Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 2, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 1-5256

V. F. CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania						23-1180120
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification number)

1551 Wewatta Street

Denver, Colorado 80202

(Address of principal executive offices)

(720) 778-4000

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)	(Trading Symbol(s))	(Name of each exchange on which registered)
Common Stock, without par value, stated capital, $0.25 per share	VFC	New York Stock Exchange
0.625% Senior Notes due 2023	VFC23	New York Stock Exchange
0.250% Senior Notes due 2028	VFC28	New York Stock Exchange
0.625% Senior Notes due 2032	VFC32	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

On July 30, 2022, there were 388,494,512 shares of the registrant’s common stock outstanding.

VF CORPORATION

Table of Contents


			PAGE NUMBER
Part I — Financial Information			3
Item 1 — Financial Statements (Unaudited)			3
Consolidated Balance Sheets: June 2022 , March 2022 and June 2021			3
Consolidated Statements of Operations: Three months ended June 2022 and June 2021			4
Consolidated Statements of Comprehensive Income (Loss): Three months ended June 202 2 and June 2021			5
Consolidated Statements of Cash Flows: Three months ended June 2022 and June 2021			6
Consolidated Statements of Stockholders’ Equity: Three months ended June 2022 and June 2021			7
Notes to Consolidated Financial Statements			8
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3 — Quantitative and Qualitative Disclosures about Market Risk			31
Item 4 — Controls and Procedures			32
Part II — Other Information			33
Item 1 — Legal Proceedings			33
Item 1A — Risk Factors			33
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 6 — Exhibits			33
Signatures			34

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PART I — FINANCIAL INFORMATION


ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED).

VF CORPORATION

Consolidated Balance Sheets

(Unaudited)


(In thousands, except share amounts)	June 2022		March 2022		June 2021
ASSETS
Current assets
Cash and equivalents	$	528,029	$	1,275,943	$	1,274,926
Accounts receivable, less allowance for doubtful accounts of: June 2022 - $29,780; March 2022 - $27,959; June 2021 - $33,666	1,249,713		1,467,842		1,138,811
Inventories	2,341,395		1,418,673		1,216,818
Short-term investments	—		—		598,806
Other current assets	492,569		425,622		334,777


Total current assets	4,611,706		4,588,080		4,564,138
Property, plant and equipment, net	1,007,853		1,041,777		1,016,465
Intangible assets, net	2,984,136		3,000,351		3,027,886
Goodwill	2,359,548		2,393,807		2,427,324
Operating lease right-of-use assets	1,227,462		1,247,056		1,426,706
Other assets	1,021,048		1,071,137		1,087,832

TOTAL ASSETS	$	13,211,753	$	13,342,208	$	13,550,351
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	827,380	$	335,462	$	8,091
Current portion of long-term debt	1,058		501,051		1,001,030
Accounts payable	1,022,755		562,992		534,803
Accrued liabilities	1,612,804		1,915,892		1,527,522


Total current liabilities	3,463,997		3,315,397		3,071,446
Long-term debt	4,468,399		4,584,261		4,726,234
Operating lease liabilities	1,006,274		1,023,759		1,192,792
Other liabilities	920,590		888,436		1,285,849

Total liabilities	9,859,260		9,811,853		10,276,321
Commitments and contingencies
Stockholders’ equity
Preferred Stock, par value $1; shares authorized, 25,000,000; no shares outstanding at June 2022, March 2022 or June 2021	—		—		—
Common Stock, stated value $0.25; shares authorized, 1,200,000,000; shares outstanding at June 2022 - 388,490,713; March 2022 - 388,298,375; June 2021 - 392,621,561	97,123		97,075		98,155
Additional paid-in capital	3,941,440		3,916,384		3,824,656
Accumulated other comprehensive income (loss)	(874,876)		(926,579)		(965,886)
Retained earnings	188,806		443,475		317,105
Total stockholders’ equity	3,352,493		3,530,355		3,274,030
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,211,753	$	13,342,208	$	13,550,351

See notes to consolidated financial statements.

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VF CORPORATION

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended June

(In thousands, except per share amounts)	2022		2021
Net revenues	$	2,261,595	$	2,194,557
Costs and operating expenses
Cost of goods sold	1,042,982		955,551
Selling, general and administrative expenses	1,155,251		1,036,122

Total costs and operating expenses	2,198,233		1,991,673
Operating income	63,362		202,884
Interest income	1,283		2,142
Interest expense	(32,545)		(34,917)

Other income (expense), net	(94,714)		9,041
Income (loss) from continuing operations before income taxes	(62,614)		179,150
Income tax expense (benefit)	(6,654)		25,178
Income (loss) from continuing operations	(55,960)		153,972
Income from discontinued operations, net of tax	—		170,273
Net income (loss)	$	(55,960)	$	324,245
Earnings (loss) per common share - basic
Continuing operations	$	(0.14)	$	0.39
Discontinued operations	—		0.44
Total earnings (loss) per common share - basic	$	(0.14)	$	0.83
Earnings (loss) per common share - diluted
Continuing operations	$	(0.14)	$	0.39
Discontinued operations	—		0.43
Total earnings (loss) per common share - diluted	$	(0.14)	$	0.82
Weighted average shares outstanding
Basic	387,563		391,351
Diluted	387,563		394,128

See notes to consolidated financial statements.

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VF CORPORATION

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended June

(In thousands)	2022		2021
Net income (loss)	$	(55,960)	$	324,245
Other comprehensive income (loss)
Foreign currency translation and other
Gains (losses) arising during the period	(51,524)		33,171

Income tax effect	(30,010)		3,882
Defined benefit pension plans
Current period actuarial losses	(19,568)		(4,013)
Amortization of net deferred actuarial losses	3,721		2,840
Amortization of deferred prior service credits	(112)		(118)
Reclassification of net actuarial loss from settlement charges	91,761		948

Income tax effect	(19,651)		659
Derivative financial instruments
Gains (losses) arising during the period	99,430		(4,563)
Income tax effect	(15,375)		192
Reclassification of net (gains) losses realized	(8,242)		10,559
Income tax effect	1,273		(443)
Other comprehensive income (loss)	51,703		43,114
Comprehensive income (loss)	$	(4,257)	$	367,359

See notes to consolidated financial statements.

