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VF CORPORATION 2015 ANNUAL REPORT
POWERFUL BRANDS. POWERFUL PLATFORMS.

Table of contents

  • Page 1
    P O W E R F U L B R A N D S. P O W E R F U L P L A T F O R M S . VF CORPORATION 2015 ANNUAL REPORT

  • Page 2
    ...000 ASSOCIATES AND REVENUE 0F $12.4 BILLION IN 2015. OUR BUSINESSES AND BRANDS ARE ORGANIZED INTO FIVE COALITIONS, CONSISTING OF: OUTDOOR & ACTION SPORTS, JEANSWEAR, IMAGEWEAR, SPORTSWEAR AND CONTEMPORARY BRANDS. VF IS HIGHLY DIVERSIFIED ACROSS BRANDS, PRODUCTS, DISTRIBUTION CHANNELS AND GEOGRAPHIES...

  • Page 3
    ... compared with adjusted earnings per share in 2014. Earnings per share on a reported basis was up 20 percent. Our full-year 2015 also faced comparisons against 2014's 53-week year. When normalized over 2014 and 2015, currency-neutral revenue grew 7 percent and earnings grew 13 percent annually over...

  • Page 4
    ... are important, there is value in measuring and assessing VF's longer-term performance. I'm pleased to report that VF's share price rose 350 percent during the period 2006-2015, compared with the S&P 500, which rose 64 percent during the same time. Moreover, VF's annualized total shareholder return...

  • Page 5
    ... the company, we emphasize pay-for-performance, using a balance of short- and long-term incentives based on a number of key performance metrics. We work to align executive compensation with shareholder returns through equity ownership and equity-based rewards. The practices we have in place help to...

  • Page 6
    ...2012 2013 2014 2015 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 REVENUES (BILLIONS) ANNUAL EARNINGS PER SHARE 2 (DILUTED) ANNUAL DIVIDENDS PER SHARE CASH FLOW FROM OPERATIONS (BILLIONS) 1 See discussion of currency-neutral amounts on Page 28 of the 2015 Annual Report on Form...

  • Page 7
    ... creativity, operational excellence and financial discipline. This culture drives our associates to ensure that everything we do contributes to consumer loyalty, sustainable growth and total shareholder return. Chief Executive magazine named VF to the top 10 in its 2016 Best Companies for Leaders...

  • Page 8
    ...brands ...they set VF apart. Our business model is built on a thoughtfully selected and rigorously managed collection of brands. OUTDOOR & ACTION SPORTS Founded: 1994 North America Founded: 1889 Founded: 1976 Founded: 1952 Founded: 1966 Asia Pacific Europe South America Founded: 1937 Founded...

  • Page 9
    VF Corporation 2015 Annual Report Powerful brands, shaped by insight and fueled by innovation, drive our continuing success by making us part of consumers' lives. 16% OF VF'S DIRECT-TO-CONSUMER SALES ARE VIA E-COMMERCE 60% OUTDOOR & ACTION SPORTS JEANSWEAR IMAGEWEAR 23% SPORTSWEAR 9% 5% 3% ...

  • Page 10
    ... in mature and emerging markets around the world. builds capabilities to connect with consumers and provides a seamless, best-in-class online and in-store shopping experience. S T R AT E G Y A N D I N N O VAT I O N utilizes our deep consumer insights to deliver new products and experiences that...

  • Page 11
    VF Corporation 2015 Annual Report BOARD OF DIRECTORS Eric C. Wiseman 2,3 * Chairman & Chief Executive Officer Director since 2006, Age 60 Robert J. Hurst 3,4 Managing Director Crestview Partners LLC New York, New York Director since 1994, Age 70 Steven E. Rendle 3* President & Chief Operating ...

  • Page 12
    ... President, Direct-to-Consumer Steven E. Rendle President & Chief Operating Officer Thomas A. Glaser Vice President & President, Supply Chain Franklin L. Terkelsen Vice President, Business Development Scott A. Roe Vice President & Chief Financial Officer Anita Z. Graham Vice President, Chief...

