ITEM 1. BUSINESS
GENERAL
Chic by H.I.S, Inc. (the "Company") was incorporated in Delaware in December 1988 under the name Henry I. Siegel Holding Corp. and changed its name to Chic by H.I.S, Inc. on December 15, 1992. All references herein to the "Company" include Chic by H.I.S, Inc. and its domestic and foreign subsidiaries unless otherwise indicated by the context.
The Company designs, manufactures and markets moderately priced, basic style, cotton denim jeans, casual pants and shorts for women, girls, men and boys, which are sold throughout the United States principally through mass merchandisers. The Company also markets similar apparel in Europe, primarily in Germany. In the United States, women's and girls' jeans and casual pants are generally marketed under the CHIC(R) brand name, and men's and boys' jeans and casual pants are generally marketed under the H.I.S(R) brand name, while in Europe all of the Company's apparel is sold under the H.I.S brand name.
The Company also licenses the use of its trademark, primarily the CHIC brand name, to manufacturers of a variety of products that the Company does not manufacture, including women's sportswear, intimate apparel, shirts, accessories, hosiery and footwear. Many of these products are sold by the same retailers that sell the Company's products and are generally promoted at the retail level in a manner that complements the Company's products. In the United States, the Company sells its apparel primarily to mass merchandisers. The Company's marketing and advertising strategy emphasizes the quality, comfortable fit and competitive pricing of its jeans and pants. The Company believes that its ability to respond quickly to its domestic customers' needs, as a result of its experienced manufacturing capabilities and its state-of-the-art ordering, inventory and management information systems, gives it an advantage over many of its competitors, particularly those which import finished goods. The Company's excellence in servicing mass merchandisers has been recognized by industry-wide awards and, in the opinion of management, is an important asset in maintaining and broadening its business.
Information with respect to sales, operating income and identifiable assets attributable to each of the Company's geographic areas appears in Note 10 of Notes to Consolidated Financial Statements on page 27 of the Company's Annual Report to Stockholders for the fiscal year ended November 2, 1996 (the "Annual Report to Stockholders") and is incorporated herein by reference.
UNITED STATES OPERATIONS
The effects of the United States recession, which began in fiscal 1990, were also apparent in fiscal 1991 as United States sales decreased. United States sales increased during fiscal 1992 primarily as a result of greater sales to major mass merchandiser customers, which generally gained market share in the jeans market relative to other retailers, and an improving United States economy. During fiscal 1993, United States sales remained relatively constant. During fiscal 1994, United States sales increased primarily due to increased advertising. During fiscal 1995, United States sales remained relatively constant. During fiscal 1996, United States sales decreased primarily as a result of a shrinking market share and substantial price competition.
In 1996, the Company made changes in advertising, marketing and manufacturing policies. During the first and fourth quarters of fiscal 1996, management authorized and committed the Company to undertake significant downsizing and operational changes which, during 1996, resulted in restructuring and special charges of $30 million.
The charge in the first quarter included the closing of certain manufacturing facilities in Tennessee and Kentucky. These first quarter closures resulted in the termination of approximately 940 employees and resulted in a total charge against earnings aggregating $15 million. In the fourth quarter, the Company identified additional manufacturing facilities to be closed. The Company has also started to move certain manufacturing operations to Mexico, although as of November 2, 1996 no actual operations have begun there. The additional closures will result in the termination of approximately 700 employees, and resulted in a total charge against earnings aggregating $15 million.
APPAREL
WOMEN'S AND GIRLS' JEANS
The Company's principal product line is women's and girls' jeans marketed under the CHIC and CHIC KIDS brand names, respectively, and other brand names owned by the Company, including SUNSET BLUES(R). The Company believes that its women's jeans were the best selling women's jeans to masS merchandisers in the United States in 1996 based on the N.P.D. Report dated July, 1996. The Company's jeans are available in a variety of finishes, such as prewashed and stone washed. By altering the laundry time and ingredients used in the finishing process, the Company is able to produce various colors and shades in denim products.
The Company was the originator of "proportioned to fit" jeans for women, which it introduced in 1975. The Company's women's and girls' jeans are designed to provide a more comfortable fit by tailoring their measurements to a woman's or girl's height in addition to her waist size. Each size is offered for sale in a variety of inseam lengths. Women's and girls' jeans are available in a relaxed fit, slim fit and classic fit.
CHIC jeans are offered in four general size categories: CHIC misses is offered in sizes 2 to 20 in petite, average and tall lengths; CHIC juniors is offered in sizes 1 to 15 in petite, average and tall lengths; CHIC plus is offered in sizes 18 to 26 in petite and average lengths; and CHIC KIDS is offered in sizes 7 to 14 for young girls.
Currently, the Company's women's jeans are generally priced to sell at retail for between $15.88 and $21.99, with most products priced to sell at retail for $19.99. The Company's girls' jeans are generally priced to sell at retail for between $14.99 and $16.99.
WOMEN'S AND GIRLS' CASUAL PANTS AND SHORTS
The Company markets women's casual pants and shorts under the CHIC brand name and girls' casual pants and shorts under the CHIC KIDS brand name. The Company's casual pants are available in the same "proportioned to fit" sizes as CHIC jeans. The Company believes that CHIC pants have the same advantages as CHIC jeans in terms of fit, quality and value. Casual pants are generally more fashion-oriented and are more susceptible than basic jeans to changing consumer preferences. The Company's two primary casual pant styles, the "CHIC Spectator" which is made of 100% cotton wrinkle resistant, and the "CHIC Schooners," which is all-cotton, are both basic design casual pants.
Currently, the Company's women's casual pants are generally priced to sell at retail for between $16.99 and $21.99, with most products priced to sell at retail for $18.99. The Company's women's casual shorts are generally priced to sell at retail for between $12.99 and $14.99; girls' casual pants are generally priced to sell at retail for between $13.99 and $16.99; and girls' casual shorts are generally priced to sell at retail for between $9.99 and $11.99.
