- Revenue from continuing operations increased 6 percent (up 9
percent in constant dollars) to $2.3 billion; excluding
acquisitions and divestitures, adjusted revenue increased 9 percent
(up 11 percent in constant dollars);
- Active segment revenue increased 8 percent (up 11 percent in
constant dollars) including a 20 percent (23 percent in constant
dollars) increase in Vans® brand revenue; Outdoor segment
revenue increased 7 percent (up 11 percent in constant dollars)
including a 9 percent (12 percent in constant dollars) increase in
The North Face® brand revenue and a 2-percentage point
revenue growth contribution from acquisitions;
- International revenue increased 2 percent (up 8 percent in
constant dollars); excluding acquisitions and divestitures and on
an adjusted basis, international revenue increased 4 percent (up 10
percent in constant dollars); China revenue increased 21 percent
(up 29 percent in constant dollars);
- Direct-to-Consumer revenue increased 14 percent (up 17
percent in constant dollars); Digital revenue increased 24 percent
(up 28 percent in constant dollars);
- Gross margin from continuing operations increased 140 basis
points to 54.4 percent; on an adjusted basis, gross margin
increased 120 basis points to 54.4 percent;
- Earnings per share from continuing operations was $0.24.
Adjusted earnings per share from continuing operations increased 61
percent (up 67 percent in constant dollars) to $0.30;
- Full year fiscal 2020 adjusted revenue from continuing
operations now expected to approximate $11.8 billion, reflecting
growth of approximately 6 percent (8 percent on a constant dollar
basis, excluding acquisitions and divestitures); and,
- Full year fiscal 2020 adjusted earnings per share from
continuing operations is now expected to be in the range of $3.32
to $3.37, including an additional $20 million, or $0.04 per share,
of incremental investment, reflecting growth of 16 percent to 18
percent (18 percent to 20 percent on a constant dollar basis,
excluding acquisitions and divestitures).
VF Corporation (NYSE: VFC) today reported financial results for
its first quarter ended June 29, 2019. All per share amounts are
presented on a diluted basis. This release refers to “reported” and
“constant dollar” amounts, terms that are described under the
heading “Constant Currency - Excluding the Impact of Foreign
Currency.” Unless otherwise noted, “reported” and “constant dollar”
amounts are the same. This release also refers to “continuing” and
“discontinued” operations amounts, which are concepts described
under the heading “Discontinued Operations - Kontoor Brands
Business.” 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 Icebreaker®, Altra® and Jeans Spin-Off
Transaction and Deal Related Expenses, Costs Related to Office
Relocations and Specified Strategic Business Decisions.” Unless
otherwise noted, “reported” and “adjusted” amounts are the
same.
“Our first quarter represents a new chapter for VF following the
spin-off of Kontoor Brands and our relocation to Denver, Colorado,"
said Steve Rendle, Chairman, President and Chief Executive Officer.
"Our first quarter results demonstrate the power of VF's evolved
portfolio and our progress along our journey to become a
purpose-led, performance-driven, value-creating enterprise anchored
in our commitment to be more consumer-minded and retail-centric in
everything we do. As a result of our strong results and increased
confidence in the full year, we are raising our fiscal 2020
outlook, including an additional $20 million of investments aimed
at accelerating growth and value creation in fiscal year 2020 and
beyond."
Constant Currency - 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 “constant dollar”
amounts, which exclude the impact of translating foreign currencies
into U.S. dollars. The “constant dollar” amounts also exclude the
impact of foreign currency-denominated transactions in countries
with highly inflationary economies. Reconciliations of GAAP
measures to constant currency 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 - Kontoor Brands
Business
On May 22, 2019, VF completed the spin-off of its Jeans
business, which included the Wrangler®, Lee® and Rock &
Republic® brands, as well as the VF OutletTM business, into an
independent, publicly traded company under the name Kontoor Brands,
Inc. (“Kontoor Brands”). Accordingly, the company has removed the
assets and liabilities of the Jeans business as of the date noted
above and included the operating results of this business in
discontinued operations for all periods presented.
