VF Corporation (NYSE: VFC) today announced results for its
second quarter ended June 30, 2012. All per share amounts are
presented on a diluted basis. All references to “organic” financial
data exclude the Timberland® and Smartwool® brands (“Timberland”),
acquired on September 13, 2011. “Adjusted amounts” refer to
non-GAAP measures that exclude Timberland acquisition-related
expenses and the gain on the sale of John Varvatos Enterprises,
Inc. (“John Varvatos”) as described in the “Adjusted Amounts”
paragraph at the end of this release.
“We’ve reached the halfway mark of the year, and are right on
track to deliver another year of strong and very profitable growth
to our shareholders,” said Eric Wiseman, VF Corporation Chairman
and Chief Executive Officer. “The strength of VF’s business model –
a diverse portfolio strategy supported by an intense focus on
financial and operational disciplines – provides us with a clear
competitive advantage as we successfully navigate through an
increasingly uncertain economic environment.”
Second Quarter Review
Revenues rose 16 percent to $2.1 billion from $1.8
billion in 2011, and included $239 million from Timberland. Organic
revenue growth in the quarter was 3 percent (6 percent in constant
dollars), driven by strong growth in the Outdoor & Action
Sports and international businesses. Revenue growth in the quarter
was tempered by unseasonably warm weather that caused a slight
shift in revenues from the second quarter to the first, and by the
sale of John Varvatos in April 2012.
Gross margin was better than anticipated in the quarter,
rising by 20 basis points to 46.1 percent compared with 45.9
percent in the same period in 2011 as the impact of higher
Jeanswear product costs eased. The comparison was impacted by a 65
basis point benefit to gross margin in the 2011 quarter from a
facility closure. Operating income was $169 million on an
adjusted basis in the second quarter of 2012. As anticipated,
adjusted operating income was impacted by a $25 million loss from
Timberland’s operations reflecting the highly seasonal nature of
that business and excludes acquisition-related expenses of $5
million. On a GAAP basis, second quarter operating income was $164
million compared with $189 million in the same period of the prior
year. Operating margin was 7.9 percent on an adjusted basis
compared to 10.3 percent reported in the second quarter of 2011.
Margin comparisons are negatively impacted by 230 basis points from
the Timberland loss as well as a 40 basis point impact from higher
pension expense in the 2012 quarter. On a GAAP basis, operating
margin was 7.7 percent. The tax rate of 15.1 percent in the
quarter includes a 600 basis point, or $11 million, benefit
triggered by the gain on the sale of John Varvatos.
Net income on an adjusted basis was $123 million, which
excludes Timberland acquisition-related expenses and the gain on
the John Varvatos sale, compared to $129 million in the same period
last year. Adjusted earnings per share declined 5 percent to
$1.11 per share from $1.17 in last year’s same period, reflecting a
loss of $0.12 per share from Timberland and an $0.11 per share
combined negative impact from foreign currency translation and
higher pension expense ($0.06 and $0.05 per share, respectively).
Adjusted earnings per share exclude a $0.32 per share gain from the
sale of John Varvatos (which includes $0.10 per share from the tax
benefit noted above), and $0.03 per share in acquisition-related
expenses. In the second quarter of 2011, earnings of $1.17 per
share included a $0.07 per share benefit from the aforementioned
facility closure. On a GAAP basis, second quarter net income was
$155 million while earnings grew 20 percent to $1.40 per share.
First Half Review
Revenues increased 24 percent to $4.7 billion from $3.8
billion in the first half of 2011, reflecting growth in every
coalition and $595 million from Timberland. Organic revenue growth
in the period was 8 percent (10 percent in constant dollars).
Net income on an adjusted basis increased 3 percent to
$341 million in the first half of 2012 from $330 million reported
in the 2011 period. Adjusted earnings per share rose 2
percent in the current period to $3.05 from $2.99 last year.
Timberland had a neutral impact on first half adjusted earnings per
share, while foreign currency translation and higher pension
expense negatively impacted earnings by $0.20 per share in the
first six months of 2012. Adjusted earnings per share in the first
half of 2012 exclude the $0.32 per share gain from the sale of John
Varvatos and $0.06 per share in acquisition-related expenses.
Earnings per share in the 2011 period benefitted from $0.18 in
special items including the aforementioned $0.07 gain from a
facility closure. On a GAAP basis, first half net income was $371
million while earnings increased 11 percent to $3.31 per share.
