UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-2433
SALANT CORPORATION
(Exact name of registrant as specified in its charter)
1114 Avenue of the Americas, New York, New York 10036
Telephone: (212) 221-7500
Incorporated in the State of Delaware Employer Identification No. 13-3402444
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1 per share,
registered on the New York Stock Exchange, and
series B Warrants, registered on the American Stock Exchange.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No __
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229-405 of this chapter) 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.
As of March 21, 1994, there were outstanding 13,516,479 shares of the
Common Stock of the registrant. Based on the closing price of the
Common Stock on the New York Stock Exchange on such date, the
aggregate market value of the voting stock held by non-affiliates of
the registrant on such date was $108,131,832. For purposes of this
computation, shares held by affiliates and by directors and executive
officers of the registrant have been excluded. Such exclusion of
shares held by directors and executive officers is not intended, nor
shall it be deemed, to be an admission that such persons are
affiliates of the registrant.
Documents incorporated by reference: The definitive Proxy Statement of
Salant Corporation relating to the 1994 Annual Meeting of Stockholders
is incorporated by reference in Part III hereof.
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Disagreements on Accounting and Financial
Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
SIGNATURES
PART I
ITEM 1. BUSINESS
Introduction. Salant Corporation designs, manufactures, imports
and markets to retailers throughout the United States a wide range
of men's, as well as women's and children's, apparel and
accessories, principally under internationally recognized brand
names owned by the Company or licensed from others. (As used
herein, the "Company" includes Salant and its subsidiaries.)
The Company's products are sold through major department and
specialty stores, major discounters and mass volume retailers. No
one customer accounted for more than 6% of the Company's net sales
during fiscal 1993. In addition, the Company receives royalty
income from the licensing of certain of its owned trademarks and
designs to other manufacturers. The Company also operates a chain
of factory outlet stores, principally in the Northeast and the
South, at which its own products and those of other apparel
manufacturers are offered at discount prices.
Salant Corporation ("Salant"), which was incorporated in Delaware
in 1987, is the successor to a business founded in 1893 and
incorporated in New York in 1919.
Bankruptcy Court Cases. On June 27, 1990 (the "Filing Date"),
Salant and its wholly owned subsidiary, Denton Mills, Inc.
("Denton Mills"), each filed with the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy
Court") a separate voluntary petition for relief under chapter 11
of title 11 of the United States Code (the "Bankruptcy Code")
(Case Nos. 90-B-12037 (CB) and 90-B-12038 (CB)) (the "Chapter 11
Cases"). The Company's other United States subsidiaries on the
Filing Date did not seek relief under the Bankruptcy Code. On
July 30, 1993, the Bankruptcy Court issued an order confirming the
Third Amended Joint Plan of Reorganization of Salant and Denton
Mills (the "Plan"). The Plan was consummated on September 20, 1993
(the "Consummation Date"), as further described in Item 3. "Legal
Proceedings" and in Note 2 to the financial statements.
Obion Denton Division - Discontinued Operation Subsequently
Retained. On March 10, 1993, the Company determined to
restructure and sell its Obion Denton division, which manufactures
and markets children's sleepwear under (i) the Company-owned
trademark DR. DENTON, (ii) licensed names and likenesses of well-
known children's characters, (iii) retailers' private labels,
(iv) licenses from Major League Baseball and the National Football
League, and (v) the licensed OSH KOSH B'GOSH trademark. As a
consequence, the division was accounted for as a discontinued
operation in the Company's financial statements for 1992 and the
first three quarters of fiscal 1993. During 1993, the Company
effected a comprehensive restructuring of the division's
operations involving (i) the discontinuation of certain product
lines which have historically produced inadequate gross profit
margins, (ii) the elimination of the resulting excess
manufacturing capacity and (iii) the reduction of the overhead
costs of the restructured business. In March 1994, the Company
concluded that the value of the division would be maximized by
retaining and continuing to operate the division. The financial
statements of the Company for all periods included in this report
have been reclassified to treat the Obion Denton division (now
known as the Salant Children's Apparel Group) as a continuing
operation.
Principal Product Lines. The following table sets forth, for
fiscal years 1991 through 1993, the percentage of the Company's
total sales contributed by each category of product:
<TABLE>
<CAPTION>
Fiscal Year
1991 1992 1993
<S> <C> <C> <C>
Men's Apparel and Accessories 71% 80% 82%
Women's Apparel and Accessories 20% 12% 8%
Children's Apparel and Accessories 9% 8% 10%
</TABLE>
The markets in which the Company operates are highly competitive.
The Company competes primarily on the basis of brand recognition,
quality, fashion, price and customer service.
A significant factor in the marketing of the Company's products is
the consumer perception of the trademark or brand name under which
those products are marketed. Approximately 80% of the Company's
net sales for 1993 was attributable to products sold under
designer trademarks and other internationally recognized brand
names and the balance was attributable to products sold under
retailers' private labels. The following table lists the
principal trademarks under which the Company's products are sold
and the product lines associated with those trademarks.
Trademarks used under license are indicated with an asterisk; all
other listed trademarks are owned by the Company.
<TABLE>
<CAPTION>
Trademark Product Lines
<S> <C>
THE BEATLES* Men's neckwear and suspenders
DR. DENTON Children's sleepwear
JOHN HENRY Men's dress shirts, neckwear, belts
and suspenders; men's and boys'
jeans
LIBERTY OF LONDON* Men's dress shirts,
neckwear, belts and suspenders
MADE IN THE SHADE Women's junior sportswear
MANHATTAN Men's dress shirts and sportswear
OSH KOSH B'GOSH* Children's sleepwear
PEANUTS* Men's dress shirts, neckwear and
suspenders
NINO CERRUTI* Men's dress shirts and neckwear
PERRY ELLIS* Men's sportswear, dress shirts,
neckwear, belts and suspenders;
women's scarves; and boys'
sportswear
PERRY ELLIS AMERICA* Men's casual sportswear and women's
scarves
PORTFOLIO BY PERRY ELLIS* Men's sportswear, dress slacks,
dress shirts, neckwear, belts and
suspenders
SAVE THE CHILDREN* Men's neckwear, suspenders and
women's scarves
THOMSON Men's dress slacks and dress shirts
VERA Women's scarves
WORLD WILDLIFE FUND* Men's casual slacks, shorts, shirts
and sweaters, neckwear and
suspenders
During fiscal 1993, approximately 29% of the Company's net sales
was attributable to products sold under the PERRY ELLIS, PORTFOLIO
BY PERRY ELLIS and PERRY ELLIS AMERICA trademarks; these products
are sold through leading department and specialty stores.
Products sold under the JOHN HENRY label accounted for
approximately 13% of the Company's net sales during fiscal 1993;
these products are marketed primarily through department and
specialty stores. Products sold under the MANHATTAN label
accounted for approximately 11% of the Company's net sales during
fiscal 1993; these products are marketed primarily through major
mass volume retailers. Products sold under the THOMSON label
accounted for approximately 8% of the Company's net sales during
fiscal 1993; these products are sold primarily through department
and specialty stores. No other line of products accounted for more
than 5% of the Company's net sales during fiscal 1993.
Trademarks Owned by the Company and Related Licensing Income. The
Company owns the DR. DENTON, JOHN HENRY, LADY MANHATTAN, MADE IN
THE SHADE, MANHATTAN, THOMSON and VERA trademarks, among others.
All of the significant brand names owned by the Company have been
registered or are pending registration with the United States
Patent Office.
The Company has sought to capitalize on consumer recognition of
and interest in its trademarks by licensing various of those
trademarks to others. As of the end of 1993, licenses were
outstanding to approximately 65 licensees to make or sell apparel
products in the United States and in 30 other countries under the
MANHATTAN, LADY MANHATTAN and JOHN HENRY trademarks, which
produced royalty income, net of related expenses, of approximately
$6.8 million in fiscal 1993. Products under license include men's
sweaters, socks, pajamas, outerwear, activewear, swimwear,
underwear, sportcoats, sportshirts, slacks, knit scarves,
sunglasses, leather accessories, hats and gloves, and women's
blouses and tops, lingerie, maternity wear, skirts and pants. The
Company also licenses the VERA trademark and related designs in
the United States to manufacturers of table linens and decorative
bedroom, bath and kitchen accessories, and internationally to
manufacturers of women's scarves.
Trademarks Licensed to the Company. The name Perry Ellis and
related trademarks are licensed to the Company under a series of
license agreements with Perry Ellis International Inc. ("PEI").
The license agreements contain renewal options which, subject to
compliance with certain conditions contained therein, permit the
Company to extend the terms of such license agreements. Assuming
the exercise by the Company of all available renewal options, the
license agreements covering men's apparel and accessories will
expire on December 31, 2015, the license agreement covering boys'
sportswear will expire on December 31, 1994 and the license
agreement covering women's scarves will expire on December 31,
2000. The Company also has rights of first refusal worldwide for
any new licenses granted by PEI for men's and children's apparel
and accessories.
The Company is also a licensee of the trademarks THE BEATLES,
DIFFA, LIBERTY OF LONDON, NINO CERRUTI, OSH KOSH B'GOSH, PEANUTS,
SAVE THE CHILDREN, WORLD WILDLIFE FUND, DISNEY characters, BARNEY,
and NINJA TURTLES for various categories of products, under
license agreements expiring between 1994 and 2008.
The agreements under which the Company is licensed to use
trademarks owned by others typically provide for royalties at
varying percentages of net sales under the licensed trademark,
subject to a minimum annual royalty payable irrespective of the
level of net sales. The Company anticipates that it will be able
to extend the term of any material licenses when they expire.
Design and Manufacturing. With limited exceptions, products sold
by the Company's various divisions are manufactured to the designs
and specifications (including fabric selections) of designers
employed by those divisions.
During fiscal 1993, approximately 27% of the products produced by
the Company (measured in units) were manufactured in the United
States, with the balance manufactured in foreign countries.
Facilities operated by the Company accounted for approximately 67%
of its domestic-made products and 31% of its foreign-made
products; the balance in each case was attributable to
unaffiliated contract manufacturers.
The Company's foreign sourcing operations are subject to various
risks of doing business abroad, including currency fluctuations,
quotas and, in certain parts of the world, political instability.
Although the Company's operations have not been materially
affected by any of such factors to date, any substantial
disruption of its relationships with its foreign suppliers could
adversely affect its operations. Some of the Company's imported
merchandise is subject to United States Customs duties. In
addition, bilateral agreements between the major exporting
countries and the United States impose quotas which limit the
amounts of certain categories of merchandise that may be imported
into the United States. Any material increase in duty levels,
material decrease in quota levels or material decrease in
available quota allocations could adversely affect the Company's
operations.
As discussed in Item 2 - Properties, the Company has manufacturing
facilities located in Mexico. The adoption of the North American
Free Trade Agreement (NAFTA) is expected to benefit the Company by
(i) reducing and/or eliminating United States Customs duties on
merchandise manufactured in the Company's facilities in Mexico,
(ii) eliminating quota levels on this merchandise, and (iii)
eliminating restrictions on exporting merchandise from the United
States for sale in both Mexico and Canada.
Raw Materials. The raw materials used in the Company's
manufacturing operations consist principally of finished fabrics
made from natural, synthetic and blended fibers. These fabrics
and other materials, such as leathers used in the manufacture of
various accessories, are purchased from a variety of sources both
within and outside the United States. The Company believes that
adequate sources of supply at acceptable price levels are
available for all such materials. No single supplier accounted
for more than 5% of Salant's raw material purchases during fiscal
1993.
Seasonality of Business. Although the Company typically
introduces and withdraws various individual products throughout
the year, the Company's principal products are organized into
seasonal lines for resale at the retail level during the spring,
fall and Christmas seasons. The Company's products are
manufactured approximately one season in advance of the related
retail selling season.
Backlog of Orders. The Company does not consider the amount of
its backlog of orders to be significant to an understanding of its
business primarily due to increased utilization of EDI technology,
which provides for the electronic transmission of orders from
customers' computers to those of the Company. As of March 5, 1994,
the Company's backlog of orders was approximately $100 million,
slightly more than 16% greater than the backlog of orders of
approximately $86 million that existed as of March 6, 1993.
Employees. As of the end of fiscal 1993, the Company employed
approximately 3,900 persons (a reduction of approximately 100
persons from the preceding year), of whom 2,900 were engaged in
manufacturing operations and the remainder were employed in
executive, marketing and sales, product design, engineering and
purchasing activities and in the operation of the Company's
factory outlet stores. Certain manufacturing employees are
covered by collective bargaining agreements with various unions,
which are in effect and expire between August 31, 1994 and July
31, 1997. The Company believes that its relations with its
employees are satisfactory.
Competition. The apparel industry in the United States is highly
competitive and characterized by a relatively small number of
multi-line manufacturers (such as the Company) and a larger number
of specialty manufacturers. The Company faces substantial
competition in its markets from manufacturers in both categories.
Some of the Company's competitors have greater financial resources
than the Company.
The Company is one of the nation's leading suppliers of men's
dress shirts, sportswear, slacks, ties, belts and suspenders. The
Company seeks to maintain its competitive position in the markets
for its branded products on the basis of the strong brand
recognition associated with those products and, with respect to
all of its products, on the basis of styling, quality, fashion,
price and customer service.
Environmental Regulations. Current environmental regulations have
not had, and in the opinion of the Company, assuming the
continuation of present conditions, will not have a material
effect on the business, capital expenditures, earnings or
competitive position of the Company.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at 1114
Avenue of the Americas, New York, New York 10036. The Company's
principal properties consist of six domestic manufacturing
facilities located in Alabama, Georgia, New York, Tennessee and
Texas, three manufacturing facilities located in Mexico, and five
distribution centers located in Georgia, New York, South Carolina
and Texas. The Company owns approximately 1,467,000 square feet
of space devoted to manufacturing and distribution and leases
approximately 330,000 square feet of such space. The Company owns
approximately 44,000 square feet of combined office, design and
showroom space and leases approximately 202,000 square feet of
such space. As of the end of 1993, the Company operated 57
factory outlet stores and one retail store, comprising
approximately 184,000 square feet of selling space, all of which
are leased.
The Company believes that its plant and equipment are adequately
maintained, in good operating condition, and will be adequate for
the Company's present needs. The Company continues, however, to
explore opportunities for additional production facilities in
order to enable the Company to further reduce its manufacturing
costs and to meet its future needs.
ITEM 3. LEGAL PROCEEDINGS
(a) Chapter 11 Cases. On June 27, 1990, Salant and Denton Mills
each filed with the Bankruptcy Court a separate voluntary petition
for relief under chapter 11 of the Bankruptcy Code. On July 30,
1993, the Bankruptcy Court issued an order confirming the debtors'
Third Amended Joint Plan of Reorganization (the "Plan").
The Plan was consummated on September 20, 1993. From that date
through January 1, 1994, the Company made cash payments of $7.1
million, issued $111.9 million of new 10-1/2% senior secured
notes, and issued 9.6 million shares of common stock in settlement
of certain undisputed claims in the chapter 11 proceedings. Salant
anticipates that an additional $9.4 million in cash and an
additional 1.7 million shares of common stock ultimately will be
distributed in connection with the resolution of all remaining
claims. Provisions for such distributions have been made in the
consolidated financial statements for the year ended January 1,
1994. As further described in Note 5 to the financial statements,
upon consummation of the Plan, the Company recorded an
extraordinary gain of $24.7 million relating to the settlement of
indebtedness pursuant to the Plan.
The process of resolving claims is continuing and, pursuant to the
Plan remains under the jurisdiction of the Bankruptcy Court.
Significant Disputed Claims.
(i) IRS Claim. By proof of claim, as amended, the Internal
Revenue Service of the United States of America (the "IRS") has
asserted a claim (the "IRS Claim") against Salant in the Chapter
11 Cases of approximately $5.2 million. The IRS Claim included
approximately $3.2 million of Excise Taxes, as discussed in
section (ii) below; pursuant to an interim agreement, which has
not yet been finalized in a formal written agreement, Salant will
pay $100,000 to the IRS in full settlement of the Excise Tax
claims. The balance of the IRS Claim seeks the payment of (a)
income taxes that are claimed to be owing for prior tax periods;
(b) withholding and FICA taxes for the tax period ending March 31,
1990; (c) interest and penalties with respect to those taxes; and
(d) FUTA taxes for the period from January 1 through June 27,
1990. Without prejudice to the rights, claims and defenses of the
Company and the IRS, the Company and the IRS agreed to expunge all
claims and proofs of claim asserted and/or filed by the IRS other
than the portion of the IRS Claim relating to such non-Excise
Taxes. Salant is currently engaged in settlement discussions with
the IRS. The Company has provided reserves for amounts which it
deems to be appropriate for these claims and believes that these
claims will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
(ii) Minimum Funding Contributions for Salant's Pension
Plans. Under provisions of the Internal Revenue Code of 1986, as
amended (the "Tax Code"), Salant is required to make minimum
contributions to three defined benefit pension plans that it has
sponsored: the Salant Corporation Retirement Plan (the "Retirement
Plan"), the Salant Corporation Pension Plan (the "Pension Plan"),
and the Manhattan Industries Employee Benefit Plan (the "Manhattan
Plan"). To the extent that a required contribution has not been
made, a plan has an accumulated funding deficiency.
Salant did not make the entire minimum contributions to the
Retirement Plan and the Pension Plan required for the plan years
beginning December 1, 1983 and December 1, 1984. At Salant's
request, however, the IRS waived the resulting funding deficiency
and gave Salant 15 years to amortize the waived deficiency. The
terms of the waiver provided that it would be retroactively null
and void if Salant failed to make any future minimum contributions
or amortization payments. As a result of the filing of the Chapter
11 Cases, Salant was prevented from making certain contributions
to the Retirement Plan, the Pension Plan, and the Manhattan Plan
by reason of the prohibition against the payment of pre-filing
date debt. The amount of the missed contributions approximated
$2.5 million. Due to changes in the rules concerning the waiver of
funding deficiencies, Salant was ineligible to request a waiver
for these missed contributions. As a consequence, the IRS has
asserted that the Retirement Plan and the Pension Plan have
accumulated funding deficiencies dating back to November 30, 1984
and that the Manhattan Plan has a deficiency for the plan year
ending January 31, 1990. The unamortized amount of the earlier
funding waivers is approximately $1.7 million.
