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Dynamic quotes 
OFFON

V.F. CORPORATION

(VFC)
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V F : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-K)

05/27/2021 | 05:43pm EDT

OVERVIEW




VF Corporation (together with its subsidiaries, collectively known as "VF" or
the "Company") is a global leader in the design, procurement, production,
marketing and distribution of branded lifestyle apparel, footwear and related
products. VF's diverse portfolio meets consumer needs across a broad spectrum of
activities and lifestyles. Our long-term growth strategy is focused on four
drivers - drive and optimize our portfolio, distort investments to Asia, elevate
direct channels and accelerate our consumer-minded, retail-centric,
hyper-digital business model transformation.
VF is diversified across brands, product categories, channels of distribution,
geographies and consumer demographics. We own
a broad portfolio of brands in the outerwear, footwear, apparel, backpack,
luggage and accessories categories. Our products are marketed to consumers
through our wholesale channel, primarily in specialty stores, national chains,
mass merchants, department stores, independently-operated partnership stores and
with strategic digital partners. Our products are also marketed to consumers
through our own direct-to-consumer operations, which include VF-operated stores,
concession retail stores, brand e-commerce sites and other digital platforms.
VF is organized by groupings of businesses represented by its reportable
segments for financial reporting purposes. The three reportable segments are
Outdoor, Active and Work.
                             BASIS OF PRESENTATION



VF operates and reports using a 52/53 week fiscal year ending on the Saturday
closest to March 31 of each year. All references to the years ended March 2021
("Fiscal 2021"), March 2020 ("Fiscal 2020") and March 2019 ("Fiscal 2019")
relate to the 53-week fiscal year ended April 3, 2021 and the 52-week fiscal
years ended March 28, 2020 and March 30, 2019, respectively.
The following discussion and analysis focuses on our financial results for the
years ended March 2021 and 2020 and year-to-year comparisons between these
years. A discussion of our results of operations for the year ended March 2020
compared to the year ended March 2019 is included in Part II, Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our   Annual Report on Form 10-K for the year ended March 28,
2020  , filed with the SEC on May 27, 2020, and is incorporated by reference
into this Form 10-K.
All per share amounts are presented on a diluted basis. All percentages shown in
the tables below and the discussion that follows have been calculated using
unrounded numbers.
References to the year ended March 2021 foreign currency amounts below reflect
the changes in foreign exchange rates from the year ended March 2020 and their
impact on translating foreign currencies into U.S. dollars. VF's most
significant foreign currency exposure relates to business conducted in
euro-based countries. Additionally, VF conducts business in other developed and
emerging markets around the world with exposure to foreign currencies other than
the euro.
On December 28, 2020, VF acquired 100% of the outstanding shares of Supreme
Holdings, Inc. ("Supreme"). The business results for Supreme have been included
in the Active segment. All references to contributions from acquisition below
represent the operating results of Supreme from its date of acquisition. Refer
to Note 3 to VF's consolidated financial statements for additional information
on acquisitions.
On January 21, 2020, VF announced its decision to explore the divestiture of its
Occupational Workwear business. The Occupational Workwear business is comprised
primarily of the following brands and businesses: Red Kap®, VF Solutions®,
                                         VF Corporation Fiscal 2021 Form 10-K 23
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Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®.
The business also includes 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, which continued
to be met as of April 3, 2021. 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. 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
for all periods presented. In late April 2021, VF entered into a definitive
agreement to sell its Occupational Workwear business for approximately $605
million in net cash, subject to certain post-closing adjustments. The
transaction is expected to close in the first quarter of Fiscal 2022, and is
subject to customary closing conditions and regulatory approvals.
On May 22, 2019, VF completed the spin-off of its Jeans business, which included
the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF OutletTM
business, into an independent, publicly traded company now operating under the
name Kontoor Brands, Inc. ("Kontoor Brands"). As a result, VF reported the
results for the Jeans business and the related cash flows as discontinued
operations in the Consolidated Statements of Operations and Consolidated
Statements of Cash Flows, respectively. These changes have been applied to all
periods presented.
Refer to Note 4 for additional information on discontinued operations and other
divestitures.
Unless otherwise noted, amounts, percentages and discussion for all periods
included below reflect the results of operations and financial condition from
VF's continuing operations.
                             RECENT DEVELOPMENTS


                               Impact of COVID-19



In March 2020, the World Health Organization declared the outbreak of a novel
coronavirus ("COVID-19") a pandemic. The pandemic significantly impacted global
economic conditions, as well as VF's business operations and financial
performance during Fiscal 2021. Throughout the global impact of COVID-19, VF has
remained first and foremost focused on a people-first approach that prioritizes
the health and well-being of its employees, customers, trade partners and
consumers around the world. To help mitigate the spread of COVID-19 and in
response to health advisors and governmental actions and regulations, VF has
modified its business practices including the temporary closing of offices and
retail stores, instituting travel bans and restrictions and implementing health
and safety measures including social distancing and quarantines. VF has also
implemented measures that are designed to ensure the health, safety and
well-being of associates employed in its distribution, fulfillment and
manufacturing centers around the world.
VF-operated retail stores across the globe were significantly impacted during
Fiscal 2021 due to temporary closures for varying periods of time. In the
Asia-Pacific region, all VF-operated retail stores reopened in the first quarter
and nearly all remained opened during Fiscal 2021. In the Europe region, the
majority of stores reopened by the end of the second quarter, however; certain
stores reclosed during the third and fourth quarters. Approximately 50% of
stores in the Europe region were closed at the end of the third quarter and
approximately 60% of stores were closed at the end of the fourth quarter. Some
stores in the Europe region have opened since the end of the fourth quarter and
currently approximately 20% of stores are closed. In North America, the majority
of stores reopened by the end of the second quarter, however; certain stores
reclosed during the third and fourth quarters. Approximately 15% of stores were
closed at the end of the third quarter. The majority of the closures were Vans®
stores, predominantly based in California. At the end of the fourth quarter,
less than 5% of stores were closed. Currently less than 5% of stores in North
America remain closed. VF is continuing to monitor the COVID-19 outbreak
globally and will comply with guidance from
government entities and public health authorities to prioritize the health and
well-being of its employees, customers, trade partners and consumers. As
COVID-19 uncertainty continues, retail store reclosures may occur.
Consistent with VF's long-term strategy, the Company's digital platform remains
a high priority through which its brands stay connected with consumer
communities while providing experiential content. Prior to the COVID-19
pandemic, consumer spending had started shifting to brand e-commerce sites and
other digital platforms, which has accelerated due to changes in the retail
landscape resulting from the COVID-19 pandemic.
COVID-19 has also impacted some of VF's suppliers, including third-party
manufacturers, logistics providers and other vendors. At this time, the majority
of VF's supply chain is operational. Suppliers are complying with local health
advisories and governmental restrictions which has resulted in isolated product
delays; however, VF is actively working with its suppliers to minimize
disruption. VF's distribution centers are operational in accordance with local
government guidelines while maintaining enhanced health and safety protocols.
In response to COVID-19, various government programs have been announced to
provide financial relief to affected businesses including the Coronavirus Aid,
Relief, and Economic Security Act ("CARES Act"). The CARES Act, among other
things, provides employer payroll tax credits for wages paid to employees unable
to work during the COVID-19 pandemic and options to defer payroll tax payments.
Other foreign government programs available to VF also provide certain payroll
tax credits and wage subsidies. The Company recognized $81.4 million during the
year ended March 2021 as a result of relief from the CARES Act and other
governmental packages, which were recorded as a reduction in selling, general
and administrative expenses. The Company also intends to defer qualified payroll
and other tax payments as permitted by the CARES Act and other governmental
packages.
24 VF Corporation Fiscal 2021 Form 10-K
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The COVID-19 pandemic is ongoing and dynamic in nature, and has driven global
uncertainty and disruption. As a result, COVID-19 had a significant negative
impact on the Company's business, including the consolidated financial
condition, results
of operations and cash flows during the year ended March 2021. While we are not
able to determine the ultimate length and severity of the COVID-19 pandemic, we
expect ongoing disruption to our business.
                         Enterprise Protection Strategy



VF has taken a number of actions to advance its Enterprise Protection Strategy
in response to the COVID-19 pandemic.
On April 23, 2020, VF closed its sale of senior unsecured notes, which provided
net proceeds to the Company of approximately $2.97 billion. A portion of the net
proceeds was used to repay borrowings under the Company's senior unsecured
revolving credit facility (the "Global Credit Facility") and the remaining net
proceeds will be used for general corporate purposes. At March 2021, VF had
approximately $1.4 billion of cash and equivalents and short-term investments.
Additionally, VF had approximately $2.2 billion available for borrowing against
the Global Credit Facility, subject to certain restrictions including a $750.0
million minimum liquidity requirement.
Other actions VF has taken to support its business in response to the COVID-19
pandemic include the Company's decision to temporarily pause its share
repurchase program. The Company currently has $2.8 billion remaining under its
current share repurchase authorization. The Company paid a cash dividend of
$1.94 per share during the year ended March 2021, and has declared a cash
dividend of $0.49 per share that is payable in the first quarter of Fiscal 2022.
Subject to approval by its Board of Directors, VF intends to continue to pay its
regularly scheduled dividend and is not contemplating the suspension of its
dividend at this time. VF's divestiture of the Occupational Workwear business is
expected to provide an additional source of cash in Fiscal 2022.
VF has implemented cost controls to reduce discretionary spending to help
mitigate the loss of sales and to conserve cash while continuing to support
employees. The Company has also commenced a multi-year initiative designed to
enable our ability to accelerate and advance VF's business model transformation.
One of the key objectives of this initiative is to deliver global cost savings
of approximately $125.0 million over a three-year period that will be used to
support the transformation agenda and highest-priority growth drivers. As VF
continues to actively monitor the situation and advance our business model
transformation, we may take further actions that affect our operations.
We believe the Company has sufficient liquidity and flexibility to operate and
continue to execute our strategy during the disruptions caused by the COVID-19
pandemic and related governmental actions and regulations and health authority
advisories, and meet its obligations as they become due. However, due to the
uncertainty of the duration and severity of the COVID-19 pandemic, governmental
actions in response to the pandemic, and the impact on us and our consumers,
customers and suppliers, there is no certainty that the measures we take will be
sufficient to mitigate the risks posed by COVID-19. See "Item 1A. Risk Factors."
for additional discussion.
HIGHLIGHTS OF THE YEAR ENDED MARCH 2021



