- Revenue from continuing operations increased 5 percent (up 7
percent in constant dollars) to $3.4 billion; excluding
acquisitions and divestitures, adjusted revenue increased 6 percent
(up 8 percent in constant dollars);
- Active segment revenue increased 9 percent (up 11 percent in
constant dollars) including a 14 percent (16 percent in constant
dollars) increase in Vans® brand revenue; Outdoor segment
revenue increased 4 percent (up 6 percent in constant dollars)
including an 8 percent (10 percent in constant dollars) increase in
The North Face® brand revenue;
- International revenue increased 4 percent (up 8 percent in
constant dollars); China revenue increased 20 percent (up 24
percent in constant dollars);
- Direct-to-Consumer revenue increased 11 percent (up 13
percent in constant dollars); Digital revenue increased 15 percent
(up 17 percent in constant dollars);
- Gross margin from continuing operations increased 90 basis
points to 52.9 percent; on an adjusted basis, gross margin
increased 90 basis points to 53.1 percent;
- Earnings per share from continuing operations was $1.61.
Adjusted earnings per share from continuing operations increased 6
percent (up 8 percent in constant dollars) to $1.26;
- Full year fiscal 2020 adjusted revenue from continuing
operations still expected to approximate $11.8 billion, reflecting
growth of approximately 6 percent (8 percent on a constant dollar
basis, excluding acquisitions and divestitures);
- Full year fiscal 2020 adjusted earnings per share from
continuing operations still expected to be in the range of $3.32 to
$3.37, reflecting growth of 16 percent to 18 percent (19 percent to
21 percent on a constant dollar basis, excluding acquisitions and
divestitures); and,
- Quarterly dividend increased by 12 percent to $0.48 per
share.
VF Corporation (NYSE: VFC) today reported financial results for
its second quarter ended September 28, 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, a term that is 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, and the
Impact of Swiss Tax Legislation.” Unless otherwise noted,
“reported” and “adjusted” amounts are the same.
“We're pleased with the strength of our second quarter and first
half results, driven by our two largest brands and our
international and direct-to-consumer platforms," said Steve Rendle,
Chairman, President and Chief Executive Officer. "The quality and
fundamentals of our business remain solid as a result of the focus
and strategic execution of our business teams around the globe.
Despite an increasingly uncertain geopolitical and macroeconomic
environment, we are confident in the trajectory of our business as
we move into the second half of our fiscal year, as reaffirmed by
our outlook. We remain deeply committed to transforming VF into a
more consumer-minded and retail-centric organization while
delivering superior returns to shareholders."
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 this date and
included the operating results and cash flows of the business in
discontinued operations for all periods presented.
Adjusted Amounts - Excluding Icebreaker®, Altra®
and Jeans Spin-Off Transaction and Deal Related Expenses, Costs
Related to Office Relocations and Specified Strategic Business
Decisions, and the Impact of Swiss Tax Legislation
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 $9 million in the second quarter of
fiscal 2020 and $22 million in the first six months 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 $18 million in the
second quarter of fiscal 2020 and $35 million in the first six
months of fiscal 2020.
Adjusted amounts in this release also exclude the impact of
recent Swiss tax legislation. On May 19, 2019, Switzerland voted to
approve the Federal Act on Tax Reform and AHV Financing ("Swiss Tax
Act"). Certain provisions of the Swiss Tax Act were enacted during
the second quarter of fiscal 2020, which resulted in adjustments to
deferred tax positions of approximately $164 million for the second
quarter and first six months of fiscal 2020. It is expected that
additional provisions may be enacted in subsequent periods,
resulting in further adjustments.
Combined, the above items positively impacted earnings per share
by $0.36 during the second quarter of fiscal 2020 and $0.30 during
the first six months 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.
