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 28, 1996 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 19, 1996 was approximately
$335,100,000.
Number of shares of Common Stock outstanding as of April 19, 1996:
26,987,252.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K
Document in which incorporated
Registrant's 1995 Annual Report to Stockholders Parts I and II
for the Fiscal Year Ended January 28, 1996
Registrant's Proxy Statement Part III
for the Annual Meeting of
Stockholders to be held on June 18, 1996
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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. On February 17, 1995, the
Company acquired the Apparel Group of Crystal Brands, Inc. ("Crystal Brands")
and in connection therewith, acquired ownership of the "Izod" and "Gant" brand
names. "Izod" is the best-selling men's sweater brand in the United States.
The Company is also a leading manufacturer and distributor of private label
shirts and sweaters. In addition, the Company has a licensing agreement to
make and market "Jantzen" branded men's sweaters.
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 and
JCPenney. Wholesale customers for its private label shirts include JCPenney,
Mervyn's, Lord & Taylor, Sears and Target, while wholesale customers for the
Company's private label sweaters and golf apparel include JCPenney and Sears.
The Company's customers for footwear include May Co., Dillard's, Federated and
Dayton Hudson. In fiscal 1995, 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 more than 900 Company-owned stores operated in five different
formats located primarily in manufacturers' outlet malls. At the end of fiscal
1995, these formats were Van Heusen, Geoffrey Beene, Bass, Gant and Izod.
According to MRCA Information Services, 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.
The Company believes its overall share of the United States men's dress
shirt market, including its branded, designer and private label offerings, is
the largest of any single company. In addition to marketing dress shirts, the
Company has responded to the growing sportswear market in the United States by
expanding its major brand product offerings to sportswear. The Company's "Van
Heusen" brand is the number-one selling men's woven sport shirt in the United
States, according to MRCA Information Services. With the acquisition of the
"Izod" and "Gant" 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
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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 success of a new outlet mall is heavily dependent on its
location and the attraction of a well known group of tenants.
The Company's stores also 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 principal
brands 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 stores. For example, the Company now offers men's and
women's sportswear and accessories in many of its Bass stores and has
continued increasing the number of its stores offering Geoffrey Beene women's
wear.
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 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; and Geoffrey Beene - the better
fashion 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.
Although the Company's expansion of its retail operations has led to
significant sales growth, many of the Company's stores have recently operated
unprofitably. The Company believes this has resulted from both a significant
downturn in recent years in the apparel and footwear markets as well as its
opening of retail stores in manufacturers' outlet centers that proved to be
less competitive as new and more productive centers opened in surrounding
areas. To address the Company's overexpansion in outlet retailing, during
fiscal 1995 the Company initiated a plan to close approximately 300
unprofitable stores. These store closings will allow the Company to achieve a
more balanced retail/wholesale sales mix while allowing the Company to reduce
its investment in its retail operations. Despite these closings, the Company
plans to continue selectively opening new stores in certain manufacturers'
outlet centers. However, since the Company already features one or more of
its store formats in the best-performing manufacturers' outlet centers in the
United States, and since the development and opening of new manufacturers'
outlet centers are occurring at a slower pace than in the past, future store
openings are anticipated to be fewer than in recent years.
Acquisition of the Apparel Group of Crystal Brands
On February 17, 1995, the Company acquired the Apparel Group of Crystal
Brands which added "Izod" and "Gant" to the Company's roster of highly
regarded brands. "Izod" and "Gant" products are sold at many better
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department stores in the United States, including Macy's, Belk's, Dillard's
and May Co. In connection with the acquisition, the Company acquired 88
outlet stores which marketed apparel under the labels acquired from Crystal
Brands. The Company has converted 34 of these stores to stores which market
apparel under either the "Izod" or "Gant" label, or to other store formats
which the Company operates and has closed the other 54 stores. In addition,
the Company has converted substantially all of its private label retail stores
into stores which market apparel under either the "Izod" or "Gant" label. 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.
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", "Izod Club" and "Gant". The Company also markets
various private label apparel products.
Van Heusen
"Van Heusen" is the best-selling men's dress shirt and woven sport shirt
brand in the United States, according to research conducted by MRCA
Information Services. In addition to the "Van Heusen" label, branded products
are marketed under the sub-brands "417", "Players", "Over Easy", "Corporate
Casual", "Winter-weights" and "Editions."
"Van Heusen" branded dress and sport shirts and sweaters 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 1995, 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 other fine
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 "Geoffrey Beene" labelled designer apparel under
three different licensing agreements with that designer. One agreement
permits the Company to market "Geoffrey Beene" labelled dress shirts and
sweaters at wholesale until the agreement terminates on December 31, 2001.
Two other agreements, one for men's apparel, the other for women's apparel,
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permit the Company to market "Geoffrey Beene" labelled products in its retail
stores. The men's and women's agreements have renewal options extending
through December 31, 2005 and December 31, 2008, respectively.
"Geoffrey Beene" dress shirts are the best-selling men's designer dress
shirts in the United States, according to MRCA Information Services.
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 dress 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 and May Co.
The Company's Geoffrey Beene stores offer a distinctive collection of
men's "Geoffrey Beene" labelled products, including dress and sport shirts,
neckwear, furnishings, outerwear, bottoms and sportswear. 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 1995, 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 and Frederick Atkins, are sold in the upper
moderate to better price range.
Until 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 approximately 60% of its Bass stores. The
Company plans to continue to expand the percentage of its Bass stores carrying
"Bass" apparel products in the future.
Izod
"Izod" branded apparel products consist of active inspired men's
sportswear, including "Izod" sweaters (the best-selling men's sweater brand in
the United States, according to the NPD Consumer Purchase Panel). These
products are marketed in the upper moderate to better price range to major
retailers, including JCPenney, May Co. and Macy's.
The Company's retail business offering Izod products features stores
marketing men's and women's casual sportswear. Target customers are generally
brand loyalists who expect quality and fashion at reasonable prices.
Izod Club
"Izod Club" branded golf apparel products are marketed to golf pro shops
and golf resort retail stores in the better price range. "Izod Club" products
consist of collections of men's and women's apparel designed to outfit the
golfer from "head to toe". Products in the collection include golf shirts,
hats, sweaters, hosiery and, beginning in the Fall of 1996, footwear.
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Gant
"Gant" branded apparel consists of a collection of men's sportswear,
including woven and knit tops and bottoms. The "Gant" brand represents an
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 Dillard's, Belk's, May Co., Macy's and fine specialty
stores.
The Company's Gant outlet stores offer fine quality knit and woven
shirts, sweaters, pants and shorts, outerwear and accessories for men. The
"Gant" line incorporates several sportswear "lifestyles". Included are
spectator-active and casual wear products, all of which maintain detailed
construction and high quality fabrics.
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" apparel products are sold in the moderate
to better price range. Major customers for "Jantzen" branded apparel are
department and specialty stores including Belk's, Mercantile, Dayton Hudson
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.
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 and department stores, including JCPenney,
Mervyns, Lord & Taylor and Sears. 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 and Sears. 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 dress shirts in the United
States.
During fiscal 1995, the Company ceased operating its Cape Isle Knitters
and Windsor Shirt private label retail stores, in large part by converting
these stores to another store format which the Company operates. The Company
currently plans to market private label apparel only at wholesale for the
foreseeable future.
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. Competitive
pressures have been increased by the recent consolidations and closings of
major department store groups. Based on the variety of the apparel marketed
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by the Company and 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. The Company's retail stores
also compete with department stores, specialty stores, chain stores and
catalogs.
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. The Company also
offers a line of men's dress shoes. Various sub-brands are utilized, the most
important ones being "Weejun" and "Sunjun". "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 4.4% 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 and Dayton Hudson. In 1992, Bass began marketing its footwear
internationally and is now selling footwear to 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's Bass stores, located primarily 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. In addition, apparel and accessories are marketed in approximately
60% of the Company's Bass 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.
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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. The Company's retail stores also
compete with department stores, specialty stores, chain stores and catalogs.
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 "EDI" system)
maximize its inventory flexibility and minimize production overruns. This EDI
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.
Dress 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.
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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
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. 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" and Izod" 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
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 a complete range
of sportswear and footwear in Europe, Australia, New Zealand and the Far East.
(During fiscal 1995, the Company acquired 25% of this Gant licensee, Pyramid
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Sportswear). The Company also 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" and "Izod" trademarks.
Retail Stores
As of January 28, 1996, the Company operated 911 stores in five different
formats: Van Heusen, Bass, Geoffrey Beene, Gant and Izod. The Company's
stores are located primarily in manufacturers' outlet malls. 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.
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, Nine West, 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 1991 and the number of stores
operated at the end of each fiscal year:
Fiscal Fiscal Fiscal Fiscal Fiscal
1995 1994 1993 1992 1991
Store openings:. . . . . . . . . . . . 102(1) 139 126 116 126
Store closings:. . . . . . . . . . . . 63 47 51 47 40
Total stores operated at year end: . . 911 872 780 705 636
(1) Includes a net addition of 34 stores acquired from Crystal Brands.
Although the Company's expansion of its retail operations has led to
significant sales growth, many of the Company's stores have recently operated
unprofitably. The Company believes this has resulted from both a significant
downturn in recent years in the apparel and footwear markets as well as its
opening of retail stores in manufacturers' outlet centers that proved to be
less competitive as new and more productive centers opened in surrounding
areas. To address this overexpansion, during fiscal 1995 the Company
initiated a plan to close approximately 300 unprofitable stores. Despite
these closings, the Company plans to continue selectively opening new stores
in certain manufacturers' outlet centers. However, since the Company already
features one or more of its store formats in the best-performing
manufacturers' outlet centers in the United States, and since the development
and opening of new manufacturers' outlet centers are occurring at a slower
pace than in the past, future store openings are anticipated to be fewer than
in recent years.
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 of
workmanship demanded by the Company. Field management then begins the
merchandising process. All of these efforts culminate with the opening of
each new store.
9
<PAGE>
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 is imported from its
Caribbean Basin manufacturing facilities and is 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. The existence of import quotas has, therefore, not had a material
adverse effect on the Company's business.
Employees
As of January 28, 1996, the Company employed approximately 9,800 persons
on a full-time basis and approximately 3,100 persons on a part-time basis.
Approximately 7% of the Company's 12,900 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.
10
<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 administrative offices at 404 Fifth Avenue, New York, New York,
where the Company occupies approximately 38,000 square feet under a lease
which expires on June 30, 1997, and 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 28, 1996:
Apparel Business
Square Feet of
Floor Space (000's)
Owned Leased Total
Manufacturing Facilities . . . . . . . . . . . . . . 239 235 474
Warehouses and Distribution Centers. . . . . . . . . 1,728 207 1,935
Administrative . . . . . . . . . . . . . . . . . . . 16 72 88
Retail Stores. . . . . . . . . . . . . . . . . . . . 6 2,383 2,389
1,989 2,897 4,886
Footwear Business
Owned Leased Total
Manufacturing Facilities . . . . . . . . . . . . . . 274 116 390
Warehouses and Distribution Centers. . . . . . . . . 127 241 368
Administrative . . . . . . . . . . . . . . . . . . . 20 128 148
Retail Stores. . . . . . . . . . . . . . . . . . . . 8 1,537 1,545
429 2,022 2,451
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.
11
<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 47
Irwin W. Winter Executive Vice President and Chief Financial
Officer; Director 62
Allen E. Sirkin Vice Chairman 53
Mark Weber Vice Chairman 47
Michael J. Blitzer Senior Vice President 46
Emanuel Chirico Vice President and Controller 38
Mr. Bruce J. Klatsky has been employed by the Company in various
capacities over the last 24 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 1987 as Vice President, Finance
and Chief Financial Officer. Mr. Winter has served as a director of the
Company since 1987.
Mr. Allen E. Sirkin has been employed by the Company since 1985. He
served as Chairman of the Company's Apparel Group since 1990 and was named
Vice Chairman of the Company in 1995.
Mr. Mark Weber has been employed by the Company in various capacities
over the last 24 years, had been a Vice President of the Company since 1988
and was named Vice Chairman of the Company in 1995.
Mr. Michael J. Blitzer has been employed by the Company since 1980. In
1995, Mr. Blitzer was named Senior Vice President. For the prior five years,
Mr. Blitzer served as President of the Company's Van Heusen retail operations.
Mr. Emanuel Chirico has been employed by the Company as Vice President
and Controller since 1993. Prior to that, Mr. Chirico was a partner with the
accounting firm of Ernst and Young LLP.
12
<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 1995 Annual Report to Stockholders, is
incorporated herein by reference. As of April 11, 1996, there were 1,969
stockholders of record of the Company's common stock.
Item 6. Selected Financial Data
Selected Financial Data which appears under the heading "Nine Year
Financial Summary" in the 1995 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 1995
Annual Report to Stockholders, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements, which appear in the 1995 Annual
Report to Stockholders, are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
13
<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 18, 1996.
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 18, 1996.
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 18, 1996.
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 18, 1996.
14
<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 28, 1996,
January 29, 1995 and January 30, 1994
Consolidated Balance Sheets--January 28, 1996 and January 29, 1995
Consolidated Statements of Cash Flows--Years Ended January 28, 1996,
January 29, 1995 and January 30, 1994
Consolidated Statements of Changes in Stockholders' Equity--
Years Ended January 28, 1996, January 29, 1995 and January 30, 1994
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
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).
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 (incorporated by reference
to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 29, 1995).
4.7 Second Amendment, dated as of July 17, 1995, to the Credit
Agreement dated as of December 16, 1993 (incorporated by reference
to Exhibit 4.7 to the Company's report on Form 10-Q for the period
ending October 29, 1995).
4.8 Third Amendment, dated as of September 27, 1995, to the Credit
Agreement dated as of December 16, 1993 (incorporated by reference
to Exhibit 4.8 to the Company's report on Form 10-Q for the period
ending October 29, 1995).
15
<PAGE>
4.9 Fourth Amendment, dated as of September 28, 1995, to the Credit
Agreement dated as of December 16, 1993 (incorporated by reference
to Exhibit 4.9 to the Company's report on Form 10-Q for the period
ending October 29, 1995).
4.10 Fifth Amendment, dated as of April 1, 1996, to the Credit Agreement
dated as of December 16, 1993.
