V.F.
Annual Report 2006

Plain-text annual report

® A Year of from A to Z VF corporation SUMMARY ANNUAL REPORT 2006 financial highlights Dollars in thousands, except per share amounts 2006 2005 2004 Summary of Operations Total revenues Operating income Operating margin Income from continuing operations Discontinued operations Cumulative effect of a change in accounting policy Net income* Return on invested capital Financial Position Working capital Current ratio Cash flow from continuing operations Debt to capital ratio Common stockholders’ equity Per Common Share Income from continuing operations — diluted Net income — diluted* Dividends Book value $ 6,215,794 826,144 13.3% 535,051 (1,535) — 533,516 14.7% $ 5,654,155 767,951 13.6% 482,629 35,906 (11,833) 506,702 14.2% $ 5,218,066 664,357 12.7% 398,879 75,823 — 474,702 13.4% $ 1,563,162 2.5 $ 1,213,233 2.1 454,128 533,654 $ 1,006,354 1.7 646,372 19.5% 22.6% 28.5% 3,265,172 2,808,213 2,513,241 $ $ 4.73 4.72 1.94 29.11 $ 4.23 4.44 1.10 25.50 3.54 4.21 1.05 22.56 * Net income and related per share amounts include operating results of discontinued operations in each year and the cumulative effect of a change in accounting policy for stock-based compensation in 2005. See details in our 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission, accessible on our website, www.vfc.com. The art and science of apparel converge in VF’s brands. We are taking advantage of new processes, new technologies and new product enhancements to build lifestyle brands that are high-tech, high-performance and highly desirable. The result is fashion innovation, wearable technology and rugged styles for extreme conditions. Manufacturing and marketing have become more exacting, more tailored and more targeted as well. We have developed sophisticated tools to mine sales data to fuel our forecast engine, and built a global supply chain and replenishment program that is second to none. From A to Z, top to bottom, across all of our coalitions, we look for opportunities to broaden our product categories and expand our geographic reach, and to do so in a way that enhances customer satisfaction and creates shareholder value. innovations All  innovations have been organized into five categories that are  fundamental to our success. B branding corporate citizenship geographic expansion product innovation supply chain aa B authentic branding JeansWear WRANGLER The largest annual sporting event in Las Vegas, the Wrangler® National Finals Rodeo draws more than 175,000 spectators each year. Las Vegas literally transforms itself into “Wrangler® town,” with hotels, casinos, restaurants and shopping malls filled with Wrangler® jeans, hats and other apparel, and neon-lit marquees and billboards emblazoned with the Wrangler® brand name. As the one and only title sponsor of what is the biggest event on the pro rodeo circuit each year, the Wrangler® brand dominates the sport. More than 96 percent of professional rodeo cowboys wear Wrangler® products, and dozens of contestants can be seen with Wrangler® trademarks on their collars and sleeves, not just during the 10-day competition but throughout the year. Fans come away with the clear impression that if you want to look like an authentic cowboy, you have to wear Wrangler® apparel. VF CORPORATION SUMMARY ANNUAL REPORT 2006  bb boutiques geographic expansion sportswear kipling Continuing its expansion strategy in the U.S., the Kipling® brand is introducing European cool stateside with new shop-in-shop boutiques in department stores. The Kipling® brand is also currently available in several new, free-standing Kipling® boutiques in Florida, New York, New Jersey and California, as well as other department stores and fine retailers throughout the country. These dedicated Kipling® stores provide a venue to test new product extensions and marketing initiatives that resonate with U.S. consumers. The internationally celebrated Belgian brand — long known for its colorful handbags, backpacks, totes and travel accessories — reinforced its image of Euro-chic in America by delineating its retail space using brushed stainless steel floor fixtures with white painted finishes, intricate displays and elements of the Kipling® brand’s newest ad campaign. Every element of the shops is designed to capture the Kipling® brand essence and personality — hip, fun, stylish and adventurous.  VF CORPORATION SUMMARY AnnUAl REpORT 2006 cc narragansett, ri PLANET REEF tm TOUR SURF CONTEST PARTIES PRODUCT GIVEAWAYS AUTOGRAPH SIGNING MISS REEF RAFFLE CONTEST los angeles, ca san diego, ca long island, ny ocean city, nj wildwood, nj virginia beach, va wrightsville beach, nc coast to coast B branding outdoor REEf The Reef ® brand has taken its grassroots marketing campaign to the sunny beaches of America, where its target 17- to 24-year-old customers love to hang out. The unparalleled 1,000-mile Planet Reef ™ Tour is a mobile celebration of all things Reef ® . In 2006, the 10-day tour kicked off in Wrightsville Beach, North Carolina, at the Reef ®/Sweetwater Pro-Am surf contest and headed north with stops at various surf breaks along the Eastern seaboard. Locals turned out in droves for the chance to surf with pipeline champion Rob Machado, get autographs from their heroes Brad Gerlach, Ben Bourgeois and Evan Valiere, meet the Reef ® Girls and have Planet Reef ™ artists embellish Reef ® products. The Planet Reef ™ entourage then switched coasts, stopping off at beaches from San Diego to Santa Cruz. An authentic and cost- effective way to reach young customers in their own environment, the Planet Reef ™ parties showed surf-loving fans how perfectly the Reef ® brand fits right into their scene. VF CORPORATION SUMMARY ANNUAL REPORT 2006  dd details product InnovatIon sportswear nautica In a bid to build its market share in knit shirts, the Nautica® brand is introducing The Deck Shirt as a centerpiece of its Spring 2007 collection. The new sportswear product incorporates everything active consumers say they want in a classic short-sleeve knit shirt. Made of 100% premium pima cotton, The Deck Shirt feels soft and luxurious, yet its reinforced split-tail hem and crisp Lycra® “no-curl” collar look sharp all the time. The Nautica® designers considered every detail when creating the shirt, including printing the interior label on the fabric to address consumers’ frustration with scratchy tags. Consumer product testing generated rave reviews, with respondents confident that the superior fabric will withstand multiple washings and support their active lifestyles. The Deck Shirt has been embraced by the brand’s retail partners, who say they see it as an exciting product innovation that will differentiate the brand from its competitors. The launch will be supported by a fully integrated 360° marketing campaign with a dedicated micro-site, thedeckshirt.com, an energetic national print campaign, outdoor advertising in major markets and specially designed in-store fixtures. The Deck Shirt will also be the new official shirt of the AVP Pro Beach Volleyball tour and the U.S. Sailing Team.  VF CORPORATION SuMMaRY annuaL REPORt 2006 ee expedition B branding outdoor ThE NORTh fAcE When The North Face® athletes reached the summit of Mount Everest in fall 2006, the story was just beginning. The mountain- eering world immediately took note of all aspects of the expedition, including The North Face® gear that proved crucial to the team’s success. The adventure really gained momentum when Kit and Rob DesLauriers and Jimmy Chin stepped into their skis and began what would become a legendary descent. For Kit, it fulfilled a dream to ski all Seven Summits, the highest points on each of the seven continents. It also gave reality to The North Face ® brand commitment — Never Stop Exploring®— as evidenced in The North Face® brand’s bold backing of such an extraordinary feat. The breathtaking achievement of The North Face® athletes’ expedition attracted global media attention, and served to rein- force the reputation of The North Face® brand as the ultimate, authentic outdoor brand. VF CORPORATION SUMMARY ANNUAL REPORT 2006 11 fire resistant product innovation imageWear bULWARk VF Imagewear’s Bulwark® brand, the leading supplier of secondary flame-resistant (FR) apparel in North America, has launched Excel FR ™ fabric as the latest advance in flame-resistant protection. Excel FR ™ continues the Bulwark® brand’s legacy of uncompromising attention to wearer safety — a fact that has made it a brand known and trusted by thousands of workers in industries such as chemical, oil, gas, petrochemical and electric utilities. All Excel FR ™ fabrics and treatments now come from a single source. The same mill converts fiber to yarn, handles all