VF Corporation (NYSE: VFC) today announced financial results for
its third quarter (Q3'FY23) ended December 31, 2022 and a series of
actions to accelerate the path to its target leverage ratio and
sharpen its focus, including declaring a quarterly per share
dividend of $0.30, reflecting a 41% decrease over the previous
quarter’s dividend.
Q3'FY23 Financial Highlights
- Revenue down 3% (up 3% in constant dollars) to $3.5
billion
- Earnings per share (EPS) down 1% to $1.31; Adjusted EPS down
17% to $1.12
Benno Dorer, Interim President and CEO, said: “We are
pleased to reaffirm the recently communicated full year 2023 EPS
outlook with revenue growth at approximately 3%, after navigating
an increasingly challenging fiscal Q3. Spending the last few weeks
with VF's dedicated and talented teams around the world has
reinforced my belief in the tremendous opportunity ahead for our
company. We are committed to improving execution through a
sharpened focus on the biggest consumer opportunities and enhanced
operational performance. Consistent with this objective, we are
shifting resource priorities across the Company, including by
reducing the dividend, exploring the sale of non-core assets,
cutting costs and eliminating non-strategic spend, while enhancing
the focus on the consumer through targeted investments. We are
confident these actions will enable a return to profitable and
sustainable growth and, with that, strong shareholder value
creation.”
Q3’FY23 Operating Highlights
- EMEA region down 2% and up 10% in constant dollars, the seventh
consecutive quarter of double-digit growth in constant dollars
- Asia Pacific region down 7% and up 4% in constant dollars,
reflecting a sequential improvement across the region and in
Greater China, where sales were down 11% and down 1% in constant
dollars, and continued strong growth in the rest of Asia
- Standout performance in the outdoor brands, led by The North
Face® up 7% and up 13% in constant dollars, with Timberland® flat
and up 6% in constant dollars
- Vans® down 13% and down 9% in constant dollars, reflecting
positive performances in Europe and Asia outside of Greater China,
while the Americas remained negative
- Balanced performance across both Direct to Consumer and
Wholesale channels
- Supply chain challenges remained persistent in the quarter and
are being addressed, with actions in place to return to full
customer service at a normalized cost
FY23 Outlook*
- Total VF revenue up approximately 3% in constant dollars,
within the previous outlook range
- Vans® revenue is expected to decline by high single digits % in
constant dollars, compared to the previous outlook of down
mid-single digits %
- The North Face® is expected to be up by at least 14% in
constant dollars, compared to the previous outlook of up at least
12%
- Adjusted gross margin down approximately 200 basis points,
compared to the previous outlook of down 100 to 150 basis
points
- Adjusted operating margin approximately 9.5%, compared to the
previous outlook of approximately 11.0%
- Adjusted EPS $2.05 to $2.15, within the previous outlook of
$2.00 to $2.20
- Adjusted cash flow from operations** approximately $0.7
billion, compared to the previous outlook of at least $0.9 billion;
Capital expenditures approximately $200 million versus the previous
outlook of $230 million
- Inventory is expected to reduce by approximately $300 million
during Q4'FY23
FY24 Expectations*
- Total VF revenue up by at least low-single digit % in constant
dollars
- Gross and operating margin expansion
- Operating earnings to grow by double-digits
- Operating cash flow to grow faster than earnings
Actions to Accelerate Path to Target Leverage Ratio and
Sharpen the Company's Focus
The Company's capital deployment priorities in the near to
medium term are focused on optimizing and driving the performance
of the portfolio, reducing leverage and returning capital to
shareholders. VF is also evaluating and deploying a series of
strategic actions to strengthen the Company's financial position
and sharpen focus on its greatest value creation opportunities,
including:
- Rightsizing the dividend payout to accelerate the return to the
Company's target leverage ratio and provide additional financial
flexibility, positioning VF to navigate the current macro-economic
challenges while continuing to make investments to advance its
strategy. As a result, VF's next quarterly per share payment will
reduce to $0.30 from $0.51 per share. The Company expects to grow
future dividends in line with earnings
- Continuing to pursue the portfolio optimization agenda. The
Company is commencing a review of strategic alternatives for its
Global Packs business, consisting of the Kipling®, Eastpak®, and
JanSport® brands. While these iconic and profitable businesses are
strong contributors of value, VF is committed to ensuring they are
optimally positioned to achieve their full potential while
enhancing management focus on the Company’s greatest strategic
priorities
- Concluding a number of asset sales during H2'FY23, including
the sale and leaseback of VF's European headquarters in Stabio,
Switzerland
- Reducing working capital and aligning inventories to optimal
levels, without compromising brand equity
- Increasing our efforts to reduce costs in order to point
resources toward the Company's highest value creation
opportunities, including completing the previously announced
actions which will deliver approximately $225 million in annualized
savings once complete in FY24
Matt Puckett, CFO, said: “As we close FY23 and move into
FY24, we have clear plans in place to address the ongoing
challenging macro-economic environment in the near term. I am
confident the actions we are taking will lead to improved operating
performance and will strengthen the Company's financial position,
enabling VF to deliver long-term, sustainable and profitable
growth.”
