or disease and (ii) the Company shall have "cause" to
terminate the Optionee's employment only if (A) the Optionee shall
engage in fraudulent activities materially injurious to the Company
or (B) the Optionee shall be convicted of a felony under state or
federal law.
5. Neither the Optionee nor the Optionee's legal represent-
atives, legatees or distributees shall be or be deemed to be the
holder of any shares of the Common Stock covered by the Option un-
less and until certificates for such shares have been issued. Upon
payment of the purchase price thereof, shares issued upon exercise
of the Option shall be fully paid and nonassessable.
6. In order to exercise the Option, the Optionee shall give
written notice of intent to exercise the Option to the Chief Fi-
nancial Officer of the Company accompanied by payment to the
Company of the amount of the aggregate Option Price for the
Optioned Shares. All or any portion of such payment may be made in
kind by the delivery of shares of the Common Stock having a fair
market value, on the date of delivery (as determined in the manner
11
<PAGE>
set forth in paragraph C of Section 7 of the Plan), equal to the
portion of the Option Price so paid.
7. (a) Unless the shares to be issued upon the exercise of
the Option shall be registered prior to the issuance thereof under
the Securities Act of 1933, the Optionee shall, as a condition of
the Company's obligation to issue such shares, give a representa-
tion in writing that he is acquiring such shares for his own ac-
count as an investment and not with a view to, or for sale in con-
nection with, the distribution of any thereof.
(b) In the event of the death of the Optionee, an additional
condition of exercising the Option shall be the delivery to the
Company of such tax waivers and other documents as the Committee
shall determine. The executors, administrators, legal repre-
sentatives, distributees and legatees of the Optionee are, after
the death of the Optionee, referred to as the Optionee with respect
to the Option.
(c) The Optionee shall, as an additional condition of exer-
cising the Option, make such arrangements with the Company with
respect to withholding as the Committee shall determine.
8. In the event that a dividend shall be declared upon the
Common Stock payable in shares of the Common Stock, the Optioned
Shares shall be adjusted by adding to each such share the number of
shares which would be distributable thereon if such share had been
outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend. In the event that the
12
<PAGE>
outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation, whether
through reorganization, recapitalization, stock split-up, combina-
tion of shares, sale of assets, merger or consolidation in which
the Company is the surviving corporation, then, there shall be
substituted for each Optioned Share the number and kind of shares
of stock or other securities into which each outstanding share of
the Common Stock shall be so changed, or for which each such share
shall be exchanged. In the event that there shall be any change,
other than as specified in this Section 8, in the number or kind
of outstanding shares of the Common Stock, or of any stock or other
securities into which the Common Stock shall have been changed, or
for which it shall have been exchanged, then, if the Committee
shall, in its sole discretion, determine that such change equitably
requires an adjustment in the number or kind of Optioned Shares,
such adjustment shall be made by the Committee and shall be
effective and binding for all purposes of this Agreement. In the
case of any such substitution or adjustment as provided for in this
Section 8, the Option Price for each Optioned Share shall be the
Option Price for all shares of stock or other securities which
shall have been substituted for such Optioned Share or to which
such share shall have been adjusted in accordance with the
provisions in this Section 8. No adjustment or substitution
provided for in this Section 8 shall require the Company to sell a
fractional share hereunder. In the event of the dissolution or
liquidation of the Company, or a merger, reorganization or consol-
idation in which the Company is not the surviving corporation,
13
<PAGE>
then, except as otherwise provided in the second sentence of this
Section 8, the Option, to the extent not theretofore exercised,
shall terminate forthwith.
9. The existence of the Option shall not affect in any way
the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganiza-
tions or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other corpo-
rate act or proceeding whether of a similar character or otherwise.
10. As a condition of the granting of the Option, the Op-
tionee agrees, for himself and his personal representatives, that
any dispute or disagreement which may arise under or as a result of
or pursuant to this Agreement shall be determined by the Committee
acting under the Plan, in its sole discretion, and that any
interpretations by said Committee of the terms of this Agreement
shall be final, binding and conclusive.
11. In the event the Optionee shall at any time sell any of
the shares acquired upon the exercise of the Option, he shall give
written notice of the sale to the Chief Financial Officer of the
Company within ten days after the date of such sale, which notice
shall state the number of such shares sold and the amount received
upon such sale.
14
<PAGE>
12. Nothing herein contained shall be deemed to confer upon
the Optionee any right to continue to be retained by the Company or
its subsidiaries, nor to interfere in any way with the right of
the Company or its subsidiaries to terminate the retention of the
Optionee at any time.
13. Notwithstanding anything in this Agreement to the
contrary, the Option shall not be exercisable in whole or in part
unless and until the amendments to the Plan adopted at the
September 9, 1993 meeting of the Board of Directors are approved by
the stockholders of the Company at the 1994 Annual Meeting of the
Stockholders of the Company.
14. This Agreement constitutes the entire agreement between
the Company and the Optionee with respect to the matters covered
hereby and may not be modified except by a written instrument
signed by or on behalf of the Company and the Optionee.
15
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer, and the Optionee has ex-
ecuted this Agreement, as of the day and year first above written.
PHILLIPS VAN-HEUSEN CORPORATION
By Pamela N. Hootkin
ACCEPTED AND AGREED TO:
Bruce J. Klatsky
Optionee
16
December 6, 1993
Mr. Bruce J. Klatsky
45 Kerry Lane
Chappaqua, NY 10514
Dear Bruce:
We refer to that certain agreement (the "April
Agreement"), dated as of April 28, 1993, by and among yourself,
Lawrence S. Phillips and us. This letter, when accepted by you,
will constitute an amendment of the April Agreement.
1. Section 4 of the April agreement is hereby amended in
its entirety so that it shall read as follows:
4. Contingent Payment. (a) To induce Klatsky to
enter into this Agreement, the Company hereby agrees to
do the following: (i) pay to Klatsky, on or prior to
December 24, 1993, a bonus (the "December Bonus") in
the amount of $750,000, (ii) convey to Klatsky, on or
prior to December 24, 1993, without additional
consideration of any type, kind or nature, the
securities (the "Restricted Securities") at a cost of
$2,250,000 listed, or described, in Exhibit A annexed
hereto, and (iii) lend to Klatsky on the date of such
conveyance, the sum of Two Hundred Seventy Eight
Thousand Three Hundred Fifty-One and 00/100
($278,351.00) Dollars (the "December Loan"). The
December Loan shall bear interest at the rate of 7 1/2%
per annum and shall be evidenced by a promissory note
in the form annexed hereto as Exhibit B.
(b) Klatsky shall hold the Restricted Securities
<PAGE>
(when this term is hereafter used, it shall be deemed to
also include proceeds from the sale or redemption of such
Restricted Securities) separate and apart from his other
assets in a brokerage or custody account chosen by him
(the "Account"). Except as otherwise specifically
provided in this Agreement, Klatsky shall not sell,
assign, transfer or otherwise dispose of, and shall not
pledge or hypothecate, any or all of the Restricted
Securities. The proceeds from the sale or redemption of
any Restricted Securities held in the Account shall, as
Klatsky shall determine, either be used to purchase other
securities or shall remain in the account and not be
reinvested. Any such securities so purchased shall
remain in the Account and otherwise be distributed as
provided herein and shall be considered Restricted
Securities for all purposes of this Agreement. All
interest or dividend income or distributions other than
stock dividends ("Earned Income") collected on any of the
Restricted Securities may, at Klatsky's option, be
removed from the Account and retained by him. Whether or
not such Earned Income is removed from the Account, the
same shall be free from all claims of the Company.
(c) The restriction against removing the Restricted
Securities from the Account set forth in subparagraph (b)
above shall terminate (i) with respect to Restricted
Securities having a fair market value of $83,333, on the
last day of each calendar month commencing February, 1994
and ending March, 1996, and (ii) with respect to the
remainder of the Restricted Securities, if any, on April
27, 1996. Klatsky shall be entitled to remove the
Restricted Securities held in the Account at any time, if
restrictions with respect thereto have terminated.
Whether or not the Restricted Securities against which
the restriction has terminated
2
<PAGE>
have been removed from the Account or not, such
securities shall, nevertheless, be free and clear of all
claims of the Company.
(d) Notwithstanding any other provisions of this
Section 4, the Restricted Securities shall no longer be
subject to forfeiture or the restrictions set forth in
section 4(b) hereof upon the occurrence of any of the
following: (i) termination of Klatsky's employment
resulting from death or "disability" (as hereinafter
defined), (ii) termination of Klatsky's employment by the
Company without "cause" (as hereinafter defined), (iii)
termination of Klatsky's employment by Klatsky following
the occurrence of a "Severance Event" as defined in the
Plan as the same is amended pursuant to Section 2 hereof,
or (iv) termination of Klatsky's employment if by written
notice to the Company (the "Termination Notice") as a
result of Klatsky's reasonable determination that
Phillips and/or the Company have acted or failed to act
in such a manner as to deny, limit or restrict to any
significant extent Klatsky's CEO Powers, at any time
commencing on June 2, 1993, or his Chairman Powers, at
any time commencing on June 14, 1994, provided that prior
to giving the Termination Notice, Klatsky has provided
the Company with written notice of such determination
(the "Determination Notice") and the Company has within
ten days from receipt of such Determination Notice failed
to cure the condition which Klatsky is claiming is the
cause of his determination under this clause (iv).
Failure by Klatsky to give the Determination Notice
herein provided after the occurrence of a condition which
would have given him the right to do so shall not be
deemed a waiver by him of his right thereafter to give
such Determination Notice.
(e) If Klatsky's employment with the Company shall
3
<PAGE>
terminate prior to April 27, 1996, then, except as
otherwise provided in Section 4(d) hereof, the Restricted
Securities which shall not have theretofore been released
from the restriction set forth in Section 4(b) hereof
shall be forfeited by Klatsky and shall be returned to
the Company, free and clear of all claims of Klatsky with
respect thereto.
(f) For purposes of this Agreement, (i)
"disability" shall mean the inability of Klatsky to
perform the duty of the offices to which he has been duly
appointed, as determined by an independent physician, due
to any physical or psychological injury, illness or
disease, and (ii) the Company shall have "cause" to
terminate Klatsky's employment only if (A) Klatsky shall
engage in fraudulent activities materially injurious to
the Company, or (B) Klatsky shall be convicted of a
felony under state or federal law.
(g) In the event that Klatsky shall have given the
Company a Determination Notice pursuant to clause (iv) of
Section 4(d) hereof, Klatsky shall be entitled, prior to
giving a Termination Notice, to submit the matter by
written notice to the Company to an arbitrator appointed
pursuant to Section 10 of the April Agreement to
determine whether (A) Klatsky has the right, pursuant to
said clause (iv) to terminate his employment, and (B) the
Company has duly cured the condition of which Klatsky has
complained. Klatsky shall not be under any obligation to
give a Termination Notice or to terminate his employment
notwithstanding the determination of the arbitrator or
his giving of a Determination Notice.
(h) On or before December 24, 1993, Klatsky shall
execute, deliver and file with the Internal Revenue
Service and the Company an election under Section 83(b)
4
<PAGE>
of the Internal Revenue Code of 1986 (the "83(b)
Election"), in substantially the form annexed hereto as
Exhibit C, whereby he elects to include in his income for
calendar year 1993, for federal, state and local income
tax purposes, an amount equal to the fair market value of
the Restricted Securities on the date of the conveyance
thereof to Klatsky.
(i) The Company shall apply the December Bonus and
the proceeds from the December Loan to the payment of tax
withholding on the December Bonus and the amount which
Klatsky is required to include in income as a result to
the 83(b) Election. Of such amount, $236,250 shall be
applied to New York State withholding, $13,500 shall be
applied to New York City withholding and the balance
shall be applied to Federal withholding.
2. If Klatsky shall not be employed by the Company on
the date of conveyance of the Restricted Securities, the provisions
of this Agreement shall be of no force and effect and the rights of
the parties shall be determined under the provisions of the April
Agreement as originally executed and delivered.
3. All references in the April Agreement to June 7,
1994 shall be deemed to be references to June 14, 1994.
4. Except as hereby expressly modified and amended,
the terms and conditions of the April Agreement shall remain in
full force and effect.
If the foregoing is acceptable to you, please sign and
return to us the enclosed copy of this letter.
PHILLIPS-VAN HEUSEN CORPORATION
By: Irwin W. Winter
Vice President
AGREED TO AND ACCEPTED
Bruce J. Klatksy
Bruce J. Klatsky
5
<PAGE>
SCHEDULE A
RESTRICTED SECURITIES
The Restricted Securities are to be United States Treasury
bills. Bruce J. Klatsky shall have the right to sell and invest
the proceeds in municipal bonds chosen by him.
6
<PAGE>
EXHIBIT B
NON-NEGOTIABLE
PROMISSORY NOTE
$278,351.00 New York, New York
December , 1993
FOR VALUE RECEIVED, the undersigned, Bruce Klatsky (the
"Maker") of 45 Kerry Lane, Chappaqua, New York 10514, hereby
promises to pay to PHILLIPS-VAN HEUSEN CORPORATION (the "Payee"),
at 1290 Avenue of the Americas, New York, New York 10104, as herein
provided, the principal sum of TWO HUNDRED SEVENTY EIGHT THOUSAND
THREE HUNDRED FIFTY-ONE AND 00/100 ($278,351.00) DOLLARS and to pay
interest (computed on the basis of a 365-day year, based on the
actual number of days elapsed) at a rate of 7 1/2% per annum, such
payments to be made as follows:
(i) monthly payments of interest accrued and unpaid on
the unpaid principal amount of this Note from the date hereof shall
be due and payable in arrears on the last day of each calendar
month commencing with March 1994 and ending with July 1994; and
(ii) monthly payments of principal on this Note, each in
the amount of EIGHTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND
00/100 ($83,333.00) DOLLARS, shall be due and payable on the last
day of each of April, 1994, May 1994 and June 1994, and a final
payment of principal on this Note in the amount of TWENTY-EIGHT
THOUSAND THREE HUNDRED FORTY-TWO AND 00/100 ($28,342.00) DOLLARS
shall be due and payable on July 31, 1994.
Payments of principal and interest hereunder shall be
made in such coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and
private debts in immediately available funds by wire transfer or by
check to the address of Payee specified above or at such other
place as Payee may from time to time designate.
Should any indebtedness represented by this Note be
collected at law or in equity, or in bankruptcy or other
proceeding, or should this Note be placed in the hands of attorneys
7
<PAGE>
for collection after default, the Maker agrees to pay, in addition
to the principal, and interest due and payable hereon, all costs of
collecting or attempting to collect this Note, including all
reasonable attorney's fees and expenses (including those incurred
in connection with any appeal).
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY OF THE CONFLICT OF LAW RULES THEREOF.
IN WITNESS WHEREOF, the undersigned has executed this
Note as of the date hereof.
Bruce J. Klatsky
8
<PAGE>
EXHIBIT C
Election to Include in Gross Income in
Year of Transfer of Property Pursuant to
Section 83(b) of the Internal Revenue Code
The undersigned (hereinafter referred to as the
("Taxpayer") hereby makes an election pursuant to Section 83(b) of
the Internal Revenue Code with respect to the property described
below and supplies the following information in accordance with the
regulations promulgated thereunder:
1. The name, address and taxpayer identification
number of the Taxpayer are as follows:
Name: Bruce J. Klatsky
Address: 45 Kerry Lane
Chappaqua, NY 10514
Tax Identification No.: ###-##-####
2. Description of property with respect to which the
election is being made:
The securities listed on Schedule A annexed
hereto, any proceeds from the sale or redemption
thereof, and any securities purchased with all or
any portion of such proceeds (collectively the
"Restricted Securities").
3. The date on which the property was transferred was
December , 1993. The taxable year to which this
election relates is calendar year 1993.
4. The nature of the restrictions to which the
property is subject is as follows:
9
<PAGE>
Pursuant to the provisions of a certain
agreement dated as of April 28, 1993, by and among
the Corporation, the Taxpayer and another
individual, as amended by letter dated December ,
1993, by and between the Corporation and the
Taxpayer (such agreement, as so amended, being
referred to herein as the "Agreement"), the
Taxpayer generally may not sell, assign, pledge or
otherwise dispose of the Restricted Securities and
must hold the Restricted Securities separate and
apart from his other assets in a brokerage or
custody account chosen by him (the "Account"). If,
while any Restricted Securities are held in the
Account, the same are sold or redeemed, the
proceeds thereof will continue to be held in the
Account and any securities purchased with all or
any portion of such proceeds will thereafter be
considered as Restricted Securities under the
Agreement.
The restrictions described above will
terminate (i) with respect to Restricted Securities
having a fair market value of $83,333 on the last
day of each calendar month commencing with
February, 1994 and ending with March 1996; and (ii)
with respect to the remainder of the Restricted
Securities, if any, on April 27, 1996, and the
Taxpayer will thereupon be entitled to remove the
same, or the proceeds from the sale or redemption
thereof, from the Account free and clear of all
claims of the Corporation with respect thereto. If
the Taxpayer's employment by the Corporation
terminates prior to April 27, 1996, then, except as
otherwise provided below, the Restricted Securities
(or the proceeds from the sale or redemption
thereof) which have not theretofore been released
10
<PAGE>
from these restrictions will be forfeited by the
Taxpayer and will be returned to the Corporation,
free and clear of all claims of the Taxpayer with
respect thereto.
Notwithstanding the foregoing, the Restricted
Securities (or the proceeds from the sale or
redemption thereof) will no longer be subject to
forfeiture or the restrictions set forth above (i)
in the event of the termination of the Taxpayer's
employment with the Corporation as a result of his
death or his "disability;" (ii) in the event that
the Taxpayer's employment with the Corporation is
terminated by the Corporation without "cause" (as
defined in the Agreement), or (iii) in the event
that the Taxpayer terminates his employment with
the Corporation upon the occurrence of certain
other events referred to in the Agreement.
5. The aggregate fair market value of the Restricted
Securities (determined without regard to any
restrictions other than restrictions which by their
terms will never lapse) is approximately
$2,250,000.
6. The amount paid by the Taxpayer for the Restricted
Securities is zero.
7. A copy of this statement has been furnished to the
Corporation.
Dated: December 6, 1993
Bruce J. Klatsky
11
PHILLIPS-VAN HEUSEN CORPORATION
1290 Avenue of the Americas
New York, New York 10104
February 14, 1995
Mr. Lawrence S. Phillips
21301 Power Line Road
Suite 309
Boca Raton, Florida 33433
Dear Larry:
This letter, when accepted and agreed to by you, shall
confirm the agreement between you ("Phillips") and Phillips-Van
Heusen Corporation (the "Company") as follows:
1. The provisions of Section 7 of the Agreement, dated as
of April 28, 1993, among Bruce J. Klatsky, Phillips and the
Company shall be terminated as of the effective date of this
agreement and shall be of no further force and effect thereafter.
