Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Apr. 03, 2010 | May. 01, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-04-03 | |
Entity Registrant Name | V F CORP | |
Entity Central Index Key | 0000103379 | |
Current Fiscal Year End Date | --01-01 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 110,105,590 |
Consolidated Statements of Inco
Consolidated Statements of Income (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Apr. 03, 2010 | 3 Months Ended
Apr. 04, 2009 |
Net Sales | $1,730,086 | $1,707,301 |
Royalty Income | 19,793 | 18,173 |
Total Revenues | 1,749,879 | 1,725,474 |
Costs and Operating Expenses | ||
Cost of goods sold | 932,203 | 996,640 |
Marketing, administrative and general expenses | 594,416 | 567,386 |
Costs and Operating Expenses, Total | 1,526,619 | 1,564,026 |
Operating Income | 223,260 | 161,448 |
Other Income (Expense) | ||
Interest income | 494 | 765 |
Interest expense | (20,499) | (22,015) |
Miscellaneous, net | 6,423 | 1,249 |
Other Income (Expense), Total | (13,582) | (20,001) |
Income Before Income Taxes | 209,678 | 141,447 |
Income Taxes | 46,219 | 41,013 |
Net Income | 163,459 | 100,434 |
Net Loss Attributable to Noncontrolling Interests in Subsidiaries | 57 | 505 |
Net Income Attributable to VF Corporation | $163,516 | $100,939 |
Earnings Per Common Share Attributable to VF Corporation Common Stockholders | ||
Basic | 1.48 | 0.92 |
Diluted | 1.46 | 0.91 |
Weighted Average Shares Outstanding | ||
Basic | 110,259 | 109,992 |
Diluted | 111,629 | 111,028 |
Cash Dividends Per Common Share | 0.6 | 0.59 |
Consolidated Balance Sheets
Consolidated Balance Sheets (USD $) | |||
In Thousands | Apr. 03, 2010
| Jan. 02, 2010
| Apr. 04, 2009
|
ASSETS | |||
Cash and equivalents | $718,634 | $731,549 | $276,428 |
Accounts receivable, less allowance for doubtful accounts of: March 2010 - $59,351; Dec. 2009 - $60,380; March 2009 - $49,177 | 787,682 | 776,140 | 996,507 |
Inventories: | |||
Finished products | 764,167 | 772,458 | 910,139 |
Work in process | 69,515 | 70,507 | 75,832 |
Materials and supplies | 118,500 | 115,674 | 132,102 |
Inventories, Total | 952,182 | 958,639 | 1,118,073 |
Other current assets | 189,088 | 163,028 | 230,251 |
Total current assets | 2,647,586 | 2,629,356 | 2,621,259 |
Property, Plant and Equipment | 1,602,996 | 1,601,608 | 1,558,857 |
Less accumulated depreciation | 1,001,137 | 987,430 | 926,444 |
Property, Plant and Equipment, Net | 601,859 | 614,178 | 632,413 |
Intangible Assets | 1,529,538 | 1,535,121 | 1,563,268 |
Goodwill | 1,363,059 | 1,367,680 | 1,437,682 |
Other Assets | 326,409 | 324,322 | 297,942 |
Total Assets | 6,468,451 | 6,470,657 | 6,552,564 |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Short-term borrowings | 48,525 | 45,453 | 287,873 |
Current portion of long-term debt | 202,690 | 203,179 | 3,272 |
Accounts payable | 296,437 | 373,186 | 323,536 |
Accrued liabilities | 509,228 | 470,765 | 483,523 |
Total current liabilities | 1,056,880 | 1,092,583 | 1,098,204 |
Long-term Debt | 937,826 | 938,494 | 1,140,414 |
Other Liabilities | 648,879 | 626,295 | 739,777 |
Commitments and Contingencies | |||
Stockholders' Equity | |||
Common stock, stated value $1; shares authorized, 300,000,000; shares outstanding: March 2010 - 109,980,912; Dec. 2009 - 110,285,132; March 2009 - 110,276,129 | 109,981 | 110,285 | 110,276 |
Additional paid-in capital | 1,938,184 | 1,864,499 | 1,763,818 |
Accumulated other comprehensive income (loss) | (246,241) | (209,742) | (297,760) |
Retained earnings | 2,024,856 | 2,050,109 | 1,996,972 |
Noncontrolling interests in subsidiaries | (1,914) | (1,866) | 863 |
Total stockholders' equity | 3,824,866 | 3,813,285 | 3,574,169 |
Total Liabilities and Stockholders' Equity | $6,468,451 | $6,470,657 | $6,552,564 |
Consolidated Balance Sheets (pa
Consolidated Balance Sheets (parenthetical) (USD $) | |||
In Thousands, except Share data | Apr. 03, 2010
| Jan. 02, 2010
| Apr. 04, 2009
|
Allowance for doubtful accounts | $59,351 | $60,380 | $49,177 |
Common stock, stated value | $1 | $1 | $1 |
Common stock, shares authorized | 300,000,000 | 300,000,000 | 300,000,000 |
Common stock, shares outstanding | 109,980,912 | 110,285,132 | 110,276,129 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (USD $) | ||
