- Revenue from continuing operations decreased 6 percent (down
8 percent in constant dollars) to $3.0 billion;
- Active segment revenue decreased 9 percent (down 11 percent
in constant dollars) including a 6 percent (8 percent in constant
dollars) decrease in Vans® brand revenue; Outdoor segment
revenue decreased 5 percent (down 7 percent in constant dollars)
including flat revenue (down 2 percent in constant dollars) in The
North Face® brand; Work segment revenue increased 8 percent
(up 6 percent in constant dollars) including a 9 percent (7 percent
in constant dollars) increase in Dickies® brand
revenue;
- International revenue was flat (down 4 percent in constant
dollars); Europe revenue increased 1 percent (down 4 percent in
constant dollars); Greater China revenue increased 18 percent (up
11 percent in constant dollars), including a 22 percent (15 percent
in constant dollars) increase in Mainland China;
- Direct-to-Consumer revenue decreased 2 percent (down 4
percent in constant dollars) including a 53 percent (49 percent in
constant dollars) increase in Direct-to-Consumer Digital
revenue;
- Gross margin from continuing operations decreased 250 basis
points, including a 90 basis point negative impact from the timing
of net foreign currency transaction activity, to 54.7 percent; on
an adjusted basis, gross margin decreased 150 basis points to 55.7
percent;
- Operating income from continuing operations on a reported
basis was $412 million; on an adjusted basis, operating income from
continuing operations was $458 million;
- Earnings per share from continuing operations was $0.83;
adjusted earnings per share from continuing operations was
$0.93;
- VF ended the third quarter of fiscal 2021 with inventories
down 14 percent compared to the prior year; at the end of the third
quarter the company had approximately $3.9 billion of cash and
short-term investments, including approximately $2 billion of cash
designated for the acquisition of the Supreme® brand that
was completed in the fourth quarter, in addition to $1.9 billion
remaining under VF's revolving credit facility; the company also
returned $191 million to shareholders through dividends;
- Full year fiscal 2021 revenue is now expected to be in the
range of $9.1 billion to $9.2 billion, reflecting a decrease of 12
percent to 13 percent on an adjusted basis; full year fiscal 2021
adjusted earnings per share is now expected to be approximately
$1.30, reflecting a decrease of approximately 51 percent.
VF Corporation (NYSE: VFC) today reported financial results for
its third quarter ended December 26, 2020. 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 - Occupational Workwear
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 and Costs
Related to Specified Strategic Business Decisions.” Unless
otherwise noted, “reported” and “adjusted” amounts are the
same.
“Our third quarter results were largely ahead of expectations
despite the impact of additional COVID-19-related disruption to our
business,” said Steve Rendle, VF’s Chairman, President and CEO.
“Our portfolio remains on track to return to growth in the fiscal
fourth quarter and we are confident in VF’s plans to accelerate
growth into fiscal 2022 and to continue advancing our business
model transformation. We remain optimistic about the year ahead and
look forward to improvements in our geopolitical, macroeconomic and
pandemic-related situations.”
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. 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 - Occupational Workwear
Business
On January 21, 2020, VF announced its decision to explore the
divestiture of its Occupational Workwear business. The Occupational
Workwear business is comprised primarily of the following brands
and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®,
Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The
business also includes certain Dickies® occupational workwear
products that have historically been sold through the
business-to-business channel.
During the three months ended March 2020, the company determined
that the Occupational Workwear business met the held-for-sale and
discontinued operations accounting criteria. Accordingly, the
company has reported the related held-for-sale assets and
liabilities as assets and liabilities of discontinued operations
and included the operating results and cash flows of the business
in discontinued operations for all periods presented.
Adjusted Amounts - Excluding Transaction and Deal Related
Expenses and Costs Related to Specified Strategic Business
Decisions
The adjusted amounts in this release exclude transaction and
deal related expenses associated primarily with the acquisition of
the Supreme® brand. Total transaction and deal related expenses
were approximately $7 million in the third quarter and the first
nine months of fiscal 2021.