  • Page 13
    ...YES ' NO È The aggregate market value of Common Stock held by non-affiliates of V.F. Corporation on July 4, 2015, the last day of the registrant's second fiscal quarter, was approximately $24,397,000,000 based on the closing price of the shares on the New York Stock Exchange. As of January 30, 2016...

  • Page 14

  • Page 15
    ... own direct-to-consumer operations. Our direct-to-consumer business includes VF-operated stores, concession retail stores and e-commerce sites. Revenues from the direct-to-consumer business represented 27% of VF's total 2015 revenues. Many of our brands sell products in international markets through...

  • Page 16
    ... brands. Product offerings include performance-based apparel, footwear, equipment, backpacks, luggage and accessories. The North Face® is the largest brand in our Outdoor & Action Sports coalition and features performancebased apparel, outerwear, sportswear, and footwear for men, women and children...

  • Page 17
    ... retail stores, over 30 VF-operated stores, over 170 independently-operated partnership locations, and online at www.napapijri.com. JanSport® backpacks, duffel bags, luggage, fleece and accessories are sold in North America, South America and Asia through department, office supply and chain stores...

  • Page 18
    ... stores in South America. In key international markets, we are expanding our reach through VF-operated stores, which are an important vehicle for presenting our brands' image and marketing message directly to consumers. We currently have more than 75 VF-operated stores primarily located in Europe...

  • Page 19
    ... 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...

  • Page 20
    ... Operations Our direct-to-consumer business includes full-price stores, outlet stores, e-commerce, and concession retail locations. Direct-to-consumer revenues were 27% of total VF revenues in 2015 compared with 26% in 2014. Our full-price stores allow us to display a brand's full line of products...

  • Page 21
    ... our direct-to-consumer business to continue to grow at a faster pace than VF's overall growth rate as we continue to drive higher comparable store sales, open new stores and expand our e-commerce presence. We opened 186 stores during 2015, concentrating on the brands where we see higher retail...

  • Page 22
    ...-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 and South America, the Caribbean and Europe...

  • Page 23
    ...Advertising, Customer Support and Community Outreach During 2015, our advertising and promotion expense was $712.6 million, representing 5.8% of total revenues. We advertise in consumer and trade publications, on radio and television, and through digital initiatives including social media and mobile...

  • Page 24
    ... 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...

  • Page 25
    ... stores, 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 e-commerce sites. Our sales in international markets are growing and represented 36% of our total revenues in 2015...

  • Page 26
    ... Sports Group businesses, from 2008 to 2011, and President of the Licensed Sports Group from 2007 to 2008. Bryan H. McNeill, 54, 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...

  • Page 27
    ... 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...

  • Page 28
    ... building new 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 and remodeling...

  • Page 29
    ... impact the operations of VF's business, including management of inventory, ordering and replenishment of 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...

  • Page 30
    ... 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...

  • Page 31
    ..., (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...

  • Page 32
    ... effect on our financial condition, results of operations or cash flows. Abnormally harsh or inclement weather can also negatively impact retail traffic and consumer spending. A substantial portion of VF's revenues and gross profit is derived from a small number of large customers. The loss of...

  • Page 33
    ...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...

  • Page 34
    ...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...

  • Page 35
    ... sales or maintain the value of VF's brands. During 2015, $126.1 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...

  • Page 36
    ... Outdoor & Action Sports coalition in North America. The Appleton facility also includes a manufacturing plant and distribution center. Additionally, we own and lease shared service facilities in Bornem, Belgium that support our international operations. Our sourcing hubs are located in Panama City...

  • Page 37
    ... Purchases of Equity Securities. VF's Common Stock is listed on the New York Stock Exchange under the symbol "VFC". The following table sets forth the high and low sale prices of VF Common Stock, as reported on the NYSE Composite Tape in each fiscal quarter of 2015 and 2014, along with dividends...

