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 December 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6666
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
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 March 19, 1996, there were outstanding 14,668,010 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
$37,222,078. 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 1996 Annual Meeting of Stockholders is incorporated
by reference in Part III hereof.
<PAGE>
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 Schedule and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction. 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. Salant designs, manufactures, imports and markets to retailers
throughout the United States brand name and private label apparel products
primarily in three product categories: (i) menswear; (ii) children's sleepwear
and underwear; and (iii) other products, as described below. Salant sells its
products to department and specialty stores, national chains, major discounters
and mass volume retailers throughout the United States. (As used herein, the
"Company" includes Salant and its subsidiaries, but excludes Salant's Vera Scarf
division.)
Men's Apparel. The men's apparel business is comprised principally of the Perry
Ellis, Texas Apparel, Thomson, Manhattan Apparel, Accessories, Fashion Shirt and
JJ. Farmer divisions. The Perry Ellis division markets dress shirts and
sportswear under the PERRY ELLIS, PORTFOLIO BY PERRY ELLIS and PERRY ELLIS
AMERICA trademarks. The Texas Apparel division markets men's and boy's jeans
under Sears, Roebuck & Co.'s ("Sears") CANYON RIVER BLUES trademark, various
other private labels and under the PERRY ELLIS AMERICA trademark. The Thomson
division markets slacks primarily under the THOMSON and PERRY ELLIS trademarks
and under various private labels. The Manhattan Apparel division markets dress
shirts and sportswear under the MANHATTAN trademark as well as sportswear under
private label. The Accessories division markets neckwear, belts and suspenders
and the Fashion Shirt division markets dress shirts under a number of different
trademarks, primarily JOHN HENRY. The JJ. Farmer division markets collection
sportswear under the JJ.
FARMER trademark.
Children's Sleepwear and Underwear. The children's sleepwear and underwear
business is conducted by the Company's Children's Apparel Group (the "Children's
Group"). The Children's Group markets licensed character blanket sleepers
primarily using a number of well-known, licensed cartoon characters, such as the
various DISNEY characters. The Children's Group also markets pajamas under the
OSHKOSH B'GOSH trademark, and sleepwear and underwear under the JOE BOXER
trademark.
Other Businesses. The other businesses of the Company consist of (i) the women's
junior apparel business, conducted by the Company's Made in The Shade division
("Made In the Shade") and (ii) a chain of factory outlet stores (the "Stores
division"), through which the Company sells its own products and those of other
apparel manufacturers.
Licensing Income. The Company receives royalty income from the licensing
of certain of its owned trademarks to other manufacturers.
Principal Product Lines. The following table sets forth, for fiscal years 1995
through 1993, the percentage of the Company's total net sales contributed by
each category of product:
<TABLE>
<CAPTION>
Fiscal Year
1995 1994 1993
<S> <C> <C> <C>
Men's Apparel 85% 82% 80%
Children's Sleepwear and Underwear 8% 8% 10%
Other Businesses 7% 10% 10%
</TABLE>
For more detailed information regarding the Company's product categories see
Note 10 to the Consolidated Financial Statements.
Approximately 12% of the Company's net sales in the year ended December 30, 1995
were made to Federated Department Stores, Inc. ("Federated"), which includes all
1995 net sales to Macy's Department Stores ("Macy's"), which was acquired by
Federated in 1994, and the Broadway Stores, Inc. ("Broadway"), which was
acquired by Federated in February 1996. In 1994 and 1993, net sales to a
combined Federated/Macy's and Broadway would have represented approximately 15%
and 12% of the Company's net sales, respectively. In 1995, approximately 11% of
the Company's net sales were made to TJX Corporation ("TJX"), which includes all
1995 net sales to Marshall's Corporation ("Marshall's"), which was acquired by
TJX in February 1996. In 1994 and 1993, net sales to a combined TJX/Marshall's
would have represented approximately 11% and 12% of the Company's net sales,
respectively. No other customer accounted for more than 10% of the Company's net
sales during 1995, 1994 or 1993.
In 1995, approximately 13% of the Children's Group's net sales were made to
various divisions of the Dayton Hudson Corporation. In addition, approximately
16% of the Children's Group net sales were equally divided between two
customers: JC Penney Company and WalMart Stores, Inc. In 1995, approximately 19%
of the net sales of Other Businesses were made to JC Penney Company.
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 73% of the Company's net sales for 1995 was attributable
to products sold under Company owned or licensed 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 owned or licensed trademarks under which the Company's products were
sold in 1995 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>
<PAGE>
Trademark Product Lines
<S> <C>
BATMAN * Children's sleepwear
DISNEY Characters *.............................................. Children's sleepwear and underwear
DR. DENTON....................................................... Children's sleepwear and underwear
GANT *........................................................... Men's dress shirts, neckwear, belts and suspenders
JJ. FARMER....................................................... Men's and women's sportswear
JOE BOXER *...................................................... Children's sleepwear and underwear
JOHN HENRY....................................................... Men's dress shirts, neckwear, belts and suspenders; men's 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
NINO CERRUTI *................................................... Men's dress shirts and neckwear
OSH KOSH B'GOSH *................................................ Children's sleepwear
PEANUTS *........................................................ Men's dress shirts, neckwear and suspenders
PERRY ELLIS *.................................................... Men's sportswear, dress shirts, neckwear, belts and suspenders
PERRY ELLIS AMERICA *............................................ Men's casual sportswear and jeans
PORTFOLIO BY PERRY ELLIS *....................................... Men's dress slacks, dress shirts, neckwear, belts and suspenders
POWER RANGERS *.................................................. Children's sleepwear and underwear
RON CHERESKIN *.................................................. Men's dress shirts
SALTY DOG *...................................................... Men's dress shirts, neckwear, belts and suspenders
SAVE THE CHILDREN *.............................................. Men's neckwear and suspenders
THOMSON.......................................................... Men's casual and dress slacks and dress shirts
UNICEF *......................................................... Men's neckwear
WORLD WILDLIFE FUND *............................................ Men's t-shirts and neckwear
</TABLE>
During 1995, approximately 31% 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 MANHATTAN label accounted for
approximately 10% of the Company's net sales during 1995; these products are
marketed primarily through mass volume retailers. Products sold under the JOHN
HENRY label accounted for approximately 8% of the Company's net sales during
1995; these products are marketed primarily through department and specialty
stores. Products sold to Sears under its exclusive brand CANYON RIVER BLUES
accounted for 8% of the Company's net sales during 1995. Products sold under the
THOMSON label accounted for approximately 5% of the Company's net sales during
1995; 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 1995.
Trademarks Owned by the Company and Related Licensing Income. The Company
owns the DR. DENTON, JJ. FARMER, JOHN HENRY, LADY MANHATTAN,
MADE IN THE SHADE, MANHATTAN and THOMSON 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
and Trademark 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 1995, licenses were outstanding to approximately 63 licensees to make or sell
apparel products and accessories in the United States and to 36 licensees in 28
other countries under the MANHATTAN, LADY MANHATTAN, JOHN HENRY and VERA
trademarks, which produced royalty income of approximately $6.6 million in 1995.
Products under license include men's activewear, dress shirts, gloves, hats,
leather accessories, neckwear, optical frames, outerwear, pajamas, robes,
scarves, slacks, socks, sportcoats, sportshirts, sunglasses, sweaters, swimwear
and underwear, and women's blouses and tops, handbags, intimate apparel,
lingerie, optical frames, pants, scarves, shirts and socks.
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
Company also has rights of first refusal worldwide for any new licenses granted
by PEI for men's apparel and accessories.
The Company is also a licensee of various trademarks, including BATMAN, GANT,
LIBERTY OF LONDON, NINO CERRUTI, OSH KOSH B'GOSH, PEANUTS, RON CHERESKIN, SALTY
DOG, SAVE THE CHILDREN, WORLD WILDLIFE FUND, certain DISNEY characters, POWER
RANGERS, JOE BOXER and UNICEF, for various categories of products under license
agreements expiring between 1996 and 2003.
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, if it so desires, the term of any material licenses when they expire.
Design and Manufacturing. Products sold by the Company's various divisions are
manufactured to the designs and specifications (including fabric selections) of
designers employed by those divisions. In limited cases, the Company's designers
may receive input from one or more of the Company's licensors on general themes
or color palettes.
During 1995, approximately 18% 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 78% of its domestic-made products and 26% of its foreign-made
products; the balance in each case was attributable to unaffiliated contract
manufacturers. In 1995, approximately 42% of the Company's foreign production
was manufactured in Mexico, approximately 12% was manufactured in the Dominican
Republic and approximately 11% was manufactured in Guatemala.
The Company's foreign sourcing operations are subject to various risks of doing
business abroad, including currency fluctuations (although the predominant
currency used is the U. S. dollar), quotas and, in certain parts of the world,
political instability. Although the Company's operations have not been
materially adversely 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) has benefited the Company by (i) reducing and/or eliminating United
States Customs duties on merchandise manufactured in the Company's leased
facilities in Mexico, (ii) eliminating quotas on this merchandise, and (iii)
eliminating restrictions on the export of merchandise from the United States for
sale in both Mexico and Canada. Also, the devaluation in 1995 of the Mexican
peso against the U.S. dollar benefited the Company as a result of employees
being paid in Mexican pesos which the Company purchases with U.S. dollars.
However, the benefit of the devaluation (gross amount of $5.0 million) was
offset by increased expenses relating to the devaluation in Mexico; the
estimated net benefit was $2.5 million.
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.
Substantially all of the Company's foreign purchases are denominated in U.S.
currency. No single supplier accounted for more than 10% of Salant's raw
material purchases during 1995. The Company has not engaged in financial
activities through the use of derivatives or otherwise to hedge or diminish
currency risks or fluctuations.
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 designed as
much as one year in advance and 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 the Company's computers. As
a result, orders are placed closer to the required delivery date than had been
the case prior to EDI technology. As of March 2, 1996, the Company's backlog of
orders was approximately $114 million, 17% less than the backlog of orders of
approximately $137 million that existed as of March 4, 1995. This decrease is
primarily related to a planned shift in the focus of sales of men's slacks, away
from branded and private label sales and toward sales under the PERRY ELLIS
trademark.
Employees. As of the end of 1995, the Company employed approximately 4,200
persons, of whom 3,600 were engaged in manufacturing and distribution 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 expire between
August 31, 1996 and November 30, 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.
Many of the Company's competitors have greater financial resources than the
Company. 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.
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
"Reorganization Plan"). The Reorganization Plan was consummated on September 20,
1993 (the "Consummation Date"), as further described in Item 3. Legal
Proceedings and in Note 18 to the financial statements.
Vera Scarf Division - Discontinued Operation. In February 1995, the Company
discontinued its Vera Scarf division, which imported and marketed women's
scarves under (i) the Company-owned trademarks VERA and ACUTE, (ii) trademarks
licensed to the Company, including PERRY ELLIS, and (iii) retailers' private
labels. The Company closed the Vera Scarf division in 1995. The financial
statements of the Company included in this report treat the Vera Scarf division
as a discontinued operation.
<PAGE>
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 (2), New
York, Tennessee and Texas, four manufacturing facilities located in Mexico, and
six distribution centers located in Georgia, New York, South Carolina (2) and
Texas (2). The Company owns approximately 1,279,000 square feet of space devoted
to manufacturing and distribution and leases approximately 570,000 square feet
of such space. The Company owns approximately 34,000 square feet of combined
office, design and showroom space and leases approximately 172,000 square feet
of such space. The Children's Group has exclusive use of the Tennessee
manufacturing facility, shares one of the Mexican manufacturing facilities with
the Texas Apparel division and has its distribution center in a building in
Texas which it shares with the Texas Apparel division. As of the end of 1995,
the Company's Stores division operated 71 factory outlet stores, comprising
approximately 214,000 square feet of selling space, all of which are leased.
Except as noted above, substantially all of the owned and leased property of the
Company is used in connection with its men's apparel business or general
corporate administrative functions.
The Company believes that its plant and equipment are adequately maintained, in
good operating condition, and are adequate for the Company's present 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' Reorganization Plan.
The Reorganization Plan was consummated on September 20, 1993. From that date
through December 30, 1995 (approximately 27 months), the Company made cash
payments of $8.8 million, issued $111.9 million of new 10-1/2% senior secured
notes, and issued 10.9 million shares of common stock in settlement of certain
undisputed and disputed claims in the chapter 11 proceedings. Salant anticipates
that an additional $4.8 million in cash and an additional 376 thousand shares of
common stock may ultimately be distributed in connection with the resolution of
all remaining claims. Provisions for such distributions had previously been made
in the consolidated financial statements at the time of emergence from the
bankruptcy during the year ended January 1, 1994. The process of resolving
claims is continuing and, pursuant to the Reorganization Plan, remains under the
jurisdiction of the Bankruptcy Court.
(b) Other. The Company is a defendant in several other legal actions. In the
opinion of the Company's management, based upon the advice of the respective
attorneys handling such cases, such actions will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1995, no matter was submitted to a vote of security
holders of Salant by means of the solicitation of proxies or otherwise.
<PAGE>
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 trading 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 quarter of
1995 and 1994 are set forth below. The Company did not declare or pay any
dividends during such 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. As of December 30, 1995, Salant was prohibited from paying
cash dividends by the most restrictive of these provisions.
