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 July 2, 1994
| | 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: 0-9831
LIZ CLAIBORNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2842791
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1441 Broadway, New York, New York 10018
(Address of principal executive offices) (Zip Code)
(212) 354-4900
(Registrant's telephone number, including area code)
Indicate by check 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 .
The number of shares of Registrant's Common Stock, par value
$1.00 per share, outstanding at 8/11/94 was 78,311,834.
(2)
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of July 2, 1994
and December 25, 1993 ............................. 3
Consolidated Statements of Income for the Six
and Three Month Periods Ended July 2, 1994
and June 26, 1993 ................................. 4
Consolidated Statements of Cash Flows
for the Six Month Periods
Ended July 2, 1994 and June 26, 1993 .............. 5
Notes to Consolidated Financial Statements .......... 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .... 10-13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................... 14
Item 4. Submission of Matters to a Vote of Security Holders. 15
Item 6. Exhibits and Reports on Form 8-K.................... 15
SIGNATURE .................................................... 16
(3)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands except share data)
(Unaudited)
July 2, December 25,
ASSETS 1994 1993
CURRENT ASSETS:
Cash and cash equivalents $ 79,621 $ 104,720
Marketable securities 234,838 204,571
Accounts receivable - trade 159,679 174,435
Inventories 383,469 436,593
Deferred income tax benefits 17,613 15,065
Other current assets 67,935 69,055
Total current assets 943,155 1,004,439
PROPERTY AND EQUIPMENT - NET 218,129 202,068
OTHER ASSETS 32,201 29,831
$1,193,485 $1,236,338
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 91,275 $ 141,126
Accrued expenses 94,797 97,765
Income taxes payable 10,454 15,547
Total current liabilities 196,526 254,438
LONG-TERM DEBT 1,283 1,334
DEFERRED INCOME TAXES 1,105 2,275
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 18,475 --
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
authorized shares - 50,000,000,
issued shares - none -- --
Common stock, $1 par value,
authorized shares - 250,000,000,
issued shares - 88,218,617 88,219 88,219
Capital in excess of par value 39,894 56,699
Retained earnings 1,145,754 1,123,413
Cumulative translation adjustment (1,660) (1,279)
1,272,207 1,267,052
Common stock in treasury, at cost
9,641,783 shares in 1994 and
9,371,217 shares in 1993 (296,111) (288,761)
Total stockholders' equity 976,096 978,291
$1,193,485 $1,236,338
The accompanying notes to consolidated financial statements are an integral
part of these statements.
/TABLE
(4)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(All dollar amounts in thousands, except per common share data)
(Unaudited)
Six Months Ended Three Months Ended
(27 Weeks) (26 Weeks)
July 2, June 26, July 2, June 26,
1994 1993 1994 1993
NET SALES $1,031,411$1,038,262 $490,043 $506,915
Cost of goods sold 674,881 666,350 321,133 326,784
GROSS PROFIT 356,530 371,912 168,910 180,131
Selling, general &
administrative expenses 293,537 267,974 146,594 135,522
OPERATING INCOME 62,993 103,938 22,316 44,609
Investment and other
income-net 5,739 8,794 2,879 4,085
INCOME BEFORE PROVISION FOR
INCOME TAXES AND CUMULATIVE
EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 68,732 112,732 25,195 48,694
Provision for income taxes 25,400 40,600 9,300 17,600
INCOME BEFORE CUMULATIVE
EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 43,332 72,132 15,895 31,094
Cumulative effect of a
change in the method of
accounting for income
taxes -- 1,643 -- --
NET INCOME $ 43,332$ 73,775 $ 15,895 $ 31,094
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 78,834,31282,265,71678,816,99881,859,809
EARNINGS PER COMMON SHARE:
INCOME BEFORE CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING
PRINCIPLE $0.55 $0.88 $0.20 $0.38
Cumulative effect of a change
in the method of accounting
for income taxes -- .02 -- --
NET INCOME $0.55 $0.90 $0.20 $0.38
DIVIDENDS PAID PER COMMON SHARE $0.23 $0.21 $0.11 $0.11
The accompanying notes to consolidated financial statements are an integral part of these
statements.
