UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 30, 2019
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number: 1-5256
vfcirclelogoa02.jpg
V. F. CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania
 
23-1180120
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. employer identification number)
105 Corporate Center Boulevard
Greensboro, North Carolina 27408
(Address of principal executive offices)
(336) 424-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of each class)
(Trading Symbol(s))
(Name of each exchange on which registered)
Common Stock, without par value, stated capital $.25 per share
VFC
New York Stock Exchange
0.625% Senior Notes due 2023
VFC23
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  þ   NO  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO  þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  þ        NO  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     YES  þ        NO  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ                         Accelerated filer ¨         
Non-accelerated filer ¨                        Smaller reporting company ¨         
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨        NO  þ
The aggregate market value of Common Stock held by non-affiliates of V.F. Corporation on September 29, 2018, the last day of the registrant’s second fiscal quarter, was approximately $30,425,000,000 based on the closing price of the shares on the New York Stock Exchange.
As of April 27, 2019, there were 397,145,529 shares of Common Stock of the registrant outstanding.
Documents Incorporated By Reference
Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on July 16, 2019 (Item 1 in Part I and Items 10, 11, 12, 13 and 14 in Part III), which definitive Proxy Statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
This document (excluding exhibits) contains 120 pages.
The exhibit index begins on page 56.




PART I
ITEM 1.    BUSINESS.

V.F. Corporation, organized in 1899, is a global leader in the design, production, procurement, marketing and distribution of branded lifestyle apparel, footwear and related products. Unless the context indicates otherwise, the terms “VF,” the "Company,” “we,” “us,” and “our” used herein refer to V.F. Corporation and its consolidated subsidiaries.
Amounts and percentages for all periods discussed below reflect the results of operations and financial condition from VF’s continuing operations.
VF’s diverse portfolio meets consumer needs across a broad spectrum of activities and lifestyles. Our ability to connect with consumers, as diverse as our brand portfolio, creates a unique platform for sustainable, long-term growth. Our long-term growth strategy is focused on four drivers:
Reshape our portfolio. Investing in our brands to realize their full potential, while ensuring the composition of our portfolio positions us to win in evolving market conditions;
Transform our model. Becoming consumer- and retail-centric to meet and exceed consumers' needs across all channels, and operate our business differently - from the design studio to the factory floor to the point of sale - by thinking and acting more like a vertical retailer;
Elevate direct-to-consumer. Investing in our direct-to-consumer business to make it the pinnacle expression of our brands, and prioritizing serving consumers through e-commerce and digitally enabled transactions; and,
Distort Asia. Accelerating our actions in Asia, especially China, to unlock growth opportunities for our brands in this fast-growing region.
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, denim, backpack, luggage, accessory and apparel categories. Our largest brands are Vans®, The North Face®, Timberland®, Wrangler® and Lee®.
Our products are marketed to consumers through our wholesale channel, primarily in specialty stores, department stores, national chains, mass merchants, 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 and brand e-commerce sites. Revenues from the direct-to-consumer business represented 33% of VF’s total Fiscal 2019 revenues. In addition to selling directly into international markets, many of our brands also sell products through licensees, agents and distributors. In Fiscal 2019, VF derived 65% of its revenues from the Americas region, 24% from the Europe region and 11% from the Asia-Pacific region.
To provide diversified products across multiple channels of distribution in different geographic areas, we balance our own manufacturing capabilities with sourcing of finished goods from independent contractors. We utilize state-of-the-art technologies for inventory replenishment that enable us to effectively and efficiently get the right assortment of products that match consumer demand.
In light of the recently completed portfolio management actions and organizational realignments, the Company realigned its internal reporting structure in the first quarter of Fiscal 2019 to reflect the organizational changes to better support and assess the operations of the business. The chief operating decision maker allocates resources and assesses performance based on a global brand view. The new reportable segments for financial reporting purposes have been identified as: Outdoor, Active, Work and Jeans.


VF Corporation Fiscal 2019 Form 10-K 1



The following table summarizes VF’s primary brands by reportable segment:
REPORTABLE SEGMENT
 
PRIMARY BRANDS
 
PRIMARY PRODUCTS
 
 
 
 
 
 
 
 
 
 
Outdoor
 
The North Face®
 
High performance outdoor apparel, footwear, equipment, accessories
 
 
Timberland® (excluding Timberland PRO®)
 
Outdoor lifestyle footwear, apparel, accessories
 
 
Icebreaker® (1)
 
High performance apparel based on natural, plant-based, recycled fibers
 
 
Smartwool®
 
Performance merino wool and other natural fibers-based apparel and accessories
 
 
Altra® (2)
 
Performance-based footwear
 
 
 
 
 
 
 
 
 
 
Active
 
Vans®
 
Youth culture/action sports-inspired footwear, apparel, accessories
 
 
Kipling®
 
Handbags, luggage, backpacks, totes, accessories
 
 
Napapijri®
 
Premium outdoor apparel, footwear, accessories
 
 
Eastpak®
 
Backpacks, luggage
 
 
JanSport®
 
Backpacks, luggage
 
 
Reef® (3)
 
Surf-inspired apparel, footwear, accessories
 
 
Eagle Creek®
 
Luggage, backpacks, travel accessories
 
 
 
 
 
 
 
 
 
 
Work
 
Dickies®
 
Work and work-inspired lifestyle apparel and footwear
 
 
Red Kap®
 
Occupational apparel
 
 
Bulwark®
 
Protective occupational apparel
 
 
Timberland PRO®
 
Protective work footwear and lifestyle apparel
 
 
VF Solutions®
 
Uniform programs for business and governmental organizations
 
 
Wrangler® RIGGS
 
Work apparel, accessories
 
 
Walls®
 
Outdoor work and sporting apparel
 
 
Terra®
 
Protective work footwear
 
 
Workrite®
 
Protective occupational apparel
 
 
Kodiak®
 
Protective work footwear and lifestyle footwear
 
 
Horace Small®
 
Occupational apparel
 
 
 
 
 
 
 
 
 
 
Jeans
 
Wrangler® (excluding Wrangler® RIGGS)
 
Denim, casual apparel, footwear, accessories
 
 
Lee®
 
Denim, casual apparel
 
 
Lee® Riders®
 
Denim, casual apparel
 
 
Rock & Republic®
 
Denim, casual apparel, accessories
(1) 
VF acquired the Icebreaker® brand on April 3, 2018.
(2) 
VF acquired the Altra® brand on June 1, 2018.
(3) 
VF sold the Reef® brand on October 26, 2018.
Financial information regarding VF’s reportable segments is included in Note 19 to the consolidated financial statements.
OUTDOOR SEGMENT

Our Outdoor segment is a group of authentic outdoor-based lifestyle brands. Product offerings include performance-based and outdoor apparel, footwear and equipment.
The North Face® is the largest brand in our Outdoor segment. The North Face® brand features performance-based apparel, outerwear, sportswear and footwear for men, women and children. Its equipment line includes tents, sleeping bags, backpacks and accessories. Many of The North Face® products are designed for extreme winter sport activities, such as high altitude
 
mountaineering, skiing, snowboarding, and ice and rock climbing. The North Face® products are marketed globally, primarily through specialty outdoor and premium sporting goods stores, independent distributors, independently-operated partnership stores, concession retail stores, over 200 VF-operated stores, on brand websites with strategic digital partners and online at www.thenorthface.com.
The Timberland® (excluding Timberland PRO®) brand offers outdoor, adventure-inspired lifestyle footwear, apparel and


2 VF Corporation Fiscal 2019 Form 10-K



accessories that combine performance benefits and versatile styling for men, women and children. We sell Timberland® (excluding Timberland PRO®) products globally through chain, department and specialty stores, independent distributors and licensees, independently-operated partnership stores, concession retail stores, approximately 250 VF-operated stores, on brand websites with strategic digital partners and online at www.timberland.com.
The Icebreaker® brand was acquired on April 3, 2018. Icebreaker® specializes in performance apparel and accessories based on natural fibers, including Merino wool and other plant-based fibers. Icebreaker® products are sold globally through premium outdoor and specialty stores, independent distributors, over 30 VF-operated stores, on brand websites with strategic digital partners and online at www.icebreaker.com.
The Smartwool® brand offers active outdoor consumers a premium, technical layering system of merino wool socks, apparel
 
and accessories that are designed to work together in fit, form and function. Smartwool® products are sold globally through premium outdoor and specialty stores, independent distributors, on brand websites with strategic digital partners and online at www.smartwool.com.
The Altra® brand was acquired by VF on June 1, 2018. Altra® is a performance-based footwear brand primarily in the road and trail running categories. Altra® products are sold through premium outdoor and specialty stores, independent distributors, on brand websites with strategic digital partners and online at www.altrarunning.com.
We expect continued long-term growth in our Outdoor segment as we focus on product innovation, extend our brands into new product categories, open additional VF-operated stores, grow our e-commerce presence, expand wholesale channel partnerships, develop geographically and acquire additional brands.
ACTIVE SEGMENT

Our Active segment is a group of activity-based lifestyle brands. Product offerings include active apparel, footwear and accessories.
Vans® is the largest brand in our Active segment. The Vans® brand offers performance and casual footwear and apparel targeting younger consumers that sit at the center of action sports, art, music and street fashion. Vans® products are available globally through chain stores, specialty stores, independent distributors and licensees, independently-operated partnership stores, concession retail stores, more than 700 VF-operated stores, on brand websites with strategic digital partners and online at www.vans.com.
Kipling® branded handbags, luggage, backpacks, totes and accessories are sold globally through department, specialty and luggage stores, independently-operated partnership stores, independent distributors, concession retail stores, home shopping television, more than 80  VF-operated stores, on brand websites with strategic digital partners and online at www.kipling.com.
The Napapijri® brand offers outdoor-inspired casual outerwear, sportswear and accessories at a premium price. Products are marketed to men, women and children in Europe, the Middle East, Asia and Africa. Products are sold in department and specialty stores, independently-operated partnership stores, concession retail stores, independent distributors, more than 25 VF-operated stores, on brand websites with strategic digital partners and online at www.napapijri.com.
Eastpak® backpacks, travel bags and luggage are sold primarily through department and specialty stores across Europe, on brand
 
websites with strategic digital partners, throughout Asia by distributors and online at www.eastpak.com.
JanSport® backpacks and accessories are sold in North America, South America and Asia through department, office supply and chain stores, as well as sports specialty stores and independent distributors. JanSport® products are also sold on brand websites with strategic digital partners and online at www.jansport.com.
The Reef® brand of surf-inspired products includes sandals, shoes, swimwear, casual apparel and accessories for men, women and children. Products were sold globally through specialty stores, sporting goods chains, department stores and independent distributors. Products were also sold on brand websites with strategic digital partners and online at www.reef.com. VF sold the Reef® brand on October 26, 2018.
Eagle Creek® adventure travel gear products include luggage, backpacks and accessories sold through specialty luggage, outdoor and department stores primarily in North America and Europe, on brand websites with strategic digital partners and online at www.eaglecreek.com.
We expect continued long-term growth in our Active segment as we focus on product innovation, extend our brands into new product categories, open additional VF-operated stores, grow our e-commerce presence, expand wholesale channel partnerships, develop geographically and acquire additional brands.
WORK SEGMENT

Our Work segment consists of work and work-inspired lifestyle apparel and footwear and occupational apparel sold through direct-to-consumer, wholesale and business-to-business ("BTB") channels.

The Work segment provides uniforms and career occupational apparel for workers in North America and internationally, under the Dickies® and Red Kap® brands (work apparel and footwear),
 
the Bulwark® and Workrite® brands (flame resistant and protective apparel primarily for the petrochemical, utility and mining industries), the Timberland PRO® brand (premium work footwear and apparel), the Wrangler® RIGGS brand (work apparel), the VF Solutions® brand (uniform programs for business and governmental organizations), the Walls® brand (outdoor workwear), the Kodiak® brand (work and lifestyle footwear), the Terra® brand (work footwear) and the Horace Small® brand (apparel


VF Corporation Fiscal 2019 Form 10-K 3



for law enforcement and public safety personnel). Products include a wide range of workwear pants, coveralls, shirts, medical scrubs, outerwear, footwear and accessories. Work segment revenues are influenced by the general level of business activity in each market.
Work segment BTB channels include industrial laundries and independent distributors who in turn supply customized workwear to employers for production, service and white-collar personnel. Since industrial laundries and distributors maintain minimal inventories of work clothes, VF’s ability to offer rapid delivery of products in a broad range of sizes is an important advantage in this market. Our commitment to customer service, supported by an automated central distribution center with several satellite locations, enables customer orders to be filled within 24 hours of receipt. The Red Kap®, Bulwark®, Dickies® and Workrite® brands have a strong presence in the reseller distributor market.
The BTB business also develops and manages uniform programs through custom-designed websites for major business customers and governmental organizations. These websites provide the employees of our customers with the convenience of shopping for their work and career apparel via the Internet.
 
Work segment products are also available on a wholesale basis, including product offerings at mass and specialty retailers, and a direct-to-consumer basis through our e-commerce sites at www.dickies.com, www.timberland.com, www.wrangler.com, www.kodiakboots.com and www.walls.com, and over 65 VF-operated retail stores. The Dickies® brand, with a strong workwear heritage, is a leader in this area with products that address the workers' needs on the job and work-inspired product that allows the worker to stay involved with the brand while in a non-traditional work-setting. The Timberland PRO® and Wrangler® RIGGS brands are also contributors in this area with products that provide comfort, durability and performance.
We believe there is a strategic opportunity for growth in our Work segment in both existing and future markets and all channels and geographies by introducing innovative products that address workers’ desires for increased comfort and performance, combined with our unique service model and increased presence in the retail workwear market.
JEANS SEGMENT

Our Jeans segment markets denim and related casual apparel products globally.
The Wrangler® (excluding Wrangler® RIGGS) brand offers denim, apparel, accessories and footwear through mass merchants, specialty stores and mid-tier and traditional department stores in the U.S., VF-operated stores and online at www.wrangler.com. Wrangler® westernwear is distributed primarily through western specialty stores, as well as various online retail sites.
Lee® brand products are sold through mid-tier and traditional department stores in the U.S., and online at www.lee.com. The Lee® Riders® brand is marketed to mass merchant and regional discount stores in the U.S. Our Rock & Republic® brand has an exclusive wholesale distribution and licensing arrangement with Kohl’s Corporation that covers all branded apparel, accessories and other merchandise in the U.S.
Wrangler® and Lee® products outside of the U.S. are positioned as higher fashion and have higher selling prices. VF’s largest international jeanswear businesses are located in Europe and Asia, where Wrangler® and Lee® products are sold through department, specialty and concession retail stores, independently-operated partnership stores, online at www.wrangler.com and www.lee.com and on brand websites with strategic digital accounts. We also market Wrangler® and Lee® products to mass merchant, department and specialty stores in Canada and Mexico. In addition, we currently have approximately 45 VF-operated stores primarily
 
located in Europe and Asia, which are an important vehicle for representing our brands' image and marketing message directly to consumers. In international markets where VF does not have retail operations, Wrangler® and Lee® products are marketed through distributors, agents, licensees and single-brand or multi-brand partnership stores.
Our world-class supply chain, including owned manufacturing facilities, coupled with advanced vendor-managed inventory and retail floor space management programs with many of our major retailer customers, gives us a competitive advantage in our U.S. jeanswear business. We receive periodic point-of-sale information from these customers, at the individual store and style-size-color stock keeping unit level. We then ship products based on that customer data to ensure their selling floors are appropriately stocked with products that match their shoppers’ needs. Our system capabilities allow us to analyze our retail customers’ sales, demographic and geographic data to develop product assortment recommendations that maximize the productivity of their jeanswear selling space and optimize their inventory investment.
On August 13, 2018, VF announced its intention to spin-off its Jeans business, which includes the Wrangler®, Lee® and Rock & Republic® brands, into an independent, publicly traded company. The spin-off was completed on May 22, 2019. The Jeans business, which also includes the Wrangler® RIGGS brand and the VF Outlet business, represented approximately 19% of VF revenue and operating income during the year ended March 2019 on a VF-historical reporting basis.


