Item 1. Financial Statements
ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED).
VF CORPORATION
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts) September 2024 March 2024 September 2023
ASSETS
Current assets
Cash and equivalents
$ 492,164 $ 656,376 $ 484,825
Accounts receivable, less allowance for doubtful accounts of: September 2024 - $ 35,674 ; March 2024 - $ 26,369 ; September 2023 - $ 28,040
1,820,197 1,263,329 1,881,531
Inventories
2,082,918 1,697,823 2,405,291
Other current assets
472,595 493,194 358,124
Current assets of discontinued operations
1,590,984 116,225 113,791
Total current assets 6,458,858 4,226,947 5,243,562
Property, plant and equipment, net
755,802 788,992 885,882
Intangible assets, net
1,774,694 1,776,482 1,778,795
Goodwill
651,934 645,356 1,145,869
Operating lease right-of-use assets
1,313,030 1,255,074 1,248,524
Other assets
1,265,320 1,210,470 1,143,728
Other assets of discontinued operations
— 1,709,642 1,695,992
TOTAL ASSETS $ 12,219,638 $ 11,612,963 $ 13,142,352
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings
$ 463,200 $ 263,938 $ 1,023,276
Current portion of long-term debt
1,750,097 1,000,721 966
Accounts payable
1,134,637 788,477 961,667
Accrued liabilities
1,486,706 1,323,982 1,486,757
Current liabilities of discontinued operations
147,791 79,861 72,167
Total current liabilities 4,982,431 3,456,979 3,544,833
Long-term debt
4,028,549 4,702,284 5,656,725
Operating lease liabilities
1,136,605 1,087,304 1,066,933
Other liabilities
665,686 636,090 598,409
Other liabilities of discontinued operations
— 71,941 65,407
Total liabilities 10,813,271 9,954,598 10,932,307
Commitments and contingencies
Stockholders’ equity
Preferred Stock, par value $ 1 ; shares authorized, 25,000,000 ; no shares outstanding at September 2024, March 2024 or September 2023
— — —
Common Stock, stated value $ 0.25 ; shares authorized, 1,200,000,000 ; shares outstanding at September 2024 - 389,283,419 ; March 2024 - 388,836,219 ; September 2023 - 388,883,825
97,321 97,209 97,221
Additional paid-in capital
3,565,198 3,600,071 3,638,029
Accumulated other comprehensive loss
( 1,070,580 ) ( 1,064,331 ) ( 1,011,705 )
Accumulated deficit
( 1,185,572 ) ( 974,584 ) ( 513,500 )
Total stockholders’ equity 1,406,367 1,658,365 2,210,045
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,219,638 $ 11,612,963 $ 13,142,352
See notes to consolidated financial statements.
3 VF Corporation Q2 FY25 Form 10-Q
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VF CORPORATION
Consolidated Statements of Operations
(Unaudited)
Three Months Ended September Six Months Ended September
(In thousands, except per share amounts) 2024 2023 2024 2023
Net revenues
$ 2,757,948 $ 2,920,123 $ 4,527,008 $ 4,888,186
Costs and operating expenses
Cost of goods sold
1,317,391 1,430,194 2,180,773 2,369,828
Selling, general and administrative expenses
1,166,654 1,139,390 2,195,352 2,197,668
Total costs and operating expenses
2,484,045 2,569,584 4,376,125 4,567,496
Operating income
273,903 350,539 150,883 320,690
Interest income
3,678 4,548 7,073 9,665
Interest expense
( 46,366 ) ( 45,659 ) ( 90,708 ) ( 86,352 )
Other income (expense), net
( 660 ) ( 2,183 ) ( 2,146 ) ( 5,826 )
Income from continuing operations before income taxes
230,555 307,245 65,102 238,177
Income tax expense
28,046 758,887 14,620 752,794
Income (loss) from continuing operations
202,509 ( 451,642 ) 50,482 ( 514,617 )
Income (loss) from discontinued operations, net of tax
( 150,331 ) 945 ( 257,190 ) 6,495
Net income (loss) $ 52,178 $ ( 450,697 ) $ ( 206,708 ) $ ( 508,122 )
Earnings (loss) per common share - basic
Continuing operations
$ 0.52 $ ( 1.16 ) $ 0.13 $ ( 1.33 )
Discontinued operations
( 0.39 ) — ( 0.66 ) 0.02
Total earnings (loss) per common share - basic $ 0.13 $ ( 1.16 ) $ ( 0.53 ) $ ( 1.31 )
Earnings (loss) per common share - diluted
Continuing operations
$ 0.52 $ ( 1.16 ) $ 0.13 $ ( 1.33 )
Discontinued operations
( 0.38 ) — ( 0.66 ) 0.02
Total earnings (loss) per common share - diluted
$ 0.13 $ ( 1.16 ) $ ( 0.53 ) $ ( 1.31 )
Weighted average shares outstanding
Basic
389,044 388,338 388,892 388,249
Diluted
390,945 388,338 390,198 388,249
See notes to consolidated financial statements.
VF Corporation Q2 FY25 Form 10-Q 4
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VF CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Net income (loss)
$ 52,178 $ ( 450,697 ) $ ( 206,708 ) $ ( 508,122 )
Other comprehensive income (loss)
Foreign currency translation and other
Gains (losses) arising during the period
( 4,519 ) 17,094 ( 20,292 ) 564
Income tax effect
22,417 ( 22,383 ) 18,737 ( 19,002 )
Defined benefit pension plans
Current period actuarial gains — 3,742 — 4,743
Amortization of net deferred actuarial losses
5,051 4,170 10,097 8,402
Amortization of deferred prior service credits
( 150 ) ( 137 ) ( 294 ) ( 272 )
Reclassification of net actuarial loss from settlement charges
— 7 — 3,299
Income tax effect
( 1,287 ) ( 2,209 ) ( 2,557 ) ( 4,118 )
Derivative financial instruments
Gains (losses) arising during the period
( 54,435 ) 59,895 ( 34,414 ) 37,155
Income tax effect
6,597 ( 9,852 ) 2,361 ( 5,714 )
Reclassification of net (gains) losses realized
10,685 ( 10,238 ) 24,414 ( 20,918 )
Income tax effect
( 1,312 ) 1,735 ( 4,301 ) 3,674
Other comprehensive income (loss)
( 16,953 ) 41,824 ( 6,249 ) 7,813
Comprehensive income (loss)
$ 35,225 $ ( 408,873 ) $ ( 212,957 ) $ ( 500,309 )
See notes to consolidated financial statements.
