vfc-20210703

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 July 3, 2021

☐ 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)

1551 Wewatta Street

Denver, Colorado 80202

(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
0.250% Senior Notes due 2028	VFC28	New York Stock Exchange
0.625% Senior Notes due 2032	VFC32	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 July 31, 2021, there were 392,638,627 shares of the registrant’s common stock outstanding.

VF CORPORATION

Table of Contents


			PAGE NUMBER
Part I — Financial Information			3
Item 1 — Financial Statements (Unaudited)			3
Consolidated Balance Sheets: June 2021, March 2021 and June 2020			3
Consolidated Statements of Operations: Three months ended June 2021 and June 2020			4
Consolidated Statements of Comprehensive Income (L oss): Three months ended June 202 1 and June 2020			5
Consolidated Statements of Cash Flows: Three months ended June 2021 and June 2020			6
Consolidated Statements of Stockholders’ Equity: Three months ended June 202 1 and June 2020			8
Notes to Consolidated Financial Statements			9
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3 — Quantitative and Qualitative Disclosures about Market Risk			35
Item 4 — Controls and Procedures			35
Part II — Other Information			36
Item 1 — Legal Proceedings			36
Item 1A — Risk Factors			36
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 6 — Exhibits			36
Signatures			37

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PART I — FINANCIAL INFORMATION


ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED).

VF CORPORATION

Consolidated Balance Sheets

(Unaudited)


(In thousands, except share amounts)	June 2021		March 2021		June 2020
ASSETS
Current assets
Cash and equivalents	$	1,274,926	$	815,750	$	2,145,111
Accounts receivable, less allowance for doubtful accounts of: June 2021 - $33,666; March 2021 - $33,654; June 2020 - $38,179	1,138,811		1,298,020		934,984
Inventories	1,216,818		1,061,839		1,402,858
Short-term investments	598,806		598,806		700,000
Other current assets	334,777		423,877		513,049

Current assets of discontinued operations	—		587,578		565,135
Total current assets	4,564,138		4,785,870		6,261,137
Property, plant and equipment, net	1,016,465		975,876		957,309
Intangible assets, net	3,027,886		3,029,545		1,855,764
Goodwill	2,427,324		2,425,427		1,162,606
Operating lease right-of-use assets	1,426,706		1,474,434		1,354,308
Other assets	1,087,832		1,062,877		887,921

TOTAL ASSETS	$	13,550,351	$	13,754,029	$	12,479,045
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	8,091	$	11,061	$	19,256
Current portion of long-term debt	1,001,030		1,023		1,025
Accounts payable	534,803		463,208		348,932
Accrued liabilities	1,527,522		1,609,928		1,254,967

Current liabilities of discontinued operations	—		125,257		91,283
Total current liabilities	3,071,446		2,210,477		1,715,463
Long-term debt	4,726,234		5,709,149		5,609,792
Operating lease liabilities	1,192,792		1,236,461		1,104,500
Other liabilities	1,285,849		1,541,778		1,136,692

Total liabilities	10,276,321		10,697,865		9,566,447
Commitments and contingencies
Stockholders’ equity
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding at June 2021, March 2021 or June 2020	—		—		—
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at June 2021 - 392,621,561; March 2021 - 391,941,477; June 2020 - 389,641,245	98,155		97,985		97,410
Additional paid-in capital	3,824,656		3,777,645		4,010,817
Accumulated other comprehensive income (loss)	(965,886)		(1,009,000)		(897,541)
Retained earnings (accumulated deficit)	317,105		189,534		(298,088)
Total stockholders’ equity	3,274,030		3,056,164		2,912,598
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,550,351	$	13,754,029	$	12,479,045

See notes to consolidated financial statements.

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VF CORPORATION

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended June

(In thousands, except per share amounts)	2021		2020
Net revenues	$	2,194,557	$	1,076,293
Costs and operating expenses
Cost of goods sold	955,551		506,951
Selling, general and administrative expenses	1,036,122		816,151

Total costs and operating expenses	1,991,673		1,323,102
Operating income (loss)	202,884		(246,809)
Interest income	2,142		1,313
Interest expense	(34,917)		(29,262)
Other income (expense), net	9,041		(38,187)
Income (loss) from continuing operations before income taxes	179,150		(312,945)
Income tax expense (benefit)	25,178		(35,203)
Income (loss) from continuing operations	153,972		(277,742)
Income (loss) from discontinued operations, net of tax	170,273		(7,871)
Net income (loss)	$	324,245	$	(285,613)
Earnings (loss) per common share - basic
Continuing operations	$	0.39	$	(0.71)
Discontinued operations	0.44		(0.02)
Total earnings (loss) per common share - basic	$	0.83	$	(0.73)
Earnings (loss) per common share - diluted
Continuing operations	$	0.39	$	(0.71)
Discontinued operations	0.43		(0.02)
Total earnings (loss) per common share - diluted	$	0.82	$	(0.73)
Weighted average shares outstanding
Basic	391,351		388,695
Diluted	394,128		390,791

See notes to consolidated financial statements.

