Exhibit 99
VF Announces Record First Quarter Revenues and Earnings, Declares Dividend and
Raises Full Year Guidance
GREENSBORO, N.C.--(BUSINESS WIRE)--April 25, 2006--VF Corporation
(NYSE: VFC):
-- 1Q EPS up 14%; revenues rise 5%
-- Operating margins expand to 12.2% from 11.8%
-- 2006 EPS guidance raised to $4.95
Information regarding VF's first quarter conference call webcast
today can be found at the end of this release.
VF Corporation (NYSE: VFC), a global leader in branded lifestyle
apparel, today announced record results for the first quarter of 2006.
All per share amounts are presented on a diluted basis.
Income rose 12% to a record $128.2 million from $114.7 million
before the cumulative effect of a change in accounting policy for
stock compensation expense, with earnings per share rising 14% to
$1.14 from $1.00. Reflecting the cumulative effect adjustment recorded
in the first quarter of 2005, net income in the 2005 period was $102.9
million, equal to $.89 per share. Total revenues increased 5% in the
current quarter, to $1,665.7 million compared with $1,582.2 million in
the 2005 quarter. Foreign currency translation negatively impacted
revenues by approximately $30 million, or 2%, and earnings per share
by $.02 in the 2006 quarter.
"We are delighted to start the year off on such a positive note,
with earnings well in excess of the initial guidance we gave in
February," said Mackey J. McDonald, chairman and chief executive
officer. "Our growth strategy clearly has momentum, which should
continue to build as the year progresses. Importantly, our performance
this year is being driven by strong organic growth. Our results this
quarter have given us increased confidence in our ability to deliver
even stronger revenues and earnings this year than previously
anticipated, while at the same time giving us the opportunity to
significantly step up the investments behind our most important growth
initiatives."
First Quarter Business Review
Outdoor
Our Outdoor team delivered another outstanding quarter. Total
revenues increased 35% in the quarter, driven by particularly strong
global growth in The North Face(R), Vans(R) and Napapijri(R) brands
and by the addition of the Reef(R) brand, acquired in April 2005,
which contributed $42 million to revenues in the quarter. Revenues of
The North Face(R) brand grew approximately 40%, while revenues of our
Vans(R) and Napapijri(R) brands both achieved mid-teen percentage
growth rates. Our packs business also grew modestly in the quarter,
driven by higher Eastpak(R) brand sales in Europe. The strong volume
gains achieved by The North Face(R) and Vans(R) brands were the
primary drivers behind a 59% increase in operating income in the
quarter, with total Outdoor operating margins rising two full
percentage points to 13.1%.
Sportswear
Each of our Sportswear businesses, which include our Nautica(R)
and John Varvatos(R) brands, as well as Kipling(R) brand sales in
North America, achieved higher revenues in the quarter. Our Nautica(R)
branded wholesale business, including men's sportswear, increased
revenues in the quarter at a low single digit rate, with strong sales
of our spring product offerings partially offset by slightly lower
revenues in Nautica(R) brand retail stores. As anticipated, operating
income and operating margins declined in the quarter, due primarily to
investments to support the upcoming launch of Nautica(R) brand women's
sportswear and our Nautica(R), Kipling(R) and John Varvatos(R) brands'
retail store strategies. In addition, margins reflected increased
promotional activity in our Nautica(R) brand retail stores during the
quarter.
Jeanswear
We are very pleased with the overall performance of our Jeanswear
coalition, which includes our Wrangler(R), Lee(R), Riders(R),
Rustler(R) and Wrangler Hero(R) brands. Domestic jeans revenues rose
slightly in the quarter, as we continued to experience solid gains in
our domestic Mass Market and Western Specialty businesses. While down
from prior year levels, Lee(R) brand domestic revenues were better
than anticipated and we expect improved top line comparisons beginning
in the second quarter. Total Jeanswear revenues were down slightly
from prior levels reflecting currency translation effects that
negatively impacted revenues by approximately $15 million. Total
Jeanswear operating income rose 5% in the quarter reflecting higher
sales of full priced products, with operating margins rising to 17.5%
from 16.4%.