  • Page 38
    ... values on the last trading day of fiscal years 2010 through 2015. Past performance is not necessarily indicative of future performance. Comparison of Five-Year Total Return of VF Common Stock, S&P 500 Index and S&P 1500 Apparel Index VF Common Stock closing price on January 2, 2016 was $62.25 TOTAL...

  • Page 39
    ...authorized by VF's Board of Directors in 2013. All share repurchases during the quarter relate to shares acquired in connection with VF's deferred compensation plans. Total Number of Shares Purchased Weighted Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced...

  • Page 40
    ..."Item 8. Financial Statements and Supplementary Data" included in this report. Historical results presented herein may not be indicative of future results. 2015 (9) 2014 (9) 2013 (9) 2012 (9) Dollars and shares in thousands, except per share amounts 2011 (9) Summary of Operations (1) Total revenues...

  • Page 41
    ... and performance apparel categories. Our products are marketed to consumers shopping in specialty stores, department stores, national chains, mass merchants and our own directto-consumer operations, which includes VF-operated stores, concession retail stores and e-commerce sites. VF is organized...

  • Page 42
    ... of VF's total revenues in 2015. • Direct-to-consumer revenues increased 3% over 2014, net of a negative 4% impact from foreign currency and a negative 3% impact from the additional week included in the 2014 results, and accounted for 27% of VF's total revenues in 2015. VF opened 186 retail stores...

  • Page 43
    ... sale of a VF Outlet® location in 2015, partially offset by increased investments in our direct-to-consumer businesses and global product development, which includes our strategic innovation centers. Selling, general and administrative expenses as a percentage of total revenues were 30 basis points...

  • Page 44
    ...iii) the comparative impact of tax benefits recorded in 2014 related to the utilization of foreign tax attributes. The international effective tax rate was 12.5% and 12.7% for 2015 and 2014, respectively. VF expects the 2016 annual tax rate to approximate 23.0%. The PATH Act of 2015, signed into law...

  • Page 45
    ... section below. Information by Business Segment Management at each of the coalitions has direct control over and responsibility for its revenues and operating income, hereinafter termed "coalition revenues" and "coalition profit", respectively. VF management evaluates operating performance and makes...

  • Page 46
    ...2014 driven by increases of 31% and 24% for The North Face® and Vans® brands, respectively. New store openings and comparable sales growth, which includes an expanding e-commerce business, all contributed to the direct-to-consumer revenue growth. Operating margin decreased 110 basis points in 2015...

  • Page 47
    ... and direct-to-consumer growth in the Lee® brand. Revenues in the Americas (non-U.S.) region declined 5% in 2014 compared with 2013, due to the negative impact of foreign currency translation. Operating margin increased 40 basis points in 2015 over 2014, primarily due to lower product costs...

  • Page 48
    ... challenges in the U.S. department store channel. New store openings and comparable sales growth, which includes higher e-commerce revenues, contributed to a 14% increase in the coalition's direct-to-consumer business. Operating margin increased 40 basis points in 2015 over 2014, primarily driven by...

  • Page 49
    ... (0.5%) VF Outlet® stores in the U.S. sell VF products at prices that are generally higher than what could be realized through external wholesale channels, as well as other non-VF products. Revenues and profits of VF products sold in these stores are reported as part of the operating results of...

  • Page 50
    ... finance, supply chain, human resources, direct-to-consumer and customer management functions that support worldwide operations. Operating costs of information systems and shared services are charged to the coalitions based on utilization of those services. Costs to develop new computer applications...

  • Page 51
    ... in the 2014 results. New store openings and comparable sales growth, which includes an expanding e-commerce business, all contributed to direct-to-consumer revenue growth. VF opened 186 stores in 2015, bringing the total number of VF-owned retail stores to 1,520 at December 2015. Direct-to-consumer...

  • Page 52
    ... of proceeds from the sale of a VF Outlet® location. Capital expenditures increased $20.4 million compared with 2014 primarily due to the purchase of a headquarters building in the Outdoor & Action Sports coalition. Software purchases decreased $4.7 million in 2015 primarily due to the completion...

