VF Corporation (NYSE: VFC) today announced results for its third
quarter ended September 29, 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.
“Having achieved yet another quarter of record revenue, gross
margin and earnings per share performance, we remain on track to
deliver a year of outstanding results to our shareholders,” said
Eric Wiseman, VF Chairman and Chief Executive Officer. “Our third
quarter results clearly demonstrate VF’s unique competitive
advantages – diversity across brands, geographic regions and
channels; powerful brands that resonate with consumers; and
business disciplines that enable the consistent, successful
execution of our growth strategies.”
Wiseman concluded, “We are confident in our ability to deliver a
very strong fourth quarter across our businesses, supported by
higher levels of strategic investments in key brands and markets
that are proven drivers of both top and bottom line growth.”
Third Quarter 2012 Review
Revenues rose 14 percent to $3.1 billion from $2.8
billion in 2011. Third quarter revenues from Timberland were $499
million compared with $164 million in the same period of last year;
the acquisition was completed on September 13, 2011. Organic
revenue growth in the quarter was 2 percent (6 percent in constant
dollars) driven by continued strength in the Outdoor & Action
Sports, international and direct-to-consumer businesses. The
Outdoor & Action Sports, Jeanswear, Sportswear and Imagewear
coalitions all achieved growth on a constant dollar basis. The sale
of John Varvatos impacted VF’s organic revenue growth by 1
percentage point in the third quarter.
Gross margin rose by 140 basis points to a record 46.7
percent, compared with 45.3 percent in the same period of 2011 with
improvements in nearly every business. The higher gross margin also
reflects the continued shift in our revenue mix towards higher
margin businesses.
Operating income was $551 million on an adjusted basis in
the third quarter of 2012 and included adjusted operating income
from Timberland of $77 million. On a GAAP basis, third quarter
operating income was $537 million compared with $430 million in the
same period of the prior year. Acquisition-related expenses for
Timberland in the third quarter of 2012 and 2011 were $14 million
and $27 million, respectively. Adjusted operating margin was
17.5 percent compared to 16.6 percent in the third quarter of 2011.
The current quarter’s operating margin was negatively impacted by
80 basis points by Timberland. On a GAAP basis, operating margin
was a record 17.1 percent.
Net income on an adjusted basis was $393 million compared
to $321 million in the same period last year. Adjusted earnings
per share increased 23 percent to $3.52 per share from $2.87
during last year’s same period. This increase includes the negative
impacts from foreign currency translation ($0.18 per share) and
higher pension expense ($0.05 per share). Timberland was accretive
to third quarter adjusted earnings per share in 2012 and 2011 by
$0.54 and $0.25, respectively. Adjusted earnings per share for the
quarter exclude Timberland acquisition-related expenses of $0.10 in
2012 and $0.18 in 2011. On a GAAP basis, third quarter net income
was $381 million while earnings grew 27 percent to $3.42 per
share.
Nine Months 2012 Review
Revenues increased 20 percent to $7.8 billion from $6.5
billion in the first nine months of 2011. The Timberland
acquisition accounted for 14 percentage points, or $931 million, of
the revenue growth in the period. Organic revenue growth during the
first nine months of 2012 was 6 percent; in constant dollars,
organic revenue growth in the first nine months was 8 percent. All
revenue comparisons include a negative impact of about 1 percentage
point from the sale of John Varvatos during the period.
Net income on an adjusted basis increased 13 percent to
$734 million in the first nine months of 2012, up from $651 million
reported in the same 2011 period. Adjusted earnings per
share rose 12 percent during the first nine months to $6.56
from $5.87 in the same period last year. Through the first nine
months of 2012, Timberland contributed $0.53 to adjusted earnings
per share. Additionally, foreign currency translation and higher
pension expense combined have negatively impacted earnings by $0.43
per share. Adjusted earnings per share in the first nine months of
2012 exclude the $0.32 per share gain from the sale of John
Varvatos and $0.16 per share in Timberland acquisition-related
expenses. On a GAAP basis, net income in the first nine months of
2012 was $752 million while earnings increased 18 percent to $6.72
per share.
