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Previous: USLIFE CORP, 10-Q, 1994-05-12 |
Next: WEIS MARKETS INC, 10-Q, 1994-05-12 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended APRIL 2, 1994
-------------
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from -------------------- to --------------------
Commission file number 1-5256
------
V. F. CORPORATION
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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) (Zip Code)
</TABLE>
Registrant's telephone number, including area code 610-378-1151
------------
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X . NO .
--- ---
On April 30, 1994, there were 64,661,902 shares of Common Stock outstanding.
-1-
<PAGE> 2
VF CORPORATION
INDEX
<TABLE>
<S> <C>
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income - Three months
ended April 2, 1994 and April 3, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - April 2, 1994
January 1, 1994 and April 3, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Three months ended April 2, 1994 and
April 3, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 10
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
-2-
<PAGE> 3
VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------
APRIL 2 APRIL 3
1994 1993
---------- ----------
<S> <C> <C>
NET SALES $1,123,035 $1,016,644
COSTS AND OPERATING EXPENSES
Cost of products sold 760,423 693,418
Marketing, administrative
and general expenses 253,910 221,789
---------- ----------
1,014,333 915,207
---------- ----------
OPERATING INCOME 108,702 101,437
OTHER INCOME (EXPENSE)
Interest income 2,508 2,940
Interest expense (19,191) (18,222)
Miscellaneous, net (4,149) 286
---------- ----------
(20,832) (14,996)
---------- ----------
INCOME BEFORE INCOME TAXES 87,870 86,441
INCOME TAXES 34,972 33,712
---------- ----------
NET INCOME $ 52,898 $ 52,729
========== ==========
EARNINGS PER COMMON SHARE
Primary $0.81 $0.83
Fully diluted 0.79 0.81
CASH DIVIDENDS PER COMMON SHARE $0.32 $0.30
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE> 4
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 2 JANUARY 1 APRIL 3
1994 1994 1993
---------- ---------- ----------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 25,522 $ 151,564 $ 37,416
Accounts receivable, less
allowances: Apr 2-$30,648;
Jan 1-$28,808; Apr 3-$33,047 632,631 511,887 544,943
Inventories:
Finished products 625,359 486,045 536,265
Work in process 136,479 119,582 142,614
Materials and supplies 145,087 173,140 149,538
---------- ---------- ----------
906,925 778,767 828,417
Other current assets 89,008 57,962 69,636
---------- ---------- ----------
Total current assets 1,654,086 1,500,180 1,480,412
PROPERTY, PLANT AND EQUIPMENT 1,340,110 1,250,023 1,279,370
Less accumulated depreciation 569,192 537,264 554,097
---------- ---------- ----------
770,918 712,759 725,273
INTANGIBLE ASSETS 917,945 575,359 550,098
OTHER ASSETS 102,520 89,050 94,098
---------- ---------- ----------
$3,445,469 $2,877,348 $2,849,881
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 446,576 $ 35,648 $ 31,525
Current portion of long-term debt 3,944 110,119 52,910
Accounts payable 257,268 246,503 257,558
Accrued liabilities 362,047 267,578 323,894
---------- ---------- ----------
Total current liabilities 1,069,835 659,848 665,887
LONG-TERM DEBT 630,574 527,573 635,821
OTHER LIABILITIES 148,678 126,978 112,649
REDEEMABLE PREFERRED STOCK 63,089 63,309 63,824
DEFERRED CONTRIBUTION TO EMPLOYEE
STOCK OWNERSHIP PLAN (46,301) (47,760) (51,139)
---------- ---------- ----------
16,788 15,549 12,685
COMMON SHAREHOLDERS' EQUITY
Common Stock 64,584 64,489 64,298
Additional paid-in capital 546,074 543,165 535,618
Foreign currency translation
adjustments (14,845) (12,865) 1,836
Retained earnings 983,781 952,611 821,087
---------- ---------- ----------
1,579,594 1,547,400 1,422,839
---------- ---------- ----------
$3,445,469 $2,877,348 $2,849,881
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 5
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------
APRIL 2 APRIL 3
1994 1993
--------- ---------
<S> <C> <C>
OPERATIONS
Net income $ 52,898 $ 52,729
Adjustments to reconcile net income to
cash provided by operations:
Depreciation 30,176 29,806
Amortization of intangible assets 7,403 4,464
Other 5,111 (3,074)
Changes in current assets and liabilities:
Accounts receivable (75,992) (51,649)
Inventories (32,287) (85,675)
Accounts payable (18,818) 8,692
Other, net 48,929 58,126
-------- --------
Cash provided by operations 17,420 13,419
INVESTMENTS
Capital expenditures (30,031) (43,258)
Business acquisitions (494,751) -
Other, net (4,258) (7,755)
-------- --------
Cash invested (529,040) (51,013)
FINANCING
Increase (decrease) in short-term borrowings 510,152 (94,314)
Proceeds from long-term debt - 98,557
Payment of long-term debt (106,978) (233,167)
Sale of Common Stock - 231,900
Cash dividends paid (21,725) (20,350)
Other 4,129 6,064
-------- --------
Cash provided (used) by financing 385,578 (11,310)
-------- --------
NET CHANGE IN CASH AND EQUIVALENTS (126,042) (48,904)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 151,564 86,320
-------- --------
CASH AND EQUIVALENTS - END OF PERIOD $ 25,522 $ 37,416
======== ========
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE> 6
VF CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
April 2, 1994 are not necessarily indicative of results that may be expected
for the year ending December 31, 1994. For further information, refer to the
consolidated financial statements and notes included in the Corporation's
Annual Report on Form 10-K for the year ended January 1, 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 - LONG-TERM DEBT
At April 2, 1994, $100.0 million of commercial paper is classified as long-term
debt pursuant to the Corporation's intent to refinance the obligation on a
long-term basis. On April 6, 1994, the Corporation issued $100.0 million of
7.60% notes due 2004.
