- Third quarter revenue from
continuing operations increased 5 percent to $3.5 billion (up 4
percent currency neutral);
- Gross margin from continuing
operations improved 100 basis points (up 180 basis points currency
neutral) to 50.1 percent;
- Outdoor & Action Sports revenue
increased 8 percent (up 6 percent currency neutral); Vans®
brand revenue increased 28 percent (up 26 percent
currency neutral);
- International revenue increased 13
percent (up 10 percent currency neutral), including 18 percent
growth in Europe (up 14 percent currency neutral) and 9 percent
growth in China;
- Direct-to-consumer revenue increased
18 percent (up 17 percent currency neutral) with digital revenue up
38 percent (up 37 percent currency neutral);
- Reported earnings per share from
continuing operations decreased 16 percent (down 12 percent
currency neutral) to $0.97 due to a noncash goodwill impairment
charge; adjusted earnings per share from continuing operations
increased 6 percent (up 10 percent currency neutral) to
$1.23;
- 2017 revenue now expected to
increase about 6 percent on a reported basis (up 5.5 percent on a
currency neutral basis) to approximately $12.1 billion;
- 2017 reported earnings per share is
now expected to be $2.73; adjusted earnings per share from
continuing operations is now expected to be $3.01, including an
additional $25 million, or $0.05 per share, of incremental
investment, up 1 percent on an adjusted basis (up 6 percent
currency neutral) compared to 2016 adjusted earnings per share of
$2.98; and,
- Quarterly dividend rate increased by
10 percent to $0.46 per share.
VF Corporation (NYSE: VFC) today reported financial results for
its third quarter ended September 30, 2017. All per share amounts
are presented on a diluted basis. This release refers to “reported”
and “currency neutral” amounts, terms that are described under the
heading “Currency Neutral – Excluding the Impact of Foreign
Currency.” Unless otherwise noted, “reported” and “currency
neutral” amounts are the same. This release also refers to
“continuing” and “discontinued” operations amounts, which are
concepts described under the heading “Discontinued Operations –
Licensing Business and Contemporary Brands.” Unless otherwise
noted, results presented are based on continuing operations. This
release also refers to “adjusted” amounts, terms that are described
under the heading “Adjusted Amounts – Excluding Noncash Impairment
Charges and Williamson-Dickie Transaction and Deal Related
Expenses.” Unless otherwise noted, “reported” and “adjusted”
amounts are the same.
“VF’s third quarter results were strong, fueled by accelerated
momentum across the company’s international and direct-to-consumer
platforms and our Outdoor and Action Sports and Workwear
businesses,” said Steve Rendle, President and Chief Executive
Officer. “Based on the strength of our third quarter performance
and the stronger growth trajectory we see for the remainder of
2017, we are again increasing our full year outlook and making
additional growth-focused investments aimed at accelerating growth
and value creation into 2018 and beyond. VF remains committed to
returning cash to shareholders as evidenced by the increase in our
dividend, which is supported by the strength of our balance sheet
and the confidence we have in our strategic growth plan.”
Currency Neutral – Excluding the Impact of Foreign
Currency
This release refers to “reported” amounts in accordance with
U.S. generally accepted accounting principles (“GAAP”), which
include translation and transactional
impacts from foreign currency exchange rates. This release also
refers to “currency neutral” amounts, which exclude both the impact of translating foreign
currencies into U.S. dollars and the impact of currency rate
changes on foreign currency denominated transactions.
Reconciliations of GAAP measures to currency neutral amounts are
presented in the supplemental financial information included with
this release, which identifies and quantifies all excluded items,
and provides management’s view of why this information is useful to
investors.
Discontinued Operations – Licensing Business and Contemporary
Brands
On April 28, 2017, the company completed the sale of its
Licensed Sports Group (LSG) business, including the Majestic®
brand. Accordingly, the company has removed the assets and
liabilities of LSG at that date and included the operating results
of LSG in discontinued operations for all periods presented. In
conjunction with the LSG divestiture, VF executed its plan to
entirely exit the licensing business and has classified the assets
of the JanSport® brand collegiate business as held for sale and
included the operating results in discontinued operations for all
periods presented.
On August 26, 2016, the company completed the sale of its
Contemporary Brands businesses, which included the 7 For All
Mankind®, Splendid® and Ella Moss® brands.
