UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-2433
SALANT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3402444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 221-7500
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark 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
As of November 2, 1994 there were outstanding 14,220,786 shares of
the Common Stock of the registrant.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations.........
Condensed Consolidated Balance Sheets...................
Condensed Consolidated Statements of
Cash Flow...............................................
Notes to Condensed Consolidated Financial Statements....
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders.................................
Item 6. Exhibits and Reports on Form 8-K.................
SIGNATURE.................................................
<PAGE>
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 1,October 2,October 1, October 2,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $ 126,919 $ 113,252 $ 307,580 $ 294,227
Cost of goods sold 96,830 84,810 235,718 223,176
Gross profit 30,089 28,442 71,862 71,051
Selling, general and
administrative expenses 21,198 19,809 60,029 58,388
Royalty income, net of
related expenses 1,581 1,386 4,463 4,776
Bankruptcy administration
expenses - 3,405 - 8,861
Income from operations before
interest, taxes and
extraordinary gain 10,472 6,614 16,296 8,578
Interest expense, net 4,318 2,090 11,658 3,874
Income before income taxes and
extraordinary gain 6,154 4,524 4,638 4,704
Income taxes 56 78 195 338
Net income before
extraordinary gain 6,098 4,446 4,443 4,366
Extraordinary Gain(Notes 3 and 7) - 24,707 63 24,707
Net income $ 6,098 $29,153 $4,506 $29,073
Earning per share:
Income per share before
extraordinary gain $ 0.40 $ 0.83 $ 0.30 $ 1.00
Extraordinary gain - 4.63 - 5.61
Income per share $ 0.40 $ 5.46 $ 0.30 $ 6.61
Weighted average common stock
and common stock equivalents
outstanding (Note 1) 15,174 5,338 15,107 4,401
</TABLE>
See Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
October 1, October 2,
1994 January 1, 1993
(Unaudited) 1994 (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,700 $ 2,157 $ 1,781
Accounts receivable, net 69,877 37,382 57,008
Inventories 125,918 104,513 115,013
Prepaid expenses and
other current assets 3,948 4,420 3,066
Total Current Assets 201,443 148,472 176,868
Property, Plant and Equipment, net 27,698 27,493 30,493
Other Assets 81,529 77,425 78,068
Total Assets $ 310,670 $ 253,390 $ 285,429
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Loans payable $ 54,447 $ - $ 32,334
Accounts payable 29,712 21,777 20,900
Accrued liabilities 15,476 22,056 23,490
Reserve for business restructuring 612 2,038 15,351
Total Current Liabilities 100,247 45,871 92,075
Long Term Debt 108,251 111,851 111,851
Deferred Liabilities 18,282 16,766 16,607
Shareholders' Equity
Common stock 15,242 15,016 15,015
Additional paid-in capital 107,017 106,726 106,723
Deficit (35,955) (40,461) (55,096)
Excess of additional pension
liability over unrecognized
prior service cost adjustment (986) (986) (353)
Accumulated foreign currency
translation adjustment 186 221 221
Less - treasury stock, at cost (1,614) (1,614) (1,614)
Total Shareholders' Equity 83,890 78,902 64,896
Total Liabilities and
Shareholders' Equity $ 310,670 $ 253,390 $ 285,429
</TABLE>
See Notes to Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
October 1, October 2,
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net income before extraordinary gain $ 4,443 $ 4,366
Adjustments to reconcile income from operations
to net cash used in operating activities:
Depreciation 3,902 4,183
Amortization of intangibles 1,959 1,848
Change in assets and liabilities before
acquisitions:
Accounts receivable (32,495) (18,109)
Inventories (17,919) (9,866)
Prepaid expenses and other
current assets 1,018 855
Other assets (89) 25
Accounts payable 7,935 (1,315)
Accrued liabilities and reserve for
business restructuring (7,891) 4,971
Deferred liabilities (69) 479
Net cash used in operating activities (39,206) (12,563)
Cash Flows from Investing Activities:
Capital expenditures, net (3,858) (5,810)
Acquisitions (9,094) -
