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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 1, 2022
or
☐ 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 29, 2022, there were 388,566,085 shares of the registrant’s common stock outstanding.
VF CORPORATION
Table of Contents
PART I — FINANCIAL INFORMATION
| | |
ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED). |
VF CORPORATION
Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands, except share amounts) | | September 2022 | | | March 2022 | | September 2021 |
ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash and equivalents | | $ | 552,811 | | | | $ | 1,275,943 | | | $ | 1,360,138 | |
Accounts receivable, less allowance for doubtful accounts of: September 2022 - $27,515; March 2022 - $27,959; September 2021 - $33,822 | | 1,834,598 | | | | 1,467,842 | | | 1,787,331 | |
Inventories | | 2,749,894 | | | | 1,418,673 | | | 1,464,714 | |
| | | | | | | |
Other current assets | | 550,940 | | | | 425,622 | | | 357,687 | |
| | | | | | | |
| | | | | | | |
Total current assets | | 5,688,243 | | | | 4,588,080 | | | 4,969,870 | |
Property, plant and equipment, net | | 984,115 | | | | 1,041,777 | | | 1,011,415 | |
Intangible assets, net | | 2,776,022 | | | | 3,000,351 | | | 3,018,242 | |
Goodwill | | 2,102,700 | | | | 2,393,807 | | | 2,415,767 | |
Operating lease right-of-use assets | | 1,217,172 | | | | 1,247,056 | | | 1,380,106 | |
Other assets | | 1,015,890 | | | | 1,071,137 | | | 1,093,687 | |
| | | | | | | |
TOTAL ASSETS | | $ | 13,784,142 | | | | $ | 13,342,208 | | | $ | 13,889,087 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Short-term borrowings | | $ | 1,692,745 | | | | $ | 335,462 | | | $ | 10,173 | |
Current portion of long-term debt | | 832,136 | | | | 501,051 | | | 1,001,037 | |
Accounts payable | | 1,022,408 | | | | 562,992 | | | 534,365 | |
Accrued liabilities | | 1,798,702 | | | | 1,915,892 | | | 1,838,790 | |
| | | | | | | |
| | | | | | | |
Total current liabilities | | 5,345,991 | | | | 3,315,397 | | | 3,384,365 | |
Long-term debt | | 3,526,101 | | | | 4,584,261 | | | 4,682,751 | |
Operating lease liabilities | | 1,022,451 | | | | 1,023,759 | | | 1,146,944 | |
Other liabilities | | 803,963 | | | | 888,436 | | | 1,076,546 | |
| | | | | | | |
Total liabilities | | 10,698,506 | | | | 9,811,853 | | | 10,290,606 | |
Commitments and contingencies | | | | | | | |
Stockholders’ equity | | | | | | | |
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding at September 2022, March 2022 or September 2021 | | — | | | | — | | | — | |
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at September 2022 - 388,569,062; March 2022 - 388,298,375; September 2021 - 392,758,016 | | 97,142 | | | | 97,075 | | | 98,190 | |
Additional paid-in capital | | 3,952,786 | | | | 3,916,384 | | | 3,854,687 | |
Accumulated other comprehensive income (loss) | | (844,165) | | | | (926,579) | | | (940,834) | |
Retained earnings (accumulated deficit) | | (120,127) | | | | 443,475 | | | 586,438 | |
Total stockholders’ equity | | 3,085,636 | | | | 3,530,355 | | | 3,598,481 | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 13,784,142 | | | | $ | 13,342,208 | | | $ | 13,889,087 | |
See notes to consolidated financial statements.