4.11 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).
4.12 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 June 13,
1995 (incorporated by reference to Exhibit 10.1 to the Company's
report on Form 10-Q for the period ended October 29, 1995).
*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, as
amended as of April 16, 1996.
*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).
*10.8 Form of Agreement amending Phillips-Van Heusen Corporation Capital
Accumulation Plan with respect to individual participants
(incorporated by reference to Exhibit 10.8 to the Company's report
on Form 10-Q for the period ending October 29, 1995).
*10.9 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).
*10.10 Phillips-Van Heusen Corporation Supplemental Savings Plan, dated as
of January 1, 1991 and amended and restated as of July 1, 1995.
16
<PAGE>
10.11 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).
*10.12 Agreement, dated as of April 28, 1993, between Bruce J. Klatsky,
Lawrence S. Phillips and the Company (incorporated by reference to
Exhibit 10.11 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 29, 1995).
*10.13 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) (incorporated by reference to Exhibit 10.12 to
the Company's Annual Report on Form 10-K for the fiscal year ended
January 29, 1995).
*10.14 Amendment, dated December 6, 1993, to the Agreement, dated April
28, 1993, between Bruce J. Klatsky, Lawrence S. Phillips and the
Company (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended
January 29, 1995).
*10.15 Consulting and non-competition agreement, dated February 14, 1995,
between the Company and Lawrence S. Phillips (incorporated by
reference to Exhibit 10.14 to the Company's Annual Report on Form
10-K for the fiscal year ended January 29, 1995).
*10.16 Performance Restricted Stock Plan, as amended as of April 16, 1996.
13. Sections of the 1995 Annual Report to Stockholders for the fiscal
year ended January 28, 1996 which are included in Parts I and II of
this Form 10-K. These sections are Selected Quarterly Financial
Data, Nine 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 1995:
None
(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.
(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.
17
<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 16, 1996
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 16, 1996
Bruce J. Klatsky Officer and Director (Principal
Executive Officer)
Irwin W. Winter Executive Vice President and April 16, 1996
Irwin W. Winter Chief Financial Officer
Emanuel Chirico Vice President and Controller April 16, 1996
Emanuel Chirico (Principal Accounting Officer)
Edward H. Cohen Director April 16, 1996
Edward H. Cohen
Estelle Ellis Director April 16, 1996
Estelle Ellis
Joseph B. Fuller Director April 16, 1996
Joseph B. Fuller
Maria Elena Lagomasino Director April 16, 1996
Maria Elena Lagomasino
Harry N.S. Lee Director April 16, 1996
Harry N.S. Lee
Bruce Maggin Director April 16, 1996
Bruce Maggin
Ellis E. Meredith Director April 16, 1996
Ellis E. Meredith
Steven L. Osterweis Director April 16, 1996
Steven L. Osterweis
William S. Scolnick Director April 16, 1996
William S. Scolnick
Peter J. Solomon Director April 16, 1996
Peter J. Solomon
18
<PAGE>
FORM 10-K-ITEM 14(a)(2)
PHILLIPS-VAN HEUSEN CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedules of Phillips-Van
Heusen Corporation and subsidiaries are included herein:
Schedule II - Valuation and Qualifying Accounts. . . . . . . . F-2
Schedule IX - Short-Term Borrowings. . . . . . . . . . . . . . F-5
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 28, 1996
<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. . . . . . . . . . . . $1,616,538 $912,894(a) $3,331,061(b) $497,022(c) $5,363,471
(a) Provisions for doubtful accounts.
(b) Primarily reserves acquired in connection with the acquisition of the Gant and Izod businesses from Crystal
Brands.
(c) Primarily uncollectible accounts charged against the allowance provided therefor.
</TABLE>
F-2
<PAGE>
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-3
<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-4
<PAGE>
SCHEDULE IX
PHILLIPS-VAN HEUSEN CORPORATION
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Average
Maximum Amount Weighted
Weighted Amount Outstanding Average
Balance At Average Outstanding During Interest Rate
Category of Aggregate End Interest During the During
Short-Term Borrowing of Period Rate the Period Period(a) the Period(b)
<S> <C> <C> <C> <C> <C>
Year ended January 28, 1996:
Revolving Credit Facilities . . . $131,590,000 5.95% $204,975,000 $141,930,000 6.57%
Year ended January 29, 1995:
Revolving Credit Facilities . . .$ - - $ 5,260,000 $ 124,000 6.08%
Year ended January 30, 1994:
Revolving Credit Facilities . . .$ - - $ 41,600,000 $ 7,211,000 4.80%
(a) The average amount outstanding during the period was computed on a daily basis.
(b) The weighted average interest rate during the period was computed by dividing the actual interest expense
by the average revolving credit balance outstanding.
</TABLE>
F-5
<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
Confecciones Imperio, S.A. Costa Rica
Camisas Modernas, S.A. Guatemala
G. H. Bass Comercio
Exportacacao Ltda. Brazil
PVH Retail Corp. Delaware
IZOD Gant Corp. 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 12, 1996,
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 (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 12, 1996, 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 28, 1996.
ERNST & YOUNG LLP
New York, New York
April 24, 1996
FIFTH AMENDMENT
FIFTH AMENDMENT, dated as of April 1, 1996 (this "Amendment"),
among PHILLIPS-VAN HEUSEN CORPORATION (the "Borrower"), the financial
institutions party to the Credit Agreement referred to below (the "Banks"), and
BANKERS TRUST COMPANY, as agent (in such capacity, the "Agent") for the
Banks. 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 Banks and the Agent are parties to a
Credit Agreement, dated as of December 16, 1993 (as modified, supplemented or
amended prior to the date hereof, the "Credit Agreement");
WHEREAS, subject to the terms and conditions hereof, the Banks and
the Borrower have agreed 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:
1. The Credit Agreement is hereby amended by (a) deleting Section
8.05 thereof in its entirety and (b) inserting in lieu thereof the following
new Section 8.05:
"8.05 Interest Coverage Ratio. The Borrower will not permit
the ratio of (i) EBITDA to (ii) Interest Charges for any period of four
consecutive fiscal quarters of the Borrower (taken as one accounting
period) ending on a date set forth below to be less than the ratio set
forth opposite such date below:
Fiscal Quarter Ending
on or about Ratio
April 30, 1996 2.35:1.00
July 31, 1996 2.35:1.00
October 31, 1996 2.50:1.00
January 31, 1997 2.50:1.00
April 30, 1997 2.75:1.00
July 31, 1997 2.75:1.00
October 31, 1997 3.00:1.00
January 31, 1998 3.00:1.00
April 30, 1998 3.25:1.00
July 31, 1998 3.25:1.00
Thereafter 3.50:1.00
2. Section 10 of the Credit Agreement is hereby amended by (a)
deleting the definitions of "Applicable CD Rate Margin," Applicable Commitment
Commission Percentage," "Applicable Eurodollar Margin" and "EBIT" in their
entirety and (b) inserting the following new definitions in appropriate
alphabetical order:
"Applicable CD Rate Margin" shall mean, at any time when the Credit
Rating is at any level set forth below, a percentage equal to the
number of basis points set forth below opposite such Credit Rating (with
100 basis points equalling 1.0%):
Applicable CD
Credit Rating Rate Margin
A-/A3 27.5
BBB+/Baa1 32.5
BBB/Baa2 37.5
BBB-/Baa3 47.5
BB+/Ba1 62.5
BB/Ba2 or lower 112.5
"Applicable Eurodollar Margin" shall mean, at any time when the Credit
Rating of the Borrower is at any level set forth below, a percentage equal
to the number of basis points set forth below opposite such Credit
Rating (with 100 basis points equalling 1.0%):
2
<PAGE>
Applicable
Eurodollar
Credit Rating Margin
A-/A3 15
BBB+/Baa1 20
BBB/Baa2 25
BBB-/Baa3 35
BB+/Ba1 50
BB/Ba2 or lower 100
"Applicable Letter of Credit Percentage" shall mean, at any time when
the Credit Rating is at any level set forth below, a percentage equal to
the number of basis points set forth below opposite such Credit Rating
(with 100 basis points equalling 1.0%):
Applicable Letter of
Credit Rating Credit Percentage
A-/A3 40
BBB+/Baa1 45
BBB/Baa2 50
BBB-/Baa3 60
BB+/Ba1 75
BB/Ba2 or lower 125
"EBIT" shall mean, for any period, the sum of (i) Consolidated Net
Income of the Borrower for such period, (ii) provisions for taxes based on
income or profits to the extent such income or profits were included in
computing Consolidated Net Income and (iii) consolidated interest expense
(including amortization of original issue discount and non-cash interest
payments or accruals and the interest component of capitalized lease
obligations), net of interest income theretofore deducted from earnings in
computing Consolidated Net Income for such period; provided, however, that
EBIT shall be determined without giving effect to the Borrower's
$27,000,000 restructuring charge reflected in its financial statements for
the fiscal year ending on or about January 31, 1996.
3
<PAGE>
"EBITDA" shall mean, for any period, EBIT for such period, adjusted
by adding thereto the amount of all depreciation expense and amortization
expense (net of amortization of landlord allowance) that were deducted in
determining EBIT for such period.
3. This Amendment shall become effective on the date (the
"Amendment Effective Date") on which the Borrower and the Required Banks shall
have executed and delivered a counterpart of this Amendment.
4. Except as expressly amended hereby, the terms and conditions of
the Credit Agreement shall remain unchanged and in full force and effect.
5. 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.
6. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.
* * * * *
4
<PAGE>
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:
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:
5<PAGE>
CHEMICAL BANK
By
Title:
THE FIRST NATIONAL BANK OF BOSTON
By
Title:
CIBC, INC.
By
Title:
UNION BANK
By
Title:
6
PHILLIPS-VAN HEUSEN CORPORATION
SPECIAL SEVERANCE BENEFIT PLAN
As Amended as of April 16, 1996
1. PURPOSE.
The Plan is intended to induce the Participants to remain in
the employ of the Company, notwithstanding any possible concern
on their behalf as to the security of their employment with the
Company in the event of a Change in Control, and to provide
special benefits in recognition of the valuable services
heretofore rendered by the Participants to the Company and in
consideration of the Participants' remaining in the employ of the
Company pursuant to a written contract or the terms of the Plan.
2. DEFINITIONS.
Affiliate - 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.
Board - The Board of Directors of PVH.
Change in Control - A Change in Control shall be deemed to
occur upon (i) the election of one of more individuals to the
Board which election results in one-third of the directors of PVH
consisting of individuals who have not been directors of PVH for
at least two years, unless such individuals have been elected as
directors or nominated for election as directors by three-
fourths of the directors of PVH who have been directors of PVH
for at least two years; (ii) the sale by PVH of all or
substantially all of its assets to any Person, the consolidation
of PVH with any Person, the merger of PVH with any Person as a
result of which merger PVH is not the surviving entity as a
publicly held corporation; (iii) the sale or transfer of shares
of PVH by PVH 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 PVH 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 PVH
who have been directors of PVH for at least two years; or (iv)
the sale or transfer of shares of PVH by PVH 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 PVH having voting
power for the election of directors. Nothing contained in this
definition shall limit or restrict the right of any director who
is a Participant from participating in any discussions or voting
on any matter referred to in this definition at any meeting of
the Board. In addition to the foregoing and not in limitation
thereof, a Change in Control with respect to Bruce Klatsky shall
also mean (a) the failure of the Board duly to continue Mr.
Klatsky as Chief Executive Officer and Chairman of the Board at
all times prior to his retirement as an employee, (b) the
appointment by the Board of an officer or the hiring by the Board
of an employee with authority equal or superior to the authority
2<PAGE>
of Mr. Klatsky at any time prior to his retirement as an employee
or (c) 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 enjoyed by Mr. Klatsky in
connection with his employment by the Company as of April 28,
1993.
Code - The Internal Revenue Code of 1986 as in effect at the
time with respect to which such term is used.
Company - PVH and all of the Subsidiaries.
Discharge for Cause - Discharge for Cause shall be deemed to
occur only upon a good faith determination by the Board that the
termination of the employment by the Company of a Participant is
necessary by reason of (i) the commission by such Participant of
any act which, if successfully prosecuted by the appropriate
authorities, would constitute a felony under state or federal
law; (ii) such Participant's embezzlement or intentional
misappropriation of any property of the Company; or (iii) such
Participant's having divulged, furnished or made accessible to
anyone other than the Company, its directors, officers,
employees, auditors and legal advisors, otherwise than in the
regular course of the business of the Company, any confidential
knowledge or information relating to the customers, employees,
operations, financial condition, revenues or projections of the
Company, other than information in the public domain which has
not been improperly
3
<PAGE>
disclosed by such Participant. Such determination by the Board
may be made only after reasonable written notice to such
Participant from a member of the Board setting forth details of
the allegations which may constitute Discharge for Cause and
after an opportunity for such Participant, together with his
counsel, to be heard by the Board.
Effective Marginal Tax Rate - The percentage equal to (i)
the product of 1.03 and the highest tax rate set forth in section
1(a) of the Code (currently 39.6%), plus (ii) the highest
combined marginal state and local income tax rate to which the
Participant with respect to whom such term is used shall be
subject with respect to compensation income, minus (iii) the
product of the tax rate set forth in clause (i) above and the tax
rate set forth in clause (ii) above, plus (iv) the highest tax
rate set forth in section 3111(b)(6) of the Code (currently
1.45%), plus (v) the highest tax rate set forth in section
4999(a) of the Code (currently 20%).
Parachute Indemnity Amount - The amount determined with
respect to a Participant as follows:
(i) There shall first be determined, after giving
effect to the payment of such Participant's Primary Benefit
but not to such Participant's Secondary Benefit, the
aggregate of such Participant's "excess parachute" payments
within the contemplation of section 280G(b)(1) of the Code.
4
<PAGE>
(ii) There shall then be determined the amount of the
aggregate taxes imposed upon such "excess parachute
payments" by the provisions of section 4999(a) of the Code.
(iii) The amount determined in accordance with the
provisions of clause (ii) shall then be multiplied by the
fraction the numerator of which shall be one and the
denominator of which shall be one minus such Participant's
Effective Marginal Tax Rate with respect to the calendar
year in which his employment by the Company shall terminate
and such product shall be such Participant's Parachute
Indemnity Amount.