/TABLE
(5)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
Six Months Ended
(27 Weeks) (26 Weeks)
July 2, June 26,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 43,332 $ 73,775
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 17,053 16,412
Non-current deferred income taxes (1,170) (729)
Cumulative effect of a change in
accounting for income taxes -- (1,643)
Tax benefit on exercise of stock options 97 953
Change in current assets and liabilities:
Decrease in accounts receivable 14,756 8,852
Decrease in inventories 53,124 2,117
(Increase) in deferred
income tax benefits (846) (1,612)
Decrease (increase) in other current assets 1,120 (6,340)
(Decrease) in accounts payable (49,851) (58,550)
(Decrease) increase in accrued expenses (2,968) (10,693)
(Decrease) in income taxes payable (5,093) (13,163)
Net cash provided by
operating activities 69,554 9,379
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (97,402) (231,779)
Sales of investment instruments 63,021 257,011
Purchases of property and equipment (33,122) (32,132)
Purchase of trademarks (1,541) (641)
Other-net (1,238) 404
Net cash used in
investing activities (70,282) (7,137)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (51) (49)
Proceeds from exercise of common stock options 471 3,141
Dividends paid (17,740) (17,468)
Proceeds from sale of put warrants 1,572 1,188
Repurchase of common stock (8,231) (46,130)
Net cash used in
financing activities (23,979) (59,318)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (392) 269
NET CHANGE IN CASH AND CASH EQUIVALENTS (25,099) (56,807)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 104,720 130,721
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 79,621 $ 73,914
The accompanying notes to consolidated financial statements are an integral part of these
statements.
/TABLE
(6)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed consolidated financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted from this report,
as is permitted by such rules and regulations; however, the
Company believes that the disclosures are adequate to make
the information presented not misleading. It is suggested
that these condensed financial statements be read in
conjunction with the financial statements and the notes
thereto included in the Company's latest annual report.
2. In the opinion of management, the information furnished
reflects all adjustments, all of which are of a normal
recurring nature, necessary for a fair presentation of the
results for the reported interim periods. Certain items
previously reported in specific captions in the accompanying
financial statements have been reclassified to conform with
the current year's classifications. Results of operations
for interim periods are not necessarily indicative of results
for the full year.
3. The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" as of the
beginning of fiscal 1994. In accordance with SFAS No.115,
prior period financial statements have not been restated to
reflect the change in accounting principle. The effect as of
December 26, 1993 of adopting SFAS No.115 was an increase in
the opening balance of stockholders' equity of $2,848,000
(net of $1,673,000 in deferred income taxes) to reflect the
net unrealized holding gains on securities classified as
available-for-sale previously carried at amortized cost.
This increase in stockholders' equity was included in
retained earnings.
(7)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following is a summary of available-for-sale securities:
(Dollars in thousands)
Dec. 25,
July 2, 1994 1993
Gross Estimated
Unrealized Fair
Cost Gains Losses Value Cost
Tax exempt notes C>
and bonds $286,059 $171 $(2,025) $284,205 $278,033
U.S. & foreign
government securities 10,828 -- (868) 9,960 10,619
Collateralized mortgage
obligations 7,272 -- (1,392) 5,880 8,201
Total debt securities 304,159 171 (4,285) 300,045 296,853
Equity securities 2,528 -- (485) 2,043 5,000
$306,687 $171 $(4,770) $302,088 $301,853
(Dollars in thousands)
July 2, 1994
Estimated
Fair
Cost Value
Due in one year or less $107,072 $105,853
Due after one year through
three years 155,264 153,977
Due after three years 41,823 40,215
304,159 300,046
Equity securities 2,528 2,043
$306,687 $302,088
At July 2, 1994, the above investments include $65,208,000 of tax
exempt notes and bonds which are classified as cash and cash
equivalents and equity securities which are included in other long-
term assets in the consolidated balance sheets.
For the six month period ended July 2, 1994, gross realized gains
and (losses) on sales of available-for-sale securities totaled
$686,000 and ($9,000), respectively. The net adjustment to
unrealized holding gains and losses on available-for-sale
securities for the six month period was a charge of $5,745,000
which was included in retained earnings.
