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Previous: USLIFE CORP, 10-Q, 1994-08-11 |
Next: WEIS MARKETS INC, 10-Q, 1994-08-11 |
<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 JULY 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)
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)
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 July 30, 1994, there were 64,690,202 shares of Common Stock outstanding.
-1-
<PAGE> 2
VF CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income - Three months
and six months ended July 2, 1994 and July 3, 1993. . . . . . . . . 3
Consolidated Balance Sheets - July 2, 1994,
January 1, 1994 and July 3, 1993. . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Six months ended July 2, 1994 and July 3, 1993. . . . . . . . . . . 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
</TABLE>
-2-
<PAGE> 3
VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- -------------------
JULY 2 JULY 3 JULY 2 JULY 3
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $1,186,324 $1,053,411 $2,309,359 $2,070,055
COSTS AND OPERATING EXPENSES
Cost of products sold 806,149 725,865 1,566,572 1,419,283
Marketing, administrative
and general expenses 258,861 223,247 512,771 445,036
---------- ---------- ---------- ----------
1,065,010 949,112 2,079,343 1,864,319
---------- ---------- ---------- ----------
OPERATING INCOME 121,314 104,299 230,016 205,736
OTHER INCOME (EXPENSE)
Interest income 1,980 2,419 4,488 5,359
Interest expense (21,579) (17,993) (40,770) (36,215)
Miscellaneous, net (4,001) 1,912 (8,150) 2,198
---------- ---------- ---------- ----------
(23,600) (13,662) (44,432) (28,658)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 97,714 90,637 185,584 177,078
INCOME TAXES 38,798 34,906 73,770 68,618
---------- ---------- ---------- ----------
NET INCOME $ 58,916 $ 55,731 $ 111,814 $ 108,460
========== ========== ========== ==========
EARNINGS PER COMMON SHARE
Primary $0.90 $0.85 $1.71 $1.68
Fully diluted 0.88 0.83 1.67 1.64
CASH DIVIDENDS
PER COMMON SHARE $0.32 $0.30 $0.64 $0.60
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE> 4
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 2 JANUARY 1 JULY 3
1994 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 25,456 $ 151,564 $ 31,103
Accounts receivable, less
allowances: Jul 2-$34,475;
Jan 1-$28,808; Jul 3-$33,281 731,165 511,887 656,537
Inventories:
Finished products 638,920 486,045 583,142
Work in process 151,123 119,582 137,360
Materials and supplies 170,305 173,140 145,184
---------- ---------- ----------
960,348 778,767 865,686
Other current assets 81,370 57,962 71,249
---------- ---------- ----------
Total current assets 1,798,339 1,500,180 1,624,575
PROPERTY, PLANT AND EQUIPMENT 1,372,230 1,250,023 1,251,020
Less accumulated depreciation 597,962 537,264 555,966
---------- ---------- ----------
774,268 712,759 695,054
INTANGIBLE ASSETS 918,670 575,359 536,535
OTHER ASSETS 104,577 89,050 104,564
---------- ---------- ----------
$3,595,854 $2,877,348 $2,960,728
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 534,204 $ 35,648 $ 132,264
Current portion of long-term debt 3,370 110,119 52,221
Accounts payable 263,794 246,503 246,280
Accrued liabilities 367,504 267,578 316,226
---------- ---------- ----------
Total current liabilities 1,168,872 659,848 746,991
LONG-TERM DEBT 623,896 527,573 634,186
OTHER LIABILITIES 156,042 126,978 122,735
REDEEMABLE PREFERRED STOCK 62,788 63,309 63,659
DEFERRED CONTRIBUTION TO EMPLOYEE
STOCK OWNERSHIP PLAN (45,033) (47,760) (50,045)
---------- ---------- ----------
17,755 15,549 13,614
COMMON SHAREHOLDERS' EQUITY
Common Stock 64,668 64,489 64,386
Additional paid-in capital 549,891 543,165 538,220
Foreign currency
translation adjustments (6,019) (12,865) (16,082)
Retained earnings 1,020,749 952,611 856,678
---------- ---------- ----------
1,629,289 1,547,400 1,443,202
---------- ---------- ----------
$3,595,854 $2,877,348 $2,960,728
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE> 5
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
JULY 2 JULY 3
1994 1993
-------- --------
<S> <C> <C>
OPERATIONS
Net income $ 111,814 $ 108,460
Adjustments to reconcile net income to
cash used by operations:
Depreciation 61,152 54,612
Amortization of intangible assets 15,439 8,892
Other 15,592 105
Changes in current assets and liabilities:
Accounts receivable (167,002) (171,098)
Inventories (76,593) (128,152)
