SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------- FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One): |X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]. For the fiscal year ended December 31, 1998 ----------------------------------------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]. For the transition period from __________ to __________ Commission file number 1-724 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: PVH Associates Investment Plan For Residents Of The Commonwealth Of Puerto Rico B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Phillips-Van Heusen Corporation, 200 Madison Avenue, New York, New York 10016
SIGNATURES The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. PHILLIPS-VAN HEUSEN CORPORATION ASSOCIATES INVESTMENT PLAN FOR THE RESIDENTS OF THE COMMONWEALTH OF PUERTO RICO Date: June 28, 1999 By /s/ Pamela N. Hootkin ------------------------------------------ Pamela N. Hootkin, Member of Administrative Committee
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Financial Statements Years ended December 31, 1998 and 1997 Contents Report of Independent Auditors.............................................. F-2 Statements of Net Assets Available for Plan Benefits ....................... F-3 Statements of Changes in Net Assets Available for Plan Benefits ............ F-4 Notes to Financial Statements............................................... F-5 The Plan's investment asset are held in a Master Trust for which a separate report is filed with the Department of Labor. Accordingly, supplemental schedules of Asset Held for Investment Purpose and Reportable Transactions of the Master Trust have not been presented. F-1
Report of Independent Auditors Administrative Committee of the Plan Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico We have audited the accompanying statements of net assets available for plan benefits of the Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico as of December 31, 1998 and 1997, and the related statements of changes in net assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1998 and 1997, and the changes in its net assets available for plan benefits for the years then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP June 25, 1998 F-2
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Statements of Net Assets Available for Plan Benefits December 31 1998 1997 ---------------------------- Assets Investments, at fair value (Notes A and E): Shares of registered investment companies: Equity Fund $ 104,902 $ 64,341 Bond Fund 50,524 40,467 Balanced Fund 111,363 80,547 International Fund 17,322 15,706 Common Stock--Employer Company Fund 188,364 340,004 Common Trust Fund * 126,496 124,666 Participant loans receivable 12,792 39,343 ---------------------------- Net assets available for plan benefits $ 611,763 $ 705,074 ============================ * 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 Associates who are Residents of the Commonwealth of Puerto Rico Statements of Changes in Net Assets Available for Plan Benefits Year ended December 31 1998 1997 ------------------------- Additions Contributions: Employer company, net of forfeitures $ 33,162 $ 34,846 Employees 87,653 117,550 ---------------------------- 120,815 152,396 Interest and investment income 58,770 18,192 ---------------------------- Total additions 179,585 170,588 ---------------------------- Deductions Payments to participants 178,171 100,812 ---------------------------- Total deductions 178,171 100,812 ---------------------------- Net realized and unrealized (depreciation) appreciation of investments (94,725) 24,345 ---------------------------- Net (decrease) increase (93,311) 94,121 Net assets available for plan benefits at beginning of year 705,074 610,953 ============================ Net assets available for plan benefits at end of year $ 611,763 $ 705,074 ============================ See notes to financial statements. F-4
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico (formerly the Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates who are Residents of the Commonwealth of Puerto Rico) Notes to Financial Statements December 31, 1998 A. Description of the Plan On July 1, 1996, the Phillips-Van Heusen Corporation Associates Investment Plan for Salaried Associates who are Residents of the Commonwealth of Puerto Rico was merged into the Phillips-Van Heusen Corporation Associates Investment Plan for Hourly Associates who are Residents of the Commonwealth of Puerto Rico. The name of the merged plan is the Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico (the "Plan"). The following description of the Plan provides only general information. Participants should refer to the Plan Document for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan covering salaried clerical and hourly production associates of Phillips-Van Heusen Corporation (the "Company") who are residents of the Commonwealth of Puerto Rico, 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 reporting and disclosure requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions Each year, participants may contribute up to 10% 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. F-5