WOMEN'S AND GIRLS' JEAN SHORTS
The Company markets women's and girls' jean shorts under the CHIC and CHIC KIDS brand names, respectively. Traditional five-pocket jean shorts constitute the Company's core product in this line. The Company complements this basic product with jean shorts that are slightly more fashion-oriented. Currently, the Company's women's jean shorts are generally priced to sell at retail for between $14.99 and $18.99. The Company's girls' jean shorts are generally priced to sell at retail for between $14.99 and $17.99.
MEN'S AND BOYS' JEANS AND JEAN SHORTS AND MEN'S CASUAL PANTS AND SHORTS
The Company markets men's and boys' jeans and jean shorts and men's casual pants and shorts under the H.I.S brand name. The Company offers its men's and boys' apparel in a broad range of sizes, colors, fabrics and finishes. All of the men's and boys' five-pocket jeans manufactured by the Company are available in two styles: a relaxed fit and a classic fit. The Company offers men's jeans in 38 different sizes by waist and inseam length. Boys' jeans are offered in sizes 8 to 18 in regular fit and slim fit.
The Company's line of men's casual pants is marketed under the H.I.S label and is available in casual, classic and basic styles that are generally more fashion-oriented and are more susceptible than its men's or boys' jeans to changing consumer preferences.
Currently, the Company's men's jeans are generally priced to sell at retail for between $16.99 and $21.99, with most products priced to sell at retail for $19.99; boys' jeans are generally priced to sell at retail for between $14.99 and $16.99; jean shorts are generally priced to sell at retail for between $14.99 and $16.99; casual pants are generally priced to sell at retail for between $17.99 and $19.99; and casual shorts are generally priced to sell at retail for between $12.99 and $16.99.
SALES AND DISTRIBUTION
During fiscal 1996, the Company sold its products to more than 3,000 retailers, which the Company believes operate over 16,000 stores in the United States. The Company also started to sell merchandise in the Canadian market. Most of the Company's sales in fiscal 1996 were made to mass merchandisers and the remainder were made primarily to department and specialty stores. Sales of the CHIC and H.I.S product lines to the Company's two largest accounts, Kmart Corporation and Target, accounted for approximately 56% of United States sales.
Sales are made primarily through the Company's full-time sales force and also through showrooms and trade shows, with an emphasis on selling to mass merchandisers. The Company has a direct sales force, which includes individuals located in the Company's New York City showroom as well as showrooms in Chicago, Dallas and other locations. The Company pays only sales commissions to its salespeople. Although the Company pays a base salary to its regional sales managers, a portion of the income of such managers is in the form of incentive bonuses, traditionally based on increases in the Company's sales. Each salesperson is equipped with a personal computer that has a direct satellite linkup with the mainframe located in the Company's executive offices, which allows each salesperson to access readily various types of information such as product availability. The Company maintains its principal showroom in New York and additional showrooms in Chicago and Dallas to service regional markets. Each showroom is staffed by local sales representatives.
The Company currently operates eight retail stores in Tennessee and Kentucky that sell seconds and closeouts of CHIC and H.I.S brand merchandise, including licensed products. At the present time, the Company does not intend to increase significantly the number of its retail stores.
The Company's warehouse and distribution center facility is located in Bruceton, Tennessee. All sewn goods are shipped from the Company's eleven assembly plants to Bruceton by the Company's own fleet of tractors and trailers and are then washed, either at the Company's facilities or an outside launderer, pressed, warehoused and distributed to the Company's customers throughout the United States and Canada.
Substantially all of the Company's sales in the United States and Europe are to retailers. For the year ended November 2, 1996, sales to two major customers (with sales in excess of 10% of total sales) approximated 25.5% and 12.2% of consolidated net sales on an individual basis. For the year ended November 4, 1995, sales to two major customers approximated 23.2% and 14.0% on an individual basis. For the year ended November 5, 1994, two major customers accounted for approximately 22.3% and 13.1% of total sales on an individual basis. The receivables from the two major customers at November 2, 1996 represent approximately 41.3% of the total accounts receivable balance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company reviews a customer's credit history before extending credit. An allowance for possible losses is established based upon factors surrounding the credit risk of specific customers, historical trends and other information.
MARKETING, ADVERTISING AND PROMOTION
The Company advertises its products nationwide through television and print media. The Company's advertising strategy emphasizes the quality, comfortable fit and competitive pricing of its jeans and pants. At the national level, the Company's advertising is image oriented. Television commercials promote the CHIC name and are designed to create a personality for the brand. The Company believes that such strategy has enabled CHIC to become a nationally recognized brand name for women's apparel.
Consumer advertising for the Company's CHIC line of products is done primarily through network and cable television and, to a lesser extent, magazines. National television advertisements are generally run during the fall back-to-school, spring and Christmas selling seasons. Print advertising of the CHIC line consists primarily of spreads in magazines oriented toward women. The Company's advertising of its H.I.S line has been accomplished primarily through the use of print advertising. The Company placed H.I.S advertisements in major national magazines that generally appeal to male readers. The Company targets women in the 18-49 age group for its CHIC brand women's products, with and emphasis on the 18-34 age group, and targets men in the 18-49 age group for its H.I.S brand men's products. The Company believes that consumers of its products are generally in the moderate-income bracket.
The Company supplements its national advertising campaign through the use of cooperative advertising in radio and newspaper media, in which the Company's products are among those featured by various retailers in their advertisements. Under the Company's cooperative advertising program, which is generally standard in the industry, the Company will pay towards approved advertising up to two percent of the store's total purchases from the Company during the preceding semi-annual period. In addition, the Company advertises to retailers through print advertisements in a variety of trade magazines and newspapers.
The Company is seeking a larger share of the domestic mass merchandise market for its men's and boys' jeans under the H.I.S brand name. To attain such increase, the Company has allocated a larger portion of its total advertising budget to the H.I.S brand.