In Thousands | 3 Months Ended
Apr. 03, 2010 | 3 Months Ended
Apr. 04, 2009 |
Operating Activities | ||
Net income | $163,459 | $100,434 |
Adjustments to reconcile net income to cash provided (used) by operating activities: | ||
Depreciation | 27,396 | 22,035 |
Amortization of intangible assets | 9,978 | 9,102 |
Other amortization | 3,695 | 3,311 |
Stock-based compensation | 14,774 | 11,668 |
Pension funding under expense | 10,324 | 18,338 |
Other, net | 27,410 | 22,125 |
Changes in operating assets and liabilities, net of acquisitions: | ||
Accounts receivable | (25,230) | (152,542) |
Inventories | 3,867 | 27,282 |
Other current assets | (4,373) | 40,211 |
Accounts payable | (74,409) | (109,748) |
Accrued compensation | (31,548) | (8,982) |
Accrued income taxes | 26,213 | (3,858) |
Accrued liabilities | 58,312 | (2,594) |
Other assets and liabilities | (25,714) | (12,145) |
Cash provided (used) by operating activities | 184,154 | (35,363) |
Investing Activities | ||
Capital expenditures | (17,339) | (16,983) |
Business acquisitions, net of cash acquired | (29,111) | (207,219) |
Software purchases | (701) | (1,840) |
Other, net | (2,486) | 593 |
Cash used by investing activities | (49,637) | (225,449) |
Financing Activities | ||
Increase in short-term borrowings | 2,837 | 235,912 |
Payments on long-term debt | (1,061) | (1,110) |
Purchase of Common Stock | (118,001) | |
Cash dividends paid | (66,224) | (64,966) |
(Cost) proceeds from issuance of Common Stock, net | 52,394 | (6,740) |
Tax benefits of stock option exercises | 1,669 | (2,438) |
Cash provided (used) by financing activities | (128,386) | 160,658 |
Effect of Foreign Currency Rate Changes on Cash | (19,046) | (5,262) |
Net Change in Cash and Equivalents | (12,915) | (105,416) |
Cash and Equivalents - Beginning of Year | 731,549 | 381,844 |
Cash and Equivalents - End of Period | $718,634 | $276,428 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (USD $) | ||||||
In Thousands | Common Stock
| Additional Paid-in Capital
| Accumulated Other Comprehensive Income (Loss)
| Retained Earnings
| Noncontrolling Interests
| Total
|
Balance at Jan. 03, 2009 | $109,848 | $1,749,464 | ($276,294) | $1,972,874 | $1,353 | |
Net income (loss) | 461,271 | (2,813) | ||||
Common Stock dividends | (261,682) | |||||
Purchase of treasury stock | (1,560) | (110,415) | ||||
Stock compensation plans, net | 1,977 | 115,035 | (12,732) | |||
Common Stock held in trust for deferred compensation plans | 20 | 793 | ||||
Distributions to noncontrolling interests | (480) | |||||
Foreign currency translation | 37,468 | 74 | ||||
Defined benefit pension plans | 25,021 | |||||
Derivative financial instruments | 510 | |||||
Marketable securities | 3,553 | |||||
Balance at Jan. 02, 2010 | 110,285 | 1,864,499 | (209,742) | 2,050,109 | (1,866) | 3,813,285 |
Net income (loss) | 163,516 | (57) | 163,459 | |||
Common Stock dividends | (66,224) | |||||
Purchase of treasury stock | (1,500) | (116,501) | ||||
Stock compensation plans, net | 1,199 | 73,685 | (5,780) | |||
Common Stock held in trust for deferred compensation plans | (3) | (264) | ||||
Foreign currency translation | (63,526) | 9 | ||||
Defined benefit pension plans | 7,589 | |||||
Derivative financial instruments | 18,496 | |||||
Marketable securities | 942 | |||||
Balance at Apr. 03, 2010 | $109,981 | $1,938,184 | ($246,241) | $2,024,856 | ($1,914) | $3,824,866 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Apr. 03, 2010 | |
Basis of Presentation | Note A Basis of Presentation VF Corporation (and its subsidiaries, collectively known as "VF") uses a 52/53week fiscal year ending on the Saturday closest to December31 of each year. For presentation purposes herein, all references to periods ended March2010, December2009 and March2009 relate to the fiscal periods ended on April3, 2010, January2, 2010 and April4, 2009, respectively. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule10-01 of RegulationS-X and do not include all of the information and notes required by generally accepted accounting principles ("GAAP") in the United States of America for complete financial statements. Similarly, the December2009 consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal and recurring adjustments necessary to fairly present the consolidated financial position, results of operations and cash flows of VF for the interim periods presented. Operating results for the three months ended March2010 are not necessarily indicative of results that may be expected for any other interim period or for the year ending January1, 2011. 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 December2009 ("2009 Form 10-K"). Certain prior year amounts, none of which are material, have been reclassified to conform with the 2010 presentation. |