Participant - Each person designated by the Compensation
Committee of the Board who shall be an officer of PVH, an officer
of any of the Subsidiaries or any other key employee of the Com-
pany. Any Participant who shall be a Participant at the time of
a Change in Control shall remain a Participant until the earlier
to occur of the expiration of two years following a Change in
Control or the termination of such Participant's employment with
the Company.
Person - An individual, partnership, firm, trust, corpora-
tion or other similar entity. 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
PVH, such partnership, limited partnership, syndicate or group
shall be deemed a "Person" for the purposes of the Plan.
5
<PAGE>
Plan - The Phillips-Van Heusen Corporation Special Severance
Benefit Plan.
Primary Benefit - Shall have the meaning accorded thereto in
Section 5.
PVH - Phillips-Van Heusen Corporation, a Delaware
corporation.
Secondary Benefit - Shall have the meaning accorded thereto
in Section 5.
Subsidiary - Any Person of which a majority of the capital
stock having voting power for the election of directors or other
governing board is owned by PVH and/or one or more of the
Subsidiaries.
Any term used in the Plan in the masculine gender shall
include the feminine gender.
3. EMPLOYMENT COMMITMENT.
An employee of the Company shall not be designated as a
Participant unless (a) such employee enters into an agreement
with PVH or a Subsidiary that he will remain in the service of
PVH or such Subsidiary for a period, subject to the terms of the
Plan, of at least one year from the date of such agreement or (b)
such employee is a party to a written contract of employment with
PVH or a Subsidiary for a term extending at least one year from
the date he is designated as a Participant. Such agreement may
6
<PAGE>
provide that the employee shall serve at the pleasure of PVH or
such Subsidiary, and at such compensation as PVH or such
Subsidiary shall reasonably determine from time to time, but not
less than his compensation as in effect on the date of such
agreement. Such agreement may also provide that it does not
confer upon the employee any right to continue in the employ of
PVH or such Subsidiary and that it does not interfere in any way
with the right of PVH or such Subsidiary to terminate the
employment of the employee at any time.
4. RIGHT TO TERMINATE EMPLOYMENT.
Notwithstanding the provisions of any agreement to the
contrary, including without limitation an agreement required
pursuant to Section 3, in the event of a Change in Control, each
Participant shall have the right to terminate voluntarily his
employment with the Company, with or without reason, within two
years after the occurrence of such Change in Control by giving
written notice of termination to PVH.
5. SPECIAL SEVERANCE BENEFITS.
Upon the voluntary termination of employment with the
Company by any Participant within two years after the occurrence
of a Change in Control, or upon the involuntary termination of
employment with the Company of any Participant for any reason
other than death or Discharge for Cause within two years after
the occurrence of a Change in Control, PVH, or the consolidated,
surviving or transferee Person in the event of a consolidation,
7
<PAGE>
merger or sale of assets, shall pay to such Participant, in a
lump sum immediately subsequent to the date of such termination,
in addition to any compensation otherwise owed to such Partici-
pant at the time of such termination (under any contract, other
plan or otherwise), (a) an amount (the "Primary Benefit") equal
to the product of (i) three and (ii) the average annual cash
compensation, including salary and bonuses, paid to and/or
accrued with respect to such Participant during the two-year
period preceding the date of such termination, or such portion of
said period as such Participant shall have been employed by the
Company, and (b) an amount (the "Secondary Benefit) equal to such
Participant's Parachute Indemnity Amount; provided, however, that
at the time of the designation of any employee of the Company as
a Participant, the Compensation Committee may, in its sole and
absolute discretion, by written notice to such Participant,
reduce the Primary Benefit with respect to such Participant and
thereafter from time to time the Compensation Committee may, in
its sole and absolute discretion, by written notice to such
Participant, increase the Primary Benefit, but in no event to an
amount greater than the Primary Benefit provided for in this
Section; provided, further, that at the time an employee of the
Company shall be designated as a Participant, the Compensation
Committee may, in its sole and absolute discretion, by written
notice to such Participant, provide that, if such Participant
shall have been an employee of the Company for less than two
years preceding the date of his termination, the Primary Benefit
8
<PAGE>
with respect to such Participant shall be the product of (I)
three and (II) such amount as such Participant would have
received had he served the Company for at least two years, using
such assumptions as to total cash compensation that would have
been paid to and/or accrued with respect to such Participant
during such two years as the Compensation Committee may provide,
or such lesser amount as the Compensation Committee may
determine. Upon the voluntary termination of employment with the
Company by any Participant within two years after the occurrence
of a Change in Control, or upon the involuntary termination of
employment with the Company of any Participant for any reason
other than death or Discharge for Cause within two years after
the occurrence of a Change in Control, PVH, or the consolidated,
surviving or transferee Person in the event of a consolidation,
merger or sale of assets, shall also provide, for the period of
three years commencing on such termination of employment,
medical, dental, life and disability insurance coverage for such
Participant and the members of his family which is not less
favorable to such Participant than the group medical, dental,
life and disability insurance coverage carried by the Company for
such Participant and the members of his family either immediately
prior to such termination of employment or on the occurrence of
such Change in Control, whichever is greater; provided, however,
that the obligations set forth in this sentence shall terminate
to the extent such Participant obtains comparable medical,
dental, life and disability insurance coverage from any other
9
<PAGE>
employer during such three-year period, but such Participant
shall not have any obligation to seek or accept employment during
such three-year period, whether or not any such employment would
provide comparable medical, dental, life and disability insurance
coverage. All payments made under the Plan to any Participant
shall be subject to withholding and to such other deductions as
shall at the time of such payment be required under any income
tax or other law, whether of the United States or any other
jurisdiction.
6. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee
appointed by the Board, which Committee shall consist of three or
more individuals who shall serve at the pleasure of the Board.
Subject to the provisions of the Plan, the Compensation Committee
shall have the authority to interpret the Plan and to prescribe,
amend and rescind rules and regulations relating to it. Any
determination by the Compensation Committee in carrying out,
administering or construing the Plan (including without
limitation the designation of an individual as a Participant)
made prior to a Change in Control shall be final and binding for
all purposes upon PVH and all other interested Persons and their
heirs, successors and personal representatives. The Board may
from time to time appoint members of the Compensation Committee
in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, in the
Compensation Committee.
10
<PAGE>
The Board shall elect one of the Compensation Committee's members
as its Chairman and the Compensation Committee shall hold its
meetings at such times and places as it shall deem advisable. A
majority of the members of the Compensation Committee shall
constitute a quorum. All action by the Compensation Committee
shall be taken by a majority of its members present at a meeting.
Any action may be taken by a written instrument signed by a
majority of the members of the Compensation Committee and action
so taken shall be fully effective as if it had been taken by a
vote of a majority of the members at a meeting duly called and
held. The Board may appoint a Secretary for the Compensation
Committee (who, if no other designation shall be made, shall be
the Secretary of PVH) and the Compensation Committee shall keep
minutes of its meetings and shall make rules and regulations for
the conduct of its business as it shall deem advisable.
7. COSTS OF ENFORCEMENT.
In the event that, subsequent to a Change in Control, any
Participant incurs any costs or expenses, including attorneys
fees, in the enforcement of his rights under the Plan, then,
unless PVH, or the consolidated, surviving or transferee Person
in the event of a consolidation, merger or sale of assets, is
wholly successful in defending against the enforcement of such
rights, PVH, or such consolidated, surviving or transferee
Person, shall promptly pay to such Participant all such costs and
expenses.
11
<PAGE>
8. AMENDMENT OR TERMINATION.
The Board may amend or terminate the Plan in whole or in
part at any time upon notice to all of the Participants;
provided, however, that, subsequent to a Change in Control or
during the period of 90 days prior to a Change in Control, no
such amendment which could adversely affect the rights of any
Participant nor any termination shall become effective until the
expiration of two years following a Change in Control.
9. NOTICES.
Any notice or other communication pursuant to the Plan
intended for a Participant shall be deemed given when personally
delivered to such Participant or sent to such Participant by
registered or certified mail, return receipt requested, at such
Participant's address as it appears on the records of the
Company, or at such other address as such Participant shall have
specified by notice to PVH in the manner herein provided. Any
notice or other communication pursuant to the Plan intended for
PVH shall be deemed given when personally delivered to the
Secretary of PVH or sent to PVH by registered or certified mail,
return receipt requested, attention of its Secretary, at 1290
Avenue of the Americas, New York, New York 10104, or at such
other address as PVH shall have specified by notice to the
Participants in the manner herein provided.
10. GOVERNING LAW.
The Plan shall be governed by the laws of the State of New
York.
12
PHILLIPS-VAN HEUSEN CORPORATION
SUPPLEMENTAL SAVINGS PLAN
(Effective as of January 1, 1991)
(As Amended and Restated Effective as of July 1, 1995)
WHEREAS,
1. Phillips-Van Heusen Corporation (the "Company") has
heretofore adopted a non-qualified plan of deferred compensation
in order to restore to the participants therein benefits which
have been lost under the Associates Investment Plan as a result
of the application of the provisions of sections 401(a)(17),
401(k), 401(m) and 415 of the Code and to provide deferred
compensation to those management or highly compensated employees
of the Company and its various Subsidiaries who were eligible to
participate.
2. The Company believes that the Supplemental Savings Plan
(the "Plan") (which was originally adopted as the "Supplemental
Defined Contribution Plan") will promote continuity of management
and increased incentive and personal interest in the welfare of
the Company by those who are or may become primarily responsible
for shaping and carrying out the long range plans of the Company
and securing its continued growth and financial success.
<PAGE>
3. The Company has amended the Associates Investment Plan
effective as of July 1, 1995 to provide additional benefits to
the participants thereunder.
4. In conjunction with the amendment of the Associates
Investment Plan referred to in Recital 3, the Company desires to
amend and restate the Plan effective as of July 1, 1995.
5. Certain of the terms used herein which are defined (and
set forth in alphabetical order) in Article IX hereof shall have
the respective meanings ascribed thereto by the provisions of
said Article IX.
NOW, THEREFORE, the Company hereby amends and restates the
Plan effective as of July 1, 1995 so that it shall read follows:
ARTICLE I
Participation
1.01 Each person who (a) is a management or highly
compensated employee of the Company and/or one or more of its
Subsidiaries within the meaning of sections 201(2), 301(a)(3) and
401(a)(1) of ERISA, (b) shall have satisfied the eligibility
requirements for the Associates Investment Plan and (c) whose
annual rate of Compensation shall exceed (i) prior to January 1,
1996, $100,000 and (ii) after December 31, 1995, the $150,000
figure set forth in section 401(a)(17) of the Code as adjusted as
provided therein, shall be eligible to become a Participant in
2
<PAGE>
the Plan; provided, however, that any person who shall have been
a Participant in the Plan on December 31, 1995 shall remain
eligible to participate in the Plan on January 1, 1996.
1.02 Subject to the provisions of Section 1.01, the
Committee shall, at any time and from time to time, select the
employees of the Company and its Subsidiaries who are to become
Participants and, as promptly as shall be practicable thereafter,
the Committee shall communicate such determination in writing to
each such Participant.
ARTICLE II
Contributions
2.01 Subject to such conditions as the Committee may at
anytime and from time to time determine, each Participant who
shall desire to make contributions to the Plan with respect to
any calendar year shall file with the Company his or her election
to contribute to the Plan with respect to such calendar year.
2.02 Each Contribution Election with respect to a calendar
year shall be irrevocable, shall not be subject to amendment and
shall be filed with the Company on or prior to the last day of
the preceding calendar year; provided, however, that (a) a
Contribution Election with respect to the period commencing on
the Amendment Date and ending on December 31, 1995 may be filed
with the Company on or prior to June 20, 1995, and (b) if a
person shall first become eligible to participate in the Plan
3
<PAGE>
during a calendar year as a result of satisfying the eligibility
requirements for the Associates Investment Plan, such person may
file a Contribution Election with respect to the portion of such
calendar year commencing on the date on which he or she shall
have become eligible to participate in the Plan within thirty
(30) days of such date.
2.03 Each Contribution Election with respect to a calendar
year shall specify the amount which the Participant filing the
same desires to contribute to the Plan with respect to such
calendar year or the method of calculating such amount; provided,
however, that, except as otherwise provided in Section 2.04, no
Participant may contribute to the Plan with respect to any
calendar year an amount which shall exceed the excess of fifteen
percent (15%) of his or her Compensation with respect to such
calendar year over the maximum amount which he or she is entitled
to contribute to the Associates Investment Plan with respect to
the plan year thereof ending contemporaneously with such calendar
year. The Company shall (either directly or through a
Subsidiary) withhold from the Compensation otherwise payable to
such Participant during such calendar year the amounts specified
in, or calculated in accordance with, the Contribution Election
of such Participant as in effect with respect to such calendar
year.
2.04 In the event that, as a result of the application of
the provisions of the Associates Investment Plan designed to
4
<PAGE>
comply with the provisions of sections 401(k)(8)(A) and/or
401(m)(6)(A) of the Code, any amounts are paid to a Participant
from the Associates Investment Plan during a calendar year in
which he or she shall have a Contribution Election in effect,
then, the Company shall (either directly or through a Subsidiary)
withhold from the Compensation otherwise payable to such
Participant an amount equal to the amount so paid to him or her.
2.05 Notwithstanding the provisions of Sections 2.03 and
2.04, if any Participant shall have effected a withdrawal from
the Associates Investment Plan on account of a "hardship
withdrawal" within the contemplation of Reg. Sec. 1.401(k)-
1(d)(2)(i) promulgated under the provisions of section 401(k) of
the Code, then, during the period of one year commencing on the
date of such withdrawal, neither the Company nor any of its
Subsidiaries shall withhold any amounts from the Compensation
otherwise payable to such Participant for the purposes of the
Plan.
ARTICLE III
Accounts
3.01 The Company shall establish and maintain on its books
a separate Phantom Stock Elective Contribution Account with
respect to each Participant who shall have become such prior to
the Amendment Date. The credit balance therein at the opening of
business on the Amendment Date shall be equal to the number of
Phantom Shares credited to his or her Elective Contribution
5
<PAGE>
Account under the Plan as in effect immediately prior to the
Amendment Date.
