- Revenue from continuing operations increased 5 percent (up 6
percent in constant dollars) to $3.4 billion; excluding the
occupational Work business, revenue from continuing operations
increased 6 percent (up 7 percent in constant dollars);
- Active segment revenue increased 8 percent (up 9 percent in
constant dollars) including a 12 percent (13 percent in constant
dollars) increase in Vans® brand revenue; Outdoor segment
revenue increased 3 percent (up 4 percent in constant dollars)
including an 8 percent increase in The North Face® brand
revenue;
- International revenue increased 8 percent (up 9 percent in
constant dollars); Europe revenue increased 4 percent (up 7 percent
in constant dollars excluding divestitures); China revenue
increased 30 percent (up 32 percent in constant dollars);
- Direct-to-Consumer revenue increased 7 percent; Digital
revenue increased 16 percent (up 17 percent in constant
dollars);
- Gross margin from continuing operations increased 110 basis
points to 55.7 percent; on an adjusted basis, gross margin
increased 100 basis points to 55.7 percent;
- Operating income from continuing operations increased 11
percent; adjusted operating income from continuing operations
increased 11 percent (12 percent in constant dollars); excluding
the occupational Work business, adjusted operating income from
continuing operations increased 14 percent (15 percent in constant
dollars);
- Earnings per share from continuing operations was $1.13.
Adjusted earnings per share from continuing operations increased 14
percent to $1.23;
- Full year fiscal 2020 adjusted revenue from continuing
operations now expected to approximate $11.75 billion, reflecting
growth of approximately 5 percent (7 percent on a constant dollar
basis, excluding acquisitions and divestitures); excluding the
occupational Work business, full year fiscal 2020 adjusted revenue
from continuing operations is expected to increase approximately 6
percent (approximately 8 percent on a constant dollar basis,
excluding acquisitions and divestitures);
- Full year fiscal 2020 adjusted earnings per share from
continuing operations now expected to be approximately $3.30,
reflecting growth of approximately 15 percent (approximately 18
percent, excluding acquisitions and divestitures).
VF Corporation (NYSE: VFC) today reported financial results for
its third quarter ended December 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 Transaction and Deal Related Expenses, Costs
Related to Office Relocations and Specified Strategic Business
Decisions, Pension Settlement Charges, and the Impact of Swiss Tax
Legislation.” Unless otherwise noted, “reported” and “adjusted”
amounts are the same. This release also refers to certain
"excluding the occupational Work business" amounts, a term that is
described under the heading "Adjusted Amounts - Excluding the
Occupational Work Business."
“Our third quarter performance was strong and our year-to-date
results are at the high end of our long-term growth objectives.
Despite a mixed holiday season in the US, we're on track to deliver
solid performance and are well positioned for continued growth and
value creation in fiscal year 2021," said Steve Rendle, VF's
Chairman, President and CEO.
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 the Occupational Work
Business
On January 21, 2020, VF announced that it is commencing a review
of strategic alternatives for the occupational portion of its Work
segment. As defined in the January 21, 2020 news release, the
occupational portion of the Work segment primarily consists of nine
brands and businesses: Red Kap®, VF Solutions®, Bulwark®,
Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace
Small®. The proposed transaction does not include the Dickies® and
Timberland PRO® brands.
This release refers to certain "excluding the occupational Work
business" amounts, which exclude the estimated historical and
forward-looking results of the occupational Work group of brands.
These excluded amounts are not indicative of the results of the
occupational Work businesses as a standalone entity, and are not
representative of VF’s discontinued operations in the event of a
disposition. VF’s analysis of the disposition of the occupational
Work businesses has not been completed and is subject to change
based on the final structure of any potential transaction.
Adjusted Amounts - Excluding Transaction and Deal Related
Expenses, Costs Related to Office Relocations and Specified
Strategic Business Decisions, Pension Settlement Charges, and the
Impact of Swiss Tax Legislation
The adjusted amounts in this release exclude transaction and
deal related expenses associated with the acquisitions and
integration of the Icebreaker® and Altra® brands. The adjusted
amounts in this release also exclude transaction expenses
associated with the completed spin-off of the Jeans business. Total
transaction and deal related expenses were approximately $22
million in the first nine months of fiscal 2020. Additionally, the
amounts also exclude an adjustment to tax expense in the third
quarter of fiscal 2020 of approximately $10 million associated with
the loss on sale for the Reef® divestiture.