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VF CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended June

(In thousands)	2022		2021
OPERATING ACTIVITIES
Net income (loss)	$	(55,960)	$	324,245
Income from discontinued operations, net of tax	—		170,273
Income (loss) from continuing operations, net of tax	(55,960)		153,972
Adjustments to reconcile net income (loss) to cash provided (used) by operating activities:

Depreciation and amortization	66,754		68,050
Reduction in the carrying amount of right-of-use assets	93,337		104,930
Stock-based compensation	22,297		21,701
Provision for doubtful accounts	899		1,850
Pension expense in excess of (less than) contributions	89,277		(6,759)



Other, net	6,813		(176,493)
Changes in operating assets and liabilities:
Accounts receivable	174,125		167,798
Inventories	(961,113)		(150,966)
Accounts payable	471,065		70,197
Income taxes	(70,727)		134,115
Accrued liabilities	(94,746)		(71,905)
Operating lease right-of-use assets and liabilities	(93,734)		(113,465)
Other assets and liabilities	(6,607)		(128,107)
Cash provided (used) by operating activities - continuing operations	(358,320)		74,918
Cash provided by operating activities - discontinued operations	—		6,090
Cash provided (used) by operating activities	(358,320)		81,008
INVESTING ACTIVITIES

Proceeds from sale of businesses, net of cash sold	—		616,529


Capital expenditures	(52,657)		(93,218)
Software purchases	(26,907)		(21,006)
Other, net	10,045		7,048
Cash provided (used) by investing activities - continuing operations	(69,519)		509,353
Cash used by investing activities - discontinued operations	—		(525)
Cash provided (used) by investing activities	(69,519)		508,828
FINANCING ACTIVITIES
Contingent consideration payment	(56,976)		—
Net increase (decrease) in short-term borrowings	491,917		(2,973)
Payments on long-term debt	(500,261)		(253)



Cash dividends paid	(194,135)		(192,131)

Proceeds from issuance of Common Stock, net of (payments) for tax withholdings	(1,766)		20,910

Cash used by financing activities	(261,221)		(174,447)
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	(58,988)		10,003
Net change in cash, cash equivalents and restricted cash	(748,048)		425,392
Cash, cash equivalents and restricted cash – beginning of year	1,277,082		851,205
Cash, cash equivalents and restricted cash – end of period	$	529,034	$	1,276,597

Balances per Consolidated Balance Sheets:
Cash and cash equivalents	$	528,029	$	1,274,926
Other current assets	880		1,643
Other assets	125		28
Total cash, cash equivalents and restricted cash	$	529,034	$	1,276,597

See notes to consolidated financial statements.

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VF CORPORATION

Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Three Months Ended June 2022
				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings
	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)	—	—		—		—		(55,960)		(55,960)
Dividends on Common Stock ($0.50 per share)	—	—		—		—		(194,135)		(194,135)

Stock-based compensation, net	192,338	48		25,056		—		(4,574)		20,530
Foreign currency translation and other	—	—		—		(81,534)		—		(81,534)
Defined benefit pension plans	—	—		—		56,151		—		56,151
Derivative financial instruments	—	—		—		77,086		—		77,086

Balance, June 2022	388,490,713	$	97,123	$	3,941,440	$	(874,876)	$	188,806	$	3,352,493

	Three Months Ended June 2021
				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings
	Common Stock
(In thousands, except share amounts)	Shares	Amounts								Total
Balance, March 2021	391,941,477	$	97,985	$	3,777,645	$	(1,009,000)	$	189,534	$	3,056,164


Net income (loss)	—	—		—		—		324,245		324,245
Dividends on Common Stock ($0.49 per share)	—	—		(2,597)		—		(189,534)		(192,131)

Stock-based compensation, net	680,084	170		49,608		—		(7,140)		42,638
Foreign currency translation and other	—	—		—		37,053		—		37,053
Defined benefit pension plans	—	—		—		316		—		316
Derivative financial instruments	—	—		—		5,745		—		5,745

Balance, June 2021	392,621,561	$	98,155	$	3,824,656	$	(965,886)	$	317,105	$	3,274,030

See notes to consolidated financial statements.

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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 and Summary of Significant Accounting Policies	9
NOTE 2	Recently Issued Accounting Standards	9
NOTE 3	Revenues	10
NOTE 4	Discontinued Operations	11
NOTE 5	Inventories	12
NOTE 6	Intangible Assets	12
NOTE 7	Goodwill	12
NOTE 8	Leases	12
NOTE 9	Pension Plans	13
NOTE 10	Capital and Accumulated Other Comprehensive Income (Loss)	13
NOTE 11	Stock-based Compensation	15
NOTE 12	Income Taxes	16
NOTE 13	Reportable Segment Information	16
NOTE 14	Earnings Per Share	17
NOTE 15	Fair Value Measurements	17
NOTE 16	Derivative Financial Instruments and Hedging Activities	19
NOTE 17	Restructuring	20
NOTE 18	Contingencies	21
NOTE 19	Subsequent Event	21

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NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 3, 2022 through April 1, 2023 ("Fiscal 2023"). Accordingly, this Form 10-Q presents our first quarter of Fiscal 2023. For presentation purposes herein, all references to periods ended June 2022 and June 2021 relate to the fiscal periods ended on July 2, 2022 and July 3, 2021, respectively. References to March 2022 relate to information as of April 2, 2022.

Basis of Presentation

On June 28, 2021, VF completed the sale of its Occupational Workwear business. The Occupational Workwear business was comprised primarily of the following brands and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also included the license of certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. The results of the Occupational Workwear business and the related cash flows have been reported as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively, through the date of sale. These changes have been applied to all periods presented.

Unless otherwise noted, discussion within these notes to the 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 2023 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 2022 consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, the accompanying unaudited interim consolidated financial statements contain all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations and cash flows of VF for the interim periods presented. Operating results for the three months ended June 2022 are not necessarily indicative of results that may be expected for any other interim period or for Fiscal 2023. 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 2, 2022 (“Fiscal 2022 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. The duration and severity of the coronavirus ("COVID-19") pandemic and the conflict between Russia and Ukraine, and the impact on VF's business is subject to uncertainty; however, the estimates and assumptions made by management include those related to COVID-19 and the Russia-Ukraine conflict based on available information. Actual results may differ from those estimates.

Significant Accounting Policies

Supply Chain Financing Program

During the three months ended June 2022, VF reinstated its voluntary supply chain finance ("SCF") program. The SCF program 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 VF 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 dates, are not impacted by a supplier's participation in the SCF program. Amounts due to suppliers who voluntarily 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. VF has been informed by the participating financial institutions that amounts payable to them for suppliers who voluntarily participated in the SCF program and included in the accounts payable line item in VF's Consolidated Balance Sheet was $164.1 million at June 2022. The amount settled through the SCF program was $15.0 million during the three months ended June 2022.

There have been no other changes to the Company's significant accounting policies described in Note 1 to the consolidated financial statements included in the Fiscal 2022 Form 10-K.