<TABLE>
<CAPTION>
High and Low Sale Prices Per Share of the Common Stock
Quarter High Low
1995
<S> <C> <C>
Fourth $ 5 7/8 $ 3 3/8
Third 6 3 1/4
Second 4 1/4 2 3/4
First 5 7/8 3 1/4
1994
Fourth $ 6 $ 4 3/8
Third 7 5
Second 8 3/8 6 1/8
First 9 3/8 6 3/4
</TABLE>
On March 19, 1996, there were 1,177 holders of record of shares of Common Stock,
and the closing market price was $4 5/8.
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.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands except share, per share and ratio data)
<TABLE>
<CAPTION>
Dec. 30, Dec. 31, Jan. 1, Jan. 2, Dec. 28,
1995 1994 1994 1993 1991
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
For The Year Ended:
Continuing Operations:
<S> <C> <C> <C> <C> <C>
Net sales $ 501,522 $ 419,285 $ 402,098 $ 411,021 $392,804
Income/(loss) from continuing operations (498) 3,507 7,816 (4,687) (17,731)
Discontinued Operations:
Loss from operations, net of income taxes - (9,639) (589) (1,299) (1,378)
Estimated loss on disposal, net of income taxes - (1,796) - (11,772) -
Reversal of estimated loss on disposal,
net of income taxes - - 11,772 - -
Extraordinary gain (a) 1,000 63 24,707 - -
Net income/(loss)(b) 502 (7,865) 43,706 (17,758) (19,109)
Income/(loss) per share from continuing
operations before extraordinary gain $ (0.03) $ 0.23 $ 1.10 $ (1.35) $ (5.12)
Income/(loss) per share from discontinued
operations - (0.76) 1.57 (3.78) (0.40)
Income per share from extraordinary gain 0.06 - 3.48 - -
Net income/(loss) per share (b) 0.03 (0.53) 6.15 (5.13) (5.52)
Cash dividends per share - - - - -
At Year End:
Current assets $ 160,826 $ 168,411 $157,622 $ 160,146 $159,864
Total assets 255,720 267,216 253,232 259,466 270,651
Current liabilities 63,454 72,163 45,713 55,093 38,091
Long-term debt 110,040 109,908 111,851 - -
Deferred liabilities 11,373 13,479 16,766 2,462 5,833
Liabilities deferred pursuant to chapter 11 cases - - - 266,420 272,977
Working capital 97,372 96,248 111,909 105,053 121,773
Current ratio 2.5:1 2.3:1 3.4:1 2.9:1 4.2:1
Shareholders' equity/(deficiency) $ 70,853 $ 71,666 $ 78,902 $(64,509) $(46,250)
Book value per share $ 4.71 $ 4.78 $ 5.34 $ (18.62) $ (13.37)
Number of shares outstanding 15,041 15,008 14,781 3,463 3,463
</TABLE>
(a) Includes, for the year ended December 30,1995, a gain of $1,000 (6 cents
per share) related to the reversal of excess liabilities previously
provided for the anticipated settlement of claims arising from the Chapter
11 proceeding; for the year ended December 31, 1994, a gain of $63 (no per
share effect) related to the purchase and retirement of a portion of the
Company's 10 1/2% Senior Secured Notes at a price below the principal
amount thereof; and for the year ended January 1, 1994, a gain of $24,707
($3.48 per share) related to the settlement and anticipated settlement of
claims arising from the Chapter 11 proceeding.
(b) Includes, for the year ended December 30, 1995, a provision of $3,550 (24
cents per share; tax benefit not available) for restructuring costs principally
related to (i) fixed asset write-downs at locations to be closed and (ii)
inventory markdowns for discontinued product lines; for the 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 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); and for the 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 certain women's
wear operations, (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.
<PAGE>
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 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
year ended December 30, 1995 with the operating results for the years ended
December 31, 1994 and January 1, 1994. In February 1995, the Company
discontinued its Vera Scarf division. The financial statements included in this
Annual Report, consistent with the 1994 Annual Report, treat the Vera Scarf
division as a discontinued operation, the effect of which is to exclude the
results of operations of the Vera Scarf division from the Company's results from
continuing operations for each year presented. See Note 17 of the Notes to the
Consolidated Financial Statements. 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 for all periods presented
include the results of operations of that division.
<TABLE>
<CAPTION>
(dollars in millions)
For the year ended
December 30, December 31, January 1,
1995 1994 1994
<S> <C> <C> <C>
Net sales $501.5 $419.3 $402.1
Gross profit $103.9 $ 93.2 $ 98.1
Gross margin 20.7% 22.2% 24.4%
Income from continuing operations
before interest, income taxes and
extraordinary gain $19.2 $19.5 $15.6
</TABLE>
Fiscal 1995 Compared with Fiscal 1994
For the 1995 fiscal year, net sales amounted to $501.5 million, a 19.6% increase
over net sales of $419.3 million in fiscal year 1994. The increase was primarily
attributable to significant sales increases in the men's apparel business.
<PAGE>
<TABLE>
<CAPTION>
(dollars in millions)
Net sales and percentage of total Percentage
for the year ended Increase/
December 30, 1995 December 31, 1994 (Decrease)
<S> <C> <C> <C> <C> <C>
Men's Apparel $423.9 85% $343.5 82% 23.4%
Children's Sleepwear and Underwear 39.9 8% 35.5 8% 12.5%
Other Businesses (a) 37.7 7% 40.3 10% (6.5%)
Total $501.5 100% $419.3 100% 19.6%
</TABLE>
(a) Includes the Made in the Shade division (a women's junior sportswear
business) and the Stores division.
Net sales of men's apparel increased $80.4 million, or 23.4%. This increase was
primarily attributable to (a) the introduction of Canyon River Blues, an
exclusive brand program for Sears, Roebuck & Co., which accounted for $41.7
million of the increase, (b) the growth of the Company's Perry Ellis sportswear
business, which increased $18.2 million, or 30.1%, in 1995, (c) an increase in
the Company's dress shirt sales of $11.2 million, or 8.8%, in 1995, and (d) an
increase in sportswear sales by the Manhattan Sportswear division of $6.0
million, or 39.3%, in 1995. Excluding dress shirt net sales under the GANT
label, which was licensed in June 1994, the Company's dress shirt net sales
increased 7.4% in 1995.
Net sales of Children's sleepwear and underwear increased $4.4 million, or
12.5%, in 1995. This increase was primarily a result of the expansion of the JOE
BOXER product line, which began shipping in 1994.
Net sales of the other businesses decreased $2.6 million, or 6.5%, in 1995,
primarily as a result of lower shipments by the Made in the Shade division due
to the lack of orders at acceptable margins.
Gross profit as a percentage of net sales decreased to 20.7% in 1995 from 22.2%
in 1994. The reduction in gross profit as a percentage of net sales was
primarily a result of continuing pressure on selling prices in all product
categories and at all levels of distribution which are, in large part, a result
of the slow retail economy. In addition, certain businesses entered into and
expanded in 1995 (Canyon River Blues and Manhattan Sportswear) yield a lower
gross margin than traditionally earned by the Company's merchandise.
The Company's gross margin was also negatively affected by higher than expected
costs associated with the start-up of the Canyon River Blues program which are
not anticipated to continue in 1996.
<PAGE>
<TABLE>
<CAPTION>
(dollars in millions)
Gross profit and gross margin
for the year ended
December 30, 1995 December 31, 1994
<S> <C> <C> <C> <C>
Men's Apparel $79.1 18.7% $70.9 20.6%
Children's Sleepwear and Underwear 10.8 26.9% 7.9 22.2%
Other Businesses (a) 14.0 37.1% 14.4 35.7%
Total $103.9 20.7% $ 93.2 22.2%
</TABLE>
(a) Includes the Made in the Shade division (a women's junior sportswear
business) and the Stores division.
Selling, general and administrative ("S,G&A") expenses for 1995 amounted to
$85.4 million, or 17.0% of net sales, as compared to $79.3 million, or 18.9% of
net sales, for 1994. The reduced S,G&A expenses as a percentage of net sales
relates, in part, to certain businesses entered into and expanded in 1995 (as
indicated above) which required minimal incremental expenses.
The provision for restructuring of $3.6 million related primarily to the planned
closing in 1996 of a manufacturing facility in Thomson, Georgia, as well as
certain expenses related to the discontinuation of several dress shirt lines,
including Liberty of London, Nino Cerruti and Ron Chereskin. It is anticipated
that additional charges totalling approximately $1.5 to $2.0 million relating to
the closure in Thomson, Georgia will be incurred in 1996.
Income from continuing operations before interest, income taxes and
extraordinary gain as a percentage of net sales decreased to 3.8% in 1995 from
4.6% in 1994. This percentage reduction was primarily a result of the gross
margin decrease, S,G&A expense changes and the provision for restructuring as
discussed above.
<TABLE>
<CAPTION>
(dollars in millions)
Income from continuing operations before
interest, income taxes and extraordinary gain
and percentage of
net sales for the year ended
December 30, 1995 December 31, 1994
<S> <C> <C> <C> <C>
Men's Apparel $ 19.8 4.7% $ 17.4 5.1%
Children's Sleepwear and Underwear 5.2 13.0% 3.1 8.8%
Other Businesses (a) (2.2) (5.9%) (0.5) (1.3%)
22.8 4.5% 20.0 4.8%
Corporate expenses (9.2) (6.2)
Licensing division income 5.6 5.7
Income from continuing
operations before interest, income
taxes and extraordinary gain $ 19.2 3.8% $ 19.5 4.6%
</TABLE>
(a) Includes the Made in the Shade division (a women's junior sportswear
business) and the Stores division.
Net interest expense for 1995 amounted to $19.4 million as compared to $15.6
million in the prior year, an increase of $3.8 million. Of this amount, $2.7
million was attributable to a higher average outstanding loan balance in 1995.
$1.1 million of this increase related to an increase in the weighted average
interest rate on borrowings from 7.8% in 1994 to 9.9% in 1995, of which the
majority related to an increase in the average prime rate.
The loss from continuing operations before extraordinary gain was $0.5 million,
or $0.03 per share, versus income from continuing operations before
extraordinary gain of $3.5 million, or $0.23 per share, a year earlier. At the
end of 1995, the Company had 15,102,000 weighted average common and common
equivalent shares outstanding versus 14,954,000 weighted average common shares
outstanding at the end of the prior year.
For 1994, the Company recognized a charge of $11.4 million, or $0.76 per share
for the discontinuance of the Vera Scarf division (inclusive of approximately
$300 thousand of losses incurred by the division in the first three quarters of
1994). The Vera Scarf division had net sales of $5.1 million in 1994.
In the fourth quarter of 1995, the Company recorded an extraordinary gain of $1
million related to the reversal of excess liabilities previously provided for
the anticipated settlement of claims arising from the chapter 11 proceeding.
As a result of the above, net income for 1995 was $0.5 million, or $0.03 per
share, compared with a net loss of $7.9 million, or
$0.53 per share in 1994.
As of December 30, 1995, there were 15,042,000 shares of the Company's common
stock outstanding. The weighted average number of common and common equivalent
shares outstanding for the 1995 fiscal year was 15,102,000, including 376,000
shares that the Company anticipates will be issued to creditors.
Earnings before interest, taxes, depreciation, amortization, restructuring
charges, discontinued operations and extraordinary gain was $30.5 million in
1995, compared to $27.0 million in 1994, an increase of $3.5 million, or 13.1%.
The Company believes this information is helpful in understanding cash flow from
operations that is available for debt service, taxes and capital expenditures.
This measure is not contained in Generally Accepted Accounting Principles and is
not a substitute for operating income, net income or net cash flows from
operating activities.
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), enacted in
1993, has benefited the Company's business by (i) reducing and/or eliminating
United States Customs duties on merchandise manufactured in the Company's leased
facilities in Mexico, (ii) eliminating quotas on this merchandise, and (iii)
eliminating restrictions on the export of merchandise from the United States for
sale in both Mexico and Canada. Also, the devaluation of the Mexican peso
against the U.S. dollar throughout 1995 benefited the Company as a result of
employees being paid in Mexican pesos which the Company purchases with U.S.
dollars. However, the benefit of the devaluation (gross amount of $5.0 million)
was offset by increased expenses relating to the devaluation in Mexico; the
estimated net benefit was $2.5 million.
Fiscal 1994 Compared with Fiscal 1993
For the 1994 fiscal year, net sales amounted to $419.3 million, a 4.3% increase
over net sales of $402.1 million in fiscal year 1993. The increase was
attributable to significant sales increases in the men's apparel business
achieved by the Company's Perry Ellis, Thomson, Manhattan Apparel and JJ. Farmer
divisions. Manhattan Apparel commenced shipping men's sportswear in September
1993, and JJ. Farmer is a label which was acquired in June 1994. These increases
were partially offset by reductions in net sales of denim-based products and
men's accessories. Notwithstanding the popularity of the casualwear trend in
offices which contributed to a slight decrease in the overall dress shirt
market, the Company's dress shirt net sales increased slightly in 1994 as
compared to 1993. In 1994, the Company signed a new license agreement for dress
shirts to be produced and sold under the GANT label. This label accounted for
net sales of $2.8 million in 1994.
