VF Announces Fourth Quarter and Full Year Results and Declares Dividend
Reports 2009 EPS of $5.16 Excluding Noncash Impairment Charge;
EPS of $4.13 Including Charge
-- 4Q EPS excluding impairment charge increases to $1.62; EPS including
charge was $.60
-- Gross margins reach record levels for quarter and full year
-- 2009 cash flow from operations reaches record $973 million
-- 2010 EPS expected to increase 9-11% to approximately $5.60-$5.70
-- Investing $50 million in 2010 to accelerate growth in our fastest
growing brands
Information regarding VF's fourth quarter conference call webcast today at 8:30 a.m. ET can be found at the end of this release.
GREENSBORO, N.C.-- VF Corporation (NYSE: VFC), a global leader in branded lifestyle apparel, today announced results for the fourth quarter and full year 2009. All per share amounts are presented on a diluted basis.
Fourth quarter revenues rose to $1,915.4 million from $1,912.2 million in the fourth quarter of 2008. Net income in the current quarter was $66.9 million or $.60 per share, compared with $115.9 million or $1.05 per share in the 2008 quarter. Excluding a $114.4 million after-tax, noncash charge related to the impairment of goodwill and intangible assets as described below, fourth quarter net income increased to $181.3 million and earnings per share increased to $1.62. The current quarter also included a $.12 per share impact from higher pension expense and a $.01 per share benefit from foreign currency translation. In 2008, fourth quarter earnings included a $.30 per share charge related to cost reduction actions. Excluding the 2008 charge and adjusting 2009 earnings for the higher pension, foreign currency and impairment impacts, earnings per share in 2009 would have increased by 28%.
"Today's results speak to the strength and resiliency of VF's business model and diversified brand portfolio," said Eric C. Wiseman, Chairman and Chief Executive Officer. "Our focus on prudent brand investment, disciplined cost control, and inventory management has enabled us to deliver exceptionally strong performance in an exceptionally difficult environment. We look forward to resuming growth this year, fueled by investments to accelerate growth in our fastest growing brands."
For the full year 2009, revenues were $7,220.3 million, down 6% from $7,642.6 million in 2008. Foreign currency translation accounted for two percentage points of the decline. Net income was $461.3 million or $4.13 per share, compared with $602.7 million or $5.42 per share in 2008. Excluding the fourth quarter impairment charge, net income in 2009 declined to $575.7 million and earnings per share were $5.16. Higher pension expense and foreign currency impacted earnings per share in 2009 by $.48 and $.18, respectively. Excluding the $.30 per share charge in the fourth quarter of 2008 and adjusting 2009 earnings for the higher pension, foreign currency and impairment impacts noted above, earnings per share in 2009 would have increased by 2%.
Noncash Impairment Charge
As a result of our review of goodwill and intangible assets that we conduct during the fourth quarter of each year in connection with our strategic planning process and preparation of our annual financial statements, we recorded a $122.0 million pre-tax noncash impairment charge to reduce the carrying value of the goodwill and intangible assets related to our Nautica(R), Reef(R) and lucy(R) brands, acquired in 2003, 2005 and 2007, respectively. On an after-tax basis, the charge totaled $114.4 million, which decreased fourth quarter earnings per share by $1.02 and full year earnings per share by $1.03. "While we continue to believe that each brand has opportunities for improved performance, we concluded that the fair value of our investments in these businesses has declined as we have not achieved the forecasted growth and cash flows originally projected at the dates of acquisition," said Mr. Wiseman.
Fourth Quarter Business Review
Outdoor & Action Sports: Fourth quarter revenues in our Outdoor & Action Sports coalition grew 8%, with operating income and margins each reaching record levels for the period. Global revenues of The North Face(R) and Vans(R) brands grew 7% and 14%, respectively. Total coalition revenues in our Americas businesses rose 4%, while international revenues were up 9% in constant dollars, led by exceptionally strong growth in Asia. Total direct-to-consumer revenues for our Outdoor & Action Sports coalition rose 21% in the quarter.
Operating margins were 20% in the quarter. Prior year results included $8.2 million in expenses related to cost reduction actions.
Jeanswear: Jeanswear revenues declined 3% in the fourth quarter, a marked improvement from the 11% decline experienced through the first nine months of the year. A key highlight of the quarter was the 3% increase in revenues of our Mass Market business in the U.S. Total domestic revenues were down slightly from those in the prior year's quarter. International revenues were down 11% in constant dollars, with 15% growth in our Asia business offset by continued difficult jeanswear market conditions across Europe.