Coalition Review
Outdoor & Action Sports delivered another quarter of
record performance with revenues up 29 percent and organic revenue
growth of 6 percent, or 11 percent in constant dollars. The
addition of the Timberland® and Smartwool® brands contributed $499
million to revenues in the quarter.
As anticipated, global revenue growth in the current quarter for
The North Face® brand moderated from prior periods, increasing 5
percent, or 8 percent in constant dollars. High single-digit growth
in the Americas region and exceptionally strong growth in Asia were
offset by a mid-single digit constant dollar decline in Europe. The
North Face® brand remains on track for mid-teen constant dollar
revenue growth both in the fourth quarter and for the full year.
The Vans® brand achieved a 21 percent (26 percent in constant
dollars) increase in global revenues in the quarter, with
double-digit revenue growth in the Americas, Europe and Asia
regions. Based on the Vans® brand’s exceptional performance year to
date, full year constant dollar revenue growth should approximate
25 percent. On a full quarter basis, Timberland constant dollar
revenues declined slightly in the third quarter. On a full year
basis, Timberland should achieve a modest increase in revenues on a
constant dollar basis.
Excluding Timberland, Outdoor & Action Sports operating
income rose 16 percent and operating margin increased 220 basis
points to an all-time high of 25.7 percent compared with 23.5
percent in the 2011 period. On a GAAP basis, operating income for
the coalition increased 29 percent with a flat year-over-year
operating margin, reflecting the impact of Timberland.
Double-digit constant dollar revenue growth in Outdoor &
Action Sports should continue in the fourth quarter, driven by
strong performance by The North Face® and Vans® brands. Both brands
should benefit from new store openings, and comp store and
e-commerce growth, supported by higher levels of marketing spending
in key regions. For the full year, Outdoor & Action Sports
revenues are expected to grow at the higher end of the 25-30
percent range provided in February 2012, with constant dollar
organic revenues growing at a mid-teen percentage rate.
Jeanswear revenues were down 1 percent (up 1 percent in
constant dollars) in the quarter, reflecting a 3 percent increase
in U.S. sales, a high single-digit increase in its Asia business
and a double-digit (constant currency) increase in the
Latin/Central American region. These increases were offset by the
continuation of challenging economic conditions in Europe.
Jeanswear operating margin improved significantly, up 320 basis
points to 18.3 percent with operating income up 19.8 percent over
the prior year period. The improvement was driven by lower product
costs and a significant improvement in European Jeanswear
profitability. Jeanswear continues to anticipate mid single-digit
constant dollar revenue growth for the full year and operating
margin expansion of more than 100 basis points.
Imagewear revenues grew 3 percent in the third quarter.
As expected, the revenue comparison was impacted by the
exceptionally strong growth achieved in the prior year’s third
quarter, which included expanded distribution in the protective
apparel business. As anticipated, operating income and margin both
declined in the quarter, as higher product costs continued to
negatively impact the business. As these cost impacts subside,
operating margin in the fourth quarter should increase over that of
the prior year’s same period.
With strong first half growth from its Image business and strong
second half growth from its Licensed Sports Group, Imagewear
coalition revenues are on track for mid single-digit growth for the
full year, consistent with guidance given in February. Operating
margin should remain strong, approximating that of the prior
year.
Sportswear revenues increased 2 percent in the third
quarter, tempered by a shift in the timing of special programs into
the fourth quarter as well as lower distressed sales. Both the
Nautica® and Kipling® (U.S.) brands achieved double-digit
direct-to-consumer growth in the quarter. Sportswear operating
income was up slightly in the quarter, with operating margin about
flat with the prior year period.
Both the Nautica® and Kipling® (U.S.) brands expect to deliver
strong double-digit revenue growth in the fourth quarter, with
total Sportswear revenues for the full year expected to increase at
a high single-digit rate.
Contemporary Brands revenues were down 17 percent in the
quarter (down 15 percent in constant dollars), with the decline
primarily due to the sale of John Varvatos, which occurred in April
2012. Excluding John Varvatos in both the 2011 and 2012 periods,
revenues decreased 1 percent (increased 2 percent in constant
dollars). The revenue comparisons were negatively impacted by a
reduction in sales of excess inventories for the 7 For All Mankind®
brand, which benefited the coalition’s profitability in the
quarter. The Splendid® and Ella Moss® brands, on a combined basis,
achieved a high teen rate of revenue growth in the quarter.