* FY23 outlook and FY24 expectations assume no additional
significant COVID-19 related lockdowns in any key commercial or
production regions and no significant worsening in global inflation
rates and consumer sentiment ** Excludes the impact of an $876
million payment VF made on October 19, 2022 to the U.S. Treasury
for the dispute regarding the timing of income inclusion associated
with VF's acquisition of Timberland in 2011, as previously
disclosed
Summary Revenue
Information
(Unaudited)
Three Months Ended
December
Nine Months Ended
December
(Dollars in millions)
2022
2021
% Change
% Change (constant currency)
2022
2021
% Change
% Change (constant currency)
Brand:
Vans®
$
926.9
$
1,060.4
(13
)%
(9
)%
$
2,825.9
$
3,170.7
(11
)%
(7
)%
The North Face®
1,321.2
1,240.3
7
%
13
%
2,753.2
2,490.2
11
%
17
%
Timberland®
595.5
593.4
—
%
6
%
1,389.1
1,388.2
—
%
7
%
Dickies®
177.0
211.5
(16
)%
(13
)%
533.7
640.7
(17
)%
(14
)%
Other Brands
510.1
518.8
(2
)%
5
%
1,371.0
1,327.4
3
%
11
%
VF Revenue
$
3,530.7
$
3,624.4
(3
)%
3
%
$
8,872.9
$
9,017.2
(2
)%
4
%
Region:
Americas
$
2,093.9
$
2,132.7
(2
)%
(1
)%
$
5,233.1
$
5,241.7
—
%
—
%
EMEA
983.3
1,003.3
(2
)%
10
%
2,510.4
2,515.9
—
%
14
%
APAC
453.4
488.3
(7
)%
4
%
1,129.3
1,259.6
(10
)%
(2
)%
VF Revenue
$
3,530.7
$
3,624.4
(3
)%
3
%
$
8,872.9
$
9,017.2
(2
)%
4
%
International
$
1,629.3
$
1,676.5
(3
)%
8
%
$
4,132.7
$
4,257.5
(3
)%
8
%
Channel:
DTC
$
1,937.4
$
1,981.5
(2
)%
3
%
$
4,082.6
$
4,247.3
(4
)%
1
%
Wholesale (a)
1,593.3
1,642.9
(3
)%
2
%
4,790.3
4,769.9
—
%
6
%
VF Revenue
$
3,530.7
$
3,624.4
(3
)%
3
%
$
8,872.9
$
9,017.2
(2
)%
4
%
All references to periods ended December
2022 relate to the 13-week and 39-week fiscal periods ended
December 31, 2022 and all references to periods ended December 2021
relate to the 13-week and 39-week fiscal periods ended January 1,
2022.
Note: Amounts may not sum due to
rounding
(a) Royalty revenues are included in the
wholesale channel for all periods.
