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 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-2433
SALANT CORPORATION
(Exact name of registrant as specified in its charter)
1114 Avenue of the Americas, New York, New York 10036
Telephone: (212) 221-7500
Incorporated in the State of Delaware
Employer Identification No. 13-3402444
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1 per share,
registered on the New York Stock Exchange, and
series B Warrants, registered on the American Stock Exchange.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No __
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 ofRegulation S-K (Section 229-405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
As of March 16, 1995 there were outstanding 14,480,092 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
$31,011,121. 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 1995 Annual Meeting of Stockholders is
incorporated by reference in Part III hereof.
TABLE OF CONTENTS
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for Registrant's Common Equity and
Related Shareholder Matters . . . . . . . . . . . . . . . .
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . .
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . .
Item 8. Financial Statements and Supplementary Data . . . . . . . . .
Item 9. Disagreements on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors and Executive Officers of the Registrant. . . . . .
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions. . . . . . . .
PART IV
Item 14. Exhibits, Financial Statement Schedule and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART I
ITEM 1. BUSINESS
Introduction. Salant Corporation ("Salant") designs, manufactures,
imports and markets to retailers throughout the United States a wide
range of men's, as well as women's junior and children's, apparel and
accessories, principally under internationally recognized brand names
owned by the Company or licensed from others. (As used herein, the
"Company" includes Salant and its subsidiaries, but excludes Salant's
Vera Scarf Division.)
The Company's products are sold through major department and
specialty stores, major discounters and mass volume retailers.
Approximately 12% of the Company's sales in the fiscal year ended
December 31, 1994 were to Federated Department Stores, Inc.
("Federated"), which includes all 1994 sales to Macy's Department
Stores ("Macy's"), which was acquired by Federated in 1994. In
1993, sales to a combined Federated/Macy's would have represented
approximately 10% of the Company's sales. No other customer accounted
for more than 10% of the Company's net sales during fiscal 1994. In
addition, the Company receives royalty income from the licensing of
certain of its owned trademarks and designs to other manufacturers.
The Company also operates a chain of factory outlet stores, at which
it sells its own products and those of other apparel manufacturers.
Salant, which was incorporated in Delaware in 1987, is the successor
to a business founded in 1893 and incorporated in New York in 1919.
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 intends to
close the Vera Scarf Division by June 1995. The financial statements
of the Company included in this report treat the Vera Scarf Division
as a discontinued operation.
Principal Product Lines. The following table sets forth, for fiscal
years 1994 through 1992, the percentage of the Company's total sales
contributed by each category of product:
Fiscal Year
1994 1993 1992
Men's Apparel and Accessories 86% 83% 81%
Women's Junior Apparel and Accessories 6% 7% 10%
Children's Apparel and Accessories 8% 10% 9%
The markets in which the Company operates are highly competitive.
The Company competes primarily on the basis of brand recognition,
quality, fashion, price and customer service.
A significant factor in the marketing of the Company's products is
the consumer perception of the trademark or brand name under which
those products are marketed. Approximately 80% of the Company's net
sales for 1994 was attributable to products sold under designer
trademarks and other internationally recognized brand names and the
balance was attributable to products sold under retailers' private
labels. The following table lists the principal trademarks under
which the Company's products are sold and the product lines
associated with those trademarks. Trademarks used under license are
indicated with an asterisk; all other listed trademarks are owned by
the Company.
Trademark Product Lines
THE BEATLES* . . . . . . . . . . . . Men's neckwear and
suspenders
DISNEY Characters* . . . . . . . . . Children's sleepwear
DR. DENTON . . . . . . . . . . . . . Children's sleepwear
GANT*. . . . . . . . . . . . . . . . Men's dress shirts,
neckwear, belts and
suspenders
JJ. FARMER . . . . . . . . . . . . . Men's and women's sportswear
JOE BOXER* . . . . . . . . . . . . . Children's boxer shorts, t-
shirts, pajamas, loungewear
and long underwear
JOHN HENRY . . . . . . . . . . . . . Men's dress shirts,
neckwear, belts and
suspenders; men's and boys'
jeans
LIBERTY OF LONDON* . . . . . . . . . Men's dress shirts,
neckwear, belts and
suspenders
MADE IN THE SHADE. . . . . . . . . . Women's junior sportswear
MANHATTAN. . . . . . . . . . . . . . Men's dress shirts and
sportswear
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
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
WORLD WILDLIFE FUND* . . . . . . . . Men's casual slacks, shorts,
t-shirts and sweaters,
neckwear and suspenders
During fiscal 1994, approximately 26% 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 12% of the
Company's net sales during fiscal 1994; these products are marketed
primarily through major mass volume retailers. Products sold under
the JOHN HENRY label accounted for approximately 9% of the Company's
net sales during fiscal 1994; these products are marketed primarily
through department and specialty stores. Products sold under the
THOMSON label accounted for approximately 8% of the Company's net
sales during fiscal 1994; these products are sold primarily through
department and specialty stores. No other line of products accounted
for more than 5% of the Company's net sales during fiscal 1994.
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
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 1994, licenses were outstanding to
approximately 56 licensees to make or sell apparel products and
accessories in the United States and in 29 other countries under the
MANHATTAN, LADY MANHATTAN and JOHN HENRY trademarks, which produced
royalty income, net of related expenses, of approximately $5.7
million in fiscal 1994. Products under license include men's ties,
sweaters, socks, pajamas, outerwear, activewear, swimwear, underwear,
sportcoats, sportshirts, slacks, scarves, sunglasses, leather
accessories, hats and gloves, and women's blouses and tops, lingerie,
skirts and pants.
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 and the license agreement covering boys' sportswear expired on
December 31, 1994. The Company is presently negotiating with PEI on
extending the license agreement for certain categories of boyswear.
The Company also has rights of first refusal worldwide for any new
licenses granted by PEI for men's and children's apparel and
accessories.
The Company is also a licensee of the trademarks THE BEATLES, 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, and JOE BOXER for various
categories of products, under license agreements expiring between
1995 and 2008.
The agreements under which the Company is licensed to use trademarks
owned by others typically provide for royalties at varying
percentages of net sales under the licensed trademark, subject to a
minimum annual royalty payable irrespective of the level of net
sales. The Company anticipates that it will be able to extend, if
it so desires, the term of any material licenses when they expire.
Design and Manufacturing. With limited exceptions, products sold by
the Company's various divisions are manufactured to the designs and
specifications (including fabric selections) of designers employed
by those divisions.
During fiscal 1994, approximately 32% 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 84% of its
domestic-made products and 28% of its foreign-made products; the
balance in each case was attributable to unaffiliated contract
manufacturers.
The Company's foreign sourcing operations are subject to various
risks of doing business abroad, including currency fluctuations,
quotas and, in certain parts of the world, political instability.
Although the Company's operations have not been materially 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 benefitted the Company by (i) reducing
and/or eliminating United States Customs duties on merchandise
manufactured in the Company's facilities in Mexico, (ii) eliminating
quota levels on this merchandise, and (iii) eliminating restrictions
on exporting merchandise from the United States for sale in both
Mexico and Canada. Also, the recent devaluation of the Mexican peso
against the U.S. dollar, will benefit the Company as a result of
employees being paid in Mexican pesos which the Company purchases
with U.S. dollars.
Raw Materials. The raw materials used in the Company's manufacturing
operations consist principally of finished fabrics made from natural,
synthetic and blended fibers. These fabrics and other materials,
such as leathers used in the manufacture of various accessories, are
purchased from a variety of sources both within and outside the
United States. The Company believes that adequate sources of supply
at acceptable price levels are available for all such materials. No
single supplier accounted for more than 10% of Salant's raw material
purchases during fiscal 1994.
Seasonality of Business. Although the Company typically introduces
and withdraws various individual products throughout the year, the
Company's principal products are organized into seasonal lines for
resale at the retail level during the spring, fall and Christmas
seasons. The Company's products are manufactured approximately one
season in advance of the related retail selling season.
Backlog of Orders. The Company does not consider the amount of its
backlog of orders to be significant to an understanding of its
business primarily due to increased utilization of EDI technology,
which provides for the electronic transmission of orders from
customers' computers to those of the Company. As of March 4, 1995,
the Company's backlog of orders was approximately $141 million, 41%
greater than the backlog of orders of approximately $100 million that
existed as of March 5, 1994.
Employees. As of the end of fiscal 1994, the Company employed
approximately 4,200 persons, of whom 3,500 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 are in effect and expire between August 31, 1996 and July 31,
1997. The Company believes that its relations with its employees are
satisfactory.
Competition. The apparel industry in the United States is highly
competitive and characterized by a relatively small number of multi-
line manufacturers (such as the Company) and a larger number of
specialty manufacturers. The Company faces substantial competition
in its markets from manufacturers in both categories. Some of the
Company's competitors have greater financial resources than the
Company.
The Company is one of the nation's leading suppliers of men's dress
shirts, sportswear, slacks, ties, belts and suspenders. The Company
seeks to maintain its competitive position in the markets for its
branded products on the basis of the strong brand recognition
associated with those products and, with respect to all of its
products, on the basis of styling, quality, fashion, price and
customer service.
Environmental Regulations. Current environmental regulations have
not had, and in the opinion of the Company, assuming the continuation
of present conditions, will not have a material effect on the
business, capital expenditures, earnings or competitive position of
the Company.
Bankruptcy Court Cases. On June 27, 1990 (the "Filing Date"), Salant
and its wholly owned subsidiary, Denton Mills, Inc. ("Denton Mills"),
each filed with the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court") a separate voluntary
petition for relief under chapter 11 of title 11 of the United States
Code (the "Bankruptcy Code") (Case Nos. 90-B-12037 (CB) and 90-B-
12038 (CB)) (the "Chapter 11 Cases"). The Company's other United
States subsidiaries on the Filing Date did not seek relief under the
Bankruptcy Code. On July 30, 1993, the Bankruptcy Court issued an
order confirming the Third Amended Joint Plan of Reorganization of
Salant and Denton Mills (the "Plan"). The Plan was consummated on
September 20, 1993 (the "Consummation Date"), as further described
in Item 3. "Legal Proceedings" and in Note 18 to the financial
statements.
Salant Children's Apparel Group (Obion Denton Division) -
Discontinued Operation Subsequently Retained. On March 10, 1993, the
Company determined to restructure and sell its Children's Apparel
division, which manufactures and markets children's sleepwear. As
a consequence, the division was accounted for as a discontinued
operation in the Company's financial statements for fiscal 1992 and
the first three quarters of fiscal 1993. During 1993, the Company
effected a comprehensive restructuring of the division's operations
involving (i) the discontinuation of certain product lines which had
historically produced inadequate gross profit margins, (ii) the
elimination of the resulting excess manufacturing capacity and
(iii) the reduction of the overhead costs of the restructured
business. In March 1994, the Company concluded that the value of the
division would be maximized by retaining and continuing to operate
the division. The financial statements of the Company for all
periods included in this report have been reclassified to treat the
Salant Children's Apparel Group as a continuing operation.
