V F CORP 10-Q

ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. VF Corporation (together with its subsidiaries, collectively known as “VF” or the “Company”) uses a 52/53 week fiscal year ending on the Saturday closest to March 31 of each year. The Company's current fiscal year runs from April 4, 2021 through April 2, 2022 ("Fiscal 2022"). Accordingly, this Form 10-Q presents our third quarter of Fiscal 2022. For presentation purposes herein, all references to periods ended December 2021 and December 2020 relate to the fiscal periods ended on January 1, 2022 and December 26, 2020, respectively. References to March 2021 relate to information as of April 3, 2021. All per share amounts are presented on a diluted basis and all percentages shown in the tables below and the following discussion have been calculated using unrounded numbers. References to the three and nine months ended December 2021 foreign currency amounts below reflect the changes in foreign exchange rates from the three and nine months ended December 2020 and their impact on 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. On December 28, 2020, VF acquired 100% of the outstanding shares of Supreme Holdings, Inc. ("Supreme"). The business results for Supreme have been included in the Active segment. All references to contributions from acquisition below represent the operating results of Supreme for the three and nine months ended December 2021. Refer to Note 4 to VF's consolidated financial statements for additional information on the acquisition. 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. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale. These changes have been applied to all periods presented. Refer to Note 5 to VF’s consolidated financial statements for additional information on discontinued operations. Unless otherwise noted, amounts, percentages and discussion for all periods included below reflect the results of operations and financial condition from VF’s continuing operations. RECENT DEVELOPMENTS Impact of COVID-19 As the global impact of the novel coronavirus ("COVID-19") continues, VF remains first and foremost focused on a people-first approach that prioritizes the health and well-being of its employees, customers, trade partners and consumers around the world. To help mitigate the spread of COVID-19 and in response to health advisories and governmental actions and regulations, VF has modified its business practices including the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines. VF has also implemented measures that are designed to ensure the health, safety and well-being of associates employed in its distribution, fulfillment and manufacturing centers around the world. At the beginning of the first quarter of Fiscal 2022, over 95% of VF-operated retail stores were open in North America, with all VF-owned retail stores reopened by the end of the first quarter. In the Europe region, approximately 60% of VF-operated retail stores were closed at the beginning of the first quarter of Fiscal 2022, with all stores reopened by the end of the first quarter. In the Asia-Pacific region, nearly all VF-operated retail stores were open at the beginning of the first quarter of Fiscal 2022; however, approximately 5% reclosed by the end of the first quarter. In comparison, at the beginning of the first quarter of Fiscal 2021, all VF-operated retail stores in North America and in the Europe region were closed. By the end of the first quarter of Fiscal 2021, approximately 75% and 90% of VF-operated retail stores were open in North America and the Europe region, respectively. In the Asia-Pacific region, approximately 5% of VF-owned retail stores were closed at the beginning of the first quarter of Fiscal 2021, with all opened by the end of the first quarter of Fiscal 2021. At the beginning of the second quarter of Fiscal 2022, all VF-operated retail stores in North America and in the Europe region were open and remained open during the quarter. In the Asia-Pacific region, approximately 5% of VF-operated retail stores were closed at the beginning of the second quarter of Fiscal 2022 with nearly all stores open at the end of the second quarter. In comparison, at the beginning of the second quarter of Fiscal 2021, approximately 75% of the VF-operated retail stores in North America were open, and over 95% were open at the end of the second quarter of Fiscal 2021. During the second quarter of Fiscal 2021, nearly all of the VF-operated retail stores in the Europe and Asia-Pacific regions were open. At the beginning of the third quarter of Fiscal 2022, all VF-operated retail stores in North America were open and remained open during the quarter. In the Europe region, all VF-operated stores were open at the beginning of the third quarter of Fiscal 2022; however, approximately 6% of stores reclosed by the end of the third quarter. In the Asia-Pacific region, nearly all VF-operated stores were open at the beginning of the third quarter of Fiscal 2022, and all stores were open by the end of the third quarter. In comparison, at the beginning of the third quarter of 29 VF Corporation Q3 FY22 Form 10-Q Table of Contents Fiscal 2021, approximately 95% of the VF-operated retail stores in North America were open, however due to stores that reclosed, approximately 85% of stores were open at the end of the third quarter of Fiscal 2021. In the Europe region, nearly all VF-operated retail stores were open at the beginning of the third quarter of Fiscal 2021, however due to stores that reclosed, approximately 50% of stores were open at the end of the third quarter of Fiscal 2021. During the third quarter of Fiscal 2021, nearly all of the VF-operated retail stores in the Asia-Pacific regions were open. VF is continuing to monitor the COVID-19 outbreak globally and will comply with guidance from government entities and public health authorities to prioritize the health and well-being of its employees, customers, trade partners and consumers. As COVID-19 uncertainty continues, retail store reclosures may occur. Consistent with VF’s long-term strategy, the Company’s digital platform remains a high priority through which its brands stay connected with consumer communities while providing experiential content. Prior to the COVID-19 pandemic, consumer spending had started shifting to brand e-commerce sites and other digital platforms, which accelerated due to changes in the retail landscape resulting from the COVID-19 pandemic. COVID-19 has also impacted some of VF's suppliers, including third-party manufacturers, logistics providers and other vendors. At this time, the majority of VF's supply chain is operational. Suppliers are complying with local health advisories and governmental restrictions which has resulted in product delays. The resurgence of COVID-19 lockdowns in key sourcing countries has resulted in additional manufacturing capacity constraints during Fiscal 2022; however, the situation has improved over time. Additionally, Fiscal 2022 has been impacted by continued port congestion, lengthened transit times, equipment availability and other logistics challenges. These issues have caused significant product delays, which has resulted in challenges to timely meet customer demand in Fiscal 2022. VF is working with its suppliers to minimize disruption and is employing expedited freight as needed. VF's distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols. The COVID-19 pandemic is ongoing and dynamic in nature, and has driven global uncertainty and disruption. While we are not able to determine the ultimate length and severity of the COVID-19 pandemic, we expect ongoing disruption to our