Q3'FY23 Income Statement Review
- Revenue $3.5 billion, down 3% (up 3% in constant dollars) with
the big four brands down 3% (up 2% in constant dollars) and the
balance of the portfolio down 2% (up 5% in constant dollars)
- The North Face® revenue $1.3 billion, up 7% (up 13% in constant
dollars)
- Vans® revenue $0.9 billion, down 13% (down 9% in constant
dollars)
- Gross margin 54.9%, down 120 basis points; Adjusted gross
margin 54.9%, down 140 basis points due primarily to increased
promotions
- Operating margin 14.6%, down 410 basis points; Adjusted
operating margin 14.9%, down 280 basis points
- Earnings per share (EPS) $1.31, down 1%; Adjusted EPS $1.12,
down 17%
Q3'FY23 Balance Sheet Review
- Inventories declined by $158 million during Q3’FY23 and
increased by 101% relative to last year; excluding the increase of
in-transit inventory of approximately $415 million, the increase
was approximately 75% relative to last year, primarily driven by
core and excess replenishment inventory
- VF modified terms with the majority of its suppliers in the
first quarter of fiscal 2023 to take ownership of inventory near
point of shipment rather than destination
- Accounts payable increased 62%, which was largely driven by the
modified terms with the majority of suppliers
Q3’FY23 Shareholder Returns
- Return of $198 million to shareholders through cash
dividends
- VF’s Board of Directors declared a quarterly dividend of $0.30
per share, reflecting a 41% decrease from the previous quarter’s
dividend. This dividend will be payable on March 21, 2023, to
shareholders of record at the close of business on March 10, 2023.
Subject to approval by its Board of Directors, VF intends to
continue to pay quarterly dividends
COVID-19 Update
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 in certain locations,
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.
VF's supply chain is currently fully operational. Suppliers are
complying with local public health advisories and governmental
restrictions. Most final product manufacturing and assembly
suppliers are back to normal operating levels, though manufacturing
and freight lead times remain elevated. VF is working with its
suppliers to minimize disruption and is employing expedited freight
strategically as needed. VF's distribution centers are operational
in accordance with local government guidelines.
In North America, no stores were closed during the third
quarter. Currently, all stores are open.
In the EMEA region, no stores were closed during the third
quarter due to COVID-19. Currently, all stores are open.
In the APAC region, including Mainland China, 4% of stores were
closed at the beginning of the third quarter with a peak of 27% of
stores (including partner doors) closed and an average of 11% of
stores closed throughout the quarter. At the end of the third
quarter, 3% of stores were closed and, as of today, no stores are
closed.
VF is continuing to monitor the evolution of COVID-19 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.
Webcast Information
VF will host its third quarter fiscal 2023 conference call
beginning at 4:30 p.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 2023 results will be
available at ir.vfc.com today before the conference call 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.
Financial Presentation Disclosure
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 below “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 below “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 below “Adjusted Amounts - Excluding Transaction
and Deal Related Activities, Costs Related to Specified Strategic
Business Decisions, Noncash Impairment Charges, Pension Settlement
Charge and a Tax Item.” Unless otherwise noted, “reported” and
“adjusted” amounts are the same.
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 June 28, 2021, VF completed the sale of its Occupational
Workwear business. The Occupational Workwear business was 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 included a license
for certain Dickies® occupational workwear products that were
historically sold through the business-to-business channel.
Accordingly, the company has reported the operating results and
cash flows of the business in discontinued operations for all
periods through the date of sale.
Adjusted Amounts - Excluding Transaction and Deal Related
Activities, Costs Related to Specified Strategic Business
Decisions, Noncash Impairment Charges, Pension Settlement Charge
and a Tax Item
The adjusted amounts in this release exclude transaction and
deal related activities associated with the acquisition of the
Supreme® brand. Total transaction and deal related activities
include integration costs of approximately $0.3 million in the
first nine months of fiscal 2023.
The adjusted amounts in this release exclude costs related to
VF's business model transformation primarily driven by Corporate
actions and resulting restructuring costs, and a transformation
initiative for our Asia-Pacific regional operations. Total costs
were approximately $11 million in the third quarter of fiscal 2023
and $72 million in the first nine months of fiscal 2023.
The adjusted amounts in this release exclude noncash impairment
charges related to the Supreme® reporting unit goodwill and
indefinite-lived trademark intangible asset of approximately $422
million in the first nine months of fiscal 2023. The impairment
charges were driven by non-operating factors including higher
interest rates and foreign currency fluctuations.
