<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]. For the fiscal year ended
December 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]. For the transition period from __________ to
__________
Commission file number 1-724
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below: PVH Associates Investment Plan for Hourly
Associates and PVH Associates Investment Plan for Salaried Associates
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office: Phillips-Van Heusen Corporation, 200
Madison Avenue, New York, New York 10016
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Administrative Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
PHILLIPS-VAN HEUSEN CORPORATION
ASSOCIATES INVESTMENT PLANS
Date: June 28, 1999 By /s/ Pamela N. Hootkin
-------------------------------------
Pamela N. Hootkin, Member of
Administrative Committee
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Financial Statements
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors.......................................... F-2
Statements of Net Assets Available for Plan Benefits.................... F-3
Statements of Changes in Net Assets Available for Plan Benefits......... F-4
Notes to Financial Statements .......................................... F-5
The Plan's investment asset are held in a Master Trust for which a separate
report is filed with the Department of Labor. Accordingly, supplemental
schedules of Asset Held for Investment Purpose and Reportable Transactions of
the Master Trust have not been presented.
F-1
<PAGE>
Report of Independent Auditors
Administrative Committee of the Plan
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
We have audited the accompanying statements of net assets available for plan
benefits of the Phillips-Van Heusen Corporation Associates Investment Plan for
Hourly Associates as of December 31, 1998 and 1997, and the related statements
of changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan'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 net assets available for plan benefits of the Plan as
of December 31, 1998 and 1997, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
June 25, 1999
F-2
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Statements of Net Assets Available for Plan Benefits
December 31,
1998 1997
-------------------------
Assets
Investments, at fair value (Notes A and F):
Shares of registered investment companies:
Equity Fund $2,429,576 $1,351,523
Bond Fund 354,620 316,250
Balanced Fund 1,336,645 932,262
International Fund 323,361 252,818
Common Stock--Employer Company Fund 1,787,531 3,999,372
Common Trust Fund* 2,056,935 2,361,276
Participant loans receivable 177,017 254,492
-------------------------
Net assets available for plan benefits $8,465,685 $9,467,993
=========================
*Consists of the Money Market Fund (Chase Manhattan Bank Domestic Liquidity
Fund).
See notes to financial statements.
F-3
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Statements of Changes in Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
---------------------------
<S> <C> <C>
Additions
Net transfer from the Associates Investment Plan of PVH
(Crystal Brands Division) $ -- $ 10,560
Contributions:
Employer Company, net of forfeitures 267,438 207,366
Participants 706,897 699,527
--------------------------
974,335 906,893
Interest and investment income 473,962 236,713
--------------------------
Total additions 1,448,297 1,154,166
--------------------------
Deductions
Net transfer to the PVH Associates Investment Plan for
Salaried Associates 249,785 155,597
Payments to participants 1,436,892 1,212,919
--------------------------
Total deductions 1,686,677 1,368,516
--------------------------
Net realized and unrealized (depreciation) appreciation
of investments (763,928) 316,782
--------------------------
Net (decrease) increase (1,002,308) 102,432
Net assets available for plan benefits at beginning of year 9,467,993 9,365,561
--------------------------
Net assets available for plan benefits at end of year $ 8,465,685 $9,467,993
==========================
</TABLE>
See notes to financial statements.
F-4
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements
December 31, 1998
A. Description of the Plan
The following description of the Phillips-Van Heusen Corporation (the "Company")
Associates Investment Plan for Hourly Associates (the "Plan") provides only
general information. Participants should refer to the Plan Document for a more
complete description of the Plan's provisions.
On October 1, 1997, the net assets of the Associates Investment Plan of
Phillips-Van Heusen Corporation (Crystal Brands Division) (the "Crystal Brands
Plan") associated with hourly associates merged into the Plan. All assets of the
Crystal Brands Plan were held by State Street Bank (trustee of the Crystal
Brands Plan through September 30, 1997). All assets of the Plan are held by
Chase Manhattan Bank (trustee of the Plan through September 30, 1997) and
Wachovia Bank, N.A. (successor trustee of the Plan effective October 1, 1997) in
the Company's Associates Investment Plan Master Trust (the "AIP Master Trust").
General
The Plan is a defined contribution plan covering hourly production and retail
field employees of the Company who have at least one year of service (1,000
hours in a year) and are age 21 or older. The Plan is subject to the provisions
of the Employee Retirement Income Security Act of 1974 ("ERISA").