Contemporary Brands achieved a significant improvement in
profits and profitability in the third quarter, with operating
income increasing 66 percent and operating margin expanding by 650
basis points to 12.9 percent. Excluding John Varvatos from the
third quarters of 2011 and 2012, operating margin improved 540
basis points, to 12.9 percent in the 2012 period from 7.5 percent
in the prior year.
Due to the John Varvatos sale, total Contemporary Brands
coalition revenues are expected to decline at a high single-digit
rate in 2012. Excluding John Varvatos, Contemporary Brands
coalition revenues should increase at a high single-digit rate in
2012.
International Review (In Constant Dollars)
International revenues increased 28 percent in the third
quarter, with 20 percentage points of the growth attributable to
Timberland. As anticipated, organic revenue growth in Europe
decelerated in the quarter, rising by 3 percent. The Vans® brand
continued its exceptional growth in Europe with revenues up 47% in
constant dollars in the quarter. Higher revenues were also achieved
in Europe by the Kipling® and Napapijri® brands. In Asia, organic
revenues increased 25 percent. Strong growth in The North Face®,
Kipling® and Lee® brands continued in China, where organic revenues
grew 23 percent in the quarter. International revenues reached 40
percent of total revenues in the quarter compared with 38 percent
in the third quarter of 2011.
Direct-to-Consumer Review
Direct-to-consumer revenues increased 28 percent in the third
quarter, with 19 percentage points of the growth attributable to
Timberland. The North Face® brand’s direct-to-consumer business
continued to post strong growth, up 10 percent in the quarter. The
Vans® brand’s direct-to-consumer business also demonstrated solid
results, with revenues rising by 18 percent. Direct-to-consumer
revenues for the Nautica®, 7 For All Mankind® and Kipling® brands
each achieved healthy growth during the quarter. A total of 42
stores were opened across our brands in the quarter, bringing the
total number of owned retail stores to 1,101. Direct-to-consumer
revenues reached 18 percent of VF’s total revenues in the quarter
compared with 16 percent in the 2011 period.
Balance Sheet Review
Inventories remain tightly controlled and were down 1 percent
from September 2011 levels. Given anticipated strong cash
generation, the company expects to pay off all commercial paper by
the end of the year.
2012 Earnings Per Share Guidance Raised
Based on strong results achieved in the first nine months of
2012, full year adjusted earnings per share are now expected to be
approximately $9.60 per share, up $0.10 from the $9.50 per share
guidance provided on July 19. The company also indicated plans to
increase its fourth quarter global marketing investment over
previously expected levels, particularly in The North Face® and
Vans® brands, to capitalize on current momentum, support growth in
key strategic regions and connect even more deeply with consumers.
In addition, given a revised assumed euro to U.S. dollar conversion
rate of 1.25 for the fourth quarter, the full year negative impact
of foreign currency translation is now estimated at $0.35 per share
compared to prior guidance of $0.42 per share.
The expected adjusted earnings contribution from Timberland in
2012 remains at $1.10 per share, as compared with $0.60 in 2011,
and is approximately $0.57 in the fourth quarter versus $0.34 in
the same period of 2011. The impact on earnings from higher pension
expense in 2012 remains at $0.19 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 $9.68.
Top line guidance for 2012 remains at $10.9 billion, an increase
of approximately 15 percent, or 17 percent in constant dollars,
with Timberland accounting for just under $1 billion of the growth.
Excluding Timberland, revenues are expected to rise by
approximately 6 percent, or 8 percent in constant dollars. Each of
the above comparisons includes about a one percentage point
negative impact from the sale of John Varvatos.
Reflecting gross margin improvement across nearly all coalitions
and an increasingly higher percentage of revenues coming from
higher margin businesses, full year gross margin is expected to
improve by approximately 80 basis points in 2012, driven by a
substantial year-over-year improvement in the fourth quarter. The
company continues to expect cash flow from operations to reach a
record $1.2 billion in 2012.
