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 December 28, 1996

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 24, 1997, there were outstanding  14,780,082  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
$33,930,555. 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.

Documents  incorporated by reference:  The definitive  Proxy Statement of Salant
Corporation  relating to the 1997 Annual Meeting of Stockholders is incorporated
by reference in Part III hereof.

<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"), 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) other products,  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 Vera Scarf
division.)

Men's Apparel.  In 1996,  Salant  substantially  restructured  its men's apparel
business  to focus on those  businesses  that the  Company  believes  offer  the
opportunity for greater  profitability  by either (i) providing its customer and
the retail consumer with products under well-known brands or designer labels, or
(ii)  developing  private  label  programs  that  capitalize  on  the  Company's
sourcing,   merchandising  and  marketing   expertise.   As  a  result  of  this
restructuring,  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 Texas Apparel  division and all pant and 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 Texas  Apparel  division  manufactures  men's and
boys' jeans,  principally under the Sears,  Roebuck & Co. ("Sears") CANYON RIVER
BLUES trademark.  The Salant Menswear Group also markets dress shirts, primarily
under the JOHN  HENRY and  MANHATTAN  trademarks,  and pants  under the  THOMSON
trademark.  Commencing in 1997, the Salant Menswear Group will manufacture men's
casual  slacks under Sears'  CANYON RIVER BLUES KHAKIS  trademark.  Prior to the
restructuring,  the  Company  marketed  sportswear  under  the  JJ.  FARMER  and
MANHATTAN trademarks.  As a result of the restructuring,  the Company (i) ceased
marketing  sportswear  under  the JJ.  FARMER  label and  determined  to sell or
license the  trademark  and (ii)  discontinued  marketing  sportswear  under the
MANHATTAN trademark.

Children's  Sleepwear  and  Underwear.  The  children's  sleepwear and underwear
business is conducted by the Company's 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 DISNEY and WARNER BROS.,
among others. The Children's Group also markets pajamas under the OSHKOSH B'GOSH
trademark, and sleepwear and underwear under the JOE BOXER trademark. Commencing
in the fall of 1997, the Children's  Group will begin marketing boys' sportswear
under the JOE BOXER trademark.

Other Businesses. The other businesses of the Company consist of (i) the women's
junior apparel  business,  conducted by the Company's Made in The Shade division
("Made In the Shade"),  and (ii) a chain of factory  outlet  stores (the "Stores
division"),  through which the Company sells its own products and those of other
apparel manufacturers.

Principal  Product Lines.  The following table sets forth, for fiscal years 1994
through 1996,  the  percentage of the Company's  total net sales  contributed by
each category of product:
<TABLE>
<CAPTION>

                                                                                            Fiscal Year
                                                                           1994            1995             1996

<S>                                                                         <C>             <C>              <C>
Men's Apparel                                                               82%             85%              81%
Children's Sleepwear and Underwear                                           8%              8%              10%
Other Businesses                                                            10%              7%               9%
</TABLE>

For more detailed  information  regarding the Company's product categories,  see
Note 10 to the Consolidated Financial Statements.

In 1996,  approximately  13% of the  Company's  net  sales  were  made to Sears.
Approximately  11% of the  Company's  net sales in 1996  were made to  Federated
Department  Stores,  Inc.  ("Federated"),  which  includes all 1996 net sales to
Macy's  Department Stores  ("Macy's"),  which was acquired by Federated in 1994,
and the Broadway Stores, Inc.  ("Broadway"),  which was acquired by Federated in
February    1996.    In   1995   and   1994,    net   sales   to   a    combined
Federated/Macy's/Broadway  would have represented  approximately  12% and 15% of
the Company's net sales,  respectively.  In each of 1995 and 1994, approximately
11% of the  Company's  net sales  were made to TJX  Corporation  ("TJX"),  which
includes  all 1995 and 1994 net  sales  to  Marshall's  Corporation,  which  was
acquired by TJX in February 1996.

In 1995,  approximately  13% of the  Children's  Group's  net sales were made to
Dayton Hudson Corporation.  In 1996,  approximately 27% and 22% of the net sales
of Other  Businesses  were made to  K-Mart  Corporation  and JC Penney  Company,
respectively.  In 1995, net sales to JC Penney  represented 19% of the net sales
of the other businesses segment.

No other customer accounted for more than 10% of the net sales of the Company or
any of its business segments during 1994, 1995 or 1996.

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 71% of the Company's net sales for 1996 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 1996 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



<C>                                                                 <S>
101 DALMATIANS *.................................................   Children's sleepwear
BATMAN *.........................................................   Children's sleepwear
DISNEY Characters *..............................................   Children's sleepwear and underwear
DR. DENTON.......................................................   Children's sleepwear and underwear
GANT *...........................................................   Men's dress shirts, neckwear, belts and suspenders
JJ. FARMER.......................................................   Men's and women's sportswear
JOE BOXER *......................................................   Children's sleepwear and underwear
JOHN HENRY.......................................................   Men's dress shirts, neckwear, belts and suspenders; men's jeans
MADE IN THE SHADE................................................   Women's junior sportswear
MANHATTAN........................................................   Men's dress shirts and sportswear
OSH KOSH 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
SPACE JAM *......................................................   Children's sleepwear
THOMSON..........................................................   Men's casual and dress slacks
UNICEF *.........................................................   Men's neckwear
</TABLE>

During 1996,  approximately  35% 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 11% of the Company's net sales during 1996. No other line of
products accounted for more than 10% of the Company's net sales during 1996.

     Trademarks Owned by the Company and Related Licensing  Income.  The Company
owns the DR. DENTON, JJ. FARMER, JOHN HENRY, LADY MANHATTAN,  MADE IN THE SHADE,
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 consumer  recognition of and interest in
its trademarks by licensing various of those trademarks to others. As of the end
of 1996, licenses were outstanding to approximately 21 licensees to make or sell
apparel  products and accessories in the United States and to 34 licensees in 31
other countries under the MANHATTAN,  LADY  MANHATTAN,  JOHN HENRY,  THOMSON and
VERA trademarks,  which produced royalty income of approximately $6.2 million in
1996.  Products  under  license  include  men's  belts,  dress  shirts,  gloves,
handkerchiefs,   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  101  DALMATIANS),  GANT,  JOE  BOXER,  OSH KOSH  B'GOSH,
PEANUTS,  SAVE  THE  CHILDREN,   UNICEF  and  certain  WARNER  BROS.  characters
(including  BATMAN and SPACE JAM),  for  various  categories  of products  under
license agreements expiring between 1997 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 1996, approximately 17% 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  81% of its  domestic-made  products  and 30% of its  foreign-made
products;  the balance in each case was  attributable to  unaffiliated  contract
manufacturers.  In 1996,  approximately 44% of the Company's foreign  production
was manufactured in Mexico,  approximately 12% was manufactured in Guatemala and
approximately 10% 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  1996.  The  Company  has not  engaged in  financial
activities  through the use of  derivatives  or  otherwise  to hedge or diminish
currency risks or fluctuations.

Employees.  As of the end of 1996,  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  factory  outlet  stores.   Substantially  all  of  the  manufacturing
employees are covered by collective  bargaining  agreements with various unions,
which expire between 1997 and 2000. The Company believes that its relations with
its employees are satisfactory.

Management.  On March 7, 1997,  the Company  announced that Nicholas P. DiPaolo,
Chairman and Chief Executive Officer, had notified the Board of Directors of his
intent to leave the Company in 1997.  On April 1, 1997,  Jerald S. Politzer will
join the  Company  as Chief  Executive  Officer  and a  member  of the  Board of
Directors.

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.

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.

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.

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.

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 six domestic  manufacturing  facilities located in Alabama,  Georgia (2), New
York, Tennessee and Texas, four manufacturing  facilities located in Mexico, and
six  distribution  centers located in Georgia,  New York, South Carolina (2) and
Texas (2). At the end of 1996, the Company was in the process of closing the two
manufacturing  facilities and one distribution  facility in Georgia. The Company
owns  approximately  1,279,000 square feet of space devoted to manufacturing and
distribution  and leases  approximately  554,000 square feet of such space.  The
Company owns  approximately  34,000 square feet of combined  office,  design and
showroom space and leases  approximately  163,000 square feet of such space. The
Children's  Group has  exclusive use of the  Tennessee  manufacturing  facility,
shares  one of the  Mexican  manufacturing  facilities  with the  Texas  Apparel
division and has its distribution  center in a building in Texas which it shares
with the Texas Apparel  division.  As of the end of 1996,  the Company's  Stores
division  operated 65 factory outlet stores,  comprising  approximately  204,000
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  December  28, 1996  (approximately  39 months),  the Company  made cash
payments of $9.4 million,  issued $111.9  million of new 10-1/2%  senior secured
notes,  and issued 11.0 million  shares of common stock in settlement of certain
undisputed and disputed claims in the chapter 11 proceedings. Salant anticipates
that an additional $4.2 million in cash and an additional 325 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 or results of
operations.