4 VF Corporation Fiscal 2019 Form 10-K



DIRECT-TO-CONSUMER OPERATIONS

Our direct-to-consumer business includes full-price stores, outlet stores, e-commerce sites and concession retail locations. Direct-to-consumer revenues were 33% of total VF revenues in the year ended March 2019.
Our full-price stores allow us to display a brand’s full line of products with fixtures and imagery that support the brand’s positioning and promise to consumers. These experiences provide high visibility for our brands and products and enable us to stay close to the needs and preferences of our consumers. The complete and impactful presentation of products in our stores also helps to increase sell-through of VF products at our wholesale customers due to increased brand awareness, education and visibility. VF-operated full-price stores generally provide gross margins that are well above VF averages.
In addition, VF operates outlet stores in both premium outlet malls and more traditional value-based locations. These outlet stores carry merchandise that is specifically designed for sale in our outlet stores and serve an important role in our overall inventory management and profitability by allowing VF to sell a significant portion of excess, discontinued and out-of-season products at better prices than otherwise available from outside parties, while maintaining the integrity of our brands.
Our growing global direct-to-consumer operations included 1,551 stores at the end of Fiscal 2019. We operate retail store locations for the following brands: Vans®, Timberland®, The North Face®, Kipling®, Dickies®, Lee®, Napapijri®, Icebreaker® and Wrangler®. We also operate 79 VF Outlet stores in the U.S. that sell a broad selection of excess VF products, as well as other non-VF products. Approximately 66% of VF-operated stores offer products at full price, and the remainder are outlet locations. Approximately 60% of our stores are located in the Americas region (48% in the U.S.),
 
24% in the Europe region and 16% in the Asia-Pacific region. Additionally, we have approximately 1,200 concession retail stores located principally in Europe and Asia.
E-commerce represented approximately 25% of our direct-to-consumer business in the year ended March 2019. The following brands are marketed online: Vans®, The North Face®, Timberland® (excluding Timberland PRO®), Dickies®, Lee®, Icebreaker®, Wrangler® (excluding Wrangler® RIGGS), Kipling®, Smartwool®, Eastpak®, Napapijri®, JanSport®, Altra®, Timberland PRO®, Reef®, Wrangler® RIGGS, Eagle Creek®, Walls®, Lee® Riders® and Kodiak®. We continue to expand our e-commerce initiatives by rolling out additional, country-specific brand sites in Europe and Asia, which enhances our ability to deliver a superior, localized consumer experience.
We expect our direct-to-consumer business to continue growing as we expand our e-commerce presence and open new stores. We opened 110 stores during Fiscal 2019, concentrating on the brands with the highest retail growth potential: Vans® and The North Face®.
In addition to our direct-to-consumer operations, our licensees, distributors and other independent parties own and operate over 3,000 partnership stores. These are primarily mono-brand retail locations selling VF products that have the appearance of VF-operated stores. Most of these partnership stores are located in Europe and Asia, and are concentrated in the Timberland®, The North Face®, Vans®Lee®, Dickies®Wrangler®, Kipling® and Napapijri® brands.
The VF Outlet business and stores are included in the spin-off of the Jeans business that was completed on May 22, 2019, which is also discussed in the "Jeans Segment" section above.
LICENSING ARRANGEMENTS

As part of our strategy of expanding market penetration of VF-owned brands, we enter into licensing agreements with independent parties for specific apparel and complementary product categories when such arrangements provide more effective manufacturing, distribution and marketing than could be achieved internally. We provide support to these business partners and ensure the integrity of our brand names by taking an active role in the design, quality control, advertising, marketing and distribution of licensed products.
 
Licensing arrangements relate to a broad range of VF brands. License agreements are for fixed terms of generally 3 to 5 years, with conditional renewal options. Each licensee pays royalties to VF based on its sales of licensed products, with most agreements providing for a minimum royalty requirement. Royalties generally range from 4% to 10% of the licensing partners’ net licensed products sales. Royalty income was $95.9 million in the year ended March 2019 (less than 1% of total revenues), primarily from the Vans®, Dickies®, Lee®, Wrangler® and Timberland® brands.
MANUFACTURING, SOURCING AND DISTRIBUTION

Product design and innovation, including fit, fabric, finish and quality, are important elements across our businesses. These functions are performed by employees located in our global supply chain organization and our branded business units across the globe.
In addition to the design functions of each brand, VF has three strategic global innovation centers that focus on technical and performance product development for apparel, footwear and jeanswear. The centers are staffed with dedicated scientists, engineers and designers who combine proprietary insights with consumer needs, and a deep understanding of technology and new
 
materials. These innovation centers are integral to VF’s long-term growth as they allow us to deliver new products and experiences that consistently delight consumers, which drives organic growth and higher gross margins.
VF’s centralized global supply chain organization is responsible for producing, procuring and delivering products to our customers. VF is highly skilled in managing the complexities associated with our global supply chain. VF sourced or produced approximately 560 million units spread across our brands. Our products are obtained from 19 VF-operated manufacturing facilities and approximately 700 independent contractor manufacturing facilities in


VF Corporation Fiscal 2019 Form 10-K 5



approximately 60 countries. Additionally, we operate 40 distribution centers and 1,551 retail stores. Managing this complexity is made possible by the use of a network of information systems for product development, forecasting, order management and warehouse management, along with our core enterprise resource management platforms.
In the year ended March 2019, 21% of our units were manufactured in VF-owned facilities and 79% were obtained from independent contractors. Products manufactured in VF facilities generally have a lower cost and shorter lead times than products procured from independent contractors. Products obtained from contractors in the Western Hemisphere generally have a higher cost than products obtained from contractors in Asia. However, contracting in the Western Hemisphere gives us greater flexibility, shorter lead times and allows for lower inventory levels. This combination of VF-owned and contracted production, along with different geographic regions and cost structures, provides a well-balanced, flexible approach to product sourcing. We will continue to manage our supply chain from a global perspective and adjust as needed to changes in the global production environment.
VF operates manufacturing facilities in the U.S., Mexico, Central America and the Caribbean. A significant percentage of denim bottoms and occupational apparel is manufactured in these plants, as well as a smaller percentage of footwear and other products. For these owned production facilities, we purchase raw materials from numerous U.S. and international suppliers to meet our production needs. Raw materials include products made from cotton, leather, rubber, wool, synthetics and blends of cotton and synthetic yarn, as well as thread and trim (product identification, buttons, zippers, snaps, eyelets and laces). In some instances, we contract the sewing of VF-owned raw materials into finished product with independent contractors. Fixed price commitments for fabric and certain supplies are generally set on a quarterly basis for the next quarter’s purchases. No single supplier represents more than 10% of our total cost of goods sold.
Independent contractors generally own the raw materials and ship finished, ready-for-sale products to VF. These contractors are engaged through VF sourcing hubs in Hong Kong (with satellite offices across Asia) and Panama. These hubs are responsible for managing the manufacturing and procurement of product, supplier oversight, product quality assurance, sustainability within the supply chain, responsible sourcing and transportation and shipping functions. In addition, our hubs leverage proprietary knowledge and technology to enable certain contractors to more effectively control costs and improve labor efficiency. Substantially all products in the Outdoor and Active segments, as well as a portion of products for our Work and Jeans segments, are obtained through these sourcing hubs.
Management continually monitors political risks and developments related to duties, tariffs and quotas. We limit VF’s
 
sourcing exposure through, among other measures: (i) diversifying geographies with a mix of VF-operated and contracted production, (ii) shifting of production among countries and contractors, (iii) sourcing production to merchandise categories where product is readily available, and (iv) sourcing from countries with tariff preference and free trade agreements. VF does not directly or indirectly source products from suppliers in countries that are prohibited by the U.S. State Department.
All VF-operated production facilities throughout the world, as well as all independent contractor facilities that manufacture VF products, must comply with VF’s Global Compliance Principles. These principles, established in 1997 and consistent with international labor standards, are a set of strict standards covering legal and ethical business practices, worker age, work hours, health and safety conditions, environmental standards and compliance with local laws and regulations. In addition, our owned factories must also undergo certification by the independent, nonprofit organization, Worldwide Responsible Accredited Production (“WRAP”), which promotes global ethics in manufacturing.
VF, through its contractor monitoring program, audits the activities of the independent businesses and contractors that produce VF products at locations across the globe. Each of the approximately 700 independent contractor facilities, including those serving our independent licensees, must be pre-certified before producing VF products. This pre-certification includes passing a factory inspection and signing a VF Terms of Engagement agreement. We maintain an ongoing audit program to ensure compliance with these requirements by using dedicated internal staff and externally contracted firms. Additional information about VF’s Code of Business Conduct, Global Compliance Principles, Terms of Engagement and Environmental Compliance Guidelines, along with a Global Compliance Report, is available on the VF website at www.vfc.com.
VF did not experience difficulty in fulfilling its raw material and contracting production needs during Fiscal 2019. Absent any material changes, VF believes it would be able to largely offset any increases in product costs through (i) the continuing shift in the mix of its business to higher margin brands, geographies and channels of distribution, (ii) increases in the prices of its products, and (iii) cost reduction efforts. The loss of any one supplier or contractor would not have a significant adverse effect on our business.
Product is shipped from our independent suppliers and VF-operated manufacturing facilities to distribution centers around the world. In some instances, product is shipped directly to our customers. Most distribution centers are operated by VF, and some support more than one brand. A portion of our distribution needs are met by contract distribution centers.


6 VF Corporation Fiscal 2019 Form 10-K



SEASONALITY

VF’s quarterly operating results vary due to the seasonality of our individual brands, and are historically stronger in the second half of the calendar year. On a quarterly basis in Fiscal 2019, revenues ranged from a low of 20% of full year revenues in the first fiscal quarter to a high of 29% in the third fiscal quarter, while operating margin ranged from a low of 6% in the fourth fiscal quarter to a high of 17% in the second fiscal quarter. This variation results primarily from the seasonal influences on revenues of our Outdoor segment, where 12% of the segment’s revenues occurred in the first fiscal quarter compared to 35% in the third fiscal quarter of Fiscal 2019. With changes in our mix of business and the growth
 
of our retail operations, historical quarterly revenue and profit trends may not be indicative of future trends.
Working capital requirements vary throughout the year. Working capital increases early in the calendar year as inventory builds to support peak shipping periods and then moderates later in the year as those inventories are sold and accounts receivable are collected. Cash provided by operating activities is substantially higher in the second half of the calendar year due to higher net income during that period and reduced working capital requirements, particularly during the fourth quarter of the calendar year.
ADVERTISING, CUSTOMER SUPPORT AND COMMUNITY OUTREACH

During the year ended March 2019, our advertising and promotion expense was $845.7 million, representing 6% of total revenues. We advertise in consumer and trade publications, on radio and television and through digital initiatives including social media and mobile platforms on the Internet. We also participate in cooperative advertising on a shared cost basis with major retailers in print and digital media, radio and television. We sponsor sporting, musical and special events, as well as athletes and personalities who promote our products. We employ marketing sciences to optimize the impact of advertising and promotional spending, and to identify the types of spending that provide the greatest return on our marketing investments.
We provide advertising support to our wholesale customers, including independent partnership stores, in the form of point-of-sale fixtures and signage to enhance the presentation and brand image of our products. We also participate in shop-in-shops and concession retail arrangements, which are separate sales areas dedicated to a specific VF brand within our customers' stores and other locations, to help differentiate and enhance the presentation of our products.
We contribute to incentive programs with our wholesale customers, including cooperative advertising funds, discounts and
 
allowances. We also offer sales incentive programs directly to consumers in the form of discounts, rebates and coupon offers that are eligible for use in certain VF-operated stores, brand e-commerce sites and concession retail locations.
In addition to sponsorships and activities that directly benefit our products and brands, VF and its associates actively support our communities and various charities. For example, The North Face® brand has committed to programs that encourage and enable outdoor participation, such as The North Face Endurance Challenge® and The North Face Explore Fund™ programs. The Timberland® brand has a strong heritage of volunteerism, including the Path of Service™ program that offers full-time employees up to 40 hours of paid time off a year to serve their local communities through global service events such as Earth Day in the spring and Serv-a-palooza in the fall. The Wrangler® brand launched the Tough Enough to Wear Pink™ program, which honors and raises money for breast cancer survivors, and the National Patriot Program™, which funds agencies that serve wounded and fallen American military veterans and their families. The Vans® brand has hosted annual Vans® Earth Day and Vans® Gives Back Day events in which all employees at the brand's headquarters spend the day volunteering in the community.
SUSTAINABILITY

VF is one of the world’s largest apparel, footwear and accessories companies and has a responsibility to make a positive impact on our industry and planet through advancing sustainable business practices. VF plans to achieve significant progress in several key areas of sustainability, including people, products, supply chains, materials and facilities, to create a positive global impact.
VF’s Sustainability & Responsibility strategy, Made for Change, launched in 2017, targets key areas to drive transformational change and create value for our business. The strategy is focused on new circular and sustainable business models to (i) harness retail opportunities in new sectors, (ii) scale foundational social and environmental programs to lead the industry toward greater progress at a faster rate, and (iii) empower our brands, associates, and consumers to act with purpose and impact with intention.
In 2017, VF committed to measurably improve the lives of two million supply chain workers and others within their communities, by 2030. Since then, VF launched a Worker and Community Development Program with strategic initiatives focused on (i) water
 
and sanitation, (ii) health and nutrition, and (iii) childcare and education. These programs have already impacted over one hundred thousand people in more than 30 factories and communities. We are also prioritizing transparency to ensure our global supply chain improves the lives of people and the planet. In October 2018, VF successfully launched traceability maps to demonstrate the end-to-end (farm-to-front door) traceability of nine iconic VF-brand products. The enterprise will scale its traceability efforts over the next three years with a plan to enhance visibility across all VF brands.
Dedication to continued sustainability progress is particularly focused in the realm of VF product materials. In 2017, VF set a goal of sourcing 50% recycled nylon and polyester for products by 2025, with a targeted 35% reduction in negative impact of key materials. VF also pledged to not use fur in any of our products, in support of newly released Animal Derived Materials & Forest Derived Materials policies. VF is committed to using sustainable cotton across the organization. We have a goal to procure cotton primarily from the U.S. and Australia, since both countries use advanced and


VF Corporation Fiscal 2019 Form 10-K 7



efficient growing methods, or through the Better Cotton Initiative (“BCI”), which helps small holder farmers reduce their environmental impact while improving farmers’ livelihoods. In 2018, VF used approximately 36,000 metric tons of certified BCI cotton and 600 metric tons of organic cotton.
Progress continues to be made toward the goals set for VF internal facilities that include (i) the sourcing of 100% of electricity from renewable sources within VF-owned and operated facilities by 2025, in line with the enterprise commitment to RE100, and (ii) achieving Zero Waste at 100% of VF internal distribution center locations by 2020, with 17 facilities already certified.
VF brands are equally committed to sustainability action in their sectors. In 2018, Vans® launched a shoe recycling pilot at 23
 
southern California stores. Timberland® used 96% "Leather Working Group" certified leather, 75% certified BCI or organic cotton, and now produces 69% recycled, organic, or renewable products. The North Face® expanded its Climate Beneficial Wool collection, launched in 2017. These products are made in the U.S. from sustainable farms. The North Face® also launched the Renewed collection in 2018 selling previously owned, damage-and-repaired or used products. The recommerce model addresses one of the apparel industry’s biggest challenges, textile waste, and offers our products at a lower price point, which allows new consumers to experience our brands.
OTHER MATTERS

