-----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, EfnDPRlgWkLRR/xOGGX/0joWHDvU106Twd77iszTI+27EI9Iw8Y/h9cYxM40liwV w2pRyr09w5G2gIApSJnH0A== 0000086346-02-000008.txt : 20020514 0000086346-02-000008.hdr.sgml : 20020514 ACCESSION NUMBER: 0000086346-02-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020330 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SALANT CORP CENTRAL INDEX KEY: 0000086346 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 133402444 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06666 FILM NUMBER: 02646358 BUSINESS ADDRESS: STREET 1: 1114 AVE OF THE AMERICAS STREET 2: 36TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2122217500 MAIL ADDRESS: STREET 1: 1058 CLAUSSEN RDSTE 101 CITY: AUGUSTA STATE: GA ZIP: 30907 10-Q 1 form10q1stquarter2002.txt FORM 10Q 1ST QUARTER 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 2002. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-6666 SALANT CORPORATION (Exact name of registrant as specified in its charter) Delaware 13-3402444 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1114 Avenue of the Americas, New York, New York 10036 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 221-7500 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 whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No As of April 25, 2002 there were outstanding 9,901,140 shares of the Common Stock of the registrant. TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Condensed Consolidated Statements of Operations 3 Condensed Consolidated Statements of Comprehensive Income/(Loss) 4 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. OTHER INFORMATION 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURE 18 Salant Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except per share data) Three Months Ended March 30, March 31, 2002 2001 Net sales $ 60,275 $ 49,448 Cost of goods sold 44,194 38,935 Gross profit 16,081 10,513 Selling, general and administrative expenses (15,405) (13,016) Royalty income 42 3 Amortization of intangibles (280) (157) Other income/(expense) 2 (13) Income/(loss) before interest and income taxes 440 (2,670) Interest income, net 25 234 Income/(Loss) before income taxes 465 (2,436) Income tax (expense)/benefit (2) 37 Net income/(loss) $ 463 $ (2,399) Basic and diluted income/(loss) per share $ .05 $ (0.24) Weighted average common stock outstanding - Basic 9,901 9,901 Weighted average common stock outstanding - Diluted 9,944 9,901 See Notes to Condensed Consolidated Financial Statements. Salant Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) (Unaudited) (Amounts in thousands) Three Months Ended March 30, March 31, 2002 2001 Net income/(loss) $ 463 $ (2,399) Other comprehensive income, net of tax: Foreign currency translation adjustments 2 -- Comprehensive income/(loss) $ 465 $(2,399) See Notes to Condensed Consolidated Financial Statements.
Salant Corporation and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) March 30, December 29, March 31, 2002 2001 2001 (Unaudited) (*) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 5,912 $ 19,820 $ 2,022 Accounts receivable, net 36,149 28,544 34,754 Inventories (Note 3) 29,732 34,735 48,046 Prepaid expenses and other current assets 1,886 3,658 2,683 Total current assets 73,679 867572 87,505 Property, plant and equipment, net 12,410 12,179 13,016 Intangible assets (Note 2 and 4) 23,182 11,217 11,673 Other assets 7,277 7,579 7,419 Total assets $ 116,548 $ 117,732 $ 119,613 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,251 $ 10,576 $ 10,981 Accrued liabilities 6,284 6,619 7,641 Net liabilities of discontinued Operations (Note 7) 481 493 750 Reserve for business restructuring (Note 6) 567 584 968 Total current liabilities 16,583 18,272 20,340 Deferred liabilities 4,417 4,377 4,299 Shareholders' equity Common Stock 10,000 10,000 10,000 Additional paid-in capital 206,040 206,040 206,040 Deficit (115,430) (115,893) (116,416) Accumulated other comprehensive loss (Note 5) (4,864) (4,866) (4,452) Less - treasury stock, at cost (198) (198) (198) Total shareholders' equity 95,548 95,083 94,974 Total liabilities and shareholders' equity $ 116,548 $ 117,732 $ 119,613 (*) Derived from the audited financial statements.
See Notes to Condensed Consolidated Financial Statements.
Salant Corporation and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands) Three Months Ended March 30, March 31, 2002 2001 Cash Flows from Operating Activities: Net income/(loss) $ 463 $ (2,399) Adjustments to reconcile income/(loss) from continuing operations to net cash provided/(used) by operating activities: Depreciation 1,135 1,120 Amortization 280 157 Change in operating assets and liabilities (net of businesses acquired): Accounts receivable (7,605) (18,166) Inventories 5,564 (816) Prepaid expenses and other assets 1,957 (226) Accounts payable (1,325) (3,817) Accrued and other liabilities (281) (3,525) Reserve for business restructuring (17) (102) Net cash provided/(used) by continuing operations 171 (27,774) Cash (used)/provided by discontinued operations (12) 6 Net cash provided/(used) by operating activities 159 (27,768) Cash Flows from Investing Activities: Capital expenditures (974) (605) Store fixture expenditures -- (249) Acquisition of a business (13,095) -- Asset Purchase -- (4,039) Net cash (used) by investing activities (14,069) (4,893) Cash Flows from Financing Activities: Other, net 2 -- Net cash provided by financing activities 2 -- Net decrease in cash and cash equivalents (13,908) (32,661) Cash and cash equivalents - beginning of year 19,820 34,683 Cash and cash equivalents - end of quarter $ 5,912 $ 2,022 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 49 $ 4 Income taxes $ -- $ -- Guaranteed future purchase price payment $ -- $ 250