In the fourth quarter, which marks the first fully comparable
period with Timberland under VF’s ownership, constant dollar
revenue growth is expected to increase by about 7 percent over the
same period last year. This also includes a one-percentage point
negative impact from the sale of John Varvatos. Given expectations
for stronger revenue growth comparisons across all coalitions, a
greater contribution to earnings from its highly profitable and
growing direct-to-consumer business, and more normalized product
costs, adjusted earnings per share for the fourth quarter should
post the strongest comparison of the year, increasing by just over
30 percent.
Adjusted Amounts
This release refers to adjusted amounts that exclude
restructuring and other costs related to the acquisition of
Timberland, which approximated $14 million pretax ($0.10 per share)
in the third quarter and $24 million pre-tax ($0.16 per share) in
the first nine months of 2012, and are currently estimated at $35
million pre-tax ($0.24 per share) for the full year. Additionally,
adjusted amounts in 2012 exclude the gain on the sale of John
Varvatos of approximately $42 million pre-tax ($0.32 per share
inclusive of a $0.10 per share tax benefit triggered by the sale).
Adjusted amounts in 2011 exclude Timberland acquisition-related
expenses of $26.6 million ($0.18 per share) in the third quarter
and first nine months of the year. 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 Increased
VF’s Board of Directors declared a quarterly dividend of $0.87
per share, reflecting a $0.15 or 21 percent increase over the
previous quarter’s dividend. The dividend is payable December 20,
2012 to shareholders of record on December 10, 2012. This marks the
40th consecutive year of higher dividend payments to
shareholders.
Webcast Information
VF will hold its third quarter conference call and webcast today
at approximately 8:30 a.m. Eastern Time. Interested parties should
call 800-500-0920 (domestic) or 719-457-2653 (international) to
access the call. The conference call will also be broadcast live
and accessible at www.vfc.com. A replay of the conference call will
be available from October 22 through October 29, 2012 via telephone
at 877-870-5176 (access code: 2649529), or at www.vfc.com.
About VF
VF Corporation is a global leader in branded lifestyle apparel
and footwear with more than 30 brands. The company’s largest five
brands are The North Face®, Wrangler®, Timberland®, Vans®, and
Lee®. Other brands include 7 For All Mankind®, Bulwark®, Eagle
Creek®, Eastpak®, Ella Moss®, JanSport®, Kipling®, lucy®,
Majestic®, Napapijri®, Nautica®, Red Kap®, Reef®, Riders®,
Splendid® and Smartwool®. For more information, please visit
www.vfc.com.
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 CORPORATION
Consolidated Statements of
Income
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended September
Nine Months Ended September
2012 2011 2012 2011
Net sales
$ 3,119,614 $ 2,727,704 $ 7,762,660 $ 6,486,046
Royalty income
28,740 22,367 83,935
62,947
Total revenues
3,148,354 2,750,071 7,846,595
6,548,993
Costs and operating expenses
Cost of goods sold 1,678,090 1,504,982 4,222,368 3,533,429
Marketing, administrative and general expenses 933,372
814,971 2,609,248
2,122,132 2,611,462 2,319,953
6,831,616 5,655,561
Operating income
536,892 430,118 1,014,979 893,432 Interest income 632 1,371
2,858 3,847 Interest expense (23,841 ) (20,671 ) (70,779 ) (52,573
) Other income (expense), net 1,569 (6,473 )
44,872 (11,139 )
Income before income taxes
515,252 404,345 991,930 833,567
Income taxes
133,934 102,933 239,960
201,168
Net income
381,318 301,412 751,970 632,399
Net (income) loss attributable to
noncontrolling interests
- (712 ) (139 ) (1,628 )
Net income attributable to VF
Corporation
$ 381,318 $ 300,700 $ 751,831 $ 630,771
Earnings per common share attributable
to VF
Corporation common stockholders Basic $ 3.48 $ 2.74 $ 6.85 $
5.79 Diluted 3.42 2.69 6.72 5.69
Weighted average shares
outstanding
Basic 109,557 109,643 109,800 108,982 Diluted 111,488 111,582
111,849 110,829
Cash dividends per common share
$ 0.72 $ 0.63 $ 2.16 $ 1.89
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 third
quarter ends on the Saturday closest to September 30. For
presentation purposes herein, all references to periods ended
September 2012, December 2011 and September 2011 relate to the 13
week, 52 week and 13 week fiscal periods ended September 29, 2012,
December 31, 2011 and October 1, 2011, respectively.
