UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended January 3, 1998

OR

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-6666

SALANT CORPORATION
(Exact name of registrant as specified in its charter)

1114 Avenue of the Americas, New York, New York 10036
Telephone: (212) 221-7500

Incorporated in the State of Delaware       Employer Identification
                                            No. 13-3402444

Securities  registered  pursuant to Section 12(b) of the Act: Common Stock,  par
value $1 per share, registered on the New York Stock Exchange.

Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes X  No __

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.

         Indicate by check mark whether the  registrant  has filed all documents
and reports  required  to be filed by Section 12, 13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
Yes X  No __

         As of March 16, 1998, there were outstanding  14,964,608  shares of the
Common Stock of the  registrant.  Based on the closing price of the Common Stock
on the New York Stock Exchange on such date,  the aggregate  market value of the
voting  stock  held  by  non-affiliates  of the  registrant  on  such  date  was
$4,805,176.  For purposes of this computation,  shares held by affiliates and by
directors and executive  officers of the  registrant  have been  excluded.  Such
exclusion of shares held by directors  and  executive  officers is not intended,
nor shall it be deemed,  to be an admission  that such persons are affiliates of
the registrant.



<PAGE>


                                           TABLE OF CONTENTS



PART I
     Item 1.      Business
     Item 2.      Properties
     Item 3.      Legal Proceedings
     Item 4.      Submission of Matters to a Vote of Security Holders

PART II

     Item 5.      Market for Registrant's Common Equity and Related
                  Stockholder Matters
     Item 6.      Selected Consolidated Financial Data
     Item 7.      Management's Discussion and Analysis of Financial Condition
                  and Results of Operations
     Item 8.      Consolidated Financial Statements and Supplementary Data
     Item 9.      Disagreements on Accounting and Financial Disclosure

PART III

     Item 10.     Directors and Executive Officers of the Registrant
     Item 11.     Executive Compensation
     Item 12.     Security Ownership of Certain Beneficial Owners and Management
     Item 13.     Certain Relationships and Related Transactions

PART IV

     Item 14.     Exhibits, Financial Statement Schedule and Reports on Form 8-K

SIGNATURES


<PAGE>


                                                                 PART I

ITEM 1.  BUSINESS

Introduction.   Salant  Corporation  ("Salant"  or  the  "Company"),  which  was
incorporated in Delaware in 1987, is the successor to a business founded in 1893
and incorporated in New York in 1919. Salant designs, manufactures,  imports and
markets to retailers  throughout  the United States brand name and private label
apparel  products  primarily in three product  categories:  (i)  menswear;  (ii)
children's sleepwear and underwear; and (iii) retail outlet stores, as described
below.  Salant sells its products to department and specialty  stores,  national
chains,  major  discounters  and mass  volume  retailers  throughout  the United
States. (As used herein, the "Company" includes Salant and its subsidiaries, but
excludes Salant's Made in the Shade and Vera Scarf divisions.)

Men's  Apparel.  The men's  apparel  business  is  comprised  of the Perry Ellis
division and Salant  Menswear  Group.  The Perry Ellis  division  markets  dress
shirts,  slacks and sportswear  under the PERRY ELLIS,  PORTFOLIO BY PERRY ELLIS
and PERRY ELLIS AMERICA  trademarks.  Salant  Menswear Group is comprised of the
Accessories division,  the Bottoms division and all dress shirt businesses other
than those selling products bearing the PERRY ELLIS trademarks.  The Accessories
division  markets  neckwear,  belts and  suspenders  under a number of different
trademarks,  including  PORTFOLIO BY PERRY ELLIS,  JOHN HENRY, SAVE THE CHILDREN
and PEANUTS. The Bottoms division primarily  manufactures men's and boys' jeans,
principally  under  the  Sears,  Roebuck  & Co.  ("Sears")  CANYON  RIVER  BLUES
trademark,  and men's  casual  slacks  under  Sears'  CANYON  RIVER BLUES KHAKIS
trademark.  The Salant Menswear Group also markets dress shirts, primarily under
the JOHN HENRY and MANHATTAN trademarks.

Children's  Sleepwear  and  Underwear.  The  children's  sleepwear and underwear
business is conducted by the Salant  Children's  Apparel Group (the  "Children's
Group").  The Children's Group markets blanket sleepers primarily using a number
of well-known  licensed cartoon characters created by, among others,  DISNEY and
WARNER BROS. The Children's  Group also markets pajamas under the OSHKOSH B'GOSH
trademark, and sleepwear and underwear under the JOE BOXER trademark. At the end
of the first quarter of 1998,  the Company  determined  not to continue with its
Joe Boxer sportswear line for Fall 1998.  Instead,  consistent with the approach
that the Joe Boxer  Corporation  (Salant's  licensor of the Joe Boxer trademark)
has  taken,  the  Company  will  focus on its core  business  of  underwear  and
sleepwear.

Retail Outlet Stores.  The retail outlet stores business of the Company consists
of a chain of factory  outlet stores (the "Stores  division"),  through which it
sells products manufactured by the Company and other apparel  manufacturers.  In
December 1997, the Company  announced the  restructuring of the Stores division,
pursuant  to which the  Company  closed  all stores  other than its Perry  Ellis
outlet stores.  This resulted in the closing of 42 outlet stores.  At the end of
1997,  Salant  operated 17 Perry Ellis outlet stores.  Commencing  with the 1998
fiscal  year,  as a result of the  restructuring  of this  division,  the retail
outlet stores will be reported as part of the men's apparel segment of Salant.



<PAGE>


Principal  Product Lines.  The following table sets forth,  for fiscal years 
1995 through 1997, the percentage of the Company's total net sales  contributed
 by each category of product:
<TABLE>
<CAPTION>

                                                                                            Fiscal Year
                                                                           1995            1996             1997

<S>                                                                         <C>             <C>              <C>
Men's Apparel                                                               86%             83%              82%
Children's Sleepwear and Underwear                                           8%             11%              12%
Retail Outlet Stores                                                         6%              6%               6%
</TABLE>

For more detailed  information  regarding the Company's product categories,  see
Note 11 to the Consolidated Financial Statements.

In 1997,  approximately  17% of the  Company's  net  sales  were  made to Sears,
approximately  11% of the Company's net sales were made to Federated  Department
Stores, Inc. ("Federated") and approximately 10% of the Company's net sales were
made to TJX Corporation ("TJX"). In 1996, approximately 13% of the Company's net
sales were made to Sears.  In 1996 and 1995, net sales to Federated  represented
approximately  11% and 12% of the  Company's net sales,  respectively.  In 1995,
approximately  11% of the  Company's  net  sales  were  made  to TJX.  In  1995,
approximately 13% of the Children's Group's net sales were made to Dayton Hudson
Corporation.

No other customer accounted for more than 10% of the net sales of the Company or
any of its business segments during 1995, 1996 or 1997.

The markets in which the Company  operates are highly  competitive.  The Company
competes primarily on the basis of brand recognition,  quality,  fashion, price,
customer service and merchandising expertise.

A significant  factor in the marketing of the Company's products is the consumer
perception  of the  trademark  or brand  name under  which  those  products  are
marketed. Approximately 76% of the Company's net sales for 1997 was attributable
to products sold under Company owned or licensed  designer  trademarks and other
internationally  recognized  brand  names and the balance  was  attributable  to
products sold under  retailers'  private labels,  including  Sears' CANYON RIVER
BLUES.  The  following  table lists the principal  owned or licensed  trademarks
under  which the  Company's  products  were sold in 1997 and the  product  lines
associated  with those  trademarks.  Trademarks used under license are indicated
with an asterisk; all other listed trademarks are owned by the Company.
<TABLE>
<CAPTION>

Trademark                                                           Product Lines

<S>                                                                 <C>
DISNEY Characters *                                                 Children's sleepwear and underwear
DR. DENTON                                                          Children's sleepwear and underwear
GANT *                                                              Men's dress shirts, neckwear, belts and suspenders
JOE BOXER *                                                         Children's sleepwear, underwear and sportswear; men's neckwear
JOHN HENRY                                                          Men's dress shirts, neckwear, belts, suspenders and jeans
LOONEY TUNES characters *                                           Children's sleepwear
MANHATTAN                                                           Men's dress shirts
OSHKOSH B'GOSH *                                                    Children's sleepwear
PEANUTS *                                                           Men's dress shirts and neckwear
PERRY ELLIS *                                                       Men's sportswear, dress shirts, neckwear, belts and suspenders
PERRY ELLIS AMERICA *                                               Men's casual sportswear and jeans
PORTFOLIO BY PERRY ELLIS *                                          Men's dress slacks, dress shirts, neckwear, belts and suspenders
SAVE THE CHILDREN *                                                 Men's neckwear and suspenders
THOMSON                                                             Men's casual and dress slacks
UNICEF *                                                            Men's neckwear
</TABLE>

During 1997,  44% of the Company's net sales was  attributable  to products sold
under  the PERRY  ELLIS,  PORTFOLIO  BY PERRY  ELLIS  and  PERRY  ELLIS  AMERICA
trademarks;  these  products are sold through  leading  department and specialty
stores.  Products  sold to Sears under its  exclusive  brand  CANYON RIVER BLUES
accounted  for 14% of the  Company's  net sales  during  1997.  No other line of
products accounted for more than 10% of the Company's net sales during 1997.

Trademarks Owned by the Company and Related Licensing  Income.  The Company owns
the DR. DENTON,  JOHN HENRY, LADY MANHATTAN,  MANHATTAN and THOMSON  trademarks,
among others.  All of the significant brand names owned by the Company have been
registered  or are  pending  registration  with the  United  States  Patent  and
Trademark Office.

The Company has sought to capitalize on the consumer recognition of and interest
in its trademarks by licensing  various of those trademarks to others. As of the
end of 1997,  licenses were outstanding to approximately 18 licensees to make or
sell apparel  products and  accessories in the United States and to 34 licensees
in 30 other countries under the MANHATTAN,  LADY MANHATTAN, JOHN HENRY, and VERA
trademarks, which produced royalty income of approximately $5.6 million in 1997.
Products under license include men's belts, dress shirts,  leather  accessories,
neckwear,  optical frames,  outerwear,  pajamas, robes, scarves, shorts, slacks,
socks, sportcoats, sunglasses, suspenders and underwear, and women's blouses and
tops, gloves, intimate apparel, lingerie, optical frames, scarves and shirts.

Trademarks Licensed to the Company.  The name Perry Ellis and related trademarks
are  licensed to the  Company  under a series of license  agreements  with Perry
Ellis  International,  Inc.  ("PEI").  The license  agreements  contain  renewal
options, which, subject to compliance with certain conditions contained therein,
permit the Company to extend the terms of such license agreements.  Assuming the
exercise by the Company of all available renewal options, the license agreements
covering  men's apparel and  accessories  will expire on December 31, 2015.  The
Company  also has rights of first  refusal  worldwide  for certain new  licenses
granted by PEI for men's apparel and accessories.

The Company is also a licensee of various  trademarks,  including certain DISNEY
characters  (including  DISNEY BABIES,  MICKEY FOR KIDS, WINNIE THE POOH and THE
LION KING-SIMBA'S  PRIDE), GANT, JOE BOXER,  OSHKOSH B'GOSH,  PEANUTS,  SAVE THE
CHILDREN,  UNICEF and certain WARNER BROS.  characters (including certain LOONEY
TUNES  characters,  such as BUGS BUNNY,  DAFFY DUCK and PORKY PIG),  for various
categories of products under license agreements expiring between 1998 and 2002.

The agreements  under which the Company is licensed to use  trademarks  owned by
others typically provide for royalties at varying percentages of net sales under
the licensed trademark, subject to a minimum annual royalty payable irrespective
of the level of net sales.  The  Company  anticipates  that it should be able to
extend, if it so desires, the term of any material licenses when they expire.

Design and  Manufacturing.  Products sold by the Company's various divisions are
manufactured to the designs and specifications  (including fabric selections) of
designers employed by those divisions. In limited cases, the Company's designers
may receive input from one or more of the Company's  licensors on general themes
or color palettes.

During 1997, approximately 12% of the products produced by the Company (measured
in units) were manufactured in the United States, with the balance  manufactured
in  foreign  countries.   Facilities  operated  by  the  Company  accounted  for
approximately  75% of its  domestic-made  products  and 37% of its  foreign-made
products;  the balance in each case was  attributable to  unaffiliated  contract
manufacturers.  In 1997,  approximately 47% of the Company's foreign  production
was manufactured in Mexico,  approximately 18% was manufactured in Guatemala and
approximately 12% was manufactured in the Dominican Republic.

The Company's foreign sourcing  operations are subject to various risks of doing
business  abroad,  including  currency  fluctuations  (although the  predominant
currency  used is the U.S.  dollar),  quotas and, in certain parts of the world,
political   instability.   Although  the  Company's  operations  have  not  been
materially  adversely  affected by any of such factors to date, any  substantial
disruption  of its  relationships  with its foreign  suppliers  could  adversely
affect its operations.  Some of the Company's imported merchandise is subject to
United States Customs  duties.  In addition,  bilateral  agreements  between the
major exporting  countries and the United States impose quotas,  which limit the
amounts of certain  categories  of  merchandise  that may be  imported  into the
United States. Any material increase in duty levels,  material decrease in quota
levels or material  decrease in  available  quota  allocations  could  adversely
affect the Company's operations.

Raw Materials.  The raw materials used in the Company's manufacturing operations
consist principally of finished fabrics made from natural, synthetic and blended
fibers.  These  fabrics  and  other  materials,  such  as  leathers  used in the
manufacture of various accessories, are purchased from a variety of sources both
within and outside the United States. The Company believes that adequate sources
of supply at  acceptable  price  levels are  available  for all such  materials.
Substantially  all of the Company's  foreign  purchases are  denominated in U.S.
currency.  No  single  supplier  accounted  for more  than 10% of  Salant's  raw
material  purchases  during  1997.  In 1997,  the Company  entered  into forward
foreign exchange  contracts,  relating to 80% of its projected 1998 Mexican peso
needs,  to fix its cost of  acquiring  pesos and  diminish  the risk of  foreign
currency fluctuation.

Employees.  As of the end of 1997,  the  Company  employed  approximately  3,800
persons, of whom 3,200 were engaged in manufacturing and distribution operations
and the  remainder  were employed in  executive,  marketing  and sales,  product
design,  engineering  and  purchasing  activities  and in the  operation  of the
Company's retail outlet stores. Substantially all of the manufacturing employees
are covered by  collective  bargaining  agreements  with various  unions,  which
expire between 1998 and 2000.  The Company  believes that its relations with its
employees are satisfactory.

Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line  manufacturers (such as
the Company) and a larger number of specialty  manufacturers.  The Company faces
substantial  competition in its markets from  manufacturers  in both categories.
Many of the Company's  competitors  have greater  financial  resources  than the
Company.  The Company seeks to maintain its competitive  position in the markets
for its branded products on the basis of the strong brand recognition associated
with those  products and,  with respect to all of its products,  on the basis of
styling, quality, fashion, price and customer service.

Environmental  Regulations.  Current environmental regulations have not had, and
in the opinion of the Company,  assuming the continuation of present conditions,
are  not  expected  to  have  a  material   effect  on  the  business,   capital
expenditures, earnings or competitive position of the Company.

Seasonality  of Business and Backlog of Orders.  This  information is included 
under Item 7.  Management's  Discussion and Analysis of Financial Condition and
Results of Operations.

Made  in  the  Shade  -  Discontinued  Operation.  In  June  1997,  the  Company
discontinued  the operations of the Made in the Shade  division,  which produced
and marketed  women's junior  sportswear under the Company owned trademarks MADE
IN THE SHADE and PRIME TIME. The financial statements of the Company included in
this report treat the Made in the Shade division as a discontinued operation.

Vera Scarf  Division -  Discontinued  Operation.  In February  1995, the Company
discontinued  its Vera Scarf  division,  which  imported  and  marketed  women's
scarves under (i) the  Company-owned  trademarks VERA and ACUTE, (ii) trademarks
licensed to the Company,  including PERRY ELLIS,  and (iii)  retailers'  private
labels.  The  Company  closed the Vera Scarf  division  in 1995.  The  financial
statements of the Company  included in this report treat the Vera Scarf division
as a discontinued operation.

Bankruptcy  Court Cases.  On June 27, 1990 (the "Filing  Date"),  Salant and its
wholly owned subsidiary,  Denton Mills,  Inc. ("Denton Mills"),  each filed with
the United States  Bankruptcy  Court for the Southern  District of New York (the
"Bankruptcy Court") a separate voluntary petition for relief under chapter 11 of
title 11 of the United States Code (the "Bankruptcy Code") (Case Nos. 90-B-12037
(CB) and 90-B-12038  (CB)) (the "Chapter 11 Cases").  The Company's other United
States  subsidiaries on the Filing Date did not seek relief under the Bankruptcy
Code. On July 30, 1993,  the  Bankruptcy  Court issued an order  confirming  the
Third  Amended  Joint Plan of  Reorganization  of Salant  and Denton  Mills (the
"Reorganization Plan"). The Reorganization Plan was consummated on September 20,
1993  (the  "Consummation   Date"),  as  further  described  in  Item  3.  Legal
Proceedings and in Note 18 to the financial statements.

Recent Events.  On March 3, 1998,  the Company  announced that it had reached an
agreement in principle (the  "Restructuring  Agreement") with its major note and
equity   holders  to   restructure   its   existing   indebtedness   (the  "Debt
Restructuring")  under its 10 1/2% Senior  Secured  Notes due  December 31, 1998
(the "Senior Secured Notes").  Under the  Restructuring  Agreement,  the Company
will convert the entire $104.9 million  outstanding  aggregate  principal amount
of, and all accrued and unpaid interest on, its Senior Secured Notes into Salant
Common Stock.  The  Restructuring  Agreement was entered into by the Company and
Magten Asset Management Corp., the beneficial owner of, or the representative of
the beneficial owners of, approximately 67% of the aggregate principal amount of
the Senior Secured Notes. Apollo Apparel Partners, L.P., the beneficial owner of
approximately 39.6% of Salant Common Stock, is also a party to the Restructuring
Agreement  and has agreed to vote all of its shares of common  stock in favor of
the Debt  Restructuring.  The  Restructuring  Agreement  provides,  among  other
things,  that (i) the entire principal amount of the Senior Secured Notes,  plus
all accrued and unpaid  interest  thereon,  will be converted  into 92.5% of the
Company's issued and outstanding  common stock, and (ii) the Company's  existing
stockholders will retain 7.5% of Salant Common Stock and will receive seven-year
warrants to purchase up to 10% of Salant Common Stock on a fully diluted  basis.
Stockholder and noteholder  approval will be required in order to consummate the
Debt  Restructuring.  The  Restructuring  Agreement  also provides for a reverse
stock  split,  which will require the  approval of the  Company's  stockholders.
Because of the treatment of accrued  interest on the Senior  Secured Notes under
the  Restructuring  Agreement,  the  Company  did not pay the  $5.5  million  of
interest  on the  Senior  Secured  Notes that  became  payable on March 2, 1998,
subject to a 30 day grace  period.  Consummation  of the Debt  Restructuring  is
subject  to the  satisfaction  of a number of  conditions  precedent,  including
stockholder  and  noteholder  approval  and the  negotiation  and  execution  of
definitive  documentation.  However,  there can be no  assurances  that the Debt
Restructuring will be consummated. Implementation of the Debt Restructuring will
result in the  elimination  of $11.0 million of annual  interest  expense to the
Company.

As part of the Debt  Restructuring,  the  Company  and The CIT  Group/Commercial
Services,  Inc. ("CIT") executed the Twelfth Amendment and Forbearance Agreement
(the  "Amendment")  to the Revolving  Credit,  Factoring and Security  Agreement
dated September 20, 1993, as amended (the "Credit Agreement"). The Amendment (i)
waives as of January  3,  1998,  the  Company's  failure  to meet the  financial
covenants related to stockholders'  equity and maximum loss, as set forth in the
Credit  Agreement,  (ii)  provides that CIT forbear from  exercising  any of its
rights and remedies  arising from the Company's  decision not to pay interest on
the Senior Secured Notes, payable on March 2, 1998, as further discussed in Item
7.  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations,  (iii)  provides  that,  subject to the terms and  conditions of the
Credit Agreement, as modified by the Amendment,  CIT will continue making loans,
advances and other financial  accommodations to the Company,  (iv) increases the
borrowings  allowed against eligible  inventory to 60%, (v) provides the Company
with a discretionary $3 million seasonal  overadvance,  (vi) reduces the Maximum
Credit  from $135  million to $120  million  and (vii)  modifies  the  financial
covenants  the Company is  required to  maintain.  Under the  Amendment,  to the
extent  that  the  Company  fails  to  maintain   certain  levels  of  borrowing
availability under its asset-based borrowing formula, the Company is required to
maintain a certain minimum interest  coverage ratio and is subject to a covenant
limiting  the maximum  loss the  Company  may incur over any twelve  consecutive
calendar months.

ITEM 2.  PROPERTIES

The  Company's  principal  executive  offices  are located at 1114 Avenue of the
Americas,  New York, New York 10036. The Company's principal  properties consist
of three  domestic  manufacturing  facilities  located in Alabama,  New York and
Tennessee,   four   manufacturing   facilities   located  in  Mexico,  and  five
distribution  centers;  one in New York, two in South Carolina and two in Texas.
At the end of 1997,  the Company was in the process of closing one  distribution
facility in South Carolina. The Company owns approximately 1,067,000 square feet
of space devoted to  manufacturing  and  distribution  and leases  approximately
497,000 square feet of such space. The Company owns approximately  69,000 square
feet of office space and leases  approximately  210,000  square feet of combined
office, design and showroom space. The Children's Group has exclusive use of the
Tennessee  manufacturing  facility,  shares  one  of the  Mexican  manufacturing
facilities  with  the  Salant  Menswear  Group  Bottoms  division  and  has  its
distribution center in a building in Texas. As of the end of 1997, the Company's
Stores  division  operated 17 factory  outlet stores,  comprising  approximately
45,000 square feet of selling  space,  all of which are leased.  Except as noted
above, substantially all of the owned and leased property of the Company is used
in   connection   with  its  men's   apparel   business  or  general   corporate
administrative functions.

The Company believes that its plant and equipment are adequately maintained,  in
good operating condition, and are adequate for the Company's present needs.

ITEM 3.  LEGAL PROCEEDINGS

 (a) Chapter 11 Cases. On June 27, 1990, Salant and Denton Mills each filed with
the Bankruptcy Court a separate  voluntary  petition for relief under chapter 11
of the Bankruptcy  Code. On July 30, 1993, the Bankruptcy  Court issued an order
confirming the Reorganization Plan.

The  Reorganization  Plan was  consummated on September 20, 1993. From that date
through  January  3, 1998  (approximately  51  months),  the  Company  made cash
payments of $9.7 million,  issued $111.9 million of Senior  Secured  Notes,  and
issued 11.1 million  shares of common stock in settlement of certain  undisputed
and disputed claims in the chapter 11 proceedings.  Salant  anticipates  that an
additional  $1.8 million in cash and an additional 206 thousand shares of common
stock will  ultimately be distributed  in connection  with the resolution of all
remaining  claims.   Provisions  for  such   distributions   were  made  in  the
consolidated  financial  statements at the time of emergence from the bankruptcy
during  the year  ended  January 1, 1994.  The  process of  resolving  claims is
continuing  and,  pursuant  to  the  Reorganization   Plan,  remains  under  the
jurisdiction of the Bankruptcy Court.

(b) Other.  The Company is a defendant in several  other legal  actions.  In the
opinion of the  Company's  management,  based upon the advice of the  respective
attorneys  handling such cases, such actions are not expected to have a material
adverse  effect on the Company's  consolidated  financial  position,  results of
operations or cash flow.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of 1997, no matter was submitted to a vote of security
holders of Salant by means of the solicitation of proxies or otherwise.


<PAGE>


                                                                  PART II

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS

Salant's  Common  Stock is traded on the New York Stock  Exchange  (the  "NYSE")
under the trading symbol SLT.

The high and low sale  prices  per share of Common  Stock  (based  upon the NYSE
composite tape as reported in published  financial  sources) for each quarter of
1996 and 1997 are set  forth  below.  The  Company  did not  declare  or pay any
dividends  during such years.  The indenture  governing the Senior Secured Notes
and the Credit  Agreement  requires the  satisfaction of certain net worth tests
prior to the  payment of any cash  dividends  by Salant.  As of January 3, 1998,
Salant was prohibited from paying cash dividends  under the most  restrictive of
these provisions.

                    High and Low Sale Prices Per Share of the Common Stock
<TABLE>

<CAPTION>
                  Quarter                                    High                                   Low

                  1997
<S>                                                        <C>  <C>                              <C>  <C>
                  Fourth                                   $3 3/8                                $1 9/16
                  Third                                   3                                       1 15/16
                  Second                                    4 1/4                                 2 7/8
                  First                                     5 3/8                                3

                  1996
                  Fourth                                   $3 7/8                                $3 1/8
                  Third                                    4                                      2 3/4
                  Second                                    4 7/8                                 3 1/2
                  First                                     5 3/4                                 3 1/8
</TABLE>

On March 24, 1998, there were 1,045 holders of record of shares of Common Stock,
and the closing market price was $0.625.

All of the outstanding voting securities of the Company's subsidiaries are owned
beneficially  and  (except  for shares of certain  foreign  subsidiaries  of the
Company  owned of  record  by others  to  satisfy  local  laws) of record by the
Company.


<PAGE>




ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands except share, per share and ratio data)

The following  selected  consolidated  financial data presented for fiscal years
1995 through 1997 have been derived from the Consolidated  Financial  Statements
of the Company,  which has been  audited by Deloitte & Touche LLP,  whose report
thereon appears under Item 8, "Financial Statements and Supplementary Data". The
selected  consolidated  financial  data for fiscal years 1993 and 1994 have been
derived from audited consolidated financial data, which are not included herein.
Such  consolidated  financial  data should be read in  conjunction  with Item 7,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  and with  the  Consolidated  Financial  Statements,  including  the
related notes thereto, included elsewhere herein.