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, three
manufacturing facilities located in Mexico, and five distribution
centers located in Georgia, New York, South Carolina and Texas (2).
The Company owns approximately 1,279,000 square feet of space devoted
to manufacturing and distribution and leases approximately 434,000
square feet of such space. The Company owns approximately 34,000
square feet of combined office, design and showroom space and leases
approximately 178,000 square feet of such space. As of the end of
1994, the Company operated 69 factory outlet stores, comprising
approximately 200,000 square feet of selling space, all of which are
leased.
The Company believes that its plant and equipment are adequately
maintained, in good operating condition, and will be adequate for the
Company's present needs. The Company continues, however, to explore
opportunities for additional production facilities in order to enable
the Company to further reduce its manufacturing costs and to meet its
future needs.
ITEM 3. LEGAL PROCEEDINGS
(a) Chapter 11 Cases. On June 27, 1990, Salant and Denton Mills
each filed with the Bankruptcy Court a separate voluntary petition
for relief under chapter 11 of the Bankruptcy Code. On July 30, 1993,
the Bankruptcy Court issued an order confirming the debtors' Third
Amended Joint Plan of Reorganization (the "Plan").
The Plan was consummated on September 20, 1993. From that date
through December 31, 1994 (approximately 15 months), the Company made
cash payments of $8.5 million, issued $111.9 million of new 10-1/2%
senior secured notes, and issued 10.5 million shares of common stock
in settlement of certain undisputed and disputed claims in the
chapter 11 proceedings. Salant anticipates that an additional $8.0
million in cash and an additional 789 thousand shares of common stock
ultimately will be distributed in connection with the resolution of
all remaining claims. Provisions for such distributions had
previously been made in the consolidated financial statements for the
year ended January 1, 1994.
The process of resolving claims is continuing and, pursuant to the
Plan, remains under the jurisdiction of the Bankruptcy Court.
Significant Disputed Claims.
(i) IRS Claim. As previously disclosed, by proof of claim, as
amended, the Internal Revenue Service of the United States of America
(the "IRS") had asserted a claim (the "IRS Claim") against Salant in
the Chapter 11 Cases of approximately $5.2 million. The IRS Claim
included approximately $3.2 million of Excise Taxes, as discussed in
section (ii) below; pursuant to an interim agreement and formal
written agreement, which is subject to Bankruptcy Court approval,
Salant will pay $100,000 to the IRS in full settlement of the Excise
Tax claims. The balance of the IRS Claim sought the payment of (a)
income taxes that are claimed to be owing for prior tax periods; (b)
withholding and FICA taxes for the tax period ending March 31, 1990;
(c) interest and penalties with respect to those taxes; and (d) FUTA
taxes for the period from January 1 through June 27, 1990. Salant has
reached a tentative agreement with the IRS relating to such non-
Excise related taxes: the implementation of this settlement is
pending. The Company has provided reserves for amounts which it
deems to be appropriate for these claims and believes that this
settlement will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
(ii) Minimum Funding Contributions for Salant's Pension Plans.
As discussed in section (i) above, the IRS filed a proof of claim,
as amended, in the amount of approximately $5.2 million, of which
approximately $3.2 million was in respect of Excise Taxes and
associated interest and penalties as a result of Salant's inability
to make certain contributions to its pension plans by reason of the
limitations on the payment of pre-petition debt that are imposed
under the Bankruptcy Code.
Salant and the IRS reached an interim agreement with respect to the
settlement of the Excise Tax claims which was read into the record
on July 30, 1993 at a hearing before the Bankruptcy Court concerning
the confirmation of the Plan. The interim agreement provides that its
terms would be set forth in detail in a formal written agreement
between Salant and the IRS, which formal written agreement has been
executed but which is still subject to Bankruptcy Court approval. The
basic terms of the agreement are that Salant will amortize the
accumulated funding deficiencies in the Retirement Plan and Pension
Plan with payments as follows: (1) $700,000 on the Consummation Date
(which was paid on September 15, 1993); (2) $750,000 on February 28,
1994 (which was paid on that date); (3) $550,000 on February 28, 1995
(which was paid on that date); and (4) a cash payment on each
anniversary of the Consummation Date during the years 1995 through
and including 2000 equal to the remainder of the aggregate funding
deficiency (after giving effect to the payments provided in (1)-(3)
above) divided by six, together with interest accruing on the
outstanding balance from the Consummation Date. Upon the effective
date of the formal written agreement, Salant will pay the IRS
$100,000 in full settlement of the Excise Tax claims.
(iii) Equity Committee Appeal. As previously disclosed, on
August 6, 1993, the Official Committee of Equity Security Holders of
Salant (the "Equity Committee") filed a notice of appeal in the
United States District Court for the Southern District of New York.
The Equity Committee appealed the portion of the Plan relating to the
payment of certain compensation to Salant's Chief Executive Officer,
Nicholas DiPaolo, which compensation became payable upon consummation
of the Plan, but did not seek to overturn the confirmation of the
Plan. On November 12, 1993, Salant moved to dismiss the appeal on the
grounds that the Equity Committee lacks standing and mootness. By
opinion and order dated December 14, 1994, Salant's motion was
granted (on the grounds that the Equity Committee lacked standing)
and the Equity Committee's appeal was dismissed.
(b) ILGWU National Retirement Fund. The ILGWU National Retirement
Fund (the "Fund") filed claims in the Chapter 11 Cases against both
Salant and Denton based on both Debtors' withdrawal liability. The
agreed amount of the total claim is $1.7 million, which in accordance
with the terms of the Plan is to be paid in common stock of Salant.
There is currently an ongoing dispute in the Bankruptcy Court
concerning the proper valuation of the common stock of Salant, and
consequently the amount of such stock necessary to pay the Fund's
total claim.
Additionally, on February 2, 1995, the Fund and two of its trustees
commenced a civil action in the United States District Court for the
Southern District of New York against seven subsidiaries of Salant,
ILGWU National Retirement Fund et al. v. Clantexport Inc. et al., No.
95 Civ. 0722 (DAB). Named as defendants were Clantexport Inc., Sea
Isle Sportswear Inc., Frost Bros. Enterprises, Inc., Vera Linen Mfg.,
Inc., Vera Licensing Inc., Manhattan Industries, Inc. (Delaware), and
Manhattan Industries, Inc. (New York). The complaint alleges, in
substance, that the defendants, as wholly owned subsidiaries of
Salant, were under common control with Salant within the meaning of
ERISA and applicable regulations, and thus that they are jointly and
severally liable for the withdrawal liability described above. The
plaintiffs seek damages in the amount of $1,715,524, plus interest,
liquidated damages and attorneys' fees, allegedly as authorized under
29 U.S.C. section 1132(g), reduced by any amounts received under the
Plan.
(c) Securities Litigation. As previously disclosed, on November 27,
1990, Mae Fischer ("Fischer"), an alleged purchaser of Salant's 13-
1/4% Senior Subordinated Debentures due June 15, 1999 (the
"Debentures"), instituted a purported class action suit in the United
States District Court for the Southern District of New York, claiming
that certain directors and officers of Salant violated the federal
securities laws by issuing favorable public statements concerning the
future profitability of Salant, which Fischer claims artificially
inflated the market price of the Debentures between October 1988 and
June 1990. Pursuant to Salant's bylaws, Salant is obligated to
indemnify its directors and officers against expenses and any
judgments or settlements entered against them in actions in which
they are sued in their capacity as directors or officers. Salant was
not named as a defendant in the suit, Fischer v. Tynan, et al., 90
Civ. 7587 (LBS), due to the pendency of the Chapter 11 Cases.
Fischer sought an unspecified amount of damages for herself and on
behalf of all persons who purchased the Debentures between October
18, 1988 and June 15, 1990. On April 30, 1992, Fischer also filed a
proof of claim (the "Fischer Claim") in the Chapter 11 Cases on
behalf of the same group of purchasers of the Debentures.
On November 30, 1992, Fischer filed an amended complaint which
contains essentially the same allegations, and seeks the same relief,
as the original complaint. On January 15, 1993, the defendants filed
a supplemental brief in further support of their motion to dismiss
the amended complaint on the ground that, among other things, it
fails to state a claim upon which relief can be granted. In addition,
the defendants have opposed the plaintiff's motion for class
certification, which was filed on June 22, 1992.
On June 16, 1993, defendants' motion to dismiss the amended complaint
was granted and Fischer's motion for class certification was
dismissed. On July 16, 1993, Fischer filed a notice of appeal from
the June 16, 1993 order with the United States Court of Appeals for
the Second Circuit. During the pendency of the appeal, the defendants
and Fischer reached an agreement to settle both the Fischer Claim and
the appeal. Pursuant to the terms and conditions of the stipulation
of settlement, Salant will issue and distribute a number of shares
of Salant Common Stock, not to exceed 11,000 shares in the
aggregate, to certain purchasers of the Debentures who sold at a loss
during a circumscribed period. In addition, Fischer's counsel will
receive $150,000 for their fees and expenses pursuant to the
settlement. The stipulation of settlement, which provides for
preliminary approval of the settlement, notice to class members of
the settlement, and a hearing for final approval, was signed by the
Bankruptcy Court on February 27, 1995. Upon final approval by the
Bankruptcy Court, the Fischer appeal and the Fischer Claim will be
deemed withdrawn with prejudice.
(d) 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 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 fiscal year 1994, no matter was
submitted to a vote of security holders of Salant by means of the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Salant's Common Stock is traded on the New York Stock Exchange (the
"NYSE") under the ticker symbol SLT.
The high and low sale prices per share of Common Stock (based upon
the NYSE composite tape as reported in published financial sources)
for each fiscal quarter for the 1994 and 1993 fiscal years are set
forth below. The Company did not declare or pay any dividends during
such fiscal years. Both (i) the indenture governing Salant's 10-1/2%
Senior Secured Notes due December 31, 1998 (the "Senior Notes"), and
(ii) the revolving credit, factoring and security agreement, dated
September 20, 1993 (the "Credit Agreement"), with the CIT
Group/Commercial Services, Inc. require the satisfaction of certain
net worth tests prior to the payment of any cash dividends by Salant.
As of December 31, 1994, Salant was prohibited from paying cash
dividends by the most restrictive of these provisions.
High and Low Sale Prices Per Share of the Common Stock
Fiscal Quarter High Low
1994
Fourth $ 6 $ 4 3/8
Third 7 5
Second 8 3/8 6 1/8
First 9 3/8 6 3/4
1993
Fourth $ 8 3/8 $ 6 1/8
Third 11 3/8 7 1/2
Second 10 3/4 7 7/8
First 9 5/8 8 1/4
On March 16, 1995, there were 1,209 holders of record of shares of
Common Stock, and the closing market price was 3 7/8.
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.