VF's after-tax net loss from discontinued operations was $48.0
million in the first quarter of fiscal 2020, which reflects the
operating results of the Jeans business, including $59.5 million of
separation costs related to the spin-off.
Adjusted Amounts - Excluding Icebreaker®, Altra®
and Jeans Spin-Off Transaction and Deal Related Expenses, Costs
Related to Office Relocations and Specified Strategic Business
Decisions
This release refers to adjusted amounts that exclude transaction
and deal related expenses associated with the acquisitions and
integration of the Icebreaker® and Altra® brands. The release also
refers to transaction expenses associated with the completed
spin-off of the Jeans business. Total transaction and deal related
expenses were approximately $13 million in the first quarter of
fiscal 2020.
This release also refers to adjusted amounts that exclude costs
primarily associated with the previously announced relocation of
VF’s global headquarters and certain brands to Denver, Colorado.
The release also refers to costs related to strategic business
decisions in South America and the operating results of jeanswear
wind-down activities in South America following the spin-off of
Kontoor Brands. Total costs were approximately $17 million in the
first quarter of fiscal 2020.
Combined, the above net charges negatively impacted earnings per
share by $0.06 during the first quarter of fiscal 2020. 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, and provides management’s view of
why this information is useful to investors.
First Quarter Fiscal 2020 Income Statement Review
- Revenue increased 6 percent (up 9 percent in constant
dollars) to $2.3 billion. Adjusted revenue increased 6 percent (up
8 percent in constant dollars) to $2.3 billion. Excluding
acquisitions and divestitures, revenue increased 9 percent (up 11
percent in constant dollars), driven by VF’s largest brands,
international and direct-to-consumer platforms, as well as strength
from the Active and Outdoor segments.
- Gross margin increased 140 basis points to 54.4 percent,
driven by favorable mix and timing of foreign currency transaction
hedge gains. On an adjusted basis, gross margin increased 120 basis
points to 54.4 percent.
- Operating income on a reported basis was $133 million.
On an adjusted basis, operating income increased 23 percent to $163
million. Operating margin on a reported basis increased 60
basis points to 5.9 percent. Adjusted operating margin increased
100 basis points to 7.2 percent.
- Earnings per share was $0.24 on a reported basis. On an
adjusted basis, earnings per share increased 61 percent (up 67
percent in constant dollars) to $0.30.
Balance Sheet Highlights
Inventories were up 9 percent compared with the same period last
year. In connection with the adoption of the new lease accounting
standard, the company has recorded approximately $1.3 billion of
operating lease right-of-use assets and $1.4 billion of operating
lease liabilities. During the quarter, the company also repaid
approximately $585 million of short term borrowings and returned
approximately $200 million of cash to shareholders through
dividends. The company did not repurchase any shares during the
first quarter and has $3.8 billion remaining under its current
share repurchase authorization.
Adjusted Full Year Fiscal 2020 Outlook
VF’s outlook for full year fiscal 2020 is on an adjusted
continuing operations basis unless otherwise noted, and has been
updated to include the following:
- Revenue is now expected to approximate $11.8 billion,
reflecting an increase of approximately 6 percent (8 percent on a
constant dollar basis excluding the impact of acquisitions and
divestitures). This compares to the previous expectation of revenue
between $11.7 billion and $11.8 billion. By segment, revenue for
Outdoor is now expected to increase approximately 5 percent
(6 percent on a constant dollar basis, excluding the impact of
acquisitions). This compares to the previous expectation of an
increase in revenue of approximately 4 percent to 5 percent (5
percent to 6 percent on a constant dollar basis, excluding the
impact of acquisitions); revenue for Active is now expected
to increase approximately 7 percent to 8 percent (10 percent to 11
percent on a constant dollar basis, excluding the impact of
divestitures). This compares to the previous expectation of an
increase in revenue of approximately 6 percent to 7 percent (9
percent to 10 percent on a constant dollar basis, excluding the
impact of divestitures); and, revenue for Work is still
expected to increase approximately 3 percent to 5 percent (4
percent to 6 percent on a constant dollar basis, excluding the
impact of divestitures).