VF CORPORATION
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share
amounts)
September December September
2012 2011 2011
ASSETS Current assets Cash and
equivalents $ 304,603 $ 341,228 $ 337,391 Accounts receivable, less
allowance for doubtful accounts of: September 2012 - $55,606;
December 2011 - $54,010; September 2011 - $57,279 1,612,579
1,120,246 1,547,741 Inventories: Finished products 1,500,595
1,197,928 1,513,801 Work in process 99,035 86,902 89,261 Materials
and supplies 159,056 168,815
174,840 1,758,686 1,453,645 1,777,902 Other current
assets 322,932 272,825 279,358
Total current assets 3,998,800 3,187,944 3,942,392
Property, plant and equipment 1,925,601 1,830,039 1,787,668
Less accumulated depreciation 1,150,125
1,092,588 1,082,733 775,476 737,451 704,935
Intangible assets 2,922,233 2,958,463 2,978,238
Goodwill 2,003,855 2,023,460 2,077,701
Other assets
431,368 405,808 415,782
Total assets $ 10,131,732 $ 9,313,126 $ 10,119,048
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities Short-term borrowings $ 741,008 $
281,686 $ 1,145,845 Current portion of long-term debt 402,838 2,744
2,709 Accounts payable 535,367 637,116 666,845 Accrued liabilities
756,629 744,486 849,165
Total current liabilities 2,435,842 1,666,032 2,664,564
Long-term debt 1,429,824 1,831,781 1,832,412
Other
liabilities 1,339,282 1,290,138 1,162,173
Commitments and
contingencies Stockholders' equity Preferred Stock, par
value $1; shares authorized, 25,000,000: no shares outstanding in
2011 or 2012 - - - Common Stock, stated value $1; shares
authorized, 300,000,000; shares outstanding; September 2012 -
109,937,451; December 2011 - 110,556,981; September 2011 -
110,081,241 109,937 110,557 110,081 Additional paid-in capital
2,497,795 2,316,107 2,280,544 Accumulated other comprehensive
income (loss) (386,853 ) (421,477 ) (279,966 ) Retained earnings
2,705,905 2,520,804 2,348,152
Total equity attributable to VF Corporation 4,926,784
4,525,991 4,458,811 Noncontrolling interests -
(816 ) 1,088 Total stockholders' equity
4,926,784 4,525,175 4,459,899
Total liabilities and stockholders' equity $ 10,131,732 $
9,313,126 $ 10,119,048
VF CORPORATION
Consolidated Statements of Cash
Flows
(Unaudited)
(In thousands)
Nine Months Ended September 2012
2011
Operating activities
Net income $ 751,970 $ 632,399
Adjustments to reconcile net income to
cash provided (used) by operating activities:
Depreciation 104,628 85,398 Amortization of intangible assets
36,130 29,092 Other amortization 26,025 17,554 Stock-based
compensation 73,149 54,247 Pension expense in excess of
contributions 57,674 32,153 Gain on sale of business (42,000 ) -
Other, net 15,709 (83,439 )
Changes in operating assets and
liabilities, net of purchases and sales of businesses:
Accounts receivable (502,501 ) (573,511 ) Inventories
(317,761 ) (328,330 ) Other current assets (23,854 ) 44,109
Accounts payable (100,101 ) (19,681 ) Accrued compensation (20,153
) 1,257 Accrued income taxes (17,095 ) 26,576 Accrued liabilities
42,078 39,238 Other assets and liabilities 18,707
14,105 Cash provided (used) by operating activities
102,605 (28,833 )
Investing activities
Capital expenditures (190,277 ) (98,173 ) Business acquisition, net
of cash acquired (1,750 ) (2,207,065 ) Proceeds from sale of
business 68,519 - Trademarks acquisition - (56,598 ) Software