2. The Company hereby agrees to retain Phillips as a
consultant for the period commencing on the effective date of
this agreement and ending on June 14, 2004 or upon the earlier
death of Phillips (the "Term"). Phillips hereby accepts such
retention, agrees to perform such consulting services as may be
reasonably requested of him from time to time by the chief
executive officer of the Company and agrees to devote his skills,
attention and energies and such portion of his business time as
shall be reasonably required to such services; provided, however,
that such consultation services shall not require more than an
<PAGE>
average of 10 hours per month or more than 20 hours in any one
month and shall not require Phillips to travel, other than to the
Company's principal executive offices and, in such case, not more
frequently than once per year; and provided, further, however,
that the Company's obligations hereunder shall not be affected as
a result of any disability of Phillips or his inability to render
consulting services as a result thereof. During the Term, the
Company shall pay to Phillips, and Phillips shall accept from the
Company, for Phillips' consulting services pursuant to this
Section 2, compensation at the rate of $250,000 per annum,
payable in equal monthly installments on the first business day
of each month, except that a pro rata portion for the month
ending February 28, 1995 shall be paid on the date hereof.
3. The Company shall pay for and provide Phillips during
the Term with the use of and maintenance for a company car in
accordance with past practice with respect to Phillips,
including, without limitation, reimbursement of all advance
and/or other payments incurred by Phillips upon lease renewals or
new leases. The Company shall pay to Phillips during the Term
$50,000 per annum to reimburse Phillips for all out-of-pocket
expenses incurred by him in connection with the performance of
his duties hereunder, which includes reimbursement of all fees
and transportation for Phillips and his spouse for attendance at
-2-
<PAGE>
business-related seminars and the costs of participating in all
business-related organizations including the Young Presidents
Organization, the World Presidents Organization, the Chief
Executive Officers Organization and the Aspen Institute. Such
amounts shall be paid to Phillips periodically during each year.
During the Term, Phillips and his family shall continue to have
the benefit of all merchandise discounts provided to employees of
the Company and the Company shall provide all documentation
therefor, including the Company's associate discount cards.
4. To the extent available, Phillips shall elect primary
coverage for his and his spouse's medical expenses under Medicare
and the Company shall, during the Term, provide and pay for
additional medical, surgical, dental, optical and other health
insurance which, together with such Medicare coverage, if any,
will provide Phillips and his spouse with the same coverage to
which they have been entitled under the Company's "Corporate
Medical Reimbursement Insurance Plan." In the event of Phillips'
death during the Term, such coverage will continue at the
Company's sole expense for the benefit of Phillips' spouse
through June 14, 2004. In addition, simultaneously with the
execution of this agreement, the Company is entering into a
split-dollar life insurance agreement on the life of Phillips in
the form of Schedule A hereto.
-3-
<PAGE>
5. During the Term, the Company shall continue as
heretofore to maintain and make available at its cost a furnished
and equipped office (and shall pay all costs associated with the
operation of such office) for Phillips and his assistant, and
shall continue to employ and pay Phillips' assistant (or any
replacement therefor selected by Phillips) at the same salary and
with the same benefits as heretofore. The Company shall also
continue to pay, or to reimburse Phillips for, the cost of all
telecommunications equipment in accordance with past practice.
6. During the Term, the Company shall continue to make
(itself or through the Phillips-Van Heusen Foundation) annual
contributions (with the first contributions to be made on or
before June 14, 1995 and additional annual contributions to be
made during each successive year of the Term) to the Phillips-
Green Foundation, American Jewish World Service, Beth Israel
Medical Center and the Parliamentary Human Rights Foundation, in
the amounts of $150,000, $10,000, $10,000 and $10,000,
respectively, so long as such organizations remain valid Section
501(c)(3) organizations under the Internal Revenue Code of 1986
or any successor statute; provided, however, if any such
organization ceases for any reason to be a valid Section
501(c)(3) organization, the Company, after consultation with
Phillips, will select a qualified replacement charitable
-4-
<PAGE>
organization to which the Company will continue to contribute;
and provided further that if the Company, after consultation with
Phillips, shall determine that continued contributions to any of
the foregoing charitable organizations is not warranted, then the
Company, after consultation with Phillips. shall select a
replacement charitable organization(s) to which the Company will
continue to contribute.
7. On the date this agreement becomes effective, the
Company shall grant to Phillips a stock option to acquire 100,000
shares of the Company's common stock at an exercise price equal
to the closing price of such common stock on the New York Stock
Exchange on the trading day prior to the grant of such option,
which option shall be in the form of Schedule B hereto.
8. Phillips agrees, during and after the Term, to keep
secret and confidential all proprietary and confidential
information heretofore or hereafter acquired by him concerning
the business and affairs of the Company or any of its
subsidiaries and/or affiliates (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended), and
further agrees that he will at no time during the Term or
thereafter disclose any such information to any person, firm or
corporation, other than to the Company or any of its subsidiaries
-5-
<PAGE>
and/or affiliates or their respective directors, officers,
employees and agents, or use the same in any manner other than in
connection with the business and affairs of the Company or any of
its subsidiaries and/or affiliates, except (i) as may be required
by law, (ii) in connection with Phillips' enforcement of his
rights under this agreement, (iii) as to such information as may
already have become publicly known other than through Phillips in
violation of this Section 8 and (iv) with the consent of the
Company.
9. Phillips agrees, to the extent permitted by law, that
he shall not, during the Term and for the five years after the
Term, for any reason whatsoever, directly or indirectly, own,
manage, operate, join or control, or participate in the
ownership, management, operation or control of, or be a director
or employee of, or a consultant to, any business, firm or
corporation which is conducting any business which competes with
the business of the Company as now conducted; provided, however,
that the provisions of this Section 9 shall not apply to
investments by Phillips in (i) securities traded on a national
securities exchange or on the national over-the-counter market
which shall constitute less than two percent of the outstanding
class of such securities and (ii) any investment partnership,
mutual fund or similar investment vehicle the investment
-6-
<PAGE>
decisions for which are made by a person or entity not affiliated
with Phillips. Notwithstanding anything to the contrary
contained herein, Phillips shall not be in breach of this Section
9 with respect to any breach of this Section 9 which is cured by
Phillips within 30 days of notification of such breach by the
Company. During the Term, the Company shall pay to Phillips, and
Phillips shall accept from the Company, in consideration of
Phillips' agreement contained in this Section 9, the amount of
$500,000 per annum, payable in equal quarterly installments on
the first business day of each quarter, except that a pro rata
portion for the quarter ending March 31, 1995 shall be paid on
the date hereof.
10. Phillips acknowledges and agrees that, because of the
unique and extraordinary nature of his services, any breach or
threatened breach of the provisions of Sections 8 and 9 hereof
will cause irreparable injury and incalculable harm to the
Company and that it shall, accordingly, be entitled to seek
injunctive or other equitable relief. The foregoing, however,
shall not be deemed to waive or to limit in any respect any other
right or remedy which the Company may have with respect to such
breach.
11. On the date this agreement becomes effective, the
-7-
<PAGE>
Company shall execute and deliver to Phillips an indemnification
agreement substantially in the form of Schedule C hereto.
12. The Company agrees to cause the memorabilia and
furnishings currently in the Heritage Room at the Company's
principal executive offices to be transported, at its cost, to a
location designated by Phillips within 20 days of the date
Phillips designates such location.
13. Phillips hereby resigns from the Board of Directors of
the Company, effective upon the acceptance of said resignation by
the Board of Directors.
14. This agreement shall become effective upon approval
thereof by the Board of Directors of the Company at its meeting
on February 14, 1995 or at any adjournment thereof. In the event
that the Board of Directors of the Company does not approve this
agreement at said meeting, none of the provisions of this
agreement shall come into force and effect and the provisions of
paragraph 7 of the Agreement referred to in Section 1 hereof
shall continue in full force and effect.
15. The Company hereby agrees to indemnify and hold
harmless Phillips from and against any and all losses, claims,
-8-
<PAGE>
liabilities, damages, costs and expenses, including, without
limitation, reasonable fees and disbursements of counsel,
suffered or incurred by Phillips arising out of, relating to, or
resulting from the execution, delivery and/or performance of this
agreement and/or the consummation of the transactions
contemplated hereby.
16. Each of the parties hereto shall pay its or his own
legal fees in connection with the negotiation, execution and
delivery of this agreement; provided, however, that the Company
shall pay the legal fees and disbursements incurred by Phillips
in connection with the negotiation, execution and delivery of
this agreement; provided, further, however, that the Company
shall not be required to pay more than $40,000 of such legal fees
and disbursements.
17. This agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York
without reference to the conflicts of law provisions thereof.
18. This agreement contains the entire understanding
between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings
with respect to the subject matter hereof. No waiver shall be
-9-
<PAGE>
deemed to be made by either of the parties to any of its or his
rights hereunder unless that waiver shall be in a writing signed
by the waiving party and any such waiver shall only be effective
to the extent set forth therein.
19. All notices and communications hereunder shall be in
writing and shall be sent by registered or certified mail, return
receipt requested, addressed to the party for whom or for which
intended, in the case of the Company, to its then principal
executive office, or at such other address of which the Company
shall have given notice to Phillips in the manner herein pro-
vided, and in the case of Phillips, at his residence address as
set forth in the records of the Company (which is currently 2197
N. W. 60th Road, Boca Raton, FL 33496) or at such other address
of which he hall have given notice to the Company in the manner
herein provided, with a copy of all such notices and communica-
tions to be given concurrently to Rosenman & Colin, 575 Madison
Avenue, New York, New York 10022, Attention: Edward H. Cohen,
Esq. and to Shereff, Friedman, Hoffman & Goodman, 919 Third
Avenue, New York, NY 10022, Attention: Martin Nussbaum, Esq.
20. Each of the parties hereto shall execute and deliver to
the other such additional documents and shall take such further
actions as may be reasonably requested to carry out the
-10-
<PAGE>
transactions contemplated by this agreement.
21. In the event that any provision of this agreement shall
be declared invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability
of the other provisions of this agreement, it being hereby agreed
that such provisions are severable and that this agreement shall
be construed in all respects as if such invalid or unenforceable
provisions were omitted.
22. The terms and provisions of this agreement shall inure
to the benefit of and be binding upon the Company and its
successors and assigns and Phillips and his heirs, legal
representatives, successors and assigns.
Very truly yours,
PHILLIPS-VAN HEUSEN CORPORATION
By_________________________________
Bruce J. Klatsky,
Chief Executive Officer
ACCEPTED AND AGREED TO:
______________________________
Lawrence S. Phillips
-11-
<PAGE>
Schedule A
SPLIT DOLLAR LIFE INSURANCE AGREEMENT
AGREEMENT made the ______ day of February, 1995 by and
between Phillips-Van Heusen Corporation (the "Corporation") and
Laura Phillips and David L. Phillips (the "Policyowners").
WHEREAS, the Corporation wishes to establish a life
insurance program for the benefit and protection of Laura
Phillips and David L. Phillips, the children of Lawrence S.
Phillips, who has been retained as a consultant to the
Corporation, under Policy No. ______________ issued by The
Guardian Insurance and Annuity Company, Inc., ("Guardian"); said
policy hereinafter referred to as the "Policy".
WHEREAS, the Corporation has agreed to pay all premiums
due on the Policy in accordance with the provisions of this
Agreement; and
WHEREAS, the Policyowners will be the sole owners of
the Policy, and the Policy will be collaterally assigned to the
Corporation for the purpose of providing security for the
repayment of premiums paid by the Corporation;
NOW, THEREFORE, in consideration of the mutual promises
contained herein, it is agreed between the parties hereto as
follows:
-12-
<PAGE>
ARTICLE I
The Policy shall be the exclusive property of the
Policyowners, and shall be owned by them as tenants in common.
The Policyowners may exercise all rights of ownership with
respect thereto subject only to the security interest and other
rights of the Corporation as expressed in this Agreement. The
Policyowners shall be jointly and severally liable to perform
their obligations under this Agreement.
ARTICLE II
A. The Corporation shall be responsible for the
payment of all premiums due to Guardian with respect to the
Policy on or before the date such premium payments are due (or
within the grace period allowed by the Policy) and, if so
requested, shall give proof of the timely payment of each premium
to the Policyowners.
B. The Policyowners shall not be required to pay any
part of the premiums; provided, however, that they shall remit to
the Corporation an amount equal to any dividends with respect to
the Policy paid in cash to the Policyowners, which amount shall
-13-
<PAGE>
be applied by the Corporation toward the payment of subsequent
premiums due with respect to the Policy.
ARTICLE III
The Policyowners shall collaterally assign the Policy
to the Corporation pursuant to the terms of this Agreement as
security for the repayment of amounts paid by the Corporation
toward the premiums on the Policy as provided for in Article II
of this Agreement. The collateral assignment shall be
substantially in the form of Exhibit "A" attached hereto and made
a part hereof.
ARTICLE IV
A. The Corporation, as collateral assignee, shall have
the limited right to obtain, from time to time, one or more
withdrawals of partial cash value benefit (as defined in the
Policy) and/or one or more policy loans based on the Policy's
loan value (as defined in the Policy), in an aggregate amount not
to exceed, as of the time of any such withdrawal or loan, the
lesser of (i) the aggregate amount theretofore paid by the
Corporation toward the premiums on the Policy, pursuant to
Article II of this Agreement, or (ii) the amount of the aggregate
-14-
<PAGE>
proceeds of the Policy which would be payable to the Corporation
pursuant to Article VI A., Part B (after payment in full of the
Part A amount as provided in Article VI A.), if the death of the
insured were to occur on the date of any such withdrawal or loan
(the "maximum withdrawal/loan amount").
B. If the Corporation withdraws and/or borrows an
amount in excess of its maximum withdrawal/loan amount, it must
promptly return or repay the amount of such excess to either
Guardian or to the Policyowners. The Corporation shall pay all
loan interest in connection with loans made to it with respect to
the Policy, in addition to the premiums payable by the
Corporation pursuant to Article II. In no event shall a payment
of interest by the Corporation constitute a premium payment under
this Agreement. Any unpaid interest charges shall be added to
the outstanding indebtedness of the Policy.
C. The Corporation shall be prohibited from taking any
action that might adversely affect the interest of the
Policyowners in the Policy and the Policyowners shall be
prohibited from taking any action that might adversely affect the
interest of the Corporation in the Policy.
-15-
<PAGE>
D. The Corporation shall have the right to select any
dividend options available with respect to the Policy.
E. In the event the Policyowners desire to surrender
the Policy, they shall give written notice of their intention to
do so to the Corporation. The Corporation, within 30 days of the
effective date of such notice, may elect by written notice to the
Policyholders that the Policyowners not surrender the Policy
whereupon the Policyowners shall transfer their entire right,
title and interest in the Policy to the Corporation without
additional consideration of any kind. In the event the
Corporation does not elect within said 30 day period to have the
Policy transferred to it, then the Policyowners shall be free to
surrender the Policy subject to the rights of the Corporation
under subparagraph F. hereof.
F. In addition to the limited rights in the Policy
assigned to the Corporation by the Policyowners pursuant to this
Article IV, the Corporation shall have a security interest in any
proceeds payable to the Policyowners in the event the
Policyowners, prior to the death of the Insured, after complying
with the provisions of Article IV E of this Agreement, surrender
the Policy pursuant to Article V A. of this Agreement. In such
event the Policyowners shall pay to the Corporation, from such
-16-
<PAGE>
proceeds, an amount equal to the lesser of (i) the amount of such
proceeds, or (ii) the aggregate amount theretofore paid (pursuant
to ARTICLE II) by the Corporation toward the premiums on the
Policy, less the aggregate amount of any withdrawals or
borrowings theretofore made by the Corporation with respect to
the Policy under Article IV A. hereof and accrued, unpaid
interest on such loans. In the event the amount described in
clause (ii) of the preceding sentence shall exceed the amount
described in clause (i), the Policyowners shall not be liable to
the Corporation with respect to such excess or any part thereof.
The amount payable by the Policyowners to the Corporation
pursuant to this Article IV F. shall be deemed to be received by
the Policyowners from Guardian on behalf of the Corporation, and
shall be promptly paid over to the Corporation. It is hereby
agreed that, alternatively, at the option of the Policyowners,
Guardian shall be directed by the Policyowners in writing to draw
a check in the appropriate amount payable directly to the
Corporation.
ARTICLE V
The Policyowners retain all rights in the Policy not
specifically assigned to the Corporation hereunder, including but
not limited to the following rights:
-17-
<PAGE>
A. The right to surrender the Policy and receive the
surrender value thereof (subject to the provisions of ARTICLES IV
E. and F. hereof).
B. The right to change the beneficiary of the Policy,
subject to the provisions of Article VI B hereof.
C. The right to select optional methods of settlement
with regard to the Part A death benefit provided for in Article
VI A hereof.
ARTICLE VI
A. In the event of the death of the Insured while the
Policy and this Agreement are in force, the aggregate proceeds of
the Policies shall be divided in two parts and paid as follows:
Part A: The following amounts shall be paid to the
Policyowners, in equal shares, per stirpes, (or in the event
neither of the Policyowners or their issue shall then survive,
the Phillips-Green Foundation), as beneficiaries:
If death occurs on or before June 14, 1996, the amount
of $3,375,000;
-18-
<PAGE>
If death occurs on or before June 14, 1997, the amount
of $3,000,000;
If death occurs on or before June 14, 1998, the amount
of $2,625,000;
If death occurs on or before June 14, 1999, the amount
of $2,250,000;
If death occurs on or before June 14, 2000, the amount
of $1,875,000;
If death occurs on or before June 14, 2001, the amount
of $1,500,000;
If death occurs on or before June 14, 2002, the amount
of $1,125,000;
If death occurs on or before June 14, 2003, the amount
of $750,000;
If death occurs on or before June 14, 2004, the amount
of $375,000.
Part B: The Corporation as beneficiary shall receive
the remainder of the proceeds of the Policy (or all thereof, if
the death of the insured shall occur after June 14, 2004).
-19-
<PAGE>
B. The designations of beneficiary under the Policy
contain, and at all times during the term of this Agreement shall
contain, a schedule of benefits identical to that set forth above
in Article VI A. of this Agreement and the Policyholders shall
provide the Corporation from time to time at the request of the
Corporation suitable proof thereof.
ARTICLE VII
A. This Agreement shall terminate upon the sooner to
occur of:
(1) Surrender of the Policy by the Policyowners
pursuant to Article V of this Agreement;
(2) Transfer of the Policy to the Corporation
pursuant to ARTICLE IV E. hereof;
(3) Upon thirty (30) days written notice of
termination sent by registered or certified mail by the
Policyholders to the Corporation; or
(4) June 15, 2004.