For each year that an accumulated funding deficiency exists, the
Tax Code imposes an Excise Tax equal to 10% (increased from 5% in
1989) on the amount of the deficiency. If the deficiency is not
corrected before the earlier of (a) the date of mailing of a
notice of deficiency of the 10% tax or (b) the assessment of the
10% tax, the IRS may impose an Excise Tax equal to 100% of the
accumulated deficiency.
As discussed in section (i) above, the IRS has filed a proof of
claim, as amended, in the amount of approximately $5.2 million, of
which approximately $3.2 million was in respect of Excise Taxes
and associated interest and penalties.
Effective January 1, 1992, the plan year of each of the Pension
Plan, the Retirement Plan, and the Manhattan Plan were changed to
the calendar year. On March 1, 1992, the Manhattan Plan was merged
into the Retirement Plan.
Salant and the IRS reached an interim agreement with respect to
the settlement of the Excise Tax claims which was read into the
record on July 30, 1993 at a hearing before the Bankruptcy Court
concerning the confirmation of the Plan. The interim agreement
provides that its terms would be set forth in detail in a formal
written agreement between Salant and the IRS, which formal written
agreement has not yet been finalized. The basic terms of the
agreement are that Salant will amortize the accumulated funding
deficiencies in the Retirement Plan and Pension Plan with payments
as follows: (1) $700,000 on the Consummation Date (which was paid
on September 15, 1993); (2) $750,000 on February 28, 1994 (which
was paid on that date); (3) $550,000 on February 28, 1995; and (4)
a cash payment on each anniversary of the Consummation Date during
the years 1995 through and including 2000 equal to the remainder
of the aggregate funding deficiency (after giving effect to the
payments provided in (1)-(3) above) divided by six, together with
interest accruing on the outstanding balance from the Consummation
Date. Upon the effective date of the formal written agreement,
Salant will pay the IRS $100,000 in full settlement of the Excise
Tax claims.
(iii) Equity Committee Appeal. On August 6, 1993, the
Official Committee of Equity Security Holders of Salant (the
"Equity Committee") filed a notice of appeal in the United States
District Court for the Southern District of New York. The Equity
Committee appealed the portion of the Plan relating to the payment
of certain compensation to Salant's Chief Executive Officer,
Nicholas DiPaolo, which compensation became payable upon
consummation of the Plan, but did not seek to overturn the
confirmation of the Plan. On November 12, 1993, Salant moved to
dismiss the appeal on the grounds that the Equity Committee lacks
standing and mootness. Consideration of the Equity Committee's
appeal is being deferred pending the resolution of Salant's motion
to dismiss.
(b) SEC Inquiry. As previously disclosed, an investigation was
conducted by the Staff of the Securities and Exchange Commission
(the "SEC") concerning the accuracy of certain statements in
Salant's Annual Report (Form 10-K) for the year ended December 30,
1989, and its Quarterly Report (Form 10-Q) for the quarter ended
March 31, 1990 (collectively, the "SEC filings"). The SEC
investigation focused on management's belief, as stated in the
Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") section in the SEC Filings, that
Salant's existing credit lines should be sufficient to meet its
working capital requirements. Salant cooperated with the SEC Staff
in connection with its investigation and has recently engaged in
discussions with the SEC Staff regarding the resolution of the
matters under investigation. The resolution of the investigation
is not expected to have a material adverse impact on Salant's
financial condition or results of operations.
(c) Securities Litigation. On November 27, 1990, Mae Fischer
("Fischer"), an alleged purchaser of Salant's 13-1/4% Senior
Subordinated Debentures due June 15, 1999 (the "Debentures"),
instituted a purported class action suit in the United States
District Court for the Southern District of New York, claiming
that certain directors and officers of Salant violated the federal
securities laws by issuing favorable public statements concerning
the future profitability of Salant, which Fischer claims
artificially inflated the market price of the Debentures between
October 1988 and June 1990. Pursuant to Salant's bylaws, Salant is
obligated to indemnify its directors and officers against expenses
and any judgements or settlements entered against them in actions
in which they are sued in their capacity as directors or officers.
Salant was not named as a defendant in the suit, Fischer v. Tynan,
et al., 90 Civ. 7587 (LBS), due to the pendency of the Chapter 11
Cases.
Fischer sought an unspecified amount of damages for herself and on
behalf of all persons who purchased the Debentures between October
18, 1988 and June 15, 1990. On April 30, 1992, Fischer also filed
a proof of claim (the "Fischer Claim") in the Chapter 11 Cases on
behalf of the same group of purchasers of the Debentures.
On November 30, 1992, Fischer filed an amended complaint which
contains essentially the same allegations, and seeks the same
relief, as the original complaint. On January 15, 1993, the
defendants filed a supplemental brief in further support of their
motion to dismiss the amended complaint on the ground that, among
other things, it fails to state a claim upon which relief can be
granted. In addition, the defendants have opposed the plaintiff's
motion for class certification, which was filed on June 22, 1992.
On June 16, 1993, defendants' motion to dismiss the amended
complaint was granted and Fischer's motion for class certification
was dismissed. On July 16, 1993, Fischer filed a notice of appeal
from the June 16, 1993 order with the United States Court of
Appeals for the Second Circuit. During the pendency of the appeal,
the defendants and Fischer reached an agreement to settle both the
Fischer Claim and the appeal. Pursuant to the terms and conditions
of the stipulation of settlement, Salant will issue and distribute
a number of shares of Salant Common Stock, not to exceed 11,000
shares, to certain purchasers of the Debentures who sold at a loss
during a circumscribed period. In addition, Fischer's counsel will
receive $150,000 for their fees and expenses pursuant to the
settlement. The stipulation of settlement, which is subject to a
hearing and review by the Bankruptcy Court, was filed with the
Bankruptcy Court on March 28, 1994. Upon final approval by the
Bankruptcy Court, the Fischer appeal and the Fischer Claim will be
deemed withdrawn with prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal year 1993, no matter was
submitted to a vote of security holders of Salant by means of the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Salant's Common Stock is traded on the New York Stock Exchange
(the "NYSE") under the ticker symbol SLT.
The high and low sale prices per share of Common Stock (based upon
the NYSE composite tape as reported in published financial
sources) for each fiscal quarter for the 1993 and 1992 fiscal
years are set forth below. The Company did not declare or pay any
dividends during such fiscal years. Both (i) the indenture
governing Salant's 10-1/2% Senior Secured Notes due December 31,
1998 (the "Senior Notes"), and (ii) the revolving credit,
factoring and security agreement, dated September 20, 1993 (the
"Credit Agreement"), with the CIT Group/Commercial Services, Inc.
require the satisfaction of certain net worth tests prior to the
payment of any cash dividends by Salant. The Credit Agreement
permits the payment of cash dividends provided that no event of
default has occurred, consolidated net worth of the Company
exceeds $87 million after giving effect to such dividend, and the
cumulative amount of dividends and distributions paid does not
exceed the sum of (i) 50% of cumulative consolidated net income
(subject to certain adjustments) after the Company has
consolidated net worth of $87 million, and (ii) net proceeds from
the issuance of capital stock. The Senior Notes have a similar
test, which is no more restrictive than the Credit Agreement. As
of January 1, 1994, Salant was prohibited from paying cash
dividends by the most restrictive of these provisions.
High and Low Sale Prices Per Share of
the Common Stock
</TABLE>
<TABLE>
<CAPTION>
Fiscal Quarter High Low
<S> <C> <C>
1993
Fourth $ 8 3/8 $ 6 1/8
Third 11 3/8 7 1/2
Second 10 3/4 7 7/8
First 9 5/8 8 1/4
1992
Fourth $10 $ 6 1/4
Third 7 1/2 3 7/8
Second 8 1/8 5
First 7 3/4 2 7/8
</TABLE>
On March 21, 1994, there were 1,096 holders of record of shares of
Common Stock.
All of the outstanding voting securities of the Company's
subsidiaries are owned beneficially and (except for shares of
certain foreign subsidiaries of the Company owned of record by
others to satisfy local laws) of record by the Company.
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands except per share and ratio data)
<TABLE>
<CAPTION>
Jan. 1, Jan. 2, Dec. 28, Dec. 29, Dec. 30,
1994 1993 1991 1990 1989
(52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
<S> <C> <C> <C> <C> <C>
For The Year Ended:
Continuing Operations:
Net sales $407,236 $415,641 $398,471 $411,680 $469,621
Income/(loss) from
continuing operations 7,227 (5,986) (19,109) (43,872) (9,354)
Discontinued Operations:
Estimated loss on
disposal, net of
income taxes - (11,772) - - -
Reversal of estimated
loss on disposal,
net of income taxes 11,772 - - - -
Extraordinary gain 24,707 - - - -
Net income/(loss)* 43,706 (17,758) (19,109) (43,872) (9,354)
Income/(loss) per
share from continuing
operations before
extraordinary gain $ 1.02 $ (1.73) $ (5.52) $ (12.68) $ (2.72)
Income/(loss) per share
from discontinued
operations 1.65 (3.40) - - -
Income per share from
extraordinary gain 3.48 - - - -
Net income/(loss)
per share* 6.15 (5.13) (5.52) (12.68) (2.72)
Cash dividends per share - - - - -
At Year End:
Current assets $148,472 $150,700 $150,332 $150,690 $186,146
Total assets 253,390 259,659 271,150 286,266 332,942
Current liabilities 45,871 55,286 38,568 25,693 126,002
Long-term debt 111,851 - - - 169,021
Deferred liabilities 16,766 2,462 5,833 5,835 21,371
Liabilities deferred
pursuant to chapter
11 cases - 266,420 272,999 282,055 -
Working capital 102,601 95,414 111,764 124,997 60,144
Current ratio 3.2:1 2.7:1 3.9:1 5.9:1 1.5:1
Shareholders'
equity/(deficiency) $ 78,902 $(64,509) $(46,250) $(27,317) $16,548
Book value per share $ 5.34 $(18.62) $(13.37) $(7.90) $4.78
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
* Includes for the fiscal year ended January 1, 1994, a provision of $5,500 (77 cents per share; tax
benefit not available) for restructuring costs principally related to the costs incurred in connection
with the closure of certain unprofitable operations, including (i) inventory markdowns associated with
those product lines and (ii) fixed asset write-downs at closed locations; for the fiscal year ended
January 2, 1993, (a) a provision of $4,824 ($1.39 per share; tax benefit not available) for restructuring
costs principally related to (i) the estimated costs to be incurred in connection with the closure of
certain unprofitable operations, (ii) the rejection, pursuant to the Bankruptcy Code, of certain lease
obligations, and (iii) the write-off of leasehold improvements, and buildings and equipment at closed
locations, and (b) the write-off of certain intangible assets of $6,759 ($1.95 per share; tax benefit
not available); for the fiscal year ended December 28, 1991, (a) a provision of $12,984 ($3.75 per share;
tax benefit not available) for restructuring costs principally related to (i) the closure of
substantially all the operations of the MI Group women's wear business, (ii) the closure of certain
unprofitable retail factory outlet stores, (iii) the rejection, pursuant to the Bankruptcy Code, of
certain lease obligations and (iv) an accrual for payment pursuant to a severance agreement with the
previous chief executive officer of Salant, (b) the write-off of certain intangible and other assets of
$6,587 ($1.90 per share; tax benefit not available) and (c) management fee income of $1,962 ($0.57 per
share) as a result of a settlement of certain litigation; for the fiscal year ended December 29, 1990, a
provision of $10,822 ($3.13 per share; tax benefit not available) for restructuring costs principally
related to (i) the closure of the North American Garment Finishing operations, (ii) discontinuance of the
Perry Ellis America garment dye program and (iii) the closing of 23 unprofitable retail factory outlet
stores, net of a reversal of $5,000 accrued for lease obligations which were rejected in the chapter 11
case; and for the fiscal year ended December 30, 1989, a provision of $6,500 ($1.89 per share; tax
benefit not available) for restructuring costs principally related to the closure of the Perry Ellis
Portfolio for Women business and the transfer of the Perry Ellis Collection for Women business.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated results of
operations and financial condition should be read in conjunction with
the accompanying Consolidated Financial Statements and related Notes
to provide additional information concerning the Company's financial
activities and condition.
Overview
On June 27, 1990, Salant and Denton Mills filed petitions for
relief under chapter 11 of the Bankruptcy Code. During the pendency of
the Chapter 11 Cases, the Company (i) eliminated unprofitable
businesses, (ii) reduced operating expenses, (iii) refocused its
resources on its core menswear businesses, with particular emphasis on
higher margin, branded product lines, (iv) incurred significant legal
and other professional fees related to the administration of the
Chapter 11 Cases, and (v) ceased to accrue interest on substantially
all of its prepetition debt. The Plan was consummated on September 20,
1993.
The Company believes that, upon completion of the claims
resolution process, it will have issued, pursuant to the Plan, an
aggregate of $111.9 million principal amount of new 10-1/2% Secured
Notes due December 31, 1998 (the "Secured Notes") and 11.3 million new
shares of common stock. For financial reporting and per share earnings
purposes, the Secured Notes and common shares issued or expected to be
issued were deemed to be outstanding from and after September 20,
1993. As a result of (i) the increase in interest expense due to the
issuance of the Secured Notes pursuant to the Plan, (ii) the reduction
in bankruptcy administration expenses following the consummation of
the Plan and (iii) the increase in the number of common shares
outstanding as a result of the Plan, the financial and per share
results for the fiscal year ended January 1, 1994 are not indicative
of the results that would have been reported had the Plan been
consummated at the beginning of the 1993 fiscal year.
In March 1994, the Company determined to retain and continue to
operate its Children's Apparel Group (formerly referred to as the
Obion Denton Division). During 1993, the Company effected a
comprehensive restructuring of the division's operations involving
(i) the discontinuation of certain product lines which have
historically produced inadequate gross profit margins, (ii) the
elimination of the resulting excess manufacturing capacity and
(iii) the reduction of the overhead costs of the restructured
business. The Company's financial statements for 1993 include the
operating results of the Children's Apparel Group in continuing
operations. Operating results for 1992 (which had reflected the
Children's Apparel Group in discontinued operations) have been
adjusted accordingly.
The Company continues to explore opportunities to increase its
presence in the dress shirt and sportswear categories.
Results of Operations
Fiscal 1993 Compared with Fiscal 1992
For the 1993 fiscal year, net sales were $407.2 million, a 2%
decrease from net sales of $415.6 million in 1992. Excluding the net
sales of product lines which ceased operations prior to 1993, net
sales for fiscal 1993 increased by 1.2%. The Company's sales of dress
shirts in 1993 increased over 1992. Based on industry statistics,
which continue to reflect a general weakness in the U.S. dress shirt
market, the Company believes that it has gained market share in this
category. Management does not anticipate a significant improvement in
the U.S. dress shirt market in the next six months.
The Company has announced the introduction of wrinkle free dress
shirts under several of its brand names for sale to consumers prior to
Father's Day 1994.
Gross profit in 1993 increased to $99.6 million, (24.5% of net
sales) from $93.7 million, (22.5% of net sales) in 1992 as a result of
increased gross profit margins in the men's Accessories Division
(primarily neckwear), the Children's Apparel Group, the Stores
division and the Thomson slacks division. These improvements more than
offset reduced gross margins in the Company's dress shirt and denim
based businesses.
The increased gross profit margin in the men's Accessories
Division was largely a result of the outstanding consumer acceptance
of the Company's novelty neckwear, produced under the PEANUTS, SAVE
THE CHILDREN, BEATLES and WORLD WILDLIFE FUND labels. The Company,
however, cannot predict whether the demand for such products will
continue at the current rate or, if such demand does not continue,
whether the Company will be able to develop other products which will
offset any reduction in the gross profit of the novelty neckwear
lines.
Selling, general and administrative expenses for the 1993 fiscal
year amounted to $76.9 million, or 18.9% of net sales, a decrease of
$1.1 million from the 1992 fiscal year, when such expenses represented
18.8% of net sales.
Earnings before interest, taxes, depreciation, amortization,
bankruptcy administration expenses and restructuring charges
("EBITDA") was $37.6 million, compared to $31.1 million in 1992, an
increase of 21%. The Company believes that EBITDA is helpful in
understanding cash flow from operations that is available for debt
service, taxes and capital expenditures. EBITDA should not be
considered as an alternative to net earnings as an indicator of the
Company's operating performance or to cash flow as an indicator of
liquidity.
In fiscal year 1993, the Company recorded a $5.5 million
provision for restructuring, which included $5.0 million related to
the restructuring of the Salant Children's Apparel Group. In fiscal
year 1992, the Company recorded division restructuring costs of $4.8
million, which included (i) the estimated costs to be incurred in
connection with the restructuring of certain unprofitable operations,
(ii) the rejection, allowable under chapter 11, of certain lease
obligations and (iii) the write-off of leasehold improvements,
buildings and equipment at closed locations.
Also, in fiscal year 1992, the Company wrote off the
unamortized portion of the excess of cost over net assets acquired
related to the Obion Denton and Vera Sportswear divisions in the
amount of $6.8 million.
Bankruptcy administration expenses decreased to $8.9 million
during fiscal year 1993 from $12.9 million during fiscal year 1992,
primarily as a result of the consummation of the plan of
reorganization on September 20, 1993.
Net interest expense (interest expense less interest income)
increased to $7.6 million in fiscal year 1993 from $3.1 million in
fiscal year 1992 as a result of interest incurred subsequent to
September 1993 on the Secured Notes issued pursuant to the Plan.
Interest expense for 1994 and subsequent years will include
approximately $11.7 million per annum related to the Secured Notes.
