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, 1997
------------------------------------------------------
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, 1290
Avenue of the Americas, New York, New York 10104
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 26, 1998 By /s/ Pamela N. Hootkin
----------------------------
Pamela N. Hootkin, Member of
Administrative Committee
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Financial Statements
and Supplemental Schedules
Years ended December 31, 1997 and 1996
Contents
Report of Independent Auditors.............................................. F-2
Financial Statements
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
Supplemental Schedules
AIP Master Trust Assets Held for Investment Purposes........................F-15
AIP Master Trust Reportable Transactions....................................F-16
Note: A schedule of party-in-interest transactions has not been presented
because there were no party-in-interest transactions. Parties-in-interest
transactions are prohibited by the Employee Retirement Income Security Act of
197 (ERISA), Section 406, and there is no statutory or administrative exemption.
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, 1997 and 1996, 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, 1997 and 1996, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of AIP Master Trust Assets Held for Investment Purposes as of December 31, 1997,
and AIP Master Trust Reportable Transactions for the year then ended, are
presented for purposes of complying with the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, and are not a required part of the basic financial
statements. The supplemental schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 18, 1998
F-2
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Statements of Net Assets Available for Plan Benefits
December 31
1997 1996
-------------------------
Assets
Investments, at fair value (Notes A and F):
Shares of registered investment companies:
Equity Fund $1,351,523 $1,008,380
Bond Fund 316,250 275,456
Balanced Fund 932,262 725,489
International Fund 252,818 175,227
Common Stock--Employer Company Fund 3,999,372 4,474,122
Common Trust Fund * 2,361,276 2,528,399
Participant loans receivable 254,492 178,488
-------------------------
Total investments 9,467,993 9,365,561
Liabilities -- --
=========================
Net assets available for plan benefits $9,467,993 $9,365,561
=========================
* 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
1997 1996
-------------------------
Additions
Net transfer from the Associates Investment Plan of PVH
(Crystal Brands Division) $ 10,560 $ --
Contributions:
Employer Company, net of forfeitures 207,366 280,071
Participants 699,527 738,451
-------------------------
906,893 1,018,522
Interest and investment income 236,713 244,897
-------------------------
Total additions 1,154,166 1,263,419
-------------------------
Deductions
Net transfer to the PVH Associates Investment Plan for
Salaried Associates 155,597 210,184
Payments to participants 1,212,919 1,738,933
-------------------------
Total deductions 1,368,516 1,949,117
-------------------------
Net realized and unrealized appreciation of investments
(Note F) 316,782 1,513,860
-------------------------
Net increase 102,432 828,162
Net assets available for plan benefits at beginning of year 9,365,561 8,537,399
=========================
Net assets available for plan benefits at end of year $9,467,993 $9,365,561
=========================
See notes to financial statements.
F-4
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements
December 31, 1997
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 a
portion of 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.
Phillips-Van Heusen Corporation Common Stock Fund: Funds are invested by
the trustees in common shares of the Company. Common shares of the Company
are purchased by the trustees in the open market.
Money Market Fund: Funds are invested by the trustees in short-term
obligations and money market instruments.
Equity Fund: Funds are invested in shares of a registered investment
company that invests primarily in common stocks (Fidelity Growth & Income
Portfolio).
Bond Fund: Funds are invested in shares of a registered investment company
that invests in corporate bonds and U.S. government securities (Fidelity
Intermediate Bond Fund).
Balanced Fund: Funds are invested in shares of a registered investment
company that invests in common stocks, preferred stocks and bonds
(Fidelity Puritan Fund).
International Fund: Funds are invested in shares of a registered
investment company that invests in common stocks and bonds of companies
and governments outside the United States (Templeton Foreign Fund).
F-6
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
A. Description of the Plan (continued)
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
The accounting records of the Plan are maintained on the accrual basis, except
for payments to participants which the Plan accounts for on the cash basis.
Accordingly, the Plan's statements of net assets available for plan benefits do
not reflect amounts payable to terminated, retired or other participants as a
liability.
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
Chase Manhattan Bank for the applicable Chase investment funds. Purchases and
sales of securities are reflected on a trade date basis.