The Company believes that there are opportunities for increasing the Company's share of the mass merchandise market for men's jeans in the United States, which the Company believes is substantially larger than the market for women's jeans. Based on its reputation as a reliable supplier of branded women's jeans and its previous history as a manufacturer of men's jeans and other apparel under the H.I.S brand name, the Company believes that opportunities exist to penetrate further the mass merchandise and specialty store market for men's jeans. The Company has begun to focus on selling men's jeans to the same mass merchandisers and specialty stores that carry CHIC women's jeans. The Company anticipates that there will be a positive correlation between an increase in advertising and an increase in sales, but there can be no assurance that the Company will realize its objective of increasing its share of the men's and boys' jeans market, which is highly competitive and in which the Company currently has only a limited presence.
The Company works with retailers to provide custom displays to stores. The Company provides to its customers, free of charge, a variety of point of sale display materials such as signs, size markers, graphics, in-store posters, photographs and other visual supports.
PRODUCT DESIGN
The Company's two in-house merchandising groups develop jeans and casual pants product lines, respectively, including the pricing and packaging for each line. The merchandising groups interpret market trends by visiting retail stores throughout the United States, Canada and Europe, attending trade shows, working with textile mills and retailers and conducting market research. The Company also researches and tests denim finishes in its Hickman laundry facility in order to develop new wash finishes to add to the Company's product mix.
After the merchandising groups have researched the retail market and domestic fabric market, consulted with the various fashion and color forecasting services to which the Company subscribes and decided on the details to be incorporated into the new lines, prototype samples, fit, colors and packaging are developed in the New York office. The prototypes are then sent to the Company's main manufacturing facility in Bruceton, Tennessee, which produces a manufactured sample.
In keeping with the Company's emphasis on a quality fit, the garment has several fit evaluations using a professional fit model from prototype stage to a finished manufactured garment. The samples produced in Tennessee are evaluated for fit, color and finish and then sent to the sales force to display to prospective customers. When the garment has been sold and the first production run of garments is produced, a full size range is sent to New York where the garment is fitted on models of various sizes to allow the merchandisers to make any final adjustments that may be needed to improve the fit and appearance of the new lines for different body types.
MANUFACTURING AND RAW MATERIALS
The Company performs all phases of the manufacturing process in converting raw materials into finished goods. The Company believes that it is the only major manufacturer of moderately priced jeans in the United States to purchase all of its raw materials domestically and to manufacture all of its products in North America. Consequently, the Company enjoys a shorter lead time in filling orders than is usually associated with competitors that rely on imports of finished goods or offshore manufacturing processes.
The Company currently buys finished fabric in bulk from domestic suppliers and generally has no supply contracts with terms longer than three months. The Company believes that through its domestic suppliers it is able to obtain good quality materials in a timely manner at competitive prices. During fiscal 1996, the Company purchased approximately 40.0% of its raw materials from two suppliers, which were the only companies supplying more than 10% of the Company's raw materials during fiscal 1996. The Company maintains a portion of its inventories in commodity raw materials, which consist mainly of cotton fabrics, including denim and twills. These raw materials, the Company believes, are readily available from numerous domestic and foreign sources. Although the Company relies heavily on certain suppliers for its raw material needs, the Company believes that the loss of any one source of raw materials, though no such loss is presently anticipated, would not have a material adverse effect on its business since many other alternative, comparable sources are readily available.
The Company operates manufacturing facilities in Tennessee, Alabama, Kentucky and Mississippi. The Company has purchased and is renovating a substantial manufacturing facility in Durango, Mexico. Production from this facility is expected to begin during the second fiscal quarter of 1997 and the production will be used for the United States market. Concurrent with the Company's purchase and renovation of its proposed manufacturing facility in Durango, Mexico, the Company closed certain United States manufacturing facilities and is currently planning to match production with demand by closing additional United States facilities.
With its manufacturing systems, which the Company believes are state-of-the-art, the Company is usually capable of converting raw material into a finished garment and delivering such garment to the retailer within three weeks from the date the Company receives the retailer's order as compared to importers, which the Company believes generally take eight to ten weeks from the date of order to delivery of a finished garment to the retailer. The Company's facilities and systems, together with exclusively domestic sourcing of fabric and other raw materials, enable it to adapt to changing consumer preferences quickly and to respond swiftly to customer orders. In addition, by reducing the time needed to manufacture a finished garment, the Company is able to keep inventory at minimal levels. By limiting inventory and avoiding many of the shipping and warehousing costs faced by overseas importers, the Company believes that it is currently able to offset any benefits it would derive from reduced labor costs were it to manufacture in overseas countries for the United States market. Although the Company currently has no plans to manufacture in overseas countries for the domestic market, as new opportunities arise for manufacturing in overseas countries for the domestic market (either through subcontractors or owning facilities), the Company intends to evaluate the possible advantages and disadvantages of manufacturing in overseas and other foreign countries.
The Company generally cuts fabric only after receiving confirmed purchase contracts from customers. Each contract is for a specified amount of product at a specified price and usually provides for several preliminary, staggered delivery dates. Customers then place specific orders for delivery against such contract. By manufacturing in response only to a confirmed purchase contract, the Company is able to determine its finished inventory needs in advance of such delivery dates so as to be able to respond quickly to a customer's order and at the same time minimize its finished inventory risk. Occasionally, based on agreements with customers, preliminary delivery dates are extended. The postponement of a delivery date may cause the Company to lose sales it otherwise might have made to the customer for the period during which delivery is eventually made. Should a delivery date be postponed, the Company is often able to arrange with its suppliers to delay delivery of raw materials the Company has ordered.
The Company uses its own fleet of tractors and trailers to pick up raw materials from its suppliers and transport such raw materials to the Company's central manufacturing headquarters in Bruceton, Tennessee. In Bruceton, the fabric is cut and trimmed and then shipped by the Company's fleet to one of the Company's ten assembly plants where the garments are sewn. Assembled garments are then sent to Hickman Laundry for laundry processing and returned to Bruceton for final finishing and pressing.
EUROPEAN OPERATIONS
In Europe, where mass merchandisers have limited market share, the Company's H.I.S brand jeans are sold primarily through department stores and mail order catalogs. Most of the Company's sales in Europe are made in Germany. European sales in fiscal 1991 increased as a result of the new pricing strategy and market opportunities created by German reunification. The unusually high demand for H.I.S products created in fiscal 1991 by expansion of the German market as a result of the reunification, however, was not duplicated in fiscal 1992 and, aggravated by a weakening German economy, resulted in decreased sales volume. Primarily as a result of increased advertising, European sales increased in fiscal 1993 through fiscal 1996.