NOTE D - CAPITAL
There are 150,000,000 authorized shares of Common Stock, no par value - stated
capital $1 a share. At April 2, 1994, there were 64,583,672 shares
outstanding, excluding 1,769,197 treasury shares. At January 1, 1994 and April
3, 1993, there were 64,488,660 and 64,298,235 shares outstanding, excluding
1,769,131 and 1,767,131 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 2,043,366 shares were outstanding at April 2, 1994,
2,050,491 at January 1, 1994 and 2,067,185 at April 3, 1993.
-6-
<PAGE> 7
VF CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE E - ACQUISITIONS
On January 4, 1994, the Corporation acquired H. H. Cutler Company for a total
consideration of $154.7 million. Also on January 19, 1994, the Corporation
acquired Nutmeg Industries, Inc. for a total consideration of $352.2 million.
The acquisitions have been accounted for as purchases, and accordingly,
operating results of the companies have been included in the consolidated
financial statements since the dates of acquisition. The following pro forma
results of operations assume that these acquisitions had occurred at the
beginning of 1993:
<TABLE>
<S> <C>
First Quarter
In thousands, except per share amounts 1993
- - -------------------------------------- -------------
Net sales $1,094,394
Net income 46,638
Earnings per common share:
Primary $0.73
Fully diluted 0.71
</TABLE>
-7-
<PAGE> 8
VF CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales increased 10% for the first quarter compared with the
first quarter of 1993. Of the total increase, $78 million represents sales of
divisions acquired since last year's first quarter. With net income flat for
the quarter, earnings per share declined slightly due to higher average shares
outstanding from the public offering of Common Stock completed in late January
1993.
During the quarter, the Corporation was reorganized into five new business
groups consisting of Jeanswear, Decorated Knitwear, Intimate Apparel, Playwear
and Specialty Apparel. Sales and operating profit by business group are
summarized as follows:
<TABLE>
<CAPTION>
First Quarter
-----------------------------------------
1993 Percent
1994 (Restated) Change
---------- ---------- -------
(In thousands)
<S> <C> <C> <C>
NET SALES
Jeanswear $ 589,000 $ 585,266 1%
Decorated Knitwear 116,883 62,752 86
Intimate Apparel 174,865 169,708 3
Playwear 77,845 45,021 73
Specialty Apparel 164,442 153,897 7
---------- ---------- ---
$1,123,035 $1,016,644 10%
========== ========== ===
OPERATING PROFIT
Jeanswear $ 80,544 $ 76,861 5%
Decorated Knitwear (5,373) (3,291) (63)
Intimate Apparel 17,502 15,855 10
Playwear 6,149 2,669 100+
Specialty Apparel 19,696 18,370 7
---------- ---------- ----
118,518 110,464 7%
====
CORPORATE EXPENSES (9,816) (9,027)
INTEREST, NET (16,683) (15,282)
OTHER INCOME (EXPENSE), NET (4,149) 286
---------- ----------
INCOME BEFORE INCOME TAXES $ 87,870 $ 86,441
========== ==========
</TABLE>
The Jeanswear business group consists of the Lee and Wrangler divisions in the
United States and in international markets, primarily in Europe. This business
group also includes Girbaud, which designs and markets licensed jeanswear
-8-
<PAGE> 9
products in the United States under the Marithe & Francois Girbaud(R) label.
Sales and operating profit increased strongly in international markets.
Domestically, operating profit increased at Lee and Wrangler despite flat
sales, but sales and profits declined at Girbaud, where consumer resistance to
premium-priced jeans has impacted performance since mid-1993.
The Decorated Knitwear business group includes the manufacturing and marketing
operations of Bassett-Walker, Nutmeg, Cutler sports apparel and JanSport
imprinted apparel. The sales increase in the current quarter was due
primarily to the addition of Nutmeg and Cutler, both newly acquired in
January 1994. Sales and profits for the first quarter are at an expected low
level due to the seasonal nature of this group.