3 VF Corporation Q2 FY23 Form 10-Q
VF CORPORATION
Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September | | | Six Months Ended September | | | |
| | | | | | | | | | | | | | | | | |
(In thousands, except per share amounts) | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | | | | |
Net revenues | | $ | 3,080,600 | | | | $ | 3,198,235 | | | | $ | 5,342,195 | | | | $ | 5,392,792 | | | | | | | |
Costs and operating expenses | | | | | | | | | | | | | | | | | |
Cost of goods sold | | 1,498,177 | | | | 1,479,446 | | | | 2,541,159 | | | | 2,434,997 | | | | | | | |
Selling, general and administrative expenses | | 1,251,320 | | | | 1,160,303 | | | | 2,406,571 | | | | 2,196,425 | | | | | | | |
Impairment of goodwill and intangible assets | | 421,922 | | | | — | | | | 421,922 | | | | — | | | | | | | |
Total costs and operating expenses | | 3,171,419 | | | | 2,639,749 | | | | 5,369,652 | | | | 4,631,422 | | | | | | | |
Operating income (loss) | | (90,819) | | | | 558,486 | | | | (27,457) | | | | 761,370 | | | | | | | |
Interest income | | 823 | | | | 1,518 | | | | 2,106 | | | | 3,660 | | | | | | | |
Interest expense | | (34,726) | | | | (35,888) | | | | (67,271) | | | | (70,805) | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other income (expense), net | | (9,280) | | | | 7,549 | | | | (103,994) | | | | 16,590 | | | | | | | |
Income (loss) from continuing operations before income taxes | | (134,002) | | | | 531,665 | | | | (196,616) | | | | 710,815 | | | | | | | |
Income tax expense (benefit) | | (15,570) | | | | 67,612 | | | | (22,224) | | | | 92,790 | | | | | | | |
Income (loss) from continuing operations | | (118,432) | | | | 464,053 | | | | (174,392) | | | | 618,025 | | | | | | | |
Income from discontinued operations, net of tax | | — | | | | — | | | | — | | | | 170,273 | | | | | | | |
Net income (loss) | | $ | (118,432) | | | | $ | 464,053 | | | | $ | (174,392) | | | | $ | 788,298 | | | | | | | |
Earnings (loss) per common share - basic | | | | | | | | | | | | | | | | | |
Continuing operations | | $ | (0.31) | | | | $ | 1.18 | | | | $ | (0.45) | | | | $ | 1.58 | | | | | | | |
Discontinued operations | | — | | | | — | | | | — | | | | 0.43 | | | | | | | |
Total earnings (loss) per common share - basic | | $ | (0.31) | | | | $ | 1.18 | | | | $ | (0.45) | | | | $ | 2.01 | | | | | | | |
Earnings (loss) per common share - diluted | | | | | | | | | | | | | | | | | |
Continuing operations | | $ | (0.31) | | | | $ | 1.18 | | | | $ | (0.45) | | | | $ | 1.57 | | | | | | | |
Discontinued operations | | — | | | | — | | | | — | | | | 0.43 | | | | | | | |
Total earnings (loss) per common share - diluted | | $ | (0.31) | | | | $ | 1.18 | | | | $ | (0.45) | | | | $ | 2.00 | | | | | | | |
Weighted average shares outstanding | | | | | | | | | | | | | | | | | |
Basic | | 387,688 | | | | 391,779 | | | | 387,625 | | | | 391,565 | | | | | | | |
Diluted | | 387,688 | | | | 394,017 | | | | 387,625 | | | | 394,072 | | | | | | | |
| | | | | | | | | | | | | | | | | |
See notes to consolidated financial statements.
VF Corporation Q2 FY23 Form 10-Q 4
VF CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September | | | Six Months Ended September | | | |
| | | | | | | | | | | | | | | | | |
(In thousands) | | 2022 | | | 2021 | | | 2022 | | | 2021 | | | | | | |
Net income (loss) | | $ | (118,432) | | | | $ | 464,053 | | | | $ | (174,392) | | | | $ | 788,298 | | | | | | | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | | | |
Foreign currency translation and other | | | | | | | | | | | | | | | | | |
Gains (losses) arising during the period | | (21,894) | | | | (12,314) | | | | (73,418) | | | | 20,857 | | | | | | | |
| | | | | | | | | | | | | | | | | |
Income tax effect | | (28,786) | | | | (11,686) | | | | (58,796) | | | | (7,804) | | | | | | | |
Defined benefit pension plans | | | | | | | | | | | | | | | | | |
Current period actuarial gains (losses) | | 5,426 | | | | (439) | | | | (14,142) | | | | (4,452) | | | | | | | |
Amortization of net deferred actuarial losses | | 3,953 | | | | 2,871 | | | | 7,674 | | | | 5,711 | | | | | | | |
Amortization of deferred prior service credits | | (111) | | | | (117) | | | | (223) | | | | (235) | | | | | | | |
Reclassification of net actuarial loss from settlement charges | | 1,141 | | | | 76 | | | | 92,902 | | | | 1,024 | | | | | | | |
| | | | | | | | | | | | | | | | | |
Income tax effect | | (2,815) | | | | (595) | | | | (22,466) | | | | 64 | | | | | | | |
Derivative financial instruments | | | | | | | | | | | | | | | | | |
Gains arising during the period | | 102,685 | | | | 34,361 | | | | 202,115 | | | | 29,798 | | | | | | | |
Income tax effect | | (16,356) | | | | (5,978) | | | | (31,731) | | | | (5,786) | | | | | | | |
Reclassification of net (gains) losses realized | | (14,906) | | | | 22,986 | | | | (23,148) | | | | 33,545 | | | | | | | |
Income tax effect | | 2,374 | | | | (4,113) | | | | 3,647 | | | | (4,556) | | | | | | | |
Other comprehensive income (loss) | | 30,711 | | | | 25,052 | | | | 82,414 | | | | 68,166 | | | | | | | |
Comprehensive income (loss) | | $ | (87,721) | | | | $ | 489,105 | | | | $ | (91,978) | | | | $ | 856,464 | | | | | | | |
See notes to consolidated financial statements.
