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 SEPTEMBER 30, 1995
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 and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
On October 28, 1995, there were 63,754,513 shares of
Common Stock outstanding.
VF CORPORATION
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income -
Three months and nine months ended September 30, 1995
and October 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - September 30, 1995,
December 31, 1994 and October 1, 1994 . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Nine months ended September 30, 1995 and
October 1, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 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
VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- --------------------------------------
SEPTEMBER 30 OCTOBER 1 SEPTEMBER 30 OCTOBER 1
1995 1994 1995 1994
-------------- ------------- ---------------- ---------------
NET SALES $ 1,332,102 $ 1,373,037 $ 3,791,625 $ 3,682,396
COSTS AND OPERATING EXPENSES
Cost of products sold 919,550 930,960 2,589,319 2,497,532
Marketing, administrative
and general expenses 277,062 274,097 823,313 786,868
----------------- ----------------- ------------------ -------------------
1,196,612 1,205,057 3,412,632 3,284,400
----------------- ----------------- ------------------ -------------------
OPERATING INCOME 135,490 167,980 378,993 397,996
OTHER INCOME (EXPENSE)
Interest income 4,439 2,104 8,805 6,592
Interest expense (20,674) (21,234) (59,754) (62,004)
Miscellaneous, net (606) (2,731) (4,963) (10,881)
----------------- ----------------- ------------------ -------------------
(16,841) (21,861) (55,912) (66,293)
----------------- ----------------- ------------------ -------------------
INCOME BEFORE INCOME TAXES 118,649 146,119 323,081 331,703
INCOME TAXES 48,931 58,315 130,173 132,085
----------------- ----------------- ------------------ -------------------
NET INCOME $ 69,718 $ 87,804 $ 192,908 $ 199,618
================= ================= ================== ===================
EARNINGS PER COMMON SHARE
Primary $1.08 $1.34 $2.98 $3.05
Fully diluted 1.05 1.31 2.91 2.98
CASH DIVIDENDS PER COMMON SHARE $0.34 $0.32 $1.02 $0.96
See notes to consolidated financial statements.
3
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
SEPTEMBER 30 DECEMBER 31 OCTOBER 1
1995 1994 1994
------------------- ------------------ --------------------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 64,144 $ 59,742 $ 54,757
Accounts receivable, less allowances:
Sept. 30 - $29,181; Dec. 31 - $32,794;
Oct. 1 - $36,028 770,133 613,337 752,120
Inventories:
Finished products 669,693 473,646 550,082
Work in process 148,536 139,255 148,311
Materials and supplies 189,915 188,437 168,353
--------------- ------------- ---------------
1,008,144 801,338 866,746
Other current assets 77,750 76,749 79,473
--------------- ------------- ---------------
Total current assets 1,920,171 1,551,166 1,753,096
PROPERTY, PLANT AND EQUIPMENT 1,497,265 1,403,852 1,399,604
Less accumulated depreciation 724,204 636,841 629,188
--------------- ------------- ---------------
773,061 767,011 770,416
INTANGIBLE ASSETS 901,758 911,285 914,743
OTHER ASSETS 131,891 106,146 101,576
--------------- ------------- ---------------
$ 3,726,881 $ 3,335,608 $ 3,539,831
=============== ============= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 357,049 $ 321,161 $ 343,479
Current portion of long-term debt 2,333 2,773 109,237
Accounts payable 309,696 291,088 281,377
Accrued liabilities 385,551 297,310 407,056
--------------- ------------- ---------------
Total current liabilities 1,054,629 912,332 1,141,149
LONG-TERM DEBT 615,095 516,700 517,449
OTHER LIABILITIES 177,341 152,871 158,266
REDEEMABLE PREFERRED STOCK 61,036 62,195 62,520
DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (38,408) (42,499) (43,858)
--------------- ------------- ---------------
22,628 19,696 18,662
COMMON SHAREHOLDERS' EQUITY
Common Stock 63,925 64,165 64,734
Additional paid-in capital 589,409 552,927 552,254
Foreign currency translation 22,744 4,557 595
Retained earnings 1,181,110 1,112,360 1,086,722
--------------- ------------- ---------------
1,857,188 1,734,009 1,704,305
--------------- ------------- ---------------
$ 3,726,881 $ 3,335,608 $ 3,539,831
=============== ============= ===============
See notes to consolidated financial statements.