Proceeds from sale of assets 274 152
Net cash used in investing activities (12,678) (5,658)
Cash Flows from Financing Activities:
Net short-term borrowings 54,447 32,334
Repayment of pre-petition secured debt - (15,097)
Repurchase of long-term debt (3,537) -
Exercise of stock options 517 64
Net cash provided by financing activities 51,427 17,301
Net decrease in cash and cash equivalents (457) (920)
Cash and cash equivalents-beginning of year 2,157 2,701
Cash and cash equivalents-end of
third quarter $ 1,700 $ 1,781
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Supplemental disclosures of cash flow
information:
October 1, October 2,
1994 1993
<S> <C> <C>
Cash paid during the year for:
Interest $ 14,661 $ 3,520
Income taxes $ 152 $ 141
Reorganization items:
Conversion of accrued liabilities and liabilities
deferred pursuant to chapter 11 cases $ 9,492
Issuance of long term debt and common stock
pursuant to plan of reorganization $ 212,079
</TABLE>
See Notes to Condensed Consolidated Financial Statements
SALANT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Thousands of Dollars Except Share Data)
(Unaudited)
Note 1. Basis of Presentation and Consolidation
The accompanying unaudited Condensed Consolidated Financial
Statements include the accounts of Salant Corporation ("Salant")
and subsidiaries (collectively, the "Company").
The results of operations for the three and nine months ended
October 1, 1994 and October 2, 1993 are not necessarily indicative
of a full year's operations. In the opinion of management, the
accompanying financial statements include all adjustments which are
necessary to present fairly such financial statements. Significant
intercompany balances and transactions are eliminated in
consolidation.
Certain reclassifications were made to the 1993 unaudited Condensed
Consolidated Financial Statements to conform with the 1994
presentation.
Income per share is based on the weighted average number of common
shares (including shares to be issued pursuant to the Company's
plan of reorganization) and common stock equivalents outstanding
during the three and nine months ended October 1, 1994 and October
2, 1993.
Note 2. Consummation of the Plan of Reorganization
On July 30, 1993, the United States Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court") issued an
order confirming the Third Amended Joint Plan of Reorganization of
Salant and Denton Mills, Inc. (the "Plan"). Salant consummated the
Plan on September 20, 1993. Upon consummation, the Company made
cash payments of $5,753, issued $111,851 of new 10-1/2% senior
secured notes and issued 1.5 million shares of common stock in
settlement of certain undisputed claims in the chapter 11
proceeding.
Note 3. 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 of
accrued interest and fees in respect of the Company's secured bank
debt during the pendency of the Company's chapter 11 cases.
Note 4. Discontinued Operations Subsequently Retained
In March 1993, the Company adopted a formal plan to restructure and
sell the Salant Children's Apparel Group. Consequently, 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 assets, liabilities
and results of operations of the Salant Children's Apparel Group
for all periods have been presented as part of continuing
operations.
The following is a summary of certain selected financial data for
the Salant Children's Apparel Group during the prior year period in
which it was reported as a discontinued operation.
<TABLE>
<CAPTION>
as of October 2, 1993
<S> <C>
Total assets $ 31,874
Total liabilities 17,229
Quarter Ended
October 2, 1993
Net sales $ 21,843
Operating income 1,725
</TABLE>
Note 5. Inventories
<TABLE>
<CAPTION>
October 1, January 1, October 2,
1994 1994 1993
<S> <C> <C> <C>
Finished goods...... $ 77,298 $ 60,686 $ 70,792
Work-in-process..... 26,924 27,661 26,211
Raw materials and
supplies.... 21,696 16,166 18,010
$ 125,918 $ 104,513 $ 115,013
</TABLE>
Note 6. Long Term Debt
In May 1994, the Company purchased and retired $3,600 of its
10 1/2% Senior Secured Notes due December 31, 1998 in an open
market transaction at a price below the principal amount thereof.
As a result of this transaction, the Company recorded an
extraordinary gain of $63.