<PAGE>


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

        (a) The annual meeting of the Company's shareholders was held on May 14,
1996 (the "Annual  Meeting").  Subsequent to that date, there have been no other
matters submitted to a vote of the Company's shareholders.

        (b) At the Annual  Meeting,  the  shareholders  approved the election of
four Directors for a three-year  term expiring at the 1999 Annual Meeting of the
Company's shareholders, with the votes for such election as follows:
<TABLE>
<CAPTION>

          Director                                           For                         Withheld

<S>                                                   <C>                                    <C>
               Mr. Robert H. Falk                     13,566,487                             91,524
               Ms. Ann Dibble Jordan                  13,565,186                             92,825
               Mr. Robert Katz                        13,567,186                             90,825
               Mr. John S. Rodgers                    13,566,793                             91,218

</TABLE>

        (c) At the Annual  Meeting,  the  shareholders  approved  the 1996 Stock
Plan,  which  provides  for 600,000  shares of Common  Stock for the granting of
options,  stock  appreciation  rights and  restricted  stock to employees of the
Company and the  granting of options to  non-employee  directors of the Company.
The shares  voting for the 1996 Stock Plan were  12,262,974,  the shares  voting
against were 1,333,543 and the shares abstaining were 61,484.

       (d) At the Annual Meeting, the shareholders ratified the reappointment of
Deloitte & Touche LLP as the Company's  independent auditors for the 1996 fiscal
year. The shares voting for the ratification were 13,616,171,  the shares voting
against the ratification were 20,258 and the shares abstaining were 21,580.


<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
1995 and 1996 are set  forth  below.  The  Company  did not  declare  or pay any
dividends  during such years.  The indenture  governing  Salant's 10-1/2% Senior
Secured  Notes due December 31, 1998,  and the revolving  credit,  factoring and
security  agreement,  dated  September  20,  1993,  as  amended,  with  the  CIT
Group/Commercial  Services,  Inc.  require the satisfaction of certain net worth
tests prior to the payment of any cash  dividends by Salant.  As of December 28,
1996,   Salant  was  prohibited  from  paying  cash  dividends  under  the  most
restrictive of these provisions.
<TABLE>
<CAPTION>

High and Low Sale Prices Per Share of the Common Stock

                  Quarter                                    High                                   Low

                  1996
<S>                                                        <C>  <C>                                <C>  <C>
                  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

                  1995
                  Fourth                                 $  5 7/8                                $  3 3/8
                  Third                                     6                                       3 1/4
                  Second                                    4 1/4                                   2 3/4
                  First                                     5 7/8                                   3 1/4
</TABLE>

On March 11, 1997, there were 1,098 holders of record of shares of Common Stock,
and the closing market price was $5.00.

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
1994 through 1996 has 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 1992 and 1993 has 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>

                                                       Dec. 28,      Dec. 30,     Dec. 31,      Jan. 1,      Jan. 2,
                                                          1996          1995         1994         1994         1993
                                                     (52 Weeks)    (52 Weeks)   (52 Weeks)   (52 Weeks)   (53 Weeks)

For The Year Ended:
  Continuing Operations:
<S>                                                    <C>           <C>          <C>          <C>          <C>
    Net sales                                          $438,119      $501,522     $419,285     $402,098     $411,021
    Restructuring costs (a)                            (11,730)       (3,550)          -        (5,500)      (4,824)
    Income/(loss) from
     continuing operations                              (9,323)         (498)        3,507        7,816      (4,687)
    Discontinued Operations:
      Loss from operations, net
       of income taxes                                     -             -         (9,639)        (589)      (1,299)
      Estimated loss on disposal,
       net of income taxes                                 -             -         (1,796)         -        (11,772)
      Reversal of estimated loss on disposal,
       net of income taxes                                 -             -             -         11,772         -
    Extraordinary gain (b)                                 -            1,000           63       24,707         -
    Net income/(loss)(a)                                (9,323)           502      (7,865)       43,706     (17,758)
    Income/(loss) per share from continuing
     operations before
     extraordinary gain                                 $(0.62)       $(0.03)        $0.23        $1.10      $(1.35)
    Income/(loss) per share from discontinued
     operations                                            -             -          (0.76)         1.57       (3.78)
    Income per share from
     extraordinary gain                                    -             0.06          -           3.48         -
    Net income/(loss) per share (a)                      (0.62)          0.03       (0.53)         6.15       (5.13)
    Cash dividends per share                               -             -             -           -            -
</TABLE>
<TABLE>


<CAPTION>
At Year End:
<S>                                                    <C>           <C>          <C>          <C>          <C>
  Current assets                                       $147,203      $160,826     $168,411     $157,622     $160,146
  Total assets                                          236,038       255,720      267,216      253,232      259,466
  Current liabilities                                    60,353        63,454       72,163       45,713       55,093
  Long-term debt                                        106,231       110,040      109,908      111,851        -
  Deferred liabilities                                    8,863        11,373       13,479       16,766        2,462
  Liabilities deferred pursuant
   to chapter 11 cases                                     -             -             -           -         266,420
  Working capital                                        86,850        97,372       96,248      111,909      105,053
  Current ratio                                           2.4:1         2.5:1        2.3:1        3.4:1        2.9:1
  Shareholders' equity/(deficiency)                     $60,591       $70,853      $71,666      $78,902    $(64,509)
  Book value per share                                    $4.01         $4.71        $4.78        $5.34     $(18.62)
  Number of shares outstanding                           15,094        15,041       15,008       14,781        3,463
</TABLE>

     (a) Includes,  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;  for the year ended January 1, 1994, a provision of
$5,500 (77 cents per share; 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;
and for the year ended  January 2, 1993,  (a) a provision  of $4,824  ($1.39 per
share; tax benefit not available) for restructuring costs principally related to
(i) the estimated costs to be incurred in connection with the closure of certain
unprofitable operations, (ii) the rejection, pursuant to the Bankruptcy Code, of
certain lease  obligations,  and (iii) the write-off of leasehold  improvements,
and  buildings  and  equipment  at closed  locations,  and (b) the  write-off of
certain   intangible  assets  of  $6,759  ($1.95  per  share;  tax  benefit  not
available).

(b)  Includes,  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
     Company's  10 1/2%  Senior  Secured  Notes at a price  below the  principal
     amount  thereof;  and for the year ended January 1, 1994, a gain of $24,707
     ($3.48 per share) related to the settlement and  anticipated  settlement of
     claims arising from the Chapter 11 proceeding.

<PAGE>









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

Overview

In the second half of 1995, the Company  formulated a strategic business plan to
enhance the profitability of its men's apparel operations and to further improve
its overall liquidity. At the core of the plan was a decision 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)  to  further  expand  the  Company's  private  label  business,   and  to
selectively  target the sale of the  Company's  products  to those  channels  of
distribution deemed most likely to generate higher profit margins.

Implementation  of this plan, which began in the fourth quarter of 1995 and will
have  been  substantially  completed  by the end of the first  quarter  of 1997,
included (i) the discontinuation of unprofitable or marginally profitable brands
and product lines  (including the Company's JJ. Farmer and Manhattan  sportswear
lines and its Nino Cerruti,  Liberty of London, Thomson, Ron Chereskin, and AXXA
dress shirt lines),  (ii) the liquidation of remaining  inventories within those
discontinued brands and product lines, (iii) the closure of two of the Company's
six  domestic  manufacturing  facilities  and one of its  domestic  distribution
centers,  and (iv) the consolidation of the Company's  sourcing,  manufacturing,
and distribution  functions under a central corporate  operations group in order
to  eliminate  duplicate  sourcing  functions  and to maximize the impact of its
corporate buying power.

As more fully  discussed  under  "Results of  Operations"  below,  these actions
significantly   affected  the   Company's   operating   results  in  1996.   The
discontinuation  of various  product lines and the  redirection of other product
lines to different  channels of  distribution  in accordance  with the strategic
plan resulted in a $58.8 million  reduction in net sales  compared to 1995.  The
implementation of the strategic plan also involved the incurrence of significant
charges  during  1996,  including  the  write-down  of goodwill and other assets
associated with discontinued product lines, expenses related to the shut-down of
manufacturing and distribution facilities,  markdowns related to the liquidation
of inventories of product lines being discontinued or redirected,  and severance
costs related to terminated employees. In connection therewith, during 1996, the
Company  recorded a  restructuring  charge of $11.7  million and incurred  other
charges  related to the  implementation  of the strategic plan of  approximately
$5.2  million to cost of goods sold and $1.1  million to  selling,  general  and
administrative expenses. As a result of these actions, however, gross profits as
a percentage of sales increased in the men's apparel  business  segment and on a
Company-wide basis compared to 1995, and the Company  significantly  reduced its
inventory  levels  through  the  liquidation  of  excess   inventories  and  the
manufacture of fewer stock keeping units.  The cash savings  associated with the
elimination  of  unprofitable   product  lines  and  business  units  and  lower
investment in inventory enabled the Company to significantly  reduce its average
outstanding revolving credit borrowings and associated interest expense.