<TABLE>
<CAPTION>

                                                       Jan. 03,      Dec. 28,     Dec. 30,     Dec. 31,      Jan. 1,
                                                          1998          1996         1995         1994         1994
                                                     (53 Weeks)    (52 Weeks)   (52 Weeks)   (52 Weeks)   (52 Weeks)

For The Year Ended:
  Continuing Operations:
<S>                                                  <C>            <C>          <C>          <C>          <C>
    Net sales                                        $ 396,832      $ 417,711    $ 485,825    $ 398,990    $ 379,012
    Restructuring costs (a)                             (2,066)      (11,730)    (3,550)              -      (5,500)
    Income/(loss) from continuing operations           (10,722)       (8,958)        (362)        3,398        7,865
    Discontinued Operations:
      Loss from operations, net of income taxes       (8,136)         (365)          (136)      (9,530)        (638)
      Estimated loss on disposal, net of income taxes   (1,330)             -            -      (1,796)            -
      Reversal of estimated loss on disposal,
       net of income taxes                                  -               -            -            -       11,772
    Extraordinary gain (b)                                2,100             -        1,000           63       24,707
    Net income/(loss)(a)                               (18,088)       (9,323)          502      (7,865)       43,706

    Basic earnings/(loss) per share:
    Earnings/(loss) per share from continuing
     operations before extraordinary gain           $   (0.71)     $  (0.60)  $    (0.02)      $  0.23       $ 1.18
    Earnings/(loss) per share from discontinued
     operations                                          (0.62)        (0.02)       (0.01)       (0.76)         1.68
    Earnings per share from extraordinary gain             0.14             -         0.06            -         3.72
    Basic earnings/(loss) per share (a)                  (1.19)        (0.62)         0.03       (0.53)         6.58

    Diluted earnings/(loss) per share:
    Earnings/(loss) per share from continuing
     operations before extraordinary gain                (0.71)     $  (0.60)  $    (0.02)      $  0.23       $ 1.10
    Earnings/(loss) per share from discontinued
     operations                                          (0.62)        (0.02)       (0.01)       (0.76)         1.57
    Earnings per share from extraordinary gain             0.14             -         0.06            -         3.48
    Diluted earnings/(loss) per share (a)                (1.19)        (0.62)         0.03       (0.53)         6.15

    Cash dividends per share                                  -             -            -            -            -
</TABLE>
<TABLE>
<CAPTION>

At Year End:
<S>                                                  <C>            <C>          <C>           <C>         <C>
  Current assets                                     $ 148,899      $ 150,986    $ 163,799     $172,234    $ 161,375
  Total assets                                          233,377       235,251      253,970      266,157      251,946
  Current liabilities (c)                               185,692        59,566       61,704       71,104       44,427
  Long-term debt  (c)                                        --       106,231      110,040      109,908      111,851
  Deferred liabilities                                    5,382         8,863       11,373       13,479       16,766
  Working capital/(deficiency)                         (36,793)        91,420      102,095      101,130      116,948
  Current ratio                                           0.8:1         2.5:1        2.7:1        2.4:1        3.6:1
  Shareholders' equity                                 $ 42,303      $ 60,591     $ 70,853     $ 71,666     $ 78,902
  Book value per share                                   $ 2.79        $ 4.01       $ 4.71       $ 4.78       $ 5.34
  Number of shares outstanding                           15,170        15,094       15,041       15,008       14,781
</TABLE>

(a)  Includes,  for the year ended January 3, 1998, a provision of $2,066
 (14 cents per share; tax benefit not available) for  restructuring  costs
 principally     related to (i) $3,530  related to the decision in the fourth
 quarter to close all retail  outlet stores other than Perry Ellis outlet 
 stores and (ii) the     reversal of previously  recorded  restructuring  
 provisions of $1,464,  primarily  resulting from the settlement of liabilities
 for less than the carrying amount,  resulting  in the reversal of the excess 
 portion of the  provision;  for the year ended  December 28, 1996, a provision
 of $11,730 (78 cents per share; tax benefit not available) for restructuring 
 costs  principally  related to (i) the write-off of goodwill and the write-down
 of other assets for a     product line which has been put up for sale,
(ii) the write-off of certain assets and accrual for future  royalties for a
 licensed  product line and (iii) employee costs related to closing  certain 
 facilities;  for the year ended December 30, 1995, a provision of $3,550
(24 cents per share;  tax benefit not     available)  for  restructuring  costs
 principally  related to (i) fixed asset  write-downs  at locations to be closed
 and (ii)  inventory  markdowns  for     discontinued  product lines;  and for 
 the year ended January 1, 1994, a provision of $5,500 (Basis loss per share of
 83 cents;  tax benefit not available) for  restructuring  costs  principally 
 related to the costs incurred in connection  with the closure of certain  
 unprofitable  operations,  including (i)inventory markdowns associated with 
 those product lines and (ii) fixed asset write-downs at closed locations.

(b)  Includes,  for the year ended  January 3, 1998,  a gain of $2,100 (14 cents
     per  share)  related  to the  reversal  of  excess  liabilities  previously
     provided for the anticipated  settlement of claims arising from the Chapter
     11  proceeding;  for the year ended  December 30, 1995, a gain of $1,000 (6
     cents per share) related to the reversal of excess  liabilities  previously
     provided for the anticipated  settlement of claims arising from the Chapter
     11 proceeding;  for the year ended December 31, 1994, a gain of $63 (no per
     share  effect)  related to the purchase and  retirement of a portion of the
     Senior Secured Notes at a price below the principal amount thereof; and for
     the year ended January 1, 1994, a gain of $24,707 (basic earnings per share
     of $3.72) related to the settlement  and  anticipated  settlement of claims
     arising from the Chapter 11 proceeding.

(c)  At January 3, 1998,  long term debt of $104,879 has been  classified as a
     current  liability.  See Note 1.  Financial  Restructuring  to the 
     Consolidated Financial Statements.


<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
           CONDITION AND RESULTS OF OPERATIONS.

Overview

In  1997,  the  Company  continued  to  implement  and  enhance  its plan (i) to
concentrate  the Company's  resources on a limited  number of key menswear brand
names  (including  continuing to emphasize and  cohesively  market the Company's
leading Perry Ellis brand),  (ii) to further expand the Company's  private label
business and (iii) to correct  operational issues that have hampered the Company
in the past.

In accordance with these  objectives,  in 1997, the Company (i) discontinued its
Made in the Shade women's junior sportswear business,  (ii) closed all non-Perry
Ellis retail outlet stores and (iii) made significant changes to management.  In
1997,  the Company  hired a new  Chairman  and Chief  Executive  Officer,  Chief
Financial  Officer,  Senior Vice President of Human Resources,  President of its
Salant Menswear  division,  and Vice Presidents for Distribution,  Manufacturing
and Information Services.

In March  1998,  the  Company  announced  that it had  reached an  agreement  in
principle  with its major note and equity  holders to  restructure  its existing
indebtedness  under  Salant's 10 1/2% Senior Secured Notes due December 31, 1998
(the "Senior Secured Notes"). Under this restructuring,  Salant will convert the
entire $104.9 million outstanding aggregate principal amount of, and all accrued
and unpaid  interest  on, its Senior  Secured  Notes into common stock of Salant
("Salant Common Stock").  See "Liquidity and Capital  Resources" section of this
Item 7 for a further description of the restructuring.

Results of Operations

Fiscal 1997 Compared with Fiscal 1996

   Net Sales

The  following  table  sets forth the net sales of each of the  Company's  three
principal  business segments for the fiscal years ended January 3, 1998 ("Fiscal
1997") and December 28, 1996 ("Fiscal 1996") and the percentage  contribution of
each of those segments to total net sales:

<TABLE>
<CAPTION>
                                                                                                 Percentage
                                                                                                   Increase/
                                                 Fiscal 1997                  Fiscal 1996        (Decrease)
                                                       (dollars in millions)

<S>                                            <C>           <C>         <C>            <C>          <C>
Men's                                          $325.8        82%         $344.7         83%          (5.5%)
Children's                                       49.2        12%           45.8         11%            7.5%
Retail Outlet Stores                             21.8         6%           27.2          6%          (19.8%)

        Total                                $396.8          100%        $417.7        100%           (5.0%)
</TABLE>

Sales of men's apparel decreased by $18.9 million, or 5.5%, in Fiscal 1997. This
decrease  resulted from (a) a $12.4 million  reduction in sales of men's slacks,
of which $8.4 reflected the elimination of unprofitable programs and the balance
was primarily due to operational  difficulties  experienced in the first quarter
of  1997  related  to the  move of  manufacturing  and  distribution  out of the
Company's facilities in Thomson,  Georgia, (b) a $5.7 million reduction in sales
of men's  sportswear,  which  includes the  elimination  of $16.7 million of the
Company's  JJ.  Farmer and Manhattan  sportswear  lines net sales,  offset by an
$11.0 million increase in sales of Perry Ellis sportswear  products,  (c) a $5.1
million decrease in sales of men's  accessories,  primarily due to the slow-down
of the novelty  neckwear  business and (d) a $4.7 million  reduction in sales of
certain dress shirt lines,  which  reflected  the  elimination  of  unprofitable
businesses.  These  sales  decreases  were  partially  offset by a $9.5  million
increase  in  sales of Perry  Ellis  dress  shirts  due to the  addition  of new
distribution and the continued strong acceptance of these products by consumers.
The total  sales  reduction  attributable  to the  elimination  of  unprofitable
programs was $29.8 million.

Sales of children's  sleepwear and underwear increased by $3.4 million, or 7.5%,
in Fiscal 1997. This increase was primarily a result of the continuing expansion
of the Joe  Boxer  children's  product  lines in 1997.  At the end of the  first
quarter of 1998,  the  Company  determined  not to  continue  with its Joe Boxer
sportswear  line for Fall 1998.  Instead,  consistent with the approach that the
Joe Boxer Corporation  (Salant's licensor of the Joe Boxer trademark) has taken,
the Company will focus on its core business of underwear and sleepwear.

Sales of the retail outlet stores division decreased by $5.4 million,  or 19.8%,
in Fiscal 1997.  This decrease was due to (i) a decrease in the number of stores
in the first 10 months of 1997 and (ii) the  decision in November  1997 to close
all non-Perry  Ellis outlet stores.  The Company ceased to operate the non-Perry
Ellis outlet stores in November 1997.

   Gross Profit

The  following  table sets forth the gross profit and gross  profit  margin
(gross  profit as a percentage  of net sales) for each of the  Company's
 business segments for each of Fiscal 1997 and Fiscal 1996:
<TABLE>
<CAPTION>
                                                 Fiscal 1997                 Fiscal  1996
                                                       (dollars in millions)

<S>                                             <C>        <C>            <C>         <C>  
Men's                                           $69.5      21.3%          $74.2       21.5%
Children's                                        7.5      15.2%           11.5       25.1%
Retail Outlet Stores                              7.5      34.6%            9.2       33.9%

        Total                                $ 84.5         21.3%        $ 94.9        22.7%
</TABLE>

The  decline  in  gross  profit  in the  men's  apparel  segment  was  primarily
attributable to the reduction in net sales discussed above.

The gross  profit  margin of the  children's  sleepwear  and  underwear  segment
declined  as a result of (i) a slowdown in sales of certain  licensed  products,
requiring a greater  percentage  of off-price  sales,  as well as an increase in
discounts and allowances,  (ii) an increase in reserves for remaining  inventory
and (iii) higher distribution and product handling costs.

The gross profit of the retail outlet stores decreased  primarily as a result of
inventory  markdowns of $1.6 million (7.3% of net sales)  related to the closing
of the non-Perry Ellis stores.  Excluding these inventory  markdowns,  the gross
profit margin increased as a result of a decrease in the transfer prices (from a
negotiated  rate to  standard  cost)  charged  to the retail  outlet  stores for
products made by other divisions of the Company.

    Selling, General and Administrative Expenses

Selling,  general and  administrative  ("S,G&A")  expenses  for Fiscal 1997 were
$80.6 million  (20.3% of net sales)  compared  with $83.1 million  (19.9% of net
sales) for Fiscal 1996.  While  implementation  of the Company's  strategic plan
resulted in the  elimination  of certain  S,G&A  expenses in Fiscal  1997,  such
eliminations were partially offset by higher  amortization costs attributable to
the  installation  of new store  fixtures  for Perry Ellis  sportswear  shops in
department  stores which  commenced  in 1995.  The  amortization  of these store
fixtures accounted for approximately $2.5 million of the total S,G&A expenses in
Fiscal 1997, compared with $1.6 million in Fiscal 1996.

    Other Income

Other income for Fiscal 1996 included a gain of $2.7 million related to the sale
of a leasehold interest in a facility located in Glen Rock, New Jersey.

    Provision for Restructuring

In Fiscal  1997,  the Company  recorded a provision  for  restructuring  of $2.1
million,  consisting  of (i) $3.5 million  related to the decision in the fourth
quarter to close all retail  outlet  stores other than Perry Ellis outlet stores
and (ii) the reversal of previously  recorded  restructuring  provisions of $1.4
million, including $300 thousand in the fourth quarter, primarily resulting from
the settlement of liabilities for less than the carrying amount,  as a result of
a settlement agreement and license arrangement with the former owners of the JJ.
Farmer  trademark,  resulting  in the  reversal  of the  excess  portion  of the
provision.

The Company recorded a restructuring  charge of $11.7 million in Fiscal 1996. Of
this amount, (i) $5.7 million was primarily related to the write-off of goodwill
and the  write-down  of other assets of the JJ. Farmer  product line,  (ii) $2.9
million was  attributable  to the  write-off  of certain  assets  related to the
licensing  of the Gant brand name for certain of the  Company's  dress shirt and
accessories  product  lines and the  accrual  of a portion  of future  royalties
payable  under the Gant  licenses  that are not expected to be covered by future
sales,  (iii) $1.8 million was primarily  related to employee  costs  associated
with the  closing of a  manufacturing  and  distribution  facility  in  Thomson,
Georgia,  (iv) $0.7 million was primarily  related to employee costs  associated
with the closing of a manufacturing  facility in Americus,  Georgia and (v) $0.6
million related to other severance costs.

The Fiscal 1997 restructuring charge related to the retail outlet store closings
was  comprised  of $1.3 million of non-cash  charges and $2.2 million  requiring
cash  payments  over a period of time.  Of the cash  portion,  $0.6  million was
expended during 1997 and the balance is expected to be expended in 1998.

Income from Continuing Operations Before Interest,
 Income Taxes and Extraordinary Gain

The  following  table  sets  forth  income  from  continuing  operations  before
interest,  income taxes and  extraordinary  gain for each of the Company's three
business  segments,  expressed both in dollars and as a percentage of net sales,
for each of Fiscal 1997 and Fiscal 1996:
<TABLE>
<CAPTION>

                                                Fiscal 1997               Fiscal 1996
                                                       (dollars in millions)

<S>                                            <C>           <C>          <C>          <C>
Men's (a)                                      $ 19.5        6.0%         $ 6.2        1.8%
Children's                                       (0.3)      (0.6%)          5.4       11.8%
Retail Outlet Stores (b)                         (8.4)     (38.4%)         (4.2)     (15.4%)
                                                 10.8        2.7%           7.4        1.8%
Corporate expenses (c)                           (9.3)                     (5.8)
Licensing division income                         4.6                       5.0
Income from continuing
 operations before interest, income
 taxes and extraordinary gain                 $   6.1        1.5%       $   6.6        1.6%
</TABLE>

(a)  Includes the  reversal of  restructuring  charges of $1.5 million in Fiscal
1997 and  restructuring  charges of $11.7  million in Fiscal 1996.  (b) Includes
restructuring  charges of $3.5 million in Fiscal 1997. (c) Includes other income
of $2.7 million in Fiscal 1996 related to the sale of a leasehold interest.

The $0.5 million decrease in income from continuing  operations before interest,
income taxes and extraordinary gain in Fiscal 1997 was primarily a result of the
significant decline in profitability of the Children's segment. This decline was
a result  of (i) the  decline  in gross  profit  as  previously  noted  and (ii)
increased  occupancy  costs  related to new office,  design and  showroom  space
acquired in 1997. The decline in retail outlet stores operating income is due to
the  restructuring  and inventory  markdown  costs related to the closing of the
non-Perry Ellis stores,  offset by the higher gross profit related to the change
in transfer pricing, as previously discussed. The increase in corporate expenses
is primarily due to costs  associated  with the significant  management  changes
previously discussed.

   Interest Expense, Net

Net  interest  expense was $16.7  million for Fiscal  1997  compared  with $15.5
million for Fiscal 1996. The $1.2 million increase is a result of higher average
borrowings  during  Fiscal 1997  primarily due to the loss from  operations  and
spending on capital expenditures and store fixtures.

   Loss from Continuing Operations

In Fiscal 1997, the Company reported a loss from continuing  operations before
extraordinary gain of $10.7 million,  or $0.71 per share,  compared with a loss
from continuing operations of $9.0 million, or $0.60 per share, in Fiscal 1996.

   Extraordinary Gain

The extraordinary  gain of $2.1 million recorded in Fiscal 1997,  including $1.5
million in the fourth  quarter,  related to the  reversal of excess  liabilities
previously  provided for the  anticipated  settlement of claims arising from the
Company's prior chapter 11 cases.



<PAGE>


   Earnings Before Interest, Taxes, Depreciation, Amortization,
Restructuring Charges and Extraordinary Gain

Earnings  before  interest,  taxes,  depreciation,  amortization,  restructuring
charges and  extraordinary  gain was $17.1 million (4.3% of net sales) in Fiscal
1997,  compared to $26.5  million (6.4% of net sales) in Fiscal 1996, a decrease
of $9.4 million,  or 35%. The Company  believes this  information  is helpful in
understanding  cash flow from  operations that is available for debt service and
capital  expenditures.  This  measure is not  contained  in  Generally  Accepted
Accounting  Principles and is not a substitute for operating income,  net income
or net cash flows from operating activities.

Fiscal 1996 Compared with Fiscal 1995

   Net Sales

The  following  table  sets forth the net sales of each of the  Company's  three
principal  business  segments  for the fiscal  years  ended  December  28,  1996
("Fiscal  1996") and  December  30,  1995  ("Fiscal  1995")  and the  percentage
contribution of each of those segments to total net sales:

<TABLE>
<CAPTION>
                                                                                                 Percentage
                                                                                                   Increase/
                                                 Fiscal 1996                   Fiscal 1995       (Decrease)
                                                       (dollars in millions)

<S>                                            <C>           <C>         <C>            <C>          <C>
Men's                                          $344.7        83%         $416.7         86%          (17.3%)
Children's                                       45.8        11%           39.9          8%           14.8%
Retail Outlet Stores                             27.2         6%           29.2          6%           (7.0%)

        Total                                $417.7          100%        $485.8        100%          (14.0%)
</TABLE>

The decline in net sales in the men's apparel segment was $72.0 million. Of this
amount, $58.8 million was attributable to the planned discontinuation of various
product lines and the  redirection of other product lines to different  channels
of distribution. Of the balance, $7.4 million resulted from a decision by Sears,
Roebuck & Co.  ("Sears")  to source its knit and woven  Canyon  River Blues tops
through its own internal sourcing operations and $3.6 million was due to reduced
sales of Perry Ellis  sportswear  as a result of a reduction of $12.3 million in
sales to off-price retailers, partially offset by an increase of $8.7 million in
sales to department stores.

Sales of children's  sleepwear  and  underwear  increased by $5.9 million, or 
14.8%,  in Fiscal 1996.  This increase was primarily a result of the continuing
expansion of the Joe Boxer children's product lines.

   Gross Profit

The  following  table sets forth the gross profit and gross profit margin (gross
profit as a percentage of net sales) for each of the Company's business segments
for each of Fiscal 1996 and Fiscal 1995:


<PAGE>


<TABLE>
<CAPTION>
                                                 Fiscal 1996                Fiscal 1995
                                                       (dollars in millions)

<S>                                             <C>        <C>            <C>         <C>
Men's                                           $74.2      21.5%          $79.1       19.0%
Children's                                       11.5      25.1%           10.8       26.9%
Retail Outlet Stores                              9.2      33.9%           10.7       36.7%

        Total                                   $94.9       22.7%        $100.6        20.7%
</TABLE>

The decline in gross profit in the men's apparel  segment and for the Company as
a whole was  primarily  attributable  to the  reduction  in net sales  discussed
above.  The gross profit margin for the men's apparel segment and the Company as
a whole, however, improved significantly, primarily as a result of (i) a greater
percentage of sales of the Company's  higher margin Perry Ellis product lines as
a percentage  of net sales,  (ii) planned  reductions  in sales of  lower-margin
brands and products, (iii) increased efficiencies at the Company's manufacturing
facilities in Mexico,  and (iv) reduced markdowns of accessories due to improved
consumer  acceptance of the Company's  neckwear  product lines. The gross profit
margin for the men's apparel segment was adversely affected, however, by charges
of (i) $3.0 million (0.8% of men's  apparel net sales) for markdowns  related to
the discontinuation of the JJ. Farmer and Manhattan sportswear product lines and
a change in the primary channel of distribution for products sold under the John
Henry label and (ii) $1.9 million (0.5% of men's  apparel net sales)  related to
the  closing of  manufacturing  and  distribution  facilities  in  Americus  and
Thomson, Georgia.

The gross  profit  margin of the  children's  sleepwear  and  underwear  segment
declined as a result of an increased  percentage of off-price  sales of licensed
character products in that segment's total sales mix. The gross profit margin of
the Company's  retail outlet stores business  declined  primarily as a result of
margin  pressures as well as charges of $0.3 million  (1.0% of net sales) due to
markdowns of discontinued product lines at the Company's outlet stores.

    Selling, General and Administrative Expenses

Selling,  general and  administrative  ("S,G&A")  expenses  for Fiscal 1996 were
$83.1 million  (19.9% of net sales)  compared  with $82.6 million  (17.0% of net
sales) for Fiscal 1995.  While  implementation  of the Company's  strategic plan
resulted in the  elimination  of certain  S,G&A  expenses in Fiscal  1996,  such
eliminations were partially offset by higher  amortization costs attributable to
the  installation  of new store  fixtures  for Perry Ellis  sportswear  shops in
department  stores  and  Canyon  River  Blues  shops  in  Sears  stores,   which
installations  commenced  in 1995.  The  amortization  of these  store  fixtures
accounted for  approximately  $1.6 million of the total S,G&A expenses in Fiscal
1996 as compared  with $0.4 million in Fiscal 1995.  The  Company's  merchandise
coordinator  and retail  specialist  programs,  which  provide  support  for the
presentation  and  coordination  of the Company's  products in retail stores was
also  enlarged in 1996,  primarily  to support the  expansion of the Perry Ellis
sportswear shop program;  this increase  accounted for a further $1.2 million of
the S,G&A  expense  increase in Fiscal  1996.  Total  expenses  related to these
programs  were $3.3  million in Fiscal  1996,  as compared  with $2.1 million in
Fiscal 1995.

    Other Income

Other income for Fiscal 1996 included a gain of $2.7 million related to the sale
of a leasehold interest in a facility located in Glen Rock, New Jersey.

    Provision for Restructuring

The Company recorded a restructuring  charge of $11.7 million in Fiscal 1996. Of
this amount, (i) $5.7 million was primarily related to the write-off of goodwill
and the  write-down  of other assets of the JJ. Farmer  product line,  (ii) $2.9
million was  attributable  to the  write-off  of certain  assets  related to the
licensing  of the Gant brand name for certain of the  Company's  dress shirt and
accessories  product  lines and the  accrual  of a portion  of future  royalties
payable  under the Gant  licenses  that are not expected to be covered by future
sales,  (iii) $1.8 million was primarily  related to employee  costs  associated
with the  closing of a  manufacturing  and  distribution  facility  in  Thomson,
Georgia,  (iv) $0.7 million was primarily  related to employee costs  associated
with the closing of a manufacturing  facility in Americus,  Georgia and (v) $0.6
million related to other severance costs.

   Income from Continuing Operations Before Interest,
 Income Taxes and Extraordinary Gain

The  following  table  sets  forth  income  from  continuing  operations  before
interest,  income taxes and  extraordinary  gain for each of the Company's three
business  segments,  expressed both in dollars and as a percentage of net sales,
for each of Fiscal 1996 and Fiscal 1995:
<TABLE>
<CAPTION>

                                                   Fiscal 1996              Fiscal 1995
                                                       (dollars in million)
<S>                                              <C>         <C>          <C>          <C>
Men's (a)                                        $6.2        1.8%         $19.6        4.7%
Children's                                        5.4       11.8%           5.2       13.0%
Retail Outlet Stores                             (4.2)     (15.4%)         (2.7)      (9.2%)
                                                  7.4        1.8%          22.1        4.6%
Corporate expenses (b)                           (5.8)                     (8.8)
Licensing division income                         5.0                       5.6
Income from continuing
 operations before interest, income
 taxes and extraordinary gain                    $6.6        1.6%         $18.9        3.9%
</TABLE>

(a)  Includes  restructuring  charges of $11.7  million in Fiscal  1996 and $3.6
million in Fiscal 1995. (b) Includes other income of $2.7 million in Fiscal 1996
related to the sale of a leasehold interest.

The  $12.3  million  reduction  in  income  from  continuing  operations  before
interest,  income taxes and  extraordinary  gain in Fiscal 1996 was  primarily a
result of the $11.7 million  restructuring charge (compared with $3.6 million in
Fiscal  1995)  and  $6.3   million  of  other   charges   associated   with  the
implementation  of the strategic  business plan, which was partially offset by a
$2.7 million gain on the sale of a leasehold interest, as previously discussed.

   Interest Expense, Net

Net  interest  expense was $15.5  million for Fiscal  1996  compared  with $19.0
million for Fiscal 1995. The $3.5 million  decrease is a result of lower average
borrowings  during  Fiscal  1996  primarily  due to  reduced  average  levels of
inventory.



<PAGE>


   Loss from Continuing Operations

In Fiscal 1996, the Company  reported a loss from continuing  operations of $9.0
million, or $0.60 per share, as compared with a loss from continuing  operations
before extraordinary gain of $0.4 million, or $0.02 per share, in Fiscal 1995.

   Extraordinary Gain

The extraordinary  gain of $1.0 million recorded in the fourth quarter of Fiscal
1995 related to the reversal of excess liabilities  previously  provided for the
anticipated  settlement of claims  arising from the  Company's  prior chapter 11
cases.