NOTE 2 — RECENTLY ISSUED ACCOUNTING STANDARDS

Recently Issued Accounting Standards

In March 2020 and January 2021, 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" and ASU No. 2021-01, "Reference Rate Reform (Topic 848): Scope", 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 optional guidance is provided to ease the potential burden of accounting for reference rate reform. The guidance is effective and can be adopted no later than December 31, 2022. The Company does not expect this guidance to have a material impact on VF's consolidated financial statements.

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In November 2021, the FASB issued ASU No. 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance", an update that requires annual disclosures about government assistance, including the

types of assistance and the effect on the financial statements. The guidance is effective for VF in Fiscal 2023. The Company is evaluating the impact that adopting this guidance will have on VF's annual disclosures.

NOTE 3 — REVENUES

Contract Balances

The following table provides information about contract assets and contract liabilities:


(In thousands)	June 2022		March 2022		June 2021
Contract assets (a)	$	2,022	$	1,065	$	1,135
Contract liabilities (b)	81,167		71,067		68,921

(a)Included in the other current assets line item in the Consolidated Balance Sheets.

(b)Included in the accrued liabilities and other liabilities line items in the Consolidated Balance Sheets.

For the three months ended June 2022, the Company recognized $64.4 million of revenue that was included in the contract liability balance during the period, including amounts recorded as a contract liability and subsequently recognized as revenue as performance obligations were satisfied within the same period, such as order deposits from customers. The change in the contract asset and contract liability balances primarily results from the timing differences between the Company's satisfaction of performance obligations and the customer's payment.

Performance Obligations

As of June 2022, the Company expects to recognize $75.3 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 June 2022, there were no arrangements with transaction price allocated to remaining performance obligations other than contracts for which the Company has applied the practical expedients and the fixed consideration related to future minimum guarantees discussed above.

For the three months ended June 2022, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.

Disaggregation of Revenues

The following tables disaggregate our revenues by channel and geography, which provides a meaningful depiction of how the nature, timing and uncertainty of revenues are affected by economic factors.


	Three Months Ended June 2022
(In thousands)	Outdoor		Active		Work		Other		Total
Channel revenues
Wholesale	$	472,282	$	582,160	$	193,191	$	148	$	1,247,781
Direct-to-consumer	292,685		666,156		40,249		—		999,090
Royalty	3,657		5,629		5,438		—		14,724
Total	$	768,624	$	1,253,945	$	238,878	$	148	$	2,261,595

Geographic revenues
Americas	$	394,515	$	790,729	$	199,660	$	148	$	1,385,052
Europe	275,045		303,275		16,293		—		594,613
Asia-Pacific	99,064		159,941		22,925		—		281,930
Total	$	768,624	$	1,253,945	$	238,878	$	148	$	2,261,595

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	Three Months Ended June 2021
(In thousands)	Outdoor		Active		Work		Other		Total
Channel revenues
Wholesale	$	334,875	$	546,025	$	226,871	$	—	$	1,107,771
Direct-to-consumer	279,658		751,235		42,812		—		1,073,705
Royalty	3,221		4,808		5,052		—		13,081
Total	$	617,754	$	1,302,068	$	274,735	$	—	$	2,194,557

Geographic revenues
Americas	$	311,139	$	756,379	$	234,400	$	—	$	1,301,918
Europe	218,555		307,216		14,196		—		539,967
Asia-Pacific	88,060		238,473		26,139		—		352,672
Total	$	617,754	$	1,302,068	$	274,735	$	—	$	2,194,557

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.

Occupational Workwear Business

On January 21, 2020, VF announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business was comprised primarily of the following brands and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also included the license of certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. As of March 28, 2020, the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of the Occupational Workwear business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively, through the date of sale.

On June 28, 2021, VF completed the sale of the Occupational Workwear business. The Company has received proceeds of $616.9 million, net of cash sold, resulting in an estimated after-tax gain on sale of $146.0 million, of which $145.6 million was included in the income from discontinued operations, net of tax line item in the Consolidated Statement of Operations for the three months ended June 2021, and is subject to adjustment for certain income tax matters.

The results of the Occupational Workwear business were previously reported in the Work segment. The results of the Occupational Workwear business recorded in the income from discontinued operations, net of tax line item in the Consolidated Statement of Operations were income of $170.3 million (including an estimated after-tax gain on sale of $145.6 million) for the three months ended June 2021.

Under the terms of a transition services agreement, the Company will provide certain support services for periods generally between 12 and 24 months from the closing date of the transaction.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the Occupational Workwear business that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Operations:


	Three Months Ended June

(In thousands)	2022		2021
Net revenues	$	—	$	181,424
Cost of goods sold	—		117,193
Selling, general and administrative expenses	—		38,735

Interest income, net	—		194
Other income (expense), net	—		6
Income from discontinued operations before income taxes	—		25,696
Gain on the sale of discontinued operations before income taxes	—		133,571
Total income from discontinued operations before income taxes	—		159,267
Income tax benefit (a)	—		(11,006)
Income from discontinued operations, net of tax	$	—	$	170,273

(a)Income tax benefit for the three months ended June 2021 includes $12.0 million of deferred tax benefit related to capital and other losses realized upon the sale of the Occupational Workwear business.

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NOTE 5 — INVENTORIES


(In thousands)	June 2022		March 2022		June 2021
Finished products	$	2,277,145	$	1,353,483	$	1,139,926
Work-in-process	49,002		50,774		53,202
Raw materials	15,248		14,416		23,690
Total inventories	$	2,341,395	$	1,418,673	$	1,216,818

During the three months ended June 2022, the Company modified terms with the majority of its suppliers to take ownership of inventory near point of shipment rather than destination. Finished products included $621.5 million, $67.7 million and $73.4 million of in-transit inventory as of June 2022, March 2022 and June 2021, respectively.

NOTE 6 — INTANGIBLE ASSETS


			June 2022						March 2022
(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	$	258,824	$	160,669	$	98,155	$	103,703



Indefinite-lived intangible assets:
Trademarks and trade names							2,885,981		2,896,648
Intangible assets, net							$	2,984,136	$	3,000,351

Amortization expense for the three months ended June 2022 was $3.6 million. Based on the carrying amounts of amortizable intangible assets noted above, estimated amortization expense for the next five years beginning in Fiscal 2023 is $14.4 million, $13.9 million, $13.4 million, $12.4 million and $11.9 million, respectively.

NOTE 7 — GOODWILL

Changes in goodwill are summarized by reportable segment as follows:


(In thousands)	Outdoor		Active		Work		Total
Balance, March 2022	$	660,786	$	1,619,121	$	113,900	$	2,393,807


Currency translation	(9,397)		(23,955)		(907)		(34,259)
Balance, June 2022	$	651,389	$	1,595,166	$	112,993	$	2,359,548

Accumulated impairment charges for the Outdoor segment were $323.2 million as of June 2022 and March 2022. No impairment charges were recorded during the three months ended June 2022.

