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 MARCH 31, 2001
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)
628 GREEN VALLEY ROAD, SUITE 500
GREENSBORO, NORTH CAROLINA 27408
(Address of principal executive offices)
(336) 547-6000
(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 April 28, 2001, there were 111,990,355 shares of the registrant's Common
Stock outstanding.
VF CORPORATION
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income -
Three months ended March 31, 2001 and
April 1, 2000 ............................................. 3
Consolidated Balance Sheets - March 31, 2001,
December 30, 2000 and April 1, 2000 ....................... 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 2001 and
April 1, 2000 ............................................. 5
Notes to Consolidated Financial Statements ................ 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 11
Item 3 - Quantitative and Qualitative Disclosures about Market Risk ... 13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings ............................................ 14
Item 4 - Submission of Matters to a Vote of Security Holders .......... 14
Item 6 - Exhibits and Reports on Form 8-K ............................. 14
2
VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
--------------------------
APRIL 1
MARCH 31 2000
2001 (RESTATED)
---------- -----------
NET SALES $1,423,299 $1,355,184
COSTS AND OPERATING EXPENSES
Cost of products sold 942,406 897,581
Marketing, administrative and general expenses 329,669 314,418
Other operating expense 4,095 3,562
---------- ----------
1,276,170 1,215,561
---------- ----------
OPERATING INCOME 147,129 139,623
OTHER INCOME (EXPENSE)
Interest income 2,009 1,302
Interest expense (24,925) (17,526)
Miscellaneous, net (749) 1,370
---------- ----------
(23,665) (14,854)
---------- ----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING POLICY 123,464 124,769
INCOME TAXES 45,978 46,918
---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING POLICY 77,486 77,851
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE
IN ACCOUNTING POLICY FOR REVENUE RECOGNITION,
NET OF INCOME TAXES -- (6,782)
---------- ----------
NET INCOME $ 77,486 $ 71,069
========== ==========
EARNINGS PER COMMON SHARE - BASIC
Income before cumulative effect of change
in accounting policy $ 0.68 $ 0.67
Net income 0.68 0.61
EARNINGS PER COMMON SHARE - DILUTED
Income before cumulative effect of change
in accounting policy $ 0.67 $ 0.66
Net income 0.67 0.60
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 111,954 115,353
Diluted 115,487 118,446
CASH DIVIDENDS PER COMMON SHARE $ 0.23 $ 0.22
See notes to consolidated financial statements.
3
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
APRIL 1
MARCH 31 DECEMBER 30 2000
2001 2000 (RESTATED)
---------- ----------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 93,680 $ 118,891 $ 81,246
Accounts receivable, less allowances:
March 31 - $53,739; Dec 30 - $54,918;
April 1 - $54,381 787,506 716,299 777,996
Inventories:
Finished products 742,135 710,158 588,879
Work in process 188,439 194,194 207,765
Materials and supplies 207,662 220,086 197,467
---------- ---------- ----------
1,138,236 1,124,438 994,111
Other current assets 148,619 150,468 104,640
---------- ---------- ----------
Total current assets 2,168,041 2,110,096 1,957,993
PROPERTY, PLANT AND EQUIPMENT 1,846,618 1,865,326 1,821,828
Less accumulated depreciation 1,094,718 1,089,311 1,033,016
---------- ---------- ----------
751,900 776,015 788,812
INTANGIBLE ASSETS 1,085,140 1,101,876 980,235
OTHER ASSETS 381,387 370,169 350,678
---------- ---------- ----------
$4,386,468 $4,358,156 $4,077,718
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings 155,932 $ 147,005 $ 418,780
Current portion of long-term debt 111,801 113,999 4,725
Accounts payable 276,378 340,127 315,284
Accrued liabilities 469,077 405,069 429,441
---------- ---------- ----------
Total current liabilities 1,013,188 1,006,200 1,168,230
LONG-TERM DEBT 904,724 905,036 517,140
OTHER LIABILITIES 218,173 214,590 198,205
REDEEMABLE PREFERRED STOCK 47,633 48,483 50,380
DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK
OWNERSHIP PLAN (6,305) (7,966) (12,612)
---------- ---------- ----------
41,328 40,517 37,768
COMMON SHAREHOLDERS' EQUITY
Common Stock, stated value $1; shares 111,690 112,259 114,196
authorized, 300,000,000; shares outstanding;
March 31 - 111,690,118; Dec 30 - 112,258,556;
April 1 - 114,195,782
Additional paid-in capital 846,112 833,441 831,932
Accumulated other comprehensive income (loss) (98,351) (87,875) (66,708)
Retained earnings 1,349,604 1,333,988 1,276,955
---------- ---------- ----------
Total common shareholders' equity 2,209,055 2,191,813 2,156,375
---------- ---------- ----------
$4,386,468 $4,358,156 $4,077,718
========== ========== ==========
See notes to consolidated financial statements.