Coalition Review
Outdoor & Action Sports revenues increased 45 percent
in the second quarter, with organic revenue growth of 12 percent
(16 percent in constant dollars). The addition of the Timberland®
and Smartwool® brands contributed $239 million to revenues.
Global revenues of The North Face® brand during the quarter
increased 14 percent (16 percent in constant dollars), with the
Americas, Europe and Asia regions each growing in excess of 15
percent in constant dollars. The North Face® brand’s
direct-to-consumer business continued to post healthy growth, up 9
percent in the quarter. The Vans® brand achieved a 25 percent (29
percent in constant dollars) increase in global revenues in the
quarter, with double-digit revenue growth in the Americas, Europe
and Asia. The Vans direct-to-consumer business also demonstrated
solid results, with revenues rising by 18 percent. As anticipated,
Timberland’s revenues were flat in the quarter (up 2 percent in
constant dollars).
Excluding Timberland, Outdoor & Action Sports operating
income rose 22 percent and operating margin increased 110 basis
points to 13.6 percent from 12.5 percent in the 2011 period. On a
GAAP basis, due to the seasonally driven loss from Timberland and
acquisition-related expenses, operating income for the coalition
declined 8 percent and the operating margin was 7.9 percent.
For the first half of 2012, Outdoor & Action Sports revenues
grew 53 percent, with organic revenue growth of 13 percent (16
percent in constant dollars). For the full year, we look forward to
constant dollar organic revenues growing at a low- to mid-teen
percentage rate.
Jeanswear revenues were down 3 percent (down 1 percent in
constant dollars) in the quarter, reflecting a shift of spring
seasonal products that boosted first quarter revenues. Double-digit
revenue increases in the Western Specialty and Asian businesses,
together with strong sales of Rock & Republic® jeans products,
were offset by a modest decline in Mass channel revenues, lower
revenues of the Lee® brand in the U.S. due to current challenges in
the mid-tier channel, and soft conditions in Europe.
Jeanswear operating margin was stronger than anticipated in the
quarter, fueled by a higher gross margin reflecting lower
manufacturing costs in our owned plants and tight inventory
controls. Operating margin rose 30 basis points to 15.7 percent
with operating income that was essentially flat with the second
quarter of 2011.
During the first half of 2012, Jeanswear revenues rose 3 percent
(5 percent in constant dollars), giving us confidence in our
guidance for mid single-digit constant dollar revenue growth for
the full year. Operating margin comparisons should continue to
strengthen in the second half of the year.
Imagewear revenues continued to grow in the second
quarter, rising 3 percent, with increases in both the Image and
Licensed Sports businesses. As expected, the revenue comparison was
tempered by the exceptionally strong growth achieved in the prior
year’s quarter.
Also as anticipated, operating income and margin both declined
in the quarter, as product costs peaked in the current period.
Imagewear revenues for the first half increased 8 percent, with
mid single-digit growth still anticipated for the full year.
Despite the impact of higher product costs in the first half of
2012, Imagewear operating margin should improve in the second half
and exceed 2011 levels for the full year.
Sportswear revenues declined 2 percent in the second
quarter, with double-digit growth in Kipling® (U.S.) brand revenues
offset by lower Nautica® brand revenues. Nautica’s results in the
quarter were reduced by a shift in the timing of special programs,
as well as lower distressed sales in the quarter. On the positive
side, the Nautica® brand’s full price wholesale and
direct-to-consumer businesses both achieved healthy growth in the
quarter.
Sportswear operating income was about flat in the quarter, with
a slight increase in operating margin to 9.8 percent from 9.7
percent in the second quarter of 2011.
First half revenues for Sportswear were up 4 percent, in line
with expected mid single-digit growth for the full year.
Contemporary Brands revenues were down 9 percent in the
quarter (6 percent in constant dollars), with the decline due
entirely to the sale of John Varvatos. Excluding John Varvatos in
both periods, revenues increased 4 percent (7 percent in constant
dollars). The 7 for All Mankind®, Splendid® and Ella Moss® brands
each achieved higher revenues on a constant dollar basis in the
quarter.
Operating income increased 12 percent in the quarter, with a 200
basis point improvement in operating margin to 11.1 percent from
the prior year’s period. Excluding John Varvatos in both periods,
operating margin improved to 12.2 percent from 9.9 percent.
