UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 201927, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number: 1-5256
vfcirclelogoa04.jpgvfc-20200627_g1.jpg
V. F. CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania23-1180120
(State or other jurisdiction of incorporation or organization)(I.R.S. employer identification number)
8505 E. Orchard Road1551 Wewatta Street
Greenwood Village, Denver, Colorado80111 80202
(Address of principal executive offices)
(720) (720) 778-4000
(Registrant’s telephone number, including area code)

8505 E. Orchard Road
Greenwood Village, Colorado 80111
(Former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)(Trading Symbol(s))(Name of each exchange on which registered)
Common Stock, without par value, stated capital, $0.25 per shareVFCNew York Stock Exchange
0.625% Senior Notes due 2023VFC23New York Stock Exchange
0.250% Senior Notes due 2028VFC28New York Stock Exchange
0.625% Senior Notes due 2032VFC32New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
 
Non-accelerated filer
 
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No   
On July 27, 2019,25, 2020, there were 398,176,515389,648,638 shares of the registrant’s common stock outstanding.





VF CORPORATION
Table of Contents
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Table of Contents


PART I — FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED).
VF CORPORATION
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts) June 2019  March 2019 June 2018(In thousands, except share amounts)June 2020March 2020June 2019
ASSETS       ASSETS
Current assets       Current assets
Cash and equivalents $606,080
  $445,119
 $392,175
Cash and equivalents$2,145,111  $1,369,028  $560,882  
Accounts receivable, less allowance for doubtful accounts of:
June 2019 ‑ $20,671; March 2019 - $19,638; June 2018 - $19,135
 1,306,270
  1,465,855
 1,222,938
Accounts receivable, less allowance for doubtful accounts of: June 2020 - $38,179; March 2020 - $37,099; June 2019 - $19,763Accounts receivable, less allowance for doubtful accounts of: June 2020 - $38,179; March 2020 - $37,099; June 2019 - $19,763934,984  1,308,051  1,211,347  
Inventories 1,665,132
  1,432,660
 1,521,659
Inventories1,402,858  1,293,912  1,381,513  
Short-term investmentsShort-term investments700,000  —  —  
Other current assets 413,373
  433,793
 401,515
Other current assets513,049  444,886  405,205  
Current assets of discontinued operations 
  896,030
 791,860
Current assets of discontinued operations565,135  611,139  431,908  
Total current assets 3,990,855
  4,673,457
 4,330,147
Total current assets6,261,137  5,027,016  3,990,855  
Property, plant and equipment, net 865,141
  915,177
 875,338
Property, plant and equipment, net957,309  954,406  826,570  
Intangible assets, net 1,980,921
  1,972,364
 2,129,013
Intangible assets, net1,855,764  1,854,545  1,917,517  
Goodwill 1,544,132
  1,541,314
 1,594,986
Goodwill1,162,606  1,156,019  1,494,502  
Operating lease right-of-use assets 1,281,106
  
 
Operating lease right-of-use assets1,354,308  1,273,514  1,246,985  
Other assets 739,809
  772,755
 774,613
Other assets887,921  867,751  735,275  
Other assets of discontinued operations 
  481,718
 487,657
Other assets of discontinued operations—  —  190,260  
TOTAL ASSETS $10,401,964
  $10,356,785
 $10,191,754
TOTAL ASSETS$12,479,045  $11,133,251  $10,401,964  
LIABILITIES AND STOCKHOLDERS’ EQUITY       LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities       Current liabilities
Short-term borrowings $67,658
  $659,060
 $1,311,861
Short-term borrowings$19,256  $1,228,812  $67,658  
Current portion of long-term debt 5,068
  5,263
 6,189
Current portion of long-term debt1,025  1,018  5,068  
Accounts payable 588,417
  580,867
 565,943
Accounts payable348,932  407,021  507,575  
Accrued liabilities 1,286,002
  1,154,932
 864,483
Accrued liabilities1,254,967  1,260,252  1,254,417  
Current liabilities of discontinued operations 
  261,482
 247,080
Current liabilities of discontinued operations91,283  126,781  112,427  
Total current liabilities 1,947,145
  2,661,604
 2,995,556
Total current liabilities1,715,463  3,023,884  1,947,145  
Long-term debt 2,126,835
  2,115,884
 2,156,627
Long-term debt5,609,792  2,608,269  2,126,835  
Operating lease liabilities 1,043,664
  
 
Operating lease liabilities1,104,500  1,020,651  1,011,582  
Other liabilities 1,132,706
  1,232,200
 1,260,681
Other liabilities1,136,692  1,123,113  1,139,512  
Other liabilities of discontinued operations 
  48,581
 47,774
Other liabilities of discontinued operations—  —  25,276  
Commitments and contingencies 

  

 

Commitments and contingencies
Total liabilities 6,250,350
  6,058,269
 6,460,638
Total liabilities9,566,447  7,775,917  6,250,350  
Stockholders’ equity       Stockholders’ equity
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding at June 2019, March 2019 or June 2018 
  
 
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at June 2019 – 397,922,120; March 2019 – 396,824,662; June 2018 – 395,509,138 99,481
  99,206
 98,877
Preferred Stock, par value $1; shares authorized, 25,000,000; 0 shares outstanding at June 2020, March 2020 or June 2019Preferred Stock, par value $1; shares authorized, 25,000,000; 0 shares outstanding at June 2020, March 2020 or June 2019—  —  —  
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at June 2020 - 389,641,245; March 2020 - 388,812,158; June 2019 - 397,922,120Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at June 2020 - 389,641,245; March 2020 - 388,812,158; June 2019 - 397,922,12097,410  97,203  99,481  
Additional paid-in capital 3,988,385
  3,921,784
 3,688,529
Additional paid-in capital4,010,817  4,183,780  3,988,385  
Accumulated other comprehensive income (loss) (867,386)  (902,075) (882,078)Accumulated other comprehensive income (loss)(897,541) (930,958) (867,386) 
Retained earnings 931,134
  1,179,601
 825,788
Retained earnings (accumulated deficit)Retained earnings (accumulated deficit)(298,088) 7,309  931,134  
Total stockholders’ equity 4,151,614
  4,298,516
 3,731,116
Total stockholders’ equity2,912,598  3,357,334  4,151,614  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,401,964
  $10,356,785
 $10,191,754
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$12,479,045  $11,133,251  $10,401,964  


See notes to consolidated financial statements.


3 VF Corporation Q1 FY20FY21 Form 10-Q

Table of Contents

VF CORPORATION
Consolidated Statements of IncomeOperations
(Unaudited)
 Three Months Ended June
(In thousands, except per share amounts)20202019
Net revenues$1,076,293  $2,050,654  
Costs and operating expenses
Cost of goods sold506,951  896,284  
Selling, general and administrative expenses816,151  1,058,405  
Total costs and operating expenses1,323,102  1,954,689  
Operating income (loss)(246,809) 95,965  
Interest income1,313  6,544  
Interest expense(29,262) (22,127) 
Other income (expense), net(38,187) 5,554  
Income (loss) from continuing operations before income taxes(312,945) 85,936  
Income tax expense (benefit)(35,203) 20,663  
Income (loss) from continuing operations(277,742) 65,273  
Loss from discontinued operations, net of tax(7,871) (16,052) 
Net income (loss)$(285,613) $49,221  
Earnings (loss) per common share - basic
Continuing operations$(0.71) $0.16  
Discontinued operations(0.02) (0.04) 
Total earnings (loss) per common share - basic$(0.73) $0.12  
Earnings (loss) per common share - diluted
Continuing operations$(0.71) $0.16  
Discontinued operations(0.02) (0.04) 
Total earnings (loss) per common share - diluted$(0.73) $0.12  
Weighted average shares outstanding
Basic388,695  396,727  
Diluted390,791  401,914  
  Three Months Ended June
      
(In thousands, except per share amounts) 2019  2018
Net revenues $2,271,479
  $2,137,135
Costs and operating expenses     
Cost of goods sold 1,036,114
  1,005,289
Selling, general and administrative expenses 1,102,073
  1,018,747
Total costs and operating expenses 2,138,187
  2,024,036
Operating income 133,292
  113,099
Interest income 7,129
  2,146
Interest expense (22,127)  (26,999)
Other income (expense), net 5,598
  (19,425)
Income from continuing operations before income taxes 123,892
  68,821
Income taxes 26,643
  7,457
Income from continuing operations 97,249
  61,364
Income (loss) from discontinued operations, net of tax (48,028)  98,994
Net income $49,221
  $160,358
Earnings (loss) per common share - basic     
Continuing operations $0.25
  $0.16
Discontinued operations (0.12)  0.25
Total earnings per common share - basic $0.12
  $0.41
Earnings (loss) per common share - diluted     
Continuing operations $0.24
  $0.15
Discontinued operations (0.12)  0.25
Total earnings per common share - diluted $0.12
  $0.40
Weighted average shares outstanding     
Basic 396,727
  394,165
Diluted 401,914
  399,548











See notes to consolidated financial statements.


VF Corporation Q1 FY20FY21 Form 10-Q 4


Table of Contents

VF CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 Three Months Ended June
(In thousands)20202019
Net income (loss)$(285,613) $49,221  
Other comprehensive income (loss)
Foreign currency translation and other
Gains arising during the period3,854  12,829  
Reclassification of foreign currency translation losses42,364  —  
Income tax effect6,255  2,943  
Defined benefit pension plans
Amortization of net deferred actuarial losses2,863  4,019  
Amortization of deferred prior service costs (credits)(17) 13  
Income tax effect336  (1,708) 
Derivative financial instruments
Gains (losses) arising during the period(7,595) 14,774  
Income tax effect1,530  (3,874) 
Reclassification of net (gains) losses realized(20,280) (10,495) 
Income tax effect4,107  2,756  
Other comprehensive income (loss)33,417  21,257  
Comprehensive income (loss)$(252,196) $70,478  
  Three Months Ended June
      
(In thousands) 2019  2018
Net income $49,221
  $160,358
Other comprehensive income (loss)     
Foreign currency translation and other     
Gains (losses) arising during the period 12,829
  (161,158)
Income tax effect 2,943
  (13,712)
Defined benefit pension plans     
Current period actuarial gains (losses) 
  53,940
Amortization of net deferred actuarial losses 4,019
  8,822
Amortization of deferred prior service costs 13
  669
Reclassification of net actuarial loss from settlement charge 
  6,842
Reclassification of deferred prior service cost due to curtailments 
  9,483
Income tax effect (1,708)  (20,655)
Derivative financial instruments     
Gains arising during the period 14,774
  94,629
Income tax effect (3,874)  (11,358)
Reclassification to net income for (gains) losses realized (10,495)  16,317
Income tax effect 2,756
  (1,867)
Other comprehensive income (loss) 21,257
  (18,048)
Comprehensive income $70,478
  $142,310
















See notes to consolidated financial statements.


5 VF Corporation Q1 FY20FY21 Form 10-Q

Table of Contents

VF CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended June
(In thousands)20202019
OPERATING ACTIVITIES
Net income (loss)$(285,613) $49,221  
Loss from discontinued operations, net of tax(7,871) (16,052) 
Income (loss) from continuing operations, net of tax(277,742) 65,273  
Adjustments to reconcile net income (loss) to cash used by operating activities:
Depreciation and amortization63,026  62,236  
Reduction in the carrying amount of right-of-use assets101,772  92,125  
Stock-based compensation9,686  33,287  
Provision for doubtful accounts8,145  1,854  
Pension expense less than contributions(3,802) (2,837) 
Other, net32,858  12,546  
Changes in operating assets and liabilities:
Accounts receivable372,754  165,909  
Inventories(100,129) (204,622) 
Accounts payable(59,768) 17,662  
Income taxes(65,128) 6,473  
Accrued liabilities(26,917) (228,548) 
Operating lease right-of-use assets and liabilities(51,579) (101,052) 
Other assets and liabilities(13,630) 3,471  
Cash used by operating activities - continuing operations(10,454) (76,223) 
Cash provided by operating activities - discontinued operations7,266  10,043  
Cash used by operating activities(3,188) (66,180) 
INVESTING ACTIVITIES
Purchases of short-term investments(700,000) —  
Capital expenditures(69,191) (45,387) 
Software purchases(13,477) (13,759) 
Other, net(573) 62,930  
Cash provided (used) by investing activities - continuing operations(783,241) 3,784  
Cash used by investing activities - discontinued operations(1,914) (4,415) 
Cash used by investing activities(785,155) (631) 
FINANCING ACTIVITIES
Net decrease in short-term borrowings(1,209,556) (585,477) 
Payments on long-term debt(222) (1,479) 
Payment of debt issuance costs(21,271) —  
Proceeds from long-term debt2,996,090  —  
Cash dividends paid(186,746) (202,538) 
Cash received from Kontoor Brands, net of cash transferred of $126.8 million—  906,148  
Proceeds from issuance of Common Stock, net of (payments) for tax withholdings(15,634) 7,199  
Cash provided by financing activities1,562,661  123,853  
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash4,126  5,078  
Net change in cash, cash equivalents and restricted cash778,444  62,120  
Cash, cash equivalents and restricted cash – beginning of year1,411,322  556,587  
Cash, cash equivalents and restricted cash – end of period$2,189,766  $618,707  
  Three Months Ended June
      
(In thousands) 2019  2018
OPERATING ACTIVITIES     
Net income $49,221
  $160,358
Income (loss) from discontinued operations, net of tax (48,028)  98,994
Income from continuing operations, net of tax 97,249
  61,364
Adjustments to reconcile net income to cash (used) provided by operating activities:     
Depreciation and amortization, including operating lease right-of-use assets 159,178
  52,896
Stock-based compensation 33,469
  24,960
Provision for doubtful accounts 2,161
  2,448
Pension expense (less than) in excess of contributions (2,837)  2,537
Other, net 12,685
  6,206
Changes in operating assets and liabilities:     
Accounts receivable 164,266
  (27,309)
Inventories (228,120)  (139,170)
Accounts payable 7,148
  79,518
Income taxes 7,867
  (73,558)
Accrued liabilities (233,610)  107,262
Operating lease right-of-use assets and liabilities (102,586)  
Other assets and liabilities 3,738
  2,183
Cash (used) provided by operating activities - continuing operations (79,392)  99,337
Cash provided by operating activities - discontinued operations 13,212
  177,807
Cash (used) provided by operating activities (66,180)  277,144
INVESTING ACTIVITIES     
Business acquisitions, net of cash received 
  (321,395)
Proceeds from sale of businesses, net of cash sold 
  288,273
Capital expenditures (46,270)  (62,484)
Software purchases (14,512)  (21,514)
Other, net 62,478
  5,373
Cash provided (used) by investing activities - continuing operations 1,696
  (111,747)
Cash used by investing activities - discontinued operations (2,327)  (17,483)
Cash used by investing activities (631)  (129,230)
FINANCING ACTIVITIES     
Net decrease in short-term borrowings (585,477)  (214,383)
Payments on long-term debt (1,479)  (1,557)
Cash dividends paid (202,538)  (181,517)
Cash received from Kontoor Brands, net of cash transferred of $126.8 million 906,148
  
Proceeds from issuance of Common Stock, net of shares withheld for taxes 7,199
  53,500
Cash provided (used) by financing activities 123,853
  (343,957)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash 5,078
  (19,998)
Net change in cash, cash equivalents and restricted cash 62,120
  (216,041)
Cash, cash equivalents and restricted cash – beginning of year 556,587
  689,190
Cash, cash equivalents and restricted cash – end of period $618,707
  $473,149

Continued on next page.

See notes to consolidated financial statements.



VF Corporation Q1 FY20FY21 Form 10-Q 6



Table of Contents
VF CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended June
(In thousands)20202019
Balances per Consolidated Balance Sheets:
Cash and cash equivalents$2,145,111  $560,882  
Other current assets1,216  3,909  
Current assets of discontinued operations42,986  45,198  
Other assets453  8,718  
Total cash, cash equivalents and restricted cash$2,189,766  $618,707  
  Three Months Ended June
      
(In thousands) 2019  2018
Balances per Consolidated Balance Sheets:     
Cash and cash equivalents $606,080
  $392,175
Other current assets 3,909
  4,067
Current and other assets of discontinued operations 
  75,759
Other assets 8,718
  1,148
Total cash, cash equivalents and restricted cash $618,707
  $473,149
















































See notes to consolidated financial statements.


7 VF Corporation Q1 FY20FY21 Form 10-Q

Table of Contents

VF CORPORATION
Consolidated Statements of Stockholders’ Equity
(Unaudited)
Three Months Ended June 2020
Additional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings (Accumulated Deficit)
 Common Stock
 (In thousands, except share amounts)SharesAmountsTotal
Balance, March 2020388,812,158  $97,203  $4,183,780  $(930,958) $7,309  $3,357,334  
Net income (loss)—  —  —  —  (285,613) (285,613) 
Dividends on Common Stock ($0.48 per share)—  —  (186,746) —  —  (186,746) 
Stock-based compensation, net829,087  207  13,783  —  (19,784) (5,794) 
Foreign currency translation and other—  —  —  52,473  —  52,473  
Defined benefit pension plans—  —  —  3,182  —  3,182  
Derivative financial instruments—  —  —  (22,238) —  (22,238) 
Balance, June 2020389,641,245  $97,410  $4,010,817  $(897,541) $(298,088) $2,912,598  
Three Months Ended June 2019
Additional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings
Common Stock
 (In thousands, except share amounts)SharesAmountsTotal
Balance, March 2019396,824,662  $99,206  $3,921,784  $(902,075) $1,179,601  $4,298,516  
Adoption of new accounting standard, ASU 2016-02—  —  —  —  (2,491) (2,491) 
Adoption of new accounting standard, ASU 2018-02—  —  —  (61,861) 61,861  —  
Net income—  —  —  —  49,221  49,221  
Dividends on Common Stock ($0.51 per share)—  —  —  —  (202,538) (202,538) 
Stock-based compensation, net1,097,458  275  66,601  —  (24,312) 42,564  
Foreign currency translation and other—  —  —  15,772  —  15,772  
Defined benefit pension plans—  —  —  2,324  —  2,324  
Derivative financial instruments—  —  —  3,161  —  3,161  
Spin-off of Jeans Business—  —  —  75,293  (130,208) (54,915) 
Balance, June 2019397,922,120  $99,481  $3,988,385  $(867,386) $931,134  $4,151,614  
 Three Months Ended June 2019 
     Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings   
 Common Stock      
 (In thousands, except share amounts)Shares Amounts    Total 
Balance, March 2019396,824,662
 $99,206
 $3,921,784
 $(902,075) $1,179,601
 $4,298,516
 
Adoption of new accounting standard, ASU 2016-02
 
 
 
 (2,491) (2,491) 
Adoption of new accounting standard, ASU 2018-02
 
 
 (61,861) 61,861
 
 
Net income
 
 
 
 49,221
 49,221
 
Dividends on Common Stock ($0.51 per share)
 
 
 
 (202,538) (202,538) 
Stock-based compensation, net1,097,458
 275
 66,601
 
 (24,312) 42,564
 
Foreign currency translation and other
 
 
 15,772
 
 15,772
 
Defined benefit pension plans
 
 
 2,324
 
 2,324
 
Derivative financial instruments
 
 
 3,161
 
 3,161
 
Spin-off of Jeans Business
 
 
 75,293
 (130,208) (54,915) 
Balance, June 2019397,922,120
 $99,481
 $3,988,385
 $(867,386) $931,134
 $4,151,614
 
             
 Three Months Ended June 2018 
     Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings   
 Common Stock      
 (In thousands, except share amounts)Shares Amounts    Total 
Balance, March 2018394,313,070
 $98,578
 $3,607,424
 $(864,030) $846,124
 $3,688,096
 
Adoption of new accounting standard, ASU 2014-09
 
 
 
 1,956
 1,956
 
Net income
 
 
 
 160,358
 160,358
 
Dividends on Common Stock ($0.46 per share)
 
 
 
 (181,517) (181,517) 
Stock-based compensation, net1,196,068
 299
 81,105
 
 (1,133) 80,271
 
Foreign currency translation and other
 
 
 (174,870) 
 (174,870) 
Defined benefit pension plans
 
 
 59,101
 
 59,101
 
Derivative financial instruments
 
 
 97,721
 
 97,721
 
Balance, June 2018395,509,138
 $98,877
 $3,688,529
 $(882,078) $825,788
 $3,731,116
 















See notes to consolidated financial statements.


