North Face 2001 Annual Report Download

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UNCOMMON STRENGTH
VF CORPORATION 2001 ANNUAL REPORT
VF CORPORATION 2001 ANNUA L REPORT

Table of contents

  • Page 1
    VF CORPORATION 2001 ANNUAL REPORT UNCOMMON STRENGTH VF CORPORATION 2001 A N N UA L REPORT

  • Page 2
    ... Review 37 Financial Review 2001 FINANCIAL HIGHLIGHTS In thousands, except per share amounts 2001* 2000** 1999 Summary of Operations Net sales Operating income Net income Return on average common equity Financial Position Working capital Current ratio Common shareholders' equity Per Common Share...

  • Page 3
    ... market leadership. Our brands define us - our history, strength and adaptability. Our brands are worn everywhere. On city streets and mountains, in offices and on playgrounds, at concert halls and rodeos. By people of all ages. From every walk of life. Around the world. Our brands are our strength.

  • Page 4
    I N U SP T S

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    T I IR T S I I UN SP R r o bli d p u t D e a n Wh i rr le i oup c a E L B A TOPP te s ra d d ska g r e n und na l in t h rs e troi d sou e c a n t ra l D a r t a n d , ton in c en he s o B s r in ? b, on u l m . tc i gh c omeans n s j ari e in Le e P v a a of le b i e ss e Th

  • Page 6

  • Page 7
    True A Saturday afternoon made for relaxing. At home with family. Jeans made for comfort. It's like wearing America.

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  • Page 9
    Why climb three days in 20 below for a five-minute ride on virgin snow? To be the first.

  • Page 10

  • Page 11
    s ive ir l . the packs ut y p ort The anSp J in . oks o lb oo pass. h c r. S tage e y s m pla Back mo D t C rs. a th d in. e k r a e ke at Sne we snea s The

  • Page 12
    advanced simplicity Place for mobile phone. Place for laptop. Life as usual. Just a bit more organized. With a lot more style.

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  • Page 14
    For her, life gets easier with time. The choices are simpler. Beauty is deeper. Achievement is nothing without style.

  • Page 15
    CONFIDENCE

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    They called in sick. The boss is typing with one finger. They haven't laughed like this since high school. The freedom to be.

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    Comfort

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    A three hour walk on the beach to find the right shell. The feeling of new snow on your cheek. A child' s laugh in the wind. Life is woven with beautiful moments.

  • Page 22
    Sandboxes, ice cream, finger paints. Think of them as clothes for kids who take fun very seriously.

  • Page 23

  • Page 24
    ... successfully, just as w e have for the past 102 years. History has show n that a diverse port folio of pow erful brands is the best defense in turbulent times. W ith names like W rangler, Lee , The North Face , JanSport , Eastpak , Vanit y Fair , Lily of France and Healthtex , VF is w ell armed...

  • Page 25
    ... inventories by $100 million by year-end - an ambitious undertaking, given the difficult sales environment. Looking specifically at these key areas, I am pleased to report that w e made good progress in each. We substantially improved the profitabilit y of our w orkw ear business, with margins w ell...

  • Page 26
    ... products and fresh marketing ideas. From The North Face's M ET5 jacket to Vanity Fair 's Illumination bra to Playw ear's Kidproof clothing, our brands continue to deliver outstanding products at great prices. W ith jeans, bras, outerw ear, shirts, uniforms and backpacks, VF's product mix is one of...

  • Page 27
    ... margins of 14% . We also continue to target a debt to capital ratio below 40% and a dividend payout rate of 30% . We'll be active managers of our brand port folio, investing in our core brands and searching for new ones. And w e will continue to ensure that our associates have the tools and support...

  • Page 28
    ...W rangler Hero ® brand's strong American heritage. In addition, the launch of innovative carpenter and cargo fashion st yles, and the successful expansion of our Outdoor Gear line, helped the brand maintain its position as the number one brand among men shopping in mass market stores. The W rangler...

  • Page 29
    ...In department stores, Lee Jeans' sub-branding strategy continues to pay off, with grow th in the Lee ® Pipes line targeted at young boys, the Lee ® Dungarees line aimed at young men and juniors, and the Riveted by Lee ® line geared tow ard fashion-seeking w omen. The Lee brand men's business w as...