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VF CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended June

(In thousands)	2021		2020
Net income (loss)	$	324,245	$	(285,613)
Other comprehensive income (loss)
Foreign currency translation and other
Gains arising during the period	33,171		3,854
Reclassification of foreign currency translation losses	—		42,364
Income tax effect	3,882		6,255
Defined benefit pension plans
Current period actuarial losses	(4,013)		—
Amortization of net deferred actuarial losses	2,840		2,863
Amortization of deferred prior service credits	(118)		(17)
Reclassification of net actuarial loss from settlement charge	948		—


Income tax effect	659		336
Derivative financial instruments
Gains (losses) arising during the period	(4,563)		(7,595)
Income tax effect	192		1,530
Reclassification of net (gains) losses realized	10,559		(20,280)
Income tax effect	(443)		4,107
Other comprehensive income (loss)	43,114		33,417
Comprehensive income (loss)	$	367,359	$	(252,196)

See notes to consolidated financial statements.

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VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended June

(In thousands)	2021		2020
OPERATING ACTIVITIES
Net income (loss)	$	324,245	$	(285,613)
Income (loss) from discontinued operations, net of tax	170,273		(7,871)
Income (loss) from continuing operations, net of tax	153,972		(277,742)
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:

Depreciation and amortization	68,050		63,026
Reduction in the carrying amount of right-of-use assets	104,930		101,772
Stock-based compensation	21,701		9,686
Provision for doubtful accounts	1,850		8,145
Pension expense less than contributions	(6,759)		(3,802)


Other, net	(176,493)		32,858
Changes in operating assets and liabilities:
Accounts receivable	167,798		372,754
Inventories	(150,966)		(100,129)
Accounts payable	70,197		(59,768)
Income taxes	134,115		(65,128)
Accrued liabilities	(71,905)		(26,917)
Operating lease right-of-use assets and liabilities	(113,465)		(51,579)
Other assets and liabilities	(128,107)		(13,630)
Cash provided (used) by operating activities - continuing operations	74,918		(10,454)
Cash provided by operating activities - discontinued operations	6,090		7,266
Cash provided (used) by operating activities	81,008		(3,188)
INVESTING ACTIVITIES

Proceeds from sale of businesses, net of cash sold	616,529		—
Purchases of short-term investments	—		(700,000)

Capital expenditures	(93,218)		(69,191)
Software purchases	(21,006)		(13,477)
Other, net	7,048		(573)
Cash provided (used) by investing activities - continuing operations	509,353		(783,241)
Cash used by investing activities - discontinued operations	(525)		(1,914)
Cash provided (used) by investing activities	508,828		(785,155)
FINANCING ACTIVITIES
Net decrease in short-term borrowings	(2,973)		(1,209,556)
Payments on long-term debt	(253)		(222)
Payment of debt issuance costs	—		(21,271)
Proceeds from long-term debt	—		2,996,090

Cash dividends paid	(192,131)		(186,746)

Proceeds from issuance of Common Stock, net of (payments) for tax withholdings	20,910		(15,634)

Cash provided (used) by financing activities	(174,447)		1,562,661
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	10,003		4,126
Net change in cash, cash equivalents and restricted cash	425,392		778,444
Cash, cash equivalents and restricted cash – beginning of year	851,205		1,411,322
Cash, cash equivalents and restricted cash – end of period	$	1,276,597	$	2,189,766

Continued on next page.

See notes to consolidated financial statements.

VF Corporation Q1 FY22 Form 10-Q 6

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VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended June

(In thousands)	2021		2020
Balances per Consolidated Balance Sheets:
Cash and cash equivalents	$	1,274,926	$	2,145,111
Other current assets	1,643		1,216

Current assets of discontinued operations	—		42,986
Other assets	28		453
Total cash, cash equivalents and restricted cash	$	1,276,597	$	2,189,766

See notes to consolidated financial statements.