Intimate Apparel
Our Intimate Apparel business posted difficult revenues and profit
comparisons as expected, with our Private Brands business continuing
to be the primary driver behind the revenue decline. We continue to
anticipate more stable performance for the remainder of the year. Our
management team is highly focused on returning this business to
traditional levels of profitability and renewing growth in our strong
brands, including Vanity Fair(R), Lily of France(R), Vassarette(R),
Bestform(R) and Curvation(R).
Imagewear
Our Imagewear coalition delivered another excellent quarter.
Revenues rose 4%, with the gain due to a strong increase in sales of
Image apparel, which includes uniforms for the industrial, public
safety and service markets. Operating margins remained strong, at
15.5% in the quarter, with operating income about flat with prior year
levels.
Gross margins were 42.1% in both the 2006 and 2005 periods.
Operating income rose 9% in the quarter, with operating margins
increasing to 12.2% from 11.8%. Income rose 12% before the cumulative
effect of the change in accounting policy for stock compensation
expense in 2005, reflecting lower net interest expense in the current
period.
Our balance sheet continues to be in excellent shape. Inventories
rose 6% versus the comparable quarter in 2005, 2% of which was due to
the acquisition of the Reef(R) brand. Debt as a percent of total
capital was 24.7% at the end of the quarter.
Outlook
Based on our strong performance this quarter, we are raising our
full year guidance for both revenues and earnings. We now expect
revenues to expand 6 to 7%, driven primarily by the momentum in our
Outdoor coalition and stronger than anticipated revenues in our
domestic Jeanswear business. We also continue to expect that our
Imagewear and Sportswear businesses will achieve revenue gains over
2005 levels.
"We are committed to maintaining the positive momentum behind our
growth strategy and believe the best means of doing so is to continue
to invest behind our brands. Accordingly, we plan to invest an
additional $20 million this year in increased advertising behind our
Jeanswear brands as well as to support a variety of growth initiatives
in our Outdoor business," said Mr. McDonald.
Previously, we had anticipated an increase in 2006 earnings per
share of approximately 6% over the $4.54 reported in 2005 before the
cumulative effect adjustment. We are now expecting a 9% increase to
approximately $4.95 per share.
We're looking forward to a very strong performance in the second
half and expect a 7 to 8% percent increase in revenues and
approximately 10% increase in earnings per share. The fourth quarter
is expected to be particularly strong.
Earnings comparisons for the second quarter of 2006 will reflect
the impact of special items that benefited net income by $7.7 million,
or $.07 per share, in the prior year's quarter. Considering those
special items, we currently expect second quarter earnings per share
to be about flat with the $0.85 per share reported in the second
quarter of 2005. Revenues should rise by 6 to 7%.
We continue to anticipate another solid year of cash flow from
operations, which should approximate $600 million in 2006.
Dividend Declared
The Board of Directors declared a regular quarterly cash dividend
of $.29 per share, payable on June 19, 2006 to shareholders of record
as of the close of business on June 9, 2006.
Cautionary Statement on 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 a
number of risks and uncertainties. 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.
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 in this release include VF's reliance on a small number of
large customers; the financial strength of VF's customers; changing
fashion trends and consumer demand; increasing pressure on margins;
VF's ability to implement its growth strategy; VF's ability to
maintain its distribution and information technology systems;
stability of VF's manufacturing facilities and foreign suppliers;
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 protect trademarks and
other intellectual property rights; maintenance by VF's licensees of
the value of VF's brands; the overall level of consumer spending;
general economic conditions and other factors affecting consumer
confidence; fluctuations in the price, availability and quality of raw
materials; foreign currency fluctuations; and legal, regulatory,
political and economic risks in international markets. 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 Securities and Exchange Commission, including VF's Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q.