B. Upon termination pursuant to Article VII A.(3) or
(4) above, the Policyowners shall, within thirty (30) days of the
-20-
<PAGE>
effective date of such termination, in their sole and absolute
discretion, either (i) transfer ownership of the Policy to the
Corporation; or (ii) pay to the Corporation an amount equal to
the aggregate amount theretofore advanced by the Corporation in
payment of premiums on the Policy, less the aggregate amount of
any withdrawals or borrowings theretofore made by the Corporation
under Article IV A. hereof and accrued, unpaid interest on such
loans.
ARTICLE VIII
Any payments made or action taken by Guardian in
accordance with the provisions of the Policy and the collateral
assignment of the Policy shall fully discharge it from all
claims, suits, and demands of all persons whatsoever. With the
sole exception of this Article VIII, Guardian shall not be deemed
to be a party to this Agreement for any purpose nor in any way be
responsible for its validity.
ARTICLE IX
This Agreement shall be binding upon the parties
hereto, their heirs, legal representatives, successors, and
assigns.
-21-<PAGE>
ARTICLE X
Any notice to be given hereunder shall be by certified
mail, return receipt requested, to the parties at the addresses
set forth below, such notice to be deemed effective on the date
of mailing thereof.
Notice to the Policyholders:
Laura Phillips
David L. Phillips
c/o Weitzner, Levine, Hamburg & Chill
437 Madison Avenue, 35th Floor
New York, New York 10022
Notice to the Corporation:
Phillips-Van Heusen Corp.
1290 Avenue of the Americas
New York, New York 10104
Attention: I. Winter
ARTICLE XI
This Agreement embodies all agreements made by the
parties with respect to the Policy, and no change, alteration, or
modification may be made except in writing signed by all parties
hereto.
-22-
<PAGE>
ARTICLE XII
This Agreement shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have set their
hands on the day and year first set forth above.
PHILLIPS-VAN HEUSEN CORPORATION
By:
Attest:
Secretary
(Witness) Laura Phillips
(Witness) David Phillips
-23-
<PAGE>
COLLATERAL ASSIGNMENT
Pursuant to the provisions of a Split Dollar Life
Insurance Agreement entered into by Laura Phillips and David L.
Phillips, (the "Policyowners"), and Phillips-Van Heusen
Corporation, (the "Corporation"), dated the day of February,
1995 (the "Agreement"), for value received, we hereby assign unto
the Corporation Policy No. (the "Policy") issued by The Guardian
Insurance and Annuity Company, Inc. ("Guardian") on the life of
Lawrence S. Phillips, as collateral security to the extent
specified below.
1. Prior to the death of Lawrence S. Phillips: The
Policy's cash values shall be collateral security to the extent of
(i) the aggregate amount paid by the Corporation toward premiums on
the policy, (ii) less the aggregate amount of any withdrawals or
borrowing against the Policy made by the Corporation.
2. Part A of the life insurance proceeds of the Policy
shall be an amount equal to:
If death occurs on or before June 14, 1996, the
amount of $3,375,000;
If death occurs on or before June 14, 1997, the
amount of $3,000,000;
If death occurs on or before June 14, 1998, the
amount of $2,625,000;
Exhibit A
-24-
<PAGE>
If death occurs on or before June 14, 1999, the
amount of $2,250,000;
If death occurs on or before June 14, 2000, the
amount of $1,875,000;
If death occurs on or before June 14, 2001, the
amount of $1,500,000;
If death occurs on or before June 14, 2002, the
amount of $1,125,000;
If death occurs on or before June 14, 2003, the
amount of $750,000;
If death occurs on or before June 14, 2004, the
amount of $375,000;
However, in no event shall Part A exceed the life
insurance proceeds payable under the policy.
3. Part B of the life insurance proceeds of the Policy
shall be the amount remaining after Part A of those proceeds has
been paid.
4. The beneficiary for Part B of the life insurance
proceeds shall be the Corporation. The beneficiary for Part A of
the life insurance proceeds shall be as stated in the policy
application or as changed pursuant to the terms and conditions of
the Policy by the Policyowners.
-25-
<PAGE>
5. The interest of any beneficiary for Part B of the
life insurance proceeds may not be assigned by the Policyowners,
and also shall not be subject to the interest of any assignee.
6. Except as specifically granted to the Corporation
pursuant to the terms of the aforesaid Split Dollar Agreement, the
Policyowners shall retain all incidence of ownership in the policy.
This Collateral Assignment may not be terminated without the
consent of the Corporation.
Dated: February , 1995
Witness Laura Phillips
Witness David L. Phillips
has retained the duplicate
of this Agreement. The Company assumes no responsibility for the
validity of the Assignment.
Dated: February , 1995
HOME OFFICE ENDORSEMENT
-26-
<PAGE>
Schedule B
PHILLIPS-VAN HEUSEN CORPORATION
NON-INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made and entered into this 14th day of
February, 1995, between PHILLIPS-VAN HEUSEN CORPORATION (the
"Company"), a Delaware corporation with its principal executive
offices at 1290 Avenue of the Americas, New York, New York 10104,
and LAWRENCE S. PHILLIPS (the "Optionee"), an individual residing
at 2197 N. W. 60th Road, Boca Raton, FL 33496.
W I T N E S S E T H:
WHEREAS, the Optionee is retained by the Company as a
consultant and the Company desires that he have an option to
acquire stock in the Company in order to increase his incentive and
personal interest in the welfare of the Company; and
WHEREAS, the committee (the "Committee") under the
Phillips-Van Heusen Corporation 1987 Stock Option Plan (the "Plan")
(a copy of which is delivered herewith by the Company and receipt
thereof is acknowledged by the Optionee) shall be responsible for
the administration of this Agreement, with such duties and
functions as prescribed in this Agreement only, notwithstanding
that the option hereby granted is not granted under or pursuant to
the Plan.
NOW, THEREFORE, the parties hereby agrees as follows:
-27-
<PAGE>
23. The Company grants to the Optionee an option (the
"Option") to purchase from the Company all or any part of an
aggregate of 100,000 shares (the "Optioned Shares") of the common
stock, $1.00 par value, of the Company (the "Common Stock"). The
Option is not intended to be an incentive stock option within the
meaning of section 422A(b) of the Internal Revenue Code of 1986
(the "Code") and this Agreement shall be construed and interpreted
in accordance with such intention.
24. The purchase price is $16.50 per share (the "Option
Price") (which is 100% of the fair market value thereof on the date
of this Agreement).
25. The Option shall not be assignable or transferable
except (x) by will and/or by the laws of descent and distribution
and (y) to the Optionee's spouse and/or lineal descendants and/or
their spouses or any trust of which the Optionee and/or the
Optionee's spouse and lineal descendants and their spouses are
beneficiaries. Any permitted transferees of the Option shall have
all of the rights of the Optionee hereunder and are, after any such
transfer, referred to as the Optionees with respect to the Option.
26. The Option, subject to the condition that it shall
not be exercised after February 13, 2005, may be exercised in whole
at any time or in part from time to time.
-28-
<PAGE>
27. Neither the Optionee nor the Optionee's legal
representatives, legatees or distributees shall be or be deemed to
be the holder of any shares of the Common Stock covered by the
Option unless and until the Optionee exercises the Option, or any
portion hereof. The Optionee shall be deemed to become an owner of
record of the Common Stock covered by the Option on the date the
Option is exercised and payment of the Option Price was made
irrespective of the date of delivery of share certificates. Upon
payment of the purchase price thereof, shares issued upon exercise
of the Option shall be validly issued and outstanding, fully paid
and nonassessable, not subject to preemptive rights, or other
contractual rights to purchase securities of the Company, and free
of all liens, claims and encumbrances.
28. In order to exercise the Option, the Optionee shall
give written notice of intent to exercise the Option to the Chief
Financial Officer of the Company or his delegate, in form and
substance reasonably satisfactory to the Committee, specifying the
number of shares of the Common Stock with respect to which the
Option is being exercised, and accompanied by payment to the
Company of the amount of the Option Price for the numbers of shares
of the Common Stock so specified.
29. A. Unless the shares to be issued upon the exercise
of the Option shall be registered prior to the issuance thereof
under the Securities Act of 1933 (the "Securities Act"), the
-29-
<PAGE>
Optionee shall, as a condition of the Company's obligation to issue
such shares, give a representation in writing that he is acquiring
such shares for his own account as an investment and not with a
view to, or for sale in connection with, the distribution of any
thereof in violation of the Securities Act.
B. In the event of the death of the Optionee, an
additional condition of exercising the Option shall be the delivery
to the Company of such tax waivers and other documents as the
Committee shall reasonably determine. The executors,
administrators and legal representatives of the Optionee shall have
all of the rights of the Optionee hereunder and are, after the
death of the Optionee, referred to as the Optionee with respect to
the Option.
C. The Optionee shall, as an additional condition
of exercising the Option, make such arrangements with the Company
with respect to withholding as the Committee shall reasonably
determine.
30. In the event that a dividend shall be declared upon
the Common Stock payable in shares of the Common Stock, the
Optioned Shares shall be adjusted by adding to each such share the
number of shares which would be distributable thereon if such share
had been outstanding on the date fixed for determining the
stockholders entitled to receive such stock dividend. In the event
that the outstanding shares of the Common Stock shall be changed
-30-
<PAGE>
into or exchanged for a different number or kind of shares of stock
or other securities of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up,
combination of shares, sale of assets, merger or consolidation in
which the Company is the surviving corporation, then, there shall
be substituted for each Optioned Share the number and kind of
shares of stock or other securities into which each outstanding
share of the Common Stock shall be so changed, or for which each
such share shall be exchanged. In the event that there shall be
any change, other than as specified in this paragraph 8, in the
number or kind of outstanding shares of the Common Stock, or of any
stock or other securities into which the Common Stock shall have
been changed, or for which it shall have been exchanged, then, if
the Committee shall, in its discretion reasonably exercised,
determine that such change equitably requires an adjustment in the
number or kind of Optioned Shares, such adjustment shall be made by
the Committee. In the case of any such substitution or adjustment
as provided for in this paragraph 8, the Option Price for each
Optioned Share shall be the Option Price for all shares of stock or
other securities which shall have been substituted for such
Optioned Share or to which such share shall have been adjusted in
accordance with the provisions in this paragraph 8. No adjustment
or substitution provided for in this paragraph 8 shall require the
Company to sell a fractional share hereunder. In the event of the
dissolution or liquidation of the Company, or a merger,
-31-
<PAGE>
reorganization or consolidation in which the Company is not the
surviving corporation, then, except as otherwise provided in the
second sentence of this paragraph 8, the Option, to the extent not
theretofore exercised, shall terminate forthwith.
31. The existence of the Option shall not affect in any
way the right or power of the Company or its stockholders to make
or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure
or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Common Stock or the rights thereof, or
the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding whether of a similar character or
otherwise.
32. In case:
(a) the Company shall declare a dividend (or any
other distribution) on its Common Stock other than regular
quarterly cash dividends; or
(b) the Company shall authorize the distribution to
any holders of the Common Stock of any additional shares of capital
stock of any class or other securities convertible, exercisable or
exchangeable into shares of capital stock or any options, rights or
warrants to subscribe therefor; or
-32-
<PAGE>
(c) there shall be any capital stock reorganization
or reclassification of the Common Stock (other than a subdivision
or combination of the outstanding Common Stock and other than a
change in the par value of the Common Stock), or any consolidation
or merger to which the Company is a party or any exchange of
securities with another corporation or any conversion of the shares
purchasable upon the exercise of the Option into securities of
another corporation or any sale or transfer of all or substantially
all of the assets; or
(d) a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or a sale of all or
substantially all of its property, asset and business shall be
proposed;
then the Company shall cause to be provided to the
Optionee at least 20 days prior to the applicable date hereinafter
specified, a notice stating (i) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights or
warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such
dividend, distribution or securities convertible into or
exercisable or exchangeable for shares of Common Stock are to be
determined, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, statutory exchange, sale,
transfer, dissolution, liquidation or winding up is expected to
-33-
<PAGE>
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange or
convert their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, statutory exchange, sale, transfer,
dissolution, liquidation or winding up.
33. As a condition of the granting of the Option, the
Optionee agrees, for himself and his personal representatives, that
any dispute or disagreement which may arise under or as a result of
or pursuant to this Agreement shall be initially determined by the
Committee, in its discretion reasonably exercised.
34. Promptly upon receipt of a written request of the
Optionee that the Company effect the registration under the
Securities Act of the resale by the Optionee to the public of all
the Optioned Shares, the Company will file, at its sole expense, a
Registration Statement on Form S-3 or any similar available short
form Registration Statement under the Securities Act covering such
resale, and the Company will use its best efforts to cause such
Registration Statement to be declared effective under the
Securities Act within 30 days after the date of such request and to
remain effective until the earlier to occur of such resale of all
of the Optioned Shares or the expiration of 90 days of
effectiveness of such Registration Statement. The Company shall
-34-
<PAGE>
indemnify the Optionee for liabilities arising under the Securities
Act in accordance with customary practice.
35. This Agreement constitutes the entire agreement
between the Company and the Optionee with respect to the matters
covered hereby and may not be modified except by a written
instrument signed by or on behalf of the Company and the Optionee.
-35-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement
to be executed by a duly authorized officer, and the Optionee has
executed this Agreement, as of the day and year first above
written.
PHILLIPS-VAN HEUSEN CORPORATION
By /s/ Bruce J. Klatsky
ACCEPTED AND AGREED TO:
/s/ Lawrence S. Phillips
Optionee
-36-
<PAGE>
Schedule C
INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement") is made
and entered into as of the day of February, 1995 by and between
PHILLIPS-VAN HEUSEN CORPORATION, a Delaware corporation (the
"Company"), and LAWRENCE S. PHILLIPS ("Indemnitee").
WHEREAS, Indemnitee has been a director of the
Company since 1951 and served as an officer of the Company from
1951 through 1994;
WHEREAS, Indemnitee has agreed to resign as a
director of the Company and to serve as a consultant to the Company
in accordance with the terms of that certain letter agreement,
dated as of the date hereof, between Indemnitee and the Company
(the "Letter Agreement");
WHEREAS, the By-laws of the Company (the "By-laws")
provide that the Company shall indemnify any person to the fullest
extent permitted by the Delaware General Corporation Law (the
"DGCL");
WHEREAS, DGCL Section 145(f) expressly recognizes
that the indemnification provisions of the DGCL are not exclusive
of any other rights to which a person seeking indemnification may
be entitled under bylaw, agreement, vote of stockholders or
disinterested directors or otherwise;
WHEREAS, the Company, in connection with, and as a
condition of, Indemnitee's agreement to enter into the Letter
Agreement, has agreed to provide Indemnitee with the benefits
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the promises,
conditions and representation set forth herein, and for other good
and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the Company and Indemnitee hereby agree as
follows:
Section 1. Definitions. The following terms, as
used herein, shall have the following meanings:
(a) "Covered Claim" shall mean any claim against
Indemnitee (whether such claim is asserted by or in the right of
the Company or otherwise) based upon or arising out of any past,
present or future act, omission, neglect or breach of duty,
including, without limitation, any actual or alleged error,
-37-
<PAGE>
omission, misstatement or misleading statement, that Indemnitee may
commit or suffer, or may have committed or suffered, while serving
in his capacity as a director, officer, employee and/or agent of
the Company and/or, at the Company's request, as a director,
officer, employee and/or agent of another corporation, partnership,
joint venture, trust or other enterprise, provided that such claim:
(i) is not solely based upon and does
not arise solely out of Indemnitee gaining in fact
any personal profit or advantage to which
Indemnitee is not legally entitled;
(ii) is not for any accounting of profits
made from the purchase or sale by Indemnitee of
securities of the Company within the meaning of
Section 16(b) of the Securities Exchange Act of
1934, as amended, or similar provisions of any
state law; and
(iii) is not based solely upon and
does not arise solely out of Indemnitee's knowingly
fraudulent, deliberately dishonest or willful
misconduct.
Notwithstanding the foregoing, Covered Claim shall not include any
claim against Indemnitee (whether such claim is asserted by or in
the right of the Company or otherwise) based upon or arising out of
any future act, omission, neglect or breach of duty, including,
without limitation, any actual or alleged error, omission,
misstatement or misleading statement, that Indemnitee may commit or
suffer which are not committed or suffered in connection with
Indemnitee's provision of services to the Company pursuant to, and
in accordance with, the Letter Agreement.
(b) "Determination" shall mean a determination,
based upon the facts known at the time, made by:
(i) the Board of Directors of the
Company, by the vote of a majority of the directors
who are not parties to the action, suit or
proceeding in question ("Disinterested Directors"),
at a meeting at which there is a quorum;
(ii) if there are no such Disinterested
Directors, or if directed by a majority of such
Disinterested Directors at a meeting of the Board
of Directors of the Company at which there is a
quorum, by independent legal counsel in a written
opinion;
-38-
<PAGE>
(iii) the stockholders of the
Company; or
(iv) a court of competent jurisdiction in
a final, nonappealable adjudication.
For the purposes hereof, "independent legal counsel" as used in
Section 1(b)(ii) hereof shall not be any person or firm who, under
applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or
the Indemnitee in an action to determine the Indemnitee's rights
under this Agreement.
(c) "Payment" shall mean any and all amounts that
Indemnitee is or becomes legally obligated to pay in connection
with a Covered Claim, including, without limitation, damages,
judgments, amounts paid in settlement, reasonable costs of
investigation, reasonable fees of attorneys, costs of
investigative, judicial or administrative proceedings or appeals,
and costs of attachment or similar bonds.
Section 2. Indemnification. The Company shall
indemnify and hold harmless Indemnitee against and from any and all
Payments to the extent that:
(a) the Company shall not have advanced expenses to
Indemnitee pursuant to the provisions of Article VII of the By-laws
or otherwise and no determination shall have been made pursuant to
such Article or the DGCL that the Indemnitee is not entitled to
indemnification;
(b) Indemnitee shall not already have received
payment on account of such Payments pursuant to one or more valid
and collectable insurance policies; and
(c) such indemnification by the Company is not
unlawful.
The Company shall have no obligation to indemnify Indemnitee under
this Agreement for any amounts paid in a settlement of any action,
suit or proceeding effected without the Company's prior written
consent, which consent shall not be unreasonably withheld. Without
Indemnitee's prior written consent, the Company shall not settle
any claim in any manner that (x) would impose any obligation on
Indemnitee which would not be indemnified against by the Company
under this Agreement and (y) does not include a complete and
irrevocable release of Indemnitee. Indemnitee shall not
unreasonably withhold his consent to any proposed settlement.
Section 3. Indemnification Procedure; Advancements
of Costs and Expenses.
-39-
<PAGE>
(a) Promptly after receipt by Indemnitee of notice
of the commencement or threat of commencement of any action, suit
or proceeding, Indemnitee shall, if indemnification with respect
thereto may be sought from the Company under this Agreement, notify
the Company thereof in writing. Failure to give such notice shall
not affect right to indemnification provided herein except and to
extent the Company is materially prejudiced by such failure.
