North Face 2004 Annual Report Download - page 48

91vf corporation 2004 Annual Report
Preferred Stock consists of 25,000,000 authorized
shares at $1 par value.
Series A Preferred Stock: At the end of 2004,
2,000,000 shares are designated as Series A
Preferred Stock, of which none has been issued.
Each outstanding share of Common Stock has one
Series A Preferred Stock purchase right attached.
The rights become exercisable ten days after an
outside party acquires, or makes an offer for, 15% or
more of the Common Stock. Once exercisable, each
right will entitle its holder to buy 1/100 share of
Series A Preferred Stock for $175. If VF is involved
in a merger or other business combination or an
outside party acquires 15% or more of the Common
Stock, each right will be modified to entitle its holder
(other than the acquirer) 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 acquirer may be
exchanged for one share of VF Common Stock. The
rights, which expire in January 2008, may be redeemed
at $0.01 per right prior to their becoming exercisable.
Series B Redeemable Preferred Stock: At the end
of 2004, 2,105,263 shares are designated as 6.75%
Series B Redeemable Preferred Stock, which were
purchased by the ESOP in 1990. (See Note N.)
Changes in shares of Preferred Stock outstanding
are summarized as follows:
Common Stock outstanding is net of shares held
in treasury, and in substance retired. There were
1,098,172 treasury shares at the end of 2004,
1,297,953 treasury shares at the end of 2003 (after
retirement of 32,000,000 shares during the year)
and 32,233,996 treasury shares at the end of 2002.
The excess of the cost of treasury shares acquired over
the $1 per share stated value of Common Stock is
charged to Retained Earnings. In addition, 256,088
shares of VF Common Stock at the end of 2004,
242,443 shares at the end of 2003 and 266,146 shares
at the end of 2002 were held in trust for deferred
compensation plans. These additional shares are
treated for financial reporting purposes as treasury
shares at a cost of $9.2 million, $8.4 million and $9.3
million at the end of 2004, 2003 and 2002, respectively.
note o – capital
VF makes contributions to the plan sufficient to meet
the minimum funding requirements under applicable
laws, plus additional amounts as recommended by VF’s
independent actuary. Although VF was not required
to make a contribution to the plan during 2005 under
applicable regulations, VF contributed $55.0 million to
its qualified pension plan in January 2005. Estimated
future benefit payments, including benefits attributable
to estimated future employee service, are approximately
$42 million in 2005, $43 million in 2006, $46 million
in 2007, $48 million in 2008, $51 million in 2009
and $312 million for the years 2010 through 2014.
Accumulated benefit obligations earned through the
respective measurement dates for these plans totaled
$947.3 million in 2004 and $896.3 million in 2003.
The excess of accumulated benefit obligations over
the sum of the fair value of plan assets and previously
accrued pension liabilities (“minimum pension
liability”) was $157.0 million in 2004 and $199.2
million in 2003. The offset to this minimum pension
liability is recorded, after income tax effect, as a
component of Accumulated Other Comprehensive
Income (Loss). At the end of both 2004 and 2003,
$55.0 million of the minimum pension liability was
classified as a current liability because VF contributed
that amount to the pension plan in early 2005 and
2004, respectively.
VF sponsors an Employee Stock Ownership Plan
(“ESOP”) as part of a 401(k) savings plan covering
most domestic salaried employees. Cash contributions
made by VF to the 401(k) plan are based on a
specified percentage of employee contributions.
By the end of 2002, all VF stock had been allocated
to the ESOP accounts of the participating employees.
VF also sponsors other savings and retirement plans
for certain domestic and foreign employees.
Expense for these plans totaled $7.0 million in
2004, $6.5 million in 2003 and $7.1 million in 2002.
VF participates in multiemployer retirement benefit
plans for certain of its union employees. Contributions
are made to these plans in amounts provided by
the collective bargaining agreements and totaled
$0.1 million in 2004, $0.2 million in 2003 and
$0.6 million in 2002. If there were a significant
reduction in union employees, VF may be required to
pay a potential withdrawal liability if the respective
plans were underfunded at the time of withdrawal.
During 2003, VF recognized a $7.7 million expense
when it was determined that a probable withdrawal
liability existed due to reductions in union-based
employment. An additional $1.0 million expense
was recognized during 2004.
September 30
Target Allocation 2004 2003
Equity securities 65%71%61%
Fixed income securities 30 21 31
Real estate securities 588
Total 100%100%100%
2004 2003 2002
Balance, beginning of year 971,250 1,195,199 1,477,930
Conversion to Common Stock (127,436) (223,949) (113,527)
Redemption of Preferred Stock ––(169,204)
Balance, end of year 843,814 971,250 1,195,199
Each share of Series B Redeemable Preferred Stock
has a redemption value and liquidation value of
$30.88 plus cumulative accrued dividends, is convert-
ible into 1.6 shares of Common Stock and is entitled
to two votes per share along with the Common
Stock. Dividends are accrued and paid in cash each
quarter. The trustee for the ESOP may convert the
preferred shares to Common Stock at any time or
may cause VF to redeem the preferred shares under
certain circumstances. The Series B Redeemable
Preferred Stock also has preference in liquidation
over all other stock issues. By the end of 2002,
all Preferred Stock had been allocated to the ESOP
accounts of the participating employees.
Accumulated Other Comprehensive Income: Other
comprehensive income consists of certain changes
in assets and liabilities that are not included in Net
Income under generally accepted accounting principles
but are instead reported within a separate component
of Common Stockholders’ Equity. Amounts
comprising Accumulated Other Comprehensive
Income (Loss) in the Consolidated Balance Sheets,
net of related income taxes, are summarized as follows:
In thousands 2004 2003
Foreign currency translation $(1,816) $(31,885)
Minimum pension liability adjustment (119,138) (160,850)
Derivative financial instruments (5,141) (4,450)
Unrealized gains on marketable securities 13,024 7,730
$(113,071) $(189,455)