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) A. Description of the Plan (continued) Participant Accounts Each participant's account is credited with the participant's contributions and allocations of (a) the Company's contributions and (b) Plan earnings. Forfeited balances of terminated participants' nonvested accounts are used to reduce future Company contributions. One hundred percent of the Company's contributions are automatically invested in the common stock of the Company. In accordance with the provisions of the Plan, participants age 55 or older may direct the Company contributions into any of the Plan's investment options. Vesting Amounts attributable to Company contributions become vested on the participant's 65th birthday or if the participant's employment by the Company terminates by reason of the participant's death or permanent disability or the participant has completed five years of service with the Company. Investment Options Upon enrollment in the Plan, a participant may direct employee contributions into any of six investment options. A participant may contribute a maximum of 25% of employee contributions into the Phillips-Van Heusen Corporation Common Stock Fund. Participant Loans Receivable Participants may borrow from the Plan, with certain restrictions, using their vested account balance as collateral. The minimum loan amount is $1,000 and the maximum loan amount is the lesser of (i) $50,000 reduced by the participant's highest outstanding loan balance during the previous 12 months, or (ii) 50% of the vested value of the participant's account. Interest is fixed for the term of the loan at the prime rate as of 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. F-6
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) A. Description of the Plan (continued) 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. Substantially all administrative expenses are paid by the company. In accordance with the Rules and Regulations of the Department of Labor, investments are included in the accompanying financial statements at market value as determined by quoted market prices or at fair value as determined by Wachovia Bank, N.A. ("Wachovia") for the applicable Wachovia investment funds. Purchases and sales of securities are reflected on a trade date basis. All assets of the Plan are held by Wachovia in the Company's Associates Investment Plan Master Trust (the "AIP Master Trust") and are segregated from the assets of the Company. The Plan shares in AIP Master Trust interest and investment income based upon its participants' shares of AIP Master Trust net assets available for plan benefits. The AIP Master Trust's investments include an interest contract with an insurance company that has been placed into conservatorship in 1991. In November 1998, the AIP Master Trust received its principal in the interest contract plus accrued interest, as defined in the conservatorship agreement. The Plan does not have a beneficial interest in this interest contract. F-7
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) B. Significant Accounting Policies (continued) The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. C. Transactions with Parties-in-Interest During the years ended December 31, 1998 and 1997, the AIP Master Trust purchased 56,702 and 41,891 shares, respectively, of the Company's common stock and received $197,777 and $205,332, respectively, from the Company as payment of dividends on its common stock. The AIP Master Trust also sold 14,961 and 58,705 shares of the Company's common stock during the years ended December 31, 1998 and 1997, respectively. In connection with the merger of the Crystal Brands Plan on October 1, 1997, 52,112 shares of the Company's common stock were transferred into the AIP Master Trust. F-8