weaving and dyeing and does all finishing and fabric treatments. Vertically integrating the process from start to finish gives VF Imagewear unprecedented quality control capabilities and also allows the Bulwark® brand to offer a great product at an outstanding value to its customers. BULWARK® EXCEL FR™ FABRIC hazards EXPLOSION FLAMMABLE SUBSTANCE FLAME SPARKS ELECTRIC ARC ff electrical utilities industry electrical maintenance industry petrochemical industry industry-specific protective apparel industry-specific protective apparel industry-specific protective apparel 12 VF CORPORATION SUMMARY ANNUAL REPORT 2006 7 oz. Dress Uniform Shirt Arc Rating 7.7 ATPV calories/cm2 Pre-washed 14.75 oz. Denim Jean Arc Rating 11.2 ATPV Button Front Plaid Dress Uniform Shirt Arc Rating 7.7 ATPV calories/cm2 Work Pant Arc Rating 11.2 ATPV Deluxe Coverall Arc Rating 4.8 ATPV gg guiding corporate citizenship outdoor ThE NORTh fAcE Virtually every guided Himalayan expedition relies upon the people of Nepal. However, what the Nepalese have in navigational skills and superior fitness, they lack in formal training in the craft of climbing. This translates to more risks on the mountain than are necessary. For three years running, The North Face® brand has brought together a team of renowned mountaineers to share crucial climbing skills at the Khumbu Climbing School (KCS), in the shadow of Mount Everest. The KCS addresses a serious need while also helping the sport move forward. A project of the Alex Lowe Charitable Foundation, dedicated to preserving the legacy of the legendary climber, the KCS has been a resounding success. Most recently, five graduates guided a team to the first post-monsoon season summit of Mount Everest in four years. Says The North Face® athlete and KCS instructor Conrad Anker, “It is our responsibility as alpinists to make the work the Nepalis do on our behalf safer.” The North Face® brand recognizes that responsibility as well and is committed to supporting the Khumbu Climbing School. VF CORPORATION SUMMARY ANNUAL REPORT 2006 1 hh heroic corporate citizenship imageWear ThE fORcE VF Imagewear’s The Force®, a line of uniforms specially designed for law enforcement professionals, has taken its commitment to the law enforcement community to a new level. To demonstrate its strong support for those who put their lives in danger in the line of duty, The Force® brand created an award program, open to all law enforcement agencies nationwide, called the Positive Force Award. In 2006, the second annual Positive Force Award was presented at the International Association of Chiefs of Police Conference to Officer Timothy Greene of the Rock Hill, South Carolina, Police Department. Officer Greene and five runners-up were selected from hundreds of nominees by an independent committee of law enforcement leaders and industry luminaries. The committee based its decision on The Force® brand’s “Made for Heroes” philosophy. Officer Greene, who was a rookie at the time, proved his valor by engaging in a lengthy gun battle and car chase while persuing an armed robber. For his exemplary courage, the Positive Force Award provided him with a $5,000 cash prize and another $5,000 donation to the charity of his choice. This prestigious award program has strengthened ties between law enforcement and The Force® brand. 16 VF CORPORATION SUMMARY ANNUAL REPORT 2006 JANSPORT® LIVEWIRE tm BLUETOOTH® & IPOD® INTEGRATED BACKPACKS bluetooth® mobile phone compatible technology shockshield laptop sleeve fits 15.4” laptop headphone jack ii ipod® connection 3G iPod® or newer ... bluetooth® toggle control integrated product innovation outdoor jANSPORT After introducing its iPod ®-enabled snowboarding jackets, the JanSport ® brand is taking wearable electronics a quantum leap forward with a cutting-edge collection of backpacks that range from basic MP3 capabilities to full Bluetooth® connectivity. The JanSport ® brand’s proprietary LiveWire ® technology has been incorporated into three packs: the original LiveWire ®, LiveWire+, and LiveWireBT (Bluetooth®) styles. The first connects to an iPod ® via the headphone jack and offers a handy above-the-pocket shoulder-strap compartment for the player. The second connects via the dock connector and has a soft-fabric keypad with five button controls of all iPod ® features. The third uses Bluetooth® technology to link a mobile phone and an iPod ® for hands-free use. Ideal for college students hiking across campus as well as outdoor enthusiasts yearning for the sound of music in alpine meadows, the JanSport ® LiveWire™ collection lets users count on maximum freedom and minimum fuss, and music wherever they go. full remote control for ipod® six separate compartments integrated raincover VF CORPORATION SUMMARY ANNUAL REPORT 2006 19 JeansWear supply chain JeansWear VF Jeanswear’s Vendor Managed Inventory (VMI) and Retail Floor Space Management (RFSM) systems incorporate a strategy of forecasting and managing merchandising, sales, marketing and supply chain, all rolled into one. Unsurpassed in the apparel industry, these customized, computer-driven programs give VF and participating retailers a hefty competitive advantage. They let VF amass point-of-sale information daily from retail customers, analyze the data to refine the assortment and stocking levels of VF products and then automatically replenish the retailers’ selling space. A store near a college campus, for instance, receives a different assortment than a store near a retirement community in the same town. The result has been maximized retail sales and gross profit, enhanced in-stock levels of products, improved inventory turns, fewer markdowns and optimal gross margin return on inventory. This transparent look at retail sales means that consumers can expect to find the right assortment of products in the stores where they shop. For VF, retailers and consumers, it is a win-win-win program. 20 VF CORPORATION SUMMARY ANNUAL REPORT 2006 JEANS REPLENISHMENT MODEL retailers with vendor managed inventory 1010110 0101010 1101010 Jj result VF analyzes daily point-of-sale information from retail partners VF generates replenishment orders Customized assortments of the right number of jeans are delivered to the right retailer at the right time Improved retail turnover Higher profits Satisfied retailers Satisfied consumers retailers without vendor managed inventory result Rush delivery expenses Depleted stock Missed sales Dissatisfied consumers s a l e ! result Lower prices Lower profit Clearance merchandise Dissatisfied retailers Vendor waits for retailers’ orders Not enough jeans are ordered or jeans are delivered too late Too many jeans are ordered or delivered at any time kk knapsack geographic expansion outdoor EASTPAk Europe’s undisputed market leader in packs, the Eastpak ® brand has now staked its claim in South America with a 300-square-meter flagship store in São Paulo, Brazil. This expansion reflects the brand’s pursuit of an aggressive international growth program in all regions including Asia, the former Eastern Bloc and the Americas. The São Paulo store is the first Eastpak® location in the Americas. Offering the full range of Eastpak® products from colorful, sturdy bags to sporty apparel, the São Paulo store reflects the cutting- edge trends of Brazilian street culture. A lounge area with WiFi access invites young sophisticates to surf the Web and catch up on e-mail. A dedicated gallery area stages art exhibitions, while the center of the store hosts a juice and snack bar that is the perfect place to meet up with friends. Large video screens and professional DJ equipment create the right ambiance for special promotions and product launches, and a “customization lab” has local artists on hand to personalize newly purchased bags to the shoppers’ own tastes. The Eastpak® brand has blurred the line between shopping and entertainment — and made the brand synonymous with fun. VF CORPORATION SUMMARY ANNUAL REPORT 2006 2 ll legends B branding outdoor vANS Skateboarding legends Tony Alva, Geoff Rowley, Dustin Dollin, Anthony Van Engelen and Tony Trujillo have their say in designing and developing skateboarding footwear for the Vans® brand, the maker of the original Off the Wall ® skateboard shoe introduced in 1966. In fact, Alva, credited for originating vertical skateboarding, was instrumental in designing the now classic Era™ shoes in 1976, and is the inspiration behind the brand’s pro-model Mid-Skool ™, which will launch in 2007. Manufactured to the high performance standards of top skateboarding pros, the signature Vans® classics are demoed by the stars themselves in a Vans® marketing campaign that includes print, film, online, podcast, point-of-sale displays, in-person store appearances and skateboarding contests. In 2006, Vans podcasts made the Top 100 iTunes Podcasts list in the People’s Choice category — a sign that its message is right on the mark. The superior grip, shock absorption and comfort of Vans® shoes are evident for all to feel. From Dogtown — the Santa Monica home- turf of skateboarders — to the Dew Action Sports Tour, Vans® skate- boarding footwear has dominated the sport for more than 40 years. 