Changes in Accounting Policies
Changes in Accounting Policies | |
3 Months Ended
Apr. 03, 2010 | |
Changes in Accounting Policies | Note B Changes in Accounting Policies During the first quarter of 2010, VF adopted new accounting guidance issued by the Financial Accounting Standards Board ("FASB") related to transfers of financial assets. This guidance modifies the requirements for derecognizing financial assets from a transferor's balance sheet and requires additional disclosures about transfers of financial assets and any continuing involvement by the transferor. The new guidance did not have a significant impact on our operating results, financial condition or disclosures. Also during the first quarter of 2010, VF adopted new accounting guidance for disclosures of fair value measurements. This guidance requires disclosures about transfers into and out of Levels 1 and 2 of the fair value hierarchy and separate disclosures about activity within Level 3 of the fair value hierarchy. The guidance also clarifies disclosures related to disaggregation of assets and liabilities and valuation techniques used to measure fair value. |
Acquisition
Acquisition | |
3 Months Ended
Apr. 03, 2010 | |
Acquisition | Note C Acquisition On March10, 2010, VF completed the acquisition of its former 50%-owned joint venture that markets Vans branded products in the wholesale channel in Mexico. As part of this transaction, VF also acquired the Vans retail stores that had been operated by our joint venture partner (together with the wholesale business, "Vans Mexico"). The purchase price of these businesses was $31.0million. The carrying value of our initial 50% investment, recorded in Other Assets, was $7.9million at the acquisition date, which included the equity in net income of the investment to the date of acquisition. VF recognized a gain in Miscellaneous Income in the first quarter of $5.7million from remeasuring its original 50% investment in the joint venture to fair value. Revenues and pretax earnings since the date of acquisition recognized in VF's first quarter operating results were $2.6million and $0.8million (excluding the $5.7million gain), respectively. Acquisition expenses included in VF's results of operations were not significant. Vans Mexico is reported as part of the Outdoor Action Sports Coalition. Management has allocated the purchase price to acquired tangible and intangible assets and assumed liabilities based on their respective fair values at the acquisition date. Of the total value, $23.4million was assigned to indefinite-lived intangible assets (trademarks)and amortizable intangible assets (customer relationships), and $16.8million was assigned to goodwill, subject to possible refinement for income taxes during the second quarter. Goodwill arising from the acquisition related to growth prospects in Mexico, an experienced workforce and synergies with the Vans business in the United States. Pro forma operating results for periods prior to the acquisition date are not provided because the acquisition was not material to VF's results of operations. |
Sale of Accounts Receivable
Sale of Accounts Receivable | |
3 Months Ended
Apr. 03, 2010 | |
Sale of Accounts Receivable | Note D Sale of Accounts Receivable In September2009, VF entered into an agreement to sell selected trade accounts receivable, on a revolving basis, to a financial institution. The agreement covers the sale of up to $192.5million of accounts receivable, at any point in time, on a nonrecourse basis. After the sale, VF continues to service and collect these accounts receivable on behalf of the financial institution but does not retain any other interests in the receivables. At the beginning of 2010, accounts receivable in the Consolidated Balance Sheet had been reduced by $74.2million related to balances sold under this program. At the end of March2010, accounts receivable had been reduced by $116.0million related to balances sold under this program. During the first quarter, VF sold $202.9million of accounts receivable at their stated amounts, less a funding fee of $0.3million, which was recorded in Miscellaneous Expense. Net proceeds of this program are recognized in the Consolidated Statement of Cash Flows as part of the change in accounts receivable in cash provided by operating activities. |
