VF Corporation
Annual Report Fiscal Year 2024
Dear Shareholders,
I am approaching my first anniversary as CEO, and I am more excited than ever about
the future of VF.
While our financial results have been weak, our transformational steps have been strong.
Once I started, we quickly introduced a wide range of transformative changes across
the business, including changing our operating model, redefining our corporate leadership
structure, resizing the organization, and bringing in new talent. These changes have been
appropriately disruptive.
No turnaround happens without a strong team, and we have spent an enormous amount
of time on this particular area. The Board of Directors brought me in partly because I have
demonstrated turnaround and long-term growth experience. Because of that experience,
I have a strong sense for the team required. We are building a strong team.
Our new Chief People Officer (CPO), Brent Hyder, is the former CPO of Salesforce, a company
nearly fifty times larger than VF, who also happens to have deep retail and apparel experience.
Our new Chief Strategy and Business Development Officer, Abhishek Dalmia, was a managing
partner at Boston Consulting Group (BCG) and spent time at lululemon. He led a wide range
of cost and growth transformation projects in apparel and footwear during his nearly seven
years at BCG. Our new Chief Design Officer, Alastair Curtis, was named by McKinsey and
others as one of the top creative design leaders in the world. He was so strong transforming
my last company into a consistently creative place that he is the first hire I have ever made
from a company I left. Paul Vogel is joining as our new Chief Financial Officer from Spotify.
We appointed Sun Choe as the new Vans® Global Brand President following seven years as
lululemon’s Head of Product, where revenues quadrupled and the brand successfully entered
many new categories and geographies. Caroline Brown joined VF in June as the new
The North Face® Global Brand President and stepped down from VF’s Board of Directors.
She has extensive experience as a senior leader and board director in the fashion and apparel
sector, including having served as CEO for Donna Karan International and DKNY, where she
led a transformation of the company. But we are not just bringing in new people. We have
promoted strong internal talent to bigger roles, including Martino Scabbia Guerrini as
Chief Commercial Officer and our new Timberland® Global Brand President, Nina Flood.
1
2
VF Corporation Annual Report Fiscal Year 2024
By the time I reach my first anniversary at VF in July, we will have almost completely
changed the leadership of the company. What I did in my last company over five or more
years, we did here in one. I did not make these changes just to deliver a turnaround. In fact,
I now have confidence that we have the right team in place to not only successfully turn
around the business but also to drive its long-term growth.
Our Reinvent transformation program was implemented in the third quarter of fiscal year
2024 (FY24) to enhance focus on brand-building and to improve operating performance and
execution, allowing us to achieve our full potential. We end the year deep into the execution
of the first phase of Reinvent, reset, where we have introduced the following initiatives:
•
With a particular emphasis on improving the results in the U.S., we established a
new global commercial structure, including the creation of an Americas regional platform,
modeled on the company’s successful operations in EMEA and APAC. We are seeing
early signs of progress in the Americas. We see a strategic place for wholesale in our
model, and we believe we can be much stronger with key strategic partners, where
we are collaborating to create a strategic long-term frame and optimize our common
commercial priorities. We are bringing improved retail execution and in-store experience
to the forefront to elevate our brands in our DTC channels. The accuracy of our forecasting
has dramatically improved as we enhance our governance and better leverage our
analytics and insights.
•
To deliver the Vans® turnaround, in addition to the benefits from the change in operating
model, we are simplifying our product line-up, introducing a sustained level of investment
in design and innovation, and transforming and simplifying our marketing.
•
To optimize our cost structure and improve operating efficiency and profitability,
we implemented a large-scale cost reduction program, and are on track to deliver on
our commitment to annualized fixed cost savings by removing spend in non-strategic
areas of the business and simplifying our organizational structure. Cost reduction and
then management can generate the fuel for future growth so we will never stop
focusing on cost even as we drive growth.
•
To further strengthen the balance sheet and reduce debt and leverage, we reduced
the dividend. We have exited assets like our planes and continue to optimize real estate.
We also made significant progress in normalizing our inventory position. This boosted
our cash generation and contributed to a reduction in net debt1 of $540 million at the end
of FY24 relative to last year. We also announced and completed a review of our portfolio
of brands with an eye toward non-strategic exits.
3
Our brands additionally had some noteworthy highlights from the year.
At The North Face®, we continue to pursue the significant global potential and appeal of the
brand. In Asia for example, revenue in FY24 grew over 30% for a second consecutive year
(on a constant currency basis2). We are investing in product, design and merchandising, and
our growth will be fueled by a steady stream of innovation and a multi-year product pipeline.
Vans® is in a turnaround process, and we moved from theory to action. We implemented
inventory reset actions during the second half of the year to make space for new products
and are starting the new fiscal year with a much cleaner inventory position in the channels.
During the year, we had strong performances from new products like Knu Skool, which became
the second biggest selling franchise globally. This is a great example of the brand’s ability
to reignite energy and interest with its consumer through new product. We simplified our
marketing to fewer, deeper campaigns while rebalancing our marketing mix to drive higher
ROI. We also launched OTW®, the pinnacle expression of the brand, to drive energy
and excitement.
As we continue our transformation, in FY25 we expect the VF business to get a little better
sequentially each quarter, beyond the first quarter, as we digest the impact from our necessary
channel inventory resets.
We are fortunate to have an incredible portfolio of iconic brands that are deeply loved by
consumers, and I am more confident than ever about our plans and our execution. We will
return the company to long-term, profitable and sustainable growth.
BRACKEN DARRELL
President & Chief Executive Officer
June 11, 2024
FOOTNOTES:
1 Net debt is defined as short- and long-term borrowings less cash and cash equivalents.
2 Excludes the impact of translating foreign currencies into U.S. dollars. Reconciliations of “reported” amounts in accordance with U.S. generally accepted
accounting principles (“GAAP”) to constant currency amounts are presented in the supplemental financial information included with the earnings press
release for the fourth quarter of fiscal 2024 filed as Exhibit 99 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 22, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
È
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 30, 2024
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 $.25 per share
VFC
New York Stock Exchange
4.125% Senior Notes due 2026
VFC26
New York Stock Exchange
0.250% Senior Notes due 2028
VFC28
New York Stock Exchange
4.250% Senior Notes due 2029
VFC29
New York Stock Exchange
0.625% Senior Notes due 2032
VFC32
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes È
No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ‘
No È
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 È
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 È
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 È
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. È
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ‘
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ‘
No È
The aggregate market value of Common Stock held by non-affiliates of V.F. Corporation on September 30, 2023, the last day of the registrant’s
second fiscal quarter, was approximately $6,177,000,000 based on the closing price of the shares on the New York Stock Exchange.
As of April 27, 2024, there were 388,887,166 shares of Common Stock of the registrant outstanding.
Documents Incorporated By Reference
Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on July 23, 2024 (Item 1 in Part I and Items 10, 11, 12, 13 and
14 in Part III), which definitive Proxy Statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to
which this report relates.
This document (excluding exhibits) contains 109 pages.
PAGE NUMBER
FORWARD-LOOKING STATEMENTS
1
PART I
ITEM 1.
Business
1
ITEM 1A. Risk Factors
10
ITEM 1B. Unresolved Staff Comments
22
ITEM 1C. Cybersecurity
23
ITEM 2.
Properties
24
ITEM 3.
Legal Proceedings
24
ITEM 4.
Mine Safety Disclosures
24
PART II
ITEM 5.
Market for VF's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
25
ITEM 6.
[Reserved]
26
ITEM 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
26
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
42
ITEM 8.
Financial Statements and Supplementary Data
42
ITEM 9.
Change in and Disagreements with Accountants on Accounting and Financial Disclosures
43
ITEM 9A. Controls and Procedures
43
ITEM 9B. Other Information
43
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
43
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
44
ITEM 11.
Executive Compensation
44
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
44
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
44
ITEM 14.
Principal Accounting Fees and Services
44
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
45
ITEM 16.
10-K Summary
48
Signatures
49
VF CORPORATION
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Certain statements contained herein, as well as in other filings that VF makes with the Securities and Exchange Commission ("SEC")
and other written and oral information VF releases, regarding VF’s future performance constitute “forward-looking statements”
within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
are made based on VF’s current expectations and beliefs concerning future events impacting VF and therefore involve risks and
uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” "believe," “estimate,”
“expect,” “should,” and “may,” and other words and terms of similar meaning or use of future dates. However, the absence of these
words or similar expressions does not mean that a statement is not forward-looking. All statements regarding VF’s plans, objectives,
projections and expectations relating to VF’s operations or financial performance, and assumptions related thereto are forward-
looking statements. VF undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law. Known or unknown risks, uncertainties or other factors that
could cause the actual results of operations or financial condition of VF to differ materially from those expressed or implied by such
forward-looking statements include, but are not limited to, those described as “Risk Factors” in Item 1A of this Annual Report on
Form 10-K and other reports VF files with the SEC.
PART I
ITEM 1.
BUSINESS.
V.F. Corporation, founded in 1899, is one of the world's largest
apparel, footwear and accessories companies connecting people
to the lifestyles, activities and experiences they cherish most
through a family of iconic outdoor, active and workwear brands.
Unless the context indicates otherwise, the terms “VF,” the
"Company,” “we,” “us,” and “our” used herein refer to V.F.
Corporation and its consolidated subsidiaries. All references to
"Fiscal 2024" relate to VF's current fiscal year which ran from
April 2, 2023 through March 30, 2024.
Unless otherwise noted, all discussion below, including amounts
and percentages for all periods, reflect the results of operations
and financial condition of VF’s continuing operations. As such,
the Occupational Workwear business that was sold on June 28,
2021 has been excluded.
Following the appointment of a new Chief Executive Officer
("CEO")
during
Fiscal
2024,
VF
introduced
the
Reinvent
turnaround program, which aims to reinvent how the Company
operates as an organization across its brands, geographies and
integrated enterprise functions. As part of Reinvent, VF is taking
measures to streamline and right-size its cost base, identify and
capture efficiencies in its business model, and strengthen the
balance sheet while reducing leverage. During the year, a new
operating model was introduced with the establishment of a
global commercial organization. This includes the creation of an
Americas
regional
platform,
modeled
on
the
Company's
successful operations in Europe and Asia-Pacific, all of which
support VF’s global brands. VF also created the new role of Chief
Commercial
Officer,
with
responsibility
for
go-to-market
execution globally. As the Company remains focused on its
turnaround, it has also identified areas, particularly in brand
building and product innovation, into which it will reinvest a
portion of the savings generated to fuel sustainable and
profitable growth in the future. The Company plans to articulate
its strategic vision during the course of Fiscal 2025.
VF is diversified across brands, product categories, channels of
distribution, geographies and consumer demographics. We own
a broad portfolio of brands in the outerwear, footwear, apparel,
backpack, luggage and accessories categories. Our largest
brands are The North Face
®, Vans
®, Timberland
® and Dickies
®.
Our products are marketed to consumers through our wholesale
channel, primarily in specialty stores, national chains, mass
merchants,
department
stores,
independently-operated
partnership stores and with strategic digital partners. Our
products are also marketed to consumers through our own
direct-to-consumer
operations,
which
include
VF-operated
stores, concession retail stores, brand e-commerce sites and
other digital platforms. Revenues from the direct-to-consumer
business represented 47% of VF’s total Fiscal 2024 revenues. In
addition to selling directly into international markets, many of
our brands also sell products through licensees, agents and
distributors. In Fiscal 2024, VF derived 52% of its revenues from
the Americas, 33% from Europe and 15% from Asia-Pacific.
To provide diversified products across multiple channels of
distribution in different geographic areas, we rely on our global
sourcing of finished goods from independent contractors. Our
diversified
supply
chain
utilizes
leading
technologies
for
inventory replenishment that enable us to match our assortment
of products to consumer demand. Through an increasingly
localized approach, we have established three main regional
sourcing hubs which has led to reduced lead times by moving
production closer to end consumption.
VF's President and CEO, who is considered the Company's chief
operating decision maker, allocates resources and assesses
performance based on a global brand view which represents
VF's operating segments. Global brands have been combined
into
reportable
segments
based
on
similar
economic
characteristics and qualitative factors. The reportable segments
for
financial
reporting
purposes
have
been
identified
as:
Outdoor, Active and Work.
VF Corporation Fiscal 2024 Form 10-K
1
The following table summarizes VF’s brands by reportable segment:
REPORTABLE SEGMENT
BRANDS
PRIMARY PRODUCTS
Outdoor
The North Face
®
High performance outdoor apparel, footwear, equipment, accessories
Timberland
®
Outdoor, adventure-inspired lifestyle footwear, apparel, accessories
Smartwool
®
Performance merino wool and other natural fibers-based apparel and accessories
Altra
®
Performance-based footwear
Icebreaker
®
High performance apparel and accessories based on natural fibers
Active
Vans
®
Youth culture/action sports-inspired footwear, apparel, accessories
Supreme
®
Streetwear apparel, footwear, accessories
Kipling
®
Handbags, luggage, backpacks, totes, accessories
Napapijri
®
Premium outdoor-inspired apparel, footwear, accessories
Eastpak
®
Backpacks, luggage
JanSport
®
Backpacks, luggage
Work
Dickies
®
Work and work-inspired lifestyle apparel and footwear
Timberland PRO
®
Protective work footwear, work and work-inspired lifestyle apparel
Financial information regarding VF’s reportable segments is included in Note 21 to the consolidated financial statements.
OUTDOOR SEGMENT
Our Outdoor segment is a group of authentic outdoor-based
lifestyle brands. Product offerings include performance-based
and outdoor apparel, footwear and equipment.
The North Face
® is the largest brand in our Outdoor segment. The
North
Face
®
brand
features
performance-based
apparel,
outerwear, sportswear and footwear for men, women and
children. Its equipment line includes tents, sleeping bags,
backpacks and accessories. Many of The North Face
® products
are designed for extreme winter sport activities, such as high
altitude mountaineering, skiing, snowboarding, and ice and rock
climbing. The North Face
® products are marketed globally,
primarily through specialty outdoor and premium sporting goods
stores,
department
stores,
independent
distributors,
independently-operated partnership stores, concession retail
stores, approximately 260 VF-operated stores, on websites with
strategic digital partners and online at www.thenorthface.com.
The
Timberland
®
brand
offers
outdoor,
adventure-inspired
lifestyle
footwear,
apparel
and
accessories
that
combine
performance benefits and versatile styling for men, women and
children. We sell Timberland
® products globally through chain,
department and specialty stores, independent distributors and
licensees,
independently-operated
partnership
stores,
concession retail stores, approximately 155 VF-operated stores,
on websites with strategic digital partners and online at
www.timberland.com.
The Smartwool
® brand offers active outdoor consumers a
premium, technical layering system of merino wool socks,
apparel and accessories that are designed to work together in
fit, form and function. Smartwool
® products are sold globally
through specialty outdoor and premium sporting goods stores,
independent distributors, on websites with strategic digital
partners and online at www.smartwool.com.
Altra
® is a performance-based footwear brand primarily in the
road and trail running categories. Altra
® products are sold
globally
through
premium
outdoor
and
specialty
stores,
independent distributors, on websites with strategic digital
partners and online at www.altrarunning.com.
The Icebreaker
® brand specializes in performance apparel and
accessories based on natural fibers, including merino wool and
plant-based fibers. Icebreaker
® products are sold globally
through specialty outdoor and premium sporting goods stores,
concession
retail
stores,
independent
distributors,
approximately 25 VF-operated stores, on websites with strategic
digital partners and online at www.icebreaker.com.
Key drivers of long-term growth in our Outdoor segment are
expected to be a continued focus on product innovation,
extension of our brands into new product categories, profitable
growth in our direct-to-consumer business including our digital
presence, expansion of wholesale channel partnerships, and
geographical diversification and development.
2
VF Corporation Fiscal 2024 Form 10-K
ACTIVE SEGMENT
Our Active segment is a group of activity-based lifestyle brands.
Product offerings include active apparel, footwear, backpacks,
luggage and accessories.
Vans
® is the largest brand in our Active segment. The Vans
®
brand offers performance and casual footwear and apparel
targeting younger consumers that sit at the center of action
sports, art, music and street fashion. Vans
® products are
available
globally
through
chain
stores,
specialty
stores,
independent distributors and licensees, independently-operated
partnership stores, concession retail stores, approximately 660
VF-operated stores, on websites with strategic digital partners
and online at www.vans.com.
Supreme
® is a leading streetwear brand that offers apparel,
accessories and footwear. Supreme
® products are available
globally through approximately 15 VF-operated stores, select
partner retail stores and online at www.supremenewyork.com.
Kipling
® branded handbags, luggage, backpacks, totes and
accessories are sold globally through department, specialty and
luggage
stores,
independently-operated
partnership
stores,
independent
distributors,
concession
retail
stores,
approximately 35 VF-operated stores, on websites with strategic
digital partners and online at www.kipling.com.
The Napapijri
® brand offers outdoor-inspired casual outerwear,
sportswear and accessories at a premium price. Products are
sold in Europe, through department and specialty stores,
independently-operated partnership stores, concession retail
stores, independent distributors, approximately 20 VF-operated
stores, on websites with strategic digital partners and online at
www.napapijri.com.
Eastpak
® backpacks, travel bags and luggage are sold primarily
through department and specialty stores across Europe, on
websites with strategic digital partners, throughout Asia by
distributors and online at www.eastpak.com.
JanSport
® backpacks and accessories are sold primarily in North
America, through department, office supply and chain stores, as
well
as
sports
specialty
stores
and
independent
distributors. JanSport
® products are also sold on websites with
strategic digital partners and online at www.jansport.com.
Key drivers of long-term growth in our Active segment are
expected to be our continued focus on product innovation,
extension of our brands into new product categories, profitable
growth of our direct-to-consumer business including our digital
presence, enhancement of wholesale channel partnerships, and
geographical diversification and development.
WORK SEGMENT
Our Work segment consists of work and work-inspired lifestyle
brands with product offerings that include apparel, footwear and
accessories.
Dickies
® is the largest brand in our Work segment. The Dickies
®
brand is a leader in authentic, functional, durable and affordable
workwear and has expanded to produce work-inspired, casual-
use products. Dickies
® products are available globally through
mass merchants, specialty stores, independent distributors and
licensees,
independently-operated
partnership
stores,
concession retail stores, approximately 15 VF-operated stores,
on websites with strategic digital partners and online at
www.dickies.com.
The Timberland PRO
® brand offers work and work-inspired
products that provide comfort, durability and performance.
Timberland PRO
® products are available primarily in North
America, through specialty stores, chain stores, independent
distributors, on websites with strategic digital partners and
online at www.timberland.com. Timberland PRO
® products are
also available in most U.S. VF-operated Timberland
® stores.
We believe there is a strategic opportunity for growth in our
Work segment in both existing and future markets, and in all
channels and geographies. We expect growth will be driven by an
increased presence in the retail workwear market, work-
inspired lifestyle product offerings and by continuing to innovate
products that address workers’ desires for increased comfort
and performance.
DIRECT-TO-CONSUMER OPERATIONS
Our direct-to-consumer business includes VF-operated retail
stores, brand e-commerce sites, concession retail locations and
other digital platforms. Direct-to-consumer revenues were 47%
of total VF revenues in Fiscal 2024.
Our full-price retail stores allow us to display a brand’s full line
of products with fixtures and imagery that support the brand’s
positioning and promise to consumers. These experiences
provide high visibility for our brands and products and enable us
to stay close to the needs and preferences of our consumers.
The complete and impactful presentation of products in our
stores also helps to increase sell-through of VF products at our
wholesale
customers
due
to
increased
brand
awareness,
education and visibility. VF-operated full-price stores generally
provide gross margins that are well above other channels.
In addition, VF operates outlet stores in both premium outlet
malls and more traditional value-based locations. These outlet
stores carry merchandise that is specifically designed for sale in
our outlet stores and serve an important role in our overall
inventory management and profitability by also allowing VF to
sell a significant portion of excess, discontinued and out-of-
season products at better prices than otherwise available from
outside parties, while maintaining the integrity of our brands.
Our global direct-to-consumer operations included 1,185 stores
at the end of Fiscal 2024. We operate retail store locations for
the following brands: Vans
®, The North Face
®, Timberland
®,
Kipling
®,
Icebreaker
®,
Napapijri
®,
Supreme
®
and
Dickies
®.
Approximately 65% of our stores are located in the Americas
(57% in the U.S.), 25% in Europe and 10% in Asia-Pacific.
Additionally, we sell certain of our branded products through
VF Corporation Fiscal 2024 Form 10-K
3
approximately 840 concession retail stores located principally in
Europe and Asia.
E-commerce represented approximately 42% of our direct-to-
consumer business and 20% of total VF revenues in Fiscal 2024.
All VF brands are marketed online. We continue to expand our
omni-channel approach and integrated marketplace strategies
in the Europe and Asia-Pacific regions, in order to engage with
consumers at every touch point with innovative assets and by
focusing on local relevance. We also continue to increase focus
on digital innovation and growth across other third-party digital
platforms that are reported within our direct-to-consumer
business.
We expect our direct-to-consumer business to gain share in our
revenue mix as we leverage strategic platforms that enable our
brands to more directly connect with consumers.
In addition to our direct-to-consumer operations, independent
parties own and operate approximately 2,400 partnership stores.
Sales to these partners are reported in our wholesale channel.
These are primarily mono-brand retail locations selling VF
products that have the appearance of VF-operated stores. Most
of these partnership stores are located in Europe and in Asia,
and are concentrated amongst The North Face
®, Timberland
®,
Vans
®, Kipling
®, Dickies
® and Napapijri
® brands.
LICENSING ARRANGEMENTS
As part of our strategy of expanding market penetration of VF-
owned
brands,
we
enter
into
licensing
agreements
with
independent parties for specific apparel and complementary
product categories when such arrangements provide more
effective sourcing, distribution and marketing than could be
achieved internally. We provide support to these business
partners and ensure the integrity of our brand names by taking
an active role in the design, quality control, advertising,
marketing and distribution of licensed products.
Licensing arrangements relate to a broad range of VF brands
and are for fixed terms of generally 3 to 5 years, with conditional
renewal options, outside of certain licensing arrangements for
the Dickies
® brand that have longer terms. Each licensee pays
royalties to VF based on its sales of licensed products, with most
agreements providing for a minimum royalty requirement.
Royalties generally range from 4% to 10% of the licensing
partners’ net licensed product sales. Royalty income was $67.1
million in Fiscal 2024 (less than 1% of total revenues), primarily
from the Dickies
®, Vans
® and Timberland
® brands.
SOURCING AND DISTRIBUTION
Product design and innovation, including fit, fabric, finish and
quality, are important elements across our businesses. These
functions are performed by employees located in our global
supply chain organization and our branded business units across
the globe.
VF’s centralized global supply chain organization is responsible
for procuring and delivering products to support our brands and
businesses.
VF
is
skilled
in
managing
the
complexities
associated with our global supply chain. In Fiscal 2024, VF
sourced approximately 266 million units spread across our
brands.
Our
products
were
primarily
obtained
from
approximately
320
independent
contractor
manufacturing
facilities in approximately 35 countries. Additionally, we operate
21 distribution centers and 1,185 retail stores across the globe.
We also utilize distribution centers managed by third parties, as
necessary, for certain brands and locations. Managing this
complexity is made possible by the use of a network of
information systems for product development, forecasting, order
management and warehouse management, along with our core
enterprise resource management platforms.
Products obtained from contractors in the Western Hemisphere
generally have a higher cost than products obtained from
contractors in Asia. However, contracting in the Western
Hemisphere gives us greater flexibility, shorter lead times and
allows for lower inventory levels for the U.S. market. The use of
contracted production with different geographic regions and cost
structures, provides a flexible approach to product sourcing. We
will continue to manage our supply chain from a global
perspective and adjust as needed to changes in the global
production environment.
Independent contractors generally own the raw materials and
ship finished, ready-for-sale products to VF. These contractors
are engaged through VF's sourcing hub in Singapore (with
satellite offices across Asia), and to a lesser extent, VF's
sourcing hubs in Panama and Switzerland. These hubs are
responsible for managing the procurement of product, supplier
oversight, product quality assurance, sustainability within the
supply chain, responsible sourcing and transportation and
shipping functions. In addition, our hubs leverage proprietary
knowledge and technology to enable certain contractors to more
effectively control costs and improve labor efficiency.
Management
continually
monitors
political
risks
and
developments related to duties, tariffs and quotas. We limit VF’s
sourcing
exposure
through,
among
other
measures:
(i)
diversifying
production
among
countries
and
contractors,
(ii)
sourcing
production
to
merchandise
categories
where
product is readily available, and (iii) sourcing from countries with
tariff preference and free trade agreements. VF does not directly
or indirectly source products from suppliers in countries that are
prohibited by the U.S. State Department.
No single supplier represented more than 6% of our total cost of
goods sold during Fiscal 2024.
All
independent
contractor
facilities
that
manufacture
VF
products, are subject to VF’s Global Compliance Principles.
These principles, consistent with international labor standards,
are a set of strict standards covering legal and ethical business
practices, worker age, work hours, health and safety conditions,
environmental standards and compliance with local laws and
regulations.
VF, through its contractor monitoring program, audits the
activities of the independent businesses and contractors that
produce VF products at locations across the globe. Independent
contractor facilities, including those serving our independent
licensees, are subject to pre-certification before producing VF
products. This pre-certification includes passing a factory
4
VF Corporation Fiscal 2024 Form 10-K
inspection and signing a VF Terms of Engagement agreement.
We maintain an ongoing audit program to ensure compliance
with these requirements by using dedicated internal staff and
externally contracted firms. Additional information about VF’s
Code of Business Conduct, Global Compliance Principles, Terms
of Engagement and Environmental Compliance Guidelines, along
with a Global Compliance Report, is available on the VF website
at www.vfc.com.
Product
is
shipped
from
our
independent
suppliers
to
distribution centers around the world. In some instances,
product is shipped directly to our customers. Most distribution
centers are operated by VF, and most support more than one
brand.
Our largest distribution centers by region are located in Ontario,
California, Prague, Czech Republic and Kunshan, China. In total,
we operate 21 owned or leased distribution centers primarily in
the U.S., but also in the Czech Republic, Belgium, United
Kingdom, the Netherlands, China, Canada, Mexico, Israel and
Japan.
SEASONALITY
VF’s quarterly operating results vary due to the seasonality of
our individual brands, and are historically stronger in the second
half of the calendar year. This variation results primarily from
the seasonal influences on revenues of our Outdoor segment,
where revenues are historically weighted towards the second
and third fiscal quarters. On a quarterly basis in Fiscal 2024,
revenues ranged from a low of 20% of full year revenues in the
first fiscal quarter to a high of 29% in the second fiscal quarter,
with corresponding operating margins of (0.4)% in the first fiscal
quarter and 12.0% in the second fiscal quarter. This variation
results primarily from the seasonal influences on revenues of
our Outdoor segment, where 15% of the segment's revenues
occurred in the first fiscal quarter compared to 31% in the
second fiscal quarter of Fiscal 2024. With changes in our mix of
business and the growth of our retail operations, historical
quarterly revenue and profit trends may not be indicative of
future trends.
Working capital requirements vary throughout the year. Working
capital typically increases early in the calendar year as inventory
builds to support peak shipping periods and then moderates
later in the calendar year as those inventories are sold and
accounts receivable are collected. Historically, cash provided by
operating activities is substantially higher in the second half of
the calendar year due to higher net income during that period
and reduced working capital requirements, particularly during
the fourth quarter of the calendar year.
ADVERTISING, CUSTOMER SUPPORT AND COMMUNITY OUTREACH
During Fiscal 2024, our advertising and promotion expense was
$835.8 million, representing 8% of total revenues. We advertise
in
consumer
and
trade
publications
and
through
digital
initiatives, including social media and mobile platforms on the
Internet. We also participate in cooperative advertising on a
shared cost basis with major retailers in print and digital media,
radio and television. We sponsor sporting, musical and special
events, as well as athletes and personalities who promote our
products. We employ marketing sciences to optimize the impact
of advertising and promotional spending, and to identify the
types of spending that provide the greatest return on our
marketing investments.
We provide advertising support to our wholesale customers,
including independent partnership stores, in the form of point-
of-sale fixtures and signage to enhance the presentation and
brand image of our products. We also participate in shop-in-
shops and concession retail arrangements, which are separate
sales areas dedicated to a specific VF brand within our
customers' stores and other locations, to help differentiate and
enhance the presentation of our products.
We
contribute
to
incentive
programs
with
our
wholesale
customers, including cooperative advertising funds, discounts
and allowances. We also offer sales incentive programs directly
to consumers in the form of discounts, rebates and coupon
offers that are eligible for use in certain VF-operated stores,
brand e-commerce sites and concession retail locations. VF also
offers loyalty programs for certain brands that provide a range of
benefits to consumers.
In addition to sponsorships and activities that directly benefit our
products and brands, VF and its associates actively support our
communities and various charities. For example, The North
Face
® brand has committed to programs that encourage and
enable outdoor participation, such as The North Face Explore
Fund™program, and provide trailblazing athletes with funding,
gear, education and mentorship to accelerate their progress
through its "Athlete Development Program". The Timberland
®
brand has a strong heritage of volunteerism, including the Path
of Service™program, which offers employees paid time off to
serve their local communities through global service events
such as Earth Day in the spring and "Serv-a-palooza" in the fall.
Since its inception in 1992, Timberland employees have served
more than 1.4 million hours. In Fiscal 2024, the Vans
® brand
supported programs and nonprofits committed to equality,
mental
health
support
and
empowering
everyone
to
use
creativity to discover themselves.
VF Corporation Fiscal 2024 Form 10-K
5
ENVIRONMENTAL AND SOCIAL RESPONSIBILITY
VF and our portfolio of brands strive to be more than just an
apparel and footwear company. Collectively, we work to be a
leading global citizen, advancing positive environmental and
social change - throughout our Company, industry and the world
at large. Our enterprise-wide strategy focuses on key areas
including people, the planet and our products.
People
•
VF employees are at the heart of everything we do. They
form a global community of movement makers who
constantly strive to do better and have a positive impact on
society and our planet. We have a responsibility to protect
and lift-up all who work across our operations and supply
chain.
Planet
•
The well-being of people and the planet are inextricably
connected. Through our sustainability efforts, we are
taking bold action on climate change to protect the planet
for generations to come.
Product
•
VF brands touch millions of lives every year – from the
people that design and make apparel and footwear to the
consumers
who
purchase
them.
Innovation
and
responsible product stewardship are infused at every step.
VF prioritizes sustainable materials, circularity, and sustainable
packaging to drive scalable change by working to reduce our
environmental
impact.
Other
critical
components
of
our
environmental
sustainability
strategy
include
reducing
greenhouse gas ("GHG") emissions, increasing responsible
sourcing of materials, reducing waste, implementing green
building design, increasing renewable energy use and improving
operational efficiency across both our direct operations and
supply chain.
VF’s President and Chief Executive Officer, as well as the
Company's Global Leadership Team and Board of Directors are
responsible
for
the
oversight
of
VF’s
sustainability
and
responsibility
strategies
and
targets.
Additionally,
the
Governance and Corporate Responsibility Committee of the
Board oversees key strategies, programs, policies and risks
related to the sustainability and social responsibility impacts of
VF’s businesses, including sustainability policies and initiatives
to address climate change risks. Regular updates on the
progress towards associated sustainability and responsibility
targets
are
provided
to
the
Governance
and
Corporate
Responsibility Committee of the Board.
VF has completed an analysis of potential climate-related risks
and
opportunities,
and
as
a
result,
'Climate
Change
&
Sustainability' was established as a VF enterprise risk and
embedded in our enterprise risk management framework.
Updates on enterprise risks are provided to the Audit Committee
of the Board of Directors quarterly.
VF's science-based targets include the following:
•
Reduce absolute Scope 1 and 2 GHG emissions 55% by
2030 from a Fiscal 2017 baseline; and
•
Reduce absolute Scope 3 GHG emissions from purchased
goods and services and upstream transportation 30% by
2030 from a Fiscal 2017 baseline.
Other planet- and product-related goals include the following:
•
Utilize 100% renewable energy across our owned-and-
operated facilities by Fiscal 2026, to be primarily achieved
through on-site renewable energy projects, and off-site
renewable
energy
investments,
including
renewable
energy credits.
•
Source 50% of our polyester from recycled materials by
Fiscal 2026.
•
Key packaging materials will be reduced and originate
from
sustainable
sources,
and
processes
redesigned
enabling packaging reuse or recyclability, by Fiscal 2031.
VF is currently on course with its internal milestones, tracking
progress towards these targets and goals.
Additional information regarding VF’s strategy and actions can
be found within our latest Environmental & Social Responsibility
report within our “Responsibility” page on www.vfc.com. Also
included on that webpage are downloads of our Sustainability
Accounting Standards Board ("SASB") and Global Reporting
Initiative ("GRI") indices. Information contained on our website or
in our Environmental & Social Responsibility reports or related
supplemental information is not incorporated by reference into
this or any other report we file with the SEC.
HUMAN CAPITAL MANAGEMENT
As a performance-driven company that is committed to its
values and having a positive impact on people and the planet, VF
aspires to leverage the size and scale of our business and the
capabilities of our people to drive profitable and sustainable
growth and create value for shareholders and stakeholders. We
are guided by our values and our purpose. Together with a laser
focus on performance and delivering on our commitments, we
are able to offer a unique value proposition to our associates – a
place where you can do well and do good at the same time.
We consider the talent and capabilities of our people as essential
to our business strategy and execution. As such, we put in place
strategies to acquire, develop and retain diverse talent with the
skills and passion to build our brands with innovative products
and experiences for our consumers around the globe. Our
Human Capital Management ("HCM") practices are designed to
promote
belonging;
provide
development
opportunities
for
associates across the organization; offer competitive rewards for
performance achievements and benefits; and sponsor programs
that support wellbeing in an engaging work environment built on
our longstanding values.
We believe that having an engaged, diverse, inclusive and
committed
workforce
enhances
not
only
our
business
performance but also our culture. Initiatives to promote overall
alignment with our performance, purpose, values, and strategy
are therefore important and include internal communications
and education about our business initiatives through regular
6
VF Corporation Fiscal 2024 Form 10-K
townhalls with executive management across our business, and
a listening strategy that engages associates and encourages
them to provide input and feedback on a variety of topics.
Our Board of Directors and its Committees provide governance
and oversight on a broad range of VF’s HCM efforts. The Board’s
oversight
includes
review
of
CEO
and
executive
officer
performance,
compensation
and
succession
planning
and
belonging
programs
and
initiatives.
The
Talent
and
Compensation Committee works with management on executive
compensation and compensation risks, and regularly reviews
our
progress
on
company-wide
HCM
priorities,
including
diversity, equity and inclusion, benefits, wellbeing, succession
planning
and
talent
development
strategies.
VF’s
Audit
Committee monitors current and emerging enterprise risks,
including HCM risks, and VF’s health and safety program. The
Governance
and
Corporate
Responsibility
Committee
is
responsible for conducting Board succession planning and
overseeing the selection of nominees to the Board, and reviews
the Company's Code of Business Conduct as well as its
sustainability policies, goals and programs. These Committees
provide recommendations to the Board and are part of the
broader framework that guides how VF acquires, develops, and
retains a workforce that aligns with VF’s values and supports its
business strategies and performance objectives. In addition, VF’s
Global
Leadership
Team
is
regularly
engaged
in
the
development and management of key talent systems, guiding
our culture and talent development programs. The sections that
follow provide further background on our associate base, as well
as examples of our key programs and initiatives that are focused
on the achievement of our objectives.
Associate Base
VF had approximately 30,000 employees at the end of Fiscal
2024. Of VF’s total employees, approximately 60% were full-time
and approximately 55% were located in the U.S. In international
markets, certain employees are covered by trade-sponsored or
governmental bargaining arrangements. Employee relations are
considered to be good.
Inclusion, Diversity, Equity, Action ("IDEA")
IDEA is fundamental to our business as we aim to sustain a
workplace that celebrates the diversity of our associates. We
strive to provide an environment that allows our associates to
bring
their
unique
selves
to
work
every
day,
and
we’re
determined to foster a workplace that is free of discrimination
and
harassment,
and
promotes
allyship,
advocacy
and
belonging. Our Global Leadership Team sets global goals and
strategic direction in alignment with VF’s global IDEA strategy,
including oversight of the aspirational goals established in 2021
by our Council to Advance Racial Equity (“CARE”) to promote:
enhancing inclusivity by increasing Black, Indigenous and People
of Color (“BIPOC”) representation at the director and above
population in the U.S.; diverse candidate slates; pay equity;
mentorship and sponsorship programs inclusive of BIPOC
employees and members of the community; and elevating our
commitment to education, listening and learning.
These actions are consistent and aligned with VF’s IDEA
Statement, committing to equal opportunity for all employees
and candidates. At the end of Fiscal 2024, approximately 18% of
our U.S. director and above workforce self-identified as BIPOC.
VF is a member of the Paradigm for Parity coalition, which has
pledged to promote organizational gender parity globally in
leadership
roles
by
2030.
At
the
end
of
Fiscal
2024,
approximately
53%
of
the
overall
VF
workforce
and
approximately 43% of director and above roles self-identified as
women. VF has added and expanded resources to support
women
in
the
workplace,
including
career
advancement
workshops, community building activities through our Employee
Resource Groups (“ERGs”), and a suite of benefits designed to
promote wellbeing and provide support for parents and families,
including paid parental leave.
Our dedication to inclusion and diversity is further reflected in
programs sponsored by our ERGs. Our ERGs enhance our
culture of belonging by creating a safe space for learning and
dialogue for underrepresented groups, establishing a sense of
community among associates and providing platforms to collect
and
share
insights
to
support
business
imperatives.
We
currently have various ERGs for women, BIPOC, Veterans and
LGBTQ+ communities. VF is committed to maximizing inclusion,
diversity and equity not only within the Company, but also within
the communities where we live and work.
Culture and Engagement
Our culture is built on our five core values: Integrity, Consumer-
focused, Growth Mindset, Simplicity and Winning Together. We
measure
our
culture
and
Employee
Net
Promoter
Score
("eNPS") via periodic surveys. Results are evaluated, shared with
associates and used to guide management focus and attention.
Recent actions have included 1) adopting a flexible approach to
where associates work, 2) creating engaging work environments
that bring associates together to collaborate and innovate, and 3)
equipping leaders to manage in a complex, hybrid environment.
VF also conducts periodic pulse check surveys for interim
feedback on a variety of topics.
Talent Management
Talent Management includes the acquisition, development,
skilling and upskilling, and deployment of our talent. We utilize a
range of tools and programs including diverse candidate slates,
talent
reviews,
performance
coaching,
mentorship
and
development,
succession
planning,
access
to
volunteering
opportunities, IDEA training and hundreds of online leadership
development
learning
modules
that
are
available
to
all
associates.
Associate Wellbeing and Safety
VF endeavors to support the diverse wellbeing needs of our
associates and their families. We define wellbeing as not only
physical health, but also mental, emotional, social, financial and
career wellbeing. We offer a comprehensive and competitive
benefits program to our full-time associates that is designed to
provide choices and flexibility to meet their needs now and in the
future. These include health and welfare programs, retirement
programs,
paid
parental
leave,
reproductive
and
adoption
assistance,
paid
time
off,
tuition
reimbursement,
product
discounts,
fitness
facilities
or
programs,
childcare
and
educational resources and various on-site services, employee
assistance program, and regular wellbeing programming, as
culturally appropriate throughout the geographies in which we
operate.
Associate safety rests at the heart of our decisions. Nothing is
more fundamental than providing people with an environment
VF Corporation Fiscal 2024 Form 10-K
7
where they feel safe, secure and supported. Our mission is
simple: Foster a culture of safety that enables a workplace free
of hazards and sends every employee home safely. Our goal is
zero workplace injuries within our operations. We’re using our
scale, influence and insight to help establish safe, stable
working environments in the factories producing our products,
while simultaneously improving the lives of those in local
communities beyond the factory walls.
Ethics and Compliance
VF’s Code of Business Conduct sets forth business policies and
principles for all directors, officers and associates of VF. The key
principles of our code are as follows: we will lead with integrity;
we will treat everyone with dignity and respect; we will compete
fairly and honestly; we will follow the law everywhere we do
business; and we will strive to make our communities better.
Our
global
Ethics
and
Compliance
program
provides
VF
associates
with
the
tools
they
need
to
understand
our
expectations for ethical business conduct and the courage to
speak up and raise concerns without fear of retaliation.
OTHER MATTERS
Competitive Factors
Our business depends on our ability to stimulate consumer
demand for VF’s brands and products. As a leader in the industry
with a portfolio of iconic brands, VF is well-positioned to
compete in its target markets for apparel, footwear, and
accessories. Our brands support the active lifestyles of their
consumers
through
the
development
of
innovative
and
differentiated products and experiences. We support our brands
in meeting their commitments to consumers by leveraging our
platforms and capabilities to innovate and ensure sufficient
availability of high-quality products when and where consumers
choose to engage with our brands, and to communicate and
maintain long-lasting relationships.
Intellectual Property
Trademarks, trade names, patents and domain names, as well
as related logos, designs and graphics, provide substantial value
in the development and marketing of VF’s products, and are
important to our continued success. We have registered this
intellectual property in the U.S. and in other countries where our
products are manufactured and/or sold. We vigorously monitor
and enforce VF’s intellectual property against counterfeiting,
infringement and violations of other rights where and to the
extent legal, feasible and appropriate. In addition, we grant
licenses to other parties to manufacture and sell products
utilizing our intellectual property in product categories and
geographic areas in which VF does not operate.
Customers
VF products are sold on a wholesale basis to specialty stores,
national
chains,
mass
merchants,
department
stores,
independently-operated partnership stores and strategic digital
partners. In addition, we sell products on a direct-to-consumer
basis through VF-operated stores, concession retail stores,
brand e-commerce sites and other digital platforms. Our
international sales represented 54% of our total revenues in the
year
ended
March
2024,
with
Europe
being
the
largest
international market.
Sales to VF’s ten largest customers amounted to approximately
14% of total revenues in Fiscal 2024. Sales to the five largest
customers amounted to approximately 9% of total revenues in
Fiscal
2024.
Sales
to
VF’s
largest
customer
totaled
approximately 2% of total revenues in Fiscal 2024.
Backlog
The dollar amount of VF’s order backlog as of any date is not
indicative of actual future shipments and, accordingly, is not
material to an understanding of the business taken as a whole.
8
VF Corporation Fiscal 2024 Form 10-K
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following are the executive officers of VF Corporation as of
May 23, 2024. The executive officers are generally elected
annually and serve at the pleasure of the Board of Directors.
None of the VF Corporation executive officers have any family
relationship with one another or with any of the directors of VF
Corporation.
Bracken Darrell, 61, has been President and Chief Executive
Officer since July 2023. Prior to joining VF, Mr. Darrell served as
Chief Executive Officer of Logitech International, S.A. from
January 2013 to June 2023, after joining Logitech as President in
April 2012.
Matthew H. Puckett, 50, has been Executive Vice President and
Chief Financial Officer of VF since June 2021. He served as Vice
President — Global Financial Planning & Analysis from June
2019 until May 2021, Vice President — Chief Financial Officer of
VF International from April 2015 until May 2019, Vice President –
Chief Financial Officer Timberland from October 2011 until
March 2015 and Vice President — Chief Financial Officer VF
Sportswear April 2009 until October 2011. Mr. Puckett joined VF
in 2001.
Martino Scabbia Guerrini, 59, has been Executive Vice President,
Chief Commercial Officer and President, Emerging Brands since
October 2023. He served as Executive Vice President, and
President, EMEA and Emerging Brands from March 2022 until
October 2023, with additional responsibilities as President, APAC
since November 2022 until October 2023. He served as Executive
Vice President and Group President — EMEA from January 2018
until March 2022. He served as President — VF EMEA from April
2017 until December 2017, Coalition President — Jeanswear,
Sportswear and Contemporary International from January 2013
until
November
2017,
President
—
Sportswear
and
Contemporary EMEA from February 2009 until December 2012
and President — Sportswear and Packs from August 2006 until
January 2009. Mr. Guerrini joined VF in 2006.
Brent E. Hyder, 59, has been Executive Vice President, Chief
People Officer since September 2023. Prior to joining VF, Mr.
Hyder
served
as
President
and
Chief
People
Officer
of
Salesforce, Inc. from September 2019 to September 2023.
Bryan H. McNeill, 62, has been Vice President — Controller and
Chief
Accounting
Officer
since
April
2015.
He
served
as
Controller and Supply Chain Chief Financial Officer of VF
International from January 2012 until March 2015 and Controller
of VF International from May 2010 until December 2011. Mr.
McNeill joined VF in 1993.
Nicole Otto, 53, has been Global Brand President, The North
Face
® since June 2022. She also served as President, APAC from
July 2022 until November 2022. Ms. Otto joined VF in June 2022.
Jennifer S. Sim, 50, has been Executive Vice President, General
Counsel and Secretary since May 2022. She served as Vice
President, Deputy General Counsel from 2019 until May 2022,
Vice President, General Counsel — Americas West from 2016
until 2019 and Vice President, General Counsel — Outdoor &
Action Sports Americas from 2013 until 2016. Ms. Sim joined VF
in 2013.
Additional information is included under the caption “Election of
Directors” in VF’s definitive Proxy Statement for the Annual
Meeting of Shareholders to be held July 23, 2024 (“2024 Proxy
Statement”) that will be filed with the Securities and Exchange
Commission within 120 days after the close of our fiscal year
ended March 30, 2024, which information is incorporated herein
by reference.
AVAILABLE INFORMATION
All periodic and current reports, registration statements and
other filings that VF has filed or furnished to the SEC, including
our annual reports on Form 10-K, quarterly reports on Form 10-
Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) of the
Exchange Act, are available free of charge from the SEC’s
website (www.sec.gov) and on VF’s website at www.vfc.com.
Such documents are available as soon as reasonably practicable
after electronic filing of the material with the SEC. Copies of
these reports may also be obtained free of charge upon written
request to the Secretary of VF Corporation, P.O. Box 13919,
Denver, CO 80201.
The following corporate governance documents can be accessed
on VF’s website: VF’s Corporate Governance Principles, Code of
Business Conduct, and the charters of our Audit Committee,
Talent and Compensation Committee, Finance Committee and
Governance and Corporate Responsibility Committee. Copies of
these documents also may be obtained by any shareholder free
of
charge
upon
written
request
to
the
Secretary
of
VF
Corporation, P.O. Box 13919, Denver, CO 80201.
After VF’s 2024 Annual Meeting of Shareholders, VF intends to
file with the New York Stock Exchange (“NYSE”) the certification
regarding
VF’s
compliance
with
the
NYSE’s
corporate
governance listing standards as required by NYSE Rule 303A.12.
Last year, VF filed this certification with the NYSE on August 4,
2023.
VF Corporation Fiscal 2024 Form 10-K
9
ITEM 1A.
RISK FACTORS.
The following risk factors should be read carefully in connection with evaluating VF’s business and the forward-looking statements
contained in this Form 10-K. Any of the following risks could materially adversely affect VF’s business, its operating results and its
financial condition.
ECONOMIC AND INDUSTRY RISKS
VF’s revenues and profits depend on the level of consumer
spending for apparel and footwear, which is sensitive to global
economic conditions and other factors. A decline in consumer
spending could have a material adverse effect on VF.
The success of VF’s business depends on consumer spending on
apparel and footwear, and there are a number of factors that
influence consumer spending, including actual and perceived
economic conditions, disposable consumer income, interest
rates,
consumer
credit
availability,
inflationary
pressures,
recessions
or
economic
slowdowns,
unemployment,
stock
market performance, weather conditions and natural disasters
(including potential effects from climate change), energy prices,
public health issues (including the coronavirus (COVID-19)
pandemic), geopolitical instability (such as the current conflict
between Russia and Ukraine and related economic and other
retaliatory measures taken by the United States, European
Union ("EU") and others, the current tensions between the U.S.
and China, and the current conflict in the Middle East), consumer
discretionary
spending
patterns
and
tax
rates
in
the
international, national, regional and local markets where VF’s
products are sold. Decreased consumer spending could result in
reduced
demand
for
our
products,
reduced
orders
from
customers
for
our
products,
order
cancellations,
lower
revenues, higher discounts, increased inventories and lower
gross margins. The uncertain state of the global economy
continues to impact businesses around the world. If global
economic and financial market conditions do not improve,
adverse economic trends or other factors could negatively
impact the level of consumer spending, which could have a
material adverse impact on VF.