Fourth quarter operating margins rose to 16% reflecting strong gross margin expansion both domestically and internationally. Prior year results included $22.6 million in expenses to reduce costs.
Sportswear: Revenues of our Sportswear coalition, which includes our Nautica(R) brand and the Kipling(R) brand in North America, declined 18% in the quarter, in line with our expectations, based on a shift in Nautica(R) brand wholesale shipments to the third from the fourth quarter.
Operating margins exceeded 12% in the quarter, a significant improvement over those in the prior year period. Operating income in the 2008 quarter included $3.2 million in cost reduction expenses.
Contemporary Brands: Revenues of our Contemporary Brands coalition, which consists of the 7 For All Mankind(R), lucy(R), John Varvatos(R), Splendid(R) and Ella Moss(R) brands increased 18%, with the acquisition of the Splendid(R) and Ella Moss(R) brands contributing $20 million to revenues in the quarter. Our 7 For All Mankind(R) brand resumed growth in the quarter, with an increase in global revenues of 5%.
Operating income rose 12% in the quarter, with operating margins improving from those reported in the first nine months of 2009. Operating margins of our 7 For All Mankind(R), Splendid(R) and Ella Moss(R) brands were at strong, mid-teen levels in the quarter.
Imagewear: As anticipated, the rate of revenue decline in our Imagewear business slowed in the fourth quarter, led by a resumption of growth in our Licensed Sports business, where revenues grew 7%. Total coalition revenues fell 8% in the quarter, reflecting continued high levels of unemployment in key sectors that have impacted our industrial and protective apparel businesses.
Profitability improved with an increase in operating margins to 11.7% in the quarter. Operating income in the 2008 quarter included $2.0 million in cost reduction expenses.
International and Direct-to-Consumer
Continued growth in our international and direct-to-consumer businesses remain key long-term drivers of both organic growth and margin expansion. During the quarter, international revenues increased slightly on a constant currency basis, with growth in our Outdoor & Action Sports and Contemporary Brands businesses largely offset by the impact of weak market conditions that continued to affect our European jeanswear business. Our Asian business continued to grow strongly, with revenues up 40% in the quarter. For the full year in 2009, international revenues declined 1% on a constant currency basis as a result of very challenging jeanswear market conditions across Europe, while Asia revenues rose 28%. International revenues as a percent of VF's total revenues were 30% in 2009 and 2008. On a constant currency basis, international revenues would have risen to 31% of total revenues in 2009.
Our direct-to-consumer business increased 7% in the quarter, driven by strong increases in our Vans(R), The North Face(R), 7 For All Mankind(R) and Napapijri(R) brands. We opened a total of 31 stores across our brands in the quarter - and 90 stores during the year - bringing the number of owned retail stores to 757 at year-end. Our direct-to-consumer revenues as a percent of total revenues increased by one and a half percentage points to over 17% in 2009. This business has consistently delivered strong returns on investment, which in 2009 remained over 20%.
Gross Margins Reach Record Levels for Fourth Quarter and Full Year
VF's gross margins expanded by 380 basis points to a record 46.3% in the quarter; for the full year 2009, gross margins reached a record 44.3% compared with 43.9% in 2008. The fourth quarter increase was fueled by gross margin expansion in each of our coalitions, driven in part by growth in our direct-to-consumer business. Significant reductions in inventories across our coalitions in 2009 also contributed to the improvements in both the quarter and full year. Operating margins excluding the impairment charge rebounded to 13.6% in the fourth quarter and were 11.9% for the full year. Higher pension expense reduced operating margins by 110 basis points for both the quarter and the year. Operating results for the fourth quarter and full year in 2008 included expenses related to cost reduction initiatives that reduced operating income by $41 million.
Strong Balance Sheet and Record Cash Flow
Our balance sheet strengthened further in 2009. We ended the year with cash and equivalents of $732 million, nearly double the 2008 levels. We exceeded our inventory reduction plans, with inventories down 17% or $193 million from 2008 year-end levels. Cash flow from operations exceeded our prior target of $800 million, reaching a record $973 million. During the year we contributed $200 million to our pension plan, spent $108 million to repurchase 1.5 million shares and increased our dividend payments to $262 million.
