V F CORP 10-Q

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED). VF CORPORATION Consolidated Balance Sheets (Unaudited) (In thousands, except share amounts) June 2023 March 2023 June 2022 ASSETS Current assets Cash and equivalents $ 806,529 $ 814,887 $ 528,029 Accounts receivable, less allowance for doubtful accounts of: June 2023 - $ 33,076 ; March 2023 - $ 28,075 ; June 2022 - $ 29,780 1,214,223 1,610,295 1,249,713 Inventories 2,787,021 2,292,790 2,341,395 Other current assets 405,784 434,737 492,569 Total current assets 5,213,557 5,152,709 4,611,706 Property, plant and equipment, net 943,163 942,440 1,007,853 Intangible assets, net 2,640,827 2,642,821 2,984,136 Goodwill 1,973,615 1,978,413 2,359,548 Operating lease right-of-use assets 1,349,725 1,372,182 1,227,462 Other assets 1,923,011 1,901,923 1,021,048 TOTAL ASSETS $ 14,043,898 $ 13,990,488 $ 13,211,753 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Short-term borrowings $ 58,520 $ 11,491 $ 827,380 Current portion of long-term debt 928,736 924,305 1,058 Accounts payable 1,282,313 936,319 1,022,755 Accrued liabilities 1,546,866 1,673,651 1,612,804 Total current liabilities 3,816,435 3,545,766 3,463,997 Long-term debt 5,722,448 5,711,014 4,468,399 Operating lease liabilities 1,155,852 1,171,941 1,006,274 Other liabilities 632,400 651,054 920,590 Total liabilities 11,327,135 11,079,775 9,859,260 Commitments and contingencies Stockholders’ equity Preferred Stock, par value $ 1 ; shares authorized, 25,000,000 ; no shares outstanding at June 2023, March 2023 or June 2022 — — — Common Stock, stated value $ 0.25 ; shares authorized, 1,200,000,000 ; shares outstanding at June 2023 - 388,836,545 ; March 2023 - 388,665,531 ; June 2022 - 388,490,713 97,209 97,166 97,123 Additional paid-in capital 3,733,777 3,775,979 3,941,440 Accumulated other comprehensive loss ( 1,053,529 ) ( 1,019,518 ) ( 874,876 ) Retained earnings (accumulated deficit) ( 60,694 ) 57,086 188,806 Total stockholders’ equity 2,716,763 2,910,713 3,352,493 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,043,898 $ 13,990,488 $ 13,211,753 See notes to consolidated financial statements. 3 VF Corporation Q1 FY24 Form 10-Q Table of Contents VF CORPORATION Consolidated Statements of Operations (Unaudited) Three Months Ended June (In thousands, except per share amounts) 2023 2022 Net revenues $ 2,086,336 $ 2,261,595 Costs and operating expenses Cost of goods sold 985,269 1,042,982 Selling, general and administrative expenses 1,110,059 1,155,251 Total costs and operating expenses 2,095,328 2,198,233 Operating income (loss) ( 8,992 ) 63,362 Interest income 5,494 1,283 Interest expense ( 55,213 ) ( 32,545 ) Other income (expense), net ( 3,567 ) ( 94,714 ) Loss before income taxes ( 62,278 ) ( 62,614 ) Income tax benefit ( 4,853 ) ( 6,654 ) Net loss $ ( 57,425 ) $ ( 55,960 ) Net loss per common share Basic $ ( 0.15 ) $ ( 0.14 ) Diluted $ ( 0.15 ) $ ( 0.14 ) Weighted average shares outstanding Basic 388,160 387,563 Diluted 388,160 387,563 See notes to consolidated financial statements. VF Corporation Q1 FY24 Form 10-Q 4 Table of Contents VF CORPORATION Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended June (In thousands) 2023 2022 Net loss $ ( 57,425 ) $ ( 55,960 ) Other comprehensive income (loss) Foreign currency translation and other Losses arising during the period ( 16,530 ) ( 51,524 ) Income tax effect 3,381 ( 30,010 ) Defined benefit pension plans Current period actuarial gains (losses) 1,001 ( 19,568 ) Amortization of net deferred actuarial losses 4,232 3,721 Amortization of deferred prior service credits ( 135 ) ( 112 ) Reclassification of net actuarial loss from settlement charges 3,292 91,761 Income tax effect ( 1,909 ) ( 19,651 ) Derivative financial instruments Gains (losses) arising during the period ( 22,740 ) 99,430 Income tax effect 4,138 ( 15,375 ) Reclassification of net (gains) losses realized ( 10,680 ) ( 8,242 ) Income tax effect 1,939 1,273 Other comprehensive income (loss) ( 34,011 ) 51,703 Comprehensive loss $ ( 91,436 ) $ ( 4,257 ) See notes to consolidated financial statements. 5 VF Corporation Q1 FY24 Form 10-Q VF CORPORATION Consolidated Statements of Cash Flows (Unaudited) Three Months Ended June (In thousands) 2023 2022 OPERATING ACTIVITIES Net loss $ ( 57,425 ) $ ( 55,960 ) Adjustments to reconcile net loss to cash provided (used) by operating activities: Depreciation and amortization 67,075 66,754 Reduction in the carrying amount of right-of-use assets 95,728 93,337 Stock-based compensation 15,784 22,297 Provision for doubtful accounts 4,633 899 Pension expense in excess of (less than) contributions ( 10,661 ) 89,277 Other, net 10,645 6,813 Changes in operating assets and liabilities: Accounts receivable 395,110 174,125 Inventories ( 493,720 ) ( 961,113 ) Accounts payable 344,482 471,065 Income taxes ( 30,667 ) ( 70,727 ) Accrued liabilities ( 66,581 ) ( 94,746 ) Operating lease right-of-use assets and liabilities ( 102,688 ) ( 93,734 ) Other assets and liabilities ( 8,140 ) ( 6,607 ) Cash provided (used) by operating activities 163,575 ( 358,320 ) INVESTING ACTIVITIES Capital