Accordingly, the company has included the operating results of
those businesses in discontinued operations for all periods
presented.
The company’s net loss from discontinued operations was less
than $1 million in the third quarter of 2017, which includes an
adjustment to the estimated loss on the sale of LSG recorded in the
first quarter of 2017, and the after-tax operating results of the
JanSport® brand collegiate business during the quarter.
Adjusted Amounts – Excluding Noncash Impairment Charges and
Williamson-Dickie Transaction and Deal Related Expenses
This release refers to adjusted amounts that exclude a pretax
noncash goodwill impairment charge related to the Nautica® brand of
$105 million and $5 million of transaction and deal related
expenses associated with the acquisition of Williamson-Dickie.
Combined, the above charges impacted earnings per share by $0.26.
All adjusted amounts referenced herein exclude the effects of these
amounts.
Reconciliations of measures calculated in accordance with GAAP
to adjusted amounts are presented in the supplemental financial
information included with this release, which identifies and
quantifies all excluded items.
Income Statement Review
- Revenue increased 5 percent to
$3.5 billion (up 4 percent currency neutral), driven by broad-based
strength across VF’s international and direct-to-consumer
platforms, Outdoor & Action Sports coalition, most notably our
Vans® brand and Workwear businesses.
- Gross margin improved 100 basis
points to 50.1 percent, as benefits from pricing and a mix shift
toward higher margin businesses were partially offset by changes in
foreign currency and an increase in product costs. Changes in
foreign currency negatively affected reported gross margin by 80
basis points during the quarter.
- Operating income on a reported
basis was down 20 percent to $484 million compared to the same
period of 2016. On an adjusted basis, operating income was down 2
percent to $593 million. Changes in foreign currency negatively
affected the reported and adjusted operating profit decline by 3
percentage points during the quarter. Operating margin on a
reported basis decreased 450 basis points to 13.8 percent. On an
adjusted basis, third quarter operating margin declined 140 basis
points to 16.9 percent. Changes in foreign currency negatively
affected reported and adjusted operating margin by 80 basis points
during the quarter.
- Earnings per share on a reported
basis decreased 16 percent to $0.97 compared to $1.16 during the
same period last year. On an adjusted basis, earnings per share
increased 6 percent to $1.23. Excluding the impact of changes in
foreign currency, third quarter reported and adjusted earnings per
share decreased 12 percent and increased 10 percent,
respectively.
Balance Sheet Highlights
Inventories were up 1 percent compared with the same period of
2016. As of the end of the third quarter, the company has $4.2
billion remaining under its current share repurchase authorization.
In anticipation of the closing of the Williamson-Dickie transaction
on October 2, 2017, VF prefunded the purchase price resulting in a
significant increase in both cash and short-term borrowings at the
end of the third quarter. The company expects to end 2017 with less
than $1 billion of short-term borrowings.
2017 Outlook Raised
The following outlook for 2017 has been updated and includes the
following:
- Revenue is now expected to
increase about 6 percent on a reported basis (up 5.5 percent
currency neutral) to approximately $12.1 billion. This compares to
the previous expectation of $11.85 billion, a 3.5 percent increase
on a reported basis (up 4.5 percent currency neutral). Both
estimates include about a $200 million contribution from the
previously announced Williamson-Dickie acquisition. By coalition,
revenue for Outdoor & Action Sports is now expected to
increase approximately 7 percent versus the previous expectation of
an approximate 5 percent increase (up 6 percent to 7 percent
currency neutral); revenue for Jeanswear is now expected to
decline slightly versus the previous expectation of revenue that
approximated that of 2016; Imagewear revenue is still
expected to increase at a mid-single-digit percentage rate; and,
Sportswear is still expected to decline at a high
single-digit percentage rate.
- International revenue is now
expected to increase approximately 10 percent versus the previous
expectation of a low single-digit increase (up high single-digit
currency neutral).
- Direct-to-consumer revenue is
now expected to increase approximately 13 percent versus the
previous expectation of a 10 percent to 11 percent increase.
Digital revenue is now expected to increase approximately 30
percent versus the previous estimate of a more than 25 percent
increase.