(8)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. Inventories are stated primarily at the lower of cost (first-
in, first-out) or market and consist of the following:
(Dollars in thousands)
July 2, December 25,
1994 1993
Raw materials $ 46,860 $ 56,560
Work-in-process 20,050 24,006
Finished goods 316,559 356,027
$383,469 $436,593
5. Property and equipment - net
(Dollars in thousands)
July 2, December 25,
1994 1993
Land and buildings $120,191 $ 67,049
Machinery and equipment 107,296 99,644
Furniture and fixtures 41,278 39,489
Leasehold improvements 107,171 99,802
Construction in progress -- 38,491
375,936 344,475
Less: Accumulated depreciation
and amortization 157,807 142,407
$218,129 $202,068
6. In April and June 1994, in connection with its previously
announced stock repurchase program, the Company sold put
warrants in privately negotiated transactions based on the
then-current market price of the Common Stock. The warrants
obligate the Company to purchase a total of 800,000 shares of
its Common Stock in July, October and December 1994 on the
respective expiration dates. The proceeds of $1.6 million
from the sale of the put warrants have been recorded in
capital in excess of par value. The Company's potential $18.5
million obligation to buy back 800,000 shares of Common Stock
has been charged to capital in excess of par value and
recorded as Put Warrants. Subsequent to July 2, 1994 the
Company's potential obligation under these put warrants was
reduced to $13.5 million as a result of the Company's purchase
of 200,000 shares for approximately $5.0 million from a holder
of such warrants.
7. On July 14, 1994, the Company's Board of Directors declared a
quarterly cash dividend on the Company's Common Stock at the
rate of $.1125 per share, to be paid on September 6, 1994, to
stockholders of record at the close of business on August 12,
1994.
(9)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. For the six months ended July 2, 1994 and June 26, 1993, the
Company made income tax payments of $32,196,000 and
$54,381,000, respectively. For the six months ended July 2,
1994 and June 26, 1993, the Company made interest payments of
$165,000 and $67,000, respectively. As of July 2, 1994, the
fair value adjustment for available-for-sale securities was a
charge of $2,897,000 (which reflects an unrealized loss net of
$1,702,000 in deferred income taxes) included in retained
earnings.
9. The Company adopted the provisions of SFAS No. 109 "Accounting
for Income Taxes" as of the beginning of fiscal 1993. SFAS
No. 109 requires a change from the deferred method to the
asset and liability method of accounting for income taxes.
The cumulative effect on prior years of this accounting change
is reflected in the consolidated statement of income for the
six months ended June 26, 1993 as a one-time increase in net
income of $1,643,000, or $.02 per share.
10. The Company enters into foreign exchange contracts to hedge
transactions denominated in foreign currencies for periods of
up to 18 months and to hedge expected payment of intercompany
transactions with its non-U.S. subsidiaries. Gains and losses
on contracts which hedge specific foreign currency denominated
commitments are recognized in the period in which the
transaction is completed. As of July 2, 1994, the Company had
contracts maturing in 1994 and 1995 to purchase at contracted
forward rates 365,575,000 Spanish pesetas and 2,336,000 Dutch
guilders and to sell 16,000,000 Canadian dollars and
11,500,000 British sterling. The aggregate U.S. dollar value
of all foreign exchange contracts is approximately
$33,000,000, approximately $4,500,000 of which are for a
period in excess of one year. Unrealized gains/losses for
outstanding foreign exchange contracts were not material as of
July 2, 1994.
(10)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The period to prior year comparable period ("period-to-period")
decrease in net sales for the 1994 second quarter was 3.3%. This
included an approximate 15% decline in net sales of Misses and
Petite sportswear, to approximately $228 million, reflecting
significantly lower average unit selling prices required primarily
to liquidate excess prior season inventory. The net sales result
also reflected an approximate 15% decline in LIZ & CO. sales, to
approximately $18 million, due primarily to lower unit volume, with
lower average unit prices accounting for approximately one-third of
the decrease. The net sales declines were offset in part by the
continued roll-out of the products of the RUSS, THE VILLAGER and
CRAZY HORSE Divisions (collectively, the "Russ Divisions"), with
sales approximately doubling to approximately $24 million, as well
as increases in Menswear sales (an approximate 61% increase, to
approximately $21 million)and DANA BUCHMAN sales (an approximate
32% increase, to approximately $26 million). These increases
primarily reflected higher unit volume, although nearly half of the
Menswear increase was due to higher average unit selling prices due
to a higher proportion of regular price sales. In addition, sales
of the Company's FIRST ISSUE, LIZ CLAIBORNE and ELISABETH stores,
and international retail operations (collectively, the "retail
operations") increased approximately 30%, to approximately $35
million, due to the opening of new domestic retail stores (84 at
1994 second quarter end as compared with 61 at 1993 second quarter
end) and European retail leased departments. Net sales for the
second quarter have historically been lower than those of the first
quarter, reflecting seasonal fluctuations.
