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 September 30, 1995 TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ...........to..........................
Commission file numbe0-9831
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 d Yes X No .
The number of shares of Registrant's Common Stock, par value $1.00
per share, outstanding at November 10, 1995 was 74,039,499.
(2)
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1995 and
December 31, 1994 3
Consolidated Statements of Income for Nine and Three Month Periods
Ended September 30, 1995 and October 1, 1994 4
Consolidated Statements of Cash Flows for the Nine Month Periods
Ended September 30, 1995 and October 1, 1994 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
(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)
September 30, December 31,
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 45,507 $ 71,419
Marketable securities 264,897 258,932
Accounts receivable - trade 246,214 159,766
Inventories 364,553 423,003
Deferred income tax benefits 26,916 32,547
Other current assets 73,640 76,864
Total current assets 1,021,727 1,022,531
PROPERTY AND EQUIPMENT - NET 234,537 236,560
OTHER ASSETS 34,192 30,571
$ 1,290,456 $ 1,289,662
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 103,777 $ 138,581
Accrued expenses 161,239 156,924
Income taxes payable 10,361 7,894
Total current liabilities 275,377 303,399
LONG-TERM DEBT 1,148 1,227
DEFERRED INCOME TAXES 1,322 2,052
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 25,283 --
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 35,049 56,714
Retained earnings 1,228,202 1,164,850
Cumulative translation adjustment (1,489) (1,637)
1,349,981 1,308,146
Common stock in treasury, at cost, 13,531,827 shares in 1995 and
11,214,688 shares in 1994 (362,655) (325,162)
Total stockholders' equity 987,326 982,984
$ 1,290,456 $ 1,289,662
The accompanying notes to consolidated financial statements are an integral part
of these statements.
(4)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(All amounts in thousands, except per common share data)
(Unaudited)
Nine Months Ended Three Months Ended
(39 Weeks) (40 Weeks)
September 30, October 1, September 30, October 1,
1995 1994 1995 1994
NET SALES $ 1,584,497 $1,648,199 $ 582,572 $ 616,788
Cost of goods sold 987,417 1,065,261 354,257 390,380
GROSS PROFIT 597,080 582,938 228,315 226,408
Selling, general & administrative expenses 457,818 454,649 154,529 161,112
OPERATING INCOME 139,262 128,289 73,786 65,296
Investment and other income-net 10,010 8,630 3,879 2,891
INCOME BEFORE PROVISION
FOR INCOME TAXES 149,272 136,919 77,665 68,187
Provision for income taxes 56,000 50,700 29,500 25,300
NET INCOME $ 93,272 $ 86,219 $ 48,165 $ 42,887
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 75,301 78,687 74,923 78,380
EARNINGS PER COMMON SHARE $1.24 $1.10 $0.64 $0.55
DIVIDENDS PAID PER COMMON SHARE $0.34 $0.34 $0.11 $0.11
The accompanying notes to consolidated financial statements are an
integral part of these statements.
(5)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in thousands)
(Unaudited)
Nine Months Ended
(39 Weeks) (40 Weeks)
September 30, October 1,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 93,272 $ 86,219
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 29,846 26,340
Other - net 366 (1,393)
Change in current assets and liabilities:
(Increase) in accounts receivable (86,448) (124,670)
Decrease in inventories 41,172 71,017
Decrease (increase) in deferred
income tax benefits 3,573 (1,147)
Decrease in other current assets 3,224 1,447
(Decrease) in accounts payable (34,804) (53,174)
Increase in accrued expenses 4,315 29,111
Increase (decrease) in income taxes payable 2,467 (2,776)
Net cash provided by operating activities 56,983 30,974
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (211,645) (98,712)
Sales of investment instruments 211,377 107,705
Purchases of property and equipment (28,393) (56,583)
Purchases of trademarks (2,042) (2,181)
Cash proceeds from sale of certain Shoe Division assets 17,872 --
Other-net (638) 56
Net cash used in investing activities (13,469) (49,715)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (79) (76)
Proceeds from exercise of common stock options 35 471
Proceeds from sale of put warrants 3,618 1,572
Dividends paid (25,352) (26,541)
Repurchase of common stock (47,785) (15,712)
Net cash used in financing activities (69,563) (40,286)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 137 (683)
NET CHANGE IN CASH AND CASH EQUIVALENTS (25,912) (59,710)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 71,419 104,720
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,507 $ 45,010
The accompanying notes to consolidated financial statements are an
integral part of these statements.