See Notes to Condensed Consolidated Financial Statements. SALANT CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Amounts in Thousands of Dollars, Except Share Data) (Unaudited) Note 1. Summary of Significant Accounting Policies Basis of Presentation and Consolidation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Salant Corporation and its subsidiaries (collectively, the "Company" or "Salant"). The Company's principal business is the designing, sourcing, importing and marketing of men's apparel and accessories. The Company sells its products to retailers, including department stores, specialty stores and off-price retailers, in addition to its own retail outlet stores. The results of the Company's operations for the three months ended March 30, 2002 and March 31, 2001 are not necessarily indicative of a full year's operations. In the opinion of management, the accompanying financial statements include all adjustments of a normal recurring nature, which are necessary to present fairly such financial statements. Certain reclassifications were made to the prior period financial statements to conform to the 2002 presentation. Significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on form 10-K for the fiscal year ended December 29, 2001. New Accounting Standards Effective December 30, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which addresses the financial accounting and reporting standards for the acquisition of intangible assets outside of a business combination and for goodwill and other intangible assets subsequent to their acquisition. This accounting standard requires that goodwill be separately disclosed from other intangible assets in the statement of financial position and no longer be amortized, but tested for impairment on a periodic basis. The provisions of this accounting standard also require the completion of a transitional impairment test within six months of adoption, with any impairments identified treated as a cumulative effect of a change in accounting principle. The Company expects to complete the transitional impairment test during the quarter ending June 29, 2002. In accordance with SFAS No. 142, the Company discontinued the amortization of goodwill effective December 30, 2001. Previously reported net income for the quarter ended March 31, 2001 would have increased by $27 due to the amounts adjusted for the exclusion of goodwill amortization. In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of" and was effective for the first quarter in the fiscal year ending December 28, 2002. The adoption of this Statement did not have an impact on the consolidated financial statements. Note 2. Acquisition of a Business On January 4, 2002, Salant Corporation, through its wholly owned subsidiary, Salant Holding Corporation ("SHC"), acquired from Axis Clothing Corporation ("Axis"), certain of its assets pursuant to an Asset Purchase Agreement between SHC, Axis and Richard Solomon ("Solomon") an individual. The assets acquired from Axis consisted of, among other things, trademarks, inventory, contract rights, fixed assets and certain office equipment primarily located in California (collectively, the "Axis Assets"). As a result of the acquisition, Salant further diversified its channels of distribution beyond traditional department stores. The results of Axis' operations are included in the statement of operations from the acquisition date. The Company did not assume any accounts payable, accrued liabilities or debt, however it did assume several leases and contracts. In conjunction with the Asset Purchase Agreement, a three-year employment contract was signed between Solomon and SHC, along with SHC signing an agreement to lease office space (at current market rates) from Solomon. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus, the allocation of the purchase price is subject to refinement. Currently, preliminary estimates have allocated $300 to intangible assets that will be amortized over a 6-month period. The remaining $11,944 will be allocated to intangibles which will not be subject to amortization, such as goodwill and trademarks, but will be tested for impairment on a periodic basis. The following table summarizes the estimated fair values of the assets acquired at the date of acquisition: Current assets $ 751 Property, plant, and equipment 100 Intangible assets 300 Goodwill and other identified intangibles 11,944 Total assets acquired $13,095 The aggregate purchase price for the Axis Assets was approximately $12,448, plus estimated direct acquisition costs of $647. Of the total purchase price, $10,648 was paid at closing and $1,800 has been placed in escrow and is payable in equal payments over the next 2 years. The purchase price was based upon arms-length negotiations considering (i) the value of the Axis brand, (ii) the quality of the Axis Assets and (iii) the estimated cash flow from the Axis Assets. The principal source of funds for the acquisition of the Axis Assets was from working capital. The following unaudited consolidated pro forma results of operations of the Company for the three months ended March 31, 2001 give effect to the acquisition as if it occurred on January 2, 2001: March 31, 2001 (Unaudited) Net Sales $ 60,406 Net Loss $ (685) Basic & Diluted Loss per Share $ (0.07) The unaudited pro forma information above has been prepared for comparative purposes only and includes certain adjustments to the Company's historical statements of income, such as the recording of goodwill and increased interest expense, or reduction of interest income, due to the cost of the acquisition. The results do not purport to be indicative of the results of operations that would have resulted had the acquisition occurred at the beginning of the period or of future results of operations of the consolidated entities. Note 3. Inventory March 30, December 29, March 31, 2002 2001 2001 Finished goods $ 22,758 $ 23,188 $ 36,826 Work-in-Process 5,280 9,310 6,694 Raw materials and supplies 3,313 4,047 6,474 Total inventory 31,351 36,545 49,994 Inventory markdown reserves (1,619) (1,810) (1,948) Net inventory $ 29,732 $ 34,735 $ 48,046 Note 4. Intangible Assets In accordance with SFAS No. 142, the Company discontinued the amortization of goodwill effective December 30, 2001. During the first quarter of 2002, the Company recorded amortization expense for identified intangible assets with finite lives of $280 and estimated amortization expense for fiscal years 2003 through 2007 will be approximately $650 per year. The intangible assets (unamortized and amortized) are associated with the wholesale segment of the Company and are as follows:
March 30, 2002 December 29, 2001 Carrying Accumulated Carrying Accumulated Amount Amortization Net Amount Amortization Net Amortizable Intangible Assets Licenses $11,161 $(5,140) $ 6,021 $11,161 $(5,039) $ 6,122 Trademarks 4,600 (1,600) 3,000 4,600 (1,572) 3,028 Other 300 (150) 150 -- -- -- Total $16,061 $(6,890) $ 9,171 $15,761 $(6,611) $ 9,150 Unamortizable Intangible Assets Goodwill $ 2,175 $ (108) $ 2,067 $ 2,175 $ (108) $ 2,067 To be allocated - Axis 11,944 -- 11,944 -- -- -- Total $14,119 $ (108) $14,011 $ 2,175 $ (108) $ 2,067 Total Intangible Assets $30,180 $(6,998) $23,182 $17,936 $(6,719) $11,217
