-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pi8MD3IboTxicrQ31h1qOlZwqUvZAgs7bp+YtbEBwY/qx3plS1XHWB+cihyiMRA0 AYo9uwVAca/r2s7dPW5Hjg== 0000889812-99-001973.txt : 19990630 0000889812-99-001973.hdr.sgml : 19990630 ACCESSION NUMBER: 0000889812-99-001973 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PHILLIPS VAN HEUSEN CORP /DE/ CENTRAL INDEX KEY: 0000078239 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 131166910 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-07572 FILM NUMBER: 99654721 BUSINESS ADDRESS: STREET 1: 200 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: (212) 381-3500 MAIL ADDRESS: STREET 1: 200 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 11-K 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------- FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One): |X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]. For the fiscal year ended December 31, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]. For the transition period from __________ to __________ Commission file number 1-724 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: PVH Associates Investment Plan for Hourly Associates and PVH Associates Investment Plan for Salaried Associates B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Phillips-Van Heusen Corporation, 200 Madison Avenue, New York, New York 10016 SIGNATURES The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. PHILLIPS-VAN HEUSEN CORPORATION ASSOCIATES INVESTMENT PLANS Date: June 28, 1999 By /s/ Pamela N. Hootkin ------------------------------------- Pamela N. Hootkin, Member of Administrative Committee Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Financial Statements Years ended December 31, 1998 and 1997 Contents Report of Independent Auditors.......................................... F-2 Statements of Net Assets Available for Plan Benefits.................... F-3 Statements of Changes in Net Assets Available for Plan Benefits......... F-4 Notes to Financial Statements .......................................... F-5 The Plan's investment asset are held in a Master Trust for which a separate report is filed with the Department of Labor. Accordingly, supplemental schedules of Asset Held for Investment Purpose and Reportable Transactions of the Master Trust have not been presented. F-1 Report of Independent Auditors Administrative Committee of the Plan Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates We have audited the accompanying statements of net assets available for plan benefits of the Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates as of December 31, 1998 and 1997, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan'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 net assets available for plan benefits of the Plan as of December 31, 1998 and 1997, and the changes in its net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP June 25, 1999 F-2 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Statements of Net Assets Available for Plan Benefits December 31, 1998 1997 ------------------------- Assets Investments, at fair value (Notes A and F): Shares of registered investment companies: Equity Fund $2,429,576 $1,351,523 Bond Fund 354,620 316,250 Balanced Fund 1,336,645 932,262 International Fund 323,361 252,818 Common Stock--Employer Company Fund 1,787,531 3,999,372 Common Trust Fund* 2,056,935 2,361,276 Participant loans receivable 177,017 254,492 ------------------------- Net assets available for plan benefits $8,465,685 $9,467,993 ========================= *Consists of the Money Market Fund (Chase Manhattan Bank Domestic Liquidity Fund). See notes to financial statements. F-3 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Statements of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1998 1997 --------------------------- Additions Net transfer from the Associates Investment Plan of PVH (Crystal Brands Division) $ -- $ 10,560 Contributions: Employer Company, net of forfeitures 267,438 207,366 Participants 706,897 699,527 -------------------------- 974,335 906,893 Interest and investment income 473,962 236,713 -------------------------- Total additions 1,448,297 1,154,166 -------------------------- Deductions Net transfer to the PVH Associates Investment Plan for Salaried Associates 249,785 155,597 Payments to participants 1,436,892 1,212,919 -------------------------- Total deductions 1,686,677 1,368,516 -------------------------- Net realized and unrealized (depreciation) appreciation of investments (763,928) 316,782 -------------------------- Net (decrease) increase (1,002,308) 102,432 Net assets available for plan benefits at beginning of year 9,467,993 9,365,561 -------------------------- Net assets available for plan benefits at end of year $ 8,465,685 $9,467,993 ==========================