All of the brands now in the Contemporary Brands portfolio are
on track to deliver higher revenues this year, with double-digit
growth expected in the Splendid® and Ella Moss® brands. Excluding
John Varvatos, Contemporary Brands revenues should increase at a
high single-digit rate in 2012. Due to the John Varvatos sale,
total coalition revenues are expected to decline at a mid
single-digit rate in 2012.
International Review (In Constant Dollars)
International revenues increased 42 percent in the second
quarter, with 26 percentage points of the growth attributable to
Timberland. Despite economic headwinds, organic revenues in Europe
increased 16 percent driven by solid performance in the Vans®, The
North Face®, 7 For All Mankind® and Napapijri® brands. In Asia,
organic revenues increased 20 percent, with continued growth in the
Lee®, The North Face®, Vans® and Kipling® brands. Organic revenue
growth in China remains robust, rising over 30 percent in the
quarter. International revenues reached 33 percent of total
revenues in the quarter compared with 29 percent in the second
quarter of 2011.
Direct-to-Consumer Review
Direct-to-consumer revenues increased 37 percent in the second
quarter, with 29 percentage points of the growth attributable to
Timberland. Direct-to-consumer revenues of The North Face®, Vans®,
Nautica® and 7 For All Mankind® brands each achieved healthy growth
in the period. A total of 34 stores were opened across our brands
in the quarter, bringing the total number of owned retail stores to
1,071. Direct-to-consumer revenues reached 21 percent of VF’s total
revenues in the quarter compared with 18 percent in the 2011
period.
Balance Sheet Review
Inventories continue to be tightly controlled. Excluding
Timberland, inventories rose only 3 percent from June 2011 levels.
Total inventories rose 22 percent from the prior year. Higher
short-term debt levels compared with June 2011 are attributable to
working capital needs. Given strong cash generation, short-term
borrowings are expected to be paid down by year-end.
2012 Earnings and Cash Flow Guidance Raised
Based on the strong results achieved in the first half of 2012,
adjusted earnings per share in 2012 are now expected to rise to
approximately $9.50 per share, up $0.05 from the $9.45 per share
guidance provided on April 27. Revised guidance covers an
additional negative impact from foreign currency exchange of $0.07
per share compared to prior guidance. Given an assumed euro to U.S.
dollar conversion rate of 1.22 for the second half, the full year
negative impact of foreign currency translation is now estimated at
$0.42 per share. The impact from higher pension expense in 2012
remains $0.19 per share.
The expected earnings contribution from Timberland in 2012
remains approximately $1.10 per share.
Guidance for adjusted earnings per share continues to exclude
two items: 1) Timberland acquisition-related expenses of $0.24 per
share, and 2) the $0.32 per share gain from the sale of John
Varvatos. Inclusive of these two items, 2012 earnings per share on
a GAAP basis is now expected to reach $9.58.
Revenues for 2012 are expected to rise by approximately 15
percent (17 percent in constant dollars) to $10.9 billion, with
Timberland accounting for approximately $1 billion of the growth.
Excluding Timberland, revenues should rise by approximately 6
percent (8 percent in constant dollars).
Reflecting strong working capital management, cash flow from
operations is now expected to reach a record $1.2 billion in
2012.
Adjusted Amounts
This release refers to adjusted amounts that exclude
restructuring and other costs related to the acquisition of
Timberland, which approximated $5 million pretax ($0.03 per share)
in the second quarter and $10 million pre-tax ($0.06 per share) in
the first half of 2012, and are currently estimated at $35 million
pre-tax ($0.24 per share) for the full year. Additionally, adjusted
amounts referenced in conjunction with the second quarter, first
half and 2012 annual guidance exclude the gain on the sale of John
Varvatos Enterprises, Inc. of approximately $42 million pre-tax
($0.32 per share inclusive of a $0.10 per share tax benefit
triggered by the sale). Reconciliations of GAAP measures to
adjusted amounts are presented in the supplemental financial
information included with this release, which identify and quantify
all excluded items.
Dividend Declared
The Board of Directors declared a quarterly cash dividend of
$0.72 per share, payable on September 20, 2012 to shareholders of
record as of the close of business on September 10, 2012.
