Document

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 September 28, 2019

☐ 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

V. F. CORPORATION

(Exact name of registrant as specified in its charter)



Pennsylvania		23-1180120
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

8505 E. Orchard Road

Greenwood Village, Colorado 80111

(Address of principal executive offices)

(720) 778-4000

(Registrant’s telephone number, including area code)



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 share	VFC	New York Stock Exchange
0.625% Senior Notes due 2023	VFC23	New 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 filer	☑	Accelerated 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 October 26, 2019, there were 399,373,631 shares of the registrant’s common stock outstanding.

VF CORPORATION

Table of Contents



	Page No.
Part I — Financial Information

Item 1 — Financial Statements (Unaudited)	3

Consolidated Balance Sheets: September 2019, March 2019 and September 2018	3

Consolidated Statements of Income: Three and six months ended September 2019 and September 2018	4

Consolidated Statements of Comprehensive Income: Three and six months ended September 2019 and September 2018	5

Consolidated Statements of Cash Flows: Six months ended September 2019 and September 2018	6

Consolidated Statements of Stockholders’ Equity: Three and six months ended September 2019 and September 2018	8

Notes to Consolidated Financial Statements	10

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3 — Quantitative and Qualitative Disclosures about Market Risk	43

Item 4 — Controls and Procedures	43

Part II — Other Information

Item 1 — Legal Proceedings	44

Item 1A — Risk Factors	44

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 6 — Exhibits	45

Signatures	46

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED).

VF CORPORATION

Consolidated Balance Sheets

(Unaudited)



(In thousands, except share amounts)	September 2019			March 2019			September 2018
ASSETS
Current assets
Cash and equivalents	$	507,605		$	445,119		$	266,788
Accounts receivable, less allowance for doubtful accounts of: September 2019 ‑ $20,742; March 2019 - $19,638; September 2018 - $19,743	1,976,154			1,465,855			1,961,274
Inventories	1,890,716			1,432,660			1,723,057
Other current assets	400,732			433,793			422,287
Current assets held-for-sale	—			—			159,852
Current assets of discontinued operations	—			896,030			884,696
Total current assets	4,775,207			4,673,457			5,417,954
Property, plant and equipment, net	871,601			915,177			893,811
Intangible assets, net	1,919,770			1,972,364			2,029,901
Goodwill	1,529,385			1,541,314			1,543,143
Operating lease right-of-use assets	1,263,903			—			—
Other assets	910,489			772,755			763,762
Other assets of discontinued operations	—			481,718			481,854
TOTAL ASSETS	$	11,270,355		$	10,356,785		$	11,130,425
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	484,321		$	659,060		$	1,564,899
Current portion of long-term debt	4,986			5,263			5,885
Accounts payable	550,700			580,867			603,575
Accrued liabilities	1,364,331			1,154,932			1,064,555
Current liabilities held-for-sale	—			—			11,358
Current liabilities of discontinued operations	—			261,482			258,424
Total current liabilities	2,404,338			2,661,604			3,508,696
Long-term debt	2,090,922			2,115,884			2,150,595
Operating lease liabilities	1,028,363			—			—
Other liabilities	1,099,113			1,232,200			1,246,962
Other liabilities of discontinued operations	—			48,581			44,616
Commitments and contingencies
Total liabilities	6,622,736			6,058,269			6,950,869
Stockholders’ equity
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding at September 2019, March 2019 or September 2018	—			—			—
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at September 2019 – 398,865,790; March 2019 – 396,824,662; September 2018 – 397,161,808	99,716			99,206			99,290
Additional paid-in capital	4,072,640			3,921,784			3,795,395
Accumulated other comprehensive income (loss)	(930,725		)	(902,075		)	(862,916		)
Retained earnings	1,405,988			1,179,601			1,147,787
Total stockholders’ equity	4,647,619			4,298,516			4,179,556
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	11,270,355		$	10,356,785		$	11,130,425

See notes to consolidated financial statements.