   Earnings Before Interest, Taxes, Depreciation, Amortization, 
Restructuring Charges and Extraordinary Gain

Earnings  before  interest,  taxes,  depreciation,  amortization,  restructuring
charges and  extraordinary  gain was $26.5 million (6.4% of net sales) in Fiscal
1996,  compared to $30.4  million (6.3% of net sales) in Fiscal 1995, a decrease
of $3.9 million,  or 12.8%.  The Fiscal 1996 amount was  negatively  affected by
$6.3 million of charges  primarily  associated  with the  implementation  of the
Company's  strategic  business  plan. The Company  believes this  information is
helpful in  understanding  cash flow from  operations that is available for debt
service and capital  expenditures.  This  measure is not  contained in Generally
Accepted Accounting Principles and is not a substitute for operating income, net
income or net cash flows from operating activities.

Liquidity and Capital Resources

The  Company  is a  party  to  the  Revolving  Credit,  Factoring  and  Security
Agreement,  dated September 20, 1993, as amended (the "Credit Agreement"),  with
The CIT Group/Commercial  Services,  Inc. ("CIT"). The Credit Agreement provides
the Company with working capital financing, in the form of direct borrowings and
letters of credit,  up to an aggregate of $120 million (the  "Maximum  Credit"),
subject to an asset-based  borrowing formula. As collateral for borrowings under
the  Credit  Agreement,  Salant  has  granted  to  CIT a  security  interest  in
substantially all of the assets of the Company.

On March 3, 1998,  the Company  announced  that it had reached an  agreement  in
principle (the "Restructuring Agreement") with its major note and equity holders
to restructure its existing  indebtedness (the "Debt  Restructuring")  under its
Senior  Secured  Notes.  Under the  Restructuring  Agreement,  the Company  will
convert the entire $104.9 million outstanding aggregate principal amount of, and
all accrued and unpaid  interest on, its Senior Secured Notes into Salant Common
Stock.  The  Restructuring  Agreement was entered into by the Company and Magten
Asset   Management   Corp.   ("Magten"),   the  beneficial   owner  of,  or  the
representative of the beneficial  owners of,  approximately 67% of the aggregate
principal amount of the Senior Secured Notes. Apollo Apparel Partners, L.P., the
beneficial owner of approximately  39.6% of Salant Common Stock, is also a party
to the  Restructuring  Agreement  and has  agreed  to vote all of its  shares of
common stock in favor of the Debt  Restructuring.  The  Restructuring  Agreement
provides that, among other things, (i) the entire principal amount of the Senior
Secured Notes, plus all accrued and unpaid interest  thereon,  will be converted
into 92.5% of the Company's  issued and outstanding  common stock,  and (ii) the
Company's existing stockholders will retain 7.5% of Salant Common Stock and will
receive  seven-year  warrants to purchase up to 10% of Salant  Common Stock on a
fully diluted basis.  Stockholder  and  noteholder  approval will be required in
order to consummate the Debt  Restructuring.  The  Restructuring  Agreement also
provides  for a reverse  stock  split,  which will  require the  approval of the
Company's  stockholders.  Because of the  treatment  of accrued  interest on the
Senior Secured Notes under the Restructuring  Agreement, the Company did not pay
the $5.5 million of interest on the Senior  Secured Notes that became payable on
March 2,  1998,  subject  to a 30 day  grace  period.  Consummation  of the Debt
Restructuring  is  subject  to  the  satisfaction  of  a  number  of  conditions
precedent, including stockholder and noteholder approval and the negotiation and
execution of definitive documentation.  However, there can be no assurances that
the  Debt  Restructuring  will  be  consummated.   Implementation  of  the  Debt
Restructuring will result in the elimination of $11.0 million of annual interest
expense to the Company.

As part of the Debt  Restructuring,  the  Company and CIT  executed  the Twelfth
Amendment and Forbearance  Agreement (the  "Amendment") to the Credit Agreement.
The Amendment (i) waives,  as of January 3, 1998, the Company's  failure to meet
the financial covenants related to stockholders' equity and maximum loss, as set
forth in the Credit  Agreement,  (ii) provides that CIT forbear from  exercising
any of its rights and remedies  arising from the  Company's  decision not to pay
interest  on the Senior  Secured  Notes,  payable  on March 2, 1998,  as further
discussed below, (iii) provides that, subject to the terms and conditions of the
Credit Agreement, as modified by the Amendment,  CIT will continue making loans,
advances and other financial  accommodations to the Company,  (iv) increases the
borrowings  allowed against eligible  inventory to 60%, (v) provides the Company
with a discretionary $3 million seasonal  overadvance,  (vi) reduces the Maximum
Credit  from $135  million to $120  million  and (vii)  modifies  the  financial
covenants  the Company is  required to  maintain.  Under the  Amendment,  to the
extent  that  the  Company  fails  to  maintain   certain  levels  of  borrowing
availability under its asset-based borrowing formula, the Company is required to
maintain a certain minimum interest  coverage ratio and is subject to a covenant
limiting  the maximum  loss the  Company  may incur over any twelve  consecutive
calendar months.

At the end of Fiscal 1997, direct  borrowings and letters of credit  outstanding
under the Credit  Agreement were $33.8 million and $23.2 million,  respectively,
and the Company had unused  availability of $17.5 million.  At the end of Fiscal
1996,  direct  borrowings  and  letters of credit  outstanding  under the Credit
Agreement were $7.7 million and $33.6 million, respectively, and the Company had
unused availability of $23.6 million.  During Fiscal 1997, the maximum aggregate
amount of direct  borrowings  and letters of credit  outstanding at any one time
under the Credit  Agreement  was $112.9  million,  at which time the Company had
unused availability of $10.5 million.  During Fiscal 1996, the maximum aggregate
amount of direct  borrowings  and letters of credit  outstanding at any one time
under the Credit  Agreement  was $101.0  million,  at which time the Company had
unused availability of $19.6 million.

On October 28, 1996, the Company completed the sale of a leasehold interest in a
facility located in Glen Rock, New Jersey.  Pursuant to the indenture  governing
the Senior  Secured  Notes,  the  $3,372,000 net cash proceeds of that sale were
applied to the repurchase of a like principal amount of the Senior Secured Notes
immediately following the end of the 1996 fiscal year.

The  instruments  governing  the  Company's  outstanding  debt contain  numerous
financial  and  operating   covenants,   including   restrictions  on  incurring
indebtedness and liens,  making investments in or purchasing the stock or all or
a substantial part of the assets of another person,  selling property and paying
cash  dividends.  In  addition,  under the  Credit  Agreement,  the  Company  is
required,  during the year, to maintain a minimum level of stockholders'  equity
and to satisfy a maximum cumulative net loss test. As previously  discussed,  at
January  3, 1998,  the  Company  was not in  compliance  with the two  financial
covenants contained in the Credit Agreement, and has obtained a waiver from CIT,
as of January 3, 1998, as provided by the Amendment to the Credit Agreement.

The  indenture  governing the Company's  outstanding  Senior  Secured Notes (the
"Indenture") requires  the  Company  to  reduce  its  outstanding   indebtedness
(excluding  outstanding  letters of credit) to $20  million or less for  fifteen
consecutive days during each twelve month period  commencing on the first day of
February.  This  covenant has been  satisfied for the balance of the term of the
Senior Secured Notes.

The  Company's  cash  used in  operating  activities  for  Fiscal  1997 was $9.8
million,  which  primarily  reflects the operating  loss of $10.7 million and an
increase in accounts  receivable  of $5.7 million,  offset by non-cash  charges,
such as depreciation and amortization, of $8.9 million.

Cash used in Fiscal 1997 for investing  activities was $10.2  million,  of which
$7.1  million  was  related  to  capital  expenditures  and $3.1  million to the
installation  of store  fixtures in department  stores.  During Fiscal 1998, the
Company plans to make capital  expenditures of approximately $6.4 million and to
spend an  additional  $2.0  million for the  installation  of store  fixtures in
department stores.

Cash provided by financing  activities in Fiscal 1997 was $22.9  million,  which
represented  short-term  borrowings under the Credit Agreement of $26.1 million,
offset by the retirement of long-term debt of $3.4 million.

In contemplation of the Debt  Restructuring,  the Company elected not to pay the
interest  payment of  approximately  $5.5 million that was due and payable under
the Senior  Secured  Notes on March 2, 1998,  subject to a 30 day grace  period.
Because  the  Company  does not plan on paying  the  interest  due on the Senior
Secured Notes by the  expiration  of the  applicable  grace period,  an event of
default  will occur with  respect to the Senior  Secured  Notes,  entitling  the
holders  to  accelerate  the  maturity  thereof.  If  holders of at least 25% in
aggregate  principal  face amount of the Senior  Secured  Notes  accelerate  all
outstanding indebtedness under the Senior Secured Notes pursuant to the terms of
the Indenture and, in the event that the Debt  Restructuring is not consummated,
such an acceleration of the  outstanding  indebtedness  under the Senior Secured
Notes could result in the Company  becoming  subject to a  proceeding  under the
Federal  bankruptcy  laws.  In  accordance  with the terms of the  Restructuring
Agreement,  Magten has provided a written direction to Bankers Trust Company, as
trustee under the  Indenture,  to forbear  during the term of the  Restructuring
Agreement  from taking any action in connection  with the failure by the Company
to make the  interest  payment  on the  Senior  Secured  Notes  that was due and
payable on March 2, 1998. However, there is no assurance that the holders of 25%
or  more  of the  Senior  Secured  Notes  will  not  decide  to  accelerate  the
outstanding indebtedness under the Senior Secured Notes prior to consummation of
the Debt Restructuring.  In addition, the Company's working capital lender, CIT,
agreed to  forbear  until July 1, 1998,  subject  to  certain  conditions,  from
exercising any of its rights or remedies under the Credit Agreement,  arising by
virtue of the  Company's  failure to pay such  interest  on the  Senior  Secured
Notes.  Failure  to  consummate  the  Debt  Restructuring  could  result  in the
acceleration  of all of the  indebtedness  under the Senior Secured Notes and/or
the Credit Agreement.

The  Company's  principal  sources  of  liquidity,  both on a  short-term  and a
long-term  basis,  are cash flow from operations and borrowings under the Credit
Agreement.  Based upon its analysis of its consolidated  financial position, its
cash flow during the past twelve months and the cash flow  anticipated  from its
future operations, the Company believes that its future cash flows together with
funds  available  under  the  Credit  Agreement,  will be  adequate  to meet the
financing  requirements it anticipates  during the next twelve months,  provided
that the Company  consummates the Debt Restructuring and secures an extension of
the  Credit  Agreement  or a new  working  capital  facility.  There  can  be no
assurance, however, (i) that the Company will consummate the Debt Restructuring,
or (ii) that future  developments and general economic trends will not adversely
affect the Company's operations and, hence, its anticipated cash flow.

The Company is required to adopt  Statement  of Financial  Accounting  Standards
("SFAS")  No.  130,  "Reporting  Comprehensive  Income",  during the year ending
January 2, 1999.  SFAS 130  establishes  standards for  reporting  comprehensive
income and its components in a full set of general-purpose financial statements.
This  Statement  requires  that  an  enterprise  (i)  classify  items  of  other
comprehensive income by their nature in a financial statements, and (ii) display
the accumulated balance of other  comprehensive  income separately from retained
earnings and additional  paid-in capital in the equity section of a statement of
financial  position.  Adoption  of this  Statement  will  require the Company to
report changes in the excess of additional  pension  liability over unrecognized
prior  service  cost  and  foreign  currency  translation  adjustment  accounts,
currently shown in the stockholders'  equity section of the balance sheet, as an
increase or decrease to reported net income in arriving at comprehensive income.

The Company is required to adopt SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related  Information" during the year ending January 2, 1999. The
Statement  establishes  standards for the way that public  business  enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments  in  interim  financial   reports  issued  to  shareholders.   It  also
establishes  standards  for related  disclosures  about  products and  services,
geographic areas, and major customers.  This Statement supersedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise", but retains
the  requirement to report  information  about major  customers.  It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries",  to remove
the special disclosure requirements for previously unconsolidated  subsidiaries.
The Company is currently considering what effect adoption of this statement will
have on the Company.

The Company is required to adopt SFAS No.  132,  "Employers'  Disclosures  about
Pensions and Other  Postretirement  Benefits",  for the period ended  January 2,
1999.  This statement  revises  employers'  disclosures  about pension and other
postretirement  benefit plans. It does not change the measurement or recognition
of those plans. It  standardizes  the disclosure  requirements  for pensions and
other  postretirement  benefits to the extent  practicable,  requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures that
are no longer as useful.  The  statement  is  effective  for fiscal  year ending
January 2, 1999.  Restatement of disclosures  for earlier  periods  provided for
comparative purposes is required.  The Company has not yet determined the impact
the adoption of this statement will have on the Company's financial statements.



<PAGE>


Year 2000 Compliance

The Company has  completed an  assessment  of its  information  systems  ("IS"),
including its computer software and hardware,  and the impact that the year 2000
will have on such systems and Salant's overall operations. The Company's current
software  systems,  without  modification,  will be  adversely  affected  by the
inability of the systems to appropriately interpret date information after 1999.
As part of the process of improving the Company's IS to provide enhanced support
to all  operating  areas,  the  Company  has  entered  into an  interim  working
agreement with Electronic Data Systems  Corporation  ("EDS"),  which constitutes
the initial phase of a long-term  contract to outsource  its IS. Such  long-term
outsourcing  contract  will provide for or eliminate any issues  involving  year
2000 compliance  because all software  provided under the  outsourcing  contract
will be year 2000  compliant.  The  Company  anticipates  that its cost for such
outsourcing will be  approximately  $9.0 million  annually,  which is consistent
with Salant's  current IS  expenditures.  The Company  anticipates  that it will
complete its outsourcing and systems conversion in time to accommodate year 2000
issues.  If the Company  fails to complete such  conversion in a timely  manner,
such  failure will have a material  adverse  effect on the  business,  financial
condition and results of operations of the Company.

Seasonality

Although the Company  typically  introduces  and  withdraws  various  individual
products  throughout  the year,  its principal  products are organized  into the
customary retail Spring, Fall and Holiday seasonal lines. The Company's products
are designed as much as one year in advance and manufactured  approximately  one
season in advance of the related retail selling season.

Backlog

The  Company  does not  consider  the  amount  of its  backlog  of  orders to be
significant  to an  understanding  of its  business  primarily  due to increased
utilization of EDI technology, which provides for the electronic transmission of
orders from customers' computers to the Company's computers. As a result, orders
are placed closer to the required  delivery date than had been the case prior to
EDI  technology.  At  March  7,  1998,  the  Company's  backlog  of  orders  was
approximately   $94.9  million,   2.3%  less  than  the  backlog  of  orders  of
approximately $97.1 million that existed at March 1, 1997.

Factors that May Affect Future Results and Financial Condition.

This report  contains or incorporates  by reference  forward-looking  statements
within the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such  forward-looking  statement,  the Company cautions that
assumed  facts or bases  almost  always  vary from the actual  results,  and the
differences  between  assumed facts or bases and actual results can be material,
depending on the circumstances.  Where, in any  forward-looking  statement,  the
Company  or its  management  expresses  an  expectation  or  belief as to future
results,  there can be no assurance  that the  statement of the  expectation  or
belief  will  result  or be  achieved  or  accomplished.  The  words  "believe",
"expect",  "estimate",  "project",  "seek", "anticipate" and similar expressions
may identify forward-looking  statements. The Company's future operating results
and financial condition are dependent upon the Company's ability to successfully
design,  manufacture,  import  and  market  apparel.  Taking  into  account  the
foregoing,  the following are  identified as important  factors that could cause
results  to  differ  materially  from  those  expressed  in any  forward-looking
statement made by, or on behalf of, the Company:

Substantial  Level of  Indebtedness  and the Ability to  Restructure  Debt.  The
Company had current  indebtedness  of $138.7  million as of January 3, 1998.  Of
this  amount,  $104.9  million  represents  the  principal  amount of the Senior
Secured  Notes.  The  Company  will  not  generate  sufficient  cash  flow  from
operations  to repay this  amount at  maturity.  Accordingly,  the  Company  has
entered into the Debt Restructuring as described above. Given the Company's past
inconsistent operating performance, together with the reluctance of investors to
invest in companies suffering from high debt-to-equity  ratios and the Company's
inability  to raise funds in the capital  markets to  recapitalize  the Company,
absent the Debt  Restructuring,  the Company does not believe it will be able to
refinance  its  indebtedness  under the  Senior  Secured  Notes.  Failure by the
Company to consummate the Debt Restructuring as contemplated could result in the
acceleration  of all of the  indebtedness  under the Senior Secured Notes and/or
the Credit  Agreement,  and,  thus,  would be likely to have a material  adverse
effect on the Company.

Competition. The apparel industry in the United States is highly competitive and
characterized by a relatively small number of multi-line  manufacturers (such as
the Company) and a large number of specialty  manufacturers.  The Company  faces
substantial  competition in its markets from  manufacturers  in both categories.
Many of the Company's  competitors  have greater  financial  resources  than the
Company.  The Company also competes for private label programs with the internal
sourcing organizations of many of its own customers.

Apparel  Industry  Cycles  and other  Economic  Factors.  The  apparel  industry
historically has been subject to substantial  cyclical variation,  with consumer
spending on apparel tending to decline during recessionary periods. A decline in
the general economy or  uncertainties  regarding  future economic  prospects may
affect consumer  spending habits,  which, in turn, could have a material adverse
effect on the Company's results of operations and financial condition.

Retail  Environment.   Various  retailers,   including  some  of  the  Company's
customers,  have  experienced  declines in revenue and profits in recent periods
and some have been forced to file for bankruptcy protection.  To the extent that
these  financial  difficulties  continue,  there  can be no  assurance  that the
Company's  financial  condition and results of operations would not be adversely
affected.

Seasonality of Business and Fashion Risk. The Company's  principal  products are
organized  into seasonal lines for resale at the retail level during the Spring,
Fall and Holiday Seasons. Typically, the Company's products are designed as much
as one year in advance and manufactured  approximately  one season in advance of
the related retail  selling  season.  Accordingly,  the success of the Company's
products  is often  dependent  on the  ability of the  Company  to  successfully
anticipate  the needs of the  Company's  retail  customers and the tastes of the
ultimate consumer up to a year prior to the relevant selling season.

Foreign  Operations.  The Company's  foreign sourcing  operations are subject to
various  risks  of  doing  business  abroad,   including  currency  fluctuations
(although  the  predominant  currency used is the U.S.  dollar),  quotas and, in
certain parts of the world, political instability. Any substantial disruption of
its relationship with its foreign suppliers could adversely affect the Company's
operations.  Some of the  Company's  imported  merchandise  is subject to United
States  Customs  duties.  In addition,  bilateral  agreements  between the major
exporting countries and the United States impose quotas,  which limit the amount
of  certain  categories  of  merchandise  that may be  imported  into the United
States. Any material increase in duty levels,  material decrease in quota levels
or material  decrease in available quota  allocation  could adversely affect the
Company's  operations.  The Company's operations in Asia, including those of its
licensees,  are subject to certain  political and economic risks including,  but
not limited to, political  instability,  changing tax and trade  regulations and
currency  devaluations  and controls.  The Company's  risks  associated with the
Company's Asian operations may be higher in 1998 than has historically  been the
case,  due to the fact that  financial  markets in East and Southeast  Asia have
recently experienced and continue to experience difficult conditions,  including
a currency crisis. As a result of recent economic volatility,  the currencies of
many  countries  in this  region have lost value  relative  to the U.S.  dollar.
Although the Company has experienced no material  foreign  currency  transaction
losses  since the  beginning of this crisis,  its  operations  in the region are
subject  to an  increased  level of  economic  instability.  The impact of these
events on the Company's  business,  and in particular  its sources of supply and
royalty income cannot be determined at this time.

Dependence on Contract Manufacturing.  The Company currently produces 59% of all
of its  products  (in units)  through  arrangements  with  independent  contract
manufacturers.  The use of such  contractors  and the  resulting  lack of direct
control could subject the Company to difficulty in obtaining  timely delivery of
products of acceptable  quality.  In addition,  as is customary in the industry,
the Company does not have any long-term  contracts with its fabric  suppliers or
product  manufacturers.  While the Company is not  dependent  on one  particular
product manufacturer or raw material supplier,  the loss of several such product
manufacturers  and/or raw  material  suppliers  in a given  season  could have a
material adverse effect on the Company's performance.

Because  of the  foregoing  factors,  as well as  other  factors  affecting  the
Company's operating results and financial condition,  past financial performance
should not be considered to be a reliable indicator of future  performance,  and
investors are cautioned not to use  historical  trends to anticipate  results or
trends in the future.  In addition,  the Company's  participation  in the highly
competitive  apparel  industry  often results in  significant  volatility in the
Company's common stock price.


<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Independent Auditors' Report

To the Board of Directors and Stockholders of Salant Corporation:

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Salant
Corporation  and  subsidiaries  as of January 3, 1998 and December 28, 1996, and
the related consolidated statements of operations, shareholders' equity and cash
flows for the years ended  January 3, 1998,  December  28, 1996 and December 30,
1995. Our audits also included the financial  statement  schedule  listed in the
index at Item 14. These financial  statements and financial  statement  schedule
are the  responsibility of the Company's  management.  Our  responsibility is to
express  an  opinion  on these  financial  statements  and  financial  statement
schedule 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,  such  financial  statements  present  fairly,  in all material
respects,  the financial  position of Salant  Corporation and subsidiaries as of
January 3, 1998 and December 28, 1996, the results of their operations and their
cash flows for the years ended  January 3, 1998,  December 28, 1996 and December
30, 1995 in conformity with generally accepted accounting  principles.  Also, in
our opinion,  the financial statement  schedule,  when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
consolidated  financial  statements,  as of January 3, 1998,  the  Company had a
working  capital  deficiency of  approximately  $37 million,  resulting from the
classification of the Company's $104.9 million of 10 1/2 % Senior Secured Notes,
due December 31, 1998, as a current  liability.  This matter raises  substantial
doubt about the Company's ability to continue as a going concern.  See Note 1 to
the  consolidated  financial  statements  for  a  discussion  of  the  Company's
agreement  with the largest  holders of its Senior  Secured  Notes and its 39.6%
shareholder,  whereby such holders of the Senior  Secured  Notes will convert
their Senior  Secured  Notes to common  equity,  subject to, among other things,
the remaining noteholders agreeing to convert their holdings to common
equity and the approval by the holders of a majority of common equity.
The consolidated financial  statements do not include any adjustments 
that might result from the outcome of this uncertainty.