5 VF Corporation Q2 FY25 Form 10-Q
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VF CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended September
(In thousands) 2024 2023
OPERATING ACTIVITIES
Net loss
$ ( 206,708 ) $ ( 508,122 )
Income (loss) from discontinued operations, net of tax
( 257,190 ) 6,495
Income (loss) from continuing operations, net of tax
50,482 ( 514,617 )
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization
126,396 136,936
Reduction in the carrying amount of right-of-use assets
179,206 183,335
Stock-based compensation
30,648 29,818
Provision for doubtful accounts
11,366 5,585
Pension expense in excess of (less than) contributions
4,028 ( 10,151 )
Deferred income taxes
( 7,237 ) ( 256,048 )
Write-off of income tax receivables and interest
— 921,409
Other, net
( 24,132 ) 3,024
Changes in operating assets and liabilities:
Accounts receivable
( 553,730 ) ( 317,214 )
Inventories
( 362,748 ) ( 201,998 )
Accounts payable
328,418 63,721
Income taxes
( 72,070 ) 41,018
Accrued liabilities
136,881 83,125
Operating lease right-of-use assets and liabilities
( 176,754 ) ( 185,140 )
Other assets and liabilities
27,423 ( 43,523 )
Cash used by operating activities - continuing operations
( 301,823 ) ( 60,720 )
Cash provided by operating activities - discontinued operations
20,052 41,459
Cash used by operating activities
( 281,771 ) ( 19,261 )
INVESTING ACTIVITIES
Proceeds from sale of assets
76,683 281
Capital expenditures
( 45,953 ) ( 93,833 )
Software purchases
( 25,727 ) ( 41,150 )
Other, net
( 21,424 ) ( 11,026 )
Cash used by investing activities - continuing operations
( 16,421 ) ( 145,728 )
Cash used by investing activities - discontinued operations
( 4,413 ) ( 4,003 )
Cash used by investing activities
( 20,834 ) ( 149,731 )
FINANCING ACTIVITIES
Net increase in short-term borrowings
199,262 1,017,895
Payments on long-term debt
( 551 ) ( 907,656 )
Payment of debt issuance costs
— ( 576 )
Cash dividends paid
( 70,048 ) ( 233,172 )
Proceeds from issuance of Common Stock, net of payments for tax withholdings
( 2,689 ) ( 2,392 )
Cash provided (used) by financing activities
125,974 ( 125,901 )
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash
14,304 ( 21,190 )
Net change in cash, cash equivalents and restricted cash
( 162,327 ) ( 316,083 )
Cash, cash equivalents and restricted cash – beginning of year
676,957 816,319
Cash, cash equivalents and restricted cash – end of period
$ 514,630 $ 500,236
Continued on next page.
See notes to consolidated financial statements.
VF Corporation Q2 FY25 Form 10-Q 6
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VF CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended September
(In thousands) 2024 2023
Balances per Consolidated Balance Sheets:
Cash and cash equivalents $ 492,164 $ 484,825
Other current assets 2,154 1,197
Current and other assets of discontinued operations 20,312 14,206
Other assets — 8
Total cash, cash equivalents and restricted cash $ 514,630 $ 500,236
See notes to consolidated financial statements.
7 VF Corporation Q2 FY25 Form 10-Q
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VF CORPORATION
Consolidated Statements of Stockholders’ Equity
(Unaudited)
Three Months Ended September 2024
Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit
Common Stock
(In thousands, except share amounts) Shares Amounts Total
Balance, June 2024 389,181,642 $ 97,295 $ 3,580,175 $ ( 1,053,627 ) $ ( 1,235,938 ) $ 1,387,905
Net income (loss)
— — — — 52,178 52,178
Dividends on Common Stock ($ 0.09 per share)
— — ( 35,033 ) — — ( 35,033 )
Stock-based compensation, net
101,777 26 20,056 — ( 1,812 ) 18,270
Foreign currency translation and other
— — — 17,898 — 17,898
Defined benefit pension plans
— — — 3,614 — 3,614
Derivative financial instruments
— — — ( 38,465 ) — ( 38,465 )
Balance, September 2024 389,283,419 $ 97,321 $ 3,565,198 $ ( 1,070,580 ) $ ( 1,185,572 ) $ 1,406,367
Three Months Ended September 2023
Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit
Common Stock
(In thousands, except share amounts) Shares Amounts Total
Balance, June 2023 388,836,545 $ 97,209 $ 3,733,777 $ ( 1,053,529 ) $ ( 60,694 ) $ 2,716,763
Net income (loss)
— — — — ( 450,697 ) ( 450,697 )
Dividends on Common Stock ($ 0.30 per share)
— — ( 116,597 ) — — ( 116,597 )
Stock-based compensation, net
47,280 12 20,849 — ( 2,109 ) 18,752
Foreign currency translation and other
— — — ( 5,289 ) — ( 5,289 )
Defined benefit pension plans
— — — 5,573 — 5,573
Derivative financial instruments
— — — 41,540 — 41,540
Balance, September 2023 388,883,825 $ 97,221 $ 3,638,029 $ ( 1,011,705 ) $ ( 513,500 ) $ 2,210,045
Continued on next page.
See notes to consolidated financial statements.
VF Corporation Q2 FY25 Form 10-Q 8
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VF CORPORATION
Consolidated Statements of Stockholders’ Equity
(Unaudited)
Six Months Ended September 2024
Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit
Common Stock
(In thousands, except share amounts) Shares Amounts Total
Balance, March 2024 388,836,219 $ 97,209 $ 3,600,071 $ ( 1,064,331 ) $ ( 974,584 ) $ 1,658,365
Net income (loss)
— — — — ( 206,708 ) ( 206,708 )
Dividends on Common Stock ($ 0.18 per share)
— — ( 70,048 ) — — ( 70,048 )
Stock-based compensation, net
447,200 112 35,175 — ( 4,280 ) 31,007
Foreign currency translation and other
— — — ( 1,555 ) — ( 1,555 )
Defined benefit pension plans
— — — 7,246 — 7,246
Derivative financial instruments
— — — ( 11,940 ) — ( 11,940 )
Balance, September 2024 389,283,419 $ 97,321 $ 3,565,198 $ ( 1,070,580 ) $ ( 1,185,572 ) $ 1,406,367
Six Months Ended September 2023
Additional Paid-in Capital Accumulated Other Comprehensive Loss 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)
— — — — ( 508,122 ) ( 508,122 )
Dividends on Common Stock ($ 0.60 per share)
— — ( 176,086 ) — ( 57,086 ) ( 233,172 )
Stock-based compensation, net
218,294 55 38,136 — ( 5,378 ) 32,813
Foreign currency translation and other
— — — ( 18,438 ) — ( 18,438 )
Defined benefit pension plans
— — — 12,054 — 12,054
Derivative financial instruments
— — — 14,197 — 14,197
Balance, September 2023 388,883,825 $ 97,221 $ 3,638,029 $ ( 1,011,705 ) $ ( 513,500 ) $ 2,210,045
See notes to consolidated financial statements.
