UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 1, 1995. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-2433 SALANT CORPORATION (Exact name of registrant as specified in its charter) Delaware	 						 13-3402444 (State or other jurisdiction of					 (I.R.S. Employer incorporation or organization)				 Identification No.) 1114 Avenue of the Americas, New York, New York 		10036 (Address of principal executive offices) 				(Zip Code) 	Registrant's telephone number, including area code: 	(212) 221-7500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No As of May 11, 1995 there were outstanding 14,480,092 shares of the Common Stock of the registrant. TABLE OF CONTENTS 													 Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements	 Condensed Consolidated Statements of Operations Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Cash Flow	 Notes to Condensed Consolidated Financial Statements Item 2.	 Management's Discussion and Analysis of 	 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K	 SIGNATURE	 Salant Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands except per share data) 			 Three Months Ended 			 April 1,	 April 2, 	 		 1995 	 1994 Net sales	 	$ 103,801	$ 89,858 Cost of goods sold		 81,334	 67,752 Gross profit	 	 	 22,467 22,106 Selling, general and administrative expenses	 	 	(20,400) 	(18,981) Royalty income, net of related expenses 			 1,430	 1,495 Goodwill amortization 			(641) 	(549) Other income 			 57	 520 Income from continuing operations before interest and taxes 		 	 2,913 4,591 Interest expense, net		 	 4,571	 3,365 Income/(loss) from continuing operations before income taxes	 	(1,658) 1,226 Income taxes			 41	 66 Income/(loss) from continuing operations 	 		(1,699) 	1,160 Loss from discontinued operations		 - (76) Net income/(loss) 	$(1,699) 	$1,084 Earnings/(loss) per share: Income/(loss) per share from continuing operations	 $ (0.11) 	$ 0.08 Loss per share from discontinued operations			 - (0.01) Net income/(loss) per share 			$ (0.11)	$ 0.07 Weighted average common stock and common stock equivalents outstanding 			 15,008 	 15,137 See Notes to Condensed Consolidated Financial Statements. Salant Corporation and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) April 1, April 2, 	1995 	December 31, 1994 	 (Unaudited)	 1994 	(Unaudited) ASSETS Current Assets: Cash and cash equivalents	$ 1,907 $ 1,965	 $ 4,383 Accounts receivable, net (Note 3)	 31,032 	36,583 23,419 Inventories (Note 4) 149,240 124,599	 111,928 Prepaid expenses and other current assets	 5,472	 5,264 3,471 Net assets of discontinued operations	 -	 - 10,677 Total Current Assets	 187,651 168,411	 153,878 Property, Plant and Equipment, net 	28,351 	27,460 	 26,892 Other Assets 70,806 71,345 67,541 Total Assets $ 286,808 $ 267,216 $ 248,311 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Loans payable (Note 3) 	$ 44,664 23,906 $ - Accounts payable 	34,459 	28,593 	 24,680 Accrued liabiliies 	14,003 	18,848 	 13,431 Net liabilities of discontinued operations (Note 2) 	339 	816 	- Current portion of long term debt (Note 5)	 - - 	3,600 Reserve for business restructuring	 - -	 1,155 Total Current Liabilities	 93,465 72,163	 42,866 Long Term Debt 	109,908 	109,908	 108,251 Deferred Liabilities 	13,475 	13,479	 16,762 Shareholders' Equity Common stock 	15,242 	15,242 15,212 Additional paid-in capital 	107,017 	107,017	 106,976 Deficit 	(50,025) (48,326) (39,376) Excess of additional pension liability over unrecognized prior service cost 	(773) 	(773) 	(986) Accumulated foreign currency translation adjustment 	113	 120 220 Less - treasury stock, at cost 	 (1,614) (1,614) 	 (1,614) Total Shareholders' Equity 69,960 71,666	 80,432 Total Liabilities and Shareholders' Equity 	$ 286,808	$ 267,216	 $248,311 See Notes to Condensed Consolidated Financial Statements. Salant Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Amounts in thousands) 	 								 Three Months Ended 	 April 1,	 April 2, 	 1995 	 1994 Cash Flows from Operating Activities: Income/(loss) from continuing operations	$ (1,699) 	$ 1,084 Adjustments to reconcile income/(loss) from continuing operations to net cash used in operating activities: Depreciation 	1,290 	1,277 Amortization of intangibles 	 641 	 549 Change in operating assets and liabilities: Accounts receivable	 5,551	 1,199 Inventories 	(24,641) 	(8,343) Prepaid expenses and other