/s/ Deloitte & Touche LLP
March 6, 1998
New York, New York



<PAGE>


                                          SALANT CORPORATION AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Amounts in thousands, except per share data)

 <TABLE>
<CAPTION>
                                                                                        Year Ended
                                                             January 3,          December 28,          December 30,
                                                                   1998                  1996                  1995

<S>                                                         <C>                   <C>                 <C>
Net sales                                                   $   396,832           $   417,711         $     485,825
Cost of goods sold                                              312,358               322,798               385,196

Gross profit                                                     84,474                94,913               100,629

Selling, general and administrative expenses                    (80,593)              (83,148)              (82,578)
Royalty income                                                    5,596                 6,154                 6,606
Goodwill amortization                                            (1,881)               (2,227)               (2,430)
Other income, net                                                   575                 2,642                   244
Division restructuring costs (Note 3)                            (2,066)              (11,730)               (3,550)
Income from continuing operations before interest,
  income taxes and extraordinary gain                             6,105                 6,604                18,921
Interest expense, net (Notes 9 and 10)                           16,660                15,459                18,965

Income/(loss) from continuing operations
  before income taxes and extraordinary gain                    (10,555)               (8,855)                  (44)

Income taxes (Note 12)                                              167                   103                   318

Income/(loss) from continuing operations
  before extraordinary gain                                     (10,722)               (8,958)                 (362)
Discontinued operations (Note 17):
  Loss from operations                                           (8,136)                 (365)                 (136)
  Estimated loss on disposal                                     (1,330)                 --                    --
Extraordinary gain (Note 4)                                       2,100                  --                   1,000

Net income/(loss)                                          $    (18,088)      $        (9,323)       $          502

Basic earnings/(loss) per share:
  Earnings/(loss) per share from continuing
    operations before extraordinary gain               $         (0.71)     $          (0.60)       $        (0.02)
  Loss per share from discontinued operations                    (0.62)                (0.02)                (0.01)
  Extraordinary gain                                              0.14                   --                   0.06

Basic earnings/(loss) per share                        $         (1.19)      $         (0.62)       $         0.03

Weighted average common stock outstanding                        15,139                15,078                15,008

</TABLE>



                          See Notes to Consolidated Financial Statements


<PAGE>


                           SALANT CORPORATION AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEETS
                     (Amounts in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                              January 3,               December 28,
                                                                                    1998                   1996
ASSETS
Current assets:
<S>                                                                      <C>                        <C>
Cash and cash equivalents                                                $         2,215            $         1,498
Accounts receivable - net of allowance for doubtful accounts
  of $2,094 in 1997 and $2,806 in 1996 (Notes 9 and 10)                           45,828                     40,133
Inventories (Notes 5 and 9)                                                       96,638                     98,497
Prepaid expenses and other current assets                                          4,218                      3,869
Net assets of discontinued operations (Note 17)                                       --                      6,989

  Total current assets                                                           148,899                    150,986

Property, plant and equipment, net (Notes 6 and 9)                                26,439                     25,173
Other assets (Notes 7, 10 and 12)                                                 58,039                     59,092

                                                                          $      233,377              $     235,251

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Loans payable (Note 9)                                                $         33,800             $        7,677
  Accounts payable                                                                27,746                     27,562
  Reserve for business restructuring (Note 3)                                      2,764                      2,969
  Accrued salaries, wages and other liabilities (Note 8)                          16,503                     17,986
  Current portion of long term debt (Note 10)                                    104,879                      3,372

    Total current liabilities                                                    185,692                     59,566

Long term debt (Note 10)                                                              --                    106,231
Deferred liabilities (Note 15)                                                     5,382                      8,863
Commitments and contingencies (Notes 9, 10, 13, 14 and 16)

Shareholders' equity (Note 14): Preferred stock, par value $2 per share:
    Authorized 5,000 shares; none issued                                            --                         --
  Common stock, par value $1 per share:
     Authorized 30,000 shares;                                                    15,405                     15,328
     issued and issuable - 15,405 shares in 1997;
     issued and issuable - 15,328 shares in 1996
  Additional paid-in capital                                                     107,249                    107,130
  Deficit                                                                        (75,235)                   (57,147)
  Excess of additional pension liability over
    unrecognized prior service cost adjustment (Note 13)                          (3,508)                    (3,182)
  Accumulated foreign currency translation adjustment                                  6                         76
  Less - treasury stock, at cost - 234 shares                                     (1,614)                    (1,614)

Total shareholders' equity                                                        42,303                     60,591

                                                                          $      233,377              $     235,251
</TABLE>

                        See Notes to Consolidated Financial Statements


<PAGE>


                                    SALANT CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                          (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                   Excess of
                                                                   Additional
                                                                    Pension
                                                                   Liability
                                                                     Over
                                                                    Unrecog-   Cumulative
                                                                     nized     Foreign                          Total
                                    Common Stock    Add'l            Prior     Currency    Treasury Stock      Share-
                                Number            Paid-In           Service  Translation     Number of         holders'
                              of Shares  Amount   Capital    Deficit  Cost    Adjustment    Shares    Amount   Equity

<S>                              <C>     <C>       <C>     <C>          <C>          <C>        <C>    <C>        <C>
Balance at December 31, 1994     15,242  $15,242   $107,017$(48,326)    $(773)       $120       234   $(1,614)   $71,666

Stock options exercised              33       33         54                                                           87
Net income                                                      502                                                  502
Excess of additional pension
 liability over unrecognized
 prior service cost adjustment                                         (1,412)                                    (1,412)
Foreign currency translation
 adjustments                                                                           10                             10

Balance at December 30, 1995     15,275   15,275    107,071 (47,824)   (2,185)        130       234    (1,614)    70,853

Stock options exercised              53       53         59                                                          112
Net loss                                                     (9,323)                                              (9,323)
Excess of additional pension
 liability over unrecognized
 prior service cost adjustment                                           (997)                                      (997)
Foreign currency translation
 adjustments                                                                          (54)                          (54)

Balance at December 28, 1996     15,328   15,328    107,130 (57,147)   (3,182)         76       234    (1,614)    60,591

Stock options exercised              77       77        119                                                          196
Net loss                                                    (18,088)                                             (18,088)
Excess of additional pension
 liability over unrecognized
 prior service cost adjustment                                           (326)                                      (326)
Foreign currency translation
 adjustments                                                                          (70)                          (70)

Balance at January 3, 1998       15,405  $15,405   $107,249$(75,235)  $(3,508)   $      6       234   $(1,614)   $42,303

</TABLE>


                                See Notes to Consolidated Financial Statements


<PAGE>


                                          SALANT CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                    (Amounts in thousands)

                                                                  Year Ended
                                                             January 3,          December 28,          December 30,
                                                                   1998                  1996                  1995
Cash Flows from Operating Activities
<S>                                                          <C>                <C>                       <C>
Income/(loss) from continuing operations                     $  (10,722)        $      (8,958)            $    (362)
Adjustments to reconcile  income from  continuing  operations  to net cash (used
  in)/provided by operating activities:
    Depreciation                                                  6,402                 5,975                 5,528
    Amortization of intangibles                                   2,512                 2,228                 2,430
    Write-down of fixed assets                                    1,274                   263                 1,850
    Write-down of other assets                                        -                 6,264                  --
    Loss on sale of fixed assets                                      -                    17                   132
    Changes in operating assets and liabilities:
      Accounts receivable                                        (5,695)               (5,256)                1,364
      Inventories                                                 1,859                16,868                 6,747
      Prepaid expenses and other current assets                     539                 1,038                   257
      Other assets                                                 (242)                 (760)                  916
      Accounts payable                                              184                 2,529                (2,653)
      Accrued salaries, wages and other liabilities              (3,463)               (2,403)                  (66)
      Reserve for business restructuring                           (205)                1,400                 1,569
      Deferred liabilities                                       (2,203)               (2,148)                 (598)
    Net cash (used in)/provided by continuing operating activities(9,760)              17,057                17,114
    Cash used in discontinued operations                         (2,217)                 (469)               (1,138)
Net cash (used in)/provided by operations                       (11,977)               16,588                15,976

Cash Flows from Investing Activities
Capital expenditures, net of disposals                           (7,061)               (7,103)               (4,286)
Store fixture expenditures                                       (3,122)               (3,855)               (2,988)
Acquisition                                                           -                  (694)                 --
Proceeds from sale of assets                                          -                 1,854                   122
Net cash used in investing activities                           (10,183)               (9,798)               (7,152)

Cash Flows from Financing Activities
Net short-term borrowings/(repayments)                           26,123                (6,745)               (9,484)
Retirement of long-term debt                                     (3,372)                 --                    --
Exercise of stock options                                           196                   112                    87
Other, net                                                          (70)                  (54)                   10
Net cash provided by/(used in) financing activities              22,877                (6,687)               (9,387)

Net increase/(decrease) in cash and cash equivalents                717                   103                  (563)

Cash and cash equivalents - beginning of year                     1,498                 1,395                 1,958
Cash and cash equivalents - end of year                    $      2,215             $   1,498            $    1,395

Supplemental  disclosures  of cash flow  information:  Cash paid during the year
for:
   Interest                                                  $   16,479             $  16,307              $ 20,280
   Income taxes                                            $        201           $       189            $      331

</TABLE>


                                  See Notes to Consolidated Financial Statements


<PAGE>


                           SALANT CORPORATION AND SUBSIDIARIES
                       Notes to Consolidated Financial Statements
          (Amounts in Thousands of Dollars, Except Share and Per Share Data)


Note 1.  Financial Restructuring

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.

At January 3, 1998,  the 10 1/2% Senior Secured Notes due December 31, 1998 (the
"Senior  Secured  Notes") in the amount of $104,879  have been  classified  as a
current  liability and the Company's  current  liabilities  exceeded its current
assets by $36,793.  This factor may indicate  that the Company will be unable to
continue as a going concern for a reasonable period of time.

On March 3, 1998,  the Company  announced  that it had reached an  agreement  in
principle (the "Restructuring Agreement") with its major note and equity holders
to convert its existing  indebtedness under the Senior Secured Notes into common
equity  (the  "Debt  Restructuring"),  as  further  described  in Note 10.  This
agreement  is  subject  to  the  approval  of  the  remaining   noteholders  and
stockholders.  However,  there can be no assurance that such transaction will be
consummated.  If the Company is not able to consummate this transaction, it will
be unable  to  continue  its  normal  operations  without  pursuing  alternative
financing  or   restructuring   strategies.   In   contemplation   of  the  Debt
Restructuring,   the  Company  elected  not  to  pay  the  interest  payment  of
approximately  $5,500 that was due and payable under the Senior Secured Notes on
March 2, 1998,  subject to a 30 day grace  period.  Because the Company does not
plan on paying the interest due on the Senior Secured Notes by the expiration of
the applicable grace period,  an event of default will occur with respect to the
Senior Secured Notes  entitling the holders to accelerate the maturity  thereof.
If  holders of at least 25% in  aggregate  principal  face  amount of the Senior
Secured Notes accelerate all outstanding  indebtedness  under the Senior Secured
Notes pursuant to the terms of the indenture  governing the Senior Secured Notes
(the  "Indenture")  and,  in  the  event  that  the  Debt  Restructuring  is not
consummated,  such an  acceleration of the  outstanding  indebtedness  under the
Senior  Secured  Notes  could  result  in  the  Company  becoming  subject  to a
proceeding under the Federal bankruptcy laws.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going concern.

Note 2.  Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Consolidated Financial Statements include the accounts of Salant Corporation
("Salant") and subsidiaries.  (As used herein, the "Company" includes Salant and
its  subsidiaries  but  excludes  Salant's  Made in the  Shade  and  Vera  Scarf
divisions.) In June 1997, the Company discontinued the operations of the Made in
the Shade division,  which produced and marketed women's junior  sportswear.  In
February 1995, Salant discontinued its Vera Scarf division. As further described
in Note 17, the Consolidated  Financial Statements and the Notes thereto reflect
the Made in the Shade  and Vera  Scarf  divisions  as  discontinued  operations.
Significant   intercompany   balances  and   transactions   are   eliminated  in
consolidation.

The Company's principal business is the designing, manufacturing,  importing and
marketing of apparel.  The Company  sells its products to  retailers,  including
department and specialty  stores,  national chains,  major  discounters and mass
volume retailers, throughout the United States.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  (such as  accounts
receivable,  inventories,  restructuring  reserves and valuation  allowances for
income taxes),  disclosure of contingent  assets and  liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

On June 27, 1990 (the "Filing Date"), Salant and one of its subsidiaries, Denton
Mills,  Inc.  ("Denton Mills"),  filed separate  voluntary  petitions for relief
under chapter 11 of title 11 of the United States Code (the  "Bankruptcy  Code")
with the United States  Bankruptcy  Court for the Southern  District of New York
(the "Bankruptcy Court"). On July 30, 1993, the Bankruptcy Court issued an order
confirming the Third Amended Joint Plan of  Reorganization  of Salant and Denton
Mills, Inc. (the "Reorganization Plan"). The Reorganization Plan was consummated
on September 20, 1993 (the  "Consummation  Date"),  as further described in Note
18.

Fiscal Year

The Company's  fiscal year ends on the Saturday  closest to  December 31. 
 The 1997 fiscal year was comprised of 53 weeks.
 The 1995 and 1996 fiscal years were
each comprised of 52 weeks.

Reclassifications

Certain  reclassifications were made to the 1995 and 1996 Consolidated Financial
Statements to conform with the 1997 presentation.

Cash and Cash Equivalents

The Company treats cash on hand,  deposits in banks and  certificates  of 
deposit with original  maturities of less than 3 months as cash and cash 
 equivalents for the purposes of the statements of cash flows.

Accounts Receivable

The Company is a party to an agreement  with a factor,  as further  described in
Note  9,  whereby  it  sells,   without  recourse,   certain  eligible  accounts
receivable.  The credit  risk for such  accounts is thereby  transferred  to the
factor.  The amounts due from the factor have been offset against  advances from
the factor in the  accompanying  balance  sheets.  The  amounts  which have been
offset were $12,827 at January 3, 1998 and $16,355 at December 28, 1996.

Inventories

Inventories  are  stated  at the  lower  of cost  (principally  determined  on a
first-in, first-out basis for apparel operations and the retail inventory method
on a first-in, first-out basis for outlet store operations) or market.

Property, Plant and Equipment

Property,  plant  and  equipment  are  stated  at cost  and are  depreciated  or
amortized over their estimated useful lives, or for leasehold improvements,  the
lease term, if shorter.  Depreciation and amortization are computed  principally
by the straight-line  method for financial reporting purposes and by accelerated
methods for income tax purposes.

The annual depreciation rates used are as follows:
<TABLE>
<CAPTION>

<S>                                                               <C>            <C>
Buildings and improvements                                        2.5%      -    10.0%
Machinery, equipment and autos                                    6.7%      -    33.3%
Furniture and fixtures                                           10.0%      -    50.0%
Leasehold improvements   Over the life of the asset or the term of the lease, whichever is shorter
</TABLE>
Other Assets

Intangible  assets  are being  amortized  on a  straight-line  basis  over their
respective  useful lives,  ranging from 25 to 40 years.  Costs in excess of fair
value of net assets acquired,  which relate to the acquisition of the net assets
of Manhattan Industries, Inc. ("Manhattan") are assessed for recoverability on a
periodic basis. In evaluating the value and future benefits of these  intangible
assets,  their  carrying  value would be reduced by the  excess,  if any, of the
intangibles  over  management's  best estimate of undiscounted  future operating
income of the acquired  businesses before amortization of the related intangible
assets over the remaining amortization period.

Income Taxes

Deferred  income  taxes are  provided  to reflect  the tax  effect of  temporary
differences  between financial statement income and taxable income in accordance
with the  provisions  of  Statement of  Financial  Accounting  Standard No. 109,
"Accounting for Income Taxes".

Fair Value of Financial Instruments

For  financial  instruments,  including  cash  and  cash  equivalents,  accounts
receivable and payable,  and accruals,  the carrying amounts  approximated  fair
value because of their short  maturity.  Long-term  debt,  which was issued at a
market rate of  interest,  currently  trades at  approximately  80% of principal
amount.
In addition,  deferred  liabilities  have carrying  amounts  approximating  fair
value.

Earnings/(Loss) Per Share

The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128,  "Earnings  Per  Share",  for the  period  ended  January  3,  1998,  which
establishes  standards for computing and  presenting  earnings per share ("EPS")
and  simplifies  the standards  for computing EPS currently  found in Accounting
Principles  Board ("APB")  Opinion No. 15 ("Earnings  Per Share").  Common stock
equivalents  under APB No.  15 are no  longer  included  in the  calculation  of
primary, or basic, EPS. Under SFAS No. 128, contingently issuable shares (shares
issuable  for  little  or no  cash  consideration)  are  still  included  in the
calculation of basic EPS.

Earnings/(loss)  per  share is based on the  weighted  average  number of common
shares  (including,  as of January 3, 1998 and December  28,  1996,  205,854 and
324,810  shares,  respectively,   anticipated  to  be  issued  pursuant  to  the
Reorganization  Plan) and common stock equivalents  outstanding,  if applicable.
Loss per  share  for 1997 and 1996 did not  include  common  stock  equivalents,
inasmuch as their effect would have been anti-dilutive.  In 1997, 1996 and 1995,
earnings per share did not include 1,343,393, 837,240 and 969,073 stock options,
respectively, which would not have had a dilutive effect.

Foreign Currency

The Company entered into forward foreign exchange contracts,  relating to 80% of
its projected  1998 Mexican peso needs,  to fix its cost of acquiring  pesos and
diminish the risk of currency fluctuations. Gains and losses on foreign currency
contracts  are  included  in income  and  offset  the  gains  and  losses on the
underlying  transactions.  On January 3, 1998, the outstanding  foreign currency
contracts  had a cost of  approximately  $8,900 and a year end  market  value of
approximately $10,000.

Revenue Recognition

Revenue is  recognized  at the time the  merchandise  is shipped.  Retail outlet
store revenues are recognized at the time of sale.

New Accounting Standards

The Company is required to adopt SFAS No. 130, "Reporting Comprehensive Income",
during the year  ending  January 2, 1999.  SFAS 130  establishes  standards  for
reporting   comprehensive   income  and  its   components   in  a  full  set  of
general-purpose financial statements. This Statement requires that an enterprise
(a) classify items of other comprehensive  income by their nature in a financial
statements,  and (b)  display  the  accumulated  balance of other  comprehensive
income separately from retained  earnings and additional  paid-in capital in the
equity section of a statement of financial position.  Adoption of this statement
will require the Company to report  changes in the excess of additional  pension
liability over unrecognized prior service cost and foreign currency  translation
adjustment accounts,  currently shown in the stockholder's equity section of the
balance sheet,  as an increase or decrease to reported net income in arriving at
comprehensive income.

The Company is required to adopt SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related  Information" during the year ending January 2, 1999. The
Statement  establishes  standards for the way that public  business  enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments  in  interim  financial   reports  issued  to  shareholders.   It  also
establishes  standards  for related  disclosures  about  products and  services,
geographic areas, and major customers.  This Statement supersedes FASB Statement
No. 14, "Financial Reporting for Segments of a Business Enterprise", but retains
the  requirement to report  information  about major  customers.  It amends FASB
Statement No. 94, "Consolidation of All Majority-Owned Subsidiaries",  to remove
the special disclosure requirements for previously unconsolidated  subsidiaries.
The Company is currently considering what effect adoption of this statement will
have on the Company.

The Company is required to adopt SFAS No.  132,  "Employers'  Disclosures  about
Pensions and Other  Postretirement  Benefits",  for the period ended  January 2,
1999.  This statement  revises  employers'  disclosures  about pension and other
postretirement  benefit plans. It does not change the measurement or recognition
of those plans. It  standardizes  the disclosure  requirements  for pensions and
other  postretirement  benefits to the extent  practicable,  requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain disclosures that
are no longer as useful.  The  statement  is  effective  for fiscal  year ending
January 2, 1999.  Restatement of disclosures  for earlier  periods  provided for
comparative purposes is required.  The Company has not yet determined the impact
the adoption of this statement will have on the Company's financial statements.

Note 3.  Restructuring Costs

In  1997,  the  Company  recorded  a  provision  for  restructuring  of  $2,066,
consisting of (i) $3,530  related to the decision in the fourth quarter to close
all retail  outlet  stores  other  than Perry  Ellis  outlet  stores  consisting
primarily of asset  write-offs  and future  payments  related to  non-cancelable
operating   leases,   offset  by  a  $1,464  reversal  of  previously   recorded
restructuring  reserves,   including  $300  in  the  fourth  quarter,  primarily
resulting from the settlement of liabilities for less than the carrying  amount.
As of January 3, 1998, $1,579 remained in the restructuring reserve, all related
to the retail outlet store closings.

In 1996,  the  Company  recorded  a  provision  for  restructuring  of  $11,730,
consisting of (i) $5,718 in connection  with the decision to sell or license the
JJ. Farmer  sportswear  product line,  which charge is primarily  related to the
write-off of goodwill and write-down of other assets, (ii) $2,858 related to the
write-off of certain assets related to the licensing of the Gant dress shirt and
accessories  product  lines,  and the accrual of a portion of the future minimum
royalties  under the Gant  licenses,  which are not  expected  to be  covered by
future sales,  (iii) $1,837  primarily  related to employee  costs in connection
with the  closing of a  manufacturing  and  distribution  facility  in  Thomson,
Georgia,  (iv) $714 primarily  related to employee costs in connection  with the
closing of a  manufacturing  facility in Americus,  Georgia and (v) $603 related
primarily to other severance  costs. As of January 3, 1998,  $1,185 of the above
amounts  remained  in the  restructuring  reserves  related  to  future  minimum
royalties and future carrying costs for a closed facility.

In the  fourth  quarter of 1995,  the  Company  recorded a $3,550  restructuring
provision,  which  included  (i) $2,400  related to fixed asset  write-downs  at
locations  to be closed and (ii)  $1,150  related  to  inventory  markdowns  for
discontinued product lines.

Note 4.  Extraordinary Gains

In 1997, the Company recorded an extraordinary gain of $2,100,  including $1,500
in the fourth  quarter.  In the fourth quarter of 1995, the Company  recorded an
extraordinary  gain of $1,000.  These  gains  related to the  reversal of excess
liabilities previously provided for the anticipated settlement of claims arising
from the chapter 11 proceeding.



<PAGE>


Note 5.  Inventories
<TABLE>
<CAPTION>
                                                                          January 3,          December 28,
                                                                                1998                  1996

<S>                                                                        <C>                   <C>
Finished goods                                                             $  52,010             $  57,826
Work-in-process                                                               21,405                14,801
Raw materials and supplies                                                    23,223                25,870
                                                                           $  96,638             $  98,497
</TABLE>

Finished goods inventory includes in transit merchandise of $4,428 and $5,400 at
January 3, 1998 and December 28, 1996, respectively.

Note 6.  Property, Plant and Equipment
<TABLE>
<CAPTION>
                                                                          January 3,          December 28,
                                                                                1998                  1996

<S>                                                                          <C>                   <C>
Land and buildings                                                           $16,574               $14,975
Machinery, equipment, furniture
  and fixtures                                                                32,197                30,551
Leasehold improvements                                                         7,505                 6,852
Property held under capital leases                                               583                   117
                                                                              56,859                52,495
Less accumulated depreciation and amortization                                30,420                27,322
                                                                             $26,439               $25,173
</TABLE>

Note 7.  Other Assets
<TABLE>
<CAPTION>
                                                                          January 3,          December 28,
                                                                                1998                  1996
Excess of cost over net assets acquired,
 net of accumulated amortization of
<S>                                                                          <C>                   <C>
 $13,240 in 1997 and $11,805 in 1996                                         $39,042               $40,477
Trademarks and license agreements,
 net of accumulated amortization of
 $4,064 in 1997 and $3,619 in 1996                                            13,498                13,943
Other                                                                          5,499                 4,672
                                                                             $58,039               $59,092
</TABLE>

In June 1996, the company  wrote-off  other assets of $4,325 which  consisted of
$4,075  for the  unamortized  portion  of the  excess  of cost  over net  assets
acquired  related to the JJ.  Farmer  division  and $250  related to the license
agreements for the Gant product lines.

In November 1996, the Company sold its leasehold  interest in a closed facility
in Glen Rock, New Jersey,  resulting in a gain of $2,712,  which is included in
other income.



<PAGE>


Note 8.  Accrued Salaries, Wages and Other Liabilities
<TABLE>
<CAPTION>
                                                                          January 3,          December 28,
                                                                                1998                  1996

<S>                                                                          <C>                   <C>
Accrued salaries and wages                                                   $ 4,002               $ 1,765
Accrued pension and retirement benefits                                        2,757                 4,080
Accrued royalties                                                                482                 1,959
Accrued interest                                                               3,897                 3,716
Other accrued liabilities                                                      5,365                 6,466
                                                                             $16,503               $17,986
</TABLE>

Note 9.  Financing and Factoring Agreements

The Company is a party to a Revolving Credit,  Factoring and Security Agreement,
dated  September  20, 1993,  as amended (the "Credit  Agreement"),  with The CIT
Group/Commercial Services, Inc. ("CIT") which provides the Company with seasonal
working  capital  financing,  consisting  of direct  borrowings  and  letters of
credit,  of up to $120,000  (the  "Maximum  Credit"),  subject to an asset based
borrowing formula. As collateral for borrowings under the Credit Agreement,  the
Company  has  granted to CIT a security  interest  in  substantially  all of the
assets of the Company.

On March 2, 1998, in connection with the Debt  Restructuring (as defined in Note
10),  the  Company  and CIT  executed  the  Twelfth  Amendment  and  Forbearance
Agreement (the "Amendment") to the Credit Agreement.  The Amendment (i) provides
a waiver,  as of January 3, 1998,  to the Company for not meeting the  financial
covenants  for  stockholders  equity and maximum loss as set forth in the Credit
Agreement,  (ii) provides for CIT to forbear from  exercising  any of its rights
and  remedies  arising  from the  Company's  decision not to pay interest on the
Senior Secured Notes, payable on March 2, 1998, as further discussed in Note 10,
(iii)  provides  that,  subject  to the  terms  and  conditions  of  the  Credit
Agreement,  as  modified  by the  Amendment,  CIT will  continue  making  loans,
advances and other financial  accommodations to the Company,  (iv) increases the
borrowings  allowed against eligible  inventory to 60%, (v) provides the Company
with a  discretionary  $3,000  seasonal  overadvance,  (vi)  reduces the Maximum
Credit from $135,000 to $120,000 and (vii) modifies the financial  covenants the
Company is required to  maintain.  Under the  Amendment,  to the extent that the
Company fails to maintain  certain  levels of borrowing  availability  under its
asset-based  borrowing  formula,  the  Company is required to maintain a certain
minimum  interest  coverage  ratio and is  subject to a  covenant  limiting  the
maximum loss the Company may incur over any twelve consecutive calendar months.

On January 3, 1998,  direct  borrowings and letters of credit  outstanding under
the Credit Agreement were $33,800 and $23,239, respectively, and the Company had
unused  availability  of $17,486.  On December 28, 1996,  direct  borrowings and
letters  of credit  outstanding  under the  Credit  Agreement  were  $7,677  and
$33,640,  and the  Company had unused  availability  of  $23,561.  The  weighted
average  interest  rate on borrowings  under the Credit  Agreement for the years
ended January 3, 1998 and December 28, 1996 was 9.3% and 9.4%, respectively.

In addition to the financial  covenants  discussed  above,  the Credit Agreement
contains  a number  of other  covenants,  including  restrictions  on  incurring
indebtedness and liens, making investments in or purchasing the stock, or all or
a substantial part of the assets of another person,  selling property and paying
cash dividends.

Note 10.  Long-Term Debt

On September 20, 1993, Salant issued $111,851 principal amount of Senior Secured
Notes.  The Senior  Secured Notes may be redeemed at any time prior to maturity,
in whole or in part, at the option of the Company, at a premium to the principal
amount thereof plus accrued interest.  The Senior Secured Notes are secured by a
first  lien  (subordinated  to the lien  securing  borrowings  under the  Credit
Agreement  to the extent of $15,000)  on certain  accounts  receivable,  certain
intangible assets,  the capital stock of Salant's  subsidiaries and certain real
property of the Company,  and by a second lien on substantially all of the other
assets of the Company.

Under the  Restructuring  Agreement,  as  discussed  in Note 1, the Company will
convert the entire $104,879  outstanding  aggregate principal amount of, and all
accrued and unpaid  interest  on, its Senior  Secured  Notes into the  Company's
common stock.

The  Restructuring  Agreement  was entered  into by the Company and Magten Asset
Management Corp.  ("Magten"),  the beneficial owner of, or the representative of
the beneficial owners of, approximately 67% of the aggregate principal amount of
the  Senior  Secured  Notes.  Apollo  Apparel  Partners,  L.P.  ("Apollo"),  the
beneficial owner of approximately  39.6% of the Company's issued and outstanding
common stock, is also a party to the  Restructuring  Agreement and has agreed to
vote all of its shares of common stock in favor of the Debt  Restructuring.  The
Restructuring  Agreement  provides,  among  other  things,  that (i) the  entire
principal  amount of the  Senior  Secured  Notes,  plus all  accrued  and unpaid
interest  thereon,  will be converted into 92.5% of the Company's  common stock,
and (ii) the Company's  existing  stockholders will retain 7.5% of the Company's
common stock and will receive  seven-year  warrants to purchase up to 10% of the
Company's  common stock on a fully diluted  basis.  Stockholder  and  noteholder
approval will be required in order to  consummate  the Debt  Restructuring.  The
Restructuring  Agreement  also  provides for a reverse  stock split,  which will
require the approval of the Company's stockholders.  Because of the treatment of
accrued  interest on the Senior  Secured Notes under the proposed  restructuring
agreement,  the Company did not pay the $5,500 of interest on the Senior Secured
Notes that became  payable on March 2, 1998,  subject to a 30 day grace  period.
Consummation  of the Debt  Restructuring  is  subject to the  satisfaction  of a
number of conditions  precedent,  including  stockholder and noteholder approval
and the negotiation and execution of definitive  documentation.  However,  there
can  be  no  assurances  that  the  Debt   Restructuring  will  be  consummated.
Implementation  of the Debt  Restructuring  will  result in the  elimination  of
$11,000 of annual interest expense to the Company.

