V F CORP 10-Q

ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED). VF CORPORATION Consolidated Balance Sheets (Unaudited) (In thousands, except share amounts) December 2023 March 2023 December 2022 ASSETS Current assets Cash and equivalents $ 988,006 $ 814,887 $ 571,347 Accounts receivable, less allowance for doubtful accounts of: December 2023 - $ 30,011 ; March 2023 - $ 28,075 ; December 2022 - $ 29,087 1,314,139 1,610,295 1,564,957 Inventories 2,148,219 2,292,790 2,591,915 Other current assets 485,562 434,737 515,763 Total current assets 4,935,926 5,152,709 5,243,982 Property, plant and equipment, net 913,384 942,440 932,663 Intangible assets, net 2,636,745 2,642,821 2,790,512 Goodwill 1,723,638 1,978,413 2,142,401 Operating lease right-of-use assets 1,314,306 1,372,182 1,293,041 Other assets 1,092,475 1,901,923 1,910,698 TOTAL ASSETS $ 12,616,474 $ 13,990,488 $ 14,313,297 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Short-term borrowings $ 452,286 $ 11,491 $ 901,668 Current portion of long-term debt 1,000,596 924,305 910,616 Accounts payable 974,844 936,319 906,340 Accrued liabilities 1,569,557 1,673,651 1,827,610 Total current liabilities 3,997,283 3,545,766 4,546,234 Long-term debt 4,755,252 5,711,014 4,617,441 Operating lease liabilities 1,133,749 1,171,941 1,068,744 Other liabilities 620,997 651,054 761,246 Total liabilities 10,507,281 11,079,775 10,993,665 Commitments and contingencies Stockholders’ equity Preferred Stock, par value $ 1 ; shares authorized, 25,000,000 ; no shares outstanding at December 2023, March 2023 or December 2022 — — — Common Stock, stated value $ 0.25 ; shares authorized, 1,200,000,000 ; shares outstanding at December 2023 - 388,819,204 ; March 2023 - 388,665,531 ; December 2022 - 388,660,385 97,205 97,166 97,165 Additional paid-in capital 3,619,654 3,775,979 3,766,304 Accumulated other comprehensive loss ( 1,051,373 ) ( 1,019,518 ) ( 929,588 ) Retained earnings (accumulated deficit) ( 556,293 ) 57,086 385,751 Total stockholders’ equity 2,109,193 2,910,713 3,319,632 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,616,474 $ 13,990,488 $ 14,313,297 See notes to consolidated financial statements. 3 VF Corporation Q3 FY24 Form 10-Q Table of Contents VF CORPORATION Consolidated Statements of Operations (Unaudited) Three Months Ended December Nine Months Ended December (In thousands, except per share amounts) 2023 2022 2023 2022 Net revenues $ 2,960,283 $ 3,530,667 $ 8,080,858 $ 8,872,862 Costs and operating expenses Cost of goods sold 1,327,871 1,593,048 3,792,168 4,134,207 Selling, general and administrative expenses 1,407,548 1,421,586 3,709,891 3,828,157 Impairment of goodwill and intangible assets 257,096 — 257,096 421,922 Total costs and operating expenses 2,992,515 3,014,634 7,759,155 8,384,286 Operating income (loss) ( 32,232 ) 516,033 321,703 488,576 Interest income 4,211 3,914 14,513 6,020 Interest expense ( 67,549 ) ( 54,144 ) ( 183,214 ) ( 121,415 ) Other income (expense), net 30,029 ( 9,901 ) 22,952 ( 113,895 ) Income (loss) before income taxes ( 65,541 ) 455,902 175,954 259,286 Income tax expense (benefit) ( 23,089 ) ( 51,966 ) 726,528 ( 74,190 ) Net income (loss) $ ( 42,452 ) $ 507,868 $ ( 550,574 ) $ 333,476 Earnings (loss) per common share Basic $ ( 0.11 ) $ 1.31 $ ( 1.42 ) $ 0.86 Diluted $ ( 0.11 ) $ 1.31 $ ( 1.42 ) $ 0.86 Weighted average shares outstanding Basic 388,383 387,739 388,294 387,663 Diluted 388,383 388,192 388,294 388,357 See notes to consolidated financial statements. VF Corporation Q3 FY24 Form 10-Q 4 Table of Contents VF CORPORATION Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three Months Ended December Nine Months Ended December (In thousands) 2023 2022 2023 2022 Net income (loss) $ ( 42,452 ) $ 507,868 $ ( 550,574 ) $ 333,476 Other comprehensive income (loss) Foreign currency translation and other Losses arising during the period ( 4,373 ) ( 1,506 ) ( 3,809 ) ( 74,924 ) Income tax effect 25,609 43,475 6,607 ( 15,321 ) Defined benefit pension plans Current period actuarial gains (losses) ( 4,046 ) ( 1,307 ) 697 ( 15,449 ) Amortization of net deferred actuarial losses 4,106 3,858 12,508 11,532 Amortization of deferred prior service credits ( 136 ) ( 112 ) ( 408 ) ( 335 ) Reclassification of net actuarial loss from settlement charges 131 695 3,430 93,597 Income tax effect ( 118 ) ( 935 ) ( 4,236 ) ( 23,401 ) Derivative financial instruments Gains (losses) arising during the period ( 73,375 ) ( 119,635 ) ( 36,220 ) 82,480 Income tax effect 11,790 17,970 6,076 ( 13,761 ) Reclassification of net (gains) losses realized 912 ( 32,905 ) ( 20,006 ) ( 56,053 ) Income tax effect ( 168 ) 4,979 3,506 8,626 Other comprehensive loss ( 39,668 ) ( 85,423 ) ( 31,855 ) ( 3,009 ) Comprehensive income (loss) $ ( 82,120 ) $ 422,445 $ ( 582,429 ) $ 330,467 See notes to consolidated financial statements. 5 VF Corporation Q3 FY24 Form 10-Q VF CORPORATION Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended December (In thousands) 2023 2022 OPERATING ACTIVITIES Net income (loss) $ ( 550,574 ) $ 333,476 Adjustments to reconcile net income (loss) to cash provided (used) by operating activities: Impairment of goodwill and intangible assets 257,096 421,922 Depreciation and amortization 231,493 192,174 Reduction in the carrying amount of right-of-use assets 283,002 280,845 Stock-based compensation 51,665 47,714 Provision for doubtful accounts 7,157 1,231 Pension expense in excess of (less than) contributions ( 10,691 ) 83,278 Deferred income taxes ( 258,338 ) ( 4,488 ) Write-off of income tax receivables and interest 921,409 — Other, net ( 10,931 ) 15,228 Changes in operating assets and liabilities: Accounts receivable 305,490 ( 120,081 ) Inventories 148,455 ( 1,200,438 ) Accounts payable 41,663 352,047 Income taxes ( 201,151 ) ( 1,178,547 ) Accrued liabilities 185,187 173,148 Operating lease right-of-use assets and liabilities ( 282,361 ) ( 290,679 ) Other assets and liabilities ( 12,824 ) 59,698 Cash provided (used) by operating activities 1,105,747 ( 833,472 ) INVESTING ACTIVITIES Capital expenditures ( 119,662 ) ( 130,214 ) Software purchases ( 52,855 ) ( 75,460 ) Other, net ( 19,477 ) ( 1,159 ) Cash used by investing activities ( 191,994 ) ( 206,833 ) FINANCING ACTIVITIES Contingent consideration payment — ( 56,976 ) Net increase in short-term borrowings 443,494 566,206 Payments on long-term debt ( 907,926 ) ( 500,786 ) Payment of debt issuance costs ( 576 ) ( 819 ) Proceeds from long-term debt — 1,000,000 Cash dividends paid ( 268,155 ) ( 586,335 ) Proceeds from issuance of Common Stock, net of (payments) for tax withholdings ( 2,603 ) ( 2,571 ) Cash provided (used) by financing activities ( 735,766 ) 418,719 Effect of foreign currency rate changes on cash, cash equivalents and restricted cash ( 4,984 ) ( 82,512 ) Net change in cash, cash equivalents and restricted cash 173,003 ( 704,098 ) Cash, cash equivalents and restricted cash – beginning of year 816,319 1,277,082 Cash, cash equivalents and restricted cash – end of period $ 989,322 $ 572,984 Balances per Consolidated Balance Sheets: Cash and cash equivalents $ 988,006 $ 571,347 Other current assets 1,186 1,511 Other assets 130 126 Total cash, cash equivalents and restricted cash $ 989,322 $ 572,984 See notes to consolidated financial statements. VF Corporation Q3 FY24 Form 10-Q 6 Table of Contents VF CORPORATION Consolidated Statements of Stockholders’ Equity (Unaudited) Three Months Ended December 2023 Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Common Stock (In