3.02 The Company shall establish and maintain on its books
a separate Cash Elective Contribution Account with respect to
each Participant and, as of the Valuation Date occurring in each
calendar month, shall credit to such Account an amount equal to
the sum of (a) the aggregate Regular Contributions of such
Participant with respect to such calendar month and (b) the
Replacement Contributions of such Participant with respect to
such calendar month.
3.03 The Company shall establish and maintain on its books
a separate Phantom Stock Matching Contribution Account with
respect to each Participant and, as of the Valuation Date
occurring in each calendar month, shall credit to such Account
the number of Phantom Shares derived by dividing (a) the sum of
(i) fifty percent (50%) of the aggregate Basic Regular
Contributions of such Participant with respect to such calendar
month and (ii) the Forfeited Matching Contributions of such
Participant with respect to such calendar month by (b) the Fair
Market Value of a share of the Common Stock on such Valuation
Date; provided, however, that, if such Participant shall have
theretofore attained his or her 55th birthday and shall have
filed an election hereunder to have the Company's Matching
Contributions credited to his or her Cash Matching Contribution
Account instead of to his or her Phantom Stock Matching
6
<PAGE>
Contribution Account, no such credit to such Participant's
Phantom Stock Matching Contribution Account shall be made.
3.04 The Company shall establish and maintain on its books
a separate Cash Matching Contribution Account with respect to
each Participant who shall have attained his or her 55th birthday
and shall have filed an election hereunder to have the Company's
Matching Contributions credited to his or her Cash Matching
Contribution Account instead of to his or her Phantom Stock
Matching Contribution Account and, as of the Valuation Date
occurring in each calendar month, shall credit to such Account an
amount equal to the sum of (a) fifty percent (50%) of the
aggregate Basic Regular Contribution of such Participant with
respect to such calendar month and (b) the Forfeited Matching
Contributions of such Participant with respect to such calendar
month; provided, however, that, unless the Committee shall
otherwise determine, no Participant who is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934,
as amended, may file an election under the provisions of this
Section other than during a period beginning on the third (3rd)
business day following the date of the release by the Company for
publication of its quarterly or annual summary statements of
sales and earnings and ending on the twelfth (12th) business day
following such date.
3.05 If any Participant who shall have a Phantom Stock
Elective Contribution Account shall so elect prior to any
7
<PAGE>
Valuation Date, the Company shall, as of such Valuation Date,
charge to such Phantom Stock Elective Contribution Account the
number of Phantom Shares specified in, or calculated in
accordance with, the provisions of such election and credit to
such Participant's Cash Elective Contribution Account an amount
equal to the product of (a) such number of Phantom Shares and (b)
the Fair Market Value of a share of the Common Stock on such
Valuation Date; provided, however, that, unless the Committee
shall otherwise determine, no Participant who is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934,
as amended, may file an election under the provisions of this
Section other than during a period beginning on the third (3rd)
business day following the date of the release by the Company for
publication of its quarterly or annual summary statements of
sales and earnings and ending on the twelfth (12th) business day
following such date.
3.06 If any Participant who shall have a Phantom Stock
Matching Contribution Account and who shall have attained his or
her 55th birthday shall so elect prior to any Valuation Date, the
Company shall, as of such Valuation Date, charge to such Phantom
Stock Matching Contribution Account the number of Phantom Shares
specified in, or calculated in accordance with, the provisions of
such election and credit to such Participant's Cash Matching
Contribution Account an amount equal to the product of (a) such
number of Phantom Shares and (b) the Fair Market Value of a share
of the Common Stock on such Valuation Date; provided, however,
8
<PAGE>
that, unless the Committee shall otherwise determine, no
Participant who is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended, may file an election
under the provisions of this Section other than during a period
beginning on the third (3rd) business day following the date of
the release by the Company for publication of its quarterly or
annual summary statements of sales and earnings and ending on the
twelfth (12th) business day following such date.
3.07 The Company shall, as of each Valuation Date, credit
to each Cash Elective Contribution Account and to each Cash
Matching Contribution Account an amount equal to interest on the
balance therein as of the preceding Valuation Date at a rate per
annum equal to the Plan Interest Rate in effect with respect to
the calendar year in which such first mentioned Valuation Date
shall occur.
ARTICLE IV
Dividends
4.01 In the event that a dividend shall be declared upon
the Common Stock payable in shares of the Common Stock, or in the
event that the Common Stock shall be changed into a different
number of shares of stock of the Company through reorganization
or stock split-up, the Company shall, on the date fixed for
determining the stockholders of the Company entitled to receive
such stock dividend or to participate in such stock split-up,
9
<PAGE>
credit to each Stock Account the number of Phantom Shares which
the Participant for whom such Stock Account was created would
have received as a result of such stock dividend or stock split-
up if such Participant were a stockholder of record on such
record date with respect to a number of shares of the Common
Stock equal to the number of Phantom Shares theretofore credited
to such Stock Account and if such stock dividend or stock split-
up were payable with respect to whole and fractional shares of
the Common Stock.
4.02 In the event that a dividend shall be declared upon
the Common Stock payable other than in shares of the Common
Stock, the Company shall, on the last Valuation Date occurring in
each calendar year, credit to each Stock Account the number of
Phantom Shares derived by dividing (a) the product of (i) the
average number of Phantom Shares constituting the credit balance
in such Stock Account during such calendar year (calculated
without giving effect to the application of the provisions of
Section 4.01, if such provisions shall have become applicable
during such calendar year) and (ii) the aggregate dividends paid
with respect to a share of the Common Stock during such calendar
year (determined, if any event referred to in Section 4.01 shall
have occurred during such calendar year, as if such event had not
occurred) by (b) the Fair Market Value of a share of the Common
Stock on such last Valuation Date; provided, however, that, if
any Participant shall have made the election referred to in
Section 3.05 and/or Section 3.06 as of a Valuation Date occurring
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<PAGE>
in such calendar year prior to the last such Valuation Date, and
if such election shall have referred to all of the Phantom Shares
held in such Account, then, as of such last Valuation Date, the
credit hereinbefore in this Section 4.02 referred to shall not be
made and, instead, the Company shall as of such last Valuation
Date, credit to such Participant's Cash Elective Contribution
Account and/or Cash Matching Contribution Account, as the case
may be, an amount equal to the product of (i) the average number
of Phantom Shares constituting the credit balance in such Stock
Account during such calendar year (calculated without giving
effect to the application of the provisions of Section 4.01, if
such provisions shall have become applicable during such calendar
year) and (ii) the aggregate dividends paid with respect to a
share of the Common Stock during such calendar year (determined,
if any event referred to in Section 4.01 shall have occurred
during such calendar year, as if such event had not occurred).
ARTICLE V
Termination of Participation; Benefits
5.01 Nothing contained herein shall require the Company or
any of its Subsidiaries to continue any Participant in its em-
ploy, or require any Participant to continue in the employ of the
Company or of any Subsidiary or require the Company or any Sub-
sidiary to rehire any Participant.
5.02 If the employment of any Participant by the Company
and all of its Subsidiaries shall terminate for any reason what
11
<PAGE>
ever, his or her participation under the Plan shall terminate on
the Valuation Date occurring in the calendar month in which the
date of such termination shall occur. (For the purposes hereof,
if the Subsidiary by which a Participant is employed shall cease
to be a Subsidiary, and if such Participant shall not thereupon
become an employee of the Company or another Subsidiary, his or
her employment by the Company and its Subsidiaries shall be
deemed to have terminated.)
5.03 The Company shall, as of and on or as promptly as
shall be practicable after a Former Participant's Payment Date,
pay to such Former Participant (or, in the event of his or her
death, to the executors or administrators of his or her estate)
an amount, without any interest or earnings thereon from and
after his or her Payment Date, equal to the sum of
(a) an amount equal to the sum of (i) the product of
(A) the number of Phantom Shares constituting the credit
balance in his or her Phantom Stock Elective Contribution
Account as of his or her Payment Date and (B) the Fair
Market Value of a share of the Common Stock on his or her
Payment Date and (ii) if his or her Payment Date shall not
be the last business day of a calendar year, the aggregate
amount of the cash dividends he or she would have received
during the calendar year in which his or her Payment Date
shall occur if, on each day in such calendar year through
and including such Payment Date he or she were the record
12
<PAGE>
owner of a number of shares of the Common Stock equal to the
average number of Phantom Shares constituting the credit
balance in such Account during the portion of such calendar
year ending on his or her Payment Date (calculated without
giving effect to the provisions of Section 4.01, if such
provisions shall have become applicable during such calendar
year),
and
(b) an amount equal to the credit balance in his or
her Cash Elective Contribution Account as of his or her
Payment Date,
and
(c) an amount equal to his or her Vested Percentage of
the sum of (i) the product of (A) the number of Phantom
Shares constituting the credit balance in his or her Phantom
Stock Matching Contribution Account as of his or her Payment
Date and (B) the Fair Market Value of a share of the Common
Stock on his or her Payment Date and (ii) if his or her
Payment Date shall not be the last business day of a
calendar year, the aggregate amount of the cash dividends he
or she would have received during the calendar year in which
his or her Payment Date shall occur if, on each day in such
calendar year through and including such Payment Date he or
she were the record owner of a number of shares of the
Common Stock equal to the average number of Phantom Shares
credited to such Account during the portion of such calendar
13
<PAGE>
year ending on his or her Payment Date (calculated without
giving effect to the provisions of Section 4.01, if such
provisions shall have become applicable during such calendar
year), and
(d) an amount equal to his or her Vested Percentage of
the credit balance in his or her Cash Matching Contribution
Account as of his or her Payment Date.
ARTICLE VI
General
6.01 The sole interest of each Participant and Former
Participant under the Plan shall be to receive the benefits
provided herein as and when the same shall become due and payable
in accordance with the terms hereof and neither any Participant
nor any Former Participant nor any person claiming under or
through him or her shall have any right, title or interest in or
to any of the assets of the Company. All benefits hereunder
shall be paid solely from the general assets of the Company, the
Company shall not maintain any separate fund to provide any
benefits hereunder and each Participant and Former Participant
(or the executors or administrators of his or her estate) shall
be solely an unsecured creditor of the Company with respect
thereto.
6.02 Notwithstanding any provisions of the Plan to the
contrary, the Company may, if the Committee in its sole and
absolute discretion shall determine, offset any amounts to be
14
<PAGE>
paid to a Former Participant (or, in the event of his or her
death, to the executors or administrators of his or her estate)
under the Plan against any amounts which such Former Participant
may owe to the Company and/or any one of more of its
Subsidiaries.
6.03 Except as required by applicable law, no benefit under
the Plan shall be subject in any manner to alienation, sale,
transfer, assignment, pledge or encumbrance, and any attempt to
do so shall be void; nor, except as otherwise provided in Section
6.02, shall any such benefit be in any manner liable for or sub-
ject to the debts, contracts, liabilities, engagements or torts
of any Participant or Former Participant.
6.04 All payments made by the Company under the Plan to any
Former Participant (or, in the event of his or her death, to the
executors or administrators of his or her estate) shall be
subject to withholding and to such other deductions as shall at
the time of such payment be required under any income tax or
other law, whether of the United States or any other
jurisdiction, and, in the case of payments to the executors or
administrators of the estate of a deceased Former Participant,
the delivery to the Company of such tax waivers, letters
testamentary and other documents as the Committee may reasonably
request.
15
<PAGE>
ARTICLE VII
Administration
7.01 No Committee member at any time acting hereunder who
is a Participant shall, acting in his or her capacity as such,
have any voice in any decision of the Committee made uniquely
with respect to such Committee member or his or her benefits
hereunder.
7.02 In the event of any disagreement among the Committee
members at any time acting hereunder and authorized to act with
respect to any matter, the decision of a majority of said
Committee members authorized to act upon such matter shall be
controlling and shall be binding and conclusive upon all persons,
including, without in any manner limiting the generality of the
foregoing, the other Committee member or Committee members, the
Company and its Subsidiaries, all persons at any time in the
employ of the Company or any of its Subsidiaries and the
Participants and Former Participants and upon the respective
successors, assigns, executors, administrators, heirs, next-of-
kin and distributees of all of the foregoing.
7.03 Subject to the provisions of Section 7.01, each
additional and each successor Committee member at any time acting
hereunder shall have all of the rights and powers (including dis-
cretionary rights and powers) and all of the privileges and im-
munities hereby conferred upon the initial Committee members
16
<PAGE>
hereunder and all of the duties and obligations so imposed upon
the initial Committee members hereunder.
7.04 No Committee member at any time acting hereunder shall
be required to give any bond or other security for the faithful
performance of his or her duties as such Committee member.
7.05 The Committee may retain legal counsel and actuarial
counsel selected by it. Any Committee member may himself or
herself act in any such capacity, and any such legal counsel and
actuarial counsel may be persons acting in a similar capacity for
the Company and/or one or more of its Subsidiaries and may be
employees of the Company and/or one or more of its Subsidiaries.
The opinion of any such legal counsel or actuarial counsel shall
be full and complete authority and protection in respect of any
action taken, suffered or omitted by the Committee in good faith
and in accordance with such opinion.
7.06 In addition to all rights to allocate and delegate
responsibilities, obligations or duties specifically granted to
the Committee by the provisions hereof, it is specifically
understood that the Committee is hereby granted, and shall always
have, to the fullest extent allowed by law, by a written
instrument executed by all of the members of the Committee and
revocable by any one or more of them, the power to allocate any
and all specific responsibilities, obligations or duties among
themselves and to delegate to any other person, firm or
corporation the responsibility to carry out any of their
responsibilities
17
<PAGE>
hereunder and, to the extent of any such allocation or
delegation, the person or persons effecting such allocation or
delegation shall have no responsibility for any acts or omissions
of the other person, firm or corporation to whom such
responsibilities, obligations or duties have been allocated or
delegated.
7.07 The Company and the Committee shall each keep such
records, and shall each seasonably give notice to the other of
such information, as shall be proper, necessary or desirable in
order to effectuate the purposes of the Plan, including, without
in any manner limiting the generality of the foregoing, records
and information with respect to the benefits granted to Partici-
pants, dates of employment and determinations made hereunder.