4
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
----------------------
APRIL 1
MARCH 31 2000
2001 (RESTATED)
-------- ----------
OPERATIONS
Net income $ 77,486 $ 71,069
Adjustments to reconcile net income to cash
provided by operations:
Cumulative effect of accounting change -- 6,782
Depreciation 34,354 33,636
Amortization of intangible assets 9,246 8,477
Other, net 1,367 3,569
Changes in current assets and liabilities:
Accounts receivable (78,208) (80,067)
Inventories (19,021) (15,516)
Accounts payable (61,948) (15,171)
Other, net 75,683 64,966
-------- --------
Cash provided by operations 38,959 77,745
INVESTMENTS
Capital expenditures (21,009) (24,377)
Other, net (1,641) 15,226
-------- --------
Cash invested (22,650) (9,151)
FINANCING
Increase in short-term borrowings 12,078 9,867
Payment of long-term debt (1,902) (600)
Purchase of Common Stock (35,330) (50,285)
Cash dividends paid (26,680) (26,099)
Proceeds from issuance of stock 11,423 418
Other, net 799 766
-------- --------
Cash used by financing (39,612) (65,933)
EFFECT OF FOREIGN CURRENCY RATE CHANGES ON CASH (1,908) (1,276)
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS (25,211) 1,385
CASH AND EQUIVALENTS - BEGINNING OF YEAR 118,891 79,861
-------- --------
CASH AND EQUIVALENTS - END OF PERIOD $ 93,680 $ 81,246
========= ========
See notes to consolidated financial statements.
5
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. Similarly, the 2000 year-end consolidated balance
sheet was derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. 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 March 31, 2001 are not necessarily indicative
of results that may be expected for the year ending December 29, 2001. 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 December
30, 2000.
NOTE B - ACQUISITIONS
The Company completed several acquisitions during 2000. The following pro forma
results of operations for the first quarter of 2000 (restated) assume that each
of these acquisitions had occurred at the beginning of 2000 (in thousands,
except per share amounts):
Net sales $1,450,934
Income before cumulative effect of change in
accounting policy 63,735
Earnings per common share, before
cumulative effect of change in accounting
policy:
Basic $ 0.55
Diluted 0.54
The Company accrued various restructuring charges in connection with
the businesses acquired in 1999 and 2000. The charges relate to severance,
closure of manufacturing and distribution facilities, and lease and contract
termination costs. Substantially all cash payments related to these actions
will be completed by the end of the year. Activity in the accrual accounts is
summarized as follows (in thousands):
Facilities Lease and
Exit Contract
Severance Costs Termination Total
--------- -------- ----------- --------
Balance, December 30, 2000 $ 3,222 $ 839 $ 11,977 $ 16,038
Cash payments (662) (46) (4,987) (5,695)
-------- -------- -------- --------
Balance, March 31, 2001 $ 2,560 $ 793 $ 6,990 $ 10,343
======== ======== ======== ========
6
NOTE C - 2000 RESTRUCTURING ACCRUAL
Activity in the 2000 restructuring accrual is summarized as follows (in
thousands):
Facilities Lease and
Exit Contract
Severance Costs Termination Total
--------- --------- ----------- --------
Balance, December 30, 2000 $ 20,391 $ 1,461 $ 15,541 $ 37,393
Cash payments (5,587) (253) (578) (6,418)
-------- -------- -------- --------
Balance, March 31, 2001 $ 14,804 $ 1,208 $ 14,963 $ 30,975
======== ======== ======== ========
The restructuring actions are proceeding according to plan, and the anticipated
benefits are being realized. Remaining severance and other cash payments will be
made into 2002.