Note 5. Accumulated Other Comprehensive Income/(Loss) Foreign Minimum Accumulated Currency Pension Other Translation Liability Comprehensive Adjustment Adjustment Income/(Loss) 2002 Beginning of year balance $ (113) $ (4,753) $ (4,866) Three months ended March 30, 2002 change 2 -- 2 End of quarter balance $ (111) $ (4,753) $ (4,864) 2001 Beginning of year balance $ (118) $ (4,334) $ (4,452) Three months ended March 31, 2001 change -- -- -- End of quarter balance $ (118) $ (4,334) $ (4,452) Note 6. Restructuring Reserve In the first quarter of 2002, the Company used $17 of the restructure reserve primarily for employee costs necessary to complete the shut down of Mexican operations and other employee benefit costs. As of March 30, 2002, the reserve balance was $567 of which $475 was reserved for severance and other employee costs and $92 was reserved for various other restructuring costs. Note 7. Discontinued Operations In the first quarter of 2002, the net liabilities of discontinued operations decreased by $12, due to the reduction of the reserve for miscellaneous legal fees. As of March 30, 2002, the net liabilities of discontinued operations consist of $450 of reserve for discontinued operations and $31 of miscellaneous liabilities. The reserve for discontinued operations consists of $390 for severance and other employee costs, and $60 of other restructuring costs. Note 8. Segment Reporting The Company operates in two business segments, wholesale and retail. The wholesale apparel segment consists of businesses that design, produce, source and market men's apparel and accessories under various trademarks owned or licensed by the Company, or by its customers. The retail segment consists of a chain of retail outlet stores, through which it sells products made under the Perry Ellis trademarks by the Company and other Perry Ellis licensees. As of March 30, 2002, the Company operated 41 Perry Ellis retail outlet stores. The Company's total assets as of March 30, 2002, March 31, 2001 and December 29, 2001 and the results of operations for the three-months ended March 30, 2002 and March 31, 2001, by segment, were as follows: March 30, March 31, December 29, 2002 2001 2001 Total Assets Wholesale $107,585 $110,719 $110,402 Retail 8,963 10,242 9,185 $116,548 $120,961 $119,587 Net Sales Wholesale $ 54,921 $ 44,905 Retail 5,354 4,543 $ 60,275 $ 49,448 Gross Profit Wholesale $ 13,740 $ 8,520 Retail 2,341 1,993 $ 16,081 $ 10,513 Income/(Loss) before Interest and Income Taxes Wholesale $ 1,350 $ (1,818) Retail (910) (852) $ 440 $ (2,670) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations First Quarter of 2002 Compared with First Quarter of 2001 Net Sales Net sales increased by $10.8 million, or 21.9%, in the first quarter of 2002, as compared to the first quarter of 2001. This increase is the result of net sales generated by newly acquired and licensed wholesale businesses. Net sales for the wholesale segment increased $10.0 million, or 22.3%, in the first quarter of 2002, as compared to the first quarter of 2001. Existing wholesale businesses decreased $7.9 million in the first quarter of 2002, primarily due to the softness at the department store level of distribution and a reduction of close-out sales due to a decrease of excess inventory. Newly acquired and licensed wholesale businesses accounted for an increase of $17.9 million for the first quarter of 2002. Net sales for the retail segment increased by $0.8 million, or 17.9%, in the first quarter of 2002, as compared to the first quarter of 2001. The primary reason for this increase was due to the additional Perry Ellis retail stores opened between March 31, 2001 and March 30, 2002. Gross Profit The gross profit percentage in the first quarter of 2002 increased to 26.7% from 21.3% in the first quarter of 2001. Total wholesale gross profit increased $5.2 million from the first quarter of 2001, and the gross profit percentage for the wholesale segment increased to 25.0% in the first quarter of 2002 from 19.0% in the first quarter of 2001. The increase is primarily the result of a decrease in sales deductions from customers and a decrease in prior-season inventory disposition losses. Total gross profit for the retail segment increased, due to additional stores, by $0.3 million in the first quarter of 2002, from the first quarter of 2001. The retail segment gross profit percentage remained relatively constant at 43.7% for the first quarter of 2002, as compared to the first quarter of 2001 at 43.9%. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses in the first quarter of 2002 increased to $15.4 million (25.6% of sales) from $13.0 million (26.3% of sales) as compared to the first quarter of 2001, but decreased as a percentage of net sales. The increase in total SG&A is the result of additional expenses related to new businesses and additional retail outlet stores. Income/Loss Before Interest and Income Taxes Income before interest and income taxes was $0.4 million for the first quarter of 2002 as compared to a loss of $2.7 million for the first quarter of 2001. The increase is primarily the result of higher net sales and improved gross margins contributed by the new businesses. The retail segment's loss from operations before interest and income taxes increased to $0.9 million in the first quarter of 2002 from a loss of $0.8 million in the first quarter of 2001. Interest Income, Net Net interest income was $25 thousand for the first quarter of 2002 as compared to $234 thousand for the first quarter of 2001. The decrease is the result of lower invested cash balances due to the acquisition of the Axis Assets and a lower interest rate in the first quarter of 2002. Net Income/Loss In the first quarter of 2002, the Company reported net income of $0.5 million, or $.05 per share, as compared to net loss of $2.4 million, or $.24 per share in the first quarter of 2001. Earnings/Loss Before Interest, Taxes, Depreciation and Amortization Earnings before interest, taxes, depreciation and amortization charges were $1.9 million (3.1% of sales) for the first quarter of 2002, compared to a loss of $1.3 million (2.8% of net sales) in the first quarter of 2001. The Company believes this information is helpful in understanding cash flow from operations that is available for potential acquisitions and capital expenditures. This measure