Intangible Assets
Intangible Assets | |
3 Months Ended
Apr. 03, 2010 | |
Intangible Assets | Note E Intangible Assets March 2010 December 2009 Weighted Gross Net Net Average Carrying Accumulated Carrying Carrying Dollars in thousands Life * Amount Amortization Amount Amount Amortizable intangible assets: Customer relationships 19 years $ 445,865 $ 86,939 $ 358,926 $ 361,039 License agreements 24 years 179,628 44,989 134,639 137,447 Trademarks and other 7 years 14,910 8,990 5,920 6,615 Amortizable intangible assets, net 499,485 505,101 Indefinite-lived intangible assets: Trademarks 1,030,053 1,030,020 Intangible assets, net $ 1,529,538 $ 1,535,121 * Amortization of customer relationships accelerated methods; license agreements accelerated and straight-line methods; trademarks and other accelerated and straight-line methods. Amortization of intangible assets for the first quarter of 2010 was $10.0million. Estimated amortization expense for the remainder of 2010 is $29.8million and for the years 2011 through 2014 is $37.4million, $34.7million, $33.1million and $32.1million, respectively. |
Goodwill
Goodwill | |
3 Months Ended
Apr. 03, 2010 | |
Goodwill | Note F Goodwill Outdoor Contemporary In thousands Action Sports Jeanswear Imagewear Sportswear Brands Total Balance, December2009 $ 574,879 $ 238,930 $ 56,703 $ 157,314 $ 339,854 $ 1,367,680 2010 acquisition 16,779 16,779 Adjustment to contingent consideration (78 ) (78 ) Currency translation (14,934 ) (3,066 ) (3,322 ) (21,322 ) Balance, March2010 $ 576,646 $ 235,864 $ 56,703 $ 157,314 $ 336,532 $ 1,363,059 Balances at December2009 are net of impairment charges recorded during 2009, as follows: Outdoor Action Sports $43.4million and Sportswear $58.5million. |
Pension Plans
Pension Plans | |
3 Months Ended
Apr. 03, 2010 | |
Pension Plans | Note G Pension Plans VF's net periodic pension cost contained the following components: Three Months Ended March In thousands 2010 2009 Service cost benefits earned during the year $ 4,083 $ 3,726 Interest cost on projected benefit obligations 19,108 17,950 Expected return on plan assets (19,172 ) (13,379 ) Amortization of: Actuarial losses 11,372 15,131 Prior service costs 987 1,067 Net periodic pension cost $ 16,378 $ 24,495 During the first quarter, VF made contributions totaling $6.1million to its defined benefit pension plans. VF currently anticipates making an additional $2.6million of contributions during the remainder of 2010. |
Business Segment Information
Business Segment Information | |
3 Months Ended
Apr. 03, 2010 | |
Business Segment Information | Note H Business Segment Information For internal management and reporting purposes, VF's businesses are grouped principally by product categories, and by brands within those product categories. These groupings of businesses are referred to as "coalitions." These coalitions are the basis for VF's reportable segments. Financial information for VF's reportable segments is as follows: Three Months Ended March In thousands 2010 2009 Coalition revenues: Outdoor Action Sports $ 678,562 $ 618,272 Jeanswear 622,065 667,383 Imagewear 221,298 226,651 Sportswear 102,177 103,570 Contemporary Brands 104,089 89,589 Other 21,688 20,009 Total coalition revenues $ 1,749,879 $ 1,725,474 Coalition profit: Outdoor Action Sports $ 132,705 $ 88,595 Jeanswear 106,808 89,648 Imagewear 22,812 22,867 Sportswear 7,168 4,508 Contemporary Brands 8,452 15,414 Other (1,225 ) (2,016 ) Total coalition profit 276,720 219,016 Corporate and other expenses (47,037 ) (56,319 ) Interest, net (20,005 ) (21,250 ) Income before income taxes $ 209,678 $ 141,447 Operating results of the lucy business unit for 2009 have been reclassified from the Contemporary Brands Coalition to the Outdoor Action Sports Coalition consistent with a change in internal management reporting beginning in 2010. |