24 VF CORPORATION SUMMARY ANNUAL REPORT 2006 mm modern product innovation JeansWear LEE EUROPE The Lee®Gold Label ™ denim collection, a premium initiative from Lee® Jeans, takes its inspiration from the brand’s rich heritage. It utilizes the design wealth and production expertise housed in the Lee® Jeans archives to create the brand’s ultimate collections. Lee®Gold Label ™ features two distinct lines: Originals and The New Original. The Originals line is for the denim purist, recreating key styles from the Lee® archives to the highest precision. Every detail, including the narrow loom selvage fabric, has been care- fully crafted to tell a story about the exhilarating period in which the jeans were originally made. The New Original line plays with iconic fabrics, details, volumes and silhouettes, but also reworks Classic 101 and workwear styles. Lee ®Gold Label ™ lines, distributed through specialty stores across Europe, extract the best from the past and transform the elements into a dynamically fresh and exciting lifestyle brand. What consumers experience is a passion for denim, both contemporary and romantically historic. VF CORPORATION SUMMARY ANNUAL REPORT 2006 2 natural fit LEE® NATURAL FIT INSTANTLY SLIMS YOU™ product innovation no-gap waistband ensures comfort nn JeansWear LEE Instantly Slims You™ is more than a tagline for Lee® Natural Fit jeans. It is the outcome of extensive research development and design innovation. With 40 percent of women surveyed reporting that their “abs” were the first thing they looked at in a mirror when trying on a new pair of jeans, Lee® designers used focus groups, fit testing and 3-D body scan research on more than 10,000 women to identify 200 body points relevant to fit. The data helped them engineer a jeans collection that accentuates the positive and offers more slimming silhouettes. Lee® Natural Fit jeans and pants feature a unique interior construction with pockets that span the entire front panel, giving an extra layer of fabric to provide tummy support. Side seams are moved forward to create the illusion of longer, slimmer legs and the no-gap waistband ensures comfort. The result is flatter-looking abs and grateful women consumers. 2 VF CORPORATION SUMMARY ANNUAL REPORT 2006 side seams moved forward for the illusion of longer, slimmer legs This innovative pocket lining comfortably holds your tummy in, creating a slimmer you! straight leg or bootcut creates a slimmer, taller silhouette oo olympics B branding outdoor NAPAPijRi With more than one-and-a-half million spectators flocking to Torino, Italy, for the 2006 Winter Olympics, the Napapijri ® brand seized the opportunity to put itself at the center of the après-event festivities by opening a café in the Olympic Village in Sestriere, the site for all alpine skiing activities. A historic eatery in Sestriere’s main square, opposite the finish line, was renamed the Napapijri Café, and redone entirely in Napapijri ® style, both inside and out. The café quickly became a welcome gathering place for the thousands of visitors who sought a convenient place to unwind, and a great platform for the Napapijri ® brand to have models showcase its latest skiwear. The brand also made its presence felt throughout the Olympic Village with Hummer® vehicles, emblazoned with its name, offering shuttle service to guests and the media. The central locale of Napapijri Café provided a natural venue for a number of social events so that everywhere Olympic fans turned, they were met by the Napapijri ® brand name. VF CORPORATION SUMMARY ANNUAL REPORT 2006 1 pink thinking corporate citizenship LEE, WRANGLER, NAUTicA The fight against breast cancer has a strong ally in VF. Adopting pink, the signature color associated with breast cancer awareness, three VF brands have come up with their own unique approach to supporting this cause. Over the past decade, Lee® Jeans has championed the cause by urging millions of people to wear denim on Lee National Denim Day® in October in exchange for a $5 donation for breast cancer prevention and treatment services. To date, Lee National Denim Day® has raised more than $61 million, $5.5 million in 2006 alone. In its “Tough Enough to Wear Pink” campaign, the Wrangler® brand launched an industry-wide program that turned the Wrangler® National Finals Rodeo into a massive forum for breast cancer awareness, with cowboys turning the arena pink by competing in special-edition pink Wrangler® shirts. The Nautica® brand, too, has joined the fight by issuing a Pink Collection of women’s sleepwear for Breast Cancer Awareness Month in October — an initiative that led to the donation of $83,000 to the Susan G. Komen Breast Cancer Foundation in 2006. With nearly a quarter-million Americans diagnosed with breast cancer each year, VF brands will continue to “think pink” until a cure is found. 2 VF CORPORATION SUMMARY ANNUAL REPORT 2006 VF’S SUPPORT FOR BREAST CANCER AWARENESS Lee National Denim Day® has raised more than $61M for the fight against breast cancer. pp $5.5M total contribution in 2006 $6+ million $1M+ $83K lee national denim day® nautica® “pink collection” wrangler® “tough enough to wear pink” “Tough Enough to Wear Pink” Night at the Wrangler∏ National Finals Rodeo sold out, with 18,000 live fans and 10 million home viewers via ESPN2. Nautica∏ “Pink Collection” advertisements in major newsstand publications led to 100 million total gross impressions. THE NORTH FACE® ULTRA-TRAIL TOUR DU MONT-BLANC UP F 4 0 + Quic k drying Anti micro b ia l TPU injection saddle: lateral and m e dial stability and support UPPER Bo a™ multi - adjust lacing sys tem Fo r ul tra-d istance running U PF 30 + Strategically p laced m esh i nsets for b reathab il it y Antimicrob ia l 10 0oz Nal gene® b ladd er 2 com partments Articulated magnetic b ite v alve VORTEX tee AGILENT short ARNUVA 50 BOA shoe HAMMERHEAD hydration pack qq 163km TRAIL 8500m ELEVATION GAIN 3 COUNTRIES 7 VALLEYS 400 PEAKS 71 GLACIERS 48 COUNTRIES REPRESENTED f r a n c e v vallorcine Col de Montets ol ar argentière Haute-Savoie trient alpage de bovine champex champex Valais mont dolent 3,823m chamonix start/finish saint-gervais les houches mont blanc 4,807m Col de Voza Grand Col Ferret arnuva praz de fort la fouly Ferret s w i t z e r l a n d alpage de la peule les contamines les contamines Notre Dame de la Gorge chalet de la balme Refuge de la Croix x me du Bonhomme refuge bonatti Val d’Aoste col checrouit maison vieille refuge bertone may courmayeur courmayeur Refuge Elisabetta Savoie Col de la Seigne La Ville des Glaciers les chapieux i t a l y Compression fa bric for enhanced performance Quick drying F latlock seams for comfor t Antimicrobia l THERMASTRETCH tight Wa terpro of, breathable , seam- seale d Magic Sea m™ construct io n Only 8. 5o z Lightweight, d ura b le EVA mid sole with X-2™ cushioning Tenacious Grip™ for excellent off-road traction Velc ro® adjustabl e cuffs DIAD jacket ARNUVA 100TR shoe N orthotic™ er gonomically designed footbed quest B branding outdoor ThE NORTh fAcE In keeping with its brand philosophy of helping athletes explore their physical and mental limits, The North Face® brand was once again the title sponsor of The North Face® Ultra-Trail Tour du Mont-Blanc. The arduous, nonstop 163-kilometer ultramarathon circles the rooftop of Europe, taking racers over trails at elevations of 8,500 feet and crossing borders between France, Italy and Switzerland. Showcasing the grandeur of Mont Blanc with its seven valleys, 400 peaks and 71 glaciers along the way, The North Face® competition is considered the longest, most challenging and most prestigious ultramarathon in Europe, drawing more than 2,500 athletes from around the world in 2006. An average hiker completes the Tour du Mont-Blanc trail in seven to 10 days and passes the night in different mountain huts or villages along the way. Last year’s race winner broke the tape in just over 21 hours. VF CORPORATION SUMMARY ANNUAL REPORT 2006  rr runWay B branding sportsWear jOhN vARvATOS John Varvatos, one of the hottest fashion designers around, has launched a new lifestyle collection titled John Varvatos H USA ™. Available in fine department and specialty stores as well as all John Varvatos boutiques, the John Varvatos H USA ™ collection is geared toward consumers with a young spirit. A preppy-meets- punk aesthetic look that gives rise to funked-up classics, the John Varvatos H USA™ line ranges from vintage-inspired authentic denim, knitwear and woven shirts to tailored clothing, dress shirts, ties and tailored outerwear. Though they are new, the pieces feel comfortable and familiar. The collection bridges the pricepoint between designer and contemporary, something very new to menswear. At the same time, it embodies a designer point of view and quality. The fabrics and leathers used are all exclusive developments with unique innovations at every turn. The line is an extension of the John Varvatos® Collection, launched in 2000. Mr. Varvatos is a much-lauded designer, recognized by the Council of Fashion Designers of America with an American Fashion Award for New Menswear Designer in 2000 and Menswear Designer of the Year awards in 2001 and 2005. 