Accounts payable (13,231) 206
Other, net 50,741 52,902
--------- ---------
Cash used by operations (2,088) (74,073)
INVESTMENTS
Capital expenditures (68,940) (103,751)
Sale of outlet facilities - 62,000
Business acquisitions (494,751) -
Other, net (5,449) (11,738)
--------- ---------
Cash invested (569,140) (53,489)
FINANCING
Increase in short-term borrowings 496,317 8,434
Proceeds from long-term debt 99,207 98,557
Payment of long-term debt (114,475) (234,945)
Sale of Common Stock - 231,900
Cash dividends paid (43,478) (40,730)
Other, net 7,549 9,129
--------- ---------
Cash provided by financing 445,120 72,345
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS (126,108) (55,217)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 151,564 86,320
--------- ---------
CASH AND EQUIVALENTS - END OF PERIOD $ 25,456 $ 31,103
========= =========
</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 six months ended
July 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 - CAPITAL
There are 150,000,000 authorized shares of Common Stock, no par value - stated
capital $1 a share. At July 2, 1994, there were 64,668,172 shares outstanding,
excluding 1,770,467 treasury shares. At January 1, 1994 and July 3, 1993,
there were 64,488,660 and 64,385,742 shares outstanding, excluding 1,769,131
and 1,767,185 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 2,033,631 shares were outstanding at July 2, 1994,
2,050,491 at January 1, 1994 and 2,061,842 at July 3, 1993.
NOTE D - 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>
<CAPTION>
Second Quarter Six Months
In thousands, except per share amounts 1993 1993
- - -------------------------------------- ------------- ----------
<S> <C> <C>
Net sales $1,139,427 $2,233,821
Net income 50,747 97,385
Earnings per common share:
Primary $0.78 $1.51
Fully diluted 0.76 1.47
</TABLE>
-6-
<PAGE> 7
VF CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales increased 13% for the second quarter and 12% for the six
months compared with the 1993 periods. Approximately $70 million and $148
million of the respective increases represent sales of divisions acquired since
the 1993 periods, with the remainder due primarily to unit volume growth within
existing divisions. Net income increased 6% for the quarter and 3% for the six
months.
During 1994, 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>
SECOND QUARTER SIX MONTHS
--------------------------------------- -----------------------------------------
1993 PERCENT 1993 PERCENT
1994 (RESTATED) CHANGE 1994 (RESTATED) CHANGE
---------- ---------- ------- ---------- ---------- -------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NET SALES
Jeanswear $ 618,469 $ 593,292 4% $1,207,469 $1,178,558 2%
Decorated Knitwear 128,790 79,733 62 245,673 142,485 72
Intimate Apparel 172,186 164,089 5 347,051 333,797 4
Playwear 81,567 52,184 56 159,412 97,205 64
Specialty Apparel 185,312 164,113 13 349,754 318,010 10
---------- ---------- --- ---------- ---------- ---
$1,186,324 $1,053,411 13% $2,309,359 $2,070,055 12%
========== ========== === ========== ========== ===
OPERATING PROFIT
Jeanswear $ 90,412 $ 74,043 22% $ 170,956 $ 150,904 13%
Decorated Knitwear (2,609) (1,967) (33) (7,982) (5,258) (52)
Intimate Apparel 12,635 15,476 (18) 30,137 31,331 (4)
Playwear 7,904 6,042 31 14,053 8,711 61
Specialty Apparel 22,736 19,678 16 42,432 38,048 12
---------- ---------- --- ---------- ---------- ---
131,078 113,272 16% 249,596 223,736 12%
=== ===
CORPORATE EXPENSES (9,764) (8,973) (19,580) (18,000)
INTEREST, NET (19,599) (15,574) (36,282) (30,856)
OTHER INCOME
(EXPENSE) (4,001) 1,912 (8,150) 2,198
---------- ---------- ---------- ----------
INCOME BEFORE
INCOME TAXES $ 97,714 $ 90,637 $ 185,584 $ 177,078
========== ========== ========== ==========
</TABLE>
The Jeanswear business group consists of the Lee and Wrangler divisions in the
United States (except for preschool sizes classified in Playwear) and in
international markets, primarily in Europe. This business group also includes
Girbaud, which designs and markets licensed jeanswear products in the United
States under the Marithe & Francois Girbaud(R) label. Sales and operating
profit for both the quarter and six months increased strongly for Lee and
Wrangler in both domestic and international markets. Sales and profits
declined at Girbaud, however, where consumer resistance to premium-priced jeans
has impacted performance since mid-1993.
