(VF LOGO)
Contact: Cindy Knoebel
VP, Financial & Corporate
Communications
VF Services, Inc.
(646) 472-2817/(336) 424-6189
VF ANNOUNCES SECOND QUARTER RESULTS AND DECLARES DIVIDEND
VF's second quarter conference call will be held at 2:00 p.m. ET on July 22nd
and can be accessed via the Company's web site www.vfc.com or
www.companyboardroom.com. A replay will be available shortly after the end of
the conference call through August 5th by dialing 800-642-1687,
passcode:1670209.
GREENSBORO, NORTH CAROLINA - JULY 22, 2003 - VF CORPORATION (NYSE: VFC), the
world's largest apparel company, today announced results for the second quarter
and first half of 2003.
Second quarter earnings from continuing operations were $.68 per share, compared
with $.79 per share in the second quarter of 2002. Prior year earnings per share
included a net benefit of $.03 per share from unusual items (see page 7). Income
from continuing operations was $74.9 million versus $88.5 million in the 2002
period. Excluding unusual items in the second quarter of 2002, income from
continuing operations declined 13% in 2003 from $86.6 million in the prior year
period. All per share amounts are presented on a diluted basis. Sales in the
quarter fell 2% to $1,134.7 million versus $1,160.3 million in the prior year's
quarter.
For the first six months of 2003, earnings from continuing operations rose 4% to
$1.51 per share from $1.45 per share. Prior year earnings per share included a
net benefit of $.02 per share from unusual items. Sales rose slightly to
$2,384.8 million compared with the $2,372.5 million reported in the 2002 period.
Income from continuing operations was $167.0 million versus $165.5 million
reported a year ago.
Foreign currency translation favorably impacted both sales and earnings in the
quarter. Excluding foreign currency effects, sales were down 5% from the prior
year period. The benefit to earnings in the quarter was $.02 per share.
Commented Mackey J. McDonald, chairman and chief executive officer, "Our sales
and earnings performance in the quarter was better than we had anticipated, due
in part to earlier than planned load-ins of new programs. We remain confident in
the strength of our brands and businesses, despite a retail environment that
continues to be less than robust."
"We are very excited about our recently announced plans to acquire Nautica,"
continued Mr. McDonald. On July 7, the Company announced that it had signed a
definitive merger agreement to acquire Nautica Enterprises, Inc. for a total
consideration of approximately $585.6 million. "The transaction will add a solid
lifestyle brand to our growing portfolio, give us new capabilities in
Page 2 of 7
July 22, 2003
sportswear and boost our presence in the jeanswear category. We also see
opportunities to improve profitability and to capture additional growth."
BUSINESS REVIEW
International jeans sales rose 5% reflecting the positive effects of foreign
currency translation. Sales in the Company's Outdoor coalition, which includes
The North Face, JanSport and Eastpak brands, rose 12% in the quarter, driven by
double-digit sales increases of The North Face brand products. Domestic jeans
sales and global intimate apparel sales declined by 4% and 3%, respectively,
reflecting continued efforts by retailers to reduce inventories and a number of
store closings by customers. Imagewear sales declined 8%, reflecting continued
weakness in the manufacturing and transportation sectors and reduced
discretionary spending by corporations. Our licensed sports business, however,
continued its positive momentum. The Company is continuing to review
alternatives for its Playwear business.
Gross margins were 37.1% compared with 37.5% reported in the second quarter of
2002; excluding the impact of unusual items in 2002, gross margins in the prior
year period were 37.2%. As anticipated, operating expenses as a percent of sales
increased to 26.5% in the quarter versus 24.9% in the prior year period.
Accordingly, operating margins declined to 11.1% in the quarter from 13.1% in
the same quarter a year ago; excluding the impact of unusual items, operating
margins in the 2002 period were 12.8%.
Inventories rose in the quarter as anticipated. The Company continues to expect
that inventories at year-end will be flat to up slightly over prior year levels.
The Company's balance sheet remains exceptionally strong. Debt as a percent of
total capital was 27.5%; net of cash, the ratio was 20.8%.
OUTLOOK
With regard to the full year, we expect that earnings per share could increase
by 3-5% from the $3.24 per share from continuing operations reported in 2002.
Compared with 2002 earnings per share of $3.38 from continuing operations (which
excludes net restructuring charges of $.14 per share), earnings per share in
2003 are expected to be about flat. Sales are expected to decline slightly.
Gross margins could rise by approximately 100 basis points from the 36.0% level
reported in 2002, with operating margins flat with those reported in the prior
year. Cash flow from operations is expected to range between $350-$400 million.
In terms of the third quarter, we expect sales to be down approximately 2%.
Earnings per share in the third quarter could be down 15-20%, primarily due to
1) expenses related to the Company's proactive stance toward managing
inventories, capacity and costs and 2) the estimated loss that the Company may
incur if the Playwear business is sold. These expenses could total approximately
$25 million, or $.15 per share.
"This year may fall short of our original expectations, but we are pleased that
we will maintain our earnings at prior year levels, demonstrating our ability to
successfully manage our way through these extraordinary times, " said Mr.
