Exhibit 99
VF Reports Record Third Quarter Sales
and Earnings and Increases Dividend; Performance Reflects Continuing
Shift toward Higher Growth, Higher Margin Businesses
GREENSBORO, N.C.--(BUSINESS WIRE)--Oct. 21, 2005--VF Corporation
(NYSE: VFC):
-- EPS up 15% on record sales
-- Gross margins up more than one full percentage point to 41.5%
-- Operating margins hit 16.2% versus 14.0% in '04 period
-- Quarterly dividend increased by 7% to $.29 per share
-- Another record year expected in 2006
Information regarding VF's third 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 third quarter ended October 1,
2005. All per share amounts are presented on a diluted basis.
Net income increased 17% to $181.9 million from $155.4 million,
with earnings per share rising 15% to $1.59 from $1.38. Last year's
third quarter earnings included an $.08 per share impact from the
recognition of certain costs related to the disposition of its
Playwear business. Sales were $1,803.1 million in the quarter versus
$1,792.6 million reported in last year's third quarter. The Reef(R)
and Holoubek businesses, which were acquired during 2005, added $29
million to sales and were neutral to earnings.
For the first nine months of 2005, net income rose 16% to $404.7
million from $349.4 million, with earnings per share rising 14% to
$3.55 from $3.11. Sales increased 7% to $4,802.5 million from $4,494.8
million.
"The transformation of our company, with the addition of higher
growth, higher margin lifestyle brands, is paying off," said Mackey J.
McDonald, chairman and chief executive officer. "Our growth engines -
including our Outdoor and Sportswear coalitions - are providing us
with a platform that will ensure healthy top and bottom line
performance."
He continued, "We're very pleased with the outstanding strength in
earnings and margins we achieved this quarter, with higher operating
margins in nearly all our business coalitions. Strong volume gains in
our higher margin Outdoor business, combined with excellent
operational efficiencies, enabled us to deliver stronger than expected
bottom line performance despite a variety of factors pressuring retail
sales and consumer spending. These factors notwithstanding, we are
disappointed with the sales performance in our Jeanswear and Intimates
businesses and are working aggressively to reverse these trends."
Third Quarter Business Review
Jeanswear
Total Jeanswear sales, which include the Wrangler(R), Lee(R),
Riders(R), Rustler(R), Wrangler Hero(R) and H.I.S(R) brands, declined
4% in the quarter, to $689 million versus $714 million in last year's
third quarter. Domestic jeanswear sales declined 7% in the quarter.
This was primarily due to a significant decrease in our Lee(R) brand
business reflecting the impact of recent retail consolidations as well
as weakness in industry jeans sales across the mid-tier channel.
International sales rose 4%, with strength in Canada, Mexico, Latin
America and Asia. Profitability of our Jeanswear business continues to
be very strong, with a 5% rise in operating income and an increase in
operating margins of more than one full percentage point. We remain
encouraged by the initial results of newer initiatives such as our
Wrangler Jeans Co.(TM) shirt program, our Riders(R)
Coppercollection(TM) and Aura from the Women at Wrangler(TM) lines for
women, and premium Wrangler(R) brand products in specialty stores. We
also recently launched a new campaign to drive awareness of the fit
attributes of our Lee(R) brand women's jeans lines.
Outdoor
Our Outdoor business had another outstanding quarter in both sales
and profitability, and we are excited about the growth prospects for
all our Outdoor brands. Sales rose 14% in the quarter to $521 million
from $457 million, with our newly acquired Reef(R) brand contributing
$18 million of the increase. Outdoor operating income rose 28%, with
operating margins expanding to 21.5% from 19.1%, resulting from the
strong volume gains and a sharp improvement in the profitability of
our Vans(R) business during the quarter.
The North Face(R) brand continued its momentum, with sales up 23%
in the quarter and increases across all product categories. Our owned
retail stores are also performing very well, with comparable store
sales in the U.S. running 17% above prior year levels. Spring 2006
bookings for the brand are extremely strong, up 30%.
Our Kipling(R) and Napapijri(R) brands also experienced solid
sales growth in the quarter, with stable results across our Vans(R),
JanSport(R) and Eastpak(R) brands.
