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 JUNE 29, 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 July 27, 1996, there were 63,534,326 shares of Common Stock
outstanding.
1
大象传媒 CORPORATION
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Income -
Three months and six months ended June 29, 1996
and July 1, 1995 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets - June 29, 1996,
December 30, 1995 and July 1, 1995 . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows -
Six months ended June 29, 1996 and
July 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 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 9
2
大象传媒 CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
JUNE 29 JULY 1 JUNE 29 JULY 1
1996 1995 1996 1995
------------ ----------- ------------ ------------
NET SALES $ 1,220,997 $ 1,271,936 $ 2,379,120 $ 2,459,523
COSTS AND OPERATING EXPENSES
Cost of products sold 824,678 871,012 1,602,284 1,670,160
Marketing, administrative and
general expenses 266,974 272,666 536,763 545,860
Other operating (income) expense (1,440) 40 (861) 1,340
------------ ------------ ------------ ------------
1,090,212 1,143,718 2,138,186 2,217,360
------------ ------------ ------------ ------------
OPERATING INCOME 130,785 128,218 240,934 242,163
OTHER INCOME (EXPENSE)
Interest income 4,187 2,155 6,247 4,366
Interest expense (16,037) (20,615) (33,904) (39,080)
Miscellaneous, net (446) (1,817) (1,632) (3,017)
------------ ------------ ------------ ------------
(12,296) (20,277) (29,289) (37,731)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 118,489 107,941 211,645 204,432
INCOME TAXES 48,597 42,704 85,823 81,242
------------ ------------ ------------ ------------
NET INCOME $ 69,892 $ 65,237 $ 125,822 $ 123,190
============ =========== ============ ============
EARNINGS PER COMMON SHARE
Primary $1.08 $1.01 $1.94 $1.90
Fully diluted 1.06 0.99 1.91 1.86
CASH DIVIDENDS PER COMMON SHARE $0.36 $0.34 $0.72 $0.68
See notes to consolidated financial statements.
3
大象传媒 CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 29 DECEMBER 30 JULY 1
1996 1995 1995
----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and equivalents $ 69,179 $ 84,075 $ 50,335
Accounts receivable, less allowances:
June 29 - $37,555; Dec. 30 - $34,621; July 1 - $29,815 740,705 629,506 828,894
Inventories:
Finished products 500,137 514,688 676,198
Work in process 165,791 139,721 165,064
Materials and supplies 141,007 187,498 180,273
----------- ------------ ------------
806,935 841,907 1,021,535
Other current assets 119,175 112,149 85,744
----------- ------------ ------------
Total current assets 1,735,994 1,667,637 1,986,508
PROPERTY, PLANT AND EQUIPMENT 1,517,040 1,490,384 1,462,688
Less accumulated depreciation 786,678 740,504 696,788
----------- ------------ ------------
730,362 749,880 765,900
INTANGIBLE ASSETS 861,368 887,606 910,930
OTHER ASSETS 151,003 141,948 136,469
----------- ------------ ------------
$ 3,478,727 $ 3,447,071 $ 3,799,807
=========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 132,654 $ 229,945 $ 485,719
Current portion of long-term debt 1,037 2,715 2,473
Accounts payable 278,687 276,598 320,854
Accrued liabilities 404,768 359,062 375,849
----------- ------------ ------------
Total current liabilities 817,146 868,320 1,184,895
LONG-TERM DEBT 626,530 614,217 615,673
OTHER LIABILITIES 176,380 169,392 173,330
REDEEMABLE PREFERRED STOCK 59,024 60,667 61,382
DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (34,057) (37,031) (39,727)
----------- ------------ ------------
24,967 23,636 21,655
COMMON SHAREHOLDERS' EQUITY
Common Stock 63,547 63,439 63,666
Additional paid-in capital 632,204 593,976 570,092
Foreign currency translation 7,708 20,483 25,986
Retained earnings 1,130,245 1,093,608 1,144,510
----------- ------------ ------------
1,833,704 1,771,506 1,804,254
----------- ------------ ------------
$ 3,478,727 $ 3,447,071 $ 3,799,807
=========== ============ ============
See notes to consolidated financial statements.