expenditures ( 61,763 ) ( 52,657 ) Software purchases ( 22,827 ) ( 26,907 ) Other, net ( 5,972 ) 10,045 Cash used by investing activities ( 90,562 ) ( 69,519 ) FINANCING ACTIVITIES Contingent consideration payment — ( 56,976 ) Net increase in short-term borrowings 47,029 491,917 Payments on long-term debt ( 268 ) ( 500,261 ) Payment of debt issuance costs ( 346 ) — Cash dividends paid ( 116,575 ) ( 194,135 ) Proceeds from issuance of Common Stock, net of (payments) for tax withholdings ( 1,725 ) ( 1,766 ) Cash used by financing activities ( 71,885 ) ( 261,221 ) Effect of foreign currency rate changes on cash, cash equivalents and restricted cash ( 9,326 ) ( 58,988 ) Net change in cash, cash equivalents and restricted cash ( 8,198 ) ( 748,048 ) Cash, cash equivalents and restricted cash – beginning of year 816,319 1,277,082 Cash, cash equivalents and restricted cash – end of period $ 808,121 $ 529,034 Balances per Consolidated Balance Sheets: Cash and cash equivalents $ 806,529 $ 528,029 Other current assets 1,465 880 Other assets 127 125 Total cash, cash equivalents and restricted cash $ 808,121 $ 529,034 See notes to consolidated financial statements. VF Corporation Q1 FY24 Form 10-Q 6 Table of Contents VF CORPORATION Consolidated Statements of Stockholders’ Equity (Unaudited) Three Months Ended June 2023 Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Common Stock (In thousands, except share amounts) Shares Amounts Total Balance, March 2023 388,665,531 $ 97,166 $ 3,775,979 $ ( 1,019,518 ) $ 57,086 $ 2,910,713 Net loss — — — — ( 57,425 ) ( 57,425 ) Dividends on Common Stock ($ 0.30 per share) — — ( 59,489 ) — ( 57,086 ) ( 116,575 ) Stock-based compensation, net 171,014 43 17,287 — ( 3,269 ) 14,061 Foreign currency translation and other — — — ( 13,149 ) — ( 13,149 ) Defined benefit pension plans — — — 6,481 — 6,481 Derivative financial instruments — — — ( 27,343 ) — ( 27,343 ) Balance, June 2023 388,836,545 $ 97,209 $ 3,733,777 $ ( 1,053,529 ) $ ( 60,694 ) $ 2,716,763 Three Months Ended June 2022 Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Common Stock (In thousands, except share amounts) Shares Amounts Total Balance, March 2022 388,298,375 $ 97,075 $ 3,916,384 $ ( 926,579 ) $ 443,475 $ 3,530,355 Net loss — — — — ( 55,960 ) ( 55,960 ) Dividends on Common Stock ($ 0.50 per share) — — — — ( 194,135 ) ( 194,135 ) Stock-based compensation, net 192,338 48 25,056 — ( 4,574 ) 20,530 Foreign currency translation and other — — — ( 81,534 ) — ( 81,534 ) Defined benefit pension plans — — — 56,151 — 56,151 Derivative financial instruments — — — 77,086 — 77,086 Balance, June 2022 388,490,713 $ 97,123 $ 3,941,440 $ ( 874,876 ) $ 188,806 $ 3,352,493 See notes to consolidated financial statements. 7 VF Corporation Q1 FY24 Form 10-Q Table of Contents VF CORPORATION Notes to Consolidated Financial Statements (Unaudited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PAGE NUMBER NOTE 1 Basis of Presentation 9 NOTE 2 Recently Adopted Accounting Standards 9 NOTE 3 Revenues 10 NOTE 4 Inventories 11 NOTE 5 Intangible Assets 11 NOTE 6 Goodwill 11 NOTE 7 Leases 12 NOTE 8 Supply Chain Financing Program 12 NOTE 9 Pension Plans 12 NOTE 10 Capital and Accumulated Other Comprehensive Loss 13 NOTE 11 Stock-based Compensation 14 NOTE 12 Income Taxes 15 NOTE 13 Reportable Segment Information 16 NOTE 14 Net Loss Per Share 16 NOTE 15 Fair Value Measurements 17 NOTE 16 Derivative Financial Instruments and Hedging Activities 18 NOTE 17 Restructuring 20 NOTE 18 Contingencies 20 NOTE 19 Subsequent Event 21 VF Corporation Q1 FY24 Form 10-Q 8 Table of Contents NOTE 1 — BASIS OF PRESENTATION Fiscal Year 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 2, 2023 through March 30, 2024 ("Fiscal 2024"). Accordingly, this Form 10-Q presents our first quarter of Fiscal 2024. For presentation purposes herein, all references to periods ended June 2023 and June 2022 relate to the fiscal periods ended on July 1, 2023 and July 2, 2022, respectively. References to March 2023 relate to information as of April 1, 2023. Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and notes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. Similarly, the March 2023 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations and cash flows of VF for the interim periods presented. Operating results for the three months ended June 2023 are not necessarily indicative of results that may be expected for any other interim period or for Fiscal 2024. For further information, refer to the consolidated financial statements and notes included in VF’s Annual Report on Form 10-K for the year ended April 1, 2023 (“Fiscal 2023 Form 10-K”). Recent Developments and Uncertainties There is ongoing uncertainty around the global economy and macroeconomic environment, which we expect to continue and cause disruption and near-term challenges for our business. Macroeconomic conditions include inflationary pressures, higher interest rates and weakening consumer sentiment. These conditions have led to elevated inventories in certain markets and an increased promotional environment, and increased borrowing