<PAGE>


Results of Operations

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 Apparel                                  $354.7          81%       $423.9            85%       (16.3%)
Children's Sleepwear
 and Underwear                                   45.8          10%         39.9             8%        14.8%
Other Businesses (a)                             37.6           9%         37.7             7%        (0.3%)

        Total                                $438.1          100%        $501.5        100%          (12.6%)
</TABLE>

(a)  Represents  the Made in the Shade  division  (a women's  junior  sportswear
business) and the retail outlet stores division (the "Stores division").

As noted under "Overview," $58.8 million (85.0%) of the $69.2 million decline in
net sales in the men's apparel segment was  attributable to the  discontinuation
of various product lines and the redirection of other product lines to different
channels of distribution  pursuant to the Company's  strategic business plan. 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 Apparel                                   $74.4      21.0%          $79.1       18.7%
Children's Sleepwear
 and Underwear                                   11.5      25.1%           10.8       26.9%
Other Businesses                                 12.0      31.9%           14.0       37.1%

        Total                                $ 97.9         22.3%        $103.9        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  other  businesses  declined  primarily  as a  result  of  margin
pressures in both the Company's juniors'  sportswear  business and the Company's
outlet  store  business  as well as  charges  of $0.3  million  (0.8%  of  other
businesses  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
$85.9 million  (19.6% of net sales)  compared  with $85.4 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. As indicated in the "Overview", S,G&A expenses for Fiscal 1996 also
included charges of $1.1 million principally  associated with the reorganization
of the men's apparel segment.

    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

As noted under "Overview," the Company recorded a restructuring  charge of $11.7
million in Fiscal 1996 as a consequence of the  implementation  of its strategic
business  plan. 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  restructuring  charge was comprised of $5.1 million of non-cash charges and
$6.6 million requiring cash payments over a period of time. Of the cash portion,
$2.5 million was expended during 1996 and the balance is expected to be expended
in the  following  manner:  $2.1 million in 1997,  $1.2 million in 1998 and $0.8
million in 1999.

   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 199
 <TABLE>
 <CAPTION>

                                                Fiscal 1996        Fiscal 1995
                              (dollars in millions)

<S>                                           <C>            <C>        <C>            <C>
Men's Apparel (a)                             $   6.4        1.8%       $  19.8        4.7%
Children's Sleepwear
 and Underwear                                    5.4       11.8%           5.2       13.0%
Other Businesses                                 (3.9)     (10.4%)         (2.2)      (5.9%)
                                                  7.9        1.8%          22.8        4.5%
Corporate expenses (b)                           (6.2)                     (9.2)
Licensing division income                         5.0                       5.6
Income from continuing
 operations before interest, income
 taxes and extraordinary gain                 $   6.7        1.5%       $  19.2        3.8%
</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  $12.5  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 $16.0  million for Fiscal  1996  compared  with $19.4
million for Fiscal 1995. The $3.4 million  decrease is a result of lower average
borrowings  during  Fiscal  1996  primarily  due to  reduced  average  levels of
inventory.

   Loss from Continuing Operations

In Fiscal 1996, the Company  reported a loss from continuing  operations of $9.3
million, or $0.62 per share, as compared with a loss from continuing  operations
before extraordinary gain of $0.5 million, or $0.03 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 $26.8 million (6.1% of net sales) in Fiscal
1996,  compared to $30.9  million (6.2% of net sales) in Fiscal 1995, a decrease
of $4.1 million,  or 13.2%.  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.

Fiscal 1995 Compared with Fiscal 1994

   Net Sales

The  following  table sets forth the net sales (and  relative  contributions  to
total sales) of each of the Company's  business segments for Fiscal 1995 and the
fiscal year ended December 31, 1994 ("Fiscal 1994")
 <TABLE>
 <CAPTION>
                                                                                                    Percentage
                                                                                                    Increase/
                                            Fiscal 1995        Fiscal 1994                             (Decrease)
                              (dollars in millions)

<S>                                            <C>             <C>       <C>               <C>        <C>
Men's Apparel                                  $423.9          85%       $343.5            82%        23.4%
Children's Sleepwear
 and Underwear                                   39.9           8%         35.5             8%        12.5%
Other Businesses                                 37.7           7%         40.3            10%        (6.5%)

        Total                                $501.5          100%        $419.3        100%           19.6%
</TABLE>

Of the total increase in net sales of men's apparel,  $41.7 million  (51.9%) was
attributable  to the  introduction  of the  Company's  Canyon  River Blues jeans
product line at Sears,  $18.2 million (22.6%) was  attributable to the growth of
the Company's  Perry Ellis  sportswear  business,  $11.2  million  (13.9%) was a
result of increased  dress shirt sales and $6.0 million (7.5%) was  attributable
to higher sales of sportswear under the Manhattan brand.  Excluding net sales of
dress shirts under the Gant label,  for which the Company  obtained a license in
June 1994, net sales of dress shirts increased by 7.4% in Fiscal 1995.

The increase in net sales of children's  sleepwear and underwear was primarily a
result of the expansion of the Joe Boxer  children's  product lines,  which were
introduced  in Fiscal 1994.  The decrease in net sales of other  businesses  was
attributable  primarily to lower  shipments by the Made in the Shade division in
response to declining margins.

   Gross Profit

The following  table sets forth the gross profit and gross profit margin of each
of the Company's business segments for each of Fiscal 1995 and Fiscal 1994:
<TABLE>
<CAPTION>

                                               Fiscal 1995        Fiscal 1994
                              (dollars in millions)

<S>                                             <C>        <C>            <C>         <C>
Men's Apparel                                   $79.1      18.7%          $70.9       20.6%
Children's Sleepwear
 and Underwear                                   10.8      26.9%            7.9       22.2%
Other Businesses                                 14.0      37.1%           14.4       35.7%

        Total                                $103.9         20.7%         $93.2        22.2%
</TABLE>

The  reduction in gross profit as a percentage of net sales in the men's apparel
segment was primarily a result of continuing  pressure on selling  prices in all
product categories and at all levels of distribution, which were, in large part,
a result  of the  slow  retail  economy.  In  addition,  certain  product  lines
introduced  or  expanded  in Fiscal  1995  (Canyon  River  Blues  and  Manhattan
sportswear) yielded a lower gross profit margin than traditionally earned by the
Company's  merchandise.  The Company's  gross profit margin was also  negatively
affected  by costs  associated  with the  start-up  of the  Canyon  River  Blues
program.

   Selling, General and Administrative Expenses

S,G&A expenses  increased by $6.1 million (7.7%) in Fiscal 1995.  However,  as a
percentage  of net sales S,G&A  expenses  declined to 17.0% from 18.9% in Fiscal
1994 due, in part,  to the  introduction  or expansion of certain  businesses in
Fiscal 1995 (as indicated above) that required minimal incremental expenses.

   Provision for Restructuring

The  restructuring  charge of $3.6  million  related  primarily  to the  planned
closing in Fiscal 1996 of a manufacturing facility in Thomson,  Georgia, as well
as certain  expenses  related to the planned  discontinuation  of several  dress
shirt lines, including Liberty of London, Nino Cerruti and Ron Chereskin.

   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 business
segments,  expressed both in dollars and as a percentage of net sales,  for each
of Fiscal 1995 and Fiscal 1994:
 <TABLE>
 <CAPTION>

                                                Fiscal 1995        Fiscal 1994
                              (dollars in millions)

<S>                                          <C>             <C>        <C>            <C>
Men's Apparel (a)                            $   19.8        4.7%       $  17.4        5.1%
Children's Sleepwear
 and Underwear                                    5.2       13.0%           3.1        8.8%
Other Businesses                                 (2.2)      (5.9%)         (0.5)      (1.3%)
                                                 22.8        4.5%          20.0        4.8%
Corporate expenses                               (9.2)                     (6.2)
Licensing division income                         5.6                       5.7
Income from continuing
 operations before interest, income
 taxes and extraordinary gain                $   19.2        3.8%       $  19.5        4.6%
</TABLE>

(a) Includes a restructuring charge of $3.6 million in Fiscal 1995

Income  from   continuing   operations   before   interest,   income  taxes  and
extraordinary gain as a percentage of net sales decreased to 3.8% in Fiscal 1995
from  4.6% in  Fiscal  1994  primarily  as a result  of the  decreases  in gross
margins,  S,G&A expense  changes and the provision for  restructuring  discussed
above.

   Interest Expense, Net

Net interest  expense for Fiscal 1995  increased by $3.8 million  compared  with
Fiscal 1994. Of this amount,  $2.7 million was  attributable to a higher average
outstanding  loan balance in Fiscal 1995. The remainder was  attributable  to an
increase in the weighted average interest rate on borrowings from 7.8% in Fiscal
1994 to 9.9% in Fiscal 1995,  due  primarily to an increase in the average prime
rate.

   Loss From Continuing Operations

The loss from continuing  operations before extraordinary gain was $0.5 million,
or $0.03  per  share,  in Fiscal  1995  compared  with  income  from  continuing
operations  before  extraordinary  gain of $3.5 million,  or $0.23 per share, in
Fiscal 1994,  primarily as a result of the $3.6 million  restructuring charge in
Fiscal 1995.

