SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
THE NORTH FACE, INC.
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(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[North Face Logo]
THE NORTH FACE, INC.
2013 FARALLON DRIVE
SAN LEANDRO, CALIFORNIA 94577
July 26, 2000
To the Stockholders of The North Face, Inc.:
Enclosed for your consideration is certain further information that was
filed with the Securities and Exchange Commission on July 26, 2000. This
information relates to The North Face and to certain other items in connection
with the proposed merger of a wholly-owned subsidiary of VF Corporation with and
into The North Face pursuant to the merger agreement dated as of April 7, 2000,
by and among The North Face, VF and VF's subsidiary. Please read the enclosed
information carefully prior to the August 14, 2000 special meeting of
stockholders (of which you have previously received notice) at which the
proposal to approve and adopt the merger agreement will be considered.
In addition, you may request free copies of The North Face's most recent
annual report on Form 10-K and quarterly report on Form 10-Q by calling (800)
535-3331, extension 2574.
By order of The North Face, Inc.
Board of Directors
San Leandro, California
July 26, 2000
<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2000
THE NORTH FACE, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-28596 94-3204082
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(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
2013 Farallon Drive
San Leandro, California 94577
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(Address of Principal Executive Offices) (Zip Code)
(510) 618-3500
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
(a) The North Face, Inc. (the "Company") hereby announces its results of
operations for its fiscal second quarter.
For the second quarter ended June 30, 2000, net loss was $30.8 million or
$2.41 per share, compared with a net loss of $7.6 million or $0.60 per share for
the second quarter of 1999. Sales for the quarter declined 26% to $40.3 million
versus $54.6 million in 1999.
For the six months ended June 30, 2000, net loss was $50.2 million or $3.93
per share, compared with a net loss of $13.1 million or $1.03 per share for the
six months ended June 30, 1999. For the year to date, sales declined 8% to $97.5
million, compared with $105.9 million for the prior year period.
The decline in sales for the quarter and for the year-to-date is primarily
the result of the acceleration of Fall 1999 wholesale shipments into the second
quarter of 1999 due to the anticipated move of the Company's distribution center
to a new facility in July 1999. Retail sales remained strong in 2000 with a 15%
increase over last year's second quarter.
Gross margins for the quarter declined from 43.8% in 1999 to 20.3% in 2000
primarily due to discounts given on liquidation sales to dispose of excess
inventory, and the write-down of excess raw material inventory to its estimated
realizable value.
Operating expenses declined slightly from $34.5 million to $33.6 million
for the quarter. The second quarter of 1999 included approximately $2.1 million
in costs related to accounts receivable accommodations made to certain
customers, as well as higher media and promotional spending than in 2000.
However, the second quarter of 2000 included $2.4 million of severance, as well
as $0.9 million of bank fees related to termination of the Company's credit
agreement in May 2000.
2
<PAGE>
The North Face, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales ......................... $ 40,326 $ 54,596 $ 97,470 $ 105,852
Cost of Sales ..................... 32,153 30,681 70,267 58,590
--------- --------- --------- ---------
Gross Profit ...................... 8,173 23,915 27,203 47,262
Gross Profit Percent .............. 20.3% 43.8% 27.9% 44.6%
Operating Expenses ................ 33,615 34,529 67,472 63,829
--------- --------- --------- ---------
Operating Loss .................... (25,442) (10,614) (40,269) (16,567)
Interest Expense .................. (3,361) (1,467) (6,726) (2,788)
Other Expense ..................... (2,596) (354) (3,730) (2,081)
--------- --------- --------- ---------
Loss Before Income Taxes .......... (31,399) (12,435) (50,725) (21,436)
Income Tax Expense (Benefit) ...... (604) (4,850) (541) (8,360)
--------- --------- --------- ---------
Net Loss .......................... $ (30,795) $ (7,585) $ (50,184) $ (13,076)
========= ========= ========= =========
Net Loss Per share - Diluted ...... $ (2.41) $ (0.60) $ (3.93) $ (1.03)
Weighted Average Shares Outstanding 12,757 12,726 12,755 12,707
</TABLE>
Consolidated Balance Sheets
(in thousands)
(unaudited)
June 30
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2000 1999
---- ----
Cash........................................... $7,512 $5,946
Accounts Receivable, net....................... 31,455 64,516
Inventories.................................... 82,681 71,839
Property and Equipment, net.................... 28,134 32,387
Other Assets................................... 8,529 62,680
-------- --------
Total Assets................................... $158,311 $237,368
======== ========
Short-term Borrowings and Current Portion of
Long-term Debt........................... $739 $68,432
Accounts Payable and Accrued Liabilities....... 34,913 35,524
Long-term Debt................................. 1,034 13,651
Other.......................................... 4,943 7,665
Due to Related Party........................... 142,490 --
Stockholders' Equity (Deficit)................. (25,808) 112,096
-------- --------
Total Liabilities and Stockholders' Equity..... $158,311 $237,368
======== ========
3
<PAGE>
For comparison purposes, set forth below is information from the Company's
Form 10-Q for the three months ended March 31, 2000.
