(VF LOGO)
Contact: Cindy Knoebel, CFA
VP, Financial & Corporate
Communications
VF Services, Inc.
(336) 424-6189/(212) 841-7141
VF ANNOUNCES RECORD EARNINGS PER SHARE FOR 2003
AND DECLARES DIVIDEND
- FOURTH QUARTER SALES UP 6%; EPS UP 52%
- 2003 GROSS MARGINS RISE MORE THAN 1 PERCENTAGE POINT TO 37.4%
- NAUTICA ADDS $.16 PER SHARE IN 2003
- CASH FLOW FROM OPERATIONS REACHES $544 MILLION
- EXPECTING RECORD EPS IN 2004 ON HIGHER SALES
VF's fourth quarter conference call will be held at 4:30 p.m. ET today and can
be accessed via www.vfc.com. A replay will be available through February 18 by
dialing 800-405-2236, passcode: 566256.
GREENSBORO, NORTH CAROLINA - FEBRUARY 11, 2004 - VF CORPORATION (NYSE: VFC), the
world's largest apparel company, today announced record results for the fourth
quarter and record earnings for the full year 2003. All per share amounts are
presented on a diluted basis.
Fourth quarter earnings from continuing operations rose 52% to $.96 per share,
compared with $.63 per share in 2002. Income from continuing operations was
$105.6 million versus $70.3 million in the 2002 period. Sales in the quarter
rose 6% to $1,387.3 million versus $1,310.6 million in the prior year's quarter.
Foreign currency translation benefited sales and earnings per share by $31
million and $.03, respectively, in the quarter.
For the full year 2003, earnings from continuing operations rose to $3.61 per
share, an increase of 11% over the $3.24 per share reported in 2002. Income from
continuing operations was $397.9 million versus $364.4 million reported a year
ago. Sales rose 2% to $5,207.5 million compared with the $5,083.5 million
reported in the 2002 period. Foreign currency translation benefited sales and
earnings per share by $128 million and $.14, respectively.
The addition of Nautica contributed approximately $177 million in sales and $.11
per share to fourth quarter results, and $249 million in sales and $.16 per
share to full year results.
Commented Mackey J. McDonald, chairman and chief executive officer, "The
contributions from our newer businesses, namely, Nautica and The North Face, are
paying off in the form of higher sales and profits for our Company. At the same
time our core businesses continue to enjoy healthy profitability and generate
the strong cash flow we'll be using to fund our future growth."
Mr. McDonald continued, "We expect continued growth in both sales and earnings
in 2004. At the same time, we believe it is time to take a more aggressive
approach to growth. Several months ago we launched an initiative within VF
designed to surface substantial new growth opportunities within our
Page 2 of 7
February 11, 2004
coalitions, across coalitions and into new categories. We are developing
specific plans to unlock the potential of our current brands, focus more heavily
in certain geographic areas, find new ways to partner with our customers and
step up the pace of acquisitions to strengthen our portfolio."
BUSINESS REVIEW
Total sales in 2003 rose 2%, a result of strong performance in our Outdoor
businesses and the acquisition of Nautica. Sales in the Company's Outdoor
coalition, which includes The North Face(R), JanSport(R) and Eastpak(R) brands,
rose to $581 million in 2003 from $508 million in 2002, an increase of 14%.
These results were driven by a sales increase of more than 25% in The North
Face(R) brand globally and strong growth in our international businesses across
each brand. Nautica performed better than we had anticipated. Nautica's
sportswear business performed better than we planned; Nautica's men's jeanswear,
retail and licensing businesses all performed well. The initial response by
customers to our Fall 2004 line has been positive, and we are encouraged by our
progress in addressing product and brand positioning issues.
As anticipated, sales in our core businesses continued to reflect soft retail
sales of apparel. Total jeans sales declined 4% to $2,667 million from $2,788
million. International jeans sales rose 5% from prior year levels due to
favorable currency translations. As anticipated, domestic jeans sales declined
7%, reflecting competitive conditions at retail and a large number of store
closings by a major customer.
Global intimate apparel sales declined slightly, to $830 million in 2003 from
$840 million. Sales in our Imagewear coalition also declined slightly.
Occupational apparel sales declined 8%, while licensed sports apparel sales
climbed 17%.
We are continuing our negotiations for the sale of our Playwear and of
our John Varvatos businesses. We anticipate the disposal of our Playwear
business will impact earnings by approximately $.03 to $.05 per share in 2004.
Gross margins improved by more than 100 basis points in 2003, rising to 37.4%
from 36.0%, while operating margins rose to 12.4% from 12.2%.