The Company markets women's and men's jeans and casual pants under the H.I.S brand name primarily in Germany and, to a lesser extent, Austria and Switzerland, as well as other European countries. As in the United States, the Company's core business in Europe is basic, five-pocket denim jeans. The Company believes that its jeans were the best selling women's jeans in Germany during fiscal 1996.
Prior to fiscal 1997, the Company had been licensing the H.I.S brands for sale in the Czech Republic for the previous three years. Commencing fiscal 1997 the Company ended the licensing arrangement and is marketing its products directly with its own contracting, sales force and distribution center.
The Company believes that in many European countries basic jeans, such as those manufactured by the Company, are perceived to be a fashion item as well as a basic, functional product and are therefore worn in a broader range of settings than in the United States, which contributes to a high level of demand for jeans in Europe. The Company believes that approximately 50 million pairs of women's and men's jeans are sold in Germany each year, and that approximately one-half of such jeans sold do not bear a recognized brand name. Due to their fashion versatility and the absence of mass merchandisers and discount retailers, jeans are priced much higher, in relative terms, at the retail level in Europe than in the United States.
The Company's European headquarters are located in Garching, Germany (outside of Munich), where the Company has its own staff of merchandising, sales, production, management and finance personnel. The Company does not own any manufacturing facilities in Europe, but currently has long-term agreements with approximately thirty five manufacturers in the Czech Republic, Germany, Greece, Italy, Malta, Portugal, Tunisia and Turkey, where the Company believes quality products can be manufactured at competitive prices. Due to the large number of manufacturers, the Company believes that the termination of any existing manufacturing contract would not have a material adverse effect on its operations. All of the raw materials used to assemble the jeans and pants are purchased by the Company in Europe and are readily available from numerous suppliers. Raw materials are shipped to subcontractors in foreign countries for assembly. Finished goods are shipped by the subcontractors to the Company's distribution center in Garching, Germany for washing, finishing, warehousing and then shipment to the Company's customers.
Most European customers are traditional department stores such as Kaufhof AG, Mac Fash TextilHandels-GessellschaftmbH, Hertie Waren-und Kaufhaus GmbH, Horten AG and specialty stores such as Leffers AG and Peek & Cloppenburg KG in Germany. Other significant customers include German-based Otto Versand GmbH & Co., the world's largest mail-order firm, and Quelle, Europe's largest mail-order firm, as well as Spar Osterreichische Warenhandels-AG (Hervis Modekaufhaus GmbH), one of the largest retail operations in Austria.
The Company employs a merchandising staff that creates styles and selects fabrics designed to meet the demands of the European consumer. Twenty commissioned salespersons service approximately 2,000 retail accounts and mail-order houses. The Company's European advertising is aimed at men and women between the ages of 16 and 39 through television and print media.
It is not possible to predict accurately the effect that the continued elimination of trade barriers among members of the European Union will have on the Company's operations in Europe. The Company considers other Western European countries, such as the United Kingdom, France and Italy, to be extremely competitive markets and does not anticipate that it will seek to expand sales significantly in such countries.
CENTRAL OFFICE AND COMPUTER SYSTEM
The Company maintains its principal executive offices in New York City from which it provides its department managers with integrated information with respect to inventory, production, manufacturing and distribution operations as well as financial matters. The Company believes that it has a state-of-the-art computer information system, substantially all of the software for which was developed internally. This sophisticated system allows the Company's salespeople to enter sales orders electronically. Many large customers submit their orders directly to the Company over an electronic data interchange system via satellite. Such linkups allow the Company to process customer orders quickly, reducing the lead time between orders and deliveries.
Major customers customarily place confirmed purchase contracts for a total unit quantity by price, style and delivery date. Through point of sale data collection devices, many of these customers monitor their sales to consumers and report directly to the Company their over-the-counter level of sales as well as the desired inventory levels they wish to maintain at their individual stores. On a weekly basis the Company receives information as well as detailed shipment orders for each of the stores of such customers. These detailed store orders are designed to replenish the inventory levels of the individual retail stores, which the Company is generally able to do in five to eight business days.
The Company also receives on a daily basis orders taken by its sales force. These orders are electronically transmitted to the Company by members of the sales force through their own computer terminals which are connected to the Company's main computer system via satellite. Such orders are then electronically reviewed for style, color, size, creditworthiness and requested delivery dates. If the results of such reviews are satisfactory, the orders are considered to be confirmed purchase contracts and are added to backlog.
The computer system allows the Company to monitor production in real time, so that the location and status of every cut and production plan in every factory is known at any moment in time. In the highly competitive apparel industry, the Company believes that its "just-in-time" ability to respond quickly to customer demand gives it a significant advantage over many of its competitors, especially with respect to mass merchandisers.
LICENSING
Pursuant to approximately 30 license agreements between the Company and various manufacturers and/or importers, such licensees produce and market a variety of products under the CHIC name and/or H.I.S name including: sportswear, intimate apparel, accessories, hosiery and footwear. Most of these products complement apparel products marketed by the Company.
The Company began licensing its trademarks in fiscal 1989. Licensing revenues have increased from approximately $0.8 million in fiscal 1990, the first full year of licensing operations, to approximately $6.4 million in fiscal 1996.
The current license agreements expire on various dates through 2000. Many of the agreements, however, permit the licensee to renew its agreement, subject to certain conditions, prior to expiration, generally for an additional three-year period. The majority of the agreements require that licensees pay a specified guaranteed minimum royalty to the Company at the beginning of each quarter during the term of the licensing agreement and then pay a certain percentage (generally five percent) of the licensee's net sales of products bearing a trademark licensed by the Company. Such payments are due within 30 days after the end of each quarter, against which amount the guaranteed royalty is deducted. Generally, each licensee is required to spend specified amounts for advertising and promotion of the licensed products and most licensees offer a matching cooperative advertising plan to retailers for advertising in weekly circulars that are used by some retailers to advertise sale items. The Company has received no indication from its licensees that they intend to terminate their licensing agreement with the Company prior to its expiration.