  • Page 30
    ... apparel category, and VF's brands are leading the w ay. For example, the Vanit y Fair ® brand's Illumination ® bra continues to be a big success, becoming the number one selling bra in department and chain stores. We intend to maintain the momentum this year with exciting fashion colors and new...

  • Page 31
    ...w hat each consumer segment w ants, executing those ideas through an efficient supply chain, and using our Retail Floor Space M anagement capabilities to deliver outstanding service. It's a winning formula. CHANNELS OF DISTRIBUTION (* LICENSED BRAND) UNITED STATES DEPARTM ENT STORE VANITY FAIR LILY...

  • Page 32
    ...programs this year. Hero by Wrangler is the FASTEST M ore recently, w e've launched the Body Type Concept for the W rangler GROW IN G JEANS BRAND in the brand, w hich offers w omen a variet y of fits that conform to their individmass market in France and Germany. ual body shapes. New point of sale...

  • Page 33
    ... of 2003. W RANGLER According to market research, our Wrangler brand is the N UM BER TW O JEAN S BRAN D IN EUROPE. H.I.S Our new est brand, H.I.S , LEADS THE M ARKET for female jeans in Germany. LEE CHANNELS OF DISTRIBUTION DEPARTM ENT STORE LEE W RANGLER H.I.S M ASS M ARKET HERO BY W RANGLER...

  • Page 34
    ... high tech, high comfort Airlift ® line, and the introduction of new fashion-forw ard products incorporating trendy, eye-catching colors, the JanSport ® brand continues to build on its position as the daypack brand of choice for students shopping at department, sporting goods and specialty stores...

  • Page 35
    ... of Time magazine's best inventions of 2001, and w e plan to expand the use of this technology in 2002. Adding a new dimension to the brand, the first The North Face "show case" retail store opened in Beverly Hills in M arch 2002. The new store format provides a total brand experience for consumers...

  • Page 36
    ... businesses. M ost importantly, w e made good progress tow ard building the foundation for our coalition's future as a one-stop shop for customers seeking a variet y of apparel, from industrial and protective uniforms to service apparel and casual lifest yle clothes. The private label knit w ear...

  • Page 37
    ... IM AGE RED KAP BULWARK PROTECTIVE APPAREL PENN STATE TEXTILE HORACE SM ALL APPAREL COM PANY VF SOLUTIONS LEE W RANGLER HERO JANSPORT GITANO THE NORTH FACE RETAIL LEE SPORT CHASE AUTHENTICS* CSA NFL RED* NFL WHITE* RED KAP W ith w ell OVER 50% OF THE INDUSTRIAL UNIFORM M ARKET, the Red Kap brand is...

  • Page 38
    ... as outerw ear. We'll also be expanding distribution of our girls' size 2-6X line. Greensboro Our M ichael Jordan line is now in its second year and should experience continued grow th in the years ahead. EVERYTHING M OM S WANT By giving moms w hat they w ant in children's apparel - VALUE, STYLE...

  • Page 39
    ... Shareholders' Equity 53 Notes to Consolidated Financial Statements 68 Financial Summary 70 Corporate Directory 72 Investor Information OPERATING COM M ITTEE left column, top to bottom: right column, top to bottom: M ackey M cDonald Chairman, President and Chief Executive Officer Candace Cummings...

  • Page 40
    .... If their financial condition w ere to w orsen, additional allow ances might be required. • Inventories - Our inventories are valued at the low er of cost or market value. We evaluate all of our inventory style-size-color stockkeeping units (SKUs) to determine excess or slow moving SKUs based on...

  • Page 41
    ...million in annual sales and $9 million in operating profit over the last three years, but a small loss (before restructuring charges) was 1999 2000 2001 reported for these businesses in 2001. margins remain above 30%. Also as part of these 2001 decisions, we are closing 21 higher cost North American...

  • Page 42
    ... costs (.8% of sales), primarily in domestic jeansw ear, and in 2000 w ere low er gross margins in occupational apparel, as w ell as normal w age and benefit inflation in both years. Over the last three years, the amount of domestic sales derived from products manufactured in low er cost locations...

  • Page 43
    ... Eastpak brands (backpacks and daypacks). Sales increased significantly in 2000 with the acquisitions of The North Face and Eastpak businesses in M ay 2000, and sales increased further in 2001 due to the acquired companies being included for the full year. Segment profit, excluding $3.7 million of...