ITEM 2. 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 unaudited Condensed Consolidated Financial
Statements and related Notes to provide additional information
concerning the financial activities and condition of Salant
Corporation ("Salant") and its subsidiary companies (collectively,
the "Company").
Results of Operations
The following discussion compares the operating results of the
Company for the three and nine months ended October 1, 1994 with
the operating results for the three and nine months ended October
2, 1993. As announced in March 1994, the Company determined to
retain and continue to operate its Children's Apparel Group.
Consequently, the Company's financial statements include the
results of operations of that division in the results of operations
for the three and nine months ended October 1, 1994. Operating
results for the three and nine months ended October 2, 1993 (which
had reflected the Children's Apparel Group in discontinued
operations) have been adjusted accordingly.
<TABLE>
<CAPTION>
(dollars in millions)
Three months ended Nine months ended
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $126.9 $113.3 $307.6 $294.2
Gross profit 30.1 28.4 71.9 71.1
Gross margin percentage 23.7% 25.1% 23.4% 24.1%
EBITDA (a) $ 12.5 $ 11.8 $ 22.2 $ 23.5
</TABLE>
(a) Earnings before interest, taxes, depreciation, amortization, bankruptcy
administration expenses and extraordinary gain.
Third Quarter 1994 Compared to Third Quarter 1993
For the third quarter of 1994, net sales amounted to $126.9
million, a 12.1% increase over net sales of $113.3 million in the
comparable 1993 quarter. The increase was realized in men's
sportswear, dress shirts and slacks. Approximately one third of
the increase in net sales related to JJ. Farmer sportswear (a label
acquired in June 1994).
Gross profit as a percentage of net sales decreased to 23.7% ($30.1
million) in the third quarter of 1994 from 25.1% of net sales
($28.4 million) in the comparable 1993 quarter. The reduction in
gross profit as a percentage of net sales was incurred primarily in
men's sportswear, neckwear and dress shirts and in denim-based
products. The cause of the reduction was (a) continuing pressure
on selling prices, (b) a change in mix to lower priced sportswear,
which carries a lower gross profit margin, as a result of the
introduction of Manhattan Sportswear late in the third quarter of
1993, and (c) certain cost increases related to wrinkle-free dress
shirts.
For the third quarter of 1994, income from operations (before net
interest expense of $4.3 million) was $10.5 million, or 8.3% of net
sales. For the third quarter of 1993, income from operations
(before an extraordinary gain of $24.7 million, bankruptcy
administration expenses of $3.4 million and net interest expense of
$2.1 million) was $10.0 million, or 8.8% of net sales. Income from
operations as a percentage of net sales was lower in 1994 primarily
as the result of continuing gross margin pressures in men's
sportswear, denim-based products and men's dress shirts.
Net interest expense for the third quarter of 1994 amounted to $4.3
million as compared to $2.1 million in the prior year's third
quarter. Until September 20, 1993, Salant was operating under
chapter 11 of the Bankruptcy Code and accordingly, was not accruing
interest on its prepetition debt.
Net income for the 1994 third quarter was $6.1 million, compared
with net income of $4.4 million (exclusive of the $24.7 million
extraordinary gain related to the Company's emergence from
bankruptcy) for the third quarter of 1993. The 37% increase in net
income (exclusive of the extraordinary gain) was due to an increase
in net sales as well as the absence of bankruptcy administration
expenses in 1994, as offset by the increase in interest expense.
Net income per share for the third quarter of 1994 was $0.40 (based
on a weighted average of 15,174,000 common shares and share
equivalents outstanding) compared to net income per share of $5.46
(based on a weighted average of 5,338,000 common shares and share
equivalents outstanding) for the third quarter of 1993, which
included the extraordinary gain of $4.63 per share. The increase
in the number of shares outstanding is primarily attributable to
the issuance of shares of common stock in connection with Salant's
emergence from bankruptcy in 1993.
Year to Date 1994 Compared to Year to Date 1993
For the nine months ended October 1, 1994, net sales were $307.6
million, an increase of 4.5% over the net sales of $294.2 million
in the comparable 1993 period.