Webcast Information
VF will hold its second quarter conference call and webcast
today at approximately 8:30 a.m. ET. Interested parties should call
1-877-675-4751 domestic, or 1-719-325-4891 international, to access
the call. You may also access this call via the Internet at
http://www.vfc.com. A replay of the conference call will be
available from July 19 through July 26, 2012 via telephone at
877-870-5176 or 858-384-5517 (access code: 9450521), or at
www.vfc.com.
About VF
VF Corporation is a global leader in branded lifestyle apparel
with more than 30 brands. The company’s top six brands are The
North Face®, Wrangler®, Timberland®, Vans®, Lee® and Nautica®;
other brands include 7 For All Mankind®, Bulwark®, Eagle Creek®,
Eastpak®, Ella Moss®, JanSport®, Kipling®, lucy®, Majestic®,
Napapijri®, Red Kap®, Reef®, Riders®, Splendid® and Smartwool®.
Forward Looking Statements
Certain statements included in this release and the attachments
are "forward-looking statements" within the meaning of the federal
securities laws. Forward-looking statements are made based on our
expectations and beliefs concerning future events impacting VF and
therefore involve a number of risks and uncertainties. You can
identify these statements by the fact that they use words such as
“will,” “anticipate,” “estimate,” “expect,” “should,” and “may” and
other words and terms of similar meaning or use of future dates. We
caution that forward-looking statements are not guarantees and that
actual results could differ materially from those expressed or
implied in the forward-looking statements. Potential risks and
uncertainties that could cause the actual results of operations or
financial condition of VF to differ materially from those expressed
or implied by forward-looking statements in this release include,
but are not limited to, the level of consumer confidence and
overall level of consumer demand for apparel; fluctuations in the
price, availability and quality of raw materials and contracted
products; disruption to VF’s distribution system; disruption and
volatility in the global capital and credit markets; VF's reliance
on a small number of large customers; the financial strength of
VF's customers; VF’s response to changing fashion trends;
increasing pressure on margins; VF's ability to implement its
growth strategy; VF's ability to grow its international and
direct-to-consumer businesses; VF's ability to successfully
integrate and grow acquisitions, including the Timberland
acquisition; VF's ability to maintain the strength and security of
its information technology systems; stability of VF's manufacturing
facilities and foreign suppliers; continued use by VF's suppliers
of ethical business practices; VF's ability to accurately forecast
demand for products; continuity of members of VF's management; VF's
ability to protect trademarks and other intellectual property
rights; maintenance by VF's licensees and distributors of the value
of VF's brands; foreign currency fluctuations; and legal,
regulatory, political and economic risks in international markets.
More information on potential factors that could affect VF's
financial results is included from time to time in VF's public
reports filed with the Securities and Exchange Commission,
including VF's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q.
(Financial Tables Follow)
VF CORPORATIONConsolidated
Statements of Income(Unaudited)(In thousands, except
per share)
Three Months Ended June
Six Months Ended June 2012 2011
2012 2011 Net Sales $
2,115,629 $ 1,821,218 $ 4,643,046 $ 3,758,342
Royalty Income
26,157 18,905 55,195
40,580
Total Revenues 2,141,786
1,840,123 4,698,241
3,798,922
Costs and Operating Expenses Cost of
goods sold 1,155,412 994,591 2,544,278 2,028,447 Marketing,
administrative and general expenses 822,389
656,861 1,675,876 1,307,161
1,977,801 1,651,452 4,220,154
3,335,608
Operating Income
163,985 188,671 478,087 463,314
Other Income
(Expense) Interest income 1,188 1,510 2,226 2,476 Interest
expense (23,593 ) (15,962 ) (46,938 ) (31,902 ) Miscellaneous, net
41,557 (2,735 ) 43,303
(4,666 ) 19,152 (17,187 ) (1,409 )
(34,092 )
Income Before Income Taxes 183,137
171,484 476,678 429,222
Income Taxes 27,712
41,917 106,026 98,235
Net Income 155,425 129,567 370,652 330,987
Net (Income) Loss Attributable to
Noncontrolling Interests
(128 ) (199 ) (139 ) (916 )
Net Income Attributable to VF Corporation $ 155,297 $
129,368 $ 370,513 $ 330,071
Earnings Per Share Attributable to VF
Corporation Common Stockholders
Basic $ 1.42 $ 1.19 $ 3.37 $ 3.04 Diluted 1.40 1.17 3.31 2.99
Weighted Average Shares Outstanding Basic 109,216
109,079 109,874 108,651 Diluted 111,228 110,890 111,992 110,453
Cash Dividends Per Common Share $ 0.72 $ 0.63 $ 1.44
$ 1.26
Basis of presentation: VF operates and reports
using a 52/53 week fiscal year ending on the Saturday closest to
December 31 of each year. Similarly, the fiscal second quarter ends
on the Saturday closest to June 30. For presentation purposes
herein, all references to periods ended June 2012, December 2011
and June 2011 relate to the 13 week, 52 week and 13 week fiscal
periods ended June 30, 2012, December 31, 2011 and July 2, 2011,
respectively.