The adjusted amounts in this release exclude a noncash pension
settlement charge. The pension settlement charge resulted from the
purchase of a group annuity contract, which was an action taken to
streamline administration, manage financial risk associated with
pension plans, and to transfer a portion of the liability
associated with VF's U.S. pension plan to an insurance company.
Total expense was approximately $92 million in the first nine
months of fiscal 2023.
The adjusted amounts in this release exclude a discrete tax
benefit of approximately $95 million in the third quarter and first
nine months of fiscal 2023 related to a favorable adjustment to
VF's transition tax liability pursuant to the Tax Cuts and Jobs Act
based on examinations by the IRS.
Combined, the above items positively impacted earnings per share
by $0.19 during the third quarter of fiscal 2023 and negatively
impacted earnings per share by $1.07 during the first nine months
of fiscal 2023. 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. The company also
provides guidance on a non-GAAP basis as we cannot predict certain
elements which are included in reported GAAP results. Additionally,
the impact of the payment of taxes and interest related to the
dispute with the IRS regarding the Timberland acquisition in 2011
has been excluded from fiscal 2023 adjusted cash flow from
operations.
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; changes in global economic conditions and the
financial strength of VF’s customers, including as a result of
current inflationary pressures; 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 and other direct-to-consumer
business risks; third-party manufacturing and product innovation;
increasing pressure on margins; VF’s ability to implement its
business strategy; VF’s ability to grow its international,
direct-to-consumer and digital businesses; VF’s ability to
transform its model to be more consumer-minded, retail-centric and
hyper-digital; retail industry changes and challenges; VF’s ability
to create and maintain an agile and efficient operating model and
organizational structure; 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 or information security breaches and data or financial
loss; VF’s ability to properly collect, use, manage and secure
business, consumer and employee data and comply with privacy and
security regulations; foreign currency fluctuations; stability of
VF’s vendors’ manufacturing facilities and VF’s ability to
establish and maintain effective supply chain capabilities;
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 recruit, develop or
retain qualified employees; VF’s ability to protect trademarks and
other intellectual property rights; possible goodwill and other
asset impairment such as the recent impairment charges related to
the Supreme® reporting unit goodwill and indefinite-lived trademark
intangible asset; maintenance by VF’s licensees and distributors of
the value of VF’s brands; VF’s ability to execute acquisitions and
dispositions and integrate acquisitions; business resiliency in
response to natural or man-made economic, political or
environmental disruptions; changes in tax laws and additional tax
liabilities, including for the timing of income inclusion
associated with our acquisition of the Timberland® brand in 2011;
legal, regulatory, political, economic, and geopolitical risks,
including those related to the current conflict in Ukraine; changes
to laws and regulations; 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; VF's ability to pay and declare dividends or
repurchase its stock in the future; climate change and increased
focus on environmental, social and governance issues; and tax risks
associated with the spin-off of our Jeanswear business completed in
2019. 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
2022
2021
2022
2021
Net revenues
$
3,530,667
$
3,624,384
$
8,872,862
$
9,017,176
Costs and operating expenses
Cost of goods sold
1,593,048
1,592,604
4,134,207
4,027,601
Selling, general and administrative
expenses
1,421,586
1,353,338
3,828,157
3,549,763
Impairment of goodwill and intangible
assets
—
—
421,922
—
Total costs and operating expenses
3,014,634
2,945,942
8,384,286
7,577,364
Operating income
516,033
678,442
488,576
1,439,812
Interest expense, net
(50,230
)
(33,388
)
(115,395
)
(100,533
)
Loss on debt extinguishment
—
(3,645
)
—
(3,645
)
Other income (expense), net
(9,901
)
(95
)
(113,895
)
16,495
Income from continuing operations
before income taxes
455,902
641,314
259,286
1,352,129
Income tax expense (benefit)
(51,966
)
123,513
(74,190
)
216,303
Income from continuing
operations
507,868
517,801
333,476
1,135,826
Income from discontinued operations,
net of tax
—
—
—
170,273
Net income
$
507,868
$
517,801
$
333,476
$
1,306,099
Earnings per common share - basic
(a)
Continuing operations
$
1.31
$
1.33
$
0.86
$
2.90
Discontinued operations
—
—
—
0.44
Total earnings per common share -
basic
$
1.31
$
1.33
$
0.86
$
3.34
Earnings per common share - diluted
(a)
Continuing operations
$
1.31
$
1.32
$
0.86
$
2.89
Discontinued operations
—
—
—
0.43
Total earnings per common share -
diluted
$
1.31
$
1.32
$
0.86
$
3.32
Weighted average shares
outstanding
Basic
387,739
390,430
387,663
391,187
Diluted
388,192
392,495
388,357
393,547
Cash dividends per common share
$
0.51
$
0.50
$
1.51
$
1.48
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 2022 relate to the 13-week and
39-week fiscal periods ended December 31, 2022 and all references
to periods ended December 2021 relate to the 13-week and 39-week
fiscal periods ended January 1, 2022. References to March 2022
relate to information as of April 2, 2022.