The Company's strategy is to identify market leaders in their respective fields who will generate increased sales over an extended period of time and entrench the brand names in key categories. The Company often consults with its largest customers to identify and evaluate potentially suitable licensees. In evaluating a potential licensee, the Company considers the experience, financial stability, manufacturing performance and marketing ability of the potential licensee. It also evaluates the marketability of the products proposed to be licensed and the compatibility of such products with other products manufactured or licensed by the Company. The Company believes that strong consumer acceptance of the CHIC and/or H.I.S brand name and the care that the Company uses in selecting suitable licensees have been major contributors to the success of its licensing program.
During the past year, the Company introduced Men's Knit and Woven Shirts under a licensing agreement with Santana Ltd., a highly regarded importer of Men's Shirts. The Company believes that the expansion of licensed products under the H.I.S. name will have a significant impact on the brand's growth in the future. The Company continues to explore opportunities to expand the H.I.S. licensing program to other related products.
By increasing consumer awareness of its brand names through expanded advertising of its products, and continuing to use care in selecting suitable licensees, the Company anticipates that it will be able to strengthen its licensing business. As the demand for licensed products expands, competition will increase among licensors and no assurance can be given that the Company will be able to expand or maintain its market position with respect to various licensed goods in the future. In addition, no assurance can be given that demand will continue to expand.
The Company coordinates the efforts of its licensees in a number of ways. The Company communicates its color schemes, styling and market trends to its licensees prior to each season, presents a coordinated in-store presentation of proprietary and licensed products, and coordinates the advertising of the family of CHIC and/or H.I.S. products through planned promotions.
As a general policy matter, in the United States the Company licenses its brand names for use only on products it does not manufacture.
COMPETITION
The apparel industry is highly competitive and characterized generally by ease of entry. Although the Company's products have been historically less sensitive to fashion trends than higher fashion lines, the apparel industry is subject to rapidly changing consumer preferences, which may have an adverse effect on the results of the Company's operations if the Company does not accurately judge such preferences. Among the factors that shape the competitive environment are quality of garment construction and design, price, fit, brand name, style and color selection, advertising and the manufacturer's ability to respond quickly to the retailer on a national basis. Customer and consumer acceptance and support are also important aspects of competition in this industry. The Company believes that its ability to market its products though its broad distribution network, which consists primarily of mass merchandisers, is important to its ability to compete. The Company also believes that its continued success will depend upon its ability to remain competitive in these areas.
The Company competes with numerous domestic and foreign manufacturers, many of which are larger or are associated with companies with substantially greater resources than the Company. The Company faces competition in sales on both the retail and consumer level. In general, mass merchandisers limit their product selection to moderately priced products. Accordingly, the Company believes that the domestic jeans market with respect to sales to mass merchandisers is stratified by a more narrow price range than sales to consumers, who might be willing to buy products in a broader price range. Since certain retailers generally carry only moderately priced products, particularly mass merchandisers, the Company competes for sales to such retailers only with companies that market similarly priced products.
The Company considers its significant competitive advantages to be the high consumer recognition and acceptance of the CHIC brand name and its ability to respond quickly to its customers' needs as a result of the Company's experienced manufacturing capabilities and advanced computer information system. Although brand recognition is an important element of competition in the apparel business, in the mass merchandising retail industry, brand recognition is less significant in the marketing of casual pants than in the marketing of jeans. Most mass merchandisers carry only casual pants bearing their own private label and a limited number, if any, of other brands of casual pants. Consequently, with respect to its mass merchandising customers, the Company's casual pants compete with fewer brands than its jeans.
In Germany, Austria and Switzerland, the Company competes in a higher priced market against various European and multinational companies, including Mustang Bekleidungswerke, manufacturer of MUSTANG brand jeans, and Levi Strauss, manufacturer of LEVI'S brand jeans. The Company believes that its pricing strategy in Europe, which is to position its products in the price range below the range for Levi Strauss, along with its reputation in Europe for marketing jeans in a variety of sizes especially suited for women, distinguishes it from its competitors in Europe. Certain jeans suppliers, such as Levi Strauss, have traditionally spent more than the Company on advertising in Europe. The Company believes that increased advertising in Europe has increased the Company's market share by attracting consumers who traditionally have bought unbranded products.
BACKLOG
The Company's backlog consists of confirmed purchase contracts. At November 2, 1996, the Company had unfilled customer orders of approximately $97.9 million of merchandise, of which approximately $53.2 million were for domestic orders and approximately $44.7 million (based on the exchange rate for the deutsche mark on November 2, 1996) were for European orders, compared to approximately $166.4 million at November 4, 1995, of which approximately $128.5 million were for domestic orders and approximately $37.9 million (based on the exchange rate for the deutsche mark on November 4, 1995) were for European orders. The Company believes that the change in backlog in the United States and Europe is attributable largely to the performance of the Company's products in over-the counter sales by its customers which leads to the placement of future orders. Substantially all of the unfilled orders at November 2, 1996 are expected to be shipped before the end of the Company's fiscal year ending November 1, 1997. The Company believes that in the past it has shipped at least 95% of its confirmed purchase contracts. The Company has not generally experienced difficulty in filling orders on a timely basis.
SEASONALITY
Demand for the Company's apparel products and its level of sales fluctuate moderately during the course of the calendar year as a result of seasonal buying trends. A moderate surge in sales of denim jeans and casual pants generally occurs during the fall back-to-school and Christmas holiday selling seasons (the Company's third and fourth quarter, respectively). See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Seasonality of Business-Quarterly Results." To balance these fluctuations in demand, the Company has developed competitively priced packages of jean shorts and casual shorts, which are sold primarily during the Company's first and second quarters. This enables the Company to market to the year-round apparel needs of consumers, thereby stabilizing production levels at the Company's manufacturing facilities during traditionally slower periods.