Net sales for the 1994 first half (27 weeks) were 0.7% lower than
those for the 1993 first half (26 weeks). The 1994 first quarter
included the shipment of certain Spring merchandise delayed from
fiscal 1993. The 1994 first half results included an approximate
9% decline in net sales of Misses and Petite sportswear, to
approximately $505 million, reflecting significantly lower average
unit selling prices required primarily to liquidate excess prior
season inventory. Contributing to the decrease were declines in
LIZ & CO. sales (down approximately 22%, to approximately $35
million) and Dresses/Suits sales (down approximately 7%, to
approximately $65 million), in each case due to lower unit volume.
The net sales declines were offset in part by the continued roll-
out of the products of the Russ Divisions, with sales approximately
doubling to approximately $52 million due to volume increases, as
well as increases in DANA BUCHMAN sales (an approximate 29%
increase, to approximately $52 million) due in substantially equal
parts to volume and price effects, and Menswear sales (an
approximate 23% increase, to approximately $42 million), with
approximately three-quarters of such increase due to a higher
proportion of regular price sales. In addition, sales of the
retail operations increased approximately 37%, to approximately $65
million, due to the same factors present in the quarter, and sales
of shoes increased approximately 20%, to approximately $35 million,
(11)
RESULTS OF OPERATIONS (continued)
due to higher average unit selling prices resulting from a higher
proportion of regular price sales.
Gross profit dollars decreased on a period-to-period basis 4.1% for
the first half and 6.2% for the second quarter of 1994. The
quarterly decrease was due in substantially equal parts to the drop
in net sales levels and to margin erosion; the decrease for the
first half was due substantially to margin erosion. Gross profit
expressed as a percentage of net sales decreased to 34.6% for the
first half and 34.5% for the second quarter of 1994 from 35.8% and
35.5% for the comparable 1993 periods. These lower gross margin
percentages reflected margin erosion at several of the wholesale
apparel divisions, primarily the Misses and Petite sportswear group
and the ELISABETH and LIZ & CO. Divisions, principally due to a
lower proportion of regular price sales, primarily reflecting the
liquidation of excess prior year inventory. Also contributing to
the margin decreases were severely depressed margins within the
Russ Divisions (which are lower margin businesses) due to a very
low proportion of regular price sales; the higher proportion of the
Company's net sales represented by these Divisions also contributed
to the overall margin decreases. The margin decline for the first
half also reflected higher markdowns within the outlet operations.
The gross profit percentage declines were offset by improved
margins within the Menswear and Shoe Divisions, due in each case to
a higher proportion of regular price sales, as well as the ongoing
conversion of much of the Company's European business from a
wholesale to a leased department (retail) operation (which
generally experiences higher gross margins than a wholesale
operation). In addition, the gross profit percentages were
favorably impacted by the higher proportion of the Company's net
sales represented by the Accessories and Jewelry Divisions (each of
which generally experience higher gross margins than the wholesale
apparel divisions).
Legislation which would further restrict the importation and/or
increase the cost of textiles and apparel produced abroad has
periodically been introduced in Congress. Although it is unclear
whether any new legislation will be enacted into law, it appears
likely that various new legislative or executive initiatives will
be proposed. These initiatives may include a reevaluation of the
trading status of certain countries, including Most Favored Nation
("MFN"") treatment for the People's Republic of China ("PRC"),
which, if enacted, would increase the cost of products purchased
from suppliers in such countries. The PRC's MFN treatment was
renewed in July 1994 for an additional year. In light of the very
substantial portion of the Company's products which are
manufactured by foreign suppliers, the enactment of new legislation
or the administration of current international trade regulations,
or executive action affecting international textile agreements,
could adversely affect the Company's operations.