purchases (12,509 ) (14,836 ) Other, net (3,429 )
(3,280 ) Cash used by investing activities (139,446 ) (2,379,952 )
Financing activities
Net increase in short-term borrowings 459,173 1,127,805 Payments on
long-term debt (2,079 ) (1,932 ) Proceeds from long-term debt -
898,450 Payment of debt issuance costs - (5,969 ) Purchase of
Common Stock (306,422 ) (6,941 ) Cash dividends paid (237,520 )
(206,277 ) Proceeds from issuance of Common Stock, net 45,668
109,671 Tax benefits of stock option exercises 39,455 22,037
Acquisition of noncontrolling interest - (108
) Cash (used) provided by financing activities (1,725 ) 1,936,736
Effect of foreign currency rate changes
on cash and equivalents
1,941 17,201
Net change in cash and
equivalents
(36,625 ) (454,848 )
Cash and equivalents - beginning of
year
341,228 792,239
Cash and equivalents - end of
year
$ 304,603 $ 337,391
VF CORPORATION
Supplemental Financial
Information
Business Segment Information
(Unaudited)
(In thousands)
Three Months Ended September
Nine Months Ended September 2012
2011 2012
2011
Coalition Revenues
Outdoor & Action Sports
$ 1,852,267 $ 1,436,832 $ 4,156,208 $ 2,942,975
Jeanswear
718,812 727,595 2,054,529 2,020,205
Imagewear
284,526 277,564 813,540 768,446
Sportswear
154,190 151,826 394,593 383,992
Contemporary Brands
104,165 126,182 339,016 356,201
Other
34,394 30,072 88,709
77,174
Total coalition revenues
$ 3,148,354 $ 2,750,071 $ 7,846,595 $
6,548,993
Coalition Profit
Outdoor & Action Sports
$ 413,012 $ 320,876 $ 697,181 $ 554,253
Jeanswear
131,447 109,691 335,566 327,182
Imagewear
37,463 39,728 110,753 116,897
Sportswear
18,499 18,294 40,711 37,382
Contemporary Brands
13,436 8,076 40,286 28,449
Other
1,377 7 133 (2,003
) Total coalition profit 615,234 496,672 1,224,630 1,062,160
Corporate and Other Expenses
(76,773 ) (73,027 ) (164,779 ) (179,867 )
Interest, net
(23,209 ) (19,300 ) (67,921 ) (48,726 )
Income Before Income Taxes
$ 515,252 $ 404,345 $ 991,930 $ 833,567
VF CORPORATION Supplemental
Financial Information Business Segment Information –
Constant Currency Basis (Unaudited) (In
thousands) Three Months Ended September
2012 Exclude As Reported Impact of Foreign
under GAAP Currency Exchange
Constant Currency
Coalition Revenues Outdoor & Action Sports $
1,852,267 $ (58,977 ) $ 1,911,244 Jeanswear 718,812 (18,736 )
737,548 Imagewear 284,526 (722 ) 285,248 Sportswear 154,190 -
154,190 Contemporary Brands 104,165 (2,726 ) 106,891 Other
34,394 - 34,394 Total
coalition revenues $ 3,148,354 $ (81,161 ) $ 3,229,515
Coalition Profit Outdoor & Action
Sports $ 413,012 $ (19,210 ) $ 432,222 Jeanswear 131,447 (2,578 )
134,025 Imagewear 37,463 (206 ) 37,669 Sportswear 18,499 - 18,499
Contemporary Brands 13,436 (435 ) 13,871 Other 1,377
- 1,377 Total coalition profit
615,234 (22,429 ) 637,663
Corporate and Other
Expenses (76,773 ) - (76,773 )
Interest, net
(23,209 ) - (23,209 )
Income Before
Income Taxes $ 515,252 $ (22,429 ) $ 537,681
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)
Nine Months Ended September 2012 Exclude As
Reported Impact of Foreign under GAAP Currency
Exchange Constant Currency Coalition
Revenues Outdoor & Action Sports $ 4,156,208 $ (104,550 ) $
4,260,758 Jeanswear 2,054,529 (40,023 ) 2,094,552 Imagewear 813,540
(1,719 ) 815,259 Sportswear 394,593 - 394,593 Contemporary Brands