(a) Amounts have been calculated using
unrounded numbers.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
December
March
December
2022
2022
2021
ASSETS
Current assets
Cash and equivalents
$
571,347
$
1,275,943
$
1,333,839
Accounts receivable, net
1,564,957
1,467,842
1,495,859
Inventories
2,591,915
1,418,673
1,287,210
Other current assets
515,763
425,622
483,738
Total current assets
5,243,982
4,588,080
4,600,646
Property, plant and equipment,
net
932,663
1,041,777
1,049,691
Goodwill and intangible assets,
net
4,932,913
5,394,158
5,419,777
Operating lease right-of-use
assets
1,293,041
1,247,056
1,302,545
Other assets
1,910,698
1,071,137
1,163,663
Total assets
$
14,313,297
$
13,342,208
$
13,536,322
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
901,668
$
335,462
$
106,010
Current portion of long-term debt
910,616
501,051
500,915
Accounts payable
906,340
562,992
559,716
Accrued liabilities
1,827,610
1,915,892
2,057,237
Total current liabilities
4,546,234
3,315,397
3,223,878
Long-term debt
4,617,441
4,584,261
4,646,379
Operating lease liabilities
1,068,744
1,023,759
1,093,013
Other liabilities
761,246
888,436
919,652
Total liabilities
10,993,665
9,811,853
9,882,922
Stockholders' equity
3,319,632
3,530,355
3,653,400
Total liabilities and stockholders'
equity
$
14,313,297
$
13,342,208
$
13,536,322
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
December
2022
2021
Operating activities
Net income
$
333,476
$
1,306,099
Income from discontinued operations, net
of tax
—
170,273
Income from continuing operations, net of
tax
333,476
1,135,826
Impairment of goodwill and intangible
assets
421,922
—
Depreciation and amortization
192,174
199,652
Reduction in the carrying amount of
right-of-use assets
280,845
309,588
Other adjustments
(2,061,889
)
(853,776
)
Cash provided (used) by operating
activities - continuing operations
(833,472
)
791,290
Cash provided by operating activities -
discontinued operations
—
6,090
Cash provided (used) by operating
activities
(833,472
)
797,380
Investing activities
Business acquisitions, net of cash
received
—
3,760
Proceeds from sale of businesses, net of
cash sold
—
616,529
Proceeds from sale of short-term
investments
—
598,806
Capital expenditures
(130,214
)
(214,220
)
Software purchases
(75,460
)
(63,758
)
Other, net
(1,159
)
12,819
Cash provided (used) by investing
activities - continuing operations
(206,833
)
953,936
Cash used by investing activities -
discontinued operations
—
(525
)
Cash provided (used) by investing
activities
(206,833
)
953,411
Financing activities
Contingent consideration payment
(56,976
)
—
Net increase (decrease) from short-term
borrowings and long-term debt
1,064,601
(411,400
)
Share repurchases
—
(299,999
)
Cash dividends paid
(586,335
)
(579,194
)
Proceeds from issuance of Common Stock,
net of (payments) for tax withholdings
(2,571
)
32,929
Cash provided (used) by financing
activities
418,719
(1,257,664
)
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(82,512
)
(9,339
)
Net change in cash, cash equivalents
and restricted cash
(704,098
)
483,788
Cash, cash equivalents and restricted
cash – beginning of year
1,277,082
851,205
Cash, cash equivalents and restricted
cash – end of period
$
572,984
$
1,334,993
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
December
% Change
% Change Constant Currency
(a)
2022
2021
Segment revenues
Outdoor
$
2,003,045
$
1,928,427
4
%
10
%
Active
1,258,682
1,410,577
(11
)%
(6
)%
Work
268,940
285,101
(6
)%
(3
)%
Other (b)
—
279
*
*
Total segment revenues
$
3,530,667
$
3,624,384
(3
)%
3
%
Segment profit (loss)
Outdoor
$
457,027
$
450,432
Active
146,885
254,497
Work
18,487
47,672
Other (b)
(134
)
(44
)
Total segment profit
622,265
752,557
Corporate and other expenses
(116,133
)
(74,210
)
Interest expense, net
(50,230
)
(33,388
)
Loss on debt extinguishment
—
(3,645
)
Income from continuing operations
before income taxes
$
455,902
$
641,314
(a) Refer to constant currency definition
on the following pages.