For the 1993 fiscal year, the Company reported income from
continuing operations before extraordinary gain of $7.2 million, or
$1.02 per share (based on a weighted average of 7,104,000 common
shares outstanding), compared to a loss from continuing operations of
$6.0 million, or $1.73 per share, (based on a weighted average of
3,460,000 common shares outstanding) for the 1992 fiscal year.
For the 1993 fiscal year, net income was $43.7 million, or $6.15
per share, compared to a net loss of $17.8 million, or $5.13 per
share, in 1992. Net income for 1993 included (i) a credit of $11.8
million, or $1.65 per share, resulting from the reversal of a reserve
which had been recorded in 1992, for the estimated loss on the
previously planned disposal of the Children's Apparel Group, and (ii)
an extraordinary gain of $24.7 million, or $3.48 per share, resulting
from the cancellation of indebtedness pursuant to the Plan. The net
loss for 1992 included the provision for the reserve of $11.8 million,
or $3.40 per share, related to the estimated loss on the previously
planned disposal of the Children's Apparel Group.
In connection with the Company's reorganization, as of January 1,
1994, 9,612,000 shares of its common stock had been issued to
creditors, resulting in approximately 13,100,000 shares outstanding as
of that date. Upon completion of the claims resolution process,
approximately 1,681,000 additional shares are expected to have been
issued to creditors and are included in the weighted average used for
purposes of the earnings per share calculations. The weighted average
number of shares outstanding during the 1993 fiscal year (based upon
the total number of common shares outstanding, including those which
the Company estimates will ultimately be issued pursuant to the Plan)
was 7,104,000, which (i) treats as issued on September 20, 1993 all
common shares (11,300,000 shares) expected to be issued pursuant to
the Plan, and (ii) gives effect to 465,000 common share equivalents
relating to outstanding stock options.
Inflation and Recent Legislation
Management believes that the rate of inflation over the past
three years has not had a material impact on Salant's operating
results.
The adoption of the North American Free Trade Agreement (NAFTA)
is expected to benefit the Company's business by (i) reducing and/or
eliminating United States Customs duties on merchandise manufactured
in Company-owned facilities in Mexico, (ii) eliminating quota levels
on this merchandise, and (iii) eliminating restrictions on exporting
merchandise from the United States for sale in both Mexico and Canada.
Fiscal 1992 Compared with Fiscal 1991
The financial statements for all periods presented have been
reclassified to present the Salant Children's Apparel Group as a part
of continuing operations.
For the 1992 fiscal year (ended January 2, 1993), Salant recorded
net sales of $415.6 million, an increase of 4.3% from net sales of
$398.5 million for the 1991 fiscal year. Excluding the net sales of
product lines which ceased operations prior to 1992, the net sales
increase from 1991 to 1992 was 13.6%. The increase in net sales was
attributable to significant sales increases achieved by the Company's
Perry Ellis menswear, Manhattan Shirt, Texas Apparel men's and boys'
jeans, Thomson slacks and Made in the Shade women's junior sportswear
divisions, partially offset by reductions in sales at the Obion
Denton, Stores and Vera Scarves divisions.
Gross profit increased to $93.7 million (22.5% of net sales) in
fiscal year 1992 from $92.5 million (23.2% of net sales) in fiscal
year 1991. The reduction in gross profit as a percentage of net sales
was primarily the result of increased costs to the Company of imported
merchandise, particularly men's dress shirts, which could not be
recovered through increases in the Company's selling prices. The
Company believes that during 1992, reductions in gross profit as a
percentage of net sales were experienced by a significant number of
companies in the apparel industry.
Selling, general and administrative expenses for the 1992 fiscal
year amounted $78.1 million, or 18.8% of net sales, a decrease of $9.2
million (10.5%) from the 1991 fiscal year, when such expenses
represented 21.9% of net sales. The reduction in selling, general and
administrative expenses for the 1992 fiscal year is primarily
attributable to (i) cost savings achieved through the consolidation
and restructuring of certain operations, (ii) reduced rent expense as
a result of the rejection, allowable under chapter 11 of the
Bankruptcy Code, of certain leases which were replaced by new leases
with more favorable terms, and (iii) continued reductions in overhead
costs at all divisions and all levels of management.
Royalty income (net of related expenses) in fiscal year 1992 was
$6.4 million. During fiscal year 1991, royalty income (net of related
expenses) was $7.7 million, which included approximately $2.0 million
of royalty income earned in prior years but received during 1991 upon
the settlement of certain litigation with Perry Ellis International
Inc., the Perry Ellis licensor.
In fiscal year 1992, the Company recorded, in its results from
continuing operations, division restructuring costs of $4.8 million as
described above in the comparison of 1993 and 1992 operating results.
In fiscal year 1991, the Company recorded, in its results from
continuing operations, division restructuring costs of $13.0 million,
which included (i) the estimated costs (including inventory markdowns)
of the closure of substantially all of the operations the MI Group
women's wear business, (ii) the estimated costs (including inventory
markdowns) of the closure of certain unprofitable retail outlet
stores, (iii) a provision for estimated claims arising from the
rejection of certain leases and (iv) an accrual for payments pursuant
to a severance agreement with the previous chief executive officer of
the Company.
In fiscal year 1992, the Company wrote off the unamortized
portion of the excess of cost over net assets acquired related to the
Obion Denton and Vera Sportswear divisions in the amount of $6.8
million. In fiscal year 1991, the Company wrote off other assets of
$6.6 million, which included (i) unamortized deferred debt expense of
$3.6 million related to the financing arrangements entered into in
connection with the acquisition of Manhattan Industries, Inc. and (ii)
unamortized leasehold interests at a closed facility.
Bankruptcy administration expenses increased to $12.9 million
during fiscal year 1992 from $6.9 million during fiscal year 1991,
primarily as a result of a significant increase in activity relating
to the Company's emergence from chapter 11. These expenses consisted
primarily of outside legal counsel, consulting and other similar
expenses.
Net interest expense (interest expense less interest income)
declined to $3.1 million in fiscal year 1992 from $5.3 million in
fiscal year 1991. The decline resulted from a reduction in average
borrowing levels and a lower average Prime Rate. Subsequent to the
Filing Date, the Company ceased accruing interest on pre-Filing Date
obligations, with immaterial exceptions.
For the 1992 fiscal year, the Company incurred a loss from
continuing operations of $6.0 million, or $1.73 per share, compared to
a loss of $19.1 million, or $5.52 per share, for the 1991 fiscal year.
For the fiscal year 1992, the Company incurred a net loss of
$17.8 million, or $5.13 per share, compared to a net loss of $19.1
million, or $5.52 per share, in fiscal year 1991. The net loss in 1992
reflected an estimated loss of $11.8 million on the planned disposal
of the Obion Denton division.
Liquidity and Capital Resources
Upon consummation of the Plan, the Company issued $111.9 million
principal amount of Secured Notes, made cash payments of approximately
$7.1 million and issued approximately 9.6 million shares of common
stock in settlement of claims arising from the Chapter 11 Cases. The
Company estimates that an additional $9.4 million in cash and an
additional 1.7 million shares of common stock will have been
distributed upon the complete resolution of all remaining claims
arising from the Chapter 11 Cases. Provisions for such distributions
have been made in the consolidated financial statements for the period
ended January 1, 1994.
On September 20, 1993, concurrent with the consummation of the
Plan, the Company entered into a two year revolving credit, factoring
and security agreement (the "Credit Agreement") with The CIT
Group/Commercial Services, Inc. ("CIT") to provide seasonal working
capital financing, including direct borrowings and letters of credit,
up to an aggregate of $120 million (subject to an asset based
borrowing formula). Interest on direct borrowings is charged monthly
at an annual rate of one-half of one percent in excess of the prime
rate of Chemical Bank (6% at January 1, 1994). As collateral for
borrowings under the Credit Agreement, Salant has granted to CIT a
security interest in substantially all of the assets of the Company.
As of January 1, 1994, the Company had fully repaid its direct
borrowings from CIT and held cash and marketable securities of
approximately $2.2 million. On that date the Company had approximately
$37.3 million of letters of credit outstanding and $31.1 million in
unused availability under the Credit Agreement.
The increase of one quarter of one percent in the prime rate at
Chemical Bank, announced in March 1994, is estimated (assuming no
further change) to raise interest expense for the Company during 1994
by approximately $100 thousand.
The Credit Agreement contains numerous financial and operating
covenants, including restrictions on incurring indebtedness and liens,
making investments in or purchasing the stock of all or a substantial
part of the assets of another person, selling property, making
capital expenditures, and paying cash dividends. In addition, the
Company is required to maintain minimum levels of working capital and
stockholders' equity and to satisfy a ratio of total liabilities to
stockholders equity, a fixed charge coverage ratio, and a maximum
cumulative net loss test. At January 1, 1994, the Company was in
compliance with all financial covenants as indicated below:
<TABLE>
<CAPTION>
Covenant January 1, 1994
Level Actual Level
<S> <C> <C>
Working Capital $ 85.0 million $102.6 million
Stockholders' Equity $ 60.0 million $ 78.9 million
Liability/Equity less than 3.25 2.21
Fixed Charge Ratio greater than 1.5 4.89
Maximum Loss $(10.0) million Positive-Income
</TABLE>
The Company is also required to reduce its indebtedness
(excluding outstanding letters of credit) to $20 million or less for
fifteen consecutive days during each twelve month period commencing
February 1, 1994.The Company has already complied with this covenant
for the period February 1, 1994 through January 31, 1995.
Pursuant to the Plan, the Company emerged from chapter 11 with
long-term debt consisting of $111.9 million of Secured Notes that
mature on December 31, 1998. The Secured Notes require no mandatory
prepayments but are subject to redemption, at any time, in whole, or
from time to time, in part, at the Company's option, at a premium to
the principal amount thereof. The premium on redemption declines
annually from 8.4% in 1994 to 2.1% in 1997.
The indenture governing the Secured Notes contains covenants
restricting, among other things, the incurrence of indebtedness and
the payment of dividends, which covenants are less restrictive than
similar covenants in the Credit Agreement.
The net decrease in cash during the year amounted to $500
thousand as compared to a $10 million net decrease in cash in the
prior year. Net cash provided by operating activities increased to
$22.9 million in 1993 from $5.4 million in 1992, principally as a
result of increased income from continuing operations and a decrease
in inventories as compared to a significant increase in inventories in
1992. Capital expenditures amounted to $8.2 million, which included
expenditures relating to new offices and showrooms for the Perry Ellis
Division, the acquisition of a dress shirt manufacturing facility in
Andalusia, Alabama and the opening of 20 new factory outlet stores, as
compared to $3.9 million in 1992. Capital expenditures for 1994 are
anticipated to be less than the amount expended in 1993. Also during
1993, $15.9 million of prepetition secured debt was repaid as compared
to $12.5 million in 1992.
The Company's business is seasonal in nature. As a result, the
Company's working capital requirements increase significantly during
the first three quarters of each year. Salant's principal sources of
liquidity, both on a short-term and a long-term basis, are cash flow
provided by operations and borrowings under the Credit Agreement.
Based upon its analysis of its consolidated financial position, its
cash flow during the past twelve months, and its cash flow anticipated
from future operations, Salant believes that its future cash flow,
together with the funds available under the Credit Agreement, will be
adequate to meet its seasonal working capital and capital requirements
for the next twelve months. There can be no assurance, however, that
future developments and general economic trends will not adversely
affect the Company's operations and, hence, its anticipated cash flow.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
To the Board of Directors and Stockholders of
Salant Corporation:
We have audited the accompanying consolidated balance sheets of Salant
Corporation and subsidiaries as of January 1, 1994 and January 2,
1993, and the related consolidated statements of operations,
shareholders' equity/deficiency and cash flows for the years ended
January 1, 1994, January 2, 1993 and December 28, 1991. Our audits
also included the financial statement schedules listed in the index at
Item 14(a)(2). These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and financial statement schedules 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, such financial statements present fairly, in all
material respects, the financial position of Salant Corporation and
subsidiaries as of January 1, 1994 and January 2, 1993, and the
results of their operations and their cash flows for the years ended
January 1, 1994, January 2, 1993 and December 28, 1991 in conformity
with generally accepted accounting principles. Also, in our opinion,
the financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present
fairly in all material respects the information set forth therein.
As discussed in Note 2 to the financial statements, on July 30, 1993
the Bankruptcy Court entered an order confirming the plan of
reorganization which became effective on September 20, 1993. Under the
plan of reorganization, the Company is required to comply with certain
terms and conditions as more fully described in Note 2.
As discussed in Note 13 to the financial statements, the Company
changed its method of accounting for income taxes effective January 3,
1993 to conform with Statement of Financial Accounting Standards No.
109.
/s/ Deloitte & Touche
New York, New York
March 11, 1994
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended
January 1, January 2, December 28,
1994 1993 1991
<S> <C> <C> <C>
Net Sales $407,236 $415,641 $398,471
Cost of goods sold 307,651 321,988 306,008
------- ------- -------
Gross Profit 99,585 93,653 92,463
Selling, general and
administrative expenses 76,938 78,069 87,244
Royalty income, net of
related expenses 6,801 6,370 7,742
Division restructuring
costs (Note 4) 5,500 4,824 12,984
Write off of other assets (Note 8) - 6,759 6,587
Bankruptcy administration expenses 8,861 12,878 6,949
------- ------- -------
Income/(loss) from continuing
operations before interest,
income taxes and
extraordinary gain 15,087 (2,507) (13,559)
Interest expense, net
(Notes 10 and 11) 7,607 3,096 5,272
------- ------- -------
Income/(loss) from continuing
operations before income taxes
and extraordinary gain 7,480 (5,603) (18,831)
Income taxes (Note 13) 253 383 278
------- ------- -------
Income/(loss) from continuing
operations before extraordinary
gain 7,227 (5,986) (19,109)
Discontinued operations (Note 3):
Estimated loss on disposal - (11,772) -
Reversal of estimated loss
on disposal 11,772 - -
Extraordinary gain (Note 5) 24,707 - -
------- ------- -------
Net income/(loss) $ 43,706 $(17,758) $(19,109)
======= ======= ======
Earnings/(loss) per share:
Income/(loss) per share from
continuing operations before
extraordinary gain $ 1.02 $ (1.73) $ (5.52)
Income/(loss) per share from
discontinued operations 1.65 (3.40) -
Extraordinary gain 3.48 - -
------ ------ ------
Net income/(loss) per share $ 6.15 $ (5.13) $ (5.52)
====== ====== ======
Weighted average common
stock outstanding 7,104 3,460 3,459
====== ====== =======
</TABLE>
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
January 1, January 2,
1994 1993
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,157 $ 2,701
Accounts receivable net of allowance
for doubtful accounts of $2,266 in 1993
and $3,788 in 1992 (Notes 10 and 11) 37,382 38,899
Inventories (Notes 6 and 10) 104,513 105,147
Prepaid expenses and other
current assets 4,420 3,953
------- -------
Total current assets 148,472 150,700
Property, plant and equipment,
net (Notes 7 and 11) 27,493 28,998
Other assets (Notes 8, 11 and 13) 77,425 79,961
------- -------
$253,390 $259,659
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIENCY)
Current Liabilities:
Accounts payable $ 21,777 $ 20,869
Reserve for business
restructuring (Note 4) 2,038 17,703
Accrued salaries, wages and
other liabilities (Note 9) 22,056 16,714
------- -------
Total Current Liabilities 45,871 55,286
Long term debt (Note 11) 111,851 -
Deferred Liabilities (Note 16) 16,766 2,462
Liabilities Deferred Pursuant
to Chapter 11 Cases - 266,420
Commitments and Contingencies
(Notes 10, 11, 13, 14, 15 and 17)
Shareholders' Equity/(Deficiency) (Notes 2 and 15):
Preferred stock, par value $2 per share:
Authorized 5,000,000 shares;
none issued in 1993 and 1992 - -
Common stock, par value $1 per share:
Authorized 30,000,000 shares; 15,016 3,698
issued and issuable-15,015,266
shares in 1993; issued-3,697,915
shares in 1992
Additional paid-in capital 106,726 17,702
Deficit (40,461) (84,167)
Excess of additional pension
liability over unrecognized prior
service cost adjustment (Note 14) (986) (353)
Accumulated foreign currency
translation adjustment 221 225
Less - treasury stock,
at cost - 234,300 shares (1,614) (1,614)
------- -------
Total Shareholders'
Equity/(Deficiency) 78,902 (64,509)
------- -------
$253,390 $259,659
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY/(DEFICIENCY)
(Amounts in thousands, except number of shares)
<TABLE>
<CAPTION>
Excess of
Additional
Pension
Liability
Over
Unrecog- Cumulative Total
nized Foreign Share-
Common Stock Add'l Prior Currency Treasury Stock holders'
Number Paid-In Service Translation Number of Equity/
of Shares Amount Capital Deficit Cost Adjustment Shares Amount (Deficiency)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
29, 1990 3,692,915 $ 3,693 $ 17,686 $(47,300) $ - $ 218 234,300 $ (1,614) $(27,317)
Net loss (19,109) (19,109)
Excess of additional
pension liability over
unrecognized prior
service cost adjustment 172 172
Foreign currency
translation adjustments 4 4
--------- ------- ------ ------- ----- ---- ------- ------ -------
Balance at December
28, 1991 3,692,915 3,693 17,686 (66,409) 172 222 234,300 (1,614) (46,250)
Stock options exercised 5,000 5 16 21
Net loss (17,758) (17,758)
Excess of additional
pension liability over
unrecognized prior
service cost adjustment (525) (525)
Foreign currency
translation adjustments 3 3
--------- ------ ------- ------- ---- ---- ------- ------ -------
Balance at January
2, 1993 3,697,915 3,698 17,702 (84,167) (353) 225 234,300 (1,614) (64,509)
Stock options exercised 24,095 24 90 114
Shares issued and
issuable in settlement
of claims 11,293,256 11,294 88,934 100,228
Net Income 43,706 43,706
Excess of additional
pension liability over
unrecognized prior
service cost adjustment (633) (633)
Foreign currency
translation adjustments (4) (4)
---------- ------- ------- ------- ----- ----- ------- ------ -------
Balances at January
1, 1994 15,015,266 $ 15,016 $106,726 $(40,461) $ (986) $ 221 234,300 $ (1,614) $ 78,902
========== ======= ======= ======= ===== ===== ======= ====== =======
</TABLE>
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Year Ended
January 1, January 2, December 28,
1994 1993 1991
<S> <C> <C> <C>
Cash Flows from Operating Activities
Income/(loss) from continuing
operations $ 7,227 $ (5,986) $(19,109)
Adjustments to reconcile
income/(loss) from continuing
operations to net cash provided by
operating activities:
Depreciation 5,681 6,505 7,211
Amortization of intangibles 2,464 2,664 2,717
Write-off of other assets - 6,759 6,587
Write-down of fixed assets 2,095 - -
Amortization of other assets - - 1,200
Change in operating assets
and liabilities:
Accounts receivable 1,517 (1,756) (2,372)
Inventories 634 (14,533) (401)
Prepaid expenses and
other current assets (249) 3,789 (1,378)
Other assets 48 (150) (77)
Accounts payable 240 8,682 6,464
Accrued salaries, wages and
other liabilities 5,932 2,150 6,693
Reserve for business restructuring (3,042) (2,076) -
Deferred liabilities 397 409 1,510
Liabilities deferred
pursuant to chapter 11 - (1,100) -
------- ------- -------
Net cash provided by
operating activities 22,944 5,357 9,045
------- ------- -------
Cash Flows from Investing Activities
Capital expenditures, net (8,154) (3,917) (2,880)
Proceeds from sale of assets 795 1,550 -
------ ------- -------
Net cash used in investing activities (7,359) (2,367) (2,880)
------- ------- -------
Cash Flows from Financing Activities
Repayment of pre-petition secured debt $(15,940) $(12,526) $(10,850)
Exercise of stock options 65 21 -
Other, net (254) (522) 176
------- ------- -------
Net cash used in financing activities (16,129) (13,027) (10,674)
------- ------- -------
Net decrease in cash and
cash equivalents (544) (10,037) (4,509)
Cash and cash equivalents
- beginning of year 2,701 12,738 17,247
------- ------- -------
Cash and cash equivalents - end of year $ 2,157 $ 2,701 $ 12,738
======= ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,847 $ 3,831 $ 3,919
======= ======= ========
Income taxes $ 206 $ 430 $ 122
======= ======= ========
Conversion of accounts payable,
accrued expenses, long-term debt
and deferred liabilities to
liabilities deferred pursuant
to chapter 11 cases $ 1,515 $ 1,503 $ 1,794
======= ======= ========
Conversion of liabilities deferred
pursuant to chapter 11 cases to
accounts payable and deferred
liabilities $ 10,249
=======
Issuance of long-term debt $111,851
=======
Issuance of common stock $100,228
=======
</TABLE>
See Notes to Consolidated Financial Statements
SALANT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Amounts in Thousands of Dollars Except Share and Per Share Data)
Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The Consolidated Financial Statements include the accounts of Salant
Corporation ("Salant") and subsidiaries (collectively, the "Company").