business. Enterprise Protection Strategy VF has taken a number of actions to advance its Enterprise Protection Strategy in response to the COVID-19 pandemic. At December 2021, VF had approximately $1.3 billion of cash and equivalents. Additionally, VF had approximately $2.2 billion available for borrowing against its Global Credit Facility, subject to certain restrictions. Actions VF has taken to support its business in response to the COVID-19 pandemic included the Company's decision to temporarily pause its share repurchase program on April 7, 2020. The Company decided to reinstate the program during the third quarter of Fiscal 2022 and completed $300.0 million of repurchases during the period, which leaves VF with $2.5 billion remaining under its share repurchase authorization. The Company paid cash dividends of $0.50 per share and $1.48 per share during the three and nine months ended December 2021, respectively, and has declared a cash dividend of $0.50 per share that is payable in the fourth quarter of Fiscal 2022. Subject to approval by its Board of Directors, VF intends to continue to pay its regularly scheduled dividend. The Company has also commenced a multi-year initiative designed to enable our ability to accelerate and advance VF's business model transformation. One of the key objectives of this initiative is to deliver global cost savings over a three-year period that will be used to support the transformation agenda and highest-priority growth drivers. As VF continues to actively monitor the situation and advance our business model transformation, we may take further actions that affect our operations. We believe the Company has sufficient liquidity and flexibility to operate and continue to execute our strategy during the disruptions caused by the COVID-19 pandemic and related governmental actions and regulations and health authority advisories, and meet its obligations as they become due. However, due to the uncertainty of the duration and severity of the COVID-19 pandemic, governmental actions in response to the pandemic, and the impact on us and our consumers, customers and suppliers, there is no certainty that the measures we take will be sufficient to mitigate the risks posed by COVID-19. See Part I, “Item 1A. Risk Factors” in the Fiscal 2021 Form 10-K for additional discussion. HIGHLIGHTS OF THE THIRD QUARTER OF FISCAL 2022 • Revenues were up 22% to $3.6 billion compared to the three months ended December 2020, including the recovery from the negative impact of COVID-19 on the prior year period and a 7% contribution from the Supreme acquisition. • Outdoor segment revenues increased 23% to $1.9 billion compared to the three months ended December 2020. • Active segment revenues increased 25% to $1.4 billion compared to the three months ended December 2020, including a $193.2 million (17%) contribution from the Supreme acquisition and a 1% unfavorable impact from foreign currency. • Work segment revenues increased 6% to $285.1 million compared to the three months ended December 2020, including a 1% favorable impact from foreign currency. • Direct-to-consumer revenues were up 30% over the 2020 period, including a 13% contribution from the Supreme acquisition. E-commerce revenues increased 21% in the current period, including an 18% contribution from the Supreme acquisition. Direct-to-consumer revenues VF Corporation Q3 FY22 Form 10-Q 30 Table of Contents accounted for 55% of VF's net revenues for the three months ended December 2021. • International revenues increased 19% compared to the three months ended December 2020, including a 1% unfavorable impact from foreign currency. Greater China (which includes Mainland China, Hong Kong and Taiwan) revenues decreased 6%, including a 3% favorable impact from foreign currency. International revenues represented 46% of VF's net revenues for the three months ended December 2021. • Gross margin increased 140 basis points to 56.1% compared to the three months ended December 2020, primarily driven by reduced promotional activity, which was partially offset by increased expedited freight costs. • Earnings per share was $1.32 compared to $0.83 in the 2020 period. The increase was primarily driven by recovery from the negative impact of COVID-19 on the prior year period and contribution from the Supreme acquisition. ANALYSIS OF RESULTS OF OPERATIONS Consolidated Statements of Operations The following table presents a summary of the changes in net revenues for the three and nine months ended December 2021 from the comparable periods in 2020: (In millions) Three Months Ended December Nine Months Ended December Net revenues — 2020 $ 2,971.5 $ 6,656.2 Organic 463.8 1,795.9 Acquisition 193.2 438.5 Impact of foreign currency (4.1) 126.6 Net revenues — 2021 $ 3,624.4 $ 9,017.2 VF reported a 22% and 35% increase in revenues for the three and nine months ended December 2021, respectively, compared to the 2020 periods. The revenue increase in both periods was primarily driven by recovery from the negative impact of COVID-19 on demand and distribution channels in the prior year periods, which included temporary closures of VF-operated retail and VF's wholesale customer stores. These growth rates have been impacted in the current year by supply chain disruption, including port delays, lengthened transit times, logistics challenges and supplier production issues. The three and nine months ended December 2021 also included a $193.2 million (7%) and $438.5 million (6%) contribution from the Supreme acquisition, respectively. The increase in the nine months ended December 2021 also included a 1% favorable impact from foreign currency. Reve nues increased ac ross all regions in the three and nine months ended December 2021. The largest increases were in the United States, Europe and Americas (non-U.S.) regions, which experienced the most significant negative impact of COVID-19 in the prior year p eriods. Revenues in the Asia-Pacific region in the three and nine months ended December 2021 have been negatively impacted by COVID-19 resurgence, which has caused disruption and consumption pressure in the region, particularly in Greater China. Revenues increased in both our wholesale and direct-to-consumer channels in the three and nine months ended December 2021. The overall increase in the direct-to-consumer channel was driven by reopenings of our owned retail stores, which had temporary closures in the prior year periods due to COVID-19, and the contribution from the Supreme acquisition during the three and nine months ended December 2021. The overall increase in the wholesale channel also reflects recovery from the negative impact of COVID-19 on the prior year periods. Additional details on revenues are provided in the section titled “Information by Reportable Segment.” The following table presents the percentage relationships to net revenues for components of the Consolidated Statements of Operations: Three Months Ended December Nine Months Ended December 2021 2020 2021 2020 Gross margin (net revenues less cost of goods sold) 56.1 % 54.7 % 55.3 % 52.9 % Selling, general and administrative expenses 37.4 40.8 39.3 45.6 Operating margin 18.7 % 13.9 % 16.0 % 7.3 % Gross margin increased 140 and 240 basis points in the three and nine months ended December 2021, respectively, compared to the 2020 periods. The increase in both periods was primarily d riven by higher levels of full-price sales as increased promotional activity was used to clear elevated inventory levels relative to demand in the prior year periods, primarily due to the negative impact of COVID-19. The three and nine months ended December 2021 also included a 20 and 30 basis point contribution from the Supreme acquisition, respectively. The increase in gross margin in both periods was partially offset by expedited freight costs, which were a direct result of the supply chain disruption. 