Exhibit 99
VF Announces Record Third Quarter Revenues and Earnings,
Raises Full Year Guidance and Declares Dividend
-- Strong Organic Revenue Growth of 12% Drives 11% Increase in
EPS to $1.75
-- All Businesses - Outdoor, Jeanswear, Sportswear, Imagewear and
Intimates - Achieve Higher Revenues
-- 2006 Full Year Guidance Raised: Revenues Could Top $7 Billion,
While EPS Expected to Be up 11%
-- Quarterly Dividend of $.55 Per Share Declared
Information Regarding VF's Third Quarter Conference Call Webcast
Today Can Be Found at the End of This Release
GREENSBORO, N.C.--(BUSINESS WIRE)--Oct. 20, 2006--VF Corporation
(NYSE: VFC), a global leader in branded lifestyle apparel, today
announced record results for the third quarter of 2006. All per share
amounts are presented on a diluted basis.
Revenues rose 12% to a record $2,033.8 million, compared with
$1,822.1 million in the third quarter of 2005, driven by higher
revenues across all our businesses. Net income in the current quarter
increased 10% to a record $197.7 million, compared with $179.6 million
in the prior year's quarter. Earnings per share rose 11% to a record
$1.75 from $1.57. Foreign currency translation benefited revenues and
earnings per share by $24 million and $.03, respectively, in the
quarter.
For the first nine months of 2006, revenues were up 8% to $5,266.3
million from $4,856.4 million in the 2005 period. Income rose 9%, to
$424.9 million from $391.1 million, while earnings per share increased
10% to $3.77 from $3.43, before a $.10 per share cumulative effect of
a change in accounting policy for stock compensation expense in the
first quarter of 2005.
"We are very pleased with our brands' strong performance this
quarter. We have stepped up our investments in a number of areas,
including product development, marketing and geographic expansion, and
it's paying off in strong organic growth," said Mackey J. McDonald,
chairman and chief executive officer. "We are committed to keeping our
brands healthy and growing through such investments, while at the same
time delivering strong earnings growth."
Third Quarter Business Review
Outdoor
Our Outdoor coalition continues to have tremendous momentum, with
total revenues up 25% to $659 million and strong gains across nearly
every brand. Domestic revenues grew 20% in the quarter while
international revenues rose 37%. The North Face(R), Vans(R),
Napapijri(R) and Eastpak(R) brands each posted revenue gains in excess
of 20%, while our Reef(R) and Kipling(R) brands also posted solid
growth in the quarter.
Operating income rose 25% in the quarter, while operating margins
remained strong and stable, despite continued investments to support
the future growth we expect from all our Outdoor brands.
Jeanswear
Our Jeanswear coalition, which includes our Wrangler(R), Lee(R)
and Riders(R) brands, posted another quarter of healthy growth, with
revenues up 6% and growth in both our domestic and international
businesses. Domestic jeanswear revenues grew 5% with our Lee, Mass
Market and Specialty businesses all growing at comparable rates.
International revenues increased 8%, due primarily to the launch of
our new majority-owned joint venture in India and foreign currency
benefits. We continue to see strong growth in such markets as Mexico,
China and Russia, where revenues are growing at double-digit rates.
Jeanswear operating income declined slightly in the quarter, due
primarily to marketing investments to support growth in our brands,
particularly our Lee(R) and Wrangler(R) brands in the U.S. In
addition, capacity actions to reduce future product costs resulted in
higher expenses in the period.
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 6% in the quarter. Each brand achieved
higher revenues in the quarter. Our Nautica(R) branded business
enjoyed a revenue gain of 4%. Double-digit revenue gains were achieved
in our Kipling(R) and John Varvatos(R) brands, as we continue to
expand these businesses in the U.S.
As anticipated, reflecting ongoing investments to support our new
Nautica(R) women's sportswear initiative, operating income and margins
declined during the quarter. Otherwise, operating margins would have
been comparable to those in the prior year period.
Imagewear
Our Imagewear coalition continued its solid growth trend with a 6%
revenue increase in the quarter, with gains in both our Image
business, which includes uniforms for the industrial, public safety
and service markets, and in our licensed apparel business. During the
quarter, we announced a new agreement with ESPN to manufacture and
market a line of College GameDay apparel, including tees, fleece crews
and hoods. The line launched in September at leading sports specialty
and sporting goods stores, in addition to better department stores,
college campus retailers and online at ESPNShop.com.
Imagewear operating income declined slightly. Operating margins
dropped in the quarter due to investments and actions taken to support
future top and bottom line growth, but remain at very healthy levels.
Full year margins are expected to be up over prior year levels.
Intimates
Reversing the trend of the past several quarters, we are pleased
that our Intimates coalition achieved a 5% increase in revenues in the
period. Our department store and Private Brands businesses drove most
of the increase, with success in new product introductions in both our
Vanity Fair(R) and Lily of France(R) brands. We also experienced
growth internationally in our Mexican and European boutique
businesses.
Intimates' operating income and margins were down from prior year
levels, and are being impacted by provisions for higher than required
inventory levels.