•Year ended March 2021 revenues decreased 12% to $9.2 billion compared to the
year ended March 2020, primarily due to the negative impact of COVID-19, and
included a 2% favorable impact from foreign currency. The year ended March 2021
also included an extra week when compared to the year ended March 2020.
•Active segment revenues decreased 15% to $4.2 billion compared to the year
ended March 2020, including a $142.0 million contribution from the Supreme
acquisition and a 2% favorable impact from foreign currency.
•Outdoor segment revenues decreased 11% to $4.1 billion compared to the year
ended March 2020, including a 2% favorable impact from foreign currency.
•Work segment revenues increased 7% to $945.7 million compared to the year ended
March 2020, including a 1% favorable impact from foreign currency.
•Direct-to-consumer revenues were down 5% compared to the year ended March 2020,
including a 2% favorable impact from foreign currency and a 4% contribution from
the Supreme acquisition. Direct-to-consumer revenues accounted for 45% of VF's
total revenues in the year ended March 2021. VF opened 80 retail stores during
the year ended March 2021 and acquired 12 Supreme® brand stores. E-commerce
revenues increased 67% in the year ended March 2021 compared to the year ended
March
2020, including a 3% favorable impact from foreign currency and a 9%
contribution from the Supreme acquisition.
•International revenues decreased 7% compared to the year ended March 2020,
including a 4% favorable impact from foreign currency. Greater China (which
includes Mainland China, Hong Kong and Taiwan) revenues were up 24%, including a
4% favorable impact from foreign currency. International revenues represented
50% of VF's total revenues in the year ended March 2021.
•Gross margin decreased 260 basis points to 52.7% in the year ended March 2021
compared to the year ended March 2020, primarily driven by elevated promotional
activity and the timing of net foreign currency transaction activity.
•Cash flows provided by operating activities were $1.2 billion in the year ended
March 2021.
•Earnings per share decreased 42% to $0.91 in the year ended March 2021 from
$1.57 in the year ended March 2020. The decrease was primarily driven by the
negative impact of COVID-19. The decrease was partially offset by the
contribution from the Supreme acquisition and favorable impacts from foreign
currency.
•VF returned $756.8 million to stockholders in cash dividends.
                                         VF Corporation Fiscal 2021 Form 10-K 25
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                       ANALYSIS OF RESULTS OF OPERATIONS


                    Consolidated Statements of Operations


The following table presents a summary of the changes in net revenues for the
year ended March 2021 compared to the year ended March 2020:
(In millions)                     Year Ended March
Net revenues - 2020              $        10,488.6
Organic                                   (1,562.7)
Acquisition                                  142.0

Impact of foreign currency                   170.9
Net revenues - 2021              $         9,238.8


Year Ended March 2021 Compared to Year Ended March 2020


VF reported a 12% decrease in revenues in Fiscal 2021 compared to Fiscal 2020,
including a 2% favorable impact from foreign currency. The revenue decrease was
primarily attributable to the negative impact of COVID-19, including closures of
VF-operated retail and VF's wholesale customer stores, supply chain disruption
and reduced consumer demand. Fiscal 2021 included a $142.0 million contribution
from the Supreme acquisition, which closed on December 28, 2020. Fiscal 2021
also included an extra week when compared to Fiscal 2020 due to VF's 53-week
Fiscal 2021.
VF reported a 23% increase in revenues in the fourth quarter of Fiscal 2021
compared to the Fiscal 2020 period, including a 4% favorable impact from foreign
currency and a 7% contribution from the Supreme acquisition. The increase was
driven by VF's largest brands, e-commerce growth and an increase in the
Asia-Pacific region, which experienced a significant negative impact from
COVID-19 in the Fiscal 2020 period. The fourth quarter of Fiscal 2021 also
included an extra week when compared to the Fiscal 2020 period due to VF's
53-week Fiscal 2021.
Additional details on revenues are provided in the section titled "Information
by Reportable Segment".
The following table presents the percentage relationship to net revenues for
components of the Consolidated Statements of Operations:
                                                                  Year Ended March

                                                                         2021           2020
Gross margin (net revenues less cost of goods sold)                     52.7  %        55.3  %
Selling, general and administrative expenses                            45.9           43.4
Impairment of goodwill and intangible assets                             0.2            3.1
Operating margin                                                         6.6  %         8.8  %



Year Ended March 2021 Compared to Year Ended March 2020
Gross margin decreased 260 basis points to 52.7% in Fiscal 2021 compared to
55.3% in Fiscal 2020. Gross margin in Fiscal 2021 was negatively impacted by
increased promotional activity to clear elevated inventory levels, the timing of
net foreign currency transaction activity, charges associated with cost
optimization and other activities indirectly related to the strategic review of
the Occupational Workwear business and costs related to a transformation
initiative for our Asia-Pacific regional operations. The decrease was partially
offset by a favorable mix shift to higher margin businesses and channels.
Selling, general and administrative expenses as a percentage of total revenues
increased 250 basis points in Fiscal 2021 compared to Fiscal 2020. This increase
was primarily due to lower leverage of operating expenses due to decreased
revenues as a result of the negative impact of COVID-19 and continued
investments in strategic growth initiatives. Selling, general and administrative
expenses decreased $307.0 million in Fiscal 2021 compared to Fiscal 2020
primarily due to cost controls taken in response to COVID-19 and payroll relief
from the CARES Act and other governmental packages.
VF recorded a $20.4 million noncash impairment charge in Fiscal 2021 related to
the write-off of certain trademark and customer relationship balances, which
resulted from strategic actions taken by the Company. VF recorded a $323.2
million noncash impairment charge related to the Timberland reporting unit
during the fourth quarter of Fiscal 2020.
In Fiscal 2021, operating margin decreased 220 basis points, to 6.6% from 8.8%
in Fiscal 2020, primarily due to the items described above.
Net interest expense increased $54.3 million to $126.5 million in Fiscal 2021.
The increase in net interest expense was primarily due to additional borrowings
of long-term debt and lower investment interest rates, partially offset by lower
interest rates on borrowings. The Fiscal 2020 period also included a deferred
loss on an interest rate hedging contract of $8.5 million recognized in net
interest expense in connection with the full redemption of the aggregate
principal amount of the outstanding 2021 notes.

26 VF Corporation Fiscal 2021 Form 10-K
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Table of Conte nts


Total outstanding interest-bearing debt averaged $5.8 billion and $2.6 billion
for Fiscal 2021 and Fiscal 2020, respectively, with short-term borrowings
representing 4.2% and 15.2% of average debt outstanding for the respective
years. The weighted average interest rate on outstanding debt was 2.1% in Fiscal
2021 and 3.0% in Fiscal 2020.
Loss on debt extinguishment of $59.8 million was recorded in Fiscal 2020 as a
result of the premiums, amortization and fees associated with cash tender offers
for VF's outstanding 2033 and 2037 notes, and the full redemption of VF's
outstanding 2021 notes.
Other income (expense), net primarily consists of components of net periodic
pension cost (excluding the service cost component), foreign currency gains and
losses and other non-operating gains and losses. Other income (expense) netted
to $(24.7) million and $(68.7) million in Fiscal 2021 and Fiscal 2020,
respectively. Included in other income (expense), net in Fiscal 2021 is $42.4
million expense related to the release of currency translation amounts
associated with the substantial liquidation of foreign entities in certain
countries in South America and $21.5 million of net periodic pension income
driven by the return on plan assets. Included in other income (expense), net in
Fiscal 2020 is $48.3 million expense related to the release of currency
translation amounts associated with the substantial liquidation of foreign
entities in certain countries in South America and $9.1 million of net periodic
pension expense driven by $27.4 million of pension settlement charges.
The effective income tax rate was 22.3% in Fiscal 2021 compared to 13.5% in
Fiscal 2020. The effective income tax rate is higher in Fiscal 2021 when
compared to Fiscal 2020 primarily due to the discrete tax benefit in Fiscal 2020
associated with the transitional impact of Switzerland's Federal Act on Tax
Reform and AHV Financing ("Swiss Tax Act"). The Fiscal 2021 effective income tax
rate included a net discrete tax expense of $9.8 million, which included a $22.8
million net tax expense related to unrecognized tax benefits and interest, a
$5.9 million tax benefit related to stock compensation, a $2.8 million tax
benefit related to return to accrual adjustments and a $4.3 million tax benefit
related to withholding taxes on prior foreign earnings. The $9.8 million net
discrete tax expense in Fiscal 2021 increased the effective income tax rate by
2.2% compared to a favorable 12.7% impact of discrete items for Fiscal 2020.
Excluding discrete items, the effective tax rate during Fiscal 2021 decreased by
approximately 6.1% primarily due to nondeductible goodwill impairment charges
during Fiscal 2020. The international effective tax rate was 14.7% for Fiscal
2021.
As a result of the above, income from continuing operations in Fiscal 2021 was
$354.9 million ($0.91 per diluted share), compared to $629.1 million ($1.57 per
diluted share) in Fiscal 2020.
Refer to additional discussion in the "Information by Reportable Segment"
section below.