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 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. Effective June 30, 1995, the Company reached a definitive agreement with a
third party to operate under license the shoe business formerly operated by
the Company's Shoe Division. As part of the transaction, the Company
received $18.0 million in cash, plus other consideration valued at $4.9
million, in exchange for inventory and other assets. The Shoe Division had
net sales of $38.9 million in the first half of 1995 and $62.7 million in
fiscal 1994. The operating results of the shoe business for each period
were not material in relationship to the Company's overall operating
results.
4. In December 1994, the Company recorded a $30.0 million restructuring
charge. This amount includes $16.8 million related to the phase out of its
First Issue business, $10.2 million for the streamlining of operating and
administrative functions and $3.0 million for the restructuring of its
Moderate Division. Principal items included in the charge are estimated
contract termination costs, severance and related benefits for staff
reductions, losses on contracts and the write-off of certain assets. This
charge reduced net income by $18.9 million, or $.24 per common share, in
the fourth quarter of 1994. The remaining balance of the restructuring
liability as of September 30, 1995 was $19.1 million. Of the $10.9 million
expended for restructuring costs, $6.2 million was related to severance
costs, $3.0 million to losses on contracts and write-offs of certain
assets, and $1.7 million to other miscellaneous costs. Substantially all of
the remaining liabilities should be paid or settled by the second quarter
of 1996. First Issue accounted for $43.6 million of 1995 nine month sales,
as compared with $42.6 million in 1994 and incurred an operating loss of
$9.8 million in the nine months of 1995, as compared with a loss of $11.5
million in 1994. The Company is in the process of converting to other
Company-operated retail formats (or closing) its remaining 26 First Issue
locations.
5. 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.
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following are summaries of available-for-sale securities:
(Dollars in thousands)
September 30, 1995
Gross Estimated
Unrealized Fair
Cost Gains Losses Value
Tax exempt notes and bonds $ 275,396 $ 993 $ (401) $ 275,988
U.S. & foreign government securities 16,318 80 (129) 16,269
Collateralized mortgage obligations 7,121 -- (804) 6,317
Total debt securities 298,835 1,073 (1,334) 298,574
Equity securities 2,528 -- (722) 1,806
$ 301,363 $ 1,073 $ (2,056) $ 300,380
(Dollars in thousands)
December 31,1994
Gross Estimated
Unrealized Fair
Cost Gains Losses Value
Tax exempt notes and bonds $ 309,126 $ 83 $ (3,060) $ 306,149
U.S. & foreign government securities 11,323 -- (905) 10,418
Collateralized mortgage obligations 8,569 3 (1,785) 6,787
Total debt securities 329,018 86 (5,750) 323,354
Equity securities 2,528 -- (588) 1,940
$ 331,546 $ 86 $ (6,338) $ 325,294
(Dollars in thousands)
September 30, 1995
Estimated
Fair
Cost Value
Due in one year or less $ 122,010 $ 121,656
Due after one year through three years 130,776 131,342
Due after three years 46,049 45,576
298,835 298,574
Equity securities 2,528 1,806
$ 301,363 $ 300,380
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At September 30, 1995, and December 31, 1994, the above investments
included $33,677,000 and $64,422,000, respectively, of tax exempt notes
and bonds which are classified as cash and cash equivalents and equity
securities which are included in other assets in the consolidated
balance sheets.
For the nine month period ended September 30, 1995, gross realized
gains and (losses) on sales of available-for-sale securities totaled
$536,000 and ($116,000), respectively. For the nine month period ended
October 1, 1994, gross realized gains and (losses) on sales of
available-for-sale securities totaled $686,000 and ($81,000),
respectively. The net adjustment to unrealized holding gains and losses
on available-for-sale securities for the nine month periods ended
September 30, 1995 and October 1, 1994, was a credit of $3,211,000 (net
of $2,058,000 in deferred income taxes) and a charge of $6,046,000 (net
of $3,551,000 in deferred income taxes), respectively, which were
included in retained earnings. As of September 30, 1995 and December
31, 1994, the fair value adjustment for available-for-sale securities
was a charge of $728,000 (net of $255,000 in deferred income taxes) and
a charge of $3,939,000 (net of $2,313,000 in deferred income taxes),
respectively, which were included in retained earnings.