2010 Outlook
"We expect to deliver higher revenues and earnings per share in 2010," said Mr. Wiseman. "We're looking forward to continued momentum in our strongest businesses, but our overall outlook is tempered by ongoing concerns over weak global market conditions." He continued, "Our confidence in the global growth potential of our brands has led to a planned increase of approximately $50 million in investment spending. Our approach to investing is disciplined and concentrated on our fastest growing and most profitable opportunities. In addition to continuing to fuel the growth of our Outdoor & Action Sports businesses, which have delivered consistently superior performance, we will invest in our Contemporary Brands business and in high-growth, high-profit international markets such as Asia."
2010 revenues are expected to increase by 2 to 3%. Excluding the 2009 impairment charges, earnings per share are expected to increase by 9 to 11% to approximately $5.60 to $5.70. On a GAAP basis, earnings per share are expected to increase approximately 35% from the $4.13 reported in 2009. Lower pension expense in 2010 compared with 2009 should benefit earnings per share by $.20. Based on recent foreign currency exchange rates, foreign currency translation is planned to be neutral to both revenues and earnings this year.
Key points related to our 2010 outlook include the following:
-- Continued momentum in our Outdoor & Action Sports businesses and strong
growth in our Contemporary Brands coalition.Outdoor & Action Sports
revenues should grow at a high single digit rate in 2010, driven by
strong growth in our The North Face(R)andVans(R) brands; Contemporary
Brands revenues are expected to increase by 10 to 15%, with solid growth
in our 7 For All Mankind(R), Splendid(R) andElla Moss(R) brands.
Jeanswear, Sportswear and Imagewear coalition revenues should remain
relatively stable in 2010, while operating margins should improve for
each.
-- Gross margin expansion of more than 100 basis points,driven by the
continued change in our mix toward higher growth lifestyle brands and a
growing direct-to-consumer business.
-- Investments totaling $50 million to support future growth,driven
primarily by a substantial increase in marketing spending behind those
businesses with the strongest opportunities for growth, including The
North Face(R), Vans(R)and7 For All Mankind(R)brands, and our business in
Asia. Investments are also planned to further strengthen our innovation
and sustainability platforms.
-- Higher operating margins,despite heavy brand investments, driven by
significantly higher gross margins.
-- Continued growth internationally.International revenues are expected to
grow in line with total revenues, with strong results in Asia where
revenue growth should exceed 20% in 2010. Over the coming years, we
expect our international revenues to approach 40% of total revenues.
-- Additional expansion in our highly profitable direct-to-consumer
business, where revenues are expected to rise by over 10% in 2010.
Growth will be driven by 80 to 90 new store openings and low-single
digit comp store growth. This expansion should drive direct-to-consumer
revenues up to 19% of total revenues in 2010. Within the next several
years, our direct-to-consumer revenues are expected to exceed 20% of
total revenues.
-- Strong cash flow from operations,which should approximate $800 million
in 2010 and support share repurchases totaling at least 3.0 million
shares,continuing the repurchases of the past two quarters and above the
level of the past several years.
-- Industry-leading dividend payout,which is expected to exceed 40% of
earnings this year.
Concluded Mr. Wiseman, "2010 will be a pivotal year for VF Corporation, as we resume healthy top and bottom line growth, expand margins and invest in our future. Our strong cash flow will enable us to repurchase additional shares this year, continue our industry-leading dividend payout and repay $200 million in long-term debt - all without compromising our ability to add more financially and strategically attractive brands to our portfolio."
Share Repurchase
The Board of Directors has approved an authorization for the Company to repurchase 10 million shares, as the prior authorization initiated in 2006 is nearly completed.
Dividend Declared
The Board of Directors also declared a quarterly cash dividend of $.60 per share, payable on March 19, 2010 to shareholders of record as of the close of business on March 9, 2010.
Non-GAAP Financial Measures
This press release contains constant currency financial information, which is a measure of financial performance that is not prepared in accordance with generally accepted accounting principles ("GAAP"). This press release also contains earnings information that excludes the effect of the fourth quarter impairment charge for goodwill and intangible assets, as well as other unusual items. An explanation of management's use of this non-GAAP financial information is described in the supplemental financial information beginning on page 11.