9 VF Corporation Q2 FY25 Form 10-Q
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VF CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PAGE NUMBER
NOTE 1 Basis of Presentation
11
NOTE 2 Recently Adopted and Issued Accounting Standards
11
NOTE 3 Revenues
12
NOTE 4 Discontinued Operations
14
NOTE 5 Inventories
15
NOTE 6 Intangible Assets
15
NOTE 7 Goodwill
16
NOTE 8 Leases
16
NOTE 9 Supply Chain Financing Program
16
NOTE 10 Pension Plans
17
NOTE 11 Capital and Accumulated Other Comprehensive Loss
17
NOTE 12 Stock-based Compensation
20
NOTE 13 Income Taxes
20
NOTE 14 Reportable Segment Information
21
NOTE 15 Earnings ( Loss) Per Share
22
NOTE 16 Fair Value Measurements
22
NOTE 17 Derivative Financial Instruments and Hedging Activities
24
NOTE 18 Restructuring
26
NOTE 19 Subsequent Events
27
VF Corporation Q2 FY25 Form 10-Q 10
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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 March 31, 2024 through March 29, 2025 (“Fiscal 2025”). Accordingly, this Form 10-Q presents our second quarter of Fiscal 2025. For presentation purposes herein, all references to periods ended September 2024 and September 2023 relate to the fiscal periods ended on September 28, 2024 and September 30, 2023, respectively. References to March 2024 relate to information as of March 30, 2024.
Basis of Presentation
On July 16, 2024, VF entered into a definitive Stock and Asset Purchase Agreement (the "Purchase Agreement") with EssilorLuxottica S.A. to sell the Supreme ® brand business ("Supreme"). On October 1, 2024, VF completed the sale of Supreme. During the three months ended September 2024, the Company determined that Supreme met the held-for-sale and discontinued operations accounting criteria. Accordingly, b eginning in the second quarter of Fiscal 2025, VF has reported the results of Supreme and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets. These changes have been applied to all periods presented.
Unless otherwise noted, discussion within these notes to the interim consolidated financial statements relates to continuing operations. Refer to Note 4 for additional information on discontinued operations.
Certain prior year amounts have been reclassified to conform to
the Fiscal 2025 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 2024 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 six months ended September 2024 are not necessarily indicative of results that may be expected for any other interim period or for Fiscal 2025. 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 March 30, 2024 (“Fiscal 2024 Form 10-K”).
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 September 2022, the Financial Accounting Standards Board (" FASB") issued A ccounting Standards Update ("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. The Company adopted the required guidance in the first quarter of Fiscal 2024 and will disclose the rollforward information in our Annual Report on Form 10-K for the year ended March 29, 2025. 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 disclosures about a reportable segment's profit or loss and assets in subsequent interim periods. Early adoption is permitted. The guidance requires retrospective application to all prior periods presented in the financial statements. The Company is evaluating the impact that adopting this guidance will have on VF's disclosures.
In December 2023, the FASB issued ASU No. 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures" , which is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The rate reconciliation disclosures will require specific categories and additional information for reconciling items that meet a quantitative threshold. The income taxes paid disclosures will require disaggregation by individual jurisdictions that are greater than 5% of total income taxes paid. The guidance will be effective for annual disclosures beginning in Fiscal 2026. Early adoption is permitted. The amendments are required to be applied on a prospective basis; however, retrospective application is permitted. The Company is evaluating the impact that adopting this guidance will have on VF's disclosures.
11 VF Corporation Q2 FY25 Form 10-Q
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NOTE 3 — REVENUES
Contract Balances
The following table provides information about contract assets and contract liabilities:
(In thousands) September 2024 March 2024 September 2023
Contract assets (a)
$ 4,392 $ 2,393 $ 3,267
Contract liabilities (b)
66,693 66,130 60,664
(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 six months ended September 2024, the Company recognized $ 52.4 million and $ 97.4 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 September 2024, the Company expects to recognize $ 69.7 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 September 2024, 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.
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 September 2024
(In thousands) Outdoor Active Work Total
Channel revenues
Wholesale $ 1,204,940 $ 442,863 $ 179,993 $ 1,827,796
Direct-to-consumer 450,858 430,261 33,818 914,937
Royalty 2,874 6,643 5,698 15,215
Total $ 1,658,672 $ 879,767 $ 219,509 $ 2,757,948
Geographic revenues
Americas $ 703,094 $ 482,634 $ 170,130 $ 1,355,858
Europe 651,870 323,038 34,647 1,009,555
Asia-Pacific 303,708 74,095 14,732 392,535
Total $ 1,658,672 $ 879,767 $ 219,509 $ 2,757,948
VF Corporation Q2 FY25 Form 10-Q 12
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Three Months Ended September 2023
(In thousands) Outdoor Active Work Total
Channel revenues
Wholesale $ 1,275,543 $ 437,003 $ 192,620 $ 1,905,166
Direct-to-consumer 433,071 524,429 39,957 997,457
Royalty 5,065 6,739 5,696 17,500
Total $ 1,713,679 $ 968,171 $ 238,273 $ 2,920,123
Geographic revenues
Americas $ 795,748 $ 523,464 $ 186,868 $ 1,506,080
Europe 657,206 351,606 33,946 1,042,758
Asia-Pacific 260,725 93,101 17,459 371,285
Total $ 1,713,679 $ 968,171 $ 238,273 $ 2,920,123
Six Months Ended September 2024
(In thousands) Outdoor Active Work Total
Channel revenues
Wholesale $ 1,646,821 $ 878,111 $ 316,637 $ 2,841,569
Direct-to-consumer 796,148 791,993 67,751 1,655,892
Royalty 5,902 13,561 10,084 29,547
Total $ 2,448,871 $ 1,683,665 $ 394,472 $ 4,527,008
Geographic revenues
Americas $ 1,076,494 $ 940,290 $ 314,773 $ 2,331,557
Europe 916,051 572,671 53,169 1,541,891
Asia-Pacific 456,326 170,704 26,530 653,560
Total $ 2,448,871 $ 1,683,665 $ 394,472 $ 4,527,008
Six Months Ended September 2023
(In thousands) Outdoor Active Work Total
Channel revenues
Wholesale $ 1,765,474 $ 899,266 $ 338,789 $ 3,003,529
Direct-to-consumer 769,404 1,003,779 79,611 1,852,794
Royalty 8,498 12,862 10,503 31,863
Total $ 2,543,376 $ 1,915,907 $ 428,903 $ 4,888,186
Geographic revenues
Americas $ 1,200,154 $ 1,084,277 $ 340,439 $ 2,624,870
Europe 945,427 608,679 52,947 1,607,053
Asia-Pacific 397,795 222,951 35,517 656,263
Total $ 2,543,376 $ 1,915,907 $ 428,903 $ 4,888,186
13 VF Corporation Q2 FY25 Form 10-Q
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NOTE 4 — DISCONTINUED OPERATIONS
The Company continuously assesses the composition of its portfolio to ensure it is aligned with its strategic objectives and positioned to maximize growth and return to shareholders.
Supreme
On July 16, 2024, VF entered into a Purchase Agreement with EssilorLuxottica S.A. to sell Supreme for an aggregate base purchase price of $ 1.5 billion, subject to customary adjustments for cash, indebtedness, working capital and transaction expenses as more fully set forth in the Purchase Agreement. On October 1, 2024, VF completed the sale of Supreme. VF received proceeds of $ 1.5 billion, subject to post closing adjustments, and recognized an after-tax estimated loss on sale of Supreme of $ 124.8 million, which is included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations for the three and six months ended September 2024. VF used a portion of the net cash proceeds to prepay $ 1.0 billion of its delayed draw Term Loan ("DDTL") pursuant to the terms of the DDTL Agreement, as amended, which required repayment within ten business days of VF’s receipt of the net cash proceeds from the sale of Supreme.
