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 OCTOBER 1, 1994
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 1-5256
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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)
(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 (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 October 29, 1994, there were 64,726,684 shares of Common Stock
outstanding.
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VF CORPORATION
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income - Three months
and nine months ended October 1, 1994
and October 2, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - October 1, 1994,
January 1, 1994 and October 2, 1993 . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Nine months ended October 1, 1994 and
October 2, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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
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VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- ----------------------------
OCTOBER 1 OCTOBER 2 OCTOBER 1 OCTOBER 2
1994 1993 1994 1993
----------- ----------- ----------- ------------
NET SALES $1,373,037 $1,152,842 $3,682,396 $3,222,897
COSTS AND OPERATING EXPENSES
Cost of products sold 930,960 797,798 2,497,532 2,217,081
Marketing, administrative and general expenses 274,097 235,115 786,868 680,151
---------- ---------- ---------- ----------
1,205,057 1,032,913 3,284,400 2,897,232
---------- ---------- ---------- ----------
OPERATING INCOME 167,980 119,929 397,996 325,665
OTHER INCOME (EXPENSE)
Interest income 2,104 28,603 6,592 33,962
Interest expense (21,234) (18,451) (62,004) (54,666)
Miscellaneous, net (2,731) 987 (10,881) 3,185
---------- ---------- ---------- ----------
(21,861) 11,139 (66,293) (17,519)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 146,119 131,068 331,703 308,146
INCOME TAXES 58,315 54,253 132,085 122,871
---------- ---------- ---------- ----------
NET INCOME $ 87,804 $ 76,815 $ 199,618 $ 185,275
========== ========== ========== ==========
EARNINGS PER COMMON SHARE
Primary $1.34 $1.18 $3.05 $2.86
Fully diluted 1.31 1.15 2.98 2.79
CASH DIVIDENDS PER COMMON SHARE $0.32 $0.30 $0.96 $0.90
See notes to consolidated financial statements.
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VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
OCTOBER 1 JANUARY 1 OCTOBER 2
1994 1994 1993
----------- ----------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 54,757 $ 151,564 $ 36,539
Accounts receivable, less allowances: Oct. 1 - $36,028;
Jan. 1 - $28,808; Oct. 2 - $32,896 752,120 511,887 628,751
Inventories:
Finished products 550,082 486,045 566,849
Work in process 148,311 119,582 129,265
Materials and supplies 168,353 173,140 147,759
---------- ---------- ----------
866,746 778,767 843,873
Other current assets 79,473 57,962 71,312
---------- ---------- ----------
Total current assets 1,753,096 1,500,180 1,580,475
PROPERTY, PLANT AND EQUIPMENT 1,399,604 1,250,023 1,270,676
Less accumulated depreciation 629,188 537,264 556,963
---------- ---------- ----------
770,416 712,759 713,713
INTANGIBLE ASSETS 914,743 575,359 535,410
OTHER ASSETS 101,576 89,050 133,563
---------- ---------- ----------
$3,539,831 $2,877,348 $2,963,161
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 343,479 $ 35,648 $ 39,613
Current portion of long-term debt 109,237 110,119 52,927
Accounts payable 281,377 246,503 240,443
Accrued liabilities 407,056 267,578 352,876
--------- ------- -------
Total current liabilities 1,141,149 659,848 685,859
LONG-TERM DEBT 517,449 527,573 633,634
OTHER LIABILITIES 158,266 126,978 126,868
REDEEMABLE PREFERRED STOCK 62,520 63,309 63,494
DEFERRED CONTRIBUTION TO EMPLOYEE STOCK OWNERSHIP PLAN (43,858) (47,760) (48,839)
---------- ---------- ----------
18,662 15,549 14,655
COMMON SHAREHOLDERS' EQUITY
Common Stock 64,734 64,489 64,440
Additional paid-in capital 552,254 543,165 540,029
Foreign currency translation adjustments 595 (12,865) (15,298)
Retained earnings 1,086,722 952,611 912,974
---------- ---------- ----------
1,704,305 1,547,400 1,502,145
---------- ---------- ----------
$3,539,831 $2,877,348 $2,963,161
========== ========== ==========
See notes to consolidated financial statements.