The adjusted amounts in this release exclude costs related to a
transformation initiative for our Asia-Pacific regional operations
as well as certain cost optimization activities and other charges
indirectly related to the strategic review of the Occupational
Workwear business. The adjusted amounts 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 $39 million in the third quarter of fiscal 2021 and
$77 million in the first nine months of fiscal 2021. Adjusted
amounts for the first nine months of fiscal 2021 also exclude
approximately $42 million of noncash non-operating expenses related
to the release of certain currency translation amounts associated
with the wind down activities in South America.
Combined, the above items negatively impacted earnings per share
by $0.10 during the third quarter of fiscal 2021 and $0.29 during
the first nine months of fiscal 2021. 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.
COVID-19 Outbreak Update
As the global impact of COVID-19 continues, VF remains first and
foremost focused on a people-first approach that prioritizes the
health and well-being of its employees, customers, trade partners
and consumers around the world. To help mitigate the spread of
COVID-19 and in response to public health advisories and
governmental actions and regulations, VF has modified its business
practices, including the temporary closing of offices and retail
stores, instituting travel bans and restrictions and implementing
health and safety measures including social distancing and
quarantines.
The majority of VF's supply chain is currently operational.
Suppliers are complying with local public health advisories and
governmental restrictions which has resulted in isolated product
delays. VF is working with its suppliers to minimize disruption.
VF's distribution centers are operational in accordance with local
government guidelines while maintaining enhanced health and safety
protocols.
In North America, over 95 percent of VF's owned retail stores
were open at the beginning of the third quarter, with all VF-owned
retail stores re-opened by mid-October. Since that time additional
stores have been re-closed, with approximately 15 percent of stores
closed by the end of the quarter. The majority of the closures were
Vans® stores, predominantly based in California. In addition, other
stores are operating with reduced capacity. Stores in North America
have begun to re-open since the end of the quarter and currently
less than 10 percent of stores are closed in the region.
In the EMEA region, nearly all of VF's owned retail stores were
open at the beginning of the third quarter. Since that time
additional stores have been re-closed, with approximately 50
percent of stores closed by the end of the quarter. Additional
stores in the EMEA region have re-closed since the end of the
quarter and currently over 60 percent of stores are closed.
Nearly all of VF's owned retail stores in the APAC region,
including Mainland China, were open during the quarter and remain
open.
VF is continuing to monitor the COVID-19 outbreak globally and
will comply with guidance from government entities and public
health authorities to prioritize the health and well-being of its
employees, customers, trade partners and consumers. As COVID-19
uncertainty continues, VF expects ongoing disruption to its
business operations.
Third Quarter Fiscal 2021 Income Statement Review
- Revenue decreased 6 percent (down 8 percent in constant
dollars) to $3.0 billion driven by store closures and lower
consumer demand as a result of the COVID-19 outbreak and related
government actions and regulations.
- Gross margin decreased 250 basis points to 54.7 percent,
primarily driven by elevated promotional activity to clear excess
inventory and the timing of net foreign currency transaction
activity. On an adjusted basis, gross margin decreased 150 basis
points to 55.7 percent.
- Operating income on a reported basis was $412 million.
On an adjusted basis, operating income was $458 million.
Operating margin was 13.9 percent. Adjusted operating margin
was 15.4 percent.
- Earnings per share was $0.83 on a reported basis. On an
adjusted basis, earnings per share was $0.93.
Balance Sheet Highlights
Inventories were down 14 percent compared with the same period
last year. During the quarter, VF returned approximately $191
million of cash to shareholders through dividends. As part of the
company's liquidity preservation actions during the ongoing
COVID-19 outbreak, the company has suspended its share repurchase
program. VF has $2.8 billion remaining under its current share
repurchase authorization.
Full Year Fiscal 2021 Outlook
VF's full year outlook assumes no material deterioration to the
company's current business operations as a result of COVID-19,
governmental actions and regulations. VF's full year fiscal 2021
outlook has been updated and includes the following:
- Revenue is now expected to be in the range of $9.1
billion to $9.2 billion, reflecting a decrease of 12 percent to 13
percent on an adjusted basis. The updated outlook includes
approximately $125 million of revenue from the Supreme® brand. This
compares to the previous expectation of at least $9.0 billion,
reflecting a decrease of approximately 14 percent on an adjusted
basis.