The apparel and footwear industries are highly competitive, and
VF’s
success
depends
on
its
ability
to
gauge
consumer
preferences and product trends, and to respond to constantly
changing markets.
VF competes with numerous apparel and footwear brands and
manufacturers. Competition is generally based upon brand
name recognition, the price, design, quality, innovation and
selection of product, service and purchasing convenience. Some
of our competitors are larger and have more resources than VF
in
some
product
categories
and
regions.
In
addition,
VF
competes directly with the private label brands of its wholesale
customers. VF’s ability to compete within the apparel and
footwear industries depends on our ability to:
•
anticipate
and
respond
to
changing
consumer
preferences and product trends in a timely manner;
•
develop attractive and innovative products that meet
changing consumer needs, consistent with consumer
trends and demands;
•
maintain strong brand recognition;
•
price products appropriately;
•
provide best-in-class marketing support and intelligence
and optimize and react to available consumer data;
•
ensure product availability and optimize supply chain
efficiencies;
•
obtain sufficient retail store space and effectively present
our products at retail;
•
produce or procure quality products on a consistent basis;
and
•
adapt to a more digitally driven consumer landscape,
including
the
effective
re-creation
of
the
in-store
experience through digital channels.
In addition, our ability to compete is also dependent on our ability
to reach consumers effectively and efficiently in an evolving
media landscape, including digital, which is subject to evolving
and increasingly restrictive privacy requirements. Failure to
compete effectively or to keep pace with rapidly changing
consumer preferences, markets, technology, business model
and product trends could have a material adverse effect on VF’s
business,
financial
condition
and
results
of
operations.
Moreover, there are significant shifts underway in the wholesale
and retail (e-commerce and retail store) channels, which have
been accelerated because of the COVID-19 pandemic. VF may
not be able to manage its brands within and across channels
sufficiently, which could have a material adverse effect on VF’s
business, financial condition and results of operations.
The retail industry has experienced financial difficulty that could
adversely affect VF's business.
There have been consolidations, reorganizations, restructurings,
bankruptcies and ownership changes in the retail industry.
These events individually, and together, could have a material,
adverse effect on VF's business. These changes could impact
VF’s opportunities in the market and increase VF’s reliance on a
smaller number of large customers. In the future, retailers are
likely
to
further
consolidate,
undergo
restructurings
or
reorganizations or bankruptcies, realign their affiliations or
reposition their stores’ target markets. In addition, consumers
have continued to transition away from traditional wholesale
retailers to large online retailers. These developments could
result in a reduction in the number of stores that carry VF’s
products, an increase in ownership concentration within the
retail industry, an increase in credit exposure to VF or an
increase in leverage by VF’s customers over their suppliers.
Further,
the
global
economy
periodically
experiences
recessionary
conditions
with
rising
unemployment,
rising
inflation and interest rates, reduced availability of credit,
increased
savings
rates
and
declines
in
real
estate
and
securities values. These recessionary conditions could have a
negative impact on retail sales of apparel, footwear and other
consumer products. The lower sales volumes, along with the
possibility of restrictions on access to the credit markets, could
result
in
our
customers
experiencing
financial
difficulties
including store closures, bankruptcies or liquidations. This could
result in higher credit risk to VF relating to receivables from our
customers who are experiencing these financial difficulties. If
10
VF Corporation Fiscal 2024 Form 10-K
these developments occur, our inability to shift sales to other
customers or to collect on VF’s trade accounts receivable could
have a material adverse effect on VF’s financial condition and
results of operations.
VF’s profitability may decline as a result of increasing pressure on
margins.
The apparel and footwear industry is subject to significant
pricing pressure caused by many factors, including intense
competition,
consolidation
in
the
retail
industry,
rising
commodity and conversion costs, inflation, rising freight costs,
rising labor costs, pressure from retailers to reduce the costs of
products, changes in consumer demand and shifts to online
shopping and purchasing. Customers may increasingly seek
markdown allowances, incentives and other forms of economic
support. If these factors cause us to reduce our sales prices to
retailers and consumers, and we fail to sufficiently reduce our
product costs or operating expenses, VF’s profitability will
decline. This could have a material adverse effect on VF’s results
of operations, liquidity and financial condition.
BUSINESS AND OPERATIONAL RISKS
VF’s business and the success of its products could be harmed if
VF is unable to maintain the images of its brands.
VF’s success to date has been due in large part to the growth of
its brands’ images and VF’s consumers’ connection to its
brands. If we are unable to timely and appropriately respond to
changing consumer demand, the names and images of our
brands may be impaired. Even if we react appropriately to
changes in consumer preferences, consumers may consider our
brands’ images to be outdated or associate our brands with
styles that are no longer popular. In addition, brand value is
based in part on consumer perceptions on a variety of qualities,
including
merchandise
quality,
corporate
integrity,
and
environmental, social and governance practices, including with
respect to human rights, diversity, equity and inclusion, and our
impact
on
the
environment.
Negative
claims
or
publicity
regarding VF, its brands or its products, including licensed
products, or its culture and values, or its employees, endorsers,
sponsors or suppliers could adversely affect our reputation and
sales regardless of whether such claims are accurate. The
rapidly changing media environment, including our increasing
reliance
on
social
media
and
online
marketing,
which
accelerates the dissemination of information, can increase the
challenges of responding to negative claims. In addition, we have
sponsorship contracts with a number of athletes, musicians and
celebrities and feature those individuals in our advertising and
marketing efforts. Failure to continue to obtain or maintain high-
quality sponsorships and endorsers could harm our business. In
addition, actions taken by those individuals associated with our
products could harm their reputations, which could adversely
affect the images of our brands. Our reputation and brand image
also could be damaged as a result of our support of, association
with or lack of support or disapproval of certain political or social
issues or catastrophic events, as well as any decisions we make
to continue to conduct, or change, certain of our activities in
response to such considerations.
VF’s revenues and cash requirements are affected by the seasonal
nature of its business.
VF’s business is seasonal, with a higher proportion of revenues
and operating cash flows generated during the second half of the
calendar year, which includes the fall and holiday selling
seasons. Poor sales in the second half of the calendar year
would have a material adverse effect on VF’s full year operating
results and cause higher inventories. In addition, fluctuations in
sales and operating income in any fiscal quarter are affected by
the timing of seasonal wholesale shipments and other events
affecting retail sales.
We may be adversely affected by weather conditions, including any
potential effects from climate change.
Our business is adversely affected by unseasonable weather
conditions, including those resulting from climate change. A
significant portion of the sales of our products is dependent in
part on the weather and is likely to decline in years in which
weather conditions do not favor the use of these products. For
example, periods of unseasonably warm weather in the fall or
winter can lead to reduced consumer spending that negatively
impacts
VF's
direct-to-consumer
business,
and
inventory
accumulation by our wholesale customers, which can, in turn,
negatively
affect
orders
in
future
seasons.
In
addition,
abnormally harsh or inclement weather can also negatively
impact retail traffic and consumer spending. As the effects of
climate change increase, we expect the frequency and impact of
weather and climate related events and conditions to increase as
well. Any and all of these risks may have a material adverse
effect on our financial condition, results of operations or cash
flows.
VF may not succeed in its business strategy, including its Reinvent
turnaround strategy.
Following the appointment of our new CEO during Fiscal 2024,
we introduced the Reinvent turnaround program, which aims to
reinvent how VF operates as an organization across our brands,
geographies and integrated enterprise functions. As part of
Reinvent, we are taking measures to streamline and right-size
our cost base, identify and capture efficiencies in our business
model,
and
strengthen
the
balance
sheet
while
reducing
leverage. During Fiscal 2024, a new operating model was
introduced with the establishment of a global commercial
organization. This includes the creation of an Americas regional
platform, modeled on VF's operations in Europe and Asia-
Pacific, all of which support VF’s global brands. We also created
the new role of Chief Commercial Officer, with responsibility for
go-to-market execution globally. As we remain focused on our
turnaround, we have also identified areas, particularly in brand
building and product innovation, into which we will reinvest a
portion of the savings generated to fuel sustainable and
profitable growth in the future. However, there is no assurance
that we will be able to achieve our Reinvent priorities, that such
measures will result in the intended outcomes, or that even if
such measures are successfully accomplished, they will be
effective in fueling sustainable and profitable growth in the
future.
We are supporting our Reinvent priorities by building our brands,
leveraging
our
supply
chain
and
information
technology
capabilities across VF and expanding our direct-to-consumer
business,
including
opening
new
stores,
remodeling
and
VF Corporation Fiscal 2024 Form 10-K
11
expanding our existing stores and growing our e-commerce
business. However, we may not be able to grow our business.
For example:
•
We may not be able to streamline and right-size our cost
base.
•
We may not be able to strengthen our balance sheet while
reducing leverage.
•
We may not be able to successfully implement our new
operating model with the establishment of a global
commercial
organization,
or
identify
and
capture
efficiencies in our new operating model.
•
We may not be able to successfully support our global
brands through the new operating model.
•
We may not be able to successfully generate savings to
invest in brand building and product innovation, or
effectively deploy such savings towards investments in
our brands and product innovation.
•
We may not be able to achieve the expected results from
our supply chain initiatives and establish and maintain
effective supply chain systems, data, and capabilities,
infrastructure, and the sourcing strategy necessary to
optimally
meet
current
and
future
business
needs,
including direct-to-consumer needs.
•
We may have difficulty recruiting, developing or retaining
qualified employees.
•
We may not be able to achieve our direct-to-consumer
expansion goals, including in e-commerce or other new
channels, manage our growth effectively, successfully
integrate the planned new stores into our operations,
operate
our
new,
remodeled
and
expanded
stores
profitably,
adapt
our
business
model
or
develop
relationships with consumers for e-commerce or other
new channels.
•
We may not be able to offset rising commodity or
conversion costs in our product costs with pricing actions
or efficiency improvements.
•
We may have difficulty completing divestitures to reshape
our portfolio, and we may not be able to achieve the
expected benefits from such divestitures, or it may
disrupt our current business.
Failure to implement our strategic objectives, including the
Reinvent turnaround strategy, may have a material adverse
effect on VF’s business.
Further, organizational effectiveness, agility and execution are
important to VF’s success. Failure to create an agile and efficient
operating model and organizational structure, beginning with
VF's global commercial organization, or to effectively define,
prioritize, and align on clear achievable and appropriately
resourced strategic priorities could result in an inability to
remain competitive in a rapidly changing marketplace and lead
to increase in costs, inefficient resource allocation, reduced
productivity, organizational confusion, and reduced employee
morale.
Our supply chain may be disrupted due to factors such as
political
instability,
inflationary
pressures,
macroeconomic
conditions, pandemics, and other factors including reduced
freight
availability
and
increased
costs,
port
disruption,
distribution center closures, severe weather due to climate
change
or
otherwise,
natural
disasters,
military
conflicts,
terrorism,
or
labor
supply
shortages
or
stoppages.
Any
significant disruption in our supply chain could impair our ability
to procure or distribute our products, which would adversely
affect our business and results of operations.
VF relies significantly on information technology. Any inadequacy,
interruption,
integration
failure
or
security
failure
of
this
technology could harm VF’s ability to effectively operate its
business.
Our ability to effectively manage and operate our business
depends significantly on information technology systems. We
rely heavily on information technology to track sales and
inventory and manage our supply chain. We are also dependent
on information technology, including the Internet, for our direct-
to-consumer sales, including our e-commerce operations and
retail business credit card transaction authorization. Despite our
preventative efforts, our systems and those of third parties on
which we rely are frequently targeted by cyber-attacks of varying
levels of severity, including the incident reported by VF in
December 2023. These systems may be vulnerable to damage,
failure or interruption, and the data that they hold may be
vulnerable to encryption or theft, due to cyber-attacks, malicious
programs,
data
security
incidents,
technical
malfunctions,
natural disasters or other causes, or in connection with
upgrades to our system or the implementation of new systems.
Some of our systems are older and are no longer supported by
the original manufacturer. The failure of our systems and those
of third parties on which we rely to operate effectively or remain
innovative, our inability to keep up with rapid technological
change (including the successful utilization of data analytics,
artificial intelligence ("AI") and machine learning), problems with
transitioning to upgraded or replacement systems, difficulty in
integrating new systems or systems of acquired businesses or a
breach in security of these systems has, and could continue to,
adversely impact the operations of VF’s business. These impacts
could affect, among other things, our reputation, management of
inventory, ordering and replenishment of products, sourcing and
distribution
of
products,
retail
store
and
e-commerce
operations, retail business credit card transaction authorization
and processing, corporate email communications and our
interaction with the public on social media, and did affect our
management
of
inventory,
ordering
and
replenishment
of
products, sourcing and distribution of products, e-commerce
operations, and corporate email communications. Moreover,
failure to provide effective digital (including omni-channel)
capabilities and information technology infrastructure could
result in an inability to meet current and future business needs
and a resulting loss of brand competitiveness, leading to loss of
revenue and market share and decreased business agility.
Cybersecurity threats and the techniques used in cyberattacks
change, develop and evolve rapidly, including from emerging
technologies, such as advanced forms of artificial intelligence.
We may fail to adapt as quickly as necessary to meet the rapidly-
changing threat environment.
VF is subject to data and information security and privacy risks
that could negatively affect its business operations, results of
operations or reputation.
In the normal course of business, we collect, retain and transmit
certain
sensitive
and
confidential
consumer
information,
including payment information, and employee information, over
public networks. There is a significant concern by consumers
and employees over the security of personal information, identity
12
VF Corporation Fiscal 2024 Form 10-K
theft and user privacy. Data and information security breaches
are increasingly sophisticated, and can be difficult to detect for
long periods of time. Accordingly, if unauthorized parties gain
access to our networks or databases, such as with the incident
reported by VF in December 2023, or those of third parties on
which we rely, they have, and could continue to, be able to steal,
publish, delete, hold ransom or modify our private and sensitive
information,
including
payment
information,
personal
information, and confidential or other proprietary business
information.
We are subject to frequent cyber-attacks of varying levels of
severity and threats to our business from a variety of bad actors,
many of whom attempt to gain unauthorized access to, steal or
compromise our confidential information and systems. For
example, we detected unauthorized occurrences on a portion of
our information technology systems in December 2023. We have
incurred, and may continue to incur, certain costs related to this
attack which may not be covered by our cyber liability insurance.
While we have implemented systems and processes designed to
protect against unauthorized access to or use of personal
information and other confidential information, and rely on
encryption and authentication technologies to effectively secure
transmission
of
such
information,
including
payment
information, there is no guarantee that they will be able to
prevent unauthorized access to our systems and information in
the future. Our facilities and systems, and those of third parties
on which we rely, are frequently the target of cyber-attacks of
varying levels of severity and have been, and may in the future be
vulnerable, and we may be unable to prevent, anticipate or
detect security breaches and data loss.
In addition, we face amplified cybersecurity risks as a result of
the number of employees we employ, including a number of
employees working remotely. These amplified risks include
increased demand on our information technology resources and
systems and an increase in the number of points of potential
attack on networks that we do not control, such as home WiFi
networks. Employees may intentionally or inadvertently cause
cybersecurity breaches that result in the unauthorized access to
our systems or the unauthorized release of personal or
confidential information.
VF and its consumers and customers could suffer harm if
valuable business data, or employee, consumer, customer and
other confidential and proprietary information were corrupted,
lost, accessed or misappropriated by third parties due to a
cyber-attack, a security failure in VF’s systems, or due to one of
our third-party service providers or our employees. Any such
breach, including, without limitation, the incident reported by VF
in
December
2023,
has
and
could
require
significant
expenditures
to
remediate;
could
cause
damage
to
our
reputation, to confidence in our e-commerce platforms and to
our relationships with customers, consumers, employees and
third parties on whom we rely; has and could result in business
disruption, negative media attention and lost sales; and could
expose us to risks of litigation, liability and increased scrutiny
from regulatory entities. In addition, as a result of recent
security breaches at a number of prominent retailers and other
companies, media and public scrutiny of information security
and privacy has become more intense and the regulatory
environment has become increasingly uncertain, rigorous and
complex. As a result, we may incur significant costs to comply
with laws regarding the privacy and security of personal
information and we may not be able to comply with new data
protection laws and regulations being adopted around the world.
Any failure to comply with the laws and regulations and
consumer expectations surrounding the privacy and security of
personal information could subject us to legal and reputational
risk,
including
significant
fines
and/or
litigation
for
non-
compliance in multiple jurisdictions, negative media coverage,
diminished consumer confidence and decreased attraction to
our brands, any of which could have a negative impact on
revenues and profits. In addition, while we maintain cyber
insurance policies, those existing insurance policies may not
adequately protect VF from all of the adverse effects and
damages that could be caused by a security breach, including
the incident reported by VF in December 2023. Moreover, if our
associates or vendors, intentionally or inadvertently, misuse
consumer data or are not transparent with consumers about
how we use their data, our brands, reputation and relationships
with consumers could be damaged.
We experienced a significant data security breach in December
2023 which could result in a number of potentially unknown
outcomes, including but not limited to, litigation, regulatory
investigations or enforcement actions, or reputational harm, any
of which could have a material impact on our business operations,
financial condition, or results of operations.
The cybersecurity incident we experienced in December 2023
included
the
encryption
of
certain
information
technology
systems and the theft of certain personal information and
business
information
through
unauthorized
access
to
our
information technology systems. As a result of the cybersecurity
incident, we may be subject to governmental investigations,
private litigation or other claims, which could result in fines,
other monetary relief, or injunctive relief that could materially
increase our data security costs, adversely impact how we
operate our systems and collect and use personal information.
If, as a result of any such governmental investigation, other
investigation or claim, we are found to be in violation of
applicable laws and regulations including, without limitation, any
applicable
data
privacy
and
information
security
laws
or
regulations,
we
could
be
subject
to
legal
risk,
including
government enforcement action and civil litigation, which could
adversely affect our business, reputation, financial condition or
results of operations. Defending any such litigation claim or
enforcement action, regardless of merit, and whether successful
or unsuccessful, and cooperating with regulatory investigations,
could be expensive and time-consuming and adversely affect our
business, reputation, results of operations or financial condition.
In addition, we may be adversely impacted by reputational harm
or a loss of confidence in the security and integrity of our
information technology systems among consumers, customers,
employees and business partners.
The development and use of AI, and the failure to use AI, present
risks and challenges that may negatively impact our business.
Our business is highly-competitive, and our success may require
the adoption of new and emerging technologies, such as AI, and
specifically generative AI, by us or our business partners. Failure
to adapt to a rapidly-changing technological environment could
result in negative impacts to our business.
We also face risks from the adoption of new technologies such
as AI if we or our business partners use them incorrectly or in
ways that introduce new risks. Our business partners may
incorporate AI tools into their offerings which may not meet
existing or rapidly-changing regulatory or industry standards
VF Corporation Fiscal 2024 Form 10-K
13
and may inhibit our or our business partners' ability to maintain
an adequate level of service.
The development of AI technologies is complex, and there are
technical challenges associated with achieving the desired level
of accuracy, efficiency, and reliability. The algorithms and
models utilized in generative AI systems may have limitations,
including biases, errors, or inability to handle certain data types
or scenarios. Furthermore, there is a risk of system failures,
disruptions,
or
vulnerabilities
that
could
compromise
the
integrity, security, or privacy of data inputs or the generated
content. These limitations or failures could result in reputational
harm, legal liabilities, or loss of consumer, customer, employee
or business partner confidence.
If we or our business partners use AI to make decisions that
affect consumers, employees or job applicants, the AI may be
subject to biases or other types of unfair decision-making that
may negatively impact those individuals and create legal or
reputational risk for us.
If we or our business partners use AI to create intellectual
property
(IP),
such
as
product
designs,
trademarks,
or
copyrightable text or code, we may be subject to IP rights claims
from third parties claiming ownership of, or demanding rights to
the IP that we or our business partners have developed using AI,
or we may face the risk of not being able to adequately secure
the rights to the IP created.
Cybersecurity
threat
actors
may
use
AI
tools,
including
generative AI, to deploy increasingly advanced attacks on our
and our business partners' information technology systems. The
increasing sophistication of cybersecurity attacks, including
through the use of AI, may create a demand for us to use more
and more sophisticated AI in our cybersecurity defense efforts.
We face risks that we will fail to combat the offensive use of AI
sufficiently or that we will fail to deploy defensive tools using AI
adequately, either because we are unable to anticipate the risks
accurately in a rapidly-evolving landscape or because we lack
the
knowledge
or
resources
to
adequately
address
the
cybersecurity threats and opportunities associated with AI.
Uncertainty in the legal regulatory regime relating to AI may
require significant resources to modify and maintain business
practices to comply with U.S. and non-U.S. laws, the nature of
which cannot be determined at this time. Several jurisdictions
around the globe, including the EU and certain U.S. states, have
already
proposed
or
enacted
laws
governing
AI.
Other
jurisdictions may decide to adopt similar or more restrictive
legislation that may render the use of such technologies
challenging. These obligations may make it harder for us to
conduct our business using AI, lead to regulatory fines or
penalties, require us to change our business practices, or
prevent or limit our use of AI. If we or our business partners
cannot use AI, or that use is restricted, our business may be less
efficient, or we may be at a competitive disadvantage. Any of
these factors could adversely affect our business, financial
condition, and results of operations.
There are risks associated with VF’s acquisitions, divestitures and
portfolio management.
Any
acquisitions,
divestitures
or
mergers
by
VF
will
be
accompanied by the risks commonly encountered in acquisitions
or divestitures of companies, businesses or brands. These risks
include, among other things, higher than anticipated acquisition
or divestiture costs and expenses, the difficulty and expense of
integrating or separating the operations, systems and personnel
of the companies, businesses or brands, the loss of key
employees
and
consumers
as
a
result
of
changes
in
management
or
ownership,
and
slower
progress
toward
environmental, social and governance goals given challenges
with data acquisition and integration, the difficulty of accessing
and disclosing sufficient environmental, social and governance
data to comply with current and emerging environmental, social
and governance regulations, and integration of environmental,
social and governance initiatives overall. In addition, geographic
distances may make integration of acquired businesses more
difficult. We may not be successful in overcoming these risks or
any
other
problems
encountered
in
connection
with
any
acquisitions or divestitures. Moreover, failure to effectively
manage VF’s portfolio of brands in line with growth targets and
shareholder
expectations,
including
acquisition
choices,
integration approach, transaction pricing and divestiture timing
could result in unfavorable impacts to growth and value creation.
Our acquisitions may cause large one-time expenses or create
goodwill or other intangible assets that could result in significant
impairment charges. We also make certain estimates and
assumptions in order to determine purchase price allocation and
estimate the fair value of assets acquired and liabilities
assumed. If our estimates or assumptions used to value these
assets and liabilities are not accurate, we may be exposed to
losses that may be material.
The Supreme
® brand employs a different business model than
the rest of our brands and is subject to unique risks because of
its focus on frequent, weekly and limited product drops through
the direct-to-consumer channel. The Supreme business model
has different characteristics from the business models which VF
and its brands have historically employed. These different
characteristics
may
include
product
volume
requirements,
product seasonality, product design and production rates, and
consumer concentrations and demand. VF's failure to make the
necessary adaptations to its operations to address these
different characteristics, complexities and market dynamics
could adversely affect VF's revenue, business condition and
results of operations.
VF
uses
third-party
suppliers
and
manufacturing
facilities
worldwide for its raw materials and finished products, which
poses risks to VF’s business operations.
During
Fiscal
2024,
VF’s
products
were
sourced
from
independent manufacturers primarily located in Asia. Any of the
following could impact our ability to source or deliver VF
products, or our cost of sourcing or delivering products and, as a
result, our profitability:
•
political or labor instability in countries where VF’s
contractors and suppliers are located;
•
inflationary pressures or changes in local economic
conditions
in
countries
where
VF’s
contractors
and
suppliers are located;
•
public health issues, such as the COVID-19 pandemic,
have resulted in (or could continue to result in) closed
factories, reduced workforces, scarcity of raw materials
and scrutiny or embargoing of goods produced in infected
areas;
•
political or military conflict could cause a delay in the
transportation of products to VF and an increase in
transportation costs;
14
VF Corporation Fiscal 2024 Form 10-K
•
disruption at ports of entry, could cause delays in product
availability and increase transportation times and costs;
•
heightened terrorism security concerns could subject
imported or exported goods to additional, more frequent
or lengthier inspections, leading to delays in deliveries or
impoundment of goods for extended periods;
•
increased risk of detention by customs officials of raw
materials
or
goods
used
by
our
suppliers
in
the
manufacture of certain of our products, and increased
risk of detention of our products;
•
decreased scrutiny by customs officials for counterfeit
goods, leading to more counterfeit goods and reduced
sales of VF products, increased costs for VF’s anti-
counterfeiting measures and damage to the reputation of
its brands;
•
disruptions at manufacturing or distribution facilities or in
shipping and transportation locations caused by natural
and man-made disasters (including potential effects from
climate change);
•
imposition of regulations and quotas relating to imports
and our ability to adjust timely to changes in trade
regulations could limit our ability to source products in
cost-effective countries that have the required labor and
expertise;
•
imposition of duties, taxes and other charges on imports;
and
•
imposition or the repeal of laws that affect intellectual
property rights.
Although no single supplier and no one country is critical to VF’s
production needs, if we were to lose a supplier it could result in
interruption of finished goods shipments to VF, cancellation of
orders by customers and termination of relationships. This,
along with the damage to our reputation, could have a material
adverse effect on VF’s revenues and, consequently, our results
of operations.
In addition, although we audit our third-party material suppliers
and
contracted
manufacturing
facilities
and
set
strict
compliance standards, actions by a third-party supplier or
manufacturer that fail to comply could result in such third-party
supplier failing to manufacture products that consistently meet
our quality standards, violating human rights, engaging in
unfavorable labor practices or providing unfavorable working
conditions that negatively impact worker health, safety and
wellness. Such noncompliance could expose VF to claims for
damages, financial penalties, delay or inability to clear goods
through
customs
authorities,
operational
disruptions
and
reputational harm, any of which could have a material adverse
effect on our business and operations.
A significant portion of VF’s revenues and gross profit is derived
from a small number of large customers. The loss of any of these
customers or the inability of any of these customers to pay VF
could substantially reduce VF’s revenues and profits.
A few of VF’s customers account for a significant portion of
revenues.
Sales
to
VF’s
ten
largest
customers
were
approximately 14% of total revenues in Fiscal 2024, with our
largest customer accounting for approximately 2% of revenues.
Sales to our customers are generally on a purchase order basis
and not subject to long-term agreements. A decision by any of
VF’s major customers to significantly decrease the volume of
products
purchased
from
VF
could
substantially
reduce
revenues and have a material adverse effect on VF’s financial
condition and results of operations.
Talent acquisition, management, engagement and retention are
important factors in VF’s success. Turnover in VF’s leadership or
other key positions may have a material adverse effect on VF.
Our future success also depends on our ability to acquire,
develop, and retain talent needed to mobilize VF against our
current and future needs, and sustain our culture as a
performance-driven company that is committed to its values and
having a positive impact on people and the planet. Competition
for experienced, well-qualified and diverse personnel is intense
and we may not be successful in attracting, developing, and
retaining such personnel, which could impact VF’s ability to
remain competitive. Our ability to acquire, develop and retain
personnel has been, and may continue to be impacted by,
challenges and structural shifts in the labor market, which has
experienced and may continue to experience wage inflation,
labor shortages, increased employee turnover, changes in
availability of the workforce and a shift toward remote work.
Additionally, changes to our office environments, the adoption of
new work models, and our requirements and/or expectations
about when or how often certain employees work on-site or
remotely may not meet the expectations of our employees. As
businesses increasingly operate remotely, traditional geographic
competition for talent may change in ways that we cannot
presently predict. If our employment proposition is not perceived
as favorable compared to other companies, it could negatively
impact our ability to acquire and retain our employees. If we are
unable to retain, acquire, and engage talented employees with
the appropriate skill sets, or if changes to our organizational
structure, operating results, or business model adversely affect
morale or retention, we may not achieve our objectives, our
relationships with our customers, consumers or other third
parties may be disrupted, and our results of operations could be
adversely impacted.
VF depends on the services and management experience of its
executive officers and business leaders who have substantial
experience and expertise in VF’s business, and in developing and
retaining employees. This loss of experience and expertise can
be mitigated through successful hiring and transition, but there
can be no assurance that we will be successful in such efforts.
Acquiring and retaining qualified senior leadership may be more
challenging under adverse business conditions. The unexpected
loss of services of one or more of these individuals or the
inability to effectively identify a suitable successor to a key role
could have a material adverse effect on VF.
On June 16, 2023, VF’s Board of Directors approved the
appointment
of
Bracken
Darrell
as
President
and
Chief
Executive Officer, effective as of July 17, 2023. This recent
change in our executive leadership team, along with other
changes in the roles and responsibilities among our executive
officers, and any future changes resulting from the hiring or
departure of executive officers, could disrupt our business and
negatively affect our ability to recruit and retain talent. Such
leadership transitions can be inherently difficult to manage;
inadequate transitions may cause disruption to our business,
including to our relationships with our associates and other third
parties. Further, these changes also increase our dependency on
other remaining members of our global leadership team, and
the departure of whom could be particularly disruptive in light of
the recent leadership transitions.
VF Corporation Fiscal 2024 Form 10-K
15
VF’s direct-to-consumer business includes risks that could have
an adverse effect on its results of operations.
VF sells merchandise direct to consumer through VF-operated
stores and e-commerce sites. Its direct-to-consumer business
is subject to numerous risks that could have a material adverse
effect on its results. Risks include, but are not limited to, (i) U.S.
or international resellers purchasing merchandise and reselling
it outside VF’s control, (ii) failure or interruption of the systems
that operate the stores and websites, and their related support
systems, including due to computer viruses, theft of consumer
information,
privacy
concerns,
telecommunication
failures,
electronic
break-ins
and
similar
disruptions,
technical
malfunctions, and natural disasters or other causes, (iii) retail
and credit card fraud and theft, (iv) risks related to VF’s direct-
to-consumer distribution centers and processes, (v) shift in
consumer preferences away from retail stores, and (vi) loss of
inventory due to damage, theft (including from organized retail
crime), and other causes. Risks specific to VF’s e-commerce
business also include (i) diversion of sales from VF stores or
wholesale customers, (ii) difficulty in recreating the in-store
experience through direct channels, (iii) liability for online
content, (iv) changing patterns of consumer behavior, (v) intense
competition from online retailers, and (vi) online fraud. VF’s
failure to successfully respond to these risks might adversely
affect sales in its e-commerce business, as well as damage its
reputation and brands.
Our VF-operated stores and e-commerce business require
substantial
fixed
investments
in
equipment
and
leasehold
improvements, information systems, inventory and personnel.
We have entered into substantial operating lease commitments
for retail space. Due to the high fixed-cost structure associated
with our direct-to-consumer operations, a decline in sales or the
closure of or poor performance of individual or multiple stores
could result in significant lease termination costs, write-offs of
equipment and leasehold improvements and employee-related
costs.
VF’s net sales depend on the volume of traffic to its stores and the
availability of suitable lease space.
A significant portion of our revenues are direct-to-consumer
sales
through
VF-operated
stores.
In
order
to
generate
consumer traffic, we locate many of our stores in prominent
locations
within
successful
retail
shopping
centers
or
in
fashionable shopping districts. Our stores benefit from the ability
of the retail center and other attractions in an area to generate
consumer traffic in the vicinity of our stores. Part of our future
growth is significantly dependent on our ability to operate stores
in desirable locations with capital investment and lease costs
providing the opportunity to earn a reasonable return. We cannot
control the development of new shopping centers or districts;
the availability or cost of appropriate locations within existing or
new shopping centers or districts; competition with other
retailers for prominent locations; or the success of individual
shopping centers or districts. Further, if we are unable to renew
or replace our existing store leases or enter into leases for new
stores on favorable terms, or if we violate the terms of our
current leases, our growth and profitability could be harmed. All
of these factors may impact our ability to meet our growth
targets and could have a material adverse effect on our financial
condition or results of operations.
VF may be unable to protect its trademarks and other intellectual
property rights.
VF’s trademarks and other intellectual property rights are
important to its success and its competitive position. VF is
susceptible to others copying its products and infringing its
intellectual property rights, especially with the shift in product
mix to higher priced brands and innovative new products in
recent years. Some of VF’s brands, such as The North Face
®,
Vans
®, Timberland
®, Dickies
® and Supreme
® enjoy significant
worldwide consumer recognition, and the higher pricing of
certain of the brands' products creates additional risk of
counterfeiting and infringement.
VF’s trademarks, trade names, patents, trade secrets and other
intellectual
property
are
important
to
VF’s
success.
Counterfeiting
of
VF’s
products
or
infringement
on
its
intellectual property rights could diminish the value of our
brands and adversely affect VF’s revenues. Actions we have
taken to establish and protect VF’s intellectual property rights
may not be adequate to prevent copying of its products by others
or to prevent others from seeking to invalidate its trademarks or
block sales of VF’s products as a violation of the trademarks and
intellectual property rights of others. In addition, unilateral
actions in the U.S. or other countries, including changes to or the
repeal of laws recognizing trademark or other intellectual
property
rights,
such
as
the
Russian
government's
announcements that it would not protect intellectual property
rights, including patent rights and rights that could block
parallel imports of gray market goods, as a result of the
sanctions imposed on Russia in connection with the Russia-
Ukraine conflict, could have an impact on VF’s ability to enforce
those rights.
The value of VF’s intellectual property could diminish if others
assert
rights
in
or
ownership
of
trademarks
and
other
intellectual property rights of VF, or trademarks that are similar
to VF’s trademarks, or trademarks that VF licenses from others.
We may be unable to successfully resolve these types of
conflicts to our satisfaction. In some cases, there may be
trademark owners who have prior rights to VF’s trademarks
because the laws of certain foreign countries may not protect
intellectual property rights to the same extent as do the laws of
the U.S. In other cases, there may be holders who have prior
rights to similar trademarks.
There have been, and there may in the future be, opposition and
cancellation proceedings from time to time with respect to some
of VF's intellectual property rights. In some cases, litigation may
be necessary to protect or enforce our trademarks and other
intellectual property rights. Furthermore, third parties may
assert intellectual property claims against us, and we may be
subject
to
liability,
required
to
enter
into
costly
license
agreements, if available at all, required to rebrand our products
and/or prevented from selling some of our products if third
parties successfully oppose or challenge our trademarks or
successfully claim that we infringe, misappropriate or otherwise
violate their trademarks, copyrights, patents or other intellectual
property
rights.
Bringing
or
defending
any
such
claim,
regardless of merit, and whether successful or unsuccessful,
could be expensive and time-consuming and have a negative
effect on VF's business, reputation, results of operations and
financial condition.
16
VF Corporation Fiscal 2024 Form 10-K
If VF encounters problems with its distribution system, VF’s ability
to deliver its products to the market could be adversely affected.
VF relies on owned or leased VF-operated and third party-
operated distribution facilities to warehouse and ship product to
VF customers. VF’s distribution system includes computer-
controlled and automated equipment, which may be subject to a
number of risks related to security or computer viruses, the
proper operation of software and hardware, power interruptions
or other system failures. Because substantially all of VF’s
products are distributed from a relatively small number of
locations,
VF’s
operations
could
also
be
interrupted
by
earthquakes, floods, fires or other natural disasters or other
events outside VF's control affecting its distribution centers,
including political or labor instability. We maintain business
interruption insurance under our property and cyber insurance
policies, but it may not adequately protect VF from the adverse
effects that could be caused by significant disruptions in VF’s
distribution facilities. In addition, VF’s distribution capacity is
dependent on the timely performance of services by third
parties, including the transportation of product to and from its
distribution
facilities.
If
we
encounter
problems
with
our
distribution system, our ability to meet customer expectations,
manage
inventory,
complete
sales
and
achieve
operating
efficiencies could be materially adversely affected.
VF’s business and operations could be materially and adversely
affected if it fails to create systems of monitoring, prevention,
response, crisis management, continuity and recovery to mitigate
natural or man-made economic, public health, political or
environmental disruptions.
Business resiliency is important to VF’s success because there
are a variety of risks generally associated with doing business on
a global basis that may involve natural or man-made economic,
public health (including the COVID-19 pandemic), political or
environmental
disruptions.
Disruptions,
and
government
responses to any disruption, could cause, among other things, a
decrease in consumer spending that would negatively impact
our sales, delays in the fulfillment or cancellation of customer
orders or disruptions in the manufacture and shipment of
products, increased costs and a negative impact on our
reputation
and
long-term
growth
plans.
The
impact
of
disruptions may vary based on the length and severity of the
disruption. VF’s failure to create and implement systems of
monitoring, prevention, response, crisis management, continuity
and recovery to anticipate, prepare, prevent, mitigate, and
respond to potential threats impacting its business, people,
processes and facilities could result in extended disruptions and
unpredictability.
LEGAL, REGULATORY AND COMPLIANCE RISKS
VF’s operations and earnings may be affected by legal, regulatory,
political and economic uncertainty and risks.
Our ability to maintain the current level of operations in our
existing markets and to capitalize on growth in existing and new
markets is subject to legal, regulatory, political and economic
uncertainty and risks. These include the burdens of complying
with U.S. and international laws and regulations, and changes in
regulatory requirements.
Changes in regulatory, geopolitical policies and other factors
may adversely affect VF’s business or may require us to modify
our current business practices. While enactment of any such
change is not certain, if such changes were adopted or if we
failed to anticipate and mitigate the impact of such changes, our
costs could increase, which would reduce our earnings. For
example, on January 31, 2020, the United Kingdom ceased to be
a member state of the European Union (commonly referred to as
“Brexit”). The United Kingdom and the EU subsequently reached
a provisional post-Brexit Trade and Cooperation Agreement that
contains new rules governing the relationship between the
United Kingdom and Europe, including with respect to trade,
travel and immigration. Brexit could adversely affect European
and worldwide economic and market conditions and could
contribute to instability in global financial and foreign exchange
markets. Any of these effects of Brexit, and others we cannot
anticipate could adversely affect our business, results of
operations and financial condition.
Beginning in February 2022, in response to the military conflict
between Russia and Ukraine, the U.S. and other North Atlantic
Treaty Organization member states, as well as non-member
states, announced targeted economic sanctions on Russia,
including certain Russian citizens and enterprises, and the
continuation of the conflict may trigger additional economic and
other sanctions. To date, we have experienced revenue impacts
due to business model changes in Russia, currency devaluation,
and costs associated with compliance with sanctions and other
regulations. For example, we have closed all VF-operated retail
stores, terminated all leases and ceased all direct-to-consumer
e-commerce operations in Russia. In addition, as of March 30,
2024, there was approximately $30.4 million of cash in Russia
that, although it can be used without limits within Russia, is
currently limited on movement out of Russia. Further impacts of
the conflict could include macro financial impacts resulting from
the exclusion of Russian financial institutions from the global
banking system, volatility in foreign exchange rates and interest
rates, inflationary pressures on raw materials and energy,
heightened cybersecurity threats, harm to employee health and
safety,
reputational
harm,
increase
in
counterfeiting
and
intellectual property infringement activity, nationalization of our
assets, and additional costs associated with compliance with
sanctions and other regulations and risks associated with failure
to comply with the same. Although our operations in Russia are
not significant, the conflict could escalate and result in broader
economic and security concerns, including in other geographies,
which could in turn adversely affect our business, financial
condition or results of operations.
As a result of our global operations, we are subject to a number
of risks impacting our employees working outside the U.S.,
including regulations that may differ from or be more stringent
than analogous U.S. regulations, political or economic instability,
cross-border political tensions and challenges in effectively
managing employees in foreign jurisdictions. VF is subject to
increased tax and regulatory risks related to employees working
remotely or otherwise in a tax location other than their normal
work location or residential state or country. These changes
have created, and continue to create, challenges in managing
our tax and regulatory compliance as well as acquiring and
retaining cross-border talent, which could adversely affect our
business, results of operations and financial condition.
VF Corporation Fiscal 2024 Form 10-K
17
Changes to U.S. or international trade policy, tariff and import/
export regulations or our failure to comply with such regulations
may have a material adverse effect on our reputation, business,
financial condition and results of operations.
Changes in U.S. or international social, political, regulatory and
economic conditions or in laws and policies governing foreign
trade,
manufacturing,
development
and
investment
in
the
territories or countries where we currently sell our products or
conduct our business, as well as any negative sentiment toward
the U.S. as a result of such changes, could adversely affect our
business. For example, the U.S. government has instituted
changes in trade policies imposing higher tariffs on imports into
the U.S. from China. Tariffs and other changes in U.S. trade
policy have in the past and could continue to trigger retaliatory
actions by affected countries, and certain foreign governments
have
instituted,
considered
or
are
considering
imposing
retaliatory measures on certain U.S. goods. VF, similar to many
other multinational corporations, does a significant amount of
business that would be impacted by changes to the trade policies
of the U.S. and foreign countries (including governmental action
related to tariffs, international trade agreements, or economic
sanctions). Such changes have the potential to adversely impact
the U.S. economy or certain sectors thereof, our industry and the
global demand for our products, and as a result, could have a
material adverse effect on our business, financial condition and
results of operations. In addition, the Uyghur Forced Labor
Prevention Act and other similar laws may lead to greater supply
chain compliance costs and delays to us and to our suppliers and
customers.
Changes in tax laws could increase our worldwide tax rate and tax
liabilities and materially affect our financial position and results of
operations.
We are subject to taxation in the U.S. and numerous foreign
jurisdictions. The current U.S. Presidential Administration has
proposed a higher U.S. federal corporate tax rate and increased
taxation of offshore income. Such action could have a material
effect on our financial position and results of operations. In
addition, many countries in the EU and around the globe have
adopted and/or proposed changes to current tax laws. Further,
organizations such as the Organisation for Economic Co-
operation and Development ("OECD") have published action
plans that, if adopted by countries where we do business, could
increase our tax obligations and compliance costs in these
countries. More specifically, the OECD has released rules to
address tax challenges arising from the digitalization of the
economy (i.e., Global Anti Base Erosion ("GloBE") model rules or
"Pillar Two"). Certain members have already begun to enact at
least portions of the model rules that are effective for tax years
beginning on or after January 1, 2024. The ultimate outcome of
these rules that are enacted into law in each country may result
in a material financial impact to VF.
Due to the large scale of our U.S. and international business
activities, many of these enacted and proposed changes to the
taxation of our activities could increase our worldwide effective
tax
rate
and
harm
our
financial
position
and
results
of
operations.
We may have additional tax liabilities from new or evolving
government or judicial interpretation of existing tax laws.
As a global company, we determine our income tax liability in
various tax jurisdictions based on an analysis and interpretation
of U.S. and international tax laws and regulations. This analysis
requires a significant amount of judgment and estimation and is
often based on various assumptions about the future actions of
tax authorities. These determinations are the subject of periodic
U.S. and international tax audits and court proceedings. In
particular, tax authorities and the courts have increased their
focus on income earned in no- or low-tax jurisdictions or income
that is not taxed in any jurisdiction. Tax authorities have also
become skeptical of special tax rulings provided to companies
offering lower taxes than may be applicable in other countries.
Although we accrue for uncertain tax positions, our accrual may
be insufficient to satisfy unfavorable findings. Unfavorable audit
findings,
or
court
interpretations
(involving
VF
or
other
companies with similar tax profiles) may result in payment of
taxes, fines and penalties for prior periods and higher tax rates
in future periods, which may have a material adverse effect on
our financial condition, results of operations or cash flows.
Our business is subject to national, state and local laws and
regulations for environmental, consumer protection, corporate
governance, competition, employment, privacy, safety and other
matters. The costs of compliance with, or the violation of, such
laws and regulations by VF or by independent suppliers who
manufacture products for VF could have an adverse effect on our
operations and cash flows, as well as on our reputation.
Our business is subject to comprehensive national, state and
local laws and regulations on a wide range of matters such as
environmental, climate change, consumer protection, social,
employment, privacy, safety and other matters. VF could be
adversely affected by costs of compliance with or violations of
those laws and regulations. In addition, while we do not control
their business practices, we require third-party suppliers to
operate
in
compliance
with
applicable
laws,
rules
and
regulations regarding working conditions, safety, employment
practices, the environment and other areas. The costs of
products purchased by VF from independent contractors could
increase due to the costs of compliance by those contractors.
Failure by VF or its third-party suppliers to comply with such
laws and regulations, as well as with ethical, social, product,
safety, labor and environmental standards, or related political
considerations, could result in a material adverse effect on our
financial condition, results of operations or cash flows, including
resulting in interruption of finished goods shipments to VF,
extensive
remediation
efforts,
cancellation
of
orders
by
customers and termination of relationships. If VF or one of our
independent
contractors
violates
labor
or
other
laws,
implements improper labor or other business practices or takes
other actions that are generally regarded as unethical, it could
result in unwanted or negative media attention, jeopardize our
reputation and potentially lead to various adverse consumer
actions, including boycotts that may reduce demand for VF’s
merchandise. Damage to VF’s reputation or loss of consumer
confidence for any of these or other reasons could have a
material adverse effect on VF’s results of operations, financial
condition and cash flows, as well as require additional resources
to rebuild VF’s reputation.
Our operations are also subject to compliance with the U.S.
Foreign Corrupt Practices Act (the “FCPA”) and other anti-
bribery laws applicable to our operations. Although we have
policies and procedures to address compliance with the FCPA
and similar laws, there can be no assurance that all of our
employees, agents and other partners will not take actions in
violation of our policies. Any such violation could subject us to
18
VF Corporation Fiscal 2024 Form 10-K
sanctions or other penalties that could negatively affect our
reputation, business and operating results.
Climate change and increased focus by governmental and non-
governmental organizations, customers, consumers and investors
on sustainability issues, including those related to climate change
and socially responsible activities, may adversely affect our
business and financial results and damage our reputation.
Climate change is occurring around the world and may impact
our business in numerous ways. Failure to monitor, adapt, build
resilience, and develop solutions against the physical and
transitional impacts from climate change may lead to revenue
loss,
market
share
loss,
business
interruptions,
physical
damage to our facilities, and rising costs. Climate change could
lead to increased volatility due to physical impacts of climate
change on the supply chain, including the availability, quality and
cost of raw materials. Increased frequency and severity of
extreme weather events (such as storms and floods) could cause
increased
incidence
of
disruption
to
the
production
and
distribution of our products, increased costs for our business,
including maintenance, repair, utilities and insurance costs, and
an adverse impact on consumer demand and spending.
Investor
advocacy
groups,
certain
institutional
investors,
investment funds, other market participants, shareholders, and
other stakeholders, including non-governmental organizations,
employees, and consumers, have focused increasingly on social
and
environmental
and
related
sustainability
practices
of
companies. These parties have placed increased importance on
the implications of the social cost of their investments and/or
have
higher
expectations
of
corporate
conduct.
If
our
environmental, social and governance practices do not meet
investor or other stakeholder expectations and standards,
including related to climate change, sustainability, social impact,
and human rights, and do not meet related regulations and
expectations for increased transparency, which continue to
evolve, our brands, reputation and employee retention may be
negatively
impacted.
In
addition,
governmental
and
self-
regulatory organizations, including the Securities and Exchange
Commission ("SEC"), the New York Stock Exchange ("NYSE") and
the European Financial Reporting Advisory Group ("EFRAG"),
promulgate rapidly changing rules and regulations addressing
environmental, social and governance topics. These rules and
regulations continue to evolve in scope and complexity and have
resulted in, and are likely to continue to result in, increased
expenses and increased management time and attention spent
complying with or meeting such rules and regulations. For
example, collection of environmental, social and governance
data, developing and acting on initiatives within the scope of
environmental,
social
and
governance,
and
collecting,
measuring and reporting environmental, social and governance
related information and targets can be costly, difficult and time
consuming and is subject to evolving reporting standards,
including climate-related disclosure requirements and the EU's
environmental,
social
and
governance-related
disclosure
requirements set forth in the Corporate Sustainability Reporting
Directive, and similar proposals and laws by other domestic and
international regulatory bodies. If our environmental, social and
governance related data, information, processes or reporting are
incomplete or inaccurate, our reputation, business, financial
performance and growth could be adversely affected. For
example, customer expectations with respect to our ability to
meet rapidly evolving environmental, social and governance
reporting standards in the EU member states and other
countries may impact our ability to do business with customers,
or otherwise present barriers to entry, which could result in an
adverse impact on our business, financial performance and
growth.