3 VF Corporation Q2 FY20 Form 10-Q

VF CORPORATION

Consolidated Statements of Income

(Unaudited)



	Three Months Ended September						Six Months Ended September

(In thousands, except per share amounts)	2019			2018			2019			2018
Net revenues	$	3,393,268		$	3,219,390		$	5,664,747		$	5,356,525
Costs and operating expenses
Cost of goods sold	1,597,307			1,545,391			2,633,421			2,550,680
Selling, general and administrative expenses	1,216,896			1,129,013			2,318,969			2,147,760
Total costs and operating expenses	2,814,203			2,674,404			4,952,390			4,698,440
Operating income	579,065			544,986			712,357			658,085
Interest income	4,983			1,484			12,112			3,630
Interest expense	(20,810		)	(28,305		)	(42,937		)	(55,304		)
Other income (expense), net	(1,813		)	(31,970		)	3,785			(51,395		)
Income from continuing operations before income taxes	561,425			486,195			685,317			555,016
Income tax expense (benefit)	(87,576		)	70,071			(60,933		)	77,528
Income from continuing operations	649,001			416,124			746,250			477,488
Income (loss) from discontinued operations, net of tax	—			90,997			(48,028		)	189,991
Net income	$	649,001		$	507,121		$	698,222		$	667,479
Earnings (loss) per common share - basic
Continuing operations	$	1.63		$	1.05		$	1.88		$	1.21
Discontinued operations	—			0.23			(0.12		)	0.48
Total earnings per common share - basic	$	1.63		$	1.28		$	1.76		$	1.69
Earnings (loss) per common share - diluted
Continuing operations	$	1.61		$	1.04		$	1.86		$	1.19
Discontinued operations	—			0.23			(0.12		)	0.47
Total earnings per common share - diluted	$	1.61		$	1.26		$	1.74		$	1.67
Weighted average shares outstanding
Basic	397,751			395,892			397,239			395,029
Diluted	402,261			401,939			402,088			400,744

See notes to consolidated financial statements.

VF Corporation Q2 FY20 Form 10-Q 4

VF CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended September						Six Months Ended September

(In thousands)	2019			2018			2019			2018
Net income	$	649,001		$	507,121		$	698,222		$	667,479
Other comprehensive income (loss)
Foreign currency translation and other
Losses arising during the period	(70,473		)	(12,600		)	(57,644		)	(173,758		)
Income tax effect	(8,912		)	(1,623		)	(5,969		)	(15,335		)
Defined benefit pension plans
Current period actuarial gains (losses)	(14,610		)	(1,898		)	(14,610		)	52,042
Amortization of net deferred actuarial losses	4,014			6,655			8,033			15,477
Amortization of deferred prior service costs (credits)	12			(59		)	25			610
Reclassification of net actuarial loss from settlement charge	519			1,342			519			8,184
Reclassification of deferred prior service cost due to curtailments	—			—			—			9,483
Income tax effect	2,207			(1,562		)	499			(22,217		)
Derivative financial instruments
Gains arising during the period	51,396			15,240			66,170			109,869
Income tax effect	(7,048		)	(89		)	(10,922		)	(11,447		)
Reclassification to net income for (gains) losses realized	(23,688		)	13,846			(34,183		)	30,163
Income tax effect	3,244			(90		)	6,000			(1,957		)
Other comprehensive income (loss)	(63,339		)	19,162			(42,082		)	1,114
Comprehensive income	$	585,662		$	526,283		$	656,140		$	668,593

See notes to consolidated financial statements.

