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 December 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 January 25, 2020, there were 394,720,284 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: December 2019, March 2019 and December 2018	3

Consolidated Statements of Income: Three and nine months ended December 2019 and December 2018	4

Consolidated Statements of Comprehensive Income: Three and nine months ended December 2019 and December 2018	5

Consolidated Statements of Cash Flows: Nine months ended December 2019 and December 2018	6

Consolidated Statements of Stockholders’ Equity: Three and nine months ended December 2019 and December 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	44

Item 4 — Controls and Procedures	44

Part II — Other Information

Item 1 — Legal Proceedings	45

Item 1A — Risk Factors	45

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 6 — Exhibits	46

Signatures	47

PART I — FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED).

VF CORPORATION

Consolidated Balance Sheets

(Unaudited)



(In thousands, except share amounts)	December 2019			March 2019			December 2018
ASSETS
Current assets
Cash and equivalents	$	583,951		$	445,119		$	451,978
Accounts receivable, less allowance for doubtful accounts of: December 2019 ‑ $21,283; March 2019 - $19,638; December 2018 - $20,932	1,641,758			1,465,855			1,566,202
Inventories	1,564,970			1,432,660			1,401,621
Other current assets	365,019			433,793			391,800
Current assets of discontinued operations	—			896,030			800,490
Total current assets	4,155,698			4,673,457			4,612,091
Property, plant and equipment, net	908,771			915,177			902,665
Intangible assets, net	1,948,232			1,972,364			2,002,906
Goodwill	1,539,579			1,541,314			1,536,544
Operating lease right-of-use assets	1,298,631			—			—
Other assets	963,351			772,755			756,065
Other assets of discontinued operations	—			481,718			474,039
TOTAL ASSETS	$	10,814,262		$	10,356,785		$	10,284,310
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	56,001		$	659,060		$	674,676
Current portion of long-term debt	4,677			5,263			5,576
Accounts payable	456,993			580,867			536,406
Accrued liabilities	1,444,421			1,154,932			1,115,371
Current liabilities of discontinued operations	—			261,482			231,018
Total current liabilities	1,962,092			2,661,604			2,563,047
Long-term debt	2,110,488			2,115,884			2,135,240
Operating lease liabilities	1,052,854			—			—
Other liabilities	1,121,238			1,232,200			1,239,503
Other liabilities of discontinued operations	—			48,581			45,896
Commitments and contingencies
Total liabilities	6,246,672			6,058,269			5,983,686
Stockholders’ equity
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding at December 2019, March 2019 or December 2018	—			—			—
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at December 2019 - 394,528,067; March 2019 - 396,824,662; December 2018 - 395,472,173	98,632			99,206			98,868
Additional paid-in capital	4,182,102			3,921,784			3,829,994
Accumulated other comprehensive income (loss)	(895,372		)	(902,075		)	(886,565		)
Retained earnings	1,182,228			1,179,601			1,258,327
Total stockholders’ equity	4,567,590			4,298,516			4,300,624
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,814,262		$	10,356,785		$	10,284,310

See notes to consolidated financial statements.

3 VF Corporation Q3 FY20 Form 10-Q

VF CORPORATION

Consolidated Statements of Income

(Unaudited)