31 VF Corporation Q3 FY22 Form 10-Q Table of Contents Selling, general and administrative expenses as a percentage of total revenues decreased during both the three and nine months ended December 2021 compared to the 2020 periods, primarily reflecting leverage of operating expenses due to increased revenues compared to the prior year periods, which were negatively impacted by COVID-19. Selling, general and administrative expenses increased $138.8 million and $513.1 million in the three and nine months ended December 2021, respectively, compared to the 2020 periods, primarily due to cost controls taken in the prior year periods in response to COVID-19 and payroll relief in the prior year periods from the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and other governmental packages. The Company recognized $8.3 million and $76.0 million during the three and nine months ended December 2020, respectively, as a result of relief from the CARES Act and other governmental packages. The increase in both periods was also due to continued investments in direct-to-consumer and digital strategic growth initiatives, advertising expenses, higher distribution spending and the impact from Supreme. The increases in the three and nine months ended December 2021 were partially offset by a $50.0 million and $158.0 million decrease in the estimated fair value of the contingent consideration liability associated with the Supreme acquisition, which were recognized in the selling, general and administrative expense line item during the three and nine months ended December 2021, respectively. Net interest expen se increased $1.6 million and $9.9 million during the three and nine months ended December 2021, respectively, compared to the 2020 periods. The increase in net interest expense in both the three and nine months ended December 2021 was primarily due to lower invested balances and lower investment interest rates. Total outstanding debt averaged $5.7 billion for both the nine months ended December 2021 and 2020, with a weighted average interest rate of 2.1% for both periods. Loss on debt extinguishment of $3.6 million was recorded in the three and nine months ended December 2021 as a result of the early redemption of $500.0 million in aggregate principal amount of VF's outstanding 2.050% Senior Notes due April 2022. Other income (expense), net decreased $6.6 million and increased $43.6 million during the three and nine months ended December 2021, respectively, compared to the 2020 periods. The decrease in the three months ended December 2021 was primarily due to higher pension benefit costs driven by an increase in settlement charges. The increase in the nine months ended December 2021 was primarily due to a $42.4 million expense recorded in the three months ended June 2020 related to the release of currency translation amounts associated with the substantial liquidation of foreign entities in certain countries in South America. The effective income tax rate for the nine months ended December 2021 was 16.0% compared to 20.2% in the 2020 period. The nine months ended December 2021 included a net discrete tax expense of $43.7 million, which included a $92.3 million net tax expense related to unrecognized tax benefits and interest, a $9.6 million net tax benefit related to return to accrual adjustments, a $35.2 million net tax benefit related to withholding taxes on prior foreign earnings, a $1.7 million tax benefit related to stock compensation, and a $2.4 million net tax benefit related to tax rate change on deferred tax items. Excluding the $43.7 million net discrete tax expense in the 2021 period, the effective income tax rate would have been 12.8%. The nine months ended December 2020 included a net discrete tax expense of $3.7 million, which included a $15.2 million net tax expense related to unrecognized tax benefits and interest, a $2.3 million tax benefit related to stock compensation, a $4.9 million net tax benefit related to return to accrual adjustments and a $4.3 million net tax benefit related to withholding taxes on prior foreign earnings. Excluding the $3.7 million net discrete tax expense in the 2020 period, the effective income tax rate would have been 19.2%. Without discrete items, the effective income tax rate for the nine months ended December 2021 decreased by 6.4% compared with the 2020 period primarily due to losses generated in the prior year and more favorable expectations to utilize foreign tax credits generated in the current year. As a result of the above, income from continuing operations in the three months ended December 2021 was $517.8 million ($1.32 per diluted share) compared to $327.7 million ($0.83 per diluted share) in the 2020 period, and income from continuing operations in the nine months ended December 2021 was $1.1 billion ($2.89 per diluted share) compared to $293.2 million ($0.75 per diluted share) in the 2020 period. 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. Included in this Other category are results primarily related to the sale of non-VF products and sourcing activities related to transition services. Refer to Note 15 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 Q3 FY22 Form 10-Q 32 Table of Contents The following tables present a summary of the changes in segment revenues and profit in the three and nine months ended December 2021 from the comparable periods in 2020 and revenues by region for our Top 4 brands for the three and nine months ended December 2021 and 2020: Segment Revenues: Three Months Ended December (In millions) Outdoor Active Work Other Total Segment revenues — 2020 $ 1,571.0 $ 1,127.1 $ 270.2 $ 3.2 $ 2,971.5 Organic 358.2 94.3 14.2 (2.9) 463.8 Acquisition — 193.2 — — 193.2 Impact of foreign currency (0.8) (4.0) 0.7 — (4.1) Segment revenues — 2021 $ 1,928.4 $ 1,410.6 $ 285.1 $ 0.3 $ 3,624.4 Nine Months Ended December (In millions) Outdoor Active Work Other Total Segment revenues — 2020 $ 3,066.7 $ 2,898.6 $ 686.2 $ 4.7 $ 6,656.2 Organic 931.9 704.8 163.3 (4.1) 1,795.9 Acquisition — 438.5 — — 438.5 Impact of foreign currency 54.2 62.9 9.5 — 126.6 Segment revenues — 2021 $ 4,052.8 $ 4,104.8 $ 859.0 $ 0.6 $ 9,017.2 Segment Profit (Loss): Three Months Ended December (In millions) Outdoor Active Work Other Total Segment profit (loss) — 2020 $ 311.8 $ 201.4 $ 16.9 $ (4.5) $ 525.6 Organic 135.8 0.8 30.7 4.5 171.8 Acquisition — 53.7 — — 53.7 Impact of foreign currency 2.8 (1.4) 0.1 — 1.5 Segment profit (loss) — 2021 $ 450.4 $ 254.5 $ 47.7 $ — $ 752.6 Nine Months Ended December (In millions) Outdoor Active Work Other Total Segment profit (loss) — 2020 $ 283.5 $ 467.6 $ 13.7 $ (9.3) $ 755.5 Organic 371.4 235.5 134.7 8.6 750.2 Acquisition — 93.2 — — 93.2 Impact of foreign currency 7.9 13.4 2.2 — 23.5 Segment profit (loss) — 2021 $ 662.8 $ 809.7 $ 150.6 $ (0.7) $ 1,622.4 33 VF Corporation Q3 FY22 Form 10-Q Table of Contents Top Brand Revenues: Three Months Ended December 2021 (In millions) Vans ® The North Face ® Timberland ® (a) Dickies ® Total United States $ 645.8 $ 620.6 $ 274.1 $ 149.6 $ 1,690.1 International: Europe 194.6 415.7 204.6 18.6 833.5 Asia-Pacific 148.9 146.4 84.5 37.4 417.2 Americas (non-U.S.) 71.2 57.6 30.1 5.8 164.7 Global $ 1,060.5 $ 1,240.3 $ 593.3 $ 211.4 $ 3,105.5 Three Months Ended December 2020 (In millions) Vans ® The North Face ® Timberland ® (a) Dickies ® Total United States $ 593.5 $ 518.2 $ 232.6 $ 112.7 $ 1,457.0 International: Europe 159.4 297.1 180.2 31.3 668.0 Asia-Pacific 178.8 113.6 