6. Inventories are stated at the lower of cost (first-in, first-out for
wholesale operations and retail method for retail and outlet
operations) or market and consist of the following:
(Dollars in thousands)
September 30, December 31,
1995 1994
Raw materials $ 47,110 $ 55,724
Work-in-process 27,455 21,527
Finished goods 289,988 345,752
$364,553 $423,003
7. Property and equipment - net
(Dollars in thousands)
September 30, December 31,
1995 1994
Land and buildings $124,375 $123,746
Machinery and equipment 127,898 117,686
Furniture and fixtures 53,880 50,518
Leasehold improvements 127,876 117,104
434,029 409,054
Less: Accumulated depreciation
and amortization 199,492 172,494
$234,537 $236,560
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. In 1995, in connection with its previously announced stock repurchase
program, the Company sold new and terminated previously outstanding put
warrants in privately negotiated transactions based on the then-current
market price of the Common Stock. The new warrants, if exercised, will
require the Company to purchase up to a total of 1,000,000 shares of its
Common Stock in March, June, September and December 1996 on the respective
expiration dates of the warrants. The proceeds of $3.6 million from the
sale of put warrants has been recorded in capital in excess of par value.
The Company's potential $25.3 million obligation to buy back 1,000,000
shares of Common Stock has been charged to capital in excess of par value
and recorded as Put Warrants.
9. On October 27, 1995, the Company's Board of Directors declared a quarterly
cash dividend on the Company's Common Stock at the rate of $0.1125 per
share, to be paid on December 4, 1995 to stockholders of record at the
close of business on November 13, 1995.
10. For the nine months ended September 30, 1995 and October 1, 1994, the
Company made income tax payments of $49,809,000 and $55,500,000,
respectively. For the nine months ended September 30, 1995 and October 1,
1994, the Company made interest payments of $459,000 and $250,000,
respectively.
11. 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 September 30, 1995, the Company had
contracts maturing in 1995 and 1996 to purchase at contracted forward rates
67,451,000 Japanese yen and to sell 56,500,000 Canadian dollars and
9,100,000 British sterling. The aggregate U.S. dollar value of all foreign
exchange contracts is approximately $55,884,000. Unrealized gains and
losses for outstanding foreign exchange contracts were not material at
September 30, 1995.
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the 1995 third quarter decreased $34 million, or 6%, on a period
to prior year comparable period ("period-to-period") basis. This net sales
decline included a 7% decrease in domestic net sales of Misses and Petite
COLLECTION, LIZSPORT and LIZWEAR (collectively, "Sportswear"), to $251 million,
and a 38% decrease in domestic net sales of the Moderate Division (consisting of
RUSS, THE VILLAGER, and CRAZY HORSE brands), to $20 million. The Sportswear net
sales decrease reflected planned unit volume declines partially offset by
slightly higher average unit selling prices due principally to changes in
product mix. The Moderate Division's net sales decline principally reflected
planned unit volume decreases. Also contributing to the result was a decrease
in the net sales of accessories (12%, to $48 million), due primarily to lower
average unit selling prices resulting from lower initial selling prices and
changes in product mix. In September 1995, the Company reached a definitive
agreement to license its shoe business effective June 30, 1995; the Shoe
Division accounted for $16 million of third quarter 1994 net sales. These
declines were offset in part by a 37% sales increase within the Retail
Operations (consisting of the Company's LIZ CLAIBORNE, ELISABETH, DANA BUCHMAN,
CLAIBORNE, First Issue and international retail stores and leased departments),
to $45 million, as a result of the opening of new domestic retail stores (120 at
1995 third quarter end compared with 97 at 1994 third quarter end) and a higher
average number of European retail leased departments during the 1995 third
quarter. In late 1994, the Company announced plans to phase out of the First
Issue retail store business and to close or convert its 77 First Issue locations
to other Company-operated retail formats. As of November 13, 1995, 49 of such
locations have been converted: 33 to an ELISABETH format, 13 to a LIZ CLAIBORNE
format (including three petite stores) and three to a CLAIBORNE men's format;
two stores have been closed. This phase out is expected to be completed by the
second quarter of 1996. First Issue accounted for $10 million of third quarter
1995 net sales, compared to $14 million in 1994. See Note 4 of Notes to
Consolidated Financial Statements. Net sales gains were also posted by DANA
BUCHMAN (30%, to $43 million), menswear (19%, to $33 million), dresses (9%, to
$37 million), and LIZ & CO. (12%, to $26 million), in each case due principally
to unit volume increases. Net sales of the outlet operations increased 9%, to
$46 million, reflecting the opening of new domestic locations (68 at 1995 third
quarter end compared with 61 at 1994 third quarter end). Net sales for the third
quarter have historically been higher than those of the second quarter,
reflecting seasonal fluctuations. The Company has previously announced a
number of new product classifications which are currently expected to be
shipped commencing in 1996.