VF Corporation Q1 FY20FY21 Form 10-Q 8


Table of Contents

VF CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSPAGE NUMBER
NOTE 1
NOTE 2
NOTE 3
NOTE 4
NOTE 5
NOTE 6
NOTE 7
NOTE 8
NOTE 9
NOTE 10
NOTE 11
NOTE 12
NOTE 13
NOTE 14
NOTE 15
NOTE 16
NOTE 17
NOTE 18
NOTE 19
NOTE 20

NOTE 1 — BASIS OF PRESENTATION

VF Corporation (together with its subsidiaries, collectively known as “VF” or the “Company”) uses a 52/53 week fiscal year ending on the Saturday closest to March 31 of each year. The Company's current fiscal year runs from March 31, 201929, 2020 through March 28, 2020April 3, 2021 ("Fiscal 2020"2021"). Accordingly, this Form 10-Q presents our first quarter of Fiscal 2020.2021. For presentation purposes herein, all references to periods ended June 20192020 and June 20182019 relate to the fiscal periods ended on June 29, 201927, 2020 and June 30, 2018,29, 2019, respectively. References to March 20192020 relate to information as of March 30, 2019.28, 2020.
On January 21, 2020, VF announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business is comprised primarily of the following brands and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also includes certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. During the three months ended March 2020, the Company determined that the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria and expects to divest this business during Fiscal 2021. Accordingly, the Company has reported the results of the Occupational Workwear business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively. The related held-for-
sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets. These changes have been applied to all periods presented.
On May 22, 2019, VF completed the spin-off of its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF OutletTM business, into an independent, publicly traded company. As a result, VF reported the operating results for the Jeans business inand the income (loss) fromrelated cash flows as discontinued operations net of tax line item in the Consolidated Statements of Income for all periods presented. In addition, the related assetsOperations and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date the spin-off was completed.
Additionally, the Nautica® brand business has been reported as discontinued operations in our Consolidated Statements of Income, and the related held-for-sale assets and liabilities have been presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale.Cash Flows, respectively. These changes have been applied to all periods presented.
Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to continuing operations. Refer to Note 5 for additional information on discontinued operations.
Certain prior year amounts have been reclassified to conform to the Fiscal 20202021 presentation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and notes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. Similarly, the March 20192020 condensed consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management,
9 VF Corporation Q1 FY21 Form 10-Q

Table of Contents
the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations and cash flows of VF for the interim periods presented. Operating results for the three months ended June 20192020 are not necessarily indicative of results that may be expected for any other interim period or for Fiscal 2020.2021. For further information, refer to the consolidated financial statements and notes included in VF’s Annual Report on Form 10-K for the year ended March 30, 201928, 2020 (“Fiscal 20192020 Form 10-K”).
In preparing the condensed consolidated financial statements, management makes estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. The duration and severity of the novel coronavirus ("COVID-19") pandemic, which is subject to uncertainty, is having a significant impact on VF's business. Management's estimates and assumptions have contemplated both current and expected impacts related to COVID-19 based on available information. Actual results may differ from those estimates.
NOTE 2 — RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

Recently Adopted Accounting Standards

In FebruaryJune 2016, the FASB issued ASU No. 2016-13, "Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, “LeasesInstruments—Credit Losses (Topic 842)”326): Measurement of Credit Losses on Financial Instruments", which requires entities to use a new accounting standardforward-looking approach based on leasing.expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics, including permitted transition methods. Collectively, the guidance is referred to as FASB Accounting Standards Codification ("ASC") 842. This standard requires companies to record most leased assets and liabilities on the balance sheet, and also retains a dual model approach for assessing lease classification and recognizing expense. The Company adopted this standard on March 31, 2019, utilizing the modified retrospective method and has recognized the cumulative effect of initially applying the new standard in retained earnings. The effective date of the adoption has been used as the date of initial application, and thus comparative prior period financial information has not been restated and continues to be reported under accounting standards in effect for those periods.
The standard provides certain optional practical expedients for transition. The Company elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC Topic 840, Leases ("ASC 840"), to all leases that existed prior to the transition date. As a result, VF did not reassess (i) whether existing or expired contracts contain leases, (ii) lease classification for any existing or expired leases, or (iii) whether lease origination costs qualified as initial direct costs. The
Company also elected the land easement practical expedient, which allows the Company to apply ASC 842 prospectively to land easements after the adoption date if they were not previously accounted for under ASC 840. Certain leases contain both lease and non-lease components. For leases associated with specific asset classes, including certain real estate, vehicles, manufacturing machinery and IT equipment, VF has elected the practical expedient which permits entities to account for separate lease and non-lease components as a single component. For all other lease contracts, the Company has elected to account for each lease component separately from the non-lease components of the contract. When applicable, VF will measure the consideration to be paid pursuant to the agreement and allocate this consideration to the lease and non-lease components based on relative stand-alone prices. Further, the Company made an accounting policy election to not recognize right-of-use assets and lease liabilities for leases with terms of 12 months or less.
The adoption of ASC 842 resulted in a net decrease of $2.5 million in the retained earnings line item of the Consolidated Balance Sheet as of March 31, 2019. The adoption of ASC 842 also resulted in the recognition of operating lease right-of-use assets and operating lease liabilities within the Consolidated Balance Sheet. Refer to Note 10 for additional lease disclosures.
In August 2017, the FASB issued ASU No. 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities", an update that amends and simplifies certain


9 VF Corporation Q1 FY20 Form 10-Q


aspects of hedge accounting rules to better portray the economic results of risk management activities in the financial statements. The FASB subsequently issued updates to the standard to provide additional guidance on specific topics. This guidance became effective for VF in the first quarter of Fiscal 2020, but did not impact VF's consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income", an update that addresses the effect of the change in the U.S. federal corporate income tax rate due to the enactment of the Tax Cuts and Jobs Act ("Tax Act") on items within accumulated other comprehensive income (loss). The guidance became effective for VF in the first quarter of Fiscal 2020. The Company elected to reclassify the income tax effects2021, but did not have a material impact on VF's consolidated financial statements. As a result of the Tax Act on items within accumulated other comprehensive income (loss) of $61.9 million to retained earnings, which primarily related to deferred taxes previously recorded for pension benefits. The adoption of this guidance, didthe following significant accounting policy from the Company’s Fiscal 2020 Form 10-K has been updated:
Accounts Receivable
Trade accounts receivable are recorded at invoiced amounts, less contractual allowances for trade terms, sales incentive programs and discounts. Royalty receivables are recorded at amounts earned based on the licensees' sales of licensed products, subject in some cases to contractual minimum royalties due from individual licensees. VF maintains an allowance for doubtful accounts for estimated losses that will result from the inability of customers and licensees to make required payments. The allowance is determined based on review of specific customer accounts where collection is doubtful, as well as an assessment of the collectability of total receivables, which are grouped based on similar risk characteristics, considering historical trends, adjusted for current economic conditions and reasonable and supportable forecasts when appropriate. The allowance represents the current estimate of lifetime expected credit losses for all outstanding accounts receivable and reflects the Company's ongoing evaluation of collectability, customer creditworthiness, historical levels of credit losses and future expectations. Receivables are written off against the allowance when it is determined that the amounts will not have an impact on VF's consolidated results of operations or cash flows.be recovered.
In JuneAugust 2018, the FASB issued ASU No. 2018-07, "2018-13,Compensation—Stock Compensation "Fair Value Measurement (Topic 718)820): ImprovementsDisclosure Framework—Changes to Nonemployee Share-Based Payment Accounting"the Disclosure Requirements for Fair Value Measurement", an update that expandsmodifies the scope of Topic 718 to include share-based payment transactionsdisclosure requirements for acquiring goods and services from nonemployees. Thisfair value measurements by removing, modifying or adding certain disclosures. The guidance became effective for VF in the first quarter of Fiscal 2020,2021, but did not have a material impact on VF's consolidated financial statements.disclosures.
In JulyAugust 2018, the FASB issued ASU No. 2018-09,2018-15, "Codification Improvements"Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract", an update that provides technical corrections, clarifications and other improvements acrossaligns the requirements for capitalizing implementation costs incurred in a variety of accounting topics.hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The transition and effective date guidance is based on the facts and circumstances of each update; however, many of them became effective for VF in the first quarter of Fiscal 2020. The guidance2021, but did not have a material impact on VF's consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which requires entities to use a forward-looking approach based on expected losses to estimate
credit losses on certain types of financial instruments, including trade receivables. The FASB has subsequently issued updates to the standard to provide additional clarification on specific topics. This guidance will be effective for VF in the first quarter of the year ended April 3, 2021 ("Fiscal 2021") with early adoption permitted. The Company is evaluating the impact that adopting this guidance will have on VF’s consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement", an update that modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The guidance will be effective for VF in the first quarter of Fiscal 2021 with early adoption permitted. The Company is evaluating the impact that adopting this guidance will have on VF's disclosures.
In August 2018, the FASB issued ASU No. 2018-14, "Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans", an update that modifies the annual disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. The guidance will be effective for VF in Fiscal 2021, with earlybut the Company does not expect the adoption permitted. The Company is evaluating the impact that adoptingof this guidance willto have a material impact on VF's disclosures.
In August 2018,December 2019, the FASB issued ASU No. 2018-15,2019-12, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)Income Taxes (Topic 740): Customer’sSimplifying the Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract"Income Taxes", an update that alignsamends and simplifies the requirementsaccounting for capitalizing implementation costs incurredincome taxes by removing certain exceptions in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurredexisting guidance and providing new guidance to develop or obtain internal-use software.reduce complexity in certain areas. The guidance will be effective for VF in the first quarter of the year ending April 2, 2022 ("Fiscal 20212022") with early adoption permitted. The Company is evaluating the impact that adopting this guidance will have on VF's consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting", an update that provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The optional guidance is provided to ease the potential burden of accounting for reference rate reform. The guidance is effective and can be adopted no later than December 31, 2022. The Company is evaluating the impact that adopting this guidance would have on VF's consolidated financial statements.


VF Corporation Q1 FY20FY21 Form 10-Q 10


Table of Contents

NOTE 3 — REVENUES
The following table provides information about accounts receivable, contract assets and contract liabilities:
(In thousands)June 2020March 2020June 2019
Accounts receivable, net$934,984  $1,308,051  $1,211,347  
Contract assets (a)
2,487  1,181  1,576  
Contract liabilities (b)
45,622  37,498  42,196  
(In thousands) June 2019  March 2019 June 2018
Accounts receivable, net $1,306,270
  $1,465,855
 $1,222,938
Contract assets (a)
 1,576
  2,569
 1,543
Contract liabilities (b)
 44,364
  30,181
 27,105
(a)Included in the other current assets line item in the Consolidated Balance Sheets.
(a)
(b)Included in the accrued liabilities and other liabilities line items in the Consolidated Balance Sheets.

Included in the other current assets line item in the Consolidated Balance Sheets.
(b)
Included in the accrued liabilities and other liabilities line items in the Consolidated Balance Sheets.

For the three months ended June 2019,2020, the Company recognized $24.7$35.6 million of revenue that was included in the contract liability balance during the period.period, including amounts recorded as a contract liability and subsequently recognized as revenue as performance obligations are satisfied within the same period, such as order deposits from customers. The change in the contract asset and contract liability balances primarily results from the timing differences between the Company's satisfaction of performance obligations and the customer's payment.
For the three months ended June 2019,2020, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.
As of June 2019,2020, the Company expects to recognize $85.0$62.9 million of fixed consideration related to the future minimum guarantees
in effect under its licensing agreements and expects such amounts
to be recognized over time through December 2024.based on the contractual terms, including $15.4 million in the remainder of Fiscal 2021. The variable consideration related to licensing arrangements is not disclosed as a remaining performance obligation as it qualifies for the sales-based royalty exemption. VF has also elected the practical expedient to not disclose the transaction price allocated to remaining performance obligations for contracts with an original expected duration of one year or less.
As of June 2019,2020, there were no arrangements with transaction price allocated to remaining performance obligations other than contracts for which the Company has applied the practical expedients and the fixed consideration related to future minimum guarantees discussed above.
Disaggregation of Revenue
The following tables disaggregate our revenues by channel and geography, which provides a meaningful depiction of how the nature, timing and uncertainty of revenues arewere affected by economic factors. The wholesale channel includes fees generated from sourcing activities as the customers and point-in-time revenue recognition are similar to other wholesale arrangements.

Three Months Ended June 2019 Three Months Ended June 2020
(In thousands)Outdoor Active Work Other Total (In thousands)OutdoorActiveWorkOtherTotal
Channel revenues
 
 
 
 
 Channel revenues
Wholesale$341,756
 $660,142
 $377,548
 $2,808
 $1,382,254
 Wholesale$158,506  $241,164  $117,604  $1,275  $518,549  
Direct-to-consumer266,342
 565,887
 40,852
 3,454
 876,535
 Direct-to-consumer180,014  324,201  40,615  44  544,874  
Royalty2,522
 6,097
 4,071
 
 12,690
 Royalty2,708  5,951  4,211  —  12,870  
Total$610,620
 $1,232,126
 $422,471
 $6,262
 $2,271,479
 Total$341,228  $571,316  $162,430  $1,319  $1,076,293  
          
Geographic revenues
 
 
 
 
 Geographic revenues
United States$303,052
 $711,205
 $346,160
 $
 $1,360,417
 United States$152,477  $265,507  $114,632  $—  $532,616  
International307,568
 520,921
 76,311
 6,262
 911,062
 International188,751  305,809  47,798  1,319  543,677  
Total$610,620
 $1,232,126
 $422,471
 $6,262
 $2,271,479
 Total$341,228  $571,316  $162,430  $1,319  $1,076,293  
 Three Months Ended June 2018
(In thousands)Outdoor Active Work Other Total
Channel revenues
 
 
 
 
Wholesale$309,776
 $654,848
 $381,364
 $8,305
 $1,354,293
Direct-to-consumer255,964
 475,536
 36,838
 
 768,338
Royalty2,860
 6,553
 5,091
 
 14,504
Total$568,600
 $1,136,937
 $423,293
 $8,305
 $2,137,135
          
Geographic revenues
 
 
 
 
United States$262,856
 $644,105
 $331,099
 $8,305
 $1,246,365
International305,744
 492,832
 92,194
 
 890,770
Total$568,600
 $1,136,937
 $423,293
 $8,305
 $2,137,135



11 VF Corporation Q1 FY20FY21 Form 10-Q

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Three Months Ended June 2019
(In thousands)OutdoorActiveWorkOtherTotal
Channel revenues
Wholesale$341,756  $660,142  $164,280  $2,808  $1,168,986  
Direct-to-consumer266,342  565,887  33,519  3,454  869,202  
Royalty2,522  6,097  3,847  —  12,466  
Total$610,620  $1,232,126  $201,646  $6,262  $2,050,654  
Geographic revenues
United States$303,052  $711,205  $142,631  $—  $1,156,888  
International307,568  520,921  59,015  6,262  893,766  
Total$610,620  $1,232,126  $201,646  $6,262  $2,050,654  
NOTE 4 — ACQUISITIONSDISCONTINUED OPERATIONS
Icebreaker

On April 3, 2018, VF acquired 100% of the stock of Icebreaker Holdings Limited ("Icebreaker") forNZ$274.4 million ($198.5 million) in cash, subject to working capital and other adjustments. The purchase price was primarily funded with short-term borrowings. The purchase price decreased NZ$1.4 million ($0.9 million) for the year ended March 2019, related to working capital adjustments, resulting in a revised purchase price of NZ$273.0 million ($197.6 million). The purchase price allocation was finalized during the three months ended March 2019.
Icebreaker was a privately held company based in Auckland, New Zealand. Icebreaker®,the primary brand, specializes in high-performance apparel based on natural fibers, including Merino wool, plant-based fibers and recycled fibers. It is an ideal complement to VF's Smartwool® brand, which also features Merino wool in its clothing and accessories. Together, the Smartwool® and Icebreaker® brands position VF as a global leader in the Merino wool and natural fiber categories.
The following table summarizes the estimated fair values of the Icebreaker assets acquired and liabilities assumed at the date of acquisition:
(In thousands) April 3, 2018
Cash and equivalents $6,444
Accounts receivable 16,781
Inventories 31,728
Other current assets 3,931
Property, plant and equipment 3,858
Intangible assets 98,041
Other assets 4,758
Total assets acquired 165,541
   
Short-term borrowings 7,235
Accounts payable 2,075
Other current liabilities 21,262
Deferred income tax liabilities 26,870
Other noncurrent liabilities 433
Total liabilities assumed 57,875
   
Net assets acquired 107,666
Goodwill 89,943
Purchase price $197,609


The goodwill is attributable to the acquired workforce of Icebreaker and the significant synergies expected to arise as a result of the acquisition. All of the goodwill has been assigned to the Outdoor segment and none is expected to be deductible for tax purposes.
The Icebreaker® trademark, which management determined to have an indefinite life, has been valued at $70.1 million.Amortizable intangible assets have been assigned values of $27.8 million for customer relationships and $0.2 million for distribution agreements. Customer relationships are being amortized using an accelerated method over 11.5 years. Distribution agreements are being amortized on a straight-line basis over four years.
Total transaction expenses for the Icebreaker acquisition of $7.4 million were recognized in the selling, general and administrative expenses line item in the Consolidated Statements of Income, of which $4.1 million was recognized during the three months ended June 2018 and the remainder was recognized prior to Fiscal 2019. In addition, the Company recognized a $9.9 million gain on derivatives used to hedge the purchase price of Icebreakerin the other income (expense), net line item in the Consolidated Statements of Income, of which $0.3 million was recognized during the three months ended June 2018 and the remainder was recognized prior to Fiscal 2019.
Pro forma results of operations of the Company would not be materially different as a result of the Icebreaker acquisition and therefore are not presented.


VF Corporation Q1 FY20 Form 10-Q 12



Altra

On June 1, 2018, VF acquired 100% of the stock of Icon-Altra LLC, plus certain assets in Europe ("Altra"). The purchase price was $131.7 million in cash, subject to working capital and other adjustments and was primarily funded with short-term borrowings. The purchase price decreased $0.1 million during the year ended March 2019, related to working capital adjustments, resulting in a revised purchase price of $131.6 million. The allocation of the purchase price was finalized during the three months ended December 2018, resulting in a decrease of goodwill
by $1.5 million related to a final adjustment to working capital balances.
Altra®, the primary brand, is an athletic and performance-based lifestyle footwear brand. Altra provides VF with a unique and differentiated technical footwear brand and a capability that, when applied across VF's footwear platforms, will serve as a catalyst for growth.
The following table summarizes the estimated fair values of the Altra assets acquired and liabilities assumed at the date of acquisition:
(In thousands) June 1, 2018
Accounts receivable $11,629
Inventories 9,310
Other current assets 575
Property, plant and equipment 1,107
Intangible assets 59,700
Total assets acquired 82,321
   
Accounts payable 5,068
Other current liabilities 7,415
Total liabilities assumed 12,483
   
Net assets acquired 69,838
Goodwill 61,719
Purchase price $131,557


The goodwill is attributable to the significant growth and synergies expected to arise as a result of the acquisition. All of the goodwill was assigned to the Outdoor segment and is expected to be deductible for tax purposes.
The Altra®trademark, which management determined to have an indefinite life, has been valued at $46.4 million.Amortizable intangible assets have been assigned values of $13.0 million for customer relationships and $0.3 million for distribution agreements. Customer relationships are being amortized using an accelerated method over 15 years. Distribution agreements are being amortized on a straight-line basis over four years.
Total transaction expenses for the Altra acquisition were $2.3 million, all of which were recognized in the selling, general and administrative expenses line item in the Consolidated Statement of Income during the three months ended June 2018.
Pro forma results of operations of the Company would not be materially different as a result of the Altra acquisition and therefore are not presented.


