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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 28, 1996
Commission File Number 0-9831
LIZ CLAIBORNE, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2842791
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1441 Broadway, New York, New York 10018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-354-4900
Securities registered pursuant to Section 12(b) of the Act:
Title of class Name of each exchange on which registered
Common Stock, par value $1 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark 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. [ ]
Based upon the closing sale price on the New York Stock Exchange composite
tape on March 4, 1997, the aggregate market value of the registrant's Common
Stock, par value $1 per share, held by non-affiliates of the registrant on such
date was approximately $2,885,159,802.
Number of shares of the registrant's Common Stock, par value $1 per share,
outstanding as of March 4, 1997: 70,785,884 shares.
----------
Documents Incorporated by Reference:
Registrant's Proxy Statement relating to its Annual Meeting of Stockholders
to be held on May 15, 1997 - Part III.
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PART I
------
Item 1. Business.
Overview
Liz Claiborne, Inc. designs and markets an extensive range of fashion
apparel and accessories, with versatile collections appropriate to wearing
occasions ranging from casual to dressy. The Company's portfolio includes DANA
BUCHMAN, dana b. & karen, LIZ CLAIBORNE, ELISABETH, EMMA JAMES, VILLAGER, FIRST
ISSUE and RUSS brands for women and the CLAIBORNE brand for men.
A portfolio of products licensed to carry the Company's brands includes
women's shoes, home furnishings, optics, sunglasses, watches and men's tailored
clothing. Products are manufactured to the Company's specifications in the
United States and abroad and are marketed through leading department and
specialty stores and other channels in the United States, Canada, Europe, Asia,
and Central and South America. Although they offer a wide array of styles, all
of Liz Claiborne's lines share the common characteristics of innovative fashion
and exceptionally high quality and value. The Company believes that it is the
largest "better" women's sportswear and dress company in the United States.
Generally, the Company's sportswear products are conceived and marketed as
"designer" items, but are priced in the "better" apparel range.
At February 28, 1997, the Company's order book reflected unfilled customer
orders for approximately $690 million of merchandise, as compared to
approximately $536 million at March 1, 1996. Order book data at any given date
is materially affected by the timing of recording orders and of shipments;
furthermore, customer orders are currently reflected in the Company's order
books on a more timely basis than in prior years, due to certain modifications
and enhancements to the Company's order entry processes. Accordingly, order book
data should not be taken as indicative of eventual actual shipments or net
sales, or as providing meaningful period-to-period comparisons.
As used herein, the term the "Company" refers to Liz Claiborne, Inc., a
Delaware corporation, together with its consolidated subsidiaries, and its
predecessor New York corporation (incorporated in 1976).
Narrative Description of Business
In order to reach a broad spectrum of consumers, the Company offers an
array of products under its portfolio of brands through a variety of
distribution channels at a broad range of price points. The Company seeks in its
product offerings to provide versatility to its consumers, in terms of
individual items, price points and overall collections of items.
In the first quarter of 1996, the Company realigned its "better" women's
sportswear product lines into the Casual Unit (consisting of misses LIZSPORT,
LIZWEAR and LIZ & CO. product); the COLLECTION Division (consisting of misses
COLLECTION and STUDIO (casual careerwear) product); and the Special Sizes Unit
(consisting of ELISABETH sportswear (including ELISABETH-LIZ & CO.) and dresses,
and petite LIZSPORT, COLLECTION, LIZWEAR, LIZ & CO. and STUDIO product). In
addition, during 1996 the Company established its new Special Markets Unit,
which includes the operations of its former Moderate Division, with
responsibility for sales of women's sportswear products under the repositioned
RUSS, VILLAGER and FIRST ISSUE brands, as well as under the new "upper moderate"
EMMA JAMES brand.
Substantially all products in each sportswear collection are sold as
separate items. Collections are structured, however, through the use of related
styles, color schemes and fabrics, to enable the consumer to assemble outfits
consisting of separate items which are designed to be worn together. By offering
similar or related styles, color schemes and fabrics over an extended period,
the Company intends to provide the consumer with a wardrobe which can be
coordinated with other Company items from season to season.
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The following is a comparison of net sales by product/division for each of the
five fiscal years ended December 28, 1996.
(Dollars in millions)
---------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Casual ................................................. $ 607.6 $ 555.9 $ 610.2 $ 695.6 $ 759.3
Special Sizes .......................................... 410.3 344.7 364.8 397.0 429.5
Collection and Studio .................................. 209.7 207.1 238.1 274.3 284.8
---------- ---------- ---------- ---------- ----------
Total Better Women's Sportswear ............... 1,227.6 1,107.7 1,213.1 1,366.9 1,473.6
Accessories and Other Non-Apparel ...................... 297.5 330.4 368.1 344.3 285.2
Retail Specialty Stores ................................ 199.7 195.0 150.0 114.4 92.9
Outlet Stores .......................................... 193.8 155.0 140.1 122.4 113.9
Dana Buchman ........................................... 188.7 136.2 112.9 90.2 73.5
Men's Sportswear and Furnishings ....................... 121.6 113.1 101.7 80.7 94.0
Dresses and Suits ...................................... 105.3 123.0 121.9 130.0 171.3
Special Markets/Moderate ............................... 77.3 81.3 111.6 78.7 21.2*
---------- ---------- ---------- ---------- ----------
2,411.5 2,241.7 2,319.4 2,327.6 2,325.6
Intercompany Sales Elimination ......................... (194.0) (160.1) (156.5) (123.3) (131.3)
---------- ---------- ---------- ---------- ----------
Net Sales ..................................... $ 2,217.5 $ 2,081.6 $ 2,162.9 $ 2,204.3 $ 2,194.3
========== ========== ========== ========== ==========
Net Sales by Geographic Areas
Domestic ............................................... $ 2,092.3 $ 1,943.4 $ 2,039.9 $ 2,091.0 $ 2,092.5
International .......................................... 125.2 138.2 123.0 113.3 101.8
---------- ---------- ---------- ---------- ----------
Net Sales ..................................... $ 2,217.5 $ 2,081.6 $ 2,162.9 $ 2,204.3 $ 2,194.3
========== ========== ========== ========== ==========
- ----------
* Partial Year Sales
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The Casual Unit offers "misses" casual sportswear under three of the
Company's trademarks. The LIZSPORT Division offers all-American sportswear for
less formal work settings and casual occasions. The LIZWEAR Division offers
denim and denim-related sportswear, including twills and fashion coordinates.
The LIZ & CO. Division offers versatile career and casual knitwear.
The COLLECTION Division offers "misses" professional careerwear with
desk-to-dinner versatility under the LIZ CLAIBORNE trademark and casual
careerwear under the STUDIO trademark. During 1996, the STUDIO line's offerings
were expanded.
The above collections are offered in petite sizes through the Special Sizes
Unit.
The DANA BUCHMAN Division offers collections for the women's "bridge"
market, the price range between "better" sportswear and designer clothing, under
the Company's DANA BUCHMAN trademark. The Division offers products with elegant
styling in distinctive fabrics, in "misses", large and petite sizes. In February
1996, the Division commenced shipment of a new line of sophisticated casual wear
under the Company's dana b. and karen trademark.
The ELISABETH Division of the Special Sizes Unit offers large-sized classic
careerwear, dresses, weekend casual, and wardrobe basics in both "plus" sizes
and petite proportions under the Company's ELISABETH trademark. In 1996, the
Division commenced offering ELISABETH-LIZ & CO. products.
The Division offers dresses and suits providing day-into-evening
versatility Dresses under the Company's LIZ CLAIBORNE trademark in both the
"misses" and petite size ranges, as well as special occasion dresses under the
LIZ NIGHT trademark.
The Menswear Division offers men's business-casual wear, sportswear and
furnishings (dress shirts and ties) under the CLAIBORNE trademark. The Company
introduced a line of men's accessories in January 1997, with shipping to
commence in the third quarter of 1997.
Each of the above Divisions presented four seasonal collections during
1996, except that the DANA BUCHMAN Division presented three, and the Dresses
Division presented five, seasonal collections.
The Accessories Group offers a wide variety of products through its
Handbag, Fashion Accessories and Jewelry Divisions, primarily under the LIZ
CLAIBORNE trademark. These offerings mirror major fashion trends and complement
many of the Company's other product lines.
The Company's Cosmetics Division offers fragrance and bath and body-care
products under the LIZ CLAIBORNE, REALITIES, VIVID, CLAIBORNE FOR MEN and,
commencing in the third quarter of 1996, CURVE, trademarks. The Company
introduced its LIZSPORT and CLAIBORNE SPORT fragrances in March 1997, with
shipping to commence in the third quarter of 1997.
In late 1994, the Company announced plans to phase out the First Issue
retail store business and to close or convert its 77 First Issue locations to
other Company-operated retail formats. As of March 1, 1996, the Company
completed the phase out. See Note 2 of Notes to Consolidated Financial
Statements.
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The Special Markets Unit offers updated career and casual clothing under
four Company trademarks: EMMA JAMES ("upper-moderate" priced related separates
for the casual workplace, sold in department stores nationally), VILLAGER
("popular" priced relaxed separates for soft career and weekend dressing, sold
in regional department stores), FIRST ISSUE ("value" priced relaxed career and
everyday wear, sold exclusively in Sears department stores), and RUSS ("budget"
priced casual separates, sold in Wal-Mart stores and other mass merchandisers).
The EMMA JAMES line first shipped in January 1997. The newly repositioned FIRST
ISSUE line first shipped to Sears in November 1996. In 1996, the Company
suspended product offerings under its CRAZY HORSE trademark, with the last
regular season shipment under this label in December 1996. The RUSS line first
shipped to Wal-Mart in January 1997. See "Competition; Certain Risks."
Sales and Marketing
The Company's wholesale sales are made primarily to department and
specialty and chain store customers throughout the United States. Retail sales
are also made through the Company's own retail stores and outlet stores, as well
as to international customers, direct-mail catalog companies, military exchanges
and other outlets. The Company continues to evaluate its methods of doing
business internationally. At 1996 year end, LIZ CLAIBORNE products were being
sold in over 60 markets outside the United States. The Company expects to
continue expansion within these markets and to expand to additional markets.
The Company currently operates a total of 112 prototype and presentational
specialty retail stores located throughout the United States which carry solely
Company products: 49 LIZ CLAIBORNE stores, 56 ELISABETH large-size apparel
stores, 6 CLAIBORNE mens' stores and one DANA BUCHMAN store. These stores
typically range in size from 2,000 square feet to 12,000 square feet. The LIZ
CLAIBORNE flagship store, an approximately 17,000 square foot store is located
on Fifth Avenue in New York City. The Company's retail stores enable it to more
closely track sales and other product data, obtain market information and
experiment with new products, visual presentation and new ideas for enhancing
customer service. This information is used to help the Company's wholesale
customers respond more quickly to consumer preferences.
In Canada, the Company operates a wholesale business which sells primarily
to department store chains. During 1996, the Company continued its LIZ CLAIBORNE
and DANA BUCHMAN product distribution in Canada while expanding its reach into
the moderate market and into new channels with its moderate brands. During 1996,
the Company continued to operate in Western Europe, principally through leased
departments, or concessions, primarily in the United Kingdom, commencing
wholesale distribution in Germany, Spain and the Benelux countries; the Company
plans to further expand wholesale distribution throughout international markets.
In other international markets, the Company has continued to add retail licenses
with third parties, totaling 61 stores in 19 countries by year-end 1996.
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Approximately 84% of 1996 sales were made to the Company's 100 largest
customers. Except for Dillard's Department Stores, Inc., which accounted for
approximately 11% of 1996 and 1995 sales, no single customer accounted for more
than 6% of 1996 or 1995 sales. However, certain of the Company's customers are
under common ownership; when considered together as a group under common
ownership, sales to the eight department store customers which were owned at
year-end 1996 by The May Department Stores Company accounted for approximately
18% of 1996 and 1995 sales and sales to the seven department store customers
which were owned at year-end 1996 by Federated Department Stores, Inc. accounted
for approximately 17% of 1996 and 1995 sales. See Note 8 of Notes to
Consolidated Financial Statements. Many major department store groups make
centralized buying decisions; accordingly, any material change in the Company's
relationship with any such group could have a material adverse effect on the
Company's operations. The Company expects that its largest customers will
continue to account for a significant percentage of its sales.
Sales to the Company's department and specialty store customers are made
primarily through the Company's New York City showrooms.
Orders from the Company's customers generally precede the related shipping
periods by several months. The Company's largest customers discuss with the
Company retail trends and their plans regarding their anticipated levels of
total purchases of Company products for future seasons. These discussions are
intended to assist the Company in planning the production and timely delivery of
its products. The Company continually monitors retail sales in order to assess
directly consumer response to its products.
The Company has implemented and continues to expand in-stock reorder
programs in several divisions to enable customers to reorder certain items for
quick delivery. See "Manufacturing." During 1996, the Company expanded LIZRIM,
an inventory replenishment system installed at a number of its retail customers,
which was first implemented in 1995.
Effective January 1, 1996, the Company lowered the trade discount offered
by its LIZSPORT, LIZWEAR, LIZ & CO., ELISABETH, COLLECTION and Dresses Divisions
from the previous 10% level to 8% (the prevailing standard in the industry). The
Company is redeploying the additional funds received as a result of this change
towards a national advertising campaign, an expanded in-store presentation
program and similar brand-enhancing activities, in an effort to stimulate full
price sales at retail. See "Item 7. -- Management's Discussion and Analysis of
Financial Condition and Results of Operations."
In January 1996, the Company introduced LIZEDGE, an in-store servicing and
maintenance program designed to enhance the way the Company's products appear on
the selling floor and to encourage multiple item, regular price sales. In 1997,
the Company expects to expand the LIZEDGE program to include accessories and
jewelry and to integrate the Company's LIZ & LEARN program, a training and
motivational program for customer sales associates.
