-----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, RGL6wCdCuwZXDdo5barGbOlMZ0epelAPLzuacDddXO9SFjn/6rOY4cM1BLnMSEFg C+HtL0w+UpCcNQGDhf6a6Q== 0000893220-98-001007.txt : 19980519 0000893220-98-001007.hdr.sgml : 19980519 ACCESSION NUMBER: 0000893220-98-001007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980518 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: SEC FILE NUMBER: 001-05256 FILM NUMBER: 98627061 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, 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 APRIL 4, 1998 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 May 2, 1998, there were 121,670,346 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 ended April 4, 1998 and April 5, 1997 ................................................3 Consolidated Balance Sheets - April 4, 1998, January 3, 1998 and April 5, 1997 ............................4 Consolidated Statements of Cash Flows - Three months ended April 4, 1998 and April 5, 1997 ................................................5 Notes to Consolidated Financial Statements ...................6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ..........................8 PART II - OTHER INFORMATION Item 2 - Changes in the Rights of the Company's Security Holders .........10 Item 4 - Submission of Matters to a Vote of Security Holders .............10 Item 6 - Exhibits and Reports on Form 8-K ................................10
2 3 VF CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED APRIL 4 APRIL 5 1998 1997 ---- ---- NET SALES $ 1,326,205 $ 1,262,781 COSTS AND OPERATING EXPENSES Cost of products sold 872,980 844,944 Marketing, administrative and general expenses 309,912 290,542 Other operating (income) expense 399 152 ----------- ----------- 1,183,291 1,135,638 ----------- ----------- OPERATING INCOME 142,914 127,143 OTHER INCOME (EXPENSE) Interest income 1,802 4,236 Interest expense (14,896) (12,618) Miscellaneous, net 356 (801) ----------- ----------- (12,738) (9,183) ----------- ----------- INCOME BEFORE INCOME TAXES 130,176 117,960 INCOME TAXES 52,070 47,774 ----------- ----------- NET INCOME $ 78,106 $ 70,186 =========== =========== EARNINGS PER COMMON SHARE Basic $ 0.63 $ 0.54 Diluted 0.62 0.53 CASH DIVIDENDS PER COMMON SHARE $ 0.20 $ 0.19
See notes to consolidated financial statements. 3 4 VF CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
APRIL 4 JANUARY 3 APRIL 5 1998 1998 1997 ---- ---- ---- ASSETS CURRENT ASSETS Cash and equivalents $ 69,716 $ 124,094 $ 219,745 Accounts receivable, less allowances: Apr 4 - $43,088; Jan 3 - $39,576; Apr 5 - $42,175 728,708 587,934 682,247 Inventories: Finished products 540,713 434,000 436,148 Work in process 179,781 166,947 165,469 Materials and supplies 167,594 173,808 141,570 ----------- ----------- ----------- 888,088 774,755 743,187 Other current assets 140,230 114,683 115,750 ----------- ----------- ----------- Total current assets 1,826,742 1,601,466 1,760,929 PROPERTY, PLANT AND EQUIPMENT 1,613,329 1,568,952 1,566,074 Less accumulated depreciation 890,480 862,962 840,467 ----------- ----------- ----------- 722,849 705,990 725,607 INTANGIBLE ASSETS 911,125 814,332 842,596 OTHER ASSETS 229,221 200,994 185,315 ----------- ----------- ----------- $ 3,689,937 $ 3,322,782 $ 3,514,447 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 253,516 $ 24,191 $ 24,641 Current portion of long-term debt 787 450 1,277 Accounts payable 285,669 301,103 291,011 Accrued liabilities 521,877 440,164 485,877 ----------- ----------- ----------- Total current liabilities 1,061,849 765,908 802,806 LONG-TERM DEBT 516,840 516,226 517,616 OTHER LIABILITIES 157,237 143,813 164,248 REDEEMABLE PREFERRED STOCK 55,756 56,341 57,661 DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (24,740) (26,275) (30,306) ----------- ----------- ----------- 31,016 30,066 27,355 COMMON SHAREHOLDERS' EQUITY Common Stock 121,608 121,225 64,010 Additional paid-in capital 773,585 744,108 681,555 Foreign currency translation (39,292) (36,110) (13,372) Retained earnings 1,067,094 1,037,546 1,270,229 ----------- ----------- ----------- 1,922,995 1,866,769 2,002,422 ----------- ----------- ----------- $ 3,689,937 $ 3,322,782 $ 3,514,447 =========== =========== ===========
