Exhibit 99
VF Announces Record Second Quarter Revenues and Earnings, Raises Full Year
Guidance and Declares Dividend
GREENSBORO, N.C.--(BUSINESS WIRE)--July 19, 2006--VF Corporation
(NYSE: VFC):
-- Revenues rise 8% on strong organic growth
-- Reported EPS up 4%, but up 13% excluding special items in
prior year 2Q
-- 2006 EPS guidance raised to $5.00
-- Declares quarterly dividend of $.55 per share
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 lifestyle
apparel, today announced record results for the second quarter of
2006. All per share amounts are presented on a diluted basis.
Revenues rose 8% in the quarter to a record $1,566.8 million
compared with $1,452.1 million in the second quarter of 2005, fueled
by healthy organic growth across our Outdoor, Jeanswear, Imagewear and
Sportswear coalitions. Net income in the current quarter increased to
a record $99.0 million compared with $96.7 million in the prior year's
quarter, which benefited from $7.7 million, equal to $.07 per share,
in special items as detailed on the last page. Accordingly, reported
earnings per share increased 4% to $.88. Excluding the effect of the
special items in 2005, second quarter earnings per share increased
13%.
For the first six months of 2006, revenues were up 7% to $3,232.6
million from $3,034.3 million in the 2005 period. Income rose 7% to
$227.2 million from $211.4 million, while earnings per share increased
9% to $2.02 per share from $1.85 per share, before a $.10 per share
cumulative effect of a change in accounting policy for stock
compensation expense in the first quarter of 2005. Excluding the
special items in last year's second quarter and the effect of the
accounting change for the first half of 2005, income in the first half
of 2006 increased 12% and earnings per share rose 13%.
"This quarter is further evidence of the power of our brands,
which are benefiting from continued investments in marketing, new
talent and infrastructure designed to keep them strong and growing,"
said Mackey J. McDonald, chairman and chief executive officer. "We are
gratified by the strong organic growth our brands are currently
generating, which we expect will continue. We are also continuing to
aggressively pursue acquisitions, which remain an important component
of our future growth."
Second Quarter Business Review
Outdoor
Our Outdoor coalition enjoyed another quarter of robust
double-digit growth, with total revenues up 24% to $371.0 million,
with strong gains both domestically and internationally. The North
Face(R) brand continued its momentum in the quarter with a revenue
increase of 16%, while our Vans(R), JanSport(R), Reef(R) and
Kipling(R) brands each grew revenues in excess of 20% in the quarter.
Operating income rose slightly in the quarter, while operating
margins declined to 11.4% from 13.9%. We are continuing to make
significant investments in our Outdoor brands to support strong future
growth. These investments impacted margins particularly heavily in the
second quarter, given the seasonal nature of our Outdoor businesses.
Jeanswear
Our Jeanswear coalition posted excellent results in the quarter,
with growth across most of our brands and geographic markets. Total
revenues were up 6% in both our domestic and international jeans
businesses. We are encouraged by the results of our efforts to
revitalize the Lee(R) brand in the U.S., where revenues grew 11% in
the quarter. Reflecting continued strength in our Wrangler Hero(R) and
Riders(R) brands, our Mass Market business also experienced solid
gains, with revenues up 8%. Growth in international markets such as
Latin America, Mexico and China continued, with double-digit revenue
increases in each. Revenues in Europe and Canada also grew in the
quarter.
Jeanswear operating margins were a healthy 13.9% in the quarter
compared with 15.3% in the prior year's quarter. Jeanswear operating
margin comparisons reflect the impact of the special items that
boosted margins by 2.2% in the 2005 quarter. Excluding the special
items, Jeanswear operating margins improved by nearly one percentage
point in the 2006 quarter.
Sportswear
Total revenues of our Sportswear coalition, which includes our
Nautica(R) and John Varvatos(R) brands as well as the Kipling(R) brand
in North America, increased 5% in the quarter. Each brand achieved
higher revenues in the quarter. Our Nautica(R) brand men's sportswear
business continues to perform very well despite recent department
store consolidation, and we are looking forward to the initial test of
our new women's sportswear line this fall.
Operating income and margins continue to reflect investments to
support our women's sportswear initiative. Sportswear operating
margins were 12.7% in the current quarter compared to 13.8% in the
prior year's quarter, with these investments accounting for nearly all
of the decline.
Imagewear
Our Imagewear team delivered another outstanding quarter, with
revenues up 4%. The gain was due to higher sales of Image apparel,
which includes uniforms for the industrial, public safety and service
markets, while our Licensed Apparel business was about flat with prior
year levels.
Operating margins jumped two full percentage points in the
quarter, to 15.4% from 13.4%.
