SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended APRIL 2, 1994 ------------- or / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from -------------------- to -------------------- 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 No.) 1047 NORTH PARK ROAD, WYOMISSING, PA 19610 - - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-378-1151 ------------ 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 (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 . --- --- On April 30, 1994, there were 64,661,902 shares of Common Stock outstanding. -1- VF CORPORATION INDEX PAGE NO. -------- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Consolidated Statements of Income - Three months ended April 2, 1994 and April 3, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheets - April 2, 1994 January 1, 1994 and April 3, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows - Three months ended April 2, 1994 and April 3, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 10 Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-2- VF CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED ----------------------------- APRIL 2 APRIL 3 1994 1993 ---------- ---------- NET SALES $1,123,035 $1,016,644 COSTS AND OPERATING EXPENSES Cost of products sold 760,423 693,418 Marketing, administrative and general expenses 253,910 221,789 ---------- ---------- 1,014,333 915,207 ---------- ---------- OPERATING INCOME 108,702 101,437 OTHER INCOME (EXPENSE) Interest income 2,508 2,940 Interest expense (19,191) (18,222) Miscellaneous, net (4,149) 286 ---------- ---------- (20,832) (14,996) ---------- ---------- INCOME BEFORE INCOME TAXES 87,870 86,441 INCOME TAXES 34,972 33,712 ---------- ---------- NET INCOME $ 52,898 $ 52,729 ========== ========== EARNINGS PER COMMON SHARE Primary $0.81 $0.83 Fully diluted 0.79 0.81 CASH DIVIDENDS PER COMMON SHARE $0.32 $0.30
See notes to consolidated financial statements. -3- VF CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
APRIL 2 JANUARY 1 APRIL 3 1994 1994 1993 ---------- ---------- ---------- ASSETS CURRENT ASSETS Cash and equivalents $ 25,522 $ 151,564 $ 37,416 Accounts receivable, less allowances: Apr 2-$30,648; Jan 1-$28,808; Apr 3-$33,047 632,631 511,887 544,943 Inventories: Finished products 625,359 486,045 536,265 Work in process 136,479 119,582 142,614 Materials and supplies 145,087 173,140 149,538 ---------- ---------- ---------- 906,925 778,767 828,417 Other current assets 89,008 57,962 69,636 ---------- ---------- ---------- Total current assets 1,654,086 1,500,180 1,480,412 PROPERTY, PLANT AND EQUIPMENT 1,340,110 1,250,023 1,279,370 Less accumulated depreciation 569,192 537,264 554,097 ---------- ---------- ---------- 770,918 712,759 725,273 INTANGIBLE ASSETS 917,945 575,359 550,098 OTHER ASSETS 102,520 89,050 94,098 ---------- ---------- ---------- $3,445,469 $2,877,348 $2,849,881 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 446,576 $ 35,648 $ 31,525 Current portion of long-term debt 3,944 110,119 52,910 Accounts payable 257,268 246,503 257,558 Accrued liabilities 362,047 267,578 323,894 ---------- ---------- ---------- Total current liabilities 1,069,835 659,848 665,887 LONG-TERM DEBT 630,574 527,573 635,821 OTHER LIABILITIES 148,678 126,978 112,649 REDEEMABLE PREFERRED STOCK 63,089 63,309 63,824 DEFERRED CONTRIBUTION TO EMPLOYEE STOCK OWNERSHIP PLAN (46,301) (47,760) (51,139) ---------- ---------- ---------- 16,788 15,549 12,685 COMMON SHAREHOLDERS' EQUITY Common Stock 64,584 64,489 64,298 Additional paid-in capital 546,074 543,165 535,618 Foreign currency translation adjustments (14,845) (12,865) 1,836 Retained earnings 983,781 952,611 821,087 ---------- ---------- ---------- 1,579,594 1,547,400 1,422,839 ---------- ---------- ---------- $3,445,469 $2,877,348 $2,849,881 ========== ========== ==========
See notes to consolidated financial statements. -4- VF CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED --------------------------------- APRIL 2 APRIL 3 1994 1993 --------- --------- OPERATIONS Net income $ 52,898 $ 52,729 Adjustments to reconcile net income to cash provided by operations: Depreciation 30,176 29,806 Amortization of intangible assets 7,403 4,464 Other 5,111 (3,074) Changes in current assets and liabilities: Accounts receivable (75,992) (51,649) Inventories (32,287) (85,675) Accounts payable (18,818) 8,692 Other, net 48,929 58,126 -------- -------- Cash provided by operations 17,420 13,419 INVESTMENTS Capital expenditures (30,031) (43,258) Business acquisitions (494,751) - Other, net (4,258) (7,755) -------- -------- Cash invested (529,040) (51,013) FINANCING Increase (decrease) in short-term borrowings 510,152 (94,314) Proceeds from long-term debt - 98,557 Payment of long-term debt (106,978) (233,167) Sale of Common Stock - 231,900 Cash dividends paid (21,725) (20,350) Other 4,129 6,064 -------- -------- Cash provided (used) by financing 385,578 (11,310) -------- -------- NET CHANGE IN CASH AND EQUIVALENTS (126,042) (48,904) CASH AND EQUIVALENTS - BEGINNING OF YEAR 151,564 86,320 -------- -------- CASH AND EQUIVALENTS - END OF PERIOD $ 25,522 $ 37,416 ======== ========