- International revenue is still expected to increase
approximately 4 percent to 6 percent, or approximately 7 percent to
9 percent on a constant dollar basis, excluding the impact of
acquisitions and divestitures.
- Direct-to-consumer revenue is now expected to increase
approximately 10 percent to 12 percent (11 percent to 13 percent on
a constant dollar basis), including 25 percent growth in digital.
This compares to the previous expectation of an increase in revenue
of approximately 9 percent to 11 percent (10 percent to 12 percent
on a constant dollar basis).
- Adjusted gross margin is now expected to be 54.1
percent, which represents an estimated increase of 80 basis points.
This compares to the previous expectation of about 54.0
percent.
- Adjusted operating margin is now expected to be 13.8
percent, which represents an estimated increase of approximately 90
basis points. This compares to the previous expectation of an
adjusted operating margin of 13.7 percent.
- Adjusted earnings per share is now expected to be in the
range of $3.32 to $3.37, including an additional $20 million, or
$0.04 per share, of incremental investment, reflecting growth of
approximately 16 percent to 18 percent (18 percent to 20 percent on
a constant dollar basis, excluding acquisitions and divestitures).
This compares to the previous expectation of $3.30 to $3.35,
reflecting growth of 15 percent to 17 percent (17 percent to 19
percent on a constant dollar basis, excluding the impact of
acquisitions and divestitures).
- Adjusted cash flow from operations is still expected to
be at least $1.3 billion.
- Other full year assumptions include an effective tax
rate of approximately 15 percent to 15.5 percent and capital
expenditures of approximately $400 million.
Dividend Declared
VF’s Board of Directors declared a quarterly dividend of $0.43
per share, payable on September 20, 2019, to shareholders of record
on September 10, 2019.
Webcast Information
VF will host its first quarter fiscal 2020 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.
Presentation
A presentation on first quarter fiscal 2020 results will be
available at ir.vfc.com beginning at
approximately 7:30 a.m. Eastern Time today and will be archived at
the same location.
About VF
VF Corporation (NYSE: VFC) outfits consumers around the world
with its diverse portfolio of iconic outdoor and activity-based
lifestyle and workwear brands, including Vans®, The North Face®,
Timberland® and Dickies®. 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: risks associated with the spin-off of our
Jeanswear business completed on May 22, 2019, including the risk
that VF will not realize all of the expected benefits of the
spin-off; and the risk that the spin-off will not be tax-free for
U.S. federal income tax purposes; the risk that there will be a
loss of synergies from separating the businesses that could
negatively impact the balance sheet, profit margins or earnings of
VF. There are also risks associated with the relocation of our
global headquarters and a number of brands to the metro Denver
area, including the risk of significant disruption to our
operations, the temporary diversion of management resources and
loss of key employees who have substantial experience and expertise
in our business, the risk that we may encounter difficulties
retaining employees who elect to transfer and attracting new talent
in the Denver area to replace our employees who are unwilling to
relocate, the risk that the relocation may involve significant
additional costs to us and that the expected benefits of the move
may not be fully realized. Other risks include foreign currency
fluctuations; the level of consumer demand for apparel, footwear
and accessories; disruption to VF’s distribution system; 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
vendors’ ability to maintain the strength and security of
information technology systems; the risk that VF's facilities and
systems and those of our third-party service providers may be
vulnerable to and unable to anticipate or detect data security
breaches and data or financial loss; VF's ability to properly
collect, use, manage and secure consumer and employee data;
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; VF's ability to execute and integrate