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 the overall level of consumer spending on apparel; disruption and volatility in the global capital and credit markets; general economic conditions and other factors affecting consumer confidence; 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 grow its international and direct-to-consumer businesses; VF's ability to successfully integrate and grow acquisitions; VF's ability to maintain the strength and security of its 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; fluctuations in the price, availability and quality of raw materials and contracted products; 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 VF
VF Corporation is a global leader in branded lifestyle apparel with more than 30 brands, including Wrangler(R), The North Face(R), Lee(R), Vans(R), Nautica(R), 7 For All Mankind(R), Eagle Creek(R), Eastpak(R), Ella Moss(R), JanSport(R), lucy(R), John Varvatos(R), Kipling(R), Majestic(R), Napapijri(R), Red Kap(R), Reef(R), Riders(R) and Splendid(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 fourth quarter conference call and webcast today at 8:30 a.m. ET. Interested parties should call 1-888-601-3864 domestic, or 1-913-312-1446 international, to access the call. You may also access this call via the Internet at www.vfc.com. A replay will be available through February 18 and can be accessed by dialing 1-888-203-1112 domestic, and 1-719-457-0820 international. The pass code is 1948490. 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 December Year Ended December
2009 2008 2009 2008
Net Sales $ 1,893,455 $ 1,892,118 $ 7,143,074 $ 7,561,621
Royalty Income 21,914 20,032 77,212 80,979
Total Revenues 1,915,369 1,912,150 7,220,286 7,642,600
Costs and
Operating
Expenses
Cost of goods 1,028,946 1,099,210 4,025,122 4,283,680
sold
Marketing,
administrative 626,730 633,137 2,336,394 2,419,925
and general
expenses
Impairment of
goodwill and 121,953 - 121,953 -
intangible
assets
1,777,629 1,732,347 6,483,469 6,703,605
Operating Income 137,740 179,803 736,817 938,995
Other Income
(Expense)
Interest income 480 1,419 2,230 6,115
Interest expense (20,743 ) (24,534 ) (85,902 ) (94,050 )
Miscellaneous, (1,620 ) (4,107 ) 1,528 (2,969 )
net
(21,883 ) (27,222 ) (82,144 ) (90,904 )
Income Before 115,857 152,581 654,673 848,091
Income Taxes
Income Taxes 50,872 36,749 196,215 245,244
Net Income 64,985 115,832 458,458 602,847
Net (Income)
Loss
Attributable to 1,900 31 2,813 (99 )
Noncontrolling
Interests in
Subsidiaries
Net Income
Attributable to $ 66,885 $ 115,863 $ 461,271 $ 602,748
VF Corporation
Earnings Per
Share
Attributable to
VF Corporation
Common
Stockholders
Basic $ 0.61 $ 1.06 $ 4.18 $ 5.52
Diluted 0.60 1.05 4.13 5.42
Weighted Average
Shares
Outstanding
Basic 110,434 109,717 110,389 109,234
Diluted 111,845 110,871 111,605 111,255
Cash Dividends $ 0.60 $ 0.59 $ 2.37 $ 2.33
Per Common Share
Basis of presentation: VF operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to periods ended December 2009 and December 2008 relate to the 13 week and 52 week fiscal periods ended January 2, 2010 and 14 week and 53 week fiscal periods ended January 3, 2009, respectively.