VF CORPORATIONConsolidated Balance
Sheets(Unaudited)(In thousands)
June December
June 2012 2011 2011
ASSETS Current Assets Cash and equivalents $
330,512 $ 341,228 $ 611,478 Accounts receivable, net 1,033,835
1,120,246 889,201 Inventories 1,570,298 1,453,645 1,285,950 Other
current assets 405,164 272,825
259,279 Total current assets 3,339,809 3,187,944 3,045,908
Property, Plant and Equipment, net 735,827 737,451
626,271
Intangible Assets 2,928,311 2,958,463
1,555,517
Goodwill 1,996,355 2,023,460 1,194,342
Other
Assets 425,767 405,808
378,408 $ 9,426,069 $ 9,313,126 $
6,800,446
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities Short-term borrowings $ 681,835 $
281,686 $ 42,567 Current portion of long-term debt 2,801 2,744
2,693 Accounts payable 506,742 637,116 456,114 Accrued liabilities
576,661 744,486 512,540
Total current liabilities 1,768,039 1,666,032 1,013,914
Long-term Debt 1,830,473 1,831,781 934,600
Other
Liabilities 1,303,505 1,290,138 581,394
Commitments
and Contingencies Stockholders' Equity Common
Stock 109,438 110,557 109,598 Additional paid-in capital 2,421,564
2,316,107 2,221,135 Accumulated other comprehensive income (loss)
(416,386 ) (421,477 ) (179,783 ) Retained earnings 2,409,436
2,520,804 2,118,343 Total equity
attributable to VF Corporation 4,524,052 4,525,991 4,269,293
Noncontrolling interests - (816 ) 1,245
Total stockholders' equity 4,524,052
4,525,175 4,270,538 $ 9,426,069
$ 9,313,126 $ 6,800,446
VF CORPORATIONConsolidated Statements
of Cash Flows(Unaudited)(In thousands)
Six Months Ended June 2012
2011 Operating Activities Net
income $ 370,652 $ 330,987
Adjustments to reconcile net income to
cash used by operating activities:
Depreciation 70,504 57,091 Amortization of intangible assets 24,221
19,246 Other amortization 16,046 11,418 Stock-based compensation
46,516 32,977 Pension contributions under expense 38,297 22,029
Gain on sale of business (41,745 ) - Other, net 9,446 6,523 Changes
in operating assets and liabilities, net of acquisitions: Accounts
receivable 71,072 (97,162 ) Inventories (136,497 ) (199,650 ) Other
current assets (45,419 ) (15,124 ) Accounts payable (126,875 )
(73,723 ) Accrued compensation (65,615 ) (50,222 ) Accrued income
taxes (84,510 ) (56,817 ) Accrued liabilities (75,738 ) (38,883 )
Other assets and liabilities 2,774 8,989
Cash provided (used) by operating activities 73,129 (42,321
)
Investing Activities Capital expenditures (118,980
) (64,022 )
Proceeds from sale of business
68,264 -
Trademarks acquisition
- (56,598 ) Software purchases (7,792 ) (8,221 ) Other, net
3,854 (1,107 ) Cash used by investing activities
(54,654 ) (129,948 )
Financing Activities
Net increase in short-term borrowings
400,166 6,252 Payments on long-term debt (1,398 ) (1,260 ) Purchase
of Common Stock (299,096 ) (5,166 ) Cash dividends paid (158,581 )
(137,182 ) Proceeds from issuance of Common Stock, net 7,180 83,845
Tax benefits of stock option exercises 25,243
14,718 Cash used by financing activities (26,486 ) (38,793 )
Effect of Foreign Currency Rate Changes on Cash
and Equivalents (2,705 ) 30,301
Net Change in Cash and Equivalents (10,716 ) (180,761 )
Cash and Equivalents - Beginning of Year
341,228 792,239
Cash and Equivalents
- End of Year $ 330,512 $ 611,478
VF CORPORATIONSupplemental Financial
InformationBusiness Segment Information(Unaudited)(In
thousands)
Three Months Ended June
Six Months Ended June 2012 2011