NOTE D - BUSINESS SEGMENT INFORMATION
Financial information for the Company's reportable segments is as follows (in
thousands):
First Quarter
--------------------------
2000
2001 (Restated)
----------- -----------
Net sales:
Consumer Apparel $ 1,079,248 $ 1,070,814
Occupational Apparel 158,417 168,158
All Other 185,634 116,212
----------- -----------
Consolidated net sales $ 1,423,299 $ 1,355,184
=========== ===========
Segment profit:
Consumer Apparel $ 158,952 $ 165,853
Occupational Apparel 13,863 15,443
All Other 5,708 (430)
----------- -----------
Total segment profit 178,523 180,866
Interest, net (22,916) (16,224)
Amortization of intangible assets (9,246) (8,613)
Corporate and other expenses (22,897) (31,260)
----------- -----------
Income before income taxes and cumulative
effect of change in accounting policy $ 123,464 $ 124,769
=========== ===========
7
NOTE E - EARNINGS PER SHARE
Earnings per share are computed as follows (in thousands, except per share
amounts):
First Quarter
---------------------
2000
2001 (Restated)
--------- --------
Basic earnings per share:
Net income $ 77,486 $ 71,069
Less Preferred Stock dividends and
redemption premium 1,463 1,186
-------- --------
Net income available for Common Stock $ 76,023 $ 69,883
======== ========
Weighted average Common
Stock outstanding 111,954 115,353
======== ========
Basic earnings per share $ 0.68 $ 0.61
======== ========
Diluted earnings per share:
Net income $ 77,486 $ 71,069
Increased ESOP expense if Preferred Stock
were converted to Common Stock 200 237
-------- --------
Net income available for Common Stock
and dilutive securities $ 77,286 $ 70,832
======== ========
Weighted average Common Stock outstanding 111,954 115,353
Additional Common Stock resulting from
dilutive securities:
Preferred Stock 2,469 2,611
Stock options and other 1,064 482
-------- --------
Weighted average Common Stock and
dilutive securities outstanding 115,487 118,446
======== ========
Diluted earnings per share $ 0.67 $ 0.60
======== ========
Outstanding options to purchase 5.8 million shares of Common Stock have been
excluded from the computation of diluted earnings per share for the first
quarter of 2001 because the option exercise prices were greater than the average
market price of the Common Stock. Similarly, options to purchase 7.9 million
shares of Common Stock were excluded for the first quarter of 2000.
NOTE F - 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 principles. The Company's comprehensive income was
as follows (in thousands):
8
First Quarter
-------------------------------
2000
2001 (Restated)
------------- ------------
Net income as reported $77,486 $71,069
Other comprehensive income (loss):
Foreign currency translation adjustments,
net of income taxes (13,591) (1,952)
Unrealized gains (losses) on marketable
securities, net of income taxes (240) -
Derivative hedging contracts, net of
income taxes 3,355 -
------------- ------------
Comprehensive income $67,010 $69,117
============= ============
Accumulated other comprehensive income (loss) for 2001 is summarized as follows
(in thousands):
Foreign Marketable Hedging
Currency Securities Contracts Total
---------- --------- -------- ---------
Balance, December 30, 2000 $ (88,146) $ 271 $ -- $ (87,875)
Other comprehensive income (loss) (13,591) (240) 3,355 (10,476)
--------- --------- --------- ---------
Balance, March 31, 2001 $(101,737) $ 31 $ 3,355 $ (98,351)
========= ========= ========= =========
The impact of foreign currency translation adjustments in the first quarter of
2001 was due to the strengthening of the U.S. dollar in relation to the
currencies of most European countries where the Company has operations.