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 impairment. Components of lease cost were as follows:


	Three Months Ended June

(In thousands)		2022		2021
Operating lease cost		$	101,705	$	113,500
Other lease cost		33,165		27,939
Total lease cost		$	134,870	$	141,439

During the three months ended June 2022 and 2021, the Company paid $102.3 million and $119.4 million of cash for operating leases, respectively. During the three months ended June 2022 and 2021, the Company obtained $105.9 million and $52.3 million of right-of-use assets in exchange for lease liabilities, respectively.

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NOTE 9 — PENSION PLANS

The components of pension cost (income) for VF’s defined benefit plans were as follows:


	Three Months Ended June

(In thousands)	2022		2021
Service cost – benefits earned during the period	$	2,646	$	3,613
Interest cost on projected benefit obligations	12,631		9,475
Expected return on plan assets	(18,860)		(19,385)
Settlement charges	91,761		948

Amortization of deferred amounts:
Net deferred actuarial losses	3,721		2,840
Deferred prior service credits	(112)		(118)
Net periodic pension cost (income)	$	91,787	$	(2,627)

The amounts reported in these disclosures have not been segregated between continuing and discontinued operations.

VF has reported the service cost component of net periodic pension cost (income) in operating income 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 $2.5 million to its defined benefit plans during the three months ended June 2022, and intends to make approximately $19.1 million of contributions during the remainder of Fiscal 2023.

During the three months ended June 2022, VF entered into an agreement with The Prudential Insurance Company of America (“Prudential”) to purchase an irrevocable group annuity contract relating to approximately $330 million of the U.S. qualified defined benefit pension plan obligations. The transaction closed on June 30, 2022 and was funded entirely by existing assets of the plan. Under the group annuity contract, Prudential assumed responsibility for benefit payments and annuity administration

for approximately 17,700 retirees and beneficiaries. The transaction will not change the amount or timing of monthly retirement benefit payments. VF recorded a $91.8 million settlement charge in the other income (expense), net line item in the Consolidated Statement of Operations during the three months ended June 2022 to recognize the related deferred actuarial losses in accumulated other comprehensive income (“OCI”). Actuarial assumptions used in the interim valuation were reviewed and revised as appropriate. The discount rate used to determine the pension obligation as of June 2022 was 4.93%.

Additionally, VF recorded a $0.9 million settlement charge in the other income (expense), net line item in the Consolidated Statement of Operations for the three months ended June 2021. The settlement charge related to the recognition of deferred actuarial losses resulting from lump sum payments of retirement benefits in the supplemental defined benefit pension plan.

NOTE 10 — CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Common Stock

During the three months ended June 2022, the Company did not purchase shares of Common Stock in open market transactions under its share repurchase program authorized by VF’s Board of Directors. These are treated as treasury stock transactions when shares are repurchased.

Common Stock outstanding is net of shares held in treasury which are, in substance, retired. There were no shares held in treasury at the end of June 2022, March 2022 or June 2021. 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.

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Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and specified components of OCI, 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 OCI are reported, net of related income taxes, in accumulated OCI in stockholders’ equity, as follows:


(In thousands)	June 2022		March 2022		June 2021
Foreign currency translation and other	$	(833,166)	$	(751,632)	$	(663,120)
Defined benefit pension plans	(174,139)		(230,290)		(257,431)
Derivative financial instruments	132,429		55,343		(45,335)
Accumulated other comprehensive income (loss)	$	(874,876)	$	(926,579)	$	(965,886)

The changes in accumulated OCI, net of related taxes, were as follows:


	Three Months Ended June 2022
(In thousands)	Foreign Currency Translation and Other		Defined Benefit Pension Plans		Derivative Financial Instruments		Total
Balance, March 2022	$	(751,632)	$	(230,290)	$	55,343	$	(926,579)
Other comprehensive income (loss) before reclassifications	(81,534)		(14,484)		84,055		(11,963)
Amounts reclassified from accumulated other comprehensive income (loss)	—		70,635		(6,969)		63,666
Net other comprehensive income (loss)	(81,534)		56,151		77,086		51,703
Balance, June 2022	$	(833,166)	$	(174,139)	$	132,429	$	(874,876)


	Three Months Ended June 2021
(In thousands)	Foreign Currency Translation and Other		Defined Benefit Pension Plans		Derivative Financial Instruments		Total
Balance, March 2021	$	(700,173)	$	(257,747)	$	(51,080)	$	(1,009,000)
Other comprehensive income (loss) before reclassifications	37,053		(2,411)		(4,371)		30,271
Amounts reclassified from accumulated other comprehensive income (loss)	—		2,727		10,116		12,843
Net other comprehensive income (loss)	37,053		316		5,745		43,114
Balance, June 2021	$	(663,120)	$	(257,431)	$	(45,335)	$	(965,886)

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Reclassifications out of accumulated OCI were as follows:


(In thousands)		Three Months Ended June
Details About Accumulated Other Comprehensive Income (Loss) Components	Affected Line Item in the Consolidated Statements of Operations

		2022		2021





Amortization of defined benefit pension plans:
Net deferred actuarial losses	Other income (expense), net	$	(3,721)	$	(2,840)
Deferred prior service credits	Other income (expense), net	112		118

Pension settlement charges	Other income (expense), net	(91,761)		(948)
Total before tax		(95,370)		(3,670)
Tax benefit		24,735		943
Net of tax		(70,635)		(2,727)
Gains (losses) on derivative financial instruments:
Foreign exchange contracts	Net revenues	(4,750)		(1,798)
Foreign exchange contracts	Cost of goods sold	5,924		(6,169)
Foreign exchange contracts	Selling, general and administrative expenses	1,609		(917)
Foreign exchange contracts	Other income (expense), net	5,432		(1,702)
Interest rate contracts	Interest expense	27		27
Total before tax		8,242		(10,559)
Tax (expense) benefit		(1,273)		443
Net of tax		6,969		(10,116)
Total reclassifications for the period, net of tax		$	(63,666)	$	(12,843)

NOTE 11 — STOCK-BASED COMPENSATION

Incentive Equity Awards Granted

During the three months ended June 2022, VF granted stock options to employees and nonemployee members of VF's Board of Directors to purchase 2,360,068 shares of its Common Stock at an exercise price of $45.34 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 in equal annual installments over three years. Stock options granted to nonemployee members of VF's Board of Directors vest upon grant and become exercisable one year from the date of grant. All options have ten-year terms.