During the three months ended September 2024, the Company determined that Supreme met the held-for-sale and discontinued operations accounting criteria. Accordingly, b eginning in the second quarter of Fiscal 2025, VF has reported the results of Supreme and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets. These changes have been applied to all periods presented.
The results of Supreme were previously reported in the Active segment. The results of Supreme recorded in the income (loss) from discontinued operations, net of tax line item in the
Consolidated Statements of Operations were losses of $ 150.3 million (including an after-tax estimated loss on sale of $ 124.8 million) and $ 257.2 million (including an after-tax estimated loss on sale of $ 124.8 million and goodwill and intangible asset impairment charges of $ 145.0 million) for the three and six months ended September 2024, respectively, and income of $ 0.9 million and $ 6.5 million for the three and six months ended September 2023 , respectively.
During the three months ended June 2024, VF determined that a triggering event had occurred requiring impairment testing of the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset. As a result of the impairment testing performed, VF recorded impairment charges of $ 94.0 million and $ 51.0 million to the Supreme reporting unit goodwill and indefinite-lived trademark intangible asset, respectively.
Under the terms of a transition services agreement, the Company will provide certain post-closing accounting, tax, treasury, digital technology, supply chain and human resource services on a transitional basis for periods generally up to 12 months from the closing date of the transaction. Under the terms of a secondment agreement, certain employees associated with the Supreme business will remain employees of VF and work exclusively in support of Supreme, and at Supreme's expense, through the end of Fiscal 2025.
Certain corporate overhead costs and segment costs previously allocated to the Supreme brand for segment reporting purposes did not qualify for classification within discontinued operations and have been allocated to continuing operations. In addition, interest expense and the related interest rate swap impact for the DDTL were reallocated to discontinued operations due to the requirement within the DDTL Agreement, as amended, that the DDTL be prepaid upon the receipt of the net cash proceeds from the sale of Supreme.
Summarized Discontinued Operations Financial Information
The following table summarizes the major line items for Supreme that are included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations:
Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Net revenues $ 101,253 $ 114,116 $ 239,494 $ 232,389
Cost of goods sold 41,688 48,834 93,949 94,469
Selling, general and administrative expenses 50,700 52,894 108,553 104,675
Impairment of goodwill and intangible assets — — 145,000 —
Interest expense, net (a)
( 16,037 ) ( 14,533 ) ( 30,767 ) ( 28,676 )
Other income (expense), net 447 ( 1,327 ) ( 17 ) ( 1,251 )
Income (loss) from discontinued operations before income taxes ( 6,725 ) ( 3,472 ) ( 138,792 ) 3,318
Estimated loss on the sale of discontinued operations before income taxes ( 132,538 ) — ( 132,538 ) —
Total income (loss) from discontinued operations before income taxes ( 139,263 ) ( 3,472 ) ( 271,330 ) 3,318
Income tax expense (benefit) 11,068 ( 4,417 ) ( 14,140 ) ( 3,177 )
Income (loss) from discontinued operations, net of tax $ ( 150,331 ) $ 945 $ ( 257,190 ) $ 6,495
(a) As noted above, interest expense and the related interest rate swap im pact for the DDTL were realloc ated to discontinued operations.
VF Corporation Q2 FY25 Form 10-Q 14
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The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented:
(In thousands) September 2024 March 2024 September 2023
Cash and equivalents $ 20,188 $ 18,229 $ 14,087
Accounts receivable, net 13,066 10,636 8,273
Inventories 89,779 68,543 75,760
Other current assets 18,910 18,817 15,671
Property, plant and equipment, net 36,166 34,894 30,689
Intangible assets, net 801,000 852,000 852,000
Goodwill 724,800 815,058 815,351
Operating lease right-of-use assets 86,465 75,287 59,119
Other assets 19,157 19,882 28,348
Deferred income tax assets (a)
( 86,009 ) ( 87,479 ) ( 89,515 )
Allowance to reduce assets to estimated fair value, less costs to sell ( 132,538 ) — —
Total assets of discontinued operations $ 1,590,984 $ 1,825,867 $ 1,809,783
Accounts payable $ 27,665 $ 28,651 $ 31,244
Accrued liabilities 38,872 51,210 40,923
Operating lease liabilities 78,723 69,554 54,725
Other liabilities 2,531 2,387 10,682
Total liabilities of discontinued operations $ 147,791 $ 151,802 $ 137,574
(a) Deferred income tax balances reflect VF’s consolidated netting by jurisdiction.
NOTE 5 — INVENTORIES
(In thousands) September 2024 March 2024 September 2023
Finished products $ 2,046,494 $ 1,658,168 $ 2,362,262
Work-in-process 36,324 39,539 42,482
Raw materials 100 116 547
Total inventories $ 2,082,918 $ 1,697,823 $ 2,405,291
NOTE 6 — INTANGIBLE ASSETS
September 2024 March 2024
(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 $ 265,950 $ 196,927 $ 69,023 $ 74,963
Indefinite-lived intangible assets:
Trademarks and trade names 1,705,671 1,701,519
Intangible assets, net $ 1,774,694 $ 1,776,482
Amortization expense for the three and six months ended September 2024 was $ 3.4 million and $ 6.7 million, respectively. Based on the carrying amounts of amortizable intangible assets noted above, estimated amortization expense for the next five years beginning in Fiscal 2025 is $ 13.3 million, $ 12.3 million, $ 11.9 million, $ 10.9 million and $ 9.9 million, respectively.
15 VF Corporation Q2 FY25 Form 10-Q
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NOTE 7 — GOODWILL
Changes in goodwill are summarized by reportable segment as follows:
(In thousands) Outdoor Active Work Total
Balance, March 2024 $ 205,868 $ 387,988 $ 51,500 $ 645,356
Foreign currency translation 2,013 4,565 — 6,578
Balance, September 2024 $ 207,881 $ 392,553 $ 51,500 $ 651,934
Accum ulated impairm ent charges for the Outdoor and Work segments were $ 769.0 million and $ 61.8 million , respectively, a s of September 2024 and March 2024. No impai rment charges were recorded during the six months ended September 2024 .
NOTE 8 — 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 gains recognized from sale leaseback transactions. The components of lease cost were as follows:
Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Operating lease cost $ 103,942 $ 102,157 $ 204,553 $ 204,446
Other lease cost 30,863 36,962 53,110 72,274
Total lease cost $ 134,805 $ 139,119 $ 257,663 $ 276,720
During the six months ended September 2024, the Company entered int o a sale leaseback transaction for certain warehouse real estate and related assets. The transaction qualified as a sale, and thus the Company reco gnized a ga in of $ 15.5 million in the selling, general and administrative expenses line item in VF's Consolidated Statement of Operations for the six months ended September 2024.