Capital and Comprehensive Incom
Capital and Comprehensive Income (Loss) | |
3 Months Ended
Apr. 03, 2010 | |
Capital and Comprehensive Income (Loss) | Note I Capital and Comprehensive Income (Loss) Common stock outstanding is net of shares held in treasury, and in substance retired. There were 15,518,019 treasury shares at March2010, 13,943,457 at December2009 and 12,383,868 at March2009. The excess of the cost of treasury shares acquired over the $1 per share stated value of Common Stock is deducted from Retained Earnings. In addition, 244,069 shares of VF Common Stock at March 2010, 241,446 shares at December2009, and 276,002 shares at March2009 were held in connection with deferred compensation plans. These shares held for deferred compensation plans are treated for financial reporting purposes as treasury shares at a cost of $10.2million, $11.0million and $12.6million at each of the respective dates. There are 25,000,000 authorized shares of Preferred Stock, $1 par value, of which none are outstanding. Other comprehensive income ("OCI") consists of changes in assets and liabilities that are not included in Net Income under GAAP but are instead reported within a separate component of Stockholders' Equity. VF's comprehensive income was as follows: Three Months Ended March In thousands 2010 2009 Net income $ 163,459 $ 100,434 Other comprehensive income (loss): Foreign currency translation Losses arising during the period (74,763 ) (40,338 ) Less income tax effect 11,237 3,777 Defined benefit pension plans Amortization of deferred actuarial losses 11,372 15,131 Amortization of prior service cost 987 1,067 Less income tax effect (4,770 ) (6,241 ) Derivative financial instruments Gains arising during the period 20,841 12,381 Less income tax effect (8,030 ) (4,770 ) Reclassification to net income for (gains)losses realized 9,247 (3,688 ) Less income tax effect (3,562 ) 1,420 Marketable securities Gains (losses)arising during the period 942 (205 ) Other comprehensive income (loss) (36,499 ) (21,466 ) Comprehensive income 126,960 78,968 Comprehensive loss attributable to noncontrolling interests 48 490 Comprehensive income attributable to VF Corporation $ 127,008 $ 79,458 Accumulated OCI for 2010 is summarized as follows: Foreign Defined Derivative Currency Benefit Financial Marketable In thousands Translation Pension Plans Instruments Securities Total Balance, December2009 $ 59,671 $ (265,970 ) $ (6,180 ) $ 2,737 $ (209,742 ) Other comprehensive income (loss) (63,526 ) 7,589 18,496 942 (36,499 ) Balance, March2010 $ (3,855 ) $ (258,381 ) $ 12,316 $ 3,679 $ (246,241 ) |
Stock-based Compensation
Stock-based Compensation | |
3 Months Ended
Apr. 03, 2010 | |
Stock-based Compensation | Note J Stock-based Compensation During the first three months of 2010, VF granted options for 1,283,874 shares of Common Stock at an exercise price of $74.85, equal to the fair market value of VF Common Stock on the date of grant. The options vest in equal annual installments over a three year period. The fair value of these options was estimated using a lattice valuation model for employee groups having similar exercise behaviors, with the following assumptions: expected volatility ranging from 24% to 39%, with a weighted average of 35%; expected term of 5.5 to 7.6years; expected dividend yield of 3.7%; and risk-free interest rate ranging from 0.2% at six months to 3.7% at 10years. The resulting weighted average fair value of these options at the date of grant was $18.42 per option. Also during the first three months of 2010, VF granted 317,305 performance-based restricted stock units. Participants are eligible to receive shares of VF Common Stock at the end of a three year performance period. The actual number of shares that will be earned, if any, will be based on VF's performance over that period. The grant date fair value of the restricted stock units was $71.91 per unit. In addition, VF granted 15,000 shares of restricted VF Common Stock with a fair value of $71.91 per share. These shares will vest in 2014, assuming continuation of employment by the grantee to that date. |
Income Taxes
Income Taxes | |