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) D. Changes in the AIP Master Trust Net Assets Held by Fund Changes in the AIP Master Trust net assets held by fund during the year ended December 31, 1998 were as follows: Phillips-Van Heusen Corp. Money Common Stock Market Bond Balanced Equity International Fund Fund Fund Fund Fund Fund ----------------------------------------------------------------------------------------------- Net assets at beginning of year .. $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805 $ 3,585,363 Interest and investment income ... 226,343 474,862 138,565 1,154,085 1,133,584 329,613 Contributions received: Employer Company, net of forfeitures .................. 1,894,714 632 1,355 17,426 31,368 5,185 Employees ...................... 325,015 561,378 320,057 1,226,067 2,101,123 622,425 Net realized and unrealized appreciation (depreciation) .... (9,106,716) -- 21,757 455,901 3,577,455 (520,450) Loans to participants, net of repayments ..................... 594 (3,431) 9,072 35,206 39,529 13,351 Payments to participants ......... (3,113,510) (2,527,309) (497,432) (1,427,011) (2,549,482) (365,871) Transfers (to) from other accounts........................ (717,388) 4,418,474 (41,203) 683,068 1,026,645 (566,629) ----------------------------------------------------------------------------------------------- Net assets at end of year ........ $ 9,414,931 $ 11,971,150 $ 2,267,092 $ 11,531,743 $ 21,524,027 $ 3,102,987 =============================================================================================== Plan's beneficial interest at end of year .................... $ 188,364 $ 126,496 $ 50,524 $ 111,363 $ 104,902 $ 17,322 =============================================================================================== Fixed Income Loan Fund Fund Total ------------------------------------------------ Net assets at beginning of year .. $ 4,575,539 $ 1,371,795 $ 66,350,847 Interest and investment income ... 377,524 -- 3,834,576 Contributions received: Employer Company, net of forfeitures .................. -- -- 1,950,680 Employees ...................... -- -- 5,156,065 Net realized and unrealized appreciation (depreciation) .... -- -- (5,572,053) Loans to participants, net of repayments ..................... -- (94,321) -- Payments to participants ......... (150,096) -- (10,630,711) Transfers (to) from other accounts ....................... (4,802,967) -- -- -------------------------------------------- Net assets at end of year ........ -- $ 1,277,474 $ 61,089,404 ============================================ Plan's beneficial interest at end of year .................... $ -- $ 12,792 $ 611,763 ============================================ Note: Certain funds above include investments in the Chase Manhattan Bank Domestic Liquidity Fund. F-9
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) D. Changes in the AIP Master Trust Net Assets Held by Fund (continued) Changes in the AIP Master Trust net assets held by fund during the year ended December 31, 1997 were as follows: Phillips-Van Heusen Corp. Money Common Stock Market Bond Balanced Equity International Fund 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 $ 2,226,120 Interest and investment income ...... 211,070 551,149 125,621 502,825 330,738 391,072 Contributions received: Employer Company, net of .......... 1,620,371 (51,060) 73 (2,835) (11,499) 585 forfeitures Employees ......................... 423,500 670,327 350,969 1,193,105 1,963,385 646,476 Net realized and unrealized appreciation (depreciation) ....... (299,112) -- 18,814 854,817 2,721,432 (327,047) Loans to participants, net of repayments ........................ (77,679) (45,092) 4,773 (42,561) (71,843) (27,416) Payments to participants ............ (1,962,154) (1,707,477) (255,224) (802,958) (1,332,908) (279,685) Transfers (to) from other accounts .. (446,731) (226,623) (85,827) 236,828 427,253 95,100 Transfer from AIP of PVH (Crystal Brands Division) .................. 824,021 2,975,961 337,257 1,697,317 2,752,294 860,158 --------------------------------------------------------------------------------------------- Net assets at end of year ........... $ 19,905,879 $ 9,046,544 $ 2,314,921 $ 9,387,001 $ 16,163,805 $ 3,585,363 ============================================================================================= Plan's beneficial interest at end of year ....................... $ 340,004 $ 124,666 $ 40,467 $ 80,547 $ 64,341 $ 15,706 ============================================================================================= Fixed Income Loan Fund Fund Total --------------------------------------------- Net assets at beginning of year ..... $ -- $ 969,816 $ 46,641,769 Interest and investment income ...... 106,016 -- 2,218,491 Contributions received: Employer Company, net of -- -- 1,555,635 forfeitures ..................... Employees ......................... -- -- 5,247,762 Net realized and unrealized appreciation (depreciation) ....... -- -- 2,968,904 Loans to participants, net of repayments ....................... -- 259,818 -- Payments to participants ............ -- -- (6,340,406) Transfers (to) from other accounts .. -- -- -- Transfer from AIP of PVH (Crystal Brands Division) .................. 4,469,523 142,161 14,058,692 --------------------------------------------- Net assets at end of year ........... $ 4,575,539 $ 1,371,795 $ 66,350,847 ============================================= Plan's beneficial interest at end of year ....................... $ -- $ 39,343 $ 705,074 ============================================= Note: Certain funds above include investments in the Chase Manhattan Bank Domestic Liquidity Fund. F-10
