Exhibit 99.1
VF Announces Record Second Quarter Sales
and Earnings Per Share, and Declares Dividend
GREENSBORO, N.C.--(BUSINESS WIRE)--July 21, 2004--VF Corporation
(NYSE:VFC):
-- Second quarter sales rise 12%; EPS up 18%
-- Gross margins rise sharply to 39.4% from 37.1%
-- New investments in growth planned
-- Raising guidance to reflect recent acquisitions
-- Continue to expect record sales and EPS in 2004
VF will hold its second quarter conference call and webcast at
8:30 a.m. EDT. Interested parties should call 800-366-3908, domestic,
or 303-262-2075, international, to access the call. You may also
access this call via the Internet at www.vfc.com. A replay will be
available through August 4 and can be accessed by dialing
800-405-2236, domestic, and 303-590-3000, international. The pass code
is 11002948. A replay can also be accessed at the Company's web site
at www.vfc.com.
VF Corporation (NYSE:VFC), a leader in branded apparel, today
announced record results for its second quarter.
Commented Mackey J. McDonald, chairman and chief executive
officer, "This was a terrific quarter on all accounts, with growth
coming from both our core businesses as well as newly acquired brands.
We now have more diversification in our business mix, more brands with
strong growth potential and more opportunities to invest in our
future."
Second quarter sales rose 12% to $1,269.5 million from $1,134.7
million in the prior year's second quarter, with growth in most of the
Company's core businesses. Net income increased 20% to $90.1 million
from $74.9 million, with earnings per share rising 18% to $.80 from
$.68. As anticipated, earnings include a benefit of $10.4 million
($.06 per share) related to disposition of the Company's Playwear
business.
The acquisition of Nautica contributed $115 million to sales and
as expected was dilutive to earnings per share by $.04. The
acquisitions of the Vans(R), Napapijri(R) and Kipling(R) brands added
$11 million to sales in the quarter and $.01 to earnings per share.
For the first six months of 2004, sales increased 13% to $2,702.2
million from $2,384.8 million. Net income rose 16% to $194.0 million
from $167.0 million, with earnings per share rising 15% to $1.73 from
$1.51.
Business Review
Sales in the Company's Outdoor businesses, which include The North
Face(R), Vans(R), JanSport(R), Eastpak(R), Napapijri(R) and Kipling(R)
brands, jumped 21% in the quarter to $146 million from $121 million.
The North Face(R) brand continued its strong growth in the quarter,
with sales up 52%. Two new stores, in Amsterdam and Hong Kong, were
added during the quarter. Additional stores in Boston, Milan and
Helsinki are on plan to open in the third quarter. Fall bookings for
the brand remain robust, up 47% in the U.S. and 28% internationally.
Sales in the Company's Packs business declined slightly in the quarter
but are expected to increase for the year, with growth driven by
travel and apparel products.
Total Jeanswear sales declined 6% to $579 million in the second
quarter, reflecting challenges faced by several key customers in the
U.S. International jeans sales rose 6% from the prior year level due
to favorable currency translations. The Company noted that its
Jeanswear sales rose 2% in the first quarter and are expected to
increase in both the third and fourth quarters. The anticipated
increase in total Jeanswear sales in the second half of the year is
based on the strong response to new programs including the Wrangler
Jeans Co.(TM), Riders(R) Copper Collection(TM), "Buddy Lee
Registered(TM)", "One True Fit(TM)" and "Ultimate 5" lines in the U.S.
and a new line under the Lee(R) trademark in Europe.
Global intimate apparel sales saw a strong increase in the
quarter, up 12% to $235 million from $210 million in the prior year's
second quarter. The Company's department store, mass channel, private
label and international businesses all reported higher sales in the
period.
Sales in our Imagewear coalition showed a strong turnaround,
rising 11% in the quarter to $173 million from $156 million last year.
Our licensed sports apparel business continued its strong growth, with
sales up 19% in the period. Occupational apparel rose 10% to $114
million from $104 million in 2003, marking an improvement in the sales
trend for the first time in several years.
Sportswear sales were $112 million in the quarter. Our Nautica
men's sportswear business continues to perform slightly better than
anticipated, with a healthy gain in retail sales per square foot
despite a significant reduction in retail floor space for the brand.
Our fall bookings remain on plan.
Profitability was strong in the quarter, with improvements in
operating margins across most of our core businesses. Gross margins in
the quarter improved by more than 200 basis points, rising to 39.4%
from 37.1%. Royalty and other income increased 88%, primarily due to
the contribution of licensing income from Nautica. Operating margins
increased to 11.8% in the quarter from 11.1% in the prior year's
period.
VF's balance sheet, liquidity and cash flow remain very strong.
Inventories rose only 6%, despite the addition of $153 million of
inventories from Nautica and the acquisitions of Vans, Napapijri and
Kipling. Inventories in the Company's core businesses declined 9% in
the quarter.
The Company generated strong cash flow from continuing operations
of $133 million in the first half of 2004. Based on the strength of
its businesses, the Company now anticipates that cash flow from
continuing operations will increase to a range of $500 to $550 million
in 2004. Debt as a percent of total capital was 35.7% at the end of
the quarter.