VF CORPORATION
Consolidated Balance Sheets
(In thousands)
December
2009 2008
ASSETS
Current Assets
Cash and equivalents $ 731,549 $ 381,844
Accounts receivable, net 776,140 851,282
Inventories 958,639 1,151,895
Deferred income taxes 69,952 96,339
Other current assets 98,069 171,650
Total current assets 2,634,349 2,653,010
Property, Plant and Equipment 1,601,608 1,557,634
Less accumulated depreciation 987,430 914,907
614,178 642,727
Intangible Assets 1,535,121 1,366,222
Goodwill 1,367,680 1,313,798
Other Assets 336,573 458,111
$ 6,487,901 $ 6,433,868
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 45,453 $ 53,580
Current portion of long-term debt 203,179 3,322
Accounts payable 373,186 435,381
Accrued liabilities 470,765 519,899
Total current liabilities 1,092,583 1,012,182
Long-term Debt 938,494 1,141,546
Other Liabilities 627,041 722,895
Commitments and Contingencies
Stockholders' Equity
Common Stock 110,285 109,848
Additional paid-in capital 1,864,499 1,749,464
Accumulated other comprehensive income (loss) (193,244 ) (276,294 )
Retained earnings 2,050,109 1,972,874
Noncontrolling interests in subsidiaries (1,866 ) 1,353
Total stockholders' equity 3,829,783 3,557,245
$ 6,487,901 $ 6,433,868
VF CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December
2009 2008
Operating Activities
Net income $ 458,458 $ 602,847
Adjustments to reconcile net income to cash
provided by operating activities of continuing
operations:
Impairment of goodwill and intangible assets 121,953 -
Depreciation 113,207 105,059
Amortization of intangible assets 40,500 39,427
Other amortization 16,745 21,685
Stock-based compensation 36,038 31,592
Provision for doubtful accounts 24,836 22,062
Pension funding in excess of expense (111,739 ) (4,787 )
Deferred income taxes 54,674 23,654
Other, net (6,923 ) (11,477 )
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable 75,449 52,679
Inventories 209,439 (38,275 )
Other current assets 77,173 (66,866 )
Accounts payable (69,560 ) (67,214 )
Accrued compensation (11,714 ) 471
Accrued income taxes 14,763 24,118
Accrued liabilities (25,182 ) (22,438 )
Other assets and liabilities (44,632 ) (33,065 )
Cash provided by operating activities of 973,485 679,472
continuing operations
Discontinued operations - (1,071 )
Cash provided by operating activities 973,485 678,401
Investing Activities
Capital expenditures (85,859 ) (124,207 )
Business acquisitions, net of cash acquired (212,339 ) (93,377 )
Software purchases (9,735 ) (10,601 )
Other, net (8,943 ) 12,399
Cash used by investing activities (316,876 ) (215,786 )
Financing Activities
Decrease in short-term borrowing (11,019 ) (67,736 )
Payments on long-term debt (3,242 ) (3,632 )
Purchase of Common Stock (111,974 ) (149,729 )
Cash dividends paid (261,682 ) (255,235 )
Proceeds from issuance of Common Stock 62,590 64,972
Tax benefits of stock option exercises 6,464 22,504
Other, net (480 ) (905 )
Cash used by financing activities (319,343 ) (389,761 )
Effect of Foreign Currency Rate Changes on Cash 12,439 (12,873 )
Net Change in Cash and Equivalents 349,705 59,981
Cash and Equivalents - Beginning of Year 381,844 321,863
Cash and Equivalents - End of Year $ 731,549 $ 381,844
VF CORPORATION
Supplemental Financial Information
Business Segment Information
(In thousands)
Three Months Ended December Year Ended December
2009 2008 * 2009 2008 *
Coalition
Revenues
Outdoor & Action $ 730,883 $ 675,745 $ 2,751,978 $ 2,742,096
Sports
Jeanswear 644,854 663,240 2,522,459 2,764,875
Imagewear 222,269 242,688 865,472 991,072
Sportswear 141,382 172,465 498,317 570,721
Contemporary 143,279 121,161 471,890 451,152
Brands
Other 32,702 36,851 110,170 122,684
Total coalition $ 1,915,369 $ 1,912,150 $ 7,220,286 $ 7,642,600
revenues
Coalition Profit
Outdoor & Action $ 147,018 $ 101,420 $ 508,289 $ 454,182
Sports
Jeanswear 103,487 55,382 370,186 378,881
Imagewear 26,013 27,097 87,489 131,626
Sportswear 16,990 9,483 51,993 41,561
Contemporary 13,238 11,806 37,184 51,817
Brands
Other 911 594 1,194 (2,414 )
Total coalition 307,657 205,782 1,056,335 1,055,653
profit
Impairment of
Goodwill and (121,953 ) - (121,953 ) -
Intangible
Assets **
Corporate and (49,584 ) (30,086 ) (196,037 ) (119,627 )
Other Expenses
Interest, net (20,263 ) (23,115 ) (83,672 ) (87,935 )
Income Before $ 115,857 $ 152,581 $ 654,673 $ 848,091
Income Taxes
Restructuring costs totaling $41.0 million in the fourth quarter of 2008
reduced coalition profit as follows: Jeanswear - $22.6 million; Outdoor &
* Action Sports - $8.2 million; Imagewear - $2.0 million; Sportswear - $3.2
million; Contemporary Brands - $0.5 million and Corporate and Other - $4.5
million.