F-7
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
B. Significant Accounting Policies (continued)
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), collectively "the trustees" of the Plan, 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 includes an interest contract with an
insurance company that has been placed into conservatorship. 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, 1997 and 1996, the AIP Master Trust
purchased 41,891 and 101,653 shares, respectively, of the Company's common stock
and received $205,332 and $203,852, respectively, from the Company as payment of
dividends on its common stock. The AIP Master Trust also sold 58,705 and 143,919
shares of the Company's common stock during the years ended December 31, 1997
and 1996, 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-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
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 $ 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
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 $ 252,818 $ -- $ 254,492 $ 9,467,993
==========================================================
F-9
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, 1996 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 $ 14,625,212 $ 8,498,272 $ 1,657,989 $ 4,302,940 $ 6,120,414
Interest and investment income 222,115 381,788 117,857 280,456 223,028
Contributions received:
Employer Company, net of forfeitures 1,953,035 (32,080) (345) 684 (2,348)
Employees 433,614 811,506 391,239 1,146,084 1,746,932
Net realized and unrealized appreciation
(depreciation) 6,089,124 -- (51,827) 452,720 1,230,887
Loans to participants, net of repayments (100,185) (49,585) 290 (42,997) (39,962)
Payments to participants (3,133,303) (2,001,608) (244,452) (594,927) (764,535)
Transfers (to) from other accounts (477,019) (728,934) (52,286) 205,503 870,537
--------------------------------------------------------------------------------
Net assets at end of year $ 19,612,593 $ 6,879,359 $ 1,818,465 $ 5,750,463 $ 9,384,953
================================================================================
Plan's beneficial interest at end of year $ 4,474,122 $ 2,528,399 $ 275,456 $ 725,489 $ 1,008,380
================================================================================
International Loan
Fund Fund Total
--------------------------------------------
Net assets at beginning of year $ 1,440,828 $ 717,488 $ 37,363,143
Interest and investment income 63,686 -- 1,288,930
Contributions received:
Employer Company, net of forfeitures (3,277) -- 1,915,669
Employees 521,595 -- 5,050,970
Net realized and unrealized appreciation
(depreciation) 246,777 -- 7,967,681
Loans to participants, net of repayments (19,889) 252,328 --
Payments to participants (205,799) -- (6,944,624)
Transfers (to) from other accounts 182,199 -- --
--------------------------------------------
Net assets at end of year $ 2,226,120 $ 969,816 $ 46,641,769
============================================
Plan's beneficial interest at end of year $ 175,227 $ 178,488 $ 9,365,561
============================================
Note: Certain funds above include investments in the Chase Manhattan Bank
Domestic Liquidity Fund.
F-10
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
E. Income Tax Status
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) of the Internal Revenue Code (the "IRC") and therefore its related trust
is tax-exempt under Section 501(a) of the IRC. The Plan's most recent
determination letter is dated April 27, 1995. The Administrative Committee of
the Plan is not aware of any course of action, amendments subsequent to the most
recent determination letter or series of events that have occurred that might
adversely affect the qualified status of the Plan.
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
1997 1996
-------------------------
Investments at fair value as determined by
quoted market price:
Shares of registered investment companies:
Fidelity Growth & Income Portfolio,
424,247 and 305,400 shares, respectively * $16,163,805 $ 9,384,931
Fidelity Intermediate Bond Fund,
227,623 and 180,402 shares, respectively 2,314,921 1,818,454
Fidelity Puritan Fund, 484,360 and 333,553
shares, respectively * 9,387,001 5,750,449
Templeton Foreign Fund, 360,337 and 214,876
shares, respectively * 3,585,363 2,226,115
Phillips-Van Heusen Corp. Common Stock Fund
1,394,679 and 1,359,381 shares, respectively * 19,905,879 19,541,102
Investments at estimated fair value:
Common Trust Fund * 9,046,544 6,950,902
Promissory notes (participant loans) 1,371,795 969,816
Interest contract:
Non-performing * 4,575,539 --
-------------------------