- Gross margin is now expected to
approximate 50.0 percent, versus the previous expectation of 49.5
percent, and includes about a 50 basis point negative impact from
changes in foreign currency. The Williamson-Dickie acquisition is
expected to negatively impact gross margin by about 20 basis
points.
- Operating margin on a reported
basis is expected to be 12.3 percent; adjusted operating
margin is expected to approximate 13.4 percent, versus the
previous expectation of 13.7 percent, including about a 50 basis
point negative impact from changes in foreign currency. The
Williamson-Dickie acquisition is expected to negatively impact
adjusted operating margin by about 20 basis points.
- Earnings per share on a reported
basis is expected to be $2.73; adjusted earnings per share
is now expected to be $3.01 compared to the previous expectation of
$2.96. Accordingly, adjusted earnings per share is expected to
increase 1 percent (up 6 percent currency neutral), compared to
2016 adjusted earnings per share of $2.98. Relative to the prior
outlook, the company’s updated 2017 adjusted earnings per share
outlook includes an additional $0.05 per share ($25 million pretax)
impact from additional investments to drive accelerated growth into
2018 and beyond. This is in addition to the $0.08 per share ($40
million pre-tax) impact from additional investments announced on
July 24, 2017.
- Other full year assumptions include an
effective tax rate of approximately 20 percent (down from a
tax rate in the low 20 percent range previously) and cash flow
from operations is expected to reach approximately $1.5 billion
(up from $1.45 billion previously).
Dividend Declared
On October 19, 2017, VF’s Board of Directors declared a
quarterly dividend of $0.46 per share, reflecting a 10 percent
increase over the previous quarter’s dividend. This dividend will
be payable on December 18, 2017, to shareholders of record at the
close of business on December 8, 2017.
Webcast Information
VF will host its 2017 third quarter conference call beginning at
8:30 a.m. Eastern Time today. The conference call will be broadcast
live via the internet, accessible at ir.vfc.com. For those unable
to listen to the live broadcast, an archived version will be
available at the same location.
About VF
VF Corporation (NYSE: VFC) outfits consumers around the world
with its diverse portfolio of iconic lifestyle brands, including
Vans®, The North Face®, Timberland®, Wrangler® and Lee®.
Founded in 1899, VF is one of the world’s largest apparel, footwear
and accessories companies with socially and environmentally
responsible operations spanning numerous geographies, product
categories and distribution channels. VF is committed to delivering
innovative products to consumers and creating long-term value for
its customers and shareholders. For more information,
visit www.vfc.com.
Forward-looking Statements
Certain statements included in this release and 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 several 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: foreign currency fluctuations; the level of
consumer demand for apparel, footwear and accessories; disruption
to VF’s distribution system; VF's reliance on a small number of
large customers; the financial strength of VF's customers;
fluctuations in the price, availability and quality of raw
materials and contracted products; disruption and volatility in the
global capital and credit markets; VF's response to changing
fashion trends, evolving consumer preferences and changing patterns
of consumer behavior, intense competition from online retailers,
manufacturing and product innovation; increasing pressure on
margins; VF's ability to implement its business strategy; VF's
ability to grow its international and direct-to-consumer
businesses; VF’s and its customers’ and vendors’ ability to
maintain the strength and security of 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; possible
goodwill and other asset impairment; maintenance by VF’s licensees
and distributors of the value of VF’s brands; changes in tax
liabilities; legal, regulatory, political and economic risks; and
adverse or unexpected weather conditions. 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.