ITEM 6. SELECTED FINANCIAL DATA
(Amounts in thousands except share, per share and ratio data)
Dec. 31, Jan. 1, Jan. 2, Dec. 28, Dec. 29,
1994 1994 1993 1991 1990
(52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks)
For The Year Ended:
Continuing Operations:
Net sales $ 419,285 $ 402,098 $ 411,021 $392,804 $403,617
Income/(loss) from
continuing operations 3,507 7,816 (4,687) (17,731) (42,328)
Discontinued Operations:
Loss from operations,
net of income taxes (9,639) (589) (1,299) (1,378) (1,544)
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 63 24,707 - - -
Net income/(loss)* (7,865) 43,706 (17,758) (19,109) (43,872)
Income/(loss) per share from continuing
operations before
extraordinary gain $ 0.23 $ 1.10 $ (1.35) $ (5.12) $ (12.24)
Income/(loss) per share from discontinued
operations (0.76) 1.57 (3.78) (0.40) (0.44)
Income per share from
extraordinary gain - 3.48 - - -
Net income/(loss) per share* (0.53) 6.15 (5.13) (5.52) (12.68)
Cash dividends per share - - - - -
At Year End:
Current assets $ 177,735 $157,622 $ 160,146 $159,864 $160,873
Total assets 276,540 253,232 259,466 270,651 286,034
Current liabiliti 81,487 45,713 55,093 38,091 25,483
Long-term debt 109,908 111,851 - - -
Deferred liabilities 13,479 16,766 2,462 5,833 5,835
Liabilities deferred pursuant
to chapter 11 cases - - 266,420 272,977 282,033
Working capital 96,248 111,909 105,053 121,773 135,390
Current ratio 2.2:1 3.4:1 2.9:1 4.2:1 6.3:1
Shareholders' equity/
(deficiency) $ 71,666 $ 78,902 $(64,509) $(46,250) $(27,317)
Book value per share $ 4.78 $ 5.34 $ (18.62) $ (13.37) $ (7.90)
Number of shares outstanding 15,008 14,781 3,463 3,463 3,463
* Includes, for the fiscal year ended January 1, 1994, a provision of
$5,500 (77 cents per share; tax benefit not available) for
restructuring costs principally related to the costs incurred in
connection with the closure of certain unprofitable operations,
including (i) inventory markdowns associated with those product lines
and (ii) fixed asset write-downs at closed locations; for
the fiscal year ended January 2, 1993, (a) a provision of $4,824
($1.39 per share; tax benefit not available) for restructuring
costs principally related to (i) the estimated costs to be incurred
in connection with the closure of certain unprofitable
operations, (ii) the rejection, pursuant to the Bankruptcy Code,
of certain lease obligations, and (iii) the write-off of leasehold
improvements, and buildings and equipment at closed locations, and (b)
the write-off of certain intangible assets of $6,759 ($1.95
per share; tax benefit not available); for the fiscal year ended
December 28, 1991, (a) a provision of $12,984 ($3.75 per share;
tax benefit not available) for restructuring costs principally related
to (i) the closure of 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; and for the fiscal
year ended December 29, 1990, a provision of $10,822 ($3.13 per share;
tax benefit not available) for restructuring costs
principally related to (i) the closure of the garment dye finishing
operations, (ii) discontinuance of a garment dye program and
(iii) the closing of 23 unprofitable retail factory outlet stores,
net of a reversal of $5,000 accrued for lease obligations which
were rejected in the chapter 11 case.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the consolidated results
of operations and financial condition should be read in conjunction
with the accompanying Consolidated Financial Statements and related
Notes to provide additional information concerning the Company's
financial activities and condition.
Results of Operations
The following discussion compares the operating results of the
Company for the fiscal year ended December 31, 1994 with the
operating results for the fiscal years ended January 1, 1994 and
January 2, 1993. In February 1995, the Company discontinued its
Vera Scarf division. The financial statements included in this
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 fiscal year presented. See
"Notes to the Consolidated Financial Statements -- Note 3." 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.
(dollars in millions)
Twelve months ended
December 31, January 1, January 2,
1994 1994 1993
Net sales $419.3 $402.1 $411.0
Gross profit $ 93.2 $ 98.1 $ 92.6
Gross margin percentage 22.2% 24.4% 22.5%
EBITDA (a) $ 27.0 $ 37.8 $ 31.9
(a) Earnings before interest, taxes, depreciation, amortization, restructuring
costs, bankruptcy administration expenses, write-off of other assets,
discontinued operations and extraordinary gain.
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
men's sportswear and slacks achieved by the Company's Perry Ellis,
Thomson, Manhattan Apparel and JJ. Farmer divisions. Manhattan
Apparel commenced shipping in September 1993, and JJ. Farmer is a
label which was acquired in June 1994. These increases were
partially offset by reductions in 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 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
sales of $2.8 million in 1994.
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 sportswear, neckwear and dress shirts and in denim-based
products. The cause of the reduction was (a) continuing pressure
on selling prices, (b) a change in the Company's mix to lower
priced sportswear, which carries a lower gross profit margin, as a
result of the introduction of Manhattan Sportswear late in the
third quarter of 1993, and (c) certain cost increases related to
wrinkle-free dress shirts.
Selling, general and administrative expenses for the 1994 fiscal
year amounted to $79.5 million, or 19.0% of net sales, as compared
to $74.8 million for the 1993 fiscal year, when such expenses
represented 18.6% of net sales. The increase in S,G&A expenses was
primarily attributable to (a) costs 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 related to an increase in the number of
factory outlet stores in operation in 1994.
Royalty income (net of related expenses) in fiscal 1994 was $5.7
million. During fiscal 1993, royalty income (net of related
expenses) was $6.7 million. The decrease in royalty income is
primarily a result of the termination of a 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.
Earnings before interest, taxes, depreciation, amortization,
bankruptcy administration expenses, restructuring charges,
discontinued operations and extraordinary gain ("EBITDA") was $27.0
million, compared to $37.8 million in 1993, a decrease of $10.8
million, as described above. The Company believes that EBITDA is
helpful in understanding cash flow from operations that is
available for debt service, taxes and capital expenditures. EBITDA
should not be considered as an alternative to (a) net earnings as
an indicator of the Company's operating performance or (b) cash
flow as an indicator of liquidity.
In fiscal year 1993, the Company recorded a $5.5 million provision
for restructuring, which included $5.0 million related to the
restructuring of the Salant Children's Apparel Group.
Net interest expense for 1994 amounted to $15.6 million as 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, versus income from continuing
operations of $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 is related to the Company's
emergence from bankruptcy in September 1993.
For the 1994 fiscal year, the Company recognized a charge of $11.4
million, or $0.76 per share (inclusive of approximately $300
thousand of losses incurred by the Vera Scarf Division in the first
three quarters of 1994), reflecting the discontinuance of that
division. The Vera Scarf Division had net sales of $5.1 million in
the 1994 fiscal year.
For the 1993 fiscal year, 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 the 1994 fiscal year 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 the 1994 fiscal year was
14,954,000 shares, which treats as issued, as of such consummation
date, 789,000 shares that the Company anticipates will be issued to
creditors.
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 passage of the General Agreement on Trades and Tariffs (GATT)
is anticipated to have a somewhat favorable impact on the Company's
results of operations.
The adoption of the North American Free Trade Agreement (NAFTA) has
benefitted the Company's business by (i) reducing and/or
eliminating United States Customs duties on merchandise
manufactured in the Company's facilities in Mexico, (ii)
eliminating quota levels on this merchandise, and (iii) eliminating
restrictions on exporting merchandise from the United States for
sale in both Mexico and Canada. Also, the recent devaluation of
the Mexican peso against the U.S. dollar, will benefit the Company
as a result of employees being paid in Mexican pesos which the
Company purchases with U.S. dollars.
Fiscal 1993 Compared with Fiscal 1992
For the 1993 fiscal year, net sales were $402.1 million, a 2%
decrease from net sales of $411.0 million in 1992. Excluding the
net sales of product lines which ceased operations prior to 1993,
net sales for fiscal 1993 increased by 1.1%. The Company's sales of
dress shirts in 1993 increased over 1992.
Gross profit in 1993 increased to $98.1 million, (24.4% of net
sales) from $92.6 million, (22.5% of net sales) in 1992 as a result
of increased gross profit margins in the men's Accessories Division
(primarily neckwear), the Children's Apparel Group, the Stores
division and the Thomson slacks division. These improvements more
than offset reduced gross margins in the Company's dress shirt and
denim based businesses.
The increased gross profit margin in the men's Accessories Division
was largely a result of the outstanding consumer acceptance of the
Company's novelty neckwear, produced under the PEANUTS, SAVE THE
CHILDREN, BEATLES and WORLD WILDLIFE FUND labels.
Selling, general and administrative expenses for the 1993 fiscal
year amounted to $74.8 million, or 18.6% of net sales, a decrease
of $800 thousand from the 1992 fiscal year, when such expenses
represented 18.4% of net sales.
Earnings before interest, taxes, depreciation, amortization,
bankruptcy administration expenses, restructuring charges and
write-off of other assets ("EBITDA") was $37.8 million, compared to
$31.9 million in 1992, an increase of 18%.
In fiscal year 1993, the Company recorded a $5.5 million provision
for restructuring, which included $5.0 million related to the
restructuring of the Salant Children's Apparel Group. In fiscal
year 1992, the Company recorded division restructuring costs of
$4.8 million, which included (i) the estimated costs to be incurred
in connection with the restructuring of certain unprofitable
operations, (ii) the rejection, allowable under chapter 11, of
certain lease obligations and (iii) the write-off of leasehold
improvements, buildings and equipment at closed locations.
Also, in fiscal year 1992, the Company wrote off the unamortized
portion of the excess of cost over net assets acquired related to
the Obion Denton and Vera Sportswear divisions in the amount of
$6.8 million.
Bankruptcy administration expenses decreased to $8.9 million during
fiscal year 1993 from $12.9 million during fiscal year 1992,
primarily as a result of the consummation of the plan of
reorganization on September 20, 1993.
Net interest expense (interest expense less interest income)
increased to $7.5 million in fiscal year 1993 from $3.0 million in
fiscal year 1992 as a result of interest incurred subsequent to
September 1993 on the Secured Notes issued pursuant to the Plan.
Interest expense for 1994 and subsequent years will include
approximately $11.7 million per annum related to the Secured Notes.
For the 1993 fiscal year, the Company reported income from
continuing operations before extraordinary gain of $7.8 million, or
$1.10 per share (based on a weighted average of 7,104,000 common
shares outstanding), compared to a loss from continuing operations
of $4.7 million, or $1.35 per share, (based on a weighted average
of 3,460,000 common shares outstanding) for the 1992 fiscal year.
For the 1993 fiscal year, net income was $43.7 million, or $6.15
per share, compared to a net loss of $17.8 million, or $5.13 per
share, in 1992. For the 1993 fiscal year, the Company recognized an
extraordinary gain of $24.7 million, or $3.48 per share, relating
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, of $1.65 per share. The net loss for 1992
included the provision for the reserve of $11.8 million, or $3.40
per share, related to the estimated loss on the previously planned
disposal of the Children's Apparel Group and a loss from
discontinued operations of $1.3 million, or $0.38 per share.