  • Page 53
    ..., the Company repurchased approximately 5.0 million shares of Common Stock in open market transactions for $301.8 million (average price per share of $59.90). VF will continue to evaluate its use of capital, giving first priority to business acquisitions and then to direct shareholder return in the...

  • Page 54
    ... below investment grade by recognized rating agencies, VF would be obligated to repurchase the notes at 101% of the aggregate principal amount of notes repurchased, plus any accrued and unpaid interest. Cash dividends totaled $1.33 per share in 2015, compared with $1.1075 in 2014 and $0.9150 in 2013...

  • Page 55
    ... the International Finance Corporation to VF suppliers. At December 2015, VF has a $0.1 million liability related to the estimated fair value of these guarantees. Management believes that VF's cash balances and funds provided by operating activities, as well as its Global Credit Facility, additional...

  • Page 56
    ..., the discount rate used to value participant liabilities and demographic characteristics of the participants. VF has taken several steps to manage the risk and volatility in the pension plans and their impact on the financial statements. In 2005, VF's U.S. defined benefit plans were closed to new...

  • Page 57
    ... market value of VF's investments, resulting in an insignificant net exposure to operating results and financial position. The VF Common Stock is treated as treasury shares for financial reporting purposes, so any gains or losses on those shares result in exposure to operating results and financial...

  • Page 58
    ... on hand, plus current production and purchase commitments, with current and expected future sales orders. Management performs an evaluation to estimate net realizable value using a systematic and consistent methodology of forecasting future demand, market conditions and selling prices less costs of...

  • Page 59
    ... attrition rates and projected revenues and profitability related to customers that existed at acquisition. Management uses the multi-period excess earnings method, which is a specific application of the discounted cash flow method, to value customer relationship assets. Under this method, VF...

  • Page 60
    ... prices and revenue/EBITDA data from target companies deemed similar to the reporting unit. Based on the range of estimated fair values developed from the income and market-based methods, VF determines the estimated fair value for the reporting unit. If the estimated fair value of the reporting...

  • Page 61
    ..., apparel and accessories for men, women and children. Products are sold globally through multiple wholesale and direct-to-consumer channels. The Timberland® reporting unit has experienced strong revenue and profit growth in recent years, primarily due to product innovation and heightened brand...

  • Page 62
    ... impacted sales, the success of recent product introductions, and continued operational growth in Europe. Key assumptions developed by VF management and used in our quantitative analysis of the Reef® reporting unit and trademark asset include: • Modest revenue growth in the wholesale channel...

  • Page 63
    ... apparel market, and expected further declines in this market. Key assumptions developed by VF management and used in our quantitative analysis of the Splendid® and Ella Moss® trademark include: • Modest revenue decline, primarily driven by the wholesale channel • Market-based discount rates...

  • Page 64
    ... year results, ii) financial performance versus management's annual and five-year strategic plans, iii) changes in the reporting unit carrying value since prior year, (iv) industry and market conditions in which the reporting unit operates, (v) macroeconomic conditions, including discount rate...

  • Page 65
    ...business conditions or strategies for a specific reporting unit change from current assumptions, including loss of major customers, (iv) investors require higher rates of return on equity investments in the marketplace or (v) enterprise values of comparable publicly traded companies, or actual sales...

  • Page 66
    ... measure defined benefit plan assets and liabilities. Therefore, all plan assets and liabilities were valued as of December 31, 2015. This did not impact our valuation as December 31, 2015 was also the last business day of our fiscal year. The below discussion of discount rate, return on assets and...

  • Page 67
    ... the U.S. plan's funded status and resulting pension expense. Management monitors the plan's asset allocation to balance risk with anticipated investment returns in a given year. Based on an evaluation of market conditions and projected market returns, VF will be using a rate of return assumption of...

  • Page 68
    ... volatility in the pension plans and their impact on the financial statements. On a longer-term basis, VF believes the year-to-year variability of the retirement benefit expense should decrease. Income Taxes As a global company, VF is subject to income taxes and files income tax returns in over 100...