The Indenture  contains  various  restrictions  pertaining to the  incurrence of
indebtedness,  the purchase of capital stock and the payment of dividends. Under
the most restrictive of these provisions, the Company currently may not purchase
or redeem any shares of its capital stock, or declare or pay cash dividends.

In contemplation of the Debt  Restructuring,  the Company elected not to pay the
interest  payment of  approximately  $5,500 that was due and  payable  under the
Senior Secured Notes on March 2, 1998, subject to a 30 day grace period. Because
the Company does not plan on paying the interest due on the Senior Secured Notes
by the expiration of the applicable grace period, an event of default will occur
with respect to the Senior  Secured  Notes,  entitling the holders to accelerate
the  maturity  thereof.  In  accordance  with  the  terms  of the  Restructuring
Agreement,  Magten has provided a written direction to Bankers Trust Company, as
trustee under the  Indenture,  to forbear  during the term of the  Restructuring
Agreement  from taking any action in connection  with the failure by the Company
to make the  interest  payment  on the  Senior  Secured  Notes  that was due and
payable on March 2, 1998. However, there is no assurance that the holders of 25%
or  more  of the  Senior  Secured  Notes  will  not  decide  to  accelerate  the
outstanding indebtedness under the Senior Secured Notes prior to consummation of
the Debt Restructuring.  In addition, the Company's working capital lender, CIT,
agreed to  forbear  until July 1, 1998,  subject  to  certain  conditions,  from
exercising any of its rights or remedies under the Credit Agreement,  arising by
virtue of the  Company's  failure to pay such  interest  on the  Senior  Secured
Notes.  Failure  to  consummate  the  Debt  Restructuring  could  result  in the
acceleration  of all of the  indebtedness  under the Senior Secured Notes and/or
the Credit Agreement.

On October 28, 1996, the Company completed the sale of a leasehold interest in a
facility  located in Glen Rock, New Jersey.  The cash  proceeds,  net of certain
expenses,  of such sale  were  $3,372.  Such  amount  was  included  in  current
liabilities  at December 28, 1996.  Pursuant to the  Indenture,  on December 30,
1996, the Company  repurchased  Senior Secured Notes in a principal amount equal
to the net cash proceeds at 100% of the principal amount thereof.

Note 11.  Segment Information and Significant Customers

The Company's principal business is the designing, manufacturing,  importing and
marketing of apparel.  The Company  sells its products to  retailers,  including
department and specialty  stores,  national chains,  major  discounters and mass
volume  retailers,  throughout the United  States.  As an adjunct to its apparel
manufacturing  operations,  the  Company  operates 17 factory  outlet  stores in
various parts of the United States. Foreign operations, other than sourcing, are
not  significant.  The Company's  products have been classified in the following
industry segments:  (i) men's apparel,  (ii) children's  sleepwear and underwear
and (iii) retail factory  outlet store  operations.  Information  concerning the
Company's business segments in 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>

                                                          1997                   1996                 1995
NET SALES
<S>                                                   <C>                    <C>                  <C>
  Men's                                               $325,845               $344,763             $416,659
  Children's                                            49,165                 45,754               39,936
  Retail Outlet Stores                                  21,822                 27,194               29,230
    Total net sales                                   $396,832               $417,711             $485,825
</TABLE>
<TABLE>
<CAPTION>

OPERATING INCOME
<S>                                                  <C>                   <C>                   <C>
  Men's                                              $  19,483             $    6,197            $  19,596
  Children's                                              (278)                 5,401                5,177
  Retail Outlet Stores                                  (8,381)                (4,195)              (2,674)
                                                        10,824                  7,403               22,099
Corporate expenses                                      (9,269)                (5,790)              (8,801)
Licensing division income                                4,550                  4,991                5,623
Interest expense, net                                  (16,660)               (15,459)             (18,965)
Income/(loss) from continuing
 operations before income taxes
 and extraordinary gain                              $ (10,555)            $   (8,855)        $        (44)
</TABLE>




<PAGE>


<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS

<S>                                                   <C>                    <C>                  <C>
  Men's                                               $150,177               $137,968             $170,203
  Children's                                            22,284                 20,709               16,349
  Retail Outlet Stores                                   3,694                 10,176               11,991
  Corporate                                             57,222                 66,398               55,427
Total identifiable assets                             $233,377               $235,251             $253,970
</TABLE>
<TABLE>
<CAPTION>

CAPITAL EXPENDITURES
<S>                                                 <C>                   <C>                   <C>
  Men's                                             $    2,972            $     4,046           $    1,389
  Children's                                             1,959                    546                  492
  Retail Outlet Stores                                     252                    439                  584
  Corporate                                              1,878                  2,072                1,821
Total capital expenditures                          $    7,061             $    7,103           $    4,286
</TABLE>
<TABLE>
<CAPTION>

DEPRECIATION AND AMORTIZATION
<S>                                                   <C>                   <C>                  <C>
  Men's                                               $  4,640              $   3,669            $   2,961
  Children's                                               455                    399                  345
  Retail Outlet Stores                                     321                    478                  459
  Corporate                                              3,498                  3,657                4,193
Total depreciation and amortization                   $  8,914              $   8,203            $   7,958
</TABLE>

In 1997,  approximately  17% of the  Company's  net  sales  were  made to Sears,
approximately  11% of the Company's net sales were made to Federated  Department
Stores, Inc. ("Federated") and approximately 10% of the Company's net sales were
made to TJX Corporation ("TJX"). In 1996, approximately 13% of the Company's net
sales were made to Sears.  In 1996 and 1995, net sales to Federated  represented
approximately  11% and 12% of the  Company's net sales,  respectively.  In 1995,
approximately  11% of the  Company's  net  sales  were  made  to TJX.  In  1995,
approximately 13% of the Children's Group's net sales were made to Dayton Hudson
Corporation.

No other customer accounted for more than 10% of the net sales of the Company or
any of its business segments during 1997, 1996 or 1995.

Note 12.  Income Taxes
<TABLE>
<CAPTION>

The provision for income taxes consists of the following:

                                                    January 3,           December 28,         December 30,
                                                          1998                   1996                 1995
Current:
<S>                                                     <C>                     <C>                   <C>
 Federal                                                $  (34)                 $(106)                $100
 State                                                      --                     --                   --
 Foreign                                                   201                    209                  218
                                                         $ 167                  $ 103                 $318

</TABLE>


<PAGE>


The following is a reconciliation of the tax provision/(benefit) at the
statutory Federal income tax rate to the actual income tax provision:
<TABLE>
<CAPTION>

                                                          1997                   1996                 1995

<S>                                                    <C>                    <C>                 <C>
Income tax benefit, at 34%                             $(3,589)               $(3,135)            $    (61)

Loss producing no current tax benefit                    3,589                  3,135                   61
Alternative minimum tax                                                                                100
Tax refunds from prior years                               (34)                  (106)
Foreign taxes                                              201                    209                  218

Income tax provision                                  $    167               $    103              $   318
</TABLE>

The following are the tax effects of significant items comprising the Company's
 net deferred tax asset:
<TABLE>
<CAPTION>
                                                                          January 3,          December 28,
                                                                                1998                  1996
Deferred tax liabilities:
<S>                                                                         <C>                   <C>
 Differences between book and tax basis of property                         $ (3,575)             $ (3,659)

Deferred tax assets:
 Reserves not currently deductible                                            12,700                13,983
 Operating loss carryforwards                                                 51,844                45,041
 Tax credit carryforwards                                                      2,958                 2,958
 Expenses capitalized into inventory                                           4,925                 4,657
                                                                              72,427                66,639
Net deferred asset                                                            68,852                62,980
Valuation allowance                                                          (68,852)              (62,980)
Net deferred tax asset                                                 $          --         $          --
</TABLE>

At January 3, 1998,  the Company had net operating loss  carryforwards  ("NOLs")
for income tax purposes of  approximately  $133,000,  expiring  from 1999 to the
year 2012,  which can be used to offset  future  taxable  income.  Approximately
$51,000 of these NOLs arose from the acquisition of Manhattan in April 1988, and
will offset goodwill when utilized.  The  implementation  of the  Reorganization
Plan and transactions  that have occurred within the three-year period preceding
the Consummation  Date have caused an "ownership  change" for federal income tax
purposes as of the Consummation  Date. As a result of such ownership change, the
use of the NOLs to offset future taxable  income is limited by the  requirements
of section 382 of the Internal Revenue Code of 1986, as amended ("Section 382").
The  $133,000  of NOLs  reflected  above is the  maximum  the Company may use to
offset future taxable  income.  Of the $133,000 of NOLs,  $102,000 is subject to
annual usage limitations under Section 382 of approximately $7,200.

In  addition,  at  January  3,  1998,  the  Company  had  available  tax  credit
carryforwards  of  $2,958  which  expire  between  1998 and  1999.  Of these tax
credits,  $1,986 will reduce  goodwill  and the balance  will reduce  income tax
expense when  utilized.  Utilization of these credits may be limited in the same
manner as the NOLs, as described above.

Additionally,  if the  Debt  Restructuring,  as  outlined  in the  Restructuring
Agreement,  is  consummated,  a second  ownership  change under Section 382 will
occur.  As a result,  the  utilization of the NOLs and tax credit  carryforwards
would likely be subject to  additional  limitations,  which could  significantly
reduce their use.

Note 13.  Employee Benefit Plans

Pension and Retirement Plans

The  Company has several  defined  benefit  plans for  virtually  all  full-time
salaried employees and certain nonunion hourly employees.  The Company's funding
policy for its plans is to fund the  minimum  annual  contribution  required  by
applicable regulations.

The Company also has a  nonqualified  supplemental  retirement and death benefit
plan covering certain  employees.  The funding for this plan is based on premium
costs of related insurance contracts.

Pension expense includes the following components:
<TABLE>
<CAPTION>

                                                          1997                  1996                  1995
Service cost-benefit earned
<S>                                                     <C>                   <C>                   <C>
  during the period                                     $1,050                $1,270                $1,029
Interest cost on projected benefit obligation            3,272                 2,912                 2,714
Loss/(return) on assets                                 (4,435)               (4,126)               (4,697)
Net amortization                                         1,602                 1,564                 2,286
Net periodic pension cost                               $1,489                $1,620                $1,332
</TABLE>

The reconciliation of the funded status of the plans at January 3, 1998 and
December 28, 1996 is as follows:
<TABLE>
<CAPTION>
                                                                           January 3,          December 28,
                                                                              1998                 1996
                                                                           Accumulated          Accumulated
                                                                              Plan                 Plan
                                                                            Benefits             Benefits
                                                                             Exceed               Exceed
                                                                           Plan Assets          Plan Assets
Actuarial present value of benefit obligation
<S>                                                                       <C>                   <C>
  Vested benefit obligation                                               $  (45,503)           $  (41,578)
  Nonvested benefit obligation                                                  (539)                 (661)
Accumulated benefit obligation                                            $  (46,042)           $  (42,239)

Projected benefit obligation                                              $  (49,862)           $  (46,811)
Plan assets at fair value                                                     42,295                35,980
Projected benefit obligation in
  excess of plan assets                                                       (7,567)              (10,831)
Unrecognized net obligation at date of
  initial application, amortized over 15 years                                   552                   624
Unrecognized net loss                                                          7,307                 7,188
Unrecognized prior service cost                                               (1,111)               (1,222)
Recognition of minimum liability
  under SFAS No. 87                                                           (3,633)               (3,332)
Accrued pension cost                                                      $   (4,452)            $  (7,573)

</TABLE>


<PAGE>


Assumptions used in accounting for defined benefit pension plans are as follows:
<TABLE>
<CAPTION>

                                                   1997        1997       1996       1996       1995       1995
                                                   Non-      Qualified    Non-     Qualified    Non-     Qualified
                                                 Qualified     Plans    Qualified    Plans    Qualified    Plans
                                                   Plan                   Plan                  Plan

<S>                                                <C>         <C>        <C>        <C>        <C>        <C>
Discount rate                                      7.0%        7.0%       7.25%      7.25%      7.0%       7.0%
Rate of increase in compensation levels             N/A        5.0%        N/A       5.0%        N/A       5.0%
Expected long-term rate of return on assets        8.0%        8.5%       8.0%       8.5%       8.0%       8.5%
</TABLE>

Assets of the Company's qualified plans are invested in directed trusts.  Assets
in the directed  trusts are invested in common and preferred  stocks,  corporate
bonds,  money market funds and U.S.  government  obligations.  The  nonqualified
supplemental  plan  assets  consist  of the  cash  surrender  value  of  certain
insurance contracts.

The Company also  contributes to certain union  retirement  and insurance  funds
established to provide  retirement  benefits and group life, health and accident
insurance  for eligible  employees.  The total cost of these  contributions  was
$3,839,  $4,095 and $4,263 in 1997, 1996 and 1995,  respectively.  The actuarial
present value of accumulated plan benefits and net assets available for benefits
for  employees  in the  union  administered  plans  are  not  determinable  from
information available to the Company.

Long Term Savings and Investment Plan

Salant sponsors the Long Term Savings and Investment  Plan, under which eligible
salaried  employees  may  contribute  up to 15% of  their  annual  compensation,
subject to certain  limitations,  to a money market  mutual fund, a fixed income
fund and/or three equity mutual  funds.  Salant  contributes a minimum  matching
amount of 20% of the first 6% of a  participant's  annual  compensation  and may
contribute an additional discretionary amount in cash or in the Company's common
stock. In 1997, 1996 and 1995 Salant's aggregate  contributions to the Long Term
Savings and Investment Plan amounted to $218, $229 and $239, respectively.

Note 14.  Stock Options and Shareholder Rights

The Company's stock plans provide for grants of stock options or stock awards 
aggregating 2,400,000 shares of Salant common stock to officers, key employees
and, in certain cases, to directors.

The  Company's   stock  plans   authorized   such  grants  (subject  to  certain
restrictions  applicable to certain stock options  granted to directors) at such
prices  and  pursuant  to such  other  terms and  conditions  as the Stock  Plan
Committee may determine.  Options may be nonqualified stock options or incentive
stock  options and may include stock  appreciation  rights.  Exercise  prices of
options are equal to 100% of the fair market  value of the  Company's  shares on
the date of grant of the  options.  Options  expire no later than ten years from
the date of grant and become exercisable in varying amounts over periods ranging
from the date of grant to five years from the date of grant.

The  Restructuring  Agreement  provides  that  Salant  will  reserve  10% of the
outstanding  common stock, on a fully diluted basis,  as of the  consummation of
the Debt Restructuring,  (the "Effective Date"), in order to create new employee
stock and stock  option plans for the benefit of the members of  management  and
the other employees of Salant. In addition, the Restructuring Agreement provides
that, on the Effective  Date, a management  stock option plan will be authorized
pursuant to which  options to acquire a certain  percentage  of such 10% reserve
will be  granted  to (i) the  directors  of Salant  and (ii)  those  members  of
management of Salant  selected by management and approved by the  non-management
members of the board of directors of Salant.  The  Restructuring  Agreement also
provides  that the  decision  to grant any  additional  stock  options  from the
balance of the 10% reserve  referred  to above,  and the  administration  of the
stock plans,  will be at the  discretion  of the  non-management  members of the
board of directors of Salant. In addition, the Restructuring  Agreement provides
that by agreement between Salant and its employees,  all existing employee stock
options and other  equity  based plans will be adjusted so that such options and
equity  based  plans will be part of the  above-referenced  new  employee  stock
and/or stock option plans (i.e., subsumed within the 10%) as agreed upon between
Apollo and Salant, subject to consultation with Magten. <TABLE> <CAPTION>

The following table summarizes stock option  transactions  during 1995, 1996 and
1997:

                                                                                                 Weighted
                                                                                                  Average
                                                                                                  Exercise
                                                          Shares             Price Range             Price

<S>                                                      <C>                <C>                  <C>
Options outstanding at December 31, 1994                 1,157,208          $1.00-15.125
Options granted during 1995                                205,300        $3.3125-5.1875
Options exercised during 1995                              (33,334)               $2.625
Options surrendered or canceled during 1995                (65,601)          $3.00-12.00
Options outstanding at December 30, 1995                 1,263,573          $1.00-15.125         $6.50
Options granted during 1996                                 51,600            $3.32-3.94         $3.42
Options exercised during 1996                              (53,000)           $1.00-2.00         $1.94
Options surrendered or canceled during 1996               (228,433)          $2.75-12.00         $6.63
Options outstanding at December 28, 1996                 1,033,740         $1.625-15.125         $6.56
Options granted during 1997                              1,316,900         $2.0625-4.125         $3.65
Options exercised during 1997                              (76,500)         $1.625-2.625         $2.56
Options surrendered or cancelled during 1997              (930,747)        $2.625-15.125         $6.54
Options outstanding at January 3, 1998                   1,343,393        $2.0625-12.875         $3.95

Options exercisable at January 3, 1998                     191,392          $2.41-12.875         $6.02

Options exercisable at December 28, 1996                   910,028         $1.625-15.125         $6.88
</TABLE>

The following tables summarize information about outstanding stock options as
of January 3, 1998 and December 28, 1996:
<TABLE>
<CAPTION>

                                                 Options Outstanding                        Options Exercisable

                                                       Weighted
                                     Number            Average          Weighted          Number          Weighted
                                 Outstanding at       Remaining         Average       Exercisable at       Average
   Range of Exercise Price           1/3/98        Contractual Life  Exercise Price       1/3/98       Exercise Price

<S>     <C>      <C>                      <C>                  <C>           <C>                <C>             <C>
        $2.0625 -$2.75                    305,300              9.55          $2.508             5,300           $2.731
        $2.813 - $4.00                    492,900              9.13           3.861            40,899            3.588
            $4.125                        400,000              9.22           4.125                 0                0
        $4.25 - $8.19                     131,567              5.43           6.346           131,567            6.346
       $9.82 - $12.875                     13,626              2.33          11.393            13,626           11.393

       $2.0625 - $12.875                 1,343,393              8.82           3.952           191,392            6.016

</TABLE>

<TABLE>
<CAPTION>

                                                       Weighted
                                     Number            Average          Weighted          Number          Weighted
                                 Outstanding at       Remaining         Average       Exercisable at       Average
   Range of Exercise Price          12/28/96       Contractual Life  Exercise Price      12/28/96      Exercise Price

<S>    <C>      <C>                       <C>                  <C>            <C>             <C>                <C>
       $1.625 - $2.625                    191,500              4.43           2.598           191,500            2.598
        $2.75 - $4.94                     129,150              8.77           3.923            45,064            4.159
       $5.125 - $5.875                    279,884              6.96           5.370           243,592            5.397
        $6.32 - $8.82                     232,113              6.57           7.615           228,779            7.634
       $9.82 - $15.125                    201,093              1.90          12.484           201,093           12.484

       $1.625 - $15.125                 1,033,740              5.65           6.564           910,028            6.875

</TABLE>

The Company has a shareholder  rights plan (the "Rights  Plan"),  which provides
for a dividend  distribution  of one right for each share of Salant common stock
to holders of record of the  Company's  common stock at the close of business on
December  23, 1987.  The rights will expire on December  23, 2002.  With certain
exceptions,  the  rights  will  become  exercisable  only in the  event  that an
acquiring party accumulates 20 percent or more of the Company's voting stock, or
if a party  announces  an offer to acquire  30  percent  or more of such  voting
stock.  Each  right,  when  exercisable,  will  entitle  the  holder  to buy one
one-hundredth  of a share of a new  series of  cumulative  preferred  stock at a
price of $30 per right or, upon the  occurrence of certain  events,  to purchase
either Salant common stock or shares in an "acquiring entity" at half the market
value  thereof.  The Company will  generally be entitled to redeem the rights at
three cents per right at any time until the 10th day following  the  acquisition
of a 20 percent  position in its voting stock. In July 1993, the Rights Plan was
amended  to  provide  that an  acquisition  or  offer by  Apollo,  or any of its
subsidiaries will not cause the rights to become exercisable.  The Restructuring
Agreement  provides  that  Salant's  Rights  Plan will be  amended to permit the
consummation  of the Debt  Restructuring  without  causing  any of the Rights to
become exercisable.

In summary,  as of January 3, 1998,  there were 1,343,392  shares of Common 
Stock reserved for the exercise of stock options and 567,022 shares of Common
Stock reserved for future grants of stock options or awards.

All stock  options are granted at fair market  value of the Common  Stock at the
grant date. The weighted  average fair value of the stock options granted during
1997 and 1996 was $3.65 and  $3.42,  respectively.  The fair value of each stock
option grant is estimated  on the date of grant using the  Black-Scholes  option
pricing model with the following weighted average assumptions used for grants in
1997: risk-free interest rate of 5.75%;  expected dividend yield of 0%; expected
life of 4.46 years;  and expected  volatility  of 211%.  The  outstanding  stock
options  at January 3, 1998 have a  weighted  average  contractual  life of 8.82
years.

The  Company  accounts  for  the  stock  plans  in  accordance  with  Accounting
Principles Board Opinion No. 25, under which no compensation  cost is recognized
for stock option awards.  Had compensation cost been determined  consistent with
Statement of Financial  Accounting Standard No. 123, "Accounting for Stock-Based
Compensation"  (SFAS 123), the Company's pro forma net  income/(loss)  for 1997,
1996 and 1995 would have been $(19,951),  $(9,692) and $192,  respectively.  The
Company's pro forma net  income/(loss)  per share for 1997,  1996 and 1995 would
have been $(1.32), $(0.64) and $0.01, respectively.  Because the SFAS 123 method
of  accounting  has not been  applied  to  options  granted  prior to 1995,  the
resulting pro forma  compensation  cost may not be  representative of that to be
expected in future years.

Note 15.  Deferred Liabilities
<TABLE>
<CAPTION>
                                                                          January 3,          December 28,
                                                                                1998                  1996

<S>                                                                          <C>                  <C>
Lease obligations                                                            $   196              $     93
Deferred pension obligations                                                   3,634                 4,865
Liability for settlement of chapter 11 claims                                  1,552                 3,905
                                                                              $5,382                $8,863
</TABLE>

Note 16.  Commitments and Contingencies

(a)      Lease Commitments

The Company  conducts a portion of its  operations  in premises  occupied  under
leases  expiring at various dates through  2012.  Certain of the leases  contain
renewal  options.  Rental  payments  under  certain  leases may be adjusted  for
increases in taxes and operating expenses above specified amounts.  In addition,
certain of the leases for outlet stores contain  provisions for additional  rent
based upon sales.

In  1997,  1996  and  1995,  rental  expense  was  $7,689,  $7,563  and  $7,265,
respectively.  As of January 3,  1998,  future  minimum  rental  payments  under
noncancelable  operating  leases  (exclusive  of  renewal  options,   percentage
rentals,  and  adjustments  for property  taxes and operating  expenses) were as
follows:

<TABLE>
<CAPTION>
                           Fiscal Year

<S>                        <C>                                                   <C>
                           1998                                                  $ 5,144
                           1999                                                    4,210
                           2000                                                    3,759
                           2001                                                    3,475
                           2002                                                    2,805
                           Thereafter                                             27,967
                              Total                                              $47,360
</TABLE>

(b)      Employment Agreements

The Company has employment agreements with certain executives, which provide for
the payment of compensation aggregating  approximately $2,500 in 1998, $2,300 in
1999 and $400 in 2000.  In  addition,  such  employment  agreements  provide for
incentive compensation based on various performance criteria.

Note 17.  Discontinued Operations

In June 1997, the Company  discontinued  the operations of the Made in the Shade
division,  which produced and marketed women's junior sportswear.  The loss from
operations of the division in 1997 was $8,136, which included a charge of $4,459
for the write-off of goodwill.  Net sales of the division  were $2,822,  $20,408
and $15,696 in 1997,  1996 and 1995,  respectively.  Additionally,  in 1997, the
Company  recorded a charge of $1,330 to accrue  for  expected  operating  losses
during the phase-out  period.  No income tax benefits have been allocated to the
division's 1997, 1996 and 1995 losses.

In February  1995,  the Company  discontinued  the  operations of the Vera Scarf
division,  which imported and marketed women's scarves. The loss from operations
of the division in 1994 was $9,639,  which  included a fourth  quarter charge of
$9,004 for the write-off of goodwill and other intangible  assets.  Net sales of
the   division   were  $1,673  and  $5,087  in  1995  and  1994,   respectively.
Additionally,  in 1994 the Company recorded a fourth quarter charge of $1,796 to
accrue for expected  operating  losses during the phase-out  period through June
1995. No income tax benefits have been allocated to the division's 1994 loss.

In 1997, the net  liabilities of  discontinued  operations have been included in
accrued  liabilities.  In 1996,  the net assets of the  discontinued  operations
consist  principally of accounts  receivable,  inventory,  goodwill and accounts
payable.

Note 18.  Consummation of the Plan of Reorganization

From  the   Consummation   Date  through  January  3,  1998,   pursuant  to  the
Reorganization  Plan, the Company made cash payments of $9,656,  issued $111,851
of new 10-1/2%  senior  secured  notes and issued 11.1 million  shares of common
stock  to  creditors  in  settlement  of  certain   claims  in  the  chapter  11
proceedings.  Salant  anticipates  that an  additional  $1,805  in  cash  and an
additional  206  thousand  shares  of  common  stock  ultimately  will have been
distributed  to creditors  upon the final  resolution of all  remaining  claims.
Provisions for such  distributions  had previously been made in the consolidated
financial statements.

Note 18.  Quarterly Financial Information (Unaudited)

 <TABLE>
<CAPTION>
                                                             Fiscal year ended January 3, 1998

                                                Total      4th Qtr.     3rd Qtr.      2nd Qtr.     1st Qtr.

