Exhibit 99
VF Reports Record Second Quarter Sales and Earnings and Declares Dividend
Business Editors/Fashion Editors
GREENSBORO, N.C.--(BUSINESS WIRE)--July 21, 2005--VF Corporation
(NYSE: VFC):
-- Second quarter sales rise 13%
-- EPS up 10%, including special items
-- Gross margins up two full percentage points to 41.4%
-- Acquisitions continue strong performance
Information regarding VF's second quarter conference call webcast
today can be found at the end of this release.
VF Corporation (NYSE: VFC), a global leader in branded apparel,
today announced record results for its second quarter ended July 2,
2005. All per share amounts are presented on a diluted basis.
Second quarter sales rose 13% to $1,435.8 million from $1,269.5
million in the prior year's second quarter. Net income increased 11%
to $100.0 million from $90.1 million, with earnings per share rising
10% to $.88 from $.80. Second quarter earnings include a net benefit
of $.07 per share from special items, detailed below. Similarly,
second quarter EPS in 2004 included a net benefit of $.04 per share
related to the exit of our Playwear business. The acquisitions of the
Vans(R), Napapijri(R), Kipling(R), Reef(R) and Holoubek businesses
added $156 million to sales and $.09 to earnings per share in the 2005
quarter.
For the first six months of 2005, sales increased 11% to $2,999.5
million from $2,702.2 million. Net income rose 15% to $222.9 million
from $194.0 million, with earnings per share rising 13% to $1.95 from
$1.73. The above acquisitions contributed $312 million to sales and
$.20 to earnings per share in the first half of 2005.
"We are delighted to report another record quarter," commented
Mackey J. McDonald, chairman and chief executive officer. "Our
strategy to transform VF into a higher growth, more dynamic company is
working: we're investing behind our core brands to maintain their
leadership positions and at the same time using our operational and
brand management skills to effectively integrate and grow our new
brands. Most of our core businesses are strong, healthy and operating
at very profitable levels, and our acquisitions are clearly delivering
on their potential."
He continued, "Earnings rose more than we anticipated during the
quarter, due to particularly robust sales in our Outdoor and
Sportswear coalitions, which in turn are driving higher gross margins.
Two noteworthy examples in the quarter were our Vans(R) brand, where
we are benefiting from very strong product launches and the success of
a new retail merchandising format, and our Nautica(R) brand, where we
experienced a double-digit sales gain and a big improvement in
profitability. We also are gratified by the sales increase posted by
our U.S. jeanswear business during the quarter."
The second quarter 2005 special items referred to above consist of
the following:
Net Income Per
(In millions) Share
-----------------------
Settlements of income tax matters in foreign
jurisdictions $12.5 $.11
Tax impact of repatriation of foreign earnings
- American Jobs Creation Act (7.0) (.06)
Reduction of accruals related to postemployment
benefits in Mexico 9.4 .08
Capacity alignment actions, principally in
intimate apparel (7.2) (.06)
-----------------------
Total $7.7 $.07
=======================
Second Quarter Business Review
Jeanswear
Total Jeanswear sales, which include the Wrangler(R), Lee(R),
Riders(R), Rustler(R), H.I.S(R), Maverick(R) and Old Axe(R) brands,
rose 2% in the quarter, to $597 million versus $586 million in last
year's second quarter, with increases in both international and
domestic jeans sales. Sales in our Mass Market and Western Specialty
businesses were robust, while our Lee(R) brand business declined. The
increase in international jeans sales resulted from favorable foreign
currency exchange rates. Jeanswear operating income increased 9%,
including the aforementioned reductions in benefit accruals that were
greater than required by local laws. The effect in any prior period
was not significant.