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VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
-------------------------
OCTOBER 1 OCTOBER 2
1994 1993
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OPERATIONS
Net income $ 199,618 $ 185,275
Adjustments to reconcile net income to cash
provided by operations:
Depreciation 94,893 82,222
Amortization of intangible assets 23,615 13,215
Other, net 3,925 (19,352)
Changes in current assets and liabilities:
Accounts receivable (189,051) (140,214)
Inventories 17,668 (104,212)
Accounts payable 3,354 (6,167)
Other, net 100,801 88,565
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Cash provided by operations 254,823 99,332
INVESTMENTS
Capital expenditures (97,454) (143,998)
Sale of outlet facilities - 62,000
Business acquisitions (494,751) -
Other, net 5,339 (27,811)
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Cash invested (586,866) (109,809)
FINANCING
Increase (decrease) in short-term borrowings 305,413 (84,933)
Proceeds from long-term debt 99,207 98,557
Payment of long-term debt (115,307) (235,002)
Proceeds from sale of Common Stock - 231,900
Cash dividends paid (65,247) (61,130)
Other, net 11,170 11,304
--------- ---------
Cash provided (used) by financing 235,236 (39,304)
NET CHANGE IN CASH AND EQUIVALENTS (96,807) (49,781)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 151,564 86,320
--------- ---------
CASH AND EQUIVALENTS - END OF PERIOD $ 54,757 $ 36,539
========= =========
See notes to consolidated financial statements.
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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 nine months ended
October 1, 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 - CAPITAL
There are 150,000,000 authorized shares of Common Stock, no par value - stated
capital $1 a share. At October 1, 1994, there were 64,734,134 shares
outstanding, excluding 1,770,575 treasury shares. At January 1, 1994 and
October 2, 1993, there were 64,488,660 and 64,440,443 shares outstanding,
excluding 1,769,131 and 1,769,159 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 2,024,953 shares were outstanding at October 1, 1994,
2,050,491 at January 1, 1994 and 2,056,501 at October 2, 1993.
NOTE D - 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:
THIRD QUARTER NINE MONTHS
1993 1993
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(In thousands, except per share amounts)
Net sales $1,286,840 $3,520,661
Net income 78,672 176,057
Earnings per common share:
Primary $1.21 $2.72
Fully diluted 1.18 2.65
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VF CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales increased 19% for the third quarter and 14% for the nine
months compared with the 1993 periods. Approximately $101 million and $249
million of the respective increases represent sales of divisions acquired since
the 1993 periods, with the remainder due primarily to unit volume growth in
existing divisions. Net income increased 14% for the quarter and 8% for the
nine months. The 1993 third quarter included a $15.0 million charge for
writedown of assets and a $26.3 million gain from an income tax settlement.
During 1994, 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:
THIRD QUARTER NINE MONTHS
---------------------------------------- --------------------------------------
1993 PERCENT 1993 PERCENT
1994 (RESTATED) CHANGE 1994 (RESTATED) CHANGE
---------- ---------- ------- ---------- ---------- -------
(In thousands) (In thousands)
NET SALES
Jeanswear $ 692,632 $ 637,864 9% $1,900,101 $1,816,422 5%
Decorated Knitwear 202,150 125,294 61 447,823 267,779 67
Intimate Apparel 184,583 165,438 12 531,634 499,235 7
Playwear 107,269 55,176 94 266,681 152,381 75
Specialty Apparel 186,403 169,070 10 536,157 487,080 10
---------- ---------- ---- ---------- ---------- ----
$1,373,037 $1,152,842 19% $3,682,396 $3,222,897 14%
========== ========== ==== ========== ========== ====
OPERATING PROFIT
Jeanswear $ 105,183 $ 90,508 16% $ 276,139 $ 241,412 14%
Decorated Knitwear 20,477 (1,326) 100+ 12,495 (6,584) 100+
Intimate Apparel 16,670 14,500 15 46,807 45,831 2
Playwear 12,103 5,345 100+ 26,156 14,056 86
Specialty Apparel 22,719 20,156 13 65,151 58,204 12
---------- ---------- ---- ---------- ---------- ----
177,152 129,183 37% 426,748 352,919 21%
==== ====
CORPORATE EXPENSES (9,172) (9,254) (28,752) (27,254)
INTEREST, NET (19,130) 10,152 (55,412) (20,704)
OTHER INCOME (EXPENSE) (2,731) 987 (10,881) 3,185
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES $ 146,119 $ 131,068 $ 331,703 $ 308,146
========== ========== ========== ==========
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The Jeanswear business group consists of the Lee and Wrangler divisions in the
United States (except for preschool sizes classified in Playwear) and in
international markets, primarily in Europe. This business group also includes
Girbaud, which designs and markets licensed products in the United States under
the Marithe & Francois Girbaud label. Sales and operating profit for both the
quarter and nine months increased strongly for Lee and Wrangler in both
domestic and international markets. Sales and profits declined at Girbaud,
however, where consumer resistance to premium-priced jeans has impacted
performance since mid-1993.