                                         VF Corporation Fiscal 2021 Form 10-K 27
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  Table of Conte    nts

                       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.
The primary financial measures used by management to evaluate the financial
results of VF's reportable segments are segment revenues and segment profit.
Segment profit comprises the operating income and other income (expense), net
line items of each segment.
Refer to Note 20 to the consolidated financial statements for a summary of
results of operations by segment, along with a reconciliation of segment profit
to income before income taxes.
Year Ended March 2021 Compared to Year Ended March 2020
The following tables present a summary of the changes in segment revenues and
profit in the year ended March 2021 compared to the year ended March 2020 and
revenues by region for our Top 4 brands for the years ended March 2021 and 2020:
Segment Revenues:
                                                        Year Ended March
(In millions)                    Outdoor        Active         Work        Other         Total
Segment revenues - 2020        $ 4,644.0      $ 4,919.4      $ 886.4      $ 38.8      $ 10,488.6
Organic                           (617.6)        (962.2)        50.6       (33.5)       (1,562.7)
Acquisition                            -          142.0            -           -           142.0

Impact of foreign currency         101.2           61.7          8.7        (0.7)          170.9
Segment revenues - 2021        $ 4,127.6      $ 4,160.9      $ 945.7      $  4.6      $  9,238.8

Segment Profit (Loss):
                                                        Year Ended March
(In millions)                    Outdoor        Active         Work        Other         Total
Segment profit (loss) - 2020   $   516.1      $ 1,136.8      $  50.4      $ (6.5)     $  1,696.8
Organic                           (191.8)        (528.7)       (24.1)       (0.8)         (745.4)
Acquisition                            -           29.2            -           -            29.2

Impact of foreign currency          17.9           11.2          0.8         1.9            31.8
Segment profit (loss) - 2021   $   342.2      $   648.5      $  27.1      $ (5.4)     $  1,012.4


Top Brand Revenues:
                                                Year Ended March 2021
(In millions)              Vans®        The North Face®       Timberland® (a)       Dickies®
United States           $ 1,945.0      $        1,211.8      $          615.8      $  415.4
International:
Europe                      702.0                 807.3                 533.2         103.2
Asia-Pacific                627.0                 329.4                 280.5         161.1
Americas (non-U.S.)         191.7                 108.9                  83.5          21.8
Global                  $ 3,465.7      $        2,457.4      $        1,513.0      $  701.5

                                                Year Ended March 2020
(In millions)              Vans®        The North Face®       Timberland® (a)       Dickies®
United States           $ 2,379.9      $        1,516.0      $          735.2      $  398.5
International:
Europe                      786.8                 768.6                 646.7         105.2
Asia-Pacific                566.8                 271.0                 269.4         118.8
Americas (non-U.S.)         329.9                 144.2                 117.5          22.6
Global                  $ 4,063.4      $        2,699.8      $        1,768.8      $  645.1


(a) The global Timberland brand includes Timberland®, reported within the Outdoor segment and Timberland PRO®, reported within the Work segment.


28 VF Corporation Fiscal 2021 Form 10-K
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Table of Conte nts


The following sections discuss the changes in revenues and profitability by
segment. For purposes of this analysis, royalty revenues have been included in
the wholesale channel for all periods.
Outdoor
                                  Year Ended March

(Dollars in millions)          2021               2020            Percent Change
Segment revenues           $ 4,127.6          $ 4,644.0                  (11.1) %
Segment profit                 342.2              516.1                  (33.7) %
Operating margin                 8.3  %            11.1  %


The Outdoor segment includes the following brands: The North Face®, Timberland®, Smartwool®, Icebreaker® and Altra®.


Year Ended March 2021 Compared to Year Ended March 2020
Global revenues for Outdoor decreased 11% in Fiscal 2021 compared to Fiscal
2020, including a 2% favorable impact due to foreign currency. The decrease in
revenues during the period was primarily related to the negative impact of
COVID-19. Revenues in the United States decreased 19% in Fiscal 2021. Revenues
in the Europe region decreased 5%, including a 5% favorable impact from foreign
currency. Revenues in the Asia-Pacific region increased 11% in Fiscal 2021, with
a 4% favorable impact from foreign currency. Revenues in the Americas (non-U.S.)
region decreased 27% in Fiscal 2021, including a 1% favorable impact from
foreign currency.
Global revenues for Outdoor increased 25% in the fourth quarter of Fiscal 2021
compared to the Fiscal 2020 period, including a 5% favorable impact from foreign
currency, driven by growth in The North Face® and Timberland® brands, including
an increase in the Asia-Pacific region, which experienced a significant negative
impact from COVID-19 in the Fiscal 2020 period. The fourth quarter of Fiscal
2021 also included an extra week when compared to the Fiscal 2020 period due to
VF's 53-week Fiscal 2021.
Global revenues for The North Face® brand decreased 9% in Fiscal 2021, including
a 2% favorable impact from foreign currency. The decrease was due to the
negative impact of COVID-19 primarily in the United States and Americas
(non-U.S.) regions, which were partially offset by e-commerce growth and strong
performance in the Asia-Pacific and Europe regions.

Global revenues for the Timberland® brand decreased 17% in Fiscal 2021,
including a 3% favorable impact from foreign currency. The decrease was
primarily due to the negative impact of COVID-19 primarily in the United States,
Americas (non-U.S.) and Europe regions, partially offset by e-commerce growth
and strong performance in the Asia-Pacific region.
Global direct-to-consumer revenues for Outdoor decreased 1% in Fiscal 2021,
including a 3% favorable impact from foreign currency. The decrease was
primarily due to the negative impact of COVID-19 and related closures of
VF-operated retail stores, partially offset by e-commerce growth across all
regions, which increased 64% in Fiscal 2021, including a 4% favorable impact
from foreign currency. Global wholesale revenues for Outdoor decreased 17%,
including a 2% favorable impact from foreign currency. The decrease was
primarily driven by the negative impact of COVID-19.
Operating margin decreased in Fiscal 2021 compared to Fiscal 2020, reflecting
lower leverage of operating expenses due to decreased revenues, elevated sales
promotional activity, negative impact from the timing of net foreign currency
transaction activity and continued investments in digital strategic growth
initiatives. The decrease was partially offset by cost controls taken in
response to COVID-19 and payroll relief from the CARES Act and other
governmental packages. The year ended March 2020 also included a gain of
approximately $11 million on the sale of office real estate and related assets
in connection with the relocation of VF's global headquarters and certain brands
to Denver, Colorado.

                                         VF Corporation Fiscal 2021 Form 10-K 29
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  Table of Conte    nts

Active
                                  Year Ended March

(Dollars in millions)          2021               2020            Percent Change
Segment revenues           $ 4,160.9          $ 4,919.4                  (15.4) %
Segment profit                 648.5            1,136.8                  (43.0) %
Operating margin                15.6  %            23.1  %


The Active segment includes the following brands: Vans®, Supreme®, Kipling®, Napapijri®, Eastpak®, JanSport® and Eagle Creek®.


Year Ended March 2021 Compared to Year Ended March 2020
Global revenues for Active decreased 15% in Fiscal 2021 compared to Fiscal 2020,
including a 2% favorable impact from foreign currency. The overall decrease in
revenues during the period was primarily related to the negative impact of
COVID-19. Revenues in the United States decreased 18% in Fiscal 2021. Revenues
in the Europe region decreased 16%, including a 4% favorable impact from foreign
currency. Revenues in the Asia-Pacific region increased 10% in Fiscal 2021,
including a 2% favorable impact from foreign currency. Revenues in the Americas
(non-U.S.) region decreased 42% in Fiscal 2021, including a 1% unfavorable
impact from foreign currency. Included in these results are revenues from the
Supreme acquisition of $142.0 million. Excluding revenues from Supreme, Active
revenues decreased 18% in Fiscal 2021, including a 2% favorable impact from
foreign currency.
Global revenues for Active increased 22% in the fourth quarter of Fiscal 2021
compared to the Fiscal 2020 period, including a 3% favorable impact from foreign
currency and a 14% contribution from the Supreme acquisition. The increase was
driven by growth in the Vans® brand, including an increase in the Asia-Pacific
region, which experienced a significant negative impact from COVID-19 in the
Fiscal 2020 period. The fourth quarter of Fiscal 2021 also included an extra
week when compared to the Fiscal 2020 period due to VF's 53-week Fiscal 2021.
Vans® brand global revenues decreased 15% in Fiscal 2021, including a 1%
favorable impact from foreign currency. The decrease was primarily due to the
negative impact of COVID-19
in the United States, Americas (non-U.S.) and Europe regions, partially offset
by e-commerce growth and growth in Greater China.
Global direct-to-consumer revenues for Active decreased 10% in Fiscal 2021,
including a 1% favorable impact from foreign currency. Excluding revenues from
acquisition, global direct-to-consumer revenues decreased 16%, including a 1%
favorable impact from foreign currency. The decrease in the direct to-consumer
channel was primarily due to the negative impact of COVID-19 and related
closures of VF-operated retail stores, partially offset by e-commerce growth
across all regions. E-commerce revenues increased 73% in Fiscal 2021, including
a 3% favorable impact from foreign currency. Excluding revenues from
acquisition, e-commerce revenues increased 53%, including a 2% favorable impact
from foreign currency. Global wholesale revenues for Active decreased 20% in
Fiscal 2021, primarily due to the negative impact of COVID-19, and included a 2%
favorable impact from foreign currency.
Operating margin decreased in Fiscal 2021 compared to Fiscal 2020, reflecting
lower leverage of operating expenses due to decreased revenues, elevated sales
promotional activity, negative impact from the timing of net foreign currency
transaction activity and continued investments in direct-to-consumer and digital
strategic growth initiatives. The decrease in Fiscal 2021 was partially offset
by cost controls taken in response to COVID-19, contribution from the Supreme
acquisition and payroll relief from the CARES Act and other governmental
packages.

30 VF Corporation Fiscal 2021 Form 10-K
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  Table of Conte    nts

Work
                                Year Ended March

(Dollars in millions)         2021             2020           Percent Change
Segment revenues           $ 945.7          $ 886.4                    6.7  %
Segment profit                27.1             50.4                  (46.1) %
Operating margin               2.9  %           5.7  %


The Work segment includes the following brands: Dickies® and Timberland PRO®.


Year Ended March 2021 Compared to Year Ended March 2020
Global Work revenues increased 7% in Fiscal 2021 compared to Fiscal 2020,
including a 1% favorable impact from foreign currency. The revenue increase was
driven by overall growth in both the Dickies® and Timberland PRO® brands,
partially offset by the negative impact of COVID-19. Revenues in the United
States increased 3% in Fiscal 2021. Revenues in the Europe region were flat,
including a 4% favorable impact from foreign currency. Revenues in the
Asia-Pacific region increased 36%, including a 5% favorable impact from foreign
currency. Revenues in the Americas (non-U.S.) region were flat in Fiscal 2021,
including a 2% unfavorable impact from foreign currency.
Global Work revenues increased 23% in the fourth quarter of Fiscal 2021 compared
to the Fiscal 2020 period, including a 3% favorable impact from foreign
currency, driven by overall growth in both the Dickies® and Timberland PRO®
brands, including an increase for the Dickies® brand in the Asia-Pacific region,
which
experienced a significant negative impact from COVID-19 in the Fiscal 2020
period. The fourth quarter of Fiscal 2021 also included an extra week when
compared to the Fiscal 2020 period due to VF's 53-week Fiscal 2021.
Dickies® brand global revenues increased 9% in Fiscal 2021, including a 2%
favorable impact from foreign currency. The increase was driven by strong
performance in work-inspired lifestyle products, and growth in e-commerce and
the Asia-Pacific region.
Operating margin decreased in Fiscal 2021 compared to Fiscal 2020. The decrease
was primarily attributed to charges associated with cost optimization and other
activities indirectly related to the strategic review of the Occupational
Workwear business, partially offset by increased pricing and cost controls taken
in response to COVID-19.