(b) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Other primarily includes sourcing activities
related to transition services.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Nine Months Ended
December
% Change
% Change Constant Currency
(a)
2022
2021
Segment revenues
Outdoor
$
4,326,997
$
4,052,802
7
%
13
%
Active
3,772,737
4,104,818
(8
)%
(3
)%
Work
772,980
858,999
(10
)%
(8
)%
Other (b)
148
557
*
*
Total segment revenues
$
8,872,862
$
9,017,176
(2
)%
4
%
Segment profit (loss)
Outdoor
$
670,615
$
662,761
Active
541,171
809,708
Work
92,989
150,649
Other (b)
(516
)
(696
)
Total segment profit
1,304,259
1,622,422
Impairment of goodwill and intangible
assets
(421,922
)
—
Corporate and other expenses
(507,656
)
(166,115
)
Interest expense, net
(115,395
)
(100,533
)
Loss on debt extinguishment
—
(3,645
)
Income from continuing operations
before income taxes
$
259,286
$
1,352,129
(a) Refer to constant currency definition
on the following pages.
(b) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Other primarily includes sourcing activities
related to transition services.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended December
2022
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
2,003,045
$
115,791
$
2,118,836
Active
1,258,682
63,161
1,321,843
Work
268,940
8,293
277,233
Other
—
—
—
Total segment revenues
$
3,530,667
$
187,245
$
3,717,912
Segment profit (loss)
Outdoor
$
457,027
$
32,608
$
489,635
Active
146,885
14,149
161,034
Work
18,487
676
19,163
Other
(134
)
(72
)
(206
)
Total segment profit
622,265
47,361
669,626
Corporate and other expenses
(116,133
)
(1,468
)
(117,601
)
Interest expense, net
(50,230
)
—
(50,230
)
Income from continuing operations
before income taxes
$
455,902
$
45,893
$
501,795
Diluted earnings per share
growth
(1
)%
8
%
7
%
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
(Unaudited)
(In thousands)
Nine Months Ended December
2022
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
4,326,997
$
261,555
$
4,588,552
Active
3,772,737
195,178
3,967,915
Work
772,980
21,231
794,211
Other
148
—
148
Total segment revenues
$
8,872,862
$
477,964
$
9,350,826
Segment profit (loss)
Outdoor
$
670,615
$
51,644
$
722,259
Active
541,171
44,528
585,699
Work
92,989
2,412
95,401
Other
(516
)
(98
)
(614
)
Total segment profit
1,304,259
98,486
1,402,745
Impairment of goodwill and intangible
assets
(421,922
)
—
(421,922
)
Corporate and other expenses
(507,656
)
(3,789
)
(511,445
)
Interest expense, net
(115,395
)
—
(115,395
)
Income from continuing operations
before income taxes
$
259,286
$
94,697
$
353,983
Diluted earnings per share
growth
(70
)%
7
%
(63
)%
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 2022
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended December
2022
As Reported
under GAAP
Transaction and Deal Related
Activities(a)
Specified Strategic Business
Decisions(b)
Impairment and Pension
Settlement Charge(c)
Tax Item(d)
Adjusted
Revenues
$
3,530,667
$
—
$
—
$
—
$
—
$
3,530,667
Gross profit
1,937,619
—
1,582
—
—
1,939,201
Percent
54.9
%
54.9
%
Operating income
516,033
—
10,609
—
—
526,642
Percent
14.6
%
14.9
%
Diluted earnings per share from
continuing operations (e)
1.31
—
0.02
0.03
(0.24
)
1.12
Nine Months Ended December 2022
As Reported
under GAAP
Transaction and Deal Related
Activities(a)
Specified Strategic Business
Decisions(b)
Impairment and Pension
Settlement Charge(c)
Tax Item(d)
Adjusted
Revenues
$
8,872,862
$
—
$
—
$
—
$
—
$
8,872,862
Gross profit
4,738,655
—
9,946
—
—
4,748,601
Percent
53.4
%
53.5
%
Operating income
488,576
331
72,031
421,922
—
982,860
Percent
5.5
%
11.1
%
Diluted earnings per share from
continuing operations (e)
0.86
—
0.15
1.17
(0.24
)
1.93
(a) Transaction and deal related
activities reflect activities associated with the acquisition of
Supreme Holdings, Inc. and include integration costs of $0.3
million for the nine months ended December 2022. The transaction
and deal related activities resulted in a net tax benefit of $0.1
million in the nine months ended December 2022.