Significant intercompany balances and transactions are eliminated in
consolidation.
On June 27, 1990 (the "Filing Date"), Salant and one of its
subsidiaries, Denton Mills, Inc. ("Denton Mills"), filed separate
voluntary petitions for relief under chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code") with the United States
Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"). On July 30, 1993, the Bankruptcy Court issued an
order confirming the Third Amended Joint Plan of Reorganization of
Salant and Denton Mills (the "Plan"). The Plan was consummated on
September 20, 1993 (the "Consummation Date"), as further described in
Note 2.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31.
The 1993 and 1991 fiscal years were comprised of 52 weeks, while the
1992 fiscal year was comprised of 53 weeks.
Reclassifications
Certain reclassifications were made to the 1992 and 1991 financials
statements to conform with the 1993 presentation.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks and short-term
investments as cash and cash equivalents for the purposes of the
statements of cash flows. Short-term investments consist of
certificates of deposit maturing within three months of issuance.
These investments are readily convertible to cash and are stated at
cost, which approximates market.
Inventories
Inventories are stated at the lower of cost (principally determined on
a first-in, first-out basis for apparel operations and the retail
inventory method on a first-in, first-out basis for outlet store
operations) or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated
or amortized over their estimated useful lives, or for leasehold
improvements, the lease term, if shorter. Depreciation and
amortization are computed principally by the straight-line method for
financial reporting purposes and by accelerated methods for income tax
purposes.
The annual depreciation rates used are as follows:
<TABLE>
<CAPTION>
<S> <C>
Buildings 3.3% - 5.0%
Machinery, equipment and autos 10.0% - 33.3%
Furniture and fixtures 10.0% - 20.0%
Leasehold improvements Over the life of the asset or
the term of the lease, which-
ever is shorter
</TABLE>
Other Assets
The excess of cost over net assets acquired, trademarks and license
agreements are being amortized over periods from 25 to 40 years.
Leasehold interests are being amortized over the remaining lives of
the leases, principally 18 years.
Fair Value of Financial Instruments
For financial instruments including cash and cash equivalents,
accounts receivables and payable, and accruals, it was assumed that
the carrying amount approximated fair value because of their short
maturity. Long-term debt, which was recently issued at the market rate
of interest, also approximates the fair value.
Earnings/(Loss) Per Share
Income/(loss) per share is based on the weighted average number of
common shares (based upon the Company's estimate of the number of
shares which will have been issued under the Plan by the final
resolution of all claims - see Note 2) and common stock equivalents
outstanding. Loss per share for 1992 and 1991 did not include common
stock equivalents, as their effect would have been anti-dilutive.
Revenue Recognition
Revenue is recognized at the time the merchandise is shipped. Retail
factory outlet store revenues are recognized at the time of sale.
Note 2. Consummation of the Plan of Reorganization
From the Consummation Date through January 1, 1994, pursuant to the
Plan, the Company made cash payments of $7,128, issued $111,851 of new
10-1/2% senior secured notes and issued 9.6 million shares of common
stock to creditors in settlement of certain claims in the chapter 11
proceedings. Salant anticipates that an additional $9,425 in cash and
an additional 1.7 million shares of common stock ultimately will have
been distributed to creditors by the time all remaining claims have
been resolved. Provisions for such distributions have been made in
the consolidated financial statements for the year ended January 1,
1994. As further described in Note 5, upon consummation of the Plan,
the Company recorded an extraordinary gain of $24,707 relating to the
settlement of indebtedness pursuant to the Plan.
Note 3. Discontinued Operations Subsequently Retained
In March 1993, the Company adopted a formal plan to restructure and
sell the Salant Children's Apparel Group (formerly the Obion Denton
division) which manufactures children's sleepwear. As a consequence,
the division was accounted for as a discontinued operation for fiscal
1992 and the first three quarters of fiscal 1993. In March 1994, the
Company concluded that the value of the division would be maximized by
retaining the Salant Children's Apparel Group as part of its
continuing operations. As a result, the Salant Children's Apparel
Group's net assets and results of operations for all periods presented
have been reclassified from discontinued operations to continuing
operations.
In the fourth quarter of 1992, the Company recorded an $11,772
provision for the estimated costs to restructure the division and to
accrue for expected operating losses during the phase-out period
through December 1993. In the fourth quarter of 1993, the 1992 charge
was reversed and the Company recorded a provision of $5,000 for
restructuring costs, including (i) the costs of closure of certain
unprofitable product lines, (ii) inventory markdowns associated with
those product lines, and (iii) fixed asset write-downs at closed
locations.
The following is a summary of certain selected financial data for the
Salant Children's Apparel Group during the period in which it was
reported as a discontinued operation.
<TABLE>
<CAPTION>
January 2, 1993
<S> <C>
Total assets $ 28,818
Total liabilities 49,315
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended
January 2, 1993 December 28, 1991
<S> <C> <C>
Net sales $ 35,442 $38,081
Operating loss (12,365) (5,899)
Operating losses of $750 related to January and February 1993 were
included in pre-measurement date losses shown in the loss from
discontinued operations in the 1992 financial statements. These
amounts have been reclassified to operating losses from continuing
operations in 1992.
</TABLE>
Note 4. Restructuring Costs
In the fourth quarter of fiscal 1993, the Company recorded a $5,500
restructuring reserve, of which $5,000 related to the restructuring of
the Salant Children's Apparel Group, as more fully described in Note
3.
In the fourth quarter of fiscal 1992, the Company recorded a $4,824
restructuring reserve, which included (i) the estimated costs to be
incurred in connection with the restructuring of certain unprofitable
operations, (ii) the rejection, allowable under chapter 11, of certain
lease obligations and (iii) the write-off of leasehold improvements,
buildings and equipment at closed locations.
In fiscal 1991, the Company recorded division restructuring costs of
$12,984, which included (i) the estimated costs of the closure of
substantially all of the operations of the MI Group women's wear
business, (ii) the estimated costs of the closure of certain
unprofitable retail factory outlet stores, (iii) a provision for
estimated claims arising from the rejection of certain leases and (iv)
an accrual for payments pursuant to a severance agreement with the
previous chief executive officer of the Company.
Note 5. Extraordinary Gain
In September 1993, the Company recorded an extraordinary gain of
$24,707 consisting of (i) an extraordinary gain of $45,974 from the
settlement and anticipated settlement of claims arising from the
chapter 11 proceeding for less than their full amount and (ii) an
extraordinary loss of $21,267 arising from the settlement in lieu of
accrued interest and fees in respect of the Company's bank debt during
the pendency of the Company's chapter 11 cases.
Note 6. Inventories
<TABLE>
<CAPTION>
January 1, January 2,
1994 1993
<S> <C> <C>
Finished goods . . . . . . . . . . . $ 60,686 $ 59,803
Work-in-process. . . . . . . . . . . 27,661 25,221
Raw materials and supplies . . . . . 16,166 20,123
------- -------
$104,513 $105,147
======= =======
</TABLE>
Note 7. Property, Plant and Equipment
<TABLE>
<CAPTION>
January 1, January 2,
1994 1993
<S> <C> <C>
Land and buildings . . . . . . . . . $15,748 $ 14,764
Machinery, equipment, furniture
and fixtures . . . . . . . . . . . 39,055 44,651
Leasehold improvements . . . . . . . 6,280 4,479
Property held under capital leases . 1,345 1,343
------- -------
62,428 65,237
Less accumulated depreciation
and amortization . . . . . . . . . 34,935 36,239
------- -------
$27,493 $28,998
======= =======
</TABLE>
Note 8. Other Assets
<TABLE>
<CAPTION>
January 1, January 2,
1994 1993
<S> <C> <C>
Excess of cost over net assets acquired,
net of accumulated amortization of $9,572
in 1993 and $7,735 in 1992 . . . . $57,698 $59,535
Trademarks and license agreements,
net of accumulated amortization of $2,577
in 1993 and $2,091 in 1992 . . . . 16,585 17,071
Leasehold interests, net of accumulated
amortization of $682 in 1993 and $540
in 1992. . . . . . . . . . . . . . 1,761 1,903
Other. . . . . . . . . . . . . . . . 1,381 1,452
------- -------
$77,425 $79,961
======= =======
</TABLE>
In the fourth quarter of 1992, the Company wrote off other assets of
$6,759, which consisted of the unamortized portion of the excess cost
over net assets acquired related to the Salant Children's Apparel
Group and Vera Sportswear division.
In the fourth quarter of 1991, the Company wrote off other assets of
$6,587, which included the write-off of (i) unamortized deferred debt
expense of $3,590 related to fees and expenses incurred in connection
with the acquisition of Manhattan Industries, Inc. ("Manhattan") in
1988, (ii) unamortized trademarks of $2,612 resulting from an inactive
licensing program, and (iii) unamortized leasehold interests of $385
resulting from the closure of a facility.
Note 9. Accrued Salaries, Wages and Other Liabilities
<TABLE>
<CAPTION>
January 1, January 2,
1994 1993
<S> <C> <C>
Accrued salaries and wages . . . . . . . $ 6,045 $ 5,666
Accrued pension and retirement. . . .. . 1,444 459
Accrued royalties. . . . . . . . . . . . 1,301 1,025
Accrued professional fees. . . . . . . . 375 2,143
Accrued interest . . . . . . . . . . . . 3,839 -
Other accrued liabilities. . . . . . . . 9,052 7,421
------ -------
$22,056 $ 16,714
====== =======
</TABLE>
Note 10. Post-Consummation Financing and Factoring Agreements
On September 20, 1993, the Company entered into a two year revolving
credit, factoring and security agreement (the "Credit Agreement") with
The CIT Group/Commercial Services, Inc. ("CIT") to provide seasonal
working capital financing, including direct borrowings and letters of
credit, of up to $120,000 (subject to an asset based borrowing
formula). As of January 1, 1994, $31,100 was available under this
facility. Interest on direct borrowings is charged monthly at an
annual rate of one-half of one percent in excess of the prime rate of
Chemical Bank (6% at January 1, 1994). As collateral for borrowings
under the Credit Agreement, the Company granted to CIT a security
interest in substantially all of the assets of the Company. As of
January 1, 1994 and January 2, 1993, there were no direct borrowings.
As of January 1, 1994, letters of credit outstanding under the Credit
Agreement were $37,256. As of January 2, 1993, letters of credit
outstanding under the previously existing financing agreement were
$39,678. The weighted average interest rate on borrowings under these
financing agreements for the years ended January 1, 1994 and
January 2, 1993 was 6.8% and 7.5%, respectively.
The Credit Agreement contains numerous financial and operating
covenants, including restrictions on incurring indebtedness and liens,
making investments in or purchasing the stock of all or a substantial
part of the assets of another person, selling property, incurring
capital expenditures, and paying cash dividends. In addition, the
Company is required to maintain minimum levels of working capital and
stockholders' equity and to satisfy a ratio of total liabilities to
stockholders' equity, a fixed charge coverage ratio and a maximum
cumulative net loss test. At January 1, 1994, Salant was in
compliance with all financial covenants.
Note 11. Long-Term Debt
On September 20, 1993, Salant issued $111,851 principal amount of 10
1/2% Senior Secured Notes (the "Secured Notes") due December 31, 1998.
The Secured Notes bear interest from September 1, 1993 and may be
redeemed at any time prior to maturity, in whole or in part, at the
option of the Company, at a premium to the principal amount thereof
plus accrued interest. The premium on redemption declines annually
from 8.4% in 1994 to 2.1% in 1997. The Secured Notes are secured by a
first lien (subordinated to the Credit Agreement to the extent of
$15,000) on certain accounts receivable, certain intangible assets,
the capital stock of Salant's subsidiaries and certain real property
of the Company, and by a second lien on substantially all of the other
assets of the Company.
The Secured Notes contain various restrictions pertaining to future
indebtedness, the purchase of capital stock and the payment of
dividends. Under the most restrictive of these provisions, the Company
currently may not purchase or redeem any shares of its capital stock,
or declare or pay cash dividends.
Note 12. Segment Information
The Company operates within one industry segment, the business of
manufacturing and marketing apparel. The Company sells its products to
retailers, including department stores, specialty stores, national
chain stores and mass volume retailers, throughout the United States.
As an adjunct to its apparel manufacturing operations, the Company
operates 57 factory outlet stores and 1 retail store in various parts
of the United States. Foreign operations are not significant.
Note 13. Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
January 1, January 2, December 28,
1994 1993 1991
<S> <C> <C> <C>
Current:
Federal . . . . . . . $ - $ - $ -
State . . . . . . . . 32 29 94
Foreign . . . . . . . 221 354 184
------ ------- --------
$ 253 $ 383 $ 278
====== ======= ========
</TABLE>
The effective tax rate differed from the statutory rate for the year
ended January 1, 1994 due to differences in tax treatment relating to
the bankruptcy and other items. The effective tax rate differed from
the statutory rate in the years ended January 2, 1993 and December 28,
1991 because no tax benefit was available with respect to losses
incurred in those years.
The following is a reconciliation of the tax provision/(benefit) at
the statutory Federal income tax rate to the actual income tax
provision:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Income tax provision/
(benefit), at 34% $2,543 ($1,905) ($6,403)
Loss producing no current
tax benefit 1,905 6,403
Utilization of net
operating loss
carryforward (2,543)
State, local and foreign
taxes 253 383 278
----- ----- -----
Income tax provision $ 253 $ 383 $ 278
===== ===== =====
</TABLE>
Effective January 3, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes". This statement supersedes SFAS No. 96 "Accounting for
Income Taxes" which was adopted by the Company in 1988. Under SFAS No.
109, the Company is required to recognize the amount of taxes payable
or refundable for the current year and to recognize deferred tax
liabilities and assets for the expected future tax consequences of
events that have been recognized in the Company's financial statements
or tax returns. Adoption of SFAS No. 109 had no cumulative effect on
earnings or effect on income tax expense for the year ended January 1,
1994, as the Company recognized a net deferred tax asset of $64,364,
offset in full by a valuation allowance as of the date of adoption.
The tax effects of significant items comprising the Company's net
deferred tax asset as of January 1, 1994:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax liabilities:
Differences between book and
tax basis of property $ (6,564)
-------
Deferred tax assets:
Reserves not currently deductible 17,517
Operating loss carryforwards 45,341
Tax credit carryforwards 2,936
Expenses capitalized into inventory 4,935
-------
70,729
Valuation Allowance (64,165)
-------
Net deferred tax asset $ -
=======
</TABLE>
At January 1, 1994, the Company had net operating loss carryforwards
("NOLs") for income tax purposes of approximately $116,000, which can
be used to offset future taxable income, expiring from 1999 to the
year 2007. Approximately $51,000, which arose from the acquisition of
Manhattan, will offset goodwill when utilized. The implementation of
the Plan, together with transactions that have occurred within the
three-year period preceding the consummation of the Plan, have caused
an "ownership change" for federal income tax purposes on the date the
Plan was consummated. As a result of such ownership change, the use
of the NOLs to offset future taxable income may be limited by the
requirements of section 382 of the Internal Revenue Code of 1986, as
amended. The annual limit under section 382 would be approximately
$7,200 or approximately $108,000 over a fifteen year carryover period.