Reconciliation of Segment Profit to Consolidated Income Before Income Taxes




There are three types of costs necessary to reconcile total segment profit to
consolidated income before income taxes. These costs are (i) impairment of
goodwill and indefinite-lived intangible assets, which is excluded from segment
profit because these costs are not part of the ongoing operations of the
respective businesses, (ii) interest expense, net, and loss on debt
extinguishment which are excluded from segment profit because substantially all
financing costs are managed at the corporate
office and are not under the control of segment management, and (iii) corporate
and other expenses, which are excluded from segment profit to the extent they
are not allocated to the segments. Impairment of goodwill and indefinite-lived
intangible assets and net interest expense are discussed in the "Consolidated
Statements of Operations" section, and corporate and other expenses are
discussed below.
Following is a summary of VF's corporate and other expenses:
                                                                          Year Ended March

(In millions)                                                           2021             2020
Information systems and shared services                              $   363.8         $ 365.9
Less costs allocated to segments                                        (219.2)         (212.0)
Information systems and shared services retained at corporate            144.6           153.9
Corporate headquarters' costs                                            228.5           292.5
Other                                                                     43.9            68.0
Corporate and other expenses                                         $   

417.0 $ 514.4




Information Systems and Shared Services
These costs include management information systems and the centralized finance,
supply chain, human resources, direct-to-consumer and customer management
functions that support worldwide operations. Operating costs of information
systems and shared services are charged to the segments based on utilization of
those services. Costs to develop new computer applications are generally not
allocated to the segments. Included in information systems and shared services
costs in
Fiscal 2021 and Fiscal 2020 are costs associated with software system
implementations and upgrades and other strategic projects.
Corporate Headquarters' Costs
Headquarters' costs include compensation and benefits of corporate management
and staff, legal and professional fees, and general and administrative expenses
that have not been allocated to the segments. The decrease in corporate
                                         VF Corporation Fiscal 2021 Form 10-K 31
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headquarters' costs in Fiscal 2021 compared to Fiscal 2020 is primarily
attributed to cost controls to reduce discretionary spending and lower costs
related to the relocation of our global headquarters and certain brands to
Denver, Colorado. The decrease in Fiscal 2021 was partially offset by expenses
associated with the acquisition of Supreme, costs related to a transformation
initiative for our Asia-Pacific regional operations and increased charges
associated with cost optimization and other activities indirectly related to the
strategic review of the Occupational Workwear business.
Other
This category includes (i) costs of corporate programs or corporate-managed
decisions that are not allocated to the segments, (ii) costs of registering,
maintaining and enforcing certain of VF's trademarks, and (iii) miscellaneous
consolidated
costs, the most significant of which is related to activity associated with VF's
centrally-managed U.S. defined benefit pension plans. The decrease in other
expenses in Fiscal 2021 compared to Fiscal 2020 is primarily due to lower
pension settlement charges of $25.9 million for the periods compared. Included
in other expense in Fiscal 2021 and Fiscal 2020 is $42.4 million and $48.3
million, respectively, related to the release of currency translation amounts
associated with the substantial liquidation of foreign entities in certain
countries in South America. Also included in other expense in both Fiscal 2021
and Fiscal 2020 are retained corporate overhead and other costs related to the
Work and former Jeans segments associated with divestiture actions taken by the
Company. The retained costs associated with the former Jeans segment have been
largely offset by reimbursements from Kontoor Brands related to transition
services provided in both periods.
                            International Operations



International revenues decreased 7% in Fiscal 2021 compared to Fiscal 2020,
primarily due to the negative impact of COVID-19. Foreign currency had a
favorable impact of 4% on international revenues in Fiscal 2021. Revenues in the
Europe region decreased 10% in Fiscal 2021, including a 5% favorable impact from
foreign currency. In the Asia-Pacific region, revenues increased 13% in Fiscal
2021 over Fiscal 2020, driven by growth in Greater China. Foreign currency
positively impacted revenues in the Asia-Pacific region by 3%. Revenues in
Greater China increased 24% in Fiscal 2021, including a 4% favorable impact from
foreign currency. Revenues in the Americas (non-U.S.) region decreased 34% in
Fiscal 2021. International revenues
were 50% and 47% of total VF revenues in Fiscal 2021 and Fiscal 2020,
respectively.
International revenues increased 21% in the fourth quarter of Fiscal 2021
compared to the Fiscal 2020 period, including a 8% favorable impact from foreign
currency and a 5% contribution from the Supreme acquisition. The increase was
driven by growth in the Asia-Pacific region, which experienced a significant
negative impact from COVID-19 in the Fiscal 2020 period. The fourth quarter of
Fiscal 2021 also included an extra week when compared to the Fiscal 2020 period
due to VF's 53-week Fiscal 2021.
Direct-to-Consumer Operations



Direct-to-consumer revenues decreased 5% in Fiscal 2021 over Fiscal 2020,
including a 2% favorable impact from foreign currency and a 4% contribution from
the Supreme acquisition. The decrease in direct-to-consumer revenues was
primarily due to the negative impact of COVID-19 and related closures of
VF-operated retail stores, as discussed in the "Impact of COVID-19" section
above. Our e-commerce business grew 67% in Fiscal 2021, including a 3% favorable
impact from foreign currency and a 9% contribution from the Supreme acquisition.
The e-commerce growth occurred across all regions and partially offset the
declines in our other direct-to-consumer operations in Fiscal 2021. VF opened 80
stores in Fiscal 2021 and acquired 12 Supreme® brand stores, bringing the total
number of VF-owned retail stores to 1,374 at March 2021, which also reflects
certain store closings during the period. There were 1,379 VF-owned
retail stores at March 2020. Direct-to-consumer revenues were 45% of total VF
revenues in Fiscal 2021 compared to 41% in Fiscal 2020.
Direct-to-consumer revenues increased 36% in the fourth quarter of Fiscal 2021
compared to the Fiscal 2020 period, including a 4% favorable impact from foreign
currency and a 17% contribution from the Supreme acquisition. Our e-commerce
business grew 106% in the fourth quarter of Fiscal 2021 compared to the Fiscal
2020 period, including a 7% favorable impact from foreign currency and a 41%
contribution from the Supreme acquisition. The fourth quarter of Fiscal 2021
also included an extra week when compared to the Fiscal 2020 period due to VF's
53-week Fiscal 2021.

32 VF Corporation Fiscal 2021 Form 10-K
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                       ANALYSIS OF FINANCIAL CONDITION


                                Balance Sheets



The following discussion refers to significant changes in balances for
continuing operations at March 2021 compared to March 2020:
•Decrease in inventories - primarily due to lower inventory purchases as part of
our inventory management to ensure proper matching of supply and demand
resulting from reduced consumer demand due to the impact of COVID-19.
•Increase in short-term investments - due to new investments of excess cash
entered into during Fiscal 2021.
•Increase in intangible assets - primarily due to the acquired indefinite-lived
Supreme® trademark intangible asset of $1.2 billion recorded in connection with
the acquisition.
•Increase in goodwill - primarily due to the amounts recorded in connection with
the Supreme acquisition of $1.25 billion.
•Increase in operating lease right-of-use assets - primarily due to the
commencement of new distribution center leases in Europe and North America
during Fiscal 2021.
•Increase in other assets - primarily due to amounts recorded in connection with
the Supreme acquisition, increases in assets held for deferred compensation
plans and an increase in net pension assets for certain defined benefit plans.
•Decrease in short-term borrowings - due to the net repayment of borrowings
under the Global Credit Facility using a portion of the net proceeds from the
issuance of senior unsecured fixed-rate notes in April 2020.
•Increase in accrued liabilities - primarily due to amounts recorded in
connection with the Supreme acquisition, and an increase in current operating
lease liabilities, derivative liabilities, accrued interest and
compensation-related liabilities.
•Increase in long-term debt - due to the issuance of $3.0 billion of senior
unsecured fixed-rate notes in April 2020.
•Increase in operating lease liabilities - primarily due to the commencement of
new distribution center leases in Europe and North America during Fiscal 2021.
•Increase in other liabilities - primarily due to deferred taxes and the
contingent consideration liability of $207.0 million recorded in connection with
the Supreme acquisition.
                            Liquidity and Cash Flows



We consider the following to be measures of our liquidity and capital resources:
(Dollars in millions)            March 2021           March 2020
Working capital                   $2,113.1             $1,518.8
Current ratio                     2.0 to 1             1.5 to 1
Net debt to total capital          68.2%                53.4%



The increase in the current ratio at March 2021 compared to March 2020 was
primarily due to a net decrease in current liabilities driven by lower
short-term borrowings, as discussed in the "Balance Sheets" section above.
For the ratio of net debt to total capital, net debt is defined as short-term
and long-term borrowings, in addition to operating lease liabilities, net of
unrestricted cash. Total capital is defined as net debt plus stockholders'
equity. The increase in the net debt to total capital ratio at March 2021
compared to March 2020 was attributed to the increase in long-term debt,
partially offset by the decrease in short-term borrowings, as discussed in the
"Balance Sheets" section above. The increase was also attributed to a decrease
in stockholders' equity, driven by payments of dividends, partially offset by
current period income.
VF's primary source of liquidity is its expected strong annual cash flow from
operating activities. Cash from operations is typically lower in the first half
of the calendar year as inventory builds to support peak sales periods in the
second half of the calendar year. Cash provided by operating activities in the
second half of the calendar year is substantially higher as inventories are sold
and accounts receivable are collected. Additionally, direct-to-consumer sales
are typically highest in the fourth quarter of the calendar year. VF's
additional sources of liquidity include available borrowing capacity against its
Global Credit Facility, available cash and investment balances and international
lines of credit.
                                         VF Corporation Fiscal 2021 Form 10-K 33
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In summary, our cash flows from continuing operations were as follows:

                                                  Year Ended March

(In millions)                                   2021             2020

Cash provided by operating activities $ 1,233.3 $ 800.4 Cash used by investing activities

             (2,892.0)         (285.3)
Cash provided by financing activities          1,052.9           309.7