thousands, except share amounts) Shares Amounts Total Balance, September 2023 388,883,825 $ 97,221 $ 3,638,029 $ ( 1,011,705 ) $ ( 513,500 ) $ 2,210,045 Net income (loss) — — — — ( 42,452 ) ( 42,452 ) Dividends on Common Stock ($ 0.09 per share) — — ( 34,983 ) — — ( 34,983 ) Stock-based compensation, net ( 64,621 ) ( 16 ) 16,608 — ( 341 ) 16,251 Foreign currency translation and other — — — 21,236 — 21,236 Defined benefit pension plans — — — ( 63 ) — ( 63 ) Derivative financial instruments — — — ( 60,841 ) — ( 60,841 ) Balance, December 2023 388,819,204 $ 97,205 $ 3,619,654 $ ( 1,051,373 ) $ ( 556,293 ) $ 2,109,193 Three Months Ended December 2022 Additional Paid-in Capital Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Common Stock (In thousands, except share amounts) Shares Amounts Total Balance, September 2022 388,569,062 $ 97,142 $ 3,952,786 $ ( 844,165 ) $ ( 120,127 ) $ 3,085,636 Net income (loss) — — — — 507,868 507,868 Dividends on Common Stock ($ 0.51 per share) — — ( 198,051 ) — — ( 198,051 ) Stock-based compensation, net 91,323 23 11,569 — ( 1,990 ) 9,602 Foreign currency translation and other — — — 41,969 — 41,969 Defined benefit pension plans — — — 2,199 — 2,199 Derivative financial instruments — — — ( 129,591 ) — ( 129,591 ) Balance, December 2022 388,660,385 $ 97,165 $ 3,766,304 $ ( 929,588 ) $ 385,751 $ 3,319,632 Continued on next page. See notes to consolidated financial statements. 7 VF Corporation Q3 FY24 Form 10-Q Table of Contents VF CORPORATION Consolidated Statements of Stockholders’ Equity (Unaudited) Nine Months Ended December 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 income (loss) — — — — ( 550,574 ) ( 550,574 ) Dividends on Common Stock ($ 0.69 per share) — — ( 211,069 ) — ( 57,086 ) ( 268,155 ) Stock-based compensation, net 153,673 39 54,744 — ( 5,719 ) 49,064 Foreign currency translation and other — — — 2,798 — 2,798 Defined benefit pension plans — — — 11,991 — 11,991 Derivative financial instruments — — — ( 46,644 ) — ( 46,644 ) Balance, December 2023 388,819,204 $ 97,205 $ 3,619,654 $ ( 1,051,373 ) $ ( 556,293 ) $ 2,109,193 Nine Months Ended December 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 income (loss) — — — — 333,476 333,476 Dividends on Common Stock ($ 1.51 per share) — — ( 203,394 ) — ( 382,941 ) ( 586,335 ) Stock-based compensation, net 362,010 90 53,314 — ( 8,259 ) 45,145 Foreign currency translation and other — — — ( 90,245 ) — ( 90,245 ) Defined benefit pension plans — — — 65,944 — 65,944 Derivative financial instruments — — — 21,292 — 21,292 Balance, December 2022 388,660,385 $ 97,165 $ 3,766,304 $ ( 929,588 ) $ 385,751 $ 3,319,632 See notes to consolidated financial statements. VF Corporation Q3 FY24 Form 10-Q 8 Table of Contents VF CORPORATION Notes to Consolidated Financial Statements (Unaudited) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PAGE NUMBER NOTE 1 Basis of Presentation 10 NOTE 2 Recently Adopted a nd Issued Accounting Standards 10 NOTE 3 Revenues 11 NOTE 4 Inventories 12 NOTE 5 Intangible Assets 13 NOTE 6 Goodwill 13 NOTE 7 Leases 13 NOTE 8 Short-term Borrowings and Long-term Debt 13 NOTE 9 Supply Chain Financing Program 14 NOTE 10 Pension Plans 14 NOTE 11 Capital and Accumulated Other Comprehensive Loss 15 NOTE 12 Stock-based Compensation 17 NOTE 13 Income Taxes 17 NOTE 14 Reportable Segment Information 18 NOTE 15 Earnings (Loss) Per Share 19 NOTE 16 Fair Value Measurements 19 NOTE 17 Derivative Financial Instruments and Hedging Activities 23 NOTE 18 Restructuring 25 NOTE 19 Subsequent Event 25 9 VF Corporation Q3 FY24 Form 10-Q 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 third quarter of Fiscal 2024. For presentation purposes herein, all references to periods ended December 2023 and December 2022 relate to the fiscal periods ended on December 30, 2023 and December 31, 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 and nine months ended December 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 Development Reinvent On October 30, 2023, VF introduced Reinvent, a transformation program to enhance focus on brand-building and to improve operating performance and allow VF to achieve its full potential. The first announced steps in this transformation cover the following priorities: improve North America results, deliver the Vans ® turnaround, reduce costs and strengthen the balance sheet. Refer to Note 18 for additional information on the program. 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 AND ISSUED ACCOUNTING STANDARDS Recently Adopted Accounting Standards In March 2020, January 2021 and December 2022, the Financial Accounting Standards Board (" FASB") issued Accounting Standards Update (" ASU") No. 2020-04, " Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ", ASU No. 2021-01, " Reference Rate Reform (Topic 848): Scope " and ASU No. 2022-06, " Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 ", respectively. This guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The guidance is provided to ease the potential burden of accounting for reference rate reform. During the first quarter of Fiscal 2024, the Company amended the terms of its $ 2.25 billion senior unsecured revolving line of credit (the “Global Credit Facility”), which replaced the LIBOR benchmark interest rate with a benchmark interest rate based on the forward-looking secured overnight financing rate ("Term SOFR"). This guidance was adopted in the first quarter of Fiscal 2024, but did not impact VF's consolidated financial statements. In September 2022, the FASB issued ASU No. 2022-04, " Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations " . This guidance requires companies with supplier finance programs to disclose sufficient qualitative and quantitative information about the program to allow a user of the financial statements to understand the nature of, activity in, and potential magnitude of the program. The guidance became effective for VF in the first quarter of Fiscal 2024, except for the rollforward information that will be effective for annual periods beginning in Fiscal 2025 on a prospective basis. Early adoption is permitted. The Company adopted the required guidance in the first quarter of Fiscal 2024 and is evaluating the impact of adopting the guidance related to the rollforward information. Refer to Note 9 for disclosures related to the Company’s supply chain financing program. Recently Issued Accounting Standards In November 2023, the FASB issued ASU No. 2023-07, " Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" , which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses that are regularly provided to the individual or group identified as the chief operating decision maker ("CODM"). The guidance also requires disclosure of the title and position of the CODM and how reported measures of segment profit or loss are used to assess performance and allocate resources. The guidance will be effective for annual disclosures beginning in Fiscal 2025, and has expanded requirements to include all annual disclosures about a reportable segment's profit or loss and assets in subsequent interim periods. Early adoption is permitted. The guidance requires retrospective application to all prior periods presented in the financial statements. The Company is evaluating the impact that adopting this guidance will have on VF's disclosures. In December 2023, the FASB issued ASU No. 