Competitive Factors
Our business depends on our ability to stimulate consumer demand for VF’s brands and products. VF is well-positioned to compete in the apparel, footwear and accessories sector by developing high quality, innovative products at competitive prices that meet consumer needs, providing high service levels, ensuring the right products are on the retail sales floor to meet consumer demand, investing significant amounts into existing brands and managing our brand portfolio through acquisitions and dispositions. Many of VF’s brands have long histories and enjoy strong recognition within their respective consumer segments.
Intellectual Property
Trademarks, trade names, patents and domain names, as well as related logos, designs and graphics, provide substantial value in the development and marketing of VF’s products, and are important to our continued success. We have registered this intellectual property in the U.S. and in other countries where our products are manufactured and/or sold. We vigorously monitor and enforce VF’s intellectual property against counterfeiting, infringement and violations of other rights where and to the extent legal, feasible and appropriate. In addition, we grant licenses to other parties to manufacture and sell products utilizing our intellectual property in product categories and geographic areas in which VF does not operate.
Customers
VF products are sold on a wholesale basis to specialty stores, mid-tier and traditional department stores, national chains and mass
 
merchants. In addition, we sell products on a direct-to-consumer basis through VF-operated stores, concession retail stores and brand e-commerce sites. Our sales in international markets are growing and represented 41% of our total revenues in the year ended March 2019, the majority of which were in Europe.
Sales to VF’s ten largest customers, all of which are retailers based in the U.S., amounted to 19% of total revenues in the year ended March 2019. Sales to the five largest customers amounted to approximately 15% of total revenues in the year ended March 2019. Sales to VF’s largest customer totaled 8% of total revenues in the year ended March 2019, the majority of which were derived from the Jeans business that was included in the spin-off completed on May 22, 2019.
Employees
VF had approximately 75,000 employees at the end of Fiscal 2019, of which approximately 42% were located in the U.S. In international markets, a significant percentage of employees are covered by trade-sponsored or governmental bargaining arrangements. Employee relations are considered to be good.
Backlog
The dollar amount of VF’s order backlog as of any date may not be indicative of actual future shipments and, accordingly, is not material to an understanding of the business taken as a whole.
EXECUTIVE OFFICERS OF VF

The following are the executive officers of VF Corporation as of May 24, 2019. The executive officers are generally elected annually and serve at the pleasure of the Board of Directors. None of the VF Corporation executive officers have any family relationship with one another or with any of the directors of VF Corporation.
Steven E. Rendle, 59, has been Executive Chairman of the Board since November 2017, President and Chief Executive Officer of VF since January 2017 and a Director of VF since June 2015. Mr. Rendle served as President and Chief Operating Officer from June 2015 to December 2016, Senior Vice President — Americas from April 2014 until June 2015, Vice President and Group President — Outdoor &
 
Action Sports Americas from May 2011 until April 2014, President of VF’s Outdoor Americas businesses from 2009 to 2011, President of The North Face® brand from 2004 to 2009 and Vice President of Sales of The North Face® brand from 1999 to 2004. Mr. Rendle joined VF in 1999.
Scott A. Roe, 54, has been Executive Vice President and Chief Financial Officer of VF since March 2019. He served as Vice President and Chief Financial Officer of VF from April 2015 to February 2019, Vice President — Controller and Chief Accounting Officer of VF from February 2013 until March 2015, Vice President — Finance of VF from 2012 to 2013, Vice President — Chief Financial


8 VF Corporation Fiscal 2019 Form 10-K



Officer of VF International from 2006 to 2012 and Vice President — Chief Financial Officer of VF’s former intimate apparel business from 2002 to 2006. Mr. Roe joined VF in 1996.
Kevin D. Bailey, 58, has been Group President — APAC since January 2018. He served as President, APAC from January 2017 until December 2017, President Action Sports & VF CASA from March 2016 to December 2016, President Action Sports & the Vans® brand from April 2014 to February 2016, Global President of the Vans® brand from June 2009 to March 2014 and Vice President Direct-to-Consumer for the Vans® brand from June 2002 to November 2007. Mr. Bailey joined VF in 2004.
Scott H. Baxter, 54, has been Group President of Jeanswear since August 2018. Previously, he was Group President — Americas West since January 2018. He served as Vice President and Group President — Outdoor & Action Sports Americas from March 2016 until December 2017, Vice President and Group President — Jeanswear Americas, Imagewear and South America from May 2013 until March 2016, Vice President and Group President — Jeanswear Americas and Imagewear from 2011 until May 2013, President of Imagewear, composed of both the Image and VF's former Licensed Sports Group businesses, from 2008 to 2011 and President of VF's former Licensed Sports Group business from 2007 to 2008. Mr. Baxter joined VF in 2007.
Martino Scabbia Guerrini, 54, has been Group President — EMEA since January 2018. He served as President — VF EMEA from April 2017 until December 2017, Coalition President — Jeanswear, Sportswear and Contemporary International from January 2013 to November 2017, President — Sportswear and Contemporary EMEA from February 2009 to December 2012 and President —
 
Sportswear and Packs from August 2006 to January 2009. Mr. Guerrini joined VF in 2006.
Curtis A. Holtz, 56, has been Group President, Workwear since March 2019. He served as Group President — Americas East from January 2018 to February 2019, Group President — Workwear, Jeans and Sportswear from January 2017 until December 2017, President — Imagewear from July 2015 to December 2016, Chief Financial Officer of VF Imagewear and International from 2010 to 2015 and President — VF’s former intimate apparel business from 2005 to 2007. Mr. Holtz joined VF in 1990.
Bryan H. McNeill, 57, has been Vice President — Controller and Chief Accounting Officer since April 2015. He served as Controller and Supply Chain Chief Financial Officer of VF International from January 2012 until March 2015 and Controller of VF International from May 2010 until December 2011. Mr. McNeill joined VF in 1993.
Laura C. Meagher, 59, has been Executive Vice President, General Counsel and Secretary since March 2019. She served as Vice President, General Counsel and Secretary from 2012 to February 2019. She served as Vice President — Deputy General Counsel from 2008 to 2012 and Assistant General Counsel from 2004 to 2008. Ms. Meagher joined VF in 2004.
Additional information is included under the caption “Election of Directors” in VF’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held July 16, 2019 (“2019 Proxy Statement”) that will be filed with the Securities and Exchange Commission within 120 days after the close of our fiscal year ended March 30, 2019, which information is incorporated herein by reference.
AVAILABLE INFORMATION

All periodic and current reports, registration statements and other filings that VF has filed or furnished to the Securities and Exchange Commission (“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, are available free of charge from the SEC’s website (www.sec.gov) and public reference room at 100 F Street, NE, Washington, DC 20549 and on VF’s website at www.vfc.com. Such documents are available as soon as reasonably practicable after electronic filing of the material with the SEC. Information on the operation of the public reference room can be obtained by calling the SEC at 1-800-SEC-0330. Copies of these reports may also be obtained free of charge upon written request to the Secretary of VF Corporation, P.O. Box 21488, Greensboro, NC 27420.
 
The following corporate governance documents can be accessed on VF’s website: VF’s Corporate Governance Principles, Code of Business Conduct, and the charters of our Audit Committee, Talent and Compensation Committee, Finance Committee and Nominating and Governance Committee. Copies of these documents also may be obtained by any shareholder free of charge upon written request to the Secretary of VF Corporation, P.O. Box 21488, Greensboro, NC 27420.
After VF’s 2019 Annual Meeting of Shareholders, VF intends to file with the New York Stock Exchange (“NYSE”) the certification regarding VF’s compliance with the NYSE’s corporate governance listing standards as required by NYSE Rule 303A.12. Last year, VF filed this certification with the NYSE on May 10, 2018.


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ITEM 1A.    RISK FACTORS.

The following risk factors should be read carefully in connection with evaluating VF’s business and the forward-looking statements contained in this Form 10-K. Any of the following risks could materially adversely affect VF’s business, its operating results and its financial condition.
VF’s revenues and profits depend on the level of consumer spending for apparel and footwear, which is sensitive to global economic conditions and other factors. A decline in consumer spending could have a material adverse effect on VF.
The success of VF’s business depends on consumer spending on apparel and footwear, and there are a number of factors that influence consumer spending, including actual and perceived economic conditions, disposable consumer income, interest rates, consumer credit availability, unemployment, stock market performance, weather conditions, energy prices, consumer discretionary spending patterns and tax rates in the international, national, regional and local markets where VF’s products are sold. The current global economic environment is unpredictable, and adverse economic trends or other factors could negatively impact the level of consumer spending, which could have a material adverse impact on VF.
The apparel and footwear industries are highly competitive, and VF’s success depends on its ability to gauge consumer preferences and product trends, and to respond to constantly changing markets.
VF competes with numerous apparel and footwear brands and manufacturers. Competition is generally based upon brand name recognition, price, design, product quality, selection, service and purchasing convenience. Some of our competitors are larger and have more resources than VF in some product categories and regions. In addition, VF competes directly with the private label brands of its wholesale customers. VF’s ability to compete within the apparel and footwear industries depends on our ability to:
Anticipate and respond to changing consumer preferences and product trends in a timely manner;
Develop attractive, innovative and high quality products that meet consumer needs;
Maintain strong brand recognition;
Price products appropriately;
Provide best-in-class marketing support and intelligence;
Ensure product availability and optimize supply chain efficiencies;
Obtain sufficient retail store space and effectively present our products at retail;
Produce or procure quality products on a consistent basis; and,
Adapt to a more digitally driven consumer landscape.
Failure to compete effectively or to keep pace with rapidly changing consumer preferences, markets and product trends could have a material adverse effect on VF’s business, financial condition and results of operations. Moreover, there are significant shifts underway in the wholesale and retail (e-commerce and retail store) channels. VF may not be able to manage its brands within and across channels sufficiently, which could have a material adverse
 
effect on VF’s business, financial condition and results of operations.
VF’s results of operations could be materially harmed if we are unable to accurately forecast demand for our products.
There can be no assurance that we will be able to successfully anticipate changing consumer preferences and product trends or economic conditions, and, as a result, we may not successfully manage inventory levels to meet our future order requirements. We often schedule internal production and place orders for products with independent manufacturers before our customers’ orders are firm. If we fail to accurately forecast consumer demand, we may experience excess inventory levels or a shortage of product required to meet the demand. Inventory levels in excess of consumer demand may result in inventory write-downs, the sale of excess inventory at discounted prices or excess inventory held by our wholesale customers, which could have a negative impact on future sales, an adverse effect on the image and reputation of VF’s brands and negatively impact profitability. On the other hand, if we underestimate demand for our products, our manufacturing facilities or third-party manufacturers may not be able to produce products to meet consumer requirements, and this could result in delays in the shipment of products and lost revenues, as well as damage to VF’s reputation and relationships. These risks could have a material adverse effect on our brand image as well as our results of operations and financial condition.
VF’s business and the success of its products could be harmed if VF is unable to maintain the images of its brands.
VF’s success to date has been due in large part to the growth of its brands’ images and VF’s customers’ connection to its brands. If we are unable to timely and appropriately respond to changing consumer demand, the names and images of our brands may be impaired. Even if we react appropriately to changes in consumer preferences, consumers may consider our brands’ images to be outdated or associate our brands with styles that are no longer popular. In addition, brand value is based in part on consumer perceptions on a variety of qualities, including merchandise quality and corporate integrity. Negative claims or publicity regarding VF, its brands or its products, including licensed products, could adversely affect our reputation and sales regardless of whether such claims are accurate. Social media, which accelerates the dissemination of information, can increase the challenges of responding to negative claims. In the past, many apparel companies have experienced periods of rapid growth in sales and earnings followed by periods of declining sales and losses. Our businesses may be similarly affected in the future. In addition, we have sponsorship contracts with a number of athletes, musicians and celebrities and feature those individuals in our advertising and marketing efforts. Actions taken by those individuals associated with our products could harm their reputations, which could adversely affect the images of our brands.
VF’s revenues and cash requirements are affected by the seasonal nature of its business.
VF’s business is increasingly seasonal, with a higher proportion of revenues and operating cash flows generated during the second half of the calendar year, which includes the fall and holiday selling seasons. Poor sales in the second half of the calendar year would have a material adverse effect on VF’s full year operating results and cause higher inventories. In addition, fluctuations in sales and


10 VF Corporation Fiscal 2019 Form 10-K



operating income in any fiscal quarter are affected by the timing of seasonal wholesale shipments and other events affecting retail sales.
VF’s profitability may decline as a result of increasing pressure on margins.
The apparel industry is subject to significant pricing pressure caused by many factors, including intense competition, consolidation in the retail industry, rising commodity and conversion costs, pressure from retailers to reduce the costs of products, changes in consumer demand and shifts to online shopping and purchasing. Consumers may increasingly seek markdown allowances, incentives and other forms of economic support. If these factors cause us to reduce our sales prices to retailers and consumers, and we fail to sufficiently reduce our product costs or operating expenses, VF’s profitability will decline. This could have a material adverse effect on VF’s results of operations, liquidity and financial condition.
VF may not succeed in its business strategy.
One of VF’s key strategic objectives is growth. We seek to grow organically and through acquisitions. We seek to grow by building our lifestyle brands, expanding our share with winning customers, stretching VF’s brands to new regions, managing costs, leveraging our supply chain and information technology capabilities across VF and expanding our direct-to-consumer business, including opening new stores, remodeling and expanding our existing stores and growing our e-commerce business. However, we may not be able to grow our existing businesses. For example:
We may have difficulty completing acquisitions or dispositions to reshape our portfolio, and we may not be able to successfully integrate a newly acquired business or achieve the expected growth, cost savings or synergies from such integration.
We may not be able to transform our model to be more consumer- and retail-centric.
We may not be able to expand our market share with winning customers, or our wholesale customers may encounter financial difficulties and thus reduce their purchases of VF products.
We may not be able to expand our brands in Asia or other geographies or achieve the expected results from our supply chain initiatives.
We may have difficulty recruiting, developing or retaining qualified employees.
We may not be able to achieve our direct-to-consumer expansion goals, manage our growth effectively, successfully integrate the planned new stores into our operations or operate our new, remodeled and expanded stores profitably.
We may not be able to offset rising commodity or conversation costs in our product costs with pricing actions or efficiency improvements.
Failure to implement our strategic objectives may have a material adverse effect on VF’s business.
 
VF relies significantly on information technology. Any inadequacy, interruption, integration failure or security failure of this technology could harm VF’s ability to effectively operate its business.
Our ability to effectively manage and operate our business depends significantly on information technology systems. We rely heavily on information technology to track sales and inventory and manage our supply chain. We are also dependent on information technology, including the Internet, for our direct-to-consumer sales, including our e-commerce operations and retail business credit card transaction authorization. Despite our preventative efforts, our systems and those of our third-party service providers may be vulnerable to damage, failure or interruption due to viruses, data security incidents, technical malfunctions, natural disasters or other causes, or in connection with upgrades to our system or the implementation of new systems. The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, difficulty in integrating new systems or systems of acquired businesses or a breach in security of these systems could adversely impact the operations of VF’s business, including management of inventory, ordering and replenishment of products, manufacturing and distribution or products, e-commerce operations, retail business credit card transaction authorization and processing, corporate email communications and our interaction with the public on social media.
VF is subject to data security and privacy risks that could negatively affect its business operations, results of operations or reputation.
In the normal course of business, we often collect, retain and transmit certain sensitive and confidential customer information, including credit card information, over public networks. There is a significant concern by consumers and employees over the security of personal information transmitted over the Internet, identity theft and user privacy. Data security attacks are increasingly sophisticated, and if unauthorized parties gain access to our networks or databases, or those of our third-party service providers, they may be able to steal, publish, delete or modify our private and sensitive information, including credit card information and personal information. Despite the security measures we currently have in place, our facilities and systems and those of our third-party service providers may be vulnerable and unable to anticipate or detect security breaches and data loss. In addition, employees may intentionally or inadvertently cause data security breaches that result in the unauthorized release of personal or confidential information. VF and its customers could suffer harm if valuable business data, or employee, customer and other proprietary information were corrupted, lost or accessed or misappropriated by third parties due to a security failure in VF’s systems or one of our third-party service providers. It could require significant expenditures to remediate any such failure or breach, severely damage our reputation and our relationships with customers, results in unwanted media attention and lost sales, and expose us to risks of litigation and liability. In addition, as a result of recent security breaches at a number of prominent retailers, the media and public scrutiny of information security and privacy has become more intense and the regulatory environment has become increasingly uncertain, rigorous and complex. As a result, we may incur significant costs to comply with laws regarding the protection and unauthorized disclosure of personal information and we may not be able to comply with new regulations such as the General Data Protection Regulation in the European Union and the California Consumer Privacy Act. Any failure to comply with the laws and regulations surrounding the protection of personal information could subject us to legal and reputational