5 VF Corporation Q2 FY23 Form 10-Q
VF CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | Six Months Ended September |
| | | | | |
(In thousands) | | 2022 | | | 2021 |
OPERATING ACTIVITIES | | | | | |
Net income (loss) | | $ | (174,392) | | | | $ | 788,298 | |
Income from discontinued operations, net of tax | | — | | | | 170,273 | |
Income (loss) from continuing operations, net of tax | | (174,392) | | | | 618,025 | |
Adjustments to reconcile net income (loss) to cash used by operating activities: | | | | | |
Impairment of goodwill and intangible assets | | 421,922 | | | | — | |
Depreciation and amortization | | 130,623 | | | | 134,553 | |
Reduction in the carrying amount of right-of-use assets | | 185,880 | | | | 208,687 | |
Stock-based compensation | | 37,474 | | | | 44,283 | |
Provision for doubtful accounts | | 1,004 | | | | 3,345 | |
Pension expense in excess of (less than) contributions | | 85,779 | | | | (12,312) | |
| | | | | |
| | | | | |
| | | | | |
Other, net | | (7,088) | | | | (191,547) | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | (461,904) | | | | (502,675) | |
Inventories | | (1,434,470) | | | | (412,058) | |
Accounts payable | | 494,424 | | | | 72,757 | |
Income taxes | | (193,671) | | | | 112,331 | |
Accrued liabilities | | 138,510 | | | | 233,369 | |
Operating lease right-of-use assets and liabilities | | (190,171) | | | | (228,969) | |
Other assets and liabilities | | 52,123 | | | | (257,016) | |
Cash used by operating activities - continuing operations | | (913,957) | | | | (177,227) | |
Cash provided by operating activities - discontinued operations | | — | | | | 6,090 | |
Cash used by operating activities | | (913,957) | | | | (171,137) | |
INVESTING ACTIVITIES | | | | | |
Business acquisitions, net of cash received | | — | | | | 3,760 | |
Proceeds from sale of businesses, net of cash sold | | — | | | | 616,529 | |
| | | | | |
Proceeds from sale of short-term investments | | — | | | | 598,806 | |
Capital expenditures | | (89,958) | | | | (144,582) | |
Software purchases | | (47,858) | | | | (42,119) | |
Other, net | | 6,112 | | | | 20,491 | |
Cash provided (used) by investing activities - continuing operations | | (131,704) | | | | 1,052,885 | |
Cash used by investing activities - discontinued operations | | — | | | | (525) | |
Cash provided (used) by investing activities | | (131,704) | | | | 1,052,360 | |
FINANCING ACTIVITIES | | | | | |
Contingent consideration payment | | (56,976) | | | | — | |
Net increase (decrease) in short-term borrowings | | 1,357,284 | | | | (889) | |
Payments on long-term debt | | (500,522) | | | | (508) | |
Payment of debt issuance costs | | (807) | | | | — | |
| | | | | |
| | | | | |
Cash dividends paid | | (388,284) | | | | (384,427) | |
Proceeds from issuance of Common Stock, net of (payments) for tax withholdings | | (1,931) | | | | 25,971 | |
| | | | | |
Cash provided (used) by financing activities | | 408,764 | | | | (359,853) | |
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash | | (85,888) | | | | (10,958) | |
Net change in cash, cash equivalents and restricted cash | | (722,785) | | | | 510,412 | |
Cash, cash equivalents and restricted cash – beginning of year | | 1,277,082 | | | | 851,205 | |
Cash, cash equivalents and restricted cash – end of period | | $ | 554,297 | | | | $ | 1,361,617 | |
Continued on next page.