See notes to consolidated financial statements. 4 5 VF CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED APRIL 4 APRIL 5 1998 1997 ---- ---- OPERATIONS Net income $ 78,106 $ 70,186 Adjustments to reconcile net income to cash provided by operations: Depreciation 33,817 32,546 Amortization of intangible assets 8,044 6,949 Other, net 6,842 (23,043) Changes in current assets and liabilities: Accounts receivable (117,011) (102,073) Inventories (23,237) (19,821) Accounts payable (27,247) (25,265) Other, net 47,368 64,623 --------- --------- Cash provided by operations 6,682 4,102 INVESTMENTS Capital expenditures (39,446) (41,370) Business acquisitions (228,155) 0 Other, net 840 499 --------- --------- Cash invested (266,761) (40,871) FINANCING Increase (decrease) in short-term borrowings 229,757 8,364 Payment of long-term debt (52) (78) Purchase of Common Stock (23,179) (10,178) Cash dividends paid (25,213) (25,247) Proceeds from issuance of stock 23,895 12,325 Other, net 493 699 --------- --------- Cash provided (used) by financing 205,701 (14,115) --------- --------- NET CHANGE IN CASH AND EQUIVALENTS (54,378) (50,884) CASH AND EQUIVALENTS - BEGINNING OF YEAR 124,094 270,629 --------- --------- CASH AND EQUIVALENTS - END OF PERIOD $ 69,716 $ 219,745 ========= =========
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 three months ended April 4, 1998 are not necessarily indicative of results that may be expected for the year ending January 2, 1999. 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 3, 1998. NOTE B - EARNINGS PER COMMON SHARE Earnings per share amounts for 1997 have been restated in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share. Earnings per share are computed as follows (in thousands, except per share amounts):
First Quarter 1998 1997 ---- ---- Basic earnings per share: Net income $ 78,106 70,186 Less Preferred Stock dividends and redemption premium 1,585 1,151 -------- -------- Net income available for Common Stock $ 76,521 $ 69,035 ======== ======== Weighted average Common Stock outstanding 121,251 127,926 ======== ======== Basic earnings per share $ 0.63 $ 0.54 Diluted earnings per share: Net income $ 78,106 $ 70,186 Increased ESOP expense if Preferred Stock were converted to Common Stock 289 316 -------- -------- Net income available for Common Stock and dilutive securities $ 77,817 $ 69,870 ======== ======== Weighted average Common Stock outstanding 121,251 127,926 Additional Common Stock resulting from dilutive securities: Preferred Stock 2,890 2,988 Stock options 1,311 942 -------- -------- Weighted average Common Stock and dilutive securities outstanding 125,452 131,856 ======== ======== Diluted earnings per share $ 0.62 $ 0.53
6 7 NOTE C - CAPITAL The Company declared a two-for-one stock split in November 1997. References in this report to per share amounts have been restated, but numbers of shares presented are based on the actual amounts outstanding. At April 4, 1998, there were 150,000,000 authorized shares of Common Stock, no par value - stated capital $1 a share. At April 4, 1998, there were 121,607,566 shares outstanding, excluding 14,397,870 treasury shares. At January 3, 1998 and April 5, 1997, there were 121,225,298 and 64,009,905 shares outstanding, excluding 13,910,519 and 2,539,948 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 1,805,868 shares were outstanding at April 4, 1998, 1,824,820 at January 3, 1998 and 1,867,558 at April 5, 1997. NOTE D - ACQUISITION On January 8, 1998, the Company acquired the common stock of Bestform Group, Inc. for $184.3 million in cash, plus repayment of $44.4 million in debt. This acquisition has been accounted for as a purchase, and accordingly, operating results have been included in the financial statements from the date of acquisition. The net assets of Bestform are included based on a preliminary allocation of the purchase price, with approximately $109 million representing intangible assets. Final asset and liability valuations are not expected to have a material effect on the financial statements. The following pro forma results of operations assume that Bestform had been acquired at the beginning of 1997 (in thousands, except per share amounts):
First Quarter 1997 ---- Net sales $1,337,377 Net income 72,297 Earnings per common share: Basic $0.56 Diluted 0.55
NOTE E - COMPREHENSIVE INCOME Effective January 4, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. Comprehensive income consists of net income from operations, plus certain changes in assets and liabilities that are not included in net income but are instead reported within a separate component of shareholders' equity under generally accepted accounting standards. The Company's comprehensive income was as follows (in thousands):
First Quarter 1998 1997 ---- ---- Net income as reported $78,106 $ 70,186 Other comprehensive income: Foreign currency translation adjustments, net of income taxes (3,182) (19,800) ------- -------- Comprehensive income $74,924 $ 50,386 ======= ========
