• Total revenues rise 16%, with organic growth in constant dollars of 6%
• Organic international revenue growth of 16% (constant dollars), driven by continued strong, double-digit growth in Europe and Asia
• Gross margin expands to 46.1%
• Adjusted EPS reaches $1.11, or a record $1.40 on a GAAP basis
• 2012 full-year guidance raised by $0.05 per share to $9.50 ($9.58 on a GAAP basis)
• Cash flow from operations now expected to reach a record $1.2 billion

GREENSBORO, N.C.--(BUSINESS WIRE)--Jul. 19, 2012-- VF Corporation (NYSE: VFC) today announced results for its second quarter ended June 30, 2012. All per share amounts are presented on a diluted basis. All references to “organic” financial data exclude the Timberland^® and Smartwool^® brands (“Timberland”), acquired on September 13, 2011. “Adjusted amounts” refer to non-GAAP measures that exclude Timberland acquisition-related expenses and the gain on the sale of John Varvatos Enterprises, Inc. (“John Varvatos”) as described in the “Adjusted Amounts” paragraph at the end of this release.

“We’ve reached the halfway mark of the year, and are right on track to deliver another year of strong and very profitable growth to our shareholders,” said Eric Wiseman, VF Corporation Chairman and Chief Executive Officer. “The strength of VF’s business model – a diverse portfolio strategy supported by an intense focus on financial and operational disciplines – provides us with a clear competitive advantage as we successfully navigate through an increasingly uncertain economic environment.”

Second Quarter Review

Revenues rose 16 percent to $2.1 billion from $1.8 billion in 2011, and included $239 million from Timberland. Organic revenue growth in the quarter was 3 percent (6 percent in constant dollars), driven by strong growth in the Outdoor & Action Sports and international businesses. Revenue growth in the quarter was tempered by unseasonably warm weather that caused a slight shift in revenues from the second quarter to the first, and by the sale of John Varvatos in April 2012.

Gross margin was better than anticipated in the quarter, rising by 20 basis points to 46.1 percent compared with 45.9 percent in the same period in 2011 as the impact of higher Jeanswear product costs eased. The comparison was impacted by a 65 basis point benefit to gross margin in the 2011 quarter from a facility closure. Operating income was $169 million on an adjusted basis in the second quarter of 2012. As anticipated, adjusted operating income was impacted by a $25 million loss from Timberland’s operations reflecting the highly seasonal nature of that business and excludes acquisition-related expenses of $5 million. On a GAAP basis, second quarter operating income was $164 million compared with $189 million in the same period of the prior year. Operating margin was 7.9 percent on an adjusted basis compared to 10.3 percent reported in the second quarter of 2011. Margin comparisons are negatively impacted by 230 basis points from the Timberland loss as well as a 40 basis point impact from higher pension expense in the 2012 quarter. On a GAAP basis, operating margin was 7.7 percent. The tax rate of 15.1 percent in the quarter includes a 600 basis point, or $11 million, benefit triggered by the gain on the sale of John Varvatos.

Net income on an adjusted basis was $123 million, which excludes Timberland acquisition-related expenses and the gain on the John Varvatos sale, compared to $129 million in the same period last year. Adjusted earnings per share declined 5 percent to $1.11 per share from $1.17 in last year’s same period, reflecting a loss of $0.12 per share from Timberland and an $0.11 per share combined negative impact from foreign currency translation and higher pension expense ($0.06 and $0.05 per share, respectively). Adjusted earnings per share exclude a $0.32 per share gain from the sale of John Varvatos (which includes $0.10 per share from the tax benefit noted above), and $0.03 per share in acquisition-related expenses. In the second quarter of 2011, earnings of $1.17 per share included a $0.07 per share benefit from the aforementioned facility closure. On a GAAP basis, second quarter net income was $155 million while earnings grew 20 percent to $1.40 per share.

First Half Review

Revenues increased 24 percent to $4.7 billion from $3.8 billion in the first half of 2011, reflecting growth in every coalition and $595 million from Timberland. Organic revenue growth in the period was 8 percent (10 percent in constant dollars).

Net income on an adjusted basis increased 3 percent to $341 million in the first half of 2012 from $330 million reported in the 2011 period. Adjusted earnings per share rose 2 percent in the current period to $3.05 from $2.99 last year. Timberland had a neutral impact on first half adjusted earnings per share, while foreign currency translation and higher pension expense negatively impacted earnings by $0.20 per share in the first six months of 2012. Adjusted earnings per share in the first half of 2012 exclude the $0.32 per share gain from the sale of John Varvatos and $0.06 per share in acquisition-related expenses. Earnings per share in the 2011 period benefitted from $0.18 in special items including the aforementioned $0.07 gain from a facility closure. On a GAAP basis, first half net income was $371 million while earnings increased 11 percent to $3.31 per share.

