-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HNTH+mTAlF7L5usoefDfNNP5PdUXBBJ9MJtXzGhIc/wKcRjc12YFcx37dISHLP7K ahKtB4Why4Dub00Ed9JwFA== 0000893220-97-001349.txt : 19970808 0000893220-97-001349.hdr.sgml : 19970808 ACCESSION NUMBER: 0000893220-97-001349 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970705 FILED AS OF DATE: 19970807 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: V F CORP /PA/ CENTRAL INDEX KEY: 0000103379 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 231180120 STATE OF INCORPORATION: PA FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05256 FILM NUMBER: 97653083 BUSINESS ADDRESS: STREET 1: 1047 N PARK RD CITY: WYOMISSING STATE: PA ZIP: 19610 BUSINESS PHONE: 2153781151 MAIL ADDRESS: STREET 2: P O BOX 1022 CITY: READING STATE: PA ZIP: 19603 FORMER COMPANY: FORMER CONFORMED NAME: VF CORPORATION DATE OF NAME CHANGE: 19900621 FORMER COMPANY: FORMER CONFORMED NAME: VANITY FAIR MILLS INC DATE OF NAME CHANGE: 19690520 10-Q 1 FORM 10-Q FOR V. F. CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JULY 5, 1997 Commission file number: 1-5256 -------------------- V. F. CORPORATION (Exact name of registrant as specified in its charter) PENNSYLVANIA 23-1180120 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 1047 NORTH PARK ROAD WYOMISSING, PENNSYLVANIA 19610 (Address of principal executive offices) (610) 378-1151 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) 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 and (2) has been subject to such filing requirements for the past 90 days. YES X NO On August 2, 1997, there were 62,819,769 shares of Common Stock outstanding. 1 2
VF CORPORATION INDEX PAGE NO. PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Statements of Income - Three months and six months ended July 5, 1997 and June 29, 1996.............................................................3 Consolidated Balance Sheets - July 5, 1997, January 4, 1997 and June 29, 1996.........................................4 Consolidated Statements of Cash Flows - Six months ended July 5, 1997 and June 29, 1996.............................................................5 Notes to Consolidated Financial Statements................................6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................7 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K...........................................9
2 3 VF CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------ -------------------------- JULY 5 JUNE 29 JULY 5 JUNE 29 1997 1996 1997 1996 ---------- ---------- ---------- ---------- NET SALES $ 1,255,549 $ 1,220,997 $ 2,518,330 $ 2,379,120 COSTS AND OPERATING EXPENSES Cost of products sold 827,899 824,678 1,672,843 1,602,284 Marketing, administrative and general expenses 286,953 266,974 577,495 536,763 Other operating (income) expense 337 (1,440) 489 (861) ---------- ---------- ---------- ---------- 1,115,189 1,090,212 2,250,827 2,138,186 ---------- ---------- ---------- ---------- OPERATING INCOME 140,360 130,785 267,503 240,934 OTHER INCOME (EXPENSE) Interest income 3,356 4,187 7,592 6,247 Interest expense (12,543) (16,037) (25,161) (33,904) Miscellaneous, net 108 (446) (693) (1,632) ---------- ---------- ---------- ---------- (9,079) (12,296) (18,262) (29,289) ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 131,281 118,489 249,241 211,645 INCOME TAXES 52,377 48,597 100,151 85,823 ---------- ---------- ---------- ---------- NET INCOME $ 78,904 $ 69,892 $ 149,090 $ 125,822 ========== ========== ========== ========== EARNINGS PER COMMON SHARE Primary $1.22 $1.08 $2.30 $1.94 Fully diluted 1.19 1.06 2.25 1.91 CASH DIVIDENDS PER COMMON SHARE $0.38 $0.36 $0.76 $0.72
See notes to consolidated financial statements. 3 4 VF CORPORATION CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
JULY 5 JANUARY 4 JUNE 29 1997 1997 1996 (Unaudited) (Unaudited) ----------- ---------- ----------- ASSETS CURRENT ASSETS Cash and equivalents $ 78,648 $ 270,629 $ 69,179 Accounts receivable, less allowances: Jul 5 - $41,234; Jan 4 - $40,253; Jun 29 - $37,555 731,093 592,942 740,705 Inventories: Finished products 462,264 394,962 500,137 Work in process 177,847 168,774 165,791 Materials and supplies 152,917 167,087 141,007 ---------- ---------- ---------- 793,028 730,823 806,935 Other current assets 124,992 111,932 119,175 ---------- ---------- ---------- Total current assets 1,727,761 1,706,326 1,735,994 PROPERTY, PLANT AND EQUIPMENT 1,591,767 1,543,351 1,517,040 Less accumulated depreciation 867,725 821,827 786,678 ---------- ---------- ---------- 