The adjusted amounts in this release exclude costs primarily
associated with the previously announced relocation of VF’s global
headquarters and certain brands to Denver, Colorado. The adjusted
amounts in this release also exclude 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 $16
million in the third quarter of fiscal 2020 and approximately $51
million in the first nine months of fiscal 2020.
The adjusted amounts in this release exclude a noncash pension
settlement charge. The pension settlement charge was a result of
actions taken to reduce risk, volatility and the liability
associated with VF's U.S. pension plan. Total expense was
approximately $23 million in the third quarter of fiscal 2020 and
the first nine months of fiscal 2020.
The adjusted amounts in this release 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
fiscal 2020, which resulted in adjustments to deferred tax
positions of approximately $164 million in the first nine months of
fiscal 2020. It is expected that additional provisions may be
enacted in subsequent periods, resulting in further
adjustments.
Combined, the above items negatively impacted earnings per share
by $0.10 during the third quarter of fiscal 2020 and positively
impacted earnings per share by $0.20 during the first nine 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.
Third Quarter Fiscal 2020 Income Statement Review
- Revenue increased 5 percent (up 6 percent in constant
dollars) to $3.4 billion, driven by VF's largest brands, and our
International and Direct-to-Consumer platforms. Excluding the
occupational Work business, revenue increased 6 percent (up 7
percent in constant dollars).
- Gross margin increased 110 basis points to 55.7 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 100 basis points to 55.7
percent.
- Operating income on a reported basis was $579 million.
On an adjusted basis, operating income increased 11 percent (up 12
percent in constant dollars) to $595 million. Excluding the
occupational Work business, operating income increased 14 percent
(up 15 percent in constant dollars). Operating margin on a
reported basis increased 100 basis points to 17.1 percent. Adjusted
operating margin increased 100 basis points to 17.6 percent.
- Earnings per share was $1.13 on a reported basis. On an
adjusted basis, earnings per share increased 14 percent to
$1.23.
Balance Sheet Highlights
Inventories were up 12 percent compared with the same period
last year. Excluding the occupational Work business, inventories
were up 8 percent. During the quarter, VF returned approximately
$189 million of cash to shareholders through dividends. The company
also repurchased approximately $500 million of shares and has $3.3
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, which includes the occupational Work
business, unless otherwise noted, and has been updated to include
the following:
- Revenue is now expected to be approximately $11.75
billion, reflecting an increase of approximately 5 percent (7
percent on a constant dollar basis excluding the impact of
acquisitions and divestitures). This compares to a previous
expectation of approximately $11.8 billion, reflecting an increase
of approximately 6 percent (approximately 8 percent on a constant
dollar basis excluding the impact of acquisitions and
divestitures). Excluding the occupational Work business, revenue is
expected to increase approximately 6 percent (approximately 8
percent on a constant dollar basis excluding the impact of
acquisitions and divestitures).
- By segment, revenue for Outdoor is now expected to
increase approximately 4 percent (approximately 5 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 to 7 percent on a constant
dollar basis, excluding the impact of acquisitions). Revenue for
Active is now expected to increase approximately 8 percent
(approximately 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 8 percent to 9 percent
(11 percent to 12 percent on a constant dollar basis, excluding the
impact of divestitures). Revenue for Work is now expected to
increase approximately 1 percent (2 percent to 3 percent on a
constant dollar basis, excluding the impact of divestitures). This
compares to the previous expectation of an increase in revenue of
approximately 2 percent to 3 percent (4 percent to 5 percent on a
constant dollar basis, excluding the impact of divestitures).
Excluding the occupational Work business, Work revenue is expected
to increase approximately 3 percent (6 percent to 7 percent on a
constant dollar basis excluding the impact of divestitures).