-7-
<PAGE> 8
The Decorated Knitwear business group includes Bassett-Walker, Nutmeg, Cutler
sports apparel and JanSport imprinted apparel. The 1994 sales increase is due
to the addition of Nutmeg and Cutler, both newly acquired in January 1994.
Sales and profits for the first six months 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 and six month sales for the group rose due to increased sales of
Vassarette products at Vanity Fair. Domestic operating margins improved from
increased manufacturing efficiencies at Vanity Fair, offset by reduced profits
in Europe due to the continuing recession in France and Spain.
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 due to the acquisition of Cutler in 1994.
Operating profits exceeded the prior year periods due primarily to higher
profits in existing 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 in the quarter and six months resulted from growth at Red Kap
and JanSport equipment.
Overall, gross margins increased to 32.0% and 32.2% of sales during the second
quarter and six months, respectively, from 31.1% and 31.4% in 1993, due
primarily to improved efficiencies in the Jeanswear group.
Marketing, administrative and general expenses were 21.8% and 22.2% of sales
during the second quarter and six months of 1994, respectively, compared with
21.2% and 21.5% in the 1993 periods. The increase is attributable to higher
distribution, business systems and other costs. Marketing, administrative and
general expenses as a percent of sales in the first half of the year 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 six months of 1994 was 39.8% versus 38.8%
for the 1993 period, based on the expected effective rate for the year. The
higher rate results from the change in the United States corporate income tax
rate from 34% to 35% effective August 1993.
-8-
<PAGE> 9
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Corporation is reflected in the following:
<TABLE>
<CAPTION>
July 2 January 1 July 3
1994 1994 1993
---------- ---------- ----------
(Dollars in millions)
<S> <C> <C> <C>
Working capital $629.5 $840.3 $877.6
Current ratio 1.5 to 1 2.3 to 1 2.2 to 1
Total debt to capitalization 41.6% 30.3% 36.0%
</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 due to the
acquisitions of Nutmeg and Cutler in January 1994. Inventories increased from
year-end 1993 due to the acquisitions and to meet seasonal requirements.
Short-term borrowings were used to finance the January 1994 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 6 - Exhibits and Reports on Form 8-K
(a) Exhibit 11
Computation of earnings per share for the three and
six months ended July 2, 1994 and July 3, 1993.
(b) Reports on Form 8-K
A report on Form 8-K dated April 6, 1994 provided various
exhibits related to the $100 million, 7.60% notes due
April 1, 2004 that were issued on April 6, 1994.
-9-
<PAGE> 10
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.
/s/ V.F. CORPORATION
(Registrant)
Date: August 10, 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)
-10-
<PAGE> 1
EXHIBIT 11
VF CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- ------------------
JULY 2 JULY 3 JULY 2 JULY 3
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
- - --------------------------
Net income $58,916 $55,731 $111,814 $108,460
Less preferred stock dividends 785 780 1,568 1,556
------- ------- -------- --------
Net income available to
common stockholders $58,131 $54,951 $110,246 $106,904
======= ======= ======== ========
Average number of common
shares outstanding 64,645 64,327 64,589 63,586
====== ====== ====== ======
Primary earnings per share $0.90 $0.85 $1.71 $1.68
===== ===== ===== =====
FULLY DILUTED EARNINGS PER SHARE
- - --------------------------------
Net income $58,916 $55,731 $111,814 $108,460
Increased ESOP contribution
required if preferred stock
were converted to common 379 397 758 793
------- ------- -------- --------
Fully diluted earnings $58,537 $55,334 $111,056 $107,667
======= ======= ======== ========
Average number of common
shares outstanding 64,645 64,327 64,589 63,586
Additional common equivalent
shares resulting from:
Conversion of preferred stock 1,627 1,650 1,630 1,652
Dilutive effect of stock options 321 381 334 419
------ ------ ------ ------
Average number of common and
common equivalent shares 66,593 66,358 66,553 65,657
====== ====== ====== ======
Fully diluted earnings per share $0.88 $0.83 $1.67 $1.64
===== ===== ===== =====
</TABLE>
-11-
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