  • Page 69
    ...Qualitative Disclosures about Market Risk. A discussion of VF's market risks is incorporated by reference to "Risk Management" in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report. Item 8. Financial Statements and Supplementary Data...

  • Page 70
    ... internal control over financial reporting. Item 9B. Other Information. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. Information regarding VF's Executive Officers required by Item 10 of this Part III is set forth in Item 1 of Part I of this Annual Report...

  • Page 71
    ... year ended January 2, 2016, which information is incorporated herein by reference. VF has adopted a written code of ethics, "VF Corporation Code of Business Conduct," that is applicable to all VF directors, officers and employees, including VF's chief executive officer, chief financial officer...

  • Page 72
    ...a part of this 2015 report: 1. Financial statements Page Number Management's Report on Internal Control Over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets ...Consolidated Statements of Income ...Consolidated Statements of Comprehensive...

  • Page 73
    ...) Form of VF Corporation 1996 Stock Compensation Plan Non-Qualified Stock Option Certificate for Non-Employee Directors (Incorporated by reference to Exhibit 10(C) to Form 10-K for the year ended December 31, 2011) Form of Award Certificate for Performance-Based Restricted Stock Units (Incorporated...

  • Page 74
    ... of the Board of Directors dated December 3, 1996 relating to lump sum payments under VF's Supplemental Executive Retirement Plan (Incorporated by reference to Exhibit 10(N) to Form 10-K for the year ended January 4, 1997) Form of Change in Control Agreement with Certain Senior Management of VF or...

  • Page 75
    ..., 2015) Management compensation plans Code of Business Conduct (Incorporated by reference to Exhibit 14.2 to Form 10-Q filed on May 7, 2014) The VF Corporation Code of Business Conduct is also available on VF's website at www.vfc.com. A copy of the Code of Business Conduct will be provided free of...

  • Page 76
    ... 1934, VF has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. V.F. CORPORATION By: /s/ Eric C. Wiseman Eric C. Wiseman Chairman and Chief Executive Officer (Chief Executive Officer) By: /s/ Scott A. Roe Scott A. Roe Vice President and Chief Financial...

  • Page 77
    VF Corporation Index to Consolidated Financial Statements and Financial Statement Schedule December 2015 Page Number Management's Report on Internal Control Over Financial Reporting ...Report of Independent Registered Public Accounting Firm ...Consolidated Balance Sheets ...Consolidated Statements ...

  • Page 78
    ...Management's Report on Internal Control Over Financial Reporting Management of VF Corporation ("VF") is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). VF's management conducted an assessment of VF's internal...

  • Page 79
    ... of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was...

  • Page 80
    VF CORPORATION Consolidated Balance Sheets December 2015 2014 In thousands, except share amounts ASSETS Current assets Cash and equivalents ...Accounts receivable, less allowance for doubtful accounts of $23,919 in 2015 and $26,694 in 2014 ...Inventories ...Other current assets ...Total current ...

  • Page 81
    VF CORPORATION Consolidated Statements of Income Year Ended December 2015 2014 2013 In thousands, except per share amounts Net sales ...Royalty income ...Total revenues ...Costs and operating expenses Cost of goods sold ...Selling...2.76 2.71 0.9150 See notes to consolidated financial statements. F-5

  • Page 82
    VF CORPORATION Consolidated Statements of Comprehensive Income Year Ended December 2014 In thousands 2015 2013 Net income ...Other comprehensive income (loss) Foreign currency translation Gains (losses) arising during year ...Less income tax effect ...Defined benefit pension plans Current year ...

  • Page 83
    ...of Cash Flows Year Ended December 2014 In thousands 2015 2013 Operating activities Net income ...Adjustments to reconcile net income to cash provided by operating activities: Impairment of goodwill and intangible assets ...Depreciation and amortization ...Stock-based compensation ...Provision for...

  • Page 84
    ... 2013 ...Net income ...Dividends on Common Stock ...Purchase of treasury stock ...Stock-based compensation, net ...Foreign currency translation ...Defined benefit pension plans ...Derivative financial instruments ...Marketable securities ...Balance, December 2014 ... 440,818,936 $110,205 $2,527...