During the quarter we opened 21 retail stores across a variety of
brands including Vans(R), Kipling(R) and Napapijri(R), bringing our
total number of owned retail stores to 560 at the end of the quarter.
Total retail revenues grew 17% in the quarter.
Overall gross margins expanded slightly in the quarter, to 42.3%.
Operating margins remain strong at 15.1% but are down modestly from
prior year levels, reflecting the higher costs associated with brand
investments and other actions supporting future revenue and earnings
growth.
Our balance sheet remains in excellent shape. Very strong revenues
in the month of September resulted in a sharp increase in accounts
receivable, and also accounted for the lower than normal cash flow
from operations for the nine month period. We continue to expect cash
generated from operations to approximate $600 million for the year.
Inventories increased at a lower rate than revenues, rising 2% versus
the comparable quarter in 2005. Debt as a percent of total capital was
24.3% at the end of the quarter versus 27.3% at the end of the 2005
period.
Outlook
We continue to look forward to a very strong fourth quarter and
our fourth consecutive year of record revenues and earnings.
We now expect full year revenues to be up approximately 8% in 2006
- - surpassing the $7 billion mark for the first time in our company's
history - with nearly all of the increase coming from organic growth.
Earnings per share are now expected to rise 11% to approximately $5.05
over the $4.54 reported in 2005 before the cumulative effect
adjustment.
Accordingly, fourth quarter revenues should increase by about 6%,
with earnings per share rising approximately 13%, indicating
additional expansion in operating margins during the period.
"We are confident that we have the pieces in place to continue to
achieve our long-term growth and margin targets," said Mr. McDonald.
"Most of our brands are strong and growing, and we have a robust
pipeline of initiatives in place to support their continued growth. We
continue to target a 14% operating margin and expect to make continued
progress towards that goal in the coming months and years. We have the
balance sheet and cash flow to fund additional acquisitions. And we
are committed to returning cash to shareholders via our very strong
dividend."
Dividend Declared
The Board of Directors declared a cash dividend of $.55 per share,
payable on December 18, 2006 to shareholders of record as of the close
of business on December 8, 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
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 and distributors 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 third quarter conference call and webcast today
at 8:30 a.m. ET. Interested parties should call 1-800-289-0572
domestic, or 1-913-981-5543 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 2, 2006 and can be accessed by dialing
1-888-203-1112 domestic, and 1-719-457-0820 international. The pass
code is 2436709. 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
-----------------------------------------------
2006 2005 2006 2005
----------------------- -----------------------
Net Sales $2,015,213 $1,803,064 $5,209,673 $4,802,538
Royalty Income 18,576 19,022 56,677 53,840
----------------------- -----------------------
Total Revenues 2,033,789 1,822,086 5,266,350 4,856,378
----------------------- -----------------------
Costs and Operating
Expenses
Cost of goods sold 1,173,149 1,055,613 3,049,549 2,812,989
Marketing,
administrative and
general expenses 553,871 478,471 1,545,878 1,415,097
----------------------- -----------------------
1,727,020 1,534,084 4,595,427 4,228,086
----------------------- -----------------------
Operating Income 306,769 288,002 670,923 628,292
Other Income (Expense)
Interest income 1,439 1,402 4,149 6,459
Interest expense (15,842) (19,357) (42,394) (56,521)
Miscellaneous, net 1,272 819 2,070 801
----------------------- -----------------------
(13,131) (17,136) (36,175) (49,261)
----------------------- -----------------------
Income before Income
Taxes and Cumulative
Effect of a Change in
Accounting Policy 293,638 270,866 634,748 579,031
Income Taxes 95,931 91,236 209,824 187,966
----------------------- -----------------------
Income before
Cumulative Effect of a
Change in Accounting
Policy 197,707 179,630 424,924 391,065
Cumulative Effect of a
Change in Accounting
Policy - - - (11,833)
----------------------- -----------------------
Net Income $ 197,707 $ 179,630 $ 424,924 $ 379,232
======================= =======================
Earnings Per Common
Share - Basic
Income before
cumulative effect of a
change in accounting
policy $ 1.78 $ 1.61 $ 3.85 $ 3.51
Cumulative effect of a
change in accounting
policy - - - (0.11)
Net income 1.78 1.61 3.85 3.40
Earnings Per Common
Share - Diluted
Income before
cumulative effect of
a change in
accounting policy 1.75 1.57 3.77 3.43
Cumulative effect of a
change in accounting
policy - - - (0.10)
Net income 1.75 1.57 3.77 3.32
Weighted Average Shares
Outstanding
Basic 110,802 111,114 110,179 111,043
Diluted 113,062 114,146 112,649 114,139
Cash Dividends Per
Common Share $ 0.55 $ 0.27 $ 1.39 $ 0.81
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 third quarter ends on the Saturday closest to September 30.