4
大象传媒 CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
-----------------------------
JUNE 29 JULY 1
1996 1995
------------ ------------
OPERATIONS
Net income $ 125,822 $ 123,190
Adjustments to reconcile net income to cash provided (used) by
operations:
Depreciation 67,805 67,167
Amortization of intangible assets 14,085 16,489
Other, net (1,476) (2,437)
Changes in current assets and liabilities:
Accounts receivable (122,554) (194,587)
Inventories 29,456 (210,394)
Accounts payable 4,251 25,390
Other, net 61,970 70,231
------------ ------------
Cash provided (used) by operations 179,359 (104,951)
INVESTMENTS
Capital expenditures (68,472) (68,389)
Business acquisitions - (12,004)
Other, net 13,216 (7,640)
------------ ------------
Cash invested (55,256) (88,033)
FINANCING
Increase (decrease) in short-term borrowings (95,425) 162,779
Proceeds from long-term debt 15,556 98,718
Payment of long-term debt (4,739) (1,922)
Purchase of Common Stock (41,774) (46,787)
Cash dividends paid (47,859) (45,429)
Other, net 35,242 16,218
------------ ------------
Cash provided (used) by financing (138,999) 183,577
------------ ------------
NET CHANGE IN CASH AND EQUIVALENTS (14,896) (9,407)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 84,075 59,742
------------ ------------
CASH AND EQUIVALENTS - END OF PERIOD $ 69,179 $ 50,335
============ ============
See notes to consolidated financial statements.
5
大象传媒 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 June 29, 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 June 29, 1996, there were 63,546,886 shares
outstanding, excluding 2,075,683 treasury shares. At December 30, 1995 and
July 1, 1995, there were 63,438,933 and 63,666,105 shares outstanding,
excluding 1,376,976 and 593,099 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 1,911,706 shares were outstanding at June 29, 1996,
1,964,942 at December 30, 1995 and 1,988,081 at July 1, 1995.
6
大象传媒 CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales decreased 4% for the second quarter and 3% for the first six months
of 1996 compared with the same periods of 1995. Earnings per share increased
by 7% for the quarter and 2% for the first six months of 1996. The decline in
sales resulted from a decline in unit sales. Earnings increased, however, due
to higher operating margins and reduced net interest expense.
Sales and operating income by business group are summarized as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------------------- -----------------------------------------
JUNE 29 JULY 1 PERCENT JUNE 29 JULY 1 PERCENT
1996 1995 CHANGE 1996 1995 CHANGE
------------- ------------- ------- ------------ ------------- -------
NET SALES (In thousands) (In thousands)
Jeanswear $ 652,353 $ 676,876 (4)% $ 1,285,019 $ 1,315,372 (2)%
Decorated Knitwear 142,767 126,709 13 259,578 230,841 12
Intimate Apparel 161,437 188,863 (15) 317,696 370,718 (14)
Playwear 77,837 96,072 (19) 164,071 179,058 (8)
Specialty Apparel 186,603 183,416 2 352,756 363,534 (3)
------------- ------------- ----- ------------ ------------- -----
$ 1,220,997 $ 1,271,936 (4)% $ 2,379,120 $ 2,459,523 (3)%
============= ============= ===== ============ ============= =====
OPERATING INCOME
Jeanswear $ 97,629 $ 92,676 5% $ 186,530 $ 182,676 2%
Decorated Knitwear 7,468 (1,377) 100+ 8,689 (9,581) 100+
Intimate Apparel 10,629 16,650 (36) 16,401 33,017 (50)
Playwear 409 7,813 (95) 2,530 13,731 (82)
Specialty Apparel 22,010 22,828 (4) 44,267 44,431 (1)
------------- ------------- ----- ------------ ------------- -----
138,145 138,590 (1)% 258,417 264,274 (2)%
===== =====
OTHER OPERATING INCOME (EXPENSE) 1,440 (40) 861 (1,340)
CORPORATE EXPENSES (8,800) (10,332) (18,344) (20,771)
------------ ------------- ------------- -------------
OPERATING INCOME $ 130,785 $ 128,218 $ 240,934 $ 242,163
============= ============= ============ =============
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. Despite modest declines in sales
in the second quarter and six months of 1996, lower product costs resulted in
an increase in operating margins. Other cost reductions helped to offset the
impact of additional advertising spending both domestically and abroad.
