-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EISqS1r12qfk/JlJ0qKbS/Xc14GBl0elRZWCIZNNpcsEVKNoE66TS+hJVtoDQmjT RFE6TbMeNttp4fRG4oPChw== 0000893220-97-000612.txt : 19970327 0000893220-97-000612.hdr.sgml : 19970327 ACCESSION NUMBER: 0000893220-97-000612 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19970104 FILED AS OF DATE: 19970326 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: V F CORP /PA/ CENTRAL INDEX KEY: 0000103379 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 231180120 STATE OF INCORPORATION: PA FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05256 FILM NUMBER: 97564089 BUSINESS ADDRESS: STREET 1: 1047 N PARK RD CITY: WYOMISSING STATE: PA ZIP: 19610 BUSINESS PHONE: 2153781151 MAIL ADDRESS: STREET 2: P O BOX 1022 CITY: READING STATE: PA ZIP: 19603 FORMER COMPANY: FORMER CONFORMED NAME: VF CORPORATION DATE OF NAME CHANGE: 19900621 FORMER COMPANY: FORMER CONFORMED NAME: VANITY FAIR MILLS INC DATE OF NAME CHANGE: 19690520 10-K 1 FORM 10-K V. F. CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended JANUARY 4, 1997 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, PENNSYLVANIA 19610 (Address of principal executive offices) (610) 378-1151 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, without par value, New York Stock Exchange stated capital $1 per share and Preferred Stock Purchase Rights Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 ____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] 2 As of March 1, 1997, 64,009,069 shares of Common Stock of the registrant were outstanding, and the aggregate market value of the common shares (based on the closing price of these shares on the New York Stock Exchange) of the registrant held by nonaffiliates was approximately $3.6 billion. In addition, 1,881,515 shares of Series B ESOP Convertible Preferred Stock of the registrant were outstanding and convertible into 1,505,212 shares of Common Stock of the registrant, subject to adjustment. The trustee of the registrant's Employee Stock Ownership Plan is the sole holder of such shares, and no trading market exists for the Series B ESOP Convertible Preferred Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report for the fiscal year ended January 4, 1997 (Items 1 and 3 in Part I and Items 5, 6, 7 and 8 in Part II). Portions of the Proxy Statement dated March 10, 1997 for the Annual Meeting of Shareholders to be held on April 15, 1997 (Item 4A in Part I, Item 9 in Part II and Items 10, 11, 12 and 13 in Part III). 2 3 PART I ITEM 1. BUSINESS VF Corporation, through its operating subsidiaries, designs, manufactures and markets branded jeanswear, knitwear, intimate apparel, children's playwear and other apparel. VF Corporation, organized in 1899, oversees the operations of its subsidiaries, providing them with financial and administrative resources. Management of each operating unit is responsible for the growth and development of its business, within guidelines established by VF Corporation management. Unless the context indicates otherwise, the term "Company" used herein means VF Corporation and its subsidiaries. BUSINESS GROUPS The Company is organized in five business groups - - Jeanswear, Decorated Knitwear, Intimate Apparel, Playwear and Specialty Apparel. (See "Recent Events.") Information regarding the operations, sales and profitability of these business groups is included on pages 3, 22, 23 and 25 of the Company's Annual Report to Shareholders for the fiscal year ended January 4, 1997 ("1996 Annual Report"), which information is incorporated herein by reference. JEANSWEAR The Jeanswear business group includes jeanswear and other casual apparel marketed under the LEE(R), WRANGLER(R), RUSTLER(R) and RIDERS(R) brands in the United States. The Company also offers cotton casual pants and shirts under the LEE CASUALS(R) and TIMBER CREEK BY WRANGLER(R) brands and licenses the MARITHE & FRANCOIS GIRBAUD(R) label for branded fashion jeans and casual apparel in the United States. According to industry data, approximately 565 million pairs of jeans made of denim, twill, corduroy and other fabrics were sold in the United States in 1996, representing an increase of 5.5% over 1995. This same data indicates that the Company currently has the largest combined unit market share at approximately 27%, with WRANGLER, LEE and RUSTLER having the second, third and fourth largest unit shares of the jeans market in the United States, respectively. In domestic markets, LEE branded products are sold through department and specialty stores. WRANGLER westernwear is marketed through western specialty stores, and other WRANGLER brand products are sold primarily through the mass merchant and discount store channels. The RUSTLER and RIDERS brands are brands marketed to national discount chains. MARITHE & FRANCOIS GIRBAUD products are sold to upscale department and specialty stores. Sales for all brands are generally made directly to retailers through full-time salespersons. During 1996, 70% of domestic jeanswear sales were derived from garments produced in Company-owned and operated cutting, sewing and laundry facilities in the United States. Eighteen percent of domestic jeanswear sales were produced in owned facilities in Mexico and other Caribbean countries, with the balance manufactured by various independent domestic and international contractors. 3 4 The Company also manufactures and markets LEE, WRANGLER and MAVERICK(R) jeanswear and related products in international markets, where jeanswear is more of a fashion product and has a higher relative price than similar products in the United States. International sales are primarily in Western Europe, but with increasing sales in Eastern Europe. LEE and WRANGLER are sold through department stores and specialty shops, while MAVERICK branded jeanswear is sold in the discount channel of distribution. Internationally, jeanswear products are sold through the Company's sales forces and independent sales agents. The Company has distributors, agents or licensees for LEE and WRANGLER jeanswear and related products in foreign markets where the Company does not have owned operations. In European markets, 67% of the Company's jeanswear products in 1996 were produced in owned plants in the United Kingdom, Ireland, Malta and Poland, with the balance (mostly tops) sourced from independent contractors. The Company also manufactures and markets LEE products in Mexico and China and participates in a joint venture in Spain and Portugal. In addition, LEE and WRANGLER are marketed in Canada. DECORATED KNITWEAR The Decorated Knitwear business group includes the manufacturing and marketing of knitted fleecewear and T-shirts. Operations are vertically integrated and include the entire process of converting cotton yarn into finished fleece and T-shirt garments. Products are marketed throughout the United States to national chain and department stores, discount stores, wholesalers and garment screen printing operators by an in-house staff of salespersons. In 1996, approximately one-third of the knitted fleecewear and T-shirts were marketed under the LEE label. The remainder was manufactured for private label customers and for the fleece and T-shirt needs of the Company's imprinted apparel operations. The Company designs, manufactures and markets imprinted sports apparel under licenses granted by the four major American professional sports leagues, NASCAR and other parties. LEE SPORT(R) and NUTMEG(R) branded adult licensed apparel is distributed through department, sporting goods and athletic specialty stores. CSA(R) branded products, primarily in children's sizes, are distributed through mass merchandisers and discount stores. Nutmeg apparel imprinted with professional soccer and other sports logos is manufactured and marketed in Europe. In addition, this business group includes JANSPORT(R) branded fleeced casualwear and T-shirts imprinted with college logos for distribution through college bookstores. INTIMATE APPAREL The Intimate Apparel business group includes the VANITY FAIR(R) and VASSARETTE(R) brands and a significant private label business in the United States. The Company manufactures and markets bras, panties, daywear, shapewear, robes and sleepwear products using the VANITY FAIR label for sales to domestic department and specialty stores and the VASSARETTE brand for the discount channel. Most products are sold through the Company's sales force. During 1996, approximately 40% of domestic intimate apparel sales were derived from garments sewn in owned domestic plants, 45% from Company-owned facilities in Mexico and the remainder from independent contractors. 4 5 In international markets, intimate apparel is marketed in department and specialty stores under the LOU(R) and BOLERO(R) brand names primarily in France and under the GEMMA(R), INTIMA CHERRY(R) and BELCOR(R) brand names in Spain. Intimate apparel is marketed in discount stores in France under the VARIANCE(R), CARINA and SILTEX brand names. Approximately 80% of the apparel is manufactured from purchased fabric in the Company's facilities in France, Spain, Tunisia and Madagascar, with the remainder manufactured by independent contractors. PLAYWEAR The Playwear business group consists of HEALTHTEX(R) branded products, preschool sizes of LEE and WRANGLER, and playwear and sleepwear products imprinted with licensed brands. Products marketed under the HEALTHTEX label are sold primarily to department and specialty stores. LEE and WRANGLER children's sizes are marketed in distribution channels consistent with their respective adult sizes. Playwear products imprinted with characters licensed from The Walt Disney Company and others are marketed primarily to mass merchandise and discount stores. Licensed NIKE(R) brand childrenswear is marketed to department and sports specialty stores. SPECIALTY APPAREL The Company is a leading producer of occupational and career apparel sold under the RED KAP(R) label. Approximately three-fourths of sales are to industrial laundries that in turn supply work clothes to employers, primarily on a rental basis, for on-the-job wear by production, service and white-collar personnel. Products include work pants, slacks, work and dress shirts, overalls, jackets and smocks. The Company expanded its presence in safety apparel in the United States and Canada by acquiring Bulwark Protective Apparel Inc. in 1996. Because industrial laundries maintain minimal inventories of work clothes, a supplier's ability to offer rapid delivery is an important factor in this market. The Company's commitment to customer service, supported by an automated central distribution center with ten satellite locations, has enabled customer orders to be filled within 24 hours of receipt and has helped the RED KAP brand obtain a significant share of the industrial laundry rental business. In addition, the Company markets a line of work clothes nationally to retail stores under the BIG BEN(R) brand. The Company designs, manufactures and markets an extensive line of women's swimwear and sportswear, including coordinated tops and bottoms, under the JANTZEN(R) trademark and, beginning in 1995, under the licensed NIKE label. A significant portion of the products are manufactured by independent contractors. Products are sold primarily to department and specialty stores in the United States and Canada through the Company's sales force. The JANTZEN trademark is licensed to other companies in several foreign countries. The Company also manufactures and markets JANSPORT brand daypacks, sold through college bookstores and department and sports specialty stores, and JANSPORT backpacking and mountaineering gear, sold through outdoor and sporting goods stores. JANSPORT daypacks and bookbags have the leading brand share in the United States. 5 6 RAW MATERIALS Raw materials include fabrics made from cotton, synthetics and blends of cotton and synthetic yarn. For most domestic operations, the Company purchases fabric from several domestic suppliers against scheduled production. The fabric is cut and sewn into finished garments in the Company's manufacturing facilities or, in certain instances, at independent contractors. An increasing percentage of fabric cut in the Company's domestic facilities is sewn into finished products in Company-owned plants in Mexico or the Caribbean. Fabric for international operations is purchased from several international suppliers. The Company also purchases thread and trim (buttons, zippers, snaps and lace) from numerous suppliers. In the domestic knitwear and intimate apparel operations, the Company knits purchased yarn into fabric in its facilities. The knit fabric is then dyed, finished and cut in domestic facilities before it is sewn into finished garments. Cotton yarn and cotton and synthetic blend yarn are purchased from a major textile company under a long-term supply agreement for the knitwear operations. Yarn is available from numerous other sources. The Company has not experienced difficulty in obtaining fabric and other raw materials to meet production needs during 1996 and does not anticipate difficulties in 1997. The loss of any one supplier would not have a significant adverse effect on the Company's business. SEASONALITY The apparel industry in the United States has four primary retail selling seasons -- Spring, Summer, Back-to-School and Holiday, while international markets typically have Spring and Fall selling seasons. Sales to retailers generally precede the retail selling seasons, although demand peaks have been reduced in recent years as more products are being sold on a replenishment basis. Overall, with its diversified product offerings, the Company's operating results are not highly seasonal. On a quarterly basis, consolidated net sales range from a low of approximately 22% in the first quarter to a high of 27% in the third quarter. Sales of the Decorated Knitwear business group, however, are more seasonal in nature, with approximately 60% of its sales of fleece and T-shirt products in the second half of the year. Working capital requirements vary throughout the year. Working capital increases during the first half of the year as inventory builds to support peak shipping periods, and accordingly decreases during the second half. Cash provided by operations is substantially higher in the second half of the year due to higher net income and reduced working capital requirements during that period. ADVERTISING The Company supports its brands through extensive advertising and promotional programs and through sponsorship of special events. The Company advertises on national and local radio and television and in consumer and trade publications. It also participates in cooperative advertising on a shared cost basis with major retailers in radio, television and various print media. In addition, point-of-sale fixtures and signage are used to promote products at the retail level. During 1996, the 6 7 Company spent $271 million advertising and promoting its products, compared with $231 million in 1995. A significant portion of the savings arising from the 1995 cost reduction initiatives (see Note M to the consolidated financial statements in the 1996 Annual Report) are being invested in increased advertising and other actions to support and build the Company's brands. The level of promotional spending is expected to increase in 1997. RECENT EVENTS Beginning in late 1996, the Company announced a series of organizational changes that are being implemented during 1997. The Company's principal operating divisions will be consolidated into five consumer-focused marketing coalitions -- Jeanswear, Intimate Apparel, Knitwear, Playwear and International. The marketing functions will remain separate, allowing marketing specialists to build and develop their brands. However, many of the Company's sourcing, manufacturing and administrative functions, previously performed in separate operating divisions, will be carried out on either a coalition or a Company-wide basis. These consolidations, plus related new business systems and processes, are expected to cost $150 million over the next few years but, upon completion, are expected to result in cost savings of $150 million annually. At the same time, the Company will make additional investments in consumer research, product development, in-store marketing programs and advertising. This incremental investment spending to support and build the Company's brands is expected to total $250 million over the next four to five years. OTHER MATTERS COMPETITIVE FACTORS The apparel industry is highly competitive and consists of a number of domestic and foreign companies. Management believes that there are only two competitors in the United States that have consolidated assets and sales greater than those of the Company. However, in certain product categories in which the Company operates, there are several competitors that have more assets and sales than the Company in those categories. TRADEMARKS AND LICENSES Trademarks are of material importance to all of the Company's operating subsidiaries. Company- owned brands are protected by registration or otherwise in the United States and most other markets where the related products are sold. These trademark rights are enforced and protected by litigation against infringement as necessary. The Company has granted licenses to other parties to manufacture products under the Company's trademarks in product categories and in geographic areas in which the Company does not operate. In some instances, the Company pays a royalty to use the trademarks of others. Apparel is manufactured and marketed under licenses granted by Major League Baseball, the National Basketball Association, the National Football League, the National Hockey League, The Walt Disney Company, NIKE, Inc. and others. Some of these license arrangements are for a short term and may not contain 7 8 specific renewal options. The MARITHE & FRANCOIS GIRBAUD label is under license in the United States through 1997. Management believes that loss of any license would not have a material adverse effect on the Company. CUSTOMERS THE COMPANY'S CUSTOMERS ARE PRIMARILY DEPARTMENT, SPECIALTY AND DISCOUNT STORES IN THE UNITED STATES AND IN INTERNATIONAL MARKETS, PRIMARILY IN EUROPE. SALES TO WAL-MART STORES, INC. TOTALED 10.3% OF TOTAL SALES IN 1996 AND 10.5% IN 1995. SALES TO THE COMPANY'S TEN LARGEST CUSTOMERS AMOUNTED TO 37% OF TOTAL SALES IN 1996 AND 35% IN 1995. EMPLOYEES The Company employs approximately 62,800 men and women. Approximately 5,700 employees are covered by various collective bargaining agreements. Employee relations are considered to be good. BACKLOG The dollar amount of backlog of orders believed to be firm as of the end of the Company's fiscal year and as of the end of the preceding fiscal year is not material for an understanding of the business of the Company taken as a whole. CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS Certain statements included in Item 1 - "Business," Item 3 - "Legal Proceedings" and Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" 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 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. 8 9 ITEM 2. PROPERTIES. The Company owns most of its facilities used in manufacturing, distribution and administrative activities. Certain other facilities are leased under operating leases that generally contain renewal options. Management believes all facilities and machinery and equipment are in good condition and are suitable for the Company's needs. Manufacturing and distribution facilities being utilized at the end of 1996 are summarized below for the Company's business groups:
Square Business Group Footage -------------- ----------- Jeanswear 7,700,000 Decorated Knitwear 4,800,000 Intimate Apparel 2,600,000 Playwear 1,200,000 Specialty Apparel 2,300,000 ----------- 18,600,000 ===========
In addition, the Company owns or leases various administrative and office space. The Company also owns or leases facilities having 2,800,000 square feet of space that is used for factory outlet operations. Approximately 78% of the factory outlet space is used for selling and warehousing the Company's products, with the balance consisting of space leased to tenants and common areas. Finally, the Company owns facilities having 1,000,000 square feet of space formerly used in its operations but now leased to other parties or held for sale. ITEM 3. LEGAL PROCEEDINGS. There are no material legal proceedings or investigations pending or threatened to which the Company is a party or of which any of its property is the subject. Notwithstanding the foregoing, the text under the caption "Other Matters" included on page 27 of the 1996 Annual Report is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY. The following are the executive officers of VF Corporation as of March 1, 1997. The term of office of each of the executive officers continues to the next annual meeting of the Board of Directors to be held April 15, 1997. There is no family relationship among any of the VF Corporation executive officers. 9 10
Period Served Name Position Age In Such Office(s) - ---- -------- --- ----------------- Mackey J. McDonald President 50 October 1993 to date Chief Executive Officer January 1996 to date Director October 1993 to date Candace S. Cummings Vice President - Administration 49 March 1996 to date & General Counsel Gerard G. Johnson Vice President - Finance and 56 December 1988 to date Chief Financial Officer Timothy A. Lambeth Vice President 55 July 1996 to date President - European & Asian August 1996 to date Operations Daniel G. MacFarlan Vice President 46 April 1995 to date Chairman - Knitwear, Playwear July 1996 to date & Intimate Apparel Coalitions Frank C. Pickard III Vice President - Treasurer 52 April 1994 to date John P. Schamberger Chairman - Jeanswear Coalition 48 February 1995 to date Vice President April 1995 to date Robert K. Shearer Vice President - Controller 45 April 1994 to date
Mr. McDonald joined the Company's Lee division in 1983, serving in various management positions until his election as President of the Company's former Troutman division in 1984. He was named Executive Vice President of the Wrangler division in 1986 and President of Wrangler in 1988. He was named Group Vice President of the Company in 1991, President of the Company in October 1993 and Chief Executive Officer in January 1996. Additional information is included on page 3 of the 1997 Proxy Statement. Mrs. Cummings joined the Company as Vice President - General Counsel in January 1995 and became Vice President - Administration & General Counsel in March 1996. Previously, she had been a senior business partner at the international law firm of Dechert Price & Rhoads where she had been employed since 1972. Mr. Johnson joined the Company in 1988 as Vice President - Finance and Chief Financial Officer. Mr. Lambeth joined the Company in 1968 and has served in various finance, administrative and marketing positions. He served as president of the Company's Healthtex division from 1991 to April 1992 and president of Lee Company from May 1992 to July 1996. He was elected a Vice President of the Company in July 1996 and President - European & Asian Operations in August 1996. 10 11 Mr. MacFarlan joined the Company's Jantzen division in 1978 and served in various capacities, including Vice President - Womens Casualwear from 1990 to May 1992 and Senior Vice President - Sales and Womens Casualwear to July 1993. He served as President of the Company's VF Factory Outlet division from October 1993 to February 1995. Since November 1994, he has served as President of the Company's Nutmeg division. He was elected as the Company's Chairman - Decorated Knitwear & Playwear Coalitions in February 1995, which was expanded in July 1996 to Chairman - Knitwear, Playwear & Intimate Apparel Coalitions, and Vice President in April 1995. Mr. Pickard joined the Company in 1976 and was elected Assistant Controller in 1982, Assistant Treasurer in 1985, Treasurer in 1987 and Vice President - Treasurer in April 1994. Mr. Schamberger joined the Company's Wrangler division in 1972 and held various positions including Vice President - New Brands from 1987 to his election as Vice President - Consumer Marketing in 1991 and President in May 1992. He was elected as the Company's Chairman - Jeanswear Coalition in February 1995 and Vice President in April 1995. Mr. Shearer joined the Company in 1986 as Assistant Controller and was elected Controller in 1989 and Vice President - Controller in April 1994. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Information concerning the market and price history of the Company's Common Stock, plus dividend information, as reported under the caption "Quarterly Results of Operations" on page 33 and under the captions "Investor Information - - Common Stock, Shareholders of Record, Dividend Policy, Dividend Reinvestment Plan, Dividend Direct Deposit and Quarterly Common Stock Price Information" on the inside back cover of the 1996 Annual Report, is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. Selected financial data for the Company for each of its last five fiscal years under the caption "Financial Summary" on pages 34 and 35 of the 1996 Annual Report is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. A discussion of the Company's financial condition and results of operations is incorporated herein by reference to pages 23, 25 and 27 of the 1996 Annual Report. 11 12 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Financial statements of the Company and specific supplementary financial information are incorporated herein by reference to pages 21, 22, 24, 26 and 28 through 33 of the 1996 Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Information under the caption "Change in Accountants" on page 25 of the 1997 Proxy Statement is incorporated herein by reference. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. Information under the caption "Election of Directors" on pages 2 through 5 of the 1997 Proxy Statement is incorporated herein by reference. See Item 4A with regard to Executive Officers. Information under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 25 of the 1997 Proxy Statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. Information on pages 10 through 15 of the 1997 Proxy Statement with regard to this item is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information under the caption "Certain Beneficial Owners" on page 17 and "Common Stock Ownership of Management" on page 18 of the 1997 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information under the caption "Election of Directors" with respect to Messrs. Hurst and Sharp on page 2 and with respect to Mr. Crutchfield on page 4 of the 1997 Proxy Statement is incorporated herein by reference. 12 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as a part of this report: 1. Financial statements - Included on pages 21, 22, 24, 26 and 28 through 33 of the 1996 Annual Report (Exhibit 13) and incorporated by reference in Item 8: Consolidated statements of income - - Fiscal years ended January 4, 1997, December 30, 1995 and December 31, 1994 Consolidated balance sheets - - January 4, 1997 and December 30, 1995 Consolidated statements of cash flows - - Fiscal years ended January 4, 1997, December 30, 1995 and December 31, 1994 Consolidated statements of common shareholders' equity - - Fiscal years ended January 4, 1997, December 30, 1995 and December 31, 1994 Notes to consolidated financial statements Report of independent accountants 2. Financial statement schedules - The following consolidated financial statement schedule is included herein: Schedule II - - Valuation and qualifying accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. 3. Exhibits
Number Description ------ ----------- 3 Articles of incorporation and bylaws: (A) Articles of Incorporation, as amended and restated as of April 18, 1986 and as presently in effect (Incorporated by reference to Exhibit 3(A) to Form 10-K for the fiscal year ended January 4, 1992) (B) Statement Affecting Class or Series of Shares (Incorporated by reference to Exhibit 3(B) to Form 10-K for the fiscal year ended January 2, 1993) (C) Statement with Respect to Shares of Series B ESOP Convertible Preferred Stock (Incorporated by reference to Exhibit 4.2 to Form 8-K dated January 22, 1990)
13 14 (D) Bylaws, as amended through January 1, 1996 and as presently in effect (Incorporated by reference to Exhibit 3(D) to Form 10-K for the fiscal year ended December 30, 1995) 4 Instruments defining the rights of security holders, including indentures: (A) A specimen of the Company's Common Stock certificate (Incorporated by reference to Exhibit 4(A) to Form 10-K for the fiscal year ended January 2, 1993) (B) A specimen of the Company's Series B ESOP Convertible Preferred Stock certificate (Incorporated by reference to Exhibit 4(B) to Form 10-K for the fiscal year ended December 29, 1990) (C) Indenture between the Company and Morgan Guaranty Trust Company of New York, dated January 1, 1987 (Incorporated by reference to Exhibit 4.1 to Form S-3 Registration No. 33-10939) (D) First Supplemental Indenture between the Company, Morgan Guaranty Trust Company of New York and United States Trust Company of New York, dated September 1, 1989 (Incorporated by reference to Exhibit 4.3 to Form S-3 Registration No. 33-30889) (E) Rights Agreement, dated January 13, 1988, between the Company and Morgan Shareholder Services Trust Company (Incorporated by reference to Exhibit 4(E) to Form 10-K for the fiscal year ended January 2, 1993) (F) Amendment No. 1 to Rights Agreement, dated April 17, 1990, between the Company and First Chicago Trust Company of New York (Incorporated by reference to Exhibit 4 to Form 10-Q for the fiscal quarter ended June 30, 1990) (G) Amendment No. 2 to Rights Agreement, dated December 4, 1990, between the Company and First Chicago Trust Company of New York (Incorporated by reference to Exhibit 3 to Form 8-K dated December 4, 1990) (H) Second Supplemental Indenture between the Company and United States Trust Company of New York as Trustee (Incorporated by reference to Exhibit 4.1 to Form 8-K dated April 6, 1994) 10 Material contracts: (A) 1982 Stock Option Plan (Incorporated by reference to Exhibit 4.1.1 of Post-Effective Amendment No. 1 to Form S-8/S-3, Registration No. 33-26566) (B) 1991 Stock Option Plan (Incorporated by reference to Exhibit A of the Company's 1992 Proxy Statement dated March 18, 1992) (C) Annual Discretionary Management Incentive Compensation Program (Incorporated by reference to Exhibit 10(C) to Form 10-K for the fiscal year ended January 4, 1992)
14 15 (D) Deferred Compensation Plan (Incorporated by reference to Exhibit 10(B) to Form 10-K for the fiscal year ended December 29, 1990) (E) Executive Deferred Savings Plan (Incorporated by reference to Exhibit 10(E) to Form 10-K for the fiscal year ended January 4, 1992) (F) Amended and Restated Supplemental Executive Retirement Plan, dated May 16, 1989 (Incorporated by reference to Exhibit 10(F) to Form 10-K for the fiscal year ended December 31, 1994) (G) First Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for L. R. Pugh (Incorporated by reference to Exhibit 10(G) to Form 10-K for the fiscal year ended December 31, 1994) (H) Second Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Mid-Career Senior Management (Incorporated by reference to Exhibit 10(H) to Form 10-K for the fiscal year ended December 31, 1994) (I) Third Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Senior Management (Incorporated by reference to Exhibit 10(I) to Form 10-K for the fiscal year ended December 31, 1994) (J) Fourth Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Participants in the Company's Deferred Compensation Plan (Incorporated by reference to Exhibit 10(J) to Form 10-K for the fiscal year ended December 31, 1994) (K) Fifth Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan which funds certain benefits upon a Change in Control (Incorporated by reference to Exhibit 10(K) to Form 10-K for the fiscal year ended December 31, 1994) (L) Seventh Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Participants in the Company's Executive Deferred Savings Plan (Incorporated by reference to Exhibit 10(L) to Form 10-K for the fiscal year ended December 31, 1994) (M) Eighth Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Participants whose Pension Plan Benefits are limited by the Internal Revenue Code (Incorporated by reference to Exhibit 10(M) to Form 10-K for the fiscal year ended December 31, 1994) (N) Resolution of the Board of Directors dated December 3, 1996 relating to lump sum payments under the Company's Supplemental Executive Retirement Plan
15 16 (O) Form of Change in Control Agreement with senior management of the Company (Incorporated by reference to Exhibit 10(J) to Form 10-K for the fiscal year ended December 29, 1990) (P) Form of Change in Control Agreement with other management of the Company (Incorporated by reference to Exhibit 10(K) to Form 10-K for the fiscal year ended December 29, 1990) (Q) Form of Change in Control Agreement with management of subsidiaries of the Company (Incorporated by reference to Exhibit 10(L) to Form 10-K for the fiscal year ended December 29, 1990) (R) Revolving Credit Agreement, dated October 20, 1994 (Incorporated by reference to Exhibit 10(Q) to Form 10-K for the fiscal year ended December 31, 1994) (S) Executive Incentive Compensation Plan (Incorporated by reference to Exhibit 10(R) to Form 10-K for the fiscal year ended December 31, 1994) (T) Restricted Stock Agreement (Incorporated by reference to Exhibit 10(S) to Form 10-K for the fiscal year ended December 31, 1994) (U) Discretionary Supplemental Executive Bonus Plan (Incorporated by reference to Exhibit 10(T) to Form 10-K for the fiscal year ended December 31, 1994) (V) 1995 Key Employee Restricted Stock Plan (Incorporated by reference to Exhibit 10(U) to Form 10-K for the fiscal year ended December 30, 1995) (W) VF Corporation Deferred Savings Plan for Non-Employee Directors 11 Computation of earnings per common share 13 Annual report to security holders 21 Subsidiaries of the Corporation 23.1 Consents of Coopers & Lybrand L.L.P. 23.2 Consents of Ernst & Young LLP 23.3 Report of Ernst & Young LLP 23.4 Report of Coopers & Lybrand L.L.P. 23.5 Report of Ernst & Young LLP 24 Power of attorney
16 17 27 Financial data schedule 99 Additional exhibits: (A) Form 11-K for VF Corporation Tax-Advantaged Savings Plan for Salaried Employees for the year ended December 31, 1996
All other exhibits for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the last quarter of the fiscal year ended January 4, 1997. 17 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. V.F. CORPORATION By: /s/ Mackey J. McDonald -------------------------- Mackey J. McDonald President (Chief Executive Officer) By: /s/ Gerald G. Johnson ----------------------------- Gerard G. Johnson Vice President - Finance (Chief Financial Officer) By: /s/ Robert K. Shearer ----------------------------- Robert K. Shearer Vice President - Controller (Chief Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated: Robert D. Buzzell* Director Edward E. Crutchfield* Director Ursula F. Fairbairn* Director Barbara S. Feigin* Director Roger S. Hillas* Director Leon C. Holt, Jr.* Director Robert J. Hurst* Director March 24, 1997 Mackey J. McDonald* Director William E. Pike* Director Lawrence R. Pugh* Director M. Rust Sharp* Director L. Dudley Walker* Director *By: /s/ L. M. Tarnoski March 24, 1997 ------------------------------ L. M. Tarnoski, Attorney-in-Fact 18 19 VF CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
====================================================================================================================== COL. A COL. B COL. C COL. D COL. E ====================================================================================================================== ADDITIONS ============================ (1) (2) Balance at Charged to Charged to Deductions Balance at Beginning Costs and Other Accounts Describe End of Description of Period Expenses Describe Period ====================================================================================================================== (Dollars in thousands) Fiscal year ended January 4, 1997 Allowance for doubtful accounts $34,621 $18,490 $12,858 (A) $40,253 ========== ========== ========== ========== Valuation allowance for deferred income tax assets $22,154 $9,874 $2,732 (B) $29,296 ========== ========== ========== ========== Fiscal year ended December 30, 1995: Allowance for doubtful accounts $32,794 $14,967 $13,140 (A) $34,621 ========== ========== ========== ========== Valuation allowance for deferred income tax assets $10,866 $12,518 $1,230 (B) $22,154 ========== ========== ========== ========== Fiscal year ended December 31, 1994: Allowance for doubtful accounts $28,808 $11,274 $7,288 (A) $32,794 ========== ========== ========== ========== Valuation allowance for deferred income tax assets $6,733 $4,203 $70 (B) $10,866 ========== ========== ========== ==========
(A) Deductions include accounts written off, net of recoveries, and in 1994 net of additions of $2.4 million from the acquisition of subsidiaries. (B) Deduction relates to circumstances where it is more likely than not that deferred tax assets will be realize 19 20 VF CORPORATION INDEX TO EXHIBITS
Number Description ------ ----------- 3 Articles of incorporation and bylaws: (A) Articles of Incorporation, as amended and restated as of April 18, 1986 and as presently in effect (Incorporated by reference to Exhibit 3(A) to Form 10-K for the fiscal year ended January 4, 1992) (B) Statement Affecting Class or Series of Shares (Incorporated by reference to Exhibit 3(B) to Form 10-K for the fiscal year ended January 2, 1993) (C) Statement with Respect to Shares of Series B ESOP Convertible Preferred Stock (Incorporated by reference to Exhibit 4.2 to Form 8-K dated January 22, 1990) (D) Bylaws, as amended through January 1, 1996 and as presently in effect (Incorporated by reference to Exhibit 3(D) to Form 10-K for the fiscal year ended December 30, 1995) 4 Instruments defining the rights of security holders, including indentures: (A) A specimen of the Company's Common Stock certificate (Incorporated by reference to Exhibit 4(A) to Form 10-K for the fiscal year ended January 2, 1993) (B) A specimen of the Company's Series B ESOP Convertible Preferred Stock certificate (Incorporated by reference to Exhibit 4(B) to Form 10-K for the fiscal year ended December 29, 1990) (C) Indenture between the Company and Morgan Guaranty Trust Company of New York, dated January 1, 1987 (Incorporated by reference to Exhibit 4.1 to Form S-3 Registration No. 33-10939) (D) First Supplemental Indenture between the Company, Morgan Guaranty Trust Company of New York and United States Trust Company of New York, dated September 1, 1989 (Incorporated by reference to Exhibit 4.3 to Form S-3 Registration No. 33-30889) (E) Rights Agreement, dated January 13, 1988, between the Company and Morgan Shareholder Services Trust Company (Incorporated by reference to Exhibit 4(E) to Form 10-K for the fiscal year ended January 2, 1993) (F) Amendment No. 1 to Rights Agreement, dated April 17, 1990, between the Company and First Chicago Trust Company of New York (Incorporated by reference to Exhibit 4 to Form 10-Q for the fiscal quarter ended June 30, 1990)