(b) Specified strategic business decisions
include costs related to VF's business model transformation of $8.3
million and $59.5 million during the three and nine months ended
December 2022, respectively, related primarily to Corporate actions
and resulting restructuring costs. Specified strategic business
decisions also include costs related to a transformation initiative
for our Asia-Pacific regional operations of $2.3 million and $12.5
million in the three and nine months ended December 2022,
respectively. The specified strategic business decisions resulted
in a net tax benefit of $2.7 million and $15.0 million in the three
and nine months ended December 2022, respectively.
(c) VF recognized noncash impairment
charges related to the Supreme reporting unit goodwill and
indefinite-lived trademark intangible asset of $421.9 million
during the nine months ended December 2022. The impairment charges
were driven by non-operating factors including higher interest
rates and foreign currency fluctuations.
A noncash pension settlement charge of
$91.8 million was recorded in the Other income (expense), net line
item during the nine months ended December 2022. The pension
settlement charge resulted from the purchase of a group annuity
contract, which was an action taken to streamline administration,
manage financial risk associated with pension plans, and to
transfer a portion of the liability associated with VF's U.S.
pension plan to an insurance company.
The impairment and pension settlement
charges resulted in a net tax expense of $12.2 million and net tax
benefit of $60.2 million in the three and nine months ended
December 2022, respectively.
(d) Tax item includes a $94.9 million
discrete tax benefit recognized during the three and nine months
ended December 2022 related to the Internal Revenue Service
examinations for tax year 2017 and short-tax year 2018 resulting in
a favorable adjustment to VF's transition tax liability under the
Tax Cuts and Jobs Act.
(e) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
was calculated using 388,192,000 and 388,357,000 weighted average
common shares for the three and nine months ended December 2022,
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 activities, activity
related to specified strategic business decisions, impairment, a
pension settlement charge and a tax item. 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 2021
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended December
2021
As Reported
under GAAP
Transaction and Deal Related
Activities(a)
Specified Strategic Business
Decisions(b)
Tax Items(c)
Adjusted
Revenues
$
3,624,384
$
—
$
—
$
—
$
3,624,384
Gross profit
2,031,780
—
9,875
—
2,041,655
Percent
56.1
%
56.3
%
Operating income
678,442
(49,398
)
13,809
—
642,853
Percent
18.7
%
17.7
%
Diluted earnings per share from
continuing operations (d)
1.32
(0.13
)
0.03
0.13
1.35
Nine Months Ended December 2021
As Reported
under GAAP
Transaction and Deal Related
Activities(a)
Specified Strategic Business
Decisions(b)
Tax Items(c)
Adjusted
Revenues
$
9,017,176
$
—
$
—
$
—
$
9,017,176
Gross profit
4,989,575
—
21,944
—
5,011,519
Percent
55.3
%
55.6
%
Operating income
1,439,812
(151,880
)
37,671
—
1,325,603
Percent
16.0
%
14.7
%
Diluted earnings per share from
continuing operations (d)
2.89
(0.37
)
0.08
0.13
2.72
(a) Transaction and deal related
activities include activities associated with the acquisition of
Supreme Holdings, Inc. ("Supreme") for the three and nine months
ended December 2021. Transaction and deal related activities
include a decrease in the estimated fair value of the contingent
consideration liability of $50.0 million and $158.0 million for the
three and nine months ended December 2021, respectively, and
integration costs of $0.6 million and $6.1 million for the three
and nine months ended December 2021, respectively. The transaction
and deal related activities resulted in a net tax benefit of $3.2
million and net tax expense of $5.1 million in the three and nine
months ended December 2021, respectively, primarily related to the
impact of the decreases in the estimated fair value of the
contingent consideration liability on the interim tax rate
calculations.