current assets 	 (208) 	692 Other assets 	(103) 	22 Accounts payable 	 5,866 	 2,956 Accrued liabilities and reserve for business restructuring 	(4,845) 	(9,279) Deferred liabilities	 (4)	 (4) Net cash used in operating activities	 (18,152)	 (9,847) Cash Flows from Investing Activities: Capital expenditures 	(2,206) 	(835) Proceeds from sale of assets	 26	 40 Net cash used in investing activities	 (2,180)	 (795) Cash Flows from Financing Activities: Net short-term borrowings 	20,758	 - Exercise of stock options (7) 446 Net cash provided by financing activities	 20,751	 446 Net cash provided by/(used in) continuing operations 	419 	(10,196) Cash used in discontinued operations	 (477) 	 (177) Net decrease in cash and cash equivalents 	(58) (10,373) Cash and cash equivalents - beginning of year	 1,965 14,756 Cash and cash equivalents - end of first quarter $1,907 	$4,383 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 7,516 	$ 6,436 Income taxes 	$ 106 	$ 50 See Notes to Condensed Consolidated Financial Statements SALANT CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Thousands of Dollars) (Unaudited) Note 1. Basis of Presentation and Consolidation The accompanying unaudited Condensed 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 2, the Condensed Consolidated Financial Statements and the Notes thereto treat the Vera Scarf Division as a discontinued operation, and, consistent with the financial statements for 1994, 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 Condensed Consolidated Balance Sheets. The results of operations for the three months ended April 1, 1995 and April 2, 1994 are not necessarily indicative of a full year's operations. In the opinion of management, the accompanying financial statements include all adjustments which are necessary to present fairly such financial statements. Significant intercompany balances and transactions are eliminated in consolidation. Certain reclassifications were made to the 1994 unaudited Condensed Consolidated Financial Statements to conform with the 1995 presentation. Income/(loss) per share is based on the weighted average number of common shares (including shares to be issued pursuant to the Company's plan of reorganization) and common stock equivalents outstanding, if applicable. Loss per share for the three months ended April 1, 1995 did not include common stock equivalents, as their effect would have been anti-dilutive. Note 2. 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 the prior year (for the three months ended April 2, 1994) was $76. Net sales of the Division were $916 and $1,488 for the three months ended April 1, 1995 and April 2, 1994, respectively. The net assets and/or net liabilities of the discontinued operations have been reclassified on the balance sheets as net assets or net liabilities of discontinued operations and consist principally of accounts receivable, inventory and accrued losses for the phase-out period. Note 3. Loans Payable and Factor Advances The Company has entered into an agreement with a factor, 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 have been offset against advances from the factor in the accompanying balance sheets. The amounts which have been offset amounted to $22,006 at April 1, 1995, $9,324 at December 31, 1994, and $24,326 at April 2, 1994. Note 4. Inventories 	April 1,	December 31, 	April 2, 	 1995 	 1994 	 1994 Finished goods 	$ 86,955 	$ 70,882 	$ 71,731 Work-in-process	 33,557 	28,298 	24,667 Raw materials and supplies 	 28,728 25,419 15,530 	$ 149,240 	$ 124,599 	$ 111,928 Note 5. Current Portion of Long Term Debt In May 1994, the Company purchased and retired $3,600 of its 10 1/2% Senior Secured Notes due December 31, 1998 (the "Secured Notes") in an open market transaction at a price below the principal amount thereof. Consequently, the purchased Secured Notes have been classified as the current portion of long term debt on the prior year's financial statements. ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 	CONDITION	 AND RESULTS OF OPERATIONS. The following discussion and analysis of the consolidated results of operations and financial condition should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements and related Notes to provide additional information concerning the financial activities and condition of Salant Corporation ("Salant") and its subsidiary companies (collectively, the "Company"). Results of Operations The following discussion compares the operating results of the Company for the three months ended April 1, 1995 with the operating results for the three months ended April 2, 1994. In February 1995, the Company discontinued its Vera Scarf Division. The financial statements included in this 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 period presented. See "Notes to the Condensed Consolidated Financial Statements --- Note 2." 		(dollars in millions) 		 Three months ended 		April 1, April 2, 		 1995 1994 Net sales	 	$103.8	 $89.9 Gross profit		 $22.5 	 $22.1 Gross margin percentage	 	 21.6%	 24.6% EBITDA (a)		 $4.8	 $6.4 (a) Earnings before interest, taxes, depreciation and amortization. For the first quarter of 1995, net sales amounted to $103.8 million, a 15.5% increase over net sales of $89.9 million in the comparable 1994 quarter. The increase was due to significant sales increases in men's sportswear, jeans and slacks achieved by the Company's Perry Ellis, Texas Apparel and Thomson divisions as well as the JJ. Farmer Division which was acquired in June 1994. These increases were partially offset by a reduction in sales of women's junior denim products. Notwithstanding the popularity of casualwear, which contributed to a slight decrease in the overall dress shirt market in 1994, the Company's dress shirt sales increased in the first quarter of 1995, as compared to the first quarter of 1994. In June 1994, the Company signed a new license agreement for dress shirts to be produced and sold under the GANT label. Net sales by category and percent of total net sales for the first quarter of 1995 as compared to the first quarter of 1994 was: (dollars in millions) 		 Three months ended 		 April 1, 1995 April 2, 1994 Dress Shirts and Accessories (a)	 		$ 42.0 40.4%	 $ 40.3 44.8% Sportswear (b) 			 27.4 26.4%	 18.0 20.1% Bottoms (c) 			 24.3 23.5%	 19.7 21.9% Other	 (d)	 	 10.1 9.7% 	 11.9 13.2% 	Total	 $103.8 100% 	 $ 89.9 100% (a) Includes the Fashion Shirt Group, the dress shirt portions of the Manhattan Apparel Group and Perry Ellis Division and the Salant Accessories Division. (b) Includes the Sportswear portions of the Perry Ellis Division and Manhattan Apparel Group and the JJ. Farmer Division. (c) Includes the Thomson and Texas Apparel Divisions. (d) Includes the Children's Apparel Group, Made in the Shade Division and the Retail Stores Division. Gross profit as a percentage of net sales decreased to 21.6% ($22.5 million) in the first quarter of 1995 from 24.6% of net sales ($22.1 million) in the comparable 1994 quarter. The reduction in gross profit as a percentage of net sales was incurred primarily in men's dress shirts, neckwear and slacks and in denim-based products. The cause of the reduction was (a) continuing pressure on selling prices, which is expected to continue, and (b) higher costs of manufacturing in our domestic dress shirt facilities and our recently closed jeans laundry in Texas. Based on recent improvements in our dress shirt facilities as well as a new laundry facility currently under construction in Mexico, we do not expect the higher manufacturing costs to continue. Selling, general and administrative expenses as a percentage of net sales decreased to 19.7% ($20.4 million), as compared to the first quarter of 1994, when such expenses amounted to 21.2% of net sales ($19.0 million). Other income for the first quarter of 1994 included a $500 thousand insurance reimbursement for legal fees and expenses incurred in prior years. For the first quarter of 1995, income from operations (before net interest expense of $4.6 million) was $2.9 million, or 2.8% of net sales. For the first quarter of 1994, income from operations (before net interest expense of $3.4 million) was $4.6 million, or 5.1% of net sales. Income from operations as a percentage of net sales was lower in 1995 primarily as a result of continuing gross margin pressures as indicated above. Net interest expense for the first quarter of 1995 amounted to $4.6 million as compared to $3.4 million in the prior year's first quarter. The increase in interest expense was primarily due to a higher average outstanding loan balance and increases in the interest rate on the Company's working capital facility. As a result of the above, the net loss for the 1995 first quarter was $1.7 million, or $0.11 per