Intimate Apparel
Our Intimate Apparel coalition experienced a revenue decline of 3%
in the quarter. The revenue decline in our Department Store and Mass
Market businesses was partially offset by a strong increase in our
Private Brands business and higher international revenues. Operating
income and margins improved in the quarter, but the comparisons
reflect special items that negatively impacted margins in the prior
year's quarter. Operating margins declined to 6.9% in 2006 from 10.3%,
excluding the special items in 2005.
We are confident that our actions to improve the performance in
our Intimates business, which includes such strong brands as Vanity
Fair(R), Lily of France(R), Vassarette(R), Bestform(R) and
Curvation(R), will be reflected during the second half of 2006.
Revenues are expected to be about flat over the second half of 2005,
with a slight improvement in operating margins.
We continue to grow our base of owned retail stores. Over the past
twelve months, we have added a total of 47 stores, including full
price and outlet stores, and we expect to add between 45 and 50
additional stores by year-end. The biggest expansion is in our base of
Vans(R) stores, with several stores also being added in our
Kipling(R), Napapijri(R) and The North Face(R) brands, as well as in
our Lee(R) and Wrangler(R) brands internationally.
The tax rate rose to 33.3% in the quarter from 29.5% in the prior
year's second quarter, due primarily to the impact of the
aforementioned special items in the 2005 period.
Our balance sheet remains strong. Inventories increased at a lower
rate than revenues, rising 4% versus the comparable quarter in 2005.
Debt as a percent of total capital was 24.7% at the end of the quarter
versus 29.7% at the end of the 2005 period.
Outlook
Our strong performance to date gives us increased confidence in
our outlook for the remainder of 2006. Accordingly, we are raising our
full year earnings guidance to $5.00 per share from $4.95 previously,
which represents a 10% increase over the $4.54 reported in 2005 before
the cumulative effect adjustment. Revenues are now expected to rise
approximately 7% for the year, to nearly $7 billion.
Strong organic growth should continue in the third quarter, with
revenues expected to rise approximately 8%. Earnings per share are
anticipated to increase by about 6%, reflecting heavier spending in
such areas as marketing, new product launches, technology and
distribution to support growth. The fourth quarter should be
particularly strong, with earnings per share rising about 17%.
"Our growth plan is working," said Mr. McDonald. "We're headed for
another record year, with strong momentum across most of our brands
and businesses. We're excited about the wide range of growth
opportunities that lie before us, many of which are still in their
early stages. We are fortunate to have built strong operating
platforms and leading-edge supply chain processes and technologies
that provide us with ample 'fuel' to invest behind these opportunities
and still maintain industry-leading profit margins."
We continue to anticipate another solid year of cash flow from
operations, which should approximate $600 million in 2006.
Dividend Declared, Reflecting 90% Increase Announced in May
The Board of Directors declared a cash dividend of $.55 per share,
payable on September 18, 2006 to shareholders of record as of the
close of business on September 8, 2006, consistent with the 90%
increase in the indicated dividend rate announced in May.
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
effectively transition to a new distribution center supporting our
domestic Outdoor businesses; VF's ability to maintain 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 second quarter conference call and webcast today
at 8:30 a.m. ET. Interested parties should call 1-888-802-2280
domestic, or 1-913-312-1266 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 2, 2006 and can be accessed by dialing
1-888-203-1112 domestic, and 1-719-457-0820 international. The pass
code is 1633243. 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 Six Months
Ended June Ended June
----------------------- -----------------------
2005 2005
2006 (see Note B) 2006 (see Note B)
----------- ----------- ----------- -----------
Net Sales $1,548,055 $1,435,831 $3,194,460 $2,999,474
Royalty Income 18,773 16,276 38,101 34,818
----------- ----------- ----------- -----------
Total Revenues 1,566,828 1,452,107 3,232,561 3,034,292
----------- ----------- ----------- -----------
Costs and Operating
Expenses
Cost of goods sold 911,842 841,812 1,876,400 1,757,376