<TABLE>
<CAPTION>
(dollars in millions)
Net sales and percentage of total Percentage
for the year ended Increase/
December 31, 1994 January 1, 1994 (Decrease)
<S> <C> <C> <C> <C> <C>
Men's Apparel $343.5 82% $323.7 80% 6.1%
Children's Sleepwear and Underwear 35.5 8% 39.5 10% (10.1%)
Other Businesses (a) 40.3 10% 38.9 10% 3.7%
Total $419.3 100% $402.1 100% 4.3%
</TABLE>
(a) Includes the Made in the Shade division (a women's junior sportswear
business) and the Stores division.
Gross profit as a percentage of net sales decreased to 22.2% ($93.2 million) in
1994 from 24.4% ($98.1 million) in 1993. The reduction in gross profit as a
percentage of net sales was incurred primarily in men's apparel. The cause of
the reduction was (a) continuing pressure on selling prices, (b) a change in the
Company's mix to lower priced sportswear, which carries a lower gross profit
margin, as a result of the introduction of Manhattan label sportswear late in
the third quarter of 1993, and (c) certain cost increases related to the
introduction of wrinkle-free dress shirts.
<PAGE>
<TABLE>
<CAPTION>
(dollars in millions)
Gross profit and gross margin
for the year ended
December 31, 1994 January 1, 1994
<S> <C> <C> <C> <C>
Men's Apparel $70.9 20.6% $79.1 24.4%
Children's Sleepwear and Underwear 7.9 22.2% 5.8 14.7%
Other Businesses (a) 14.4 35.7% 13.2 34.0%
Total $ 93.2 22.2% $ 98.1 24.4%
</TABLE>
(a) Includes the Made in the Shade division (a women's junior sportswear
business) and the Stores division.
S,G&A expenses for 1994 amounted to $79.2 million, or 18.9% of net sales, as
compared to $73.9 million, or 18.4% of net sales, for 1993. The increase in
S,G&A expenses was primarily attributable to (a) costs of $2.2 million
associated with new product lines (JJ. Farmer which was acquired in June 1994
and Manhattan sportswear, which began shipping in September 1993) and (b)
payroll and occupancy costs of $1.3 million related to an increase in the number
of factory outlet stores in operation in 1994.
Royalty income in 1994 was $6.7 million. During 1993, royalty income was $8.0
million. The decrease in royalty income was primarily the result of the
termination of a significant license agreement in 1993, and the absence of the
related licensing revenue in 1994. The product for which royalties previously
were received became the basis of the Company's Manhattan Sportswear division,
which commenced shipping in the third quarter of 1993. The license for this
product had contributed income of $580 thousand in 1993.
In 1993, the Company recorded a $5.5 million provision for restructuring, which
included $5.0 million related to the restructuring of the Children's Apparel
Group.
Income from continuing operations before interest, income taxes and
extraordinary gain increased as a percentage of net sales from 3.9% in 1993 to
4.6% in 1994. This percentage increase was primarily as a result of the absence
of the provision for restructuring of $5.5 million and the bankruptcy
administration expenses of $8.9 million which were recorded in 1993, as offset
by the lower gross margins achieved in 1994, as discussed above.
<PAGE>
<TABLE>
<CAPTION>
(dollars in millions)
Income from continuing operations before
interest, income taxes and extraordinary gain
and percentage of
net sales for the year ended
December 31, 1994 January 1, 1994
<S> <C> <C> <C> <C>
Men's Apparel $ 17.4 5.1% $ 29.1 9.0%
Children's Sleepwear and Underwear 3.1 8.8% (3.1) (8.1)%
Other Businesses (a) (0.5) (1.3%) (0.4) (1.0)%
20.0 4.8% 25.6 6.4%
Corporate expenses (6.2) (7.5)
Licensing division income 5.7 6.4
Bankruptcy administration expenses -- (8.9)
Income from continuing
operations before interest, income
taxes and extraordinary gain $ 19.5 4.6% $ 15.6 3.9%
</TABLE>
(a) Includes the Made in the Shade division (a women's junior sportswear
business) and the Stores division.
Net interest expense for 1994 amounted to $15.6 million compared to $7.5 million
in the prior year. Until September 20, 1993, Salant was operating under chapter
11 of the Bankruptcy Code and, accordingly, was not accruing interest on its
prepetition debt.
Income from continuing operations before extraordinary gain was $3.5 million, or
$0.23 per share, compared to $7.8 million, or $1.10 per share, a year earlier.
At the end of 1994, the Company had 14,954,000 weighted average shares
outstanding versus 7,104,000 weighted average shares and share equivalents
outstanding at the end of the prior year. The increase in the number of shares
outstanding was related to the Company's emergence from bankruptcy in September
1993.
For 1994, the Company recognized a charge of $11.4 million, or $0.76 per share,
reflecting the discontinuance of the Vera Scarf division (inclusive of
approximately $300 thousand of losses incurred by the division in the first
three quarters of 1994). The Vera Scarf division had net sales of $5.1 million
in 1994.
For 1993, the Company recognized an extraordinary gain of $24.7 million, or
$3.48 per share, related to the Company's emergence from bankruptcy, a loss from
discontinued operations of $589,000, or $0.08 per share, and a reversal of
estimated loss on disposal of discontinued operations of $11.8 million, or $1.65
per share.
As a result of the above, the net loss for 1994 was $7.9 million,
or $0.53 per share, compared with net income of $43.7 million, or
$6.15 per share in 1993.
As of December 31, 1994, there were 14,218,000 shares of the Company's common
stock outstanding, including 10,504,000 shares issued to creditors in connection
with the Company's reorganization, consummated on September 20, 1993. The
weighted average number of shares outstanding for 1994 was 14,954,000 shares,
including 789,000 shares that the Company anticipated would be issued to
creditors.
Earnings before interest, taxes, depreciation, amortization, bankruptcy
administration expenses, restructuring charges, discontinued operations and
extraordinary gain was $27.0 million in 1994, compared to $37.8 million in 1993,
a decrease of $10.8 million, as described above. The Company believes that this
information is helpful in understanding cash flow from operations that is
available for debt service, taxes and capital expenditures. This measure is not
contained in Generally Accepted Accounting Principles and is not a substitute
for operating income, net income or net cash flows from operating activities.
Liquidity and Capital Resources
The Company entered into a revolving credit, factoring and security agreement,
as amended (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 $135 million,
subject to an asset based borrowing formula (the "Maximum Credit"). On March 27,
1996, the Company and CIT executed the Seventh Amendment to the Credit Agreement
(the "Amendment"). The Amendment extends the term of the Credit Agreement to
March 31, 1997 and provides the Company with the ability to cease factoring at
September 20, 1996. The Amendment also increased the Maximum Credit to $135
million during certain periods of 1996, which was consistent with the Maximum
Credit provided in 1995. In addition, the Amendment also modified certain
financial covenants relating to working capital and stockholders' equity. In the
absence of the Amendment, Salant would not have been able to satisfy the
stockholders' equity covenant for its 1995 fiscal year. Interest on direct
borrowings is charged monthly at an annual rate of one percent in excess of the
base rate of Chemical Bank (the "Prime Rate") (which Prime Rate was 8.5% at
December 30, 1995). 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. At the end of 1995, direct borrowings and letters of credit
outstanding under the Credit Agreement were $14.4 million and $31.4 million,
respectively, and the Company had unused availability of $27.5 million. At the
end of 1994, direct borrowings and letters of credit outstanding under the
Credit Agreement were $23.9 million and $50.5 million, respectively, and the
Company had unused availability of $4.1 million.
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, as referenced in Exhibit
4.3. 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, under the Credit
Agreement, 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 December 30, 1995, the Company was in compliance with all
financial covenants as indicated below:
<TABLE>
<CAPTION>
Covenant December 30, 1995
Credit Agreement Covenants Level (a) Actual Level
<S> <C> <C>
Working Capital $ 85.0 million $ 97.4 million
Stockholders' Equity $ 60.0 million $ 70.9 million
Liabilities/Equity less than 3.0 2.6
Fixed Charge Ratio greater than 1.5 1.6
Maximum Loss $(10.0) million positive income
</TABLE>
(a) The covenant levels reflect all modifications in the Credit Agreement made
pursuant to the Amendment.
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 complied
with this covenant for all periods through January 31, 1997.
At the end of 1995, the Company's short term borrowings were $9.5 million lower
than such borrowings at the end of 1994.
The Company's cash flow from operating activities (the Company's primary source
of cash) was $13.5 million. This represented a $36.5 million improvement over
1994 and was primarily a result of asset management improvements primarily
relating to inventory and accounts receivable. The lower inventory balances
resulted from supply and demand process improvements made during the year.
Cash used in 1995 for investing activities was $4.2 million, primarily related
to capital expenditures.
Cash used in financing activities in 1995 was $9.4 million, which represented
repayments of short-term borrowings under the Credit Agreement. Cash flow
generated from operations was used to make these repayments.
Capital expenditures in 1995 amounted to $4.3 million as compared to $4.9
million in 1994. Capital expenditures for 1996 are anticipated to be
approximately $7.7 million.
The Company's business is seasonal in nature. As a result, Salant'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.
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 and the funds available
under the Credit Agreement will be adequate to meet the financing requirements
it anticipates in 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.
Effective in 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits",
which requires the accrual method of accounting for certain of these benefits.
SFAS No. 112 was adopted as a result of the implementation of a formal short
term disability policy for employees. Prior to 1995, the Company recognized the
cost of providing these benefits on a cash basis.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may no longer be
recoverable. Adoption of SFAS No. 121, which is effective for years beginning
after December 15, 1995, is not expected to have a material impact on the
Company.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation". The standard encourages, but does not
require, companies to recognize compensation expense of grants for stock, stock
options and other equity instruments to employees based on fair value accounting
rules. SFAS No. 123 requires companies that choose not to adopt the new fair
value accounting rules to disclose pro forma net income and earnings per share
under the new method. The standard is effective for fiscal years beginning after
December 15, 1995. The Company has not yet determined if it will adopt the
accounting provisions of SFAS No. 123 or only the disclosure provision. However,
the Company does not believe that adoption of SFAS No. 123 will have a
significant effect on its results of operations.
Factors that May Affect Future Results and Financial Condition.
The Company's future operating results and financial condition are dependent on
the Company's ability to successfully design, manufacture, import and market
apparel. Inherent in this process are many factors that the Company must
successfully manage in order to achieve favorable operating results and
financial condition including, without limitation, the following:
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 large number of specialty manufacturers. The Company faces
substantial competition in its markets from manufacturers in both categories.
Many of the Company's competitors have greater financial resources than the
Company.
Apparel Industry Cycles and other Economic Factors. The apparel industry
historically has been subject to substantial cyclical variation, with consumer
spending on apparel tending to decline during recessionary periods. A decline in
the general economy or uncertainties regarding future economic prospects may
affect consumer spending habits, which, in turn, could have a material adverse
effect on the Company's results of operations and its financial condition.
Retail Environment. Various retailers, including some of the Company's
customers, have experienced declines in revenue and profits in recent periods
and some have been forced to file for protection under the Bankruptcy Code. To
the extent that these financial difficulties continue, there can be no assurance
that the Company's financial condition and results of operations would not be
adversely affected.
Seasonality of Business and Fashion Risk. The Company's principal products are
organized into seasonal lines for resale at the retail level during the Spring,
Fall and Christmas Seasons. Typically, the Company's products are designed as
much as one year in advance and manufactured approximately one season in advance
of the related retail selling season. Accordingly, the success of the Company's
products is often dependent on the ability of the Company to successfully
anticipate the needs of the Company's retail customers and the tastes of the
ultimate consumer up to a year prior to the relevant selling season.
Substantial Level of Indebtedness. The Company had indebtedness of $124.5
million as of December 30, 1995. This level of indebtedness could adversely
affect the Company's operations because a substantial portion of the Company's
cash flow from operations must be dedicated to the payment of interest and
would, therefore, not be available for other purposes. Further, this level of
indebtedness might inhibit the Company's ability to obtain financing in the
future for working capital needs, capital expenditures, acquisitions,
investments, general corporate purposes or other purposes.
Foreign Operations. The Company's foreign sourcing operations are subject to
various risks of doing business abroad, including currency fluctuations
(although the predominant currency used is the U.S. dollar), quotas and, in
certain parts of the world, political instability. Any substantial disruption of
its relationship with its foreign suppliers could adversely affect the Company's
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 amount
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 allocation could adversely affect the
Company's operations.
Dependence on Contract Manufacturing. The Company currently produces 64% of all
of its products (in units) through arrangements with independent contract
manufacturers. The use of such contractors and the resulting lack of direct
control could subject the Company to difficulty in obtaining timely delivery of
products of acceptable quality. In addition, as is customary in the industry,
the Company does not have any long-term contracts with its fabric suppliers or
product manufacturers. While the Company is not dependent on one particular
product manufacturer or fabric supplier, the loss of several such product
manufacturers and/or fabric suppliers in a given season could have a material
adverse effect on the Company's performance.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial performance
should not be considered to be a reliable indicator of future performance, and
investors are cautioned not to use historical trends to anticipate results or
trends in the future. In addition, the Company's participation in the highly
competitive apparel industry often results in significant volatility of the
Company's common stock price.