Gross profit as a percentage of net sales decreased to 23.4% ($71.9
million) for the nine months ended October 1, 1994 from 24.1% of
net sales ($71.1 million) in the comparable 1993 period. The
decline in gross profit percentage for the nine months is primarily
the result of the same factors as the third quarter of 1994.
For the first nine months of 1994, income from operations (before
net interest expense of $11.7 million) was $16.3 million, or 5.3%
of net sales, compared to income from operations (before the
extraordinary gain of $24.7 million, bankruptcy administration
expenses of $8.9 million and net interest expense of $3.9 million)
of $17.4 million, or 5.9% of net sales, in the first nine months of
1993. Income from operations for the nine months was lower
primarily due to (a) reduced gross margins resulting from
continuing selling price pressures in dress shirts as well as
start-up costs relating to the manufacture of wrinkle free shirts
and (b) continuing weaker margins of Perry Ellis sportswear.
Current retail sales of Perry Ellis sportswear and slacks are
strong.
Net interest expense for the first nine months of 1994 amounted to
$11.7 million as compared to $3.9 million in the first nine months
of 1993. Until September 20, 1993, Salant was operating under
chapter 11 of the Bankruptcy Code and, accordingly, was not
accruing interest on its prepetition debt.
Net income for the first nine months of 1994 was $4.5 million
compared with net income of $4.4 million (exclusive of the $24.7
million extraordinary gain related to the Company's emergence from
bankruptcy) in the first nine months of 1993.
Net income per share for the first nine months of 1994 was $0.30
(based on a weighted average of 15,107,000 common shares and share
equivalents outstanding), compared to net income per share of $6.61
(based on a weighted average of 4,401,000 common shares and share
equivalents outstanding) in the first nine months of 1993, which
included the extraordinary gain of $5.61 per share.
Liquidity and Capital Resources
In September 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, in the form of 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 (which prime rate was 7.75% at October 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 October 1, 1994, direct borrowings
and letters of credit outstanding under the Agreement were $54.4
million and $38.9 million, respectively, and the Company had unused
availability of $3.7 million. As of October 2, 1993, direct
borrowings and letters of credit outstanding under the Credit
Agreement were $32.3 million and $34.7 million, respectively, and
the unused availability amounted to $7.0 million. The average
interest rate on borrowings for the three months ended October 1,
1994 and October 2, 1993 was 7.9% and 6.9%, respectively. The
average interest rate on borrowings for the nine months ended
October 1, 1994 and October 2, 1993 was 7.4% and 7.2%,
respectively.
In September 1993, the Company issued $111.9 million principal
amount of 10 1/2% Senior Secured Notes due December 31, 1998 (the
"Secured Notes") in connection with the consummation of its plan of
reorganization. In May 1994, the Company purchased and retired
$3.6 million of the Secured Notes in an open market transaction at
a price below the principal amount thereof.
The Credit Agreement and the indenture governing the Secured Notes
contain 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 tests relating to its ratio of
total liabilities to stockholders' equity, fixed charge coverage,
and maximum cumulative net loss. At October 1, 1994, the Company
was in compliance with all covenants.
During the first nine months of 1994, the Company's short term
borrowings increased by $54.4 million as compared to an increase of
$32.3 million during the comparable 1993 period. Short term
borrowings normally rise during the first nine months of the year,
reflecting the seasonal patterns of the Company's business. The
increase in 1994 over 1993 was primarily the result of a larger
increase in accounts receivable of $14.4 million due to
substantially higher sales in September 1994, cash payments
aggregating $9.1 million in connection with the acquisitions of the
JJ. Farmer business and the GANT and SALTY DOG license agreements,
a larger increase in inventories of $8.1 million in anticipation of
higher sales in the 1994 fourth quarter, and the purchase and
retirement of $3.6 million principal amount of the Secured Notes.