(b) If, at the time of receipt of such notice the
Company has directors' and officers' liability insurance in effect,
and such insurance would provide insurance with respect to the
Covered Claim, the Company shall give prompt notice of the
commencement of such action, suit or proceeding to the insurers in
accordance with the procedures set forth in the respective policies
in favor of Indemnitee. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on
behalf of Indemnitee, all Payments payable as a result of such
action, suit or proceeding in accordance with the terms of such
policies.
(c) Subject to Section 3(d), all costs and
expenses, including reasonable fees of attorneys, incurred by
Indemnitee in defending or investigating such action, suit or
proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding; provided, however,
that no such costs or expenses shall be paid by the Company if,
with respect to such action, suit or proceeding, a Determination is
made that:
(i) Indemnitee did not act in good faith
and in a manner Indemnitee reasonably believed to
be in or not opposed to the best interests of the
Company; or
(ii) in the case of any criminal action
or proceeding, Indemnitee had reasonable cause to
believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the
Indemnitee did not satisfy the foregoing standard of conduct to the
extent applicable thereto.
Indemnitee hereby undertakes to and agrees that he will repay the
Company for any costs or expenses advanced by or on behalf of the
Company pursuant to this Section 3(c) if it shall ultimately be
determined by a court of competent jurisdiction in a final,
nonappealable adjudication that Indemnitee is not entitled to
indemnification under this Agreement.
-40-
<PAGE>
(d) If the Company shall advance the costs and
expenses of any such action, suit or proceeding pursuant to Section
3(c) of this Agreement, it shall be entitled to assume the defense
of such action, suit or proceeding, if appropriate, with counsel
reasonably satisfactory to Indemnitee, upon delivery to Indemnitee
of written notice of its election so to do. After delivery of such
notice, the Company shall not be liable to Indemnitee under this
Agreement for any costs or expenses subsequently incurred by
Indemnitee in connection with such defense other than costs and
expenses of investigation; provided, however, that:
(i) Indemnitee shall have the right to
employ separate counsel in any such action, suit or
proceeding provided that the fees and expenses of
such counsel incurred after delivery of notice by
the Company of its assumption of such defense shall
be at Indemnitee's own expense; and
(ii) the fees and expenses of counsel
employed by Indemnitee shall be at the expense of
the Company if (aa) the employment of counsel by
Indemnitee has previously been authorized by the
Company, (bb) Indemnitee shall have reasonably
concluded that there is, or will likely be, a
conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or
(cc) the Company shall not, in fact, have employed
counsel to assume the defense of such action, suit
or proceeding.
(e) All payments on account of the Company's
advancement obligations under Section 3(c) of this Agreement shall
be made within ten (10) days of Indemnitee's written request
therefor. All other payments on account of the Company's
obligations under this Agreement shall be made within thirty (30)
days of Indemnitee's written request therefor, unless a
Determination is made that the claims giving rise to Indemnitee's
request are not payable under this Agreement. Each request for
payment hereunder shall be accompanied by evidence of Indemnitee's
incurrence of the costs and expenses for which such payment is
sought.
Section 4. Amendment to Certificate or By-laws.
The Company shall not adopt any amendment to the Certificate of
Incorporation or By-laws of the Company the effect of which would
be to deny, diminish or encumber the Indemnitee's rights to
indemnity pursuant to the Certificate of Incorporation or By-laws
of the Company, the DGCL or any other applicable law as applied to
any act or failure to act occurring in whole or in part prior to
the date (the "Effective Date") upon which the amendment was
approved by the Board of Directors of the Company or the
-41-
stockholders of the Company, as the case may be. In the event that
the Company shall adopt any amendment to the Certificate of
Incorporation or By-laws of the Company the effect of which is to
so deny, diminish or encumber the Indemnitee's rights to indemnity,
such amendment shall apply only to acts or failures to act
occurring entirely after the Effective Date thereof.
Section 5. Enforcement of Indemnification; Burden
of Proof. If a claim for indemnification or advancement of costs
and expenses under this Agreement is not paid in full by or on
behalf of the Company within the time period specified in Section
3(e) of this Agreement, Indemnitee may at any time thereafter bring
suit against the Company to recover the unpaid amount of such
claim. In any such action, the Company shall have the burden of
proving that indemnification is not required under this Agreement.
It is the intent of the Company that the Indemnitee not be required
to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action because
the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if the Company fails to comply with any of its
obligations under the Agreement or in the event that the Company or
any other person takes any action to declare the Agreement void or
unenforceable, or institutes any action, suit or proceeding
designed (or having the effect of being designed) to deny, or to
recover from, the Indemnitee the benefits intended to be provided
to the Indemnitee hereunder, the Company irrevocably authorizes the
Indemnitee from time to tine to retain counsel of his choice, at
the expense of the Company as hereafter provided, to represent the
Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company
or any director, officer, stockholder or other person affiliated
with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay and be solely responsible for any
and all costs, charges and expenses, including without limitation
reasonable attorneys' and others' fees and expenses, reasonably
incurred by the Indemnitee as a result of the Company or any person
contesting the validity or enforceability of this Agreement or any
provision thereof as aforesaid; provided, however, that the Company
shall not so pay or be so responsible if it is determined by a
court of competent jurisdiction that to so pay and be so
responsible would be unlawful.
Section 6. Employee Benefit Plans. The term "other
enterprise," as used in this Agreement, shall include employee
benefit plans. All references in this Agreement to, "serving...at
the Company's request" shall include any service by Indemnitee as
a director, officer, employee and/or agent of the Company which
imposes duties on, or involves services by, Indemnitee with
respect to an employee benefit plan, its participants or
-42-
<PAGE>
beneficiaries. If Indemnitee acts in good faith and in a manner he
reasonably believes to be in the interests of the participants and
beneficiaries of an employee benefit plan, then, for purposes of
Section 3(c)(i) hereof, Indemnitee shall be deemed to have acted in
a manner he "reasonably believed to be in or not opposed to the
best interests of the Company."
Section 7. Rights Not Exclusive. The rights to
indemnification and advancement of costs and expenses provided
hereunder shall not be deemed exclusive of any other rights to
which Indemnitee may be entitled under any charter document, bylaw,
agreement, insurance policy, vote of stockholders or disinterested
directors or otherwise.
Section 8. Subrogation. In the event of payment
under this Agreement by or on behalf of the Company, the Company
shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who promptly shall execute, at
the sole expense of the Company, all papers that may be required
and, at the sole expense of the Company, promptly shall do all
things that may be necessary to secure such rights, including,
without limitation, the execution of such documents as may be
necessary to enable the Company effectively to bring suit to
enforce such rights.
Section 9. Choice of Law. This Agreement shall be
governed by and construed and enforced in accordance with the laws
of the State of New York without reference to the conflicts of law
provisions thereof.
Section 10. Jurisdiction. The Company and
Indemnitee hereby irrevocably consent to the jurisdiction of the
courts of the State of New York for all purposes in connection with
any action, suit or proceeding which arises out of or relates to
this Agreement, and agree that any action instituted under this
Agreement shall be brought only n the state courts of the State of
New York.
Section 11. Attorney's Fees. Subject to Section 5
hereof, if any action, suit or proceeding is commenced in
connection with or related to this Agreement, the prevailing party
shall be entitled to have its costs and expenses, including,
without limitation, reasonable fees of attorneys and reasonable
expenses of investigation, paid by the losing party.
Section 12. Severability. In the event that any
provision of this Agreement shall be declared invalid or
unenforceable, such invalidity or enforceability shall not affect
the validity or enforceability of the other provisions of this
Agreement, it being hereby agreed that such provisions are
severable and that this Agreement shall be construed in all
-43-
<PAGE>
respects as if such invalid or unenforceable provisions were
omitted.
Section 13. Successors and Assigns. This Agreement
shall be binding upon all successors and assigns of the Company,
including any transferee of all or substantially all of its assets
and any successor by merger or otherwise by operation of law, and
shall be binding upon and inure to the benefit of the heirs, legal
representatives, successors and assigns of Indemnitee.
Section 14. Notices. All notices and
communications hereunder shall be in writing and shall be sent by
registered or certified mail, return receipt requested, addressed
to the party for whom or for which intended, in the case of the
Company, to its then principal executive office, or at such other
address of which the Company shall have given notice to Indemnitee
in the manner herein provided, and in the case of Indemnitee, at
his residence address as set forth in the records of the Company
(which is currently 2197 N.W. 60th Road, Boca Raton, Florida
33496) or at such other address of which he shall have given notice
to the Company in the manner herein provided, with a copy of all
such notices and communications to be given concurrently to
Rosenman & Colin, 575 Madison Avenue, New York, New York 10022,
Attention: Edward H. Cohen, Esq. and to Shereff, Friedman, Hoffman
& Goodman, LLP, 919 Third Avenue, New York, NY 10022, Attention:
Martin Nussbaum, Esq.
Section 15. Prior Agreements; Waivers. This
Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof and, except as
contemplated hereby, supersedes all prior agreements and
understandings with respect to the subject matter hereof. No
waiver shall be deemed to be made by either of the parties to any
of its or his rights hereunder unless that waiver shall be in a
writing signed by the waiving party and any such waiver shall only
be effective to the extent set forth therein.
Section 16. Descriptive Headings. The descriptive
headings in this Agreement are included for the convenience of the
parties only and shall not affect the construction of this
Agreement.
Section 17. Counterparts. This Agreement may be
executed in two counterparts, both of which taken together shall
constitute one document.
Section 18. Amendment. No amendment, modification,
termination or cancellation of this Agreement shall be effective
unless made in writing and signed by each of the parties hereto.
-44-
<PAGE>
IN WITNESS WHEREOF, the Company and Indemnitee have
executed this Agreement as of the day and year first above written.
PHILLIPS-VAN HEUSEN CORPORATION
By:
Name:
Title:
Name: Lawrence S. Phillips
-45-
PHILLIPS-VAN HEUSEN CORPORATION
PERFORMANCE RESTRICTED STOCK PLAN
(As Adopted Effective as of April 18, 1995)
1. Purpose. The purpose of the Phillips-Van Heusen
Performance Restricted Stock Plan (the "Plan") is to induce
certain senior executive employees to remain in the employ of the
Company and its present and future Subsidiaries, to attract new
individuals to enter into such employ, to encourage ownership of
shares in the Company by such employees and to provide additional
incentive for such employees to promote the success of the
Company's business.
2. Definitions
(a) "Affiliate" shall mean any Person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, any other
Person.
(b) "Award" shall mean an amount calculated with respect to
a Participant and with respect to a Fiscal Year in accordance
with the provisions of Section 8(c).
(c) "Base Compensation", as used with respect to a
Participant and with respect to a Fiscal Year, shall mean such
Participant's annual rate of salary from the Company and its
Subsidiaries on the first business day of such Fiscal Year;
provided, however, that if a Participant shall not be an employee
of the Company or any of its Subsidiaries on the first day of a
Fiscal Year, then his Base Compensation with respect to such
Fiscal Year shall be equal to the product of (i) such
Participant's annual rate of salary from the Company and its
Subsidiaries on the first business day on which he or she shall
become such an employee and (ii) the fraction the numerator of
which shall be the number of days remaining in such Fiscal Year
from and after the date on which he or she shall have first
become an employee of the Company and/or one or more of its
Subsidiaries and the denominator of which shall be the number of
days in such Fiscal Year.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) A "Change in Control" shall be deemed to occur upon (i)
the election of one or more individuals to the Board which
election results in one-third of the directors of the Company
consisting of individuals who have not been directors of the
Company for at least two years, unless such individuals have been
elected as directors by three-fourths of the directors of the
Company who have been directors of the Company for at least two
years, (ii) the sale by the Company of all or substantially all
of its assets to any Person, the consolidation of the Company
with any person, the merger of the Company with any Person as a
result of which merger the Company is not the surviving entity as
a publicly held corporation, (iii) the sale or transfer of shares
2
<PAGE>
of the Company by the Company and/or any one or more of its
stockholders, in one or more transactions, related or unrelated,
to one or more Persons under circumstances whereby any Person and
its Affiliates shall own, after such sales and transfers, at
least one-fourth, but less than one-half, of the shares of the
Company having voting power for the election of directors, unless
such sale or transfer has been approved in advance by three-
fourths of the directors of the Company who have been directors
of the Company for at least two years, or (iv) the sale or
transfer of shares of the Company by the Company and/or any one
or more of its stockholders, in one or more transactions, related
or unrelated, to one or more Persons under circumstances whereby
any Person and its Affiliates shall own, after such sales and
transfers, at least one-half of the shares of the Company having
voting power for the election of directors.
(f) "Code" shall mean the Internal Revenue Code of 1986 as
in effect at the time with respect to which such term is used.
(g) "Common Stock" shall mean the shares of the common
stock, $1.00 par value, of the Company authorized and outstanding
on the date of the adoption of the Plan.
(h) "Company" shall mean Phillips-Van Heusen Corporation, a
Delaware corporation.
(i) "Corporate EBIT Goal" shall mean a dollar amount
established by the Committee with respect to a Fiscal Year as
3
<PAGE>
provided in Section 8(a) of the consolidated net income of the
Company and its Subsidiaries before interest and taxes, after
charges with respect to the Plan required by generally accepted
accounting principles, before non-operating expenses and/or
reserves, including but not limited to expenses and/or reserves
for plant closings and/or restructurings, before any extra-
ordinary items within the contemplation of generally accepted
accounting principles, and with such additional modifications as
the Committee shall determine at or prior to its determination
referred to in Section 8(a). Such net income shall be determined
in accordance with generally accepted accounting principles
consistently applied.
(j) "Corporate Executive Goal" shall mean a dollar amount
established by the Committee with respect to a Fiscal Year which
shall be equal to the aggregate of the Divisional Goals with
respect to such Fiscal Year (as adjusted to eliminate
duplication) minus the corporate and other expenses with respect
to such Fiscal Year taken into account in determining the
Corporate EBIT Goal with respect to such Fiscal Year.
(k) "Corporate Executive Group" shall mean all of the
following officers of the Company: Chief Executive Officer, Chief
Financial Officer, Treasurer, Controller, Vice President of Human
Resources and Vice President, Chief Information Officer and such
4
<PAGE>
other senior executive officers, if any, as the Committee shall
determine at or prior to its determination referred to in Section
8(a).
(l) "Discharge for Cause" shall mean the termination of a
Participant's employment by the Company and its Subsidiaries by
reason of (i) the commission by such Participant of any act or
omission that would constitute a crime under federal, state or
equivalent foreign law, (ii) the commission by such Participant
of any act of moral turpitude, (iii) fraud, dishonesty or other
acts or omissions that result in a breach of any fiduciary or
other material duty of such Participant to the Company and/or any
one or more of its Subsidiaries, or (iv) continued alcohol or
other substance abuse that renders such Participant incapable of
performing his or her material duties to the satisfaction of the
Company and/or its Subsidiaries.
(m) "Divisional Goal" shall mean a dollar amount
established by the Committee with respect to a Fiscal Year as
provided in Section 8(a) of the net income of the operating
division with respect to which such determination is made before
interest and taxes, after charges with respect to the Plan
required by generally accepted accounting principles and
allocated to such operating division, before non-operating
expenses and/or reserves, including but not limited to expenses
and/or reserves for plant closings and/or restructurings, before
any extraordinary items within the contemplation of generally
5
<PAGE>
accepted accounting principles, and with such additional
modifications as the Committee shall determine at or prior to its
determination referred to in Section 8(a). Such net income shall
be determined in accordance with generally accepted accounting
principles consistently applied.
(n) "Exchange Act" shall mean the Securities Exchange Act
of 1934 as in effect at the time with respect to which such term
is used.
(o) The "Fair Market Value" of a share of the Common Stock
on any date shall be equal to (i) the closing sale price of the
Common Stock on the New York Stock Exchange on such date or (ii)
if there is no sale of the Common Stock on such Exchange on such
date, the average of the bid and asked prices on such Exchange at
the close of the market on such date.
(p) "Fiscal Year" shall mean the 52 or 53 week period
ending on the Sunday on or closest to January 31 of each calendar
year on the basis of which the Company maintains its books and
records.
(q) "Grant Value", as used with respect to a share of the
Common Stock and with respect to a Fiscal Year, shall mean the
greater of (i) the average of the Fair Market Values of a share
of the Common Stock at the close of trading on each business day
6
<PAGE>
included in the 90 day period ending on the last day of such
Fiscal Year and (ii) 85% of the Fair Market Value thereof on the
last business day of such Fiscal Year.
(r) "Participant" shall mean a senior executive employee of
the Company and/or one or more of its Subsidiaries who shall have
become a Participant hereunder as provided in Section 8(a).
(s) "Permanent Disability" shall mean a physical and/or
mental condition of a Participant caused by a non-self-inflicted
injury, illness or disease which, in the opinion of the
Committee, based upon such medical evidence as the Committee
shall reasonably determine, renders such Participant unable to
perform the duties and responsibilities of his or her position
with the Company and its Subsidiaries and which will be permanent
and continuous for the remainder of his or her life.
(t) "Person" shall mean any individual, partnership, firm,
trust, corporation or other similar entity, and when two or more
Persons act as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding or disposing of
securities of the Company, such partnership, limited partnership,
syndicate or group shall be deemed a "Person".
(u) "Restricted Stock Agreement" shall mean an agreement
between the Company and a Participant embodying the restrictions
on the transfer of Restricted Shares referred to in Section 10.
7
<PAGE>
(v) "Stock Restrictions" shall mean the restrictions on the
ability of a Participant to transfer Restricted Shares issued to
such Participant hereunder referred to in Sections 10(a) and
10(b) and embodied in a Restricted Stock Agreement between the
Company and such Participant.
(w) "Subsidiary" shall have the meaning ascribed thereto by
the provisions of section 424(f) of the Code.
(x) "Termination Without Cause" shall mean the termination
of a Participant's employment by the Company and all of its
Subsidiaries at the request of the Company under circumstances
which do not constitute Discharge for Cause.
3. Effective Date of the Plan. The Plan became effective
on April 18, 1995, by action of the Board, subject to
ratification of the Plan at the 1995 Annual Meeting of the
Stockholders of the Company.
4. Stock Subject to Plan. 600,000 of the authorized but
unissued shares of the Common Stock are hereby reserved for
issuance under the Plan; provided, however, that the number of
shares so reserved may from time to time be reduced to the extent
that a corresponding number of issued and outstanding shares of
the Common Stock are purchased by the Company and set aside for
issuance under the Plan. If any shares of the Common Stock
8
<PAGE>
issued under the Plan are reacquired by the Company as provided
in Section 10(b), such shares shall again be available for the
purposes of the Plan.