is not contained in Generally Accepted Accounting Principles and is not a substitute for operating income, net income or net cash flows from operations. Liquidity and Capital Resources On May 11, 1999, the Company entered into a syndicated revolving credit facility, (the "Credit Agreement"), as amended and restated on November 30, 2001, with The CIT Group/Commercial Services, Inc. ("CIT"). The Credit Agreement provides for a general working capital facility, in the form of direct borrowings and letters of credit, up to $85 million subject to an asset-based borrowing formula. The Credit Agreement consists of an $85 million revolving credit facility, with at least a $45 million letter of credit subfacility. As collateral for borrowings under the Credit Agreement, the Company granted to CIT and a syndicate of lenders arranged by CIT (the "Lenders") a first priority lien on and security interest in substantially all of the assets of the Company. The Credit Agreement has an initial term of three years. Effective May 11, 2002, the Company signed an amendment with CIT to extend the Credit Agreement for an additional three years with similar or more favorable terms. The Credit Agreement also provides, among other things, that (i) the Company will be charged an interest rate on direct borrowings of .25% in excess of the Prime Rate or at the Company's request, 2.25% in excess of LIBOR (as defined in the Credit Agreement), and (ii) the Lenders may, in their sole discretion, make loans to the Company in excess of the borrowing formula but within the $85 million limit of the revolving credit facility. The Company is required under the agreement to maintain certain financial covenants relating to consolidated tangible net worth, capital expenditures, minimum pre-tax income and minimum interest coverage ratio. The Company was in compliance with all applicable covenants at March 30, 2002. At March 30, 2002, there were no direct borrowings outstanding; letters of credit outstanding under the Credit Agreement were $21.7 million and the Company had unused availability, based on outstanding letters of credit and existing collateral, of $39.6 million and cash of approximately $5.9 million available to fund its operations. At the end of the first quarter of 2001, there were no direct borrowings outstanding; letters of credit outstanding were $30.8 million, and the Company had unused availability of $36.7 million and cash of approximately $2.0 million available to fund its operations. March 30, March 31, 2002 2001 Maximum Availability under Credit Agreement $61.3 $67.5 Borrowings under Credit Agreement -- -- Outstanding Letters of Credit 21.7 30.8 Current Availability under Credit Agreement $39.6 $36.7 Cash on Hand 5.9 2.0 Available to fund operations $45.5 $38.7 The Company's cash provided by operating activities for the first three months of 2002 was $0.2 million, which primarily reflects (i) an increase in net accounts receivable of $7.6 million, (ii) a decrease in net inventories of $5.6 million, (iii) a decrease in prepaid assets of $3.8 million, (iv) a decrease in deferred liabilities of $1.8 million, (v) a decrease in accounts payable of $1.3 million, (vi) a decrease in accrued liabilities and reserve for business restructuring of $0.3 million, and (vii) net income from continuing operations of $0.5 million. In addition, non-cash charges for depreciation and amortization totaled $1.4 million. Cash used by investing activities for the first three months of 2002 was $14.1 million, which reflects $13.1 million used to purchase certain assets of Axis Clothing Corporation and $1.0 million for capital expenditures. During fiscal 2002, the Company plans to make capital expenditures of approximately $5.1 million and to spend $1.0 million for the installation of fixtures in department stores. Working Capital At March 30, 2002, working capital totaled $57.1 million as compared to $67.2 million at the end of the first quarter of 2001 and the current ratio improved to 4.4:1 as compared to 4.3:1 in the first quarter of 2001. The components of working capital also changed significantly in the first quarter of 2002 as compared to the first quarter of 2001. Cash increased by $3.9 million and current liabilities decreased by $3.8 million, which were offset by a decrease in inventory, and the purchase of the Axis Assets. The decrease in inventory is due to improved inventory management. Liabilities decreased $5.0 million in the first quarter of 2002 as compared to the first quarter of 2001 due to the settlement of restructuring charges and the timing of the payments in the normal course of business. Accounts receivable increased by $1.4 million due to an increase in net sales from the first quarter of 2001. Factors that May Affect Future Results and Financial Condition. This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, the Company cautions that assumed facts or bases almost always vary from the actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. Where, in any forward-looking statement, the Company or its management expresses an expectation or belief as to future results, there can be no assurance that the statement of the expectation or belief will result or be achieved or accomplished. The words "believe", "expect", "estimate", "project", "seek", "anticipate" and similar expressions may identify forward-looking statements. The Company's future operating results and financial condition are dependent upon the Company's ability to successfully design, source, import and market apparel. Because of the following factors, as well as other factors affecting the Company's operating results and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors are cautioned not to use historical trends to anticipate results or trends in the future. In addition, the Company's participation in the highly competitive apparel industry often results in significant volatility in the Company's common stock price. The following are identified as important factors that could cause results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company: Competition. The apparel industry in the United States is highly competitive and characterized by a relatively small number of multi-line manufacturers (such as the Company) and a large number of specialty manufacturers. The Company faces substantial competition in its markets from manufacturers in both categories. Many of the Company's competitors have greater financial resources