It is possible that stakeholders may oppose our environmental,
social and governance practices or disagree with them. It is also
possible that stakeholders may not be satisfied with our
environmental, social and governance practices or the speed of
their adoption. While we may announce voluntary environmental,
social and governance targets, we may not be able to meet such
targets in the manner or on such a timeline as initially
contemplated, including, but not limited to as a result of
unforeseen
costs
or
technical
difficulties
associated
with
achieving such results. Achieving environmental, social and
governance targets will require significant efforts from us and
other stakeholders, such as our suppliers and other third
parties, and also require capital investment, additional costs,
and the development of technology that may not currently exist.
In addition, we could be criticized for the scope or nature of such
targets, or for any revision to those targets. We could also incur
additional costs and require additional resources to monitor,
report, and comply with various environmental, social and
governance practices and regulations. Also, our failure, or
perceived failure, to manage reputational threats and meet
stakeholder expectations or shifting consumer and customer
preferences
with
respect
to
environmentally
or
socially
responsible
activities
and
products
and
packaging
and
sustainability commitments and regulations could negatively
impact our brand, image, reputation, credibility, employee
retention, and the willingness of our customers and suppliers to
do business with us.
FINANCIAL RISKS
VF’s balance sheet includes a significant amount of intangible
assets and goodwill. A decline in the fair value of an intangible
asset or of a business unit could result in an asset impairment
charge, such as the recent impairment charges related to the
Timberland
®, Dickies
®and Icebreaker
® reporting unit goodwill.
VF’s policy is to evaluate indefinite-lived intangible assets and
goodwill for possible impairment as of the beginning of the
fourth quarter of each year, or whenever events or changes in
circumstances indicate that the fair value of such assets may be
below their carrying amount. In addition, intangible assets that
are being amortized are tested for impairment whenever events
or circumstances indicate that their carrying value may not be
recoverable. For these impairment tests, we use various
valuation methods to estimate the fair value of our business
units and intangible assets. If the fair value of an asset is less
than its carrying value, we would recognize an impairment
charge for the difference.
During the third quarter of Fiscal 2024, due to continued
weakness and downturn in financial results, combined with
expectations of a slower recovery than previously anticipated, VF
determined that a triggering event had occurred requiring
impairment testing of the Timberland and Dickies reporting unit
goodwill and indefinite-lived trademark intangible assets. As a
result of the impairment testing performed, VF recorded
goodwill impairment charges of $195.3 million and $61.8 million
related
to
the
Timberland
and
Dickies
reporting
units,
VF Corporation Fiscal 2024 Form 10-K
19
respectively. The goodwill impairment related to the reduction in
financial projections for both reporting units.
During the fourth quarter of Fiscal 2024, in connection with its
annual impairment testing, VF performed a quantitative analysis
of the Icebreaker reporting unit goodwill and indefinite-lived
trademark intangible asset. As a result of the impairment testing
performed, VF recorded an impairment charge of $38.8 million
to the Icebreaker reporting unit goodwill. The impairment
related to lower financial projections.
During the fourth quarter of Fiscal 2024, due to the continued
downturn in financial results and weakness in the wholesale
channel, combined with expectations of a slower recovery, VF
determined that a triggering event had occurred requiring
additional impairment testing of the Timberland reporting unit
goodwill and indefinite-lived trademark intangible assets. As a
result of the impairment testing performed, VF recorded an
impairment charge of $211.7 million related to the Timberland
reporting unit goodwill. The impairment related to lower
financial projections.
It is possible that we could have another impairment charge for
goodwill or trademark and trade name intangible assets in
future periods if (i) the businesses do not perform as projected,
(ii) overall economic conditions in Fiscal 2025 or future years
vary from our current assumptions (including changes in
discount rates and foreign currency exchange rates), (iii)
business conditions or our strategies for a specific business unit
change from our current assumptions, (iv) investors require
higher rates of return on equity investments in the marketplace,
or
(v)
enterprise
values
of
comparable
publicly
traded
companies, or of actual sales transactions of comparable
companies, were to decline, resulting in lower comparable
multiples of revenues and earnings before interest, taxes,
depreciation and amortization and, accordingly, lower implied
values of goodwill and intangible assets. Any future impairment
charge for goodwill or intangible assets could have a material
effect on our consolidated financial position or results of
operations.
Fluctuations in wage rates and the price, availability and quality of
raw materials and finished goods could increase costs.
Fluctuations in the price, availability and quality of purchased
finished goods or the fabrics, leather, cotton or other raw
materials used therein could have a material adverse effect on
VF’s cost of goods sold or its ability to meet its customers’
demands. Prices of purchased finished products may depend on
wage rate increases required by legal or industry standards in
Asia
and
other
geographic
areas
where
our
independent
contractors are located, as well as increasing freight costs from
those regions. Inflation, including as a result of inflationary
pressures related to global supply chain disruptions, can also
have a long-term impact on us because increasing costs of
materials
and
labor
may
impact
our
ability
to
maintain
satisfactory margins. For example, the cost and availability of
the materials that are used in our products, such as oil-related
commodity prices and other raw materials, such as cotton, dyes
and chemical and other costs, such as fuel, energy and utility
costs, can fluctuate significantly as a result of inflation in
addition to many other factors, including general economic
conditions and demand, crop yields, energy prices, weather
patterns, water supply quality and availability, public health
issues (such as the COVID-19 pandemic) and speculation in the
commodities markets. A significant portion of our products also
are manufactured in other countries and declines in the values
of the U.S. dollar may result in higher manufacturing costs. In
the future, VF may not be able to offset cost increases with other
cost reductions or efficiencies or to pass higher costs on to its
customers. This could have a material adverse effect on VF’s
results of operations, liquidity and financial condition.
VF’s business is exposed to the risks of foreign currency exchange
rate fluctuations. VF’s hedging strategies may not be effective in
mitigating those risks.
A growing percentage of VF’s total revenues (approximately 54%
in Fiscal 2024) is derived from markets outside the U.S. Many of
VF’s international businesses operate in functional currencies
other than the U.S. dollar. Changes in currency exchange rates
affect the U.S. dollar value of the foreign currency-denominated
amounts at which VF’s international businesses purchase
products, incur costs or sell products. In addition, for VF’s U.S.-
based businesses, the majority of products are sourced from
independent contractors located in foreign countries. As a
result, the costs of these products are affected by changes in the
value of the relevant currencies. Furthermore, much of VF’s
licensing revenue is derived from sales in foreign currencies.
Changes in foreign currency exchange rates could have an
adverse impact on VF’s financial condition, results of operations
and cash flows.
In accordance with our operating practices, we hedge a
significant portion of our foreign currency transaction exposures
arising in the ordinary course of business to reduce risks in our
cash flows and earnings. Our hedging strategy may not be
effective in reducing all risks, and no hedging strategy can
completely insulate VF from foreign exchange risk.
Further, our use of derivative financial instruments may expose
VF to counterparty risks. Although VF only enters into hedging
contracts with counterparties having investment grade credit
ratings, it is possible that the credit quality of a counterparty
could be downgraded or a counterparty could default on its
obligations, which could have a material adverse impact on VF’s
financial condition, results of operations and cash flows.
Our ability to obtain financing on favorable terms, if needed, could
be adversely affected by geopolitical risk and volatility in the
capital markets, including interest rate risks.
Any disruption in the capital markets could limit the availability
of funds or the ability or willingness of financial institutions to
extend capital to VF in the future. Future volatility in the financial
and credit markets, including adverse interest rates, could make
it more difficult for us to obtain financing or refinance existing
debt, on terms that would be acceptable to us. This disruption or
volatility
could
adversely
affect
our
liquidity
and
funding
resources or significantly increase our cost of capital. An
inability to access capital and credit markets may have an
adverse effect on our business, results of operations, financial
condition and cash flows. In addition, if the U.S. or another
material country's government were to default on its debt
obligations, the U.S. and global capital markets would be
adversely affected and our liquidity and cost of capital would be
adversely impacted.
20
VF Corporation Fiscal 2024 Form 10-K
VF’s indebtedness could have a material adverse effect on its
business, financial condition and results of operations and prevent
VF from fulfilling its financial obligations, and VF may not be able
to maintain its current credit ratings, may not continue to pay
dividends or repurchase its common stock and may not remain in
compliance with existing debt covenants.
As of March 30, 2024, VF had approximately $6.0 billion of debt
outstanding. VF’s debt and interest payment requirements could
have important consequences on its business, financial condition
and results of operations. For example, they could:
•
require VF to dedicate a substantial portion of its cash
flow from operations to repaying its indebtedness, which
would reduce the availability of its cash flow to fund
working
capital
requirements,
capital
expenditures,
future acquisitions, dividends, repurchase VF’s common
stock and for other general corporate purposes;
•
limit VF’s flexibility in planning for or reacting to general
adverse economic conditions or changes in its business
and the industries in which it operates;
•
place VF at a competitive disadvantage compared to its
competitors that have less indebtedness outstanding; and
•
negatively affect VF's credit ratings and limit, along with
the financial and other restrictive covenants in VF’s debt
documents and its ability to borrow additional funds.
VF's credit ratings may impact the cost and availability of future
borrowings. As a result of recent downgrades by S&P Global Inc.
and Moody's Investor Services, Inc., VF's global credit facility and
term loan were subject to interest rate adjustments. In addition,
VF may incur substantial additional indebtedness in the future to
fund acquisitions, repurchase common stock or fund other
activities for general business purposes. If VF incurs additional
indebtedness, it may limit VF’s ability to access the debt capital
markets or other forms of financing in the future and may result
in increased borrowing costs.
Although VF has historically declared and paid quarterly cash
dividends on its common stock and has been authorized to
repurchase its stock subject to certain limitations under its
share repurchase programs, any determinations by the Board of
Directors to continue to declare and pay cash dividends on VF’s
common stock or to repurchase VF’s common stock will be
based
primarily
upon
VF’s
financial
condition,
results
of
operations and business requirements, its access to debt capital
markets or other forms of financing, the price of its common
stock in the case of the repurchase program and the Board of
Directors’
continuing
determination
that
the
repurchase
programs and the declaration and payment of dividends are in
the best interests of VF’s shareholders and are in compliance
with all laws and agreements applicable to the repurchase and
dividend programs. Our cash dividend payments may change
from time to time, and we cannot provide assurance that we will
increase our cash dividend payment or declare cash dividends in
any particular amount or at all. A reduction in the amount or
suspension of our cash dividend payments or a reduction in the
level or discontinuation of our share repurchases could have a
negative effect on VF’s stock price. Beginning in the fourth
quarter of Fiscal 2023, we reduced the cash dividend, which is
expected to support the return to VF's target leverage ratio and
provide additional financial flexibility. In addition, under VF's
$2.25 billion senior unsecured revolving line of credit, the total
amount of certain payments, including cash dividends, is limited
to $500.0 million annually, on a calendar-year basis.
VF is required to comply with certain financial and other
restrictive debt covenants in its debt documents. Failure by VF to
comply with these covenants could result in an event of default
that, if not cured or waived, could have a material adverse effect
on VF if the lenders declare any outstanding obligations to be
immediately due and payable.
VF is subject to the risk that its licensees may not generate
expected sales or maintain the value of VF’s brands.
During Fiscal 2024, $67.1 million of VF’s revenues were derived
from licensing royalties. Although VF generally has significant
control over its licensees’ products and advertising, we rely on
our licensees for, among other things, operational and financial
controls over their businesses. Failure of our licensees to
successfully market licensed products or our inability to replace
existing licensees, if necessary, could adversely affect VF’s
revenues, both directly from reduced royalties received and
indirectly from reduced sales of our other products. Risks are
also associated with a licensee’s ability to:
•
obtain capital;
•
manage its labor relations;
•
maintain relationships with its suppliers;
•
manage its credit risk effectively;
•
maintain relationships with its customers; and
•
adhere to VF’s Global Compliance Principles.
In addition, VF relies on its licensees to help preserve the value
of its brands. Although we attempt to protect VF’s brands
through approval rights over design, production processes,
quality, packaging, merchandising, distribution, advertising and
promotion of our licensed products, we cannot completely
control the use of licensed VF brands by our licensees. The
misuse of a brand by a licensee, including through the marketing
of products under one of our brand names that do not meet our
quality standards, could have a material adverse effect on that
brand and on VF.
Volatility in securities markets, interest rates and other economic
factors could substantially increase VF’s defined benefit pension
costs.
VF currently has obligations under its defined benefit pension
plans. The funded status of the pension plans is dependent on
many factors, including returns on invested assets and the
discount
rates
used
to
determine
pension
obligations.
Unfavorable impacts from returns on plan assets, changes in
discount rates, changes in plan demographics or revisions in the
applicable laws or regulations could materially change the
timing and amount of pension funding requirements, which
could reduce cash available for VF’s business.
VF’s operating performance also may be negatively impacted by
the amount of expense recorded for its pension plans. Pension
expense is calculated using actuarial valuations that incorporate
assumptions and estimates about financial market, economic
and demographic conditions. Differences between estimated and
actual results give rise to gains and losses that are deferred and
amortized as part of future pension expense, which can create
volatility that adversely impacts VF’s future operating results.
VF Corporation Fiscal 2024 Form 10-K
21
The spin-off of Kontoor Brands, Inc. could result in substantial tax
liability to us and our shareholders.
We received opinions of tax advisors substantially to the effect
that, for U.S. Federal income tax purposes, the May 22, 2019
spin-off of our Jeans business, Kontoor Brands, Inc. ("Kontoor
Brands") and certain related transactions qualify for tax-free
treatment under certain sections of the Internal Revenue Code.
However, if the factual assumptions or representations made by
us in connection with the delivery of the opinions are inaccurate
or incomplete in any material respect, including those relating to
the past and future conduct of our business, we will not be able
to rely on the opinions. Furthermore, the opinions are not
binding on the IRS or the courts. If, notwithstanding receipt of
the opinions, the spin-off transaction and certain related
transactions are determined to be taxable, we would be subject
to a substantial tax liability. In addition, if the spin-off transaction
is taxable, each holder of our common stock who received
shares of Kontoor Brands in connection with the spin-off would
generally be treated as receiving a taxable distribution of
property in an amount equal to the fair market value of the
shares received.
Even if the spin-off otherwise qualifies as a tax-free transaction,
the distribution would be taxable to us (but not to our
shareholders) in certain circumstances if future significant
acquisitions of our stock or the stock of Kontoor Brands are
deemed to be part of a plan or series of related transactions that
included the spin-off. In this event, the resulting tax liability
could be substantial. In connection with the spin-off, we entered
into a tax matters agreement with Kontoor Brands, pursuant to
which Kontoor Brands agreed to not enter into any transaction
that could cause any portion of the spin-off to be taxable to us
without our consent and to indemnify us for any tax liability
resulting from any such transaction. In addition, these potential
tax liabilities may discourage, delay or prevent a change of
control of us.
GENERAL RISKS
Regional epidemics or global pandemics may materially and
adversely affect our business, financial condition and results of
operations.
The occurrence of regional epidemics or a global pandemic may
adversely affect our business, financial condition and results of
operations. For example, the COVID-19 pandemic has and could
continue to materially and adversely affect our business,
financial condition and results of operation. Our business has
been, and could continue to be, impacted by the effects of the
COVID-19 pandemic in countries and territories where we
operate and where our employees, suppliers, third-party service
providers, consumers or customers are located. Our operations
may be closed again or experience operational restrictions if and
where there is a resurgence in COVID-19 or new variants of the
virus emerge. We may continue to experience significant
reductions in demand and significant volatility in demand for our
products by consumers and customers, resulting in reduced
orders, order cancellations, lower revenues, higher discounts,
increased inventories, decreased value of inventories and lower
gross margins. We may be negatively impacted by significant
uncertainty and turmoil in global economic and financial market
conditions causing, among other things: decreased consumer
confidence and decreased consumer spending, inability to
access financing in the credit and capital markets (including the
commercial paper market) at reasonable rates (or at all),
increased exposure to fluctuations in foreign currency exchange
rates relative to the U.S. Dollar, and volatility in the availability
and prices for commodities and raw materials we use for our
products and in our supply chain. We may continue to fail to
meet our consumers’ and customers’ needs for inventory
production and fulfillment due to disruptions in our supply chain
and increased costs associated with mitigating the effects of the
pandemic.
These impacts have placed, and could continue to place
limitations on our ability to execute our business plan and
materially and adversely affect our business, financial condition
and
results
of
operations.
Measures
to
contain
a
global
pandemic, including COVID-19, may exacerbate other risks
discussed in this “Risk Factors” section, any of which could have
a material effect on us. The extent of the impact of the COVID-19
pandemic will depend on future developments, including the
duration, severity and any resurgences of COVID-19, which are
uncertain and cannot be predicted.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
22
VF Corporation Fiscal 2024 Form 10-K
ITEM 1C.
CYBERSECURITY.
Our business operations and relationships with consumers,
customers, employees and business partners rely heavily on
information
technology
(“IT”)
systems
and
data.
We
also
recognize the need to continually assess cybersecurity risk and
evolve our management approach in the face of a rapidly and
ever-changing environment. Accordingly, we aim to protect our
business
operations,
including
consumer,
employee
and
confidential business records and information, against known
and
evolving
cybersecurity
threats.
We
have
established
processes for identifying, assessing, and managing material
risks from cybersecurity threats using a systematic framework
intended to protect the confidentiality, integrity, and availability
of the Company’s important IT systems and data.
Oversight responsibility in this area is shared by the Board, its
Audit Committee, and management.
Responsible party
Oversight of cybersecurity
Board of Directors
Oversight of cybersecurity within VF’s overall risks
Audit Committee
Primary oversight responsibility for cybersecurity, including internal controls designed to identify,
assess, and manage risks related to cybersecurity
Management
Our Chief Information Security Officer ("CISO”), General Counsel, Chief Strategy and Business
Development Officer (“CSBDO”), and other senior members of our digital and technology and risk
teams are responsible for identifying, assessing, and managing risks related to these topics, and
reporting to the Audit Committee and/or the full Board of Directors
Management receives a cybersecurity and information security
maturity assessment from a third-party assessor biannually to
gain a third-party view of our cybersecurity and information
security
program.
We
have
integrated
the
identification,
assessment and management of cybersecurity risks into VF’s
enterprise risk management program, ensuring alignment with
our overall approach to risk oversight by the Board, its
committees, and management. The Board receives an annual
update
from
VF
senior
leadership
on
cybersecurity
and
information security matters. The Audit Committee receives
regular reports from VF senior leadership, including the CISO,
on cyber threats, information security risks and controls, and
other program updates, as well as enterprise risk management
program updates. The Audit Committee regularly briefs the
Board on these cybersecurity matters, and the Board also
receives periodic briefings on cyber threats and best practices to
enhance our directors’ literacy on cybersecurity and information
security issues.
We place a high priority on securing confidential business
information and the sensitive personal information we receive
and store about our consumers, customers and employees. We
have systems in place to securely receive and store that
information and to detect, contain, and respond to cybersecurity
incidents. We also have processes to manage risk from
cybersecurity threats associated with third parties, including
service providers, such as risk assessments and contractual
requirements that include cybersecurity measures. In addition,
we have a cybersecurity and information security training and
compliance program in place to support our teams who work in
areas of cybersecurity and information security risk. As part of
this program, VF associates who have access to confidential
information receive training at least annually on cybersecurity
and information security. To respond to the threat of security
breaches and cyberattacks, VF maintains a program, overseen
by VF’s CISO and CSBDO, that is designed to protect and
preserve the confidentiality, integrity and continued availability of
all information and systems owned by, or in the care of, VF. This
program also includes a cyber incident response plan that
provides processes for timely and accurate reporting of any
material cybersecurity incident. Our CISO has over thirty years of
experience as a cybersecurity professional, including experience
as the CISO of two large retailers, and reports to our CSBDO,
who leads our digital and technology functions and has nearly
twenty years of experience enabling digital transformation for
global companies. In addition, members of VF’s information
security, IT and privacy teams have broad experience and
expertise in selecting, deploying and operating cybersecurity
technologies, initiatives and processes around the world. VF also
engages service providers, consultants and other third parties in
connection
with
these
processes
to
provide
augmented
cybersecurity
capabilities,
deliver
strategic
advice,
provide
assurance regarding the effectiveness of certain processes and
assist in cybersecurity incident response efforts, as needed. VF
also maintains a cybersecurity risk insurance policy.
VF’s IT systems have been subject to cybersecurity incidents in
the past, including the previously disclosed December 2023
cybersecurity incident (the “Cyber Incident”). We believe the
impacts of the Cyber Incident were not material to VF’s financial
condition or results of operations. In addition, we do not believe
that risks from cybersecurity threats have materially affected
VF’s
business
strategy,
financial
condition,
or
results
of
operations.
However,
there
is
no
guarantee
that
future
cybersecurity incidents will not have a material impact in the
future. Furthermore, processes designed to manage cyber risks,
including those described herein, may not be effective. To learn
more about risks from cybersecurity threats, as well as risks
from the Cyber Incident, see the following risk factors in Item 1A
of this Part I, under the headings, "VF relies significantly on
information technology. Any inadequacy, interruption, integration
failure or security failure of this technology could harm VF’s
ability to effectively operate its business," "VF is subject to data
and information security and privacy risks that could negatively
affect
its
business
operations,
results
of
operations
or
reputation,” and "We experienced a significant data security
breach in December 2023 which could result in a number of
potentially unknown outcomes, including but not limited to,
litigation, regulatory investigations or enforcement actions, or
reputational harm, any of which could have a material impact on
our business operations, financial condition, or results of
operations." Additional risks and uncertainties not currently
known or that may currently be deemed to be immaterial also
may materially adversely affect VF’s business strategy, financial
condition, or results of operations. VF is seeking reimbursement
of costs, expenses and losses stemming from the Cyber Incident
by submitting claims to VF’s cybersecurity insurers. The timing
and amount of any such reimbursements are not known at this
time.
VF Corporation Fiscal 2024 Form 10-K
23
ITEM 2.
PROPERTIES.
The following is a summary of VF Corporation’s principal owned
and leased properties as of March 30, 2024.
VF’s global headquarters are located in a 285,000 square foot,
leased facility in Denver, Colorado. In addition, we lease facilities
in Stabio, Switzerland and lease offices in Shanghai, China,
which
serve
as
our
European
and
Asia-Pacific
regional
headquarters,
respectively.
We
also
own
or
lease
brand
headquarter facilities throughout the world.
VF owns a 236,000 square foot facility in Appleton, Wisconsin
that serves as a shared service center for certain brands in
North America. We own a 180,000 square foot facility in
Greensboro, North Carolina that serves as a corporate shared
service center. We own and lease shared service facilities in
Antwerp, Belgium; Kuala Lumpur, Malaysia and Dalian, China
that support our European and Asia-Pacific operations. Our
sourcing hubs are located in Singapore, Panama City, Panama,
and Stabio, Switzerland.
Our largest distribution centers by region are located in Ontario,
California, Prague, Czech Republic and Kunshan, China. In total,
we operate 21 owned or leased distribution centers primarily in
the U.S., but also in the Czech Republic, Belgium, United
Kingdom, the Netherlands, China, Canada, Mexico, Israel and
Japan.
In addition to the principal properties described above, we lease
many offices worldwide for sales and administrative purposes.
We operate 1,185 retail stores across the Americas, Europe and
Asia-Pacific regions. Retail stores are generally leased under
operating leases and include renewal options. We believe all
facilities and machinery and equipment are in good condition and
are suitable for VF’s needs.
ITEM 3.
LEGAL PROCEEDINGS.
There are no pending material legal proceedings, other than ordinary, routine litigation incidental to the business, to which VF or any
of its subsidiaries is a party or to which any of their property is the subject.
SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental
regulations if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to
SEC regulations, VF uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is
required. VF believes that this threshold is reasonably designed to result in disclosure of any such proceedings that are material to
VF’s business or financial condition. Applying this threshold, there are no such proceedings to disclose for this period.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
24
VF Corporation Fiscal 2024 Form 10-K
PART II
ITEM 5.
MARKET FOR VF’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
VF’s Common Stock is listed on the New York Stock Exchange under the symbol “VFC”. As of April 27, 2024 there were 2,607
shareholders of record. Quarterly dividends on VF Common Stock, when declared, are paid on or about the 20
th day of June,
September, December and March.
PERFORMANCE GRAPH:
The following graph compares the cumulative total shareholder
return on VF Common Stock with that of the Standard & Poor’s
(“S&P”) 500 Index and the S&P 1500 Apparel, Accessories &
Luxury Goods Subindustry Index (“S&P 1500 Apparel Index”) for
Fiscal 2020 through Fiscal 2024. The S&P 1500 Apparel Index at
the end of Fiscal 2024 consisted of Capri Holdings Limited,
Carter’s, Inc., Columbia Sportswear Company, G-III Apparel
Group, Ltd., Hanesbrands Inc., Kontoor Brands, Inc., Lululemon
Athletica Inc., Movado Group, Inc., Oxford Industries, Inc., PVH
Corp., Ralph Lauren Corporation, Tapestry, Inc., Under Armour,
Inc. and VF Corporation. The graph assumes that $100 was
invested at the end of Fiscal 2019 in each of VF Common Stock,
the S&P 500 Index and the S&P 1500 Apparel Index, and that all
dividends were reinvested. The graph plots the respective values
on the last trading day of Fiscal 2019 through Fiscal 2024. Past
performance is not necessarily indicative of future performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF VF COMMON STOCK,
S&P 500 INDEX AND S&P 1500 APPAREL INDEX
VF Common Stock closing price on March 30, 2024 was $15.34
Dollars
VF Corporation
S&P 500 Index
S&P 1500 Apparel, Accessories & Luxury Goods
3/30/2019
3/28/2020
4/3/2021
4/2/2022
4/1/2023
3/30/2024
0
50
100
150
200
250
Company / Index
Base
Period
3/30/19
3/28/20
4/3/21
4/2/22
4/1/23
3/30/24
VF Corporation
$
100.00
$
72.30
$
102.03
$
74.73
$
31.91
$
22.28
S&P 500 Index
100.00
91.45
147.16
168.77
155.20
201.57
S&P 1500 Apparel, Accessories & Luxury Goods
100.00
52.80
104.08
87.88
69.28
67.69
VF Corporation Fiscal 2024 Form 10-K
25
ISSUER PURCHASES OF EQUITY SECURITIES:
The following table sets forth VF’s repurchases of our Common Stock during the fiscal quarter ended March 30, 2024 under the share
repurchase program authorized by VF’s Board of Directors in 2017.
Fiscal Period
Total
Number of
Shares
Purchased
Weighted
Average Price
Paid
per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
Dollar Value
of Shares that May
Yet be Purchased
Under the Program
December 31, 2023 — January 27, 2024
—
$
—
—
$
2,486,971,057
January 28, 2024 — February 24, 2024
—
—
—
2,486,971,057
February 25, 2024 — March 30, 2024
—
—
—
2,486,971,057
Total
—
—
ITEM 6.
[RESERVED]
Not applicable.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
VF Corporation (together with its subsidiaries, collectively known
as “VF” or the "Company”) is a global leader in the design,
procurement, marketing and distribution of branded lifestyle
apparel, footwear and accessories. VF’s diverse portfolio meets
consumer needs across a broad spectrum of activities and
lifestyles.
VF is diversified across brands, product categories, channels of
distribution, geographies and consumer demographics. We own
a broad portfolio of brands in the outerwear, footwear, apparel,
backpack, luggage and accessories categories. Our products are
marketed
to
consumers
through
our
wholesale
channel,
primarily in specialty stores, national chains, mass merchants,
department stores, independently-operated partnership stores
and with strategic digital partners. Our products are also
marketed to consumers through our own direct-to-consumer
operations, which include VF-operated stores, concession retail
stores, brand e-commerce sites and other digital platforms.
VF
is
organized
by
groupings
of
brands
and
businesses
represented by its reportable segments for financial reporting
purposes. The three reportable segments are Outdoor, Active
and Work.
BASIS OF PRESENTATION
VF operates and reports using a 52/53 week fiscal year ending on
the Saturday closest to March 31 of each year. All references to
the years ended March 2024 ("Fiscal 2024"), March 2023 ("Fiscal
2023") and March 2022 ("Fiscal 2022") relate to the 52-week
fiscal years ended March 30, 2024, April 1, 2023, and April 2,
2022, respectively.
The following discussion and analysis focuses on our financial
results for the years ended March 2024 and 2023 and year-to-
year comparisons between these years. A discussion of our
results of operations for the year ended March 2023 compared to
the year ended March 2022 is included in Part II, Item 7.
"Management's Discussion and Analysis of Financial Condition
and Results of Operations" of our Annual Report on Form 10-K
for the year ended April 1, 2023, filed with the SEC on May 25,
2023, and is incorporated by reference into this Form 10-K.
All per share amounts are presented on a diluted basis. All
percentages shown in the tables below and the discussion that
follows have been calculated using unrounded numbers.
References to the year ended March 2024 foreign currency
amounts and impacts below reflect the changes in foreign
exchange
rates
from
the
year
ended
March
2023
when
translating foreign currencies into U.S. dollars. VF’s most
significant
foreign
currency
exposure
relates
to
business
conducted in euro-based countries. Additionally, VF conducts
business in other developed and emerging markets around the
world with exposure to foreign currencies other than the euro.
26
VF Corporation Fiscal 2024 Form 10-K
RECENT DEVELOPMENTS
Cybersecurity Incident
On December 13, 2023, VF detected unauthorized occurrences
on a portion of its information technology ("IT") systems. Upon
detecting the unauthorized occurrences, VF began taking steps
to
contain,
assess
and
remediate
the
incident,
including
beginning an investigation with leading external cybersecurity
experts, activating its incident response plan, and shutting down
some systems. As a result of these and other measures, VF
believes the threat actor was ejected from VF’s IT systems on
December 15, 2023. The threat actor disrupted VF’s business
operations by encrypting some IT systems, and stole data from
VF, including personal data. After VF shut down some of its
systems, VF experienced disruption to certain of its operations,
including interrupted replenishment of retail store inventory and
delayed order fulfillment which had impacts such as the
cancellation by customers and consumers of some product
orders, reduced demand on certain of its brands’ e-commerce
sites, and delay of some wholesale shipments.
As of April 25, 2024, VF's investigation of the cybersecurity
incident
has
concluded.
VF
believes
the
impacts
of
the
cybersecurity incident were not material to its financial condition
or results of operations.
VF is seeking reimbursement of costs, expenses and losses
stemming from the cybersecurity incident by submitting claims
to VF’s cybersecurity insurers. The timing and amount of any
such reimbursements are not known at this time.
Reinvent
On October 30, 2023, VF introduced Reinvent, a transformation
program to enhance focus on brand-building and to improve
operating performance and allow VF to achieve its full potential.
The first announced steps in this transformation, which cover
the following priorities: improve North America results, deliver
the Vans
® turnaround, reduce costs and strengthen the balance
sheet, are as follows:
•
Establish global commercial organization, inclusive of an
Americas region: Change the operating model with the
establishment of a global commercial structure. This
includes the creation of an Americas regional platform,
modeled on the Company's successful operations in the
Europe and Asia-Pacific regions. With this change, VF has
created the role of Chief Commercial Officer, with
responsibility for go-to-market execution globally.
•
Sharpen brand presidents' focus on sustainable growth: A
direct consequence and intent of the operating model
change, which is particularly critical at this stage for the
Vans
® brand, enables brand presidents to direct greater
focus and attention to long-term brand-building, product
innovation and growth strategies.
•
Appoint new Vans
® president: The Global Brand President
of Vans
® has stepped down from the position. VF's CEO is
serving as the brand president on an interim basis until a
permanent brand president is appointed.
•
Optimize cost structure to improve operating efficiency and
profitability:
Implement
a
large-scale
cost
reduction
program, which is expected to deliver $300 million in fixed
cost savings, by removing spend in non-strategic areas of
the
business,
and
simplifying
and
right-sizing
VF's
structure.
•
Reduce debt and leverage:
In
addition
to
improving
operating performance, VF is committed to deleveraging
the balance sheet.
Reinvent charges and project-related costs in Fiscal 2024 were
$105.4 million, which primarily included costs associated with
severance and employee-related benefits and the net impact of
asset disposals and write-downs.
Dividend Update
On October 24, 2023, the Board of Directors declared a quarterly
dividend of $0.09 per share that was paid during the third
quarter of Fiscal 2024, which represented a 70% reduction when
compared to the dividend of $0.30 per share paid in the second
quarter of Fiscal 2024. The decrease in the dividend was an
action taken to strengthen the Company's financial position by
reducing debt. Subject to approval by its Board of Directors, VF
intends to continue to pay quarterly dividends. On May 14, 2024,
the Board of Directors declared a quarterly dividend of $0.09 per
share to be paid during the first quarter of Fiscal 2025.
Impact of Global Events and Uncertainties
Although it did not have a significant impact in the current year,
the coronavirus ("COVID-19") pandemic resulted in temporary
closures of VF-operated retail stores in Fiscal 2023, most
notably in the Asia-Pacific region, which impacted revenues in
the region for the year ended March 2023. The ongoing conflict
between Russia and Ukraine and the conflict in the Middle East
continue to cause disruption in the regions and unknown
impacts to the global economy; however, we currently do not
expect significant disruption to our business.
For additional information regarding recent developments, see
"Item 1A. Risk Factors."
VF Corporation Fiscal 2024 Form 10-K
27
SUMMARY OF THE YEAR ENDED MARCH 2024
•
Revenues decreased 10% to $10.5 billion compared to the
year ended March 2023, including a 1% favorable impact
from foreign currency.
•
Outdoor segment revenues decreased 3% to $5.5 billion
compared to the year ended March 2023, including a 1%
favorable impact from foreign currency.
•
Active segment revenues decreased 17% to $4.1 billion
compared to the year ended March 2023, including a 1%
favorable impact from foreign currency.
•
Work segment revenues decreased 16% to $891.5 million
compared to the year ended March 2023.
•
Wholesale revenues were down 14% compared to the
year ended March 2023, including a 1% favorable impact
from foreign currency.
•
Direct-to-consumer revenues were down 5% compared to
the year ended March 2023, including a 1% favorable
impact from foreign currency. E-commerce revenues
decreased 8% in the year ended March 2024. Direct-to-
consumer revenues accounted for 47% of VF’s total
revenues in the year ended March 2024.
•
International revenues increased 1% compared to the
year ended March 2023, including a 2% favorable impact
from foreign currency. Revenues in Europe were flat,
including a 4% favorable impact from foreign currency.
Revenues
in
the
Asia-Pacific
region
increased
3%,
including a 4% unfavorable impact from foreign currency.
International revenues represented 54% of VF’s total
revenues in the year ended March 2024.
•
Revenues
in
the
Americas
region
decreased
18%
compared to the year ended March 2023, including a 1%
favorable impact from foreign currency.
•
Gross margin decreased 50 basis points to 52.0% in the
year ended March 2024 compared to the year ended
March 2023, primarily driven by unfavorable foreign
currency impacts, partially offset by favorable mix.
•
Earnings (loss) per share decreased to $(2.49) in the year
ended March 2024 from $0.31 in the year ended March
2023. The decrease was primarily driven by increased tax
expense
due
to
the
unfavorable
decision
in
the
Timberland tax case and lower profitability across all
segments in the year ended March 2024.
ANALYSIS OF RESULTS OF OPERATIONS
Consolidated Statements of Operations
The following table presents a summary of the changes in net revenues for the year ended March 2024 compared to the year ended
March 2023:
(In millions)
Year Ended March
Net revenues — 2023
$
11,612.5
Organic
(1,265.3)
Impact of foreign currency
107.5
Net revenues — 2024
$
10,454.7
Year Ended March 2024 Compared to Year Ended March 2023
VF reported a 10% decrease in revenues in Fiscal 2024 compared to Fiscal 2023, including a 1% favorable impact from foreign
currency. The revenue decrease was attributed to declines across all segments, most notably in the Active and Work segments. The
revenue decrease was primarily driven by weakness in the Americas region wholesale channel, partially offset by overall growth in
the Asia-Pacific region. The Asia-Pacific region was negatively impacted by COVID-19 resurgence in Mainland China in Fiscal 2023.
Additional details on revenues are provided in the section titled “Information by Reportable Segment”.
The following table presents the percentage relationship to net revenues for components of the Consolidated Statements of
Operations:
Year Ended March
2024
2023
Gross margin (net revenues less cost of goods sold)
52.0 %
52.5 %
Selling, general and administrative expenses
47.4
43.4
Impairment of goodwill and intangible assets
4.9
6.3
Operating margin
(0.3)%
2.8 %
28
VF Corporation Fiscal 2024 Form 10-K
Year Ended March 2024 Compared to Year Ended March 2023
Gross margin decreased 50 basis points to 52.0% in Fiscal 2024
compared to 52.5% in Fiscal 2023. The decrease in gross margin
in Fiscal 2024 was driven by unfavorable foreign currency
impacts, partially offset by favorable mix.
Selling, general and administrative expenses as a percentage of
total revenues increased 400 basis points in Fiscal 2024
compared to Fiscal 2023. Selling, general and administrative
expenses decreased $70.3 million in Fiscal 2024 compared to
Fiscal 2023. The decrease was due to lower distribution costs,
compensation and administrative costs and direct-to-consumer
expenses, partially offset by higher information technology costs
and Reinvent charges.
During the year ended March 2024, VF recorded goodwill
impairment charges of $507.6 million related to the Timberland,
Dickies and Icebreaker reporting units. During the third quarter
of Fiscal 2024, VF determined that a triggering event had
occurred requiring a quantitative analysis of the Timberland and
Dickies reporting units, and as a result of the impairment testing
performed, VF recorded goodwill impairment charges of $195.3
million and $61.8 million, respectively. As a result of VF's annual
impairment testing as of the beginning of the fourth quarter of
Fiscal 2024, VF recorded a goodwill impairment charge of $38.8
million related to the Icebreaker reporting unit. During the
fourth quarter of Fiscal 2024, VF also performed an impairment
analysis of the Timberland reporting unit as a result of a
triggering
event,
and
recorded
an
additional
goodwill
impairment charge of $211.7 million.
VF recorded goodwill and intangible asset impairment charges
of $394.1 million and $340.9 million, respectively, in the year
ended March 2023 related to the Supreme reporting unit. During
the second quarter of Fiscal 2023, VF determined that a
triggering event had occurred requiring a quantitative analysis of
the
Supreme
reporting
unit
goodwill
and
indefinite-lived
trademark intangible asset. As a result of the impairment testing
performed, VF recorded impairment charges of $229.0 million
and $192.9 million to the Supreme reporting unit goodwill and
indefinite-lived trademark intangible asset, respectively. During
the fourth quarter of Fiscal 2023, in connection with its annual
impairment testing, VF performed a quantitative analysis of the
Supreme reporting unit goodwill and indefinite-lived trademark
intangible
asset.
As
a
result
of
the
impairment
testing
performed, VF recorded additional impairment charges of $165.1
million and $148.0 million to the Supreme reporting unit
goodwill
and
indefinite-lived
trademark
intangible
asset,
respectively.
In Fiscal 2024, operating margin decreased to (0.3)% from 2.8%
in Fiscal 2023, primarily due to the items described above.
Net interest expense increased $58.8 million to $223.4 million in
Fiscal 2024. The increase in net interest expense was primarily
due to additional borrowings on long-term debt at higher rates,
partially
offset
by
lower
short-term
commercial
paper
borrowings and higher investment rates. Total outstanding
interest-bearing debt averaged $6.7 billion and $6.2 billion for
Fiscal 2024 and Fiscal 2023, respectively, with short-term
borrowings representing 5.8% and 16.8% of average debt
outstanding for the respective years. The weighted average
interest rate on outstanding debt was 3.5% in Fiscal 2024 and
2.6% in Fiscal 2023.
Other income (expense), net primarily consists of components of
net
periodic
pension
cost
(excluding
the
service
cost
component), certain foreign currency and hedging gains and
losses and other non-operating gains and losses. Other income
(expense) netted to $23.8 million and $(119.8) million in Fiscal
2024 and Fiscal 2023, respectively. Other income (expense), net
in Fiscal 2024 primarily included legal settlement gains of $29.1
million, $3.2 million of net periodic pension cost and $2.9 million
of foreign currency and hedging losses. Other income (expense),
net in Fiscal 2023 primarily included a $91.8 million pension
settlement charge, which resulted from the purchase of a group
annuity contract and transfer of a portion of the assets and
liabilities associated with the U.S. qualified defined benefit
pension plan to an insurance company, and $23.0 million of
foreign currency and hedging losses.
The effective income tax rate was (314.6)% in Fiscal 2024
compared to (174.0)% in Fiscal 2023. The Fiscal 2024 effective
income
tax
rate
included
a
net
discrete
tax
expense
of
$704.6 million, primarily related to the tax effects of decisions in
the Timberland tax case and Belgium excess profits ruling. Refer
to Note 20 to VF's consolidated financial statements for
additional information. The $704.6 million net discrete tax
expense in Fiscal 2024 decreased the effective income tax rate
by 301.5% compared to a favorable 223.5% impact of discrete
items for Fiscal 2023. Excluding discrete items, the effective tax
rate during Fiscal 2024 decreased by approximately 62.6%
primarily due to the jurisdictional mix of earnings and losses and
the impact of nondeductible goodwill impairment in Fiscal 2024,
resulting in a consolidated pre-tax loss.
As a result of the above, net income (loss) in Fiscal 2024 was
$(968.9) million ($(2.49) per diluted share), compared to $118.6
million ($0.31 per diluted share) in Fiscal 2023.
Refer to additional discussion in the “Information by Reportable
Segment” section below.
Information by Reportable Segment
VF's reportable segments are: Outdoor, Active and Work. We have included an Other category in the tables below for purposes of
reconciliation of revenues and profit, but it is not considered a reportable segment. Other primarily includes sourcing activities
related to transition services.
The primary financial measures used by management to evaluate the financial results of VF's reportable segments are segment
revenues and segment profit. Segment profit comprises the operating income and other income (expense), net line items of each
segment.
Refer to Note 21 to the consolidated financial statements for a summary of results of operations by segment, along with a
reconciliation of segment profit to income before income taxes.
VF Corporation Fiscal 2024 Form 10-K
29
Year Ended March 2024 Compared to Year Ended March 2023
The following tables present a summary of the changes in segment revenues and profit in the year ended March 2024 compared to
the year ended March 2023 and revenues by region for our Top 4 brands for the years ended March 2024 and 2023:
Segment Revenues:
Year Ended March
(In millions)
Outdoor
Active
Work
Other
Total
Segment revenues — 2023
$
5,647.5
$
4,904.6
$
1,060.2
$
0.1
$
11,612.5
Organic
(208.7)
(886.6)
(169.9)
(0.1)
(1,265.3)
Impact of foreign currency
62.6
43.7
1.2
—
107.5
Segment revenues — 2024
$
5,501.4
$
4,061.7
$
891.5
$
—
$
10,454.7
Segment Profit (Loss):
Year Ended March
(In millions)
Outdoor
Active
Work
Other
Total
Segment profit (loss) — 2023
$
785.4
$
654.7
$
121.2
$
(0.5)
$
1,560.7
Organic
(195.6)
(311.2)
(105.1)
0.5
(611.2)
Impact of foreign currency
12.9
8.7
1.5
—
23.1
Segment profit — 2024
$
602.7
$
352.2
$
17.6
$
—
$
972.6
Note: Amounts may not sum due to rounding.
Top Brand Revenues:
Year Ended March 2024
(In millions)
The North Face
®
Vans
®
Timberland
® (a)
Dickies
®
Total
Americas
$
1,704.4
$
1,708.2
$
682.7
$
437.2
$
4,532.5
Europe
1,312.5
726.3
641.3
113.4
2,793.5
Asia-Pacific
656.4
351.2
233.0
67.8
1,308.4
Global
$
3,673.3
$
2,785.7
$
1,556.9
$
618.4
$
8,634.4
Year Ended March 2023
(In millions)
The North Face
®
Vans
®
Timberland
® (a)
Dickies
®
Total
Americas
$
1,896.4
$
2,380.5
$
933.6
$
513.6
$
5,724.1
Europe
1,198.7
838.3
632.4
107.4
2,776.8
Asia-Pacific
517.6
464.1
218.7
104.2
1,304.6
Global
$
3,612.7
$
3,682.9
$
1,784.7
$
725.2
$
9,805.5
(a)
The global Timberland brand includes Timberland
®, reported within the Outdoor segment and Timberland PRO
®, reported within the Work
segment.
Note: Amounts may not sum due to rounding.
30
VF Corporation Fiscal 2024 Form 10-K
The following sections discuss the changes in revenues and profitability by segment. For purposes of this analysis, royalty revenues
have been included in the wholesale channel for all periods.
Outdoor
Year Ended March
(Dollars in millions)
2024
2023
Percent Change
Segment revenues
$
5,501.4
$
5,647.5
(2.6)%
Segment profit
602.7
785.4
(23.3)%
Operating margin
11.0 %
13.9 %
The Outdoor segment includes the following brands: The North Face
®, Timberland
®, Smartwool
®, Altra
® and Icebreaker
®.
Year Ended March 2024 Compared to Year Ended March 2023
Global revenues for Outdoor decreased 3% in Fiscal 2024
compared to Fiscal 2023, including a 1% favorable impact due to
foreign currency. Revenues in the Americas region decreased
14% in Fiscal 2024, including a 1% favorable impact from foreign
currency. Revenues in the Asia-Pacific region increased 20% in
Fiscal 2024, including a 5% unfavorable impact from foreign
currency and a 27% increase in Greater China (which includes
Mainland China, Hong Kong and Taiwan), including a 5%
unfavorable impact from foreign currency. Revenues in the
Europe region increased 6%, including a 4% favorable impact
from foreign currency.
Global revenues for The North Face
® brand increased 2% in
Fiscal 2024, including a 1% favorable impact from foreign
currency. The increase in the year ended March 2024 was driven
by growth in the Asia-Pacific and Europe regions. Revenues in
the Asia-Pacific region increased 27% in Fiscal 2024, including a
4% unfavorable impact from foreign currency. Revenues in the
Europe region increased 9% in Fiscal 2024, including a 4%
favorable impact from foreign currency. Revenues in the
Americas region decreased 10% in the year ended March 2024.
Global revenues for the Timberland
® brand decreased 11% in
Fiscal 2024, including a 2% favorable impact from foreign
currency. The overall decline was most significantly driven by a
32% decrease in the Americas region in the year ended March
2024, including a 1% favorable impact from foreign currency.
Revenues in the Asia-Pacific region increased 7% in Fiscal 2024,
including a 3% unfavorable impact from foreign currency.
Revenues in the Europe region increased 1% in the year ended
March 2024, including a 4% favorable impact from foreign
currency.
Global direct-to-consumer revenues for Outdoor increased 3% in
Fiscal 2024. The increase was primarily due to The North Face
®
brand in the Asia-Pacific and Europe regions. Global wholesale
revenues decreased 7% in Fiscal 2024, including a 1% favorable
impact from foreign currency. The decrease was primarily driven
by declines in the Americas regions.
Operating margin decreased in Fiscal 2024 compared to Fiscal
2023, reflecting increased direct-to-consumer expenses and
higher information technology costs. The decrease was partially
offset by higher gross margin, primarily driven by favorable
pricing and mix, partially offset by unfavorable foreign currency
impacts.
Active
Year Ended March
(Dollars in millions)
2024
2023
Percent Change
Segment revenues
$
4,061.7
$
4,904.6
(17.2)%
Segment profit
352.2
654.7
(46.2)%
Operating margin
8.7 %
13.3 %
The Active segment includes the following brands: Vans
®, Supreme
®, Kipling
®, Napapijri
®, Eastpak
® and JanSport
®.
Year Ended March 2024 Compared to Year Ended March 2023
Global revenues for Active decreased 17% in Fiscal 2024
compared to Fiscal 2023, including a 1% favorable impact from
foreign currency. Revenues in the Americas region decreased
23% in Fiscal 2024. Revenues in the Europe region decreased 8%
in the year ended March 2024, including a 4% favorable impact
from foreign currency. Revenues in the Asia-Pacific region
decreased 12% in Fiscal 2024, including a 3% unfavorable impact
from foreign currency, and an 18% decrease in Greater China,
including a 3% unfavorable impact from foreign currency.