Neither the Company nor the Committee shall be required to
duplicate any records kept by the other. To the extent that the
Company and/or the Committee shall prescribe forms for use by the
Participants and Former Participants in communicating with the
Company or the Committee, as the case may be, and/or shall estab-
lish periods during which communications may be received or elec-
tions made, the Company and the Committee shall respectively be
protected in disregarding any notice or communication for which
a form shall have been so proscribed and which shall not be
received on such form and/or any notice, communication or
election for the receipt of which a period shall so have been
established and which shall not be received during such period,
and the Company and the Committee shall also respectively be
protected in accepting any notice or communication which shall
18
<PAGE>
not be made on the proper form and/or in accepting any notice,
communication or election which shall not be received during the
proper period, and their doing so shall not be deemed to create
any precedent with respect thereto. The Company and the
Committee shall respectively also be protected in acting upon any
notice or other communication purporting to be signed by any
person and reasonably believed to be genuine and accurate.
7.08 All determinations hereunder made by the Company or
the Committee shall be made in the sole and absolute discretion
of the Company or of the Committee, as the case may be.
7.09 In the event that any disputed matter shall arise
hereunder, including, without in any manner limiting the general-
ity of the foregoing, any matter relating to the eligibility of
any person to participate under the Plan, the participation of
any person under the Plan, the amounts payable to any person
under the Plan and the applicability and interpretation of the
provisions of the Plan, the decision of the Committee upon such
matter shall be binding and conclusive upon all persons, includ-
ing, without in any manner limiting the generality of the fore-
going, the Company, all of its Subsidiaries, all persons at any
time in the employ of the Company and/or one or more of its Sub-
sidiaries, and upon the respective successors, assigns, execu-
tors, administrators, heirs, next-of-kin and distributees of the
foregoing.
19
<PAGE>
7.10 The Company shall not have any responsibility or
liability whatever hereunder except to make any payment required
under the provisions hereof, and no director or officer of the
Company who is not a Committee member shall have any
responsibility or liability whatever hereunder and no director or
officer of the Company who is a Committee member shall have any
responsibility or liability hereunder other than by reason of
being a Committee member.
ARTICLE VIII
Claims Procedure
8.01 If a Participant or Former Participant (or, in the
event of his or her death, the executors or administrators of his
or her estate) (the "Claimant") believes that he or she has not
received all the benefits to which he or she is entitled under
the Plan or has otherwise been damaged by any action or decision
regarding his or her participation in the Plan or the benefits
payable to him or her under the Plan, he or she may file a claim
notice with the Claims Officer. The claim notice must be
typewritten and signed and shall specify in reasonable detail his
or her objections and the reasons therefor.
8.02 If the Claims Officer shall deny a claim in whole or
in part, the Claimant shall be given written notice of this
decision within ninety (90) days after the claim is filed. In
the event that special circumstances require more time, this
20
<PAGE>
ninety (90) day period may be extended by up to an additional
ninety (90) days. In such a case, the special circumstances
shall be explained to the Claimant and the Claims Officer shall
indicate the date by which he or she expects to render a final
decision. The notice that the claim has been denied in whole or
in part will inform the Claimant of the specific reason or
reasons for the denial, will contain specific references to the
pertinent Plan provisions on which the denial is based, will
describe any additional material or information necessary for the
Claimant to perfect the claim and will inform the Claimant of the
steps he or she must take if he or she wishes to submit the claim
for review.
8.03 If a claim is denied and the Claimant disagrees with
the decision of the Claims Officer, the Claimant may appeal that
decision to the Committee by filing with the Committee a written
request for review. Such request must be filed with the
Committee within sixty (60) days after receipt by the Claimant of
written notification of the denial of his or her claim by the
Claims Officer, must be typewritten and signed and must state the
reasons underlying the appeal. Upon appeal the Claimant may
review pertinent documents, may submit issues and comments in
writing, may request a hearing before the Committee and may be
represented, if he or she wishes, at his or her own expense, by
legal counsel or other authorized representative. The Committee
will ordinarily render a written decision within sixty (60) days
after receipt of a request for review. If special circumstances
21
<PAGE>
require more time (for example, if a hearing is requested), this
sixty (60) day period may be extended by up to an additional
sixty (60) days, in which case the Claimant will be so notified
before the expiration of the original sixty (60) day period. The
Committee's decision on review will include specific reasons for
their decision as well as specific references to the pertinent
Plan provisions on which the decision is based.
ARTICLE IX
Definitions
9.01 The term "Account", as used with respect to a
Participant or Former Participant, shall mean each of his or her
Cash Elective Contribution Account, his or her Phantom Stock
Elective Contribution Account, his or her Cash Matching
Contribution Account and his or her Phantom Stock Matching
Contribution Account.
9.02 The term "Amendment Date" shall mean July 1, 1995.
9.03 The term "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.
9.04 The term "Associates Investment Plan" shall mean the
Phillips-Van Heusen Corporation Associates Investment Plan as in
effect at the time with respect to which such term is used.
22
<PAGE>
9.05 The term "Basic Regular Contribution", as used with
respect to a Participant and with respect to a calendar year,
shall mean the portion of the Regular Contribution of such
Participant with respect to such calendar year which does not
exceed the excess of six percent (6%) of his or her Compensation
with respect to such calendar year over the maximum amount which
he or she is entitled to contribute to the Associates Investment
Plan with respect to the Plan Year thereof ending
contemporaneously with such calendar year.
9.06 The term "Board" shall mean the board of directors of
the Company or any committee designated by said board of
directors to have its authority with respect to the Plan.
9.07 The term "business day" shall mean a day which is not
a Saturday, Sunday or legal holiday in the State of New York.
9.08 The term "Cash Elective Contribution Account", as used
with respect to a Participant or Former Participant, shall mean
the separate account which the Company is required to establish
and maintain with respect to such Participant or Former
Participant in accordance with the provisions of Section 3.02.
9.09 The term "Cash Matching Contribution Account", as used
with respect to a Participant or Former Participant, shall mean
the separate account which the Company is required to establish
and maintain with respect to such Participant in accordance with
the provisions of Section 3.04 and/or 3.06.
23
<PAGE>
9.10 A "Change in Control" shall be deemed to occur upon
(a) 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, (b) 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, (c) 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-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 (d) 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
24
<PAGE>
transfers, at least one-half of the shares of the Company having
voting power for the election of directors.
9.11 The term "Claims Officer" shall mean the Vice
President-Human Resources of the Company or, if the Claimant
shall be the Vice President-Human Resources of the Company, the
Chief Financial Officer of the Company.
9.12 The term "Code" shall mean the Internal Revenue Code
of 1986 as in effect at the time with respect to which such term
is used.
9.13 The term "Committee" shall mean the Compensation
Committee of the Board which is charged with the administration
of the Plan.
9.14 The term "Common Stock", as used with respect to any
date, shall mean the shares of the common stock, $1.00 par value,
of the Company authorized on the Amendment Date and any shares of
stock which may, at any time prior to the date on which such term
is used, be issued in exchange for and/or upon a change of such
shares of Common Stock or any other shares, whether in sub-
division or combination thereof, or otherwise, but not any shares
of stock which may be issued as a dividend or stock-split on or
with respect to said shares of Common Stock or any other such
shares.
9.15 The term "Compensation", as used with respect to a
Participant and with respect to a calendar year, shall mean the
25
<PAGE>
regular cash compensation paid by the Company and its Subsid-
iaries to such Participant during such calendar year, including
commissions, overtime compensation, bonus payments, vacation pay,
holiday pay and other paid leave but exclusive of moving
expenses, deferred compensation, benefit plan pay, imputed
compensation, workers' compensation and severance pay and
determined without giving effect to any contributions made to the
Associates Investment Plan by or on behalf of such Participant
during such calendar year or to a plan within the meaning of
section 125 of the Code.
9.16 The term "Contribution Election", as used with respect
to a Participant and with respect to any time, shall mean such
Participant's authorization referred to in Section 2.01 as in
effect at the time with respect to which such term is used.
9.17 The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974 as in effect at the time with respect
to which such term is used.
9.18 The term "Fair Market Value", as used with respect to
a share of the Common Stock and with respect to any date, shall
mean the closing sale price of a share of the Common Stock as
published by the national securities exchange on which the shares
of the Common Stock are traded on such date or, if there is no
sale of the Common Stock on such date, the average of the bid and
asked prices on such exchange at the close of trading on such
date or, if the shares of the Common Stock are not listed on a
26
<PAGE>
national securities exchange on such date, the average of the bid
and asked prices in the over-the-counter market on such date or,
if the Common Stock is not traded on a national securities ex-
change or in the over-the-counter market, the fair market value
of a share of the Common Stock on such date as shall be
determined in good faith by the Committee.
9.19 The term "Forfeited Matching Contribution", as used
with respect to a Participant and with respect to a calendar
month, shall mean any amounts which are forfeited by such
Participant during such calendar month under the Associates
Investment Plan other than any such amounts which are forfeited
as an incident to the termination of his participation
thereunder.
9.20 The term "Former Participant" shall mean a person
whose participation under the Plan shall have terminated in
accordance with the provisions of Section 5.02.
9.21 The term "Participant" shall mean a person who shall
have become a Participant under the Plan in accordance with the
provisions of Section 1.02 and whose participation shall not have
terminated in accordance with the provisions of Section 5.02.
9.22 The term "Payment Date", as used with respect to a
Former Participant, shall mean his or her Termination Date;
provided, however, that, if such Former Participant shall be a
"covered employee" of the Company within the meaning of section
27
<PAGE>
162(m)(3) of the Code with respect to the taxable year of the
Company in which his or her Termination Date shall occur, then,
such Former Participant's Payment Date shall be the first
Valuation Date occurring in the succeeding taxable year of the
Company.
9.23 The term "Permanent Disability", as used with respect
to a Participant or Former Participant, shall mean a state of
physical or mental incapacity of such Participant or Former Par-
ticipant such that, in the opinion of the Committee, based upon a
medical certificate from a physician or physicians satisfactory
to the Committee, such Participant or Former Participant, by
reason of injury, illness or disease, is unable to fulfill the
requirements of his or her position with the Company and its
Subsidiaries and such disability will be permanent and continuous
during the remainder of his or her life.
9.24 The term "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".
9.25 The term "Phantom Share" shall mean a credit to a
Stock Account of a Participant or Former Participant which is
equal in value to one share of the Common Stock.
28
<PAGE>
9.26 The term "Phantom Stock Elective Contribution
Account", as used with respect to a Participant or Former
Participant, shall mean the separate account which the Company is
required to establish and maintain with respect to such
Participant or Former Participant in accordance with the
provisions of Section 3.01.
9.27 The term "Phantom Stock Matching Contribution
Account", as used with respect to a Participant or Former
Participant, shall mean the separate account which the Company is
required to establish and maintain with respect to such
Participant or Former Participant in accordance with the
provisions of Section 3.03.
9.28 The term "Plan Interest Rate", as used with respect to
a calendar year, shall mean a rate per annum equal to the yield
to maturity on a 10 Year Treasury Note on the first business day
of such calendar year; provided, however, that for the period
beginning on July 1, 1995 and ending on December 31, 1995, the
term "Plan Interest Rate" shall mean a rate per annum equal to
the yield to maturity on a 10 Year Treasury Note on the first
business day of July, 1995.
9.29 The term "Regular Contribution", as used with respect
to a Participant and with respect to a calendar month, shall mean
an amount withheld from the Compensation of such Participant with
respect to such calendar month for the purposes of the Plan in
accordance with the provisions of Section 2.03.
29
<PAGE>
9.30 The term "Replacement Contribution", as used with
respect to a Participant and with respect to a calendar month,
shall mean an amount withheld from the Compensation of such
Participant with respect to such calendar month for the purposes
of the Plan in accordance with the provisions of Section 2.04.
9.31 The term "Stock Account" shall mean each of a Phantom
Stock Elective Contribution Account and a Phantom Stock Matching
Contribution Account.
9.32 The term "Subsidiary" shall mean a corporation
included in an unbroken chain of corporations beginning with the
Company if, at the time with respect to which such term is used,
each of the corporations in such unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other
corporations in such unbroken chain.
9.33 The term "Termination Date", as used with respect to a
Former Participant, shall mean the date on which his or her
participation under the Plan shall terminate in accordance with
the provisions of Section 5.02.
9.34 The term "Valuation Date" shall mean each of (a) the
Amendment Date and (b) the last business day of each calendar
month thereafter.
9.35 The term "Vested Percentage", as used with respect to
a Former Participant and with respect to any date, (a) shall mean
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<PAGE>
one hundred percent (100%) if he or she shall have attained his
or her sixty-fifth (65th) birthday on or prior to such date while
in the employ of the Company and/or any of its Subsidiaries or if
his or her employment by the Company and all of its Subsidiaries
shall have terminated on or prior to such date by reason of his
or her death or Permanent Disability or after he or she shall
have a Vested Percentage of one hundred percent (100%) under the
Associates Investment Plan and (b) shall mean zero percent (0%)
if his or her employment by the Company and its Subsidiaries
shall have terminated on or prior to such date under any other
circumstances, provided, however, that, from and after the
occurrence of a Change in Control, each Participant's Vested
Percentage shall be one hundred percent (100%).
ARTICLE X
Amendment; Termination
10.01 The Company may, at any time and from time to time,
pursuant to a resolution of the Board, amend the terms and pro-
visions of the Plan and may, at any time, similarly terminate the
Plan; provided, however, that no such amendment or termination
shall adversely affect the credit balance in any Account on the
date of such amendment or reduce the Vested Percentage of any
Participant or impair the Company's obligation to make payment or
distribution of amounts theretofore earned under the Plan.
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ARTICLE XI
Construction
11.01 The Plan shall be construed and regulated in
accordance with the laws of the State of New York.
11.02 To the extent that the context shall permit, any
masculine pronoun used herein shall be construed to include also
the similar feminine pronoun, any feminine pronoun used herein
shall be construed to include also the similar masculine pronoun,
any singular word so used shall be construed to include also the
similar plural word and any plural word so used shall be con-
strued to include also the similar singular word.
11.03 Any reference herein to any date or day shall, except
as otherwise specifically provided herein, be deemed to be a
reference to the close of business on such date or day.