The North Face, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31
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2000 1999
---- ----
Net Sales .......................... $ 57,144 $ 51,256
Cost of Sales ...................... 38,114 27,909
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Gross Profit ....................... 19,030 23,347
Gross Profit Percent ............... 33.3% 45.5%
Operating Expenses ................. 33,857 29,300
-------- --------
Operating Loss ..................... (14,827) (5,953)
Interest Expense ................... (3,365) (1,321)
Other Expense ...................... (1,134) (1,727)
-------- --------
Loss Before Income Taxes ........... (19,326) (9,001)
Income Tax Expense (Benefit) ....... 63 (3,510)
-------- --------
Net Loss ........................... $(19,389) $ (5,491)
======== ========
Net Loss Per share - Diluted ....... $ (1.52) $ (0.43)
Weighted Average Shares Outstanding 12,752 12,687
Consolidated Balance Sheets
(in thousands)
(unaudited)
March 31
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2000 1999
---- ----
Cash............................................... $4,315 $5,955
Accounts Receivable, net........................... 45,205 62,555
Inventories........................................ 70,393 59,621
Property and Equipment, net........................ 29,557 31,947
Other Assets....................................... 12,982 58,053
-------- --------
Total Assets....................................... $162,452 $218,131
======== ========
Short-term Borrowings and Current Portion
of Long-term Debt............................. $107,158 $50,884
Accounts Payable and Accrued Liabilities........... 42,339 34,268
Long-term Debt..................................... 991 5,426
Other.............................................. 6,175 7,704
Stockholders' Equity............................... 5,789 119,849
-------- --------
Total Liabilities and Stockholders' Equity......... $162,452 $218,131
======== ========
4
<PAGE>
(b) As disclosed in the Company's Information Statement referred to below,
V.F. Corporation ("VF"), through a wholly-owned subsidiary, has advanced funds
to the Company for various corporate purposes. A copy of the Demand Note
pursuant to which these advances have been made is attached as Exhibit 4.1. The
Demand Note is the Company's only current formal or informal financing
arrangement, and the Company believes that financing from other sources would be
unavailable absent credit support from VF.
(c) On April 19, 2000, a wholly-owned subsidiary of VF commenced a tender
offer for all of the outstanding shares of the Company at a purchase price of
$2.00 per share pursuant to the Agreement and Plan of Merger dated as of April
7, 2000 among the Company, VF and VF's wholly owned subsidiary (the "Merger
Agreement"). Pursuant to the offer, which expired on May 23, 2000, VF's
wholly-owned subsidiary purchased approximately 81% of the shares of the Company
outstanding on such date. In accordance with the Merger Agreement, the Company
subsequently furnished to its remaining minority stockholders an information
statement (the "Information Statement") relating to a stockholder's meeting at
which all of the stockholders will be permitted to vote upon a proposal to
approve the merger (the "Merger") of VF's subsidiary with and into the Company.
Pursuant to the Merger Agreement, all of the outstanding shares of the Company
(other than shares owned by VF or any of its affiliates or shares held by any
stockholders of the Company who properly exercise their appraisal rights) will,
upon consummation of the Merger, be converted into the right to receive $2.00
per share in cash.
On July 18, 2000, a purported class action lawsuit was filed against the
Company's directors, VF and VF's subsidiary challenging the proposed Merger. The
lawsuit, styled Polacheck v. VF Corporation et al., was commenced in Delaware
Chancery Court in and for New Castle County. The complaint alleges that the
defendants breached their fiduciary duties owed to the minority stockholders
because the Information Statement that was mailed to the minority stockholders
with the notice of the stockholders' meeting allegedly omitted certain
information that would allow those stockholders to decide whether to exercise
their appraisal rights or accept the $2.00 per share merger consideration.
Specifically, the complaint asserts that the Information Statement failed to
disclose certain financial information about the Company, information regarding
recent strategic decisions made by the management of the Company and information
relating to loans made by VF to the Company. On July 26, 2000, the Company's
directors, VF and VF's subsidiary agreed to settle the lawsuit by, among other
things, distributing this Form 8-K to the Company's stockholders.
ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) EXHIBITS
4.1 Demand Note dated May 24, 2000 executed by The North Face, Inc. in
favor of Ring Company, a wholly-owned subsidiary of VF Corporation.
5
<PAGE>
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 hereunto duly authorized.
THE NORTH FACE, INC.
Dated: July 26, 2000 By: /s/ Daniel E. Templin
--------------------------------
Name: Daniel E. Templin
Title: Vice President and Chief
Financial Officer
<PAGE>
EXHIBIT 4.1
DEMAND NOTE
May 24, 2000
New York, New York
FOR VALUE RECEIVED, the undersigned, THE NORTH FACE, INC., a Delaware
corporation ("Maker"), promises to pay to the order of RING COMPANY ("Ring"), a
Delaware corporation, on demand, the aggregate principal amount of all advances
made to Maker by Ring from time to time on or after the date hereof. The
aggregate principal amount outstanding from time to time will bear interest at
the rate of interest published in the Wall Street Journal Money Rates Section as
the one-month London Interbank Offered Rate (LIBOR) for any date on which any
principal amount is outstanding (which rate shall be applicable until the next
date as of which any change in LIBOR is published) plus .75%. This interest rate
may change on a daily basis. Interest on the aggregate principal amount
outstanding will be computed on a basis of a year of 360 days and paid for
actual days elapsed. Interest accrued through the last day of each calendar
month shall be payable on the first business day of the succeeding month
commencing June 1, 2000.
If default is made in the payment of this Demand Note, Maker agrees to
pay the holder all costs of collection, including but not limited to court costs
and reasonable attorneys' fees.
All advances made by Ring and all repayments of the principal thereof
and interest thereon shall be recorded by Ring and, if Ring so elects in
connection with any transfer of enforcement hereof, appropriate notations to
evidence the foregoing information with respect to each such advance then
outstanding may be endorsed by Ring on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof, provided that
the failure of Ring to make any such recordation or endorsement shall not affect
the obligations of the Maker hereunder.
This Demand Note shall be governed by and construed in accordance with
the laws of the State of New York.
THE NORTH FACE, INC.
By: /s/ Geoffrey D. Lurie
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Name: Geoffrey Lurie
Title: CEO
