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VF Reports 2013 Fourth Quarter And Full Year Results, And Announces Outlook For 2014

 

VF CORPORATION

Consolidated Statements of Income

(Unaudited)

(In thousands, except per share amounts)
           
Three Months Ended December % Twelve Months Ended December %
  2013     2012   Change   2013     2012   Change
 
Net sales $ 3,258,712 $ 3,003,360 9% $ 11,302,350 $ 10,766,020 5%
Royalty income   31,387     29,900   5%   117,298     113,835   3%
 
Total revenues   3,290,099     3,033,260   8%   11,419,648     10,879,855   5%
 
Costs and operating expenses
Cost of goods sold 1,704,690 1,595,512 7% 5,931,469 5,817,880 2%
Selling, general and administrative expenses   1,077,027     987,460   9%   3,841,032     3,596,708   7%
  2,781,717     2,582,972   8%   9,772,501     9,414,588   4%
 
Operating income 508,382 450,288 13% 1,647,147 1,465,267 12%
 
Interest income 1,577 495 219% 4,141 3,353 24%
Interest expense (20,985 ) (22,826 ) 8% (84,773 ) (93,605 ) 9%
Other income (expense), net   (2,302 )   1,988   (216%)   (4,025 )   46,860   (109%)
 
Income before income taxes 486,672 429,945 13% 1,562,490 1,421,875 10%
 
Income taxes   119,005     95,777   24%   352,371     335,737   5%
 
Net income 367,667 334,168 10% 1,210,119 1,086,138 11%
 
Net (income) loss attributable to noncontrolling interests   -     -     -     (139 )
 
Net income attributable to VF Corporation $ 367,667   $ 334,168   10% $ 1,210,119   $ 1,085,999   11%
 
Earnings per common share attributable to

VF Corporation common stockholders
Basic $ 0.84 $ 0.76 11% $ 2.76 $ 2.47 12%
Diluted 0.82 0.75 9% 2.71 2.43 12%
 
Weighted average shares outstanding
Basic 439,023 439,572 438,657 439,292
Diluted 447,746 448,240 446,809 447,616
 
Cash dividends per common share $ 0.2625 $ 0.2175 21% $ 0.9150 $ 0.7575 21%
 

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. Similarly, the fiscal fourth quarter ends on the Saturday closest to December 31. For presentation purposes herein, all references to periods ended December 2013 and December 2012 relate to the 13 week and 52 week fiscal periods ended December 28, 2013 and December 29, 2012, respectively.

 

VF CORPORATION

Consolidated Balance Sheets

(Unaudited)

(In thousands, except share amounts)
   
December December
  2013     2012  
 
ASSETS
Current assets
Cash and equivalents $ 776,403 $ 597,461
Accounts receivable, net 1,360,443 1,222,345
Inventories 1,399,062 1,354,158
Other current assets   347,074     275,619  
Total current assets 3,882,982 3,449,583
 
Property, plant and equipment 932,792 828,218
Intangible assets 2,960,201 2,917,058
Goodwill 2,021,750 2,009,757
Other assets   517,718     428,405  
Total assets $ 10,315,443   $ 9,633,021  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 18,810 $ 12,559
Current portion of long-term debt 5,167 402,873
Accounts payable 638,732 562,638
Accrued liabilities   905,292     754,142  
Total current liabilities 1,568,001 1,732,212
 
Long-term debt 1,426,829 1,429,166
Other liabilities 1,243,575 1,346,018
Commitments and contingencies
Stockholders' equity
Preferred Stock, par value $1 - -
Common Stock, stated value $0.25 110,078 110,205
Additional paid-in capital 2,746,590 2,527,868
Accumulated other comprehensive income (loss) (211,720 ) (453,895 )
Retained earnings   3,432,090     2,941,447  
Total stockholders' equity   6,077,038     5,125,625  
Total liabilities and stockholders' equity $ 10,315,443   $ 9,633,021  
 

VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)
   
Twelve Months Ended December
  2013     2012  
 
Operating activities
Net income $ 1,210,119 $ 1,086,138
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 157,810 148,969
Amortization of intangible assets 45,787 47,929
Other amortization 49,676 41,058
Stock-based compensation 87,118 92,814
Provision for doubtful accounts 15,756 19,264
Deferred income taxes

(12,370

)
(20,797 )
Pension expense in excess of (less than) contributions (28,102 ) (20,198 )
Gain on sale of business - (44,485 )
Other, net