  • Page 85
    ... share amounts Retained Earnings Balance, December 2014 ...Net income ...Dividends on Common Stock ...Purchase of treasury stock ...Stock-based compensation, net ...Foreign currency translation ...Defined benefit pension plans ...Derivative financial instruments ...Marketable securities ...Balance...

  • Page 86
    ... distributes a variety of products, including jeanswear, outerwear, footwear, backpacks, luggage, sportswear, and occupational and performance apparel, for consumers of all ages. Products are marketed primarily under VF-owned brand names. Basis of Presentation The consolidated financial statements...

  • Page 87
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 Accounts Receivable Trade accounts receivable are recorded at invoiced amounts, less estimated allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks and returns as discussed below in Revenue ...

  • Page 88
    ... at fair value in the Consolidated Balance Sheets with changes in fair value recognized directly in net income. The counterparties to the derivative contracts are financial institutions having at least A-rated investment grade credit ratings. To manage its credit risk, VF continually monitors...

  • Page 89
    ... recognized when the product has been received by the customer. Sales at VF-operated retail stores are recognized at the time products are purchased by consumers. Revenue from the sale of gift cards is deferred until the gift card is redeemed by the customer or the Company determines that the...

  • Page 90
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 Rent Expense VF enters into noncancelable operating leases for retail stores, office space, distribution facilities and equipment. Leases for real estate typically have initial terms ranging from 3 to 15 years, generally with ...

  • Page 91
    ... Financial Statements December 2015 Concentration of Risks VF markets products to a broad customer base throughout the world. Products are sold at a range of price points through multiple wholesale and direct-to-consumer channels. VF's ten largest customers, all U.S.-based retailers, accounted...

  • Page 92
    ... financial statements. In June 2014, the FASB issued an update to their accounting guidance related to stock-based compensation. The guidance requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition...

  • Page 93
    ... from the Consolidated Balance Sheets at the time of sale. VF does not retain any interests in the sold accounts receivable but continues to service and collect outstanding accounts receivable on behalf of the financial institution. During 2015 and 2014, VF sold total accounts receivable of $1,340...

  • Page 94
    ...in 2013. Net proceeds of this program are classified in operating activities in the Consolidated Statements of Cash Flows. Note C - Inventories 2015 2014 In thousands Finished products ...Work in process ...Raw materials ...Total inventories ...Note D - Property, Plant and Equipment $1,352,572 102...

  • Page 95
    ...are summarized by business segment as follows: Outdoor & Action Sports Jeanswear Imagewear Sportswear In thousands Contemporary Brands Total Balance, December 2013 ...Impairment charge ...Currency translation ...Balance, December 2014 ...Currency translation ...Balance, December 2015 ... $1,434,898...

  • Page 96
    ... Consolidated Financial Statements December 2015 VF did not record any impairment charges in 2015 or 2013 based on the results of its annual goodwill impairment testing. In 2014, VF recorded an impairment charge of $142.4 million to write off the goodwill in the Splendid® and Ella Moss® reporting...

  • Page 97
    ... 2015 and 2014, respectively. Note I - Accrued Liabilities 2015 2014 In thousands Compensation ...Deferred compensation (Note L) ...Income taxes ...Other taxes ...Advertising ...Customer discounts and allowances ...Interest ...Derivative financial instruments (Note T) ...Insurance ...Product...

  • Page 98
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 Note J - Long-term Debt 2015 2014 In thousands 5.95% notes, due 2017 ...3.50% notes, due 2021 ...6.00% notes, due 2033 ...6.45% notes, due 2037 ...Other long-term debt ...Capital leases ...Total long-term debt ...Less current ...

  • Page 99
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 Capital leases relate primarily to buildings and improvements (Note D), expire at dates through 2021 and have an effective interest rate of 5.06%. Assets under capital leases are included in property, plant and equipment at a ...