TRADEMARKS
Several of the Company's trademarks, including CHIC and H.I.S, are registered in the United States Patent and Trademark Office. These registrations expire on various dates through 2005, subject to renewal. From time to time the Company adopts new trademarks in connection with the marketing of its products. The Company considers its trademarks to be significant assets of the Company and to have significant value in the marketing of its products.
The Company has registered and filed applications for various trademarks, including H.I.S, which is the primary trademark used by the Company to market its products in Europe, in approximately 20 countries throughout the world, primarily Germany, Austria and Switzerland. The Company believes that these foreign trademarks constitute significant assets and are material to its European marketing operations.
EMPLOYEES
As of November 2, 1996, the Company employed approximately 3,200 full-time people in the United States, most of whom work in Tennessee. The Company believes that it is one of the largest private employers in the State of Tennessee. As of November 2, 1996, the Company employed approximately 150 people in Europe.
None of the Company's employees are represented by a union. The Company believes that its relationship with its employees is good.
The Company believes that all of its manufacturing facilities are in material compliance with applicable occupational health and safety laws.
RECENT DEVELOPMENTS - SUBSEQUENT EVENTS
In December 1996, the Company negotiated the prepayment of the outstanding balance of the senior notes payable of $43.0 million. The prepayment was funded through the Company's existing revolving credit agreement.
On January 27, 1997, the Company announced that it had retained a managing underwriter for a proposed initial public offering that will result in the sale by the Company of a significant minority interest in the Company's wholly-owned German subsidiary h.i.s. sportswear GmbH headquartered in Munich. The sale is expected to occur in the second quarter of 1997. Consummation of the sale would be subject to market conditions, approval by the Company's Board of Directors, receipt of a fairness opinion from the Company's financial adviser, execution of an underwriting agreement and other definitive documentation and satisfaction of certain legal and regulatory requirements.
ITEM 2.

ITEM 2. PROPERTIES
The Company owns its principal manufacturing and distribution facilities which are located in Tennessee. The Company leases additional facilities, including its corporate headquarters and showrooms in New York City, and other offices, factories, warehouses, showrooms and retail stores in the United States, Germany, Austria and Switzerland from unrelated third parties. The Company's principal owned and leased properties are described in the chart below.
PRINCIPAL OWNED AND LEASED PROPERTIES
The Company believes that its existing facilities are well maintained, in good operating condition and are adequate for its present level of operations and sufficient to accommodate any increased output for the foreseeable future after consideration of the operational changes made during fiscal 1996.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company believes that no currently pending litigation to which it is a party will have a material adverse effect on its consolidated financial condition or results of operations.
ENVIRONMENTAL MATTERS
The Company believes it is in material compliance with all applicable environmental laws to which it is subject, including, among others, the Federal Water Pollution Control Act, and the Tennessee Solid Waste Disposal Act. Although the Company is unable to predict what legislation or regulations may be adopted in the future with respect to environmental protection and what their impact on the Company may be, compliance with existing legislation and regulations has not had a material adverse effect on its capital expenditures, results of operations or competitive position.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is included under the captions "PRICE RANGE OF COMMON STOCK" and "DIVIDEND POLICY" on page 28 of the Annual Report to Stockholders and is incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included under the caption "SELECTED CONSOLIDATED FINANCIAL DATA" on page 10 of the Annual Report to Stockholders and is incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item is included under the caption "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on page 11 of the Annual Report to Stockholders and is incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements, notes thereto, report of independent certified public accountants thereon and quarterly financial information (unaudited) appearing in the Annual Report to Stockholders and made a part of the Annual Report to Stockholders are incorporated herein by reference.
Except as specifically set forth herein and elsewhere in this Form 10-K, no information appearing in the Annual Report to Stockholders is incorporated by reference into this report and the Annual Report to Stockholders shall not be deemed to be filed, as part of this report or otherwise, pursuant to the Securities and Exchange Act of 1934.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is included under the captions "ELECTION OF DIRECTORS" and "EXECUTIVE OFFICERS" on pages 5 through 8 of the Company's Proxy Statement for the Annual Meeting of Stockholders to be held on February 28,1997 (the "1997 Proxy Statement") and is incorporated herein by reference.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included under the caption "EXECUTIVE COMPENSATION" on pages 9 through 15 of the 1997 Proxy Statement and is incorporated herein by reference, except that the subsections entitled "Report of Compensation Committee on Executive Compensation" appearing on pages 13 through 14 and "Performance Graph" appearing on page 15 of the 1997 Proxy Statement shall not be deemed to be so incorporated.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included under the caption "PRINCIPAL STOCKHOLDERS OF THE COMPANY" on pages 3 through 5 of the 1997 Proxy Statement and is incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included under the caption "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" on page 16 of the Company's 1997 Proxy Statement and is incorporated herein by reference.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed or incorporated by reference as a part of this report:
1. The financial statements which are incorporated by reference from the Annual Report to Stockholders pursuant to Item 8 as follows:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets at November 4, 1995 and November 2, 1996
Consolidated Statements of Operations For the Years Ended November 5, 1994, November 4, 1995 and November 2, 1996
Consolidated Statement of Stockholders' Equity For the Years ended November 5, 1994, November 4, 1995 and November 2, 1996
Consolidated Statement of Cash Flows for the Years Ended November 5, 1994, November 4, 1995 and November 2, 1996
Notes to Consolidated Financial Statements
2. The schedule and report of independent certified public accountants thereon, listed on the Index to Financial Statement Schedules attached hereto.
(b) No reports on Form 8-K were filed by the registrant during the last quarter of the period covered by this report.
(c) Exhibits
Exhibit No. Description of Exhibit - ----------- ----------------------
3.1 Restated Certificate of Incorporation of the Company. (Incorporated herein by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 No. 33-56270).
3.2 By-laws of the Company. (Incorporated herein by reference to Exhibit 3.4 to the Company's Registration Statement on Form S-1 No. 33- 56270).
4.1 Loan Agreement, dated as of May 1, 1990, between the Industrial Development Board of the County of Carroll (the "ID Board") and Henry I. Siegel Company, Inc. ("Siegel"). (Incorporated herein by reference to Exhibit 4.12 to the Company's Registration Statement on Form S-1 No. 33-56270).