21 (G) Amendment No. 2 to Rights Agreement, dated December 4, 1990, between the Company and First Chicago Trust Company of New York (Incorporated by reference to Exhibit 3 to Form 8-K dated December 4, 1990) (H) Second Supplemental Indenture between the Company and United States Trust Company of New York as Trustee (Incorporated by reference to Exhibit 4.1 to Form 8-K dated April 6, 1994) 10 Material contracts: (A) 1982 Stock Option Plan (Incorporated by reference to Exhibit 4.1.1 of Post-Effective Amendment No. 1 to Form S-8/S-3, Registration No. 33-26566) (B) 1991 Stock Option Plan (Incorporated by reference to Exhibit A of the Company's 1992 Proxy Statement dated March 18, 1992) (C) Annual Discretionary Management Incentive Compensation Program (Incorporated by reference to Exhibit 10(C) to Form 10-K for the fiscal year ended January 4, 1992) (D) Deferred Compensation Plan (Incorporated by reference to Exhibit 10(B) to Form 10-K for the fiscal year ended December 29, 1990) (E) Executive Deferred Savings Plan (Incorporated by reference to Exhibit 10(E) to Form 10-K for the fiscal year ended January 4, 1992) (F) Amended and Restated Supplemental Executive Retirement Plan, dated May 16, 1989 (Incorporated by reference to Exhibit 10(F) to Form 10-K for the fiscal year ended December 31, 1994) (G) First Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for L. R. Pugh (Incorporated by reference to Exhibit 10(G) to Form 10-K for the fiscal year ended December 31, 1994) (H) Second Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Mid-Career Senior Management (Incorporated by reference to Exhibit 10(H) to Form 10-K for the fiscal year ended December 31, 1994) (I) Third Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Senior Management (Incorporated by reference to Exhibit 10(I) to Form 10-K for the fiscal year ended December 31, 1994) (J) Fourth Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Participants in the Company's Deferred Compensation Plan (Incorporated by reference to Exhibit 10(J) to Form 10-K for the fiscal year ended December 31, 1994)
22 (K) Fifth Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan which funds certain benefits upon a Change in Control (Incorporated by reference to Exhibit 10(K) to Form 10-K for the fiscal year ended December 31, 1994) (L) Seventh Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Participants in the Company's Executive Deferred Savings Plan (Incorporated by reference to Exhibit 10(L) to Form 10-K for the fiscal year ended December 31, 1994) (M) Eighth Amended Annual Benefit Determination under the Amended and Restated Supplemental Executive Retirement Plan for Participants whose Pension Plan Benefits are limited by the Internal Revenue Code (Incorporated by reference to Exhibit 10(M) to Form 10-K for the fiscal year ended December 31, 1994) (N) Resolution of the Board of Directors dated December 3, 1996 relating to lump sum payments under the Company's Supplemental Executive Retirement Plan (O) Form of Change in Control Agreement with senior management of the Company (Incorporated by reference to Exhibit 10(J) to Form 10-K for the fiscal year ended December 29, 1990) (P) Form of Change in Control Agreement with other management of the Company (Incorporated by reference to Exhibit 10(K) to Form 10-K for the fiscal year ended December 29, 1990) (Q) Form of Change in Control Agreement with management of subsidiaries of the Company (Incorporated by reference to Exhibit 10(L) to Form 10-K for the fiscal year ended December 29, 1990) (R) Revolving Credit Agreement, dated October 20, 1994 (Incorporated by reference to Exhibit 10(Q) to Form 10-K for the fiscal year ended December 31, 1994) (S) Executive Incentive Compensation Plan (Incorporated by reference to Exhibit 10(R) to Form 10-K for the fiscal year ended December 31, 1994) (T) Restricted Stock Agreement (Incorporated by reference to Exhibit 10(S) to Form 10-K for the fiscal year ended December 31, 1994) (U) Discretionary Supplemental Executive Bonus Plan (Incorporated by reference to Exhibit 10(T) to Form 10-K for the fiscal year ended December 31, 1994) (V) 1995 Key Employee Restricted Stock Plan (Incorporated by reference to Exhibit 10(U) to Form 10-K for the fiscal year ended December 30, 1995) (W) VF Corporation Deferred Savings Plan for Non-Employee Directors
23 11 Computation of earnings per common share 13 Annual report to security holders 21 Subsidiaries of the Corporation 23.1 Consents of Coopers & Lybrand L.L.P. 23.2 Consents of Ernst & Young LLP 23.3 Report of Ernst & Young LLP 23.4 Report of Coopers & Lybrand L.L.P. 23.5 Report of Ernst & Young LLP 24 Power of attorney 27 Financial data schedule 99 Additional exhibits: (A) Form 11-K for VF Corporation Tax-Advantaged Savings Plan for Salaried Employees for the year ended December 31, 1996
EX-10.N 2 RESOLUTION OF THE BOARD OF DIRECTORS DATED 12/3/96 1 Exhibit 10(n) Resolution of the Board of Directors of VF Corporation dated December 3, 1996: RESOLVED: That the Pension Plan Committee be and is hereby authorized to approve requests for lump sum payments that may be made in the future by VF Supplemental Executive Retirement Plan (SERP) participants under Section 4.3 of the SERP, provided that in the judgment of such Committee such approval would be in the best interest of the Corporation. EX-10.W 3 VF CORPORATION DEFERRED SAVING PLAN 1 VF CORPORATION DEFERRED SAVINGS PLAN FOR NON-EMPLOYE DIRECTORS 2 VF CORPORATION DEFERRED SAVINGS PLAN FOR NON-EMPLOYEE DIRECTORS VF Corporation (the "Company") hereby establishes this Deferred Savings Plan for Non-Employee Directors (the "Plan") pursuant to which non-employee members of its Board of Directors may elect to defer receipt of all or any portion of the compensation payable to them for services rendered to the Company. The intention of VF Corporation is that the Plan be at all times maintained on an unfunded basis for federal income tax purposes under the Internal Revenue Code of 1986, as amended ("Code"), and exempt from the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The plan shall be effective as of March 1, 1997. SECTION I DEFINITIONS Unless otherwise required by the context, the terms used herein shall have the meanings as set forth below: 1. "ACCRUED BENEFIT" means the sum of a Participant's Deferrals (and any gains and losses credited thereon). 2. "BENEFICIARY" means the individual or entity named pursuant to the Plan to receive benefit payments hereunder in the event of the death of the Participant. 3. "COMMITTEE" means the VF Corporation Pension Plan Committee. 4. "COMPANY" means VF Corporation, a Pennsylvania corporation. 5. "COMPENSATION" means a Participant's aggregate compensation payable by the Company for services rendered as a Director, including the annual base retainer and attendance fees for board and committee meetings. 6. "DEFERRAL" means that portion of a Participant's Compensation elected to be deferred hereunder. 7. "PARTICIPANT" means a Director who is not employed by the Company or any of its subsidiaries or affiliates. 8. "PLAN" means the VF Deferred Savings Plan for Non- Employee Directors, as it may be amended from time to time. 1 3 9. "PLAN YEAR" means the calendar year, except that with respect to the first year, the Plan Year shall commence March 1, 1997 and end December 31, 1997. 10. "SEVERANCE FROM SERVICE" means the date on which a Participant ceases to be a Director of the Company. 11. "SPOUSE" means the person to whom the Participant is legally married. SECTION II ELIGIBILITY 1. A Director shall be eligible to make Deferral elections under this Plan as long as he or she (a) remains a Director of the Company and (b) is not concurrently employed by the Company or any of its subsidiaries or affiliates. 2. Participation in this Plan is voluntary. SECTION III DEFERRALS 1. ELECTION. A Participant may elect to defer up to 100% of his or her Compensation by directing the Company to reduce his or her Compensation by a whole percentage or amount authorized by an agreement executed by the Participant and approved by the Committee. Such Deferral election shall be made during the December immediately prior to the Plan Year to which the election relates, provided that for the first Plan Year, the election shall be made on or before March 1, 1997. 2. NON-DEFERRED COMPENSATION. Any Compensation not deferred under this Plan shall be paid in accordance with normal Company policy. 3. VESTING. A Participant shall have a nonforfeitable right to his or her Deferrals and any credited gains or losses attributable thereto. 4. CHANGE OF ELECTION. The percentage or amount of Compensation designated by the Participant as a Deferral will continue in effect, notwithstanding any change in Compensation, until the Participant requests a change of such percentage or amount (increase, decrease or suspension) and obtains the consent of the Committee. A Participant, by submitting a written election form to the Committee prior to the first day of the calendar quarter for which the election is to become effective, may request a change of the percentage or amount of Deferral. If the Committee consents, such change shall become effective no later than the first day of the calendar quarter next following such consent. 2 4 SECTION IV INVESTMENT A Participant's Deferrals shall be credited with gains and losses as if such Deferrals had been invested in a hypothetical fund which invests in common stock of the Company, purchased on the open market at the then prevailing price on the New York Stock Exchange on the date of purchase or in a private transaction with a seller other than the Company. SECTION V RECORDS The Committee shall create and maintain adequate records, in book entry form, for each Participant of Deferrals and credited gains or losses attributable thereto. Each Participant shall be informed of the status of his or her Accrued Benefit at least quarterly. SECTION VI PLAN BENEFITS 1. SEVERANCE FROM SERVICE. Upon a Participant's Severance from Service, he or she shall be entitled to his or her Accrued Benefit payable in accordance with Section VII. 2. DEATH. In the event of the death of a Participant prior to Severance from Service, the Participant's Beneficiary shall be entitled to a benefit equal to the Participant's Accrued Benefit, payable in accordance with Section VII. 3. BENEFICIARY. Each Participant should designate a Beneficiary (along with alternate beneficiaries) to whom, in the event of the Participant's death, any benefit is payable hereunder. Each Participant has the right to change any designation of Beneficiary and such change automatically revokes any prior designation. A designation or change of Beneficiary must be in writing on forms supplied by the Committee and any change of Beneficiary will not become effective until filed with the Committee; provided, however, that the Committee shall not recognize the validity of any designation received after the death of the Participant. The interest of any Beneficiary who dies before the Participant will terminate unless otherwise provided. If a Beneficiary is not validly designated, or is not living or cannot be found at the date of payment, any amount payable pursuant to this Plan will be paid to the Spouse of the Participant if living at the time of payment, otherwise in equal shares to such of the children of the Participant as may be living at the time of payment; provided, however, that if there is no surviving Spouse or child at the time of payment, such payment will be made to the estate of the Participant. 3 5 SECTION VII PAYMENT OF BENEFITS 1. The normal form for the payment of a Participant's Accrued Benefit shall be a lump-sum payment in cash, payable as soon as practicable after the event giving rise to the distribution. 2. Notwithstanding the foregoing, a Participant may request, by filing an application in writing to the Committee, that payment be made in installments over a period of not more than ten (10) years. Such written application must be made to the Committee at least sixty (60) days prior to the Participant's Severance from Service, and the decision to permit the requested installment payments shall be made at the sole discretion of the Committee taking into account the interests of the Participant and the Company. SECTION VIII FUNDING STATUS This Plan is unfunded. All obligations hereunder shall constitute an unsecured promise of the Company to pay a Participant's benefit out of the general assets of the Company, subject to all of the terms and conditions of the Plan, as amended from time to time, and applicable law. A Participant hereunder shall have no greater right to benefits provided hereunder than that of any unsecured general creditor of the Company. SECTION IX ADMINISTRATION 1. The Plan shall be administered by the Committee which shall have the following powers and responsibilities. (a) to amend the Plan; (b) to terminate the Plan; (c) to construe the Plan, make factual determinations, consider requests made by Participants, correct defects, and take any and all similar actions to the extent necessary to administer the Plan, with any instructions or interpretations of the Plan made in good faith by the Committee to be final and conclusive for all purposes; (d) to prepare periodic administration reports to the Board of Directors which will show, in reasonable detail, the administrative operations of the Plan; and 4 6 (e) to take all other actions and do all other things which are reasonable and necessary to the proper administration of the Plan. 2. The Committee shall have complete discretion in carrying out its powers and responsibilities under the Plan, and its exercise of discretion hereunder shall be final and conclusive. 3. The Committee may, in writing, delegate some or all of its powers and responsibilities to any other person or entity. 4. The Committee may hold meetings upon such notice, at such time or times, and at such place or places as it may determine. The majority of the members of the Committee at the time in office will constitute a quorum for the transaction of business at all meetings and a majority vote of those present and constituting a quorum at any meeting will be required for action. The Committee may also act by written consent of a majority of its members. 5. The Committee may adopt such rules for administration of the Plan as is considered desirable, provided they do not conflict with the Plan. Records of administration of the Plan will be kept, and Participants and their Beneficiaries may examine records pertaining directly to themselves. 6. The Committee may retain such counsel, and actuarial, accounting, clerical and other services as they may require to carry out the provisions and purposes of the Plan. 7. The Committee shall be entitled to rely upon all tables, valuations, certificates, and reports furnished by any duly appointed auditor, or actuary, upon all certificates and reports made by any investment manager, or any duly appointed accountant, and upon all opinions given by any duly appointed legal counsel. 8. No member of the Committee shall be personally liable by virtue of any instrument executed by the member, or on the member's behalf, as a member of the Committee. Neither the Company nor any of its officers or directors, nor any member of the Committee, shall be personally liable for any action or inaction with respect to any duty or responsibility imposed upon such person by the terms of the Plan unless such action or inaction is judicially determined to be a breach of that person's responsibility as a fiduciary with respect to the Plan under any applicable law. The Company shall indemnify and hold harmless its officers, directors, and each member of the Committee against any and all claims, losses, damages, expenses (including attorneys' fees), and liability (including, in each case, amounts paid in settlement), arising from any action or failure to act, except when the same is judicially determined to be due to the gross negligence or willful misconduct of such officer, director or member of the Committee. The foregoing right of indemnification shall be in addition to any other rights to which any such person may be entitled as a matter of law. 5 7 SECTION X MODIFICATION AND TERMINATION The Committee reserves the right to terminate this Plan at any time or to modify, amend or suspend it from time to time. Any such termination or modification shall be effective at such date as the Committee may determine. The Committee shall promptly give notice of any such modification or termination to all Participants. A modification may affect Participants, irrespective of whether they are past, current or future Participants, provided, however, that a modification may not eliminate or reduce the Accrued Benefit of any Participant as of the effective date of such modification. SECTION XI GENERAL PROVISIONS 1. Nothing contained herein shall be deemed to give any Non-Employee Director the right to be retained in the service of the Company. 2. It is a condition of this Plan, and all rights of each Participant shall be subject thereto, that no right or interest of any Participant under this Plan or in his or her credited Deferrals (and any credited gains or losses attributable thereto) shall be assignable or transferable in whole or in part, either directly or by operation of law or otherwise, including but without limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner, subject, however, to applicable law, but excluding devolution by death or mental incompetency, and no right or interest of any Participant under this Plan or in his or her credited Deferrals (and any credited gains or losses attributable thereto) shall be liable for or subject to any obligation or liability of such Participant, subject, however, to applicable law. 3. All payments of benefits under the Plan shall be subject to such taxes and other withholdings (federal, state or local) as may be due thereon, and the determination of the Committee as to withholding with respect to payments shall be binding upon the Participant and each Beneficiary. 4. The sale of all of the assets of the Company, or a merger, consolidation or reorganization of the Company wherein the Company is not the surviving corporation, or any other transaction which, in effect, amounts to a sale of the Company or voting control thereof, shall not terminate this Plan or any related agreements and the obligations created hereunder or thereby shall be binding upon the successors and assigns of the Company. 5. If a Participant or Beneficiary entitled to receive any benefits hereunder is deemed by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such benefits, the benefits will be paid to such persons as the Committee might designate or to the duly appointed guardian. 6 8 6. This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding the conflict of law rules applicable therein. 7 EX-11 4 COMPUTATION OF EARNINGS PER COMMON SHARE 1 Exhibit 11 VF CORPORATION COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEAR ENDED =========================================== JANUARY 4 DECEMBER 30 DECEMBER 31 1997 1995 1994 ============ ============ ============ PRIMARY EARNINGS PER SHARE Net income $299,524 $157,291 $274,536 Less Preferred Stock dividends and redemption premium 4,407 3,683 3,430 -------- -------- -------- Net income available to common stockholders $295,117 $153,608 $271,106 ======== ======== ======== Average number of common shares outstanding 63,646 63,743 64,620 ======== ======== ======== Primary earnings per share $4.64 $2.41 $4.20 ======== ======== ======== FULLY DILUTED EARNINGS PER SHARE Net income $299,524 $157,291 $274,536 Increased ESOP contribution required if Preferred Stock were converted to Common Stock 1,318 1,430 1,508 -------- -------- -------- Fully diluted earnings $298,206 $155,861 $273,028 ======== ======== ======== Average number of common shares outstanding 63,646 63,743 64,620 Additional common equivalent shares resulting from: Conversion of Preferred Stock 1,528 1,586 1,623 Dilutive effect of stock options and restricted shares 533 409 351 -------- -------- -------- Average number of common and common equivalent shares 65,707 65,738 66,594 ======== ======== ======== Fully diluted earnings per share $4.54 $2.37 $4.10 ======== ======== ========
