VF CORPORATION QUARTERLY RESULTS OF OPERATIONS
In thousands, Earnings Per Common Share Dividends Per
except per share amounts Net Sales Gross Profit Net Income Primary Fully Diluted Common Share
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1994
FIRST QUARTER $1,123,035 $ 362,612 $ 52,898 $ .81 $ .79 $ .32
SECOND QUARTER 1,186,324 380,175 58,916 .90 .88 .32
THIRD QUARTER 1,373,037 442,077 87,804 1.34 1.31 .32
FOURTH QUARTER 1,289,317 399,554 74,918 1.15 1.12 .34
---------------------------------------------------------------------------------------------------------------------------------
$4,971,713 $1,584,418 $274,536 $4.20 $4.10 $1.30
=================================================================================================================================
1993
First Quarter $1,016,644 $ 323,226 $ 52,729 $ .83 $ .81 $ .30
Second Quarter 1,053,411 327,546 55,731 .85 .83 .30
Third Quarter 1,152,842 355,044 76,815* 1.18* 1.15* .30
Fourth Quarter 1,097,507 339,727 61,140 .94 .92 .32
---------------------------------------------------------------------------------------------------------------------------------
$4,320,404 $1,345,543 $246,415 $3.80 $3.71 $1.22
=================================================================================================================================
1992
First Quarter $ 817,592 $ 261,770 $ 43,692 $ .73 $ .71 $ .27
Second Quarter 852,544 269,203 46,202 .77 .75 .27
Third Quarter 1,125,294 368,215 76,556 1.29 1.25 .27
Fourth Quarter 1,029,019 321,535 70,581** 1.18** 1.14** .30
---------------------------------------------------------------------------------------------------------------------------------
$3,824,449 $1,220,723 $237,031 $3.97 $3.85 $1.11
=================================================================================================================================
* Interest income relating to settlement of income tax examinations
increased net income by $15.1 million ($.24 per share).
** A refund of prior years' income taxes and related interest income
increased net income by $14.4 million ($.24 per share), and
recognition of cumulative postretirement benefits reduced net income
by $4.1 million ($.07 per share).
[GRAPH]
15
VF CORPORATION CONSOLIDATED STATEMENTS OF INCOME
In thousands, except per share amounts Fiscal year ended DECEMBER 31, 1994 January 1, 1994 January 2, 1993
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET SALES $4,971,713 $4,320,404 $3,824,449
COSTS AND OPERATING EXPENSES
Cost of products sold 3,387,295 2,974,861 2,603,726
Marketing, administrative and general expenses 1,045,615 913,734 791,343
-----------------------------------------------------------------------------------------------------------------------------
4,432,910 3,888,595 3,395,069
-----------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 538,803 431,809 429,380
OTHER INCOME (EXPENSE)
Interest income 9,296 35,284 17,453
Interest expense (80,280) (72,671) (71,068)
Miscellaneous, net (12,158) 5,565 8
-----------------------------------------------------------------------------------------------------------------------------
(83,142) (31,822) (53,607)
-----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 455,661 399,987 375,773
INCOME TAXES 181,125 153,572 138,742
-----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 274,536 $ 246,415 $ 237,031
=============================================================================================================================
EARNINGS PER COMMON SHARE
Primary $ 4.20 $ 3.80 $ 3.97
Fully diluted 4.10 3.71 3.85
CASH DIVIDENDS PER COMMON SHARE $ 1.30 $ 1.22 $ 1.11
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 64,620 64,011 58,608
=============================================================================================================================
See notes to consolidated financial statements.
VF CORPORATION SALES AND OPERATING PROFIT BY BUSINESS GROUP (UNAUDITED)
In thousands Fiscal year ended DECEMBER 31, 1994 January 1, 1994 January 2, 1993
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET SALES
Jeanswear $2,547,131 $2,418,533 $2,155,212
Decorated Knitwear 623,272 392,002 443,970
Intimate Apparel 724,462 668,995 505,210
Playwear 367,508 196,245 152,810
Specialty Apparel 709,340 644,629 567,247
------------------------------------------------------------------------------------------------
$4,971,713 $4,320,404 $3,824,449
------------------------------------------------------------------------------------------------
OPERATING PROFIT
Jeanswear $ 372,392 $ 310,165 $ 300,256
Decorated Knitwear 32,423 3,853 38,326
Intimate Apparel 60,347 57,318 53,534
Playwear 36,457 18,344 2,819
Specialty Apparel 75,851 80,212 65,666
------------------------------------------------------------------------------------------------
577,470 469,892 460,601
CORPORATE EXPENSES (38,667) (38,083) (31,221)
INTEREST, NET (70,984) (37,387) (53,615)
MISCELLANEOUS, NET (12,158) 5,565 8
------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES $ 455,661 $ 399,987 $ 375,773
================================================================================================
16
VF CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
ANALYSIS OF OPERATIONS
Net sales in 1994 were up 15% over 1993 and 30% over 1992. Excluding
acquisitions, the sales increases were 7% and 17%, respectively. The sales
increases within existing divisions resulted primarily from unit volume growth.
Gross margins were 31.9% of sales in 1994, compared with 31.1% in 1993 and
31.9% in 1992. The increase in 1994 over 1993 is due to higher margins in the
Jeanswear business group resulting from manufacturing efficiencies. In
addition, 1993 was lower than normal due to a provision for capacity reduction
in knitwear and significantly reduced margins at Girbaud.
Marketing and administrative expenses were 21.0% of sales in 1994, compared
with 21.1% and 20.7% in 1993 and 1992, respectively. The inclusion of the
newly acquired international intimate apparel divisions in 1993, which have
historically maintained higher operating expense levels, accounted for the
increase in 1993 and 1994.