Contributions
Each year, participants may contribute up to 15% of pretax annual compensation,
as defined by the Plan. The Company contributes 50% of the first 6% of base
compensation that a participant contributes to the Plan.
Participant Accounts
Each participant's account is credited with the participant's contributions and
allocations of (a) Company's contributions, and (b) Plan earnings. Forfeited
balances of terminated participants' nonvested accounts are used to reduce
future Company contributions. One hundred percent of the Company contributions
are automatically invested in the common stock of the Company. In accordance
with the provisions of the Plan, participants age 55 or older may direct the
Company contribution into any of the Plan's investment options.
F-5
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
A. Description of the Plan (continued)
Vesting
Amounts attributable to Company contributions become vested on the participant's
65th birthday or if the participant's employment by the Company terminates by
reason of the participant's death or permanent disability or the participant has
completed five years of service with the Company.
Investment Options
Upon enrollment in the Plan, a participant may direct employee contributions
into any of six investment options. A participant may contribute a maximum of
25% of employee contributions into the Phillips-Van Heusen Corporation Common
Stock Fund.
Participant Loans Receivable
Participants may borrow from the Plan, with certain restrictions, using their
vested account balance as collateral. The minimum loan amount is $1,000 and the
maximum loan amount is the lesser of (i) $50,000 reduced by the participant's
highest outstanding loan balance during the previous 12 months, or (ii) 50% of
the vested value of the participant's account. Interest is fixed for the term of
the loan at the prime rate as of the first business day of the month of
application as published in The Wall Street Journal, plus 1%. Loan repayments
are made through payroll deductions which may be specified for a term of 1 to 5
years or up to 15 years for the purchase of a primary residence.
Payment of Benefits
Participants entitled to final distributions generally will receive payment in
the form of a lump sum amount equal to the value of their vested account.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
B. Significant Accounting Policies
F-6
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
The accounting records of the Plan are maintained on the accrual basis.
Substantially all administrative expenses are paid by the company.
In accordance with the Rules and Regulations of the Department of Labor,
investments are included in the accompanying financial statements at market
value as determined by quoted market prices or at fair value as determined by
Wachovia Bank, N.A. ("Wachovia") for the applicable Wachovia investment funds.
Purchases and sales of securities are reflected on a trade date basis.
All assets of the Plan are held by Wachovia in the AIP Master Trust and are
segregated from the assets of the Company. The Plan shares in AIP Master Trust
interest and investment income based upon its participants' shares of AIP Master
Trust net assets available for plan benefits. The AIP Master Trust's investments
include an interest contract with an insurance company that has been placed into
conservatorship in 1991. In November 1998, the AIP Master Trust received its
principal in the interest contract plus accrued interest, as defined in the
conservatorship agreement. The Plan does not have a beneficial interest in this
interest contract.
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 these estimates.
C. Transactions with Parties-in-Interest
During the years ended December 31, 1998 and 1997, the AIP Master Trust
purchased 56,702 and 41,891 shares, respectively, of the Company's common stock
and received $197,777 and $205,332, respectively, from the Company as payment of
dividends on its common stock. The AIP Master Trust also sold 14,961 and 58,705
shares of the Company's common stock during the years ended December 31, 1998
and 1997, respectively.
In connection with the merger of the Crystal Brands Plan on October 1, 1997,
52,112 shares of the Company's common stock were transferred into the AIP Master
Trust.