The period-to-period dollar increases in selling, general and
administrative ("SG&A") expenses were 9.5% and 8.2% for the first
half and second quarter of 1994, respectively. Approximately half
of these increases reflect the continued expansion of the Company's
(12)
RESULTS OF OPERATIONS (continued)
retail operations, including the opening of new domestic stores and
the conversion to retail of much of the Company's European
business. Also contributing to these increases were costs
associated with the VIVID fragrance (introduced in July 1993), as
well as expansion of the Russ and DANA BUCHMAN Divisions and outlet
operations. SG&A expenses expressed as a percentage of net sales
were 28.5% and 25.8% for the first six months and 29.9% and 26.7%
for the second quarter, respectively, of 1994 and 1993. These
percentage increases reflect the above factors, as well as the fact
that dollar expenses increased on an overall basis, notwithstanding
the decline in sales levels. Although certain wholesale apparel
divisions reduced their period-to-period SG&A levels, their
percentage decrease in sales outpaced their percentage decrease in
expense levels.
The period-to-period decreases in investment and other income-net
were due to lower rates of return realized on the Company's
portfolio, as well as decreases in the Company's average portfolio
of cash equivalents and marketable securities, reflecting in part
the Company's stock repurchase program.
As a result of the factors described above, on a period-to-period
basis, the Company's income before provision for income taxes and
cumulative effect of a change in accounting principle declined
39.0% for the first half and 48.3% for the second quarter of 1994.
The provisions for income taxes decreased on a period-to-period
basis, reflecting the changes in pre-tax income, offset in part by
an increase in tax rates. Net income decreased 41.3% for the first
half and 48.9% for the second quarter of 1994.
The Company adopted the Financial Accounting Standards Board
Statement No. 109 "Accounting for Income Taxes" and changed its
method of accounting for income taxes as of the beginning of fiscal
1993. The cumulative effect on prior years of this accounting
change is reflected in the consolidated statement of income for the
six months ended June 26, 1993 as a one-time increase in net income
of $1.6 million, or $.02 per share. Management believes that the
$17.6 million deferred tax benefit will be fully realized through
future taxable income and reversals of existing deferred tax
liabilities of $1.1 million.
The earnings per common share computations reflect a lower number
of outstanding shares on a period-to-period basis, as a result of
the Company's stock repurchase program.
The Company's results of operations reflect the difficult tone of
business, as well as the Company's having cut back on forward
merchandise commitments in an effort to limit exposure to
significant end-of-season excess inventory positions. The Company
continues to view 1994 as a year in which it has begun a far-
reaching process of rebuilding and restructuring, and has initiated
a number of programs and is exploring a variety of initiatives and
projects which it believes hold it in good stead in the future.
While the Company believes that apparel gross margins should see
improvement from current levels, weakness in demand for the
Company's offerings within the continuing difficult retail
environment could impair any such improvement.
(13)
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operations increased to $69.6 million through
July 2, 1994, from $9.4 million through June 26, 1993, primarily
because of a larger reduction in the level of inventory from year
end ($51.0 million) and smaller reductions in eurrent liabilities
($24.5 million), offset in part by lower net income ($30.4
million). Net cash used by investing activities increased to $70.3
million in 1994 from $7.1 million in 1993, due primarily to a $34.4
million increase in the Company's portfolio of marketable
securities in 1994 as compared to a $25.2 million decrease in 1993.
Net cash used in financing activities decreased to $24.0 million in
1994 from $59.3 million in 1993, reflecting a $37.9 million
reduction in the amount expended in the Company's stock repurchase
program. On April 21, 1994, the Company's Board of Directors
authorized an additional $50 million under the previously announced
stock repurchase program. As of August 11, 1994, the Company had
expended or committed to expend approximately $375 million of the
$400 million authorized under the program, covering an aggregate of
12,882,000 shares.
Inventories at July 2, 1994 were $383.5 million, down from $436.6
million at year end 1993, and approximately equal to the $383.8
million at June 26, 1993. On a period-to-period basis, the
inventory levels reflected decreases within the wholesale apparel
and shoe operations, offset in part by incremental inventories
resulting from the expansion of the outlet operations and the Russ
Divisions. Virtually all of the Company's excess inventory
manufactured in 1993 was disposed of as of the end of the second
quarter. The existence of such excess inventory, which takes
additional time to liquidate, has a negative impact on the
Company's inventory turnover rate.
The Company's anticipated capital expenditures for 1994 currently
approximate $75 million. These expenditures consist primarily of
certain building and equipment expenditures, including expansions
of and improvements to the Company's North Bergen, New Jersey
office facility, as well as a distribution facility in Montgomery,
Alabama, leasehold improvements of new stores and leased
departments for the Company's retail operations, and the upgrading
of data processing systems. These expenditures will be financed
through available capital and future earnings. Increased working
capital needs will be met by current funds. Bank lines of credit,
which are available to finance import transactions and direct
borrowings, were decreased by the Company from $295 million to $280
million subsequent to July 2, 1994 to reduce excess lines. The
Company expects to be able to adjust these lines as required.