13 VF Corporation Q1 FY20 Form 10-Q


NOTE 5 — DISCONTINUED OPERATIONS AND OTHER DIVESTITURES

The Company continuously assesses the composition of its portfolio to ensure it is aligned with its strategic objectives and positioned to maximize growth and return to shareholders.
Discontinued Operations

Occupational Workwear Business
On January 21, 2020, VF announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business is comprised primarily of the following brands and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also includes certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel.
During the three months ended March 2020, the Company determined the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria and expects to divest this business during Fiscal 2021. Accordingly, the Company has reported the results of the Occupational Workwear business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets.
The results of the Occupational Workwear business were previously reported in the Work segment. The results of the Occupational Workwear business recorded in the loss from discontinued operations, net of tax line item in the Consolidated Statements of Operations were a loss of $7.9 million and income of $32.0 million for the three months ended June 2020 and June 2019, respectively.
Certain corporate overhead costs and segment costs previously allocated to the Occupational Workwear business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations.
Jeans Business
On May 22, 2019, VF completed the spin-off its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF OutletTM business, into an independent, publicly traded company now operating under the name Kontoor
Brands, Inc. ("Kontoor Brands") and trading under the symbol "KTB" on the New York Stock Exchange. The spin-off was effected through a distribution to VF shareholders of one share of Kontoor Brands common stock for every seven shares of VF common stock held on the record date of May 10, 2019. Accordingly, the Company has reported the results of the Jeans business and the related cash flows as discontinued operations in the Consolidated Statements of IncomeOperations and presented the related assets and liabilities as assets and liabilitiesConsolidated Statements of discontinued operations in the Consolidated Balance Sheets, through the date the spin-off was completed.Cash Flows, respectively.
In connection with the spin-off, Kontoor Brands entered into a credit agreement with respect to $1.55 billion in senior secured credit facilities consisting of a senior secured five-yearfive-year $750.0 million term loan A facility, a senior secured seven-yearseven-year $300.0 million term loan B facility and a five-yearfive-year $500.0 million senior secured revolving credit facility (collectively, the "Kontoor Credit Facilities"). Prior to the effective date of the spin-off, Kontoor Brands incurred $1.05 billion of indebtedness under the Kontoor Credit Facilities, which was primarily used to fund a transfer of $906.1 million to VF and its subsidiaries, net of $126.8 million of cash received from VF. As a result of the spin-off, VF divested net assets of $54.9 million, including the indebtedness under the Kontoor Credit Facilities. Also included in the net assets divested was $75.3 million of net accumulated other comprehensive losses attributable to the Jeans business, primarily related to foreign currency translation.
The results of the Wrangler®, Lee® and Rock & Republic® brands were previously reported in the Jeans segment, the results of the Wrangler® RIGGS brand were previously reported in the Work segment, and the results of the non-VF products sold in VF OutletTM stores were previously reported in the Other category included in the reconciliation of segment revenues and segment profit. The results of the Jeans business recorded in the income (loss)loss from discontinued operations, net of tax line item in the Consolidated StatementsStatement of IncomeOperations were a loss of $48.0 million and income of $98.6 million for the three months ended June 2019, and June 2018, respectively.
Certain corporate overhead costs and segment costs previously allocated to the Jeans business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations. The results of the Jeans business reported as discontinued operations includeincluding $59.5 million of separation and related expenses during the three months ended June 2019.expenses.
In connection with the spin-off of the Jeans business, the Company entered into several agreements with Kontoor Brands that govern
the relationship of the parties following the spin-off
VF Corporation Q1 FY21 Form 10-Q 12

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including the Separation and Distribution Agreement, the Tax Matters Agreement, the Transition Services Agreement, the VF Intellectual Property License Agreement and the Employee Matters Agreement. Under the terms of the Transition Services Agreement, the Company and Kontoor Brands agreed to provide each other certain transitional services including information technology, information management, human resources,
employee benefits administration, supply chain, facilities, and other limited finance and accounting related services for periods up to 1824 months. Payments and operating expense reimbursements for transition services are recorded within the reportable segments or within the corporate and other expenses line item, in the reconciliation of segment profit in Note 15,14, based on the function providing the service.
Nautica® Brand Business

During the three months ended December 30, 2017, the Company reached the strategic decision to exit the Nautica® brand business, and determined that it met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of the Nautica® brand business as discontinued operations in the Consolidated Statements of Income and presented the related held-for-sale assets and liabilities as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale.
On April 30, 2018, VF completed the sale of the Nautica® brand business. The Company received proceeds of $285.8 million, net of cash sold, resulting in a final after-tax loss on sale of $38.2 million, including a $5.0 million decrease in the estimated loss on sale that was recorded in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statement of Income for the three months ended June 2018.
The results of the Nautica® brand business recorded in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statement of Income were income of $0.4 million (including a $5.0 million decrease in the estimated loss on sale) for the three months ended June 2018.
Under the terms of the transition services agreement, the Company provided certain support services for periods up to 12 months from the closing date of the transaction. Revenue and related expense items associated with the transition services were recorded in the Other category, and operating expense reimbursements were recorded within the corporate and other expenses line item, in the reconciliation of segment revenues and segment profit in Note 15.


VF Corporation Q1 FY20 Form 10-Q 14



Summarized Discontinued Operations Financial Information
The following table summarizes the major line items included for the JeansOccupational Workwear business and Nautica® brandthe Jeans business that are included in the income (loss)loss from discontinued operations, net of tax line item in the Consolidated Statements of Income:Operations:
 Three Months Ended June
(In thousands)20202019
Net revenues$125,333  $556,028  
Cost of goods sold101,470  342,954  
Selling, general and administrative expenses33,256  196,466  
Interest income, net293  33  
Other income (expense), net—  (623) 
Income (loss) from discontinued operations before income taxes(9,100) 16,018  
Income tax expense (benefit) (a)
(1,229) 32,070  
Loss from discontinued operations, net of tax$(7,871) $(16,052) 
(a)Income tax expense for the three months ended June 2019 includes additional tax expense on nondeductible transaction costs and uncertain tax positions related to the Jeans business.
  Three Months Ended June
      
(In thousands) 2019  2018
Net revenues $335,203
  $672,924
Cost of goods sold 203,124
  394,394
Selling, general and administrative expenses 152,798
  165,931
Interest, net (552)  969
Other income (expense), net (667)  (969)
Income (loss) from discontinued operations before income taxes (21,938)  112,599
Gain on the sale of discontinued operations before income taxes 
  4,206
Total income (loss) from discontinued operations before income taxes (21,938)  116,805
Income tax expense (a)
 (26,090)  (17,811)
Income (loss) from discontinued operations, net of tax $(48,028)  $98,994
(a)
Income tax expense for the three months ended June 2019 includes additional tax expense on nondeductible transaction costs and uncertain tax positions.
The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented:
(In thousands) June 2019  March 2019 June 2018(In thousands)June 2020March 2020June 2019
Cash and equivalents $
  $97,892
 $75,742
Cash and equivalents$42,986  $39,752  $45,198  
Accounts receivable, net 
  242,941
 205,596
Accounts receivable, net64,065  83,650  94,923  
Inventories 
  510,370
 472,166
Inventories258,632  294,000  283,619  
Other current assets 
  44,827
 38,356
Other current assets10,027  6,701  8,168  
Property, plant and equipment, net 
  142,091
 142,826
Property, plant and equipment, net46,697  44,863  38,571  
Intangible assets 
  51,913
 55,263
Intangible assets, netIntangible assets, net54,471  54,471  63,404  
Goodwill 
  213,570
 221,176
Goodwill43,530  43,530  49,630  
Operating lease right-of-use assetsOperating lease right-of-use assets39,452  38,941  34,121  
Other assets 
  74,144
 68,392
Other assets5,275  5,231  4,534  
Total assets of discontinued operations $
  $1,377,748
 $1,279,517
Total assets of discontinued operations$565,135  $611,139  $622,168  
       
Short-term borrowings $
  $5,995
 $5,062
Accounts payable 
  113,866
 109,638
Accounts payable$27,810  $63,380  $80,842  
Accrued liabilities 
  141,621
 132,380
Accrued liabilities31,134  29,699  31,585  
Operating lease liabilitiesOperating lease liabilities34,462  35,867  32,082  
Other liabilities 
  48,581
 47,774
Other liabilities2,284  2,270  3,442  
Deferred income tax liabilities (a)
Deferred income tax liabilities (a)
(4,407) (4,435) (10,248) 
Total liabilities of discontinued operations $
  $310,063
 $294,854
Total liabilities of discontinued operations$91,283  $126,781  $137,703  

The following table presents information regarding certain components of cash flows from discontinued operations:(a)Deferred income tax balances reflect VF's consolidated netting by jurisdiction.
  Three Months Ended June
      
(In thousands) 2019  2018
Cash provided by operating activities $13,212
  $177,807
Cash used by investing activities (2,327)  (17,483)
      
Non-cash items: 
  
Depreciation and amortization $4,829
  $18,234
Capital expenditures 2,651
  6,435



1513 VF Corporation Q1 FY20FY21 Form 10-Q


Table of Contents
Other Divestitures
NOTE 5 — INVENTORIES

(In thousands)June 2020March 2020June 2019
Finished products$1,314,399  $1,201,562  $1,290,814  
Work-in-process64,401  67,603  62,268  
Raw materials24,058  24,747  28,431  
Total inventories$1,402,858  $1,293,912  $1,381,513  
Reef® Brand Business
During the three months ended September 29, 2018, the Company reached the decision to sell the Reef® brand business, which was included in the Active segment.
VF signed a definitive agreement for the sale of the Reef® brand business on October 2, 2018, and completed the transaction on October 26, 2018. VF received cash proceeds of $139.4 million, and recorded a $14.4 million final loss on sale, which was included in the other income (expense), net line item in the Consolidated Statement of Income for the year ended March 2019.
Under the terms of the transition services agreement, the Company is providing certain support services for periods up to 21 months from the closing date of the transaction. Revenue and related expense items associated with the transition services and
operating expense reimbursements are recorded in the Other category in the reconciliation of segment revenues and segment profit in Note 15.
Van Moer Business
During the three months ended September 29, 2018, the Company reached the decision to sell the Van Moer business, which was acquired in connection with the Williamson-Dickie business and included in the Work segment.
VF completed the sale of the Van Moer business on October 5, 2018, and received cash proceeds of €7.0 million ($8.1 million). VF recorded a $22.4 million final loss on sale, which was included in the other income (expense), net line item in the Consolidated Statement of Income for the year ended March 2019.
NOTE 6 — SALE OF ACCOUNTS RECEIVABLE

In connection with the spin-off of its Jeans business, VF terminated its agreement with the financial institution to sell trade accounts receivable on a recurring, non-recourse basis. As of June 2019, the Company had no outstanding amounts related to accounts receivable previously sold to the financial institution and no other obligations or liabilities related to the agreement.
NOTE 7 — INVENTORIES
(In thousands) June 2019  March 2019 June 2018
Finished products $1,511,217
  $1,284,293
 $1,373,591
Work-in-process 77,921
  73,968
 75,871
Raw materials 75,994
  74,399
 72,197
Total inventories $1,665,132
  $1,432,660
 $1,521,659

NOTE 8 — INTANGIBLE ASSETS
   June 2020March 2020
(In thousands)Weighted
Average
Amortization
Period
Amortization
Method
CostAccumulated
Amortization
Net
Carrying
Amount
Net
Carrying
Amount
Amortizable intangible assets:
Customer relationships18 yearsAccelerated$278,522  $144,548  $133,974  $137,017  
License agreements19 yearsAccelerated7,542  5,019  2,523  2,548  
Other8 yearsStraight-line8,086  5,376  2,710  2,909  
Amortizable intangible assets, net139,207  142,474  
Indefinite-lived intangible assets:
Trademarks and trade names1,716,557  1,712,071  
Intangible assets, net$1,855,764  $1,854,545  
       June 2019  March 2019
(In thousands) 
Weighted
Average
Amortization
Period
 
Amortization
Method
  Cost 
Accumulated
Amortization
 
Net
Carrying
Amount
  
Net
Carrying
Amount
Amortizable intangible assets:              
Customer relationships 17 years Accelerated  $332,746
 $141,015
 $191,731
  $197,129
License agreements 19 years Accelerated  7,616
 4,835
 2,781
  2,807
Trademark 3 years Straight-line  800
 458
 342
  399
Other 8 years Straight-line  8,264
 4,443
 3,821
  4,032
Amortizable intangible assets, net        198,675
  204,367
Indefinite-lived intangible assets:            
Trademarks and trade names        1,782,246
  1,767,997
Intangible assets, net          $1,980,921
  $1,972,364


Intangible assets increased during the three months ended June 20192020 due to the impact of foreign currency fluctuations.
Amortization expense for the three months ended June 20192020 was $6.3$4.4 million. Based on the carrying amounts of amortizable intangible assets noted above, estimated amortization expense for the next five years beginning in Fiscal 20202021 is $25.7$17.5 million, $24.3$16.3 million, $22.7$15.2 million, $21.3$14.6 million and $20.5$14.2 million, respectively.


VF Corporation Q1 FY20 Form 10-Q 16



NOTE 97 — GOODWILL
Changes in goodwill are summarized by reportable segment as follows:
(In thousands)Outdoor Active Work Total 
Balance, March 2019$983,889
 $393,956
 $163,469
 $1,541,314
 
Currency translation349
 2,675
 (206) 2,818
 
Balance, June 2019$984,238
 $396,631
 $163,263
 $1,544,132
 

(In thousands)OutdoorActiveWorkTotal
Balance, March 2020$653,433  $389,848  $112,738  $1,156,019  
Currency translation3,931  2,602  54  6,587  
Balance, June 2020$657,364  $392,450  $112,792  $1,162,606  
NoAccumulated impairment charges for the Outdoor segment were $323.2 million as of June 2020 and March 2020. NaN impairment charges were recorded during the three months ended June 2019 and there are no remaining accumulated impairment charges.2020.
NOTE 108 — LEASES

VF determines if an arrangement is or contains a lease at contract inception and determines its classification as an operating or finance lease at lease commencement. The Company leases certain retail locations, office space, distribution facilities, machinery and equipment, and vehicles. While theThe substantial majority of these leases are operating leases, certain distribution centersleases. Total lease cost includes operating lease cost, variable lease cost, finance lease cost, short-term lease cost, impairment and office spaces are finance leases.
Leases for real estate typically have initial terms ranginggain recognized from 3 to 15 years, generally with renewal options. Leases for equipment typically have initial terms ranging from 2 to 5 years and vehicle leases typically have initial terms ranging from 1 to 8 years. In determining the lease term used in the lease right-of-use asset and lease liability calculations, the Company considers various factors such as market conditions and the terms of any renewal or termination options that may exist. When deemed reasonably certain, the renewal and termination options are included in the determination of the lease term and calculation of the lease right-of-use asset and lease liability.
Most leases have fixed rental payments. Many of the real estate leases also require additional variable payments for occupancy-related costs, real estate taxes and insurance, as well as other payments (e.g., contingent rent) owed when sales at individual retail store locations exceed a stated base amount. Variable lease payments are excluded from the measurement of the lease liability and are recognized in profit and loss in the period in which the event or conditions that triggers those payments occur.
VF estimates the amount it expects to pay to the lessor under a residual value guarantee and includes it in lease payments used to measure the lease liability only for amounts probable of being owed by VF at the commencement date.
VF calculates lease right-of-use assets and lease liabilities as the present valuesale-leaseback transactions. Components of lease payments over the lease term at
cost were as follows:
Three Months Ended June
(In thousands)20202019
Operating lease cost$108,852  $99,588  
Other lease costs14,998  17,904  
Total lease cost$123,850  $117,492  
commencement date. When readily determinable, the Company uses the implicit rate to determine the present value of lease payments, which generally does not happen in practice. As the rate implicit in the majority of the Company's leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, including the lease term, currency, country specific risk premium and adjustments for collateralized debt.
Operating lease expense is recorded as a single lease cost on a straight-line basis over the lease term. For finance leases, right-of-use asset amortization and interest on lease liabilities are presented separately in the Consolidated Statement of Income.
The Company assesses whether a sale leaseback transaction qualifies as a sale when the transaction occurs. For transactions qualifying as a sale, VF derecognizes the underlying asset and recognizes the entire gain or loss at the time of the sale. The corresponding lease entered into with the buyer-lessor is accounted for as an operating lease. During the three months ended June 2020 and 2019, the Company entered into a sale leaseback transactionpaid $65.0 million and $102.6 million of cash for certain office real estate and related assets.operating leases, respectively. The transaction qualified as a sale, and thusdecrease was driven by the Company recognized a gaintiming of $11.3 million resulting from the transaction duringpayments. During the three months ended June 2019.
As of June2020 and 2019, the Company has signed certain distribution center leases that have not yet commenced but will create significant rightsobtained $190.2 million and obligations. The leases will commence$146.4 million of right of use assets in Fiscal 2020 and Fiscal 2021 and haveexchange for lease terms of 15 years. Other leases signed that have not yet commenced are not individually significant. The Company does not have material subleases.

liabilities, respectively.

17 VF Corporation Q1 FY20 Form 10-Q


The assets and liabilities related to operating and finance leases were as follows:
(In thousands)Location in Consolidated Balance Sheet  June 2019 
Assets:     
Operating lease assetsOperating lease right-of-use assets  $1,281,106
 
Finance lease assetsProperty, plant and equipment  24,437
 
Total lease assets   $1,305,543
 
      
Liabilities:     
Current     
Operating lease liabilitiesAccrued liabilities  $326,874
 
Finance lease liabilitiesCurrent portion of long-term debt  5,068
 
Noncurrent     
Operating lease liabilitiesOperating lease liabilities  1,043,664
 
Finance lease liabilitiesLong-term debt  27,586
 
Total lease liabilities   $1,403,192
 

The components of lease costs were as follows:
(In thousands) Three Months Ended June 2019 
Operating lease cost (a)
 $101,459
 
Finance lease cost – amortization of right-of-use asset 969
 
Finance lease cost – interest on lease liability 284
 
Short-term lease cost 569
 
Variable lease cost 1,690
 
Gain recognized from sale-leaseback transactions (11,329) 
Total lease cost $93,642
 
(a)
Includes sublease income, which is not material.
Supplemental cash flow information related to leases was as follows:
(In thousands) Three Months Ended June 2019 
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows – operating leases $104,539
 
Operating cash flows – finance leases 284
 
Financing cash flows – finance leases 1,223
 
Right-of-use assets obtained in exchange for new lease liabilities: 

 
Operating leases (a)
 1,374,872
 
Finance leases 
 
(a)
Includes amounts recorded upon adoption of ASC 842.


VF Corporation Q1 FY20FY21 Form 10-Q 1814

Table of Contents
NOTE 9 — SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Revolving Credit Facility
In April 2020, VF entered into Amendment No. 1 to its $2.25 billion senior unsecured revolving line of credit (the "Global Credit Facility") (the “Amendment”). The Amendment provides for (i) an increase in VF’s consolidated indebtedness to consolidated capitalization ratio financial covenant to 0.70 to 1.00 (from 0.60 to 1.00) through the last day of the fiscal quarter ending March 31, 2022, (ii) calculation of consolidated indebtedness (and, thereby consolidated capitalization) net of unrestricted cash of VF and its subsidiaries and (iii) testing of such financial covenant solely as of the last day of each fiscal quarter during such period. In addition, the Amendment requires VF and its subsidiaries to maintain minimum liquidity in the form of unrestricted cash and unused financing commitments of not less than $750.0 million at all times during such period. As of June 2020, VF was in compliance with all covenants.



Senior Notes Issuance
Lease terms and discount rates wereIn April 2020, VF issued senior unsecured notes, as follows:outlined in the table below:
(Dollars in thousands)
Scheduled MaturityAggregate PrincipalEffective Annual Interest RateInterest Payments
2.050% notes, due 2022$1,000,000  2.277 %Semiannually
2.400% notes, due 2025750,000  2.603 %Semiannually
2.800% notes, due 2027500,000  2.953 %Semiannually
2.950% notes, due 2030750,000  3.071 %Semiannually
Total Issuance$3,000,000  
June 2019
Weighted average remaining lease term:
Operating leases5.58 years
Finance leases13.41 years
Weighted average discount rate:
Operating leases2.50%
Finance leases3.22%

MaturitiesVF used a portion of operatingthe net proceeds from this offering to repay borrowings under its Global Credit Facility. The aggregate outstanding balance of these notes was $2.98 billion at June 2020, which was net of unamortized original issue discount and finance lease liabilities for the next five fiscal years (including the remainder of Fiscal 2020) and thereafter as of June 2019 were as follows:debt issuance costs.
(In thousands) Operating Leases Finance Leases Total 
Remainder of 2020 $269,262
 $4,522
 $273,784
 
2021 366,243
 6,532
 372,775
 
2022 254,351
 1,911
 256,262
 
2023 186,670
 1,626
 188,296
 
2024 118,016
 1,550
 119,566
 
Thereafter 281,021
 23,495
 304,516
 
Total lease payments 1,475,563
 39,636
 1,515,199
 
Less: present value adjustment 105,025
 6,982
 112,007
 
Present value of lease liabilities $1,370,538
 $32,654
 $1,403,192
 

The Company excluded approximately $286.5 million of leases (undiscounted basis) that have not yet commenced. These leases will commence in Fiscal 2020 with lease terms of 2 to 15 years.
Future minimum lease payments under operating leases with noncancelable lease terms in excess of one year from continuing operations as of March 2019, prior to the adoption of ASC 842, were as follows:
(In thousands) Operating Leases
2020 $320,224
2021 287,829
2022 212,918
2023 154,920
2024 100,789
Thereafter 251,228
Total lease payments $1,327,908



19 VF Corporation Q1 FY20 Form 10-Q


NOTE 1110 — PENSION PLANS
The components of pension cost (income) cost for VF’s defined benefit plans were as follows:
  Three Months Ended June
      
(In thousands) 2019  2018
Service cost – benefits earned during the period $3,381
  $6,224
Interest cost on projected benefit obligations 14,761
  16,013
Expected return on plan assets (23,178)  (23,834)
Settlement charges 
  6,842
Curtailments 
  9,483
Amortization of deferred amounts:    
Net deferred actuarial losses 4,019
  8,822
Deferred prior service costs 13
  669
Net periodic pension (income) cost $(1,004)  $24,219

 Three Months Ended June
(In thousands)20202019
Service cost – benefits earned during the period$3,632  $3,381  
Interest cost on projected benefit obligations11,948  14,761  
Expected return on plan assets(20,539) (23,178) 
Amortization of deferred amounts:
Net deferred actuarial losses2,863  4,019  
Deferred prior service costs (credits)(17) 13  
Net periodic pension cost (income)$(2,113) $(1,004) 
The amounts reported in these disclosures for prior periods have not been segregated between continuing and discontinued operations.