acquisitions; changes in tax laws and liabilities; legal,
regulatory, political and economic risks; the risk of economic
uncertainty associated with the pending exit of the United Kingdom
from the European Union ("Brexit") or any other similar referendums
that may be held; 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
June
%
2019
2018
Change
Net revenues
$
2,271,479
$
2,137,135
6%
Costs and operating expenses
Cost of goods sold
1,036,114
1,005,289
3%
Selling, general and administrative
expenses
1,102,073
1,018,747
8%
Total costs and operating expenses
2,138,187
2,024,036
6%
Operating income
133,292
113,099
18%
Interest, net
(14,998
)
(24,853
)
(40)%
Other income (expense), net
5,598
(19,425
)
*
Income from continuing operations
before income taxes
123,892
68,821
80%
Income taxes
26,643
7,457
*
Income from continuing
operations
97,249
61,364
58%
Income (loss) from discontinued
operations, net of tax
(48,028
)
98,994
*
Net income
$
49,221
$
160,358
(69)%
Earnings (loss) per common share -
basic (a)
Continuing operations
$
0.25
$
0.16
57%
Discontinued operations
(0.12
)
0.25
*
Total earnings per common share -
basic
$
0.12
$
0.41
(70)%
Earnings (loss) per common share -
diluted (a)
Continuing operations
$
0.24
$
0.15
58%
Discontinued operations
(0.12
)
0.25
*
Total earnings per common share -
diluted
$
0.12
$
0.40
(69)%
Weighted average shares
outstanding
Basic
396,727
394,165
Diluted
401,914
399,548
Cash dividends per common share
$
0.51
$
0.46
11%
* 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
March 31 of each year. For presentation purposes herein, all
references to periods ended June 2019 and June 2018 relate to the
13-week fiscal period ended June 29, 2019 and the 13-week fiscal
period ended June 30, 2018, respectively, and references to March
2019 relate to the balance sheet as of March 30, 2019.
(a) Amounts have been calculated using
unrounded numbers.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
June
March
June
2019
2019
2018
ASSETS
Current assets
Cash and equivalents
$
606,080
$
445,119
$
392,175
Accounts receivable, net
1,338,610
1,465,855
1,222,938
Inventories
1,665,132
1,432,660
1,521,659
Other current assets
424,049
433,793
401,515
Current assets of discontinued
operations
—
896,030
791,860
Total current assets
4,033,871
4,673,457
4,330,147
Property, plant and equipment
865,141
915,177
875,338
Goodwill and intangible assets
3,525,053
3,513,678
3,723,999
Operating lease right-of-use
asset
1,272,552
—
—
Other assets
739,776
772,755
774,613
Other assets of discontinued
operations
—
481,718
487,657
Total assets
$
10,436,393
$
10,356,785
$
10,191,754
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
67,658
$
659,060
$
1,311,861
Current portion of long-term debt
5,068
5,263
6,189
Accounts payable
588,417
580,867
565,943
Accrued liabilities
1,318,342
1,154,932
864,483
Current liabilities of discontinued
operations
—
261,482
247,080
Total current liabilities
1,979,485
2,661,604
2,995,556
Long-term debt
2,126,835
2,115,884
2,156,627
Operating lease liabilities
1,042,117
—
—
Other liabilities
1,137,219
1,232,200
1,260,681
Other liabilities of discontinued
operations
—
48,581
47,774
Total liabilities
6,285,656
6,058,269
6,460,638
Stockholders' equity
4,150,737
4,298,516
3,731,116
Total liabilities and stockholders'
equity
$
10,436,393
$
10,356,785
$
10,191,754
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Three Months Ended
June
2019
2018
Operating activities
Net income
$
49,221
$
160,358
Income (loss) from discontinued
operations, net of tax
(48,028
)
98,994
Income from continuing operations, net of
tax
97,249
61,364
Depreciation and amortization, including
operating lease right-of-use assets
158,482
52,896
Other adjustments
(342,477
)
(14,923
)
Cash (used) provided by operating
activities - continuing operations
(86,746
)
99,337
Cash provided by operating activities -
discontinued operations
16,818
177,807
Cash (used) provided by operating
activities
(69,928
)
277,144
Investing activities
Business acquisitions, net of cash
received
—
(321,395
)
Proceeds from sale of businesses, net of
cash sold
—
288,273
Capital expenditures
(41,861
)
(62,484
)
Software purchases
(14,512
)
(21,514
)
Other, net
61,123
5,373
Cash provided (used) by investing
activities - continuing operations
4,750
(111,747