As of January 1, 1994, there were 13,100,000 shares of the
Company's common stock outstanding, including 9,612,000 shares
issued to creditors in connection with the Company's
reorganization, consummated on September 20, 1993. The weighted
average number of shares outstanding for the 1993 fiscal year was
7,104,000 shares, which (i) treats as issued, as of such
consummation date, 1,681,000 shares that the Company anticipates
will be issued to creditors, and (ii) gives effect to 465,000
common share equivalents relating to outstanding stock options.
Liquidity and Capital Resources
In September 1993, the Company entered into a two year revolving
credit, factoring and security agreement (the "Credit Agreement")
with The CIT Group/Commercial Services, Inc. ("CIT"), as referenced
in Exhibit 4.3 to this Form 10-K, to provide seasonal working
capital financing, in the form of direct borrowings and letters of
credit, up to an aggregate of $120 million (subject to an asset
based borrowing formula). Interest on direct borrowings was charged
monthly at an annual rate of one-half of one percent in excess of
the prime rate of Chemical Bank (the "Prime Rate")(which prime rate
was 8.5% at December 31, 1994). As collateral for borrowings under
the Credit Agreement, Salant has granted to CIT a security interest
in substantially all of the assets of the Company. At the end of
fiscal 1994, direct borrowings and letters of credit outstanding
under the Credit Agreement were $33.2 million and $50.5 million,
respectively, and the Company had unused availability of $4.1
million. At the end of fiscal 1993, the Company had fully repaid
its direct borrowings and held cash and marketable securities of
$2.2 million. On that date the Company had approximately $37.3
million of letters of credit outstanding under the Credit Agreement
and had unused availability of $31.1 million.
As previously disclosed in the Current Report on Form 8-K, dated
March 2, 1995, on February 28, 1995, the Company entered into an
agreement (the "Amendment") with CIT, as referenced in Exhibit
10.22 to this Form 10-K, amending the Credit Agreement. The
Amendment provides for, among other things (i) an increase in the
aggregate limitation (the "Maximum Credit") on direct borrowings
and letters of credit from $120 million to a maximum of $135
million during certain periods of 1995 (subject to an asset based
formula), (ii) an increase in the rate of advance of "Eligible
Inventory" (as defined in the Credit Agreement) used to calculate
the asset based formula from fifty percent to sixty percent during
March, April, May and June 1995 together with an increase in the
"Inventory Sublimit" (as defined in the Credit Agreement) from
$60,000,000 to $70,000,000 during such months, (iii) an extension
of the term of the Credit Agreement by one year ending on September
20, 1996, (iv) an increase in the interest rate on direct borrowing
from an annual rate of one-half of one percent in excess of the
Prime Rate to one percent in excess of the Prime Rate, (v) a
modification of certain financial covenants contained in the Credit
Agreement, and (vi) a continuation of certain factoring services by
CIT.
Salant's business is seasonal in nature. As a result, Salant's
working capital requirements increase significantly during the
first three quarters of each year. As discussed in Salant's
Quarterly Report on Form 10-Q for the period ended October 1, 1994,
Salant anticipated the need to borrow funds during certain periods
of 1995 in excess of the $120 million Maximum Credit limitation
under the Credit Agreement, as a result of projected increased
sales growth in 1995. The Amendment provides for, among other
things, the borrowing capacity to support Salant's planned growth
for 1995.
As a result of the loss incurred in the fourth quarter of 1994, as
well as higher inventory levels that are necessary to support
greater projected 1995 sales volume than had been anticipated, the
Company's loan balance at the end of the 1994 fiscal year was
higher than planned. Salant's requirement to borrow funds in
excess of the $120 million Maximum Credit commenced one month
earlier (in March 1995 rather than the second quarter of 1995),
than previously expected. In addition, Salant required funds
during certain periods in 1995 in excess of the asset based formula
contained in the Credit Agreement, prior to the Amendment. The
increase in the rate of advance on Eligible Inventory and the
increase in the Inventory Sublimit contained in the Amendment
provide Salant with sufficient borrowing capacity to support its
projected needs in 1995 under the asset based formula set forth in
the Credit Agreement. Although not currently anticipated based on
its projected requirements for 1995, if Salant needs to borrow
funds in excess of the asset based formula, the Credit Agreement
provides for, in the sole discretion of CIT, up to $15 million in
"Seasonal Overadvance" (as defined in the Credit Agreement). There
can be no assurance, however, that CIT would agree to provide
Salant with funds under the Seasonal Overadvance.
Pursuant to the Amendment, the Maximum Credit at the end of each
month in 1995 is as follows:
Month Maximum Credit
(in millions)
February $120
March $132
April $135
May $130
June $130
July $130
August $132
September $128
Thereafter $120
The Amendment also provides for a modification of financial
covenants relating to (i) working capital, (ii) stockholders'
equity, (iii) liabilities to stockholders' equity ratio, (iv) fixed
charge coverage ratio and (v) maximum loss. In the absence of the
Amendment, Salant (i) would not have been able to satisfy the fixed
charge coverage ratio for its 1994 fiscal year and (ii) may not
have been able to meet the other four covenants described above for
certain periods during 1995, commencing April 1995.
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 4.5 to this Form 10-K. 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 31, 1994, the Company was in compliance with all financial
covenants as indicated below:
Covenant December 31, 1994
Credit Agreement Covenants Level (a) Actual Level
Working Capital $ 85.0 million $ 96.2 million
Stockholders' Equity $ 65.0 million $ 71.7 million
Liability/Equity less than 3.0 2.85
Fixed Charge Ratio greater than 1.5 1.73
Maximum Loss $(10.0) million positive income (b)
(a) The covenant levels reflect all modifications in the Credit Agreement
made pursuant to the Amendment.
(b) In accordance with the Amendment, maximum loss excludes any write-off
of goodwill in the 1994 fiscal year.
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
the period February 1, 1994 through January 31, 1995.
During 1994, the Company's short term borrowings increased by $33.2
million. The increase in borrowings in 1994 over 1993 was
primarily the result of an increase in inventories of $19.3 million
to provide for businesses entered into in 1994 (Gant and JJ.
Farmer) and in anticipation of higher sales in 1995, a larger
increase (from year to year) in accounts receivable of $8.7 million
due to substantially higher sales in the last month of 1994, cash
payments aggregating $5.7 million in connection with the
acquisition of the JJ. Farmer business, and the purchase and
retirement of $3.6 million principal amount of the Secured Notes.
Capital expenditures in 1994 amounted to $4.9 million as compared
to $8.2 million in 1993. Capital expenditures for 1995 are
anticipated to be approximately $6 - 7 million.
The increase of one half of one percent in the Prime Rate,
announced in January 1995, is estimated (assuming no further
change) to increase the Company's interest expense in 1995 by
approximately $300 thousand per annum, assuming the same level of
average loan balance.
In addition, the increase in the interest rate on direct
borrowings, as contained in the Amendment, is estimated to raise
interest expense by approximately $300 thousand per annum, assuming
the same level of average loan balance.
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, together with the funds available under the Credit
Agreement, as amended, will be adequate to meet its financing
requirements including the growth 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.
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 31, 1994 and January 1, 1994,
and the related consolidated statements of operations, shareholders'
equity/deficiency and cash flows for the years ended December 31, 1994,
January 1, 1994 and January 2, 1993. 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 31, 1994 and January 1, 1994, and the results of their operations and
their cash flows for the years ended December 31, 1994, January 1, 1994 and
January 2, 1993 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.
As discussed in Note 1 to the financial statements, on July 30, 1993 the
Bankruptcy Court entered an order confirming the plan of reorganization which
became effective on September 20, 1993. Under the plan of reorganization, the
Company is required to comply with certain terms and conditions as more fully
described in Note 18.