Vans
® brand global revenues decreased 24% in Fiscal 2024,
including a 1% favorable impact from foreign currency. The
overall decline in Fiscal 2024 was most significantly driven by a
28% decrease in the Americas region, including a 1% favorable
impact from foreign currency. Revenues in the Asia-Pacific
region decreased 24% in the year ended March 2024, including a
2% unfavorable impact from foreign currency. The declines in
the Americas and Asia-Pacific regions include the impact of
strategic wholesale channel reset actions taken during Fiscal
2024. Revenues in the Europe region decreased 13% in Fiscal
2024, including a 3% favorable impact from foreign currency.
Global direct-to-consumer revenues for Active decreased 12% in
Fiscal 2024. The decrease was primarily due to declines in the
Americas region, which decreased 17% in Fiscal 2024, including
a 1% favorable impact from foreign currency. Global wholesale
VF Corporation Fiscal 2024 Form 10-K
31
revenues for Active decreased 24% in Fiscal 2024, and included a
2% favorable impact from foreign currency. The decrease in
Fiscal 2024 was primarily due to a 32% decrease in the Americas
region, including a 1% favorable impact from foreign currency.
Wholesale revenues in the Europe region decreased 14% in the
year ended March 2024, including a 3% favorable impact from
foreign currency. Wholesale revenues in the Asia-Pacific region
decreased 25%, including a 1% unfavorable impact from foreign
currency.
Operating margin decreased in Fiscal 2024 compared to Fiscal
2023, reflecting lower leverage of operating expenses due to
decreased revenues. The decrease was also due to lower gross
margin,
primarily
driven
by
unfavorable
foreign
currency
impacts, partially offset by favorable mix. The decrease was
partially offset by legal settlement gains of $29.1 million.
Work
Year Ended March
(Dollars in millions)
2024
2023
Percent Change
Segment revenues
$
891.5
$
1,060.2
(15.9)%
Segment profit
17.6
121.2
(85.4)%
Operating margin
2.0 %
11.4 %
The Work segment includes the following brands: Dickies
® and Timberland PRO
®.
Year Ended March 2024 Compared to Year Ended March 2023
Global Work revenues decreased 16% in Fiscal 2024 compared
to Fiscal 2023. Revenues in the Americas region decreased 16%
in Fiscal 2024. Revenues in the Asia-Pacific region decreased
35%, including a 3% unfavorable impact from foreign currency.
Revenues in the Europe region increased 6%, including a 5%
favorable impact from foreign currency.
Dickies
® brand global revenues decreased 15% in Fiscal 2024.
The decline was primarily driven by a decrease in the Americas
region of 15%, reflecting lower inventory replenishment and
weakness with certain key U.S. wholesale customer accounts.
The decline in the year ended March 2024 was also attributed to
a decrease in the Asia-Pacific region of 35%, including a 3%
unfavorable impact from foreign currency, primarily due to
broad-based weakness in Greater China. Revenues in the
Europe region increased 6% in the year ended March 2024,
including a 5% favorable impact from foreign currency.
Operating margin decreased in Fiscal 2024 compared to Fiscal
2023, reflecting lower gross margin resulting from higher
distressed inventory reserves and higher material costs, and
lower
leverage
of
operating
expenses
due
to
decreased
revenues. The decrease was partially offset by price increases
and favorable mix.
Reconciliation of Segment Profit to Consolidated Income (Loss) Before Income Taxes
There are three types of costs necessary to reconcile total
segment profit to consolidated income (loss) from continuing
operations before income taxes. These costs are (i) impairment
of goodwill and indefinite-lived intangible assets, which is
excluded from segment profit because these costs are not part
of the ongoing operations of the respective businesses, (ii)
corporate
and
other
expenses,
which
are
excluded
from
segment profit to the extent they are not allocated to the
segments, and (iii) interest expense, net, which is excluded from
segment profit because substantially all financing costs are
managed at the corporate office and are not under the control of
segment management. Impairment of goodwill and indefinite-
lived intangible assets and net interest expense are discussed in
the
“Consolidated
Statements
of
Operations”
section,
and
corporate and other expenses are discussed below.
Year Ended March
(In millions)
2024
2023
Percent Change
Impairment of goodwill and intangible assets
$
507.6
(30.9)%
Corporate and other expenses
475.3
(23.1)%
Interest expense, net
223.4
35.7 %
Corporate and other expenses are those that have not been
allocated to the segments for internal management reporting,
including (i) information systems and shared service costs, (ii)
corporate headquarters costs, and (iii) certain other income and
expenses.
Information Systems and Shared Services
These costs include management information systems and the
centralized finance, supply chain and human resources functions
that support worldwide operations. The costs also include
software system implementations and upgrades and other
strategic projects. Operating costs of information systems and
shared
services
are
charged
to
the
segments
based
on
utilization of those services. Costs to develop new software and
related applications are generally not allocated to the segments.
Corporate Headquarters’ Costs
Headquarters’
costs
include
compensation
and
benefits
of corporate management and staff, legal and professional fees,
32
VF Corporation Fiscal 2024 Form 10-K
$
735.0
617.8
164.6
and general and administrative expenses that have not been
allocated to the segments.
Other
This category includes (i) costs of corporate programs or
corporate-managed decisions that are not allocated to the
segments, (ii) costs of registering, maintaining and enforcing
certain of VF’s trademarks, and (iii) miscellaneous consolidated
activities, the most significant of which is related to VF’s
centrally-managed U.S. defined benefit pension plans.
Corporate and other expenses decreased $142.5 million in Fiscal
2024 when compared to Fiscal 2023. The decrease was primarily
due to a $91.8 million pension settlement charge recorded in the
first quarter of Fiscal 2023. The decrease was also attributed to
lower compensation and administrative costs and lower foreign
currency and hedging losses, partially offset by Reinvent charges
in Fiscal 2024.
International
International revenues increased 1% in Fiscal 2024 compared to
Fiscal 2023. Foreign currency had a favorable impact of 2% on
international revenues in Fiscal 2024.
Revenues in the Europe region were flat in Fiscal 2024, including
a 4% favorable impact from foreign currency. In the Asia-Pacific
region, revenues increased 3% in Fiscal 2024, including a 4%
unfavorable impact from foreign currency. Revenues in Greater
China increased 9% in Fiscal 2024, including a 4% unfavorable
impact from foreign currency. The year ended March 2023 was
negatively impacted by COVID-19 resurgence in Mainland China.
Revenues in the Americas (non-U.S.) region decreased 3% in
Fiscal 2024, including a 3% favorable impact from foreign
currency.
International revenues were 54% of total VF revenues in Fiscal
2024 compared to 48% in Fiscal 2023.
Direct-to-Consumer
Direct-to-consumer revenues decreased 5% in Fiscal 2024
compared to Fiscal 2023, including a 1% favorable impact from
foreign currency.
VF's e-commerce business declined 8% in Fiscal 2024. The
decrease was primarily driven by declines in the e-commerce
business in the Americas region.
Revenues from VF-operated retail stores decreased 5% in Fiscal
2024, including a 1% favorable impact from foreign currency. VF
opened 81 stores in Fiscal 2024, bringing the total number of VF-
owned retail stores to 1,185 at March 2024, which also reflects
161 store closures during the period. There were 1,265 VF-
owned
retail
stores
at
March
2023.
Direct-to-consumer
revenues were 47% of total VF revenues in Fiscal 2024 compared
to 45% in Fiscal 2023.
Wholesale
Wholesale revenues decreased 14% in Fiscal 2024 compared to
Fiscal 2023, including a 1% favorable impact from foreign
currency. The results were primarily driven by declines in the
wholesale business in the Americas region. Wholesale revenues
were 53% of total revenues in Fiscal 2024 compared to 55% in
Fiscal 2023.
ANALYSIS OF FINANCIAL CONDITION
Balance Sheets
The
following
discussion
refers
to
significant
changes
in
balances at March 2024 compared to March 2023:
•
Decrease in accounts receivable — primarily due to lower
wholesale shipments.
•
Decrease in inventories — driven by VF reducing elevated
inventory levels, primarily in core and replenishment
products.
•
Decrease in property, plant and equipment — primarily due
to asset disposals, write-downs and reclassifications to
current assets held-for-sale.
•
Decrease in goodwill — primarily due to $507.6 million in
impairment charges related to the Timberland, Dickies
and Icebreaker reporting units recorded in Fiscal 2024.
•
Decrease in other assets — primarily due to the write-off of
the $875.7 million income tax receivable in the second
quarter of Fiscal 2024 due to the unfavorable decision in
the Timberland tax case related to 2011 taxes and interest
disputed with the Internal Revenue Service ("IRS").
•
Increase in short-term borrowings — primarily due to an
increase in commercial paper borrowings.
•
Decrease in accounts payable — primarily driven by lower
inventory purchases and the timing of payments to
vendors.
•
Decrease in accrued liabilities — primarily due to lower
accrued income taxes.
•
Decrease in long-term debt — due to the reclassification of
$1.0 billion of long-term debt due in December 2024
related to our delayed draw Term Loan Agreement (the
"DDTL Agreement").
VF Corporation Fiscal 2024 Form 10-K
33
Liquidity and Cash Flows
We consider the following to be measures of our liquidity and capital resources:
(Dollars in millions)
March 2024
March 2023
Working capital
$770.0
$1,606.9
Current ratio
1.2 to 1
1.5 to 1
Net debt to total capital
80.3%
71.6%
The decrease in working capital and the current ratio at March
2024 compared to March 2023 was primarily due to a net
decrease in current assets driven by lower accounts receivable
and inventories for the periods compared, as discussed in the
"Balance Sheets" section above.
For the ratio of net debt to total capital above, net debt is defined
as
short-term
and
long-term
borrowings,
in
addition
to
operating lease liabilities, net of unrestricted cash. Total capital
is defined as net debt plus stockholders’ equity. The increase in
the net debt to total capital ratio at March 2024 compared to
March 2023 was driven by a decrease in stockholders' equity,
partially offset by a decrease in net debt for the periods
compared. The decrease in stockholders' equity was primarily
driven by the net loss in the period and payments of dividends.
The decrease in net debt was driven by the repayment of
€850.0 million in aggregate principal amount of Senior Notes
due in September 2023, partially offset by higher short-term
borrowings, as discussed in the "Balance Sheets" section above.
VF’s primary source of liquidity is its expected annual cash flow
from operating activities. Cash from operations is typically lower
in the first half of the calendar year as inventory builds to
support peak sales periods in the second half of the calendar
year. Cash provided by operating activities in the second half of
the calendar year is substantially higher as inventories are sold
and accounts receivable are collected. Additionally, direct-to-
consumer sales are highest in the fourth quarter of the calendar
year. VF's additional sources of liquidity include available
borrowing capacity against its Global Credit Facility, available
cash balances and international lines of credit.
In summary, our cash flows were as follows:
Year Ended March
(In millions)
2024
2023
Cash provided (used) by operating activities
$
1,014.6
$
(655.8)
Cash used by investing activities
(172.3)
(188.1)
Cash provided (used) by financing activities
(959.6)
463.9
Cash Provided (Used) by Operating Activities
Cash flows related to operating activities are dependent on net
income (loss), adjustments to net income (loss) and changes in
working capital. The increase in cash provided by operating
activities in Fiscal 2024 compared to Fiscal 2023 was primarily
due to a decrease in net cash used by working capital driven by
lower accounts receivable and inventory balances in Fiscal 2024,
and the $875.7 million payment related to the Timberland tax
case in the prior year. The increase in cash provided by operating
activities was partially offset by lower earnings for the periods
compared.
Cash Used by Investing Activities
The decrease in cash used by investing activities in Fiscal 2024
compared to Fiscal 2023 was primarily due to the liquidation of a
life insurance contract investment of $39.7 million, decreased
software purchases of $30.2 million and decreased capital
expenditures of $20.1 million, partially offset by lower proceeds
from the sale of assets of $72.9 million compared to the Fiscal
2023 period.
Cash Provided (Used) by Financing Activities
The increase in cash used by financing activities in Fiscal 2024
compared to Fiscal 2023 was primarily due to a $907.1 million
payment of long-term debt in Fiscal 2024, compared to the
issuance of €1.0 billion euro-denominated fixed rate notes,
borrowings of $1.0 billion under the DDTL Agreement and a
$500.0 million payment of long-term debt in Fiscal 2023. The
increase was partially offset by a $579.1 million net increase in
short-term borrowings for the periods compared, a $57.0 million
payment of Supreme contingent consideration in Fiscal 2023 and
a $399.7 million decrease in dividends paid for the periods
compared.
Share Repurchases
VF did not purchase shares of its Common Stock in the open
market during Fiscal 2024 or Fiscal 2023 under the share
repurchase program authorized by VF's Board of Directors.
As of the end of Fiscal 2024, VF had $2.5 billion remaining for
future repurchases under its share repurchase authorization.
VF's capital deployment priorities in the near-to-medium term
will be focused on optimizing and driving the performance of the
current portfolio and reducing leverage.
Revolving Credit Facility and Short-term Borrowings
VF relies on its ability to generate cash flows to finance its
ongoing operations. In addition, VF has significant liquidity from
its available cash balances and credit facilities. VF maintains a
$2.25 billion senior unsecured revolving line of credit (the
"Global Credit Facility") that expires in November 2026. VF may
request an unlimited number of one-year extensions so long as
each extension does not cause the remaining life of the Global
34
VF Corporation Fiscal 2024 Form 10-K
Credit Facility to exceed five years, subject to stated terms and
conditions;
however,
granting
of
any
extension
is
at
the
discretion of the lenders. The Global Credit Facility may be used
to borrow funds in U.S. dollars or any alternative currency
(including euros and any other currency that is freely convertible
into U.S. dollars, approved at the request of the Company by the
lenders) and has a $75.0 million letter of credit sublimit. The
Global Credit Facility supports VF’s global commercial paper
program for short-term, seasonal working capital requirements
and
general
corporate
purposes.
Outstanding
short-term
balances may vary from period to period depending on the level
of corporate requirements.
VF has restrictive covenants on its Global Credit Facility,
including a consolidated net indebtedness to consolidated net
capitalization
financial
ratio
covenant,
as
defined
in
the
agreement as amended in April 2024, starting at 70% with future
step downs. The calculation of consolidated net indebtedness is
net of unrestricted cash and the calculation of consolidated net
capitalization permits certain addbacks, including non-cash
impairment
charges
and
material
impacts
resulting
from
adverse legal rulings, as defined in the amended agreement. The
covenant calculation also excludes consolidated operating lease
liabilities. Additionally, the amended agreement restricts the
total amount of cash dividends and share repurchases to $500.0
million annually, on a calendar-year basis. As of March 2024, VF
was in compliance with all covenants.
VF has a global commercial paper program that allows for
borrowings of up to $2.25 billion to the extent that it has
borrowing capacity under the Global Credit Facility. There were
$250.0 million in U.S. commercial paper borrowings as of March
2024. In addition to the U.S. commercial paper program, VF
commenced a euro commercial paper borrowing program
during the second quarter of Fiscal 2024. As of March 2024,
there were no outstanding euro commercial paper borrowings
under this program. Standby letters of credit issued under the
Global Credit Facility as of March 2024 were $0.6 million, leaving
approximately $2.0 billion available for borrowing against the
Global Credit Facility at March 2024, subject to applicable
financial covenants.
VF has $81.2 million of international lines of credit with various
banks, which are uncommitted and may be terminated at any
time by either VF or the banks. Total outstanding balances under
these
arrangements
were
$13.9
million
at
March
2024.
Borrowings under these arrangements had a weighted average
interest rate of 51.6% at March 2024.
Additionally, VF had $674.6 million of unrestricted cash and
equivalents at March 2024.
Maturity
On September 18, 2023, VF repaid €850.0 million ($907.1 million)
in aggregate principal amount of its outstanding 0.625% Senior
Notes due in September 2023, in accordance with the terms of
the notes.
Supply Chain Financing Program
VF facilitates a voluntary supply chain finance ("SCF") program
that enables a significant portion of our inventory suppliers 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 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 terms (which are generally
within 90 days of the invoice date) are not impacted by a
supplier's participation in the SCF program. All amounts due to
suppliers that are eligible to 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. At March 2024 and
2023, the accounts payable line item in VF's Consolidated
Balance Sheets included total outstanding obligations of $485.0
million and $510.9 million, respectively, due to suppliers that are
eligible to participate in the SCF program.
In the second quarter of Fiscal 2023, VF extended its payment
terms with eligible suppliers under the SCF program. The
change is not expected to have a material impact on VF's long-
term overall liquidity or capital resources.
Rating Agencies
At the end of March 2024, VF’s long-term debt ratings were
‘BBB-’ by Standard & Poor’s ("S&P") Global Ratings and ‘Baa3’
by Moody’s Investors Service ("Moody's"), and U.S. commercial
paper ratings by those rating agencies were ‘A-3’ and ‘P-3’,
respectively. The Moody's rating for VF's euro commercial paper
was also 'P-3' at the end of March 2024. There is no active
market for euro commercial paper based on VF's current rating.
VF's credit rating outlook by both S&P and Moody's at the end of
March 2024 was 'negative'.
VF’s credit agency ratings allow for access to additional liquidity
at competitive rates. Further downgrades to VF's ratings would
negatively impact borrowing costs.
None of VF’s long-term debt agreements contain acceleration of
maturity clauses based solely on changes in credit ratings.
However, if there were a change in control of VF and, as a result
of the change in control the notes were rated below investment
grade by recognized rating agencies, then VF would be obligated
to repurchase the notes at 101% of the aggregate principal
amount, plus any accrued and unpaid interest, if required by the
respective holders of the notes. The change of control provision
applies to all notes, except for the notes due in 2033.
Dividends
Cash dividends totaled $0.78 per share in Fiscal 2024 compared
to $1.81 in Fiscal 2023. The dividend payout ratio was (31.3)% of
diluted earnings (loss) per share in Fiscal 2024 compared to
592.8% in Fiscal 2023. The Company declared a dividend of $0.09
per share that is payable in the first quarter of Fiscal 2025.
Subject to approval by its Board of Directors, VF intends to
continue to pay quarterly dividends.
Other Matters
As previously reported, VF petitioned the U.S. Tax Court (the “Tax
Court”) to resolve an IRS dispute regarding the timing of income
inclusion associated with VF’s acquisition of The Timberland
Company in September 2011. While the IRS argued that all such
income should have been immediately included in 2011, VF
VF Corporation Fiscal 2024 Form 10-K
35
reported periodic income inclusions in subsequent tax years. In
Fiscal 2023, the Tax Court issued its final decision in favor of the
IRS, which was appealed by VF. On October 19, 2022, VF paid
$875.7 million related to the 2011 taxes and interest being
disputed, which was recorded as an income tax receivable based
on the technical merits of our position with regards to the case
and began to accrue interest income. On September 8, 2023, the
U.S. Court of Appeals for the First Circuit ("Appeals Court")
upheld the Tax Court's decision in favor of the IRS. As a result of
the Appeals Court decision, VF wrote off the related income tax
receivable and associated interest and recorded $690.0 million
of income tax expense in the second quarter of Fiscal 2024. This
amount included the reversal of $19.6 million of interest income,
of which $7.5 million was recorded in the first quarter of Fiscal
2024. This amount reflects the total estimated net impact to VF's
tax expense, which includes the expected reduction in taxes paid
on the periodic inclusions that VF has reported, release of
related deferred tax liabilities, and consideration of indirect tax
effects resulting from the decision. The estimated impact is
subject to future adjustments based on finalization with tax
authorities.
Contractual Obligations
Following is a summary of VF’s material contractual obligations and commercial commitments at the end of March 2024 that will
require the use of funds:
Payment Due or Forecasted by Fiscal Year
(In millions)
Total
2025
2026
2027
2028
2029
Thereafter
Recorded liabilities:
Long-term debt
(1)
$
5,741
$
1,001
$
1,291
$
2
$
1,041
$
541
$
1,865
Operating leases
(2)
1,626
355
312
267
190
126
376
Unrecorded commitments:
Interest payment obligations
(3)
928
183
128
104
91
89
332
Inventory obligations
(4)
2,421
2,344
73
3
—
—
—
$
10,715
$
3,884
$
1,805
$
376
$
1,322
$
756
$
2,572
Note: Amounts may not sum due to rounding.
(1)
Long-term debt consists of required undiscounted principal payments on long-term debt and finance lease obligations.
(2)
Operating leases represent required undiscounted lease payments during the noncancelable lease term. Variable payments for occupancy-
related costs, real estate taxes, insurance and contingent rent are not included above. In addition, $82.3 million of leases (on an undiscounted
basis) that have not yet commenced with terms of 1 to 15 years beginning primarily in Fiscal 2025 are not included above.
(3)
Interest payment obligations represent required interest payments on long-term debt. Amounts exclude amortization of debt issuance costs,
debt discounts and acquisition costs that would be included in interest expense in the consolidated financial statements.
(4)
Inventory obligations represent binding commitments to purchase finished goods and raw materials that are payable upon VF taking ownership
of the inventory. This obligation excludes the amount included in accounts payable at March 2024 related to inventory purchases.
VF had other financial commitments at the end of Fiscal 2024
that are not included in the above table but may require the use
of funds under certain circumstances:
•
$106.3 million of surety bonds, custom bonds, standby
letters of credit and international bank guarantees are not
included in the table above because they represent
contingent
guarantees
of
performance
under
self-
insurance and other programs and would only be drawn
upon if VF were to fail to meet its other obligations.
•
Purchase orders for goods or services in the ordinary
course of business are not included in the above table
because they represent authorizations to purchase rather
than binding commitments.
Management
believes
that
VF
has
sufficient
liquidity
and
flexibility to operate its business and meet its current and long-
term obligations as they become due.
VF does not participate in transactions with unconsolidated
entities or financial partnerships that are reasonably likely to
have a material impact on the Company.
Risk Management
VF is exposed to risks in the ordinary course of business.
Management regularly assesses and manages exposures to
these risks through operating and financing activities and, when
appropriate, by (i) taking advantage of natural hedges within VF,
(ii) purchasing insurance from commercial carriers, or (iii) using
derivative
financial
instruments.
Some
potential
risks
are
discussed below:
Insured risks
VF is self-insured for a significant portion of its employee
medical, workers’ compensation, vehicle and general liability
exposures.
VF
purchases
insurance
from
highly-rated
commercial carriers to cover other risks, including directors and
officers,
cyber,
property,
stock
throughput,
employment
practices, wage and hour and umbrella, and to establish stop-
loss limits on self-insurance arrangements.
36
VF Corporation Fiscal 2024 Form 10-K
Cash and equivalents risks
VF had $674.6 million of cash and equivalents at the end of
Fiscal 2024. Management continually monitors the credit ratings
of the financial institutions with whom VF conducts business and
geopolitical risks that may impact countries where VF has cash
balances. Management also monitors the credit quality of cash
equivalents.
Defined benefit pension plan risks
At the end of Fiscal 2024, VF’s defined benefit pension plans
were overfunded by a net total of $89.9 million. The overfunded
status includes a $54.0 million liability related to our U.S.
unfunded supplemental defined benefit plan, $30.4 million of net
liabilities related to our non-U.S. defined benefit plans, and a
$174.3 million net asset related to our U.S. qualified defined
benefit plan. VF will continue to evaluate the funded status and
future funding requirements of these plans, which depends in
part on the future performance of the plans’ investment
portfolios. Management believes that VF has sufficient liquidity
to make any required contributions to the pension plans in future
years.
VF’s reported earnings are subject to risks due to the volatility of
its pension cost (income), which has ranged in recent years from
cost of $101.9 million in the year ended March 2023 to income of
$7.3 million in the year ended March 2022. These fluctuations
are primarily due to differences in the amount of settlement
charges recorded in the respective periods. The changes are
also impacted by varying amounts of actuarial gains and losses
that are deferred and amortized to future years’ pension cost
(income). The assumptions that impact actuarial gains and
losses include the rate of return on investments held by the
pension plans, the discount rate used to value participant
liabilities and demographic characteristics of the participants.
VF has taken a series of steps to manage the risk and volatility in
the pension plans and their impact on the financial statements,
including the following:
•
The U.S. qualified and supplemental defined benefit plans
were closed to new entrants at the end of 2004 and all
future benefit accruals were frozen as of December 31,
2018.
•
During the year ended March 2020, VF offered former
employees in the U.S. qualified plan a lump-sum option to
receive a distribution of their deferred vested benefits.
The U.S. qualified plan participants were reduced by 10%
as a result of this offer. No additional funding of the
pension plan was required as all distributions were paid
out of existing plan assets, and the plan's funded status
remained materially unchanged.
•
During the year ended March 2023, VF entered into an
agreement with The Prudential Insurance Company of
America (“Prudential”) to purchase an irrevocable group
annuity contract relating to approximately $330 million of
the U.S. qualified defined benefit pension plan obligations.
The transaction closed on June 30, 2022 and was funded
entirely by existing assets of the plan. Under the group
annuity contract, Prudential assumed responsibility for
benefit
payments
and
annuity
administration
for
approximately 17,700 retirees and beneficiaries.
The investment strategy of the U.S. qualified plan continues to
define dynamic asset allocation targets that are dependent upon
changes in the plan’s funded status, capital market expectations,
and risk tolerance. Management will continue to evaluate
actions that may help to reduce VF’s risks related to its defined
benefit plans.
Interest rate risks
VF limits the risk of interest rate fluctuations by managing the
mix of fixed and variable interest rate debt. In addition, VF may
use derivative financial instruments to manage risk. Since most
of VF’s long-term debt has fixed interest rates, the exposure
primarily relates to changes in interest rates on variable rate
short-term
borrowings
(which
averaged
approximately
$386.0 million at an 8.1% rate during Fiscal 2024). Additionally,
VF entered into a DDTL Agreement during Fiscal 2023, which has
a variable interest rate. VF entered into floating-to-fixed interest
rate swap contracts to hedge a portion of the cash flow risk
associated with the DDTL Agreement. Any change in interest
rates would also affect interest income earned on VF’s cash
equivalents. Based on the average amount of variable rate
borrowings and cash equivalents during Fiscal 2024, the effect of
a hypothetical 1% increase in interest rates would be a decrease
in reported net income of approximately $6.9 million and a
hypothetical 1% decrease in interest rates would be an increase
in reported net income of approximately $6.9 million.
Foreign currency exchange rate risks
VF is a global enterprise subject to the risk of foreign currency
fluctuations. Approximately 54% of VF’s revenues in the year
ended March 2024 were generated in international markets.
Most of VF’s foreign businesses operate in functional currencies
other than the U.S. dollar. In periods where the U.S. dollar
strengthens relative to the euro or other foreign currencies
where VF has operations, there is a negative impact on VF’s
operating results upon translation of those foreign operating
results into the U.S. dollar. As discussed later in this section,
management
hedges
VF’s
investments
in
certain
foreign
operations and foreign currency transactions.
The reported values of assets and liabilities in these foreign
businesses are subject to fluctuations in foreign currency
exchange rates. For net advances to and investments in VF’s
foreign businesses that are considered to be long-term, the
impact of changes in foreign currency exchange rates on those
long-term advances is deferred as a component of accumulated
other comprehensive loss ("OCL") in stockholders’ equity. The
U.S. dollar value of net investments in foreign subsidiaries
fluctuates with changes in the underlying functional currencies.
In March 2023 and February 2020, VF issued €1.0 billion of euro-
denominated fixed-rate notes. These notes, along with VF's euro
commercial paper borrowings, have been designated as net
investment
hedges
of
VF’s
investment
in
certain
foreign
operations. Because this debt qualified as a nonderivative
hedging instrument, foreign currency transaction gains or losses
on the debt are deferred in the foreign currency translation and
other component of accumulated OCL as an offset to the foreign
currency translation adjustments on the hedged investments.
Any amounts deferred in accumulated OCL will remain until the
hedged investment is sold or substantially liquidated.
VF monitors net foreign currency market exposures and enters
into derivative foreign currency contracts to hedge the effects of
exchange rate fluctuations for a significant portion of forecasted
foreign
currency
cash
flows
or
specific
foreign
currency
transactions (relating to cross-currency inventory purchases,
VF Corporation Fiscal 2024 Form 10-K
37
product
sales,
operating
costs
and
intercompany
royalty
payments). VF’s practice is to buy or sell foreign currency
exchange contracts that cover up to 80% of foreign currency
exposures for periods of up to 24 months. Currently, VF uses
only foreign exchange forward contracts but may use options or
collars in the future. This use of financial instruments allows
management to reduce the overall exposure to risks from
exchange rate fluctuations on VF’s cash flows and earnings,
since gains and losses on these contracts will offset a portion of
losses and gains on the transactions being hedged.
For cash flow hedging contracts outstanding at the end of Fiscal
2024, a hypothetical 10% decrease and 10% increase in foreign
currency exchange rates compared to rates at the end of Fiscal
2024, would result in a decrease in the unrealized net loss of
approximately $61.8 million and an increase in the unrealized
net loss of approximately $50.3 million, respectively. However,
any change in the fair value of the hedging contracts would be
substantially offset by a change in the fair value of the underlying
hedged exposure impacted by the currency rate changes.
Counterparty risks
VF
is
exposed
to
credit-related
losses
in
the
event
of
nonperformance
by
counterparties
to
derivative
hedging
instruments.
To
manage
this
risk,
we
have
established
counterparty credit guidelines and only enter into derivative
transactions with financial institutions that have ‘A minus/A3’
investment
grade
credit
ratings
or
better.
VF
continually
monitors the credit rating of, and limits the amount hedged with,
each counterparty. Additionally, management utilizes a portfolio
of financial institutions to minimize exposure to potential
counterparty defaults and adjusts positions as necessary. VF
also monitors counterparty risk for derivative contracts within
the defined benefit pension plans.
Commodity price risks
VF is exposed to market risks for the pricing of cotton, leather,
rubber, wool and other materials, primarily due to the impact on
the
cost
of
sourced
finished
goods
from
independent
contractors. To manage risks of commodity price changes,
management negotiates prices of finished goods in advance
when possible. VF has not historically managed commodity price
exposures by using derivative instruments.
Deferred compensation and related investment security risks
VF has nonqualified deferred compensation plans in which
liabilities to the plans’ participants are based on the market
values of the participants’ selection of a hypothetical portfolio of
investment funds. VF invests in a portfolio of securities and
variable life insurance contracts that substantially mirror the
participants’
investment
selections.
The
increases
and
decreases in deferred compensation liabilities are substantially
offset by corresponding increases and decreases in the market
value of VF’s investments, resulting in an insignificant net
exposure to operating results and financial position.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
VF has chosen accounting policies that management believes
are appropriate to accurately and fairly report VF’s operating
results and financial position in conformity with accounting
principles generally accepted in the U.S. VF applies these
accounting
policies
in
a
consistent
manner.
Significant
accounting
policies
are
summarized
in
Note
1
to
the
consolidated financial statements.
The application of these accounting policies requires that VF
make estimates and assumptions about future events and apply
judgments that affect the reported amounts of assets, liabilities,
revenues,
expenses,
contingent
assets
and
liabilities,
and
related
disclosures.
These
estimates,
assumptions
and
judgments are based on historical experience, current trends
and
other
factors
believed
to
be
reasonable
under
the
circumstances. Management evaluates these estimates and
assumptions on an ongoing basis. In addition, VF may retain
outside
specialists
to
assist
in
valuations
of
business
acquisitions and impairment testing of goodwill and intangible
assets. Because VF’s business cycle is relatively short (i.e., from
the date inventory is purchased until that inventory is sold and
payment is collected), actual results related to most estimates
are known within a few months after any balance sheet date. If
actual results ultimately differ from previous estimates, the
revisions are included in results of operations when the actual
amounts become known.
VF believes the following accounting policies involve the most
significant management estimates, assumptions and judgments
used in preparation of the consolidated financial statements or
are the most sensitive to change from outside factors. The
application of these critical accounting policies and estimates is
discussed with the Audit Committee of the Board of Directors.
Business Combinations
VF accounts for business combinations using the acquisition
method of accounting. Under the acquisition method, the
consolidated financial statements reflect the operations of an
acquired
business
starting
from
the
closing
date
of
the
acquisition. All assets acquired and liabilities assumed are
recorded at fair value as of the acquisition date. VF allocates the
purchase price of an acquired business to the fair values of the
tangible and identifiable intangible assets acquired and liabilities
assumed, with any excess purchase price recorded as goodwill.
Contingent consideration, if any, is included within the purchase
price and is recognized at its fair value on the acquisition date.
The application of the acquisition method of accounting for
business combinations and determination of fair value requires
management to make judgments and may involve the use of
significant
estimates,
including
assumptions
related
to
estimated future revenues, growth rates, cash flows, discount
rates and royalty rates, among other items. VF generally
evaluates
fair
value
at
acquisition
using
three
valuation
techniques - the replacement cost, market and income methods
- and weights the valuation methods based on what is most
appropriate in the circumstances. The process of assigning fair
values, particularly to acquired intangible assets, is highly
subjective. VF also utilizes third-party valuation specialists to
assist management in the determination of the fair value of
38
VF Corporation Fiscal 2024 Form 10-K
assets acquired and liabilities assumed. Management estimates
of
fair
value
are
based
on
assumptions
believed
to
be
reasonable, but are inherently uncertain and unpredictable and,
as a result, actual results may differ from estimates. If the
actual results differ from the estimates and judgments used, the
amounts recorded in the consolidated financial statements may
be exposed to potential impairment of the intangible assets and
goodwill, as discussed in the "Long-Lived Assets, Including
Intangible Assets and Goodwill" section below.
During the measurement period, which is up to one year from
the acquisition date, adjustments to the assets acquired and
liabilities assumed may be recorded, with the corresponding
offset to goodwill.
Long-Lived Assets, Including Intangible Assets and Goodwill
Definite-Lived Assets
VF’s depreciation policies for property, plant and equipment
reflect judgments on the estimated economic lives and residual
values, if any. VF’s amortization policies for definite-lived
intangible assets reflect judgments on the estimated amounts
and duration of future cash flows expected to be generated by
those assets. In evaluating the amortizable life for customer
relationship intangible assets, management considers historical
attrition
patterns
for
various
groups
of
customers.
In
determining the lease term used to amortize operating lease
right-of-use assets, VF considers initial terms and any renewal
or termination options that may exist. When deemed reasonably
certain, the renewal and termination options are included in the
determination of lease term.
VF’s policy is to review property, plant and equipment, definite-
lived intangible assets and operating lease right-of-use assets
for
potential
impairment
whenever
events
or
changes
in
circumstances indicate the carrying value of an asset or asset
group may not be recoverable. VF tests for potential impairment
at the asset or asset group level, which is the lowest level for
which
there
are
identifiable
cash
flows
that
are
largely
independent. VF measures recoverability of the carrying value of
an asset or asset group by comparison to the estimated pre-tax
undiscounted cash flows expected to be generated by the asset.
If
the
forecasted
pre-tax
undiscounted
cash
flows
to
be
generated by the asset are not expected to be adequate to
recover the asset’s carrying value, a fair value analysis is
performed, and an impairment charge is recorded if there is an
excess of the asset’s carrying value over its estimated fair value.
When testing property, plant and equipment for potential
impairment, VF uses the income-based discounted cash flow
method using the estimated cash flows of the respective asset or
asset group. The estimated pre-tax undiscounted cash flows of
the asset or asset group through the end of its useful life are
compared to its carrying value. If the pre-tax undiscounted cash
flows of the asset or asset group exceed its carrying value, there
is no impairment charge. If the pre-tax undiscounted cash flows
of the asset or asset group are less than its carrying value, the
estimated fair value of the asset or asset group is calculated
based
on
the
after-tax
discounted
cash
flows
using
an
appropriate weighted average cost of capital ("WACC"), and an
impairment charge is recognized for the difference between the
estimated fair value of the asset or asset group and its carrying
value.
When
testing
customer
relationship
intangible
assets
for
potential
impairment,
management
considers
historical
customer attrition rates and projected revenues and profitability
related to customers that existed at acquisition. Management
uses the multi-period excess earnings method, which is a
specific application of the discounted cash flow method, to value
customer
relationship
assets.
The
estimated
pre-tax
undiscounted cash flows of the asset through the end of its
useful life are compared to its carrying value. If the pre-tax
undiscounted cash flows of the asset exceed its carrying value,
there is no impairment charge. If the pre-tax undiscounted cash
flows of the asset are less than its carrying value, the estimated
fair value of the asset is calculated based on the present value of
the after-tax cash flows expected to be generated by the
customer relationship asset after deducting contributory asset
charges, and an impairment charge is recognized for the
difference between the estimated fair value of the asset and its
carrying value.
When testing operating lease right-of-use assets for potential
impairment, VF uses the income-based discounted cash flow
method using the estimated cash flows of the respective asset or
asset group. The estimated pre-tax undiscounted cash flows of
the asset or asset group through the end of its useful life are
compared to its carrying value. If the pre-tax undiscounted cash
flows of the asset exceed its carrying value, there is no
impairment charge. If the pre-tax undiscounted cash flows of the
asset or asset group are less than its carrying value, the
estimated fair value of the asset or asset group is calculated
considering what a market participant would pay to lease the
asset for its highest and best use, and an impairment charge is
recognized for the difference between the estimated fair value of
the asset or asset group and its carrying value. The impairment
loss is allocated to the long-lived assets of the group on a pro-
rata basis using the relative carrying amounts of those assets.
Indefinite-Lived Intangible Assets and Goodwill
Fair value for acquired intangible assets is generally based on
the present value of expected cash flows. Indefinite-lived
trademark or trade name intangible assets (collectively referred
to herein as “trademarks”) represent individually acquired
trademarks, some of which are registered in multiple countries.
Goodwill represents the excess of cost of an acquired business
over the fair values of the tangible and identifiable intangible
assets acquired and liabilities assumed, and is assigned at the
reporting unit level.
VF’s policy is to evaluate indefinite-lived intangible assets and
goodwill for possible impairment as of the beginning of the
fourth quarter of each fiscal year, or whenever events or
changes in circumstances indicate that the fair value of such
assets may be below their carrying amount. As part of its annual
impairment testing, VF may elect to assess qualitative factors as
a basis for determining whether it is necessary to perform
quantitative impairment testing. If management’s assessment of
these qualitative factors indicates that it is more likely than not
that the fair value of the intangible asset or reporting unit is
more than its carrying value, then no further testing is required.
Otherwise, the intangible asset or reporting unit is quantitatively
tested for impairment.
An indefinite-lived intangible asset is quantitatively tested for
possible impairment by comparing the estimated fair value of
VF Corporation Fiscal 2024 Form 10-K
39
the asset to its carrying value. Fair value of an indefinite-lived
trademark is based on an income approach using the relief-
from-royalty method. Under this method, forecasted revenues
for products sold with the trademark are assigned a royalty rate
that would be charged to license the trademark (in lieu of
ownership), and the estimated fair value is calculated as the
present value of those forecasted royalties avoided by owning
the trademark. The discount rate is based on the reporting unit’s
WACC that considers market participant assumptions and is
adjusted, as appropriate, to factor in the risk of the intangible
asset. The royalty rate is selected based on consideration of (i)
royalty rates included in active license agreements, if applicable,
(ii) royalty rates received by market participants in the apparel
and footwear industry, and (iii) the current performance of the
reporting unit. If the estimated fair value of the trademark
intangible
asset
exceeds
its
carrying
value,
there
is
no
impairment charge. If the estimated fair value of the trademark
is less than its carrying value, an impairment charge is
recognized for the difference.
Goodwill is quantitatively evaluated for possible impairment by
comparing the estimated fair value of a reporting unit to its
carrying value. Reporting units are businesses with discrete
financial
information
that
is
available
and
reviewed
by
management.
For goodwill impairment testing, VF estimates the fair value of a
reporting unit using both income-based and market-based
valuation methods. The income-based approach is based on the
reporting unit’s forecasted future cash flows that are discounted
to present value using the reporting unit’s WACC, as discussed
above. For the market-based approach, management uses both
the guideline company and similar transaction methods. The
guideline
company
method
analyzes
market
multiples
of
revenues and earnings before interest, taxes, depreciation and
amortization (“EBITDA”) for a group of comparable public
companies. The market multiples used in the valuation are
based on the relative strengths and weaknesses of the reporting
unit compared to the selected guideline companies. Under the
similar transactions method, valuation multiples are calculated
utilizing actual transaction prices and revenue/EBITDA data from
target
companies
deemed
similar
to
the
reporting
unit.
Management typically assigns more weight to the income-based
valuation method. Management also evaluates the fair value
estimates of reporting units in the context of VF's total
enterprise market value.
Based on the range of estimated fair values developed from the
income
and
market-based
methods,
VF
determines
the
estimated fair value for the reporting unit. If the estimated fair
value of the reporting unit exceeds its carrying value, the
goodwill is not impaired and no further review is required.
However, if the estimated fair value of the reporting unit is less
than its carrying value, VF calculates the impairment loss as the
difference between the carrying value of the reporting unit and
the estimated fair value, limited to the amount of reporting unit
goodwill.
The
income-based
fair
value
methodology
requires
management’s assumptions and judgments regarding economic
conditions in the markets in which VF operates and conditions in
the capital markets, many of which are outside of management’s
control. At the reporting unit level, fair value estimation requires
management’s
assumptions
and
judgments
regarding
the
effects of overall economic conditions on the specific reporting
unit, along with assessment of the reporting unit’s strategies
and forecasts of future cash flows. Forecasts of individual
reporting unit cash flows involve management’s estimates and
assumptions regarding:
•
Annual cash flows, on a debt-free basis, arising from
future revenues and profitability, changes in working
capital, capital spending and income taxes for a forecast
period.
•
A terminal growth rate for years beyond the forecast
period. The terminal growth rate is selected based on
consideration of growth rates used in the forecast period,
historical performance of the reporting unit and economic
conditions.
•
A discount rate that reflects the risks inherent in realizing
the forecasted cash flows. A discount rate considers the
risk-free rate of return on long-term treasury securities,
the risk premium associated with investing in equity
securities of comparable companies, the beta obtained
from comparable companies and the cost of debt for
investment grade issuers. In addition, the discount rate
may consider any company-specific risk (at the reporting
unit
level)
in
achieving
the
prospective
financial
information.
Under the market-based fair value methodology, judgment is
required in evaluating market multiples and recent transactions.
Management
believes
that
the
assumptions
used
for
its
impairment tests are representative of those that would be used
by market participants performing similar valuations of VF’s
reporting units.
Fiscal 2024 Impairment Testing
Interim Impairment Testing
During the third quarter of Fiscal 2024, management determined
that the recent downturn in the Timberland historical financial
results, combined with a downward revision to the latest Fiscal
2024 forecast and forward-looking financial projections, was a
triggering event that required management to perform a
quantitative
impairment
analysis
of
both
the
Timberland
reporting unit goodwill, which includes the Timberland
® brand,
and the Timberland indefinite-lived trademark intangible asset,
which includes both the Timberland
® and Timberland PRO
®
brands. The carrying values of the goodwill and indefinite-lived
trademark intangible asset at the December 30, 2023 testing
date were $407.9 million and $999.5 million, respectively. As a
result of the impairment testing performed, VF recorded a
goodwill
impairment
charge
of
$195.3
million
in
the
Consolidated Statement of Operations in the third quarter of
Fiscal 2024 to write down the Timberland reporting unit carrying
value to its estimated fair value. No impairment charge was
recorded on the indefinite-lived trademark intangible asset. The
estimated fair value of the indefinite-lived trademark intangible
asset exceeded its carrying value by a significant amount.
During the third quarter of Fiscal 2024, management determined
that the continued downturn in the Dickies financial results,
weakness in certain key U.S. wholesale customer accounts,
including lost product placement, and weakness in certain
international markets, combined with expectations of a slower
recovery, which have resulted in further reductions to the
financial projections, was a triggering event that required
management to perform a quantitative impairment analysis of
both the Dickies reporting unit goodwill and the Dickies
indefinite-lived trademark intangible asset. The carrying values
40
VF Corporation Fiscal 2024 Form 10-K
of the goodwill and indefinite-lived trademark intangible asset at
the December 30, 2023 testing date were $61.8 million and
$290.0 million, respectively. Based on the analysis, management
concluded that the Dickies reporting unit goodwill was fully
impaired and thus recorded an impairment charge of $61.8
million in the Consolidated Statement of Operations in the third
quarter of Fiscal 2024. Based on the analysis, management
concluded that the indefinite-lived trademark intangible asset
was not impaired and the estimated fair value exceeded its
carrying value by a significant amount.
Annual and Fourth Quarter Impairment Testing
Management performed its annual goodwill and indefinite-lived
intangible asset impairment testing as of the beginning of the
fourth quarter of Fiscal 2024. VF elected to bypass the qualitative
analysis for the Icebreaker, Supreme, Timberland PRO, Altra
and Smartwool reporting unit goodwill and indefinite-lived
trademark
intangible
assets.
As
a
result
of
the
annual
impairment testing, VF recorded a goodwill impairment charge
of $38.8 million in the Consolidated Statement of Operations for
the year ended March 2024 related to Icebreaker. Based on the
analysis, management concluded that Icebreaker's indefinite-
lived trademark intangible asset was not impaired and the
estimated fair value exceeded its carrying value by a significant
amount. No other impairment charges were taken as a result of
the annual impairment testing. Based on the analyses, the
estimated fair values of the Supreme, Altra and Timberland PRO
reporting units exceeded the respective carrying values by 8%,
15% and 17%, respectively, and the estimated fair value of the
Smartwool reporting unit exceeded its carrying value by a
significant amount. Based on the analyses, the estimated fair
value of the Supreme indefinite-lived trademark intangible asset
exceeded its carrying value by 3%, and the estimated fair values
of the Altra and Smartwool indefinite-lived trademark intangible
assets exceeded the respective carrying values by a significant
amount.
During
the
fourth
quarter
of
Fiscal
2024,
management
determined that the recent downward revision to the forward-
looking financial projections was a triggering event that required
management to perform a quantitative impairment analysis of
both the Timberland reporting unit goodwill and indefinite-lived
trademark intangible asset. The carrying values of the goodwill
and indefinite-lived trademark intangible asset at the testing
date were $211.7 million and $999.5 million, respectively. As a
result
of the impairment testing performed, management
concluded that the Timberland reporting unit goodwill was fully
impaired and thus recorded an additional impairment charge of
$211.7 million in the Consolidated Statement of Operations for
the year ended March 2024. Based on the analysis, management
concluded that the indefinite-lived trademark intangible asset
was not impaired and the estimated fair value exceeded its
carrying value by 14%.
During
the
fourth
quarter
of
Fiscal
2024,
management
determined that the overall weakness in the Dickies business
and financial results, was a triggering event that required
management to perform a quantitative impairment analysis of
the Dickies indefinite-lived trademark intangible asset. The
carrying value of the indefinite-lived trademark intangible asset
at the March 30, 2024 testing date was $290.0 million. Based on
the analysis, management concluded that the indefinite-lived
trademark intangible asset was not impaired and the estimated
fair value exceeded its carrying value by 16%.
For the remaining reporting units and indefinite-lived trademark
intangible assets, VF elected to perform a qualitative analysis
during the annual goodwill and indefinite-lived intangible asset
impairment testing, as of the beginning of the fourth quarter of
Fiscal 2024, to determine whether it was more likely than not
that the goodwill and indefinite-lived trademark intangible
assets in those reporting units were impaired. Based on the
results of the qualitative assessment, VF concluded it was more
likely than not the carrying values of the goodwill and indefinite-
lived trademark intangible assets were less than their fair
values, and that further quantitative testing was not necessary.
Refer to Notes 9 and 24 to the consolidated financial statements
for additional discussion on Fiscal 2024 impairment testing.
Management’s Use of Estimates and Assumptions
Management made its estimates based on information available
as of the date of our assessments, using assumptions we believe
market participants would use in performing an independent
valuation of the business. Although management believes the
estimates and assumptions used in the impairment testing are
reasonable and appropriate, it is possible that VF's assumptions
and conclusions regarding impairment or recoverability of
goodwill or indefinite-lived trademark intangible assets in any
reporting unit could change in future periods. There can be no
assurance the estimates and assumptions, particularly our long-
term financial projections, used in our goodwill and indefinite-
lived intangible asset impairment testing will prove to be
accurate predictions of the future, if, for example, (i) the
businesses do not perform as projected, (ii) overall economic
conditions in Fiscal 2025 or future years vary from current
assumptions (including changes in discount rates, royalty rates
and foreign currency exchange rates), (iii) business conditions or
strategies change from current assumptions, including loss of
major customers or channels, (iv) investors require higher rates
of return on equity investments in the marketplace, or (v)
enterprise values of comparable publicly traded companies, or
actual sales transactions of comparable companies, were to
decline, resulting in lower multiples of revenues and EBITDA.