share, compared with net income of $1.1 million, or $0.07 per share, for the first quarter of 1994. There were 15,007,632 weighted average common shares outstanding in the first quarter of 1995, compared to 15,137,328 weighted average common shares and common share equivalents outstanding in the first quarter of 1994. Liquidity and Capital Resources The Company is a party to a revolving credit, factoring and security agreement, as amended, (the "Credit Agreement") with The CIT Group/Commercial Services, Inc. ("CIT") to provide seasonal working capital financing in the form of direct borrowings and letters of credit, up to an aggregate of $135 million during certain periods of 1995 (subject to an asset based borrowing formula). Interest on direct borrowings is charged monthly at an annual rate of one percent in excess of the prime rate of Chemical Bank (the "Prime Rate") (which prime rate was 9.0% at April 1, 1995). As collateral for borrowings under the Credit Agreement, Salant has granted to CIT a security interest in substantially all of the assets of the Company. As of April 1, 1995, direct borrowings and letters of credit outstanding under the Agreement were $44.7 million and $37.9 million, respectively, and the Company had unused availability of $7.3 million. As of April 2, 1994, there were no direct borrowings, letters of credit outstanding under the Credit Agreement were $35.9 million, and the unused availability amounted to $26.9 million. The average interest rate on borrowings for the three months ended April 1, 1995 and April 2, 1994 was 9.4% and 6.3%, respectively. 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 (i) during the year, to maintain minimum levels of working capital and stockholders' equity and to satisfy a maximum cumulative net loss test and (ii) at year end, to satisfy a ratio of total liabilities to stockholders' equity and a fixed charge coverage ratio. At April 1, 1995, the Company was in compliance with all financial covenants as indicated below: 	 Covenant	April 1, 1995 Credit Agreement Covenants	 Level 	 Actual Level Working Capital 		$ 85.0 million		$ 94.2 million Stockholders' Equity		$ 65.0 million		$ 70.0 million Maximum Loss 	$ (10.0) million	$ (1.6) million (a) (a) In accordance with the Credit Agreement, 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. At the end of the first quarter of 1995, the Company's short term borrowings were $20.8 million higher than such borrowings at the end of 1994. The increase in borrowings was primarily the result of an increase in inventories of $24.6 million to provide for businesses entered into in 1994 and in anticipation of higher sales in the second quarter of 1995, including the initial shipments of the new Sears' Canyon River Blues program for men and boys. Capital expenditures in the first quarter of 1995 were $2.2 million, related primarily to the creation of Perry Ellis shops in department stores, additional showroom and office space in New York City and a new jeans laundry facility currently under construction in Mexico, as compared to $800 thousand in the first quarter of 1994. Capital expenditures for 1995 are anticipated to be approximately $6-7 million. 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, will be adequate to meet its financing requirements for the remainder of 1995. 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. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Reports on Form 8-K During the first quarter of 1995, the Company filed one Form 8-K, dated March 2, 1995, reporting an amendment to the Revolving Credit, Factoring and Security Agreement, dated September 20, 1993, between The CIT Group/Commerical Services, Inc. and Salant Corporation. Exhibits Number	Description 10.27	Fourth Amendment to Credit Agreement, dated as of March 1, 1995, to the Revolving Credit, Factoring and Security Agreement, dated as of September 20, 1993, as amended, between Salant Corporation and The CIT Group/Commercial Services, Inc. 10.28	Letter Agreement, dated April 12, 1995, amending the Employment Agreement, dated June 1, 1993, between Todd Kahn and Salant Corporation. 27	Financial Data Schedule SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 	SALANT CORPORATION Date: May 12, 1995 	/s/ Richard P. Randall 	 	Richard P. Randall 	 	Senior Vice President 	and Chief Financial Officer 	(Principal Financial Officer)