costs. VF has considered the impact of these developments on the estimates and assumptions used when preparing the interim consolidated financial statements and accompanying notes. The duration and severity of these recent developments, and the related impacts on VF's business are subject to uncertainty; however, the estimates and assumptions made by management are based on available information. Use of Estimates In preparing the interim consolidated financial statements, management makes estimates and assumptions that affect amounts reported in the interim consolidated financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 — 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 r elationships 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 8 for disclosures related to the Company’s supply chain financing program. 9 VF Corporation Q1 FY24 Form 10-Q Table of Contents NOTE 3 — REVENUES Contract Balances The following table provides information about contract assets and contract liabilities: (In thousands) June 2023 March 2023 June 2022 Contract assets (a) $ 2,645 $ 2,294 $ 2,022 Contract liabilities (b) 62,942 62,214 81,167 (a) Included in the other current assets line item in the Consolidated Balance Sheets. (b) Included in the accrued liabilities and other liabilities line items in the Consolidated Balance Sheets. For the three months ended June 2023, the Company recognized $ 68.2 million of revenue that was included in the contract liability balance during the period, including amounts recorded as a contract liability and subsequently recognized as revenue as performance obligations were satisfied within the same period, such as 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 June 2023, the Company expects to recognize $ 63.6 million of fixed consideration related to the future mini mum guarantees in effect under its licensing agreements and expects such amounts to be recognized over time based on the contractual terms through March 2031. The variable consideration related to licensing arrangements is not disclosed as a remaining performance obligation as it qualifies for the sales-based royalty exemption. VF has also elected the practical expedient to not disclose the transaction price allocated to remaining performance obligations for contracts with an original expected duration of one year or less. As of June 2023, there were no arrang ements 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. For the three months ended June 2023, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material. Disaggregation of Revenues 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. Three Months Ended June 2023 (In thousands) Outdoor Active Work Other Total Channel revenues Wholesale $ 489,931 $ 462,265 $ 146,169 $ — $ 1,098,365 Direct-to-consumer 336,333 597,621 39,654 — 973,608 Royalty 3,433 6,123 4,807 — 14,363 Total $ 829,697 $ 1,066,009 $ 190,630 $ — $ 2,086,336 Geographic revenues Americas $ 404,406 $ 625,847 $ 153,571 $ — $ 1,183,824 Europe 288,221 277,126 19,001 — 584,348 Asia-Pacific 137,070 163,036 18,058 — 318,164 Total $ 829,697 $ 1,066,009 $ 190,630 $ — $ 2,086,336 VF Corporation Q1 FY24 Form 10-Q 10 Table of Contents Three Months Ended June 2022 (In thousands) Outdoor Active Work Other Total Channel revenues Wholesale $ 472,282 $ 582,160 $ 193,191 $ 148 $ 1,247,781 Direct-to-consumer 292,685 666,156 40,249 — 999,090 Royalty 3,657 5,629 5,438 — 14,724 Total $ 768,624 $ 1,253,945 $ 238,878 $ 148 $ 2,261,595 Geographic revenues Americas $ 394,515 $ 790,729 $ 199,660 $ 148 $ 1,385,052 Europe 275,045 303,275 16,293 — 594,613 Asia-Pacific 99,064 159,941 22,925 — 281,930 Total $ 768,624 $ 1,253,945 $ 238,878 $ 148 $ 2,261,595 NOTE 4 — INVENTORIES (In thousands) June 2023 March 2023 June 2022 Finished products $ 2,731,511 $ 2,240,215 $ 2,277,145 Work-in-process 41,827 39,508 49,002 Raw materials 13,683 13,067 15,248 Total inventories $ 2,787,021 $ 2,292,790 $ 2,341,395 NOTE 5 — INTANGIBLE ASSETS June 2023 March 2023 (In thousands) Weighted Average Amortization Period Amortization Method Cost Accumulated Amortization Net Carrying Amount Net Carrying Amount Amortizable intangible assets: Customer relationships and other 19 years Accelerated $ 263,268 $ 177,711 $ 85,557 $ 88,902 Indefinite-lived intangible assets: Trademarks and trade names 2,555,270 2,553,919 Intangible assets, net $ 2,640,827 $ 2,642,821 Amortization expense for the three months ended June 2023 was $ 3.5 million. Based on the carrying amounts of amortizable intangible assets noted above, estimated amortization expense for the next five years beginning in Fiscal 2024 is $ 13.6 million, $ 13.1 million, $ 12.1 million, $ 11.7 million and $ 10.7 million, respectively. NOTE 6 — GOODWILL Changes in goodwill are summarized by reportable segment as follows: (In thousands) Outdoor Active Work Total Balance, March 2023 $ 653,787 $ 1,211,244 $ 113,382 $ 1,978,413 Currency translation ( 1,218 ) ( 3,273 ) ( 307 ) ( 4,798 ) Balance, June 2023 $ 652,569 $ 1,207,971 $ 113,075 $ 1,973,615 Accum ulated impairm ent charges were $ 323.2 million for the Outdoor segment and $ 394.1 million for the Active segment as of the dates presented above. No impairment charges were recorded during the three months ended June 2023. 