- Adjusted earnings per share is expected to be
approximately $1.30, reflecting a decrease of approximately 51
percent. The updated outlook includes approximately $0.05 of
adjusted earnings per share from the Supreme® brand. This compares
to the previous expectation of at least $1.20, reflecting a
decrease of approximately 55 percent.
- Adjusted free cash flow is now expected to be
approximately $650 million. This compares to the previous
expectation of greater than $600 million.
Dividend Declared
VF’s Board of Directors declared a quarterly dividend of $0.49
per share, payable on March 22, 2021, to shareholders of record on
March 10, 2021. Subject to approval by its Board of Directors, VF
intends to continue to pay its regularly scheduled dividend and is
not currently contemplating the suspension of its dividend.
Webcast Information
VF will host its third quarter fiscal 2021 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 2021 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 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, however, the absence of
these words or similar expressions does not mean that a statement
is not forward-looking. All statements regarding VF’s plans,
objectives, projections and expectations relating to VF’s
operations or financial performance, and assumptions related
thereto are forward-looking statements. 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. VF undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required by law. 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 include, but are not limited to: risks
arising from the widespread outbreak of an illness or any other
communicable disease, or any other public health crisis, including
the coronavirus (COVID-19) global pandemic; 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; retail industry changes and challenges; 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; foreign
currency fluctuations; 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, including the recently acquired
Supreme® brand; changes in tax laws and liabilities; legal,
regulatory, political and economic risks; the risk of economic
uncertainty associated with the exit of the United Kingdom from the
European Union (“Brexit”) or any other similar referendums that may
be held; adverse or unexpected weather conditions; VF's
indebtedness and its ability to obtain financing on favorable
terms, if needed, could prevent VF from fulfilling its financial
obligations; climate change and increased focus on sustainability
issues; and 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; the risk
that the spin-off will not be tax-free for U.S. federal income tax
purposes; and 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. 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
SEC, including VF’s Annual Report on Form 10-K, and Quarterly
Reports on Form 10-Q, and Forms 8-K filed or furnished with the
SEC.
VF CORPORATION
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
December
%
Nine Months Ended
December
%
2020
2019
Change
2020
2019
Change
Net revenues
$
2,971,541
$
3,155,723
(6
)%
$
6,656,158
$
8,386,135
(21
)%
Costs and operating expenses
Cost of goods sold
1,345,024
1,351,653
0
%
3,134,381
3,704,254
(15
)%
Selling, general and administrative
expenses
1,214,518
1,264,031
(4
)%
3,036,639
3,497,315
(13
)%
Total costs and operating expenses
2,559,542
2,615,684
(2
)%
6,171,020
7,201,569
(14
)%
Operating income
411,999
540,039
(24
)%
485,138
1,184,566
(59
)%
Interest, net
(31,776
)
(17,337
)
83
%
(90,656
)
(49,306
)
84
%
Other income (expense), net
6,484
(22,144
)
*
(27,059
)
(18,361
)
*
Income from continuing operations
before income taxes
386,707
500,558
(23
)%
367,423
1,116,899
(67
)%
Income tax expense
59,048
78,976
(25
)%
74,260
4,667
*
Income from continuing
operations
327,659
421,582
(22
)%
293,163
1,112,232
(74
)%
Income from discontinued operations,
net of tax
19,581
43,421
(55
)%
25,186
50,993
(51
)%
Net income
$
347,240
$
465,003
(25
)%
$
318,349
$
1,163,225
(73
)%
Earnings per common share - basic
(a)
Continuing operations
$
0.84
$
1.06
(21
)%
$
0.75
$
2.80
(73
)%
Discontinued operations
0.05
0.11
(54
)%
0.06
0.13
(50
)%
Total earnings per common share -
basic
$
0.89
$
1.17
(24
)%
$
0.82
$
2.93
(72
)%
Earnings per common share - diluted
(a)
Continuing operations
$
0.83
$
1.05
(21
)%
$
0.75
$
2.77
(73
)%
Discontinued operations
0.05
0.11
(54
)%
0.06
0.13
(49
)%
Total earnings per common share -
diluted
$
0.88
$
1.16
(24
)%
$
0.81
$
2.90
(72
)%
Weighted average shares
outstanding
Basic
389,872
395,940
389,262
396,806
Diluted
392,851
400,322
391,607
401,499
Cash dividends per common share
$
0.49
$
0.48
2
%
$
1.45
$
1.42
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 December 2020 relate to the 13-week and
39-week fiscal periods ended December 26, 2020 and all references
to periods ended December 2019 relate to the 13-week and 39-week
fiscal periods ended December 28, 2019. References to March 2020
relate to information as of March 28, 2020.
