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 JULY 1, 1995 Commission file number: 1-5256 ----------------- V. F. CORPORATION (Exact name of registrant as specified in its charter) PENNSYLVANIA 23-1180120 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 1047 NORTH PARK ROAD WYOMISSING, PA 19610 (Address of principal executive offices) (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 July 29, 1995, there were 63,841,527 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 six months ended July 1, 1995 and July 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Balance Sheets - July 1, 1995, December 31, 1994 and July 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows - Six months ended July 1, 1995 and July 2, 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 SIX MONTHS ENDED ------------------------------ ------------------------------ JULY 1 JULY 2 JULY 1 JULY 2 1995 1994 1995 1994 ----------- ------------ ------------ ----------- NET SALES $ 1,271,936 $ 1,186,324 $ 2,459,523 $ 2,309,359 COSTS AND OPERATING EXPENSES Cost of products sold 871,012 806,149 1,670,160 1,566,572 Marketing, administrative and general expenses 272,666 258,861 545,860 512,771 ----------- ------------ ------------ ------------ 1,143,678 1,065,010 2,216,020 2,079,343 ----------- ------------ ------------ ------------ OPERATING INCOME 128,258 121,314 243,503 230,016 OTHER INCOME (EXPENSE) Interest income 2,155 1,980 4,366 4,488 Interest expense (20,615) (21,579) (39,080) (40,770) Miscellaneous, net (1,857) (4,001) (4,357) (8,150) ----------- ------------ ------------ ------------ (20,317) (23,600) (39,071) (44,432) ----------- ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 107,941 97,714 204,432 185,584 INCOME TAXES 42,704 38,798 81,242 73,770 ----------- ------------ ------------ ------------ NET INCOME $ 65,237 $ 58,916 $ 123,190 $ 111,814 =========== ============ ============ ============ EARNINGS PER COMMON SHARE Primary $ 1.01 $ 0.90 $ 1.90 $ 1.71 Fully diluted 0.99 0.88 1.86 1.67 CASH DIVIDENDS PER COMMON SHARE $ 0.34 $ 0.32 $ 0.68 $ 0.64
See notes to consolidated financial statements. 3 VF CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
JULY 1 DECEMBER 31 JULY 2 1995 1994 1994 --------------- --------------- ---------------- ASSETS CURRENT ASSETS Cash and equivalents $ 50,335 $ 59,742 $ 25,456 Accounts receivable, less allowances: Jul. 1 - $29,815; Dec. 31 - $32,794; Jul. 2 - $34,475 828,894 613,337 731,165 Inventories: Finished products 676,198 473,646 638,920 Work in process 165,064 139,255 151,123 Materials and supplies 180,273 188,437 170,305 --------------- --------------- ---------------- 1,021,535 801,338 960,348 Other current assets 85,744 76,749 81,370 --------------- --------------- ---------------- Total current assets 1,986,508 1,551,166 1,798,339 PROPERTY, PLANT AND EQUIPMENT 1,462,688 1,403,852 1,372,230 Less accumulated depreciation 696,788 636,841 597,962 --------------- --------------- ---------------- 765,900 767,011 774,268 INTANGIBLE ASSETS 910,930 911,285 918,670 OTHER ASSETS 136,469 106,146 104,577 --------------- --------------- ---------------- $ 3,799,807 $ 3,335,608 $ 3,595,854 =============== =============== ================ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 485,719 $ 321,161 $ 534,204 Current portion of long-term debt 2,473 2,773 3,370 Accounts payable 320,854 291,088 263,794 Accrued liabilities 375,849 297,310 367,504 --------------- --------------- ---------------- Total current liabilities 1,184,895 912,332 1,168,872 LONG-TERM DEBT 615,673 516,700 623,896 OTHER LIABILITIES 173,330 152,871 156,042 REDEEMABLE PREFERRED STOCK 61,382 62,195 62,788 DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (39,727) (42,499) (45,033) --------------- --------------- ---------------- 21,655 19,696 17,755 COMMON SHAREHOLDERS' EQUITY Common Stock 63,666 64,165 64,668 Additional paid-in capital 570,092 552,927 549,891 Foreign currency translation 25,986 4,557 (6,019) Retained earnings 1,144,510 1,112,360 1,020,749 --------------- --------------- ---------------- 1,804,254 1,734,009 1,629,289 --------------- --------------- ---------------- $ 3,799,807 $ 3,335,608 $ 3,595,854 =============== =============== ================
See notes to consolidated financial statements. 4 VF CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS ENDED ------------------------------------ JULY 1 JULY 2 1995 1994 --------------- --------------- OPERATIONS Net income $ 123,190 $ 111,814 Adjustments to reconcile net income to cash used by operations: Depreciation 67,167 61,152 Amortization of intangible assets 16,489 15,439 Other, net (2,437) 15,592 Changes in current assets and liabilities: Accounts receivable (194,587) (167,002) Inventories (210,394) (76,593) Accounts payable 25,390 (13,231) Other, net 70,231 50,741 --------------- --------------- Cash used by operations (104,951) (2,088) INVESTMENTS Capital expenditures (68,389) (68,940) Business acquisitions (12,004) (494,751) Other, net (7,640) (5,449) --------------- --------------- Cash invested (88,033) (569,140) FINANCING Increase in short-term borrowings 162,779 496,317 Proceeds from long-term debt 98,718 99,207 Payment of long-term debt (1,922) (114,475) Purchase of Common Stock (46,787) - Cash dividends paid (45,429) (43,478) Other, net 16,218 7,549 --------------- --------------- Cash provided by financing 183,577 445,120 --------------- --------------- NET CHANGE IN CASH AND EQUIVALENTS (9,407) (126,108) CASH AND EQUIVALENTS - BEGINNING OF YEAR 59,742 151,564 --------------- --------------- CASH AND EQUIVALENTS - END OF PERIOD $ 50,335 $ 25,456 =============== ===============