F-7
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
D. Changes in the AIP Master Trust Net Assets Held by Fund
Changes in the AIP Master Trust net assets held by fund during the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Phillips-Van
Heusen Corp. Money
Common Stock Market Bond Balanced Equity
Fund Fund Fund Fund Fund
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at beginning of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805
Interest and investment income 226,343 474,862 138,565 1,154,085 1,133,584
Contributions received:
Employer Company, net of
forfeitures 1,894,714 632 1,355 17,426 31,368
Employees 325,015 561,378 320,057 1,226,067 2,101,123
Net realized and unrealized
appreciation (depreciation) (9,106,716) -- 21,757 455,901 3,577,455
Loans to participants, net of
repayments 594 (3,431) 9,072 35,206 39,529
Payments to participants (3,113,510) (2,527,309) (497,432) (1,427,011) (2,549,482)
Transfers (to) from other accounts
(717,388) 4,418,474 (41,203) 683,068 1,026,645
----------------------------------------------------------------------------
Net assets at end of year $ 9,414,931 $ 11,971,150 $ 2,267,092 $ 11,531,743 $ 21,524,027
============================================================================
Plan's beneficial interest at end of year $ 1,787,531 $ 2,056,935 $ 354,620 $ 1,336,645 $ 2,429,576
============================================================================
</TABLE>
<TABLE>
<CAPTION>
Fixed
International Income Loan
Fund Fund Fund Total
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at beginning of year $ 3,585,363 $4,575,539 $ 1,371,795 $ 66,350,847
Interest and investment income 329,613 377,524 -- 3,834,576
Contributions received:
Employer Company, net of
forfeitures 5,185 -- -- 1,950,680
Employees 622,425 -- -- 5,156,065
Net realized and unrealized
appreciation (depreciation) (520,450) -- -- (5,572,053)
Loans to participants, net of
repayments 13,351 -- (94,321) --
Payments to participants (365,871) (150,096) -- (10,630,711)
Transfers (to) from other accounts
(566,629) (4,802,967) -- --
----------------------------------------------------------
Net assets at end of year $ 3,102,987 -- $ 1,277,474 $ 61,089,404
==========================================================
Plan's beneficial interest at end of year $ 323,361 $ -- $ 177,017 $ 8,465,685
==========================================================
</TABLE>
Note: Certain funds above include investments in the Chase Manhattan Bank
Domestic Liquidity Fund.
F-8
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
D. Changes in the AIP Master Trust Net Assets Held by Fund (continued)
Changes in the AIP Master Trust net assets held by fund during the year ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Phillips-Van
Heusen Corp. Money
Common Stock Market Bond Balanced Equity
Fund Fund Fund Fund Fund
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at beginning of year $ 19,612,593 $ 6,879,359 $ 1,818,465 $ 5,750,463 $ 9,384,953
Interest and investment income 211,070 551,149 125,621 502,825 330,738
Contributions received:
Employer Company, net of
forfeitures 1,620,371 (51,060) 73 (2,835) (11,499)
Employees 423,500 670,327 350,969 1,193,105 1,963,385
Net realized and unrealized
appreciation (depreciation) (299,112) -- 18,814 854,817 2,721,432
Loans to participants, net of (77,679) (45,092) 4,773 (42,561) (71,843)
repayments
Payments to participants (1,962,154) (1,707,477) (255,224) (802,958) (1,332,908)
Transfers (to) from other accounts (446,731) (226,623) (85,827) 236,828 427,253
Transfer from AIP of PVH (Crystal
Brands Division) 824,021 2,975,961 337,257 1,697,317 2,752,294
----------------------------------------------------------------------------
Net assets at end of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805
============================================================================
Plan's beneficial interest at end of year $ 3,999,372 $ 2,361,276 $ 316,250 $ 932,262 $ 1,351,523
============================================================================
</TABLE>
<TABLE>
<CAPTION>
Fixed
International Income Loan
Fund Fund Fund Total
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at beginning of year $ 2,226,120 $ -- $ 969,816 $ 46,641,769
Interest and investment income 391,072 106,016 -- 2,218,491
Contributions received:
Employer Company, net of
forfeitures 585 -- -- 1,555,635
Employees 646,476 -- -- 5,247,762
Net realized and unrealized
appreciation (depreciation) (327,047) -- -- 2,968,904
Loans to participants, net of (27,416) -- 259,818 --
repayments
Payments to participants (279,685) -- -- (6,340,406)
Transfers (to) from other accounts 95,100 -- -- --
Transfer from AIP of PVH (Crystal
Brands Division) 860,158 4,469,523 142,161 14,058,692
--------------------------------------------------------------
Net assets at end of year $ 3,585,363 $ 4,575,539 $ 1,371,795 $ 66,350,847
==============================================================
Plan's beneficial interest at end of year $ 252,818 $ -- $ 254,492 $ 9,467,993
==============================================================
</TABLE>
Note: Certain funds above include investments in the Chase Manhattan Bank
Domestic Liquidity Fund.
F-9
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
E. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated April 27, 1995, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
F. Assets of the Plan
Assets of the Plan are included in the assets of the AIP Master Trust held by
the trustees. The assets of the AIP Master Trust are presented in the following
table. Investments that represent 5% or more of the AIP Master Trust's total net
assets are identified by an asterisk.