than the Company. The Company also competes for private label programs with the internal sourcing organizations of many of its own customers. Strategic Initiatives. In the first quarter of 2002, the Company acquired certain assets and trademarks of Axis which designs, produces, and markets better men's sportswear. In the first quarter of 2001, the Company purchased certain assets and trademarks of Tricots St. Raphael, Inc. which designs, produces, and markets better men's sweaters and sportswear. As a result of the acquisitions, Salant has diversified its operations by expanding into alternate channels of distribution. Management of the Company is continuing to explore various strategic opportunities, including but not limited to, new licensing opportunities and/or acquisitions. Management is also exploring ways to increase productivity and efficiency, and to reduce the cost structures of its respective businesses. Through this process management expects to expand its distribution channels and achieve effective economies of scale. No assurance may be given that any transactions resulting from this process will be announced or completed. Apparel Industry Cycles and other Economic Factors. Historically, the apparel industry has been subject to substantial cyclical variation, with consumer spending on apparel tending to decline during recessionary periods. A decline in the general economy or uncertainties regarding future economic prospects may affect consumer-spending habits, which, in turn, could have a material adverse effect on the Company's results of operations and financial condition. Retail Environment. Various retailers, including some of the Company's customers, have experienced declines in revenue and profits in recent periods. To the extent that these difficult financial conditions continue at retail, there can be no assurance that the Company's financial condition and results of operations would not be adversely affected. Seasonality of Business and Fashion Risk. The Company's principal products are organized into seasonal lines for resale at the retail level during the Spring, Transition, Fall and Holiday Seasons. Typically, the Company's products are designed as much as one year in advance and manufactured approximately one season in advance of the related retail selling season. Accordingly, the success of the Company's products is often dependent on the ability of the Company to successfully anticipate the needs of the Company's retail customers and the tastes of the ultimate consumer up to a year prior to the relevant selling season. Foreign Operations. The Company's foreign sourcing operations are subject to various risks of doing business abroad, including currency fluctuations (although the predominant currency used is the U.S. dollar), quotas, and in certain parts of the world, political instability. Any substantial disruption of its relationship with its foreign suppliers could adversely affect the Company's operations. Some of the Company's imported merchandise is subject to United States Customs duties. In addition, bilateral agreements between the major exporting countries and the United States impose quotas, which limit the amount of certain categories of merchandise that may be imported into the United States. Any material increase in duty levels, material decrease in quota levels or material decrease in available quota allocation could adversely affect the Company's operations. The Company's operations in Asia are subject to certain political and economic risks including, but not limited to, political instability, changing tax and trade regulations and currency devaluations and controls. Although the Company has experienced no material foreign currency transaction losses, its operations in the region are subject to an increased level of economic instability. The impact of these events on the Company's business, and in particular its sources of supply, could have a material adverse effect on the Company's performance. Dependence on Contract Manufacturing. The Company produces substantially all of its products (in units) through arrangements with independent contract manufacturers. The use of such contractors and the resulting lack of direct control could subject the Company to difficulty in obtaining timely delivery of products of acceptable quality. In addition, as is customary in the industry, the Company does not have any long-term contracts with its fabric suppliers or product manufacturers. While the Company is not dependent on one particular product manufacturer or raw material supplier, the loss of several such product manufacturers and/or raw material suppliers in a given season could have a material adverse effect on the Company's performance. New Accounting Pronouncements. Effective December 30, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which addresses the financial accounting and reporting standards for the acquisition of intangible assets outside of a business combination and for goodwill and other intangible assets subsequent to their acquisition. This accounting standard requires that goodwill be separately disclosed from other intangible assets in the statement of financial position and no longer be amortized, but tested for impairment on a periodic basis. The provisions of this accounting standard also require the completion of a transitional impairment test within six months of adoption, with any impairments identified treated as a cumulative effect of a change in accounting principle. The Company expects to complete the transitional impairment test during the quarter ending June 29, 2002. In accordance with SFAS No. 142, the Company discontinued the amortization of goodwill effective December 30, 2001. Previously reported net income for the quarter ended March 31, 2001 would have increased by $27 due to the amounts adjusted for the exclusion of goodwill amortization. In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of" and was effective for the first quarter in the fiscal year ending December 28, 2002. The adoption of this Statement did not have an impact on the consolidated financial statements. PART II - OTHER INFORMATION Item 5. Other Information Magten Asset Management Corp. ("Magten"), a registered investment advisor, reported on a Form 4 (filed on May 10, 2002) and Amendment No. 3 to Schedule 13D (filed on May 14, 2002), that it had distributed in kind 2,545,040 shares of the Company's common stock to an investment advisory client on April 15, 2002. The Company believes that the advisory client is General Motors Investment Management Corp. As a result of the distribution of such shares Magten's beneficial ownership of shares of common stock has been reduced from 5,984,850, representing approximately 60.4% of the outstanding common stock, to 3,439,810, representing approximately 34.7% of the outstanding common stock. Talton R. Embry, a managing director and the sole shareholder of Magten, is a director of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits Exhibit 10.55 Amendment No. 1 dated May 11, 2002 to the Second Amended and Restated Revolving Credit and Security Agreement between The Company and The CIT Group/Commercial Services, Inc.. Reports on Form 8-K On January 18, 2002 the Company filed a current report on Form 8-K relating to the purchase of certain assets of Axis Clothing Corporation. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SALANT CORPORATION Date: May 14, 2002 /s/ Awadhesh K. Sinha Awadhesh K. Sinha Chief Operating Officer and Chief Financial Officer EX-10 3 cit_renewal51102.txt EXHIBIT 10.55 CIT RENEWAL DATED MAY 11, 2002 [EXECUTION COPY] AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT AMENDMENT NO. 1, dated as of May 11, 2002 (this "Amendment") to the Second Amended and Restated Revolving Credit and Security Agreement, dated November 30, 2001 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") by and among SALANT CORPORATION, a Delaware corporation ("Salant"), SALANT HOLDING CORPORATION, a Delaware corporation ("Holding", and together with Salant, collectively, the "Borrowers"), the lenders party thereto (collectively, the "Lenders"), including THE CIT GROUP/COMMERCIAL SERVICES, INC. ("CIT"), the sole Lender as of the date hereof, and CIT, as agent, for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, the Borrowers have requested that the Agent and the Lenders agree to extend the term and amend certain provisions of the Credit Agreement; and WHEREAS, the Agent and the Lenders have agreed to extend the term and make such amendments to the Credit Agreement upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and in the Credit Agreement, the parties hereto agree as follows: 1. Defined Terms. Capitalized terms used and not otherwise defined herein shall have their respective meanings as defined in the Credit Agreement. 2. Amendment of Section 1. Section 1 of the Credit Agreement is hereby amended by adding the following new Sections 1.7(A), 1.7(B), 1.7(C), 1.25(A), 1.25(B) and 1.79(A): "1.7(A) 'Amendment No. 1' shall mean Amendment No. 1 to Second Amended and Restated Revolving Credit and Security Agreement, dated as of May 11, 2002, executed by and among Agent, Lenders and Borrowers and consented to by the Guarantors." "1.7(B) 'Amendment No. 1 Effective Date' shall mean May 11, 2002. "1.7(C) 'Availability' shall mean, as of any date, the amount, if any, by which (i) the aggregate amount available to the Borrowers under the Lending Formulas, not to exceed the Maximum Credit, exceeds (ii) the aggregate principal amount of the Loans and Letter of Credit Accommodations outstanding and any reserves established pursuant to Section 3.3." "1.25(A) 'Consolidated Working Capital' shall mean, as of any date, the amount by which total current assets exceed total current liabilities, determined on a consolidated basis, for Salant and its Subsidiaries in accordance with GAAP." "1.25(B) 'Contract Year' shall mean the consecutive twelve (12) month period commencing May 11, 2002 and each consecutive twelve (12) month period or portion thereof immediately thereafter during the term hereof." "1.79(A) 'Prime Rate Loans' shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms hereof." 3. Amendment of Section 1.51. The definition of "Interest Rate" is hereby amended by replacing the phrase " 'Interest Rate' shall mean as to Prime Rate Loans, a rate of one-quarter (.25%) percent per annum in excess of the Prime Rate" set forth in such definition with the phrase " 'Interest Rate' shall mean as to Prime Rate Loans, a rate equal to the Prime Rate". 4. Amendment of Section 1.79. The definition of " Prime Rate" is hereby amended by replacing "The Chase Manhattan Bank" wherever set forth therein with "JPMorgan Chase Bank". 5. Amendment of Section 3. Section 3 of the Credit Agreement is hereby amended by adding the following new Section 3.14: "3.14 'Clean-Up' Borrowers shall reduce the aggregate amount of Loans outstanding to $0 for thirty (30) consecutive days during each Contract Year, provided, that any Loan arising during such thirty (30) day period out of a Letter of Credit Accommodation, or any charge or fee, which Loan is repaid in full by the close of the Business Day next following the day on which such Loan is made shall not constitute a breach of this Section 3.14." 6. Amendment of Section 3.2(b). Section 3.2(b) of the Credit Agreement is hereby amended by adding the following at the end thereof: "Effective as of the Amendment No. 1 Effective Date, notwithstanding anything to the contrary contained in Schedule 3.2(b) hereto, letter of credit fees payable upon negotiation or payment of documentary letters of credit shall be payable in respect of the first Fifty Million Dollars ($50,000,000) of documentary letters of credit negotiated or paid in each Contract Year. Effective as of the Amendment No. 1 Effective Date, Schedule 3.2(b) hereto shall be deemed amended in accordance with the preceding sentence and, except as so amended, shall remain in full force and effect in accordance with its terms." 7. Amendment of Section 3.7. Section 3.7 of the Credit Agreement is amended by replacing the phrase "an unused line fee at a rate equal to one-quarter of one percent (.25%) per annum" with the phrase "an unused line fee at a rate equal to one-fifth of one percent (.20%) per annum". 8. Amendment of Section 3.8. Section 3.8 of the Credit Agreement is amended by replacing the phrase "a collateral management fee in an amount equal to $8,333 for each month (or part thereof)" with the phrase "a collateral management fee in an amount equal to $4,000 for each month (or part thereof)". 