4.2 Amended and Restated Revolving Credit and Term Loan Agreement, dated as of December 15, 1994, among the Company, NationsBank of North Carolina, N.A. ("NationsBank"), National Westminster Bank USA ("NatWest") and The Bank of New York ("BONY"). (Incorporated herein by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
4.3 Amendment Agreement, dated June 8, 1995, among the Company, NationsBank, NatWest and BONY. (Incorporated herein by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended November 4, 1995).
4.4 Waiver and Amendment Agreement No. 2, dated as of February 2, 1996, among the Company, NationsBank, NatWest and BONY. (Incorporated herein by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the fiscal year ended November 4, 1995).
4.5 Amendment Agreement No. 3, dated as of December 31, 1996, among the Company, NationsBank and Fleet Bank (f/k/a NatWest).
4.6 Lease, dated as of September 1, 1993, between the ID Board and Siegel. (Incorporated herein by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the fiscal year ended November 6, 1993).
4.7 Lease, dated as of August 1, 1994, between the City of Hickman, Kentucky, and H.I.S Kentucky, Inc. (Incorporated herein by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
Exhibit No. Description of Exhibit - ----------- ----------------------
4.8 Note Agreement, dated as of June 30, 1995, by the Company and each of the Purchasers listed on Schedule 1 thereto (the "Note Agreement"). (Incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended August 5, 1995).
4.9 Waiver and Amendment Agreement, dated as of February 14, 1996, among the Company and each of the Purchasers listed on Schedule I attached to the Note Agreement. (Incorporated herein by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the fiscal year ended November 4, 1995).
4.10 Lease, dated as of February 1, 1995, between Fulton County, Kentucky and H.I.S Kentucky, Inc. (Incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended May 6, 1995).
4.11 Loan Agreement, dated as of April 1, 1995, between the ID Board and Siegel. (Incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended May 6, 1995).
9.1 Voting Trust Agreement ("Voting Trust Agreement 1"), dated as of January 11, 1989, among Milan Danek, Stephen Weiner and Burton M. Rosenberg, as voting trustee. (Incorporated herein by reference to Exhibit 9.1 to the Company's Registration Statement on Form S-1 No. 33-56270).
9.2 Amendment No. 1, dated as of November 24, 1992, to Voting Trust Agreement 1 among Milan Danek, Stephen Weiner and Burton M. Rosenberg, as voting trustee. (Incorporated herein by reference to Exhibit 9.2 to the Company's Registration Statement on Form S-1 No. 33-56270.)
9.3 Voting Trust Agreement, dated as of June 27, 1990, among Nancy Siegel and Hillary Siegel and Burton M. Rosenberg, as voting trustee. (Incorporated herein by reference to Exhibit 9.3 to the Company's Registration Statement on Form S-1 No. 33-56270.)
9.4 Voting Trust Agreement, dated as of February 2, 1993, among Roland Kimberlin, Robert Luehrs, Harvey Schulman and Burton M. Rosenberg, as voting trustee. (Incorporated herein by reference to Exhibit 9.4 to the Company's Annual Report on Form 10-K for the fiscal year ended November 6, 1993).
Exhibit No. Description of Exhibit - ----------- ----------------------
10.1 Registration Rights Agreement, dated as of November 20, 1992, among the Company, Chrysler Capital Corporation, Whirlpool Financial Corporation, NatWest, B.T. Expedition, Inc. and Jesse S. Siegel. (Incorporated herein by reference to Exhibit 4.14 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.2 Registration Rights Agreement, dated January 22, 1993, among the Company and its stockholders as of such date. (Incorporated herein by reference to Exhibit 4.4 to the Company's Annual Report on Form 10- K for the fiscal year ended November 6, 1993).
10.3 Representatives' Warrant Agreement, dated as of February 18, 1993, among the Company, Nomura Securities International, Inc., Josephthal Lyon & Ross Incorporated and Tucker Anthony Incorporated, including Form of Representatives' Warrant Certificate. (Incorporated herein by reference to Exhibit 4.5 to the Company's Annual Report on Form 10- K for the fiscal year ended November 6, 1993).
10.4 Amended and Restated Consulting Agreement, dated September 23, 1988, between Siegel and Jesse S. Siegel. (Incorporated herein by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.5 Employment Agreement, dated as of March 15, 1996, among the Company, Siegel and Burton M. Rosenberg.
10.6 Employment Agreement, dated as of March 15, 1996, among the Company, Siegel and Roland L. Kimberlin.
10.7 Employment Agreement, dated as of March 15, 1996, among the Company, Siegel and Robert F. Luehrs.
10.8 Employment Agreement, dated as of March 15, 1996, among the Company, Siegel and Stephen Weiner.
10.10 Lease, dated November 1989, between Tishomingo County, Mississippi, and Siegel. (Incorporated herein by reference to Exhibit 10.14 to the Company's Registration Statement on Form S-1 No. 33- 56270).
10.11 Lease, dated December 1, 1989, between Tishomingo County, Mississippi, and Siegel. (Incorporated herein by reference to Exhibit 10.15 to the Company's Registration Statement on Form S-1 No. 33- 56270).
Exhibit No. Description of Exhibit - ----------- ----------------------
10.12 Agreement of Lease, dated as of May 10, 1985, between Nineteen New York Properties Limited Partnership and Siegel. (Incorporated herein by reference to Exhibit 10.16 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.13 Lease, dated November 1, 1968, between Keystone Associates and Siegel, as amended. (Incorporated herein by reference to Exhibit 10.17 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.14 Lease, dated September 11, 1979, between the Mayor and Board of Aldermen of the Town of Tiptonville, Lake County, Tennessee, and Siegel. (Incorporated herein by reference to Exhibit 10.18 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.15 Chic by H.I.S, Inc. 1993 Stock Option Plan and First Amendment thereto. (Incorporated herein by reference to Exhibit 10.19 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.16 Chic by H.I.S, Inc. 1995 Stock Option Plan for Non- Employee Directors. (Incorporated herein by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
10.17 Phoenix Home Life Insurance Plan (Disability Plan). (Incorporated herein by reference to Exhibit 10.20 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.18 Pension Plan for Eligible Employees, including amendments I through III thereto). (Incorporated herein by reference to Exhibit 10.21 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.19 Security Agreement, dated as of May 1, 1990, between the ID Board and Siegel. (Incorporated herein by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.20 Guaranty Agreement, dated as of May 1, 1990, by the Company in favor of Trust Company Bank, as trustee. (Incorporated herein by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.21 Letter, dated May 11, 1990, from the Company and Siegel to Bayerische Hypotheken-Und Weschsel-Bank AG. (Incorporated herein by reference to Exhibit 10.24 to the Company's Registration Statement on Form S-1 No. 33-56270).