We remain excited about the prospects for our Kipling(R) and
Napapijri(R) brands. In September we opened a new Kipling(R) brand
flagship store in London and have opened 16 stores internationally
through our distributors in 2005. Year to date, we have experienced
double-digit growth for our Kipling(R) brand in Spain, the UK and
Germany. Spring bookings for our Napapijri(R) brand are up 18%, with
particularly strong growth in Germany and France. Our newest store
opened recently in Munich and we're looking forward to the opening of
our first store in the U.S., in New York City, next spring.
Our Vans(R) brand continues to perform very well. Our new retail
prototype store continues to show great promise, with comparable store
sales up 22% year-to-date in these remodeled stores. We're committed
to expanding our Vans(R) branded apparel business, and have launched
the Vans(R) Core and Vault collections for spring of 2006.
The integration of our most recent acquisition, the Reef(R) brand,
is on plan. Business trends for the brand are quite positive, with
double-digit growth across all channels.
Intimate Apparel
We continued to experience difficult comparisons in our Intimate
Apparel business, which includes our Vanity Fair(R), Vassarette(R),
Lily of France(R), Bestform(R) and Curvation(R) brands. Sales declined
9% in the quarter, to $213 million from $235 million. As has been the
case throughout 2005, the majority of the decline was in our private
brands business. Operating income fell 35%, with operating margins
dropping to 10.1% from 14.1%, as we continue to take actions to align
costs and capacity. Sales comparisons are expected to improve in the
fourth quarter, although margins will remain under pressure. Key
organizational changes, a focus on driving new product success and
actions taken to reduce product costs are expected to result in
improved sales and profits in 2006.
Imagewear
Our Imagewear coalition reported a 5% sales increase in the
quarter, to $203 million from $193 million. The increase in sales was
a result of the January 2005 acquisition of the assets of Holoubek, a
licensee of the Harley-Davidson Motor Company, Inc., which drove a
double-digit sales gain in our licensed sports apparel business.
Imagewear operating income rose 25%, with operating margins exceeding
18% in the current quarter.
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 2% in the quarter, to $166 million from $163
million. Sales comparisons reflect lower sales of distressed
Nautica(R) brand products, which also contributed to improved
operating margins. Sportswear operating income increased 32%, while
operating margins reached nearly 18%.
We continue to gain market share in men's sportswear in department
stores with our Nautica(R) brand. The productivity of our men's
sportswear business at retail is improving, with sales per square foot
expected to be up 10% in 2005. Spring 2006 bookings for our men's
sportswear business are healthy, up 7%.
The John Varvatos(R) men's luxury business continued its strong
sales growth in the quarter and we are looking forward to the opening
of our new flagship store in New York City in November.
We are moving ahead aggressively with our expansion plans for our
Kipling(R) brand in the U.S. and in September opened three new retail
stores.
Overall gross margins for VF increased by more than one full
percentage point in the quarter, to 41.5% from 40.2%, with
improvements across most of our businesses. Operating margins also
rose sharply in the quarter, to 16.2% from 14.0%. Operating margins in
2004 were impacted by a $15 million loss on the disposal of our
Playwear business. The income tax rate for the 2005 quarter rose to
33.9% from 33.4% due to expected settlements of prior year taxes.
Our balance sheet remains in excellent shape, and we ended the
quarter with over $200 million in cash. Inventories were up 11% over
September 2004 levels, with $21 million of the total increase of $117
million due to the 2005 acquisitions. Debt as a percent of total
capital was 27.5% at the end of the quarter, or 23.2% net of cash. We
recently repaid $300 million of long-term debt that came due at the
beginning of the fourth quarter. During the quarter we repurchased one
million shares of common stock, bringing the total shares repurchased
year-to-date to three million. We expect to repurchase an additional
one million shares by year-end.
Outlook
We are maintaining our expectation for an increase in earnings of
about 10% for the full year to approximately $4.65 per share. Sales
for 2005 should rise 5 to 6%, excluding any additional acquisitions.
Anticipating a continuation of difficult retail conditions, we expect
sales in the fourth quarter to rise about 2%, while earnings per share
should be flat to up slightly over the same period a year ago.