<PAGE>
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 December 30, 1995 and December 31, 1994, and
the related consolidated statements of operations, shareholders'
equity/deficiency and cash flows for the years ended December 30, 1995, December
31, 1994 and January 1, 1994. Our audits also included the financial statement
schedule listed in the index at Item 14(a)(2). These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule 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
December 30, 1995 and December 31, 1994, and the results of their operations and
their cash flows for the years ended December 30, 1995, December 31, 1994 and
January 1, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, the financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
March 20, 1996
(March 27, 1996 as to Note 8)
New York, New York
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Year Ended
December 30, December 31, January 1,
1995 1994 1994
<S> <C> <C> <C>
Net sales $ 501,522 $ 419,285 $ 402,098
Cost of goods sold 397,630 326,059 303,989
Gross profit 103,892 93,226 98,109
Selling, general and administrative expenses (85,372) (79,273) (73,944)
Royalty income 6,606 6,699 8,040
Goodwill amortization (2,575) (2,376) (2,194)
Other income/(expense) 244 1,196 (70)
Division restructuring costs (Note 2) (3,550) -- (5,500)
Bankruptcy administration expenses -- -- (8,861)
Income from continuing operations before interest,
income taxes and extraordinary gain 19,245 19,472 15,580
Interest expense, net (Notes 8 and 9) 19,425 15,617 7,523
Income/(loss) from continuing operations
before income taxes and extraordinary gain (180) 3,855 8,057
Income taxes (Note 11) 318 348 241
Income/(loss) from continuing operations
before extraordinary gain (498) 3,507 7,816
Discontinued operations (Notes 17 and 19):
Loss from operations -- (9,639) (589)
Estimated loss on disposal -- (1,796) --
Reversal of estimated loss on disposal -- -- 11,772
Extraordinary gain (Notes 3 and 9) 1,000 63 24,707
Net income/(loss) $ 502 $ (7,865) $ 43,706
Earnings/(loss) per share:
Income/(loss) per share from continuing
operations before extraordinary gain $ (0.03) $ 0.23 $ 1.10
Income from reversal of estimated loss on disposal of
discontinued operations -- -- 1.65
Loss per share from discontinued operations -- (0.76) (0.08)
Extraordinary gain 0.06 -- 3.48
Net income/(loss) per share $ 0.03 $ (0.53) $ 6.15
Weighted average common stock outstanding 15,102 14,954 7,104
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 30, December 31,
1995 1994
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,400 $ 1,965
Accounts receivable - net of allowance for doubtful accounts
of $3,007 in 1995 and $2,565 in 1994 (Notes 8 and 9) 35,290 36,583
Inventories (Notes 4 and 8) 119,120 124,599
Prepaid expenses and other current assets 5,016 5,264
Total current assets 160,826 168,411
Property, plant and equipment, net (Notes 5 and 8) 24,526 27,460
Other assets (Notes 6, 9 and 11) 70,368 71,345
$ 255,720 $ 267,216
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable 14,422 $ 23,906
Accounts payable 26,755 28,593
Reserve for business restructuring (Note 2) 1,569 --
Accrued salaries, wages and other liabilities (Note 7) 20,397 18,848
Net liabilities of discontinued operations (Note 17) 311 816
Total current liabilities 63,454 72,163
Long term debt (Notes 9 and 16) 110,040 109,908
Deferred liabilities (Note 14) 11,373 13,479
Commitments and contingencies (Notes 6, 8, 9, 11, 12, 13 and 15)
Shareholders' equity (Note 13): Preferred stock, par value $2 per share:
Authorized 5,000 shares; none issued -- --
Common stock, par value $1 per share:
Authorized 30,000 shares; 15,275 15,242
issued and issuable - 15,275 shares in 1995;
issued and issuable - 15,242 shares in 1994
Additional paid-in capital 107,071 107,017
Deficit (47,824) (48,326)
Excess of additional pension liability over
unrecognized prior service cost adjustment (Note 12) (2,185) (773)
Accumulated foreign currency translation adjustment 130 120
Less - treasury stock, at cost - 234 shares (1,614) (1,614)
Total shareholders' equity 70,853 71,666
$ 255,720 $ 267,216
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY/(DEFICIENCY)
(Amounts in thousands)
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 January 2, 1993 3,698 $3,698 $17,702 $(84,167) $(353) $225 234 $(1,614) $(64,509)
Stock options exercised 24 24 90 114
Shares issued and issuable
in settlement of claims 11,294 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)
Balance at January 1, 1994 15,016 15,016 106,726 (40,461) (986) 221 234 (1,614) 78,902
Stock options exercised 226 226 291 517
Net loss (7,865) (7,865)
Excess of additional pension
liability over unrecognized
prior service cost adjustment 213 213
Foreign currency translation
adjustments (101) (101)
Balance at December 31, 1994 15,242 15,242 107,017 (48,326) (773) 120 234 (1,614) 71,666
Stock options exercised 33 33 54 87
Net income 502 502
Excess of additional pension
liability over unrecognized
prior service cost adjustment (1,412) (1,412)
Foreign currency translation
adjustments 10 10
Balance at December 30, 1995 15,275 $15,275 $107,071$(47,824) $ (2,185) $ 130 234 $(1,614) $70,853
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
SALANT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended
December 30, December 31, January 1,
1995 1994 1994
Cash Flows from Operating Activities
<S> <C> <C> <C>
Income/(loss) from continuing operations $ (498) $ 3,507 $ 7,816
Adjustments to reconcile income from continuing operations to net cash provided
by/(used in) operating activities:
Depreciation 5,116 5,113 5,619
Amortization of intangibles 2,575 2,376 2,194
Write-down of fixed assets 1,850 -- 2,095
Loss on sale of fixed assets 132 -- --
Changes in operating assets and liabilities:
Accounts receivable 1,293 (11,965) (1,987)
Inventories 5,479 (19,262) 844
Prepaid expenses and other current assets 248 (947) (378)
Other assets (1,646) (1,302) 48
Accounts payable (1,838) 6,869 266
Accrued salaries, wages and other liabilities (191) (5,786) 5,941
Reserve for business restructuring 1,569 (2,038) (3,042)
Deferred liabilities (598) 330 398
Net cash provided by/(used in) operating activities 13,491 (23,105) 19,814
Cash Flows from Investing Activities
Capital expenditures, net (4,286) (4,926) (8,153)
Acquisition -- (5,720) --
Proceeds from sale of assets 122 294 795
Net cash used in investing activities (4,164) (10,352) (7,358)
Cash Flows from Financing Activities
Net short-term borrowings/(repayments) (9,484) 36,516 --
Repayment of pre-petition secured debt -- -- (15,940)
Retirement of long-term debt -- (3,537) --
Exercise of stock options 87 517 65
Other, net 10 (101) (254)
Net cash (used in)/provided by financing activities (9,387) 33,395 (16,129)
Net cash used in continuing operations (60) (62) (3,673)
Cash used in discontinued operations (505) (119) (304)
Net decrease in cash and cash equivalents (565) (181) (3,977)
Cash and cash equivalents - beginning of year 1,965 2,146 6,123
Cash and cash equivalents - end of year $ 1,400 $ 1,965 $ 2,146
</TABLE>
<TABLE>
<CAPTION>
Supplemental disclosures of cash flow information: Cash paid during the year
for:
<S> <C> <C> <C>
Interest $ 20,280 $ 16,150 $ 3,847
Income taxes $ 331 $ 674 $ 206
</TABLE>
Conversion of accounts payable, accrued expenses,
long-term debt and deferred liabilities to liabilities
deferred pursuant to chapter 11 cases $ 1,515
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
See Notes to Consolidated Financial Statements
<PAGE>
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. (As used herein, the "Company" includes Salant and
its subsidiaries but excludes Salant's Vera Scarf division.) In February 1995,
Salant discontinued its Vera Scarf division. As further described in Note 17,
the Consolidated Financial Statements and the Notes thereto reflect the Vera
Scarf division as a discontinued operation, and the financial results of the
Vera Scarf division are not included in the presentation of income/(loss) from
continuing operations. In addition, the net liabilities of the discontinued Vera
Scarf division operations have been separately classified in the Consolidated
Balance Sheets. Significant intercompany balances and transactions are
eliminated in consolidation.
The Company's principal business is the designing, manufacturing, importing and
marketing of apparel. The Company sells its products to retailers, including
department and specialty stores, national chains, major discounters and mass
volume retailers, throughout the United States.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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, Inc. (the "Reorganization Plan"). The Reorganization Plan was consummated
on September 20, 1993 (the "Consummation Date"), as further described in Note
18.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31. The 1995,
1994 and 1993 fiscal years were each comprised of 52 weeks.
<PAGE>
Reclassifications
Certain reclassifications were made to the 1994 and 1993 Consolidated Financial
Statements to conform with the 1995 presentation.
Cash and Cash Equivalents
The Company considers cash on hand and deposits in banks as cash and cash
equivalents for the purposes of the statements of cash flows.
Accounts Receivable
The Company has entered into an agreement with a factor, as further described in
Note 8, whereby it sells, without recourse, certain eligible accounts
receivable. The credit risk for such accounts is thereby transferred to the
factor. The amounts due from the factor have been offset against advances from
the factor in the accompanying balance sheets. The amounts which have been
offset were $33,792 at December 30, 1995 and $9,324 at December 31, 1994. This
increase in the amounts which have been offset results from a change in the
agreement with the factor.
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.
<TABLE>
<CAPTION>
The annual depreciation rates used are as follows:
<S> <C> <C>
Buildings and improvements 2.5% - 10.0%
Machinery, equipment and autos 6.7% - 33.3%
Furniture and fixtures 10.0% - 50.0%
Leasehold improvements Over the life of the asset or the term of the lease, whichever is
shorter
</TABLE>
<PAGE>
Other Assets
Intangible assets are being amortized on a straight-line basis over their
respective useful lives. Costs in excess of fair value of net assets acquired,
which relate to the acquisition of the net assets of Manhattan Industries, Inc.
("Manhattan") and JJ. Farmer Clothing, Inc. are assessed for recoverability on
an annual basis. In evaluating the value and future benefits of these intangible
assets, their carrying value would be reduced by the excess, if any, of the
intangibles over management's best estimate of undiscounted future operating
income of the acquired businesses before amortization of the related intangible
assets over the remaining amortization period. Intangible assets are being
amortized over periods ranging from 7 1/2 to 40 years.
Fair Value of Financial Instruments
For financial instruments, including cash and cash equivalents, accounts
receivable and payable, and accruals, it was assumed that the carrying amount
approximated fair value because of their short maturity. Long-term debt, which
was issued at the market rate of interest, currently trades at approximately 85%
of the principal amount.
Income/(Loss) Per Share
Income/(loss) per share is based on the weighted average number of common shares
(including, as of December 30, 1995, 375,889 shares anticipated to be issued
pursuant to the Reorganization Plan) and common stock equivalents outstanding,
if applicable. Loss per share for 1994 did not include common stock equivalents,
inasmuch 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.
Accounting Changes
Effective in 1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits,"
which requires the accrual method of accounting for certain of these benefits.
SFAS No. 112 was adopted as a result of the implementation of a formal short
term disability policy for employees. Prior to 1995, the Company recognized the
cost of providing these benefits on a cash basis.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may no longer be
recoverable. Adoption of SFAS No. 121, which is effective for years beginning
after December 15, 1995, is not expected to have a material impact on the
Company.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation". The standard encourages, but does not
require, companies to recognize compensation expense of grants for stock, stock
options and other equity instruments to employees based on fair value accounting
rules. SFAS No. 123 requires companies that choose not to adopt the new fair
value accounting rules to disclose pro forma net income and earnings per share
under the new method. The standard is effective for fiscal years beginning after
December 15, 1995. The Company has not yet determined if it will adopt the
accounting provisions of SFAS No. 123 or only the disclosure provision. However,
the Company does not believe that adoption of SFAS No. 123 will have a
significant effect on its results of operations.
Note 2. Restructuring Costs
In the fourth quarter of 1995, the Company recorded a $3,550 restructuring
provision, which included (i) fixed asset write-downs at locations to be closed
and (ii) inventory markdowns for discontinued product lines.
In the fourth quarter of 1993, the Company recorded a $5,500 restructuring
provision, of which $5,000 related to the restructuring of the Children's
Apparel Group, as more fully described in Note 19.
Note 3. Extraordinary Gain
In the fourth quarter of 1995, the Company recorded an extraordinary gain of
$1,000 related to the reversal of excess liabilities previously provided for the
anticipated settlement of claims arising from the chapter 11 proceeding.
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.
<TABLE>
<CAPTION>
Note 4. Inventories
December 30, December 31,
1995 1994
<S> <C> <C>
Finished goods $ 72,850 $ 70,882
Work-in-process 15,829 28,298
Raw materials and supplies 30,441 25,419
$119,120 $124,599
</TABLE>
Finished goods inventory includes in transit merchandise of $6,500 at December
30, 1995 and December 31, 1994.
