Back to GetFilings.com
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 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6666
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,
Trading Over-The-Counter - Bulletin Board
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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.
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 March 23, 2001, there were outstanding 9,901,140 shares of the
Common Stock of the registrant. Based on the closing price of the Common Stock
on such date, the aggregate market value of the voting stock held by
non-affiliates of the registrant on such date was $10,897,507. 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 to be filed relating to the 2001 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 Stockholder
Matters
Item 6. Selected Consolidated Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants 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 Schedules and Reports on Form 8-K
SIGNATURES
PART I
ITEM 1. BUSINESS
Introduction. Salant Corporation ("Salant" or the "Company"), which was
incorporated in Delaware in 1987, is the successor to a business founded in 1893
and incorporated in New York in 1919. The Company designs, produces, imports and
markets to retailers throughout the United States brand name and private label
menswear apparel products. The Company currently sells its products to
department and specialty stores, and for a portion of 1999 made limited sales of
certain products to national chains, major discounters and mass volume retailers
throughout the United States. In December 1998, the Company determined to
discontinue and sell its Salant Children's Apparel Group (the "Children's
Group"), which manufactured and marketed blanket sleepers, pajamas and
underwear. Also at that time, the Company decided to sell or close its non-Perry
Ellis menswear businesses in order to focus on the Perry Ellis brand. During
1999, the Company substantially completed the process of closing or selling
these businesses. (As used herein, the "Company" includes Salant and its
subsidiaries.)
Bankruptcy Court Case. On December 29, 1998 (the "Filing Date"), Salant filed a
voluntary petition under chapter 11 of the Bankruptcy Code with the Bankruptcy
Court (the "1998 Case") in order to implement a restructuring of its 10-1/2 %
Senior Secured Notes due December 31, 1998 (the "Senior Notes"). Salant also
filed its plan of reorganization (the "Plan") with the Bankruptcy Court on the
Filing Date in order to implement its restructuring. On April 16, 1999, the
Bankruptcy Court issued an order confirming the Plan (the "Confirmation Order").
The Plan was consummated on May 11, 1999 (the "Effective Date").
In accordance with the Plan, Salant's focus is primarily on its Perry Ellis
men's apparel business and, as a result, Salant has exited its other businesses,
including its Children's Group and non-Perry Ellis menswear divisions. To that
end, Salant has sold its John Henry and Manhattan businesses. These businesses
included the John Henry, Manhattan and Lady Manhattan trade names, the John
Henry and Manhattan dress shirt inventory, the leasehold interest in a dress
shirt facility located in Valle Hermosa, Mexico, and the equipment located at
the Valle Hermosa facility and at Salant's facility located in Andalusia,
Alabama. Salant has also sold its Children's Group business. This sale was
primarily for inventory related to the Children's Group business and the Dr.
Denton trademark.
Pursuant to the Plan (i) all of the outstanding principal amount of Senior
Notes, plus all accrued and unpaid interest thereon, was converted into 95% of
Salant's new common stock, subject to dilution, and (ii) all of Salant's
existing old common stock was converted into 5% of Salant's new common stock,
subject to dilution. Salant's general unsecured creditors (including trade
creditors) were unimpaired under the Plan and were entitled to be paid in full.
The Plan was approved by all of the holders of Senior Notes that voted and over
96% of the holders of Salant's old common stock that voted.
Salant operates its Perry Ellis businesses under certain licensing agreements
(the "Perry Ellis Licenses") between Salant and Perry Ellis International, Inc.
("PEI"). During the 1998 Case, Supreme International Corporation ("Supreme")
entered into discussions with PEI to acquire PEI and, thereafter, Supreme
acquired PEI. Prior to the hearing on the confirmation of the Plan, Supreme (in
its own capacity and on behalf of PEI (collectively, referred to herein as
"Supreme-PEI")) filed an objection to the confirmation. In connection with the
confirmation of the Plan, Salant and Supreme-PEI settled and resolved their
differences and the material terms of such settlement were set forth in a term
sheet (the "Term Sheet") attached to and incorporated into the Confirmation
Order (the "PEI Settlement").
The PEI Settlement. The following is a summary of the material provisions of the
Term Sheet setting forth the terms of the PEI Settlement. The following
description is qualified in its entirety by the provisions of the Term Sheet.
The PEI Settlement provided that: (i) Salant would return to PEI the license to
sell Perry Ellis products in Puerto Rico, the U.S. Virgin Islands, Guam and
Canada (Salant retained the right to sell its existing inventory in Canada
through January 31, 2000); (ii) the royalty rate due PEI under Salant's Perry
Ellis Portfolio pants license with respect to regular price sales in excess of
$15.0 million annually would be increased to 5%; (iii) Salant would provide
Supreme-PEI with the option to take over any real estate lease for a retail
store that Salant intends to close; (iv) Salant would assign to Supreme-PEI its
sublicense with Aris Industries, Inc. for the manufacture, sale and distribution
of the Perry Ellis America brand sportswear and, depending on certain
circumstances, Salant would receive certain royalty payments from Supreme-PEI
through the year 2005; (v) Salant would pay PEI its pre-petition invoices of
$616,844 and post-petition invoices of $56,954 on the later of (a) the Effective
Date of the Plan or (b) the due date with respect to such amounts; (vi)
Supreme-PEI (a) agreed and acknowledged that the sales of businesses made by
Salant during the 1998 Case did not violate the terms of the Perry Ellis
Licenses and did not give rise to the termination of the Perry Ellis Licenses
and (b) consented to the change of control arising from the conversion of debt
into equity under the Plan and acknowledged that such change of control did not
give rise to any right to terminate the Perry Ellis Licenses; and (vii)
Supreme-PEI withdrew with prejudice, its objection to confirmation of the Plan,
and supported confirmation of the Plan.
Men's Apparel. In fiscal 2000, the Company's ongoing business was primarily
comprised of Perry Ellis products. The Company markets accessories, dress
shirts, slacks and sportswear under the PERRY ELLIS and PORTFOLIO BY PERRY ELLIS
trademarks and a limited amount of private label products.
Retail Outlet Stores. The retail outlet stores business of the Company consists
of a chain of outlet stores (the "Stores division"), through which it sells
products manufactured by the Company and other Perry Ellis licensed
manufacturers. At the end of fiscal 2000, the Company operated 36 Perry Ellis
outlet stores.
Significant Customers. In 2000 and 1999 approximately 19% of the Company's sales
were made to Federated Department Stores, Inc. ("Federated") and approximately
18% of the Company's sales were made to Dillards Corporation ("Dillards"). Also
in 2000 and 1999, approximately 17% and 16% of the Company's sales were made to
the May Company ("May"), respectively and approximately 13% of the Company's
sales were made to Marmaxx Corporation ("Marmaxx") in 2000 and 1999. In 1998
approximately 20% of the Company's sales were made to Sears Roebuck & Company,
and approximately 14% of the Company's sales were made to Federated. Also in
1998, approximately 11% of the Company's sales were made to Dillards and
approximately 10% of the Company's sales were made to Marmaxx.
No other customer accounted for more than 10% of the sales during 1998, 1999 or
2000.
Trademarks. The markets in which the Company operates are highly competitive.
The Company competes primarily on the basis of brand recognition, quality,
fashion, price, customer service and merchandising expertise.
Approximately 97.9% of the Company's net sales for 2000 were attributable to
products sold under Company owned or licensed designer trademarks, primarily
PERRY ELLIS and PORTFOLIO BY PERRY ELLIS trademarks (the "Perry Ellis
Trademarks"); these products are sold through leading department and specialty
stores. The balance was attributable to products sold under retailers' private
labels.
In January 2001, the Company purchased the assets and trademarks of Tricots St.
Raphael, Inc. ("Tricot"). Tricot designs, produces and markets men's designer
knitwear and sweaters for better department and specialty stores.
Trademarks Licensed to the Company. The Perry Ellis Trademarks are licensed to
the Company under the Perry Ellis Licenses with 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. The Company also had rights of first refusal
worldwide for certain new licenses granted by PEI for men's apparel and
accessories through February 1, 2001. On January 28, 1999, PEI and Supreme
announced that they had entered into a definitive agreement under which Supreme
would acquire for cash all of the stock of PEI for $75 million. On April 7,
1999, Supreme completed the acquisition of PEI and became Salant's licensor
under the Perry Ellis Licenses.
In the second quarter of 2000, the Company entered into an agreement with Hartz
& Company, Inc. ("Hartz") to design, produce and distribute sportswear and
furnishings for Hartz's exclusive Tallia brand. No sales for this license were
recorded in 2000, however the Company did incur expenses related to the
development of the spring 2001 line.
Design and Production. Products sold by the Company's various divisions are
produced to the designs and specifications (including fabric selections) of
designers employed by those divisions. In limited cases, the Company's designers
may receive input from the Company's licensors on general themes or color
palettes.
During 2000, approximately 6.0% of the units produced by the Company were
manufactured in the United States, with the balance manufactured in foreign
countries. The units produced by the Company were attributable to unaffiliated
contract manufacturers. In 2000, approximately 22.6% of the Company's foreign
production was manufactured in Guatemala, approximately 21.6% was manufactured
in Hong Kong, approximately 20.4% was manufactured in China and approximately
15.3% was manufactured in the Dominican Republic.
The Company's foreign sourcing operations are subject to various risks of doing
business abroad, including currency fluctuations (although the predominant
currency used is the U.S. dollar), quotas and, in certain parts of the world,
political instability. 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.
Raw Materials. The raw materials used in the Company's production 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.
Substantially all of the Company's foreign purchases are denominated in U.S.
currency. During fiscal 2000, two suppliers accounted for more than 10%, on an
individual basis, of Salant's raw material purchases.
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 companies in both categories. Many
of the Company's competitors have greater financial resources than the Company.
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,
are not expected to have a material effect on the business, capital
expenditures, earnings or competitive position of the Company.
Seasonality of Business and Backlog of Orders. This information is included
under Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Employees. As of the end of 2000, the Company employed 618 persons, of whom 187
were engaged in distribution operations and the remainder were employed in
executive, marketing and sales, product design, general and administrative,
engineering and purchasing activities and in the operation of the Company's
retail outlet stores. The Company believes that its relations with its employees
are satisfactory. Pursuant to the business plan implemented in connection with
the Plan, the Company no longer engages in manufacturing and has closed all of
its distribution facilities, except for its Winnsboro, South Carolina facility,
which is covered by a collective bargaining agreement.
ITEM 2. PROPERTIES
The Company's principal executive offices are located at 1114 Avenue of the
Americas, New York, New York 10036. During 1999 and 2000, the Company sold or
closed all manufacturing and distribution facilities, except for the owned
distribution facility in South Carolina which has 360,000 square feet of space
devoted to distribution. The Company leases approximately 97,000 square feet of
combined office, design and showroom space. As of the end of 2000, the Company's
Stores division operated 36 retail outlet stores, comprising approximately
88,000 square feet of selling space, all of which are leased. Except as noted
above, substantially all of the owned and leased property of the Company is used
in connection with its men's apparel business or general corporate
administrative functions.
The Company believes that its facilities and equipment are adequately
maintained, in good operating condition, and are adequate for the Company's
present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in several legal actions. In the opinion of the
Company's management, based upon the advice of the respective attorneys handling
such cases, such actions are not expected to have a material adverse effect on
the Company's consolidated financial position, results of operations or cash
flow. In addition, the Company notes the following legal proceedings.
1. Bankruptcy Case. On the Filing Date, Salant filed a voluntary petition
for relief under chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York. The Company filed its
Plan on the Filing Date and the Plan was confirmed by the Bankruptcy Court on
April 16, 1999. The Plan was consummated on the Effective Date. The 1998 Case is
currently pending under the caption In re Salant Corporation, Chapter 11 Case
No. 98-10107 (CB). All pre-Filing Date non-disputed and allowed claims against
Salant have been or will be satisfied pursuant to the terms of the Plan. Salant
has filed, and expects to continue to file, objections to all disputed
pre-Filing Date claims asserted against Salant in the 1998 Case.
2. Declaratory Judgement Action. The Company is a defendant in a
declaratory judgment action, captioned Hartford Fire Insurance Company v. Salant
Corporation, Index No. 60233/98, in the Supreme Court of the State of New York,
County of New York (the "Hartford Action"). The Company's insurers seek a
declaratory judgment that the claims asserted against the Company in a lawsuit
captioned Maria Delores Rodriguez-Olvera, et al. v. Salant Corp., et al., Case
No. 97-07-14605-CV, in the 365th Judicial District Court of Maverick County,
Texas (the "Rodriguez-Olvera Action") are not covered under the policies that
the insurers had issued. The Company's insurers nevertheless provided a defense
to the Company in the Rodriguez-Olvera Action and paid $30 million to settle the
case without prejudice to their positions in the Hartford Action. Currently,
there are discussions being held with a view to reaching an agreement for the
settlement of the Hartford Action; if the settlement proposal is achieved as
contemplated, management believes there would be no material impact on the
Company's financial position or the results of operations. Pending such a
settlement of this action, Salant's insurers have not withdrawn their
reservation of rights, and the possibility remains that one or more of such
insurers will seek recourse against Salant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 2000, 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 STOCKHOLDER MATTERS
Salant's common stock is currently trading on the Over-the-Counter Bulletin
Board under the trading symbol SLNT.OB.
The high and low sale prices per share of common stock (old and new) for each
quarter of 2000 and 1999 are set forth below. The price of the old common stock
is reflected for the first two quarters of 1999, while the price of the new
common stock is reflected in the third and fourth quarters of 1999 and all of
2000. The Company did not declare or pay any dividends during such years. The
Company's financing agreement requires the satisfaction of certain net worth
tests and other financial benchmarks prior to having the right to pay any cash
dividends. As of December 30, 2000, the Company was prohibited from paying cash
dividends by reason of, among other things, these provisions.
High and Low Sale Prices Per Share of the New Common Stock *
Quarter High Low
2000
Fourth $3.000 $1.875
Third 3.250 2.500
Second 3.060 1.620
First 3.120 1.870
1999
Fourth $4.250 $1.060
Third 6.500 4.120
High and Low Sale Pricese Per Share of the Old Common Stock *
Quarter High Low
1999
Second $0.310 $0.125
First 0.200 0.046
* The Company's new common stock was issued in conjunction with the
restructuring of the Company's debt pursuant to the Plan on the Effective Date,
at which time the Company's old common stock was cancelled. Shareholders of the
old common stock received .03337 shares of new common stock for each share of
the old common stock. No adjustment has been made to the price of the old common
stock reflected above. Although the Effective Date of the Plan was May 11, 1999,
trading of the Company's new common stock did not occur until August 11, 1999,
therefore no prices are reflected for the second quarter of 1999 for the new
common stock. See Note 1 - Financial Reorganization to the Consolidated
Financial Statements.
On March 23, 2001 there were 968 holders of record of shares of common stock,
and the closing market price was $3.25.