[GRAPH]
Interest expense increased in 1994 due to higher borrowings incurred to fund
the acquisitions of H.H. Cutler Company (Cutler) and Nutmeg Industries, Inc.
(Nutmeg) in January 1994. Interest income was lower in 1994, as 1993 included
$24.4 million and 1992 included $8.3 million related to refunds of previous
years' income taxes.
The change in miscellaneous (net) in 1994 resulted primarily from higher
goodwill amortization expense related to the 1994 acquisitions of Cutler and
Nutmeg. Miscellaneous in 1992 was reduced by a $6.6 million provision
representing the cumulative charge for postretirement benefits under Financial
Accounting Standards No. 106.
The effective income tax rate was 39.7% in 1994, 38.4% in 1993 and 36.9% in
1992. Income tax expense was higher in 1994 because of additional
nondeductible goodwill amortization arising from the 1994 acquisitions. Income
tax expense in 1994 and 1993 included the effect of the 1% increase in the
United States corporate income tax rate and in 1992 was reduced by a $9.2
million refund of prior years' taxes.
OPERATING RESULTS BY BUSINESS GROUP
The Jeanswear business group includes the Lee and Wrangler divisions in the
United States and in international markets. Also included is the Girbaud
division, which designs and markets licensed products in the United States
under the Marithe & Francois Girbaud(R) label. Total Jeanswear sales in 1994
increased by 5% over 1993 and 18% over 1992 levels, with international growth
at a more rapid rate than in the United States. Operating margins of Wrangler
and Lee improved during this period due to increased manufacturing efficiencies
and reduced use of outside contractors. Sales and profits at Girbaud, however,
have declined in the last two years due to consumer resistance to
premium-priced jeans.
The Decorated Knitwear business group consists of Bassett-Walker, JanSport
imprinted apparel and, with their acquisitions in 1994, Cutler sports apparel
and Nutmeg. The 1994 sales increase was due to the additions of Cutler and
Nutmeg. The 1994 profit increase resulted from profits at Cutler and Nutmeg
and increased profits at Bassett-Walker, representing a recovery from industry
conditions in 1993 characterized by overcapacity and related pricing weakness.
In addition, 1993 operating results for this group included a $15.0 million
provision for reduction of knitwear production capacity at Bassett-Walker.
The Intimate Apparel business group includes the operations of Vanity Fair
Mills domestically and the intimate apparel divisions in Europe. Sales of the
business group increased during 1994 and 1993 due to
17
VF CORPORATION CONSOLIDATED BALANCE SHEETS
In thousands DECEMBER 31, 1994 January 1, 1994
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...
ASSETS
CURRENT ASSETS
Cash and equivalents $ 59,742 $ 151,564
Accounts receivable, less allowances of
$32,794 in 1994 and $28,808 in 1993 613,337 511,887
Inventories 801,338 778,767
Deferred income taxes 48,388 38,138
Other current assets 28,361 19,824
----------------------------------------------------------------------------------------------------------------
Total current assets 1,551,166 1,500,180
PROPERTY, PLANT AND EQUIPMENT 767,011 712,759
INTANGIBLE ASSETS 911,285 575,359
OTHER ASSETS 106,146 89,050
----------------------------------------------------------------------------------------------------------------
$3,335,608 $2,877,348
================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 321,161 $ 35,648
Current portion of long-term debt 2,773 110,119
Accounts payable 291,088 246,503
Accrued liabilities 297,310 267,578
----------------------------------------------------------------------------------------------------------------
Total current liabilities 912,332 659,848
LONG-TERM DEBT 516,700 527,573
OTHER LIABILITIES 152,871 126,978
REDEEMABLE PREFERRED STOCK 62,195 63,309
DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (42,499) (47,760)
----------------------------------------------------------------------------------------------------------------
19,696 15,549
COMMON SHAREHOLDERS' EQUITY
Common Stock, stated value $1; shares authorized 150,000,000; shares
outstanding, 64,164,524 in 1994 and 64,488,660 in 1993 64,165 64,489
Additional paid-in capital 552,927 543,165
Foreign currency translation 4,557 (12,865)
Retained earnings 1,112,360 952,611
----------------------------------------------------------------------------------------------------------------
1,734,009 1,547,400
----------------------------------------------------------------------------------------------------------------
$3,335,608 $2,877,348
================================================================================================================
See notes to consolidated financial statements.
18
VF CORPORATION
growth at Vanity Fair, particularly with the Vassarette brand and private label
sales, and from the European companies acquired during 1992. Operating margins
have declined due to higher marketing and other expenses in the European
companies.
The Playwear business group consists of Healthtex, the Cutler playwear and
sleepwear operations and the preschool sizes of Lee and Wrangler. Growth in
playwear sales and profits over the three year period resulted from the
acquisition of Cutler in 1994 as well as growth within existing companies.
Red Kap, Jantzen and the equipment division of JanSport are the larger
components of the Specialty Apparel group. Sales and profits expanded at each
company in both 1994 and 1993, with the exception of Jantzen which in 1994
incurred a restructuring charge to discontinue its men's sportswear and sweater
businesses.
ANALYSIS OF FINANCIAL CONDITION
In managing its capital structure, VF balances financial leverage with equity
to reduce its overall cost of capital, while providing the flexibility to
pursue investment opportunities that may become available.
In January 1993, the Company sold 4.6 million shares of Common Stock. While
proceeds were specifically used to repay short-term borrowings that temporarily
financed the business acquisitions completed during 1992, the offering provided
additional flexibility within the Company's overall capital structure.