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) E. Assets of the Plan Assets of the Plan are included in the assets of the AIP Master Trust held by the trustees. The assets of the AIP Master Trust are presented in the following table. Investments that represent 5% or more of the AIP Master Trust's total net assets are identified by an asterisk. December 31, 1998 1997 -------------------------------- Investments at fair value as determined by quoted market price: Shares of registered investment companies: Fidelity Growth & Income Portfolio, 469,513 and 424,247 shares, respectively $ 21,524,027* $ 16,163,805* Fidelity Intermediate Bond Fund, 220,576 and 227,623 shares, respectively 2,267,092 2,314,921 Fidelity Puritan Fund, 574,442 and 484,360 shares, respectively 11,531,743* 9,387,001* Templeton Foreign Fund, 369,842 and 360,337 shares, respectively 3,102,987* 3,585,363* Phillips-Van Heusen Corp. Common Stock Fund 1,304,634 and 1,394,679 shares, respectively 9,414,931* 19,905,879* Investments at estimated fair value: Common Trust Fund 11,971,150* 9,046,544* Promissory notes (participant loans) 1,277,474 1,371,795 Non-performing interest contract -- 4,575,539* -------------------------------- Total net assets $ 61,089,404 $ 66,350,847 ================================ Plan's beneficial interest $ 611,763 $ 705,074 ================================ F-11
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) F. Income Tax Status The Plan has received a determination letter from the Internal Revenue Service dated May 12, 1995, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the related trust is exempt from taxation. Once qualified, the plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. G. Differences Between Plan Financial Statements and Form 5500 The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500: December 31, 1998 1997 ------------------------------ Net assets available for plan benefits as reported on the financial statements $ 611,763 $ 705,074 Less amounts allocated to withdrawn participants at the end of the year (9,089) (24,529) ------------------------------ Net assets available for plan benefits as reported on the Form 5500 $ 602,674 $ 680,545 ============================== Year ended December 31, 1998 --------------- Benefits paid to participants per the financial statements $ 178,171 Add amounts allocated to withdrawn participants at December 31, 1998 9,089 Less amounts allocated to withdrawn participants at December 31, 1997 (24,529) --------------- Benefits paid to participants per the Form 5500 $ 162,731 =============== 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-12
Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico Notes to Financial Statements (continued) H. Year 2000 (Unaudited) The Plan Sponsor has determined that it will be necessary to take certain steps in order to ensure that the Plan's information systems are prepared to handle year 2000 dates. The Plan Sponsor is taking a two phase approach. The first phase addresses internal systems that must be modified or replaced to function properly. Both internal and external resources are being utilized to replace or modify existing software applications, and test the software and equipment for the year 2000 modifications. The Plan Sponsor anticipates substantially completing this phase of the project by the end of 1999. Costs associated with modifying software and equipment are not estimated to be significant and will be paid by the Plan Sponsor. For the second phase of the project, Plan management established formal communications with its third party service providers to determine that they have developed plans to address their own year 2000 problems as they relate to the Plan's operations. All third party service providers have indicated that they will be year 2000 compliant by the end of 1999. If modification of data processing systems of either the Plan, the Plan Sponsor, or its service providers are not completed timely, the year 2000 problem could have a material impact on the operations of the Plan. Plan management has not developed a contingency plan, because they are confident that all systems will be year 2000 ready. F-13
EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 1 Consent of Independent Auditors
Exhibit 1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico of our report dated June 25, 1999, with respect to the financial statements of the Phillips-Van Heusen Corporation Associates Investment Plan for Associates who are Residents of the Commonwealth of Puerto Rico included in this Annual Report (Form 11-K) for the year ended December 31, 1998. /s/ Ernst & Young LLP New York, New York June 25, 1999