Outdoor
Our Outdoor businesses had another excellent quarter. Sales
doubled in the quarter to $297 million from $146 million, with the
acquisitions of the Vans(R), Kipling(R), Reef(R) and Napapijri(R)
brands contributing $138 million of the increase. Our Vans(R) and
Kipling(R) brands had exceptionally strong results and continue to
outpace our expectations. The Reef(R) brand acquisition, which was
completed in April 2005, contributed $25 million to sales in the
quarter. Organic sales growth in the quarter was 9%, driven by strong
growth in The North Face(R) and JanSport(R) brands. Operating income
rose 97%, with a slight decline in margins reflecting the impact of
recent acquisitions.
Intimate Apparel
Sales in our Intimate Apparel business, which includes our Vanity
Fair(R), Vassarette(R), Lily of France(R), Bestform(R) and
Curvation(R) brands, declined 5% in the quarter, to $223 million from
$235 million. We have noted previously that 2004 results benefited
from a large new product launch with a specialty store customer, which
will result in difficult sales and profit comparisons throughout 2005.
The 61% decline in operating income and lower margins primarily result
from the lower sales and aggressive actions taken to align capacity
and reduce costs. We expect comparisons in the second half of the year
to improve versus the first half.
Imagewear
Our Imagewear coalition reported a 4% sales increase in the
quarter, to $181 million from $173 million. The increase in sales was
a result of the January 2005 acquisition of the assets of a licensee
of the Harley-Davidson Motor Company, Inc., which drove a double-digit
sales gain in our licensed sports apparel business. Occupational
apparel sales were about flat in the quarter. Operating income rose
16% as we continue to lower product costs and leverage a very solid
business platform.
Sportswear
Sales of our Sportswear businesses, which include the Nautica(R)
and John Varvatos(R) brands, as well as Kipling(R) brand sales in
North America, increased 22% in the quarter, to $127 million from $105
million. Each Nautica business unit - Men's Sportswear, Jeans,
Furnishings and Retail - experienced solid gains in the quarter. The
John Varvatos(R) men's luxury sportswear business also continued its
rapid sales growth in the quarter. Operating income increased sharply
to $19 million, or 15.1% of sales, compared to $1 million in last
year's second quarter. Both sales and operating income in the 2004
quarter included the negative impact of an acquisition-related
adjustment of $7 million.
Overall gross margins for VF increased by two full percentage
points in the quarter, to 41.4% from 39.4%, with the improvement
coming primarily from growth in our higher margin businesses.
Operating margins declined to 11.1% from 11.8% in the prior year
period, primarily due to the lower margins in our Intimates business
in the current quarter. The tax rate for the 2005 period declined to
29.6% from 32.1% due to the net impact of the income tax settlements
and repatriation of foreign earnings, as detailed above.
Our balance sheet remains in excellent shape, and we ended the
quarter with $250 million in cash. Inventories were up 8% over June
2004 levels, with $23 million of the total increase of $82 million due
to the 2005 acquisitions. Debt as a percent of total capital was 29.9%
at the end of the quarter, or 24.9% net of cash. During the quarter we
repaid $100 million of long-term debt and will repay another $300
million that becomes due on October 1, 2005. During the quarter we
repurchased one million shares of common stock, bringing the total
shares repurchased year-to-date to two million. We expect to
repurchase an additional two million shares over the balance of the
year.
Outlook
For the full year, we continue to expect another record year in
both sales and earnings. Sales are expected to rise approximately 7%,
excluding any additional acquisitions. We anticipate that sales in the
second half of the year will be up approximately 4%, which includes
the negative impact of a stronger U.S. dollar versus our prior
expectations. We expect comparable increases in both the third and
fourth quarters.
We now expect that earnings will rise about 10% in 2005 to
approximately $4.65 per share, reflecting both continued strong
performance across most of our businesses during the second half and
the special items reported in the most recent quarter. Third quarter
EPS should rise approximately 12%, including an $.08 per share impact
from the recognition of certain costs related to the disposition of
our Playwear business reported in the third quarter of 2004.
Dividend Declared
The Board of Directors declared a regular quarterly cash dividend
of $.27 per share, payable on September 19, 2005 to shareholders of
record as of the close of business on September 9, 2005.