[GRAPH]
It is management's goal to maintain a debt to total capital ratio of less than
40%. Our debt to total capital ratio was within these guidelines: 32.7% at
the end of 1994 and 30.3% at the end of 1993. Despite our stated goal, we will
exceed this level if warranted by appropriate investment opportunities.
[GRAPH]
BALANCE SHEETS
The increase in total assets in 1994 was mostly due to intangible assets
related to the acquisitions of Cutler and Nutmeg. Also showing increases were
two key components of working capital: accounts receivable and inventories.
Accounts receivable increased due to the 1994 acquisitions, somewhat slower
collections and extended terms at international locations. The increase in
inventories resulted from the 1994 acquisitions. However, inventories of
divisions other than those acquired in 1994 declined from prior year levels
despite sales increases.
Short-term borrowings increased in 1994, primarily to finance the acquisitions
of Cutler and Nutmeg, and long-term debt was reduced by $118 million.
The Company enters into foreign currency forward contracts to minimize the
effect of fluctuating foreign currencies on cash flows from its foreign
operations. Such contracts are not material.
19
VF CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands Fiscal year ended DECEMBER 31, 1994 January 1, 1994 January 2, 1993
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPERATIONS
Net income $ 274,536 $ 246,415 $ 237,031
Adjustments to reconcile net income
to cash provided by operations:
Depreciation 126,902 106,678 90,866
Amortization of intangible assets 31,609 19,087 17,415
Other, net (4,973) (3,177) (19,215)
Changes in current assets and liabilities:
Accounts receivable (45,519) (24,094) (95,027)
Inventories 72,061 (41,797) (160,511)
Accounts payable 14,559 421 48,608
Other, net 10,226 (9,782) 3,893
-----------------------------------------------------------------------------------------------------------------------
Cash provided by operations 479,401 293,751 123,060
INVESTMENTS
Capital expenditures (132,908) (209,494) (207,202)
Business acquisitions (494,751) (17,629) (133,857)
Sale of outlet facilities - 62,000 -
Other, net 1,053 45,840 8,513
-----------------------------------------------------------------------------------------------------------------------
Cash invested (626,606) (119,283) (332,546)
FINANCING
Increase (decrease) in short-term borrowings 282,739 (86,756) 55,751
Proceeds from long-term debt 99,207 98,557 331,900
Payment of long-term debt (222,718) (283,560) (231,708)
Sale of Common Stock - 232,068 -
Purchase of Common Stock (27,878) - -
Cash dividends paid (88,223) (82,831) (69,552)
Other, net 12,256 13,298 47,123
-----------------------------------------------------------------------------------------------------------------------
Cash provided (used) by financing 55,383 (109,224) 133,514
-----------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND EQUIVALENTS (91,822) 65,244 (75,972)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 151,564 86,320 162,292
-----------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS - END OF YEAR $ 59,742 $ 151,564 $ 86,320
=======================================================================================================================
20
VF CORPORATION
LIQUIDITY AND CASH FLOW
Working capital declined in 1994 primarily due to short-term borrowings
incurred to finance the acquisitions of Cutler and Nutmeg. Accordingly, the
current ratio declined from 2.3 to 1 in 1993 to 1.7 to 1 in 1994.
Cash provided by operations of $479 million in 1994 was significantly higher
than prior years due to higher net income and reduced working capital
requirements.
[GRAPH]
Capital expenditures were $133 million in 1994. The higher spending level of
the prior two years supported the growth reported during 1994. However, due to
continued growth expectations, capital expenditures should increase in 1995 and
are expected to be funded by cash flows from operations. In addition, the
Company's strong financial position provides substantial unused borrowing
capacity to meet other investment opportunities that may arise.
The Company purchased 588,000 shares of its Common Stock during 1994 in open
market transactions pursuant to an authorization from the Board of Directors to
purchase up to three million shares.
[GRAPH]
Dividends totaled $1.30 per common share in 1994, compared with $1.22 in 1993
and $1.11 in 1992. The dividend payout rate was 31% in 1994, 32% in 1993 and
28% in 1992. The indicated annual dividend rate for 1995 is $1.36 per share.
VF has paid dividends on its Common Stock annually since 1941 and intends to
maintain a long-term payout rate of 30%.
OTHER MATTERS
The Company is a defendant in an action initiated in 1990 alleging infringement
of a patent allegedly relating to a process, commonly called "acid wash," used
in the production of certain denim garments. Similar actions have been brought
against other denim apparel manufacturers. The Company is vigorously
contesting the action and believes that it has numerous substantive defenses.
No trial date has been set. Based on currently available information and the
advice of counsel, management is not in a position to determine the likelihood
of the outcome of the action with certainty. Notwithstanding, management
believes at this time that the outcome will not have a material impact on the
financial position of the Company.