Cash Provided by Operating Activities


Cash flow related to operating activities is dependent on net income,
adjustments to net income and changes in working capital. The increase in cash
provided by operating activities in Fiscal 2021 compared to Fiscal 2020 is
primarily due to a decrease in net cash usage for working capital, partially
offset by lower earnings for the periods compared.
Cash Used by Investing Activities
The increase in cash used by investing activities in Fiscal 2021 compared to
Fiscal 2020 related primarily to the cash paid to acquire Supreme of $2.0
billion, net of cash received, and purchases of short-term investments of $800.0
million, partially offset by proceeds from maturities of short-term investments
of $200.0 million. Capital expenditures decreased $89.5 million and software
purchases increased $29.9 million in Fiscal 2021 compared to the Fiscal 2020
period.
Cash Provided by Financing Activities
The increase in cash provided by financing activities in Fiscal 2021 compared to
Fiscal 2020 was primarily due to the increase in net proceeds from long-term
debt issuances of $1.9 billion, a $1.0 billion decrease in share repurchases and
a $647.4 million decrease in payments on long-term debt, which was partially
offset by a $1.8 billion net decrease in short-term borrowings for the periods
compared. The increase was also partially offset by $906.1 million of cash
received from Kontoor Brands, net of cash transferred, in Fiscal 2020.
Share Repurchases
VF did not purchase shares of its Common Stock in the open market during Fiscal
2021. During Fiscal 2020, VF purchased 12.0 million shares of its Common Stock
in open market transactions at a total cost of $1.0 billion (average price per
share of $83.33) under the share repurchase program authorized by VF's Board of
Directors.
In response to the COVID-19 outbreak and to preserve financial liquidity, VF has
made the decision to temporarily pause its share repurchase program. As of the
end of Fiscal 2021, the Company had $2.8 billion remaining for future
repurchases under its share repurchase program. VF will continue to evaluate its
use of capital, giving first priority to enterprise protection and then to
business acquisitions and direct shareholder return in the form of dividends and
share repurchases.
Revolving Credit Facility and Short-term Borrowings
VF relies on its ability to generate cash flows to finance its ongoing
operations. In addition, VF has significant liquidity from its available cash
and investment balances and credit facilities. VF maintains a $2.25 billion
senior unsecured revolving line of
credit (the "Global Credit Facility") that expires December 2023. VF may request
an unlimited number of one year extensions so long as each extension does not
cause the remaining life of the Global Credit Facility to exceed five years,
subject to stated terms and conditions. The Global Credit Facility may be used
to borrow funds in both U.S. dollar and certain non-U.S. dollar currencies, and
has a $50.0 million letter of credit sublimit. In addition, the Global Credit
Facility supports VF's U.S. commercial paper program for short-term, seasonal
working capital requirements and general corporate purposes, including share
repurchases and acquisitions. Outstanding short-term balances may vary from
period to period depending on the level of corporate requirements. Borrowings
under the Global Credit Facility are priced at a credit spread of 91.0 basis
points over the appropriate LIBOR benchmark for each currency. VF is also
required to pay a facility fee to the lenders, currently equal to 9.0 basis
points of the committed amount of the facility. The credit spread and facility
fee are subject to adjustment based on VF's credit ratings.
In April 2020, VF entered into an amendment to the Global Credit Facility that
resulted in certain changes to the restrictive covenants, including an increase
to the consolidated indebtedness to consolidated capitalization ratio financial
covenant to 70% (from 60%) and a revision to the calculation of consolidated
indebtedness to be net of unrestricted cash. As of March 2021, the covenant
calculation includes cash and equivalents and short-term investments, and
excludes consolidated operating lease liabilities. In addition, the amendment
requires VF and its subsidiaries to maintain minimum liquidity in the form of
unrestricted cash and unused financing commitments of not less than $750.0
million. As of March 2021, VF was in compliance with all covenants.
VF has a commercial paper program that allows for borrowings up to $2.25 billion
to the extent that it has borrowing capacity under the Global Credit Facility.
There were no commercial paper borrowings as of March 2021. Standby letters of
credit issued as of March 2021 were $24.1 million, leaving approximately
$2.2 billion available for borrowing against the Global Credit Facility at March
2021. Additionally, VF had approximately $1.4 billion of cash and equivalents
and short-term investments at March 2021.
VF has $63.9 million of international lines of credit with various banks, which
are uncommitted and may be terminated at any time by either VF or the banks.
Total outstanding balances under these arrangements were $11.1 million and $13.8
million at March 2021 and March 2020, respectively. Borrowings under these
arrangements had a weighted average interest rate of 11.0% and 16.3% at March
2021 and March 2020, respectively.
Senior Notes Issuance
On April 23, 2020, VF closed its sale of senior unsecured notes including $1.0
billion of 2.050% notes due April 2022, $750.0 million of 2.400% notes due April
2025, $500.0 million of 2.800%
34 VF Corporation Fiscal 2021 Form 10-K
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Table of Conte nts


notes due April 2027 and $750.0 million of 2.950% notes due April 2030. The net
proceeds received by the Company were approximately $2.97 billion. A portion of
the net proceeds was used to repay outstanding borrowings under the Global
Credit Facility resulting from actions taken by VF to strengthen the Company's
cash position in response to the COVID-19 pandemic.
Rating Agencies
VF's favorable credit agency ratings allow for access to additional liquidity at
competitive rates. At the end of March 2021, VF's long-term debt ratings were
'A-' by Standard & Poor's ("S&P") Global Ratings and 'Baa1' by Moody's Investors
Service, both with 'stable' outlooks, and commercial paper ratings by those
rating agencies were 'A-2' and 'P-2', respectively.
None of VF's long-term debt agreements contain acceleration of maturity clauses
based solely on changes in credit ratings. However, if there were a change in
control of VF and, as a result
of the change in control, the notes were rated below investment grade by
recognized rating agencies, then VF would be obligated to repurchase the notes
at 101% of the aggregate principal amount, plus any accrued and unpaid interest,
if required by the respective holders of the notes. The change of control
provision applies to all notes, except for the 2033 note.
Dividends
Cash dividends totaled $1.94 per share in Fiscal 2021 compared to $1.90 in
Fiscal 2020. The dividend payout ratio was 186.5% of diluted earnings per share
in Fiscal 2021 compared to 111.8% in Fiscal 2020. The Company has declared a
dividend of $0.49 per share that is payable in the first quarter of Fiscal 2022.
Subject to approval by its Board of Directors, VF intends to continue to pay its
regularly scheduled dividend and is not contemplating the suspension of its
dividend at this time.
Contractual Obligations
Following is a summary of VF's material contractual obligations and commercial
commitments at the end of March 2021 that will require the use of funds:
                                                                                  Payment Due or Forecasted by Fiscal Year
(In millions)                         Total              2022              2023             2024            2025            2026            Thereafter
Recorded liabilities:
Long-term debt (1)                 $  5,763          $       2          $ 1,001          $ 1,001          $    2          $  751          $     3,006
Operating leases (2)                  1,747                435              347              245             175             119                  426
Unrecorded commitments:
Interest payment obligations (3)      1,084                127              108              103             100              83                  563
Inventory obligations (4)             2,417              2,394               14                9               -               -                    -
                                   $ 11,011          $   2,958          $ 1,470          $ 1,358          $  277          $  953          $     3,995




(1)Long-term debt consists of required principal payments on long-term debt and
finance lease obligations.
(2)Operating leases represent required lease payments during the noncancelable
lease term. Variable payments for occupancy-related costs, real estate taxes,
insurance and contingent rent are not included above. In addition, $23.1 million
of leases (on an undiscounted basis) that have not yet commenced with terms of
2 to 10 years beginning in Fiscal 2022 are not included above.
(3)Interest payment obligations represent required interest payments on
long-term debt and the interest portion of payments on finance leases. Amounts
exclude amortization of debt issuance costs, debt discounts and acquisition
costs that would be included in interest expense in the consolidated financial
statements.
(4)Inventory obligations represent binding commitments to purchase finished
goods, raw materials and contract production that are payable upon delivery of
the inventory to VF. This obligation excludes the amount included in accounts
payable at March 2021 related to inventory purchases.

VF had other financial commitments at the end of Fiscal 2021 that are not
included in the above table but may require the use of funds under certain
circumstances:
•$118.1 million of surety bonds, custom bonds, standby letters of credit and
international bank guarantees are not included in the table above because they
represent contingent guarantees of performance under self-insurance and other
programs and would only be drawn upon if VF were to fail to meet its other
obligations.
•Purchase orders for goods or services in the ordinary course of business are
not included in the above table because they represent authorizations to
purchase rather than binding commitments.
Management believes that VF's cash and investment balances and expected funds to
be provided by operating activities, as well
as its Global Credit Facility, additional borrowing capacity and access to
capital markets, taken as a whole, provide (i) adequate liquidity to meet all of
its current and long-term obligations when due, (ii) adequate liquidity to fund
capital expenditures and to maintain the planned dividend, and (iii) flexibility
to meet investment opportunities that may arise. There continues to be
significant uncertainty about the duration and extent of the impact of COVID-19;
however, management believes that VF has sufficient liquidity and flexibility to
operate during and after the disruptions caused by the COVID-19 pandemic.
VF does not participate in transactions with unconsolidated entities or
financial partnerships established to facilitate off-balance sheet arrangements
or other limited purposes.
                                         VF Corporation Fiscal 2021 Form 10-K 35
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                                Risk Management