(a) Amounts have been calculated using
unrounded numbers.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
December
March
December
2020
2020
2019
ASSETS
Current assets
Cash and equivalents
$
3,254,236
$
1,369,028
$
540,029
Accounts receivable, net
1,411,565
1,308,051
1,539,923
Inventories
1,075,983
1,293,912
1,254,460
Short-term investments
599,403
—
—
Other current assets
383,384
444,886
356,882
Current assets of discontinued
operations
560,648
611,139
464,404
Total current assets
7,285,219
5,027,016
4,155,698
Property, plant and equipment,
net
955,845
954,406
867,205
Goodwill and intangible assets,
net
3,056,254
3,010,564
3,377,738
Operating lease right-of-use
assets
1,476,503
1,273,514
1,259,066
Other assets
970,520
867,751
958,253
Other assets of discontinued
operations
—
—
196,302
Total assets
$
13,744,341
$
11,133,251
$
10,814,262
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
299,748
$
1,228,812
$
56,001
Current portion of long-term debt
1,006
1,018
4,677
Accounts payable
412,324
407,021
389,749
Accrued liabilities
1,664,760
1,260,252
1,410,609
Current liabilities of discontinued
operations
120,185
126,781
101,056
Total current liabilities
2,498,023
3,023,884
1,962,092
Long-term debt
5,786,552
2,608,269
2,110,488
Operating lease liabilities
1,211,655
1,020,651
1,014,544
Other liabilities
1,109,937
1,123,113
1,128,834
Other liabilities of discontinued
operations
—
—
30,714
Total liabilities
10,606,167
7,775,917
6,246,672
Stockholders' equity
3,138,174
3,357,334
4,567,590
Total liabilities and stockholders'
equity
$
13,744,341
$
11,133,251
$
10,814,262
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
December
2020
2019
Operating activities
Net income
$
318,349
$
1,163,225
Income from discontinued operations, net
of tax
25,186
50,993
Income from continuing operations, net of
tax
293,163
1,112,232
Depreciation and amortization
204,580
194,647
Reduction in the carrying amount of
right-of-use assets
309,579
282,531
Other adjustments
276,955
(775,433
)
Cash provided by operating activities -
continuing operations
1,084,277
813,977
Cash provided by operating activities -
discontinued operations
57,779
27,649
Cash provided by operating activities
1,142,056
841,626
Investing activities
Purchases of short-term investments
(800,000
)
—
Proceeds from maturities of short-term
investments
200,000
—
Capital expenditures
(152,446
)
(179,195
)
Software purchases
(51,964
)
(36,104
)
Other, net
(9,116
)
52,728
Cash used by investing activities -
continuing operations
(813,526
)
(162,571
)
Cash used by investing activities -
discontinued operations
(3,171
)
(11,385
)
Cash used by investing activities
(816,697
)
(173,956
)
Financing activities
Net increase (decrease) from short-term
borrowings and long-term debt
2,044,426
(601,055
)
Share repurchases
—
(500,003
)
Cash dividends paid
(564,904
)
(562,298
)
Cash received from Kontoor Brands, net of
cash transferred of $126.8 million
—
906,148
Proceeds from issuance of Common Stock,
net of payments for tax withholdings
45,867
135,086
Cash provided (used) by financing
activities
