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 JULY 5, 1997
Commission file number: 1-5256
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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 number)
1047 NORTH PARK ROAD
WYOMISSING, PENNSYLVANIA 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 August 2, 1997, there were 62,819,769 shares of Common Stock outstanding.
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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 July 5, 1997 and
June 29, 1996.............................................................3
Consolidated Balance Sheets - July 5, 1997,
January 4, 1997 and June 29, 1996.........................................4
Consolidated Statements of Cash Flows -
Six months ended July 5, 1997 and
June 29, 1996.............................................................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
------------------------ --------------------------
JULY 5 JUNE 29 JULY 5 JUNE 29
1997 1996 1997 1996
---------- ---------- ---------- ----------
NET SALES $ 1,255,549 $ 1,220,997 $ 2,518,330 $ 2,379,120
COSTS AND OPERATING EXPENSES
Cost of products sold 827,899 824,678 1,672,843 1,602,284
Marketing, administrative
and general expenses 286,953 266,974 577,495 536,763
Other operating (income) expense 337 (1,440) 489 (861)
---------- ---------- ---------- ----------
1,115,189 1,090,212 2,250,827 2,138,186
---------- ---------- ---------- ----------
OPERATING INCOME 140,360 130,785 267,503 240,934
OTHER INCOME (EXPENSE)
Interest income 3,356 4,187 7,592 6,247
Interest expense (12,543) (16,037) (25,161) (33,904)
Miscellaneous, net 108 (446) (693) (1,632)
---------- ---------- ---------- ----------
(9,079) (12,296) (18,262) (29,289)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 131,281 118,489 249,241 211,645
INCOME TAXES 52,377 48,597 100,151 85,823
---------- ---------- ---------- ----------
NET INCOME $ 78,904 $ 69,892 $ 149,090 $ 125,822
========== ========== ========== ==========
EARNINGS PER COMMON SHARE
Primary $1.22 $1.08 $2.30 $1.94
Fully diluted 1.19 1.06 2.25 1.91
CASH DIVIDENDS PER COMMON SHARE $0.38 $0.36 $0.76 $0.72
See notes to consolidated financial statements.
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大象传媒 CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JULY 5 JANUARY 4 JUNE 29
1997 1997 1996
(Unaudited) (Unaudited)
----------- ---------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 78,648 $ 270,629 $ 69,179
Accounts receivable, less
allowances: Jul 5 - $41,234;
Jan 4 - $40,253; Jun 29 - $37,555 731,093 592,942 740,705
Inventories:
Finished products 462,264 394,962 500,137
Work in process 177,847 168,774 165,791
Materials and supplies 152,917 167,087 141,007
---------- ---------- ----------
793,028 730,823 806,935
Other current assets 124,992 111,932 119,175
---------- ---------- ----------
Total current assets 1,727,761 1,706,326 1,735,994
PROPERTY, PLANT AND EQUIPMENT 1,591,767 1,543,351 1,517,040
Less accumulated depreciation 867,725 821,827 786,678
---------- ---------- ----------
724,042 721,524 730,362
INTANGIBLE ASSETS 828,489 863,930 861,368
OTHER ASSETS 189,879 157,755 151,003
---------- ---------- ----------
$ 3,470,171 $ 3,449,535 $ 3,478,727
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 40,376 $ 17,528 $ 132,654
Current portion of long-term debt 450 1,298 1,037
Accounts payable 299,863 320,056 278,687
Accrued liabilities 469,801 427,385 404,768
---------- ---------- ----------
Total current liabilities 810,490 766,267 817,146
LONG-TERM DEBT 516,733 519,058 626,530
OTHER LIABILITIES 167,133 164,077 176,380
REDEEMABLE PREFERRED STOCK 57,229 58,092 59,024
DEFERRED CONTRIBUTIONS TO EMPLOYEE
STOCK OWNERSHIP PLAN (28,941) (31,698) (34,057)
---------- ---------- ----------
28,288 26,394 24,967
COMMON SHAREHOLDERS' EQUITY
Common Stock 62,915 63,908 63,547
Additional paid-in capital 710,725 668,554 632,204
Foreign currency translation (26,745) 6,428 7,708
Retained earnings 1,200,632 1,234,849 1,130,245
---------- ---------- ----------
1,947,527 1,973,739 1,833,704
---------- ---------- ----------
$ 3,470,171 $ 3,449,535 $ 3,478,727
========== ========== ==========
See notes to consolidated financial statements.