VF is exposed to risks in the ordinary course of business. Management regularly
assesses and manages exposures to these risks through operating and financing
activities and, when appropriate, by (i) taking advantage of natural hedges
within VF, (ii) purchasing insurance from commercial carriers, or (iii) using
derivative financial instruments. Some potential risks are discussed below:
Insured risks
VF is self-insured for a significant portion of its employee medical, workers'
compensation, vehicle and general liability exposures. VF purchases insurance
from highly-rated commercial carriers to cover other risks, including directors
and officers, property and umbrella, and to establish stop-loss limits on
self-insurance arrangements.
Cash and equivalents risks
VF had $815.8 million of cash and equivalents at the end of Fiscal 2021.
Management continually monitors the credit ratings of the financial institutions
with whom VF conducts business. Similarly, management monitors the credit
quality of cash equivalents.
Defined benefit pension plan risks
At the end of Fiscal 2021, VF's defined benefit pension plans were overfunded by
a net total of $13.7 million. The overfunded status includes a $117.6 million
liability related to our U.S. unfunded supplemental defined benefit plan, $58.4
million of net liabilities related to our non-U.S. defined benefit plans, and a
$189.7 million net asset related to our U.S. qualified defined benefit plan. VF
will continue to evaluate the funded status and future funding requirements of
these plans, which depends in part on the future performance of the plans'
investment portfolios. Management believes that VF has sufficient liquidity to
make any required contributions to the pension plans in future years.
VF's reported earnings are subject to risks due to the volatility of its pension
cost (income), which has ranged in recent years from cost of $39.7 million in
the year ended March 2019 to income of $5.7 million in the year ended March
2021. These fluctuations are primarily due to the decrease in service costs due
to the freeze of future benefit accruals in the U.S. qualified and supplemental
defined benefit plans as of December 31, 2018 and varying amounts of actuarial
gains and losses that are deferred and amortized to future years' expense. The
assumptions that impact actuarial gains and losses include the rate of return on
investments held by the pension plans, the discount rate used to value
participant liabilities and demographic characteristics of the participants.
In Fiscal 2019, VF approved a freeze of all future benefit accruals under the
U.S. qualified defined benefit pension plan and supplemental defined benefit
pension plan, effective December 31, 2018. During the year ended March 2020, VF
took an additional step in managing pension risk by offering former employees in
the U.S. qualified plan a lump-sum option to receive a distribution of their
deferred vested benefits. The U.S. qualified plan participants were reduced by
10% as a result of this offer. No additional funding of the pension plan was
required as all distributions were paid out of existing plan assets, and the
plan's funded status remained materially unchanged. Refer to Note 16 to the
consolidated financial statements.
VF has taken a series of steps to manage the risk and volatility in the pension
plans and their impact on the financial statements. The U.S. qualified and
supplemental defined benefit plans were closed to new entrants in 2005 and all
future benefit accruals were frozen as of December 31, 2018. The investment
strategy of the U.S. qualified plan continues to define dynamic asset allocation
targets that are dependent upon changes in the plan's funded status, capital
market expectations, and risk tolerance. Management will continue to evaluate
actions that may help to reduce VF's risks related to its defined benefit plans.
Interest rate risks
VF limits the risk of interest rate fluctuations by managing the mix of fixed
and variable interest rate debt. In addition, VF may use derivative financial
instruments to manage risk. Since all of VF's long-term debt has fixed interest
rates, the exposure relates to changes in interest rates on variable rate
short-term borrowings (which averaged approximately $244.0 million during Fiscal
2021). However, any change in interest rates would also affect interest income
earned on VF's cash equivalents. Based on the average amount of variable rate
borrowings and cash equivalents during Fiscal 2021, the effect of a hypothetical
1% increase in interest rates would be an increase in reported net income of
approximately $15.0 million and a hypothetical 1% decrease in interest rates
would be a decrease in reported net income of approximately $15.0 million.
Foreign currency exchange rate risks
VF is a global enterprise subject to the risk of foreign currency fluctuations.
Approximately 50% of VF's revenues in the year ended March 2021 were generated
in international markets. Most of VF's foreign businesses operate in functional
currencies other than the U.S. dollar. In periods where the U.S. dollar
strengthens relative to the euro or other foreign currencies where VF has
operations, there is a negative impact on VF's operating results upon
translation of those foreign operating results into the U.S. dollar. As
discussed later in this section, management hedges VF's investments in certain
foreign operations and foreign currency transactions.
The reported values of assets and liabilities in these foreign businesses are
subject to fluctuations in foreign currency exchange rates. For net advances to
and investments in VF's foreign businesses that are considered to be long-term,
the impact of changes in foreign currency exchange rates on those long-term
advances is deferred as a component of accumulated OCI in stockholders' equity.
The U.S. dollar value of net investments in foreign subsidiaries fluctuates with
changes in the underlying functional currencies. In February 2020, VF issued
€1.0 billion of euro-denominated fixed-rate notes and in September 2016, VF
issued €850 million of euro-denominated fixed-rate notes. These notes have been
designated as net investment hedges 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.
36 VF Corporation Fiscal 2021 Form 10-K
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Any amounts deferred in accumulated OCI will remain until the hedged investment
is sold or substantially liquidated.
VF monitors net foreign currency market exposures and enters into derivative
foreign currency contracts to hedge the effects of exchange rate fluctuations
for a significant portion of forecasted foreign currency cash flows or specific
foreign currency transactions (relating to cross-border inventory purchases,
production costs, product sales, operating costs and intercompany royalty
payments). VF's practice is to buy or sell foreign currency exchange contracts
that cover up to 80% of foreign currency exposures for periods of up to 24
months. Currently, VF uses only foreign exchange forward contracts but may use
options or collars in the future. This use of financial instruments allows
management to reduce the overall exposure to risks from exchange rate
fluctuations on VF's cash flows and earnings, since gains and losses on these
contracts will offset losses and gains on the transactions being hedged.
For cash flow hedging contracts outstanding at the end of Fiscal 2021, if there
were a hypothetical 10% change in foreign currency exchange rates compared to
rates at the end of Fiscal 2021, it would result in a change in fair value of
those contracts of approximately $234 million. However, any change in the fair
value of the hedging contracts would be substantially offset by a change in the
fair value of the underlying hedged exposure impacted by the currency rate
changes.
Counterparty risks
VF is exposed to credit-related losses in the event of nonperformance by
counterparties to derivative hedging instruments. To manage this risk, we have
established
counterparty credit guidelines and only enter into derivative transactions with
financial institutions that have 'A minus/A3' investment grade credit ratings or
better. VF continually monitors the credit rating of, and limits the amount
hedged with, each counterparty. Additionally, management utilizes a portfolio of
financial institutions to minimize exposure to potential counterparty defaults
and adjusts positions as necessary. VF also monitors counterparty risk for
derivative contracts within the defined benefit pension plans.
Commodity price risks
VF is exposed to market risks for the pricing of cotton, leather, rubber, wool
and other materials, which we either purchase directly or in a converted form
such as fabric or shoe soles. To manage risks of commodity price changes,
management negotiates prices in advance when possible. VF has not historically
managed commodity price exposures by using derivative instruments.
Deferred compensation and related investment security risks
VF has nonqualified deferred compensation plans in which liabilities to the
plans' participants are based on the market values of the participants'
selection of a hypothetical portfolio of investment funds. VF invests in a
portfolio of securities that substantially mirrors the participants' investment
selections. The increases and decreases in deferred compensation liabilities are
substantially offset by corresponding increases and decreases in the market
value of VF's investments, resulting in an insignificant net exposure to
operating results and financial position.
                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES



VF has chosen accounting policies that management believes are appropriate to
accurately and fairly report VF's operating results and financial position in
conformity with accounting principles generally accepted in the U.S. VF applies
these accounting policies in a consistent manner. Significant accounting
policies are summarized in Note 1 to the consolidated financial statements.
The application of these accounting policies requires that VF make estimates and
assumptions about future events and apply judgments that affect the reported
amounts of assets, liabilities, revenues, expenses, contingent assets and
liabilities, and related disclosures. These estimates, assumptions and judgments
are based on historical experience, current trends and other factors believed to
be reasonable under the circumstances. Management evaluates these estimates and
assumptions on an ongoing basis. Because VF's business cycle
is relatively short (i.e., from the date that inventory is received until that
inventory is sold and the trade receivable is collected), actual results related
to most estimates are known within a few months after any balance sheet date. In
addition, VF may retain outside specialists to assist in valuations of business
acquisitions and impairment testing of goodwill and intangible assets. If actual
results ultimately differ from previous estimates, the revisions are included in
results of operations when the actual amounts become known.
VF believes the following accounting policies involve the most significant
management estimates, assumptions and judgments used in preparation of the
consolidated financial statements or are the most sensitive to change from
outside factors. The application of these critical accounting policies and
estimates is discussed with the Audit Committee of the Board of Directors.
                                  Inventories



VF's inventories are primarily comprised of finished goods and are stated at the
lower of cost or net realizable value. Cost includes all material, labor and
overhead costs incurred to purchase or manufacture the finished goods. Overhead
allocated to manufactured product is based on the normal capacity of plants and
does not include amounts related to idle capacity or abnormal production
inefficiencies. VF performs a detailed review at each business unit, at least
quarterly, of all inventories on the basis of individual styles or individual
style-size-color
stock keeping units to identify slow moving or excess products, discontinued and
to-be-discontinued products, and off-quality merchandise. This review matches
inventory on hand, plus current production and purchase commitments, with
current and expected future sales orders. Management performs an evaluation to
estimate net realizable value using a systematic and consistent methodology of
forecasting future demand, market conditions and selling prices less costs of
disposal. If the estimated net realizable value is less than cost, VF provides
an
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allowance to reflect the lower value of that inventory. This methodology
recognizes inventory exposures at the time such losses are evident rather than
at the time goods are actually sold. Historically, these estimates of future
demand and selling prices have not varied significantly from actual results due
to VF's timely identification and ability to rapidly dispose of these distressed
inventories.
Existence of physical inventory is verified through periodic physical inventory
counts and ongoing cycle counts at most locations throughout the year. VF
provides for estimated inventory losses that have likely occurred since the last
physical inventory date. Historically, physical inventory shrinkage has not been
material.
Business Combinations