11 VF Corporation Q1 FY24 Form 10-Q Table of Contents NOTE 7 — LEASES The Company leases certain retail locations, office space, distribution facilities, machinery and equipment, and vehicles. The substantial majority of these leases are operating leases. Total lease cost includes operating lease cost, variable lease cost, finance lease cost, short-term lease cost and impairment. Components of lease cost were as follows: Three Months Ended June (In thousands) 2023 2022 Operating lease cost $ 106,131 $ 101,705 Other lease cost 35,319 33,165 Total lease cost $ 141,450 $ 134,870 During the three months ended June 2023 and 2022, the Company paid $ 114.2 million and $ 102.3 million for operating leases, respectively. During the three months ended June 2023 and 2022, the Company obtained $ 71.8 million and $ 105.9 million of right-of-use assets in exchange for lease liabilities, respectively. NOTE 8 — SUPPLY CHAIN FINANCING PROGRAM VF facilitates a voluntary supply chain finance ("SCF") program that enables a significant portion of our 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 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 June 2023, March 2023 and June 2022, the accounts payable line item in VF’s Consolidated Balance Sheets included total outstanding obligations of $ 931.0 million, $ 510.9 million and $ 506.5 million, respectively, due to suppliers that are eligible to participate in the SCF program. NOTE 9 — PENSION PLANS The components of pension cost for VF’s defined benefit plans were as follows: Three Months Ended June (In thousands) 2023 2022 Service cost – benefits earned during the period $ 2,192 $ 2,646 Interest cost on projected benefit obligations 11,812 12,631 Expected return on plan assets ( 15,877 ) ( 18,860 ) Settlement charges 3,292 91,761 Amortization of deferred amounts: Net deferred actuarial losses 4,232 3,721 Deferred prior service credits ( 135 ) ( 112 ) Net periodic pension cost $ 5,516 $ 91,787 VF has reported the service cost component of net periodic pension cost in operating income (loss) and the other components, which include interest cost, expected return on plan assets, settlement charges and amortization of deferred actuarial losses and prior service credits, in the other income (expense), net line item in the Consolidated Statements of Operations. VF contributed $ 16.2 million to its defined benefit plans during the three months ended June 2023, and intends to make approximately $ 13.5 million of contributions during the remainder of Fiscal 2024. VF recorded a $ 3.3 million settlement charge in the other income (expense), net line item in the Consolidated Statement of Operations for the three months ended June 2023. The settlement charge related to the recognition of deferred actuarial losses resulting from lump sum payments of retirement benefits in the supplemental defined benefit pension plan. Actuarial assumptions used in the interim valuation were reviewed and revised as appropriate. The discount rate used to determine the supplemental defined benefit pension obligation as of June 2023 was 5.44 % Additionally, during the three months ended June 2022, VF entered into an agreement with The Prudential Insurance VF Corporation Q1 FY24 Form 10-Q 12 Table of Contents 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 three months ended June 2022 to recognize the related deferred actuarial losses in accumulated other comprehensive loss (“OCL”). NOTE 10 — CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS Common Stock During the three months ended June 2023, the Company did no t purchase shares of Common Stock in open market transactions under its share repurchase program authorized by VF’s Board of Directors. These are treated as treasury stock transactions when shares are repurchased. Common Stock outstanding is net of shares held in treasury which are, in substance, retired. There were no shares held in treasury at the end of June 2023, March 2023 or June 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. Accumulated Other Comprehensive Loss Comprehensive loss consists of net loss and specified components of OCL, which relate to changes in assets and liabilities that are not included in net loss under GAAP but are instead deferred and accumulated within a separate component of stockholders’ equity in the balance sheet. VF’s comprehensive loss is presented in the Consolidated Statements of Comprehensive Loss. The deferred components of OCL are reported, net of related income taxes, in accumulated OCL in stockholders’ equity, as follows: (In thousands) June 2023 March 2023 June 2022 Foreign currency translation and other $ ( 872,800 ) $ ( 859,651 ) $ ( 833,166 ) Defined benefit pension plans ( 161,211 ) ( 167,692 ) ( 174,139 ) Derivative financial instruments ( 19,518 ) 7,825 132,429 Accumulated other comprehensive loss $ ( 1,053,529 ) $ ( 1,019,518 ) $ ( 874,876 ) The changes in accumulated OCL, net of related taxes, were as