<S>                                          <C>          <C>           <C>           <C>          <C>
Net sales                                    $396,832     $116,360      $110,871      $81,391      $88,210
Gross profit                                   84,474       20,886        27,236       16,567       19,785
Net income/(loss)                             (18,088)      (5,646)        5,212      (14,144)      (3,510)
Basic earnings/(loss) per share (a)            $(1.19)      $(0.37)       $0.34       $(0.94)       $(0.23)

</TABLE>
                                  Fiscal year ended December 28, 1996
<TABLE>
<CAPTION>

                                                Total      4th Qtr.     3rd Qtr.      2nd Qtr.     1st Qtr.
<S>                                          <C>          <C>           <C>           <C>          <C>
Net sales                                    $417,711     $115,117      $117,159      $91,889      $93,546
Gross profit                                   94,913       27,048        29,059       17,164       21,642
Net income/(loss)                              (9,323)       6,116         6,335      (18,862)      (2,912)
Basic earnings/(loss) per share (a)            $(0.62)       $0.40        $0.42       $(1.25)       $(0.19)

</TABLE>

Reference  is made to Notes 3, 4 and 5  concerning  fourth  quarter  adjustments
during the years ended January 3, 1998 and December 28, 1996.

(a)     Income/(loss) per share of common stock is computed  separately for each
        period.  The sum of the amounts of  income/(loss)  per share reported in
        each period  differs  from the total for the year due to the issuance of
        shares and, when appropriate, the inclusion of common stock equivalents.


<PAGE>



ITEM 9.           DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

                                                                 PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Board of Directors (the "Board")  consists of ten members divided into three
classes,  the  first  class  consisting  of  three  members,  the  second  class
consisting  of two  members  and the third  class  consisting  of four  members.
Presently  there is one  vacancy on the  Board.  The term of office of the first
class ("Class One") expires at the Annual Meeting of  Stockholders  (the "Annual
Meeting")  scheduled  for the year 2000;  the term of the second  class  ("Class
Two")  expires  at the 1999  Annual  Meeting;  and the term of the  third  class
("Class Three") expires at the 1998 Annual Meeting.

The following table sets forth certain  information  with respect to the persons
who are members of the Board or executive officers of Salant.

---------------------------------------------
<TABLE>
<CAPTION>
                                                                                            Director/Officer
          Name                Age     Positions and Offices                                  of Salant Since
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
<S>                           <C>     <C>                                                     <C>       <C>
Jerald S. Politzer.......     52      Director - Class One; Chairman of the Board                 April 1997
                                      and Chief Executive Officer
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Harold Leppo.............     61      Director - Class One                                    September 1993
Edward M. Yorke..........     39      Director - Class One                                    September 1993
Bruce F. Roberts.........     74      Director - Class Two                                    September 1993
Marvin Schiller..........     64      Director - Class Two                                          May 1983
Robert H. Falk...........     59      Director - Class Three                                        May 1996
Ann Dibble Jordan........     63      Director - Class Three                                  September 1993
Robert Katz..............     31      Director - Class Three                                     August 1995
John S. Rodgers..........     68      Director - Class Three                                      March 1973
Philip A. Franzel........     50      Executive Vice President                                   August 1997
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
                                      and Chief Financial Officer
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Todd Kahn................     33      Executive Vice President, General Counsel                    June 1993
                                      and Secretary
</TABLE>

-----------------------------------------------------------------
The business  experience of each of the directors and executive  officers during
the past five years is as follows:

Jerald S.  Politzer  joined the Company as a director on March 24,  1997,  Chief
Executive  Officer on April 1, 1997 and  Chairman of the Board on May 13,  1997.
From July 1989 to November 1996 he had been Executive Vice President of Melville
Corporation,  a  diversified  retailer.  Mr.  Politzer  is a director  of Norton
McNaughton, Inc., a manufacturer of women's apparel.

Harold Leppo has been an  independent  retail  consultant for more than the past
five years. Mr. Leppo is a director of Filene's Basement,  an operator of retail
clothing stores; J. Baker,  Inc., an operator of retail clothing stores;  Napier
Co.,  a  jewelry  manufacturer;   and  Royce  Hosiery  Mills,  Inc.,  a  hosiery
manufacturer.

Edward M. Yorke has been an officer, since 1992, of Apollo Advisors,  L.P.,
which, together with an affiliate,  serves as managing general partner of Apollo
Investment  Fund,  L.P.,  AIF II, L.P.  and Apollo  Investment  Fund III,  L.P.,
private  securities  investment  funds.  AIF II, L.P. is the general  partner of
Apollo Apparel Partners,  L.P. ("Apollo  Apparel"),  the largest  stockholder of
Salant. From 1990 to 1992,  Mr.  Yorke was a vice  president  in the high  yield
capital  markets  group of BT Securities  Corp.  Mr. Yorke is a director of Aris
Industries,  Inc.,  an apparel  manufacturer;  and  Telemundo  Group,  Inc.,  an
operator of television stations.

Bruce F. Roberts is Executive Director of the Textile Distributors  Association,
a trade  association,  from September 1990.  Prior to that time, Mr. Roberts was
most recently Senior Vice President - Corporate  Relations at Spring Industries,
a textile manufacturer.

Marvin  Schiller  was  Managing  Director of A. T.  Kearney,  Inc., a management
consulting  firm,  from May 1983 until his  retirement as of January  1995.  Dr.
Schiller is a director of  LePercq-Istel  Fund,  Inc., a mutual fund;  Strategic
Agricultural Management Corp., a software developer and marketer; and Tutor Time
Learning Systems Inc., a childcare and educational company.

Robert H. Falk has been a principal, since April 1992, of Apollo Advisors, L.P.,
which, together with an affiliate,  serves as managing general partner of Apollo
Investment  Fund,  L.P.,  AIF II, L.P.  and Apollo  Investment  Fund III,  L.P.,
private  securities  investment  funds.  AIF II, L.P. is the general  partner of
Apollo  Apparel,  the largest  stockholder of Salant.  Mr. Falk is a director of
Converse, Inc., a manufacturer of athletic and leisure footwear;  Culligan Water
Technologies, Inc., a manufacturer of water purification and treatment products;
and Samsonite Corporation, a luggage manufacturer.

Ann Dibble Jordan has been an  independent  consultant  for the last five years.
Ms. Dibble Jordan is a director of Johnson & Johnson Corporation, a manufacturer
and marketer of consumer  healthcare  products;  The  Travelers  Corporation,  a
financial services and insurance firm; The Hechinger Company, a retailer of home
improvement products;  and Automatic Data Processing,  Inc., a computer services
company.

Robert  Katz has been  associated  since  1990 with and is an  officer of Apollo
Advisors,  L.P., which,  together with an affiliate,  serves as managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo Investment Fund
III, L.P.,  private  securities  investment  funds.  AIF II, L.P. is the general
partner of Apollo  Apparel,  the largest  stockholder  of Salant.  Mr. Katz is a
director of Alliance Imaging Inc., a medical imaging  company;  Aris Industries,
Inc., an apparel manufacturer and Vail Resorts Inc., a resort operator.

John S. Rodgers is an  independent  consultant.  From  September 1993 until July
1995, Mr. Rodgers was Executive Vice President,  Secretary and Senior Counsel of
Salant.  Prior to that time,  Mr. Rodgers was Chairman of the Board of Directors
of the  Company  since  March  1991.  Prior to June 1993,  Mr.  Rodgers had been
General  Counsel for more than the previous  five years and prior to August 1995
he had been Secretary for more than the previous five years.

Mr. Franzel  joined the Company as Executive Vice President and Chief  Financial
Officer on August 18,  1997.  From 1993 until  joining  Salant Mr.  Franzel  was
Executive Vice President and Chief Financial Officer of Ermenegildo Zegna Corp.,
a leading international manufacturer and marketer of men's apparel.

Mr. Kahn was elected  Executive Vice  President on May 13, 1997,  Vice President
and General Counsel on June 1, 1993,  Assistant  Secretary on September 22, 1993
and  Secretary on August 15, 1995.  He had been an attorney with the law firm of
Fried, Frank, Harris, Shriver & Jacobson,  outside counsel to the Company, since
September 1988.

Each of the  executive  officers of Salant was elected at a meeting of the Board
and will serve until the next Annual Meeting of the Board or until his successor
has been duly elected and qualified.  Section 16(a) of the  Securities  Exchange
Act of 1934 (the "Securities Exchange Act") requires the Company's directors and
executive officers and holders of more than 10% of the Common Stock to file with
the  Securities  and Exchange  Commission  reports of  ownership  and changes in
beneficial  ownership of Common Stock and other equity securities of the Company
on Forms 3, 4 and 5. Based on written  representations of the reporting persons,
the Company  believes  that during the fiscal year ended  January 3, 1998,  such
persons complied with all applicable Section 16(a) filing requirements.

Post-Debt Restructuring Board

The  Restructuring  Agreement  provides  that,  if  the  Debt  Restructuring  is
consummated,  the existing members of the Board will resign and between five and
seven new Board members will be elected by the shareholders.  As provided for in
the Restructuring Agreement, the nominees for the new Board will consist of: (i)
Jerald S.  Politzer,  as the Chairman of the Board;  (ii) between three and five
members nominated by Magten,  subject to consultation with the Company and other
holders of the Senior  Secured  Notes,  and (iii) one member  designated  by the
current Board.

Payments to Management in Connection with Debt Restructuring

The  Restructuring  Agreement  provides  that  no  payments  will be made to the
members   of   management   under   existing   severance,    employment   and/or
change-in-control  agreements or any other arrangements  solely as result of the
consummation of the Debt Restructuring.

ITEM 11.          EXECUTIVE COMPENSATION

The following  table sets forth all  compensation  paid or accrued by Salant for
fiscal years 1995 through 1997 for services in all  capacities to the Company by
all individuals serving as the Chief Executive Officer during the last completed
fiscal  year  and each of the  four  most  highly  compensated  other  executive
officers of Salant who were either (i) serving as executive  officers at the end
of the last  completed  fiscal year or (ii) served as  executive  officers for a
portion of the last completed  fiscal year but were not serving at year end (the
"Named Executive Officers").




<PAGE>


SUMMARY COMPENSATION TABLE

<TABLE>
--------------------------------------------------------------------------------------------------------
                                                    Annual Compensation (a)             Long-Term Compensation
-------------------------------------------------------------------------------
                                                                            
                                       

<CAPTION>
                                                                                                Number of
                                                                                                Securities
                                                                          Other     Restricted  Underlying  Long-Term    All Other
                      Principal                                          Annual       Stock     Options    Incentive     Compen-
Name                  Positions          Year    Salary($)   Bonus($)  Compensation   Awards    Granted     Payouts      sation($)


Jerald S. Politzer    Chief
                      Executive
<S>                   <C>                 <C>    <C>        <C>               <C>        <C>     <C>             <C>      <C>
                      Officer (b)         1997    487,500    650,000(c)        0          0       400,000         0        29,644(d)



Philip A. Franzel     Executive
                      Vice President
                      and Chief
                      Financial           1997    109,615    150,000(c)        0          0        75,000         0                0
                      Officer (e)

Todd Kahn             Executive Vice
                      President,
                      General Counsel                                                                                          1,900
                      and Secretary(f)    1997    258,077        75,000        0          0        65,000         0              (g)

                      Vice President,
                      General Counsel
                      and Secretary       1996    201,923             0        0          0             0         0              792
                      Vice President,
                      General Counsel
                      and Secretary       1995    167,827             0        0          0        15,000         0              762



<PAGE>


Nicholas P. DiPaolo
                      Chairman,
                      President and
                      Chief Executive     1997    632,211             0        0          0             0         0           22,339
                      Officer (h)                                                                                                (i)

                      Chairman,
                      President and       1996    625,000             0        0          0             0         0           22,239
                      Chief Executive
                      Officer

                      Chairman,           1995    602,885             0        0          0             0         0           22,239
                      President and
                      Chief Executive
                      Officer

Michael A. Lubin      Executive Vice
                      President and
                      Chief Operating     1997    236,923(k)          0        0          0      162,500          0            1,900
                      Officer (j)                                                                                                (g)

                      Executive Vice
                      President and       1996    400,000             0        0          0            0          0                0
                      Chief Operating
                      Officer

                      Executive Vice      1995     90,769             0        0          0            0          0                0
                      President and
                      Chief Operating
                      Officer

Richard P. Randall    Senior Vice
                      President and
                      Chief
                      Financial                                                                                                1,900
                      Officer (l)         1997    240,000             0        0          0            0          0              (g)
                      Senior Vice
                      President and
                      Chief
                      Financial
                      Officer             1996    320,000             0        0          0            0          0            1,800
                      Senior Vice
                      President,
                      Treasurer and
                      Chief
                      Financial
                      Officer             1995    283,077             0        0          0            0          0            1,800



</TABLE>



-------------------------------------------------------------------------------


<PAGE>


(a)      Includes amounts earned in fiscal year, whether or not deferred.
(b) Mr. Politzer  joined the Company and was elected Chief Executive  Officer on
April 1, 1997. (c) Reflects a one-time  minimum cash bonus for 1997 agreed to in
lieu of a sign-up  bonus.  (d) Housing  allowance of $21,000 and  pre-employment
expense reimbursement of $8,644.
(e) Mr. Franzel joined the Company and was elected  Executive Vice President and
Chief Financial  Officer on August 18, 1997. (f) Mr. Kahn was elected  Executive
Vice President on May 13, 1997. (g) Matching  contributions  under the Company's
Long Term Savings and Investment Plans (the "Savings Plan").
(h) Effective May 13, 1997, Mr. DiPaolo resigned from his positions at Salant.
(i)  Consists  of  (i)  premiums  of  $20,439  under  a  life   insurance/salary
continuation  plan and (ii) matching  contributions  of $1,900 under the Savings
Plan.  (j)  Effective  July 31, 1997,  Mr. Lubin  resigned from his positions at
Salant.  (k) Excludes monthly retainer to Lubin Delano of $8,333.33 and one-time
lump sum  payment of $368,149 to Lubin  Delano,  pursuant to a letter  agreement
dated July
         18, 1997 (the  "Lubin  Agreement").  For a summary of the Lubin  Delano
         Consulting Agreement with Salant, see Item 13. "Certain  Relationships,
         and Related Transactions" herein.
(l) Effective April 1, 1997, Mr. Randall resigned from his positions at Salant.

Option Grants for Fiscal Year 1997

The following table sets forth  information  with respect to grants to the Named
Executive Officers of options to purchase Common Stock in the last fiscal year.

<TABLE>
<CAPTION>


                                           % of Total
                              Number of      Options                                 Potential Realizable Value at
                              Securities   Granted to                                Assumed Annual Rates of Stock
                              Underlying    Employees                                Price Appreciation for Option
                               Options      in Fiscal     Option       Expiration                 Term
               Name            Granted        Year         Price          Date
                                                                                           5%             10%
<S>                               <C>          <C>           <C>        <C>  <C>         <C>             <C>
       Jerald Politzer            400,000      30.4298       $4.125     3/24/07          $1,037,676      $2,629,675

       Philip A. Franzel           75,000       5.7056        $2.34     8/18/07            $110,829        $280,431

       Todd Kahn                   65,000       4.9448        $4.00     4/14/07            $163,671        $414,625

       Nicholas P. DiPaolo              0            0            0        -                      0               0

       Michael Lubin              162,500      12.3621        $4.00     2/11/07*           $408,781      $1,035,932

       Richard P. Randall               0            0            0        -                      0               0

</TABLE>

* Pursuant to the Lubin Agreement all such options expired on December 31, 1997.

Option Exercises and Values for Fiscal Year 1997

The  following  table  sets  forth as of  January  3, 1998 for each of the Named
Executive  Officers (i) the total number of shares of Common Stock received upon
exercise of options  during fiscal year 1997,  (ii) the value realized upon such
exercise, (iii) the total number of unexercised options to purchase Common Stock
(exercisable  and  unexercisable)  held at January 3, 1998 and (iv) the value of
such options which were in-the-money at January 3, 1998 (based on the difference
between the closing  price of Common Stock on January 2, 1998,  the last trading
day of the fiscal  year ended  January 3, 1998,  and the  exercise  price of the
option). The Company has not issued any stock appreciation rights.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

                                                                                           Total Value of
                                                           Number of Securities              Unexercised
                                                          Underlying Unexercised            In-the-Money
                                                                  Options              Options Held at Fiscal
                                                             at Fiscal Year-End               Year-End(a)

------------------------------------------------------------------------------------------------------------------
Name                   Number of Shares
                         Acquired on         Value     Exercisable   Unexercisable   Exercisable    Unexercisable
                           Exercise        Realized
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>          <C>       <C>                  <C>             <C>
Jerald S. Politzer                     0             0            0         400,000              0               0
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Philip A. Franzel                      0             0            0          75,000              0               0

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Todd Kahn                              0             0       30,000          70,000              0               0
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Nicholas P. DiPaolo
                                  65,000       $38,750            0               0              0               0
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Michael A. Lubin
                                       0             0            0               0              0               0
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
 Richard P.  Randall
                                       0             0            0               0              0               0
-------------------------------------------------------------------------------------------------------------------
   ----------------------------------------------------------------------------------------------------------------
</TABLE>

   -------------------------------------------------------------------------
(a)       The closing price of the Common Stock on January 2, 1998, the last
 trading day of the fiscal year ended January 3, 1998, was $1.75 per share.

Performance Graph

The following table compares the cumulative total  shareholder  return on Salant
Common Stock with the cumulative  total  shareholder  returns of (x) the S&P 500
Textile-Apparel  Manufacturers  index  and  (y) the  Wilshire  5000  index  from
December 1992 to December 1997. The return on the indices is calculated assuming
the investment of $100 on December 31, 1992 and the reinvestment of dividends.

       Cumulative Total Shareholder Return December 1991 to December 1996

          Comparison of Five Year Cumulative Total Shareholder Return*
        Salant Corporation, Wilshire 5000, and S&P Textile Industry Index
<TABLE>
<CAPTION>

            Date                                          Salant           Wilshire 5000          S&P Textile

<S>                      <C>                             <C>                     <C>                  <C>
                December 1992                            $100.00                 $100.00              $100.00
                December 1993                              80.78                  111.29                75.61
                December 1994                              62.98                  111.22                74.08
                December 1995                              42.45                  151.77                83.15
                December 1996                              34.23                  183.97               114.23
                December 1997                              19.17                  241.53               123.17
</TABLE>

*Total return assumes reinvestment of dividends on a quarterly basis.


<PAGE>



Employment Agreements

Mr. Politzer is a party to an agreement (the "Politzer Agreement"),  dated as of
March 24, 1997, which provides for his employment as Chief Executive  Officer of
Salant  effective  April 1, 1997 through March 31, 2000. The Politzer  Agreement
provides  for the payment of a base  salary in the amount of $650,000  per annum
for the first twelve months of his employment, $700,000 per annum for the second
twelve months of his  employment and $750,000 for the third twelve months of his
employment.  Under the terms of the Politzer  Agreement,  Mr. Politzer is paid a
cash bonus equal to 50% of his then current base salary if the Company generates
actual  pre-tax  income for a year equal to at least 90% of the  pre-tax  income
provided in the Company's  annual  business plan for such year. If the Company's
actual  pre-tax  income for a year equals 100% of its annual  business  plan for
such year,  then he receives a cash bonus equal to 100% of his then current base
salary.  Actual pre-tax income in excess of the annual  business plan for a year
increases Mr.  Politzer's  incentive bonus by 1% of his then current base salary
for each 1% increment of increased actual pre-tax income for the year.  Pursuant
to the Politzer  Agreement,  Mr.  Politzer will receive a minimum cash bonus for
the 1997 fiscal  year,  and no other  fiscal year  thereafter,  in the amount of
$650,000.  If Mr.  Politzer's  employment is terminated by him for "good reason"
(as defined in the Politzer  Agreement)  or by the Company  without  cause,  Mr.
Politzer will receive (i) his base salary at the annualized rate on the date his
employment  ends for a period ending on the later of (x) the  Employment  Period
(as  defined  in  the  Politzer   Agreement)  or  (y)  twelve  months  following
termination,  (ii) any pro-rata bonus earned in the year his employment ends and
(iii) the right to exercise any stock  options  (whether or not then vested) for
six months from the date his employment ends. If Mr. Politzer's  employment ends
as a result of death or  Disability  (as defined in the Politzer  Agreement)  he
will receive (i) his base salary through the date of death or Disability and any
bonus for any fiscal  year  earned  but not yet paid,  (ii) any  pro-rata  bonus
earned in the year his employment  ends, (iii) in the case of death only, a lump
sum payment equal to three months base salary and (iv) the right to exercise any
stock option (whether or not then vested) for a one year period.

Mr.  Franzel is a party to an  agreement  (the Franzel  Agreement),  dated as of
August 18, 1997,  which provides for his employment as Executive Vice President,
and Chief Financial Officer of Salant effective August 18, 1997 through December
31, 1999. The Franzel Agreement provides for the payment of a base salary in the
amount of $300,000 per year.  Commencing in August of 1998,  Mr.  Franzel's base
salary will be reviewed for  increase,  and in no event shall the base salary be
less than  $300,000  per year.  Under the terms of the  Franzel  Agreement,  Mr.
Franzel  shall receive a minimum cash bonus of $150,000 for the 1997 fiscal year
only, payable to Mr. Franzel within ninety (90) days after the end of the fiscal
year.  Under the terms of the  Franzel  Agreement,  Mr.  Franzel is  entitled to
receive a cash bonus equal to 40% of his then current base salary if the Company
generates actual pre-tax income for a year equal to or greater than 90% and less
than 100% of the pre-tax income  provided in the Company's  annual business plan
for such year. If the Company's  actual pre-tax income for a year is equal to or
greater than 100% of its annual  business plan for such year, then he receives a
cash bonus equal to 50% of his then current base salary.  Actual  pre-tax income
in  excess  of the  annual  business  plan for a year  increases  Mr.  Franzel's
incentive  bonus by 5% of his then  current base salary for each 5% increment of
increased  actual  pre-tax income for the year. If Mr.  Franzel's  employment is
terminated  by him for good reason (as defined in the Franzel  Agreement)  or by
the Company  without cause,  Mr. Franzel will receive (i) his base salary at the
annualized rate on the date his employment ends for a period ending on the later
of (x) the Employment Period (as defined in the Franzel Agreement) or (y) twelve
months  following  termination,  (ii) any pro-rata  bonus earned in the year his
employment  ends and (iii) the right to exercise any stock  options  (whether or
not then  vested)  for six  months  from the date his  employment  ends.  If Mr.
Franzel's employment ends as a result of death or Disability ( as defined in the
Franzel Agreement) he will receive (i) his base salary through the date of death
or  Disability  and any bonus for any fiscal year earned but not yet paid,  (ii)
any pro-rata bonus earned through the date of death or Disability,  (iii) in the
case of death  only,  a lump sum payment  equal to three  months base salary and
(iv) the right to exercise  any stock  option  (whether or not vested) for a one
year period.  Pursuant to the Franzel Agreement,  all stock options  outstanding
will  immediately  vest upon a "Change of  Control"  (as  defined in the Franzel
Agreement).

Mr. Kahn is a party to an agreement (the "Kahn  Agreement"),  dated as of May 1,
1997,  which provides for his employment as Executive  Vice  President,  General
Counsel and  Secretary of Salant,  effective  May 1, 1997  through  December 31,
1999. The Kahn Agreement provides for the payment of a base salary in the amount
of $275,000 per year.  Commencing in March of 1998,  Mr. Kahn's base salary will
be  reviewed  for  increase,  and in no event shall his base salary be less than
$275,000 per year.  Under the terms of the Kahn Agreement,  Mr. Kahn is entitled
to  receive a cash bonus  equal to 40% of his then  current  base  salary if the
Company  generates actual pre-tax income for a year equal to or greater than 90%
and less  than 100% of the  pre-tax  income  provided  in the  Company's  annual
business plan for such year. If the Company's  actual  pre-tax income for a year
is equal to or greater than 100% of its annual business plan for such year, then
he receives a cash bonus equal to 50% of his then current  base  salary.  Actual
pre-tax  income in excess of the annual  business plan for a year  increases Mr.
Kahn's  incentive  bonus  by 5% of his  then  current  base  salary  for each 5%
increment  of  increased  actual  pre-tax  income  for the year.  If Mr.  Kahn's
employment  is  terminated  by him for "good  reason"  (as  defined  in the Kahn
Agreement) or by the Company  without cause,  Mr. Kahn will receive (i) his base
salary  at the  annualized  rate on the  date his  employment  ends for a period
ending  on the  later  of (x) the  Employment  Period  (as  defined  in the Kahn
Agreement) or (y) twelve months following  termination,  (ii) any pro-rata bonus
earned in the year his employment ends and (iii) the right to exercise any stock
options (whether or not then vested) for six months from the date his employment
ends.  If Mr.  Kahn's  employment  ends as a result of death or  Disability  (as
defined in the Kahn  Agreement) he will receive (i) his base salary  through the
date of death or Disability and any bonus for any fiscal year earned but not yet
paid,  (ii) any pro-rata  bonus earned  through the date of death or Disability,
(iii) in the case of death only, a lump sum payment equal to three months salary
and (iv) the right to exercise  any stock  option  (whether or not vested) for a
one year period.  Pursuant to the Kahn Agreement,  all stock options outstanding
will  immediately  vest upon a  "Change  of  Control"  (as  defined  in the Kahn
Agreement).

Mr.  DiPaolo is party to an agreement  (the  "DiPaolo  Agreement"),  dated as of
January 1, 1997,  which  provided for his  employment  as Chairman of the Board,
President and Chief Executive  Officer of Salant through  December 31, 1997. The
DiPaolo  Agreement  provided  for the  payment of a base salary in the amount of
$625,000 from January 1, 1997 to December 31, 1997.

On May 13, 1997 (the  "Termination  Date"),  Mr. DiPaolo  exercised his right to
terminate the agreement for "good reason" (as defined in the DiPaolo Agreement).
Pursuant to the DiPaolo  Agreement,  Mr. DiPaolo was entitled to his base salary
for the balance of 1997. Of such amount,  and pursuant to the DiPaolo Agreement,
$312,500 was paid as a lump-sum within ten days of the Termination Date, and the
balance  was paid in  bi-weekly  installments  commencing  six months  after the
Termination Date.