The grant date fair value of each option award was calculated using a lattice option-pricing valuation model, which incorporated a range of assumptions for inputs as follows:


						Three Months Ended June 2022
Expected volatility						30% to 41%
Weighted average expected volatility						38%
Expected term (in years)						6.0 to 7.7
Weighted average dividend yield						2.9%
Risk-free interest rate						1.53% to 2.76%
Weighted average fair value at date of grant						$13.52

During the three months ended June 2022, VF granted 340,571 performance-based restricted stock units ("RSUs") to employees that enable them to receive shares of VF Common Stock at the end of a three-year performance cycle. The fair market value of VF Common Stock at the date the units were granted was $45.34 per share. Each performance-based RSU has a potential final payout ranging from zero to two shares of VF Common Stock. The number of shares earned by participants, if any, is based on achievement of three-year financial 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. Additionally, 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. 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 $3.46 per share.

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During the three months ended June 2022, VF granted 19,860 nonperformance-based RSUs to nonemployee members of the Board of Directors. These units vest upon grant and will be settled in shares of VF Common Stock one year from the date of grant. The fair market value of VF Common Stock at the date the units were granted was $45.34 per share.

In addition, VF granted 589,208 nonperformance-based RSUs to employees during the three months ended June 2022. These units generally vest over periods of up to four years from the date of grant and each unit entitles the holder to one share of VF Common Stock. The fair market value of VF Common Stock at the date the units were granted was $45.34 per share.

NOTE 12 — INCOME TAXES

The effective income tax rate for the three months ended June 2022 was 10.6% compared to 14.1% in the 2021 period. The three months ended June 2022 included a net discrete tax expense of $0.8 million, which included a $1.6 million net tax expense related to unrecognized tax benefits and interest and a $0.8 million net tax benefit related to withholding taxes on prior foreign earnings. Excluding the $0.8 million net discrete tax expense in the 2022 period, the effective income tax rate would have been 12.0%. The three months ended June 2021 included a net discrete tax benefit of $2.3 million, which included a $1.2 million net tax expense related to unrecognized tax benefits and interest, a $1.1 million tax benefit related to stock compensation and a $2.4 million net tax benefit related to tax rate change on deferred tax items. Excluding the $2.3 million net discrete tax benefit in the 2021 period, the effective income tax rate would have been 15.3%. Without discrete items, the effective income tax rate for the three months ended June 2022 decreased by 3.3% compared with the 2021 period primarily due to year-to-date losses generated in the current quarter.

VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. In the U.S., the Internal Revenue Service ("IRS") examinations for tax years through 2015 have been effectively settled.

As previously reported, VF petitioned the U.S. Tax Court (the “Court”) to resolve an IRS dispute regarding the timing of income inclusion associated with VF’s acquisition of The Timberland Company in September 2011. While the IRS argues that all such income should have been immediately included in 2011, VF has reported periodic income inclusions in subsequent tax years. Both parties moved for summary judgment on the issue. On January 31, 2022, the Court issued its opinion in favor of the IRS and on July 14, 2022 issued its final decision. VF believes the opinion of the Court was in error based on the technical merits and intends to appeal. VF continues to believe its timing and treatment of the income inclusion is appropriate and VF is vigorously defending its position. No impact of the Court opinion has been recorded in the consolidated financial statements based on our assessment of the position under the more-likely-than-not standard of the accounting literature. Refer to Note 18 for additional details on this matter.

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. Management believes that some of these audits and negotiations will conclude during the next 12 months.

VF was granted a ruling which lowered the effective income tax rate on taxable earnings for years 2010 through 2014 under Belgium’s excess profit tax regime. During 2015, the European Union Commission (“EU”) investigated and announced its decision that these rulings were illegal and ordered the tax benefits to be collected from affected companies, including VF. Requests for annulment were filed by Belgium and VF Europe BVBA individually. During 2017 and 2018, VF Europe BVBA was assessed and paid €35.0 million tax and interest, which was recorded as an income tax receivable based on the expected success of the requests for annulment. During 2019, the General Court annulled the EU decision and the EU subsequently appealed the General Court’s annulment. In September 2021, the General Court's judgment was set aside by the Court of Justice of the EU and the case was sent back to the General Court to determine whether the excess profit tax regime amounted to illegal State aid. The case remains open and unresolved. If this matter is adversely resolved, these amounts will not be collected by VF.

During the three months ended June 2022, the amount of net unrecognized tax benefits and associated interest increased by $1.9 million to $279.6 million. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits and interest may decrease during the next 12 months by approximately $257.1 million related to the completion of examinations and other settlements with tax authorities and the expiration of statutes of limitations, of which $12.5 million would reduce income tax expense.

NOTE 13 — REPORTABLE SEGMENT INFORMATION

The chief operating decision maker allocates resources and assesses performance based on a global brand view which represents VF's operating segments. The operating segments have been evaluated and combined into reportable segments because they meet the similar economic characteristics and qualitative aggregation criteria set forth in the relevant accounting guidance.

The Company's reportable segments have been identified as: Outdoor, Active and Work. We have included an Other category in the table below for purposes of reconciliation of revenues and profit, but it is not considered a reportable segment. Other includes results primarily related to the sale of non-VF products and sourcing activities related to transition services.

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Financial information for VF's reportable segments is as follows:


	Three Months Ended June

(In thousands)	2022		2021
Segment revenues:
Outdoor	$	768,624	$	617,754
Active	1,253,945		1,302,068
Work	238,878		274,735
Other	148		—
Total segment revenues	$	2,261,595	$	2,194,557
Segment profit (loss):
Outdoor	$	(46,851)	$	(71,747)
Active	214,031		270,862
Work	35,002		41,004
Other	(225)		(282)
Total segment profit	201,957		239,837

Corporate and other expenses	(233,309)		(27,912)
Interest expense, net	(31,262)		(32,775)

Income (loss) from continuing operations before income taxes	$	(62,614)	$	179,150

NOTE 14 — EARNINGS PER SHARE


	Three Months Ended June

(In thousands, except per share amounts)	2022		2021
Earnings (loss) per share – basic:
Income (loss) from continuing operations	$	(55,960)	$	153,972
Weighted average common shares outstanding	387,563		391,351
Earnings (loss) per share from continuing operations	$	(0.14)	$	0.39
Earnings (loss) per share – diluted:
Income (loss) from continuing operations	$	(55,960)	$	153,972
Weighted average common shares outstanding	387,563		391,351
Incremental shares from stock options and other dilutive securities	—		2,777
Adjusted weighted average common shares outstanding	387,563		394,128
Earnings (loss) per share from continuing operations	$	(0.14)	$	0.39

In the three-month period ended June 2022, the dilutive impact of outstanding options and other securities was excluded from dilutive shares as a result of the Company's net loss for the period and, as such, their inclusion would have been anti-dilutive. Outstanding options to purchase approximately 2.9 million shares were excluded from the calculation of diluted earnings per share for the three-month period ended June 2021 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 calculation of diluted earnings per share for the three-month period ended June 2021 because these units were not considered to be contingent outstanding shares in the period.