VF CORPORATION
Condensed Consolidated Statements of
Income
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended September %
Nine Months Ended September % 2017
2016 Change 2017
2016 Change Net
sales $ 3,481,202 $ 3,298,484 6% $ 8,370,183 $ 8,200,228 2%
Royalty income 27,616 29,232
(6%) 79,893 82,371 (3%)
Total
revenues 3,508,818 3,327,716 5%
8,450,076 8,282,599 2%
Costs
and operating expenses Cost of goods sold 1,751,748 1,693,071
3% 4,225,444 4,229,018 0% Selling, general and administrative
expenses 1,168,470 1,026,398 14% 3,176,536 2,939,115 8% Impairment
of goodwill 104,651 - * 104,651
- * Total costs and operating expenses
3,024,869 2,719,469 11% 7,506,631
7,168,133 5%
Operating income
483,949 608,247 (20%) 943,445 1,114,466 (15%)
Interest,
net (22,537 ) (22,568 ) 0% (63,332 ) (63,982 ) (1%)
Other
(expense) income, net (332 ) (1,097 ) *
(2,052 ) 1,696 *
Income from continuing operations
before income taxes
461,080 584,582 (21%) 878,061 1,052,180 (17%)
Income
taxes 74,316 99,358 (25%)
161,753 188,528 (14%)
Income from
continuing operations 386,764 485,224 (20%) 716,308 863,652
(17%)
Income (loss) from discontinued
operations, net of tax
(624 ) 13,265 * (11,116 )
(53,879 ) *
Net income $ 386,140 $ 498,489
(23%) $ 705,192 $ 809,773 (13%)
Earnings (loss) per common share -
basic (a)
Continuing operations $ 0.98 $ 1.17 (16%) $ 1.79 $ 2.07 (14%)
Discontinued operations - 0.03 *
(0.03 ) (0.13 ) *
Total earnings per common share -
basic
$ 0.98 $ 1.21 (19%) $ 1.76 $ 1.94 (9%)
Earnings (loss) per common share -
diluted (a)
Continuing operations $ 0.97 $ 1.16 (16%) $ 1.77 $ 2.04 (13%)
Discontinued operations - 0.03 *
(0.03 ) (0.13 ) *
Total earnings per common share -
diluted
$ 0.97 $ 1.19 (18%) $ 1.74 $ 1.91 (9%)
Weighted average shares outstanding Basic 393,258
413,461 400,771 417,067 Diluted 397,384 419,240 404,619 423,477
Cash dividends per common share $ 0.42 $ 0.37 14% $
1.26 $ 1.11 14% * Calculation not meaningful
Basis of presentation of condensed
consolidated financial statements: VF operates and reports
using a 52/53 week fiscal year ending on the Saturday closest to
December 31 of each year. For presentation purposes herein, all
references to periods ended September 2017, December 2016 and
September 2016 relate to the 13-week and 39-week fiscal periods
ended September 30, 2017, the 52-week fiscal period ended December
31, 2016 and the 13-week and 39-week fiscal periods ended October
1, 2016.
(a) Amounts have been calculated using
unrounded numbers.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
September December September
2017 2016 2016
ASSETS Current assets Cash and
equivalents $ 1,546,128 $ 1,227,862 $ 737,825 Accounts receivable,
net 1,851,430 1,161,393 1,736,521 Inventories 1,909,563 1,471,300
1,897,546 Other current assets 319,991 296,698 293,904 Current
assets of discontinued operations 315 135,845
153,227 Total current assets 5,627,427 4,293,098
4,819,023
Property, plant and equipment 921,217
926,010 935,015
Intangible assets 1,936,522 1,797,271
1,925,955
Goodwill 1,642,873 1,708,323 1,769,838
Other
assets 746,882 929,190 904,742
Other assets of discontinued
operations - 85,395 88,536
Total assets $ 10,874,921 $ 9,739,287 $ 10,443,109
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities Short-term borrowings $ 1,985,287 $
26,029 $ 737,660 Current portion of long-term debt 253,831 253,689
3,643 Accounts payable 554,107 642,970 550,427 Accrued liabilities
1,028,170 827,507 860,383 Current liabilities of discontinued
operations - 35,205 25,083 Total
current liabilities 3,821,395 1,785,400 2,177,196
Long-term debt 2,144,221 2,039,180 2,347,122
Other
liabilities 971,885 977,076 1,049,353
Other liabilities of
discontinued operations(a) - (3,290 )
(3,339 )
Total liabilities 6,937,501 4,798,366
5,570,332
Stockholders' equity 3,937,420
4,940,921 4,872,777
Total
liabilities and stockholders' equity $ 10,874,921 $ 9,739,287
$ 10,443,109 (a) This line contains deferred
income tax liabilities that reflect VF's consolidated netting by
jurisdiction.