21
VF CORPORATION CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
Additional Foreign
Common Paid-in Currency Retained
In thousands Stock Capital Translation Earnings
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BALANCE JANUARY 4, 1992 $ 57,700 $ 239,987 $ 16,054 $ 624,337
Net income - - - 237,031
Cash dividends:
Common Stock - - - (65,217)
Series B Preferred Stock - - - (4,335)
Exercise of stock options,
net of shares surrendered 1,819 61,349 - (2,944)
Foreign currency translation - - (11,810) -
---------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 2, 1993 59,519 301,336 4,244 788,872
Net income - - - 246,415
Cash dividends:
Common Stock - - - (78,540)
Series B Preferred Stock - - - (4,291)
Tax benefit from Preferred Stock dividends - - - 1,180
Redemption of Preferred Stock - - - (264)
Sale of Common Stock 4,600 227,468 - -
Exercise of stock options,
net of shares surrendered 370 14,361 - (761)
Foreign currency translation, less
deferred income taxes of $6,927 - - (17,109) -
---------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 1, 1994 64,489 543,165 (12,865) 952,611
Net income - - - 274,536
Cash dividends:
Common Stock - - - (83,994)
Series B Preferred Stock - - - (4,229)
Tax benefit from Preferred Stock dividends - - - 1,082
Redemption of Preferred Stock - - - (284)
Purchase of treasury shares (588) - - (27,290)
Exercise of stock options,
net of shares surrendered 264 9,762 - (72)
Foreign currency translation, less
deferred income taxes of $9,381 - - 17,422 -
---------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1994 $ 64,165 $ 552,927 $ 4,557 $1,112,360
===============================================================================================================
See notes to consolidated financial statements.
22
MANAGEMENT'S RESPONSIBILITY FOR
FINANCIAL STATEMENTS
Management of VF Corporation has prepared the accompanying financial statements
and is responsible for their content. We believe the statements accurately
report the financial position and operating results of the Company, on a basis
consistent with generally accepted accounting principles and management's best
estimates and judgments. Other financial information in this report is
consistent with these financial statements.
Management has established a system of internal control which we believe
reasonably assures that assets are safeguarded and that financial information
is accurately reported. Inherent in all systems of internal control are
limitations based on the recognition that the costs of such systems should be
related to the benefits to be derived. The internal control system is
routinely challenged by management, the independent auditors and our internal
audit staff to determine whether the internal control system continues to
function effectively. Significant auditor recommendations have been reviewed
and adopted when appropriate.
The Audit Committee of the Board of Directors meets periodically with the
independent and internal auditors to discuss the scope and findings of audit
work performed, the impact of financial reporting issues and the adequacy of
the internal control system. The independent auditors and internal auditors
have full access to the Committee, with and without the presence of management,
to discuss any appropriate matters.
/s/ L. R. PUGH
---------------------------
L. R. PUGH
Chairman and Chief Executive Officer
/s/ G. G. JOHNSON
---------------------------
G. G. JOHNSON
Vice President - Finance and Chief Financial Officer
/s/ R. K. SHEARER
---------------------------
R. K. SHEARER
Vice President - Controller and Chief Accounting Officer
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
VF Corporation
We have audited the accompanying consolidated balance sheets of VF Corporation
as of December 31, 1994 and January 1, 1994, and the related consolidated
statements of income, cash flows, and common shareholders' equity for each of
the three fiscal years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of VF Corporation at
December 31, 1994 and January 1, 1994, and the consolidated results of its
operations and its cash flows for each of the three fiscal years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Reading, Pennsylvania
February 8, 1995
23
VF CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's principal business is designing, manufacturing and marketing high
quality jeanswear, knitwear, intimate apparel, children's playwear and other
apparel. The Company's customers are primarily department, discount and
specialty stores.
NOTE A - ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of all wholly owned subsidiaries after elimination of intercompany
transactions and profits.
INVENTORIES are stated at the lower of cost or market. Inventories stated on
the last-in, first-out basis represent 33% of total 1994 and 32% of 1993
inventories. Remaining inventories are valued using the first-in, first-out
method.
PROPERTY AND DEPRECIATION: Property, plant and equipment are stated at cost.
Depreciation is computed principally by the straight-line method for financial
reporting purposes and by accelerated methods for income tax purposes.
INTANGIBLE ASSETS represent the excess of costs over the fair value of net
tangible assets of businesses acquired, less accumulated amortization of $174.0
million and $140.0 million in 1994 and 1993. These assets are amortized on the
straight-line method over five to forty years. The Company periodically
reviews intangible assets to assess recoverability based on projected operating
income of the related business unit.
EARNINGS PER 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 B - ACQUISITIONS
On January 4, 1994, the Company acquired the common stock of H.H. Cutler
Company for a total consideration of $154.7 million. On January 19, 1994, the
Company acquired the common stock of Nutmeg Industries, Inc. for a total
consideration of $352.2 million. Both companies manufacture and market
licensed apparel.
In December 1993, the Company acquired the principal operating assets of
Central Corsetera, S.A. for $17.6 million. During 1992, the Company acquired
the common stock of The Valero Group (Valero), Vives Vidal, S.A. (Vivesa) and
Jean Bellanger Enterprises (JBE) for an aggregate purchase price of $150.9
million. These companies manufacture and market branded intimate apparel
primarily in France and Spain.
All acquisitions have been accounted for as purchases, and accordingly,
operating results of these companies have been included in the consolidated
financial statements since the dates of acquisition.
The following unaudited pro forma results of operations for 1993 assume that
the acquisitions of H.H. Cutler Company and Nutmeg Industries, Inc. had
occurred at January 3, 1993:
(In thousands, except per share amounts)
--------------------------------------------------------
Net sales $4,710,557
Net income 232,034
Earnings per common share
Primary $ 3.58
Fully diluted 3.49
========================================================
NOTE C - INVENTORIES
In thousands 1994 1993
--------------------------------------------------------------------------
Finished products $473,646 $486,045
Work in process 139,255 119,582
Materials and supplies 188,437 173,140
--------------------------------------------------------------------------
$801,338 $778,767
==========================================================================
The current cost of inventories stated on the last-in, first-out method (see
Note A) is not significantly different from their value determined under the
first-in, first-out method.