2012 2011 Coalition
Revenues Outdoor & Action Sports $ 1,039,974 $ 717,928 $
2,303,941 $ 1,506,143 Jeanswear 594,006 613,367 1,335,717 1,292,610
Imagewear 251,493 244,074 529,014 490,882 Sportswear 117,488
120,272 240,403 232,166 Contemporary Brands 107,947 118,103 234,851
230,019 Other 30,878 26,379
54,315 47,102 Total coalition revenues
$ 2,141,786 $ 1,840,123 $ 4,698,241 $
3,798,922
Coalition Profit Outdoor
& Action Sports $ 82,469 $ 89,472 $ 284,169 $ 233,377 Jeanswear
93,347 94,365 204,119 217,491 Imagewear 30,364 40,271 73,290 77,169
Sportswear 11,486 11,658 22,212 19,088 Contemporary Brands 11,992
10,689 26,850 20,373 Other 366 64
(1,244 ) (2,010 ) Total coalition profit
230,024 246,519 609,396 565,488
Corporate and Other
Expenses (24,482 ) (60,583 ) (88,006 ) (106,840 )
Interest,
net (22,405 ) (14,452 ) (44,712 )
(29,426 )
Income Before Income Taxes $ 183,137
$ 171,484 $ 476,678 $ 429,222
VF CORPORATION Supplemental Financial Information
Business Segment Information – Constant Currency Basis
(Unaudited) (In thousands)
Three Months Ended June 2012 Exclude
As Reported Impact of Foreign under
GAAP Currency Exchange Constant Currency
Coalition Revenues Outdoor & Action Sports $ 1,039,974 $
(30,634 ) $ 1,070,608 Jeanswear 594,006 (14,212 ) 608,218 Imagewear
251,493 (800 ) 252,293 Sportswear 117,488 - 117,488 Contemporary
Brands 107,947 (2,739 ) 110,686 Other 30,878 -
30,878 Total coalition revenues $
2,141,786 $ (48,385 ) $ 2,190,171
Coalition Profit Outdoor & Action Sports $ 82,469 $
(5,688 ) $ 88,157 Jeanswear 93,347 (887 ) 94,234 Imagewear 30,364
(196 ) 30,560 Sportswear 11,486 - 11,486 Contemporary Brands 11,992
(446 ) 12,438 Other 366 - 366
Total coalition profit 230,024 (7,217 ) 237,241
Corporate and Other Expenses (24,482 ) - (24,482 )
Interest, net (22,405 ) -
(22,405 )
Income Before Income Taxes $ 183,137
$ (7,217 ) $ 190,354
Constant Currency Financial
Information
VF is a global company that reports
financial information in U.S. dollars in accordance with generally
accepted accounting principles. Foreign currency exchange rate
fluctuations affect the amounts reported by VF from translating its
foreign revenues and expenses into U.S. dollars. These rate
fluctuations can have a significant effect on reported operating
results. As a supplement to our reported operating results, we
present constant currency financial information, which is a
non-GAAP financial measure. We use constant currency information to
provide a framework to assess how our businesses performed
excluding the effects of changes in foreign currency translation
rates. Management believes this information is useful to investors
to facilitate comparisons of operating results and better identify
trends in our businesses.
To calculate coalition revenues and
profits on a constant currency basis, operating results for the
current year period for entities reporting in currencies other than
the U.S. dollar are translated into U.S. dollars at the average
exchange rates in effect during the comparable period of the prior
year (rather than the actual exchange rates in effect during the
current year period).
These constant currency performance
measures should be viewed in addition to, and not in lieu of or
superior to, our operating performance measures calculated in
accordance with GAAP. The constant currency information presented
may not be comparable to similarly titled measures reported by
other companies.