NOTE 15 — FAIR VALUE MEASUREMENTS

Financial assets and financial liabilities measured and reported at fair value are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs, as follows:

•Level 1 — Quoted prices in active markets for identical assets or liabilities.

•Level 2 — Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities, or (iii) information derived from or corroborated by observable market data.

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•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.

The following table summarizes financial assets and financial liabilities that are measured and recorded in the consolidated financial statements at fair value on a recurring basis:


	Total Fair Value		Fair Value Measurement Using (a)
(In thousands)			Level 1		Level 2		Level 3
June 2022
Financial assets:
Cash equivalents:
Money market funds	$	50,619	$	50,619	$	—	$	—
Time deposits	27,009		27,009		—		—

Derivative financial instruments	156,458		—		156,458		—
Deferred compensation	106,658		106,658		—		—
Financial liabilities:
Derivative financial instruments	23,770		—		23,770		—
Deferred compensation	109,832		—		109,832		—

	Total Fair Value		Fair Value Measurement Using (a)
(In thousands)			Level 1		Level 2		Level 3
March 2022
Financial assets:
Cash equivalents:
Money market funds	$	324,868	$	324,868	$	—	$	—
Time deposits	1,100		1,100		—		—

Derivative financial instruments	79,046		—		79,046		—
Deferred compensation	125,323		125,323		—		—
Financial liabilities:
Derivative financial instruments	27,723		—		27,723		—
Deferred compensation	129,078		—		129,078		—
Contingent consideration	56,976		—		—		56,976

(a)There were no transfers among the levels within the fair value hierarchy during the three months ended June 2022 or the year ended March 2022.

The following table presents the activity related to the contingent consideration liability designated as Level 3:


	Three Months Ended June

(In thousands)		2022		2021
Beginning Balance		$	56,976	$	207,000
Change in fair value		—		(73,000)
Cash payout		(56,976)		—
Ending Balance		$	—	$	134,000

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, is determined based on observable market inputs (Level 2), including spot and forward exchange rates for foreign currencies, 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.

The contingent consideration liability represented the amount of additional cash consideration paid to the selling shareholders of Supreme Holdings, Inc. ("Supreme"), which was dependent upon the achievement of certain financial targets over the one-year earn-out period ended January 31, 2022. The estimated fair value of the contingent consideration liability, which could range from zero to $300.0 million, was $57.0 million as of March 2022

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and $134.0 million as of June 2021. During Fiscal 2022, the contingent consideration liability was remeasured at fair value based on the probability-weighted present value of various future cash payment outcomes resulting from the estimated achievement levels of the financial targets, with changes recognized in the selling, general and administrative expenses line item in the Consolidated Statements of Operations. The contingent consideration was paid during the three months ended June 2022.

All other 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 June 2022 and March 2022, their carrying values approximated fair value. Additionally, at June 2022 and March 2022, the carrying values of VF’s long-term debt, including the current portion, were $4,469.5 million and $5,085.3 million, respectively, compared with fair values of $4,208.3 million and $5,042.5 million at those respective dates. Fair value for long-term debt is a Level 2 estimate based on quoted market prices or values of comparable borrowings.

NOTE 16 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Summary of Derivative Financial Instruments

All of VF’s outstanding derivative financial instruments are foreign exchange forward 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

derivative contracts were $3.3 billion at June 2022, $2.9 billion at March 2022 and $2.7 billion at June 2021, consisting primarily of contracts hedging exposures to the euro, British pound, Canadian dollar, Swiss franc, South Korean won, Mexican peso, Swedish krona, Polish zloty, Japanese yen and New Zealand dollar. Derivative contracts have maturities up to 20 months.

The following table presents outstanding derivatives on an individual contract basis:


	Fair Value of Derivatives with Unrealized Gains						Fair Value of Derivatives with Unrealized Losses

(In thousands)	June 2022		March 2022		June 2021		June 2022		March 2022		June 2021
Foreign currency exchange contracts designated as hedging instruments	$	154,231	$	79,046	$	13,580	$	(22,612)	$	(27,678)	$	(64,616)
Foreign currency exchange contracts not designated as hedging instruments	2,227		—		258		(1,158)		(45)		(1,109)
Total derivatives	$	156,458	$	79,046	$	13,838	$	(23,770)	$	(27,723)	$	(65,725)

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 of its foreign exchange forward contracts on a net basis in accordance with the terms of its master netting agreements, the amounts presented in the Consolidated Balance Sheets would be adjusted from the current gross presentation to the net amounts as detailed in the following table:


	June 2022				March 2022				June 2021

(In thousands)	Derivative Asset		Derivative Liability		Derivative Asset		Derivative Liability		Derivative Asset		Derivative Liability
Gross amounts presented in the Consolidated Balance Sheets	$	156,458	$	(23,770)	$	79,046	$	(27,723)	$	13,838	$	(65,725)
Gross amounts not offset in the Consolidated Balance Sheets	(23,018)		23,018		(18,721)		18,721		(13,825)		13,825
Net amounts	$	133,440	$	(752)	$	60,325	$	(9,002)	$	13	$	(51,900)

Derivatives are classified as current or noncurrent based on maturity dates, as follows:


(In thousands)	June 2022		March 2022		June 2021
Other current assets	$	133,859	$	71,910	$	6,746
Accrued liabilities	(20,549)		(24,267)		(61,391)
Other assets	22,599		7,136		7,092
Other liabilities	(3,221)		(3,456)		(4,334)

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Cash Flow Hedges

VF uses derivative contracts primarily to hedge a portion of the exchange risk for its forecasted sales, inventory purchases, operating costs and intercompany royalties. The effects of cash flow hedging included in VF’s Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income (Loss) are summarized as follows:


(In thousands)	Gain (Loss) on Derivatives Recognized in OCI Three Months Ended June

Cash Flow Hedging Relationships	2022		2021
Foreign currency exchange	$	99,430	$	(4,563)


(In thousands)	Gain (Loss) Reclassified from Accumulated OCI into Income (Loss) Three Months Ended June

Location of Gain (Loss)	2022		2021
Net revenues	$	(4,750)	$	(1,798)
Cost of goods sold	5,924		(6,169)
Selling, general and administrative expenses	1,609		(917)
Other income (expense), net	5,432		(1,702)
Interest expense	27		27
Total	$	8,242	$	(10,559)

Derivative Contracts Not Designated as Hedges

VF uses derivative contracts to manage foreign currency exchange risk on third-party 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.