See notes to consolidated financial statements
VF Corporation Q2 FY23 Form 10-Q 6
VF CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | Six Months Ended September |
| | | | | |
(In thousands) | | 2022 | | | 2021 |
Balances per Consolidated Balance Sheets: | | | | | |
Cash and cash equivalents | | $ | 552,811 | | | | $ | 1,360,138 | |
Other current assets | | 1,360 | | | | 1,421 | |
Other assets | | 126 | | | | 58 | |
Total cash, cash equivalents and restricted cash | | $ | 554,297 | | | | $ | 1,361,617 | |
See notes to consolidated financial statements.
7 VF Corporation Q2 FY23 Form 10-Q
VF CORPORATION
Consolidated Statements of Stockholders’ Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 2022 | |
| | | | | 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 2022 | 388,490,713 | | | $ | 97,123 | | | $ | 3,941,440 | | | $ | (874,876) | | | $ | 188,806 | | | $ | 3,352,493 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net income (loss) | — | | | — | | | — | | | — | | | (118,432) | | | (118,432) | | |
Dividends on Common Stock ($0.50 per share) | — | | | — | | | (5,343) | | | — | | | (188,806) | | | (194,149) | | |
| | | | | | | | | | | | |
Stock-based compensation, net | 78,349 | | | 19 | | | 16,689 | | | — | | | (1,695) | | | 15,013 | | |
Foreign currency translation and other | — | | | — | | | — | | | (50,680) | | | — | | | (50,680) | | |
Defined benefit pension plans | — | | | — | | | — | | | 7,594 | | | — | | | 7,594 | | |
Derivative financial instruments | — | | | — | | | — | | | 73,797 | | | — | | | 73,797 | | |
Balance, September 2022 | 388,569,062 | | | $ | 97,142 | | | $ | 3,952,786 | | | $ | (844,165) | | | $ | (120,127) | | | $ | 3,085,636 | | |
| | | | | | | | | | | | |
| 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 | | |
Continued on next page.
See notes to consolidated financial statements.
VF Corporation Q2 FY23 Form 10-Q 8
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended September 2022 | |
| | | | | 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 2022 | 388,298,375 | | | $ | 97,075 | | | $ | 3,916,384 | | | $ | (926,579) | | | $ | 443,475 | | | $ | 3,530,355 | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Net income (loss) | — | | | — | | | — | | | — | | | (174,392) | | | (174,392) | | |
Dividends on Common Stock ($1.00 per share) | — | | | — | | | (5,343) | | | — | | | (382,941) | | | (388,284) | | |
| | | | | | | | | | | | |
Stock-based compensation, net | 270,687 | | | 67 | | | 41,745 | | | — | | | (6,269) | | | 35,543 | | |
Foreign currency translation and other | — | | | — | | | — | | | (132,214) | | | — | | | (132,214) | | |
Defined benefit pension plans | — | | | — | | | — | | | 63,745 | | | — | | | 63,745 | | |
Derivative financial instruments | — | | | — | | | — | | | 150,883 | | | — | | | 150,883 | | |
Balance, September 2022 | 388,569,062 | | | $ | 97,142 | | | $ | 3,952,786 | | | $ | (844,165) | | | $ | (120,127) | | | $ | 3,085,636 | | |
| | | | | | | | | | | | |
| 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 | | |
See notes to consolidated financial statements.
9 VF Corporation Q2 FY23 Form 10-Q
VF CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
| | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | PAGE NUMBER |
| | |
NOTE 1 | | |
NOTE 2 | | |
NOTE 3 | | |
NOTE 4 | | |
NOTE 5 | | |
NOTE 6 | | |
NOTE 7 | | |
NOTE 8 | | |
NOTE 9 | Long-term Debt | |
NOTE 10 | | |
NOTE 11 | | |
NOTE 12 | | |
NOTE 13 | | |
NOTE 14 | | |
NOTE 15 | | |
NOTE 16 | | |
NOTE 17 | | |
NOTE 18 | | |
NOTE 19 | | |
NOTE 20 | | |
VF Corporation Q2 FY23 Form 10-Q 10
NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
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 3, 2022 through April 1, 2023 ("Fiscal 2023"). Accordingly, this Form 10-Q presents our second quarter of Fiscal 2023. For presentation purposes herein, all references to periods ended September 2022 and September 2021 relate to the fiscal periods ended on October 1, 2022 and October 2, 2021, respectively. References to March 2022 relate to information as of April 2, 2022.