About the Company
VF Corporation is a leader in branded lifestyle apparel including
jeanswear, outdoor products, intimate apparel, image apparel and
sportswear. Its principal brands include Wrangler(R), Lee(R),
Riders(R), Rustler(R), The North Face(R), Vans(R), Reef(R),
Napapijri(R), Kipling(R), Nautica(R), John Varvatos(R), JanSport(R),
Eastpak(R), Vanity Fair(R), Vassarette(R), Bestform(R), Lily of
France(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 first quarter conference call and webcast today
at 2:30 p.m. ET. Interested parties should call 1-888-802-2266
domestic, or 1-913-312-1270 international, to access the call. You may
also access this call via the Internet at www.vfc.com. A replay will
be available through May 8, 2006 and can be accessed by dialing
1-888-203-1112 domestic, and 1-719-457-0820 international. The pass
code is 8436724. 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
March
-----------------------
(Revised,
see Note B)
2006 2005
---------- -----------
Net Sales $1,646,405 $1,563,643
Royalty Income 19,328 18,542
---------- ----------
Total Revenues 1,665,733 1,582,185
---------- ----------
Costs and Operating Expenses
Cost of goods sold 964,558 915,564
Marketing, administrative and general
expenses 498,228 480,115
---------- ----------
1,462,786 1,395,679
---------- ----------
Operating Income 202,947 186,506
Other Income (Expense)
Interest income 1,418 3,016
Interest expense (12,690) (18,674)
Miscellaneous, net 882 119
---------- ----------
(10,390) (15,539)
---------- ----------
Income before Income Taxes and Cumulative
Effect of a Change in Accounting Policy 192,557 170,967
Income Taxes 64,372 56,281
---------- ----------
Income before Cumulative Effect of a Change
in Accounting Policy 128,185 114,686
Cumulative Effect of a Change in
Accounting Policy - (11,833)
---------- ----------
Net Income $ 128,185 $ 102,853
========== ==========
Earnings Per Common Share - Basic
Income before cumulative effect of a
change in accounting policy $ 1.16 $ 1.02
Cumulative effect of a change in
accounting policy - (0.11)
Net income 1.16 0.92
Earnings Per Common Share - Diluted
Income before cumulative effect of a
change in accounting policy $ 1.14 $ 1.00
Cumulative effect of a change in
accounting policy - (0.10)
Net income 1.14 0.89
Weighted Average Shares Outstanding
Basic 109,854 111,761
Diluted 112,339 114,993
Cash Dividends Per Common Share $ 0.29 $ 0.27
NOTE A: 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 first quarter ends on the Saturday closest to March 31. For
presentation purposes herein, all references to periods ended March
2006, December 2005 and March 2005 relate to the fiscal periods ended
as of April 1, 2006, December 31, 2005 and April 2, 2005,
respectively.
NOTE B: During the fourth quarter of 2005, VF elected to early adopt
FASB Statement No. 123 (Revised), Share-Based Payment, effective as
of the beginning of 2005 using the modified retrospective method.
Under this method of adoption, VF restated its 2005 interim financial
statements as follows: (1) recorded in the first quarter a noncash
charge as the Cumulative Effect of a Change in Accounting Policy for
periods prior to January 2005, (2) restated its operating results,
including segment information, for each quarter of 2005 to recognize
compensation cost for grants of stock options and other stock-based
compensation, (3) reclassified accrued stock-based compensation from
Current Liabilities to Common Stockholders' Equity in the
Consolidated Balance Sheet and (4) reclassified the tax benefits from
the exercise of stock options from operating activities to financing
activities in the Consolidated Statement of Cash Flows.
NOTE C: Beginning in the fourth quarter of 2005, Royalty Income was
classified as a separate component of Total Revenues, with related
expenses classified in Marketing, Administrative and General. Prior
period amounts have been reclassified to conform with the new
presentation.