1,525,389
(622,122
)
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
12,513
(4,927
)
Net change in cash, cash equivalents
and restricted cash
1,863,261
40,621
Cash, cash equivalents and restricted
cash – beginning of year
1,411,322
556,587
Cash, cash equivalents and restricted
cash – end of period
$
3,274,583
$
597,208
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)
2020
2019
Segment revenues
Outdoor
$
1,571,043
$
1,659,108
(5
)%
(7
)%
(5
)%
(7
)%
Active
1,127,121
1,239,462
(9
)%
(11
)%
(9
)%
(11
)%
Work
270,182
251,063
8
%
6
%
8
%
6
%
Other (c)
3,195
6,090
*
*
*
*
Total segment revenues
$
2,971,541
$
3,155,723
(6
)%
(8
)%
(6
)%
(8
)%
Segment profit (loss)
Outdoor
$
311,767
$
348,995
(11
)%
(13
)%
Active
201,373
286,474
(30
)%
(31
)%
Work
16,900
22,111
(24
)%
(22
)%
Other (c)
(4,435
)
(2,800
)
*
*
Total segment profit
525,605
654,780
(20
)%
(21
)%
Corporate and other expenses
(107,122
)
(136,885
)
(22
)%
(22
)%
Interest, net
(31,776
)
(17,337
)
83
%
83
%
Income from continuing operations
before income taxes
$
386,707
$
500,558
(23
)%
(25
)%
(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) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Includes results primarily related to the sale
of non-VF products.
* 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)
2020
2019
Segment revenues
Outdoor
$
3,066,678
$
3,795,665
(19
)%
(21
)%
(19
)%
(21
)%
Active
2,898,639
3,885,222
(25
)%
(26
)%
(25
)%
(26
)%
Work
686,163
674,826
2
%
1
%
2
%
1
%
Other (c)
4,678
30,422
*
*
*
*
Total segment revenues
$
6,656,158
$
8,386,135
(21
)%
(22
)%
(20
)%
(22
)%
Segment profit (loss)
Outdoor
$
283,531
$
525,107
(46
)%
(48
)%
Active
467,632
982,240
(52
)%
(53
)%
Work
13,672
52,129
(74
)%
(74
)%
Other (c)
(9,322
)
(2,035
)
*
*
Total segment profit
755,513
1,557,441
(51
)%
(53
)%
Corporate and other expenses
(297,434
)
(391,236
)
(24
)%
(24
)%
Interest, net
(90,656
)
(49,306
)
84
%
84
%
Income from continuing operations
before income taxes
$
367,423
$
1,116,899
(67
)%
(69
)%
(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) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Includes results primarily related to the sale
of non-VF products.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended December
2020
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
1,571,043
$
(35,799
)
$
1,535,244
Active
1,127,121
(21,655
)
1,105,466
Work
270,182
(3,750
)
266,432
Other
3,195
667
3,862
Total segment revenues
$
2,971,541
$
(60,537
)
$
2,911,004
Segment profit (loss)
Outdoor
$
311,767
$
(6,748
)
$
305,019
Active
201,373
(3,161
)
198,212
Work
16,900
398
17,298
Other
(4,435
)
(1,468
)
(5,903
)
Total segment profit
525,605
(10,979
)
514,626
Corporate and other expenses
(107,122
)
254
(106,868
)
Interest, net
(31,776
)
—
(31,776
)
Income from continuing operations
before income taxes
$
386,707
$
(10,725
)
$
375,982
Diluted earnings per share
growth
(21
)
%
(2
)
%
(23
)
%
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. 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. 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).