5. Committee. The Plan shall be administered by a
Committee which shall consist of two or more members of the Board
both or all of whom shall be "disinterested persons" within the
meaning of Rule 16b-3(c)(i) promulgated under the Exchange Act
and "outside directors" within the contemplation of section
162(m)(4)(C) of the Code. The Committee shall be appointed
annually by the Board, which may at any time and from time to
time remove any members of the Committee, with or without cause,
appoint additional members of the Committee and fill vacancies,
however caused, in the Committee. A majority of the members of
the Committee shall constitute a quorum. All determinations of
the Committee shall be made by a majority of its members present
at a meeting duly called and held. Any decision or determination
of the Committee reduced to writing and signed by all of the
members of the Committee shall be fully as effective as if it had
been made at a meeting duly called and held.
6. Administration. Subject to the express provisions of
the Plan, the Committee shall have complete authority, in its
discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the
Corporate EBIT Goal, the Corporate Executive Goal and the various
Divisional Goals with respect to each Fiscal Year, to determine
9
<PAGE>
the terms and provisions of the Restricted Stock Agreements, to
determine the Participants with respect to each Fiscal Year and
to make all other determinations necessary or advisable for the
administration of the Plan. In making such determinations, the
Committee may take into account the nature of the services
rendered by the respective Participants, their present and
potential contributions to the success of the Company and its
Subsidiaries and such other factors as the Committee in its
discretion shall deem relevant. The Committee's determination on
the matters referred to in this Section 6 shall be conclusive.
Any dispute or disagreement which may arise hereunder or under
any Restricted Stock Agreement or as a result of or with respect
to any Award shall be determined by the Committee, in its sole
discretion, and any interpretations by the Committee of the terms
thereof shall be final, binding and conclusive.
7. Eligibility. Participation in the Plan with respect to
any Fiscal Year shall only be available to persons who are senior
executive employees of the Company and/or one or more of its
Subsidiaries on the date of the Committee's determination with
respect to such Fiscal Year provided for in Section 8(a).
8. Calculation of Fiscal Year Awards. (a) The Committee
shall, no later than 90 days after the commencement of each
Fiscal Year, determine the senior executive employees of the
Company and its Subsidiaries who will participate in the Plan
with respect to such Fiscal Year, the Corporate EBIT Goal and the
10
<PAGE>
Corporate Executive Goal which will be applicable with respect to
such Fiscal Year and, in the case of each Participant who is not
a member of the Corporate Executive Group, the Divisional Goal
with respect to the operating division for which such Participant
has responsibility. The Committee shall promptly thereafter send
written notice of such determination to the Board and the Chief
Financial Officer of the Company and, to the extent applicable to
any Participant, to such Participant.
(b) The Committee shall, within 30 days after the receipt
of the Company's audited financial statements with respect to any
Fiscal Year, calculate the percentage of the Corporate EBIT Goal
which has been achieved with respect to such Fiscal Year and, if
such percentage is at least 100%, the percentage of the Corporate
Executive Goal and of each Divisional Goal which has been
achieved with respect to such Fiscal Year and the amount of the
Award which has been earned by each Participant with respect to
such Fiscal Year. Each Participant's Award with respect to any
Fiscal Year shall be determined in accordance with the provisions
of Section 8(c) and, except as otherwise provided in Section
8(d), shall be the sum of the amount calculated with respect to
him or her in accordance with the provisions of Section 8(c)(i)
and whichever shall be applicable of Sections 8(c)(ii) and
8(c)(iii). The Committee shall, promptly after it has made such
calculations, send written notice thereof to the Board and the
Chief Financial Officer of the Company and, to the extent
applicable to any Participant, to such Participant.
11
<PAGE>
(c) The amount of each Participant's Award with respect to
each Fiscal Year shall be the sum of the amounts calculated as
follows:
(i) In the case of each Participant, if the Corporate
EBIT Goal is achieved with respect to such Fiscal Year, an
amount equal to 25% of his or her Base Compensation with
respect to such Fiscal Year.
(ii) If at least 100% of the Corporate EBIT Goal is
achieved with respect to such Fiscal Year, then, in the case
of each Participant who shall be a member of the Corporate
Executive Group on the date of the Committee's determination
referred to in Section 8(a), (A) if at least 90% but less
95% of the Corporate Executive Goal is achieved with respect
to such Fiscal Year, an amount equal to 12-1/2% of his or
her Base Compensation with respect to such Fiscal Year, (B)
if at least 95% but less than 100% of the Corporate
Executive Goal is achieved with respect to such Fiscal Year,
an amount equal to 18-3/4% of his or her Base Compensation
with respect to such Fiscal Year, (C) if at least 100% but
less than 105% of the Corporate Executive Goal is achieved
with respect to such Fiscal Year, an amount equal to 25% of
his or her Base Compensation with respect to such Fiscal
Year, (D) if at least 105% but less than 110% of the
Corporate Executive Goal is achieved with respect to such
Fiscal Year, an amount equal to 31-1/4% of his or her Base
12
<PAGE>
Compensation with respect to such Fiscal Year, and (E) if at
least 110% of the Corporate Executive Goal is achieved with
respect to such Fiscal Year, an amount equal to 37-1/2% of
his or her Base Compensation with respect to such Fiscal
Year.
(iii) If at least 100% of the Corporate EBIT Goal is
achieved with respect to such Fiscal Year, then, in the case
of each Participant who shall not be a member of the
Corporate Executive Group on the date of the Committee's
determination referred to in Section 8(a), (A) if at least
90% but less 95% of his or her Divisional Goal is achieved
with respect to such Fiscal Year, an amount equal to 12-1/2%
of his or her Base Compensation with respect to such Fiscal
Year, (B) if at least 95% but less than 100% of his or her
Divisional Goal is achieved with respect to such Fiscal
Year, an amount equal to 18-3/4% of his or her Base
Compensation with respect to such Fiscal Year, (C) if at
least 100% but less than 105% of his or her Divisional Goal
is achieved with respect to such Fiscal Year, an amount
equal to 25% of his or her Base Compensation with respect to
such Fiscal Year, (D) if at least 105% but less than 110% of
his or her Divisional Goal is achieved with respect to such
Fiscal Year, an amount equal to 31-1/4% of his or her Base
Compensation with respect to such Fiscal Year, and (E) if at
13
<PAGE>
least 110% of his or her Divisional Goal is achieved with
respect to such Fiscal Year, an amount equal to 37-1/2% of
his or her Base Compensation with respect to such Fiscal
Year.
(d) (i) Notwithstanding the provisions of Section 8(c), if
a Participant shall not be entitled to an Award under the
provisions of Section 8(c)(i) with respect to any Fiscal Year
(due to the fact that at least 100% of the Corporate EBIT Goal
has not been achieved with respect to such Fiscal Year), then
such Participant shall not be entitled to any Award with respect
to such Fiscal Year under whichever shall be applicable to him or
her of Sections 8(c)(ii) or 8(c)(iii).
(ii) If any Participant shall cease to be employed by the
Company and all of its Subsidiaries prior to the end of any
Fiscal Year, he or she shall not be entitled to receive an Award
with respect to such Fiscal Year.
9. Settlement of Fiscal Year Awards. The Company shall,
no later than 30 days after the date of the delivery to its Chief
Financial Officer of the certification by the Committee referred
to in Section 8(b) with respect to any Fiscal Year, deliver to
each Participant who shall have received an Award hereunder with
respect to such Fiscal Year and
(a) who shall be employed by the Company and/or one or
more of its Subsidiaries on the date of such delivery or
14
<PAGE>
(b) whose employment by the Company and all of its
Subsidiaries shall have terminated after the end of such
Fiscal Year by reason of any of the events referred to in
Section 10(c),
a stock certificate, registered in the name of such Participant,
with respect to the largest whole number of shares of the Common
Stock which shall be equal to or less than the number derived by
dividing the amount of such Participant's Award with respect to
such Fiscal Year by the Grant Value of a share of the Common
Stock with respect to such Fiscal Year. Each share of the Common
Stock issued to a Participant referred to in clause (a) above
shall be subject to an agreement between the Company and the
Participant which will embody the terms and conditions of Section
10.
10. Stock Restrictions. (a) Except as otherwise provided
in this Section 10 and in Section 12(b), each share of the Common
Stock issued in accordance with the provisions of Section 9 (a
"Restricted Share") to a Participant referred to in clause (a)
thereof may not be sold, assigned, transferred or otherwise
disposed of, and may not be pledged or hypothecated, prior to the
last business day of the third Fiscal Year following the Fiscal
Year during which the Award with respect to which it was issued
was earned.
15
<PAGE>
(b) Except as otherwise provided in Section 10(c), if the
employment by the Company and all of its Subsidiaries of the
Participant to whom Restricted Shares have been issued shall
terminate prior to the last business day of the third Fiscal Year
following the Fiscal Year during which the Award with respect to
which it was issued was earned, such Restricted Shares shall be
forfeited and he or she shall be obligated to redeliver such
Restricted Shares to the Company immediately without the receipt
of any consideration therefore.
(c) Anything herein to the contrary notwithstanding, the
restrictions set forth in Sections 10(a) and 10(b) shall
terminate as to all of the Restricted Shares owned by a
Participant which shall not have theretofore have been required
to be redelivered to the Company upon the occurrence of any of
the following events:
(i) Such Participant's employment by the Company and
all of its Subsidiaries shall have terminated by reason of
his or her death or Permanent Disability or on or after his
or her 65th birthday or after the occurrence of a Change in
Control.
16
<PAGE>
(ii) Such Participant's employment by the Company and
all of its Subsidiaries shall have terminated on or after
his or her 55th birthday and prior to his or her 65th
birthday and after he or she shall have completed at least
ten years of employment with the Company and the Committee,
on the recommendation of the Company's Chief Executive
Officer, shall so determine.
(iii) Such Participant's employment by the Company and
all of its Subsidiaries shall have terminated by reason of
his or her Termination Without Cause and the Committee, on
the recommendation of the Company's Chief Executive Officer,
shall so determine.
(d) Upon issuance of the certificate or certificates for
Restricted Shares in the name of a Participant, such Participant
shall thereupon be a stockholder of the Company with respect to
all the Restricted Shares represented by such certificate or
certificates and shall have the rights of a stockholder with
respect to such Restricted Shares, including the right to vote
such Restricted Shares and to receive all dividends and other
distributions paid with respect to such Restricted Shares.
(e) Each Participant who is entitled to receive shares of
the Common Stock in accordance with the provisions of Section 9
shall
17
<PAGE>
(i) represent and warrant to the Company that he or
she is acquiring such shares for investment for his or her
own account (unless there is then current a prospectus
relating to such shares under Section 10(a) of the
Securities Act of 1933, as amended) and, in any event, that
he or she will not sell or otherwise dispose of such shares
except in compliance with the provisions of said Act, and
(ii) agree that the Company may place on the
certificates representing the shares or new or additional or
different shares or securities distributed with respect to
such shares such legend or legends as the Company may deem
appropriate and that the Company may place a stop transfer
order with respect to such shares with the Transfer Agent(s)
for the Common Stock.
In addition, if such shares shall be Restricted Shares, such
Participant shall
(iii) agree that such Restricted Shares shall be
subject to, and shall be held by him or her in accordance
with, all of the applicable terms and considerations of the
Plan, and
(iv) at his or her option, (A) be entitled to make the
election permitted under section 83(b) of the Code to
include in gross income in the taxable year in which the
Restricted Shares are transferred to him or her an amount
18
<PAGE>
equal to the Fair Market Value of such shares at the time of
transfer, notwithstanding that such shares are subject to a
substantial risk of forfeiture within the meaning of section
83(c)(1) of the Code, or (B) include in gross income the
Fair Market Value of the Restricted Shares as of the date on
which such restrictions lapse.
The foregoing agreement, representation and warranty shall be
contained in an agreement in writing which shall be delivered by
such Participant to the Company.
11. Adjustment of Number of Shares. In the event that a
dividend shall be declared upon the Common Stock payable in
shares of the Common Stock, the number of shares of the Common
Stock then subject to any Restricted Stock Agreement and the
number of shares of the Common Stock reserved for issuance in
accordance with the provisions of the Plan but not yet issued
(and if the record date with respect thereto shall occur during
the period commencing at the end of a Fiscal Year and ending on
the date of issuance referred to in Section 9, the number of
shares required to be issued) shall be adjusted by adding to each
such share the number of shares which would be distributable
thereon if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock
dividend. In the event that the outstanding shares of the Common
Stock shall be changed into or exchanged for a different number
19
<PAGE>
or kind of shares of stock or other securities of the Company or
of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, sale of
assets, merger or consolidation in which the Company is the
surviving corporation, then, there shall be substituted for each
share of the Common Stock then subject to a Restricted Stock
Agreement and for each share of the Common Stock reserved for
issuance in accordance with the provisions of the Plan but not
yet issued (and if the record date with respect thereto shall
occur during the period commencing at the end of a Fiscal Year
and the date of issuance referred to in Section 9, for each such
share so required to be so issued), the number and kind of shares
of stock or other securities into which each outstanding share of
the Common Stock shall be so changed or for which each such share
shall be exchanged. In the event that there shall be any change,
other than as specified in this Section 11, in the number or kind
of outstanding shares of the Common Stock, or of any stock or
other securities into which the Common Stock shall have been
changed, or for which it shall have been exchanged, then, if the
Committee shall, in its sole discretion, determine that such
change equitably requires an adjustment in the number or kind of
shares then subject to a Restricted Stock Agreement and the
number or kind of shares reserved for issuance in accordance with
the provisions of the Plan but not yet issued (and if the record
date with respect thereto shall occur during the period
commencing at the end of a Fiscal Year and the date of issuance
20
<PAGE>
referred to in Section 9, for each such share so required to be
so issued, the number or kind of shares required to be so
issued), such adjustment shall be made by the Committee and shall
be effective and binding for all purposes of the Plan and of each
Restricted Stock Agreement entered into in accordance with the
provisions of the Plan. No adjustment or substitution provided
for in this Section 11 shall require the Company to deliver a
fractional share under the Plan or any Restricted Stock
Agreement.
12. Withholding and Waivers. (a) Each Participant shall
make such arrangements with the Company with respect to income
tax withholding as the Company shall determine in its sole
discretion is appropriate to ensure payment of federal, state or
local income taxes due with respect to the issuance and/or
ownership of shares of the Common Stock issued hereunder and the
release of the Stock Restrictions on Restricted Shares issued
hereunder. In the event of the death of a Participant, an
additional condition to the Company's obligation to issue shares
of the Common Stock to the executors or administrators of such
Participant's estate in accordance with the provisions of Section
9 and to release the Stock Restrictions provided hereunder on any
Restricted Shares owned by such Participant as provided in
Section 10(b) shall be the delivery to the Company of such tax
waivers, letters testamentary and other documents as the
Committee may reasonably determine.
21
<PAGE>
(b) A Participant may, in the discretion of the Committee
and subject to such rules as the Committee may adopt, elect to
satisfy his or her withholding obligation arising as a result of
the release of the Stock Restrictions with respect to any
Restricted Shares, in whole or in part, by electing (an
"Election") to deliver to the Company shares of the Common Stock
(other than shares of the Common Stock as to which the Stock
Restrictions (under this or any other agreement entered into in
accordance with the Plan) shall not have theretofore terminated)
having a Fair Market Value, determined as of the date that the
amount to be withheld is determined (the "Tax Date"), equal to
the amount required to be so withheld. Such Participant shall
pay the Company in cash for any fractional share that would
otherwise be required to be delivered.
(c) Each Election shall be subject to the following
restrictions:
(i) The Election must be made on or prior to the Tax
Date;
(ii) The Election shall be irrevocable;
(iii) The Election is subject to the approval of the
Committee;
(iv) If the Participant's transactions in shares of
the Common Stock are subject to the provisions of section
22
<PAGE>
16(b) of the Exchange Act, an Election may not be made
within six months of the date of the execution and delivery
of the Restricted Stock Agreement governing such Restricted
Shares.
(v) If the Participant's transactions in shares of the
Common Stock are subject to the provisions of section 16(b)
of the Exchange Act, the Election must be made (A) six
months or more prior to the Tax Date or (B) during the
period beginning on the third business date following the
date of the release of the Company's quarterly or annual
statement of sales and earnings and ending on the twelfth
business day following such date.
Plan nor the grant of any Awards hereunder shall require the
Company or any Subsidiary to continue any Participant in the
employ of the Company or such Subsidiary.
14. Termination and Amendment of the Plan. The Board may
at any time terminate the Plan or make such modifications of the
Plan as it shall deem advisable; provided, however, that the
Board may not without further approval of the holders of a
majority of the shares of the Common Stock present in person or
by proxy at any special or annual meeting of the stockholders,
increase the number of shares which may be issued under the Plan
(as adjusted in accordance with the provisions of Section 11), or
23
<PAGE>
change the manner of calculating Awards or change the class of
persons eligible to become Participants hereunder or withdraw the
authority to administer the Plan from the Committee. Except as
otherwise provided in Section 11, no termination or amendment of
the Plan may, without the consent of the Participant to whom any
Restricted Shares shall theretofore have been granted, adversely
affect the rights of such Participant with respect to such
Restricted Shares.
15. Expiration and Termination of the Plan. Unless the
holders of a majority of the shares of the Common Stock present
in person or by proxy at any special or annual meeting of the
Stockholders occurring on or prior to the date of the 1999 Annual
Meeting of the Stockholders shall approve the continuation of the
Plan after the 1999 Annual Meeting of the Stockholders (for a
term which shall not exceed five years from the date of such
special or annual meeting at which such approval is obtained), no
Awards shall be granted hereunder with respect to any Fiscal Year
ending after January 30, 2000.
24
FINANCIAL REVIEW
Phillips-Van Heusen's primary strategy is to maximize stockholder value
by maximizing the value of its brands through strong wholesale distribution
coupled with the ability to reach consumers directly through its retail
stores. This strategy was enhanced importantly in early 1995 by the
acquisition of "Gant" and "Izod", two outstanding sportswear brands. The
significance of this acquisition is discussed throughout this report.
The year 1994 proved to be, by far, the most difficult since the
Company's recapitalization in 1987. After six consecutive years of double
digit growth in sales and earnings, Phillips-Van Heusen experienced slower
sales growth in certain key categories and a significant reduction from the
prior year in overall earnings. Virtually all of the Company's businesses
were negatively impacted to some degree by extremely difficult apparel and
footwear markets, a condition that began in late 1992 and worsened throughout
1994.
Despite the difficult environment, the Company achieved another year of
record sales primarily due to the continued expansion of its retail business.