PHILLIPS-VAN HEUSEN CORPORATION
By
32
PHILLIPS-VAN HEUSEN CORPORATION
PERFORMANCE RESTRICTED STOCK PLAN
(As Amended Effective as of April 16, 1996)
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
<PAGE>
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
of the Company by the Company and/or any one or more of its
2
<PAGE>
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
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
3
<PAGE>
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
extraordinary 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, and with
such additional modifications as the Committee shall determine at
or prior to its determination referred to in Section 8(a).
(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
other senior executive officers, if any, as the Committee shall
determine at or prior to its determination referred to in Section
8(a).
4
<PAGE>
(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
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
5
<PAGE>
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
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.
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<PAGE>
(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.
(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.
7
<PAGE>
(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
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
8
<PAGE>
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
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.
9
<PAGE>
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
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
10
<PAGE>
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.
(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
11
<PAGE>
Executive Group on the date of the Committee's determination
referred to in Section 8(a), (A) if at least 90% but less
than 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 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 than 95% of his or her Divisional Goal is
11
<PAGE>
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
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).
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<PAGE>
(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.
(e) The Committee may, no later than 90 days after the
commencement of each Fiscal Year, increase (but not reduce) the
percentages of the Corporate Executive Goal or the Divisional
Goal which must be achieved with respect to such Fiscal Year and
may reduce (but not increase) the percentage of a Participant's
Base Compensation which shall be the portion of such
Participant's Award attributable to the Corporate Executive Goal
or his or her Divisional Goal for 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
(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),
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<PAGE>
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.
(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
14
<PAGE>
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.
(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.
15
<PAGE>
(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
(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.
16
<PAGE>
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
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
17
<PAGE>
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
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
18
<PAGE>
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
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
19
<PAGE>
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.
(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;
20
<PAGE>
(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
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.
13. No Employment Right. Neither the existence of the
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
21
<PAGE>
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
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.
22
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,464,128 $1,255,466 $1,152,394
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . 987,921 845,655 747,555
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 476,207 409,811 404,839
Selling, general and administrative expenses . . . . . . . . . . . 428,634 353,109 324,528
Plant and store closing and restructuring expenses . . . . . . . . 27,000 7,000 -
Income before interest and taxes . . . . . . . . . . . . . . . . . 20,573 49,702 80,311
Interest expense, net. . . . . . . . . . . . . . . . . . . . . . . 23,199 12,793 16,679
Income (loss) before taxes . . . . . . . . . . . . . . . . . . . . (2,626) 36,909 63,632
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . (2,920) 6,894 20,380
Income before extraordinary loss . . . . . . . . . . . . . . . . . 294 30,015 43,252
Extraordinary loss on debt retirement. . . . . . . . . . . . . . . - - (11,394)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 294 $ 30,015 $ 31,858
Net income per share:
Before extraordinary loss. . . . . . . . . . . . . . . . . . . . . $ 0.01 $ 1.11 $ 1.60
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . - - (0.42)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.01 $ 1.11 $ 1.18
See notes to consolidated financial statements.
</TABLE>
1
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
January 28, January 29,
1996 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of $8,474 and $68,586. . . . . . . . . . . $ 17,533 $ 80,473
Trade receivables, less allowances of $5,514 and $1,617 . . . . . . . . . . 109,866 77,527
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,773 255,244
Income tax refund receivable. . . . . . . . . . . . . . . . . . . . . . . . 16,987 -
Other, including deferred taxes of $9,801 and $7,108. . . . . . . . . . . . 23,505 16,426
Total Current Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 444,664 429,670
Property, Plant and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 143,398 136,297
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,914 17,733
Other Assets, including deferred taxes of $22,113 and $9,502 . . . . . . . . . 41,079 12,584
$749,055 $596,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,590 $ -
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,796 38,759
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,603 75,014
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 10,137 260
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . 183,126 114,033
Long-Term Debt, less current portion . . . . . . . . . . . . . . . . . . . . . 229,548 169,679
Other Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,089 37,112
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 26,979,352 and 26,610,310 . . . . . . . . . . . 26,979 26,610
Additional capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,977 112,801
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,336 136,049
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . 275,292 275,460
$ 749,055 $ 596,284
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating activities:
Income before extraordinary loss . . . . . . . . . . . . . . . . . . . . .$ 294 $ 30,015 $ 43,252
Adjustments to reconcile to cash provided (used) by operating
activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . 33,740 24,765 19,582
Amortization of contributions from landlords . . . . . . . . . . . . . . (8,198) (5,732) (3,032)
Write-off of property, plant and equipment . . . . . . . . . . . . . . . 13,000 - -
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . (7,051) (6,275) (2,195)
Extraordinary loss on debt retirement. . . . . . . . . . . . . . . . . . - - (11,394)
Changes in operating assets and liabilities:
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,927) (15,541) (3,168)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,315 14,627 (11,110)
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . (73,483) 3,242 13,428
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,183) 4,293 (3,297)
Net Cash Provided (Used) By Operating Activities . . . . . . . . . . . (42,493) 49,394 42,066
Investing activities:
Acquisition of the Apparel Group of Crystal Brands, Inc. . . . . . . . . . (114,503) - -
Property, plant and equipment acquired . . . . . . . . . . . . . . . . . . (39,773) (53,140) (47,866)
Investment in Pyramid Sportswear . . . . . . . . . . . . . . . . . . . . . (6,950) - -
Contributions from landlords . . . . . . . . . . . . . . . . . . . . . . . 7,800 15,310 9,983
Other-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,905 2,438 (678)
Net Cash Used By Investing Activities. . . . . . . . . . . . . . . . . . (149,521) (35,392) (38,561)
Financing activities:
Proceeds from revolving line of credit and long-term borrowings. . . . . . 204,736 - 141,023
Payments on revolving line of credit and long-term borrowings. . . . . . . (73,400) (245) (157,026)
Exercise of stock options. . . . . . . . . . . . . . . . . . . . . . . . . 1,745 2,630 7,425
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,007) (3,984) (3,920)
Net Cash Provided (Used) By Financing Activities . . . . . . . . . . . . 129,074 (1,599) (12,498)
Increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . . . . . . (62,940) 12,403 (8,993)
Cash at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . 80,473 68,070 77,063
Cash at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 17,533 $ 80,473 $ 68,070
See notes to consolidated financial statements.
</TABLE>
3
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock
$1 par Additional Retained Treasury Stockholders'
Shares Value Capital Earnings Stock Equity
<S> <C> <C> <C> <C> <C> <C>
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 . . . . . . . . . (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 . . . . . . . . . (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
Stock options exercised. . . . . 187,908 188 1,557 1,745
Net income . . . . . . . . . . . 294 294
Cash dividends . . . . . . . . . (4,007) (4,007)
Investment in Pyramid Sportswear 181,134 181 1,619 1,800
January 28, 1996 . . . . . . . . . 26,979,352 $ 26,979 $115,977 $132,336 $ 0 $275,292
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per 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.
Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
the estimates.
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 1995, 1994 and 1993 represent the 52 weeks ended
January 28, 1996, January 29, 1995 and January 30, 1994, respectively.
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.
Asset Impairments - The Company records impairment losses on long-lived
assets used in operations when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
Inventories - Inventories are stated at the lower of cost or market. Cost
for the apparel business is determined principally using the last-in,
first-out method (LIFO), except for certain sportswear inventories which are
determined using the first-in, first-out method (FIFO). Cost for the footwear
business is determined using 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 $5,474 and $2,405
in 1995 and 1994, 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 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 $23,748 and $24,146 at January 28, 1996 and
January 29, 1995, respectively.
Fair Value of Financial Instruments - Using discounted cash flow analyses,
the Company estimates that the fair value of all financial instruments
approximates their carrying value.
Advertising - The Company expenses advertising costs as incurred.
Advertising expenses totalled $20,165 (1995), $18,532 (1994) and $15,615
(1993).
5
<PAGE>
Net Income Per Share - Net income per share has been computed by dividing
net income by the weighted average number of shares outstanding during the
year and, in 1994 and 1993, share equivalents applicable to dilutive stock
options. In 1995, share equivalents applicable to dilutive stock options were
immaterial and have been excluded from the net income per share calculations.
The resulting number of shares used in such computations was 26,725,804
(1995), 27,154,173 (1994) and 27,105,888 (1993).
6
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Income Taxes
Income taxes consist of:
1995 1994 1993
<S> <C> <C> <C>
Federal:
Current. . . . . . . . . . . . . . . . . . . . . . . . . $(8,219) $11,720 $16,628
Deferred . . . . . . . . . . . . . . . . . . . . . . . . 2,995 (5,585) (1,088)
State, foreign and local:
Current. . . . . . . . . . . . . . . . . . . . . . . . . 1,936 1,449 4,945
Deferred . . . . . . . . . . . . . . . . . . . . . . . . 368 (690) (105)
$(2,920) $ 6,894 $20,380
</TABLE>
Taxes paid were $3,371 (1995), $12,766 (1994) and $9,936 (1993).
The approximate tax effect of items giving rise to the deferred income tax
asset recognized on the Company's balance sheets is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . $(14,574) $(8,713)
Landlord contributions. . . . . . . . . . . . . . . . . . . . 9,334 9,207
Plant and store closing and restructuring . . . . . . . . . . 7,555 3,084
Employee compensation and benefits. . . . . . . . . . . . . . 8,797 7,175
Tax loss carryforward . . . . . . . . . . . . . . . . . . . . 16,328 -
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . 4,474 5,857
$ 31,914 $16,610
</TABLE>
A deferred tax asset of $18,667 resulting principally from the acquisition
of the Gant and Izod businesses from Crystal Brands is included in the
Company's balance sheet as of January 28, 1996. This asset did not affect
the Company's 1995 tax provision.
A reconciliation of the statutory Federal income tax to the income tax
(benefit) expense is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory 35% federal tax . . . . . . . . . . . . . . . . . . $ (919) $12,918 $22,271
State, foreign and local income taxes,
net of Federal income tax benefit. . . . . . . . . . . . . . 1,454 1,845 2,736
Income of Puerto Rico subsidiaries(1) . . . . . . . . . . . . (3,298) (2,953) (3,054)
Reversal of estimated tax liabilities(2). . . . . . . . . . . - (4,100) -
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . (157) (816) (1,573)
Income tax (benefit) expense. . . . . . . . . . . . . . . . . $(2,920) $ 6,894 $20,380
</TABLE>
(1)Exemption from Puerto Rico income tax expires in 1998.
(2)During 1994, the Company reversed estimated tax liabilities which
were no longer deemed necessary.
During 1995 and 1994, the Company recognized tax benefits of $397 and
$1,568, respectively, related to the exercise of stock options. These
benefits were credited to additional capital.
7
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,194 $ 19,849
Work in process. . . . . . . . . . . . . . . . . . . . . . . . . . 13,145 17,026
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . 249,434 218,369
$276,773 $255,244
Inventories would have been $12,923 and $12,700 higher than reported at
January 28, 1996 and January 29, 1995, respectively, if the FIFO method of
inventory accounting had been used for the entire apparel business.
Property, Plant and Equipment
Property, plant and equipment, at cost, are summarized as follows:
1995 1994
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,814 $ 1,710
Buildings and building improvements. . . . . . . . . . . . . . . . 37,661 32,961
Machinery and equipment, furniture and
fixtures and leasehold improvements. . . . . . . . . . . . . . . 228,729 210,688
268,204 245,359
Less: Accumulated depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . . 124,806 109,062
$143,398 $136,297
</TABLE>
8
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
Long-Term Debt and Extraordinary Loss
Long-term debt, exclusive of current portion, is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revolving Credit Facilities. . . . . . . . . . . . . . . . . . . . . . . $ 70,000 $ -
7.75% Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,435 99,429
7.75% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,143 69,000
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 970 1,250
$229,548 $169,679
</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.
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.
9
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
Long-Term Debt and Extraordinary Loss - (Continued)
The Company has a credit agreement which includes a revolving credit
facility under which the Company may, at its option, borrow and repay amounts
within certain limits. The credit agreement also includes a letter of credit
facility. The total amount available to the Company under each of the
revolving credit and the letter of credit facility is $250,000, provided,
however, that the aggregate maximum amount outstanding at any time under both
facilities is $400,000. All outstanding borrowings and letters of credit
under the credit agreement are due February 13, 1999. Interest on amounts
borrowed under the revolving credit facility is payable quarterly at the prime
rate or at LIBOR plus .25%. A commitment fee of .25% is payable quarterly on
the $250,000 revolving credit facility. The amount outstanding at January 28,
1996 and January 29, 1995 under the letter of credit facility was $115,462 and
$98,469, respectively.
The Company has 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.
The weighted average interest rate on outstanding borrowings from both
revolving credit facilities at January 28, 1996 was 5.95%.
Interest paid was $22,949 (1995), $14,131 (1994) and $18,007 (1993).
Scheduled maturities of long-term debt, including current portion, for the
next five years are as follows: 1996-$10,137, 1997-$10,157, 1998-$10,182,
1999-$10,202 and 2000-$9,857.
Investment in Pyramid Sportswear
During the fourth quarter of 1995, the Company acquired 25% of Pyramid
Sportswear ("Pyramid") for $6,950 in cash and $1,800 in the Company's stock.
Pyramid, headquarted in Sweden, designs, develops and sources Gant sportswear
under a license from the Company and markets such sportswear in 20 countries
around the world. In connection with this investment, the Company also
acquired an option to purchase the remaining 75% of Pyramid in the year 2000.
10
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per 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.
The Company accounts for its stock options under the provisions of APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and intends to
continue to do so.
11
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per 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 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
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 568,390 10.75- 17.50
Exercised. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,908 4.75- 10.69
Cancelled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131,383 4.75- 34.75
Outstanding at January 28, 1996. . . . . . . . . . . . . . . . . . . 1,803,348 $ 4.75- $36.25
</TABLE>
Of the outstanding options at January 28, 1996 and January 29, 1995,
options covering 842,912 and 900,242 shares were exercisable, respectively.