The impact of de-designated derivative contracts and changes in the fair value of derivative contracts not designated as hedges, recognized as gains or losses in VF's Consolidated Statements of Operations were not material for the three months ended June 2022 and June 2021.

Other Derivative Information

At June 2022, accumulated OCI included $108.9 million of pre-tax net deferred gains for foreign currency exchange contracts

that are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on exchange rates in effect when outstanding derivative contracts are settled.

Net Investment Hedge

The Company has designated its euro-denominated fixed-rate notes, which represent €1.850 billion in aggregate principal, as a net investment hedge of VF’s investment in certain foreign operations. Because this debt qualified as a nonderivative hedging instrument, foreign currency transaction gains or losses of the debt are deferred in the foreign currency translation and other component of accumulated OCI as an offset to the foreign currency translation adjustments on the hedged investments. During the three-month periods ended June 2022 and June 2021, the Company recognized an after-tax gain of $87.7 million and an after-tax loss of $11.5 million, respectively, in OCI related to the net investment hedge transaction. Any amounts deferred in accumulated OCI will remain until the hedged investment is sold or substantially liquidated.

NOTE 17 — RESTRUCTURING

The Company incurs restructuring charges related to strategic initiatives and cost optimization of business activities, primarily related to severance and employee-related benefits. During the three months ended June 2022, VF recognized $6.1 million of restructuring charges, related to approved initiatives. Of the restructuring charges recognized in the three months ended June 2022, $4.7 million were reflected in selling, general and administrative expenses and $1.4 million in cost of goods sold. The Company has not recognized any significant incremental

costs related to accruals for the year ended March 2022 or prior periods.

Of the $21.2 million total restructuring accrual at June 2022, $20.5 million is expected to be paid out within the next 12 months and is classified within accrued liabilities. The remaining $0.7 million will be paid out beyond the next 12 months and thus is classified within other liabilities.

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The components of the restructuring charges are as follows:


	Three Months Ended June

(In thousands)	2022		2021
Severance and employee-related benefits	$	2,094	$	2,874

Accelerated depreciation	3,668		1,431

Contract termination and other	344		—
Total restructuring charges	$	6,106	$	4,305

Restructuring costs by business segment are as follows:


	Three Months Ended June

(In thousands)	2022		2021
Outdoor	$	—	$	2,223
Active	—		732
Work	—		—
Other	6,106		1,350
Total	$	6,106	$	4,305

The activity in the restructuring accrual for the three-month period ended June 2022 was as follows:


(In thousands)	Severance		Other		Total
Accrual at March 2022	$	25,640	$	1,211	$	26,851
Charges	2,094		344		2,438
Cash payments and settlements	(7,773)		(84)		(7,857)
Adjustments to accruals	(150)		62		(88)
Impact of foreign currency	(93)		(45)		(138)
Accrual at June 2022	$	19,718	$	1,488	$	21,206

NOTE 18 — CONTINGENCIES

As previously reported, VF petitioned the U.S. Tax Court (the “Court”) to resolve an IRS dispute regarding the timing of income inclusion associated with VF’s acquisition of The Timberland Company in September 2011. While the IRS argues that all such income should have been immediately included in 2011, VF has reported periodic income inclusions in subsequent tax years. Both parties moved for summary judgment on the issue. On January 31, 2022, the Court issued its opinion in favor of the IRS and on July 14, 2022 issued its final decision. VF believes the opinion of the Court was in error based on the technical merits and intends to appeal; however, VF will be required to pay the 2011 taxes and interest being disputed or post a surety bond. It is anticipated that during Fiscal 2023, the IRS will assess, and VF will pay, the 2011 taxes and interest, which would be recorded as a tax receivable based on the technical merits of our position with regards to the case. The gross amount of taxes and interest as of July 2, 2022 was estimated at approximately $857.5 million and will continue to

accrue interest until paid. VF continues to believe its timing and treatment of the income inclusion is appropriate and VF is vigorously defending its position. However, should the Court opinion ultimately be upheld on appeal, this tax receivable may not be collected by VF. If the Court opinion is upheld, VF should be entitled to a refund of taxes paid on the periodic inclusions that VF has reported. However, any such refund could be substantially reduced by potential indirect tax effects resulting from application of the Court opinion. Deferred tax liabilities, representing VF’s future tax on annual inclusions, would also be released. The net impact to tax expense estimated as of July 2, 2022 could be up to $715.0 million.

The Company is currently involved in other legal proceedings that are ordinary, routine litigation incidental to the business. The resolution of which is not currently expected to have a material adverse impact on the Company's financial position, results of operations or cash flows.

NOTE 19 — SUBSEQUENT EVENT

On July 26, 2022, VF’s Board of Directors declared a quarterly cash dividend of $0.50 per share, payable on September 20, 2022 to stockholders of record on September 12, 2022.

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ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

All per share amounts are presented on a diluted basis and all percentages shown in the tables below and the following discussion have been calculated using unrounded numbers.

References to the three months ended June 2022 foreign currency amounts below reflect the changes in foreign exchange rates from the three months ended June 2021 and their impact on translating foreign currencies into U.S. dollars. VF’s most significant foreign currency exposure relates to business conducted in euro-based countries. Additionally, VF conducts business in other developed and emerging markets around the world with exposure to foreign currencies other than the euro.

Unless otherwise noted, amounts, percentages and discussion for all periods included below reflect the results of operations and financial condition from VF’s continuing operations.


RECENT DEVELOPMENTS


Russia-Ukraine Conflict

In response to the ongoing conflict in Ukraine, all VF-operated retail locations within Russia are currently closed and commercial shipments to both Russia and Ukraine are suspended. Revenues in Russia and Ukraine represented less than 1% of VF's total Fiscal 2022 revenue. While we are not able to determine the ultimate length and severity of the conflict, we currently do not expect significant disruption to our business. For additional information, see the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Fiscal 2022 Form 10-K.


Impact of COVID-19

The coronavirus ("COVID-19") pandemic significantly impacted global economic conditions, as well as VF's business operations and financial performance during Fiscal 2022 and continues to impact Fiscal 2023.

VF-operated retail stores across the globe have been impacted during the first quarter of Fiscal 2023 and Fiscal 2022 due to COVID-19, including temporary closures for varying periods of time in certain regions, most notably in Asia-Pacific. VF is continuing to monitor the COVID-19 outbreak globally and will comply with guidance from government entities and public health authorities to prioritize the health and well-being of its employees, customers, trade partners and consumers. As COVID-19 uncertainty continues, retail store reclosures may occur.