/s/ Deloitte & Touche LLP
March 3, 1995
New York, New York
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Year Ended
December 31, January 1,January 2,
1994 1994 1993
Net Sales $ 419,285 $402,098 $411,021
Cost of goods sold 326,059 303,989 318,430
Gross Profit 93,226 98,109 92,591
Selling, general and
administrative expenses 79,463 74,818 75,661
Royalty income, net
of related expenses 5,709 6,650 6,188
Division restructuring
costs (Note 4) - 5,500 4,824
Write off of other assets (Note 8) - - 6,759
Bankruptcy administration expenses - 8,861 12,878
Income/(loss) from continuing operations
before interest, income taxes and
extraordinary gain 19,472 15,580 (1,343)
Interest expense,
net (Notes 10 and 11) 15,617 7,523 2,978
Income/(loss) from continuing operations
before income taxes
and extraordinary gain 3,855 8,057 (4,321)
Income taxes (Note 13) 348 241 366
Income/(loss) from continuing operations
before extraordinary gain 3,507 7,816 (4,687)
Discontinued operations (Notes 3 and 19):
Loss from operations (9,639) (589) (1,299)
Estimated loss on disposal (1,796) - (11,772)
Reversal of estimated loss
on disposal - 11,772 -
Extraordinary gain (Notes 5 and 11) 63 24,707 -
Net income/(loss) $ (7,865) $ 43,706 $(17,758)
Earnings/(loss) per share:
Income/(loss) per share from continuing
operations before
extraordinary gain $ 0.23 $ 1.10 $ (1.35)
Income from reversal of estimated loss on disposal of
discontinued operations - 1.65 -
Income/(loss) per share from
discontinued operations (0.76) (0.08) (3.78)
Extraordinary gain - 3.48 -
Net income/(loss) per share $ (0.53) $ 6.15 $ (5.13)
Weighted average common stock
outstanding 14,954 7,104 3,460
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 31, January 1,
1994 1994
ASSETS
Current assets:
Cash and cash equivalents $ 1,965 $ 2,146
Accounts receivable net of allowance
for doubtful accounts of $2,565 in 1994
and $2,261 in 1993 (Notes 10 and 11) 45,907 37,228
Inventories (Notes 6 and 10) 124,599 103,585
Prepaid expenses and other
current assets 5,264 4,163
Net assets of discontinued
operations (Note 3) - 10,500
Total current assets 177,735 157,622
Property, plant and equipment,
net (Notes 7 and 11) 27,460 27,459
Other assets (Notes 8, 11 and 13) 71,345 68,151
$ 276,540 $ 253,232
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Loans payable $ 33,230 $ -
Accounts payable 28,593 21,724
Reserve for business
restructuring (Note 4) - 2,038
Accrued salaries, wages and
other liabilities (Note 9) 18,848 21,951
Net liabilities of discontinued
operations (Note 3) 816 -
Total Current Liabilities 81,487 45,713
Long Term Debt (Notes 2 and 11) 109,908 111,851
Deferred Liabilities (Note 16) 13,479 16,766
Commitments and Contingencies (Notes 10, 11, 13, 14, 15 and 17)
Shareholders' Equity (Notes 4 and 15):
Preferred stock, par value $2 per share:
Authorized 5,000 shares; none issued - -
Common stock, par value $1 per share:
Authorized 30,000 shares; 15,242 15,016
issued and issuable-15,242 shares in 1994;
issued-and issuable-15,015 shares in 1993
Additional paid-in capital 107,017 106,726
Deficit (48,326) (40,461)
Excess of additional pension liability over
unrecognized prior service
cost adjustment (Note 14) (773) (986)
Accumulated foreign currency
translation adjustment 120 221
Less - treasury stock, at
cost - 234 shares (1,614) (1,614)
Total Shareholders' Equity 71,666 78,902
$ 276,540 $ 253,232
See Notes to Consolidated Financial Statements
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 TranslationNumber of Equity/
of Shares Amount Capital Deficit Cost Adjustment Shares Amount (Deficiency)
Balance at December 28, 1991 3,693 $3,693 $17,686 $(66,409) $172 $222 234 $(1,614) $(46,250)
Stock options exercised 5 5 16 21
Net loss (17,758) (17,758)
Excess of additional pension
liability over unrecognized
prior service cost adjustment (525) (525)
Foreign currency translation
adjustments 3 3
Balance at January 2, 1993 3,698 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
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended
December 31, January 1, January 2,
1994 1994 1993
Cash Flows from Operating Activities
Income/(loss) from continuing
operations $3,507 $7,816 $(4,687)
Adjustments to reconcile
income/(loss) from
continuing operations to net
cash (used in)/provided by
operating activities:
Depreciation 5,113 5,619 6,390
Amortization of intangibles 2,376 2,194 2,393
Write-off of other assets - - 6,759
Write-down of fixed assets - 2,095 -
Change in operating assets and liabilities:
Accounts receivable (8,679) 1,462 (1,950)
Inventories (19,262) 844 (14,706)
Prepaid expenses and
other current assets (947) (378) 3,831
Other assets (1,302) 48 (150)
Accounts payable 6,869 266 8,837
Accrued salaries, wages and
other liabilities (5,786) 5,941 2,212
Reserve for business
restructuring (2,038) (3,042) (2,009)
Deferred liabilities 330 398 409
Liabilities deferred
pursuant to chapter 11 - - (1,078)
Net cash (used in)/provided by
operating activities (19,819) 23,263 6,251
Cash Flows from Investing Activities
Capital expenditures, net (4,926) (8,153) (3,923)
Acquisition (5,720) - -
Proceeds from sale of assets 294 795 1,550
Net cash used in investing
activities (10,352) (7,358) (2,373)
Cash Flows from Financing Activities
Net short-term borrowings 33,230 - -
Repayment of pre-petition
secured debt - (15,940) (12,526)
Retirement of long-term debt (3,537) - -
Exercise of stock options 517 65 21
Other, net (101) (254) (522)
Net cash provided by/(used in)
financing activities 30,109 (16,129) (13,027)
Net cash used in continuing
operations (62) (224) (9,149)
Cash used in discontinued
operations (119) (304) (855)
Net decrease in cash and
cash equivalents (181) (528) (10,004)
Cash and cash equivalents
- beginning of year 2,146 2,674 12,678
Cash and cash equivalents
- end of year $1,965 $2,146 $2,674
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 16,150$ 3,847$ 3,831
Income taxes $ 674$ 206$ 430
Conversion of accounts payable, accrued expenses,
long-term debt and deferred liabilities to liabilities
deferred pursuant to chapter 11 cases $1,515 $ 1,503
Conversion of liabilities deferred pursuant to chapter11
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
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
3, 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 assets and/or net liabilities of the
discontinued operations have been separately classified in the
Consolidated Balance Sheet for fiscal 1994. The fiscal 1993
Consolidated Balance Sheet has been restated to conform to the 1994
presentation. Significant intercompany balances and transactions
are eliminated in consolidation.
On June 27, 1990 (the "Filing Date"), Salant and one of its
subsidiaries, Denton Mills, Inc. ("Denton Mills"), filed separate
voluntary petitions for relief under chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code") with the United States
Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"). On July 30, 1993, the Bankruptcy Court issued
an order confirming the Third Amended Joint Plan of Reorganization
of Salant and Denton Mills, Inc. (the "Plan"). The 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 1994 and 1993 fiscal years were each comprised of
52 weeks, while the 1992 fiscal year was comprised of 53 weeks.
Reclassifications
Certain reclassifications were made to the 1993 and 1992 financial
statements to conform with the 1994 presentation.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks and
short-term investments as cash and cash equivalents for the
purposes of the statements of cash flows. Short-term investments
consist of certificates of deposit maturing within three months of
issuance. These investments are readily convertible to cash and
are stated at cost, which approximates market.
Accounts Receivable
The Company has entered into an agreement with a factor, as further
described in Note 10, whereby it sells, without recourse, an
interest in a defined pool of eligible accounts receivable. The
credit risk for such accounts is thereby transferred to the factor.
The amounts due from factor included in accounts receivable
amounted to $9,324 at December 31, 1994, and $12,610 at January 1,
1994.
Inventories
Inventories are stated at the lower of cost (principally determined
on a first-in, first-out basis for apparel operations and the
retail inventory method on a first-in, first-out basis for outlet
store operations) or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are
depreciated or amortized over their estimated useful lives, or for
leasehold improvements, the lease term, if shorter. Depreciation
and amortization are computed principally by the straight-line
method for financial reporting purposes and by accelerated methods
for income tax purposes.
The annual depreciation rates used are as follows:
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
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. 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 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 95% of the par value of
the debt.
Income Taxes
Effective January 3, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes". Under SFAS No. 109, the Company is required to
recognize the amount of taxes payable or refundable for the current
year and to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns.
Earnings/(Loss) Per Share
Income/(loss) per share is based on the weighted average number of
common shares (including shares to be issued pursuant to the Plan)
and common stock equivalents outstanding, if applicable. Loss per
share for 1994 and 1992 did not include common stock equivalents,
as their effect would have been anti-dilutive.
Revenue Recognition
Revenue is recognized at the time the merchandise is shipped.
Retail factory outlet store revenues are recognized at the time of
sale.
Note 2. 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 the future
profitability of JJ. Farmer. Through December 31, 1994, the
Company made additional payments of $409. 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 ($4,535 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 $1,657,
and is included in long-term debt.
Note 3. Discontinued Operations
In February 1995, the Company discontinued the Vera Scarf Division,
which imports and markets women's scarves. The loss from
operations of the Division in fiscal 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 fiscal 1993 was $589.
Additionally, 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, 1993 or 1992 losses. Such losses
are included in the Company's net operating loss carryforward
disclosed in Note 13.
Net sales of the Division were $5,087, $5,138 and $4,621 in 1994,
1993 and 1992, respectively. The net assets and/or net liabilities
of the discontinued operations have been reclassified on the
balance sheet 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 4. Restructuring Costs
In the fourth quarter of fiscal 1993, the Company recorded a $5,500
restructuring provision, of which $5,000 related to the
restructuring of the Salant Children's Apparel Group, as more fully
described in Note 19.
In the fourth quarter of fiscal 1992, the Company recorded a $4,824
restructuring reserve, which included (i) the estimated costs to be
incurred in connection with the restructuring of certain
unprofitable operations, (ii) the rejection, allowable under
chapter 11, of certain lease obligations and (iii) the write-off of
leasehold improvements, buildings and equipment at closed
locations.
Note 5. Extraordinary Gain
In September 1993, the Company recorded an extraordinary gain of
$24,707 consisting of (i) an extraordinary gain of $45,974 from the
settlement and anticipated settlement of claims arising from the
chapter 11 proceeding for less than their full amount and (ii) an
extraordinary loss of $21,267 arising from the settlement of
accrued interest and fees in respect of the Company's secured bank
debt during the pendency of the Company's chapter 11 cases.
Note 6. Inventories
December 31, January 1,
1994 1994
Finished goods . . . . . . . . . . . $ 70,882 $ 59,993
Work-in-process. . . . . . . . . . . 28,298 27,426
Raw materials and supplies . . . . . 25,419 16,166
$ 124,599 $103,585
Inventory in transit was $6,500 and $5,000 at December 31, 1994 and
January 1, 1994, respectively.
Note 7. Property, Plant and Equipment
December 31, January 1,
1994 1994
Land and buildings . . . . . . . . . $ 16,808 $ 15,748
Machinery, equipment, furniture
and fixtures . . . . . . . . . . . 40,794 38,478
Leasehold improvements . . . . . . . 5,958 5,992
Property held under capital leases . 1,345 1,345
64,905 61,563
Less accumulated depreciation
and amortization . . . . . . . . . 37,445 34,104
$ 27,460 $ 27,459
Note 8. Other Assets
December 31, January 1,
1994 1994
Excess of cost over net assets acquired,
net of accumulated amortization of
$10,059 in 1994 and $8,269 in 1993. $52,542 $49,797
Trademarks and license agreements,
net of accumulated amortization of
$2,795 in 1994 and $2,350 in 1993 . 14,767 15,212
Leasehold interests, net of accumulated
amortization of $823 in 1994 and $682
in 1993. . . . . . . . . . . . . . 1,620 1,761
Other. . . . . . . . . . . . . . . . 2,416 1,381
$71,345 $68,151
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.
In the fourth quarter of 1992, the Company wrote off other assets
of $6,759, which consisted of the unamortized portion of the excess
cost over net assets acquired related to the Salant Children's
Apparel Group and Vera Sportswear division.
Note 9. Accrued Salaries, Wages and Other Liabilities
December 31, January 1,
1994 1994
Accrued salaries and wages . . . . . . . $ 3,721 $ 6,045
Accrued pension and retirement. . . .. . 1,791 1,444
Accrued royalties. . . . . . . . . . . . 1,852 1,295
Accrued interest . . . . . . . . . . . . 3,716 3,839
Other accrued liabilities. . . . . . . . 7,768 9,328
$ 18,848 $ 21,951
Note 10. Financing and Factoring Agreements
On September 20, 1993, the Company entered into a two year
revolving credit, factoring and security agreement (the "Credit
Agreement") with The CIT Group/Commercial Services, Inc. ("CIT") to
provide seasonal working capital financing, including direct
borrowings and letters of credit, of up to $120,000 (subject to an
asset based borrowing formula). As of December 31, 1994, $4,085 was
available under this facility. Interest on direct borrowings is
charged monthly at an annual rate of one-half of one percent in
excess of the prime rate of Chemical Bank (the "Prime Rate")(8.5%
at December 31, 1994). As collateral for borrowings under the
Credit Agreement, the Company granted to CIT a security interest in
substantially all of the assets of the Company. As of December 31,
1994, direct borrowings were $33,230. As of January 1, 1994, there
were no direct borrowings. As of December 31, 1994 and January 1,
1994, letters of credit outstanding under the Credit Agreement were
$50,515 and $37,256, respectively. The weighted average interest
rate on borrowings under the Credit Agreement for the years ended
December 31, 1994 and January 1, 1994 was 7.8% and 6.8%,
respectively.