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures" , which is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The rate reconciliation disclosures will require specific categories and additional information for reconciling items that meet a quantitative threshold. The income taxes paid disclosures VF Corporation Q3 FY24 Form 10-Q 10 Table of Contents will require disaggregation by individual jurisdictions that are greater than 5% of total income taxes paid. The guidance will be effective for annual disclosures beginning in Fiscal 2026. Early adoption is permitted. The amendments are required to be applied on a prospective basis; however, retrospective application is permitted. The Company is evaluating the impact that adopting this guidance will have on VF's disclosures. NOTE 3 — REVENUES Contract Balances The following table provides information about contract assets and contract liabilities: (In thousands) December 2023 March 2023 December 2022 Contract assets (a) $ 1,877 $ 2,294 $ 1,273 Contract liabilities (b) 67,103 62,214 80,456 (a) Included in the other current assets line item in the Consolidated Balance Sheets. (b) Included in the accrued liabilities line item in the Consolidated Balance Sheets. For the three and nine months ended December 2023, the Company recognized $ 59.9 million and $ 187.1 million, respectively, of revenue that was included in the contract liability balance during the periods, 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 December 2023, the Company expects to recognize $ 84.6 million of fixed consideration related to the future minimum guarantees in effect under its licensing agreements and expects such amounts to be recognized over time based on the contractual terms through March 2031. 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 December 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 and nine months ended December 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 December 2023 (In thousands) Outdoor Active Work Other Total Channel revenues Wholesale $ 734,130 $ 264,606 $ 157,841 $ — $ 1,156,577 Direct-to-consumer 999,694 728,479 58,038 — 1,786,211 Royalty 4,755 6,311 6,429 — 17,495 Total $ 1,738,579 $ 999,396 $ 222,308 $ — $ 2,960,283 Geographic revenues Americas $ 821,506 $ 578,955 $ 185,916 $ — $ 1,586,377 Europe 622,377 267,075 22,829 — 912,281 Asia-Pacific 294,696 153,366 13,563 — 461,625 Total $ 1,738,579 $ 999,396 $ 222,308 $ — $ 2,960,283 11 VF Corporation Q3 FY24 Form 10-Q Table of Contents Three Months Ended December 2022 (In thousands) Outdoor Active Work Other Total Channel revenues Wholesale $ 973,292 $ 401,521 $ 198,956 $ — $ 1,573,769 Direct-to-consumer 1,023,428 850,167 63,773 — 1,937,368 Royalty 6,325 6,994 6,211 — 19,530 Total $ 2,003,045 $ 1,258,682 $ 268,940 $ — $ 3,530,667 Geographic revenues Americas $ 1,110,134 $ 766,394 $ 217,408 $ — $ 2,093,936 Europe 643,740 312,857 26,752 — 983,349 Asia-Pacific 249,171 179,431 24,780 — 453,382 Total $ 2,003,045 $ 1,258,682 $ 268,940 $ — $ 3,530,667 Nine Months Ended December 2023 (In thousands) Outdoor Active Work Other Total Channel revenues Wholesale $ 2,499,604 $ 1,163,874 $ 496,630 $ — $ 4,160,108 Direct-to-consumer 1,769,098 1,964,645 137,649 — 3,871,392 Royalty 13,253 19,173 16,932 — 49,358 Total $ 4,281,955 $ 3,147,692 $ 651,211 $ — $ 8,080,858 Geographic revenues Americas $ 2,021,660 $ 1,790,686 $ 526,355 $ — $ 4,338,701 Europe 1,567,804 915,086 75,776 — 2,558,666 Asia-Pacific 692,491 441,920 49,080 — 1,183,491 Total $ 4,281,955 $ 3,147,692 $ 651,211 $ — $ 8,080,858 Nine Months Ended December 2022 (In thousands) Outdoor Active Work Other Total Channel revenues Wholesale $ 2,602,744 $ 1,524,712 $ 608,972 $ 148 $ 4,736,576 Direct-to-consumer 1,710,437 2,226,870 145,274 — 4,082,581 Royalty 13,816 21,155 18,734 — 53,705 Total $ 4,326,997 $ 3,772,737 $ 772,980 $ 148 $ 8,872,862 Geographic revenues Americas $ 2,325,405 $ 2,282,005 $ 625,565 $ 148 $ 5,233,123 Europe 1,447,353 994,783 68,255 — 2,510,391 Asia-Pacific 554,239 495,949 79,160 — 1,129,348 Total $ 4,326,997 $ 3,772,737 $ 772,980 $ 148 $ 8,872,862 NOTE 4 — INVENTORIES (In thousands) December 2023 March 2023 December 2022 Finished products $ 2,093,174 $ 2,240,215 $ 2,535,759 Work-in-process 43,453 39,508 41,307 Raw materials 11,592 13,067 14,849 Total inventories $ 2,148,219 $ 2,292,790 $ 2,591,915 VF Corporation Q3 FY24 Form 10-Q 12 Table of Contents NOTE 5 — INTANGIBLE ASSETS December 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 $ 264,610 $ 185,650 $ 78,960 $ 88,902 Indefinite-lived intangible assets: Trademarks and trade names 2,557,785 2,553,919 Intangible assets, net $ 2,636,745 $ 2,642,821 Amortization expense for the three and nine months ended December 2023 was $ 3.5 million and $ 10.4 million, respectively. Based on the carrying amounts of amortizable intangible assets noted above, estimated amortization expense for the next five years beginning in Fiscal 2024 is $ 13.7 million, $ 13.1 million, $ 12.2 million, $ 11.7 million and $ 10.8 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 Impairment charges ( 195,287 ) — ( 61,809 ) ( 257,096 ) Foreign currency translation 1,259 1,135 ( 73 ) 2,321 Balance, December 2023 $ 459,759 $ 1,212,379 $ 51,500 $ 1,723,638 During the three months ended December 2023, VF performed interim impairment analyses of the Timberland and Dickies reporting units and recorded impairment charges of $ 195.3 million and $ 61.8 million, respectively. The Timberland reporting unit is part of the Outdoor segment and the Dickies reporting unit is part of the Work segment. Refer to Note 16 for additional information on fair value measurements. Accum ulated impairm ent charges for the Outdoor segment were $ 518.5 million and $ 323.2 million as of December 2023 and March 2023, respectively. Accumulated impairment charges for the Active segment were $ 394.1 million as of December 2023 and March 2023, and accumulated impairment charges were $ 61.8 million for the Work segment as of December 2023. 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 December Nine Months Ended December (In thousands) 2023 2022 2023 2022 Operating lease cost $ 104,266 $ 103,127 $ 316,368 $ 306,259 Other lease cost 44,520 37,784 116,809 104,960 Total lease cost $ 148,786 $ 140,911 $ 433,177 $ 411,219 During the nine months ended December 2023 and 2022, the Company paid $ 321.1 million and $ 315.0 million for operating leases, respectively. During the nine months ended December 2023 and 2022, the Company obtained $ 220.7 million and $ 356.1 million of right-of-use assets in exchange for lease liabilities, respectively. NOTE 8 — SHORT-TERM BORROWINGS AND LONG-TERM DEBT Commercial Paper Program During the second quarter of Fiscal 2024, VF commenced a euro commercial paper program, which in addition to the existing U.S. commercial paper program, is supported by VF's $ 2.25 billion Global Credit Facility. The Company designates its euro commercial paper borrowings as a net investment hedge of VF's investment in certain foreign operations. Refer to Note 17 for additional 13 VF Corporation Q3 FY24 Form 10-Q Table of Contents information. As of December 2023, there were no outstanding euro commercial paper borrowings under this program. There were $ 437.0 million and $ 889.9 million in U.S. commercial paper borrowings as of December 2023 and December 2022, respectively. Senior Notes Maturity On September 18, 2023, VF repaid € 850.0 million ( $ 907.1 million) in aggregate principal amount of its outstanding 0.625 % Senior Notes due in September 2023, in accordance with the terms of the notes. NOTE 9 — 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 