)
Cash used by investing activities -
discontinued operations
(1,632
)
(17,483
)
Cash provided (used) by investing
activities
3,118
(129,230
)
Financing activities
Net decrease from short-term borrowings
and long-term debt
(586,956
)
(215,940
)
Cash dividends paid
(202,538
)
(181,517
)
Cash received from Kontoor Brands, net of
cash transferred
906,147
—
Proceeds from issuance of Common Stock,
net of shares withheld for taxes
7,199
53,500
Cash provided (used) by financing
activities
123,852
(343,957
)
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
5,078
(19,998
)
Net change in cash, cash equivalents
and restricted cash
62,120
(216,041
)
Cash, cash equivalents and restricted
cash – beginning of year
556,587
689,190
Cash, cash equivalents and restricted
cash – end of period
$
618,707
$
473,149
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
June
% Change
% Change Constant Currency
(a)
% Change Adjusted (b)
% Change Constant Currency and
Adjusted (a) (b)
% Change Adjusted Organic (b)
(c)
% Change Constant Currency and
Adjusted Organic (a) (b) (c)
2019
2018
Segment revenues
Outdoor
$
610,620
$
568,600
7%
11%
7%
11%
5%
8%
Active
1,232,126
1,136,937
8%
11%
8%
11%
13%
16%
Work
422,471
423,293
0%
1%
0%
1%
3%
4%
Other (d)
6,262
8,305
*
*
*
*
*
*
Total segment revenues
$
2,271,479
$
2,137,135
6%
9%
6%
8%
9%
11%
Segment profit (loss)
Outdoor
$
(80,270
)
$
(83,495
)
4%
2%
Active
307,566
269,197
14%
17%
Work
47,025
48,927
(4)%
(3)%
Other (d)
(1,616
)
2,233
*
*
Total segment profit
272,705
236,862
15%
18%
Corporate and other expenses
(133,815
)
(143,188
)
(7)%
(6)%
Interest, net
(14,998
)
(24,853
)
(40)%
(40)%
Income from continuing operations
before income taxes
$
123,892
$
68,821
80%
88%
(a) Refer to constant currency definition
on the following pages.
(b) Excludes the operating results of
jeanswear wind down activities in South America post the separation
of Kontoor Brands for the three months ended June 2019. Refer to
Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three Months Ended June 2019" page
for additional information.
(c) Excludes the operating results of
Altra® for the two months ended May 2019, which reflects the
one-year anniversary of the acquisition. The change also excludes
divestitures representing the operating results of Reef® and the
Van Moer business for the three months ended June 2018. Refer to
Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three Months Ended June 2019" and
"Reconciliation of Select GAAP Measures to Non-GAAP Measures -
Three Months Ended June 2018" pages for additional information.
(d) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Includes results from transition services
related to the sales of the Reef® and Nautica® brand businesses, as
well as sales of non-VF products.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended June
2019
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
610,620
$
17,882
$
628,502
Active
1,232,126
26,854
1,258,980
Work
422,471
3,524
425,995
Other
6,262
2,473
8,735
Total segment revenues
$
2,271,479
$
50,733
$
2,322,212
Segment profit (loss)
Outdoor
$
(80,270
)
$
(1,514
)
$
(81,784
)
Active
307,566
7,203
314,769
Work
47,025
291
47,316
Other
(1,616
)
93
(1,523
)
Total segment profit
272,705
6,073
278,778
Corporate and other expenses
(133,815
)
(260
)
(134,075
)
Interest, net
(14,998
)
—
(14,998
)
Income from continuing operations
before income taxes
$
123,892
$
5,813
$
129,705
Diluted earnings per share
growth
58
%
6
%
64
%
Constant Currency 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. 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 that excludes
the impact of translating foreign currencies into U.S. dollars. The
constant currency financial information also excludes the impact of
foreign currency-denominated transactions in countries with highly
inflationary economies. We use constant currency 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 measuring foreign currency transactions
in highly inflationary economies. 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 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). Similarly, foreign currency transactions in
highly inflationary economies, on a constant currency basis, are
calculated using exchange rates from the comparable period of the
prior year.