Retail sales were $764.7 million in 1994, up from $679.6 million and $571.8
million in 1993 and 1992, respectively. During 1994, dress shirts, which
represent approximately 25% of the Company's total sales (and 60% of its
wholesale apparel sales) were hit particularly hard. It is the Company's
belief that virtually all of apparel and footwear continue to be strongly
influenced by business and fashion cycles. While this particular down period
in apparel and footwear has lasted longer than usual - it should, like all
business cycles, reverse itself. This report speaks to a variety of
initiatives that Phillips-Van Heusen has taken to position itself to return
with increased strength and balance, no matter when the recovery occurs.
1
<PAGE>
RESULTS OF OPERATIONS
The Company analyzes its results of operations by its vertically
integrated apparel and footwear segments. Reference should be made to the
Segment Data footnote on page 34.
APPAREL
Net sales of the Company's apparel segment were $883.9 million in 1994,
$800.5 million in 1993 and $709.4 million in 1992, representing increases of
10.4% and 12.8%, respectively. These increases relate principally to growth
in retail sales, including the expanded offering of apparel at the Bass
Company stores, offset, in part, in 1993, by a small reduction in wholesale
sales caused by a downsizing of the Company's private label dress shirt and
sweater business.
Wholesale shirt sales were negatively impacted by a period of weak
demand following a strong but short-lived fashion surge in 1992. This period
of weak dress shirt demand was somewhat offset by capitalizing on the very
important trend to more casual attire for work as the Company's "Corporate
Casual" Friday-wear business continued to grow in 1994. This positive trend
is expected to continue in 1995 and should accelerate with the Company's
expanded offering of "Beene Unbuttoned" casual dress shirts.
Gross profit on sales was 30.8% in 1994 compared with 33.1% in 1993 and
33.8% in 1992. Both the Company's wholesale and retail divisions experienced
gross profit reductions in 1994 from the prior year. General market
conditions worsened considerably in 1994 and were further disrupted by the
introduction of Wrinkle-Free shirts at Van Heusen and Geoffrey Beene.
2
<PAGE>
Three separate issues relating to the introduction of Wrinkle-Free
shirts affected gross margins:
- The decision by most retailers to achieve a very fast transition
into Wrinkle-Free shirts led to increased promotional selling of
non wrinkle-free shirts, thus exacerbating an already weak market.
- Start-up costs of Wrinkle-Free shirts, including accelerated
amortization of new equipment, as well as training and
manufacturing inefficiencies, added some $4 million to 1994 costs.
- Higher production costs associated with the Company's post-cured
vapor phase manufacturing process of its Wrinkle-Free shirts
further reduced 1994 initial gross margins.
At retail, gross margins were negatively impacted by the overall weak
apparel environment resulting in the taking of significant promotional
markdowns to generate sales. The Company's branded store formats of Van
Heusen and Geoffrey Beene had considerably better overall results than the
private label store formats of Cape Isle Knitters and Windsor Shirt. Outlet
stores, as discussed in the Chairman's letter, are generally destination
apparel stores which do, in fact, require extra travel time and therefore are
very much influenced by trends (good and bad) affecting specialty apparel
stores.
Also impacting overall gross margins was a LIFO charge of $1.2 million
in 1994 compared with $0.2 million in 1993 and a credit of $1.7 million in
1992.
3
<PAGE>
Selling, general and administrative expenses were 26.7% of sales in
1994, compared with 26.1% in 1993 and 26.8% in 1992. Expense levels in both
1994 and 1993 were negatively impacted by a higher weighing of retail business
as part of the overall apparel sales mix. In addition, 1994 included $3
million of introductory Wrinkle-Free marketing costs. Importantly, two cost
reduction programs initiated late in the fourth quarter should contribute to
expense reductions in 1995 and beyond. The Company implemented a plan to
restructure and consolidate certain managerial, field supervisory and
administrative functions associated with its retail operations. At wholesale,
the Company adopted a plan to realign its four marketing divisions into two -
Dress Shirts and Sportswear. In addition to reducing expenses, this new
structure should improve marketing focus and product supply pipeline
efficiency.
Looking ahead, the Company believes that while 1995 will continue to be
a year of transition, Wrinkle-Free shirts will become established as an
important part of the overall dress shirt business and non Wrinkle-Free shirts
will also be established in a fixed niche, thereby eliminating a good deal of
the uncertainty that existed in 1994. Start-up costs should gradually abate
and gross margins should normalize as production is moved to lower cost
Caribbean plants and pre-cured fabrics requiring lower cost manufacturing are
introduced into overall production - on selected oxford and broadcloth
shirtings where they are able to produce superior results. The Company will
continue to utilize its post-cured vapor phase treatment on lighter weight
fabrics such as pinpoint oxfords where it believes that other wrinkle-free
treatments are not close to the same quality standard.
The Company's sweater business should benefit significantly from the
recently announced licensing agreement to make and market Jantzen sweaters,
the number-one selling sweater brand in the U.S. In addition, ownership of
Izod brings with it the famous Izod cardigan sweater, which also should help
4
<PAGE>
to maximize this business. These two new brands, along with Van Heusen and
Geoffrey Beene, make the Company the leading supplier of branded sweaters in
the U.S.
As for men's sportswear, which seems to be on a very solid growth
trajectory, the Company's position in Van Heusen sportswear has been
substantially supplemented by the Jantzen license covering active sportswear
as well as sweaters and, of course, by Izod and Gant. This is clearly an area
targeted for important growth and development in 1995 and beyond.
At retail, all store formats have business initiatives which are viewed
very positively. These include Van Heusen for Her, Geoffrey Beene for Women
and, most importantly, the conversion of the Company's two private label
formats, Cape Isle Knitters and Windsor Shirt, into stores marketing apparel
under the Izod and Gant labels, respectively.
While 1995 appears at this point to be a continuation of the prior
year's generally poor retail environment, the Company believes that its many
initiatives at all levels of business should provide the basis for solid
improvement in the periods ahead.
FOOTWEAR
Net sales of the Company's footwear segment, conducted through its Bass
division (excluding Bass apparel), were $371.5 million in 1994 compared with
$351.9 million in 1993 and $333.2 million in 1992, representing increases of
5.6% in both years.
Footwear sales were negatively impacted in both years by the generally
poor retail environment described above. One particularly successful footwear
category, however, was men's and women's sandals which increased substantially
in 1994 and successfully offset the decline in the exceptionally strong
performance of canvas shoes in 1992 and 1993.
5
<PAGE>
International sales grew to $8.2 million in 1994 from $7.1 million in
1993, driven by territory growth in Europe and Asia as well as introductions
in South America and the Caribbean.
Gross profit on sales was 37.1% in 1994 compared with 39.7% in 1993 and
43.7% in 1992. As in apparel, the Company's footwear business in 1994 was
marked by sluggish consumer demand and a highly promotional environment. At
the same time, 1994 was for Bass a period focused on streamlining inventory,
reducing SKU's and sharpening size offerings. This combination led to
moderate overall growth and significantly reduced gross profit margins as
greater off-price sales at both wholesale and retail depressed margins. At
Retail, Bass Footwear experienced many of the same pressures as the Company's
apparel stores, including a weak specialty store environment and a generally
soft women's career market. This was offset, in part, by good performance in
men's waterproof shoes and sandals.
Selling, general and administrative expenses were 28.6%, compared with
29.1% in 1993 and 33.0% in 1992, which reflects the continued leveraging and
management of footwear's expense structure.
Looking ahead, the Company believes that Bass' well-established product
diversification will be particularly helpful in the coming year, with
continued strong growth in the men's and women's sandal category as well as
good growth in the casual and outdoor shoe categories. The men's Weejun, with
its updated styling of classic looks, enjoyed a 6% increase in 1994 over 1993
and should continue to do well. Internationally, sales are targeted for
continued growth in 1995, principally due to greater penetration in already
existing markets.
RESTRUCTURING CHARGE
In the fourth quarter of 1994, the Company recorded a pre-tax
restructuring charge totaling $7.0 million associated with its apparel
6
<PAGE>
business. The Company has restructured and consolidated certain managerial,
field supervisory and administrative functions associated with its retail
operations, and adopted a plan to realign its wholesale apparel business from
four operating divisions into a dress shirt division and a sportswear
division. This new structure will reduce expenses and should improve the
Company's marketing focus and product pipeline efficiency. These expense
reduction initiatives are part of an ongoing process to optimize the Company's
operating structure.
Also, in connection with the acquisition of the Izod and Gant labels,
respectively, the Company adopted a plan to convert its Cape Isle Knitters and
Windsor Shirt private label retail stores to stores that will market branded
apparel under the Izod and Gant labels, respectively. The Company believes
that these store conversions should have a very positive impact on the future
sales and earnings of these two retail companies.
CORPORATE EXPENSES
Corporate expenses were $10.9 million in 1994 compared with $13.4
million in 1993 and $15.5 million in 1992. The primary reason for the
decrease in 1994 was a reduction in the Company's liability for its
supplemental savings plan which is linked to the market value of Phillips-Van
Heusen stock - in addition to a reduction in general corporate spending. In
1992, the Company incurred a one-time cost of $2.4 million in connection with
moving to new facilities in Bridgewater, New Jersey and South Portland, Maine.
Those relocations accounted for most of the higher expense level in that year.
INTEREST EXPENSE
Interest expense was $12.8 million compared with $16.7 million in 1993
and $15.7 million in 1992. The decrease in 1994 relates principally to the
November 1993 refinancing to lower interest rates of a portion of the
Company's long-term debt. In addition, lower average debt and higher interest
rates on invested cash contributed to the interest expense reduction.
7
<PAGE>
INCOME TAXES
The Company's effective tax rate was 18.7% in 1994 compared with 32.0%
in 1993 and 30.5% in 1992. The significantly reduced rate in 1994 resulted,
in part, from the reversal of estimated tax liabilities no longer deemed
necessary. In addition, the $7.0 million restructuring charge reduced income
from domestic sources, which is taxed at normal rates, thereby increasing the
proportionate share of tax exempt income earned from the Company's operations
in Puerto Rico.
EXTRAORDINARY LOSS - EARLY RETIREMENT OF DEBT
In 1993, the Company incurred a loss, net of tax, of $11.4 million, or
$.42 per share, in connection with the early retirement of long-term debt.
See "Liquidity and Capital Resources" below for further discussion of this
transaction.
SEASONALITY
The Company's business is seasonal, with higher sales and income during
its third and fourth quarters, which coincide with the Company's two peak
retail selling seasons: the first running from the start of summer vacation in
late May and continuing through September; the second being the Christmas
selling season beginning with weekend following Thanksgiving and continuing
through the week after Christmas.
Also contributing to the strength of the third quarter is the high
volume of fall shipments to wholesale customers which are more profitable than
spring shipments. The slower spring selling season at wholesale combined with
the retail seasonality make the first quarter particularly weak.
8
<PAGE>
ACQUISITION
On January 24, 1995 Phillips-Van Heusen Corporation entered into a
binding agreement to acquire the Crystal Brands Apparel Group for $114.7
million in cash. This acquisition, completed on February 17, 1995, adds Gant,
Izod and Salty Dog to its roster of highly regarded brands: Van Heusen, Bass
and Geoffrey Beene.
The acquisition, financed by a combination of invested cash plus use of
the Company's revolving credit bank line, should not be dilutive in the
initial transitional year, and should be quite positive thereafter.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following table shows key cash flow elements over the last three
years:
(In thousands) 1994 1993 1992
Income from operations adjusted
for non-cash items $44,256 $59,714 $51,962
Early retirement of debt -- (11,394) --
Change in working capital 5,138 (6,254) (30,448)
Capital spending, net (37,830) (37,883) (32,034)
Cash dividends on common stock (3,983) (3,920) (3,556)
Cash dividends on preferred stock -- -- (2,138)
Issuance of common stock -- -- 133,949
Repurchase of preferred stock -- -- (121,148)
Exercise of stock options 2,629 7,425 8,722
Other changes 2,438 (678) 13,067
Increase in cash, before net
change in debt $12,648 $7,010 $18,376
The Company's ongoing emphasis on achieving a faster inventory turn was
once again the key driver in achieving a positive cash flow. Measured against
an overall sales increase of 8.9%, inventory was reduced 5.4% to $255.2
million from $269.9 million. The Company expects this favorable trend in
inventory turnover to continue.
Capital expenditures in 1994 included the near-completion of the
Company's 500,000 square foot distribution facility in Jonesville, North
Carolina, investment in Wrinkle-Free manufacturing capacity and the continued
upgrading of information systems. Spending in 1993 included the initial
investment in the distribution facility as well as the completion of new
office facilities in South Portland, Maine. During 1992 through 1994, the
Company continued to invest in new retail store openings and refurbishing
existing stores. With the completion of the distribution center in early
1995, capital expenditures for the full year 1995 should be somewhat lower.
During 1993 and 1992, the Company took a number of steps to strengthen
its financial position. On May 4, 1992, the Company completed the sale of 6.4
million shares of its common stock. Approximately $121.1 million of the net
proceeds were used to repurchase the Company's preferred stock, with the
10
<PAGE>
remaining $12.8 million used to reduce debt. This transaction improved cash
flow on an annual basis by approximately $8.0 million by eliminating the non-
tax deductible 11.25% dividend on the preferred stock plus interest savings on
the debt reduction (offset in part by the dividends on the common stock issued
in connection with the sale). On October 29, 1992, the Company issued $69
million of Senior Notes due 1996-2002 at a blended rate of 7.75%. The
proceeds were used to repay all the outstanding borrowings under the Company's
revolving credit facility, with the remaining proceeds invested in short-term
instruments.
Concurrent with the Company achieving an investment grade rating from
both Standard & Poor's and Moody's, on November 15, 1993 the Company issued
$100 million of 7.75% debentures due 2023 with a yield to maturity of 7.80%.
The net proceeds were used to redeem the outstanding 11.2% and 9.93% senior
notes. Due to prepayment provisions associated with the redeemed notes, the
Company incurred the extraordinary loss noted earlier. Also in 1993, the
Company entered into a new revolving credit agreement with its existing bank
group; the interest rate on this facility was reduced from LIBOR plus .75% to
LIBOR plus .50%.
In February 1995, in conjunction with the acquisition of the Crystal
Brands Apparel Group, the Company increased the size of its bank credit
facility to $400 million ($200 million in revolving credit lines and $200
million in letter of credit lines) from a total facility of $250 million - and
maintained the same pricing.
Total debt (net of invested cash) as a percentage of total capital was
reduced to 26.9% at year-end 1994 compared to 29.7% and 34.3% at year-end 1993
and 1992, respectively.
This much improved financial position, together with its continued
anticipation of positive cash flow, allowed the Company to accomplish the
acquisition of the Crystal Brands Apparel Group for cash without compromising
its objective of maintaining its investment grade rating.
11
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,255,466 $1,152,394 $1,042,565
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . 845,655 747,555 657,040
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,811 404,839 385,525
Selling, general and administrative expenses . . . . . . . . . . . . . 353,109 324,528 311,717
Restructuring expenses . . . . . . . . . . . . . . . . . . . . . . . . 7,000 - 3,600
Income before interest and taxes . . . . . . . . . . . . . . . . . . . 49,702 80,311 70,208
Interest expense, net. . . . . . . . . . . . . . . . . . . . . . . . . 12,793 16,679 15,727
Income before taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 36,909 63,632 54,481
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,894 20,380 16,600
Income before extraordinary loss . . . . . . . . . . . . . . . . . . . 30,015 43,252 37,881
Extraordinary loss on debt retirement. . . . . . . . . . . . . . . . . - (11,394) -
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,015 $ 31,858 $ 37,881
Net income per share:
Before extraordinary loss. . . . . . . . . . . . . . . . . . . . . . . $ 1.11 $ 1.60 1.42
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . - (0.42) -
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.11 $ 1.18 $ 1.42
See notes to consolidated financial statements.
</TABLE>
12
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
January 29, January 30,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of $68,586 and $66,064 . . . . . . . . . . $ 80,473 $ 68,070
Trade receivables, less allowances of $1,617 and $2,171 . . . . . . . . . . 77,527 61,986
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,244 269,871
Other, including deferred taxes of $7,108 and $5,727. . . . . . . . . . . . 16,426 18,775
Total Current Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 429,670 418,702
Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 136,297 109,506
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,733 18,189
Other Assets, including deferred taxes of $9,502 and $4,608. . . . . . . . . . 12,584 8,374
$596,284 $554,771
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,759 $ 42,188
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,039 60,696
Accrued income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,975 6,027
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 260 245
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . 114,033 109,156
Long-Term Debt, less current portion . . . . . . . . . . . . . . . . . . . . . 169,679 169,934
Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,112 28,882
Stockholders' Equity:
Preferred stock, par value $100 per share; 150,000 shares
authorized; no shares outstanding . . . . . . . . . . . . . . . . . . . .
Common stock, par value $1 per share; 100,000,000 shares
authorized; shares issued 26,610,310 and 33,190,750 . . . . . . . . . . . 26,610 33,191
Additional capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,801 118,360
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136,049 269,055
275,460 420,606
Less: 6,728,576 shares of common stock held in
treasury as of January 30, 1994 - at cost . . . . . . . . . . . . . . 0 (173,807)
Total Stockholders' Equity. . . . . . . . . . . . . . . . . . . . . . . 275,460 246,799
$596,284 $554,771
See notes to consolidated financial statements.
</TABLE>
13
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Operating activities:
Net Income before extraordinary loss . . . . . . . . . . . . . . . . . . . $ 30,015 $ 43,252 $ 37,881
Adjustments to reconcile to cash provided by operating
activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . 24,309 19,126 15,020
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . (6,275) (2,195) (518)
Extraordinary loss on debt retirement. . . . . . . . . . . . . . . . . . - (11,394) -
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,793) (469) (421)
Changes in operating assets and liabilities:
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,541) (3,168) (8,768)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,627 (11,110) (32,367)
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . 1,759 11,321 8,412
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,293 3,297 2,275
Net Cash Provided By Operating Activities. . . . . . . . . . . . . . . 49,394 42,066 21,514
Investing activities:
Plant and equipment acquired . . . . . . . . . . . . . . . . . . . . . . . (53,140) (47,866) (36,771)
Contributions from landlords . . . . . . . . . . . . . . . . . . . . . . . 15,310 9,983 4,737
Collection of note receivable. . . . . . . . . . . . . . . . . . . . . . . - - 5,100
Sale of property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 5,964
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,438 (678) 2,003
Net Cash Used By Investing Activities. . . . . . . . . . . . . . . . . . (35,392) (38,561) (18,967)
Financing activities:
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . - - 133,949
Repurchase of preferred stock. . . . . . . . . . . . . . . . . . . . . . . - - (121,148)
Proceeds from revolving line of credit and long-term borrowings. . . . . . - 141,023 146,900
Payments on revolving line of credit and long-term borrowings. . . . . . . (245) (157,026) (95,166)
Exercise of stock options. . . . . . . . . . . . . . . . . . . . . . . . . 2,630 7,425 8,722
Cash dividends on common stock . . . . . . . . . . . . . . . . . . . . . . (3,984) (3,920) (3,556)
Cash dividends on preferred stock. . . . . . . . . . . . . . . . . . . . . - - (2,138)
Net Cash (Used) Provided By Financing Activities . . . . . . . . . . . . (1,599) (12,498) 67,563
Increase (Decrease) in cash. . . . . . . . . . . . . . . . . . . . . . . . . 12,403 (8,993) 70,110
Cash at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 68,070 77,063 6,953
Cash at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,473 $ 68,070 $ 77,063
See notes to consolidated financial statements.