<TABLE>
<CAPTION>
December 31,
1998 1997
-------------------------------
<S> <C> <C>
Investments at fair value as determined by
quoted market price:
Shares of registered investment companies:
Fidelity Growth & Income Portfolio,
469,513 and 424,247 shares, respectively $21,524,027* $16,163,805*
Fidelity Intermediate Bond Fund,
220,576 and 227,623 shares, respectively 2,267,092 2,314,921
Fidelity Puritan Fund, 574,442 and 484,360
shares, respectively 11,531,743* 9,387,001*
Templeton Foreign Fund, 369,842 and 360,337 shares,
respectively 3,102,987* 3,585,363*
Phillips-Van Heusen Corp. Common Stock Fund
1,304,634 and 1,394,679 shares, respectively 9,414,931* 19,905,879*
Investments at estimated fair value:
Common Trust Fund 11,971,150* 9,046,544*
Promissory notes (participant loans) 1,277,474 1,371,795
Non-performing interest contract - 4,575,539*
-------------------------------
Total net assets $61,089,404 $66,350,847
===============================
Plan's beneficial interest $ 8,465,685 $ 9,467,993
===============================
</TABLE>
F-10
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
G. Differences Between Plan Financial Statements and Form 5500
The following is a reconciliation of net assets available for plan benefits per
the financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31,
1998 1997
-------------------------------
<S> <C> <C>
Net assets available for plan benefits as reported on the
financial statements $8,465,685 $9,467,993
Less amounts allocated to withdrawn participants at the
end of the year (307,191) (295,118)
===============================
Net assets available for plan benefits as reported on the
Form 5500 $8,158,494 $9,172,875
===============================
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
</TABLE>
<TABLE>
<CAPTION>
Year ended
December
31, 1998
----------
<S> <C>
Benefits paid to participants per the financial statements $1,436,892
Add amounts allocated to withdrawn participants
at December 31, 1998 307,191
Less amounts allocated to withdrawn participants
at December 31, 1997 (295,118)
-----------
Benefits paid to participants per the Form 5500 $1,448,965
===========
</TABLE>
Amounts allocated to withdrawn participants on the Form 5500 represent benefit
claims that have been processed and approved for payment prior to year-end but
not yet paid.
F-11
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
H. Year 2000 (Unaudited)
The Plan Sponsor has determined that it will be necessary to take certain steps
in order to ensure that the Plan's information systems are prepared to handle
year 2000 dates. The Plan Sponsor is taking a two phase approach. The first
phase addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the year 2000 modifications. The Plan Sponsor anticipates substantially
completing this phase of the project by the end of 1999. Costs associated with
modifying software and equipment are not estimated to be significant and will be
paid by the Plan Sponsor.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determine that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. All third party service providers have indicated that
they will be year 2000 compliant by the end of 1999. If modification of data
processing systems of either the Plan, the Plan Sponsor, or its service
providers are not completed timely, the year 2000 problem could have a material
impact on the operations of the Plan. Plan management has not developed a
contingency plan, because they are confident that all systems will be year 2000
ready.
F-12
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Financial Statements
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors............................................. F-14
Statements of Net Assets Available for Plan Benefits....................... F-15
Statements of Changes in Net Assets Available for Plan Benefits............ F-16
Notes to Financial Statements ............................................. F-17
The Plan's investment asset are held in a Master Trust for which a separate
report is filed with the Department of Labor. Accordingly, supplemental
schedules of Asset Held for Investment Purpose and Reportable Transactions of
the Master Trust have not been presented.
F-13
<PAGE>
Report of Independent Auditors
Administrative Committee of the Plan
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
We have audited the accompanying statements of net assets available for plan
benefits of the Phillips-Van Heusen Corporation Associates Investment Plan for
Salaried Associates as of December 31, 1998 and 1997, and the related statements
of changes in net assets available for plan benefits for the years then ended.
These financial statements are the responsibility of the Plan'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 net assets available for plan benefits of the Plan as
of December 31, 1998 and 1997, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
June 25, 1999
F-14
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Statements of Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
December 31,
1998 1997
------------------------------
<S> <C> <C>
Assets
Investments (Notes A and E):
Shares of registered investment companies:
Equity Fund $18,989,549 $14,747,941
Bond Fund 1,861,948 1,958,204
Balanced Fund 10,083,735 8,374,192
International Fund 2,762,304 3,316,839
Common stock--Employer Company Fund 7,439,036 15,566,503
Common Trust Fund* 9,787,719 6,560,602
Non-performing interest contract (Note F) -- 4,575,539
Participant loans receivable 1,087,665 1,077,960
------------------------------
Net assets available for plan benefits $52,011,956 $56,177,780
==============================
</TABLE>
*Consists of the Money Market Fund (Chase Manhattan Bank Domestic Liquidity
Fund).