December 2023, March 2023 and December 2022, the accounts payable line item in VF’s Consolidated Balance Sheets included total outstanding obligations of $ 599.0 million, $ 510.9 million and $ 502.8 million, respectively, due to suppliers that are eligible to participate in the SCF program. NOTE 10 — PENSION PLANS The components of pension cost for VF’s defined benefit plans were as follows: Three Months Ended December Nine Months Ended December (In thousands) 2023 2022 2023 2022 Service cost – benefits earned during the period $ 2,224 $ 2,632 $ 6,653 $ 7,904 Interest cost on projected benefit obligations 11,763 10,754 35,350 34,065 Expected return on plan assets ( 15,882 ) ( 14,752 ) ( 47,661 ) ( 48,364 ) Settlement charges 131 695 3,430 93,597 Amortization of deferred amounts: Net deferred actuarial losses 4,106 3,858 12,508 11,532 Deferred prior service credits ( 136 ) ( 112 ) ( 408 ) ( 335 ) Net periodic pension cost $ 2,206 $ 3,075 $ 9,872 $ 98,399 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 $ 20.6 million to its defined benefit plans during the nine months ended December 2023, and intends to make approximately $ 10.2 million of contributions during the remainder of Fiscal 2024. VF recorded $ 0.1 million and $ 3.4 million in settlement charges in the other income (expense), net line item in the Consolidated Statements of Operations for the three and nine months ended December 2023, respectively, as well as $ 0.7 million and $ 1.8 million for the three and nine months ended December 2022, respectively. The settlement charges 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 valuations were reviewed and revised as appropriate. The discount rate used to determine the supplemental defined benefit pension obligation as of December 2023, September 2023 and June 2023 was 5.24 %, 6.10 % and 5.44 %, respectively. Additionally, in the first quarter of Fiscal 2023, VF entered into an agreement with The Prudential Insurance Company of America (“Prudential”) to purchase an irrevocable group annuity contract relating to approximately $ 330.0 million of the U.S. qualified defined benefit pension plan obligations. The transaction closed on June 30, 2022 and was funded entirely by existing assets of the plan. Under the group annuity contract, Prudential assumed responsibility for benefit payments and annuity administration for approximately 17,700 retirees and beneficiaries. The transaction did not change the amount or timing of monthly retirement benefit payments. VF recorded a $ 91.8 million settlement charge in the other income (expense), net line item in the Consolidated Statement of Operations during the nine months ended December 2022 to recognize the related deferred actuarial losses in accumulated other comprehensive loss (“OCL” ). VF Corporation Q3 FY24 Form 10-Q 14 Table of Contents NOTE 11 — CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS Common Stock During the nine months ended December 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 December 2023, March 2023 or December 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 income (loss) consists of net income (loss) and specified components of other comprehensive income (loss), which relate to changes in assets and liabilities that are not included in net income (loss) under GAAP but are instead deferred and accumulated within a separate component of stockholders’ equity in the balance sheet. VF’s comprehensive income (loss) is presented in the Consolidated Statements of Comprehensive Income (Loss). The deferred components of other comprehensive income (loss) are reported, net of related income taxes, in accumulated OCL in stockholders’ equity, as follows: (In thousands) December 2023 March 2023 December 2022 Foreign currency translation and other $ ( 856,853 ) $ ( 859,651 ) $ ( 841,877 ) Defined benefit pension plans ( 155,701 ) ( 167,692 ) ( 164,346 ) Derivative financial instruments ( 38,819 ) 7,825 76,635 Accumulated other comprehensive loss $ ( 1,051,373 ) $ ( 1,019,518 ) $ ( 929,588 ) The changes in accumulated OCL, net of related taxes, were as follows: Three Months Ended December 2023 (In thousands) Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total Balance, September 2023 $ ( 878,089 ) $ ( 155,638 ) $ 22,022 $ ( 1,011,705 ) Other comprehensive income (loss) before reclassifications 21,236 ( 3,002 ) ( 61,585 ) ( 43,351 ) Amounts reclassified from accumulated other comprehensive loss — 2,939 744 3,683 Net other comprehensive income (loss) 21,236 ( 63 ) ( 60,841 ) ( 39,668 ) Balance, December 2023 $ ( 856,853 ) $ ( 155,701 ) $ ( 38,819 ) $ ( 1,051,373 ) Three Months Ended December 2022 (In thousands) Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total Balance, September 2022 $ ( 883,846 ) $ ( 166,545 ) $ 206,226 $ ( 844,165 ) Other comprehensive income (loss) before reclassifications 41,969 ( 850 ) ( 101,665 ) ( 60,546 ) Amounts reclassified from accumulated other comprehensive loss — 3,049 ( 27,926 ) ( 24,877 ) Net other comprehensive income (loss) 41,969 2,199 ( 129,591 ) ( 85,423 ) Balance, December 2022 $ ( 841,877 ) $ ( 164,346 ) $ 76,635 $ ( 929,588 ) 15 VF Corporation Q3 FY24 Form 10-Q Table of Contents Nine Months Ended December 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 2,798 762 ( 30,144 ) ( 26,584 ) Amounts reclassified from accumulated other comprehensive loss — 11,229 ( 16,500 ) ( 5,271 ) Net other comprehensive income (loss) 2,798 11,991 ( 46,644 ) ( 31,855 ) Balance, December 2023 $ ( 856,853 ) $ ( 155,701 ) $ ( 38,819 ) $ ( 1,051,373 ) Nine Months Ended December 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 ( 90,245 ) ( 11,226 ) 68,719 ( 32,752 ) Amounts reclassified from accumulated other comprehensive loss — 77,170 ( 47,427 ) 29,743 Net other comprehensive income (loss) ( 90,245 ) 65,944 21,292 ( 3,009 ) Balance, December 2022 $ ( 841,877 ) $ ( 164,346 ) $ 76,635 $ ( 929,588 ) Reclassifications out of accumulated OCL were as follows: (In thousands) Three Months Ended December Nine Months Ended December Details About Accumulated Other Comprehensive Loss Components Affected Line Item in the Consolidated Statements of Operations 2023 2022 2023 2022 Amortization of defined benefit pension plans: Net deferred actuarial losses Other income (expense), net $ ( 4,106 ) $ ( 3,858 ) $ ( 12,508 ) $ ( 11,532 ) Deferred prior service credits Other income (expense), net 136 112 408 335 Pension settlement charges Other income (expense), net ( 131 ) ( 695 ) ( 3,430 ) ( 93,597 ) Total before tax ( 4,101 ) ( 4,441 ) ( 15,530 ) ( 104,794 ) Tax benefit 1,162 1,392 4,301 27,624 Net of tax ( 2,939 ) ( 3,049 ) ( 11,229 ) ( 77,170 ) Gains (losses) on derivative financial instruments: Foreign exchange contracts Net revenues ( 794 ) 782 ( 220 ) ( 9,173 ) Foreign exchange contracts Cost of goods sold ( 2,697 ) 33,816 14,777 68,830 Foreign exchange contracts Selling, general and administrative expenses 833 1,816 3,141 5,380 Foreign exchange contracts Other income (expense), net 536 ( 3,536 ) ( 725 ) ( 9,065 ) Interest rate contracts Interest expense 1,210 27 3,033 81 Total before tax ( 912 ) 32,905 20,006 56,053 Tax expense 168 ( 4,979 ) ( 3,506 ) ( 8,626 ) Net of tax ( 744 ) 27,926 16,500 47,427 Total reclassifications for the period, net of tax $ ( 3,683 ) $ 24,877 $ 5,271 $ ( 29,743 ) VF Corporation Q3 FY24 Form 10-Q 16 Table of Contents NOTE 12 — STOCK-BASED COMPENSATION Incentive Equity Awards Granted During the nine months ended December 2023, VF granted stock options to