In March 1996, the Company introduced LIZVIEW, a program designed to
enhance the presentation of the Company's product on retail selling floors
generally through the use of proprietary fixturing and layouts. By year-end
1996, 176 LIZVIEW shops were installed in 97 stores, amounting to over 200,000
square feet of upgraded selling space. The Company has requests for in excess of
500 additional LIZVIEW installations and anticipates that approximately 400 will
be installed during 1997.
The Company spent approximately $23 million on national advertising for its
various brands in 1996 and currently plans to spend approximately $31 million in
1997. The Company maintains cooperative advertising programs under which it
generally shares the costs of each customer's advertising and promotional
expenditures, up to a stated percentage of the customer's purchases. The Company
incurred costs under the cooperative advertising programs of approximately $50
million in respect of 1996 sales.
The Company currently operates 83 outlet stores, virtually all of which are
located in "outlet centers" comprised primarily of manufacturer-operated stores.
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Manufacturing
The Company does not own any product manufacturing facilities; all of its
products are manufactured in accordance with its specifications through
arrangements with independent suppliers.
A very substantial portion of the Company's sales is represented by
products produced abroad, mainly in the Far East, the Caribbean and Central
America. The Company also sources in the United States and other regions. The
Company does not itself own quota and therefore must obtain quota from its
suppliers and vendors. During 1996, the Company's products were manufactured by
several hundred suppliers. The Company's products are currently manufactured in
approximately 30 different countries, including China, the Dominican Republic,
South Korea, the United States, Sri Lanka and Hong Kong. The Company continually
seeks additional suppliers throughout the world for its sourcing needs. The
Company's largest supplier of finished products manufactured less than 6% of the
Company's purchases of finished products during 1996. Approximately 28% of the
Company's 1996 and 1995 purchases of finished products were manufactured by its
ten largest suppliers, as compared to 24% of 1994 purchases. The Company expects
that the percentage of production represented by its largest suppliers will
continue to increase in light of the Company's ongoing worldwide factory
certification initiative, under which the Company is planning to allocate even
larger portions of its production requirements to suppliers which appear to have
superior capacity, quality (of product and operations) and financial resources.
The Company's purchases from its suppliers are affected through individual
purchase orders specifying the price and quantity of the items to be produced.
Generally, the Company does not have any long-term, formal arrangements with any
of the suppliers which manufacture its products. The Company believes that it is
the largest customer of many of its manufacturing suppliers and considers its
relations with such suppliers to be satisfactory.
During 1996, most of the Company's fabrics, trimmings and other materials
were obtained in bulk from various foreign and domestic suppliers. Where the
Company purchases completed product "packages" from its contractors, the
contractor is itself responsible to purchase all necessary raw materials and
other product components. Inasmuch as the Company intends to continue to move
towards purchasing an increasing portion of its products as "packages," the
Company is developing a group of "approved suppliers" to supply such raw
materials and other product components directly to its contractors; the Company
anticipates purchasing a substantial portion of its products as "packages" in
1997. During 1996, the raw materials used in Company products were purchased
from several hundred suppliers, located in the United States, South Korea,
Taiwan, Hong Kong, Japan and Italy. Approximately 28% of the Company's
expenditures for raw materials during 1996 and 25% during 1995 were accounted
for by its five largest raw material suppliers, with no single raw material
supplier accounting for more than 6% of 1996 raw material expenditures.
Generally, the Company does not have any long-term, formal arrangements with any
supplier of raw materials. The Company, through a wholly-owned subsidiary, owns
a 50% interest in a joint venture which supplies certain types of domestically
dyed and finished fabrics for use in certain Company products; the Company
continues to analyze its options with respect to this venture. To date, the
Company has experienced little difficulty in satisfying its raw material
requirements and considers its sources of supply adequate.
The Company operates under substantial time constraints in producing each
of its collections. See "Sales and Marketing." In order to deliver, in a timely
manner, merchandise which reflects current tastes, the Company attempts to
schedule a substantial portion of its materials and manufacturing commitments
relatively late in the production cycle, thereby favoring suppliers able to make
quick adjustments in response to changing production needs. However, in order to
secure necessary materials and manufacturing facilities, the Company must make
substantial advance commitments, often as much as seven months prior to the
receipt of firm orders from customers for the items to be produced. The Company
has and continues to implement a number of initiatives designed to reduce the
time required to move a product from design to the customer.
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If the Company should misjudge its ability to sell its products, it could
be faced with substantial outstanding fabric and/or manufacturing commitments,
resulting in excess merchandise inventories. See "Competition; Certain Risks".
The Company was left with significant excess merchandise inventory positions
during 1993 and into the first half of 1994 due to the Company's increased 1993
commitments compared to 1992 and the decreased demand for certain of the
Company's apparel at retail.
The Company's arrangements with foreign suppliers are subject to the risks
of doing business abroad, including currency fluctuations and revaluations,
restrictions on the transfer of funds and, in certain parts of the world,
political instability. The Company's operations have not been materially
affected by any such factors to date. However, due to the large portion of the
Company's products which are produced abroad, any substantial disruption of its
relationships with its foreign suppliers could adversely affect the Company's
operations.
Import and Import Restrictions
Virtually all of the Company's merchandise imported into the United States
is subject to United States duties. In addition, bilateral agreements between
the major exporting countries and the United States impose quotas that limit the
amount of certain categories of merchandise that may be imported into the United
States. The majority of such agreements contain "consultation" clauses which
allow the United States, under certain circumstances, to impose unilateral
restrictions on the importation of certain categories of merchandise that are
not subject to specified limits under the terms of an agreement. These bilateral
agreements have been negotiated under the framework of the MultiFiber
Arrangement ("MFA"), which has been in effect since 1974. The United States, a
participant in international negotiations known as the "Uruguay Round", ratified
legislation enacting and implementing the various agreements of the Uruguay
Round, effective January 1, 1995, including the Uruguay Round Agreement on
Textiles and Clothing which requires World Trade Organization member countries
to phase out textile and apparel quotas in three stages over a ten year period.
In addition, it regulates trade in non-integrated textile and apparel quotas
during the ten year transition period. However, even with respect to integrated
textile and apparel quota categories, the United States remains free to
establish numerical restraints in response to a particular product being
imported in such increased quantities as to cause (or threaten) serious damage
to the relevant domestic industry. United States legislation implementing the
Uruguay Round also changes the rule of origin for many textiles and apparel
products effective July 1, 1996, with certain minor exceptions. This change
would determine country of origin based on "assembly" for most textile and
apparel products. The Uruguay Round also incorporates modest duty reductions for
textile and apparel products over a ten year staging schedule. This will likely
result in a modification of current patterns of international trade with respect
to apparel and textiles. In addition, there are various United States
initiatives pending concerning the trading status of certain countries, which,
if enacted, would likely increase the cost of doing business in such countries.
See "Item 7. -- Management's Discussion and Analysis of Financial Condition and
Results of Operations".
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In addition, each of the countries in which the Company's products are sold
have laws and regulations regarding import restrictions and quotas. Because the
United States and other countries in which the Company's products are
manufactured and sold may, from time to time, impose new quotas, duties,
tariffs, surcharges or other import controls or restrictions, or adjust
presently prevailing quota allocations or duty or tariff rates or levels, the
Company maintains a program of intensive monitoring of import and quota-related
developments. The Company seeks continually to minimize its potential exposure
to import and quota-related risks through, among other measures, allocation of
production to merchandise categories that are not subject to quota pressures,
adjustments in product design and fabrication, shifts of production among
countries and manufacturers, and otherwise, as well as through geographical
diversification of its sources of supply.
In light of the very substantial portion of the Company's products which
are manufactured by foreign suppliers, the enactment of new legislation or the
administration of current international trade regulations, or executive action
affecting textile agreements, could adversely affect the Company's operations.
Trademarks
The Company utilizes a variety of trademarks on its products, including LIZ
CLAIBORNE, LIZ, CLAIBORNE, LIZWEAR, LIZSPORT, LIZ CLAIBORNE COLLECTION, LIZ
NIGHT, LIZ CLAIBORNE STUDIO, its LC logomark, its triangular logomark, DANA
BUCHMAN, dana b. and karen, ELISABETH, LIZ & CO., LEATHER CO., EMMA JAMES, FIRST
ISSUE, RUSS, VILLAGER, REALITIES, VIVID, CURVE and CLAIBORNE SPORT. The Company
has registered or applied for registration of a multitude of trademarks for use
on apparel and apparel-related products, including accessories, cosmetics and
jewelry in the United States as well as numerous foreign territories. In
February 1997, the Company acquired several trademarks from JH Collectibles,
Inc., including JH COLLECTIBLES, JH and JUNIOR HOUSE. The Company also has a
number of design patents. The Company regards its trademarks and other
proprietary rights as valuable assets and believes that they have significant
value in the marketing of its products. The Company vigorously protects its
trademarks and other intellectual property rights against infringement.
Licensing
The Company has six license agreements pursuant to which third party
licensees produce merchandise under the Company's trademarks in accordance with
designs furnished or approved by the Company. The present terms of these
agreements (not including renewal terms) expire at various dates through 2010.
Current licenses cover women's and men's sunglasses and readers; women's and
men's ophthalmic frames for prescription eyewear; home furnishing products;
men's tailored clothing; women's watches; and women's career, career-casual,
casual and sport shoes. Each of the licenses provides for the payment to the
Company of a percentage of the licensee's sales of the licensed products against
a guaranteed minimum royalty which generally increases over the term of the
agreement. The Company is currently negotiating a license agreement pursuant to
which a third party licensee will produce swimwear merchandise.
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Competition; Certain Risks
The apparel and related product markets are highly competitive, both within
the United States and abroad.
The Company's ability to effectively compete depends on a number of
factors, including the Company's ability to effectively anticipate, gauge and
respond to changing consumer demands and tastes, to effectively translate these
market trends into appropriate, saleable product offerings relatively far in
advance, and to operate within substantial production and delivery constraints.
In addition, consumer and customer acceptance and support (especially by the
Company's largest customers), depend upon, among other things, product, value
and services.
The Company believes that, based on sales, it is among the largest apparel
companies operating in the United States. Although the Company is unaware of any
comprehensive trade statistics, it believes, based on its knowledge of the
market and available trade information, that measured by sales, it is the
largest "better" women's sportswear and dress company in the United States.
Commencing in 1996, a number of apparel companies began distribution of new
collections of women's "better" sportswear through the department store channel
of distribution.
In addition to the competitive factors described above, the Company's
business, including its revenues and profitability, is influenced by and subject
to a number of factors which are inherently uncertain and therefore difficult to
predict, including the general retail environment and general economic
conditions; the Company's relationships with its customers, especially its major
department store customers; the Company's ability to correctly judge the level
of its fabric and/or merchandise commitments; the Company's ability to
effectively distribute its products within its targeted markets (including
distribution through wholesale accounts and Company operated retail stores and
concession locations); and the chance of substantial disruption of the Company's
relationships with its suppliers, manufacturers and employees. See "Sales and
Marketing", "Manufacturing" and "Employees."
The Company from time to time reviews its possible entry into new markets.
The entry into new markets (including the development and launch of new product
categories), such as the Company's entry into the moderate market, is
accompanied by risks inherent in any new business and may require methods of
operations and marketing strategies different from those employed in the
Company's other businesses. Certain new businesses may be lower margin
businesses and may require the Company to achieve significant cost efficiencies.
In addition, new markets may involve buyers, store customers and/or competitors
different from the Company's historical buyers, customers and competitors.
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Employees
At December 28, 1996, the Company had approximately 7,100 full-time
employees, as compared with approximately 7,400 full-time employees at December
30, 1995. The Company considers its relations with its employees to be
satisfactory and to date has not experienced any interruption of operations due
to labor disputes.
Between May 31, 1997 and August 31, 1997, five separate collective
bargaining agreements between the Company and various locals of the Union of
Needletrades, Industrial and Textiles Employees (UNITE) will expire. These
agreements cover approximately 1,700 of the Company's full-time employees. Most
of the union-represented employees are employed in the seven warehouse
facilities the Company maintains in New Jersey, Pennsylvania and Alabama. While
relations between the Company and the union have historically been amicable, the
Company believes it prudent to prepare for the possibility of a labor dispute at
one or more of its facilities. While the Company does not foresee the likelihood
of a prolonged labor dispute, any substantial labor disruption could adversely
affect the Company's operations.
Item 2. Properties.
The Company's showrooms, sales, merchandising and design staffs, as well as
its executive offices, are located at 1441 Broadway, New York, New York, where
the Company leases approximately 276,000 square feet under a master lease which
expires at the end of 2001 and contains certain renewal options and rights of
first refusal for additional space. The Company currently leases office space at
one other building in New York City covering approximately 29,000 square feet,
with a term expiring in 2003.
The Company owns its approximately 450,000 square foot principal New Jersey
warehouse and distribution facility located at One Claiborne Avenue, North
Bergen, New Jersey. This facility also houses the Company's production and
certain other administrative personnel. The Company also owns an approximately
300,000 square foot office facility at this location. The Company presently
leases approximately 969,000 square feet in six other New Jersey warehouse
facilities, the current terms of which expire through 2008. The Company also
owns an approximately 313,000 square foot warehouse and distribution facility
located on approximately 80 acres in Mt. Pocono, Pennsylvania. The Company's
approximately 270,000 square foot leased facility in Augusta, Georgia (located
on a 98-acre site), has been subleased to a joint venture comprised of a
wholly-owned subsidiary of the Company and an unrelated third party; this
facility is used as a dyeing and finishing operation. The Company leases an
approximately 290,000 square foot warehouse and distribution facility located on
an approximately 124 acre site in Montgomery, Alabama; the Company's options to
purchase 80 acres adjacent to this facility expired unexercised on November 30,
1996. The Company is the lessee of the Georgia and Alabama facilities pursuant
to industrial development financing. The Company also leases showroom, warehouse
and office space in various other domestic and international locations.
The Company leases space for its 112 retail specialty stores (aggregating
approximately 500,000 square feet in various malls) and for its 83 outlet stores
(aggregating approximately 818,000 square feet).