VF has reported the service cost component of net periodic pension cost (income) cost in operating income and the other components, (whichwhich include interest cost, expected return on plan assets, and amortization of deferred actuarial losses and prior service costs or credits and actuarial gains and losses)(credits), in the other income (expense), net line item in the Consolidated Statements of Income.Operations.

VF contributed $1.8$1.7 million to its defined benefit plans during the three months ended June 2019,2020, and intends to make approximately $22.6$15.9 million of contributions during the remainder of Fiscal 2020.
In the first quarter of Fiscal 2019, VF approved a freeze of all future benefit accruals under the U.S. qualified defined benefit pension
2021.
plan and the supplemental defined benefit pension plan, effective December 31, 2018. Accordingly, the Company recognized a $9.5 million pension curtailment loss in the other income (expense), net line item in the Consolidated Statement of Income for the three months ended June 2018.
Additionally,15 VF reported $6.8 million in settlement charges in the other income (expense), net line item in the Consolidated Statement of Income for the three months ended June 2018 related to the recognition of deferred actuarial losses resulting from lump sum payments of retirement benefits in the supplemental defined benefit pension plan.Corporation Q1 FY21 Form 10-Q

Table of Contents
NOTE 1211 — CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Common Stock

During the three months ended June 2019,2020, the Company did not0t purchase shares of Common Stock in open market transactions under its share repurchase program authorized by VF’s Board of Directors. These are treated as treasury stock transactions when shares are repurchased.
Common Stock outstanding is net of shares held in treasury which are, in substance, retired. There were no0 shares held in treasury at the end of June 2019,2020, March 20192020 or June 2018.2019. The excess of
the cost of treasury shares acquired over the $0.25 per share stated value of Common Stock is deducted from retained earnings.
Prior to March 2019, VF Common Stock was also held by the Company’s deferred compensation plans and was treated as treasury shares for financial reporting purposes. As of June 2019, there were no shares held in the Company's deferred compensation plans.

Balances related to shares held for deferred compensation plans were as follows:
(In thousands, except share amounts) June 2019  March 2019 June 2018
Shares held for deferred compensation plans 
  
 210,124
Cost of shares held for deferred compensation plans $
  $
 $2,663




VF Corporation Q1 FY20 Form 10-Q 20



Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and specified components of other comprehensive income (“OCI”), which relates to changes in assets and liabilities that are not included in net income (loss) under GAAP but are instead deferred and accumulated within a separate component of stockholders’ equity in the balance sheet. VF’s comprehensive income (loss) is presented in the Consolidated Statements of Comprehensive Income.Income (Loss). The deferred components of OCI are reported, net of related income taxes, in accumulated OCI in stockholders’ equity, as follows:
(In thousands) June 2019  March 2019 June 2018
Foreign currency translation and other $(635,901)  $(725,679) $(651,739)
Defined benefit pension plans (290,468)  (243,184) (230,517)
Derivative financial instruments 58,983
  66,788
 178
Accumulated other comprehensive income (loss) $(867,386)  $(902,075) $(882,078)

(In thousands)June 2020March 2020June 2019
Foreign currency translation and other$(685,236) $(737,709) $(635,901) 
Defined benefit pension plans(259,290) (262,472) (290,468) 
Derivative financial instruments46,985  69,223  58,983  
Accumulated other comprehensive income (loss)$(897,541) $(930,958) $(867,386) 
The changes in accumulated OCI, net of related taxes, were as follows:
 Three Months Ended June 2019 
(In thousands)Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total 
Balance, March 2019$(725,679) $(243,184) $66,788
 $(902,075) 
Adoption of new accounting standard, ASU 2018-02(9,088) (50,402) (2,371) (61,861) 
Other comprehensive income (loss) before reclassifications15,772
 (823) 10,900
 25,849
 
Amounts reclassified from accumulated other comprehensive income (loss)
 3,147
 (7,739) (4,592) 
Spin-off of Jeans Business83,094
 794
 (8,595) 75,293
 
Net other comprehensive income (loss)89,778
 (47,284) (7,805) 34,689
 
Balance, June 2019$(635,901) $(290,468) $58,983
 $(867,386) 
 Three Months Ended June 2020
(In thousands)Foreign Currency Translation and OtherDefined Benefit Pension PlansDerivative Financial InstrumentsTotal
Balance, March 2020$(737,709) $(262,472) $69,223  $(930,958) 
Other comprehensive income (loss) before reclassifications10,109  987  (6,065) 5,031  
Amounts reclassified from accumulated other comprehensive income (loss)42,364  2,195  (16,173) 28,386  
Net other comprehensive income (loss)52,473  3,182  (22,238) 33,417  
Balance, June 2020$(685,236) $(259,290) $46,985  $(897,541) 

 Three Months Ended June 2019
(In thousands)Foreign Currency Translation and OtherDefined Benefit Pension PlansDerivative Financial InstrumentsTotal
Balance, March 2019$(725,679) $(243,184) $66,788  $(902,075) 
Adoption of new accounting standard, ASU 2018-02(9,088) (50,402) (2,371) (61,861) 
Other comprehensive income (loss) before reclassifications15,772  (823) 10,900  25,849  
Amounts reclassified from accumulated other comprehensive income (loss)—  3,147  (7,739) (4,592) 
Spin-off of Jeans Business83,094  794  (8,595) 75,293  
Net other comprehensive income (loss)89,778  (47,284) (7,805) 34,689  
Balance, June 2019$(635,901) $(290,468) $58,983  $(867,386) 
 Three Months Ended June 2018
(In thousands)Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total
Balance, March 2018$(476,869) $(289,618) $(97,543) $(864,030)
Other comprehensive income (loss) before reclassifications(174,870) 40,228
 83,271
 (51,371)
Amounts reclassified from accumulated other comprehensive income (loss)
 18,873
 14,450
 33,323
Net other comprehensive income (loss)(174,870) 59,101
 97,721
 (18,048)
Balance, June 2018$(651,739) $(230,517) $178
 $(882,078)


21VF Corporation Q1 FY20FY21 Form 10-Q16


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Reclassifications out of accumulated OCI were as follows:
 
(In thousands)
Details About Accumulated Other Comprehensive Income (Loss) Components
Affected Line Item in the Consolidated Statements of Income  Three Months Ended June
 
       
   2019  2018
 Amortization of defined benefit pension plans:      
 Net deferred actuarial lossesOther income (expense), net  $(4,019)  $(8,822)
 Deferred prior service costsOther income (expense), net  (13)  (669)
 Pension curtailment losses and settlement chargesOther income (expense), net  
  (16,325)
 Total before tax   (4,032)  (25,816)
 Tax benefit   885
  6,943
 Net of tax   (3,147)  (18,873)
 Gains (losses) on derivative financial instruments:      
 Foreign exchange contractsNet sales  (2,905)  945
 Foreign exchange contractsCost of goods sold  11,105
  (11,938)
 Foreign exchange contractsSelling, general and administrative expenses  716
  (2,698)
 Foreign exchange contractsOther income (expense), net  2,872
  (1,393)
 Interest rate contractsInterest expense  (1,293)  (1,233)
 Total before tax   10,495
  (16,317)
 Tax (expense) benefit   (2,756)  1,867
 Net of tax   7,739
  (14,450)
 Total reclassifications for the period, net of tax  $4,592
  $(33,323)

(In thousands)
Details About Accumulated Other Comprehensive Income (Loss) Components
Affected Line Item in the Consolidated Statements of OperationsThree Months Ended June
20202019
Losses on foreign currency translation and other:
Liquidation of foreign entitiesOther income (expense), net$(42,364) $—  
Total before tax(42,364) —  
Tax (expense) benefit—  —  
Net of tax(42,364) —  
Amortization of defined benefit pension plans:
Net deferred actuarial lossesOther income (expense), net(2,863) (4,019) 
Deferred prior service (costs) creditsOther income (expense), net17  (13) 
Total before tax(2,846) (4,032) 
Tax benefit651  885  
Net of tax(2,195) (3,147) 
Gains (losses) on derivative financial instruments:
Foreign exchange contractsNet revenues171  (2,905) 
Foreign exchange contractsCost of goods sold16,705  11,105  
Foreign exchange contractsSelling, general and administrative expenses1,607  716  
Foreign exchange contractsOther income (expense), net1,770  2,872  
Interest rate contractsInterest expense27  (1,293) 
Total before tax20,280  10,495  
Tax expense(4,107) (2,756) 
Net of tax16,173  7,739  
Total reclassifications for the period, net of tax$(28,386) $4,592  


VF Corporation Q1 FY20 Form 10-Q 22



NOTE 1312 — STOCK-BASED COMPENSATION

Spin-Off of Jeans Business
In connection with the spin-off of the Jeans business on May 22, 2019, the Company adjusted its outstanding equity awards in accordance with the terms of the Employee Matters Agreement between the Company and Kontoor Brands. Adjustments to the underlying shares and terms of outstanding stock options, restricted stock units ("RSUs") and restricted stock were made to preserve the intrinsic value of the awards immediately before the separation. The adjustment of the underlying shares and exercise prices, as applicable, was determined using a ratio based on the relative values of the VF pre-distribution stock value and the VF post-distribution stock value as determined by the Company. The
outstanding awards continue to vest over their original vesting periods. The Company will recognize $13.0 million of total incremental compensation cost related to the adjustment of the VF equity awards, of which $12.0 million was recognized during the three months ended June 2019.
In connection with the spin-off, stock options to purchase 756,709 shares of VF Common Stock, 52,018 performance-based RSUs, 79,187 nonperformance-based RSUs and 112,763 restricted shares of VF Common Stock were converted into Kontoor Brands equity awards.
Incentive Equity Awards Granted
During the three months ended June 2019,2020, VF granted stock options to employees and nonemployee members of VF's Board of Directors to purchase 1,452,4141,679,918 shares of its Common Stock at an exercise price of $84.23$55.74 per share. The exercise price of each option granted was equal to the fair market value of VF Common Stock on the date of grant. Employee stock options vest in equal annual installments over three years. Stock options granted to nonemployee members of VF's Board of Directors vest upon grant and become exercisable one year from the date of grant. All options have ten-year terms.
The grant date fair value of each option award was calculated using a lattice option-pricing valuation model, which incorporated a range of assumptions for inputs as follows:
Three Months Ended June 20192020
Expected volatility24%28% to 27%48%
Weighted average expected volatility25%37%
Expected term (in years)6.2 to 7.68.0
Weighted average dividend yield2.5%2.4%
Risk-free interest rate2.1%0.2% to 2.4%0.7%
Weighted average fair value at date of grant$17.2015.78


Also during the three months ended June 2019,2020, VF granted 268,449 performance-based RSUs to employees that enable them to receive shares of VF Common Stock at the end of a three-year performance cycle. Each performance-based RSU has a potential final payout ranging from zero to two shares of VF Common Stock. The number of shares earned by participants, if any, is based on achievement of three-year financial targets set by the Talent and Compensation Committee of the Board of Directors. Shares will be issued to participants in the year following the conclusion of the three-year performance period. The fair market value of VF Common Stock at the date the16,775 nonperformance-based restricted stock units were granted was $84.23 per share.
The actual number of performance-based RSUs earned may also be adjusted upward or downward by 25% of the target award, based on how VF’s total shareholder return (“TSR”("RSUs") over the three-year period compares to the TSR for companies included in the Standard & Poor’s 500 Consumer Discretionary Index. The grant date fair value of the TSR-based adjustment related to the performance-based RSU grants was determined using a Monte Carlo simulation technique that incorporates option-pricing model inputs, and was $7.11 per share.
VF granted 10,780 nonperformance-based RSUs to nonemployee members of the Board of Directors during the three months ended
June 2019.Directors. These units vest upon grant and will be settled in shares of VF Common Stock one year from the date of grant. The fair market value of VF Common Stock at the date the units were granted was $84.23$55.74 per share.
VF granted 7,50010,000 nonperformance-based RSUs to certain key employees in international jurisdictions during the three months ended June 2019.2020. These units vest 50% over a two-year period and 50% over a four-year periodperiods of up to four years from the date of grant and each unit entitles the holder to one1 share of VF Common Stock. The fair market value of VF Common Stock at the date the units were granted was $84.23$55.74 per share.
17 VF Corporation Q1 FY21 Form 10-Q

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In addition, VF granted 158,215266,190 nonperformance-based RSUs to employees during the three months ended June 2019.2020. These awards vest 50% over a two-yeartwo-year period and 50% over a four-yearfour-year period from the date of grant and entitleeach unit entitles the holder to one1 share of VF Common Stock. The fair market value of VF Common Stock at the date the units were granted was $84.23$55.74 per share.

VF granted 40,20550,061 restricted shares of VF Common Stock to certain members of management during the three months ended June 2019.2020. These shares vest over periods of up to four years from the date of grant. The fair market value of VF Common Stock at the date the shares were granted was $84.23$55.74 per share.


23 VF Corporation Q1 FY20 Form 10-Q


NOTE 1413 — INCOME TAXES

The effective income tax rate for the three months ended June 20192020 was 21.5%11.2% compared to 10.8%24.0% in the 20182019 period. The three months ended June 2020 included a net discrete tax expense of $1.8 million, which primarily related to unrecognized tax benefits and interest. The $1.8 million net discrete tax expense in the 2020 period reduced the effective income tax rate by 0.6%. The 2019 period included a discrete tax benefit of $2.2$2.0 million related to stock compensation and a discrete tax expense of $2.2$2.0 million related to unrecognized tax benefits and interest. The 2018 period included a net discrete tax benefit of $6.4 million, which included a $5.7 million tax benefit related to stock compensation, $0.6 million of net tax expense related to unrecognized tax benefits and interest, a $2.9 million net tax benefit related to adjustments to provisional amounts recorded in 2017 under the Tax Act, and $1.6 million of tax expense related to adjustments to previously recognized state income tax credits. The $6.4 million net discrete tax benefit in the 2018 period reduced the effective income tax rate by 9.3%. Without discrete items, the effective income tax rate for the three months ended June 2019 increased2020 decreased by 1.4%12.2% compared with the 20182019 period primarily due to a lowerhigher percentage of income in lower tax rate jurisdictions.jurisdictions and losses in the current quarter.
VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. In the U.S., the Internal Revenue Service ("IRS") examinations for tax years through 20142015 have been effectively settled. The examination of Timberland’s 2011 tax return is ongoing.
In addition, VF is currently subject to examination by various state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years, and has concluded that VF’s provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on VF’s consolidated financial statements. Management believes that some of these audits and negotiations will conclude during the next 12 months.
VF was granted a ruling which lowered the effective income tax rate on taxable earnings for years 2010 through 2014 under Belgium’s excess profit tax regime. In February 2015, the European Union Commission (“EU”) opened a state aid investigation into Belgium’s rulings. On January 11, 2016, the EU announced its decision that these rulings were illegal and
ordered that tax benefits granted under these rulings should be collected from the affected companies, including VF.
On March 22, 2016, the Belgium government filed an appeal seeking annulment of the EU decision. Additionally, on June 21, 2016, VF Europe BVBA filed its own application for annulment of the EU decision.
On December 22, 2016, Belgium adopted a law which entitled the Belgium tax authorities to issue tax assessments, and demand timely payments from companies which benefited from the excess profits regime. On January 10, 2017, VF Europe BVBA received an assessment for €31.9 million tax and interest related to excess profits benefits received in prior years. VF Europe BVBA remitted €31.9 million ($33.9 million) on January 13, 2017, which was recorded as an income tax receivable in 2017 based on the expected success of the aforementioned requests for annulment. An additional assessment of €3.1 million ($3.8 million) was received and paid in January 2018. On February 14, 2019 the General Court annulled the EU decision and on April 26, 2019 the EU appealed the General Court’s annulment. Both listed requests for annulment remain open and unresolved. Additionally, the EU has initiated proceedings related to individual rulings granted by Belgium, including the ruling granted to VF. If this matter is adversely resolved, these amounts will not be collected by VF.
During the three months ended June 2019,2020, the amount of net unrecognized tax benefits and associated interest increased by $6.3$1.2 million to $180.2$166.3 million. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits and interest may decrease during the next 12 months by approximately $24.9$15.7 million related to the completion of examinations and other settlements with tax authorities and the expiration of statutes of limitations, of which $23.8$8.7 million would reduce income tax expense.
On May 19, 2019, Switzerland voted to approve the Federal Act on Tax Reform and AHV Financing ("Swiss Tax Act"). Due to various factors, the Swiss Tax Act was not considered enacted for GAAP purposes during the three months ended June 2019. The Company is currently evaluating the Swiss Tax Act and the associated tax effects will be reflected in the period the Swiss Tax Act is considered enacted. We believe the Swiss Tax Act will have a material impact to the Company's tax expense.


VF Corporation Q1 FY20FY21 Form 10-Q 2418


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NOTE 1514 — REPORTABLE SEGMENT INFORMATION

The chief operating decision maker allocates resources and assesses performance based on a global brand view which represents VF's operating segments. The operating segments have been evaluated and combined into reportable segments because they meet the similar economic characteristics and qualitative aggregation criteria set forth in the relevant accounting guidance.
The Company's reportable segments have been identified as:
Outdoor, Active and Work. We have included an Other category in the table below for purposes of reconciliation of revenues and profit (loss), but it is not considered a reportable segment. Other includes results from transition servicesprimarily related to the sales of the Reef® and Nautica® brand businesses, as well as salessale of non-VF products.
Financial information for VF's reportable segments was as follows:
 Three Months Ended June
(In thousands)20202019
Segment revenues:
Outdoor$341,228  $610,620  
Active571,316  1,232,126  
Work162,430  201,646  
Other1,319  6,262  
Total segment revenues$1,076,293  $2,050,654  
Segment profit (loss):
Outdoor$(160,711) $(80,270) 
Active7,136  307,566  
Work(11,401) 15,471  
Other(2,361) (1,616) 
Total segment profit (loss)(167,337) 241,151  
Corporate and other expenses (a)
(117,659) (139,632) 
Interest expense, net(27,949) (15,583) 
Income (loss) from continuing operations before income taxes$(312,945) $85,936  
  Three Months Ended June
      
(In thousands) 2019  2018
Segment revenues:     
Outdoor $610,620
  $568,600
Active 1,232,126
  1,136,937
Work 422,471
  423,293
Other 6,262
  8,305
Total segment revenues $2,271,479
  $2,137,135
Segment profit (loss):     
Outdoor $(80,270)  $(83,495)
Active 307,566
  269,197
Work 47,025
  48,927
Other (1,616)  2,233
Total segment profit 272,705
  236,862
Corporate and other expenses (a)
 (133,815)  (143,188)
Interest expense, net (14,998)  (24,853)
Income from continuing operations before income taxes $123,892
  $68,821
(a)Certain corporate overhead and other costs of $6.1 million for the three-month period ended June 2019, previously allocated to the Work segment have been reallocated to continuing operations.
(a)
Certain corporate overhead and other costs of $24.6 million for the three-month period ended June 2018, previously allocated to the former Jeans segment and Other category for segment reporting purposes, have been reallocated to continuing operations.
NOTE 1615 — EARNINGS PER SHARE
 Three Months Ended June
(In thousands, except per share amounts)20202019
Earnings (loss) per share – basic:
Income (loss) from continuing operations$(277,742) $65,273  
Weighted average common shares outstanding388,695  396,727  
Earnings (loss) per share from continuing operations$(0.71) $0.16  
Earnings (loss) per share – diluted:
Income (loss) from continuing operations$(277,742) $65,273  
Weighted average common shares outstanding388,695  396,727  
Incremental shares from stock options and other dilutive securities2,096  5,187  
Adjusted weighted average common shares outstanding390,791  401,914  
Earnings (loss) per share from continuing operations$(0.71) $0.16  
  Three Months Ended June
      
(In thousands, except per share amounts) 2019  2018
Earnings per share – basic:     
Income from continuing operations $97,249
  $61,364
Weighted average common shares outstanding 396,727
  394,165
Earnings per share from continuing operations $0.25
  $0.16
Earnings per share – diluted:     
Income from continuing operations $97,249
  $61,364
Weighted average common shares outstanding 396,727
  394,165
Incremental shares from stock options and other dilutive securities 5,187
  5,383
Adjusted weighted average common shares outstanding 401,914
  399,548
Earnings per share from continuing operations $0.24
  $0.15


Outstanding options to purchase approximately 1.55.4 million and 1.81.5 million shares were excluded from the calculations of diluted earnings per share for the three-month periods ended June 20192020 and June 2018,2019, respectively, because the effect of their inclusion would have been anti-dilutive.

