Exhibit 99
VF Announces Record Third Quarter Sales and Earnings Per Share and Raises
Dividend; Company Establishes New Long-term Sales Growth Target of 8%
GREENSBORO, N.C.--(BUSINESS WIRE)--Oct. 21, 2004--VF Corporation (NYSE:
VFC):
-- Third quarter sales rise 25%; EPS up 21%
-- Gross margins expand to 40.2% from 37.4%
-- Quarterly dividend increased by $.01 to $.27 per share
-- Continue to expect record sales and EPS in 2004
-- High single digit sales and earnings growth expected in 2005
Information regarding VF's third quarter conference call webcast
today and its investor meeting webcast tomorrow can be found at the
end of this release.
VF Corporation (NYSE: VFC), a leader in branded apparel, today
announced record results for its third quarter and an aggressive
growth plan designed to increase sales 8% annually. The Company is
holding a meeting with investors on October 22 to review its growth
plans in more detail.
Commented Mackey J. McDonald, chairman and chief executive
officer, "Our position has never been stronger. Our core businesses
are in great shape -- most are growing, and they are highly profitable
and generating healthy levels of cash flow. At the same time, we've
identified and successfully completed several acquisitions of powerful
lifestyle brands that offer terrific potential for future growth. We
believe we have established a platform that will enable us to generate
sales growth of 8% annually. Through our growth plan, we also have
identified ways to more effectively leverage our global supply chain
capabilities that could generate $100 million in cost savings over the
next five years."
Third quarter sales rose 25% to $1,792.6 million from $1,435.4
million in the prior year's third quarter. Net income increased 24% to
$155.4 million from $125.3 million, with earnings per share rising 21%
to $1.38 from $1.14. All per share amounts are presented on a diluted
basis. The Company saw solid growth in most of its core businesses,
while the recent acquisitions of the Vans(R), Napapijri(R) and
Kipling(R) brands added $183.6 million to sales in the quarter and
$.12 to earnings per share. As anticipated, earnings reflect a $15.0
million or $.08 per share impact from the recognition of certain costs
related to the disposition of the Company's Playwear business.
For the first nine months of 2004, sales increased 18% to $4,494.8
million from $3,820.2 million. Net income rose 20% to $349.4 million
from $292.3 million, with earnings per share rising 17% to $3.11 from
$2.65. The results for the nine months include a net $7.6 million
($.04 per share) charge related to disposition of the Playwear
business.
"We are aggressively driving integration and growth plans for all
of our acquired businesses, both in Outdoor and Sportswear, and are
very pleased by the benefits we've seen to date," commented Mr.
McDonald. "We are on or ahead of schedule in meeting our sales and
operating margin goals, and remain extremely excited at the future
growth prospects for all these brands."
Third Quarter Business Review
Outdoor
Our Outdoor businesses continued their outstanding performance in
the quarter. Combined sales of our Outdoor businesses, which include
The North Face(R), Vans(R), JanSport(R), Eastpak(R), Napapijri(R) and
Kipling(R) brands, jumped 116% in the quarter to $457 million from
$212 million. The North Face(R) brand continued to show powerful
momentum, with sales up 44%. The brand experienced growth across all
product categories -- outerwear, sportswear, footwear and equipment.
During the quarter a new store was added in Boston, with stores in
Paris, Munich, Copenhagen, Innsbruck, Antwerp and Turin opened in
conjunction with our retail customers. Spring bookings for the brand
are up 22% in the U.S. and 23% in Europe. Sales in our Packs business
also rose strongly in the quarter, with growth driven by travel and
apparel products. Our Vans business is performing above our
expectations, with double-digit sales growth in its core footwear
business in the quarter. The Vans(R), Napapijri(R) and Kipling(R)
brand acquisitions contributed $184 million to Outdoor sales in the
quarter.