	Three Months Ended December						Nine Months Ended December

(In thousands, except per share amounts)	2019			2018			2019			2018
Net revenues	$	3,384,746		$	3,227,712		$	9,049,493		$	8,584,237
Costs and operating expenses
Cost of goods sold	1,500,463			1,464,761			4,133,884			4,015,441
Selling, general and administrative expenses	1,305,481			1,242,131			3,624,450			3,389,891
Total costs and operating expenses	2,805,944			2,706,892			7,758,334			7,405,332
Operating income	578,802			520,820			1,291,159			1,178,905
Interest income	5,489			3,116			17,601			6,746
Interest expense	(22,303		)	(28,336		)	(65,240		)	(83,640		)
Other income (expense), net	(22,152		)	(1,027		)	(18,367		)	(52,422		)
Income from continuing operations before income taxes	539,836			494,573			1,225,153			1,049,589
Income tax expense	87,089			85,453			26,156			162,981
Income from continuing operations	452,747			409,120			1,198,997			886,608
Income (loss) from discontinued operations, net of tax	12,256			54,389			(35,772		)	244,380
Net income	$	465,003		$	463,509		$	1,163,225		$	1,130,988
Earnings (loss) per common share - basic
Continuing operations	$	1.14		$	1.03		$	3.02		$	2.24
Discontinued operations	0.03			0.14			(0.09		)	0.62
Total earnings per common share - basic	$	1.17		$	1.17		$	2.93		$	2.86
Earnings (loss) per common share - diluted
Continuing operations	$	1.13		$	1.02		$	2.99		$	2.21
Discontinued operations	0.03			0.14			(0.09		)	0.61
Total earnings per common share - diluted	$	1.16		$	1.16		$	2.90		$	2.82
Weighted average shares outstanding
Basic	395,940			395,294			396,806			395,117
Diluted	400,322			399,767			401,499			400,418

See notes to consolidated financial statements.

VF Corporation Q3 FY20 Form 10-Q 4

VF CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended December						Nine Months Ended December

(In thousands)	2019			2018			2019			2018
Net income	$	465,003		$	463,509		$	1,163,225		$	1,130,988
Other comprehensive income (loss)
Foreign currency translation and other
Gains (losses) arising during the period	46,813			(67,820		)	(10,831		)	(241,578		)
Income tax effect	5,154			(3,345		)	(815		)	(18,680		)
Defined benefit pension plans
Current period actuarial gains	35,971			1,428			21,361			53,470
Amortization of net deferred actuarial losses	4,203			6,676			12,236			22,153
Amortization of deferred prior service costs (credits)	13			(58		)	38			552
Reclassification of net actuarial loss from settlement charge	24,943			662			25,462			8,846
Reclassification of deferred prior service cost due to curtailments	—			—			—			9,483
Income tax effect	(16,334		)	(2,313		)	(15,835		)	(24,530		)
Derivative financial instruments
Gains (losses) arising during the period	(56,699		)	43,836			9,471			153,705
Income tax effect	10,163			(7,217		)	(759		)	(18,664		)
Reclassification to net income for (gains) losses realized	(22,563		)	5,391			(56,746		)	35,554
Income tax effect	3,689			(889		)	9,689			(2,846		)
Other comprehensive income (loss)	35,353			(23,649		)	(6,729		)	(22,535		)
Comprehensive income	$	500,356		$	439,860		$	1,156,496		$	1,108,453

See notes to consolidated financial statements.

5 VF Corporation Q3 FY20 Form 10-Q

VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)