In addition, 0.80.4 million and 0.90.8 million shares of performance-based RSUs were excluded from the calculations of diluted earnings per share for the three-month periods ended June 20192020 and June 2018,2019, respectively, because these units were not considered to be contingent outstanding shares in those periods.


2519 VF Corporation Q1 FY20FY21 Form 10-Q

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NOTE 1716 — FAIR VALUE MEASUREMENTS

Financial assets and financial liabilities measured and reported at fair value are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs, as follows:
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable
data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities, or (iii) information derived from or corroborated by observable market data.
Level 3 — Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be VF’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.
The following table summarizes financial assets and financial liabilities that are measured and recorded in the consolidated financial statements at fair value on a recurring basis:
 Total Fair Value
Fair Value Measurement Using (a)
(In thousands)Level 1Level 2Level 3
June 2020
Financial assets:
Cash equivalents:
Money market funds$1,476,533  $1,476,533  $—  $—  
Time deposits373,440  373,440  —  —  
Short-term investments:
Managed income fund500,000  500,000  —  —  
Time deposits200,000  200,000  —  —  
Derivative financial instruments68,585  —  68,585  —  
Deferred compensation120,359  120,359  —  —  
Financial liabilities:
Derivative financial instruments15,631  —  15,631  —  
Deferred compensation126,326  —  126,326  —  
Total Fair Value
Fair Value Measurement Using (a)
(In thousands)Level 1Level 2Level 3
March 2020
Financial assets:
Cash equivalents:
Money market funds$1,211,887  $1,211,887  $—  $—  
Time deposits1,932  1,932  —  —  
Derivative financial instruments91,834  —  91,834  —  
Deferred compensation105,706  105,706  —  —  
Financial liabilities:
Derivative financial instruments14,531  —  14,531  —  
Deferred compensation113,289  —  113,289  —  
 Total Fair Value 
Fair Value Measurement Using (a)
 
(In thousands) Level 1 Level 2 Level 3 
June 2019        
Financial assets:        
Cash equivalents:        
Money market funds$344,357
 $344,357
 $
 $
 
Time deposits3,726
 3,726
 
 
 
Derivative financial instruments80,351
 
 80,351
 
 
Investment securities131,989
 124,627
 7,362
 
 
Financial liabilities:        
Derivative financial instruments11,374
 
 11,374
 
 
Deferred compensation144,131
 
 144,131
 
 
 Total Fair Value 
Fair Value Measurement Using (a)
 
(In thousands) Level 1 Level 2 Level 3 
March 2019        
Financial assets:        
Cash equivalents:        
Money market funds$248,560
 $248,560
 $
 $
 
Time deposits8,257
 8,257
 
 
 
Derivative financial instruments92,771
 
 92,771
 
 
Investment securities186,698
 176,209
 10,489
 
 
Financial liabilities:        
Derivative financial instruments22,337
 
 22,337
 
 
Deferred compensation199,336
 
 199,336
 
 
(a)There were no transfers among the levels within the fair value hierarchy during the three months ended June 2020 or the year ended March 2020.
The amounts reported in the table above for prior periods have not been segregated between continuing and discontinued operations. The March 2019 balances include $50.8 million of deferred compensation liabilities and associated assets related to the Jeans business, which were transferred in connection with the spin-off.
(a)
There were no transfers among the levels within the fair value hierarchy during the three months ended June 2019 or the year ended March 2019.

VF’s cash equivalents include money market funds, and short-term time deposits with maturities within three months of their purchase dates, that approximate fair value based on Level 1 measurements. The fair value of derivative financial instruments, which consist of foreign exchange forward contracts, is determined based on observable market inputs (Level 2), including spot and forward exchange rates for foreign currencies, and considers the credit risk of the Company and its counterparties. Investment securities are heldVF's short-term investments include excess cash invested in a managed income fund, and time deposits with
maturities greater than three months but less than one year from their purchase dates, that approximate fair value based on Level 1 measurements. VF’s deferred compensation plansassets primarily represent investments held within plan trusts as an economic hedge of the related deferred compensation liabilities.
These investments primarily include mutual funds (Level 1) that are valued based on quoted prices in active markets and a separately managed fixed-income fund (Level 2) with underlying investments that are valued based on quoted prices for similar assets in active markets or quoted prices in inactive markets for identical assets.markets. Liabilities related to VF’s deferred compensation plans are recorded at amounts due to participants, based on the fair value of the participants’ selection of hypothetical investments.


VF Corporation Q1 FY20FY21 Form 10-Q 2620


All other financial assets and financial liabilities are recorded in the consolidated financial statements at cost, except life insurance contracts which are recorded at cash surrender value. These other financial assets and financial liabilities include cash held as demand deposits, accounts receivable, short-term borrowings, accounts payable and accrued liabilities. At June 20192020 and March 2019,2020, their carrying values approximated fair
value. Additionally,
at June 20192020 and March 2019,2020, the carrying values of VF’s long-term debt, including the current portion, were $2,131.9$5,610.8 million and $2,121.1$2,609.3 million, respectively, compared with fair values of $2,392.5$5,899.4 million and $2,318.6$2,672.9 million at those respective dates. Fair value for long-term debt is a Level 2 estimate based on quoted market prices or values of comparable borrowings.
NOTE 1817 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Summary of Derivative Financial Instruments

All of VF’s outstanding derivative financial instruments are foreign exchange forward contracts. Although derivatives meet the criteria for hedge accounting at the inception of the hedging relationship, a limited number of derivative contracts intended to hedge assets and liabilities are not designated as hedges for accounting purposes. The notional amounts of all outstanding derivative contracts were $2.9 billion at June 2020,$2.6 billionat
contracts wereMarch 2020 and $3.1 billion at June 2019, $2.8 billion at March 2019 and $2.9 billion at June 2018, consisting primarily of contracts hedging exposures to the euro, British pound, Canadian dollar, Mexican peso, Swiss franc, Swedish krona, South Korean won, Swedish krona, Polish zloty, Japanese yen and New Zealand dollar, Polish zloty and Japanese yen.dollar. Derivative contracts have maturities up to 20 months.
The following table presents outstanding derivatives on an individual contract basis:
  
Fair Value of Derivatives
with Unrealized Gains
  
Fair Value of Derivatives
with Unrealized Losses
                
(In thousands) June 2019  March 2019 June 2018  June 2019  March 2019 June 2018
Foreign currency exchange contracts designated as hedging instruments $67,979
  $92,356
 $53,417
  $(9,359)  $(21,798) $(33,984)
Foreign currency exchange contracts not designated as hedging instruments 12,372
  415
 
  (2,015)  (539) (205)
Total derivatives $80,351
  $92,771
 $53,417
  $(11,374)  $(22,337) $(34,189)

 Fair Value of Derivatives
with Unrealized Gains
Fair Value of Derivatives
with Unrealized Losses
(In thousands)June 2020March 2020June 2019June 2020March 2020June 2019
Foreign currency exchange contracts designated as hedging instruments$53,810  $78,298  $67,979  $(13,329) $(12,682) $(9,359) 
Foreign currency exchange contracts not designated as hedging instruments14,775  13,536  12,372  (2,302) (1,849) (2,015) 
Total derivatives$68,585  $91,834  $80,351  $(15,631) $(14,531) $(11,374) 
VF records and presents the fair values of all of its derivative assets and liabilities in the Consolidated Balance Sheets on a gross basis, even though they are subject to master netting agreements. If VF were to offset and record the asset and liability balances of its foreign exchange forward contracts on a net basis in accordance with the terms of its master netting agreements, the amounts presented in the Consolidated Balance Sheets would be adjusted from the current gross presentation to the net amounts as detailed in the following table:
  June 2019  March 2019 June 2018
              
(In thousands) 
Derivative
Asset
 
Derivative
Liability
  
Derivative
Asset
 
Derivative
Liability
 
Derivative
Asset
 
Derivative
Liability
Gross amounts presented in the Consolidated Balance Sheets $80,351
 $(11,374)  $92,771
 $(22,337) $53,417
 $(34,189)
Gross amounts not offset in the Consolidated Balance Sheets (11,301) 11,301
  (22,274) 22,274
 (30,304) 30,304
Net amounts $69,050
 $(73)  $70,497
 $(63) $23,113
 $(3,885)

 June 2020March 2020June 2019
(In thousands)Derivative
Asset
Derivative
Liability
Derivative
Asset
Derivative
Liability
Derivative
Asset
Derivative
Liability
Gross amounts presented in the Consolidated Balance Sheets$68,585  $(15,631) $91,834  $(14,531) $80,351  $(11,374) 
Gross amounts not offset in the Consolidated Balance Sheets(15,607) 15,607  (14,393) 14,393  (11,301) 11,301  
Net amounts$52,978  $(24) $77,441  $(138) $69,050  $(73) 
Derivatives are classified as current or non-currentnoncurrent based on maturity dates, as follows:
(In thousands) June 2019  March 2019 June 2018
Other current assets $72,132
  $83,582
 $32,144
Accrued liabilities (8,143)  (18,590) (32,508)
Other assets 8,219
  9,189
 21,273
Other liabilities (3,231)  (3,747) (1,681)


(In thousands)June 2020March 2020June 2019
Other current assets$56,428  $71,784  $72,132  
Accrued liabilities(10,103) (11,378) (8,143) 
Other assets12,157  20,050  8,219  
Other liabilities(5,528) (3,153) (3,231) 

2721 VF Corporation Q1 FY20FY21 Form 10-Q

Cash Flow Hedges
VF uses derivative contracts primarily to hedge a portion of the exchange risk for its forecasted sales, purchases, production costs, operating costs and intercompany royalties. The effects of cash flow hedging included in VF’s Consolidated Statements of IncomeOperations and Consolidated Statements of Comprehensive Income (Loss) are summarized as follows:
(In thousands)Gain (Loss) on Derivatives Recognized in OCI
Three Months Ended June
Cash Flow Hedging Relationships20202019
Foreign currency exchange$(7,595) $14,774  
(In thousands) 
Gain (Loss) on Derivatives Recognized in OCI
Three Months Ended June
      
Cash Flow Hedging Relationships 2019  2018
Foreign currency exchange $14,774
  $94,629
(In thousands)Gain (Loss) Reclassified from Accumulated OCI into Income (Loss)
Three Months Ended June
Location of Gain (Loss)20202019
Net revenues$171  $(2,905) 
Cost of goods sold16,705  11,105  
Selling, general and administrative expenses1,607  716  
Other income (expense), net1,770  2,872  
Interest expense27  (1,293) 
Total$20,280  $10,495  
(In thousands) Gain (Loss) Reclassified from Accumulated OCI into Income Three Months Ended June
      
Location of Gain (Loss) 2019  2018
Net sales $(2,905)  $945
Cost of goods sold 11,105
  (11,938)
Selling, general and administrative expenses 716
  (2,698)
Other income (expense), net 2,872
  (1,393)
Interest expense (1,293)  (1,233)
Total $10,495
  $(16,317)


Derivative Contracts Not Designated as Hedges

VF uses derivative contracts to manage foreign currency exchange risk on third-party accounts receivable and payable, as well as intercompany borrowings. These contracts are not designated as hedges, and are recorded at fair value in the Consolidated Balance Sheets. Changes in the fair values of these instruments are recognized directly in earnings. Gains or losses on these contracts largely offset the net transaction losses or gains on the related assets and liabilities. In the case of derivative contracts executed on foreign currency exposures that are no longer probable of occurring, VF de-designates these hedges and the fair value changes of these instruments are also recognized directly in earnings.
Foreign currency exchange contracts not designated as hedges as of June 2019 also include contracts still owned by VF that are related to the former Jeans business. In connection with the spin-off, VF transferred the valueAs a result of the unrecognizedCOVID-19 pandemic and actions expected to be taken by the Company, certain derivative contracts were de-designated as hedged forecasted transactions were no longer deemed probable of occurring. Accordingly, the Company reclassified amounts from accumulated OCI and recognized a $5.0 million net gain on these contracts to Kontoor Brands.during the three months ended June 2020, which was primarily recorded in cost of goods sold.
The changes in fair value of derivative contracts not designated as hedges that have been recognized as gains or losses in VF's Consolidated Statements of IncomeOperations were not material for the three months ended June 20192020 and June 2018.2019.

Other Derivative Information

At June 2019,2020, accumulated OCI included $66.5$43.3 million of pre-tax net deferred gains for foreign currency exchange contracts that are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on exchange rates in effect when outstanding derivative contracts are settled.
VF entered into interest rate swap derivative contracts in 2011 and 2003 to hedge the interest rate risk for issuance of long-term debt due in 2021 and 2033, respectively. In each case, the contracts were terminated concurrent with the issuance of the debt, and the realized gain or loss was deferred in accumulated OCI. The remaining pre-tax net deferred loss in accumulated OCI was $10.4 million at June 2019, which will be reclassified into interest expense in the Consolidated Statements of Income over the remaining terms of the associated debt instruments. VF reclassified $1.3 million and $1.2 million of net deferred losses from accumulated OCI into interest expense for the three-month periods ended June 2019 and June 2018, respectively. VF expects to reclassify $5.3 million to interest expense during the next 12 months.
Net Investment Hedge

The Company has designated its €850.0 million€1.850 billion of euro-denominated fixed-rate notes as a net investment hedge of VF’s investment in certain foreign operations. Because this debt qualified as a nonderivative hedging instrument, foreign currency transaction gains or losses of the debt are deferred in the foreign currency translation and other component of accumulated OCI as an offset to the foreign currency translation adjustments on the hedged investments. During the three-month periods ended June 20192020 and June 2018,2019, the Company recognized an after-tax losslosses of $18.1 million and $8.7 million, and an after-tax gain of $41.0 million, respectively.respectively, in OCI related to the net investment hedge transaction. Any amounts deferred in accumulated OCI will remain until the hedged investment is sold or substantially liquidated.


VF Corporation Q1 FY20FY21 Form 10-Q 2822


Table of Contents

NOTE 1918 — RESTRUCTURING

The Company typically incurs restructuring charges related to strategic initiatives and cost optimization of business activities, primarily related to severance and employee-related benefits. During thethreemonths endedJune 2019,2020, VF leadership approved$4.8recognized $22.5 millionof restructuring charges related to approved restructuring initiatives. Of the $22.5 million of which$3.4restructuring charges recognized in the three months ended June 2020, $8.5 millionwas recognized were reflected in selling, general and administrative expenses and$1.4 $14.0 millionin cost of goods sold. The Company
has not recognized any significant incremental costs related to the actionsaccruals for the year ended March 20192020 or prior periods.
periods.
Of the $57.9$49.9 million total restructuring accrual at June 2019, $55.32020, $49.6 million is expected to be paid out within the next 12 months and is classified within accrued liabilities. The remaining $2.6$0.3 million will be paid out beyond the next 12 months and thus is classified within other liabilities.
The components of the restructuring charges are as follows:
Three Months Ended June
(In thousands)20202019
Severance and employee-related benefits$18,509  $2,224  
Accelerated depreciation3,807  —  
Contract termination and other141  2,121  
Total restructuring charges$22,457  $4,345  
Restructuring costs by business segment are as follows:
Three Months Ended June
(In thousands)20202019
Outdoor$4,750  $4,215  
Active370  20  
Work429  110  
Corporate and other16,908  —  
Total$22,457  $4,345  
The activity in the restructuring accrual for the three-month period ended June 20192020 was as follows:
(In thousands)SeveranceOtherTotal
Accrual at March 2020$38,052  $2,888  $40,940  
Charges18,509  141  18,650  
Cash payments(8,806) (421) (9,227) 
Adjustments to accruals173  —  173  
Impact of foreign currency(639) 34  (605) 
Accrual at June 2020$47,289  $2,642  $49,931  
(In thousands)Severance Other Total 
Accrual at March 2019$58,106
 $11,035
 $69,141
 
Charges2,224
 2,564
 4,788
 
Cash payments(8,887) (8,335) (17,222) 
Adjustments to accruals1,303
 
 1,303
 
Currency translation11
 (97) (86) 
Accrual at June 2019$52,757
 $5,167
 $57,924
 


Restructuring charges were incurred as follows:
(In thousands) Three Months Ended June 2019  Three Months Ended June 2018
Outdoor $4,215
  $2,898
Active 20
  2,559
Work 553
  2,828
Corporate and other 
  1,506
Total $4,788
  $9,791


NOTE 2019 — CONTINGENCIES

The Company petitioned the U.S. Tax Court to resolve an IRS dispute regarding the timing of income inclusion associated with the 2011 Timberland acquisition. The Company remains confident in our timing and treatment of the income inclusion, and therefore this matter is not reflected in our financial statements. We are vigorously defending our position, and do not expect the resolution to have a material adverse impact on the Company's financial position, results of operations or cash flows. While the IRS argues immediate income inclusion, the Company's position is to include the income over a period of years. As the matter relates to 2011, nearly half of the timing at dispute has passed with the Company including the income, and paying the related tax, on our income
tax returns. The Company
notes that should the IRS prevail in this timing matter, the net interest expense would be up to $137$165 million. Further, this timing matter is impacted by the Tax Cuts and Jobs Act that reduced the U.S. corporate income tax rate from 35% to 21%. If the IRS is successful, this rate differential would increase tax expense by approximately $136 million.
The Company is currently involved in other legal proceedings that are ordinary, routine litigation incidental to the business. The resolution of any particular proceeding is not currently expected to have a material adverse impact on the Company's financial position, results of operations or cash flows.
NOTE 2120 — SUBSEQUENT EVENTEVENTS

On July 15, 2019,28, 2020, VF’s Board of Directors declared a quarterly cash dividend of $0.43$0.48 per share, payable on September 20, 201921, 2020 to stockholders of record on September 10, 2019.