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 CONSOLIDATED FINANCIAL DATA
(Amounts in thousands except share, per share and ratio data)
The following selected consolidated financial data as of January 1, 2000 and
December 30, 2000 and for each of the fiscal years in the three year period
ended December 30, 2000 have been derived from the Consolidated Financial
Statements of the Company, which have been audited by Deloitte & Touche LLP,
whose report thereon appears under Item 8, "Financial Statements and
Supplementary Data". The selected consolidated balance sheet data for fiscal
years 1996 through 1998 and statement of operations data for fiscal years 1996
and 1997 have been derived from the Company's audited consolidated financial
statements, which are not included herein. Such consolidated financial data
should be read in conjunction with Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and with the Consolidated
Financial Statements, including the related notes thereto, included elsewhere
herein.
Dec. 30, Jan. 01, Jan. 02, Jan. 03, Dec. 28,
2000 2000 1999 1998 1996
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
For The Year Ended:
Continuing Operations:
Net sales $208,303 $248,730 $300,586 $ 347,667 $ 371,958
Restructuring costs (a) 629 (4,039) (24,825) (2,066) (11,730)
Income/(loss) from continuing operations 12,711 (2,148) (56,775) (8,394) (12,652)
Discontinued Operations:
Income/(loss) from operations, net of income taxes 569 (1,955) (10,163) (10,464) 3,329
Loss on disposal, net of income taxes - - (5,724) (1,330) -
Extraordinary gain (b) - 24,703 - 2,100 -
Net income/(loss)(a) 13,280 20,600 (72,662) (18,088) (9,323)
Pro forma basic and diluted earnings/(loss) per share:
Earnings/(loss) per share from continuing
operations before extraordinary gain (a) $1.28 $(0.21) $(5.68)$ (0.84) $ (1.26)
Earnings/(loss) per share from discontinued
operations .06 (0.20) (1.59) (1.18) 0.33
Earnings per share from extraordinary gain - 2.47 - 0.21 -
Pro forma basic and diluted earnings/(loss) per share (a)1.34 2.06 (7.27) (1.81) (0.93)
Cash dividends per share - - - - -
At Year End:
Current assets $102,859 $93,331 $149,697 $147,631 $149,476
Total assets 130,548 121,803 176,129 228,583 231,717
Current liabilities (c) 27,533 32,069 201,766 180,898 56,032
Long-term debt (c) - - - - 106,231
Deferred liabilities 5,642 4,133 5,273 5,382 8,863
Working capital/(deficiency) 75,326 61,262 (52,069) (33,267) 93,444
Current ratio 3.7:1 2.9:1 0.7:1 0.8:1 2.7:1
Shareholders' equity / (deficiency) $97,373 $85,601 $(30,910) $42,303 $60,591
Book value per share $9.83 $8.65 $(2.04) $2.79 $4.01
Number of shares outstanding 9,901 9,901 15,171 15,171 15,094
Pro forma Book value per share - - $(3.09) $4.23 $6.06
Pro forma number of shares outstanding - - 10,000 10,000 10,000
(a)Includes, for the year ended December 30, 2000 a reversal of $629
($0.06 per share; tax benefit not available) related primarily to better
than anticipated recovery on the sale of assets and settlement of
previously recorded liabilities. For the year ended January 1, 2000, a
provision for $4,039 ($0.40 per pro forma share; tax benefit not available)
for restructuring costs related primarily to severance for employees
terminated in connection with the Company's restructuring and exit from its
non-Perry Ellis businesses. For the year ended January 2, 1999, a provision
of $24,825 ($2.48 per pro forma share; tax benefit not available) for
restructuring costs primarily related to the Company's intention to focus
solely on its Perry Ellis men's apparel business and, as a result, exit its
non-Perry Ellis menswear divisions. For the year ended January 3, 1998, a
provision of $2,066 ($0.21 per pro forma share; tax benefit not available)
for restructuring costs principally related to (i) $3,530 in connection
with the decision in the fourth quarter to close all retail outlet stores
other than Perry Ellis outlet stores and (ii) the reversal of previously
recorded restructuring provisions of $1,464, primarily resulting from the
settlement of liabilities for less than the carrying amount, resulting in
the reversal of the excess portion of the provision. For the year ended
December 28, 1996, a provision of $11,730 ($1.17 per pro forma share; tax
benefit not available) for restructuring costs principally related to (i)
the write-off of goodwill and the write-down of other assets for a product
line which has been put up for sale, (ii) the write-off of certain assets
and accrual for future royalties for a licensed product line and (iii)
employee costs related to closing certain facilities. See Note 3. -
Restructuring Costs to the Consolidated Financial Statements for additional
discussion regarding years 1998-2000.
(b) Includes, for the year ended January 1, 2000, a gain of $24,703 ($2.47 per
pro forma share) related to the conversion of all the Senior Notes and the
related unpaid interest into equity. For the year ended January 3, 1998, a
gain of $2,100 ($0.21 per pro forma share) related to the reversal of
excess liabilities previously provided for the anticipated settlement of
claims arising from the 1990 Chapter 11 proceeding.
(c) At January 1, 2000 the Senior Notes had been converted into equity. At
January 2, 1999 and January 3, 1998, long term debt of $104,879 was
classified as liabilities subject to compromise and reflected as a current
liability, respectively. See Note 1. - Financial Reorganization to the
Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview
In connection with the 1998 Case, Salant filed the Plan with the Bankruptcy
Court in order to implement its restructuring. The restructuring consisted of
two key components: (i) the conversion of all principal and accrued interest on
the Senior Notes into 95% of new common stock of Salant; and (ii) the sale or
disposal of substantially all of the Company's businesses other than the
businesses conducted under the Perry Ellis Trademarks. In fiscal 2000, the
Company's ongoing business was primarily comprised of Perry Ellis products. The
Company markets accessories, dress shirts, slacks and sportswear to department
stores and better specialty stores primarily under the PERRY ELLIS and PORTFOLIO
BY PERRY ELLIS trademarks.
Results of Operations
Fiscal 2000 Compared with Fiscal 1999
Net Sales
In fiscal 2000, net sales of $208.3 million were $40.1 million, or 16.1%, less
than net sales of $248.4 million in fiscal 1999. The decrease resulted from the
Company's exit from its non-Perry Ellis businesses during 1999, namely its
Manhattan, John Henry, Gant and private label dress shirt and accessories
businesses and its private label bottoms business. Net sales for these
businesses in fiscal 1999 were $44.5 million, compared to none in fiscal 2000.
Net sales for the Company's ongoing Perry Ellis and private label businesses for
fiscal 2000 were $208.3 million, an increase of $ 4.4 million, or 2.1%, over
fiscal 1999 net sales of $203.9 million. Of the increase, net sales of the
Company's Perry Ellis retail outlet stores (36 stores at the close of fiscal
2000 compared to 28 stores at the close of fiscal 1999) increased $8.1 million,
or 47.0%. Net sales of Perry Ellis men's apparel at wholesale in fiscal 2000
were unchanged at $178 million compared to fiscal 1999. Weakness at retail in
the men's accessories business in 2000 and closing the Company's Canadian
operations in fiscal year 1999 offset increases in other product lines.
Excluding the men's accessories business, the Company's net sales of men's
apparel at wholesale increased 5.4% in 2000.
Gross Profit
In fiscal 2000, gross profit of $55.6 million was $0.4 million less than gross
profit of $56.0 million in fiscal 1999. Gross profit margin increased from 22.5%
in fiscal 1999 to 26.7% in fiscal 2000. Gross profit for the non-Perry Ellis
businesses exited by the Company in fiscal 1999 (as noted above) was $(1.5)
million, or (3.5)%, which caused the decline in the Company's overall margin for
1999. Gross profit for the Company's ongoing Perry Ellis and private label
businesses decreased to $55.5 million, or 26.7% of net sales, in fiscal 2000
compared to $57.1 million, or 28.1%, in fiscal 1999. The decline in margin was
primarily due to the weakness in the men's accessories business, noted above.
The Company has also experienced a decline in the margins for closeout sales of
prior season Perry Ellis products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (S,G&A) for fiscal 2000 were $45.2
million, or 21.7% of net sales, compared to $54.9 million, or 22.1% of net
sales, in fiscal 1999, a decrease of $9.7 million, or 17.7%. As part of the
Company's restructuring noted above, headcount in S,G&A was reduced resulting in
a reduction in salaries and related benefits. In addition, the Company realized
savings due to the reduced overhead associated with its reorganization.
Royalty Income
Royalty income decreased $1.2 million, or 61.4%, to $0.7 million in fiscal 2000
from $1.9 million in fiscal 1999. The decrease in royalties was due to the sale
of the John Henry and Manhattan trademarks at the end of the first quarter of
fiscal 1999.
Provision for Restructuring
During fiscal 2000, the Company realized $0.6 million in favorable recoveries on
the disposal and sale of buildings and other assets and settlements of
previously recorded liabilities, partially offset by an increase in the
estimated severance related to the closure of the Company's Mexican
manufacturing operations. During 2000, the Company incurred approximately $0.9
million of restructuring costs that were provided for in 1999 and 1998. These
costs included severance and employee costs of $0.5 million, lease payments of
$0.1 million and the remaining balance for other restructuring costs, offset by
$0.3 million of gains from the sale of property, plant and equipment.
During the first quarter of 1999, the Company recorded a provision for
restructuring of $4.0 million, primarily for severance pay for employees
terminated in 1999, as part of the Company's restructuring and exit from its
non-Perry Ellis businesses. During 1999, the Company incurred approximately $5.7
million (mostly cash related items) of restructuring costs that were either
provided for in 1999 or included in the restructuring reserve balance at January
2, 1999. These costs included severance and employee costs of $4.1 million,
lease payments of $0.8 million, royalty payments of $0.5 million and the
remaining balance for other restructuring costs, offset by $0.4 million of gains
from the sale of fixed assets.
Interest Income / Expense, Net
In fiscal 2000, net interest income was $1.2 million compared to net interest
expense of $0.4 million in fiscal 1999. The change resulted primarily from the
sale of the Company's Manhattan and John Henry trademarks for $27 million, as
well as the Company's operating cash flow for fiscal 2000 of $8.4 million, both
of which have significantly reduced the Company's needs under its existing
credit facility.
Income/Loss from Continuing Operations
In fiscal 2000, the Company's income from continuing operations was $12.7
million, or $1.28 per share, compared to a loss of $2.1 million, or $0.21 per
pro forma share, in fiscal 1999.
Earnings before Interest, Taxes, Depreciation, Amortization, Reorganization
Costs, Debt Restructuring Costs, Restructuring Charges, Discontinued
Operations, and Extraordinary Gain
Earnings before interest, taxes, depreciation, amortization, reorganization
costs, debt restructuring costs, restructuring charges, discontinued operations
and extraordinary gain was $15.5 million (7.4% of net sales) in fiscal 2000,
compared to $8.6 million (3.5% of net sales) in fiscal 1999, an increase of $6.9
million, or 80.2%. The Company believes this information is helpful in
understanding cash flow from operations, which is available for debt service and
capital expenditures. This measure is not included in generally accepted
accounting principles and is not a substitute for operating income, net income
or cash flows from operating activities.
Extraordinary Gain
In fiscal 1999, the Company recorded an extraordinary gain of $24.7 million, or
$2.47 per pro forma share, on the conversion of its Senior Notes and related
unpaid interest into new common stock, as part of its restructuring. The holders
of the Senior Notes exchanged $104.9 million of Senior Notes and $14.8 million
of accrued and unpaid interest for 9.5 million shares of new common stock,
representing 95% of the issued and outstanding shares of the Company.
Income / Loss from Discontinued Operations
In fiscal 2000, the Company recorded income of $0.6 million related to the
discontinuance of the Children's group. The income related primarily to better
than anticipated recovery on the sale of assets (primarily the real estate
holdings) related to the Children's business.
In fiscal 1999, the Company recorded a charge of $2.0 million related to the
discontinuance of its Children's Group. The charge of $2.0 million related to
additional losses incurred during the phase-out period and additional expenses
incurred in disposing of the assets related to the Children's business.
Net Income
Net income for fiscal 2000 was $13.3 million, or $1.34 per share, compared to
income of $20.6 million, or $2.06 per pro forma share for fiscal year 1999.
Fiscal 1999 Compared with Fiscal 1998
Net Sales
In fiscal 1999, net sales of $248.4 million were $52.2 million, or 17.4%, less
than net sales of $300.6 million in fiscal 1998. The decrease resulted from the
Company's exit from its non-Perry Ellis businesses during 1999, namely its
Manhattan, John Henry, Gant and private label dress shirt and accessories
businesses and its private label bottoms business. Net sales for these
businesses in fiscal 1999 were $44.5 million, compared to $112.7 million in
fiscal 1998, a decrease of $68.3 million, or 60.6%. Net sales for the Company's
ongoing Perry Ellis and private label businesses for fiscal 1999 were $203.9
million, an increase of $16.0 million, or 8.5%, over fiscal 1998 net sales of
$187.9 million. Of the increase, net sales of the Company's Perry Ellis retail
outlet stores (28 stores in fiscal 1999 compared to 20 stores in fiscal 1998)
increased $3.4 million, or 25.0%, net sales of Perry Ellis men's apparel at
wholesale increased $12.4 million, or 7.5%, and net sales of the Company's
private label accessories business increased $0.2 million, or 2.1%.
Gross Profit
In fiscal 1999, gross profit of $56.0 million was $6.4 million less than gross
profit of $62.4 million in fiscal 1998. Gross profit margin increased from 20.8%
in fiscal 1998 to 22.5% in fiscal 1999. Gross profit for the Company's ongoing
Perry Ellis and private label businesses increased to $57.5 million, or 28.2%,
in fiscal 1999 compared to $51.8 million, or 27.6%, in fiscal 1998. Gross profit
for the non-Perry Ellis businesses exited by the Company in fiscal 1999, noted
above, was $(1.5) million, or (3.5)%, compared to $10.6 million, or 9.4%, in
fiscal 1998. The decrease resulted from markdowns required to dispose of the
inventories of these businesses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (S,G&A) for fiscal 1999 were $54.9
million, or 22.1% of net sales, compared to $72.0 million, or 23.9% of net
sales, in fiscal 1998, a decrease of $17.1 million, or 23.7%. As part of the
Company's restructuring noted above, headcount in S,G&A was reduced from 525 in
fiscal 1998 to 400 in fiscal 1999, resulting in savings of $8.3 million in
salaries and related benefits. In addition, the Company realized savings due to
the reduced overhead associated with the reorganization of the Company, along
with the reduction of consulting fees.
Royalty Income
Royalty income decreased $3.4 million, or 64.2%, to $1.9 million in fiscal 1999
from $5.3 million in fiscal 1998. The decrease in royalties was due to the sale
of the John Henry and Manhattan trademarks, which resulted in royalty income
from these trademarks for only the first quarter of 1999 versus the entire year
of 1998.
Provision for Restructuring
During the first quarter of 1999, the Company recorded a provision for
restructuring of $4.0 million, primarily for severance pay for employees
terminated in 1999, as part of the Company's restructuring and exit from its
non-Perry Ellis businesses. During 1999 the Company incurred approximately $5.7
million (mostly cash related items) of restructuring costs that were either
provided for in 1999 or included in the restructuring reserve balance at January
2, 1999. These costs included severance and employee costs of $4.1 million,
lease payments of $0.8 million, royalty payments of $0.5 million and the
remaining balance for other restructuring costs, offset by $0.4 million of gains
from the sale of fixed assets.