If the Company utilizes the special bankruptcy exception of section 382(l)(5),
the operating loss (which is not subject to an annual limitation)
would be approximately $89,000. In addition, the Company realized
cancellation of indebtedness income of approximately $917 upon
consummation of the Plan and the NOLs will be reduced or limited
accordingly.
In addition, at January 1, 1994, the Company had available investment
tax and other credits which expire between 1994 and 1999, of which
$1,986 will reduce goodwill and the balance will reduce income tax
expense when utilized. The Company's utilization of these credits may
be limited in the same manner as the Company's utilization of its NOLs
as described above.
On June 27, 1990, the date of the filing of the Chapter 11 cases, the
Internal Revenue Service (the "IRS") was in the process of examining
the tax returns of Manhattan (acquired in April 1988) for the years
ended January 31, 1982 through January 31, 1986 and January 31, 1988.
The IRS has filed amended proofs of claim (the "IRS Claim") with the
Bankruptcy Court in the aggregate amount of $5,201 which includes
$2,010 of income and withholding taxes, interest and penalties
thereon, and unemployment taxes (the "Income Tax Claim") through the
filing date of the Chapter 11 Cases. Without prejudice to the rights,
claims and defenses of the IRS and the Company, at the confirmation
hearing with respect to the Plan, the Company and the IRS agreed to
expunge all claims and proofs of claims asserted and/or filed by the
IRS other than the portion of the IRS Claim relating to such taxes.
The IRS Claim also includes $3,191 for excise taxes (the "Excise Tax
Claim") arising from the failure of Salant to have met minimum funding
obligations for its defined benefit pension plans and penalties
associated therewith.
Pursuant to a settlement reached with the IRS (which is subject to
final IRS approval), the Excise Tax Claim (plus any associated
penalties) has been reduced to $100, which is payable upon the
execution of the definitive settlement agreement. Provisions for such
distributions to the IRS in settlement of the Income Tax Claim and the
Excise Tax Claim have been made in the consolidated financial
statements for the year ended January 1, 1994.
Note 14. Employee Benefit Plans
Pension and Retirement Plans
The Company has several defined benefit plans for virtually all
full-time salaried employees and certain nonunion hourly employees.
The Company's funding policy for its plans is to fund the minimum
annual contribution required by applicable regulations.
The Company also has a nonqualified supplemental retirement and death
benefit plan covering certain employees. The funding for this plan is
based on premium costs of related insurance contracts.
Pension expense includes the following components:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost-benefit earned
during the period. . . . . . $ 1,183 $1,101 $ 1,083
Interest cost on projected benefit
obligation . . . . . . . . . 2,555 2,419 2,254
Return on assets . . . . . . . (2,008) (2,162) (1,420)
Net amortization . . . . . . . 169 647 107
------ ----- -----
Net periodic pension cost. . . $ 1,899 $2,005 $2,024
====== ===== =====
</TABLE>
The reconciliation of the funded status of the plans at January 1, 1994 and
January 2, 1993 is as follows:
<TABLE>
<CAPTION>
January 1, January 1, January 2, January 2,
1994 1994 1993 1993
Accumulated Plan Accumulated Plan
Plan Assets Plan Assets
Benefits Exceed Benefits Exceed
Exceed Accumulated Exceed Accumulated
Plan Assets Plan Benefits Plan Assets Plan Benefits
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligation
Vested benefit obligation. $(30,670) $(710) $(26,918) $(603)
Nonvested benefit obligation . . (680) - (884) -
------- ---- ------- ----
Accumulated benefit obligation . . $(31,350) $(710) $(27,802) $(603)
======= ==== ======= ====
Projected benefit obligation . . . $(36,068) $(710) $(32,111) $(603)
Plan assets at fair value. . 25,155 785 22,478 710
------- ---- ------- ----
Projected benefit obligation in
(excess of)/less than plan assets (10,913) 75 (9,633) 107
Unrecognized net obligation at date of
initial application, amortized over
15 years . . . . . . . . . 985 - 1,223 -
Unrecognized net (gain)/loss . . . 1,928 (160) 467 (305)
Unrecognized prior service cost. . 37 - 196 -
Recognition of minimum liability
under SFAS No. 87. . . . . (1,420) - (1,050) -
------- ---- ------- ----
Accrued pension cost . . . $ (9,383) $ (85) $ (8,797) $(198)
======= ==== ======= ====
</TABLE>
Assumptions used in accounting for defined benefit pension plans are
as follows:
<TABLE>
<CAPTION>
1993 1993 1992 1992 1991 1991
Non- Qualified Non- Qualified Non- Qualified
Qualified Plans Qualified Plans Qualified Plans
Plan Plan Plan
<S>. . . . . . . . . . <C> <C> <C> <C> <C> <C>
Discount rate. . . . . 7.5% 7.5% 8.0% 8.0% 8.0% 8.0%
Rate of increase in
compensation levels . N/A 5.5% N/A 6.0% N/A 6.0%
Expected long-term
rate of return on assets 12.0% 8.0% 12.0% 8.0% 12.0% 8.0%
</TABLE>
Assets of the Company's qualified plans are invested in directed
trusts. Assets in the directed trusts are invested in common and
preferred stocks, corporate bonds, money market funds and U.S.
government obligations. The nonqualified supplemental plan assets
consist of the cash surrender value of certain insurance contracts.
During 1992, each of the retirement plans was amended to change the
plan year to the calendar year, effective January 1, 1992, resulting
in each of the plans having a short plan year, ending December 31,
1991. One of the plans, the Manhattan Industries, Inc. Employees'
Benefit Plan was merged into the Salant Corporation Retirement Plan,
effective as of March 1, 1992.
The Company also contributes to certain union retirement and insurance
funds established to provide retirement benefits and group life,
health and accident insurance for eligible employees. The total cost
of these contributions was $5,060, $4,769 and $5,064 in 1993, 1992 and
1991, respectively. The actuarial present value of accumulated plan
benefits and net assets available for benefits for employees in the
union administered plans are not determinable from information
available to the Company.
Long Term Savings and Investment Plan
Salant sponsors the Long Term Savings and Investment Plan, under which
eligible salaried employees may contribute up to 15% of their annual
compensation, subject to certain limitations, to a money market fund,
a fixed income fund and/or an equity fund. Salant contributes a
minimum matching amount of 20% of the first 6% of a participant's
annual compensation and may contribute an additional discretionary
amount in cash or in the Company's common stock. Prior to March 1,
1992, the Company's contributions were made in the Company's common
stock, and additional contributions were based on earnings per share.
In 1993, 1992 and 1991 Salant's aggregate contributions to the Plan
amounted to $208, $163 and $55, respectively.
At the end of 1991, the Manhattan Salary Savings Plan was amended to
change the plan year to the calendar year, effective January 1, 1992,
resulting in the plan having a short plan year, ending December 31,
1991. The Manhattan Salary Savings Plan was merged into the Long Term
Savings and Investment Plan, effective March 1, 1992.
Note 15. Stock Options, Warrants and Shareholder Rights
On September 20, 1993, pursuant to the Plan, the Company adopted the
1993 Stock Plan under which options or awards may be granted to
directors and key employees of the Company for the purchase of an
aggregate of 600,000 shares of the Company's common stock.
The 1988 and 1987 Stock Plans authorized the Company to grant stock
options or stock awards aggregating 1,200,000 shares of Salant common
stock to officers, key employees and, in the case of the 1988 Stock
Plan, directors. The 1993, 1988 and 1987 Stock Plans authorized such
grants at such prices and pursuant to such other terms and conditions
as the Stock Plan Committee may determine. Options may be
nonqualified stock options or incentive stock options and may include
stock appreciation rights. Options expire no later than ten years
from the date of grant and become exercisable in varying amounts over
periods ranging from four months to five years from the date of grant.
The following table summarizes stock option transactions during 1991,
1992 and 1993:
<TABLE>
<CAPTION>
Shares Price Range
<S> <C> <C>
Options outstanding at December 29, 1990 . . 998,777 $1.00-15.125
Options granted during fiscal 1991 . . . . . 421,500 $1.625-2.75
Options surrendered or cancelled
during fiscal 1991. . . (440,052) $1.00-12.875
---------
Options outstanding at December 28, 1991 . . 980,225 $1.00-15.125
Options granted during fiscal 1992 . . . . . 197,000 $2.25-8.75
Options exercised during fiscal 1992 . . . . (5,000) $1.00
Options surrendered or cancelled
during fiscal 1992. . . (121,985) $2.25-12.875
---------
Options outstanding at January 2, 1993 . . . 1,050,240 $1.00-15.125
Options granted during fiscal 1993 . . . . . 392,000 $6.69-10.69
Options exercised during fiscal 1993 . . . . (24,095) $1.00-5.875
Options surrendered or cancelled
during fiscal 1993. . . (55,371) $2.25-12.875
---------
Options outstanding at January 1, 1994 . . . 1,362,774 $1.00-15.125
=========
Options exercisable at January 1, 1994 . . . 766,614 $1.00-15.125
=========
</TABLE>
At January 1, 1994, there were 337,141 shares of Salant common stock
reserved for future grants of stock options or stock awards.
Pursuant to the Plan, the Company issued 2,371,182 Salant B Warrants
(the "Warrants") to holders of the Company's common stock immediately
prior to the consummation date. Each Warrant expires three years from
the date of issuance and entitles the registered holder thereof to
purchase one share of common stock of the Company at prices of $16
during the first year after issuance, $18 during the second year after
issuance and $20 thereafter. No Warrants were exercised in 1993.
In addition, warrants outstanding which entitled the holders to
purchase an aggregate of 325,000 shares of Salant common stock at
prices ranging from $12 to $16.75 expired during 1993. No warrants
were exercised in 1993, 1992 or 1991.
The Company has a shareholder rights plan (the "Rights Plan"), which
provides for a dividend distribution of one right for each share of
Salant common stock to holders of record at the close of business on
December 23, 1987. The rights will expire on December 23, 1997. With
certain exceptions, the rights will become exercisable only in the
event that an acquiring party accumulates 20 percent or more of the
Company's voting stock, or if a party announces an offer to acquire 30
percent or more of such voting stock. Each right, when exercisable,
will entitle the holder to buy one one-hundredth of a share of a new
series of cumulative preferred stock at a price of $30 per right or
upon the occurrence of certain events, to purchase either Salant
common stock or shares in an "acquiring entity" at half the market
value thereof. The Company will generally be entitled to redeem the
rights at three cents per right at any time until the 10th day
following the acquisition of a 20 percent position in its voting
stock. In July 1993, the Rights Plan was amended to provide that an
acquisition or offer by Apollo Apparel Partners, L.P., or any of its
subsidiaries, will not cause the rights to become exercisable.
As of January 1, 1994, there were 4,071,097 shares of Common Stock
reserved for the future issuance of stock options, stock awards and
warrants.
Note 16. Deferred Liabilities
<TABLE>
<CAPTION>
January 1, January 2,
1994 1993
<S> <C> <C>
Lease obligations. . . . . . . . . . . . $ 1,688 $1,215
Deferred pension obligation. . . . . . . 8,300 1,247
Liability for chapter 11 claims
settlements. . . . . . . . . . . . . . 6,778 -
------ ------
$16,766 $ 2,462
====== ======
</TABLE>
Note 17. Commitments and Contingencies
(a) Lease Commitments
The Company conducts a portion of its operations in premises occupied
under leases expiring at various dates through 1999. Certain of the
leases contain renewal options. Rental payments under certain leases
may be adjusted for increases in taxes and operating expenses above
specified amounts. In addition, certain of the leases for outlet
stores contain provisions for additional rent based upon sales.
In fiscal years 1993, 1992 and 1991, rental expense was $5,773, $6,686
and $8,513, respectively. As of January 1, 1994, future minimum
rental payments under noncancellable operating leases (exclusive of
renewal options, percentage rentals, and adjustments for property
taxes and operating expenses) were as follows:
<TABLE>
<CAPTION>
Fiscal Year
<S> <C>
1994. . . . . . . . . . . . . . . $ 5,098
1995. . . . . . . . . . . . . . . 4,704
1996. . . . . . . . . . . . . . . 4,170
1997. . . . . . . . . . . . . . . 3,312
1998. . . . . . . . . . . . . . . 2,465
Thereafter. . . . . . . . . . . . 4,682
------
Total . . . . . . . . . . . $24,431
======
</TABLE>
(b) Legal Contingencies/Significant Disputed Claims
(1) Chapter 11 Cases. On June 27, 1990, Salant and Denton Mills each
filed with the Bankruptcy Court a separate voluntary petition for
relief under chapter 11 of the Bankruptcy Code. On July 30, 1993, the
Bankruptcy Court confirmed the Plan. The consummation of the Plan took
place on September 20, 1993.
On August 6, 1993, the Official Committee of Equity Security Holders
of Salant (the "Equity Committee") filed a notice of appeal in the
United States District Court for the Southern District of New York.
The Equity Committee appealed the portion of the Plan relating to the
payment of certain compensation to Salant's Chief Executive Officer,
Nicholas DiPaolo, which compensation became payable upon consummation
of the Plan, but did not seek to overturn the confirmation of the
Plan. On November 12, 1993, Salant moved to dismiss the appeal on the
grounds that the Equity Committee lacks standing and mootness.
Consideration of the Equity Committee's appeal is being deferred
pending the resolution of Salant's motion to dismiss.
(2) SEC Inquiry. As previously disclosed, an investigation was
conducted by the Staff of the Securities and Exchange Commission (the
"SEC") concerning the accuracy of certain statements in Salant's
Annual Report (Form 10-K) for the year ended December 30, 1989, and
its Quarterly Report (Form 10-Q) for the quarter ended March 31, 1990
(collectively, the "SEC Filings"). The SEC investigation focused on
management's belief, as stated in those filings in the Management's
Discussion and Analysis of Financial Condition and Results of
Operation ("MD&A") section in the SEC Filings, that Salant's existing
credit lines should be sufficient to meet its working capital
requirements. Salant cooperated with the SEC Staff in connection with
its investigation and has recently engaged in discussions with the SEC
Staff regarding the resolution of the matters under investigation. The
resolution of the investigation is not expected to have a material
adverse impact on Salant's financial condition or results of
operations.
(3) Securities Litigation. On November 27, 1990, Mae Fischer
("Fischer"), an alleged purchaser of Salant's 13-1/4% Senior
Subordinated Debentures due June 15, 1999 (the "Debentures"),
instituted a purported class action suit in the United States District
Court for the Southern District of New York, claiming that certain
directors and officers of Salant violated the federal securities laws
by issuing favorable public statements concerning the future
profitability of Salant, which Fischer claims artificially inflated
the market price of the Debentures between October 1988 and June 1990.
Pursuant to Salant's bylaws, Salant is obligated to indemnify its
directors and officers against expenses and any judgments or
settlements entered against them in actions in which they are sued in
their capacity as directors or officers. Salant was not named as a
defendant in the suit, Fischer v. Tynan, et al., 90 Civ. 7587 (LBS),
due to the pendency of the Chapter 11 Cases.
Pursuant to the terms and conditions of the stipulation of settlement,
Salant will issue and distribute a number of shares of Salant Common
Stock, not to exceed 11,000 shares, to certain purchasers of the
Debentures who sold at a loss during a circumscribed period. In
addition, Fischer's counsel will receive $150 for their fees and
expenses pursuant to the settlement. The stipulation of settlement,
which is subject to a hearing and review by the Bankruptcy Court, was
filed with the Bankruptcy Court on March 28, 1994. Upon final approval
by the Bankruptcy Court, the Fischer appeal and the Fischer Claim will
be deemed withdrawn with prejudice.
(c) Employment Agreements
The Company has employment agreements with certain executives, which
provide for the payment of compensation aggregating approximately
$6,274 in 1994, $1,909 in 1995 and $918 in 1996. In addition, such
employment agreements provide for incentive compensation based on
various performance criteria.
Note 18. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Fiscal year ended January 1, 1994(b)
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . $407,236 $113,010 $113,251 $85,918 $95,057
Gross profit . . . . . . . . . . 99,585 28,535 28,441 20,520 22,089
Income/(loss) from
continuing operations . . . . 7,227 2,859 4,446 (488) 410
Discontinued Operations:
Reversal of estimated
loss on disposal . . . . 11,772 11,772 - - -
Extraordinary gain . . . . . . . 24,707 - 24,707 - -
Net income/(loss). . . . . . . . 43,706 14,631 29,153 (488) 410
Income/(loss) per share from
continuing operations (a) $1.02 $0.19 $0.83 $(0.12) $0.10
Income per share from discontinued
operations reversal (a). . . . 1.65 0.77 - - -
Income per share from
extraordinary gain(a) 3.48 - 4.63 - -
Net income/(loss) per share (a) 6.15 0.96 5.46 (0.12) 0.10
</TABLE>
Fiscal year ended January 2, 1993 (b)
<TABLE>
<CAPTION>
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . $415,641 $105,034 $127,619 $91,181 $91,807
Gross profit . . . . . . . . . . 93,653 23,870 28,360 19,924 21,499
Income/(loss) from continuing
operations (5,986) (12,133) 6,065 55 27
Discontinued operations:
Estimated loss on disposal . . (11,772) (11,772) - - -
Net income/(loss). . . . . . . . (17,758) (23,905) 6,065 55 27
Income/(loss) per share from
continuing operations (a). . . $(1.73) $(3.50) $1.60 $0.02 $0.01
Loss per share from discontinued
operations (a) . . . . . . . . (3.40) (3.40) - - -
Net income/(loss) per share(a) . (5.13) (6.90) 1.60 0.02 0.01
</TABLE>
Reference is made to Notes 3, 4 and 8 concerning fourth quarter
adjustments during the fiscal years ended January 1, 1994
and January 2, 1993.
(a) Income/(loss) per share of common stock is computed separately
for each period. The sum of the amounts of income/(loss) per
share reported in each period differs from the total for the
year due to the issuance of shares in 1993 and, when appropriate,
the inclusion of common stock equivalents.