6 VF CORPORATION SUMMARY ANNUAL REPORT 2006 VF ASIA SOURCING Other Asian Countries 38 sourcing associates 37 ss sourcing supply chain VF ASIA SOURCING BALANCE by percent 37 2 2 18 4 Pakistan 17 sourcing associates Bangladesh 40 sourcing associates India 33 sourcing associates China 145 sourcing associates Hong Kong — VF Asia HQ 682 sourcing associates Indonesia 8 sourcing associates vf asia comparison 2001 2006 $150 million in products sourced 80 associates Few brands Few styles Numerous small-volume vendors $1.6 billion in products sourced 950 + associates 48 brands 200 products and 10,000 styles Consolidated vendor base — Top 20% >50% VF Asia sourcing represents more than 60% of VF’s total production vf asia When it comes to containing costs, VF has a powerfully effective advantage in its Asia sourcing program. Over the last five years, the global sourcing team in Asia has saved the company an estimated $100 million — money that has significantly improved VF’s profit margins and freed substantial funds to reinvest in product enhancements. VF is not a newcomer in Asia. More than 30 years ago, VF began developing and sourcing products there for American, European and Asian markets. Headquartered in Hong Kong, VF Asia today maintains a sourcing team of more than 950 associates and manages over 60 percent of VF’s units worldwide. The Asia team focuses heavily on speed- to-market and product development and factory compliance, ever mindful that distance is a challenge for those in Western markets. In recent years, the Asia team has collaborated with vendor partners and leveraged VF’s scale to improve cycle times on key programs. It has established development centers to help create new merchandise, and found ways to eliminate inefficiencies through VF’s supply chain. Evidence of its effectiveness can be seen in VF’s lean inventories, reduced duty rates, and enhanced container and fabric utilization. As more Western companies begin building their own Asia sourcing units, VF will have a competitive edge with its long history, substantial scale and talented team in the region. VF CORPORATION SUMMARY ANNUAL REPORT 2006 9 technology product innovation drink tube temperature sensor insulated drink tube sleeve tt led status indicator outdoor ThE NORTh fAcE The North Face ® brand tackles the bane of winter outdoor athletes with a new HTR™ heated hydration system that keeps water from freezing even in harsh conditions. Powered by four AA batteries, The North Face ® HTR ™system combines the proven power of insulation with thermal technology to keep water in a liquid state for at least 20 hours at 15º F (-10º C). Available in a water-pack/backpack unit called Snowday and a water-pack sleeve called Flask, the system has a sensor that monitors the temperature of the water in the hose and activates the heat function when it approaches freezing. In 2006, The North Face® brand introduced another breakthrough in outdoor gear — the ultralight Spectrum 23 tent. Able to withstand winds of over 130 miles per hour in wind-tunnel tests, this tent combines rugged construction with a revo- lutionary frame design that fends off the wind by funneling air through vents in the dome. As a result, it offers shelter from the harshest conditions imaginable. True to its heritage, The North Face® brand continues to bring technical innovations to its gear and apparel to help the outdoor athlete explore further and more comfortably. 40 VF CORPORATION SUMMARY ANNUAL REPORT 2006 active heating elements insulated bite valve garage htr control unit VF IMAGEWEAR & FEDEX Employee accountability Employee satisfaction Orders placed according to needs of employee uu uniforms supply chain employee requests order with manager org code job code location code Ordering process is streamlined Brand and uniform compliance manager or admin enters employee’s codes into system Use-it-or-lose-it spending statistically 10% of allowance not spent Credit card purchases facilitated for employees who want to spend more balance: $175 Yearly uniform budget defined based on head count System efficiencies resulted in cost savings system displays region-specific options and displays employee’s remaining allotment and allowance sint-niklaas, belgium henning, tennessee hong kong orders delivered within 2 days based on locations determined by system imageWear fEdEx FedEx Freight singled out VF Imagewear from a field of more than 15,000 suppliers worldwide to be one of 15 suppliers recognized for outstanding performance in 2006. VF Imagewear manages the uniform program for nine separate operating companies within FedEx, ships to over 6,000 FedEx locations worldwide and supplies uniforms to more than 150,000 FedEx employees and contractors. VF Imagewear designed and now manages five customized websites for FedEx. In 2006, VF Imagewear was named by FedEx Express as a Platinum supplier, the highest possible performance ranking within the FedEx Express vendor system. In conducting its evaluation, FedEx Express gave VF Imagewear particularly strong marks for system enhancements, global availability and value-added services. FedEx Freight also recognized VF Imagewear with an Outstanding Performance Award for its dedication as a Gold supplier and lauded VF Imagewear for its prompt delivery, innovative ideas and superior quality. Such recognition is high praise from a company that prides itself on timely deliveries and service excellence. VF CORPORATION SUMMARY ANNUAL REPORT 2006 4 venture geographic expansion LEE, WRANGLER, kiPLiNG, NAUTicA, jANSPORT With the rapidly growing middle class in India now numbering more than 300 million, opportunities abound for VF as brand- conscious Indian consumers clamor for the latest apparel sold in upscale shopping environments. In 2006, VF formed a joint venture with our licensing partner, Arvind Mills, Ltd., to grow our business throughout India. Majority owned by VF, the joint venture encompasses our Lee ®, Wrangler ®, Kipling ®, Nautica® and JanSport ® brand businesses. Not only do these brands enjoy sizable name recognition in India, they communicate the allure of the Western lifestyle. Nautica® stores, which now exist in Bangalore, New Delhi and Chennai, with others planned, reflect the brand’s “navigator” concept through its classic yachting fixtures. In Bangalore, the world’s largest Wrangler® store, which also sells Lee® products, conveys the spirit of the urban cowboy and authentic Western heritage in its interior décor. Youthful and fashion- oriented, the themed stores heighten the pleasure of experiencing VF brands, while providing VF with an exciting new growth opportunity. Through the new joint venture, VF expects its business in India to grow at a rate of more than 25 percent annually. 