North Face 2000 Annual Report Download - page 4

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To Our Shareholders
The elements are in place for improved
performance in 2001. By exiting unprofitable
businesses, reaping the benefits from acquisitions,
consolidating operations and strengthening our
leadership team, we have built a solid foundation
for renewed growth.
VF remains in a very strong financial posi-
tion. At year-end, our debt to capital ratio was
35%. Cash flow from operations of $443 million
gave us the flexibility to make acquisitions and
continue our share repurchase program. In 2000,
VF invested $106 million to repurchase four
million shares. We intend to continue to repurchase
our shares in 2001 as well. 2000 also marked
the 28th consecutive year of increased dividend
payments to our shareholders.
Recapping the Year’s Highlights
Strong brands. Backed by a steady flow of innova-
tive products, new marketing and great service,
VF’s brands generally performed solidly in 2000,
despite a lackluster retail environment. We are
particularly proud of the fact that our Wrangler
brand continued to expand its unit market share
and is now the number one jeans brand in the
U.S. Our Lee brand also had an excellent year,
with new products and retail service programs
driving strong gains. With our Wrangler, Lee,
Rustler, Riders, Brittania, Gitano and Chic
brands, VF holds a 27.5% share of the total jeans
market in the U.S., up from 24.7% in 1999. Our
European jeans brands also enjoyed a stronger
year in 2000, despite poor market conditions.
A continued emphasis on product innovation
also benefited our intimate apparel brands, as
evidenced by the success of new products such
as Vanity Fair’s Illumination®bras and the Lily of
France X-BraTM and Strappies bras. 2000 also
marked the successful launch of a new line of
intimate apparel under the licensed Tommy
Hilfiger brand. Our Playwear coalition, consisting
of our Healthtex, Lee and licensed Nike chil-
drenswear businesses, enjoyed an excellent year in
sales and profit growth. The knitwear industry
remains challenging, but we continue to make
strides in improving our competitive position
through lower cost manufacturing. Our JanSport
VF continues to strengthen its ability to take
advantage of changing economic and industry
conditions, giving us confidence in our outlook
for the future.
2000 was characterized by a volatile
stock market, a weak retail environment
and mixed financial results from many
industry participants. However, we made
solid progress on a number of important
fronts, including acquisitions, brand portfolio
development, cost reduction and systems. We also
were gratified by the increase in our stock price,
which rose 21% in 2000, compared with a 10%
decline for the S&P 500 index.
As we enter 2001, we believe we have the
right mix of brands, people and technology to
meet the needs of consumers and customers
around the world.
2000 Financial Performance
VF’s sales reached a record $5.7 billion in 2000,
reflecting strong jeans sales in the U.S. and the
addition of several new brands to our growing
portfolio. Excluding unusual items, earnings per
share were $2.98, compared with $3.04 in 1999.
In the fourth quarter of 2000, we took a
variety of actions to improve future profitability,
including exiting underperforming businesses and
product lines, closing higher cost manufacturing
facilities and consolidating distribution and
administrative operations. These actions, which
resulted in a charge to earnings in 2000 of
$120 million, or $.67 per share, should benefit
earnings by $45 million annually. Earnings were
also affected by a change in accounting policy
for revenue recognition in accordance with new
SEC guidelines. Reflecting both the restructuring
charge and the change in accounting policy, we
reported earnings per share of $2.25 in 2000.
Our core jeanswear, playwear, daypack,
knitwear and international businesses performed
well in 2000, but the dilutive effect of acquisitions
made during the year, difficulties in integrating
several workwear companies acquired in 1998
and 1999, and operating losses from our Wrangler
Japan business affected our bottom line.
Mackey J. McDonald
Chairman, President
and Chief Executive
Officer