94.6 51.9 438.9 Americas (non-U.S.) 50.3 43.2 28.9 6.5 128.9 Global $ 982.0 $ 972.1 $ 536.3 $ 202.4 $ 2,692.8 Nine Months Ended December 2021 (In millions) Vans ® The North Face ® Timberland ® (a) Dickies ® Total United States $ 1,805.1 $ 1,211.5 $ 644.0 $ 455.2 $ 4,115.8 International: Europe 669.6 852.4 472.2 58.2 2,052.4 Asia-Pacific 492.9 303.1 181.8 111.6 1,089.4 Americas (non-U.S.) 203.1 123.2 90.1 15.7 432.1 Global $ 3,170.7 $ 2,490.2 $ 1,388.1 $ 640.7 $ 7,689.7 Nine Months Ended December 2020 (In millions) Vans ® The North Face ® Timberland ® (a) Dickies ® Total United States $ 1,378.0 $ 960.5 $ 459.1 $ 305.0 $ 3,102.6 International: Europe 484.7 559.3 396.5 74.6 1,515.1 Asia-Pacific 482.3 233.7 194.2 120.2 1,030.4 Americas (non-U.S.) 130.3 82.9 64.5 17.3 295.0 Global $ 2,475.3 $ 1,836.4 $ 1,114.3 $ 517.1 $ 5,943.1 (a) The global Timberland brand includes Timberland ® , reported within the Outdoor segment and Timberland PRO ® , reported within the Work segment. VF Corporation Q3 FY22 Form 10-Q 34 Table of Contents 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 Three Months Ended December Nine Months Ended December (Dollars in millions) 2021 2020 Percent Change 2021 2020 Percent Change Segment revenues $ 1,928.4 $ 1,571.0 22.7 % $ 4,052.8 $ 3,066.7 32.2 % Segment profit 450.4 311.8 44.5 % 662.8 283.5 133.8 % Operating margin 23.4 % 19.8 % 16.4 % 9.2 % The Outdoor segment includes the following brands: The North Face ® , Timberland ® , Smartwool ® , Icebreaker ® and Altra ® . Global revenues for Outdoor increased 23% in the three months ended December 2021 compared to 2020, including recovery from the negative impact of COVID-19 on the prior year period. Revenues in the United States increased 22% . Revenues in the Europe region increased 30%, including a 2% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region increased 11%, including a 3% favorable impact from foreign currency. Revenues in the Americas (non-U.S.) region increased 21% , including a 4% favorable impact from foreign currency. Global revenues for Outdoor increased 32% in the nine months ended December 2021 compared to 2020, including a 2% favorable impact due to foreign currency. The over all increase i n revenues during the period was driven by recovery from the negative impact of COVID-19 on the prior year period. Revenues in the United States increased 32%. Revenues in the Europe region increased 39%, including a 3% favorable impact from foreign currency. Revenues in the Asia-Pacific region increased 13%, including a 5% favorable impact from foreign currency. Revenues in the Americas (non-U.S.) region increased 45%, including a 7% favorable impact from foreign currency. Global revenues for The North Face ® brand increased 28% and 36% in the three and nine months ended December 2021, respectively, compared to the 2020 periods. This includes a 1% and 2% favorable impact from foreign currency in the three and nine months ended December 2021, respectively. The overall revenue growth reflects increases in all regions and channels during the three and nine months ended December 2021. The overall growth was led by the Europe region, which increased 40% and 52% in the three and nine months ended December 2021, respectively, including a 1% unfavorable and 3% favorable impact from foreign currency, respectively. Global revenues for the Timberland ® brand increased 11% and 24% in the three and nine months ended December 2021, respectively, compared to the 2020 periods, including a 1% unfavorable and 2% favorable impact from foreign currency in the three and nine months ended December 2021, respectively. The increase in both periods was driven by recovery from the negative impact of COVID-19 on demand and distribution channels in the prior year periods. The overall growth was led by an increase of 20% and 45% in the United States in the three and nine months ended December 2021, respectively. The increase in both periods was partially offset by an 11% and 6% decrease in the Asia-Pacific region during the three and nine months ended December 2021, respectively, including a 1% and 3% favorable impact from foreign currency, respectively. Revenues in the Asia-Pacific region have been negatively impacted by COVID-19 resurgence during both periods. Global direct-to-consumer revenues for Outdoor increased 20% and 23% in the three and nine months ended December 2021, respectively, compared to the 2020 periods, including a 2% favorable impact from foreign currency in the nine months ended December 2021. The increase in both periods was primarily due to the reopening of VF-operated retail stores, which had significant temporary closures in the prior year periods due to COVID-19. Global wholesale revenues increased 26% and 39% in the three and nine months ended December 2021, respectively, compared to the 2020 periods, including a 2% favorable impact from foreign currency in the nine months ended December 2021. The increases reflect recovery from the negative impact of COVID-19 on the prior year periods. Operating margin increased in the three and nine months ended December 2021 compared to the 2020 periods primarily due to leverage of operating expenses on increased revenues and reduced promotional activity compared to the prior year periods, which were negatively impacted by COVID-19. The increase in both periods was partially offset by expedited freight costs and continued investments in digital strategic growth initiatives. The prior year periods also included cost controls taken in response to COVID-19 and payroll relief from the CARES Act and other governmental packages. 35 VF Corporation Q3 FY22 Form 10-Q Table of Contents Active Three Months Ended December Nine Months Ended December (Dollars in millions) 2021 2020 Percent Change 2021 2020 Percent Change Segment revenues $ 1,410.6 $ 1,127.1 25.1 % $ 4,104.8 $ 2,898.6 41.6 % Segment profit 254.5 201.4 26.4 % 809.7 467.6 73.2 % Operating margin 18.0 % 17.9 % 19.7 % 16.1 % The Active segment includes the following brands: Vans ® , Supreme ® , Kipling ® , Napapijri ® , Eastpak ® , JanSport ® and Eagle Creek ® . Global revenues for Active increased 25% in the three months ended December 2021 compared to the 2020 period, including a 1% unfavorable impact from foreign currency. Included in these results are revenues from the Supreme acquisition of $193.2 million, which provided a 17% contribution to the overall increase. The overall increase in revenues during the period was driven by recovery from the negative impact of COVID-19 on the prior year period. Revenues in the United States increased 27%, including an 18% contribution from the Supreme acquisition. Revenues in the Europe region increased 30%, including a 3% unfavorable impact from foreign currency and a 12% contribution from the Supreme acquisition. Revenues in the Asia-Pacific region increased 8%, driven by a 1% favorable impact from foreign currency and a 25% contribution from the Supreme acquisition, which were partially offset by a 23% decrease in Greater China primarily due to the negative impact of COVID-19 resurgence. Revenues in the Americas (non-U.S.) region increased 43% . Global revenues for Active increased 42% in the nine months ended December 2021 compared to the 2020 period, including a 3% favorable impact from foreign currency. Included in these results are revenues from the Supreme acquisition of $438.5 million, which provided a 16% contribution to the overall increase. The overall increase in revenues during the period was driven by recovery from the negative impact of COVID-19 on the prior year period. Revenues in the United States increased 49%, including an 18% contribution