339,016 (6,366 ) 345,382 Other 88,709 -
88,709 Total coalition revenues $ 7,846,595
$ (152,658 ) $ 7,999,253
Coalition
Profit Outdoor & Action Sports $ 697,181 $ (29,428 ) $
726,609 Jeanswear 335,566 (3,522 ) 339,088 Imagewear 110,753 (428 )
111,181 Sportswear 40,711 - 40,711 Contemporary Brands 40,286
(1,067 ) 41,353 Other 133 - 133
Total coalition profit 1,224,630 (34,445 ) 1,259,075
Corporate and Other Expenses (164,779 ) - (164,779 )
Interest, net (67,921 ) -
(67,921 )
Income Before Income Taxes $ 991,930
$ (34,445 ) $ 1,026,375
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 Three Months Ended Operating
Ended Operating September 2012 Margin
September 2011 Margin Operating
Income, as reported under GAAP $ 536,892 17.1 % $ 430,118 15.6
% Timberland acquisition-related expenses 14,358
26,649
Operating Income, as adjusted $
551,250 17.5 % $ 456,767 16.6 % Timberland profit, excluding
acquisition-related expenses (77,356 )
Operating Income, excluding Timberland $
473,894 17.9 %
Net Income, as reported under GAAP $
381,318 $ 300,700
Timberland acquisition-related
expenses
11,324 19,949 Gain on sale of John Varvatos Enterprises,
Inc. - -
Net Income, as adjusted
$ 392,642 $ 320,649
VF Corporation
Timberland
VF Corporation
Timberland
Three Months
Three Months
Three Months
Three Months
Ended
Ended
Ended
Ended
September 2012
September 2012
September 2011
September 2011
Diluted earnings per share, as reported under GAAP $
3.42
$
0.44
$ 2.69
$
0.07
Timberland acquisition-related expenses 0.10
0.10
0.18
0.18
Gain on sale of John Varvatos Enterprises, Inc. -
-
-
-
Diluted earnings per share, as
adjusted
$ 3.52 $ 2.87
Timberland impact on diluted earnings
per share, as adjusted
$
0.54
$
0.25
Non-GAAP Financial Information The 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.
VF CORPORATION Supplemental
Financial Information Reconciliation of Select GAAP Measures
to Non-GAAP Measures (Unaudited) (In thousands)
Nine Months Nine Months
Ended Operating Ended Operating
September 2012 Margin September 2011
Margin Operating Income, as reported under
GAAP $ 1,014,979 12.9 % $ 893,432 13.6 % Timberland
acquisition-related expenses 23,954 26,649
Operating Income, as adjusted $ 1,038,933 13.2 % $
920,081 14.0 % Timberland profit, excluding
acquisition-related expenses (73,441 )
Operating Income, excluding Timberland $
965,492 14.3 %
Net Income, as reported under GAAP $
751,831 $ 630,771 Timberland acquisition-related expenses
18,049 19,949 Gain on sale of John Varvatos Enterprises,
Inc. (35,975 ) -
Net Income, as
adjusted $ 733,905 $ 650,720
VF Corporation
Timberland
VF Corporation
Timberland
VF Corporation
Guidance
Guidance
Nine Months
Nine Months
Nine Months
Year
Year
Ended
Ended
Ended
Ended
Ended
September 2012
September 2012
September 2011
December 2012
December 2012
Diluted earnings per share, as reported under GAAP $
6.72
$
0.37
$ 5.69 $ 9.68
$
0.86
Timberland acquisition-related expenses 0.16
0.16
0.18 0.24
0.24
Gain on sale of John Varvatos Enterprises, Inc. (0.32
)
-
- (0.32 )
-
Diluted earnings per share, as adjusted $ 6.56
$ 5.87 $ 9.60
Timberland impact on diluted earnings
per share, as adjusted
$
0.53
$
1.10
Non-GAAP Financial Information
The 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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