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大象传媒 CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
---------------------------
JULY 5 JUNE 29
1997 1996
--------- ---------
OPERATIONS
Net income $ 149,090 $ 125,822
Adjustments to reconcile net income to
cash provided by operations:
Depreciation 66,105 67,805
Amortization of intangible assets 13,880 14,085
Other, net (21,643) (1,476)
Changes in current assets and liabilities:
Accounts receivable (155,530) (122,554)
Inventories (73,273) 29,456
Accounts payable (14,521) 4,251
Other, net 45,532 61,970
--------- ---------
Cash provided by operations 9,640 179,359
INVESTMENTS
Capital expenditures (77,671) (68,472)
Other, net (679) 13,216
--------- ---------
Cash invested (78,350) (55,256)
FINANCING
Increase (decrease) in short-term borrowings 24,551 (95,425)
Proceeds from long-term debt 0 15,556
Payment of long-term debt (1,229) (4,739)
Purchase of Common Stock (134,964) (41,774)
Cash dividends paid (50,320) (47,859)
Proceeds from issuance of stock 37,407 34,621
Other, net 1,284 621
--------- ---------
Cash used by financing (123,271) (138,999)
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS (191,981) (14,896)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 270,629 84,075
--------- ---------
CASH AND EQUIVALENTS - END OF PERIOD $ 78,648 $ 69,179
========= =========
See notes to consolidated financial statements.
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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 July
5, 1997 are not necessarily indicative of results that may be expected for the
year ending January 3, 1998. 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 January 4, 1997.
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.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which establishes new standards for computations of
earnings per share. The Statement will be effective for periods ending after
December 15, 1997, with prior periods restated at that time to comply with the
new standards. If the Statement had been effective for the periods ended July 5,
1997 and June 29, 1996, there would have been no significant change in earnings
per share as presented in the accompanying Consolidated Statements of Income.
NOTE C - CAPITAL
There are 150,000,000 authorized shares of Common Stock, no par value - stated
capital $1 a share. At July 5, 1997, there were 62,914,669 shares outstanding,
excluding 4,139,641 treasury shares. At January 4, 1997 and June 29, 1996, there
were 63,907,874 and 63,546,886 shares outstanding, excluding 2,399,323 and
2,075,683 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 1,853,570 shares were outstanding at July 5, 1997,
1,881,515 at January 5, 1997 and 1,911,706 at June 29, 1996.
NOTE D - DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into short-term foreign currency forward exchange contracts
to manage exposures related to certain anticipated foreign currency cash flows.
Gains and losses are included in operating income currently. The amounts of the
contracts, and related gains and losses, are not material.
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大象传媒 CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Substantially all of the sales dollar increases of 3% for the quarter and 6% for
the six month periods ended July 5, 1997 resulted from increases in unit sales.
In addition, sales in both 1997 periods were reduced by 1% from the negative
impact of the translation of foreign currencies into the U.S. dollar, as the
U.S. dollar strengthened in relation to the currencies of most European
countries where the Company has operations.
The sales increases for both the quarter and six month periods were broad-based;
that is, most of the Company's businesses experienced increases, with the
exception of our international operations. Sales of domestic jeanswear increased
during the quarter and six months, with jeanswear sold through the mass markets
reflecting particularly strong increases driven by our Wrangler, Riders and
Timber Creek brands. U.S. intimate apparel also contributed significantly to the
sales increase with expanded distribution of the Vassarette brand. Our Red Kap
occupational apparel business also posted higher sales resulting from unit
volume growth, aided by the August 1996 acquisition of Bulwark Protective
Apparel. Total international sales for both our jeanswear and intimate apparel
businesses were down for the quarter and six months, due primarily to the
effects of foreign currency translation and to weak retail conditions in several
key European markets.