In addition to the foregoing, pursuant to the DiPaolo Agreement, Salant assigned
to Mr.  DiPaolo three  insurance  policies on his life owned by Salant,  with an
aggregate current cash surrender value of approximately $228,253.

Mr. Lubin is party to an agreement (the "Lubin Agreement"), dated as of July 18,
1997. Pursuant to the Lubin Agreement,  effective as of July 31, 1997, Mr. Lubin
resigned as President and Chief Operating Officer of Salant,  and his employment
with  Salant  ended  as of that  date.  The  Lubin  Agreement  provided  for the
continuation  of Mr.  Lubin's  salary  and the  payment  to Lubin  Delano of its
consulting fee pursuant to the Lubin Delano Agreement through July 31, 1997 (For
a discussion of the Lubin Delano  Agreement,  see Item 13-Certain  Relationships
and Related Transactions below). Additionally,  the Lubin Agreement provided for
a one-time lump sum payment of $368,149.00 to Lubin Delano.

Mr.  Randall is party to an agreement  (the  "Randall  Agreement"),  dated as of
February 24, 1997.  Pursuant to the Randall Agreement,  effective as of April 1,
1997, Mr. Randall resigned as Senior Vice President and Chief Financial  Officer
of Salant and his  employment  with  Salant  ended as of that date.  The Randall
Agreement  provided for a severance period beginning April 1, 1997 and ending on
the  earlier  of (i) the day Mr.  Randall  commences  Full Time  Employment  (as
defined in the Randall Agreement) and (ii) six (6) months from April 1, 1997.

Compensation Committee Interlocks and Insider Participation

The members of the Company's  Compensation and Stock Plan Committees are Messrs.
Leppo, Schiller and Yorke, none of whom were (i) during the 1997 fiscal year, an
officer of the Company or any of its subsidiaries or (ii) formerly an officer of
the Company or any of its subsidiaries.

Joint Report of the Compensation and Stock Plan 
Committees on Executive Compensation

This report sets forth the  compensation  policies  that guide  decisions of the
Compensation  and Stock Plan Committees with respect to the  compensation of the
Company's  executive  officers.  This report also reviews the  rationale for pay
decisions that affected Mr.  Politzer  during the 1997 fiscal year, and, in that
regard,   offers  additional  insight  into  the  figures  that  appear  in  the
compensation  tables  which are an integral  part of the overall  disclosure  of
executive compensation. Any consideration of pay-related actions that may become
effective in future fiscal years are not reported in this statement.

Committee  Responsibility.   The  central  responsibility  of  the  Compensation
Committee  is to oversee  compensation  practices  for the  Company's  executive
officers.   In  this  capacity,  it  reviews  salaries,   benefits,   and  other
compensation paid to the Company's  executive officers and recommends actions to
the full  Board of  Directors  with  respect  to these  matters.  The Stock Plan
Committees  administer the Company's 1987,  1988, 1993 and 1996 Stock Plans and,
in this role, are responsible for granting stock options to all of the Company's
eligible employees, including its officers.

Statement of Compensation Policy. In the context of their oversight  roles,  the
Compensation  and Stock Plan  Committees  are  dedicated  to  ensuring  that the
Company's financial resources are used effectively to support the achievement of
its short-term and long-term business  objectives.  In general, it is the policy
of the Company that executive compensation (a) reflect relevant market standards
for individuals  with superior  capabilities so as to ensure that the Company is
effectively positioned to recruit and retain high-performing  management talent;
(b) be driven  substantially  by the  Company's  performance  as measured by the
achievement of internally  generated  earnings  targets;  and (c) correlate with
share price appreciation,  thereby  coordinating the interests of management and
shareholders.
Percentile objectives are not specified in setting executive compensation.

The  members of the  Compensation  and Stock Plan  Committees  believe  that the
Company's  executive  compensation  program is well  structured  to achieve  its
objectives.  These  objectives  are  satisfied  within the context of an overall
executive pay system that is comprised of a market driven base salary,  variable
incentive compensation and options to purchase the Company's Common Stock.

Description of Compensation Practices.It is the Company's practice to enter into
employment agreements with its executive officers.  These agreements specify the
various  components of compensation,  including,  among others,  base salary and
incentive compensation.

Base Salary. Base salaries for the Company's  executive  officers are defined in
their  respective  employment  agreements,  and, in the view of the Compensation
Committee,  reflect  base pay  levels  that  generally  are being  commanded  by
high-quality management in the marketplace.  The Compensation Committee's normal
practice is to review each  executive  officer's  salary at the time of contract
renewal,  at which point adjustments are recommended to ensure  consistency with
pay  expectations  in the  apparel  industry  and to  reflect  the extent of the
executive's contribution to corporate performance over time. Mr. Politzer's base
salary for 1997 was established pursuant to an agreement,  dated as of March 24,
1997. Mr.  Politzer's  compensation  represents a negotiated  rate that reflects
market prices for executives of his caliber and experience.

Incentive Compensation.Incentive compensation payments to executive officers are
based on the  Company's  performance  and are intended to motivate the Company's
executive  officers to maximize  their  efforts to meet and exceed key  earnings
goals.  The  specific  terms  of each  incentive  arrangement  are  individually
negotiated,  but, in  general,  executive  officers  can earn  incremental  cash
compensation  based on the  extent to which the  Company  achieves  and  exceeds
annual earnings targets.  Ordinarily,  executive  officers are paid a fixed cash
award in years when actual pre-tax income  (before  amortization  of intangibles
and after any reserve  for  contingencies)  equals  100% of the annual  business
plan.  Smaller awards are paid when earnings fall below plan levels, and greater
payments  are made when results  exceed  plan.  There is no limit on the overall
incentive opportunity;  however, in a year in which operating income falls below
90% of the annual  business plan, no incentive  compensation  payments are made.
Mr.  Politzer's  incentive  compensation is designed to align the bonus, if any,
with the performance of the Company.

Stock Plans.  The Company  reinforces  the  importance  of producing  attractive
returns to  shareholders  over the long term through the  operation of its 1987,
1988,  1993 and 1996 Stock Plans.  Stock options  granted  pursuant to the Stock
Plans provide  recipients  with the opportunity to acquire an equity interest in
the Company and to participate in the increase in shareholder value reflected in
an  increase  in the price of Company  shares.  Exercise  prices of options  are
ordinarily equal to 100% of the fair market value of the Company's shares on the
date of grant of the option.  This ensures that  executives will derive benefits
as  shareholders   realize   corresponding   gains.  To  encourage  a  long-term
perspective,  options  are  assigned a 10-year  term,  and most  options  become
exercisable in equal installments on the first,  second and third  anniversaries
of the date of grant.  Stock options granted to executive officers typically are
considered when employment agreements are initiated or renewed. In recent years,
the Stock Plan  Committees  have based their decisions to grant stock options on
competitive  factors,  their  understanding  of  current  industry  compensation
practices  and their  assessment of individual  potential  and  performance.  By
granting stock options,  the Committees are not only  addressing  market demands
with  respect  to total  compensation  opportunities,  but are also  effectively
reinforcing  the Company's  policy of encouraging  executive  stock ownership in
support of building  shareholder  value.  Mr.  Politzer has been  granted  stock
options which vest at the rate of 25% on the first and second  anniversaries  of
the grant date and 50% on the third anniversary of the grant date to incentivize
Mr. Politzer to promote long-term shareholder value.

Deductibility of Executive  Compensation. Section 162(m) of the Internal Revenue
Code ("Section  162(m)")  generally  disallows a federal income tax deduction to
any  publicly-held  corporation for compensation paid in excess of $1 million in
any taxable  year to the chief  executive  officer or any of the four other most
highly  compensated  executive  officers  who are employed by the Company on the
last day of the taxable year. In 1997,  Section  162(m) will only affect the tax
deductibility of a portion of the compensation paid to Mr. Politzer.

Summary.  The  Compensation  and Stock Plan  Committees  are  responsible  for a
variety of compensation  recommendations  and decisions  affecting the Company's
executive officers. By conducting their decision-making  within the context of a
highly  integrated,  multicomponent  framework,  the Committees  ensure that the
overall  compensation  offered to  executive  officers  is  consistent  with the
Company's interest in providing  competitive pay opportunities which reflect its
pay-for-performance   orientation  and  support  its  short-term  and  long-term
business  mission.  The  Compensation and Stock Plan Committees will continue to
actively monitor the effectiveness of the Company's executive compensation plans
and  assess  the  appropriateness  of  executive  pay  levels to assure  prudent
application of the Company's resources.

                                    Marvin Schiller, Chairman
                                    Harold Leppo
                                    Edward M. Yorke

Other Information Regarding the Directors

During  the  1997  fiscal  year,  there  were  eight  meetings  of the  Board of
Directors. Directors who are not employees of Salant are paid an annual retainer
of $13,000 and an additional  fee of $600 for  attendance at each meeting of the
Board or of a committee of the Board  (other than the  Executive  Committee)  as
well as $5,000 per year for service on the Executive Committee,  $3,000 per year
for  service  on the  Audit  Committee,  $2,000  per  year  for  service  on the
Compensation  Committee,  $2,000  per year for  service  on the  Qualified  Plan
Committee  and  $1,000  per year for  service on the  Nominating  Committee.  In
addition, the Chairman of each Committee is paid an annual fee of $1,000. During
the 1997 fiscal year,  none of the directors  attended  fewer than 75 percent of
the aggregate number of meetings held by (i) the Board during the period that he
or she served as a director,  with the  exception of Messrs.  Cogut and Falk and
(ii) the Committees of which he or she was a member during the period that he or
she served on these Committees.

The Board has established five standing committees to assist it in the discharge
of its responsibilities.

The Executive Committee met three times during the 1997 fiscal year. The members
of the Committee are to Messrs.  Politzer,  Schiller, and Yorke and prior to May
13,  1997,  Mr.  DiPaolo.  The  Committee,  to the extent  permitted by law, may
exercise all the power of the Board  during  intervals  between  meetings of the
Board.

The Audit  Committee  met two times during the 1997 fiscal year.  The members of
the  Committee  are  Messrs.  Katz,  Leppo  and  Roberts.  The  Committee  meets
independently   with   the   Director   of  the   Internal   Audit   Department,
representatives  of  Salant's  independent  auditors  and  the  Company's  Chief
Financial  Officer  and  reviews  the  general  scope of the  audit,  the annual
financial  statements  of the  Company and the related  audit  report,  the fees
charged by the  independent  auditors and matters  relating to internal  control
systems.   The  Committee  is  responsible  for  reviewing  and  monitoring  the
performance  of  non-audit  services by Salant's  independent  auditors  and for
recommending to the Board the selection of Salant's independent auditors.

The  Compensation  and Stock Plan  Committees  met eight  times  during the 1997
fiscal  year.  The members of the  Committees  are Messrs.  Leppo,  Schiller and
Yorke.  The Committees are  responsible  for reviewing and  recommending  to the
Board  compensation for officers and certain other management  employees and for
administering and granting awards under the stock plans.

The  Nominating  Committee met once during the 1997 fiscal year.  The members of
the Committee  were Ms. Dibble Jordan and Mr. Roberts and, prior to November 24,
1997,  Mr.  Cogut.  The  Committee is  responsible  for  proposing  nominees for
director for election by the  stockholders  at each Annual Meeting and proposing
candidates to fill any vacancies on the Board.

 The Qualified Plan Committee met twice during the 1997 fiscal year. The members
of the Committee are Ms.  Dibble Jordan and Messrs.  Roberts,  Rodgers and Kahn.
The Committee is responsible for overseeing the  administration of the Company's
pension and savings plans.

Salant Corporation Retirement Plan

Salant sponsors the Salant Corporation  Retirement Plan (the "Retirement Plan"),
a  noncontributory,  final  average pay,  defined  benefit  plan. A  participant
becomes  vested upon  completion  of 5 years of  service.  The  Retirement  Plan
provides pension benefits and benefits to surviving  spouses of participants who
die prior to  retirement.  At normal  retirement,  a member  receives  an annual
pension benefit for life equal to the greater of (a) the sum of 0.65% of his/her
average final annual  compensation  for the highest 5  consecutive  years of the
last 15 years preceding retirement ("final average  compensation") not in excess
of 140% of the average  Social  Security wage base for the 35-year period ending
with   retirement   ("covered   compensation")   plus  1.25%  of  final  average
compensation in excess of covered compensation multiplied by the number of years
of his/her  credited  service not in excess of 35, or (b) $96  multiplied by the
number  of years of  his/her  credited  service,  but not to  exceed  $2,880.  A
participant   may  elect  an  actuarially   reduced  benefit  at  his/her  early
retirement.  The benefit  formula of the Retirement  Plan was amended in October
1991  effective  as of  December  1, 1989.  A  participant's  benefit  under the
Retirement  Plan will never be less than the greater of his/her  accrued benefit
under the terms of such plan prior to (a) the effective date of the amendment or
(b) January 1, 1994.  The benefit  formula  prior to amendment  was 1 1/4 % of a
participant's  average final annual  compensation  for the highest 5 consecutive
years of the last 15 years  preceding  retirement  multiplied  by the  number of
years of  his/her  credited  service  not in  excess  of 30,  minus up to 50% of
primary  social  security,  prorated  for fewer  than 30 years of  service.  The
following  table  shows the annual  pension  benefits  which would be payable to
members of the Retirement Plan at normal  retirement  after specific  periods of
service at selected  salary levels,  assuming the  continuance of the Retirement
Plan.


<PAGE>





<TABLE>
<CAPTION>


      Estimated Annual Pension Payable to Member Upon Retirement at Age 65

                                                              Number of Years of Service (b)
-----------------------------------------------------------------------------------------------------------------

          Average Annual Compensation in                10          20           25          30          35
       Highest Five Consecutive Years of the
       Last 15 Years Preceding Retirement(a)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
<S>     <C>                                             <C>        <C>          <C>         <C>         <C>
        $60,000...................................      $5,038     $10,077      $12,596     $15,115     $17,635
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
          80,000..................................       7,538      15,077       18,846      22,615      26,385
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
        100,000...................................      10,038      20,077       25,096      30,115      35,135
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
        120,000...................................      12,538      25,077       31,346      37,615      43,885
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
        150,000...................................      16,288      32,577       40,721      48,865      57,010
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
        180,000...................................      17,538      35,077       43,846      52,615      61,385
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
        200,000...................................      17,538      35,077       43,846      52,615      61,385
-----------------------------------------------------------------------------------------------------------------

</TABLE>
-------

(a)      Effective from 1989 through 1993, no more than $200,000 of compensation
         (adjusted for inflation) may be recognized for the purpose of computing
         average annual compensation.  Subsequent to 1993, no more than $150,000
         of  compensation  (adjusted for  inflation)  may be recognized for such
         purpose.
(b)      Messrs. Kahn, DiPaolo, Lubin and Randall have, respectively, 4 years, 
12 years, 1 year and 6 years of credited service under the Retirement Plan.

Mr.  DiPaolo was a  participant  in the  Manhattan  Industries,  Inc.  Employees
Benefit Plan (the "Manhattan  Plan"),  which was merged into the Retirement Plan
as of March 1, 1992. His years of service as a participant in the Manhattan Plan
will be  considered  in  determining  his benefits  under the  Retirement  Plan.
Furthermore,  his benefits under the Retirement Plan will never be less than his
accrued  benefits under the terms of the Manhattan Plan determined as of January
31, 1989.  The benefit  formula of the Manhattan Plan was the product of (a) the
sum of (i)  0.50%  of the  participant's  average  annual  compensation  for any
36-consecutive month period of his employment ("final average  compensation") in
excess  of his  covered  compensation  plus  (ii)  1.00%  of his  final  average
compensation in excess of covered  compensation  multiplied by (b) the number of
his years of service.


<PAGE>



ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain  information  with respect to each person
who is known to Salant to be the  "beneficial  owner" (as defined in regulations
of the  Securities and Exchange  Commission) of more than 5% of the  outstanding
shares of Common Stock..
<TABLE>
<CAPTION>

                    Beneficial Owners of More than 5% of the
                    Outstanding Shares of Salant Common Stock

--------------------------------------------------------------------------------------------------------------------
                   Name and Address                              Amount and Nature of               Percent of
                  of Beneficial Owner                            Beneficial Ownership                Class(a)
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                             <C>
Apollo Apparel Partners, L.P...........................               5,924,352                       39.6%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
  c/o Apollo Advisors, L.P.
  Two Manhattanville Road
  Purchase, New York 10577
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
DDJ Capital Management, LLC............................               1,809,100                       12.1%
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
   141 Linden Street, Suite 4
  Wellesley, MA 02181
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------

 -------

--------------------------------------------------------------------------------------------------------------------
(a)      This  percentage is calculated on the basis of 14,964,608  shares  outstanding  as of March 16,  1998,  excluding 
         those shares held by or for the account of Salant.

                        SECURITY OWNERSHIP OF MANAGEMENT

The  following  table sets forth certain  information  as of March 16, 1998 with
respect to the beneficial  ownership of Common Stock by each of the directors of
Salant, the Named Executive Officers and all directors and executive officers of
Salant as a group.
</TABLE>


<PAGE>



                 Beneficial Ownership of Salant Common Stock by
                   Directors and Executive Officers of Salant
<TABLE>
<CAPTION>

   Name of Beneficial Owner                                         Amount and Nature of            Percent of
                                                                   Beneficial Ownership(a)           Class(b)



<S>                                                                               <C>                 <C>
   Nicholas P. DiPaolo........................................                               0          *
   Robert H. Falk.............................................                    5,925,652(c)        39.6%
   Philip A. Franzel..........................................                        1,000(d)          *
   Ann Dibble Jordan..........................................                        2,200(e)          *
   Todd Kahn .................................................                       71,500(f)          *
   Robert Katz................................................                    5,925,952(g)        39.6%
   Harold Leppo...............................................                        2,200(h)          *
   Michael A. Lubin...........................................                               0          *
   Jerald S. Politzer.........................................                      145,000(i)         1.0%
   Richard P. Randall.........................................                               0          *
   Bruce F. Roberts...........................................                        6,200(j)          *
   John S. Rodgers............................................                      433,787(k)         2.9%
   Marvin Schiller............................................                       16,434(l)          *
   Edward M. Yorke............................................                    5,926,552(m)        39.6%
   All directors and executive officers as a group (14                            6,607,773(n)        43.6%
      persons)................................................
_</TABLE>
-----
-------------------------------
-------------------------------------------------------------------------
*        Represents less than one percent.

(a)      For  purposes of this table,  a person or group of persons is deemed to
         have  "beneficial  ownership"  of any shares of Common Stock which such
         person  has the right to  acquire  within 60 days  following  March 16,
         1998.

(b)      As of  March  16,  1998,  there  were  14,964,608  shares  outstanding,
         excluding  those  shares  held by or for the  account  of  Salant.  For
         purposes of computing the  percentage of  outstanding  shares of Common
         Stock held by each person or group of persons named above, any security
         which such  person or persons  has the right to acquire  within 60 days
         following March 16, 1998 is deemed to be outstanding, but is not deemed
         to be outstanding for the purpose of computing the percentage ownership
         of any other person.

(c)      This amount  includes  5,924,352  shares  beneficially  owned by Apollo
         Apparel and 1,300 shares  issuable upon the exercise of stock  options.
         The general  partner of Apollo  Apparel is AIF II,  L.P.,  the managing
         general  partner  of which  is  Apollo  Advisors,  L.P.  Mr.  Falk is a
         principal of Apollo Advisors, L.P. He disclaims beneficial ownership of
         any shares of Common Stock held by Apollo Apparel.

(d)       This amount represents 1,000 shares held directly by Mr. Franzel.

(e) This amount represents 2,200 issuable upon the exercise of stock options.

(f)      This amount includes 4,000 shares held directly and 67,500 shares
         issuable upon the exercise of stock options.

(g)      This amount  includes  5,924,352  shares  beneficially  owned by Apollo
         Apparel and 1,600 shares  issuable upon the exercise of stock  options.
         The general  partner of Apollo  Apparel is AIF II,  L.P.,  the managing
         general  partner  of which is  Apollo  Advisors,  L.P.  Mr.  Katz is an
         officer of Apollo Advisor, L.P.
         He disclaims beneficial ownership of any shares of Common Stock held by
Apollo Apparel.

(h) This amount represents 2,200 issuable upon the exercise of stock options.

(i)      This amount includes 45,000 shares held directly and 100,000 shares
         issuable upon the exercise of stock options.

(j)      This amount includes 4,000 shares held directly and 2,200 shares
         issuable upon the exercise of stock options.

(k)      This amount includes 424,280 shares held directly by Mr. Rodgers, 1,300
         shares  issuable upon the exercise of stock options,  2,284 shares held
         through  the  Company's  Long Term  Savings  and  Investment  Plan (the
         "Savings Plan") and 5,923 shares held by the Margaret S. Vickery Trust,
         of which Mr.  Rodgers is a  co-trustee.  As to the  shares  held by the
         Margaret S. Vickery  Trust,  Mr.  Rodgers  shares voting and investment
         power with a co-trustee. He disclaims beneficial ownership with respect
         to the shares held by the Trust.

(l)      This amount includes 11,234 shares held directly and 5,200 shares 
         issuable upon the exercise of stock options.

(m)      This amount  includes  5,924,352  shares  beneficially  owned by Apollo
         Apparel and 2,200 shares  issuable upon the exercise of stock  options.
         The general  partner of Apollo  Apparel is AIF II,  L.P.,  the managing
         partner of which is Apollo  Advisors,  L.P.  Mr. Yorke is an officer of
         Apollo Advisors,  L.P. He disclaims  beneficial ownership of any shares
         of Common Stock held by Apollo Apparel.

(n)      The 6,607,773  shares held by all  directors and executive  officers of
         Salant as a group counts the  5,924,352  shares held by Apollo  Apparel
         (discussed in notes (c), (g) and (m) above) once. Such 6,607,773 shares
         include (i)  6,419,789  shares held  directly by, or  attributable  to,
         directors  and executive  officers,  (ii) 2,284 shares held through the
         Savings Plan by an executive officer, and (iii) 185,700 shares issuable
         upon the exercise of stock  options held by all directors and executive
         officers  that are  exercisable  on, or may become  exercisable  within
         sixty days of, March 16, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as described below, no transactions have occurred since December 31, 1996
to  which  Salant  was or is to be a party  and in  which  directors,  executive
officers or control persons of Salant, or their associates, had or are to have a
direct or indirect material interest.

Pursuant to an agreement,  dated December 1, 1995 (the "Lubin Delano  Consulting
Agreement"),  the Company has retained Lubin Delano to render certain  financial
advisory and investment  banking  services to the Company for a monthly retainer
of  $8,333.33.  Under the Lubin Delano  Consulting  Agreement,  Lubin Delano may
receive a bonus equal to 100% of its annual  retainer if the  company's  pre-tax
income for the year equals 100% of the pre-tax income  provided in the Company's
annual  business plan.  Actual  pre-tax income in excess of the annual  business
plan  increases  Lubin  Delano's bonus by 20% of its retainer for each full five
percentage point increment of increased pre-tax income for the year. The term of
Lubin Delano's engagement is coterminous with the employment of Michael A. Lubin
by the Company.  Effective  with Mr.  Lubin's  resignation  on July 31, 1997 the
Lubin Delano  Consulting  Agreement  was  terminated,  and pursuant to the Lubin
Agreement, a one-time lump sum payment of $368,149 was made to Lubin Delano (for
a discussion of the Lubin Agreement, see Item 11. Executive Compensation).



<PAGE>


                                     PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

Financial Statements

The following financial statements are included in Item 8 of this Annual Report:

Independent Auditors' Report

Consolidated Statements of Operations

Consolidated Balance Sheets

Consolidated Statements of Shareholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Financial Statement Schedule

The following  Financial Statement Schedule for the years ended January 3, 1998,
December 28, 1996 and December 30, 1995 is filed as part of this Annual Report:

Schedule II - Valuation and Qualifying Accounts and Reserves

All other  schedules  have been  omitted  because they are  inapplicable  or not
required,  or the information is included elsewhere in the financial  statements
or notes thereto.


<PAGE>



                       SALANT CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

COLUMN A                               COLUMN B              COLUMN C                  COLUMN D               COLUMN E

                                                        (1)             (2)
                                     Balance at     Charged to         Charged to                               Balance
                                      Beginning     Costs and      Other Accounts      Deductions               at End
Description                          of Period       Expenses     -- Describe         -- Describe              of Period

YEAR ENDED JANUARY 3, 1998:

Accounts receivable allowance
<S>                                      <C>              <C>              <C>           <C>                      <C>
  for doubtful accounts                  $2,806           $195             $--          $907 (A)                 $2,094

Reserve for business restructuring       $2,969         $2,066             $--       $ 2,271 (B)                 $2,764

YEAR ENDED DECEMBER 28, 1996:

Accounts receivable allowance
  for doubtful accounts                  $3,007         $(112)             $--           $89 (A)                 $2,806

Reserve for business restructuring       $1,569        $11,730             $--       $10,330 (B)                 $2,969

YEAR ENDED DECEMBER 30, 1995:

Accounts receivable - allowance
  for doubtful accounts                  $2,565         $1,510            $  --        $1,068 (A)                 $3,007

Reserve for business restructuring    $    --           $3,550            $  --        $1,981 (B)                 $1,569
</TABLE>

NOTES:

(A) Uncollectible  accounts written off, less recoveries.  (B) Costs incurred in
plant closings and business restructuring.


<PAGE>


Reports on Form 8-K

The  Company  did not file any  reports  on Form 8-K during  the  quarter  ended
January 3, 1998.


<PAGE>


Exhibits
<TABLE>
<CAPTION>

                                                                 Incorporation
Number         Description                                       By Reference To

<S>            <C>                                               <C>
2.1            Third Amended Disclosure                          Exhibit 1 to
               Statement of Salant                               Form 8-A dated
               Corporation, and Denton                           July 28, 1993.
               Mills, Inc., dated
               May 12,1993.