VF CORPORATION
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended September
2017 (b)
2016 (a), (b)
Operating activities Net income $
705,192 $ 809,773 Impairment of goodwill 104,651 - Depreciation and
amortization 207,590 205,491 Other adjustments (1,010,750 )
(968,067 ) Cash provided by operating activities 6,683
47,197
Investing activities Proceeds from sale of
businesses, net of cash sold 213,494 115,983 Capital expenditures
(124,393 ) (129,947 ) Software purchases (53,451 ) (31,843 ) Other,
net (10,558 ) (4,997 ) Cash provided (used) by
investing activities 25,092 (50,804 )
Financing
activities Net increase in short-term borrowings 1,959,335
287,759 Payments on long-term debt (2,749 ) (12,385 ) Payments of
debt issuance costs - (6,772 ) Proceeds from long-term debt -
951,782 Purchases of treasury stock (1,200,356 ) (1,000,230 ) Cash
dividends paid (502,993 ) (462,406 )
Proceeds from issuance of Common Stock,
net of shares withheld for taxes
48,144 40,667 Cash provided (used) by
financing activities 301,381 (201,585 )
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(13,914 ) 1,018
Net change in cash,
cash equivalents and restricted cash 319,242 (204,174 )
Cash, cash equivalents and restricted cash - beginning of
year (c) 1,231,026 946,396
Cash, cash equivalents and restricted cash - end of
period (c) $ 1,550,268 $ 742,222
(a) Reflects the impact of adopting the
new accounting guidance on the presentation of restricted cash and
restricted cash equivalents as of the beginning of the first
quarter of 2017, which resulted in a $3.8 million reclassification
of cash flows used by operating activities in the Condensed
Consolidated Statement of Cash Flows for the nine months ended
September 2016.
(b) The cash flows related to discontinued operations
have not been segregated, and are included in the Condensed
Consolidated Statements of Cash Flows. (c) The cash
amounts presented above differ from the Condensed Consolidated
Balance Sheets due to the adoption of the new accounting guidance
discussed in (a) above.
VF CORPORATION
Supplemental Financial
Information
Business Segment Information
(Unaudited)
(In thousands)
Three Months Ended September
% Change Currency
Neutral (a)
Nine Months Ended September
% Change Currency
Neutral (a)
2017 2016
%Change
2017 2016
%Change
Coalition revenues Outdoor & Action Sports $
2,502,590 $ 2,326,436 8% 6% $ 5,647,587 $ 5,378,272 5% 5% Jeanswear
697,701 701,416 (1%) (1%) 1,945,950 2,041,186 (5%) (4%) Imagewear
138,885 127,992 9% 8% 423,859 404,633 5% 5% Sportswear 140,272
140,705 0% 0% 352,848 373,977 (6%) (6%) Other 29,370
31,167 (6%) (6%) 79,832 84,531
(6%) (6%) Total coalition revenues $ 3,508,818
$ 3,327,716 5% 4% $ 8,450,076 $ 8,282,599 2%
2%
Coalition profit (loss) Outdoor &
Action Sports $ 524,489 $ 491,015 7% 11% $ 877,206 $ 842,378 4% 10%
Jeanswear 121,218 142,427 (15%) (16%) 323,994 388,564 (17%) (17%)
Imagewear 22,377 23,981 (7%) (10%) 72,349 74,497 (3%) (4%)
Sportswear 17,488 15,080 16% 16% 27,764 26,156 6% 6% Other
(737 ) (341 ) (116%) (116%) (3,225 ) (3,523 )
8% 8% Total coalition profit 684,835 672,162 2% 5% 1,298,088
1,328,072 (2%) 2%
Impairment of goodwill (104,651 ) -
* * (104,651 ) - * *
Corporate and other expenses (96,567 )
(65,012 ) 49% 48% (252,044 ) (211,910 ) 19% 19%
Interest,
net (22,537 ) (22,568 ) 0% 0% (63,332 )
(63,982 ) (1%) (1%)
Income from continuing operations
before income taxes
$ 461,080 $ 584,582 (21%) (18%) $ 878,061 $
1,052,180 (17%) (12%)
(a) Refer to currency neutral definition
on the following pages.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Business Segment Information – Currency
Neutral Basis
(Unaudited)
(In thousands)
Three Months Ended
September 2017 As Reported Adjust for
Foreign under GAAP Currency Exchange Currency
Neutral Coalition revenues Outdoor & Action
Sports $ 2,502,590 $ (29,266 ) $ 2,473,324 Jeanswear 697,701 (5,469
) 692,232 Imagewear 138,885 (191 ) 138,694 Sportswear 140,272 -
140,272 Other 29,370 - 29,370
Total coalition revenues $ 3,508,818 $ (34,926
) $ 3,473,892
Coalition profit (loss) Outdoor
& Action Sports $ 524,489 $ 22,918 $ 547,407 Jeanswear 121,218
(1,791 ) 119,427 Imagewear 22,377 (780 ) 21,597 Sportswear 17,488 -
17,488 Other (737 ) - (737 )
Total coalition profit 684,835 20,347 705,182
Impairment
of goodwill (104,651 ) - (104,651 )
Corporate and other
expenses (96,567 ) 619 (95,948 )
Interest, net
(22,537 ) - (22,537 )
Income from
continuing operations before income taxes $ 461,080 $
20,966 $ 482,046
Diluted earnings per share
growth (16 %) 4 % (12 %)
Currency Neutral Financial Information
VF is a global company that reports
financial information in U.S. dollars in accordance with GAAP.