VF Corporation Fiscal 2019 Form 10-K 11



risk, including significant fines for non-compliance, any of which could have a negative impact on revenues and profits.
VF’s business is exposed to the risks of foreign currency exchange rate fluctuations. VF’s hedging strategies may not be effective in mitigating those risks.
A growing percentage of VF’s total revenues (approximately 41% in Fiscal 2019) is derived from markets outside the U.S. VF’s international businesses operate in functional currencies other than the U.S. dollar. Changes in currency exchange rates affect the U.S. dollar value of the foreign currency-denominated amounts at which VF’s international businesses purchase products, incur costs or sell products. In addition, for VF’s U.S.-based businesses, the majority of products are sourced from independent contractors or VF plants located in foreign countries. As a result, the costs of these products are affected by changes in the value of the relevant currencies. Furthermore, much of VF’s licensing revenue is derived from sales in foreign currencies. Changes in foreign currency exchange rates could have an adverse impact on VF’s financial condition, results of operations and cash flows.
In accordance with our operating practices, we hedge a significant portion of our foreign currency transaction exposures arising in the ordinary course of business to reduce risks in our cash flows and earnings. Our hedging strategy may not be effective in reducing all risks, and no hedging strategy can completely insulate VF from foreign exchange risk.
Further, our use of derivative financial instruments may expose VF to counterparty risks. Although VF only enters into hedging contracts with counterparties having investment grade credit ratings, it is possible that the credit quality of a counterparty could be downgraded or a counterparty could default on its obligations, which could have a material adverse impact on VF’s financial condition, results of operations and cash flows.
There are risks associated with VF’s acquisitions.
Any acquisitions or mergers by VF will be accompanied by the risks commonly encountered in acquisitions of companies. These risks include, among other things, higher than anticipated acquisition costs and expenses, the difficulty and expense of integrating the operations, systems and personnel of the companies and the loss of key employees and customers as a result of changes in management. In addition, geographic distances may make integration of acquired businesses more difficult. We may not be successful in overcoming these risks or any other problems encountered in connection with any acquisitions.
Our acquisitions may cause large one-time expenses or create goodwill or other intangible assets that could result in significant impairment charges in the future. We also make certain estimates and assumptions in order to determine purchase price allocation and estimate the fair value of assets acquired and liabilities assumed. If our estimates or assumptions used to value these assets and liabilities are not accurate, we may be exposed to losses that may be material.
VF’s operations and earnings may be affected by legal, regulatory, political and economic risks.
Our ability to maintain the current level of operations in our existing markets and to capitalize on growth in existing and new markets is subject to legal, regulatory, political and economic risks. These include the burdens of complying with U.S. and international laws
 
and regulations, unexpected changes in regulatory requirements,  tariffs or other trade barriers and the economic uncertainty associated with the pending exit of the United Kingdom from the European Union ("Brexit") or any other similar referendums that may be held.
A significant portion of VF's Fiscal 2019 net income was earned in jurisdictions outside the U.S. and most of our goods are manufactured outside the U.S. VF is exposed to risks of changes in U.S. policy for companies having business operations and manufacturing products outside the U.S. We cannot predict any changes to U.S. participation in or renegotiations of certain trade agreements or whether quotas, duties, taxes, exchange controls or other restrictions will be imposed by the U.S., China, the European Union or other countries on the import or export of our products, or what effect any of these actions would have on VF’s business, financial condition or results of operations. Changes in regulatory, geopolitical policies and other factors may adversely affect VF’s business or may require us to modify our current business practices. While enactment of any such change is not certain, if such changes were adopted, our costs could increase, which would reduce our earnings.
Changes in tax laws could increase our worldwide tax rate and materially affect our financial position and results of operations.
We are subject to taxation in the U.S. and numerous foreign jurisdictions. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), which included a broad range of tax reform proposals affecting businesses, including a reduction in the U.S. federal corporate tax rate from 35% to 21%, a one-time mandatory deemed repatriation tax on earnings of certain foreign subsidiaries that were previously tax-deferred, and a new minimum tax on certain foreign earnings. The Tax Act significantly impacted our effective tax rate for the year ended December 2017 as a result of the deemed repatriation tax, and may continue to impact several other elements of our operating model. Certain additional provisions of the Tax Act, such as a minimum tax on foreign earnings, could also apply to VF depending on certain facts and circumstances and, as a result, could increase our effective tax rate. Taxes due over a period of time as a result of the new tax law could be accelerated upon certain triggering events, including failure to pay such taxes when due. The new law made broad and complex changes to the U.S. tax code and regulatory, administrative and legislative guidance continues to be released. To the extent any future guidance differs from our preliminary interpretation of the law, it could have a material effect on our financial position and results of operations.
In addition, many countries in the European Union and around the globe have adopted and/or proposed changes to current tax laws. Further, organizations such as the Organisation for Economic Co-operation and Development have published action plans that, if adopted by countries where we do business, could increase our tax obligations in these countries. Due to the large scale of our U.S. and international business activities, many of these enacted and proposed changes to the taxation of our activities could increase our worldwide effective tax rate and harm our financial position and results of operations.
We may have additional tax liabilities.
As a global company, we determine our income tax liability in various tax jurisdictions based on an analysis and interpretation of local tax laws and regulations. This analysis requires a significant


12 VF Corporation Fiscal 2019 Form 10-K



amount of judgment and estimation and is often based on various assumptions about the future actions of the local tax authorities. These determinations are the subject of periodic U.S. and international tax audits. Although we accrue for uncertain tax positions, our accrual may be insufficient to satisfy unfavorable findings. Unfavorable audit findings and tax rulings may result in payment of taxes, fines and penalties for prior periods and higher tax rates in future periods, which may have a material adverse effect on our financial condition, results of operations or cash flows.
The Company petitioned the U.S. Tax Court to resolve an Internal Revenue Service ("IRS") dispute regarding the timing of income inclusion associated with the 2011 Timberland acquisition. The Company remains confident in our timing and treatment of the income inclusion, and therefore this matter is not reflected in our financial statements. We are vigorously defending our position, and do not expect the resolution to have a material adverse impact on the Company's financial position, results of operations or cash flows. While the IRS argues immediate income inclusion, the Company's position is to include the income over a period of years. As the matter relates to 2011, nearly half of the timing at dispute has passed with the Company including the income, and paying the related tax, on our income tax returns. The Company notes that should the IRS prevail in this timing matter, the net interest expense would be up to $130 million. Further, this timing matter is impacted by the Tax Act that reduced the U.S. corporate income tax rate from 35% to 21%. If the IRS is successful, this rate differential would increase tax expense by approximately $136 million.
VF’s balance sheet includes a significant amount of intangible assets and goodwill. A decline in the fair value of an intangible asset or of a business unit could result in an asset impairment charge, which would be recorded as an operating expense in VF’s Consolidated Statement of Income and could be material.
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 year, or whenever events or changes in circumstances indicate that the fair value of such assets may be below their carrying amount. In addition, intangible assets that are being amortized are tested for impairment whenever events or circumstances indicate that their carrying value may not be recoverable. For these impairment tests, we use various valuation methods to estimate the fair value of our business units and intangible assets. If the fair value of an asset is less than its carrying value, we would recognize an impairment charge for the difference.
It is possible that we could have an impairment charge for goodwill or trademark and trade name intangible assets in future periods if (i) overall economic conditions in Fiscal 2020 or future years vary from our current assumptions, (ii) business conditions or our strategies for a specific business unit change from our current assumptions, (iii) investors require higher rates of return on equity investments in the marketplace, or (iv) enterprise values of comparable publicly traded companies, or of actual sales transactions of comparable companies, were to decline, resulting in lower comparable multiples of revenues and earnings before interest, taxes, depreciation and amortization and, accordingly, lower implied values of goodwill and intangible assets. A future impairment charge for goodwill or intangible assets could have a material effect on our consolidated financial position or results of operations.
 
VF uses third-party suppliers and manufacturing facilities worldwide for a substantial portion of its raw materials and finished products, which poses risks to VF’s business operations.
During Fiscal 2019, approximately 79% of VF’s units were purchased from independent manufacturers primarily located in Asia, with substantially all of the remainder produced by VF-owned and operated manufacturing facilities located in the U.S., Mexico, Central America and the Caribbean. Any of the following could impact our ability to produce or deliver VF products, or our cost of producing or delivering products and, as a result, our profitability:
Political or labor instability in countries where VF’s facilities, contractors and suppliers are located;
Changes in local economic conditions in countries where VF’s facilities, contractors, and suppliers are located;
Political or military conflict could cause a delay in the transportation of raw materials and products to VF and an increase in transportation costs;
Disruption at ports of entry, such as the west coast dock workers labor dispute that disrupted international trade at seaports, could cause delays in product availability and increase transportation times and costs;
Heightened terrorism security concerns could subject imported or exported goods to additional, more frequent or more lengthy inspections, leading to delays in deliveries or impoundment of goods for extended periods;
Decreased scrutiny by customs officials for counterfeit goods, leading to more counterfeit goods and reduced sales of VF products, increased costs for VF’s anti-counterfeiting measures and damage to the reputation of its brands;
Disruptions at manufacturing or distribution facilities caused by natural and man-made disasters;
Disease epidemics and health-related concerns could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargo of VF’s goods produced in infected areas;
Imposition of regulations and quotas relating to imports and our ability to adjust timely to changes in trade regulations could limit our ability to produce products in cost-effective countries that have the required labor and expertise;
Imposition of duties, taxes and other charges on imports; and,
Imposition or the repeal of laws that affect intellectual property rights.
Although no single supplier and no one country is critical to VF’s production needs, if we were to lose a supplier it could result in interruption of finished goods shipments to VF, cancellation of orders by customers and termination of relationships. This, along with the damage to our reputation, could have a material adverse effect on VF’s revenues and, consequently, our results of operations.
In addition, although we audit our third-party material suppliers and contracted manufacturing facilities and set strict compliance standards, actions by a third-party supplier or manufacturer that fail to comply could expose VF to claims for damages, financial penalties and reputational harm, any of which could have a material adverse effect in our business and operations.


VF Corporation Fiscal 2019 Form 10-K 13



Our business is subject to national, state and local laws and regulations for environmental, consumer protection, employment, privacy, safety and other matters. The costs of compliance with, or the violation of, such laws and regulations by VF or by independent suppliers who manufacture products for VF could have an adverse effect on our operations and cash flows, as well as on our reputation.
Our business is subject to comprehensive national, state and local laws and regulations on a wide range of environmental, consumer protection, employment, privacy, safety and other matters. VF could be adversely affected by costs of compliance with or violations of those laws and regulations. In addition, while we do not control their business practices, we require third-party suppliers to operate in compliance with applicable laws, rules and regulations regarding working conditions, employment practices and environmental compliance. The costs of products purchased by VF from independent contractors could increase due to the costs of compliance by those contractors.
Failure by VF or its third-party suppliers to comply with such laws and regulations, as well as with ethical, social, product, labor and environmental standards, or related political considerations, could result in interruption of finished goods shipments to VF, cancellation of orders by customers and termination of relationships. If one of our independent contractors violates labor or other laws, implements labor or other business practices or takes other actions that are generally regarded as unethical, it could jeopardize our reputation and potentially lead to various adverse consumer actions, including boycotts that may reduce demand for VF’s merchandise. Damage to VF’s reputation or loss of consumer confidence for any of these or other reasons could have a material adverse effect on VF’s results of operations, financial condition and cash flows, as well as require additional resources to rebuild VF’s reputation.
Fluctuations in wage rates and the price, availability and quality of raw materials and finished goods could increase costs.
Fluctuations in the price, availability and quality of fabrics, leather or other raw materials used by VF in its manufactured products, or of purchased finished goods, could have a material adverse effect on VF’s cost of goods sold or its ability to meet its customers’ demands. The prices we pay depend on demand and market prices for the raw materials used to produce them. The price and availability of such raw materials may fluctuate significantly, depending on many factors, including general economic conditions and demand, crop yields, energy prices, weather patterns and speculation in the commodities markets. Prices of purchased finished products also depend on wage rates in Asia and other geographic areas where our independent contractors are located, as well as freight costs from those regions. Inflation can also have a long-term impact on us because increasing costs of materials and labor may impact our ability to maintain satisfactory margins. For example, the cost of the materials, that are used in our manufacturing process, such as oil-related commodity prices and other raw materials, such as cotton, dyes and chemical and other costs, such as fuel, energy and utility costs, can fluctuate as a result of inflation and other factors. Similarly, a significant portion of our products are manufactured in other countries and declines in the values of the U.S. dollar may result in higher manufacturing costs.In addition, fluctuations in wage rates required by legal or industry standards could increase our costs. In the future, VF may not be able to offset cost increases with other cost reductions or efficiencies or to pass higher costs on to its customers. This could have a material adverse effect on VF’s results of operations, liquidity and financial condition.
 
We may be adversely affected by weather conditions.
Our business is adversely affected by unseasonable weather conditions. A significant portion of the sales of our products is dependent in part on the weather and is likely to decline in years in which weather conditions do not favor the use of these products. For example, periods of unseasonably warm weather in the fall or winter can lead to inventory accumulation by our wholesale customers, which can, in turn, negatively affect orders in future seasons. In addition, abnormally harsh or inclement weather can also negatively impact retail traffic and consumer spending. Any and all of these risks may have a material adverse effect on our financial condition, results of operations or cash flows.
A substantial portion of VF’s revenues and gross profit is derived from a small number of large customers. The loss of any of these customers or the inability of any of these customers to pay VF could substantially reduce VF’s revenues and profits.
A few of VF’s customers account for a significant portion of revenues. Sales to VF’s ten largest customers were 19% of total revenues in Fiscal 2019, with our largest customer accounting for 8% of revenues. Sales to our customers are generally on a purchase order basis and not subject to long-term agreements. A decision by any of VF’s major customers to significantly decrease the volume of products purchased from VF could substantially reduce revenues and have a material adverse effect on VF’s financial condition and results of operations.
The retail industry has experienced financial difficulty that could adversely affect VF's business.
Recently there have been consolidations, reorganizations, restructurings, bankruptcies and ownership changes in the retail industry. These events individually, and together, could materially, adversely affect VF's business. These changes could impact VF’s opportunities in the market and increase VF’s reliance on a smaller number of large customers. In the future, retailers are likely to further consolidate, undergo restructurings or reorganizations or bankruptcies, realign their affiliations or reposition their stores’ target markets. In addition, consumers have continued to transition away from traditional wholesale retailers to large online retailers. These developments could result in a reduction in the number of stores that carry VF’s products, an increase in ownership concentration within the retail industry, an increase in credit exposure to VF or an increase in leverage by VF’s customers over their suppliers.
Further, the global economy periodically experiences recessionary conditions with rising unemployment, reduced availability of credit, increased savings rates and declines in real estate and securities values. These recessionary conditions could have a negative impact on retail sales of apparel and other consumer products. The lower sales volumes, along with the possibility of restrictions on access to the credit markets, could result in our customers experiencing financial difficulties including store closures, bankruptcies or liquidations. This could result in higher credit risk to VF relating to receivables from our customers who are experiencing these financial difficulties. If these developments occur, our inability to shift sales to other customers or to collect on VF’s trade accounts receivable could have a material adverse effect on VF’s financial condition and results of operations.