(14)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of its officers and directors are parties
to several pending legal proceedings and claims, including an
action styled Ressler et al. vs. Liz Claiborne, Inc., et al.
pending in the United States District Court for the Eastern
District of New York. The plaintiffs seek compensatory damages on
behalf of a class of purchasers of the Company's Common Stock
during the period commencing September 1992 through and including
July 16, 1993, and allege that the defendants violated the federal
securities laws by, among other things, making misrepresentations
or omissions of material facts that artificially inflated the
market price of the Common Stock during the class period. An
earlier-filed lawsuit before the same court as Ressler, styled
Fishbaum vs. Chazen, et. al., made allegations similar to the
Ressler complaint and sought damages on behalf of a class of
purchasers of the Company's Common Stock for the period commencing
March 30, 1993, through and including July 16, 1993. An amended
complaint was filed in the Ressler action in May 1994 to add
Fishbaum as a plantiff. In June 1994, the Court granted the
Company's motion to dismiss the Fishbaum complaint, with leave to
amend, on the grounds that the complaint did not adequately set
forth the requisite element of scienter. In July 1994, the Company
moved to dismiss the Ressler complaint.
In April 1994, two stockholder derivative actions, which contain
substantially similar allegations, styled Goldberg Family Trust vs.
Chazen, et al. and Liz Claiborne, Inc., nominal defendant and Laz
Schneider vs. Chazen, et al. and Liz Claiborne, Inc., nominal
defendant, were brought in the Court of Chancery of the State of
Delaware against the Company's directors and its former Vice
Chairman. The complaints contain allegations of breach by the
directors of their fiduciary obligations to the Company and its
shareholders and corporate mismanagement, waste of corporate assets
in connection with the Company's stock repurchase program and the
defense of pending legal proceedings, and unjust enrichment in
connection with the sale of shares of the Company's Common Stock
between September 1992 and July 1993 by certain of its present and
former officers and directors. In July 1994, the Laz Schneider
action was consolidated into the Goldberg action. In August 1994,
the defendants moved to dismiss the consolidated complaint.
The Company believes that the litigations described in this
Item are without merit and intends to vigorously defend these
actions. Although the outcome of any such litigation or claim
cannot be determined with certainty, management is of the opinion
that the final outcome of these litigations should not have a
material adverse effect on the Company's results of operations or
financial position.
(15)
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's 1994 Annual Meeting of Stockholders held on
May 12, 1994 (the "1994 Annual Meeting"), the stockholders of the
Company (i) approved the Company's Section 162(m) Cash Bonus Plan
(the number of affirmative votes cast was 67,470,336, the number of
negative votes cast was 2,863,504, and the number of abstentions
was 1,082,378) and (ii) ratified the appointment of Arthur Andersen
& Co. as independent public accountants of the Company for the
fiscal year ending December 31, 1994 (the number of affirmative
votes cast was 70,453,515, the number of negative votes cast was
767,325 and the number of abstentions was 195,378). In addition,
at the 1994 Annual Meeting, the Company's stockholders elected the
following nominees to the Company's Board of Directors:
Votes
Nominee For Withheld
Harvey L. Falk 69,207,434 2,208,784
Ann M. Fudge 69,230,939 2,185,279
J. James Gordon 69,242,783 2,173,435
Louis Lowenstein 69,394,611 2,021,607
There were no broker nonvotes with respect to any matter acted upon
at the 1994 Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) Amendment No. 5 to the Liz Claiborne Savings Plan.
10(b) Trust Agreement, dated as of July 1, 1994, between Liz
Claiborne, Inc. and IDS Trust Company.
(b) The Company did not file any reports on Form 8-K in the
quarter.
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.
LIZ CLAIBORNE, INC.
DATE: August 15, 1994 BY /s/Samuel M. Miller
SAMUEL M. MILLER
Senior Vice President - Finance
Chief Financial and Accounting
Officer
EXHIBIT INDEX
Exhibit No. Description
10(a) Amendment No. 5 to the Liz Claiborne Savings Plan.
10(b) Trust Agreement, dated as of July 1, 1994 between Liz
Claiborne, Inc. and IDS Trust Company.