Gross margins improved to 34.1% of sales in the quarter and 33.6% in the six
months of 1997, compared with 32.5% and 32.7% in 1996. The margin improvement
resulted from lower raw material costs, lower cost sourcing and a higher
percentage of products sold at regular pricing than experienced in the 1996
periods.
Marketing, administrative and general expenses were 22.9% of sales during the
quarter and six month periods, compared with 21.9% and 22.6%, respectively, in
1996. The increases were due to higher levels of advertising and other specific
promotional expenses in the Company's targeted growth areas of domestic and
international jeanswear, intimate apparel and daypacks. These advertising and
promotional expenses totaled $150 million during the first six months of 1997, a
25% increase over the prior year period. Management has committed to invest a
significant portion of the savings resulting from the manufacturing, selling and
administrative cost reduction initiatives of the past two years in increased
advertising and other actions to support and build its brands.
Net interest expense declined significantly in 1997 due to a higher level of
cash and reduced short and long-term borrowings.
The effective income tax rate for the six months of 1997 was 40.2%, compared
with 40.6% in the prior year, based on the expected rate for the year.
Earnings per share for the 1997 quarter advanced 13% over the prior year quarter
and 19% for the six months, with the effects of a strong U.S. dollar on foreign
currency translation reducing earnings by $.02 and $.06 per share, respectively.
7
FINANCIAL CONDITION AND LIQUIDITY
The financial condition of the Company is reflected in the following:
JULY 5 JANUARY 4 JUNE 29
1997 1997 1996
--------- --------- -------
(Dollars in millions)
Working capital $917.3 $940.1 $918.8
Current ratio 2.1 to 1 2.2 to 1 2.1 to 1
Debt to total capital 22.3% 21.4% 29.3%
Accounts receivable balances are higher than at the end of 1996 due to seasonal
sales patterns, with days sales outstanding in accounts receivable consistent
for all dates presented. Inventories at the end of the second quarter of both
1997 and 1996 are comparable, but more than at the end of 1996 due to seasonal
patterns.
Short-term debt levels are significantly lower at the end of the second quarter
of 1997 than at the comparable date in 1996 due to the strong cash flow from
operations during the 1996 year.
Cash flow from operations for the first six months of 1997 is at a normal level
compared with most prior years. In contrast, cash flow from operations for the
1996 period was unusually high due to a reduction in inventory levels from the
prior year-end instead of the more normal inventory build-up during this period
of the year.
During the second quarter, the Company accelerated its Common Stock repurchase
program. So far during 1997, the Company has repurchased 1.7 million shares of
its Common Stock in open market transactions for a total of $135.0 million.
Management intends to continue to repurchase shares during the remainder of the
year using its free cash flow. Under its current authorization from the Board of
Directors, the Company may repurchase up to an additional 2.9 million Common
Shares.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
Certain statements included herein are "forward-looking statements" within the
meaning of the federal securities laws. This includes any statements concerning
plans and objectives of management relating to the Company's operations or
economic performance, and assumptions related thereto. In addition, the Company
and its representatives may from time to time make other oral or written
statements that are also forward-looking statements.
These forward-looking statements are made based on management's expectations and
beliefs concerning future events impacting the Company and therefore involve a
number of risks and uncertainties. Management cautions that forward-looking
statements are not guarantees and that actual results could differ materially
from those expressed or implied in the forward-looking statements.
Important factors that could cause the actual results of operations or financial
condition of the Company to differ include, but are not necessarily limited to,
the overall level of consumer spending for apparel; changes in trends in the
segments of the market in which the Company competes; the financial strength of
the retail
8
industry; actions of competitors that may impact the Company's business; timely
completion of the Company's cost reduction initiatives; and the impact of
unforeseen economic changes in the markets where the Company competes, such as
changes in interest rates, currency exchange rates, inflation rates, recession,
and other external economic and political factors over which the Company has no
control.
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 July 5, 1997 and June 29, 1996.
Exhibit 27 - Financial data schedule as of July 5, 1997.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the three months ended July 5, 1997.
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, 1997
By: /s/ Robert K. Shearer
---------------------------
Robert K. Shearer
Vice President - Controller
(Chief Accounting Officer)
10