Second Quarter Fiscal 2020 Income Statement Review
- Revenue increased 5 percent (up 7 percent in constant
dollars) to $3.4 billion. Excluding the impact of acquisitions and
divestitures and on an adjusted basis, revenue increased 6 percent
(up 8 percent in constant dollars), driven by VF's two largest
brands, and our international and direct-to-consumer
platforms.
- Gross margin increased 90 basis points to 52.9 percent,
primarily driven by favorable mix shift toward higher margin
businesses and timing of net foreign currency transaction gains. On
an adjusted basis, gross margin increased 90 basis points to 53.1
percent.
- Operating income on a reported basis was $579 million.
On an adjusted basis, operating income increased 7 percent (up 10
percent in constant dollars) to $606 million. Operating
margin on a reported basis increased 20 basis points to 17.1
percent. Adjusted operating margin increased 40 basis points to
17.9 percent.
- Earnings per share was $1.61 on a reported basis. On an
adjusted basis, earnings per share increased 6 percent (up 8
percent in constant dollars) to $1.26.
Balance Sheet Highlights
Inventories were up 10 percent compared with the same period
last year. During the quarter, VF also returned approximately $171
million of cash to shareholders through dividends. The company did
not repurchase any shares during the second 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 still 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). By segment, revenue for Outdoor is still
expected to increase approximately 5 percent (6 percent to 7
percent on a constant dollar basis, excluding the impact of
acquisitions). This compares to the previous expectation of an
increase in revenue of approximately 5 percent (6 percent on a
constant dollar basis, excluding the impact of acquisitions).
Revenue for Active is now expected to increase approximately
8 percent to 9 percent (11 percent to 12 percent on a constant
dollar basis, excluding the impact of divestitures). This compares
to the previous expectation of an increase in revenue of
approximately 7 percent to 8 percent (10 percent to 11 percent on a
constant dollar basis, excluding the impact of divestitures).
Revenue for Work is now expected to increase approximately 2
percent to 3 percent (4 percent to 5 percent on a constant dollar
basis, excluding the impact of divestitures). This compares to the
previous expectation of an increase in revenue of approximately 3
percent to 5 percent (4 percent to 6 percent on a constant dollar
basis, excluding the impact of divestitures).
- International revenue is now expected to increase
approximately 4 percent to 5 percent, or approximately 8 percent to
9 percent on a constant dollar basis, excluding the impact of
acquisitions and divestitures. This compares to the previous
expectation of an increase in revenue of approximately 4 percent to
6 percent (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 11 percent to 12 percent (12 percent to 13 percent on
a constant dollar basis), including about 25 percent growth in
digital. This compares to the previous expectation of an increase
in revenue of approximately 10 percent to 12 percent (11 percent to
13 percent on a constant dollar basis).
- Adjusted gross margin is still expected to be 54.1
percent, which represents an estimated increase of 80 basis
points.
- Adjusted operating margin is still expected to be 13.8
percent, which represents an estimated increase of approximately 90
basis points.
- Adjusted earnings per share is still expected to be in
the range of $3.32 to $3.37, reflecting growth of approximately 16
percent to 18 percent (19 percent to 21 percent on a constant
dollar basis, excluding 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 $0.48
per share, reflecting a 12 percent increase over the previous
quarter's dividend. This dividend will be payable on December 20,
2019, to shareholders of record on December 10, 2019.