44 VF CORPORATION SUMMARY ANNUAL REPORT 2006 RETAIL STORES IN INDIA vv Chandigarh New Delhi Delhi Agra Baroda South Tukoganj Bhopal Ranchi Kolkatta Mumbai Pune Hyderabad Bhubaneshwar Vizag Bangalore Jayanagar Chennai Coimbatore Cochin WRANGLER® STORE LEE® STORE KIPLING® STORE NAUTICA® STORE Ww Wanted B branding JeansWear WRANGLER EUROPE The spirit of the Wrangler ® brand and the outlaw adventure of the American Wild West are vividly brought to life in Europe by the Wrangler ® “Wanted” campaign, now the longest-running European campaign in the history of the brand. Playing off of the double meaning of the word “wanted,” the marketing program evokes the Wrangler ® brand’s authentic Western roots while simultaneously appealing to the yearning of today’s youth to live on the edge. Featuring eye-catching contemporary photographs, “Wanted” has been rolled out in 22 European countries through traditional and nontraditional media and will be followed in 2007 with more maximum-impact events. Market research has shown that the campaign has enhanced the perception of the Wrangler ® brand among 25- to 35-year-olds, which, in turn, has spurred brand sales. For a whole new generation of consumers, the Wrangler ® brand has extended its reputation beyond rugged functionality to a fashion look that is both sexy and daring. VF CORPORATION SUMMARY ANNUAL REPORT 2006 4 xx experience geographic expansion JeansWear LEE chiNA With China shaping up to be the next frontier in jeans, the first Lee® concept store opened in Shanghai at the end of 2006. Located in a brand-new upscale shopping mall, the stand-alone Lee® store targets Shanghai’s emerging affluent consumers. More than simply a venue for selling Lee® products, the store is intended to let young, fashion-conscious Chinese experience the excitement of the Lee® brand. The store blends a strong Lee® brand story into the different elements of the decor, with innovative use of antique furniture, denim wall fixtures, rough brick surface, and black steel finishes. The effect is Western-style industrial chic. The concept store is also positioned as a place for the Lee® brand to cultivate a special connectivity with the local community through in-store and off-site music and art events and activities, including the Lee® Passion4Music platform at China’s largest underground and alternative music festival. Currently the leader in terms of volume and image in the premium and upper-end price segment of the China jeans market, the Lee® brand is strengthening consumer loyalty. Plans call for opening eight additional Lee® stores in China in 2007, with more to follow. 4 VF CORPORATION SUMMARY ANNUAL REPORT 2006 VF IMAGEWEAR CUSTOMER FIRST SUPPLY CHAIN at the super bowl Final game countdown yy At the Tampa command center: VF Imagewear is ready to call in instructions to printers everywhere at the printer Call received from Tampa — production begins! y a b a p m a t Shirts ready for printing blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l blanks l952 size l Empty boxes ready to be filled with championship product and sent to distribution center Blank shirts to be printed at the distribution center orders are packed & delivered to customers orders Orders filled Product delivered to retailers at the retailer in as few as 4 hours 1 1 1 Satisfied consumers yield supply chain imageWear NfL fANWEAR The end of the Super Bowl kicks off the action for the VF Imagewear team with not a moment to spare. Before fans even leave the stadium, screen printing and embroidering of Super Bowl champion logos begin on hundreds of thousands of T-shirts and sweatshirts. The work continues throughout the night. By 2 a.m. on the Monday after the game, retailers begin picking up inventory to seize their hometown advantage. A long-standing licensee of the NFL, VF Imagewear starts months in advance to make sure that the right team graphics are ready to go the instant the clock runs out. No matter which team wins the Super Bowl, one thing is certain — the fans will be celebrating in VF Imagewear. VF CORPORATION SUMMARY ANNUAL REPORT 2006 1 zz zone product innovation outdoor vANS As the leader in integrating Boa™-enclosure technology for snowboard boots for more than five years, the Vans® brand has leapt even further ahead of its competition by offering the next-generation Boa™ Focus Closure System. Boot fit is a principal concern of all snowboarders, and the Boa™ System allows for a more consistent and customizable fit throughout the boot using adjustable upper and lower zones. The result is an exact fit that concentrates closure on the instep, the all-important Focus Zone for heel hold-down. The latest Vans® offering is a Boa™ lacing system that allows snowboarders to fine-tune their fit with an effortless dial twist. No straining to tighten frozen laces. The Boa™ Coiler Reel prevents any slack in the cables. Wearers can select the perfect tightness and distribute the fit perfectly across the entire boot, resulting in fewer pressure points than laces. 2 VF CORPORATION SUMMARY ANNUAL REPORT 2006 I am pleased to report that 2006 marked another year of record financial performance, great progress in our efforts to transform VF and excellent returns for our shareholders. We enter 2007 looking forward to a fifth consecutive year of record revenues and earnings, bolstered by a newly rebalanced business portfolio designed to drive strong growth and profitability. We began 2007 with a historic announce- ment — the planned sale of our global Intimates business. This important step is part of our ongoing transformation toward becoming a higher-growth, higher-margin lifestyle brand company. Contributing revenues of over $800 million and operating income of approximately $50 million in 2006, Intimates has played an important and positive role in our success over our 100-plus-year history. However, the time has come to rebalance our portfolio strategically and focus our energies and resources on the many growth opportunities within our Jeanswear, Outdoor, Imagewear and Sportswear businesses instead. The main implications of this sale are threefold. The first relates to our business mix. When we launched our Growth Plan in 2004, over 70 percent of our revenues came from our heritage businesses — Jeanswear, Imagewear and Intimates — and nearly 30 percent came from our lifestyle segments — Outdoor and Sports- wear. The Plan established a target of 60 percent of revenues from our lifestyle businesses. As a result of the sale of our Intimates business, and the continued 2006 HIgHLIgHTS Growth in revenues and earnings per share from continuing operations of 10% and 12%, respectively. A 90% increase in our quarterly cash dividend to an annual rate of $2.20 per share. A 48% increase in VF’s stock price. BUSINESS mIx 3 7 8 6 9 5 1 4 2 3 7 2 PERCENT OF TOTAL REVENUES Heritage Coalitions Lifestyle Coalitions VF CORPORATION SUMMARY ANNUAL REPORT 2006 55 Dear ShareholDerS, ‘04‘05‘06strong growth in Outdoor, our lifestyle businesses now account for over 40 percent of our total revenues. Second, the sale enhances our prospects for organic growth. While we will continue to pursue acquisitions aggressively, we expect that the majority of our growth will come from tapping opportunities in our existing businesses. This reinforces our confidence that we can sustain 8 percent annual growth in revenues. Third, the sale lifts VF’s overall margins. Operating margins benefit by nearly a full percentage point, and we expect to approach our operating margin goal of 14 percent in 2007. The progress we have made on our Growth Plan to date is immensely gratifying and is in keeping with our vision statement to grow by building leading lifestyle brands that excite consumers around the world. Toward this goal, we are guided by six Growth Drivers that serve to direct our transformation initiatives. In 2006, we made consider- able progress in each of the Growth Drivers outlined here. Build More Growing, Global Lifestyle Brands Over the years we have enhanced our portfolio with the addition of such dynamic lifestyle brands as The North Face ®, Nautica ®, Vans ®, Reef ®, Kipling® and Napapijri.® In nearly every instance, the performance of these brands is surpassing our expectations and brightening our prospects for future growth. Most recently, we completed two additional acquisitions: Majestic Athletic and Eagle Creek, Inc. Majestic is the leading global provider of authentic licensed sports apparel and branded team uniforms for Major League Baseball. Eagle Creek® is the nation’s leading adventure travel brand. Combined, these new businesses are expected to contribute approximately $200 million to our annual revenues. Acquisitions are only a part of the VF story. We also have significantly stepped up the investments behind many of our brands in both our heritage and lifestyle businesses to keep them healthy and growing. Looking forward, our success in building lifestyle brands will come from continuing these investments and from additional acquisitions. Expand Our Share with Winning Customers The success of VF and that of our retail partners are closely entwined. Hence, gaining share with increasingly large and powerful retailers requires a strategy that aligns our company’s strengths and resources precisely with theirs. To accomplish this, we have built Customer Teams committed to improving our ability to better identify and execute opportunities for mutual growth across our brands and coalitions. Stretch Our Brands to New Geographies In 2006, international revenues reached 26 percent of our total revenues, up from 19 percent just five years ago. Most of this growth has been fueled by our Outdoor gROSS mARgiN iNCREASE (PERCENT OF REVENUES) 43% 2006 38% 2003 coalition, through a combination of organic growth and acquisitions. We aim to continue to grow our