See notes to financial statements.
F-15
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Statements of Changes in Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997
-----------------------------
<S> <C> <C>
Additions
Net transfer from the PVH Associates Investment
Plan for Hourly Associates $ 249,785 $ 155,597
Net transfer from the Associates Investment Plan
of PVH (Crystal Brands Division) -- 14,048,132
-----------------------------
249,785 14,203,729
-----------------------------
Contributions:
Employer Company, net of forfeitures 1,650,080 1,313,423
Participants 4,361,515 4,430,685
-----------------------------
6,011,595 5,744,108
Interest and investment income 3,301,844 1,963,586
-----------------------------
Total additions 9,563,224 21,911,423
-----------------------------
Deductions
Payments to participants 9,015,648 5,026,675
-----------------------------
Total deductions 9,015,648 5,026,675
-----------------------------
Net realized and unrealized (depreciation) appreciation of
investments (4,713,400) 2,627,777
-----------------------------
Net (decrease) increase (4,165,824) 19,512,525
Net assets available for plan benefits at
beginning of year 56,177,780 36,665,255
-----------------------------
Net assets available for plan benefits at
end of year $52,011,956 $56,177,780
=============================
</TABLE>
See notes to financial statements.
F-16
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements
December 31, 1998
A. Description of the Plan
The following description of the Phillips-Van Heusen Corporation (the "Company")
Associates Investment Plan for Salaried Associates (the "Plan") provides only
general information. Participants should refer to the Plan Document for a more
complete description of the Plan's provisions.
On October 1, 1997, the net assets of the Associates Investment Plan of
Phillips-Van Heusen Corporation (Crystal Brands Division) (the "Crystal Brands
Plan") associated with salaried or former associates were merged into the Plan.
All assets of the Crystal Brands Plan were held by State Street Bank (trustee of
the Crystal Brands Plan through September 30, 1997). All assets of the Plan are
held by Chase Manhattan Bank (trustee of the Plan through September 30, 1997)
and Wachovia Bank, N.A. ("Wachovia") (successor trustee of the Plan effective
October 1, 1997) in the Company's Associates Investment Plan Master Trust (the
"AIP Master Trust"). The investment alternatives of the Crystal Brands Plan have
included interest contracts with insurance companies, as discussed further in
this note and in Note F.
General
The Plan is a defined contribution plan covering salaried clerical employees of
the Company who have at least one year of service (1,000 hours in a year) and
are age 21 or older. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
Contributions
Each year, participants may contribute up to 15% of pretax annual compensation,
as defined by the Plan. The Company contributes 50% of the first 6% of base
compensation that a participant contributes to the Plan.
Participant Accounts
Each participant's account is credited with the participant's contributions and
allocations of (a) the Company's contributions and (b) Plan earnings. Forfeited
balances of terminated participants' nonvested accounts are used to reduce
future Company contributions. One hundred percent of the Company contributions
are automatically invested in the common stock of the Company. In accordance
with the provisions of the Plan, participants age 55 or older may direct the
Company contribution into any of the Plan's investment options.
F-17
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
A. Description of the Plan (continued)
Vesting
Amounts attributable to Company contributions become vested on the participant's
65th birthday or if the participant's employment by the Company terminates by
reason of the participant's death or permanent disability or the participant has
completed five years of service with the Company.
Investment Options
Upon enrollment in the Plan, a participant may direct employee contributions
into any of six investment options. A participant may contribute a maximum of
25% of employee contributions into the Phillips-Van Heusen Corporation Common
Stock Fund.
Participant Loans Receivable
Participants may borrow from the Plan, with certain restrictions, using their
vested account balance as collateral. The minimum loan amount is $1,000 and the
maximum loan amount is the lesser of (i) $50,000 reduced by the participant's
highest outstanding loan balance during the previous 12 months, or (ii) 50% of
the vested value of the participant's account. Interest is fixed for the term of
the loan at the prime rate as of the first business day of the month of
application as published in The Wall Street Journal, plus 1%. Loan repayments
are made through payroll deductions which may be specified for a term of 1 to 5
years or up to 15 years for the purchase of a primary residence.