During the six months ended September 2024 and 2023, the Company pai d $ 211.8 million and $ 209.3 million for operating leases, respectively. During the six months ended September 2024 and 2023, the Company obtained $ 227.9 million and $ 139.1 million of right-of-use assets in exchange for lease liabili ties, respectively.
NOTE 9 — SUPPLY CHAIN FINANCING PROGRAM
VF facilitates a voluntary supply chain finance ("SCF") program that enables a significant portion of our inventory suppliers to leverage VF's credit rating to receive payment from participating financial institutions prior to the payment date specified in the terms between VF and the supplier. The SCF program is administered through third-party platforms that allow participating suppliers to track payments from VF and elect which receivables, if any, to sell to the financial institutions. The transactions are at the sole discretion of both the suppliers and financial institutions, and VF is not a party to the agreements and has no economic interest in the supplier's decision to sell a receivable. The terms between VF and the supplier, including the amount due and scheduled payment terms (which are generally
within 90 days of the invoice date), are not impacted by a supplier's participation in the SCF program. All amounts due to suppliers that are eligible to participate in the SCF program are included in the accounts payable line item in VF's Consolidated Balance Sheets and VF payments made under the SCF program are reflected in cash flows from operating activities in VF's Consolidated Statements of Cash Flows. At September 2024, March 2024 and September 2023, the accounts payable line item in VF’s Consolidated Balance Sheets included total outstanding obligations of $ 804.9 million, $ 485.0 million and $ 688.0 million, respectively, due to suppliers that are eligible to participate in the SCF program.
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NOTE 10 — PENSION PLANS
The components of pension cost for VF’s defined benefit plans were as follows:
Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Service cost – benefits earned during the period $ 2,498 $ 2,237 $ 4,906 $ 4,429
Interest cost on projected benefit obligations 11,715 11,775 23,395 23,587
Expected return on plan assets ( 15,334 ) ( 15,902 ) ( 30,630 ) ( 31,779 )
Settlement charges — 7 — 3,299
Amortization of deferred amounts:
Net deferred actuarial losses 5,051 4,170 10,097 8,402
Deferred prior service credits ( 150 ) ( 137 ) ( 294 ) ( 272 )
Net periodic pension cost $ 3,780 $ 2,150 $ 7,474 $ 7,666
VF has reported the service cost component of net periodic pension cost i n operating income an d 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 co ntributed $ 3.4 million to its defined benefit plans during the six months ended September 2024, and intends to make approximately $ 12.7 million of contributions during the remainder of Fiscal 2025.
VF recorded $ 3.3 million in settlement charges in the other income (expense), net line item in the Consolidated Statement of Operations for the six months ended September 2023. 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.
NOTE 11 — CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS
Common Stock
During the six months ended September 2024, the Company did no t purc hase 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 out standing is net of shares held in treasury which are, in substance, retired. There were no shares held in treasury at the end of September 2024, March 2024 or September 2023. 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 deficit).
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 o f other comprehensive income (loss) are reported, net of related income taxes, in accu mulated other comprehensive loss ("OC L") in stockholders’ equity, as follows:
(In thousands) September 2024 March 2024 September 2023
Foreign currency translation and other $ ( 869,994 ) $ ( 868,439 ) $ ( 878,089 )
Defined benefit pension plans ( 175,087 ) ( 182,333 ) ( 155,638 )
Derivative financial instruments ( 25,499 ) ( 13,559 ) 22,022
Accumulated other comprehensive loss $ ( 1,070,580 ) $ ( 1,064,331 ) $ ( 1,011,705 )
17 VF Corporation Q2 FY25 Form 10-Q
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The changes in accumulated OCL, ne t of related taxes, were as follows:
Three Months Ended September 2024
(In thousands) Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total
Balance, June 2024 $ ( 887,892 ) $ ( 178,701 ) $ 12,966 $ ( 1,053,627 )
Other comprehensive income (loss) before reclassifications
17,898 ( 26 ) ( 47,838 ) ( 29,966 )
Amounts reclassified from accumulated other comprehensive loss
— 3,640 9,373 13,013
Net other comprehensive income (loss)
17,898 3,614 ( 38,465 ) ( 16,953 )
Balance, September 2024 $ ( 869,994 ) $ ( 175,087 ) $ ( 25,499 ) $ ( 1,070,580 )
Three Months Ended September 2023
(In thousands) Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total
Balance, June 2023 $ ( 872,800 ) $ ( 161,211 ) $ ( 19,518 ) $ ( 1,053,529 )
Other comprehensive income (loss) before reclassifications
( 5,289 ) 2,676 50,043 47,430
Amounts reclassified from accumulated other comprehensive loss
— 2,897 ( 8,503 ) ( 5,606 )
Net other comprehensive income (loss)
( 5,289 ) 5,573 41,540 41,824
Balance, September 2023 $ ( 878,089 ) $ ( 155,638 ) $ 22,022 $ ( 1,011,705 )
Six Months Ended September 2024
(In thousands) Foreign Currency Translation and Other Defined Benefit Pension Plans Derivative Financial Instruments Total
Balance, March 2024 $ ( 868,439 ) $ ( 182,333 ) $ ( 13,559 ) $ ( 1,064,331 )
Other comprehensive loss before reclassifications ( 1,555 ) ( 36 ) ( 32,053 ) ( 33,644 )
Amounts reclassified from accumulated other comprehensive loss
— 7,282 20,113 27,395
Net other comprehensive income (loss)
( 1,555 ) 7,246 ( 11,940 ) ( 6,249 )
Balance, September 2024 $ ( 869,994 ) $ ( 175,087 ) $ ( 25,499 ) $ ( 1,070,580 )
Six Months Ended September 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
( 18,438 ) 3,764 31,441 16,767
Amounts reclassified from accumulated other comprehensive loss
— 8,290 ( 17,244 ) ( 8,954 )
Net other comprehensive income (loss)
( 18,438 ) 12,054 14,197 7,813
Balance, September 2023 $ ( 878,089 ) $ ( 155,638 ) $ 22,022 $ ( 1,011,705 )
VF Corporation Q2 FY25 Form 10-Q 18
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Reclassifications out of accumulated OCL were as follows:
(In thousands) Three Months Ended September Six Months Ended September
Details About Accumulated Other Comprehensive Loss Components Affected Line Item in the Consolidated Statements of Operations
2024 2023 2024 2023
Amortization of defined benefit pension plans:
Net deferred actuarial losses
Other income (expense), net $ ( 5,051 ) $ ( 4,170 ) $ ( 10,097 ) $ ( 8,402 )
Deferred prior service credits
Other income (expense), net 150 137 294 272
Pension settlement charges
Other income (expense), net — ( 7 ) — ( 3,299 )
Total before tax
( 4,901 ) ( 4,040 ) ( 9,803 ) ( 11,429 )
Tax benefit
1,261 1,143 2,521 3,139
Net of tax
( 3,640 ) ( 2,897 ) ( 7,282 ) ( 8,290 )
Gains (losses) on derivative financial instruments:
Foreign exchange contracts
Net revenues ( 7,851 ) ( 516 ) ( 12,182 ) 574
Foreign exchange contracts
Cost of goods sold ( 4,001 ) 9,399 ( 14,127 ) 17,474
Foreign exchange contracts
Selling, general and administrative expenses ( 47 ) 1,007 ( 455 ) 2,308
Foreign exchange contracts
Other income (expense), net 53 ( 750 ) ( 3 ) ( 1,261 )
Interest rate contracts
Interest expense 27 27 54 54
Interest rate contracts
Income (loss) from discontinued operations, net of tax 1,134 1,071 2,299 1,769
Total before tax
( 10,685 ) 10,238 ( 24,414 ) 20,918
Tax benefit (expense)
1,312 ( 1,735 ) 4,301 ( 3,674 )
Net of tax
( 9,373 ) 8,503 ( 20,113 ) 17,244
Total reclassifications for the period, net of tax $ ( 13,013 ) $ 5,606 $ ( 27,395 ) $ 8,954