The Company believes that its existing facilities are well maintained, in
good operating condition and, upon occupancy of additional space, will be
adequate for its present level of operations. See Note 8 of Notes to
Consolidated Financial Statements.
- 11 -
12
Item 3. Legal Proceedings.
Various legal actions are pending against the Company including the
following:
The Company and certain of its present and former officers and directors
are defendants in an action styled Ressler et al. vs. Liz Claiborne, Inc., et
al., pending in the United States District Court for the Eastern District of New
York. The plaintiffs seek compensatory damages on behalf of a class of
purchasers of the Company's Common Stock during the period commencing September
21, 1992 through and including July 16, 1993, and allege that the defendants
violated the federal securities laws by, among other things, making
misrepresentations or omissions of material facts that artificially inflated the
market price of the Common Stock during the class period. An earlier-filed
lawsuit before the same court as Ressler, styled Fishbaum vs. Chazen, et. al.,
made allegations similar to the Ressler complaint and sought damages on behalf
of a class of purchasers of the Company's Common Stock for the period commencing
March 30, 1993, through and including July 16, 1993. An amended complaint was
filed in the Ressler action in May 1994 to add Fishbaum as a plaintiff. In June
1994, the court granted the Company's motion to dismiss the Fishbaum complaint,
with leave to amend, on the grounds that the complaint did not adequately set
forth the requisite element of scienter. In July 1994, the Company moved to
dismiss the Ressler complaint. In August 1995, the Court granted that motion,
again with leave to amend, on the grounds that the Ressler complaint failed to
comply with pleading requirements of the Federal Rules of Civil Procedure.
However, the Court rejected the contention that scienter had not been adequately
pled. In response to the Company's motion for reconsideration of that latter
point, the Court indicated that the Company could present the scienter issue
again in moving to dismiss a new amended complaint. In October 1995, a second
amended complaint was filed. In December 1995, the Company moved to dismiss that
complaint. The motion was argued in May 1996 and has not yet been decided.
In April 1994, two stockholder derivative actions, which contain
substantially similar allegations, styled Goldberg Family Trust vs. Chazen, et
al. and Liz Claiborne, Inc., nominal defendant, and Laz Schneider vs. Chazen, et
al. and Liz Claiborne, Inc., nominal defendant, were brought in the Court of
Chancery of the State of Delaware against certain of the Company's former and
present directors and two of its former Vice Chairmen. The complaints contain
allegations that the individual defendants breached their fiduciary obligations
to the Company and its shareholders, committed corporate mismanagement and
wasted corporate assets in connection with the Company's stock repurchase
program and the defense of pending legal proceedings, and were unjustly enriched
in connection with the sale of shares of the Company's Common Stock between
September 1992 and July 1993 by certain of its present and former officers and
directors. In July 1994, the Laz Schneider action was consolidated with the
Goldberg action. In August 1994, the defendants moved to dismiss the
consolidated complaint. The motion is pending.
The Company believes that the litigations described in this Item are
without merit and intends to vigorously defend these actions. Although the
outcome of any such litigation or claim cannot be determined with certainty,
management is of the opinion that the final outcome of these litigations should
not have a material adverse effect on the Company's results of operations or
financial position.
- 12 -
13
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
Executive Officers of the Registrant.
Information as to the executive officers of the Company is set forth below:
Name Age Position(s)
- ---- --- -----------
Paul R. Charron 54 Chairman of the Board and Chief Executive
Officer
Denise V. Seegal 43 President
Jorge L. Figueredo 36 Senior Vice President - Human Resources
Samuel M. Miller 59 Senior Vice President - Finance, Chief
Financial Officer
John R. Thompson 45 Senior Vice President - Service, Systems and
Reengineering, Chief Information Officer
Robert J. Zane 57 Senior Vice President - Manufacturing and
Sourcing
- 13 -
14
Executive officers serve at the discretion of the Board of Directors.
Mr. Charron joined the Company as Vice Chairman and Chief Operating
Officer, and became a Director, in May 1994. In 1995, Mr. Charron became
President, a position he held until October 1996, and Chief Executive Officer.
In May 1996, Mr. Charron became Chairman of the Board of the Company. Prior to
joining the Company, Mr. Charron served as Executive Vice President of VF
Corporation, an apparel manufacturer, from 1993 to 1994, and as a Group Vice
President of VF Corporation from 1988 to 1993.
Ms. Seegal joined the Company in October 1996 as President. Prior to
joining the Company, Ms. Seegal served as President of the CK Men's and Women's
divisions of Calvin Klein, Inc. from 1994 to 1996 and as President of the DKNY
divisions of the Donna Karan Company from 1989 to 1994.
Mr. Figueredo joined the Company in 1984 as Administrator, Warehouse
Employee Relations and served in various management positions thereafter. In
1992, Mr. Figueredo was promoted to Vice President, Human Resources Operations.
In 1994, Mr. Figueredo was promoted to Senior Vice President - Human Resources.
Mr. Miller, a certified public accountant, joined the Company in 1988 as
Senior Vice President - Finance, Chief Financial and Accounting Officer, after
more than sixteen years in various senior financial positions within the apparel
industry.
Mr. Thompson joined the Company in February 1995 as Senior Vice President
of Service, Systems and Reengineering, Chief Information Officer. Prior to
joining the Company, Mr. Thompson served as Executive Vice President for
Business Systems/Logistics and Chief Information Officer of Goody's Family
Clothing, Inc., an apparel retailer, from 1993 to 1995. From 1991 to 1993, Mr.
Thompson was Vice President Business Systems and Management Information Systems
for Lee Apparel Company, an apparel manufacturer. Mr. Thompson also served as
Vice President of Marketing and Sales of Quick Response Services, Inc., an
information management services company, from 1987 to 1991.
Mr. Zane joined the Company in September 1995 as Senior Vice President -
Manufacturing and Sourcing. Prior to joining the Company, Mr. Zane owned and
operated Medallion Tekstil, a private label manufacturing company he founded in
1989. Prior to that, Mr. Zane was Vice President, Sourcing at Bernard Chaus,
Inc. and Executive Vice President at Murjani International, Inc.
- 14 -
15
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Common Stock trades on the New York Stock Exchange ("NYSE")
under the symbol LIZ. The table below sets forth the high and low closing sale
prices of the Common Stock (based on the NYSE composite tape) for the periods
indicated.
Calendar Period High Low
--------------- ---- ---
1996:
1st Quarter 35 5/8 26 3/8
2nd Quarter 37 3/4 33 1/4
3rd Quarter 37 5/8 28 1/8
4th Quarter 45 36 1/4
1995:
1st Quarter 18 14 1/2
2nd Quarter 21 1/4 17 3/4
3rd Quarter 25 3/4 21 1/8
4th Quarter 30 23 3/4
On March 4 1997, the closing sale price of the Common Stock on the NYSE was
$41 3/4. As of March 4, 1997, the approximate number of record holders of Common
Stock was 10,115.
The Company has paid regular quarterly cash dividends since May 1984.
Quarterly dividends for the last two fiscal years were paid as follows:
Calendar Period Dividends Paid per Common Share
--------------- -------------------------------
1996:
1st Quarter $.1125
2nd Quarter $.1125
3rd Quarter $.1125
4th Quarter $.1125
1995:
1st Quarter $.1125
2nd Quarter $.1125
3rd Quarter $.1125
4th Quarter $.1125
The Company plans to continue paying quarterly cash dividends on its Common
Stock. The amount of any such dividend will depend on the Company's earnings,
financial position, capital requirements and other relevant factors.
- 15 -
16
In December 1989, the Board of Directors first authorized the repurchase,
as market and business conditions warranted, of the Company's Common Stock for
cash in open market purchases and privately negotiated transactions. From time
to time thereafter, the Board has authorized additional repurchases. As of March
4, 1997, the Company had expended or had commitments to expend, through the sale
of put warrants (see Note 8 of Notes to Consolidated Financial Statements),
approximately $624 million of the $675 million authorized under its stock
repurchase program, covering an aggregate of 22.2 million shares.
Item 6. Selected Financial Data.
The following table sets forth certain information regarding the Company's
operating results and financial position and is qualified in its entirety by the
consolidated financial statements and notes thereto which appear elsewhere
herein:
(All dollar amounts in thousands except per common share data)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Net sales $ 2,217,518 $ 2,081,630 $ 2,162,901 $ 2,204,297 $ 2,194,330
Gross profit 876,435 790,701 755,207 750,916 830,116
Net income 155,665 126,914 82,849* 126,924** 218,824
Working capital 816,425 758,314 719,132 750,001 832,789
Total assets 1,382,750 1,329,243 1,289,662 1,236,338 1,256,308
Stockholders'
equity 1,020,492 988,226 982,984 978,291 997,775
Earnings per
common share 2.15 1.69 1.06* 1.56** 2.61
Book value at
year-end 14.37 13.41 12.77 12.41 12.05
Dividends paid
per common share .45 .45 .45 .44 .39
Weighted average
common shares
outstanding 72,396,130 75,002,861 78,526,724 81,509,120 83,965,342
- ----------
* Includes the after tax effect of a restructuring charge of $18,900 ($30,000
pretax) or $.24 per common share in 1994.
** Includes a credit representing the cumulative effect of a change in the
method of accounting for income taxes of $1,643 or $.02 per common share in
1993.
- 16 -
17
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The following table sets forth items in the Consolidated Statements of Income as
a percent of net sales and the percentage change of those items as compared to
the prior year.
PERCENT OF NET YEAR TO YEAR
SALES PERCENTAGE CHANGE
- ------------------------------------------------------------------------------------------------------------------------------------
FISCAL YEARS 1996 1995 1994 1996 VS. 1995 VS.
1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
NET SALES 100.0% 100.0% 100.0% 6.5% (3.8)%
Cost of goods sold 60.5 62.0 65.1 3.9 (8.3)
----- ----- -----
GROSS PROFIT 39.5 38.0 34.9 10.8 4.7
Selling, general and
administrative expenses 28.9 28.8 27.9 6.9 (.7)
Restructuring charge -- -- 1.4 -- --
----- ----- -----
OPERATING INCOME 10.6 9.2 5.6 23.4 57.5
Investment and other
income-net .6 .6 .5 11.4 20.8
----- ----- -----
INCOME BEFORE PROVISION
FOR INCOME TAXES 11.2 9.8 6.1 22.6 54.5
Provision for income
taxes 4.2 3.7 2.3 22.6 56.8
----- ----- -----
NET INCOME 7.0% 6.1% 3.8% 22.7% 53.2%
===== ===== =====
- 17 -
18
RESULTS OF OPERATIONS
CONTINUED
The Company's net sales for 1996 (52 weeks) were $2.22 billion, compared to
$2.08 billion in 1995 (52 weeks) and $2.16 billion in 1994 (53 weeks). The 1996
results reflected increased net sales of better women's sportswear and DANA
BUCHMAN product, as well as increased net sales of the outlet operations,
partially offset by lower net sales of dresses. New apparel product lines
introduced during 1996 (LIZ & CO. petites; ELISABETH-LIZ & CO.; and dana b. &
karen, the casual career offering of the DANA BUCHMAN Division) accounted for
$48 million of net sales. The Cosmetics Division's 1996 net sales increased $13
million, reflecting $40 million of sales of the new CURVE for Women and CURVE
for Men fragrances, initially shipped in July 1996, partially offset by a
decline in net sales of the Company's other fragrance products. The Liz
Claiborne shoe business was licensed to a third party as of June 1995; this
business accounted for $39 million of 1995 net sales prior to the license. The
Company's watch business was licensed to a third party as of June 1996; this
business accounted for $1 million of 1996 net sales prior to the license,
compared to $8 million in 1995 (see Note 3 of Notes to Consolidated Financial
Statements). Approximately 18% of the 1996 net sales increase was attributable
to the change in trade terms (from 10% to 8%, the prevailing standard in the
industry), effective as of January 1, 1996. As a result of this change, the net
sales of the Company's misses and petite sportswear (including LIZ & CO.),
Dress, and ELISABETH Divisions increased by approximately 2% over the results
they would have reported without the change, with corresponding dollar increases
in gross margin and selling, general and administrative ("SG&A") expenses.
The Company has realigned its better women's sportswear product lines into
the Casual Unit (consisting of misses LIZSPORT, LIZWEAR and LIZ & CO. product);
the COLLECTION Division (consisting of misses COLLECTION and STUDIO (casual
careerwear) product); and the Special Sizes Unit (consisting of ELISABETH
sportswear (including ELISABETH-LIZ & CO.) and dresses, and petite LIZSPORT,
COLLECTION, LIZWEAR, LIZ & CO. and STUDIO product). The Company's new Special
Markets Unit includes the operations of its former Moderate Division, with
responsibility for sales of women's sportswear products under the repositioned
RUSS, VILLAGER and FIRST ISSUE brands, as well as under the new "upper-moderate"
EMMA JAMES brand.
The 1996 net sales result reflected an 11% increase in the sales of the
Company's better women's sportswear lines, comprised of: a 9% increase in the
sales of the Casual Unit, to $608 million, due in equal parts to higher unit
volume and higher average unit selling prices; a 19% increase in the sales of
the Special Sizes Unit, to $410 million, due to a significant increase in unit
volume, with 31% of the increase due to the new LIZ & CO. petite line and, to a
lesser extent, the additional product required by the Company's new ELISABETH
stores (61 at 1996 year end as compared with 51 at 1995 year end),
notwithstanding lower net sales of petite COLLECTION product; and a 1% increase
in the net sales of the COLLECTION Division, to $210 million, reflecting the
inclusion of the expanded STUDIO line, offset by a 12% decrease in the sales of
misses COLLECTION product due to weakness in demand. Sales of DANA BUCHMAN
product increased 39%, to $189 million, due to higher unit volume, with
approximately 45% of the increase relating to the introduction of the dana b. &
karen line. Net sales of the outlet operations increased 25%, to $194 million,
reflecting improved store productivity and new store openings (82 at 1996 year
end as compared with 76 at 1995 year end). Net sales of menswear increased 8%,
to $122 million, due to higher unit volume. The 1996 net sales increase was
moderated by a 14% decrease in dress sales, to $105 million, due in equal parts
to lower unit volume and lower average unit selling prices, reflecting weakness
in demand. In late 1994, the Company announced plans to phase out the First
Issue retail store business and to close or convert its 77 First Issue locations
to other Company-operated retail formats. As of March 1, 1996, the Company
completed the phase out; the First Issue stores accounted for $3 million of 1996
net sales (two months), compared to $53 million in 1995 (twelve months) (see
Note 2 of Notes to Consolidated Financial Statements).