The Intimate Apparel business group includes the operations of Vanity Fair
Mills and Barbizon domestically and the intimate apparel divisions in Europe.
Quarterly sales for the group rose modestly as a result of increased sales of
Vassarette products at Vanity Fair. Operating margin improvements were posted
for all divisions included in the business group.
The Playwear business group consists of Healthtex, the playwear and sleepwear
operations of Cutler and the preschool sizes of Lee and Wrangler in the United
States. Playwear sales increased primarily due to the acquisition of Cutler in
1994. Quarterly operating profits exceeded the prior year period due to
the inclusion of Cutler and significantly higher margins in all other divisions.
The Specialty Apparel business group consists primarily of the Red Kap
and Jantzen divisions and JanSport equipment. The group's sales and operating
profit increases resulted primarily from the higher volume experienced at Red
Kap.
Overall, gross margins increased slightly to 32.3% of sales from 31.8% in 1993,
due primarily to reduced use of outside contractors in the Jeanswear group.
Marketing, administrative and general expenses were 22.6% of sales, compared
with 21.8% in the first quarter of 1993. The increase is attributable to
higher distribution and other costs. 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 increased due to higher short-term borrowings related to
the Nutmeg and Cutler acquisitions. The increase in miscellaneous expense
results from higher goodwill amortization related to these acquisitions.
The effective income tax rate for the first quarter of 1994 was 39.8% versus
39.0% for the 1993 period, based on the expected effective rate for the year.
The higher rate results primarily from the change in the United States
corporate income tax rate from 34% to 35% effective August 1993.
-9-
<PAGE> 10
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Corporation is reflected in the following:
<TABLE>
<CAPTION>
April 2 January 1 April 3
1994 1994 1993
---------- ---------- ----------
(Dollars in millions)
<S> <C> <C> <C>
Working capital $584.3 $840.3 $814.5
Current ratio 1.5 to 1 2.3 to 1 2.2 to 1
Total debt to capitalization 40.6% 30.3% 33.6%
</TABLE>
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 and at
year-end 1993 levels due to the acquisitions of Nutmeg and Cutler in January
1994. Inventories also increased from year-end 1993 to meet seasonal
requirements.
During the 1994 first quarter, short-term borrowings were used to finance
the purchases of Nutmeg and Cutler. In addition, the Corporation used
short-term borrowings to fund the January 1994 redemption of $100.0 million of
8.00% notes due in 1997. On April 6, 1994, the redeemed notes were refinanced
with 10 year 7.60% notes.
PART II - OTHER INFORMATION
Item 4 -Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the Corporation held on April
19, 1994, shares representing a total of 66,606,149 votes were
outstanding and entitled to vote on the following matters:
1) The Directors elected at the meeting for a term of three years were
Roger S. Hillas, William E. Pike, M. Rust Sharp, and L. Dudley
Walker.
2) The proposal to adopt the 1991 Stock Option Plan, as amended, was
approved. The vote was 49,041,668 for, 6,967,014 against and
350,372 abstaining.
3) The proposal to adopt the Executive Incentive Compensation Plan was
approved. The vote was 54,080,711 for, 1,897,425 against and
380,918 abstaining.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 11
Computation of earnings per share for the three months ended
April 2, 1994 and April 3, 1993
(b) Reports on Form 8-K
A report on Form 8-K dated January 19, 1994, as amended on
Form 8-K/A, announced the acquisitions of Nutmeg Industries,
Inc. and H. H. Cutler Company and included documents related
to the acquisitions, financial statements of Nutmeg and
combined condensed financial statements.
-10-
<PAGE> 11
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)
Date: May 12, 1994
/s/ G. G. Johnson
--------------------------
G. G. JOHNSON
Vice President-Finance
(Chief Financial Officer)
/s/ R. K. Shearer
--------------------------
R. K. SHEARER
Vice President/Controller
(Chief Accounting Officer)
-11-
<PAGE> 1
EXHIBIT 11
VF CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
APRIL 2 APRIL 3
1994 1993
--------- --------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
- - --------------------------
Net income $ 52,898 $ 52,729
Less preferred stock dividends 783 777
-------- --------
Net income available to
common stockholders $ 52,115 $ 51,952
======== ========
Average number of common
shares outstanding 64,532 62,842
====== ======
Primary earnings per share $0.81 $0.83
===== =====
FULLY DILUTED EARNINGS PER SHARE
- - --------------------------------
Net income $ 52,898 $ 52,729
Increased ESOP contribution
required if preferred stock
were converted to common 379 396
-------- --------
Fully diluted earnings $ 52,519 $ 52,333
======== ========
Average number of common
shares outstanding 64,532 62,842
Additional common equivalent
shares resulting from:
Conversion of preferred stock 1,634 1,654
Dilutive effect of stock options 347 461
------ ------
Average number of common and
common equivalent shares 66,513 64,957
====== ======
Fully diluted earnings per share $0.79 $0.81
===== =====
</TABLE>
-12-
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