7
The sales increase in the Decorated Knitwear business group resulted from
higher unit volumes in decorated and undecorated fleece and T-shirts. The
benefits of additional production volume in fleece and T-shirt manufacturing
plants, as well as improvements in operating margins within the sports apparel
businesses, resulted in better profitability within this category for the first
half of the year.
The Intimate Apparel business group includes the Vanity Fair and Vassarette
brands as well as a private label business domestically. The Company also
has intimate apparel operations in Europe, primarily in France and Spain.
The sales and profit decline resulted from reductions in sales unit volumes
both in the United States and in Europe.
The Playwear business group consists of the Healthtex brand, the preschool
sizes of Lee and Wrangler, and products imprinted with characters licensed from
The Walt Disney Company and others. Sales and operating margins declined in the
quarter and six months due to operating difficulties related to changes in the
manufacturing structure at Healthtex.
The Specialty Apparel business group includes Red Kap occupational apparel,
Jantzen swim and casual apparel and JanSport brand equipment. Sales and
profits remained relatively stable during the quarter and six month periods.
Gross margins improved to 32.5% of sales in the quarter and 32.7% in the six
months of 1996, compared with 31.5% and 32.1% in 1995. These increases
resulted from lower manufacturing costs attributable to the cost reduction
initiatives of late 1995 and lower inventory write-down requirements.
Marketing, administrative and general expenses were 21.9% of sales during the
quarter and 22.6% for the six month period, compared with 21.4% and 22.2%,
respectively, in 1995. For the current quarter and first half of 1996,
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 half are historically at higher levels than annual amounts and are
not necessarily representative of the level expected for the year.
Net interest expense declined in 1996 due to improved cash flows from
operations, primarily from lower inventory levels, and the resulting reduction
in the Company's borrowings.
The effective income tax rate for the six months of 1996 was 40.6%, compared
with 39.7% for the 1995 period, based on the expected effective rate for the
year. The rate increase is due to expected higher levels of foreign operating
losses with no current tax benefit.
8
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company is reflected in the following:
JUNE 29 DECEMBER 30 JULY 1
1996 1995 1995
-------------- --------------- ------------
(Dollars in millions)
Working capital $918.8 $799.3 $801.6
Current ratio 2.1 to 1 1.9 to 1 1.7 to 1
Debt to total capital 29.3% 32.3% 38.0%
Days sales outstanding in accounts receivable are up slightly from the level at
the end of 1995 and are consistent with the level at the end of the 1995 second
quarter.
The significant reduction in inventories from the 1995 second quarter resulted
from specific efforts to reduce inventory levels in a somewhat unstable retail
environment.
Short-term borrowings declined during the first half of 1996 due to strong cash
flow from operations resulting from reduced inventory levels.
During the second quarter of 1996, the Company purchased 692,000 shares of its
Common Stock in open market transactions, thus completing its authorization
from the Board of Directors to purchase up to three million shares. In July
1996, the Board authorized the purchase of an additional five million shares.
On August 2, 1996, the Company acquired the common stock of Bulwark Protective
Apparel Inc. for $20.4 million. Bulwark, based in Edmonton, Alberta, is
Canada's leading manufacturer and marketer of premium flame retardant apparel
for the petrochemical, chemical and utility industries throughout North
America. Bulwark will be managed as a business unit of the Company's Red Kap
occupational apparel division.
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 June 29, 1996 and July 1, 1995.
Exhibit 27 - Financial data schedule as of June 29, 1996.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for the
quarter ended June 29, 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: August 7, 1996
By: /s/ Robert K. Shearer
-----------------------
Robert K. Shearer
Vice President - Controller
(Chief Accounting Officer)
10