(b) Information provided for the first, second and third quarters
of 1993, and the fourth quarter of 1992 has been adjusted for
the reclassification and retention of the Salant Children's
Apparel Group. See Note 3 for additional information.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference from
the Proxy Statement of Salant Corporation.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from
the Proxy Statement of Salant Corporation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated by reference from
the Proxy Statement of Salant Corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from
the Proxy Statement of Salant Corporation.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Financial Statements
The following financial statements are included in Item 8 of this
Annual Report:
Independent Auditors' Report. . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . .
Consolidated Statements of Shareholders'
Equity/(Deficiency) . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . .
Notes to Consolidated Financial Statements. . . . . .
Financial Statement Schedules
The following Financial Statement Schedules for the fiscal years ended
January 1, 1994, January 2, 1993, and December 28, 1991 and are filed
as part of this Annual Report:
Schedule VIII - Valuation and Qualifying Accounts
and Reserves. . . . . . . . . . . . . . . . . . . .
Schedule IX - Short-Term Borrowings . . . . . . . . .
Schedule X - Supplementary Income Statement Information . . .
All other schedules have been omitted because they are inapplicable or
not required, or the information is included elsewhere in the
financial statements or notes thereto.
SALANT CORPORATION
AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
(1) (2)
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End
of Period Expenses -- Describe --Describe of Period
<S> <C> <C> <C> <C> <C>
Description
YEAR ENDED JANUARY 1, 1994:
Accounts receivable
allowance for doubtful
accounts $ 3,788 $ 94 $ - $ 1,616(A) $ 2,266
Reserve for business
restructuring $ 5,931 $ 5,500 $ - $ 9,393(B) $ 2,038
Reserve for loss on
disposal of discontinued
operations $11,772 $ - $ - $11,722(D) $ -
YEAR ENDED JANUARY 2, 1993:
Accounts receivable
allowance for doubtful
accounts $ 4,709 $ 2,867 $ - $ 3,788(A) $ 3,788
Reserve for business
restructuring $ 8,007 $11,757 $ - $13,833(B) $ 5,931
Reserve for loss on
disposal of discontinued
operations(E) $ - $11,772(C) $ - $ - $11,772
YEAR ENDED DECEMBER 28, 1991:
Accounts receivable
- allowance for doubtful
accounts $ 4,332 $ 1,904 $ - $ 1,527(A) $ 4,709
Reserve for business
restructuring $ 1,937 $12,984 $ - $ 6,914(B) $ 8,007
</TABLE>
NOTES:
(A) Uncollectible accounts written off, less recoveries.
(B) Costs incurred in plant closings and business restructuring.
(C) Charged to discontinued operations.
(D) Reversal of estimated loss on disposal of discontinued operation.
(E) Included in reserve for restructuring on the balance sheet.
SALANT CORPORATION
AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest
Category of Aggregate at End Interest During During Rate During
Short-Term Borrowings of Period Rate the Period the Period(1) The Period(2)
(000's omitted)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994 - 6.8% $ 48,700 $ 20,892 6.8%
Payable to Factor
YEAR ENDED JANUARY 2, 1993
Payable to Factor - 7.5% $ 38,818 $ 16,184 7.5%
YEAR ENDED DECEMBER 28, 1991
Payable to Factor - 9.9% $ 35,300 $ 15,517 9.9%
</TABLE>
NOTES:
(1)Average amount outstanding during the period is computed by
dividing the total of daily outstanding principal balances by 365.
(2)Average interest rate for the year is computed by dividing the
actual short-term interest expense by the average short-term
debt outstanding.
SALANT CORPORATION
AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
For Each Year in the Three-Year Period Ended January 1, 1994
(000's omitted)
<TABLE>
<CAPTION>
Column A Column B
Charged To Costs And Expenses
Continuing Operations
ITEM 1993 1992 1991
<S> <C> <C> <C>
Advertising $6,532 $7,351 $6,768
===== ===== =====
Royalties $8,565 $8,000 $9,192
===== ===== =====
</TABLE>
Amounts for maintenance and repairs, preoperating costs and similar
deferrals, taxes other than payroll and income taxes are not presented
inasmuch as such amounts are less than 1% of net sales.
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended January 1, 1994.
Exhibits
<TABLE>
<CAPTION>
Incorporation
Number Description By Reference To
<S> <C> <C>
2.1 Third Amended Disclosure Exhibit 1 to
Statement of Salant Form 8-A dated
Corporation, and Denton 7/28/93.
Mills, Inc., dated
5/12/93.
2.2 Third Amended Joint Included as
Chapter 11 Plan of Exhibit D-1
Reorganization of to Exhibit 1
Salant Corporation to Form 8-A
and Denton Mills, Inc. dated 7/28/93.
3.1 Form of Amended and Included as Exhibit
Restated Certificate of D-1 to Exhibit 2
Incorporation of Salant to Form 8-A dated
Corporation. 7/28/93.
3.27 Form of Bylaws, as amended, of Exhibit 19.2 to Quarterly Report on
Salant Corporation, effective Form 10-Q for the quarter ended
7/10/91. 6/29/91.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
12/8/87 between Salant on Form 8-K dated 12/8/87.
Corporation and The Chase
Manhattan Bank, N.A.,
as Rights Agent. The Rights
Agreement includes as Exhibit B the
form of Right Certificate.
4.2 Form of First Amendment Exhibit 3 to
to the Rights Agreement Amendment No. 1 to
between Salant Corporation Form 8-A dated
and Mellon Securities. 7/29/93.
4.3 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated 9/20/93, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial 10/02/93.
Services, Inc.
4.5 Indenture, dated as of Exhibit 10.34 to
9/20/93, between Salant Quarterly Report
Corporation and Bankers on Form 10-Q for
Trust Company, as trustee, the quarter ended
for the 10-1/2% Senior 10/02/93.
Secured Notes due
December 31, 1998.
4.6 Warrant Agreement dated Exhibit 10.35 to
as of September 20, 1993, Quarterly Report on
between Salant Corporation Form 10-Q for the
and Bankers Trust Company, quarter ended 10/02/93.
as Warrant Agent.
10.1 Deferred Compensation Exhibit (19)(j) to Annual Report
Administration Plan, as amended on Form 10-K for fiscal year
and restated, effective as of 1982.
5/30/82.*
10.2 Salant Corporation Retirement Exhibit (19)(a) to Quarterly
Plan, as amended and restated, Report on Form 10-Q for the
effective 12/1/84.* quarter ended 8/30/86.
10.3 Amendment No. 1 to Salant Exhibit 19.8 to Annual Report on
Corporation Retirement Plan.* Form 10-K for fiscal year 1987.
10.4 Amendment No. 2 to Salant Exhibit 19.1 to Annual Report on
Corporation Retirement Plan.* Form 10-K for fiscal year 1989.
10.5 Salant Corporation Pension Plan, Exhibit (19)(b) to Quarterly Report
as amended and restated, on Form 10-Q for the quarter ended 8/30/86, for
effective 12/1/84.* fiscal year 1987.
10.6 Amendment No. 1 to Salant Exhibit 19.9 to Annual Report
Corporation Pension Plan.* on Form 10-K for fiscal year 1987.
10.7 Amendment No. 2 to Salant Exhibit 19.2 to Annual Report
Corporation Pension Plan.* on Form 10-K for fiscal
year 1989.
10.8 Letter of 8/20/86 to John P. Exhibit (19)(a) to Annual Report
MacDonald of Fried, Frank, on Form 10-K for fiscal year 1986.
Harris, Shriver & Jacobson from
the Internal Revenue Service in
respect of the Salant Corporation
Retirement Plan and Salant
Corporation Pension Plan.
10.9 Salant Corporation Long Term Exhibit (19)(c) to Annual Report
Savings and Investment Plan, as on Form 10-K for fiscal year 1985.
amended and restated, effective
1/1/85.*
10.10 Amendment One to Salant Exhibit 19.10 to Annual Report on
Corporation Long Term Savings Form 10-K for fiscal year 1987.
and Investment Plan.*
10.11 Second Amendment to Salant Exhibit 19.6 to Annual Report on
Corporation Long Term Savings Form 10-K for fiscal year 1988.
and Investment Plan.*
10.12 Third Amendment to Salant Exhibit 19.3 to Annual Report on
Corporation Long Term Savings Form 10-K for fiscal year 1989.
and Investment Plan.*
10.13 Fourth Amendment to Salant Exhibit 19.4 to Annual Report on
Corporation Long Term Savings Form 10-K for fiscal year 1989.
and Investment Plan.*
10.14 Salant Corporation 1987 Stock Exhibit 19.2 to Annual Report on Form 10-K for
Plan. fiscal year 1987.
10.15 Salant Corporation 1987 Stock Exhibit 10.12 to Form S-2
Plan Agreement, dated as of Registration Statement filed
6/13/88, between Salant 6/17/88.
Corporation and Nicholas P.
DiPaolo.
10.16 Salant Corporation 1988 Stock Exhibit 19.3 to Annual Report on
Plan. Form 10-K for fiscal year 1988.
10.17 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of 7/25/89, to the Salant on Form 10-Q for the
Corporation 1988 Stock Plan. quarter ended 9/30/89.
10.18 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.19 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.20 Employment Agreement, dated as of Exhibit 19.4 to
12/31/90, between Herbert R. Annual Report on
Aronson and Salant Corporation.* Form 10-K for fiscal
year 1990.
10.21 Letter Agreement, dated 6/30/92, Exhibit 19.1 to Quarterly
amending the Employment Report on Form 10-Q for
Agreement, dated as of 12/31/90, the quarter ended 10/3/92.
between Herbert R. Aronson and
Salant Corporation.*
10.22 Employment Agreement dated as of Exhibit 19.1 to Annual Report on
7/1/91, between Joseph G. Form 10-K for fiscal year 1990.
Salloum and Salant Corporation.*
10.23 License Agreement, dated Exhibit 19.1 to Annual Report
January 1, 1991, by and between on Form 10-K for fiscal year 1992.
Perry Ellis International Inc.
and Salant Corporation regarding
men's sportswear.
10.24 License Agreement, dated Exhibit 19.2 to Annual Report
January 1, 1991, by and between on Form 10-K for
Perry Ellis International Inc. fiscal year 1992.
and Salant Corporation regarding
men's dress shirts.
10.25 Employment Agreement Exhibit 10.32 to
dated as of 6/01/93, Quarterly Report on
between Todd Kahn and Form 10-Q for the
Salant Corporation.* quarter ended 7/8/93.
10.26 Form of Agreement between Included as Exhibit
Salant Corporation and P-11 to Exhibit 1
Apollo Apparel Partners, L.P. to Form 8-A dated
7/28/93.
10.27 Employment Agreement, dated Exhibit 10.36 to
as of 9/20/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Nicholas P. DiPaolo.* quarter ended 10/2/93.
10.28 Employment Agreement, dated Exhibit 10.37 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
John S. Rodgers.* quarter ended 10/2/93.
10.29 Employment Agreement, dated Exhibit 10.38 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Richard P. Randall.* quarter ended 10/2/93.
10.30 Letter Agreement, dated Exhibit 10.39 to
8/13/93, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
7/1/91, between Joseph G. quarter ended 10/2/93.
Salloum and Salant Corporation.*
10.31 Letter Agreement, dated Exhibit 10.40 to
11/1/93, amending the Letter Quarterly Report on
Agreement, dated 8/13/93 and Form 10-Q for the
the Employment Agreement, quarter ended 10/2/93.
dated 7/1/91, between Joseph G.
Salloum and Salant Corporation.*
10.32 Employment Agreement dated
as of 12/21/93, between
Elliot M. Lavigne and Salant
Corporation.*
10.33 Agreement, dated as of 9/22/93,
between Nicholas P. DiPaolo and
Salant Corporation.*
10.34 Forms of Salant Corporation 1993 Stock
Plan Directors' Option Agreement.*
21 List of Subsidiaries of the Company
</TABLE>
* denotes management contract or compensatory plan or arrangement.
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.
SALANT CORPORATION
Date: March 31, 1994. By /s/John S. Rodgers
Executive Vice President,
Senior Counsel and Secretary
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 indicated.
Signature Title
/s/Nicholas P. DiPaolo Chairman of the Board,
Nicholas P. DiPaolo President and Chief
Executive Officer
(Principal Executive
Officer); Director
/s/Richard P. Randall Senior Vice President,
Richard P. Randall Treasurer and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
/s/John S. Rodgers Executive Vice President,
John S. Rodgers Senior Counsel and Secretary;
Director
/s/Craig M. Cogut
Craig M. Cogut Director
/s/Ann Dibble Jordan
Ann Dibble Jordan Director
/s/Stanley R. Klion
Stanley R. Klion Director
/s/Harold Leppo
Harold Leppo Director
/s/Bruce Roberts
Bruce Roberts Director
/s/Marvin Schiller Director
Marvin Schiller
/s/Edward M. Yorke
Edward M. Yorke Director
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 1, 1994
SALANT CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporation
Number Description By Reference To
<S> <C> <C>
2.1 Third Amended Disclosure Exhibit 1 to
Statement of Salant Form 8-A dated
Corporation, and Denton 7/28/93.
Mills, Inc., dated
5/12/93.
2.2 Third Amended Joint Included as
Chapter 11 Plan of Exhibit D-1
Reorganization of to Exhibit 1
Salant Corporation to Form 8-A
and Denton Mills, Inc. dated 7/28/93.
3.1 Form of Amended and Included as Exhibit
Restated Certificate of D-1 to Exhibit 2
Incorporation of Salant to Form 8-A dated
Corporation. 7/28/93.
3.2 Form of Bylaws, as amended, of Exhibit 19.2 to Quarterly Report on
Salant Corporation, effective Form 10-Q for the quarter ended
7/10/91. 6/29/91.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
12/8/87 between Salant Corporation on Form 8-K dated 12/8/87.
and The Chase Manhattan Bank, N.A.,
as Rights Agent. The Rights
Agreement includes as Exhibit B the
form of Right Certificate.
4.2 Form of First Amendment Exhibit 3 to
to the Rights Agreement Amendment No. 1 to
between Salant Corporation Form 8-A dated
and Mellon Securities. 7/29/93.
4.3 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated 9/20/93, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial 10/02/93.
Services, Inc.
4.5 Indenture, dated as of Exhibit 10.34 to
9/20/93, between Salant Quarterly Report
Corporation and Bankers on Form 10-Q for
Trust Company, as trustee, the quarter ended
for the 10-1/2% Senior 10/02/93.
Secured Notes due
December 31, 1998.
4.6 Warrant Agreement dated Exhibit 10.35 to
as of September 20, 1993, Quarterly Report on
between Salant Corporation Form 10-Q for the
and Bankers Trust Company, quarter ended 10/02/93.
as Warrant Agent.
10.1 Deferred Compensation Administration Exhibit (19)(j) to Annual Report
Plan, as amended and restated, on Form 10-K for fiscal year 1982.
effective as of 5/30/82.*
10.2 Salant Corporation Retirement Plan, Exhibit (19)(a) to Quarterly Report
as amended and restated, effective on Form 10-Q for the quarter
12/1/84.* ended 8/30/86.
10.3 Amendment No. 1 to Salant Exhibit 19.8 to Annual Report on
Corporation Retirement Plan.* Form 10-K for fiscal year 1987.
10.4 Amendment No. 2 to Salant Exhibit 19.1 to Annual Report on
Corporation Retirement Plan.* Form 10-K for fiscal year 1989.
10.5 Salant Corporation Pension Plan, as Exhibit (19)(b) to Quarterly Report
amended and restated, effective on Form 10-Q for the quarter ended 8/30/86, for
12/1/84.* fiscal year 1987.
10.6 Amendment No. 1 to Salant Exhibit 19.9 to Annual Report on
Corporation Pension Plan.* on Form 10-K.
10.7 Amendment No. 2 to Salant Exhibit 19.2 to Annual Report
Corporation Pension Plan.* on Form 10-K for fiscal
year 1989.
10.8 Letter of 8/20/86 to John P. Exhibit (19)(a) to Annual Report
MacDonald of Fried, Frank, on Form 10-K for fiscal year 1986.
Harris, Shriver & Jacobson from
the Internal Revenue Service in
respect of the Salant Corporation
Retirement Plan and Salant
Corporation Pension Plan.
10.9 Salant Corporation Long Term Exhibit (19)(c) to Annual Report
Savings and Investment Plan, as on Form 10-K for fiscal year 1985.
amended and restated, effective
1/1/85.*
10.10 Amendment One to Salant Corporation Exhibit 19.10 to Annual Report on
Long Term Savings and Investment Form 10-K for fiscal year 1987.
Plan.* for fiscal year 1987.
10.11 Second Amendment to Salant Exhibit 19.6 to Annual Report on
Corporation Long Term Savings Form 10-K for fiscal year 1988.
and Investment Plan.*
10.12 Third Amendment to Salant Exhibit 19.3 to Annual Report on
Corporation Long Term Savings Form 10-K for fiscal year 1989.
and Investment Plan.*
10.13 Fourth Amendment to Salant Exhibit 19.4 to Annual Report on
Corporation Long Term Savings Form 10-K for fiscal year 1989.
and Investment Plan.*
10.14 Salant Corporation 1987 Stock Plan. Exhibit 19.2 to Annual Report on Form 10-K for
fiscal year 1987.
10.15 Salant Corporation 1987 Stock Plan Exhibit 10.12 to Form S-2
Agreement, dated as of 6/13/88, Registration Statement filed
between Salant Corporation and 6/17/88.
Nicholas P. DiPaolo.
10.16 Salant Corporation 1988 Stock Plan. Exhibit 19.3 to Annual Report on
Form 10-K for fiscal year 1988.
10.17 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of 7/25/89, to the Salant on Form 10-Q for the
Corporation 1988 Stock Plan. quarter ended 9/30/89.
10.18 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.19 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.20 Employment Agreement, dated as of Exhibit 19.4 to
12/31/90, between Herbert R. Annual Report on
Aronson and Salant Corporation.* Form 10-K for fiscal
year 1990.
