vfc-20211002

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 October 2, 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 October 30, 2021, there were 392,782,274 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: September 2021, March 2021 and September 2020			3
Consolidated Statements of Operations: Three and six months ended September 2021 and September 2020			4
Consolidated Statements of Comprehensive Income (Loss): Three and six months ended September 2021 and September 2020			5
Consolidated Statements of Cash Flows: Six months ended Se ptember 2021 and September 2020			6
Consolidated Statements of Stockholders’ Equity: Three and six months ended September 2021 and September 2020			8
Notes to Consolidated Financial Statements			10
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3 — Quantitative and Qualitative Disclosures about Market Risk			41
Item 4 — Controls and Procedures			41
Part II — Other Information			42
Item 1 — Legal Proceedings			42
Item 1A — Risk Factors			42
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			42
Item 6 — Exhibits			42
Signatures			43

Table of Contents

PART I — FINANCIAL INFORMATION


ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED).

VF CORPORATION

Consolidated Balance Sheets

(Unaudited)


(In thousands, except share amounts)	September 2021		March 2021		September 2020
ASSETS
Current assets
Cash and equivalents	$	1,360,138	$	815,750	$	1,877,398
Accounts receivable, less allowance for doubtful accounts of: September 2021 - $33,822; March 2021 - $33,654; September 2020 - $36,121	1,787,331		1,298,020		1,606,479
Inventories	1,464,714		1,061,839		1,434,843
Short-term investments	—		598,806		800,000
Other current assets	357,687		423,877		408,809

Current assets of discontinued operations	—		587,578		552,677
Total current assets	4,969,870		4,785,870		6,680,206
Property, plant and equipment, net	1,011,415		975,876		933,990
Intangible assets, net	3,018,242		3,029,545		1,851,093
Goodwill	2,415,767		2,425,427		1,173,514
Operating lease right-of-use assets	1,380,106		1,474,434		1,385,121
Other assets	1,093,687		1,062,877		917,342

TOTAL ASSETS	$	13,889,087	$	13,754,029	$	12,941,266
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	10,173	$	11,061	$	13,237
Current portion of long-term debt	1,001,037		1,023		1,127
Accounts payable	534,365		463,208		450,109
Accrued liabilities	1,838,790		1,609,928		1,505,703

Current liabilities of discontinued operations	—		125,257		114,356
Total current liabilities	3,384,365		2,210,477		2,084,532
Long-term debt	4,682,751		5,709,149		5,679,440
Operating lease liabilities	1,146,944		1,236,461		1,129,840
Other liabilities	1,076,546		1,541,778		1,102,216

Total liabilities	10,290,606		10,697,865		9,996,028
Commitments and contingencies
Stockholders’ equity
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding at September 2021, March 2021 or September 2020	—		—		—
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at September 2021 - 392,758,016; March 2021 - 391,941,477; September 2020 - 389,964,718	98,190		97,985		97,491
Additional paid-in capital	3,854,687		3,777,645		3,852,358
Accumulated other comprehensive income (loss)	(940,834)		(1,009,000)		(959,658)
Retained earnings (accumulated deficit)	586,438		189,534		(44,953)
Total stockholders’ equity	3,598,481		3,056,164		2,945,238
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,889,087	$	13,754,029	$	12,941,266

See notes to consolidated financial statements.

3 VF Corporation Q2 FY22 Form 10-Q

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VF CORPORATION

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September				Six Months Ended September

(In thousands, except per share amounts)	2021		2020		2021		2020
Net revenues	$	3,198,235	$	2,608,324	$	5,392,792	$	3,684,617
Costs and operating expenses
Cost of goods sold	1,479,446		1,282,406		2,434,997		1,789,357
Selling, general and administrative expenses	1,160,303		1,005,970		2,196,425		1,822,121

Total costs and operating expenses	2,639,749		2,288,376		4,631,422		3,611,478
Operating income	558,486		319,948		761,370		73,139
Interest income	1,518		3,176		3,660		4,489
Interest expense	(35,888)		(34,107)		(70,805)		(63,369)
Other income (expense), net	7,549		4,644		16,590		(33,543)
Income (loss) from continuing operations before income taxes	531,665		293,661		710,815		(19,284)
Income tax expense	67,612		50,415		92,790		15,212
Income (loss) from continuing operations	464,053		243,246		618,025		(34,496)
Income from discontinued operations, net of tax	—		13,476		170,273		5,605
Net income (loss)	$	464,053	$	256,722	$	788,298	$	(28,891)
Earnings (loss) per common share - basic
Continuing operations	$	1.18	$	0.62	$	1.58	$	(0.09)
Discontinued operations	—		0.03		0.43		0.01
Total earnings (loss) per common share - basic	$	1.18	$	0.66	$	2.01	$	(0.07)
Earnings (loss) per common share - diluted
Continuing operations	$	1.18	$	0.62	$	1.57	$	(0.09)
Discontinued operations	—		0.03		0.43		0.01
Total earnings (loss) per common share - diluted	$	1.18	$	0.66	$	2.00	$	(0.07)
Weighted average shares outstanding
Basic	391,779		389,219		391,565		388,957
Diluted	394,017		391,180		394,072		390,986

See notes to consolidated financial statements.