(b) Specified strategic business decisions
for the three and nine months ended December 2021 include costs
related to VF's business model transformation of $0.5 million and
$2.2 million in the three and nine months ended December 2021,
respectively, related primarily to restructuring and other costs.
Specified strategic business decisions also include costs related
to a transformation initiative for our Asia-Pacific regional
operations of $13.7 million and $35.5 million in the three and nine
months ended December 2021, respectively. Specified strategic
business decisions also include cost optimization charges and other
activities, including the sale of certain assets, indirectly
related to the divestiture of the Occupational Workwear business,
which totaled income of $0.4 million during the three months ended
December 2021. The specified strategic business decisions also
include non-operating expense of $0.2 million and income of $1.5
million during the three and nine months ended December 2021,
respectively, associated with VF's transformation initiatives. The
specified strategic business decisions resulted in a net tax
benefit of $2.0 million and $5.2 million in the three and nine
months ended December 2021, respectively.
(c) Tax items include $51.9 million net
tax expense associated with certain discrete tax activities
recognized during the three and nine months ended December 2021.
This is comprised of $87.1 million tax expense for unrecognized tax
benefits resulting from updated estimates related to intellectual
property transfers completed in a prior period, and $35.2 million
tax benefit related to the reorganization of certain foreign
operations.
(d) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impacts were calculated using 392,495,000 and 393,547,000 weighted
average common shares for the three and nine months ended December
2021, 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 activities, activity
related to specified strategic business decisions and certain tax
items. 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
2022
Nine Months Ended December
2022
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
(13
)%
(5
)%
(22
)%
(13
)%
(7
)%
(9
)%
(27
)%
(11
)%
% change constant currency*
(13
)%
7
%
(14
)%
(9
)%
(7
)%
3
%
(22
)%
(7
)%
The North Face®
% change
8
%
1
%
17
%
7
%
13
%
3
%
21
%
11
%
% change constant currency*
9
%
13
%
29
%
13
%
14
%
17
%
30
%
17
%
Timberland®
% change
9
%
(5
)%
(17
)%
0
%
0
%
3
%
(9
)%
0
%
% change constant currency*
9
%
7
%
(7
)%
6
%
1
%
18
%
(1
)%
7
%
Dickies®
% change
(19
)%
44
%
(34
)%
(16
)%
(18
)%
17
%
(29
)%
(17
)%
% change constant currency*
(19
)%
63
%
(25
)%
(13
)%
(18
)%
34
%
(22
)%
(14
)%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended December
2022
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
(2)%
(1)%
EMEA
(2)%
10%
APAC
(7)%
4%
Greater China
(11)%
(1)%
International
(3)%
8%
Global
(3)%
3%
Nine Months Ended December
2022
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
0%
0%
EMEA
0%
14%
APAC
(10)%
(2)%
Greater China
(18)%
(12)%
International
(3)%
8%
Global
(2)%
4%
Three Months Ended December
2022
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
(3)%
2%
Direct-to-consumer
(2)%
3%
Digital
0%
6%
Nine Months Ended December
2022
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
0%
6%
Direct-to-consumer
(4)%
1%
Digital
(6)%
(1)%
As of December
2022
2021
DTC Store
Count
Total
1,282
1,354
*Refer to constant currency
definition on previous pages.
(a) Royalty revenues are included
in the wholesale channel for all periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230207005300/en/
Investor Contact: Allegra
Perry ir@vfc.com
Media Contact: Colin Wheeler
corporate_communications@vfc.com
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