EX-13 5 ANNUAL REPORT TO SECURITY HOLDERS 1 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors and Shareholders VF Corporation We have audited the accompanying consolidated balance sheets of VF Corporation as of January 4, 1997 and December 30, 1995, and the related consolidated statements of income, cash flows, and common shareholders' equity for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of VF Corporation for the year ended December 31, 1994 were audited by other auditors, whose report dated February 8, 1995 expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of VF Corporation at January 4, 1997 and December 30, 1995, and the consolidated results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. Philadelphia, Pennsylvania February 6, 1997 2 VF CORPORATION CONSOLIDATED BALANCE SHEETS
JANUARY 4 DECEMBER 30 In thousands 1997 1995 ----------- ----------- ASSETS CURRENT ASSETS Cash and equivalents $ 270,629 $ 84,075 Accounts receivable, less allowances of $40,253 in 1996 and $34,621 in 1995 592,942 629,506 Inventories 730,823 841,907 Deferred income taxes 90,556 84,952 Other current assets 21,376 27,197 ----------- ----------- Total current assets 1,706,326 1,667,637 PROPERTY, PLANT AND EQUIPMENT 721,524 749,880 INTANGIBLE ASSETS 863,930 887,606 OTHER ASSETS 157,755 141,948 ----------- ----------- $ 3,449,535 $ 3,447,071 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term borrowings $ 17,528 $ 229,945 Current portion of long-term debt 1,298 2,715 Accounts payable 320,056 276,598 Accrued liabilities 427,385 359,062 ----------- ----------- Total current liabilities 766,267 868,320 LONG-TERM DEBT 519,058 614,217 OTHER LIABILITIES 164,077 169,392 REDEEMABLE PREFERRED STOCK 58,092 60,667 DEFERRED CONTRIBUTIONS TO EMPLOYEE STOCK OWNERSHIP PLAN (31,698) (37,031) ----------- ----------- 26,394 23,636 COMMON SHAREHOLDERS' EQUITY Common Stock, stated value $1; shares authorized 150,000,000; shares outstanding, 63,907,874 in 1996 and 63,438,933 in 1995 63,908 63,439 Additional paid-in capital 668,554 593,976 Foreign currency translation 6,428 20,483 Retained earnings 1,234,849 1,093,608 ----------- ----------- 1,973,739 1,771,506 ----------- ----------- $ 3,449,535 $ 3,447,071 =========== ===========
See notes to consolidated financial statements. 3 VF CORPORATION CONSOLIDATED STATEMENTS OF INCOME
FISCAL YEAR ENDED ------------------------------------------- JANUARY 4 DECEMBER 30 DECEMBER 31 In thousands, except per share amounts 1997 1995 1994 ----------- ----------- ----------- NET SALES $ 5,137,178 $ 5,062,299 $ 4,971,713 COSTS AND OPERATING EXPENSES Cost of products sold 3,458,166 3,577,555 3,387,295 Marketing, administrative and general expenses 1,122,076 1,131,290 1,045,615 Other operating expense (income) (347) 6,064 8,297 ----------- ----------- ----------- 4,579,895 4,714,909 4,441,207 ----------- ----------- ----------- OPERATING INCOME 557,283 347,390 530,506 OTHER INCOME (EXPENSE) Interest income 13,406 11,085 9,296 Interest expense (62,793) (77,302) (80,280) Miscellaneous, net 512 2,962 (3,861) ----------- ----------- ----------- (48,875) (63,255) (74,845) ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 508,408 284,135 455,661 INCOME TAXES 208,884 126,844 181,125 ----------- ----------- ----------- NET INCOME $ 299,524 $ 157,291 $ 274,536 =========== =========== =========== EARNINGS PER COMMON SHARE Primary $ 4.64 $ 2.41 $ 4.20 Fully diluted 4.54 2.37 4.10 CASH DIVIDENDS PER COMMON SHARE $ 1.46 $ 1.38 $ 1.30 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 63,646 63,743 64,620
See notes to consolidated financial statements. 4 VF CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEAR ENDED ------------------------------------- JANUARY 4 DECEMBER 30 DECEMBER 31 In thousands 1997 1995 1994 --------- --------- --------- OPERATIONS Net income $ 299,524 $ 157,291 $ 274,536 Adjustments to reconcile net income to cash provided by operations: Depreciation 132,440 134,039 126,902 Amortization of intangible assets 28,138 33,682 31,609 Other, net (18,239) (15,048) (4,973) Changes in current assets and liabilities: Accounts receivable 25,270 (2,045) (45,519) Inventories 110,807 (31,881) 72,061 Accounts payable 43,196 (18,623) 14,559 Other, net 90,318 66,241 10,226 --------- --------- --------- Cash provided by operations 711,454 323,656 479,401 INVESTMENTS Capital expenditures (138,747) (155,206) (132,908) Business acquisitions (24,284) (12,004) (494,751) Other, net 36,887 4,216 1,053 --------- --------- --------- Cash invested (126,144) (162,994) (626,606) FINANCING Increase (decrease) in short-term borrowings (213,746) (92,655) 282,739 Proceeds from long-term debt 15,556 98,718 99,207 Payment of long-term debt (111,522) (3,123) (222,718) Purchase of Common Stock (61,483) (86,251) (27,878) Cash dividends paid (97,036) (92,038) (88,223) Proceeds from issuance of stock 67,819 36,015 8,277 Other, net 1,656 3,005 3,979 --------- --------- --------- Cash provided (used) by financing (398,756) (136,329) 55,383 --------- --------- --------- NET CHANGE IN CASH AND EQUIVALENTS 186,554 24,333 (91,822) CASH AND EQUIVALENTS - BEGINNING OF YEAR 84,075 59,742 151,564 --------- --------- --------- CASH AND EQUIVALENTS - END OF YEAR $ 270,629 $ 84,075 $ 59,742 ========= ========= =========
See notes to consolidated financial statements. 5 VF CORPORATION CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
ADDITIONAL FOREIGN COMMON PAID-IN CURRENCY RETAINED In thousands STOCK CAPITAL TRANSLATION EARNINGS ------- --------- ----------- ----------- BALANCE JANUARY 1, 1994 $64,489 $543,165 $(12,865) $ 952,611 Net income - - - 274,536 Cash dividends: Common Stock - - - (83,994) Series B Preferred Stock - - - (4,229) Tax benefit from Preferred Stock dividends - - - 1,082 Redemption of Preferred Stock - - - (284) Purchase of treasury shares (588) - - (27,290) Exercise of stock options, net of shares surrendered 264 9,762 - (72) Foreign currency translation, net of $9,381 deferred income taxes - - 17,422 - ------- -------- -------- ---------- BALANCE DECEMBER 31, 1994 64,165 552,927 4,557 1,112,360 Net income - - - 157,291 Cash dividends: Common Stock - - - (87,907) Series B Preferred Stock - - - (4,131) Tax benefit from Preferred Stock dividends - - - 955 Redemption of Preferred Stock - - - (507) Restricted stock 5 (230) - 248 Purchase of treasury shares (1,720) - - (84,531) Exercise of stock options, net of shares surrendered 989 41,279 - (170) Foreign currency translation, net of $8,576 deferred income taxes - - 15,926 - ------- -------- -------- ---------- BALANCE DECEMBER 30, 1995 63,439 593,976 20,483 1,093,608 Net income - - - 299,524 Cash dividends: Common Stock - - - (93,020) Series B Preferred Stock - - - (4,016) Tax benefit from Preferred Stock dividends - - - 827 Redemption of Preferred Stock - - - (1,218) Restricted stock - 23 - - Purchase of treasury shares (1,015) - - (60,468) Exercise of stock options, net of shares surrendered 1,484 74,555 - (388) Foreign currency translation, net of $7,568 deferred income taxes - - (14,055) - ------- -------- -------- ---------- BALANCE JANUARY 4, 1997 $63,908 $668,554 $ 6,428 $1,234,849 ======= ======== ======== ==========
See notes to consolidated financial statements. 6 VF CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JANUARY 4, 1997 VF Corporation's principal business is designing, manufacturing and marketing high quality branded jeanswear, knitwear, intimate apparel, children's playwear and other apparel. Jeanswear and related products represent over one-half of consolidated sales and earnings and approximately one-half of total assets. The Company's customers are primarily department, discount and specialty stores throughout the world. One domestic discount store group comprises 10.3% of consolidated sales in 1996 and 10.5% in 1995. NOTE A - ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of VF Corporation and all majority owned subsidiaries after elimination of intercompany transactions and profits. INVENTORIES are stated at the lower of cost or market. Inventories stated on the last-in, first-out basis represent 29% of total 1996 inventories and 33% in 1995. Remaining inventories are valued using the first-in, first-out method. PROPERTY AND DEPRECIATION: Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the assets, ranging up to 40 years for buildings and 10 years for machinery and equipment. INTANGIBLE ASSETS represent the excess of costs over the fair value of net tangible assets of businesses acquired, less accumulated amortization of $224.5 million and $208.4 million in 1996 and 1995. These assets are amortized on the straight-line method over five to forty years. The Company's policy is to evaluate intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. This evaluation is based on a number of factors, including a business unit's expectations for operating income and undiscounted cash flows that will result from the use of such assets. ADVERTISING COSTS are expensed as incurred and were $271.4 million in 1996, $230.6 million in 1995 and $218.9 million in 1994. EARNINGS PER 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. STOCK-BASED EMPLOYEE BENEFIT PLANS: Compensation expense is not recorded for stock options granted at fair market value. For grants of restricted stock, compensation equal to the market value of shares at the date of grant is deferred and amortized to expense over the vesting period. 7 USE OF ESTIMATES: In preparing financial statements in accordance with generally accepted accounting principles, management makes estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE B - ACQUISITIONS In August 1996, the Company acquired a manufacturer and marketer of flame retardant apparel for $20.8 million. Intangible assets related to this acquisition totaled $18.1 million. During 1995 and 1996, the Company paid a total of $15.5 million for a company that manufactures and markets Lee branded products in Mexico. In January 1994, the Company acquired the common stock of H.H. Cutler Company for a total consideration of $154.7 million and the common stock of Nutmeg Industries, Inc. for a total consideration of $352.2 million, of which $349.1 million related to intangible assets of these companies. Both companies manufacture and market licensed apparel. All acquisitions have been accounted for as purchases, and accordingly the purchase prices have been allocated to the net assets acquired based on fair values at the dates of acquisition. The excess of cost over fair value of the purchased businesses has been allocated to intangible assets and is being amortized primarily over 40 years. Operating results of these companies have been included in the consolidated financial statements since the dates of acquisition. NOTE C - INVENTORIES
1996 1995 -------- -------- (In thousands) Finished products $394,962 $514,688 Work in process 168,774 139,721 Materials and supplies 167,087 187,498 -------- -------- $730,823 $841,907 ======== ========
The current cost of inventories stated on the last-in, first-out method (see Note A) is not significantly different from their value determined under the first-in, first-out method. 8 NOTE D - PROPERTY, PLANT AND EQUIPMENT
1996 1995 ---------- ---------- (In thousands) Land $ 44,244 $ 42,605 Buildings 402,635 389,135 Machinery and equipment 1,096,472 1,058,644 ---------- ---------- 1,543,351 1,490,384 Less accumulated depreciation 821,827 740,504 ---------- ---------- $ 721,524 $ 749,880 ========== ========== NOTE E - SHORT-TERM BORROWINGS 1996 1995 ---------- ---------- (In thousands) Commercial paper $ 143,070 Banks $ 17,528 86,875 ---------- ---------- $ 17,528 $ 229,945
The weighted average interest rate was 12.6% at the end of 1996 and 6.6% at the end of 1995. The Company maintains an unsecured revolving credit agreement with a group of banks for $750.0 million that supports commercial paper borrowings and is otherwise available for general corporate purposes. The agreement, which extends to 1999, requires a .12% facility fee per year and contains various financial covenants, including minimum net worth and debt ratio requirements. At January 4, 1997, there were no borrowings under the agreement. NOTE F - ACCRUED LIABILITIES
1996 1995 ---------- ---------- (In thousands) Income taxes $ 81,419 $ 44,182 Compensation 87,027 49,583 Insurance 64,247 50,805 Special charges (Note M) 16,218 66,277 Other 178,474 148,215 ---------- ---------- $ 427,385 $ 359,062 ========== ==========
9 NOTE G - LONG-TERM DEBT
1996 1995 ---------- ---------- (In thousands) 9.50% notes, due 1999 $ 100,000 9.50% notes, due 2001 $ 100,000 100,000 6.63% notes, due 2003 100,000 100,000 7.60% notes, due 2004 100,000 100,000 6.75% notes, due 2005 100,000 100,000 9.25% debentures, due 2022 100,000 100,000 Capital leases and other 20,356 16,932 ---------- ---------- 520,356 616,932 Less current portion 1,298 2,715 ---------- ---------- $ 519,058 $ 614,217 ========== ==========
The scheduled payments of long-term debt are $.6 million in each of 1998, 1999 and 2000 and $116.5 million in 2001. The Company paid interest of $62.6 million in 1996, $74.4 million in 1995 and $83.1 million in 1994. NOTE H - OTHER LIABILITIES
1996 1995 ---------- ---------- (In thousands) Deferred income taxes $ 43,131 $ 59,191 Deferred compensation 84,617 76,834 Other 36,329 33,367 ---------- ---------- $ 164,077 $ 169,392 ========== ==========
NOTE I - BENEFIT PLANS The Company sponsors a noncontributory defined benefit pension plan covering substantially all full-time domestic employees. Benefits are based on employees' compensation and years of service. The Company annually contributes amounts, as determined by an actuary, that provide the plan with sufficient assets to meet future benefit payments. Plan assets consist principally of common stocks, U.S. government obligations and corporate obligations. 10 The effect of the defined benefit plan on income is as follows:
1996 1995 1994 ----------- ----------- ----------- (In thousands) Service cost - benefits earned during the year $ 17,160 $ 14,660 $ 16,230 Interest cost on projected benefit obligation 31,060 26,409 25,639 Actual return on plan assets (38,049) (68,659) (5,193) Net amortization and deferral 7,711 44,606 (18,124) ----------- ----------- ----------- Pension expense $ 17,882 $ 17,016 $ 18,552 =========== =========== =========== The funded status of the defined benefit plan, based on a September 30 valuation date, is as follows: 1996 1995 ----------- ----------- (In thousands) Present value of vested benefits $ 326,185 $ 307,952 =========== =========== Present value of accumulated benefits $ 372,183 $ 333,846 =========== =========== Plan assets at fair value $ 405,000 $ 358,051 Present value of projected benefits 411,295 392,112 ----------- ----------- Funded status (6,295) (34,061) Unrecognized net loss 12,387 31,526 Unrecognized net asset (7,446) (11,824) Unrecognized prior service cost 18,208 23,195 ----------- ----------- Pension asset recorded in Other Assets $ 16,854 $ 8,836 =========== ===========
The projected benefit obligation was determined using an assumed discount rate of 8.0% in 1996, 7.8% in 1995 and 8.3% in 1994. The assumption for compensation increases was 4.5% in 1996 and 5.0% in 1995 and 1994, and the assumption for return on plan assets was 8.8% in each year. The Company sponsors an Employee Stock Ownership Plan (ESOP) as part of a 401(k) savings plan covering most domestic salaried employees. Contributions made by the Company to the 401(k) plan are based on a specified percentage of employee contributions. Cash contributions by the Company were $5.5 million in 1996, $5.8 million in 1995 and $5.6 million in 1994. Plan expense was $5.7 million in 1996, $6.2 million in 1995 and $6.4 million in 1994, after giving effect to tax-deductible dividends on the Series B Preferred Stock of $4.0 million in 1996, $4.1 million in 1995 and $4.2 million in 1994. The Company sponsors other savings and retirement plans for certain domestic and foreign employees. Expense for these plans totaled $9.6 million in 1996, $13.3 million in 1995 and $9.7 million in 1994. 11 NOTE J - CAPITAL Common shares outstanding are net of shares held in treasury of 2,399,323 in 1996, 1,376,976 in 1995 and 2,358,675 in 1994. During 1995, 2,700,000 treasury shares were retired. There are 25,000,000 authorized shares of Preferred Stock, $1 par value. As of January 4, 1997, 2,000,000 shares are designated as Series A Preferred Stock, of which none have been issued. In addition, 2,105,263 shares are designated as 6.75% Series B Preferred Stock, which were purchased by the ESOP. There were 1,881,515 shares of Series B Preferred Stock outstanding at January 4, 1997, 1,964,942 shares outstanding at December 30, 1995 and 2,014,427 shares outstanding at December 31, 1994, after share redemptions. Each outstanding share of Common Stock has one preferred stock purchase right attached. The rights become exercisable ten days after an outside party acquires, or makes an offer for, 20% or more of the Common Stock. Each right entitles its holder to buy 1/100 share of Series A Preferred Stock for $100. Once exercisable, if the Company is involved in a merger or other business combination or an outside party acquires 20% or more of the Common Stock, each right will be modified to entitle its holder (other than the acquiror) to purchase common stock of the acquiring company or, in certain circumstances, VF Common Stock having a market value of twice the exercise price of the right. In some circumstances, rights other than those held by an acquiror may be exchanged for one share of VF Common Stock or 1/100 share of Series A Preferred Stock. The rights, which expire on January 13, 1998, may be redeemed at $.01 per right prior to their becoming exercisable. NOTE K - REDEEMABLE PREFERRED STOCK Each share of Series B Preferred Stock has a redemption value of $30.88 plus cumulative accrued dividends, is convertible into 8/10 share of Common Stock and is entitled to one vote per share along with the Common Stock. The trustee for the ESOP may convert the preferred shares to Common Stock at any time or may cause the Company to redeem the preferred shares under certain circumstances. The Series B Preferred Stock also has preference in liquidation over all other stock issues. The ESOP's purchase of the preferred shares was funded by a loan of $65.0 million from the Company that bears interest at 9.80% and is payable in increasing installments through 2003. Interest related to this loan was $4.4 million in 1996, $4.9 million in 1995 and $5.3 million in 1994. Principal and interest obligations on the loan are satisfied as the Company makes contributions to the savings plan and dividends are paid on the Preferred Stock. As principal payments are made on the loan, shares of Preferred Stock are allocated to participating employees' accounts within the ESOP. NOTE L - STOCK OPTIONS The Company has granted nonqualified stock options to officers, directors and key employees under two stock option plans at prices not less than fair market value on the date of grant. Options become exercisable one year after the date of grant and expire ten years after the date of grant. 12 Activity in the stock option plans is summarized as follows:
SHARES WEIGHTED UNDER AVERAGE OPTIONS EXERCISE PRICE ---------- -------------- Balance January 1, 1994 4,168,291 $ 44.61 Options granted 1,015,475 47.90 Options exercised (265,408) 31.57 Options canceled (178,870) 53.96 ---------- --------- Balance December 31, 1994 4,739,488 45.69 Options granted 1,088,775 52.00 Options exercised (992,710) 36.42 Options canceled (73,504) 50.83 ---------- --------- Balance December 30, 1995 4,762,049 48.99 Options granted 361,105 68.94 Options exercised (1,491,288) 45.74 Options canceled (171,225) 49.72 ---------- --------- Balance January 4, 1997 3,460,641 $ 52.43 ==========
Stock options outstanding at January 4, 1997 are summarized as follows:
RANGE OF WEIGHTED AVERAGE WEIGHTED EXERCISE NUMBER REMAINING AVERAGE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE - -------- ----------- ---------------- -------------- $16-20 23,850 3.9 years $ 16.19 21-30 34,300 1.7 years 27.53 31-40 218,415 4.4 years 35.48 41-50 885,271 7.5 years 46.77 51-60 1,937,700 7.3 years 54.74 61-69 361,105 9.9 years 68.94 - ------ --------- --------- ------ $16-69 3,460,641 7.4 years $ 52.43 =========
All above options are exercisable except for those granted in 1996. There are 36,595 options available for future grants. In December 1996 the Board of Directors adopted the 1996 Stock Compensation Plan, subject to shareholder approval at the April 1997 Annual Meeting. Under the 1996 plan, there are an additional 621,595 options that have been granted at $69.00 per share, subject to shareholder approval of the new plan. The Company has not recognized compensation expense in connection with stock options grants under the plans. However, had compensation expense been determined based on the fair value of the options on the grant dates, the Company's pro forma net income and both primary and fully diluted earnings per 13 share for 1996 would have been reduced by $6.9 million or $.11 per share. Because options are granted late in the year, the pro forma expense for 1995 would not be meaningful and is therefore not presented. The fair value of options granted during 1996 was $15.95 per share and of options granted during 1995 was $10.98 per share. Fair value is estimated based on the Black-Scholes option-pricing model with the following assumptions for grants in 1996 and 1995: dividend yield of 2.5%; expected volatility of 20%; risk-free interest rates of 6.5% in 1996 and 5.4% in 1995; and expected lives of 5 years. The Company has granted to a key employee 5,253 shares of restricted stock that vest in the year 2005. The Company has 300,000 shares available for future grants under the 1995 Key Employee Restricted Stock Plan. NOTE M - SPECIAL CHARGES During the fourth quarter of 1995, the Company recorded special charges totaling $155.9 million ($1.61 per share) to address changes in consumer buying habits and the increasingly competitive retail environment that have occurred in the apparel industry. These charges were aimed at reducing the Company's overall cost structure, including both manufacturing and administrative costs, through the closure of higher cost manufacturing facilities and personnel reductions in administrative positions. In addition, included in the charges were provisions related to better align inventories to existing retailer and consumer requirements. These actions affected approximately 7,700 of the Company's employees in manufacturing and headquarters locations throughout North America and Europe. Charges related to personnel reductions, including severance and related benefits, totaled $46.9 million. Of this amount, $6.7 million was paid in 1995 and $33.3 million was paid in 1996 to approximately 6,200 employees who have been terminated. The remainder of the employees included in the cost reduction initiatives are located at manufacturing and other facilities that are still in the closure process. Remaining cash payments of $6.9 million will be made to those employees during 1997. The remaining $109.0 million of the 1995 special provisions included noncash charges of $59.9 million for asset write-offs for closed manufacturing facilities and business and inventory realignments and $49.1 million for expected cash charges for lease and other contract terminations. Cash payments totaled $23.0 million in 1995 and $16.8 million in 1996. Remaining cash payments totaling $9.3 million relate to asset disposition and contract and lease termination costs to be paid in 1997. The special charges were recorded in the 1995 consolidated statement of income as follows: Cost of Products Sold - $109.8 million; Marketing, Administrative and General Expenses - $41.7 million; Miscellaneous and Other Operating Expenses - - $4.4 million. NOTE N - INCOME TAXES 14 The provision for income taxes is computed based on the following amounts of income before income taxes:
1996 1995 1994 --------- --------- --------- (In thousands) Domestic $ 433,959 $ 261,437 $ 409,806 Foreign 74,449 22,698 45,855 --------- --------- --------- $ 508,408 $ 284,135 $ 455,661 ========= ========= =========
The provision for income taxes consists of:
1996 1995 1994 --------- --------- --------- (In thousands) Current: Federal $ 179,217 $ 136,863 $ 149,000 Foreign 43,493 32,535 24,649 State 15,894 11,299 12,978 --------- --------- --------- 238,604 180,697 186,627 Deferred, primarily federal (29,720) (53,853) (5,502) --------- --------- --------- $ 208,884 $ 126,844 $ 181,125 ========= ========= =========
The reasons for the difference between income taxes computed by applying the statutory federal income tax rate and income tax expense in the financial statements are as follows:
1996 1995 1994 --------- --------- --------- (In thousands) Tax at federal statutory rate $ 177,943 $ 99,448 $ 159,481 State income taxes, net of federal tax benefit 10,331 7,344 8,436 Amortization of intangible assets 7,091 7,319 7,126 Foreign operating losses with no current benefit 7,109 11,169 2,302 Other, net 6,410 1,564 3,780 --------- --------- --------- $ 208,884 $ 126,844 $ 181,125 ========= ========= =========
15 Deferred income tax assets and liabilities consist of the following:
1996 1995 --------- --------- (In thousands) Deferred income tax assets: Employee benefits $ 42,582 $ 39,567 Other accrued expenses 93,922 82,453 Inventories 21,934 19,603 Operating loss carryforwards 32,760 27,018 --------- --------- 191,198 168,641 Valuation allowance (29,296) (22,154) --------- --------- $ 161,902 $ 146,487 ========= ========= Deferred income tax liabilities: Depreciation $ 58,848 $ 62,473 Inventories 21,596 22,492 Foreign currency translation 3,461 11,030 Unremitted foreign earnings 6,735 11,373 Other 16,461 6,349 --------- --------- $ 107,101 $ 113,717 ========= =========
The Company has $77.4 million of foreign operating loss carryforwards expiring at various dates; a valuation allowance has been provided where it is more likely than not that the deferred tax assets relating to certain of those loss carryforwards will not be realized. Income taxes paid were $177.4 million in 1996, $172.0 million in 1995 and $177.0 million in 1994. NOTE O - OPERATIONS BY GEOGRAPHIC AREA
1996 1995 1994 ----------- ----------- ----------- (In thousands) Net sales: United States $ 4,203,675 $ 4,192,435 $ 4,209,090 Foreign 933,503 869,864 762,623 ----------- ----------- ----------- $ 5,137,178 $ 5,062,299 $ 4,971,713 =========== =========== =========== Operating income: United States $ 481,684 $ 328,878 $ 493,922 Foreign 111,064 59,173 75,253 ----------- ----------- ----------- 592,748 388,051 569,175 Corporate expenses (35,465) (40,661) (38,669) Interest, net (49,387) (66,217) (70,984) Miscellaneous, net 512 2,962 (3,861) ----------- ----------- ----------- Income before income taxes $ 508,408 $ 284,135 $ 455,661 =========== =========== ===========
16
1996 1995 1994 ---------- ---------- ---------- (In thousands) Identifiable assets: United States $2,546,162 $2,672,864 $2,632,079 Foreign 646,410 684,426 610,543 Corporate 256,963 89,781 92,986 ---------- ---------- ---------- $3,449,535 $3,447,071 $3,335,608 ========== ========== ==========
Foreign operations are conducted primarily in Europe. Foreign operations located elsewhere are not significant. Corporate assets consist primarily of cash and cash equivalents. The 1995 special charges (Note M) were incurred as follows: United States - $127.1 million; Foreign - $22.9 million; Corporate - $2.9 million; Miscellaneous - $3.0 million. NOTE P - LEASES The Company leases certain facilities and equipment under noncancelable operating leases. Rental expense was $67.0 million in 1996, $70.4 million in 1995 and $55.5 million in 1994. Future minimum lease payments are $45.6 million, $35.5 million, $26.3 million, $22.5 million and $19.4 million for the years 1997 through 2001 and $57.2 million thereafter. NOTE Q - CONTINGENCIES The Company has certain contingent liabilities resulting from legal proceedings and claims arising in the ordinary course of business. Management believes that the probable resolution of such contingencies will not have a material adverse effect on the financial position of the Company. NOTE R - FINANCIAL INSTRUMENTS The following represents the carrying amount and fair value of financial instruments included in the balance sheets:
1996 1995 ------------------- ------------------ CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- ----- -------- ----- (In thousands) Financial liabilities: Short-term borrowings $ 17,528 $ 17,528 $229,945 $229,945 Long-term debt 519,058 537,698 614,217 668,108 Series B Preferred Stock 58,092 101,602 60,667 82,921
The fair value of the Company's short-term and long-term debt is estimated based on quoted market prices or values of comparable borrowings. The fair value of the Series B Preferred Stock is based on a valuation by an independent financial consulting firm. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION ANALYSIS OF OPERATIONS The Company's earnings in 1996 reflect the benefits from actions taken in late 1995 (refer to Note M to the consolidated financial statements) to (1) close a number of higher cost domestic manufacturing facilities and move a greater percentage of our manufacturing to lower cost offshore locations, (2) effect reductions in selling and administrative expenses and (3) reinvest a significant portion of the savings from these actions in increased advertising and other actions to support and build our brands. These initiatives, along with substantially improved inventory positions, contributed substantially to the Company's achievement of record levels of earnings and cash generation in 1996. Net sales in 1996 increased by 1% over 1995. Unit sales declined by 2%, but average prices increased, primarily due to changes in product mix. Net sales in 1995 increased by 2% over 1994 on flat unit sales. The sales dollar increase resulted from modest price increases and the impact of a weaker U.S. dollar in translating foreign currencies. Gross margins were 32.7% of sales in 1996, compared with 29.3% in 1995 and 31.9% in 1994. Gross margins in 1995 included $109.8 million of special charges; excluding these charges, 1995 gross margins were 31.5%. The margin improvement in 1996 over the prior two years, after excluding the special charges in 1995, resulted from lower manufacturing costs attributable to the cost reduction initiatives of late 1995 and, particularly in relation to 1995, lower provisions for inventory write-downs and manufacturing plant downtime. Marketing, administrative and general expenses were 21.8% of sales in 1996, compared with 22.3% and 21.0% in 1995 and 1994, respectively. Excluding special charges of $41.7 million in 1995, expenses were 21.5% of sales. During 1996, administrative expenses declined as 18 a result of the cost reduction initiatives undertaken in late 1995, but marketing and promotional expenses increased as a result of the Company's decision to invest more heavily in brand support. The increase in 1995 over 1994, after excluding the special charges, was due to increased advertising and other marketing expenses on lower than expected sales. Other operating income and expense includes goodwill amortization expense, offset by net royalty income. Royalty income increased over the three year period, while amortization of goodwill declined in 1996 from expiring amortization periods. Net interest expense declined significantly in 1996 as the high level of cash generated from operations was used to reduce borrowings. Net interest expense declined slightly in 1995 from 1994 due to a lower borrowing level. The effective income tax rate was 41.1% in 1996, 44.6% in 1995 and 39.7% in 1994. The increase in rate over 1994 is primarily due to a higher level of foreign operating losses with no current tax benefit. The rate in 1995 was unusually high due to the amounts of nondeductible foreign operating losses and goodwill expense in relation to the low level of income before income taxes. - -OPERATING RESULTS BY BUSINESS GROUP- The Jeanswear business group includes the Lee, Wrangler, Rustler and Riders brands in the United States and the Lee, Wrangler and Maverick brands in international markets, primarily in Europe. International sales have been growing at a higher rate than in the United States. Jeanswear operating income in 1995 includes $54.8 million of special charges related to both domestic and international operations. The operating income improvement in 1996 over the prior two years, after excluding special charges in 1995, resulted from lower manufacturing and other product costs, both domestically and abroad. 19 The Decorated Knitwear business group consists of the Lee Sport and Nutmeg sports apparel brands, JanSport imprinted apparel, and private label and printwear fleece and T-shirt operations. Sales increased in 1996 due to higher private label fleece and T-shirt volume. Operating income increased substantially in 1996 over the two prior years, even after excluding $28.7 million of special charges in 1995. In addition to higher sales volume, this increase resulted from improved operating margins within the sports apparel businesses. The Intimate Apparel business group includes the Vanity Fair and Vassarette brands as well as a private label business in the United States, along with a number of brands in Europe, primarily in France and Spain. Sales declined in 1996 in both the United States and Europe. The operating loss in 1995 includes $45.4 million in special charges. Otherwise, the declines in operating income have been primarily volume related. The Playwear business group consists of the Healthtex brand, the preschool sizes of Lee and Wrangler, Nike licensed products and playwear and sleepwear products imprinted with characters licensed from The Walt Disney Company and others. Operating income in the business group in 1995 was impacted by $12.7 million in special charges. The overall decline in this category from 1994 resulted from manufacturing and operating difficulties along with continued pricing pressures at retail. The Specialty Apparel business group includes Red Kap occupational apparel, Jantzen swim and casual apparel and JanSport brand daypacks and equipment. Sales grew in each brand in 1996. Sales in the business group declined in 1995 as a result of the discontinuation of the Jantzen men's sportswear and sweater businesses. Operating income increased in each brand in 1996, even after excluding $6.9 million of special charges in 1995. ANALYSIS OF FINANCIAL CONDITION In managing its capital structure, VF balances financial leverage with equity to reduce its overall cost of capital, while providing the flexibility to pursue investment opportunities that may become 20 available. It is management's goal to maintain a debt to capital ratio of less than 40%. Our debt to capital ratio was within these guidelines: 21.4% at the end of 1996 and 32.3% at the end of 1995. Despite our stated goal, we will exceed this level if warranted by appropriate investment opportunities. - -BALANCE SHEETS- Accounts receivable was lower at the end of 1996 than 1995, despite higher fourth quarter sales. The timing of our fiscal year-end in 1996 provided for an additional week of cash collections in January. Inventories are lower at the end of 1996, reflecting improvements in inventory management and controls. Total inventories are at their lowest level since 1991. All domestic short-term borrowings were repaid during 1996 from the strong cash flow from operations. The remaining balance in short-term borrowings represents amounts due to international lenders only. In addition, during 1996, the Company called for redemption $100 million of its long-term debt originally due in 1999. No further debt reductions were made in 1996, despite cash availability, as there are no long-term debt maturities until the year 2001. Over 18% of our 1996 sales and operating income were derived from international locations. VF's financial position and operating results can be influenced by economic conditions in countries where VF conducts business and by changing foreign currency exchange rates. VF does not hedge the translation of foreign currencies into the U.S. dollar, but we do enter into foreign currency forward contracts to minimize the effect of fluctuating foreign currencies on cash flows from foreign operations. These contracts are not material. 21 - -LIQUIDITY AND CASH FLOW- Working capital increased in 1996, and the current ratio increased to 2.2 to 1 from 1.9 to 1 in 1995 due to the high cash and low short-term debt levels at the end of 1996. Cash provided by operations was a record $711 million for 1996, resulting from higher net income, reduced accounts receivable and inventory levels and an increase in current liabilities. The 1995 amount was lower than 1994 because of lower net income and an increase in working capital requirements. Capital expenditures were $139 million in 1996, compared with $155 million and $133 million in 1995 and 1994, respectively. Capital expenditures in 1997 should be somewhat higher than the level of the past three years and are expected to be funded by cash flows from operations. Beginning in late 1994 and continuing through 1996, the Company purchased 3.3 million shares of its Common Stock in open market transactions for a total of $175 million. Of these totals, one million shares were purchased for $61 million during 1996. Under the most recent authorization of the Board of Directors for share repurchase, the Company can purchase up to an additional 4.7 million shares. Cash dividends totaled $1.46 per common share in 1996, compared with $1.38 in 1995 and $1.30 in 1994. The dividend payout rate was 31% in 1996, compared with 57% in 1995 due to lower earnings and 31% in 1994. The indicated annual dividend rate for 1997 is $1.52 per share. VF has paid dividends on its Common Stock annually since 1941 and intends to maintain a long-term payout rate of 30%. The Company's strong financial position, including existing cash, unused credit lines and a low debt ratio, provides substantial capacity to meet investment opportunities that may arise. 22 - -OTHER MATTERS- The Company is a defendant in an action initiated in 1990 alleging infringement of a patent allegedly relating to a process, commonly called "acid wash," used in the production of certain denim garments. Similar actions have been brought against other denim apparel manufacturers. The Company is vigorously contesting the action and believes that it has numerous substantive defenses. No trial date has been ordered. Based on currently available information and the advice of counsel, management is not in a position to determine the likelihood of the outcome of the action with certainty. Notwithstanding, management believes at this time that the outcome will not have a material impact on the financial position of the Company. 23 QUARTERLY RESULTS OF OPERATIONS In thousands, except per share amounts