VF accounts for business combinations using the acquisition method of
accounting. Under the acquisition method, the consolidated financial statements
reflect the operations of an acquired business starting from the closing date of
the acquisition. All assets acquired and liabilities assumed are recorded at
fair value as of the acquisition date. VF allocates the purchase price of an
acquired business to the fair values of the tangible and identifiable intangible
assets acquired and liabilities assumed, with any excess purchase price recorded
as goodwill. Contingent consideration, if any, is included within the purchase
price and is recognized at its fair value on the acquisition date.
The application of the acquisition method of accounting for business
combinations and determination of fair value requires management to make
judgments and may involve the use of significant estimates, including
assumptions related to estimated future revenues, growth rates, cash flows,
discount rates and royalty rates, among other items. VF generally evaluates fair
value at acquisition using three valuation techniques - the replacement cost,
market and income methods - and weights the valuation methods based on what is
most appropriate in the circumstances. The process of assigning fair values,
particularly to acquired intangible assets, is highly subjective. VF also
typically utilizes third-party valuation specialists to assist management in the
determination of the fair value of assets acquired and liabilities assumed.
Management estimates of fair value are based on assumptions believed to be
reasonable, but are inherently uncertain and unpredictable and, as a result,
actual results may differ from estimates. If the actual results differ from the
estimates and judgments used, the amounts recorded in the consolidated financial
statements may be exposed to potential impairment of the intangible assets and
goodwill, as discussed in the "Long-Lived Assets, Including Intangible Assets
and Goodwill" section below.
During the measurement period, which is up to one year from the acquisition
date, adjustments to the assets acquired and liabilities assumed may be
recorded, with the corresponding offset to goodwill.
During the fourth quarter of Fiscal 2021, VF completed the acquisition of
Supreme Holdings, Inc. ("Supreme"). The preliminary purchase price for the
transaction was $2.4 billion, which is comprised of $2.2 billion in cash and
$0.2 billion for the estimated fair value of contingent consideration. The
transaction also included $0.2 billion of cash acquired by VF. Management
allocated the preliminary purchase price of the acquired Supreme business to the
preliminary estimated fair values of the acquired assets and assumed liabilities
at the date of acquisition, which resulted in excess purchase price of $1.25
billion that has been recorded as goodwill. The acquired assets include the
estimated fair value of $1.20 billion for the Supreme® trademark, which is an
identifiable intangible asset management believes to have an indefinite life.
The estimated fair value of the Supreme® trademark was determined using the
relief-from-royalty method of the income valuation approach, which required the
use of significant estimates and assumptions, including future revenues, growth
rates, royalty rate, tax rates and discount rate associated with the acquired
intangible asset. Management's estimates and assumptions utilized internal
forecasts of Supreme's future business performance and relevant market
information. Management also utilized a third-party valuation specialist to
assist in the determination of the estimated fair value of the Supreme®
trademark.
Management believes the assumptions used in determining the estimated fair value
of the Supreme® trademark are reasonable, but are inherently uncertain and
unpredictable. As a result, actual results may differ from estimates. Future
business and economic conditions, as well as significant changes in any of the
assumptions used to estimate the acquisition date fair value of the Supreme®
trademark, may result in a future impairment charge that could have a material
effect on VF's consolidated financial position and results of operations.
Refer to Note 3 to the consolidated financial statements for additional
information related to acquisitions.
Long-Lived Assets, Including Intangible Assets and Goodwill



Definite-Lived Assets
VF's depreciation policies for property, plant and equipment reflect judgments
on the estimated economic lives and residual value, if any. VF's amortization
policies for definite-lived intangible assets reflect judgments on the estimated
amounts and duration of future cash flows expected to be generated by those
assets. In evaluating the amortizable life for customer relationship intangible
assets, management considers historical attrition patterns for various groups of
customers. In determining the lease term used to amortize operating lease
right-of-use assets, VF considers initial terms and any renewal or termination
options that may exist. When deemed reasonably
certain, the renewal and termination options are included in the determination
of lease term.
VF's policy is to review property, plant and equipment, definite-lived
intangible assets and operating lease right-of-use assets for potential
impairment whenever events or changes in circumstances indicate the carrying
value of an asset or asset group may not be recoverable. VF tests for potential
impairment at the asset or asset group level, which is the lowest level for
which there are identifiable cash flows that are largely independent. VF
measures recoverability of the carrying value of an asset or asset group by
comparison to the estimated pre-tax undiscounted cash flows expected to be
generated by the asset.
38 VF Corporation Fiscal 2021 Form 10-K
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If the forecasted pre-tax undiscounted cash flows to be generated by the asset
are not expected to be adequate to recover the asset's carrying value, a fair
value analysis must be performed, and an impairment charge is recorded if there
is an excess of the asset's carrying value over its estimated fair value.
When testing property, plant and equipment for potential impairment, VF uses the
income-based discounted cash flow method using the estimated cash flows of the
respective asset or asset group. The estimated pre-tax undiscounted cash flows
of the asset or asset group through the end of its useful life are compared to
its carrying value. If the pre-tax undiscounted cash flows of the asset or asset
group exceed its carrying value, there is no impairment charge. If the pre-tax
undiscounted cash flows of the asset or asset group are less than its carrying
value, the estimated fair value of the asset or asset group is calculated based
on the after-tax discounted cash flows using an appropriate weighted average
cost of capital ("WACC"), and an impairment charge is recognized for the
difference between the estimated fair value of the asset or asset group and its
carrying value.
When testing customer relationship intangible assets for potential impairment,
management considers historical customer attrition rates and projected revenues
and profitability related to customers that existed at acquisition. Management
uses the multi-period excess earnings method, which is a specific application of
the discounted cash flow method, to value customer relationship assets. The
estimated pre-tax undiscounted cash flows of the asset through the end of its
useful life are compared to its carrying value. If the pre-tax undiscounted cash
flows of the asset exceed its carrying value, there is no impairment charge. If
the pre-tax undiscounted cash flows of the asset are less than its carrying
value, the estimated fair value of the asset is calculated based on the present
value of the after-tax cash flows expected to be generated by the customer
relationship asset after deducting contributory asset charges, and an impairment
charge is recognized for the difference between the estimated fair value of the
asset and its carrying value.
When testing operating lease right-of-use assets for potential impairment, VF
uses the income-based discounted cash flow method using the estimated cash flows
of the respective asset or asset group. The estimated pre-tax undiscounted cash
flows of the asset or asset group through the end of its useful life are
compared to its carrying value. If the pre-tax undiscounted cash flows of the
asset exceed its carrying value, there is no impairment charge. If the pre-tax
undiscounted cash flows of the asset or asset group are less than its carrying
value, the estimated fair value of the asset or asset group is calculated
considering what a market participant would pay to lease the asset for its
highest and best use, and an impairment charge is recognized for the difference
between the estimated fair value of the asset or asset group and its carrying
value. The impairment loss is allocated to the long-lived assets of the group on
a pro-rata basis using the relative carrying amounts of those assets.
Indefinite-Lived Intangible Assets and Goodwill
Fair value for acquired intangible assets is generally based on the present
value of expected cash flows. Indefinite-lived trademark or trade name
intangible assets (collectively referred to herein as "trademarks") represent
individually acquired trademarks, some of which are registered in multiple
countries. Goodwill represents the excess of cost of an acquired business
over the fair values of the tangible and identifiable intangible assets acquired
and liabilities assumed, and is assigned at the reporting unit level.
VF's policy is to evaluate indefinite-lived intangible assets and goodwill for
possible impairment as of the beginning of the fourth quarter of each fiscal
year, or whenever events or changes in circumstances indicate that the fair
value of such assets may be below their carrying amount. As part of its annual
impairment testing, VF may elect to assess qualitative factors as a basis for
determining whether it is necessary to perform quantitative impairment testing.
If management's assessment of these qualitative factors indicates that it is not
more likely than not that the fair value of the intangible asset or reporting
unit is less than its carrying value, then no further testing is required.
Otherwise, the intangible asset or reporting unit must be quantitatively tested
for impairment.
An indefinite-lived intangible asset is quantitatively tested for possible
impairment by comparing the estimated fair value of the asset to its carrying
value. Fair value of an indefinite-lived trademark is based on an income
approach using the relief-from-royalty method. Under this method, forecasted
revenues for products sold with the trademark are assigned a royalty rate that
would be charged to license the trademark (in lieu of ownership), and the
estimated fair value is calculated as the present value of those forecasted
royalties avoided by owning the trademark. The appropriate discount rate is
based on the reporting unit's WACC that considers market participant
assumptions, plus a spread that factors in the risk of the intangible asset. The
royalty rate is selected based on consideration of (i) royalty rates included in
active license agreements, if applicable, (ii) royalty rates received by market
participants in the apparel industry, and (iii) the current performance of the
reporting unit. If the estimated fair value of the trademark intangible asset
exceeds its carrying value, there is no impairment charge. If the estimated fair
value of the trademark is less than its carrying value, an impairment charge
would be recognized for the difference.
Goodwill is quantitatively evaluated for possible impairment by comparing the
estimated fair value of a reporting unit to its carrying value. Reporting units
are businesses with discrete financial information that is available and
reviewed by management.
For goodwill impairment testing, VF estimates the fair value of a reporting unit
using both income-based and market-based valuation methods. The income-based
approach is based on the reporting unit's forecasted future cash flows that are
discounted to present value using the reporting unit's WACC as discussed above.
For the market-based approach, management uses both the guideline company and
similar transaction methods. The guideline company method analyzes market
multiples of revenues and earnings before interest, taxes, depreciation and
amortization ("EBITDA") for a group of comparable public companies. The market
multiples used in the valuation are based on the relative strengths and
weaknesses of the reporting unit compared to the selected guideline companies.
Under the similar transactions method, valuation multiples are calculated
utilizing actual transaction prices and revenue/EBITDA data from target
companies deemed similar to the reporting unit.
Based on the range of estimated fair values developed from the income and
market-based methods, VF determines the estimated fair value for the reporting
unit. If the estimated fair
                                         VF Corporation Fiscal 2021 Form 10-K 39
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value of the reporting unit exceeds its carrying value, the goodwill is not
impaired and no further review is required. However, if the estimated fair value
of the reporting unit is less than its carrying value, VF calculates the
impairment loss as the difference between the carrying value of the reporting
unit and the estimated fair value.
The income-based fair value methodology requires management's assumptions and
judgments regarding economic conditions in the markets in which VF operates and
conditions in the capital markets, many of which are outside of management's
control. At the reporting unit level, fair value estimation requires
management's assumptions and judgments regarding the effects of overall economic
conditions on the specific reporting unit, along with assessment of the
reporting unit's strategies and forecasts of future cash flows. Forecasts of
individual reporting unit cash flows involve management's estimates and
assumptions regarding:
•Annual cash flows, on a debt-free basis, arising from future revenues and
profitability, changes in working capital, capital spending and income taxes for
at least a 10-year forecast period.
•A terminal growth rate for years beyond the forecast period. The terminal
growth rate is selected based on consideration of growth rates used in the
forecast period, historical performance of the reporting unit and economic
conditions.
•A discount rate that reflects the risks inherent in realizing the forecasted
cash flows. A discount rate considers the risk-free rate of return on long-term
treasury securities, the risk premium associated with investing in equity
securities of comparable companies, the beta obtained from comparable companies
and the cost of debt for investment grade issuers. In addition, the discount
rate may consider any company-specific risk in achieving the prospective
financial information.
Under the market-based fair value methodology, judgment is required in
evaluating market multiples and recent transactions. Management believes that
the assumptions used for its impairment tests are representative of those that
would be used by market participants performing similar valuations of VF's
reporting units.
Fiscal 2021 Impairment Testing
Management performed its annual goodwill and indefinite-lived intangible asset
impairment testing as of the beginning of the fourth quarter of Fiscal 2021. VF
elected to bypass the qualitative analysis for the Kipling reporting unit
goodwill and indefinite-lived trademark intangible asset. See additional
discussion in the "Kipling Reporting Unit and Indefinite-Lived Intangible Asset
Impairment Analysis" section below. Management performed a qualitative analysis
for all other reporting units and trademark intangible assets, as discussed
below in the "Other Reporting Units - Qualitative Impairment Analysis" section.
Kipling Reporting Unit and Indefinite-Lived Intangible Asset Impairment Analysis
In conjunction with VF's annual goodwill and indefinite-lived intangible asset
impairment testing as of the beginning of the fourth quarter of Fiscal 2021,
management performed a quantitative impairment analysis of the Kipling reporting
unit goodwill and indefinite-lived trademark intangible asset. This
decision to bypass the optional qualitative impairment assessment and proceed
directly to a quantitative impairment analysis was based on continued
deterioration in Kipling financial results. Based on the analysis, management
concluded the goodwill and indefinite-lived trademark intangible asset were not
impaired. For goodwill, the estimated fair value of the reporting unit exceeded
the carrying value by 19%. The estimated fair value of the indefinite-lived
trademark intangible asset exceeded its carrying value by a significant amount.
The carrying values of the reporting unit goodwill and indefinite-lived
trademark intangible asset at the December 27, 2020 testing date were $192.9
million and $50.1 million, respectively.
The Kipling® brand, acquired in 2004, offers handbags, luggage, backpacks,
totes, and accessories. Products are sold globally through department, specialty
and luggage stores, independently-operated partnership stores, independent
distributors, concession retail stores, VF-operated stores, on websites with
strategic digital partners and online. The Kipling reporting unit is included in
the Active reportable segment.
Management's revenue and profitability forecasts used in the Kipling reporting
unit and indefinite-lived trademark intangible asset valuations considered
historical performance, strategic initiatives and industry trends. Assumptions
used in the valuations were similar to those that would be used by market
participants performing independent valuations of the business.
Key assumptions developed by management and used in the quantitative analysis of
the Kipling reporting unit and indefinite-lived trademark intangible asset
include:
•Financial projections and future cash flows, including a base year reflecting
deterioration of actual results including the impact of COVID-19, delayed and
extended recovery from the COVID-19 pandemic in relation to other VF brands,
ultimately trending towards growth rates and profitability in-line with
historical trends and terminal growth rates based on the expected long-term
growth rate of the brand;
•Tax rates based on the statutory rates for the countries in which the brand
operates and the related intellectual property is domiciled;
•Royalty rates based on market data as well as active license agreements with
similar VF brands; and,
•Market-based discount rates.
The valuation model used by management in the impairment testing assumes
recovery over an extended period of time from the recent downturn in the brand's
operating results, including the impact of the COVID-19 pandemic, and the return
to growth rates and profitability more in-line with historical operating trends.
If the brand is unable to achieve the financial projections, an impairment on
the indefinite-lived trademark intangible asset or the reporting unit goodwill
could occur in the future.
Other Reporting Units - Qualitative Impairment Analysis
For all other reporting units, VF elected to perform a qualitative assessment
during the annual goodwill and indefinite-lived intangible asset impairment
testing to determine whether it was more likely than not that the goodwill and
indefinite-lived trademark intangible assets in those reporting units were
impaired. In this qualitative assessment, VF considered relevant events and
circumstances for each reporting unit, including (i) current year results and
performance versus management's
40 VF Corporation Fiscal 2021 Form 10-K
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annual and strategic plans, (ii) financial outlook based on the latest strategic
plan, (iii) changes in the reporting unit carrying value since prior year and
the amounts relative to the size of the respective business, (iv) industry and
market conditions in which the reporting unit operates, (v) macroeconomic
conditions, including discount rate changes, and (vi) changes in products or
services offered by the reporting unit. If applicable, performance in recent
years was compared to forecasts included in prior valuations. Based on the
results of the qualitative assessment, VF concluded it was not more likely than
not the carrying values of the goodwill and indefinite-lived trademark
intangible assets were greater than their fair values, and that further
quantitative testing was not necessary.
Management's Use of Estimates and Assumptions
Management made its estimates based on information available as of the date of
our assessments, using assumptions we believe market participants would use in
performing an independent valuation of the business. It is possible that VF's
conclusions regarding impairment or recoverability of goodwill or indefinite-
lived intangible assets in any reporting unit could change in future periods.
There can be no assurance that the estimates and assumptions used in our
goodwill and indefinite-lived intangible asset impairment testing will prove to
be accurate predictions of the future, if, for example, (i) the businesses do
not perform as projected, (ii) overall economic conditions in Fiscal 2022 or
future years vary from current assumptions (including changes in discount
rates), (iii) business conditions or strategies for a specific reporting unit
change from current assumptions, including loss of major customers,
(iv) investors require higher rates of return on equity investments in the
marketplace, or (v) enterprise values of comparable publicly traded companies,
or actual sales transactions of comparable companies, were to decline, resulting
in lower multiples of revenues and EBITDA.
A future impairment charge for goodwill or indefinite-lived intangible assets
could have a material effect on VF's consolidated financial position and results
of operations.
                                  Income Taxes