VF CORPORATION
Consolidated Balance Sheets
(In thousands)
(Revised,
see Note B)
March December March
2006 2005 2005
----------- ----------- -----------
ASSETS
Current Assets
Cash and equivalents $154,014 $296,557 $365,864
Accounts receivable, net 937,666 764,184 844,009
Inventories 1,048,298 1,081,080 987,737
Other current assets 212,425 223,555 156,347
----------- ----------- -----------
Total current assets 2,352,403 2,365,376 2,353,957
Property, Plant and Equipment 1,601,435 1,551,411 1,544,786
Less accumulated depreciation 987,734 987,356 972,382
----------- ----------- -----------
613,701 564,055 572,404
Intangible Assets 740,932 744,313 653,574
Goodwill 1,097,797 1,097,037 1,028,235
Other Assets 414,264 400,290 411,499
----------- ----------- -----------
$5,219,097 $5,171,071 $5,019,669
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $213,049 $138,956 $37,852
Current portion of long-term
debt 34,938 33,956 401,563
Accounts payable 346,821 451,900 319,010
Accrued liabilities 490,249 527,331 486,755
----------- ----------- -----------
Total current liabilities 1,085,057 1,152,143 1,245,180
Long-term Debt 689,319 647,728 558,863
Other Liabilities 571,378 539,661 547,578
Commitments and Contingencies
Redeemable Preferred Stock 22,497 23,326 24,935
Common Stockholders' Equity
Common Stock 109,277 110,108 111,830
Additional paid-in capital 1,302,085 1,277,486 1,199,976
Accumulated other comprehensive
income (loss) (186,975) (164,802) (110,062)
Retained earnings 1,626,459 1,585,421 1,441,369
----------- ----------- -----------
Total common stockholders'
equity 2,850,846 2,808,213 2,643,113
----------- ----------- -----------
$5,219,097 $5,171,071 $5,019,669
=========== =========== ===========
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended
March
-------------------
(Revised,
see Note B)
2006 2005
--------- ---------
Operating Activities
Net income $ 128,185 $ 102,853
Adjustments to reconcile net income
to cash used by operating activities:
Cumulative effect of a change in accounting
policy - 11,833
Depreciation 23,455 22,199
Amortization of intangible assets 4,018 3,696
Other amortization 4,237 4,100
Stock-based compensation 18,725 17,229
Provision for doubtful accounts 980 4,524
Pension funding in excess of expense (64,055) (44,739)
Other, net 796 (917)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (174,738) (100,070)
Inventories 32,955 (10,106)
Accounts payable (105,042) (52,157)
Accrued liabilities and other 23,457 11,802
--------- ---------
Cash used by operating activities (107,027) (29,753)
Investing Activities
Capital expenditures (18,939) (29,229)
Business acquisitions, net of cash acquired (1,225) (23,817)
Software purchases (5,405) (5,964)
Other, net 340 4,410
--------- ---------
Cash used by investing activities (25,229) (54,600)
Financing Activities
Increase in short-term borrowings 73,461 (4,751)
Payments on long-term debt (488) (531)
Purchase of Common Stock (55,365) (59,073)
Cash dividends paid (32,252) (30,801)
Proceeds from issuance of Common Stock 3,839 54,373
Tax benefits of stock option exercises 751 9,610
--------- ---------
Cash used by financing activities (10,054) (31,173)
Effect of Foreign Currency Rate Changes on Cash (233) (4,117)
--------- ---------
Net Change in Cash and Equivalents (142,543) (119,643)
Cash and Equivalents - Beginning of Year 296,557 485,507
--------- ---------
Cash and Equivalents - End of Period $ 154,014 $ 365,864
========= =========
VF CORPORATION
Supplemental Financial Information
Business Segment Information
(In thousands)
Three Months Ended
March
-----------------------
(Revised,
see Note B)
2006 2005
---------- -----------
Coalition revenues
Jeanswear $ 703,820 $ 713,502
Outdoor 385,645 285,381
Intimate Apparel 210,111 227,703
Imagewear 193,965 187,304
Sportswear 163,021 159,596
Other 9,171 8,699
---------- ----------
Total coalition revenues $1,665,733 $1,582,185
========== ==========
Coalition profit
Jeanswear $ 123,023 $ 116,679
Outdoor 50,592 31,725
Intimate Apparel 15,759 22,308
Imagewear 30,051 29,570
Sportswear 20,453 26,429
Other (1,210) (724)
---------- ----------
Total coalition profit 238,668 225,987
Corporate and other expenses (34,839) (39,362)
Interest, net (11,272) (15,658)
---------- ----------
Income before income taxes $ 192,557 $ 170,967
========== ==========
CONTACT: VF Services, Inc.
Cindy Knoebel, CFA, 212-841-7141 or 336-424-6189
VP, Financial & Corporate Communications