   Loss From Discontinued Operations

In Fiscal 1994,  the Company  recorded a charge of $11.4  million,  or $0.76 per
share,  for the  discontinuance  of the Vera  Scarf  division.  The  Vera  Scarf
division had net sales of $5.1 million in 1994

   Extraordinary Gain

In the fourth quarter of Fiscal 1995, the Company recorded an extraordinary gain
of $1.0  million  related  to the  reversal  of  excess  liabilities  previously
provided for the anticipated settlement of claims arising from its prior chapter
11 cases.

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

Earnings  before  interest,  taxes,  depreciation,  amortization,  restructuring
charges,  discontinued operations and extraordinary gain was $30.9 million (6.2%
of net sales) in Fiscal 1995, compared with $27.0 million (6.4% of net sales) in
Fiscal 1994, an increase of $3.9 million,  or 14.4%.  The Company  believes this
information  is  helpful  in  understanding  cash flow from  operations  that is
available for debt service, taxes 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 a revolving credit,  factoring and security agreement,
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 $135  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 February  20, 1997,  the Company and CIT executed the Tenth  Amendment to the
Credit  Agreement  (the  "Amendment").  The  Amendment  extended the term of the
Credit  Agreement  from March 31, 1997 until  September 30, 1998.  The Amendment
provided for a reduction in the interest rate charged on direct  borrowings from
one percent in excess of the base rate of the Chase  Manhattan  Bank,  N.A. (the
"Prime  Rate",  which was 8.25% at December 28, 1996) to one-half of one percent
in excess of the Prime Rate.  The  Amendment  also provided the Company with the
option to borrow  funds at 2.75%  above the  London  Late  Eurodollar  rate (the
"Eurodollar Rate", which was 5.625% at December 28, 1996). Based upon Eurodollar
Rates  currently in effect,  the Company's  effective rate of interest under the
Eurodollar  option is approximately 100 basis points below its borrowing rate in
effect prior to the Amendment. The Amendment also modified or eliminated certain
financial  covenants.  As a result of the  Amendment,  the Company  will only be
required to  maintain  certain  minimum  levels of  stockholders'  equity and to
comply with one other financial  covenant  limiting the maximum loss the Company
may incur over any four or eight consecutive calendar quarters.

At the end of Fiscal 1996, direct  borrowings and letters of credit  outstanding
under the Credit  Agreement were $7.7 million and $32.3  million,  respectively,
and the Company had unused  availability of $28.1 million.  At the end of Fiscal
1995,  direct  borrowings  and  letters of credit  outstanding  under the Credit
Agreement  were $14.4 million and $31.4 million,  respectively,  and the Company
had unused  availability  of $27.5  million.  During  Fiscal  1996,  the maximum
aggregate amount of direct  borrowings and letters of credit  outstanding  under
the Credit  Agreement  was $101.0  million at which time the  Company had unused
availability of $19.6 million.  During Fiscal 1995, the maximum aggregate amount
of direct  borrowings  and  letters  of  credit  outstanding  under  the  Credit
Agreement was $134.2  million at which time the Company had unused  availability
of $828,000.

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  Company's  outstanding  10 1/2% Senior  Secured Notes due 1998 (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.  The Company  was at December  28,
1996, and currently is, in compliance  with all of its covenants.  The following
table  indicates  the  Company's  compliance  with the two  remaining  financial
covenants contained in the Credit Agreement:


                       December 28, 1996
Credit Agreement Covenants                  Covenant Level
                         Actual Level

Stockholders' Equity                        no less than $52.0 million
              $ 60.6 million
Maximum Loss (a)                            no more than $(10.0) million
                                        positive income

(a) Maximum loss excludes  write-offs  for goodwill,  restructuring  expenses or
other unusual or  non-recurring  expenses during the first two quarters of 1996,
up to a maximum of $13.0 million.

The indenture governing the Company's  outstanding Senior Secured Notes 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 flow from  operating  activities  for Fiscal 1996 was $16.9
million, which reflects a $17.5 million reduction in inventories due to improved
inventory  management,  and the effects of the  implementation  of its strategic
business  plan for the men's  apparel  group.  The lower  inventory  balance was
partially  offset by an increase in accounts  receivable,  due to changes in the
Company's factoring  arrangements with CIT, which reduced the amount of accounts
receivable sold to CIT and the related factoring costs.

Cash used in Fiscal 1996 for investing activities was $9.8 million and primarily
related to capital  expenditures  of $7.1 million and the  installation of store
fixtures in department  stores of $3.9 million,  partially offset by the sale of
assets of $1.9 million.  During  Fiscal 1997,  the Company plans to make capital
expenditures  of  approximately  $10.7 million and to spend an  additional  $4.2
million for the installation of store fixtures in department stores.

Cash  used in  financing  activities  in  Fiscal  1996 was $6.7  million,  which
represented repayments of short-term borrowings under the Credit Agreement using
cash generated from operations.

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.  There can
be no assurance,  however,  that future developments and general economic trends
will not adversely  affect the Company's  operations and, hence, its anticipated
cash flow.

The Company's Senior Secured Notes, of which $104.9 million principal amount was
outstanding  at March 24, 1997,  mature  December 31, 1998. The Company does not
expect to generate  sufficient cash flow from operations to repay those notes at
maturity and will seek to refinance the notes prior to maturity. There can be no
assurance  that the Company  will obtain such  refinancing  or that the terms of
such  refinancing,  if obtained,  will not be less favorable to the Company than
those of the Senior Secured Notes.

Seasonality

Although the Company  typically  introduces  and  withdraws  various  individual
products  throughout  the year,  its principal  products are organized  into the
customary  retail  seasonal  lines:  for the  Spring,  Fall and  Christmas.  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  1,  1997,  the  Company's  backlog  of  orders  was
approximately   $99.0   million,   13%  less  than  the  backlog  of  orders  of
approximately $114.0 million that existed at March 2, 1996.

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:

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 its 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 Christmas  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.

Substantial  Level of  Indebtedness.  The  Company  had  indebtedness  of $117.3
million as of December  28, 1996.  This level of  indebtedness  could  adversely
affect the Company's  operations because a substantial  portion of the Company's
cash flow from  operations  must be  dedicated  to the payment of  interest  and
would,  therefore,  not be available for other purposes.  Further, this level of
indebtedness  might  inhibit the  Company's  ability to obtain  financing in the
future  for  working   capital  needs,   capital   expenditures,   acquisitions,
investments, general corporate purposes or other purposes.

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.

Dependence on Contract Manufacturing.  The Company currently produces 61% 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.

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 December 28, 1996 and December 30, 1995, and
the related consolidated statements of operations, shareholders' equity and cash
flows for the years ended December 28, 1996,  December 30, 1995 and December 31,
1994. 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
December 28, 1996 and December 30, 1995, and the results of their operations and
their cash flows for the years ended  December 28,  1996,  December 30, 1995 and
December 31, 1994 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.


/s/ Deloitte & Touche LLP
March 4, 1997
New York, New York


<PAGE>


<TABLE>
<CAPTION>


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

                                                                    Year Ended
                                                           December 28,          December 30,          December 31,
                                                                   1996                  1995                  1994

<S>                                                       <C>                   <C>                    <C>
Net sales                                                 $     438,119         $     501,522          $    419,285

Cost of goods sold                                              340,203               397,630               326,059

Gross profit                                                     97,916               103,892                93,226

Selling, general and administrative expenses                    (85,867)              (85,372)              (79,273)
Royalty income                                                    6,154                 6,606                 6,699
Goodwill amortization                                            (2,372)               (2,575)               (2,376)
Other income/(expense)                                            2,642                   244                 1,196
Division restructuring costs (Note 2)                           (11,730)               (3,550)                 --

Income from continuing operations before interest,
  income taxes and extraordinary gain                             6,743                19,245                19,472
Interest expense, net (Notes 8 and 9)                            15,963                19,425                15,617

Income/(loss) from continuing operations
  before income taxes and extraordinary gain                     (9,220)                 (180)                3,855

Income taxes (Note 11)                                              103                   318                   348

Income/(loss) from continuing operations
  before extraordinary gain                                      (9,323)                 (498)                3,507

Discontinued operations (Note 17):
  Loss from operations                                             --                    --                  (9,639)
  Estimated loss on disposal                                       --                    --                  (1,796)
Extraordinary gain (Notes 3 and 9)                                 --                   1,000                    63

Net income/(loss)                                       $        (9,323)       $          502          $     (7,865)

Income/(loss) per share:
  Income/(loss) per share from continuing
    operations before extraordinary gain                    $    (0.62)       $        (0.03)          $      0.23
  Loss per share from discontinued operations                      --                   --                   (0.76)
  Extraordinary gain                                               --                   0.06                   --

Net income/(loss) per share                            $         (0.62)       $         0.03           $     (0.53)

Weighted average common stock outstanding                        15,078                15,102                14,954
</TABLE>