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. 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 2, 1994 are not necessarily indicative of results that may be expected for the year ending December 31, 1994. For further information, refer to the consolidated financial statements and notes included in the Corporation's Annual Report on Form 10-K for the year ended January 1, 1994. 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. NOTE C - LONG-TERM DEBT At April 2, 1994, $100.0 million of commercial paper is classified as long-term debt pursuant to the Corporation's intent to refinance the obligation on a long-term basis. On April 6, 1994, the Corporation issued $100.0 million of 7.60% notes due 2004. NOTE D - CAPITAL There are 150,000,000 authorized shares of Common Stock, no par value - stated capital $1 a share. At April 2, 1994, there were 64,583,672 shares outstanding, excluding 1,769,197 treasury shares. At January 1, 1994 and April 3, 1993, there were 64,488,660 and 64,298,235 shares outstanding, excluding 1,769,131 and 1,767,131 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 2,043,366 shares were outstanding at April 2, 1994, 2,050,491 at January 1, 1994 and 2,067,185 at April 3, 1993. -6- VF CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE E - ACQUISITIONS On January 4, 1994, the Corporation acquired H. H. Cutler Company for a total consideration of $154.7 million. Also on January 19, 1994, the Corporation acquired Nutmeg Industries, Inc. for a total consideration of $352.2 million. The acquisitions have been accounted for as purchases, and accordingly, operating results of the companies have been included in the consolidated financial statements since the dates of acquisition. The following pro forma results of operations assume that these acquisitions had occurred at the beginning of 1993: First Quarter In thousands, except per share amounts 1993 - - -------------------------------------- ------------- Net sales $1,094,394 Net income 46,638 Earnings per common share: Primary $0.73 Fully diluted 0.71
-7- VF CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Consolidated net sales increased 10% for the first quarter compared with the first quarter of 1993. Of the total increase, $78 million represents sales of divisions acquired since last year's first quarter. With net income flat for the quarter, earnings per share declined slightly due to higher average shares outstanding from the public offering of Common Stock completed in late January 1993. During the quarter, the Corporation was reorganized into five new business groups consisting of Jeanswear, Decorated Knitwear, Intimate Apparel, Playwear and Specialty Apparel. Sales and operating profit by business group are summarized as follows:
First Quarter ----------------------------------------- 1993 Percent 1994 (Restated) Change ---------- ---------- ------- (In thousands) NET SALES Jeanswear $ 589,000 $ 585,266 1% Decorated Knitwear 116,883 62,752 86 Intimate Apparel 174,865 169,708 3 Playwear 77,845 45,021 73 Specialty Apparel 164,442 153,897 7 ---------- ---------- --- $1,123,035 $1,016,644 10% ========== ========== === OPERATING PROFIT Jeanswear $ 80,544 $ 76,861 5% Decorated Knitwear (5,373) (3,291) (63) Intimate Apparel 17,502 15,855 10 Playwear 6,149 2,669 100+ Specialty Apparel 19,696 18,370 7 ---------- ---------- ---- 118,518 110,464 7% ==== CORPORATE EXPENSES (9,816) (9,027) INTEREST, NET (16,683) (15,282) OTHER INCOME (EXPENSE), NET (4,149) 286 ---------- ---------- INCOME BEFORE INCOME TAXES $ 87,870 $ 86,441 ========== ==========
The Jeanswear business group consists of the Lee and Wrangler divisions in the United States and in international markets, primarily in Europe. This business group also includes Girbaud, which designs and markets licensed jeanswear -8- products in the United States under the Marithe & Francois Girbaud(R) label. Sales and operating profit increased strongly in international markets. Domestically, operating profit increased at Lee and Wrangler despite flat sales, but sales and profits declined at Girbaud, where consumer resistance to premium-priced jeans has impacted performance since mid-1993. The Decorated Knitwear business group includes the manufacturing and marketing operations of Bassett-Walker, Nutmeg, Cutler sports apparel and JanSport imprinted apparel. The