Payment of Benefits
Participants entitled to final distributions generally will receive payment in
the form of a lump-sum amount equal to the value of their vested account.
Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
F-18
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
B. Significant Accounting Policies
The accounting records of the Plan are maintained on the accrual basis.
Substantially all administrative expenses are paid by the company.
In accordance with the Rules and Regulations of the Department of Labor,
investments are included in the accompanying financial statements at market
value as determined by quoted market price or at fair value as determined by
Wachovia for the applicable Wachovia investment funds. The interest contract is
stated at cost plus accumulated interest. Purchase and sales of securities are
reflected on a trade date basis.
All assets of the Plan are held by Wachovia in the AIP Master Trust and are
segregated from the assets of the Company. The Plan shares in AIP Master Trust
interest and investment income based upon its participants' shares of AIP Master
Trust net assets available for plan benefits.
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 these estimates.
C. Transactions with Parties-in-Interest
During the years ended December 31, 1998 and 1997, the AIP Master Trust
purchased 56,702 and 41,891 shares, respectively, of the Company's common stock
and received $197,777 and $205,332, respectively, from the Company as payment of
dividends on its common stock. The AIP Master Trust also sold 14,961 and 58,705
shares of the Company's common stock during the years ended December 31, 1998
and 1997, respectively.
In connection with the merger of the Crystal Brands Plan on October 1, 1997,
52,112 shares of the Company's common stock were transferred into the AIP Master
Trust.
F-19
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
D. Changes in the AIP Master Trust Net Assets Held by Fund
Changes in the AIP Master Trust net assets held by fund during the year ended
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Phillips-Van
Heusen Corp. Money
Common Market Bond Balanced Equity
Stock Fund Fund Fund Fund Fund
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at beginning of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805
Interest and investment income 226,343 474,862 138,565 1,154,085 1,133,584
Contributions received:
Employer Company, net of
forfeitures 1,894,714 632 1,355 17,426 31,368
Employees 325,015 561,378 320,057 1,226,067 2,101,123
Net realized and unrealized
appreciation (depreciation) (9,106,716) -- 21,757 455,901 3,577,455
Loans to participants, net of
repayments 594 (3,431) 9,072 35,206 39,529
Payments to participants (3,113,510) (2,527,309) (497,432) (1,427,011) (2,549,482)
Transfers (to) from other accounts (717,388) 4,418,474 (41,203) 683,068 1,026,645
----------------------------------------------------------------------------
Net assets at end of year $ 9,414,931 $ 11,971,150 $ 2,267,092 $ 11,531,743 $ 21,524,027
============================================================================
Plan's beneficial interest at end of year $ 7,439,036 $ 9,787,719 $ 1,861,948 $ 10,083,735 $ 18,989,549
============================================================================
</TABLE>
<TABLE>
<CAPTION>
International Fixed Income Loan
Fund Fund Fund Total
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at beginning of year $ 3,585,363 $ 4,575,539 $ 1,371,795 $ 66,350,847
Interest and investment income 329,613 377,524 3,834,576
Contributions received:
Employer Company, net of
forfeitures 5,185 -- -- 1,950,680
Employees 622,425 -- -- 5,156,065
Net realized and unrealized
appreciation (depreciation) (520,450) -- -- (5,572,053)
Loans to participants, net of
repayments 13,351 -- (94,321) --
Payments to participants (365,871) (150,096) -- (10,630,711)
Transfers (to) from other accounts (566,629) (4,802,967) -- --
------------------------------------------------------------
Net assets at end of year $ 3,102,987 $ -- $ 1,277,474 $ 61,089,404
============================================================
Plan's beneficial interest at end of year $ 2,762,304 $ -- $ 1,087,665 $ 52,011,956
============================================================
</TABLE>
Note: Certain funds above include investments in the Chase Manhattan Bank
Domestic Liquidity Fund.
