Note M — Retirement and Savings Benefit Plans

VF has several retirement and savings benefit plans covering eligible employees. VF retains the right to amend any aspect of the plans, or to curtail or discontinue any of the plans, subject to local regulations.

Defined Benefit Pension Plans

Defined benefit plans provide pension benefits based on compensation and years of service. VF sponsors a noncontributory qualified defined benefit pension plan covering most full-time domestic employees employed before 2005 (the “domestic qualified plan”) and an unfunded supplemental defined benefit pension plan that provides benefits in excess of limitations imposed by income tax regulations (together, the “domestic plans”). The domestic plans comprise 93% of VF’s total defined benefit plan assets and projected benefit obligations at December 2012, and the remainder relates to defined benefit plans covering selected international employees.

The components of pension cost for all of VF’s defined benefit plans were as follows:

The following provides a reconciliation of the changes in fair value of all of VF’s defined benefit plan assets and projected benefit obligations for each year, and the funded status at the end of each year:

Accumulated benefit obligations at any measurement date are the present value of vested and unvested pension benefits earned, without projection to future periods. Projected benefit obligations are the present value of vested and unvested pension benefits earned, considering projected future compensation increases.

Deferred actuarial losses result from differences between expected amounts for a year using actuarial assumptions and the actual results for that year. These amounts are deferred as a component of accumulated OCI and amortized to pension expense in future years as follows: amounts in excess of 20% of projected benefit obligations at the beginning of the year are amortized over five years; amounts between (i) 10% of the greater of projected benefit obligations or plan assets and (ii) 20% of projected benefit obligations are amortized over the expected average remaining years of service of active participants; and amounts less than the greater of 10% of projected benefit obligations or plan assets are not amortized. Deferred prior service costs are also recorded in accumulated OCI and amortized to pension expense in future years. The estimated amounts of accumulated OCI to be amortized to pension expense in 2013 are $85.3 million of deferred actuarial losses and $1.1 million of deferred prior service costs.

Management’s investment objective for the domestic qualified plan is to invest the plan assets in a diversified portfolio of securities to provide long-term growth, minimize the volatility of the value of plan assets relative to plan liabilities, and to ensure plan assets are sufficient to pay the benefit payment obligations. Investment strategies focus on diversification among multiple asset classes, a balance of long-term investment return at an acceptable level of risk, and liquidity to meet benefit payments. In March 2012, the investment strategy of the domestic qualified plan was modified to more closely align the plan assets with the plan liabilities, and to implement dynamic asset allocation targets dependent upon changes in the plan’s funded ratio, capital market expectations, and risk tolerance. At the end of 2012, the target asset allocation of the domestic qualified plan was 45% fixed income and 55% return-seeking investments (including equities and alternative investments such as commodities, hedge funds, and real estate).

Plan assets for the domestic qualified plan are primarily composed of common collective trust funds which invest in liquid securities diversified across equity, fixed income, real estate and other asset classes. Fund assets are allocated among independent investment managers who have full discretion to manage their portion of the fund’s assets, subject to strategy and risk guidelines established with each manager. The overall strategy, the resulting allocations of plan assets and the performance of funds and individual investment managers are continually monitored. Derivative instruments may be used by investment managers for hedging purposes to gain exposure to alternative asset classes through the futures markets. There are no investments in VF debt or equity securities and no significant concentrations of security risk.

The expected long-term rate of return on plan assets for the domestic qualified plan was based on an evaluation of the weighted average of the expected returns for the major asset classes in which the plans invest. Expected returns by asset class were developed through analysis of historical market returns, current market conditions, inflation expectations, and equity and credit risks. Inputs from various investment advisors on long-term capital market returns and other variables were also considered where appropriate.

The fair value of investments held by all of VF’s defined benefit plans at December 2012 and 2011, by asset class, is summarized below. See Note T for a description of the three levels of the fair value measurement hierarchy. Level 2 securities generally represent institutional funds measured at their daily net asset value derived from quoted prices of the underlying investments.

VF makes contributions to its defined benefit plans sufficient to meet minimum funding requirements under applicable laws, plus discretionary amounts as considered prudent. VF made a $100.0 million discretionary contribution to the domestic qualified plan during 2012 and an additional $100.0 million discretionary contribution in January 2013. VF does not currently plan to make any additional contributions to the domestic qualified plan during 2013, but will continue to evaluate whether discretionary contributions would be appropriate. VF intends to make contributions totaling approximately $19.9 million to its other defined benefit plans during 2013. The estimated future benefit payments for all of VF’s defined benefit plans are approximately $75.8 million in 2013, $80.4 million in 2014, $83.3 million in 2015, $86.3 million in 2016, $89.4 million in 2017 and $501.1 million for the years 2018 through 2022.

Deferred Compensation Plans

VF sponsors a nonqualified retirement savings plan for employees whose contributions to a 401(k) plan would be limited by provisions of the Internal Revenue Code. This plan allows participants to defer a portion of their compensation and to receive matching contributions for a portion of the deferred amounts. Expense under this plan was $4.7 million in 2012, $4.3 million in 2011 and $3.9 million in 2010. Participants earn a return on their deferred compensation based on their selection of a hypothetical portfolio of publicly traded mutual funds, a fixed income fund and VF Common Stock. Changes in the fair value of the participants’ hypothetical investments are recorded as an adjustment to deferred compensation liabilities and compensation expense. Deferred compensation, including accumulated earnings, is distributable in cash at participant-specified dates or upon retirement, death, disability or termination of employment. Similarly, under a separate nonqualified plan, nonemployee members of the Board of Directors may defer their Board compensation and invest it in hypothetical shares of VF Common Stock. VF also has remaining obligations under deferred compensation plans of acquired companies. At December 2012, VF’s liability to participants under all deferred compensation plans was $232.3 million, of which $28.2 million was recorded in accrued liabilities (Note J) and $204.1 million was recorded in other liabilities (Note L).

VF has purchased (i) publicly traded mutual funds, a fixed income fund and VF Common Stock in the same amounts as most of the participant-directed hypothetical investments underlying the deferred compensation liabilities and (ii) variable life insurance contracts that invest in institutional funds that are substantially the same as the participant-directed hypothetical investments. These investment securities (other than VF Common Stock) and earnings thereon, are intended to provide a source of funds to meet the deferred compensation obligations, and serve as an economic hedge of the financial impact of changes in deferred compensation liabilities. They are held in an irrevocable trust but are subject to claims of creditors in the event of VF’s insolvency. VF also has assets related to deferred compensation plans of acquired companies, which are primarily invested in life insurance contracts. At December 2012, the fair value of investments held for all deferred compensation plans was $217.2 million, of which $26.0 million was recorded in other current assets and $191.2 million was recorded in other assets (Note H). The VF Common Stock purchased to match participant-directed hypothetical investments is treated for financial reporting purposes as treasury stock (Note N), which is the primary reason for the difference in carrying value of the investment securities and the recorded deferred compensation liabilities. Realized and unrealized gains and losses on these investments (other than VF Common Stock) are recorded in compensation expense in the Consolidated Statements of Income and substantially offset losses and gains resulting from changes in deferred compensation liabilities to participants.

Other Retirement and Savings Plans

VF sponsors 401(k) plans as well as other domestic and foreign retirement and savings plans. Expense for these plans totaled $18.7 million in 2012, $16.9 million in 2011 and $14.6 million in 2010.