- International revenue is now expected to increase
approximately 6 percent, or approximately 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 5 percent, or
approximately 8 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 9 percent to 10 percent (10 percent to 11 percent on
a constant dollar basis), including about 20 percent growth in
Digital 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 11 percent
to 12 percent (12 percent to 13 percent on a constant dollar
basis), including about 25 percent growth in Digital on a constant
dollar basis, excluding the impact of acquisitions and
divestitures.
- 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 operating income is expected to
increase approximately 12 percent (approximately 14 percent on a
constant dollar basis excluding the impact of acquisitions and
divestitures). Excluding the occupational Work business, adjusted
operating income is expected to increase approximately 15 percent
(approximately 18 percent on a constant dollar basis excluding the
impact of acquisitions and divestitures).
- Adjusted earnings per share is now expected to be
approximately $3.30, reflecting growth of approximately 15 percent
(approximately 18 percent on a constant dollar basis, excluding
acquisitions and divestitures). This compares to the previous
expectation of adjusted earnings per share 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 the impact of
acquisitions and divestitures).
- Adjusted cash flow from operations is now expected to
approximate $1.3 billion. This compares to the previous expectation
of at least $1.3 billion.
- Other full year assumptions include an effective tax
rate of approximately 15.5 percent and capital
expenditures of approximately $350 million. This compares to
the previous expectation of 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, payable on March 20, 2020, to shareholders of record on
March 10, 2020.
Webcast Information
VF will host its third 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 third 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
December
%
Nine Months Ended
December
%
2019
2018
Change
2019
2018
Change
Net revenues
$
3,384,746
$
3,227,712
5%
$
9,049,493
$
8,584,237
5%
Costs and operating expenses
Cost of goods sold
1,500,463
1,464,761
2%
4,133,884
4,015,441
3%
Selling, general and administrative
expenses
1,305,481
1,242,131
5%
3,624,450
3,389,891
7%
Total costs and operating expenses
2,805,944
2,706,892
4%
7,758,334
7,405,332
5%
Operating income
578,802
520,820
11%
1,291,159
1,178,905
10%
Interest, net
(16,814
)
(25,220
)
(33)%
(47,639
)
(76,894
)
(38)%
Other income (expense), net
(22,152
)
(1,027
)
*
(18,367
)
(52,422
)
*
Income from continuing operations
before income taxes
539,836
494,573
9%
1,225,153
1,049,589
17%
Income tax expense
87,089
85,453
2%
26,156
162,981
*
Income from continuing
operations
452,747
409,120
11%
1,198,997
886,608
35%
Income (loss) from discontinued
operations, net of tax
12,256
54,389
*
(35,772
)
244,380
*
Net income
$
465,003
$
463,509
0%
$
1,163,225
$
1,130,988
3%
Earnings (loss) per common share -
basic (a)
Continuing operations
$
1.14
$
1.03
10%
$
3.02
$
2.24
35%
Discontinued operations
0.03
0.14
*
(0.09
)
0.62
*
Total earnings per common share -
basic
$
1.17
$
1.17
0%
$
2.93
$
2.86
2%
Earnings (loss) per common share -
diluted (a)
Continuing operations
$
1.13
$
1.02
11%
$
2.99
$
2.21
35%
Discontinued operations
0.03
0.14
*
(0.09
)
0.61
*
Total earnings per common share -
diluted
$
1.16
$
1.16
0%
$
2.90
$
2.82
3%
Weighted average shares
outstanding
Basic
395,940
395,294
396,806
395,117
Diluted
400,322
399,767
401,499
400,418
Cash dividends per common share
$
0.48
$
0.51
(6)%
$
1.42
$
1.43
(1)%
* 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 December 2019 relate to the 13-week and
39-week fiscal periods ended December 28, 2019 and all references
to periods ended December 2018 relate to the 13-week and 39-week
fiscal periods ended December 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)