EARNINGS PER COMMON SHARE DIVIDENDS PER NET SALES GROSS PROFIT NET INCOME PRIMARY FULLY DILUTED COMMON SHARE ---------- ------------ ---------- ------- ------------- ------------- 1996 FIRST QUARTER $1,158,123 $ 380,517 $ 55,930 $ .86 $ .85 $ .36 SECOND QUARTER 1,220,997 396,319 69,892 1.08 1.06 .36 THIRD QUARTER 1,380,919 446,358 91,048 1.42 1.39 .36 FOURTH QUARTER 1,377,139 455,818 82,654 1.28 1.25 .38 ---------- ---------- -------- ----- ----- ----- $5,137,178 $1,679,012 $299,524 $4.64 $4.54 $1.46 ========== ========== ======== ===== ===== ===== 1995 First quarter $1,187,587 $ 388,439 $ 57,953 $ .89 $ .87 $ .34 Second quarter 1,271,936 400,924 65,237 1.01 .99 .34 Third quarter 1,332,102 412,552 69,718 1.08 1.05 .34 Fourth quarter 1,270,674 282,829 (35,617)* (0.57)* (0.57)* .36 ---------- ---------- -------- ----- ----- ----- $5,062,299 $1,484,744 $157,291 $2.41 $2.37 $1.38 ========== ========== ======== ===== ===== ===== 1994 First quarter $1,123,035 $ 362,612 $ 52,898 $ .81 $ .79 $ .32 Second quarter 1,186,324 380,175 58,916 .90 .88 .32 Third quarter 1,373,037 442,077 87,804 1.34 1.31 .32 Fourth quarter 1,289,317 399,554 74,918 1.15 1.12 .34 ---------- ---------- -------- ----- ----- ----- $4,971,713 $1,584,418 $274,536 $4.20 $4.10 $1.30 ========== ========== ======== ===== ===== =====
* Special charges of $155.9 million reduced net income by $102.5 million ($1.61 per share). See Note M to Consolidated Financial Statements. 24 SALES AND OPERATING INCOME BY BUSINESS GROUP (Unaudited)
In thousands Fiscal year ended JANUARY 4, 1997 December 30, 1995 December 31, 1994 - -------------------------------------------------------------------------------------------------- NET SALES Jeanswear $ 2,754,039 $ 2,664,930 $ 2,547,131 Decorated Knitwear 637,982 619,932 623,272 Intimate Apparel 650,197 729,149 724,462 Playwear 382,382 371,717 367,508 Specialty Apparel 712,578 676,571 709,340 - -------------------------------------------------------------------------------------------------- $ 5,137,178 $ 5,062,299 $ 4,971,713 - -------------------------------------------------------------------------------------------------- OPERATING INCOME Jeanswear $ 395,591 $ 311,688 $ 372,392 Decorated Knitwear 52,362 8,039 32,423 Intimate Apparel 39,947 (778) 60,349 Playwear 12,342 2,745 36,457 Specialty Apparel 92,160 72,421 75,851 - -------------------------------------------------------------------------------------------------- 592,402 394,115 577,472 OTHER OPERATING (EXPENSE) INCOME 347 (6,064) (8,297) CORPORATE EXPENSES (35,466) (40,661) (38,669) - -------------------------------------------------------------------------------------------------- $ 557,283 $ 347,390 $ 530,506 ==================================================================================================
25 QUARTERLY COMMON STOCK PRICE INFORMATION
1996 1995 1994 ----------------- ----------------- ----------------- High Low High Low High Low ----------------- ----------------- ----------------- First quarter $56 3/4 $47 5/8 $53 1/8 $47 1/8 $51 7/8 $44 1/2 Second quarter 63 3/8 53 3/4 53 3/4 50 1/2 53 3/4 46 Third quarter 62 3/8 52 1/2 57 1/8 48 52 7/8 46 1/2 Fourth quarter 69 7/8 59 53 5/8 46 3/4 51 5/8 44 1/4
26 VF CORPORATION 1996 FINANCIAL SUMMARY
In thousands, except per share amounts 1996 1995 1994 ------------ ------------ ------------ SUMMARY OF OPERATIONS Net sales $ 5,137,178 $ 5,062,299 $ 4,971,713 Cost of products sold 3,458,166 3,577,555 3,387,295 ------------ ------------ ------------ Gross profit 1,679,012 1,484,744 1,584,418 Marketing, administrative and other 1,121,729 1,137,354 1,053,912 ------------ ------------ ------------ Operating income 557,283 347,390 530,506 Interest, net (49,387) (66,217) (70,984) Miscellaneous, net 512 2,962 (3,861) ------------ ------------ ------------ Income before income taxes 508,408 284,135 455,661 Income taxes 208,884 126,844 181,125 ------------ ------------ ------------ Net income $ 299,524 $ 157,291 $ 274,536 ------------ ------------ ------------ Per share of Common Stock (1) Earnings - primary $ 4.64 $ 2.41 $ 4.20 Dividends 1.46 1.38 1.30 Average number of common shares outstanding 63,646 63,743 64,620 Net income as % of average common shareholders' equity 16.2% 8.8% 16.8% Net income as % of average total assets 8.6% 4.4% 7.9% ------------ ------------ ------------ FINANCIAL POSITION Accounts receivable, net $ 592,942 $ 629,506 $ 613,337 Inventories 730,823 841,907 801,338 Total current assets 1,706,326 1,667,637 1,551,166 Property, plant and equipment, net 721,524 749,880 767,011 Total assets 3,449,535 3,447,071 3,335,608 Total current liabilities 766,267 868,320 912,332 Long-term debt 519,058 614,217 516,700 Common shareholders' equity 1,973,739 1,771,506 1,734,009 ------------ ------------ ------------ OTHER STATISTICS Working capital $ 940,059 $ 799,317 $ 638,834 Current ratio 2.2 1.9 1.7 Debt to total capital ratio (2) 21.4% 32.3% 32.7% Dividends $ 97,036 $ 92,038 $ 88,223 Purchase of Common Stock 61,483 86,251 27,878 Cash provided by operations 711,454 323,656 479,401 Capital expenditures (excluding acquisitions) 138,747 155,206 132,908 Depreciation and amortization 160,578 167,721 158,511 ------------ ------------ ------------ MARKET DATA Market price range (1) $69 7/8 - 47 5/8 $57 1/8 - 46 3/4 $53 3/4 - 44 1/4 Book value per common share (1) 30.88 27.92 27.02 Price earnings ratio -- high-low 15.1 - 10.3 23.7 - 19.4 12.8 - 10.5 Rate of payout (3) 31.5% 57.3% 31.0%
In thousands, except per share amounts 1993 1992 ------------ ------------ SUMMARY OF OPERATIONS Net sales $ 4,320,404 $ 3,824,449 Cost of products sold 2,974,861 2,603,726 ------------ ------------ Gross profit 1,345,543 1,220,723 Marketing, administrative and other 911,063 788,216 ------------ ------------ Operating income 434,480 432,507 Interest, net (37,387) (53,615) Miscellaneous, net 2,894 (3,119) ------------ ------------ Income before income taxes 399,987 375,773 Income taxes 153,572 138,742 ------------ ------------ Net income $ 246,415 $ 237,031 ============ ============ Per share of Common Stock (1) Earnings - primary $ 3.80 $ 3.97 Dividends 1.22 1.11 Average number of common shares outstanding 64,011 58,608 Net income as % of average common shareholders' equity 16.9% 23.0% Net income as % of average total assets 8.5% 9.7% ------------ ------------ FINANCIAL POSITION Accounts receivable, net $ 511,887 $ 493,030 Inventories 778,767 742,474 Total current assets 1,500,180 1,365,573 Property, plant and equipment, net 712,759 711,087 Total assets 2,877,348 2,712,380 Total current liabilities 659,848 684,002 Long-term debt 527,573 767,641 Common shareholders' equity 1,547,400 1,153,971 ------------ ------------ OTHER STATISTICS Working capital $ 840,332 $ 681,571 Current ratio 2.3 2.0 Debt to total capital ratio (2) 30.3% 44.8% Dividends $ 82,831 $ 69,552 Purchase of Common Stock - - Cash provided by operations 293,751 123,060 Capital expenditures (excluding acquisitions) 209,494 207,202 Depreciation and amortization 125,765 108,281 ------------ ------------ MARKET DATA Market price range (1) $56 1/2 - 39 1/2 $57 1/2 - 38 1/2 Book value per common share (1) 23.99 19.39 Price earnings ratio -- high-low 14.9 - 10.4 14.5 - 9.7 Rate of payout (3) 32.1% 28.0%
(1) Per share computations and market price ranges have been adjusted to reflect two-for-one stock split in April 1986. (2) Capital is defined as common shareholders' equity plus short-term and long-term debt. (3) Dividends per share divided by earnings per share. 27 VF BRANDS
CHANNEL OF JEANSWEAR INTIMATE DECORATED PLAYWEAR SPECIALTY DISTRIBUTION APPAREL KNITWEAR APPAREL - ------------------------------------------------------------------------------------------------------------------------------------ DEPARTMENT Lee Vanity Fair Lee Sport Healthtex JanSport STORES Marithe & Nutmeg Lee Jantzen Francois Nike* Nike* Girbaud* Joe Boxer* - ------------------------------------------------------------------------------------------------------------------------------------ DISCOUNT Wrangler Vassarette Cutler Cutler Wolf Creek STORES Riders Sports Wrangler Big Ben Rustler Timber Creek - ------------------------------------------------------------------------------------------------------------------------------------ SPECIALTY Wrangler Nutmeg JanSport STORES Western JanSport Nike* Rugged Wear Red Kap - ------------------------------------------------------------------------------------------------------------------------------------ INTERNATIONAL Lee Lou Nutmeg Wrangler Bolero Maverick Carina Variance Siltex Belcor Intima Cherry Gemma - ------------------------------------------------------------------------------------------------------------------------------------
*licensed EX-21 6 SUBSIDIARIES OF THE CORPORTION 1 Exhibit 21 VF CORPORATION SUBSIDIARIES OF THE CORPORATION FOLLOWING IS A LISTING OF THE SIGNIFICANT SUBSIDIARIES OF THE CORPORATION, ALL OF WHICH ARE WHOLLY OWNED:
Name Jurisdiction of Organization ====================================== =========================================== Bassett-Walker Apparel Corp. Delaware Bassett-Walker, Inc. Virginia H.H. Cutler Company Michigan D. J. Industries, Inc. Delaware Healthtex, Inc. Delaware Healthtex Apparel Corp. Delaware JanSport, Inc. Delaware JanSport Apparel Corp. Delaware Jantzen Inc. Nevada Jantzen Apparel Corp. Delaware Lee Apparel Company, Inc. Pennsylvania Lee Apparel (UK) Ltd. N. Ireland The H. D. Lee GmbH Germany The H. D. Lee Company, Inc. Delaware Lee Europe N.V. Belgium Lee Italia Srl Italy Les Dessous Boutique Diffusion S.A. France Nutmeg Industries, Inc. Florida Red Kap Industries, Inc. Delaware Red Kap Apparel Corp. Delaware VF Factory Outlet, Inc. Delaware VF Diffusion, SNC France Vanity Fair, Inc. Delaware Vanity Fair Intimates, Inc. Alabama Vives Vidal, Vivesa, S.A. Spain Wrangler Limited United Kingdom Wrangler Germany GmbH Germany Wrangler Apparel Corp. Delaware Wrangler, Inc. Alabama Wrangler Clothing Corp. Delaware
Excludes subsidiaries which, if considered as a single subsidiary or after taking into account the elimination of intercompany accounts, would not constitute a significant subsidiary at January 4, 1997. EX-23.1 7 CONSENT OF COOPERS & LYBRAND L.L.P. 1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS FOR FORM 10-K We hereby consent to the incorporation by reference in (1) Registration Statement No. 33-55014, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 33-26566 on Form S-8/S-3, and Post-Effective Amendment No. 6 to Registration Statement No. 2-85579 on Form S-8/S-3; (2) Registration Statement No. 33-33621 on Form S-8, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 2-99945 on Form S-8; (3) Registration Statement No. 33-10491 on Form S-3; (4) Registration Statement No. 33-41241 on Form S-8; and (5) Registration Statement No. 33-53231 on Form S-3 of our report dated February 6, 1997 on our audits of the consolidated financial statements of VF Corporation as of January 4, 1997 and December 30, 1995, and for the years then ended, appearing on page 21 of the 1996 Annual Report of Shareholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the consolidated financial statement schedule, which appears on page 19 of this Form 10-K. /s/ Coopers & Lybrand L.L.P. Philadelphia, Pennsylvania March 24, 1997 CONSENT OF INDEPENDENT ACCOUNTANTS FOR FORM 11-K We hereby consent to the incorporation by reference in (1) Registration Statement No. 33-55014, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 33-26566 on Form S-8/S-3, and Post-Effective Amendment No. 6 to Registration Statement No. 2-85579 on Form S-8/S-3; (2) Registration Statement No. 33-33621 on Form S-8, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 2-99945 on Form S-8, of our report dated March 10, 1997 on our audits of the financial statements of the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees as of December 31, 1996 and December 31, 1995 and for the years then ended included in the Form 11-K, which is filed as Exhibit 99(A) to this Form 10-K. /s/ Coopers & Lybrand L.L.P. Philadelphia, Pennsylvania March 24, 1997 EX-23.2 8 CONSENT OF ERNST & YOUNG LLP 1 Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS ON FORM 10-K We consent to the incorporation by reference in (1) Registration Statement No. 33-55014, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 33-26566 on Form S-8/S-3, and Post-Effective Amendment No. 6 to Registration Statement No. 2-85579 on Form S-8/S-3; (2) Registration Statement No. 33-33621 on Form S-8, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 2-99945 on Form S-8; (3) Registration Statement No. 33-10491 on Form S-3; (4) Registration Statement No. 33-41241 on Form S-8; and (5) Registration Statement No. 33-53231 on Form S-3 of our report dated February 8, 1995, with respect to the consolidated statements of income, cash flows, and common shareholders' equity and the financial statement schedule (as it pertains to 1994) of VF Corporation for the fiscal year ended December 31, 1994 incorporated by reference in this Annual Report on Form 10-K for the year ended January 4, 1997. /s/ Ernst & Young LLP Reading, Pennsylvania March 24, 1997 CONSENT OF INDEPENDENT AUDITORS ON FORM 11-K We consent to the incorporation by reference in (1) Registration Statement No. 33-55014, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 33-26566 on Form S-8/S-3 and Post-Effective Amendment No. 6 to Registration Statement No. 2-85579 on Form S-8/S-3 (2) Registration Statement No. 33-33621 on Form S-8, which acts as Post-Effective Amendment No. 2 to Registration Statement No. 2-99945 on Form S-8, of our report dated March 10, 1995, with respect to the statement of changes in net assets available for benefits of the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees for the year ended December 31, 1994 included in the Annual Report on Form 11-K for the year ended December 31, 1994. /s/ Ernst & Young LLP Reading, Pennsylvania March 24, 1997 EX-23.3 9 REPORT OF ERNST & YOUNG LLP 1 Exhibit 23.3 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders VF Corporation We have audited the accompanying consolidated statements of income, cash flows, and common shareholders' equity for the fiscal year ended December 31, 1994. Our audit also included the financial statement schedule (as it pertains to 1994) as listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of VF Corporation for the fiscal year ended December 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic 1994 financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Reading, Pennsylvania February 8, 1995 EX-23.4 10 REPORT OF COOPERS & LYBRAND L.L.P. 1 Exhibit 23.4 REPORT OF INDEPENDENT ACCOUNTANTS ON 1995 AND 1996 FINANCIAL STATEMENT SCHEDULE Board of Directors and Shareholders VF Corporation Our report on the 1995 and 1996 consolidated financial statements of VF Corporation has been incorporated by reference in this Form 10-K from page 21 of the 1996 Annual Report to Shareholders of VF Corporation. In connection with our audits of such consolidated financial statements, we have also audited the related consolidated financial statement schedule listed in Item 14(a)2 on page 13 of this Form 10-K. In our opinion, the consolidated financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ Coopers & Lybrand L.L.P. Philadelphia, Pennsylvania February 6, 1997 EX-23.5 11 REPROT OF ERNST & YOUNG LLP 1 Exhibit 23.5 REPORT OF INDEPENDENT AUDITORS VF Corporation Pension Plan Committee VF Corporation Tax-Advantaged Plan for Salaried Employees We have audited the accompanying statement of changes in net assets available for benefits of the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees for the year ended December 31, 1994. This financial statement is the responsibility of the Plan's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the changes in net assets available for benefits of the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees for the year ended December 31, 1994, in conformity with generally accepted accounting principles. Our audit was performed for the purpose of forming an opinion on the financial statement taken as a whole. The Fund Information in the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the changes in net assets available for benefits of each fund. The Fund Information has been subjected to the auditing procedures applied in our audit of the financial statement and, in our opinion, is fairly stated in all material respects in relation to the financial statement taken as a whole. /s/ Ernst & Young LLP Reading, Pennsylvania March 10, 1995 EX-24 12 POWER OF ATTORNEY 1 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that V.F. Corporation and the undersigned directors and officers of V.F. Corporation do hereby constitute and appoint G. G. Johnson, L. M. Tarnoski and R. K. Shearer, and each of them, true and lawful attorneys-in-fact of the undersigned to execute on their behalf the Annual Report of V.F. Corporation on Form 10-K (including any amendments thereof) of the Securities and Exchange Commission for the fiscal year of V.F. Corporation ended January 7, 1997. IN WITNESS WHEREOF, each of the undersigned has duly executed this Power of Attorney this 11th day of February, 1997. ATTEST: V.F. CORPORATION /s/ L. M. Tarnoski By: /s/ Mackey J. McDonald - ------------------------------------------- --------------------------------------------- L. M. Tarnoski Mackey J. McDonald, President and Chief Secretary Executive Officer Principal Executive Officer: Principal Financial Officer: /s/ Mackey J. McDonald /s/ G. G. Johnson - ------------------------------------------- --------------------------------------------- Mackey J. McDonald, President, G. G. Johnson, Vice President-Finance Chief Executive Officer and Director and Chief Financial Officer Principal Accounting Officer: /s/ R. K. Shearer - ------------------------------------------- R. K. Shearer, Vice President - Controller /s/ Robert D. Buzzell /s/ Edward E. Crutchfield - ------------------------------------------- --------------------------------------------- Robert D. Buzzell, Director Edward E. Crutchfield, Director /s/ Ursula F. Fairbairn /s/ Barbara S. Feigin - ------------------------------------------- --------------------------------------------- Ursula F. Fairbairn, Director Barbara S. Feigin, Director /s/ Roger S. Hillas /s/ Leon C. Holt, Jr. - ------------------------------------------- --------------------------------------------- Roger S. Hillas, Director Leon C. Holt, Jr., Director /s/ Robert J. Hurst /s/ L. R. Pugh - ------------------------------------------- --------------------------------------------- Robert J. Hurst, Director L. R. Pugh, Director /s/ William E. Pike /s/ L. Dudley Walker - ------------------------------------------- --------------------------------------------- William E. Pike, Director L. Dudley Walker, Director /s /M. Rust Sharp - ------------------------------------------- M. Rust Sharp, Director