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 provided by operations and borrowings under the Credit
Agreement. The Company believes that the Credit Agreement,
together with the Company's cash flow from operations, will provide
sufficient funds to satisfy its anticipated financing requirements
into the second quarter of 1995. In anticipation of increased
sales growth in 1995, including that resulting from the acquisition
of the JJ. Farmer business and the licensing of the GANT and SALTY
DOG trademarks, the Company projects the need to borrow funds
during certain periods of 1995 in excess of the current $120
million limitation under the Credit Agreement. The Company has
sufficient assets available under the asset based borrowing formula
of the Credit Agreement to provide it with sufficient funds to
support its planned growth in 1995, however its needs are projected
to exceed the maximum borrowing limitation that currently exists
under the Credit Agreement. Accordingly, the Company has commenced
discussions with CIT to increase the maximum borrowing limitation
under the Credit Agreement. The Company believes that either the
maximum borrowing limitation under the Credit Agreement will be
increased by CIT or that the Company will be able to obtain
alternative financing on a timely basis, sufficient to support its
planned growth in 1995. 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 and/or other
financing agreements, will be adequate to meet its financing
requirements for the growth it anticipates in the next twelve
months. There can be no assurance, however, that the Company will
be able to obtain such additional or alternative financing or that
future developments and general economic trends will not adversely
affect the Company's operations and, hence, its anticipated cash
flow. PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter
ended October 1, 1994.
Exhibits
Number Description
10.45 Letter Agreement, dated as of August 24, 1994,
between Salant Corporation ("Salant") and the CIT
Group/Commercial Services, Inc. ("CIT") amending
the Revolving Credit, Factoring and Security
Agreement, dated as of September 20, 1993 between
Salant and CIT.
10.46 Letter Agreement, dated as of October 18, 1994,
between Salant Corporation and Herbert Aronson,
amending his employment agreement dated December
31, 1990.
10.47 Letter Agreement, dated as of October 25, 1994,
between Salant Corporation and Richard Randall,
amending his employment agreement dated July 30,
1993.
SIGNATURE
Pursuant to the requirements 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: November 11, 1994 /s/Richard P. Randall
Richard P. Randall
Senior Vice President
and Chief Financial Officer
(Principal Financial
Officer)
October 25, 1994
Mr. Richard P. Randall
131 Peaceable Street
Redding, Connecticut 06896
Dear Dick:
Reference is hereby made to the Employment Agreement, dated as of July 30,
1993, between yourself as the Employee and Salant Corporation.
We have mutually agreed to amend the Employment Agreement, effective January
1, 1995, as follows:
Section 3 of the Employment Agreement is hereby deleted in its entirety and
substituted with the following therefore:
"Section 3. Term of Employment. For purposes of this Agreement,
the term
"Employment Period" shall mean the period commencing January 1, 1995 and ending
December 31, 1996. The Corporation agrees that if it intends to renew or
extend the term
of the Employment Period beyond December 31, 1996, it will so notify the
Employee in writing on or before July 1, 1996."
Paragraph (a) of Section 4 is hereby deleted in its entirety and substituted
with the following therefore:
"(a) Salary. As annual salary for the services to be rendered by
the Employee a
salary at the rate of $300,000 per annum from January 1, 1995 to
December 31, 1995; and
$320,000 per annum from January 1,1996 through December 31, 1996, payable
in equal semimonthly installments during the Employment Period."
Section 13 of the Employment Agreement is hereby deleted in its entirety and
substituted with the following therefore:
"Section 13. Automobile Allowance. During the Employment Period, the
Corporation will provide the Employee with an automobile allowance in the
amount of $680 per month.
Except as specifically set forth herein, the Employment Agreement
remains in full
force and effect and is hereby ratified, confirmed and approved. The Employment
Agreement, as modified by this letter, is the only agreement that governs
the terms of your
employment All other letters, agreements and memorandum are hereby null
and void.
If the foregoing correctly sets forth our mutual agreement, please
sign and return to
me the three attached copies of this letter.