4
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 30 OCTOBER 1
1995 1994
------------------ ---------------
OPERATIONS
Net income $ 192,908 $ 199,618
Adjustments to reconcile net income to cash provided by operations:
Depreciation 101,636 94,893
Amortization of intangible assets 24,759 23,615
Other, net (1,707) 3,925
Changes in current assets and liabilities:
Accounts receivable (136,921) (189,051)
Inventories (198,171) 17,668
Accounts payable 14,644 3,354
Other, net 91,319 100,801
---------------- ----------------
Cash provided by operations 88,467 254,823
INVESTMENTS
Capital expenditures (113,140) (97,454)
Business acquisitions (12,004) (494,751)
Other, net 2,620 5,339
---------------- ----------------
Cash invested (122,524) (586,866)
FINANCING
Increase in short-term borrowings 34,078 305,413
Proceeds from long-term debt 98,718 99,207
Payment of long-term debt (2,613) (115,307)
Purchase of Common Stock (57,443) -
Cash dividends paid (68,176) (65,247)
Other, net 33,895 11,170
---------------- ----------------
Cash provided by financing 38,459 235,236
---------------- ----------------
NET CHANGE IN CASH AND EQUIVALENTS 4,402 (96,807)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 59,742 151,564
---------------- ----------------
CASH AND EQUIVALENTS - END OF PERIOD $ 64,144 $ 54,757
================ ================
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 nine months ended
September 30, 1995 are not necessarily indicative of results that may be
expected for the year ending December 30, 1995. 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 31, 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 September 30, 1995, there were 63,924,913 shares
outstanding, excluding 784,411 treasury shares. During 1995, 2,700,000
treasury shares were retired. At December 31, 1994 and October 1, 1994, there
were 64,164,524 and 64,734,134 shares outstanding, excluding 2,358,675 and
1,770,575 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 1,976,884 shares were outstanding at September 30,
1995, 2,014,427 at December 31, 1994 and 2,024,953 at October 1, 1994.
6
VF CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the first six months of 1995, net sales increased 7% and earnings per
share increased 11% compared with 1994, with increases due primarily to unit
volume growth. In the 1995 third quarter, however, sales declined 3%,
primarily due to a decline in unit shipments in the United States, and earnings
per share declined 19% from 1994 levels. Included in operating income in the
1995 quarter was $25 million of expenses related to a plant closing and costs
associated with excess capacity and production downtime.
Sales and operating profit by business group are summarized as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------------- ----------------------------------------------
SEPTEMBER 30 OCTOBER 1 PERCENT SEPTEMBER 30 OCTOBER 1 PERCENT
1995 1994 CHANGE 1995 1994 CHANGE
---------------- -------------- --------- ---------------- ------------- ------------
NET SALES (In thousands) (In thousands)
Jeanswear $ 682,697 $ 692,632 (1)% $ 1,998,069 $ 1,900,101 5%
Decorated Knitwear 202,027 202,150 - 432,868 447,823 (3)
Intimate Apparel 181,459 184,583 (2) 552,177 531,634 4
Playwear 107,574 107,269 - 286,632 266,681 7
Specialty Apparel 158,345 186,403 (15) 521,879 536,157 (3)
-------------- -------------- --------- --------------- --------------- --------
$ 1,332,102 $ 1,373,037 (3)% $ 3,791,625 $ 3,682,396 3%
============== ============== ========= =============== =============== ========
OPERATING PROFIT
Jeanswear $ 89,745 $ 105,183 (15)% $ 272,421 $ 276,139 (1)%
Decorated Knitwear 19,750 20,477 (4) 10,169 12,495 (19)
Intimate Apparel 13,079 16,670 (22) 46,096 46,807 (2)
Playwear 5,566 12,103 (54) 19,297 26,156 (26)
Specialty Apparel 16,752 22,719 (26) 61,183 65,151 (6)
-------------- -------------- --------- --------------- --------------- --------
144,892 177,152 (18)% 409,166 426,748 (4)%
========= ========
CORPORATE EXPENSES (9,402) (9,172) (30,173) (28,752)
INTEREST, NET (16,235) (19,130) (50,949) (55,412)
MISCELLANEOUS, NET (606) (2,731) (4,963) (10,881)
-------------- -------------- --------------- ---------------
INCOME BEFORE INCOME TAXES $ 118,649 $ 146,119 $ 323,081 $ 331,703
============== ============== =============== ===============
The Jeanswear business group includes the Lee, Wrangler and Girbaud divisions
in the United States and the Lee and Wrangler operations in international
markets, primarily in Europe. The sales and operating profit increases in the
first six months of 1995 resulted from growth at Wrangler in the United States
and in the international jeanswear companies. In the third quarter, sales and
profits declined in the United States; in international markets, sales
continued to increase but profits declined due to an $11 million charge related
to closing a manufacturing facility.
