VF Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

3 Months Ended

Jun. 30, 2018

Discontinued Operations and Disposal Groups [Abstract]

The Company continuously assesses the composition of our portfolio to ensure it is aligned with our strategic objectives and positioned to maximize growth and return to our shareholders.

Nautica^® Brand Business

During the three months ended December 30, 2017, the Company reached the strategic decision to exit the Nautica^® brand business, and determined that it met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of the Nautica^® brand business as discontinued operations in the Consolidated Statements of Income and presented the related assets and liabilities as held-for-sale in the Consolidated Balance Sheets. These changes have been applied for all periods presented.

On April 30, 2018, VF completed the sale of the Nautica^® brand business for $289.1 million in cash. The estimated after-tax loss on sale is $38.6 million, which is subject to working capital and other adjustments.

The results of the Nautica^® brand's North America business were previously reported in the former Sportswear segment, and the results of the Asia business were previously reported in the former Outdoor & Action Sports segment. The results of the Nautica^® brand business recorded in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income were income of $0.4 million (including a $5.0 million decrease in the estimated loss on sale) for the three months ended June 2018 and income of $7.8 million for the three months ended June 2017.

Certain corporate overhead costs and segment costs previously allocated to the Nautica^® brand business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations.

Under the terms of the transition services agreement, the Company will provide certain support services for periods up to 12 months from the closing date of the transaction. Revenue and expense items associated with the transition services are recorded in the other category included in the reconciliation of segment revenues and segment profit in Note 14.

Licensing Business

During the three months ended April 1, 2017, the Company reached the strategic decision to exit its Licensing Business, which comprised the Licensed Sports Group ("LSG") and the JanSport^® brand collegiate businesses. Accordingly, the Company has reported the results of the businesses as discontinued operations in the Consolidated Statements of Income and presented the related assets and liabilities as held-for-sale in the Consolidated Balance Sheets. These changes have been applied for all periods presented.

LSG included the Majestic^® brand and was previously reported within the former Imagewear segment. On April 28, 2017, VF completed the sale of LSG to Fanatics, Inc. The Company received proceeds of $213.5 million, net of cash sold, resulting in a final after-tax loss on sale of $4.1 million, of which $3.0 million is included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the three months ended June 2017.

The LSG results recorded in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income were losses of $4.6 million (including a $3.0 million adjustment to the estimated loss on sale) for the three months ended June 2017.

During the three months ended December 30, 2017, VF completed the sale of the assets associated with the JanSport^® brand collegiate business, which was previously included within the former Outdoor & Action Sports segment. The Company received net proceeds of $1.5 million and recorded a final after-tax loss on sale of $0.2 million, of which a $0.2 million gain is included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the three months ended June 2017.

The JanSport^® brand collegiate results recorded in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income were losses of $0.4 million (including a $0.2 million decrease to the estimated loss on sale) for the three months ended June 2017.

Certain corporate overhead and other costs previously allocated to the Licensing Business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations.

Under the terms of the transition services agreement, the Company is providing certain support services for periods up to 24 months from the closing date of the transaction. Revenue and expense items associated with the transition services are primarily recorded in the Work segment.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the Nautica^® brand business and the Licensing Business that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income:



	Three Months Ended June
(In thousands)	2018			2017
Revenues	$	21,913		$	123,456
Cost of goods sold	14,706			70,906
Selling, general and administrative expenses	12,391			45,602
Interest expense, net	—			(7		)
Other income, net	272			5
Income (loss) from discontinued operations before income taxes	(4,912		)	6,946
Gain (loss) on the sale of discontinued operations before income taxes	4,206			(6,386		)
Total income (loss) from discontinued operations before income taxes	(706		)	560
Income tax benefit	1,111			2,237
Income from discontinued operations, net of tax	$	405		$	2,797

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 2018		March 2018			June 2017
Cash	$	—	$	2,330		$	497
Accounts receivable, net	—		26,298			12,101
Inventories	—		55,610			49,920
Other current assets	—		1,247			864
Property, plant and equipment, net	—		15,021			16,266
Intangible assets	—		262,202			264,348
Goodwill	—		49,005			153,656
Other assets	—		3,961			2,831
Allowance to reduce assets to estimated fair value, less costs to sell	—		(42,094		)	—
Total assets of discontinued operations ^(a)	$	—	$	373,580		$	500,483


Accounts payable	$	—	$	11,619		$	10,428
Accrued liabilities	—		10,658			15,293
Other liabilities	—		11,912			12,311
Deferred income tax liabilities ^(b)	—		51,838			77,731
Total liabilities of discontinued operations ^(a)	$	—	$	86,027		$	115,763


^(a)	Amounts at June 2017 related to the Nautica^®brand business have been classified as current and long-term in the Consolidated Balance Sheets.


^(b)	Deferred income tax balances reflect VF’s consolidated netting by jurisdiction.

The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows. There were no significant capital expenditures and operating noncash items for any periods presented. Depreciation and amortization expense was $3.1 million for the three months ended June 2017.