  • Page 100
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 Activity relating to accrued product warranty claims is summarized as follows: 2015 2014 In thousands 2013 Balance, beginning of year ...Accrual for products sold during the year ...Repair or replacement costs incurred ......

  • Page 101
    ... Consolidated Financial Statements December 2015 The following provides a reconciliation of the changes in fair value of VF's defined benefit plan assets and projected benefit obligations for each year, and the funded status at the end of each year: 2015 2014 In thousands Fair value of plan assets...

  • Page 102
    ... the volatility of the value of plan assets relative to plan liabilities, and to ensure plan assets are sufficient to pay the benefit obligations. Investment strategies focus on diversification among multiple asset classes, a balance of long-term investment return at an acceptable level of risk, and...

  • Page 103
    ... CORPORATION Notes to Consolidated Financial Statements December 2015 The fair value of investments held by VF's defined benefit plans at December 2015 and 2014, by asset class, is summarized below. See Note S for a description of the three levels of the fair value measurement hierarchy. Total Plan...

  • Page 104
    ... plan that permits nonemployee members of the Board of Directors to defer their Board compensation and invest in hypothetical shares of VF Common Stock. VF also has remaining obligations under other deferred compensation plans, primarily related to acquired companies. At December 2015, VF...

  • Page 105
    ... L) and is treated as treasury shares for financial reporting purposes. During 2015, the Company purchased 36,100 shares of Common Stock in open market transactions for $2.5 million. Balances related to shares held for deferred compensation plans are as follows: 2015 2014 2013 In thousands, except...

  • Page 106
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 The changes in accumulated OCI, net of related taxes, are as follows: Foreign Currency Translation Defined Benefit Pension Plans Derivative Financial Instruments In thousands Marketable Securities Total Balance, December 2013 ...

  • Page 107
    ...units ("RSUs") and restricted stock to officers, key employees and nonemployee members of VF's Board of Directors. Substantially all stock-based compensation awards are classified as equity awards, which are accounted for in stockholders' equity in the Consolidated Balance Sheets. On a limited basis...

  • Page 108
    ...to Consolidated Financial Statements December 2015 Total stock-based compensation cost and the associated income tax benefits recognized in the Consolidated Statements of Income, and stock-based compensation costs included in inventory in the Consolidated Balance Sheets, are as follows: 2015 2014 In...

  • Page 109
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 Stock option activity for 2015 is summarized as follows: Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (In thousands) Number of Shares Outstanding, December 2014 ...

  • Page 110
    ... for the three-year performance period ended in 2015 and distributable in early 2016 totaled 1,067,426 shares of VF Common Stock having a value of $61.9 million, as approved by the Compensation Committee of the Board of Directors. Similarly, 1,290,354 shares of VF Common Stock having a value of $88...

  • Page 111
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 Nonvested shares of restricted stock had a market value of $37.0 million at the end of 2015. The market value of the shares that vested during 2015, 2014 and 2013 was $14.1 million, $20.1 million and $9.7 million, respectively. ...

  • Page 112
    ... for years 2010 through 2014 under Belgium's excess profit tax regime. This lower rate, when compared with the country's statutory rate, resulted in an income tax reduction of $14.9 million ($0.03 per diluted share) in 2014 and $10.4 million ($0.02 per diluted share) in 2013. In February 2015, the...

  • Page 113
    ... to reinvest these earnings to support the strategic priority for growth in international markets. If management decides at a later date to repatriate these funds to the U.S., VF would be required to provide taxes on these amounts based on applicable U.S. tax rates, net of foreign taxes already...

  • Page 114
    ... at the end of 2015, if recognized, would reduce the annual effective tax rate. VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and foreign jurisdictions. In the U.S., the Internal Revenue Service ("IRS") examinations for...

  • Page 115
    ... apparel Sales of non-VF products at VF Outlet® stores Management at each of the coalitions has direct control over and responsibility for its revenues, operating income and assets, hereinafter termed "coalition revenues," "coalition profit" and "coalition assets," respectively. VF management...