See notes to financial statements. F-4 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements December 31, 1998 A. Description of the Plan The following description of the Phillips-Van Heusen Corporation (the "Company") Associates Investment Plan for Hourly Associates (the "Plan") provides only general information. Participants should refer to the Plan Document for a more complete description of the Plan's provisions. On October 1, 1997, the net assets of the Associates Investment Plan of Phillips-Van Heusen Corporation (Crystal Brands Division) (the "Crystal Brands Plan") associated with hourly associates merged into the Plan. All assets of the Crystal Brands Plan were held by State Street Bank (trustee of the Crystal Brands Plan through September 30, 1997). All assets of the Plan are held by Chase Manhattan Bank (trustee of the Plan through September 30, 1997) and Wachovia Bank, N.A. (successor trustee of the Plan effective October 1, 1997) in the Company's Associates Investment Plan Master Trust (the "AIP Master Trust"). General The Plan is a defined contribution plan covering hourly production and retail field employees of the Company who have at least one year of service (1,000 hours in a year) and are age 21 or older. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions Each year, participants may contribute up to 15% of pretax annual compensation, as defined by the Plan. The Company contributes 50% of the first 6% of base compensation that a participant contributes to the Plan. Participant Accounts Each participant's account is credited with the participant's contributions and allocations of (a) Company's contributions, and (b) Plan earnings. Forfeited balances of terminated participants' nonvested accounts are used to reduce future Company contributions. One hundred percent of the Company contributions are automatically invested in the common stock of the Company. In accordance with the provisions of the Plan, participants age 55 or older may direct the Company contribution into any of the Plan's investment options. F-5 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements (continued) A. Description of the Plan (continued) Vesting Amounts attributable to Company contributions become vested on the participant's 65th birthday or if the participant's employment by the Company terminates by reason of the participant's death or permanent disability or the participant has completed five years of service with the Company. Investment Options Upon enrollment in the Plan, a participant may direct employee contributions into any of six investment options. A participant may contribute a maximum of 25% of employee contributions into the Phillips-Van Heusen Corporation Common Stock Fund. Participant Loans Receivable Participants may borrow from the Plan, with certain restrictions, using their vested account balance as collateral. The minimum loan amount is $1,000 and the maximum loan amount is the lesser of (i) $50,000 reduced by the participant's highest outstanding loan balance during the previous 12 months, or (ii) 50% of the vested value of the participant's account. Interest is fixed for the term of the loan at the prime rate as of the first business day of the month of application as published in The Wall Street Journal, plus 1%. Loan repayments are made through payroll deductions which may be specified for a term of 1 to 5 years or up to 15 years for the purchase of a primary residence. Payment of Benefits Participants entitled to final distributions generally will receive payment in the form of a lump sum amount equal to the value of their vested account. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. B. Significant Accounting Policies F-6 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements (continued) The accounting records of the Plan are maintained on the accrual basis. Substantially all administrative expenses are paid by the company. In accordance with the Rules and Regulations of the Department of Labor, investments are included in the accompanying financial statements at market value as determined by quoted market prices or at fair value as determined by Wachovia Bank, N.A. ("Wachovia") for the applicable Wachovia investment funds. Purchases and sales of securities are reflected on a trade date basis. All assets of the Plan are held by Wachovia in the AIP Master Trust and are segregated from the assets of the Company. The Plan shares in AIP Master Trust interest and investment income based upon its participants' shares of AIP Master Trust net assets available for plan benefits. The AIP Master Trust's investments include an interest contract with an insurance company that has been placed into conservatorship in 1991. In November 1998, the AIP Master Trust received its principal in the interest contract plus accrued interest, as defined in the conservatorship agreement. The Plan does not have a beneficial interest in this interest contract. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. C. Transactions with Parties-in-Interest During the years ended December 31, 1998 and 1997, the AIP Master Trust purchased 56,702 and 41,891 shares, respectively, of the Company's common stock and received $197,777 and $205,332, respectively, from the Company as payment of dividends on its common stock. The AIP Master Trust also sold 14,961 and 58,705 shares of the Company's common stock during the years ended December 31, 1998 and 1997, respectively. In connection with the merger of the Crystal Brands Plan on October 1, 1997, 52,112 shares of the Company's common stock were transferred into the AIP Master Trust. F-7 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements (continued) D. Changes in the AIP Master Trust Net Assets Held by Fund Changes in the AIP Master Trust net assets held by fund during the year ended December 31, 1998 were as follows:
Phillips-Van Heusen Corp. Money Common Stock Market Bond Balanced Equity Fund Fund Fund Fund Fund ---------------------------------------------------------------------------- Net assets at beginning of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805 Interest and investment income 226,343 474,862 138,565 1,154,085 1,133,584 Contributions received: Employer Company, net of forfeitures 1,894,714 632 1,355 17,426 31,368 Employees 325,015 561,378 320,057 1,226,067 2,101,123 Net realized and unrealized appreciation (depreciation) (9,106,716) -- 21,757 455,901 3,577,455 Loans to participants, net of repayments 594 (3,431) 9,072 35,206 39,529 Payments to participants (3,113,510) (2,527,309) (497,432) (1,427,011) (2,549,482) Transfers (to) from other accounts (717,388) 4,418,474 (41,203) 683,068 1,026,645 ---------------------------------------------------------------------------- Net assets at end of year $ 9,414,931 $ 11,971,150 $ 2,267,092 $ 11,531,743 $ 21,524,027 ============================================================================ Plan's beneficial interest at end of year $ 1,787,531 $ 2,056,935 $ 354,620 $ 1,336,645 $ 2,429,576 ============================================================================
Fixed International Income Loan Fund Fund Fund Total ----------------------------------------------------------- Net assets at beginning of year $ 3,585,363 $4,575,539 $ 1,371,795 $ 66,350,847 Interest and investment income 329,613 377,524 -- 3,834,576 Contributions received: Employer Company, net of forfeitures 5,185 -- -- 1,950,680 Employees 622,425 -- -- 5,156,065 Net realized and unrealized appreciation (depreciation) (520,450) -- -- (5,572,053) Loans to participants, net of repayments 13,351 -- (94,321) -- Payments to participants (365,871) (150,096) -- (10,630,711) Transfers (to) from other accounts (566,629) (4,802,967) -- -- ---------------------------------------------------------- Net assets at end of year $ 3,102,987 -- $ 1,277,474 $ 61,089,404 ========================================================== Plan's beneficial interest at end of year $ 323,361 $ -- $ 177,017 $ 8,465,685 ==========================================================
Note: Certain funds above include investments in the Chase Manhattan Bank Domestic Liquidity Fund. F-8 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements (continued) D. Changes in the AIP Master Trust Net Assets Held by Fund (continued) Changes in the AIP Master Trust net assets held by fund during the year ended December 31, 1997 were as follows:
Phillips-Van Heusen Corp. Money Common Stock Market Bond Balanced Equity Fund Fund Fund Fund Fund ---------------------------------------------------------------------------- Net assets at beginning of year $ 19,612,593 $ 6,879,359 $ 1,818,465 $ 5,750,463 $ 9,384,953 Interest and investment income 211,070 551,149 125,621 502,825 330,738 Contributions received: Employer Company, net of forfeitures 1,620,371 (51,060) 73 (2,835) (11,499) Employees 423,500 670,327 350,969 1,193,105 1,963,385 Net realized and unrealized appreciation (depreciation) (299,112) -- 18,814 854,817 2,721,432 Loans to participants, net of (77,679) (45,092) 4,773 (42,561) (71,843) repayments Payments to participants (1,962,154) (1,707,477) (255,224) (802,958) (1,332,908) Transfers (to) from other accounts (446,731) (226,623) (85,827) 236,828 427,253 Transfer from AIP of PVH (Crystal Brands Division) 824,021 2,975,961 337,257 1,697,317 2,752,294 ---------------------------------------------------------------------------- Net assets at end of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805 ============================================================================ Plan's beneficial interest at end of year $ 3,999,372 $ 2,361,276 $ 316,250 $ 932,262 $ 1,351,523 ============================================================================
Fixed International Income Loan Fund Fund Fund Total --------------------------------------------------------------- Net assets at beginning of year $ 2,226,120 $ -- $ 969,816 $ 46,641,769 Interest and investment income 391,072 106,016 -- 2,218,491 Contributions received: Employer Company, net of forfeitures 585 -- -- 1,555,635 Employees 646,476 -- -- 5,247,762 Net realized and unrealized appreciation (depreciation) (327,047) -- -- 2,968,904 Loans to participants, net of (27,416) -- 259,818 -- repayments Payments to participants (279,685) -- -- (6,340,406) Transfers (to) from other accounts 95,100 -- -- -- Transfer from AIP of PVH (Crystal Brands Division) 860,158 4,469,523 142,161 14,058,692 -------------------------------------------------------------- Net assets at end of year $ 3,585,363 $ 4,575,539 $ 1,371,795 $ 66,350,847 ============================================================== Plan's beneficial interest at end of year $ 252,818 $ -- $ 254,492 $ 9,467,993 ==============================================================
Note: Certain funds above include investments in the Chase Manhattan Bank Domestic Liquidity Fund. F-9 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements (continued) E. Income Tax Status The Plan has received a determination letter from the Internal Revenue Service dated April 27, 1995, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is exempt from taxation. Once qualified, the plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. F. Assets of the Plan Assets of the Plan are included in the assets of the AIP Master Trust held by the trustees. The assets of the AIP Master Trust are presented in the following table. Investments that represent 5% or more of the AIP Master Trust's total net assets are identified by an asterisk.