NOTE D - PROPERTY, PLANT AND EQUIPMENT
In thousands 1994 1993
------------------------------------------------------------------------
Land $ 42,745 $ 40,612
Buildings 391,250 346,656
Machinery and equipment 969,857 862,755
------------------------------------------------------------------------
1,403,852 1,250,023
Less accumulated depreciation 636,841 537,264
------------------------------------------------------------------------
$ 767,011 $ 712,759
========================================================================
NOTE E - SHORT-TERM BORROWINGS
--------------------------------------------------------------------
1994 1993
(In thousands)
--------------------------------------------------------------------
Commercial paper $216,703 $ -
Banks 104,458 35,648
--------------------------------------------------------------------
$321,161 $35,648
====================================================================
The weighted average interest rate was 6.16% at the end of 1994 and 10.70% at
the end of 1993.
24
VF CORPORATION
The Company maintains an unsecured revolving credit agreement with a group of
banks for $750.0 million that supports commercial paper borrowings and is
otherwise available for general corporate purposes. The agreement requires a
.12% fee on the unused portion and extends to 1999. At December 31, 1994,
there was $75.0 million outstanding under the agreement.
NOTE F - ACCRUED LIABILITIES
In thousands 1994 1993
----------------------------------------------------------------
Income taxes $ 43,220 $ 41,270
Compensation 64,147 48,633
Insurance 38,940 27,345
Other 151,003 150,330
----------------------------------------------------------------
$ 297,310 $ 267,578
================================================================
NOTE G - LONG-TERM DEBT
In thousands 1994 1993
-----------------------------------------------------------------------
9.40% notes, due 1996 $ - $100,000
8.00% notes, due 1997 - 100,000
9.50% notes, due 1999 100,000 100,000
9.50% notes, due 2001 100,000 100,000
6.63% notes, due 2003 100,000 100,000
7.60% notes, due 2004 100,000 -
9.25% debentures, due 2022 100,000 100,000
Capital leases and other 19,473 37,692
-----------------------------------------------------------------------
519,473 637,692
Less current portion 2,773 110,119
-----------------------------------------------------------------------
$516,700 $527,573
=======================================================================
The scheduled payments of long-term debt are $2.6 million in 1996, $2.2 million
in 1997, $1.0 million in 1998 and $100.8 million in 1999. The 1997 notes were
called for redemption in January 1994 and, accordingly, were classified as a
current obligation at January 1, 1994. The Company paid interest of $83.1
million in 1994, $70.3 million in 1993 and $68.1 million in 1992.
NOTE H - OTHER LIABILITIES
In thousands 1994 1993
-----------------------------------------------------------------------
Deferred income taxes $ 64,830 $ 60,446
Deferred compensation 49,283 30,782
Other 38,758 35,750
-----------------------------------------------------------------------
$152,871 $126,978
=======================================================================
NOTE I - BENEFIT PLANS
The Company sponsors a noncontributory defined benefit pension plan covering
substantially all full-time domestic employees. Benefits are based on
employees' compensation and years of service. The Company annually contributes
amounts, as determined by an actuary, that provide the plan with sufficient
assets to meet future benefit payments. Plan assets consist principally of
common stocks, U.S. government obligations and corporate obligations.
The effect of the defined benefit plan on income is as follows:
In thousands 1994 1993 1992
--------------------------------------------------------------------------------------------------------------
Service cost - benefits earned during the year $ 16,230 $ 10,337 $ 8,568
Interest cost on projected benefit obligation 25,639 22,148 18,934
Actual return on plan assets (5,193) (34,895) (19,646)
Net amortization and deferral (18,124) 12,574 (1,884)
--------------------------------------------------------------------------------------------------------------
Pension expense $ 18,552 $ 10,164 $ 5,972
==============================================================================================================
The funded status of the defined benefit plan is as follows:
In thousands 1994 1993
----------------------------------------------------------------------------------------------------------------
Present value of vested benefits $251,540 $265,457
================================================================================================================
Present value of accumulated benefits $273,037 $285,390
================================================================================================================
Plan assets at fair value $286,554 $289,324
Present value of projected benefits 313,150 332,656
----------------------------------------------------------------------------------------------------------------
Funded status (26,596) (43,332)
Unrecognized net loss 22,468 42,147
Unrecognized net asset (16,202) (20,580)
Unrecognized prior service cost 28,182 33,169
----------------------------------------------------------------------------------------------------------------
Pension asset recorded in Other Assets $ 7,852 $ 11,404
================================================================================================================
The projected benefit obligation was determined using an assumed discount rate
of 8.25% in 1994, 7.50% in 1993 and 9.00% in 1992. The assumptions for
compensation increases were 5.00% in 1994 and 1993 and 5.50% in 1992; the
assumption for return on plan assets was 8.75% in each year.
The Company also sponsors an Employee Stock Ownership Plan (ESOP) as part of a
401(k) savings plan covering most domestic salaried employees. Contributions
made by the Company to the 401(k) plan are based on a specified percentage of
employee contributions. Cash contributions by the Company were $5.6 million in
1994, $4.5 million in 1993 and $4.0 million in 1992. Plan expense was $6.4
million for 1994 and $6.0 million for 1993 and 1992, after giving effect to
tax-deductible dividends on the Series B Preferred Stock of $4.2 million in
1994 and $4.3 million in 1993 and 1992.
NOTE J - CAPITAL
Common shares outstanding are net of shares held in treasury of 2,358,675 in
1994, 1,769,131 in 1993 and 1,766,832 in 1992. In January 1993, the Company
issued 4,600,000 shares of Common Stock in a public offering. The net proceeds
were used to repay borrowings incurred to purchase Valero, Vivesa and JBE.
(See Note B.)