follows: Three Months Ended June 2023 (In thousands) Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total Balance, March 2023 $ ( 859,651 ) $ ( 167,692 ) $ 7,825 $ ( 1,019,518 ) Other comprehensive income (loss) before reclassifications ( 13,149 ) 1,088 ( 18,602 ) ( 30,663 ) Amounts reclassified from accumulated other comprehensive loss — 5,393 ( 8,741 ) ( 3,348 ) Net other comprehensive income (loss) ( 13,149 ) 6,481 ( 27,343 ) ( 34,011 ) Balance, June 2023 $ ( 872,800 ) $ ( 161,211 ) $ ( 19,518 ) $ ( 1,053,529 ) Three Months Ended June 2022 (In thousands) Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total Balance, March 2022 $ ( 751,632 ) $ ( 230,290 ) $ 55,343 $ ( 926,579 ) Other comprehensive income (loss) before reclassifications ( 81,534 ) ( 14,484 ) 84,055 ( 11,963 ) Amounts reclassified from accumulated other comprehensive loss — 70,635 ( 6,969 ) 63,666 Net other comprehensive income (loss) ( 81,534 ) 56,151 77,086 51,703 Balance, June 2022 $ ( 833,166 ) $ ( 174,139 ) $ 132,429 $ ( 874,876 ) 13 VF Corporation Q1 FY24 Form 10-Q Table of Contents Reclassifications out of accumulated OCL were as follows: (In thousands) Three Months Ended June Details About Accumulated Other Comprehensive Loss Components Affected Line Item in the Consolidated Statements of Operations 2023 2022 Amortization of defined benefit pension plans: Net deferred actuarial losses Other income (expense), net $ ( 4,232 ) $ ( 3,721 ) Deferred prior service credits Other income (expense), net 135 112 Pension settlement charges Other income (expense), net ( 3,292 ) ( 91,761 ) Total before tax ( 7,389 ) ( 95,370 ) Tax benefit 1,996 24,735 Net of tax ( 5,393 ) ( 70,635 ) Gains (losses) on derivative financial instruments: Foreign exchange contracts Net revenues 1,090 ( 3,534 ) Foreign exchange contracts Cost of goods sold 8,075 11,356 Foreign exchange contracts Selling, general and administrative expenses 1,301 1,609 Foreign exchange contracts Other income (expense), net ( 511 ) ( 1,216 ) Interest rate contracts Interest expense 725 27 Total before tax 10,680 8,242 Tax expense ( 1,939 ) ( 1,273 ) Net of tax 8,741 6,969 Total reclassifications for the period, net of tax $ 3,348 $ ( 63,666 ) NOTE 11 — STOCK-BASED COMPENSATION Incentive Equity Awards Granted During the three months ended June 2023, VF granted stock options to employees and nonemployee members of VF's Board of Directors to purchase 4,566,907 shares of its Common Stock at an exercise price of $ 17.95 per share. The exercise price of each option granted was equal to the fair market value of VF Common Stock on the date of grant. Employee stock options vest and become exercisable in equal annual installments over three years . 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: Three Months Ended June 2023 Expected volatility 33 % to 52 % Weighted average expected volatility 42 % Expected term (in years) 6.1 to 7.8 Weighted average dividend yield 3.7 % Risk-free interest rate 3.80 % to 5.44 % Weighted average fair value at date of grant $ 5.72 During the three months ended June 2023, VF granted 426,885 performance-based restricted stock units ("RSUs") to executives that enable them to receive shares of VF Common Stock at the end of a three-year performance cycle. The fair market value of VF Common Stock at the date the units were granted was $ 17.95 per share. 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 targets set by the Talent and Compensation Committee of the Board of Directors. Shares will be issued to participants in the year following the conclusion of the three-year performance period. 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 total shareholder return ("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 per share. VF Corporation Q1 FY24 Form 10-Q 14 Table of Contents During the three months ended June 2023, VF granted 45,126 nonperformance-based RSUs to nonemployee members of the Board of Directors. These units vest upon grant and will be settled in shares of VF Common Stock one year from the date of grant. The fair market value of VF Common Stock at the date the units were granted was $ 17.95 per share. In addition, VF granted 2,565,204 nonperformance-based RSUs to employees during the three months ended June 2023. These units generally vest over periods up to four years from the date of grant and each unit entitles the holder to one share of VF Common Stock. The fair market value of VF Common Stock at the date the units were granted was $ 17.95 per share. NOTE 12 — INCOME TAXES The effective income tax rate for the three months ended June 2023 was 7.8 % compared to 10.6 % in the 2022 period. The three months ended June 2023 included a net discrete tax expense of $ 0.2 million, which included a $ 4.7 million net tax expense related to unrecognized tax benefits and interest, a $ 3.1 million tax expense related to stock compensation and a $ 7.5 million net tax benefit for interest on the income tax receivable related to the Timberland court case. Excluding the $ 0.2 million net discrete tax expense in the 2023 period, the effective income tax rate would have been 8.2 %. The three months ended June 2022 included a net discrete tax expense of $ 0.8 million, which included a $ 1.6 million net tax expense related to unrecognized tax benefits and interest and a $ 0.8 million net tax benefit related to withholding taxes on prior foreign earnings. Excluding the $ 0.8 million net discrete tax expense in the 2022 period, the effective income tax rate would have been 12.0 %. Without discrete items, the effective income tax rate for the three months ended June 2023 decreased by 3.8 % compared with the 2022 period primarily due to disproportionate year-to-date losses in jurisdictions with no tax benefit. 