2020. The Board of Directors also granted approximately 400,000 performance-based RSUs.

2923 VF Corporation Q1 FY20FY21 Form 10-Q

Table

ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

VF Corporation (together with its subsidiaries, collectively known as “VF” or the “Company”) uses a 52/53 week fiscal year ending on the Saturday closest to March 31 of each year. The Company's current fiscal year runs from March 31, 201929, 2020 through March 28, 2020April 3, 2021 ("Fiscal 2020"2021"). Accordingly, this Form 10-Q presents our first quarter of Fiscal 2020.2021. For presentation purposes herein, all references to periods ended June 20192020 and June 20182019 relate to the fiscal periods ended on June 29, 201927, 2020 and June 30, 2018,29, 2019, respectively. References to March 20192020 relate to information as of March 30, 2019.28, 2020.
All per share amounts are presented on a diluted basis and all percentages shown in the tables below and the following discussion have been calculated using unrounded numbers. All references to foreign currency amounts below reflect the changes in foreign currency exchange rates from the same period in 20182019 and their impact on translating foreign currencies into U.S. dollars. All references to foreign currency amounts also reflect the impact of foreign currency-denominated transactions in countries with highly inflationary economies. VF’s most significant foreign currency exposure relates to business conducted in euro-based countries. Additionally, VF conducts business in other developed and emerging markets around the world with exposure to foreign currencies other than the euro, such as Argentina, which is a highly inflationary economy.
On June 1, 2018, VF acquired 100% of the stock of Icon-Altra LLC, plus certain assets in Europe ("Altra"). The business results for Altra have been included in the Outdoor segment. All references to contributions from acquisition below represent the operating results of Altra for the two months ended May 2019, which reflects the one-year anniversary of the acquisition. Refer to Note 4 to VF's consolidated financial statements for additional information on acquisitions.
On October 5, 2018, VF completed the sale of the Van Moer business, which was included in the Work segment. On October 26, 2018, VF completed the sale of the Reef® brand business, which was included in the Active segment. All references to dispositions below represent the impact of operating results of the Reef® brand and the Van Moer business for the three months ended June 2018.euro.
On May 22, 2019, VF completed the spin-off of its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF OutletTM business, into an independent, publicly traded company now operating under the name Kontoor Brands, Inc. ("Kontoor Brands"). As a result, VF reported the operating results for the Jeans business inand the income (loss) fromrelated cash flows as discontinued operations net of tax line item in the Consolidated Statements of Income forOperations and Consolidated Statements of Cash Flows,
respectively. These changes have been applied to all periods presented. In addition,
On January 21, 2020, VF announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business is comprised primarily of the following brands and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also includes certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. During the three months ended March 2020, the Company determined that the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria and expects to divest this business during Fiscal 2021. Accordingly, the Company has reported the results of the Occupational Workwear business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date the spin-off was completed.
Additionally, the Nautica® brand business has been reported as discontinued operations in our Consolidated Statements of Income, and the related held-for-sale assets and liabilitiesSheets. These changes have been presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale.applied to all periods presented.
Unless otherwise noted, amounts, percentages and discussion for all periods included below reflect the results of operations and financial condition from VF’s continuing operations.
Refer to Note 54 to VF’s consolidated financial statements for additional information on discontinued operations and other divestitures.operations.
RECENT DEVELOPMENTS
Impact of COVID-19
As the global impact of the novel coronavirus ("COVID-19") continues, VF remains first and foremost focused on a people-first approach that prioritizes the health and well-being of its employees, customers, trade partners and consumers around the world. To help mitigate the spread of COVID-19 and in response to health advisories and governmental actions and regulations, VF has modified its business practices including the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines. VF has also implemented measures that are designed to ensure the health, safety and well-being of associates employed in its distribution, fulfillment and manufacturing centers around the world.
During the first quarter, all 265 VF-operated retail stores reopened in the Asia-Pacific region and while store traffic improved, it remained down when compared with the prior year. VF initiated a phased reopening of its retail stores in Europe and North America during the first quarter in accordance with guidance from government entities and public health authorities, to allow proper training and preparation of the retail environment. In Europe, over 90 percent of the 339 VF-operated retail stores reopened during the first quarter, with most of the stores that remained closed located in the United Kingdom. In North America, approximately 75 percent of the 772 VF-operated retail stores reopened during the first quarter. Subsequent to
quarter-end, over 150 additional stores reopened in North America; however, approximately 120 stores have temporarily reclosed due to localized resurgence of COVID-19 outbreaks and resulting health advisories and governmental actions. VF's wholesale customers in all regions have reopened most of their retail stores. VF is continuing to monitor the COVID-19 outbreak globally and will comply with guidance from government entities and public health authorities to prioritize the health and well-being of its employees, customers, trade partners and consumers. As COVID-19 uncertainty continues, additional retail store reclosures may occur.
Consistent with VF’s long-term strategy, the Company’s digital platform remains a high priority through which its brands stay connected with consumer communities while providing experiential content. Many of VF's distribution and fulfillment facilities have remained operational in support of digital consumer engagement with its brands and to service retail partners as needed. Prior to the COVID-19 pandemic, consumer spending had started shifting to brand e-commerce sites and other digital platforms, which has accelerated due to changes in the retail landscape resulting from the COVID-19 pandemic.
COVID-19 has also impacted some of VF's suppliers, including third-party manufacturers, logistics providers and other vendors. At this time, the majority of VF's supply chain is operational. Suppliers are complying with local health advisories
VF Corporation Q1 FY21 Form 10-Q 24

and governmental restrictions which can result in product delays; however, VF is actively working with its suppliers to minimize disruption. VF's distribution centers are operational in accordance with local government guidelines but are experiencing intermittent disruptions while maintaining enhanced health and safety protocols.
In response to COVID-19, various government programs have been announced to provide financial relief to affected businesses including the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act, among other things, provides employer payroll tax credits for wages paid to employees unable to work during the COVID-19 pandemic and options to defer payroll tax payments. Other foreign government programs available to VF also provide certain payroll tax credits and wage subsidies. During the first quarter of Fiscal 2021, the Company recognized $50.4 million as a result of relief from the CARES Act and other governmental packages, which were recorded as a
reduction in selling, general and administrative expenses. The Company also intends to defer qualified payroll and other tax payments as permitted by the CARES Act.
The COVID-19 pandemic is ongoing and dynamic in nature, and has driven global uncertainty and disruption. As a result, COVID-19 had a significant negative impact on the Company's business, including the consolidated financial condition, results of operations and cash flows during the first quarter of Fiscal 2021. While we are not able to determine the ultimate length and severity of the COVID-19 pandemic, we expect ongoing disruption to our business operations including retail store closures, both VF-operated and our customers, a reduction in traffic once stores reopen and a highly promotional marketplace, which will continue to have a significant negative impact on our Fiscal 2021 financial performance, including an expected decrease in revenues of less than 25 percent in the second quarter compared to the same period in the prior year.
Enterprise Protection Strategy
VF has taken a number of actions to advance its Enterprise Protection Strategy in response to the COVID-19 pandemic.
On April 23, 2020, VF closed its sale of senior unsecured notes, which provided net proceeds to the Company of approximately $2.98 billion. A portion of the net proceeds was used to repay borrowings under the Company's senior unsecured revolving credit facility (the "Global Credit Facility") and the remaining net proceeds will be used for general corporate purposes. At June 2020, VF had approximately $2.8 billion of cash and equivalents and short-term investments and approximately $2.2 billion available for borrowing against the Global Credit Facility, subject to certain restrictions including a $750.0 million minimum liquidity requirement.
Other actions VF has taken to support its business in response to the COVID-19 pandemic include the Company's decision to temporarily pause its share repurchase program. The Company currently has $2.8 billion remaining under its current share repurchase authorization. The Company paid a cash dividend of $0.48 per share during the three months ended June 2020 and has declared a cash dividend of $0.48 per share that is payable in the second quarter of Fiscal 2021. Subject to approval by its Board of Directors, VF intends to continue to pay its regularly scheduled dividend and is not contemplating the suspension of its dividend at this time. VF's planned divestiture of the Occupational Workwear business would provide an additional source of cash.
Other actions taken by VF also included a four-month reduction of CEO Steve Rendle's base salary by 50 percent and the base salaries of VF's Executive Leadership Team by 25 percent. In addition, VF's Board of Directors elected to temporarily forgo their cash retainer for the same period.
VF has implemented cost controls to reduce discretionary spending to help mitigate the loss of sales and to conserve cash while continuing to support employees. VF continues to assess its forward inventory purchase commitments to ensure proper matching of supply and demand, which we expect will result in an overall reduction in future commitments from comparable periods in the prior year. As VF continues to actively monitor the situation, we may take further actions that affect our operations.
We believe the Company has sufficient liquidity and flexibility to operate during the disruptions caused by the COVID-19 pandemic and related governmental actions and regulations and health authority advisories and meet its obligations as they become due. However, due to the uncertainty of the duration and severity of the COVID-19 pandemic, governmental actions in response to the pandemic, and the impact on us and our consumers, customers and suppliers, there is no certainty that the measures we take will be sufficient to mitigate the risks posed by COVID-19. See Part II, "Item 1A. Risk Factors." below for additional discussion.
HIGHLIGHTS OF THE FIRST QUARTER OF FISCAL 20202021

Revenues were up 6% to $2.3 billion compared to the three months ended June 2018, primarily due to the $234.6 million contribution from organic growth, including a 3%unfavorableRevenues were down 48% to $1.1 billion compared to the three months ended June 2019, primarily due to the negative impact of COVID-19 and a 1% unfavorable impact from foreign currency.
Active segment revenues increased8% to $1.2 billion compared to the three months ended June 2018, including a 3%unfavorable impact from foreign currency.
Outdoor segment revenues increased7% to $610.6 million compared to the three months ended June 2018, including an $11.8 million contribution from the Altra acquisition and a 4%unfavorable impact from foreign currency.
Direct-to-consumer revenues were up 14% over the 2018 period, including a 3%unfavorable impact from foreign currency. E-commerce revenues increased24% in the current period, including a 4%unfavorable impact from foreign currency. Direct-to-consumer revenues accounted for 39% of net revenues for the three months ended June 2019.
Active segment revenues decreased 54% to $571.3 million compared to the three months ended June 2019, including a 1% unfavorable impact from foreign currency.
Outdoor segment revenues decreased 44% to $341.2 million compared to the three months ended June 2019, including a 1% unfavorable impact from foreign currency.

Direct-to-consumer revenues were down 37% over the 2019 period. E-commerce revenues increased 78% in the current period, including a 3% unfavorable impact from foreign currency. Direct-to-consumer revenues accounted for 51% of net revenues for the three months ended June 2020.
International revenues decreased 39% compared to the three months ended June 2019, including a 2% unfavorable impact from foreign currency. Greater China revenues were flat in the current period, including a 3% unfavorable impact from foreign currency. International revenues represented 51% of net revenues in the current period.
25 VF Corporation Q1 FY21 Form 10-Q

Gross margin decreased 340 basis points to 52.9% compared to the three months ended June 2019, primarily driven by elevated promotional activity to clear excess inventory, partially offset by favorable mix shift toward higher margin businesses and channels.

Earnings (loss) per share was $(0.71) compared to $0.16 in the 2019 period. The decrease was driven by the negative impact of COVID-19, costs related to specified strategic business decisions and the unfavorable impacts from foreign currency.
International revenues increased2% compared to the three months ended June 2018, including a 6%unfavorable impact from foreign currency. International revenues represented 40% of net revenues in the current period.
Gross margin increased 140 basis points to 54.4% compared to the three months ended June 2018 driven by a mix-shift to higher margin businesses and a favorable net foreign currency transaction impact.
Earnings per share increased 58% to $0.24 from $0.15 in the 2018 period. The increase was driven by organic growth in all segments, and continued strength in our direct-to-consumer and international businesses. These improvements were partially offset by costs related to the relocation of our global headquarters and certain brands to Denver, Colorado, specified strategic business decisions and the unfavorable impacts from foreign currency.


VF Corporation Q1 FY20 Form 10-Q 30



ANALYSIS OF RESULTS OF OPERATIONS
Consolidated Statements of IncomeOperations
The following table presents a summary of the changes in net revenues for the three months ended June 20192020 from the comparable period in 2018:2019:
(In millions) Three Months Ended June 
Net revenues — 2018 $2,137.1
 
Organic growth 234.6
 
Acquisition 11.8
 
Dispositions (61.3) 
Impact of foreign currency (50.7) 
Net revenues — 2019 $2,271.5
 

(In millions)Three Months Ended June
Net revenues — 2019$2,050.7 
Organic(959.2)
Impact of foreign currency(15.2)
Net revenues — 2020$1,076.3 

VF reported a 6% increase48% decrease in revenues for the three months ended June 20192020 compared to the 20182019 period. The revenue increasedecrease was primarily attributable to organic growth in all segments, continued strength in our direct-to-consumerthe negative impact of COVID-19 and international businesses and contribution from the Altra acquisition. The increases were partially offset by lower revenues due to the Reef® brand and Van Moer business dispositions and anincluded a 1% unfavorable impact from foreign currency. Excluding the impact of foreign currency, international sales grewRevenues decreased in every regionboth our wholesale and direct-to-consumer channels in the three months ended June 2019.2020. Decreases in the direct-to-consumer channel were driven by declines in our owned retail stores, which were partially offset by significant e-commerce revenue growth during the three months ended June 2020.
Additional details on revenues are provided in the section titled “Information by Reportable Segment.”
The following table presents the percentage relationships to net revenues for components of the Consolidated Statements of Income:Operations:
 Three Months Ended June
 20202019
Gross margin (net revenues less cost of goods sold)52.9 %56.3 %
Selling, general and administrative expenses75.8  51.6  
Operating margin(22.9)%4.7 %
  Three Months Ended June
      
  2019  2018
Gross margin (net revenues less cost of goods sold) 54.4%  53.0%
Selling, general and administrative expenses 48.5
  47.7
Operating margin 5.9%  5.3%

Gross margin increased 140decreased 340 basis points in the three months ended June 20192020 compared to the 20182019 period. Gross margin in the three months ended June 20192020 was positivelynegatively impacted by a mix-shiftelevated promotional activity to clear excess inventory, partially offset by favorable mix shift toward higher margin businesses and a favorable net foreign currency transaction impact, partially offset by certain increases in product costs.channels.
Selling, general and administrative expenses as a percentage of total revenues increased 80 basis points during the three months ended June 20192020 compared to the 2018 period. The increase is2019 period, primarily reflecting lower leverage of operating expenses due to decreased revenues as a result of the negative impact of COVID-19. Selling, general and administrative expenses decreased $242.3 million in the three months ended June 2020 compared to the 2019 period, primarily due to cost controls taken in response to COVID-19 and payroll relief from the CARES Act and other governmental packages, partially offset by continued investments in direct-to-consumer and digital strategic growth initiatives. The decrease was also attributable to lower transaction and deal-related costs and lower costs related to the relocation of our global headquarters and certain brands to Denver, Colorado and specified strategic business decisions in South America. These costs were partially offset by a gain of approximately $11 million on the sale of office real estate and related assets in connection with the relocation of VF's global headquarters and certain brands to Denver, Colorado and leverage of operating expenses on higher revenues.three months ended June 2020.

Net interest expense decreased $9.9increased $12.4 million during the three months ended June 20192020 compared to the 20182019 period. The decreaseincrease in net interest expense in the three months ended June 20192020 was primarily due to additional borrowings of long-term debt and lower borrowingsinvestment interest rates, partially offset by lower interest rates on short-term debt, partially due to repayment activity funded by the cash received from Kontoor Brands, and higher international bank balances in higher yielding currencies.borrowings. Total outstanding debt averaged $2.6$6.2 billion in the three months ended June 20192020 and $3.5$2.6 billion in the same period in 2018,2019, with weighted average interest rates of 3.2%1.9% and 3.0%3.2%, respectively.
Other income (expense), net increased $25.0decreased $43.7 million during the three months ended June 20192020 compared to the 20182019 period. The increasedecrease was driven by lower pension cost in the three months ended June 2019. The decrease in pension cost wasprimarily due to settlement charges and curtailments$42.4 million expense recorded in the three months ended June 2018 that did not recur2020 related to the release of currency translation amounts associated with the substantial liquidation of foreign entities in the three months ended June 2019.certain countries in South America.
The effective income tax rate for the three months ended June 20192020 was 21.5%11.2% compared to 10.8%24.0% in the 20182019 period. The three months ended June 2020 included a net discrete tax expense of $1.8 million, which primarily related to unrecognized tax benefits and interest. The $1.8 million net discrete tax expense in the 2020 period reduced the effective income tax rate by 0.6%. The 2019 period included a discrete tax benefit of $2.2$2.0 million related to stock compensation and a discrete tax expense of $2.2$2.0 million
VF Corporation Q1 FY21 Form 10-Q 26

Table of Contents
related to unrecognized tax benefits and interest. The 2018 period included a net discrete tax benefit of $6.4 million, which included a $5.7 million tax benefit related to stock compensation, $0.6 million of net tax expense related to unrecognized tax benefits and interest, a $2.9 million net tax benefit related to adjustments to provisional amounts recorded in 2017 under the Tax Cuts and Jobs Act and $1.6 million of tax expense related to adjustments to previously recognized state income tax credits. The $6.4 million net discrete tax benefit in the 2018 period reduced the effective income tax rate by 9.3%. Without discrete items, the effective income tax rate for the three months ended June 2019 increased2020 decreased by 1.4%12.2% compared with the 20182019 period primarily due to a lowerhigher percentage of income in lower tax rate jurisdictions.jurisdictions and losses in the current quarter.

As a result of the above, income (loss) from continuing operations in the three months ended June 20192020 was $97.2$(277.7) million ($0.24(0.71) per diluted share) compared to $61.4$65.3 million ($0.150.16 per diluted share) in the 20182019 period. Refer to additional discussion in the “Information by Reportable Segment” section below.


31 VF Corporation Q1 FY20 Form 10-Q


Information by Reportable Segment

VF's reportable segments are: Outdoor, Active and Work. We have included an Other category in the tables below for purposes of reconciliation of revenues and profit (loss), but it is not considered a reportable segment. Included in this Other category are results from transition servicesprimarily related to the sales of the Reef® and Nautica® brand businesses, as well as salessale of non-VF products.
Refer to Note 1514 to the consolidated financial statements for a summary of results of operations by segment, along with a reconciliation of segment profit (loss) to income (loss) before income taxes.
The following tables present a summary of the changes in segment revenues and profit (loss) in the three months ended June 20192020 from the comparable period in 2018:2019:
Segment Revenues:
Three Months Ended June
(In millions)OutdoorActiveWorkOtherTotal
Segment revenues — 2019$610.6  $1,232.1  $201.6  $6.4  $2,050.7  
Organic(265.3) (651.8) (37.2) (4.9) (959.2) 
Impact of foreign currency(4.1) (9.0) (2.0) (0.1) (15.2) 
Segment revenues — 2020$341.2  $571.3  $162.4  $1.4  $1,076.3  
 Three Months Ended June 
(In millions)Outdoor Active Work 
Other (a)
 Total 
Segment revenues — 2018$568.6
 $1,136.9
 $423.3
 $8.3
 $2,137.1
 
Organic growth48.1
 170.0
 16.1
 0.4
 234.6
 
Acquisition11.8
 
 
 
 11.8
 
Dispositions
 (47.9) (13.4) 
 (61.3) 
Impact of foreign currency(17.9) (26.9) (3.5) (2.4) (50.7) 
Segment revenues — 2019$610.6
 $1,232.1
 $422.5
 $6.3
 $2,271.5
 

Segment Profit (Loss):
Three Months Ended June
(In millions)OutdoorActiveWorkOtherTotal
Segment profit (loss) — 2019$(80.3) $307.6  $15.5  $(1.6) $241.2  
Organic(81.9) (299.6) (26.8) (2.0) (410.3) 
Impact of foreign currency1.5  (0.9) (0.1) 1.3  1.8  
Segment profit (loss) — 2020$(160.7) $7.1  $(11.4) $(2.3) $(167.3) 



Segment Profit:
 Three Months Ended June 
(In millions)Outdoor Active Work 
Other (a)
 Total 
Segment profit — 2018$(83.5) $269.2
 $48.9
 $2.3
 $236.9
 
Organic growth1.9
 54.4
 (1.1) (3.8) 51.4
 
Acquisition(0.2) 
 
 
 (0.2) 
Dispositions
 (8.8) (0.5) 
 (9.3) 
Impact of foreign currency1.5
 (7.2) (0.3) (0.1) (6.1) 
Segment profit — 2019$(80.3) $307.6
 $47.0
 $(1.6) $272.7
 
(a)
Included in the Other category for the three months ended June 2019 are results related to the sale of non-VF products and transition services related to the sale of the Reef®27 brand business, while the three months ended June 2018 reflect results from transition services related to the sale of the Nautica® brand business. Differences in the results as compared to the prior year, other than the impact of foreign currency, are reflected within the "organic growth" activity.


VF Corporation Q1 FY20FY21 Form 10-Q32



Table of Contents
The following sections discuss the changes in revenues and profitability by segment. For purposes of this analysis, royalty revenues have been included in the wholesale channel for all periods.
Outdoor
 Three Months Ended June
(Dollars in millions)20202019Percent
Change
Segment revenues$341.2  $610.6  (44.1)%
Segment profit (loss)(160.7) (80.3) 
Operating margin(47.1)%(13.1)%
  Three Months Ended June
        
(Dollars in millions) 2019  2018 Percent
Change
Segment revenues $610.6
  $568.6
 7.4%
Segment profit (loss) (80.3)  (83.5) 3.9%
Operating margin (13.1)%  (14.7)% 

The Outdoor segment includes the following brands: The North Face®, Timberland®(excluding Timberland PRO®), Icebreaker®, Smartwool® and Altra®.

Global revenues for Outdoor increased 7%decreased 44% in the three months ended June 20192020 compared to 2018,2019, including a 4%1% unfavorable impact due to foreign currency. Revenues in the Americas region increased 14%decreased 51%. Revenues in the Europe region decreased 2%45%, including a 6%1% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region increased 6%decreased 19%, with a 5% unfavorable impact from foreign currency. Included in these results are revenues from the Altra acquisition of $11.8 million through the one-year anniversary of the acquisition. Excluding the revenues from Altra, Outdoor revenues increased 5% in the three months ended June 2019, including a 3%1% unfavorable impact from foreign currency.
Global revenues for The North Face® brand increased 9%decreased 45% in the three months ended June 20192020 compared to the 20182019 period. This includes a 3%1% unfavorable impact from foreign currency in the three months ended June 2019.2020. The increasedecrease was primarily due to strong operational growth across all channels and regions, including strong wholesale performance and growththe negative impact of COVID-19 in the direct-to-consumer channel drivenAmericas and Europe regions, partially offset by an expanding e-commerce business and comparable store growth.
Global revenues for the Timberland® brand (excluding decreasedTimberland PRO®) decreased 1%47% in the three months ended June 2019,2020 compared to the 2018 period, as slight increases in the direct-to-
consumer and wholesale channels were more than offset by an overall 4% unfavorable impact from foreign currency. Increases in the wholesale channel in the Americas and the Asia-Pacific regions, were partially offset by declines in the Europe region.
Global direct-to-consumer revenues for Outdoor increased 4%2019 period. The decrease in the three months ended June 2019 compared2020 was primarily due to the 2018 period, including a 3%negative impact of COVID-19 and includes an overall 1% unfavorable impact from foreign currency. The increase was primarily due to a growingcurrency, partially offset by e-commerce business across all regions. growth.