25
VF CORPORATION
There are 25,000,000 authorized shares of Preferred Stock, $1 par value. As of
December 31, 1994, 2,000,000 shares are designated as Series A Preferred Stock,
of which none have been issued. In addition, 2,105,263 shares are designated
as 6.75% Series B Preferred Stock, which were purchased by the ESOP.
There were 2,014,427 shares of Series B Preferred Stock outstanding at December
31, 1994, 2,050,491 shares outstanding at January 1, 1994 and 2,069,965 shares
at January 2, 1993, after share redemptions.
Each outstanding share of Common Stock has one preferred stock purchase right
attached. The rights become exercisable ten days after an outside party
acquires, or makes an offer for, 20% or more of the Common Stock. Each right
entitles its holder to buy 1/100 share of Series A Preferred Stock for $100.
Once exercisable, if the Company is involved in a merger or other business
combination or an outside party acquires 20% or more of the Common Stock, each
right will be modified to entitle its holder (other than the acquiror) to
purchase common stock of the acquiring company or, in certain circumstances, VF
Common Stock having a market value of twice the exercise price of the right.
In some circumstances, rights other than those held by an acquiror may be
exchanged for one share of VF Common Stock or 1/100 share of Series A Preferred
Stock. The rights, which expire on January 13, 1998, may be redeemed at $.01
per right prior to their becoming exercisable.
NOTE K - REDEEMABLE PREFERRED STOCK
Each share of Series B Preferred Stock has a redemption value of $30.88 plus
cumulative accrued dividends, is convertible into 8/10 share of Common Stock
and is entitled to one vote per share along with the Common Stock. The trustee
for the ESOP may convert the preferred shares to Common Stock at any time or
may cause the Company to redeem the preferred shares under certain
circumstances. The Series B Preferred Stock also has preference in liquidation
over all other stock issues.
The ESOP's purchase of the preferred shares was funded by a loan of $65.0
million from the Company that bears interest at 9.80% and is payable in
increasing installments through 2003. Interest related to this loan was $5.3
million in 1994, $5.7 million in 1993 and $6.0 million in 1992. Principal and
interest obligations on the loan are satisfied as the Company makes
contributions to the savings plan and dividends are paid on the Preferred
Stock. As principal payments are made on the loan, shares of Preferred Stock
are allocated to participating employees' accounts within the ESOP.
NOTE L - STOCK OPTIONS
The Company has granted nonqualified and incentive stock options under two
stock option plans at prices not less than fair market value on the date of
grant. Options become exercisable one year after the date of grant and expire
ten years after the date of grant unless otherwise specified by the Board of
Directors.
Changes in the status of the stock option plans are summarized as follows:
Shares Under Shares Available
Option for Option
----------------------------------------------------------------------------------------------------------------
Balance January 1, 1994 4,168,291 2,115,446
Options granted 1,015,475 (1,015,475)
Options exercised at $13.03 to $45.20 per share (265,408) -
Options canceled (178,870) 174,869
----------------------------------------------------------------------------------------------------------------
Balance December 31, 1994 4,739,488 1,274,840
================================================================================================================
Options exercisable at December 31, 1994 at
$13.03 to $57.20 per share 3,724,013
================================================================================================================
NOTE M - INCOME TAXES
The provision for income taxes is computed based on the following amounts of
income before income taxes:
In thousands 1994 1993 1992
---------------------------------------------------------------------------------------------------------------
Domestic $409,806 $356,109 $363,732
Foreign 45,855 43,878 12,041
---------------------------------------------------------------------------------------------------------------
$455,661 $399,987 $375,773
===============================================================================================================
The provision for income taxes consists of:
In thousands 1994 1993 1992
--------------------------------------------------------------------------------------------------------------
Current:
Federal $149,000 $125,966 $111,501
Foreign 24,649 17,863 17,404
State 12,978 13,806 15,973
--------------------------------------------------------------------------------------------------------------
186,627 157,635 144,878
Deferred, primarily federal (5,502) (4,063) (6,136)
--------------------------------------------------------------------------------------------------------------
$181,125 $153,572 $138,742
==============================================================================================================
The reasons for the difference between income taxes computed by applying the
statutory federal income tax rate and income tax expense in the financial
statements are as follows:
In thousands 1994 1993 1992
--------------------------------------------------------------------------------------------------------------
Tax at federal statutory rate $159,481 $139,995 $127,763
State income taxes, net of federal tax benefit 8,436 8,974 10,542
Amortization of intangible assets 7,126 4,234 4,781
Tax refund - - (9,208)
Other, net 6,082 369 4,864
--------------------------------------------------------------------------------------------------------------
$181,125 $153,572 $138,742
==============================================================================================================
26
VF CORPORATION
Deferred income tax liabilities and assets consist of the following:
In thousands 1994 1993
----------------------------------------------------------------------------------------------------------------
Depreciation $ 65,767 $ 62,731
Inventories 21,207 22,141
Unremitted foreign earnings 12,812 16,341
Other 13,974 7,317
----------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities $113,760 $108,530
================================================================================================================
Employee benefits $ 27,758 $ 21,699
Other accrued expenses 51,095 44,872
Inventories 18,748 14,278
Operating loss carryforwards 12,988 10,135
Foreign currency translation - 6,927
----------------------------------------------------------------------------------------------------------------
110,589 97,911
Valuation allowance (10,866) (6,733)
----------------------------------------------------------------------------------------------------------------
Deferred income tax assets $ 99,723 $ 91,178
================================================================================================================
Income taxes paid were $177.0 million in 1994, $152.1 million in 1993 and
$145.0 million in 1992. Interest income in 1993 includes $24.4 million and in
1992 includes $8.3 million relating to settlements of tax examinations of
acquired companies.