14 VF Corporation Fiscal 2019 Form 10-K



Our ability to obtain short-term or long-term financing on favorable terms, if needed, could be adversely affected by geopolitical risk and volatility in the capital markets.
Any disruption in the capital markets could limit the availability of funds or the ability or willingness of financial institutions to extend capital in the future. This could adversely affect our liquidity and funding resources or significantly increase our cost of capital. An inability to access capital and credit markets may have an adverse effect on our business, results of operations, financial condition and cash flows.
VF has a global revolving credit facility. One or more of the participating banks may not be able to honor their commitments, which could have an adverse effect on VF’s business.
VF has a $2.25 billion global revolving credit facility that expires in December 2023. If the financial markets return to recessionary conditions, this could impair the ability of one or more of the banks participating in our credit agreements to honor their commitments. This could have an adverse effect on our business if we were not able to replace those commitments or to locate other sources of liquidity on acceptable terms.
The loss of members of VF’s executive management and other key employees could have a material adverse effect on its business.
VF depends on the services and management experience of its executive officers and business leaders who have substantial experience and expertise in VF’s business. The unexpected loss of services of one or more of these individuals could have a material adverse effect on VF. Our future success also depends on our ability to recruit, retain and engage our personnel sufficiently. Competition for experienced and well-qualified personnel is intense and we may not be successful in attracting and retaining such personnel.
VF’s direct-to-consumer business includes risks that could have an adverse effect on its results of operations.
VF sells merchandise direct-to-consumer through VF-operated stores and e-commerce sites. Its direct-to-consumer business is subject to numerous risks that could have a material adverse effect on its results. Risks include, but are not limited to, (i) U.S. or international resellers purchasing merchandise and reselling it overseas outside VF’s control, (ii) failure of the systems that operate the stores and websites, and their related support systems, including computer viruses, theft of customer information, privacy concerns, telecommunication failures and electronic break-ins and similar disruptions, (iii) credit card fraud, and (iv) risks related to VF’s direct-to-consumer distribution centers and processes. Risks specific to VF’s e-commerce business also include (i) diversion of sales from VF stores or wholesale customers, (ii) difficulty in recreating the in-store experience through direct channels, (iii) liability for online content, (iv) changing patterns of consumer behavior, and (v) intense competition from online retailers. VF’s failure to successfully respond to these risks might adversely affect sales in its e-commerce business, as well as damage its reputation and brands.
Our VF-operated stores and e-commerce business require substantial fixed investments in equipment and leasehold improvements, information systems, inventory and personnel. We have entered into substantial operating lease commitments for retail space. Due to the high fixed-cost structure associated with our direct-to-consumer operations, a decline in sales or the closure of or poor performance of individual or multiple stores
 
could result in significant lease termination costs, write-offs of equipment and leasehold improvements and employee-related costs.
VF’s net sales depend on the volume of traffic to its stores and the availability of suitable lease space.
A growing portion of our revenues are direct-to-consumer sales through VF-operated stores. In order to generate customer traffic, we locate many of our stores in prominent locations within successful retail shopping centers or in fashionable shopping districts. Our stores benefit from the ability of the retail center and other attractions in an area to generate consumer traffic in the vicinity of our stores. Part of our future growth is significantly dependent on our ability to operate stores in desirable locations with capital investment and lease costs providing the opportunity to earn a reasonable return. We cannot control the development of new shopping centers or districts; the availability or cost of appropriate locations within existing or new shopping centers or districts; competition with other retailers for prominent locations; or the success of individual shopping centers or districts. Further, if we are unable to renew or replace our existing store leases or enter into leases for new stores on favorable terms, or if we violate the terms of our current leases, our growth and profitability could be harmed. All of these factors may impact our ability to meet our growth targets and could have a material adverse effect on our financial condition or results of operations.
VF may be unable to protect its trademarks and other intellectual property rights.
VF’s trademarks and other intellectual property rights are important to its success and its competitive position. VF is susceptible to others copying its products and infringing its intellectual property rights, especially with the shift in product mix to higher priced brands and innovative new products in recent years. Some of VF’s brands, such as The North Face®, Timberland®, Vans®, JanSport®, Dickies®, Wrangler® and Lee®, enjoy significant worldwide consumer recognition, and the higher pricing of those products creates additional risk of counterfeiting and infringement.
VF’s trademarks, trade names, patents, trade secrets and other intellectual property are important to VF’s success. Counterfeiting of VF’s products or infringement on its intellectual property rights could diminish the value of our brands and adversely affect VF’s revenues. Actions we have taken to establish and protect VF’s intellectual property rights may not be adequate to prevent copying of its products by others or to prevent others from seeking to invalidate its trademarks or block sales of VF’s products as a violation of the trademarks and intellectual property rights of others. In addition, unilateral actions in the U.S. or other countries, including changes to or the repeal of laws recognizing trademark or other intellectual property rights, could have an impact on VF’s ability to enforce those rights.
The value of VF’s intellectual property could diminish if others assert rights in or ownership of trademarks and other intellectual property rights of VF, or trademarks that are similar to VF’s trademarks, or trademarks that VF licenses from others. We may be unable to successfully resolve these types of conflicts to our satisfaction. In some cases, there may be trademark owners who have prior rights to VF’s trademarks because the laws of certain foreign countries may not protect intellectual property rights to the same extent as do the laws of the U.S. In other cases, there may be holders who have prior rights to similar trademarks.


VF Corporation Fiscal 2019 Form 10-K 15



There have been, and there may in the future be, opposition and cancellation proceedings from time to time with respect to some of VF's intellectual property rights. In some cases, litigation may be necessary to protect or enforce our trademarks and other intellectual property rights. Furthermore, third parties may assert intellectual property claims against us, and we may be subject to liability, required to enter into costly license agreements, if available at all, required to rebrand our products and/or prevented from selling some of our products if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks, copyrights, patents or other intellectual property rights. Bringing or defending any such claim, regardless or merit, and whether successful or unsuccessful, could be expensive and time-consuming and have a negative effect on VF's business, reputation, results of operations and financial condition.
VF is subject to the risk that its licensees may not generate expected sales or maintain the value of VF’s brands.
During Fiscal 2019, $95.9 million of VF’s revenues were derived from licensing royalties. Although VF generally has significant control over its licensees’ products and advertising, we rely on our licensees for, among other things, operational and financial controls over their businesses. Failure of our licensees to successfully market licensed products or our inability to replace existing licensees, if necessary, could adversely affect VF’s revenues, both directly from reduced royalties received and indirectly from reduced sales of our other products. Risks are also associated with a licensee’s ability to:
Obtain capital;
Manage its labor relations;
Maintain relationships with its suppliers;
Manage its credit risk effectively;
Maintain relationships with its customers; and,
Adhere to VF’s Global Compliance Principles.
In addition, VF relies on its licensees to help preserve the value of its brands. Although we attempt to protect VF’s brands through approval rights over design, production processes, quality, packaging, merchandising, distribution, advertising and promotion of our licensed products, we cannot completely control the use of licensed VF brands by our licensees. The misuse of a brand by a licensee, including through the marketing or products under one of our brand names that do not meet our quality standards, could have a material adverse effect on that brand and on VF.
If VF encounters problems with its distribution system, VF’s ability to deliver its products to the market could be adversely affected.
VF relies on owned or independently-operated distribution facilities to warehouse and ship product to its customers. VF’s distribution system includes computer-controlled and automated equipment, which may be subject to a number of risks related to security or computer viruses, the proper operation of software and hardware, power interruptions or other system failures. Because substantially all of VF’s products are distributed from a relatively small number of locations, VF’s operations could also be interrupted by earthquakes, floods, fires or other natural disasters affecting its distribution centers. We maintain business interruption insurance, but it may not adequately protect VF from the adverse effects that could be caused by significant disruptions in VF’s distribution facilities, such as the long-term loss of
 
customers or an erosion of brand image. In addition, VF’s distribution capacity is dependent on the timely performance of services by third parties, including the transportation of product to and from its distribution facilities. If we encounter problems with our distribution system, our ability to meet customer expectations, manage inventory, complete sales and achieve operating efficiencies could be materially adversely affected.
Volatility in securities markets, interest rates and other economic factors could substantially increase VF’s defined benefit pension costs.
VF currently has obligations under its defined benefit pension plans. The funded status of the pension plans is dependent on many factors, including returns on investment assets and the discount rate used to determine pension obligations. Unfavorable impacts from returns on plan assets, decreases in discount rates, changes in plan demographics or revisions in the applicable laws or regulations could materially change the timing and amount of pension funding requirements, which could reduce cash available for VF’s business.
VF’s operating performance also may be negatively impacted by the amount of expense recorded for its pension plans. Pension expense is calculated using actuarial valuations that incorporate assumptions and estimates about financial market, economic and demographic conditions. Differences between estimated and actual results give rise to gains and losses that are deferred and amortized as part of future pension expense, which can create volatility that adversely impacts VF’s future operating results.
The relocation of our global headquarters; The North Face®, JanSport®, Smartwool®, Altra® and Eagle Creek® brands; and VF’s Global Innovation Center for technical fabrics and Digital Lab could adversely affect our operations, operating results and financial condition, as we may experience disruptions to our business and incur additional costs in connection with the relocation.
We announced on August 13, 2018 the relocation of our global headquarters to the metro Denver area, which will also serve as the home for The North Face®, JanSport®, Smartwool®, Altra® and Eagle Creek® brands (the “Relocating Brands”) and VF’s Global Innovation Center for technical fabrics and Digital Lab (the “Innovation Center and Lab”). The process of moving our headquarters, the Relocating Brands and the Innovation Center and Lab is inherently complex and not part of our day-to-day operations. The relocation process could cause significant disruption to our operations, cause the temporary diversion of management resources and result in the loss of key employees who have substantial experience and expertise in our business, all of which could have a material adverse effect on our operations, operating results and financial condition. The need to replace Company personnel who do not relocate, train new employees and transition Company operating knowledge may cause disruptions in our business. While we have implemented a transition plan to provide for the move of our global headquarters, the Relocating Brands and the Innovation Center and Lab, including relocation benefits for employees who may be transferring, and severance and retention benefits for employees who will not be continuing with the Company after the move, we may encounter difficulties retaining employees who elect to transfer and attracting new talent in the Denver area to replace our employees who are unwilling to relocate. We may also experience difficulties in retaining employees who will remain in Greensboro during the transition period and who we are relying on to facilitate the transition of operating knowledge. In addition, we may incur additional costs for


16 VF Corporation Fiscal 2019 Form 10-K



duplication in staff as we effect the transition. We can give no assurance that the relocation will be completed as planned or within the expected timeframe. In addition, the relocation may involve significant additional costs to us and the expected benefits of the move may not be fully realized due to associated disruption to our operations and personnel.
We may be unable to achieve some or all of the benefits we expect to achieve from the spin-off.
On May 22, 2019, we completed the spin-off of our Jeans business, Kontoor Brands, Inc. ("Kontoor Brands"). Although we believe that the spin-off will enhance our long-term value, we may not be able to achieve some or all of the anticipated benefits from the separation of our businesses, and the spin-off may adversely affect our business. Separating the businesses resulted in two independent, publicly traded companies, each of which is now a smaller, less diversified and more narrowly focused business than before the spin-off, which makes us more vulnerable to changing market and economic conditions. Additionally, a potential loss of synergies from separating the businesses could negatively impact the balance sheet, profit margins or earnings of both businesses and the combined value of the common stock of the two publicly traded companies may not be equal to or greater than the value of VF common stock had the spin-off not occurred. If we fail to achieve some or all of the benefits that we expect to achieve as a result of the spin-off, or do not achieve them in the time we expect, our results of operations and financial condition could be materially adversely affected.
The Kontoor Brands spin-off could result in substantial tax liability to us and our stockholders.
We received opinions of tax advisors substantially to the effect that, for U.S. Federal income tax purposes, the spin-off and certain related transactions qualify for tax-free treatment under certain sections of the Internal Revenue Code. However, if the factual assumptions or representations made by us in connection with the delivery of the opinions are inaccurate or incomplete in any material respect, including those relating to the past and future conduct of our business, we will not be able to rely on the opinions. Furthermore, the opinions are not binding on the IRS or the courts. If, notwithstanding receipt of the opinions, the spin-off transaction and certain related transactions are determined to be taxable, we would be subject to a substantial tax liability. In addition, if the spin-
 
off transaction is taxable, each holder of our common stock who received shares of Kontoor Brands in connection with the spin-off would generally be treated as receiving a taxable distribution of property in an amount equal to the fair market value of the shares received.
Even if the spin-off otherwise qualifies as a tax-free transaction, the distribution would be taxable to us (but not to our stockholders) in certain circumstances if future significant acquisitions of our stock or the stock of Kontoor Brands are deemed to be part of a plan or series of related transactions that included the spin-off. In this event, the resulting tax liability could be substantial. In connection with the spin-off, we entered into a tax matters agreement with Kontoor Brands, pursuant to which Kontoor Brands agreed to not enter into any transaction that could cause any portion of the spin-off to be taxable to us without our consent and to indemnify us for any tax liability resulting from any such transaction. In addition, these potential tax liabilities may discourage, delay or prevent a change of control of us.
Certain directors who serve on our Board of Directors also serve as directors of Kontoor Brands, and ownership of shares of common stock of Kontoor Brands following the spin-off by our directors and executive officers, may create, or appear to create, conflicts of interest.
Certain of our directors who serve on our Board of Directors currently serve on the Board of Directors of Kontoor Brands. This may create, or appear to create, conflicts of interest when our or Kontoor Brands' management and directors face decisions that could have different implications for us and Kontoor Brands, including the resolution of any dispute regarding the terms of the agreements governing the spin-off and the relationship between us and Kontoor Brands after the spin-off or any other commercial agreements entered into in the future between us and Kontoor Brands.
Most of our executive officers and non-employee directors currently own shares of the common stock of Kontoor Brands. The continued ownership of such common stock by our directors and executive officers following the spin-off creates or may create the appearance of a conflict of interest when these directors and executive officers are faced with decisions that could have different implications for us and Kontoor Brands.
ITEM 1B.    UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.    PROPERTIES.

The following is a summary of VF Corporation’s principal owned and leased properties as of March 30, 2019.
VF’s global headquarters are located in a 180,000 square foot, owned facility in Greensboro, North Carolina. VF owns other facilities in Greensboro, including the Jeans segment headquarters building. In addition, we own facilities in Stabio, Switzerland and lease offices in Hong Kong, China, which serve as our European and Asia-Pacific regional headquarters, respectively. We also own or lease segment and brand headquarters facilities throughout the world.
 
VF owns a 236,000 square foot facility in Appleton, Wisconsin that serves as a shared services center for certain Outdoor, Active and Work brands in North America. Additionally, we own and lease shared service facilities in Bornem, Belgium that support our European operations. Our sourcing hubs are located in Panama City, Panama and Hong Kong, China.
Our largest distribution centers are located in Prague, Czech Republic and Visalia, California. Additionally, we operate 38 other owned or leased distribution centers primarily in the U.S., but also in Argentina, Belgium, Canada, Chile, China, Mexico, the Netherlands and the United Kingdom. We operate 19 owned or


VF Corporation Fiscal 2019 Form 10-K 17



leased manufacturing plants primarily in Mexico, but also in the Dominican Republic, Honduras, Nicaragua and the U.S.
In addition to the principal properties described above, we lease many offices worldwide for sales and administrative purposes. We operate 1,551 retail stores across the Americas, European and
 
Asia-Pacific regions. Retail stores are generally leased under operating leases and include renewal options. We believe all facilities and machinery and equipment are in good condition and are suitable for VF’s needs.
ITEM  3.    LEGAL PROCEEDINGS.

There are no pending material legal proceedings, other than ordinary, routine litigation incidental to the business, to which VF or any of its subsidiaries is a party or to which any of their property is the subject.
ITEM  4.    MINE SAFETY DISCLOSURES.
Not applicable.


18 VF Corporation Fiscal 2019 Form 10-K



PART II
ITEM 5.    MARKET FOR VF’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

VF’s Common Stock is listed on the New York Stock Exchange under the symbol “VFC”. As of April 27, 2019 there were 3,281 shareholders of record. Quarterly dividends on VF Common Stock, when declared, are paid on or about the 20th day of June, September, December and March.
PERFORMANCE GRAPH:

The following graph compares the cumulative total shareholder return on VF Common Stock with that of the Standard & Poor’s (“S&P”) 500 Index and the S&P 1500 Apparel, Accessories & Luxury Goods Subindustry Index (“S&P 1500 Apparel Index”) for Fiscal 2014 through Fiscal 2019. The S&P 1500 Apparel Index at the end of Fiscal 2019 consisted of Capri Holdings Limited, Carter’s, Inc., Fossil, Inc., G-III Apparel Group, Ltd., Hanesbrands Inc., Movado Group, Inc., Oxford Industries, Inc., PVH Corp., Ralph Lauren
 
Corporation, Tapestry, Inc., Under Armour, Inc., Vera Bradley, Inc. and VF Corporation. The graph assumes that $100 was invested at the end of Fiscal 2013 in each of VF Common Stock, the S&P 500 Index and the S&P 1500 Apparel Index, and that all dividends were reinvested. The graph plots the respective values on the last trading day of Fiscal 2013 through Fiscal 2019. Past performance is not necessarily indicative of future performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF VF COMMON STOCK,
S&P 500 INDEX AND S&P 1500 APPAREL INDEX
VF Common Stock closing price on March 30, 2019 was $86.91
chart-fd65eab007b85d1288c.jpg
Company / Index
 
 
Base Period 12/28/13
 
 
1/3/15
 
 
1/2/16
 
 
12/31/16
 
 
12/30/17
 
 
3/30/19
 
VF Corporation
 
 
$
100.00

 
 
$
121.81

 
 
$
104.78

 
 
$
92.06

 
 
$
131.42

 
 
$
158.92

 
S&P 500 Index
 
 
100.00

 
 
114.11

 
 
115.71

 
 
129.55

 
 
157.84

 
 
171.51

 
S&P 1500 Apparel, Accessories & Luxury Goods
 
 
100.00

 
 
105.39

 
 
83.41

 
 
75.01

 
 
89.53

 
 
90.74

 


VF Corporation Fiscal 2019 Form 10-K 19



ISSUER PURCHASES OF EQUITY SECURITIES:

The following table sets forth VF’s repurchases of our Common Stock during the fiscal quarter ended March 30, 2019 under the share repurchase program authorized by VF’s Board of Directors in 2017.
 