7 VF Corporation Q1 FY22 Form 10-Q

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VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Three Months Ended June 2021
				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)
	Common Stock
(In thousands, except share amounts)	Shares	Amounts								Total
Balance, March 2021	391,941,477	$	97,985	$	3,777,645	$	(1,009,000)	$	189,534	$	3,056,164


Net income (loss)	—	—		—		—		324,245		324,245
Dividends on Common Stock ($0.49 per share)	—	—		(2,597)		—		(189,534)		(192,131)

Stock-based compensation, net	680,084	170		49,608		—		(7,140)		42,638
Foreign currency translation and other	—	—		—		37,053		—		37,053
Defined benefit pension plans	—	—		—		316		—		316
Derivative financial instruments	—	—		—		5,745		—		5,745

Balance, June 2021	392,621,561	$	98,155	$	3,824,656	$	(965,886)	$	317,105	$	3,274,030

	Three Months Ended June 2020
				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)
	Common Stock
(In thousands, except share amounts)	Shares	Amounts								Total
Balance, March 2020	388,812,158	$	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, net	829,087	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 2020	389,641,245	$	97,410	$	4,010,817	$	(897,541)	$	(298,088)	$	2,912,598

See notes to consolidated financial statements.

VF Corporation Q1 FY22 Form 10-Q 8

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VF CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS		PAGE NUMBER

NOTE 1	Basis of Presentation	10
NOTE 2	Recently Adopted and Issued Accounting Standards	10
NOTE 3	Revenues	10
NOTE 4	Acquisition	12
NOTE 5	Discontinued Operations	13
NOTE 6	Inventories	14
NOTE 7	Intangible Assets	15
NOTE 8	Goodwill	15
NOTE 9	Leases	15
NOTE 10	Pension Plans	16
NOTE 11	Capital and Accumulated Other Comprehensive Income (Loss)	16
NOTE 12	Stock-based Compensation	18
NOTE 13	Income Taxes	18
NOTE 14	Reportable Segment Information	19
NOTE 15	Earnings Per Share	20
NOTE 16	Fair Value Measurements	20
NOTE 17	Derivative Financial Instruments and Hedging Activities	22
NOTE 18	Restructuring	24
NOTE 19	Contingencies	24
NOTE 20	Subsequent Event	24

9 VF Corporation Q1 FY22 Form 10-Q

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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 April 4, 2021 through April 2, 2022 ("Fiscal 2022"). Accordingly, this Form 10-Q presents our first quarter of Fiscal 2022. For presentation purposes herein, all references to periods ended June 2021 and June 2020 relate to the fiscal periods ended on July 3, 2021 and June 27, 2020, respectively. References to March 2021 relate to information as of April 3, 2021.

On June 28, 2021, VF completed the sale of its Occupational Workwear business. The Occupational Workwear business was 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 included the license of certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. The results of the Occupational Workwear business and the related cash flows have been reported as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively, through the date of sale. 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 of sale. These changes have been applied to all periods presented.

Unless otherwise noted, discussion within these notes to the condensed 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 2022 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 2021 condensed 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 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 2021 are not necessarily indicative of results that may be expected for any other interim period or for Fiscal 2022. 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 April 3, 2021 (“Fiscal 2021 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, continues to impact 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 December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", an update that amends and simplifies the accounting for income taxes by removing certain exceptions in existing guidance and providing new guidance to reduce complexity in certain areas. The guidance became effective for VF in the first quarter of Fiscal 2022, but did not have a material impact on VF's consolidated financial statements.

Recently Issued Accounting Standards

In March 2020 and January 2021, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and ASU No. 2021-01, "Reference Rate Reform (Topic 848): Scope", respectively. This guidance 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.

NOTE 3 — REVENUES

Contract Balances

The following table provides information about contract assets and contract liabilities:


(In thousands)	June 2021		March 2021		June 2020
Contract assets (a)	$	1,135	$	880	$	2,487
Contract liabilities (b)	68,921		49,869		45,622

(a)Included in the other current assets line item in the Consolidated Balance Sheets.

(b)Included in the accrued liabilities line item in the Consolidated Balance Sheets.

VF Corporation Q1 FY22 Form 10-Q 10

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For the three months ended June 2021, the Company recognized $91.0 million of revenue that was included in the contract liability balance during the period, including amounts recorded as a contract liability and subsequently recognized as revenue as performance obligations were 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.

Performance Obligations

As of June 2021, the Company expects to recognize $63.8 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 based on the contractual terms, with the majority of the revenue recognized by Fiscal

2025. 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 2021, 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.

For the three months ended June 2021, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.

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 are affected by economic factors.


