Quarterly report pursuant to Section 13 or 15(d)

REVENUES

v3.10.0.1
REVENUES
9 Months Ended
Dec. 29, 2018
Revenue from Contract with Customer [Abstract]  
REVENUES
REVENUES

Revenue is recognized when performance obligations under the terms of a contract with the customer are satisfied based on the transfer of control of promised goods or services. The transfer of control typically occurs at a point in time based on consideration of when the customer has i) an obligation to pay for, ii) physical possession of, iii) legal title to, iv) risks and rewards of ownership of and v) accepted the goods or services. The timing of revenue recognition within the wholesale channel occurs either on shipment or delivery of goods based on contractual terms with the customer. The timing of revenue recognition in the direct-to-consumer channel generally occurs at the point of sale within VF-operated or concession retail stores and either on shipment or delivery of goods for e-commerce transactions based on contractual terms with the customer. For finished products shipped directly to customers from our suppliers, the Company's promise to the customer is a performance obligation to provide the specified goods, and thus the Company is the principal in the arrangement and revenue is recognized on a gross basis at the transaction price. For sourcing arrangements, the Company's promise to the customer is to arrange for certain goods, typically finished products, to be provided and thus the Company is acting as an agent and revenue is recognized on a net basis at the fee amount earned.
The duration of contractual arrangements with our customers in the wholesale and direct-to-consumer channels is typically less than one year. Payment terms with customers are generally between 30 and 60 days. The Company does not adjust the promised amount of consideration for the effects of a significant financing component as it is expected, at contract inception, that the period between the transfer of the promised good or service to the customer and the customer payment for the good or service will be one year or less.
The amount of revenue recognized in both wholesale and direct-to-consumer channels reflects the expected consideration to be received for providing the goods or services to the customer, which includes estimates for variable consideration. Variable consideration includes allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks and product returns. Estimates of variable consideration are determined at contract inception and reassessed at each reporting date, at a minimum, to reflect any changes in facts and circumstances. The Company utilizes the expected value method in determining its estimates of variable consideration, based on evaluations of specific product and customer circumstances, historical and anticipated trends, and current economic conditions.
Certain products sold by the Company include an assurance warranty. Product warranty costs are estimated based on historical and anticipated trends, and are recorded as cost of goods sold at the time revenue is recognized.
Revenue from the sale of gift cards is deferred and recorded as a contract liability until the gift card is redeemed by the customer, factoring in breakage as appropriate.
Various VF brands maintain customer loyalty programs where customers earn rewards from qualifying purchases or activities, which are redeemable for discounts on future purchases or other rewards. For its customer loyalty programs, the Company estimates the stand-alone selling price of the loyalty rewards and allocates a portion of the consideration for the sale of products to the loyalty points earned. The deferred amount is recorded as a contract liability, and is recognized as revenue when the points are redeemed or when the likelihood of redemption is remote.
The Company has elected to treat all shipping and handling activities as fulfillment costs and recognize the costs as selling, general and administrative expenses at the time the related revenue is recognized. Shipping and handling costs billed to customers are included in net revenues. Sales taxes and value added taxes collected from customers and remitted directly to governmental authorities are excluded from the transaction price.
The Company has licensing agreements for its symbolic intellectual property, most of which include minimum guaranteed royalties. Royalty income is recognized as earned over the respective license term based on the greater of minimum guarantees or the licensees' sales of licensed products at rates specified in the licensing contracts. Royalty income related to the minimum guarantees is recognized using a measure of progress with variable amounts recognized only when the cumulative earned royalty exceeds the minimum guarantees. As of December 2018, the Company expects to recognize $97.8 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 through December 2024. The variable consideration is not disclosed as a remaining performance obligation as the licensing arrangements qualify for the sales-based royalty exemption.
The Company has applied the practical expedient to recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.
Performance Obligations
Disclosure is required for the aggregate transaction price allocated to performance obligations that are unsatisfied at the end of a reporting period, unless the optional practical expedients are applicable. VF is electing the practical expedients to not disclose the transaction price allocated to remaining performance obligations for i) variable consideration related to sales-based royalty arrangements and ii) contracts with an original expected duration of one year or less.
As of December 2018, 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 fixed consideration related to future minimum guarantees discussed above.
For the three and nine months ended December 2018, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.
Contract Balances

Accounts receivable represent the Company's unconditional right to receive consideration from a customer and are recorded at net invoiced amounts, less an estimated allowance for doubtful accounts.
Contract assets are rights to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time. Once the Company has an unconditional right to consideration under a contract, amounts are invoiced and contract assets are reclassified to accounts receivable. The Company's primary contract assets relate to sales-based royalty arrangements, which are discussed in more detail above.
Contract liabilities are recorded when a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional, before the transfer of a good or service to the customer and thus represent the Company's obligation to transfer the good or service to the customer at a future date. The Company's primary contract liabilities relate to gift cards, loyalty programs and sales-based royalty arrangements, which are discussed in more detail above.
The following table provides information about accounts receivable, contract assets and contract liabilities:
(In thousands)
 