NOTE G - CAPITAL
Common shares outstanding are net of shares held in treasury, and in substance
retired, of 26,142,575 at March 31, 2001, 25,139,879 at December 30, 2000 and
23,139,897 at April 1, 2000. In addition, 314,108, 311,608 and 334,723 shares of
VF Common Stock held in trust for deferred compensation plans are treated for
financial accounting purposes as treasury stock at each of the respective dates.
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 1,542,766 shares were outstanding at March 31, 2001,
1,570,301 at December 30, 2000 and 1,631,738 at April 1, 2000.
NOTE H - RECENT ACCOUNTING PRONOUNCEMENTS
During the fourth quarter of 2000, the Company changed its accounting policy for
recognizing sales in accordance with the SEC's Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements. The cumulative effect of this
change in policy on net income of $6.8 million, or $.06 per share, was reported
as a charge as of the beginning of 2000. As a result, the Company has restated
its financial statements for each of the first three quarters of 2000.
Effective at the beginning of the first quarter of 2001, the Company adopted
FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, and related amendments. This Statement
9
requires that all derivatives be recognized as assets or liabilities on the
balance sheet and measured at their fair value. Changes in the fair value of
derivatives are recognized in either net income or in other comprehensive
income, depending on the designated purpose of the derivative.
Due to the limited use of derivative instruments prior to 2001, the effect of
adopting this Statement at the beginning of the first quarter of 2001 was not
significant. Derivatives outstanding at the beginning of the year, all of which
expired in the first quarter, were not designated as hedges, so unrealized gains
of $.6 million at the beginning of 2001 were recorded in cost of products sold.
Beginning in the first quarter of 2001, the Company expanded its use of foreign
currency forward exchange contracts to hedge against the effects of exchange
rate fluctuations on forecasted cash flows. The Company does not use derivative
financial instruments for trading or speculative purposes. Use of hedging
contracts allows the Company to reduce its overall exposure to exchange rate
movements, since gains and losses on these contracts will offset losses and
gains on the transactions being hedged. The Company formally documents all
hedged transactions and hedging instruments, and assesses, both at the inception
of the contract and on an ongoing basis, whether the hedging instruments are
effective in offsetting changes in cash flows of the hedged transactions. The
Company hedges an average of 50% of its significant foreign currency cash flows
relating to inventory purchases and sales, operating expenses and intercompany
royalty payments anticipated for the following twelve months. During the first
quarter, the Company recognized net gains of $.4 million in cost of products
sold for hedging contracts that had matured. The total notional value of foreign
exchange contracts outstanding at March 31, 2001 was $92.0 million. At that
date, the Company had net deferred gains of $5.2 million included in accumulated
other comprehensive income, which amount is expected to be reclassified to net
income during the next twelve months as the hedged transactions are recognized
in earnings.
10
VF CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
After adjustment for the new accounting policy for revenue recognition
(Note H), consolidated sales increased 5% for the first quarter ended March 31,
2001, compared with the comparable period in 2000. The sales increase was due
to businesses acquired in 2000, net of sales of the Wrangler Japan and
occupational apparel businesses exited in the fourth quarter of 2000. Also, in
translating foreign currencies to the U.S. dollar, a stronger U.S. dollar
reduced sales comparisons by $15 million in the quarter and earnings per share
by $.01 compared with the prior year period.
Gross margins were 33.8% of sales in both the 2001 and 2000 periods. Higher
gross margins earned at The North Face and Eastpak businesses acquired in 2000
were offset by expenses for downtime incurred in the domestic jeanswear
manufacturing plants.
Marketing, administrative and general expenses were 23.2% of sales in both the
2001 and 2000 periods. Expense reductions as a percent of sales in most business
units were offset by a higher level of expenses at the recently acquired
companies, which sell to upper tier distribution channels that traditionally
require higher levels of marketing expenditures.
Other operating expense, which includes amortization of intangible assets and
net royalty income, increased in 2001 due to amortization of intangible assets
related to the businesses acquired in 2000.
Net interest expense increased in the first quarter of 2001 due to higher
average borrowings to support acquisitions, as well as higher overall interest
rates on the Company's short and long-term debt.