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 - Three Months Ended June
2019
(Unaudited)
(In thousands, except
per share amounts)
Three Months Ended June 2019
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Relocation and Specified
Strategic Business Decisions (b)
Adjusted
Contribution from Acquisition
(c)
Adjusted Organic
Revenues
$
2,271,479
$
—
$
(4,315
)
$
2,267,164
$
(11,764
)
$
2,255,400
Gross profit
1,235,365
(667
)
(2,168
)
1,232,530
(4,485
)
1,228,045
Percent
54.4
%
54.4
%
54.4
%
Operating income
133,292
12,840
16,953
163,085
37
163,122
Percent
5.9
%
7.2
%
7.2
%
Other income (expense), net
5,598
—
124
5,722
4
5,726
Diluted earnings per share from
continuing operations (d)
0.24
0.02
0.03
0.30
—
0.30
(a) Transaction and deal related costs
include acquisition and integration costs related to the
acquisitions of the Icebreaker® and Altra® brands, which totaled
$3.3 million for the three months ended June 2019. The costs also
include separation and related expenses associated with the
spin-off of the Jeans business of $9.5 million, that did not meet
the criteria for discontinued operations, for the three months
ended June 2019. The transaction and deal related costs resulted in
a net tax benefit of $3.1 million in the three months ended June
2019.
(b) Relocation and specified strategic
business decisions for the three months ended June 2019 include
costs associated with the relocation of VF’s global headquarters
and certain brands to Denver, Colorado, which totaled $15.0 million
for the three months ended June 2019. This activity includes a gain
of approximately $11 million on the sale of certain office real
estate and related assets in connection with the relocation. The
activity also reflects costs related to specified strategic
business decisions to cease operations in Argentina and planned
business model changes in certain other countries in South America
as well as the operating results of jeanswear wind down activities
in South America post the separation of Kontoor Brands, which
totaled $2.0 million for the three months ended June 2019. The
relocation and specified strategic business decisions costs
resulted in a net tax benefit of $4.1 million for the three months
ended June 2019.
(c) The contribution from acquisition
represents the operating results of Altra® for the two months ended
May 2019, which reflects the one-year anniversary of the
acquisition. The results exclude transaction and deal related
costs.
(d) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impacts were calculated using 401,914,000 weighted average common
shares for the three months ended June 2019.
Non-GAAP Financial Information
The financial information above has been
presented on a GAAP basis, on an adjusted basis, which excludes the
impact of transaction and deal related costs and relocation and
specified strategic business decisions, and on an adjusted organic
basis, which excludes the operating results of Altra® (for the two
months ended May 2019). Contribution from acquisition also excludes
transaction and deal related costs. 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 - Three Months Ended June
2018
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended June 2018
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Impact of Tax Act (b)
Adjusted
Contribution from Divestitures
(c)
Adjusted Organic
Revenues
$
2,137,135
$
—
$
—
$
2,137,135
$
(61,268
)
$
2,075,867
Gross profit
1,131,846
4,323
—
1,136,169
(25,124
)
1,111,045
Percent
53.0
%
53.2
%
53.5
%
Operating income
113,099
19,155
—
132,254
(9,305
)
122,949
Percent
5.3
%
6.2
%
5.9
%
Diluted earnings per share from
continuing operations (d)
0.15
0.04
(0.01
)
0.18
(0.02
)
0.17
(a) Transaction and deal related costs for
the three months ended June 2018 include acquisition and
integration costs related to the acquisitions of Williamson-Dickie
and the Icebreaker® and Altra® brands. The transaction and deal
related costs resulted in a net tax benefit of $3.5 million in the
three months ended June 2018.