Webcast Information
VF will host its second 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 second 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
Founded in 1899, VF Corporation is one of the world’s largest
apparel, footwear and accessories companies connecting people to
the lifestyles, activities and experiences they cherish most
through a family of iconic outdoor, active and workwear brands
including Vans®, The North Face®, Timberland® and Dickies®. Our
purpose is to power movements of sustainable and active lifestyles
for the betterment of people and our planet. We connect this
purpose with a relentless drive to succeed to create value for all
stakeholders and use our company as a force for good. For more
information, please visit 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
September
%
Six Months Ended
September
%
2019
2018
Change
2019
2018
Change
Net revenues
$
3,393,268
$
3,219,390
5%
$
5,664,747
$
5,356,525
6%
Costs and operating expenses
Cost of goods sold
1,597,307
1,545,391
3%
2,633,421
2,550,680
3%
Selling, general and administrative
expenses
1,216,896
1,129,013
8%
2,318,969
2,147,760
8%
Total costs and operating expenses
2,814,203
2,674,404
5%
4,952,390
4,698,440
5%
Operating income
579,065
544,986
6%
712,357
658,085
8%
Interest, net
(15,827
)
(26,821
)
(41)%
(30,825
)
(51,674
)
(40)%
Other income (expense), net
(1,813
)
(31,970
)
*
3,785
(51,395
)
*
Income from continuing operations
before income taxes
561,425
486,195
15%
685,317
555,016
23%
Income tax expense (benefit)
(87,576
)
70,071
*
(60,933
)
77,528
*
Income from continuing
operations
649,001
416,124
56%
746,250
477,488
56%
Income (loss) from discontinued
operations, net of tax
—
90,997
*
(48,028
)
189,991
*
Net income
$
649,001
$
507,121
28%
$
698,222
$
667,479
5%
Earnings (loss) per common share -
basic (a)
Continuing operations
$
1.63
$
1.05
55%
$
1.88
$
1.21
55%
Discontinued operations
—
0.23
*
(0.12
)
0.48
*
Total earnings per common share -
basic
$
1.63
$
1.28
27%
$
1.76
$
1.69
4%
Earnings (loss) per common share -
diluted (a)
Continuing operations
$
1.61
$
1.04
56%
$
1.86
$
1.19
56%
Discontinued operations
—
0.23
*
(0.12
)
0.47
*
Total earnings per common share -
diluted
$
1.61
$
1.26
28%
$
1.74
$
1.67
4%
Weighted average shares
outstanding
Basic
397,751
395,892
397,239
395,029
Diluted
402,261
401,939
402,088
400,744
Cash dividends per common share
$
0.43
$
0.46
(7)%
$
0.94
$
0.92
2%
* 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 September 2019 relate to the 13-week
and 26-week fiscal periods ended September 28, 2019 and all
references to periods ended September 2018 relate to the 13-week
and 26-week fiscal periods ended September 29, 2018. 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)
September
March
September
2019
2019
2018
ASSETS
Current assets
Cash and equivalents
$
507,605
$
445,119
$
266,788
Accounts receivable, net
1,976,154
1,465,855
1,961,274
Inventories
1,890,716
1,432,660
1,723,057
Other current assets
400,732
433,793
582,139
Current assets of discontinued
operations
—
896,030
884,696
Total current assets
4,775,207
4,673,457
5,417,954
Property, plant and equipment
871,601
915,177
893,811
Goodwill and intangible assets
3,449,155
3,513,678
3,573,044
Operating lease right-of-use
asset
1,263,903
—
—
Other assets
910,489
772,755
763,762
Other assets of discontinued
operations
—
481,718
481,854
Total assets
$
11,270,355
$
10,356,785
$
11,130,425