At January 1, 2000 the Company had a building in Andalusia, Alabama still
available for sale. Additional costs of $0.1 million were anticipated and
accrued due to holding the Andalusia facility and additional employee related
expenses of $0.2 million were accrued and anticipated for 2000. The additional
employee related expenses are primarily related to increased insurance costs for
closed facilities. These additional costs were offset by the favorable results
of settlements of royalties and other restructuring costs of $0.1 million and
$0.2 million, respectively.
In fiscal 1998, the Company recorded a provision for restructuring of $24.8
million, also related to the Company's exit from its non-Perry Ellis businesses.
The provision included $16.2 million for the loss on sale of the Company's
Manhattan and John Henry trademarks, goodwill and related operating assets. The
provision also included (i) $6.3 million for write downs of property, plant and
equipment of the Company's manufacturing, distribution and office facilities to
be disposed of as part of its restructuring, (ii) $2.9 million for the write off
of other assets, severance costs, lease termination and other restructuring
costs, and (iii) an offset of $0.6 million relating to adjustments of previously
recorded restructuring reserves and the gain on sale of a facility in Thomson,
Georgia.
Interest Expense, Net
For fiscal 1999, net interest expense was $0.4 million compared to $13.9 million
in fiscal 1998. The decrease resulted primarily from the conversion of $104.9
million aggregate principal face amount of Senior Notes into equity, as part of
the Company's restructuring in fiscal 1999. In addition, the sale of the
Company's Manhattan and John Henry trademarks for $27 million, as well as the
Company's operating cash flow for fiscal 1999 of $45.2 million, has
significantly reduced the Company's borrowing needs under its credit facility.
At January 1, 2000 there were no borrowings outstanding under the Company's
credit facility, compared to $38.5 million at January 2, 1999.
Loss from Continuing Operations
In fiscal 1999, the Company's loss from continuing operations was $2.1 million,
or $0.21 per pro forma share, compared to a loss of $56.8 million, or $5.68 per
pro forma share, in fiscal 1998.
Earnings before Interest, Taxes, Depreciation, Amortization, Reorganization
Costs, Debt Restructuring Costs, Restructuring Charges, Discontinued
Operations, and Extraordinary Gain
Earnings before interest, taxes, depreciation, amortization, reorganization
costs, debt restructuring costs, restructuring charges, discontinued operations
and extraordinary gain was $8.6 million (3.5% of net sales) in fiscal 1999,
compared to $3.3 million (1.1% of net sales) in fiscal 1998, an increase of $5.3
million, or 160.6%. The Company believes this information is helpful in
understanding cash flow from operations which is available for debt service and
capital expenditures. This measure is not included in generally accepted
accounting principles and is not a substitute for operating income, net income
or cash flows from operating activities.
Extraordinary Gain
In fiscal 1999, the Company recorded an extraordinary gain of $24.7 million, or
$2.47 per pro forma share, on the conversion of its Senior Notes and related
unpaid interest into new common stock, as part of its restructuring. The holders
of the Senior Notes exchanged $104.9 million of Senior Notes and $14.8 million
of accrued and unpaid interest for 9.5 million shares of new common stock,
representing 95% of the issued and outstanding shares of the Company.
Loss from Discontinued Operations
In fiscal 1999, the Company recorded a charge of $2.0 million related to the
discontinuance of its Children's Group. The charge of $2.0 million related to
additional losses incurred during the phase-out period and additional expenses
incurred in disposing of the assets related to the Children's business.
In fiscal 1998, the Company recorded a charge of $15.9 million, also relating to
the discontinuance of the Children's Group. Of the $15.9 million, $10.2 million
related to operating losses of the Children's Group prior to the date of
discontinuance, and $5.7 million represented estimated future operating losses
and the estimated loss on the sale of the business. The $5.7 million consisted
of asset write-offs of $2.9 million, estimated losses from operations during the
phase out period of $1.6 million, severance pay of $1.5 million and royalty and
lease payments of $1.5 million, offset by $1.8 million for the sale of the
Company's Dr. Denton trademark.
The Children's Group had net sales of $5.5 million and $42.8 million in fiscal
1999 and 1998, respectively.
Net Income/(Loss)
Net income for fiscal 1999 was $20.6 million, or $2.06 per pro forma share,
compared to a net loss of $72.7 million, or $7.27 per pro forma share for fiscal
1998. In addition to the items noted above, the improvement was due to lower
chapter 11 reorganization costs ($.5 million in 1999 as compared to $3.2 million
in 1998) and a debt restructuring charge of $8.6 million recorded in 1998.
Liquidity and Capital Resources
Upon commencement of the 1998 Case, Salant filed a motion seeking the authority
of the Bankruptcy Court to enter into a revolving credit facility with The CIT
Group/Commercial Services, Inc. ("CIT"), Salant's existing working capital
lender pursuant to and in accordance with the terms of the Ratification and
Amendment Agreement, dated as of December 29, 1998 (the "Amendment") which,
together with related documents are referred to as the "CIT DIP Facility,"
effective as of the Filing Date, which would replace the Company's existing
working capital facility under its then existing credit agreement. On December
29, 1998, the Bankruptcy Court approved the CIT DIP Facility on an interim basis
and on January 19, 1999 the Bankruptcy Court approved the CIT DIP Facility on a
final basis.
On May 11, 1999, the effective date of the Plan, the Company entered into a
syndicated revolving credit facility (the "Credit Agreement") with CIT pursuant
to and in accordance with the terms of a commitment letter dated December 7,
1998, which replaced the CIT DIP Facility described above.
The Credit Agreement provides for a general working capital facility, in the
form of direct borrowings and letters of credit, up to $85 million subject to an
asset-based borrowing formula. The Credit Agreement consists of an $85 million
revolving credit facility, with at least a $35 million letter of credit
subfacility. As collateral for borrowings under the Credit Agreement, the
Company granted to CIT and a syndicate of lenders arranged by CIT (the
"Lenders") a first priority lien on and security interest in substantially all
of the assets of the Company. The Credit Agreement has an initial term of three
years.
The Credit Agreement also provides, among other things, that (i) the Company
will be charged an interest rate on direct borrowings of .25% in excess of the
Prime Rate or at the Company's request, 2.25% in excess of LIBOR (as defined in
the Credit Agreement), and (ii) the Lenders may, in their sole discretion, make
loans to the Company in excess of the borrowing formula but within the $85
million limit of the revolving credit facility. The Company is required under
the agreement to maintain certain financial covenants relating to consolidated
tangible net worth, capital expenditures, maximum pre-tax losses/minimum pre-tax
income and minimum interest coverage ratios. The Company was in compliance with
all applicable covenants at December 30, 2000.
Pursuant to the Credit Agreement, the Company will pay or paid the following
fees: (i) a documentary letter of credit fee of 1/8 of 1.0% on issuance and 1/8
of 1.0% on negotiation; (ii) a standby letter of credit fee of 1.0% per annum
plus bank charges; (iii) a commitment fee of $325 thousand; (iv) an unused line
fee of .25%; (v) an agency fee of $100 thousand (only for the second and third
years of the term of the Credit Agreement); (vi) a collateral management fee of
$8,333 per month; and (vii) a field exam fee of $750 per day plus out-of-pocket
expenses.
At the end of fiscal 2000, there were no direct borrowings outstanding under the
Credit Agreement. Letters of credit outstanding were $30.0 million and the
Company had unused availability, based on outstanding letters of credit and
existing collateral, of $21.7 million. In addition to the unused availability,
the Company had approximately $34.7 million of cash available to fund its
operations. At the end of fiscal 1999, there were no direct borrowings
outstanding and letters of credit outstanding under the Credit Agreement were
$30.1 million, at which time the Company had unused availability of $16.5
million. In addition to the unused availability, the Company had approximately
$30.1 million of cash available to fund its operations. During fiscal 2000, the
maximum aggregate amount of direct borrowings and letters of credit outstanding
at any one time was $36.3 million, at which time the Company had unused
availability of $16.9 million. During fiscal 1999, the maximum aggregate amount
of direct borrowings and letters of credit outstanding at any one time was $66.9
million, at which time the Company had unused availability of $13.0 million.
The Company's cash provided by operating activities for fiscal 2000 was $8.4
million, which primarily reflects (i) income from continuing operations of $12.7
million, (ii) an increase in accounts payable of $2.7 million, and (iii)
non-cash charges, such as depreciation and amortization of $ 4.6 million. These
items were offset by an increase in inventory of $3.6 million, a decrease in
liabilities subject to compromise of $3.0 million, a decrease in accrued
liabilities of $2.4 million and a decrease in the reserve for business
restructuring of $1.2 million.
Cash used by investing activities for fiscal 2000 was $3.8 million, which
reflects $1.9 million of capital expenditures and $1.9 million for the
installation of store fixtures in department stores. During fiscal 2001, the
Company plans to make capital expenditures of approximately $4.1 million and to
spend an additional $1.1 million for the installation of store fixtures in
department stores.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is effective for all fiscal years
beginning after June 15, 1999. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. Under SFAS 133, certain
contracts that were not formerly considered derivatives may now meet the
definition of a derivative. The Company adopted SFAS 133 effective as of
December 31, 2000. Management does not expect the adoption of SFAS 133 to have a
significant impact on the financial position or results of operations of the
Company because the Company does not have significant derivative activity.
Seasonality
Although the Company typically introduces and withdraws various individual
products throughout the year, its principal products are organized into the
customary retail Spring, Transition, Fall and Holiday seasonal lines. The
Company's products are designed as much as one year in advance and manufactured
approximately one season in advance of the related retail selling season.
Backlog
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 the Company's computers. As a result, orders
are placed closer to the required delivery date than had been the case prior to
EDI technology. At March 20, 2001, the Company's backlog of orders was
approximately $44.6 million, which was 6.4% more than the backlog of orders of
approximately $41.9 million that existed at March 20, 2000.
Factors that May Affect Future Results and Financial Condition
This report contains or incorporates by reference forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such forward-looking statement, the Company cautions that
assumed facts or bases almost always vary from the actual results, and the
differences between assumed facts or bases and actual results can be material,
depending on the circumstances. Where, in any forward-looking statement, the
Company or its management expresses an expectation or belief as to future
results, there can be no assurance that the statement of the expectation or
belief will result or be achieved or accomplished. The words "believe",
"expect", "estimate", "project", "seek", "anticipate" and similar expressions
may identify forward-looking statements. The Company's future operating results
and financial condition are dependent upon the Company's ability to successfully
design, manufacture, import and market apparel. Taking into account the
foregoing, the following are identified as important factors that could cause
results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company:
Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line manufacturers (such as
the Company) and a large number of specialty manufacturers. The Company faces
substantial competition in its markets from manufacturers in both categories.
Many of the Company's competitors have greater financial resources than the
Company. The Company also competes for private label programs with the internal
sourcing organizations of many of its own customers.
Strategic Initiatives. During the second quarter of 2000, the Company entered
into a licensing agreement with Hartz to design, produce and distribute men's
sportswear and furnishings for Hartz's exclusive Tallia brand. In the first
quarter of 2001, the Company purchased the assets and trademarks of Tricots
which designs, produces, and markets better men's sweaters and sportswear.
Management of the Company is continuing to consider various strategic
opportunities, including but not limited to, new menswear licenses and/or
acquisitions. Management is also exploring ways to increase productivity and
efficiency, and to reduce the cost structures of its respective businesses.
Through this process management expects to increase its distribution channels
and achieve effective economies of scale. No assurance may be given that any
transactions resulting from this process will be announced or completed.
Apparel Industry Cycles and other Economic Factors. The apparel industry
historically has been subject to substantial cyclical variation, with consumer
spending on apparel tending to decline during recessionary periods. A decline in
the general economy or uncertainties regarding future economic prospects may
affect consumer spending habits, which, in turn, could have a material adverse
effect on the Company's results of operations and financial condition.
Retail Environment. Various retailers, including some of the Company's
customers, have experienced declines in revenue and profits in recent periods
and some have been forced to file for bankruptcy protection. To the extent that
these financial difficulties continue, there can be no assurance that the
Company's financial condition and results of operations would not be adversely
affected.
Seasonality of Business and Fashion Risk. The Company's principal products are
organized into seasonal lines for resale at the retail level during the Spring,
Transition, Fall and Holiday Seasons. Typically, the Company's products are
designed as much as one year in advance and manufactured approximately one
season in advance of the related retail selling season. Accordingly, the success
of the Company's products is often dependent on the ability of the Company to
successfully anticipate the needs of the Company's retail customers and the
tastes of the ultimate consumer up to a year prior to the relevant selling
season.
Foreign Operations. The Company's foreign sourcing operations are subject to
various risks of doing business abroad, including currency fluctuations
(although the predominant currency used is the U.S. dollar), quotas and, in
certain parts of the world, political instability. Any substantial disruption of
its relationship with its foreign suppliers could adversely affect the Company's
operations. Some of the Company's imported merchandise is subject to United
States Customs duties. In addition, bilateral agreements between the major
exporting countries and the United States impose quotas, which limit the amount
of certain categories of merchandise that may be imported into the United
States. Any material increase in duty levels, material decrease in quota levels
or material decrease in available quota allocation could adversely affect the
Company's operations. The Company's operations in Asia are subject to certain
political and economic risks including, but not limited to, political
instability, changing tax and trade regulations and currency devaluations and
controls. Although the Company has experienced no material foreign currency
transaction losses, its operations in the region are subject to an increased
level of economic instability. The impact of these events on the Company's
business, and in particular its sources of supply, cannot be determined at this
time.
Dependence on Contract Manufacturing. As of December 30, 2000, the Company
produced all of its products (in units) through arrangements with independent
contract manufacturers, as the Company closed its manufacturing facilities
during 1999. The use of such contractors and the resulting lack of direct
control could subject the Company to difficulty in obtaining timely delivery of
products of acceptable quality. In addition, as is customary in the industry,
the Company does not have any long-term contracts with its fabric suppliers or
product manufacturers. While the Company is not dependent on one particular
product manufacturer or raw material supplier, the loss of several such product
manufacturers and/or raw material suppliers in a given season could have a
material adverse effect on the Company's performance.
Because of the foregoing factors, as well as other factors affecting the
Company's operating results and financial condition, past financial performance
should not be considered to be a reliable indicator of future performance, and
investors are cautioned not to use historical trends to anticipate results or
trends in the future. In addition, the Company's participation in the highly
competitive apparel industry often results in significant volatility in the
Company's common stock price.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not engage in the trading of market risk sensitive instruments
in the normal course of business. Financing arrangements for the Company are
subject to variable interest rates including rates primarily based on the
Reference Rate (as defined in the Credit Agreement), with a LIBOR option. An
analysis of the Credit Agreement can be found in Note 9 to the Consolidated
Financial Statements, Financing Agreements, included in this report of Form
10-K. On December 30, 2000 there were no direct borrowings outstanding under the
Credit Agreement.
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 (the "Company") as of December 30, 2000 and January
1, 2000, and the related consolidated statements of operations, comprehensive
income, shareholders' equity/deficiency and cash flows for each of the three
years in the period ended December 30, 2000. Our audits also included the
financial statement schedule listed in the index at Item 14. 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 auditing standards generally accepted
in the United States of America. 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 consolidated financial statements present fairly, in all
material respects, the financial position of Salant Corporation and subsidiaries
at December 30, 2000 and January 1, 2000, the results of their operations and
their cash flows for each of the three years in the period ended December 30,
2000 in conformity with accounting principles generally accepted in the United
States of America. 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, the Bankruptcy Court has
entered an order confirming the Plan of Reorganization which became effective on
May 11, 1999.