Total net assets $66,350,847 $46,661,769
=========================
Plan's beneficial interest $ 9,467,993 $ 9,365,561
=========================
F-11
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
F. Assets of the Plan (continued)
During the years ended December 31, 1997 and 1996, net appreciation of the AIP
Master Trust's investments was $2,968,904 and $7,967,681, respectively, as
follows:
1997 1996
--------------------------
Fair value of assets determined by
quoted market price:
Phillips-Van Heusen Corp. Common Stock Fund $ (299,112) $ 6,089,124
Fidelity Growth & Income Portfolio 2,721,432 1,230,887
Fidelity Intermediate Bond Fund 18,814 (51,827)
Fidelity Puritan Fund 854,817 452,720
Templeton Foreign Fund (327,047) 246,777
--------------------------
Net appreciation in fair value $ 2,968,904 $ 7,967,681
==========================
Plan's beneficial interest $ 316,782 $ 1,513,860
==========================
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
1997
----------
Net assets available for plan benefits per the financial statements $9,467,993
Less amounts allocated to withdrawn participants at December 31, 1997 295,118
----------
Net assets available for plan benefits per the Form 5500 $9,172,875
==========
F-12
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
Notes to Financial Statements (continued)
G. Differences Between Plan Financial Statements and Form 5500 (continued)
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year ended
December 31
1997
-----------
Benefits paid to participants per the financial statements $ 1,212,919
Add amounts allocated to withdrawn participants at December 31, 1997 295,118
Less amounts allocated to withdrawn participants at December 31, 1996 (294,809)
-----------
Benefits paid to participants per the Form 5500 $ 1,213,228
===========
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-13
Supplemental Schedules
F-14
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
AIP Master Trust Assets Held for Investment Purposes
December 31, 1997
Market
Identity of Issuer Description Cost Value
- --------------------------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 424,247 shares $ 11,505,482 $ 16,163,805
Fidelity Intermediate Bond Fund 227,623 shares 2,327,822 2,314,921
Fidelity Puritan Fund 484,360 shares 8,274,270 9,387,001
Templeton Foreign Fund 360,337 shares 3,624,622 3,585,363
Chase Manhattan Bank--
Domestic Liquidity Fund 9,046,544 shares 9,046,544 9,046,544
Phillips-Van Heusen Corporation Common
Stock Fund 1,394,679 shares * 17,708,524 19,905,879
Mutual Benefit Life Insurance Company Interest Contract ** 4,575,539 4,575,539
Promissory notes Participant loans 1,371,795 1,371,795
-----------------------------------
$ 58,434,598 $ 66,350,847
===================================
* Party-in-interest investment (see Note C).
** Maturity date and interest rates are subject to statutory conservatorship
rules.
F-15
Phillips-Van Heusen Corporation
Associates Investment Plan for Hourly Associates
AIP Master Trust Reportable Transactions
Year ended December 31, 1997
Purchase Selling Cost of Net Number of
Party Involved Description of Assets Price Price Assets Sold Gain Transactions
- ---------------------------------------------------------------------------------------------------------------------------
Category (i)--Individual
transactions in excess of
5% of plan assets
Wachovia Bank, N.A. Chase Domestic Liquidity Fund $2,963,108
Category (iii)--Series of
transactions in excess of
5% of plan assets
Chase Manhattan Bank, N.A. Chase Domestic Liquidity Fund 7,609,276 $5,513,634 $5,513,634 $ - 235
There were no category (ii) or (iv) reportable transactions for the year ended
December 31, 1997.
F-16
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Financial Statements
and Supplemental Schedules
Years ended December 31, 1997 and 1996
Contents
Report of Independent Auditors..............................................F-18
Financial Statements
Statements of Net Assets Available for Plan Benefits........................F-19
Statements of Changes in Net Assets Available for Plan Benefits.............F-20
Notes to Financial Statements ..............................................F-21
Supplemental Schedules
AIP Master Trust Assets Held for Investment Purposes ......................F-32
AIP Master Trust Reportable Transactions ...................................F-33
Note: A schedule of party-in-interest transactions has not been presented
because there were no party-in-interest transactions. Parties-in-interest
transactions are prohibited by the Employee Retirement Income Security Act of
1974 ("ERISA"), Section 406, and there is no statutory or administrative
exemption.