Coalition Review

Outdoor & Action Sports revenues increased 45 percent in the second quarter, with organic revenue growth of 12 percent (16 percent in constant dollars). The addition of the Timberland^® and Smartwool^® brands contributed $239 million to revenues.

Global revenues of The North Face^® brand during the quarter increased 14 percent (16 percent in constant dollars), with the Americas, Europe and Asia regions each growing in excess of 15 percent in constant dollars. The North Face^® brand’s direct-to-consumer business continued to post healthy growth, up 9 percent in the quarter. The Vans^® brand achieved a 25 percent (29 percent in constant dollars) increase in global revenues in the quarter, with double-digit revenue growth in the Americas, Europe and Asia. The Vans direct-to-consumer business also demonstrated solid results, with revenues rising by 18 percent. As anticipated, Timberland’s revenues were flat in the quarter (up 2 percent in constant dollars).

Excluding Timberland, Outdoor & Action Sports operating income rose 22 percent and operating margin increased 110 basis points to 13.6 percent from 12.5 percent in the 2011 period. On a GAAP basis, due to the seasonally driven loss from Timberland and acquisition-related expenses, operating income for the coalition declined 8 percent and the operating margin was 7.9 percent.

For the first half of 2012, Outdoor & Action Sports revenues grew 53 percent, with organic revenue growth of 13 percent (16 percent in constant dollars). For the full year, we look forward to constant dollar organic revenues growing at a low- to mid-teen percentage rate.

Jeanswear revenues were down 3 percent (down 1 percent in constant dollars) in the quarter, reflecting a shift of spring seasonal products that boosted first quarter revenues. Double-digit revenue increases in the Western Specialty and Asian businesses, together with strong sales of Rock & Republic^® jeans products, were offset by a modest decline in Mass channel revenues, lower revenues of the Lee^® brand in the U.S. due to current challenges in the mid-tier channel, and soft conditions in Europe.

Jeanswear operating margin was stronger than anticipated in the quarter, fueled by a higher gross margin reflecting lower manufacturing costs in our owned plants and tight inventory controls. Operating margin rose 30 basis points to 15.7 percent with operating income that was essentially flat with the second quarter of 2011.

During the first half of 2012, Jeanswear revenues rose 3 percent (5 percent in constant dollars), giving us confidence in our guidance for mid single-digit constant dollar revenue growth for the full year. Operating margin comparisons should continue to strengthen in the second half of the year.

Imagewear revenues continued to grow in the second quarter, rising 3 percent, with increases in both the Image and Licensed Sports businesses. As expected, the revenue comparison was tempered by the exceptionally strong growth achieved in the prior year’s quarter.

Also as anticipated, operating income and margin both declined in the quarter, as product costs peaked in the current period.

Imagewear revenues for the first half increased 8 percent, with mid single-digit growth still anticipated for the full year. Despite the impact of higher product costs in the first half of 2012, Imagewear operating margin should improve in the second half and exceed 2011 levels for the full year.

Sportswear revenues declined 2 percent in the second quarter, with double-digit growth in Kipling^® (U.S.) brand revenues offset by lower Nautica^® brand revenues. Nautica’s results in the quarter were reduced by a shift in the timing of special programs, as well as lower distressed sales in the quarter. On the positive side, the Nautica^® brand’s full price wholesale and direct-to-consumer businesses both achieved healthy growth in the quarter.

Sportswear operating income was about flat in the quarter, with a slight increase in operating margin to 9.8 percent from 9.7 percent in the second quarter of 2011.

First half revenues for Sportswear were up 4 percent, in line with expected mid single-digit growth for the full year.

Contemporary Brands revenues were down 9 percent in the quarter (6 percent in constant dollars), with the decline due entirely to the sale of John Varvatos. Excluding John Varvatos in both periods, revenues increased 4 percent (7 percent in constant dollars). The 7 for All Mankind^®, Splendid^® and Ella Moss^® brands each achieved higher revenues on a constant dollar basis in the quarter.

Operating income increased 12 percent in the quarter, with a 200 basis point improvement in operating margin to 11.1 percent from the prior year’s period. Excluding John Varvatos in both periods, operating margin improved to 12.2 percent from 9.9 percent.

All of the brands now in the Contemporary Brands portfolio are on track to deliver higher revenues this year, with double-digit growth expected in the Splendid^® and Ella Moss^® brands. Excluding John Varvatos, Contemporary Brands revenues should increase at a high single-digit rate in 2012. Due to the John Varvatos sale, total coalition revenues are expected to decline at a mid single-digit rate in 2012.

International Review (In Constant Dollars)

International revenues increased 42 percent in the second quarter, with 26 percentage points of the growth attributable to Timberland. Despite economic headwinds, organic revenues in Europe increased 16 percent driven by solid performance in the Vans^®, The North Face^®, 7 For All Mankind^® and Napapijri^® brands. In Asia, organic revenues increased 20 percent, with continued growth in the Lee^®, The North Face^®, Vans^® and Kipling^® brands. Organic revenue growth in China remains robust, rising over 30 percent in the quarter. International revenues reached 33 percent of total revenues in the quarter compared with 29 percent in the second quarter of 2011.

