North Face 2004 Annual Report Download - page 46

87vf corporation 2004 Annual Report
note k – accrued liabilities
note l – long-term debt
In thousands 2004 2003
6.75% notes, due 2005 $ 100,000 $ 100,000
8.10% notes, due 2005 300,000 300,000
8.50% notes, due 2010 200,000 200,000
6.00% notes, due 2033 292,230 292,133
Other 65,641 65,394
957,871 957,527
Less current portion 401,232 1,144
$ 556,639 $ 956,383
In thousands 2004 2003
Compensation $ 141,584 $ 89,856
Income taxes 39,750 21,520
Other taxes 51,829 32,432
Minimum pension liability (Note N) 55,000 55,000
Advertising 29,374 34,742
Insurance 25,831 18,212
Interest 14,989 14,789
Product warranty claims (Note M) 7,193 8,426
Other 192,665 163,962
$ 558,215 $ 438,939
The notes contain customary covenants and events
of default, including limitations on liens and sale-
leaseback transactions and a cross-acceleration event
of default. The cross-acceleration is triggered for all
notes if more than $50.0 million of other debt is in
default and has been accelerated by the lenders,
except for the 6.75% notes where the threshold is $5.0
million. If VF fails in the performance of any covenant
under the indenture that governs the respective notes
(after giving effect to any applicable grace period), the
trustee or lenders may declare the principal due and
payable immediately. At the end of 2004, management
believes that VF was in compliance with all covenants.
VF may redeem the 8.10%, the 8.50% and the 6.00%
obligations, in whole or in part, at a price equal to
100% of the principal amount, plus accrued interest
to the redemption date and a premium (if any)
relating to the then-prevailing treasury yield over
the remaining life of the obligations.
The 6.00% notes having a principal balance of $300.0
million were sold at an original issue discount of $7.9
million. The notes are carried net of the unamortized
portion of the discount. These notes have an effective
annual interest cost of 6.19%, including amortization of
the original issue discount, deferred gain on the interest
rate hedging contract (Note U) and debt issuance costs.
Other debt includes $66.0 million payable to a former
officer of Nautica, of which $33.0 million is payable
in each of 2006 and 2007 (Note B). These non-
interest-bearing installments were recorded at discounts
of 3.25% and 3.84%, respectively, reflecting VF’s
incremental borrowing rates for those periods.
The discounts are being amortized as Interest Expense
over the lives of these obligations. The carrying value
of this debt was $61.1 million at the end of 2004
and $59.0 million at the end of 2003.
The scheduled payments of long-term debt are $34.1
million in 2006, $34.2 million in 2007, $0.8 million in
2008 and $0.2 million in 2009.
Short-term borrowings, all from foreign banks,
had a weighted average interest rate of 7.0% at
the end of 2004 and at the end of 2003.
The Company maintains a $750.0 million unsecured
committed revolving bank credit agreement that
supports issuance of up to $750.0 million in com-
mercial paper or is otherwise available for general
corporate purposes. This agreement, which expires
in September 2008, requires VF to pay a facility fee
of .09% per year and contains a financial covenant
requiring VF’s ratio of consolidated indebtedness
to consolidated capitalization to remain below 60%.
The agreement also contains other covenants
and events of default, including limitations on liens,
subsidiary indebtedness and sales of assets, and a
$50.0 million cross-acceleration event of default.
If VF fails in the performance of any covenant under
this agreement (after giving effect to any applicable
grace period), the banks may terminate their obliga-
tion to lend, and any bank borrowings outstanding
under this agreement may become due and payable.
At the end of 2004, management believes that
VF was in compliance with all covenants. Also at
the end of 2004, the entire amount of the credit
agreement was available for borrowing, except for
$11.8 million of standby letters of credit issued
under the agreement on behalf of VF.
note j – short-term borrowings
note m – other liabilities
In thousands 2004 2003
Deferred compensation $ 186,834 $ 174,771
Minimum pension liability (Note N) 102,009 144,239
Accrued pension benefits (Note N) 56,512 49,375
Income taxes 83,033 70,201
Product warranty claims 26,976 20,426
Other 80,767 59,613
$ 536,131 $ 518,625
VF maintains deferred compensation plans for the
benefit of eligible employees. These plans allow
participants to defer compensation and, in some
plans, receive matching contributions by VF. Deferred
compensation, including accumulated earnings
on the participant-directed investment options,
is distributable in cash at employee-specified dates
or upon retirement, death, disability or termination
of employment. See Note I for investment securities
owned by VF to fund liabilities under certain of these
deferred compensation plans.