Fourth Quarter 2012 Review

Revenues rose 4 percent (5 percent in constant dollars) to a record $3.0 billion from $2.9 billion in the same period of 2011 driven by strength in the Outdoor & Action Sports and Sportswear coalitions, and in our international and direct-to-consumer businesses. The sale of John Varvatos in April 2012 negatively impacted VF’s revenue growth by 1 percentage point in the fourth quarter.

Gross margin rose by 220 basis points to a record 47.4 percent, compared with 45.2 percent in the same period of 2011, reflecting improvements in every coalition. The higher gross margin reflects the continued shift in our revenue mix towards higher margin businesses and lower year over year product costs.

Operating income on an adjusted basis grew 28 percent to $457 million in the fourth quarter of 2012 compared with $358 million in the same period of 2011. On a GAAP basis, fourth quarter operating income increased 28 percent to $450 million, compared with $351 million in last year’s same period.

Acquisition-related expenses for Timberland were $7 million in the fourth quarters of both 2012 and 2011. Adjusted operating margin was 15.1 percent compared to 12.3 percent in the fourth quarter of 2011. On a GAAP basis, operating margin rose to 14.8 percent from 12.1 percent in the fourth quarter of 2011.

Net income on an adjusted basis grew by 32 percent to $344 million, compared with $262 million in the fourth quarter of 2011. Adjusted earnings per share – which excludes Timberland acquisition-related items of $0.09 per share in 2012 and $0.04 per share in 2011 – also increased 32 percent, to $3.07 from $2.32 during last year’s same period.

This increase includes the negative impacts of foreign currency translation of $0.04 per share and higher pension expense of $0.05 per share. On a GAAP basis, fourth quarter net income was $334 million, with a 31 percent increase in earnings per share to $2.98.

VF Corporation