Direct-to-Consumer Review

Direct-to-consumer revenues increased 37 percent in the second quarter, with 29 percentage points of the growth attributable to Timberland. Direct-to-consumer revenues of The North Face^®, Vans^®, Nautica^® and 7 For All Mankind^® brands each achieved healthy growth in the period. A total of 34 stores were opened across our brands in the quarter, bringing the total number of owned retail stores to 1,071. Direct-to-consumer revenues reached 21 percent of VF’s total revenues in the quarter compared with 18 percent in the 2011 period.

Balance Sheet Review

Inventories continue to be tightly controlled. Excluding Timberland, inventories rose only 3 percent from June 2011 levels. Total inventories rose 22 percent from the prior year. Higher short-term debt levels compared with June 2011 are attributable to working capital needs. Given strong cash generation, short-term borrowings are expected to be paid down by year-end.

2012 Earnings and Cash Flow Guidance Raised

Based on the strong results achieved in the first half of 2012, adjusted earnings per share in 2012 are now expected to rise to approximately $9.50 per share, up $0.05 from the $9.45 per share guidance provided on April 27. Revised guidance covers an additional negative impact from foreign currency exchange of $0.07 per share compared to prior guidance. Given an assumed euro to U.S. dollar conversion rate of 1.22 for the second half, the full year negative impact of foreign currency translation is now estimated at $0.42 per share. The impact from higher pension expense in 2012 remains $0.19 per share.

The expected earnings contribution from Timberland in 2012 remains approximately $1.10 per share.

Guidance for adjusted earnings per share continues to exclude two items: 1) Timberland acquisition-related expenses of $0.24 per share, and 2) the $0.32 per share gain from the sale of John Varvatos. Inclusive of these two items, 2012 earnings per share on a GAAP basis is now expected to reach $9.58.

Revenues for 2012 are expected to rise by approximately 15 percent (17 percent in constant dollars) to $10.9 billion, with Timberland accounting for approximately $1 billion of the growth. Excluding Timberland, revenues should rise by approximately 6 percent (8 percent in constant dollars).

Reflecting strong working capital management, cash flow from operations is now expected to reach a record $1.2 billion in 2012.

Adjusted Amounts

This release refers to adjusted amounts that exclude restructuring and other costs related to the acquisition of Timberland, which approximated $5 million pretax ($0.03 per share) in the second quarter and $10 million pre-tax ($0.06 per share) in the first half of 2012, and are currently estimated at $35 million pre-tax ($0.24 per share) for the full year. Additionally, adjusted amounts referenced in conjunction with the second quarter, first half and 2012 annual guidance exclude the gain on the sale of John Varvatos Enterprises, Inc. of approximately $42 million pre-tax ($0.32 per share inclusive of a $0.10 per share tax benefit triggered by the sale). Reconciliations of GAAP measures to adjusted amounts are presented in the supplemental financial information included with this release, which identify and quantify all excluded items.

Dividend Declared

The Board of Directors declared a quarterly cash dividend of $0.72 per share, payable on September 20, 2012 to shareholders of record as of the close of business on September 10, 2012.

Webcast Information

VF will hold its second quarter conference call and webcast today at approximately 8:30 a.m. ET. Interested parties should call 1-877-675-4751 domestic, or 1-719-325-4891 international, to access the call. You may also access this call via the Internet at http://www.vfc.com. A replay of the conference call will be available from July 19 through July 26, 2012 via telephone at 877-870-5176 or 858-384-5517 (access code: 9450521), or at www.vfc.com.

About VF

VF Corporation is a global leader in branded lifestyle apparel with more than 30 brands. The company’s top six brands are The North Face^®, Wrangler^®, Timberland^®, Vans^®, Lee^® and Nautica^®; other brands include 7 For All Mankind^®, Bulwark^®, Eagle Creek^®, Eastpak^®, Ella Moss^®, JanSport^®, Kipling^®, lucy^®, Majestic^®, Napapijri^®, Red Kap^®, Reef^®, Riders^®, Splendid^® and Smartwool^®.

Forward Looking Statements

Certain statements included in this release and the attachments 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. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” and “may” and other words and terms of similar meaning or use of future dates. 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, but are not limited to, the level of consumer confidence and overall level of consumer demand for apparel; fluctuations in the price, availability and quality of raw materials and contracted products; disruption to VF’s distribution system; disruption and volatility in the global capital and credit markets; VF's reliance on a small number of large customers; the financial strength of VF's customers; VF’s response to changing fashion trends; 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, including the Timberland acquisition; 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; 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.

(Financial Tables Follow)

Source: VF Corporation

VF Services
Cindy Knoebel, CFA
VP, Corporate Relations
212-841-7141 / 336-424-6189
or
Lance Allega
Director, Investor Relations
336-424-6082