/s/ Deloitte & Touche LLP
March 9, 2001
New York, New York
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Year Ended
---------------------------------------------------------------------------
December 30, January 1, January 2,
2000 2000 1999
------------------ ------------ -------------
Net sales $ 208,303 $ 248,370 $ 300,586
Cost of goods sold 152,708 192,391 238,192
-------------- ----------- -----------
Gross profit 55,595 55,979 62,394
Selling, general and administrative expenses (45,188) (54,909) (71,999)
Royalty income 750 1,945 5,254
Goodwill amortization (519) (519) (1,881)
Other income, net 213 579 199
Restructuring reversal/(costs) (Note 3) 629 (4,039) (24,825)
Reorganization costs (Note 1) -- (500) (3,200)
Debt restructuring costs (Note 10) -- -- (8,633)
----------------- --------------- ----------
Income/(loss) from continuing operations before interest,
income taxes and extraordinary gain 11,480 (1,464) (42,691)
Interest (income)/expense, net (Notes 9 and 10) (1,244) 439 13,944
------------- ------------- ----------
Income/(loss) from continuing operations
before income taxes and extraordinary gain 12,724 (1,903) (56,635)
Income taxes (Note 12) 13 245 140
-------------- ------------- ------------
Income/(loss) from continuing operations
before extraordinary gain 12,711 (2,148) (56,775)
Discontinued operations (Note 17):
Income/(loss) from discontinued operations 569 (1,955) (10,163)
Loss on disposal -- - (5,724)
Extraordinary gain (Note 4) -- 24,703 --
--------------- ---------- ----------------
Net Income/(loss) $ 13,280 $ 20,600 $ (72,662)
========== ========== ===========
Basic and diluted income/(loss) per share (Note 2):
Income/(loss) per share from continuing
operations before extraordinary gain $ 1.28 $ (0.21)* $ (5.68)*
Income/(loss) per share from discontinued operations .06 (0.20)* (1.59)*
Extraordinary gain -- 2.47* --*
------------- -------------- -----------------
Basic and diluted income/(loss) per share $ 1.34 $ 2.06* $ (7.27)*
=========== ============= ===============
Weighted average common stock outstanding 9,901 9,998* 10,000*
============ ============= ================
*The year ended January 2, 1999 and January 1, 2000 information is pro-forma --
See Note 2.
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(Amounts in thousands)
December 30, January 1, January 2,
2000 2000 1999
------------------ ------------- ------------
Net income/(loss) $13,280 $20,600 $(72,662)
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments 25 54 (203)
Minimum pension liability adjustments (1,533) 1,055 (348)
--------- --------- -----------
Comprehensive income/(loss) $11,772 $21,709 $(73,213)
======= ======= ========
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
December 30, January 1,
2000 2000
------------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $ 34,683 $ 30,116
Accounts receivable - net of allowance for doubtful accounts
of $2,625 in 2000 and $2 419 in 1999 16,588 15,956
Inventories (Notes 5 and 9) 45,283 41,669
Prepaid expenses and other current assets 6,305 5,490
Assets held for sale (Note 3) -- 100
----------------- ------------------
Total current assets 102,859 93,331
Property, plant and equipment, net (Notes 6 and 9) 13,185 14,185
Other assets (Notes 7 and 12) 14,504 14,287
------------- ----------------
$ 130,548 $ 121,803
=========== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY / (DEFICIENCY)
Current liabilities:
Accounts payable $ 14,798 $ 12,097
Reserve for business restructuring (Note 3) 1,070 2,308
Liabilities subject to compromise (Notes 1 and 10) 1,611 4,604
Accrued salaries, wages and other liabilities (Note 8) 9,310 11,751
Net liabilities of discontinued operations (Note 17) 744 1,309
--------------- ----------------
Total current liabilities 27,533 32,069
Deferred liabilities (Note 15) 5,642 4,133
Commitments and contingencies (Notes 9, 10, 13, 14, 16 and 20)
Shareholders' equity / (deficiency) (Notes 2 and 14): Preferred stock, par value
$2 per share:
Authorized 5,000 shares; none issued -- --
Common stock, par value $1 per share
Authorized 45,000 shares;
Issued and issuable - 10,000 in 2000 and 1999 10,000 10,000
Additional paid-in capital 206,040 206,040
Deficit (114,017) (127,297)
Accumulated other comprehensive income/(loss) (Note 18) (4,452) (2,944)
Less - treasury stock, at cost - 99 shares in 2000 and 1999 (198) (198)
--------------- -----------------
Total shareholders' equity 97,373 85,601
------------- ----------------
$ 130,548 $ 121,803
=========== ==============
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY / (DEFICIENCY)
(Amounts in thousands)
Accum-
ulated
Other Total
Compre- Share-
Common Stock Add'l hensive Treasury Stock holders'
Number Paid-In Income/ Number Equity/
of Shares Amount Capital Deficit (Loss) of Shares Amount (Deficiency)
--------- -------------------------------------------------------------------
Balance at January 3, 1998 15,405 $15,405 $107,249 $(75,235)$(3,502) 234 $(1,614) $42,303
Net loss (72,662) (72,662)
Other Comprehensive Loss (551) (551)
-------------------------------------------------------------- ------------------
Balance at January 2, 1999 15,405 $15,405 $107,249 $(147,897)$(4,053) 234 $(1,614) $(30,910)
Net Income 20,600 20,600
Other Comprehensive Income 1,109 1,109
Reorganization:
Cancel Old Common Stock (15,405) (15,405) 13,791 (234) 1,614 --
Issue New Common Stock 10,000 10,000 85,000 95,000
Purchase of Treasury Stock 99 (198) (198)
-------------------------------------------------------------------------------
Balance at January 1, 2000 10,000 $10,000 $206,040 $(127,297)$(2,944) 99 $(198) $85,601
Net Income 13,280 13,280
Other Comprehensive Loss (1,508) (1,508)
---------------------------------------------------------------- ---------------
Balance at December 30, 2000 10,000 $10,000 $206,040 $(114,017)$(4,452) 99 $(198) $97,373
====== ======= ======== ========= ======= ========= ====== =======
See Notes to Consolidated Financial Statements
Salant Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended
---------------------------------------------------------
December 30, January 1, January 2,
2000 2000 1999
------------------- ------------- --------------
Cash Flows from Operating Activities
Income/(loss) from continuing operations $ 12,711 $ (2,148) $ (56,775)
Adjustments to reconcile income/(loss) from continuing operations
to net cash provided by operating activities:
Depreciation 4,101 5,027 7,474
Amortization of intangibles 519 519 1,881
Write-down of fixed assets - - 10,931
Write-down of other assets - - 39,952
Changes in operating assets and liabilities:
Accounts receivable (632) 22,403 1,276
Inventories (3,614) 27,921 15,187
Prepaid expenses and other current assets (815) (224) (1,730)
Assets held for sale 100 - (28,400)
Other assets (14) (521) 301
Accounts payable 2,701 9,266 (21,058)
Accrued salaries, wages and other liabilities (2,441) (1,209) (1,222)
Liabilities subject to compromise (2,993) (19,621) 38,928
Reserve for business restructuring (1,238) (1,243) 787
Deferred liabilities (24) (85) (1,720)
-------------- ------------ ------------
Net cash provided by continuing operating activities 8,361 40,085 5,812
Cash provided by/(used in) discontinued operations 4 6,214 (5,257)
--------------- ---------- -------------
Net cash provided by operations 8,365 46,299 555
------------ --------- -------------
Cash Flows from Investing Activities
Capital expenditures, net of disposals (1,959) (4,579) (4,871)
Store fixture expenditures (1,864) (2,486) (1,148)
Proceeds from sale of assets - 28,300 -
--------------- --------- -----------------
Net cash (used in)/provided by investing activities (3,823) 21,235 (6,019)
----------- --------- -------------
Cash Flows from Financing Activities
Net short-term borrowings/(repayments) - (38,496) 4,696
Purchase of treasury stock - (198) -
Other, net 25 54 (203)
------------- ------------ -------------
Net cash (used in)/provided by financing activities 25 (38,640) 4,493
------------- --------- ------------
Net increase/(decrease) in cash and cash equivalents 4,567 28,894 (971)
Cash and cash equivalents - beginning of year 30,116 1,222 2,193
---------- ---------- ------------
Cash and cash equivalents - end of year $ 34,683 $ 30,116 $ 1,222
========= ========= ===========
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 93 $ 1,054 $ 5,441
============ ========= =========
Income taxes $ 179 $ 90 $ 321
=========== =========== ==========
Supplemental investing and financing non-cash transactions:
Common Stock issued for Senior Notes -- $104,879 --
Common Stock issued for pre-petition interest -- $ 14,703 --
Common Stock issued for post-petition interest -- $ 121 --
Change in minimum pension liability $ (1,533) $ 1,055 $ (348)
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. Financial Reorganization
On December 29, 1998 (the "Filing Date"), Salant Corporation filed a petition
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") (the "1998 Case") in order to implement a restructuring
of its 10-1/2 % Senior Secured Notes due December 31, 1998 (the "Senior Notes").
Salant also filed its plan of reorganization (the "Plan") with the Bankruptcy
Court on the Filing Date in order to implement its restructuring. On April 16,
1999, the Bankruptcy Court issued an order (the "Confirmation Order") confirming
the Plan. The effective date of the Plan occurred on May 11, 1999 (the
"Effective Date").
Pursuant to the Plan (i) all of the outstanding principal amount of Senior
Notes, plus all accrued and unpaid interest thereon, was converted into 95% of
Salant's new common stock, subject to dilution, and (ii) all of Salant's
existing common stock was converted into 5% of Salant's new common stock,
subject to dilution. Salant's general unsecured creditors (including trade
creditors) were unimpaired and are entitled to be paid in full. The Plan was
approved by all of the holders of Senior Notes that voted and over 96% of the
holders of Salant common stock that voted.
Salant operates its Perry Ellis businesses under certain licensing agreements
(the "Perry Ellis Licenses") between Salant and Perry Ellis International, Inc.
("PEI"). During the 1998 Case, Supreme International Corporation ("Supreme")
entered into discussions with PEI to acquire PEI and, thereafter, Supreme
acquired PEI. Prior to the hearing on the confirmation of the Plan, Supreme (in
its own capacity and on behalf of PEI (collectively, referred to herein as
"Supreme-PEI")) filed an objection to the confirmation. In connection with the
confirmation of the Plan, Salant and Supreme-PEI settled and resolved their
differences and the material terms of such settlement were set forth in a term
sheet (the "Term Sheet") attached to and incorporated into the Confirmation
Order (the "PEI Settlement").
The following is a summary of the material provisions of the Term Sheet setting
forth the terms of the PEI Settlement. The following description is qualified in
its entirety by the provisions of the Term Sheet. The PEI Settlement provided
that: (i) Salant would return to PEI the license to sell Perry Ellis products in
Puerto Rico, the U.S. Virgin Islands, Guam and Canada (Salant retained the right
to sell its existing inventory in Canada through January 31, 2000); (ii) the
royalty rate due PEI under Salant's Perry Ellis Portfolio pants license with
respect to regular price sales in excess of $15.0 million annually would be
increased to 5%; (iii) Salant would provide Supreme-PEI with the option to take
over any real estate lease for a retail store that Salant intends to close; (iv)
Salant would assign to Supreme-PEI its sublicense with Aris Industries, Inc. for
the manufacture, sale and distribution of the Perry Ellis America brand
sportswear and, depending on certain circumstances, Salant would receive certain
royalty payments from Supreme-PEI through the year 2005; (v) Salant would pay
PEI its pre-petition invoices of $616,844 and post-petition invoices of $56,954
on the later of (a) the Effective Date of the Plan or (b) the due date with
respect to such amounts; (vi) Supreme-PEI (a) agreed and acknowledged that the
sales of businesses made by Salant during the 1998 Case did not violate the
terms of the Perry Ellis Licenses and did not give rise to the termination of
the Perry Ellis Licenses and (b) consented to the change of control arising from
the conversion of debt into equity under the Plan and acknowledged that such
change of control did not give rise to any right to terminate the Perry Ellis
Licenses; and (vii) Supreme-PEI withdrew with prejudice its objection to
confirmation of the Plan, and supported confirmation of the Plan.
As of the Filing Date, Salant had $143,807 (consisting of $14,703 in Senior Note
interest, $104,879 of Senior Notes and $24,225 of unsecured pre-bankruptcy
claims) of liabilities subject to compromise, in addition to $38,496 of loans
payable to CIT. In addition Salant accrued the estimated fees of $3,200 in the
1998 fourth quarter in connection with the administration of the 1998 Case.
Pursuant to the Plan, on the Effective Date, all of Salant's then existing
common stock ("Old Common Stock"), $1.00 par value per share, was cancelled. In
accordance with the Plan, 10,000,000 shares of new common stock, $1.00 par value
per share (the "New Common Stock"), were issued by Salant as follows: (i)
9,500,000 shares of the New Common Stock were distributed to the holders (the
"Noteholders") of Salant's Senior Notes, in full satisfaction of all of the
outstanding principal amount, plus all accrued and unpaid interest on the Senior
Notes and (ii) 500,000 shares of the New Common Stock were distributed to the
holders of Salant's Old Common Stock, in full satisfaction of any and all
interests of such holders in Salant.
Accordingly, under the Plan, as of the Effective Date, Salant's stockholders
immediately prior to the Effective Date, who at that time owned 100% of the
outstanding Old Common Stock of Salant, received, in the aggregate, 5% of the
issued and outstanding shares of New Common Stock, subject to dilution, and the
Noteholders received, in the aggregate, 95% of the issued and outstanding shares
of New Common Stock, subject to dilution. The Company reserved 1,111,111 shares
(10% of the outstanding shares) of New Common Stock for the 1999 Stock Award and
Incentive Plan.
The authorized capital stock of Salant as of the Effective Date consists of (i)
45,000,000 shares of New Common Stock, $1.00 par value per share and (ii)
5,000,000 shares of Preferred Stock, $2.00 par value per share (the "Preferred
Stock"). No Preferred Stock has been issued either in connection with the Plan
or otherwise.
Post-restructuring, Salant has focused primarily on its Perry Ellis men's
apparel business and, as a result, Salant exited its other businesses, including
its Children's Group and non-Perry Ellis menswear divisions. During 1999, the
Company sold its John Henry and Manhattan businesses. These businesses included
the John Henry, Manhattan and Lady Manhattan trade names, the John Henry and
Manhattan dress shirt inventory, the leasehold interest in the dress shirt
facility located in Valle Hermosa, Mexico, and the equipment located at the
Valle Hermosa facility and at Salant's facility located in Andalusia, Alabama.
During 1999, Salant also sold its Children's Group, which primarily involved the
sale of inventory related to the Children's Group. As a result of the above,
Salant will now report its business operations as a single segment.