<PAGE>
<TABLE>
<CAPTION>
Note 5. Property, Plant and Equipment
December 30, December 31,
1995 1994
<S> <C> <C>
Land and buildings $ 14,779 $ 16,808
Machinery, equipment, furniture
and fixtures 40,347 40,794
Leasehold improvements 8,315 5,958
Property held under capital leases 1,345 1,345
64,786 64,905
Less accumulated depreciation and amortization 40,260 37,445
$ 24,526 $ 27,460
</TABLE>
<TABLE>
<CAPTION>
Note 6. Other Assets
December 30, December 31,
1995 1994
Excess of cost over net assets acquired,
net of accumulated amortization of
<S> <C> <C>
$12,014 in 1995 and $10,059 in 1994 $50,641 $52,542
Trademarks and license agreements,
net of accumulated amortization of
$3,274 in 1995 and $2,795 in 1994 14,588 15,067
Leasehold interests, net of accumulated
amortization of $965 in 1995 and $823
in 1994 1,478 1,620
Other 3,661 2,116
$70,368 $71,345
</TABLE>
In June 1994, the Company entered into various licensing agreements for dress
shirts and men's accessories using the trademarks GANT and SALTY DOG. As part of
these agreements, the Company purchased inventory from the licensor, made
advance royalty payments to the licensor, and is required to make future minimum
royalty payments.
<TABLE>
<CAPTION>
Note 7. Accrued Salaries, Wages and Other Liabilities
December 30, December 31,
1995 1994
<S> <C> <C>
Accrued salaries and wages $ 3,268 $ 3,721
Accrued pension and retirement benefits 3,737 1,791
Accrued royalties 1,716 1,852
Accrued interest 3,716 3,716
Other accrued liabilities 7,960 7,768
$ 20,397 $ 18,848
</TABLE>
<PAGE>
Note 8. Financing and Factoring Agreements
The Company entered into a revolving credit, factoring and security agreement,
as amended (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 $135,000, subject to an asset based
borrowing formula (the "Maximum Credit"). On March 27, 1996, the Company and CIT
executed the Seventh Amendment to the Credit Agreement (the "Amendment"). The
Amendment extends the term of the Credit Agreement to March 31, 1997 and
provides the Company with the ability to cease factoring at September 20, 1996.
The Amendment also increased the Maximum Credit to $135,000 during certain
periods of 1996, which was consistent with the Maximum Credit provided in 1995.
In addition, the Amendment also modified certain financial covenants relating to
working capital and stockholders' equity. In the absence of the Amendment,
Salant would not have been able to satisfy the stockholders' equity covenant for
its 1995 fiscal year. As of December 30, 1995 and December 31, 1994, $27,500 and
$4,085, respectively, was available under this facility. Interest on direct
borrowings is charged monthly at an annual rate of one percent in excess of the
base rate of Chemical Bank (the "Prime Rate") (8.5% at December 30, 1995). 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
December 30, 1995 and December 31, 1994, direct borrowings were $14,422 and
$23,906, respectively. As of December 30, 1995 and December 31, 1994, letters of
credit outstanding under the Credit Agreement were $31,415 and $50,515,
respectively. The weighted average interest rate on borrowings under the Credit
Agreement for the years ended December 30, 1995 and December 31, 1994 was 9.9%
and 7.8%, 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 December 30, 1995, Salant was in compliance with
all financial covenants, as contained in the Credit Agreement.
Note 9. 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 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 4.2% in 1996 to 2.1% in 1997
and to 0% in 1998. The Secured Notes are secured by a first lien (subordinated
to the lien securing borrowings under 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.
<PAGE>
The Secured Notes contain various restrictions pertaining to the incurrence of
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.
In May 1994, the Company purchased and retired $3,600 of the Secured Notes 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 in
1994.
Note 10. Segment Information and Significant Customers
The Company's principal business is the designing, manufacturing, importing and
marketing of apparel. The Company sells its products to retailers, including
department and specialty stores, national chains, major discounters and mass
volume retailers, throughout the United States. As an adjunct to its apparel
manufacturing operations, the Company operates 71 factory outlet stores in
various parts of the United States. Foreign operations are not significant.
These products have been classified in the following industry segments: (i)
men's apparel, (ii) children's sleepwear and underwear and (iii) other products,
consisting of women's junior apparel and retail factory outlet store operations.
Information concerning the Company's business segments in 1995, 1994 and 1993 is
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
NET SALES
<S> <C> <C> <C>
Men's Apparel $423,894 $343,455 $323,742
Children's Sleepwear and Underwear 39,936 35,513 39,493
Other Businesses 37,692 40,317 38,863
Total net sales $501,522 $419,285 $402,098
OPERATING INCOME
Men's Apparel $ 19,819 $ 17,366 $ 29,134
Children's Sleepwear and Underwear 5,184 3,119 (3,189)
Other Businesses (2,205) (522) (395)
22,798 19,963 25,550
Corporate expenses (9,176) (6,171) (7,487)
Licensing division income 5,623 5,680 6,378
Bankruptcy administration expenses -- -- (8,861)
Interest expense, net (19,425) (15,617) (7,523)
Income/(loss) from continuing
operations before income taxes
and extraordinary gain $ (180) $ 3,855 $ 8,057
<PAGE>
IDENTIFIABLE ASSETS
Men's Apparel $170,203 $161,751 $120,353
Children's Sleepwear and Underwear 16,349 14,273 16,656
Other Businesses 20,179 18,092 17,032
Corporate 48,989 73,100 86,680
Total identifiable assets $255,720 $267,216 $240,721
CAPITAL EXPENDITURES
Men's Apparel 1,389 $ 2,629 $ 6,072
Children's Sleepwear and Underwear 492 435 212
Other Businesses 584 1,140 1,109
Corporate 1,821 722 760
Total capital expenditures $ 4,286 $ 4,926 $ 8,153
DEPRECIATION AND AMORTIZATION
Men's Apparel $ 2,534 $ 2,549 $ 1,876
Children's Sleepwear and Underwear 345 311 662
Other Businesses 514 473 481
Corporate 4,298 4,156 4,794
Total depreciation and amortization $ 7,691 $ 7,489 $ 7,813
</TABLE>
Approximately 12% of the Company's net sales in the year ended December 30, 1995
were made to Federated Department Stores, Inc. ("Federated") which includes all
1995 net sales to The Broadway Stores, Inc., ("Broadway") which was acquired by
Federated in February 1996. In 1994 and 1993, net sales to Federated, including
all net sales to Broadway and to Macy's Department Stores ("Macy's"), which was
acquired by Federated in 1994, represented approximately 15% and 12% of the
Company's net sales, respectively. In 1995, approximately 11% of the Company's
net sales were made to TJX Corporation ("TJX"), which includes all 1995 net
sales to Marshall's Corporation ("Marshall's"), which was acquired by TJX in
February 1996. In 1994 and 1993, net sales to TJX, including all net sales to
Marshall's, represented approximately 11% and 12% of the Company's net sales,
respectively. In 1995, approximately 13% of the Children's Group's net sales
were made to various divisions of the Dayton Hudson Corporation. In addition, in
1995 approximately 16% of the Children's Group net sales were equally divided
between two customers: JC Penney Company and WalMart Stores, Inc. In 1995,
approximately 19% of the net sales of Other Businesses were made to JC Penney
Company. No other customer accounted for more than 10% of the Company's net
sales during 1995, 1994 or 1993.
<PAGE>
Note 11. Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
December 30, December 31, January 1,
1995 1994 1994
Current:
<S> <C> <C> <C>
Federal $ 100 $ 100 $ --
State -- 20 32
Foreign 218 228 209
$ 318 $ 348 $ 241
</TABLE>
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>
1995 1994 1993
<S> <C> <C> <C>
Income tax provision/(benefit), at 34% $ (61) $ 1,097 $ 2,543
Loss producing no current tax benefit 61
Utilization of net operating loss
carryforward (1,097) (2,543)
Alternative minimum tax 100 100
State, local and foreign taxes 218 248 241
Income tax provision $ 318 $ 348 $ 241
</TABLE>
The adoption of SFAS No. 109, as of January 3, 1993, 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.
<PAGE>
The tax effects of significant items comprising the Company's net deferred
tax asset consists of the following:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
Deferred tax liabilities:
<S> <C> <C>
Differences between book and tax basis of property $ (6,253) $ (6,090)
Deferred tax assets:
Reserves not currently deductible 17,155 16,862
Operating loss carryforwards 43,182 43,873
Tax credit carryforwards 3,055 2,992
Expenses capitalized into inventory 4,959 5,857
68,351 69,584
Net deferred asset 62,098 63,494
Valuation allowance (62,098) (63,494)
Net deferred tax asset $ -- $ --
</TABLE>
At December 30, 1995, the Company had net operating loss carryforwards ("NOLs")
for income tax purposes of approximately $105,000, which can be used to offset
future taxable income, expiring from 1999 to the year 2008. Approximately
$51,000, which arose from the acquisition of Manhattan in April 1988, will
offset goodwill when utilized. The implementation of the Reorganization Plan and
transactions that have occurred within the three-year period preceding the
consummation of the Reorganization Plan have caused an "ownership change" for
federal income tax purposes as of the date the Reorganization Plan was
consummated. As a result of such ownership change, the use of the NOLs to offset
future taxable income has been limited by the requirements of section 382 of the
Internal Revenue Code of 1986, as amended. The annual limit under section 382 is
approximately $7,200 over a fifteen year carryover period. Upon consummation of
the Reorganization Plan, the Company realized cancellation of indebtedness
income of approximately $917 and the NOLs have been reduced or limited
accordingly.
In addition, at December 30, 1995, the Company had available investment tax and
other credits of $3,092 which expire between 1996 and 1999, of which $1,986 will
reduce goodwill and the balance will reduce income tax expense when utilized.
Utilization of these credits may be limited in the same manner as the NOLs, as
described above.
On the Filing Date, the Internal Revenue Service of the United States of America
(the "IRS") was in the process of examining the tax returns of Manhattan for the
years ended January 31, 1982 through January 31, 1986 and January 31, 1988. By
proof of claim, as amended, the IRS had asserted a claim (the "IRS Claim")
against Salant of approximately $5,200. The IRS Claim included approximately
$3,200 of Excise Taxes. Pursuant to an interim agreement and formal written
agreement, which was approved by the Bankruptcy Court on May 26, 1995, Salant
will pay $100 to the IRS in full settlement of such Excise Tax claims. The
balance of the IRS Claim sought the payment of (i) income taxes that were
claimed to be owing for prior tax periods; (ii) withholding and FICA taxes for
the tax period ended March 31, 1990; (iii) interest and penalties with respect
to those taxes; and (iv) FUTA taxes for the period from January 1 through June
27, 1990. On September 25, 1995, Salant and the IRS executed a final agreement
relating to such non-Excise Taxes. Pursuant to this agreement, the IRS Claim was
withdrawn, and the IRS will pay Salant a net refund of approximately $875, plus
net interest from June 1, 1995.
Note 12. 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>
1995 1994 1993
Service cost-benefit earned
<S> <C> <C> <C>
during the period $ 1,029 $ 1,125 $ 1,183
Interest cost on projected benefit obligation 2,714 2,626 2,555
Loss/(return) on assets (4,697) 1,331 (2,008)
Net amortization 2,286 (3,437) 169
Net periodic pension cost $ 1,332 $ 1,645 $ 1,899
</TABLE>
<PAGE>
The reconciliation of the funded status of the plans at December 30, 1995
and December 31, 1994 is as follows:
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
Accumulated Accumulated
Plan Plan
Benefits Benefits
Exceed Exceed
Plan Assets Plan Assets
Actuarial present value of benefit obligation
<S> <C> <C>
Vested benefit obligation $ (36,211) $ (28,645)
Nonvested benefit obligation (597) (838)
Accumulated benefit obligation $ (36,808) $ (29,483)
Projected benefit obligation $ (40,833) $ (33,579)
Plan assets at fair value 30,900 25,947
Projected benefit obligation in
excess of plan assets (9,933) (7,632)
Unrecognized net obligation at date of
initial application, amortized over 15 years 810 897
Unrecognized net loss 4,616 784
Unrecognized prior service cost (1,176) (739)
Recognition of minimum liability
under SFAS No. 87 (2,524) (1,160)
Accrued pension cost $ (8,207) $ (7,850)
</TABLE>
Assumptions used in accounting for defined benefit pension plans are as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993 1993
Non- Qualified Non- Qualified Non- Qualified
Qualified Plans Qualified Plans Qualified Plans
Plan Plan Plan
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.0% 7.0% 8.5% 8.5% 7.5% 7.5%
Rate of increase in compensation levels N/A 5.0% N/A 5.5% N/A 5.5%
Expected long-term rate of return on assets 8.0% 8.5% 8.0% 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.
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
$4,263, $4,693, and $5,060 in 1995, 1994 and 1993, 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. In
1995, 1994 and 1993 Salant's aggregate contributions to the Long Term Savings
and Investment Plan amounted to $239, $239 and $208, respectively.
Note 13. Stock Options, Warrants and Shareholder Rights
On September 20, 1993, pursuant to the Reorganization Plan, the Company adopted
the 1993 Stock Plan under which directors receive an automatic grant of stock
options pursuant to a formula contained in such plan and options or awards may
be granted to 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 (subject to certain
restrictions applicable to 1993 Stock Plan stock options granted to directors)
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. Exercise prices of
options are ordinarily equal to 100% of the fair market value of the Company's
shares on the date of grant of the options. Options expire no later than ten
years from the date of grant and become exercisable in varying amounts over
periods ranging from the date of grant to five years from the date of grant.