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
2020
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
3,066,678
$
(54,808
)
$
3,011,870
Active
2,898,639
(27,897
)
2,870,742
Work
686,163
(3,167
)
682,996
Other
4,678
696
5,374
Total segment revenues
$
6,656,158
$
(85,176
)
$
6,570,982
Segment profit (loss)
Outdoor
$
283,531
$
(13,046
)
$
270,485
Active
467,632
(6,712
)
460,920
Work
13,672
(51
)
13,621
Other
(9,322
)
(3,057
)
(12,379
)
Total segment profit
755,513
(22,866
)
732,647
Corporate and other expenses
(297,434
)
83
(297,351
)
Interest, net
(90,656
)
—
(90,656
)
Income from continuing operations
before income taxes
$
367,423
$
(22,783
)
$
344,640
Diluted earnings per share
growth
(73
)%
(2
)%
(75
)%
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. 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. 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).
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 2020
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended December
2020
As Reported under
GAAP
Transaction and Deal Related
Costs (a)
Specified Strategic Business
Decisions (b)
Adjusted
Revenues
$
2,971,541
$
—
$
—
$
2,971,541
Gross profit
1,626,517
—
27,936
1,654,453
Percent
54.7
%
55.7
%
Operating income
411,999
6,680
39,378
458,057
Percent
13.9
%
15.4
%
Diluted earnings per share from
continuing operations (c)
0.83
0.01
0.09
0.93
Nine Months Ended December 2020
As Reported under
GAAP
Transaction and Deal Related
Costs (a)
Specified Strategic Business
Decisions (b)
Adjusted
Revenues
$
6,656,158
$
—
$
—
$
6,656,158
Gross profit
3,521,777
410
42,599
3,564,786
Percent
52.9
%
53.6
%
Operating income
485,138
7,132
76,863
569,133
Percent
7.3
%
8.6
%
Diluted earnings per share from
continuing operations (c)
0.75
0.01
0.27
1.04
(a) Transaction and deal related costs
include expenses associated with the acquisition of Supreme
Holdings, Inc. of $6.6 million for both the three and nine months
ended December 2020. Transaction and deal related costs also
include expenses associated with the anticipated sale of the
Occupational Workwear business of $0.1 million and $0.5 million,
that did not meet the criteria for discontinued operations, for the
three and nine months ended December 2020, respectively. The
transaction and deal related costs resulted in a net tax benefit of
$1.7 million in both the three and nine months ended December
2020.
(b) Specified strategic business decisions
for the three and nine months ended December 2020 include costs
related to a transformation initiative for our Asia-Pacific
regional operations of $20.3 million in both periods. Specified
strategic business decisions also include cost optimization
activities and other charges indirectly related to the strategic
review of the Occupational Workwear business, which totaled $19.1
million and $52.3 million during the three and nine months ended
December 2020, respectively. The costs also include jeanswear wind
down activities in South America after 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 $4.0
million for the nine months ended December 2020. The nine months
ended December 2020 also include a $42.4 million noncash charge
recorded in the 'Other income (expense), net' line related to the
release of certain currency translation amounts associated with the
wind down activities in South America. The specified strategic
business decisions resulted in a net tax benefit of $5.7 million
and $11.7 million in the three and nine months ended December 2020,
respectively.
(c) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impacts were calculated using 392,851,000 and 391,607,000 weighted
average common shares for the three and nine months ended December
2020, respectively.
Non-GAAP Financial Information
The financial information above has been
presented on a GAAP basis and on an adjusted basis, which excludes
the impact of transaction and deal related costs and activity
related to specified strategic business decisions. The adjusted
presentation provides 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 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
Revenues
$
3,155,723
$
—
$
(231
)
$
—
$
—
$
3,155,492
Gross profit
1,804,070
—
831
—
—
1,804,901
Percent
57.2
%
57.2
%
Operating income
540,039
—
16,195
—
—
556,234
Percent
17.1
%
17.6
%
Diluted earnings per share from
continuing operations (e)
1.05
0.03
0.03
0.04
—
1.15
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
Revenues
$
8,386,135
$
—
$
(14,252
)
$
—
$
—
$
8,371,883
Gross profit
4,681,881
(630
)
(1,782
)
—
—
4,679,469
Percent
55.8
%
55.9
%
Operating income
1,184,566
22,317
51,093
—
—
1,257,976
Percent
14.1
%
15.0
%
Diluted earnings per share from
continuing operations (e)
2.77
0.07
0.10
0.04
(0.41
)
2.57
(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) A pension settlement charge of $22.9
million was recorded in the 'Other income (expense), net' line for
the three and nine months ended December 2019 as 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 for both
periods.