December
March
December
2019
2019
2018
ASSETS
Current assets
Cash and equivalents
$
583,951
$
445,119
$
451,978
Accounts receivable, net
1,641,758
1,465,855
1,566,202
Inventories
1,564,970
1,432,660
1,401,621
Other current assets
365,019
433,793
391,800
Current assets of discontinued
operations
—
896,030
800,490
Total current assets
4,155,698
4,673,457
4,612,091
Property, plant and equipment
908,771
915,177
902,665
Goodwill and intangible assets
3,487,811
3,513,678
3,539,450
Operating lease right-of-use
asset
1,298,631
—
—
Other assets
963,351
772,755
756,065
Other assets of discontinued
operations
—
481,718
474,039
Total assets
$
10,814,262
$
10,356,785
$
10,284,310
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
56,001
$
659,060
$
674,676
Current portion of long-term debt
4,677
5,263
5,576
Accounts payable
456,993
580,867
536,406
Accrued liabilities
1,444,421
1,154,932
1,115,371
Current liabilities of discontinued
operations
—
261,482
231,018
Total current liabilities
1,962,092
2,661,604
2,563,047
Long-term debt
2,110,488
2,115,884
2,135,240
Operating lease liabilities
1,052,854
—
—
Other liabilities
1,121,238
1,232,200
1,239,503
Other liabilities of discontinued
operations
—
48,581
45,896
Total liabilities
6,246,672
6,058,269
5,983,686
Stockholders' equity
4,567,590
4,298,516
4,300,624
Total liabilities and stockholders'
equity
$
10,814,262
$
10,356,785
$
10,284,310
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
December
2019
2018
Operating activities
Net income
$
1,163,225
$
1,130,988
Income (loss) from discontinued
operations, net of tax
(35,772
)
244,380
Income from continuing operations, net of
tax
1,198,997
886,608
Depreciation and amortization
204,341
192,049
Amortization of operating lease
right-of-use assets
287,439
—
Other adjustments
(862,364
)
33,069
Cash provided by operating activities -
continuing operations
828,413
1,111,726
Cash provided by operating activities -
discontinued operations
13,213
324,937
Cash provided by operating activities
841,626
1,436,663
Investing activities
Business acquisitions, net of cash
received
—
(320,405
)
Proceeds from sale of businesses, net of
cash sold
—
430,273
Capital expenditures
(186,281
)
(180,241
)
Software purchases
(37,333
)
(42,533
)
Other, net
51,985
(16,189
)
Cash used by investing activities -
continuing operations
(171,629
)
(129,095
)
Cash used by investing activities -
discontinued operations
(2,327
)
(19,451
)
Cash used by investing activities
(173,956
)
(148,546
)
Financing activities
Net decrease from short-term borrowings
and long-term debt
(601,055
)
(859,345
)
Purchases of treasury stock
(500,003
)
(150,676
)
Cash dividends paid
(562,298
)
(565,176
)
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
135,086
137,470
Cash used by financing activities
(622,122
)
(1,437,727
)
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(4,927
)
(681
)
Net change in cash, cash equivalents
and restricted cash
40,621
(150,291
)
Cash, cash equivalents and restricted
cash – beginning of year
556,587
689,190
Cash, cash equivalents and restricted
cash – end of period
$
597,208
$
538,899
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
December
% 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
$
1,659,108
$
1,612,605
3%
4%
3%
4%
3%
4%
Active
1,239,462
1,142,580
8%
9%
8%
9%
9%
10%
Work
480,086
471,875
2%
2%
2%
2%
2%
2%
Other (d)
6,090
652
*
*
*
*
*
*
Total segment revenues
$
3,384,746
$
3,227,712
5%
6%
5%
6%
5%
6%
Segment profit (loss)
Outdoor
$
348,995
$
338,009
3%
4%
Active
286,474
272,862
5%
6%
Work
54,556
56,178
(3)%
(3)%
Other (d)
(2,800
)
520
*
*
Total segment profit
687,225
667,569
3%
3%
Corporate and other expenses
(130,575
)
(147,776
)
(12)%
(12)%
Interest, net
(16,814
)
(25,220
)
(33)%
(33)%
Income from continuing operations
before income taxes
$
539,836
$
494,573
9%
9%
(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 December 2019. Refer
to Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Nine Months Ended
December 2019" page for additional information.