Basis of Presentation
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. 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 4 for additional information on discontinued operations.
Certain prior year amounts have been reclassified to conform to the Fiscal 2023 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 2022 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 2022 are not necessarily indicative of results that may be expected for any other interim period or for Fiscal 2023. 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 2, 2022 (“Fiscal 2022 Form 10-K”).
Use of Estimates
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 challenging macroeconomic environment, the coronavirus ("COVID-19") pandemic and the conflict between Russia and Ukraine, and the related impacts on VF's business are subject to uncertainty; however, the estimates and assumptions made by management are based on available information. Actual results may differ from those estimates.
Significant Accounting Policies
Supply Chain Financing Program
During the first quarter of Fiscal 2023, VF reinstated its voluntary supply chain finance ("SCF") program. The SCF program enables a significant portion of our suppliers of inventory to leverage VF's credit rating to receive payment from participating financial institutions prior to the payment date specified in the terms between VF and the supplier. The SCF program is administered through third-party platforms that allow participating suppliers to track payments from VF and elect which VF receivables, if any, to sell to the financial institutions. The transactions are at the sole discretion of both the suppliers and financial institutions, and VF is not a party to the agreements and has no economic interest in the supplier's decision to sell a receivable. The terms between VF and the supplier, including the amount due and scheduled payment dates, are not impacted by a supplier's participation in the SCF program. Amounts due to suppliers who voluntarily participate in the SCF program are included in the accounts payable line item in VF's Consolidated Balance Sheets and VF payments made under the SCF program are reflected in cash flows from operating activities in VF's Consolidated Statements of Cash Flows. VF has been informed by the participating financial institutions that amounts payable to them for suppliers who voluntarily participated in the SCF program and included in the accounts payable line item in VF's Consolidated Balance Sheet was $201.2 million at September 2022. The amounts settled through the SCF program during the three and six months ended September 2022 were $417.2 million and $432.2 million, respectively.
There have been no other changes to the Company's significant accounting policies described in Note 1 to the consolidated financial statements included in the Fiscal 2022 Form 10-K.
11 VF Corporation Q2 FY23 Form 10-Q
NOTE 2 — RECENTLY ISSUED ACCOUNTING STANDARDS
Recently Issued Accounting Standards
In March 2020 and January 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 does not expect this guidance to have a material impact on VF's consolidated financial statements.
In November 2021, the FASB issued ASU No. 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance", an update that requires
annual disclosures about government assistance, including the types of assistance and the effect on the financial statements. The guidance is effective for VF in Fiscal 2023, but the Company does not expect the adoption of this guidance to have a material impact on VF's annual disclosures.
In September 2022, the FASB issued ASU No. 2022-04, "Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations". This guidance requires companies with supplier finance programs to disclose sufficient qualitative and quantitative information about the program to allow a user of the financial statements to understand the nature of, activity in, and potential magnitude of the program. The guidance will be effective for VF in the first quarter of Fiscal 2024, except for certain quantitative disclosures that will be effective in Fiscal 2025. Early adoption is permitted. The Company is evaluating the impact that adopting this guidance will have on VF's disclosures.
NOTE 3 — REVENUES
Contract Balances
The following table provides information about contract assets and contract liabilities:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | September 2022 | | | March 2022 | | September 2021 |
Contract assets (a) | | $ | 2,772 | | | | $ | 1,065 | | | $ | 1,773 | |
Contract liabilities (b) | | 77,466 | | | | 71,067 | | | 58,841 | |
(a)Included in the other current assets line item in the Consolidated Balance Sheets.
(b)Included in the accrued liabilities and other liabilities line items in the Consolidated Balance Sheets.
For the three and six months ended September 2022, the Company recognized $96.2 million and $160.6 million, respectively, 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 September 2022, the Company expects to recognize $75.4 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 2022, 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 2022, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.
VF Corporation Q2 FY23 Form 10-Q 12
Disaggregation of Revenues
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 2022 | |
(In thousands) | Outdoor | | Active | | Work | | Other | | Total | |
Channel revenues | | | | | | | | | | |
Wholesale | $ | 1,157,170 | | | $ | 541,031 | | | $ | 216,825 | | | $ | — | | | $ | 1,915,026 | | |
Direct-to-consumer | 394,324 | | | 710,547 | | | 41,252 | | | — | | | 1,146,123 | | |
Royalty | 3,834 | | | 8,532 | | | 7,085 | | | |