(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) 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 and on an adjusted basis, which excludes
the impact of transaction and deal related costs, relocation and
specified strategic business decisions, the impact of the pension
settlement charge and the impact of the Swiss Tax Act. The adjusted
presentation provides 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
2020
Nine Months Ended December
2020
Top 4 Brand Revenue
Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
(10
)%
(9
)%
15
%
(6
)%
(30
)%
(16
)%
6
%
(22
)%
% change constant currency*
(10
)%
(13
)%
9
%
(8
)%
(30
)%
(19
)%
5
%
(23
)%
The North Face®
% change
(12
)%
22
%
16
%
0
%
(26
)%
(3
)%
4
%
(17
)%
% change constant currency*
(12
)%
17
%
10
%
(2
)%
(26
)%
(7
)%
1
%
(18
)%
Timberland®
% change
(19
)%
(11
)%
(6
)%
(14
)%
(26
)%
(24
)%
(11
)%
(23
)%
% change constant currency*
(18
)%
(16
)%
(11
)%
(17
)%
(26
)%
(28
)%
(13
)%
(25
)%
Dickies®
% change
8
%
7
%
14
%
9
%
2
%
(4
)%
20
%
5
%
% change constant currency*
8
%
3
%
8
%
7
%
3
%
(7
)%
17
%
4
%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended December
2020
% Change
% Change Constant
Currency*
% Change Adjusted (a)
% Change Constant Currency and
Adjusted*(a)
Geographic
Revenue Growth
U.S.
(11
)%
(11
)%
(11
)%
(11
)%
EMEA
1
%
(4
)%
1
%
(4
)%
APAC
6
%
1
%
6
%
1
%
Greater China
18
%
11
%
18
%
11
%
Americas (non-U.S.)
(17
)%
(16
)%
(17
)%
(16
)%
International
0
%
(4
)%
0
%
(4
)%
Global
(6
)%
(8
)%
(6
)%
(8
)%
Nine Months Ended December
2020
% Change
% Change Constant
Currency*
% Change Adjusted (a)
% Change Constant Currency and
Adjusted*(a)
Geographic
Revenue Growth
U.S.
(25
)%
(25
)%
(25
)%
(25
)%
EMEA
(17
)%
(20
)%
(17
)%
(20
)%
APAC
0
%
(2
)%
0
%
(2
)%
Greater China
13
%
10
%
13
%
10
%
Americas (non-U.S.)
(39
)%
(38
)%
(38
)%
(36
)%
International
(15
)%
(17
)%
(15
)%
(17
)%
Global
(21
)%
(22
)%
(20
)%
(22
)%
Three Months Ended December
2020
% Change
% Change Constant
Currency*
% Change Adjusted (a)
% Change Constant Currency and
Adjusted*(a)
Channel Revenue
Growth
Wholesale (b)
(10
)%
(12
)%
(10
)%
(12
)%
Direct-to-consumer
(2
)%
(4
)%
(2
)%
(4
)%
Digital
53
%
49
%
53
%
49
%
Nine Months Ended December
2020
% Change
% Change Constant
Currency*
% Change Adjusted (a)
% Change Constant Currency and
Adjusted*(a)
Channel Revenue
Growth
Wholesale (b)
(25
)%
(26
)%
(24
)%
(25
)%
Direct-to-consumer
(15
)%
(16
)%
(15
)%
(16
)%
Digital
56
%
54
%
56
%
54
%
As of December
2020
2019
DTC Store
Count
Total
1,396
1,397
*Refer to constant currency definition on
previous pages.
(a) Excludes the operating results of
jeanswear wind down activities in South America after 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) Royalty revenues are included in the
wholesale channel for all periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210127005156/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
VF (NYSE:VFC)
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