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 MARCH 30, 1996
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 April 27, 1996, there were 63,801,869 shares of Common Stock
outstanding.
VF CORPORATION
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income -
Three months ended March 30, 1996
and April 1, 1995 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - March 30, 1996,
December 30, 1995 and April 1, 1995 . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Three months ended March 30, 1996 and
April 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . 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 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
-------------------------
MARCH 30 APRIL 1
1996 1995
---------- ----------
NET SALES $1,158,123 $1,187,587
COSTS AND OPERATING EXPENSES
Cost of products sold 777,606 799,148
Marketing, administrative and general expenses 269,789 273,194
Other operating (income) expense 579 1,300
---------- ----------
1,047,974 1,073,642
---------- ----------
OPERATING INCOME 110,149 113,945
OTHER INCOME (EXPENSE)
Interest income 2,060 2,211
Interest expense (17,867) (18,465)
Miscellaneous, net (1,186) (1,200)
---------- ----------
(16,993) (17,454)
---------- ----------
INCOME BEFORE INCOME TAXES 93,156 96,491
INCOME TAXES 37,226 38,538
---------- ----------
NET INCOME $ 55,930 $ 57,953
========== ==========
EARNINGS PER COMMON SHARE
Primary $0.86 $0.89
Fully diluted 0.85 0.87
CASH DIVIDENDS PER COMMON SHARE $0.36 $0.34
See notes to consolidated financial statements.
3
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 30 DECEMBER 30 APRIL 1
1996 1995 1995
---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and equivalents $ 85,435 $ 84,075 $ 72,260
Accounts receivable, less allowances:
Mar. 30 - $36,864; Dec. 30 - $34,621; April 1 - $34,936 677,061 629,506 702,938
Inventories:
Finished products 525,809 514,688 579,462
Work in process 142,872 139,721 163,832
Materials and supplies 163,863 187,498 191,166
---------- ---------- ----------
832,544 841,907 934,460
Other current assets 113,875 112,149 89,524
---------- ---------- ----------
Total current assets 1,708,915 1,667,637 1,799,182
PROPERTY, PLANT AND EQUIPMENT 1,496,615 1,490,384 1,429,554
Less accumulated depreciation 758,686 740,504 670,799
---------- ---------- ----------
737,929 749,880 758,755
INTANGIBLE ASSETS 875,264 887,606 915,759
OTHER ASSETS 144,902 141,948 120,060
---------- ---------- ----------
$ 3,467,010 $ 3,447,071 $ 3,593,756
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 148,643 $ 229,945 $ 437,553
Current portion of long-term debt 2,155 2,715 2,705
Accounts payable 273,120 276,598 317,892
Accrued liabilities 419,959 359,062 374,960
---------- ---------- ----------
Total current liabilities 843,877 868,320 1,133,110
LONG-TERM DEBT 613,276 614,217 516,890
OTHER LIABILITIES 175,990 169,392 168,327
REDEEMABLE PREFERRED STOCK 59,746 60,667 61,737
DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (35,557) (37,031) (41,103)
---------- ---------- ----------
24,189 23,636 20,634
COMMON SHAREHOLDERS' EQUITY
Common Stock 63,764 63,439 63,452
Additional paid-in capital 608,232 593,976 558,852
Foreign currency translation 12,422 20,483 27,384
Retained earnings 1,125,260 1,093,608 1,105,107
---------- ---------- ----------
1,809,678 1,771,506 1,754,795
---------- ---------- ----------
$ 3,467,010 $ 3,447,071 $ 3,593,756
========== ========== ==========
See notes to consolidated financial statements.
4
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
--------------------------
MARCH 30 APRIL 1
1996 1995
---------- ----------
OPERATIONS
Net income $ 55,930 $ 57,953
Adjustments to reconcile net income to cash provided (used) by
operations:
Depreciation 33,169 34,306
Amortization of intangible assets 7,156 8,230
Other, net 6,199 2,087
Changes in current assets and liabilities:
Accounts receivable (55,785) (72,991)
Inventories 5,102 (123,131)
Accounts payable (1,554) 22,281
Other, net 67,284 63,888
---------- ----------
Cash provided (used) by operations 117,501 (7,377)
INVESTMENTS
Capital expenditures (36,993) (27,288)
Business acquisitions - (12,004)
Other, net 13,728 5,706
---------- ----------
Cash invested (23,265) (33,586)
FINANCING
Increase (decrease) in short-term borrowings (80,185) 114,489
Payment of long-term debt (1,350) (403)
Purchase of Common Stock - (43,419)
Cash dividends paid (23,926) (22,788)
Other, net 12,585 5,602
---------- ----------
Cash provided (used) by financing (92,876) 53,481
---------- ----------
NET CHANGE IN CASH AND EQUIVALENTS 1,360 12,518
CASH AND EQUIVALENTS - BEGINNING OF YEAR 84,075 59,742
---------- ----------
CASH AND EQUIVALENTS - END OF PERIOD $ 85,435 $ 72,260
========== ==========
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 three months ended
March 30, 1996 are not necessarily indicative of results that may be expected
for the year ending January 4, 1997. 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 30, 1995.