December 31, 1998 1997 ------------------------------- Investments at fair value as determined by quoted market price: Shares of registered investment companies: Fidelity Growth & Income Portfolio, 469,513 and 424,247 shares, respectively $21,524,027* $16,163,805* Fidelity Intermediate Bond Fund, 220,576 and 227,623 shares, respectively 2,267,092 2,314,921 Fidelity Puritan Fund, 574,442 and 484,360 shares, respectively 11,531,743* 9,387,001* Templeton Foreign Fund, 369,842 and 360,337 shares, respectively 3,102,987* 3,585,363* Phillips-Van Heusen Corp. Common Stock Fund 1,304,634 and 1,394,679 shares, respectively 9,414,931* 19,905,879* Investments at estimated fair value: Common Trust Fund 11,971,150* 9,046,544* Promissory notes (participant loans) 1,277,474 1,371,795 Non-performing interest contract - 4,575,539* ------------------------------- Total net assets $61,089,404 $66,350,847 =============================== Plan's beneficial interest $ 8,465,685 $ 9,467,993 ===============================
F-10 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements (continued) G. Differences Between Plan Financial Statements and Form 5500 The following is a reconciliation of net assets available for plan benefits per the financial statements to the Form 5500:
December 31, 1998 1997 ------------------------------- Net assets available for plan benefits as reported on the financial statements $8,465,685 $9,467,993 Less amounts allocated to withdrawn participants at the end of the year (307,191) (295,118) =============================== Net assets available for plan benefits as reported on the Form 5500 $8,158,494 $9,172,875 =============================== The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500:
Year ended December 31, 1998 ---------- Benefits paid to participants per the financial statements $1,436,892 Add amounts allocated to withdrawn participants at December 31, 1998 307,191 Less amounts allocated to withdrawn participants at December 31, 1997 (295,118) ----------- Benefits paid to participants per the Form 5500 $1,448,965 ===========
Amounts allocated to withdrawn participants on the Form 5500 represent benefit claims that have been processed and approved for payment prior to year-end but not yet paid. F-11 Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates Notes to Financial Statements (continued) H. Year 2000 (Unaudited) The Plan Sponsor has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle year 2000 dates. The Plan Sponsor is taking a two phase approach. The first phase addresses internal systems that must be modified or replaced to function properly. Both internal and external resources are being utilized to replace or modify existing software applications, and test the software and equipment for the year 2000 modifications. The Plan Sponsor anticipates substantially completing this phase of the project by the end of 1999. Costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Plan Sponsor. For the second phase of the project, Plan management established formal communications with its third party service providers to determine that they have developed plans to address their own year 2000 problems as they relate to the Plan's operations. All third party service providers have indicated that they will be year 2000 compliant by the end of 1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers are not completed timely, the year 2000 problem could have a material impact on the operations of the Plan. Plan management has not developed a contingency plan, because they are confident that all systems will be year 2000 ready. F-12 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Financial Statements Years ended December 31, 1998 and 1997 Contents Report of Independent Auditors............................................. F-14 Statements of Net Assets Available for Plan Benefits....................... F-15 Statements of Changes in Net Assets Available for Plan Benefits............ F-16 Notes to Financial Statements ............................................. F-17 The Plan's investment asset are held in a Master Trust for which a separate report is filed with the Department of Labor. Accordingly, supplemental schedules of Asset Held for Investment Purpose and Reportable Transactions of the Master Trust have not been presented. F-13 Report of Independent Auditors Administrative Committee of the Plan Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates We have audited the accompanying statements of net assets available for plan benefits of the Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates as of December 31, 1998 and 1997, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan'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 net assets available for plan benefits of the Plan as of December 31, 1998 and 1997, and the changes in its net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP June 25, 1999 F-14 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Statements of Net Assets Available for Plan Benefits