VF Corporation Q2 FY22 Form 10-Q 4

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VF CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended September				Six Months Ended September

(In thousands)	2021		2020		2021		2020
Net income (loss)	$	464,053	$	256,722	$	788,298	$	(28,891)
Other comprehensive income (loss)
Foreign currency translation and other
Gains (losses) arising during the period	(12,314)		(33,483)		20,857		(29,629)
Reclassification of foreign currency translation losses	—		—		—		42,364
Income tax effect	(11,686)		18,582		(7,804)		24,837
Defined benefit pension plans
Current period actuarial losses	(439)		(8,853)		(4,452)		(8,853)
Amortization of net deferred actuarial losses	2,871		2,898		5,711		5,761
Amortization of deferred prior service credits	(117)		(17)		(235)		(34)
Reclassification of net actuarial loss from settlement charge	76		572		1,024		572


Income tax effect	(595)		386		64		722
Derivative financial instruments
Gains (losses) arising during the period	34,361		(39,731)		29,798		(47,326)
Income tax effect	(5,978)		7,197		(5,786)		8,727
Reclassification of net (gains) losses realized	22,986		(11,379)		33,545		(31,659)
Income tax effect	(4,113)		1,711		(4,556)		5,818
Other comprehensive income (loss)	25,052		(62,117)		68,166		(28,700)
Comprehensive income (loss)	$	489,105	$	194,605	$	856,464	$	(57,591)

See notes to consolidated financial statements.

5 VF Corporation Q2 FY22 Form 10-Q

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VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended September

(In thousands)	2021		2020
OPERATING ACTIVITIES
Net income (loss)	$	788,298	$	(28,891)
Income from discontinued operations, net of tax	170,273		5,605
Income (loss) from continuing operations, net of tax	618,025		(34,496)
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:

Depreciation and amortization	134,553		138,853
Reduction in the carrying amount of right-of-use assets	208,687		205,635
Stock-based compensation	44,283		26,113
Provision for doubtful accounts	3,345		15,727
Pension expense less than contributions	(12,312)		(7,953)


Other, net	(191,547)		15,852
Changes in operating assets and liabilities:
Accounts receivable	(502,675)		(275,436)
Inventories	(412,058)		(115,515)
Accounts payable	72,757		36,019
Income taxes	112,331		(40,770)
Accrued liabilities	233,369		161,785
Operating lease right-of-use assets and liabilities	(228,969)		(150,170)
Other assets and liabilities	(257,016)		63,866
Cash provided (used) by operating activities - continuing operations	(177,227)		39,510
Cash provided by operating activities - discontinued operations	6,090		43,298
Cash provided (used) by operating activities	(171,137)		82,808
INVESTING ACTIVITIES
Business acquisitions, net of cash received	3,760		—
Proceeds from sale of businesses, net of cash sold	616,529		—
Purchases of short-term investments	—		(800,000)
Proceeds from sale of short-term investments	598,806		—
Capital expenditures	(144,582)		(112,501)
Software purchases	(42,119)		(38,345)
Other, net	20,491		(3,839)
Cash provided (used) by investing activities - continuing operations	1,052,885		(954,685)
Cash used by investing activities - discontinued operations	(525)		(2,693)
Cash provided (used) by investing activities	1,052,360		(957,378)
FINANCING ACTIVITIES
Net decrease in short-term borrowings	(889)		(1,215,575)
Payments on long-term debt	(508)		(768)
Payment of debt issuance costs	—		(21,430)
Proceeds from long-term debt	—		2,996,090

Cash dividends paid	(384,427)		(373,638)

Proceeds from issuance of Common Stock, net of (payments) for tax withholdings	25,971		(7,221)

Cash provided (used) by financing activities	(359,853)		1,377,458
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	(10,958)		(8,082)
Net change in cash, cash equivalents and restricted cash	510,412		494,806
Cash, cash equivalents and restricted cash – beginning of year	851,205		1,411,322
Cash, cash equivalents and restricted cash – end of period	$	1,361,617	$	1,906,128

Continued on next page.

See notes to consolidated financial statements.

VF Corporation Q2 FY22 Form 10-Q 6

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VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)


	Six Months Ended September

(In thousands)	2021		2020
Balances per Consolidated Balance Sheets:
Cash and cash equivalents	$	1,360,138	$	1,877,398
Other current assets	1,421		1,301

Current assets of discontinued operations	—		26,846
Other assets	58		583
Total cash, cash equivalents and restricted cash	$	1,361,617	$	1,906,128

See notes to consolidated financial statements.