employees and nonemployee members of VF's Board of Directors to purchase 5,837,052 shares of its Common Stock at a weighted average exercise price of $ 18.12 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 typically vest and become exercisable in equal annual installments over three years . St ock 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: Nine Months Ended December 2023 Expected volatility 33 % to 52 % Weighted average expected volatility 42 % Expected term (in years) 5.9 to 7.8 Weighted average dividend yield 3.8 % Risk-free interest rate 3.80 % to 5.50 % Weighted average fair value at date of grant $ 5.73 During the nine months ended December 2023, VF granted 709,338 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 weighted average fair market value of VF Common Stock at the dates the units were granted was $ 18.29 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. During the nine months ended December 2023, VF granted 50,883 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 weighted average fair market value of VF Common Stock at the dates the units were granted was $ 17.88 per share. In addition, VF granted 3,354,593 nonperformance-based RSUs to employees during the nine months ended December 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 weighted average fair market value of VF Common Stock at the dates the units were granted was $ 17.18 per share. NOTE 13 — INCOME TAXES The effective income tax rate for the nine months ended December 2023 was 412.9 % compared to ( 28.6 )% in the 2022 period. The nine months ended December 2023 included a net discrete tax expense of $ 693.6 million, primarily related to the tax effects of decisions in the Timberland tax case and Belgium excess profits ruling, which are discussed further below. Excluding the $ 693.6 million net discrete tax expense in the 2023 period, the effective income tax rate would have been 18.7 %. The nine months ended December 2022 included a net discrete tax benefit of $ 98.8 million, which primarily related to the Internal Revenue Service ("IRS") examinations for tax year 2017 and short-tax year 2018 resulting in a $ 94.9 million favorable adjustment to VF's transition tax liability under the Tax Cuts and Jobs Act. Excluding the $ 98.8 million net discrete tax benefit in the 2022 period, the effective income tax rate would have been 9.5 %. Without discrete items, the effective income tax rate for the nine months ended December 2023 increased by 9.2 % compared with the 2022 period primarily due to the jurisdictional mix of earnings and losses. As previously reported, VF petitioned the U.S. Tax Court (the “Tax Court”) to resolve an IRS dispute regarding the timing of income inclusion associated with VF’s acquisition of The Timberland Company in September 2011. While the IRS argued that all such income should have been immediately included in 2011, VF reported periodic income inclusions in subsequent tax years. In Fiscal 2023, the Tax Court issued its final decision in favor of the IRS, which was appealed by VF. On October 19, 2022, VF paid $ 875.7 million related to the 2011 taxes and interest being disputed, which was recorded as an income tax receivable and began to accrue interest income. These amounts were included in the other assets line item in VF's Consolidated Balance Sheet, based on our assessment of the position under the more-likely-than-not standard of the accounting literature. On September 8, 2023, the U.S. Court of Appeals for the First Circuit (“Appeals Court”) upheld the Tax Court’s decision in favor of the IRS. As a result of the Appeals Court decision, VF determined that its position no longer met the more-likely-than-not threshold, and thus wrote off the related income tax receivable and associated interest and recorded $ 690.0 million of income tax expense in 17 VF Corporation Q3 FY24 Form 10-Q Table of Contents the second quarter of Fiscal 2024. This amount includes the reversal of $ 19.6 million of interest income, of which $ 7.5 million was recorded in the first quarter of Fiscal 2024. This amount reflects the total estimated net impact to VF’s tax expense, which includes the expected reduction in taxes paid on the periodic inclusions that VF has reported, release of related deferred tax liabilities, and consideration of indirect tax effects resulting from the decision. The estimated impact is subject to future adjustments based on finalization with tax authorities. VF was granted a ruling which lowered the effective income tax rate on taxable earnings for years 2010 through 2014 under Belgium’s excess profit tax regime. During 2015, the European Union Commission ("EU") investigated and announced its decision that these rulings were illegal and ordered the tax benefits to be collected from affected companies, including VF. During 2017 and 2018, VF Europe BVBA was assessed and paid € 35.0 million in tax and interest, which was recorded as an income tax receivable and was included in the other current assets line item in VF's Consolidated Balance Sheets, based on the expected success of the requests for annulment. After subsequent annulments and appeals, the General Court confirmed the decision of the EU on September 20, 2023. As a result, VF wrote off the related income tax receivable and recorded a benefit for the associated foreign tax credit, resulting in $ 26.1 million of net income tax expense in the second quarter of Fiscal 2024. VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. In the U.S., the IRS examinations for tax years through 2015 have been effectively settled. 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 nine months ended December 2023, the amount of net unrecognized tax benefits and associated interest increased by $ 0.9 million to $ 298.5 million, which includes a net reduction of $ 183.0 million due to settlement with the tax authorities related to intellectual property transfers completed in a prior period and a net increase of $ 192.5 million due to uncertainty in the application of court decisions upheld upon appeal, which were recorded in the second quarter of Fiscal 2024. 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 $ 29.4 million due to settlement of audits and expiration of statutes of limitations, of which $ 25.7 million would reduce income tax expense. NOTE 14 — REPORTABLE SEGMENT INFORMATION The CODM allocates resources and assesses performance based on a global brand view which represents VF's operating segments. The operating segments have been evaluated and combined into reportable segments because they meet the similar economic characteristics and qualitative aggregation criteria set forth in the relevant accounting guidance. 