Goodwill and trademark impairment charges totaling $122.0 million in the
** fourth quarter of 2009 related to: Outdoor & Action Sports - $36.7 million;
Sportswear - $58.5 million, and Contemporary Brands - $26.8 million.
VF CORPORATION
Supplemental Financial Information
Business Segment Information - Constant Currency Basis
(In thousands)
Three Months Ended December 2009
Exclude
Impact of Foreign
As Reported Currency Exchange Constant Currency
Coalition Revenues
Outdoor & Action Sports $ 730,883 $ 16,769 $ 714,114
Jeanswear 644,854 7,679 637,175
Imagewear 222,269 (162 ) 222,431
Sportswear 141,382 - 141,382
Contemporary Brands 143,279 2,832 140,447
Other 32,702 - 32,702
Total coalition revenues $ 1,915,369 $ 27,118 $ 1,888,251
Coalition Profit
Outdoor & Action Sports $ 147,018 $ 2,007 $ 145,011
Jeanswear 103,487 (1,139 ) 104,626
Imagewear 26,013 (116 ) 26,129
Sportswear 16,990 - 16,990
Contemporary Brands 13,238 680 12,558
Other 911 - 911
Total coalition profit 307,657 1,432 306,225
Impairment of Goodwill (121,953 ) - (121,953 )
and Intangible Assets
Corporate and Other (49,584 ) - (49,584 )
Expenses
Interest, net (20,263 ) - (20,263 )
Income Before Income $ 115,857 $ 1,432 $ 114,425
Taxes
Constant Currency Financial Information VF is a global company that reports financial information in U.S. dollars in accordance with generally accepted accounting principles. Foreign currency exchange rate fluctuations affect the amounts reported by VF from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure. We use constant currency information to provide a framework to assess how our businesses performed excluding the effects of changes in foreign currency translation rates. Management believes this information is useful to investors to facilitate comparisons of operating results and better identify trends in our businesses. To calculate coalition revenues and profits on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period). These constant currency performance measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.
VF CORPORATION
Supplemental Financial Information
Business Segment Information - Constant Currency Basis
(In thousands)
Year Ended December 2009
Exclude
Impact of Foreign
As Reported Currency Exchange Constant Currency
Coalition Revenues
Outdoor & Action Sports $ 2,751,978 $ (75,966 ) $ 2,827,944
Jeanswear 2,522,459 (76,952 ) 2,599,411
Imagewear 865,472 (147 ) 865,619
Sportswear 498,317 - 498,317
Contemporary Brands 471,890 (2,783 ) 474,673
Other 110,170 - 110,170
Total coalition revenues $ 7,220,286 $ (155,848 ) $ 7,376,134
Coalition Profit
Outdoor & Action Sports $ 508,289 $ (15,647 ) $ 523,936
Jeanswear 370,186 (7,616 ) 377,802
Imagewear 87,489 247 87,242
Sportswear 51,993 - 51,993
Contemporary Brands 37,184 (1,776 ) 38,960
Other 1,194 - 1,194
Total coalition profit 1,056,335 (24,792 ) 1,081,127
Impairment of Goodwill (121,953 ) - (121,953 )
and Intangible Assets
Corporate and Other (196,037 ) - (196,037 )
Expenses
Interest, net (83,672 ) - (83,672 )
Income Before Income $ 654,673 $ (24,792 ) $ 679,465
Taxes
VF CORPORATION
Supplemental Financial Information
Consolidated Statements of Income - Excluding Impairment Charge
(In thousands, except per share amounts)
Three Months Ended December 2009
Exclude
Impairment
As Reported Charge As Adjusted
Net Sales $ 1,893,455 $ - $ 1,893,455
Royalty Income 21,914 - 21,914
Total Revenues 1,915,369 - 1,915,369
Costs and Operating Expenses
Cost of goods sold 1,028,946 - 1,028,946
Marketing, administrative and 626,730 - 626,730
general expenses
Impairment of goodwill and 121,953 121,953 -
intangible assets
1,777,629 121,953 1,655,676
Operating Income 137,740 (121,953 ) 259,693
Other Income (Expense)
Interest income 480 - 480
Interest expense (20,743 ) - (20,743 )
Miscellaneous, net (1,620 ) - (1,620 )
(21,883 ) - (21,883 )
Income Before Income Taxes 115,857 (121,953 ) 237,810
Income Taxes 50,872 (7,517 ) 58,389
Net Income 64,985 (114,436 ) 179,421
Net (Income) Loss Attributable to
Noncontrolling Interests in 1,900 - 1,900
Subsidiaries
Net Income Attributable to VF $ 66,885 $ (114,436 ) $ 181,321
Corporation
Earnings Per Share Attributable
to VF Corporation Common
Stockholders
Basic $ 0.61 $ (1.04 ) $ 1.64
Diluted 0.60 (1.02 ) 1.62
Operating Performance, Excluding Impairment Charge As a supplement to our reported operating results, we present our operating results excluding the impairment charge for goodwill and intangible assets, which is a non-GAAP financial measure. Management believes this information is useful to investors to facilitate comparisons of operating results. This non-GAAP performance measure should be viewed in addition to, and not in lieu of or superior to, our operating results calculated in accordance with GAAP. This supplemental information presented may not be comparable to similarly titled measures reported by other companies.