Fiscal Period
 
Total Number of Shares Purchased
 
Weighted Average Price  Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Programs
 
Dollar Value of Shares that May Yet be Purchased Under the Program
December 30, 2018 — January 26, 2019
 

 
$

 

 
$
3,836,982,574

January 27, 2019 — February 23, 2019
 

 

 

 
3,836,982,574

February 24, 2019 — March 30, 2019
 

 

 

 
3,836,982,574

Total
 

 
 
 

 
 




20 VF Corporation Fiscal 2019 Form 10-K



ITEM 6.    SELECTED FINANCIAL DATA.

The following table sets forth selected consolidated financial data for the five years ended March 30, 2019 and transition period ended March 31, 2018. VF operates and reports using a 52/53 week fiscal year ending on the Saturday closest to March 31 of each year. VF previously used a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. All references to the periods ended March 2019, December 2017, December 2016 and December 2015 relate to the 52-week fiscal years ended March 30, 2019, December 30, 2017, December 31, 2016 and January 2, 2016, respectively, and all references to the period ended December 2014 relate to the 53-week fiscal year ended January 3, 2015. All references to the period ended March 2018 relate to the 13-week transition period ended March 31, 2018.
 
Unless otherwise indicated, the following disclosures reflect the Company’s continuing operations, including financial position metrics. Refer to Note 4 to VF’s consolidated financial statements included in this report for additional information regarding discontinued operations.
This selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and VF’s consolidated financial statements and accompanying notes included in this report. Historical results presented herein may not be indicative of future results.
(Dollars and shares in thousands, except per share amounts)
 
 
Year Ended March
 
 
Three Months Ended March
(Transition Period)
 
Year Ended December
 
 
2019
 
 
2018
 
2017
 
2016
 
2015
 
2014
SUMMARY OF OPERATIONS (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
$
13,848,660

 
 
$
3,045,446

 
$
11,811,177

 
$
11,026,147

 
$
10,996,393

 
$
10,831,889

Operating income (2)
 
 
1,675,840

 
 
310,065

 
1,513,029

 
1,455,458

 
1,680,419

 
1,697,172

Income from continuing operations
 
 
1,259,004

 
 
261,164

 
721,209

 
1,078,854

 
1,217,056

 
1,233,711

Earnings per common share from continuing operations – basic
 
 
$
3.19

 
 
$
0.66

 
$
1.81

 
$
2.59

 
$
2.86

 
$
2.85

Earnings per common share from continuing operations – diluted
 
 
3.14

 
 
0.65

 
1.79

 
2.56

 
2.82

 
2.80

Dividends per share
 
 
1.9400

 
 
0.4600

 
1.7200

 
1.5300

 
1.3300

 
1.1075

Dividend payout ratio (3)
 
 
61.7
%
 
 
70.7
%
 
96.2
%
 
59.9
%
 
47.2
%
 
39.5
%
FINANCIAL POSITION (4)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Working capital
 
 
$
2,011,853

 
 
$
1,256,941

 
$
1,353,983

 
$
2,378,198

 
$
2,033,498

 
$
2,215,491

Current ratio
 
 
1.8

 
 
1.4

 
1.5

 
2.4

 
2.1

 
2.5

Total assets
 
 
$
10,356,785

 
 
$
9,937,730

 
$
9,577,802

 
$
9,015,694

 
$
8,600,426

 
$
8,611,545

Long-term debt, less current maturities
 
 
2,115,884

 
 
2,212,555

 
2,187,789

 
2,039,180

 
1,401,820

 
1,403,919

Stockholders’ equity
 
 
4,298,516

 
 
3,688,096

 
3,719,900

 
4,940,921

 
5,384,838

 
5,630,882

Debt to total capital ratio (5)
 
 
39.3
%
 
 
50.4
%
 
44.0
%
 
31.9
%
 
25.6
%
 
20.2
%
Weighted average common shares outstanding
 
 
395,189

 
 
395,253

 
399,223

 
416,103

 
425,408

 
432,611

Book value per common share
 
 
$
10.83

 
 
$
9.35

 
$
9.40

 
$
11.93

 
$
12.62

 
$
13.01

OTHER STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
 
12.1
%
 
 
10.2
%
 
12.8
%
 
13.2
%
 
15.3
%
 
15.7
%
Return on invested capital (6) (7) 
 
 
18.2
%
 
 
4.0
%
 
10.5
%
 
15.4
%
 
17.1
%
 
17.1
%
Return on average stockholders’ equity (6)
 
 
33.3
%
 
 
7.4
%
 
18.9
%
 
23.8
%
 
25.3
%
 
22.5
%
Return on average total assets (6)
 
 
12.7
%
 
 
2.8
%
 
8.2
%
 
12.7
%
 
14.4
%
 
14.8
%
Cash provided (used) by operations (8)
 
 
$
1,664,223

 
 
$
(243,223
)
 
$
1,474,660

 
$
1,480,568

 
$
1,203,616

 
$
1,761,841

Cash dividends paid
 
 
767,061

 
 
181,373

 
684,679

 
635,994

 
565,275

 
478,933

(1) 
VF recorded non-operating losses on sale related to the divestitures of the Reef® brand business and Van Moer business, totaling $36.8 million in the year ended March 2019. The losses impacted after-tax income from operations by $33.1 million, basic earnings per share by $0.08 and diluted earnings per share by $0.08. Operating results for the year ended March 2019 include costs associated with the relocation of VF's global headquarters and certain brands to Denver, Colorado and separation and related expenses associated with the planned spin-off of the Jeans business. The costs impacted pretax operating income by $158.9 million, after-tax income from continuing operations by $120.0 million, basic earnings per share by $0.30 and diluted earnings per share by $0.30. VF recorded a $465.5 million provisional tax charge in December 2017 related to the transitional impact of the Tax Act. The charge impacted basic earnings per share by $1.17 and diluted earnings per share by $1.15. Operating results for the year ended December 2016 include charges for the impairment of goodwill and intangible assets and pension settlement. The charges impacted pretax operating income by $130.5 million, after-tax income from continuing operations by $95.5 million, basic earnings per share by $0.23 and diluted earnings per share by $0.23.


VF Corporation Fiscal 2019 Form 10-K 21



(2) 
Reflects adoption of accounting standards update 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" and the restatement of prior periods to conform to current year presentation. For the years ended December 2017, 2016, 2015 and 2014, operating income increased and other income (expense), net decreased by $9.9 million, $87.2 million, $35.6 million and $33.8 million, respectively. In the three months ended March 2018, operating income decreased and other income (expense), net increased by $1.3 million.
(3) 
Dividend payout ratio is defined as dividends per share divided by earnings per diluted share.
(4) 
VF early adopted the accounting standards update regarding intra-entity transfers in the first quarter of 2017, which resulted in a cumulative adjustment to retained earnings and reduction in other assets in the Consolidated Balance Sheet at January 1, 2017 of $237.8 million. VF adopted the accounting standards update regarding revenue recognition on April 1, 2018, which resulted in a cumulative adjustment to increase retained earnings by $2.0 million and had a material impact to the Consolidated Balance Sheet due to reclassifications of certain customer-related balances. Refer to Note 1 to VF’s consolidated financial statements for additional information.
(5) 
Total capital is defined as stockholders’ equity plus short-term and long-term debt.
(6) 
The numerator in the return calculations is defined as income from continuing operations plus total interest income/expense, net of taxes.
(7) 
Invested capital is defined as average stockholders’ equity plus average short-term and long-term debt.
(8) 
The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows. Accordingly, the information includes the results of continuing and discontinued operations.
ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

VF Corporation (together with its subsidiaries, collectively known as “VF” or the "Company”) is a global leader in the design, production, procurement, 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 — reshape our portfolio, transform our model, elevate direct-to-consumer and distort Asia.
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, denim,
 
backpack, luggage, accessory and apparel categories. Our products are marketed to consumers shopping in specialty stores, department stores, national chains, mass merchants, independently-operated partnership stores and with strategic digital partners, and our own direct-to-consumer operations, which includes VF-operated stores, concession retail stores and brand e-commerce sites.
VF is organized by groupings of businesses represented by its reportable segments for financial reporting purposes. The four reportable segments are Outdoor, Active, Work and Jeans.
BASIS OF PRESENTATION

VF changed to a 52/53 week fiscal year ending on the Saturday closest to March 31 of each year. VF previously used a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. All references to the years ended March 2019 ("2019"), December 2017 ("2017") and December 2016 ("2016") relate to the 52-week fiscal years ended March 30, 2019, December 30, 2017 and December 31, 2016, respectively. All references to the three months ended March 2018 and March 2017 relate to the 13-week transition period ended March 31, 2018 and the comparable 13-week period ended April 1, 2017, respectively. All references to the twelve months ended March 2018 ("2018") relate to the 52-week period ended March 31, 2018. This period, when presented in comparison to our results for the year ended March 2019, is provided as we believe this comparison is more meaningful to our reader's understanding of our Fiscal 2019 results of operations than a comparison to the year ended December 2017. The unaudited Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Cash Flows for the twelve months ended March 2018 and the three months ended March 2017 are presented at the end of the "Analysis of Results of Operations" section below for reference in the comparisons to the year ended March 2019 and the three months ended March 2018, respectively. The results for the twelve months ended March 2018 and the three months ended March 2017 are unaudited.
 
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 2019 foreign currency amounts below reflect the changes in foreign exchange rates from the twelve months ended March 2018 and their impact on translating foreign currencies into U.S. dollars and on foreign currency-denominated transactions in countries with highly inflationary economies. References to the year ended December 2017 foreign currency amounts below reflect the changes in foreign exchange rates from the year ended December 2016 and their impact on both translating foreign currencies into U.S. dollars and on transactions denominated in a foreign currency. References to the three months ended March 2018 foreign currency amounts below reflect the changes in foreign exchange rates from the three months ended March 2017 and their impact on both translating foreign currencies into U.S. dollars and on transactions denominated in a foreign currency. 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, such as Argentina, which is a highly inflationary economy.
In light of the recently completed portfolio management actions and organizational realignments, the Company realigned its


22 VF Corporation Fiscal 2019 Form 10-K


internal reporting structure to reflect the organizational changes to better support and assess the operations of the business. The chief operating decision maker allocates resources and assesses performance based on a global brand view with the new reportable segments: Outdoor, Active, Work and Jeans. In the tables below, the Company has recast historical financial information to reflect the new reportable segments. These changes had no impact on previously reported consolidated results of operations. Refer to additional discussion in the “Information by Reportable Segment” section below and Note 19 to VF's consolidated financial statements.
On October 2, 2017, VF acquired 100% of the outstanding shares of Williamson-Dickie Mfg. Co. ("Williamson-Dickie") and the business results have been included in the Work segment. On April 3, 2018, VF acquired 100% of the stock of Icebreaker Holdings Limited ("Icebreaker"). On June 1, 2018, VF acquired 100% of the stock of Icon-Altra LLC, plus certain assets in Europe ("Altra"). The business results for Icebreaker and Altra have been included in the Outdoor segment. All references to contributions from acquisitions below represent the operating results of Williamson-Dickie through the one-year anniversary of the acquisition and the operating results of Icebreaker and Altra from their respective dates of acquisition. Refer to Note 3 to VF's consolidated financial statements for additional information on acquisitions.
On October 5, 2018, VF completed the sale of the Van Moer business, which was included in the Work segment. On October 26, 2018, VF completed the sale of the Reef® brand business, which was included in the Active segment. All references to dispositions
 
below represent the impact of operating results of the Reef® brand and the Van Moer business, beginning in the period of disposition.
The Nautica® brand business, the Licensing Business (which comprised the Licensed Sports Group and JanSport® brand collegiate businesses), and the former Contemporary Brands segment have been reported as discontinued operations in our Consolidated Statements of Income, and the related held-for-sale assets and liabilities have been presented as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through their respective dates of disposal. 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.
On August 13, 2018, VF announced its intention to spin-off its Jeans business, which includes the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF Outlet business. The spin-off creates two independent, publicly traded companies. The transaction is expected to be tax-free to VF and its shareholders and is effected through a pro-rata distribution of the new company’s stock to existing VF shareholders whereby each VF shareholder will receive one share of the new company's stock for every seven shares of VF stock held on the record date. The spin-off, which was completed after March 30, 2019 on May 22, 2019, is not reflected in our historical financial statements.
Refer to Note 4 to VF’s consolidated financial statements for additional information on discontinued operations and other divestitures.
HIGHLIGHTS OF THE YEAR ENDED MARCH 2019

Year ended March 2019 revenues were up 12% to $13.8 billion compared to the twelve months ended March 2018, primarily due to the $1.0 billion contribution from organic growth and a $696.3 million contribution from acquisitions, including a 1% unfavorable impact from foreign currency.
Active segment revenues increased 16% over the twelve months ended March 2018 to $4.7 billion, including a 2% unfavorable impact from foreign currency.
Outdoor segment revenues increased 9% over the twelve months ended March 2018 to $4.6 billion, including a $224.4 million contribution from acquisitions and a 1% unfavorable impact from foreign currency.
Direct-to-consumer revenues increased 14% over the twelve months ended March 2018, including a 1% unfavorable impact from foreign currency and a 3-percentage point contribution from acquisitions. Direct-to-consumer revenues accounted for 33% of VF’s total revenues in the year ended March 2019. VF opened 110 retail stores in the year ended March 2019. E-commerce revenues increased 32% in the year ended March 2019 compared to the twelve months ended March 2018, including a 1% unfavorable impact from foreign currency and a 9-percentage point contribution from acquisitions.
International revenues increased 10% over the twelve months ended March 2018, including a 3% unfavorable impact from foreign currency and a 6-percentage point contribution from acquisitions. International revenues represented 41% of VF’s total revenues in the year ended March 2019.
 
Gross margin increased 10 basis points to 50.7% in the year ended March 2019 compared to the twelve months ended March 2018, reflecting benefits from a mix-shift to higher margin businesses and increased pricing, partially offset by costs related to the acquisition, integration and separation of businesses and certain increases in product costs.
Cash flow from operations was $1.7 billion in the year ended March 2019.
Earnings per share increased 63% to $3.14 in the year ended March 2019 from $1.92 in the twelve months ended March 2018. The twelve months ended March 2018 included a $1.15 negative transitional impact from the enactment of the Tax Cuts and Jobs Act ("Tax Act") compared to a $0.09 negative impact in the year ended March 2019 due to adjustments on provisional amounts recorded. The increase was also driven by organic growth in the Active, Outdoor and Work segments, continued strength in our direct-to-consumer and international businesses and contributions from acquisitions. These improvements were partially offset by expenses related to the acquisition, integration and separation of businesses, costs related to relocation and other strategic business decisions and declines in the Jeans segment.
VF increased the quarterly dividend rate by 11% in the year ended March 2019, marking the 46th consecutive year of increase in the rate of dividends paid per share.
VF repurchased $150.7 million of its Common Stock and paid $767.1 million in cash dividends, returning $917.8 million to stockholders.