On February 28, 1995, Salant entered into an agreement (the
"Amendment") with CIT amending the Agreement. The Amendment
provides for, among other things (i) an increase in the aggregate
limitation (the "Maximum Credit") on direct borrowings and letters
of credit from $120,000 to a maximum of $135,000 during certain
periods of 1995 (subject to an asset based formula), (ii) an
increase in the rate of advance of "Eligible Inventory" (as defined
in the Credit Agreement) used to calculate the asset based formula
from fifty percent to sixty percent during March, April, May and
June 1995 together with an increase in the "Inventory Sublimit" (as
defined in the Credit Agreement) from $60,000 to $70,000 during
such months, (iii) an extension of the term of the Credit Agreement
by one year ending on September 20, 1996, (iv) an increase in the
interest rate on direct borrowing from an annual rate of one-half
of one percent in excess of the Prime Rate to one percent in excess
of the Prime Rate, (v) a modification of certain financial
covenants contained in the Credit Agreement, and (vi) a
continuation of certain factoring services by CIT.
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 31,
1994, Salant was in compliance with all financial covenants, as
contained in the Credit Agreement, as amended.
The Amendment also provides for a modification of financial
covenants relating to (i) working capital, (ii) stockholders'
equity, (iii) liabilities to stockholders' equity ratio, (iv) fixed
charge coverage ratio and (v) maximum loss. In the absence of the
Amendment, Salant (i) would not have been able to satisfy the fixed
charge coverage ratio for its 1994 fiscal year and (ii) may not
have been able to meet the other four covenants described above for
certain periods during 1995, commencing April 1995.
Note 11. Long-Term Debt
On September 20, 1993, Salant issued $111,851 principal amount of
10 1/2% Senior Secured Notes (the "Secured Notes") due December 31,
1998. The Secured Notes bear interest from September 1, 1993 and
may be redeemed at any time prior to maturity, in whole or in part,
at the option of the Company, at a premium to the principal amount
thereof plus accrued interest. The premium on redemption declines
annually from 6.3% in 1995 to 2.1% in 1997. The Secured Notes are
secured by a first lien (subordinated to the Credit Agreement to
the extent of $15,000) on certain accounts receivable, certain
intangible assets, the capital stock of Salant's subsidiaries and
certain real property of the Company, and by a second lien on
substantially all of the other assets of the Company.
The Secured Notes contain various restrictions pertaining to future
indebtedness, the purchase of capital stock and the payment of
dividends. Under the most restrictive of these provisions, the
Company currently may not purchase or redeem any shares of its
capital stock, or declare or pay cash dividends.
In May 1994, the Company purchased and retired $3,600 of its
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.
Note 12. Segment Information and Significant Customers
The Company operates within one industry segment, the business of
manufacturing and marketing apparel. The Company sells its products
to retailers, including department stores, specialty stores,
national chain stores and mass volume retailers, throughout the
United States. As an adjunct to its apparel manufacturing
operations, the Company operates 69 factory outlet stores in
various parts of the United States. Foreign operations are not
significant.
Approximately 12% of the Company's sales in the fiscal year ended
December 31, 1994 were to Federated Department Stores, Inc.
("Federated"), which includes all 1994 sales to Macy's Department
Stores ("Macy's"), which was acquired by Federated in 1994. In
1993, sales to a combined Federated/Macy's would have represented
approximately 10% of the Company's sales. No other customer
accounted for more than 10% of the Company's net sales during
fiscal 1994, 1993 or 1992.
Note 13. Income Taxes
The provision for income taxes consists of the following:
December 31, January 1, January 2,
1994 1994 1993
Current:
Federal . . . . . . . $ 100 $ - $ -
State . . . . . . . . 20 32 29
Foreign . . . . . . . 228 209 337
$ 348 $ 241 $ 366
The effective tax rate differed from the statutory rate for the
year ended January 1, 1994 due to differences in tax treatment
relating to the bankruptcy and other items. The effective tax rate
differed from the statutory rate in the years ended December 31,
1994 and January 2, 1993 because no tax benefit was available with
respect to losses incurred.
The following is a reconciliation of the tax provision/(benefit) at
the statutory Federal income tax rate to the actual income tax
provision:
1994 1993 1992
Income tax provision/
(benefit), at 34% $ 1,097 $ 2,543 $ (1,905)
Loss producing no current
tax benefit 1,905
Utilization of net
operating loss
carryforward (1,097) (2,543)
Alternative minimum tax 100
State, local and foreign
taxes 248 241 366
Income tax provision $ 348 $ 241 $ 366
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.
The tax effects of significant items comprising the Company's net
deferred tax asset consists of the following:
December 31, January 1,
1994 1994
Deferred tax liabilities:
Differences between book and
tax basis of property $ (6,090) $ (6,564)
Deferred tax assets:
Reserves not currently deductible 16,862 17,517
Operating loss carryforwards 43,873 45,341
Tax credit carryforwards 2,992 2,936
Expenses capitalized into inventory 5,857 4,935
69,584 70,729
Valuation Allowance (63,494) (64,165)
Net deferred tax asset $ - $ -
At December 31, 1994, the Company had net operating loss
carryforwards ("NOLs") for income tax purposes of approximately
$112,000, 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, will offset goodwill when
utilized. The implementation of the Plan, together with
transactions that have occurred within the three-year period
preceding the consummation of the Plan, have caused an "ownership
change" for federal income tax purposes on the date the Plan was
consummated. As a result of such ownership change, the use of the
NOLs to offset future taxable income 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 Plan, the Company realized cancellation of indebtedness income
of approximately $917 and the NOLs have been reduced or limited
accordingly.
In addition, at December 31, 1994, the Company had available
investment tax and other credits which expire between 1995 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 June 27, 1990, the date of the filing of the Chapter 11 cases,
the Internal Revenue Service (the "IRS") was in the process of
examining the tax returns of Manhattan (acquired in April 1988) for
the years ended January 31, 1982 through January 31, 1986 and
January 31, 1988. The IRS has filed amended proofs of claim (the
"IRS Claim") with the Bankruptcy Court in the aggregate amount of
$5,201 which includes $2,010 of income and withholding taxes,
interest and penalties thereon, and unemployment taxes (the "Income
Tax Claim") through the filing date of the Chapter 11 Cases.
Without prejudice to the rights, claims and defenses of the IRS and
the Company, at the confirmation hearing with respect to the Plan,
the Company and the IRS agreed to expunge all claims and proofs of
claims asserted and/or filed by the IRS other than the portion of
the IRS Claim relating to such taxes. The IRS Claim also includes
$3,191 for excise taxes (the "Excise Tax Claim") arising from the
failure of Salant to have met minimum funding obligations for its
defined benefit pension plans and penalties associated therewith.
Pursuant to a settlement reached with the IRS (which is subject to
final IRS approval), the Excise Tax Claim (plus any associated
penalties) has been reduced to $100, which is payable upon the
execution of the definitive settlement agreement. Provisions for
such distributions to the IRS in settlement of the Income Tax Claim
and the Excise Tax Claim had been made in the consolidated
financial statements for the year ended January 1, 1994.
Note 14. Employee Benefit Plans
Pension and Retirement Plans
The Company has several defined benefit plans for virtually all
full-time salaried employees and certain nonunion hourly employees.
The Company's funding policy for its plans is to fund the minimum
annual contribution required by applicable regulations.
The Company also has a nonqualified supplemental retirement and
death benefit plan covering certain employees. The funding for
this plan is based on premium costs of related insurance contracts.
Pension expense includes the following components:
1994 1993 1992
Service cost-benefit earned
during the period. . . . . . $ 1,125 $ 1,183 $ 1,101
Interest cost on projected
benefit obligation . . . . . 2,626 2,555 2,419
Loss/(return) on assets. . . . 1,331 (2,008) (2,162)
Net amortization . . . . . . . (3,437) 169 647
Net periodic pension cost. . . $ 1,645 $ 1,899 $ 2,005
The reconciliation of the funded status of the plans at December 31,
1994 and January 1, 1994 is as follows:
December 31, January 1, January 1,
1994 1994 1994
Accumulated Accumulated Plan
Plan Plan Assets
Benefits Benefits Exceed
Exceed Exceed Accumulated
Plan Assets Plan AssetsPlan Benefits
Actuarial present value of benefit
obligation
Vested benefit obligation. . . . $ (28,645) $(30,670) $ (710)
Nonvested benefit obligation . . (838) (680) -
Accumulated benefit obligation . . $ (29,483) $ (31,350) $ (710)
Projected benefit obligation . . . $ (33,579) $(36,068) $ (710)
Plan assets at fair value. . . . . 25,947 25,155 785
Projected benefit obligation in
(excess of)/less than plan assets. . (7,632) (10,913) 75
Unrecognized net obligation at date of
initial application, amortized over
15 years . . . . . . . . . . . . 897 985 -
Unrecognized net (gain)/loss . . . 784 1,928 (160)
Unrecognized prior service cost. . (739) 37 -
Recognition of minimum liability
under SFAS No. 87. . . . . . . . (1,160) (1,420) -
Accrued pension cost . . . . . . . $ (7,850) $ (9,383) $ (85)
Assumptions used in accounting for defined benefit pension plans
are as follows:
1994 1994 1993 1993 1992 1992
Non- Qualified Non- Qualified Non- Qualified
QualifiedPlans Qualified Plans Qualified Plans
Plan Plan Plan
Discount rate. . . . . 8.5% 8.5% 7.5% 7.5% 8.0% 8.0%
Rate of increase in
compensation levels . N/A 5.5% N/A 5.5% N/A 6.0%
Expected long-term
rate of return on assets 8.0% 8.0% 12.0% 8.0% 12.0% 8.0%
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 $4,693, $5,060 and $4,769
in 1994, 1993 and 1992, 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
1994, 1993 and 1992 Salant's aggregate contributions to the Plan
amounted to $239, $208 and $163, respectively.
Note 15. Stock Options, Warrants and Shareholder Rights
On September 20, 1993, pursuant to the Plan, the Company adopted
the 1993 Stock Plan under which options or awards may be granted to
directors and key employees of the Company for the purchase of an
aggregate of 600,000 shares of the Company's common stock.
The 1988 and 1987 Stock Plans authorized the Company to grant stock
options or stock awards aggregating 1,200,000 shares of Salant
common stock to officers, key employees and, in the case of the
1988 Stock Plan, directors.
The 1993, 1988 and 1987 Stock Plans authorized such grants at such
prices and pursuant to such other terms and conditions as the Stock
Plan Committee may determine. Options may be nonqualified stock
options or incentive stock options and may include stock
appreciation rights. Options expire no later than ten years from
the date of grant and become exercisable in varying amounts over
periods ranging from four months to five years from the date of
grant.