	Nine Months Ended December

(In thousands)	2019			2018
OPERATING ACTIVITIES
Net income	$	1,163,225		$	1,130,988
Income (loss) from discontinued operations, net of tax	(35,772		)	244,380
Income from continuing operations, net of tax	1,198,997			886,608
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	204,341			192,049
Amortization of operating lease right-of-use assets	287,439			—
Stock-based compensation	95,304			67,577
Provision for doubtful accounts	9,592			11,413
Pension expense in excess of contributions	9,428			2,932
Loss on sale of businesses, net of tax	—			33,501
Other, net	(124,056		)	(36,393		)
Changes in operating assets and liabilities:
Accounts receivable	(185,259		)	(418,983		)
Inventories	(132,862		)	(69,211		)
Accounts payable	(121,532		)	54,306
Income taxes	(44,092		)	(43,935		)
Accrued liabilities	(82,948		)	444,424
Operating lease right-of-use assets and liabilities	(318,636		)	—
Other assets and liabilities	32,697			(12,562		)
Cash provided by operating activities - continuing operations	828,413			1,111,726
Cash provided by operating activities - discontinued operations	13,213			324,937
Cash provided by operating activities	841,626			1,436,663
INVESTING ACTIVITIES
Business acquisitions, net of cash received	—			(320,405		)
Proceeds from sale of businesses, net of cash sold	—			430,273
Capital expenditures	(186,281		)	(180,241		)
Software purchases	(37,333		)	(42,533		)
Other, net	51,985			(16,189		)
Cash used by investing activities - continuing operations	(171,629		)	(129,095		)
Cash used by investing activities - discontinued operations	(2,327		)	(19,451		)
Cash used by investing activities	(173,956		)	(148,546		)
FINANCING ACTIVITIES
Net decrease in short-term borrowings	(596,559		)	(852,547		)
Payments on long-term debt	(4,496		)	(4,675		)
Payment of debt issuance costs	—			(2,123		)
Purchases of treasury stock	(500,003		)	(150,676		)
Cash dividends paid	(562,298		)	(565,176		)
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	135,086			137,470
Cash used by financing activities	(622,122		)	(1,437,727		)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	(4,927		)	(681		)
Net change in cash, cash equivalents and restricted cash	40,621			(150,291		)
Cash, cash equivalents and restricted cash – beginning of year	556,587			689,190
Cash, cash equivalents and restricted cash – end of period	$	597,208		$	538,899

Continued on next page.

See notes to consolidated financial statements.

VF Corporation Q3 FY20 Form 10-Q 6

VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)



	Nine Months Ended December

(In thousands)	2019		2018
Balances per Consolidated Balance Sheets:
Cash and cash equivalents	$	583,951	$	451,978
Other current assets	3,448		2,855
Current and other assets of discontinued operations	—		83,351
Other assets	9,809		715
Total cash, cash equivalents and restricted cash	$	597,208	$	538,899

See notes to consolidated financial statements.

7 VF Corporation Q3 FY20 Form 10-Q

VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)



	Three Months Ended December 2019
						Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Common Stock
(In thousands, except share amounts)	Shares		Amounts											Total
Balance, September 2019	398,865,790		$	99,716		$	4,072,640	$	(930,725	)	$	1,405,988		$	4,647,619
Net income	—		—			—		—			465,003			465,003
Dividends on Common Stock ($0.48 per share)	—		—			—		—			(188,694		)	(188,694		)
Purchase of treasury stock	(5,840,550	)	(1,460		)	—		—			(498,543		)	(500,003		)
Stock-based compensation, net	1,502,827		376			109,462		—			(1,526		)	108,312
Foreign currency translation and other	—		—			—		51,967			—			51,967
Defined benefit pension plans	—		—			—		48,796			—			48,796
Derivative financial instruments	—		—			—		(65,410		)	—			(65,410		)
Balance, December 2019	394,528,067		$	98,632		$	4,182,102	$	(895,372	)	$	1,182,228		$	4,567,590

	Three Months Ended December 2018
						Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Common Stock
(In thousands, except share amounts)	Shares		Amounts											Total
Balance, September 2018	397,161,808		$	99,290		$	3,795,395	$	(862,916	)	$	1,147,787		$	4,179,556
Net income	—		—			—		—			463,509			463,509
Dividends on Common Stock ($0.51 per share)	—		—			—		—			(201,325		)	(201,325		)
Purchase of treasury stock	(1,863,724	)	(466		)	—		—			(149,730		)	(150,196		)
Stock-based compensation, net	174,089		44			34,599		—			(1,914		)	32,729
Foreign currency translation and other	—		—			—		(71,165		)	—			(71,165		)
Defined benefit pension plans	—		—			—		6,395			—			6,395
Derivative financial instruments	—		—			—		41,121			—			41,121
Balance, December 2018	395,472,173		$	98,868		$	3,829,994	$	(886,565	)	$	1,258,327		$	4,300,624

Continued on next page.

See notes to consolidated financial statements.

VF Corporation Q3 FY20 Form 10-Q 8

VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)



	Nine Months Ended December 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	)