The effective income tax rate for the three months of 2001 was 37.2%, based on
the expected rate for the year, compared with 37.6% in the prior year. The lower
tax rate for 2001 is due to expected lower foreign income taxes as the Company
reorganizes its international operations and to an expected reduction in foreign
operating losses with no benefit.
Income before the cumulative effect of a change in accounting policy decreased
slightly during the quarter, and basic and diluted earnings per share increased
by $.01, reflecting the benefit of the Company's share repurchase program. The
2000 acquisitions, all of which were completed in later quarters of 2000, had a
$.01 per share negative impact on 2001 reported earnings per share.
INFORMATION BY BUSINESS SEGMENT
The Consumer Apparel segment consists of jeanswear, women's intimate
apparel, swimwear and the children's apparel businesses. Overall, this
segment's sales (as adjusted for the change in accounting policy) increased by
1% for the quarter, compared with the 2000 period. Domestic jeans sales were
flat in the quarter, with increases in the Company's Mass Market business
offset by a decline in the Western business. International jeanswear sales
increased 6% in the quarter, primarily due to the addition of the H.I.S
business acquired in late 2000, offset in part by elimination of the Wrangler
business in Japan and effects of foreign currency translation. Domestic
intimate apparel sales increased 5% in the quarter, with increases in the
Vanity Fair, Lily of France, Vassarette and private label businesses. Swimwear
and playwear sales declined in the quarter. Segment profit declined in the
quarter. An increase in international jeanswear profit relating to continuing
improvements in operating efficiencies was offset by expenses related to
downtime in domestic jeanswear manufacturing facilities to align inventories and
lower profits in our swimwear, playwear and Latin American jeanswear
businesss.
11
The Occupational Apparel segment includes the Company's industrial, career and
safety apparel businesses. Sales decreased during the quarter due to the exit of
regional catalog, linens and other product lines in the fourth quarter of 2000,
and segment profit declined on the reduced sales volume.
The All Other segment includes the Company's knitwear, daypack and outdoor
businesses. Sales increased due to the acquisitions of The North Face and
Eastpak in May 2000. Although difficult market conditions and pricing pressures
continue in the knitwear industry, segment profit increased in the quarter due
to lower cost sourcing in our knitwear business. Due to the seasonal nature of
the businesses comprising this segment, the low level of first quarter
profitability in this segment is not necessarily indicative of expected full
year results.
Management will continue to evaluate its underperforming units. Any actions
resulting from this evaluation could have an impact on operating results.
The decline in Corporate and other expenses results from higher
expenses in the prior year related to cost reduction efforts and lower shared
services and information systems expenses in the 2001 quarter.
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company is reflected in the following:
April 1
March 31 December 30 2000
2001 2000 (Restated)
--------- ----------- ------------
(Dollars in millions)
Working capital $1,154.9 $1,103.9 $789.8
Current ratio 2.1 to 1 2.1 to 1 1.7 to 1
Debt to total capital 34.7% 34.7% 30.4%
Accounts receivable at the end of the first quarter of 2001 are higher than at
the same period in 2000 due to higher sales, offset in part by a slight
improvement in the number of day's sales outstanding. Receivables are higher
than at the end of 2000 due to seasonal sales patterns.
Inventories at the end of the first quarter of 2001 are 14% higher than at the
comparable date in 2000. Excluding the 2000 acquisitions, inventory balances
were 4% higher. Management has targeted an inventory reduction of as much as
$100 million during 2001 and expects to see some reduction in balances by the
end of the second quarter. Inventories are 1% higher than at the end of 2000 due
to seasonal sales patterns.
Accounts payable declined compared with the first quarter of 2000 and with
year-end 2000 due to reduced inventory purchases at domestic jeanswear in the
current period as part of their inventory reduction efforts. In addition,
accounts payable balances declined compared with the prior year period due to
disposal of the Wrangler Japan business, which had a higher level of payables
than the average VF operating business.
Accrued liabilities at the end of the 2001 quarter are higher than year-end due
to seasonal patterns and are higher than at the comparable quarter in 2000 due
to accrued restructuring charges incurred in the fourth quarter of 2000.