F-17
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, 1997 and 1996, 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, 1997 and 1996, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of AIP Master Trust Assets Held for Investment Purposes as of December 31, 1997,
and AIP Master Trust Reportable Transactions for the year then ended, are
presented for purposes of complying with the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, and are not a required part of the basic financial
statements. The supplemental schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
June 18, 1998
F-18
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Statements of Net Assets Available for Plan Benefits
December 31
1997 1996
--------------------------
Assets
Investments (Notes A and E):
Shares of registered investment companies:
Equity Fund $14,747,941 $ 8,328,323
Bond Fund 1,958,204 1,514,892
Balanced Fund 8,374,192 4,969,298
International Fund 3,316,839 2,032,940
Common stock--Employer Company Fund 15,566,503 14,798,535
Common Trust Fund * 6,560,602 4,242,876
Interest contract:
Non-performing (Note F) 4,575,539 --
Participant loans receivable 1,077,960 778,391
--------------------------
Total investments 56,177,780 36,665,255
Liabilities -- --
==========================
Net assets available for plan benefits $56,177,780 $36,665,255
==========================
* Consists of the Money Market Fund (Chase Manhattan Bank Domestic Liquidity
Fund).
See notes to financial statements.
F-19
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Statements of Changes in Net Assets Available for Plan Benefits
Year ended December 31
1997 1996
-------------------------
Additions
Net transfer from the PVH Associates Investment
Plan for Hourly Associates $ 155,597 $ 210,184
Net transfer from the Associates Investment Plan
of PVH (Crystal Brands Division) 14,048,132 --
-------------------------
14,203,729 210,184
-------------------------
Contributions:
Employer Company, net of forfeitures 1,313,423 1,589,047
Participants 4,430,685 4,189,780
-------------------------
5,744,108 5,778,827
Interest and investment income 1,963,586 1,025,344
-------------------------
Total additions 21,911,423 7,014,355
-------------------------
Deductions
Payments to participants 5,026,675 5,050,131
-------------------------
Total deductions 5,026,675 5,050,131
-------------------------
Net realized and unrealized appreciation of
investments (Note E) 2,627,777 6,338,290
-------------------------
Net increase 19,512,525 8,302,514
Net assets available for plan benefits at
beginning of year 36,665,255 28,362,741
-------------------------
Net assets available for plan benefits at
end of year $56,177,780 $36,665,255
=========================
See notes to financial statements.
F-20
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements
December 31, 1997
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. (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 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) 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 a
portion of the Company contribution into any of the Plan's investment options.
F-21
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 seven investment options. A participant may contribute a maximum of
25% of employee contributions into the Phillips-Van Heusen Corporation Common
Stock Fund.
Phillips-Van Heusen Corporation Common Stock Fund: Funds are invested by
the trustees in common shares of the Company. Common shares of the Company
are purchased by the trustees in the open market.
Money Market Fund: Funds are invested by the trustees in short-term
obligations and money market instruments.
Equity Fund: Funds are invested in shares of a registered investment
company that invests primarily in common stock (Fidelity Growth & Income
Portfolio).
Bond Fund: Funds are invested in shares of a registered investment company
that invests in corporate bonds and U.S. government securities (Fidelity
Intermediate Bond Fund).
Balanced Fund: Funds are invested in shares of a registered investment
company that invests in common stock, preferred stocks and bonds (Fidelity
Puritan Fund).
International Fund: Funds are invested in shares of a registered
investment company that invests in common stocks and bonds of companies
and governments outside the United States (Templeton Foreign Fund).
F-22
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
A. Description of the Plan (continued)
Fixed Income Fund: The balance in this fund represents an investment in an
interest contract issued by Mutual Benefit Life Insurance Company which,
as discussed in Note F, has been classified as non-performing at December
31, 1997 and 1996. No new uncommitted investments in interest contracts
were made subsequent to June 30, 1991. Effective July 1, 1995, future
contributions to this fund were prohibited. Upon release of frozen assets,
funds will be transferred into the Money Market Fund where participants
may elect to withdraw or transfer the funds to other investment options.
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-23
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, except
for payments to participants which the Plan accounts for on the cash basis.
Accordingly, the Plan's statements of net assets available for plan benefits do
not reflect amounts payable to terminated, retired or other participants as a
liability.
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
Chase Manhattan Bank for the applicable Chase investment funds. The interest
contract is stated at cost plus accumulated interest. Purchase and sales of
securities are reflected on a trade date basis. Substantially all administrative
expenses are paid by the Company.