Note 2. 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 Children's Group.) In December 1998, the
Company decided to discontinue the operations of the Children's Group, which
produced and marketed children's blanket sleepers primarily using a number of
well-known licensed characters created by, among others, DISNEY and WARNER
BROTHERS. The Children's Group also marketed pajamas under the DR. DENTON and
OSHKOSH B'GOSH trademarks, and sleepwear and underwear under the JOE BOXER
trademark. As further described in Note 17, the consolidated financial
statements and the notes thereto reflect the Children's Group division as a
discontinued operation. Intercompany balances and transactions are eliminated in
consolidation.
The Company's principal business is the designing, producing, importing and
marketing of men's apparel and as such, management believes that the Company
only operates in one reportable segment. The Company currently sells its
products to retailers, including department and specialty stores, and for a
portion of 1999 made limited sales of certain products to national chains, major
discounters and mass volume retailers, throughout the United States.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities (such as accounts
receivable, inventories, restructuring reserves and valuation allowances for
income taxes), disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to December 31. The 2000,
1999 and 1998 fiscal years were comprised of 52 weeks.
Reclassifications
Certain reclassifications were made to the 1998 and 1999 consolidated financial
statements to conform to the 2000 presentation.
Cash and Cash Equivalents
The Company treats cash on hand, deposits in banks and certificates of deposit
with original maturities of less than 3 months as cash and cash equivalents for
the purposes of the statements of cash flows.
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% - 33.3%
Leasehold improvements Shorter of the life of the asset or the lease
term
Other Assets
Intangible assets are being amortized on a straight-line basis over their useful
lives of 25 years. Costs in excess of fair value of net assets acquired are
assessed for recoverability on a periodic 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.
Income Taxes
Deferred income taxes are provided to reflect the tax effect of temporary
differences between financial statement income and taxable income in accordance
with the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".
Fair Value of Financial Instruments
For financial instruments, including cash and cash equivalents, accounts
receivable and payable, and accrued expenses, the carrying amounts approximated
fair value because of their short maturity. Liabilities subject to compromise
are valued based upon the amount the Company plans to pay in accordance with the
Plan. In addition, deferred liabilities have carrying amounts approximating fair
value.
Income/(Loss) Per Share
Pro forma basic income/(loss) per share is based on the weighted average number
of common shares as if the New Common Stock had been issued at the beginning of
the earliest period presented. Common stock equivalents are not considered, as
the options for the New Common Stock are anti-dilutive for the periods
presented.
The following is a comparison of basic and diluted income/(loss) per share using
the historical shares outstanding. Common stock equivalents are not considered
for the Old Common Stock, as the options were cancelled or anti-dilutive. Such
computation does not give retroactive effect to the issuance of the New Common
Stock.
1999 1998
Basic and diluted income/(loss) per share:
From continuing operations $(0.18) $(3.74)
From discontinued operations (0.17) (1.05)
From extraordinary gain 2.09 0.00
------- -------
Basic and diluted income/(loss) per share $ 1.74 $(4.79)
====== ======
Weighted average common stock outstanding 11,830 15,171
====== ======
Foreign Currency
The Company had no forward foreign exchange contracts at the end of fiscal 2000
and 1999. In fiscal 1998, the Company entered into forward foreign exchange
contracts, relating to its projected 1999 Mexican peso needs, to fix its cost of
acquiring pesos and diminish the risk of currency fluctuations. Gains and losses
on foreign currency contracts are included in income and offset the gains and
losses on the underlying transactions. On January 2, 1999, the outstanding
foreign currency contracts had a cost of $4,886 and a year end market value of
$4,851. Subsequent to year-end 1998 and in connection with the restructuring,
the outstanding foreign currency contracts were sold without a material gain or
loss.
Revenue Recognition
Revenue is recognized at the time merchandise is shipped. Retail outlet store
revenues are recognized at the time of sale.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is effective for all fiscal years
beginning after June 15, 1999. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. Under SFAS 133, certain
contracts that were not formerly considered derivatives may now meet the
definition of a derivative. The Company adopted SFAS 133 effective as of
December 31, 2000. Management does not expect the adoption of SFAS 133 to have a
significant impact on the financial position or results of operations of the
Company because the Company does not have significant derivative activity.
Note 3. Restructuring Costs
In the fourth quarter of fiscal 2000, the Company recorded a net reversal of
$629 due to favorable recovery on the sale of its Andalusia, Alabama facility
and the recovery of other assets and settlement of previously recorded
liabilities, partially offset by increased severance costs related to the
closure of the Company's Mexican manufacturing operations. During 2000, the
Company used approximately $908 of its restructuring reserves related to
severance and employee costs of $498, lease payments of $89 and the remaining
balance for other restructuring costs, offset by gains from the sale of fixed
assets of $299. At the end of fiscal 2000, $1,070 remained in the reserve of
which $550 relates to severance and other employee costs, $200 for lease buyouts
and $320 for other restructuring items. Activity in the accrued reserve for
business restructuring for fiscal 2000 is as follows:
Balance Gains from Accrual/ Balance
1/1/00 Uses Sales Reversal 12/30/00
Lease payments and
other property costs $ 600 $ (89) $ 264 $ (575) $ 200
Severance 850 (498) -- 198 550
Other 858 (321) 35 (252) 320
-------- -------- ------ -------- --------
$2,308 $ (908) $ 299 $ (629) $1,070
====== ======= ===== ======= ======
In 1999, the Company recorded a provision for restructuring of $4,039 related
the Company's 1998 decision to focus primarily on its Perry Ellis men's apparel
business. The restructuring charge related primarily to employee costs of $3,898
that could not be accrued in 1998, as the employees were not notified until
1999. In addition, $161 of the charge was related to the write off of store
fixtures and the closing of the Company's operations in Canada. During 1999 the
Company used approximately $5,671 of its restructuring reserves related to
severance and employee costs of $4,080, lease payments of $753 offset by $389 of
gains from the sale of fixed assets, royalties of $452 and the remaining balance
for other restructuring costs. At the end of fiscal 1999, $2,308 remained in the
reserve of which approximately $850 related to severance and other employee
related costs, $600 for lease buy outs and other asset related disposal costs
and $858 for other restructuring items. Activity in the accrued reserve for
business restructuring for fiscal 1999 is as follows:
Balance Balance
1/2/99 Provisions Uses Other 1/1/00
Lease payments and
other property costs $ 845 $ (389) $ (753) $ 508 $ 600
Royalties 592 -- (452) (140) --
Severance 840 3,878 (4,080) 212 850
Other 1,274 161 (386) (191) 858
------ --------- -------- -------- --------
$3,551 $4,039 $(5,671) $ 389 $2,308
====== ====== ======= ====== ======
Assets held for sale at January 1, 2000 related to the facility in Andalusia,
Alabama. Additional costs of $119 were anticipated due to holding the Andalusia
facility and additional employee related expenses of $212 were accrued and were
anticipated for 2000. These additional costs were offset by the favorable
results of settlements of royalties and other restructuring liabilities of $140
and $191, respectively. The Company subsequently sold this facility during
fiscal 2000.
In 1998, the Company recorded a provision for restructuring of $24,825 related
to its decision to focus primarily on its Perry Ellis men's apparel business. As
a result, the Company has substantially exited its other businesses. During
1999, Salant sold its John Henry and Manhattan businesses pursuant to a Purchase
and Sale Agreement dated December 28, 1998 (subject to and subsequently approved
by the Bankruptcy Court on February 26, 1999). These businesses included the
John Henry, Manhattan and Lady Manhattan trade names and the related goodwill,
the leasehold interest in a dress shirt facility located in Valle Hermosa,
Mexico, and equipment located at the Valle Hermosa facility and at Salant's
facility located in Andalusia, Alabama. These assets had a net book value of
$43,184 (consisting of $29,979 for goodwill, $9,680 for licenses and $3,525 for
fixed assets) and were sold for $27,000, resulting in a loss of $16,184. At the
end of fiscal 1998 the net realizable value of $27,000 for these assets was
included in the consolidated balance sheet as assets held for sale. The assets
not sold in this transaction were also included as assets held for sale and were
recorded at their estimated net realizable value of $1,400 at January 2, 1999.
In addition to the $16,184 charge noted above, the 1998 restructuring provision
consisted of (i) $6,305 of additional property, plant and equipment write-downs,
(ii) $2,936 for the write off of other assets, severance costs, lease exit costs
and other restructuring costs and (iii) offset by $600 from the reversal of
previously recorded restructuring reserves primarily resulting from the
settlement of liabilities for less than the carrying amount and the gain on the
sale of a manufacturing and distribution facility.
Note 4. Extraordinary Gain
In the second quarter of 1999, the Company recorded an extraordinary gain of
$24,703 related to the conversion of the Senior Notes and the related unpaid
interest into equity, as described in Note 1.
Pursuant to the Plan, the Noteholders received, in the aggregate, 95% of the
issued and outstanding shares of New Common Stock, subject to dilution, in full
satisfaction of all of the outstanding principal amount ($104,879), plus all
accrued and unpaid interest ($14,824) on the Senior Notes. As a result, pursuant
to the Plan, 9,500,000 shares of the New Common Stock, were distributed to the
holders of the Senior Notes.
Note 5. Inventories
December 30, January 1,
2000 2000
Finished goods $ 27,078 $ 25,385
Work-in-process 11,009 10,208
Raw materials and supplies 7,196 6,076
----------- -----------
$ 45,283 $ 41,669
========= =========
Finished goods inventory includes in transit merchandise of $2,172 and $1,501 at
December 30, 2000 and January 1, 2000, respectively.
Note 6. Property, Plant and Equipment
December 30, January 1,
2000 2000
Land and buildings $ 6,901 $ 6,851
Machinery, equipment, furniture
and fixtures 18,350 16,769
Leasehold improvements 5,484 5,290
----------- -----------
30,735 28,910
Less accumulated depreciation and amortization 17,550 14,725
---------- ----------
$ 13,185 $ 14,185
========= =========
Note 7. Other Assets
December 30, January 1,
2000 2000
Excess of cost over net assets acquired,
net of accumulated amortization of
$4,635 in 2000 and $4,232 in 1999 $ 6,526 $ 6,929
Trademarks and license agreements,
net of accumulated amortization of
$1,457 in 2000 and $1,342 in 1999 3,143 3,258
Other 4,835 4,100
----------- -----------
$ 14,504 $ 14,287
========= =========
In fiscal 1998, the unamortized portion of intangible assets related to the
non-Perry Ellis menswear operations amounting to $39,952 ($29,979 representing
the excess of cost over net assets acquired, $9,680 representing licenses and
$293 representing trademarks) were included in the restructuring charge as
discussed in Note 3.
Note 8. Accrued Salaries, Wages and Other Liabilities
December 30, January 1,
2000 2000
Accrued salaries and wages $ 3,483 $ 4,247
Accrued pension, retirement and benefits 1,391 2,055
Workers Compensation 1,831 2,163
Other accrued liabilities 2,605 3,286
---------- ----------
$ 9,310 $ 11,751
========= ========
Note 9. Financing Agreements
Upon commencement of the 1998 Case, Salant filed a motion seeking the authority
of the Bankruptcy Court to enter into a revolving credit facility with The CIT
Group/Commercial Services, Inc. ("CIT"), Salant's existing working capital
lender pursuant to and in accordance with the terms of the Ratification and
Amendment Agreement, dated as of December 29, 1998 (the "Amendment") which,
together with related documents are referred to as the "CIT DIP Facility,"
effective as of the Filing Date, which would replace the Company's existing
working capital facility under its then existing credit agreement. On December
29, 1998, the Bankruptcy Court approved the CIT DIP Facility on an interim basis
and on January 19, 1999 the Bankruptcy Court approved the CIT DIP Facility on a
final basis.
On May 11, 1999, the effective date, the Company entered into a syndicated
revolving credit facility (the "Credit Agreement") with CIT pursuant to and in
accordance with the terms of a commitment letter dated December 7, 1998 which
replaced the CIT DIP Facility.
The Credit Agreement provides for a general working capital facility, in the
form of direct borrowings and letters of credit, up to $85 million subject to an
asset-based borrowing formula. The Credit Agreement consists of an $85 million
revolving credit facility, with at least a $35 million letter of credit
subfacility. As collateral for borrowings under the Credit Agreement, the
Company granted to CIT and a syndicate of lenders arranged by CIT (the
"Lenders") a first priority lien on and security interest in substantially all
of the assets of the Company. The Credit Agreement has an initial term of three
years.
The Credit Agreement also provides, among other things, that (i) the Company
will be charged an interest rate on direct borrowings of .25% in excess of the
Reference Rate or 2.25% in excess of LIBOR (as defined in the Credit Agreement),
and (ii) the Lenders may, in their sole discretion, make loans to the Company in
excess of the borrowing formula but within the $85 million limit of the
revolving credit facility. The Company is required under the agreement to
maintain certain financial covenants relating to consolidated tangible net
worth, capital expenditures, maximum pre-tax losses/minimum pre-tax income and
minimum interest coverage ratios. The Company was in compliance with all
applicable covenants at December 30, 2000.
Pursuant to the Credit Agreement, the Company paid or will pay the following
fees: (i) a documentary letter of credit fee of 1/8 of 1.0% on issuance and 1/8
of 1.0% on negotiation; (ii) a standby letter of credit fee of 1.0% per annum
plus bank charges; (iii) a commitment fee of $325 thousand; (iv) an unused line
fee of .25%; (v) an agency fee of $100 thousand (only for the second and third
years of the term of the Credit Agreement); (vi) a collateral management fee of
$8,333 per month; and (vii) a field exam fee of $750 per day plus out-of-pocket
expenses
On December 30, 2000, there were no direct borrowings outstanding under the
Credit Agreement. Letters of credit outstanding were $30,036 and the Company had
unused availability, based on outstanding letters of credit and existing
collateral, of $21,716. In addition to the unused availability, the Company had
$34,683 of cash available to fund its operations. On January 1, 2000, there were
no direct borrowings and letters of credit outstanding under the Credit
Agreement were $30,093 and the Company had unused availability of $16,497. In
addition to the unused availability, the Company had $30,116 of cash available
to fund its operations. The weighted average interest rate on borrowings under
the Credit Agreement for the years ended December 30, 2000 and January 1, 2000
was 9.4% and 8.7%, respectively.
In addition to the financial covenants discussed above, the Credit Agreement
contains a number of other covenants, including restrictions on incurring
indebtedness and liens, making investments in or purchasing the stock, or all or
a substantial part of the assets of another person, selling property and paying
cash dividends.
Note 10. Long-Term Debt
On September 20, 1993, the Company issued $111,851 principal amount of Senior
Notes. The Senior Notes could 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 Senior Notes were due on December 31,
1998 and as of January 2, 1999, $104,879 of principal and $14,703 in interest
was outstanding and included in liabilities subject to compromise. In fiscal
1999 pursuant to the Plan, the Company converted the Senior Notes and the
outstanding interest into equity. (See additional discussion in Note 1. -
Financial Reorganization)
On April 22, 1998, the Company filed a registration statement on Form S-4 in
order to facilitate the debt restructuring of the Senior Notes due December 31,
1998. Thereafter, Salant filed amendments to the registration statement on May
10, 1998, May 26, 1998 and August 31, 1998. In consideration of, among other
things, the significant additional time required to consummate such transactions
and the occurrence of certain events (including, but not limited to, a reduction
in the value of certain of Salant's business units) that caused the Company, its
noteholders and shareholders to seek an alternative debt restructuring process
through chapter 11 proceedings. In connection with the S-4 filing the Company
incurred $8,633 relating to the efforts to restructure the debt through the
registration statement process, which were charged to expense in the fourth
quarter of 1998.