Outlook
We continue to expect another strong year in sales and earnings in
2004. Sales are expected to increase by 12 to 15%, and could hit $6
billion for the year - a significant new milestone for us. Earnings
per share are expected to increase approximately 8%. The acquisitions
of the Vans(R), Napapijri(R) and Kipling(R) brands are expected to
contribute approximately $275 million to sales and $.05 to earnings
per share.
We are committed to investing in our Company's future growth and
are planning to make investments in a number of targeted areas during
the remainder of 2004 to support this growth. Our core businesses are
performing very well in both sales and earnings, and we continue to
believe they have great promise. To sustain our performance, unlock
the potential of our core brands and capitalize on our newly acquired
brands, we plan to invest an additional $45 million in our brands, our
people and our organization this year. These expenditures totaled
nearly $8 million in the second quarter and are expected to
approximate $15 million and $22 million in the third and fourth
quarters, respectively.
In terms of the third quarter, we currently expect a sales
increase of 20 to 25% and an increase in earnings per share of
approximately 10%. Included in this guidance is the negative impact
from the Company's Playwear business of $.06 per share, primarily
driven by the recognition of certain costs related to the disposition
of the business. Fourth quarter sales should rise 5 to 8% and earnings
per share should be about flat with prior year results. The Company
noted that results in the fourth quarter of 2003 included a favorable
tax settlement, which benefited earnings by $.07 per share.
"We have tremendous momentum, which is giving us the opportunity
to make investments that will fuel our future growth while still
enabling us to deliver strong bottom line results to our
shareholders," said Mr. McDonald. He indicated that the Company is
boosting its marketing spending, investing in new resources in such
areas as strategic planning and leadership development, and
establishing a new customer team organization. VF is also exploring
new ways to maximize the efficiency of its supply chain to more fully
leverage its global capabilities across all business units and improve
profitability. "This is an exciting time for our company - not only
are we exceeding our growth targets, we are putting in place the
foundation for consistent, sustainable growth in coming years," he
said.
Dividend Declared
The Board of Directors declared a regular quarterly cash dividend
of $.26 per share, payable on September 20, 2004 to shareholders of
record as of the close of business on September 10, 2004.
Cautionary Statement on Forward-looking Statements
Certain statements included in this release are "forward-looking
statements" within the meaning of the federal securities laws.
Management cautions that forward-looking statements are not guarantees
and that actual results could differ materially from those expressed
or implied in the forward-looking statements. Important risk factors
that could cause the actual results of operations or financial
condition of the Company to differ include, but are not limited to,
the overall level of consumer spending for apparel; changes in trends
in the segments of the market in which the Company competes;
competitive conditions in and financial strength of our customers and
of our suppliers; actions of competitors, customers, suppliers and
service providers that may impact the Company's business; the
Company's ability to integrate acquisitions successfully; the
Company's ability to achieve expected sales and earnings growth from
acquisitions; terrorist actions; and the impact of economic and
political factors in the markets where the Company competes, such as
recession or changes in interest rates, currency exchange rates, price
levels, capital market valuations and other external economic and
political factors over which the Company has no control. Investors are
also directed to consider the risks and uncertainties discussed in
documents filed by the Company with the Securities and Exchange
Commission.
About the Company
VF Corporation is a leader in branded apparel including jeanswear,
intimate apparel, sportswear, outdoor products and workwear. Its
principle brands include Lee(R), Wrangler(R), Riders(R), Rustler(R),
Vanity Fair(R), Vassarette(R), Bestform(R), Lily of France(R),
Nautica(R), Earl Jean(R), John Varvatos(R), JanSport(R), Eastpak(R),
The North Face(R), Vans(R), Napapijri(R), Kipling(R), Lee Sport(R) and
Red Kap(R).
VF Corporation's press releases, annual report and other
information can be accessed through the Company's home page,
www.vfc.com.