The 1995 net sales result reflected a 9% decline in the sales of the
Company's better women's sportswear lines, comprised of: a 13% decrease in the
net sales of the COLLECTION Division, to $207 million; a 9% decrease in the net
- 18 -
19
RESULTS OF OPERATIONS
CONTINUED
sales of the Casual Unit, to $556 million; and a 6% decrease in the net sales of
the Special Sizes Unit, to $345 million. These decreases reflected planned unit
volume declines and slightly lower average unit selling prices due to product
mix, offset by higher unit volume of LIZ & CO. product. The decline in the net
sales of the Special Sizes Unit reflected a 4% decrease in sales of ELISABETH
product, to $131 million, due to lower off-price sales volume, offset by
increased sales to the Company's new ELISABETH stores. Net sales of the Special
Markets Unit declined 27%, to $81 million, reflecting a planned unit volume
decrease. Also contributing to the net sales result was a 6% decrease in the net
sales of accessories, to $175 million, due primarily to lower average unit
selling prices, reflecting lower initial selling prices and changes in product
mix. The Shoe Division accounted for $39 million of 1995 net sales (six months),
compared to $63 million in 1994 (twelve months). These declines were offset in
part by a 30% sales increase within the Company's LIZ CLAIBORNE, ELISABETH, DANA
BUCHMAN, CLAIBORNE, FIRST ISSUE and international retail stores and leased
departments (collectively, the "Retail Operations"), to $195 million, reflecting
higher average numbers of domestic retail stores and European retail leased
departments. Net sales gains were also posted by DANA BUCHMAN (21%, to $136
million), primarily reflecting higher unit volume as well as slightly higher
average unit selling prices, and menswear (11%, to $113 million), due to higher
unit volume. Net sales of the outlet operations increased 11%, to $155 million,
principally reflecting the opening of new stores (76 at 1995 year end compared
with 70 at 1994 year end). The First Issue retail stores accounted for $53
million of 1995 net sales, compared to $64 million in 1994.
Gross profit margins were 39.5% in 1996, compared to 38.0% in 1995 and
34.9% in 1994. Gross profit dollars increased $86 million, or 10.8%, in 1996 and
$35 million, or 4.7%, in 1995. Approximately one-half of the 1996 improvement in
gross margin percentage was due to the change in trade terms referred to above.
The 1996 gross profit results also reflected higher initial gross margins due in
part to an improved air/vessel ratio. Overall margins were favorably impacted by
significant margin improvements in the outlet operations, as well as higher
margins within, and a higher proportion of net sales represented by, the DANA
BUCHMAN Division and the Cosmetics Division (both of which are higher margin
businesses). The improvements in gross margin percentage were moderated by lower
margins realized on dress sales, lower margins within the Special Markets Unit
(principally reflecting the repositioning of the brands), and lower margins
within the Company's domestic retail store operations due to higher store
markdowns.
The margin improvement in 1995 generally reflected lower markdowns
resulting from lower excess inventory positions, an increase in average unit
selling prices realized on close-out merchandise, and slightly lower average
unit costs across substantially all of the wholesale apparel divisions.
Significant margin gains were realized by the ELISABETH and LIZ & CO. Divisions,
as well as the outlet operations. Although women's sportswear margins improved,
gross profit dollars declined somewhat, reflecting the lower sales base. Special
Markets' margins remained at depressed levels notwithstanding significant
improvement over 1994. Overall margins were favorably impacted by the larger
percentage of sales represented by the Retail Operations and the DANA BUCHMAN
Division (which are higher margin businesses) and the lower percentage of sales
represented by the Special Markets Unit (which is a lower margin business).
Margins within the Retail Operations declined slightly from 1994 levels, and
DANA BUCHMAN margins improved. Margin improvements were partially offset by
margin declines within the menswear and jewelry businesses due to a lower
proportion of regular price sales, reflecting weakness in demand.
Legislation which would further restrict the importation and/or increase
the cost of textiles and apparel produced abroad has periodically been
introduced in Congress. Although it is unclear whether any new legislation will
be enacted
- 19 -
20
RESULTS OF OPERATIONS
CONTINUED
into law, it appears likely that various new legislative or executive
initiatives will be proposed. These initiatives may include a reevaluation of
the trading status of certain countries, including Most Favored Nation ("MFN")
treatment for the People's Republic of China ("PRC") and/or retaliatory duties,
quotas or other trade sanctions, which, if enacted, would increase the cost of
products purchased from suppliers in such countries. The PRC's MFN treatment was
renewed in July 1996 for an additional year. In light of the very substantial
portion of the Company's products which are manufactured by foreign suppliers,
the enactment of new legislation or the administration of current international
trade regulations, or executive action affecting international textile
agreements, could adversely affect the Company's operations.
SG&A expenses increased $41 million, or 6.9%, in 1996 over 1995, compared
with a decrease of $4 million, or 0.7%, in 1995 over 1994. These expenses
represented 28.9% of net sales in 1996, compared to 28.8% in 1995 and 27.9% in
1994. The 1996 dollar increase principally reflected the continued expansion of
the Company's brand enhancing activities (including a national advertising
campaign and in-store service and presentation program), the costs of which are
being funded through the redeployment of funds generated as a result of the
change in trade terms, and the introduction of the new CURVE fragrances.
Additional expenses associated with the expansion of the Company's DANA BUCHMAN
Division and the Company's domestic retail stores and outlet operations, as well
as incremental expenses related to the higher sales volume in certain divisions,
contributed to the SG&A increase. This increase was partially offset by lower
expense levels as expense reduction initiatives continued during 1996. The
Company's former shoe and watch businesses together accounted for approximately
$1 million and $10 million of 1996 and 1995 direct expenses, respectively, prior
to the license of such businesses to third parties.
The 1995 SG&A results reflected lower expense levels due to expense
reduction initiatives; however, the percentage decrease in the sales of certain
divisions slightly outpaced their percentage decreases in expense levels. The
1995 results also reflected increases resulting from the continued expansion of
the Company's outlets and Retail Operations, as well as expansion of the DANA
BUCHMAN Division and the expansion of in-store retail shop programs at a number
of divisions. These results reflected $6 million of direct expenses related to
the shoe business in 1995 (six months), compared with $12 million in 1994
(twelve months).
Investment and other income-net increased on a year-to-year basis by $1.5
million in 1996 and $2.2 million in 1995, reflecting in each case an increase in
the Company's investment portfolio of cash equivalents and marketable
securities, notwithstanding the Company's ongoing stock repurchase program. The
1996 increase was moderated by various other income and expense items, and the
1995 increase also reflected slightly higher rates of return.
As a result of the factors described above, the Company's income before
provision for income taxes increased on a year-to-year basis 23% in 1996,
compared with 55% in 1995. These results included continuing operating losses
within the Special Markets Unit and (viewed on a stand alone basis) the
Company's Retail Operations. The 1995 improvement reflected the absence of a $30
million charge provided against the 1994 results to cover estimated costs
associated with the restructuring of the Retail Operations and the Special
Markets Unit, as well as the Company's efforts to streamline operating and
administrative functions (see Note 2 of Notes to Consolidated Financial
Statements). The provisions for income taxes reflected the changes in pre-tax
income and an increase in the effective tax rate in 1995.
The earnings per common share computations reflected a lower number of
average outstanding shares on a period-to-period basis as a result of the
Company's ongoing stock repurchase program.
- 20 -
21
RESULTS OF OPERATIONS
CONTINUED
Net income expressed as a percentage of net sales was 7.0% in 1996,
compared with 6.1% in 1995 and 3.8% in 1994. The 1996 increase was principally
due to higher operating margins, offset in part by a higher provision for income
taxes as a percentage of sales. The 1994 results reflected the restructuring
charge discussed above, which reduced 1994 after-tax net income by $19 million.
The retail environment remains intensely competitive and highly
promotional, and the tone of business continues to be challenging. The Company
is continuing the process of implementing a comprehensive business
transformation effort which includes process reengineering and profit
improvement programs, and is progressing towards a number of previously
announced three-year goals for this initiative. Over the past few years, the
Company has licensed a number of product categories to third parties; management
is exploring entry into a licensing arrangement covering its cosmetics business.
Management believes that ongoing product improvements as well as the Company's
stepped up marketing activities will continue to enhance customer and consumer
response to its product offerings, resulting in continued growth in sales and
earnings in 1997, although any such improvement will be moderated by continuing
losses within certain divisions.
Financial Position, Capital Resources and Liquidity
Net cash provided by operating activities was $238 million in 1996,
compared to $222 million in 1995 and $173 million in 1994. The year-to-year
increase in 1996 primarily reflects a larger decrease in inventories ($44
million in 1996 compared to $12 million in 1995), higher net income and a larger
increase in accounts payable ($25 million in 1996 compared to $0.2 million in
1995), offset by an increase in accounts receivable of $32 million in 1996
compared to a decrease of $34 million in 1995.
The 1995 increase primarily reflected higher net income, a larger decrease
in accounts receivable ($34 million in 1995 compared to $15 million in 1994), a
smaller increase in deferred income tax benefits ($0.4 million in 1995 compared
to $15 million in 1994) and a $5 million increase in income taxes payable
compared to an $8 million decrease in 1994, offset by a decrease in accrued
expenses of $1 million compared to an increase in 1994 (including accruals
associated with the restructuring charge) of $59 million.
Net cash provided by investing activities was $156 million in 1996,
compared to net cash used in investing activities of $134 million in 1995 and
$131 million in 1994. The fluctuations in net cash provided by and used in
investing activities are related to the net disposals of investments of $176
million in 1996, compared to net purchases of $118 million in 1995 and $60
million in 1994, and the lower level of capital expenditures on a year-to-year
basis in both 1996 and 1995. The 1996 to 1995 comparisons were also affected by
the cash proceeds from the sale of certain assets from the Company's former shoe
business in 1995.
Net cash used in financing activities was $123 million in 1996, compared to
$104 million in 1995 and $75 million in 1994. The changes in net cash used in
financing activities principally reflects the amount expended in the Company's
stock repurchase program, partially offset in 1996 by the proceeds from exercise
of stock options. As of March 4, 1997, the Company had expended or committed to
expend, through the sale of put warrants (see Note 8 of Notes to Consolidated
Financial Statements), approximately $624 million of the $675 million authorized
under its stock repurchase program, covering an aggregate of 22.2 million
shares.
- 21 -
22
RESULTS OF OPERATIONS
CONTINUED
The decrease in 1996 year end inventory levels over the prior year end
reflected later receipt of spring merchandise across substantially all of the
Company's wholesale apparel divisions and a reduction of ongoing inventory
levels within the outlet operations. Lower average inventory levels had a
positive impact on the Company's 1996 inventory turnover rate.
The Company's anticipated capital expenditures for 1997 currently
approximate $70 million. These expenditures consist primarily of the expansion
of the Company's distribution facilities, including certain building and
equipment expenses and renovation of New York showrooms and offices. The Company
has recently completed the planning stages of a significant information systems
upgrade project, which will involve substantial changes to the Company's present
hardware and software systems which the Company expects to provide certain
competitive benefits and allow the information systems to be "Year 2000"
compliant. Management currently expects that full implementation of this project
will involve a commitment of approximately $45-$60 million over the next three
years; approximately $17 million of such amount is included in the Company's $70
million anticipated capital expenditures for 1997 referred to above. Capital
expenditures will be financed through available capital and future earnings. Any
increased working capital needs will be met by current funds. Bank lines of
credit, which are available to finance import transactions, were $270 million at
year end 1996 and 1995. The Company expects to be able to adjust these lines as
required.
Statements contained herein that relate to the Company's future
performance, including, without limitation, statements with respect to the
Company's anticipated results for any portion of fiscal 1997, shall be deemed
forward-looking statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, as a number of factors affecting the
Company's business and operations could cause actual results to differ
materially from those contemplated by the forward-looking statements. Those
factors include the overall level of consumer spending and the performance of
the Company's products within the prevailing retail environment, as well as such
other factors as are set forth in the Company's 1996 Annual Report on Form 10-K,
including, without limitation, those set forth under the heading "Business -
Competition; Certain Risks". The Company has introduced a new upper-moderate
label and has repositioned its moderate brands under its recently designated
Special Markets Unit. This business is accompanied by certain risks, including
risks associated with generating acceptance by new customers (including mass
merchants) of new product lines and the general risks inherent with any such
expansion. The Company's efforts to date within the moderate market (which is
generally a lower margin business) have not been profitable.
Inflation
The rate of inflation over the past few years has not had a significant
impact on the Company's sales and profitability.
Item 8. Financial Statements and Supplementary Data.
Information called for by this Item 8 is included following the "Index to
Consolidated Financial Statement Schedules" appearing at the end of this Annual
Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
- 22-
23
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
Information with respect to Executive Officers of the Company is set forth
in Part I of this Annual Report on Form 10-K.
Information with respect to Directors of the Company which is called for by
this Item 10 is incorporated by reference to the information set forth under the
heading "Election of Directors" in the Company's Proxy Statement relating to its
1997 Annual Meeting of Stockholders to be filed pursuant to Regulation aG (the
"Company's 1997 Proxy Statement").
Item 11. Executive Compensation.
Information called for by this Item 11 is incorporated by reference to the
information set forth under the heading "Executive Compensation" in the
Company's 1997 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information called for by this Item 12 is incorporated by reference to the
information set forth under the headings "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management" in the Company's 1997
Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Information called for by this Item 13 is incorporated by reference to the
information set forth under the headings "Election of Directors" and "Executive
Compensation-Employment Arrangements" in the Company's 1997 Proxy Statement.