  • Page 44
    ...had sales averaging $206 million per year and segment profit averaging $9 million over the three year period, resulted in a $102.5 million restructuring charge in 2001. The remaining licensed sportsw ear and distributor knitw ear businesses offer more attractive prospects on a sharply low er capital...

  • Page 45
    ... are recognized in cost of products sold in the Consolidated Statements of Income as the related products are sold. We have other financial commitments at the end of 2001 that may require the use of funds under certain circumstances: • The Company has outstanding $72.4 million of trade letters of...

  • Page 46
    ... rite-off of $350 to $550 million of intangible assets. This charge will be reported as the cumulative effect of a change in accounting policy at the beginning of 2002. See Note A to the consolidated financial statements. To establish an appropriate basis for comparison, had the change in accounting...

  • Page 47
    ... the euro and the Canadian dollar. We monitor net foreign currency market exposures and may in the ordinary course of business enter into foreign exchange forw ard contracts related to specific foreign currency transactions or anticipated cash flows occurring within 12 months. Use of these financial...

  • Page 48
    ..., President and Chief Executive Officer Robert K. Shearer Vice President - Finance and Chief Financial Officer Robert A. Cordaro Vice President - Controller and Chief Accounting Officer Report of Independent Accountants To the Board of Directors and Shareholders VF Corporation In our opinion...

  • Page 49
    ... reduced net income by $170.0 million ($1.53 per share). See Note M to the consolidated financial statements. * * The first quarter of 2000 includes an aftertax change of $6.8 million ($.06 per share) for the cumulative effect of a change in accounting policy for revenue recognition. In addition, in...

  • Page 50
    Consolidated Statements of Income In thousands, except per share amounts Fiscal year ended December 29, 2001 December 30, 2000 January 1, 2000 Net Sales Costs and Operating Expenses Cost of products sold Marketing, administrative and general expenses Other operating expense, net $5,518,805 3,798,...

  • Page 51
    ...Statements of Comprehensive Income In thousands Fiscal year ended December 29, 2001 December 30, 2000 January 1, 2000 Net Income Other Comprehensive Income (Loss) Foreign currency translation: Amount arising during year... Foreign exchange hedging contracts: Amount arising during year Less income...

  • Page 52
    ...Short-term borrowings Current portion of long-term debt Accounts payable Accrued liabilities Total current liabilities Long-term Debt Other Liabilities Redeemable Preferred Stock Deferred Contributions to Employee Stock Ownership Plan Common Shareholders' Equity Common Stock, stated value $1; shares...

  • Page 53
    ... Other, net Cash provided by operations Investments Capital expenditures Business acquisitions Other, net Cash invested Financing Increase (decrease) in short-term borrowings Proceeds from long-term debt Payment of long-term debt Purchase of Common Stock Cash dividends paid Proceeds from issuance of...

  • Page 54
    ... Statements of Common Shareholders' Equity In thousands Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Balance January 2, 1999 Net income Cash dividends: Common Stock Series B Convertible Preferred Stock Tax benefit from Preferred Stock...

  • Page 55
    ... Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements. Previously, sales w ere recorded upon shipment of goods to the customer. The new policy recognizes that the risks of ow nership in some transactions do not substantively transfer to customers until the product has been...

  • Page 56
    ... stock of The North Face, Inc., the Eastpak backpack and daypack business and 85% of the common stock of H.I.S Sportsw ear AG. The Company also acquired the trademark rights to the Chic and Gitano brands. The aggregate cost for these businesses w as $206.5 million, plus repayment of $107.7 million...

  • Page 57
    ... 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 over periods from 19 to 40 years. Operating results of these businesses have been included in the consolidated financial statements...

  • Page 58
    ... debt are $101.7 million in 2003, $100.3 million in 2004, $400.3 million in 2005 and $.3 million in 2006. The Company paid interest of $95.2 million in 2001, $77.1 million in 2000 and $73.4 million in 1999. Subsequent to the end of the year, the Company called a total of $200.0 million of its notes...

  • Page 59
    ...Fair value of plan assets, beginning of year Actual return on plan assets Company contributions Acquired company plan Benefits paid Fair value of plan assets, end of year Projected benefit obligations, beginning of year Service cost Interest cost Plan amendments Acquired company plan Partial plan...

  • Page 60
    ... financial accounting purposes as treasury shares at a cost of $9.2 million, $10.6 million and $10.5 million, respectively, at the end of the last three years. There are 25,000,000 authorized shares of Preferred Stock, $1 par value. As of December 29, 2001, 2,000,000 shares are designated as Series...