7 8 VF CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Consolidated sales increased 5% for the quarter ended April 5, 1998, compared with the first quarter of 1997. Businesses acquired since last year's first quarter increased sales by 6%. In the translation of foreign currencies into the U.S. dollar, a stronger U.S. dollar reduced sales comparisons by 2% (and earnings by $.02 per share). Domestic intimate apparel sales increased from the acquisition of Bestform Group, Inc. (Bestform) and the continuing growth of the Vassarette brand. Sales of domestic jeanswear increased during the quarter, particularly in the Lee, Riders and Timber Creek brands. Total international sales for both our jeanswear and intimate apparel businesses declined for the quarter due to the effects of a stronger U.S. dollar in translating foreign currencies and to weak retail conditions in several key European markets. Sales also declined in knitwear due to difficult market conditions. Gross margins improved to 34.2% of sales in the quarter, compared with 33.1% in the 1997 period. The margin improvement occurred in most businesses and resulted from the continuing shift to lower cost sourcing, lower raw material costs and improved operating efficiencies. Marketing, administrative and general expenses were 23.4% of sales during the quarter, compared with 23.0% in 1997. Marketing expenses as a percent of sales in the last two years have been above historical spending levels as management has increased advertising and other efforts to support and build its brands. In addition, expenses have increased as a percent of sales due to the implementation of shared services and common systems. Net interest expense increased in 1998 due to a reduced level of cash and increased short-term borrowings related to the acquisition of Bestform in January 1998. The effective income tax rate for the three months of 1998 was 40.0%, based on the expected rate for the year, compared with 40.5% in the prior year. FINANCIAL CONDITION AND LIQUIDITY The financial condition of the Company is reflected in the following:
APRIL 4 JANUARY 3 APRIL 5 1998 1998 1997 ---- ---- ---- (Dollars in millions) Working capital $764.9 $835.6 $958.1 Current ratio 1.7 to 1 2.1 to 1 2.2 to 1 Debt to total capital 28.6% 22.5% 21.3%
8 9 Accounts receivable balances at the end of the first quarter of 1998 are higher than at the comparable date in 1997 and at year-end 1997 due primarily to the acquisition of Bestform. In addition, first quarter balances are higher than year-end balances due to seasonal sales patterns. Days sales outstanding are consistent for all dates presented. Inventories at the end of the first quarter of 1998 include those of Bestform. Excluding Bestform, inventories are consistent with the 1997 year-end level and 6% higher than the level at the end of the first quarter of 1997 due primarily to sales growth expectations. Intangible assets increased during 1998 due to the acquisition of Bestform. The increase in short-term borrowings relates to the acquisition of Bestform in January 1998. During the first quarter of 1998, the Company repurchased 487,000 shares of its Common Stock in open market transactions for a total cost of $23.2 million. Under its current authorization from the Board of Directors, the Company may repurchase up to an additional 4.7 million Common Shares. The Company announced subsequent to the end of the quarter the formation of a majority-owned subsidiary to manufacture and market Wrangler products in Japan. The transaction is expected to close near the end of the second quarter. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Certain statements included herein are "forward-looking statements" within the meaning of the federal securities laws. This includes 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 industry; actions of competitors that may impact the Company's business; 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. 9 10 PART II - OTHER INFORMATION Item 2 - Changes in the Rights of the Company's Security Holders In October 1997, the Board of Directors adopted a new Shareholder Rights Plan to replace the former rights plan which expired on January 25, 1998. Under the new Plan, the Company declared a dividend of one Right for each share of VF Common Stock outstanding on January 25, 1998. The Rights become exercisable ten days after an outside party acquires, or makes an offer for, 15% or more of the Common Stock. Once exercisable, each Right will entitle its holder to buy 1/100 share of Series A Preferred Stock for $175. If the Company is involved in a merger or other business combination or an outside party acquires 15% or more of the Common Stock, each Right will be modified to entitle its holder (other than the acquirer) to purchase common stock of the acquiring company or, in certain circumstances, VF Common Stock having a market value of twice the exercise price of the Right. In some circumstances, Rights other than those held by an acquirer may be exchanged for one share of VF Common Stock. The Rights, which expire in January 2008, may be redeemed at $.01 per right prior to their becoming exercisable. Item 4 - Submission of Matters to a Vote of Security Holders At the Annual Meeting of Shareholders of the Company held on April 21, 1998, the following three nominees to the Board of Directors were elected to serve until the 2001 Annual Meeting:
Votes For Votes Withheld --------- -------------- Robert D. Buzzell 99,523,392 4,277,122 Edward E. Crutchfield 98,781,099 5,019,415 George Fellows 98,632,589 5,167,925
In addition, the proposal to increase the number of shares of Common Stock that the Company is authorized to issue from 150 million to 300 million was approved by the shareholders. The vote was 96,504,447 for, 6,935,040 against and 361,027 abstaining. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 3(A) - Articles of Amendment with Respect to Designation of Series A Participating Cumulative Preferred Stock (Incorporated by reference to Exhibit 3(C) to Form 10-K for the fiscal year ended January 3, 1998) Exhibit 3(B) - Article Fifth of the Amended and Restated Articles of Incorporation Exhibit 4(A) - Rights Agreement, dated as of October 22, 1997, between the Company and First Chicago Trust Company of New York (Incorporated by reference to Exhibit 4(F) to Form 10-K for the fiscal year ended January 3, 1998) Exhibit 27 - Financial data schedule as of April 4, 1998 (b) Reports on Form 8-K - There were no reports on Form 8-K filed for the three months ended April 4, 1998. 10 11 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: May 15, 1998 By: /s/ Robert K. Shearer -------------------------------- Robert K. Shearer Vice President - Controller (Chief Accounting Officer) 11 EX-3.B 2 ARTICLE FIFTH OF THE AMENDED & RESTATED ARTICLES 1 Exhibit 3(B) Microfilm Number_________________Filed with the Department of State on May 12, 1998 Entity Number 0372201 ______________________________________ Secretary of the Commonwealth j/c ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (Rev 91) In compliance with the requirements of 15 Pa.C.S. $ 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: V.F. Corporation 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) 1047 North Park Road Wyomissing, PA 19610 ___________________________________________________________________________ Number and Street City State Zip County (b) c/o ________________________________________________________________________ Name of Commercial Registered Office Provider For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is: The Act of April 29, 1874 4. The date of its incorporation is: December 4, 1899 5. (Check, and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of Amendment in the Department of State. / / The amendment shall be effective on ______ at ______a.m. Date Hour 6. (Check one of the following): X The amendment was adopted by the shareholders (or members) pursuant to 15 Pa.C.S. $ 1914(c). / / The amendment was adopted by the board of directors pursuant to 15 Pa.C.S. $ 1914(c). 7. (Check, and if appropriate complete, one of the following): / / The amendment adopted by the corporation, set forth in full, is as follows: /x/ The amendment adopted by the corporation as set forth in full in Exhibit A attached hereto and made a part hereto. 12 2 8. (Check if the amendment restates the Articles): ___ The restated Articles of Incorporation supersede the original Articles and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 29th day of April 1998. VF Corporation -------------------------------------------- (Name of Corporation) By: Mackey J. McDonald ----------------------------------------- (Signature) Title: President and Chief Executive Officer 13 3 Exhibit A Article FIFTH of the Amended and Restated Articles of Incorporation of V.F. Corporation is amended by deleting the first, second and third sentences thereof and substituting in lieu thereof the following: This Corporation is authorized to issue two classes of shares to be designated respectively "Preferred Stock" and "Common Stock"; the total number of shares which this Corporation shall have authority to issue is 325,000,000. The number of shares of Preferred Stock shall be 25,000,000, and the par value of each share of such class shall be One Dollar ($1.00). The number of shares of Common Stock shall be 300,000,000, without par value. Except as amended as set forth above, Article FIFTH remains in full force and effect. 14 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from financial statements included in Form 10-Q for April 4, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS JAN-02-1999 APR-04-1998 69,716 0 771,796 43,088 888,088 1,826,742 1,613,329 890,480 3,689,937 1,061,849 516,840 31,016 0 121,608 1,801,387 3,689,937 1,326,205 1,326,205 872,980 872,980 0 0 14,896 130,176 52,070 78,106 0 0 0 78,106 .63 .62
-----END PRIVACY-ENHANCED MESSAGE-----