Exhibit No. Description of Exhibit - ----------- ----------------------
10.22 Lease, dated October 27, 1986, between Sportswear and Erbengemeinschaft Kellerer, including an amendment thereto. (Translated). (Incorporated herein by reference to Exhibit 10.28 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.23 Agreement, dated December 28, 1992, between Commerzbank and Sportswear. (Translated). (Incorporated herein by reference to Exhibit 10.29 to the Company's Registration Statement on Form S-1 No. 33- 56270).
10.24 Agreement, dated December 18, 1992, among Deutsche Bank, Sportswear, Siegel and the Company. (Translated). (Incorporated herein by reference to Exhibit 10.30 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.25 Agreement, dated June 26, 1991, between Hypo Bank and Sportswear. (Translated). (Incorporated herein by reference to Exhibit 10.31 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.26 Licensing and Cooperation Agreement, dated November 2, 1990, between Sportswear and Odevni Prumysl, Statni Podnik. (Incorporated herein by reference to Exhibit 10.32 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.27 Licensing Agreement, dated May 29, 1992, between Sportswear and CONSINVEST Ltd. (Translated). (Incorporated herein by reference to Exhibit 10.33 to the Company's Registration Statement on Form S-1 No. 33-56270).
10.28 Guaranty Agreement, dated as of September 1, 1993, by the Company in favor of First American National Bank, as Trustee. (Incorporated herein by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended November 6, 1993).
10.29 Guaranty Agreement, dated as of August 1, 1994, by the Company in favor of First American National Bank. (Incorporated herein by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
10.30 Amended and Restated Limited Guaranty Agreement, dated as of December 15, 1994, by h.i.s Limited in favor of NationsBank. (Incorporated herein by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
Exhibit No. Description of Exhibit - ----------- ----------------------
10.31 Amended and Restated Limited Guaranty Agreement, dated as of December 15, 1994, by Chic by H.I.S Licensing Corporation in favor of NationsBank. (Incorporated herein by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
10.32 Amended and Restated Limited Guaranty Agreement, dated as of December 15, 1994, by Chic Holdings Corp. in favor of NationsBank. (Incorporated herein by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
10.33 Amended and Restated Limited Guaranty Agreement, dated as of December 15, 1994, by Siegel in favor of NationsBank. (Incorporated herein by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
10.34 Amended and Restated Limited Guaranty Agreement, dated as of December 15, 1994, by H.I.S Kentucky, Inc. in favor of NationsBank. (Incorporated herein by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
10.35 Guaranty Agreement, dated as of February 1, 1995, by the Company in favor of First American National Bank, as trustee. (Incorporated herein by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended May 6, 1995).
10.36 Guaranty Agreement, dated as of April 1, 1995, by the Company in favor of First American National Bank, as trustee. (Incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended May 6, 1995).
10.37 Guaranty Agreement, dated as of June 30, 1995, by Siegel in favor of the Purchasers listed on Annex 1 thereto. (Incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended August 5, 1995).
10.38 Guaranty Agreement, dated as of June 30, 1995, by Chic Holdings Corp. in favor of the Purchasers listed on Annex 1 thereto. (Incorporated herein by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended August 5, 1995).
Exhibit No. Description of Exhibit - ----------- ----------------------
10.39 Guaranty Agreement, dated as of June 30, 1995, by Chic by H.I.S Licensing Corporation in favor of the Purchasers listed on Annex 1 thereto. (Incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended August 5, 1995).
10.40 Guaranty Agreement, dated as of June 30, 1995, by H.I.S Kentucky, Inc. in favor of the Purchasers listed on Annex 1 thereto. (Incorporated herein by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q for the quarter ended August 5, 1995).
10.41 Guaranty Agreement, dated as of June 30, 1995, by h.i.s Limited in favor of the Purchasers listed on Annex 1 thereto. (Incorporated herein by reference to Exhibit 10.6 of the Company's Quarterly Report on Form 10-Q for the quarter ended August 5, 1995).
13.1 Annual Report to Stockholders of the Company for the fiscal year ended November 2, 1996 (including attachment thereto).
21.1 Subsidiaries of the Company. (Incorporated herein by reference to Exhibit 21.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 5, 1994).
27 Financial Data Schedule
99.1 Press Release of the Company dated January 17, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of New York, State of New York, on January 28, 1997.
CHIC BY H.I.S, INC.
By /s/ Burton M. Rosenberg --------------------------- (Burton M. Rosenberg) Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
FINANCIAL STATEMENT SCHEDULE
Report of Independent Certified Public Accountants on Financial Statement Schedule S - 1
Schedule II- Valuation and Qualifying Accounts S - 2
All other schedules are not submitted because they are not required or because the required information is included in the financial statements or notes thereto.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of Chic by H.I.S., Inc. and Subsidiaries
The audits referred to in our report dated December 31,1996, relating to the consolidated financial statements of Chic by H.I.S., Inc. and Subsidiaries, which is referred to in Item S of this Form 10-k, included the audit of the accompanying financial statement schedule. This financial statement schedule is the responsibility of the Company's management Our responsibility is to express an opinion on this financial Statement schedule based on our audits.
In our opinion, such financial statement schedule presents fairly, in all material respects, the information set forth therein.
BDO Seidman, LLP
New York, New York December 31, 1996
S-1
CHIC BY H.I.S, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
S-2