(VF LOGO)
October 23, 2003
FOR IMMEDIATE RELEASE Contact: Cindy Knoebel
VP, Financial & Corporate
Communications
VF Services, Inc.
(646) 472-2817/(336) 424-6189
VF ANNOUNCES THIRD QUARTER RESULTS AND INCREASES DIVIDEND
VF's third quarter conference call will be held at 2:00 p.m. ET today and can be
accessed via the Company's web site www.vfc.com or www.companyboardroom.com. A
replay will be available through October 30 by dialing 800-642-1687, passcode:
3208694.
GREENSBORO, NORTH CAROLINA - OCTOBER 23, 2003 - VF CORPORATION (NYSE: VFC), the
world's largest apparel company, today announced better than anticipated sales
and earnings for the third quarter of 2003, reflecting stronger than expected
sales in the Company's core businesses and a higher than expected profit
contribution from Nautica Enterprises, Inc. The Company also increased its
guidance for full year earnings and raised its quarterly dividend.
Third quarter earnings from continuing operations were $1.14 per share, compared
with $1.15 per share in 2002. Income from continuing operations was $125.3
million versus $128.6 million in the 2002 period. All per share amounts are
presented on a diluted basis. Sales in the quarter rose 3% to $1,435.4 million
versus $1,400.4 million in the prior year's quarter.
The addition of Nautica contributed approximately $72 million in sales and $.05
per share to third quarter results.
As anticipated, 2003 third quarter earnings reflect expenses related to the
Company's actions to manage inventories and capacity. However, these expenses
were less than anticipated. In addition, the Company had expected third quarter
earnings to reflect the estimated loss that the Company would have incurred upon
the sale of its Playwear business. The Company did not reach an agreement on the
sale of its Playwear operation and is currently evaluating all alternatives for
this business. Previously, the Company had anticipated expenses related to these
actions would approximate $25 million, or $.15 per share. The actual expenses in
the quarter were $12 million, or $.07 per share.
Foreign currency translation favorably impacted both sales and earnings in the
quarter. Excluding foreign currency effects, sales were about flat. The benefit
to earnings in the quarter was $.04 per share.
For the first nine months of 2003, earnings from continuing operations rose to
$2.65 per share from $2.60 in the same period in 2002. Current year sales rose
slightly to $3,820.2 million compared with the $3,772.9 million reported in the
2002 period. Income from continuing operations was $292.3 million versus $294.1
million reported a year ago.
Page 2 of 6
October 23, 2003
Commented Mackey J. McDonald, chairman and chief executive officer, "We were
pleased to see a pickup in sales toward the end of the quarter, in line with
generally stronger sales at retail, particularly in September. We also are
pleased with the contribution made by Nautica in the quarter and are looking
forward to building Nautica as the foundation for our new Sportswear coalition."
BUSINESS REVIEW
Sales in the Company's Outdoor coalition, which includes The North Face(R),
JanSport(R) and Eastpak(R) brands, rose 15% in the quarter, or 11% adjusted for
currency effects, driven by double-digit sales increases of The North Face(R)
brand globally and strong growth in our international businesses across each
brand. International jeans sales were about flat with prior year levels, and
were down 9% excluding currency effects. Domestic jeans sales and Imagewear
sales each declined 6%, while global intimate apparel sales were down 3%.
Mr. McDonald noted sales of the Company's mass market jeans brands were better
than anticipated in the quarter, with the impact from the entry of a new
competitor in discount stores less than expected. However, the Company has seen
a higher than expected impact from the number of store closings by a large
customer. The Company is very pleased with the strengthening of its mass jeans
brands through the back to school period, and noted particular strength in its
Wrangler(R) Five Star Premium Denim and fashion programs.
Gross and operating margins declined in the quarter, due to the impact of the
actions related to capacity alignment and inventory management.
VF's balance sheet remains strong, and the Company made excellent progress
during the quarter toward reaching its year-end inventory goal. Excluding
Nautica, inventories were up 7% over prior year levels, or 5% excluding currency
effects. The Company continues to expect that, excluding Nautica, inventories at
year-end will be slightly above the prior year level.