Note 11. Significant Customers
The Company's principal business is the designing, producing, importing and
marketing of men's apparel. The Company currently sells its products to
retailers, including department and specialty stores, and for a portion of 1999
made limited sales of certain products to national chains, major discounters and
mass volume retailers throughout the United States. The Company also operates 36
retail outlet stores in various parts of the United States. Foreign operations,
other than sourcing, are not significant.
In 2000 and 1999 approximately 19% of the Company's sales were made to Federated
Department Stores, Inc. ("Federated") and approximately 18% of the Company's
sales were made to Dillards Corporation ("Dillards"). Also in 2000 and 1999,
approximately 17% and 16% of the Company's sales were made to the May Company
("May"), respectively and approximately 13% of the Company's sales were made to
Marmaxx Corporation ("Marmaxx") in 2000 and 1999. In 1998 approximately 20% of
the Company's sales were made to Sears Roebuck & Company and approximately 14%
of the Company's sales were made to Federated. Also in 1998, approximately 11%
of the Company's sales were made to Dillards and approximately 10% of the
Company's sales were made to Marmaxx. No other customer accounted for more than
10% of sales during 2000, 1999 or 1998.
Note 12. Income Taxes
The provision for income taxes consists of the following:
December 30, January 1, January 2,
2000 2000 1999
Current:
Federal $ -- $ (20) $ (109)
Foreign 13 265 249
------ ------- -------
$ 13 $ 245 $ 140
===== ====== =======
The following is a reconciliation of the income tax/(benefit) at the statutory
Federal and State income tax rates to the actual income tax provision:
2000 1999 1998
---------- -------- --------
Income tax/(benefit), at 34% $ 4,520 $ (647) $(19,256)
State tax/(benefit) 665 (96) (2,832)
Loss producing no current tax benefit -- 742 22,088
Reversal of valuation allowance (6,060) -- --
Tax refunds from prior years -- (20) (109)
Other 875 -- --
Foreign taxes 13 265 249
---------- ---------- --------
Income tax provision $ 13 $ 245 $ 140
========= ========= =========
The following are the tax effects of significant items comprising the Company's
net deferred tax asset:
December 30, January 1,
2000 2000
Deferred tax assets:
Reserves not currently deductible $ 10,365 $ 14,233
Operating loss carryforwards 45,872 43,959
Tax credit carryforwards 138 759
Expenses capitalized into inventory 2,299 5,019
Differences between book and tax basis of property 1,241 2,005
---------- -----------
$ 59,915 $ 65,975
======== -========
Net deferred tax asset $ 59,915 $ 65,975
Valuation allowance (59,915) (65,975)
-------- ---------
Net deferred tax asset $ -- $ --
========== ===========
At December 30, 2000, the Company had net operating loss carryforwards ("NOLs")
for income tax purposes of approximately $117,620, expiring from 2001 to the
year 2020, which can be used to offset future taxable income. To the extent any
of these NOLs relate to the acquisition of Manhattan Industries in April 1988,
their utilization will reduce the remaining balance of approximately $9,700 of
intangible assets recorded in connection with the acquisition.
The Manhattan Industries acquisition and the 1990 bankruptcy and subsequent
consummation have caused an "ownership change" for federal income tax purposes.
As a result, the use of any NOLs existing at the date of the ownership change to
offset future taxable income is limited by section 382 of the Internal Revenue
Code of 1986, as amended ("Section 382"). The $117,620 of NOLs reflected above
is the maximum the Company may use to offset future taxable income. Of the
$117,620 of NOLs, $84,200 is subject to annual usage limitations under Section
382 of approximately $7,200.
Additionally, by virtue of the consummation of the Plan, a second ownership
change under Section 382 has occurred during fiscal 1999. As a result, the
utilization of the NOLs and tax credit carryforwards could be subject to
additional limitations, which could reduce their use.
In addition, at December 30, 2000, the Company had available tax credit
carryforwards of approximately $138, which expire between 2001 and 2011.
Utilization of these credits may be limited in the same manner as the NOLs, as
described above.
Note 13. Employee Benefit Plans
Pension and Retirement Plans
The Company has several defined benefit plans for virtually all full-time
salaried employees and certain non-union 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 non-qualified supplemental retirement and death benefit
plan covering certain employees that was terminated during 1998. The funding for
this plan was based on premium costs of related insurance contracts.
The reconciliation of the funded status of the plans at December 30, 2000 and
January 1, 2000 is as follows:
2000 1999
---------- -----------
Change in Projected Benefit Obligation (PBO)
During Measurement Period
PBO, November 30 of previous year $ 45,555 $ 51,151
Service Cost 569 760
Interest Cost 3,311 3,290
Actuarial (Gain)/Loss 1,124 (4,890)
Plan Curtailment -- (2,000)
Benefits Paid (2,809) (2,756)
--------- ---------
PBO, November 30 $ 47,750 $ 45,555
========= =========
Change in Plan Assets During the Measurement Period
Plan Assets at Fair Value, November 30
of previous year $ 48,205
$ 45,282
Actual Return on Plan Assets 795 4,560
Employer Contribution 1,753 1,119
Benefits Paid (2,809) (2,756)
--------- ----------
Plan Assets at Fair Value, November 30 $ 47,944 $ 48,205
========= =========
The reconciliation of the Prepaid/(Accrued) plans at December 30, 2000 and
January 1, 2000 is as follows:
2000 1999
----- ----
Reconciliation of Prepaid/(Accrued)
Funded Status of the Plan $ 195 $ 2,650
Unrecognized Net (Gain)/Loss 4,400 155
Unrecognized Prior Service Cost (397) (456)
Unrecognized Net Transition (Asset)/Obligation 151 178
---------- -----------
Net Amount Recognized $ 4,349 $ 2,527
======== =========
Prepaid Benefit Cost $ 3,123 $ 2,227
Accrued Benefit Liability (3,108) (2,501)
Accumulated Other Comprehensive Income 4,334 2,801
--------- ----------
Net Amount Recognized $ 4,349 $ 2,527
======== =========
Components of Net Periodic Benefit Cost for Fiscal Year
2000 1999 1998
---- ---- ----
Service Cost $ 569 $ 760 $ 1,000
Interest Cost 3,311 3,290 3,307
Expected Return of Plan Assets (4,026) (3,707) (3,427)
Amortization of Unrecognized:
Net (Gain)/Loss 110 244 266
Prior Service Cost (59) (79) (111)
Net Transition (Asset)/Obligation 27 36 71
Settlement Gain -- -- (92)
Curtailment (Gain)/Loss -- (299) 101
------------- ----------- -----------
Net Periodic Pension (Income)/Cost $ (68) $ 245 $ 1,115
=========== ========== =========
Other Comprehensive (Loss)/Income $ (1,533) $ 1,055 $ (348)
Accrued Benefit Obligation, November 30 $ 46,715 $ 43,814 $ 46,878
Assumptions used in accounting for defined benefit pension plans are as follows:
2000 1999 1998 1998
Qualified Qualified Non- Qualified
Plans Plans Qualified Plans
Plan
Discount rate 7.5% 7.5% 6.75% 6.75%
Rate of increase in compensation levels 5.0% 5.0% N/A 5.0%
Expected long-term rate of return on assets 8.5% 8.5% 8.5% 8.5%
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 consisted 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
$2,330, $3,985 and $4,597 in 2000, 1999 and 1998, 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 mutual fund, a fixed income
fund, the Company's common stock (in 1999 and 1998) and/or selected mutual
funds. 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 2000, 1999 and 1998 Salant's
aggregate contributions to the Long Term Savings and Investment Plan amounted to
$111, $140 and $198, respectively.
Note 14. Stock Options and Shareholder Rights
Pursuant to the Plan, on the Effective Date, all existing stock options for the
Old Common Stock were cancelled and the Company established, in accordance with
the description set forth in the Plan, the Salant Corporation 1999 Stock Award
and Incentive Plan (the "Incentive Plan"). The Plan provides that Salant will
reserve 10% of the outstanding New Common Stock, on a fully diluted basis, as of
the Effective Date, in order to create new employee stock and stock option plans
for the benefit of the members of management and the other employees of Salant.
In addition, the Plan provides that, on the Effective Date, a management stock
option plan will be authorized pursuant to which options to acquire a certain
percentage of such 10% reserve will be granted to (i) the directors of Salant
and (ii) those members of management of Salant selected by executive management
and approved by the non-management members of the board of directors of Salant.
The Plan also provides that the decision to grant any additional stock options
from the balance of the 10% reserve referred to above, and the administration of
the stock plans, will be at the discretion of the non-management members of the
board of directors of Salant.
The following table summarizes stock option transactions during 1998, 1999 and
2000:
Weighted
Average
Exercise
Shares Price Range Price
Options outstanding at January 3,1998 1,343,393 $2.0625-12.875 $3.95
Options granted during 1998 10,000 $1.7188 $1.72
Options exercised during 1998 0
Options surrendered or canceled during 1998 (87,026) $2.25-12.875 $5.15
-------------
Options outstanding at January 2, 1999 1,266,367 $1.7188-9.82 $3.85
Options cancelled due to reorganization - 1999 (1,266,367) $1.7188-9.82 $3.85
Options granted during 1999 1,814,554 $4.125-5.875 $4.99
Options exercised during 1999 0
Options surrendered or canceled during 1999 (895,609) $5.875 $5.88
------------
Options outstanding at January 1, 2000 914,945 $4.125-5.875 $4.13
Options granted during 2000 33,000 $2.50-2.87 $2.64
Options exercised during 2000 -- $ -- $ --
Options surrendered or cancelled during 2000 (134,001) $4.125-5.875 $4.16
-------------
Options outstanding at December 30, 2000 813,944 $2.50-4.125 $4.07
============
Options exercisable at December 30, 2000 630,961 $2.50-4.125 $4.10
============
Options exercisable at January 1, 2000 406,389 $4.125-5.875 $4.14
============
The 895,609 of options shown in the above table as "surrendered or canceled"
during 1999 reflect 890,777 of options that were issued at $5.875 and repriced
to $4.125 all within fiscal 1999.
The following tables summarize information about outstanding stock options as of
December 30, 2000 and January 1, 2000:
Options Outstanding Options Exercisable
Weighted Average
Number Remaining Weighted Number Weighted
Outstanding at Contractual Life Average Exercisable at Average
- ----------------
Range of Exercise Price 12/30/00 Exercise 12/30/00 Exercise Price
----------------------- -------- --------- -------- --------------
Price
-----
$2.5 -$2.87 33,000 9.37 $2.64 12,002 $2.66
$4.125 780,944 8.77 $4.13 618,959 $4.13
$2.50-$4.125 813,944 8.80 $4.07 630,961 $4.10
Weighted Average
Number Remaining Weighted Number Weighted
Outstanding at Contractual Life Average Exercisable at Average
----------------
Range of Exercise Price 1/1/00 Exercise 1/1/00 Exercise Price
Price
$4.125-5.875 914,945 9.43 $4.13 406,389 $4.14
In summary, as of December 30, 2000, there were 1,111,111 shares of Common Stock
reserved for the exercise of stock options and 297,167 shares of Common Stock
reserved for future grants of stock options or awards.
All stock options are granted at fair market value of the Common Stock at the
grant date. The weighted average fair value of the stock options granted during
2000 and 1999 was $2.64 and $4.99, respectively. The fair value of each stock
option grant is estimated on the date of grant using the Black-Scholes multiple
option pricing model with the following weighted average assumptions used for
grants in 2000, 1999 and 1998, respectively: risk-free interest rate of 6.00%,
6.00% and 5.16%; expected dividend yield of 0%, for all years; expected life of
5.25, 5.75 years and 4.46 years; and expected volatility of 98%, 316%, and 106%.
The outstanding stock options at December 30, 2000 have a weighted average
contractual life of 8.8 years.
The Company accounts for the stock option plans in accordance with Accounting
Principles Board Opinion No. 25, under which no compensation cost is recognized
for stock option awards. Had compensation cost been determined consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), the Company's pro forma net income/(loss) for 2000,
1999 and 1998 would have been $12,338, $16,687 and ($74,069), respectively. The
Company's pro-forma net income per-share for fiscal 2000 would have been $1.25.
The Company's pro forma net income/(loss) per share based upon the New Common
Stock for 1999 and 1998 would have been $1.67 and ($7.41), respectively. Because
the SFAS 123 method of accounting has not been applied to options granted prior
to 1995, the resulting pro forma compensation cost may not be representative of
that to be expected in future years.
Note 15. Deferred Liabilities
December 30, January 1,
2000 2000
Deferred pension obligations $ 4,334 $ 2,801
Deferred rent 1,294 1,314
Other deferred liabilities 14 18
---------- ----------
$ 5,642 $ 4,133
======= =======
Note 16. Commitments and Contingencies
(a) Lease Commitments
The Company conducts a portion of its operations in premises occupied under
leases expiring at various dates through 2013. 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 2000, 1999 and 1998, rental expense was $3,891, $5,144 and $7,008,
respectively. As of December 30, 2000, future minimum rental payments under
noncancelable operating leases (exclusive of renewal options, percentage
rentals, and adjustments for property taxes and operating expenses) were as
follows:
Fiscal Year
2001 $ 4,898
2002 4,754
2003 4,813
2004 4,591
2005 3,846
Thereafter 22,773
Total (Not reduced by minimum $ 45,675
sublease rentals of $18,432)
(b) Employment Agreements
The Company has employment agreements with certain executives, which provide for
the payment of compensation aggregating approximately $1,175 in 2001. In
addition, such employment agreements provide for incentive compensation based on
various performance criteria.
Note 17. Discontinued Operations
In December 1998, the Company discontinued the operations of the Children's
Group, which produced and marketed children's blanket sleepers primarily using a
number of well-known licensed characters created by, among others, DISNEY and
WARNER BROTHERS. The Children's Group also marketed pajamas under the DR. DENTON
and OSHKOSH B'GOSH trademarks, and sleepwear and underwear under the JOE BOXER
trademark.
For the fourth quarter of fiscal 2000, the Company recorded income of $569
related to better than anticipated recovery on the sale of assets (primarily
real estate holdings) related to the Children's business. At the end of fiscal
2000, $550 remained in the reserve of which approximately $350 was for severance
and the remaining balance related to the disposal of assets and other costs.
For fiscal 1999, the Company recognized a charge of $1,955 for additional
expenses incurred during the phase-out period and additional expenses needed to
dispose of the assets related to the Children's business. At the end of Fiscal
1999, $941 remained in the reserve of which approximately $300 was for severance
and the remaining balance related to the disposal of assets. For Fiscal 1998,
the Company recognized a charge of $15,877 reflecting the discontinuance of the
Children's Group. Of the $15,877, $10,163 related to the operations prior to the
date the decision was made to discontinue the business and $5,724 represented
estimated future losses during the phase-out period. The $5,724 was comprised of
(i) write-off of assets of $2,929, (ii) estimated loss from operations of
$1,597, (iii) severance of $1,450 and (iv) royalty and lease payments of $1,498,
offset by $1,750 for the sale of the Dr. Denton trademark. No income tax
benefits have been allocated to the division.