from the Supreme acquisition. Revenues in the Europe region increased 39%, including a 3% favorable impact from foreign currency and an 8% contribution from the Supreme acquisition. Revenues in the Asia-Pacific region increased 20%, driven by a 5% favorable impact from foreign currency and a 19% contribution from the Supreme acquisition. Rev enues in the Americas (non-U.S.) region increased 54%, including an 8% favorable impact from foreign currency. Vans ® brand global revenues increased 8% and 28% in the three and nine months ended December 2021, respectively, compared to the 2020 periods. This includes a 2% favorable impact from foreign currency in the nine months ended December 2021. The increase in both periods was driven by recovery from the negative impact of COVID-19 on demand and distribution channels in the prior year periods. The overall growth in the three and nine months ended December 2021 was led by an increase of 9% and 31% in the United States, respectively, and an increase of 22% and 38% in the Europe region, respectively, including a 2% unfavorable and 4% favorable impact from foreign currency in the three and nine months ended December 2021, respectively. The increase in the three months ended December 2021 was partially offset by a 17% decrease in the Asia-Pacific region, including a 1% favorable impact from foreign currency, primarily due to the negative impact of COVID-19 resurgence. Global direct-to-consumer revenues for Active increased 46% and 65% in the three and nine months ended December 2021, respectively, compared to the 2020 periods, including a 2% favorable impact from foreign currency in the nine months ended December 2021. Excluding revenues from the Supreme acquisition, global direct-to-consumer revenues increased 16% and 36% in the three and nine months ended December 2021, respectively, including a 1% unfavorable and 2% favorable impact from foreign currency in the three and nine months ended December 2021, respectively. The increase in both periods was primarily due to the reopening of VF-operated retail stores, which had significant temporary closures in the prior year periods due to COVID-19. Global wholesale revenues decreased 4% and increased 16% in the three and nine months ended December 2021, respectively, and included a 1% unfavorable and 2% favorable impact from foreign currency in the respective periods. The increase in the nine months ended December 2021 reflects recovery from the negative impact of COVID-19 on the prior year period. Operating margin increased in the three and nine months ended December 2021 compared to the 2020 periods The increase in both the three and nine months ended December 2021 was primarily due to leverage of operating expenses on increased revenues and less promotional activity compared to the prior year periods, which was negatively impacted by COVID-19. The increase was partially offset by expedited freight costs and continued investments in digital strategic growth initiatives. The prior year periods also included cost controls taken in response to COVID-19 and payroll relief from the CARES Act and other governmental packages. VF Corporation Q3 FY22 Form 10-Q 36 Table of Contents Work Three Months Ended December Nine Months Ended December (Dollars in millions) 2021 2020 Percent Change 2021 2020 Percent Change Segment revenues $ 285.1 $ 270.2 5.5 % $ 859.0 $ 686.2 25.2 % Segment profit 47.7 16.9 182.1 % 150.6 13.7 * Operating margin 16.7 % 6.3 % 17.5 % 2.0 % *Calculation not meaningful The Work segment includes the following brands: Dickies ® and Timberland PRO ® . Global Work revenues increased 6% in the three months ended December 2021 compared to the 2020 period, including a 1% favorable impact from foreign currency. The increase in revenues during the period was attributed to overall growth in both the Dickies ® and Timberland PRO ® brands. Revenues in the United States increased 25% . Revenues in the Europe region decreased 42% due to strategic business model changes. Revenues in the Asia-Pacific region decreased 28%, including a 1% favorable impact from foreign currency, driven by declines in Greater China primarily due to the negative impact of COVID-19 resurgence. Revenues in the Americas (non-U.S.) region increased 3%, including a 4% favorable impact from foreign currency. Global Work revenues increased 25% in the nine months ended December 2021 compared to the 2020 period, including a 1% favorable impact from foreign currency. The increase in revenues during the period was attributed to overall growth in both the Dickies ® and Timberland PRO ® brands, including recovery from the negative impact of COVID-19 on demand in the prior year period. Revenues in the United States increased 43%. Revenues in the Europe region decreased 24%, including a 2% favorable impact from foreign currency, due to strategic business model changes. Revenues in the Asia-Pacific region decreased 7%, including a 4% favorable impact from foreign currency, driven by declines in Greater China primarily due to the negative impact of COVID-19 resurgence. Revenues in the Americas (non-U.S.) region increased 15%, including an 8% favorable impact from foreign currency. Dickies ® brand global revenues increased 4% and 24% in the three and nine months ended December 2021, respectively, compared to the 2020 periods, including a 1% favorable impact from foreign currency in the nine months ended December 2021. The growth in the three and nine months ended December 2021 was led by an increase of 33% and 49% in the United States, driven by growth in the wholesale channel and in work-inspired lifestyle products. Operating margin increased in the three and nine months ended December 2021 compared to the 2020 periods. The increase in the three and nine months ended December 2021 was primarily due to leverage of operating expenses on increased revenues compared to the prior year periods, which were negatively impacted by COVID-19. The increase in both periods was also due to lower cost optimization activity and other charges indirectly related to the strategic review of the Occupational Workwear business in the prior year and other operating efficiency gains. The increase in both periods was partially offset by expedited freight costs and continued investments in digital strategic growth initiatives. The prior year periods also included cost controls taken in response to COVID-19 and payroll relief from the CARES Act and other governmental packages. Reconciliation of Segment Profit to Income Before Income Taxes There are three types of costs necessary to reconcile total segment profit, as discussed in the preceding paragraphs, to consolidated income from continuing operations before income taxes. These costs are (i) corporate and other expenses, discussed below, (ii) interest expense, net, and (iii) loss on debt extinguishment, which were both discussed in the “Consolidated Statements of Operations” section. Three Months Ended December Nine Months Ended December (Dollars in millions) 2021 2020 Percent Change 2021 2020 Percent Change Corporate and other expenses $ 74.2 $ 107.1 (30.7) % $ 166.1 $ 297.4 (44.2) % Interest expense, net 33.4 31.8 5.1 % 100.5 90.7 10.9 % 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. The decrease in the three and nine months ended December 2021 was primarily attributed to a $50.0 million and $158.0 million decrease in the estimated fair value of the contingent consideration liability associated with the Supreme acquisition in the three and nine months ended December 2021, respectively. The decrease in both periods was also due to lower charges associated with cost optimization and other activities