sales increase in the current quarter was due primarily to the addition of Nutmeg and Cutler, both newly acquired in January 1994. Sales and profits for the first quarter are at an expected low level due to the seasonal nature of this group. The Intimate Apparel business group includes the operations of Vanity Fair Mills and Barbizon domestically and the intimate apparel divisions in Europe. Quarterly sales for the group rose modestly as a result of increased sales of Vassarette products at Vanity Fair. Operating margin improvements were posted for all divisions included in the business group. The Playwear business group consists of Healthtex, the playwear and sleepwear operations of Cutler and the preschool sizes of Lee and Wrangler in the United States. Playwear sales increased primarily due to the acquisition of Cutler in 1994. Quarterly operating profits exceeded the prior year period due to the inclusion of Cutler and significantly higher margins in all other divisions. The Specialty Apparel business group consists primarily of the Red Kap and Jantzen divisions and JanSport equipment. The group's sales and operating profit increases resulted primarily from the higher volume experienced at Red Kap. Overall, gross margins increased slightly to 32.3% of sales from 31.8% in 1993, due primarily to reduced use of outside contractors in the Jeanswear group. Marketing, administrative and general expenses were 22.6% of sales, compared with 21.8% in the first quarter of 1993. The increase is attributable to higher distribution and other costs. Marketing, administrative and general expenses as a percent of sales in the first quarter are historically at higher levels than annual amounts and are not necessarily representative of the trend expected for the year. Net interest expense increased due to higher short-term borrowings related to the Nutmeg and Cutler acquisitions. The increase in miscellaneous expense results from higher goodwill amortization related to these acquisitions. The effective income tax rate for the first quarter of 1994 was 39.8% versus 39.0% for the 1993 period, based on the expected effective rate for the year. The higher rate results primarily from the change in the United States corporate income tax rate from 34% to 35% effective August 1993. -9- FINANCIAL CONDITION AND LIQUIDITY The financial condition of the Corporation is reflected in the following:
April 2 January 1 April 3 1994 1994 1993 ---------- ---------- ---------- (Dollars in millions) Working capital $584.3 $840.3 $814.5 Current ratio 1.5 to 1 2.3 to 1 2.2 to 1 Total debt to capitalization 40.6% 30.3% 33.6%
Days' sales outstanding in accounts receivable are consistent at all balance sheet dates. Inventories are higher than at the comparable date in the prior year and at year-end 1993 levels due to the acquisitions of Nutmeg and Cutler in January 1994. Inventories also increased from year-end 1993 to meet seasonal requirements. During the 1994 first quarter, short-term borrowings were used to finance the purchases of Nutmeg and Cutler. In addition, the Corporation used short-term borrowings to fund the January 1994 redemption of $100.0 million of 8.00% notes due in 1997. On April 6, 1994, the redeemed notes were refinanced with 10 year 7.60% notes. PART II - OTHER INFORMATION Item 4 -Submission of Matters to a Vote of Security Holders At the Annual Meeting of Shareholders of the Corporation held on April 19, 1994, shares representing a total of 66,606,149 votes were outstanding and entitled to vote on the following matters: 1) The Directors elected at the meeting for a term of three years were Roger S. Hillas, William E. Pike, M. Rust Sharp, and L. Dudley Walker. 2) The proposal to adopt the 1991 Stock Option Plan, as amended, was approved. The vote was 49,041,668 for, 6,967,014 against and 350,372 abstaining. 3) The proposal to adopt the Executive Incentive Compensation Plan was approved. The vote was 54,080,711 for, 1,897,425 against and 380,918 abstaining. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit 11 Computation of earnings per share for the three months ended April 2, 1994 and April 3, 1993 (b) Reports on Form 8-K A report on Form 8-K dated January 19, 1994, as amended on Form 8-K/A, announced the acquisitions of Nutmeg Industries, Inc. and H. H. Cutler Company and included documents related to the acquisitions, financial statements of Nutmeg and combined condensed financial statements. -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) Date: May 12, 1994 /s/ G. G. Johnson -------------------------- G. G. JOHNSON Vice President-Finance (Chief Financial Officer) /s/ R. K. Shearer -------------------------- R. K. SHEARER Vice President/Controller (Chief Accounting Officer) -11-