Pursuant to a purchase and sale agreement dated January 14, 1999, the Company
sold all of its right, title and interest in, certain assets (Dr. Denton
trademark, selected inventory and machinery and equipment) of the Children's
Group. Accounts receivable, prepaids, accounts payable and accrued liabilities
will be collected or paid through the normal course of business. Property, plant
and equipment was written down to its estimated net realizable value and the
Company has disposed of these assets.
The Children's division results for 2000, 1999 and 1998 are summarized as
follows (no income tax benefits have been allocated to the division):
2000 1999 1998
---- ---- ----
Net Sales $ -- $ 5,493 $ 42,766
========= ========= ==========
Net Income/(Loss) from Operations $ 569 $ (1,955) $ (10,163)
====== ======== =========
Net (liabilities)/assets of discontinued operations in the 2000 and 1999
consolidated balance sheets include:
2000 1999
---- ----
Prepaids and other $ 30 $ 24
Assets held for Sale -- 86
-------- --------
Assets $ 30 $ 110
------ ------
Accounts payable $ -- $ 193
Accrued liabilities 224 285
Reserve for future phase-out losses 550 941
------- --------
Liabilities $ 774 $ 1,419
------ --------
Net (Liabilities)/Assets $ (744) $ (1,309)
====== ========
Note 18. Accumulated Other Comprehensive Income/(Loss)
Accum-
Foreign Minimum ulated
Currency Pension other
Translation Liability Compre-
Adjust- Adjust- hensive
ments ments Income/
(Loss)
2000
Beginning of the year balance $ (143) $ (2,801) $ (2,944)
12 month change 25 (1,533) (1,508)
-------- -------- ---------
End of the year balance $ (118) $ (4,334) $ (4,452)
======= ========= =========
1999
Beginning of the year balance $ (197) $ (3,856) $ (4,053)
12 month change 54 1,055 1,109
-------- --------- ---------
End of the year balance $ (143) $ (2,801) $ (2,944)
======= ======== ========
1998
Beginning of the year balance $ 6 $ (3,508) $ (3,502)
12 month change (203) (348) (551)
-------- ----------- -----------
End of the year balance $ (197) $ (3,856) $ (4,053)
======= ========= =========
Note 19. Quarterly Financial Information (Unaudited)
Fiscal year ended December 30, 2000
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Net sales $208,303 $49,473 $56,344 $45,830 $56,656
Gross profit 55,595 14,065 13,777 14,112 13,641
Net income 13,280 5,193 3,744 2,602 1,741
Diluted earnings per share $1.34 $0.52 $0.38 $0.26 $0.18
Fiscal year ended January 1, 2000
Total 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
Net sales $248,370 $50,671 $57,297 $61,820 $78,582
Gross profit 55,979 15,267 14,111 9,768 16,833
Net income/(loss) 20,600 1,859 2,371 22,141 (5,771)
Pro forma diluted earnings/(loss) per share $2.06 $0.19 $0.24 $2.21 ($0.58)
Reference is made to Notes 3, 4 and 17 concerning fourth quarter adjustments
during the years ended December 30, 2000 and January 1, 2000.
Note 20. Legal Proceedings
The Company is a defendant in several legal actions. In the opinion of the
Company's management, based upon the advice of the respective attorneys handling
such cases, such actions are not expected to have a material adverse effect on
the Company's consolidated financial position, results of operations or cash
flow. In addition, the Company notes the following legal proceedings.
1. Bankruptcy Case. On the Filing Date, Salant filed a voluntary petition
for relief under chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York. The Company filed its
Plan on the Filing Date and the Plan was confirmed by the Bankruptcy Court on
April 16, 1999. The Plan was consummated on the Effective Date. The 1998 Case is
currently pending under the caption In re Salant Corporation, Chapter 11 Case
No. 98-10107 (CB). All pre-Filing Date non-disputed and allowed claims against
Salant have been or will be satisfied pursuant to the terms of the Plan. Salant
has filed, and expects to continue to file, objections to all disputed
pre-Filing Date claims asserted against Salant in the 1998 Case.
2. Declaratory Judgement Action. The Company is a defendant in a
declaratory judgment action, captioned Hartford Fire Insurance Company v. Salant
Corporation, Index No. 60233/98, in the Supreme Court of the State of New York,
County of New York (the "Hartford Action"). The Company's insurers seek a
declaratory judgment that the claims asserted against the Company in a lawsuit
captioned Maria Delores Rodriguez-Olvera, et al. v. Salant Corp., et al., Case
No. 97-07-14605-CV, in the 365th Judicial District Court of Maverick County,
Texas (the "Rodriguez-Olvera Action") are not covered under the policies that
the insurers had issued. The Company's insurers nevertheless provided a defense
to the Company in the Rodriguez-Olvera Action and paid $30 million to settle the
case without prejudice to their positions in the Hartford Action. Currently,
there are discussions being held with a view to reaching an agreement for the
settlement of the Hartford Action; if the settlement proposal is achieved as
contemplated, management believes there would be no material impact on the
Company's financial position or the results of operations. Pending such a
settlement of this action, Salant's insurers have not withdrawn their
reservation of rights, and the possibility remains that one or more of such
insurers will seek recourse against Salant.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
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 herein from the
Company's Proxy Statement to be filed by the Company relating to the 2001 annual
meeting of shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference herein from the
Company's Proxy Statement to be filed by the Company relating to the 2001 annual
meeting of shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference herein from the
Company's Proxy Statement to be filed by the Company relating to the 2001 annual
meeting of shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference herein from the
Company's Proxy Statement to be filed by the Company relating to the 2001 annual
meeting of shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
1. Financial Statements
The following financial statements are included in Item 8 of this Annual Report:
Independent Auditors' Report
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income/(Loss)
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity/(Deficiency)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
The following Financial Statement Schedule for the years ended December 30,
2000, January 1, 2000 and January 2, 1999 is filed as part of this Annual
Report:
Schedule II - Valuation and Qualifying Accounts and Reserves
All other financial statement 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 at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End
Description of Period Expenses -- Describe -- Describe of Period
---------- --------- ------------------ ----------- ---------
YEAR ENDED DECEMBER 30, 2000:
Accounts receivable allowance
for doubtful accounts $2,419 $526 $ -- $320(A) $2,625
Reserve for business restructuring $2,308 $(629) $ -- $609(B) $1,070
YEAR ENDED JANUARY 1, 2000:
Accounts receivable allowance
for doubtful accounts $2,661 $260 $ -- $502 (A) $2,419
Reserve for business restructuring $3,551 $4,039 $ -- $5,282 (B) $2,308
YEAR ENDED JANUARY 2, 1999:
Accounts receivable - allowance
for doubtful accounts $2,094 $2,769 $ -- $2,202 (A) $2,661
Reserve for business restructuring $2,764 $24,825 $ -- $24,038 (B) $3,551
NOTES:
(A) Uncollectible accounts written off, less recoveries. (B) Costs incurred in
plant closings and business restructuring.
Reports on Form 8-K
The Company did not file any reports on Form 8-K for the quarter ended December
30, 2000.
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 July 28, 1993.
Mills, Inc., dated
May 12,1993.
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 July 28, 1993.
2.3 Chapter 11 Plan of Reorganization Exhibit 2.3 to Form 8-K dated
for Salant Corporation, dated December 29, 1998.
December 29, 1998.
2.4 Disclosure Statement for Chapter 11 Exhibit 2.4 to Form 8-K dated
Plan of Reorganization, dated December 29, 1998.
December 29, 1998.
2.5 First Amended Chapter 11 Plan of Exhibit 2.5 to Form 8-K dated
Reorganization for Salant April 30, 1999.
Corporation, dated
February 3, 1999.
2.6 First Amended Disclosure Exhibit 2.7 to Annual Report on
Statement for Chapter 11 Plan Form 10-K for Fiscal Year 1999.
of Reorganization for Salant
Corporation, dated
February 3, 1999.
2.7 Order Pursuant to Section 1129 Exhibit 99.3 to Salant
of the Bankruptcy Code Confirming Corporation's Current Report on
the First Amended Plan of Form 8-K dated April 30, 1999.
Reorganization of Salant
Corporation, dated
April 16, 1999.
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. July 28, 1993.
3.2 Form of Bylaws, as amended, of Exhibit 3.2 to Form 10-K
Salant Corporation, effective dated March 24, 1995
September 21, 1994.
3.3 Amended and Restated Exhibit 1.1 to
Certificate of Form 8-A dated
Incorporation of May 12, 1999
Salant Corporation,
effective May 11, 1999.
3.4 Amended and Restated Exhibit 1.2 to
By-laws of Salant Form 8-A dated
Corporation, effective May 12, 1999
May 11, 1999.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
December 8, 1987 between Salant on Form 8-K dated December 8, 1987.
Corporation 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. July 29, 1993.
4.3 Indenture, dated as of Exhibit 10.34 to
September 20, 1993, 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 October 2, 1993.
Secured Notes due
December 31, 1998.
10.1 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated September 29, 1993, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial October 2, 1993.
Services, Inc.
10.2 Salant Corporation 1987 Stock Plan.* Exhibit 19.2 to Annual Report on
Form 10-K for fiscal year 1987.
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 July 25, 1989, to the Salant on Form 10-Q for the quarter
Corporation 1988 Stock Plan. * ended September 30, 1989.
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 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.
10.8 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.
10.9 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual
Stock Plan Directors' Option Report on Form
Agreement. * 10-K for Fiscal Year 1993.
10.10 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 October 1, 1994.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.11 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.
10.12 Salant Corporation Retirement Plan, Exhibit 10.23 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.13 Salant Corporation Pension Plan, Exhibit 10.24 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.14 Salant Corporation Long Term Savings Exhibit 10.25 to Annual Report on
and Investment Plan as amended Form 10-K for Fiscal Year 1994.
and restated. *
10.15 Fourth Amendment to Credit Exhibit 10.27 to
Agreement, dated as of March 1, Quarterly Report
1995, to the Revolving Credit, on Form 10-Q for
Factoring and Security Agreement, the quarter
dated as of September 20, 1993, ended April 1,
as amended, between Salant 1995.
Corporation and The CIT Group/
Commercial Services, Inc.
10.16 Fifth Amendment to Credit Exhibit 10.29
Agreement, dated as of to Quarterly
June 28, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.17 Sixth Amendment to Credit Exhibit 10.30
Agreement, dated as of to Quarterly
August 15, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.18 Letter from The CIT Group/ Exhibit 10.31
Commercial Services, Inc., to Quarterly
dated as of July 11, 1995, Report on
regarding the waiver of a Form l0-Q for
default. the quarter
ended July 1,
1995.
10.19 Letter Agreement between Exhibit 10.31
Salant Corporation and The to Quarterly
CIT Group/Commercial Services, Report on
Inc. dated as of July 11, 1995, Form l0-Q for
regarding the Seasonal Overadvance the quarter
Subfacility. ended July 1,
1995.
10.20 Seventh Amendment to Credit Exhibit 10.34 to
Agreement, dated as of Annual Report on
March 27, 1996, to the Form 10-K for
Revolving Credit, Factoring fiscal year 1995.
and Security Agreement,
dated as of September 20, 1993,
as amended, between Salant
Corporation and
The CIT Group/Commercial Services, Inc.
10.21 First Amendment to the Salant Exhibit 10.35 to
Corporation Retirement Plan, dated Quarterly Report on
as of January 31, 1996. * Form 10-Q for the
quarter ended
March 30, 1996.
10.22 First Amendment to the Salant Exhibit 10.36 to
Corporation Long Term Savings and Quarterly Report on
Investment Plan, effective as of Form 10-Q for the
January 1, 1994. * quarter ended
March 30, 1996.
10.23 Eighth Amendment to Credit Agreement, Exhibit 10.37 to
dated as of June 1, 1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commercial Services,
Inc.
10.24 Ninth Amendment to Credit Agreement, Exhibit 10.38 to
dated as of August 16,1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commercial Services,
Inc.
10.25 Salant Corporation 1996 Stock Plan.* Exhibit 10.40 to Annual Report on
Form 10-K for Fiscal Year 1996.
10.26 Tenth Amendment to Credit Agreement, Exhibit 10.41 to Annual Report on
dated as of February 20, 1997, to Form 10-K for Fiscal Year 1996.
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.
10.27 Employment Agreement, dated as Exhibit 10.43 to Annual Report on
of March 24, 1997, between Form 10-K for Fiscal Year 1996.
Jerald S. Politzer and
Salant Corporation. *
10.28 Employment Agreement, dated as of Exhibit 10.44 to Quarterly Report on
May 1, 1997, between Todd Kahn and Form 10-Q for the quarter ended
Salant Corporation. * June 28, 1997.
10.29 Employment Agreement, dated as of Exhibit 10.45 to Quarterly Report on
August 18, 1997 between Philip A. Form 10-Q for the quarter ended
Franzel and Salant Corporation. * June 28, 1997.
10.30 Eleventh Amendment to Credit Exhibit 10.46 to Quarterly Report on
Agreement, dated as of Form 10-Q for the quarter ended
August 8, 1997, to the Revolving June 28, 1997.
Credit, Factoring and Security
Agreement, dated as of
September 20, 1993, as amended,
between Salant Corporation and
The CIT Group/Commercial Services, Inc.
10.31 Letter Agreement, dated Exhibit 10.48 to Current Report on
March 2, 1998, by and among Salant Form 8-K dated March 4, 1998.
Corporation, Magten Asset Management
Corp., as agent on behalf of
certain of its accounts, and Apollo
Apparel Partners, L.P.
10.32 Twelfth Amendment and Forbearance Exhibit 10.49 to Current Report on
Agreement to Credit Agreement, dated Form 8-K dated March 4, 1998.
as of March 2, 1998, by and between
Salant Corporation and The CIT
Group/Commercial Services, Inc.
10.33 Thirteenth Amendment and Forbearance Exhibit 10.53 to Current Report on
Agreement, dated as of June 1, 1998, Form 8-K dated June 1, 1998.
By and between Salant Corporation
And The CIT Group/Commercial
Services, Inc.
10.34 Commitment Letter, dated June 1, Exhibit 10.54 to Current Report
on 1998, by and between Salant Form 8-K dated June 1, 1998.
Corporation and The CIT
Group/Commercial Services, Inc.
10.35 Letter Agreement, dated June 1, Exhibit 10.55 to Current Report on
1998, by and among Salant Form 8-K dated June 1, 1998.
Corporation, Magten Asset Management
Corp., as agent on behalf of
certain of its accounts, and Apollo
Apparel Partners, L.P.
10.36 Letter Agreement, dated July 8, Exhibit 10.44 to Quarterly Report on
1998, amending the Letter Agreement, Form 10-Q for the quarter ended
dated March 2, 1998, as amended, July 4, 1998.
By and among Salant Corporation,
Magten Asset Management Corp.,
as agent on behalf of certain of its
accounts, and Apollo Apparel
Partners, L.P.