For presentation purposes herein, all references to periods ended
September 2006, December 2005 and September 2005 relate to the
fiscal periods ended as of September 30, 2006, December 31, 2005 and
October 1, 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)
September December September
2006 2005 2005
----------- ----------- -----------
ASSETS
Current Assets
Cash and equivalents $ 154,196 $ 296,557 $ 215,549
Accounts receivable, net 1,191,303 764,184 950,649
Inventories 1,196,154 1,081,080 1,170,098
Other current assets 223,814 223,555 199,464
----------- ----------- -----------
Total current assets 2,765,467 2,365,376 2,535,760
Property, Plant and Equipment 1,601,144 1,551,411 1,535,247
Less accumulated depreciation 993,943 987,356 978,079
----------- ----------- -----------
607,201 564,055 557,168
Intangible Assets 761,895 744,313 749,997
Goodwill 1,133,790 1,097,037 1,095,146
Other Assets 408,104 400,290 418,520
----------- ----------- -----------
$5,676,457 $5,171,071 $5,356,591
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities
Short-term borrowings $ 302,641 $ 138,956 $ 181,017
Current portion of long-term debt 35,670 33,956 333,665
Accounts payable 395,891 451,900 356,438
Accrued liabilities 511,579 527,331 577,750
----------- ----------- -----------
Total current liabilities 1,245,781 1,152,143 1,448,870
Long-term Debt 665,475 647,728 527,511
Other Liabilities 642,075 539,661 580,722
Commitments and Contingencies
Redeemable Preferred Stock - 23,326 24,083
Common Stockholders' Equity
Common Stock 111,208 110,108 110,887
Additional paid-in capital 1,407,986 1,277,486 1,261,506
Accumulated other comprehensive
income (loss) (155,956) (164,802) (140,607)
Retained earnings 1,759,888 1,585,421 1,543,619
----------- ----------- -----------
Total common stockholders'
equity 3,123,126 2,808,213 2,775,405
----------- ----------- -----------
$5,676,457 $5,171,071 $5,356,591
=========== =========== ===========
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September
---------------------
2006 2005
---------- ----------
Operating Activities
Net income $ 424,924 $ 379,232
Adjustments to reconcile net income
to cash provided by operating activities:
Cumulative effect of a change in accounting
policy - 11,833
Depreciation 72,190 72,348
Amortization of intangible assets 13,130 12,111
Other amortization 16,352 11,838
Stock-based compensation 39,209 35,794
Pension funding in excess of expense (42,901) (24,536)
Other, net 1,700 (6,692)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (408,290) (199,095)
Inventories (95,205) (179,913)
Accounts payable (66,126) (16,094)
Accrued liabilities and other 71,959 44,817
---------- ----------
Cash provided by operating activities 26,942 141,643
Investing Activities
Capital expenditures (79,552) (75,864)
Business acquisitions, net of cash acquired (40,378) (212,286)
Software purchases (8,609) (13,008)
Sale of VF Playwear business 4,860 6,667
Other, net 10,001 18,528
---------- ----------
Cash used by investing activities (113,678) (275,963)
Financing Activities
Increase in short-term borrowings 154,802 136,464
Payments on long-term debt (34,519) (101,189)
Purchase of Common Stock (118,582) (175,136)
Cash dividends paid (154,775) (91,757)
Proceeds from issuance of Common Stock 79,699 92,751
Tax benefits of stock option exercises 12,063 16,433
Other, net - (181)
---------- ----------
Cash used by financing activities (61,312) (122,615)
Effect of Foreign Currency Rate Changes on Cash 5,687 (13,023)
---------- ----------
Net Change in Cash and Equivalents (142,361) (269,958)
Cash and Equivalents -- Beginning of Year 296,557 485,507
---------- ----------
Cash and Equivalents -- End of Period $ 154,196 $ 215,549
========== ==========
VF CORPORATION
Supplemental Financial Information
Business Segment Information
(In thousands)
Three Months Ended Nine Months Ended
September September
-----------------------------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Coalition revenues
Jeanswear $ 738,171 $ 694,746 $2,080,161 $2,010,222
Outdoor 658,987 525,171 1,415,679 1,110,986
Intimate Apparel 223,691 213,768 649,317 664,662
Imagewear 215,743 203,045 598,204 571,158
Sportswear 183,995 173,934 488,226 467,902
Other 13,202 11,422 34,763 31,448
----------- ----------- ----------- -----------
Total coalition
revenues $2,033,789 $1,822,086 $5,266,350 $4,856,378
=========== =========== =========== ===========
Coalition profit
Jeanswear $ 117,766 $ 121,893 $ 329,639 $ 330,399
Outdoor 139,606 111,243 232,553 184,680
Intimate Apparel 18,512 21,052 49,217 56,420
Imagewear 33,733 36,808 92,892 90,535
Sportswear 24,919 28,788 63,257 73,779
Other 405 (1,518) (522) (2,446)
----------- ----------- ----------- -----------
Total coalition profit 334,941 318,266 767,036 733,367
Corporate and other
expenses (26,900) (29,445) (94,043) (104,274)
Interest, net (14,403) (17,955) (38,245) (50,062)
----------- ----------- ----------- -----------
Income before income
taxes and cumulative
effect of a change in
accounting policy $ 293,638 $ 270,866 $ 634,748 $ 579,031
=========== =========== =========== ===========
CONTACT: VF Services, Inc.
Cindy Knoebel, 212-841-7141 or 336-424-6189
CFA VP, Financial & Corporate Communications