As a global company, VF is subject to income taxes and files income tax returns
in over 100 U.S. and foreign jurisdictions each year. Due to economic and
political conditions, tax rates in various jurisdictions may be subject to
significant change. The Company could be subject to changes in its tax rates,
the adoption of new U.S. or international tax legislation or changes in
interpretation of existing tax laws and regulations or rulings by courts or
government authorities leading to exposure to additional tax liabilities. In
particular, tax authorities and the courts have increased their focus on income
earned in no- or low-tax jurisdictions or income that is not taxed in any
jurisdiction. Tax authorities have also become skeptical of special tax rulings
provided to companies offering lower taxes than may be applicable in other
countries. VF makes an ongoing assessment to identify any significant exposure
related to increases in tax rates in the jurisdictions in which VF operates.
Furthermore, in February 2015, the European Union Commission ("EU") opened a
state aid investigation into Belgium's tax rulings. On January 11, 2016, the EU
announced its decision that these rulings were illegal and ordered that tax
benefits granted under these rulings should be collected from the affected
companies, including VF. On March 22, 2016, the Belgium government filed an
appeal seeking annulment of the EU decision. Additionally, on June 21, 2016, VF
Europe BVBA filed its own application for annulment of the EU decision. On
December 22, 2016, Belgium adopted a law which entitled the Belgium tax
authorities to issue tax assessments and demand timely payments from companies
which benefited from the excess profits regime. On January 10, 2017, VF Europe
BVBA received an assessment for €31.9 million tax and interest related to excess
profits benefits received in prior years. VF Europe BVBA remitted €31.9 million
($33.9 million) on January 13, 2017, which was recorded as an income tax
receivable in 2017 based on the expected success of the aforementioned requests
for annulment. An additional assessment of €3.1 million ($3.8 million) was
received and paid in January 2018. On February 14, 2019 the General Court
annulled the EU decision and on April 26, 2019 the EU appealed the General
Court's annulment. Both listed requests for annulment remain open and
unresolved. Additionally, the EU has initiated proceedings related to individual
rulings granted by Belgium, including the ruling
granted to VF. If this matter is adversely resolved, these amounts will not be
collected by VF.
The calculation of income tax liabilities involves uncertainties in the
application of complex tax laws and regulations, which are subject to legal
interpretation and significant management judgment. VF's income tax returns are
regularly examined by federal, state and foreign tax authorities, and those
audits may result in proposed adjustments. VF has reviewed all issues raised
upon examination, as well as any exposure for issues that may be raised in
future examinations. VF has evaluated these potential issues under the
"more-likely-than-not" standard of the accounting literature. A tax position is
recognized if it meets this standard and is measured at the largest amount of
benefit that has a greater than 50% likelihood of being realized. Such judgments
and estimates may change based on audit settlements, court cases and
interpretation of tax laws and regulations. Income tax expense could be
materially affected to the extent VF prevails in a tax position or when the
statute of limitations expires for a tax position for which a liability for
unrecognized tax benefits or valuation allowances have been established, or to
the extent VF is required to pay amounts greater than the established liability
for unrecognized tax benefits. VF does not currently anticipate any material
impact on earnings from the ultimate resolution of income tax uncertainties.
There are no accruals for general or unknown tax expenses.
As of March 2021, VF has $326.4 million of gross deferred income tax assets
related to operating loss and capital loss carryforwards, and $270.0 million of
valuation allowances against those assets. Realization of deferred tax assets
related to operating loss and capital loss carryforwards is dependent on future
taxable income in specific jurisdictions, the amount and timing of which are
uncertain, and on possible changes in tax laws. If management believes that VF
will not be able to generate sufficient taxable income or capital gains to
offset losses during the carryforward periods, VF records valuation allowances
to reduce those deferred tax assets to amounts expected to be ultimately
realized. If in a future period management determines that the amount of
deferred tax assets to be realized differs from the net recorded amount, VF
would
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record an adjustment to income tax expense in that future period.
On May 19, 2019, Switzerland voted to approve the Federal Act on Tax Reform and
AHV Financing ("Swiss Tax Act"). Provisions of the Swiss Tax Act were enacted
for Swiss federal purposes during the second quarter of Fiscal 2020, and later
enacted for certain cantons during the fourth quarter. In addition to changes to
the federal and cantonal tax rates, there were transitional measures allowing
companies to recognize a step-up in tax
basis that is subsequently amortized over a period of time. Calculation of the
additional tax basis involves estimates and application of specific guidelines
determined by the Swiss federal authorities as well as through ongoing
discussions with Swiss cantonal tax authorities. These provisions resulted in
adjustments to deferred tax assets and liabilities such that a net tax benefit
of $93.6 million was recorded in the year ended March 2020.
Recently Issued and Adopted Accounting Standards


Refer to Note 1 to the consolidated financial statements for discussion of recently issued and adopted accounting standards.

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