10.37 Letter Agreement, dated July 20, Exhibit 10.45 to Quarterly Report on
1998, amending the Employment Form 10-Q for the quarter ended
Agreement, dated August 18, 1997, October 3, 1998.
between Philip A. Franzel and
Salant Corporation. *
10.38 Letter Agreement, dated July 20, Exhibit 10.46 to Quarterly Report on
1998, amending the Employment Form 10-Q for the quarter ended
Agreement, dated May 1, 1997, October 3, 1998.
between Todd Kahn and Salant
Corporation. *
10.39 Agreement, dated July 20, Exhibit 10.47 to Quarterly Report on
1998, amending the Employment Form 10-Q for the quarter ended
Agreement, dated March 20, 1997, October 3, 1998.
between Jerald s. Politzer and
Salant Corporation. *
10.40 Letter Agreement, dated Exhibit 10.48 to Current Report on
November 30, 1998, by and between Form 8-K dated November 30, 1998.
Salant Corporation and The CIT
Group/Commercial Services, Inc.
10.41 Letter Agreement, dated Exhibit 10.49 to Current Report on
December 4, 1998, by and between Form 8-K dated November 30, 1998.
Salant Corporation and The CIT
Group/Commercial Services, Inc.
10.42 Ratification and Amendment Exhibit 10.50 to Current Report on
Agreement, dated as of December 29, Form 8-K dated December 29, 1998.
1998, by and between Salant
Corporation and The CIT Group/Commercial
Services, Inc.
10.43 Agreement between Salant Exhibit 99.4 to Current Report on
Corporation and Pension Benefit Form 8-K dated April 30, 1999.
Guaranty Corporation, dated
March 24, 1999.
10.44 Amended and Restated Revolving Exhibit 10.43 to Form 10-Q, dated
Credit and Security Agreement, May 17, 1999.
dated May 11, 1999.
10.45 Employment Agreement, dated Exhibit 10.45 to Annual Report on
February 1, 1999, between Form 10-K for fiscal year 1999.
Awadhesh Sinha and Salant
Corporation. *
10.46 Employment Agreement, dated as Exhibit 10.46 to Annual Report on
of May 17, 1999, between Michael Form 10-K for fiscal year 1999.
Setola and Salant Corporation. *
10.47 Letter Agreement, dated July 1, 1999, Exhibit 10.47 to Annual Report on
amending the Employment Agreement, Form 10-K for fiscal year 1999.
dated February 1, 1999, between
Awadhesh Sinha and Salant
Corporation. *
10.48 Salant Corporation 1999 Stock Award Exhibit A to Salant Corporation
Incentive Plan. Definitive Proxy Statement on
Schedule 14(a)
dated April 14, 2000.
21 List of Subsidiaries of the Company
* constitutes a 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 28, 2001 By: /s/ Awadhesh K. Sinha
Awadhesh K. Sinha
Chief Financial Officer and
Chief Operating 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 28, 2001.
Signature Title
/s/ Michael J. Setola Chairman of the Board,
Michael J. Setola and Chief Executive Officer
(Principal Executive Officer); Director
/s/ Awadhesh K. Sinha Chief Financial Officer
Awadhesh K. Sinha and Chief Operating Officer
(Principal Financial and Accounting Officer)
/s/ Talton R. Embry Director
Talton R. Embry
/s/ G. Raymond Empson Director
G. Raymond Empson
/s/ Ben Evans Director
Ben Evans
/s/ Rose P. Lynch Director
Rose P. Lynch
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2000
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 July 28, 1993.
Mills, Inc., dated
May 12,1993.
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 July 28, 1993.
2.3 Chapter 11 Plan of Reorganization Exhibit 2.3 to Form 8-K dated
for Salant Corporation, dated December 29, 1998.
December 29, 1998.
2.4 Disclosure Statement for Chapter 11 Exhibit 2.4 to Form 8-K dated
Plan of Reorganization, dated December 29, 1998.
December 29, 1998.
2.5 First Amended Chapter 11 Plan of Exhibit 2.5 to Form 8-K dated
Reorganization for Salant April 30, 1999.
Corporation, dated
February 3, 1999.
2.6 First Amended Disclosure Exhibit 2.7 to Annual Report on
Statement for Chapter 11 Plan Form 10-K for fiscal year 1999.
of Reorganization for Salant
Corporation, dated
February 3, 1999.
2.7 Order Pursuant to Section 1129 Exhibit 99.3 to Salant
of the Bankruptcy Code Confirming Corporation's Current Report on
the First Amended Plan of Form 8-K dated April 30, 1999.
Reorganization of Salant
Corporation, dated
April 16, 1999.
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. July 28, 1993.
3.2 Form of Bylaws, as amended, of Exhibit 3.2 to Form 10-K
Salant Corporation, effective dated March 24, 1995
September 21, 1994.
3.3 Amended and Restated Exhibit 1.1 to
Certificate of Form 8-A dated
Incorporation of May 12, 1999
Salant Corporation,
effective May 11, 1999.
3.4 Amended and Restated Exhibit 1.2 to
By-laws of Salant Form 8-A dated
Corporation, effective May 12, 1999
May 11, 1999.
4.1 Rights Agreement dated as of Exhibit 1 to Current Report
December 8, 1987 between Salant on Form 8-K dated December 8, 1987.
Corporation 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. July 29, 1993.
4.3 Indenture, dated as of Exhibit 10.34 to
September 20, 1993, 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 October 2, 1993.
Secured Notes due
December 31, 1998.
10.1 Revolving Credit, Exhibit 10.33 to
Factoring and Security Quarterly Report
Agreement dated September 29, 1993, on Form 10-Q for
between Salant Corporation the quarter ended
and The CIT Group/Commercial October 2, 1993.
Services, Inc.
10.2 Salant Corporation 1987 Stock Plan.* Exhibit 19.2 to Annual Report on
Form 10-K for fiscal year 1987.
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 July 25, 1989, to the Salant on Form 10-Q for the quarter
Corporation 1988 Stock Plan. * ended September 30, 1989.
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 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.
10.8 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.
10.9 Forms of Salant Corporation 1993 Exhibit 10.34 to Annual
Stock Plan Directors' Option Report on Form
Agreement. * 10-K for Fiscal Year 1993.
10.10 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 October 1, 1994.
September 20, 1993,
between The CIT Group/Commercial
Services, Inc. and Salant Corporation.
10.11 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.
10.12 Salant Corporation Retirement Plan, Exhibit 10.23 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.13 Salant Corporation Pension Plan, Exhibit 10.24 to Annual Report on
as amended and restated. * Form 10-K for Fiscal Year 1994.
10.14 Salant Corporation Long Term Savings Exhibit 10.25 to Annual Report on
and Investment Plan as amended Form 10-K for Fiscal Year 1994.
and restated. *
10.15 Fourth Amendment to Credit Exhibit 10.27 to
Agreement, dated as of March 1, Quarterly Report
1995, to the Revolving Credit, on Form 10-Q for
Factoring and Security Agreement, the quarter
dated as of September 20, 1993, ended April 1,
as amended, between Salant 1995.
Corporation and The CIT Group/
Commercial Services, Inc.
10.16 Fifth Amendment to Credit Exhibit 10.29
Agreement, dated as of to Quarterly
June 28, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.17 Sixth Amendment to Credit Exhibit 10.30
Agreement, dated as of to Quarterly
August 15, 1995, to the Report on
Revolving Credit, Factoring Form l0-Q for
and Security Agreement, the quarter
dated as of September 20, ended July 1,
1993, as amended, between 1995.
Salant Corporation and The
CIT Group/Commercial Services, Inc.
10.18 Letter from The CIT Group/ Exhibit 10.31
Commercial Services, Inc., to Quarterly
dated as of July 11, 1995, Report on
regarding the waiver of a Form l0-Q for
default. the quarter
ended July 1,
1995.
10.19 Letter Agreement between Exhibit 10.31
Salant Corporation and The to Quarterly
CIT Group/Commercial Services, Report on
Inc. dated as of July 11, 1995, Form l0-Q for
regarding the Seasonal Overadvance the quarter
Subfacility. ended July 1,
1995.
10.20 Seventh Amendment to Credit Exhibit 10.34 to
Agreement, dated as of Annual Report on
March 27, 1996, to the Form 10-K for
Revolving Credit, Factoring fiscal year 1995.
and Security Agreement,
dated as of September 20, 1993,
as amended, between SalantCorporation
and The CIT Group/Commercial Services, Inc.
10.21 First Amendment to the Salant Exhibit 10.35 to
Corporation Retirement Plan, dated Quarterly Report on
as of January 31, 1996. * Form 10-Q for the
quarter ended
March 30, 1996.
10.22 First Amendment to the Salant Exhibit 10.36 to
Corporation Long Term Savings and Quarterly Report on
Investment Plan, effective as of Form 10-Q for the
January 1, 1994. * quarter ended
March 30, 1996.
10.23 Eighth Amendment to Credit Agreement, Exhibit 10.37 to
dated as of June 1, 1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commercial Services,
Inc.
10.24 Ninth Amendment to Credit Agreement, Exhibit 10.38 to
dated as of August 16,1996, to the Quarterly Report on
Revolving Credit, Factoring and Form 10-Q for the
Security Agreement, dated as of quarter ended
September 20, 1993, as amended, June 29, 1996.
between Salant Corporation and
The CIT Group/Commercial Services,
Inc.
10.25 Salant Corporation 1996 Stock Plan.* Exhibit 10.40 to Annual Report on
Form 10-K for Fiscal Year 1996.
10.26 Tenth Amendment to Credit Agreement, Exhibit 10.41 to Annual Report on
dated as of February 20, 1997, to Form 10-K for Fiscal Year 1996.
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.
10.27 Employment Agreement, dated as Exhibit 10.43 to Annual Report on
of March 24, 1997, between Form 10-K for Fiscal Year 1996.
Jerald S. Politzer and
Salant Corporation. *
10.28 Employment Agreement, dated as of Exhibit 10.44 to Quarterly Report on
May 1, 1997, between Todd Kahn and Form 10-Q for the quarter ended
Salant Corporation. * June 28, 1997.
10.29 Employment Agreement, dated as of Exhibit 10.45 to Quarterly Report on
August 18, 1997 between Philip A. Form 10-Q for the quarter ended
Franzel and Salant Corporation. * June 28, 1997.
10.30 Eleventh Amendment to Credit Exhibit 10.46 to Quarterly Report on
Agreement, dated as of Form 10-Q for the quarter ended
August 8, 1997, to the Revolving June 28, 1997.
Credit, Factoring and Security
Agreement, dated as of
September 20, 1993, as amended,
between Salant Corporation and
The CIT Group/Commercial Services, Inc.
10.31 Letter Agreement, dated Exhibit 10.48 to Current Report on
March 2, 1998, by and among Salant Form 8-K dated March 4, 1998.
Corporation, Magten Asset Management
Corp., as agent on behalf of
certain of its accounts, and Apollo
Apparel Partners, L.P.
10.32 Twelfth Amendment and Forbearance Exhibit 10.49 to Current Report on
Agreement to Credit Agreement, dated Form 8-K dated March 4, 1998.
as of March 2, 1998, by and between
Salant Corporation and The CIT
Group/Commercial Services, Inc.
10.33 Thirteenth Amendment and Forbearance Exhibit 10.53 to Current Report on
Agreement, dated as of June 1, 1998, Form 8-K dated June 1, 1998.
By and between Salant Corporation
And The CIT Group/Commercial
Services, Inc.
10.34 Commitment Letter, dated June 1, Exhibit 10.54 to Current Report
on 1998, by and between Salant Form 8-K dated June 1, 1998.
Corporation and The CIT
Group/Commercial Services, Inc.
10.35 Letter Agreement, dated June 1, Exhibit 10.55 to Current Report on
1998, by and among Salant Form 8-K dated June 1, 1998.
Corporation, Magten Asset Management
Corp., as agent on behalf of
certain of its accounts, and Apollo
Apparel Partners, L.P.
10.36 Letter Agreement, dated July 8, Exhibit 10.44 to Quarterly Report on
1998, amending the Letter Agreement, Form 10-Q for the quarter ended
dated March 2, 1998, as amended, July 4, 1998.
By and among Salant Corporation,
Magten Asset Management Corp.,
as agent on behalf of certain of its
accounts, and Apollo Apparel
Partners, L.P.
10.37 Letter Agreement, dated July 20, Exhibit 10.45 to Quarterly Report on
1998, amending the Employment Form 10-Q for the quarter ended
Agreement, dated August 18, 1997, October 3, 1998.
between Philip A. Franzel and
Salant Corporation. *
10.38 Letter Agreement, dated July 20, Exhibit 10.46 to Quarterly Report on
1998, amending the Employment Form 10-Q for the quarter ended
Agreement, dated May 1, 1997, October 3, 1998.
between Todd Kahn and Salant
Corporation. *
10.39 Letter Agreement, dated July 20, Exhibit 10.47 to Quarterly Report on
1998, amending the Employment Form 10-Q for the quarter ended
Agreement, dated March 20, 1997, October 3, 1998.
between Jerald s. Politzer and
Salant Corporation. *
10.40 Letter Agreement, dated Exhibit 10.48 to Current Report on
November 30, 1998, by and between Form 8-K dated November 30, 1998.
Salant Corporation and The CIT
Group/Commercial Services, Inc.
10.41 Letter Agreement, dated Exhibit 10.49 to Current Report on
December 4, 1998, by and between Form 8-K dated November 30, 1998.
Salant Corporation and The CIT
Group/Commercial Services, Inc.
10.42 Ratification and Amendment Exhibit 10.50 to Current Report on
Agreement, dated as of December 29, Form 8-K dated December 29, 1998.
1998, by and between Salant
Corporation and The CIT Group/Commercial
Services, Inc.
10.43 Agreement between Salant Exhibit 99.4 to Current Report on
Corporation and Pension Benefit Form 8-K dated April 30, 1999.
Guaranty Corporation, dated
March 24, 1999.
10.44 Amended and Restated Revolving Exhibit 10.43 to Form 10-Q, dated
Credit and Security Agreement, May 17, 1999.
dated May 11, 1999.
10.45 Employment Agreement, dated Exhibit 10.45 to Annual Report on
February 1, 1999, between Form 10-K for fiscal year 1999.
Awadhesh Sinha and Salant
Corporation. *
10.46 Employment Agreement, dated as Exhibit 10.46 to Annual Report on
of May 17, 1999, between Michael Form 10-K for fiscal year 1999.
Setola and Salant Corporation. *
10.47 Letter Agreement, dated July 1, 1999, Exhibit 10.47 to Annual Report on
amending the Employment Agreement, Form 10-K for fiscal year 1999.
dated February 1, 1999, between
Awadhesh Sinha and Salant
Corporation. *
10.48 Salant Corporation 1999 Stock Award Exhibit A to Salant Corporation
Incentive Plan. Definitive Proxy Statement on
Schedule 14(a)
dated April 14, 2000.
21 List of Subsidiaries of the Company
* constitutes a 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
Salant Holding Corp., a Delaware corporation
SLT Sourcing, Inc., a New York corporation
Vera Licensing, Inc., a Nevada corporation
Vera Linen Manufacturing, Inc., a Delaware corporation
Salant Caribbean, S.A., a Guatemalan Corporation