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 March 30, 1996, there were 63,763,865 shares
outstanding, excluding 1,381,332 treasury shares. At December 30, 1995 and
April 1, 1995, there were 63,438,933 and 63,451,955 shares outstanding,
excluding 1,376,976 and 3,228,337 treasury shares, respectively. During the
second quarter of 1995, 2,700,000 treasury shares were retired.
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 1,935,082 shares were outstanding at March 30, 1996,
1,964,942 at December 30, 1995 and 1,999,567 at April 1, 1995.
6
VF CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the first quarter of 1996, net sales decreased 2% and earnings per share
decreased 3% compared with 1995. The declines in sales and earnings resulted
from a decline in unit sales related to the general slowdown in retail sales in
the United States that began in the second half of 1995.
Sales and operating income by business group are summarized as follows:
FIRST QUARTER
-------------------------------------------
PERCENT
1996 1995 CHANGE
--------- --------- ----------
NET SALES (In thousands)
Jeanswear $ 632,666 $ 638,496 (1)%
Decorated Knitwear 116,811 104,132 12
Intimate Apparel 156,259 181,855 (14)
Playwear 86,234 82,986 4
Specialty Apparel 166,153 180,118 (8)
--------- --------- -------
$1,158,123 $1,187,587 (2)%
========= ========= -------
OPERATING INCOME
Jeanswear $ 88,901 $ 90,000 (1)%
Decorated Knitwear 1,221 (8,204) 100+
Intimate Apparel 5,772 16,367 (65)
Playwear 2,121 5,918 (64)
Specialty Apparel 22,257 21,603 3
--------- --------- -------
120,272 125,684 (4)%
=======
OTHER OPERATING INCOME (EXPENSE) (579) (1,300)
CORPORATE EXPENSES (9,544) (10,439)
--------- ---------
OPERATING INCOME $ 110,149 $ 113,945
========= =========
The Jeanswear business group includes the Lee, Wrangler, Rustler, Riders and
Girbaud brands in the United States and the Lee and Wrangler brands in
international markets, primarily in Europe. Unit sales and operating margins
were comparable during the 1996 and 1995 quarters. Within this category, cost
reductions helped offset the impact of additional advertising spending both
domestically and abroad.
7
Increased volume in undecorated fleece products and T-shirts were the primary
factors contributing to the sales increase in the Decorated Knitwear business
group. The manufacturing benefits related to additional volume, as well as
improvements in operating margins within the sports apparel businesses,
resulted in better profitability within this category.
The Intimate Apparel business group includes the Vanity Fair and Vassarette
brands, as well as a private label business domestically. The Company also
operates intimate apparel operations in Europe, primarily in France and Spain.
The sales and profit decline resulted primarily from reductions in domestic
sales volume in the Vanity Fair brand and private label businesses.
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 at Healthtex due to continued pricing pressures
at retail in this product category.
The Specialty Apparel business group includes Red Kap occupational apparel,
Jantzen swim and casual apparel and JanSport brand equipment. Sales declined
in this business group, in part due to closing the Jantzen men's division, but
operating margins improved due to cost reductions achieved.
Marketing, administrative and general expenses were 23.3% of sales during the
quarter, compared with 23.0% in the 1995 period. Marketing expenses increased
as a percent of sales due to higher advertising, but administrative and general
expenses declined in amount and as a percent of sales. 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 level expected for the year.
Net interest expense declined slightly in 1996 due to a reduced borrowing
level.
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company is reflected in the following:
MARCH 30 DECEMBER 30 APRIL 1
1996 1995 1995
--------- ----------- ---------
(Dollars in millions)
Working capital $865.0 $799.3 $666.1
Current ratio 2.0 to 1 1.9 to 1 1.6 to 1
Debt to total capital 29.7% 32.3% 35.3%
8
Days sales outstanding in accounts receivable are consistent with the level at
the end of 1995 and slightly improved from the level at the end of the 1995
first quarter.
Inventories declined slightly from the end of 1995 and declined significantly
from the 1995 first quarter due to our continuing emphasis to reduce inventory
levels.
Short-term borrowings declined during the first quarter of 1996 due to strong
cash flow from operations related primarily to control over inventory levels.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Company held on April 16,
1996, shares representing a total of 65,559,995 votes were outstanding
and entitled to vote for the election of Directors. The Directors
elected at the meeting for a term of three years were Ursula F.
Fairbairn, Barbara S. Feigin, Mackey J. McDonald and Lawrence R. Pugh.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of earnings per share for the three
months ended March 30, 1996 and April 1, 1995.
Exhibit 27 - Financial data schedule as of March 30, 1996.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the three months ended March 30, 1996.
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: May 9, 1996
By: /s/ Robert K. Shearer
--------------------------
Robert K. Shearer
Vice President - Controller
(Chief Accounting Officer)
10