19 VF Corporation Q2 FY25 Form 10-Q
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NOTE 12 — STOCK-BASED COMPENSATION
Incentive Equity Awards Granted
During the six months ended September 2024, VF granted stock options to employees and nonemployee members of VF's Board of Directors to purchase 6,415,325 shares of its Common Stock at a weighted average exercise price of $ 13.08 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 . 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:
Six Months Ended September 2024
Expected volatility 37 % to 53 %
Weighted average expected volatility 47 %
Expected term (in years) 5.5 to 7.3
Weighted average dividend yield 2.2 %
Risk-free interest rate 3.80 % to 5.43 %
Weighted average fair value at date of grant $ 5.22
During the six months ended September 2024, VF granted 1,510,938 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 $ 16.51 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 the achievement of financial targets and relative total shareholder return ("TSR") 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 are based on the average, for the three years of the performance cycle, of the annual levels of achievement of VF's total revenue, weighted 50 %, and the average, for the three years of the performance cycle, of the annual levels of achievement of VF's gross margin, weighted 50 %. Furthermore, the actual number of shares earned may be adjusted upward or downward by 25 % of the target award, based on how VF's TSR over the three-year period compares to the TSR for companies included in the
Standard & Poor's 600 Consumer Discretionary Sector 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 $ 2.05 per share.
During the six months ended September 2024, VF granted 92,384 nonperformance-based stock units 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 $ 16.42 per share.
In addition, VF granted 3,249,172 nonperformance-based RSUs to employees during the six months ended September 2024. 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 $ 16.58 per share.
NOTE 13 — INCOME TAXES
The effective income tax rate for the six months ended September 2024 was 22.5 % compared to 316.1 % in the 2023 period. The six months ended September 2024 included a net discrete tax benefit of $ 5.8 million, which was comprised primarily of a $ 9.5 million net tax benefit related to unrecognized tax benefits and interest, and a $ 5.3 million tax expense related to stock compensation. Excluding the $ 5.8 million net discrete tax benefit in the 2024 period, the effective income tax rate would have been 31.4 %. The six months ended September 2023 included a net discrete tax expense of $ 703.3 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 $ 703.3 million net discrete tax expense in the 2023 period, the effective income tax rate would have been 20.8 %. Without discrete items, the effective income tax rate for the six months ended September 2024 increased by 10.6 % compared with the 2023 period primarily due to disproportionate
year-to-date losses in jurisdictions with no tax benefit, as well as the jurisdictional mix of earnings.
As previously reported, VF petitioned the U.S. Tax Court (the "Tax Court”) to resolve an Internal Revenue Service ("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
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Appeals for the First Circuit (“Appeals Court”) upheld the Tax Court’s decision in favor of the IRS. As a result of the Appeals Court decision, VF determined that its position no longer met the more-likely-than-not threshold, and thus wrote off the related income tax receivable and associated interest and recorded $ 690.0 million of income tax expense in the three months ended September 2023. This amount included the reversal of $ 19.6 million of interest income, of which $ 7.5 million was recorded in the first quarter of Fiscal 2024. This amount reflects the total estimated net impact to VF’s tax expense, which includes the expected reduction in taxes paid on the periodic inclusions that VF has reported, release of related deferred tax liabilities, and consideration of indirect tax effects resulting from the decision. The estimated impact is subject to future adjustments based on finalization with tax authorities.
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 three months ended September 2023.
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 six months ended September 2024, the amount of net unrecognized tax benefits and associated interest decreased by $ 6.3 million to $ 296.5 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 $ 5.0 million due to settlement of audits and expiration of statutes of limitations, of which $ 1.8 million would reduce income tax expense.
NOTE 14 — REPORTABLE SEGMENT INFORMATION
VF's President and Chief Executive Officer, who is considered the Company's CODM, allocates resources and assesses performance based on a global brand view that 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.
Financial information for VF's reportable segments is as follows:
Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Segment revenues:
Outdoor $ 1,658,672 $ 1,713,679 $ 2,448,871 $ 2,543,376
Active 879,767 968,171 1,683,665 1,915,907
Work 219,509 238,273 394,472 428,903
Total segment revenues $ 2,757,948 $ 2,920,123 $ 4,527,008 $ 4,888,186
Segment profit:
Outdoor $ 287,414 $ 296,750 $ 203,999 $ 253,089
Active 103,659 121,189 172,759 222,324
Work 20,408 8,515 25,736 15,346
Total segment profit 411,481 426,454 402,494 490,759
Corporate and other expenses ( 138,238 ) ( 78,098 ) ( 253,757 ) ( 175,895 )
Interest expense, net (a)
( 42,688 ) ( 41,111 ) ( 83,635 ) ( 76,687 )
Income from continuing operations before income taxes
$ 230,555 $ 307,245 $ 65,102 $ 238,177
(a) Interest expense and the related interest rate swap im pact for the DDTL, which totaled $ 16.2 million and $ 31.1 million for the three and six months ended September 2024, respectively, and $ 14.8 million and $ 29.3 million for the three and six months ended September 2023, respectively, were reallocated to discontinued operations due to the requiremen t within the DDTL's amended agreement that the DDTL be prepaid upon the receipt of the net cash proceeds from the sale of Supreme.
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NOTE 15 — EARNINGS (LOSS) PER SHARE
Three Months Ended September Six Months Ended September
(In thousands, except per share amounts) 2024 2023 2024 2023
Earnings (loss) per share – basic:
Income (loss) from continuing operations
$ 202,509 $ ( 451,642 ) $ 50,482 $ ( 514,617 )
Weighted average common shares outstanding
389,044 388,338 388,892 388,249
Earnings (loss) per share from continuing operations
$ 0.52 $ ( 1.16 ) $ 0.13 $ ( 1.33 )
Earnings (loss) per share – diluted:
Income (loss) from continuing operations
$ 202,509 $ ( 451,642 ) $ 50,482 $ ( 514,617 )
Weighted average common shares outstanding
389,044 388,338 388,892 388,249
Incremental shares from stock options and other dilutive securities
1,901 — 1,306 —
Adjusted weighted average common shares outstanding
390,945 388,338 390,198 388,249
Earning (loss) per share from continuing operations
$ 0.52 $ ( 1.16 ) $ 0.13 $ ( 1.33 )
Outstanding stock options and other potentially dilutive securities of approximately 13.1 million and 15.9 million shares were excluded from the calculations of diluted earnings per share for the three and six-month periods ended September 2024 , respectively, because the effect of their inclusion would have been anti-dilutive to those periods. In addition, 2.4 million and 1.6 million shares of performance-based RSUs were excluded from the calculations of diluted earnings per share for the three and six-months periods ended September 2024 , respectively, because these units were not considered to be contingent outstanding shares in those periods.