- 23 -
24
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
PAGE REFERENCE
1996 FORM 10-K
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets of December 28, 1996
and December 30, 1995 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 28, 1996 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 28, 1996 F-5 to F-6
Consolidated Statements of Cash Flows for the
Three Fiscal Years Ended December 28, 1996 F-7
Notes to Consolidated Financial Statements F-8 to F-19
UNAUDITED QUARTERLY RESULTS F-20
NOTE: Schedules other than those referred to above and parent company condensed
financial statements have been omitted as inapplicable or not required
under the instructions contained in Regulation S-X or the information is
included elsewhere in the financial statements or the notes thereto.
- 24 -
25
3. Exhibits.
Exhibit
No. Description
- ------- -----------
3(a) - Restated Certificate of Incorporation of Registrant (incorporated
herein by reference from Exhibit 3(a) to Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 26, 1993).
3(b) - By-laws of Registrant, as amended (incorporated herein by reference
from Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 26, 1992 [the "1992 Annual Report"]).
4(a) - Specimen certificate for Registrant's Common Stock, par value $1.00
per share (incorporated herein by reference from Exhibit 4(a) to the
1992 Annual Report).
4(b) - Rights Agreement, dated December 7, 1988, as amended, between
Registrant and First Chicago Trust Company of New York, as Rights
Agent (successor to The Chase Manhattan Bank, N.A.) (incorporated
herein by reference from Exhibit 4(d) to Registrant's Report on Form
8-A dated January 29, 1991).
4(b)(i) - Amendment to Rights Agreement, dated March 1990, between Registrant
and First Chicago Trust Company of New York, as Rights Agent
(successor to The Chase Manhattan Bank, N.A.) (incorporated herein
by reference from Exhibit 4(d)(i) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 30, 1989 [the "1989
Annual Report"]).
4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992, between
Registrant and First Chicago Trust Company of New York, as Rights
Agent (incorporated herein by reference from Exhibit 4(b)(ii) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 28, 1991 [the "1991 Annual Report"]).
10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder, which
are incorporated herein by this reference.
10(b)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated herein by
reference from Exhibit 10(hh) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1983 [the "1983 Annual
Report"]).
10(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein by
reference from Exhibit 10(d)(i) to the 1988 Annual Report).
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 25 -
26
Exhibit
No. Description
- ------- -----------
10(c)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock Option
Plan (the "1984 Option Plan") (incorporated herein by reference from
Exhibit 10(nn) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 1984).
10(c)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan
(incorporated herein by reference from Exhibit 10(e)(i) to the 1992
Annual Report).
10(d)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended and
restated (incorporated herein by reference from Exhibit 10(f) to the
1989 Annual Report).
10(d)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz Claiborne,
Inc. and IDS Trust Company (incorporated herein by reference from
Exhibit 10(b) to Registrant's Quarterly Report on Form 10-Q for the
period ended July 2, 1994).
10(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated herein by
reference from Exhibit 10(g) to the 1992 Annual Report).
10(e)(i)+ - Amendment Nos. 3 and 4 to the Savings Plan (incorporated herein by
reference from Exhibit 10(g) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 26, 1993 [the "1993 Annual
Report"]).
10(e)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report on
Form 10-Q for the period ended July 2, 1994).
10(e)(iii)+* - Amendment No. 6 to the Savings Plan.
10(e)(iv)+* - Amendment No. 7 to the Savings Plan.
10(f)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement Plan
(the "Profit-Sharing Plan") (incorporated herein by reference from
Exhibit 10(h) to the 1992 Annual Report).
10(g) - Trust Agreement related to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(jj) to the 1983 Annual Report).
10(g)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(i)(i) to the 1993 Annual
Report).
10(g)(ii)+ - Amendment No. 3 to the Profit-Sharing Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report on
Form 10-Q for the period ended October 1, 1994).
10(g)(iii)+ - Amendment No. 4 to the Profit-Sharing Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report on
Form 10-Q for the period ended July 1, 1995).
10(g)(iv)+* - Amendment No. 5 to the Profit-Sharing Plan.
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 26 -
27
Exhibit
No. Description
- ------- -----------
10(h) - Collective Bargaining Agreement, dated June 1, 1994, between New
York Skirt and Sportswear Association, Inc. (of which Registrant is
a member) and Amalgamated Ladies' Garment Cutters' Union, Local 10,
I.L.G.W.U. and Blouse, Skirt, Sportswear, Children's Wear & Allied
Workers' Union, Local 23-25, I.L.G.W.U. (incorporated herein by
reference from Exhibit 10(h) to Registrant's Annual Report on Form
10-K for Fiscal Year ended December 28, 1995 (the "1995 Annual
Report").
10(i)+ - Executive Liability and Indemnification Policy No. 81035379F, with
Chubb Group of Insurance Companies (the "Insurance Policy")
(incorporated herein by reference from Exhibit 10(l) to Registrant's
Annual Report on Form 10-K for Fiscal Year ended December 31, 1994
(the "1994 Annual Report").
10(i)(i)+* - Summary of Extension of the Insurance Policy.
10(j)* - Excess Coverage Directors and Officers Liability Insurance Policy
No. 483-73-56, with National Union Fire Insurance Company of
Pittsburgh, PA.
10(k)+* - Description of 1996 Salaried Employee Incentive Bonus Plan.
10(l) - Lease, dated as of January 1, 1990 for premises located at 1441
Broadway, New York, New York between Registrant and
Lechar Realty Corp. (incorporated herein by reference
from Exhibit 10(n) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 29,
1990).
10(m)+ - Liz Claiborne, Inc. Amended and Restated Outside Directors' 1991
Stock Ownership Plan (the "Outside Directors' 1991 Plan")
(incorporated herein by reference from Exhibit 10(m) to the 1995
Annual Report).
10(m)(i)+* - Form of Option Agreement under the Outside Directors' 1991 Plan.
10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992 Plan")
(incorporated herein by reference from Exhibit 10(p) to the 1991
Annual Report).
10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by reference
from Exhibit 10(p)(i) to the 1993 Annual Report).
10(o)+ - Form of Option Agreement under the 1992 Plan for premium-priced
options (incorporated herein by reference from Exhibit 10(q) to the
1992 Annual Report).
10(p)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(q)+* - Form of Option Grant Certificate under the 1992 Plan.
10(r)+ - Form of Restricted Career Share Agreement under the 1992 Plan
(incorporated herein by reference from Exhibit 10(a) to Registrant's
Quarterly Report of Form 10-Q for the period ended September 30,
1995).
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 27 -
28
Exhibit
No. Description
- ------- -----------
10(s)+ - Description of unfunded deferred compensation arrangement for Jerome
A. Chazen (incorporated herein by reference from Exhibit 10(s) to
the 1992 Annual Report).
10(t)+* - Description of Supplemental Life Insurance Plans.
10(u)+ - Description of unfunded death/disability benefits for certain
executives (incorporated herein by reference from Exhibit 10(u) to
the 1992 Annual Report).
10(v)+ - Form of the Liz Claiborne ss.162(m) Cash Bonus Plan
(incorporated herein by reference from Exhibit 10(v) to the
1994 Annual Report).
10(w)+* - Liz Claiborne, Inc. Supplemental Executive Retirement Plan (As amended and
restated effective as of January 1, 1997).
10(x)+* - The Liz Claiborne, Inc. Bonus Deferral Plan.
10(y)+ - Employment Agreement dated as of May 9, 1994, between Registrant and
Paul R. Charron (the "Employment Agreement") (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report on
Form 10-Q for the period ended April 2, 1994).
10(y)(i)+ - Amendment to the Employment Agreement, dated as of November 20,
1995, between Registrant and Paul R. Charron (incorporated herein by
reference from Exhibit 10(x)(i) to the 1995 Annual Report).
10(y)(ii)+* - Amendment to the Employment Agreement, dated as of September 19,
1996, between Registrant and Paul R. Charron (including the Liz
Claiborne Retirement Income Accumulation Plan for the benefit of
Mr. Charron).
10(z)+* - Employment Agreement dated as of September 26, 1996 between
Registrant and Denise V. Seegal.
10(aa)* - Agreements dated as of May 15, 1996 and May 17, 1996, between
Registrant and Jerome A. Chazen.
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
99* - Undertakings.
(b) Reports on Form 8-K.
Not applicable.
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
- 28 -
29
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
on March 27, 1997.
LIZ CLAIBORNE, INC.
By /s/ Samuel M. Miller
-------------------------------------------
Samuel M. Miller,
Senior Vice President-Finance,
Chief Financial Officer/
Principal Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the registrant and in the capacities indicated, on March 27, 1997.
Signature Title
--------- -----
/s/Paul R. Charron Chairman of the Board, Chief Executive Officer
- ---------------------------- and Director/Principal Executive Officer
Paul R. Charron
/s/Denise V. Seegal
- ----------------------------
Denise V. Seegal President
/s/Lee Abraham
- ----------------------------
Lee Abraham Director
/s/Eileen H. Bedell
- ----------------------------
Eileen H. Bedell Director
/s/Jerome A. Chazen
- ----------------------------
Jerome A. Chazen Director
/s/Ann M. Fudge
- ----------------------------
Ann M. Fudge Director
/s/J. James Gordon
- ----------------------------
J. James Gordon Director
/s/Kenneth P. Kopelman
- ----------------------------
Kenneth P. Kopelman Director
/s/Kay Koplovitz
- ----------------------------
Kay Koplovitz Director
/S/Paul E. Tierney, Jr.
- ----------------------------
Paul E. Tierney, Jr. Director
- 29 -
30
INDEX
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Page
Number
------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
December 28, 1996 and December 30, 1995 F-3
Consolidated Statements of Income for the
Three Fiscal Years Ended December 28, 1996 F-4
Consolidated Statements of Stockholders' Equity
for the Three Fiscal Years Ended December 28, 1996 F-5 to F-6
Consolidated Statements of Cash Flows
for the Three Fiscal Years Ended December 28, 1996 F-7
Notes to Consolidated Financial Statements F-8 to F-19
UNAUDITED QUARTERLY RESULTS F-20
NOTE: Schedules other than those referred to above and parent company condensed
financial statements have been omitted as inapplicable or not required
under the instructions contained in Regulation S-X or the information is
included elsewhere in the financial statements or the notes thereto.