Jeanswear
Total Jeanswear sales, which include the Lee(R), Wrangler(R),
Riders(R) and Rustler(R) brands, were $710 million, down slightly from
$716 million in last year's third quarter. Domestic jeans sales
slipped in the quarter, due in part to lower sales of distressed
products, which also contributed to higher margins in the quarter.
International jeans sales rose slightly due to favorable currency
translations. We continue to expect an increase in fourth quarter
sales for our total Jeanswear business, based on the recent rollouts
of our Wrangler Jeans Co.(TM), Riders(R) Coppercollection(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.
Sportswear
Sales of our Sportswear businesses, which include the Nautica(R),
Earl Jean(R) and John Varvatos(R) brands, were $167 million in the
quarter and were $72 million in last year's third quarter, reflecting
the inclusion of these brands for the full quarter in 2004 versus a
partial quarter in the 2003 period. Sales per square foot and
inventory turns for Nautica continue to improve, and profitability is
up significantly even with a sharp increase in brand investment.
Global Intimates
Our Global Intimate apparel business continued its strong growth
trend in the quarter. Sales rose 12% to $235 million from $210 million
in the prior year's third quarter. Our private brands, mass channel,
department store and international businesses all reported higher
sales in the period. Strong new products and distinctive brand
positioning are fueling growth for the Vassarette(R), Vanity Fair(R),
Lily of France(R) and Bestform(R) brands. Our newest brand,
Curvation(TM), is now in its second year and continues to grow through
expanded distribution and new sport and strapless bra products.
Imagewear
Sales in our Imagewear coalition also rose in the quarter, up 5%
to $192 million from $183 million last year. Continuing the positive
trend we saw in the second quarter, occupational apparel sales rose 3%
to $107 million from $104 million in 2003, with growth coming from new
apparel programs with large multinational companies and government
agencies.
Overall profitability was strong in the quarter, with improvements
in operating margins across most of our core businesses. Gross margins
are benefiting from the acquisitions of strong lifestyle brands, where
gross margins tend to be higher than in some of our category-driven
businesses. Gross margins in the quarter improved by nearly 300 basis
points, rising to 40.2% from 37.4%. Royalty income increased,
primarily due to the full quarter contribution of licensing income
from Nautica.
Operating margins were down slightly compared with prior year
levels, reflecting the aforementioned $15 million in costs related to
the disposition of our Playwear business. We also continued our
investments in our growth plan in the quarter; as anticipated, these
costs totaled approximately $13 million.
VF's balance sheet, liquidity and cash flow remain in excellent
condition. Inventories actually declined 1%, despite the addition of
$58 million of inventories from the acquisitions of Vans, Napapijri
and Kipling. Inventories in our core businesses declined 6% in the
quarter from the third quarter of 2003.
We generated strong cash flow from continuing operations of $298
million in the first three quarters of 2004. We anticipate that cash
flow from continuing operations could approximate $550 million in
2004. Debt as a percent of total capital was 31.9% at the end of the
quarter.
Outlook
We continue to expect a record year in sales and earnings in 2004.
Full year sales are expected to increase 15%, approaching the $6
billion mark for the year. Earnings per share are expected to rise
approximately 12% over prior year levels. The acquisitions of the
Vans(R), Napapijri(R) and Kipling(R) brands are now expected to
contribute approximately $285 million to sales and $.14 to earnings
per share this year, above our previous expectations.
For the fourth quarter, we now expect a sales increase of
approximately 8%, with earnings per share about flat with last year's
fourth quarter. Growth plan spending could approximate $20 million in
the quarter. Areas of continued investment include brand marketing,
new customer team initiatives and supply chain projects. In addition,
results in the fourth quarter of 2003 included a favorable tax
settlement, which benefited earnings by $.07 per share.