7 VF Corporation Q2 FY22 Form 10-Q

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VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)


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


Net income (loss)	—	—		—		—		464,053		464,053
Dividends on Common Stock ($0.49 per share)	—	—		—		—		(192,296)		(192,296)

Stock-based compensation, net	136,455	35		30,031		—		(2,424)		27,642
Foreign currency translation and other	—	—		—		(24,000)		—		(24,000)
Defined benefit pension plans	—	—		—		1,796		—		1,796
Derivative financial instruments	—	—		—		47,256		—		47,256

Balance, September 2021	392,758,016	$	98,190	$	3,854,687	$	(940,834)	$	586,438	$	3,598,481

	Three Months Ended September 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, June 2020	389,641,245	$	97,410	$	4,010,817	$	(897,541)	$	(298,088)	$	2,912,598


Net income (loss)	—	—		—		—		256,722		256,722
Dividends on Common Stock ($0.48 per share)	—	—		(186,892)		—		—		(186,892)

Stock-based compensation, net	323,473	81		28,433		—		(3,587)		24,927
Foreign currency translation and other	—	—		—		(14,901)		—		(14,901)
Defined benefit pension plans	—	—		—		(5,014)		—		(5,014)
Derivative financial instruments	—	—		—		(42,202)		—		(42,202)

Balance, September 2020	389,964,718	$	97,491	$	3,852,358	$	(959,658)	$	(44,953)	$	2,945,238

Continued on next page.

See notes to consolidated financial statements.

VF Corporation Q2 FY22 Form 10-Q 8

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VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Six Months Ended September 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)	—	—		—		—		788,298		788,298
Dividends on Common Stock ($0.98 per share)	—	—		(2,597)		—		(381,830)		(384,427)

Stock-based compensation, net	816,539	205		79,639		—		(9,564)		70,280
Foreign currency translation and other	—	—		—		13,053		—		13,053
Defined benefit pension plans	—	—		—		2,112		—		2,112
Derivative financial instruments	—	—		—		53,001		—		53,001

Balance, September 2021	392,758,016	$	98,190	$	3,854,687	$	(940,834)	$	586,438	$	3,598,481

	Six Months Ended September 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)	—	—		—		—		(28,891)		(28,891)
Dividends on Common Stock ($0.96 per share)	—	—		(373,638)		—		—		(373,638)

Stock-based compensation, net	1,152,560	288		42,216		—		(23,371)		19,133
Foreign currency translation and other	—	—		—		37,572		—		37,572
Defined benefit pension plans	—	—		—		(1,832)		—		(1,832)
Derivative financial instruments	—	—		—		(64,440)		—		(64,440)

Balance, September 2020	389,964,718	$	97,491	$	3,852,358	$	(959,658)	$	(44,953)	$	2,945,238

See notes to consolidated financial statements.

9 VF Corporation Q2 FY22 Form 10-Q

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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	11
NOTE 2	Recently Adopted and Issued Accounting Standards	11
NOTE 3	Revenues	11
NOTE 4	Acquisition	13
NOTE 5	Discontinued Operations	15
NOTE 6	Inventories	16
NOTE 7	Intangible Assets	17
NOTE 8	Goodwill	17
NOTE 9	Leases	17
NOTE 10	Pension Plans	18
NOTE 11	Capital and Accumulated Other Comprehensive Income (Loss)	18
NOTE 12	Stock-based Compensation	20
NOTE 13	Income Taxes	21
NOTE 14	Reportable Segment Information	21
NOTE 15	Earnings Per Share	22
NOTE 16	Fair Value Measurements	23
NOTE 17	Derivative Financial Instruments and Hedging Activities	24
NOTE 18	Restructuring	26
NOTE 19	Contingencies	27
NOTE 20	Subsequent Event	27

VF Corporation Q2 FY22 Form 10-Q 10

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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 second quarter of Fiscal 2022. For presentation purposes herein, all references to periods ended September 2021 and September 2020 relate to the fiscal periods ended on October 2, 2021 and September 26, 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 interim 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 interim 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 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, the accompanying unaudited interim 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 and six months ended September 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 interim consolidated financial statements, management makes estimates and assumptions that affect amounts reported in the interim 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)	September 2021		March 2021		September 2020
Contract assets (a)	$	1,773	$	880	$	2,573
Contract liabilities (b)	58,841		49,869		44,010

(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.

11 VF Corporation Q2 FY22 Form 10-Q

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For the three and six months ended September 2021, the Company recognized $71.0 million and $162.0 million, respectively, of revenue that was included in the contract liability balance during the periods, 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 September 2021, the Company expects to recognize $80.8 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 through March 2031. 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 September 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 and six months ended September 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 September 2021

(In thousands)

Outdoor

Active

Work

Other

Total

Channel revenues

Wholesale

1,132,068

605,523