  • Page 116
    ... plans and information systems. Financial information for VF's reportable segments is as follows: 2015 2014 In thousands 2013 Coalition revenues: Outdoor & Action Sports ...Jeanswear ...Imagewear ...Sportswear ...Contemporary Brands ...Other ...Total coalition revenues ...Coalition profit...

  • Page 117
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 2015 2014 In thousands 2013 Coalition assets: Outdoor & Action Sports ...Jeanswear ...Imagewear ...Sportswear ...Contemporary Brands ...Other ...Total coalition assets ...Cash and equivalents ...Intangible assets and goodwill ...

  • Page 118
    ... 383,372 932,792 No single customer accounted for 10% or more of the Company's total revenues in 2015, 2014 and 2013. Note Q - Commitments VF is obligated under noncancelable operating leases related primarily to retail stores, office space, distribution facilities and equipment. Rent expense, net...

  • Page 119
    ... shares of performance-based restricted stock units were excluded from the calculations of diluted earnings per share in 2015, 2014 and 2013, respectively, because these units were not considered to be contingent outstanding shares. Note S - Fair Value Measurements Financial assets and financial...

  • Page 120
    ...There were no transfers among the levels within the fair value hierarchy during 2015 or 2014. VF's cash equivalents include money market funds and short-term time deposits that approximate fair value based on Level 1 measurements. The fair value of derivative financial instruments, which consist of...

  • Page 121
    ...Financial Statements December 2015 of the participants' selection of hypothetical investments. Prior to the second quarter of 2015, other marketable securities consisted of common stock investments classified as available-for-sale, the fair value of which was based on quoted prices in active markets...

  • Page 122
    ... Financial Statements December 2015 The fair value of reporting units for goodwill impairment testing is determined using a combination of two valuation methods: an income approach and a market approach. The income approach is based on projected future (debt-free) cash flows that are discounted...

  • Page 123
    VF CORPORATION Notes to Consolidated Financial Statements December 2015 The following table presents outstanding derivatives on an individual contract basis: Fair Value of Derivatives Fair Value of Derivatives with Unrealized Gains with Unrealized Losses December December December December 2015 2014...

  • Page 124
    ... Cash Flow Hedging Relationships Foreign currency exchange ... $89,993 $88,387 $(8,133) Location of Gain (Loss) Gain (Loss) Reclassified from Accumulated OCI into Income 2015 2014 2013 In thousands Net sales ...Cost of goods sold ...Selling, general and administrative expenses ...Other income...

  • Page 125
    ...VF's Consolidated Statements of Income: Derivatives Not Designated as Hedges Location of Gain (Loss) on Derivatives Recognized in Income Gain (Loss) on Derivatives Recognized in Income 2015 2014 2013 In thousands Foreign currency exchange ...Foreign currency exchange ...Total ... Cost of goods sold...

  • Page 126
    ...-based RSUs, 42,000 nonperformance-based RSUs and 85,000 shares of restricted VF Common Stock at market value. Note W - Quarterly Results of Operations (Unaudited) First Quarter Second Third Fourth Quarter Quarter Quarter In thousands, except per share amounts Full Year 2015 (a)(b) Total revenues...

  • Page 127
    ... D COL. E Description Fiscal year ended December 2015 Allowance for doubtful accounts ...Other accounts receivable allowances ...Valuation allowance for deferred income tax assets ...Fiscal year ended December 2014 Allowance for doubtful accounts ...Other accounts receivable allowances ...Valuation...

  • Page 128

  • Page 129
    ...-2015. QUARTERLY COMMON STOCK PRICE DIVIDEND DIRECT DEPOSIT Shareholders may have their dividends deposited into their savings or checking account at any bank that is a member of the Automated Clearing House system. Questions concerning this service should be directed to Computershare Trust Company...

  • Page 130
    VF CORPORATION 105 CORPORATE CENTER BLVD. GREENSBORO, NC 27408 336.424.6000 FOR ADDITIONAL INFORMATION VISIT VFC.COM C101537 er