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 Internal Revenue Service ("IRS") examinations for tax years throug h 2015 have been effectively settled. As previously reported, VF petitioned the U.S. Tax Court (the “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 argues that all such income should have been immediately included in 2011, VF has reported periodic income inclusions in subsequent tax years. Both parties moved for summary judgment on the issue. On January 31, 2022, the Court issued its opinion in favor of the IRS and on July 14, 2022 issued its final decision. VF believes the opinion of the Court was in error based on the technical merits and filed a notice of appeal on October 7, 2022. VF continues to believe its timing and treatment of the income inclusion is appropriate and VF is vigorously defending its position. 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 and will accrue interest income. These amounts are included in the other assets line item in VF's Consolidated Balance Sheet at June 2023, based on our assessment of the position under the more-likely-than-not standard of the accounting literature. Refer to Note 18 for additional details on this matter. 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. Requests for annulment were filed by Belgium and VF Europe BVBA individually. 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 is included in the other current assets line item in VF's Consolidated Balance Sheets, based on the expected success of the requests for annulment. During 2019, the General Court annulled the EU decision and the EU subsequently appealed the General Court’s annulment. In September 2021, the General Court's judgment was set aside by the Court of Justice of the EU and the case was sent back to the General Court to determine whether the excess profit tax regime amounted to illegal State aid. The case remains open and unresolved. If this matter is adversely resolved, these amounts will not be collected by VF. 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. During the three months ended June 2023, the amount of net unrecognized tax benefits and associated interest increased by $ 7.0 million to $ 304.6 million. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits and interest may decrease during the next 12 months by approximately $ 301.3 million due to settlement of audits and expiration of statutes of limitations, primarily comprised of tax payments related to intellectual property transfers completed in a prior period. The overall decrease of unrecognized tax benefits would reduce income tax expense by $ 24.8 million. 15 VF Corporation Q1 FY24 Form 10-Q Table of Contents NOTE 13 — REPORTABLE SEGMENT INFORMATION The chief operating decision maker 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. The Company's reportable segments have been identified as: Outdoor, Active and Work. We have included an Other category in the table 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. Financial information for VF's reportable segments is as follows: Three Months Ended June (In thousands) 2023 2022 Segment revenues: Outdoor $ 829,697 $ 768,624 Active 1,066,009 1,253,945 Work 190,630 238,878 Other — 148 Total segment revenues $ 2,086,336 $ 2,261,595 Segment profit (loss): Outdoor $ ( 43,661 ) $ ( 46,851 ) Active 123,782 214,031 Work 6,831 35,002 Other — ( 225 ) Total segment profit 86,952 201,957 Corporate and other expenses ( 99,511 ) ( 233,309 ) Interest expense, net ( 49,719 ) ( 31,262 ) Loss before income taxes $ ( 62,278 ) $ ( 62,614 ) NOTE 14 — NET LOSS PER SHARE Three Months Ended June (In thousands, except per share amounts) 2023 2022 Net loss per common share – basic: Net loss $ ( 57,425 ) $ ( 55,960 ) Weighted average common shares outstanding 388,160 387,563 Net loss per common share $ ( 0.15 ) $ ( 0.14 ) Net loss per common share – diluted: Net loss $ ( 57,425 ) $ ( 55,960 ) Weighted average common shares outstanding 388,160 387,563 Incremental shares from stock options and other dilutive securities — — Adjusted weighted average common shares outstanding 388,160 387,563 Net loss per common share $ ( 0.15 ) $ ( 0.14 ) In the three-month periods ended June 2023 and June 2022, the dilutive impacts of outstanding stock options and other dilutive securities were excluded from dilutive shares as a result of the Company's net loss for the periods and, as such, their inclusion would have been anti-dilutive. As a result, a total of 18.6 million and 13.3 million potentially dilutive shares related to stock options and other dilutive securities were excluded from the diluted earnings per share calculations for the three-month periods ended June 2023 and June 2022, respectively. VF Corporation Q1 FY24 Form 10-Q 16 Table of Contents NOTE 15 — 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. 