In the three and six-month periods ended September 2023, the dilutive impacts of all outstanding stock options and other dilutive securities were excluded from dilutive shares as a result of the Company's loss from continuing operations for the periods and, as such, their inclusion would have been anti-dilutive. As a result, a total of 19.3 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 six-month periods ended September 2023, respectively.
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.
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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
September 2024
Financial assets:
Cash equivalents:
Money market funds $ 108,232 $ 108,232 $ — $ —
Time deposits 22,929 22,929 — —
Derivative financial instruments 16,445 — 16,445 —
Deferred compensation and other 95,747 95,747 — —
Financial liabilities:
Derivative financial instruments 54,569 — 54,569 —
Deferred compensation 92,024 — 92,024 —
Contingent consulting fees 13,563 — — 13,563
Total Fair Value Fair Value Measurement Using (a)
(In thousands) Level 1 Level 2 Level 3
March 2024
Financial assets:
Cash equivalents:
Money market funds $ 171,931 $ 171,931 $ — $ —
Time deposits 54,853 54,853 — —
Derivative financial instruments 32,548 — 32,548 —
Deferred compensation and other 95,236 95,236 — —
Financial liabilities:
Derivative financial instruments 40,234 — 40,234 —
Deferred compensation 90,804 — 90,804 —
(a) There w ere no tra nsfers among the levels within the fair value hierarchy during the six months ended September 2024 or the year ended March 2024.
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.
During the three months ended September 2024, VF entered into a contract with a consulting firm to support Reinvent, VF's transformation program. The contract includes contingent fees tied to increases in VF's stock price. These fees are accounted for under Accounting Standards Codification Topic 718 — Stock Compensation ("ASC 718") as a liability award to a non-employee. Accordingly, VF has utilized the Monte Carlo valuation model
(Level 3) to estimate the fair value of the award at its inception, and will adjust such fair value on a quarterly basis over the measurement period, which concludes on June 30, 2027. The valuation includes the effects of market conditions that are based upon VF's stock price performance relative to stock price targets and a minimum payout dependent on the Standard & Poor's 500 Index return and VF's TSR versus that of peer companies over the measurement period. As of September 2024, the total fair value of the contingent fees was $ 30.7 million, of which $ 13.6 million was recognized as of September 2024.
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 September 2024 and March 2024, their carrying values approximated their fair values. Additionally, at September 2024 and March 2024, the carrying values of VF’s long-term debt, including the current portion, were $ 5,778.6 million and $ 5,703.0 million, respectively, compared with fair values of $ 5,437.7 million and $ 5,263.3 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.
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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 $ 3.1 billion at September 2024, $ 3.1 billion at March 2024 and $ 3.3 billion at September
2023, consisting primarily of contracts hedging exposures to the euro, British pound, Canadian dollar, Swiss franc, Mexican peso, Chinese renminbi, Polish zloty, Swedish krona, South Korean won, and Japanese yen. These derivative contracts have maturities up to 20 months.
The notional amount of VF's outstanding interest rate swap contracts was $ 500.0 million at September 2024, March 2024 and September 2023. These contracts hedge the cash flow risk of interest payments on the variable-rate DDTL Agreement.
The following table presents outstanding derivatives on an individual contract basis:
Fair Value of Derivatives
with Unrealized Gains Fair Value of Derivatives
with Unrealized Losses
(In thousands) September 2024 March 2024 September 2023 September 2024 March 2024 September 2023
Derivatives Designated as Hedging Instruments:
Foreign exchange contracts $ 15,846 $ 29,657 $ 51,216 $ ( 53,621 ) $ ( 39,639 ) $ ( 37,664 )
Interest rate contracts 324 2,335 4,897 — — —
Total derivatives designated as hedging instruments 16,170 31,992 56,113 ( 53,621 ) ( 39,639 ) ( 37,664 )
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts 275 556 1,258 ( 948 ) ( 595 ) ( 905 )
Total derivatives
$ 16,445 $ 32,548 $ 57,371 $ ( 54,569 ) $ ( 40,234 ) $ ( 38,569 )
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:
September 2024 March 2024 September 2023
(In thousands) Derivative
Asset Derivative
Liability Derivative
Asset Derivative
Liability Derivative
Asset Derivative
Liability
Gross amounts presented in the Consolidated Balance Sheets
$ 16,445 $ ( 54,569 ) $ 32,548 $ ( 40,234 ) $ 57,371 $ ( 38,569 )
Gross amounts not offset in the Consolidated Balance Sheets
( 8,282 ) 8,282 ( 11,322 ) 11,322 ( 25,460 ) 25,460
Net amounts
$ 8,163 $ ( 46,287 ) $ 21,226 $ ( 28,912 ) $ 31,911 $ ( 13,109 )
Derivatives are classified as current or noncurrent based on maturity dates, as follows:
(In thousands) September 2024 March 2024 September 2023
Derivative Instruments Balance Sheet Location
Foreign exchange contracts Other current assets $ 12,988 $ 26,366 $ 40,567
Foreign exchange contracts Accrued liabilities ( 44,300 ) ( 35,578 ) ( 35,347 )
Foreign exchange contracts Other assets 3,133 3,847 11,907
Foreign exchange contracts Other liabilities ( 10,269 ) ( 4,656 ) ( 3,222 )
Interest rate contracts Other current assets 324 2,335 —
Interest rate contracts Other assets — — 4,897
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Cash Flow Hedges
VF primarily uses foreign currency exchange forward contracts to hedge a portion of the exchange risk for its forecasted sales, inventory purchases, operating costs and certain intercompany transactions, including sourcing and management fees and royalties. The Company also uses interest rate swap contracts to hedge against a portion of the exposure related to its interest payments on its variable-rate debt. The effects of cash flow hedging included in VF’s Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Operations are summarized as follows:
(In thousands) Gain (Loss) on Derivatives
Recognized in Accumulated OCL
Three Months Ended September Gain (Loss) on Derivatives
Recognized in Accumulated OCL
Six Months Ended September
Cash Flow Hedging Relationships 2024 2023 2024 2023
Foreign exchange contracts $ ( 54,203 ) $ 58,509 $ ( 34,702 ) $ 29,349
Interest rate contracts ( 232 ) 1,386 288 7,806
Total $ ( 54,435 ) $ 59,895 $ ( 34,414 ) $ 37,155
(In thousands) Gain (Loss) Reclassified from
Accumulated OCL into Net Income (Loss)
Three Months Ended September Gain (Loss) Reclassified from Accumulated OCL into Net Income (Loss)
Six Months Ended September
Cash Flow Hedging Relationships Location of Gain (Loss) 2024 2023 2024 2023
Foreign exchange contracts Net revenues $ ( 7,851 ) $ ( 516 ) $ ( 12,182 ) $ 574
Foreign exchange contracts Cost of goods sold ( 4,001 ) 9,399 ( 14,127 ) 17,474
Foreign exchange contracts Selling, general and administrative expenses ( 47 ) 1,007 ( 455 ) 2,308
Foreign exchange contracts Other income (expense), net 53 ( 750 ) ( 3 ) ( 1,261 )
Interest rate contracts Interest expense 27 27 54 54
Interest rate contracts Income (loss) from discontinued operations, net of tax 1,134 1,071 2,299 1,769
Total $ ( 10,685 ) $ 10,238 $ ( 24,414 ) $ 20,918
Derivative Contracts Not Designated as Hedges
VF uses foreign currency exchange contracts to manage foreign currency exchange risk on third-party and intercompany accounts receivable and payable, as well as third-party and intercompany borrowings and interest payments. These contracts are not designated as hedges, and are recorded at fair value in the Consolidated Balance Sheets. Changes in the fair values of these instruments are recognized directly in earnings. Gains or losses on these contracts largely offset the net transaction losses or gains on the related assets and liabilities. In the case of derivative contracts executed on foreign currency exposures that are no longer probable of occurring, VF de-designates these hedges and the fair value changes of these instruments are also recognized directly in earnings. During the six months ended September 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 $ 8.1 million loss in cost of goods sold during the six months ended September 2023. There were no material reclassifications in the other periods presented.