F-20
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
D. Changes in the AIP Master Trust Net Assets Held by Fund (continued)
Changes in the AIP Master Trust net assets held by fund during the year ended
December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Phillips-Van
Heusen Corp. Money
Common Market Bond Balanced Equity
Stock Fund Fund Fund Fund Fund
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets at beginning of year $ 19,612,593 $ 6,879,359 $ 1,818,465 $ 5,750,463 $ 9,384,953
Interest and investment income 211,070 551,149 125,621 502,825 330,738
Contributions received:
Employer Company, net of
forfeitures 1,620,371 (51,060) 73 (2,835) (11,499)
Employees 423,500 670,327 350,969 1,193,105 1,963,385
Net realized and unrealized
appreciation (depreciation) (299,112) -- 18,814 854,817 2,721,432
Loans to participants, net of
repayments (77,679) (45,092) 4,773 (42,561) (71,843)
Payments to participants (1,962,154) (1,707,477) (255,224) (802,958) (1,332,908)
Transfers (to) from other accounts (446,731) (226,623) (85,827) 236,828 427,253
Transfer from AIP of PVH (Crystal
Brands Division) 824,021 2,975,961 337,257 1,697,317 2,752,294
---------------------------------------------------------------------------
Net assets at end of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805
===========================================================================
Plan's beneficial interest at end of year $ 15,566,503 $ 6,560,602 $ 1,958,204 $ 8,374,192 $ 14,747,941
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
International Fixed Income Loan
Fund Fund Fund Total
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets at beginning of year $ 2,226,120 $ -- $ 969,816 $46,641,769
Interest and investment income 391,072 106,016 -- 2,218,491
Contributions received:
Employer Company, net of
forfeitures 585 -- -- 1,555,635
Employees 646,476 -- -- 5,247,762
Net realized and unrealized
appreciation (depreciation) (327,047) -- -- 2,968,904
Loans to participants, net of
repayments (27,416) -- 259,818 --
Payments to participants (279,685) - -- (6,340,406)
Transfers (to) from other accounts 95,100 -- -- --
Transfer from AIP of PVH (Crystal
Brands Division) 860,158 4,469,523 142,161 14,058,692
------------------------------------------------------------
Net assets at end of year $ 3,585,363 $ 4,575,539 $ 1,371,795 $66,350,847
============================================================
Plan's beneficial interest at end of year $ 3,316,839 $ 4,575,539 $ 1,077,960 $56,177,780
============================================================
</TABLE>
Note: Certain funds above include investments in the Chase Manhattan Bank
Domestic Liquidity Fund.
F-21
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
E. Assets of the Plan
Assets of the Plan are included in the assets of the AIP Master Trust held by
the trustees. The assets of the AIP Master Trust are presented in the following
table. Investments that represent 5% or more of the AIP Master Trust's total net
assets are identified by an asterisk.
<TABLE>
<CAPTION>
December 31,
1998 1997
----------------------------------
<S> <C> <C>
Investments at fair value as determined
by quoted market price:
Shares of registered investment companies:
Fidelity Growth & Income Portfolio,
465,513 and 424,247 shares, respectively $ 21,524,027* $ 16,163,805*
Fidelity Intermediate Bond Fund,
220,576 and 227,623 shares, respectively 2,267,092 2,314,921
Fidelity Puritan Fund, 574,442 and 484,360
shares, respectively 11,531,743* 9,387,001*
Templeton Foreign Fund, 369,842 and
360,337 shares, respectively 3,102,987* 3,585,363*
Phillips-Van Heusen Corp. Common Stock Fund,
1,304,634 and 1,394,679 shares, respectively 9,414,931* 19,905,879*
Investments at estimated fair value:
Common Trust Fund 11,971,150* 9,046,544*
Promissory notes (participant loans) 1,277,474 1,371,795
Non-performing interest contract -- 4,575,539*
----------------------------------
Total net assets $ 61,089,404 $ 66,350,847
==================================
Plan's beneficial interest $ 52,011,956 $ 56,177,780
==================================
</TABLE>
F. Non-Performing Interest Contract
On July 16, 1991, on application of the Insurance Commissioner of the State of
New Jersey, the Superior Court of New Jersey placed the Mutual Benefit Life
Insurance Company ("MBLIC") into rehabilitation. Effective June 30, 1991,
allocation of interest on MBLIC interest contracts to participants was
suspended, and on January 1, 1992, the interest accrual rate on all MBLIC
contracts was reduced to 3% in accordance with the recommendation of the Deputy
Rehabilitator of MBLIC.