9. Amendment of Section 3.9. Section 3.9 of the Credit Agreement is amended by deleting it in its entirety and replacing it with the following new Section 3.9: "Section 3.9 Agency Fee. As compensation for acting as Agent and administering the Credit Facility for the benefit of Borrowers and Lenders, Borrowers shall pay to the Agent, for its own account, an agency fee for each month (or part thereof) during the term hereof, as follows: (a) $3,125, if, after the Amendment No. 1 Effective Date, the total of the Loans outstanding plus the face amount of Letter of Credit Accommodations issued under the Credit Facility exceeds $50,000,000 in the aggregate at the end of any month (other than the months of July, August and September), such payment to commence the month next following the end of such month; or (b) $6,250, if, after the Amendment No. 1 Effective Date, the total of the Loans outstanding plus the face amount of Letter of Credit Accommodations issued under the Credit Facility exceeds $60,000,000 in the aggregate at the end of any month (other than the months of July, August and September), such payment to commence the month next following the end of such month. All agency fees shall be fully earned and payable monthly in advance on the first day of each month that such fee is payable, except that with respect to the first month for which such agency fee is payable, such agency fee shall be payable in arrears on the first day of the immediately following month. 10. Amendment of Section 7.6. Section 7.6 of the Credit Agreement is hereby amended by adding the following at the end thereof: "In the event that, with the prior written consent of Lenders, either Borrower acquires assets and/or stock of another Person for an aggregate Purchase Price in excess of $1,000,000 ("Material Acquisition") then, after such Borrower has taken title to the property acquired in any such Material Acquisition, the Lenders will give consideration to adjusting, in their discretion, the dollar amount(s)/ratio set forth in (i) Section 3.14 Clean-Up; (ii) Section 7.21 Consolidated Tangible Net Worth, (iii) Section 7.22 Minimum Pre-Tax Income, (iv) Section 7.23 Minimum Interest Coverage Ratio, and/or Section 7.23(A) Consolidated Working Capital. In the case of Consolidated Working Capital, Lenders will also give consideration to establishing, in their discretion, revised minimum Consolidated Working Capital amounts for fiscal 2003 and thereafter based upon Salant projections for such periods submitted to Agent and acceptable to Lenders." 11. Amendment of Section 7.8. Section 7.8 of the Credit Agreement is hereby amended by adding the following at the end of clause (i) thereof: "provided, however, that each Borrower may pay such dividends if (w) at the time of any such payment, no Event of Default has occurred and is continuing or would result from the making of such payment, (x) after giving effect to any such payment, Availability equals or exceeds $15,000,000, (y) the aggregate amount of such dividends paid to shareholders of Salant in respect of any fiscal year does not exceed fifty percent (50%) of Salant's consolidated net income for such fiscal year, and (z) such dividends are declared not later than 180 days after the fiscal year in respect of which such consolidated net income is earned," 12. Amendment of Section 7.21. Section 7.21 of the Credit Agreement is amended by deleting it in its entirety and replacing it with the following new Section 7.21: "Section 7.21. Consolidated Tangible Net Worth. Salant shall maintain as of the end of each fiscal quarter, during each period set forth below, Consolidated Tangible Net Worth in an amount not less than the amount set forth below opposite each such period: Minimum Consolidated Period Tangible Net Worth Beginning of the first fiscal quarter of 2002 through the end of the third fiscal quarter of 2002 $65,000,000 Beginning of the fourth fiscal quarter of 2002 through the end of the third fiscal quarter of $70,000,000 2003 Beginning of the fourth fiscal quarter of 2003 and thereafter $80,000,000" 13. Amendment of Section 7.22. Section 7.22 of the Credit Agreement is amended by deleting it in its entirety and replacing it with the following new Section 7.22: "Section 7.22 Minimum Pre-Tax Income. Salant and its Subsidiaries shall achieve cumulative pre-tax income of not less than (i) $0 for the twelve month period ending at the end of the third fiscal quarter of 2002, (ii) $3,000,000 for each twelve month period through the end of each fiscal quarter beginning with the fourth fiscal quarter of 2002 and ending with the third fiscal quarter of 2003 and (iii) $5,000,000 for each twelve month period through the end of each fiscal quarter beginning with the fourth fiscal quarter of 2003, and thereafter. Notwithstanding anything to the contrary contained in this Section 7.22, write-offs by Salant for intangible assets (including, without limitation, trademarks and goodwill) which Salant would otherwise be required to include in the determination of Salant's pre-tax loss or income under this Section 7.22 shall be excluded from such determinations." 14. Amendment of Section 7.23. Section 7.23 of the Credit Agreement is amended by deleting it in its entirety and replacing it with the following new Section 7.23: "Section 7.23 Minimum Interest Coverage Ratio. Salant shall not permit the ratio of (a) consolidated net income (including royalty income) from continuing operations (excluding any unusual or non recurring items of income or expense) before interest and taxes of Salant and its Subsidiaries, to (b) consolidated interest expense (including all imputed interest on Capitalized Lease Obligations) of Salant and its Subsidiaries, to be less than (i) 2:1 for the nine month period ending at the end of the third fiscal quarter of 2002, and (ii) 3:1 for the twelve month period ending at the end of the fourth fiscal quarter of 2002 and for each twelve month period through the end of each fiscal quarter thereafter." 15. Amendment of Section 7. Section 7 of the Credit Agreement is hereby amended by adding the following new Section 7.23 (A): "Section 7.23 (A) Consolidated Working Capital. Salant shall maintain, as of the end of each fiscal quarter and thereafter as set forth below, Consolidated Working Capital in an amount not less that the amount set forth below opposite each such period: Minimum Consolidated Period Working Capital Second Quarter of 2002 $45,000,000 Third Quarter of 2002 $50,000,000 Fourth Quarter of 2002 and thereafter $55,000,000" 16. Amendment of Section 10.1(a). Section 10.1(a) of the Credit Agreement is hereby amended by replacing the phrase "a term ending May 11, 2002 (the 'Renewal Date') and from year to year thereafter" with the phrase "a term ending May 11, 2005 (the 'Renewal Date') and from year to year thereafter". 