VF CORPORATION Supplemental Financial
Information Business Segment Information – Constant Currency
Basis (Unaudited) (In thousands)
Six Months Ended June 2012
Exclude As Reported Impact of Foreign under
GAAP Currency Exchange Constant Currency
Coalition Revenues Outdoor & Action Sports $ 2,303,941 $
(45,358 ) $ 2,349,299 Jeanswear 1,335,717 (21,287 ) 1,357,004
Imagewear 529,014 (967 ) 529,981 Sportswear 240,403 - 240,403
Contemporary Brands 234,851 (3,640 ) 238,491 Other 54,315
- 54,315 Total coalition
revenues $ 4,698,241 $ (71,252 ) $ 4,769,493
Coalition Profit Outdoor & Action Sports $
284,169 $ (10,205 ) $ 294,374 Jeanswear 204,119 (944 ) 205,063
Imagewear 73,290 (296 ) 73,586 Sportswear 22,212 - 22,212
Contemporary Brands 26,850 (632 ) 27,482 Other (1,244 )
- (1,244 ) Total coalition profit
609,396 (12,077 ) 621,473
Corporate and Other
Expenses (88,006 ) - (88,006 )
Interest, net
(44,712 ) - (44,712 )
Income Before
Income Taxes $ 476,678 $ (12,077 ) $ 488,755
Constant Currency Financial Information
VF is a global company that reports
financial information in U.S. dollars in accordance with generally
accepted accounting principles. Foreign currency exchange rate
fluctuations affect the amounts reported by VF from translating its
foreign revenues and expenses into U.S. dollars. These rate
fluctuations can have a significant effect on reported operating
results. As a supplement to our reported operating results, we
present constant currency financial information, which is a
non-GAAP financial measure. We use constant currency information to
provide a framework to assess how our businesses performed
excluding the effects of changes in foreign currency translation
rates. Management believes this information is useful to investors
to facilitate comparisons of operating results and better identify
trends in our businesses.
To calculate coalition revenues and
profits on a constant currency basis, operating results for the
current year period for entities reporting in currencies other than
the U.S. dollar are translated into U.S. dollars at the average
exchange rates in effect during the comparable period of the prior
year (rather than the actual exchange rates in effect during the
current year period).
These constant currency performance
measures should be viewed in addition to, and not in lieu of or
superior to, our operating performance measures calculated in
accordance with GAAP. The constant currency information presented
may not be comparable to similarly titled measures reported by
other companies.
VF CORPORATION Supplemental Financial
Information Reconciliation of Select GAAP Measures to
Non-GAAP Measures (Unaudited) (In thousands)
Three
Months Six Months Ended Operating
Ended Operating June 2012 Margin
June 2012 Margin Operating Income,
as reported under GAAP $ 163,985 7.7 % $ 478,087 10.2 %
Timberland acquisition-related expenses 4,954
9,596
Operating Income, as adjusted $ 168,939
7.9 % $ 487,683 10.4 % Timberland loss, excluding
acquisition-related expenses 24,809 2,710
Operating Income, excluding Timberland
$ 193,748 10.2 %
$ 490,393
12.0 %
Net Income, as reported under
GAAP $ 155,297 $ 370,513 Timberland acquisition-related
expenses 3,430 6,725 Gain on sale of John Varvatos
Enterprises, Inc. (35,814 ) (35,814 )
Net
Income, as adjusted $ 122,913 $ 341,424
Actual Actual Guidance Three
Months Six Months Year Ended Ended
Ended June 2012 June 2012 December 2012
Diluted earnings per share, as reported under GAAP $
1.40 $ 3.31 $ 9.58 Timberland acquisition-related expenses
0.03 0.06 0.24 Gain on sale of John Varvatos Enterprises,
Inc. (0.32 ) (0.32 ) (0.32 )
Diluted
earnings per share, as adjusted $ 1.11 $ 3.05 $
9.50
Non-GAAP Financial Information
The 2012 financial information above has
been presented on a GAAP basis and on an adjusted basis which
excludes the impact of costs related to the acquisition of
Timberland and the gain on the sale of John Varvatos Enterprises,
Inc. These adjusted presentations are non-GAAP measures. Management
believes these measures provide investors with useful supplemental
information regarding VF's underlying business trends and the
performance of VF's ongoing operations and are useful for
period-over-period comparisons of such operations.
Management uses the above financial
measures internally in its budgeting and review process and, in
some cases, as a factor in determining compensation. While
management believes that these non-GAAP financial measures are
useful in evaluating the business, this information should be
considered as supplemental in nature and should be viewed in
addition to, and not in lieu of or superior to, VF's operating
performance measures calculated in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similarly titled measures presented by other companies.
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