<PAGE>
The following table summarizes stock option transactions during
1993, 1994 and 1995:
<TABLE>
<CAPTION>
Shares Price Range
<S> <C> <C>
Options outstanding at January 2, 1993 1,050,240 $1.00-15.125
Options granted during 1993 392,000 $6.69-10.69
Options exercised during 1993 (24,095) $1.00-5.875
Options surrendered or canceled during 1993 (55,371) $2.25-12.875
Options outstanding at January 1, 1994 1,362,774 $1.00-15.125
Options granted during 1994 61,050 $4.94-6.69
Options exercised during 1994 (226,666) $2.00-2.63
Options surrendered or canceled during 1994 (39,950) $5.125-12.00
Options outstanding at December 31, 1994 1,157,208 $1.00-15.125
Options granted during 1995 205,300 $3.3125-5.1875
Options exercised during 1995 (33,334) $2.625
Options surrendered or canceled during 1995 (65,601) $3.00-12.00
Options outstanding at December 30, 1995 1,263,573 $1.00-15.125
Options exercisable at December 30, 1995 904,209 $1.00-15.125
Options exercisable at December 31, 1994 809,672 $1.00-15.125
</TABLE>
At December 30, 1995, there were 176,342 shares of Salant common stock reserved
for future grants of stock options or stock awards.
Pursuant to the Reorganization 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, 1994, or 1995.
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.
In summary, as of December 30, 1995, there were 1,263,573 shares of Common Stock
reserved for the exercise of stock options, 176,342 shares of Common Stock
reserved for future grants of stock options or awards and 2,371,182 shares of
Common Stock reserved for the Warrants, for a total of 3,811,097 shares of
Common Stock reserved for the future issuance of stock options, stock awards and
warrants.
Note 14. Deferred Liabilities
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
<S> <C> <C>
Lease obligations $ 1,206 $ 1,225
Deferred pension obligations 5,087 6,253
Liability for chapter 11 claims settlements 4,600 6,001
Other 480 --
$ 11,373 $ 13,479
</TABLE>
Note 15. Commitments and Contingencies
(a) Lease Commitments
The Company conducts a portion of its operations in premises occupied under
leases expiring at various dates through 2012. 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 1995, 1994 and 1993, rental expense was $7,265, $5,914 and $5,478,
respectively. As of December 30, 1995, future minimum rental payments under
noncancelable 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> <C>
1996 $6,759
1997 5,584
1998 5,113
1999 3,989
2000 2,328
Thereafter 11,001
Total $34,774
</TABLE>
(b) Employment Agreements
The Company has employment agreements with certain executives, which provide for
the payment of compensation aggregating approximately $4,742 in 1996, $1,070 in
1997 and $250 in 1998. In addition, such employment agreements provide for
incentive compensation based on various performance criteria.
Note 16. Acquisition
On June 10, 1994, the Company acquired all the capital stock of JJ. Farmer
Clothing Inc. (a Canadian corporation) and the assets of JJ. Farmer
International Limited (a Hong Kong corporation) (collectively "JJ. Farmer") for
approximately $5,311 in cash. The purchase price is subject to adjustment based
on a number of items, including the future profitability of JJ. Farmer. Through
December 30, 1995, the Company made additional payments of $463. The acquisition
has been accounted for as a purchase, and accordingly, JJ. Farmer's operating
results have been included in the Company's consolidated results of operations
commencing June 11, 1994. Pro forma results of operations have not been
presented as the effect would not be significant. JJ. Farmer's net sales for the
five months ended May 31, 1994 and the twelve months ended December 31, 1993
were $3,392 and $13,104, respectively. The excess of cost over the book value of
net assets acquired ($4,589 subject to adjustment) is being amortized over a
period of not more than 15 years on a straight-line basis.
As part of the acquisition, the Company agreed to pay to the sellers of JJ.
Farmer, certain minimum amounts in the years 1996 through 1999. The present
value of such future payments is $1,789, and is included in long-term debt.
Note 17. Discontinued Operations
In February 1995, the Company discontinued the operations of the Vera Scarf
division, which imported and marketed women's scarves. The loss from operations
of the division in 1994 was $9,639, which included a fourth quarter charge of
$9,004 for the write-off of goodwill and other intangible assets. The loss from
operations of the division in 1993 was $589.
Additionally, in 1994 the Company recorded a fourth quarter charge of $1,796 to
accrue for expected operating losses during the phase-out period through June
1995. No income tax benefits have been allocated to the division's 1994 or 1993
losses. Such losses are included in the Company's net operating loss
carryforward disclosed in Note 11.
Net sales of the division were $1,673, $5,087, and $5,138 in 1995, 1994, and
1993 respectively. The net assets and/or net liabilities of the discontinued
operations have been reclassified on the balance sheets as net assets or net
liabilities of discontinued operations, and consist principally of accounts
receivable, inventory and accrued losses for the phase-out period.
Note 18. Consummation of the Plan of Reorganization
From the Consummation Date through December 30, 1995, pursuant to the
Reorganization Plan, the Company made cash payments of $8,800, issued $111,851
of new 10-1/2% senior secured notes and issued 10.9 million shares of common
stock to creditors in settlement of certain claims in the chapter 11
proceedings. Salant anticipates that an additional $4,761 in cash and an
additional 376 thousand shares of common stock ultimately will have been
distributed to creditors by the time all remaining claims have been resolved.
Provisions for such distributions had previously been made in the consolidated
financial statements. As further described in Note 3, upon consummation of the
Reorganization Plan, the Company recorded an extraordinary gain of $24,707
relating to the settlement of indebtedness pursuant to the Reorganization Plan.
Note 19. Discontinued Operations Subsequently Retained
In March 1993, the Company adopted a formal plan to restructure and sell its
Children's Apparel Group. Consequently, the division was accounted for as a
discontinued operation for 1992 and the first three quarters of 1993. In March
1994, the Company concluded that the value of the division would be maximized by
retaining the Children's Apparel Group as part of its continuing operations. As
a result, the assets, liabilities and results of operations for all periods
presented have been presented as part of continuing operations. In the fourth
quarter of 1993, a previous estimated loss on disposal charge was reversed in
its entirety 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.
<PAGE>
Note 20. Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Fiscal year ended December 30, 1995
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C>
Net sales $501,522 $127,347 $148,313 $122,061 $103,801
Gross profit 103,892 23,152 33,752 24,521 22,467
Income/(loss) from continuing operations (498) (5,509) 6,318 392 (1,699)
Extraordinary gain (See note 3) 1,000 1,000 -- -- --
Net income/(loss) 502 (4,509) 6,318 392 (1,699)
Income/(loss) per share from
continuing operations (a) $ (0.03) $ (0.36) $ 0.42 $ 0.03 $ (0.11)
Income per share from extraordinary gain 0.06 0.06 -- -- --
Net income/(loss) per share (a) 0.03 (0.30) 0.42 0.03 (0.11)
</TABLE>
Fiscal year ended December 31, 1994
<TABLE>
<CAPTION>
Total 4th Qtr.3rd Qtr. 2nd Qtr. 1st Qtr.
<S> <C> <C> <C> <C> <C>
Net sales $419,285 $115,840 $125,403 $ 88,184 $ 89,858
Gross profit 93,226 22,662 29,591 18,867 22,106
Income/(loss) from continuing operations 3,507 (1,251) 6,119 (2,521) 1,160
Discontinued operations:
Income/(loss) from discontinued operations (9,639) (9,325) (21) (219) (74)
Estimated loss on disposal (1,796) (1,796) -- -- --
Extraordinary gain 63 -- -- 63 --
Net income/(loss) (7,865) (12,372) 6,098 (2,677) 1,086
Income/(loss) per share from
continuing operations (a) $ 0.23 $ (0.08) $ 0.40 $ (0.17) $ 0.07
Loss per share from discontinued operations (a) (0.76) (0.74) -- (0.01) --
Net income/(loss) per share (a) (0.53) (0.82) 0.40 (0.18) 0.07
</TABLE>
Reference is made to Notes 2, 3 and 17 concerning fourth quarter adjustments
during the years ended December 30, 1995 and December 31, 1994.
(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 and, when appropriate, the inclusion of common stock equivalents.
<PAGE>
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.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE 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 Schedule
The following Financial Statement Schedule for the years ended December 30,
1995, December 31, 1994, and January 1, 1994 is filed as part of this Annual
Report:
Schedule II - Valuation and Qualifying Accounts and Reserves
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.
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
SCHEDULE II -- 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
Description of Period Expenses -- Describe -- Describe of Period
YEAR ENDED DECEMBER 30, 1995:
Accounts receivable - allowance
<S> <C> <C> <C> <C> <C>
for doubtful accounts $2,565 $1,510 $ -- $1,068 (A) $3,007
Reserve for business restructuring $ -- $3,550 $ -- $1,981 (B) $1,569
YEAR ENDED DECEMBER 31, 1994:
Accounts receivable - allowance
for doubtful accounts $2,261 $1,068 $ -- $ 764 (A) $2,565
Reserve for business restructuring $2,038 $2,038 $ -- $ -- $ --
YEAR ENDED JANUARY 1, 1994:
Accounts receivable allowance
for doubtful accounts $3,776 $ 63 $ -- $1,578 (A) $2,261
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 (C) $ --
</TABLE>
NOTES:
(A) Uncollectible accounts written off, less recoveries. (B) Costs incurred in
plant closings and business restructuring. (C) Reversal of estimated loss on
disposal of discontinued operation.
<PAGE>
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 30, 1995.
<PAGE>
Exhibits
Incorporation
Number Description By Reference To
<PAGE>
<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 July 28, 1993.
Mills, Inc., dated
May 12,1993.
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 July 28, 1993.
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. July 28, 1993.
3.2 Form of Bylaws, as amended, of
Salant Corporation, effective September 21, 1994.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
December 8, 1987 between Salant on Form 8-K dated December 8, 1987.
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. July 29, 1993.
4.3 Indenture, dated as of Exhibit 10.34 to
September 20, 1993, 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 October 2, 1993.
Secured Notes due
December 31, 1998.
4.4 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 October 2, 1993.
as Warrant Agent.
10.1 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated September 29, 1993, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial October 2, 1993.
Services, Inc.
10.2 Salant Corporation 1987 Stock Plan. Exhibit 19.2 to Annual Report on Form 10-K for fiscal year 1987.
10.3 Salant Corporation 1987 Stock Plan Exhibit 10.12 to Form S-2
Agreement, dated as of June 13, Registration Statement filed
1988, between Nicholas P. DiPaolo June 17, 1988.
and Salant Corporation.
10.4 Salant Corporation 1988 Stock Plan. Exhibit 19.3 to Annual Report on
Form 10-K for fiscal year 1988.
10.5 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of July 25, 1989, to the Salant on Form 10-Q for the quarter
Corporation 1988 Stock Plan. ended September 30, 1989.
10.6 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.7 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.8 Employment Agreement, dated as of Exhibit 19.4 to
December 31, 1990, between Herbert Annual Report on
R. Aronson and Salant Corporation. * Form 10-K for fiscal
year 1990.
10.9 Letter Agreement, dated Exhibit 19.1 to Quarterly
June 20, 1992, amending the Report on Form 10-Q for
Employment Agreement, dated as of the quarter ended October 3, 1992.
December 31, 1990, between Herbert
R. Aronson and Salant Corporation. *
10.10 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.
10.11 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.
10.12 Employment Agreement, Exhibit 10.32 to
dated as of June 1, 1993, Quarterly Report on
between Todd Kahn Form 10-Q for the
and Salant Corporation. * quarter ended July 8, 1993.
10.13 Employment Agreement, dated Exhibit 10.36 to
as of September 20, 1993, between Quarterly Report on
Nicholas P. DiPaolo and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.14 Employment Agreement, dated Exhibit 10.38 to
as of July 30, 1993, between Quarterly Report on
Richard P. Randall and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.15 Employment Agreement, dated Exhibit 10.32 to Annual Report on
as of December 21, 1993, between Form 10-K for Fiscal Year 1993.
Elliot M. Lavigne and Salant
Corporation. *
10.16 Agreement, dated as of Exhibit 10.33 to Annual Report on
September 22, 1993, between Nicholas Form 10-K for Fiscal Year 1993.
P. DiPaolo and Salant Corporation. *
<PAGE>
10.17 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual
Stock Plan Directors' Option Report on Form
Agreement. * 10-K for Fiscal Year 1993.
10.18 Letter Agreement, dated as of Exhibit 10.45 to
August 24, 1994, amending the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated quarter ended October 1, 1994.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.19 Letter Agreement, dated Exhibit 10.46 to
October 18, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
December 31, 1990, between Herbert quarter ended October 1, 1994.
R. Aronson and Salant Corporation. *
10.20 Letter Agreement, dated Exhibit 10.47 to
October 25, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
July 30, 1993, between Richard quarter ended October 1, 1994.