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), collectively "the trustees" of the Plan, in 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, 1997 and 1996, the AIP Master Trust
purchased 41,891 and 101,653 shares, respectively, of the Company's common stock
and received $205,332 and $203,852, respectively, from the Company as payment of
dividends on its common stock. The AIP Master Trust also sold 58,705 and 143,919
shares of the Company's common stock during the years ended December 31, 1997
and 1996, 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-24
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, 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
============================================================================
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
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
==========================================================
F-25
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, 1996 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 $ 14,625,212 $ 8,498,272 $ 1,657,989 $ 4,302,940 $ 6,120,414
Interest and investment income 222,115 381,788 117,857 280,456 223,028
Contributions received:
Employer Company, net of
forfeitures 1,953,035 (32,080) (345) 684 (2,348)
Employees 433,614 811,506 391,239 1,146,084 1,746,932
Net realized and unrealized
appreciation (depreciation) 6,089,124 -- (51,827) 452,720 1,230,887
Loans to participants, net of
repayments (100,185) (49,585) 290 (42,997) (39,962)
Payments to participants (3,133,303) (2,001,608) (244,452) (594,927) (764,535)
Transfers (to) from other accounts (477,019) (728,934) (52,286) 205,503 870,537
----------------------------------------------------------------------------
Net assets at end of year $ 19,612,593 $ 6,879,359 $ 1,818,465 $ 5,750,463 $ 9,384,953
============================================================================
Plan's beneficial interest at end of year $ 14,798,535 $ 4,242,876 $ 1,514,892 $ 4,969,298 $ 8,328,323
============================================================================
International Loan
Fund Fund Total
-------------------------------------------
Net assets at beginning of year $ 1,440,828 $ 717,488 $ 37,363,143
Interest and investment income 63,686 -- 1,288,930
Contributions received:
Employer Company, net of
forfeitures (3,277) -- 1,915,669
Employees 521,595 -- 5,050,970
Net realized and unrealized
appreciation (depreciation) 246,777 -- 7,967,681
Loans to participants, net of
repayments (19,889) 252,328 --
Payments to participants (205,799) -- (6,944,624)
Transfers (to) from other accounts 182,199 -- --
-------------------------------------------
Net assets at end of year $ 2,226,120 $ 969,816 $ 46,641,769
===========================================
Plan's beneficial interest at end of year $ 2,032,940 $ 778,391 $ 36,665,255
===========================================
Note: Certain funds above include investments in the Chase Manhattan Bank
Domestic Liquidity Fund.
F-26
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
1997 1996
-------------------------
Investments at fair value as determined
by quoted market price:
Shares of registered investment companies:
Fidelity Growth & Income Portfolio,
424,247 and 305,400 shares, respectively * $16,163,805 $ 9,384,931
Fidelity Intermediate Bond Fund,
227,623 and 180,402 shares, respectively 2,314,921 1,818,454
Fidelity Puritan Fund, 484,360 and 333,553
shares, respectively * 9,387,001 5,750,449
Templeton Foreign Fund, 360,337 and
214,876 shares, respectively * 3,585,363 2,226,115
Phillips-Van Heusen Corp. Common Stock Fund,
1,394,679 and 1,359,381 shares, respectively * 19,905,879 19,541,102
Investments at estimated fair value:
Common Trust Fund * 9,046,544 6,950,902
Promissory notes (participant loans) 1,371,795 969,816
Interest Contract:
Non-performing * 4,575,539 --
-------------------------
Total net assets $66,350,847 $46,641,769
=========================
Plan's beneficial interest $56,177,780 $36,665,255
=========================
F-27
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
E. Assets of the Plan (continued)
During the years ended December 31, 1997 and 1996, net appreciation of the AIP
Master Trust's investments was $2,968,904 and $7,967,681, respectively, as
follows:
1997 1996
--------------------------
Fair value of assets determined by quoted market price:
Phillips-Van Heusen Corp. Common Stock Fund $ (299,112) $ 6,089,124
Fidelity Growth & Income Portfolio 2,721,432 1,230,887
Fidelity Intermediate Bond Fund 18,814 (51,827)
Fidelity Puritan Fund 854,817 452,720
Templeton Foreign Fund (327,047) 246,777
--------------------------
Net appreciation in fair value $ 2,968,904 $ 7,967,681
==========================
Plan's beneficial interest $ 2,627,777 $ 6,338,290
==========================
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.