NOTE N - LEASES
The Company leases certain facilities and equipment under noncancelable
operating leases. Rental expense was $55.5 million in 1994, $46.9 million in
1993 and $30.2 million in 1992. Future minimum lease payments are $50.0
million, $39.6 million, $29.7 million, $22.1 million and $16.5 million for the
years 1995 through 1999 and $56.2 million thereafter.
NOTE O - OPERATIONS BY GEOGRAPHIC AREA
In thousands 1994 1993 1992
-------------------------------------------------------------------------------------------------------------
Net sales:
United States $4,209,090 $3,678,577 $3,404,171
Foreign 762,623 641,827 420,278
-------------------------------------------------------------------------------------------------------------
$4,971,713 $4,320,404 $3,824,449
=============================================================================================================
Operating profit:
United States $ 497,099 $ 399,001 $ 426,348
Foreign 80,373 70,891 34,253
-------------------------------------------------------------------------------------------------------------
577,472 469,892 460,601
Corporate expenses (38,669) (38,083) (31,221)
Interest, net (70,984) (37,387) (53,615)
Miscellaneous, net (12,158) 5,565 8
-------------------------------------------------------------------------------------------------------------
Income before income taxes $ 455,661 $ 399,987 $ 375,773
=============================================================================================================
Identifiable assets:
United States $2,632,079 $2,178,754 $2,122,334
Foreign 610,543 562,053 503,324
Corporate 92,986 136,541 86,722
-------------------------------------------------------------------------------------------------------------
$3,335,608 $2,877,348 $2,712,380
=============================================================================================================
Foreign operations are conducted primarily in Europe. Foreign operations
located elsewhere are not significant. Corporate assets consist primarily of
cash and cash equivalents.
NOTE P - FINANCIAL INSTRUMENTS
The following represents the carrying amount and fair value of financial
instruments included in the balance sheets under the indicated captions:
In thousands 1994 1993
--------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------------------------------------------------------------------------------------------------
Financial liabilities:
Short-term borrowings $321,161 $321,161 $ 35,648 $ 35,648
Long-term debt 516,700 506,900 527,573 579,373
Redeemable Preferred Stock 62,195 78,361 63,309 75,709
==============================================================================================================
The fair value of the Company's short-term and long-term debt is estimated
based on quoted market prices or values of comparable borrowings. The fair
value of the Series B Preferred Stock is based on a valuation by an independent
financial consulting firm.
27
VF CORPORATION FINANCIAL SUMMARY
In thousands, except per share amounts 1994 1993 1992 1991
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY OF OPERATIONS
Net sales $ 4,971,713 $ 4,320,404 $ 3,824,449 $ 2,952,433
Cost of products sold 3,387,295 2,974,861 2,603,726 2,039,787
------------------------------------------------------------------------------------------------------------------------------
Gross profit 1,584,418 1,345,543 1,220,723 912,646
Marketing, administrative and
general expenses 1,045,615 913,734 791,343 608,592
------------------------------------------------------------------------------------------------------------------------------
Operating income 538,803 431,809 429,380 304,054
Interest, net (70,984) (37,387) (53,615) (55,155)
Miscellaneous, net (12,158) 5,565 8 14,298
------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 455,661 399,987 375,773 263,197
Income taxes 181,125 153,572 138,742 101,867
------------------------------------------------------------------------------------------------------------------------------
Net income $ 274,536 $ 246,415 $ 237,031 $ 161,330
------------------------------------------------------------------------------------------------------------------------------
Per share of Common Stock(1)
Earnings - primary $ 4.20 $ 3.80 $ 3.97 $ 2.75
Dividends 1.30 1.22 1.11 1.02
Average number of common
shares outstanding 64,620 64,011 58,608 57,152
Net income as % of average
common shareholders' equity 16.8% 16.9% 23.0% 18.8%
Net income as % of
average total assets 7.9% 8.5% 9.7% 8.0%
==============================================================================================================================
FINANCIAL POSITION
Accounts receivable, net $ 613,337 $ 511,887 $ 493,030 $ 333,073
Inventories 801,338 778,767 742,474 537,027
Total current assets 1,551,166 1,500,180 1,365,573 1,071,109
Property, plant and
equipment, net 767,011 712,759 711,087 577,019
Total assets 3,335,608 2,877,348 2,712,380 2,126,913
Total current liabilities 912,332 659,848 684,002 510,776
Long-term debt 516,700 527,573 767,641 583,209
Common shareholders' equity 1,734,009 1,547,400 1,153,971 938,078
==============================================================================================================================
OTHER STATISTICS
Working capital $ 638,834 $ 840,332 $ 681,571 $ 560,333
Current ratio 1.7 2.3 2.0 2.1
Debt to total capital ratio (2) 32.7% 30.3% 44.8% 42.2%
Dividends $ 88,223 $ 82,831 $ 69,552 $ 62,712
Purchase of Common Stock 27,878 -- -- --
Cash provided by operations 479,401 293,751 123,060 287,172
Capital expenditures
(excluding acquisitions) 132,908 209,494 207,202 110,762
Depreciation and amortization 158,511 125,765 108,281 90,991
==============================================================================================================================
MARKET DATA
Market price range(1) $ 53 3/4-44 1/4 $ 56 1/2-39 1/2 $ 57 1/2-38 1/2 $ 41 1/2-17 5/8
Book value per
common share(1) 27.02 23.99 19.39 16.26
Price earnings ratio - high-low 12.8-10.5 14.9-10.4 14.5-9.7 15.1-6.4
Rate of payout(3) 31.0% 32.1% 28.0% 37.1%
==============================================================================================================================
(1) Per share computations and market price ranges have been adjusted
to reflect a two-for-one stock split in April 1986.
