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 5, 1997
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 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 3, 1997, there were 63,916,249 shares of Common Stock outstanding.
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VF CORPORATION
INDEX
PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income -
Three months ended April 5, 1997 and
March 30, 1996.......................................................3
Consolidated Balance Sheets - April 5, 1997,
January 4, 1997 and March 30, 1996...................................4
Consolidated Statements of Cash Flows -
Three months ended April 5, 1997 and
March 30, 1996.......................................................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 1 - Legal Proceedings...............................................9
Item 2 - Changes in Securities...........................................9
Item 4 - Submission of Matters to a Vote of Security Holders.............9
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
------------------------------
APRIL 5 MARCH 30
1997 1996
----------- -----------
NET SALES $ 1,262,781 $ 1,158,123
COSTS AND OPERATING EXPENSES
Cost of products sold 844,944 777,606
Marketing, administrative
and general expenses 290,542 269,789
Other operating expense 152 579
----------- -----------
1,135,638 1,047,974
----------- -----------
OPERATING INCOME 127,143 110,149
OTHER INCOME (EXPENSE)
Interest income 4,236 2,060
Interest expense (12,618) (17,867)
Miscellaneous, net (801) (1,186)
----------- -----------
(9,183) (16,993)
----------- -----------
INCOME BEFORE INCOME TAXES 117,960 93,156
INCOME TAXES 47,774 37,226
----------- -----------
NET INCOME $ 70,186 $ 55,930
=========== ===========
EARNINGS PER COMMON SHARE
Primary $ 1.08 $ 0.86
Fully diluted 1.06 0.85
CASH DIVIDENDS PER COMMON SHARE $ 0.38 $ 0.36
See notes to consolidated financial statements.
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VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
APRIL 5 JANUARY 4 MARCH 30
1997 1997 1996
(Unaudited) (Unaudited)
----------- ----------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 219,745 $ 270,629 $ 85,435
Accounts receivable, less
allowances: Apr 5 - $42,175;
Jan 4 - $40,253; Mar 30 - $36,864 682,247 592,942 677,061
Inventories:
Finished products 436,148 394,962 525,809
Work in process 165,469 168,774 142,872
Materials and supplies 141,570 167,087 163,863
----------- ----------- -----------
743,187 730,823 832,544
Other current assets 115,750 111,932 113,875
----------- ----------- -----------
Total current assets 1,760,929 1,706,326 1,708,915
PROPERTY, PLANT AND EQUIPMENT 1,566,074 1,543,351 1,496,615
Less accumulated depreciation 840,467 821,827 758,686
----------- ----------- -----------
725,607 721,524 737,929
INTANGIBLE ASSETS 842,596 863,930 875,264
OTHER ASSETS 185,315 157,755 144,902
----------- ----------- -----------
$ 3,514,447 $ 3,449,535 $ 3,467,010
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 24,641 $ 17,528 $ 148,643
Current portion of long-term debt 1,277 1,298 2,155
Accounts payable 291,011 320,056 273,120
Accrued liabilities 485,877 427,385 419,959
----------- ----------- -----------
Total current liabilities 802,806 766,267 843,877
LONG-TERM DEBT 517,616 519,058 613,276
OTHER LIABILITIES 164,248 164,077 175,990
REDEEMABLE PREFERRED STOCK 57,661 58,092 59,746
DEFERRED CONTRIBUTIONS TO EMPLOYEE
STOCK OWNERSHIP PLAN (30,306) (31,698) (35,557)
----------- ----------- -----------
27,355 26,394 24,189
COMMON SHAREHOLDERS' EQUITY
Common Stock 64,010 63,908 63,764
Additional paid-in capital 681,555 668,554 608,232
Foreign currency translation (13,372) 6,428 12,422
Retained earnings 1,270,229 1,234,849 1,125,260
----------- ----------- -----------
2,002,422 1,973,739 1,809,678
----------- ----------- -----------
$ 3,514,447 $ 3,449,535 $ 3,467,010
=========== =========== ===========
See notes to consolidated financial statements.
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VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
---------------------
APRIL 5 MARCH 30
1997 1996
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OPERATIONS
Net income $ 70,186 $ 55,930
Adjustments to reconcile net income to
cash provided by operations:
Depreciation 32,546 33,169
Amortization of intangible assets 6,949 7,156
Other, net (23,043) 6,199
Changes in current assets and liabilities:
Accounts receivable (102,073) (55,785)
Inventories (19,821) 5,102
Accounts payable (25,265) (1,554)
Other, net 64,623 67,284
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Cash provided by operations 4,102 117,501
INVESTMENTS
Capital expenditures (41,370) (36,993)
Other, net 499 13,728
--------- ---------
Cash invested (40,871) (23,265)
FINANCING
Increase (decrease) in short-term borrowings 8,364 (80,185)
Payment of long-term debt (78) (1,350)
Purchase of Common Stock (10,178) -
Cash dividends paid (25,247) (23,926)
Proceeds from issuance of stock 12,325 12,568
Other, net 699 17
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Cash used by financing (14,115) (92,876)
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NET CHANGE IN CASH AND EQUIVALENTS (50,884) 1,360
CASH AND EQUIVALENTS - BEGINNING OF YEAR 270,629 84,075
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CASH AND EQUIVALENTS - END OF PERIOD $ 219,745 $ 85,435
========= =========
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 three months ended
April 5, 1997 are not necessarily indicative of results that may be expected for
the year ending January 3, 1998. 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 4, 1997.