Global wholesaledirect-to-consumer revenues increased 10%for Outdoor decreased 32% in the three months ended June 2019,2020 compared to the 2018 period, driven2019 period. The decrease was primarily due to the negative impact of COVID-19 and related closures of VF-operated retail stores, partially offset by globale-commerce growth in The North Face® brand and the Altra acquisition, and included a 3% unfavorable impact from foreign currency. Excluding revenues from the Altra acquisition, wholesale revenuesacross all regions, which increased 7%97% in the three months ended June 2019, compared to the 2018 period,2020, including a 3%2% unfavorable impact from foreign currencycurrency. Global wholesale revenues decreased 53% in the three months ended June 2019.2020 compared to the 2019 period, driven by the negative impact of COVID-19.
Operating margin increased 160 basis pointsdecreased in the three months ended June 2019,2020 compared to the 20182019 period due to reflecting lower leverage of operating expenses ondue to decreased revenues, elevated promotional activity, higher revenuesproduct costs and continued investments in direct-to-consumer and digital strategic growth initiatives. The decrease in the three months ended June 2020 was partially offset by a mix-shift to higher margin businesses and channels, cost controls taken in response to COVID-19 and payroll relief from the CARES Act and other governmental packages. The three months ended June 2019 included a gain of approximately $11 million on the sale of office real estate and related assets in connection with the relocation of VF's global headquarters and certain brands to Denver, Colorado. These increases were partially offset by relocation costs, higher product costs and increased investments in direct-to-consumer, product innovation, demand creation and technology.


33VF Corporation Q1 FY20FY21 Form 10-Q28


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Active
 Three Months Ended June
(Dollars in millions)20202019Percent
Change
Segment revenues$571.3  $1,232.1  (53.6)%
Segment profit7.1  307.6  
Operating margin1.2 %25.0 %
  Three Months Ended June
        
(Dollars in millions) 2019  2018 Percent
Change
Segment revenues $1,232.1
  $1,136.9
 8.4%
Segment profit 307.6
  269.2
 14.3%
Operating margin 25.0%  23.7%  

The Active segment includes the following brands: Vans®, Kipling®, Napapijri®, Eastpak®, JanSport®, Reef® (through the date of sale) and Eagle Creek®.

Global revenues for Active increased 8%decreased 54% in the three months ended June 2019,2020, compared to the 20182019 period, primarily driven by growth across all channels. Excluding the negative impact of foreign currency, revenues also grew across all regions.COVID-19. The overall increasedecrease includes a 3%1% unfavorable impact from foreign currency. Revenues in the Americas region increased 10%decreased 64%. Revenues in the Europe region decreased 2%51%, including a 6%1% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region increased 21%decreased 9%, with a 6%3% unfavorable impact from foreign currency.
Vans® brand global revenues decreased 52% in the three months ended June 2020, compared to the 2019 period, including a 1% unfavorable impact from foreign currency. The three months ended June 2019 were negatively impacted bydecrease was primarily due to the sale of the Reef® brand business in October 2018, which resulted in lower revenues of $47.9 million. Excluding thenegative impact of the disposition,COVID-19, partially offset by e-commerce growth and growth in Greater China.
Global direct-to-consumer revenues for Active decreased 43% in the three months ended June 2019 increased 13%2020, compared to the 20182019 period, including a 1% unfavorable impact from foreign currency. The decrease in the direct-to-consumer channel was
primarily due to the negative impact of COVID-19 and related closures of VF-operated retail stores, partially offset by e-commerce growth across all regions, which increased 75%, including a 3% unfavorable impact from foreign currency.
Vans® brand global Wholesale revenues increased 20%decreased 63% in the three months ended June 2019, compared2020, primarily due to the 2018 period, includingnegative impact of COVID-19, and included a 3% 1% unfavorable impact from foreign currency. The increase was due to strong operational growth across all channels and regions, including strong wholesale performance and direct-to-consumer growth driven by an expanding e-commerce business, comparable store growth and new store openings.
Global direct-to-consumer revenues for Active grew 19%Operating margin decreased in the three months ended June 2019,2020 compared to the 20182019 period including a 2% unfavorable impact from foreign currency. Growthreflecting lower leverage of operating expenses due to decreased revenues, elevated promotional activity and continued investments in the direct-to-consumer channel was driven by a growing e-commerce business, comparable storeand digital strategic growth and new store openings. Wholesale revenues increased 1%initiatives. The decrease in the three months ended June 2019, driven by global growth in the Vans® brand, and included a 2% unfavorable impact from foreign currency. Excluding the impact of the Reef® brand disposition, wholesale revenues increased 8% in the three months ended June 2019, compared to the 2018 period, including a 3% unfavorable impact from foreign currency in the three months ended June 2019.
Operating margin increased 130 basis points in the three months ended June 2019, compared to the 2018 period, reflecting gross margin expansion driven2020 was partially offset by a mix-shift to higher margin businesses and products, a favorable net foreign currency transaction impact and leverage of operating expenses on higher revenues. These increases were partially offset by higherchannels, lower product costs, cost controls taken in response to COVID-19 and increased investments in direct-to-consumer, product innovation, demand creationpayroll relief from the CARES Act and technology.other governmental packages.


Work
 Three Months Ended June
(Dollars in millions)20202019Percent
Change
Segment revenues$162.4  $201.6  (19.4)%
Segment profit (loss)(11.4) 15.5  
Operating margin(7.0)%7.7 %
  Three Months Ended June
        
(Dollars in millions) 2019  2018 Percent
Change
Segment revenues $422.5
  $423.3
 (0.2)%
Segment profit 47.0
  48.9
 (3.9)%
Operating margin 11.1%  11.6% 

The Work segment includes the following brands: Dickies®and, RedKap®, Bulwark®, Timberland PRO®, VF Solutions®, Walls®, Terra®, Workrite®, Kodiak® and Horace Small®.

Global Work revenues were flatdecreased 19% in the three months ended June 2019,2020 compared to the 2018 period.2019 period, including a 1% unfavorable impact due to foreign currency. The three months ended June 2019 includedrevenue decrease was primarily due to the negative impact of COVID-19. Revenues in the Americas region decreased 20%. Revenues in the Europe region decreased 35%, including a 1% unfavorable impact from foreign currency. The three months ended June 2019 were negatively impacted byRevenues in the sale of the Van Moer business in October 2018, which resulted in lowerAsia-Pacific region decreased 2%, including a 3% unfavorable impact from foreign currency.
Dickies® brand global revenues of $13.4 million. Excluding the impact of the disposition, revenuesdecreased 16% in the three months ended June 2019 increased 3%,2020, compared to the 20182019 period, including a 1% unfavorable impact from foreign currency. The revenue increase was due to balanced growth across nearly all brands.
Dickies® brand global revenues increased 1%decrease in the three months ended June 2019, compared2020 was primarily due to the 2018 period, including a 1% unfavorablenegative impact from foreign currency. The increase was driven by strengthof COVID-19 in the Americas region, China and the direct-to-consumer channel, partially offset by declinesgrowth in the Europe region.Greater China and e-commerce growth.
Operating margin decreased 50 basis points in the three months ended June 20192020 compared to the 2018 period. The decrease reflects2019 period reflecting lower leverage of operating expenses due to decreased revenues and certain higher product costs, and increased investments in direct-to-consumer, product innovation and demand creation. These decreases were partially offset by increased pricing and lower transaction and deal-related costs from the acquisition of the Williamson-Dickie business.cost controls taken in response to COVID-19.



29VF Corporation Q1 FY20FY21 Form 10-Q34



Table of Contents
Reconciliation of Segment Profit (Loss) to Income (Loss) Before Income Taxes

There are two types of costs necessary to reconcile total segment profit (loss), as discussed in the preceding paragraphs, to consolidated income (loss) from continuing operations before income taxes. These costs are (i) corporate and other expenses, discussed below, and (ii) interest expense, net, which was discussed in the “Consolidated Statements of Income”Operations” section.
 Three Months Ended June
(Dollars in millions)20202019Percent
Change
Corporate and other expenses$117.7  $139.6  (15.7)%
Interest expense, net27.9  15.6  79.4 %
  Three Months Ended June
        
(Dollars in millions) 2019  2018 Percent
Change
Corporate and other expenses $133.8
  $143.2
 (6.5)%
Interest expense, net 15.0
  24.9
 (39.7)%

Corporate and other expenses are those that have not been allocated to the segments for internal management reporting, including (i) information systems and shared service costs, (ii) corporate headquarters costs, and (iii) certain other income and expenses. The decrease was driven by lower pension cost, primarily attributed to settlement charges and curtailments
recorded in the three months ended June 2018 that did not recur in the three months ended June 2019. The decrease2020 was partially offset byattributed to cost controls to reduce discretionary spending, lower transaction and deal-related costs and lower costs related to the relocation of our global headquarters and
certain brands to Denver, Colorado in the three months ended June 2019.2020. The decrease was partially offset by a $42.4 million expense recorded in the three months ended June 2020 related to the release of currency translation amounts associated with the substantial liquidation of foreign entities in certain countries in South America and increased costs related to cost optimization activity indirectly related to the strategic review of the Occupational Workwear business.
International Operations

International revenues increased 2%decreased 39% in the three months ended June 20192020 compared to the 2018 period.2019 period primarily due to the negative impact of COVID-19. Foreign currency negatively impacted international revenue growth by 6%2% in the three months ended June 2019.2020. Revenues in Europe decreased 5%48% in the three months ended June 2019,2020, including a 6% unfavorable impact from foreign currency. In the Asia-Pacific region, revenues increased 13% in the three months ended June 2019, driven by growth in China. Foreign currency negatively impacted revenues in the Asia-Pacific region by 6% in the three months ended June
2019. Revenues in the Americas (non-U.S.) region increased 5% in the three months ended June 2019, partially offset by a 5% unfavorable impact from foreign currencies in the three months ended June 2019. Excluding the impact of dispositions, international revenues increased 5% in the three months ended June 2019, including a 6% unfavorable impact from foreign currency. International revenues were 40% and42% of total revenues in the three-month periods ended June 2019 and 2018, respectively.
Direct-to-Consumer Operations

Direct-to-consumer revenues grew 14% in the three months ended June 2019, reflecting growth in all regions. Foreign currency negatively impacted direct-to-consumer revenue growth by 3% in the three months ended June 2019. The increase in direct-to-consumer revenues was due to comparable store growth for locations open at least twelve months at each reporting date, new store openings and an expanding e-commerce business, which
grew 24% in the three months ended June 2019. The e-commerce growth includes a 4%1% unfavorable impact from foreign currency in the three months ended June 2019.2020. In the Asia-Pacific region, revenues decreased 12% in the three months ended June 2020. Foreign currency negatively
impacted revenues in the Asia-Pacific region by 3% in the three months ended June 2020. Revenues in Greater China were flat, including a 3% unfavorable impact from foreign currency. Revenues in the Americas (non-U.S.) region decreased 71% in the three months ended June 2020, including a 2% unfavorable impact from foreign currencies. International revenues were 51% and 44% of total revenues in the three-month periods ended June 2020 and 2019, respectively.
Direct-to-Consumer Operations

Direct-to-consumer revenues decreased 37% in the three months ended June 2020. The decrease in direct-to-consumer revenues was primarily due to the negative impact of COVID-19 and related closures of VF-operated retail stores. Our e-commerce business grew 78% in the three months ended June 2020, including a 3% unfavorable impact from foreign currency. The e-commerce growth occurred across all regions and partially offset the declines in our other direct-to-consumer operations for the three months ended June 2020. There were 1,4271,376 VF-owned retail stores at June 20192020 compared to 1,3821,386 at June 2018.2019. Direct-to-consumer revenues were 39%51% of total revenues for the three-month period ended June 20192020 compared to 36%42% in the 20182019 period.


35VF Corporation Q1 FY20FY21 Form 10-Q30

Table

ANALYSIS OF FINANCIAL CONDITION
Consolidated Balance Sheets

The following discussion refers to significant changes in balances at June 20192020 compared to March 2019:2020:
 
Decrease in accounts receivable — primarily due to lower wholesale shipments resulting from the negative impact of COVID-19. in accounts receivable — primarily due to the timing of cash collections and lower wholesale shipments due to seasonality.
Increase in inventories — due to the seasonality of the business.
Decrease in property, plant and equipment, net — primarily due to the sale of office real estate and related assets in connection with the relocation of VF's global headquarters and certain brands to Denver, Colorado.
Increase in operating lease right-of-use assets — due to amounts recorded in connection with the adoption of Financial Accounting Standards Board Accounting Standards Codification Topic 842, Leases ("ASC 842").
Decrease in short-term borrowings — due to net repayment of commercial paper borrowings primarily funded by the cash received from Kontoor Brands.
Increase in accrued liabilities — primarily due to amounts recorded for the current portion of operating lease liabilities in connection with the adoption of ASC 842, partially offset by a decrease in accrued compensation.
Increase in operating lease liabilities — due to amounts recorded for operating lease liabilities in connection with the adoption of ASC 842.
Decrease in other liabilities — primarily due to the reclassification of deferred rent credits from other liabilities to operating lease right-of-use assets in connection with the adoption of ASC 842.
Increase in inventories — primarily due to the seasonality of the business and decreased consumer demand resulting from the negative impact of COVID-19, partially offset by lower inventory purchases as part of our inventory management to ensure proper matching of supply and demand.
Increase in short-term investments — due to new investments entered into during June 2020.
Increase in other current assets — primarily due to higher prepaid income taxes.
Increase in operating lease right-of-use assets — primarily due to the commencement of a new distribution center lease in Europe during the period.
Decrease in short-term borrowings — due to net repayment of borrowings under the Global Credit Facility using a portion of the net proceeds from the issuance of senior unsecured fixed-rate notes in April 2020.
Decrease in accounts payable — due to the timing of payments to vendors and an overall reduction in purchases and spending resulting from the COVID-19 impact.
Increase in long-term debt — due to the issuance of $3.0 billion of senior unsecured fixed-rate notes in April 2020.
Increase in operating lease liabilities — primarily due to the commencement of a new distribution center lease in Europe during the period.
The following discussion refers to significant changes in balances at June 20192020 compared to June 2018:2019:

Increase in accounts receivable — primarily due to higher wholesale shipments.
Decrease in accounts receivable — primarily due to lower wholesale shipments resulting from the negative impact of COVID-19.
Increase in short-term investments — due to new investments entered into during June 2020.
Increase in other current assets — primarily due to higher prepaid income taxes.
Increase in property, plant and equipment — primarily related to capital spending associated with the construction of distribution centers and leasehold improvements in VF's new global headquarters in Denver, Colorado.
Decrease in goodwill — primarily due to a $323.2 million goodwill impairment charge related to the Timberland reporting unit in the fourth quarter of Fiscal 2020.
Increase in operating lease right-of-use assets — primarily due to new and renewed retail store leases and a new distribution center lease in Europe that commenced during the period.
Increasein other assets primarily due to an increase in deferred tax assets associated with the enactment of certain provisions of Switzerland's Federal Act on Tax Reform and AHV Financing.
Decrease in short-term borrowings — due to net repayment of commercial paper borrowings.
Decrease in accounts payable — driven by the timing of payments to vendors and an overall reduction in purchases and spending resulting from the COVID-19 impact.
Increase in long-term debt — due to the issuance of $3.0 billion fixed-rate notes in April 2020 and the issuance of €1.0 billion euro-denominated fixed-rate notes in February 2020, partially offset by the full redemption of $500.0 million of VF's outstanding 2021 notes in March 2020.
Increase in operating lease liabilities — due to new and renewed retail store leases and a new distribution center lease in Europe that commenced during the period.
Increase in inventories — driven by growth in the business.
Decrease in intangible assets — due to the divestiture of the Reef® brand business and impact of foreign currency fluctuations.
Increase in operating lease right-of-use assets — due to amounts recorded in connection with the adoption of ASC 842.
Decreasein short-term borrowings — due to net repayment of commercial paper borrowings.
Increase in accrued liabilities — primarily due to amounts recorded for the current portion of operating lease liabilities in connection with the adoption of ASC 842.
Increase in operating lease liabilities — due to amounts recorded for operating lease liabilities in connection with the adoption of ASC 842.
Decrease in other liabilities — primarily due to the reclassification of deferred rent credits from other liabilities to operating lease right-of-use assets in connection with the adoption of ASC 842.
Liquidity and Capital Resources
The financial condition of VF is reflected in the following:
JuneMarchJune
(Dollars in millions)202020202019
Working capital$4,071.8$1,518.8$1,724.2
Current ratio3.5 to 11.5 to 11.9 to 1
Net debt to total capital63.1%53.4%41.7%
  June  March June
(Dollars in millions) 2019  2019 2018
Working capital $2,043.7  $1,377.3 $789.8
Current ratio 2.0 to 1  1.6 to 1 1.3 to 1
Debt to total capital 46.2%  39.3% 48.2%

The increase in the current ratio at June 20192020 compared to both March 2019 and June 20182020 was primarily due to a net increase in current assets driven by higher cash balances due to proceeds from long-term debt, as discussed in the "Cash Provided by Financing Activities" section below, higher short-term investments and inventory balances and a net decrease in current liabilities driven by lower short-term borrowings, andas discussed in the "Consolidated Balance Sheets" section above. The increase in the current ratio
at June 2020 compared to June 2019 was primarily due to a net increase in current assets driven by higher inventorycash balances due to proceeds from long-term debt, as discussed in the "Cash Provided by Financing Activities" section below and higher short-term investments, as discussed in the "Consolidated Balance Sheets" section above and higher cash balances due to cash received from Kontoor Brands, as discussed in the "Cash Provided (Used) by Financing Activities" section below. The increase in the current ratio at June 2019 compared to June 2018 was also due to a net increase in accounts receivable balances, as discussed in the "Consolidated Balance Sheets" section above. Both comparisons are impacted by the recording
31 VF Corporation Q1 FY21 Form 10-Q

Table of the current portion of operating lease liabilities in accrued liabilities beginning in the three months ended June 2019 in connection with the adoption of ASC 842.Contents
For the ratio of net debt to total capital, net debt is defined as short-term and long-term borrowings, in addition to operating lease liabilities, beginning in the June 2019 period.net of unrestricted cash of VF and its subsidiaries. Total capital is defined as net debt plus stockholders’ equity. The increase in the net debt to total capital ratio at June 20192020 compared to both March 2020 and June 2019 was attributed to the increase in operating lease liabilities,long-term debt, as discussed in the "Consolidated Balance Sheets" section above and decreases in stockholders' equity. The increase in the net debt to total capital ratio at June 2020 compared to March 2020 was partially offset by the
decrease in short-term borrowings, as discussed in the "Consolidated Balance Sheets" section above. The decrease in the debt to total capital ratiostockholders' equity at June 20192020 compared to June 2018March 2020 was driven by the decrease in short-term borrowings, as discussed innet loss for the "Consolidated Balance Sheets" section aboveperiod and the increasepayments of dividends. The decrease in stockholders' equity whichat June 2020 compared to June 2019 was driven by net incomepayments of dividends,
share repurchases and stock-based compensation activity, partially offset by payments of dividends and purchases of treasury stock. The decrease was partially offset by the increase in operating lease liabilities, as discussed in the "Consolidated Balance Sheets" section above. Excluding the operating lease liabilities, the debt to total capital ratio was 34.6% as of June 2019.net income.
VF’s primary source of liquidity is the strongits expected annual cash flow from operating activities. Cash from operations is typically lower in the first half of the calendar year as inventory builds to support peak sales periods in the second half of the calendar year. Cash provided by operating activities in the second half of the calendar year is substantially higher as inventories are sold and accounts receivable are collected. Additionally, direct-to-consumer sales are highest in the fourth quarter of the calendar year. VF's additional sources of liquidity include available borrowing capacity against its Global Credit Facility, remaining net proceeds from recent borrowings of long-term debt and international lines of credit.