14,306

 
(40,931 )
Changes in operating assets and liabilities, net of
sale of business:
Accounts receivable (155,053 ) (111,571 )
Inventories (47,240 ) 87,620
Other current assets (9,194 ) 32,382
Accounts payable 75,073 (74,294 )
Accrued compensation (1,139 ) (18,907 )
Accrued income taxes 16,628 26,213
Accrued liabilities 85,611 (17,005 )
Other assets and liabilities   1,255     40,801  
Cash provided by operating activities 1,506,041 1,275,000
 
Investing activities
Capital expenditures (271,153 ) (251,940 )
Business acquisitions, net of cash acquired - (1,750 )
Proceeds from sale of businesses - 72,519
Software purchases (53,989 ) (30,890 )
Other, net   (25,131 )   (8,230 )
Cash used by investing activities (350,273 ) (220,291 )
 
Financing activities
Net increase (decrease) in short-term borrowings 9,032 (269,010 )
Payments on long-term debt (404,872 ) (2,776 )
Purchase of Common Stock (282,024 ) (307,282 )
Cash dividends paid (402,136 ) (333,229 )
Proceeds from issuance of Common Stock, net 48,029 62,770
Tax benefits of stock option exercises 48,140 47,213
Other, net   -     (201 )
Cash used by financing activities (983,831 ) (802,515 )
 
Effect of foreign currency rate changes on cash and equivalents   7,005     4,039  
 
Net change in cash and equivalents 178,942 256,233
 
Cash and equivalents - beginning of year   597,461     341,228  
 
Cash and equivalents - end of period $ 776,403   $ 597,461  

           
 

VF CORPORATION

Supplemental Financial Information

Business Segment Information

(Unaudited)

(In thousands)
 
 
Three Months Ended December % Twelve Months Ended December %
  2013     2012   Change   2013     2012   Change
 
Coalition revenues
Outdoor & Action Sports $ 1,919,322 $ 1,709,863 12% $ 6,379,167 $ 5,866,071 9%
Jeanswear 734,075 734,764 - 2,810,994 2,789,293 1%
Imagewear 286,888 262,137 9% 1,065,952 1,075,677 (1%)
Sportswear 207,774 182,724 14% 624,693 577,317 8%
Contemporary Brands 107,714 106,944 1% 415,053 445,960 (7%)
Other   34,326     36,828   (7%)   123,789     125,537   (1%)
 
Total coalition revenues $ 3,290,099   $ 3,033,260   8% $ 11,419,648   $ 10,879,855   5%
 
 
Coalition profit
Outdoor & Action Sports $ 358,247 $ 322,244 11% $ 1,106,384 $ 1,019,425 9%
Jeanswear 134,331 131,394 2% 544,882 466,960 17%
Imagewear 44,860 34,300 31% 152,203 145,053 5%
Sportswear 35,676 32,267 11% 88,157 72,978 21%
Contemporary Brands 8,915 8,896 - 38,825 49,182 (21%)
Other   1,633     (365 ) 547%   (562 )   (232 ) (142%)
 
Total coalition profit 583,662 528,736 10% 1,929,889 1,753,366 10%
 
Corporate and other expenses (77,582 ) (76,460 ) (1%) (286,767 ) (241,239 ) (19%)
Interest, net   (19,408 )   (22,331 ) 13%   (80,632 )   (90,252 ) 11%
 
Income before income taxes $ 486,672   $ 429,945   13% $ 1,562,490   $ 1,421,875   10%
 

VF CORPORATION

Supplemental Financial Information

Business Segment Information – Constant Currency Basis

(Unaudited)

(In thousands)
     
Three Months Ended December 2013
Exclude
As Reported Impact of Foreign
under GAAP Currency Exchange Constant Currency
 
Coalition revenues
Outdoor & Action Sports $ 1,919,322 $ 16,983 $ 1,902,339
Jeanswear 734,075 (4,805 ) 738,880
Imagewear 286,888 (1,087 ) 287,975
Sportswear 207,774 - 207,774
Contemporary Brands 107,714 1,184 106,530
Other   34,326     -     34,326  
 
Total coalition revenues $ 3,290,099   $ 12,275   $ 3,277,824  
 
Coalition profit
Outdoor & Action Sports $ 358,247 $ 3,583 $ 354,664
Jeanswear 134,331 358 133,973
Imagewear 44,860 (32 ) 44,892
Sportswear 35,676 - 35,676
Contemporary Brands 8,915 166 8,749
Other   1,633     -     1,633  
 
Total coalition profit 583,662 4,075 579,587
 
Corporate and other expenses (77,582 ) - (77,582 )
Interest, net   (19,408 )   -     (19,408 )
 
Income before income taxes $ 486,672   $ 4,075   $ 482,597  
 

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

(Unaudited)