(b) On December 22, 2017, the U.S.
government enacted comprehensive tax legislation commonly referred
to as the Tax Cuts and Jobs Act ("Tax Act"). Measurement period
adjustments related to the provisional net charge were recorded
during the three months ended June 2018, resulting in a tax benefit
of $2.9 million.
(c) The contribution from divestitures
represents the operating results of the Reef® brand and Van Moer
business for the three months ending June 2018. The contribution
from divestitures resulted in tax expense of $1.9 million for the
three months ended June 2018.
(d) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impact was calculated using 399,548,000 weighted average common
shares for the three months ended June 2018.
Non-GAAP Financial Information
The financial information above has been
presented on a GAAP basis, on an adjusted basis, which excludes
transaction and deal related expenses and the impact of tax reform,
and on an adjusted organic basis, which excludes the operating
results of Reef® and the Van Moer business. 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 4 Brand Revenue
Information
(Unaudited)
Three Months Ended June
2019
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Vans®
% change
22%
8%
26%
20%
% change constant currency*
22%
15%
33%
23%
The North Face®
% change
10%
4%
14%
9%
% change constant currency*
10%
11%
20%
12%
Timberland®
% change
6%
(9)%
1%
(1)%
% change constant currency*
7%
(4)%
5%
2%
Dickies®
% change
4%
(11)%
(3)%
1%
% change constant currency*
4%
(5)%
2%
2%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended June
2019
% Change
% Change Constant
Currency*
% Change Adjusted (a)
% Change Constant Currency and
Adjusted*(a)
% Change Adjusted Organic (a)
(b)
% Change Constant Currency and
Adjusted Organic*(a) (b)
Geographic
Revenue Growth
U.S.
9%
9%
9%
9%
12%
12%
EMEA
(5)%
1%
(5)%
1%
0%
5%
APAC
13%
19%
13%
19%
13%
19%
China
21%
29%
21%
29%
21%
29%
Americas (non-U.S.)
5%
10%
2%
5%
3%
6%
International
2%
8%
2%
7%
4%
10%
Global
6%
9%
6%
8%
9%
11%
Three Months Ended June
2019
% Change
% Change Constant
Currency*
% Change Adjusted (a)
% Change Constant Currency and
Adjusted*(a)
% Change Adjusted Organic (a)
(b)
% Change Constant Currency and
Adjusted Organic*(a) (b)
Channel Revenue
Growth
Wholesale (c)
2%
4%
2%
4%
6%
8%
Direct-to-consumer
14%
17%
14%
16%
14%
16%
Digital
24%
28%
24%
28%
25%
29%
As of June
2019
2018
DTC Store
Count
Total
1,427
1,382
*Refer to constant currency definition on
previous pages.
(a) Excludes the operating results of
jeanswear wind down activities in South America post the separation
of Kontoor Brands for the three months ended June 2019. Refer to
Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three Months Ended June 2019" page
for additional information.
(b) Excludes the operating results of
Altra® for the two months ended May 2019, which reflects the
one-year anniversary of the acquisition. The change also excludes
divestitures representing the operating results of Reef® and the
Van Moer business for the three months ended June 2018. Refer to
Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three Months Ended June 2019" and
"Reconciliation of Select GAAP Measures to Non-GAAP Measures -
Three Months Ended June 2018" pages for additional information.
(c) Royalty revenues are included in the
wholesale channel for all periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190724005288/en/
VF Corporation Joe Alkire,
720-778-4051 Vice President, Corporate Development, Investor
Relations and Treasury or Craig Hodges, 720-778-4116 Vice
President, Corporate Affairs
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