McDonald.
The Company is on plan to complete its merger agreement to acquire Nautica
Enterprises, Inc. early in the fourth quarter of 2003. The Company expects that
even with additional borrowings its
Page 3 of 7
July 22, 2003
debt to total capital ratio at year-end will range between 30-35%, remaining
well below the Company's long-term target of 40%.
DIVIDEND DECLARED
The Board of Directors declared a regular quarterly cash dividend of $.25 per
share, payable on September 19, 2003 to shareholders of record as of the close
of business on September 9, 2003.
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
necessarily limited to, the overall level of consumer spending for apparel;
changes in trends in the segments of the market in which the Company competes;
competitive conditions in and financial strength 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 integrate new
acquisitions successfully; the Company's ability to achieve anticipated cost
savings from the recent restructuring initiatives; additional 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 external
economic and political 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 the world's largest apparel company and a leader in jeanswear,
intimate apparel, playwear, workwear and daypacks. Its principal brands include
Lee(R), Wrangler(R), Riders(R), Rustler(R), Vanity Fair(R), Vassarette(R),
Bestform(R), Lily of France(R), Lee Sport(R), Healthtex(R), JanSport(R),
Eastpak(R), Red Kap(R) and The North Face(R).
VF Corporation's press releases, annual report and other information can be
accessed through the Company's home page, http://www.vfc.com.
Page 4 of 7
July 22, 2003
VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
JULY 5 JUNE 29 JULY 5 JUNE 29
2003 2002 * 2003 2002 *
----------- ----------- ----------- -----------
NET SALES $ 1,134,742 $ 1,160,256 $ 2,384,797 $ 2,372,518
COSTS AND OPERATING EXPENSES
Cost of products sold 714,011 725,076 1,495,303 1,509,444
Marketing, administrative
and general expenses 301,157 288,578 623,491 583,695
Other operating income (6,039) (5,324) (12,369) (9,821)
----------- ----------- ----------- -----------
1,009,129 1,008,330 2,106,425 2,083,318
----------- ----------- ----------- -----------
OPERATING INCOME 125,613 151,926 278,372 289,200
OTHER INCOME (EXPENSE)
Interest, net (13,090) (14,727) (25,158) (32,114)
Miscellaneous, net 2,207 392 2,938 1,526
----------- ----------- ----------- -----------
(10,883) (14,335) (22,220) (30,588)
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 114,730 137,591 256,152 258,612
INCOME TAXES 39,785 49,111 89,141 93,085
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 74,945 88,480 167,011 165,527
DISCONTINUED OPERATIONS -- 386 -- 2,335
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING POLICY FOR GOODWILL -- -- -- (527,254)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 74,945 $ 88,866 $ 167,011 $ (359,392)
=========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE - BASIC
Income from continuing operations $ 0.69 $ 0.79 $ 1.54 $ 1.45
Discontinued operations -- -- -- 0.02
Cumulative effect of change in accounting policy -- -- -- (4.80)
Net income (loss) 0.69 0.79 1.54 (3.33)
EARNINGS (LOSS) PER COMMON SHARE - DILUTED
Income from continuing operations $ 0.68 $ 0.79 $ 1.51 $ 1.45
Discontinued operations -- -- -- 0.02
Cumulative effect of change in accounting policy -- -- -- (4.66)
Net income (loss) 0.68 0.79 1.51 (3.18)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 107,412 109,626 107,884 109,793
Diluted 110,088 112,982 110,500 113,185
CASH DIVIDENDS PER COMMON SHARE $ 0.25 $ 0.24 $ 0.50 $ 0.48
* Reclassified to present the Private Label knitwear and the Jantzen swimwear
businesses as discontinued operations.
...Continued
Page 5 of 7
July 22, 2003
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JULY 5 JANUARY 4 JUNE 29
2003 2003 2002 *
----------- ----------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 204,977 $ 496,367 $ 272,199
Accounts receivable, net 695,499 587,859 640,857
Inventories 1,030,931 830,518 892,620
Other current assets 143,839 154,513 154,073
Current assets of discontinued operations 2,809 5,283 20,464
----------- ----------- -----------
Total current assets 2,078,055 2,074,540 1,980,213
PROPERTY, PLANT AND EQUIPMENT 1,561,367 1,539,269 1,556,865
Less accumulated depreciation 1,003,460 972,723 964,100
----------- ----------- -----------
557,907 566,546 592,765
GOODWILL 481,174 473,355 471,534
OTHER ASSETS 399,973 386,204 416,360
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS -- 2,506 11,461
----------- ----------- -----------
$ 3,517,109 $ 3,503,151 $ 3,472,333
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 60,540 $ 60,918 $ 65,302
Current portion of long-term debt 639 778 640
Accounts payable 262,930 298,456 264,924
Accrued liabilities 435,595 502,057 478,882
Current liabilities of discontinued operations 6,930 12,635 26,869
----------- ----------- -----------
Total current liabilities 766,634 874,844 836,617
LONG-TERM DEBT 602,155 602,287 702,777
OTHER LIABILITIES 366,744 331,270 246,400
REDEEMABLE PREFERRED STOCK 32,909 36,902 41,700
COMMON SHAREHOLDERS' EQUITY
Common Stock 107,162 108,525 109,181
Additional paid-in capital 933,395 930,132 924,159
Accumulated other comprehensive income (loss) (181,537) (214,141) (108,871)
Retained earnings 889,647 833,332 720,370
----------- ----------- -----------
Total common shareholders' equity 1,748,667 1,657,848 1,644,839
----------- ----------- -----------
$ 3,517,109 $ 3,503,151 $ 3,472,333
=========== =========== ===========
* Reclassified to present the Private Label knitwear and the Jantzen swimwear
businesses as discontinued operations.