indirectly related to the strategic review of the Occupational Workwear business. In addition, the nine months ended December 2020 included a $42.4 million expense related to the release of currency translation amounts associated with the substantial liquidation of foreign entities in certain countries in South America. The decrease in the three and nine months ended December 2021 was partially offset by increased technology spending in the current year and lower discretionary spending in the prior year due to cost controls in response to COVID-19. The decrease in the nine months ended December 2021 was partially offset by higher costs related to a transformation initiative for our Asia-Pacific regional operations in the current year. 37 VF Corporation Q3 FY22 Form 10-Q Table of Contents International Operations International revenues increased 19% and 30% in the three and nine months ended December 2021, respectively, compared to the 2020 periods driven by recovery from the negative impact of COVID-19 on the prior year periods, and included a 5% and 6% contribution from the Supreme acquisition in the respective periods. Foreign currency had an unfavorable impact of 1% and a favorable impact of 4% on international revenue in the three and nine months ended December 2021, respectively. Revenues in Europe increased 26% and 36% in the three and nine months ended December 2021, respectively, including a 2% unfavorable and 3% favorable impact from foreign currency in the three and nine months ended December 2021, respectively. In the Asia-Pacific region, revenues increased 5% and 14% in the three and nine months ended December 2021, respectively, and included a 10% and 9% contribution from the Supreme acquisition in the respective periods. Foreign currency had a favorable impact of 2% and 4% on Asia-Pacific revenue in the three and nine months ended December 2021, respectively. Revenues in Greater China decreased 6% and increased 5% in the three and nine months ended December 2021, respectively, including a 3% and 6% favorable impact from foreign currency in the three and nine months ended December 2021, respectively. The Asia-Pacific region was negatively impacted by COVID-19 resurgence during the three and nine months ended December 2021. Revenues in the Americas (non-U.S.) region increased 27% and 45% in the three and nine months ended December 2021, respectively, including a 3% and 8% favorable impact from foreign currency in the three and nine months ended December 2021, respectively. International revenues were 46% and 47% of total revenues in the three-month periods ended December 2021 and 2020, respectively, and 47% and 49% of total revenues in the nine-month periods ended December 2021 and 2020, respectively. Direct-to-Consumer Operations Direct-to-consumer revenues increased 30% and 43% in the three and nine months ended December 2021, respectively, compared to the 2020 periods, including a 2% favorable impact from foreign currency in the nine months ended December 2021. The three and nine months ended December 2021 included a 13% and 15% contribution from the Supreme acquisition, respectively. The increase in direct-to-consumer revenues was primarily due to the reopening of VF-operated retail stores, which had significant temporary closures in the prior year periods due to COVID-19. Our e-commerce business grew 21% and 23% in the three and nine months ended December 2021, respectively, including a 2% favorable impact from foreign currency in the nine months ended December 2021. The three and nine months ended December 2021 included an 18% and 21% contribution from the Supreme acquisition, respectively. Excluding the Supreme acquisition, e-commerce revenues increased 3% and 2% in the three and nine months ended December 2021, respectively, including a 2% favorable impact from foreign currency in the nine months ended December 2021. The deceleration of e-commerce growth rates when compared to the prior year was primarily due to the reopening of VF-operated retail and wholesale customer stores, which had significant temporary closures in the prior year periods due to COVID-19, as consumer spending shifted to VF's brand e-commerce sites and other digital platforms during the temporary store closures. Consistent with VF’s long-term strategy, the Company’s digital platform remains a high priority and e-commerce revenues in the three and nine months ended December 2021 remain well above levels in periods prior to COVID-19. There were 1,354 VF-owned retail stores at December 2021 compared to 1,396 at December 2020. Direct-to-consumer revenues were 55% and 51% of total revenues in the three-month periods ended December 2021 and 2020, respectively, and 47% and 45% of total revenues in the nine-month periods ended December 2021 and 2020, respectively. VF Corporation Q3 FY22 Form 10-Q 38 Table of Contents ANALYSIS OF FINANCIAL CONDITION Consolidated Balance Sheets The following discussion refers to significant changes in balances at December 2021 compared to March 2021: • Increase in accounts receivable — primarily due to the seasonality of th e business and increased wholesale shipments. • Increase in inv entories — primarily due to recovery from the negative impact of COVID-19 on the comparative period. • Decrease in short-term investments — due to the sale of short-term investments. • Increase in short-term borrowings — primarily due to amounts related to VF's supply chain financing program. • Increase in the current portion of long-term debt — due to the reclassification of $500.0 million of long-term notes due in April 2022. • Increase in accrued liabilities — primarily due to an increase in the accrual for unrecognized tax benefits and the reclassification of a portion of the accrual from other liabilities due to the timing of expected settlement, and the reclassification of the contingent consideration liability associated with the Supreme acquisition from other liabilities. • Decrease in long-term debt — due to the reclassification of $500.0 million of long-term notes due in April 2022 and the early redemption of $500.0 million of long-term notes in December 2021. • Decrease in other liabilities — primarily due to lower deferred income taxes, a decrease in the accrual for unrecognized tax benefits resulting from the reclassification of a portion of the accrual to accrued liabilities, and the reclassification of the contingent consideration liability associated with the Supreme acquisition to accrued liabilities. The following discussion refers to significant changes in balances at December 2021 compared to December 2020: • Increase in inventories — primarily due to recovery from the negative impact of COVID-19 on the prior year period and amounts related to the Supreme acquisition. • Decrease in short-term investments — due to the sale and maturity of short-term investments. • Increase in intangible assets — primarily due to the acquired indefinite-lived Supreme ® trademark intangible asset of $1.2 billion recorded in connection with the acquisition. • Increase in goodwill — primarily due to the amounts recorded in connection with the Supreme acquisition of $1.25 billion. • Decrease in short-term borrowings — primarily due to the repayment of commercial paper borrowings, partially offset by amounts related to VF's supply chain financing program. • Increase in the current portion of long-term debt — due to the reclassification of $500.0 million of long-term notes due in April 2022. • Increase in accounts payable — driven by the timing of payments made to vendors and an overall reduction in purchases and spending resulting from the COVID-19 impact in the prior year