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
484,321
$
659,060
$
1,564,899
Current portion of long-term debt
4,986
5,263
5,885
Accounts payable
550,700
580,867
603,575
Accrued liabilities
1,364,331
1,154,932
1,075,913
Current liabilities of discontinued
operations
—
261,482
258,424
Total current liabilities
2,404,338
2,661,604
3,508,696
Long-term debt
2,090,922
2,115,884
2,150,595
Operating lease liabilities
1,028,363
—
—
Other liabilities
1,099,113
1,232,200
1,246,962
Other liabilities of discontinued
operations
—
48,581
44,616
Total liabilities
6,622,736
6,058,269
6,950,869
Stockholders' equity
4,647,619
4,298,516
4,179,556
Total liabilities and stockholders'
equity
$
11,270,355
$
10,356,785
$
11,130,425
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
September
2019
2018
Operating activities
Net income
$
698,222
$
667,479
Income (loss) from discontinued
operations, net of tax
(48,028
)
189,991
Income from continuing operations, net of
tax
746,250
477,488
Depreciation and amortization, including
operating lease right-of-use assets
321,129
129,259
Other adjustments
(1,446,070
)
(702,432
)
Cash used by operating activities -
continuing operations
(378,691
)
(95,685
)
Cash provided by operating activities -
discontinued operations
13,213
198,636
Cash provided (used) by operating
activities
(365,478
)
102,951
Investing activities
Business acquisitions, net of cash
received
—
(320,405
)
Proceeds from sale of businesses, net of
cash sold
—
288,273
Capital expenditures
(108,596
)
(129,582
)
Software purchases
(25,576
)
(32,710
)
Other, net
59,087
(9,979
)
Cash used by investing activities -
continuing operations
(75,085
)
(204,403
)
Cash used by investing activities -
discontinued operations
(2,327
)
(13,924
)
Cash used by investing activities
(77,412
)
(218,327
)
Financing activities
Net increase (decrease) from short-term
borrowings and long-term debt
(171,289
)
37,112
Purchases of treasury stock
—
(480
)
Cash dividends paid
(373,604
)
(363,851
)
Cash received from Kontoor Brands, net of
cash transferred of $126.8 million
906,148
—
Proceeds from issuance of Common Stock,
net of shares withheld for taxes
50,659
130,114
Cash provided (used) by financing
activities
411,914
(197,105
)
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(5,385
)
(17,270
)
Net change in cash, cash equivalents
and restricted cash
(36,361
)
(329,751
)
Cash, cash equivalents and restricted
cash – beginning of year
556,587
689,190
Cash, cash equivalents and restricted
cash – end of period
$
520,226
$
359,439
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
September
% 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
$
1,525,937
$
1,466,503
4%
6%
4%
6%
4%
6%
Active
1,413,634
1,299,961
9%
11%
9%
11%
10%
12%
Work
435,627
451,661
(4)%
(3)%
(4)%
(3)%
(1)%
(1)%
Other (d)
18,070
1,265
*
*
*
*
*
*
Total segment revenues
$
3,393,268
$
3,219,390
5%
7%
5%
7%
6%
8%
Segment profit
Outdoor
$
256,382
$
258,121
(1)%
2%
Active
388,200
351,051
11%
13%
Work
39,210
51,320
(24)%
(23)%
Other (d)
2,381
717
*
*
Total segment profit
686,173
661,209
4%
6%
Corporate and other expenses
(108,921
)
(148,193
)
(27)%
(26)%
Interest, net
(15,827
)
(26,821
)
(41)%
(41)%
Income from continuing operations
before income taxes
$
561,425
$
486,195
15%
18%
(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 September 2019. Refer
to Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Six Months Ended
September 2019" page for additional information.