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 June 2023 Financial assets: Cash equivalents: Money market funds $ 118,530 $ 118,530 $ — $ — Time deposits 30,083 30,083 — — Derivative financial instruments 32,888 — 32,888 — Deferred compensation 101,041 101,041 — — Financial liabilities: Derivative financial instruments 82,028 — 82,028 — Deferred compensation 97,507 — 97,507 — 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 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 three months ended June 2023 or the year ended March 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. 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. 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 17 VF Corporation Q1 FY24 Form 10-Q Table of Contents include cash held as demand deposits, accounts receivable, short-term borrowings, accounts payable and accrued liabilities. At June 2023 and March 2023, their carrying values approximated fair value. Additionally, at June 2023 and March 2023, the carrying values of VF’s long-term debt, including the current portion, were $ 6,651.2 million and $ 6,635.3 million, respectively, compared with fair values of $ 6,170.7 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. NOTE 16 — 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 $ 3.5 billion at June 2023, $ 3.4 billion at March 2023 and $ 3.3 billion at June 2022, consisting primarily of contracts hedging exposures to the euro, British pound, Canadian dollar, Swiss franc, Mexican peso, Chinese renminbi, South Korean won, Swedish krona, Polish zloty and Japanese yen. These derivative contracts have maturities up to 20 months. The notional amounts of VF's outstanding interest rate swap contracts were $ 500.0 million at June 2023 and March 2023. There were no notional amounts outstanding on interest rate swap contracts at June 2022. 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) June 2023 March 2023 June 2022 June 2023 March 2023 June 2022 Derivatives Designated as Hedging Instruments: Foreign exchange contracts $ 27,902 $ 46,752 $ 154,231 $ ( 74,050 ) $ ( 71,052 ) $ ( 22,612 ) Interest rate contracts 4,582 — — — ( 1,140 ) — Total derivatives designated as hedging instruments 32,484 46,752 154,231 ( 74,050 ) ( 72,192 ) ( 22,612 ) Derivatives Not Designated as Hedging Instruments: Foreign exchange contracts 404 2,936 2,227 ( 7,978 ) ( 461 ) ( 1,158 ) Total derivatives $ 32,888 $ 49,688 $ 156,458 $ ( 82,028 ) $ ( 72,653 ) $ ( 23,770 ) 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 would be adjusted from the current gross presentation to the net amounts as detailed in the following table: June 2023 March 2023 June 2022 (In thousands) Derivative Asset Derivative Liability Derivative Asset Derivative Liability Derivative Asset Derivative Liability Gross amounts presented in the Consolidated Balance Sheets $ 32,888 $ ( 82,028 ) $ 49,688 $ ( 72,653 ) $ 156,458 $ ( 23,770 ) Gross amounts not offset in the Consolidated Balance Sheets ( 27,128 ) 27,128 ( 26,470 ) 26,470 ( 23,018 ) 23,018 Net amounts $ 5,760 $ ( 54,900 ) $ 23,218 $ ( 46,183 ) $ 133,440 $ ( 752 ) VF Corporation Q1 FY24 Form 10-Q 18 Table of Contents Derivatives are classified as current or noncurrent based on maturity dates, as follows: (In thousands) June 2023 March 2023 June 2022 Derivative Instruments Balance Sheet Location Foreign exchange contracts Other current assets $ 26,145 $ 48,132 $ 133,859 Foreign exchange contracts Accrued liabilities ( 73,049 ) ( 59,995 ) ( 20,549 ) Foreign exchange contracts Other assets 2,161 1,556 22,599 Foreign exchange contracts Other liabilities ( 8,979 ) ( 11,518 ) ( 3,221 ) Interest rate contracts Other assets 4,582 — — Interest rate contracts Other liabilities — ( 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 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 Operations and Consolidated Statements of Comprehensive Loss are summarized as follows: (In thousands) Gain (Loss) on Derivatives Recognized in OCL Three Months Ended June Cash Flow Hedging Relationships 2023 2022 Foreign exchange contracts $ ( 29,160 ) $ 99,430 Interest rate contracts 6,420 — Total $ ( 22,740 ) $ 99,430 (In thousands) Gain (Loss) Reclassified from Accumulated OCL into Net Loss Three Months Ended June Cash Flow Hedging Relationships Location of Gain (Loss) 2023 2022 Foreign exchange contracts Net revenues $ 1,090 $ ( 3,534 ) Foreign exchange contracts Cost of goods sold 8,075 11,356 Foreign exchange contracts Selling, general and administrative expenses 1,301 1,609 Foreign exchange contracts Other income (expense), net ( 511 ) ( 1,216 ) Interest rate contracts Interest expense 725 27 Total $ 10,680 $ 8,242 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 intercompany borrowings. 