	Three Months Ended June 2021
(In thousands)	Outdoor		Active		Work		Other		Total
Channel revenues
Wholesale	$	334,875	$	546,025	$	226,871	$	—	$	1,107,771
Direct-to-consumer	279,658		751,235		42,812		—		1,073,705
Royalty	3,221		4,808		5,052		—		13,081
Total	$	617,754	$	1,302,068	$	274,735	$	—	$	2,194,557

Geographic revenues
United States	$	283,158	$	695,835	$	217,526	$	—	$	1,196,519
International:
Europe	218,555		307,216		14,196		—		539,967
Asia-Pacific	88,060		238,473		26,139		—		352,672
Americas (non-U.S.)	27,981		60,544		16,874		—		105,399
Total	$	617,754	$	1,302,068	$	274,735	$	—	$	2,194,557


	Three Months Ended June 2020
(In thousands)	Outdoor		Active		Work		Other		Total
Channel revenues
Wholesale	$	158,506	$	241,164	$	117,604	$	1,275	$	518,549
Direct-to-consumer	180,014		324,201		40,615		44		544,874
Royalty	2,708		5,951		4,211		—		12,870
Total	$	341,228	$	571,316	$	162,430	$	1,319	$	1,076,293

Geographic revenues
United States	$	152,477	$	265,507	$	114,632	$	—	$	532,616
International:
Europe	99,024		125,526		13,301		1,319		239,170
Asia-Pacific	79,267		162,414		24,509		—		266,190
Americas (non-U.S.)	10,460		17,869		9,988		—		38,317
Total	$	341,228	$	571,316	$	162,430	$	1,319	$	1,076,293

11 VF Corporation Q1 FY22 Form 10-Q

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NOTE 4 — ACQUISITION

On December 28, 2020, VF acquired 100% of the outstanding shares of Supreme Holdings, Inc. ("Supreme") for $2.2 billion in cash, which is subject to working capital and other adjustments. The transaction also included $0.2 billion of cash acquired by VF. The preliminary purchase price was primarily funded with cash on hand.

The acquisition of Supreme includes a contingent arrangement that may require additional cash consideration to be paid to the selling shareholders of Supreme ranging from zero to $300.0 million, subject to the achievement of certain financial targets over the one-year earn-out period ending January 31, 2022. The initial estimated fair value of the contingent consideration of $207.0 million is included in the preliminary purchase price and was reported in the other liabilities line item in the Consolidated Balance Sheet at March 2021. The estimated fair value of the contingent consideration was determined based on the probability-weighted present value of various future cash payment outcomes. In subsequent reporting periods, the contingent consideration liability is remeasured at fair value with changes recognized in the selling, general and administrative expenses line item in the Consolidated Statements of Operations. Refer to Note 16 for additional information on fair value measurements.

Supreme was a privately-held company based in New York, New York and is a global streetwear leader that sells apparel, accessories and footwear under its namesake brand, Supreme®, through direct-to-consumer channels, including digital. The acquisition of Supreme accelerates VF's long-term growth

strategy and builds on a long-standing relationship between Supreme and VF, with the Supreme® brand being a regular collaborator with VF's Vans®, The North Face® and Timberland® brands. The acquisition also provides VF with deeper access to attractive consumer segments and the ability to leverage VF's enterprise platforms and capabilities to enable sustainable long-term growth.

In connection with the acquisition, VF deposited in escrow 605,050 shares of VF Common Stock. The common shares are subject to certain future service requirements and vest over periods of up to four years. For accounting purposes, VF will recognize the stock-based compensation cost for the fair value of these awards of $51.7 million over the vesting periods.

For the three months ended June 2021, Supreme contributed revenues of $145.7 million and net income of $26.3 million. The results of Supreme have been reported in the Active segment since the date of acquisition. Total transaction expenses for the Supreme acquisition were $8.7 million, all of which were recognized in the year ended March 2021 in the selling, general and administrative expenses line item in the Consolidated Statement of Operations.

The allocation of the purchase price is preliminary and subject to change, primarily for certain income tax matters and final adjustments for net working capital. Accordingly, adjustments may be made to the values of the assets acquired and liabilities assumed as additional information is obtained about the facts and circumstances that existed at the valuation date.