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; the
financial strength and competitive conditions, including
consolidation, 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 ongoing businesses and
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 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,
outdoor products, intimate apparel, image apparel and sportswear. 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), Reef(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 second quarter conference call and webcast at
9:00 a.m. ET. Interested parties should call (800)811-0667 domestic,
or (913)981-4901 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, 2005 and can be accessed by dialing
(888)203-1112 domestic, and (719) 457-0820 international. The pass
code is 3281749. A replay also can be accessed at the Company's web
site at www.vfc.com.
VF CORPORATION
Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June June
--------------------------------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net Sales $1,435,831 $1,269,537 $2,999,474 $2,702,206
Costs and Operating
Expenses
Cost of goods sold 841,221 769,708 1,755,645 1,648,101
Marketing, administrative
and general expenses 445,813 371,785 909,485 763,796
Royalty income and other (9,873) (11,368) (23,222) (24,608)
Gain on disposal of
Playwear business - (10,363) - (7,417)
---------- ---------- ---------- ----------
1,277,161 1,119,762 2,641,908 2,379,872
---------- ---------- ---------- ----------
Operating Income 158,670 149,775 357,566 322,334
Other Income (Expense)
Interest, net (16,449) (16,656) (32,107) (33,437)
Miscellaneous, net (137) (489) (18) 1,118
---------- ---------- ---------- ----------
(16,586) (17,145) (32,125) (32,319)
---------- ---------- ---------- ----------
Income Before Income Taxes 142,084 132,630 325,441 290,015
Income Taxes 42,097 42,542 102,586 96,053
---------- ---------- ---------- ----------
Net Income $ 99,987 $ 90,088 $ 222,855 $ 193,962
========== ========== ========== ==========
Earnings Per Common Share
Basic $ 0.90 $ 0.82 $ 2.00 $ 1.77
Diluted 0.88 0.80 1.95 1.73
Weighted Average Shares
Outstanding
Basic 110,254 109,655 111,008 109,192
Diluted 113,277 112,642 114,102 112,078
Cash Dividends Per Common
Share $ 0.27 $ 0.26 $ 0.54 $ 0.52
Basis of presentation: VF operates and reports using a 52/53 week
fiscal year ending on the Saturday closest to December 31 of each
year. Similarly, the fiscal second quarter ends on the Saturday
closest to June 30. For presentation purposes herein, all references
to periods ended June 2005, December 2004 and June 2004 relate to the
fiscal periods ended as of July 2, 2005, January 1, 2005 and July 3,
2004, respectively.
Reclassifications: Certain prior year amounts have been reclassified
to conform with the 2005 presentation.
VF CORPORATION
Consolidated Balance Sheets
(In thousands)
June December June
2005 2004 2004
------------- ----------- ----------
ASSETS
Current Assets
Cash and equivalents $ 249,517 $ 485,507 $ 177,382
Accounts receivable, net 792,747 751,582 763,013
Inventories 1,176,548 973,248 1,094,120
Other current assets 199,363 168,231 148,465
------------- ----------- ----------
Total current assets 2,418,175 2,378,568 2,182,980
Property, Plant and Equipment 1,544,884 1,539,490 1,578,771
Less accumulated depreciation 985,297 967,236 984,578
------------- ----------- ----------
559,587 572,254 594,193
Intangible Assets 754,717 639,520 702,229
Goodwill 1,094,562 1,031,594 970,369
Other Assets 399,511 382,342 368,270
------------- ----------- ----------
$ 5,226,552 $ 5,004,278 $4,818,041
============= =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Short-term borrowings $ 256,090 $ 42,830 $ 271,112
Current portion of long-term
debt 301,585 401,232 101,150