(c) Excludes divestitures representing the
operating results of Reef® and the Van Moer business, through the
respective dates of sale for the three months ended December 2018.
Refer to Non-GAAP financial information on "Reconciliation of
Select GAAP Measures to Non-GAAP Measures - Three and Nine Months
Ended December 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 primarily related to the sale of
the Nautica® brand business.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Nine Months Ended
December
% 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
$
3,795,665
$
3,647,708
4%
6%
4%
6%
4%
5%
Active
3,885,222
3,579,478
9%
10%
9%
10%
11%
13%
Work
1,338,184
1,346,829
(1)%
0%
(1)%
0%
1%
2%
Other (d)
30,422
10,222
*
*
*
*
*
*
Total segment revenues
$
9,049,493
$
8,584,237
5%
7%
5%
7%
6%
8%
Segment profit (loss)
Outdoor
$
525,107
$
512,635
2%
4%
Active
982,240
893,110
10%
12%
Work
140,791
156,425
(10)%
(10)%
Other (d)
(2,035
)
3,470
*
*
Total segment profit
1,646,103
1,565,640
5%
6%
Corporate and other expenses
(373,311
)
(439,157
)
(15)%
(15)%
Interest, net
(47,639
)
(76,894
)
(38)%
(38)%
Income from continuing operations
before income taxes
$
1,225,153
$
1,049,589
17%
19%
(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 nine months ended December 2019. Refer to
Non-GAAP financial information on "Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Nine Months Ended
December 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, through the respective dates of sale for the
nine months ended December 2018. Refer to Non-GAAP financial
information on "Reconciliation of Select GAAP Measures to Non-GAAP
Measures - Three and Nine Months Ended December 2019" and
"Reconciliation of Select GAAP Measures to Non-GAAP Measures -
Three and Nine Months Ended December 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 primarily related to the sale of
the Nautica® brand business.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended December
2019
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
1,659,108
$
12,180
$
1,671,288
Active
1,239,462
9,806
1,249,268
Work
480,086
604
480,690
Other
6,090
(240
)
5,850
Total segment revenues
$
3,384,746
$
22,350
$
3,407,096
Segment profit (loss)
Outdoor
$
348,995
$
1,664
$
350,659
Active
286,474
1,659
288,133
Work
54,556
145
54,701
Other
(2,800
)
(2,069
)
(4,869
)
Total segment profit
687,225
1,399
688,624
Corporate and other expenses
(130,575
)
77
(130,498
)
Interest, net
(16,814
)
—
(16,814
)
Income from continuing operations
before income taxes
$
539,836
$
1,476
$
541,312
Diluted earnings per share
growth
11
%
0
%
11
%
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)
Nine Months Ended December
2019
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
3,795,665
$
59,353
$
3,855,018
Active
3,885,222
62,000
3,947,222
Work
1,338,184
6,530
1,344,714
Other
30,422
3,974
34,396
Total segment revenues
$
9,049,493
$
131,857
$
9,181,350
Segment profit (loss)
Outdoor
$
525,107
$
6,591
$
531,698
Active
982,240
16,171
998,411
Work
140,791
579
141,370
Other
(2,035
)
(2,667
)
(4,702
)
Total segment profit
1,646,103
20,674
1,666,777
Corporate and other expenses
(373,311
)
(208
)
(373,519
)
Interest, net
(47,639
)
—
(47,639
)
Income from continuing operations
before income taxes
$
1,225,153
$
20,466
$
1,245,619
Diluted earnings per share
growth
35
%
2
%
37
%
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 Nine Months Ended
December 2019
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended December
2019
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Relocation and Specified
Strategic Business Decisions (b)
Pension Settlement Charge
(c)
Impact of Swiss Tax Act
(d)
Adjusted
Contribution from Acquisition
(e)
Adjusted Organic
Revenues
$
3,384,746
$
—
$
(231
)
$
—
$
—
$
3,384,515
$
—
$
3,384,515
Gross profit
1,884,283
—
831
—
—
1,885,114
—
1,885,114
Percent
55.7
%
55.7
%
55.7
%
Operating income
578,802
—
16,195
—
—
594,997
—
594,997
Percent
17.1
%
17.6
%
17.6
%
Other income (expense), net
(22,152
)
—
(18
)
22,934
—
764
—
764
Diluted earnings per share from
continuing operations (f)
1.13
0.03
0.03
0.04
—
1.23
—
1.23
Nine Months Ended December 2019
As Reported under GAAP
Transaction and Deal Related
Costs (a)
Relocation and Specified