VF Corporation Q1 FY20 Form 10-Q 36



In summary, our cash flows from continuing operations were as follows:
 Three Months Ended June
(In thousands)20202019
Cash used by operating activities$(10,454) $(76,223) 
Cash provided (used) by investing activities(783,241) 3,784  
Cash provided by financing activities1,562,661  123,853  
  Three Months Ended June
      
(In thousands) 2019  2018
Cash (used) provided by operating activities $(79,392)  $99,337
Cash provided (used) by investing activities 1,696
  (111,747)
Cash provided (used) by financing activities 123,853
  (343,957)

Cash (Used) ProvidedUsed by Operating Activities
Cash flow related to operating activities is dependent on net income (loss), adjustments to net income (loss) and changes in working capital. The decrease in cash providedused by operating activities in the three months ended June 20192020 compared to June 20182019 is primarily due to the timing of VF's annual bonus payoutsa decrease in the three months ended June 2019 compared to the three months ended March 2018net cash usage for the prior fiscal year,working capital, partially offset by higher net income inlower earnings for the three months ended June 2019.periods compared.
Cash Provided (Used) by Investing Activities
The increase in cash providedused by investing activities in the three months ended June 20192020 related primarily to $321.4 millionpurchases of net cash paid for acquisitions in theshort-term investments of $700.0 million. The three months ended June 2018 and2019 included $63.7 million from the sale of office real estate and related assets in connection with the relocation of VF's global headquarters and certain brands to Denver, ColoradoColorado. Capital expenditures increased $23.8 million in the three months ended June 2019, partially offset by $288.3 million of proceeds from the sale of businesses, net of cash sold in the three months ended June 2018. Capital expenditures decreased $16.22020 compared to the 20182019 period.
Cash Provided (Used) by Financing Activities
The increase in cash provided by financing activities during the three months ended June 20192020 was primarily due to the net proceeds from long-term debt issuance of $3.0 billion fixed-rate notes, which was partially offset by a $624.1 million net decrease in short-term borrowings for the periods compared. The increase was also partially offset by $906.1 million of cash received from Kontoor Brands, net of cash transferred. This increase was partially offset by a $371.1 million net decreasetransferred, in short-term borrowings driven by higher net repayments of commercial paper borrowings during the three months ended June 2019 compared to the same period in 2018.2019.
VF did not purchase shares of its Common Stock in the open market during the three months ended June 20192020 or the three months ended June 20182019 under the share repurchase program authorized by VF's Board of Directors.
In response to the COVID-19 outbreak and to preserve financial liquidity, VF has made the decision to temporarily pause its share repurchase program. As of the end of June 2019,2020, the Company had $3.8$2.8 billion remaining for future repurchases
under its share repurchase program. VF will continue to evaluate its use of capital, giving first priority to enterprise protection and then to business acquisitions and then to direct shareholder return in the form of dividends and share repurchases.
VF relies on continued strongits ability to generate cash generationflows to finance its ongoing operations. In addition, VF has significant liquidity from its available cash and investment balances and credit facilities. VF maintains a $2.25 billion senior unsecured revolving line of credit (the “Global Credit Facility”) that expires December 2023. VF may request an unlimited number of one year extensions so long as each extension does not cause the remaining life of the Global Credit Facility to exceed five years, subject to stated terms and conditions. The Global Credit Facility may be used to borrow funds in both U.S. dollar and certain non-U.S. dollar currencies, and has a $50.0 million letter of credit sublimit. In addition, the Global Credit Facility supports VF’s U.S.
commercial paper program for short-term, seasonal working capital requirements and general corporate purposes, including share repurchases and acquisitions. Outstanding short-term balances may vary from period to period depending on the level of corporate requirements.
In April 2020, VF entered into an amendment to the Global Credit Facility that resulted in certain changes to the restrictive covenants, including an increase to the consolidated indebtedness to consolidated capitalization financial ratio covenant to 70% and a revision to the calculation of consolidated indebtedness to be net of unrestricted cash. As of June 2020, the covenant calculation includes cash and equivalents and short-term investments, and excludes consolidated operating lease liabilities.In addition, the amendment requires VF and its subsidiaries to maintain minimum liquidity in the form of unrestricted cash and unused financing commitments of not less than $750.0 million. As of June 2020, VF was in compliance with all covenants.
VF has a commercial paper program that allows for borrowings of up to $2.25 billion to the extent that it has borrowing capacity
VF Corporation Q1 FY21 Form 10-Q 32

Table of Contents
under the Global Credit Facility. CommercialAs of June 2020, there were no commercial paper borrowings and standbyborrowings. Standby letters of credit issued as of June 20192020 were $65.0$22.0 million, and $15.0 million, respectively, leaving approximately $2.2 billion available for borrowing against the Global Credit Facility at June 2019.2020. Additionally, VF had approximately $2.8 billion of cash and equivalents and short-term investments at June 2020.
VF has $165.9$92.1 million of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either VF or the banks. Total outstanding balances under these arrangements were $2.7$13.2 million at June 2019.2020.
On April 23, 2020, VF closed its sale of senior unsecured notes including $1.0 billion of 2.050% notes due April 2022, $750.0 million of 2.400% notes due April 2025, $500.0 million of 2.800% notes due April 2027 and $750.0 million of 2.950% notes due April 2030. The net proceeds received by the Company were approximately $2.98 billion. A portion of the net proceeds was used to repay $2.0 billion of outstanding borrowings under the Global Credit Facility resulting from actions taken by VF to strengthen the Company's cash position in response to the COVID-19 pandemic, and the remaining net proceeds will be used for general corporate purposes.
VF’s favorable credit agency ratings allow for access to additional liquidity at competitive rates. At the end of June 2019,2020, VF’s long-term debt ratings were ‘A’ by Standard & Poor’s Ratings Services and ‘A3’ by Moody’s Investors Service, both with 'negative' outlooks, and commercial paper ratings by those rating agencies were ‘A-1’ and ‘Prime-2’, respectively.In April 2020, Standard & Poor's Ratings Services revised VF's credit rating outlook to 'negative' from 'stable' to reflect the risk that extended economic stress from the COVID-19 pandemic on operating performance could result in a downgrade due to prolonged credit measure deterioration. Similarly, in April 2020, Moody's Investor Services also revised VF's credit rating outlook to 'negative'. There have been no subsequent changes in the credit rating outlooks.
None of VF’s long-term debt agreements contain acceleration of maturity clauses based solely on changes in credit ratings. However, if there were a change in control of VF, and as a result of the change in control the 2021, 2023, 2028, 2032 and 2037 notes were rated below investment grade by recognized rating
agencies, VF would be obligated to repurchase the notes at 101% of the aggregate principal amount, plus any accrued and unpaid interest.interest, if required to by the respective holders of the notes.
The Company paid a cash dividend of $0.48 per share ($186.7 million) during the three months ended June 2020 and the Company has declared a cash dividend of $0.48 per share that is payable in the second quarter of Fiscal 2021. Subject to approval by its Board of Directors, VF intends to continue to pay its regularly scheduled dividend and is not contemplating the suspension of its dividend at this time.
Management’s Discussion and Analysis in the Fiscal 20192020 Form 10-K provided a table summarizing VF’s contractual obligations and commercial commitments at the end of Fiscal 20192020 that would require the use of funds. As of June 2019,2020, there have been no material changes in the amounts disclosed in the Fiscal 20192020 Form 10-K, except as noted below:
 
ContractualInventory purchase obligations and commercial commitmentsdecreased by approximately $310 million at the end of Fiscal 2019 includedJune 2020 primarily due to the timing of sourcing activities and the impact of COVID-19.
In addition to operating lease liabilities recorded in VF's Consolidated Balance Sheet, the Company has entered into approximately $349$200 million of inventory obligationsleases that have not yet commenced, including over $150 million related to a distribution center lease that is expected to begin during Fiscal 2021 with a lease term of 15 years.
VF's required principal payments on long-term debt increased during the Jeans business, which is now classified as discontinued operations.period due to the issuance of senior unsecured notes with an aggregate principal value of $3.0 billion.
ManagementThere continues to be significant uncertainty about the duration and extent of the impact of COVID-19 and we expect there will be a significant negative impact to our Fiscal 2021 cash flows. However, management believes that VF’s cash balancesVF has sufficient liquidity and funds providedflexibility to operate during and after the disruptions caused by operating activities, as well as its Global Credit Facility, additional borrowing capacitythe COVID-19 pandemic and access to capital markets, taken as a whole, provide (i) adequate liquidity torelated governmental actions and regulations and health authority advisories and meet all of its current and long-term obligations when due, (ii) adequate liquidity to fund capital expenditures and to maintain the planned dividend payout rate, and (iii) flexibility to meet investment opportunities, including acquisitions, that may arise.as they become due.


37 VF Corporation Q1 FY20 Form 10-Q


Recent Accounting Pronouncements
Refer to Note 2 to VF’s consolidated financial statements for information on recently issued and adopted accounting standards.
Critical Accounting Policies and Estimates

Management has chosen accounting policies it considers to be appropriate to accurately and fairly report VF’s operating results and financial position in conformity with generally accepted accounting principles in the United States of America. Our critical accounting policies are applied in a consistent manner. Significant accounting policies are summarized in Note 1 to the consolidated financial statements included in the Fiscal 20192020 Form 10-K.
The application of these accounting policies requires management to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, contingent assets and liabilities, and related disclosures. These estimates, assumptions and judgments are based on historical experience, current trends and other factors believed to be reasonable under
the circumstances. Management
evaluates these estimates and assumptions, and may retain outside consultants to assist in the evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known.
The accounting policies that involve the most significant estimates, assumptions and management judgments used in preparation of the consolidated financial statements, or are the most sensitive to change from outside factors, are discussed in Management’s Discussion and Analysis in the Fiscal 20192020 Form 10-K.
Except as it relates to VF's adoption of ASC 842 as disclosed in Note 2 and Note 10 to VF's consolidated financial statements, there have been no material changes in VF's accounting policies.
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Cautionary Statement on Forward-looking Statements

From time to time, VF may make oral or written statements, including statements in this quarterly report that constitute “forward-looking statements” within the meaning of the federal securities laws. These include statements concerning plans, objectives, projections and expectations relating to VF’s operations or economic performance and assumptions related thereto. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting VF and therefore involve a number of risks and uncertainties. Forward-looking statements are not guarantees, and 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: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel, footwear and accessories; disruption to VF’s distribution system; the financial strength of VF’s customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; VF’s response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers; manufacturing and product innovation; increasing pressure on margins; VF’s ability to implement its business strategy; VF’s ability to grow its international and direct-to-consumer businesses; retail industry changes and challenges; VF’s and its vendors’ ability to maintain the strength and security of information technology systems; the risk that
VF’s facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; VF’s ability to properly collect, use, manage and secure consumer and employee data; foreign currency fluctuations; 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; possible goodwill and other asset impairment; maintenance by VF’s licensees and distributors of the value of VF’s brands; VF’s ability to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; the risk of economic uncertainty associated with the exit of the United Kingdom from the European Union (“Brexit”) or any other similar referendums that may be held; adverse or unexpected weather conditions; VF's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent VF from fulfilling its financial obligations; climate change and increased focus on sustainability issues; and risks associated with the spin-off of our Jeanswear business completed on May 22, 2019, including the risk that VF will not realize all of the expected benefits of the spin-off; the risk that the spin-off will not be tax-free for U.S. federal income tax purposes; and the risk that there will be a loss of synergies from separating the businesses that could negatively impact the balance sheet, profit margins or earnings of VF. There are also risks associated with the relocation of our global headquarters and a number of brands to the metro Denver area, including the risk of significant disruption to our operations, the temporary diversion of management resources and loss of key employees who have substantial experience and expertise in our business, the risk that we may encounter difficulties retaining employees who elect to transfer and attracting new talent in the Denver area to replace our employees who are unwilling to relocate, the risk that the relocation may involve significant additional costs to us and that the expected benefits of the move may not be fully realized. Other risks include foreign currency fluctuations; the level of consumer demand for apparel, footwear
and accessories; disruption to VF’s distribution system; the financial strength of VF's customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; VF's response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior, intense competition from online retailers, manufacturing and product innovation; increasing pressure on margins; VF's ability to implement its business strategy; VF's ability to grow its international and direct-to-consumer businesses; VF’s and its vendors’ ability to maintain the strength and security of information technology systems; the risk that VF's facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; VF's ability to properly collect, use, manage and secure consumer and employee data; 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; possible goodwill and other asset impairment; maintenance by VF’s licensees and distributors of the value of VF’s brands; VF's ability to execute and integrate acquisitions; changes in tax laws and liabilities; legal, regulatory, political and economic risks; the risk of economic uncertainty associated with the pending exit of the United Kingdom from the European Union ("Brexit") or any other similar referendums that may be held; and adverse or unexpected weather conditions. 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.



VF Corporation Q1 FY20 Form 10-Q 38



ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKRISK.
There have been no significant changes in VF’s market risk exposures from what was disclosed in Item 7A in the Fiscal 20192020 Form 10‑K.10-K.
ITEM 4 — CONTROLS AND PROCEDURESPROCEDURES.
Disclosure controls and procedures:
Under the supervision of the Chief Executive Officer and Chief Financial Officer, a Disclosure Committee comprising various members of management has evaluated the effectiveness of the disclosure controls and procedures at VF and its subsidiaries as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded as of the Evaluation Date that such controls and procedures were effective.
Changes in internal control over financial reporting:
VF adopted ASC 842 on March 31, 2019 and as a result implemented changes to processes and internal control over financial reporting to ensure compliance with the new accounting and disclosure rules. There have been no other changes during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, VF’sVF's internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

39VF Corporation Q1 FY20FY21 Form 10-Q34

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PART II — OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGSPROCEEDINGS.
Information on VF’s legal proceedings is set forth under Part I, Item 3, “Legal Proceedings,”"Item 3. Legal Proceedings” in the Fiscal 20192020 Form 10-K. There have been no material changes to the legal proceedings from those described in the Fiscal 20192020 Form 10-K.
ITEM 1A — RISK FACTORSFACTORS.

You should carefully consider
In addition to the risk factorsother information set forth underin this report and in our other reports and statements that we file with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q, careful consideration should be given to the factors discussed in Part I, Item 1A, “Risk Factors,”“Item 1A. Risk Factors” in the Fiscal 20192020 Form 10-K. There10-K, as updated and supplemented below, which could materially affect our business, financial condition and future results. The risks described in the Fiscal 2020 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.
Other than the risks identified below, there have been no material changes to the risk factors from those disclosedidentified in Part I, “Item 1A. Risk Factors” in the Fiscal 20192020 Form 10‑K.10-K.
The recent coronavirus (COVID-19) global pandemic has and will continue to materially and adversely affect our business, financial condition and results of operations.
Our business has been, and will continue to be, impacted by the effects of the COVID-19 global pandemic in countries and territories where we operate and our employees, suppliers, third-party service providers, consumers or customers are located. These effects include recommendations or mandates from governmental authorities to close businesses, require staged reopening, limit travel, prevent large gatherings, and require individuals to follow self-quarantine, curfew, shelter-in-place, and stay-at-home orders. The countries and territories in which our products are made, manufactured, distributed or sold are in varying stages of restrictions and reopening to address the COVID-19 pandemic. Certain jurisdictions have begun reopening following precautionary measures such as limited operating hours and limited occupancy levels, only to return to further restrictions and closures in the face of a rising number of COVID-19 cases. There is significant uncertainty around retail store openings and the extent to which stores may remain open if and where there is a resurgence in COVID-19, and the duration and severity of any related restrictions. Some of the impacts of the COVID-19 pandemic on our business have included, and could continue to include, the following:
significant reductions in demand and significant volatility in demand for our products by consumers and customers resulting in reduced orders, order cancellations, lower revenues, higher discounts, increased inventories, decreased value of inventories and lower gross margins, which continue to be caused by, among other things: the inability of consumers to purchase our products due to illness, quarantine or other restrictions or out of fear of exposure to COVID-19, phased reopenings and reclosures of our owned stores as well as stores of our customers or reduced store hours across the Americas, Europe and Asia Pacific due to a resurgence of COVID-19, significant declines in consumer retail store traffic to stores that have reopened, or financial hardship and unemployment, shifts in demand away from consumer discretionary products and reduced options for marketing and
promotion of products or other restrictions in connection with the COVID-19 pandemic;
significant uncertainty and turmoil in global economic and financial market conditions causing, among other things: decreased consumer confidence and decreased consumer spending, now and in the mid and long-term, inability to access financing in the credit and capital markets (including the commercial paper market) at reasonable rates (or at all) in the event we, our customers or suppliers find it desirable to do so, increased exposure to fluctuations in foreign currency exchange rates relative to the U.S. Dollar, and volatility in the availability and prices for commodities and raw materials we use for our products and in our supply chain;
inability to meet our consumers’ and customers’ needs for inventory production and fulfillment due to disruptions in our supply chain and increased costs associated with mitigating the effects of the pandemic caused by, among other things: reduction or loss of workforce due to illness, quarantine or other restrictions or facility closures, scarcity of and/or increased prices for raw materials, scrutiny or embargoing of goods produced in infected areas, and increased freight and logistics costs, expenses and times; failure of third parties on which we rely, including our suppliers, customers, distributors, service providers and commercial banks, to meet their obligations to us or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, including business failure or insolvency and collectability of existing receivables;
significant changes in the conditions in markets in which we do business, including quarantines, governmental or regulatory actions, closures or other restrictions, including voluntarily adopted practices, that limit or close our operating and manufacturing facilities and restrict our employees’ ability to perform necessary business functions, including operations necessary for the design, development, production, distribution, sale, marketing and support of our products and increase the likelihood of litigation;
increased costs, including increased employee costs, such as for expanded benefits and essential employee incentives, and increased operating costs, including those associated with provision of personal protective equipment and compliance with governmental or public health organization mandates or guidance, allowances or extended payment terms for customers, inventory write-offs, all of which have negatively impacted our profitability;
increased risk to the health, safety and wellness, including mental and emotional health, of our employees due to the virus or the impact of related restrictions; and
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amplified data security risks as a result of more employees working remotely, including increased demand on our information technology resources and systems, increased phishing and other cybersecurity attacks, and an increase in the number of points of potential attack, such as laptops and mobile devices.
These impacts have placed, and will continue to place, limitations on our ability to execute our business plan and materially and adversely affect our business, financial condition and results of operations. We continue to monitor the situation
and may adjust our current policies and procedures as more information and guidance become available regarding the evolving situation. The impact of COVID-19 may also exacerbate other risks discussed in the “Risk Factors” section of the Fiscal 2020 Form 10-K, any of which could have a material effect on us. The extent of the impact of the COVID-19 pandemic will depend on future developments, including the duration, severity and any resurgences of COVID-19, which are uncertain and cannot be predicted. This situation is dynamic and changing rapidly and additional impacts may arise that we are not aware of currently.
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSPROCEEDS.
 
(c)Issuer purchases of equity securities:
(c)Issuer purchases of equity securities:
The following table sets forth VF's repurchases of our Common Stock during the fiscal quarter ended June 29, 201927, 2020 under the share repurchase program authorized by VF’s Board of Directors in 2017.
First Quarter Fiscal 2020 
Total
Number of
Shares
Purchased
 
Weighted
Average
Price Paid
per Share
 
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
 
Dollar Value
of Shares that May
Yet be Purchased
Under the Program
March 31 - April 27, 2019 
 $
 
 $3,836,982,574
April 28 - May 25, 2019 
 
 
 3,836,982,574
May 26 - June 29, 2019 
 
 
 3,836,982,574
Total 
   
  
First Quarter Fiscal 2021Total
Number of
Shares
Purchased
Weighted
Average
Price Paid
per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
Dollar Value
of Shares that May
Yet be Purchased
Under the Program
March 29 - April 25, 2020— $— — $2,836,975,339 
April 26 - May 23, 2020— — — 2,836,975,339 
May 24 - June 27, 2020— — — 2,836,975,339 
Total— — 
VF will continue to evaluate future share repurchases, considering funding required for enterprise protection and business acquisitions, VF’s Common Stock price and levels of stock option exercises.



VF Corporation Q1 FY20FY21 Form 10-Q 4036


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ITEM 6 — EXHIBITS
ITEM 6 — EXHIBITS.
Certification of Steven E. Rendle, Chairman, President and Chief Executive Officer, pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Scott A. Roe, Executive Vice President and Chief Financial Officer, pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Steven E. Rendle, Chairman, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Scott A. Roe, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
V.F. CORPORATION
(Registrant)
V.F. CORPORATION
By:(Registrant)
By:/s/ Scott A. Roe
Scott A. Roe
Executive Vice President and Chief Financial Officer

(Principal Financial Officer)
Date: August 8, 20194, 2020By:/s/ Bryan H. McNeill
Bryan H. McNeill
Vice President, Controller and Chief Accounting Officer

(Principal Accounting Officer)


VF Corporation Q1 FY20FY21 Form 10-Q 4238