(c) Excludes divestitures representing the
operating results of Reef® and the Van Moer business for the three
months ended September 2018. Refer to Non-GAAP financial
information on "Reconciliation of Select GAAP Measures to Non-GAAP
Measures - Three and Six Months Ended September 2018" page 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 related to the sale of non-VF
products and transition services related to the sales of the Reef®
and Nautica® brand businesses.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Six Months Ended
September
% 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
$
2,136,557
$
2,035,103
5%
7%
5%
7%
4%
7%
Active
2,645,760
2,436,898
9%
11%
9%
11%
12%
14%
Work
858,098
874,954
(2)%
(1)%
(2)%
(1)%
1%
1%
Other (d)
24,332
9,570
*
*
*
*
*
*
Total segment revenues
$
5,664,747
$
5,356,525
6%
8%
5%
7%
7%
9%
Segment profit
Outdoor
$
176,112
$
174,626
1%
4%
Active
695,766
620,248
12%
15%
Work
86,235
100,247
(14)%
(14)%
Other (d)
765
2,950
*
*
Total segment profit
958,878
898,071
7%
9%
Corporate and other expenses
(242,736
)
(291,381
)
(17)%
(17)%
Interest, net
(30,825
)
(51,674
)
(40)%
(40)%
Income from continuing operations
before income taxes
$
685,317
$
555,016
23%
27%
(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 six months ended September 2019. Refer to
Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Six Months Ended
September 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 six months ended September 2018. Refer to
Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Six Months Ended
September 2019" and "Reconciliation of Select GAAP Measures to
Non-GAAP Measures - Three and Six Months Ended September 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 related to the sale of non-VF
products and transition services related to the sales of the Reef®
and Nautica® brand businesses.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended September
2019
As Reported under
GAAP
Adjust for Foreign
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
1,525,937
$
29,291
$
1,555,228
Active
1,413,634
25,340
1,438,974
Work
435,627
2,402
438,029
Other
18,070
1,741
19,811
Total segment revenues
$
3,393,268
$
58,774
$
3,452,042
Segment profit
Outdoor
$
256,382
$
6,441
$
262,823
Active
388,200
7,309
395,509
Work
39,210
143
39,353
Other
2,381
(691
)
1,690
Total segment profit
686,173
13,202
699,375
Corporate and other expenses
(108,921
)
(25
)
(108,946
)
Interest, net
(15,827
)
—
(15,827
)
Income from continuing operations
before income taxes
$
561,425
$
13,177
$
574,602
Diluted earnings per share
growth
56
%
3
%
59
%
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
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Six Months Ended September
2019
As Reported under
GAAP
Adjust for Foreign
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
2,136,557
$
47,173
$
2,183,730
Active
2,645,760
52,194
2,697,954
Work
858,098
5,926
864,024
Other
24,332
4,214
28,546
Total segment revenues
$
5,664,747
$
109,507
$
5,774,254
Segment profit
Outdoor
$
176,112
$
4,927
$
181,039
Active
695,766
14,512
710,278
Work
86,235
434
86,669
Other
765
(598
)
167
Total segment profit
958,878
19,275
978,153
Corporate and other expenses
(242,736
)
(285
)
(243,021
)
Interest, net
(30,825
)
—
(30,825
)
Income from continuing operations
before income taxes
$
685,317
$
18,990
$
704,307
Diluted earnings per share
growth
56
%
3
%
59
%
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 and Six Months Ended
September 2019
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended September
2019
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Relocation and Specified
Strategic Business Decisions (b)
Impact of Swiss Tax Act
(c)
Adjusted
Contribution from Acquisition
(d)
Adjusted Organic
Revenues
$
3,393,268
$
—
$
(9,706
)
$
—
$
3,383,562
$
—
$
3,383,562
Gross profit
1,795,961
37
(445
)
—
1,795,553
—
1,795,553
Percent
52.9
%
53.1
%
53.1
%
Operating income
579,065
9,477
17,945
—
606,487
—
606,487
Percent
17.1
%
17.9
%
17.9
%
Diluted earnings per share from
continuing operations (e)
1.61
0.02
0.03
(0.41
)
1.26
—
1.26
Six Months Ended September 2019
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Relocation and Specified
Strategic Business Decisions (b)
Impact of Swiss Tax Act
(c)
Adjusted
Contribution from Acquisition
(d)
Adjusted Organic
Revenues
$
5,664,747
$
—
$
(14,021
)
$
—
$
5,650,726
$
(11,764
)
$
5,638,962
Gross profit
3,031,326
(630
)
(2,613
)
—
3,028,083
(4,485
)
3,023,598
Percent
53.5
%
53.6
%
53.6
%
Operating income
712,357
22,317
34,898
—
769,572
37
769,609
Percent
12.6
%
13.6
%
13.6
%
Diluted earnings per share from
continuing operations (e)
1.86
0.04
0.07
(0.41
)
1.55
—
1.55
(a) Transaction and deal related costs
include acquisition, integration and other costs related to the
acquisitions of the Icebreaker® and Altra® brands, which totaled
$9.5 million and $12.8 million for the three and six months ended
September 2019, respectively. 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 six months ended September 2019. The
transaction and deal related costs resulted in a net tax benefit of
$2.7 million and $5.8 million in the three and six months ended
September 2019, respectively.
