North Face 2004 Annual Report Download - page 36

67vf corporation 2004 Annual Report
as a percentage of our total retirement benefit
expense. In addition, the year-to-year variability of
our retirement benefit expense should also decrease.
•Restructuring charges – We have provided restruc-
turing charges related to actions taken to reduce our
manufacturing, marketing and administrative cost
structure and to exit underperforming businesses.
We have also recognized liabilities at newly acquired
businesses related to our intent to exit certain
activities or positions as we integrate the operations
of the acquired businesses with those of VF. These
liabilities relate primarily to workforce reduction and
consolidation and elimination of facilities. Severance
and related charges are accrued based on estimates
of amounts that will be paid to affected employees.
Asset impairment charges related to consolidation
or closure of manufacturing or distribution facilities
are based on estimates of expected sales proceeds for
the real estate and equipment. Plans to exit facilities
may result in charges for lease termination and losses
for future lease payments, net of estimated sublease
income. Losses may also result from termination of
existing contracts.
We reassess these liabilities at the end of each
reporting period. If circumstances change, causing
current estimates to differ from prior estimates,
adjustments are recorded in the period of change.
•Income taxes – VF’s income tax returns are regularly
examined by federal, state and foreign tax
authorities. These audits may result in proposed
adjustments. We, in consultation with our inde-
pendent advisers, have reviewed all issues raised
upon examination and other possible exposures
and have recorded amounts that reflect our best
estimates of the probable outcomes related to these
matters. We do not anticipate any material impact
on earnings from their ultimate resolution.
We have recorded deferred income tax assets related
to operating loss carryforwards and, when necessary,
have recorded valuation allowances to reduce those
assets to amounts expected to be ultimately realized.
An adjustment to income tax expense would be
required in a future period if we determine that the
amount of deferred tax assets to be realized differs
from the net recorded amount.
We have not provided United States income taxes
on a portion of our foreign subsidiaries’ undistrib-
uted earnings because we intend to invest those
earnings indefinitely. If we were to decide to remit
those earnings to the United States in a future
period, our provision for income taxes could increase
in that period. The American Jobs Creation Act
of 2004 contained provisions for a temporary
incentive for repatriation of foreign earnings during
2005. We are evaluating our foreign undistributed
earnings and studying the impact of the changes
in tax law. If we were to decide to remit some
or all of these earnings, the incremental income
tax expense related to the repatriation would be
recognized in 2005, along with any effects on
our deferred income tax assets and liabilities.
The balance sheet classifications and amounts of
accrued and deferred income taxes related to assets
and liabilities of acquired companies were based
on assumptions that could change depending
on the ultimate resolution of certain tax matters.
Since these income tax accruals and deferrals were
established in the allocation of the purchase price
of the acquired businesses, future changes in these
amounts could result in adjustments to Goodwill.
Cautionary Statement on
Forward-Looking Statements
From time to time, we may make oral or written
statements, including statements in this Annual
Report, that constitute “forward-looking statements”
within the meaning of the federal securities laws.
These include statements concerning plans, objec-
tives, projections and expectations relating to VF’s
operations or economic performance, and assump-
tions related thereto.
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 actual results could
differ materially from those expressed or implied in
the forward-looking statements.
Important factors that could cause the actual results
of operations or financial condition of VF to differ
include, but are not limited to, the overall level of
consumer spending for apparel; changes in trends in
the segments of the market in which VF competes;
ongoing selling price and cost pressures in the
worldwide apparel industry; financial strength and
competitive conditions, including consolidation,
of our customers and of our suppliers; actions of
competitors, customers, suppliers, service providers
and licensees that may impact VF’s business;
our ability to make and integrate acquisitions
successfully; our ability to achieve expected sales
and earnings growth from ongoing businesses
and acquisitions; our ability to achieve planned cost
savings; terrorist actions; natural disasters; and the
impact of economic and political factors in the
markets where VF competes or from which VF
imports products, such as recession or changes in
interest rates, currency exchange rates, price levels,
capital market valuations and other factors over
which we have no control.