Very truly yours,
SALANT CORPORATION
By: /s/ Nicholas P. DiPaolo
Nicholas P. DiPaolo
Chairman of the Board,
President and CEO
Accepted and Agreed To:
By: /s/Richard P. Randall
Richard P. Randall
Date: October 26,1994
October 18, 1994
Mr. Herbert Aronson
150 Central Park South
Apt. 506
New York, New York 10019
Dear Herb:
Reference is hereby made to both the Employment Agreement, dated
as of December 31,
1990 and the Renewal and Extension Letter, dated June 30, 1992,
between yourself as the
Employee and Salant Corporation.
We have mutually agreed to amend the Employment Agreement,
effective January 1, 1995, as
follows:
The first sentence of Section 3 of the Employment Agreement
is hereby amended as
follows:
"3. Employment Period. The period of the Employee's
employment (the
"Employment Period") shall commence on January 1, 1995 and shall
end on December 31,
1996."
Section 4 of the Employment Agreement is hereby deleted in
its entirety and is
substituted with the following therefore:
"4. Compensation. During the Employment Period,
Salant shall pay to the
Employee as compensation for his services:
(a) a salary at the rate of $365,000 per annum for the
1995 fiscal year; and a
salary at the rate of $380,000 per annum for the 1996 fiscal
year, payable in equal semi-
monthly installments.
(b) A bonus, in accordance with attached Exhibit 1.
Each bonus shall be paid
by Salant to the Employee within ninety (90) days after the end
of the fiscal year of Salant
for which such bonus is payable. If the employment of the
Employee is terminated under
Section 11 or otherwise than "for cause" as defined in Section
10, or if the fiscal year of
Salant is changed so that the termination of the Employment
Period is not on the last day of
Salant's fiscal year, the bonus amount payable under this Section
4 shall be the amount to
which the Employee would have been entitled thereunder had his
employment continued for
the full fiscal year, prorated by the proportion that the number
of months of the employment
of the Employee hereunder completed during that fiscal year (as
rounded to the nearest
month) bears to twelve (12)."
Section 7 is hereby deleted in its entirety and is
substituted with the following
therefore:
" 7. Consulting Period.
(a) Upon the termination of the Employment Period on
December 31, 1996, unless
sooner terminated under Section 10 or Section 11, the Employee
shall cease to be an
employee of Salant and the Employee hereby agrees to become a
consultant (as an
independent contractor and not as an employee) to Salant, and
Salant so agrees to retain the
Employee for a five (5) year period commencing on January 1, 1997
and ending on
December 31, 2001 (the "Consulting Period"). There shall not be
a Consulting Period if the
Employment Period is terminated under Section 10 or Section 11.
As a consultant, the
Employee shall render such consulting services to Salant during
the Consulting Period as
Salant may reasonably request, subject to the following:
(i) the Employee shall only be required to render
such consulting services in
New York, New York and the Employee shall not be required to
render such consulting
services for more than fifty-four (54) complete business days in
any fiscal year of Salant
during the Consulting Period;
(ii) Salant shall pay to the Employee on the last day
of each and every month
during the Consulting Period the sum of $8,333.33 per month
during the Consulting Period,
provided, however, that if Salant elects to call on the Employee
for more than fifty-four (54)
complete days of consulting during any fiscal year of the
Consulting Period, and the
Employee renders such services, it will pay Employee an
additional sum of $1,800 per day
for each day of consulting in excess of fifty-four (54) in such
fiscal year. The Employee has
the right to decline to perform consulting services in excess of
fifty-four (54) days in any
fiscal year; once the Employee has worked fifty-four (54) days
in any fiscal year the $1,800
per day shall commence and be paid to the Employee on the last
day of each month during
said fiscal year for the number of days so worked by the
Employee; and
(iii) the noncompetition covenant contained in Section
9 shall remain in full
force and effect throughout the Consulting Period and the
Employee agrees to be bound
thereby.
(b) At any time the Employee may elect to terminate
the Consulting Period (or, if
during the Employment Period, to eliminate the Consulting
Period), in each case effective on
ninety (90) days prior written notice to Salant (or upon the
termination of the Employment
Period, as the case may be). If such election is made, upon the
termination of the last of the
Employment Period or the Consulting Period, the Employee shall
not be required to observe
and comply with the noncompetition covenant contained in Section
9 herein, and Salant shall
not be required to make any further payments to the Employee
after termination of the
Consulting Period or Employment Period, as the case may be,
except for salary, bonus or
consulting fees accrued but unpaid to such termination date, and
upon such payment, this
Agreement shall terminate."