VF Corporation Fiscal 2019 Form 10-K 23


ANALYSIS OF RESULTS OF OPERATIONS
Consolidated Statements of Income
The following table presents a summary of the changes in net revenues for the year ended March 2019 compared to the twelve months ended March 2018 and the year ended December 2017 compared to the year ended December 2016:
(In millions)
 
Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)
 
 
Year Ended December 2017 Compared to Year Ended December 2016
Net revenues — prior period
 
$
12,356.3

 
 
$
11,026.1

Organic growth
 
1,039.0

 
 
489.3

Acquisitions
 
696.3

 
 
247.2

Dispositions
 
(89.0
)
 
 

Impact of foreign currency
 
(153.9
)
 
 
48.6

Net revenues — current period
 
$
13,848.7

 
 
$
11,811.2


Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)

VF reported a 12% increase in revenues in 2019. The 2019 results were driven by organic growth in the Active, Outdoor and Work segments, continued strength in our direct-to-consumer and international businesses and contributions from acquisitions. The increases were partially offset by an unfavorable impact from foreign currency, lower revenues due to dispositions and declines in the Jeans segment. International sales grew in every region in 2019.
 
Year Ended December 2017 Compared to Year Ended December 2016

VF reported a 7% increase in revenues in 2017. The 2017 results were driven by increases in the Active and Outdoor segments and continued strength in our direct-to-consumer and international businesses. The increase was also attributable to growth in the Work segment, which included a $247.2 million contribution from the Williamson-Dickie acquisition, which closed on October 2, 2017. These increases were offset by declines in the Jeans segment. International sales grew in every region in 2017.
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 Income:
 
 
Year Ended
March 2019
 
 
Twelve Months Ended March
2018 
(unaudited)
 
Year Ended December
 
 
 
 
 
2017
 
2016
Gross margin (net revenues less cost of goods sold)
 
50.7
%
 
 
50.6
%
 
50.5
%
 
49.3
%
Selling, general and administrative expenses
 
38.6

 
 
38.2

 
37.7

 
35.4

Impairment of goodwill and intangible assets
 

 
 

 

 
0.7

Operating income
 
12.1
%
 
 
12.4
%
 
12.8
%
 
13.2
%

Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)
 
Gross margin increased 10 basis points to 50.7% in 2019 compared to 50.6% in 2018. Gross margin in 2019 was positively impacted by a mix-shift to higher margin businesses and increased pricing, partially offset by $45.9 million of costs related to the acquisition, integration and separation of businesses, and costs related to the relocation of our global headquarters and certain brands to Denver, Colorado.
Selling, general and administrative expenses as a percentage of total revenues increased 40 basis points in 2019 compared to 2018. This increase is primarily due to $186.7 million of expenses related to the acquisition, integration and separation of businesses, and relocation of our global headquarters and certain brands to Denver, Colorado. The increase is also due to continued investments in our key strategic growth initiatives. These costs were partially offset by leverage of operating expenses on higher revenues.
In 2019, operating margin decreased 30 basis points, to 12.1% from 12.4% in 2018, primarily due to the items described above.
Net interest expense decreased $1.4 million to $85.4 million in 2019. The decrease in net interest expense was due to higher
 
international bank balances in high yielding currencies and the payoff of the $250.0 million of 5.95% fixed-rate notes on November 1, 2017, which was partially offset by higher interest rates on increased levels of short-term borrowings.
Outstanding interest-bearing debt averaged $3.4 billion for both 2019 and 2018, with short-term borrowings representing 35.3% and 30.9% of average debt outstanding for the respective years. The weighted average interest rates on outstanding debt were 3.1% in 2019 and 2.9% in 2018.
Other income (expense), net primarily consists of foreign currency gains and losses, the funding fee charged on the sale of our trade receivables, other components of net periodic pension cost (excluding the service cost component) and non-operating gains and losses. Other income (expense) netted to $(63.0) million and $(1.8) million in 2019 and 2018, respectively. Included in other income (expense), net in 2019 is the loss on sale of the Reef® brand business of $14.4 million and loss on sale of $22.4 million related to the divestiture of the Van Moer business.
The effective income tax rate was 17.6% in 2019 compared to 46.6% in 2018. The effective income tax rate is substantially lower in 2019 when compared to 2018 primarily due to discrete tax expense


24 VF Corporation Fiscal 2019 Form 10-K


associated with the Tax Act. In December 2017, VF recognized a provisional charge of approximately $465.5 million to reflect the impacts resulting from the Tax Act, primarily comprised of approximately $512.4 million related to the transition tax and approximately $89.5 million of tax benefits related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%. Other provisional charges of $42.6 million were primarily related to U.S. federal and state tax on foreign income and dividends and establishing a deferred tax liability for foreign withholding taxes as the Company is not asserting indefinite reinvestment on short-term liquid assets of certain foreign subsidiaries. All other foreign earnings, including basis differences of certain foreign subsidiaries, continue to be considered indefinitely reinvested.
The 2019 effective income tax rate included a net discrete tax expense of $18.9 million, which included $37.3 million net tax expense related to adjustments to provisional amounts recorded in 2017 under the Tax Act, $31.9 million of tax benefit related to stock compensation, $14.3 million of net tax expense related to unrecognized tax benefits and interest, $1.9 million of tax benefit related to adjustments of previously recorded amounts based on proposed regulations, and $1.2 million of tax expense related to adjustments to previously recognized state income tax credits. The $18.9 million net discrete tax expense in 2019 increased the effective income tax rate by 1.3% compared to an unfavorable 29.4% impact of discrete items for 2018. Excluding discrete items, the effective tax rate during 2019 decreased by approximately 0.9% primarily due to a lower US corporate income tax rate that was effective beginning January 1, 2018. The international effective tax rate was 11.6% for 2019.
As a result of the above, income from continuing operations in 2019 was $1.3 billion ($3.14 per diluted share), compared to $0.8 billion ($1.92 per diluted share) in 2018.
Refer to additional discussion in the “Information by Reportable Segment” section below.
Year Ended December 2017 Compared to Year Ended December 2016
Gross margin improved 120 basis points to 50.5% in 2017 compared to 49.3% in 2016, reflecting a 180 basis point benefit from pricing, a mix-shift toward higher margin businesses and lower restructuring costs, which was partially offset by an unfavorable 60 basis point impact from foreign currency.
Selling, general and administrative expenses as a percentage of total revenues increased 230 basis points in 2017 compared to 2016. This increase is primarily due to investments in our key growth priorities, which include direct-to-consumer, product innovation, demand creation and technology initiatives. The increases were partially offset by lower restructuring costs in 2017.
In 2017, operating margin decreased 40 basis points, to 12.8% from 13.2% in 2016. In addition to the items described above, the operating margin decrease was partially offset by a 70 basis point increase from goodwill and intangible asset impairments in 2016 that did not recur in 2017.
Net interest expense increased $0.3 million to $85.9 million in 2017. The increase in net interest expense was due to higher interest rates on short-term borrowings and higher interest on long-term debt balances due to a full year of interest on the €850 million euro-denominated 0.625% fixed-rate notes issued in September 2016, which were partially offset by the payoff of the $250.0 million of 5.95% fixed-rate notes on November 1, 2017 and an increase in international short-term investment rates.
 
Outstanding interest-bearing debt averaged $3.2 billion for 2017 compared to $2.6 billion for 2016, with short-term borrowings representing 27% and 37% of average debt outstanding for the respective years. The weighted average interest rates on outstanding debt were 3.1% in 2017 and 3.5% in 2016, as the impact of the issuance of €850 million euro-denominated 0.625% fixed-rate notes in September of 2016 was offset by higher short-term debt rates.
Other income (expense), net primarily consists of foreign currency gains and losses, the funding fee charged on the sale of our trade receivables, other components of net periodic pension cost (excluding the service cost component) and non-operating gains and losses. Other income (expense) netted to $(10.7) million and $(85.2) million in 2017 and 2016, respectively. A pension settlement charge of $50.9 million was included in 2016, which did not recur in 2017.
The effective income tax rate was 49.1% in 2017 compared to 16.0% in 2016. The effective income tax rate is substantially higher in 2017 when compared to 2016 primarily due to discrete tax expense associated with the Tax Act. The Tax Act reduces the federal tax rate on U.S. earnings to 21% and moves from a global taxation regime to a modified territorial regime. As part of the legislation, U.S. companies are required to pay a tax on historical earnings generated offshore that have not been repatriated to the U.S. Additionally, revaluation of deferred tax asset and liability positions at the lower federal base rate of 21% is also required. The transitional impact of the Tax Act resulted in a provisional net charge of $465.5 million, or $1.15 per share, during the three months ended December 2017. This amount, which is included in the income taxes line item in the Consolidated Statements of Income, is primarily comprised of approximately $512.4 million related to the transition tax and approximately $89.5 million tax benefit related to revaluing U.S. deferred tax assets and liabilities using the new U.S. corporate tax rate of 21%. Other provisional charges of $42.6 million were primarily related to U.S. federal and state tax on foreign income and dividends and establishing a deferred tax liability for foreign withholding taxes as the Company is not asserting indefinite reinvestment on short-term liquid assets of certain foreign subsidiaries. All other foreign earnings, including basis differences of certain foreign subsidiaries, continue to be considered indefinitely reinvested.
The 2017 effective income tax rate included a net discrete tax expense of $438.9 million, which included the provisional net charge of $465.5 million related to the Tax Act, $25.2 million of tax benefits related to stock compensation, $2.9 million of net tax benefit related to the realization of previously unrecognized tax benefits and interest, and $1.9 million of discrete tax expense related to the effects of tax rate changes, exclusive of the Tax Act. The $438.9 million net discrete tax expense in 2017 increased the effective income tax rate by 31.0% compared to a favorable 3.4% impact of discrete items in 2016. Without discrete items, the effective tax rate during 2017 decreased by approximately 1.3% primarily due to the negative tax impact related to the 2016 goodwill impairment. The international effective tax rate was 13.1% and 10.9% for 2017 and 2016, respectively.
As a result of the above, income from continuing operations in 2017 was $0.7 billion ($1.79 per diluted share), compared to $1.1 billion ($2.56 per diluted share) in 2016.
Refer to additional discussion in the “Information by Reportable Segment” section below.


VF Corporation Fiscal 2019 Form 10-K 25


Transition Period Three Months Ended March 2018 Compared to Three Months Ended March 2017 (unaudited)
The following table presents a summary of the changes in net revenues from the comparable period in 2017: 
(In millions)
Three Months Ended March
Net revenues — 2017
$
2,500.3

Organic growth
191.6

Acquisitions
233.1

Impact of foreign currency
120.4

Net revenues — 2018
$
3,045.4


VF reported a 22% increase in revenues for the three months ended March 2018 compared to the 2017 period. The revenue increase was attributable to the Williamson-Dickie acquisition, organic growth in the Active segment and continued strength in our direct-to-consumer and international businesses. These increases were partially offset by declines in the Jeans segment. Excluding the
 
impacts from foreign currency, international sales grew in every region in the three months ended March 2018.
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 Income:
 
Three Months Ended March
 
2018
 
2017
(unaudited)
Gross margin (net revenues less cost of goods sold)
50.5
%
 
50.3
%
Selling, general and administrative expenses
40.4

 
38.5

Operating income
10.2
%
 
11.7
%

Gross margin increased 20 basis points in the three months ended March 2018 compared to the 2017 period. Gross margin was favorably impacted by increases in pricing, a mix-shift to higher margin businesses in the Outdoor and Active segments, and foreign currency changes, offset by lower margins attributable to the Williamson-Dickie acquisition and certain increases in product costs.
Selling, general and administrative expenses as a percentage of total revenues increased 190 basis points during the three months ended March 2018 compared to the 2017 period. The increase was due to expenses related to the acquisition and integration of businesses and higher investments in our key growth priorities, which include demand creation, customer fulfillment, direct-to-consumer and product innovation. Higher compensation costs also impacted the three months ended March 2018.
Net interest expense increased $1.0 million during the three months ended March 2018 compared to the 2017 period. This increase was due to higher levels of short-term borrowings at higher interest rates compared to 2017, which was partially offset by lower interest on long-term debt due to the payoff of the $250.0 million of 5.95% fixed-rate notes on November 1, 2017. Total outstanding debt averaged $3.2 billion in the three months ended March 2018 and $2.6 billion in the same period in 2017, with weighted average interest rates of 2.9% and 3.6%, respectively.
The effective income tax rate for the three months ended March 2018 was 11.2% compared to 20.8% in the three months ended
 
March 2017. The three months ended March 2018 included a net discrete tax benefit of $16.1 million, which included a $12.1 million tax benefit related to stock compensation, a $7.3 million net tax benefit related to the realization of previously unrecognized tax benefits and interest, an $8.8 million tax expense related to the change of a prior estimate of taxes payable, and a $5.1 million net tax benefit related to adjustments to provisional amounts recorded in 2017 under the Tax Act. The $16.1 million net discrete tax benefit in the three months ended March 2018 reduced the effective income tax rate by 5.5% compared to a favorable 0.4% impact of discrete items in the three months ended March 2017. Without discrete items, the effective income tax rate for the three months ended March 2018 decreased by 4.5% compared with the estimated annual effective tax rate applied to the three months ended March 2017 primarily due to a higher percentage of income in lower tax rate jurisdictions, partially offset by an unfavorable impact from the Tax Act.
As a result of the above, net income in the three months ended March 2018 was $261.2 million ($0.65 per share) compared to $213.3 million ($0.51 per share) in the 2017 period.
Refer to additional discussion in the “Information by Reportable Segment” section below.


26 VF Corporation Fiscal 2019 Form 10-K


Information by Reportable Segment

As discussed above, VF realigned its internal reporting structure in Fiscal 2019 to reflect organizational changes to better support and assess the operations of the business. The new reportable segments are: Outdoor, Active, Work and Jeans. 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. The Company has recast historical financial information to reflect the new reportable segments. These changes had no impact on previously reported consolidated results of operations.
 
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 19 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 2019 Compared to Twelve Months Ended March 2018 (unaudited) and Year Ended December 2017 Compared to Year Ended December 2016
The following tables present a summary of the changes in segment revenues and profit in the year ended March 2019 compared to the twelve months ended March 2018 and the year ended December 2017 compared to the year ended December 2016:
Segment Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)
 
(In millions)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Segment revenues — Twelve Months Ended March 2018 (unaudited)
$
4,261.9

 
$
4,054.5

 
$
1,342.0

 
$
2,586.6

 
$
111.3

 
$
12,356.3

 
Organic growth
222.2

 
776.0

 
79.4

 
(51.4
)
 
12.8

 
1,039.0

 
Acquisitions
224.4

 

 
471.9

 

 

 
696.3

 
Dispositions

 
(64.4
)
 
(24.6
)
 

 

 
(89.0
)
 
Impact of foreign currency
(59.5
)
 
(44.3
)
 
(6.7
)
 
(43.4
)
 

 
(153.9
)
 
Segment revenues — Year Ended March 2019
$
4,649.0

 
$
4,721.8

 
$
1,862.0

 
$
2,491.8

 
$
124.1

 
$
13,848.7

 
 
 
 
 
Year Ended December 2017 Compared to Year Ended December 2016
 
(In millions)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Segment revenues — Year Ended December 2016
$
4,123.4

 
$
3,318.4

 
$
776.2

 
$
2,690.1

 
$
118.0

 
$
11,026.1

 
Organic growth
54.3

 
459.6

 
75.1

 
(94.9
)
 
(4.8
)
 
489.3

 
Acquisition

 

 
247.2

 

 

 
247.2

 
Impact of foreign currency
31.3

 
13.7

 
1.2

 
2.4

 

 
48.6

 
Segment revenues — Year Ended December 2017
$
4,209.0

 
$
3,791.7

 
$
1,099.7

 
$
2,597.6

 
$
113.2

 
$
11,811.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment Profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)
 
(In millions)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Segment profit — Twelve Months Ended March 2018 (unaudited)
$
508.8

 
$
894.2

 
$
166.0

 
$
395.8

 
$
(4.0
)
 
$
1,960.8

 
Organic growth
27.1

 
247.3

 
17.0

 
(109.3
)
 
4.5

 
186.6

 
Acquisitions
21.1

 

 
39.7

 

 

 
60.8

 
Dispositions

 
(9.6
)
 
(1.4
)
 

 

 
(11.0
)
 
Impact of foreign currency
(12.6
)
 
(6.2
)
 
(0.6
)
 
14.0

 

 
(5.4
)
 
Segment profit — Year Ended March 2019
$
544.4

 
$
1,125.7

 
$
220.7

 
$
300.5

 
$
0.5

 
$
2,191.8

 
 
 
 
 
Year Ended December 2017 Compared to Year Ended December 2016
 
(In millions)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
 
Segment profit — Year Ended December 2016
$
594.5

 
$
628.2

 
$
137.3

 
$
479.2

 
$
(4.9
)
 