See Notes to Consolidated Financial Statements

<PAGE>



<TABLE>
<CAPTION>

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

                                                                            December 28,               December 30,
                                                                                    1996                       1995
ASSETS
Current assets:
<S>                                                                      <C>                        <C>
Cash and cash equivalents                                                $         1,501            $         1,400
Accounts receivable - net of allowance for doubtful accounts
  of $2,806 in 1996 and $3,007  in 1995 (Notes 8 and 9)                           40,214                     35,290
Inventories (Notes 4 and 8)                                                      101,619                    119,120
Prepaid expenses and other current assets                                          3,869                      5,016

  Total current assets                                                           147,203                    160,826

Property, plant and equipment, net (Notes 5 and 8)                                25,185                     24,526
Other assets (Notes 6, 9 and 11)                                                  63,650                     70,368

                                                                           $     236,038              $     255,720

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Loans payable (Note 8)                                                 $         7,677             $       14,422
  Accounts payable                                                                28,327                     26,755
  Reserve for business restructuring (Note 2)                                      2,969                      1,569
  Accrued salaries, wages and other liabilities (Note 7)                          18,008                     20,708
  Current portion of long term debt (Note 9)                                       3,372                       --

    Total current liabilities                                                     60,353                     63,454

Long term debt (Notes 9 and 16)                                                  106,231                    110,040
Deferred liabilities (Note 14)                                                     8,863                     11,373
Commitments and contingencies (Notes 8, 9, 12, 13 and 15)

Shareholders' equity (Note 13): Preferred stock, par value $2 per share:
    Authorized 5,000 shares; none issued                                            --                         --
  Common stock, par value $1 per share:
     Authorized 30,000 shares;                                                    15,328                     15,275
     issued and issuable - 15,328 shares in 1996;
     issued and issuable - 15,275 shares in 1995
  Additional paid-in capital                                                     107,130                    107,071
  Deficit                                                                        (57,147)                   (47,824)
  Excess of additional pension liability over
    unrecognized prior service cost adjustment (Note 12)                          (3,182)                    (2,185)
  Accumulated foreign currency translation adjustment                                 76                        130
  Less - treasury stock, at cost - 234 shares                                     (1,614)                    (1,614)

Total shareholders' equity                                                        60,591                     70,853

                                                                          $      236,038              $     255,720
</TABLE>

See Notes to Consolidated Financial Statements

<PAGE>


<TABLE>
<CAPTION>

                       SALANT CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                             (Amounts in thousands)

                                                                                    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 January 1, 1994       15,016  $15,016   $106,726$(40,461)  $  (986)    $   221       234   $(1,614)   $78,902

Stock options exercised             226      226        291                                                          517
Net loss                                                     (7,865)                                              (7,865)
Excess of additional pension
 liability over unrecognized
 prior service cost adjustment                                            213                                        213
Foreign currency translation
 adjustments                                                                         (101)                          (101)

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
</TABLE>


See Notes to Consolidated Financial Statements



<PAGE>


<TABLE>
<CAPTION>

                       SALANT CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)

                                                                  Year Ended
                                                           December 28,          December 30,          December 31,
                                                                   1996                  1995                  1994
Cash Flows from Operating Activities
<S>                                                           <C>                 <C>                    <C>
Income/(loss) from continuing operations                      $  (9,323)          $      (498)           $    3,507
Adjustments to reconcile income from continuing  operations to net cash provided
  by/(used in) operating activities:
    Depreciation                                                  5,986                 5,542                 5,113
    Amortization of intangibles                                   2,372                 2,575                 2,376
    Write-down of fixed assets                                      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                                        (4,924)                1,293               (11,965)
      Inventories                                                17,501                 5,479               (19,262)
      Prepaid expenses and other current assets                   1,066                   248                  (947)
      Other assets                                                 (760)                  916                (1,302)
      Accounts payable                                            1,572                (1,838)                6,869
      Accrued salaries, wages and other liabilities              (2,410)                 (191)               (5,786)
      Reserve for business restructuring                          1,400                 1,569                (2,038)
      Deferred liabilities                                       (2,148)                 (598)                  330
    Net cash provided by/(used in) operating activities          16,876                16,479               (23,105)

Cash Flows from Investing Activities
Capital expenditures, net                                        (7,103)               (4,286)               (4,926)
Store fixture expenditures                                       (3,855)               (2,988)                   --
Acquisition                                                        (694)                 --                  (5,720)
Proceeds from sale of assets                                      1,854                   122                   294
Net cash used in investing activities                            (9,798)               (7,152)              (10,352)

Cash Flows from Financing Activities
Net short-term borrowings/(repayments)                           (6,745)               (9,484)               36,516
Retirement of long-term debt                                       --                    --                  (3,537)
Exercise of stock options                                           112                    87                   517
Other, net                                                          (54)                   10                  (101)
Net cash (used in)/provided by financing activities              (6,687)               (9,387)               33,395

  Net cash provided by/(used in) continuing operations              391                   (60)                  (62)
  Cash used in discontinued operations                             (290)                 (505)                 (119)
Net increase/(decrease) in cash and cash equivalents                101                  (565)                 (181)
Cash and cash equivalents - beginning of year                     1,400                 1,965                 2,146
Cash and cash equivalents - end of year                      $    1,501             $   1,400            $    1,965

Supplemental  disclosures  of cash flow  information:  Cash paid during the year
for:
    Interest                                                  $  16,307              $ 20,280            $   16,150
   Income taxes                                             $       189            $      331          $        674
</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.  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 Vera Scarf division.) 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 Vera
Scarf division as a  discontinued  operation,  and the financial  results of the
Vera Scarf division are not included in the presentation of  income/(loss)  from
continuing  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 1994,
 1995 and 1996 fiscal years were each comprised of
52 weeks.



<PAGE>


Reclassifications

Certain  reclassifications were made to the 1994 and 1995 Consolidated Financial
Statements to conform with the 1996 presentation.

Cash and Cash Equivalents

The  Company  treats  cash on hand  and  deposits  in  banks  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  8,  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 $16,355 at December  28, 1996 and $33,792 at December 30, 1995.  The
decrease in the amounts  which have been  offset  resulted  from a change in the
agreement with the factor.

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.
<TABLE>
<CAPTION>

The annual depreciation rates used are as follows:

<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>



<PAGE>


Other Assets

Intangible  assets  are being  amortized  on a  straight-line  basis  over their
respective useful lives, ranging from 7 1/2 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.

Long-Lived Assets

In 1996, the Company adopted Statement of Financial Accounting Standard No. 121,
which requires that long-lived  assets and certain  identifiable  intangibles be
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that the carrying amount of an asset may no longer be  recoverable.  Adoption of
this statement did not have a material impact on the Company.

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  93% of principal
amount. In addition,  deferred  liabilities have carrying amounts  approximating
fair value.

Income/(Loss) Per Share

Income/(loss) per share is based on the weighted average number of common shares
(including,  as of December 28, 1996 and December 30, 1995,  324,810 and 375,889
shares,  respectively,  anticipated to be issued pursuant to the  Reorganization
Plan) and common stock equivalents  outstanding,  if applicable.  Loss per share
for 1994 and 1996 did not include  common stock  equivalents,  inasmuch as their
effect would have been anti-dilutive.

Revenue Recognition

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

Note 2.  Restructuring Costs

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.

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

Note 3.  Extraordinary Gain

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

Note 4.  Inventories
<TABLE>
<CAPTION>
                                                                        December 28,          December 30,
                                                                                1996                  1995

<S>                                                                        <C>                   <C>
Finished goods                                                             $  58,663             $  72,850
Work-in-process                                                               16,011                15,829
Raw materials and supplies                                                    26,945                30,441
                                                                            $101,619              $119,120
</TABLE>

Finished goods inventory includes in transit merchandise of $5,400 and $6,500 at
December 28, 1996 and December 30, 1995, respectively.



<PAGE>


Note 5.  Property, Plant and Equipment
<TABLE>
<CAPTION>
                                                                        December 28,          December 30,
                                                                                1996                  1995

<S>                                                                          <C>                   <C>
Land and buildings                                                           $14,975               $14,779
Machinery, equipment, furniture
  and fixtures                                                                30,815                40,347
Leasehold improvements                                                         6,895                 8,315
Property held under capital leases                                               117                 1,345
                                                                              52,802                64,786
Less accumulated depreciation and amortization                                27,617                40,260
                                                                             $25,185               $24,526
</TABLE>

Note 6.  Other Assets
<TABLE>
<CAPTION>
                                                                        December 28,          December 30,
                                                                                1996                  1995
Excess of cost over net assets acquired,
 net of accumulated amortization of
<S>                                                                          <C>                   <C>
 $13,058 in 1996 and $12,014 in 1995                                         $45,008               $50,641
Trademarks and license agreements,
 net of accumulated amortization of
 $3,619 in 1996 and $3,274 in 1995                                            13,943                14,588
Leasehold interests, net of accumulated
 amortization of $965 in 1995                                                   --                   1,478
Other                                                                          4,699                 3,661
                                                                             $63,650               $70,368
</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.