"We're looking forward to wrapping up another record year in both
sales and earnings, and to continuing the momentum into next year,"
said Mr. McDonald. "At the present time, we are optimistic that we can
deliver another record year in 2006, with strong top and bottom line
growth. However, we believe it prudent to continue to monitor retail
conditions prior to providing specific sales and earnings guidance."
The Company plans to provide an update on its Growth Plan and more
specific financial guidance for 2006 in mid-December.
Dividend Increased
The Board of Directors declared an increase in the quarterly cash
dividend rate of $.02 to $.29 per share. This marks the 15th
consecutive year that the Company has increased its quarterly dividend
rate. The cash dividend is payable on December 19, 2005 to
shareholders of record as of the close of business on December 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; natural disasters; 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), 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 third quarter conference call and webcast today
at 8:30 a.m. ET. Interested parties should call (800)289-0529
domestic, or (913)981-5523 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 3, 2005 and can be accessed by dialing
(888)203-1112 domestic, and (719) 457-0820 international. The pass
code is 6993994. 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 Nine Months Ended
September September
--------------------------------------------
2005 2004 2005 2004
-------- ----------- ----------- -----------
Net Sales $1,803,064 $1,792,569 $4,802,538 $4,494,775
Costs and Operating
Expenses
Cost of goods sold 1,055,064 1,072,741 2,810,709 2,720,842
Marketing, administrative
and general expenses 470,753 466,197 1,380,238 1,229,993
Royalty income and
other (15,218) (12,751) (38,440) (37,359)
Loss on disposal of VF
Playwear - 14,978 - 7,561
----------- ----------- ----------- -----------
1,510,599 1,541,165 4,152,507 3,921,037
----------- ----------- ----------- -----------
Operating Income 292,465 251,404 650,031 573,738
Other Income (Expense)
Interest, net (17,955) (18,735) (50,062) (52,172)
Miscellaneous, net 819 838 801 1,956
----------- ----------- ----------- -----------
(17,136) (17,897) (49,261) (50,216)
----------- ----------- ----------- -----------
Income Before Income
Taxes 275,329 233,507 600,770 523,522
Income Taxes 93,464 78,070 196,050 174,123
----------- ----------- ----------- -----------
Net Income $181,865 $155,437 $404,720 $349,399
=========== =========== =========== ===========
Earnings Per Common Share
Basic $1.63 $1.41 $3.63 $3.18
Diluted 1.59 1.38 3.55 3.11
Weighted Average Shares Outstanding
Basic 111,114 110,149 111,043 109,511
Diluted 114,099 113,034 114,099 112,232
Cash Dividends Per
Common Share $0.27 $0.26 $0.81 $0.78
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 third quarter ends on the Saturday closest
to September 30. For presentation purposes herein, all references to
periods ended September 2005, December 2004 and September 2004 relate
to the fiscal periods ended as of October 1, 2005, January 1, 2005 and
October 2, 2004, respectively.
Reclassifications: Certain prior year amounts have been
reclassified to conform with the 2005 presentation.