December 31, 1998 1997 ------------------------------ Assets Investments (Notes A and E): Shares of registered investment companies: Equity Fund $18,989,549 $14,747,941 Bond Fund 1,861,948 1,958,204 Balanced Fund 10,083,735 8,374,192 International Fund 2,762,304 3,316,839 Common stock--Employer Company Fund 7,439,036 15,566,503 Common Trust Fund* 9,787,719 6,560,602 Non-performing interest contract (Note F) -- 4,575,539 Participant loans receivable 1,087,665 1,077,960 ------------------------------ Net assets available for plan benefits $52,011,956 $56,177,780 ==============================
*Consists of the Money Market Fund (Chase Manhattan Bank Domestic Liquidity Fund). See notes to financial statements. F-15 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Statements of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1998 1997 ----------------------------- Additions Net transfer from the PVH Associates Investment Plan for Hourly Associates $ 249,785 $ 155,597 Net transfer from the Associates Investment Plan of PVH (Crystal Brands Division) -- 14,048,132 ----------------------------- 249,785 14,203,729 ----------------------------- Contributions: Employer Company, net of forfeitures 1,650,080 1,313,423 Participants 4,361,515 4,430,685 ----------------------------- 6,011,595 5,744,108 Interest and investment income 3,301,844 1,963,586 ----------------------------- Total additions 9,563,224 21,911,423 ----------------------------- Deductions Payments to participants 9,015,648 5,026,675 ----------------------------- Total deductions 9,015,648 5,026,675 ----------------------------- Net realized and unrealized (depreciation) appreciation of investments (4,713,400) 2,627,777 ----------------------------- Net (decrease) increase (4,165,824) 19,512,525 Net assets available for plan benefits at beginning of year 56,177,780 36,665,255 ----------------------------- Net assets available for plan benefits at end of year $52,011,956 $56,177,780 =============================
See notes to financial statements. F-16 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements December 31, 1998 A. Description of the Plan The following description of the Phillips-Van Heusen Corporation (the "Company") Associates Investment Plan for Salaried Associates (the "Plan") provides only general information. Participants should refer to the Plan Document for a more complete description of the Plan's provisions. On October 1, 1997, the net assets of the Associates Investment Plan of Phillips-Van Heusen Corporation (Crystal Brands Division) (the "Crystal Brands Plan") associated with salaried or former associates were merged into the Plan. All assets of the Crystal Brands Plan were held by State Street Bank (trustee of the Crystal Brands Plan through September 30, 1997). All assets of the Plan are held by Chase Manhattan Bank (trustee of the Plan through September 30, 1997) and Wachovia Bank, N.A. ("Wachovia") (successor trustee of the Plan effective October 1, 1997) in the Company's Associates Investment Plan Master Trust (the "AIP Master Trust"). The investment alternatives of the Crystal Brands Plan have included interest contracts with insurance companies, as discussed further in this note and in Note F. General The Plan is a defined contribution plan covering salaried clerical employees of the Company who have at least one year of service (1,000 hours in a year) and are age 21 or older. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions Each year, participants may contribute up to 15% of pretax annual compensation, as defined by the Plan. The Company contributes 50% of the first 6% of base compensation that a participant contributes to the Plan. Participant Accounts Each participant's account is credited with the participant's contributions and allocations of (a) the Company's contributions and (b) Plan earnings. Forfeited balances of terminated participants' nonvested accounts are used to reduce future Company contributions. One hundred percent of the Company contributions are automatically invested in the common stock of the Company. In accordance with the provisions of the Plan, participants age 55 or older may direct the Company contribution into any of the Plan's investment options. F-17 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) A. Description of the Plan (continued) Vesting Amounts attributable to Company contributions become vested on the participant's 65th birthday or if the participant's employment by the Company terminates by reason of the participant's death or permanent disability or the participant has completed five years of service with the Company. Investment Options Upon enrollment in the Plan, a participant may direct employee contributions into any of six investment options. A participant may contribute a maximum of 25% of employee contributions into the Phillips-Van Heusen Corporation Common Stock Fund. Participant Loans Receivable Participants may borrow from the Plan, with certain restrictions, using their vested account balance as collateral. The minimum loan amount is $1,000 and the maximum loan amount is the lesser of (i) $50,000 reduced by the participant's highest outstanding loan balance during the previous 12 months, or (ii) 50% of the vested value of the participant's account. Interest is fixed for the term of the loan at the prime rate as of the first business day of the month of application as published in The Wall Street Journal, plus 1%. Loan repayments are made through payroll deductions which may be specified for a term of 1 to 5 years or up to 15 years for the purchase of a primary residence. Payment of Benefits Participants entitled to final distributions generally will receive payment in the form of a lump-sum amount equal to the value of their vested account. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. F-18 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) B. Significant Accounting Policies The accounting records of the Plan are maintained on the accrual basis. Substantially all administrative expenses are paid by the company. In accordance with the Rules and Regulations of the Department of Labor, investments are included in the accompanying financial statements at market value as determined by quoted market price or at fair value as determined by Wachovia for the applicable Wachovia investment funds. The interest contract is stated at cost plus accumulated interest. Purchase and sales of securities are reflected on a trade date basis. All assets of the Plan are held by Wachovia in the AIP Master Trust and are segregated from the assets of the Company. The Plan shares in AIP Master Trust interest and investment income based upon its participants' shares of AIP Master Trust net assets available for plan benefits. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. C. Transactions with Parties-in-Interest During the years ended December 31, 1998 and 1997, the AIP Master Trust purchased 56,702 and 41,891 shares, respectively, of the Company's common stock and received $197,777 and $205,332, respectively, from the Company as payment of dividends on its common stock. The AIP Master Trust also sold 14,961 and 58,705 shares of the Company's common stock during the years ended December 31, 1998 and 1997, respectively. In connection with the merger of the Crystal Brands Plan on October 1, 1997, 52,112 shares of the Company's common stock were transferred into the AIP Master Trust. F-19 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) D. Changes in the AIP Master Trust Net Assets Held by Fund Changes in the AIP Master Trust net assets held by fund during the year ended December 31, 1998 were as follows:
Phillips-Van Heusen Corp. Money Common Market Bond Balanced Equity Stock Fund Fund Fund Fund Fund ---------------------------------------------------------------------------- Net assets at beginning of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805 Interest and investment income 226,343 474,862 138,565 1,154,085 1,133,584 Contributions received: Employer Company, net of forfeitures 1,894,714 632 1,355 17,426 31,368 Employees 325,015 561,378 320,057 1,226,067 2,101,123 Net realized and unrealized appreciation (depreciation) (9,106,716) -- 21,757 455,901 3,577,455 Loans to participants, net of repayments 594 (3,431) 9,072 35,206 39,529 Payments to participants (3,113,510) (2,527,309) (497,432) (1,427,011) (2,549,482) Transfers (to) from other accounts (717,388) 4,418,474 (41,203) 683,068 1,026,645 ---------------------------------------------------------------------------- Net assets at end of year $ 9,414,931 $ 11,971,150 $ 2,267,092 $ 11,531,743 $ 21,524,027 ============================================================================ Plan's beneficial interest at end of year $ 7,439,036 $ 9,787,719 $ 1,861,948 $ 10,083,735 $ 18,989,549 ============================================================================
International Fixed Income Loan Fund Fund Fund Total ------------------------------------------------------------ Net assets at beginning of year $ 3,585,363 $ 4,575,539 $ 1,371,795 $ 66,350,847 Interest and investment income 329,613 377,524 3,834,576 Contributions received: Employer Company, net of forfeitures 5,185 -- -- 1,950,680 Employees 622,425 -- -- 5,156,065 Net realized and unrealized appreciation (depreciation) (520,450) -- -- (5,572,053) Loans to participants, net of repayments 13,351 -- (94,321) -- Payments to participants (365,871) (150,096) -- (10,630,711) Transfers (to) from other accounts (566,629) (4,802,967) -- -- ------------------------------------------------------------ Net assets at end of year $ 3,102,987 $ -- $ 1,277,474 $ 61,089,404 ============================================================ Plan's beneficial interest at end of year $ 2,762,304 $ -- $ 1,087,665 $ 52,011,956 ============================================================
Note: Certain funds above include investments in the Chase Manhattan Bank Domestic Liquidity Fund. F-20 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) D. Changes in the AIP Master Trust Net Assets Held by Fund (continued) Changes in the AIP Master Trust net assets held by fund during the year ended December 31, 1997 were as follows:
Phillips-Van Heusen Corp. Money Common Market Bond Balanced Equity Stock Fund Fund Fund Fund Fund --------------------------------------------------------------------------- Net assets at beginning of year $ 19,612,593 $ 6,879,359 $ 1,818,465 $ 5,750,463 $ 9,384,953 Interest and investment income 211,070 551,149 125,621 502,825 330,738 Contributions received: Employer Company, net of forfeitures 1,620,371 (51,060) 73 (2,835) (11,499) Employees 423,500 670,327 350,969 1,193,105 1,963,385 Net realized and unrealized appreciation (depreciation) (299,112) -- 18,814 854,817 2,721,432 Loans to participants, net of repayments (77,679) (45,092) 4,773 (42,561) (71,843) Payments to participants (1,962,154) (1,707,477) (255,224) (802,958) (1,332,908) Transfers (to) from other accounts (446,731) (226,623) (85,827) 236,828 427,253 Transfer from AIP of PVH (Crystal Brands Division) 824,021 2,975,961 337,257 1,697,317 2,752,294 --------------------------------------------------------------------------- Net assets at end of year $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805 =========================================================================== Plan's beneficial interest at end of year $ 15,566,503 $ 6,560,602 $ 1,958,204 $ 8,374,192 $ 14,747,941 ===========================================================================
International Fixed Income Loan Fund Fund Fund Total ------------------------------------------------------------ Net assets at beginning of year $ 2,226,120 $ -- $ 969,816 $46,641,769 Interest and investment income 391,072 106,016 -- 2,218,491 Contributions received: Employer Company, net of forfeitures 585 -- -- 1,555,635 Employees 646,476 -- -- 5,247,762 Net realized and unrealized appreciation (depreciation) (327,047) -- -- 2,968,904 Loans to participants, net of repayments (27,416) -- 259,818 -- Payments to participants (279,685) - -- (6,340,406) Transfers (to) from other accounts 95,100 -- -- -- Transfer from AIP of PVH (Crystal Brands Division) 860,158 4,469,523 142,161 14,058,692 ------------------------------------------------------------ Net assets at end of year $ 3,585,363 $ 4,575,539 $ 1,371,795 $66,350,847 ============================================================ Plan's beneficial interest at end of year $ 3,316,839 $ 4,575,539 $ 1,077,960 $56,177,780 ============================================================
Note: Certain funds above include investments in the Chase Manhattan Bank Domestic Liquidity Fund. F-21 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) E. Assets of the Plan Assets of the Plan are included in the assets of the AIP Master Trust held by the trustees. The assets of the AIP Master Trust are presented in the following table. Investments that represent 5% or more of the AIP Master Trust's total net assets are identified by an asterisk.
December 31, 1998 1997 ---------------------------------- Investments at fair value as determined by quoted market price: Shares of registered investment companies: Fidelity Growth & Income Portfolio, 465,513 and 424,247 shares, respectively $ 21,524,027* $ 16,163,805* Fidelity Intermediate Bond Fund, 220,576 and 227,623 shares, respectively 2,267,092 2,314,921 Fidelity Puritan Fund, 574,442 and 484,360 shares, respectively 11,531,743* 9,387,001* Templeton Foreign Fund, 369,842 and 360,337 shares, respectively 3,102,987* 3,585,363* Phillips-Van Heusen Corp. Common Stock Fund, 1,304,634 and 1,394,679 shares, respectively 9,414,931* 19,905,879* Investments at estimated fair value: Common Trust Fund 11,971,150* 9,046,544* Promissory notes (participant loans) 1,277,474 1,371,795 Non-performing interest contract -- 4,575,539* ---------------------------------- Total net assets $ 61,089,404 $ 66,350,847 ================================== Plan's beneficial interest $ 52,011,956 $ 56,177,780 ==================================
F. Non-Performing Interest Contract On July 16, 1991, on application of the Insurance Commissioner of the State of New Jersey, the Superior Court of New Jersey placed the Mutual Benefit Life Insurance Company ("MBLIC") into rehabilitation. Effective June 30, 1991, allocation of interest on MBLIC interest contracts to participants was suspended, and on January 1, 1992, the interest accrual rate on all MBLIC contracts was reduced to 3% in accordance with the recommendation of the Deputy Rehabilitator of MBLIC. F-22 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) F. Non-Performing Interest Contract (continued) On November 10, 1993, the court approved a plan of rehabilitation for MBLIC. The rehabilitation plan provides investors with two alternatives consisting of either (1) participating ("opt-in") in the plan, or (2) not participating ("opt-out") in the plan. Investors electing to opt-in are projected to receive 100% of their July 16, 1991 investment balance over a four-year period from December 31, 1999 to December 31, 2003. Investors who elected to opt-out received approximately 55% of their July 16, 1991 investment balance no later than mid-1996. The Plan's interest contract