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 December Nine Months Ended December (In thousands) 2023 2022 2023 2022 Segment revenues: Outdoor $ 1,738,579 $ 2,003,045 $ 4,281,955 $ 4,326,997 Active 999,396 1,258,682 3,147,692 3,772,737 Work 222,308 268,940 651,211 772,980 Other — — — 148 Total segment revenues $ 2,960,283 $ 3,530,667 $ 8,080,858 $ 8,872,862 Segment profit (loss): Outdoor $ 304,741 $ 457,027 $ 557,830 $ 670,615 Active (a) 94,020 146,885 351,772 541,171 Work ( 1,864 ) 18,487 13,482 92,989 Other — ( 134 ) — ( 516 ) Total segment profit 396,897 622,265 923,084 1,304,259 Impairment of goodwill and intangible assets ( 257,096 ) — ( 257,096 ) ( 421,922 ) Corporate and other expenses ( 142,004 ) ( 116,133 ) ( 321,333 ) ( 507,656 ) Interest expense, net ( 63,338 ) ( 50,230 ) ( 168,701 ) ( 115,395 ) Income (loss) before income taxes $ ( 65,541 ) $ 455,902 $ 175,954 $ 259,286 (a) Includes legal settlement gains of $ 29.1 million in the three and nine months ended December 2023. VF Corporation Q3 FY24 Form 10-Q 18 Table of Contents NOTE 15 — EARNINGS (LOSS) PER SHARE Three Months Ended December Nine Months Ended December (In thousands, except per share amounts) 2023 2022 2023 2022 Earnings (loss) per common share – basic: Net income (loss) $ ( 42,452 ) $ 507,868 $ ( 550,574 ) $ 333,476 Weighted average common shares outstanding 388,383 387,739 388,294 387,663 Earnings (loss) per common share $ ( 0.11 ) $ 1.31 $ ( 1.42 ) $ 0.86 Earnings (loss) per common share – diluted: Net income (loss) $ ( 42,452 ) $ 507,868 $ ( 550,574 ) $ 333,476 Weighted average common shares outstanding 388,383 387,739 388,294 387,663 Incremental shares from stock options and other dilutive securities — 453 — 694 Adjusted weighted average common shares outstanding 388,383 388,192 388,294 388,357 Earnings (loss) per common share $ ( 0.11 ) $ 1.31 $ ( 1.42 ) $ 0.86 In the three and nine-month periods ended December 2023, 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 19.2 million and 19.0 million potentially dilutive shares related to stock options and other dilutive securities were excluded from the diluted loss per share calculations for the three and nine-month periods ended December 2023, respectively. Outstanding stock options and other dilutive securities of approximately 9.9 million and 9.7 million shares were excluded from the calculations of diluted earnings per share for the three and nine-month periods ended December 2022, respectively, because the effect of their inclusion would have been anti-dilutive. In addition, 0.6 million shares of performance-based RSUs were excluded from the calculations of diluted earnings per share for both the three and nine-month periods ended December 2022, because these units were not considered to be contingent outstanding shares in those periods. NOTE 16 — 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. 19 VF Corporation Q3 FY24 Form 10-Q Table of Contents 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 December 2023 Financial assets: Cash equivalents: Money market funds $ 69,840 $ 69,840 $ — $ — Time deposits 27,659 27,659 — — Derivative financial instruments 15,804 — 15,804 — Deferred compensation 91,666 91,666 — — Financial liabilities: Derivative financial instruments 64,700 — 64,700 — Deferred compensation 88,566 — 88,566 — 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 nine months ended December 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 include cash held as demand deposits, accounts receivable, short-term borrowings, accounts payable and accrued liabilities. At December 2023 and March 2023, their carrying values approximated fair value. Additionally, at December 2023 and March 2023, the carrying values of VF’s long-term debt, including the current portion, were $ 5,755.8 million and $ 6,635.3 million, respectively, compared with fair values of $ 5,280.7 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. Nonrecurring Fair Value Measurements Timberland Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis During the three months ended December 2023, management determined that the recent downturn in the Timberland historical financial results, combined with a downward revision to the latest Fiscal 2024 forecast and forward-looking financial projections, was a triggering event that required management to perform a quantitative impairment analysis of both the Timberland reporting unit goodwill, which includes the Timberland ® brand, and the Timberland indefinite-lived trademark intangible asset, which includes both the Timberland ® and Timberland PRO ® brands. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the December 30, 2023 testing date were $ 407.9 million and $ 999.5 million, respectively. As a result of the impairment testing performed, VF VF Corporation Q3 FY24 Form 10-Q 20 Table of Contents recorded a goodwill impairment charge of $ 195.3 million in the Consolidated Statements of Operations for the three and nine months ended December 2023 to write down the Timberland reporting unit carrying value to its estimated fair value. No impairment charge was recorded on the indefinite-lived trademark intangible asset. The estimated fair value of the indefinite-lived trademark intangible asset exceeded its carrying value by a significant amount. The Timberland ® brand, acquired in 2011, offers outdoor, adventure-inspired lifestyle footwear, apparel and accessories that combine performance benefits and versatile styling for men, women and children. Products are sold globally through chain, department and specialty stores, independent distributors and licensees, independently-operated partnership stores, concession retail stores, VF-operated stores, on websites with strategic digital partners and online at www.timberland.com. The Timberland reporting unit is included in the Outdoor reportable segment. The fair values of the Timberland reporting unit and indefinite-lived trademark intangible asset were estimated using valuation techniques consistent with those discussed in the Critical Accounting Policies and Estimates section included in Management's Discussion and Analysis in the Fiscal 2023 Form 10-K. Management's revenue and profitability forecasts used in the Timberland reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Timberland reporting unit and indefinite-lived trademark intangible asset include: • Financial projections and future cash flows that considered recent historical results, actual results lower than previous internal forecasts, with forecasted revenue growth and profitability improvement throughout the forecast period that reflects the long-term strategy for the business with a return to historical averages, and terminal growth rates based on the expected long-term growth rate of the business; • Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; • Royalty rates based on market data as well as active license agreements for the brand and similar VF brands; and, • Market-based discount rates. The valuation model used by management in the impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth and improved profitability over the projection period. If the brand is unable to achieve the financial projections, an impairment on the indefinite-lived trademark intangible asset or additional impairment on the reporting unit goodwill could occur in the future. Dickies Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis September 30, 2023 Testing During the three months ended September 2023, management determined that the recent downturn in the Dickies historical financial results, combined with a downward revision to the latest Fiscal 2024 forecast, was a triggering event that required management to perform a quantitative impairment analysis of both the Dickies reporting unit goodwill and the Dickies indefinite-lived trademark intangible asset. Based on the analysis, management concluded both the goodwill and indefinite-lived intangible asset were not impaired. For goodwill, the estimated fair value of the reporting unit exceeded the carrying value by 8 %. The estimated fair value of the indefinite-lived trademark intangible asset exceeded its carrying value by a significant amount. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the September 30, 2023 testing date were $ 61.2 million and $ 290.0 million, respectively. December 30, 2023 Testing During the three months ended December 2023, management determined that the continued downturn in the Dickies financial results, weakness in certain key U.S. wholesale customer accounts, including lost product placement, and weakness in certain international markets, combined with expectations of a slower recovery, which have resulted in further reductions to the financial projections, was a triggering event that required management to perform a quantitative impairment analysis of both the Dickies reporting unit goodwill and the Dickies indefinite-lived trademark intangible asset. The carrying values of the goodwill and indefinite-lived trademark intangible asset at the December 30, 2023 testing date were $ 61.8 million and $ 290.0 million, respectively. Based on the analysis, management concluded that the Dickies reporting unit goodwill was fully impaired and thus recorded an impairment charge of $ 61.8 million in the Consolidated Statements of Operations for the three and nine months ended December 2023. Based on the analysis, management concluded that the indefinite-lived trademark intangible asset was not impaired and the estimated fair value exceeded its carrying value by a significant amount. The Dickies ® brand, acquired in 2017, is a leader in authentic, functional, durable and affordable workwear and has expanded to produce work-inspired, casual-use products. Products are sold globally through mass merchants, specialty stores, independent distributors and licensees, independently-operated partnership stores, concession retail stores, VF-operated stores, on websites with strategic digital partners and online at www.dickies.com. The Dickies reporting unit is included in the Work reportable segment. The fair values of the Dickies reporting unit and indefinite-lived trademark intangible asset were estimated using valuation techniques consistent with those discussed in the Critical Accounting Policies and Estimates section included in Management's Discussion and Analysis in the Fiscal 2023 Form 10-K. Management's revenue and profitability forecasts used in the Dickies reporting unit and indefinite-lived trademark intangible asset valuations considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that 21 VF Corporation Q3 FY24 Form 10-Q Table of Contents would be used by market participants performing independent valuations of the business. Key assumptions developed by management and used in the quantitative analysis of the Dickies reporting unit and indefinite-lived trademark intangible asset include: • Financial projections and future cash flows, including a base year that considered recent actual results lower than previous internal forecasts, continued weakness in certain key accounts and markets, slower recovery from the recent downturn, with moderate revenue growth and improved profitability throughout the forecast period that reflects the long-term strategy for the business, and terminal growth rates based on the expected long-term growth rate of the business; • Tax rates based on the statutory rates for the countries in which the brand operates and the related intellectual property is domiciled; • Royalty rates based on market data as well as active license agreements for the brand and similar VF brands; and, • Market-based discount rates. The valuation model used by management in the impairment testing assumes recovery from the recent downturn in the brand's operating results and the return to revenue growth and improved profitability over the projection period. If the brand is unable to achieve the financial projections, an impairment of the indefinite-lived trademark intangible asset could occur in the future. Management's Use of Estimates and Assumptions Management made its estimates based on information available as of the date of our assessments, using assumptions we believe market participants would use in performing an independent valuation of the business. Although management believes the estimates and assumptions used in the impairment testing are reasonable and appropriate, it is possible that VF's assumptions and conclusions regarding impairment or recoverability of the Timberland reporting unit goodwill or the Timberland and Dickies indefinite-lived trademark intangible assets could change in future periods. There can be no assurance the estimates and assumptions, particularly our long-term financial projections, used in our goodwill and indefinite-lived intangible asset impairment testing will prove to be accurate predictions of the future, if, for example, (i) the businesses do not perform as projected, (ii) overall economic conditions in the remainder of Fiscal 2024 or future years vary from current assumptions (including changes in discount rates, royalty rates and foreign currency exchange rates), (iii) business conditions or strategies change from current assumptions, including loss of major customers or channels, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and earnings before interest, tax, depreciation and amortization ("EBITDA"). A future impairment charge of the Timberland reporting unit goodwill or the Timberland and Dickies indefinite-lived trademark intangible assets could have a material effect on VF's consolidated financial position and results of operations. The Company owns a broad, diverse portfolio of other brands and businesses for which material amounts of goodwill and intangible assets have been recorded in the Consolidated Balance Sheets. Management continuously evaluates the current and future performance of VF's brands and businesses, as well as other relevant factors, in assessing the recoverability of these assets. There can be no assurances that the estimates and assumptions used in our long-term financial projections, among other factors, will prove to be accurate predictions of the future. As such, a future impairment charge of goodwill or intangible assets could occur, and if so, could have a material effect on VF's consolidated financial position and results of operations. VF Corporation Q3 FY24 Form 10-Q 22 Table of Contents NOTE 17 — 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 $ 3.0 billion at December 2023, $ 3.4 billion at March 2023 and $ 3.3 billion at December 2022, consisting primarily of contracts hedging exposures to the euro, British pound, Canadian dollar, Swiss franc, Mexican peso, South Korean won, Chinese renminbi, 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 December 2023, March 2023 and December 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) December 2023 March 2023 December 2022 December 2023 March 2023 December 2022 Derivatives Designated as Hedging Instruments: Foreign exchange contracts $ 13,901 $ 46,752 $ 80,435 $ ( 63,897 ) $ ( 71,052 ) $ ( 58,455 ) Interest rate contracts 1,737 — 422 — ( 1,140 ) — Total derivatives designated as hedging instruments 15,638 46,752 80,857 ( 63,897 ) ( 72,192 ) ( 58,455 ) Derivatives Not Designated as Hedging Instruments: Foreign exchange contracts 166 2,936 4,061 ( 803 ) ( 461 ) ( 321 ) Total derivatives $ 15,804 $ 49,688 $ 84,918 $ ( 64,700 ) $ ( 72,653 ) $ ( 58,776 ) 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: December 2023 March 2023 December 2022 (In thousands) Derivative Asset Derivative Liability Derivative Asset Derivative Liability Derivative Asset Derivative Liability Gross amounts presented in the Consolidated Balance Sheets $ 15,804 $ ( 64,700 ) $ 49,688 $ ( 72,653 ) $ 84,918 $ ( 58,776 ) Gross