COVID-19 has also impacted some of VF's suppliers, including raw material suppliers, third-party manufacturers, logistics providers and other vendors. At this time, the majority of VF's supply chain is operational. Suppliers are complying with local

health advisories and governmental restrictions which has resulted in product delays. The resurgence of COVID-19 lockdowns in key sourcing countries resulted in additional manufacturing capacity constraints during Fiscal 2022 and the first quarter of Fiscal 2023; however, the situation has improved over time. VF has worked with its suppliers to minimize disruption and employed expedited freight as needed. VF's distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols.

The COVID-19 pandemic is ongoing and dynamic in nature, and has driven global uncertainty and disruption. While we are not able to determine the ultimate length and severity of the COVID-19 pandemic, we expect ongoing disruption to our business.

For additional information, see the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Fiscal 2022 Form 10-K.

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HIGHLIGHTS OF THE FIRST QUARTER OF FISCAL 2023

•Revenues were up 3% to $2.3 billion compared to the three months ended June 2021, including a 4% unfavorable impact from foreign currency.

•Active segment revenues decreased 4% to $1.3 billion compared to the three months ended June 2021, including a 4% unfavorable impact from foreign currency.

•Outdoor segment revenues increased 24% to $768.6 million compared to the three months ended June 2021, including a 7% unfavorable impact from foreign currency.

•Work segment revenues decreased 13% to $238.9 million compared to the three months ended June 2021, including a 2% unfavorable impact from foreign currency.

•Direct-to-consumer revenues were down 7% over the 2021 period, including a 4% unfavorable impact from foreign currency. E-commerce revenues decreased 18% in the current period, including a 4% unfavorable impact from foreign currency. Direct-to-consumer revenues accounted for 44% of VF's net revenues for the three months ended June 2022.

•International revenues decreased 1% compared to the three months ended June 2021, including a 10% unfavorable impact from foreign currency. Greater China (which includes Mainland China, Hong Kong and Taiwan) revenues decreased 33%, including a 3% unfavorable impact from foreign currency. International revenues represented 44% of VF's net revenues for the three months ended June 2022.

•Gross margin decreased 260 basis points to 53.9% compared to the three months ended June 2021, primarily driven by unfavorable mix and higher freight costs, partially offset by price increases.

•Earnings (loss) per share was $(0.14) compared to $0.39 in the 2021 period. The decrease was primarily driven by a pension settlement charge and lower profitability in the Active segment in the three months ended June 2022, and a decrease in the estimated fair value of the contingent consideration liability associated with the Supreme Holdings, Inc. ("Supreme") acquisition in the three months ended June 2021.


ANALYSIS OF RESULTS OF OPERATIONS


Consolidated Statements of Operations

The following table presents a summary of the changes in net revenues for the three months ended June 2022 from the comparable period in 2021:


(In millions)	Three Months Ended June
Net revenues — 2021	$	2,194.6
Organic	162.8

Impact of foreign currency	(95.8)
Net revenues — 2022	$	2,261.6

VF reported a 3% increase in revenues for the three months ended June 2022, compared to the 2021 period. The revenue increase was primarily driven by global growth in the Outdoor segment. The increase in the three months ended June 2022 was partially offset by declines in the Asia-Pacific region and an overall 4% unfavorable impact from foreign currency. The Asia-Pacific region has been negatively impacted by COVID-19 resurgence, which has caused disruption and consumption pressure in the region, particularly in Mainland China.

Additional details on revenues are provided in the section titled “Information by Reportable Segment.”

The following table presents the percentage relationships to net revenues for components of the Consolidated Statements of Operations:


	Three Months Ended June

	2022		2021
Gross margin (net revenues less cost of goods sold)	53.9	%	56.5	%
Selling, general and administrative expenses	51.1		47.3

Operating margin	2.8	%	9.2	%

Gross margin decreased 260 basis points in the three months ended June 2022, compared to the 2021 period. The decrease was primarily driven by unfavorable mix as wholesale and Outdoor segment revenues, which generally have lower margins, represented a larger portion of VF consolidated revenues in the three months ended June 2022. The decrease was also

attributed to higher freight costs, partially offset by price increases.

Selling, general and administrative expenses as a percentage of total revenues increased 380 basis points during the three months ended June 2022 compared to the 2021 period. Selling, general and administrative expenses increased $119.1 million in

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the three months ended June 2022, compared to the 2021 period, primarily due to a $73.0 million decrease in the estimated fair value of the contingent consideration liability associated with the Supreme acquisition, which was recognized in the selling, general and administrative expense line item in the three months ended June 2021. The increase was also due to higher distribution spending and increased technology spending in the three months ended June 2022.

Net interest expense decreased $1.5 million during the three months ended June 2022, compared to the 2021 period. The decrease in net interest expense in the three months ended June 2022 was primarily due to the repayment of the $1.0 billion in aggregate principal of the 2.050% Senior Notes due April 2022, partially offset by higher short-term borrowings in the three months ended June 2022. Total outstanding debt averaged $5.4 billion in the three months ended June 2022 and $5.8 billion in the three months ended June 2021, with a weighted average interest rate of 2.1% for both periods.

Other income (expense), net decreased $103.8 million during the three months ended June 2022, compared to the 2021 period. The decrease in the three months ended June 2022 was primarily due to a $91.8 million pension settlement charge recorded in the three months ended June 2022, which resulted from the purchase of a group annuity contract and transfer of a portion of the assets and liabilities associated with the U.S. qualified defined pension plan to an insurance company.

As a result of the above, income (loss) from continuing operations in the three months ended June 2022 was $(56.0) million ($(0.14) per diluted share) compared to $154.0 million ($0.39 per diluted share) in the 2021 period. Refer to additional discussion in the “Information by Reportable Segment” section below.


Information by Reportable Segment

VF's reportable segments are: Outdoor, Active and Work. We have included an Other category in the tables below for purposes of reconciliation of revenues and profit, but it is not considered a reportable segment. Included in this Other category are results primarily related to the sale of non-VF products and sourcing activities related to transition services.

Refer to Note 13 to the consolidated financial statements for a summary of results of operations by segment, along with a reconciliation of segment profit to income (loss) before income taxes.

The following tables present a summary of the changes in segment revenues and profit in the three months ended June 2022 from the comparable period in 2021 and revenues by region for our Top 4 brands for the three months ended June 2022 and 2021:

Segment Revenues:


	Three Months Ended June
(In millions)	Outdoor		Active		Work		Other		Total
Segment revenues — 2021	$	617.8	$	1,302.1	$	274.7	$	—	$	2,194.6
Organic	190.0		3.9		(31.3)		0.2		162.8

Impact of foreign currency	(39.2)		(52.1)		(4.5)		—		(95.8)
Segment revenues — 2022	$	768.6	$	1,253.9	$	238.9	$	0.2	$	2,261.6

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