Stock options available for grant at January 28, 1996 and January 29, 1995
amounted to 532,041 and 219,748 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 28, 1996, minimum annual rental commitments under
non-cancellable operating leases, including leases for new retail stores which
had not begun operating at January 28, 1996, are as follows:
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 66,383
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,007
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,304
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,769
2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,051
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . 71,256
Total minimum lease payments. . . . . . . . . . . . . . . . . . $312,770
12
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
Leases - (Continued)
Rent expense, principally for real estate, is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,988 $56,089 $46,275
Percentage and other. . . . . . . . . . . . . . . . . . . . . . . 11,807 10,435 12,232
$81,795 $66,524 $58,507
</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>
1995 1994 1993
<S> <C> <C> <C>
Defined Benefit Plans:
Service cost - benefits earned during the period . . . . . . . . . $ 2,145 $2,294 $1,828
Interest cost on projected benefit obligation. . . . . . . . . . . 7,107 2,922 2,429
Actual (gain) loss on plan assets. . . . . . . . . . . . . . . . . (19,533) 1,854 (2,074)
Net amortization and deferral of actuarial gains (losses). . . . . 12,028 (3,048) 612
Net pension cost of defined benefit plans. . . . . . . . . . . . . 1,747 4,022 2,795
Multi-employer plans . . . . . . . . . . . . . . . . . . . . . . . 219 214 215
Total pension expense . . . . . . . . . . . . . . . . . . . . . . . $ 1,966 $4,236 $3,010
</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>
1995 1994 1993
<S> <C> <C> <C>
Discount rate used in determining projected benefit obligation. . . . 7.50% 8.75% 7.50%
Rate of increase in compensation levels . . . . . . . . . . . . . . . 4.00% 5.25% 5.00%
Long-term rate of return on assets. . . . . . . . . . . . . . . . . . 8.75% 8.75% 7.50%
</TABLE>
13
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
Retirement and Benefit Plans - (Continued)
The following table sets forth the plans' funded status and amounts
recognized on the Company's balance sheets for defined benefit plans:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . $ 95,815 $29,358
Accumulated benefit obligation. . . . . . . . . . . . . . . . . . . . $ 98,087 $30,680
Projected benefit obligation for services rendered to date. . . . . . . $106,568 $36,401
Less: plan assets at fair value . . . . . . . . . . . . . . . . . . . . (103,797) (26,012)
Projected benefit obligation in excess of plan assets . . . . . . . . . 2,771 10,389
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . (3,302) (4,209)
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . (7,370) (2,485)
Unrecognized net asset at adoption date of FAS Statement No. 87 . . . . 374 442
Net pension (asset) liability recognized on the balance sheet . . . . . $ (7,527) $ 4,137
</TABLE>
The projected benefit obligation in excess of plan assets at January 28,
1996 is net of $4,375 for certain overfunded plans.
The 1995 increases in the actuarial present value of the vested,
accumulated and projected benefit obligations, as well as the plan assets at
fair value, relate to the acquisition of the Gant and Izod businesses from
Crystal Brands.
The Company has an unfunded supplemental defined benefit plan covering 24
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 28, 1996 and January 29, 1995, $6,696 and $6,127, 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
generally may elect to contribute up to 15% 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 with respect to the first
6% of compensation and were $2,668 (1995), $2,406 (1994) and $2,303 (1993).
In accordance with the terms of the Associates Investment Plan, Company
matching contributions 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.
14
<PAGE>
Net post-retirement benefit cost includes the following components:
1995 1994 1993
Service cost $ 466 $ 402 $ 275
Interest cost 2,128 850 739
Amortization of net loss 37 - -
Amortization of transition obligation 273 273 273
$2,904 $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:
1995 1994
Retirees receiving benefits $22,877 $ 7,086
Fully eligible active plan participants 2,104 1,065
Active plan participants not eligible for benefits 4,980 2,300
29,961 10,451
Unrecognized transition obligation (4,643) (4,916)
Unrecognized net loss (6,432) (709)
Post-retirement liability recognized on the
balance sheet $18,886 $ 4,826
The increases in the interest cost and accumulated post-retirement benefit
obligation relate primarily to the acquisition of the Gant and Izod businesses
from Crystal Brands.
The weighted average annual assumed rate of increase in the cost of covered
benefits (i.e., health care cost trend rate) is 8.0% for 1996 and is assumed
to decrease gradually to 5.5% by 2010 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 28, 1996 by $2,823, and the aggregate of the service and interest cost
components of net post-retirement benefit cost for 1995 by $260. The discount
rate used in determining the accumulated post-retirement benefit obligation at
January 28, 1996 and January 29, 1995 was 7.5% and 8.75%, respectively.
15
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per 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>
1995 1994 1993
<S> <C> <C> <C>
Net Sales
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,040 $ 883,949 $ 800,454
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,088 371,517 351,940
Total Net Sales . . . . . . . . . . . . . . . . . . . . . . . . $1,464,128 $1,255,466 $1,152,394
Operating Income
Apparel(1). . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,948 $ 28,676 $ 55,724
Footwear(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 25,510 31,525 37,559
Total Operating Income. . . . . . . . . . . . . . . . . . . . . 33,458 60,201 93,283
Corporate Expenses . . . . . . . . . . . . . . . . . . . . . . . . (12,885) (10,499) (12,972)
Interest Expense, net. . . . . . . . . . . . . . . . . . . . . . . (23,199) (12,793) (16,679)
Income (Loss) Before Taxes. . . . . . . . . . . . . . . . . . . $ (2,626) $ 36,909 $ 63,632
Identifiable Assets
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 468,618 $ 307,111 $ 305,132
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,390 176,261 164,197
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,047 112,912 85,442
$ 749,055 $ 596,284 $ 554,771
Depreciation and Amortization
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,526 $ 18,433 $ 13,299
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,986 4,125 4,405
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,228 2,207 1,878
$ 33,740 $ 24,765 $ 19,582
Identifiable Capital Expenditures
Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,627 $ 36,176 $ 29,449
Footwear. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,209 6,152 16,038
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,937 10,812 2,379
$ 39,773 $ 53,140 $ 47,866
</TABLE>
(1) Operating income of the apparel segment includes charges for plant and
store closing and restructuring expenses of $25,000 (1995) and $7,000
(1994).
(2) Operating income of the footwear segment includes charges for store
closing and restructuring expenses of $2,000 in 1995.
16
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
Segment Data - (Continued)
Apparel inventories as of January 28, 1996 and January 29, 1995 of
$166,606 and $132,875, respectively, were determined using the LIFO method.
Acquisition
On February 17, 1995, the Company completed the acquisition of the Apparel
Group of Crystal Brands, Inc. (Gant and Izod) for $114,503 in cash, net of
cash acquired, and subject to certain adjustments. This acquisition was
accounted for as a purchase. The acquired operations are included in the
Company's consolidated financial statements since February 17, 1995.
In connection with the acquisition, the Company acquired assets with a
fair value estimated to be $207,101 (including $104,504 of excess of cost over
net assets acquired) and assumed liabilities estimated to be $92,598.
If the acquisition had occurred on the first day of fiscal 1994 instead of
on February 17, 1995, the Company's proforma consolidated results of
operations would have been:
1995 1994
Net sales $1,470,259 $1,486,476
Net income $ 231 $ 31,011
Net income per share $ 0.01 $ 1.14
Plant and Store Closing and Restructuring Expenses
During 1995, the Company adopted and began to implement a plan designed to
reduce costs and realign the product distribution mix primarily within the
Company's apparel business. Significant components of the plan included the
closure of three domestic shirt manufacturing facilities, closing
approximately 300 unprofitable retail outlet stores and reorganizing the
Company's management structure which combines the Company's wholesale and
retail businesses into eight discrete operating units, each with total
marketing and profit responsibility for its brand. As a result, the Company
recorded a pre-tax charge of $27,000 during 1995. Approximately $13,000 of
this charge relates to the write-off of fixed assets located in such factories
and retail outlet stores. The remaining $14,000 relates to termination
benefits, including pension settlements and curtailments of $1,200, for
approximately 1,250 employees impacted by this restructuring. As of January
28, 1996, approximately $6,490 of employee termination benefits and
approximately $13,000 of fixed asset write-offs had been charged against the
$27,000 reserve.
17
<PAGE>
During 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. Also, in connection with the acquisition of the Gant
and Izod businesses from Crystal Brands, the Company adopted a plan to convert
its Cape Isle Knitters and Windsor Shirt private label retail stores to stores
which market branded apparel under the Izod and Gant labels, respectively.
As a result, the Company eliminated approximately 85 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
of $5,300 were recognized. Included in the 1994 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. Accordingly, $7,000 was recognized as
a net restructuring charge during 1994. As of January 28, 1996, substantially
all of the 1994 reserve had been expended in completing this restructuring
plan.
As part of its ongoing expense reduction initiatives, the Company
continues to evaluate its operating structure.
18
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Dollars in thousands, except per share data)
Other Comments
One of the Company's directors, Mr. Harry N.S. Lee, is a director of TAL
Apparel Limited, an apparel manufacturer and exporter based in Hong Kong.
During 1995, the Company purchased approximately $45,000 of products from TAL
Apparel Limited and certain related companies.
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 1995, 1994 and 1993 the Company paid a $0.0375 per share cash
dividend each quarter on its common stock.
Certain items in 1994 and 1993 have been reclassified to present these
items on a basis consistent with 1995.
19
<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 Executive Vice President and
Chief Executive Officer Chief Financial Officer
20
<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 28, 1996 and January 29,
1995, 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 28, 1996. 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 28, 1996 and January 29, 1995,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended January 28, 1996 in conformity with
generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, in
1995 the Company adopted Financial Accounting Standards Board Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."
E&Y SIGNATURE STAMP
New York, New York
March 12, 1996
21
<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
1995 1994 1995 1994 1995(1) 1994 1995(2) 1994(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . $282,987 $238,897 $349,493 $283,771 $448,007 $379,406 $383,641 $353,392
Gross profit . . . . . . . 97,404 79,162 119,597 94,761 139,055 123,387 120,151 112,501
Net income (loss). . . . . (3,360) (3,531) 3,894 5,735 (4,374) 17,850 4,134 9,961
Net income (loss) per
share (4) . . . . . . . (0.13) (0.13) 0.15 0.21 (0.16) 0.66 0.15 0.37
Price range of common
stock
High. . . . . . . . . . 18 39 17 33 1/2 15 7/8 23 3/4 11 3/4 16 3/8
Low . . . . . . . . . . 15 32 7/8 14 18 1/2 9 1/8 14 9 1/4 14
</TABLE>
(1) Net loss for the third quarter of 1995 includes a pre-tax charge of
$25,000 for plant and store closing and restructuring expenses.
(2) Net income for the fourth quarter of 1995 includes a pre-tax charge of
$2,000 for plant and store closing and restructuring expenses.
(3) 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 $4,100 resulting from the reversal of estimated tax liabilities.
(4) Fully diluted net income per share has not been presented since the
results are not materially different from primary net income per share.
22
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NINE 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>
1995(1) 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net sales
Apparel. . . . . . . . . . . . . . . . . . . . . . $1,100,040 $ 883,949 $ 800,454 $ 709,361 $596,383
Footwear . . . . . . . . . . . . . . . . . . . . . 364,088 371,517 351,940 333,204 307,717
1,464,128 1,255,466 1,152,394 1,042,565 904,100
Cost of goods sold and expenses. . . . . . . . . . . 1,443,555 1,205,764 1,072,083 972,357 843,367
Interest expense, net. . . . . . . . . . . . . . . . 23,199 12,793 16,679 15,727 16,686
Income (loss) before taxes . . . . . . . . . . . . . (2,626) 36,909 63,632 54,481 44,047
Income tax expense (benefit) . . . . . . . . . . . . (2,920) 6,894 20,380 16,600 12,910
Income from continuing operations. . . . . . . . . . 294 30,015 43,252 37,881 31,137
Income (loss) from discontinued
operations . . . . . . . . . . . . . . . . . . . . - - - - -
Extraordinary loss, net of tax . . . . . . . . . . . - - (11,394) - -
Net income. . . . . . . . . . . . . . . . . . . $ 294 $ 30,015 $ 31,858 $ 37,881 $ 31,137
Per Share Statistics(3)
Income from continuing operations. . . . . . . . . . $ 0.01 $ 1.11 $ 1.60 $ 1.42 $ 1.15
Discontinued operations. . . . . . . . . . . . . . . - - - - -
Extraordinary loss . . . . . . . . . . . . . . . . . - - (0.42) - -
Net income . . . . . . . . . . . . . . . . . . . . . $ 0.01 $ 1.11 $ 1.18 $ 1.42 $ 1.15
Dividends paid per share . . . . . . . . . . . . . . $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.1425
Stockholders' equity per share.. . . . . . . . . . . 10.20 10.35 9.33 8.14 4.52
Financial Position
Invested cash. . . . . . . . . . . . . . . . . . . . $ 8,474 $ 68,586 $ 66,064 $ 75,862 $ 5,326
Current assets . . . . . . . . . . . . . . . . . . . 444,664 429,670 418,702 410,522 303,143
Current liabilities. . . . . . . . . . . . . . . . . 183,126 114,033 109,156 115,208 102,976
Working capital. . . . . . . . . . . . . . . . . . . 261,538 315,637 309,546 295,314 200,167
Total assets . . . . . . . . . . . . . . . . . . . . 749,055 596,284 554,771 517,362 398,969
Long-term debt . . . . . . . . . . . . . . . . . . . 229,548 169,679 169,934 170,235 121,455
Convertible redeemable preferred stock . . . . . . . - - - - 72,800
Stockholders' equity . . . . . . . . . . . . . . . . 275,292 275,460 246,799 211,413 84,903
Other Statistics
Total debt to total capital (5). . . . . . . . . . . 52.3% 38.2% 40.8% 46.8% 46.0%
Net debt to net capital (6). . . . . . . . . . . . . 51.5% 26.9% 29.7% 34.3% 45.0%
Market value of stockholders' equity . . . . . . . . $ 270,000 $ 426,000 $ 949,000 $ 753,000 $392,000
Current ratio. . . . . . . . . . . . . . . . . . . . 2.4 3.8 3.8 3.6 2.9
Average shares and equivalents outstanding . . . . . 26,726 27,154 27,106 25,253 19,897
(1) 1995 includes the operations of Gant and Izod from date of acquisition, February 17, 1995, and includes a
$27,000 pre-tax restructuring charge.