amounts not offset in the Consolidated Balance Sheets ( 15,011 ) 15,011 ( 26,470 ) 26,470 ( 24,024 ) 24,024 Net amounts $ 793 $ ( 49,689 ) $ 23,218 $ ( 46,183 ) $ 60,894 $ ( 34,752 ) Derivatives are classified as current or noncurrent based on maturity dates, as follows: (In thousands) December 2023 March 2023 December 2022 Derivative Instruments Balance Sheet Location Foreign exchange contracts Other current assets $ 12,261 $ 48,132 $ 79,862 Foreign exchange contracts Accrued liabilities ( 55,562 ) ( 59,995 ) ( 42,274 ) Foreign exchange contracts Other assets 1,806 1,556 4,634 Foreign exchange contracts Other liabilities ( 9,138 ) ( 11,518 ) ( 16,502 ) Interest rate contracts Other current assets 1,737 — — Interest rate contracts Other assets — — 422 Interest rate contracts Other liabilities — ( 1,140 ) — 23 VF Corporation Q3 FY24 Form 10-Q Table of Contents 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 Comprehensive Income (Loss) and Consolidated Statements of Operations are summarized as follows: (In thousands) Gain (Loss) on Derivatives Recognized in Accumulated OCL Three Months Ended December Gain (Loss) on Derivatives Recognized in Accumulated OCL Nine Months Ended December Cash Flow Hedging Relationships 2023 2022 2023 2022 Foreign exchange contracts $ ( 71,398 ) $ ( 120,057 ) $ ( 42,049 ) $ 82,058 Interest rate contracts ( 1,977 ) 422 5,829 422 Total $ ( 73,375 ) $ ( 119,635 ) $ ( 36,220 ) $ 82,480 (In thousands) Gain (Loss) Reclassified from Accumulated OCL into Net Income (Loss) Three Months Ended December Gain (Loss) Reclassified from Accumulated OCL into Net Income (Loss) Nine Months Ended December Cash Flow Hedging Relationships Location of Gain (Loss) 2023 2022 2023 2022 Foreign exchange contracts Net revenues $ ( 794 ) $ 782 $ ( 220 ) $ ( 9,173 ) Foreign exchange contracts Cost of goods sold ( 2,697 ) 33,816 14,777 68,830 Foreign exchange contracts Selling, general and administrative expenses 833 1,816 3,141 5,380 Foreign exchange contracts Other income (expense), net 536 ( 3,536 ) ( 725 ) ( 9,065 ) Interest rate contracts Interest expense 1,210 27 3,033 81 Total $ ( 912 ) $ 32,905 $ 20,006 $ 56,053 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 nine months ended December 2023, certain derivative contracts were de-designated as the related hedged forecasted transactions were no longer deemed probable of occurring. Accordingly, the Company reclassified amounts from accumulated OCL and recognized an $ 8.3 million loss in cost of goods sold during the nine months ended December 2023. Other Derivative Information A t December 2023, accumulated OCL included $ 40.7 million of pre-tax net deferred losses for foreign currency exchange contracts and a $ 1.7 million pre-tax deferred gain for interest rate swap contracts, which are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on exchange rates in effect when outstanding derivative contracts are settled. Net Investment Hedge The Company has designated its euro-denominated fixed-rate notes and euro commercial paper borrowings, which represented € 2.0 billion in aggregate principal as of December 2023, as a net investment hedge of VF’s investment in certain foreign operations. Because this debt qualified as a nonderivative hedging instrument, foreign currency transaction gains or losses of the debt are deferred in the foreign currency translation and other component of accumulated OCL as an offset to the foreign currency translation adjustments on the hedged investments. During the three and nine-month periods ended December 2023, the Company recognized an after-tax loss of $ 74.8 million and $ 19.3 million, respectively, in other comprehensive income (loss) related to the net investment hedge transaction, and an after-tax loss of $ 126.5 million and an after-tax gain of $ 45.2 million for the three and nine-month periods ended December 2022, respectively. Any amounts deferred in accumulated OCL will remain until the hedged investment is sold or substantially liquidated. VF Corporation Q3 FY24 Form 10-Q 24 Table of Contents NOTE 18 — RESTRUCTURING The Company incurs restructuring charges related to strategic initiatives and cost optimization of business activities. Beginning in the three months ended December 2023, restructuring costs include charges related to Reinvent, a transformation program to enhance focus on brand-building and to improve operating performance and allow VF to achieve its full potential. The Company currently estimates that it will incur approximately $ 80.0 million to $ 130.0 million in restructuring and restructuring-related charges in connection with Reinvent, and that substantially all actions will be completed by the end of Fiscal 2025. Of the total estimated charges, the Company anticipates that approximately one-half will relate to severance and employee-related benefits and that the remainder will relate to asset impairments and other non-cash write-downs. Cash payments are generally expected to be paid within one year of charges incurred. During the three and nine months ended December 2023, VF recorded $ 50.3 million of charges in connection with Reinvent, of which $ 31.6 million related to severance and employee-related benefits and $ 18.7 million related to non-cash asset write-downs. As of December 2023, $ 3.7 million of cash payments related to the Reinvent charges have been made. During the three and nine months ended December 2023, VF recognized $ 50.8 million and $ 51.9 million, respectively, of total restructuring charges, related to approved initiatives. Of the total restructuring charges recognized in the three and nine months ended December 2023, $ 46.6 million and $ 47.7 million were reflected in selling, general and administrative expenses, respectively, and $ 4.2 million in cost of goods sold in both periods. The Company has not recognized any significant incremental costs related to accruals for the year ended March 2023 or prior periods. Of the $ 45.2 million total restructuring accrual at December 2023, $ 43.7 million is expected to be paid out within the next 12 months and is classified within accrued liabilities. The remaining $ 1.5 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 December Nine Months Ended December (In thousands) 2023 2022 2023 2022 Severance and employee-related benefits $ 31,602 $ 10,607 $ 32,278 $ 50,165 Asset impairments and write-downs 18,739 — 18,739 — Accelerated depreciation — 25 — 7,276 Contract termination and other 435 460 889 5,563 Total restructuring charges $ 50,776 $ 11,092 $ 51,906 $ 63,004 Restructuring costs by business segment are as follows: Three Months Ended December Nine Months Ended December (In thousands) 2023 2022 2023 2022 Outdoor $ — $ 391 $ 242 $ 887 Active — — 434 1,478 Work — — — 9 Corporate and other 50,776 10,701 51,230 60,630 Total $ 50,776 $ 11,092 $ 51,906 $ 63,004 The activity in the restructuring accrual for the nine-month period ended December 2023 was as follows: (In thousands) Severance Other Total Accrual at March 2023 $ 38,721 $ 6,545 $ 45,266 Charges 32,278 — 32,278 Cash payments and settlements ( 24,574 ) ( 4,839 ) ( 29,413 ) Adjustments to accruals ( 2,398 ) ( 582 ) ( 2,980 ) Impact of foreign currency 37 26 63 Accrual at December 2023 $ 44,064 $ 1,150 $ 45,214 NOTE 19 — SUBSEQUENT EVENT On January 23, 2024, VF’s Board of Directors declared a quarterly cash dividend of $ 0.09 per share, payable on March 20, 2024 to stockholders of record on March 11, 2024. 25 VF Corporation Q3 FY24 Form 10-Q Table of Contents