Total long-term debt increased with the issuance of $500.0 million of five and
ten year notes in September 2000.
12
During the first quarter of 2001, the Company repurchased 1.0 million shares of
its Common Stock in open market transactions for a total cost of $35.3 million.
Under its current authorization from the Board of Directors, the Company may
repurchase up to an additional 3.0 million common shares. Depending on other
opportunities that may arise, the Company intends to repurchase approximately
one million shares per quarter over the remainder of the year.
Looking forward to the second quarter of 2001, management expects sales
to be flat to up slightly, reflecting the continuation of difficult retail
sales trends. Gross margins and operating margins could decline by up to 2% of
sales reflecting downtime scheduled to be taken in domestic jeanswear
manufacturing plants to reduce inventory levels and poor performance in our
swimwear business. The 2000 acquisitions are expected to have a $.04 per share
dilutive impact in the second quarter, compared with a $.02 dilutive impact in
2000, because of the seasonality of The North Face and Eastpak businesses
acquired in May 2000. These factors could result in second quarter earnings per
share being 15% below the prior year level.
Continuing for the full year, management expects earnings per share to increase
in the range of 8-10% over the $2.98 earned in 2000, excluding the effects of
the fourth quarter restructuring and the change in accounting policy. This
expected improvement is driven by positive earnings contributions from the 2000
acquisitions, continued progress in integrating the workwear companies acquired
in 1998 and 1999, benefits from restructuring actions taken in the fourth
quarter of 2000, a slight improvement in the effective income tax rate toward
37.0% as the reorganization of international operations continues through the
year, and the effect of the share repurchase program. Cash flow from operations
is expected to range from $450-500 million, and capital expenditures are
expected to be comparable with the 2000 level. The excess cash flow will be
directed toward share repurchases and debt reduction.
For information regarding the Company's exposure to certain market risks, see
Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in the
annual report on Form 10-K for fiscal 2000. There have been no significant
changes in the Company's market risk exposures since year-end.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
From time to time, the Company and its representatives may make oral or written
statements, including statements in this quarterly report, that constitute
"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.
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 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; competitive conditions in
and the financial strength of the retail industry; actions of competitors that
may impact the Company's business; receipt and integration of software developed
by outside vendors; 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.
13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is a party to litigation arising in the ordinary course of its
business. In addition, the Company, its subsidiary, The North Face, Inc., and
certain of The North Face's former and current officers and directors have been
named parties in various purported shareholder actions in California, Colorado
and Delaware, including ENG v. Cason, et al., Civil Action No. 810726-0
(California Superior Court, Alameda County), Markus, et al. v. The North Face,
Inc., Civil Action No. 99-Z-473 (United States District Court for the District
of Colorado), and Polacheck v. VF Corporation, et al. (Court of Chancery,
Delaware). The actions allege, among other things, self-dealing, breach of
fiduciary duties and violations of federal and state laws. On April 30, 2001,
the United States District Court granted final approval of the settlement of the
Markus action. The North Face has reached agreements with plaintiffs to settle
both the ENG and the Polacheck actions. In management's opinion, there are no
pending claims or litigation, the outcome of which would have a material adverse
effect on the Company's consolidated financial position, results of operations
or cash flows.
Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company held on April 24, 2001, the
following four nominees to the Board of Directors were elected to serve until
the 2004 Annual Meeting.
Votes For Votes Withheld
----------- --------------
Robert D. Buzzell 105,161,572 904,630
Edward E. Crutchfield 105,101,902 964,300
George Fellows 105,227,152 839,050
Daniel R. Hesse 105,197,715 868,487
In addition, the proposal to increase by seven million the number of shares of
Common Stock available for future grants under the Company's 1996 Stock
Compensation Plan, to increase the annual per-person limitation on option
grants, and to reapprove certain other material terms of the Plan relating to
performance goals was approved by the shareholders. The vote was 87,706,202 for,
10,778,371 against and 835,379 abstaining.
Item 6 - Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the
three months ended March 31, 2001.
14
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/ Robert K. Shearer