724,042 721,524 730,362 INTANGIBLE ASSETS 828,489 863,930 861,368 OTHER ASSETS 189,879 157,755 151,003 ---------- ---------- ---------- $ 3,470,171 $ 3,449,535 $ 3,478,727 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 40,376 $ 17,528 $ 132,654 Current portion of long-term debt 450 1,298 1,037 Accounts payable 299,863 320,056 278,687 Accrued liabilities 469,801 427,385 404,768 ---------- ---------- ---------- Total current liabilities 810,490 766,267 817,146 LONG-TERM DEBT 516,733 519,058 626,530 OTHER LIABILITIES 167,133 164,077 176,380 REDEEMABLE PREFERRED STOCK 57,229 58,092 59,024 DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (28,941) (31,698) (34,057) ---------- ---------- ---------- 28,288 26,394 24,967 COMMON SHAREHOLDERS' EQUITY Common Stock 62,915 63,908 63,547 Additional paid-in capital 710,725 668,554 632,204 Foreign currency translation (26,745) 6,428 7,708 Retained earnings 1,200,632 1,234,849 1,130,245 ---------- ---------- ---------- 1,947,527 1,973,739 1,833,704 ---------- ---------- ---------- $ 3,470,171 $ 3,449,535 $ 3,478,727 ========== ========== ==========
See notes to consolidated financial statements. 4 5 VF CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED --------------------------- JULY 5 JUNE 29 1997 1996 --------- --------- OPERATIONS Net income $ 149,090 $ 125,822 Adjustments to reconcile net income to cash provided by operations: Depreciation 66,105 67,805 Amortization of intangible assets 13,880 14,085 Other, net (21,643) (1,476) Changes in current assets and liabilities: Accounts receivable (155,530) (122,554) Inventories (73,273) 29,456 Accounts payable (14,521) 4,251 Other, net 45,532 61,970 --------- --------- Cash provided by operations 9,640 179,359 INVESTMENTS Capital expenditures (77,671) (68,472) Other, net (679) 13,216 --------- --------- Cash invested (78,350) (55,256) FINANCING Increase (decrease) in short-term borrowings 24,551 (95,425) Proceeds from long-term debt 0 15,556 Payment of long-term debt (1,229) (4,739) Purchase of Common Stock (134,964) (41,774) Cash dividends paid (50,320) (47,859) Proceeds from issuance of stock 37,407 34,621 Other, net 1,284 621 --------- --------- Cash used by financing (123,271) (138,999) --------- --------- NET CHANGE IN CASH AND EQUIVALENTS (191,981) (14,896) CASH AND EQUIVALENTS - BEGINNING OF YEAR 270,629 84,075 --------- --------- CASH AND EQUIVALENTS - END OF PERIOD $ 78,648 $ 69,179 ========= =========
See notes to consolidated financial statements. 5 6 VF CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended July 5, 1997 are not necessarily indicative of results that may be expected for the year ending January 3, 1998. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended January 4, 1997. NOTE B - EARNINGS PER COMMON SHARE Primary earnings per share are computed by dividing net income, after deducting preferred dividends, by the weighted average number of common shares outstanding. Fully diluted earnings per share assume the conversion of Preferred Stock and the exercise of stock options that have a dilutive effect. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which establishes new standards for computations of earnings per share. The Statement will be effective for periods ending after December 15, 1997, with prior periods restated at that time to comply with the new standards. If the Statement had been effective for the periods ended July 5, 1997 and June 29, 1996, there would have been no significant change in earnings per share as presented in the accompanying Consolidated Statements of Income. NOTE C - CAPITAL There are 150,000,000 authorized shares of Common Stock, no par value - stated capital $1 a share. At July 5, 1997, there were 62,914,669 shares outstanding, excluding 4,139,641 treasury shares. At January 4, 1997 and June 29, 1996, there were 63,907,874 and 63,546,886 shares outstanding, excluding 2,399,323 and 2,075,683 treasury shares, respectively. There are 25,000,000 authorized shares of Preferred Stock, $1 par value. Of these shares, 2,000,000 were designated as Series A, of which none have been issued, and 2,105,263 shares were designated and issued as 6.75% Series B Preferred Stock, of which 1,853,570 shares were outstanding at July 5, 1997, 1,881,515 at January 5, 1997 and 1,911,706 at June 29, 1996. NOTE D - DERIVATIVE FINANCIAL INSTRUMENTS The Company enters into short-term foreign currency forward exchange contracts to manage exposures related to certain anticipated foreign currency cash flows. Gains and losses are included in operating income currently. The amounts of the contracts, and related gains and losses, are not material. 