interna- tional base, targeting 30 percent of total revenues over the next three to five years. To help achieve this, in 2006 we entered into a majority-owned joint venture to market our brands in India, one of the fastest-growing and most dynamic economies in the world. The joint ven- ture builds on our successful licensing relationship with India-based Arvind Mills, Ltd., and is intended to drive the expansion of our Lee ®, Wrangler ®, Nautica ®, JanSport ® and Kipling ® brands throughout India. Other international markets are showing good momentum as well. Notably, our revenues in China and Russia are growing at double-digit rates. Expand Our Direct-to-Consumer Business Our focus on lifestyle brands has opened up a new avenue for growth for VF via owned retail stores. The strength of such brands as Vans ®, Nautica ®, The North Face ®, Wrangler ®, Lee ®, Kipling ® and Napapijri ® lends itself naturally to freestanding retail stores, where the brands’ complete array of products can be displayed to full advantage. In 2005, we had a total of 495 retail stores; in 2006, we ended the year with 538 stores. We plan to continue the pace of retail expansion, adding roughly 75 to 100 stores annually across our brands. As we continue our search for acquisitions, we will be looking for brands that have — or have the potential for — owned retail store development. Fuel the Growth With so many initiatives under way across our company, it is critical that we leverage the power of our supply chain to maintain strong profitability. When we launched our Growth Plan, we established a cost reduction goal of $100 million, with savings targeted in such areas as procurement, distribution, inventory management and technology systems. To date, we have realized approximately half of those savings. The progress of this effort can be seen in the continuing improvements in our gross margins, which have risen from 38 percent in 2003 to 43 percent in 2006. Build New Growth Enablers Our plans for growth are ambitious, requiring the addition of new capabilities and talent across our company. Developing future leaders is paramount to maintaining our momentum. Toward that end, we have initiated programs within VF to give our employees the skills and tools they will need to succeed. VF CORPORATiON SUMMARY ANNUAL REPORT 2006 57 Another secret to our success lies in how we manage our diverse portfolio of brands and businesses. We give our individual brands and companies great autonomy when it comes to such areas as product development, marketing and retail relationships. We acquire companies whose leaders and associates are passionate about their brands, and who live the lifestyles those brands represent. The role of VF, as we see it, is to enable each of our brands to realize its full potential, and to apply the financial and operating disciplines that will ensure that each provides significant returns to our shareholders. The VF story continues to grow more positive each year. I am proud of the accomplishments of our leaders and associates, whose dedication has made us what we are today: the world’s leading provider of lifestyle brands. I also am deeply indebted to our Board of Directors for their wise guidance and counsel. I am confident that we have the people and resources in place to continue our momentum. Mackey J. McDonald Chairman and Chief Executive Officer We also have added talented new leaders in such areas as strategy, acquisitions, customer teams, human resources, technology and e-commerce. On every front, VF is committed to innovation leadership. This year’s annual report provides A-to-Z highlights of initiatives designed to extend the global reach and reputation of our brands, improve the efficiency of our operations and act responsibly as corporate citizens. Over the years, I have often been asked to explain what differentiates VF from our competitors. After all, many companies within our industry talk about their focus on building global lifestyle brands. The difference, I believe, is that VF possesses the unique ability to bring both art and science to the apparel business. The skill to design and market beautiful, innovative products of the highest quality — the “art” of apparel — is essential to the success of any apparel company. We think we do this better than most. What truly sets VF apart, however, is the “science” we bring to the table. We have carefully honed exceptional capabilities related to consumer research, inventory manage- ment, flow replenishment, sourcing and technology, all of which help to ensure that we have the right products for our consumers and retail partners, where and when they want them. This balance of art and science provides us with a business model that has led to strong and consistent performance over many decades. VF Cor p or ation 2006 FinanCial HigHligHts 6 1 2 , 6 4 5 6 , 5 8 1 2 , 5 6 . 3 1 3 . 3 1 7 . 2 1 5 . 8 2 6 . 2 2 5 . 9 1 Revenues (DollaRs in Millions) opeRating MaRgin (peRcent to Revenues) Debt to capital Ratio (peRcent) 6 4 6 4 3 5 4 5 4 7 . 4 1 2 . 4 1 4 . 3 1 4 9 . 1 0 1 . 1 5 0 . 1 cash pRoviDeD by opeRations (DollaRs in Millions) RetuRn on capital (peRcent) DiviDenDs peR shaRe (DollaRs) ‘04 ‘05 ‘06 vF coRpoRation SUMMARY ANNUAL REPORT 2006 59 Coalitions at a gl anCe 3-yEAR COALiTiON REVENUES AND PROFiTS (DOLLARS iN miLLiONS) HERiTAgE COALiTiONS LiFESTyLE COALiTiONS Revenues Profits 6 0 7 , 2 7 9 6 , 2 0 8 7 , 2 8 6 8 , 1 5 5 4 , 1 2 1 0 , 1 6 0 8 8 2 8 0 7 7 2 4 4 2 5 4 0 3 4 7 1 1 6 2 1 4 3 1 3 3 2 6 5 1 1 5 6 5 8 6 9 1 6 9 9 2 0 0 1 1 9 7 6 ‘04 ‘05 ‘06 ‘04 ‘05 ‘06 ‘04 ‘05 ‘06 ‘04 ‘05 ‘06 JEANSwEAR imAgEwEAR OUTDOOR SPORTSwEAR 45 % 13 % 30 % 11% of Total Revenues of Total Revenues of Total Revenues of Total Revenues OUTDOOR The North Face, JanSport, Eastpak, Vans, Reef, Napapijri, Kipling, Eagle Creek SPORTSwEAR Nautica, John Varvatos, Kipling (U.S.) JEANSwEAR Wrangler, Wrangler Hero, Lee, Riders, Rustler, Timber Creek by Wrangler, Wrangler Rugged Wear, Riggs Workwear by Wrangler, Wrangler 47, Aura from the Women at Wrangler, 20X, Chic, Gitano, Brittania, Hero by Wrangler, H.I.S imAgEwEAR Lee Sport, CSA, Red Kap, Bulwark, The Force, Chef Designs, Byron Nelson Classic*, Chase Authentics*, NFL Red*, NFL White*, Harley-Davidson * licensed JEANSwEAR imAgEwEAR VF sells more pairs of jeans than any other company in the world. In fact, Lee® and Wrangler® brand products are sold in nearly every developed country. Our Imagewear business has two solid foundations for continued growth: uniforms and occupational apparel, and licensed apparel. We believe our Jeanswear brands can continue to grow by extending into additional categories, including shirts and other casual apparel products. Our focus on innovative products, exclusivity with key licensing partners and unmatched service within our industry provide us with a competitive advantage. We also see room for additional geographic expansion, particularly in markets such as India, China, Russia and Eastern Europe. A new outerwear program will enable continued growth in our NFL-licensed business. Growth will also come from investing more heavily in marketing programs that enhance our brands’ equity and stimulate consumer buying. We will build on a well-established base of stores in Latin America and Asia by continuing to selectively add new stores in Europe as well. In 2006, we became the apparel licensee for ESPN apparel, providing another avenue for our future growth. Expanding our capabilities in the service sector, including hospitality, should provide new sources of growth in our uniform business as well. OUTDOOR SPORTSwEAR Outdoor is our fastest-growing business. The success of our Outdoor brands is based on their strong connection with our consumers’ lifestyles, including hiking, out- door adventure, skateboarding and surfing. Product innovation is at the heart of our success, with our brands bringing both functional and fashionable solutions to our consumers. All of our brands are experiencing strong growth internationally. Retail stores will continue to be an important contributor to future growth, with additional stores planned for our Vans ®, The North Face®, Kipling® and Napapijri® brands, both in the U.S. and abroad. Our Nautica® brand will benefit from signifi- cant new product introductions in men’s sportswear and jeans, and men’s and women’s sleepwear. Our new Nautica® women’s line will continue to selectively expand its distribution, while the outlook for our licensed businesses in categories such as fragrance, home accessories, watches, eyewear, and men’s furnishings remains healthy. Our John Varvatos® brand is looking forward to continued strong growth within its wholesale, retail and licensing businesses, driven in part by the