5 VF Corporation Q2 FY20 Form 10-Q

VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended September

(In thousands)	2019			2018
OPERATING ACTIVITIES
Net income	$	698,222		$	667,479
Income (loss) from discontinued operations, net of tax	(48,028		)	189,991
Income from continuing operations, net of tax	746,250			477,488
Adjustments to reconcile net income to cash used by operating activities:
Depreciation and amortization, including operating lease right-of-use assets	321,129			129,259
Stock-based compensation	71,419			46,669
Provision for doubtful accounts	6,234			6,714
Pension expense in excess of (less than) contributions	(6,125		)	1,595
Loss on sale of businesses, net of tax	—			29,791
Other, net	(99,762		)	21,604
Changes in operating assets and liabilities:
Accounts receivable	(544,133		)	(806,080		)
Inventories	(474,417		)	(384,093		)
Accounts payable	(23,959		)	124,101
Income taxes	(47,082		)	(91,183		)
Accrued liabilities	(125,950		)	333,511
Operating lease right-of-use assets and liabilities	(227,609		)	—
Other assets and liabilities	25,314			14,939
Cash used by operating activities - continuing operations	(378,691		)	(95,685		)
Cash provided by operating activities - discontinued operations	13,213			198,636
Cash provided (used) by operating activities	(365,478		)	102,951
INVESTING ACTIVITIES
Business acquisitions, net of cash received	—			(320,405		)
Proceeds from sale of businesses, net of cash sold	—			288,273
Capital expenditures	(108,596		)	(129,582		)
Software purchases	(25,576		)	(32,710		)
Other, net	59,087			(9,979		)
Cash used by investing activities - continuing operations	(75,085		)	(204,403		)
Cash used by investing activities - discontinued operations	(2,327		)	(13,924		)
Cash used by investing activities	(77,412		)	(218,327		)
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings	(168,421		)	40,219
Payments on long-term debt	(2,868		)	(3,107		)
Purchases of treasury stock	—			(480		)
Cash dividends paid	(373,604		)	(363,851		)
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	50,659			130,114
Cash provided (used) by financing activities	411,914			(197,105		)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	(5,385		)	(17,270		)
Net change in cash, cash equivalents and restricted cash	(36,361		)	(329,751		)
Cash, cash equivalents and restricted cash – beginning of year	556,587			689,190
Cash, cash equivalents and restricted cash – end of period	$	520,226		$	359,439

Continued on next page.

See notes to consolidated financial statements.

VF Corporation Q2 FY20 Form 10-Q 6

VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended September

(In thousands)	2019		2018
Balances per Consolidated Balance Sheets:
Cash and cash equivalents	$	507,605	$	266,788
Other current assets	2,748		3,919
Current assets held-for-sale	—		2,059
Current and other assets of discontinued operations	—		86,009
Other assets	9,873		664
Total cash, cash equivalents and restricted cash	$	520,226	$	359,439

See notes to consolidated financial statements.

7 VF Corporation Q2 FY20 Form 10-Q

VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)



	Three Months Ended September 2019
						Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Common Stock
(In thousands, except share amounts)	Shares		Amounts											Total
Balance, June 2019	397,922,120		$	99,481		$	3,988,385	$	(867,386	)	$	931,134		$	4,151,614
Net income	—		—			—		—			649,001			649,001
Dividends on Common Stock ($0.43 per share)	—		—			—		—			(171,066		)	(171,066		)
Stock-based compensation, net	943,670		235			84,255		—			(3,081		)	81,409
Foreign currency translation and other	—		—			—		(79,385		)	—			(79,385		)
Defined benefit pension plans	—		—			—		(7,858		)	—			(7,858		)
Derivative financial instruments	—		—			—		23,904			—			23,904
Balance, September 2019	398,865,790		$	99,716		$	4,072,640	$	(930,725	)	$	1,405,988		$	4,647,619

	Three Months Ended September 2018
						Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Common Stock
(In thousands, except share amounts)	Shares		Amounts											Total
Balance, June 2018	395,509,138		$	98,877		$	3,688,529	$	(882,078	)	$	825,788		$	3,731,116
Net income	—		—			—		—			507,121			507,121
Dividends on Common Stock ($0.46 per share)	—		—			—		—			(182,334		)	(182,334		)
Purchase of treasury stock	(5,210	)	(1		)	—		—			(479		)	(480		)
Stock-based compensation, net	1,657,880		414			106,866		—			(2,309		)	104,971
Foreign currency translation and other	—		—			—		(14,223		)	—			(14,223		)
Defined benefit pension plans	—		—			—		4,478			—			4,478
Derivative financial instruments	—		—			—		28,907			—			28,907
Balance, September 2018	397,161,808		$	99,290		$	3,795,395	$	(862,916	)	$	1,147,787		$	4,179,556

Continued on next page.

See notes to consolidated financial statements.

VF Corporation Q2 FY20 Form 10-Q 8

VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)



	Six Months Ended September 2019
				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Common Stock
(In thousands, except share amounts)	Shares	Amounts										Total
Balance, March 2019	396,824,662	$	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	—