(b) Relocation and specified strategic
business decisions for the three and six months ended September
2019 include costs associated with the relocation of VF’s global
headquarters and certain brands to Denver, Colorado, which totaled
$15.7 million and $30.7 million for the three and six months ended
September 2019, respectively. 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, which was
recorded in the three months ended June 2019. The activity also
includes the operating results of jeanswear wind down activities in
South America post the separation of Kontoor Brands and costs
related to specified strategic business decisions to cease
operations in Argentina and planned business model changes in
certain other countries in South America, which totaled $2.2
million and $4.2 million for the three and six months ended
September 2019, respectively. The relocation and specified
strategic business decisions costs resulted in a net tax benefit of
$4.2 million and $8.3 million for the three and six months ended
September 2019, respectively.
(c) On May 19, 2019, Switzerland voted to
approve the Federal Act on Tax Reform and AHV Financing ("Swiss Tax
Act"). Certain provisions of the Swiss Tax Act were enacted during
the three months ended September 2019, which resulted in
adjustments to deferred tax positions of $164.4 million for the
three and six months ended September 2019.
(d) 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.
(e) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impacts were calculated using 402,261,000 and 402,088,000 weighted
average common shares for the three and six months ended September
2019, respectively.
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, activity related to
relocation and specified strategic business decisions and the
impact of the Swiss Tax Act, 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 and Six Months Ended
September 2018
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended September
2018
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Relocation and other
Restructuring Costs (b)
Impact of U.S. Tax Act
(c)
Adjusted
Contribution from Divestitures
(d)
Adjusted Organic
Revenues
$
3,219,390
$
—
$
—
$
—
$
3,219,390
$
(30,584
)
$
3,188,806
Gross profit
1,673,999
2,891
2,948
—
1,679,838
(10,898
)
1,668,940
Percent
52.0
%
52.2
%
52.3
%
Operating income
544,986
9,151
10,716
—
564,853
743
565,596
Percent
16.9
%
17.5
%
17.7
%
Other income (expense), net
(31,970
)
32,321
—
—
351
(3
)
348
Diluted earnings per share from
continuing operations (e)
1.04
0.09
0.02
0.04
1.19
—
1.19
Six Months Ended September 2018
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Relocation and other
Restructuring Costs (b)
Impact of U.S. Tax Act
(c)
Adjusted
Contribution from Divestitures
(d)
Adjusted Organic
Revenues
$
5,356,525
$
—
$
—
$
—
$
5,356,525
$
(91,852
)
$
5,264,673
Gross profit
2,805,845
7,214
2,948
—
2,816,007
(36,022
)
2,779,985
Percent
52.4
%
52.6
%
52.8
%
Operating income
658,085
28,306
10,716
—
697,107
(8,562
)
688,545
Percent
12.3
%
13.0
%
13.1
%
Other income (expense), net
(51,395
)
32,010
—
—
(19,385
)
5
(19,380
)
Diluted earnings per share from
continuing operations (e)
1.19
0.13
0.02
0.03
1.37
(0.02
)
1.36
(a) Transaction and deal related costs
include acquisition and integration costs related to the
acquisitions of Williamson-Dickie and the Icebreaker® and Altra®
brands, which totaled $8.4 million and $27.2 million for the three
and six months ended September 2018, respectively. The costs also
include separation and related expenses associated with the
spin-off of the Jeans business of $0.8 million, that did not meet
the criteria for discontinued operations, for the three and six
months ended September 2018. Additionally, the costs included
estimated non-operating losses on sale related to the divestitures
of the Reef® brand and Van Moer business, totaling $32.3 million in
the three and six months ended September 2018. The transaction and
deal related costs resulted in a net tax benefit of $4.8 million
and $8.3 million in the three and six months ended September 2018,
respectively.