Earnings in 2003 also benefited from higher interest income and a lower tax
rate, both resulting from favorable tax settlements received in the fourth
quarter.
VF's balance sheet, liquidity and cash flow remain very strong, particularly
given the acquisition of Nautica in the third quarter. Our focus on inventory
management has paid off: inventories at year-end were up 12% over prior year
levels, with all of the increase resulting from the Nautica acquisition and
foreign currency effects. At year-end, cash totaled $515 million. Debt as a
percent of total capital was 33.7% at the end of the year; net of cash, debt was
19.6% of total capital. Cash flow from operations was $544 million, with Nautica
adding approximately $60 million since being acquired.
OUTLOOK
We're looking forward to another record year in earnings in 2004, and are
currently projecting a 5% increase in both earnings and sales.
Sales growth will be driven primarily from the acquisition of Nautica, which is
expected to contribute approximately $550 million to full year sales and at
least $.16 to earnings per share in 2004. Our Outdoor businesses are also
expecting another strong year of double-digit sales growth. Total jeanswear
sales are expected to be about flat with prior year levels, with low-single
digit sales
Page 3 of 7
February 11, 2004
increases expected in both global intimate apparel and imagewear. We also expect
sales will reflect the exit of our Playwear business, which contributed
approximately $141 million to sales in 2003.
Operating margins in 2004 are expected to be up slightly, and reflect continued
improvement in gross margins. We expect higher interest expense in 2004, due to
higher long-term borrowings, and a tax rate of approximately 34.5%. Cash flow
from operations is expected to range between $450 and $500 million.
In terms of the first quarter, we currently expect sales to rise 8-10%.
Reflecting the seasonal nature of Nautica's business and its dilutive impact on
the first quarter, earnings are expected to be about flat with prior year
levels.
DIVIDEND DECLARED
The Board of Directors declared a regular quarterly cash dividend of $.26 per
share, payable on March 19, 2004 to shareholders of record as of the close of
business on March 9, 2004.
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
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 expected sales and
earnings growth from new acquisitions; the Company's ability to complete its
planned divestitures; 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, sportswear, workwear and daypacks. Its 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 website, www.vfc.com.
Page 4 of 7
February 11, 2004
VF CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED
----------------------------- -----------------------------
JANUARY 3 JANUARY 4 JANUARY 3 JANUARY 4
2004 2003 2004 2003
----------- ----------- ----------- -----------
NET SALES $ 1,387,259 $ 1,310,616 $ 5,207,459 $ 5,083,523
COSTS AND OPERATING EXPENSES
Cost of products sold 868,747 873,447 3,262,375 3,254,008
Marketing, administrative
and general expenses 366,462 325,180 1,331,814 1,229,902
Other operating income (9,891) (4,420) (31,619) (22,311)
----------- ----------- ----------- -----------
1,225,318 1,194,207 4,562,570 4,461,599
----------- ----------- ----------- -----------
OPERATING INCOME 161,941 116,409 644,889 621,924
OTHER INCOME (EXPENSE)
Interest income 6,844 2,290 11,456 7,397
Interest expense (17,966) (14,124) (61,368) (71,325)
Miscellaneous, net 745 1,510 3,529 3,732
----------- ----------- ----------- -----------
(10,377) (10,324) (46,383) (60,196)
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 151,564 106,085 598,506 561,728
INCOME TAXES 45,931 35,748 200,573 197,300
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 105,633 70,337 397,933 364,428
DISCONTINUED OPERATIONS -- 6,263 -- 8,283
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING POLICY FOR GOODWILL -- -- -- (527,254)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 105,633 $ 76,600 $ 397,933 $ (154,543)
=========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE - BASIC
Income from continuing operations $ 0.97 $ 0.64 $ 3.67 $ 3.26
Discontinued operations -- 0.06 -- 0.08
Cumulative effect of change in
accounting policy -- -- -- (4.83)
Net income (loss) 0.97 0.70 3.67 (1.49)
EARNINGS (LOSS) PER COMMON SHARE - DILUTED
Income from continuing operations $ 0.96 $ 0.63 $ 3.61 $ 3.24
Discontinued operations -- 0.06 -- 0.07
Cumulative effect of change in