Based on the current momentum within our businesses and the
variety of initiatives underway within our growth plan, we currently
anticipate that both sales and earnings could increase at high
single-digit rates in 2005. Margins should benefit as the
profitability of our recent acquisitions continues to improve and our
supply chain initiatives take hold. At the same time, we will continue
to invest behind our brands and businesses to ensure they remain
healthy and growing. Additional details regarding our outlook for 2005
will be provided at the time of our year-end earnings release in
mid-February.
Dividend Increase
The Board of Directors declared an increase in the quarterly cash
dividend rate of $.01 to $.27 per share. This marks the 14th
consecutive year that the Company has increased its quarterly dividend
rate. The cash dividend is payable on December 20, 2004 to
shareholders of record as of the close of business on December 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 make and integrate acquisitions successfully; the
Company's ability to achieve expected sales and earnings growth from
acquisitions; the Company's ability to achieve its planned cost
savings; 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
principal 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.
Webcast Information
VF will hold its third quarter conference call and webcast at 1:00
p.m. EDT. Interested parties should call 800-240-5318, domestic, or
303-262-2130, international, to access the call. You may also access
this call via the Internet at www.vfc.com. A replay will be available
through November 4 and can be accessed by dialing 800-405-2236,
domestic, and 303-590-3000, international. The pass code is 11010665.
A replay also can be accessed at the Company's web site at
www.vfc.com. In addition, the Company will be webcasting its October
22 investor meeting from 8:30 a.m. to 1:00 p.m. EDT on its web site.
Interested parties can listen by dialing 800-798-2796, domestic, or
617-614-6204, international, using the passcode 39912907. A replay can
be accessed by dialing 888-286-8010, domestic, or 617-801-6888,
international, using the passcode 62687815. The replay will be
available for two weeks following the call.
VF CORPORATION
Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
----------------------- -----------------------
October 2 October 4 October 2 October 4
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net Sales $1,792,569 $1,435,403 $4,494,775 $3,820,200
Costs and Operating
Expenses
Cost of goods sold 1,072,741 898,325 2,720,842 2,393,628
Marketing,
administrative and
general expenses 466,197 341,861 1,229,993 965,352
Royalty income and
other (12,751) (9,359) (37,359) (21,728)
Loss on disposal of
Playwear business,
net 14,978 - 7,561 -
----------- ----------- ----------- -----------
1,541,165 1,230,827 3,921,037 3,337,252
----------- ----------- ----------- -----------
Operating Income 251,404 204,576 573,738 482,948
Other Income (Expense)
Interest, net (18,735) (13,632) (52,172) (38,790)
Miscellaneous, net 838 (154) 1,956 2,784
----------- ----------- ----------- -----------
(17,897) (13,786) (50,216) (36,006)
----------- ----------- ----------- -----------
Income Before Income
Taxes 233,507 190,790 523,522 446,942
Income Taxes 78,070 65,501 174,123 154,642
----------- ----------- ----------- -----------
Net Income $155,437 $125,289 $349,399 $292,300
=========== =========== =========== ===========
Earnings Per Common Share
Basic $1.41 $1.16 $3.18 $2.70
Diluted 1.38 1.14 3.11 2.65
Weighted Average Shares
Outstanding
Basic 110,149 107,213 109,511 107,660
Diluted 113,034 109,775 112,232 110,259
Cash Dividends Per
Common Share $0.26 $0.25 $0.78 $0.75
VF CORPORATION
Consolidated Balance Sheets
(In thousands)
October 2 January 3 October 4
2004 2004 2003
--------------- ----------- -----------
ASSETS
Current Assets
Cash and equivalents $182,007 $514,785 $217,491
Accounts receivable, net 923,610 633,863 840,159
Inventories 1,052,776 932,985 1,062,585