A future impairment charge of goodwill or indefinite-lived
intangible
assets
could
have
a
material
effect
on
VF’s
consolidated financial position and results of operations.
Income Taxes
As a global company, VF is subject to income taxes and files
income tax returns in over 100 U.S. and foreign jurisdictions
each year. Due to economic and political conditions, tax rates in
various jurisdictions may be subject to significant change. The
Company could be subject to changes in its tax rates, the
adoption of new U.S. or international tax legislation or changes
in interpretation of existing tax laws and regulations or rulings
by courts or government authorities leading to exposure to
additional tax liabilities. In particular, tax authorities and the
courts have increased their focus on income earned in no- or
low-tax jurisdictions or income that is not taxed in any
jurisdiction. Tax authorities have also become skeptical of
VF Corporation Fiscal 2024 Form 10-K
41
special tax rulings provided to companies offering lower taxes
than may be applicable in other countries. VF makes an ongoing
assessment to identify any significant exposure related to
increases in tax rates in the jurisdictions in which VF operates.
Furthermore, VF was granted a ruling which lowered the
effective income tax rate on taxable earnings for years 2010
through 2014 under Belgium's excess profit tax regime. During
2015, the European Union Commission (“EU”) investigated and
announced its decision that these rulings were illegal and
ordered
the
tax
benefits
to
be
collected
from
affected
companies, including VF. During 2017 and 2018, VF Europe BVBA
was assessed and paid €35.0 million tax and interest, which was
recorded as an income tax receivable and was included in the
other current assets line item in VF's Consolidated Balance
Sheets, based on the expected success of the requests for
annulment. After subsequent annulments and appeals, the
General Court confirmed the decision of the EU on September
20, 2023. As a result, VF wrote off the related income tax
receivable and recorded a benefit for the associated foreign tax
credit, resulting in $26.1 million of net income expense in the
second quarter of Fiscal 2024.
As previously reported, VF petitioned the U.S. Tax Court (the “Tax
Court”) to resolve an IRS dispute regarding the timing of income
inclusion associated with VF’s acquisition of The Timberland
Company in September 2011. While the IRS argued that all such
income should have been immediately included in 2011, VF
reported periodic income inclusions in subsequent tax years. In
Fiscal 2023, the Tax Court issued its final decision in favor of the
IRS, which was appealed by VF. On October 19, 2022, VF paid
$875.7 million related to the 2011 taxes and interest being
disputed, which was recorded as an income tax receivable based
on the technical merits of our position with regards to the case
and began to accrue interest income. On September 8, 2023, the
U.S. Court of Appeals for the First Circuit ("Appeals Court")
upheld the Tax Court's decision in favor of the IRS. As a result of
the Appeals Court decision, VF wrote off the related income tax
receivable and associated interest and recorded $690.0 million
of income tax expense in the second quarter of Fiscal 2024. This
amount included the reversal of $19.6 million of interest income,
of which $7.5 million was recorded in the first quarter of Fiscal
2024. This amount reflects the total estimated net impact to VF's
tax expense, which includes the expected reduction in taxes paid
on the periodic inclusions that VF has reported, release of
related deferred tax liabilities, and consideration of indirect tax
effects resulting from the decision. The estimated impact is
subject to future adjustments based on finalization with tax
authorities.
The calculation of income tax liabilities involves uncertainties in
the application of complex tax laws and regulations, which are
subject to legal interpretation and significant management
judgment. VF’s income tax returns are regularly examined by
federal, state and foreign tax authorities, and those audits may
result in proposed adjustments. VF has reviewed all issues
raised upon examination, as well as any exposure for issues that
may be raised in future examinations. VF has evaluated these
potential issues under the “more-likely-than-not” standard of
the accounting literature. A tax position is recognized if it meets
this standard and is measured at the largest amount of benefit
that has a greater than 50% likelihood of being realized. Such
judgments
and
estimates
may
change
based
on
audit
settlements, court cases and interpretation of tax laws and
regulations. Income tax expense could be materially affected to
the extent VF prevails in a tax position or when the statute of
limitations expires for a tax position for which a liability for
unrecognized tax benefits or valuation allowances has been
established, or to the extent VF is required to pay amounts
greater than the established liability for unrecognized tax
benefits. Under the more-likely-than-not standard, VF does not
currently anticipate any material impact on earnings from the
ultimate resolution of income tax uncertainties. There are no
accruals for general or unknown tax expenses.
As of March 2024, VF had $711.1 million of gross deferred
income tax assets related to operating loss, credit and capital
loss carryforwards, and $435.3 million of valuation allowances
against those assets. Realization of deferred tax assets related
to operating loss, credit and capital loss carryforwards is
dependent on future taxable income in specific jurisdictions, the
amount and timing of which are uncertain, and on possible
changes in tax laws. If management believes that VF will not be
able to generate sufficient taxable income or capital gains to
offset losses or credits during the carryforward periods, VF
records valuation allowances to reduce those deferred tax
assets to amounts expected to be ultimately realized. If in a
future period management determines that the amount of
deferred tax assets to be realized differs from the net recorded
amount, VF would record an adjustment to income tax expense
in that future period.
Recently Issued and Adopted Accounting Standards
Refer to Note 1 to the consolidated financial statements for discussion of recently issued and adopted accounting standards.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
A discussion of VF’s market risks is incorporated by reference to “Risk Management” in Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in this Annual Report.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See “Index to Consolidated Financial Statements and Financial Statement Schedule” on page F-1 of this Annual Report for
information required by this Item 8.
42
VF Corporation Fiscal 2024 Form 10-K
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES.
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision of the Chief Executive Officer and the
Chief Financial Officer, VF conducted an evaluation of the
effectiveness of the design and operation of VF’s “disclosure
controls and procedures” as defined in Rules 13a-15(e) or
15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange
Act”) as of March 30, 2024. These require that VF ensure that
information required to be disclosed by VF in reports that it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in
the Securities and Exchange Commission’s rules and forms and
that information required to be disclosed in the reports filed or
submitted
under
the
Exchange
Act
is
accumulated
and
communicated to VF’s management, including the principal
executive officer and principal financial officer, to allow timely
decisions
regarding
required
disclosures.
Based
on
VF’s
evaluation, the principal executive officer and the principal
financial officer concluded that VF’s disclosure controls and
procedures were effective as of March 30, 2024.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
See page F-2 of this Annual Report for “Management’s Report on Internal Control Over Financial Reporting.”
REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
See page F-3 of this Annual Report for the "Report of Independent Registered Public Accounting Firm."
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in VF’s internal control over financial reporting that occurred during its last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, VF’s internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION.
During the three months ended March 30, 2024, no director or officer of VF adopted or terminated a “Rule 10b5-1 trading
arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
VF Corporation Fiscal 2024 Form 10-K
43
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information
regarding
VF’s
Executive
Officers
required
by
Item 10 of this Part III is set forth in Item 1 of Part I of this
Annual Report under the caption “Information About Our
Executive Officers.” Information required by Item 10 of Part III
regarding VF’s Directors is included under the caption “Election
of Directors” in VF’s 2024 Proxy Statement that will be filed with
the Securities and Exchange Commission within 120 days after
the close of our fiscal year ended March 30, 2024, which
information is incorporated herein by reference.
Information regarding compliance with Section 16(a) of the
Exchange Act of 1934 is included under the caption “Delinquent
Section 16(a) Reports” (to the extent reported therein) in VF’s
2024 Proxy Statement that will be filed with the Securities and
Exchange Commission within 120 days after the close of our
fiscal
year
ended
March
30,
2024,
which
information
is
incorporated herein by reference.
Information regarding the Audit Committee is included under the
caption “Corporate Governance at VF — Board Committees and
Their Responsibilities — Audit Committee” in VF’s 2024 Proxy
Statement that will be filed with the Securities and Exchange
Commission within 120 days after the close of our fiscal year
ended March 30, 2024, which information is incorporated herein
by reference.
VF has adopted a written code of ethics, “VF Corporation Code of
Business Conduct,” that is applicable to all VF directors, officers
and employees, including VF’s chief executive officer, chief
financial officer, chief accounting officer and other executive
officers identified pursuant to this Item 10 (collectively, the
“Selected Officers”). The code is posted on VF’s website,
www.vfc.com. VF will disclose any changes in or waivers from its
code of ethics applicable to any Selected Officer or director on its
website at www.vfc.com.
The Board of Directors’ Corporate Governance Principles, the
Audit Committee, Governance and Corporate Responsibility
Committee, Talent and Compensation Committee and Finance
Committee
charters
and
other
corporate
governance
information, including the method for interested parties to
communicate directly with nonmanagement members of the
Board of Directors, are available on VF’s website. These
documents, as well as the VF Corporation Code of Business
Conduct, will be provided free of charge to any shareholder upon
request directed to the Secretary of VF Corporation at P.O. Box
13919, Denver, CO 80201.
ITEM 11.
EXECUTIVE COMPENSATION.
Information required by Item 11 of this Part III is included under the captions “Corporate Governance at VF” and “Executive
Compensation” in VF’s 2024 Proxy Statement that will be filed with the Securities and Exchange Commission within 120 days after the
close of our fiscal year ended March 30, 2024, which information is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
Information required by Item 12 of this Part III is included under the captions “Security Ownership of Certain Beneficial Owners and
Management” and "Executive Compensation" in VF’s 2024 Proxy Statement that will be filed with the Securities and Exchange
Commission within 120 days after the close of our fiscal year ended March 30, 2024, which information is incorporated herein by
reference.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information required by Item 13 of this Part III is included under the caption “Corporate Governance at VF” in VF’s 2024 Proxy
Statement that will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended
March 30, 2024, which information is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES.
Information required by Item 14 of this Part III is included under the caption “Professional Fees of PricewaterhouseCoopers LLP” in
VF’s 2024 Proxy Statement that will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal
year ended March 30, 2024, which information is incorporated herein by reference.
44
VF Corporation Fiscal 2024 Form 10-K
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as a part of this Fiscal 2024 report:
1. Financial statements
PAGE NUMBER
Management’s Report on Internal Control Over Financial Reporting
F-2
Report of Independent Registered Public Accounting Firm
F-3
Consolidated Balance Sheets
F-5
Consolidated Statements of Operations
F-6
Consolidated Statements of Comprehensive Income (Loss)
F-7
Consolidated Statements of Cash Flows
F-8
Consolidated Statements of Stockholders’ Equity
F-10
Notes to Consolidated Financial Statements
F-11
2. Financial statement schedules
PAGE NUMBER
Schedule II — Valuation and Qualifying Accounts
F-57
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable and therefore have been omitted.
3. Exhibits
NUMBER
DESCRIPTION
3.1
Articles of Incorporation, restated as of October 21, 2013 (Incorporated by reference to Exhibit 3(i) to Form 8-K filed
October 21, 2013)
3.2
Amended and Restated By-Laws of V.F. Corporation, effective January 24, 2023 (Incorporated by reference to Exhibit 3.1
to Form 8-K filed January 25, 2023)
4.1
A specimen of VF’s Common Stock certificate (Incorporated by reference to Exhibit 4(A) to Form 10-K for the year ended
January 3, 1998)
4.2
Indenture between VF and United States Trust Company of New York, as Trustee, dated September 29, 2000
(Incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended September 30, 2000)
4.3
Form of 6.00% Note due October 15, 2033 for $297,500,000 (Incorporated by reference to Exhibit 4.2 to Form S-4
Registration Statement No. 110458 filed November 13, 2003)
4.4
Indenture between VF and The Bank of New York Trust Company, N.A., as Trustee, dated October 15, 2007 (Incorporated
by reference to Exhibit 4.1 to Form S-3ASR Registration Statement No. 333-146594 filed October 10, 2007)
4.5
First Supplemental Indenture between VF and The Bank of New York Trust Company, N.A., as Trustee, dated October 15,
2007 (Incorporated by reference to Exhibit 4.2 to Form 8-K filed October 25, 2007)
4.6
Form of 6.45% Note due 2037 for $350,000,000 (Incorporated by reference to Exhibit 4.4 to Form 8-K filed October 25,
2007)
4.7
Third Supplemental Indenture between VF, The Bank of New York Mellon Trust Company, N.A., as Trustee, and The Bank
of New York Mellon, London Branch, as Paying Agent, dated as of September 20, 2016 (Incorporated by reference to
Exhibit 4.2 to Form 8-K filed September 20, 2016)
4.8
Form of 0.625% Senior Notes due 2023 (Incorporated by reference to Exhibit 4.3 to Form 8-K filed September 20, 2016)
4.9
Fourth Supplemental Indenture between VF, The Bank of New York Mellon Trust Company, N.A., as Trustee, and The
Bank of New York Mellon, London Branch, as Paying Agent dated as of February 25, 2020 (Incorporated by reference to
Exhibit 4.2 to Form 8-K filed February 25, 2020)
4.10
Form of 0.250% Senior Notes due 2028 (Incorporated by reference to Exhibit 4.3 to Form 8-K filed February 25, 2020)
4.11
Form of 0.625% Senior Notes due 2032 (Incorporated by reference to Exhibit 4.4 to Form 8-K filed February 25, 2020)
4.12
Fifth Supplemental Indenture between VF and The Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of
April 23, 2020 (Incorporated by reference to Exhibit 4.2 to Form 8-K filed April 23, 2020)
4.13
Form of 2.400% Senior Notes due 2025 (Incorporated by reference to Exhibit 4.4 to Form 8-K filed April 23, 2020)
4.14
Form of 2.800% Senior Notes due 2027 (Incorporated by reference to Exhibit 4.5 to Form 8-K filed April 23, 2020)
4.15
Form of 2.950% Senior Notes due 2030 (Incorporated by reference to Exhibit 4.6 to Form 8-K filed April 23, 2020)
4.16
Sixth Supplemental Indenture between VF and The Bank of New York Mellon Trust Company, N.A., as Trustee, dated as of
March 7, 2023 (Incorporated by reference to Exhibit 4.2 to Form 8-K filed March 7, 2023)
4.17
Form of 4.125% Senior Notes due 2026 (Incorporated by reference to Exhibit 4.3 to Form 8-K filed March 7, 2023)
VF Corporation Fiscal 2024 Form 10-K
45
NUMBER
DESCRIPTION
4.18
Form of 4.250% Senior Notes due 2029 (Incorporated by reference to Exhibit 4.4 to Form 8-K filed March 7, 2023)
4.19
Description of Securities
10.1
1996 Stock Compensation Plan, as amended and restated as of February 10, 2015 (Incorporated by reference to Appendix
B to the 2015 Proxy Statement filed March 19, 2015)*
10.2
1996 Stock Compensation Plan, as amended and restated as of March 12, 2024*
10.3
Form of VF Corporation 1996 Stock Compensation Plan Non-Qualified Stock Option Certificate (Incorporated by reference
to Exhibit 10(B) to Form 10-K for the year ended January 2, 2010)*
10.4
Form of VF Corporation 1996 Stock Compensation Plan Non-Qualified Stock Option Certificate for Non-Employee
Directors (Incorporated by reference to Exhibit 10(C) to Form 10-K for the year ended December 31, 2011)*
10.5
Form of Award Certificate for Performance-Based Restricted Stock Units (Incorporated by reference to Exhibit 10.1 to
Form 10-Q for the quarter ended September 26, 2020)*
10.6
Form of Award Certificate for Restricted Stock Units for Non-Employee Directors (Incorporated by reference to Exhibit
10(F) to Form 10-K for the year ended March 28, 2020)*
10.7
Form of Award Certificate for Restricted Stock Units (Incorporated by reference to Exhibit 10(K) to Form 10-K for the year
ended March 28, 2020)*
10.8
Form of Award Certificate for Restricted Stock Units Special Award (Cliff Vesting) (Incorporated by reference to Exhibit
10(L) to Form 10-K for the year ended March 28, 2020)*
10.9
Form of Award Certificate for Restricted Stock Units Special Award (Split Vesting) (Incorporated by reference to Exhibit
10(M) to Form 10-K for the year ended March 28, 2020)*
10.10
Form of Award Certificate for Restricted Stock Special Award (Cliff Vesting) (Incorporated by reference to Exhibit 10(P) to
Form 10-K for the year ended March 28, 2020)*
10.11
Form of Award Certificate for Restricted Stock Special Award (Split Vesting) (Incorporated by reference to Exhibit 10(Q) to
Form 10-K for the year ended March 28, 2020)*
10.12
Deferred Compensation Plan, as amended and restated as of December 31, 2001 (Incorporated by reference to Exhibit
10(A) to Form 10-Q for the quarter ended March 30, 2002)*
10.13
Executive Deferred Savings Plan, as amended and restated as of December 31, 2001 (Incorporated by reference to Exhibit
10(B) to Form 10-Q for the quarter ended March 30, 2002)*
10.14
Executive Deferred Savings Plan II, as amended and restated January 1, 2020 (Incorporated by reference to Item 10.1 to
Form 10-Q for the quarter ended December 28, 2019)*
10.15
Amendment to Executive Deferred Savings Plan (Incorporated by reference to Exhibit 10(b) to Form 8-K filed
December 17, 2004)*
10.16
Amended and Restated Second Supplemental Annual Benefit Determination under the Amended and Restated
Supplemental Executive Retirement Plan for Mid-Career Senior Management (Incorporated by reference to Exhibit 10.2
to Form 10-Q for the quarter ended April 1, 2006)*
10.17
Amended and Restated Fourth Supplemental Annual Benefit Determination under the Amended and Restated
Supplemental Executive Retirement Plan for Participants in VF’s Deferred Compensation Plan (Incorporated by reference
to Exhibit 10.3 to Form 10-Q for the quarter ended April 1, 2006)*
10.18
Amended and Restated Seventh Supplemental Annual Benefit Determination under the Amended and Restated
Supplemental Executive Retirement Plan for Participants in VF’s Executive Deferred Savings Plan (Incorporated by
reference to Exhibit 10.5 to Form 10-Q for the quarter ended April 1, 2006)*
10.19
Amended and Restated Eighth Supplemental Annual Benefit Determination under the Amended and Restated
Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended
April 1, 2006)*
10.20
Amended and Restated Ninth Supplemental Annual Benefit Determination under the Amended and Restated
Supplemental Executive Retirement Plan relating to the computation of benefits for Senior Management (Incorporated by
reference to Exhibit 10.7 to Form 10-Q for the quarter ended April 1, 2006)*
10.21
Amended and Restated Tenth Supplemental Annual Benefit Determination under the Amended and Restated
Supplemental Executive Retirement Plan for Participants in VF’s Mid-Term Incentive Plan (Incorporated by reference to
Exhibit 10.8 to Form 10-Q for the quarter ended April 1, 2006)*
10.22
Eleventh Supplemental Annual Benefit Determination Pursuant to the Amended and Restated Supplemental Executive
Retirement Plan (Incorporated by reference to Exhibit 10.9 to Form 10-Q for the quarter ended April 1, 2006)*
10.23
Twelfth Supplemental Benefit Determination Pursuant to the VF Corporation Amended and Restated Supplemental
Executive Retirement Plan (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 27,
2014)*
10.24
Amended and Restated Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10.10 to Form 10-
Q for the quarter ended April 1, 2006)*
10.25
Resolution of the Board of Directors dated December 3, 1996 relating to lump sum payments under VF’s Supplemental
Executive Retirement Plan (Incorporated by reference to Exhibit 10(N) to Form 10-K for the year ended January 4, 1997)*
10.26
2019 Form of Change in Control Agreement with Certain Senior Management of VF or its Subsidiaries (Incorporated by
reference to Exhibit 10(HH) to Form 10-K for the year ended March 28, 2020)*
46
VF Corporation Fiscal 2024 Form 10-K
NUMBER
DESCRIPTION
10.27
Amended and Restated Deferred Savings Plan for Non-Employee Directors (Incorporated by reference to Exhibit 10(W) to
Form 10-K for the year ended January 3, 2009)*
10.28
Form of Indemnification Agreement with each of VF’s Non-Employee Directors (Incorporated by reference to Exhibit 10.2
of the Form 10-Q for the quarter ended September 27, 2008)*
10.29
2004 Mid-Term Incentive Plan, a subplan under the 1996 Stock Compensation Plan, as amended and restated as of
October 18, 2017 (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended September 30, 2017)*
10.30
2004 Long-Term Incentive Plan, a subplan under the 1996 Stock Compensation Plan, as amended and restated as of
March 11, 2024*
10.31
Annual Incentive Plan (effective prior to May 15, 2023) (Incorporated by reference to Exhibit 10(HH) to Form 10-K for the
year ended April 2, 2022)*
10.32
Annual Incentive Plan (effective May 15, 2023) (Incorporated by reference to Exhibit 10(II) to Form 10-K for the year ended
April 1, 2023)*
10.33
Form of Non-Competition, Non-Solicitation and Confidentiality Agreement for Equity Plan Participants (Incorporated by
reference to Exhibit 10(JJ) to Form 10-K for the year ended April 1, 2023)
10.34
Retirement and General Release Agreement dated December 2, 2022 (Incorporated by reference to Exhibit 10.1 to Form
10-Q for the quarter ended December 31, 2022)*
10.35
Offer Letter between VF and Bracken Darrell, dated June 20, 2023 (Incorporated by reference to Exhibit 10.1 to Form 8-K
filed June 20, 2023)*
10.36
Severance Plan for Section 16 Officers (effective October 6, 2023) (Incorporated by reference to Exhibit 10.1 to Form 10-Q
for the quarter ended December 30, 2023)*
10.37
Five-Year Revolving Credit Agreement by and among V.F. Corporation and VF International Sagl, as borrowers, the
lenders named therein, JPMorgan Chase Bank, N.A., as Administrative Agent, JPMorgan Chase Bank, N.A., BofA
Securities, Inc., Barclays Bank PLC, HSBC Securities (USA) Inc., U.S. Bank National Association and Wells Fargo
Securities, LLC, as Joint-Lead Arrangers and Joint Bookrunners, Bank of America, N.A., Barclays Bank PLC, HSBC Bank
USA, National Association, U.S. Bank National Association and Wells Fargo Bank, National Association, as Syndication
Agents, and ING Bank N.V., Dublin Branch, PNC Bank, N.A., TD Bank, N.A. and Morgan Stanley Bank, N.A., as
Documentation Agents, dated November 24, 2021 (Incorporated by reference to Exhibit 10.1 to Form 8-K filed November
24, 2021)
10.38
Amendment No. 1 to Revolving Credit Agreement, dated February 16, 2023, by and among V.F. Corporation, JPMorgan
Chase Bank, N.A., as Administrative Agent, the Lenders party thereto and the other parties thereto (Incorporated by
reference to Exhibit 10.1 to Form 8-K filed February 16, 2023)
10.39
Amendment No. 2 to Revolving Credit Agreement, dated May 19, 2023, by and among V.F. Corporation, JPMorgan Chase
Bank, N.A., as Administrative Agent, the Lenders party thereto and the other parties thereto (Incorporated by reference
to Exhibit 10(NN) to Form 10-K for the year ended April 1, 2023)
10.40
Amendment No. 3 to Revolving Credit Agreement, dated as of April 25, 2024, by and among V.F. Corporation, JPMorgan
Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto (Incorporated by reference to Exhibit 10.1 to
Form 8-K filed April 26, 2024)
10.41
Term Loan Agreement by and among V.F. Corporation, as borrower, the lenders named therein, JPMorgan Chase Bank,
N.A., as Administrative Agent, Wells Fargo Securities, LLC, JPMorgan Chase Bank, N.A, PNC Bank National Association,
TD Securities (USA) LLC, Truist Securities, Inc. and U.S. Bank National Association, as Joint Lead Arrangers and Joint
Bookrunners, Wells Fargo Bank, National Association, as Syndication Agent, and PNC Bank National Association, TD
Bank, N.A., Truist Bank and U.S. Bank National Association, as Documentation Agents, dated August 11, 2022
(Incorporated by reference to Exhibit 10.1 to Form 8-K filed August 11, 2022)
10.42
Amendment No. 1 to Term Loan Agreement, dated February 16, 2023, by and among V.F. Corporation, as borrower, JP
Morgan Chase Bank, N.A., as Administrative Agent, the Lenders party thereto and the other parties thereto (Incorporated
by reference to Exhibit 10.2 to Form 8-K filed February 16, 2023)
10.43
Separation and Distribution Agreement dated May 22, 2019 (Incorporated by reference to Exhibit 2.1 to Form 8-K filed
May 23, 2019)
10.44
Tax Matters Agreement dated May 22, 2019 (Incorporated by reference to Exhibit 10.1 to Form 8-K filed May 23, 2019)
10.45
Transition Services Agreement dated May 22, 2019 (Incorporated by reference to Exhibit 10.2 to Form 8-K filed May 23,
2019)
10.46
VF Intellectual Property License Agreement dated May 17, 2019 (Incorporated by reference to Exhibit 10.3 to Form 8-K
filed May 23, 2019)
10.47
Kontoor Intellectual Property License Agreement dated May 17, 2019 (Incorporated by reference to Exhibit 10.4 to Form
8-K filed May 23, 2019)
10.48
Employee Matters Agreement dated May 22, 2019 (Incorporated by reference to Exhibit 10.5 to Form 8-K filed May 23,
2019)
19.1
Insider Trading Policy
21.1
Subsidiaries of the Corporation
23.1
Consent of independent registered public accounting firm
24.1
Power of attorney
VF Corporation Fiscal 2024 Form 10-K
47
NUMBER
DESCRIPTION
31.1
Certification of the principal executive officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of the principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
97.1
Policy for the Recovery of Erroneously Awarded Compensation
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
104.
Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document
All other exhibits for which provision is made in the applicable regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have been omitted.
*
Management compensation plans
ITEM 16.
FORM 10-K SUMMARY.
None.
48
VF Corporation Fiscal 2024 Form 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, VF has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
V.F. CORPORATION
By:
/s/ Bracken Darrell
Bracken Darrell
President, Chief Executive Officer and Director
(Principal Executive Officer)
By:
/s/ Matthew H. Puckett
Matthew H. Puckett
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
By:
/s/ Bryan H. McNeill
Bryan H. McNeill
Vice President, Controller and Chief Accounting Officer
(Principal Accounting Officer)
May 23, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of VF and in the capacities and on the dates indicated:
Richard T. Carucci*
Chair of the Board and Director
Caroline T. Brown*
Director
Alexander K. Cho*
Director
Juliana L. Chugg*
Director
Benno Dorer*
Director
Trevor A. Edwards*
Director
Mark S. Hoplamazian*
Director
Laura W. Lang*
Director
W. Rodney McMullen*
Director
Clarence Otis, Jr.*
Director
Carol L. Roberts*
Director
Matthew J. Shattock*
Director
*By:
/s/ Jennifer S. Sim
Jennifer S. Sim, Attorney-in-Fact
May 23, 2024
VF Corporation Fiscal 2024 Form 10-K
49
(THIS PAG
P
E INTENTIONALL
N
Y L
L
EFT BLANK)
VF CORPORATION
Index to Consolidated Financial Statements
and Financial Statement Schedule
March 2024
PAGE NUMBER
Management’s Report on Internal Control Over Financial Reporting
F-2
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
F-3
Consolidated Balance Sheets
F-5
Consolidated Statements of Operations
F-6
Consolidated Statements of Comprehensive Income (Loss)
F-7
Consolidated Statements of Cash Flows
F-8
Consolidated Statements of Stockholders’ Equity
F-10
Notes to Consolidated Financial Statements
F-11
Schedule II — Valuation and Qualifying Accounts
F-57
VF Corporation Fiscal 2024 Form 10-K
F-1
V.F. Corporation
Management’s Report on Internal Control Over Financial Reporting
Management of V.F. Corporation (“VF”) is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rule 13a-15(f). VF’s management conducted an assessment of VF's internal control over
financial reporting based on the framework described in Internal Control — Integrated Framework (2013), issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this assessment, VF’s management has determined that VF’s
internal control over financial reporting was effective as of March 30, 2024.
The effectiveness of VF’s internal control over financial reporting as of March 30, 2024 has been audited by PricewaterhouseCoopers
LLP, an independent registered public accounting firm, as stated in their report which appears herein.
F-2
VF Corporation Fiscal 2024 Form 10-K
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of V. F. Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of V. F. Corporation and its subsidiaries (the “Company”) as of March
30, 2024 and April 1, 2023, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’
equity and of cash flows for each of the three years in the period ended March 30, 2024, including the related notes and schedule of
valuation and qualifying accounts for each of the three years in the period ended March 30, 2024 listed in the index appearing under
Item 15(a)2 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control
over financial reporting as of March 30, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of March 30, 2024 and April 1, 2023, and the results of its operations and its cash flows for each of the three years in
the period ended March 30, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 30, 2024,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
VF Corporation Fiscal 2024 Form 10-K
F-3
Interim and Annual Goodwill and Indefinite-Lived Intangible Asset Impairment Analyses – Supreme and Timberland Reporting Units and
Supreme Indefinite-Lived Trademark Intangible Asset
As described in Notes 1, 8, 9, and 24 to the consolidated financial statements, the goodwill and indefinite-lived trademark intangible
asset balances were $1,460.4 million and $2,553.5 million as of March 30, 2024, respectively, of which the Supreme reporting unit
goodwill and indefinite-lived trademark intangible asset makes up a portion of each of the consolidated balances, while the
Timberland reporting unit goodwill was fully impaired as of March 30, 2024. Management evaluates indefinite-lived intangible assets
and goodwill for possible impairment as of the beginning of the fourth quarter of each fiscal year, or whenever events or changes in
circumstances indicate that the fair value of such assets may be below their carrying amount. If management determines that it is
more likely than not that the fair value of an asset or reporting unit is less than its carrying value, it is quantitatively evaluated for
possible impairment by comparing the estimated fair value with its carrying value. An impairment charge is recorded if the carrying
value exceeds its estimated fair value. As disclosed by management, triggering events in the third and fourth quarters of the year
ended March 30, 2024 caused management to perform quantitative impairment analyses of the Timberland reporting unit goodwill
resulting in goodwill impairment charges of $195.3 million and $211.7 million, respectively, for the year ended March 30, 2024.
During the annual goodwill and indefinite-lived intangible asset impairment analysis, management performed a quantitative
impairment analysis of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset, resulting in no
impairment. Management estimates the fair value of the reporting units using both income-based and market-based valuation
methods and the fair value of the indefinite-lived trademark intangible asset is based on an income approach using the relief-from-
royalty method. The income-based fair value methodology requires management to make assumptions and judgments and is based
on management’s estimate of financial projections and future cash flows, which include significant assumptions related to revenue
growth and profitability improvement throughout the forecast period, terminal growth rates, tax rates, royalty rates and market-
based discount rates.
The principal considerations for our determination that performing procedures relating to the interim impairment analyses for the
Timberland reporting unit goodwill, and the annual goodwill and indefinite-lived intangible asset impairment analyses for the
Supreme reporting unit goodwill and indefinite-lived trademark intangible asset is a critical audit matter are (i) the significant
judgment by management when developing the fair value estimates of the reporting units and the indefinite-lived trademark
intangible asset; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating
management’s significant assumptions related to revenue growth throughout the forecast period and market-based discount rates
for the Supreme and Timberland reporting units and Supreme indefinite-lived trademark intangible asset, and royalty rates for the
Supreme indefinite-lived trademark intangible asset; and (iii) the audit effort involved the use of professionals with specialized skill
and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
goodwill and indefinite-lived trademark intangible asset impairment analyses, including controls over the valuation of the Supreme
and Timberland reporting units and the Supreme indefinite-lived trademark intangible asset. These procedures also included, among
others (i) testing management’s process for developing the fair value estimates of the Timberland and Supreme reporting units, and
the Supreme indefinite-lived trademark intangible asset; (ii) evaluating the appropriateness of the income-based valuation methods
for the reporting units and the indefinite-lived trademark intangible asset; (iii) testing the completeness and accuracy of underlying
data used in the income-based valuation methods; and (iv) evaluating the reasonableness of the significant assumptions used by
management related to revenue growth throughout the forecast period and market-based discount rates for the Supreme and
Timberland reporting units and the Supreme indefinite-lived trademark intangible asset, and royalty rates for the Supreme
indefinite-lived trademark intangible asset. Evaluating management’s assumptions related to the revenue growth throughout the
forecast period involved evaluating whether the assumptions used by management were reasonable considering (i) the current and
past performance of the Supreme and Timberland reporting units and products sold with the Supreme trademarks; (ii) the
consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in
other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of (i) the
appropriateness of the Company’s income-based valuation methods for the reporting units and the indefinite-lived trademark
intangible asset and (ii) the reasonableness of the royalty rate and market-based discount rate significant assumptions.
/s/ PricewaterhouseCoopers LLP
Greensboro, North Carolina
May 23, 2024
We have served as the Company’s auditor since 1995.
F-4
VF Corporation Fiscal 2024 Form 10-K
(In thousands, except share amounts)
March 2024
March 2023
ASSETS
Current assets
Cash and equivalents
$
674,605
$
814,887
Accounts receivable, less allowance for doubtful accounts of: March 2024 -
$26,369; March 2023 - $28,075
1,273,965
1,610,295
Inventories
1,766,366
2,292,790
Other current assets
512,011
434,737
Total current assets
4,226,947
5,152,709
Property, plant and equipment, net
823,886
942,440
Intangible assets, net
2,628,482
2,642,821
Goodwill
1,460,414
1,978,413
Operating lease right-of-use assets
1,330,361
1,372,182
Other assets
1,142,873
1,901,923
TOTAL ASSETS
$
11,612,963
$
13,990,488
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings
$
263,938
$
11,491
Current portion of long-term debt
1,000,721
924,305
Accounts payable
817,128
936,319
Accrued liabilities
1,375,192
1,673,651
Total current liabilities
3,456,979
3,545,766
Long-term debt
4,702,284
5,711,014
Operating lease liabilities
1,156,858
1,171,941
Other liabilities
638,477
651,054
Total liabilities
9,954,598
11,079,775
Commitments and contingencies
Stockholders' equity
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding
at March 2024 or March 2023
—
—
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares
outstanding at March 2024 - 388,836,219; March 2023 - 388,665,531
97,209
97,166
Additional paid-in capital
3,600,071
3,775,979
Accumulated other comprehensive loss
(1,064,331)
(1,019,518)
Retained earnings (accumulated deficit)
(974,584)
57,086
Total stockholders’ equity
1,658,365
2,910,713
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
11,612,963
$
13,990,488
See notes to consolidated financial statements.
VF CORPORATION
Consolidated Balance Sheets
VF Corporation Fiscal 2024 Form 10-K
F-5
Year Ended March
(In thousands, except per share amounts)
2024
2023
2022
Net revenues
$
10,454,667
$
11,612,475
$
11,841,840
Costs and operating expenses
Cost of goods sold
5,017,445
5,515,796
5,386,393
Selling, general and administrative expenses
4,963,718
5,033,977
4,823,243
Impairment of goodwill and intangible assets
507,566
735,009
—
Total costs and operating expenses
10,488,729
11,284,782
10,209,636
Operating income (loss)
(34,062)
327,693
1,632,204
Interest income
21,628
9,758
5,006
Interest expense
(245,036)
(174,390)
(136,469)
Loss on debt extinguishment
—
—
(3,645)
Other income (expense), net
23,785
(119,774)
26,154
Income (loss) from continuing operations before income
taxes
(233,685)
43,287
1,523,250
Income tax expense (benefit)
735,197
(75,297)
306,981
Income (loss) from continuing operations
(968,882)
118,584
1,216,269
Income from discontinued operations, net of tax
—
—
170,672
Net income (loss)
$
(968,882)
$
118,584
$
1,386,941
Earnings (loss) per common share - basic
Continuing operations
$
(2.49)
$
0.31
$
3.12
Discontinued operations
—
—
0.44
Total earnings (loss) per common share - basic
$
(2.49)
$
0.31
$
3.55
Earnings (loss) per common share - diluted
Continuing operations
$
(2.49)
$
0.31
$
3.10
Discontinued operations
—
—
0.43
Total earnings (loss) per common share - diluted
$
(2.49)
$
0.31
$
3.53
Weighted average shares outstanding
Basic
388,360
387,763
390,291
Diluted
388,360
388,370
392,411
See notes to consolidated financial statements.
VF CORPORATION
Consolidated Statements of Operations
F-6
VF Corporation Fiscal 2024 Form 10-K
Year Ended March
(In thousands)
2024
2023
2022
Net income (loss)
$
(968,882)
$
118,584
$
1,386,941
Other comprehensive income (loss)
Foreign currency translation and other
Losses arising during the period
(1,491)
(106,527)
(17,355)
Income tax effect
(7,297)
(1,492)
(34,104)
Defined benefit pension plans
Current period actuarial gains (losses), including plan
amendments
(38,230)
(25,211)
12,927
Amortization of net deferred actuarial losses
16,195
16,395
11,310
Amortization of deferred prior service credits
(80)
(453)
(440)
Reclassification of net actuarial loss from settlement
charges
3,538
93,731
7,466
Income tax effect
3,936
(21,864)
(3,806)
Derivative financial instruments
Gains (losses) arising during the period
(7,933)
53,533
71,494
Income tax effect
1,490
(8,554)
(11,741)
Reclassification of net (gains) losses realized
(18,121)
(110,160)
54,326
Income tax effect
3,180
17,663
(7,656)
Other comprehensive income (loss)
(44,813)
(92,939)
82,421
Comprehensive income (loss)
$
(1,013,695)
$
25,645
$
1,469,362
See notes to consolidated financial statements.
VF CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
VF Corporation Fiscal 2024 Form 10-K
F-7
Year Ended March
(In thousands)
2024
2023
2022
OPERATING ACTIVITIES
Net income (loss)
$
(968,882)
$
118,584
$
1,386,941
Income from discontinued operations, net of tax
—
—
170,672
Income (loss) from continuing operations, net of tax
(968,882)
118,584
1,216,269
Adjustments to reconcile net income (loss) to cash provided (used) by
operating activities:
Impairment of goodwill and intangible assets
507,566
735,009
—
Depreciation, amortization and other asset write-downs
319,204
262,324
266,935
Reduction in the carrying amount of right-of-use assets
394,426
383,199
410,132
Stock-based compensation
67,332
60,354
91,358
Provision for doubtful accounts
11,170
3,532
(716)
Pension expense in excess of (less than) contributions
(18,080)
79,197
(41,309)
Deferred income taxes
(395,100)
(53,554)
(157,489)
Write-off of income tax receivables and interest
921,409
—
—
Loss on extinguishment of debt
—
—
3,645
Other, net
7,359
(11,433)
(12,007)
Changes in operating assets and liabilities:
Accounts receivable
324,629
(147,331)
(202,526)
Inventories
508,584
(890,173)
(380,851)
Accounts payable
(106,048)
377,433
105,357
Income taxes
(154,606)
(1,148,610)
201,391
Accrued liabilities
32,952
(91,650)
88,213
Operating lease right-of-use assets and liabilities
(390,227)
(379,963)
(444,125)
Other assets and liabilities
(47,107)
47,287
(286,079)
Cash provided (used) by operating activities - continuing operations
1,014,581
(655,795)
858,198
Cash provided by operating activities - discontinued operations
—
—
6,090
Cash provided (used) by operating activities
1,014,581
(655,795)
864,288
INVESTING ACTIVITIES
Business acquisitions, net of cash received
—
—
3,760
Proceeds from sale of businesses, net of cash sold
—
—
616,928
Proceeds from sale of assets
26,615
99,499
32,542
Proceeds from sale of short-term investments
—
—
598,806
Capital expenditures
(145,818)
(165,925)
(245,449)
Software purchases
(65,167)
(95,326)
(82,871)
Other, net
12,112
(26,301)
(19,456)
Cash provided (used) by investing activities - continuing operations
(172,258)
(188,053)
904,260
Cash used by investing activities - discontinued operations
—
—
(525)
Cash provided (used) by investing activities
(172,258)
(188,053)
903,735
FINANCING ACTIVITIES
Contingent consideration payment
—
(56,976)
—
Net increase (decrease) in short-term borrowings
255,146
(323,972)
324,404
Payments on long-term debt
(908,199)
(501,051)
(504,200)
Payment of debt issuance costs
(576)
(6,796)
(2,496)
Proceeds from long-term debt
—
2,058,341
—
Share repurchases
—
—
(350,004)
Cash dividends paid
(303,140)
(702,846)
(773,205)
Proceeds from issuance of Common Stock, net of (payments) for tax
withholdings
(2,846)
(2,794)
36,654
Cash provided (used) by financing activities
$
(959,615)
$
463,906
$
(1,268,847)
Continued on next page.
See notes to consolidated financial statements.
VF CORPORATION
Consolidated Statements of Cash Flows
F-8
VF Corporation Fiscal 2024 Form 10-K
Year Ended March
(In thousands)
2024
2023
2022
Effect of foreign currency rate changes on cash, cash equivalents and restricted
cash
$
(22,069)
$
(80,822)
$
(73,299)
Net change in cash, cash equivalents and restricted cash
(139,361)
(460,764)
425,877
Cash, cash equivalents and restricted cash — beginning of period
816,318
1,277,082
851,205
Cash, cash equivalents and restricted cash — end of period
$
676,957
$
816,318
$
1,277,082
Balances per Consolidated Balance Sheets:
Cash and cash equivalents
$
674,605
$
814,887
$
1,275,943
Other current assets
2,221
1,305
1,109
Other assets
131
126
30
Total cash, cash equivalents and restricted cash
$
676,957
$
816,318
$
1,277,082
See notes to consolidated financial statements.
VF CORPORATION
Consolidated Statements of Cash Flows
VF Corporation Fiscal 2024 Form 10-K
F-9
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
(Accumulate
d Deficit)
Total
(In thousands, except share amounts)
Shares
Amounts
Balance, March 2021
391,941,477
$
97,985
$ 3,777,645
$
(1,009,000)
$
189,534
$ 3,056,164
Net income (loss)
—
—
—
—
1,386,941
1,386,941
Dividends on Common Stock ($1.98 per
share)
—
—
(2,597)
—
(770,608)
(773,205)
Share repurchases
(4,805,093)
(1,201)
—
—
(348,803)
(350,004)
Stock-based compensation, net
1,161,991
291
141,336
—
(13,589)
128,038
Foreign currency translation and other
—
—
—
(51,459)
—
(51,459)
Defined benefit pension plans
—
—
—
27,457
—
27,457
Derivative financial instruments
—
—
—
106,423
—
106,423
Balance, March 2022
388,298,375
97,075
3,916,384
(926,579)
443,475
3,530,355
Net income (loss)
—
—
—
—
118,584
118,584
Dividends on Common Stock ($1.81 per
share)
—
—
(203,394)
—
(499,452)
(702,846)
Stock-based compensation, net
367,156
91
62,989
—
(5,521)
57,559
Foreign currency translation and other
—
—
—
(108,019)
—
(108,019)
Defined benefit pension plans
—
—
—
62,598
—
62,598
Derivative financial instruments
—
—
—
(47,518)
—
(47,518)
Balance, March 2023
388,665,531
97,166
3,775,979
(1,019,518)
57,086
2,910,713
Net income (loss)
—
—
—
—
(968,882)
(968,882)
Dividends on Common Stock ($0.78 per
share)
—
—
(246,054)
—
(57,086)
(303,140)
Stock-based compensation, net
170,688
43
70,146
—
(5,702)
64,487
Foreign currency translation and other
—
—
—
(8,788)
—
(8,788)
Defined benefit pension plans
—
—
—
(14,641)
—
(14,641)
Derivative financial instruments
—
—
—
(21,384)
—
(21,384)
Balance, March 2024
388,836,219
$
97,209
$3,600,071
$
(1,064,331) $
(974,584) $ 1,658,365
See notes to consolidated financial statements.
VF CORPORATION
Consolidated Statements of Stockholders' Equity
F-10
VF Corporation Fiscal 2024 Form 10-K
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NUMBER
NOTE 1
Summary of Significant Accounting Policies
F-12
NOTE 2
Revenues
F-18
NOTE 3
Discontinued Operations
F-19
NOTE 4
Accounts Receivable
F-20
NOTE 5
Inventories
F-20
NOTE 6
Other Current Assets
F-21
NOTE 7
Property, Plant and Equipment
F-21
NOTE 8
Intangible Assets
F-21
NOTE 9
Goodwill
F-22
NOTE 10 Leases
F-23
NOTE 11 Other Assets
F-24
NOTE 12 Supply Chain Financing Program
F-25
NOTE 13 Short-term Borrowings
F-25
NOTE 14 Accrued Liabilities
F-26
NOTE 15 Long-term Debt
F-26
NOTE 16 Other Liabilities
F-28
NOTE 17 Retirement and Savings Benefit Plans
F-29
NOTE 18 Capital and Accumulated Other Comprehensive Loss
F-33
NOTE 19 Stock-based Compensation
F-35
NOTE 20 Income Taxes
F-38
NOTE 21 Reportable Segment Information
F-42
NOTE 22 Commitments
F-45
NOTE 23 Earnings (Loss) Per Share
F-45
NOTE 24 Fair Value Measurements
F-45
NOTE 25 Derivative Financial Instruments and Hedging Activities
F-53
NOTE 26 Supplemental Cash Flow Information
F-55
NOTE 27 Restructuring
F-55
NOTE 28 Subsequent Event
F-56
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-11
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
VF Corporation (together with its subsidiaries, collectively known
as “VF” or the "Company”) is a global apparel, footwear and
accessories company based in the United States. VF designs,
procures, markets and distributes a variety of branded products,
including outerwear, footwear, apparel, backpacks, luggage and
accessories for consumers of all ages. Products are marketed
under VF-owned brand names.
Basis of Presentation
The consolidated financial statements and related disclosures
are presented in accordance with generally accepted accounting
principles in the U.S. (“GAAP”). The consolidated financial
statements include the accounts of VF and its controlled
subsidiaries, after elimination of intercompany transactions and
balances.
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
consolidated
financial
statements
relates
to
continuing
operations. Refer to Note 3 for additional information on
discontinued operations.
Fiscal Year
VF operates and reports using a 52/53 week fiscal year ending on
the Saturday closest to March 31 of each year. VF's current fiscal
year ran from April 2, 2023 through March 30, 2024 ("Fiscal
2024"). All references to the periods ended March 2024, March
2023 and March 2022 relate to the 52-week fiscal years ended
March 30, 2024, April 1, 2023 ("Fiscal 2023") and April 2, 2022
("Fiscal
2022"),
respectively.
Certain
foreign
subsidiaries
reported using a March 31 year-end for Fiscal 2024, 2023 and
2022 due to local statutory requirements. The impact to VF's
consolidated financial statements is not material.
Recent Development
Reinvent
On October 30, 2023, VF introduced Reinvent, a transformation
program to enhance focus on brand-building and to improve
operating performance and allow VF to achieve its full potential.
The first announced steps in this transformation cover the
following priorities: improve North America results, deliver the
Vans
® turnaround, reduce costs and strengthen the balance
sheet. Refer to Note 27 for additional information on the
program.
Use of Estimates
In preparing the consolidated financial statements in accordance
with GAAP, management makes estimates and assumptions that
affect amounts reported in the consolidated financial statements
and accompanying notes. Actual results may differ from those
estimates.
Foreign Currency Translation and Transaction
The financial statements of most foreign subsidiaries are
measured using the foreign currency as the functional currency.
Assets and liabilities denominated in a foreign currency are
translated into U.S. dollars using exchange rates in effect at the
balance sheet date, and revenues and expenses are translated at
average exchange rates during the period. Resulting translation
gains and losses, and transaction gains and losses on long-term
advances
to
foreign
subsidiaries,
are
reported
in
the
Consolidated Statements of Comprehensive Income (Loss).
Foreign currency transactions are denominated in a currency
other than the functional currency of a particular entity. These
transactions generally result in receivables or payables that are
fixed in the foreign currency. Transaction gains or losses arise
when exchange rate fluctuations either increase or decrease the
functional currency cash flows from the originally recorded
transaction. Foreign currency transaction gains and losses
reported in the Consolidated Statements of Operations, were a
net loss of $16.6 million, $16.9 million and $6.7 million in the
years ended March 2024, 2023 and 2022, respectively.
