Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

v3.23.3
FAIR VALUE MEASUREMENTS
 6 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS 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.
Recurring Fair Value Measurements
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 1 Level 2 Level 3
September 2023
Financial assets:
Cash equivalents:
Money market funds $ 82,146  $ 82,146  $ —  $ — 
Time deposits 37,935  37,935  —  — 
Derivative financial instruments 57,371  —  57,371  — 
Deferred compensation 86,186  86,186  —  — 
Financial liabilities:
Derivative financial instruments 38,569  —  38,569  — 
Deferred compensation 83,312  —  83,312  — 
Total Fair Value
Fair Value Measurement Using (a)
(In thousands) Level 1 Level 2 Level 3
March 2023
Financial assets:
Cash equivalents:
Money market funds $ 418,304  $ 418,304  $ —  $ — 
Time deposits 21,233  21,233  —  — 
Derivative financial instruments 49,688  —  49,688  — 
Deferred compensation 99,200  99,200  —  — 
Financial liabilities:
Derivative financial instruments 72,653  —  72,653  — 
Deferred compensation 96,364  —  96,364  — 
(a)There were no transfers among the levels within the fair value hierarchy during the six months ended September 2023 or the year ended March 2023.

VF’s cash equivalents include money market funds and 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 and interest rate swap contracts, is determined based on observable market inputs (Level 2), including spot and forward exchange rates for foreign currencies and interest rate forward curves, and considers the credit risk of the Company and its counterparties. VF’s deferred compensation assets 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. 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.
All other significant 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 September 2023 and March 2023, their carrying values
approximated fair value. Additionally, at September 2023 and March 2023, the carrying values of VF’s long-term debt, including the current portion, were $5,657.7 million and $6,635.3 million, respectively, compared with fair values of $5,111.0 million and $6,244.4 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.
Nonrecurring Fair Value Measurements
During the three months ended September 2023, management determined that the recent downturn in the Dickies historical financial results, combined with a downward revision to the latest Fiscal 2024 forecast, was a triggering event that required management to perform a quantitative impairment analysis of both the Dickies reporting unit goodwill and the Dickies indefinite-lived trademark intangible asset. Based on the analysis, management concluded both the goodwill and indefinite-lived intangible asset were not impaired. For goodwill, the estimated fair value of the reporting unit exceeded the carrying value by 8%. The estimated fair value of the indefinite-lived trademark intangible asset exceeded its carrying value by a significant amount. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the September 30, 2023 testing date were $61.2 million and $290.0 million,
respectively. The Dickies reporting unit is included in the Work reportable segment.
The fair values of the Dickies reporting unit and indefinite-lived trademark intangible asset were estimated using valuation techniques consistent with those discussed in the Critical Accounting Policies and Estimates section included in Management's Discussion and Analysis in the Fiscal 2023 Form 10-K.
Management's revenue and profitability forecasts used in the Dickies reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business.
Key assumptions developed by management and used in the quantitative analysis of the Dickies reporting unit and indefinite-lived trademark intangible asset include:
•Financial projections and future cash flows, including a base year that considered recent actual results lower than previous internal forecasts, with revenue growth and profitability improvement throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business;
•Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled;
•Royalty rates based on market data as well as active license agreements for the brand and similar VF brands; and,
•Market-based discount rates.
The valuation model used by management in the impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth and improved profitability. If the brand is unable to achieve the financial projections, an impairment of the reporting unit goodwill or indefinite-lived trademark intangible asset could occur in the future.
Management performed a sensitivity analysis on the impairment model used to test the Dickies reporting unit goodwill. In doing so, management determined that individual changes of a 30%
reduction in the annual growth for earnings before interest, tax, depreciation and amortization ("EBITDA"), or a 100 basis point increase in the discount rate used in the discounted cash flow model did not cause the estimated fair value of the reporting unit to decline below its carrying value.
Management made its estimates based on information available as of the date of our assessment, using assumptions we believe market participants would use in performing an independent valuation of the business. Although management believes the estimates and assumptions used in the impairment testing are reasonable and appropriate, it is possible that VF's assumptions and conclusions regarding impairment or recoverability of the Dickies reporting unit goodwill or indefinite-lived trademark intangible asset could change in future periods. There can be no assurance the estimates and assumptions, particularly our long-term financial projections, used in our goodwill and indefinite-lived intangible asset impairment testing will prove to be accurate predictions of the future, if, for example, (i) the business does not perform as projected, (ii) overall economic conditions in the remainder of Fiscal 2024 or future years vary from current assumptions (including changes in discount rates and foreign currency exchange rates), (iii) business conditions or strategies change from current assumptions, including loss of major customers or channels, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and EBITDA. A future impairment charge of the Dickies reporting unit goodwill or indefinite-lived trademark intangible asset could have a material effect on VF's consolidated financial position and results of operations.
The Company owns a broad, diverse portfolio of other brands and businesses for which material amounts of goodwill and intangible assets have been recorded in the Consolidated Balance Sheets. Management continuously evaluates the current and future performance of VF's brands and businesses, as well as other relevant factors, in assessing the recoverability of these assets. There can be no assurances that the estimates and assumptions used in our long-term financial projections, among other factors, will prove to be accurate predictions of the future. As such, a future impairment charge of goodwill or intangible assets could occur, and if so, could have a material effect on VF's consolidated financial position and results of operations.