The Decorated Knitwear business group includes Bassett-Walker, Nutmeg, Cutler
sports apparel and JanSport imprinted apparel. The 1994 sales increase is due
to the addition of Nutmeg and Cutler, both newly acquired in January 1994.
Sales and profits increased at Bassett-Walker for the quarter and nine months,
representing a recovery from industry conditions in 1993 characterized by
overcapacity and related pricing weakness. The third quarter of 1993 included
a $15.0 million charge for a reduction in fleece and T-shirt capacity.
The Intimate Apparel business group includes the operations of Vanity Fair
Mills and Barbizon domestically and the intimate apparel divisions in Europe.
Quarterly and nine month sales increased at most business units in the 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 and profits increased due to the acquisition of Cutler
and increases in existing divisions.
The Specialty Apparel business group consists of the Red Kap and Jantzen
divisions and JanSport equipment. The group's sales and operating profit
increases in the quarter and nine months resulted from growth at Red Kap and
JanSport equipment.
Overall, gross margins increased to 32.2% of sales during the third quarter and
nine months, from 30.8% and 31.2% in the 1993 periods. The 1993
third quarter included a $15.0 million capacity writedown. The increases in
both 1994 periods were due primarily to improved efficiencies in the Jeanswear
group.
Marketing, administrative and general expenses were 20.0% and 21.4% of sales
during the third quarter and nine months of 1994, respectively, compared with
20.4% and 21.1% in the 1993 periods.
Interest income in the 1993 quarter included $26.3 million related to
settlement of income tax issues of an acquired company. Excluding this, 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 nine months of 1994 was 39.8%, compared
with 39.9% for the 1993 period, based on the expected effective rate for the
year. The third quarter of 1993 included the cumulative effect of the increase
in the United States corporate income tax rate, which was retroactive to the
beginning of the year.
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FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Corporation is reflected in the following:
OCTOBER 1 JANUARY 1 OCTOBER 2
1994 1994 1993
--------- --------- ---------
(Dollars in millions)
Working capital $611.9 $840.3 $894.6
Current ratio 1.5 to 1 2.3 to 1 2.3 to 1
Total debt to capitalization 36.3% 30.3% 32.4%
Days' sales outstanding in accounts receivable are consistent at each balance
sheet date.
Inventories are higher than at the comparable date in the prior year due to the
acquisitions of Nutmeg and Cutler in January 1994, partially offset by
reductions at existing divisions. Inventories increased from year-end 1993 due
to the acquisitions and to meet seasonal requirements.
Short-term borrowings were used to finance the January 1994 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. The
redeemed notes were refinanced with 10 year, 7.60% notes in April 1994. The
$100.0 million of 9.40% notes due in 1996 were called for redemption in October
and, accordingly, are classified as a current obligation at October 1, 1994.
In October 1994, the existing revolving credit agreements totaling $750 million
were replaced by a single $750 million unsecured revolving credit agreement
with a group of banks. The agreement, expiring in October 1999, requires a
.12% fee on the unused portion and is available to support commercial paper
borrowings and for general corporate purposes.
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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 nine months ended October 1, 1994 and October 2,
1993.
Exhibit 27 - Financial data schedule as of October 1, 1994.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the three months ended October 1, 1994.
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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
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(Registrant)
/s/ G. G. JOHNSON
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G. G. JOHNSON
Vice President-Finance
Date: November 10, 1994 (Chief Financial Officer)
/s/ R. K. SHEARER
-------------------------
R.K. SHEARER
Vice President/Controller
(Chief Accounting Officer)
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EXHIBIT INDEX
The following is an index of the exhibits included in this Report:
Item
No. Exhibit
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11 Computation of earnings per share for the three months and nine
months ended October 1, 1994 and October 2, 1993.
27 Financial Data Schedule as of October 1, 1994.