F-1
31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and Stockholders of Liz Claiborne, Inc.:
We have audited the accompanying consolidated balance sheets of Liz Claiborne,
Inc. (a Delaware corporation) and subsidiaries as of December 28, 1996 and
December 30, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended December 28, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Liz Claiborne, Inc. and
subsidiaries as of December 28, 1996 and December 30, 1995, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 28, 1996 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
New York, New York
February 14, 1997
F-2
32
CONSOLIDATED BALANCE SHEETS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
ALL AMOUNTS IN THOUSANDS EXCEPT SHARE DATA DECEMBER 28, 1996 DECEMBER 30, 1995
----------------- -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 322,881 $ 54,722
Marketable securities 205,855 383,128
Accounts receivable - trade 158,168 126,053
Inventories 349,427 393,363
Deferred income tax benefits 31,555 30,235
Other current assets 74,212 77,710
----------- -----------
Total current assets 1,142,098 1,065,211
----------- -----------
PROPERTY AND EQUIPMENT - NET 223,284 239,467
OTHER ASSETS 17,368 24,565
----------- -----------
$ 1,382,750 $ 1,329,243
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 163,666 $ 138,800
Accrued expenses 151,245 155,449
Income taxes payable 10,762 12,648
----------- -----------
Total current liabilities 325,673 306,897
----------- -----------
LONG-TERM DEBT 996 1,115
DEFERRED INCOME TAXES 8,253 7,722
COMMITMENTS AND CONTINGENCIES
PUT WARRANTS 27,336 25,283
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized shares-
50,000,000, issued shares-none -- --
Common stock, $1 par value, authorized shares -
250,000,000, issued shares - 88,218,617 88,219 88,219
Capital in excess of par value 38,577 35,075
Retained earnings 1,382,247 1,255,325
Cumulative translation adjustment (4,311) (1,256)
----------- -----------
1,504,732 1,377,363
Common stock in treasury, at cost - 17,212,585
shares in 1996 and 14,526,922 shares in 1995 (484,240) (389,137)
----------- -----------
Total stockholders' equity 1,020,492 988,226
----------- -----------
$ 1,382,750 $ 1,329,243
=========== ===========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
33
CONSOLIDATED STATEMENTS OF INCOME
LIZ CLAIBORNE, INC. AND SUBSIDIARIES FISCAL YEARS ENDED
------------------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER COMMON SHARE DATA DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
NET SALES $2,217,518 $2,081,630 $2,162,901
Cost of goods sold 1,341,083 1,290,929 1,407,694
---------- ---------- ----------
GROSS PROFIT 876,435 790,701 755,207
Selling, general and administrative expenses 641,720 600,471 604,421
Restructuring charge -- -- 30,000
---------- ---------- ----------
OPERATING INCOME 234,715 190,230 120,786
Investment and other income - net 14,350 12,884 10,663
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 249,065 203,114 131,449
Provision for income taxes 93,400 76,200 48,600
---------- ---------- ----------
NET INCOME $ 155,665 $ 126,914 $ 82,849
========== ========== ==========
NET INCOME PER COMMON SHARE $ 2.15 $ 1.69 $ 1.06
========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $ .45 $ .45 $ .45
========== ========== ==========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
34
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
Common Stock
--------------------- Capital in Cumulative Common
Number of Excess of Retained Translation Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment Treasury Total
---------- ------- ---------- ---------- ----------- --------- --------
BALANCE, DECEMBER 25, 1993 88,218,617 $88,219 $56,699 $1,123,413 $(1,279) $(288,761) $978,291
Effect of a change in accounting
for available-for-sale securities,
net of tax -- -- -- 2,848 -- -- 2,848
Net income -- -- -- 82,849 -- -- 82,849
Exercise of stock options and
related tax benefits -- -- 15 (134) -- 431 312
Cash dividends paid -- -- -- (35,304) -- -- (35,304)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- (6,787) -- -- (6,787)
Translation adjustment -- -- -- -- (358) -- (358)
Purchase of 1,960,300 shares of
common stock -- -- -- -- -- (39,591) (39,591)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- (2,035) -- 2,759 724
----------- ------- ------- ----------- ------- --------- ---------
BALANCE, DECEMBER 31, 1994 88,218,617 88,219 56,714 1,164,850 (1,637) (325,162) 982,984
Net income -- -- -- 126,914 -- -- 126,914
Exercise of stock options and
related tax benefits -- -- 27 (132) -- 659 554
Cash dividends paid -- -- -- (33,627) -- -- (33,627)
Proceeds from sale of put warrants -- -- 3,617 -- -- -- 3,617
Reclassification of put warrant
obligations -- -- (25,283) -- -- -- (25,283)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- 4,549 -- -- 4,549
Translation adjustment -- -- -- -- 381 -- 381
Purchase of 3,749,900 shares of
common stock -- -- -- -- -- (74,800) (74,800)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- (7,229) -- 10,166 2,937
----------- ------- ------- ----------- ------- --------- ---------
BALANCE, DECEMBER 30, 1995 88,218,617 88,219 35,075 1,255,325 (1,256) (389,137) 988,226
35
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
Common Stock
--------------------- Capital in Cumulative Common
Number of Excess of Retained Translation Stock in
ALL DOLLAR AMOUNTS IN THOUSANDS Shares Amount Par Value Earnings Adjustment Treasury Total
---------- ------- ---------- ---------- ----------- --------- --------
BALANCE, DECEMBER 30, 1995 88,218,617 $88,219 $35,075 $1,255,325 $(1,256) $(389,137) $988,226
Net income -- -- -- 155,665 -- -- 155,665
Exercise of stock options and
related tax benefits -- -- 1,719 1,778 -- 11,070 14,567
Cash dividends paid -- -- -- (32,318) -- -- (32,318)
Proceeds from sale of put warrants -- -- 3,836 -- -- -- 3,836
Reclassification of put warrant
obligations, net -- -- (2,053) -- -- -- (2,053)
Adjustment to unrealized gains
(losses) on available-for-sale
securities, net of tax -- -- -- (991) -- -- (991)
Translation adjustment -- -- -- -- (3,055) -- (3,055)
Purchase of 3,211,462 shares of
common stock -- -- -- -- -- (107,617) (107,617)
Issuance of common stock under
restricted stock and employment
agreements, net -- -- -- 2,788 -- 1,444 4,232
----------- ------- ------- ----------- ------- --------- ---------
BALANCE, DECEMBER 28, 1996 88,218,617 $88,219 $38,577 $1,382,247 $(4,311) $(484,240) $1,020,492
=========== ======= ======= =========== ======= ========= =========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
36
CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEARS ENDED
LIZ CLAIBORNE, INC. AND SUBSIDIARIES -------------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
DECEMBER 28, DECEMBER 30, DECEMBER 31,
ALL DOLLAR AMOUNTS IN THOUSANDS 1996 1995 1994
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 155,665 $ 126,914 $ 82,849
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 42,850 39,043 35,039
Other-net 6,452 7,524 513
Change in current assets and liabilities:
(Increase) decrease in accounts receivable - trade (32,115) 33,713 14,669
Decrease in inventories 43,936 12,362 13,590
(Increase) in deferred income tax benefits (676) (416) (15,169)
Decrease (increase) in other current assets 3,498 (846) (7,809)
Increase (decrease) in accounts payable 24,866 219 (2,545)
(Decrease) increase in accrued expenses (4,204) (1,475) 59,159
(Decrease) increase in income taxes payable (1,886) 4,754 (7,653)
--------- --------- ---------
Net cash provided by operating activities 238,386 221,792 172,643
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment instruments (348,646) (344,626) (181,739)
Disposals of investment instruments 524,323 227,119 121,713
Purchases of property and equipment (23,337) (34,357) (70,594)
Purchase of trademarks -- (2,595) (3,193)
Proceeds from sale of certain shoe division assets -- 17,872 --
Other-net 3,828 2,102 2,935
--------- --------- ---------
Net cash provided by (used in) investing activities 156,168 (134,485) (130,878)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (119) (112) (107)
Proceeds from exercise of common stock options 12,878 537 297
Dividends paid (32,318) (33,627) (35,304)
Purchase of common stock, net of put warrant premiums (103,781) (71,183) (39,591)
--------- --------- ---------
Net cash used in financing activities (123,340) (104,385) (74,705)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (3,055) 381 (361)
--------- --------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS 268,159 (16,697) (33,301)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 54,722 71,419 104,720
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 322,881 $ 54,722 $ 71,419
========= ========= =========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Liz Claiborne, Inc. is primarily engaged in the design and marketing of a broad
range of apparel, accessories and fragrances. The Company's products are sold
principally in the United States. The consolidated financial statements include
the accounts of Liz Claiborne, Inc. and its wholly-owned subsidiaries (the
"Company"). All intercompany balances and transactions have been eliminated in
consolidation. The consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require management to make
estimates and assumptions that affect the reported amounts in the financial
statements and related notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
All highly liquid investments with a remaining maturity of three months or less
at the date of acquisition are classified as cash equivalents.
MARKETABLE SECURITIES
Investments are stated at market in accordance with Statement of Financial
Accounting Standards ("SFAS") No.115, "Accounting for Certain Investments in
Debt and Equity Securities" which was adopted by the Company at the beginning of
the 1994 fiscal year. Gains and losses on investment transactions are recognized
in income based on settlement dates. Unrealized gains and losses are included in
retained earnings until realized. Dividends on equity securities are recorded in
income based on payment dates. Interest is recognized when earned.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out for wholesale
operations and retail method for retail and outlet operations) or market.
PROPERTY AND EQUIPMENT - NET
Property and equipment is stated at cost less accumulated depreciation and
amortization. Buildings and building improvements are depreciated using the
straight-line method over their estimated useful lives of 20 to 39 years.
Machinery and equipment and furniture and fixtures are depreciated using the
straight-line method over their estimated useful lives of five to seven years.
Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful lives of the assets.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of non-U.S. subsidiaries have been translated at year-end
exchange rates. Revenues and expenses have been translated at average rates of
exchange in effect during the year. Resulting translation adjustments have been
recorded as a separate component of stockholders' equity. Gains and losses on
translation of intercompany loans with foreign subsidiaries of a long-term
investment nature are also included in this component of stockholders' equity.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
FOREIGN EXCHANGE FORWARD AND OPTION CONTRACTS
The Company enters into foreign exchange forward and option contracts to hedge
transactions denominated in foreign currencies for periods of less than one year
and to hedge expected payment of intercompany transactions with its non-U.S.
subsidiaries. Gains and losses on contracts which hedge specific foreign
currency denominated commitments are recognized in the period in which the
transaction is completed and are accounted for as part of the underlying
transaction. Transaction gains and losses included in income were not
significant in fiscal 1996, 1995 and 1994. As of December 28, 1996, the Company
had forward contracts maturing through May 1997 to sell 6,000,000 Canadian
dollars and option contracts to sell 5,000,000 Canadian dollars and 1,000,000
British pounds sterling. The aggregate U.S. dollar value of the foreign exchange
contracts is approximately $9,800,000 at year-end 1996, as compared with
approximately $35,000,000 at year-end 1995. Unrealized gains and losses for
outstanding foreign exchange forward and option contracts were not material at
December 28, 1996 and December 30, 1995.
REVENUE RECOGNITION
Revenue within wholesale operations is recognized at the time merchandise is
shipped from the Company's distribution centers. Retail and outlet store
revenues are recognized at the time of sale.
EARNINGS PER COMMON SHARE
Earnings per common share have been computed using the weighted average number
of shares outstanding during each period. The inclusion of shares subject to
unexercised stock options would not have a material dilutive effect.
FISCAL YEAR
In 1994, the Company changed its fiscal year to the Saturday closest to December
31 from the last Saturday in December. This change had no effect on the 1994,
1995 or 1996 year end date. The 1996 and 1995 fiscal years each reflect a
52-week period, while the 1994 fiscal year reflects a 53-week period.
NOTE 2
RESTRUCTURING CHARGE
In December 1994, the Company recorded a $30.0 million restructuring charge. The
amount included $16.8 million related to the phase out of its First Issue
business, $10.2 million for the streamlining of operating and administrative
functions and $3.0 million for the restructuring of its Moderate Division.
Principal items included in the charge were estimated contract termination
costs, severance and related benefits for staff reductions, losses on contracts
and write-off of certain assets. This charge reduced net income by $18.9
million, or $.24 per common share, in the fourth quarter of 1994. Expenditures
charged to the reserve consisted of $12.3 million related to severance costs,
$11.0 million to losses on contracts and write-off of certain assets and $6.7
million to other miscellaneous costs. The process of streamlining operating and
administrative functions is continuing and the costs are currently being charged
through operations. First Issue accounted for $3.2 million of 1996 net sales, as
compared with $53.3 million in 1995 and $63.9 million in 1994, and incurred
operating losses of $.7 million in 1996, $8.9 million in 1995 and $17.3 million
in 1994. The conversion of the Company's First Issue retail stores to other
Company-operated formats was completed during the first quarter of 1996.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 3
LICENSE AGREEMENT
Effective June 30, 1995, the Company entered into an agreement with a third
party to operate under license the shoe business formerly operated by the
Company's Shoe Division. As part of the transaction, the Company received $18.0
million in cash, plus other consideration valued at $4.9 million, in exchange
for inventory and other assets. In 1996, the Company also licensed its watch
business. The Shoe and Watch Divisions had combined net sales of $47.1 million
in 1995 and $62.7 million in 1994. The operating results of the shoe and watch
businesses for each period were not material to the Company's overall operating
results.
NOTE 4
MARKETABLE SECURITIES
The following are summaries of available-for-sale marketable securities and
maturities:
DECEMBER 28, 1996
--------------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value
- ---------------------- ---- ----- ------ ----------
Tax exempt notes and bonds ........................... $ 354,392 $ 357 $ (288) $ 354,461
Commercial paper ..................................... 148,651 -- -- 148,651
U.S. & foreign government securities ................. 12,877 74 (272) 12,679
Collateralized mortgage obligations .................. 7,112 -- (442) 6,670
--------- --------- --------- ---------
523,032 431 (1,002) 522,461
Equity securities .................................... 236 -- (39) 197
--------- --------- --------- ---------
$ 523,268 $ 431 $ (1,041) $ 522,658
========= ========= ========= =========
DECEMBER 30, 1995
--------------------------------------------------------------------
Gross Unrealized
----------------------------- Estimated
(DOLLARS IN THOUSANDS) Cost Gains Losses Fair Value
- ---------------------- ---- ----- ------ ----------
Tax exempt notes and bonds ........................... $ 409,763 $ 1,285 $ (86) $ 410,962
U.S. & foreign government securities ................. 12,124 187 (129) 12,182
Collateralized mortgage obligations .................. 7,118 -- (231) 6,887
--------- --------- --------- ---------
429,005 1,472 (446) 430,031
Equity securities .................................... 1,721 -- -- 1,721
--------- --------- --------- ---------
$ 430,726 $ 1,472 $ (446) $ 431,752
========= ========= ========= =========
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
DECEMBER 28, 1996
--------------------
Estimated
(DOLLARS IN THOUSANDS) Cost Fair Value
- ---------------------- ---- ----------
Due in one year or less ................................ $365,376 $364,931
Due after one year through three years ................. 152,308 152,486
Due after three years .................................. 5,348 5,044
-------- --------
523,032 522,461
Equity securities ...................................... 236 197
-------- --------
$523,268 $522,658
======== ========
These investments include $316,606,000 in 1996 of tax exempt notes and bonds
and commercial paper and $46,903,000 in 1995 of tax exempt notes and bonds which
are classified as cash and cash equivalents and equity securities which are
included in other long-term assets in the consolidated balance sheets.
For the fiscal years 1996, 1995 and 1994, gross realized gains on
available-for-sale securities totaled $1,881,000, $956,000 and $674,000,
respectively, and gross realized losses totaled $491,000, $1,167,000 and
$412,000, respectively. The adjustment to unrealized gains and losses on
available-for-sale securities which was included in retained earnings was a
charge of $991,000 (net of $645,000 in deferred income taxes) and a credit of
$4,549,000 (net of $2,729,000 in deferred income taxes) in fiscal 1996 and 1995,
respectively.
NOTE 5
INVENTORIES
Inventories are summarized as follows:
DECEMBER 28, DECEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------
- --------------------------------------------------------------------------------
Raw materials .......................... $ 28,198 $ 41,972
Work in process ........................ 17,209 17,018
Finished goods ......................... 304,020 334,373
-------- --------
$349,427 $393,363
======== ========
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 6
PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
DECEMBER 28, DECEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1995
- ----------------------
- --------------------------------------------------------------------------------
Land and buildings ................................... $124,125 $124,195
Machinery and equipment .............................. 138,620 137,847
Furniture and fixtures ............................... 55,022 52,848
Leasehold improvements ............................... 126,956 127,422
-------- --------
444,723 442,312
Less-accumulated depreciation and amortization ....... 221,439 202,845
-------- --------
$223,284 $239,467
======== ========
The Company's land and building located in Mount Pocono, Pennsylvania is pledged
as collateral against long-term debt of $996,000.
NOTE 7
INCOME TAXES
The provisions for income taxes are as follows:
FISCAL YEARS ENDED
-------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
DECEMBER 28, DECEMBER 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ----------------------
- --------------------------------------------------------------------------------
Current:
Federal ..................... $ 76,898 $ 57,617 $ 48,117
Foreign ..................... 2,055 3,003 1,962
State and local ............. 14,300 9,300 8,950
-------- -------- --------
93,253 69,920 59,029
Deferred - net ................... 147 6,280 (10,429)
-------- -------- --------
$ 93,400 $ 76,200 $ 48,600
======== ======== ========
Liz Claiborne, Inc. and its U.S. subsidiaries file a consolidated federal income
tax return. Deferred income tax benefits and deferred income taxes represent the
tax effects of revenues, costs and expenses which are recognized for tax
purposes in different periods from those used for financial statement purposes.