The first sentence of Section 9 of the Employment Agreement
is hereby deleted and
substituted with the following therefore:
"Subject to the provisions of Section 7 of this Agreement,
the Employee agrees, as a
separate and independent covenant which is of the essence of this
Agreement, that in the
event the Employee shall cease to remain in the employ of Salant
for any reason other than
the wrongful discharge of the Employee or other substantial
breach of this Agreement by
Salant, the Employee will not, for a period commencing with the
date of such termination of
employment and concluding on December 31, 2001, without express
written approval in each
case of the Board of Directors of Salant (or any corporation
succeeding to a substantial
portion of its assets), engage, or be otherwise directly or
indirectly interested, (i) as an
individual, (ii) as a director, officer, employee, consultant,
independent contractor or other
similar capacity, (iii) by acting through or with any other
person, firm or corporation, or (iv)
by owning any stock or having any other interest in such a
business other than a corporation
listed on a national securities exchange in which the Employee
and members of his family,
directly or indirectly, own less than 1% of the outstanding
stock, in the business of
manufacturing and/or selling men's shirts, ties, scarves or other
neckwear items, belts,
suspenders and small leather goods (hereinafter called the
"Products") anywhere in the United
States of America, its territories and possessions, or sell or
solicit orders for the Products
from any customer, either for himself or on behalf of any other
person, firm, partnership,
association or corporation."
Section 11(c) is hereby deleted in its entirety and is
substituted with the following
therefore:
"(c) Further Payments.
(i) In the event that the Employment Period hereunder
is terminated because
of death or disability of the Employee as provided in (a) or (b)
above, Salant agrees to pay
the Employee or his estate (i) any sums accrued but unpaid as of
the date of termination of
the Employment Period; and (ii) the sum of $50,000 a year, in
equal monthly installments on
the last day of each month, for a period of five (5) years
commencing on the date of such
termination of the Employment Period. If such termination is
caused by the disability of the
Employee, such payment shall only be made so long as the Employee
continues to comply
with the noncompetition agreement contained in Section 9, hereof.
(ii) In the event that the Consulting Period hereunder
is terminated because of
death or disability of the Employee as provided in (a) or (b)
above, Salant agrees to pay the
Employee or his estate (i) any sums accrued but unpaid as of the
date of termination of the
Consulting Period; and (ii) the sum of $50,000 a year, in equal
monthly installments on the
last day of each month, for the remaining balance of the
Consulting Period had it not been so
terminated. If such termination is caused by the disability of
the Employee, such payments
shall only be made so long as the Employee continues to comply
with the noncompetition
agreement contained in Section 9 hereof."
Section 12(a) is hereby deleted in its entirety and is
substituted with the following
therefore:
"12. Change in Control.
(a) In the event of a "change in control" of Salant
(defined in accordance with
Section 12(b) below) during the Employment Period (but not during
the Consulting Period)
and if Employee is not then in material default in the
performance of his obligations under
this Agreement, Employee shall have the right to elect to
terminate his obligation to render
services under this Agreement by notice in writing to Salant. In
the event he elects to do so,
Salant shall pay the Employee, as severance pay, in a lump sum
(on the later of the date of
Employee's termination of employment or five days after the
delivery to Salant of Employee's
written notice of his election to terminate his employment) the
salary (not including bonus or
the value of any fringe benefits) to be paid for the remainder of
the Employment Period (and
not including the Consulting Period), but in no event less than
the salary (not including bonus
or the value of any fringe benefits) for six months. In the
event Employee elects to terminate
the Employment Period under this Section 12, there shall then
commence, for a five (5) year
period, the Consulting Period, as to which the provisions of
Sections 7 and 9 above shall
apply.