  • Page 61
    ... L Stock Option Plan The Company has granted nonqualified stock options to officers, directors and key employees under a stock compensation plan at prices not less than fair market value on the date of grant. Options become exercisable generally one year after the date of grant and expire ten years...

  • Page 62
    ...Private Label knitw ear and Fibrotek business units, plus the remaining net assets of the Jantzen business unit, will be liquidated during 2002 as customer commitments are satisfied. • Close manufacturing facilities- $61.1 million: The Company is closing 21 higher cost North American manufacturing...

  • Page 63
    ... six higher cost North American manufacturing facilities. • Consolidate distribution and administrative functions- $31.7 million: The Company incurred charges to close distribution centers and consolidate administrative offices and functions in the United States, Europe and Latin America. For the...

  • Page 64
    ...million of the 2000 noncash charges w ere not required and accordingly w ere credited to income in 2001. Remaining severance and other cash payments will be made into 2002. Restructuring costs w ere recorded as follows: In thousands 2001 2000 Cost of products sold...policy...1999 Current: ...statements...

  • Page 65
    ...183.4 million in 2000 and $228.0 million in 1999. Note O Business Segment Information The Company designs and manufactures apparel products marketed primarily under Company-ow ned brand names. Customers include department, discount and specialty stores throughout the w orld. The Company manages its...

  • Page 66
    ..., plant and equipment. Corporate assets include investments and deferred income taxes. Financial information for the Company's reportable segments is as follows: In thousands 2001 2000 1999 Net sales: Consumer Apparel Occupational Apparel Outdoor Apparel and Equipment All Other Consolidated...

  • Page 67
    ... 540,292 $5,551,616 Sales to one domestic discount store group comprise 14.3% of consolidated sales in 2001, 13.9% in 2000 and 13.0% in 1999. Note P Commitments The Company leases certain facilities and equipment under noncancelable operating leases. Rental expense w as $65.0 million in 2001, $67...

  • Page 68
    ... under the Employee Stock Ow nership Plan are made to participants in the form of shares of the Company's Series B Convertible Preferred Stock. The Company has an obligation to redeem Series B Convertible Preferred Stock held in participant accounts, and to pay each participant the value of their...

  • Page 69
    ...,052 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 Convertible Preferred Stock is based on a valuation by an independent financial consulting firm. The Company monitors net...

  • Page 70
    ...' equity Other Statistics Working capital Current ratio Debt to capital ratio (3) Dividends Purchase of Common Stock Cash provided by operations Capital expenditures (excluding acquisitions) Depreciation and amortization M arket Data Market price range (1) Book value per common share (1) Price...

  • Page 71
    ...938,078 $ $ 835,558 $ 2.1 22.5% 100,141 $ 391,651 460,652 154,262 156,252...million ($1.53 per share) restructuring charge. includes a $76.7 million ($.67 per share) restructuring charge and a $6.8 million ($.06 per share) charge for the cumulative effect of a change in accounting policy for revenue...

  • Page 72
    ... Corporation Rosw ell, Georgia (Consumer products) Director since 2000, age 57 Ursula F. Fairbairn 2,3,6 Executive Vice President - Human Resources & Quality American Express Company New York, New York (Financial services company) Director since 1994, age 59 Barbara S. Feigin 1,5 Consultant New York...

  • Page 73
    ... Vice President and Chairman - North & South America Jeansw ear & Playw ear Coalitions Joined VF in 1972, age 53 Eric C. Wiseman Vice President and Chairman - Global Intimate Apparel Coalition Joined VF in 1995, age 46 Robert K. Shearer VP - Finance, and Chief Financial Officer and Chairman...

  • Page 74
    Investor Information Common Stock Listed on the New York Stock Exchange and Pacific Exchange - trading symbol VFC. Shareholders of Record As of February 11, 2002, there w ere 6,279 shareholders of record. Dividend Policy Quarterly dividends on VF Corporation Common Stock, w hen declared, are paid ...

  • Page 75
    ... may be obtained from the Investor Relations Office. Other Information VF's press releases, annual report and other information can be accessed through the Company's home page on the World Wide Web, http://www.vfc.com. The following trademarks owned by VF Corporation or its affiliates appear in...

  • Page 76
    VF Corporation 628 Green Valley Road, Suite 500 Greensboro, North Carolina 27408 w w w.vfc.com