Business Combinations
VF accounts for business combinations using the acquisition
method of accounting. Under the acquisition method, the
consolidated financial statements reflect the operations of an
acquired
business
starting
from
the
closing
date
of
the
acquisition. All assets acquired and liabilities assumed are
recorded at fair value as of the acquisition date. VF allocates the
purchase price of an acquired business to the fair values of the
tangible and identifiable intangible assets acquired and liabilities
assumed, with any excess purchase price recorded as goodwill.
Contingent consideration, if any, is included within the purchase
price and is recognized at its fair value on the acquisition date. In
subsequent reporting periods, any contingent consideration
liabilities are remeasured at fair value with changes recognized
in operating income (loss). During the measurement period,
which is up to one year from the acquisition date, adjustments to
the assets acquired and liabilities assumed may be recorded,
with the corresponding offset to goodwill.
Cash and Equivalents
Cash and equivalents are demand deposits, receivables from
third-party credit card processors and highly liquid investments
that mature within three months of their purchase dates. Highly
liquid investments considered cash equivalents were $226.8
million and $439.5 million at March 2024 and 2023, respectively,
consisting of money market funds and short-term time deposits.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-12
VF Corporation Fiscal 2024 Form 10-K
Accounts Receivable
Trade accounts receivable are recorded at invoiced amounts,
less contractual allowances for trade terms, sales incentive
programs and discounts. Royalty receivables are recorded at
amounts earned based on the licensees' sales of licensed
products, subject in some cases to contractual minimum
royalties
due
from
individual
licensees.
VF
maintains
an
allowance for doubtful accounts for estimated losses that will
result from the inability of customers and licensees to make
required payments. The allowance is determined based on
review
of
specific
customer
accounts
where
collection
is
doubtful, as well as an assessment of the collectability of total
receivables,
which
are
grouped
based
on
similar
risk
characteristics,
considering
historical
trends,
adjusted
for
current economic conditions and reasonable and supportable
forecasts when appropriate. The allowance represents the
current estimate of lifetime expected credit losses for all
outstanding accounts receivable and reflects the Company's
ongoing evaluation of collectability, customer creditworthiness,
historical levels of credit losses and future expectations.
Receivables are written off against the allowance when it is
determined that the amounts will not be recovered.
Inventories
Inventories are stated at the lower of cost or net realizable value.
Cost is determined on the first-in, first-out method, includes all
costs incurred to purchase the finished goods and is net of
discounts or rebates received from vendors. A detailed review of
all inventories is performed, at least quarterly, to identify slow
moving or excess products, discontinued and to-be-discontinued
products, off-quality merchandise and other specific or unique
situations. Management performs an evaluation to estimate net
realizable value using a systematic and consistent methodology
of forecasting future demand, market conditions and selling
prices less costs of disposal. If the estimated net realizable
value is less than cost, VF provides an allowance to reflect the
lower value of that inventory. This methodology recognizes
inventory exposures at the time such losses are evident rather
than at the time goods are actually sold. Historically, these
estimates of future demand and selling prices have not varied
significantly from actual results due to VF’s timely identification
and ability to typically dispose of these distressed inventories at
amounts either above or not significantly below cost.
Existence of physical inventory is verified through periodic
physical inventory counts and ongoing cycle counts at most
locations throughout the year, and an estimate of inventory
losses that have likely occurred since the last physical inventory
date is recorded. Historically, physical inventory shrinkage has
not been material.
Long-lived Assets, Including Intangible Assets and Goodwill
Property, plant and equipment, intangible assets and goodwill
are initially recorded at cost. VF capitalizes improvements to
property, plant and equipment that substantially extend the
useful life of the asset, and interest cost incurred during
construction of major assets. Repair and maintenance costs are
expensed as incurred.
Cost for acquired intangible assets represents the fair value at
acquisition date, which is generally based on the present value of
expected cash flows. Trademark intangible assets represent
individual acquired trademarks, some of which are registered in
multiple countries. Customer relationship intangible assets are
based on the value of relationships with wholesale customers in
place at the time of acquisition.
Goodwill represents the excess of cost of an acquired business
over the fair value of net tangible assets and identifiable
intangible assets acquired. Goodwill is assigned at the reporting
unit level.
Depreciation of property, plant and equipment is computed using
the straight-line method over the estimated useful lives of the
assets, ranging from 3 to 10 years for machinery and equipment
and up to 40 years for buildings. Amortization expense for
leasehold improvements and assets under finance leases is
recognized over the shorter of their estimated useful lives or the
lease
terms,
and
is
included
in
depreciation
expense.
Depreciation is ceased on assets that meet the held-for-sale
criteria and they are measured at the lower of their carrying
value or fair value, less costs of disposal.
Intangible assets determined to have indefinite lives, consisting
of major trademarks and trade names, are not amortized. Other
intangible assets determined to have a finite life primarily
consist of customer relationships, which are amortized over
their estimated useful lives ranging from 11 to 24 years using an
accelerated method consistent with the timing of benefits
expected to be received.
Depreciation and amortization expense related to obtaining
finished goods inventories is included in cost of goods sold, and
other depreciation and amortization expense is included in
selling, general and administrative expenses.
VF’s policy is to review property, plant and equipment and
amortizable intangible assets for possible impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable. If
forecasted pre-tax undiscounted cash flows to be generated by
the asset are not expected to recover the asset’s carrying value,
an impairment charge is recorded for the excess of the asset’s
carrying value over its estimated fair value.
VF’s policy is to evaluate indefinite-lived intangible assets and
goodwill for possible impairment as of the beginning of the
fourth quarter of each fiscal year, or whenever events or
changes in circumstances indicate that the fair value of such
assets may be below their carrying amount. VF may first assess
qualitative factors as a basis for determining whether it is
necessary to perform quantitative impairment testing. If VF
determines that it is more likely than not that the fair value of an
asset or reporting unit is more than its carrying value, then no
further testing is required. Otherwise, the assets must be
quantitatively tested for impairment.
An indefinite-lived intangible asset is quantitatively evaluated for
possible impairment by comparing the estimated fair value of
the asset with its carrying value. An impairment charge is
recorded if the carrying value of the asset exceeds its estimated
fair value.
Goodwill is quantitatively evaluated for possible impairment by
comparing the estimated fair value of a reporting unit with its
carrying value, including the goodwill assigned to that reporting
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-13
unit. An impairment charge is recorded if the carrying value of
the reporting unit exceeds its estimated fair value.
Leases
VF determines if an arrangement is or contains a lease at
contract inception and determines its classification as an
operating
or
finance
lease
at
lease
commencement.
The
Company
leases
certain
retail
locations,
office
space,
distribution facilities, machinery and equipment, and vehicles.
While the substantial majority of these leases are operating
leases, one of VF's distribution centers is a finance lease.
Leases for real estate typically have initial terms ranging from 2
to
15
years,
generally
with
renewal
options.
Leases
for
equipment typically have initial terms ranging from 2 to 5 years
and vehicle leases typically have initial terms ranging from 1 to 6
years. In determining the lease term used in the lease right-of-
use asset and lease liability calculations, the Company considers
various factors such as market conditions and the terms of any
renewal or termination options that may exist. When deemed
reasonably certain, the renewal and termination options are
included in the determination of the lease term and calculation
of the lease right-of-use assets and lease liabilities. The
Company has made an accounting policy election to not
recognize right-of-use assets and lease liabilities for leases with
terms of 12 months or less.
Most leases have fixed rental payments. Many of the real estate
leases also require additional variable payments for occupancy-
related costs, real estate taxes and insurance, as well as other
payments (i.e., contingent rent) owed when sales at individual
retail store locations exceed a stated base amount. Variable
lease payments are excluded from the measurement of the
lease liability and are recognized in profit and loss in the period
in which the event or conditions that triggers those payments
occur.
Certain leases contain both lease and non-lease components.
For leases associated with specific asset classes, including
certain real estate, vehicles and IT equipment, VF has elected
the practical expedient which permits entities to account for
separate
lease
and
non-lease
components
as
a
single
component. For all other lease contracts, the Company accounts
for each lease component separately from the non-lease
components of the contract. When applicable, VF will measure
the consideration to be paid pursuant to the agreement and
allocate
this
consideration
to
the
lease
and
non-lease
components based on relative standalone prices.
VF estimates the amount it expects to pay to the lessor under a
residual value guarantee and includes it in lease payments used
to measure the lease liability only for amounts probable of being
owed by VF at the commencement date.
VF calculates lease liabilities as the present value of lease
payments over the lease term at commencement date. Lease
right-of-use
assets
are
calculated
based
on
the
initial
measurement of the respective lease liabilities adjusted for any
lease
payments
made
to
the
lessor
at
or
before
the
commencement date, lease incentives received and initial direct
costs incurred. When readily determinable, the Company uses
the implicit rate to determine the present value of lease
payments, which generally does not happen in practice. As the
rate implicit in the majority of the Company's leases is not
readily
determinable,
the
Company
uses
its
incremental
borrowing rate based on the information available at the lease
commencement
date,
including
the
lease
term,
currency,
country specific risk premium and adjustments for collateralized
debt.
Operating lease expense is recorded as a single lease cost on a
straight-line basis over the lease term. For finance leases, right-
of-use asset amortization and interest on lease liabilities are
presented
separately
in
the
Consolidated
Statements
of
Operations. The Company does not have material subleases.
The Company assesses whether a sale leaseback transaction
qualifies as a sale when the transaction occurs. For transactions
qualifying as a sale, VF derecognizes the underlying asset and
recognizes the entire gain or loss at the time of the sale. The
corresponding lease entered into with the buyer-lessor is
accounted for as an operating lease. During the year ended
March 2023, the Company entered into a sale leaseback
transaction for certain office real estate and related assets. The
transaction qualified as a sale, and thus the Company recognized
a gain of $13.2 million in the selling, general and administrative
expenses line item in VF's Consolidated Statement of Operations
for the year ended March 2023.
Defined Benefit Pension Plans
VF sponsors various defined benefit pension plans in the U.S.
and in certain international jurisdictions. The Company's U.S.
plans, including a noncontributory qualified defined benefit
pension plan and an unfunded supplemental defined benefit
pension plan, were frozen for all future benefit accruals,
effective December 31, 2018.
The funded status of defined benefit pension plans is recorded
as a net asset or liability in the Consolidated Balance Sheets
based
on
the
difference
between
the
projected
benefit
obligations and the fair value of plan assets, which is assessed
on a plan-by-plan basis. The changes in funded status of defined
benefit pension plans, primarily related to actuarial gains and
losses arising from differences between actual experience and
actuarial assumptions, are recognized in the year in which the
changes occur and reported in the Consolidated Statements of
Comprehensive Income (Loss).
VF reports the service component of net periodic pension cost
(income)
within
operating
income
(loss)
and
the
other
components of net periodic pension cost, which include interest
cost, expected return on plan assets, settlement charges,
curtailments and amortization of deferred actuarial losses and
prior service credits, in the other income (expense), net line item
of the Consolidated Statements of Operations.
Derivative Financial Instruments
Derivative financial instruments are measured at fair value in
the Consolidated Balance Sheets. Unrealized gains and losses
are recognized as assets and liabilities, respectively, and
classified as current or noncurrent based on the derivatives’
maturity dates. The accounting for changes in the fair value of
derivative instruments (i.e., gains and losses) depends on the
intended use of the derivative, whether the Company has elected
to designate a derivative in a hedging relationship and apply
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-14
VF Corporation Fiscal 2024 Form 10-K
hedge accounting and whether the hedging relationship has
satisfied the criteria necessary to apply hedge accounting. To
qualify for hedge accounting treatment, all hedging relationships
must be formally documented at the inception of the hedges and
must be highly effective in offsetting changes to future cash
flows of hedged transactions. VF’s hedging practices are
described in Note 25, which primarily relate to cash flow hedges.
VF does not use derivative instruments for trading or speculative
purposes. Hedging cash flows are classified in the Consolidated
Statements of Cash Flows in the same category as the items
being hedged.
VF
formally
documents
hedging
instruments
and
hedging
relationships at the inception of each contract. Further, at the
inception of a contract and on an ongoing basis, as necessary, VF
assesses whether the hedging instruments are highly effective
in offsetting the risk of the hedged transactions. When hedging
instruments are determined to not be highly effective, hedge
accounting treatment is discontinued, and any future changes in
fair value of the instruments are recognized immediately in net
income (loss). Unrealized gains or losses related to hedging
instruments remain in accumulated other comprehensive loss
("OCL") until the hedged forecasted transaction occurs and
impacts earnings. If the hedged forecasted transaction is
deemed probable of not occurring, any unrealized gains or
losses in accumulated OCL are immediately recognized in net
income (loss).
VF also uses derivative contracts to manage foreign currency
exchange risk on certain assets and liabilities. These contracts
are not designated as hedges, and are measured at fair value in
the Consolidated Balance Sheets with changes in fair value
recognized directly in net income (loss).
The counterparties to the derivative contracts are financial
institutions having at least A-rated investment grade credit
ratings. To manage its credit risk, VF continually monitors the
credit risks of its counterparties, limits its exposure in the
aggregate and to any single counterparty, and adjusts its
hedging positions as appropriate. The impact of VF’s credit risk
and the credit risk of its counterparties, as well as the ability of
each party to fulfill its obligations under the contracts, is
considered in determining the fair value of the derivative
contracts. Credit risk has not had a significant effect on the fair
value of VF’s derivative contracts. VF does not have any credit
risk-related contingent features or collateral requirements with
its derivative contracts.
Revenue Recognition
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.
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 wholesale customers are
generally between 30 and 60 days while direct-to-consumer
arrangements have shorter terms. 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 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. Allowances for estimates of sales
incentive programs, discounts, markdowns, chargebacks and
returns are recorded as accrued liabilities in the Consolidated
Balance Sheets.
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 standalone 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,
some
of
which
include
minimum
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-15
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.
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. The Company
has also elected 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.
Cost of Goods Sold
Cost of goods sold for purchased finished goods includes the
purchase costs and related overhead. Overhead includes all
costs related to purchasing finished goods, including costs of
planning,
purchasing,
quality
control,
depreciation,
freight,
duties, royalties paid to third parties and shrinkage. Cost of
goods sold also includes provisions to state inventories at the
lower of cost or net realizable value. For product lines with a
warranty, a provision for estimated future repair or replacement
costs, based on historical and anticipated trends, is recorded
when these products are sold.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs of
product development, selling, marketing and advertising, VF-
operated retail stores, concession retail stores, warehousing,
distribution, shipping and handling, licensing and administration.
Advertising costs are expensed as incurred and totaled $835.8
million, $861.8 million and $840.6 million in the years ended
March 2024, 2023 and 2022, respectively. Advertising costs
include
cooperative
advertising
payments
made
to
VF’s
customers as reimbursement for certain costs of advertising
VF’s products, which totaled $12.7 million, $16.5 million and
$16.2 million in the years ended March 2024, 2023 and 2022,
respectively. Shipping and handling costs for delivery of products
to customers totaled $549.2 million, $637.0 million and $634.2
million in the years ended March 2024, 2023 and 2022,
respectively. Expenses related to royalty income were $0.8
million, $0.9 million and $0.9 million in the years ended March
2024, 2023 and 2022, respectively.
Stock-based Compensation
VF accounts for all stock-based payments to employees and
non-employee directors based on their respective grant date fair
values. Compensation cost for all awards expected to vest is
recognized over the shorter of the requisite service period or the
vesting period, including accelerated recognition for retirement-
eligible employees. Awards that do not vest are forfeited.
Generally, dividend equivalents accrue without compounding and
are payable in additional shares of VF common stock upon
vesting.
VF uses a lattice option-pricing model to estimate the fair value
of stock options granted to employees and non-employee
directors.
VF's
performance-based
awards
are
based
on
management achieving both performance and market-based
financial targets. The grant date fair value of market conditions
is
determined
using
a
Monte
Carlo
simulation
technique
incorporating option-pricing model inputs.
Dividends
Dividends declared on common stock are recorded as a
reduction of retained earnings to the extent retained earnings
are available at the close of the period prior to the date of the
declared dividend. Dividends declared in excess of retained
earnings are recorded as a reduction of additional paid-in-
capital.
Self-insurance
VF is self-insured for a significant portion of its employee
medical, workers’ compensation, vehicle, property and general
liability exposures. Liabilities for self-insured exposures are
accrued at the present value of amounts expected to be paid
based on historical claims experience and actuarial data for
forecasted settlements of claims filed and for incurred but not
yet reported claims. Accruals for self-insured exposures are
included in current and noncurrent liabilities based on the
expected periods of payment. Excess liability insurance has been
purchased to limit the amount of self-insured risk on claims.
Income Taxes
Income taxes are provided on pre-tax income (loss) for financial
reporting purposes. Income taxes are based on amounts of taxes
payable or refundable in the current year and on expected future
tax
consequences
of
events
that
are
recognized
in
the
consolidated financial statements in different periods than they
are recognized in tax returns. As a result of timing of recognition
and measurement differences between financial accounting
standards and income tax laws, temporary differences arise
between amounts of pre-tax financial statement income (loss)
and taxable income (loss), and between reported amounts of
assets and liabilities in the Consolidated Balance Sheets and
their respective tax bases. Deferred income tax assets and
liabilities reported in the Consolidated Balance Sheets reflect
the estimated future tax impact of these temporary differences
and net operating loss and net capital loss carryforwards, based
on tax rates currently enacted for the years in which the
differences are expected to be settled or realized. Realization of
deferred tax assets is dependent on future taxable income in
specific jurisdictions. Valuation allowances are used to reduce
deferred tax assets to amounts considered more-likely-than-not
to be realized. All deferred tax assets and liabilities are
classified as noncurrent in the Consolidated Balance Sheets.
Accrued income taxes in the Consolidated Balance Sheets
include unrecognized income tax benefits, along with related
interest and penalties, appropriately classified as current or
noncurrent. VF has evaluated these potential issues under the
more-likely-than-not standard of the accounting literature. A tax
position is recognized if it meets this standard and is measured
at the largest amount of benefit that has a greater than 50%
likelihood of being realized. The provision for income taxes also
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-16
VF Corporation Fiscal 2024 Form 10-K
includes estimated interest and penalties related to uncertain
tax positions.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net
income (loss) by the weighted average number of shares of
Common Stock outstanding during the period. Diluted earnings
per share assumes conversion of potentially dilutive securities
such as stock options, restricted stock units and restricted
stock. In periods of a net loss, all potentially dilutive securities
are excluded from diluted loss per share, as their inclusion
would be anti-dilutive.
Concentration of Risks
VF markets products to a broad customer base throughout the
world. Products are sold at a range of price points through
various wholesale and direct-to-consumer channels. VF’s ten
largest customers accounted for approximately 14% of Fiscal
2024 total revenues. Sales to VF’s largest customer accounted
for approximately 2% of Fiscal 2024 total revenues. Sales are
generally made on an unsecured basis under customary terms
that may vary by product, channel of distribution or geographic
region. VF continuously monitors the creditworthiness of its
customers and has established internal policies regarding
customer credit limits. The breadth of product offerings,
combined with the large number and geographic diversity of its
customers, limits VF’s concentration of risks.
Legal and Other Contingencies
Management periodically assesses liabilities and contingencies
in connection with legal proceedings and other claims that may
arise from time to time. When it is probable that a loss has been
or will be incurred and the amount of the loss is reasonably
estimable,
the
estimate
of
the
loss
is
recorded
in
the
consolidated financial statements. Estimates of losses are
adjusted when additional information becomes available or
circumstances change. A contingent liability is disclosed when
there is at least a reasonable possibility that a material loss may
have been incurred.
Reclassifications
Certain prior year amounts have been reclassified to conform
with the Fiscal 2024 presentation.
Recently Adopted Accounting Standards
In March 2020, January 2021 and December 2022, 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", ASU No. 2021-01, "Reference Rate Reform
(Topic 848): Scope" and ASU No. 2022-06, "Reference Rate Reform
(Topic 848): Deferral of the Sunset Date of Topic 848", 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 guidance is provided to ease the potential burden of
accounting for reference rate reform. During the first quarter of
Fiscal 2024, the Company amended the terms of its $2.25 billion
senior unsecured revolving line of credit (the “Global Credit
Facility”), which replaced the LIBOR benchmark interest rate
with a benchmark interest rate based on the forward-looking
secured overnight financing rate ("Term SOFR"). This guidance
was adopted in the first quarter of Fiscal 2024, but did not impact
VF's consolidated financial statements.
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 became effective for VF in the first
quarter of Fiscal 2024, except for the rollforward information
that will be effective for annual periods beginning in Fiscal 2025
on a prospective basis. Early adoption is permitted. The
Company adopted the required guidance in the first quarter of
Fiscal 2024 and is evaluating the impact of adopting the guidance
related to the rollforward information. Refer to Note 12 for
disclosures related to the Company's supply chain financing
program.
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, "Segment
Reporting (Topic 280): Improvements to Reportable Segment
Disclosures", which updates reportable segment disclosure
requirements primarily through enhanced disclosures about
significant segment expenses that are regularly provided to the
individual or group identified as the chief operating decision
maker ("CODM"). The guidance also requires disclosure of the
title and position of the CODM and how reported measures of
segment profit or loss are used to assess performance and
allocate resources. The guidance will be effective for annual
disclosures
beginning
in
Fiscal
2025,
and
has
expanded
requirements to include all disclosures about a reportable
segment's profit or loss and assets in subsequent interim
periods. Early adoption is permitted. The guidance requires
retrospective application to all prior periods presented in the
financial statements. The Company is evaluating the impact that
adopting this guidance will have on VF's disclosures.
In December 2023, the FASB issued ASU No. 2023-09, "Income
Taxes (Topic 740): Improvements to Income Tax Disclosures", which
is intended to enhance the transparency and decision usefulness
of income tax disclosures by requiring that an entity, on an
annual
basis,
disclose
additional
income
tax
information,
primarily related to the rate reconciliation and income taxes
paid. The rate reconciliation disclosures will require specific
categories and additional information for reconciling items that
meet a quantitative threshold. The income taxes paid disclosures
will require disaggregation by individual jurisdictions that are
greater than 5% of total income taxes paid. The guidance will be
effective for annual disclosures beginning in Fiscal 2026. Early
adoption is permitted. The amendments are required to be
applied
on
a
prospective
basis;
however,
retrospective
application is permitted. The Company is evaluating the impact
that adopting this guidance will have on VF's disclosures.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-17
NOTE 2 — REVENUES
Contract Balances
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 within Note 1.
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 within Note 1,
and order deposits.
The following table provides information about contract assets and contract liabilities:
(In thousands)
March 2024
March 2023
Contract assets
(a)
$
2,393
$
2,294
Contract liabilities
(b)
67,115
62,214
(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.
For the year ended March 2024, the Company recognized $253.6
million of revenue, which included the majority of the contract
liability balance at the beginning of the year, and amounts
recorded as a contract liability and subsequently recognized as
revenue as performance obligations were satisfied during the
year, including 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
March
2024,
the
Company
expects
to
recognize
$78.5 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.
As of March 2024, 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.
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.
Year Ended March 2024
(In thousands)
Outdoor
Active
Work
Other
Total
Channel revenues
Wholesale
$
3,152,260
$
1,579,251
$
690,934
$
—
$
5,422,445
Direct-to-consumer
2,330,390
2,458,475
176,284
—
4,965,149
Royalty
18,749
24,003
24,321
—
67,073
Total
$
5,501,399
$
4,061,729
$
891,539
$
—
$ 10,454,667
Geographic revenues
Americas
$
2,498,520
$
2,255,982
$
710,366
$
—
$
5,464,868
Europe
2,080,583
1,234,569
113,420
—
3,428,572
Asia-Pacific
922,296
571,178
67,753
—
1,561,227
Total
$
5,501,399
$
4,061,729
$
891,539
$
—
$ 10,454,667
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-18
VF Corporation Fiscal 2024 Form 10-K
Year Ended March 2023
(In thousands)
Outdoor
Active
Work
Other
Total
Channel revenues
Wholesale
$
3,375,343
$
2,082,875
$
847,729
$
148
$
6,306,095
Direct-to-consumer
2,252,958
2,791,936
186,462
—
5,231,356
Royalty
19,225
29,811
25,988
—
75,024
Total
$
5,647,526
$
4,904,622
$
1,060,179
$
148
$ 11,612,475
Geographic revenues
Americas
$
2,921,383
$
2,912,666
$
848,524
$
148
$
6,682,721
Europe
1,960,485
1,343,796
107,414
—
3,411,695
Asia-Pacific
765,658
648,160
104,241
—
1,518,059
Total
$
5,647,526
$
4,904,622
$
1,060,179
$
148
$ 11,612,475
Year Ended March 2022
(In thousands)
Outdoor
Active
Work
Other
Total
Channel revenues
Wholesale
$
3,194,881
$
2,256,444
$
919,080
$
785
$
6,371,190
Direct-to-consumer
2,115,056
3,102,231
186,788
—
5,404,075
Royalty
17,631
21,663
27,281
—
66,575
Total
$
5,327,568
$
5,380,338
$
1,133,149
$
785
$ 11,841,840
Geographic revenues
Americas
$
2,748,935
$
3,155,870
$
899,706
$
785
$
6,805,296
Europe
1,877,502
1,432,260
89,537
—
3,399,299
Asia-Pacific
701,131
792,208
143,906
—
1,637,245
Total
$
5,327,568
$
5,380,338
$
1,133,149
$
785
$ 11,841,840
NOTE 3 — DISCONTINUED OPERATIONS
The Company continuously assesses the composition of its
portfolio to ensure it is aligned with its strategic objectives and
positioned to maximize growth and return to shareholders.
Occupational Workwear Business
On January 21, 2020, VF announced its decision to explore the
divestiture
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. As of
March 28, 2020, the Occupational Workwear business met the
held-for-sale and discontinued operations accounting criteria.
Accordingly, the Company has reported the results of the
Occupational Workwear business and the related cash flows as
discontinued operations in the Consolidated Statements of
Operations
and
Consolidated
Statements
of
Cash
Flows,
respectively, through the date of sale.
On June 28, 2021, VF completed the sale of the Occupational
Workwear business. The Company received proceeds of $616.9
million, net of cash sold, resulting in a final after-tax gain on sale
of $146.0 million, which was included in the income from
discontinued operations, net of tax line item in the Consolidated
Statement of Operations for the year ended March 2022.
The results of the Occupational Workwear business were
previously reported in the Work segment. The results of the
Occupational Workwear business recorded in the income from
discontinued operations, net of tax line item in the Consolidated
Statement of Operations was income of $170.7 million (including
a final after-tax gain on sale of $146.0 million) for the year ended
March 2022.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-19
Summarized Discontinued Operations Financial Information
The following table summarizes the major line items for the Occupational Workwear business that are included in the income from
discontinued operations, net of tax line item in the Consolidated Statements of Operations:
Year Ended March
(In thousands)
2024
(a)
2023
(a)
2022
Net revenues
$
—
$
—
$
181,424
Cost of goods sold
—
—
117,193
Selling, general and administrative expenses
—
—
38,735
Interest income, net
—
—
194
Other income (expense), net
—
—
6
Income from discontinued operations before income taxes
—
—
25,696
Gain on the sale of discontinued operations before income taxes
—
—
133,970
Total income from discontinued operations before income taxes
—
—
159,666
Income tax benefit
(b)
—
—
(11,006)
Income from discontinued operations, net of tax
$
—
$
—
$
170,672
(a)
There was no activity during the years ended March 2024 and 2023.
(b)
Income tax benefit for the year ended March 2022 included $12.0 million of deferred tax benefit related to capital and other losses realized upon
the sale of the Occupational Workwear business.
NOTE 4 — ACCOUNTS RECEIVABLE
(In thousands)
March 2024
March 2023
Trade
$
1,227,707
$
1,521,975
Other (including royalty)
72,627
116,395
Total accounts receivable
1,300,334
1,638,370
Less allowance for doubtful accounts
26,369
28,075
Accounts receivable, net
$
1,273,965
$
1,610,295
NOTE 5 — INVENTORIES
(In thousands)
March 2024
March 2023
Finished products
$
1,718,676
$
2,240,215
Work-in-process
39,539
39,508
Raw materials
8,151
13,067
Total inventories
$
1,766,366
$
2,292,790
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-20
VF Corporation Fiscal 2024 Form 10-K
NOTE 6 — OTHER CURRENT ASSETS
(In thousands)
March 2024
March 2023
Prepaid income taxes
$
176,821
$
114,307
Prepaid expenses
110,943
108,185
Right of return assets
72,105
47,872
Assets held-for-sale
55,082
14,769
Derivative financial instruments (Note 25)
28,701
48,132
Other taxes
28,401
43,712
Investments held for deferred compensation plans (Note 17)
10,771
18,936
Other
29,187
38,824
Other current assets
$
512,011
$
434,737
NOTE 7 — PROPERTY, PLANT AND EQUIPMENT
(In thousands)
March 2024
March 2023
Land and improvements
$
65,886
$
69,401
Buildings and improvements
886,158
896,973
Machinery and equipment
1,006,294
1,051,093
Property, plant and equipment, at cost
1,958,338
2,017,467
Less accumulated depreciation and amortization
1,134,452
1,075,027
Property, plant and equipment, net
$
823,886
$
942,440
NOTE 8 — INTANGIBLE ASSETS
(In thousands)
Weighted
Average
Amortization
Period
Amortization
Method
Cost
Accumulated
Amortization
Net
Carrying
Amount
March 2024
Amortizable intangible assets:
Customer relationships and other
19 years
Accelerated
$
262,084
$
187,121
$
74,963
Indefinite-lived intangible assets:
Trademarks and trade names
2,553,519
Intangible assets, net
$
2,628,482
(In thousands)
Weighted
Average
Amortization
Period
Amortization
Method
Cost
Accumulated
Amortization
Net
Carrying
Amount
March 2023
Amortizable intangible assets:
Customer relationships and other
19 years
Accelerated
$
262,818
$
173,916
$
88,902
Indefinite-lived intangible assets:
Trademarks and trade names
2,553,919
Intangible assets, net
$
2,642,821
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-21
VF did not record any intangible asset impairment charges in the
years ended March 2024 or March 2022. VF recorded impairment
charges of $340.9 million in the year ended March 2023 related
to the Supreme
® indefinite-lived trademark intangible asset.
Refer to Note 24 for additional information on fair value
measurements.
Amortization expense for the years ended March 2024, 2023 and
2022 was $13.8 million, $14.1 million and $15.6 million,
respectively. Estimated amortization expense for the next five
fiscal years is $13.2 million, $12.3 million, $11.8 million, $10.8
million and $9.8 million, respectively.
NOTE 9 — GOODWILL
Changes in goodwill are summarized by reportable segment as follows:
(In thousands)
Outdoor
Active
Work
Total
Balance, March 2022
$
660,786
$
1,619,121
$
113,900
$
2,393,807
Impairment charges
—
(394,131)
—
(394,131)
Foreign currency translation
(6,999)
(13,746)
(518)
(21,263)
Balance, March 2023
653,787
1,211,244
113,382
1,978,413
Impairment charges
(445,757)
—
(61,809)
(507,566)
Foreign currency translation
(2,162)
(8,198)
(73)
(10,433)
Balance, March 2024
$
205,868
$
1,203,046
$
51,500
$
1,460,414
During the year ended March 2024, VF recorded impairment
charges of $507.6 million related to the Timberland, Dickies and
Icebreaker reporting units. During the fourth quarter of Fiscal
2024, VF performed an impairment analysis of the Timberland
reporting unit as a result of a triggering event and recorded
impairment charges of $211.7 million. As a result of VF's annual
impairment testing of goodwill as of the beginning of the fourth
quarter of Fiscal 2024, VF recorded impairment charges of $38.8
million related to the Icebreaker reporting unit. During the third
quarter of Fiscal 2024, VF performed interim impairment
analyses of the Timberland and Dickies reporting units as a
result of triggering events and recorded impairment charges of
$195.3 million and $61.8 million, respectively. The Timberland
and Icebreaker reporting units are part of the Outdoor segment
and the Dickies reporting unit is part of the Work segment. Refer
to
Note
24
for
additional
information
on
fair
value
measurements.
During the year ended March 2023, VF recorded impairment
charges of $394.1 million related to the Supreme reporting unit,
which is part of the Active segment. VF did not record any
impairment charges in the year ended March 2022 based on the
results of its goodwill impairment testing.
Accumulated impairment charges for the Outdoor, Active and
Work segments were $769.0 million, $394.1 million and $61.8
million as of March 2024, respectively, and $323.2 million and
$394.1 million for the Outdoor and Active segments as of March
2023, respectively.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-22
VF Corporation Fiscal 2024 Form 10-K
NOTE 10 — LEASES
The assets and liabilities related to operating and finance leases were as follows:
(In thousands)
Location in Consolidated Balance Sheet
March 2024
March 2023
Assets:
Operating lease assets
Operating lease right-of-use assets
$
1,330,361
$
1,372,182
Finance lease assets
Property, plant and equipment, net
11,500
12,417
Total lease assets
$
1,341,861
$
1,384,599
Liabilities:
Current
Operating lease liabilities
Accrued liabilities
$
309,444
$
332,222
Finance lease liabilities
Current portion of long-term debt
981
951
Noncurrent
Operating lease liabilities
Operating lease liabilities
1,156,858
1,171,941
Finance lease liabilities
Long-term debt
15,178
16,287
Total lease liabilities
$
1,482,461
$
1,521,401
The components of lease costs were as follows:
Year Ended March
(In thousands)
2024
2023
2022
Operating lease cost
$
426,602
$
418,716
$
435,637
Finance lease cost – amortization of right-of-use assets
917
917
917
Finance lease cost – interest on lease liabilities
457
486
513
Short-term lease cost
25,256
22,154
17,602
Variable lease cost
132,474
117,189
98,052
Impairment
12,958
—
4,279
Gain recognized from sale-leaseback transaction
—
(13,189)
—
Total lease cost
$
598,664
$
546,273
$
557,000
Supplemental cash flow information related to leases was as follows:
Year Ended March
(In thousands)
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases
$
441,269
$
428,443
$
465,249
Operating cash flows – finance leases
457
486
513
Financing cash flows – finance leases
1,079
1,050
1,023
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases
361,959
545,856
205,811
Finance leases
—
—
—
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-23
Lease terms and discount rates were as follows:
March 2024
March 2023
March 2022
Weighted average remaining lease term:
Operating leases
6.26 years
6.60 years
6.17 years
Finance leases
12.51 years
13.51 years
14.51 years
Weighted average discount rate:
Operating leases
3.29 %
2.61 %
1.78 %
Finance leases
2.71 %
2.71 %
2.71 %
Maturities of operating and finance lease liabilities for the next five fiscal years and thereafter as of March 2024 were as follows:
(In thousands)
Operating Leases
Finance Leases
Total
2025
$
354,808
$
1,408
$
356,216
2026
312,351
1,536
313,887
2027
266,884
1,664
268,548
2028
190,088
1,536
191,624
2029
125,901
1,408
127,309
Thereafter
375,946
11,523
387,469
Total lease payments
1,625,978
19,075
1,645,053
Less: present value adjustment
159,676
2,916
162,592
Present value of lease liabilities
$
1,466,302
$
16,159
$
1,482,461
The Company excluded approximately $82.3 million of leases (undiscounted basis) that have not yet commenced. These leases will commence
primarily in Fiscal 2025 with lease terms of 1 to 15 years.
NOTE 11 — OTHER ASSETS
(In thousands)
March 2024
March 2023
Deferred income taxes (Note 20)
$
389,783
$
95,117
Computer software, net of accumulated amortization of: March 2024 - $324,492; March 2023
- $256,414
300,963
348,739
Pension assets (Note 17)
175,110
183,929
Investments held for deferred compensation plans (Note 17)
86,623
120,423
Income taxes receivable and prepaid income taxes
42,993
1,004,289
Other investments
39,764
27,542
Deposits
36,958
42,746
Partnership stores and shop-in-shop costs, net of accumulated amortization of: March 2024 -
$91,042; March 2023 - $90,072
26,362
24,743
Derivative financial instruments (Note 25)
3,847
1,556
Other
40,470
52,839
Other assets
$
1,142,873
$
1,901,923
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-24
VF Corporation Fiscal 2024 Form 10-K
NOTE 12 — SUPPLY CHAIN FINANCING PROGRAM
VF facilitates a voluntary supply chain finance ("SCF") program
that enables a significant portion of our inventory suppliers 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 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 terms (which are generally
within 90 days of the invoice date), are not impacted by a
supplier's participation in the SCF program. All amounts due to
suppliers that are eligible to 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. At March 2024 and
2023, the accounts payable line item in VF's Consolidated
Balance Sheets included total outstanding obligations of $485.0
million and $510.9 million, respectively, due to suppliers that are
eligible to participate in the SCF program.
NOTE 13 — SHORT-TERM BORROWINGS
(In thousands)
March 2024
March 2023
Commercial paper borrowings
$
250,000
$
—
International borrowing arrangements
13,938
11,491
Short-term borrowings
$
263,938
$
11,491
VF maintains a $2.25 billion Global Credit Facility that expires in
November 2026. VF may request an unlimited number of one-
year extensions so long as each extension does not cause the
remaining life of the Global Credit Facility to exceed five years,
subject to stated terms and conditions; however, granting of any
extension is at the discretion of the lenders. The Global Credit
Facility may be used to borrow funds in U.S. dollars or any
alternative currency (including euros and any other currency
that is freely convertible into U.S. dollars, approved at the
request of the Company by the lenders) and has a $75.0 million
letter of credit sublimit. There were no borrowings under the
Global Credit Facility during the years ended March 2024 and
2023. Any borrowings under the Global Credit Facility would
currently be priced at a credit spread of 122.5 basis points over
the appropriate benchmark interest rate based on Term SOFR or
the Euro Interbank Offer Rate ("EURIBOR"), plus a credit spread
adjustment of 22.5 basis points for Term SOFR, based on the
agreement as amended in April 2024. VF is also required to pay a
facility fee to the lenders, currently equal to 15 basis points of
the committed amount of the facility. The credit spread and
facility fee are subject to adjustment based on VF’s credit
ratings. Outstanding short-term balances may vary from period
to period depending on the level of corporate requirements.
VF has restrictive covenants on its Global Credit Facility,
including a consolidated net indebtedness to consolidated net
capitalization
financial
ratio
covenant,
as
defined
in
the
agreement as amended in April 2024. The calculation of
consolidated net indebtedness to consolidated net capitalization
ratio permits certain addbacks, including non-cash impairment
charges and material impacts resulting from adverse legal
rulings, as defined in the amended agreement. Additionally, as
amended, the consolidated net indebtedness to consolidated net
capitalization ratio financial covenant, as of the last day of any
fiscal quarter, cannot be greater than 0.70 to 1.00 through the
last day of the fiscal quarter ending on or about September 30,
2024, then 0.65 to 1.00 through the last day of the fiscal quarter
ending on or about September 30, 2025, and 0.60 to 1.00
thereafter. As of March 2024, VF was in compliance with all
covenants.
The Global Credit Facility also supports VF’s global commercial
paper
program
for
short-term,
seasonal
working
capital
requirements and general corporate purposes. VF’s global
commercial paper program allows for borrowings of up to $2.25
billion to the extent it has borrowing capacity under the Global
Credit Facility. Outstanding U.S. commercial paper borrowings
totaled $250.0 million at March 2024 and had a weighted average
interest rate of 6.4%. There were no U.S. commercial paper
borrowings as of March 2023. In addition to the U.S. commercial
paper program, VF commenced a euro commercial paper
borrowing program during the second quarter of Fiscal 2024. As
of March 2024, there were no outstanding euro commercial
paper borrowings under this program. The Company designates
its euro commercial paper borrowings as a net investment
hedge of VF's investment in certain foreign operations. Refer to
Note 25 for additional information. The Global Credit Facility also
had $0.6 million and $7.7 million of outstanding standby letters
of credit issued on behalf of VF as of March 2024 and 2023,
respectively, leaving approximately $2.0 billion and $2.2 billion
as of March 2024 and 2023, respectively, available for borrowing
against this facility.
VF has $81.2 million of international lines of credit with various
banks, which are uncommitted and may be terminated at any
time by either VF or the banks. Total outstanding balances under
these arrangements were $13.9 million and $11.5 million at
March 2024 and 2023, respectively. Borrowings under these
arrangements had a weighted average interest rate of 51.6% and
39.1% at March 2024 and 2023, respectively.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-25
NOTE 14 — ACCRUED LIABILITIES
(In thousands)
March 2024
March 2023
Current portion of operating lease liabilities (Note 10)
$
309,444
$
332,222
Customer discounts and allowances
270,838
220,614
Other taxes
145,226
151,621
Compensation
133,754
141,437
Income taxes
113,288
314,465
Contract liabilities (Note 2)
67,115
62,214
Restructuring (Note 27)
52,465
43,121
Interest
46,398
60,504
Derivative financial instruments (Note 25)
35,578
59,995
Freight, duties and postage
31,801
57,271
Insurance
16,690
15,501
Product warranty claims (Note 16)
12,893
11,308
Deferred compensation (Note 17)
10,771
18,936
Advertising
8,775
41,338
Pension liabilities (Note 17)
6,597
20,727
Other
113,559
122,377
Accrued liabilities
$
1,375,192
$
1,673,651
NOTE 15 — LONG-TERM DEBT
(In thousands)
March 2024
March 2023
0.625% notes, due September 2023 ("2023 notes")
$
—
$
923,354
Delayed Draw Term Loan Agreement, due December 2024
999,740
999,269
2.400% notes, due April 2025 ("2025 notes")
748,385
746,933
4.125% notes, due March 2026 ("2026 notes")
536,553
539,121
2.800% notes, due April 2027 ("2027 notes")
497,713
497,029
0.250% notes, due February 2028 ("2028 notes")
535,849
538,923
4.250% notes, due March 2029 ("2029 notes")
534,690
537,809
2.950% notes, due April 2030 ("2030 notes")
744,986
744,246
0.625% notes, due February 2032 ("2032 notes")
531,760
534,763
6.000% notes, due October 2033 ("2033 notes")
272,255
271,869
6.450% notes, due November 2037 ("2037 notes")
284,915
284,765
Finance leases
16,159
17,238
Total long-term debt
5,703,005
6,635,319
Less current portion
1,000,721
924,305
Long-term debt, due beyond one year
$
4,702,284
$
5,711,014
Term Debt Facility
In August 2022, the Company entered into a delayed draw Term
Loan Agreement (the “DDTL Agreement”). Under the DDTL
Agreement, the lenders agreed to provide up to three separate
delayed draw term loans (each, a "Delayed Draw”) to the
Company in an aggregate principal amount of up to $1.0 billion
(which may be increased to $1.1 billion subject to the terms and
conditions of the DDTL Agreement). The DDTL Agreement has a
termination date of December 14, 2024.
Subject to the terms and conditions of the DDTL Agreement, the
Company may request extensions of the termination date.
Interest on the borrowings under the DDTL Agreement will
generally be at Term SOFR, plus a 10 basis point credit spread
adjustment, plus a margin. The margin ranges from 0.70% to
0.875% per annum based on the Company’s credit ratings. The
Company is permitted at any time to prepay outstanding Delayed
Draws without premium or penalty.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-26
VF Corporation Fiscal 2024 Form 10-K
During the third quarter of Fiscal 2023, VF completed two draws
under the DDTL Agreement totaling $1.0 billion, all of which will
mature in December 2024. In connection with the draws, VF
elected a base rate of one-month Term SOFR. The weighted
average interest rate at March 2024 and 2023 was 6.30% and
5.73%, respectively.
The DDTL Agreement is subject to restrictive covenants as
defined in the amendment as of February 2023.
Senior Notes
Debt Issuance
In March 2023, VF issued €500.0 million of 4.125% euro-
denominated fixed-rate notes maturing in March 2026 and
€500.0 million of 4.250% euro-denominated fixed-rate notes
maturing in March 2029. The 2029 notes were issued as a green
bond, and thus an amount equal to the net proceeds has been
dedicated to projects that focus on VF's key environmental
sustainability initiatives.
Maturity and Redemption
In September 2023, VF repaid €850.0 million ($907.1 million) in
aggregate principal amount of its outstanding 0.625% Senior
Notes due in September 2023, in accordance with the terms of
the notes.
In December 2021, VF completed an early redemption of
$500.0 million in aggregate principal amount of its outstanding
2.050% Senior Notes due April 2022. The redemption price was
equal to the sum of the present value of the remaining
scheduled payments of principal and interest discounted to the
redemption date at 38.7 basis points, which resulted in a make-
whole premium of $3.2 million. Additionally, in connection with
the redemption, $0.5 million of unamortized original issue
discount and debt issuance costs were recognized. The make-
whole premium and amortization were recorded in the loss on
debt extinguishment line item in the Consolidated Statement of
Operations in the year ended March 2022. In April 2022, VF
repaid the remaining $500.0 million in aggregate principal
amount of its outstanding 2.050% Senior Notes due April 2022, in
accordance with the terms of the notes.
Other Information
All notes, along with any amounts outstanding under the Global
Credit Facility (Note 13), rank equally as senior unsecured
obligations of VF. All notes contain customary covenants and
events of default, including limitations on liens and sale-
leaseback
transactions
and
a
cross-acceleration
event
of
default. The cross-acceleration provision of the 2033 notes is
triggered if more than $50.0 million of other debt is in default
and has been accelerated by the lenders. For the other notes,
the cross-acceleration trigger is $100.0 million. If VF fails in the
performance of any covenant under the indentures that govern
the respective notes, the trustee or lenders may declare the
principal due and payable immediately. As of March 2024, VF
was in compliance with all covenants. None of the long-term
debt agreements contain acceleration of maturity clauses based
solely on changes in credit ratings. However, if there were a
change in control of VF and, as a result of the change in control,
the notes were rated below investment grade by recognized
rating agencies, then VF would be obligated to repurchase those
notes at 101% of the aggregate principal amount plus any
accrued interest. The change of control provision applies to all
notes, except for the 2033 notes.
VF may redeem its notes, in whole or in part, at a price equal to
the greater of (i) 100% of the principal amount, plus accrued
interest to the redemption date, or (ii) the sum of the present
value of the remaining scheduled payments of principal and
interest discounted to the redemption date at an adjusted
treasury rate, as defined, plus 15 basis points for the 2028, 2032
and 2033 notes, 25 basis points for the 2026 and 2037 notes, 30
basis points for the 2029 notes, 35 basis points for the 2025
notes and 40 basis points for the 2027 and 2030 notes, plus
accrued interest to the redemption date. In addition, the 2029,
2030 and 2032 notes can be redeemed at 100% of the principal
amount plus accrued interest to the redemption date within the
three months prior to maturity, the 2027 and 2028 notes can be
redeemed at 100% of the principal amount plus accrued interest
to the redemption date within two months prior to maturity and
the 2025 and 2026 notes can be redeemed at 100% of the
principal amount plus accrued interest to the redemption date
within one month prior to maturity.
The 2025, 2027 and 2030 notes have a principal balance of
$750.0 million, $500.0 million and $750.0 million, respectively,
and are recorded net of unamortized original issue discounts
and debt issuance costs. Interest expense on the 2025, 2027 and
2030 notes is recorded at an effective annual interest rate of
2.603%, 2.953% and 3.071%, respectively.
The 2026, 2028, 2029 and 2032 notes each have a principal
balance of €500.0 million and are recorded net of unamortized
original issue discounts and debt issuance costs. Interest
expense on the 2026, 2028, 2029 and 2032 notes is recorded at
an effective annual interest rate of 4.339%, 0.388%, 4.409% and
0.789%, respectively. The Company has designated these notes
as a net investment hedge of VF's investment in certain foreign
operations. Refer to Note 25 for additional information.
The 2033 and 2037 notes have a principal balance of $277.0
million and $286.9 million, respectively, and are recorded net of
unamortized original issue discounts and debt issuance costs.
Interest expense on the 2033 and 2037 notes is recorded at an
effective annual interest rate of 6.19% and 6.57% respectively.