The following table summarizes stock option transactions during
1992, 1993 and 1994:
Shares Price Range
Options outstanding at December 28, 1991 . . 980,225 $1.00-15.125
Options granted during fiscal 1992 . . . . . 197,000 $2.25-8.75
Options exercised during fiscal 1992 . . . . (5,000) $1.00
Options surrendered or cancelled during
fiscal 1992. . . (121,985) $2.25-12.875
Options outstanding at January 2, 1993 . . . 1,050,240 $1.00-15.125
Options granted during fiscal 1993 . . . . . 392,000 $6.69-10.69
Options exercised during fiscal 1993 . . . . (24,095) $1.00-5.875
Options surrendered or cancelled during
fiscal 1993. . . (55,371) $2.25-12.875
Options outstanding at January 1, 1994 . . . 1,362,774 $1.00-15.125
Options granted during fiscal 1994 . . . . . 61,050 $4.94-6.69
Options exercised during fiscal 1994 . . . . (226,666) $2.00-2.63
Options surrendered or cancelled during
fiscal 1994. . . (39,950) $5.125-12.00
Options outstanding at December 31, 1994 . . 1,157,208 $1.00-15.125
Options exercisable at December 31, 1994 . . 809,672 $1.00-15.125
At December 31, 1994, there were 316,041 shares of Salant common
stock reserved for future grants of stock options or stock awards.
Pursuant to the Plan, the Company issued 2,371,182 Salant B
Warrants (the "Warrants") to holders of the Company's common stock
immediately prior to the consummation date. Each Warrant expires
three years from the date of issuance and entitles the registered
holder thereof to purchase one share of common stock of the Company
at prices of $16 during the first year after issuance, $18 during
the second year after issuance and $20 thereafter. No Warrants
were exercised in 1993 or 1994.
The Company has a shareholder rights plan (the "Rights Plan"),
which provides for a dividend distribution of one right for each
share of Salant common stock to holders of record at the close of
business on December 23, 1987. The rights will expire on December
23, 1997. With certain exceptions, the rights will become
exercisable only in the event that an acquiring party accumulates
20 percent or more of the Company's voting stock, or if a party
announces an offer to acquire 30 percent or more of such voting
stock. Each right, when exercisable, will entitle the holder to buy
one one-hundredth of a share of a new series of cumulative
preferred stock at a price of $30 per right or upon the occurrence
of certain events, to purchase either Salant common stock or shares
in an "acquiring entity" at half the market value thereof. The
Company will generally be entitled to redeem the rights at three
cents per right at any time until the 10th day following the
acquisition of a 20 percent position in its voting stock. In July
1993, the Rights Plan was amended to provide that an acquisition or
offer by Apollo Apparel Partners, L.P., or any of its subsidiaries,
will not cause the rights to become exercisable.
As of December 31, 1994, there were 3,844,431 shares of Common
Stock reserved for the future issuance of stock options, stock
awards and warrants.
Note 16. Deferred Liabilities
December 31, January 1,
1994 1994
Lease obligations. . . . . . . $ 1,225 $ 1,688
Deferred pension obligation. . 6,253 8,300
Liability for chapter 11 claims
settlements . . . . . . . . . 6,001 6,778
$ 13,479 $ 16,766
Note 17. Commitments and Contingencies
(a) Lease Commitments
The Company conducts a portion of its operations in premises
occupied under leases expiring at various dates through 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 fiscal years 1994, 1993 and 1992, rental expense was $5,914,
$5,478 and $6,611, respectively. As of December 31, 1994, future
minimum rental payments under noncancellable operating leases
(exclusive of renewal options, percentage rentals, and adjustments
for property taxes and operating expenses) were as follows:
Fiscal Year
1995. . . . . . . . . . . . . . . $ 6,419
1996. . . . . . . . . . . . . . . 5,704
1997. . . . . . . . . . . . . . . 4,577
1998. . . . . . . . . . . . . . . 4,155
1999. . . . . . . . . . . . . . . 2,327
Thereafter. . . . . . . . . . . . 8,761
Total . . . . . . . . . . . $31,943
(b) Legal Contingencies/Significant Disputed Claims
Securities Litigation. On November 27, 1990, Mae Fischer
("Fischer"), an alleged purchaser of Salant's 13-1/4% Senior
Subordinated Debentures due June 15, 1999 (the "Debentures"),
instituted a purported class action suit in the United States
District Court for the Southern District of New York, claiming that
certain directors and officers of Salant violated the federal
securities laws by issuing favorable public statements concerning
the future profitability of Salant, which Fischer claims
artificially inflated the market price of the Debentures between
October 1988 and June 1990. Pursuant to Salant's bylaws, Salant is
obligated to indemnify its directors and officers against expenses
and any judgments or settlements entered against them in actions in
which they are sued in their capacity as directors or officers.
Salant was not named as a defendant in the suit, Fischer v. Tynan,
et al., 90 Civ. 7587 (LBS), due to the pendency of the Chapter 11
Cases.
Pursuant to the terms and conditions of the stipulation of
settlement, Salant will issue and distribute a number of shares of
Salant Common Stock, not to exceed 11,000 shares in the aggregate,
to certain purchasers of the Debentures who sold at a loss during
a circumscribed period. In addition, Fischer's counsel will receive
$150 for their fees and expenses pursuant to the settlement. The
stipulation of settlement, which provides for preliminary approval
of the settlement, notice to class members of the settlement, and
a hearing for final approval, was signed by the Bankruptcy Court on
February 27, 1995. Upon final approval by the Bankruptcy Court,
the Fischer appeal and the Fischer Claim will be deemed withdrawn
with prejudice. Provisions for such distributions had been made in
the consolidated financial statements for the year ended January 1,
1994.
(c) Employment Agreements
The Company has employment agreements with certain executives,
which provide for the payment of compensation aggregating
approximately $6,500 in 1995, $2,980 in 1996 and $250 in 1997. In
addition, such employment agreements provide for incentive
compensation based on various performance criteria.
Note 18. Consummation of the Plan of Reorganization
From the Consummation Date through December 31, 1994, pursuant to
the Plan, the Company made cash payments of $8,500, issued $111,851
of new 10-1/2% senior secured notes and issued 10.5 million shares
of common stock to creditors in settlement of certain claims in the
chapter 11 proceedings. Salant anticipates that an additional
$8,000 in cash and an additional 789 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 5, upon
consummation of the Plan, the Company recorded an extraordinary
gain of $24,707 relating to the settlement of indebtedness pursuant
to the Plan.
Note 19. Discontinued Operations Subsequently Retained
In March 1993, the Company adopted a formal plan to restructure and
sell the Salant Children's Apparel Group. Consequently, the
division was accounted for as a discontinued operation for fiscal
1992 and the first three quarters of fiscal 1993. In March 1994,
the Company concluded that the value of the division would be
maximized by retaining the Salant Children's Apparel Group as part
of its continuing operations. As a result, the assets, liabilities
and results of operations for all periods presented have been
presented as part of continuing operations.
In the fourth quarter of 1992, the Company recorded an $11,772
provision for the estimated costs to restructure the division and
to accrue for expected operating losses during the phase-out period
through December 1993. In the fourth quarter of 1993, the 1992
charge was reversed 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.
The following is a summary of certain selected financial data for
the Salant Children's Apparel Group during the prior year period in
which it was reported as a discontinued operation.
Year Ended
January 2, 1993
Net sales $ 35,442
Operating loss (12,365)
Operating losses of $750 related to January and February 1993 were
included in pre-measurement date losses shown in the loss from
discontinued operations in the 1992 financial statements. These
amounts have been reclassified to operating losses from continuing
operations in 1992.
Note 20. Quarterly Financial Information (Unaudited)
Fiscal year ended December 31, 1994
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
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
Fiscal year ended January 1, 1994
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Net sales. . . . . . . . . . . . $402,098 $ 111,608 $ 111,475 $ 85,121 $ 93,894
Gross profit . . . . . . . . . . 98,109 28,158 27,861 20,295 21,795
Income/(loss) from continuing operations . 7,816 2,900 4,467 (216) 665
Discontinued Operations:
Reversal of estimated loss on disposal .11,772 11,772 - - -
Income/(loss) from discontinued
operations . . (589) (41) (21) (272) (255)
Extraordinary gain . . . . . . . 24,707 - 24,707 - -
Net income/(loss). . . . . . . . 43,706 14,631 29,153 (488) 410
Income/(loss) per share from continuing
operations(a). . $1.10 $ 0.19 $ 0.83 $ (0.05) $ 0.16
Income per share from reversal of estimated loss
on disposal of discontinued operations (a) 1.65 0.77 - - -
Loss per share from discontinued
operations (a). (0.08) - - (0.07) (0.06)
Income per share from extraordinary
gain (a) . . 3.48 - 4.63 - -
Net income/(loss) per share (a). 6.15 0.96 5.46 (0.12) 0.10
Reference is made to Notes 3, 4, 8 and 19 concerning fourth quarter
adjustments during the fiscal years ended December 31,
1994 and January 1, 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.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference
from the Proxy Statement of Salant Corporation.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference
from the Proxy Statement of Salant Corporation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated by reference
from the Proxy Statement of Salant Corporation.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference
from the Proxy Statement of Salant Corporation.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT 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 fiscal years
ended December 31, 1994, January 1, 1994, and January 2, 1993, and
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.
SALANT CORPORATION
AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
(1) (2)
Balance atCharged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End
of Period Expenses -- Describe -- Describe of Period
Description
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(D) $ -
YEAR ENDED JANUARY 2, 1993:
Accounts receivable allowance
for doubtful accounts $ 4,635 $ 2,796 $ - $ 3,655(A) $ 3,776
Reserve for business
restructuring $ 7,941 $11,757 $ - $13,767(B) $ 5,931
Reserve for loss on disposal of
discontinued operations(E) $ - $11,772(C) $ - $ - $11,772
NOTES:
(A) Uncollectible accounts written off, less recoveries.
(B) Costs incurred in plant closings and business restructuring.
(C) Charged to discontinued operations.
(D) Reversal of estimated loss on disposal of discontinued operation.
(E) Included in reserve for restructuring on the balance sheet.
Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1994.
Exhibits
Incorporation
Number Description By Reference To
2.1 Third Amended Disclosure Exhibit 1 to
Statement of Salant Form 8-A dated
Corporation, and Denton 7/28/93.
Mills, Inc., dated
5/12/93.
2.2 Third Amended Joint Included as
Chapter 11 Plan of Exhibit D-1
Reorganization of to Exhibit 1
Salant Corporation to Form 8-A
and Denton Mills, Inc. dated 7/28/93.
3.1 Form of Amended and Included as Exhibit
Restated Certificate of D-1 to Exhibit 2
Incorporation of Salant to Form 8-A dated
Corporation. 7/28/93.
3.2 Form of Bylaws, as amended, of
Salant Corporation, effective
9/21/94.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
12/8/87 between Salant Corporation on Form 8-K dated 12/8/87.
and The Chase Manhattan Bank, N.A.,
as Rights Agent. The Rights
Agreement includes as Exhibit B the
form of Right Certificate.