VF CORPORATION
Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
----------------------- -----------------------
July 3 July 5 July 3 July 5
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net Sales $1,269,537 $1,134,742 $2,702,206 $2,384,797
Costs and Operating
Expenses
Cost of goods sold 769,708 714,011 1,648,101 1,495,303
Marketing,
administrative
and general expenses 371,785 301,157 763,796 623,491
Royalty income and
other (11,368) (6,039) (24,608) (12,369)
Gain on disposition
of Playwear business (10,363) - (7,417) -
----------- ----------- ----------- -----------
1,119,762 1,009,129 2,379,872 2,106,425
----------- ----------- ----------- -----------
Operating Income 149,775 125,613 322,334 278,372
Other Income (Expense)
Interest, net (16,656) (13,090) (33,437) (25,158)
Miscellaneous, net (489) 2,207 1,118 2,938
----------- ----------- ----------- -----------
(17,145) (10,883) (32,319) (22,220)
----------- ----------- ----------- -----------
Income Before Income
Taxes 132,630 114,730 290,015 256,152
Income Taxes 42,542 39,785 96,053 89,141
----------- ----------- ----------- -----------
Net Income $90,088 $74,945 $193,962 $167,011
=========== =========== =========== ===========
Earnings Per Common Share
Basic $0.82 $0.69 $1.77 $1.54
Diluted 0.80 0.68 1.73 1.51
Weighted Average Shares
Outstanding
Basic 109,655 107,412 109,192 107,884
Diluted 112,642 110,088 112,078 110,500
Cash Dividends Per
Common Share $0.26 $0.25 $0.52 $0.50
VF CORPORATION
Consolidated Balance Sheets
(In thousands)
July 3 January 3 July 5
2004 2004 2003
--------------- ----------- -----------
ASSETS
Current Assets
Cash and equivalents $177,382 $514,785 $204,977
Accounts receivable, net 763,791 633,863 695,499
Inventories 1,093,452 932,985 1,030,931
Other current assets 150,380 126,898 146,648
--------------- ----------- -----------
Total current assets 2,185,005 2,208,531 2,078,055
Property, Plant and Equipment 1,583,930 1,559,846 1,561,367
Less accumulated
depreciation 984,578 968,166 1,003,460
--------------- ----------- -----------
599,352 591,680 557,907
Intangible
Assets 708,229 318,634 2,037
Goodwill 958,436 700,972 481,174
Other Assets 421,967 425,735 397,936
--------------- ----------- -----------
$4,872,989 $4,245,552 $3,517,109
=============== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current
Liabilities
Short-term borrowings $270,048 $33,948 $60,540
Current portion of long-term
debt 101,150 1,144 639
Accounts payable 383,959 315,219 262,930
Accrued liabilities 529,786 521,546 442,525
--------------- ----------- -----------
Total current
liabilities 1,284,943 871,857 766,634
Long-term Debt 858,569 956,383 602,155
Other
Liabilities 490,591 436,018 366,744
Redeemable Preferred Stock 27,151 29,987 32,909
Common Stockholders' Equity
Common Stock 109,998 108,170 107,162
Additional paid-in capital 1,030,919 964,990 933,395
Accumulated other
comprehensive income (loss) (134,759) (189,455) (181,537)
Retained earnings 1,205,577 1,067,602 889,647
--------------- ----------- -----------
Total common
stockholders' equity 2,211,735 1,951,307 1,748,667
--------------- ----------- -----------
$4,872,989 $4,245,552 $3,517,109
=============== =========== ===========
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
----------------------------
July 3 July 5
2004 2003
-------------- -----------
Operations
Net income $193,962 $167,011
Adjustments to reconcile net income
to cash provided by operating
activities of continuing operations:
Depreciation 47,670 51,698
Amortization 10,815 4,231
Provision for doubtful accounts 6,783 7,996
Pension funding in excess of expense (30,146) (48,335)
Other, net 7,144 7,241
Changes in current assets and
liabilities:
Accounts receivable (63,281) (98,778)
Inventories (93,804) (182,189)
Other current assets 5,065 3,748
Accounts payable 20,946 (41,745)
Accrued liabilities 27,793 (2,601)
-------------- -----------
Cash provided (used) by operating
activities of continuing
operations 132,947 (131,723)
Investments
Capital expenditures (34,867) (45,400)
Business acquisitions, net of cash
acquired (604,525) (3,100)
Software purchases (4,616) (6,282)
Sale of Playwear business 4,417 -
Other, net 3,860 (1,428)
-------------- -----------
Cash used by investing activities
of continuing operations (635,731) (56,210)
Financing
Decrease in short-term borrowings 169,613 (2,957)
Payments on long-term debt (708) (222)
Purchase of Common Stock - (61,400)
Cash dividends paid (58,011) (55,165)
Proceeds from issuance of Common Stock 60,709 3,840
Other, net (456) (338)
-------------- -----------
Cash provided (used) by financing
activities of continuing
operations 171,147 (116,242)
Net Cash Used by Discontinued Operations (3,136) (1,879)
Effect of Foreign Currency Rate Changes on
Cash (2,630) 14,664
-------------- -----------
Net Change in Cash and Equivalents (337,403) (291,390)
Cash and Equivalents - Beginning of Year 514,785 496,367
-------------- -----------
Cash and Equivalents - End of Period $177,382 $204,977
============== ===========
VF CORPORATION
Supplemental Financial Information
Sales by Product Category
(In thousands)
Three Months Ended Six Months Ended
----------------------- -----------------------
July 3 July 5 July 3 July 5
2004 2003 2004 2003
----------- ----------- ----------- -----------
Jeans and related
apparel $579,060 $614,301 $1,282,844 $1,303,234
Intimate apparel 234,807 210,446 484,227 442,235
Sportswear 111,712 - 257,860 -
Outdoor products 145,736 120,681 270,315 221,066
Occupational apparel 114,392 103,716 225,902 226,571
Other apparel 83,830 85,598 181,058 191,691
----------- ----------- ----------- -----------
Total $1,269,537 $1,134,742 $2,702,206 $2,384,797
=========== =========== =========== ===========
CONTACT: VF Services, Inc.
Cindy Knoebel, 336-424-6189/212-841-7141
www.vfc.com
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