Interest payments are due annually on the 2026, 2028, 2029 and
2032 notes and semiannually on all other notes.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-27
The scheduled payments of long-term debt, excluding finance leases (Note 10), at the end of Fiscal 2024 for the next five fiscal years
and thereafter are summarized as follows:
(In thousands)
Notes and Other
2025
$
1,000,000
2026
1,289,450
2027
—
2028
1,039,450
2029
539,450
Thereafter
1,853,423
5,721,773
Less unamortized debt discount
15,077
Less unamortized debt issuance costs
19,850
Total long-term debt
5,686,846
Less current portion
999,740
Long-term debt, due beyond one year
$
4,687,106
NOTE 16 — OTHER LIABILITIES
(In thousands)
March 2024
March 2023
Income taxes
$
356,099
$
273,955
Deferred compensation (Note 17)
81,103
77,428
Pension liabilities (Note 17)
78,628
72,825
Product warranty claims
48,373
41,111
Deferred income taxes (Note 20)
10,080
107,546
Derivative financial instruments (Note 25)
4,656
12,658
Other
59,538
65,531
Other liabilities
$
638,477
$
651,054
VF accrues warranty costs, as cost of goods sold, at the time revenue is recognized. Product warranty costs are estimated based on
historical experience and specific identification of the product requirements, which may fluctuate based on product mix. Activity
relating to accrued product warranty claims is summarized as follows:
Year Ended March
(In thousands)
2024
2023
2022
Balance, beginning of year
$
52,419
$
53,487
$
62,087
Accrual for products sold during the year
22,555
11,086
8,815
Repair or replacement costs incurred and other
(13,658)
(12,024)
(17,025)
Currency translation
(50)
(130)
(390)
Balance, end of year
61,266
52,419
53,487
Less current portion (Note 14)
12,893
11,308
11,742
Long-term portion
$
48,373
$
41,111
$
41,745
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-28
VF Corporation Fiscal 2024 Form 10-K
NOTE 17 — RETIREMENT AND SAVINGS BENEFIT PLANS
VF has various retirement and savings benefit plans covering
eligible employees. VF retains the right to curtail or discontinue
any of the plans, subject to local regulations.
Defined Benefit Pension Plans
Defined
benefit
plans
provide
pension
benefits
based
on
participant compensation and years of service. VF sponsors a
noncontributory qualified defined benefit pension plan covering
most full-time U.S. employees employed before 2005 (the “U.S.
qualified plan”) and an unfunded supplemental defined benefit
pension plan that provides benefits in excess of limitations
imposed by income tax regulations (the “U.S. nonqualified plan”).
VF was in a net funded status at the end of Fiscal 2024. The U.S.
qualified plan is fully funded and the majority of underfunded
amounts
relate
to
obligations
under
the
unfunded
U.S.
nonqualified plan. As of December 31, 2018, the U.S. qualified
defined benefit pension plan and supplemental defined benefit
pension plan were frozen for all future benefit accruals. The U.S.
qualified and nonqualified plans comprise 86% of VF’s total
defined benefit plan assets and 81% of VF’s total projected
benefit obligations at March 2024, and the remainder relates to
non-U.S. defined benefit plans. A March 31 measurement date is
used to value plan assets and obligations for all pension plans.
The amounts reported in these disclosures have not been
segregated between continuing and discontinued operations.
The components of pension cost (income) for VF’s defined benefit plans were as follows:
Year Ended March
(In thousands)
2024
2023
2022
Service cost — benefits earned during the period
$
8,924
$
10,632
$
14,288
Interest cost on projected benefit obligations
47,079
44,732
37,534
Expected return on plan assets
(63,569)
(63,157)
(77,432)
Settlement charges
3,538
93,731
7,466
Amortization of deferred amounts:
Net deferred actuarial losses
16,195
16,395
11,310
Deferred prior service credits
(80)
(453)
(440)
Net periodic pension cost (income)
$
12,087
$
101,880
$
(7,274)
Weighted average actuarial assumptions used to determine pension cost
(income):
Discount rate in effect for determining service cost
2.50 %
1.42 %
0.46 %
Discount rate in effect for determining interest cost
4.85 %
4.09 %
2.16 %
Expected long-term return on plan assets
5.99 %
5.24 %
4.53 %
Rate of compensation increase
(a)
2.19 %
1.95 %
2.01 %
(a)
Rate of compensation increase is calculated as the weighted average rate of compensation increase for active plans. Frozen plans are excluded
from the calculation.
VF recorded $3.5 million, $1.9 million and $7.5 million of
settlement charges in the other income (expense), net line item
in the Consolidated Statements of Operations for the years
ended
March
2024,
2023
and
2022,
respectively.
These
settlement charges related to the recognition of deferred
actuarial
losses
resulting
from
lump-sum
payments
of
retirement benefits in the U.S. nonqualified plan.
Additionally, in the year ended March 2023, VF entered into an
agreement with The Prudential Insurance Company of America
(“Prudential”) to purchase an irrevocable group annuity contract
relating to approximately $330.0 million of the U.S. qualified
defined benefit pension plan obligations. The transaction closed
on June 30, 2022 and was funded entirely by existing assets of
the plan. Under the group annuity contract, Prudential assumed
responsibility for benefit payments and annuity administration
for
approximately
17,700
retirees
and
beneficiaries.
The
transaction did not change the amount or timing of monthly
retirement benefit payments. VF recorded a $91.8 million
settlement charge in the other income (expense), net line item in
the Consolidated Statement of Operations during the year ended
March 2023 to recognize the related deferred actuarial losses in
accumulated OCL.
The following provides a reconciliation of the changes in fair
value of VF’s defined benefit plan assets and projected benefit
obligations for each period, and the funded status at the end of
each period:
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-29
(In thousands)
March 2024
March 2023
Fair value of plan assets, beginning of period
$
1,111,710
$
1,643,435
Actual return on plan assets
17,332
(146,068)
VF contributions
30,167
22,683
Participant contributions
5,447
5,035
Settlement
—
(328,412)
Benefits paid
(81,150)
(79,865)
Currency translation
1,736
(5,098)
Fair value of plan assets, end of period
1,085,242
1,111,710
Projected benefit obligations, beginning of period
1,021,333
1,557,715
Service cost
8,924
10,632
Interest cost
47,079
44,732
Participant contributions
5,447
5,035
Actuarial gain
(7,518)
(183,536)
Settlement
—
(328,412)
Benefits paid
(81,150)
(79,865)
Plan amendments
(489)
(478)
Currency translation
1,731
(4,490)
Projected benefit obligations, end of period
(a)
995,357
1,021,333
Funded status, end of period
$
89,885
$
90,377
(a)
The change in projected benefit obligations in the year ended March 2023 was driven by actuarial gains, primarily as a result of changes in
discount rates and the purchase of an irrevocable group annuity contract relating to approximately $330.0 million of the U.S. qualified defined
benefit pension plan obligations.
Pension benefits are reported in the Consolidated Balance Sheets as a net asset or liability based on the overfunded or underfunded
status of the defined benefit plans, assessed on a plan-by-plan basis.
(In thousands)
March 2024
March 2023
Amounts included in Consolidated Balance Sheets:
Other assets (Note 11)
$
175,110
$
183,929
Accrued liabilities (Note 14)
(6,597)
(20,727)
Other liabilities (Note 16)
(78,628)
(72,825)
Funded status
$
89,885
$
90,377
Accumulated other comprehensive loss, pretax:
Net deferred actuarial losses
$
260,512
$
241,864
Net deferred prior service credits
(4,290)
(4,286)
Total accumulated other comprehensive loss, pretax
$
256,222
$
237,578
Accumulated benefit obligations
$
976,120
$
1,005,159
Weighted average actuarial assumptions used to determine pension obligations:
Discount rate
4.94 %
4.89 %
Rate of compensation increase
(a)
2.11 %
2.15 %
(a)
Rate of compensation increase is calculated as the weighted average rate of compensation increase for active plans. Frozen plans are excluded
from the calculation.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-30
VF Corporation Fiscal 2024 Form 10-K
The actuarial model utilizes discount rates, which are used to
estimate the present value of future cash outflows necessary to
meet the projected benefit obligations for VF's defined benefit
plans. The discount rates reflect the estimated interest rate that
VF could use to settle its projected benefit obligations at the
valuation date. The discount rate assumption is based on current
market interest rates. VF selects a discount rate for each
defined benefit pension plan by matching high quality corporate
bond yields to the timing of the projected benefit payments to
participants in each plan. VF uses the spot rate approach to
measure the projected benefit obligations and service and
interest costs. Under the spot rate approach, the full yield curve
is applied separately to cash flows for each projected benefit
obligation, service cost, and interest cost for a more precise
calculation.
Accumulated benefit obligations at any measurement date are
the present value of vested and unvested pension benefits
earned, without considering projected future compensation
increases. Projected benefit obligations are the present value of
vested and unvested pension benefits earned, considering
projected future compensation increases.
Deferred actuarial gains and losses are changes in the amount
of either the benefit obligation or the value of plan assets
resulting 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
OCL and amortized to pension cost (income) in future years. For
the U.S. qualified plan, 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 life expectancy of all participants; and amounts less
than the greater of 10% of projected benefit obligations or plan
assets are not amortized. For the U.S. nonqualified plan,
amounts in excess of 10% of the pension benefit obligations are
amortized on a straight-line basis over the expected average life
expectancy of all participants.
Deferred prior service credits related to plan amendments are
also recorded in accumulated OCL and amortized to pension
cost
(income)
on
a
straight-line
basis
over
the
average
remaining years of service for active employees.
The following provides information for VF's defined benefit plans with projected benefit obligations and accumulated benefit
obligations in excess of plan assets:
(In thousands)
March 2024
March 2023
Projected benefit obligations
$
183,329
$
186,532
Accumulated benefit obligations
164,092
170,357
Fair value of plan assets
98,104
92,980
The net amount of projected benefit obligations and plan assets for underfunded defined benefit plans was $85.2 million and $93.6 million as of March
2024 and 2023, respectively, and was reported in accrued liabilities and other liabilities in the Consolidated Balance Sheets.
Management’s investment objectives are to invest 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
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. The primary objective of the
investment strategies is to more closely align plan assets with
plan liabilities by utilizing dynamic asset allocation targets
dependent upon changes in the plan’s funded ratio, capital
market expectations and risk tolerance. The majority of the
Company's plan assets relate to the U.S. qualified plan, which
generally targets above 90% asset allocation to liability-hedging
asset classes, primarily in fixed-income investments.
Plan assets are primarily composed of common collective trust
funds that invest in liquid securities diversified across equity,
fixed-income 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 financial instruments may
be used by investment managers for hedging purposes. There
are no direct investments in VF debt or equity securities and no
significant concentrations of security risk.
The expected long-term rate of return on plan assets was based
on an evaluation of the weighted average expected returns for
the major asset classes in which the plans have invested.
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.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-31
The fair value of investments held by VF’s defined benefit plans at March 2024 and March 2023, by asset class, is summarized below.
Refer to Note 24 for a description of the three levels of the fair value measurement hierarchy.
Total Plan
Assets
Fair Value Measurements
(In thousands)
Level 1
Level 2
Level 3
March 2024
Plan assets
Cash equivalents
$
4,428
$
4,428
$
—
$
—
Fixed income securities:
U.S. Treasury and government agencies
2
—
2
—
Insurance contracts
103,362
—
103,362
—
Futures contracts
2,661
2,661
—
—
Total plan assets in the fair value hierarchy
110,453
$
7,089
$
103,364
$
—
Plan assets measured at net asset value
Cash equivalents
87,748
Equity securities:
Domestic
33,510
International
40,933
Fixed income securities:
Corporate and international bonds
751,147
Alternative investments
61,451
Total plan assets measured at net asset value
974,789
Total plan assets
$
1,085,242
Total Plan
Assets
Fair Value Measurements
(In thousands)
Level 1
Level 2
Level 3
March 2023
Plan assets
Cash equivalents
$
983
$
983
$
—
$
—
Fixed income securities:
U.S. Treasury and government agencies
3
—
3
—
Insurance contracts
97,429
—
97,429
—
Futures contracts
6,649
6,649
—
—
Total plan assets in the fair value hierarchy
105,064
$
7,632
$
97,432
$
—
Plan assets measured at net asset value
Cash equivalents
118,114
Equity securities:
Domestic
34,957
International
51,577
Fixed income securities:
Corporate and international bonds
734,455
Alternative investments
67,543
Total plan assets measured at net asset value
1,006,646
Total plan assets
$
1,111,710
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-32
VF Corporation Fiscal 2024 Form 10-K
Cash equivalents include cash held by individual investment
managers of other asset classes for liquidity purposes (Level 1),
and an institutional fund that invests primarily in short-term U.S.
government securities measured at their daily net asset value.
The fair values of insurance contracts are provided by the
insurance companies and are primarily based on accumulated
contributions plus returns guaranteed by the insurers (Level 2).
Futures
contracts
consist
of
U.S.
Treasury
bond
futures
contracts (Level 1).
Equity
and
fixed-income
securities
generally
represent
institutional funds measured at their daily net asset value
derived from quoted prices of the underlying investments.
Alternative investments are primarily in funds of hedge funds
(“FoHFs”), which are comprised of different and independent
hedge
funds
with
various
investment
strategies.
The
administrators of the FoHFs utilize unobservable inputs to
calculate the net asset value of the FoHFs on a monthly basis.
VF makes contributions to its defined benefit plans sufficient to
meet minimum funding requirements under applicable laws,
plus discretionary amounts as determined by management. VF
does not currently plan to make any contributions to the U.S.
qualified
plan
during
Fiscal
2025,
and
intends
to
make
approximately $18.8 million of contributions to its other defined
benefit plans during Fiscal 2025. The estimated future benefit
payments for all of VF’s defined benefit plans, are approximately
$66.4 million in Fiscal 2025, $67.2 million in Fiscal 2026, $70.0
million in Fiscal 2027, $69.5 million in Fiscal 2028, $70.9 million
in Fiscal 2029 and $361.7 million for Fiscal 2030 through 2034.
Other Retirement and Savings 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.
Participants
earn
a
return
on
their
deferred
compensation based on their selection of a hypothetical portfolio
of publicly traded mutual funds. Changes in the fair value of the
participants’
hypothetical
investments
are
recorded
as
an
adjustment
to
deferred
compensation
liabilities
and
compensation expense. Expense under this plan was $0.4
million, $0.8 million and $1.3 million in the years ended March
2024, 2023 and 2022, respectively. Deferred compensation,
including accumulated earnings, is distributable in cash at
participant-specified dates upon retirement, death, disability or
termination of employment. VF sponsors a similar nonqualified
plan that permits nonemployee members of the Board of
Directors to defer their Board compensation. VF also has
remaining obligations under other deferred compensation plans,
primarily related to acquired companies. At March 2024, VF’s
liability to participants under all deferred compensation plans
was $91.9 million, of which $10.8 million was recorded in
accrued liabilities (Note 14) and $81.1 million was recorded in
other liabilities (Note 16).
VF has purchased (i) publicly traded mutual funds 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 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 March 2024, the value of investments
held for all deferred compensation plans was $97.4 million, of
which $10.8 million was recorded in other current assets (Note
6) and $86.6 million was recorded in other assets (Note 11).
Realized and unrealized gains and losses on these deferred
compensation assets are recorded in compensation expense in
the Consolidated Statements of Operations and substantially
offset losses and gains resulting from changes in deferred
compensation liabilities to participants.
VF sponsors 401(k) plans as well as other domestic and foreign
retirement and savings plans. Expense for these plans totaled
$43.6 million, $42.6 million and $42.0 million in the years ended
March 2024, 2023 and 2022, respectively.
NOTE 18 — CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS
Common Stock
During the years ended March 2024 and 2023, the Company did
not
purchase
shares
of
Common
Stock
in
open
market
transactions under its share repurchase program authorized by
VF’s Board of Directors. During the year ended March 2022, the
Company purchased 4.8 million shares of Common Stock in open
market
transactions
for
$350.0
million
under
its
share
repurchase program authorized by VF's Board of Directors.
These purchases were treated as treasury stock transactions.
Common Stock outstanding is net of shares held in treasury
which are, in substance, retired. During the year ended March
2022, VF restored 4.8 million treasury shares to an unissued
status, after which they were no longer recognized as shares
held in treasury. There were no shares held in treasury at the
end of March 2024, 2023 or 2022. The excess of the cost of
treasury shares acquired over the $0.25 per share stated value
of Common Stock is deducted from retained earnings.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-33
Accumulated Other Comprehensive Loss
Comprehensive income (loss) consists of net income (loss) and specified components of other comprehensive income (loss), which
relate to changes in assets and liabilities that are not included in net income (loss) under GAAP but are instead deferred and
accumulated within a separate component of stockholders’ equity in the balance sheet. VF’s comprehensive income (loss) is
presented in the Consolidated Statements of Comprehensive Income (Loss). The deferred components of other comprehensive
income (loss) are reported, net of related income taxes, in accumulated OCL in stockholders’ equity, as follows:
(In thousands)
March 2024
March 2023
Foreign currency translation and other
$
(868,439)
$
(859,651)
Defined benefit pension plans
(182,333)
(167,692)
Derivative financial instruments
(13,559)
7,825
Accumulated other comprehensive loss
$
(1,064,331)
$
(1,019,518)
The changes in accumulated OCL, net of related taxes, were as follows:
(In thousands)
Foreign
Currency
Translation
and Other
Defined
Benefit
Pension Plans
Derivative
Financial
Instruments
Total
Balance, March 2021
$
(700,173)
$
(257,747)
$
(51,080)
$
(1,009,000)
Other comprehensive income (loss) before reclassifications
(51,459)
13,547
59,753
21,841
Amounts reclassified from accumulated other comprehensive
loss
—
13,910
46,670
60,580
Net other comprehensive income (loss)
(51,459)
27,457
106,423
82,421
Balance, March 2022
(751,632)
(230,290)
55,343
(926,579)
Other comprehensive income (loss) before reclassifications
(108,019)
(18,596)
44,979
(81,636)
Amounts reclassified from accumulated other comprehensive
loss
—
81,194
(92,497)
(11,303)
Net other comprehensive income (loss)
(108,019)
62,598
(47,518)
(92,939)
Balance, March 2023
(859,651)
(167,692)
7,825
(1,019,518)
Other comprehensive income (loss) before reclassifications
(8,788)
(28,939)
(6,443)
(44,170)
Amounts reclassified from accumulated other comprehensive
loss
—
14,298
(14,941)
(643)
Net other comprehensive income (loss)
(8,788)
(14,641)
(21,384)
(44,813)
Balance, March 2024
$
(868,439) $
(182,333) $
(13,559) $
(1,064,331)
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-34
VF Corporation Fiscal 2024 Form 10-K
Reclassifications out of accumulated OCL were as follows:
(In thousands)
Affected Line Item in the
Consolidated Statements of
Operations
Year Ended March
Details About Accumulated Other
Comprehensive Loss Components
2024
2023
2022
Amortization of defined benefit pension plans:
Net deferred actuarial losses
Other income (expense), net
$
(16,195)
$
(16,395)
$
(11,310)
Deferred prior service credits
Other income (expense), net
80
453
440
Pension settlement charges
Other income (expense), net
(3,538)
(93,731)
(7,466)
Total before tax
(19,653)
(109,673)
(18,336)
Tax benefit
5,355
28,479
4,426
Net of tax
(14,298)
(81,194)
(13,910)
Gains (losses) on derivative financial instruments:
Foreign exchange contracts
Net revenues
(5,004)
(6,843)
(27,382)
Foreign exchange contracts
Cost of goods sold
15,703
120,438
(26,346)
Foreign exchange contracts
Selling, general and
administrative expenses
3,437
6,695
(487)
Foreign exchange contracts
Other income (expense), net
(253)
(10,365)
(219)
Interest rate contracts
Interest expense
4,238
235
108
Total before tax
18,121
110,160
(54,326)
Tax (expense) benefit
(3,180)
(17,663)
7,656
Net of tax
14,941
92,497
(46,670)
Total reclassifications for the period, net of tax
$
643
$
11,303
$
(60,580)
NOTE 19 — STOCK-BASED COMPENSATION
Pursuant to the amended and restated 1996 Stock Compensation
Plan approved by stockholders, VF is authorized to grant
nonqualified stock options, restricted stock units (“RSUs”) and
restricted stock to officers, key employees and nonemployee
members of VF’s Board of Directors. Substantially all stock-
based compensation awards are classified as equity awards,
which
are
accounted
for
in
stockholders’
equity
in
the
Consolidated Balance Sheets. On a limited basis, cash-settled
stock appreciation rights and RSUs are granted to employees in
certain international jurisdictions. These awards are accounted
for as liabilities in the Consolidated Balance Sheets and
remeasured to fair value each reporting period until the awards
are settled. Compensation cost for all awards expected to vest is
recognized over the shorter of the requisite service period or the
vesting period, including accelerated recognition for retirement-
eligible employees. Awards that do not vest are forfeited.
Total stock-based compensation cost and the associated income tax benefits recognized in the Consolidated Statements of
Operations are as follows:
Year Ended March
(In thousands)
2024
2023
2022
Stock-based compensation cost
$
67,332
$
60,354
$
91,358
Income tax benefits
15,018
13,714
21,917
At the end of March 2024, there was $64.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to all
stock-based compensation arrangements that will be recognized over a weighted average period of 1.5 years.
At the end of March 2024, there were 5,422,693 shares available for future grants of stock options and stock awards under the 1996
Stock Compensation Plan. Shares for option exercises are issued from VF’s authorized but unissued Common Stock.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-35
Stock Options
Stock options are granted with an exercise price equal to the fair
market value of VF Common Stock on the date of grant.
Employee stock options typically vest and become exercisable in
equal annual installments over three years, and compensation
cost is recognized ratably over the shorter of the requisite
service period or the vesting period. Stock options granted to
nonemployee members of VF’s Board of Directors vest upon
grant and become exercisable one year from the date of grant.
All options have ten-year terms.
The grant date fair value of each option award was calculated using a lattice option-pricing valuation model, which incorporated a
range of assumptions for inputs as follows:
Year Ended March
2024
2023
2022
Expected volatility
33% to 54%
30% to 46%
28% to 41%
Weighted average expected volatility
42%
39%
36%
Expected term (in years)
5.9 to 7.8
6.0 to 7.8
6.1 to 7.9
Weighted average dividend yield
3.7%
2.9%
2.6%
Risk-free interest rate
3.80% to 5.50%
1.53% to 4.89%
0.04% to 1.81%
Weighted average fair value at date of grant
$5.74
$13.46
$20.17
Expected volatility over the contractual term of an option was
based on a combination of the implied volatility from publicly
traded options on VF Common Stock and the historical volatility
of VF Common Stock. The expected term represents the period
of time over which vested options are expected to be outstanding
before exercise. VF used historical data to estimate option
exercise behaviors and to estimate the number of options that
would vest. Groups of employees that have historically exhibited
similar option exercise behaviors were considered separately in
estimating the expected term for each employee group. Dividend
yield represents expected dividends on VF Common Stock for the
contractual life of the options. Risk-free interest rates for the
periods during the contractual life of the option were the implied
yields at the date of grant from the U.S. Treasury zero coupon
yield curve.
Stock option activity for the year ended March 2024 is summarized as follows:
Number of Shares
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual
Term (Years)
Aggregate Intrinsic
Value
(In thousands)
Outstanding, March 2023
9,051,328
$
62.42
Granted
5,869,857
18.10
Exercised
—
—
Forfeited/cancelled
(1,886,645)
44.58
Outstanding, March 2024
13,034,540
$
45.04
6.9
$
223
Exercisable, March 2024
6,517,404
$
64.57
4.8
$
—
The total fair value of stock options that vested during the years ended March 2024, 2023 and 2022 was $21.8 million, $23.2 million
and $16.6 million, respectively. The total intrinsic value of stock options exercised during the years ended March 2024, 2023 and 2022,
was $0.0 million, $0.4 million and $22.9 million, respectively.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-36
VF Corporation Fiscal 2024 Form 10-K
Restricted Stock Units
VF grants performance-based RSUs that enable employees to
receive shares of VF Common Stock at the end of a three-year
performance
cycle.
Each
performance-based
RSU
has
a
potential final payout ranging from zero to two and one-quarter
shares of VF Common Stock. The number of shares earned by
participants, if any, is based on achievement of three-year
financial and relative total shareholder return ("TSR") targets set
by the Talent and Compensation Committee of the Board of
Directors. Shares are issued to participants in the year following
the conclusion of each three-year performance period.
For performance-based RSUs granted in Fiscal 2024 and 2023,
the financial targets include 50% weighting based on VF's
revenue growth and 50% weighting based on VF's gross margin
performance over the three-year period compared to financial
targets. Furthermore, the actual number of shares earned may
be adjusted upward or downward by 25% of the target award,
based on how VF's TSR over the three-year period compares to
the TSR for companies included in the Standard & Poor's 500
Consumer Discretionary Index, resulting in a maximum payout of
225% of the target award. The grant date fair value of the TSR-
based adjustment related to the performance-based RSU grants
was determined using a Monte Carlo simulation technique that
incorporates option-pricing model inputs, and was $0.35 and
$3.46 per share for the performance-based RSU grants in the
years ended March 2024 and 2023, respectively.
For performance-based RSUs granted in Fiscal 2022, the
financial targets include 50% weighting based on VF's revenue
growth over the three-year period compared to a group of
industry peers and 50% weighting based on VF's TSR over the
three-year period compared to the TSR for companies included
in the Standard & Poor's 500 Consumer Discretionary Index. The
grant date fair value of the TSR portion of the performance-
based RSU grants was determined using a Monte Carlo
simulation technique that incorporates option-pricing model
inputs, and was $101.56 per share. Additionally, the actual
number of performance-based RSUs earned may be adjusted
upward or downward by 25% of the target award, based on VF's
gross margin performance over the three-year period, resulting
in a maximum payout of 225% of the target award.
VF also grants nonperformance-based RSUs to employees as
part of its stock compensation program and to nonemployee
members of the Board of Directors. Each nonperformance-
based RSU entitles the holder to one share of VF Common Stock.
The employee nonperformance-based RSUs generally vest over
periods of up to four years from the date of grant. The
nonperformance-based RSUs granted to nonemployee members
of the Board of Directors vest upon grant and will be settled in
shares of VF Common Stock one year from the date of grant.
Dividend equivalents on the RSUs accrue without compounding
and are payable in additional shares of VF Common Stock when
the RSUs vest. Dividend equivalents are subject to the same risk
of forfeiture as the RSUs.
RSU activity for the year ended March 2024 is summarized as follows:
Performance-based
Nonperformance-based
Number
Outstanding
(a)
Weighted Average
Grant Date
Fair Value
Number
Outstanding
Weighted Average
Grant Date
Fair Value
Outstanding, March 2023
863,928
$
69.92
1,578,040
$
50.85
Granted
709,338
18.29
3,586,940
17.09
Issued as Common Stock
(13,033)
70.86
(363,353)
59.41
Forfeited/cancelled
(b)
(427,911)
63.12
(496,331)
26.95
Outstanding, March 2024
1,132,322
$
40.14
4,305,296
$
24.68
Vested, March 2024
515,967
$
58.63
338,605
$
25.44
(a)
Reflects activity at target level of awards and has not been adjusted for performance and market conditions, except for awards issued during the
period.
(b)
Includes adjustment for performance and market conditions for awards issued during the period.
The weighted average fair value of performance-based RSUs
granted during the years ended March 2024 and March 2023 was
$18.29 and $45.23 per share, respectively, based on the fair
market value of the underlying VF Common Stock on each grant
date. The weighted average fair value of performance-based
RSUs granted during the year ended March 2022 was $89.65 per
share, based on the weighting of the TSR and the fair market
value of the underlying VF Common Stock on each grant date.
The total market value of awards outstanding at the end of
March 2024 was $17.4 million. Awards earned and vested for the
three-year performance period ended in March 2023 and
distributed in early Fiscal 2024 totaled 13,033 shares of VF
Common Stock having a value of $0.3 million. Similarly, 92,848
shares of VF Common Stock having a value of $4.4 million were
earned for the performance period ended in March 2022 and
distributed in early Fiscal 2023.
The weighted average fair value of nonperformance-based RSUs
granted during the years ended March 2024, 2023 and 2022 was
$17.09, $38.31 and $75.29 per share, respectively, which was
equal to the fair market value of the underlying VF Common
Stock on each grant date. The total market value of awards
outstanding at the end of March 2024 was $66.0 million.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-37
Restricted Stock
VF grants restricted shares of VF Common Stock to certain
members of management. The fair value of the restricted
shares, equal to the fair market value of VF Common Stock at
the grant date, is recognized ratably over the vesting period.
Restricted shares vest over periods of up to four years from the
date of grant. Dividends accumulate in the form of additional
restricted shares and are subject to the same risk of forfeiture
as the restricted stock. Restricted stock activity during Fiscal
2024 included vesting of a portion of the shares of VF Common
Stock deposited in escrow in connection with the Supreme
acquisition, which for accounting purposes, are considered
stock-based compensation.
Restricted stock activity for the year ended March 2024 is summarized below:
Nonvested Shares
Outstanding
Weighted Average
Grant Date Fair
Value
Nonvested shares, March 2023
598,135
$
67.17
Granted
—
—
Dividend equivalents
8,696
18.41
Vested
(248,590)
78.06
Forfeited
(95,158)
37.78
Nonvested shares, March 2024
263,083
$
65.90
Nonvested shares of restricted stock had a market value of $4.0 million at the end of March 2024. The market value of the shares that
vested during the years ended March 2024, 2023 and 2022 was $4.7 million, $11.1 million and $5.0 million, respectively.
NOTE 20 — INCOME TAXES
The provision for income taxes was computed based on the following amounts of income from continuing operations before income
taxes:
Year Ended March
(In thousands)
2024
2023
2022
Domestic
$
(970,325)
$
(885,562)
$
518,386
Foreign
736,640
928,849
1,004,864
Income (loss) before income taxes
$
(233,685)
$
43,287
$
1,523,250
The provision for income taxes consisted of:
Year Ended March
(In thousands)
2024
2023
2022
Current:
Federal
$
236,135
$
(114,772)
$
231,469
Foreign
759,679
106,192
196,540
State
134,483
(13,163)
36,461
1,130,297
(21,743)
464,470
Deferred:
Federal and state
(316,470)
(46,677)
(177,381)
Foreign
(78,630)
(6,877)
19,892
(395,100)
(53,554)
(157,489)
Income tax expense (benefit)
$
735,197
$
(75,297) $
306,981
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-38
VF Corporation Fiscal 2024 Form 10-K
The differences between income taxes computed by applying the statutory federal income tax rate and income tax expense (benefit)
reported in the consolidated financial statements are as follows:
Year Ended March
(In thousands)
2024
2023
2022
Tax at federal statutory rate
$
(49,074)
$
9,090
$
319,882
State income taxes, net of federal tax benefit
(28,867)
(17,301)
16,641
Foreign rate differences
54,941
(38,609)
(62,928)
Tax reform
—
(94,877)
67,358
Tax litigation
691,053
—
—
Goodwill impairment
55,076
74,624
—
Stock compensation
3,908
2,304
(1,977)
Non-taxable contingent consideration adjustments
—
—
(28,090)
Interest on tax receivable
11,972
(11,972)
—
Other
(3,812)
1,444
(3,905)
Income tax expense (benefit)
$
735,197
$
(75,297) $
306,981
Income tax expense (benefit) includes tax benefits of $34.7
million, $10.6 million and $2.2 million in the years ended March
2024, 2023 and 2022, respectively, from other favorable audit
outcomes on certain tax matters and from expiration of statutes
of limitations. Income tax expense (benefit) in the year ended
March 2023 also includes a $94.9 million favorable adjustment to
VF’s transition tax liability under the U.S. Tax Act pursuant to the
Internal Revenue Service ("IRS") examinations for tax year 2017
and short-tax year 2018.
On May 19, 2019, Switzerland voted to approve the Federal Act
on Tax Reform and AHV Financing ("Swiss Tax Act"). In Fiscal
2022, $67.4 million net tax expense was recorded due to changes
to the related deferred tax assets.
VF was granted a ruling which lowered the effective income tax
rate on taxable earnings for years 2010 through 2014 under
Belgium’s excess profit tax regime. During 2015, the European
Union
Commission
("EU")
investigated
and
announced
its
decision that these rulings were illegal and ordered the tax
benefits to be collected from affected companies, including VF.
During 2017 and 2018, VF Europe BVBA was assessed and paid
€35.0 million in tax and interest, which was recorded as an
income tax receivable and was included in the other current
assets line item in VF's Consolidated Balance Sheets, based on
the expected success of the requests for annulment. After
subsequent
annulments
and
appeals,
the
General
Court
confirmed the decision of the EU on September 20, 2023. As a
result, VF wrote off the related income tax receivable and
recorded a benefit for the associated foreign tax credit, resulting
in $26.1 million of net income tax expense in the second quarter
of Fiscal 2024.
In addition, VF has been granted a lower effective income tax
rate on taxable earnings in one foreign jurisdiction that will
expire in March 2026. This lower rate, when compared with the
country statutory rate, resulted in income tax reductions of $44.2
million ($0.11 per diluted share) in the year ended March 2024,
$57.8 million ($0.15 per diluted share) in the year ended March
2023 and $0.4 million ($0.00 per diluted share) in the year ended
March 2022.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-39
Deferred income tax assets and liabilities consisted of the following:
(In thousands)
March 2024
March 2023
Deferred income tax assets:
Inventories
$
88,299
$
74,395
Depreciation and capitalized research and development
12,785
—
Deferred compensation
19,904
24,557
Stock compensation
26,961
27,589
Operating lease liabilities
352,821
361,676
Other employee benefits
3,170
—
Other accrued expenses
117,689
109,050
Interest expense limitation carryforward
143,077
3,932
Capital loss carryforwards
153,789
166,587
Operating loss and credit carryforwards
557,272
331,167
Gross deferred income tax assets
1,475,767
1,098,953
Valuation allowances
(436,047)
(424,932)
Net deferred income tax assets
1,039,720
674,021
Deferred income tax liabilities:
Depreciation and capitalized research and development
—
26,303
Intangible assets
120,682
277,473
Operating lease right-of-use assets
320,896
330,235
Other employee benefits
—
3,707
Outside basis difference in subsidiaries
216,215
46,690
Other deferred tax liabilities
2,224
2,042
Deferred income tax liabilities
660,017
686,450
Net deferred income tax assets (liabilities)
$
379,703
$
(12,429)
Amounts included in the Consolidated Balance Sheets:
Other assets (Note 11)
$
389,783
$
95,117
Other liabilities (Note 16)
(10,080)
(107,546)
$
379,703
$
(12,429)
At the end of Fiscal 2024, the Company is not asserting indefinite
reinvestment with regards to short-term liquid assets of its
foreign subsidiaries. All other foreign earnings, including basis
differences of certain foreign subsidiaries, continue to be
considered
indefinitely
reinvested.
The
Company
has
not
determined the deferred tax liability associated with these
undistributed
earnings
and
basis
differences,
as
such
determination is not practicable.
VF has potential tax benefits totaling $453.4 million for foreign
operating loss carryforwards, of which $86.3 million have an
unlimited carryforward life. There are $153.8 million of potential
tax benefits for capital loss carryforwards that begin to expire in
2026 and $48.7 million of foreign tax credit carryforwards that
begin to expire in 2030 and $5.3 million of general business
credit carryforwards that begin to expire in 2044. Additionally,
there are $49.9 million of potential tax benefits for state
operating loss and credit carryforwards that expire between
2025 and 2040.
A valuation allowance has been provided where it is more likely
than not that the deferred tax assets related to those operating
loss carryforwards will not be realized. Valuation allowances
totaled $218.1 million for available foreign operating loss
carryforwards,
$150.3
million
for
available
capital
loss
carryforwards, $48.7 million for foreign tax credit carryforwards,
$18.2 million for available state operating loss and credit
carryforwards, and $0.7 million for other foreign deferred
income tax assets. During Fiscal 2024, VF had a net decrease in
valuation allowances of $1.2 million related to capital loss
carryforwards, a net increase of $48.7 million related to foreign
tax credit carryforwards, a net increase of $8.2 million related to
state operating loss and credit carryforwards and a decrease of
$44.6 million related to foreign operating loss carryforwards and
other foreign deferred tax assets, inclusive of foreign currency
effects.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-40
VF Corporation Fiscal 2024 Form 10-K
A reconciliation of the change in the accrual for unrecognized income tax benefits is as follows:
(In thousands)
Unrecognized
Income Tax
Benefits
Accrued
Interest
and Penalties
Unrecognized
Income Tax
Benefits
Including Interest
and Penalties
Balance, March 2021
$
223,010
$
38,141
$
261,151
Additions for current year tax positions
28,098
—
28,098
Additions for prior year tax positions
(a)
112,850
32,642
145,492
Reductions for prior year tax positions
(895)
(532)
(1,427)
Reductions due to statute expirations
(5,803)
(840)
(6,643)
Payments in settlement
(21,278)
(730)
(22,008)
Decrease due to divestiture
(506)
(340)
(846)
Currency translation
186
(43)
143
Balance, March 2022
335,662
68,298
403,960
Additions for current year tax positions
22,319
—
22,319
Additions for prior year tax positions
13,324
20,577
33,901
Reductions for prior year tax positions
(3,747)
(951)
(4,698)
Reductions due to statute expirations
(15,369)
(1,699)
(17,068)
Payments in settlement
(3,847)
(1,608)
(5,455)
Currency translation
(172)
(10)
(182)
Balance, March 2023
348,170
84,607
432,777
Additions for current year tax positions
15,982
—
15,982
Additions for prior year tax positions
(b)
165,426
78,133
243,559
Reductions for prior year tax positions
(36,943)
(3,809)
(40,752)
Reductions due to statute expirations
(1,436)
(383)
(1,819)
Payments in settlement
(c)
(210,874)
(74,659)
(285,533)
Currency translation
(11)
(4)
(15)
Balance, March 2024
$
280,314
$
83,885
$
364,199
(a)
The year ended March 2022 included an increase resulting from updated estimates related to intellectual property transfers completed in a prior
period.
(b)
The year ended March 2024 includes an increase due to uncertainty in the application of court decisions upheld upon appeal.
(c)
The year ended March 2024 includes a settlement with the tax authorities related to intellectual property transfers completed in a prior period.
(In thousands)
March 2024
March 2023
Amounts included in the Consolidated Balance Sheets
(a):
Unrecognized income tax benefits, including interest and penalties
$
364,199
$
432,777
Less deferred tax benefits
61,368
135,175
Total unrecognized tax benefits
$
302,831
$
297,602
(a)
Included in the accrued liabilities and other liabilities line items in the Consolidated Balance Sheets.
The unrecognized tax benefits of $302.8 million at the end of
Fiscal 2024, if recognized, would reduce the annual effective tax
rate.
VF files a consolidated U.S. federal income tax return, as well as
separate and combined income tax returns in numerous state
and international jurisdictions. In the U.S., the IRS examinations
for tax years through 2015 have been effectively settled.
As previously reported, VF petitioned the U.S. Tax Court (the "Tax
Court") to resolve an IRS dispute regarding the timing of income
inclusion associated with VF’s acquisition of The Timberland
Company in September 2011. While the IRS argued that all such
income should have been immediately included in 2011, VF
reported periodic income inclusions in subsequent tax years. In
Fiscal 2023, the Tax Court issued its final decision in favor of the
IRS, which was appealed by VF. On October 19, 2022, VF paid
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-41
$875.7 million related to the 2011 taxes and interest being
disputed, which was recorded as an income tax receivable and
began to accrue interest income. These amounts were included
in the other assets line item in VF's Consolidated Balance Sheet,
based on our assessment of the position under the more-likely-
than-not standard of the accounting literature. On September 8,
2023, the U.S. Court of Appeals for the First Circuit (“Appeals
Court”) upheld the Tax Court’s decision in favor of the IRS. As a
result of the Appeals Court decision, VF determined that its
position no longer met the more-likely-than-not threshold, and
thus wrote off the related income tax receivable and associated
interest and recorded $690.0 million of income tax expense in
the second quarter of Fiscal 2024. This amount included the
reversal of $19.6 million of interest income, of which $7.5 million
was recorded in the first quarter of Fiscal 2024. This amount
reflects the total estimated net impact to VF’s tax expense,
which includes the expected reduction in taxes paid on the
periodic inclusions that VF has reported, release of related
deferred tax liabilities, and consideration of indirect tax effects
resulting from the decision. The estimated impact is subject to
future adjustments based on finalization with tax authorities.
In addition, VF is currently subject to examination by various
state and international tax authorities. Management regularly
assesses the potential outcomes of both ongoing and future
examinations for the current and prior years and has concluded
that VF’s provision for income taxes is adequate. The outcome of
any one examination is not expected to have a material impact
on VF’s consolidated financial statements. Management believes
that some of these audits and negotiations will conclude during
the next 12 months. Management also believes that it is
reasonably possible that the amount of unrecognized income tax
benefits may decrease by $4.6 million within the next 12 months
due to settlement of audits and expiration of statutes of
limitations of which $1.6 million would reduce income tax
expense.
NOTE 21 — REPORTABLE SEGMENT INFORMATION
VF's President and Chief Executive Officer, who is considered the Company's CODM, allocates resources and assesses performance
based on a global brand view which represents VF's operating segments. The operating segments have been evaluated and combined
into reportable segments because they meet the similar economic characteristics and qualitative aggregation criteria set forth in the
relevant accounting guidance. Based on this assessment, the Company's reportable segments have been identified as: Outdoor,
Active and Work.
Below is a description of VF's reportable segments and the brands included within each:
REPORTABLE SEGMENT
BRANDS
Outdoor - Outdoor apparel, footwear and equipment
The North Face
®
Timberland
®
Smartwool
®
Altra
®
Icebreaker
®
Active - Active apparel, footwear and accessories
Vans
®
Supreme
®
Kipling
®
Napapijri
®
Eastpak
®
JanSport
®
Work - Work and work-inspired lifestyle apparel and footwear
Dickies
®
Timberland PRO
®
Other - included in the tables below for purposes of reconciliation of revenues and profit, but it is not considered a reportable
segment. Other primarily includes sourcing activities related to transition services.
The Company continuously assesses the composition of its
portfolio to ensure it is aligned with its strategic objectives and
positioned to maximize growth and return to shareholders. In
doing so, it evaluates whether changes may need to be made to
our internal reporting structure to better support and assess the
operations of our business going forward. If changes are made,
we will assess the resulting effect on our reportable segments,
operating segments and reporting units, if any. The primary
financial measures used by management to evaluate the
financial results of VF's reportable segments are segment
revenues and segment profit. Segment profit comprises the
operating income and other income (expense), net line items of
each segment.
Accounting policies used for internal management reporting at
the individual segments are consistent with those in Note 1,
except as stated below. Corporate costs (other than common
costs allocated to the segments), goodwill and indefinite-lived
intangible asset impairment charges, net interest expense and
loss on debt extinguishment are not controlled by segment
management and therefore are excluded from the measurement
of segment profit. Common costs such as information systems
processing, retirement benefits and insurance are allocated
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-42
VF Corporation Fiscal 2024 Form 10-K
from corporate costs to the segments based on appropriate
metrics such as usage or employment. Corporate costs that are
not allocated to the segments consist of corporate headquarters
expenses (including compensation and benefits of corporate
management and staff, certain legal and professional fees and
administrative and general costs), costs of corporate programs
or corporate-managed decisions, and other expenses which
include a portion of defined benefit pension costs, development
costs for management information systems, costs of registering,
maintaining and enforcing certain of VF’s trademarks and
miscellaneous consolidated costs. Defined benefit pension plans
in the U.S. are centrally managed. The current year service cost
component of pension cost is allocated to the segments, while
the
remaining
pension
cost
components
are
reported
in
corporate and other expenses.
Segment assets, for internal management purposes, are those
used directly in or resulting from the operations of each
business,
which
are
accounts
receivable
and
inventories.
Segment assets included in the Other category represent
balances primarily related to corporate activities, and are
provided for purposes of reconciliation as the Other category is
not considered a reportable segment. Total expenditures for
additions
to
long-lived
assets
are
not
disclosed
as
this
information is not regularly provided to the CODM at the
segment level.
Financial information for VF’s reportable segments is as follows:
Year Ended March
(In thousands)
2024
2023
2022
Segment revenues:
Outdoor
$
5,501,399
$
5,647,526
$
5,327,568
Active
4,061,729
4,904,622
5,380,338
Work
891,539
1,060,179
1,133,149
Other
—
148
785
Total segment revenues
$
10,454,667
$
11,612,475
$
11,841,840
Segment profit (loss):
Outdoor
$
602,708
$
785,431
$
795,523
Active
(a)
352,248
654,691
979,746
Work
17,647
121,157
193,492
Other
—
(536)
(586)
Total segment profit
972,603
1,560,743
1,968,175
Impairment of goodwill and indefinite-lived intangible
assets
(507,566)
(735,009)
—
Corporate and other expenses
(475,314)
(617,815)
(309,817)
Interest expense, net
(223,408)
(164,632)
(131,463)
Loss on debt extinguishment
—
—
(3,645)
Income (loss) from continuing operations before income
taxes
$
(233,685)
$
43,287
$
1,523,250
(a)
Includes legal settlement gains of $29.1 million in the year ended March 2024.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-43
(In thousands)
March 2024
March 2023
Segment assets:
Outdoor
$
1,544,364
$
1,936,090
Active
1,034,714
1,341,142
Work
452,384
610,798
Other
8,869
15,055
Total segment assets
3,040,331
3,903,085
Cash and equivalents
674,605
814,887
Property, plant and equipment, net
823,886
942,440
Intangible assets and goodwill
4,088,896
4,621,234
Operating lease right-of-use assets
1,330,361
1,372,182
Other assets
1,654,884
2,336,660
Consolidated assets
$
11,612,963
$
13,990,488
Year Ended March
(In thousands)
2024
2023
2022
Depreciation, amortization and other asset write-downs:
Outdoor
$
103,586
$
94,448
$
95,860
Active
93,587
81,106
87,235
Work
13,620
12,524
14,439
Other
108,411
74,246
69,401
$
319,204
$
262,324
$
266,935
Supplemental information (with revenues by geographic area primarily based on the origin of the shipment) is as follows:
Year Ended March
(In thousands)
2024
2023
2022
Total revenues:
U.S.
$
4,843,098
$
6,043,359
$
6,178,300
Foreign
5,611,569
5,569,116
5,663,540
$
10,454,667
$
11,612,475
$
11,841,840
Property, plant and equipment:
U.S.
$
596,387
$
707,035
Foreign
227,499
235,405
$
823,886
$
942,440
No single customer accounted for 10% or more of the Company’s total revenues in the years ended March 2024, 2023 and 2022.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-44
VF Corporation Fiscal 2024 Form 10-K
NOTE 22 — COMMITMENTS
VF is obligated under noncancelable operating leases. Refer to
Note 10 for additional information related to future lease
payments.
In the ordinary course of business, VF has entered into purchase
commitments for finished products and raw materials. Total
payments required under these agreements, which primarily
relate to finished products, are $2.3 billion, $73.2 million and
$3.0 million for Fiscal 2025 through 2027, respectively, and no
commitments thereafter.
VF has entered into commitments for (i) capital spending,
(ii)
service
and
maintenance
agreements
related
to
its
management information systems, and (iii) other obligations.
Future payments under these agreements are $128.7 million,
$80.6 million, $41.5 million, $6.6 million and $0.8 million for
Fiscal 2025 through 2029, respectively, and no commitments
thereafter.
Surety bonds, customs bonds, standby letters of credit and
international bank guarantees, all of which represent contingent
guarantees of performance under self-insurance and other
programs, totaled $106.3 million as of March 2024. These
commitments would only be drawn upon if VF were to fail to
meet its claims or other obligations.
NOTE 23 — EARNINGS (LOSS) PER SHARE
Year Ended March
(In thousands, except per share amounts)
2024
2023
2022
Earnings (loss) per share — basic:
Income (loss) from continuing operations
$
(968,882)
$
118,584
$
1,216,269
Weighted average common shares outstanding
388,360
387,763
390,291
Earnings (loss) per share from continuing operations
$
(2.49)
$
0.31
$
3.12
Earnings (loss) per share — diluted:
Income (loss) from continuing operations
$
(968,882)
$
118,584
$
1,216,269
Weighted average common shares outstanding
388,360
387,763
390,291
Incremental shares from stock options and other dilutive securities
—
607
2,120
Adjusted weighted average common shares outstanding
388,360
388,370
392,411
Earnings (loss) per share from continuing operations
$
(2.49)
$
0.31
$
3.10
In the year ended March 2024, the dilutive impacts of all
outstanding stock options and other dilutive securities were
excluded from dilutive shares as a result of the Company's net
loss for the period and, as such, their inclusion would have been
anti-dilutive. As a result, a total of 19.0 million potentially dilutive
shares related to stock options and other dilutive securities were
excluded from the diluted loss per share calculation for the year
ended March 2024.