Marketing,
administrative and
general expenses 493,779 456,511 992,007 936,626
----------- ----------- ----------- -----------
1,405,621 1,298,323 2,868,407 2,694,002
----------- ----------- ----------- -----------
Operating Income 161,207 153,784 364,154 340,290
Other Income (Expense)
Interest income 1,292 2,041 2,710 5,057
Interest expense (13,862) (18,490) (26,552) (37,164)
Miscellaneous, net (84) (137) 798 (18)
----------- ----------- ----------- -----------
(12,654) (16,586) (23,044) (32,125)
----------- ----------- ----------- -----------
Income before Income
Taxes and Cumulative
Effect of a Change in
Accounting Policy 148,553 137,198 341,110 308,165
Income Taxes 49,521 40,449 113,893 96,730
----------- ----------- ----------- -----------
Income before Cumulative
Effect of a Change in
Accounting Policy 99,032 96,749 227,217 211,435
Cumulative Effect of a
Change in Accounting
Policy - - - (11,833)
----------- ----------- ----------- -----------
Net Income $ 99,032 $ 96,749 $ 227,217 $ 199,602
=========== =========== =========== ===========
Earnings Per Common
Share - Basic
Income before
cumulative effect of a
change in accounting
policy $ 0.90 $ 0.87 $ 2.06 $ 1.90
Cumulative effect of
a change in
accounting policy - - - (0.11)
Net income 0.90 0.87 2.06 1.79
Earnings Per Common
Share - Diluted
Income before
cumulative effect of
a change in accounting
policy 0.88 0.85 2.02 1.85
Cumulative effect of
a change in
accounting policy - - - (0.10)
Net income 0.88 0.85 2.02 1.75
Weighted Average Shares
Outstanding
Basic 109,879 110,254 109,867 111,008
Diluted 112,539 113,283 112,440 114,138
Cash Dividends Per
Common Share $ 0.55 $ 0.27 $ 0.84 $ 0.54
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 second quarter ends on the Saturday closest to June 30. For
presentation purposes herein, all references to periods ended June
2006, December 2005 and June 2005 relate to the fiscal periods ended
as of July 1, 2006, December 31, 2005 and July 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)
June
June December 2005
2006 2005 (see Note B)
----------- ---------- -----------
ASSETS
Current Assets
Cash and equivalents $ 161,672 $ 296,557 $ 249,517
Accounts receivable, net 892,732 764,184 792,747
Inventories 1,223,408 1,081,080 1,177,324
Other current assets 256,302 223,555 199,363
----------- ----------- -----------
Total current assets 2,534,114 2,365,376 2,418,951
Property, Plant and Equipment 1,598,442 1,551,411 1,544,884
Less accumulated depreciation 991,421 987,356 985,297
----------- ----------- -----------
607,021 564,055 559,587
Intangible Assets 747,839 744,313 754,717
Goodwill 1,108,484 1,097,037 1,094,562
Other Assets 409,111 400,290 412,201
----------- ----------- -----------
$5,406,569 $5,171,071 $5,240,018
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 229,145 $ 138,956 $ 256,090
Current portion of long-term debt 36,164 33,956 301,585
Accounts payable 456,095 451,900 384,757
Accrued liabilities 458,650 527,331 499,513
----------- ----------- -----------
Total current liabilities 1,180,054 1,152,143 1,441,945
Long-term Debt 693,359 647,728 559,181
Other Liabilities 611,749 539,661 565,579
Commitments and Contingencies
Redeemable Preferred Stock - 23,326 24,626
Common Stockholders' Equity
Common Stock 110,640 110,108 111,095
Additional paid-in capital 1,368,082 1,277,486 1,218,995
Accumulated other comprehensive
income (loss) (180,782) (164,802) (133,028)
Retained earnings 1,623,467 1,585,421 1,451,625
----------- ----------- -----------
Total common stockholders'
equity 2,921,407 2,808,213 2,648,687
----------- ----------- -----------
$5,406,569 $5,171,071 $5,240,018
=========== =========== ===========
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended June
---------------------
2005
2006 (see Note B)
--------- ----------
Operations
Net income $ 227,217 $ 199,602
Adjustments to reconcile net income
to cash provided by operating activities:
Cumulative effect of a change in
accounting policy - 11,833
Depreciation 47,525 47,633
Amortization of intangible assets 8,386 7,876
Other amortization 11,484 8,091
Stock-based compensation 29,523 25,641
Provision for doubtful accounts 325 6,475
Pension funding in excess of expense (52,442) (34,638)
Other, net 4,243 (14,700)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable (120,133) (36,288)
Inventories (133,837) (190,535)
Accounts payable 403 13,673
Accrued liabilities and other (42,722) (22,076)
--------- ---------
Cash provided (used) by operating
activities (20,028) 22,587
Investments
Capital expenditures (57,187) (50,722)