(2) Capital is defined as common shareholders' equity plus short-term
and long-term debt.
(3) Dividends per share divided by earnings per share.
28
1990 1989 1988 1987 1986 1985 1984
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,612,613 $ 2,532,711 $ 2,516,107 $2,573,762 $1,544,574 $1,481,182 $ 1,167,356
1,874,590 1,753,476 1,751,577 1,758,773 1,002,856 951,368 742,959
------------------------------------------------------------------------------------------------------------------------------
738,023 779,235 764,530 814,989 541,718 529,814 424,397
530,770 466,371 459,929 456,383 278,175 239,825 191,589
------------------------------------------------------------------------------------------------------------------------------
207,253 312,864 304,601 358,606 263,543 289,989 232,808
(64,938) (38,908) (38,232) (50,631) (18,319) (19,338) 1,875
769 9,789 8,561 5,770 4,219 1,466 5,948
------------------------------------------------------------------------------------------------------------------------------
143,084 283,745 274,930 313,745 249,443 272,117 240,631
61,960 107,734 101,270 134,051 112,985 132,700 115,885
------------------------------------------------------------------------------------------------------------------------------
$ 81,124 $ 176,011 $ 173,660 $ 179,694 $ 136,458 $ 139,417 $ 124,746
------------------------------------------------------------------------------------------------------------------------------
$ 1.35 $ 2.72 $ 2.55 $ 2.65 $ 2.16 $ 2.25 $ 1.96
1.00 .91 .85 .75 .66 .58 .52
57,122 64,803 68,165 67,793 63,068 61,963 63,706
9.9% 17.4% 16.8% 19.8% 21.5% 28.4% 29.8%
4.1% 9.3% 9.1% 9.4% 12.3% 16.2% 19.7%
==============================================================================================================================
$ 301,032 $ 319,981 $ 266,399 $ 285,370 $ 267,368 $ 148,423 $ 135,750
436,657 507,451 422,801 493,024 465,988 208,745 175,812
824,249 873,532 786,466 912,038 877,064 436,804 378,017
537,178 513,927 482,248 507,106 488,898 315,538 304,067
1,852,829 1,889,764 1,759,862 1,925,656 1,897,782 860,193 807,675
351,462 325,057 231,024 463,993 452,876 145,052 188,774
585,142 637,549 302,348 322,888 437,558 124,280 153,294
823,126 819,777 1,095,383 980,591 831,249 554,223 441,370
==============================================================================================================================
$ 472,787 $ 548,475 $ 555,442 $ 448,045 $ 424,188 $ 291,752 $ 189,243
2.3 2.7 3.4 2.0 1.9 3.0 2.0
44.9% 47.3% 22.9% 35.7% 45.4% 23.1% 34.1%
$ 61,133 $ 57,313 $ 57,958 $ 50,862 $ 42,124 $ 36,026 $ 32,607
29,950 395,213 -- -- -- -- 47,940
284,378 172,822 328,260 250,121 164,072 152,336 195,260
110,143 125,294 64,137 90,817 60,775 53,142 30,714
97,850 91,029 88,934 89,689 54,966 50,075 26,842
==============================================================================================================================
$34 1/4-11 5/8 $38 3/8-27 3/4 $33 7/8-24 3/4 $48 1/4-22 $ 36-24 $ 27-13 $16 1/4-10 7/8
14.44 14.14 16.05 14.43 12.30 8.91 7.14
25.4-8.6 14.1-10.2 13.3-9.7 18.2-8.3 16.7-11.1 12.0-5.8 8.3-5.5
74.1% 33.5% 33.3% 28.3% 30.6% 25.8% 26.3%
==============================================================================================================================
29
VF CORPORATION INVESTOR INFORMATION
COMMON STOCK
Listed on the New York Stock Exchange and Pacific Stock Exchange -- trading
symbol VFC.
SHAREHOLDERS OF RECORD
As of February 1, 1995, there were 8,238 shareholders of record.
DIVIDEND POLICY
Quarterly dividends on VF Corporation Common Stock, when declared, are usually
paid on or about the 20th day of March, June, September and December.
DIVIDEND REINVESTMENT PLAN
The Plan is offered to shareholders by First Chicago Trust Company of New York.
The Plan provides for automatic dividend reinvestment and voluntary cash
contributions for the purchase of additional shares of VF Corporation Common
Stock. Questions concerning general Plan information should be directed to the
Office of the Vice President - Secretary of VF Corporation.
DIVIDEND DIRECT DEPOSIT
Shareholders may have their dividends deposited into their savings or checking
account at any bank that is a member of the Automated Clearing House (ACH)
system. A brochure describing this service may be obtained by contacting First
Chicago or VF Corporation.
QUARTERLY COMMON STOCK PRICE INFORMATION
The high and low sales prices for the periods indicated were as follows:
1994 1993 1992
------------------------------------------------------------------------------
High Low High Low High Low
------------------------------------------------------------------------------
First quarter $51 7/8 $44 1/2 $56 1/2 $44 3/4 $46 7/8 $38 1/2
Second quarter 53 3/4 46 51 3/4 45 3/4 47 7/8 40 1/2
Third quarter 52 7/8 46 1/2 47 1/4 40 3/8 50 1/4 43
Fourth quarter 51 5/8 44 1/4 46 1/4 39 1/2 57 1/2 45 1/8
------------------------------------------------------------------------------
32