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 three months ended June 2023, certain derivative contracts were de-designated as hedged forecasted transactions were no longer deemed probable of occurring. Accordingly, the Company reclassified amounts from accumulated OCL and recognized an $ 8.4 million loss in cost of goods sold. The changes in fair value of derivative contracts not designated as hedges and recognized as gains or losses in VF's Consolidated Statements of Operations were not material fo r the three months ended June 2023 and June 2022. Other Derivative Information At June 2023, accumulated OCL included $ 13.2 million of pre-tax net deferred losses for foreign currency exchange contracts that are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on exchange rates in effect when outstanding derivative contracts are settled. Net Investment Hedge The Company has designated its euro-denominated fixed-rate notes, which represent € 2.850 billion in aggregate principal, 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 19 VF Corporation Q1 FY24 Form 10-Q Table of Contents 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 three-month periods ended June 2023 and June 2022, the Company recognized an after-tax loss of $ 10.4 million and an after-tax gain of $ 87.7 million, respectively, in OCL 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 17 — RESTRUCTURING The Company incurs restructuring charges related to strategic initiatives and cost optimization of business activities, primarily related to severance and employee-related benefits. During the three months ended June 2023, VF recognized $ 0.7 million of restructuring charges, related to approved initiatives. All restructuring charges recognized in the three months ended June 2023, were reflected in selling, general and administrative expenses. The Company has not recognized any significant incremental costs related to accruals for the year ended March 2023 or prior periods. Of the $ 30.5 million total restructuring accrual at June 2023, $ 29.2 million is expected to be paid out within the next 12 months and is classified within accrued liabilities. The remaining $ 1.3 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: Three Months Ended June (In thousands) 2023 2022 Severance and employee-related benefits $ 676 $ 2,094 Accelerated depreciation — 3,668 Contract termination and other 19 344 Total restructuring charges $ 695 $ 6,106 Restructuring costs by business segment are as follows: Three Months Ended June (In thousands) 2023 2022 Outdoor $ 242 $ — Active 434 — Work — — Corporate and other 19 6,106 Total $ 695 $ 6,106 The activity in the restructuring accrual for the three-month period ended June 2023 was as follows: (In thousands) Severance Other Total Accrual at March 2023 $ 38,721 $ 6,545 $ 45,266 Charges 676 — 676 Cash payments and settlements ( 9,305 ) ( 4,041 ) ( 13,346 ) Adjustments to accruals ( 1,587 ) ( 585 ) ( 2,172 ) Impact of foreign currency 15 16 31 Accrual at June 2023 $ 28,520 $ 1,935 $ 30,455 NOTE 18 — CONTINGENCIES As previously reported, VF petitioned the U.S. Tax Court (the “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 argues that all such income should have been immediately included in 2011, VF has reported periodic income inclusions in subsequent tax years. Both parties moved for summary judgment on the issue. On January 31, 2022, the Court issued its opinion in favor of the IRS and on July 14, 2022 issued its final decision. VF believes the opinion of the Court was in error based on the technical merits and filed a notice of appeal on October 7, 2022. 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 will accrue interest income. VF continues to believe its timing and treatment of the income inclusion is appropriate and VF is vigorously defending its position. However, should the Court opinion ultimately be upheld on appeal, this income tax receivable will not be collected by VF. If the Court opinion is upheld, VF should be entitled to a VF Corporation Q1 FY24 Form 10-Q 20 Table of Contents refund of taxes paid on the periodic inclusions that VF has reported. However, any such refund could be substantially reduced by potential indirect tax effects resulting from application of the Court opinion. Deferred tax liabilities, representing VF’s future tax on annual inclusions, would also be released. The net impact to tax expense is estimated to be up to $ 730.0 million, plus the reversal of any interest income accrued on the payment, which was approximately $ 19.6 million at June 2023. The Company is currently involved in other legal proceedings that are ordinary, routine litigation incidental to the business, the resolution of which is not currently expected to have a material adverse impact on the Company's financial position, results of operations or cash flows. NOTE 19 — SUBSEQUENT EVENT On July 25, 2023, VF’s Board of Directors declared a quarterly cash dividend of $ 0.30 per share, payable on September 20, 2023 to stockholders of record on September 11, 2023. 21 VF Corporation Q1 FY24 Form 10-Q Table of Contents