3 Months Ended
Apr. 03, 2010 | |
Income Taxes | Note K Income Taxes The effective income tax rate was 22.1% for the first quarter of 2010, compared with 29.0% in the comparable period of 2009. The lower rate in 2010 was due to a higher percentage of income in lower tax jurisdictions outside the United States and a $13.0million tax benefit related to refund claims in a foreign jurisdiction. The effective tax rate for the full year 2009 was 29.9%, which included a 3.7% unfavorable impact from a goodwill impairment charge. VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous states and foreign jurisdictions. In the United States, the Internal Revenue Service ("IRS") completed its examination of tax years 2004, 2005 and 2006, and VF has appealed the results of those examinations to the IRS Appeals office. Tax years 2003 to 2008 are under examination by the State of Alabama, and tax years 2006 and 2007 are under examination by the State of California. VF is also currently subject to examination by various other taxing authorities. Management believes that some of these audits and negotiations will conclude during the next 12months. During the first quarter of 2010, the amount of unrecognized tax benefits increased by $8.3million due primarily to tax positions taken in prior years. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits may decrease during the next 12months by approximately $32.0million due to settlements of audits, other settlements with tax authorities and expiration of statutes of limitations, of which $29.8million would reduce income tax expense. In addition, VF intends to file refund claims in various tax jurisdictions during 2010, which could reduce income tax expense in 2010. |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Apr. 03, 2010 | |
Earnings Per Share | Note L Earnings Per Share Three Months Ended March In thousands, except per share amounts 2010 2009 Earnings per share basic: Net income attributable to VF Corporation common stockholders $ 163,516 $ 100,939 Weighted average Common Stock outstanding 110,259 109,992 Earnings per share attributable to VF Corporation common stockholders $ 1.48 $ 0.92 Earnings per share diluted: Net income attributable to VF Corporation common stockholders $ 163,516 $ 100,939 Weighted average Common Stock outstanding 110,259 109,992 Stock options and other dilutive securities 1,370 1,036 Weighted average Common Stock and dilutive securities outstanding 111,629 111,028 Earnings per share attributable to VF Corporation common stockholders $ 1.46 $ 0.91 Outstanding options to purchase 3.8million shares and 5.8million shares of Common Stock were excluded from the computations of diluted earnings per share for the three months ended March2010 and March2009, respectively, because the effect of their inclusion would have been antidilutive. In addition, performance-based restricted stock units for the three month periods ended March2010 and 2009 were excluded from the computation of diluted earnings per share because their performance factor is not known until the annual financial results are available. |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Apr. 03, 2010 | |
Fair Value Measurements | Note M Fair Value Measurements Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting standards establish a three-level hierarchy that distinguishes between (i)market data obtained or developed from independent sources (i.e., observable data inputs) and (ii)a reporting entity's own data and assumptions that market participants would use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity of pricing inputs: * Level 1 Fair value based on quoted prices in active markets for identical assets or liabilities. * Level 2 Fair value based on 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 Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity's own data and judgments about assumptions that market participants would use in pricing the asset or liability. The fair value measurement level for an asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs. The following table summarizes the classes of financial assets and financial liabilities measured and recorded at fair value on a recurring basis at the dates indicated: Fair Value Using: Quoted Prices Significant in Active Other Significant Total Markets for Observable Unobservable Fair Identical Assets Inputs Inputs In thousands Value (Level 1) (Level 2) (Level 3) March2010 Financial assets: Cash equivalents money market funds $ 429,659 $ 429,659 $ $ Cash equivalents time deposits 85,036 85,036 Derivative instruments 31,130 31,130 Investment securities 190,485 150,265 40,220 Financial liabilities: Derivative instruments 4,947 4,947 Deferred compensation 209,303 209,303 December2009 Financial assets: Cash equivalents money market funds $ 372,516 $ 372,516 $ $ |