</TABLE>
14
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Common
$1 par Additional Retained Treasury Stockholders'
Shares Value Capital Earnings Stock Equity
<S> <C> <C> <C> <C> <C> <C>
February 2, 1992 . . . . . . . . . 25,518,344 $25,518 $24,285 $208,930 $(173,830) $84,903
Issuance of common stock and
repurchase of preferred stock. 6,440,000 6,440 79,161 85,601
Stock options exercised. . . . . 786,047 786 9,036 9,822
Net income . . . . . . . . . . . 37,881 37,881
Cash dividends:
Common stock . . . . . . . . . (3,556) (3,556)
Preferred stock. . . . . . . . (2,138) (2,138)
Stock repurchased and cancelled (40,223) (40) (1,060) (1,100)
January 31, 1993 . . . . . . . . . 32,704,168 32,704 111,422 241,117 (173,830) 211,413
Stock options exercised. . . . . 486,647 487 6,940 7,427
Net income . . . . . . . . . . . 31,858 31,858
Cash dividends on common stock (3,920) (3,920)
Issue 150 shares from treasury . 23 23
Stock repurchased and cancelled (65) (2) (2)
January 30, 1994 . . . . . . . . . 33,190,750 33,191 118,360 269,055 (173,807) 246,799
Stock options exercised. . . . . 148,471 148 2,493 2,641
Net income . . . . . . . . . . . 30,015 30,015
Cash dividends on common stock . (3,984) (3,984)
Retirement of treasury stock . . (6,728,576) (6,729) (8,041) (159,037) 173,807 0
Stock repurchased and cancelled (335) (11) (11)
January 29, 1995 . . . . . . . . . $26,610,310 $ 26,610 $112,801 $136,049 $ 0 $275,460
See notes to consolidated financial statements.
</TABLE>
15
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries. Significant
intercompany accounts and transactions have been eliminated in consolidation.
Fiscal Year - Fiscal years are designated in the financial statements and
notes by the calendar year in which the fiscal year commences. Accordingly,
results for fiscal years 1994, 1993 and 1992 represent the 52 weeks ended
January 29, 1995, January 30, 1994 and January 31, 1993.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
for the apparel segment is determined principally using the last-in, first-out
method (LIFO). Cost for the footwear segment is determined using the first-in,
first-out method (FIFO).
Property, Plant and Equipment - Depreciation is computed principally by
the straight line method over the estimated useful lives of the various
classes of property.
Goodwill - Goodwill, net of accumulated amortization of $2,405 and $1,949
in 1994 and 1993, respectively, is being amortized principally by the straight
line method over 40 years. The Company assesses the recoverability of
goodwill based on the estimated future non-discounted cash flows over the
remaining amortization period.
Contributions from Landlords - The Company receives contributions from
landlords for fixturing new retail stores which the Company leases. Such
amounts are amortized as a reduction of rent expense over the life of the
related lease. Unamortized contributions are included in accrued expenses and
other liabilities and amounted to $24,146 and $14,568 at January 29, 1995 and
January 30, 1994, respectively.
Fair Value of Financial Instruments - The Company estimates that the fair
value of all financial instruments approximates their carrying value, except
as noted in the footnote entitled "Long-Term Debt and Extraordinary Loss."
Advertising - The Company expenses advertising costs as incurred.
Advertising expenses totalled $18,532 in 1994, $15,615 in 1993 and $13,791 in
1992.
Net Income Per Share - Primary net income per share has been computed by
dividing net income, adjusted for the Series B Convertible Redeemable
Preferred Stock ("preferred stock") dividend requirement of $2,138 in 1992, by
the weighted average number of common shares outstanding during the year and
common share equivalents applicable to dilutive stock options; the number of
shares used in such computation was 27,154,173 (1994), 27,105,888 (1993) and
25,253,170 (1992).
Fully diluted net income per share in 1994, 1993 and 1992 is not
materially different from primary net income per share and is not presented.
16
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Income Taxes
Income taxes from continuing operations consist of:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal:
Current. . . . . . . . . . . . . . . . . . . . . . . . . $11,720 $16,628 $11,945
Deferred . . . . . . . . . . . . . . . . . . . . . . . . (5,585) (1,088) (518)
State, foreign and local:
Current. . . . . . . . . . . . . . . . . . . . . . . . . 1,449 4,945 5,173
Deferred . . . . . . . . . . . . . . . . . . . . . . . . (690) (105) -
$ 6,894 $20,380 $16,600
</TABLE>
Taxes paid were $12,766 (1994), $9,936 (1993) and $14,858 (1992).
The approximate tax effect of items giving rise to the deferred income tax
asset recognized on the Company's balance sheet at January 29, 1995 and
January 30, 1994 is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Depreciation. . . . . . . . . . . . . . . . . . . . . . . $(8,713) $(10,535)
Landlord contributions. . . . . . . . . . . . . . . . . . 9,207 6,227
Restructuring costs . . . . . . . . . . . . . . . . . . . 3,084 1,732
Employee compensation and benefits. . . . . . . . . . . . 7,175 6,790
Other-net . . . . . . . . . . . . . . . . . . . . . . . . 5,857 6,121
$16,610 $ 10,335
</TABLE>
A reconciliation of the statutory Federal income tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Statutory Federal tax rate. . . . . . . . . . . . . . . . . . 35.0% 35.0% 34.0%
State, foreign and local income taxes,
net of Federal income tax benefit. . . . . . . . . . . . . . 5.0 4.3 4.9
Income of Puerto Rico subsidiaries(1) . . . . . . . . . . . . (8.0) (4.8) (7.3)
Reversal of estimated tax liabilities(2). . . . . . . . . . . (11.1) - -
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . (2.2) (2.5) (1.1)
Effective income tax rate . . . . . . . . . . . . . . . . . . 18.7% 32.0% 30.5%
</TABLE>
(1)Exemption from Puerto Rico income tax expires in 1998.
(2)During 1994, the Company reversed estimated tax liabilities totalling
$4,100 where were no longer deemed necessary.
During 1994 and 1993, the Company recognized a tax benefit of $1,568 and
$1,972 related to the exercise of stock options. These benefits were
credited to additional capital.
17
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,849 $ 16,710
Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . 17,026 13,941
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . 218,369 239,220
$255,244 $269,871
</TABLE>
Inventories would have been $12,700 and $11,500 higher than reported at
January 29, 1995 and January 30, 1994, respectively, if the FIFO method of
inventory accounting had been used for the apparel segment.
Property, Plant and Equipment
Property, plant and equipment, at cost, are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,710 $ 1,716
Buildings and building improvements. . . . . . . . . . . . . . . . 32,961 27,996
Machinery and equipment, furniture and
fixtures and leasehold improvements. . . . . . . . . . . . . . . 210,688 169,527
245,359 199,239
Less: Accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . . 109,062 89,733
$136,297 $109,506
</TABLE>
18
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Long-Term Debt and Extraordinary Loss
Long-term debt, exclusive of current portion, is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
7.75% Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,429 $ 99,424
7.75% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,000 69,000
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 1,510
$169,679 $169,934
</TABLE>
The Company issued $100,000 of 7.75% Debentures due 2023 on November 15,
1993 with a yield to maturity of 7.80%. Interest is payable semi-annually.
The net proceeds from the sale of these debentures, together with cash from
the Company's working capital, were used to redeem the Company's then
outstanding 11.2% Senior Note and 9.93% Senior Notes. Due to certain
prepayment provisions associated with the redeemed Notes, the Company
recognized a one-time extraordinary loss of $11,394, net of a $7,025 tax
benefit, in the fourth quarter of 1993.
Due to increases in long-term interest rates since the Company's issuance
of the 7.75% Debentures, the Company estimates that the present value of these
Debentures on January 29, 1995, using discounted cash flow analyses, was
approximately $82,827.
The Company issued a series of Senior Notes due 1996-2002 with an average
interest rate of 7.75% to a group of investors on October 29, 1992. The notes
are payable in seven equal annual installments commencing November 1, 1996.
Interest is payable semi-annually.
19
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Long-Term Debt and Extraordinary Loss - (Continued)
In connection with the acquisition of the Apparel Group of Crystal Brands,
Inc., the Company amended its primary revolving credit agreement on February
13, 1995. The amended agreement provides that the Company may, at its option,
borrow and repay amounts up to a maximum of $185,000, except that for the
Company's third quarter, during which period its borrowings peak, the maximum
amount available to the Company is $200,000. All outstanding borrowings under
this agreement are due February 13, 1999. Interest on amounts borrowed under
the revolving credit agreement is payable quarterly at the prime rate or at
LIBOR plus .50%. A commitment fee of .25% is payable quarterly on the
unutilized portion of the facility.
On February 13, 1995, the Company entered into a secondary revolving
credit agreement under which the Company may, at its option, borrow and repay
amounts up to a maximum of $15,000. Borrowings under this agreement bear
interest at prevailing market rates as determined by the lending bank.
Interest paid was $14,131 (1994), $18,007 (1993), $15,357 (1992).
Scheduled maturities of long-term debt, including current portion, for the
next five years are as follows: 1995-$260, 1996-$10,137, 1997-$10,157,
1998-$10,182 and 1999-$10,202.
Issuance of Common Stock and Repurchase of Series B Convertible Redeemable
Preferred Stock
On May 4, 1992, the Company completed the sale of 6,440,000 shares of its
common stock with net proceeds of $133,949. On the same day, the Company used
$121,148 of these proceeds to repurchase its preferred stock (with a
liquidation value of $72,800) from The Prudential Insurance Company of
America. The price paid for the preferred stock reflects both a reduction in
interest rates since the time of the original issue of the preferred stock as
well as the value of its conversion feature. The net effect of these two
transactions was to increase the Company's stockholders' equity by $85,601.
While it was outstanding, the preferred stock was entitled to receive
cumulative cash dividends at the annual rate of 11.25% per $100 of liquidation
value (equivalent to an annual dividend of $675 per share).
If the issuance of the common stock and repurchase of the preferred stock
had been completed on February 3, 1992, instead of May 4, 1992, the Company's
net income per share for 1992 of $1.42 would have been unchanged.
20
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Stockholders' Equity
Preferred Stock Rights - On June 10, 1986, the Board of Directors declared
a distribution of one Right (the "Rights") to purchase Series A Cumulative
Participating Preferred Stock, par value $100 per share, for each outstanding
share of common stock. As a result of subsequent stock splits, each
outstanding share of common stock now carries with it one-fifth of one Right.
Under certain circumstances, each Right will entitle the registered holder
to acquire from the Company one one-hundredth (1/100) of a share of said
Series A Preferred Stock at an exercise price of $100. The Rights will be
exercisable, except in certain circumstances, commencing ten days following a
public announcement that (i) a person or group has acquired or obtained the
right to acquire 20% or more of the common stock, in a transaction not
approved by the Board of Directors or (ii) a person or group has commenced or
intends to commence a tender offer for 30% or more of the common stock (the
"Distribution Date").
If the Company is the surviving corporation in a merger or other business
combination then, under certain circumstances, each holder of a Right will
have the right to receive upon exercise the number of shares of common stock
having a market value equal to two times the exercise price of the Right.
In the event the Company is not the surviving corporation in a merger or
other business combination, or more than 50% of the Company's assets or
earning power is sold or transferred, each holder of a Right will have the
right to receive upon exercise the number of shares of common stock of the
acquiring company having a market value equal to two times the exercise price
of the Right.
At any time prior to the close of business on the Distribution Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.05
per Right. The Rights will expire June 16, 1996, unless such date is extended
or the Rights are earlier redeemed by the Company.
Stock Options - Under the Company's stock option plans, non-qualified and
incentive stock options ("ISOs") may be granted. Options are granted at fair
market value at the date of grant. ISOs and non-qualified options granted have
a ten year duration. All options are cumulatively exercisable in three
installments commencing two years after the date of grant for grants issued
prior to March 30, 1993, and commencing three years after the date of grant
for grants issued after that date.
21
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Stockholders' Equity - (Continued)
Other data with respect to stock options follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
<S> <C> <C> <C>
Outstanding at February 2, 1992. . . . . . . . . . . . . . . . . . . 2,279,784 $3.55- $20.00
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,370 22.15- 27.00
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 786,047 3.55- 11.00
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,006 4.75- 22.38
Outstanding at January 31, 1993. . . . . . . . . . . . . . . . . . . 1,664,101 3.80- 27.00
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479,029 28.00- 36.00
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486,647 3.80- 28.00
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,023 4.75- 31.63
Outstanding at January 30, 1994. . . . . . . . . . . . . . . . . . . 1,558,460 3.80- 36.00
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,907 15.25- 36.25
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,471 4.75- 22.38
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,647 4.75- 33.25
Outstanding at January 29, 1995. . . . . . . . . . . . . . . . . . . 1,554,249 $4.75- $36.25
</TABLE>
Of the outstanding options at January 29, 1995, and January 30, 1994,
options covering 900,242 and 778,362 shares were exercisable, respectively.
Stock options available for grant at January 29, 1995 and January 30, 1994
amounted to 219,748 and 364,208 shares, respectively.
Leases
The Company leases retail stores, manufacturing facilities, office space
and equipment. The leases generally are renewable and provide for the payment
of real estate taxes and certain other occupancy expenses. Retail store leases
generally provide for the payment of percentage rentals based on store sales,
and other costs associated with the leased property.
At January 29, 1995, minimum annual rental commitments under
non-cancellable operating leases, including leases for new retail stores which
had not begun operating at January 29, 1995, are as follows:
1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,685
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,343
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,270
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,042
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,611
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . 78,937
Total minimum lease payments. . . . . . . . . . . . . . . . . . $316,888
22
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Leases - (Continued)
Rent expense, principally for real estate, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,089 $46,275 $39,809
Percentage and other. . . . . . . . . . . . . . . . . . . . . . . 10,435 12,232 9,067
$66,524 $58,507 $48,876
</TABLE>
Retirement and Benefit Plans
Defined Benefit Plans - The Company has noncontributory, defined benefit
pension plans covering substantially all U.S. employees meeting certain age
and service requirements. For those vested (after five years of service), the
plans provide monthly benefits upon retirement based on career compensation
and years of credited service. It is the Company's policy to fund pension cost
annually in an amount consistent with Federal law and regulations. The assets
of the plans are principally invested in a mix of fixed income and equity
investments. In addition, the Company also participates in multi-employer
plans, which provide defined benefits to their union employees.
A summary of the components of net pension cost for the defined benefit
plans and the total contributions charged to pension expense for the
multi-employer plans follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Defined Benefit Plans:
Service cost - benefits earned during the period . . . . . . . . . $2,294 $1,828 $ 1,453
Interest cost on projected benefit obligation. . . . . . . . . . . 2,922 2,429 2,039
Actual loss (gain) on plan assets. . . . . . . . . . . . . . . . . 1,854 (2,074) (2,255)
Net amortization and deferral of actuarial gains . . . . . . . . . (3,048) 612 771
Net pension cost of defined benefit plans. . . . . . . . . . . . . 4,022 2,795 2,008
Multi-employer plans. . . . . . . . . . . . . . . . . . . . . . . . 214 215 222
Total pension expense . . . . . . . . . . . . . . . . . . . . . . . $4,236 $3,010 $ 2,230
</TABLE>
Significant rate assumptions used in determining pension obligations at
the end of each year, as well as pension cost in the following year, were
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Discount rate used in determining projected benefit obligation. . . . 8.75% 7.5% 8.0%
Rate of increase in compensation levels . . . . . . . . . . . . . . . 5.25% 5.0% 5.5%
Long-term rate of return on assets. . . . . . . . . . . . . . . . . . 8.75% 7.5% 7.5%
</TABLE>
23
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Retirement and Benefit Plans - (Continued)
The following table sets forth the plans' funded status and amounts
recognized on the Company's balance sheet at January 29, 1995 and January 30,
1994 for defined benefit plans:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . $29,358 $ 30,884
Accumulated benefit obligation. . . . . . . . . . . . . . . . . . . . $30,680 $ 32,171
Projected benefit obligation for services rendered to date. . . . . . . $36,401 $ 39,318
Less: plan assets at fair value . . . . . . . . . . . . . . . . . . . . (26,012) (26,011)
Projected benefit obligation in excess of plan assets . . . . . . . . . 10,389 13,307
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . (4,209) (4,771)
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . (2,485) (5,435)
Unrecognized net asset at adoption date of FAS Statement No. 87 . . . . 442 509
Net pension liability recognized on the balance sheet . . . . . . . . . $ 4,137 $ 3,610
</TABLE>
The net pension liability is included in accrued expenses and other
liabilities.
The Company has an unfunded supplemental defined benefit plan covering 25
current and retired executives under which the participants will receive a
predetermined amount during the 10 years following the attainment of age 65,
provided that prior to the termination of employment with the Company, the
participant has been in the plan for at least 10 years and has attained age
55. The Company does not intend to admit new participants in the future. At
January 29, 1995 and January 30, 1994, $6,127 and $5,343, respectively, are
included in other liabilities as the accrued cost of this plan.
Savings and Retirement Plans - The Company has a savings and retirement
plan (the "Associates Investment Plan") and a supplemental savings plan for
the benefit of its eligible employees who elect to participate. Participants
may elect to contribute up to 6% of their annual compensation, as defined, to
the plans. Company contributions to the plans are equal to 50% of the amounts
contributed by participating employees and were 2,406 in 1994, $2,303 in 1993
and $2,206 in 1992. In accordance with the terms of the Associates
Investment Plan, a portion of its assets are invested in the Company's common
stock.
Post-retirement Benefits - The Company and its domestic subsidiaries
provide certain health care and life insurance benefits to retired employees.
Employees become eligible for these benefits if they reach retirement age
while working for the Company. Retirees contribute to the cost of this plan,
which is unfunded.
24
<PAGE>
On February 1, 1993, the Company adopted FAS Statement No. 106 which requires
that the cost of this plan be recognized as an expense as employees render
service instead of when the benefits are paid. Post-retirement benefit cost
for 1992, which was recorded on a cash basis and totalled $459 in that year,
has not been restated.