period. • Increase in accrued liabilities — primarily due to an increase in the accrual for unrecognized tax benefits and the reclassification of a portion of the accrual from other liabilities due to the timing of expected settlement , and the contingent consideration liability recorded in connection with the Supreme acquisition. • Decrease in long-term debt — due to the reclassification of $500.0 million of long-term notes due in April 2022 and the early redemption of $500.0 million of long-term notes in December 2021. • Decrease in other liabilities — primarily due to a decrease in the accrual for unrecognized tax benefits resulting from the reclassification of a portion of the accrual to accrued liabilities. Liquidity and Capital Resources We consider the following to be measures of our liquidity and capital resources: December March December (Dollars in millions) 2021 2021 2020 Working capital $1,376.8 $2,113.1 $4,346.7 Current ratio 1.4 to 1 2.0 to 1 2.8 to 1 Net debt to total capital 59.4% 68.2% 58.7% The decrease in the current ratio at December 2021 comp ared to March 2021 was primarily due to a net increase in current liabilities driven by a higher current portion of long-term debt and higher accrued liabilities, as discussed in the "Consolidated Balance Sheets" section above. The decrease in the current ratio at December 2021 compared to December 2020 was primarily due to a net decrease in current assets driven by lower cash balances due to the timing of proceeds from long-term debt during the nine months ended December 2020, as discussed in the "Cash Provided (Used) by Financing Activities" section below and a net increase in current liabilities driven by a higher current portion of long-term debt and higher accrued liabilities, as discussed in the "Consolidated Balance Sheets" section above . For the ratio of net debt to total capital, net debt is defined as short-term and long-term borrowings, in addition to operating 39 VF Corporation Q3 FY22 Form 10-Q Table of Contents lease liabilities, net of unrestricted cash. Total capital is defined as net debt plus stockholders’ equity. The decrease in the net debt to total capital ratio at December 2021 compared to March 2021 was primarily driven by a decrease in net debt due to the $500.0 million early redemption of 2.050% Senior Notes due April 2022 during December 2021 and higher cash balances at December 2021, and an increase in stockholders' equity. The increase in the net debt to total capital ratio at December 2021 compared to December 2020 was primarily driven by an increase in net debt due to lower cash balances at December 2021, partially offset by an increase in stockholders' equity. The increase in stockholders' equity for both comparisons was driven by net income in the respective periods, partially offset by payments of dividends and share repurchases. 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 from continuing operations were as follows: Nine Months Ended December (In thousands) 2021 2020 Cash provided by operating activities $ 791,290 $ 1,084,277 Cash provided (used) by investing activities 953,936 (813,526) Cash provided (used) by financing activities (1,257,664) 1,525,389 Cash Provided by Operating Activities Cash flows related to operating activities are dependent on net income, adjustments to net income and changes in working capital. The decrease in cash p rovided by operating activities in the nine months ended December 2021 compared to December 2020 is primarily due to a decrease in net cash provided by working capital, partially offset by higher earnings for the periods compared. Cash Provided (Used) by Investing Activities The decrease in cash used by investing activities in the nine months ended December 2021 was primarily due to $616.5 million of net proceeds from the sale of the Occupational Workwear business and $598.8 million of proceeds from the sale of short-term investments in the nine months ended December 2021, compared to purchases of short-term investments of $800.0 million and $200.0 million of proceeds from maturities of short-term investments in the nine months ended December 2020. Capital expenditures increased $61.8 million and software purchases increased $11.8 million in the nine months ended December 2021 compared to the 2020 period. Cash Provided (Used) by Financing Activities The decrease in cash provided by financing activities during the nine months ended December 2021 was primarily due to the net proceeds from long-term debt issuance of $3.0 billion fixed-rate notes in the nine months ended December 2020, and a $502.8 million increase in payments on long-term debt and a $300.0 million increase in share repurchases in the nine months ended December 2021, which were partially offset by a $1.0 billion net decrease in short-term borrowings for the periods compared. Share Repurchases During the nine months ended December 2021, VF purchased 4.0 million sh ares of its Common Stock in open market transactions at a total cost of $300.0 million (average price per share of $74.45) under the share repurchase program authorized by VF's Board of Directors. VF did not purchase shares of its Common stock in the open market during the nine months ended December 2020. As of the end of December 2021, VF had $2.5 billion r emaining for future repurchases under its share repurchase authorization. VF will continue to evaluate its use of capital, giving first priority to business acquisitions then to direct shareholder return in the form of dividends and share repurchases, and enterprise protection. 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. In November 2021, VF entered into a $2.25 billion senior unsecured revolving line of credit (the “Global Credit Facility”) that expires November 2026. The Global Credit Facility replaced VF's $2.25 billion revolving facility which was scheduled to expire in December 2023. 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. 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. In addition, the Global Credit Facility supports VF’s U.S. commercial paper program for short-term, seasonal working capital requirements and general corporate purposes, including acquisitions and share repurchases. 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 starting at 70% with future step downs. The calculation of consolidated net indebtedness is net of unrestricted cash. As of December 2021, the covenant calculation includes cash and equivalents and excludes VF Corporation Q3 FY22 Form 10-Q 40 Table of Contents consolidated operating lease liabilities. As of December 2021, VF was in compliance with all covenants. VF has a 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 no commercial paper borrowings as of December 2021 . Standby letters of credit issued as of December 2021 were $24.4 million, leaving approximately $2.2 billion available for borrowing against the Global Credit Facility at December 2021. Additionally, VF had approximately $1.3 billion of cash and equivalents at December 2021. VF has $32.5 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 $6.8 million at December 2021. Redemption 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 valu e 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. Supply Chain Financing Program During the three months ended December 2021, VF began offering a voluntary supply chain finance ("SCF") program that enables certain suppliers of inventory to leverage VF's credit rating to receive payment from participating financial institutions prior to the payment date specified in the terms between VF and the supplier. The transactions are at the sole discretion of both the suppliers and financial