Strategic Business Decisions (b)
Pension Settlement Charge
(c)
Impact of Swiss Tax Act
(d)
Adjusted
Contribution from Acquisition
(e)
Adjusted Organic
Revenues
$
9,049,493
$
—
$
(14,252
)
$
—
$
—
$
9,035,241
$
(11,764
)
$
9,023,477
Gross profit
4,915,609
(630
)
(1,782
)
—
—
4,913,197
(4,485
)
4,908,712
Percent
54.3
%
54.4
%
54.4
%
Operating income
1,291,159
22,317
51,093
—
—
1,364,569
37
1,364,606
Percent
14.3
%
15.1
%
15.1
%
Other income (expense), net
(18,367
)
—
(30
)
22,934
—
4,537
4
4,541
Diluted earnings per share from
continuing operations (f)
2.99
0.07
0.10
0.04
(0.41
)
2.78
—
2.79
(a) Transaction and deal related costs
include acquisition, integration and other costs related to the
acquisitions of the Icebreaker® and Altra® brands, which totaled
$12.8 million for the nine months ended December 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 nine months ended
December 2019. These transaction and deal related costs resulted in
a net tax benefit of $5.8 million in the nine months ended December
2019. Additionally, the three and nine months ended December 2019
include an adjustment to tax expense of $10.2 million associated
with the loss on sale for the divestiture of the Reef® brand.
(b) Relocation and specified strategic
business decisions for the three and nine months ended December
2019 include costs associated with the relocation of VF’s global
headquarters and certain brands to Denver, Colorado, which totaled
$10.8 million and $41.5 million for the three and nine months ended
December 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 $5.4
million and $9.6 million for the three and nine months ended
December 2019, respectively. The relocation and specified strategic
business decisions costs resulted in a net tax benefit of $3.0
million and $11.3 million for the three and nine months ended
December 2019, respectively.
(c) The pension settlement charge was a
result of actions taken to reduce risk, volatility and the
liability associated with VF's U.S. pension plan. The pension
settlement charge resulted in a net tax benefit of $5.8 million in
the three and nine months ended December 2019.
(d) 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
nine months ended December 2019.
(e) 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.
(f) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impacts were calculated using 400,322,000 and 401,499,000 weighted
average common shares for the three and nine months ended December
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, the impact
of the pension settlement charge 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 Nine Months Ended
December 2018
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended December
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
$
3,227,712
$
—
$
—
$
—
$
3,227,712
$
(4,340
)
$
3,223,372
Gross profit
1,762,951
1,640
564
—
1,765,155
(1,395
)
1,763,760
Percent
54.6
%
54.7
%
54.7
%
Operating income
520,820
8,046
5,983
—
534,849
1,063
535,912
Percent
16.1
%
16.6
%
16.6
%
Other income (expense), net
(1,027
)
4,842
—
—
3,815
1
3,816
Diluted earnings per share from
continuing operations (e)
1.02
0.02
0.01
0.03
1.08
—
1.09
Nine Months Ended December 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
$
8,584,237
$
—
$
—
$
—
$
8,584,237
$
(96,192
)
$
8,488,045
Gross profit
4,568,796
8,854
3,512
—
4,581,162
(37,417
)
4,543,745
Percent
53.2
%
53.4
%
53.5
%
Operating income
1,178,905
36,352
16,699
—
1,231,956
(7,499
)
1,224,457
Percent
13.7
%
14.4
%
14.4
%
Other income (expense), net
(52,422
)
36,852
—
—
(15,570
)
6
(15,564
)
Diluted earnings per share from
continuing operations (e)
2.21
0.15
0.03
0.06
2.46
(0.01
)
2.44
(a) Transaction and deal related costs
include acquisition and integration costs related to the
acquisitions of Williamson-Dickie and the Icebreaker® and Altra®
brands, and divestiture costs related to the sale of the Reef®
brand, which totaled $6.4 million and $33.6 million for the three
and nine months ended December 2018, respectively. The costs also
include separation and related expenses associated with the
spin-off of the Jeans business of $1.6 million and $2.4 million,
that did not meet the criteria for discontinued operations, for the
three and nine months ended December 2018, respectively.