6 7 VF CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Substantially all of the sales dollar increases of 3% for the quarter and 6% for the six month periods ended July 5, 1997 resulted from increases in unit sales. In addition, sales in both 1997 periods were reduced by 1% from the negative impact of the translation of foreign currencies into the U.S. dollar, as the U.S. dollar strengthened in relation to the currencies of most European countries where the Company has operations. The sales increases for both the quarter and six month periods were broad-based; that is, most of the Company's businesses experienced increases, with the exception of our international operations. Sales of domestic jeanswear increased during the quarter and six months, with jeanswear sold through the mass markets reflecting particularly strong increases driven by our Wrangler, Riders and Timber Creek brands. U.S. intimate apparel also contributed significantly to the sales increase with expanded distribution of the Vassarette brand. Our Red Kap occupational apparel business also posted higher sales resulting from unit volume growth, aided by the August 1996 acquisition of Bulwark Protective Apparel. Total international sales for both our jeanswear and intimate apparel businesses were down for the quarter and six months, due primarily to the effects of foreign currency translation and to weak retail conditions in several key European markets. Gross margins improved to 34.1% of sales in the quarter and 33.6% in the six months of 1997, compared with 32.5% and 32.7% in 1996. The margin improvement resulted from lower raw material costs, lower cost sourcing and a higher percentage of products sold at regular pricing than experienced in the 1996 periods. Marketing, administrative and general expenses were 22.9% of sales during the quarter and six month periods, compared with 21.9% and 22.6%, respectively, in 1996. The increases were due to higher levels of advertising and other specific promotional expenses in the Company's targeted growth areas of domestic and international jeanswear, intimate apparel and daypacks. These advertising and promotional expenses totaled $150 million during the first six months of 1997, a 25% increase over the prior year period. Management has committed to invest a significant portion of the savings resulting from the manufacturing, selling and administrative cost reduction initiatives of the past two years in increased advertising and other actions to support and build its brands. Net interest expense declined significantly in 1997 due to a higher level of cash and reduced short and long-term borrowings. The effective income tax rate for the six months of 1997 was 40.2%, compared with 40.6% in the prior year, based on the expected rate for the year. Earnings per share for the 1997 quarter advanced 13% over the prior year quarter and 19% for the six months, with the effects of a strong U.S. dollar on foreign currency translation reducing earnings by $.02 and $.06 per share, respectively. 7 8 FINANCIAL CONDITION AND LIQUIDITY The financial condition of the Company is reflected in the following:
JULY 5 JANUARY 4 JUNE 29 1997 1997 1996 --------- --------- ------- (Dollars in millions) Working capital $917.3 $940.1 $918.8 Current ratio 2.1 to 1 2.2 to 1 2.1 to 1 Debt to total capital 22.3% 21.4% 29.3%
Accounts receivable balances are higher than at the end of 1996 due to seasonal sales patterns, with days sales outstanding in accounts receivable consistent for all dates presented. Inventories at the end of the second quarter of both 1997 and 1996 are comparable, but more than at the end of 1996 due to seasonal patterns. Short-term debt levels are significantly lower at the end of the second quarter of 1997 than at the comparable date in 1996 due to the strong cash flow from operations during the 1996 year. Cash flow from operations for the first six months of 1997 is at a normal level compared with most prior years. In contrast, cash flow from operations for the 1996 period was unusually high due to a reduction in inventory levels from the prior year-end instead of the more normal inventory build-up during this period of the year. During the second quarter, the Company accelerated its Common Stock repurchase program. So far during 1997, the Company has repurchased 1.7 million shares of its Common Stock in open market transactions for a total of $135.0 million. Management intends to continue to repurchase shares during the remainder of the year using its free cash flow. Under its current authorization from the Board of Directors, the Company may repurchase up to an additional 2.9 million Common Shares. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Certain statements included herein are "forward-looking statements" within the meaning of the federal securities laws. This includes any statements concerning plans and objectives of management relating to the Company's operations or economic performance, and assumptions related thereto. In addition, the Company and its representatives may from time to time make other oral or written statements that are also forward-looking statements. These forward-looking statements are made based on management's expectations and beliefs concerning future events impacting the Company and therefore involve a number of risks and uncertainties. Management cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause the actual results of operations or financial condition of the Company to differ include, but are not necessarily limited to, the overall level of consumer spending for apparel; changes in trends in the segments of the market in which the Company competes; the financial strength of the retail 8 9 industry; actions of competitors that may impact the Company's business; timely completion of the Company's cost reduction initiatives; and the impact of unforeseen economic changes in the markets where the Company competes, such as changes in interest rates, currency exchange rates, inflation rates, recession, and other external economic and political factors over which the Company has no control. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 11 - Computation of earnings per share for the three months and six months ended July 5, 1997 and June 29, 1996. Exhibit 27 - Financial data schedule as of July 5, 1997. (b) Reports on Form 8-K - There were no reports on Form 8-K filed for the three months ended July 5, 1997. 9 10 SIGNATURES Pursuant to the requirements 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. V.F. CORPORATION ----------------------- (Registrant) By: /s/ Gerard G. Johnson ------------------------- Gerard G. Johnson Vice President - Finance (Chief Financial Officer) Date: August 7, 1997 By: /s/ Robert K. Shearer --------------------------- Robert K. Shearer Vice President - Controller (Chief Accounting Officer) 10 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 Exhibit 11 VF CORPORATION COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------- ------------------------------ JULY 5 JUNE 29 JULY 5 JUNE 29 1997 1996 1997 1996 ------------- ------------- ------------- ----------- PRIMARY EARNINGS PER SHARE Net income $ 78,904 $ 69,892 $ 149,090 $ 125,822 Less Preferred Stock dividends and redemption premium 1,158 1,127 2,268 2,251 ------------- ------------- ------------- ----------- Net income available to common stockholders $ 77,746 $ 68,765 $ 146,822 $ 123,571 ============= ============= ============= =========== Average number of common shares outstanding 63,693 63,719 63,828 63,641 ============= ============= ============= =========== Primary earnings per share $1.22 $1.08 $2.30 $1.94 ============= ============= ============= =========== FULLY DILUTED EARNINGS PER SHARE Net income $ 78,904 $ 69,892 $ 149,090 $ 125,822 Increased ESOP contribution required if Preferred Stock were converted to Common Stock 312 334 624 670 ------------- ------------- ------------- ----------- Fully diluted earnings $ 78,592 $ 69,558 $ 148,466 $ 125,152 ============= ============= ============= =========== Average number of common shares outstanding 63,693 63,719 63,828 63,641 Additional common equivalent shares resulting from: Conversion of Preferred Stock 1,483 1,529 1,489 1,546 Dilutive effect of stock options 784 419 775 419 ------------- ------------- ------------- ----------- Average number of common and common equivalent shares 65,960 65,667 66,092 65,606 ============= ============= ============= =========== Fully diluted earnings per share $1.19 $1.06 $2.25 $1.91 ============= ============= ============= ===========
11 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS INCLUDED IN FORM 10-Q FOR JULY 5, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-03-1998 JUL-05-1997 78,648 0 772,327 41,234 793,028 1,727,761 1,591,767 867,725 3,470,171 810,490 516,733 28,288 0 62,915 1,884,612 3,470,171 2,518,330 2,518,330 1,672,843 1,672,843 0 0 25,161 249,241 100,151 149,090 0 0 0 149,090 2.30 2.25
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