with MBLIC is not covered by state guaranty associations. For certain investments not covered by state guaranty associations, including the Plan's interest contract, the rehabilitation provides, for those investors electing to opt-in, reinsurance by a consortium of insurance companies including the Prudential Insurance Company of America and the Metropolitan Life Insurance Company. State Street Bank, the former trustee of the Crystal Brands Plan, elected to opt-in to the MBLIC rehabilitation plan. State Street Bank made this decision after review and analysis of the rehabilitation plan and the financial strength of the reinsurers. Based on the MBLIC rehabilitation plan, including the reinsurance provision, no adjustment to the carrying value of the MBLIC interest contract was made. The Plan's MBLIC interest contract was credited with interest at 6.35% from January 1, 1997 through June 30, 1997 and 9.75% for July 1, 1997 through November 2, 1998. On November 2, 1998, the Plan received as final settlement from MBLIC of $4,802,967, which includes principal and accrued interest of $4,425,443 and $377,524, respectively. G. Income Tax Status The Plan has received a determination letter from the Internal Revenue Service dated April 27, 1995, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is exempt from taxation. Once qualified, the plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. F-23 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) H. Differences Between Plan Financial Statements and Form 5500 The following is a reconciliation of net assets available for plan benefits per the financial statements to the Form 5500:
December 31, 1998 1997 ------------------------------- Net assets available for plan benefits as reported on the financial statements $52,011,956 $56,177,780 Less amounts allocated to withdrawn participants at the end of the year 557,663 1,223,049 ------------------------------- Net assets available for plan benefits as reported on the Form 5500 $51,454,293 $54,954,731 ===============================
The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500:
Year ended December 31, 1998 ------------ Benefits paid to participants per the financial statements $ 9,015,648 Add amounts allocated to withdrawn participants at December 31, 1998 557,663 Less amounts allocated to withdrawn participants at December 31, 1997 (1,223,049) ------------ Benefits paid to participants per the Form 5500 $ 8,350,262 ============
Amounts allocated to withdrawn participants on the Form 5500 represent benefit claims that have been processed and approved for payment prior to year-end but not yet paid. F-24 Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates Notes to Financial Statements (continued) I. Year 2000 (Unaudited) The Plan Sponsor has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle year 2000 dates. The Plan Sponsor is taking a two phase approach. The first phase addresses internal systems that must be modified or replaced to function properly. Both internal and external resources are being utilized to replace or modify existing software applications, and test the software and equipment for the year 2000 modifications. The Plan Sponsor anticipates substantially completing this phase of the project by the end of 1999. Costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Plan Sponsor. For the second phase of the project, Plan management established formal communications with its third party service providers to determine that they have developed plans to address their own year 2000 problems as they relate to the Plan's operations. All third party service providers have indicated that they will be year 2000 compliant by the end of 1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers are not completed timely, the year 2000 problem could have a material impact on the operations of the Plan. Plan management has not developed a contingency plan, because they are confident that all systems will be year 2000 ready. F-25 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 1 Consent of Independent Auditors (Associates Investment Plan for Hourly Associates) 2 Consent of Independent Auditors (Associates Investment Plan for Salaried Associates) EX-1 2 CONSENT OF INDEPENDENT AUDITORS Exhibit 1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates of our report dated June 25, 1999, with respect to the financial statements of the Phillips-Van Heusen Corportation Associates Investment Plan for Hourly Associates included in this Annual Report (Form 11-K) for the year ended December 31, 1998. /s/ Ernst & Young LLP New York, New York June 25, 1999 EX-2 3 CONSENT OF INDEPENDENT AUDITORS Exhibit 2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates of our report dated June 25, 1999, with respect to the financial statements of the Phillips Van-Heusen Corporation Associates Investment Plan for Salaried Associates included in this Annual Report (Form 11-K) for the year ended December 31, 1998. /s/ Ernst & Young LLP New York, New York June 25, 1999 -----END PRIVACY-ENHANCED MESSAGE-----