December 2018
 
 
At Adoption - April 1, 2018 (a)
Accounts receivable, net
 
$
1,774,460

 
 
$
1,408,587

Contract assets (b)
 
3,368

 
 
2,600

Contract liabilities (c)
 
40,615

 
 
28,252

(a) 
The Company adopted ASC 606 on April 1, 2018. Refer to Note 2 for additional information.
(b) 
Included in the other current assets line item in the Consolidated Balance Sheets.
(c) 
Included in the accrued liabilities and other liabilities line items in the Consolidated Balance Sheets.
For the three and nine months ended December 2018, the Company recognized $19.7 million and $44.1 million, respectively, of revenue that was previously included in the contract liability balance. 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.
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. The wholesale channel includes fees generated from sourcing activities as the customers and point-in-time revenue recognition are similar to other wholesale arrangements.

Three Months Ended December 2018
 
(In thousands)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Channel revenues

 

 

 

 

 

 
Wholesale
$
839,579

 
$
490,985

 
$
434,409

 
$
557,642

 
$
3,559

 
$
2,326,174

 
Direct-to-consumer
769,775

 
642,571

 
50,788

 
91,514

 
29,975

 
1,584,623

 
Royalty
3,251

 
9,024

 
8,390

 
8,697

 

 
29,362

 
Total
$
1,612,605

 
$
1,142,580

 
$
493,587

 
$
657,853

 
$
33,534

 
$
3,940,159

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Geographic revenues

 

 

 

 

 

 
United States
$
889,298

 
$
638,179

 
$
400,739

 
$
494,575

 
$
33,534

 
$
2,456,325

 
International
723,307

 
504,401

 
92,848

 
163,278

 

 
1,483,834

 
Total
$
1,612,605

 
$
1,142,580

 
$
493,587

 
$
657,853

 
$
33,534

 
$
3,940,159

 
 
Three Months Ended December 2017
 
(In thousands)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Channel revenues

 

 

 

 

 

 
Wholesale
$
735,349

 
$
441,521

 
$
421,709

 
$
591,729

 
$

 
$
2,190,308

 
Direct-to-consumer
718,199

 
535,704

 
54,347

 
92,933

 
33,313

 
1,434,496

 
Royalty
3,106

 
6,758

 
6,771

 
7,844

 

 
24,479

 
Total
$
1,456,654

 
$
983,983

 
$
482,827

 
$
692,506

 
$
33,313

 
$
3,649,283

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Geographic revenues

 

 

 

 

 

 
United States
$
789,583

 
$
522,250

 
$
385,002

 
$
510,029

 
$
33,313

 
$
2,240,177

 
International
667,071

 
461,733

 
97,825

 
182,477

 

 
1,409,106

 
Total
$
1,456,654

 
$
983,983

 
$
482,827

 
$
692,506

 
$
33,313

 
$
3,649,283

 
 
Nine Months Ended December 2018
 
(In thousands)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Channel revenues
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
$
2,280,071

 
$
1,829,861

 
$
1,267,633

 
$
1,643,404

 
$
21,074

 
$
7,042,043

 
Direct-to-consumer
1,358,287

 
1,728,779

 
123,051

 
226,294

 
83,899

 
3,520,310

 
Royalty
9,350

 
20,838

 
18,332

 
24,818

 

 
73,338

 
Total
$
3,647,708

 
$
3,579,478

 
$
1,409,016

 
$
1,894,516

 
$
104,973

 
$
10,635,691

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Geographic revenues

 

 

 

 

 

 
United States
$
1,826,230

 
$
1,934,778

 
$
1,127,168

 
$
1,364,659

 
$
104,973

 
$
6,357,808

 
International
1,821,478

 
1,644,700

 
281,848

 
529,857

 

 
4,277,883

 
Total
$
3,647,708

 
$
3,579,478

 
$
1,409,016

 
$
1,894,516

 
$
104,973

 
$
10,635,691

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended December 2017
 
(In thousands)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Channel revenues
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
$
2,091,005

 
$
1,575,246

 
$
834,934

 
$
1,707,810

 
$

 
$
6,208,995

 
Direct-to-consumer
1,272,275

 
1,389,219

 
58,041

 
232,266

 
91,003

 
3,042,804

 
Royalty
10,626

 
18,424

 
6,771

 
23,217

 

 
59,038

 
Total
$
3,373,906

 
$
2,982,889

 
$
899,746

 
$
1,963,293

 
$
91,003

 
$
9,310,837

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Geographic revenues
 
 
 
 
 
 
 
 
 
 
 
 
United States
$
1,730,340

 
$
1,525,746

 
$
791,610

 
$
1,391,102

 
$
91,003

 
$
5,529,801

 
International
1,643,566

 
1,457,143

 
108,136

 
572,191

 

 
3,781,036

 
Total
$
3,373,906

 
$
2,982,889

 
$
899,746

 
$
1,963,293

 
$
91,003

 
$
9,310,837