VF CORPORATION
Supplemental Financial Information
Consolidated Statements of Income - Excluding Impairment Charge
(In thousands, except per share amounts)
Year Ended December 2009
Exclude
Impairment
As Reported Charge As Adjusted
Net Sales $ 7,143,074 $ - $ 7,143,074
Royalty Income 77,212 - 77,212
Total Revenues 7,220,286 - 7,220,286
Costs and Operating Expenses
Cost of goods sold 4,025,122 - 4,025,122
Marketing, administrative and 2,336,394 - 2,336,394
general expenses
Impairment of goodwill and 121,953 121,953 -
intangible assets
6,483,469 121,953 6,361,516
Operating Income 736,817 (121,953 ) 858,770
Other Income (Expense)
Interest income 2,230 - 2,230
Interest expense (85,902 ) - (85,902 )
Miscellaneous, net 1,528 - 1,528
(82,144 ) - (82,144 )
Income Before Income Taxes 654,673 (121,953 ) 776,626
Income Taxes 196,215 (7,517 ) 203,732
Net Income 458,458 (114,436 ) 572,894
Net (Income) Loss Attributable to
Noncontrolling Interests in 2,813 - 2,813
Subsidiaries
Net Income Attributable to VF $ 461,271 $ (114,436 ) $ 575,707
Corporation
Earnings Per Share Attributable
to VF Corporation Common
Stockholders
Basic $ 4.18 $ (1.04 ) $ 5.22
Diluted 4.13 (1.03 ) 5.16
VF CORPORATION
Supplemental Financial Information
Impact of Unusual Items on Diluted Earnings per Share
Three Months Ended December
2009 2008
Diluted earnings per share, as reported $ 0.60 $ 1.05
Impact of restructuring charge - 0.30
Impact of goodwill and intangible asset impairment 1.02 -
charges
Impact of foreign currency translation (0.01 ) -
Impact of incremental pension expense 0.12 -
Diluted earnings per share, as adjusted $ 1.73 $ 1.35
Year Ended December
2009 2008
Diluted earnings per share, as reported $ 4.13 $ 5.42
Impact of restructuring charge - 0.30
Impact of goodwill and intangible asset impairment 1.03 -
charges
Impact of foreign currency translation 0.18 -
Impact of incremental pension expense 0.48 -
Diluted earnings per share, as adjusted $ 5.82 $ 5.72
Adjusted Financial Information As a supplement to our reported operating results, we present our earnings per share excluding the effects of certain unusual items, as follows:
* 2008 - impact of restructuring charges totaling $41.0 million (pretax) for
both the fourth quarter and year
2009 - impact of goodwill and intangible asset impairment charges of
$122.0 million (pretax) for both the fourth quarter and year; impact of
* foreign currency translation of $(1.4) million (pretax benefit) for the
fourth quarter and $24.8 million (pretax) for the year; and incremental
pension cost (over the 2008 level) of $21.9 million (pretax) for the
fourth quarter and $87.2 million (pretax) for the year
Management believes this information is useful to investors to facilitate comparisons of operating results. This non-GAAP performance measure should be viewed in addition to, and not in lieu of or superior to, our earnings per share calculated in accordance with GAAP. This supplemental information presented may not be comparable to similarly titled measures reported by other companies.
Source: VF Corporation
Released February 11, 2010