Net sales for the nine months of 1995 (39 weeks) decreased $64 million, or 4%,
from the 1994 nine month period (40 weeks). This net sales decline included an
11% decrease in domestic net sales of Sportswear, to $670 million, and a 32%
decrease in domestic net sales of the Moderate Division, to $57 million, in each
case due principally to planned unit volume declines. Also contributing to the
net sales decline were decreases in the net sales of accessories (9%, to $129
million), due primarily to lower average unit selling prices resulting from
lower initial selling prices and changes in product mix, and ELISABETH (7%, to
$104 million), due in equal parts to lower average unit prices and lower unit
volume reflecting lower off-price sales volume. These decreases were offset in
part by sales increases within the Retail Operations (42%, to $140 million), due
to the opening of new domestic retail stores and European retail leased
departments, as well as DANA BUCHMAN (20%, to $102 million) and menswear (19%,
to $83 million), in each case due principally to higher unit volume. Net sales
of the outlet operations increased 10%, to $110 million, reflecting the opening
of new domestic locations. The Shoe Division's net sales through June 30, 1995
were $39 million, compared to $51 million for the first nine months of 1994.
On a period-to-period basis, gross profit dollars increased 0.8% for the third
quarter, and 2.4% for the first nine months , of 1995. Gross profit margins
increased on a period-to-period basis to 39.2% from 36.7% in the third quarter,
and to 37.7% from 35.4% for the first nine months, of 1995, generally reflecting
lower markdowns resulting from lower excess inventory positions and an increase
in average unit selling prices realized on close-out merchandise across
substantially all of the wholesale apparel divisions. The third quarter margin
percentage principally reflected improvements within the Sportswear and
ELISABETH Divisions, partially offset by a decline within menswear, due to a
lower proportion of regular price sales reflecting weakness in demand. Moderate
margins remained at depressed levels notwithstanding period-to-period
improvements. Margins were also favorably impacted by improvements within the
outlet operations as well as the larger percentage of sales represented by the
Retail Operations and the DANA BUCHMAN Division (which are generally higher
margin businesses). In addition, the margin improvement for the nine month
period was partially offset by a margin decline within accessories due to lower
initial selling prices and changes in product mix, as well as margin erosion at
First Issue as inventory is liquidated during the phase-out period.
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 1995 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.
On a period-to-period basis, selling, general and administrative ("SG&A")
expenditures decreased 4.1% for the third quarter, and increased 0.7% for the
first nine months, of 1995. SG&A expenses expressed as a percentage of net sales
were 26.5% and 26.1% for the third quarter and 28.9% and 27.6% for the nine
month periods, respectively, of 1995 and 1994. These results reflect increases
in expenses due to the continued expansion of the Company's outlets and the
Retail Operations ($4.4 million increase for the third quarter, and $22.3
million increase for the nine months, of 1995) offset by lower expense levels
across substantially all of the wholesale divisions as expense reduction
initiatives continue. The percentage decreases in the sales of certain divisions
continued to outpace their percentage decreases in expense levels. The 1994
third quarter results included $3.6 million of direct expenses related to the
Shoe Division.
The period-to-period increases in investment and other income - net reflected an
increase in the Company's investment portfolio, notwithstanding the ongoing
stock repurchase program, as well as slightly higher rates of return realized on
the portfolio.
As a result of the factors described above, the Company's income before
provision for income taxes increased on a period-to-period basis 9.0% for the
first nine months, and 13.9% for the third quarter, of 1995. These results
included continuing operating losses within the Retail Operations and the
Moderate Division. The provisions for income taxes reflect the changes in
pre-tax income as well as an increase in the effective income tax rate. As a
result of the above, net income increased on a period-to-period basis.