Foreign currency exchange rate fluctuations affect the amounts
reported by VF from translating its foreign revenues and expenses
into U.S. dollars, and from entering foreign currency transactions.
These rate fluctuations can have a significant effect on reported
operating results. As a supplement to our reported operating
results, we present currency neutral financial information, which
is a non-GAAP financial measure that excludes both the impact of
translating foreign currencies into U.S. dollars and the impact of
currency rate changes on foreign currency denominated transactions.
We use currency neutral information to provide a framework to
assess how our business performed excluding the effects of changes
in the rates used to calculate foreign currency translation, and
transaction gains and losses. Management believes this information
is useful to investors to facilitate comparison of operating
results and better identify trends in our businesses.
To calculate foreign currency translation
on a currency neutral 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). Similarly, transaction gains and losses on a currency
neutral basis are calculated using exchange rates from the
comparable period of the prior year.
These currency neutral 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 currency neutral information presented
may not be comparable to similarly titled measures reported by
other companies.
VF CORPORATION
Supplemental Financial
Information
Business Segment Information – Currency
Neutral Basis
(Unaudited)
(In thousands)
Nine Months Ended September 2017 As
Reported Adjust for Foreign under GAAP
Currency Exchange Currency Neutral
Coalition revenues Outdoor & Action Sports $ 5,647,587 $
8,263 $ 5,655,850 Jeanswear 1,945,950 5,642 1,951,592 Imagewear
423,859 (65 ) 423,794 Sportswear 352,848 - 352,848 Other
79,832 - 79,832 Total
coalition revenues $ 8,450,076 $ 13,840 $ 8,463,916
Coalition profit (loss) Outdoor & Action
Sports $ 877,206 $ 53,068 $ 930,274 Jeanswear 323,994 (422 )
323,572 Imagewear 72,349 (949 ) 71,400 Sportswear 27,764 - 27,764
Other (3,225 ) - (3,225 ) Total
coalition profit 1,298,088 51,697 1,349,785
Impairment of
goodwill (104,651 ) - (104,651 )
Corporate and other
expenses (252,044 ) 863 (251,181 )
Interest, net
(63,332 ) - (63,332 )
Income from
continuing operations before income taxes $ 878,061 $
52,560 $ 930,621
Diluted earnings per share
growth (13 %) 5 % (8 %)
Currency
Neutral Financial Information
VF is a global company that reports
financial information in U.S. dollars in accordance with GAAP.
Foreign currency exchange rate fluctuations affect the amounts
reported by VF from translating its foreign revenues and expenses
into U.S. dollars, and from entering foreign currency transactions.
These rate fluctuations can have a significant effect on reported
operating results. As a supplement to our reported operating
results, we present currency neutral financial information, which
is a non-GAAP financial measure that excludes both the impact of
translating foreign currencies into U.S. dollars and the impact of
currency rate changes on foreign currency denominated transactions.
We use currency neutral information to provide a framework to
assess how our business performed excluding the effects of changes
in the rates used to calculate foreign currency translation, and
transaction gains and losses. Management believes this information
is useful to investors to facilitate comparison of operating
results and better identify trends in our businesses.
To calculate foreign currency translation
on a currency neutral 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). Similarly, transaction gains and losses on a currency
neutral basis are calculated using exchange rates from the
comparable period of the prior year.