Note 7.  Accrued Salaries, Wages and Other Liabilities
<TABLE>
<CAPTION>
                                                                        December 28,          December 30,
                                                                                1996                  1995

<S>                                                                          <C>                   <C>
Accrued salaries and wages                                                   $ 1,765               $ 3,268
Accrued pension and retirement benefits                                        4,080                 3,737
Accrued royalties                                                              1,959                 1,716
Accrued interest                                                               3,716                 3,716
Other accrued liabilities                                                      6,488                 8,271
                                                                             $18,008               $20,708
</TABLE>

Note 8.  Financing and Factoring Agreements

The Company is a party to a revolving credit,  factoring and security agreement,
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 $135,000 (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 February  20, 1997,  the Company and CIT executed the Tenth  Amendment to the
Credit  Agreement  (the  "Amendment").  The  Amendment  extended the term of the
Credit  Agreement  from March 31, 1997 until  September 30, 1998.  The Amendment
provided for a reduction in the interest rate charged on direct  borrowings from
one percent in excess of the base rate of the Chase  Manhattan  Bank,  N.A. (the
"Prime  Rate",  which was 8.25% at December 28, 1996) to one-half of one percent
in excess of the Prime Rate.  The  Amendment  also provided the Company with the
option to borrow  funds at 2.75%  above the  London  Late  Eurodollar  rate (the
"Eurodollar Rate", which was 5.625% at December 28, 1996). Based upon Eurodollar
Rates  currently in effect,  the Company's  effective rate of interest under the
Eurodollar  option is approximately 100 basis points below its borrowing rate in
effect prior to the Amendment. The Amendment also modified or eliminated certain
financial  covenants.  As a result of the  Amendment,  the Company  will only be
required to  maintain  certain  minimum  levels of  stockholders'  equity and to
comply with one other financial  covenant  limiting the maximum loss the Company
may incur over any four or eight consecutive calendar quarters.

As of December 28, 1996 and December 30, 1995, direct borrowings were $7,677 and
$14,422, respectively. As of December 28, 1996 and December 30, 1995, letters of
credit  outstanding  under  the  Credit  Agreement  were  $32,337  and  $31,415,
respectively.  The weighted average interest rate on borrowings under the Credit
Agreement  for the years ended  December 28, 1996 and December 30, 1995 was 9.4%
and 9.9%, respectively.

In addition to the two 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 9.  Long-Term Debt

On September 20, 1993, Salant issued $111,851 principal amount of 10 1/2% Senior
Secured Notes due December 31, 1998 (the "Secured Notes"). The 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 premium on redemption declines annually from 2.1% in 1997 to 0% in 1998. The
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.

The indenture  governing the Secured Notes (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.

On October 28, 1996, the Company completed the sale of a leasehold interest in a
facility located in Glen Rock, New Jersey.  The Net Cash Proceeds (as defined in
the  Indenture)  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  Secured Notes in a principal amount equal to the
Net Cash Proceeds at 100% of the principal amount thereof.

In May 1994, the Company purchased and retired $3,600 of the Secured Notes in an
open market  transaction  at a price below the principal  amount  thereof.  As a
result of this transaction, the Company recorded an extraordinary gain of $63 in
1994.

Note 10.  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 65 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)  other  products,  consisting  of women's  junior  apparel  and retail
factory outlet store operations.  Information  concerning the Company's business
segments in 1996, 1995 and 1994 is as follows:
 <TABLE>
<CAPTION>

                                                          1996                   1995                 1994

NET SALES
<S>                                                   <C>                    <C>                  <C>
  Men's Apparel                                       $354,723               $423,894             $343,455
  Children's Sleepwear
   and Underwear                                        45,754                 39,936               35,513
  Other Businesses                                      37,642                 37,692               40,317
    Total net sales                                   $438,119               $501,522             $419,285

</TABLE>



<PAGE>


<TABLE>
<CAPTION>
OPERATING INCOME
<S>                                                 <C>                     <C>                  <C>
  Men's Apparel                                     $    6,400              $  19,819            $  17,366
  Children's Sleepwear
   and Underwear                                         5,401                  5,184                3,119
  Other Businesses                                      (3,912)                (2,205)                (522)
                                                         7,889                 22,798               19,963
Corporate expenses                                      (6,137)                (9,176)              (6,171)
Licensing division income                                4,991                  5,623                5,680
Interest expense, net                                  (15,963)               (19,425)             (15,617)
Income/(loss) from continuing
 operations before income taxes
 and extraordinary gain                             $   (9,220)           $      (180)          $    3,855
</TABLE>

<TABLE>
<CAPTION>

IDENTIFIABLE ASSETS
<S>                                                   <C>                    <C>                  <C>
  Men's Apparel                                       $138,024               $170,203             $161,751
  Children's Sleepwear
   and Underwear                                        20,709                 16,349               14,273
  Other Businesses                                      18,846                 20,179               18,092
  Corporate                                             58,459                 48,989               73,100
Total identifiable assets                             $236,038               $255,720             $267,216
</TABLE>

<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
<S>                                                 <C>                    <C>                  <C>
  Men's Apparel                                     $    4,046             $    1,389           $    2,629
  Children's Sleepwear
   and Underwear                                           546                    492                  435
  Other Businesses                                         439                    584                1,140
  Corporate                                              2,072                  1,821                  722
Total capital expenditures                          $    7,103             $    4,286           $    4,926
</TABLE>

<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION
<S>                                                 <C>                    <C>                  <C>
  Men's Apparel                                     $    3,672             $    2,960           $    2,549
  Children's Sleepwear
   and Underwear                                           399                    345                  311
  Other Businesses                                         526                    514                  473
  Corporate                                              3,761                  4,298                4,156
Total depreciation and
 amortization                                       $    8,358             $    8,117           $    7,489
</TABLE>

In 1996,  approximately  13% of the  Company's  net  sales  were  made to Sears,
Roebuck & Co.  ("Sears").  Approximately  11% of the Company's net sales in 1996
were made to Federated Department Stores, Inc. ("Federated"), which includes all
1996 net sales to Macy's  Department  Stores  ("Macy's"),  which was acquired by
Federated  in 1994,  and the  Broadway  Stores,  Inc.  ("Broadway"),  which  was
acquired  by  Federated  in  February  1996.  In 1995 and  1994,  net sales to a
combined  Federated/Macy's/Broadway would have represented approximately 12% and
15% of the  Company's  net  sales,  respectively.  In  each of  1995  and  1994,
approximately  11% of the  Company's  net  sales  were  made to TJX  Corporation
("TJX"),  which includes all 1995 and 1994 net sales to Marshall's  Corporation,
which was acquired by TJX in February 1996.

In 1995,  approximately  13% of the  Children's  Group's  net sales were made to
Dayton Hudson Corporation.  In 1996,  approximately 27% and 22% of the net sales
of Other  Businesses  were made to  K-Mart  Corporation  and JC Penney  Company,
respectively.  In 1995, net sales to JC Penney  represented 19% of the net sales
of the Other Businesses.

No other customer accounted for more than 10% of the net sales of the Company or
any of its business segments during 1996, 1995 or 1994.

Note 11.  Income Taxes

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>

                                                  December 28,           December 30,         December 31,
                                                          1996                   1995                 1994
Current:
<S>                                                      <C>                     <C>                  <C>
 Federal                                                 $(106)                  $100                 $100
 State                                                      --                     --                   20
 Foreign                                                   209                    218                  228
                                                        $  103                   $318                 $348
</TABLE>

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>

                                                          1996                   1995                 1994

Income tax provision/
<S>                                                    <C>                   <C>                    <C>
 (benefit), at 34%                                     $(3,135)              $    (61)              $1,097

Loss producing no current
 tax benefit                                             3,135                     61
Utilization of net operating loss
  carryforward                                                                                      (1,097)
Alternative minimum tax                                                           100                  100
Tax refunds from prior years                              (106)
State, local and foreign taxes                             209                    218                  248

Income tax provision                                  $    103               $    318              $   348
</TABLE>



<PAGE>


The following are the tax effects of significant  items comprising the Company's
net deferred tax asset:
<TABLE>
<CAPTION>

                                                                        December 28,          December 30,
                                                                                1996                  1995
Deferred tax liabilities:
 Differences between book and tax
<S>                                                                          <C>                  <C>
  basis of property                                                          $(3,659)             $ (6,253)

Deferred tax assets:
 Reserves not currently deductible                                            13,983                17,155
 Operating loss carryforwards                                                 45,041                43,182
 Tax credit carryforwards                                                      2,958                 3,055
 Expenses capitalized into inventory                                           4,657                 4,959
                                                                              66,639                68,351
Net deferred asset                                                            62,980                62,098
Valuation allowance                                                          (62,980)              (62,098)
Net deferred tax asset                                                  $      --             $      --
</TABLE>

At December 28, 1996, the Company had net operating loss carryforwards  ("NOLs")
for income tax purposes of  approximately  $115,000,  expiring  from 1999 to the
year 2011,  which can be used to offset  future  taxable  income.  Approximately
$51,000,  which arose from the  acquisition  of  Manhattan  in April 1988,  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  has  been  limited  by the
requirements  of section 382 of the Internal  Revenue Code of 1986,  as amended.
The annual limit under section 382 is approximately $7,200. Upon consummation of
the  Reorganization  Plan, the Company  realized  cancellation  of  indebtedness
income for tax purposes of approximately  $917 and the NOLs have been reduced or
limited accordingly.