Randall and Salant Corporation. *
10.21 Third Amendment to Credit Agreement, Exhibit 10.48 to Current Report on
dated February 28, 1995, to the Form 8-K, dated March 2, 1995.
Revolving Credit, Factoring and
Security Agreement, dated
September 20, 1993, as amended,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.22 Salant Corporation Retirement Plan, Exhibit 10.23 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.23 Salant Corporation Pension Plan, Exhibit 10.24 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.24 Salant Corporation Long Term Savings Exhibit 10.25 to Annual Report on
and Investment Plan as amended Form 10-K for Fiscal Year 1994.
and restated. *
10.25 Letter Agreement, dated Exhibit 10.26 to Annual Report on
February 15, 1995, amending the Form 10-K for Fiscal Year 1994.
Employment Agreement, dated
July 30, 1993, between Richard
Randall and Salant Corporation. *
10.26 Fourth Amendment to Credit Exhibit 10.27 to
Agreement, dated as of March 1, Quarterly Report
1995, to the Revolving Credit, on Form 10-Q for
Factoring and Security Agreement, the quarter
dated as of September 20, 1993, ended April 1,
as amended, between Salant 1995.
Corporation and The CIT Group/
Commercial Services, Inc.
10.27 Letter Agreement, dated April 12, Exhibit 10.28 to
1995, amending the Employment Quarterly Report
Agreement, dated June 1, 1993, on Form l0-Q for
between Todd Kahn and Salant the quarter
Corporation. * ended April 1,
1995.
10.28 Fifth Amendment to Credit Exhibit 10.29
Agreement, dated as of to Quarterly
June 28, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.29 Sixth Amendment to Credit Exhibit 10.30
Agreement, dated as of to Quarterly
August 15, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.30 Letter from The CIT Group/ Exhibit 10.31
Commercial Services, Inc., to Quarterly
dated as of July 11, 1995, Report on
regarding the waiver of a Form l0-Q for
default. the quarter
ended July 1,
1995.
10.31 Letter Agreement between Exhibit 10.31
Salant Corporation and The to Quarterly
CIT Group/Commercial Services, Report on
Inc. dated as of July 11, 1995, Form l0-Q for
regarding the Seasonal Overadvance the quarter
Subfacility. ended July 1,
1995.
10.32 Letter Agreement, dated as of Exhibit 10.33 to
August 31, 1995, amending the Quarterly Report
Employment Agreement, dated on Form l0-Q for
September 20, 1993, between the quarter
Nicholas P. DiPaolo and ended September
Salant Corporation. * 30, 1995.
10.33 Letter Agreement, dated
December 1, 1995, between
Lubin, Delano & Company and
Salant Corporation.
10.34 Seventh Amendment to Credit
Agreement, dated as of
March 27, 1996, to the
Revolving Credit, Factoring
and Security Agreement,
dated as of September 20,
1993, as amended, between
Salant Corporation and The
CIT Group/Commercial Services,
Inc.
21 List of Subsidiaries of the Company
27 Financial Data Schedule
</TABLE>
* constitutes a management contract or compensatory plan or arrangement.
<PAGE>
Incorporation
Number Description By Reference To
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SALANT CORPORATION
Date: March 28, 1996 By: /s/ Richard P. Randall
Senior Vice President and
Chief Financial Officer
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 and on March 22, 1996.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ Nicholas P. DiPaolo Chairman of the Board,
Nicholas P. DiPaolo President and Chief Executive Officer
(Principal Executive Officer); Director
/s/ Michael A. Lubin Executive Vice President and
Michael A. Lubin Chief Operating Officer
/s/ Richard P. Randall Senior Vice President
Richard P. Randall and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Craig M. Cogut
Craig M. Cogut Director
/s/ Ann Dibble Jordan
Ann Dibble Jordan Director
/s/ Robert Katz
Robert Katz Director
/s/ Harold Leppo
Harold Leppo Director
/s/ Bruce F. Roberts
Bruce F. Roberts Director
/s/ John S. Rodgers
John S. Rodgers Director
/s/ Marvin Schiller
Marvin Schiller Director
/s/ Edward M. Yorke
Edward M. Yorke Director
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995
<PAGE>
SALANT CORPORATION
EXHIBIT INDEX
Incorporation
Number Description By Reference To
<PAGE>
<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 July 28, 1993.
Mills, Inc., dated
May 12,1993.
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 July 28, 1993.
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. July 28, 1993.
3.2 Form of Bylaws, as amended, of
Salant Corporation, effective September 21, 1994.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
December 8, 1987 between Salant on Form 8-K dated December 8, 1987
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. July 29, 1993.
4.3 Indenture, dated as of Exhibit 10.34 to
September 20, 1993, 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 October 2, 1993.
Secured Notes due
December 31, 1998.
4.4 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 October 2, 1993.
as Warrant Agent.
10.1 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated September 29, 1993, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial October 2, 1993.
Services, Inc.
10.2 Salant Corporation 1987 Stock Plan. Exhibit 19.2 to Annual Report on Form 10-K for fiscal year 1987.
10.3 Salant Corporation 1987 Stock Plan Exhibit 10.12 to Form S-2
Agreement, dated as of June 13, 1988, Registration Statement filed
between Nicholas P. DiPaolo and June 17, 1988.
Salant Corporation.
10.4 Salant Corporation 1988 Stock Plan. Exhibit 19.3 to Annual Report on
Form 10-K for fiscal year 1988.
10.5 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of July 25, 1989, to the Salant on Form 10-Q for the quarter
Corporation 1988 Stock Plan. ended September 30, 1989.
10.6 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.7 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.8 Employment Agreement, dated as of Exhibit 19.4 to
December 31, 1990, between Herbert Annual Report on
R. Aronson and Salant Corporation. * Form 10-K for fiscal
year 1990.
10.9 Letter Agreement, dated Exhibit 19.1 to Quarterly
June 20, 1992, amending the Report on Form 10-Q for
Employment Agreement, dated as of the quarter ended October 3, 1992.
December 31, 1990, between Herbert
R. Aronson and Salant Corporation. *
10.10 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.
10.11 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.
10.12 Employment Agreement, Exhibit 10.32 to
dated as of June 1, 1993, Quarterly Report on
between Todd Kahn and Form 10-Q for the
Salant Corporation. * quarter ended July 8, 1993.
10.13 Employment Agreement, dated Exhibit 10.36 to
as of September 20, 1993, between Quarterly Report on
Nicholas P. DiPaolo and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.14 Employment Agreement, dated Exhibit 10.38 to
as of July 30, 1993, between Quarterly Report on
Richard P. Randall and Form 10-Q for the
Salant Corporation. * quarter ended October 2, 1993.
10.15 Employment Agreement, dated Exhibit 10.32 to Annual Report on
as of December 21, 1993, between Form 10-K for Fiscal Year 1993.
Elliot M. Lavigne and Salant
Corporation. *
10.16 Agreement, dated as of Exhibit 10.33 to Annual Report on
September 22, 1993, between Nicholas Form 10-K for Fiscal Year 1993.
P. DiPaolo and Salant Corporation. *
<PAGE>
10.17 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual
Stock Plan Directors' Option Report on Form
Agreement. * 10-K for Fiscal Year 1993.
10.18 Letter Agreement, dated as of Exhibit 10.45 to
August 24, 1994, amending the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated quarter ended October 1, 1994.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.19 Letter Agreement, dated Exhibit 10.46 to
October 18, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
December 31, 1990, between Herbert quarter ended October 1, 1994.
R. Aronson and Salant Corporation. *
10.20 Letter Agreement, dated Exhibit 10.47 to
October 25, 1994, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
July 30, 1993, between Richard quarter ended October 1, 1994.
Randall and Salant Corporation. *
10.21 Third Amendment to Credit Agreement, Exhibit 10.48 to Current Report on
dated February 28, 1995, to the Form 8-K, dated March 2, 1995.
Revolving Credit, Factoring and
Security Agreement, dated
September 20, 1993, as amended,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.22 Salant Corporation Retirement Plan, Exhibit 10.23 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.23 Salant Corporation Pension Plan, Exhibit 10.24 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.24 Salant Corporation Long Term Savings Exhibit 10.25 to Annual Report on
and Investment Plan as amended Form 10-K for Fiscal Year 1994.
and restated. *
10.25 Letter Agreement, dated Exhibit 10.26 to Annual Report on
February 15, 1995, amending the Form 10-K for Fiscal Year 1994.
Employment Agreement, dated
July 30, 1993, between Richard
Randall and Salant Corporation. *
10.26 Fourth Amendment to Credit Exhibit 10.27 to
Agreement, dated as of March 1, Quarterly Report
1995, to the Revolving Credit, on Form 10-Q for
Factoring and Security Agreement, the quarter
dated as of September 20, 1993, ended April 1,
as amended, between Salant 1995.
Corporation and The CIT Group/
Commercial Services, Inc.
10.27 Letter Agreement, dated April 12, Exhibit 10.28 to
1995, amending the Employment Quarterly Report
Agreement, dated June 1, 1993, on Form l0-Q for
between Todd Kahn and Salant the quarter
Corporation. * ended April 1,
1995.
10.28 Fifth Amendment to Credit Exhibit 10.29
Agreement, dated as of to Quarterly
June 28, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.29 Sixth Amendment to Credit Exhibit 10.30
Agreement, dated as of to Quarterly
August 15, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.30 Letter from The CIT Group/ Exhibit 10.31
Commercial Services, Inc., to Quarterly
dated as of July 11, 1995, Report on
regarding the waiver of a Form l0-Q for
default. the quarter
ended July 1,
1995.
10.31 Letter Agreement between Exhibit 10.31
Salant Corporation and The to Quarterly
CIT Group/Commercial Services, Report on
Inc. dated as of July 11, 1995, Form l0-Q for
regarding the Seasonal Overadvance the quarter
Subfacility. ended July 1,
1995.
10.32 Letter Agreement, dated as of Exhibit 10.33 to
August 31, 1995, amending the Quarterly Report
Employment Agreement, dated on Form l0-Q for
September 20, 1993, between the quarter
Nicholas P. DiPaolo and ended September
Salant Corporation. * 30, 1995.
10.33 Letter Agreement, dated
December 1, 1995, between
Lubin, Delano & Company and
Salant Corporation.
10.34 Seventh Amendment to Credit
Agreement, dated as of
March 27, 1996, to the
Revolving Credit, Factoring
and Security Agreement,
dated as of September 20,
1993, as amended, between
Salant Corporation and The
CIT Group/Commercial Services,
Inc.
21 List of Subsidiaries of the Company
27 Financial Data Schedule
</TABLE>
* constitutes a management contract or compensatory plan or arrangement.
<PAGE>
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
JJ. Farmer Clothing, Inc., a Canadian 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
Salant Canada, Inc., a Canadian corporation
SLT Sourcing, Inc., a New York corporation
Vera Licensing, Inc., a Nevada corporation
Vera Linen Manufacturing, Inc., a Delaware corporation
SEVENTH AMENDMENT TO CREDIT AGREEMENT
SEVENTH AMENDMENT TO CREDIT AGREEMENT, dated as of March 27, 1996 (this
"Amendment"), to the Revolving Credit, Factoring and Security Agreement, dated
as of September 20, 1993, as amended by letter agreement Re: Amendment to Credit
Agreement with respect to the Mississippi Property, dated June 14, 1994 (the
"First Amendment") and by letter agreement Re: Amendment to Credit Agreement
with respect to Additional Guarantors, dated August 24, 1994 (the "Second
Amendment"), and by the Third Amendment to Credit Agreement, dated as of
February 28, 1995 (the "Third Amendment"), and by the Fourth Amendment to Credit
Agreement, dated as of March 1, 1995 (the "Fourth Amendment"), and by the Fifth
Amendment to Credit Agreement, dated as of June 28, 1995 (the "Fifth Amendment")
and by the Sixth Amendment to Credit Agreement, dated as of August 15, 1995 (the
"Sixth Amendment") (as so amended, and as further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), between THE CIT
GROUP/COMMERCIAL SERVICES, INC. ("Lender") and SALANT CORPORATION ("Borrower").
W I T N E S S E T H :
WHEREAS, Lender and Borrower are parties to the Credit Agreement;
WHEREAS, Borrower has requested Lender to amend the Credit Agreement to increase
the Maximum Credit and the Revolving Loan Limit as defined therein and to amend
certain financial covenants set forth therein; and
WHEREAS, Lender is willing to make such amendments to the Credit Agreement upon
the terms and subject to the conditions set forth in this Amendment;
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby
agree, effective as of the Effective Date, as defined below, as follows:
1. Defined Terms. Initially capitalized terms used and not
otherwise defined herein shall have their
respective meanings as defined in the Credit Agreement.
2. Amendment of Section 3.1(a) (iii). Section 3.1(a) (iii) of the Credit
Agreement is amended in its
---------------------------------
entirety to read as follows:
<PAGE>
"(iii) Fifty percent (50%) of the value of Eligible Inventory,
provided, however, that solely for, and at all times during the months
of May, June, July and August of 1996, such advance rate shall be sixty
percent (60%) of the value of Eligible Inventory."
3. Amendment of Section 3.1(c). Section 3.1(c) of the Credit Agreement
is amended in its entirety to read
---------------------------
as follows:
"(c) Notwithstanding anything to the contrary contained herein or in
any of the other Financing Agreements, except in Lender's discretion,
the aggregate unpaid principal amount of Revolving Loans outstanding at
any time based on the value of all Eligible Inventory shall not exceed
$60,000,000 (the "Inventory Sublimit"), provided, however, that solely
for, and at all times during, the months of May, June, July and August
of 1996, the Inventory Sublimit may equal but shall not exceed
$70,000,000. On or before September 10, 1996, Borrower shall pay in
full to Lender that portion of the Revolving Loans which is equal to
the difference (such amount, the "Inventory Overadvance") between: (i)
the aggregate amount of Revolving Loans then outstanding with respect
to Eligible Inventory, and (ii) the lesser of: (A) the maximum amount
of Revolving Loans with respect to Eligible Inventory to which Borrower
is entitled on September 1, 1996, based on an advance rate of fifty
percent (50%) of the value of Eligible Inventory, and (B) the Inventory
Sublimit as in effect on September 1, 1996. Borrower's failure to pay
the Inventory Overadvance in full on or before September 10, 1996,
shall constitute an Event of Default under Section 8.1(a) of this
Agreement."
4. Amendment of Section 3.3. Section 3.3 of the Credit Agreement is
amended in its entirety to read as follows:
"3.3 Maximum Credit
The aggregate principal amount of the Revolving Loans and Letter of
Credit Accommodations at any time outstanding shall not exceed
$120,000,000, provided, however, that solely for, and at all times
during, the months of March, April, May, June, July, August, September
and October of 1996, such outstanding amount shall not exceed the
amount set forth opposite each such month and provided, further,
however, that during the first twenty (20) days of each month, the
Maximum Credit may equal but shall not exceed the higher of (i) the
Maximum Credit on the last day of the immediately preceding month or
(ii) the amount set forth below opposite such month:
<TABLE>
<CAPTION>
Month (1996) Amount
<S> <C>
March $132,000,000
April $135,000,000
May $130,000,000
June $132,000,000
July $130,000,000
August $135,000,000
September $135,000,000
October $130,000,000
</TABLE>
Notwithstanding anything to the contrary contained herein, the Maximum Credit as
of November 21, 1996 and thereafter shall not exceed $120,000,000."
5. Amendment of Section 3.6(k). The first sentence of Section 3.6(k) of
the Credit Agreement is amended in its entirety to read as follows:
"From and after September 30, 1996, Borrower shall have the right to
cease factoring the Accounts of any of its divisions or other operating
units upon not less than sixty (60) days prior written notice to
Lender, provided, however, that (x) all Accounts shall at all times
constitute security for all Obligations and (y) if Borrower delivers a
notice to Lender in accordance with this Section 3.6(k) that Borrower
will cease any and all further factoring of its Accounts, the exercise
of such right shall be subject to Borrower's executing and delivering
to Lender all such documents as Lender shall reasonably request in
connection therewith."
6. Amendment of Section 7.18. Section 7.18 of the Credit Agreement is
amended in its entirety to read as follows:
"7.18 Working Capital
Borrower shall not at the end of any fiscal month permit its consolidated
working capital to be less than $80,000,000 during the period from the
Consummation Date through the day before the last day of its 1993 fiscal year,
and $85,000,000 during the period from the last day of its 1993 fiscal year
through the day before the last day of its 1996 fiscal year, and $90,000,000
thereafter."
7. Amendment of Section 7.19. Section 7.19 of the Credit Agreement is
amended in its entirety to read as follows:
"7.19 Stockholders' Equity
Borrower shall not permit its consolidated stockholders' equity to be less than
$55,000,000 at any time during the period from the Consummation Date through the
day before the last day of its 1993 fiscal year, $60,000,000 at any time during
the period from the last day of its 1993 fiscal year through the day before the
last day of its 1996 fiscal year, and $70,000,000 thereafter. Notwithstanding
anything to the contrary contained herein, write-offs for goodwill,
restructuring expense or other unusual or non-recurring expense arising during
Borrower's 1996 fiscal year in connection with or pursuant to a restructuring
and which Borrower would otherwise be required to include in the determination
of Borrower's consolidated stockholders' equity, shall, in an aggregate amount
not to exceed $5,000,000, be excluded from such determination of Borrower's
consolidated stockholders' equity from and after December 28, 1996."
8. Amendment of Section 7.21. Section 7.21 of the Credit Agreement is
amended in its entirety to read as follows:
"7.21 Fixed Charge Coverage Ratio
Borrower shall not permit the ratio of (a) the sum of (i) the
consolidated net income (including royalty income) from continuing
operations (excluding any unusual or non-recurring items of income or
expense) before interest and taxes of Borrower and its Subsidiaries
during any computation period and (ii) the consolidated depreciation
and amortization expenses of Borrower and its Subsidiaries for such
computation period to (b) the sum of (I) the consolidated interest
expense (including all imputed interest on capital lease obligations)
of Borrower and its Subsidiaries and (II) the aggregate amount of all
scheduled repayments of Indebtedness (other than the Obligations) by
Borrower and its Subsidiaries during the computation period, to be less
than 1.5:1.0 at the end of its 1993, 1994, 1995 and 1996 fiscal years."
9. Amendment of Section 10.1(a). Section 10.1(a) of the Credit Agreement
is amended in its entirety to read as follows:
"10.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date hereof and shall continue in full force and
effect for a term ending on March 31, 1997 (the "Renewal Date") and
from year to year thereafter, unless sooner terminated pursuant to the
terms hereof."
10. Representations and Warranties. Borrower hereby represents and warrants to
Lender that the representations and warranties set forth in Section 6 of the
Credit Agreement are true on and as of the date hereof as if made on and as of
the date hereof after giving effect to this Amendment, except to the extent any
such representation or warranty expressly relates to a prior date, and breach of
any of the representations and warranties made in this paragraph 8 shall
constitute an Event of Default under Section 8.1(b) or 8.1(c) of the Credit
Agreement, as applicable. Borrower further represents and warrants that, after
giving effect to this Amendment, no Event of Default or event which, with the
lapse of time or the giving of notice or both, would become an Event of Default
has occurred and is continuing.
11. Effectiveness. This Amendment shall become effective on the date
(the "Effective Date") Lender shall have received each of the following:
a. The written consent of all Participants to
the execution and delivery of this
Amendment by Lender.
b. Counterparts of this Amendment, duly
executed and delivered by Borrower and
Lender.
c. A duly executed copy of the Consent of
Guarantors substantially in the form of
Exhibit A hereto.
12. Continuing Effect of Credit Agreement. This Amendment shall not constitute a
waiver or amendment of any provision of the Credit Agreement not expressly
referred to herein and shall not be construed as a consent to any further or
future action on the part of Borrower that would require consent of Lender.
Except as expressly amended, the provisions of the Credit Agreement are and
shall remain in full force and effect.
13. Counterparts. This Amendment may be executed in counterparts,
and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.
14. Governing Law. This Amendment shall be governed by, and construed
and interpreted in accordance with,the laws of the state of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered in New York, New York by their proper and duly authorized
officers as of the day and year first above written.
THE CIT GROUP/COMMERCIAL
SERVICES, INC.
By:
Title:
SALANT CORPORATION
By:
Title:
<PAGE>
EXHIBIT A
CONSENT OF GUARANTORS
Each of the undersigned, CLANTEXPORT, INC., DENTON MILLS, INC., FROST BROS.
ENTERPRISES, INC., SLT SOURCING, INC., each a Guarantor under its respective
Guarantee, each dated as of September 20, 1993, and SALANT CANADA INC. and JJ.
FARMER CLOTHING INC., each a guarantor under its respective Guaranty (Unlimited
Liability), each dated as of September 20, 1994 (individually, in the case of
each of the foregoing Guarantors, its "Guarantee"), made in favor of the CIT
Group/Commercial Services, Inc. ("Lender"), pursuant to the Credit Agreement as
defined in the Seventh Amendment to Credit Agreement, dated as of March __, 1996
between Lender and Salant Corporation (the "Amendment"), to which this Consent
is attached, hereby consents to the Amendment and the matters contemplated
thereby, and hereby confirms and agrees that its Guarantee is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in
all respects except that, on and after the effective date of the Amendment, each
reference in its Guarantee to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended by the Amendment.
IN WITNESS WHEREOF, each of the undersigned has caused this Consent of
Guarantors to be duly executed and delivered by its authorized officer this __
day of March, 1996.
CLANTEXPORT, INC. FROST BROS. ENTERPRISES, INC.
By: By:
Title: Title:
DENTON MILLS, INC. SLT SOURCING, INC.
By: By:
Title: Title:
VERA LICENSING, INC. SALANT CANADA INC.
By: By:
Title: Title:
<PAGE>
JJ. FARMER CLOTHING, INC.
By:
Title:
<PAGE>
December 1, 1995
Salant Corporation
1114 Avenue of the Americas
New York, NY 10036
Attn: Mr. Nicholas P. DiPaolo
Chairman of the Board
Ladies and Gentlemen:
The purpose of this letter is to confirm the engagement, effective October 1,
1995 (the "Effective Date"), of Lubin, Delano & Company ("LD&C") by Salant
Corporation (the "Company") to render certain financial advisory and investment
banking services to the Company.
Section 1. Prior Agreement. LD&C and the Company are parties to an agreement
dated January 2, 1994, as amended by a letter dated February 28, 1995
(collectively, the "Prior Agreement"). This letter hereby replaces the Prior
Agreement and such agreement shall be deemed null and void as of the Effective
Date.
Section 2. Services to be Rendered. LD&C will render such financial advisory and
investment banking services as may from time to time by agreed upon by LD&C and
the Company.
The Company acknowledges that all opinions and advice given by LD&C to the
Company in connection with LD&C's engagement are intended solely for the benefit
and use of the Company (including their management, directors and attorneys) and
the Company agrees that no such opinion or advice shall be used, reproduced,
disseminated, quoted or referred to at any time, in any manner or for any
purpose (other than for the Company's internal use), nor shall any public
references to LD&C be made by the Company (or such persons) without the prior
written consent of LD&C, which consent shall not be unreasonably withheld.
Section 3. Confidential Treatment. LD&C hereby agrees that any information
furnished by the Company in the course of LD&C's engagement hereunder and LD&C's
work product in connection with its engagement hereunder will be kept
confidential and will not, without the prior written consent of the Company, be
disclosed to any third party, provided, however, that (i) any such material may
be disclosed to LD&C's partners, employees and attorneys who need to know such
information in connection with LD&C's performance of services hereunder (it
being understood that such partners, employees and attorneys will be informed by
LD&C of the confidential nature of such material and that by receiving such
material they are agreeing to be bound by this Section 2 and that LD&C shall be
responsible for any breach by such person of any of the provisions hereof), and
(ii) any such material may be disclosed as may be legally required in response
to a summons or subpoena or in connection with any litigation or in order to
comply with any law, order, regulation or ruling applicable to LD&C, provided,
however, that either (a) LD&C shall give the Company at least ten days written
notice (or shorter, but prompt, notice to the extent LD&C is required to respond
to legal process in fewer than ten days) prior to any disclosure of any such
material, setting forth the reasons for the disclosure of such material and the
basis upon which such disclosure will not, in LD&C's reasonable judgement,
constitute a breach of this agreement, or (b) LD&C may make such disclosure to a
Court under seal. LD&C further agrees that in the event any disclosure of such
material is to be made by LD&C under clause (ii) above and LD&C has not made
such disclosure to a Court under seal, LD&C will not oppose any application by
the Company that the disclosure of such material be made under an appropriate
confidentiality order and seal. Subject to the foregoing, LD&C shall take all
reasonable steps to protect such material to prevent any disclosure or use
thereof except as provided by this agreement. LD&C further agrees that, upon the
Company's request, LD&C will promptly return, or destroy, any or all of such
information.
Section 4. Monthly Retainer. The Company shall pay to LD&C a monthly retainer,
payable in advance, of $8,333.33 commencing on the Effective Date.
Section 5. Expenses. In addition to any fees that may be payable to LD&C
hereunder, the Company hereby agrees, from time to time upon request, to
reimburse LD&C for all reasonable travel and other out-of-pocket expenses
incurred in connection with LD&C's engagement hereunder.
Section 6. Indemnification. The Company agrees to indemnify LD&C (and its
partners, agents and employees) as described in the letter agreement between
LD&C and the Company dated September 20, 1993, which is attached hereto.
Section 7. Termination of Engagement. LD&C's engagement hereunder will
continue and be coterminous to Michael A. Lubin's Employment Period (as such
term is defined in the Employment Agreement, dated October 10, 1995, between
Michael A. Lubin and the Company), provided, however, that LD&C will be entitled
to any and all fees paid or due under Section 4 hereof through the date of
termination, and provided, further, that the provisions of Sections 3, 5 and 6
hereof shall survive such termination.
Please confirm that the foregoing is in accordance with your understandings and
agreements with LD&C by signing and returning to LD&C the duplicate of this
letter enclosed herewith.
Very truly yours,
LUBIN, DELANO & COMPANY
By:
General Partner
ACCEPTED AND AGREED AS OF THE
DATE FIRST ABOVE WRITTEN:
SALANT CORPORATION
By:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
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