F-22
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
F. Non-Performing Interest Contract (continued)
On November 10, 1993, the court approved a plan of rehabilitation for MBLIC. The
rehabilitation plan provides investors with two alternatives consisting of
either (1) participating ("opt-in") in the plan, or (2) not participating
("opt-out") in the plan. Investors electing to opt-in are projected to receive
100% of their July 16, 1991 investment balance over a four-year period from
December 31, 1999 to December 31, 2003. Investors who elected to opt-out
received approximately 55% of their July 16, 1991 investment balance no later
than mid-1996. The Plan's interest contract with MBLIC is not covered by state
guaranty associations. For certain investments not covered by state guaranty
associations, including the Plan's interest contract, the rehabilitation
provides, for those investors electing to opt-in, reinsurance by a consortium of
insurance companies including the Prudential Insurance Company of America and
the Metropolitan Life Insurance Company.
State Street Bank, the former trustee of the Crystal Brands Plan, elected to
opt-in to the MBLIC rehabilitation plan. State Street Bank made this decision
after review and analysis of the rehabilitation plan and the financial strength
of the reinsurers. Based on the MBLIC rehabilitation plan, including the
reinsurance provision, no adjustment to the carrying value of the MBLIC interest
contract was made. The Plan's MBLIC interest contract was credited with interest
at 6.35% from January 1, 1997 through June 30, 1997 and 9.75% for July 1, 1997
through November 2, 1998. On November 2, 1998, the Plan received as final
settlement from MBLIC of $4,802,967, which includes principal and accrued
interest of $4,425,443 and $377,524, respectively.
G. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated April 27, 1995, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
F-23
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
H. Differences Between Plan Financial Statements and Form 5500
The following is a reconciliation of net assets available for plan benefits per
the financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31,
1998 1997
-------------------------------
<S> <C> <C>
Net assets available for plan benefits as reported on the
financial statements $52,011,956 $56,177,780
Less amounts allocated to withdrawn participants at the end
of the year 557,663 1,223,049
-------------------------------
Net assets available for plan benefits as reported on the
Form 5500 $51,454,293 $54,954,731
===============================
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year ended
December 31,
1998
------------
<S> <C>
Benefits paid to participants per the financial statements $ 9,015,648
Add amounts allocated to withdrawn participants
at December 31, 1998 557,663
Less amounts allocated to withdrawn participants
at December 31, 1997 (1,223,049)
------------
Benefits paid to participants per the Form 5500 $ 8,350,262
============
</TABLE>
Amounts allocated to withdrawn participants on the Form 5500 represent benefit
claims that have been processed and approved for payment prior to year-end but
not yet paid.
F-24
<PAGE>
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
I. Year 2000 (Unaudited)
The Plan Sponsor has determined that it will be necessary to take certain steps
in order to ensure that the Plan's information systems are prepared to handle
year 2000 dates. The Plan Sponsor is taking a two phase approach. The first
phase addresses internal systems that must be modified or replaced to function
properly. Both internal and external resources are being utilized to replace or
modify existing software applications, and test the software and equipment for
the year 2000 modifications. The Plan Sponsor anticipates substantially
completing this phase of the project by the end of 1999. Costs associated with
modifying software and equipment are not estimated to be significant and will be
paid by the Plan Sponsor.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determine that they
have developed plans to address their own year 2000 problems as they relate to
the Plan's operations. All third party service providers have indicated that
they will be year 2000 compliant by the end of 1999. If modification of data
processing systems of either the Plan, the Plan Sponsor, or its service
providers are not completed timely, the year 2000 problem could have a material
impact on the operations of the Plan. Plan management has not developed a
contingency plan, because they are confident that all systems will be year 2000
ready.
F-25
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
1 Consent of Independent Auditors
(Associates Investment Plan for
Hourly Associates)
2 Consent of Independent Auditors
(Associates Investment Plan for
Salaried Associates)
<PAGE>
Exhibit 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Phillips-Van Heusen Corporation Associates Investment
Plan for Hourly Associates of our report dated June 25, 1999, with respect to
the financial statements of the Phillips-Van Heusen Corportation Associates
Investment Plan for Hourly Associates included in this Annual Report (Form 11-K)
for the year ended December 31, 1998.
/s/ Ernst & Young LLP
New York, New York
June 25, 1999
<PAGE>
Exhibit 2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Phillips-Van Heusen Corporation Associates Investment
Plan for Salaried Associates of our report dated June 25, 1999, with respect to
the financial statements of the Phillips Van-Heusen Corporation Associates
Investment Plan for Salaried Associates included in this Annual Report (Form
11-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
New York, New York
June 25, 1999