Accounts payable 384,757 369,937 379,699
Accrued liabilities 519,005 558,215 443,344
------------- ----------- ----------
Total current liabilities 1,461,437 1,372,214 1,195,305
Long-term Debt 559,181 556,639 858,569
Other Liabilities 565,579 536,131 525,281
Commitments and Contingencies
Redeemable Preferred Stock 24,626 26,053 27,151
Common Stockholders' Equity
Common Stock 111,095 111,388 109,998
Additional paid-in capital 1,162,505 1,087,641 1,030,919
Accumulated other comprehensive
income (loss) (133,028) (113,071) (134,759)
Retained earnings 1,475,157 1,427,283 1,205,577
------------- ----------- ----------
Total common
stockholders' equity 2,615,729 2,513,241 2,211,735
------------- ----------- ----------
$ 5,226,552 $ 5,004,278 $4,818,041
============= =========== ==========
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended June
-----------------------
2005 2004
---------- ----------
Operations
Net income $ 222,855 $ 193,962
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 47,633 47,670
Amortization of intangible assets 7,876 3,405
Other amortization 8,327 7,410
Provision for doubtful accounts 6,475 6,783
Pension funding in excess of expense (34,638) (30,146)
Other, net (8,844) 7,144
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable (36,288) (63,281)
Inventories (190,535) (93,804)
Accounts payable 13,673 20,946
Accrued liabilities and other (3,019) 42,893
---------- ----------
Cash provided by operating activities 33,515 142,982
Investments
Capital expenditures (50,722) (34,867)
Business acquisitions, net of cash acquired (211,301) (614,560)
Software purchases (9,484) (4,616)
Sale of VF Playwear business 6,667 4,417
Other, net 12,670 3,860
---------- ----------
Cash used by investing activities (252,170) (645,766)
Financing
Increase in short-term borrowings 212,525 169,613
Payments on long-term debt (100,743) (708)
Purchase of Common Stock (116,066) -
Cash dividends paid (61,309) (58,011)
Proceeds from issuance of Common Stock 63,805 60,709
Other, net (191) (456)
---------- ----------
Cash provided (used) by financing
activities (1,979) 171,147
Net Cash Used by Discontinued Operations - (3,136)
Effect of Foreign Currency Rate Changes on Cash (15,356) (2,630)
---------- ----------
Net Change in Cash and Equivalents (235,990) (337,403)
Cash and Equivalents - Beginning of Year 485,507 514,785
---------- ----------
Cash and Equivalents - End of Period $ 249,517 $ 177,382
========== ==========
VF CORPORATION
Supplemental Financial Information
Business Segment Information
(In thousands)
Three Months Ended Six Months Ended
June June
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Coalition sales
Jeanswear $ 596,606 $ 586,047 $1,303,327 $1,294,327
Outdoor Apparel and
Equipment 296,688 145,737 578,984 270,316
Intimate Apparel 223,016 234,807 450,292 484,227
Imagewear 180,697 173,433 367,865 346,465
Sportswear 127,254 104,728 279,016 246,380
Other 11,570 24,785 19,990 60,491
---------- ---------- ---------- ----------
Net sales $1,435,831 $1,269,537 $2,999,474 $2,702,206
========== ========== ========== ==========
Coalition profit
Jeanswear $ 93,065 $ 85,003 $ 212,274 $ 207,338
Outdoor Apparel and
Equipment 42,438 21,543 74,832 35,445
Intimate Apparel 13,600 35,242 37,128 70,498
Imagewear 24,609 21,233 54,899 43,078
Sportswear 19,270 515 46,171 13,702
Other (92) 8,590 (639) 4,418
---------- ---------- ---------- ----------
Total coalition profit 192,890 172,126 424,665 374,479
Corporate and other
expenses (34,357) (22,840) (67,117) (51,027)
Interest, net (16,449) (16,656) (32,107) (33,437)
---------- ---------- ---------- ----------
Income before income
taxes $ 142,084 $ 132,630 $ 325,441 $ 290,015
========== ========== ========== ==========
CONTACT: VF Services, Inc.
Cindy Knoebel, 336-424-6189 or 212-841-7141