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.
F-28
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
F. Non-Performing Interest Contract (continued)
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% for January 1, 1997 through June 30, 1997 and 9.75% for July 1, 1997
through December 31, 1997.
G. Income Tax Status
The Internal Revenue Service has ruled that the Plan qualifies under Section
401(a) of the Internal Revenue Code (the "IRC") and, therefore, its related
trust is tax-exempt under Section 501(a) of the IRC. The Plan's most recent
determination letter is dated April 27, 1995. The Administrative Committee of
the Plan is not aware of any course of action, amendments subsequent to the most
recent determination letter or series of events that have occurred that might
adversely affect the qualified status of the Plan.
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
1997
-----------
Net assets available for plan benefits per the financial statements $56,177,780
Less amounts allocated to withdrawn participants at December 31, 1997 1,223,049
===========
Net assets available for plan benefits per the Form 5500 $54,954,731
===========
F-29
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
Notes to Financial Statements (continued)
H. Differences Between Plan Financial Statements and Form 5500 (continued)
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year ended
December 31
1997
-----------
Benefits paid to participants per the financial statements $ 5,026,675
Add amounts allocated to withdrawn participants at December 31, 1997 1,223,049
Less amounts allocated to withdrawn participants at December 31, 1996 (856,171)
-----------
Benefits paid to participants per the Form 5500 $ 5,393,553
===========
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-30
Supplemental Schedules
F-31
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
AIP Master Trust Assets Held for Investment Purposes
December 31, 1997
Market
Identity of Issuer Description Cost Value
- ------------------------------------------------------------------------------------------
Fidelity Growth & Income Portfolio 424,247 shares $11,505,482 $16,163,805
Fidelity Intermediate Bond Fund 227,623 shares 2,327,822 2,314,921
Fidelity Puritan Fund 484,360 shares 8,274,270 9,387,001
Templeton Foreign Fund 360,337 shares 3,624,622 3,585,363
Chase Manhattan Bank--
Domestic Liquidity Fund 9,046,544 shares 9,046,544 9,046,544
Phillips-Van Heusen Corporation Common
Stock Fund 1,394,679 shares * 17,708,524 19,905,879
Mutual Benefit Life Insurance Company Interest Contract ** 4,575,539 4,575,539
Promissory notes Participant loans 1,371,795 1,371,795
-------------------------
$58,434,598 $66,350,847
=========================
* Party-in-interest investment (see Note C).
** Maturity date and interest rates are subject to statutory conservatorship
rules (see Note F).
F-32
Phillips-Van Heusen Corporation
Associates Investment Plan for Salaried Associates
AIP Master Trust Reportable Transactions
Year ended December 31, 1997
Purchase Selling Cost of Net Number of
Party Involved Description of Assets Price Price Assets Sold Gain Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Category (i)--Individual transactions
in excess of 5% of plan assets
Wachovia Bank, N.A. Chase Domestic Liquidity Fund $2,963,108
Category (iii)--Series of transactions
in excess of 5% of plan assets
Chase Manhattan Bank, N.A. Chase Domestic Liquidity Fund 7,609,276 $5,513,634 $5,513,634 $ -- 235
There were no category (ii) or (iv) reportable transactions for the year ended
December 31, 1997.
F-33
Exhibit
[LETTERHEAD OF ERNST & YOUNG LLP]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Associates Investment Plan for Hourly Associates of
Phillips-Van Heusen Corporation of our report dated June 18, 1998, with respect
to the financial statements and schedules of the Associates Investment Plan for
Hourly Associates included in this Annual report (form 11-K) for the year ended
December 31, 1997.
/s/ Ernst & Young LLP
New York, New York
June 18, 1998
Exhibit
[LETTERHEAD OF ERNST & YOUNG LLP]
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Associates Investment Plan for Salaried Associates of
Phillips-Van Heusen Corporation of our report dated June 18, 1998, with respect
to the financial statements and schedules of the Associates Investment Plan for
Salaried Associates included in this Annual report (form 11-K) for the year
ended December 31, 1997.
/s/ Ernst & Young LLP
New York, New York
June 18, 1998