accounting policy -- -- -- (4.69)
Net income (loss) 0.96 0.69 3.61 (1.38)
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 107,845 108,379 107,713 109,167
Diluted 110,572 111,199 110,323 112,336
CASH DIVIDENDS PER COMMON SHARE $ 0.26 $ 0.25 $ 1.01 $ 0.97
...Continued
Page 5 of 7
February 11, 2004
VF CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JANUARY 3 JANUARY 4
2004 2003
----------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 514,785 $ 496,367
Accounts receivable, net 633,863 587,859
Inventories 932,985 830,518
Deferred income taxes 90,955 117,214
Other current assets 33,347 37,299
Current assets of discontinued operations 2,596 5,283
----------- -----------
Total current assets 2,208,531 2,074,540
PROPERTY, PLANT AND EQUIPMENT 1,559,846 1,539,269
Less accumulated depreciation 968,166 972,723
----------- -----------
591,680 566,546
INTANGIBLE ASSETS 318,634 --
GOODWILL 700,972 473,355
DEFERRED INCOME TAXES 117,436 141,375
OTHER ASSETS 308,299 244,829
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS -- 2,506
----------- -----------
$ 4,245,552 $ 3,503,151
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 33,948 $ 60,918
Current portion of long-term debt 1,144 778
Accounts payable 315,219 298,456
Accrued liabilities 515,630 502,057
Current liabilities of discontinued operations 5,916 12,635
----------- -----------
Total current liabilities 871,857 874,844
LONG-TERM DEBT 956,383 602,287
OTHER LIABILITIES 436,018 331,270
REDEEMABLE PREFERRED STOCK 29,987 36,902
COMMON SHAREHOLDERS' EQUITY
Common Stock 108,170 108,525
Additional paid-in capital 964,990 930,132
Accumulated other comprehensive income (loss) (189,455) (214,141)
Retained earnings 1,067,602 833,332
----------- -----------
Total common shareholders' equity 1,951,307 1,657,848
----------- -----------
$ 4,245,552 $ 3,503,151
=========== ===========
...Continued
Page 6 of 7
February 11, 2004
VF CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED
-------------------------
JANUARY 3 JANUARY 4
2004 2003
--------- ---------
OPERATIONS
Net income (loss) $ 397,933 $(154,543)
Adjustments to reconcile net income (loss)
to cash provided by operating activities
of continuing operations:
Discontinued operations -- (8,283)
Cumulative effect of change in
accounting policy -- 527,254
Restructuring costs -- 26,342
Depreciation 104,463 107,398
Amortization 13,913 16,523
Provision for doubtful accounts 11,197 18,490
Pension expense (21,785) 3,770
Deferred income taxes 30,961 70,849
Other, net 13,889 (12,225)
Changes in current assets and liabilities:
Accounts receivable 47,502 (24,077)
Inventories 61,596 43,253
Other current assets 22,865 (135)
Accounts payable (60,636) 54,123
Accrued compensation (42,823) 28,697
Accrued restructuring (25,392) (44,798)
Other accrued liabilities (9,979) (7,054)
--------- ---------
Cash provided by operating activities of
continuing operations 543,704 645,584
INVESTMENTS
Capital expenditures (86,619) (64,503)
Business acquisitions, net of cash acquired (578,038) (1,342)
Software purchases (12,775) (12,141)
Sale of property, plant and equipment 17,964 25,731
Other, net (51) 7,675
--------- ---------
Cash used by investing activities of
continuing operations (659,519) (44,580)
FINANCING
Decrease in short-term borrowings (30,080) (16,586)
Proceeds from long-term debt 292,110 --
Payments on long-term debt (16,183) (301,564)
Purchase of common stock (61,400) (124,623)
Cash dividends paid (111,258) (108,773)
Proceeds from issuance of common stock 32,631 39,753
Other, net (510) (8,290)
--------- ---------
Cash provided (used) by financing activities of
continuing operations 105,310 (520,083)
NET CASH PROVIDED (USED) BY DISCONTINUED OPERATIONS (1,417) 69,899
EFFECT OF FOREIGN CURRENCY RATE CHANGES ON CASH 30,340 13,498
--------- ---------
NET CHANGE IN CASH AND EQUIVALENTS 18,418 164,318
CASH AND EQUIVALENTS - BEGINNING OF YEAR 496,367 332,049
--------- ---------
CASH AND EQUIVALENTS - END OF YEAR $ 514,785 $ 496,367
========= =========
...Continued
Page 7 of 7
February 11, 2004
VF CORPORATION
SUPPLEMENTAL FINANCIAL INFORMATION
SALES BY PRODUCT CATEGORY
(IN THOUSANDS)
YEAR ENDED
--------------------------
JANUARY 3 JANUARY 4
2004 2003
---------- ----------
Jeans and related apparel $2,666,815 $2,788,486
Intimate apparel 830,225 839,786
Sportswear 248,967 --
Outdoor products 580,663 508,020
Occupational apparel 450,511 491,295
Other apparel 430,278 455,936
---------- ----------
Total $5,207,459 $5,083,523
========== ==========
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