success of the John Varvatos H USA™ collection. Our Kipling® brand business in the U.S. also has substantial room for growth, both via owned retail stores and an expanding wholesale business. VF CORPORATiON SUMMARY ANNUAL REPORT 2006 61 FinanCial summary Dollars in thousands, except per share amounts Summary of Operations Total revenues from continuing operations Operating income from continuing operations Income from continuing operations Discontinued operations Cumulative effect of a change in accounting policy(1) Net income (loss) Earnings (loss) per common share – basic Income from continuing operations Discontinued operations Cumulative effect of a change in accounting policy(1) Net income (loss) Earnings (loss) per common share – diluted Income from continuing operations Discontinued operations Cumulative effect of a change in accounting policy(1) Net income (loss) Dividends per share Dividend payout ratio(2) Average number of common shares outstanding Financial Position Working capital Current ratio Total assets Long-term debt Redeemable preferred stock Common stockholders’ equity Debt to total capital ratio(3) Book value per common share Other Statistics(5) Operating margin Return on invested capital(4) (6) Return on average common stockholders’ equity(6) Return on average total assets(6) Cash dividends paid (1) After tax effect of change in accounting policy in 2005 to adopt FASB Statement 123(R), Share-Based Payment, and in 2002 to adopt FASB Statement No. 142, Goodwill and Other Intangible Assets. (2) Dividends per share divided by the total of income from continuing and discontinued operations per diluted share. (3) Total Capital is defined as common stockholders’ equity plus short-term and long-term debt. (4) Capital is defined as average common stockholders’ equity plus average short-term and long-term debt. (5) Operating statistics and market data are based on continuing operations. (6) Return is defined as income from continuing operations before net interest expense, after income taxes. 2006 2005 2004 2003 2002 $ $ $ $ $ $ $ $ 6,215,794 826,144 535,051 (1,535) — 533,516 4.83 (0.01) — 4.82 4.73 (0.01) — 4.72 1.94 41.1% $ $ $ 5,654,155 767,951 482,629 35,906 (11,833) 506,702 4.33 0.32 (0.11) 4.54 4.23 0.31 (0.10) 4.44 1.10 24.2% $ $ $ 5,218,066 664,357 398,879 75,823 — 474,702 3.61 0.69 — 4.30 3.54 0.67 — 4.21 1.05 24.9% 4,413,354 552,523 343,261 54,672 — 397,933 3.17 0.51 — 3.67 3.11 0.50 — 3.61 1.01 28.0% $ $ $ 4,267,068 523,501 300,223 72,488 (527,254) (154,543) 2.67 0.66 (4.83) (1.49) 2.67 0.65 (4.69) (1.38) .97 29.2% 110,560 111,192 109,872 107,713 109,167 $ $ 1,563,162 2.5 5,465,693 635,359 — 3,265,172 $ $ 1,213,233 2.1 5,171,071 647,728 23,326 2,808,213 $ $ 1,006,354 1.7 5,004,278 556,639 26,053 2,513,241 $ $ 1,419,281 2.8 4,245,552 955,393 29,987 1,951,307 1,199,696 2.4 3,503,151 601,145 36,902 1,657,848 19.5% 22.6% 28.5% 33.7% 28.3% $ 29.11 $ 25.50 $ 22.56 $ 18.04 $ 15.28 13.3% 14.7% 18.0% 10.0% 13.6% 14.2% 18.0% 9.4% 12.7% 13.4% 17.8% 8.5% 12.5% 14.4% 19.3% 9.1% 12.3% 14.2% 18.2% 8.6% $ 216,529 $ 124,116 $ 117,731 $ 111,258 $ 108,773 VF CORPORATiON SUMMARY ANNUAL REPORT 2006 63  in thousands Assets Current Assets Cash and equivalents Accounts receivable Inventories Deferred income taxes Other current assets Current assets of discontinued operations Total current assets Property, Plant and Equipment Intangible Assets Goodwill Other Assets Noncurrent Assets of Discontinued Operations Liabilities and Stockholders’ Equity Current Liabilities Short-term borrowings Current portion of long-term debt Accounts payable Accrued liabilities Current liabilities of discontinued operations Total current liabilities Long-term Debt Other Liabilities Noncurrent Liabilities of Discontinued Operations Commitments and Contingencies Redeemable Preferred Stock Common Stockholders’ Equity Common Stock Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total common stockholders’ equity Consolidated bal anCe sHeets Consolidated statements oF inCome December year Ended December 2006 2005 in thousands, except per share amounts 2006 2005 2004 $ $ 343,224 809,594 958,262 84,519 120,485 261,926 296,557 676,265 900,452 98,586 112,912 280,604 Net Sales Royalty Income Total Revenues Costs and Operating Expenses Cost of goods sold Marketing, administrative and general expenses 2,578,010 2,365,376 Operating Income $ 6,138,087 77,707 $ 5,582,075 72,080 $ 5,150,985 67,081 6,215,794 5,654,155 5,218,066 3,515,624 1,874,026 3,209,312 1,676,892 3,067,678 1,486,031 5,389,650 4,886,204 4,553,709 826,144 767,951 664,357 5,994 (57,259) 2,359 8,217 (70,596) 6,121 7,151 (76,021) 182 (48,906) (56,258) (68,688) 777,238 711,693 595,669 242,187 229,064 196,790 535,051 (1,535) — 482,629 35,906 (11,833) 398,879 75,823 — Other Income (Expense) Interest income Interest expense Miscellaneous, net Income from Continuing Operations Before Income Taxes Income Taxes Income from Continuing Operations Discontinued Operations Cumulative Effect of a Change in Accounting Policy Net Income $ 533,516 $ 506,702 $ 474,702 Earnings Per Common Share — Basic Income from continuing operations Discontinued operations Cumulative effect of a change in accounting policy Net income Earnings Per Common Share — Diluted Income from continuing operations Discontinued operations Cumulative effect of a change in accounting policy Net income Cash Dividends Per Common Share $ $ $ $ $ $ 4.83 (0.01) — $ 4.33 0.32 (0.11) 3.61 0.69 — 4.82 $ 4.54 $ 4.30 $ 4.73 (0.01) — $ 4.23 0.31 (0.10) 4.72 1.94 $ $ 4.44 1.10 $ $ 3.54 0.67 — 4.21 1.05 Audited financial statements and notes, along with management’s discussion and analysis of results of operations and financial condition, are available in our 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission, accessible on our website, www.vfc.com. VF CORPORATiON SUMMARY ANNUAL REPORT 2006 65 593,058 755,693 1,030,925 348,862 159,145 510,678 744,313 979,511 368,760 202,433 $ 5,465,693 $ 5,171,071 $ $ 88,467 68,876 385,700 392,815 78,990 138,956 33,956 392,709 490,434 96,088 1,014,848 1,152,143 635,359 536,728 13,586 647,728 528,138 11,523 — 23,326 112,185 1,469,764 (123,652) 1,806,875 110,108 1,277,486 (164,802) 1,585,421 3,265,172 2,808,213 $ 5,465,693 $ 5,171,071 Audited financial statements and notes, along with management’s discussion and analysis of results of operations and financial condition, are available in our 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission, accessible on our website, www.vfc.com. Consolidated statements oF C a sH Flows boar d oF dir eCtor s in thousands Operating Activities Net income Adjustments to reconcile net income to cash provided by operating activities of continuing operations: (Income) loss from discontinued operations Cumulative effect of a change in accounting policy Depreciation and amortization Stock-based compensation Pension funding in excess of expense Deferred income taxes Other, net Changes in operating assets and liabilities, net of acquisitions: Accounts receivable Inventories Other current assets Accounts payable Accrued compensation Other accrued liabilities year Ended December 2006 2005 2004 $ 533,516 $ 506,702 $ 474,702 1,535 — 126,505 46,024 (31,277) (24,463) 11,442 (113,363) (33,193) 6,322 (19,043) (23,592) (26,285) (35,906) 11,833 121,434 40,021 (14,857) (12,133) 11,158 (11,106) (80,428) (44,608) 80,166 (7,168) (31,454) (75,823) — 130,216 10,047 (236) 15,025 36,491 (25,401) 59,685 (26,739) (1,016) 46,908 2,513 Cash provided by operating activities of continuing operations Cash provided by operating activities of discontinued operations 454,128 36,625 533,654 27,692 646,372 77,619 Cash provided by operating activities Investing Activities Capital expenditures Business acquisitions, net of cash acquired Software purchases Sale of VF Playwear business Other, net 490,753 561,346 723,991 (127,195) (69,759) (8,939) 4,667 3,004 (102,976) (211,838) (17,494) 6,667 12,772 (74,141) (649,089) (12,953) 4,517 11,917 Cash used by investing activities of continuing operations (198,222) (312,869) (719,749) Discontinued operations, net 1,017 (1,674) (9,509) Cash used by investing activities Financing Activities Increase (decrease) in short-term borrowings Proceeds from long-term debt Payments on long-term debt Purchase of Common Stock Cash dividends paid Proceeds from issuance of Common Stock Tax benefits of stock option exercises (197,205) (314,543) (729,258) (60,533) — (3,062) (118,582) (216,529) 119,675 24,064 95,673 117,792 (401,253) (229,003) (124,116) 99,673 17,741 (19,056) — (3,494) — (117,731) 105,883 — Cash used by financing activities of continuing operations (254,967) (423,493) (34,398) Effect of Foreign Currency Rate Changes on Cash Net Change in Cash and Equivalents Cash and