(b) Relocation and other restructuring
costs for the three and six months ended September 2018 primarily
include costs associated with the relocation of VF's global
headquarters and certain brands to Denver, Colorado. The costs
resulted in a net tax benefit of $2.7 million for the three and six
months ended September 2018.
(c) On December 22, 2017, the U.S.
government enacted comprehensive tax legislation commonly referred
to as the Tax Cuts and Jobs Act ("U.S. Tax Act"). Measurement
period adjustments related to the provisional net charge were
recorded during the three and six months ended September 2018,
resulting in a tax expense of $15.8 million and $12.9 million for
the respective periods.
(d) The contribution from divestitures
represents the operating results of the Reef® brand and Van Moer
business for the three and six months ended September 2018. The
contribution from divestitures resulted in a net tax benefit of
$0.1 million and net tax expense of $1.8 million for the three and
six months ended September 2018, respectively.
(e) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impact was calculated using 401,939,000 and 400,744,000 weighted
average common shares for the three and six months ended September
2018, respectively.
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, relocation and other
restructuring costs and the impact of the U.S. Tax Act, 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 September
2019
Six Months Ended September
2019
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
15%
4%
28%
14%
18%
6%
27%
17%
% change constant currency*
15%
9%
31%
16%
19%
11%
32%
19%
The North Face®
% change
9%
7%
9%
8%
9%
6%
11%
8%
% change constant currency*
9%
12%
12%
10%
9%
12%
14%
10%
Timberland®
% change
9%
(12)%
4%
(1)%
8%
(11)%
3%
(1)%
% change constant currency*
9%
(7)%
6%
1%
8%
(7)%
5%
1%
Dickies®
% change
(9)%
(3)%
20%
(4)%
(3)%
(6)%
9%
(2)%
% change constant currency*
(9)%
2%
22%
(3)%
(3)%
(1)%
12%
0%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended September
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.
7%
7%
7%
7%
8%
8%
EMEA
(1)%
4%
(1)%
4%
1%
5%
APAC
14%
16%
14%
16%
14%
16%
China
20%
24%
20%
24%
20%
24%
Americas (non-U.S.)
11%
14%
7%
9%
7%
9%
International
4%
8%
3%
7%
4%
8%
Global
5%
7%
5%
7%
6%
8%
Six Months Ended September
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.
8%
8%
8%
8%
9%
9%
EMEA
(2)%
3%
(2)%
3%
0%
5%
APAC
13%
17%
13%
17%
13%
17%
China
21%
26%
21%
26%
21%
26%
Americas (non-U.S.)
9%
12%
5%
8%
6%
8%
International
3%
8%
3%
7%
4%
9%
Global
6%
8%
5%
7%
7%
9%
Three Months Ended September
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)
3%
5%
3%
5%
4%
6%
Direct-to-consumer
11%
13%
11%
12%
11%
12%
Digital
15%
17%
15%
17%
16%
18%
Six Months Ended September
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)
3%
5%
2%
4%
5%
7%
Direct-to-consumer
12%
14%
12%
14%
12%
14%
Digital
19%
22%
19%
22%
20%
23%
As of September
2019
2018
DTC Store
Count
Total
1,413
1,389
*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 and six months ended September
2019. Refer to Non-GAAP financial information on "Reconciliation of
Select GAAP Measures to Non-GAAP Measures - Three and Six Months
Ended September 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 and six months ended September
2018. Refer to Non-GAAP financial information on "Reconciliation of
Select GAAP Measures to Non-GAAP Measures - Three and Six Months
Ended September 2019" and "Reconciliation of Select GAAP Measures
to Non-GAAP Measures - Three and Six Months Ended September 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/20191025005023/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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