Business acquisitions, net of cash acquired (3,893) (211,301)
Software purchases (7,196) (9,484)
Sale of VF Playwear business 4,666 6,667
Other, net 9,582 12,670
--------- ---------
Cash used by investing activities (54,028) (252,170)
Financing
Increase in short-term borrowings 88,175 212,525
Payments on long-term debt (1,444) (100,743)
Purchase of Common Stock (118,582) (116,066)
Cash dividends paid (93,607) (61,309)
Proceeds from issuance of Common Stock 53,542 63,614
Tax benefits of stock option exercises 7,824 10,928
--------- ---------
Cash provided (used) by financing
activities (64,092) 8,949
Effect of Foreign Currency Rate Changes on Cash 3,263 (15,356)
--------- ---------
Net Change in Cash and Equivalents (134,885) (235,990)
Cash and Equivalents - Beginning of Year 296,557 485,507
--------- ---------
Cash and Equivalents - End of Period $ 161,672 $ 249,517
========= =========
VF CORPORATION
Supplemental Financial Information
Business Segment Information
(In thousands)
Three Months Ended June Six Months Ended June
----------------------- -----------------------
2005 2005
2006 (see Note B) 2006 (see Note B)
----------- ----------- ---------- -----------
Coalition revenues
Jeanswear $638,170 $601,974 $1,341,990 $1,315,476
Outdoor 371,047 300,434 756,692 585,815
Intimate Apparel 215,515 223,191 425,626 450,894
Imagewear 188,496 180,809 382,461 368,113
Sportswear 141,210 134,372 304,231 293,968
Other 12,390 11,327 21,561 20,026
----------- ----------- ----------- -----------
Total coalition
revenues $1,566,828 $1,452,107 $3,232,561 $3,034,292
=========== =========== =========== ===========
Coalition profit
Jeanswear $ 88,850 $91,827 (1) $211,873 $208,506 (1)
Outdoor 42,355 41,712 92,947 73,437
Intimate Apparel 14,946 13,060 (2) 30,705 35,368 (2)
Imagewear 29,107 24,157 59,158 53,727
Sportswear 17,885 18,562 38,338 44,991
Other 283 (204) (927) (928)
----------- ----------- ----------- -----------
Total coalition
profit 193,426 189,114 432,094 415,101
Corporate and other
expenses (32,303) (35,467) (67,142) (74,829)
Interest, net (12,570) (16,449) (23,842) (32,107)
----------- ----------- ----------- -----------
Income before income
taxes $148,553 $137,198 $341,110 $308,165
=========== =========== =========== ===========
(1) Jeanswear
coalition profit:
As reported $ 91,827 $208,506
Special items
included above
(see page 9) (13,178) (13,178)
----------- -----------
As adjusted $78,649 $195,328
=========== ===========
(2) Intimate Apparel
coalition profit:
As reported $ 13,060 $ 35,368
Special items
included above
(see page 9) 9,872 9,872
----------- -----------
As adjusted $ 22,932 $ 45,240
=========== ===========
VF CORPORATION
Special Items Included in Second Quarter 2005 Operating Results
(Dollars in thousands, except share amounts)
Net
Income EPS
--------- ---------
Special items included in 2005
operating income:
Reductions of accruals
totaling $14,194, primarily
in Jeanswear, for
postemployment benefits
in Mexico that were greater
than required by local laws $ 9,400 $ 0.08
Capacity alignment actions
totaling $10,888, primarily
in Intimate Apparel (7,200) (0.06)
Special items included in 2005
income tax expense:
Settlement of income tax matters
in certain foreign
jurisdictions 12,500 0.11
Tax impact of repatriation
of foreign earnings under the
American Jobs Creation Act of
2004 (7,000) (0.06)
--------- ---------
Total $7,700 $ 0.07
========= =========
Reconciliation of Reported Operating Results
with Certain Information Excluding 2005 Special Items
Second Quarter
--------------------------- Percent
2006 2005 Increase
--------- --------- --------
Net income, as reported $99,032 $96,749 2%
Special items - (7,700)
--------- ---------
Adjusted net income $99,032 $89,049 11%
========= =========
Earnings per share, as
reported $ 0.88 $ 0.85 4%
Special items - (0.07)
--------- ---------
Adjusted earnings per share $ 0.88 $ 0.78 13%
========= =========
Six Months Ended June
----------------------------- Percent
2006 2005 Increase
--------- --------- --------
Income before cumulative effect
of a change in accounting
policy, as reported $227,217 $ 211,435 7%
Special items - (7,700)
--------- ----------
Adjusted income before
cumulative effect of a
change in accounting policy $227,217 $ 203,735 12%
========= ==========
Earnings per share before
cumulative effect of a
change in accounting policy,
as reported $ 2.02 $ 1.85 9%
Special items - (0.07)
--------- ----------
Adjusted earnings per share
before cumulative effect of
a change in accounting policy $ 2.02 $ 1.78 13%
========= ==========
CONTACT: VF Services, Inc.
Cindy Knoebel, 212-841-7141 or 336-424-6189