Debt as a percent of total capital was 38% at the end of the quarter. On October
14, 2003 the Company refinanced part of the debt incurred to acquire Nautica by
issuing $300 million principal amount of 6.00% unsecured notes due in 2033. The
net cash proceeds of $292.4 million were used to repay commercial paper
borrowings related to the Nautica acquisition. During the fourth quarter, the
Company expects to repay the remaining amount of commercial paper associated
with the Nautica acquisition from cash flow provided by operations. Accordingly,
the ratio of debt to total capital is expected to range between 30% and 35% at
the end of 2003.
"Our balance sheet remains in great shape, despite having made such a
significant acquisition, providing us with the flexibility to invest in
additional new growth opportunities," Mr. McDonald said.
OUTLOOK
Encouraged by our most recent results, we are increasing our full year earnings
per share guidance. We now expect that earnings could reach $3.50 to $3.55 per
share, an increase of 8% to 10% from the $3.24 per share from continuing
operations reported in 2002. This excludes any impact from exiting the Playwear
business, which could result in a loss somewhat higher than the $7 million
previously indicated. Sales are expected to increase approximately 3%. The
acquisition
Page 3 of 6
October 23, 2003
of Nautica is expected to contribute approximately $240 million in sales and
$.08 to $.10 to earnings per share in 2003. The Company has indicated that
Nautica could add at least $.10 to earnings per share in 2004.
We continue to anticipate that gross margins could rise by approximately 100
basis points from the 36.0% level reported in 2002 and that operating margins
will be about flat. Cash flow from operations is expected to approximate $350
million.
The Company's expectations regarding sales and earnings in the fourth quarter
remain intact, excluding any impact from the possible exit of Playwear. Sales
could increase approximately 8%, while earnings are expected to range between
$.85 and $.90 per share.
The company also announced the retirement of Dr. Robert Buzzell, 70, from the
Board of Directors after 20 years of service.
DIVIDEND INCREASE
The Board of Directors declared an increase in the quarterly cash dividend rate
of $.01 to $.26 per share. This marks the 13th consecutive year that the Company
has increased its quarterly dividend rate. "We're proud that we can offer our
shareholders a yield that outpaces not only our competitors, but the overall
market as well," said Mr. McDonald. The cash dividend is payable on December 19,
2003 to shareholders of record as of the close of business on December 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), Nautica(R), Earl Jean(R), John Varvatos(R),
Healthtex(R), JanSport(R), Eastpak(R), The North Face(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.
Page 4 of 6
October 23, 2003
VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
OCTOBER 4 SEPTEMBER 28 OCTOBER 4 SEPTEMBER 28
2003 2002 2003 2002
---- ---- ---- ----
NET SALES $ 1,435,403 $ 1,400,389 $ 3,820,200 $ 3,772,907
COSTS AND OPERATING EXPENSES
Cost of products sold 898,325 871,117 2,393,628 2,380,561
Marketing, administrative and general expenses 341,861 321,027 965,352 904,722
Other operating income (9,359) (8,070) (21,728) (17,891)
----------- ----------- ----------- -----------
1,230,827 1,184,074 3,337,252 3,267,392
----------- ----------- ----------- -----------
OPERATING INCOME 204,576 216,315 482,948 505,515
OTHER INCOME (EXPENSE)
Interest, net (13,632) (19,980) (38,790) (52,094)
Miscellaneous, net (154) 696 2,784 2,222
----------- ----------- ----------- -----------
(13,786) (19,284) (36,006) (49,872)
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 190,790 197,031 446,942 455,643
INCOME TAXES 65,501 68,467 154,642 161,552
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 125,289 128,564 292,300 294,091
DISCONTINUED OPERATIONS -- (315) -- 2,020
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING POLICY FOR GOODWILL -- -- -- (527,254)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 125,289 $ 128,249 $ 292,300 $ (231,143)
=========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE - BASIC