Other Derivative Information
A t September 2024, accumulated OCL included $ 21.4 million of pre-tax net deferred losses for foreign currency exchange
contracts and a $ 0.3 million pre-tax deferred gain for interest rate swap contracts, which are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on exchange rates and interest rates in effect when outstanding derivative contracts are settled.
Net Investment Hedge
The Company has designated its euro-denominated fixed-rate notes, which represented € 2.0 billion in aggregate principal as of September 2024, as a net investment hedge of VF’s investment in certain foreign operations. Because this debt qualified as a nonderivative hedging instrument, foreign currency transaction gains or losses of the debt are deferred in the foreign currency translation and other component of accumulated OCL as an offset to the foreign currency translation adjustments on the hedged investments. During the three and six-month periods ended September 2024, the Company recognized an after-tax loss of $ 64.8 million and an after-tax loss of $ 54.0 million, respectively, in other comprehensive income (loss) related to the net investment hedge transaction and an after-tax gain of $ 65.9 million and $ 55.5 million for the three and six-month periods ended September 2023, respectively. Any amounts deferred in accumulated OCL will remain until the hedged investment is sold or substantially liquidated.
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NOTE 18 — RESTRUCTURING
The Company incurs restructuring charges related to strategic initiatives and cost optimization of business activities. A description of significant restructuring programs and other restructuring charges is provided below.
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 Company currently estimates it will incur approximately $ 190.0 million to $ 210.0 million in restructuring 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 70 % will relate to severance and employee-related benefits and the remainder will primarily relate to asset impairments and write-downs. Cash payments are generally expected to be paid within one year of charges incurred. During the six months ended September 2024, $ 21.3 million of cash payments related to the Reinvent charges were made.
The type of cost and respective location of restructuring charges related to Reinvent for the three and six months ended September 2024, and the cumulative charges recorded since the inception of Reinvent were as follows:
(In thousands) Three Months Ended September 2024 Six Months Ended September 2024 Cumulative Charges
Type of Cost Statement of Operations Location
Severance and employee-related benefits Selling, general and administrative expenses $ 8,158 $ 19,299 $ 84,121
Severance and employee-related benefits Cost of goods sold — 181 4,691
Contract termination and other Selling, general and administrative expenses — 737 737
Contract termination and other Cost of goods sold — 157 157
Asset impairments and write-downs Selling, general and administrative expenses — 500 39,886
Pension withdrawal Selling, general and administrative expenses 3,619 3,619 3,619
Accelerated depreciation Selling, general and administrative expenses 18 879 879
Accelerated depreciation Cost of goods sold — 17 17
Total Reinvent Restructuring Charges $ 11,795 $ 25,389 $ 134,107
All restructuring charges related to Reinvent recognized in the three and six months ended September 2024 were reported within 'Corporate and other' expenses in Note 14, Reportable Segment Information.
Other Restructuring Charges
Other Restructuring Charges are related to various approved initiatives. The type of cost and respective location of Other Restructuring Charges for the three and six months ended September 2024 and 2023 were as follows:
Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Type of Cost Statement of Operations Location
Severance and employee-related benefits Selling, general and administrative expenses $ — $ — $ — $ 676
Contract termination and other Selling, general and administrative expenses 154 435 591 454
Total Other Restructuring Charges $ 154 $ 435 $ 591 $ 1,130
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Other Restructuring Charges by business segment were as follows:
Three Months Ended September Six Months Ended September
(In thousands) 2024 2023 2024 2023
Outdoor $ — $ — $ — $ 242
Active — — — 434
Work — — — —
Corporate and other 154 435 591 454
Total $ 154 $ 435 $ 591 $ 1,130
Consolidated Restructuring Charges
The activity in the restructuring accrual related to Reinvent and Other Restructuring Charges for the six-month period ended September 2024 was as follows:
(In thousands) Severance Other Total
Accrual at March 2024 $ 60,160 $ 345 $ 60,505
Charges 19,480 894 20,374
Cash payments and settlements ( 23,041 ) ( 902 ) ( 23,943 )
Adjustments to accruals ( 292 ) — ( 292 )
Impact of foreign currency 56 — 56
Accrual at September 2024 $ 56,363 $ 337 $ 56,700
Of the $ 56.7 million total restructuring accrual at September 2024, $ 54.8 million is expected to be paid out within the next 12 months and is classified within accrued liabilities. The remaining $ 1.9 million will be paid out beyond the next 12 months and thus is classified within other liabilities. The Company has not recognized any significant incremental costs related to the accruals for the year ended March 2024 or prior periods.
NOTE 19 — SUBSEQUENT EVENTS
On October 1, 2024, VF completed the sale of Supreme to EssilorLuxottica S.A. for $ 1.5 billion, subject to customary adjustments for cash, indebtedness, working capital and transaction expenses as set forth in the Purchase Agreement. Refer to Note 4 for additional information.
O n October 4, 2024, VF made an aggregate $ 1.0 billion prepayment of the DDTL using the net cash proceeds from the sale of Supreme, pursuant to the terms of the DDTL Agreement, as amended.
On October 22, 2024, VF’s Board of Directors declared a quarterly cash dividend of $ 0.09 per share, payable on December 18, 2024 to stockholders of record on December 10, 2024.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.