...Continued
Page 6 of 7
July 22, 2003
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
-------------------------
JULY 5 JUNE 29
2003 2002 *
--------- ---------
OPERATIONS
Net income (loss) $ 167,011 $(359,392)
Adjustments to reconcile net income (loss)
to cash provided (used) by operating activities
of continuing operations:
Discontinued operations -- (2,335)
Cumulative effect of change in accounting policy -- 527,254
Restructuring costs -- 4,011
Depreciation 51,698 52,461
Other, net 37,413 (2,277)
Changes in current assets and liabilities:
Accounts receivable (98,778) (55,204)
Inventories (182,189) (24,899)
Accounts payable (41,745) 23,452
Other, net (65,133) 61,338
--------- ---------
Cash provided (used) by operating activities of
continuing operations (131,723) 224,409
INVESTMENTS
Capital expenditures (45,400) (22,026)
Business acquisitions (3,100) --
Other, net (7,710) (4,301)
--------- ---------
Cash used by investing activities of
continuing operations (56,210) (26,327)
FINANCING
Decrease in short-term borrowings (2,957) (11,826)
Payment of long-term debt (222) (200,956)
Purchase of Common Stock (61,400) (84,850)
Cash dividends paid (55,165) (54,190)
Proceeds from issuance of Common Stock 3,840 34,530
Other, net (338) (5,623)
--------- ---------
Cash used by financing activities of
continuing operations (116,242) (322,915)
NET CASH PROVIDED (USED) BY DISCONTINUED OPERATIONS (1,879) 61,721
EFFECT OF FOREIGN CURRENCY RATE CHANGES ON CASH 14,664 3,262
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS (291,390) (59,850)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 496,367 332,049
--------- ---------
CASH AND EQUIVALENTS - END OF PERIOD $ 204,977 $ 272,199
========= =========
* Reclassified to present the Private Label knitwear and the Jantzen swimwear
businesses as discontinued operations.
...Continued
Page 7 of 7
July 22, 2003
VF CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SECOND QUARTER 2002 SIX MONTHS 2002 FULL YEAR 2002
-------------------------- -------------------------- --------------------------
AS AS AS
REPORTED PRO FORMA * REPORTED PRO FORMA * REPORTED PRO FORMA *
----------- ----------- ----------- ----------- ----------- -----------
NET SALES $ 1,160,256 $ 1,160,256 $ 2,372,518 $ 2,372,518 $ 5,083,523 $ 5,083,523
----------- ----------- ----------- ----------- ----------- -----------
COSTS AND OPERATING EXPENSES
Cost of products sold 725,076 728,185 1,509,444 1,508,415 3,254,008 3,236,160
Marketing, administrative and
general expenses 288,578 288,634 583,695 582,510 1,229,902 1,221,408
Other operating (income)
expense, net (5,324) (5,324) (9,821) (9,821) (22,311) (22,311)
----------- ----------- ----------- ----------- ----------- -----------
1,008,330 1,011,495 2,083,318 2,081,104 4,461,599 4,435,257
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME 151,926 148,761 289,200 291,414 621,924 648,266
OTHER INCOME (EXPENSE)
Interest, net (14,727) (14,727) (32,114) (32,114) (63,928) (63,928)
Miscellaneous, net 392 392 1,526 1,526 3,732 3,732
----------- ----------- ----------- ----------- ----------- -----------
(14,335) (14,335) (30,588) (30,588) (60,196) (60,196)
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 137,591 134,426 258,612 260,826 561,728 588,070
INCOME TAXES 49,111 47,865 93,085 93,792 197,300 207,194
----------- ----------- ----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS $ 88,480 $ 86,561 $ 165,527 $ 167,034 $ 364,428 $ 380,876
=========== =========== =========== =========== =========== ===========
EARNINGS PER COMMON SHARE
FROM CONTINUING OPERATIONS
Basic $ 0.79 $ 0.77 $ 1.45 $ 1.47 $ 3.26 $ 3.41
Diluted 0.79 0.76 1.45 1.47 3.24 3.38
* The pro forma Consolidated Statements of Income exclude the effects of
the 2001 / 2002 Strategic Repositioning Program, as follows:
Costs and Operating Expenses
Costs of products sold $ (3,109) $ 1,029 $ 17,848
Marketing, administrative and general expenses (56) 1,185 8,494
----------- ----------- -----------
$ (3,165) $ 2,214 $ 26,342
=========== =========== ===========