In  addition,  at  December  28,  1996,  the Company  had  available  tax credit
carryforwards  of  $2,798  which  expire  between  1997 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.

Note 12.  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>

                                                         1996                 1995                  1994
Service cost-benefit earned
<S>                                                     <C>                   <C>                   <C>
  during the period                                     $1,270                $1,029                $1,125
Interest cost on projected
 benefit obligation                                      2,912                 2,714                 2,626
Loss/(return) on assets                                 (4,126)               (4,697)                1,331
Net amortization                                         1,564                 2,286                (3,437)
Net periodic pension cost                               $1,620                $1,332                $1,645
</TABLE>

The  reconciliation  of the funded  status of the plans at December 28, 1996 and
 December 30, 1995 is as follows:
<TABLE>
<CAPTION>

                                                                        December 28,          December 30,
                                                                                1996                  1995
                                                                         Accumulated           Accumulated
                                                                                Plan                  Plan
                                                                            Benefits              Benefits
                                                                              Exceed                Exceed
                                                                         Plan Assets           Plan Assets

Actuarial present value of benefit obligation
<S>                                                                         <C>                   <C>
  Vested benefit obligation                                                 $(41,578)             $(36,211)
  Nonvested benefit obligation                                                  (661)                 (597)
Accumulated benefit obligation                                              $(42,239)             $(36,808)

Projected benefit obligation                                                 (46,811)             $(40,833)
Plan assets at fair value                                                     35,980                30,900
Projected benefit obligation in
  excess of plan assets                                                      (10,831)               (9,933)
Unrecognized net obligation at date of
  initial application, amortized over 15 years                                   624                   810
Unrecognized net loss                                                          7,188                 4,616
Unrecognized prior service cost                                               (1,222)               (1,176)
Recognition of minimum liability
  under SFAS No. 87                                                           (3,332)               (2,524)
Accrued pension cost                                                       $  (7,573)            $  (8,207)
</TABLE>

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

                                         1996       1996       1995       1995       1994       1994
                                         Non-  Qualified       Non-  Qualified       Non-  Qualified
                                         Qualified Plans  Qualified      Plans  Qualified      Plans
                                         Plan                  Plan                  Plan

<S>                                                <C>         <C>        <C>        <C>        <C>        <C>
Discount rate                                      7.25%       7.25%      7.0%       7.0%       8.5%       8.5%
Rate of increase in
 compensation levels                                N/A        5.0%       N/A        5.0%       N/A        5.5%
Expected long-term rate of
 return on assets                                  8.0%        8.5%       8.0%       8.5%       8.0%       8.0%
</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
$4,095,  $4,263 and $4,693 in 1996, 1995 and 1994,  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  fund,  a fixed income fund
and/or an equity fund.  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
1996, 1995 and 1994 Salant's  aggregate  contributions  to the Long Term Savings
and Investment Plan amounted to $229, $239 and $239, respectively.

Note 13.  Stock Options, Warrants and Shareholder Rights

On May 14, 1996, the  stockholders of the Company  approved the 1996 Stock Plan.
Pursuant to the 1996 Stock Plan,  directors  receive an automatic grant of stock
options pursuant to a formula  contained in such plan, and options or awards may
be granted to key  employees  of the Company for the purchase of an aggregate of
600,000 shares of the Company's common stock.

The 1993,  1988 and 1987 Stock  Plans  authorized  the  Company  to grant  stock
options or stock awards  aggregating  1,800,000 shares of Salant common stock to
officers,  key  employees  and,  in the case of the 1993 and 1988  Stock  Plans,
directors.

The 1996,  1993,  1988 and 1987 Stock Plans  authorized  such grants (subject to
certain  restrictions  applicable  to 1996 and 1993  Stock  Plan  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 ordinarily 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 following table summarizes stock option  transactions  during 1994, 1995 and
1996:

<TABLE>
<CAPTION>
                                                                                                 Weighted
                                                                                                  Average
                                                                                                  Exercise
                                                          Shares             Price Range             Price

Options outstanding at
<S>                                                      <C>                <C>   <C>
 January 1, 1994                                         1,362,774          $1.00-15.125
Options granted during 1994                                 61,050          $4.94-6.69
Options exercised during 1994                             (226,666)         $2.00-2.63
Options surrendered or canceled
 during 1994                                               (39,950)         $5.125-12.00
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         $3.62
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 exercisable at
 December 28, 1996                                         910,028         $1.625-15.125         $6.88

Options exercisable at
 December 30, 1995                                         904,209          $1.00-15.125
</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, 1997.  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  Apparel  Partners,
L.P.,  or  any of  its  subsidiaries,  will  not  cause  the  rights  to  become
exercisable.

In summary, as of December 28, 1996, there were 1,033,740 shares of Common Stock
reserved  for the exercise of stock  options and 953,175  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
1996 and 1995 was $3.42 and  $4.52,  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
1996: risk-free interest rate of 6.18%;  expected dividend yield of 0%; expected
life of 4.44 years;  and expected  volatility  of 220%.  The  outstanding  stock
options at December 28, 1996 have a weighted  average  contractual  life of 5.65
years. The number of stock options exercisable at December 28, 1996 was 910,028.
These stock options have a weighted average exercise price of $6.88 per share.

The Company accounts for the 1987, 1988, 1993 and 1996 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  1996  and 1995  would  have  been  $(9,692)  and  $192,
respectively.  The Company's pro forma net  income/(loss) per share for 1996 and
1995  would have been  ($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 14.  Deferred Liabilities
<TABLE>
<CAPTION>
                                                                        December 28,          December 30,
                                                                                1996                  1995

<S>                                                                        <C>                    <C>
Lease obligations                                                          $      93              $  1,206
Deferred pension obligations                                                   4,865                 5,087
Liability for settlement of chapter 11 claims                                  3,905                 4,600
Other                                                                             --                   480
</TABLE>

    $ 8,863               $11,373

Note 15.  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  1996,  1995  and  1994,  rental  expense  was  $7,563,  $7,265  and  $5,914,
respectively.  As of December 28, 1996,  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>
                           1997                                                 $  6,907
                           1998                                                    6,004
                           1999                                                    4,739
                           2000                                                    3,015
                           2001                                                    2,566
                           Thereafter                                             15,709
                              Total                                              $38,940
</TABLE>

(b)      Employment Agreements

The Company has employment agreements with certain executives, which provide for
the payment of compensation aggregating approximately $2,108 in 1997 and $490 in
1998  .  In  addition,   such  employment   agreements   provide  for  incentive
compensation based on various performance criteria.

Note 16.  Acquisition

On June 10,  1994,  the Company  acquired  all the capital  stock of JJ.  Farmer
Clothing   Inc.  (a  Canadian   corporation)   and  the  assets  of  JJ.  Farmer
International Limited (a Hong Kong corporation)  (collectively "JJ. Farmer") for
approximately  $5,311 in cash. The purchase price is subject to adjustment based
on a number of items,  including the future profitability of JJ. Farmer. As part
of the  acquisition,  the  Company  agreed  to pay to the  former  owners of JJ.
Farmer,  certain  minimum  amounts in the years 1996 through  1999.  The present
value of such future  payments is $1,352,  which is included in long-term  debt.
Through December 28, 1996, the Company had made additional payments of $1,157 in
accordance  with the acquisition  agreement.  The acquisition has been accounted
for as a purchase,  and accordingly,  JJ. Farmer's  operating  results have been
included in the Company's consolidated results of operations commencing June 11,
1994.  Pro forma  results of  operations  have not been  presented as the effect
would not be  significant.  JJ. Farmer's net sales for the five months ended May
31,  1994 were  $3,392.  The  excess of cost over the book  value of net  assets
acquired ($4,589 subject to adjustment) was being amortized over a period of not
more  than 15 years on a  straight-line  basis,  prior to the  write-off  in the
second quarter of 1996.

Note 17.  Discontinued Operations

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.