4.2 Form of First Amendment Exhibit 3 to
to the Rights Agreement Amendment No. 1 to
between Salant Corporation Form 8-A dated
and Mellon Securities. 7/29/93.
4.3 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated 9/20/93, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial 10/02/93.
Services, Inc.
4.5 Indenture, dated as of Exhibit 10.34 to
9/20/93, between Salant Quarterly Report
Corporation and Bankers on Form 10-Q for
Trust Company, as trustee, the quarter ended
for the 10-1/2% Senior 10/02/93.
Secured Notes due
December 31, 1998.
4.6 Warrant Agreement dated Exhibit 10.35 to
as of September 20, 1993, Quarterly Report on
between Salant Corporation Form 10-Q for the
and Bankers Trust Company, quarter ended 10/02/93.
as Warrant Agent.
10.1 Salant Corporation 1987 Stock Plan. Exhibit 19.2 to Annual Report on Form 10-K for
fiscal year 1987.
10.2 Salant Corporation 1987 Stock Plan Exhibit 10.12 to Form S-2
Agreement, dated as of 6/13/88, Registration Statement filed
between Salant Corporation and 6/17/88.
Nicholas P. DiPaolo.
10.3 Salant Corporation 1988 Stock Plan. Exhibit 19.3 to Annual Report on
Form 10-K for fiscal year 1988.
10.4 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of 7/25/89, to the Salant on Form 10-Q for the
Corporation 1988 Stock Plan. quarter ended 9/30/89.
10.5 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.6 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.7 Employment Agreement, dated as of Exhibit 19.4 to
12/31/90, between Herbert R. Annual Report on
Aronson and Salant Corporation.* Form 10-K for fiscal
year 1990.
10.8 Letter Agreement, dated 6/30/92, Exhibit 19.1 to Quarterly
amending the Employment Agreement, Report on Form 10-Q for
dated as of 12/31/90, between the quarter ended 10/3/92.
Herbert R. Aronson and Salant
Corporation.*
10.9 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.
10.10 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.
10.11 Employment Agreement Exhibit 10.32 to
dated as of 6/01/93, Quarterly Report on
between Salant Corporation Form 10-Q for the
and Todd Kahn.* quarter ended 7/8/93.
10.12 Form of Agreement between Included as Exhibit
Salant Corporation and P-11 to Exhibit 1
Apollo Apparel Partners, L.P. to Form 8-A dated
7/28/93.
10.13 Employment Agreement, dated Exhibit 10.36 to
as of 9/20/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Nicholas P. DiPaolo.* quarter ended 10/2/93.
10.14 Employment Agreement, dated Exhibit 10.37 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
John S. Rodgers.* quarter ended 10/2/93.
10.15 Employment Agreement, dated Exhibit 10.38 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Richard P. Randall.* quarter ended 10/2/93.
10.16 Employment Agreement dated Exhibit 10.32 to Annual Report on Form
as of 12/21/93, between 10-K for Fiscal Year 1993.
Elliot M. Lavigne and Salant
Corporation.*
10.17 Agreement, dated as of 9/22/93, Exhibit 10.33 to Annual Report on Form
between Nicholas P. DiPaolo and 10-K for Fiscal Year 1993.
Salant Corporation.*
10.18 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual Report on Form
Stock Plan Directors' Option 10-K for Fiscal Year 1993.
Agreement.*
10.19 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 10/1/94.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.20 Letter Agreement, dated Exhibit 10.46 to
10/18/94, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
12/31/90, between Herbert R. quarter ended 10/1/94.
Aronson and Salant Corporation.*
10.21 Letter Agreement, dated Exhibit 10.47 to
10/25/94, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
7/30/93, between Richard quarter ended 10/1/94.
Randall and Salant Corporation.*
10.22 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.
10.23 Salant Corporation Retirement Plan,
as amended and restated. *
10.24 Salant Corporation Pension Plan,
as amended and restated. *
10.25 Salant Corporation Long Term Savings
and Investment Plan as amended
and restated. *
10.26 Letter Agreement, dated
2/15/95, amending the
Employment Agreement, dated
7/30/93, between Richard
Randall and Salant Corporation.*
21 List of Subsidiaries of the Company
27 Financial Data Schedule
* denotes management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SALANT CORPORATION
Date: March 22, 1995 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, 1995.
Signature Title
/s/ Nicholas P. DiPaolo Chairman of the Board,
Nicholas P. DiPaolo President and Chief
Executive Officer
(Principal Executive
Officer); Director
/s/ Richard P. Randall Senior Vice President
Richard P. Randall and Chief
Financial Officer
(Principal Financial
and Accounting Officer)
/s/ John S. Rodgers Executive Vice President,
John S. Rodgers Senior Counsel and Secretary;
Director
/s/ Craig M. Cogut
Craig M. Cogut Director
/s/ Ann Dibble Jordan
Ann Dibble Jordan Director
/s/ Harold Leppo
Harold Leppo Director
/s/ Bruce F. Roberts
Bruce F. Roberts Director
/s/ Marvin Schiller
Marvin Schiller Director
/s/ Edward M. Yorke
Edward M. Yorke Director
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
SALANT CORPORATION
EXHIBIT INDEX
Incorporation
Number Description By Reference To
2.1 Third Amended Disclosure Exhibit 1 to
Statement of Salant Form 8-A dated
Corporation, and Denton 7/28/93.
Mills, Inc., dated
5/12/93.
2.2 Third Amended Joint Included as
Chapter 11 Plan of Exhibit D-1
Reorganization of to Exhibit 1
Salant Corporation to Form 8-A
and Denton Mills, Inc. dated 7/28/93.
3.1 Form of Amended and Included as Exhibit
Restated Certificate of D-1 to Exhibit 2
Incorporation of Salant to Form 8-A dated
Corporation. 7/28/93.
3.2 Form of Bylaws, as amended, of
Salant Corporation, effective
9/21/94.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
12/8/87 between Salant Corporation on Form 8-K dated 12/8/87.
and The Chase Manhattan Bank, N.A.,
as Rights Agent. The Rights
Agreement includes as Exhibit B the
form of Right Certificate.
4.2 Form of First Amendment Exhibit 3 to
to the Rights Agreement Amendment No. 1 to
between Salant Corporation Form 8-A dated
and Mellon Securities. 7/29/93.
4.3 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated 9/20/93, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial 10/02/93.
Services, Inc.
4.5 Indenture, dated as of Exhibit 10.34 to
9/20/93, between Salant Quarterly Report
Corporation and Bankers on Form 10-Q for
Trust Company, as trustee, the quarter ended
for the 10-1/2% Senior 10/02/93.
Secured Notes due
December 31, 1998.
4.6 Warrant Agreement dated Exhibit 10.35 to
as of September 20, 1993, Quarterly Report on
between Salant Corporation Form 10-Q for the
and Bankers Trust Company, quarter ended 10/02/93.
as Warrant Agent.
10.1 Salant Corporation 1987 Stock Plan. Exhibit 19.2 to Annual Report on Form 10-K for
fiscal year 1987.
10.2 Salant Corporation 1987 Stock Plan Exhibit 10.12 to Form S-2
Agreement, dated as of 6/13/88, Registration Statement filed
between Salant Corporation and 6/17/88.
Nicholas P. DiPaolo.
10.3 Salant Corporation 1988 Stock Plan. Exhibit 19.3 to Annual Report on
Form 10-K for fiscal year 1988.
10.4 First Amendment, effective Exhibit 19.1 to Quarterly Report
as of 7/25/89, to the Salant on Form 10-Q for the
Corporation 1988 Stock Plan. quarter ended 9/30/89.
10.5 Form of Salant Corporation 1988 Exhibit 19.7 to Annual Report on
Stock Plan Employee Agreement. Form 10-K for fiscal year 1988.
10.6 Form of Salant Corporation Exhibit 19.8 to
1988 Stock Plan Director Annual Report on
Agreement. Form 10-K for fiscal
year 1988.
10.7 Employment Agreement, dated as of Exhibit 19.4 to
12/31/90, between Herbert R. Annual Report on
Aronson and Salant Corporation.* Form 10-K for fiscal
year 1990.
10.8 Letter Agreement, dated 6/30/92, Exhibit 19.1 to Quarterly
amending the Employment Agreement, Report on Form 10-Q for
dated as of 12/31/90, between the quarter ended 10/3/92.
Herbert R. Aronson and Salant
Corporation.*
10.9 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.
10.10 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.
10.11 Employment Agreement Exhibit 10.32 to
dated as of 6/01/93, Quarterly Report on
between Salant Corporation Form 10-Q for the
and Todd Kahn.* quarter ended 7/8/93.
10.12 Form of Agreement between Included as Exhibit
Salant Corporation and P-11 to Exhibit 1
Apollo Apparel Partners, L.P. to Form 8-A dated
7/28/93.
10.13 Employment Agreement, dated Exhibit 10.36 to
as of 9/20/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Nicholas P. DiPaolo.* quarter ended 10/2/93.
10.14 Employment Agreement, dated Exhibit 10.37 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
John S. Rodgers.* quarter ended 10/2/93.
10.15 Employment Agreement, dated Exhibit 10.38 to
as of 7/30/93, between Quarterly Report on
Salant Corporation and Form 10-Q for the
Richard P. Randall.* quarter ended 10/2/93.
10.16 Employment Agreement dated Exhibit 10.32 to Annual Report on Form
as of 12/21/93, between 10-K for Fiscal Year 1993.
Elliot M. Lavigne and Salant
Corporation.*
10.17 Agreement, dated as of 9/22/93, Exhibit 10.33 to Annual Report on Form
between Nicholas P. DiPaolo and 10-K for Fiscal Year 1993.
Salant Corporation.*
10.18 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual Report on Form
Stock Plan Directors' Option 10-K for Fiscal Year 1993.
Agreement.*
10.19 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 10/1/94.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.20 Letter Agreement, dated Exhibit 10.46 to
10/18/94, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
12/31/90, between Herbert R. quarter ended 10/1/94.
Aronson and Salant Corporation.*
10.21 Letter Agreement, dated Exhibit 10.47 to
10/25/94, amending the Quarterly Report on
Employment Agreement, dated Form 10-Q for the
7/30/93, between Richard quarter ended 10/1/94.
Randall and Salant Corporation.*
10.22 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.
10.23 Salant Corporation Retirement Plan,
as amended and restated. *
10.24 Salant Corporation Pension Plan,
as amended and restated. *
10.25 Salant Corporation Long Term Savings
and Investment Plan as amended
and restated. *
10.26 Letter Agreement, dated
2/15/95, amending the
Employment Agreement, dated
7/30/93, between Richard
Randall and Salant Corporation.*
21 List of Subsidiaries of the Company
27 Financial Data Schedule
* denotes management contract or compensatory plan or arrangement.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Birdhill, Limited, a Hong Kong corporation
Carrizo Manufacturing Co., S.A. de C.V., a Mexican corporation
Clantexport, Inc., a New York corporation
Denton Mills, Inc., a Delaware corporation
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