Additionally, the costs included estimated non-operating losses on
sale related to the divestitures of the Reef® brand and Van Moer
business, totaling $4.5 million and $36.8 million in the three and
nine months ended December 2018, respectively. The transaction and
deal related costs resulted in a net tax benefit of $3.3 million
and $11.6 million in the three and nine months ended December 2018,
respectively.
(b) Relocation and other restructuring
costs for the three and nine months ended December 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 $1.6 million and $4.3 million for
the three and nine months ended December 2018, respectively.
(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 nine months ended December 2018,
resulting in a tax expense of $10.4 million and $23.3 million for
the respective periods.
(d) The contribution from divestitures
represents the operating results of the Reef® brand and Van Moer
business, through the respective dates of sale for the three and
nine months ended December 2018. The contribution from divestitures
resulted in a net tax benefit of $0.2 million and net tax expense
of $1.6 million for the three and nine months ended December 2018,
respectively.
(e) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impact was calculated using 399,767,000 and 400,418,000 weighted
average common shares for the three and nine months ended December
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 December
2019
Nine Months Ended December
2019
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
9%
14%
23%
12%
15%
8%
25%
15%
% change constant currency*
9%
16%
25%
13%
15%
13%
30%
17%
The North Face®
% change
4%
15%
13%
8%
7%
10%
12%
8%
% change constant currency*
4%
17%
15%
8%
7%
14%
15%
9%
Timberland®
% change
(4)%
(9)%
0%
(5)%
2%
(10)%
2%
(3)%
% change constant currency*
(4)%
(7)%
1%
(4)%
2%
(7)%
3%
(1)%
Dickies®
% change
7%
5%
45%
13%
0%
(2)%
23%
3%
% change constant currency*
7%
6%
46%
13%
0%
1%
25%
4%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended December
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.
3%
3%
3%
3%
3%
3%
EMEA
4%
6%
4%
6%
4%
7%
APAC
14%
15%
14%
15%
14%
15%
China
30%
32%
30%
32%
30%
32%
Americas (non-U.S.)
9%
9%
9%
9%
9%
9%
International
8%
9%
8%
9%
8%
9%
Global
5%
6%
5%
6%
5%
6%
Nine Months Ended December
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.
6%
6%
6%
6%
7%
7%
EMEA
0%
4%
0%
4%
2%
6%
APAC
13%
16%
13%
16%
13%
16%
China
24%
29%
24%
29%
24%
29%
Americas (non-U.S.)
9%
11%
6%
8%
7%
9%
International
5%
8%
5%
8%
6%
9%
Global
5%
7%
5%
7%
6%
8%
Three Months Ended December
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%
4%
3%
4%
4%
4%
Direct-to-consumer
7%
7%
7%
7%
7%
7%
Digital
16%
17%
16%
17%
16%
17%
Nine Months Ended December
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%
4%
3%
4%
4%
6%
Direct-to-consumer
10%
11%
10%
11%
10%
11%
Digital
17%
19%
17%
19%
18%
20%
As of December
2019
2018
DTC Store
Count
Total
1,438
1,420
*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 nine months ended December
2019. Refer to Non-GAAP financial information on "Reconciliation of
Select GAAP Measures to Non-GAAP Measures - Three and Nine Months
Ended December 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, through the respective dates of sale for the
three and nine months ended December 2018. Refer to Non-GAAP
financial information on "Reconciliation of Select GAAP Measures to
Non-GAAP Measures - Three and Nine Months Ended December 2019" and
"Reconciliation of Select GAAP Measures to Non-GAAP Measures -
Three and Nine Months Ended December 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/20200123005095/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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