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 six months ended July 1, 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 July 1, 1995, there were 63,666,105 shares outstanding, excluding 593,099 treasury shares. During 1995, 2,700,000 treasury shares were retired. At December 31, 1994 and July 2, 1994, there were 64,164,524 and 64,668,172 shares outstanding, excluding 2,358,675 and 1,770,467 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 1,988,081 were outstanding at July 1, 1995, 2,014,427 at December 31, 1994 and 2,033,631 at July 2, 1994. 6 VF CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales increased 7% for the second quarter and six months compared with the same periods of 1994. Earnings per share increased by 12% for the quarter and 11% for the six months of 1995. The increases in sales and earnings were primarily due to unit volume growth. A smaller portion of the increases in both periods was due to currency translation as the U.S. dollar declined in relation to the currencies of most European countries where the Company has operations. Sales and operating profit by business group are summarized as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------------- --------------------------------------- JULY 1 JULY 2 PERCENT JULY 1 JULY 2 PERCENT 1995 1994 CHANGE 1995 1994 CHANGE ------------- ------------- ---------- ----------- ------------ ---------- (In thousands) (In thousands) NET SALES Jeanswear $ 676,876 $ 618,469 9% $ 1,315,372 $ 1,207,469 9% Decorated Knitwear 126,709 128,790 (2) 230,841 245,673 (6) Intimate Apparel 188,863 172,186 10 370,718 347,051 7 Playwear 96,072 81,567 18 179,058 159,412 12 Specialty Apparel 183,416 185,312 (1) 363,534 349,754 4 ----------- ------------- ------- ----------- ------------ ------- $ 1,271,936 $ 1,186,324 7% $ 2,459,523 $ 2,309,359 7% =========== ============= ======= =========== ============ ======= OPERATING PROFIT Jeanswear $ 92,676 $ 90,412 3% $ 182,676 $ 170,956 7% Decorated Knitwear (1,377) (2,609) 47 (9,581) (7,982) (20) Intimate Apparel 16,650 12,635 32 33,017 30,137 10 Playwear 7,813 7,904 (1) 13,731 14,053 (2) Specialty Apparel 22,828 22,736 0 44,431 42,432 5 ----------- ------------- ------- ----------- ------------ ------- 138,590 131,078 6% 264,274 249,596 6% CORPORATE EXPENSES (10,332) (9,764) (20,771) (19,580) INTEREST, NET (18,460) (19,599) (34,714) (36,282) MISCELLANEOUS, NET (1,857) (4,001) (4,357) (8,150) ----------- ------------- ----------- ------------ INCOME BEFORE INCOME TAXES $ 107,941 $ 97,714 $ 204,432 $ 185,584 =========== ============= =========== ============
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 both the quarter and six months of 1995 resulted from growth at Wrangler in the United States and in the international jeanswear companies. 7 The Decorated Knitwear business group consists of Bassett-Walker, Nutmeg, Cutler sports apparel and JanSport imprinted apparel. A significant profit improvement at Bassett-Walker in the quarter and six month periods was offset by declines at Nutmeg and Cutler, reflecting the effects of continued weakness in the sports apparel market. Overall, sales and profits for the first half of 1995 are at an expected low level due to the seasonal nature of this group. In the Intimate Apparel business group, sales and margins improved at Vanity Fair Mills domestically and at the intimate apparel divisions in Europe for the quarter and six months of 1995. 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 six 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. The group's sales and operating profit increases for the six months resulted primarily from higher volumes experienced at Red Kap and Jantzen. Overall, gross margins declined slightly to 31.5% of sales in the quarter and 32.1% in the six months of 1995, compared with 32.0% and 32.2% in 1994. Marketing, administrative and general expenses declined to 21.4% of sales from 21.8% in the 1994 quarter; expenses for the six months were 22.2% of sales in both years. Marketing, administrative and general expenses as a percent of sales in the first quarter are historically at higher levels than annual amounts and are not necessarily representative of the trend expected for the year. Net interest expense declined slightly in 1995. The effect of a reduced borrowing level in 1995 was partially offset by higher short-term interest rates. FINANCIAL CONDITION AND LIQUIDITY The financial condition of the Company is reflected in the following:
JULY 1 DECEMBER 31 JULY 2 1995 1994 1994 ----------- ------------ ---------- (Dollars in millions) Working capital $801.6 $638.8 $629.5 Current ratio 1.7 to 1 1.7 to 1 1.5 to 1 Debt to total capital 38.0% 32.7% 41.6%
8 Days' sales outstanding in accounts receivable are consistent at all balance sheet dates. Inventories are higher than at the comparable date in the prior year due to the higher sales level in 1995. Inventories increased from year-end 1994 to meet seasonal requirements. 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 937,600 shares of its Common Stock during the first six months of 1995 in open market transactions pursuant to an authorization from the Board of Directors to purchase up to three million shares. 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 six months ended July 1, 1995 and July 2, 1994. Exhibit 27 - Financial data schedule as of July 1, 1995. (b) Reports on Form 8-K - A report on Form 8-K dated June 8, 1995 provided various exhibits related to the $100 million, 6.75% notes due June 1, 2005 that were issued on June 6, 1995. In addition, the Company's By-Laws, as amended effective April 18, 1995, were included as an exhibit. 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: August 8, 1995 By: /s/ Robert K. Shearer ------------------------- Robert K. Shearer Vice President - Controller (Chief Accounting Officer) 10