Note 18.  Consummation of the Plan of Reorganization

From  the  Consummation  Date  through  December  28,  1996,   pursuant  to  the
Reorganization  Plan, the Company made cash payments of $9,400,  issued $111,851
of new 10-1/2%  senior  secured  notes and issued 11.0 million  shares of common
stock  to  creditors  in  settlement  of  certain   claims  in  the  chapter  11
proceedings.  Salant  anticipates  that an  additional  $4,161  in  cash  and an
additional  325  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 19.  Quarterly Financial Information (Unaudited)

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                                    $438,119     $119,317      $122,599      $97,010      $99,193
Gross profit                                   97,916       27,371        29,935       18,030       22,580
Net income/(loss)                              (9,323)       6,116         6,335      (18,862)      (2,912)
Net income/(loss) per share (a)             $   (0.62)    $   0.40    $    0.42     $  (1.25)      $ (0.19)
</TABLE>

Fiscal year ended December 30, 1995
<TABLE>
<CAPTION>

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

<S>                                          <C>          <C>          <C>           <C>          <C>
Net sales                                    $501,522     $127,347     $148,313      $122,061     $103,801
Gross profit                                  103,892       23,152       33,752        24,521       22,467
Income/(loss) from
 continuing operations                           (498)      (5,509)       6,318           392       (1,699)
Extraordinary gain
 (See note 3)                                   1,000        1,000         --            --           --
Net income/(loss)                                 502       (4,509)       6,318           392       (1,699)
Income/(loss) per share from
 continuing operations (a)                  $   (0.03)  $    (0.36)  $     0.42    $    0.03     $   (0.11)
Income per share from
 extraordinary gain                              0.06         0.06          --           --           --
Net income/(loss) per share (a)                  0.03        (0.30)        0.42         0.03         (0.11)
</TABLE>

Reference  is made to Notes 2, 3 and 6  concerning  fourth  quarter  adjustments
during the years ended December 28, 1996 and December 30, 1995.

(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 information  required by Item 10 is incorporated by reference from the Proxy
Statement of Salant Corporation.

ITEM 11.          EXECUTIVE COMPENSATION

The information  required by Item 11 is incorporated by reference from the Proxy
Statement of Salant Corporation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information  required by Item 12 is incorporated by reference from the Proxy
Statement of Salant Corporation.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  required by Item 13 is incorporated by reference from the Proxy
Statement of Salant Corporation.



<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  December 28,
1996,  December  30, 1995 and  December 31, 1994 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

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>

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 DECEMBER 28, 1996:

Accounts receivable allowance
<S>                                      <C>            <C>             <C>               <C>                     <C>
  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

YEAR ENDED DECEMBER 31, 1994:

Accounts receivable - allowance
  for doubtful accounts                  $2,261         $1,068            $  --       $   764 (A)                 $2,565

Reserve for business
 restructuring                           $2,038         $2,038            $  --   $       --                   $   --
</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
December 28, 1996.


<PAGE>






Exhibits
<TABLE>
<CAPTION>




<PAGE>




                                                                 Incorporation
Number         Description                                       By Reference To


<C>            <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           Employment Agreement, dated as of                 Exhibit 19.4 to
               December 31, 1990, between Herbert                Annual Report on
               R. Aronson and Salant Corporation. *              Form 10-K for fiscal
                                                                 year 1990.

10.9           Letter Agreement, dated                           Exhibit 19.1 to Quarterly
               June 20, 1992, amending the                       Report on Form 10-Q for
               Employment Agreement, dated as of                 the quarter ended October 3, 1992.
               December 31, 1990, between Herbert
               R. Aronson and Salant Corporation. *

10.10          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.

10.11          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.

10.12          Employment Agreement,                             Exhibit 10.32 to
               dated as of June 1, 1993,                         Quarterly Report on
               between Todd Kahn                                 Form 10-Q for the
               and Salant Corporation. *                         quarter ended July 8, 1993.

10.13          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.

10.14          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.

10.15          Employment Agreement, dated                       Exhibit 10.32 to Annual Report on
               as of December 21, 1993, between                  Form 10-K for Fiscal Year 1993.
               Elliot M. Lavigne and Salant
               Corporation. *

10.16          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. *

<PAGE>





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

10.18          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.

10.19          Letter Agreement, dated                           Exhibit 10.46 to
               October 18, 1994, amending the                    Quarterly Report on
               Employment Agreement, dated                       Form 10-Q for the
               December 31, 1990, between Herbert                quarter ended October 1, 1994.
               R. Aronson and Salant Corporation. *

10.20          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. *

10.21          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.

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

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

10.24          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. *

10.25          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. *

10.26          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.

10.27          Letter Agreement, dated April 12,                 Exhibit 10.28 to
               1995, amending the Employment                     Quarterly Report
               Agreement, dated June 1, 1993,                    on Form l0-Q for
               between Todd Kahn and Salant                      the quarter
               Corporation. *                                    ended April 1,
                                                                 1995.

10.28          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.

10.29          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.

10.30          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.

10.31          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.

10.32          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.

10.33          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.

10.34          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.

10.35          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.

10.36          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.

10.37          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/Commerical Services,
               Inc.

10.38          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/Commerical Services,
               Inc.

10.39          Employment Agreement, dated as
               of January 1, 1997, between
               Nicholas P. DiPaolo and
               Salant Corporation. *

10.40          Salant Corporation 1996 Stock Plan

10.41          Tenth Amendment to Credit Agreement,
               dated as of February 20, 1997, to the
               Revolving Credit, Factoring and
               Security Agreement, dated as of
               September 20, 1993, as amended,
               between Salant Corporation and
               The CIT Group/Commerical Services,
               Inc.

10.42          Employment Agreement, dated as
               of February 11, 1997, between
               Michael A. Lubin and
               Salant Corporation. *

10.43          Employment Agreement, dated as
               of March 24, 1997, between
               Jerald S. Politzer and
               Salant Corporation. *

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.

<TABLE>
<CAPTION>
                               SALANT CORPORATION

Date:   March 28, 1997                                 By:  /s/ Richard P. Randall
                                                             Senior 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 28, 1997.

         Signature                                        Title

<S>                                                      <C>
         /s/ Nicholas P. DiPaolo                         Chairman of the Board,
         Nicholas P. DiPaolo                             President and Chief Executive Officer
                                                         (Principal Executive Officer); Director

         /s/ Michael A. Lubin                            Executive Vice President and
         Michael A. Lubin                                Chief Operating Officer

         /s/ Richard P. Randall                          Senior Vice President
         Richard P. Randall                              and Chief Financial Officer
                                                         (Principal Financial and Accounting Officer)



         /s/ Craig M. Cogut                              /s/ Jerald S. Politzer
         Craig M. Cogut                                  Director        Jerald S. Politzer
         Director

         /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
         /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

</TABLE>


<PAGE>




SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549






EXHIBITS


to


FORM 10-K


FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996



<PAGE>


SALANT CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>



<PAGE>





                  Incorporation
Number         Description                                       By Reference To


<C>            <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           Employment Agreement, dated as of                 Exhibit 19.4 to
               December 31, 1990, between Herbert                Annual Report on
               R. Aronson and Salant Corporation. *              Form 10-K for fiscal
                                                                 year 1990.

10.9           Letter Agreement, dated                           Exhibit 19.1 to Quarterly
               June 20, 1992, amending the                       Report on Form 10-Q for
               Employment Agreement, dated as of                 the quarter ended October 3, 1992.
               December 31, 1990, between Herbert
               R. Aronson and Salant Corporation. *

10.10          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.

10.11          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.

10.12          Employment Agreement,                             Exhibit 10.32 to
               dated as of June 1, 1993,                         Quarterly Report on
               between Todd Kahn                                 Form 10-Q for the
               and Salant Corporation. *                         quarter ended July 8, 1993.

10.13          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.

10.14          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.

10.15          Employment Agreement, dated                       Exhibit 10.32 to Annual Report on
               as of December 21, 1993, between                  Form 10-K for Fiscal Year 1993.
               Elliot M. Lavigne and Salant
               Corporation. *

10.16          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. *

<PAGE>





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

10.18          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.

10.19          Letter Agreement, dated                           Exhibit 10.46 to
               October 18, 1994, amending the                    Quarterly Report on
               Employment Agreement, dated                       Form 10-Q for the
               December 31, 1990, between Herbert                quarter ended October 1, 1994.
               R. Aronson and Salant Corporation. *

10.20          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. *

10.21          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.

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

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

10.24          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. *

10.25          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. *

10.26          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.

10.27          Letter Agreement, dated April 12,                 Exhibit 10.28 to
               1995, amending the Employment                     Quarterly Report
               Agreement, dated June 1, 1993,                    on Form l0-Q for
               between Todd Kahn and Salant                      the quarter
               Corporation. *                                    ended April 1,
                                                                 1995.

10.28          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.

10.29          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.

10.30          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.

10.31          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.

10.32          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.

10.33          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.

10.34          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.

10.35          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.

10.36          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.

10.37          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/Commerical Services,
               Inc.

10.38          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/Commerical Services,
               Inc.

10.39          Employment Agreement, dated as
               of January 1, 1997, between
               Nicholas P. DiPaolo and
               Salant Corporation. *

10.40          Salant Corporation 1996 Stock Plan

10.41          Tenth Amendment to Credit Agreement,
               dated as of February 20, 1997, to the
               Revolving Credit, Factoring and
               Security Agreement, dated as of
               September 20, 1993, as amended,
               between Salant Corporation and
               The CIT Group/Commerical Services,
               Inc.

10.42          Employment Agreement, dated as
               of February 11, 1997, between
               Michael A. Lubin and
               Salant Corporation. *

10.43          Employment Agreement, dated as
               of March 24, 1997, between
               Jerald S. Politzer and
               Salant Corporation. *

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