EX-99 13 FORM 11-K VF CORP. TAX-ADVANTAGED SAVINGS PLAN 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K ANNUAL REPORT ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1996 Commission file number: 1-5256 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES (Full title of plan) 1047 NORTH PARK ROAD WYOMISSING, PA 19610 (Address of principal executive offices) (610) 378-1151 (Registrant's telephone number, including area code) 1 2 Item 1. Changes in the Plan There were no changes in the Plan. Item 2. Changes in Investment Policy There were no changes in investment policy. Item 3. Contributions Under the Plan Contributions made by VF Corporation (the Corporation) are measured by reference to the employees' contributions and are not discretionary. Item 4. Participating Employees There were approximately 7,210 enrolled participants in the Plan as of December 31, 1996, out of approximately 7,782 eligible employees. Item 5. Administration of the Plan (a) The Plan provides that a Committee of three persons be appointed to administer the Plan. The Committee, the VF Corporation Pension Plan Committee, is comprised of the following officers of the Corporation: Lori M. Tarnoski, Vice President - Secretary; Frank C. Pickard III, Vice President - Treasurer; and Louis J. Fecile, Vice President - Employee Benefits. All committee persons are located at the Corporation's headquarters: 1047 North Park Road, Wyomissing, PA 19610. Each of these individuals is an employee of the Corporation. The Committee has the power to adopt rules and regulations for carrying out and administering the Plan and has the full authority and power to construe, interpret and administer the Plan. Committee members receive no compensation from the Plan. (b) All expenses of administration of the Plan, including Trustee fees, are paid by the Corporation. Item 6. Custodian of Investments (a) The Corporation has entered into a Trust Agreement under which UMB Bank, n.a., 10th and Grand, P.O. Box 419692, Kansas City, MO 64141-6692, has been appointed as Trustee under the Plan. Under the terms of the Trustee Agreement, UMB Bank, n.a., holds and invests all assets of the Plan, subject to the direction of each of the participants of the Plan regarding the investment fund or funds to receive contributions. (b) The custodian's compensation is paid by the Corporation. (c) No bond was furnished or is required to be furnished by the Trustee. Item 7. Reports to Participating Employees Each participant receives a quarterly statement showing the amounts contributed by him/her to each of the funds during the calendar quarter and the market values of investments as of the end of each quarter. The statement also shows the Corporation's matching contributions allocated to the participant through the Employees Stock Ownership Plan, which are invested in VF Corporation Series B Preferred Stock (ESOP Preferred Stock), and the fair values based on the preferred stock's stated redemption price of $30.875 per share or 80% of the market value of the Corporation's Common Stock, whichever is greater. 2 3 Item 8. Investment of Funds Each participant by calling the VF Savings Line directs the Plan Administrator to notify the Trustee to invest his/her own contributions in one or more of the following funds: - Money Market Fund - Fixed Income Fund - Balanced Fund - Equity Growth & Income Fund - Equity Growth Fund - Foreign Fund - VF Corporation Common Stock Fund (investing in common stock of the Corporation) Brokerage commissions of $3,878, $8,909, and $6,859 for the years ended December 31, 1996, 1995 and 1994 were paid by the Trustee to acquire the Corporation's common stock for the Plan. The Corporation's matching contributions go solely to the ESOP. These contributions are allocated to participants who receive full value in the form of ESOP Preferred Stock and are used by the ESOP to pay principal and debt service on a loan from the Corporation. Item 9. Financial Statements and Exhibits (a) Financial Statements Page No. Report of Independent Accountants 5 Statements of Net Assets Available for Benefits - December 31, 1996 and 1995 - Combined Plan 6 - Money Market Fund and Fixed Income Fund 7 - Balanced Fund and Equity Growth & Income Fund 8 - Equity Growth Fund and Foreign Fund 9 - VF Corporation Common Stock Fund and 10 Employee Stock Ownership Plan - Loan Fund 11 Statements of Changes in Net Assets Available for Benefits - For the Years Ended December 31, 1996, 1995 and 1994 - Combined Plan 12 - Money Market Fund 13 - Fixed Income Fund 14 - Balanced Fund 15 - Equity Growth & Income Fund 16 - Equity Growth Fund 17 - Foreign Fund 18 - VF Corporation Common Stock Fund 19 - Employee Stock Ownership Plan 20 - Loan Fund 21 Notes to Financial Statements 22
Schedules: Schedules I, II and III have been omitted because the required information is included in the financial statements and the related notes. (b) Exhibits - none 3 4 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the VF Corporation Pension Plan Committee has duly caused this annual report to be signed by the undersigned thereunto duly authorized. VF Corporation Tax-Advantaged Savings Plan for Salaried Employees ------------------------------------------- By: /s/ Louis J. Fecile ---------------------------------------- Louis J. Fecile Vice President - Employee Benefits Date: March 21, 1997 4 5 Report of Independent Accountants VF Corporation Pension Plan Committee VF Corporation Tax-Advantaged Savings Plan for Salaried Employees We have audited the accompanying statements of net assets available for benefits of the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees as of December 31, 1996 and December 31, 1995, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees for the year ended December 31, 1994 were audited by other auditors whose report dated March 10, 1995 expressed an unqualified opinion on these statements. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees at December 31, 1996 and December 31, 1995, and the changes in its net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The fund information in the statements of net assets available for benefits and in the statements of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The fund information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Coopers & Lybrand L.L.P. Philadelphia, Pennsylvania March 10, 1997 5 6 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS COMBINED PLAN
December 31 ----------------------------------- ASSETS 1996 1995 ----- ---- Investments, at fair value VF Corporation Common Stock - 326,618 shares in 1996 340,506 shares in 1995 $ 22,046,715 $ 17,961,692 VF Corporation ESOP Preferred Stock - 1,881,515 shares in 1996 1,964,942 shares in 1995 101,601,810 82,920,550 United States government obligations 16,991,039 17,329,048 Other securities 90,076,616 73,881,463 ------------ ------------ Total investments 230,716,180 192,092,753 Dividends and interest receivable 312,017 338,457 Loans receivable from participants 9,374,718 8,705,631 ------------ ------------ TOTAL ASSETS 240,402,915 201,136,841 ------------ ------------ LIABILITIES Employee Stock Ownership Plan obligation - payable to VF Corporation 41,563,481 46,650,286 ------------ ------------ TOTAL LIABILITIES 41,563,481 46,650,286 ------------ ------------ Net assets available for benefits $198,839,434 $154,486,555 ============ ============
See notes to financial statements. 6 7 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) MONEY MARKET FUND AND FIXED INCOME FUND
Money Market Fund Fixed Income Fund December 31 December 31 -------------------------------- ------------------------------ 1996 1995 1996 1995 ---- ---- ---- ---- ASSETS Investments, at fair value United States government obligations $ 0 $ 0 $16,991,039 $17,329,048 Other securities 6,629,950 6,187,337 2,250,229 1,175,779 ---------- ---------- ----------- ----------- Total investments 6,629,950 6,187,337 19,241,268 18,504,827 Dividends and interest receivable 180 31,938 307,497 302,060 Loans receivable from participants 0 1,423,668 0 1,630,963 ---------- ---------- ----------- ----------- Net assets available for benefits $6,630,130 $7,642,943 $19,548,765 $20,437,850 ========== ========== =========== ===========
See notes to financial statements. 7 8 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) BALANCED FUND AND EQUITY GROWTH & INCOME FUND
Balanced Fund Equity Growth & Income Fund December 31 December 31 --------------------------------- ---------------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- ASSETS - ------ Investments, at fair value Other securities $7,045,986 $3,932,420 $44,337,501 $34,980,125 ---------- ---------- ----------- ----------- Total investments 7,045,986 3,932,420 44,337,501 34,980,125 Dividends and interest receivable 181 30 378 223 Loans receivable from participants 0 53,297 0 2,457,411 ---------- ---------- ----------- ----------- Net assets available for benefits $7,046,167 $3,985,747 $44,337,879 $37,437,759 ========== ========== =========== ===========
See notes to financial statements. 8 9 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) EQUITY GROWTH FUND & FOREIGN FUND
Equity Growth Fund Foreign Fund December 31 December 31 ---------------------------------- ------------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- ASSETS Investments, at fair value Other securities $24,163,579 $24,727,939 $5,329,365 $2,370,207 ----------- ----------- ---------- ---------- Total investments 24,163,579 24,727,939 5,329,365 2,370,207 Dividends and interest receivable 382 321 124 12 Loans receivable from participants 0 994,276 0 (34,572) ----------- ----------- ---------- ---------- Net assets available for benefits $24,163,961 $25,722,536 $5,329,489 $2,335,647 =========== =========== ========== ==========
See notes to financial statements. 9 10 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) VF CORPORATION COMMON STOCK FUND AND EMPLOYEE STOCK OWNERSHIP PLAN
VF Corporation Common Stock Fund Employee Stock Ownership Plan December 31 December 31 -------------------------------- ----------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- ASSETS Investments, at fair value VF Corporation Common Stock 326,616 shares in 1996 340,506 shares in 1995 $22,046,715 $17,961,692 $ 0 $ 0 VF Corporation ESOP Preferred Stock 1,881,515 shares in 1996 1,964,942 shares in 1995 0 0 101,601,810 82,920,550 Other securities 240,255 315,239 79,751 192,417 ----------- ----------- ------------ ----------- Total investments 22,286,970 18,276,931 101,681,561 83,112,967 Dividends and interest receivable 454 514 2,821 3,359 Loans receivable from participants 0 2,180,588 0 0 ----------- ----------- ------------ ----------- TOTAL ASSETS 22,287,424 20,458,033 101,684,382 83,116,326 ----------- ----------- ------------ ----------- LIABILITIES Employee Stock Ownership Plan obligation - payable to VF Corporation 0 0 41,563,481 46,650,286 ----------- ----------- ------------ ----------- TOTAL LIABILITIES 0 0 41,563,481 46,650,286 ----------- ----------- ------------ ----------- Net assets available for benefits $22,287,424 $20,458,033 $60,120,901 $36,466,040 =========== =========== ============ ===========
See notes to financial statements. 10 11 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) LOAN FUND
Loan Fund December 31 ----------- 1996 ---- ASSETS Investments, at fair value Other securities $ 0 ---------- Total investments 0 Dividends and interest receivable 0 Loans receivable from participants 9,374,718 ---------- Net assets available for benefits $9,374,718 ==========
See notes to financial statements. 11 12 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) COMBINED PLAN
YEAR ENDED DECEMBER 31 ---------------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Investment income Dividends on VF Corporation Common Stock $ 469,018 $ 538,867 $497,205 Dividends on ESOP Preferred Stock 3,971,574 4,131,256 4,228,632 Interest 1,234,816 1,255,562 979,143 Income from mutual funds and bank common trust funds 4,639,609 3,693,225 2,614,714 ----------- ----------- ---------- 10,315,017 9,618,910 8,319,694 ----------- ----------- ---------- Contributions Interest on loan repayments 637,885 548,512 402,626 Participants 14,670,636 14,883,216 15,290,975 VF Corporation 5,527,985 5,762,864 5,570,215 ----------- ----------- ---------- 20,836,506 21,194,592 21,263,816 ----------- ----------- ---------- Withdrawals (16,191,145) (6,901,351) (8,128,767) Forfeitures that reduce VF Corporation contributions (301,873) (255,310) (118,128) Interest paid to VF Corporation on Employee Stock Ownership Plan obligation (4,386,805) (4,878,310) (5,344,502) Expenses 0 (53,764) 0 Net realized and unrealized appreciation in fair value of investments 34,081,179 20,147,532 2,951,585 ----------- ----------- ---------- Net increase 44,352,879 38,872,299 18,943,698 Net assets available for benefits at beginning of year 154,486,555 115,614,256 96,670,558 ----------- ----------- ---------- Net assets available for benefits at end of year $198,839,434 $154,486,555 $115,614,256 ============ ============ ============
See notes to financial statements. 12 13 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) MONEY MARKET FUND
Year Ended December 31 ------------------------------------------------------------- 1996 1995 1994 Investment income Income from mutual funds and bank common trust funds $ 313,675 $ 338,605 $ 204,216 ----------- ----------- ---------- 313,675 338,605 204,216 ----------- ----------- ---------- Contributions Interest on loan repayments 0 49,368 34,933 Participants 1,537,425 1,146,077 1,024,192 ----------- ----------- ---------- 1,537,425 1,195,445 1,059,125 ----------- ----------- ---------- Withdrawals (991,225) (373,362) (434,310) Forfeitures that reduce VF Corporation contributions (9) (579) (435) Fund transfers, net (449,011) (396,856) (311,109) ----------- ----------- ---------- Net increase 410,855 763,253 517,487 Net assets available for benefits Beginning of year, as reported 7,642,943 6,879,690 6,362,203 Reclassify loan balances to separate fund (1,423,668) 0 0 ----------- ----------- ---------- Beginning of year, as adjusted 6,219,275 6,879,690 6,362,203 ----------- ----------- ---------- End of year $6,630,130 $ 7,642,943 $6,879,690 =========== =========== ==========
See notes to financial statements. 13 14 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) FIXED INCOME FUND
Year Ended December 31 --------------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Investment income Interest $1,234,816 $ 1,255,562 $979,143 Income from mutual funds and bank common trust funds 42,437 41,620 38,440 ----------- ----------- ---------- 1,277,253 1,297,182 1,017,583 ----------- ----------- ---------- Contributions Interest on loan repayments 0 96,211 59,901 Participants 2,109,713 2,700,460 2,598,897 ----------- ----------- ---------- 2,109,713 2,796,671 2,658,798 ----------- ----------- ---------- Withdrawals (2,565,214) (1,402,288) (1,771,571) Forfeitures that reduce VF Corporation contributions (11) (706) (890) Net realized and unrealized appreciation (depreciation) in fair value of investments (109,871) 191,476 (123,376) Fund transfers, net 30,008 (571,686) (13,095) ----------- ----------- ---------- Net increase 741,878 2,310,649 1,767,449 Net assets available for benefits Beginning of year, as reported 20,437,850 18,127,201 16,359,752 Reclassify loan balances to separate fund (1,630,963) 0 0 ----------- ----------- ---------- Beginning of year, as adjusted 18,806,887 18,127,201 16,359,752 ----------- ----------- ---------- End of year $19,548,765 $ 20,437,850 $18,127,201 =========== ============ ===========
See notes to financial statements. 14 15 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) BALANCED FUND
Year Ended December 31 ----------------------------------- 1996 1995 ---- ---- Investment income Income from mutual funds and bank common trust funds $ 721,016 $ 141,331 ---------- ----------- 721,016 141,331 ---------- ----------- Contributions Interest on loan repayments 0 7,685 Participants 703,667 226,246 ---------- ----------- 703,667 233,931 ---------- ----------- Withdrawals (317,576) (40,993) Forfeitures that reduce VF Corporation contributions (238) 0 Net realized and unrealized appreciation in fair value of investments 70,842 90,964 Fund transfers, net 1,936,006 3,560,514 ---------- ----------- Net increase 3,113,717 3,985,747 Net assets available for benefits Beginning of year, as reported 3,985,747 0 Reclassify loan balances to separate fund (53,297) 0 ---------- ----------- Beginning of year, as adjusted 3,932,450 0 ---------- ----------- End of year $7,046,167 $ 3,985,747 ========== ===========
See notes to financial statements. 15 16 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) EQUITY GROWTH & INCOME FUND
Year Ended December 31 ------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Investment income Income from mutual funds and bank common trust funds $2,148,023 $ 1,688,047 1,833,144 ----------- ----------- ----------- 2,148,023 1,688,047 1,833,144 ----------- ----------- ----------- Contributions Interest on loan repayments 0 154,780 123,536 Participants 4,131,053 4,215,860 4,624,489 ----------- ----------- ----------- 4,131,053 4,370,640 4,748,025 ----------- ----------- ----------- Withdrawals (3,484,495) (1,378,118) (2,031,249) Forfeitures that reduce VF Corporation contributions (391) (1,272) (1,164) Net realized and unrealized appreciation (depreciation) in fair value of investments 5,037,526 7,296,660 (1,267,002) Fund transfers, net 1,525,815 (1,485,754) (25,479) ----------- ----------- ----------- Net increase 9,357,531 10,490,203 3,256,275 Net assets available for benefits Beginning of year, as reported 37,437,759 26,947,556 23,691,281 Reclassify loan balances to separate fund (2,457,411) 0 0 ----------- ----------- ----------- Beginning of year, as adjusted 34,980,348 26,947,556 23,691,281 ----------- ----------- ----------- End of year $44,337,879 $37,437,759 $26,947,556 =========== =========== ===========
See notes to financial statements. 16 17 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) EQUITY GROWTH FUND