VF CORPORATION
Consolidated Balance Sheets
(In thousands)
September December September
2005 2004 2004
----------- ----------- -----------
ASSETS
Current Assets
Cash and equivalents $215,549 $485,507 $182,007
Accounts receivable, net 950,649 751,582 923,610
Inventories 1,169,322 973,248 1,052,776
Other current assets 199,464 168,231 156,103
----------- ----------- -----------
Total current assets 2,534,984 2,378,568 2,314,496
Property, Plant and Equipment 1,535,247 1,539,490 1,573,320
Less accumulated depreciation 978,079 967,236 998,052
----------- ----------- -----------
557,168 572,254 575,268
Intangible Assets 749,997 639,520 631,266
Goodwill 1,095,146 1,031,594 1,023,422
Other Assets 404,481 382,342 382,208
------------ ----------- -----------
$5,341,776 $5,004,278 $4,926,660
============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $181,017 $42,830 $149,342
Current portion of long-term debt 333,665 401,232 401,078
Accounts payable 356,438 369,937 347,214
Accrued liabilities 602,113 558,215 544,971
------------- ----------- -----------
Total current liabilities 1,473,233 1,372,214 1,442,605
Long-term Debt 527,511 556,639 557,099
Other Liabilities 575,247 536,131 537,363
Commitments and Contingencies
Redeemable Preferred Stock 24,083 26,053 26,702
Common Stockholders' Equity
Common Stock 110,887 111,388 110,489
Additional paid-in capital 1,196,286 1,087,641 1,049,327
Accumulated other comprehensive
income (loss) (135,132) (113,071) (129,346)
Retained earnings 1,569,661 1,427,283 1,332,421
------------- ----------- -----------
Total common stockholders'
equity 2,741,702 2,513,241 2,362,891
------------- ----------- -----------
$5,341,776 $5,004,278 $4,926,660
============= =========== ===========
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September
--------------------
2005 2004
--------- ---------
Operating Activities
Net income $404,720 $349,399
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 72,348 81,686
Amortization of intangible assets 12,111 12,101
Other amortization 12,203 11,061
Provision for doubtful accounts 9,602 11,126
Pension funding in excess of expense (24,536) (10,912)
Other, net (8,210) (924)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable (199,095) (223,879)
Inventories (179,913) (56,695)
Other current assets (24,022) 2,013
Accounts payable (16,094) (12,535)
Accrued liabilities 98,962 135,888
--------- ---------
Cash provided by operating
activities 158,076 298,329
Investing Activities
Capital expenditures (75,864) (52,204)
Business acquisitions, net of cash acquired (212,286) (629,258)
Software purchases (13,008) (8,139)
Sale of VF Playwear business 6,667 4,517
Other, net 18,528 8,894
--------- ---------
Cash used by investing activities (275,963) (676,190)
Financing Activities
Increase in short-term borrowings 136,464 61,634
Payments on long-term debt (101,189) (2,832)
Purchase of Common Stock (175,136) -
Cash dividends paid (91,757) (87,222)
Proceeds from issuance of Common Stock 92,751 77,973
Other, net (181) (456)
--------- ---------
Cash provided (used) by financing
activities (139,048) 49,097
Net Cash Used by Discontinued Operations - (3,320)
Effect of Foreign Currency Rate Changes on Cash (13,023) (694)
--------- ---------
Net Change in Cash and Equivalents (269,958) (332,778)
Cash and Equivalents -- Beginning of Year 485,507 514,785
--------- ---------
Cash and Equivalents -- End of Period $215,549 $182,007
========= =========
VF CORPORATION
Supplemental Financial Information
Business Segment Information
(In thousands)
Three Months Ended Nine Months Ended
September September
---------------------------------------------
2005 2004 2005 2004
--------- ----------- ----------- -----------
Coalition sales
Jeanswear $688,513 $713,850 $1,991,840 $2,008,177
Outdoor Apparel and
Equipment 520,757 457,081 1,099,741 727,398
Intimate Apparel 213,281 234,579 663,573 718,806
Imagewear 202,753 192,529 570,618 538,995
Sportswear 166,338 163,333 445,354 409,712
Other 11,422 31,197 31,412 91,687
----------- ----------- ----------- -----------
Net sales $1,803,064 $1,792,569 $4,802,538 $4,494,775
=========== =========== =========== ===========
Coalition profit
Jeanswear $123,059 $116,669 $335,334 $324,007
Outdoor Apparel and
Equipment 111,968 87,241 186,801 122,686
Intimate Apparel 21,589 32,998 58,717 103,496
Imagewear 37,228 29,695 92,126 72,772
Sportswear 29,480 22,297 75,650 36,000
Other (1,406) (15,037) (2,045) (10,619)
----------- ----------- ----------- -----------
Total coalition profit 321,918 273,863 746,583 648,342
Corporate and other
expenses (28,634) (21,621) (95,751) (72,648)
Interest, net (17,955) (18,735) (50,062) (52,172)
----------- ----------- ----------- -----------
Income before income
taxes $275,329 $233,507 $600,770 $523,522
=========== =========== =========== ===========
CONTACT: VF Services, Inc.
Cindy Knoebel, CFA, 336-424-6189 or 212-841-7141
VP, Financial & Corporate Communications