(b) The "change in control" that shall be the
precondition for the exercise of
the Employee's rights under this Section 12 shall be defined in
the same manner, and the
Employee's right to terminate his employment shall be exercisable
under the same
circumstances, as shall be provided for in the employment
contract of Salant's Chief
Executive Officer."
Salant Corporation's address, as referenced in Section 16 of
the Employment
Agreement is hereby deleted in its entirety and substituted with
the following therefore:
"Salant Corporation
1114 Avenue of the Americas, 36th Floor
New York, New York 10036
Attention: Todd Kahn, Esq."
Except as specifically set forth herein, the Employment Agreement
remains in full force and
effect and is hereby ratified, confirmed and approved. The
Employment Agreement, as
modified by this letter, is the only agreement that governs the
terms of your employment.
Effective January 1, 1995, all other letters, agreements and
memorandum are hereby null and
void.
If the foregoing correctly sets forth our mutual agreement,
please sign and return to me the
attached copies of this letter.
Very truly yours,
SALANT CORPORATION
By: /s/ Nicholas P. DiPaolo
Nicholas P. DiPaolo
Chairman of the Board,
President and CEO
Accepted and Agreed To:
By: /s/ Herbert R. Aronson
Herbert R. Aronson
Date: 10/21/94
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> QTR-3 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-END> OCT-01-1994 OCT-01-1994
<CASH> 1,700 1,700
<SECURITIES> 0 0
<RECEIVABLES> 79,802 79,802
<ALLOWANCES> (9,925) (9,925)
<INVENTORY> 125,918 125,918
<CURRENT-ASSETS> 201,443 201,443
<PP&E> 64,843 64,843
<DEPRECIATION> (37,145) (37,145)
<TOTAL-ASSETS> 310,670 310,670
<CURRENT-LIABILITIES> 100,247 100,247
<BONDS> 108,251 108,251
<COMMON> 15,242 15,242
0 0
0 0
<OTHER-SE> 68,648 68,648
<TOTAL-LIABILITY-AND-EQUITY> 310,670 310,670
<SALES> 126,919 307,580
<TOTAL-REVENUES> 128,500 312,043
<CGS> 96,830 235,718
<TOTAL-COSTS> 118,028 295,747
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,318 11,658
<INCOME-PRETAX> 6,154 4,638
<INCOME-TAX> 56 195
<INCOME-CONTINUING> 6,098 4,443
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 63
<CHANGES> 0 0
<NET-INCOME> 6,098 4,506
<EPS-PRIMARY> 0 0
<EPS-DILUTED> .4 .3
</TABLE>
August 24, 1994
Salant Corporation
1114 Avenue of the Americas
New York, New York 10036
Re: Amendment to Credit Agreement
with respect to Additional Guarantors
Gentlemen:
Reference is made to the Revolving Credit, Factoring
and Security Agreement, dated as of September 20, 1993, between
The CIT Group/Commercial Services, Inc. and Salant Corporation
(as amended, the "Credit Agreement"). Initially capitalized
terms used not otherwise defined herein shall have their
respective meanings as set forth in the Credit Agreement.
It is hereby agreed effective as of the date hereof
that Section 1.41 of the Credit Agreement as amended in its
entirety to read as follows:
"1.41 'Guarantors' shall mean Clantexport Inc., a
New York corporation, Denton Mills, Inc. a
Delaware corporation, Frost Bros. Enterprises,
Inc., a Texas corporation, Sea Isle Sportswear
Inc., a New York corporation, Vera Licensing, Inc.
a Nevada Corporation, Salant Canada Inc., a
Canadian corporation and J.J. Farmer Clothing
Inc., a Canadian corporation, and each of their
respective successors and assigns".
Except as hereinabove amended, the Credit Agreement
remains in full force and effect in accordance with its terms.
Please indicate your agreement to the foregoing by
executing a copy of this letter where indicated below and return
it to us.
Very truly yours,
The CIT Group/Commercial Services, Inc.
By: /s/ Anthony Lombardi
Title:
AGREED:
Salant Corporation
By:/s/ Todd Kahn
/s/ John Rodgers
Title:
