UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6666
SALANT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3402444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1114 Avenue of the Americas, New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 221-7500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section
12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan
confirmed by a court. Yes X No
As of May 6, 1997, there were outstanding 14,780,416 shares of the Common Stock
of the registrant.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE>
3
<TABLE>
<CAPTION>
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
March 29, March 30,
1997 1996
<S> <C> <C>
Net sales $ 89,432 $ 99,193
Cost of goods sold 69,643 76,612
Gross profit 19,789 22,581
Selling, general and
administrative expenses (21,178) (21,961)
Royalty income 1,107 1,128
Goodwill amortization (506) (649)
Reversal of/(provision for)
restructuring costs (Note 3) 754 (161)
Other income 117 18
--------- ---------
Income from operations before
interest and income taxes 83 956
Interest expense, net 3,551 3,847
----------------------------------------------------
Loss from operations before income taxes (3,468) (2,891)
Income taxes 42 22
--------------------------
Net loss $ (3,510) $ (2,913)
========= =========
Net loss per share $ (0.23) $ (0.19)
=================================== =================
Weighted average common stock and common
stock equivalents outstanding 15,097 15,041
==========================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<TABLE>
<CAPTION>
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
March 29, December 28, March 30,
1997 1996 1996
(Unaudited) (*) (Unaudited)
ASSETS
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 1,261 $ 1,501 $ 1,385
Accounts receivable, net 45,279 40,214 30,166
Inventories (Note 2) 113,104 101,619 121,451
Prepaid expenses and
other current assets 3,498 3,869 5,008
-----------------------------------------------------------------------------------------------------
Total current assets 163,142 147,203 158,010
Property, plant and equipment, net 26,968 25,185 24,204
Other assets 63,709 63,650 70,708
---------------------------------------------------------------------------------------------------------------
Total assets $ 253,819 $ 236,038 $ 252,922
=====================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Loans payable $ 32,921 $ 7,677 $ 16,995
Accounts payable 33,275 28,327 28,357
Accrued liabilities 14,466 18,008 17,455
Current portion of long term debt -- 3,372 --
Reserve for business restructuring (Note 3) 2,049 2,969 989
-------------------------------------------------------------------------------
Total current liabilities 82,711 60,353 63,796
Long term debt 104,879 106,231 110,015
Deferred liabilities 9,114 8,863 11,196
Shareholders' equity
Common stock 15,339 15,328 15,275
Additional paid-in capital 107,142 107,130 107,071
Deficit (60,657) (57,147) (50,737)
Excess of additional pension
liability over unrecognized
prior service cost (3,182) (3,182) (2,185)
Accumulated foreign currency
translation adjustment 87 76 105
Less - treasury stock, at cost (1,614) (1,614) (1,614)
---------- -------------------- ----------
Total shareholders' equity 57,115 60,591 67,915
-------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 253,819 $ 236,038 $ 252,922
======================================================================================================
</TABLE>
(*) Derived from the audited financial statements.
<PAGE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Salant Corporation and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Three Months Ended
March 29, March 30,
1997 1996
------------------------------
Cash Flows from Operating Activities:
<S> <C> <C>
Loss from operations $ (3,510) $ (2,913)
Adjustments to reconcile loss from operations to net cash used in operating
activities:
Depreciation 1,143 1,132
Amortization of intangibles 1,051 923
Loss on disposal of fixed assets -- 82
Change in operating assets and liabilities:
Accounts receivable (5,065) 5,124
Inventories (11,485) (2,331)
Prepaid expenses and other current assets 371 8
Other assets (18) (647)
Accounts payable 4,948 1,602
Accrued liabilities and reserve for
business restructuring (4,417) (3,667)
Deferred liabilities (1,101) (202)
---------------------------------------------------------------------- ----------
Net cash used in operating activities (18,083) (889)
-------------------------------------------------------- ---------------------
Cash Flows from Investing Activities:
Capital expenditures (2,970) (932)
Store fixture expenditures (1,093) (616)
Proceeds from sale of assets -- 40
--------------------------------
Net cash used in investing activities (4,063) (1,508)
---------- ---------------------
Cash Flows from Financing Activities:
Net short-term borrowings 25,244 2,573
Retirement of long-term debt (3,372) --
Exercise of stock options 23 --
Other, net 11 (25)
---------------------------------
Net cash provided by financing activities 21,906 2,548
---------- ----------
Net cash (used in)/provided by continuing operations (240) 151
Cash used in discontinued operations -- (166)
---------- ----------
Net decrease in cash and cash equivalents (240) (15)
Cash and cash equivalents - beginning of year 1,501 1,400
--------------------------------
Cash and cash equivalents - end of quarter $ 1,261 $ 1,385
================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,493 $ 6,747
================================
Income taxes $ 42 $ 13
================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
SALANT CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Amounts in Thousands of Dollars, Except Share Data)
(Unaudited)
Note 1. Basis of Presentation and Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements include
the accounts of Salant Corporation ("Salant") and subsidiaries (collectively,
the "Company").
The 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 results of operations for the three months ended March 29, 1997 and March
30, 1996 are not necessarily indicative of a full year's operations. In the
opinion of management, the accompanying financial statements include all
adjustments of a normal recurring nature which are necessary to present fairly
such financial statements. Significant intercompany balances and transactions
are eliminated in consolidation. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
annual report to shareholders for the year ended December 28, 1996.
Loss per share is based on the weighted average number of common shares
(including, as of March 29, 1997 and March 30, 1996, 323,878 and 349,952 shares,
respectively, anticipated to be issued pursuant to the Company's plan of
reorganization) and common stock equivalents outstanding, if applicable. Loss
per share does not include common stock equivalents, inasmuch as their effect
would have been anti-dilutive.
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", effective for interim and annual periods ending after December 15, 1997,
establishes standards for computing and presenting earnings per share ("EPS")
and simplifies the standards for computing EPS currently found in Accounting
Principles Board ("APB") Opinion No. 15, ("Earnings Per Share"). Common stock
equivalents under APB No. 15 are no longer included in the calculation of
primary, or basic, EPS. Under SFAS No. 128, contingently issuable shares are
still included in the calculation of basic EPS. Adoption of SFAS No. 128 is not
expected to have a material impact on the Company.
<PAGE>
<TABLE>
<CAPTION>
Note 2. Inventories
March 29, December 28, March 30,
1997 1996 1996
<S> <C> <C> <C>
Finished goods $ 67,055 $ 58,663 $ 82,803
Work-in-Process 18,689 16,011 15,761
Raw materials and supplies 27,360 26,945 22,887
---------- -------------------------------------
$113,104 $101,619 $121,451
================================== ========
</TABLE>
Note 3. Division Restructuring Costs
In the first quarter of 1997, the Company reversed a previously recorded
restructuring provision of $754. The provision was for net liabilities related
to the JJ. Farmer sportswear product line. These net liabilities were settled
for less than the carrying amount, resulting in the reversal of the excess
portion of the provision.
In the first quarter of 1996, the Company recorded a $161 restructuring
provision, which related to the closure of certain unprofitable retail factory
outlet stores.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
First Quarter of 1997 Compared with First Quarter of 1996
Net Sales
The following table sets forth the net sales of each of the Company's
three principal business segments for the three months ended March 29, 1997 and
March 30, 1996 and the percentage contribution of each of those segments to
total net sales:
<TABLE>
<CAPTION>
Percentage
Three Months Ended Increase/
March 29, 1997 March 30, 1996 (Decrease)
- ------------------------------------------------------------------------------------------ ----------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Men's Apparel $79.5 89% $87.2 88% (8.8%)
Children's Sleepwear and Underwear 4.4 5% 4.2 4% 4.8%
Other Businesses (a) 5.5 6% 7.8 8% (29.5%)
------- ------ ------- ------
Total $89.4 100% $99.2 100% (9.8%)
================== =================
</TABLE>
(a) Represents the Made in the Shade division (a women's junior sportswear
business) and the retail outlet stores division (the "Stores division").
Sales of Men's apparel decreased by $7.7 million, or 8.8%, in the first quarter
of 1997, as compared to the first quarter of 1996. This decrease resulted from
(a) a $6.2 million reduction in sales of men's slacks, of which $1.8 million was
a planned reduction based upon the Company's decision to eliminate unprofitable
programs and the balance was due to operational difficulties in the move of
manufacturing and distribution out of the Company's facilities in Thomson,
Georgia, (b) a $6.1 million reduction in sales of men's sportswear, of which
$4.8 million was a planned reduction based upon the Company's decision to
eliminate its JJ. Farmer and Manhattan sportswear lines and the balance was
primarily due to the Company's decision to accept returns of slow-moving Perry
Ellis sportswear items to enable retailers to purchase additional Perry Ellis
product, and (c) a planned $2.5 million reduction in sales of certain dress
shirt lines, which was based upon the Company's decision to eliminate
unprofitable businesses. These sales decreases were partially offset by (a) a
$4.6 million increase in sales of jeans, which was due to the continuing success
of the Canyon River Blues line which the Company manufactures for Sears, Roebuck
& Co., and (b) a $3.6 million increase in sales of Perry Ellis dress shirts due
to the addition of new distribution and the continued strong acceptance of these
products by consumers.
Sales of children's sleepwear and underwear increased by $0.2 million,
or 4.8%, in the first quarter of 1997, as
compared to the first quarter of 1996. This increase was primarily a result of
the continuing expansion of the Joe Boxer children's product lines.
Sales of other businesses decreased by $2.3 million, or 29.5%, in the first
quarter of 1997, as compared to the first quarter of 1996. This decrease was due
to lower sales by the Made in the Shade division, primarily as a result of
strong price competition in the private label sector, resulting in the lack of
orders at acceptable gross margins. The Company anticipates that sales of the
Made in the Shade division will continue below 1996 levels. In response, the
Company has instituted certain cost reduction programs designed to restore the
division to profitability for the balance of 1997. In addition, the division has
recently executed a license to produce a branded line of sportswear under the
trademark Fly Girls, which is intended to improve the division's gross profit
margins for the balance of 1997.
Gross Profit
The following table sets forth the gross profit and gross profit margin (gross
profit as a percentage of net sales) for each of the Company's business segments
for the three months ended March 29, 1997 and March 30, 1996:
<TABLE>
<CAPTION>
Three Months Ended
March 29, 1997 March 30, 1996
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel $17.5 22.0% $19.1 21.9%
Children's Sleepwear and Underwear 0.8 18.1% 0.9 21.2%
Other Businesses 1.5 26.8% 2.6 33.0%
------- -------
Total $19.8 22.1% $22.6 22.8%
============= =============
</TABLE>
The decline in gross profit in the men's apparel segment and for the Company as
a whole was primarily attributable to the reduction in net sales discussed
above.
The gross profit margin of the Company's other businesses declined primarily as
a result of margin pressures in the Company's Made in the Shade business.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the first quarter of
1997 were $21.2 million (23.7% of net sales) compared with $22.0 million (22.1%
of net sales) for the first quarter of 1996.
Reversal of /(Provision for) Restructuring Costs
In the first quarter of 1997, the Company reversed a previously recorded
restructuring provision of $0.8 million. The provision was for net liabilities
related to the JJ. Farmer sportswear product line. These net liabilities were
settled for less than the carrying amount, resulting in the reversal of the
excess portion of the provision.
The cash portion of the remaining reserve for restructuring is expected to be
expended in the following manner: $1.2 million in the last three quarters of
1997, $0.4 million in 1998 and $0.4 million in 1999.
Income from Operations Before Interest and Income Taxes
The following table sets forth income from operations before interest and income
taxes for each of the Company's three business segments, expressed both in
dollars and as a percentage of net sales, for the three months ended March 29,
1997 and March 30, 1996:
<TABLE>
<CAPTION>
Three Months Ended
March 29, 1997 March 30, 1996
(dollars in millions)
<S> <C> <C> <C> <C>
Men's Apparel (a) $ 4.8 5.9% $ 4.4 5.0%
Children's Sleepwear and Underwear (1.0) (22.5%) (0.4) (10.6%)
Other Businesses (2.3) (41.2%) (1.6) (20.0%)
--------- -------------
1.5 1.6% 2.4 2.4%
Corporate expenses (2.2) (2.2)
Licensing division income 0.8 0.8
--------- --------
Income from operations before
interest and income taxes $ 0.1 0.1% $ 1.0 1.0%
================ ==============
</TABLE>
(a) Includes the reversal of restructuring charges of $0.8 million in the
first quarter of 1997.
The $0.9 million reduction in income from operations before interest and income
taxes in the first quarter of 1997 was primarily a result of the lower sales and
gross profit, which was partially offset by lower SG&A expenses and the reversal
of the provision for restructuring, as previously discussed.
Interest Expense, Net
Net interest expense was $3.6 million for the first quarter of 1997
compared with $3.8 million for the first
quarter of 1996.
Net Loss
In the first quarter of 1997, the Company reported a net loss of $3.5 million,
or $0.23 per share, as compared with a net loss of $2.9 million, or $0.19 per
share, in the first quarter of 1996.
Earnings Before Interest, Taxes, Depreciation, Amortization and
Restructuring Charges
Earnings before interest, taxes, depreciation, amortization and restructuring
charges was $2.3 million (2.5% of net sales) in the first quarter of 1997,
compared to $3.0 million (3.0% of net sales) in the first quarter of 1996, a
decrease of $0.7 million, or 23%. The Company believes this information is
helpful in understanding cash flow from operations that is available for debt
service 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 is a party to a revolving credit, factoring and security agreement,
as amended (the "Credit Agreement"), with The CIT Group/Commercial Services,
Inc. ("CIT"). The Credit Agreement provides the Company with working capital
financing through September 30, 1998, in the form of direct borrowings and
letters of credit, up to an aggregate of $135 million (the "Maximum Credit"),
subject to an asset-based borrowing formula. 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.
Pursuant to the Credit Agreement, the interest rate charged on direct borrowings
is one-half of one percent in excess of the base rate of The Chase Manhattan
Bank, N.A. (the "Prime Rate", which was 8.5% at March 29, 1997) or 2.75% above
the London Late Eurodollar rate (the "Eurodollar Rate", which was 5.6875% at
March 29, 1997). Pursuant to the Credit Agreement, the Company sells to CIT,
without recourse, certain eligible accounts receivable. The credit risk for such
accounts is thereby transferred to CIT. The amounts due from CIT have been
offset against the Company's direct borrowings from CIT in the accompanying
balance sheets. The amounts which have been offset were $15.0 million at March
29, 1997 and $36.8 million at March 30, 1996. The decrease in the amounts which
have been offset resulted from a change in the Credit Agreement, pursuant to
which the Company has significantly reduced the amount of its receivables which
are sold to CIT.
On March 29, 1997, direct borrowings (including borrowings under the Eurodollar
option) and letters of credit outstanding under the Credit Agreement were $32.9
million and $32.6 million, respectively, and the Company had unused availability
of $18.8 million. On March 30, 1996, direct borrowings and letters of credit
outstanding under the Credit Agreement were $17.0 million and $29.8 million,
respectively, and the Company had unused availability of $24.4 million. During
the first quarter of 1997, the maximum aggregate amount of direct borrowings and
letters of credit outstanding under the Credit Agreement was $71.8 million at
which time the Company had unused availability of $11.9 million. During the
first quarter of 1996, the maximum aggregate amount of direct borrowings and
letters of credit outstanding under the Credit Agreement was $48.5 million at
which time the Company had unused availability of $18.3 million. The increase in
direct borrowings compared to the first quarter of 1996 was a result of the
change in the Company's factoring arrangement with CIT described above, pursuant
to which the Company is now factoring significantly less of its receivables.
The instruments governing the Company's outstanding debt contain numerous
financial and operating covenants, including restrictions on incurring
indebtedness and liens, making investments in or purchasing the stock, or all or
a substantial part of the assets of another person, selling property and paying
cash dividends. In addition, under the Credit Agreement, the Company is required
during the year to maintain a minimum level of stockholders' equity and to
satisfy a maximum cumulative net loss test. The Company was at March 29, 1997,
and currently is, in compliance with all of its covenants. The following table
indicates the Company's compliance with the two financial covenants contained in
the Credit Agreement:
March 29, 1997
Credit Agreement Covenants Covenant Level Actual Level
Stockholders' Equity no less than $52.0 million
$57.1 million
Maximum Loss (a) no more than $(10.0) million positive income
(a) Maximum loss excludes write-offs for goodwill, restructuring expenses or
other unusual or non-recurring expenses during the first two quarters of 1996,
up to a maximum of $13.0 million.
The indenture governing the Company's outstanding Senior Secured Notes requires
the Company to reduce its outstanding indebtedness (excluding outstanding
letters of credit) to $20 million or less for fifteen consecutive days during
each twelve month period commencing on the first day of February. This covenant
has been satisfied for the balance of the term of the Senior Secured Notes.
The Company's cash used in operating activities for the first quarter of 1997
was $18.1 million, which reflects an $11.5 million increase in inventories and a
$5.1 million increase in accounts receivable. A significant portion of these
increases were planned to occur in the first quarter of 1997.
Cash used for investing activities in the first quarter of 1997 was $4.1
million, which represented capital expenditures of $3.0 million and the
installation of store fixtures in department stores of $1.1 million. During
1997, the Company plans to make capital expenditures of approximately $10.7
million and to spend an additional $4.2 million for the installation of store
fixtures in department stores.
Cash provided by financing activities in the first quarter of 1997 was
$21.9 million, which represented
short-term borrowings under the Credit Agreement of $25.2 million,
partially offset by cash used to retire $3.4
million of Senior Secured Notes.
The Company's principal sources of liquidity, both on a short-term and a
long-term basis, are cash flow from 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 the cash flow anticipated from its
future operations, the Company believes that its future cash flows together with
funds available under the Credit Agreement will be adequate to meet the
financing requirements it anticipates during 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.
The Company's Senior Secured Notes, of which $104.9 million principal amount was
outstanding at March 29, 1997, mature December 31, 1998. The Company does not
expect to generate sufficient cash flow from operations to repay those notes at
maturity and will seek to refinance the notes prior to maturity. There can be no
assurance that the Company will obtain such refinancing or that the terms of
such refinancing, if obtained, will not be less favorable to the Company than
those of the Senior Secured Notes.
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", effective for interim and annual periods ending after December 15, 1997,
establishes standards for computing and presenting earnings per share ("EPS")
and simplifies the standards for computing EPS currently found in Accounting
Principles Board Opinion ("APB") No. 15, ("Earnings Per Share"). Common stock
equivalents under APB No. 15 are no longer included in the calculation of
primary, or basic, EPS. Under SFAS No. 128, contingently issuable shares are
still included in the calculation of basic EPS. Adoption of SFAS No. 128 is not
expected to have a material impact on the Company.
Factors that May Affect Future Results and Financial Condition.
This report contains or incorporates by reference forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such forward-looking statement, the Company cautions that
assumed facts or bases almost always vary from the actual results, and the
differences between assumed facts or bases and actual results can be material,
depending on the circumstances. Where, in any forward-looking statement, the
Company or its management expresses an expectation or belief as to future
results, there can be no assurance that the statement of the expectation or
belief will result or be achieved or accomplished. The words "believe",
"expect", "estimate", "project", "seek", "anticipate" and similar expressions
may identify forward-looking statements. The Company's future operating results
and financial condition are dependent upon the Company's ability to successfully
design, manufacture, import and market apparel. Taking into account the
foregoing, the following are identified as important factors that could cause
results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company:
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. The Company also competes for private label programs with the internal
sourcing organizations of many of its own customers.
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 bankruptcy protection. 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 $137.8
million as of March 29, 1997. 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. In 1996, the Company produced
61% 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 raw
material supplier, the loss of several such product manufacturers and/or raw
material 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 in the
Company's common stock price.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K
During the first quarter of 1997, the Company did not file any reports on Form
8-K.
Exhibits
Number Description
27 Financial Data Schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SALANT CORPORATION
Date: May 12, 1997 /s/ Thomas W. Busch
-------------- ---------------------
Thomas W. Busch
Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 1,261
<SECURITIES> 0
<RECEIVABLES> 58,301
<ALLOWANCES> 13,022
<INVENTORY> 113,104
<CURRENT-ASSETS> 163,142
<PP&E> 57,350
<DEPRECIATION> 30,382
<TOTAL-ASSETS> 253,819
<CURRENT-LIABILITIES> 82,711
<BONDS> 0
0
0
<COMMON> 15,339
<OTHER-SE> 41,776
<TOTAL-LIABILITY-AND-EQUITY> 253,819
<SALES> 89,432
<TOTAL-REVENUES> 90,656
<CGS> 69,643
<TOTAL-COSTS> 91,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (754)
<INTEREST-EXPENSE> 3,551
<INCOME-PRETAX> (3,468)
<INCOME-TAX> 42
<INCOME-CONTINUING> (3,510)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,510)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