2.2            Third Amended Joint                               Included as
               Chapter 11 Plan of                                Exhibit D-1
               Reorganization of                                 to Exhibit 1
               Salant Corporation                                to Form 8-A
               and Denton Mills, Inc.                            dated July 28, 1993.

3.1            Form of Amended and                               Included as Exhibit
               Restated Certificate of                           D-1 to Exhibit 2
               Incorporation of Salant                           to Form 8-A dated
               Corporation.                                      July 28, 1993.

3.2            Form of Bylaws, as amended, of
               Salant Corporation, effective
               September 21, 1994.

4.1            Rights Agreement dated as of                      Exhibit 1 to Current Report
               December 8, 1987 between Salant                   on Form 8-K dated December 8, 1987.
               Corporation and The Chase
               Manhattan Bank, N.A.,
               as Rights Agent.  The Rights
               Agreement includes as Exhibit B the
               form of Right Certificate.

4.2            Form of First Amendment                           Exhibit 3 to
               to the Rights Agreement                           Amendment No. 1 to
               between Salant Corporation                        Form 8-A dated
               and Mellon Securities.                            July 29, 1993.

4.3            Indenture, dated as of                            Exhibit 10.34 to
               September 20, 1993, between Salant                Quarterly Report
               Corporation and Bankers                           on Form 10-Q for
               Trust Company, as trustee,                        the quarter ended
               for the 10-1/2% Senior                            October 2, 1993.
               Secured Notes due
               December 31, 1998.

10.1           Revolving Credit,                                 Exhibit 10.33 to
               Factoring and Security                            Quarterly Report
               Agreement dated September 29, 1993,               on Form 10-Q for
               between Salant Corporation                        the quarter ended
               and The CIT Group/Commercial                      October 2, 1993.
               Services, Inc.

10.2           Salant Corporation 1987 Stock Plan.               Exhibit 19.2 to Annual Report on
                                                                 Form 10-K for fiscal year 1987.

10.3           Salant Corporation 1987 Stock Plan                Exhibit 10.12 to Form S-2
               Agreement, dated as of June 13,                   Registration Statement filed
               1988, between Nicholas P. DiPaolo                 June 17, 1988.
               and Salant Corporation.

10.4           Salant Corporation 1988 Stock Plan.               Exhibit 19.3 to Annual Report on
                                                                 Form 10-K for fiscal year 1988.


10.5           First Amendment, effective                        Exhibit 19.1 to Quarterly Report
               as of July 25, 1989, to the Salant                on Form 10-Q for the quarter
               Corporation 1988 Stock Plan.                      ended September 30, 1989.

10.6           Form of Salant Corporation 1988                   Exhibit 19.7 to Annual Report on
               Stock Plan Employee Agreement.                    Form 10-K for fiscal year 1988.

10.7           Form of Salant Corporation                        Exhibit 19.8 to
               1988 Stock Plan Director                          Annual Report on
               Agreement.                                        Form 10-K for fiscal
                                                                 year 1988.

10.8           License Agreement, dated                          Exhibit 19.1 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for fiscal year 1992.
               Perry Ellis International Inc.
               and Salant Corporation regarding
               men's sportswear.

10.9           License Agreement, dated                          Exhibit 19.2 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for
               Perry Ellis International Inc.                    fiscal year 1992.
               and Salant Corporation regarding
               men's dress shirts.

10.10          Employment Agreement, dated                       Exhibit 10.36 to
               as of September 20, 1993, between                 Quarterly Report on
               Nicholas P. DiPaolo and                           Form 10-Q for the
               Salant Corporation. *                             quarter ended October 2, 1993.

10.11          Employment Agreement, dated                       Exhibit 10.38 to
               as of July 30, 1993, between                      Quarterly Report on
               Richard P. Randall and                            Form 10-Q for the
               Salant Corporation. *                             quarter ended October 2, 1993.

10.12          Agreement, dated as of                            Exhibit 10.33 to Annual Report on
               September 22, 1993, between Nicholas              Form 10-K for Fiscal Year 1993.
               P. DiPaolo and Salant Corporation. *

10.13          Forms of Salant Corporation 1993                  Exhibit 10.34 to Annual
               Stock Plan Directors' Option                      Report on Form
               Agreement. *                                      10-K for Fiscal Year 1993.

10.14          Letter Agreement, dated as of                     Exhibit 10.45 to
               August 24, 1994, amending the                     Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated                         quarter ended October 1, 1994.
               September 20, 1993,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.15          Letter Agreement, dated                           Exhibit 10.47 to
               October 25, 1994, amending the                    Quarterly Report on
               Employment Agreement, dated                       Form 10-Q for the
               July 30, 1993, between Richard                    quarter ended October 1, 1994.
               Randall and Salant Corporation. *

10.16          Third Amendment to Credit Agreement,              Exhibit 10.48 to Current Report on
               dated February 28, 1995, to the                   Form 8-K, dated March 2, 1995.
               Revolving Credit, Factoring and
               Security Agreement, dated
               September 20, 1993, as amended,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.17          Salant Corporation Retirement Plan,               Exhibit 10.23 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.18          Salant Corporation Pension Plan,                  Exhibit 10.24 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.19          Salant Corporation Long Term Savings              Exhibit 10.25 to Annual Report on
               and Investment Plan as amended                    Form 10-K for Fiscal Year 1994.
               and restated. *

10.20          Letter Agreement, dated                           Exhibit 10.26 to Annual Report on
               February 15, 1995, amending the                   Form 10-K for Fiscal Year 1994.
               Employment Agreement, dated
               July 30, 1993, between Richard
               Randall and Salant Corporation. *

10.21          Fourth Amendment to Credit                        Exhibit 10.27 to
               Agreement, dated as of March 1,                   Quarterly Report
               1995, to the Revolving Credit,                    on Form 10-Q for
               Factoring and Security Agreement,                 the quarter
               dated as of September 20, 1993,                   ended April 1,
               as amended, between Salant                        1995.
               Corporation and The CIT Group/
               Commercial Services, Inc.

10.22          Fifth Amendment to Credit                         Exhibit 10.29
               Agreement, dated as of                            to Quarterly
               June 28, 1995, to the                             Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.23          Sixth Amendment to Credit                         Exhibit 10.30
               Agreement, dated as of                            to Quarterly
               August 15, 1995, to the                           Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.24          Letter from The CIT Group/                        Exhibit 10.31
               Commercial Services, Inc.,                        to Quarterly
               dated as of July 11, 1995,                        Report on
               regarding the waiver of a                         Form l0-Q for
               default.                                          the quarter
                                                                 ended July 1,
                                                                 1995.

10.25          Letter Agreement between                          Exhibit 10.31
               Salant Corporation and The                        to Quarterly
               CIT Group/Commercial Services,                    Report on
               Inc. dated as of July 11, 1995,                   Form l0-Q for
               regarding the Seasonal Overadvance                the quarter
               Subfacility.                                      ended July 1,
                                                                 1995.

10.26          Letter Agreement, dated as of                     Exhibit 10.33 to
               August 31, 1995, amending the                     Quarterly Report
               Employment Agreement, dated                       on Form l0-Q for
               September 20, 1993, between                       the quarter
               Nicholas P. DiPaolo and                           ended September
               Salant Corporation. *                             30, 1995.

10.27          Letter Agreement, dated                           Exhibit 10.33 to
               December 1, 1995, between                         Annual Report on
               Lubin, Delano & Company and                       Form 10-K for
               Salant Corporation.                               fiscal year 1995.

10.28          Seventh Amendment to Credit                       Exhibit 10.34 to
               Agreement, dated as of                            Annual Report on
               March 27, 1996, to the                            Form 10-K for
               Revolving Credit, Factoring                       fiscal year 1995.
               and Security Agreement,
               dated as of September 20,
               1993, as amended, between
               Salant Corporation and The
               CIT Group/Commercial Services,
               Inc.

10.29          First Amendment to the Salant                     Exhibit 10.35 to
               Corporation Retirement Plan, dated                Quarterly Report on
               as of January 31, 1996.                           Form 10-Q for the
                                                                 quarter ended
                                                                 March 30, 1996.

10.30          First Amendment to the Salant                     Exhibit 10.36 to
               Corporation Long Term Savings and                 Quarterly Report on
               Investment Plan, effective as of                  Form 10-Q for the
               January 1, 1994.                                  quarter ended
                                                                 March 30, 1996.

10.31          Eighth Amendment to Credit Agreement,             Exhibit 10.37 to
               dated as of June 1, 1996, to the                  Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.32          Ninth Amendment to Credit Agreement,              Exhibit 10.38 to
               dated as of August 16,1996, to the                Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.33          Employment Agreement, dated as                    Exhibit 10.39 to Annual Report on
               of January 1, 1997, between                       Form 10-K for Fiscal Year 1996.
               Nicholas P. DiPaolo and
               Salant Corporation. *

10.34          Salant Corporation 1996 Stock Plan                Exhibit 10.40 to Annual Report on
                         Form 10-K for Fiscal Year 1996.

10.35          Tenth Amendment to Credit Agreement,              Exhibit 10.41 to Annual Report on
               dated as of February 20, 1997, to                 Form 10-K for Fiscal Year 1996.
               the Revolving Credit, Factoring and Security Agreement,  dated as
               of September 20, 1993, as amended, between Salant Corporation and
               The CIT Group/Commercial Services, Inc.

10.36          Employment Agreement, dated as                    Exhibit 10.42 to Annual Report on
               of February 11, 1997, between                     Form 10-K for Fiscal Year 1996.
               Michael A. Lubin and
               Salant Corporation. *

10.37          Employment Agreement, dated as                    Exhibit 10.43 to Annual Report on
               of March 24, 1997, between                        Form 10-K for Fiscal Year 1996.
               Jerald S. Politzer and
               Salant Corporation. *

10.38          Employment Agreement, dated as of                 Exhibit 10.44 to Quarterly Report on
               May 1, 1997, between Todd Kahn and                Form 10-Q for the quarter ended
               Salant Corporation.                               June 28, 1997.

10.39          Employment Agreement, dated as of                 Exhibit 10.45 to Quarterly Report on
               August 18, 1997 between Philip A.                 Form 10-Q for the quarter ended
               Franzel and Salant Corporation.                   June 28, 1997.

10.40          Eleventh Amendment to Credit                      Exhibit 10.46 to Quarterly Report on
               Agreement, dated as of                            Form 10-Q for the quarter ended
               August 8, 1997, to the Revolving                  June 28, 1997.
               Credit, Factoring and Security
               Agreement, dated as of
               September 20, 1993, as amended,
               between Salant Corporation and
               The CIT Group/Commercial Services, Inc.

10.41          Letter Agreement, dated as of                     Exhibit 10.47 to Quarterly Report on
               July 18, 1997, between                            Form 10-Q for the quarter ended
               Michael A. Lubin,                                 June 28, 1997.
               Lubin Delano & Company and Salant
               Corporation.

10.42          Letter Agreement, dated                           Exhibit 10.48 to Current Report on
               March 2, 1998, by and among Salant                Form 8-K dated March 4, 1998.
               Corporation, Magten Asset Management
               Corp., as agent on behalf of
               certain of its accounts, and Apollo
               Apparel Partners, L.P.

10.43          Twelfth Amendment and Forbearance                 Exhibit 10.49 to Current Report on
               Agreement to Credit Agreement, dated              Form 8-K dated March 4, 1998.
               as of March 2, 1998, by and between
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

21             List of Subsidiaries of the Company

27             Financial Data Schedule
</TABLE>

* constitutes a management contract or compensatory plan or arrangement.


<PAGE>


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.

                                                       SALANT CORPORATION

Date:   March 31, 1998                           By:/s/   Philip A. Franzel
                                                 Executive Vice President and
                                                     Chief Financial 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 indicated and on March 31, 1998.

         Signature                         Title

         /s/ Jerald S. Politzer            Chairman of the Board,
         Jerald S. Politzer              President and Chief Executive Officer
                                        (Principal Executive Officer); Director

         /s/ Philip A. Franzel            Executive Vice President
         Philip A. Franzel               and Chief Financial Officer
                                   (Principal Financial and Accounting Officer)



         /s/ Robert Falk                           /s/ Bruce F. Roberts
         Robert Falk       Director                  Bruce F. Roberts Director

         /s/ Ann Dibble Jordan                     /s/ John S. Rodgers
         Ann Dibble Jordan  Director                John S. Rodgers   Director

         /s/ Robert Katz                           /s/ Marvin Schiller
         Robert Katz        Director                   Marvin Schiller Director

         /s/ Harold Leppo                         /s/ Edward M. Yorke
         Harold Leppo       Director                   Edward M. Yorke Director


<PAGE>




                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549






                                    EXHIBITS


                                       to


                                    FORM 10-K


                    FOR THE FISCAL YEAR ENDED JANUARY 3, 1998


<PAGE>


<TABLE>
<CAPTION>
                               SALANT CORPORATION
                                  EXHIBIT INDEX

                                                                 Incorporation
Number         Description                                       By Reference To


<S>            <C>                                               <C>
2.1            Third Amended Disclosure                          Exhibit 1 to
               Statement of Salant                               Form 8-A dated
               Corporation, and Denton                           July 28, 1993.
               Mills, Inc., dated
               May 12,1993.

2.2            Third Amended Joint                               Included as
               Chapter 11 Plan of                                Exhibit D-1
               Reorganization of                                 to Exhibit 1
               Salant Corporation                                to Form 8-A
               and Denton Mills, Inc.                            dated July 28, 1993.

3.1            Form of Amended and                               Included as Exhibit
               Restated Certificate of                           D-1 to Exhibit 2
               Incorporation of Salant                           to Form 8-A dated
               Corporation.                                      July 28, 1993.

3.2            Form of Bylaws, as amended, of
               Salant Corporation, effective
               September 21, 1994.

4.1            Rights Agreement dated as of                      Exhibit 1 to Current Report
               December 8, 1987 between Salant                   on Form 8-K dated December 8, 1987.
               Corporation and The Chase
               Manhattan Bank, N.A.,
               as Rights Agent.  The Rights
               Agreement includes as Exhibit B the
               form of Right Certificate.

4.2            Form of First Amendment                           Exhibit 3 to
               to the Rights Agreement                           Amendment No. 1 to
               between Salant Corporation                        Form 8-A dated
               and Mellon Securities.                            July 29, 1993.

4.3            Indenture, dated as of                            Exhibit 10.34 to
               September 20, 1993, between Salant                Quarterly Report
               Corporation and Bankers                           on Form 10-Q for
               Trust Company, as trustee,                        the quarter ended
               for the 10-1/2% Senior                            October 2, 1993.
               Secured Notes due
               December 31, 1998.

10.1           Revolving Credit,                                 Exhibit 10.33 to
               Factoring and Security                            Quarterly Report
               Agreement dated September 29, 1993,               on Form 10-Q for
               between Salant Corporation                        the quarter ended
               and The CIT Group/Commercial                      October 2, 1993.
               Services, Inc.

10.2           Salant Corporation 1987 Stock Plan.               Exhibit 19.2 to Annual Report on
                                                                 Form 10-K for fiscal year 1987.

10.3           Salant Corporation 1987 Stock Plan                Exhibit 10.12 to Form S-2
               Agreement, dated as of June 13,                   Registration Statement filed
               1988, between Nicholas P. DiPaolo                 June 17, 1988.
               and Salant Corporation.

10.4           Salant Corporation 1988 Stock Plan.               Exhibit 19.3 to Annual Report on
                                                                 Form 10-K for fiscal year 1988.


10.5           First Amendment, effective                        Exhibit 19.1 to Quarterly Report
               as of July 25, 1989, to the Salant                on Form 10-Q for the quarter
               Corporation 1988 Stock Plan.                      ended September 30, 1989.

10.6           Form of Salant Corporation 1988                   Exhibit 19.7 to Annual Report on
               Stock Plan Employee Agreement.                    Form 10-K for fiscal year 1988.

10.7           Form of Salant Corporation                        Exhibit 19.8 to
               1988 Stock Plan Director                          Annual Report on
               Agreement.                                        Form 10-K for fiscal
                                                                 year 1988.

10.8           License Agreement, dated                          Exhibit 19.1 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for fiscal year 1992.
               Perry Ellis International Inc.
               and Salant Corporation regarding
               men's sportswear.

10.9           License Agreement, dated                          Exhibit 19.2 to Annual Report
               January 1, 1991, by and between                   on Form 10-K for
               Perry Ellis International Inc.                    fiscal year 1992.
               and Salant Corporation regarding
               men's dress shirts.

10.10          Employment Agreement, dated                       Exhibit 10.36 to
               as of September 20, 1993, between                 Quarterly Report on
               Nicholas P. DiPaolo and                           Form 10-Q for the
               Salant Corporation. *                             quarter ended October 2, 1993.

10.11          Employment Agreement, dated                       Exhibit 10.38 to
               as of July 30, 1993, between                      Quarterly Report on
               Richard P. Randall and                            Form 10-Q for the
               Salant Corporation. *                             quarter ended October 2, 1993.

10.12          Agreement, dated as of                            Exhibit 10.33 to Annual Report on
               September 22, 1993, between Nicholas              Form 10-K for Fiscal Year 1993.
               P. DiPaolo and Salant Corporation. *

10.13          Forms of Salant Corporation 1993                  Exhibit 10.34 to Annual
               Stock Plan Directors' Option                      Report on Form
               Agreement. *                                      10-K for Fiscal Year 1993.

10.14          Letter Agreement, dated as of                     Exhibit 10.45 to
               August 24, 1994, amending the                     Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated                         quarter ended October 1, 1994.
               September 20, 1993,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.15          Letter Agreement, dated                           Exhibit 10.47 to
               October 25, 1994, amending the                    Quarterly Report on
               Employment Agreement, dated                       Form 10-Q for the
               July 30, 1993, between Richard                    quarter ended October 1, 1994.
               Randall and Salant Corporation. *

10.16          Third Amendment to Credit Agreement,              Exhibit 10.48 to Current Report on
               dated February 28, 1995, to the                   Form 8-K, dated March 2, 1995.
               Revolving Credit, Factoring and
               Security Agreement, dated
               September 20, 1993, as amended,
               between The CIT Group/Commercial
               Services, Inc. and Salant Corporation.

10.17          Salant Corporation Retirement Plan,               Exhibit 10.23 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.18          Salant Corporation Pension Plan,                  Exhibit 10.24 to Annual Report on
               as amended and restated. *                        Form 10-K for Fiscal Year 1994.

10.19          Salant Corporation Long Term Savings              Exhibit 10.25 to Annual Report on
               and Investment Plan as amended                    Form 10-K for Fiscal Year 1994.
               and restated. *

10.20          Letter Agreement, dated                           Exhibit 10.26 to Annual Report on
               February 15, 1995, amending the                   Form 10-K for Fiscal Year 1994.
               Employment Agreement, dated
               July 30, 1993, between Richard
               Randall and Salant Corporation. *

10.21          Fourth Amendment to Credit                        Exhibit 10.27 to
               Agreement, dated as of March 1,                   Quarterly Report
               1995, to the Revolving Credit,                    on Form 10-Q for
               Factoring and Security Agreement,                 the quarter
               dated as of September 20, 1993,                   ended April 1,
               as amended, between Salant                        1995.
               Corporation and The CIT Group/
               Commercial Services, Inc.

10.22          Fifth Amendment to Credit                         Exhibit 10.29
               Agreement, dated as of                            to Quarterly
               June 28, 1995, to the                             Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.23          Sixth Amendment to Credit                         Exhibit 10.30
               Agreement, dated as of                            to Quarterly
               August 15, 1995, to the                           Report on
               Revolving Credit, Factoring                       Form l0-Q for
               and Security Agreement,                           the quarter
               dated as of September 20,                         ended July 1,
               1993, as amended, between                         1995.
               Salant Corporation and The
               CIT Group/Commercial Services, Inc.

10.24          Letter from The CIT Group/                        Exhibit 10.31
               Commercial Services, Inc.,                        to Quarterly
               dated as of July 11, 1995,                        Report on
               regarding the waiver of a                         Form l0-Q for
               default.                                          the quarter
                                                                 ended July 1,
                                                                 1995.

10.25          Letter Agreement between                          Exhibit 10.31
               Salant Corporation and The                        to Quarterly
               CIT Group/Commercial Services,                    Report on
               Inc. dated as of July 11, 1995,                   Form l0-Q for
               regarding the Seasonal Overadvance                the quarter
               Subfacility.                                      ended July 1,
                                                                 1995.

10.26          Letter Agreement, dated as of                     Exhibit 10.33 to
               August 31, 1995, amending the                     Quarterly Report
               Employment Agreement, dated                       on Form l0-Q for
               September 20, 1993, between                       the quarter
               Nicholas P. DiPaolo and                           ended September
               Salant Corporation. *                             30, 1995.

10.27          Letter Agreement, dated                           Exhibit 10.33 to
               December 1, 1995, between                         Annual Report on
               Lubin, Delano & Company and                       Form 10-K for
               Salant Corporation.                               fiscal year 1995.

10.28          Seventh Amendment to Credit                       Exhibit 10.34 to
               Agreement, dated as of                            Annual Report on
               March 27, 1996, to the                            Form 10-K for
               Revolving Credit, Factoring                       fiscal year 1995.
               and Security Agreement,
               dated as of September 20,
               1993, as amended, between
               Salant Corporation and The
               CIT Group/Commercial Services,
               Inc.

10.29          First Amendment to the Salant                     Exhibit 10.35 to
               Corporation Retirement Plan, dated                Quarterly Report on
               as of January 31, 1996.                           Form 10-Q for the
                                                                 quarter ended
                                                                 March 30, 1996.

10.30          First Amendment to the Salant                     Exhibit 10.36 to
               Corporation Long Term Savings and                 Quarterly Report on
               Investment Plan, effective as of                  Form 10-Q for the
               January 1, 1994.                                  quarter ended
                                                                 March 30, 1996.

10.31          Eighth Amendment to Credit Agreement,             Exhibit 10.37 to
               dated as of June 1, 1996, to the                  Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.32          Ninth Amendment to Credit Agreement,              Exhibit 10.38 to
               dated as of August 16,1996, to the                Quarterly Report on
               Revolving Credit, Factoring and                   Form 10-Q for the
               Security Agreement, dated as of                   quarter ended
               September 20, 1993, as amended,                   June 29, 1996.
               between Salant Corporation and
               The CIT Group/Commercial Services,
               Inc.

10.33          Employment Agreement, dated as                    Exhibit 10.39 to Annual Report on
               of January 1, 1997, between                       Form 10-K for Fiscal Year 1996.
               Nicholas P. DiPaolo and
               Salant Corporation. *

10.34          Salant Corporation 1996 Stock Plan                Exhibit 10.40 to Annual Report on
                         Form 10-K for Fiscal Year 1996.

10.35          Tenth Amendment to Credit Agreement,              Exhibit 10.41 to Annual Report on
               dated as of February 20, 1997, to                 Form 10-K for Fiscal Year 1996.
               the Revolving Credit, Factoring and Security Agreement,  dated as
               of September 20, 1993, as amended, between Salant Corporation and
               The CIT Group/Commercial Services, Inc.

10.36          Employment Agreement, dated as                    Exhibit 10.42 to Annual Report on
               of February 11, 1997, between                     Form 10-K for Fiscal Year 1996.
               Michael A. Lubin and
               Salant Corporation. *

10.37          Employment Agreement, dated as                    Exhibit 10.43 to Annual Report on
               of March 24, 1997, between                        Form 10-K for Fiscal Year 1996.
               Jerald S. Politzer and
               Salant Corporation. *

10.38          Employment Agreement, dated as of                 Exhibit 10.44 to Quarterly Report on
               May 1, 1997, between Todd Kahn and                Form 10-Q for the quarter ended
               Salant Corporation.                               June 28, 1997.

10.39          Employment Agreement, dated as of                 Exhibit 10.45 to Quarterly Report on
               August 18, 1997 between Philip A.                 Form 10-Q for the quarter ended
               Franzel and Salant Corporation.                   June 28, 1997.

10.40          Eleventh Amendment to Credit                      Exhibit 10.46 to Quarterly Report on
               Agreement, dated as of                            Form 10-Q for the quarter ended
               August 8, 1997, to the Revolving                  June 28, 1997.
               Credit, Factoring and Security
               Agreement, dated as of
               September 20, 1993, as amended,
               between Salant Corporation and
               The CIT Group/Commercial Services, Inc.

10.41          Letter Agreement, dated as of                     Exhibit 10.47 to Quarterly Report on
               July 18, 1997, between                            Form 10-Q for the quarter ended
               Michael A. Lubin,                                 June 28, 1997.
               Lubin Delano & Company and Salant
               Corporation.

10.42          Letter Agreement, dated                           Exhibit 10.48 to Current Report on
               March 2, 1998, by and among Salant                Form 8-K dated March 4, 1998.
               Corporation, Magten Asset Management
               Corp., as agent on behalf of
               certain of its accounts, and Apollo
               Apparel Partners, L.P.

10.43          Twelfth Amendment and Forbearance                 Exhibit 10.49 to Current Report on
               Agreement to Credit Agreement, dated              Form 8-K dated March 4, 1998.
               as of March 2, 1998, by and between
               Salant Corporation and The CIT
               Group/Commercial Services, Inc.

21             List of Subsidiaries of the Company

27             Financial Data Schedule
</TABLE>

* constitutes a management contract or compensatory plan or arrangement.


<PAGE>


EXHIBIT 21


              SUBSIDIARIES OF THE REGISTRANT


Birdhill, Limited, a Hong Kong corporation

Carrizo Manufacturing Co., S.A. de C.V., a Mexican corporation

Clantexport, Inc., a New York corporation

Denton Mills, Inc., a Delaware corporation

JJ. Farmer Clothing, Inc., a Canadian corporation

Frost Bros. Enterprises, Inc., a Texas corporation

Manhattan Industries, Inc., a Delaware corporation

Manhattan Industries, Inc., a New York corporation

Manhattan Industries (Far East) Limited, a Hong Kong corporation

Maquiladora Sur S.A. de C.V., a Mexican corporation

Salant Canada, Inc., a Canadian corporation

SLT Sourcing, Inc., a New York corporation

Vera Licensing, Inc., a Nevada corporation

Vera Linen Manufacturing, Inc., a Delaware corporation

Salant Caribbean, S.A., a Guatemalan Corporation