$
1,834.3

 
Organic growth
(35.0
)
 
211.8

 
14.2

 
(76.6
)
 
1.9

 
116.3

 
Acquisition

 

 
11.0

 

 

 
11.0

 
Impact of foreign currency
(22.0
)
 
(34.2
)
 
1.1

 
3.9

 

 
(51.2
)
 
Segment profit — Year Ended December 2017
$
537.5

 
$
805.8

 
$
163.6

 
$
406.5

 
$
(3.0
)
 
$
1,910.4

 



VF Corporation Fiscal 2019 Form 10-K 27


Transition Period Three Months Ended March 2018 Compared to Three Months Ended March 2017 (unaudited)
The following tables present a summary of the changes in segment revenues and profit in the three months ended March 2018 from the comparable period in 2017:
Segment Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 2018 Compared to Three Months Ended March 2017 (unaudited)
(In millions)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
Segment revenues — Three Months Ended March 2017 (unaudited)
$
835.1

 
$
808.8

 
$
200.0

 
$
634.3

 
$
22.1

 
$
2,500.3

Organic growth
7.1

 
208.9

 
8.5

 
(31.0
)
 
(1.9
)
 
191.6

Acquisition

 

 
233.1

 

 

 
233.1

Impact of foreign currency
45.8

 
53.9

 
0.7

 
20.0

 

 
120.4

Segment revenues — Three Months Ended March 2018
$
888.0

 
$
1,071.6

 
$
442.3

 
$
623.3

 
$
20.2

 
$
3,045.4

 
 
 
 
 
 
 
 
 
 
 
 
Segment Profit:
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 2018 Compared to Three Months Ended March 2017 (unaudited)
(In millions)
Outdoor
 
Active
 
Work
 
Jeans
 
Other
 
Total
Segment profit — Three Months Ended March 2017 (unaudited)
$
73.5

 
$
149.3

 
$
37.7

 
$
114.5

 
$
(2.3
)
 
$
372.7

Organic growth
(29.0
)
 
76.0

 
(3.4
)
 
(17.9
)
 
(0.8
)
 
24.9

Acquisition

 

 
4.8

 

 

 
4.8

Impact of foreign currency
0.2

 
12.3

 
0.9

 
7.2

 

 
20.6

Segment profit — Three Months Ended March 2018
$
44.7

 
$
237.6

 
$
40.0

 
$
103.8

 
$
(3.1
)
 
$
423.0



28 VF Corporation Fiscal 2019 Form 10-K


The following sections outline 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 December
(Dollars in millions)
 
Year Ended March 2019
 
 
Twelve Months Ended March 2018
(unaudited)
 
 
Percent Change
 
 
2017
 
2016
 
Percent Change
Segment revenues
 
$
4,649.0

 
 
$
4,261.9

 
 
9.1
%
 
 
$
4,209.0

 
$
4,123.4

 
2.1
 %
Segment profit
 
544.4

 
 
508.8

 
 
7.0
%
 
 
537.5

 
594.5

 
(9.6
)%
Operating margin
 
11.7
%
 
 
11.9
%
 
 
 
 
 
12.8
%
 
14.4
%
 


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

Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)
Global revenues for Outdoor increased 9% in 2019, driven by growth in the wholesale and direct-to-consumer channels, including a 1% unfavorable impact due to foreign currency. Revenues in the Americas region increased 8% in 2019, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region increased 9%, including a 3% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region increased 12% in 2019, with a 2% unfavorable impact from foreign currency. Included in these results are revenues from the Icebreaker acquisition of $174.2 million and revenues from the Altra acquisition of $50.2 million. Excluding revenues from Icebreaker and Altra, Outdoor revenues increased 4% in 2019, including a 1% unfavorable impact from foreign currency.
Global revenues for The North Face® brand increased 9% in 2019, including a 1% unfavorable impact from foreign currency. The increase was due to strong operational growth across all channels and regions, including strong performance in the wholesale channel and growth in the direct-to-consumer channel driven by an expanding e-commerce business, comparable store growth and new store openings.
Global revenues for the Timberland® brand (excluding Timberland PRO®) decreased 1% in 2019, as slight increases in the direct-to-consumer and wholesale channels were more than offset by a 2% unfavorable impact from foreign currency. Increases in the direct-to-consumer channel were driven by growth in the Americas region and China, as well as e-commerce growth across all regions, partially offset by declines across the Europe and Asia-Pacific (excluding China) regions.
Global direct-to-consumer revenues for Outdoor increased 7% in 2019, including a 1% unfavorable impact from foreign currency. Excluding revenues from acquisitions, global direct-to-consumer revenues increased 3%, including a 1% unfavorable impact from foreign currency. The increase was primarily due to a growing e-commerce business across all regions and new store openings. Global wholesale revenues for Outdoor increased 11%, driven by global growth in The North Face® brand and acquisitions, and included a 1% unfavorable impact from foreign currency. Excluding revenues from acquisitions, wholesale revenues increased 4%, including a 2% unfavorable impact from foreign currency. The increase was driven by growth across all regions.
 
Operating margin decreased 20 basis points in 2019 driven by costs related to the relocation of certain brands to Denver, Colorado, partially offset by leverage of operating expenses on higher revenues.
Year Ended December 2017 Compared to Year Ended December 2016
Global revenues for Outdoor increased 2% in 2017, driven by growth in the direct-to-consumer channel, including a 1% favorable impact from foreign currency. Revenues in the Americas region decreased 4% in 2017, reflecting a 5% decrease in the US, partially offset by 9% growth in the non-U.S. Americas region, which included a 3% favorable impact from foreign currency. Revenues in the Europe region increased 15%, including a 2% favorable impact from foreign currency. Revenues in the Asia-Pacific region increased 1% in 2017 due to foreign currency.
Global revenues for The North Face® brand increased 4% in 2017, as growth in the direct-to-consumer channel, driven by comparable store and e-commerce growth, and a 1% favorable impact from foreign currency, were partially offset by relatively flat wholesale revenues. Global wholesale revenues for The North Face® brand were tempered by U.S. retailer bankruptcies, lower year-over-year off-price shipments and efforts to manage inventory levels in certain markets.
Global revenues for the Timberland® brand (excluding Timberland PRO®) increased 1% in 2017, as growth in the direct-to-consumer channel, driven by comparable store and e-commerce growth, and a 2% favorable impact from foreign currency, were partially offset by declines in the wholesale channel.
Global direct-to-consumer revenues for Outdoor grew 9% in 2017, driven by an expanding e-commerce business, comparable store growth and a 1% favorable impact from foreign currency. Global wholesale revenues for Outdoor decreased 2% in 2017, driven by the above-mentioned U.S. retailer bankruptcies, lower year-over-year off-price shipments and efforts to manage inventory levels in certain markets.
Operating margin decreased 160 basis points in 2017, reflecting increased investments in direct-to-consumer, product and innovation, demand creation and technology, partially offset by gross margin expansion driven by a mix-shift to higher margin businesses, lower product costs and pricing.


VF Corporation Fiscal 2019 Form 10-K 29


Transition Period Three Months Ended March 2018 Compared to Three Months Ended March 2017 (unaudited)
 
 
Three Months Ended March
(Dollars in millions)
 
2018
 
2017
(unaudited)
 
Percent
Change
Segment revenues
 
$
888.0

 
$
835.1

 
6.3
 %
Segment profit
 
44.7

 
73.5

 
(39.2
)%
Operating margin
 
5.0
%
 
8.8
%
 
 

Global revenues for Outdoor increased 6% in the three months ended March 2018 compared to 2017, driven by an overall 5% favorable impact due to foreign currency as well as growth in the direct-to-consumer channel, partially offset by a decline in the wholesale channel. Revenues in the Americas region decreased 5% in the three months ended March 2018. Revenues in the Europe region increased 24%, including a 13% favorable impact from foreign currency. Revenues in the Asia-Pacific region increased 5%, with a 6% favorable impact from foreign currency.
Global revenues for The North Face® brand increased 11% in the three months ended March 2018 compared to the 2017 period. The increase in the period was primarily due to growth in the direct-to-consumer channel, driven by comparable store and e-commerce growth, and an overall 4% favorable impact from foreign currency. Increases in the wholesale channel were driven by growth in the Europe region and a favorable foreign currency impact, partially offset by declines in the Americas and Asia-Pacific regions.
Global revenues for the Timberland® brand (excluding Timberland PRO®) increased 5% in the three months ended March 2018 due
 
to growth in the direct-to-consumer channel, driven by the Europe region, and a 7% favorable impact from foreign currency. The growth in the direct-to-consumer channel was due to comparable store and e-commerce growth, and was more than offset by declines in the wholesale channel.
Global direct-to-consumer revenues for Outdoor grew 18% in the three months ended March 2018 compared to the 2017 period. Growth in the direct-to-consumer channel was driven by an expanding e-commerce business, comparable store growth and a 6% favorable impact from foreign currency. Wholesale revenues decreased 1% in the three months ended March 2018, driven by declines in the Asia-Pacific and Americas regions, partially offset by growth in the Europe region and a 5% favorable impact from foreign currency.
Operating margin decreased 380 basis points in the three months ended March 2018 compared to the 2017 period, primarily due to increased selling, general and administrative investments in direct-to-consumer and demand creation initiatives and higher product costs, partially offset by a mix-shift to higher margin businesses.


30 VF Corporation Fiscal 2019 Form 10-K


Active
 
 
 
 
 
 
 
 
 
 
 
Year Ended December
(Dollars in millions)
 
Year Ended March 2019
 
 
Twelve Months Ended March 2018
(unaudited)
 
 
Percent Change
 
 
2017
 
2016
 
Percent Change
Segment revenues
 
$
4,721.8

 
 
$
4,054.5

 
 
16.5
%
 
 
$
3,791.7

 
$
3,318.4

 
14.3
%
Segment profit
 
1,125.7

 
 
894.2

 
 
25.9
%
 
 
805.8

 
628.2

 
28.3
%
Operating margin
 
23.8
%
 
 
22.1
%
 
 
 
 
 
21.3
%
 
18.9
%
 


The Active segment includes the following brands: Vans®, Kipling®, Napapijri®, Eastpak®, JanSport®, Reef® (through the date of sale) and Eagle Creek®.

Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)
Global revenues for Active increased 16% in 2019, driven by growth across all channels and regions, including a 2% unfavorable impact from foreign currency. Revenues in the Americas region increased 21% in 2019, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region increased 7%, including a 2% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region increased 17% in 2019, including a 1% unfavorable impact from foreign currency. The year ended March 2019 was negatively impacted by the sale of the Reef® brand business in October 2018, which resulted in lower revenues of $64.4 million. Excluding the impact of this divestiture, revenues increased 18% compared to the 2018 period, including a 1% unfavorable impact from foreign currency.
Vans® brand global revenues increased 24% in 2019, including a 2% unfavorable impact from foreign currency. The increase was due to strong operational growth across all channels and regions, including strong wholesale performance and direct-to-consumer growth driven by an expanding e-commerce business, comparable store growth and new store openings.
Global direct-to-consumer revenues for Active grew 22% in 2019, including a 1% unfavorable impact from foreign currency. Growth in the direct-to-consumer channel was driven by a growing e-commerce business, comparable store growth and new store openings. Global wholesale revenues for Active increased 12% in 2019, driven by global growth in the Vans® brand, and included a 1% unfavorable impact from foreign currency.
Operating margin increased 170 basis points in 2019, reflecting gross margin expansion driven by a mix-shift to higher margin businesses and products, and leverage of operating expenses on higher revenues.
 
Year Ended December 2017 Compared to Year Ended December 2016
Global revenues for Active increased 14% in 2017, driven by growth in the direct-to-consumer and wholesale channels. Revenues in the Americas region increased 15% in 2017, including a 1% favorable impact from foreign currency. Revenues in the Europe and Asia-Pacific regions each increased 14%, including a 1% favorable impact from foreign currency.
Vans® brand global revenues increased 19% in 2017, reflecting strong operational growth in both the direct-to-consumer and wholesale channels. The growth in the direct-to-consumer channel was driven by strong comparable store and e-commerce growth.
Global direct-to-consumer revenues for Active grew 25% in 2017, driven by an expanding e-commerce business and comparable store growth. Wholesale revenues increased 7% in 2017, including a 1% favorable impact from foreign currency. The increase was driven by growth in the Vans® brand and Europe region.
Operating margin increased 240 basis points in 2017. The increase was due to gross margin expansion driven by a mix-shift to higher margin businesses, pricing and lower product costs, partially offset by increased investments in direct-to-consumer, product and innovation, demand creation and technology.


VF Corporation Fiscal 2019 Form 10-K 31


Transition Period Three Months Ended March 2018 Compared to Three Months Ended March 2017 (unaudited)
 
 
Three Months Ended March
(Dollars in millions)
 
2018
 
2017
(unaudited)
 
Percent
Change
Segment revenues
 
$
1,071.6

 
$
808.8

 
32.5
%
Segment profit
 
237.6

 
149.3

 
59.2
%
Operating margin
 
22.2
%
 
18.5
%
 
 

Global revenues for Active increased 32% in the three months ended March 2018 compared to 2017, driven by growth in the direct-to-consumer and wholesale channels and an overall 6% favorable impact due to foreign currency. Revenues in the Americas region increased 35% in the three months ended March 2018, including a 1% increase from foreign currency. Revenues in the Europe region increased 33%, including a 15% favorable impact from foreign currency. Revenues in the Asia-Pacific region increased 20%, with a 7% favorable impact from foreign currency.
Vans® brand global revenues increased 45% in the three months ended March 2018 compared to the 2017 period. The increase in the period was due to strong operational growth in both the wholesale and direct-to-consumer channels in all regions, including an overall 6% favorable impact from foreign currency. The growth in the direct-to-consumer channel was driven by strong comparable store and e-commerce growth.
 
Global direct-to-consumer revenues for Active grew 45% in the three months ended March 2018 compared to the 2017 period. Growth in the direct-to-consumer channel was driven by an expanding e-commerce business, comparable store growth and a 7% favorable impact from foreign currency. Wholesale revenues increased 25% in the three months ended March 2018, driven by global growth in the Vans® brand and broad-based growth across our brands in the Europe region, in addition to a 7% favorable impact from foreign currency.
Operating margin increased 370 basis points in the three months ended March 2018 compared to the 2017 period, reflecting gross margin expansion driven by a mix-shift to higher margin businesses, pricing and lower product costs, partially offset by increased selling, general and administrative investments in direct-to-consumer and demand creation initiatives.
Work
 
 
 
 
 
 
 
 
 
 
 
Year Ended December
(Dollars in millions)
 
Year Ended March 2019
 
 
Twelve Months Ended March 2018
(unaudited)
 
 
Percent Change
 
 
2017
 
2016
 
Percent Change
Segment revenues
 
$
1,862.0

 
 
$
1,342.0

 
 
38.7
%
 
 
$
1,099.7

 
$
776.2

 
41.7
%
Segment profit
 
220.7

 
 
166.0

 
 
33.0
%
 
 
163.6

 
137.3

 
19.1
%
Operating margin
 
11.9
%
 
 
12.4
%
 
 
 
 
 
14.9
%
 
17.7
%
 


The Work segment consists of occupational apparel and uniform product categories including the Bulwark®, Red Kap®, Timberland PRO®, Wrangler® RIGGS and Horace Small® brand industrial businesses, as well as the workwear apparel brands from the Williamson-Dickie acquisition including Dickies®, Workrite®, Walls®, Terra® and Kodiak®. The Work segment also includes the results of certain transition services related to the sale of the Licensed Sports Group (the "LSG transition services") that commenced in the second quarter of 2017.

Year Ended March 2019 Compared to Twelve Months Ended March 2018 (unaudited)
Global Work revenues increased 39% in 2019 compared to 2018. Included in the 2019 results were revenues from the Williamson-Dickie acquisition of $471.9 million through the one-year anniversary of the acquisition. The year ended March 2019 was also negatively impacted by the sale of the Van Moer business in October 2018, which resulted in lower revenues of $24.6 million. Excluding the impact of the acquisition and divestiture, revenues increased 6% compared to the 2018 period. The revenue increase was due to growth in the Timberland PRO®, Wrangler® RIGGS, Bulwark® and Red Kap