(In thousands)
 
Twelve Months Ended December 2013
  Exclude
As Reported Impact of Foreign
under GAAP Currency Exchange Constant Currency
 
Coalition revenues
Outdoor & Action Sports $ 6,379,167 $ 53,426 $ 6,325,741
Jeanswear 2,810,994 (8,286 ) 2,819,280
Imagewear 1,065,952 (2,420 ) 1,068,372
Sportswear 624,693 - 624,693
Contemporary Brands 415,053 3,099 411,954
Other   123,789     -     123,789  
 
Total coalition revenues $ 11,419,648   $ 45,819   $ 11,373,829  
 
Coalition profit
Outdoor & Action Sports $ 1,106,384 $ 16,122 $ 1,090,262
Jeanswear 544,882 2,208 542,674
Imagewear 152,203 12 152,191
Sportswear 88,157 - 88,157
Contemporary Brands 38,825 494 38,331
Other   (562 )   -     (562 )
 
Total coalition profit 1,929,889 18,836 1,911,053
 
Corporate and other expenses (286,767 ) - (286,767 )
Interest, net   (80,632 )   -     (80,632 )
 
Income before income taxes $ 1,562,490   $ 18,836   $ 1,543,654  
 
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 business performed excluding the effects of changes in foreign currency translation rates. Management believes this information is useful to investors to facilitate comparison 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

Reconciliation of Select GAAP Measures to Non-GAAP Measures

(Unaudited)

(In thousands, except per share amounts)
 
Three Months Three Months
Ended Operating Ended Operating
December 2013 Margin December 2012 Margin
 
Operating income, as reported under GAAP $ 508,382 15.5% $ 450,288 14.8%
Timberland acquisition-related expenses   647   6,811
 
Operating income, as adjusted $ 509,029 15.5% $ 457,099 15.1%
 
 
Net income attributable to VF Corporation,
as reported under GAAP $ 367,667 $ 334,168
Timberland acquisition-related expenses   570   10,226
 
Net income attributable to VF Corporation,
as adjusted $ 368,237 $ 344,394
 
 
Diluted earnings per share, as reported
under GAAP $ 0.82 $ 0.75
Timberland acquisition-related expenses   -   0.02
 
Diluted earnings per share, as adjusted $ 0.82 $ 0.77
 
 
 

Non-GAAP Financial Information

The financial information above has been presented on a GAAP basis and on an adjusted basis which excludes the impact of costs related to the acquisition of The Timberland Company. These adjusted presentations are non-GAAP measures. Management believes these measures provide investors with useful supplemental information regarding VF's underlying business trends and the performance of VF's ongoing operations and are useful for period-over-period comparisons of such operations.

 

Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not in lieu of or superior to, VF's operating performance measures calculated in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures presented by other companies.

 

       

VF CORPORATION

Supplemental Financial Information

Reconciliation of Select GAAP Measures to Non-GAAP Measures

(Unaudited)

(In thousands, except per share amounts)
 
Twelve Months Twelve Months
Ended Operating Ended Operating
December 2013   Margin December 2012   Margin
 
Operating income, as reported under GAAP $ 1,647,147 14.4% $ 1,465,267 13.5%
Timberland acquisition-related expenses   10,684   30,765  
 
Operating income, as adjusted $ 1,657,831 14.5% $ 1,496,032   13.8%
 
 
Net income attributable to VF Corporation,
as reported under GAAP $ 1,210,119 $ 1,085,999
Timberland acquisition-related expenses 8,826 27,927
Gain on sale of John Varvatos Enterprises, Inc.   -   (35,814 )
 
Net income attributable to VF Corporation,
as adjusted $ 1,218,945 $ 1,078,112  
 
 
Twelve Months Twelve Months
Ended Ended
December 2013   December 2012  
Diluted earnings per share, as reported
under GAAP $ 2.71 $ 2.43
Timberland acquisition-related expenses 0.02 0.06
Gain on sale of John Varvatos Enterprises, Inc.   -   (0.08 )
 
Diluted earnings per share, as adjusted $ 2.73 $ 2.41  
 
 
 
Non-GAAP Financial Information

The financial information above has been presented on a GAAP basis and on an adjusted basis which excludes the impact of costs related to the acquisition of The Timberland Company and the gain on the sale of John Varvatos Enterprises, Inc. These adjusted presentations are non-GAAP measures. Management believes these measures provide investors with useful supplemental information regarding VF's underlying business trends and the performance of VF's ongoing operations and are useful for period-over-period comparisons of such operations.
 

Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not in lieu of or superior to, VF's operating performance measures calculated in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures presented by other companies.

 

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