(2) 1990 includes 53 weeks of operations.
(3) 1987 includes the operations of G.H. Bass & Co. from date of acquisition, August 21, 1987.
(4) 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.
(5) Total capital equals interest-bearing debt, preferred stock and stockholders' equity.
(6) Net debt and net capital are total debt and total capital reduced by invested cash.
</TABLE>
23
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NINE 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(2) 1989 1988 1987(3)
<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
Income before taxes. . . . . . . . . . . . . . . . . 35,179 32,694 27,386 35,973
Income tax expense (benefit) . . . . . . . . . . . . 8,795 8,502 6,565 14,655
Income from continuing operations. . . . . . . . . . 26,384 24,192 20,821 21,318
Income (loss) from discontinued
operations . . . . . . . . . . . . . . . . . . . . - - (152) 8,691
Extraordinary loss, net of tax . . . . . . . . . . . - - - -
Net income. . . . . . . . . . . . . . . . . . . $ 26,384 $ 24,192 $ 20,669 $ 30,009
Per Share Statistics(4)
Income from continuing operations. . . . . . . . . . $ 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 (5). . . . . . . . . . . 53.2% 52.6% 55.1% 56.9%
Net debt to net capital (6). . . . . . . . . . . . . 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) 1995 includes the operations of Gant and Izod from date of acquisition, February 17, 1995, and
includes a $27,000 pre-tax restructuring charge.
(2) 1990 includes 53 weeks of operations.
(3) 1987 includes the operations of G.H. Bass & Co. from date of acquisition, August 21, 1987.
(4) 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.
(5) Total capital equals interest-bearing debt, preferred stock and stockholders' equity.
(6) Net debt and net capital are total debt and total capital reduced by invested cash.
</TABLE>
24
FINANCIAL REVIEW
The Company's primary strategy is and has been to build the value of its brands.
Events of the year 1995, while they underscored the importance of that strategy,
also marked the beginning of a major change in the execution of that strategy.
For the past decade, PVH's growth has been driven by committing the majority of
its resources to a single channel of distribution - outlet retailing. However
successful that tactic was in growing the Company and strengthening its balance
sheet, it led to an overextension in that area of the business. This, in turn,
exacerbated the very significant "hit" experienced by the Company in the apparel
and footwear downturn, which began as long as four years ago and worsened
considerably in 1995. Although retail sales reached $872.5 million in 1995
compared with $764.7 million in 1994 and $679.6 million in 1993, most of the
increases were the result of new store openings and store expansions to carry
brand extensions, offset in part, by lower sales in existing stores. In
addition, a disproportionate amount of sales was driven by intense promotional
activity. This was, by far, the most difficult aspect of 1995's operations.
Whether the current down cycle in apparel and footwear is or is not nearing
an end is a matter of conjecture. What is not conjecture, however, is that
strong brand equity is the key to successful marketing. And apparel and
footwear are no exception to the importance of having a global presence in the
marketplace. Also not conjecture is the increasing importance of men's
casualwear to the total apparel market.
As noted in the Chairman's letter, all of these strategic issues were the
subject of specific initiatives addressed by PVH in 1995.
Acquisition of the Crystal Brands Apparel Group (Gant and Izod), together
with other changes in product, have significantly broadened PVH's sportswear
mix and increased its branded position. This can be seen readily in the
following:
1995 1994 1993
Casual Footwear &
Accessories 24% 29% 31%
Sportswear 56 46 42
Dress Wear 20 25 27
100% 100% 100%
Branded 88% 79% 78%
Private Label 12 21 22
100% 100% 100%
These trends should continue into 1996 and beyond as the Company continues
to emphasize its branded men's sportswear business.
The Company's presence in the global market has been significantly
increased with its 25% investment in Pyramid Sportswear. Pyramid, the
international licensee of Gant, markets over $80 million in Gant sportswear
products in 20 countries around the world. PVH has an option to acquire the
balance of Pyramid in four years.
25
The Company has taken a $27 million pre-tax restructuring charge which has
allowed it to move aggressively forward on the following issues:
o Closing 300 of PVH's retail stores (about one-third of total stores). These
closings should free-up some $40 million of capital, eliminate the weakest
and worst trending stores and accelerate the realignment of PVH's sales
towards a more balanced wholesale/retail mix.
o Closing three domestic shirt manufacturing facilities, which should trigger
increasing annual cost reductions exceeding $6.0 million by 1998.
o Reorganizing PVH's management structure to intensify focus on PVH's five
leading brands, improve logistics and lower costs.
Clearly 1996 will be a year of "new beginnings." All of the 1995
initiatives should begin to take hold. The full realignment of the Company
into a brand marketing organization should be completed by early Spring. At
that point, the Company will begin to execute its new strategic direction with
eight discrete operating units seeking to leverage fully all of PVH's core
competencies and to maximize the equity and financial potential of each of its
brands.
The Company recognizes that the current environment for apparel and
footwear offers a considerable challenge, but it believes it has the resources
and the wherewithal to "stay the course" and that the rewards of success will
be substantial.
This report deals with all of these initiatives and describes how they are
being harnessed to reverse the negative trends of the past several years.
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 $1.1 billion in 1995,
$883.9 million in 1994 and $800.5 million in 1993, representing increases of
24.4% and 10.4%, respectively. The increase in 1995 was due entirely to the
acquisition of the Gant and Izod businesses on February 17, 1995. The 1994
increase was principally related to the growth in retail sales, including the
expanded offering of Bass Apparel at Bass Company stores.
While 1995 sales, excluding the Gant and Izod acquisition, were about flat,
the Company's wholesale division achieved significant improvement in the gross
margin of all operating divisions. In dress shirts, gross margins showed
increasing improvement throughout the year as the introductory costs and
market disruptions caused by the new wrinkle-free product abated. In addition,
the creation early in the year of a dress shirt group housing all branded and
private label dress shirt business helped significantly to leverage the
Company's cost base and add to the gross margin improvement.
26
The sweater group also improved its gross margin by leveraging an
increasing percentage of higher margin branded goods into its product mix and
by maximizing the use of its production facilities in Puerto Rico. Sportswear
margins, particularly from the new Gant and Izod businesses, also contributed
to this improvement, despite a very significant restructuring of the sourcing
base for the new companies. Going forward, a much improved sourcing position
together with the further leveraging of these costs should be a major plus as
these new businesses begin to reach their full sales potential.
The retail division, on the other hand, experienced a significant reduction
in gross margin as promotional selling became considerably more intense.
The gross margin improvement at wholesale offset the reduced margin at
retail and overall gross margin in apparel increased slightly to 30.9% in 1995
from 30.8%. This compared with 33.1% in 1993 when retail operated in a far
less promotional environment.
Selling, general and administrative expenses were 27.9% of sales in 1995
compared with 26.7% in 1994 and 26.1% in 1993. Expense levels at wholesale
increased in 1995 with the inclusion of the Gant and Izod businesses which,
while providing a higher level of gross margin, also have higher selling and
marketing expenses. For example, Gant maintains a growing staff of field
coordinators and exclusive selling specialists to maximize the impact and
effectiveness of its in-store shops. As PVH's sportswear companies grow, their
expected higher gross margins will be increasingly leveraged with resulting
improvement in overall profitability.
Expense levels in 1995 were also negatively impacted by the overall
weakness in retail sales. Lower retail store sales per square foot caused an
increase in the relationship of in-store expenses to sales and further
weakened bottom line results. The increase in 1994 expense levels came from a
higher weighting of retail business as part of the overall apparel sales mix.
Closing 200 of PVH's weakest performing apparel retail stores should have a
very positive impact on in-store expense levels. Also, the realignment of
channel mix with a much greater emphasis on wholesale growth should serve to
reduce overall expense levels.
FOOTWEAR
Net sales of the Company's footwear segment were $364.1 million in 1995
compared with $371.5 million in 1994 and $351.9 million in 1993, representing
a 2% decrease in the current year following a 5.6% increase in 1994. While
individual product categories (Weejuns in 1995, Sandals in 1994) achieved
added growth, the sluggish retail environment for footwear kept overall sales
about flat. Bass Apparel is included in the apparel segment.
Gross margin on sales was 37.4% in 1995 compared with 37.1% in 1994 and
39.7% in 1993. In general, the factors influencing footwear were much the
same as those affecting apparel and their impact was similar. The wholesale
division achieved considerable gross margin improvement from an ongoing
program of cost cutting and sourcing initiatives. Price promotions in the
retail division principally offset the wholesale improvements.
27
Selling, general and administrative expenses were 29.8% of sales in 1995
compared with 28.6% in 1994 and 29.1% in 1993. As in apparel, the key feature
of the 1995 increased expense level was a slowdown in retail store sales per
square foot with a corresponding increase in in-store expense levels. Here
too, closing 100 of the weakest performing footwear stores should have a very
positive effect.
Looking ahead, combining the wholesale and retail divisions of PVH into
eight discrete operating units, each with total marketing and profit
responsibility for the brand it manages, should bring very positive results.
It will allow for the streamlining of the organization, the elimination of
redundancy and a consistent market focus.
RESTRUCTURING CHARGES
The Company recorded a $27 million pre-tax restructuring charge in 1995 to
provide for the three key steps discussed above - the closing of 300 outlet
stores, the closing of three domestic shirt manufacturing facilities and the
reorganization of PVH's management structure. Approximately one-half of the
charge relates to non-cash items.
In 1994 the Company recorded a $7 million pre-tax restructuring charge to
realign its wholesale apparel business from four operating units into a dress
shirt division and a sportswear division. The dress shirt division has proved
to be a particularly effective vehicle for leveraging costs and improving
gross margins and it will not be affected by the 1995 changes. While the
sportswear group provided an effective mechanism for achieving an immediate
integration of Gant and Izod into PVH, the 1995 reorganization permits its
split-up into separate brand marketing units.
CORPORATE EXPENSES
Corporate expenses were $12.9 million in 1995 compared with $10.5 million
in 1994 and $13.0 million in 1993. The lower expense level in 1994 compared
with both 1995 and 1993 resulted primarily from a reduction in the Company's
liability for its supplemental savings plan which is linked to the market
value of PVH stock. Contributing to the higher expense level in 1995 were
expenses related to certain brand research and marketing projects.
INTEREST EXPENSE
Interest expense was $23.2 million in 1995 compared with $12.8 million in
1994 and $16.7 million in 1993. The increase in 1995 reflects the higher
borrowing levels associated with the acquisition of the Gant and Izod
businesses. The decrease in 1994 relates principally to the November 1993
refinancing which reduced the interest rate on 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.
28
INCOME TAXES
In 1995, PVH incurred a pre-tax loss of $2.6 million after taking into
account the charge for restructuring. Such loss represented a combination of
pre-tax income earned in Puerto Rico and a U.S. tax loss. Since the U.S. tax
loss was available for carryback without limitation and the Puerto Rico income
was tax exempt, the net result was a tax benefit which eliminated the full
amount of the pre-tax loss. 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 in 1994 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.
SEASONALITY
The Company's business is seasonal, with higher sales and operating 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 the weekend following Thanksgiving and
continuing through the week after Christmas.
Also contributing to the relative 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.
LIQUIDITY AND CAPITAL RESOURCES
The following table shows key cash flow elements over the last three years:
(In Thousands) 1995 1994 1993
Income from operations
adjusted for non-cash items $ 31,785 $42,773 $57,607
Change in working capital (74,278) 6,621 (4,147)
Capital spending, net (31,973) (37,830) (37,883)
Acquisition of Gant & Izod (114,503) 0 0
Investment in Pyramid
Sportswear (6,950) 0 0
Early retirement of debt 0 0 (11,394)
Cash dividends (4,007) (3,984) (3,920)
Exercise of stock options 1,745 2,630 7,425
Other changes 3,905 2,438 (678)
Increase (decrease) in cash,
before net change in debt $(194,276) $12,648 $ 7,010
29
The year 1995 was characterized by major investment.
The acquisition of the Gant and Izod businesses involved both the cost of
the acquisition itself as well as the costs of their immediate restructuring
and integration into PVH. The investment in Pyramid Sportswear represents the
purchase of a 25% interest in that company plus an option to acquire the
balance in four years.
Changes in working capital components, after excluding working capital
acquired in the acquisition of the Gant and Izod businesses, were as follows:
Source/(Use) of Cash (000's)
Accounts receivable $(13,927)
Inventory 16,315
Other assets (3,183)
Payables and accruals (17,201)
$(17,996)
The increase in accounts receivable was due principally to a temporary
change in the timing of year end shipments. Inventory, which ended the year
with a 10% reduction, was well balanced and continues to reflect the Company's
focus on tight management of working capital.
Capital spending of $39.8 million marked the completion of several major
capital projects, including the new Jonesville Distribution Center and the
upgrading of key information systems.
Looking ahead, the major restructuring initiatives under way, including the
downsizing of the Company's retail business, should provide a significant
reduction in working capital requirements. In addition, a $10.0 million
reduction in capital spending is planned for the coming year.
Total debt as a percentage of total capital increased at year end 1995 to
52.3% from 38.2% at year end 1994 and 40.8% at year end 1993. The Company
believes that the 1995 increase, principally due to the acquisition of the
Gant and Izod businesses, represents a temporary interruption of the past
seven years of improving financial position.
With all of its major investments now in place, PVH is well-positioned to
achieve a very positive cash flow in 1996 and beyond.
30
<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 28, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-END> JAN-28-1996
<CASH> 17,533
<SECURITIES> 0
<RECEIVABLES> 115,380
<ALLOWANCES> 5,514
<INVENTORY> 276,773
<CURRENT-ASSETS> 444,664
<PP&E> 143,398<F1>
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 749,055
<CURRENT-LIABILITIES> 183,126
<BONDS> 229,548
26,979
0
<COMMON> 0
<OTHER-SE> 248,313
<TOTAL-LIABILITY-AND-EQUITY> 749,055
<SALES> 1,464,128
<TOTAL-REVENUES> 1,464,128
<CGS> 987,921
<TOTAL-COSTS> 987,921
<OTHER-EXPENSES> 455,634
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 23,199
<INCOME-PRETAX> (2,626)
<INCOME-TAX> (2,920)
<INCOME-CONTINUING> 294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 294
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
<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>