The current income tax provisions exclude $1,719,000 in 1996, $27,000 in 1995
and $15,000 in 1994, arising from the exercise of nonqualified stock options.
These amounts have been credited to capital in excess of par value.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The effective income tax rate differs from the statutory federal income tax rate
as follows:
FISCAL YEARS ENDED
-----------------------------------------------
(52 WEEKS) (52 WEEKS) (53 WEEKS)
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Federal tax provision at statutory rate ...................................... 35.0% 35.0% 35.0%
State and local income taxes, net of federal benefit ......................... 3.7 3.0 4.4
Tax-exempt interest income ................................................... (2.7) (3.2) (2.3)
Other-net .................................................................... 1.5 2.7 (0.1)
---- ---- ----
37.5% 37.5% 37.0%
==== ==== ====
The components of net deferred taxes arising from temporary differences as of
December 28, 1996 and December 30, 1995 are as follows:
(DOLLARS IN THOUSANDS) DECEMBER 28, 1996 DECEMBER 30, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSET TAX LIABILITY TAX ASSET TAX LIABILITY
Inventory valuation ......................................... $ 13,301 $ -- $ 14,235 $ --
Unremitted earnings from foreign subsidiaries ............... -- 14,342 -- 13,481
Restructuring liability ..................................... -- -- 4,988 --
Accounts receivable valuation ............................... 5,805 -- 5,486 --
Unrealized investment losses/(gains) ........................ 229 -- (384) --
Depreciation ................................................ -- (5,933) -- (7,430)
Other-net ................................................... 12,220 (156) 5,910 1,671
-------- -------- -------- --------
$ 31,555 $ 8,253 $ 30,235 $ 7,722
======== ======== ======== ========
Management believes that the deferred tax benefits will be fully realized
through future taxable income and reversals of deferred tax liabilities.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 8
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
The Company leases office, showroom, warehouse/distribution and retail space,
computers and other equipment under various noncancellable operating lease
agreements which expire through December 2013. Rental expense for 1996, 1995 and
1994 was approximately $74,685,000, $74,902,000 and $67,208,000, respectively.
At December 28, 1996, the minimum aggregate rental commitments are as follows:
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
FISCAL YEAR OPERATING LEASES FISCAL YEAR OPERATING LEASES
- ------------------------------------------------------------------------------------------------------------------------------------
1997..................................................... $52,365 2000.............................................. $ 43,884
1998..................................................... 49,303 2001 ............................................. 43,200
1999..................................................... 45,967 Thereafter........................................ 107,646
Certain rental commitments have renewal options extending through the year 2029.
Some of these renewals are subject to adjustments in future periods. Many of the
leases call for additional charges, some of which are based upon various
escalations, and, in the case of outlet and retail leases, the gross sales of
the individual stores above base levels.
At December 28, 1996, the Company had entered into commitments for the purchase
of raw materials and for the production of finished goods totaling approximately
$625,727,000.
In 1996, in connection with its stock repurchase program, the Company sold put
warrants on 1.25 million shares of common stock in privately negotiated
transactions based on the then-current market price of the common stock. The
warrants give the holders the right at maturity to require the Company to
repurchase shares of its common stock at specified prices. In 1996, warrants on
1.5 million shares of common stock expired unexercised or were terminated.
Warrants on an additional 750,000 shares remained outstanding at December 28,
1996; if exercised, these warrants will require the Company to purchase up to
750,000 shares of its common stock at various dates in 1997. In 1995, the
Company sold put warrants on 2.0 million shares of common stock. As of December
30, 1995, warrants on 1.0 million shares of common stock had expired unexercised
and warrants on an additional 1.0 million shares remained outstanding, and
expired at various dates in 1996. The proceeds from the sale of put warrants of
$3.8 million in 1996 and $3.6 million in 1995 have been recorded in capital in
excess of par value. The Company's potential obligations of $27.3 million in
1996 and $25.3 million in 1995 to buy back 750,000 and 1.0 million shares,
respectively, of common stock have been charged to capital in excess of par
value and reflected as put warrants on the consolidated balance sheets.
In the normal course of business, the Company extends credit, on open account,
to its retail store customers, after a credit analysis based on a number of
financial and other criteria. In the past, a number of corporate groups which
include certain of the Company's largest department store customers have been
involved in highly leveraged financial transactions and certain of these
customers have filed for protection under Chapter 11 of the Federal Bankruptcy
Code. Subsequently, certain customers have emerged from protection under Chapter
11. In 1996 and 1995, three corporate groups of department store customers
accounted for 18%, 17% and 11%, respectively, of net sales. In 1994, two
corporate groups of department store customers accounted for 17% and 11%,
respectively, of net sales. The Company does not believe that this concentration
of sales and credit risk represents a material risk of loss with respect to its
financial position as of December 28, 1996.
The Company is a party to several pending legal proceedings and claims. Although
the outcome of such actions cannot be determined with certainty, management is
of the opinion that the final outcome should not have a material adverse effect
on the Company's results of operations or financial position.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 9
LINES OF CREDIT
As of December 28, 1996, the Company had bank lines of credit aggregating
$270,000,000 which were available to cover letters of credit issued by the
banks.
At December 28, 1996 and December 30, 1995, the Company had outstanding letters
of credit of $195,567,000 and $210,145,000, respectively.
NOTE 10
STOCK PLANS
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related Interpretations in accounting for its stock-based
compensation plans, which are described below. Accordingly, no compensation cost
has been recognized for its fixed stock option grants. Had compensation costs
for the Company's stock option grants been determined based on the fair value at
the grant dates for awards under these plans in accordance with SFAS No. 123
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share would have been reduced to the pro forma amounts as follows:
(Dollars in thousands except per common share data) DECEMBER 28, DECEMBER 30,
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net income:
As reported ...................................................... $ 155,665 $ 126,914
Pro forma ........................................................ $ 153,918 $ 125,960
Earnings per share:
As reported ...................................................... $ 2.15 $ 1.69
Pro forma ........................................................ $ 2.13 $ 1.68
For this purpose, the fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in 1996 and 1995, respectively:
dividend yield of 1% for both years, expected volatility of 34% and 35%, risk
free interest rates of 5.4% and 7.8% and expected lives of four years.
In February 1984 and March 1992, the Company adopted plans under which
nonqualified options to acquire shares of common stock may be granted to
officers, other key employees and directors selected by the plans'
administrative committee ("the committee"). Payment by option holders upon
exercise of an option may be made in cash or, with the consent of the committee,
by delivering previously acquired shares of Company common stock. Stock
appreciation rights may be granted in connection with all or any part of any
option granted under the plans, and may also be granted without a grant of a
stock option. The grantee of a stock appreciation right has the right, with the
consent of the committee, to receive either in cash or in shares of common
stock, an amount equal to the appreciation in the fair market value of the
covered shares from the date of grant to the date of exercise. Options and
rights are exercisable over a period of time designated by the committee (but
not prior to one year from the date of grant) and are subject to such other
terms and conditions as the committee determines. Vesting schedules will be
accelerated upon merger of the Company or the happening of certain other events.
Options and rights may not be transferred during the lifetime of a holder.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
Awards under the 1992 plan may also be made in the form of incentive stock
options, dividend equivalent rights, restricted stock, unrestricted stock and
performance shares. To date, no stock appreciation rights, incentive stock
options, dividend equivalent rights or performance shares have been granted
under the plan. Exercise prices for awards under the plan are determined by the
committee; to date, all stock options have been granted at an exercise price not
less than the quoted market value of the underlying shares on the date of grant.
The 1992 plan provides initially for the issuance of up to 2,500,000 shares of
common stock with respect to options, stock appreciation rights and other awards
granted under the plan, and provides that the Board of Directors may increase
such number by an amount equal to 1% of the common stock outstanding as of
January 1, 1994 and each January 1st thereafter. At December 28, 1996, there
were available for future grant 1,968,666 shares under the 1992 plan. The 1992
plan expires in 2002. The 1984 plan has expired; awards made thereunder prior to
its termination remain in effect in accordance with their terms.
Since January 1990, the Company has delivered treasury shares upon the exercise
of stock options. The difference between the cost of the treasury shares, on a
first-in, first-out basis, and the exercise price of the options has been
reflected in retained earnings.
Changes in common shares under option for the three fiscal years in the period
ended December 28, 1996 are summarized as follows:
1996 1995 1994
----------------------------- ----------------------------- ------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of year......... 2,581,870 $26.82 2,450,421 $32.06 3,728,249 $36.06
Granted................... 726,900 27.73 1,085,875 17.32 123,000 22.39
Exercised................. (486,484) 26.74 (30,502) 25.48 (13,496) 22.00
Cancelled................. (646,363) 29.56 (923,924) 29.57 (1,387,332) 42.07
--------- ------ --------- ------ ---------- ------
End of year............... 2,175,923 $26.34 2,581,870 $26.83 2,450,421 $32.06
========= ====== ========= ====== ========== ======
Exercisable at
end of year............. 493,098 $30.87 829,253 $35.19 1,019,674 $33.90
========= ====== ========= ====== ========== ======
Weighed average fair
value of options granted
during the year........... $8.93 $6.43 --
- ------------------------------------------------------------------------------------------------------------------------------------
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The following table summarizes information about options outstanding at December
28, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------------- ----------------------------------------
Weighted Average
Range of Outstanding Remaining Weighted Average Exercisable at Weighted Average
Exercise Prices at Dec. 28, 1996 Contractual Life Exercise Price Dec. 28, 1996 Exercise Price
- --------------- ---------------- ---------------- ------------------ -------------- ------------------
$15.00 - $25.00 1,108,479 5.6 years $19.08 239,536 $20.06
25.01 - 35.00 635,749 8.8 years 27.23 12,624 30.31
35.01 - 60.00 431,695 3.4 years 43.68 240,938 41.64
- ------------------------------------------------------------------------------------------------------------------------------------
$15.00 - $60.00 2,175,923 6.1 years $26.34 493,098 $30.87
- ------------------------------------------------------------------------------------------------------------------------------------
On January 9, 1997, nonqualified options to acquire 752,235 shares of common
stock were granted to officers and other key employees with an exercise price of
$38.75.
In January 1996 and June 1995, the committee granted 43,500 and 416,000 shares,
respectively, of common stock to a group of key executives. As of December 28,
1996, 415,500 of these shares remained outstanding. These shares are subject to
restrictions on transfer and subject to risk of forfeiture until earned by
continued employment. The restrictions expire on December 20, 2004. The
expiration of the restrictions may be accelerated if the total return of the
common stock exceeds that of a predetermined group of competitors or upon the
happening of certain other events. The unearned compensation is being amortized
over a period of three years in anticipation of the accelerated expiration of
the restrictions.
In May 1994, the committee granted 85,000 shares of common stock in connection
with the hiring of a key executive. These shares are subject to restrictions on
transfer and subject to risk of forfeiture until earned by continued employment.
The restrictions expire on the last day of each of the Company's fiscal years
1994 through 2001. The expiration of the restrictions may be accelerated if the
market value of the common stock attains certain predetermined levels or upon
the happening of certain other events. In 1996, one-third of the then 65,000
unvested restricted shares (or 21,665 shares) vested in accordance with the
accelerated vesting provisions of the employment agreement. The remaining shares
vest at the rate of 6,667 shares of common stock per year through the year 2000
and 10,000 shares in the year 2001. The unearned compensation related to all
restricted stock grants as of December 28, 1996 and December 30, 1995 was
$4,622,000 and $6,933,000, respectively, and is included in retained earnings on
the consolidated balance sheets.
In 1992, options were granted to certain of the Company's senior officers at a
price of $58.50 per share, representing 150% of the market price at the date of
grant. At December 28, 1996, 50,000 of these options remained outstanding; they
will become exercisable on October 21, 1998 and expire on October 21, 2000,
subject to certain exceptions.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
The Company's outside directors' stock ownership plan provides non-employee
directors, as part of their annual retainer, shares of common stock with a value
of $15,000 on the first business day of each fiscal year. The shares so issued
are nontransferable for a period of three years following the grant date,
subject to certain exceptions. In 1996, 2,872 shares of common stock were issued
under this plan. This plan also provides each non-employee director a grant of
options to purchase 1,000 shares of common stock on the first business day of
each fiscal year. Not more than one half of one percent (0.50%) of the shares of
common stock outstanding from time to time may be issued under the plan, which
will expire in 2006.
NOTE 11
PROFIT-SHARING RETIREMENT,
SAVINGS AND DEFERRED COMPENSATION PLANS
The Company's noncontributory, defined contribution profit-sharing retirement
plan covers all eligible U.S. employees who are 21 years of age with one or more
years of service and who are not covered by collective bargaining agreements.
The plan pays benefits based on an employee's vested account balance in
accordance with qualification rules set out in the plan. Vesting begins at 20%
after two years of service, and from the 3rd through 6th years, vesting
increases by 20% each year until full vesting occurs, except that for employees
commencing employment after December 31, 1996, vesting will be on a "cliff"
(100%) basis after a period of five years of service. Each year, profit-sharing
contributions, if any, are determined by the Board of Directors. The Company's
1996, 1995 and 1994 plan contribution expense, which is included in selling,
general and administrative expenses, was $5,590,000, $5,572,000 and $6,166,000,
respectively.