Income from continuing operations $ 1.16 $ 1.16 $ 2.70 $ 2.61
Discontinued operations -- -- -- 0.02
Cumulative effect of change in accounting policy -- -- -- (4.82)
Net income (loss) 1.16 1.16 2.70 (2.19)
EARNINGS (LOSS) PER COMMON SHARE - DILUTED
Income from continuing operations $ 1.14 $ 1.15 $ 2.65 $ 2.60
Discontinued operations -- -- -- 0.02
Cumulative effect of change in accounting policy -- -- -- (4.68)
Net income (loss) 1.14 1.15 2.65 (2.05)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 107,213 108,767 107,660 109,450
Diluted 109,775 111,849 110,259 112,737
CASH DIVIDENDS PER COMMON SHARE $ 0.25 $ 0.24 $ 0.75 $ 0.72
Continued
Page 5 of 6
October 23, 2003
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
OCTOBER 4 JANUARY 4 SEPTEMBER 28
2003 2003 2002
---- ---- ----
ASSETS
CURRENT ASSETS
Cash and equivalents $ 217,491 $ 496,367 $ 254,977
Accounts receivable, net 840,159 587,859 744,918
Inventories 1,062,585 830,518 878,636
Other current assets 179,811 154,513 158,389
Current assets of discontinued operations 2,257 5,283 7,343
----------- ----------- -----------
Total current assets 2,302,303 2,074,540 2,044,263
PROPERTY, PLANT AND EQUIPMENT 1,581,200 1,539,269 1,546,326
Less accumulated depreciation 980,792 972,723 976,561
----------- ----------- -----------
600,408 566,546 569,765
INTANGIBLE ASSETS 383,366 -- --
GOODWILL 677,657 473,355 474,500
OTHER ASSETS 317,468 386,204 406,152
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS -- 2,506 4,178
----------- ----------- -----------
$ 4,281,202 $ 3,503,151 $ 3,498,858
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 224,812 $ 60,918 $ 56,768
Current portion of long-term debt 2,117 778 562
Accounts payable 246,337 298,456 270,950
Accrued liabilities 559,954 502,057 576,350
Current liabilities of discontinued operations 5,806 12,635 16,046
----------- ----------- -----------
Total current liabilities 1,039,026 874,844 920,676
LONG-TERM DEBT 910,849 602,287 602,550
OTHER LIABILITIES 446,918 331,270 232,588
REDEEMABLE PREFERRED STOCK 31,225 36,902 40,491
COMMON SHAREHOLDERS' EQUITY
Common Stock 107,401 108,525 108,252
Additional paid-in capital 938,260 930,132 926,780
Accumulated other comprehensive income (loss) (181,821) (214,141) (114,280)
Retained earnings 989,344 833,332 781,801
----------- ----------- -----------
Total common shareholders' equity 1,853,184 1,657,848 1,702,553
----------- ----------- -----------
$ 4,281,202 $ 3,503,151 $ 3,498,858
=========== =========== ===========
Continued
Page 6 of 6
October 23, 2003
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED
-------------------------
OCTOBER 4 SEPTEMBER 28
2003 2002
---- ----
OPERATIONS
Net income (loss) $ 292,300 $(231,143)
Adjustments to reconcile net income (loss)
to cash provided by operating activities
of continuing operations:
Discontinued operations -- (2,020)
Cumulative effect of change in accounting policy -- 527,254
Restructuring costs -- 6,227
Depreciation 77,083 80,586
Amortization of intangible assets 1,157 --
Other, net 70,488 (2,918)
Changes in current assets and liabilities:
Accounts receivable (159,863) (155,847)
Inventories (80,291) (12,142)
Accounts payable (124,435) 29,735
Other, net (35,492) 147,790
--------- ---------
Cash provided by operating activities of
continuing operations 40,947 387,522
INVESTMENTS
Capital expenditures (64,023) (33,774)
Business acquisitions, net of cash acquired (578,489) (1,342)
Other, net (5,412) (3,463)
--------- ---------
Cash used by investing activities of
continuing operations (647,924) (38,579)
FINANCING
Increase (decrease) in short-term borrowings 452,360 (19,241)
Payment of long-term debt (427) (301,326)
Purchase of Common Stock (61,400) (124,623)
Cash dividends paid (82,595) (80,961)
Proceeds from issuance of Common Stock 8,562 36,747
Other, net (338) (8,021)
--------- ---------
Cash provided (used) by financing activities of
continuing operations 316,162 (497,425)
NET CASH PROVIDED (USED) BY DISCONTINUED OPERATIONS (2,705) 66,255
EFFECT OF FOREIGN CURRENCY RATE CHANGES ON CASH 14,644 5,155
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS (278,876) (77,072)
CASH AND EQUIVALENTS - BEGINNING OF YEAR 496,367 332,049
--------- ---------
CASH AND EQUIVALENTS - END OF PERIOD $ 217,491 $ 254,977
========= =========
#####