The following table summarizes the preliminary estimated fair values of the Supreme assets acquired and liabilities assumed at the date of acquisition:


(In thousands)	December 28, 2020
Cash and equivalents	$	218,104
Accounts receivable	19,698
Inventories	44,937
Other current assets	35,091
Property, plant and equipment	18,914
Intangible asset	1,201,000
Operating lease right-of-use assets	55,668
Other assets	58,479
Total assets acquired	1,651,891

Accounts payable	25,717
Other current liabilities	78,205
Operating lease liabilities	53,062
Deferred income tax liabilities	275,718
Other liabilities	35,245
Total liabilities assumed	467,947

Net assets acquired	1,183,944
Goodwill	1,250,311
Purchase price	$	2,434,255

VF Corporation Q1 FY22 Form 10-Q 12

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The preliminary purchase price consisted of the following components:


(In thousands)	December 28, 2020
Cash consideration	$	2,227,255
Contingent consideration	207,000
Purchase price	$	2,434,255

The goodwill is attributable to our ability to expand the Supreme® brand into new markets, the acquired workforce and future collaboration opportunities for the Supreme® brand. All of the goodwill was assigned to the Active segment and will not be deductible for tax purposes.

The Supreme® trademark, which management believes to have an indefinite life, has been valued at $1.2 billion using the relief-from-royalty method, which is an income valuation approach. The relief-from-royalty method requires the use of significant estimates and assumptions, including but not limited to, future revenues, growth rates, royalty rate, tax rates and discount rate.

The following unaudited pro forma summary presents consolidated information of VF as if the acquisition of Supreme had occurred on March 31, 2019:


(In thousands, except per share amounts)	Three Months Ended June 2020 (unaudited)
Total revenues	$	1,190,285
Income (loss) from continuing operations	(264,463)
Earnings (loss) per common share from continuing operations
Basic	$	(0.68)
Diluted	(0.68)

These pro forma amounts have been calculated after applying VF’s accounting policies and adjusting the results of Supreme to reflect the fair value adjustments to intangible assets, property, plant and equipment and inventory. The results of Supreme have also been adjusted for historical interest expense as the acquired business was debt-free on the acquisition date. These changes have been applied from March 31, 2019, with related tax effects.

Pro forma financial information is not necessarily indicative of VF’s operating results if the acquisition had been effected at the date indicated, nor is it necessarily indicative of future operating results. Amounts do not include any marketing leverage, or operating efficiencies that VF believes are achievable.

NOTE 5 — DISCONTINUED OPERATIONS

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.

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 the license of certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. As of March 28, 2020, the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria. 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, through the date of sale. 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 of sale.

On June 28, 2021, VF completed the sale of the Occupational Workwear business. The Company received proceeds of $616.5 million, net of cash sold, resulting in an estimated after-tax gain on sale of $145.6 million, which is included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statement of Operations for the three months ended June 2021, and is subject to working capital and other adjustments.

The results of the Occupational Workwear business were previously reported in the Work segment. The results of the Occupational Workwear business recorded in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations were income of $170.3 million (including an estimated after-tax gain on sale of $145.6 million) and a loss of $7.9 million for the three months ended June 2021 and June 2020, respectively.

Under the terms of a transition services agreement, the Company will provide certain support services for periods generally up to 12 months from the closing date of the transaction.

13 VF Corporation Q1 FY22 Form 10-Q

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Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the Occupational Workwear business that are included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations:


	Three Months Ended June

(In thousands)	2021		2020
Net revenues	$	181,424	$	125,333
Cost of goods sold	117,193		101,470
Selling, general and administrative expenses	38,735		33,256

Interest income, net	194		293
Other income (expense), net	6		—
Income (loss) from discontinued operations before income taxes	25,696		(9,100)
Gain on the sale of discontinued operations before income taxes	133,571		—
Total income (loss) from discontinued operations before income taxes	159,267		(9,100)
Income tax benefit (a)	(11,006)		(1,229)
Income (loss) from discontinued operations, net of tax	$	170,273	$	(7,871)

(a)Income tax benefit for the three months ended June 2021 includes $12.0 million of deferred tax benefit related to capital and other losses realized upon the sale of the Occupational Workwear business.

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 2021		March 2021		June 2020
Cash and equivalents	$	—	$	34,132	$	42,986
Accounts receivable, net	—		103,835		64,065
Inventories	—		245,227		258,632
Other current assets	—		8,208		10,027
Property, plant and equipment, net	—		49,394		46,697
Intangible assets, net	—		54,471		54,471
Goodwill	—		43,530		43,530
Operating lease right-of-use assets	—		43,220		39,452
Other assets	—		5,561		5,275

Total assets of discontinued operations	$	—	$	587,578	$	565,135


Accounts payable	$	—	$	59,965	$	27,810
Accrued liabilities	—		38,956		31,134
Operating lease liabilities	—		31,301		34,462
Other liabilities	—