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 retail environment remains highly promotional, and the tone of business
continues to be difficult. Prospects for the upcoming retail holiday selling
season remain uncertain. The Company continues the process of implementing a
comprehensive process reengineering and profit improvement program, and is
proceeding towards a number of previously announced three-year goals for this
initiative. The Company continues to expect that earnings for the fourth quarter
of 1995 will show improvement over 1994, although any such improvement will be
moderated by continuing losses within the Retail Operations and Moderate
Division. As part of its ongoing strategic review process, the Company continues
to evaluate certain business operations.
The Company has previously announced that, effective January 1, 1996, it will
lower the trade discount offered by its Sportswear, Dress, LIZ & CO. and
ELISABETH Divisions from the current 10% level to 8% (the prevailing standard in
the industry). The Company has further announced plans to redeploy the
additional funds received as a result of this change towards a national
advertising campaign, an expanded in-store presentation program and similar
brand-enhancing activities, in an effort to stimulate full price sales at
retail. Upon implementation of this change, the net sales of the affected
divisions will increase by approximately 2% over the results they would have
reported without the change in trade discount, with corresponding dollar
increases in gross margin and SG&A expenses.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
Net cash provided by operating activities was $57.0 million through September
30, 1995, compared to $31.0 million through October 1, 1994, reflecting a
smaller increase in accounts receivable ( $86.4 million in 1995 compared to
$124.7 million in 1994) and a smaller decrease in accounts payable in 1995
compared to 1994, offset in part by a smaller decrease in inventories ( $41.2
million in 1995 against $71.0 million in 1994) and a smaller increase in accrued
expenses in 1995 compared to 1994. Net cash used in investing activities was
$13.5 million in 1995 compared to $49.7 million in 1994 , reflecting changes in
marketable securities and capital expenditures on a period-to-period basis, as
well as cash proceeds from the sale of certain Shoe Division assets realized in
1995. Net cash used in financing activities was $69.6 million in 1995 compared
to $40.3 million in 1994, reflecting a $32.1 million increase in the amount
expended in the Company's stock repurchase program . As of November 13, 1995,
the Company had expended or committed to expend, through the sale of put
warrants (see Note 8 of Notes to Consolidated Financial Statements),
approximately $474 million of the $500 million authorized under that program,
covering an aggregate of 18.0 million shares.
Inventories at September 30, 1995 were $364.6 million, down from $423.0 million
and $365.6 million at December 31, 1994 and October 1, 1994, respectively. The
September 30, 1995 inventory level reflects the expansion of an in-stock reorder
program in several divisions and the addition of new stores within the Retail
Operations, offset by a reduction of ongoing inventory levels within the outlet
operations and the sale of inventory related to the Company's former Shoe
Division (see Note 3 of Notes to Consolidated Financial Statements).
The Company's anticipated capital expenditures for 1995 currently approximate
$35 to $40 million, of which $28 million has been expended through September 30,
1995. These expenditures consist primarily of leasehold improvements and
fixturing of new stores and leased departments for the Retail Operations and
upgrading of management information systems. These expenditures are financed
through available capital and future earnings. Any 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 $282 million to $270 million during the third quarter to reduce excess
lines. The Company expects to be able to adjust these lines as required.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and certain of its present and former 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 21, 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 plaintiff. In June 1994, the court granted defendants' 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. On
August 25, 1995, the district court granted defendants' motion to dismiss the
amended Ressler complaint, with leave to amend, on the grounds that the
complaint failed to comply with the pleading requirements of the Federal Rules
of Civil Procedure. The Court denied that branch of defendants' motion seeking
to dismiss the amended complaint for failure adequately to allege scienter.
Defendants have moved to reargue that portion of the Court's decision. On
October 30, 1995, a second amended complaint was filed in the Ressler action;
the Company has not yet responded to that new 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 two former Vice Chairmen.
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 above 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.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(a) Form of Restricted Career Share Agreement.
27 Financial Data Schedule as of September 30, 1995.
(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: November 13, 1995 BY /s/ Samuel M. Miller
SAMUEL M. MILLER
Senior Vice President - Finance
Chief Financial and Accounting Officer