7
The Decorated Knitwear business group consists of Bassett-Walker, Nutmeg,
Cutler sports apparel and JanSport imprinted apparel. Sales and operating
profit for the quarter were comparable with the prior year, but declined for
the nine months. Profit improvement at Bassett-Walker in both periods was
offset by declines at Nutmeg and Cutler, reflecting the effects of continued
weakness in the sports apparel market.
In the Intimate Apparel business group, sales and operating profit increased at
Vanity Fair Mills domestically and at the intimate apparel divisions in Europe
for the first six months of 1995. In the third quarter, profit margins
declined on a small decline in sales.
The Playwear business group consists of Healthtex, the playwear and sleepwear
operations of Cutler and the preschool sizes of Lee and Wrangler. Operating
margins declined in the quarter and nine months due to continued pricing
pressures in the discount channel of distribution and due to operating
difficulties.
The Specialty Apparel business group consists primarily of Red Kap, Jantzen and
the JanSport equipment division. Sales and operating profit declined in the
quarter and nine months, with a significant part of the sales decline due to
discontinuation of the Jantzen men's division in late 1994.
Overall, gross margins declined to 31.0% of sales in the quarter and 31.7% in
the nine months of 1995, compared with 32.2% in both 1994 periods. The 1995
periods included an $11 million charge for closing a manufacturing plant and
other costs related to production downtime and excess inventories.
Marketing, administrative and general expenses were 20.8% and 21.7% of sales
during the third quarter and nine months of 1995, compared with 20.0% and 21.4%
in the 1994 periods. The increase in percent of sales for both 1995 periods is
due primarily to higher spending levels in anticipation of a higher level of
third quarter sales.
Net interest expense declined slightly in 1995. The effect of a reduced
borrowing level in 1995 was partially offset by higher short-term interest
rates.
The effective income tax rate for the nine months of 1995 was 40.3%, compared
with 39.8% for the 1994 period, based on the expected effective rate for the
year. The rate increase is due to expected lower taxable income for 1995; see
1995 Fourth Quarter following.
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company is reflected in the following:
SEPTEMBER 30 DECEMBER 31 OCTOBER 1
1995 1994 1994
--------------- -------------- --------------
(Dollars in millions)
Working capital $865.5 $638.8 $611.9
Current ratio 1.8 to 1 1.7 to 1 1.5 to 1
Debt to total capital 34.4% 32.7% 36.3%
8
Accounts receivable increased due to somewhat slower collections and
receivables at international locations with extended terms.
Inventories are higher than at the comparable date in the prior year as they
had been increased in anticipation of higher third quarter sales that did not
materialize in the United States. Management has taken actions to align
production with anticipated demand and to reduce inventories.
In June 1995, the Company issued $100.0 million of 10 year, 6.75% notes.
Proceeds were used to reduce short-term borrowings.
The Company purchased 1,127,600 shares of its Common Stock during the first
nine months of 1995 in open market transactions pursuant to an authorization
from the Board of Directors to purchase up to three million shares.
1995 FOURTH QUARTER
At the time of the release of third quarter earnings on October 18, 1995, the
Company announced that it will take a charge related to plant closings and
other restructuring initiatives that will significantly impact fourth quarter
earnings.
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 September 30, 1995 and October 1, 1994.
Exhibit 27 - Financial data schedule as of
September 30, 1995.
(b) Reports on Form 8-K - A report on Form 8-K
dated July 17, 1995 announced a change to
Coopers & Lybrand L.L.P. as the principal
accountants to audit the Company's financial
statements for fiscal year 1995.
9
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: November 13, 1995
By: /s/ Robert K. Shearer
--------------------------
Robert K. Shearer
Vice President - Controller
(Chief Accounting Officer)
10