Net post-retirement benefit cost includes the following components:
1994 1993
Service cost $ 402 $ 275
Interest cost 850 739
Amortization of transition obligation 273 273
$1,525 $1,287
The following reconciles the plan's accumulated post-retirement benefit with
amounts recognized in the Company's balance sheet:
Accumulated post-retirement benefit obligation:
1994 1993
Retirees receiving benefits 7,086 $7,481
Fully eligible active plan participants 1,065 1,092
Active plan participants not eligible for benefits 2,300 2,053
10,451 10,626
Unrecognized transition obligation (4,916) (5,189)
Unrecognized net loss (709) (1,011)
Post-retirement liability recognized on the
balance sheet $ 4,826 $4,426
The weighted average annual assumed rate of increase in the cost of covered
benefits (i.e., health care cost trend rate) is 9.0% for 1995 and is assumed
to decrease gradually to 5.0% by 2040 and remain at that level thereafter.
Increasing the assumed health care cost trend rate by one percentage point
would increase the accumulated post-retirement benefit obligation as of
January 29, 1995 by $1,045, and the aggregate of the service and interest cost
components of net post-retirement benefit cost for 1994 by $163. The discount
rate used in determining the accumulated post-retirement benefit obligation
was 8.75%.
25
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Segment Data
The Company operates in two industry segments: (i) apparel - the
manufacture, procurement for sale and marketing of a broad range of men's,
women's and children's apparel to traditional wholesale accounts as well as
through Company-owned retail stores, and (ii) footwear - the manufacture,
procurement for sale and marketing of a broad range of men's, women's and
children's shoes to traditional wholesale accounts as well as through
Company-owned retail stores.
Operating income represents net sales less operating expenses. Excluded
from operating results of the segments are interest expense, net, corporate
expenses and income taxes.
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net Sales
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 883,949 $ 800,454 $709,361
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 371,517 351,940 333,204
Total Net Sales . . . . . . . . . . . . . . . . . . . . . . . . $1,255,466 $1,152,394 $1,042,565
Operating Income
Apparel(1). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,091 $ 56,139 $ 49,931
Footwear(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 31,525 37,559 35,786
Total Operating Income. . . . . . . . . . . . . . . . . . . . . 60,616 93,698 85,717
Corporate Expenses(3). . . . . . . . . . . . . . . . . . . . . . . (10,914) (13,387) (15,509)
Interest Expense, net. . . . . . . . . . . . . . . . . . . . . . . (12,793) (16,679) (15,727)
Income Before Taxes . . . . . . . . . . . . . . . . . . . . . . $ 36,909 $ 63,632 $ 54,481
Identifiable Assets
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 307,111 $ 305,132 $283,256
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,261 164,197 140,091
483,372 469,329 423,347
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,966 85,442 94,015
$ 594,338 $ 554,771 $517,362
Depreciation and Amortization
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,977 $ 12,843 $ 10,700
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,125 4,405 3,066
22,102 17,248 13,766
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,207 1,878 1,254
$ 24,309 $ 19,126 $ 15,020
Identifiable Capital Expenditures
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,176 $ 29,449 $ 23,488
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,152 16,038 6,453
42,328 45,487 29,941
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,812 2,379 6,830
$ 53,140 $ 47,866 $ 36,771
</TABLE>
(1) Operating income of the apparel segment includes net charges for
restructuring of $7,000 in 1994 and $2,000 in 1992.
(2) In 1992, reserves of $1,600 for closing the Company's footwear catalog
business were charged to operating income of the footwear segment.
(3) In 1992, corporate expenses include $2,400 for relocating the Company's
administrative offices to Bridgewater, New Jersey and South Portland,
Maine.
26
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Segment Data - (Continued)
Apparel inventories as of January 29, 1995 and January 30, 1994 of
$132,875 and $150,857, respectively, were determined using the LIFO method.
Acquisition
On January 24, 1995, the Company entered into a binding agreement to
acquire the Apparel Group of Crystal Brands, Inc. for $114,700 in cash,
subject to certain adjustments. This acquisition was completed on February
17, 1995. The cash used for the acquisition was provided in part from the
Company's invested cash, and in part from borrowings under the Company's
revolving credit agreements. The assets acquired relate principally to the
production and distribution of men's and women's sportswear under the brand
names Izod, Gant and Salty Dog.
Restructuring
During the fourth quarter of 1994, the Company implemented a plan to
restructure and consolidate certain managerial, field supervisory and
administrative functions associated with its retail operations, and adopted a
plan to realign its wholesale apparel business from four operating divisions
into a dress shirt division and a sportswear division. This new structure
will reduce expenses while improving the Company's marketing focus.
Also, in connection with the acquisition of Crystal Brands, the Company
adopted a plan to convert its Cape Isle Knitters and Windsor Shirt private
label retail stores to stores which will market branded apparel under the Izod
and Gant labels. The Company believes that these store conversions will have
a positive impact on the future sales and earnings of these two retail
companies.
As a result, the Company eliminated approximately eighty five positions at
a cost of $3,300. Also, various other costs associated with the retail and
wholesale consolidations and with the Cape Isle Knitters and Windsor Shirt
conversions estimated at $5,300 have been recognized. Included in the current
year's restructuring charge is a reversal of $1,600 of prior year's
restructuring reserves, related to the Company's wholesale sweater operations,
which were determined to be no longer required as a result of certain events
in the fourth quarter. Accordingly, $7,000 has been recognized as a net
restructuring charge during the fourth quarter of 1994. Prior to January 29,
1995, approximately $847 of termination benefits had been charged against the
$8,600 restructuring reserve.
As part of its ongoing expense reduction initiatives, the Company
continues to evaluate its operating structure.
27
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands, except share data)
Other Comments
The Company has available a letter of credit facility from its lending
banks totaling $200,000 of which $98,469 was utilized at January 29, 1995.
The Company is a party to certain litigation which, in management's
judgment based in part on the opinion of legal counsel, will not have a
material adverse effect on the Company's financial position.
During 1994, 1993 and 1992 the Company has paid $0.0375 quarterly cash
dividends per share on its common stock.
Certain items in 1993 and 1992 have been reclassified to present these
items on a basis consistent with 1994.
28
<PAGE>
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
Management of the Company has the responsibility for preparing the
accompanying financial statements and for their integrity and objectivity.
The statements have been prepared by management in conformity with generally
accepted accounting principles. The financial statements include some amounts
that are based on management's best estimates and judgements. Management also
prepared the other information in the annual report and is responsible for its
accuracy and consistency with the financial statements.
The Company maintains a system of internal accounting controls designed to
provide management with reasonable assurance that transactions are executed in
accordance with management's authorization and recorded properly. The concept
of reasonable assurance is based on the recognition that the cost of a system
of internal control should not exceed the benefits derived and that the
evaluation of those factors requires estimates and judgements by management.
Further, because of inherent limitations in any system of internal accounting
control, errors or irregularities may occur and not be detected.
Nevertheless, management believes that a high level of internal control is
maintained by the Company through the selection and training of qualified
personnel, the establishment and communication of accounting and business
policies, and its internal audit program.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with management and the Company's internal
auditors and independent auditors to review matters relating to the quality of
financial reporting and internal accounting control and the nature, extent and
results of their audits. The Company's internal auditors and independent
auditors have complete access to the Audit Committee.
SIGNATURE STAMP SIGNATURE STAMP
BRUCE J. KLATSKY IRWIN W. WINTER
Chairman, President and Vice President and
Chief Executive Officer Chief Financial Officer
29
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Stockholders and the Board of Directors
Phillips-Van Heusen Corporation
We have audited the accompanying consolidated balance sheets of Phillips-
Van Heusen Corporation and subsidiaries as of January 29, 1995 and January 30,
1994, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended January 29, 1995. 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.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Phillips-Van
Heusen Corporation and subsidiaries at January 29, 1995 and January 30, 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended January 29, 1995 in conformity with
generally accepted accounting principles.
E&Y SIGNATURE STAMP
New York, New York
March 14, 1995
30
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED
(In thousands, except per share data)
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
1994 1993 1994 1993(1) 1994 1993 1994(2) 1993(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . $238,897 $221,924 $283,771 $264,016 $379,406 $357,389 $353,392 $309,065
Gross profit . . . . . . . 79,162 78,124 94,761 94,893 123,387 124,272 112,501 109,656
Income (loss) before
extraordinary loss . . . (3,531) (2,208) 5,735 7,757 17,850 24,520 9,961 13,183
Net income . . . . . . . . (3,531) (2,208) 5,735 7,757 17,850 24,520 9,961 1,789
Net income (loss) per
share:
Before extraordinary
loss. . . . . . . . . . . (0.13) (.08) 0.21 0.29 0.66 0.91 0.37 0.48
Extraordinary loss (4) . . - - - - - - - (0.42)
Net income (5). . . . . . (0.13) (.08) 0.21 0.29 0.66 0.91 0.37 0.06
Price range of common
stock
High. . . . . . . . . . 39 32 3/4 33 1/2 33 3/8 23 3/4 34 1/2 16 3/8 37 5/8
Low . . . . . . . . . . 32 7/8 26 5/8 18 1/2 25 3/4 14 25 7/8 14 32 1/4
</TABLE>
(1) Net income for the second quarter of 1993 includes a pre-tax credit of
$1,700 for the adjustment of certain fringe benefit accruals.
(2) Net income for the fourth quarter of 1994 includes a net pre-tax charge
of $7,000 for restructuring, a pre-tax LIFO credit of $1,991 and a credit
of $4,209 which resulted from an adjustment to the estimated tax rate
used in the first three quarters.
(3) Net income for the fourth quarter of 1993 includes a pre-tax LIFO credit
of $1,699.
(4) Net income for the fourth quarter of 1993 includes an extraordinary loss,
net of tax, of $11,394 related to the prepayment of certain debt.
(5) Fully diluted net income per share has not been presented since the
results are not materially different from primary net income per share.
31
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
EIGHT YEAR FINANCIAL SUMMARY
(In thousands, except per share data, percents and ratios)
The Company's financial summary is presented from 1987, the year in which the
Company recapitalized its balance sheet and acquired G.H. Bass & Co.
<TABLE>
<CAPTION>
1994 1993 1992 1991
<S> <C> <C> <C> <C>
Summary of Operations
Net sales
Apparel. . . . . . . . . . . . . . . . . . . . . .$ 883,949 $ 800,454 $ 709,361 $596,383
Footwear . . . . . . . . . . . . . . . . . . . . . 371,517 351,940 333,204 307,717
1,255,466 1,152,394 1,042,565 904,100
Cost of goods sold and expenses. . . . . . . . . . . 1,205,764 1,072,083 972,357 843,367
Interest expense, net. . . . . . . . . . . . . . . . 12,793 16,679 15,727 16,686
1,218,557 1,088,762 988,084 860,053
Income before taxes. . . . . . . . . . . . . . . . . 36,909 63,632 54,481 44,047
Income taxes . . . . . . . . . . . . . . . . . . . . 6,894 20,380 16,600 12,910
Income from continuing operations
before extraordinary loss. . . . . . . . . . . . . 30,015 43,252 37,881 31,137
(Loss) income from discontinued
operations . . . . . . . . . . . . . . . . . . . . - - - -
Extraordinary loss, net of tax . . . . . . . . . . . - (11,394) - -
Net income. . . . . . . . . . . . . . . . . . .$ 30,015 $ 31,858 $ 37,881 $ 31,137
Per Share Statistics(3)
Income from continuing operations
before extraordinary loss. . . . . . . . . . . . .$ 1.11 $ 1.60 $ 1.42 $ 1.15
Discontinued operations. . . . . . . . . . . . . . . - - - -
Extraordinary loss . . . . . . . . . . . . . . . . . - (0.42) - -
Net income . . . . . . . . . . . . . . . . . . . . .$ 1.11 $ 1.18 $ 1.42 $ 1.15
Dividends paid per share . . . . . . . . . . . . . . 0.15 0.15 0.15 0.1425
Stockholders' equity per share.. . . . . . . . . . . 10.35 9.33 8.14 4.52
Financial Position
Invested cash. . . . . . . . . . . . . . . . . . . .$ 68,586 $ 66,064 $ 75,862 $ 5,326
Current assets . . . . . . . . . . . . . . . . . . . 429,670 418,702 410,522 303,143
Current liabilities. . . . . . . . . . . . . . . . . 114,033 109,156 115,208 102,976
Working capital. . . . . . . . . . . . . . . . . . . 315,637 309,546 295,314 200,167
Total assets . . . . . . . . . . . . . . . . . . . . 596,284 554,771 517,362 398,969
Long-term debt . . . . . . . . . . . . . . . . . . . 169,679 169,934 170,235 121,455
Series B convertible redeemable
preferred stock. . . . . . . . . . . . . . . . . . - - 72,800
Stockholders' equity . . . . . . . . . . . . . . . . 275,460 246,799 211,413 84,903
Other Statistics
Total debt to total capital (4). . . . . . . . . . . 38.2% 40.8% 46.8% 46.0%
Net debt to net capital (5). . . . . . . . . . . . . 26.9% 29.7% 34.3% 45.0%
Market value of stockholders' equity . . . . . . . .$ 426,000 $ 949,000 $ 753,000 $392,000
Current ratio. . . . . . . . . . . . . . . . . . . . 3.8 3.8 3.6 2.9
Average shares and equivalents outstanding . . . . . 27,154 27,106 25,253 19,897
(1) 1990 includes 53 weeks of operations.
(2) 1987 includes the operations of G.H. Bass & Co. from date of acquisition, August 21, 1987,
and includes a gain on settlement of pension plans of $3,415, or $0.13 per share.
(3) Fully diluted net income per share has not been presented since the results are either not
materially different from primary net income per share or are anti-dilutive.
(4) Total capital equals interest-bearing debt, preferred stock and stockholders' equity.
(5) Net debt and net capital are total debt and total capital reduced by invested cash.
</TABLE>
32
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
EIGHT YEAR FINANCIAL SUMMARY (CONTINUED)
(In thousands, except per share data, percents and ratios)
The Company's financial summary is presented from 1987, the year in which
the Company recapitalized its balance sheet and acquired G.H. Bass & Co.
<TABLE>
<CAPTION>
1990(1) 1989 1988 1987(2)
<S> <C> <C> <C> <C>
Summary of Operations
Net sales
Apparel. . . . . . . . . . . . . . . . . . . . . . $536,352 $493,395 $460,342 $416,407
Footwear . . . . . . . . . . . . . . . . . . . . . 269,963 239,541 180,696 83,618
806,315 732,936 641,038 500,025
Cost of goods sold and expenses. . . . . . . . . . . 752,252 682,687 597,543 457,842
Interest expense, net. . . . . . . . . . . . . . . . 18,884 17,555 16,109 6,210
771,136 700,242 613,652 464,052
Income before taxes. . . . . . . . . . . . . . . . . 35,179 32,694 27,386 35,973
Income taxes . . . . . . . . . . . . . . . . . . . . 8,795 8,502 6,565 14,655
Income from continuing operations
before extraordinary loss. . . . . . . . . . . . . 26,384 24,192 20,821 21,318
(Loss) income from discontinued
operations . . . . . . . . . . . . . . . . . . . . - - (152) 8,691
Extraordinary loss, net of tax . . . . . . . . . . . - - - -
Net income. . . . . . . . . . . . . . . . . . . $ 26,384 $ 24,192 $ 20,669 $ 30,009
Per Share Statistics(3)
Income from continuing operations
before extraordinary loss. . . . . . . . . . . . . $ 0.95 $ 0.84 $ 0.68 $ 0.66
Discontinued operations. . . . . . . . . . . . . . . - - (0.01) 0.33
Extraordinary loss . . . . . . . . . . . . . . . . . - - - -
Net income . . . . . . . . . . . . . . . . . . . . . $ 0.95 $ 0.84 $ 0.67 $ 0.99
Dividends paid per share . . . . . . . . . . . . . . 0.14 0.14 0.14 0.125
Stockholders' equity per share.. . . . . . . . . . . 3.38 2.53 1.79 1.24
Financial Position
Invested cash. . . . . . . . . . . . . . . . . . . . $ 5,796 $ 3,551 $ 7,191 $ 8,979
Current assets . . . . . . . . . . . . . . . . . . . 285,315 266,867 265,039 258,135
Current liabilities. . . . . . . . . . . . . . . . . 90,748 84,190 88,191 86,741
Working capital. . . . . . . . . . . . . . . . . . . 194,567 182,677 176,848 171,394
Total assets . . . . . . . . . . . . . . . . . . . . 376,790 333,108 323,133 317,773
Long-term debt . . . . . . . . . . . . . . . . . . . 140,259 118,776 116,400 120,848
Series B convertible redeemable
preferred stock. . . . . . . . . . . . . . . . . . 72,800 72,800 72,800 72,800
Stockholders' equity . . . . . . . . . . . . . . . . 62,324 46,085 32,476 22,456
Other Statistics
Total debt to total capital (4). . . . . . . . . . . 53.2% 52.6% 55.1% 56.9%
Net debt to net capital (5). . . . . . . . . . . . . 52.2% 51.9% 53.7% 55.1%
Market value of stockholders' equity . . . . . . . . $173,000 $132,000 $127,000 $ 86,000
Current ratio. . . . . . . . . . . . . . . . . . . . 3.1 3.2 3.0 3.0
Average shares and equivalents outstanding . . . . . 19,094 19,140 18,572 26,258
(1) 1990 includes 53 weeks of operations.
(2) 1987 includes the operations of G.H. Bass & Co. from date of acquisition, August 21, 1987,
and includes a gain on settlement of pension plans of $3,415, or $0.13 per share.
(3) Fully diluted net income per share has not been presented since the results are either not
materially different from primary net income per share or are anti-dilutive.
(4) Total capital equals interest-bearing debt, preferred stock and stockholders' equity.
(5) Net debt and net capital are total debt and total capital reduced by invested cash.
</TABLE>
33
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PHILLIPS-VAN HEUSEN CORPORATION FINANCIAL STATEMENTS INCLUDED IN ITS 10-K
REPORT FOR THE YEAR ENDED JANUARY 29, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-1995
<PERIOD-END> JAN-29-1995
<CASH> 80,473
<SECURITIES> 0
<RECEIVABLES> 77,527
<ALLOWANCES> (1,617)
<INVENTORY> 255,244
<CURRENT-ASSETS> 429,670
<PP&E> 136,297<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 596,284
<CURRENT-LIABILITIES> 114,033
<BONDS> 169,679
<COMMON> 26,610
0
0
<OTHER-SE> 248,850
<TOTAL-LIABILITY-AND-EQUITY> 596,284
<SALES> 1,255,466
<TOTAL-REVENUES> 1,255,466
<CGS> 845,655
<TOTAL-COSTS> 845,655
<OTHER-EXPENSES> 360,109
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 12,793
<INCOME-PRETAX> 36,909
<INCOME-TAX> 6,894
<INCOME-CONTINUING> 30,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,015
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<FN>
<F1>Property, plant and equipment is presented net of accumulated
depreciation.
<F2>Provision for doubtful accounts is included in other costs and expenses.
</FN>
</TABLE>