Other current assets 156,103 126,898 182,068
--------------- ----------- -----------
Total current assets 2,314,496 2,208,531 2,302,303
Property, Plant and Equipment 1,573,320 1,559,846 1,581,200
Less accumulated depreciation 998,052 968,166 980,792
--------------- ----------- -----------
575,268 591,680 600,408
Intangible Assets 631,266 318,634 383,366
Goodwill 1,023,422 700,972 677,657
Other Assets 437,874 425,735 317,468
--------------- ----------- -----------
$4,982,326 $4,245,552 $4,281,202
=============== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Liabilities
Short-term borrowings $149,342 $33,948 $224,812
Current portion of long-term
debt 401,078 1,144 2,117
Accounts payable 347,214 315,219 246,337
Accrued liabilities 636,115 521,546 565,760
--------------- ----------- -----------
Total current liabilities 1,533,749 871,857 1,039,026
Long-term Debt 557,099 956,383 910,849
Other Liabilities 501,885 436,018 446,918
Redeemable Preferred Stock 26,702 29,987 31,225
Common Stockholders' Equity
Common Stock 110,489 108,170 107,401
Additional paid-in capital 1,049,327 964,990 938,260
Accumulated other
comprehensive income (loss) (129,346) (189,455) (181,821)
Retained earnings 1,332,421 1,067,602 989,344
--------------- ----------- -----------
Total common
stockholders' equity 2,362,891 1,951,307 1,853,184
--------------- ----------- -----------
$4,982,326 $4,245,552 $4,281,202
=============== =========== ===========
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
------------------------
October 2 October 4
2004 2003
------------ -----------
Operations
Net income $349,399 $292,300
Adjustments to reconcile net income
to cash provided by operating activities
of continuing operations:
Depreciation 81,686 77,083
Amortization 23,162 7,364
Provision for doubtful accounts 11,126 11,609
Pension funding in excess of
expense (10,912) (34,156)
Other, net (924) 9,335
Changes in current assets and
liabilities:
Accounts receivable (223,879) (159,863)
Inventories (56,695) (80,291)
Other current assets 2,013 6,951
Accounts payable (12,535) (124,435)
Accrued liabilities 135,888 35,050
------------ -----------
Cash provided by operating activities of
continuing operations 298,329 40,947
Investments
Capital expenditures (52,204) (64,023)
Business acquisitions, net of cash acquired (629,258) (578,489)
Software purchases (8,139) (7,413)
Sale of Playwear business 4,517 -
Other, net 8,894 2,001
------------ -----------
Cash used by investing activities
of continuing operations (676,190) (647,924)
Financing
Increase in short-term borrowings 61,634 452,360
Payments on long-term debt (2,832) (427)
Purchase of Common Stock - (61,400)
Cash dividends paid (87,222) (82,595)
Proceeds from issuance of Common Stock 77,973 8,562
Other, net (456) (338)
------------ -----------
Cash provided by financing activities of
continuing operations 49,097 316,162
Net Cash Used by Discontinued Operations (3,320) (2,705)
Effect of Foreign Currency Rate Changes on
Cash (694) 14,644
------------ -----------
Net Change in Cash and Equivalents (332,778) (278,876)
Cash and Equivalents - Beginning of Year 514,785 496,367
------------ -----------
Cash and Equivalents - End of Period $182,007 $217,491
============ ===========
VF CORPORATION
Supplemental Financial Information
Sales by Product Category
(In thousands)
Three Months Ended Nine Months Ended
----------------------- -----------------------
October 2 October 4 October 2 October 4
2004 2003 2004 2003
----------- ----------- ----------- -----------
Jeans and related
apparel $709,761 $716,000 $1,992,605 $2,019,234
Intimate apparel 234,579 209,723 718,806 651,958
Sportswear 167,422 72,431 425,282 72,431
Outdoor products 457,081 211,598 727,396 432,664
Occupational apparel 107,080 103,897 332,982 330,468
Other apparel 116,646 121,754 297,704 313,445
----------- ----------- ----------- -----------
Total $1,792,569 $1,435,403 $4,494,775 $3,820,200
=========== =========== =========== ===========
CONTACT: VF Services, Inc.
Cindy Knoebel, 212-841-7141