17. Amendment of Section 10.1(e). Section 10.1(e) of the Credit Agreement is hereby amended by deleting it in its entirety and replacing it with the following new Section 10.1(e): "(e) If this Agreement terminates upon the occurrence of an Event of Default or at the request of Salant and such termination is effective after May 11, 2002 but on or prior to May 11, 2004, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of the lost profits of Agent and Lenders as a result thereof, Borrowers hereby agree to pay to Agent for the ratable benefit of Lenders, upon the effective date of such termination, an early termination fee in an amount equal to one (1%) percent of the average aggregate daily balance of Loans and Letter of Credit Accommodations outstanding for the twelve (12) month period prior to the Termination Date. Such early termination fee shall be presumed to be the amount of damages sustained by said early termination and each Borrower agrees that it is reasonable under the circumstances currently existing. The early termination fee provided for in this Section 10.1 shall be deemed included in the Obligations." 18. Representations and Warranties Construction. Each of the Borrowers hereby represents and warrants to the Agent and the Lenders that (a) the execution, delivery and performance of this Amendment has been duly authorized by all requisite corporate action on the part of each of the Borrowers and will not violate the certificates of incorporation or by-laws of any of the Borrowers, (b) this Amendment is the legal, valid, binding and enforceable obligation of each of the Borrowers and is enforceable against it in accordance with its terms, (c) the representations and warranties contained in the Credit Agreement are true and correct in all material respects on and as of the date hereof as though made on and as of such date, except to the extent that any such representation or warranty expressly relates to an earlier date and for changes therein permitted or contemplated by the Credit Agreement, and (d) no Event of Default under the Credit Agreement has occurred and is continuing. 19. Conditions Precedent. This Amendment shall be effective upon the satisfaction of each of the following conditions precedent: (a) The Agent shall have received an original of this Amendment, duly authorized, executed and delivered by each of the Borrowers, each of the Guarantors, the Agent and each of the Lenders. (b) No Event of Default shall have occurred and be continuing. (c) The Agent shall have received an original of the Consent of Guarantors, which immediately follows this Amendment, duly authorized, executed and delivered by each of the Guarantors. 20. Effect on the Financing Agreements. (a) On and after the date hereof, each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import, and each reference in the other Financing Agreements to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended hereby. (b) Except as specifically amended herein, the Credit Agreement and all other Financing Agreements shall remain in full force and effect and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Agent or any Lender under any of the Financing Agreements, nor shall it constitute a waiver of any provision of any of the Financing Agreements. 21. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws of the State of New York (without giving effect to principles of conflicts of law). 22. Binding Agreement. This Amendment shall be a binding agreement upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. 23. Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the day and year first above written. SALANT CORPORATION, as Borrower By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, CFO & Secretary SALANT HOLDING CORPORATION, as Borrower By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer THE CIT GROUP/COMMERCIAL SERVICES, INC., as Agent By: /s/Charles M. Carbone Name: Charles M. Carbone Title: Vice President THE CIT GROUP/COMMERCIAL SERVICES, INC., as Lender By: /s/Charles M. Carbone Name: Charles M. Carbone Title: Vice President CONSENT OF GUARANTORS Each of the undersigned, SALANT CORPORATION, SALANT HOLDING CORPORATION, CLANTEXPORT INC., FROST BROS. ENTERPRISES, INC., SLT SOURCING, INC., DENTON MILLS, INC., VERA LICENSING, INC., VERA MANUFACTURING, INC. and SALANT CANADA, INC., each a Guarantor, as defined in the Second Amended and Restated Revolving Credit and Security Agreement, dated as of November 30, 2001, by and among SALANT CORPORATION and SALANT HOLDING CORPORATION, as Borrowers, the financial institutions named therein, as Lenders, and The CIT Group/Commercial Services, Inc., as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), as amended by Amendment No. 1 to Credit Agreement dated as of May 11, 2002 ("Amendment No. 1") to which this Consent of Guarantors is attached, hereby consents to Amendment No. 1 and to the matters contemplated thereby, and hereby confirms and agrees that its Guarantee, as defined in the Credit Agreement, is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respect except that, on and after the effective date of Amendment No. 1, each reference in its Guarantee to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by Amendment No. 1. IN WITNESS WHEREOF, each of the undersigned has caused this Consent of Guarantors to be duly executed and delivered by its authorized officer as of this 11th day of May, 2002. SALANT CORPORATION, as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, CFO & Secretary SALANT HOLDING CORPORATION, as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer [SIGNATURES CONTINUED ON NEXT PAGE] [SIGNATURES CONTINUED FROM PREVIOUS PAGE] CLANTEXPORT INC., as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer FROST BROS. ENTERPRISES, INC., as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer SLT SOURCING, INC., as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer DENTON MILLS, INC., as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer [SIGNATURES CONTINUED ON NEXT PAGE] [SIGNATURES CONTINUED FROM PREVIOUS PAGE] VERA LICENSING, INC., as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer VERA MANUFACTURING, INC., as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer SALANT CANADA INC., as Guarantor By: /s/ Awadhesh K. Sinha Name: Awadhesh K. Sinh Title: COO, Treasurer -----END PRIVACY-ENHANCED MESSAGE-----