Year Ended December 31 ---------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Investment income Income from mutual funds and bank common trust funds $ 1,130,443 $ 1,353,455 $515,020 ----------- ----------- ----------- 1,130,443 1,353,455 515,020 ----------- ----------- ----------- Contributions Interest on loan repayments 0 100,380 81,580 Participants 3,389,402 3,329,947 3,834,443 ----------- ----------- ----------- 3,389,402 3,430,327 3,916,023 ----------- ----------- ----------- Withdrawals (2,420,165) (1,087,899) (1,129,617) Forfeitures that reduce VF Corporation contributions (236) (1,444) (118) Net realized and unrealized appreciation (depreciation) in fair value of investments 1,604,220 4,253,881 (726,720) Fund transfers, net (4,267,963) 1,794,722 2,439,546 ----------- ----------- ----------- Net increase (decrease) (564,299) 9,743,042 5,014,134 Net assets available for benefits Beginning of year, as reported 25,722,536 15,979,494 10,965,360 Reclassify loan balances to separate fund (994,276) 0 0 ----------- ----------- ----------- Beginning of year, as adjusted 24,728,260 15,979,494 10,965,360 ----------- ----------- ----------- End of year $24,163,961 $25,722,536 $15,979,494 =========== =========== ===========
See notes to financial statements. 17 18 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) FOREIGN FUND
Year Ended December 31 -------------------------------------- 1996 1995 ---- ---- Investment income Income from mutual funds and bank common trust funds $ 257,147 $ 98,277 ---------- ---------- 257,147 98,277 ---------- ---------- Contributions Interest on loan repayments 0 5,537 Participants 504,049 165,453 ---------- ---------- 504,049 170,990 ---------- ---------- Withdrawals (217,661) (9,708) Forfeitures that reduce VF Corporation contributions (234) 0 Net realized and unrealized appreciation (depreciation) in fair value of investments 428,766 (122,155) Fund transfers, net 1,987,203 2,198,243 ---------- ---------- Net increase 2,959,270 2,335,647 Net assets available for benefits Beginning of year, as reported 2,335,647 0 Reclassify loan balances to separate fund 34,572 0 ---------- ---------- Beginning of year, as adjusted 2,370,219 0 ---------- ---------- End of year $5,329,489 $2,335,647 ========== ==========
See notes to financial statements. 18 19 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) VF CORPORATION COMMON STOCK FUND
Year Ended December 31 ----------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Investment income Dividends on VF Corporation Common Stock $ 469,018 $ 538,867 $ 497,205 Income from mutual funds and bank common trust funds 5,963 6,622 4,284 ----------- ----------- ----------- 474,981 545,489 501,489 ----------- ----------- ----------- Contributions Interest on loan repayments 0 134,551 102,676 Participants 2,295,327 3,099,173 3,208,954 ----------- ----------- ----------- 2,295,327 3,233,724 3,311,630 ----------- ----------- ----------- Withdrawals (1,888,739) (1,137,459) (1,310,494) Forfeitures that reduce VF Corporation contributions (143) (802) (841) Net realized and unrealized appreciation in fair value of investments 4,701,766 1,635,363 985,506 Fund transfers, net (1,573,213) (5,099,183) (2,089,863) ----------- ----------- ----------- Net increase (decrease) 4,009,979 (822,868) 1,397,427 Net assets available for benefits Beginning of year, as reported 20,458,033 21,280,901 19,883,474 Reclassify loan balances to separate fund (2,180,588) ----------- ----------- ----------- Beginning of year, as adjusted 18,277,445 21,280,901 19,883,474 ----------- ----------- ----------- End of year $22,287,424 $20,458,033 $21,280,901 =========== =========== ===========
See notes to financial statements. 19 20 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) EMPLOYEE STOCK OWNERSHIP PLAN
Year Ended December 31 ----------------------------------------------------------- 1996 1995 1994 ---- ---- ---- Investment income Dividends on ESOP Preferred Stock $ 3,971,574 $ 4,131,256 $ 4,228,632 Income from mutual funds and bank common trust funds 20,905 25,268 19,610 ----------- ----------- ----------- 3,992,479 4,156,524 4,248,242 ----------- ----------- ----------- Contributions VF Corporation 5,527,985 5,762,864 5,570,215 ----------- ----------- ----------- 5,527,985 5,762,864 5,570,215 ----------- ----------- ----------- Withdrawals (3,526,117) (1,471,524) (1,451,526) Forfeitures that reduce VF Corporation contributions (300,611) (250,507) (114,680) Expenses 0 (53,764) 0 Interest paid to VF Corporation on Employee Stock Ownership Plan Obligation (4,386,805) (4,878,310) (5,344,502) Net realized and unrealized appreciation in fair value of investments 22,347,930 6,801,343 4,083,177 ----------- ----------- ----------- Net increase 23,654,861 10,066,626 6,990,926 Net assets available for benefits Beginning of year 36,466,040 26,399,414 19,408,488 ----------- ----------- ----------- End of year $60,120,901 $36,466,040 $26,399,414 =========== =========== ===========
See notes to financial statements. 20 21 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS (CONTINUED) LOAN FUND
Year Ended December 31 1996 ---------------------- Contributions Interest on loan repayments $ 637,885 ----------- 637,885 ----------- Withdrawals (779,953) Forfeitures that reduce VF Corporation contributions 0 Expenses 0 Net realized and unrealized appreciation in fair value of investments 0 Fund transfers, net 811,155 ----------- Net increase 669,087 ----------- Net assets available for benefits beginning of year, as reported 0 Reclassify loan balances to separate fund 8,705,631 ----------- Beginning of year, as adjusted 8,705,631 ----------- End of year $9,374,718 ==========
See notes to financial statements. 21 22 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS NOTE A -- DESCRIPTION OF THE PLAN VF Corporation (the Corporation) sponsors the VF Corporation Tax-Advantaged Savings Plan for Salaried Employees (the Plan), which is a cash or deferred plan under Section 401(k) of the Internal Revenue Code. Under the Plan, certain salaried employees of specified subsidiaries, having at least one year of credited service, may elect to contribute between 2% and 10% of their compensation to the Plan. The Corporation matches employee contributions by 50% for up to 6% of compensation contributed by the employee. Employees remain fully vested in their contributions to the Plan. The Corporation's matching contributions are vested monthly on a pro rata basis, with full vesting after five years of service or upon normal or late retirement, disability or death. The Plan includes an Employee Stock Ownership Plan (ESOP). In 1990, the ESOP purchased 2,105,263 shares of VF Corporation 6.75% Series B ESOP Convertible Preferred Stock (ESOP Preferred Stock) for $65.0 million. Each share of ESOP Preferred Stock, which has a redemption value of $30.88 plus cumulative accrued dividends, is convertible into eight-tenths share of VF Corporation Common Stock and is entitled to one vote. The trustee for the ESOP may convert the ESOP Preferred Stock to Common Stock at any time or may cause the Corporation to redeem the ESOP Preferred Stock under certain circumstances. The ESOP Preferred Stock also has preference in liquidation over all other stock issues. The Corporation's matching contributions, all of which go into the ESOP, are allocated to employees in shares of ESOP Preferred Stock. Of the shares of ESOP Preferred Stock owned by the ESOP, 854,856 shares in 1996 and 765,568 shares in 1995 have been allocated to employees. The ESOP's purchase of the ESOP Preferred Stock was funded by a loan of $65.0 million from the Corporation that bears interest at 9.8%. The loan will be repaid in increasing installments through 2003 from future minimum Corporation matching contributions to the ESOP and dividends on the ESOP Preferred Stock. The Corporation's minimum required matching contributions and dividends are $8.7 million in 1997 and increases each year to $9.6 million over the following four years. Employee contributions are invested at the direction of the employee in one or more of the funds administered by the Plan's trustee. The investment programs of the Plan are as follows: (a) Money Market Fund: Monies are invested in a money market fund. (b) Fixed Income Fund: Monies are invested in investments that provide a fixed rate of return. (c) Balanced Fund: Monies are invested in investments to obtain as much income as possible, consistent with the preservation and conservation of capital. (d) Equity Growth & Income Fund: Monies are invested in investments that are currently paying dividends and/or offer prospects for growth of capital and future income, with emphasis on capital appreciation. (e) Equity Growth Fund: Monies are primarily invested in common stock, securities convertible into common stock and debt securities, with emphasis on long-term growth opportunities. (f) Foreign Fund: Monies are invested in stocks and debt obligations of companies and governments outside the United States. 22 23 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS (Continued) NOTE A -- DESCRIPTION OF THE PLAN (Continued) (g) VF Corporation Common Stock Fund: Monies are invested in Common Stock of the Corporation purchased on the open market at prevailing prices on the New York Stock Exchange on the date of purchase. Employees can direct no more than 50% of their contributions to the VF Corporation Common Stock Fund. Individual accounts are maintained for each participant; each account includes the individual's contributions, Corporation matching contributions and investment funds' earnings. Accounts may become payable upon retirement, disability, death or termination of employment. Participants may also withdraw all or a portion of their accounts by filing a written request that demonstrates financial hardship. Participants may elect to receive distributions in a lump sum or in an annuity, or accounts may be rolled over into another IRS-approved tax deferral vehicle. Forfeitures are used to reduce VF Corporation's obligation to pay plan expenses. Participants may borrow from their individual account. Participants are charged interest at the Morgan Guaranty "Published" prime rate at the time of the loan and repay the principal within 60 months, or 120 months if the loan is for the purchase of their primary residence. Participants may borrow up to 100% of their account balance in the Money Market Fund and 75% of their account balance of remaining funds, not to exceed 50% of the participant's total vested account balance, but may not borrow from the Corporation matching portion. Payment in full is required at termination of employment. There were 1,772 loans outstanding at December 31, 1996. Although it has no intent to do so, the Corporation may terminate the Plan in whole or in part at any time. In the event of termination, participants become fully vested in their accounts. The number of participants in each fund was as follows:
Year Ended December 31 -------------------------------------- 1996 1995 1994 ---- ---- ---- Money Market Fund 2,862 2,805 2,818 Fixed Income Fund 3,731 4,308 4,382 Balanced Fund 1,393 1,035 0 Equity Growth & Income Fund 5,420 5,725 5,603 Equity Growth Fund 4,040 4,513 3,999 Foreign Fund 1,032 700 0 VF Corporation Common Stock Fund 4,146 4,553 4,839 Employee Stock Ownership Plan 7,077 7,461 7,317
The total number of participants in the Plan was less than the sum of participants shown above because many were participating in more than one fund. 23 24 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS (Continued) NOTE B -- SIGNIFICANT ACCOUNT POLICIES Investments are stated at fair value. Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the plan year. The ESOP Preferred Stock is stated at fair value, based on the greater of 80% of the fair value of the Corporation's Common Stock or the preferred stock's stated redemption price of $30.875 per share. For commercial notes and United States government obligations, the Plan trustee has established a fair value based on yields currently available on comparable instruments. The fair value of the participation units owned by the Plan in mutual funds and bank common trust funds is based on quoted redemption values on the last business day of the plan year. The plan presents in the statement of changes in net assets the net appreciation (depreciation) in the fair value of its investments, which consists of the realized gains or losses and unrealized appreciation or depreciation on those investments. Administrative expenses consisting primarily of fees for legal, accounting and other services are paid by the corporation in accordance with the Plan Agreement and are based on customary and reasonable rates for such services. Payment of Benefits: Benefits are recorded when paid. Use of Estimates: In preparing financial statements in accordance with generally accepted accounting principles, management makes estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE C -- INCOME TAX STATUS The Internal Revenue Service has issued a favorable Determination Letter dated January 16, 1996 stating that the Plan qualifies under the appropriate sections of the Internal Revenue Code (IRC) and is, therefore, not subject to tax under present income tax law. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Pension Plan Committee is not aware of any action or series of events that have occurred that might adversely affect the Plan's qualified status. 24 25 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS (Continued) NOTE D -- INVESTMENTS Net unrealized appreciation (depreciation) in fair value of investments included in Plan equity includes the following:
Net Unrealized Appreciation (Depreciation) in Fair Value Fair Value for the Year Ended December 31 at December 31 ----------------------------------------------- -------------------------------------------- 1996 1995 1994 1996 1995 1994 ----------- ----------- ----------- ------------ ------------- ------------- Fair value as determined by quoted market or stated redemption price: VF Corporation Common Stock $ 4,168,463 $ 52,620 $ 215,007 $ 22,046,715 $ 17,961,692 $ 19,295,129 ESOP Preferred Stock 22,201,877 6,484,308 3,812,036 101,601,810 82,920,550 78,361,197 Mutual funds and bank common trust funds 6,121,697 11,083,328 (2,153,697) 86,921,008 71,875,357 46,457,343 ----------- ----------- ----------- ------------ ------------ ------------ 32,492,037 17,620,256 1,873,346 210,569,533 172,757,599 144,113,669 Fair value as determined by Plan trustee: United States government obligations 0 0 0 16,991,039 17,329,048 15,767,773 Commercial notes (109,067) 191,467 (146,268) 812,427 678,070 249,552 Mutual funds and bank common trust funds 0 0 0 2,343,181 1,328,036 1,580,383 ----------- ----------- ----------- ------------ ------------ ------------ (109,067) 191,467 (146,268) 20,146,647 19,335,154 17,597,708 ----------- ----------- ----------- ------------ ------------ ------------ $32,382,970 $17,811,723 $ 1,727,078 $230,716,180 $192,092,753 $161,711,377 =========== =========== =========== ============ ============ ============
Unrealized appreciation in fair value of investments at December 31, 1996, 1995 and 1994 was $70,620,796, $39,182,641 and $21,770,129, respectively. 25 26 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS (Continued) NOTE D -- INVESTMENTS (CONTINUED) Net unrealized appreciation (depreciation) in fair value of investments includes the following:
Year Ended December 31 --------------------------------------------------- 1996 1995 1994 ----------- ------------ ----------- Aggregate proceeds $62,417,960 $57,592,059 49,419,023 Aggregate cost 60,719,750 55,256,250 48,194,516 ----------- ----------- ---------- Net realized gain $ 1,698,210 $ 2,335,809 $1,224,507 =========== =========== ==========
Of the net realized gain, $679,356, $1,690,513 and $1,041,640 related to gains recognized on the sale of VF Common Stock and the redemption of VF Preferred Stock for the years ended 1996, 1995 and 1994, respectively. The fair value of individual investments that represent 5% or more of the Plan's net assets at December 31, 1996 and 1995 are as follows:
1996 1995 ---- ---- ESOP Preferred Stock $101,601,810 $82,920,550 Fidelity Growth & Income Fund 44,076,501 34,838,023 Fidelity Magellan Fund 23,976,308 24,637,151 VF Corporation Common Stock 22,046,715 17,961,692
26 27 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES NOTE TO FINANCIAL STATEMENTS (Continued) NOTE D -- INVESTMENTS (Continued) Investment held at December 31, 1996:
NUMBER OF SHARES NAME OF ISSUER AND TITLE OF ISSUE OR PRINCIPAL AMOUNT FAIR VALUE COST - --------------------------------- ------------------- ---------- ---- Securities of participating employer: VF Corporation Common Stock 326,618 $ 22,046,715 12,356,875 VF Corporation 6.75% Series B ESOP Convertible Preferred Stock 1,881,515 101,601,810 58,091,776 ------------ ------------ 123,648,525 70,448,651 ------------ ------------ United States Government Obligations: Small Business Administration Loans: (Rates of 5.20% to 8.83%, maturities of 03/02/97 to 05/23/11) $15,907,048 15,543,917 15,555,391 N.O.A.A. loans (Rates of 7.975%, matures 01/02/97) $ 114,831 114,687 114,687 F.M.H.A. loans (Rates of 5.675% to 9.875%, of maturities 05/01/98 to 11/19/08) $ 1,340,258 1,332,435 1,332,435 ------------ ------------ 16,991,039 17,002,513 ------------ ------------ Other Securities: Mutual funds and bank common trust funds: Kemper Money Market Fund 6,588,972 6,588,972 6,588,972 Fidelity Puritan Fund 404,454 6,972,787 6,813,359 Fidelity Growth & Income Fund 1,434,315 44,076,501 31,587,314 Fidelity Magellan Fund 297,288 23,976,308 19,500,582 Templeton Foreign Fund 512,205 5,306,439 4,997,831 UMB Bank Fund: Scout Prime - R 2,343,182 2,343,182 2,343,182 American Commercial Lines (Due 07/15/01) $ 183,000 184,386 184,386 Private Export Funding Corp. (Due 04/30/04) $ 187,500 189,618 183,486 Raytheon Co. (Due 01/10/97) $ 200,000 199,729 199,108 Smith Enron Cogeneration LP (Due 12/15/06) $ 246,000 238,694 246,000 ------------ ------------ $230,716,180 $160,095,384 ============ ============
27 28 VF CORPORATION TAX-ADVANTAGED SAVINGS PLAN FOR SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS (Continued) NOTE E -- RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for benefits per the financial statements to Form 5500:
1996 1995 ---- ---- Net assets available for benefits per the financial statements 198,839,434 154,486,555 Amounts allocated to withdrawing participants 709,083 2,881,962 ------------ ------------ Net assets available for benefits per Form 5500 $198,130,351 $151,604,593 ============ ============
The following is a reconciliation of withdrawals paid to participants per the financial statements to Form 5500:
1996 ---- Withdrawals paid to participants and forfeitures per the financial statements $16,493,018 Add amounts allocated to withdrawing participants at December 31, 1996 709,083 Less amounts allocated to withdrawing participants at December 31, 1995 (2,881,962) ----------- Withdrawals paid to participants and forfeitures per Form 5500 $14,320,139 ===========
Amounts allocated to withdrawing participants are recorded on Form 5500 as withdrawal claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. 28 EX-27 14 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the 1996 Annual Report and is qualified in its entirety by reference to such financial statements. 1,000 YEAR JAN-04-1997 JAN-04-1997 270,629 0 633,195 40,253 730,823 1,706,326 1,543,351 821,827 3,449,535 766,267 519,058 26,394 0 63,908 1,909,831 3,449,535 5,137,178 5,137,178 3,458,166 3,458,166 0 0 62,793 508,408 208,884 299,524 0 0 0 299,524 4.64 4.54
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