These currency neutral 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 currency neutral 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, except per share
amounts)
Three Months Ended September 2017
As Reported
under GAAP
Goodwill
Impairment Charge (a)
Williamson-Dickie
Transaction Related
Expenses (b)
Adjusted Operating income $ 483,949 $
104,651 $ 4,890 $ 593,490
Tax expense 74,316 6,133
1,555 82,004
Income from continuing operations
386,764 98,518 3,335 488,617
Diluted earnings per share
from continuing operations (c) 0.97 0.25 0.01 1.23
Nine Months Ended September 2017
As Reported
under GAAP
Goodwill
Impairment Charge (a)
Williamson-Dickie
Transaction Related
Expenses (b)
Adjusted Operating income $ 943,445 $
104,651 $ 4,890 $ 1,052,986
Tax expense 161,753 6,133
1,555 169,441
Income from continuing operations
716,308 98,518 3,335 818,161
Diluted earnings per share
from continuing operations (c) 1.77 0.24 0.01 2.02
(a) VF recognized goodwill impairment charges of $104.7
million related to the Nautica® reporting unit for the three and
nine months ended September 2017. The tax expense adjustment of
$6.1 million represents the impact of non-deductible goodwill
impairment on the interim tax rate calculation. Excluding the
impairment charge, the tax rate for the quarter would have been
14.2%. The EPS impact was calculated using 397,384 and 404,619
weighted average common shares for the three and nine months ended
September 2017, respectively. (b) VF recognized $4.9 million
of transaction and deal related expenses associated with the
acquisition of Williamson-Dickie during the three and nine months
ended September 2017. The EPS impact was calculated using 397,384
and 404,619 weighted average common shares for the three and nine
months ended September 2017, respectively. (c) Amounts shown
in the table have been calculated using unrounded numbers.
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
impairment charges for goodwill and transaction and deal related
expenses associated with the acquisition of Williamson-Dickie.
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
Top 5 Brand Revenue Information
(Unaudited)
Three Months Ended September 2017 Nine Months
Ended September 2017 Americas EMEA
APAC Global Americas EMEA APAC
Global Top 5 Brand Revenue Growth
Vans®
% change
23% 42% 23% 28% 12% 15% 23% 14% % change currency neutral* 22% 39%
23% 26% 12% 16% 25% 15%
The North Face® %
change (9%) 18% 5% (2%) (4%) 18% 0% 2% % change currency neutral*
(10%) 17% 4% (3%) (4%) 19% 2% 2%
Timberland® %
change (6%) 6% (5%) (1%) (5%) 3% (4%) (2%) % change currency
neutral* (7%) 3% (5%) (2%) (5%) 3% (4%) (2%)
Wrangler® % change 6% 2% (7%) 5% (2%) 1% (6%) (2%) %
change currency neutral* 6% (2%) (10%) 4% (2%) 0% (9%) (2%)
Lee® % change (14%) 12% (3%) (7%) (12%) 3% (3%) (8%)
% change currency neutral* (14%) 7% (4%) (8%) (12%) 3% (1%) (7%)
*Refer to currency neutral definition on previous
pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended
September 2017
Nine Months Ended
September 2017
%Change
% Change
Currency
Neutral*
%Change
% Change
Currency
Neutral*
Geographic
Revenue Growth
U.S. 0% 0% (1%) (1%)
EMEA 18% 14% 9% 9% APAC 5% 4% 5% 6% China 9% 9% 9% 12%
Americas (non-U.S.) 8% 5% 6% 6%
International 13%
10% 7% 8% Three Months
Ended
September 2017
Nine Months Ended
September 2017
%Change
% Change
Currency
Neutral*
%Change
% Change
Currency
Neutral*
Channel Revenue
Growth
Wholesale 1% 0% (2%) (2%)
Direct-to-Consumer 18% 17% 13%
13% As of September 2017
2016
DTC Store
Count
Total 1,508 1,475 *Refer
to currency neutral definition on previous pages.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171023005294/en/
VF CorporationJoe Alkire,
336-424-7711VP, Investor Relations andFinancial Planning &
AnalysisorCraig Hodges, 336-424-5636Senior Director, Corporate
Communications
VF (NYSE:VFC)
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