The Company's 401(k) savings plan covers all eligible U.S. employees who are 21
years of age with one or more years of service and who are not covered by
collective bargaining agreements. The plan pays benefits based on an employee's
vested account balance. Subject to Internal Revenue Code limitations,
participants may contribute from 1% to 15% of their salary on a before-tax
basis. Such contributions are fully and immediately vested. Vesting of the
Company's matching contribution (equal to 50% of the first 5% contributed by the
participant) begins at 20% after two years of service, and from the 3rd through
6th years, vesting increases by 20% each year until full vesting occurs. The
Company's 1996, 1995 and 1994 plan contribution expense, which is included in
selling, general and administrative expenses, was $2,016,000, $2,044,000 and
$2,082,000, respectively.
The Company has a supplemental retirement plan for executives whose benefits
under the profit-sharing retirement plan and the savings plan are expected to be
constrained by the operation of certain Internal Revenue Code limitations. The
supplemental plan provides a benefit equal to the difference between the
contribution that would be made for an executive under the two tax-qualified
plans absent such limitations and the actual contribution under those plans. The
plan also allows participants to defer up to 15% of their salary. Supplemental
benefits attributable to participant deferals are fully vested at all times and
the balance of a participant's benefits vests on the same basis as the matching
contribution under the Company's 401(k) plan. Under a separate bonus deferral
plan participants may defer up to 100% of their annual bonus. These supplemental
plans are not funded. The Company's expenses related to these plans, which are
included in selling, general and administrative expenses, were $889,000,
$405,000 and $362,000 in 1996, 1995 and 1994, respectively.
In 1996, the Company established an unfunded deferred compensation arrangement
for a senior executive which accrues over a six year period as of the first day
of each fiscal year beginning in 1996, based on an amount equal to 15% of the
sum of the senior executive's base salary and bonus. The accrued amount plus
earnings will become fully vested on December 28, 2002, provided the senior
executive is the Chairman of the Board and Chief Executive Officer of the
Company on such date. This arrangement also provides for the deferral of an
amount equal to the portion of the executive's base salary that exceeds $1
million. The deferred amount plus earnings will be fully vested at all times.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LIZ CLAIBORNE, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
NOTE 12
STOCKHOLDER RIGHTS PLAN
The Company has a Stockholder Rights Plan under which one preferred stock
purchase right is attached to each share of common stock outstanding. Pursuant
to the Rights Agreement covering the Stockholder Rights Plan, the rights become
exercisable 10 days, subject to extension, after a party or group acquires or
makes a tender offer for 20% or more of the Company's common stock. Each right
entitles its holder, under certain circumstances, to buy 1/100 share of a newly
created Series A Junior Participating Preferred Stock for $85. If 20% of the
Company's common stock is acquired by a party or group, each right not owned by
a 20%-or-more stockholder will entitle the holder to purchase Company common
stock having a market value of twice the exercise price of the right. In
addition, if the Company is involved in a merger or certain other business
combinations in which it is not the surviving corporation, each right not owned
by a 20%-or-more stockholder will entitle the holder to purchase common stock of
the surviving corporation having a market value of twice the exercise price of
the right. The rights, which expire on December 21, 1998 and do not have voting
rights, may be redeemed by the Company at $.01 per right prior to their becoming
exercisable.
NOTE 13
CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES
During fiscal 1996, 1995 and 1994, the Company made income tax payments of
$94,632,000, $65,590,000, and $72,415,000, respectively. Non-cash investing
activities which are not included in the consolidated statements of cash flows
for 1995 and 1994 include a direct financing lease receivable with a disposition
of property and equipment of $1,120,000 and $1,177,000, respectively, and in
1995 a reversal of the remaining direct financing lease receivable and
acquisition of property and equipment of $9,738,000.
NOTE 14
ACCRUED EXPENSES
Accrued expenses at December 28, 1996 and December 30, 1995 consisted of the
following:
DECEMBER 28, DECEMBER 30,
(DOLLARS IN THOUSANDS) 1996 1995
---------------------------------------------------------------------------------------------------------------------------
Payroll and bonuses ..................................................... $ 42,065 $ 40,070
Taxes, other than taxes on income ....................................... 9,432 8,072
Employee benefits ....................................................... 16,784 19,153
Advertising ............................................................. 17,042 15,461
Restructuring reserve ................................................... -- 13,316
Common stock in transit ................................................. 2,420 --
Other ................................................................... 63,502 59,377
-------- --------
$151,245 $155,449
======== ========
49
UNAUDITED QUARTERLY RESULTS
Unaudited quarterly financial information for 1996 and 1995 is set forth in the
table below:
March June September December
------------------- ------------------- ------------------- -------------------
All dollar amounts in thousands
except per common share data 1996 1995 1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $556,558 $527,076 $500,595 $474,849 $622,102 582,572 $538,263 $497,133
Gross profit 211,242 192,067 192,604 176,698 254,120 228,315 218,469 193,621
Net income 35,886 28,085 22,670 17,022 56,223 48,165 40,886 33,642
Earnings per common share $.49 $.37 $.31 $.23 $.78 $.64 $.57 $.45
Dividends paid per common share $.11 $.11 $.11 $.11 $.11 $.11 $.11 $.11
- ------------------------------------------------------------------------------------------------------------------------------------
50
]
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------
3(a) - Restated Certificate of Incorporation of Registrant
(incorporated herein by reference from Exhibit 3(a) to
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 26, 1993).
3(b) - By-laws of Registrant, as amended (incorporated herein by
reference from Exhibit 3(b) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 26, 1992 [the
"1992 Annual Report"]).
4(a) - Specimen certificate for Registrant's Common Stock, par value
$1.00 per share (incorporated herein by reference from Exhibit
4(a) to the 1992 Annual Report).
4(b) - Rights Agreement, dated December 7, 1988, as amended, between
Registrant and First Chicago Trust Company of New York, as
Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d) to
Registrant's Report on Form 8-A dated January 29, 1991).
4(b)(i) - Amendment to Rights Agreement, dated March 1990, between
Registrant and First Chicago Trust Company of New York, as
Rights Agent (successor to The Chase Manhattan Bank, N.A.)
(incorporated herein by reference from Exhibit 4(d)(i) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 30, 1989 [the "1989 Annual Report"]).
4(b)(ii) - Amendment to Rights Agreement, dated as of January 24, 1992,
between Registrant and First Chicago Trust Company of New
York, as Rights Agent (incorporated herein by reference from
Exhibit 4(b)(ii) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 28, 1991 [the "1991 Annual
Report"]).
10(a) - Reference is made to Exhibits 4(b) - 4(b)(ii) filed hereunder,
which are incorporated herein by this reference.
10(b)+ - Liz Claiborne, Inc. 1984 Stock Option Plan (incorporated
herein by reference from Exhibit 10(hh) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1983 [the "1983 Annual Report"]).
10(b)(i)+ - Amendment to the 1984 Stock Option Plan (incorporated herein
by reference from Exhibit 10(d)(i) to the 1988 Annual Report).
- ----------
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
51
Exhibit
No. Description
- ------- -----------
10(c)+ - Form of Option Agreement under Liz Claiborne, Inc. 1984 Stock
Option Plan (the "1984 Option Plan") (incorporated herein by
reference from Exhibit 10(nn) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29, 1984).
10(c)(i)+ - Amended Form of Option Agreement under the 1984 Option Plan
(incorporated herein by reference from Exhibit 10(e)(i) to the
1992 Annual Report).
10(d)+ - Liz Claiborne Savings Plan (the "Savings Plan"), as amended
and restated (incorporated herein by reference from Exhibit
10(f) to the 1989 Annual Report).
10(d)(i)+ - Trust Agreement dated as of July 1, 1994, between Liz
Claiborne, Inc. and IDS Trust Company (incorporated herein by
reference from Exhibit 10(b) to Registrant's Quarterly Report
on Form 10-Q for the period ended July 2, 1994).
10(e)+ - Amendment Nos. 1 and 2 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g) to the 1992 Annual
Report).
10(e)(i)+ - Amendment Nos. 3 and 4 to the Savings Plan (incorporated
herein by reference from Exhibit 10(g) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 26,
1993 [the "1993 Annual Report"]).
10(e)(ii)+ - Amendment No. 5 to the Savings Plan (incorporated herein by
reference from Exhibit 10(a) to Registrant's Quarterly Report
on Form 10-Q for the period ended July 2, 1994).
10(e)(iii)+* - Amendment No. 6 to the Savings Plan.
10(e)(iv)+* - Amendment No. 7 to the Savings Plan.
10(f)+ - Amended and Restated Liz Claiborne Profit-Sharing Retirement
Plan (the "Profit-Sharing Plan") (incorporated herein by
reference from Exhibit 10(h) to the 1992 Annual Report).
10(g) - Trust Agreement related to the Profit-Sharing Plan
(incorporated herein by reference from Exhibit 10(jj) to the
1983 Annual Report).
10(g)(i)+ - Amendment Nos. 1 and 2 to the Profit-Sharing Plan
(incorporated herein by reference from Exhibit 10(i)(i) to the
1993 Annual Report).
10(g)(ii)+ - Amendment No. 3 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(a) to Registrant's
Quarterly Report on Form 10-Q for the period ended October 1,
1994).
10(g)(iii)+ - Amendment No. 4 to the Profit-Sharing Plan (incorporated
herein by reference from Exhibit 10(a) to Registrant's
Quarterly Report on Form 10-Q for the period ended July 1,
1995).
10(g)(iv)+* - Amendment No. 5 to the Profit-Sharing Plan.
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
52
Exhibit
No. Description
- ------- -----------
10(h) - Collective Bargaining Agreement, dated June 1, 1994, between
New York Skirt and Sportswear Association, Inc. (of which
Registrant is a member) and Amalgamated Ladies' Garment
Cutters' Union, Local 10, I.L.G.W.U. and Blouse, Skirt,
Sportswear, Children's Wear & Allied Workers' Union, Local
23-25, I.L.G.W.U. (incorporated herein by reference from
Exhibit 10(h) to Registrant's Annual Report on Form 10-K for
Fiscal Year ended December 28, 1995 (the "1995 Annual
Report").
10(i)+ - Executive Liability and Indemnification Policy No. 81035379F,
with Chubb Group of Insurance Companies (the "Insurance
Policy") (incorporated herein by reference from Exhibit 10(l)
to Registrant's Annual Report on Form 10-K for Fiscal Year
ended December 31, 1994 (the "1994 Annual Report").
10(i)(i)+* - Summary of Extension of the Insurance Policy.
10(j)* - Excess Coverage Directors and Officers Liability Insurance
Policy No. 483-73-56, with National Union Fire Insurance
Company of Pittsburgh, PA.
10(k)+* - Description of 1996 Salaried Employee Incentive Bonus Plan.
10(l) - Lease, dated as of January 1, 1990 for premises located at
1441 Broadway, New York, New York between Registrant and
Lechar Realty Corp. (incorporated herein by reference from
Exhibit 10(n) to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 1990).
10(m)+ - Liz Claiborne, Inc. Amended and Restated Outside Directors'
1991 Stock Ownership Plan (the "Outside Directors' 1991 Plan")
(incorporated herein by reference from Exhibit 10(m) to the
1995 Annual Report).
10(m)(i)+* - Form of Option Agreement under the Outside Directors' 1991
Plan.
10(n)+ - Liz Claiborne, Inc. 1992 Stock Incentive Plan (the "1992
Plan") (incorporated herein by reference from Exhibit 10(p) to
the 1991 Annual Report).
10(n)(i)+ - Amendment No. 1 to the 1992 Plan (incorporated herein by
reference from Exhibit 10(p)(i) to the 1993 Annual Report).
10(o)+ - Form of Option Agreement under the 1992 Plan for premium-
priced options (incorporated herein by reference from Exhibit
10(q) to the 1992 Annual Report).
10(p)+ - Form of Option Agreement under the 1992 Plan (incorporated
herein by reference from Exhibit 10(r) to the 1992 Annual
Report).
10(q)+* - Form of Option Grant Certificate under the 1992 Plan.
10(r)+ - Form of Restricted Career Share Agreement under the 1992 Plan
(incorporated herein by reference from Exhibit 10(a) to
Registrant's Quarterly Report of Form 10-Q for the period
ended September 30, 1995).
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).
53
Exhibit
No. Description
- ------- -----------
10(s)+ - Description of unfunded deferred compensation arrangement for
Jerome A. Chazen (incorporated herein by reference from
Exhibit 10(s) to the 1992 Annual Report).
10(t)+* - Description of Supplemental Life Insurance Plans.
10(u)+ - Description of unfunded death/disability benefits for certain
executives (incorporated herein by reference from Exhibit
10(u) to the 1992 Annual Report).
10(v)+ - Form of the Liz Claiborne 162(m) Cash Bonus Plan
(incorporated herein by reference from Exhibit 10(v) to the
1994 Annual Report).
10(w)+* - Liz Claiborne Supplemental Executive Retirement Plan (As amended
and restated effective as of January 1, 1997).
10(x)+* - The Liz Claiborne, Inc. Bonus Deferral Plan.
10(y)+ - Employment Agreement dated as of May 9, 1994, between
Registrant and Paul R. Charron (the "Employment Agreement")
(incorporated herein by reference from Exhibit 10(a) to
Registrant's Quarterly Report on Form 10-Q for the period
ended April 2, 1994).
10(y)(i)+ - Amendment to the Employment Agreement, dated as of November
20, 1995, between Registrant and Paul R. Charron (incorporated
herein by reference from Exhibit 10(x)(i) to the 1995 Annual
Report).
10(y)(ii)+* - Amendment to the Employment Agreement, dated as of September
19, 1996 between Registrant and Paul R. Charron (including the
Liz Claiborne Retirement Income Accumulation Plan for the
benefit of Mr. Charron).
10(z)+* - Employment Agreement dated as of September 26, 1996, between
Registrant and Denise V. Seegal.
10(aa)* - Agreements dated as of May 15, 1996 and May 17, 1996, between
Registrant and Jerome A. Chazen.
21* - List of Registrant's Subsidiaries.
23* - Consent of Independent Public Accountants.
27* - Financial Data Schedule.
99* - Undertakings.
(b) Reports on Form 8-K.
Not applicable.
- ----------
* Filed herewith.
+ Compensation plan or arrangement required to be noted as provided
in Item 14(a)(3).