10.21 Letter Agreement, dated 6/30/92, Exhibit 19.1 to Quarterly
amending the Employment Agreement, Report on Form 10-Q for
dated as of 12/31/90, between the quarter ended 10/3/92.
Herbert R. Aronson and Salant
Corporation.*
10.22 Employment Agreement dated as of Exhibit 19.1 to Annual Report on
7/1/91, between Joseph G. Salloum Form 10-K for fiscal year 1990.
and Salant Corporation.*
10.23 License Agreement, dated Exhibit 19.1 to Annual Report
January 1, 1991, by and between on Form 10-K for fiscal year 1992.
Perry Ellis International Inc.
and Salant Corporation regarding
men's sportswear.
10.24 License Agreement, dated Exhibit 19.2 to Annual Report
January 1, 1991, by and between on Form 10-K for
Perry Ellis International Inc. fiscal year 1992.
and Salant Corporation regarding
men's dress shirts.
10.25 Employment Agreement Exhibit 10.32 to
dated as of 6/01/93, Quarterly Report on
between Salant Corporation Form 10-Q for the
and Todd Kahn.* quarter ended 7/8/93.
10.26 Form of Agreement between Included as Exhibit
Salant Corporation and P-11 to Exhibit 1
Apollo Apparel Partners, L.P. to Form 8-A dated
7/28/93.
10.27 Employment Agreement, dated Exhibit 10.36 to
as of 9/20/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Nicholas P. DiPaolo.* quarter ended 10/2/93.
10.28 Employment Agreement, dated Exhibit 10.37 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
John S. Rodgers.* quarter ended 10/2/93.
10.29 Employment Agreement, dated Exhibit 10.38 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Richard P. Randall.* quarter ended 10/2/93.
10.30 Letter Agreement, dated Exhibit 10.39 to
8/13/93, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
7/1/91, between Joseph G. quarter ended 10/2/93.
Salloum and Salant Corporation.*
10.31 Letter Agreement, dated Exhibit 10.40 to
11/1/93, amending the Letter Quarterly Report on
Agreement, dated 8/13/93 and Form 10-Q for the
the Employment Agreement, quarter ended 10/2/93.
dated 7/1/91, between Joseph G.
Salloum and Salant Corporation.*
10.32 Employment Agreement dated
as of 12/21/93, between
Elliot M. Lavigne and Salant
Corporation.*
10.33 Agreement, dated as of 9/22/93,
between Nicholas P. DiPaolo and
Salant Corporation.*
10.34 Forms of Salant Corporation 1993 Stock
Plan Directors' Option Agreement.*
21 List of Subsidiaries of the Company
</TABLE>
* denotes management contract or compensatory plan or arrangement.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Birdhill, Limited, a Hong Kong corporation
Carrizo Manufacturing Co., S.A. de C.V., a Mexican corporation
Clantexport, Inc., a New York corporation
Denton Mills, Inc., a Delaware corporation
Frost Bros. Enterprises, Inc., a Texas corporation
Manhattan Industries, Inc., a Delaware corporation
Manhattan Industries, Inc., a New York corporation
Manhattan Industries (Far East) Limited, a Hong Kong corporation
Maquiladora Sur S.A. de C.V., a Mexican corporation
Sea Isle Sportswear Inc., a New York corporation
Vera Licensing, Inc., a Nevada corporation
Vera Linen Manufacturing, Inc., a Delaware corporation
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of December 21, 1993 (this "Agreement"),
between SALANT CORPORATION, a Delaware corporation, (the "Corporation"),
and ELLIOT M. LAVIGNE (the "Employee").
WHEREAS, the Employee and the Corporation are now parties to an
Employment Agreement dated as of May 1, 1991(the "Prior Employment
Agreement"), which expires by its terms on April 30 1994, and the
Employee and the Corporation wish to cancel such Agreement and enter
into a new employment agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
Section 1. Certain Definitions. When used in this Agreement, the
following terms shall have the following meanings (such meanings will be
applicable to both the singular and plural forms of the terms defined):
"Affiliate" shall mean any natural person, firm, corporation,
partnership or other legal entity that, directly or indirectly,
controls, is controlled by or is under common control with, the
Corporation.
"Fiscal Year" shall mean the fiscal year of the Corporation.
"PEM" shall mean the Perry Ellis Men's Division of the Corporation.
"Person" shall mean any natural person, corporation, partnership, trust,
association, governmental authority or unit, or any other entity,
whether acting in an individual, fiduciary or other capacity.
Section 2. Prior Employment Agreement. The Prior Employment Agreement
is hereby cancelled by mutual consent.
Section 3. Nature of Employee's Services. The Corporation agrees to
employ the Employee and the Employee agrees to serve the Corporation as
Executive Vice President - Marketing, of the Corporation and Chairman of
PEM, or with such other corporate title as may be designated, from time
to time, by the Chief Executive Officer of the Corporation. The
Employee shall perform such services and duties as shall be assigned to
him or delegated to him, from time to time, by the Board of Directors of
the Corporation (the "Board of Directors"), the Executive Committee of
the Board of Directors or the Chief Executive Officer of the Corporation
during the Employment Period (as hereinafter defined). The Employee's
duties shall include, without additional compensation, the performance
of similar services for any subsidiaries of the Corporation. The
Employee agrees that, except as otherwise provided herein, he shall
devote substantially all of his business time, attention and energy to
the business of the Corporation and its subsidiaries in the advancement
of the best interests of the Corporation and its subsidiaries. The
Employee will perform his duties hereunder principally in the
metropolitan New York area. During the Employment Period it shall not
be a violation of this Agreement for the Employee to (a) serve on
corporate, civic or charitable boards or committees, (b) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (c) subject to Section 12 hereof, manage personal
investments, so long as such activities do not interfere with the
performance of Employee's responsibilities as an employee of the
Corporation in accordance with this Agreement.
Section 4. Term of Employment. The term of the Employee's employment
hereunder shall become effective on January 3, 1994 and, unless
terminated earlier pursuant to Section 10 hereof, shall terminate on
December 31, 1996 (the initial term of the Employee's employment being
hereinafter referred to as the "Basic Term"), except that, commencing on
the expiration date of the Basic Term, and on each anniversary
thereafter, the term of employment may be extended for an additional
year on the terms set forth in this Agreement if, not later than 120
days preceding the expiration date of the Basic Term or each succeeding
year-to-year extension of the term of employment pursuant to this
Section 4 (together, the Basic Term and the cumulative year-to-year
extensions of the term of employment are hereinafter referred to as the
"Employment Period") the Corporation shall have given written notice to
the Employee that it wishes to extend the term of employment (the
"Extension Notice"), and the Employee shall accept the extension of the
term of employment within 30 days from the date the Extension Notice was
sent by the Corporation to the Employee.
Section 5. Annual Compensation. Subject to the terms hereof, the
Corporation agrees to pay to the Employee, subject to all applicable
laws and requirements, including, without limitation, laws with respect
to withholding of federal, state or local taxes:
(a) Salary. An annual salary at the rate of $475,000 per year during
the first Fiscal Year of the Basic Term, $550,000 per year during the
second Fiscal Year of the Basic Term and $600,000 per year during the
third fiscal year of the Basic Term and the balance of the Employment
Period, subject to increase (after the expiration of the Basic Term),
from time to time, in the discretion of the Board of Directors (the
"Salary"), payable in equal semi-monthly installments.
(b) Corporate Incentive Compensation. Corporate incentive compensation,
payable in accordance with the Corporation's customary practices for
executive employees, based upon the schedule comparing the Corporation's
performance during each Fiscal Year which ends within the Employment
Period to operating targets for each such Fiscal Year, which schedule is
set forth in Exhibit 1 hereto.
(c) PEM Bonus. The Corporation agrees to pay to the Employee in
respect of each Fiscal Year during the Employment Period, commencing
with the Fiscal Year of the Corporation ending on or about December 31,
1993, an annual bonus during the Employment Period in an amount equal to
five (5%) per cent of the Pre Tax Income of PEM.
The following principles shall apply in calculating the Pre Tax Income
of PEM which term shall mean the aggregate income of PEM before
provision for the following: (i) all Federal, State and local income
taxes thereon; (ii) all royalty income (iii) all foreign income and (iv)
all income received from Perry Ellis International, Inc. In calculating
such Pre Tax Income, all items of income and deductions shall be
determined in accordance with generally accepted accounting principles
applied on a consistent basis in a manner consistent with their
application to other divisions and subsidiaries of the Corporation,
subject, however, to the provisions of the following subparagraphs:
(i) There shall be excluded from income: all extraordinary or
nonrecurring items of income such as gains and losses on the sale of
fixed assets or intangible assets; all insurance recoveries other than
from business interruption; non-recurring gains or losses including,
without limitation, gains or losses on the termination of any employee
benefit plans or gains or losses realized on the sale of quota or other
intangibles.
(ii) Deductions from income shall include all fixed charges and
reasonable provisions for depreciation, amortization and obsolescence,
inventory write-offs and the salary and bonus payable to the Employee
hereunder. Interest shall be charged and deducted in calculating the
Pre Tax Income of PEM. Interest on all funds provided or advanced to
PEM shall be charged at the same rate as the Corporation charges
interest expense to its other divisions.
(iii) Deductions shall be made from income in determining the Pre Tax
Income of PEM for the fair value of all services provided by the
Corporation for PEM whether obtained from third parties or provided by
employees of the Corporation.
For purposes of calculating any bonus payable to the Employee during the
Employment Period, Pre Tax Income shall continue to be reduced by the
amount of the royalties that would have been payable by PEM (and the
Corporation) to Perry Ellis International, Inc. at the respective
royalty percentage rates in effect on December 31, 1990 (for example, 6%
of net sales on men's dress shirts) not withstanding that such royalty
percentage rates have been reduced as part of a settlement of certain
outstanding differences between the Corporation and Perry Ellis
International, Inc.
(d) Minimum Compensation . Provided that the Employment Period has not
terminated pursuant to Section 10(d) hereof, the Employee shall receive
a minimum compensation
(inclusive of the bonuses set forth in Sections 5(b) and 5(c) hereof)
for each Fiscal Year of the Employment Period of
$910,000.
(e) Payment of Bonuses. Each bonus, including the bonuses set forth in
Section 5(b) and 5(c) hereof, shall be paid by the Corporation to the
Employee within ninety (90) days after the end of the Fiscal Year for
which such bonus is payable. If the employment of the Employee is
terminated (other than pursuant to Section 10(d) hereof) or if the
Employment Period terminates on a day other than the last day of a
Fiscal Year, the bonus amount payable shall be the amount to which the
Employee would have been entitled had his employment continued for all
of that Fiscal Year, prorated by the proportion that (x) the number of
days from the beginning of such Fiscal Year to the date of termination
of the Employment Period bears to (y) 365.
Section 6. Stock Options. The Corporation shall grant to the Employee
nonqualified stock options to purchase 100,000 shares of common stock,
par value $1.00 per share (the "Common Stock"), of the Corporation
pursuant to the Corporation's 1987 Stock Plan, 1988 Stock Plan and/or
1993 Stock Plan at such time as shares of Common Stock become available.
The stock options shall be subject to the terms and conditions set forth
in the Corporation's 1987 Stock Plan, 1988 Stock Plan and/or 1993 Stock
Plan, as the case may be, and an agreement or agreements to be entered
into, pursuant to the applicable plan or plans, between the Corporation
and the Employee. Such agreement or agreements will provide, among
other things, that the purchase price per share of Common Stock subject
to the options will be an amount equal to the Fair Market Value (as such
term is defined in the Corporation's 1987 Stock Plan, 1988 Stock Plan
and/or the 1993 Stock Plan, as the case may be) of the Common Stock on
the date the options are granted and that the options will vest with
respect to 33-1/3% of the shares of Common Stock subject to the options
upon each of the first three anniversaries of the date on which the
options are granted.
Section 7. Loans to Employee.
(a) Prior Loan. Employee is presently indebted to the Corporation in
the amount of $450,000 as evidenced by a Promissory Note, dated May 1,
1991 (the "Old Note"). Interest is payable by the Employee on the
entire unpaid principal balance of the Old Note at the prime rate in
effect from time to time at Manufacturers Hanover Trust Company plus one
and one half (1- 1/2%) percent per annum. The Corporation agrees that
it will not demand payment on the Old Note prior to the earlier to occur
of; (i) March 1, 1994; or (ii) the date that the Employee is no longer
employed by the Corporation.
The Corporation and the Employee acknowledge that the planned Pre Tax
Income budget for PEM for the 1991, 1992 and 1993 fiscal years was as
follows:
1991 - $ 8,574,000
1992 - $ 11,181,000
1993 - $ 15,291,000
$ 35,046,000
(i) If PEM achieves total Pre Tax Income for the three Fiscal Years
1991, 1992 and 1993 of at least 90% of $35,046,000, but not more than
94% of $35,046,000, the Corporation agrees on March 1, 1994, to forgive
$150,000 of the principal indebtedness of the Old Note;
(ii) If PEM achieves total Pre Tax Income for the three Fiscal Years
1991, 1992, and 1993 of more than 95% of $35,046,000, but not more than
100% of $35,046,000, the Corporation agrees on March 1, 1994 to forgive
$200,000 of the principal indebtedness of the Old Note;
(iii) If PEM achieves total Pre Tax Income for the three Fiscal Years
1991, 1992 and 1993 of at least $35,046,000 but not more than 105% of
$35,046,000, the Corporation agrees, on March 1, 1994, to forgive the
entire principal amount of the Old Note plus all interest accrued
thereon and to pay to the Employee a super achievement bonus of
$150,000;
(iv) If PEM achieves total Pre Tax Income for the three Fiscal Years
1991, 1992 and 1993 of more than 105% of $35,046,000, but not more than
110% of $35,046,000, the Corporation agrees, on March 1, 1994, to
forgive the entire principal amount of the Old Note plus all interest
accrued thereon and to pay to the Employee a super achievement bonus of
$175,000; and
(v) If PEM achieves total Pre Tax Income for the three Fiscal Years
1991, 1992 and 1993 of, more than 110% of $35,046,000, the Corporation
agrees, on March 1, 1994, to forgive the entire principal amount of the
Old Note plus all interest accrued thereon and to pay to the Employee a
super achievement bonus of $250,000.
(b) New Loan. Simultaneously with the execution of this Employment
Agreement, the Corporation is advancing the Employee an additional
$750,000 and the Employee is executing a Demand Promissory Note (the
"New Note") payable to the order of the Corporation. Interest is
payable by the Employee on the entire unpaid principal balance of the
Note at the prime rate in effect from time to time at Chemical Bank plus
one and one half (1-1/2%) percent per annum. The Corporation agrees
that it will not demand payment on the New Note prior to the earlier to
occur of; (i) December 31, 1996; or (ii) the date that the Employee is
no longer employed by the Corporation.
If the Corporation's total operating income (before amortization of
intangibles and after reserve for contingencies)("Operating Income"), as
shown on its audited financial statements for the three Fiscal Years
1994, 1995, and 1996 ("Actual Operating Income") is greater than the sum
of (i) the aggregate amount of Operating Income provided for in the
Corporation's annual business plan for each of those Fiscal Years and
(ii) the outstanding principal of and accrued interest on the New Note
(together, the "Overachievement"), the Corporation shall forgive such
portion of the outstanding principal of and accrued interest on the New
Note to the extent of the Overachievement. The Corporation shall apply
any Overachievement to the accrued and unpaid interest on the New Note
before applying funds to the outstanding principal.
For purposes of this Section 7(b), Actual Operating Income shall be
calculated without giving effect to unusual or nonrecurring items of
income or expense.
Notwithstanding any provisions to the contrary, the Employee must be
employed by the Corporation at the end of the 1996 Fiscal Year for the
Corporation to forgive any portion of the outstanding principal of and
accrued interest on the New Note; provided, however, that in the case of
a termination pursuant to Sections 10(b) or 10(c) hereof, the
Corporation shall forgive such portion of the outstanding principal of
and accrued interest on the New Note to the extent of the
Overachievement for the three year period, prorated by the portion that
the number of months of employment completed by the Employee during such
three year period bears to thirty-six (36); and provided, further, that
if the Corporation terminates the Employment Period prior to the end of
the 1996 Fiscal Year without cause, the Corporation shall forgive the
entire outstanding principal of and accrued interest on the New Note.
Section 8. Employee Benefit Plans. The Employee shall, during the
Employment Period, be eligible to participate in and receive benefits
under and in accordance with the provisions of any pension plan, welfare
plan or other similar plan or policy of the Corporation maintained for
the benefit of its employees (together, the "Benefit Plans") in which he
now participates, and the Employee shall be entitled to continue to
participate in such plans (or any successors thereto) during the
Employment Period, to the extent permitted by the respective terms
thereof. In the event any new Benefit Plan is established which is in
addition to, and not an alternative to, any Benefit Plan in which the
Employee now participates, the Employee shall be entitled to participate
in such Benefit Plan to the extent permitted by the terms thereof. The
Corporation will not take any action directed solely at the Employee,
with respect to the Benefit Plans or the Employee's participation in the
Benefit Plans, that results in a material adverse change from the
benefits the Employee now enjoys. The Corporation shall have the right,
however, to make changes in Benefit Plans applicable to its senior
executives or employees generally and the Employee agrees that such
changes shall also be applicable to the Employee.
Section 9. Expenses. Subject to compliance by the Employee with such
policies regarding expenses and expense reimbursement as may be adopted
from time to time by the Corporation, the Employee is authorized to
incur reasonable expenses in the performance of his duties hereunder in
the furtherance of the business of the Corporation and its subsidiaries,
and the Corporation shall reimburse the Employee for all such reasonable
expenses.
Section 10. Termination.
(a) Termination Date and Termination of Rights and Obligations. On the
earlier of (i) the date of expiration of the Employment Period or
(ii) the date on which termination of employment becomes effective
pursuant to subsections (b) through (d) of this Section 10 (the
"Termination Date"), the Employee's salary and other rights under this
Agreement shall terminate, provided, however, that the Corporation shall
pay to the Employee his Salary and benefits accrued prior thereto.