institutions, and VF is not a party to the agreements. The terms between VF and the supplier, including the amount due and scheduled payment dates, are not impacted by a supplier's participation in the SCF program. The amount financed by suppliers and outstanding under this program is primarily included in the short-term borrowings line item in VF's Consolidated Balance Sheet and was $99.0 million at December 2021. Invoices selected for financing by the suppliers are primarily reported as operating cash outflows and financing cash inflows. Payments made by VF to the banks to settle the invoices on the originally scheduled payment dates are primarily reflected as financing cash outflows. Subsequent to the quarter end, VF decided to temporarily suspend the SCF program to implement certain modifications to the program. Rating Agencies VF’s favorable credit agency ratings allow for access to additional liquidity at competitive rates. At the end of December 2021, VF’s long-term debt ratings were ‘A-’ by Standard & Poor’s Global Ratings and ‘Baa1’ by Moody’s Investors Service, and commercial paper ratings by those rating agencies were ‘A-2’ and ‘P-2’, respectively. 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 2033 notes. Dividends The Company paid cash dividends of $0.50 per share and $1.48 per share during the three and nine months ended December 2021, and the Company has declared a cash dividend of $0.50 per share that is payable in the fourth quarter of Fiscal 2022. Subject to approval by its Board of Directors, VF intends to continue to pay its regularly scheduled dividend. Contractual Obligations Management’s Discussion and Analysis in the Fiscal 2021 Form 10-K provided a table summarizing VF’s material contractual obligations and commercial commitments at the end of Fiscal 2021 that would require the use of funds. As of December 2021, there have been no material changes in the amounts of unrecorded commitments disclosed in the Fiscal 2021 Form 10-K, except as noted below: • Inventory purchase obligations increased by approximately $160.0 million at the end of December 2021 primarily due to the seasonality of VF's business. There continues to be uncertainty about the duration and extent of the impact of COVID-19. However, management believes that VF has sufficient liquidity and flexibility to operate during and after the disruptions caused by the COVID-19 pandemic and related governmental actions and regulations and health authority advisories, and meet its current and long-term obligations as they become due. Recent Accounting Pronouncements Refer to Note 2 to VF’s consolidated financial statements for information on recently adopted and issued accounting standards. Critical Accounting Policies and Estimates Management has chosen accounting policies it considers to be appropriate to accurately and fairly report VF’s operating results and financial position in conformity with generally accepted accounting principles in the United States of America. Our critical accounting policies are applied in a consistent manner. Significant accounting policies are summarized in Note 1 to the consolidated financial statements included in the Fiscal 2021 Form 10-K. The application of these accounting policies requires management to 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, and may retain outside consultants to assist in the 41 VF Corporation Q3 FY22 Form 10-Q Table of Contents evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The accounting policies that involve the most significant estimates, assumptions and management judgments used in preparation of the consolidated financial statements, or are the most sensitive to change from outside factors, are discussed in Management’s Discussion and Analysis in the Fiscal 2021 Form 10-K. There have been no material changes in VF's accounting policies from those disclosed in our Fiscal 2021 Form 10-K. Cautionary Statement on Forward-looking Statements From time to time, VF may make oral or written statements, including statements in this quarterly report, that constitute “forward-looking statements” within the meaning of the federal securities laws. These include statements concerning plans, objectives, projections and expectations relating to VF’s operations or economic performance and assumptions related thereto. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting VF and therefore involve a number of risks and uncertainties. Forward-looking statements are not guarantees, and actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and uncertainties that could cause the actual results of operations or financial condition of VF to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel, footwear and accessories; disruption to VF’s distribution system; the financial strength of VF’s customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; VF’s response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers and other direct-to-consumer business risks; manufacturing and product innovation; increasing pressure on margins; VF’s ability to implement its business strategy; VF’s ability to grow its international, direct-to-consumer and digital businesses; VF's ability to transform its model to be more consumer-minded, retail-centric and hyper-digital; retail industry changes and challenges; VF's ability to create and maintain an agile and efficient operating model and organizational structure; VF’s and its vendors’ ability to maintain the strength and security of information technology systems; the risk that VF’s facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss; VF’s ability to properly collect, use, manage and secure business, consumer and employee data and comply with privacy and security regulations; foreign currency fluctuations; stability of VF’s and VF's vendors' manufacturing facilities and VF's ability to establish and maintain effective supply chain capabilities; continued use by VF’s suppliers of ethical business practices; VF’s ability to accurately forecast demand for products; continuity of members of VF’s management; VF's ability to recruit, develop or retain qualified employees; VF’s ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; maintenance by VF’s licensees and distributors of the value of VF’s brands; VF’s ability to execute acquisitions and dispositions and integrate acquisitions, including the recently acquired Supreme ® brand; business resiliency in response to natural or man-made economic, political or environmental disruptions; changes in tax laws and liabilities; legal, regulatory, political and economic risks and changes to laws and regulations; adverse or unexpected weather conditions; VF's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent VF from fulfilling its financial obligations; climate change and increased focus on sustainability issues; and risks associated with the spin-off of our Jeanswear business completed on May 22, 2019, including the risk that VF will not realize all of the expected benefits of the spin-off; the risk that the spin-off will not be tax-free for U.S. federal income tax purposes; and the risk that there will be a loss of synergies from separating the businesses that could negatively impact the balance sheet, profit margins or earnings of VF. More information on potential factors that could affect VF’s financial results is included from time to time in VF’s public reports filed with the Securities and Exchange Commission, including VF’s Annual Report on Form 10-K. ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. There have been no significant changes in VF’s market risk exposures from what was disclosed in Item 7A in the Fiscal 2021 Form 10-K.