Outstanding stock options and other dilutive securities of
approximately 9.7 million and 3.3 million shares were excluded
from the calculations of diluted earnings per share for the years
ended March 2023 and 2022, respectively, because the effect of
their inclusion would have been anti-dilutive to those years. In
addition, 0.6 million and 0.5 million shares of performance-
based RSUs were excluded from the calculations of diluted
earnings per share for the years ended March 2023 and 2022,
respectively, because these units were not considered to be
contingent outstanding shares in those years.
NOTE 24 — FAIR VALUE MEASUREMENTS
Financial assets and financial liabilities measured and reported
at fair value are classified in a three-level hierarchy that
prioritizes the inputs used in the valuation process. A financial
instrument’s categorization within the valuation hierarchy is
based on the lowest level of any input that is significant to the
fair
value
measurement.
The
hierarchy
is
based
on
the
observability and objectivity of the pricing inputs, as follows:
•
Level 1 — Quoted prices in active markets for identical
assets or liabilities.
•
Level 2 — Significant directly observable data (other than
Level 1 quoted prices) or significant indirectly observable
data through corroboration with observable market data.
Inputs would normally be (i) quoted prices in active
markets for similar assets or liabilities, (ii) quoted prices
in inactive markets for identical or similar assets or
liabilities, or (iii) information derived from or corroborated
by observable market data.
•
Level 3 — Prices or valuation techniques that require
significant unobservable data inputs. These inputs would
normally
be
VF’s
own
data
and
judgments
about
assumptions that market participants would use in
pricing the asset or liability.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-45
RECURRING FAIR VALUE MEASUREMENTS
The following table summarizes financial assets and financial liabilities that are measured and recorded in the consolidated financial
statements at fair value on a recurring basis:
Total Fair
Value
Fair Value Measurement Using
(a)
(In thousands)
Level 1
Level 2
Level 3
March 2024
Financial assets:
Cash equivalents:
Money market funds
$
171,931
$
171,931
$
—
$
—
Time deposits
54,853
54,853
—
—
Derivative financial instruments
32,548
—
32,548
—
Deferred compensation and other
95,236
95,236
—
—
Financial liabilities:
Derivative financial instruments
40,234
—
40,234
—
Deferred compensation
90,804
—
90,804
—
Total Fair
Value
Fair Value Measurement Using
(a)
(In thousands)
Level 1
Level 2
Level 3
March 2023
Financial assets:
Cash equivalents:
Money market funds
$
418,304
$
418,304
$
—
$
—
Time deposits
21,233
21,233
—
—
Derivative financial instruments
49,688
—
49,688
—
Deferred compensation and other
99,200
99,200
—
—
Financial liabilities:
Derivative financial instruments
72,653
—
72,653
—
Deferred compensation
96,364
—
96,364
—
(a)
There were no transfers among the levels within the fair value hierarchy during the years ended March 2024 or 2023.
VF’s cash equivalents include money market funds and time
deposits with maturities within three months of their purchase
dates,
that
approximate
fair
value
based
on
Level
1
measurements.
The
fair
value
of
derivative
financial
instruments,
which
consist
of
foreign
exchange
forward
contracts and interest rate swap contracts, is determined based
on observable market inputs (Level 2), including spot and
forward exchange rates for foreign currencies and interest rate
forward curves, and considers the credit risk of the Company
and its counterparties. VF’s deferred compensation assets
primarily represent investments held within plan trusts as an
economic hedge of the related deferred compensation liabilities
(Note 17). These investments primarily include mutual funds
(Level 1) that are valued based on quoted prices in active
markets. Liabilities related to VF’s deferred compensation plans
are recorded at amounts due to participants, based on the fair
value of the participants’ selection of hypothetical investments.
In connection with the Supreme acquisition on December 28,
2020, the fair value of the related contingent consideration
liability was initially estimated at $207.0 million (Level 3). During
Fiscal
2022,
the
contingent
consideration
liability
was
remeasured at fair value based on the probability-weighted
present
value
of
various
future
cash
payment
outcomes
resulting from the estimated achievement levels of the financial
targets, with changes of $150.0 million recognized in the selling,
general
and
administrative
expenses
line
item
in
the
Consolidated Statement of Operations in the year ended March
2022. As of March 2022, the estimated fair value of the
contingent consideration liability was $57.0 million and was paid
during Fiscal 2023.
All other significant financial assets and financial liabilities are
recorded in the consolidated financial statements at cost, except
life insurance contracts which are recorded at cash surrender
value. These other financial assets and financial liabilities
include cash held as demand deposits, accounts receivable,
short-term borrowings, accounts payable and accrued liabilities.
At March 2024 and 2023, their carrying values approximated
their fair values. Additionally, at March 2024 and 2023, the
carrying values of VF’s long-term debt, including the current
portion, were $5,703.0 million and $6,635.3 million, respectively,
compared with fair values of $5,263.3 million and $6,244.4
million at those respective dates. Fair value for long-term debt is
a Level 2 estimate based on quoted market prices or values of
comparable borrowings.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-46
VF Corporation Fiscal 2024 Form 10-K
NONRECURRING FAIR VALUE MEASUREMENTS
Certain non-financial assets, primarily property, plant and
equipment, goodwill and intangible assets, and operating lease
right-of-use assets, are not required to be measured at fair
value on a recurring basis and are reported at carrying value.
However,
these
assets
are
required
to
be
assessed
for
impairment whenever events or circumstances indicate their
carrying value may not be fully recoverable, and at least annually
for goodwill and indefinite-lived intangible assets. In the event an
impairment is required, the asset is adjusted to its estimated fair
value, using market-based assumptions.
The Company recorded $39.4 million, $3.0 million and $6.4
million of impairments in the years ended March 2024, 2023 and
2022, respectively, related to retail store assets, lease right-of-
use assets and other fixed assets. These impairments were
recorded in the selling, general and administrative expenses line
item in the Consolidated Statements of Operations.
The Company recorded $507.6 million and $735.0 million of
impairments
in
the
years
ended
March
2024
and
2023,
respectively, related to goodwill and indefinite-lived trademark
intangible
assets.
No
impairment
charges
of
goodwill
or
indefinite-lived trademark intangible assets were recorded in
the year ended March 2022. Refer to additional discussion of
management's goodwill and indefinite-lived intangible asset
impairment testing below.
Fiscal 2024 Goodwill and Intangible Asset Impairment Testing
Timberland Reporting Unit and Indefinite-Lived Intangible Asset
Impairment Analysis
During the third quarter of Fiscal 2024, management determined
that the recent downturn in the Timberland financial results,
combined with a downward revision to the latest Fiscal 2024
forecast
and
forward-looking
financial
projections,
was
a
triggering event that required management to perform a
quantitative
impairment
analysis
of
both
the
Timberland
reporting unit goodwill, which includes the Timberland
® brand,
and the Timberland indefinite-lived trademark intangible asset,
which includes both the Timberland
® and Timberland PRO
®
brands. The carrying values of the goodwill and indefinite-lived
trademark
intangible
asset
at
the
testing
date
were
$407.9 million and $999.5 million, respectively. As a result of the
impairment
testing
performed,
VF
recorded
a
goodwill
impairment charge of $195.3 million in the third quarter of Fiscal
2024 to write down the Timberland reporting unit carrying value
to its estimated fair value. No impairment charge was recorded
on the indefinite-lived trademark intangible asset. The estimated
fair value of the indefinite-lived trademark intangible asset
exceeded its carrying value by a significant amount.
During
the
fourth
quarter
of
Fiscal
2024,
management
determined that the continued downturn in Timberland financial
results and weakness in the wholesale channel, combined with
expectations of a slower recovery, was a triggering event that
required management to perform a quantitative impairment
analysis of both the Timberland reporting unit goodwill and
indefinite-lived trademark intangible asset. The carrying values
of the goodwill and indefinite-lived trademark intangible asset at
the testing date were $211.7 million and $999.5 million,
respectively. As a result of the impairment testing performed,
management concluded that the Timberland reporting unit
goodwill was fully impaired and thus recorded an additional
impairment
charge
of $211.7
million in
the
Consolidated
Statement of Operations for the year ended March 2024. Based
on the analysis, management concluded that the indefinite-lived
trademark intangible asset was not impaired and the estimated
fair value exceeded its carrying value by 14%.
The Timberland reporting unit is included in the Outdoor
reportable segment.
Management's revenue and profitability forecasts used in the
Timberland
reporting
unit
and
indefinite-lived
trademark
intangible asset valuations considered recent and historical
performance,
strategic
initiatives,
industry
trends
and
macroeconomic factors. Assumptions used in the valuations
were similar to those that would be used by market participants
performing independent valuations of the business.
Key assumptions developed by management and used in the
quantitative analysis of the Timberland reporting unit and
indefinite-lived trademark intangible asset include:
•
Financial
projections
and
future
cash
flows
that
considered recent actual results lower than previous
internal forecasts, slower recovery from the recent
downturn, with moderate revenue growth and profitability
improvement throughout the forecast period that reflects
the long-term strategy for the business, and terminal
growth rates based on the expected long-term growth
rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements for the brand and similar VF brands;
and,
•
Market-based discount rates.
The valuation model used by management in the indefinite-lived
trademark
intangible
asset
impairment
testing
assumes
recovery from the recent downturn in the brand's operating
results and the return to revenue growth over the projection
period. If the brand is unable to achieve the financial projections,
an impairment of the indefinite-lived trademark intangible asset
could occur in the future.
Management performed a sensitivity analysis on the impairment
model used to test the Timberland indefinite-lived trademark
intangible asset. In doing so, management determined that a
40% decrease in the annual growth rate assumption for
revenues used in the projections, combined with a 100 basis
point increase in the discount rate used in the relief-from-
royalty model resulted in the estimated fair value of the
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-47
indefinite-lived trademark intangible asset to be below its
carrying value, which would result in impairment.
Dickies Reporting Unit and Indefinite-Lived Intangible Asset
Impairment Analysis
During
the
second
quarter
of
Fiscal
2024,
management
determined that the recent downturn in the Dickies historical
financial results, combined with a downward revision to the
latest Fiscal 2024 forecast, was a triggering event that required
management to perform a quantitative impairment analysis of
both the Dickies reporting unit goodwill and the Dickies
indefinite-lived
trademark
intangible
asset.
Based
on
the
analysis, management concluded that both the goodwill and
indefinite-lived intangible asset were not impaired. For goodwill,
the estimated fair value of the reporting unit exceeded the
carrying value by 8%. The estimated fair value of the indefinite-
lived trademark intangible asset exceeded its carrying value by a
significant amount. The carrying values of the goodwill and
indefinite-lived trademark intangible asset at the testing date
were $61.2 million and $290.0 million, respectively.
During the third quarter of Fiscal 2024, management determined
that the continued downturn in the Dickies financial results,
weakness in certain key U.S. wholesale customer accounts,
including lost product placement, and weakness in certain
international markets, combined with expectations of a slower
recovery, which have resulted in further reductions to the
financial projections, was a triggering event that required
management to perform a quantitative impairment analysis of
both the Dickies reporting unit goodwill and the Dickies
indefinite-lived trademark intangible asset. The carrying values
of the goodwill and indefinite-lived trademark intangible asset at
the
testing
date
were
$61.8
million
and
$290.0
million,
respectively. Based on the analysis, management concluded that
the Dickies reporting unit goodwill was fully impaired and thus
recorded an impairment charge of $61.8 million in the third
quarter of Fiscal 2024. Based on the analysis, management
concluded that the indefinite-lived trademark intangible asset
was not impaired and the estimated fair value exceeded its
carrying value by a significant amount.
During
the
fourth
quarter
of
Fiscal
2024,
management
determined that the overall weakness in the Dickies business
and financial results, was a triggering event that required
management to perform a quantitative impairment analysis of
the Dickies indefinite-lived trademark intangible asset. The
carrying value of the indefinite-lived trademark intangible asset
at the testing date was $290.0 million. Based on the analysis,
management concluded that the indefinite-lived trademark
intangible asset was not impaired and the estimated fair value
exceeded its carrying value by 16%.
The Dickies reporting unit is included in the Work reportable
segment.
Management's revenue and profitability forecasts used in the
Dickies reporting unit and indefinite-lived trademark intangible
asset valuations considered recent and historical performance,
strategic initiatives, industry trends and macroeconomic factors.
Assumptions used in the valuations were similar to those that
would be used by market participants performing independent
valuations of the business.
Key assumptions developed by management and used in the
quantitative analysis of the Dickies reporting unit and indefinite-
lived trademark intangible asset include:
•
Financial projections and future cash flows, including a
base year that considered recent actual results lower
than previous internal forecasts, continued weakness in
certain key accounts and markets, slower recovery from
the recent downturn, with moderate revenue growth and
improved profitability throughout the forecast period that
reflects the long-term strategy for the business, and
terminal growth rates based on the expected long-term
growth rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements for the brand and similar VF brands;
and,
•
Market-based discount rates.
The valuation model used by management in the indefinite-lived
trademark
intangible
asset
impairment
testing
assumes
recovery from the recent downturn in the brand's operating
results and the return to revenue growth over the projection
period. If the brand is unable to achieve the financial projections,
an impairment of the indefinite-lived trademark intangible asset
could occur in the future.
Management performed a sensitivity analysis on the impairment
model used to test the Dickies indefinite-lived trademark
intangible asset. In doing so, management determined that a
50% decrease in the annual growth rate assumption for
revenues used in the projections, combined with a 200 basis
point increase in the discount rate used in the relief-from-
royalty model resulted in the estimated fair value of the
indefinite-lived trademark intangible asset to be below its
carrying value, which would result in impairment.
Icebreaker Reporting Unit and Indefinite-Lived Intangible Asset
Impairment Analysis
In conjunction with VF's annual goodwill and indefinite-lived
intangible asset impairment testing as of the beginning of the
fourth
quarter
of
Fiscal
2024,
management
performed
a
quantitative impairment analysis of the Icebreaker reporting unit
goodwill and indefinite-lived trademark intangible asset. The
decision
to
bypass
the
optional
qualitative
impairment
assessment and proceed directly to a quantitative impairment
analysis was based on results from management's prior testing,
combined with a downward revision to the latest Fiscal 2024
forecast and forward-looking financial projections. The carrying
values of the Icebreaker reporting unit goodwill and indefinite-
lived trademark intangible asset at the testing date were
$81.2 million and $62.1 million, respectively. As a result of the
annual impairment testing, VF recorded a goodwill impairment
charge of $38.8 million in the Consolidated Statement of
Operations for the year ended March 2024. Based on the
analysis,
management
concluded
that
the
indefinite-lived
trademark intangible asset was not impaired and the estimated
fair value exceeded its carrying value by a significant amount.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-48
VF Corporation Fiscal 2024 Form 10-K
The Icebreaker reporting unit is included in the Outdoor
reportable segment.
Management's revenue and profitability forecasts used in the
Icebreaker
reporting
unit
and
indefinite-lived
trademark
intangible asset valuations considered recent and historical
performance,
strategic
initiatives,
industry
trends
and
macroeconomic factors. Assumptions used in the valuations
were similar to those that would be used by market participants
performing independent valuations of the business.
Key assumptions developed by management and used in the
quantitative analysis of the Icebreaker reporting unit and
indefinite-lived trademark intangible asset include:
•
Financial projections and future cash flows, including a
base year that considered recent actual results lower
than previous internal forecasts, slower recovery from the
recent downturn, with moderate revenue growth and
improved profitability throughout the forecast period that
reflects the long-term strategy for the business, and
terminal growth rates based on the expected long-term
growth rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements for similar VF brands; and,
•
Market-based discount rates.
The valuation model used by management in the impairment
testing assumes recovery from the recent downturn in the
brand's operating results and the return to revenue growth and
improved profitability over the projection period. If the brand is
unable
to
achieve
the
financial
projections,
additional
impairment of the reporting unit goodwill or impairment of the
indefinite-lived trademark intangible asset could occur in the
future.
Supreme Reporting Unit and Indefinite-Lived Intangible Asset
Impairment Analysis
In conjunction with VF's annual goodwill and indefinite-lived
intangible asset impairment testing as of the beginning of the
fourth
quarter
of
Fiscal
2024,
management
performed
a
quantitative impairment analysis of the Supreme reporting unit
goodwill and indefinite-lived trademark intangible asset. The
decision
to
bypass
the
optional
qualitative
impairment
assessment and proceed directly to a quantitative impairment
analysis
was
based
on
the
impairment
results
from
management's prior year testing and the overall significance of
the
related
assets.
Based
on
the
analysis,
management
concluded the Supreme reporting unit goodwill and indefinite-
lived
trademark
intangible
asset
were
not
impaired.
For
goodwill, the estimated fair value of the reporting unit exceeded
the carrying value by 8%. The estimated fair value of the
indefinite-lived trademark intangible asset exceeded its carrying
value by 3%. The carrying values of the Supreme reporting unit
goodwill and indefinite-lived trademark intangible asset at the
testing date were $819.7 million and $852.0 million, respectively.
The Supreme reporting unit is included in the Active reportable
segment.
Management's revenue and profitability forecasts used in the
Supreme reporting unit and indefinite-lived trademark intangible
asset valuations considered recent and historical performance,
strategic initiatives, industry trends and macroeconomic factors.
Assumptions used in the valuations were similar to those that
would be used by market participants performing independent
valuations of the business.
Key assumptions developed by management and used in the
quantitative
analysis
of
the
Supreme
reporting
unit
and
indefinite-lived trademark intangible asset include:
•
Financial projections and future cash flows that are
comparable to those used in the prior year testing, as the
brand is executing on its strategy and delivered strong
profitability growth in the current year, with moderate
revenue
growth
and
a
continued
improvement
in
profitability throughout the forecast period that reflects
the long-term strategy for the business, and terminal
growth rates based on the expected long-term growth
rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements with similar VF brands;
•
Market-based discount rates that are slightly lower than
prior testing due to overall market conditions; and,
•
Market approach reflecting improved recent historical
financial measures for Supreme.
The valuation model used by management in the impairment
testing assumes continued recovery in the brand's operating
results with revenue growth and improved profitability over the
projection period. If the brand is unable to achieve the financial
projections, additional impairment of the reporting unit goodwill
and indefinite-lived trademark intangible asset could occur in
the future.
Management performed a sensitivity analysis on the impairment
models used to test the Supreme reporting unit goodwill and
indefinite-lived
trademark
intangible
asset.
In
doing
so,
management determined that individual changes of either a 20%
reduction in the annual growth assumption for earnings before
interest, taxes, depreciation and amortization (“EBITDA”) used in
the projections, or a 100 basis point increase in the discount rate
used in the discounted cash flow model resulted in the
estimated fair value of the reporting unit to be below its carrying
value, which would result in goodwill impairment. Management
also determined that individual changes of either a 10%
decrease in the annual growth rate assumption for revenues
used in the projections, or a 50 basis point increase in the
discount rate used in the relief-from-royalty model resulted in
the estimated fair value of the indefinite-lived trademark
intangible asset to be below its carrying value, which would
result in impairment.
Timberland PRO Reporting Unit Impairment Analysis
In conjunction with VF's annual goodwill and indefinite-lived
intangible asset impairment testing as of the beginning of the
fourth
quarter
of
Fiscal
2024,
management
performed
a
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-49
quantitative
impairment
analysis
of
the
Timberland
PRO
reporting unit goodwill. The decision to bypass the optional
qualitative impairment assessment and proceed directly to a
quantitative impairment analysis was based on current year
declines in revenue and segment profit and reductions to recent
financial projections. Based on the analysis, management
concluded the Timberland PRO reporting unit goodwill was not
impaired. For goodwill, the estimated fair value of the reporting
unit exceeded the carrying value by 17%. The carrying value of
the Timberland PRO reporting unit goodwill at the testing date
was $51.5 million.
The Timberland PRO reporting unit is included in the Work
reportable segment.
Management's revenue and profitability forecasts used in the
Timberland PRO reporting unit valuation considered recent and
historical performance, strategic initiatives, industry trends and
macroeconomic factors. Assumptions used in the valuation were
similar to those that would be used by market participants
performing independent valuations of the business.
Key assumptions developed by management and used in the
quantitative analysis of the Timberland PRO reporting unit
include:
•
Financial projections and future cash flows, including the
current year that considered actual results lower than
previous internal forecasts, with recovery expected to
begin next fiscal year driven by revenue growth and
improved profitability throughout the forecast period that
reflects the long-term strategy for the business and is in-
line with historical financial results, and terminal growth
rates based on the expected long-term growth rate of the
business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rate assumption consistent with that used in the
Timberland reporting unit analysis; and,
•
Market-based discount rates.
The valuation model used by management in the impairment
testing assumes recovery from the recent downturn in the
brand's operating results and the return to revenue growth and
improved profitability over the projection period. If the brand is
unable to achieve the financial projections, an impairment of the
reporting unit goodwill could occur in the future.
Management performed a sensitivity analysis on the impairment
model used to test the Timberland PRO reporting unit goodwill.
In doing so, management determined that individual changes of
either a 20% reduction in the annual growth assumption for
EBITDA used in the projections, or a 200 basis point increase in
the discount rate used in the discounted cash flow model
resulted in the estimated fair value of the reporting unit to be
below its carrying value, which would result in goodwill
impairment.
Altra
Reporting
Unit
and
Indefinite-Lived
Intangible
Asset
Impairment Analysis
In conjunction with VF's annual goodwill and indefinite-lived
intangible asset impairment testing as of the beginning of the
fourth
quarter
of
Fiscal
2024,
management
performed
a
quantitative impairment analysis of the Altra reporting unit
goodwill and indefinite-lived trademark intangible asset. The
decision
to
bypass
the
optional
qualitative
impairment
assessment and proceed directly to a quantitative impairment
analysis was based on results from management's prior testing,
combined with recent actual segment profit margins lower than
previous internal forecasts. Based on the analysis, management
concluded the Altra reporting unit goodwill and indefinite-lived
trademark intangible asset were not impaired. For goodwill, the
estimated fair value of the reporting unit exceeded the carrying
value by 15%. The estimated fair value of the indefinite-lived
trademark intangible asset exceeded its carrying value by a
significant amount. The carrying values of the Altra reporting
unit goodwill and indefinite-lived trademark intangible asset at
the
testing
date
were
$61.7
million
and
$46.4
million,
respectively.
The Altra reporting unit is included in the Outdoor reportable
segment.
Management's revenue and profitability forecasts used in the
Altra reporting unit and indefinite-lived trademark intangible
asset valuations considered recent and historical performance,
strategic initiatives, industry trends and macroeconomic factors.
Assumptions used in the valuations were similar to those that
would be used by market participants performing independent
valuations of the business.
Key assumptions developed by management and used in the
quantitative analysis of the Altra reporting unit and indefinite-
lived trademark intangible asset include:
•
Financial projections and future cash flows, including a
base year that considered recent actual results lower
than previous internal forecasts, with consistent revenue
growth and improved profitability throughout the forecast
period that reflects the long-term strategy for the
business, and terminal growth rates based on the
expected long-term growth rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements for other VF brands; and,
•
Market-based discount rates.
The valuation model used by management in the impairment
testing assumes recovery from the recent downturn in the
brand's operating results and the return to revenue growth and
improved profitability over the projection period. If the brand is
unable to achieve the financial projections, an impairment of the
reporting unit goodwill or indefinite-lived trademark intangible
asset could occur in the future.
Management performed a sensitivity analysis on the impairment
model used to test the Altra reporting unit goodwill. In doing so,
management determined that individual changes of either a 10%
reduction in the annual growth assumption for EBITDA used in
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-50
VF Corporation Fiscal 2024 Form 10-K
the projections, or a 200 basis point increase in the discount rate
used in the discounted cash flow model resulted in the
estimated fair value of the reporting unit to be below its carrying
value, which would result in goodwill impairment.
Smartwool Reporting Unit and Indefinite-Lived Intangible Asset
Impairment Analysis
In conjunction with VF's annual goodwill and indefinite-lived
intangible asset impairment testing as of the beginning of the
fourth
quarter
of
Fiscal
2024,
management
performed
a
quantitative impairment analysis of the Smartwool reporting unit
goodwill and indefinite-lived trademark intangible asset. The
decision
to
bypass
the
optional
qualitative
impairment
assessment and proceed directly to a quantitative impairment
analysis was based on current year declines in revenue and
segment profit and reductions to recent financial projections,
combined with recent actual segment profit margins lower than
previous internal forecasts. Based on the analysis, management
concluded the Smartwool reporting unit goodwill and indefinite-
lived
trademark
intangible
asset
were
not
impaired.
For
goodwill, the estimated fair value of the reporting unit exceeded
the carrying value by a significant amount. The estimated fair
value of the indefinite-lived trademark intangible asset also
exceeded its carrying value by a significant amount. The carrying
values of the Smartwool reporting unit goodwill and indefinite-
lived trademark intangible asset at the testing date were $53.5
million and $75.4 million, respectively.
The Smartwool reporting unit is included in the Outdoor
reportable segment.
Management's revenue and profitability forecasts used in the
Smartwool
reporting
unit
and
indefinite-lived
trademark
intangible asset valuations considered recent and historical
performance,
strategic
initiatives,
industry
trends
and
macroeconomic factors. Assumptions used in the valuations
were similar to those that would be used by market participants
performing independent valuations of the business.
Key assumptions developed by management and used in the
quantitative analysis of the Smartwool reporting unit and
indefinite-lived trademark intangible asset include:
•
Financial projections and future cash flows, including a
base year that considered recent actual results lower
than previous internal forecasts, continued near-term
weakness in the wholesale channel, moderate revenue
growth and improved profitability throughout the forecast
period that reflects the long-term strategy for the
business, and terminal growth rates based on the
expected long-term growth rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements for other VF brands; and,
•
Market-based discount rates.
The valuation model used by management in the impairment
testing assumes recovery from the recent downturn in the
brand's operating results and the return to revenue growth and
improved profitability over the projection period. If the brand is
unable to achieve the financial projections, an impairment of the
reporting unit goodwill or indefinite-lived trademark intangible
asset could occur in the future.
Indefinite-Lived Intangible Assets - Significant Assumptions
The impairment testing of indefinite-lived trademark intangible
assets during Fiscal 2024 used significant unobservable inputs
to estimate fair values. The discount rates used in the testing
ranged from 12.0% to 18.5%, with a weighted average of 14.2%
based on relative fair value. The royalty rates used in the testing
ranged from 4.0% to 10.0%, with a weighted average of 7.0%
based on relative fair value. The long-term revenue growth rates
used in the testing ranged from 2.0% to 3.5%, with a weighted
average of 2.3% based on relative fair value.
Other Reporting Units and Indefinite-Lived Intangible Assets -
Qualitative Impairment Analysis
For the remaining reporting units and indefinite-lived intangible
assets, VF elected to perform a qualitative assessment during
the
annual
goodwill
and
indefinite-lived
intangible
asset
impairment testing, as of the beginning of the fourth quarter of
Fiscal 2024, to determine whether it was more likely than not
that the goodwill and indefinite-lived trademark intangible
assets in those reporting units were impaired. The carrying
values
of
the
reporting
unit
goodwill
and
indefinite-lived
trademark intangible assets subject to qualitative assessment at
the testing date were $443.5 million and $522.3 million,
respectively. In this qualitative assessment, VF considered
relevant events and circumstances for each reporting unit,
including (i) current year results and performance versus
management's plans, (ii) financial outlook based on the latest
internal financial plan, (iii) changes in the reporting unit carrying
value since prior year and the amounts relative to the size of the
respective business, (iv) industry and market conditions in which
the reporting unit operates, (v) macroeconomic conditions,
including discount rate and foreign exchange rate changes, and
(vi) changes in products or services offered by the reporting unit.
If applicable, performance in recent years was compared to
forecasts included in prior valuations. Based on the results of
the qualitative assessment, VF concluded it was more likely than
not that the carrying values of the goodwill and indefinite-lived
trademark intangible assets were less than their fair values, and
that further quantitative testing was not necessary.
Fiscal 2023 Goodwill and Intangible Asset Impairment Testing
Supreme Reporting Unit and Indefinite-Lived Intangible Asset
Impairment Analysis
During the second quarter of Fiscal 2023, due to continued
increases in the federal funds rate and strengthening of the U.S.
dollar relative to other currencies, management performed a
quantitative impairment analysis of both the Supreme reporting
unit goodwill and the indefinite-lived trademark intangible asset.
The carrying values of the Supreme reporting unit goodwill and
indefinite-lived trademark intangible asset at the testing date
were $1.21 billion and $1.19 billion, respectively. As a result of
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-51
the
interim
impairment
testing
performed,
VF
recorded
impairment charges of $229.0 million and $192.9 million related
to the Supreme reporting unit goodwill and indefinite-lived
trademark intangible asset, respectively, in the Consolidated
Statement of Operations for the year ended March 2023.
The impairment related to an increase in the market-based
discount rates used in the valuations and the negative impact of
foreign currency exchange rate changes on financial projections.
Management’s revenue and profitability forecasts used in the
Supreme reporting unit and indefinite-lived trademark intangible
asset valuations considered recent and historical performance,
strategic initiatives and industry trends. Assumptions used in the
valuations were similar to those that would be used by market
participants performing independent valuations of the business.
Key assumptions developed by management and used in the
interim quantitative analysis of the Supreme reporting unit and
indefinite-lived trademark intangible asset included:
•
Financial projections and future cash flows reflecting
results lower than prior forecasts primarily driven by the
negative impacts of foreign currency exchange rate
changes. The projections assumed revenue growth and
profitability improvement throughout the forecast period
reflecting the long-term strategy for the business which
was largely unchanged from the business combination
valuation, and terminal growth rates based on the
expected long-term growth rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements with similar VF brands;
•
Market-based discount rates reflecting increases in the
federal funds rate; and,
•
Market
approach
reflecting
lower
recent
historical
financial measures for Supreme and valuation multiples.
In conjunction with VF's annual goodwill and indefinite-lived
intangible asset impairment testing as of the beginning of the
fourth
quarter
of
Fiscal
2023,
management
performed
a
quantitative impairment analysis of the Supreme reporting unit
goodwill and indefinite-lived trademark intangible asset. The
decision
to
bypass
the
optional
qualitative
impairment
assessment and proceed directly to a quantitative impairment
analysis was based on the recent impairment results from the
interim quantitative analysis, weakness in recent Supreme
financial performance including the results from the latest
season and the overall significance of the related assets.
As a result of the annual impairment testing, VF recorded
additional
impairment
charges
of
$165.1
million
and
$148.0 million to the Supreme reporting unit goodwill and
indefinite-lived trademark intangible asset, respectively, in the
Consolidated Statement of Operations for the year ended March
2023. The remaining carrying values of the Supreme reporting
unit goodwill and indefinite-lived trademark intangible asset,
after
the
impairment
charges,
were
$825.9
million
and
$852.0 million, respectively.
The impairment related to lower financial projections and
increased risk of achieving management's forecasts.
The Supreme reporting unit is included in the Active reportable
segment.
Management's revenue and profitability forecasts used in the
Supreme reporting unit and indefinite-lived trademark intangible
asset valuations considered historical performance, strategic
initiatives
and
industry
trends.
Assumptions
used
in
the
valuations were similar to those that would be used by market
participants performing independent valuations of the business.
Key assumptions developed by management and used in the
quantitative
analysis
of
the
Supreme
reporting
unit
and
indefinite-lived trademark intangible asset included:
•
Financial projections and future cash flows, including a
base year reflecting actual results lower than forecasts
used in the second quarter of Fiscal 2023, primarily driven
by weakness in the North America region, and a longer
recovery
timeline,
revenue
growth
and
profitability
improvement throughout the forecast period that reflects
the
long-term
strategy
for
the
business,
including
geographic expansion, and terminal growth rates based
on the expected long-term growth rate of the business;
•
Tax rates based on the statutory rates for the countries in
which the brand operates and the related intellectual
property is domiciled;
•
Royalty rates based on market data as well as active
license agreements with similar VF brands;
•
Market-based discount rates, including consideration of
additional risk of achievement of the financial projections
based on recent financial performance; and,
•
Market
approach
reflecting
lower
recent
historical
financial measures for Supreme.
Methodology and Management's Use of Estimates and Assumptions
Our
impairment
testing
of
goodwill
and
indefinite-lived
trademark intangible assets utilizes significant unobservable
inputs (Level 3) to determine fair value.
The fair value of reporting units for goodwill impairment testing
is determined using a combination of two valuation methods: an
income approach and a market approach. The income approach
is based on projected future (debt-free) cash flows that are
discounted to present value. The appropriate discount rate is
based on the reporting unit’s weighted average cost of capital
(“WACC”)
that
takes
market
participant
assumptions
into
consideration. For the market approach, management uses both
the guideline company and similar transaction methods. The
guideline
company
method
analyzes
market
multiples
of
revenues
and
EBITDA
for
a
group
of
comparable
public
companies. The market multiples used in the valuation are
based on the relative strengths and weaknesses of the reporting
unit compared to the selected guideline companies. Under the
similar transactions method, valuation multiples are calculated
utilizing actual transaction prices and revenue/EBITDA data from
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-52
VF Corporation Fiscal 2024 Form 10-K
target
companies
deemed
similar
to
the
reporting
unit.
Management typically assigns more weight to the income-based
valuation method.
Management uses the relief-from-royalty method to value
indefinite-lived trademark intangible assets. Under this method,
revenues expected to be generated by the trademark are
multiplied by a selected royalty rate. The royalty rate is selected
based on consideration of (i) royalty rates included in active
license agreements, if applicable, (ii) royalty rates received by
market participants in the apparel or footwear industry, and (iii)
the current performance of the reporting unit. The estimated
after-tax royalty revenue stream is then discounted to present
value using the reporting unit’s WACC adjusted, as appropriate,
to factor in the risk of the intangible asset.
Management’s revenue and profitability forecasts used in the
reporting unit and intangible asset valuations were developed in
conjunction with management’s forecast and plan review, which
includes management's overall assessment of events and
circumstances,
including
macroeconomic
conditions
and
industry and market considerations, and the resulting outlook
for the businesses, considering recent performance, trends and
strategic initiatives. Assumptions used in the valuations are
similar to those that would be used by market participants
performing independent valuations of these businesses.
Management's Use of Estimates and Assumptions
Management made its estimates based on information available
as of the date of our assessments, using assumptions we believe
market participants would use in performing an independent
valuation of the business. Although management believes the
estimates and assumptions used in the impairment testing are
reasonable and appropriate, it is possible that VF's assumptions
and conclusions regarding impairment or recoverability of
goodwill or indefinite-lived trademark intangible assets in any
reporting unit could change in future periods. There can be no
assurance the estimates and assumptions, particularly our long-
term financial projections, used in our goodwill and indefinite-
lived intangible asset impairment testing will prove to be
accurate predictions of the future, if, for example, (i) the
businesses do not perform as projected, (ii) overall economic
conditions in Fiscal 2025 or future years vary from current
assumptions (including changes in discount rates, royalty rates
and foreign currency exchange rates), (iii) business conditions or
strategies change from current assumptions, including loss of
major customers or channels, (iv) investors require higher rates
of return on equity investments in the marketplace, or (v)
enterprise values of comparable publicly traded companies, or
actual sales transactions of comparable companies, were to
decline, resulting in lower multiples of revenues and EBITDA.
A future impairment charge of goodwill or indefinite-lived
intangible
assets
could
have
a
material
effect
on
VF’s
consolidated financial position and results of operations.
NOTE 25 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Summary of Derivative Financial Instruments
VF’s outstanding derivative financial instruments include foreign
currency exchange forward contracts and interest rate swap
contracts. Although derivatives meet the criteria for hedge
accounting at the inception of the hedging relationship, a limited
number of derivative contracts intended to hedge assets and
liabilities are not designated as hedges for accounting purposes.
The notional amounts of all outstanding foreign currency
exchange forward contracts were $3.1 billion and $3.4 billion at
March 2024 and 2023, respectively, consisting primarily of
contracts
hedging
exposures
to
the
euro,
British
pound,
Canadian dollar, Swiss franc, Mexican peso, South Korean won,
Swedish krona, Polish zloty, Chinese renminbi and Japanese
yen. These derivative contracts have maturities up to 20 months.
The notional amount of VF's outstanding interest rate swap
contracts was $500.0 million at March 2024 and 2023. These
contracts hedge the cash flow risk of interest payments on VF's
variable-rate DDTL Agreement.
The following table presents outstanding derivatives on an individual contract basis:
Fair Value of Derivatives
with Unrealized Gains
Fair Value of Derivatives
with Unrealized Losses
(In thousands)
March 2024
March 2023
March 2024
March 2023
Derivatives Designated as Hedging Instruments:
Foreign exchange contracts
$
29,657
$
46,752
$
(39,639)
$
(71,052)
Interest rate contracts
2,335
—
—
(1,140)
Total derivatives designated as hedging instruments
31,992
46,752
(39,639)
(72,192)
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts
556
2,936
(595)
(461)
Total derivatives
$
32,548
$
49,688
$
(40,234)
$
(72,653)
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-53
VF records and presents the fair values of all of its derivative assets and liabilities in the Consolidated Balance Sheets on a gross
basis, even though they are subject to master netting agreements. If VF were to offset and record the asset and liability balances on a
net basis in accordance with the terms of its master netting agreements, the amounts presented in the Consolidated Balance Sheets
as of March 2024 and 2023 would be adjusted from the current gross presentation to the net amounts as detailed in the following
table:
March 2024
March 2023
(In thousands)
Derivative
Asset
Derivative
Liability
Derivative
Asset
Derivative
Liability
Gross amounts presented in the Consolidated Balance Sheets
$
32,548
$
(40,234)
$
49,688
$
(72,653)
Gross amounts not offset in the Consolidated Balance Sheets
(11,322)
11,322
(26,470)
26,470
Net amounts
$
21,226
$
(28,912)
$
23,218
$
(46,183)
Derivatives are classified as current or noncurrent based on maturity dates, as follows:
(In thousands)
March 2024
March 2023
Derivative Instruments
Balance Sheet Location
Foreign exchange contracts
Other current assets (Note 6)
$
26,366
$
48,132
Foreign exchange contracts
Accrued liabilities (Note 14)
(35,578)
(59,995)
Foreign exchange contracts
Other assets (Note 11)
3,847
1,556
Foreign exchange contracts
Other liabilities (Note 16)
(4,656)
(11,518)
Interest rate contracts
Other current assets (Note 6)
2,335
—
Interest rate contracts
Other liabilities (Note 16)
—
(1,140)
Cash Flow Hedges
VF primarily uses foreign currency exchange forward contracts to hedge a portion of the exchange risk for its forecasted sales,
inventory purchases, operating costs and certain intercompany transactions, including sourcing and management fees and royalties.
The Company also uses interest rate swap contracts to hedge against a portion of the exposure related to its interest payments on its
variable-rate debt. The effects of cash flow hedging included in VF’s Consolidated Statements of Comprehensive Income (Loss) and
Consolidated Statements of Operations are summarized as follows:
(In thousands)
Cash Flow Hedging Relationships
Gain (Loss) on Derivatives Recognized in Accumulated OCL
Year Ended March
2024
2023
2022
Foreign exchange contracts
$
(15,538)
$
54,546
$
71,494
Interest rate contracts
7,605
(1,013)
—
Total
$
(7,933)
$
53,533
$
71,494
Gain (Loss) Reclassified from Accumulated OCL into Net Income
(Loss)
(In thousands)
Year Ended March
Cash Flow Hedging Relationships Location of Gain (Loss)
2024
2023
2022
Foreign exchange contracts
Net revenues
$
(5,004)
$
(6,843)
$
(27,382)
Foreign exchange contracts
Cost of goods sold
15,703
120,438
(26,346)
Foreign exchange contracts
Selling, general and
administrative expenses
3,437
6,695
(487)
Foreign exchange contracts
Other income (expense), net
(253)
(10,365)
(219)
Interest rate contracts
Interest expense
4,238
235
108
Total
$
18,121
$
110,160
$
(54,326)
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-54
VF Corporation Fiscal 2024 Form 10-K
Derivative Contracts Not Designated as Hedges
VF uses foreign currency exchange contracts to manage foreign
currency
exchange
risk
on
third-party
and
intercompany
accounts receivable and payable, as well as third-party and
intercompany
borrowings
and
interest
payments.
These
contracts are not designated as hedges, and are recorded at fair
value in the Consolidated Balance Sheets. Changes in the fair
values of these instruments are recognized directly in earnings.
Gains or losses on these contracts largely offset the net
transaction losses or gains on the related assets and liabilities.
In the case of derivative contracts executed on foreign currency
exposures that are no longer probable of occurring, VF de-
designates these hedges and the fair value changes of these
instruments are also recognized directly in earnings. During the
year ended March 2024, certain derivative contracts were de-
designated as the related hedged forecasted transactions were
no longer deemed probable of occurring. Accordingly, the
Company reclassified amounts from accumulated OCL and
recognized an $8.8 million loss in cost of goods sold during the
year ended March 2024.
Other Derivative Information
At March 2024, accumulated OCL included $29.8 million of pre-
tax net deferred losses for foreign currency exchange contracts
and a $2.3 million pre-tax deferred gain for interest rate swap
contracts, which are expected to be reclassified to earnings
during the next 12 months. The amounts ultimately reclassified
to earnings will depend on exchange rates and interest rates in
effect when outstanding derivative contracts are settled.
Net Investment Hedge
The Company has designated its euro-denominated fixed-rate
notes
and
euro
commercial
paper
borrowings,
which
represented €2.0 billion in aggregate principal as of March 2024,
as a net investment hedge of VF’s investment in certain foreign
operations. Because this debt qualified as a nonderivative
hedging instrument, foreign currency transaction gains or losses
of the debt are deferred in the foreign currency translation and
other component of accumulated OCL as an offset to the foreign
currency translation adjustments on the hedged investments.
During the years ended March 2024, 2023 and 2022, the
Company recognized after-tax gains of $21.6 million, $5.2
million and $99.5 million, respectively, in other comprehensive
income (loss) related to the net investment hedge transaction.
Any amounts deferred in accumulated OCL will remain until the
hedged investment is sold or substantially liquidated.
NOTE 26 — SUPPLEMENTAL CASH FLOW INFORMATION
Year Ended March
(In thousands)
2024
2023
2022
Income taxes paid, net of refunds
(a)(b)
$
349,978
$
1,113,940
$
263,733
Interest paid, net of amounts capitalized
234,417
160,272
123,476
Noncash transactions:
Property, plant and equipment expenditures included in
accounts payable or accrued liabilities
15,903
44,151
45,235
Computer software costs included in accounts payable or
accrued liabilities
17,080
28,519
33,997
(a)
The year ended March 2023 included the payment related to the IRS dispute associated with VF's acquisition of The Timberland Company in
September 2011. Refer to Note 20 for additional information.
(b)
Includes both continuing and discontinued operations.
NOTE 27 — RESTRUCTURING
The Company incurs restructuring charges related to strategic
initiatives and cost optimization of business activities. Beginning
in the third quarter of Fiscal 2024, restructuring costs include
charges related to Reinvent, a transformation program to
enhance focus on brand-building and to improve operating
performance and allow VF to achieve its full potential. The
Company
currently
estimates
it
will
incur
approximately
$130.0
million
to
$150.0
million
in
restructuring
and
restructuring-related charges in connection with Reinvent, and
that substantially all actions will be completed by the end of
Fiscal 2025. Of the total estimated charges, the Company
anticipates that more than one-half will relate to severance and
employee-related benefits and the remainder will relate to asset
impairments and other non-cash write-downs. Cash payments
are generally expected to be paid within one year of charges
incurred. During the year ended March 2024, VF recorded $108.7
million of charges in connection with Reinvent, of which $69.3
million related to severance and employee-related benefits and
$39.4 million related to non-cash asset write-downs. As of
March 2024, $19.0 million of cash payments related to the
Reinvent charges have been made.
During the years ended March 2024, 2023 and 2022, VF
recognized $110.7 million, $75.7 million and $20.0 million,
respectively, of total restructuring charges related to approved
initiatives. Of the restructuring charges recognized in the year
ended March 2024, $106.2 million were reflected in selling,
general and administrative expenses and $4.5 million in cost of
goods sold. Of the restructuring charges recognized in the year
ended March 2023, $70.9 million were reflected in selling,
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
VF Corporation Fiscal 2024 Form 10-K
F-55
general and administrative expenses and $4.8 million in cost of
goods sold. Of the restructuring charges recognized in the year
ended March 2022, $18.3 million were reflected in selling,
general and administrative expenses and $1.7 million in cost of
goods sold. The Company has not recognized any significant
incremental costs related to the accruals for the year ended
March 2023 or prior periods.
Of the total restructuring accrual at March 2024, $52.5 million is
expected to be paid out within the next 12 months and is
classified within accrued liabilities (Note 14). The remaining
$8.2 million will be paid out beyond the next 12 months and thus
is classified within other liabilities.
The components of the restructuring charges are as follows:
Year Ended March
(In thousands)
2024
2023
2022
Severance and employee-related benefits
$
70,008
$
57,433
$
12,283
Asset impairments and write-downs
39,386
—
—
Accelerated depreciation
—
8,016
7,016
Contract termination and other
1,326
10,289
703
Total restructuring charges
$
110,720
$
75,738
$
20,002
Restructuring costs by business segment are as follows:
Year Ended March
(In thousands)
2024
2023
2022
Outdoor
$
242
$
1,088
$
4,523
Active
434
1,478
1,008
Work
—
9
2,315
Corporate and other
110,044
73,163
12,156
Total
$
110,720
$
75,738
$
20,002
The activity in the restructuring accrual was as follows:
(In thousands)
Severance
Other
Total
Accrual at March 2022
$
25,640
$
1,211
$
26,851
Charges
57,433
5,190
62,623
Cash payments and settlements
(41,338)
(345)
(41,683)
Adjustments to accruals
(3,236)
40
(3,196)
Impact of foreign currency
222
449
671
Accrual at March 2023
38,721
6,545
45,266
Charges
70,008
—
70,008
Cash payments and settlements
(42,684)
(5,923)
(48,607)
Adjustments to accruals
(5,660)
(287)
(5,947)
Impact of foreign currency
(54)
10
(44)
Accrual at March 2024
$
60,331
$
345
$
60,676
NOTE 28 — SUBSEQUENT EVENT
On May 14, 2024, VF’s Board of Directors declared a quarterly cash dividend of $0.09 per share, payable on June 20, 2024 to
shareholders of record on June 10, 2024.
VF CORPORATION
Notes to Consolidated Financial Statements
March 2024
F-56
VF Corporation Fiscal 2024 Form 10-K
Schedule II — Valuation and Qualifying Accounts
COL. A
COL. B
COL. C
COL. D
COL. E
ADDITIONS
Description
Balance at
Beginning
of Period
(1)
Charged to
Costs and
Expenses
(2)
Charged to
Other
Accounts
Deductions
Balance at
End of
Period
(In thousands)
Year Ended March 2024
Allowance for doubtful accounts
$
28,075
$
11,170
$
—
$
12,876
(a)
$
26,369
Valuation allowance for deferred income tax
assets
424,932
—
11,115
(b)
—
436,047
Year Ended March 2023
Allowance for doubtful accounts
27,959
3,532
—
3,416
(a)
28,075
Valuation allowance for deferred income tax
assets
616,533
—
—
191,601
(c)
424,932
Year Ended March 2022
Allowance for doubtful accounts
33,654
(716)
—
4,979
(a)
27,959
Valuation allowance for deferred income tax
assets
500,601
—
115,932
(b)
—
616,533
(a)
Deductions include accounts written off, net of recoveries, the effects of foreign currency translation and reclassifications.
(b)
Additions primarily related to circumstances where it is more likely than not that deferred income tax assets will not be realized and the effects of
foreign currency translation.
(c)
Deductions primarily related to changes in circumstances which decrease the amount of deferred income tax assets that will, more likely than
not, be realized and the effect of foreign currency translation.
VF Corporation Fiscal 2024 Form 10-K
F-57
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