Derivative Financial Instrument
Derivative Financial Instruments and Hedging Activities | |
3 Months Ended
Apr. 03, 2010 | |
Derivative Financial Instruments and Hedging Activities | Note N Derivative Financial Instruments and Hedging Activities VF is exposed to risks in its ongoing business operations. Some of these risks are managed by using derivative financial instruments. Derivative financial instruments are contracts whose value is based on, or "derived" from, changes in the value of an underlying currency exchange rate, interest rate or other financial asset or index. VF conducts business in many foreign countries and therefore is subject to movements in foreign currency exchange rates. Exchange rate fluctuations can have a significant effect on the translated U.S. dollar value of operating results and net assets denominated in foreign currencies. VF does not attempt to manage translation risk but does use derivative contracts to manage the exchange rate risk of specified cash flows or transactions denominated in foreign currencies. VF manages exchange rate risk on a consolidated basis, which allows exposures to be netted. Use of derivative financial instruments allows VF to reduce the overall exposure to risks in its cash flows and earnings, since gains and losses in the value of the derivative contracts offset losses and gains in the value of the underlying hedged exposures. In addition, in prior years VF had used derivatives in limited instances to hedge interest rate risk. Summary of derivative instruments All of VF's derivative instruments meet the criteria for hedge accounting at the inception of the hedging relationship. However, derivative instruments that are cash flow hedges of forecasted cash receipts are dedesignated as hedges near the end of their term and, accordingly, do not qualify for hedge accounting after the date of dedesignation. Fair value for derivative contracts outstanding at March2010 and December2009 totaled $922 million and $857million, respectively, and consisted primarily of contracts hedging exposures to the euro, British pound, Mexican peso and Canadian dollar. Derivative contracts, consisting of forward exchange contracts, have maturities ranging from one month to 20months. Amounts of outstanding derivatives in the following table are presented on an individual contract basis: Fair Value of Derivatives Fair Value of Derivatives with Unrealized Gains with Unrealized Losses March December March December In thousands 2010 2009 2010 2009 Foreign exchange contracts designated as hedging instruments $ 34,887 $ 11,183 $ 8,031 $ 16,769 Foreign exchange contracts not designated as hedging instruments 43 560 716 25 Total derivatives $ 34,930 $ 11,743 $ 8,747 $ 16,794 The amounts above have been aggregated by counterparty for presentation in the Consolidated Balance Sheets and classified as current or noncurrent based on the derivatives' maturity dates, as follows: In thousands March 2010 December 2009 Other current assets $ 28,881 $ 6,843 Accrued current liabilities (4,107 ) (13,476 ) Oth |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | |
3 Months Ended
Apr. 03, 2010 | |
Recently Issued Accounting Standards | Note O Recently Issued Accounting Standards New accounting guidance issued by the FASB but not effective until after March2010 is not expected to have a significant effect on VF's consolidated financial position, results of operations or disclosures. |
Subsequent Event
Subsequent Event | |
3 Months Ended
Apr. 03, 2010 | |
Subsequent Event | Note P Subsequent Event VF's Board of Directors declared a quarterly cash dividend of $0.60 per share, payable on June18, 2010 to shareholders of record on June8, 2010. |