(b) Death of Employee. In the event of the death of the Employee, the
Employment Period shall terminate on the last day of the calendar month
within which such death shall have occurred.
(c) Disability of Employee. The Corporation shall have the right to
terminate the Employment Period, upon written notice to the Employee, if
the Corporation determines that the Employee has been disabled (either
mentally or physically) so as to be unable to substantially perform his
duties hereunder for a period of two months or more.
(d) Termination for Cause. The Corporation shall have the right to
terminate the Employment Period, upon written notice to the Employee, if
the Employee (i) engages in conduct which is determined by a court to
constitute a felony or act of moral turpitude or (ii) commits any act of
willful misconduct, malfeasance or gross negligence that is injurious to
the Company or (iii) breaches this Agreement.
Section 11. Covenant Not to Compete. The Employee covenants and agrees
that he will not, at any time during the Employment Period (determined
without giving effect to any termination of employment), whether as
owner, principal, agent, partner, officer, employee, independent
contractor, consultant, shareholder, licensor or otherwise, alone or in
association with any other Person, either directly or indirectly, carry
on, be engaged or take part in, render services to or own, share in the
earnings of, or invest in the stocks, bonds or other securities of, or
be interested in any way in any business competing with or similar to
any of the businesses of the Corporation or its subsidiaries without the
prior written consent of the Board of Directors, provided that the
Employee may hold a passive investment in a business which is
competitive with or similar to any of the businesses of the Corporation
if the investment is in securities which are listed on a national
securities exchange and the investment in any class of securities does
not exceed 1% of the outstanding shares of such class or 1% of the
aggregate outstanding principal amount of such class, as the case may
be.
Section 12. Restrictions on Investments. The Employee covenants and
agrees that he will not, at any time during the Employment Period,
whether as owner, principal, officer or shareholder, alone or in
association with any other person, either directly or indirectly, invest
in the stock, bonds or other securities (the "Securities") of any public
company (other than a Fortune 500 Company) if such investment in the
Securities exceeds 2% of the outstanding shares of such class or 2% of
the aggregate outstanding principal amount of such class or is
convertible into 2% or more of the outstanding shares of such company
without the prior written consent of the Board of Directors.
Section 13. Non-Disclosure Covenant. The Employee further agrees that
during the Employment Period and thereafter without limit, he will not,
either directly or indirectly, communicate or divulge to any person,
firm or corporation other than the Corporation and its subsidiaries, any
information (except that which is generally known to the public)
relating to the business, customers and suppliers, or other affairs of
the Corporation or its subsidiaries ("Confidential Information") except
(a) for the purpose of, or in connection with, the advancement of the
business of the Corporation or (b) in the event that the Employee is
required (by oral questions, interrogatories, requests for information
or documents, subpoena, civil investigative demand or similar legal
process) to disclose Confidential Information, and the Employee is
compelled to disclose such Confidential Information or else stand liable
for contempt or suffer other censure, penalty or violation in a court
proceeding. In the event that the Employee is required to disclose such
Confidential Information in the circumstances described in Section
13(b), the Employee will either (i) give the Corporation at least ten
days' written notice (or shorter, but prompt, notice to the extent the
Employee is required to respond to legal process in fewer than ten days)
so that the Corporation may seek an appropriate protective order or (ii)
make such disclosure to a court under seal.
Section 14. Indemnification. On the same terms and conditions
applicable to other officers of the Corporation, the Corporation shall
continue to indemnify the Employee against all liability and loss with
respect to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason
of the fact that he is or was a director, officer, employee or agent of
the Corporation or any of its subsidiaries or Affiliates, against
expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that he did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Notwithstanding any other provision of this Agreement, the Corporation's
obligation to indemnify the Employee shall survive the expiration of
this Agreement, provided that in the event that the Employee is
terminated pursuant to Section 10(d) hereof, the Corporation shall have
no obligation to indemnify the Employee under this Section 14 against
any liability, loss or expense arising from conduct that constitutes
grounds for the Corporation to terminate the Employment Period pursuant
to Section 10(d) hereof.
Section 15. Automobile. During the Employment Period, the Corporation
will provide the Employee with an automobile allowance in the amount of
$680 per month.
Section 16. Vacations. The Employee shall be entitled to paid
vacations in accordance with the policies of the Corporation in effect
from time to time, but no less than four weeks in any of the Fiscal
Years during which the Employee is employed. To the extent the Employee
does not use the full vacation period during a Fiscal Year, the unused
balance shall accrue and be carried over into subsequent Fiscal Years;
provided, however, that such unused balance may be carried forward only
with the consent of the chief executive officer of the Corporation and,
in any event, no more than an aggregate of two weeks of unused vacation
time may be carried forward from one Fiscal Year to the next Fiscal
Year.
Section 17. Successors and Assigns. In the event that the Corporation
shall at any time be merged or consolidated with any other corporation
or shall sell or otherwise transfer substantially all of its assets or
business to another corporation or entity, the provisions of this
Agreement shall be binding upon and inure to the benefit of such
corporation or entity surviving or resulting from such merger or
consolidation or to which such assets or business shall be so sold or
transferred; provided, however, that nothing contained in this
Section 17 shall in any way limit, or be construed to limit, the
obligations to the Employee, under this Agreement, of the Corporation or
the Corporation's successors or assigns. This Agreement shall not be
assignable by the Employee.
Section 18. Notice. Any notice or other communication which is
required or permitted by this Agreement shall be in writing and shall be
deemed to have been duly given when delivered in person, transmitted by
telecopy or five (5) days after being mailed by registered or certified
mail, postage prepaid, return receipt requested, to such party at the
address shown below:
If to the Corporation, care of the following:
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Attention: Todd Kahn, Esq.
If to the Employee, then to the following:
Mr. Elliot M. Lavigne
24 Sutton Place
Engelwood, New Jersey 07631
Each party may, by notice to other party, change the above address.
Section 19. Entire Agreement; Amendments. This Agreement embodies the
entire agreement and understanding between the parties and supersedes
all prior agreements (including, without limitation, the Prior
Employment Agreement) and understandings as to the employment of the
Employee. No amendment, waiver, modification or discharge of any of the
terms of this Agreement shall be valid unless in writing and signed by
the party against which enforcement is sought.
Section 20. Waiver. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach thereof.
Section 21. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original.
Section 22. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
Section 23. Arbitration. The Employee and the Corporation agree that
any dispute of any kind, nature or description between the parties
hereto, with respect to, relating to or arising out of the Employee's
employment with the Corporation or the terms of this Agreement, shall
be submitted to arbitration before the American Arbitration Association
in New York, New York in accordance with its rules then in effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
SALANT CORPORATION
By: /s/ Nicholas P. DiPaolo
Nicholas P. DiPaolo
Chairman of the Board,
President and Chief
Executive Officer
/s/ Elliot M. Lavigne
Elliot M. Lavigne
Exhibit 1
INCENTIVE COMPENSATION SCHEDULE
If the Corporation's operating income (before amortization of
intangibles), as shown on its audited financial statements for any
Fiscal Year during the Employment Period ("Actual Annual Operating
Income"), is equal to or greater than 90% and less than 95% of the
amount of operating income (before amortization of intangibles and after
the reserve for contingencies) provided for in Salant's annual business
plan for that Fiscal Year ("Planned Annual Operating Income"), the
Employee shall receive a cash bonus equal to 10% of his Salary at the
end of the applicable Fiscal Year ("Annual Salary").
If the Corporation's Actual Annual Operating Income is equal to or
greater than 95% and less than 100% of Planned Annual Operating Income,
the Employee shall receive a cash bonus equal to 25% of his Annual
Salary.
If the Corporation's Actual Annual Operating Income is equal to or
greater than 100% of Planned Annual Operating Income, the Employee shall
receive a cash bonus equal to 50% of his Annual Salary.
For each full five percentage points (after rounding to the nearest
1/100th of a percent) by which the Corporation's Actual Annual Operating
Income exceeds 100% of Planned Annual Operating Income, the Employee
shall receive an additional cash bonus equal to 10% of his Annual
Salary.
Actual Annual Operating Income shall be calculated without giving effect
to unusual or nonrecurring items of income or expense.
AGREEMENT
AGREEMENT dated as of September 22, 1993, by and between Nicholas
P. DiPaolo ("Employee") and Salant Corporation, a Delaware
corporation ("Salant").
WHEREAS, pursuant to the Employment Agreement, dated September
20, 1993, between Employee and Salant (the "Employment
Agreement"), the Employee is currently the Chairman of the Board
of Directors, Chief Executive Officer and President of Salant;
WHEREAS, the Board of Directors of Salant has determined that it
would be in the best interest of Salant to have an option to
extend the Basic Term (as defined in the Employment Agreement) of
the Employee (the "Option");
WHEREAS, pursuant to certain conditions contained in this
Agreement, the Employee desires to give Salant the Option.
NOW THEREFORE, in consideration of the respective premises,
mutual covenants and agreements of the parties hereto, and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. The Option. Subject to the terms and conditions of
this Agreement, the Employee hereby grants to Salant the option
to extend the Basic Term under the Employment Agreement for a
period of one year, commencing on January 1, 1995 and ending on
December 31, 1995 (the "Additional Year"). In consideration for
the Option, Salant hereby agrees to guarantee that it will fully
comply with all of the terms and conditions provided for in the
Employment Agreement, including without limitation, Section 4 of
the Employment Agreement. The Employee shall receive an annual
salary at the rate of $625,000 per year for the Additional Year.
All of the other terms and provisions of the Employment Agreement
in effect immediately prior to the commencement of the Additional
Year shall remain in effect without modification during the
Additional Year.
Section 2. Ability to Exercise the Option. The Option granted
hereunder shall be exercisable and binding on the Employee only
if (i) at the time immediately prior to the commencement of the
Additional Year, Salant is in full compliance with all of the
terms and conditions provided for in the Employment Agreement,
including without limitation, Section 4 of the Employment
Agreement, and (ii) Salant has notified the Employee in writing
on or before July 1, 1994 of its intention to exercise the
Option.
Section 3. Notice. Any notice or other communication which is
required or permitted by this Agreement shall be in writing and
shall be deemed to have been duly given when delivered in person,
transmitted by facsimile or five (5) days after being mailed by
registered or certified mail, postage prepaid, return receipt
requested, to such party at the address shown below:
If to Salant, care of the following: If to the Employee,
then to the following:
Salant Corporation Mr. Nicholas P. DiPaolo
1114 Avenue of the Americas 8-01 Plymouth Drive
New York, New York 10036 Fair Lawn, NJ 07410
Attention: Todd Kahn, Esq.
Each party may, by notice to other party, change the above
address.
Section 4. Entire Agreement; Amendments. This Agreement
embodies the entire agreement and understanding between the
parties and supersedes all prior agreements and understandings as
to the Option. No amendment, waiver, modification or discharge
of any of the terms of this Agreement shall be valid unless in
writing and signed by the party against which enforcement is
sought.
Section 5. Successors and Assigns. In the event that Salant
shall at any time be merged or consolidated with any other
corporation or shall sell or otherwise transfer substantially all
of its assets or business to another corporation or entity, the
provisions of this Agreement shall be binding upon and inure to
the benefit of such corporation or entity surviving or resulting
from such merger or consolidation or to which such assets or
business shall be so sold or transferred; provided, however, that
nothing contained in this Section 5 shall in any way limit, or be
construed to limit, the obligations to the Employee, under this
Agreement, of Salant or Salant's successors or assigns. This
Agreement shall not be assignable by the Employee.
Section 6. Waiver. The waiver by either party of a breach of
any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach thereof.
Section 7. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original.
Section 8. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
New York. For purposes of any action or proceeding involving
this Agreement, Salant and the Employee hereby submit to the
jurisdiction of all federal and state courts of competent
jurisdiction sitting within the area comprising the Southern
District of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first set forth above.
SALANT CORPORATION
By: \s\ John. S. Rodgers
John S. Rodgers, Esq.
Executive Vice President,
Senior Counsel and Secretary
\s\ Nicholas P. DiPaolo
Nicholas P. DiPaolo
FORM OF INITIAL GRANT OF
DIRECTOR OPTION AGREEMENT
SALANT CORPORATION 1993 STOCK PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of [DATE] (the "Grant Date"), between
Salant Corporation, a Delaware corporation (the "Company"), and
[NAME] (the "Optionee").
WHEREAS, the Company has adopted the Salant Corporation 1993
Stock Plan (the "Plan") in order to provide additional incentive
to selected key employees and directors of the Company and its
Subsidiaries; and
WHEREAS, the Plan provides for the grant of a Director Option to
the Optionee as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
1.1 The Company hereby makes an Initial Grant of a Director
Option (the "Option") to the Optionee to purchase all or any part
of an aggregate of 1,000 whole Shares subject to, and in
accordance with, the terms and conditions set forth in this
Agreement and the Plan.
1.2 The Option is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
1.3 This Agreement shall be construed in accordance and
consistence with, and subject to, the terms of the Plan (the
provisions of which are incorporated herein by reference); and,
except as otherwise expressly set forth herein, the capitalized
terms used in this Agreement shall have the same definitions as
set forth in the Plan.
2. Purchase Price.
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be $[PRICE] per
Share.
3. Duration of Option.
The Option shall be exercisable to the extent and in the manner
provided herein for a period of ten years from the Grant Date;
provided, however, that the Option may be earlier terminated as
provided in Section 8 of the Plan.
4. No Right to Continued Employment.
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to
continuance of Optionee's service as a director of the Company or
any Subsidiary.
5. Withholding of Taxes.
Whenever shares of Stock are to be issued pursuant to this
Agreement, the Company shall require the recipient of the Stock
to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to issuance of
the certificate for shares of Stock.
6. Grantee Bound by the Plan.
The Optionee hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof.
7. Modification of Agreement.
Subject to the provisions of the Plan, this Agreement may be
modified, amended, suspended or terminated, and any terms or
conditions may be waived, but only by a written instrument
executed by the parties hereto.
8. Severability.
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
9. Successors in Interest.
This Agreement shall inure to the benefit of and be binding
upon any successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All
obligations imposed upon the Optionee and all rights granted to
the Company under this Agreement shall be final, binding and
conclusive upon the Optionee's heirs, executors, administrators
and successors.
10. Resolution of Disputes.
Any dispute or disagreement which may arise under, or as a
result of, or in any way relate to, the interpretation,
construction or application of this Agreement shall be determined
by the Committee. Any determination made hereunder shall be
final, binding and conclusive on the Optionee and Company for all
purposes.
SALANT CORPORATION
By__________________________
Nicholas P. DiPaolo
Attest:
__________________________
____________________________
[NAME]
____________________________
____________________________
Address
____________________________
Social Security Number
FORM OF ANNUAL GRANT OF
DIRECTOR OPTION AGREEMENT
SALANT CORPORATION 1993 STOCK PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, made as of [DATE] (the "Grant Date"), between
Salant Corporation, a Delaware corporation (the "Company"), and
[NAME] (the "Optionee").
WHEREAS, the Company has adopted the Salant Corporation 1993
Stock Plan (the "Plan") in order to provide additional incentive
to selected key employees and directors of the Company and its
Subsidiaries; and
WHEREAS, the Plan provides for the grant of a Director Option to
the Optionee as provided herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Option.
1.1 The Company hereby makes an Annual Grant of a Director
Option (the "Option") to the Optionee to purchase all or any part
of an aggregate of 300 whole Shares subject to, and in accordance
with, the terms and conditions set forth in this Agreement and
the Plan.
1.2 The Option is not intended to qualify as an Incentive Stock
Option within the meaning of Section 422 of the Code.
1.3 This Agreement shall be construed in accordance and
consistence with, and subject to, the terms of the Plan (the
provisions of which are incorporated herein by reference); and,
except as otherwise expressly set forth herein, the capitalized
terms used in this Agreement shall have the same definitions as
set forth in the Plan.
2. Purchase Price.
The price at which the Optionee shall be entitled to purchase
Shares upon the exercise of the Option shall be $[PRICE] per
Share.
<PAGE>
3. Duration of Option.
The Option shall be exercisable to the extent and in the manner
provided herein for a period of ten years from the Grant Date;
provided, however, that the Option may be earlier terminated as
provided in Section 8 of the Plan.
4. No Right to Continued Employment.
Nothing in this Agreement or the Plan shall be interpreted or
construed to confer upon the Optionee any right with respect to
continuance of Optionee's service as a director of the Company or
any Subsidiary.
5. Withholding of Taxes.
Whenever shares of Stock are to be issued pursuant to this
Agreement, the Company shall require the recipient of the Stock
to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to issuance of
the certificate for shares of Stock.
6. Grantee Bound by the Plan.
The Optionee hereby acknowledges receipt of a copy of the Plan
and agrees to be bound by all the terms and provisions thereof.
7. Modification of Agreement.
Subject to the provisions of the Plan, this Agreement may be
modified, amended, suspended or terminated, and any terms or
conditions may be waived, but only by a written instrument
executed by the parties hereto.
8. Severability.
Should any provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be
affected by such holding and shall continue in full force in
accordance with their terms.
9. Successors in Interest.
This Agreement shall inure to the benefit of and be binding
uponany successor to the Company. This Agreement shall inure to
the benefit of the Optionee's legal representatives. All
obligations imposed upon the Optionee and all rights granted to
the Company under this Agreement shall be final, binding and
conclusive upon the Optionee's heirs, executors, administrators
and successors.
10. Resolution of Disputes.
Any dispute or disagreement which may arise under, or as a result
of, or in any way relate to, the interpretation, construction or
application of this Agreement shall be determined by the
Committee. Any determination made hereunder shall be final,
binding and conclusive on the Optionee and Company for all
purposes.
SALANT CORPORATION
By__________________________
Nicholas P. DiPaolo
Attest:
__________________________
____________________________
[NAME]
____________________________
____________________________
Address
____________________________
Social Security Number