Equivalents — Beginning of Year 8,086 46,667 296,557 (12,260) (188,950) 10,387 (29,278) 485,507 514,785 Cash and Equivalents — End of Year $ 343,224 $ 296,557 $ 485,507 Audited financial statements and notes, along with management’s discussion and analysis of results of operations and financial condition, are available in our 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission, accessible on our website, www.vfc.com. Left to Right Robert J. Hurst , Mackey J. McDonald, Ursula O. Fairbairn, Raymond G. Viault, George Fellows, Eric C. Wiseman, M. Rust Sharp, W. Alan McCollough, Juan Ernesto de Bedout, Daniel R. Hesse, Barbara S. Feigin, Edward E. Crutchfield, Clarence Otis, Jr. VF CORPORATiON SUMMARY ANNUAL REPORT 2006 67 oper ating Commit tee mackey J. mcDonald Chairman & Chief Executive Officer Candace S. Cummings Vice President — Administration, General Counsel & Secretary Robert K. Shearer Senior Vice President & Chief Financial Officer Franklin L. Terkelsen Vice President — Mergers & Acquisitions Eric C. wiseman President & Chief Operating Officer Frank C. Pickard iii Vice President — Treasurer george N. Derhofer Senior Vice President — Global Operations michael T. gannaway Vice President — Customer Management Stephen F. Dull Vice President — Strategy Susan Larson williams Vice President — Human Resources Boyd A. Rogers Vice President & President — Supply Chain Bradley w. Batten Vice President — Controller & Chief Accounting Officer martin S. Schneider Vice President & Chief Information Officer VF CORPORATiON SUMMARY ANNUAL REPORT 2006 69 investor infor mation cor p or ate dir ectory Common Stock Listed on the New York Stock Exchange — trading symbol VFC. Shareholders of Record As of February 9, 2007, there were 4,044 shareholders of record. Dividend Policy Quarterly dividends on VF Corporation Common Stock, when declared, are paid on or about the 20th day of March, June, September and December. Dividend Reinvestment Plan The Plan is offered to share- holders by Computershare Trust Company, N.A. The Plan provides for automatic dividend reinvestment and voluntary cash contributions for the purchase of additional shares of VF Corporation Common Stock. Questions concerning general Plan information should be directed to the Office of the Vice President – Administration, General Counsel and Secretary of VF Corporation. Quarterly Common Stock Price Dividend Direct Deposit Shareholders may have their dividends deposited into their savings or checking account at any bank that is a member of the Automated Clearing House (ACH) system. A brochure describing this service may be obtained by contacting Computershare. Quarterly Common Stock Price Information The high and low sales prices on a calendar quarter basis for the periods indicated were as follows: First Quarter Second Quarter Third Quarter Fourth Quarter 2006 2005 2004 High $58.67  67.97  75.32  83.10 Low High Low High Low $53.28  55.99  62.16  73.00 $60.74 59.93 61.61 59.47 $52.20 54.60 55.52 50.44 $47.04 50.45 51.02 55.61 $42.06 43.50 45.87 47.15 VF CoRPoRatIon HIgH/Low StoCk PRICeS (DoLLaRS) 90 80 70 60 50 40 30 20 10 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 Corporate office VF World Headquarters 105 Corporate Center Blvd. Greensboro, NC 27408 Telephone: (336) 424-6000 Facsimile: (336) 424-7696 Mail Address: P.O. Box 21488 Greensboro, NC 27420 annual Meeting The Annual Meeting of Shareholders will be held on Tuesday, April 24, 2007, at 10:30 AM at the O’Henry Hotel, Caldwell Room, 624 Green Valley Road, Greensboro, NC 27408 Investor Relations Cindy Knoebel, CFA Vice President, Financial & Corporate Communications VF Services, Inc. 105 Corporate Center Blvd. Greensboro, NC 27408 transfer agent and Registrar Computershare Trust Company, N.A. P.O. Box 43070 Providence, RI 02940 Shareholder Relations Department 800-662-7232 Independent accountants PricewaterhouseCoopers LLP 101 CentrePort Drive Greensboro, NC 27409 Certifications VF has filed the certifications required under Section 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of the Company’s financial statements and disclosures in the Company’s annual report on Form 10-K for the fiscal year ended December 30, 2006. After VF’s 2007 Annual Meeting of Shareholders, VF intends to file with the New York Stock Exchange the certification regarding VF’s compliance with the NYSE’s corporate gover- nance listing standards as required by NYSE Rule 303A.12. Last year, the Company filed this certification with the NYSE on May 4, 2006. other Information VF’s filings with the SEC, including its annual report on Form 10-K, quarterly reports on Form 10-Q, press releases and reports on Form 8-K and other information, are available and can be accessed free of charge through the Company’s website at www.vfc.com. VF’s Corporate Governance Principles, Code of Business Conduct, and charters for the Audit Committee, Compensation Committee, Nominating and Governance Committee and Finance Committee are also available on our website. These documents will also be provided to any shareholder free of charge upon request to the Secretary of VF at P.O. Box 21488, Greensboro, NC 27420. Concept/Design And Partners, NY www.andpartnersny.com Executive Photography Richard Frank Illustration MGMT Design Printing Hemlock Printers Ltd., Burnaby, BC boar d of dir ector s Daniel R. Hesse 3,5 Chairman & Chief Executive Officer Embarq Corporation Overland Park, Kansas (Telecommunications) Director since 1999, age 53 Robert J. Hurst 2,3,4 Managing Director Crestview Partners LLC New York, New York (Private equity firm) Director since 1994, age 61 W. Alan McCollough 4,5 Former Chairman of the Board Circuit City Stores, Inc. Richmond, Virginia (National retailer) Director since 2000, age 57 Mackey J. McDonald 2,3* Chairman & Chief Executive Officer Director since 1993, age 60 Clarence Otis, Jr. 1,4 Chairman & Chief Executive Officer Darden Restaurants, Inc. Orlando, Florida (Casual dining restaurants) Director since 2004, age 50 M. Rust Sharp 2,5 Of Counsel Heckscher, Teillon, Terrill & Sager West Conshohocken, Pennsylvania (Attorneys) Director since 1984, age 66 Raymond G. Viault 1,4 Former Vice Chairman General Mills, Inc. Minneapolis, Minnesota (Consumer food products) Director since 2002, age 62 Eric C. Wiseman 3* President & Chief Operating Officer Director since 2006, age 51 Committees of the Board 1 AUDit COMMittEE 2 ExECUtiVE COMMittEE 3 FinAnCE COMMittEE 4 nOMinAtinG AnD GOVERnAnCE COMMittEE 5 COMpEnSAtiOn COMMittEE * Ex OFFiCiO MEMBER Edward E. Crutchfield 2,3,5 Former Chairman & Chief Executive Officer First Union Corporation Charlotte, North Carolina (Banking) Director since 1992, age 65 Juan Ernesto de Bedout 1,3 Group President Latin American Operations Kimberly-Clark Corporation Roswell, Georgia (Consumer products) Director since 2000, age 62 Ursula O. Fairbairn 2,5 President & Chief Executive Officer Fairbairn Group LLC New York, New York (Human resources consultant) Director since 1994, age 64 Barbara S. Feigin 1,4 Consultant New York, New York (Strategic marketing and branding) Director since 1987, age 69 George Fellows 1,4 President & Chief Executive Officer Callaway Golf Company Carlsbad, California (Sporting goods) Director since 1997, age 64 This report is printed with vegetable-based inks on FSC certified paper that contains 15% post- consumer recycled fiber. The financial section of this report is printed on paper that contains 80% post-consumer recycled fiber. Resulting in environmental savings of: 208 trees 75,720 gallons of water 31 million BTU’s of energy 12,528 solid lbs. of waste 45,072 lbs. of greenhouse gases (CO2 emissions) the following trademarks owned by VF Corporation or its affiliates appear in this report. Registered trademarks: Lee, Wrangler, Wrangler Hero, Riders, Rustler, Timber Creek by Wrangler, Wrangler Rugged Wear, 20X, Chic, Gitano, Brittania, Hero by Wrangler, Lee Sport, CSA, Bulwark, Red Kap, The Force, Lee National Denim Day, Nautica, John Varvatos, Kipling, The North Face, Never Stop Exploring, JanSport, LiveWire, Napapijri, Eastpak, Vans, Off The Wall, Reef, Eagle Creek trademarks: Riggs Workwear by Wrangler, Wrangler 47, Aura from the Women at Wrangler, Excel FR, Mid Skool, Era, HTR, John Varvatos H USA, Instantly Slims You, Planet Reef, Lee Gold Label, Chef Designs, Northotic, X-2, Magic Seam, Tenacious Grip the following trademarks owned by other companies also appear in this report: Bluetooth, Boa, iPOD, Hummer, Lycra, Nalgene, Velcro, NFL Red, NFL White, Harley-Davidson, Chase Authentics Byron Nelson classic under license to VF Imagewear, Inc. VF Corporation 105 Corporate Center Blvd. Greensboro, NC 27408 (336) 424-6000 www.vfc.com ® 

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