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.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which establishes new standards for computations of
earnings per share. The Statement will be effective for periods ending after
December 15, 1997, with prior periods restated to comply with the new standards
at that time. If the Statement had been effective for the quarters ended April
5, 1997 and March 30, 1996, there would have been no significant change in
earnings per share as presented in the accompanying Consolidated Statements of
Income.
NOTE C - CAPITAL
There are 150,000,000 authorized shares of Common Stock, no par value - stated
capital $1 a share. At April 5, 1997, there were 64,009,905 shares outstanding,
excluding 2,539,948 treasury shares. At January 4, 1997 and March 30, 1996,
there were 63,907,874 and 63,763,865 shares outstanding, excluding 2,399,323 and
1,381,332 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 1,867,558 shares were outstanding at April 5, 1997,
1,881,515 at January 5, 1997 and 1,935,082 at March 30, 1996.
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VF CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The sales dollar increase of 9% for the quarter ended April 5, 1997 resulted
from an 11% increase in unit sales, offset by the negative impact of the
translation of foreign currencies into the U.S. dollar, as the U.S. dollar
strengthened in relation to the currencies of most European countries where the
Company has operations.
The sales increase was broad-based; that is, most of the Company's businesses
experienced strong percentage sales dollar increases, with the exception of our
international operations. Domestic jeanswear sold through the mass markets
reflected particularly strong increases, driven by our Wrangler and Rustler
brands. U.S. intimate apparel brands also contributed significantly to the sales
increase with expanded distribution of the Vassarette brand and a strong private
label business. Our Red Kap occupational apparel business also posted a
significant sales increase resulting from unit volume growth, aided by the
August 1996 acquisition of Bulwark Protective Apparel. While total international
sales were flat with the prior year quarter, sales increases in international
jeans, excluding the effects of currency translation, were comparable to the
gains in the U. S.
Gross margins improved to 33.1% of sales, compared with 32.9% in the 1996
quarter. The margin improvement resulted from lower raw material costs, lower
cost sourcing and a higher percentage of products sold at regular pricing than
experienced in the same quarter of 1996.
Marketing, administrative and general expenses were 23.0% of sales, compared
with 23.3% in the prior year period. Administrative expenses declined as a
percent of sales as a result of the cost reduction initiatives begun in late
1995. Marketing expenses also declined as a percent of sales despite an increase
of $17 million in total marketing spending. This increase results from
additional promotional spending in the Company's targeted growth areas of
jeanswear, intimate apparel, international businesses and daypacks.
Net interest expense declined significantly in 1997 due to a higher level of
cash and reduced short and long-term borrowings.
The effective income tax rate for the first quarter of 1997 was 40.5%, compared
with 40.0% in the prior year, based on the expected rate for the year.
Earnings per share for the 1997 quarter advanced 26% over the prior year
quarter, with the effects of a strong U.S. dollar on foreign currency
translation reducing earnings by $.04 per share.
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FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company is reflected in the following:
APRIL 5 JANUARY 4 MARCH 30
1997 1997 1996
------- --------- --------
(Dollars in millions)
Working capital $958.1 $940.1 $865.0
Current ratio 2.2 to 1 2.2 to 1 2.0 to 1
Debt to total capital 21.3% 21.4% 29.7%
Days sales outstanding in accounts receivable are consistent for all dates
presented. Inventories at the end of the 1997 first quarter are slightly higher
than at the end of 1996. They are, however, significantly lower than the level
at the end of the 1996 first quarter, reflecting improved inventory management
and controls.
Cash balances are much higher and short-term debt levels are significantly lower
at the end of the first quarter of 1997 than at the comparable date in 1996 due
to the strong cash flow from operations during the 1996 year.
During the first quarter, the Company repurchased 150,000 shares of its Common
Stock in open market transactions for a total of $10.2 million. Under its
current authorization from the Board of Directors, the Company may repurchase up
to an additional 4.5 million Common Shares. The Company has indicated that it
intends to accelerate its share repurchase program from the first quarter rate.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements included herein are "forward-looking statements" within the
meaning of the federal securities laws. This includes any 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; timely completion of the Company's cost reduction initiatives; 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.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Reference is made to Item 3, Legal Proceedings, in the Company's Form 10-K and
to "Other Matters" included in Management's Discussion and Analysis of
Operations and Financial Condition in the Company's annual report for the year
ended January 4, 1997. During the first quarter, the trial date for the "acid
wash" litigation was set for November 1997.
Item 2 - Changes in Securities
During the quarter, the Company issued a total of 9,000 shares of restricted
Common Stock to certain senior officers of the Company pursuant to terms of the
1995 Key Employee Restricted Stock Plan in transactions not involving an offer
or sale of securities for purposes of the Securities Act of 1933, as amended.
Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company held on April 15, 1997,
the four nominees to the Board of Directors were elected as follows:
Votes For Votes Withheld
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To serve until the 1999 Annual Meeting:
William E. Pike 58,362,701 785,659
To serve until the 2000 Annual Meeting:
Robert J. Hurst 57,704,466 1,443,894
M. Rust Sharp 57,591,231 1,557,129
L. Dudley Walker 58,349,798 798,562
In addition, the proposal to adopt the 1996 Stock Compensation Plan was approved
by the shareholders. The vote was 49,657,758 for, 5,988,265 against and 453,420
abstaining.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of earnings per share for the three
months ended April 5, 1997 and March 30, 1996.
Exhibit 27 - Financial data schedule as of April 5, 1997.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the three months ended April 5, 1997.
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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)
By: /s/ Gerard G. Johnson
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Gerard G. Johnson
Vice President - Finance
(Chief Financial Officer)
Date: May 9, 1997
By: /s/ Robert K. Shearer
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Robert K. Shearer
Vice President - Controller
(Chief Accounting Officer)
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