XML 33 R22.htm IDEA: XBRL DOCUMENT
v3.5.0.2

Derivative Financial Instruments and Hedging Activities | 6 Months Ended
--- | ---
Jul. 02, 2016
Derivative Financial Instruments and Hedging Activities | Note O – Derivative Financial Instruments and Hedging Activities Summary of Derivative Financial Instruments All of VF’s outstanding derivative financial instruments are forward foreign currency exchange contracts. Although derivatives meet the criteria for hedge accounting at the inception of the hedging relationship, a limited number of derivative contracts intended to hedge assets and liabilities are not designated as hedges for accounting purposes. The notional amounts of outstanding derivative contracts were $2.4 billion at June 2016, $2.4 billion at December 2015 and $2.5 billion at June 2015, consisting primarily of contracts hedging exposures to the euro, British pound, Canadian dollar, Swiss franc, Mexican peso, Swedish krona, Japanese yen and Polish zloty. Derivative contracts have maturities up to 24 months. The following table presents outstanding derivatives on an individual contract basis:
|  | Fair Value of Derivatives with Unrealized Gains |  |  | Fair Value of Derivatives with Unrealized Losses |
In thousands |  | June 2016 |  |  | December 2015 |  |  | June 2015 |  |  | June 2016 |  |  | December 2015 |  |  | June 2015 |
Foreign currency exchange contracts designated as hedging instruments |  | $ | 91,691 |  |  | $ | 105,536 |  |  | $ | 136,265 |  |  | $ | (33,171 | ) |  | $ | (27,896 | ) |  | $ | (56,786 | )
Foreign currency exchange contracts not designated as hedging instruments |  |  | — |  |  |  | 255 |  |  |  | 400 |  |  |  | (280 | ) |  |  | (136 | ) |  |  | (43 | )
Total derivatives |  | $ | 91,691 |  |  | $ | 105,791 |  |  | $ | 136,665 |  |  | $ | (33,451 | ) |  | $ | (28,032 | ) |  | $ | (56,829 | )
VF records and presents the fair values of all of its derivative assets and liabilities in the Consolidated Balance Sheets on a gross basis, even though they are subject to master netting agreements. However, if VF were to offset and record the asset and liability balances of its forward foreign currency exchange contracts on a net basis in accordance with the terms of its master netting agreements, the amounts presented in the Consolidated Balance Sheets would be adjusted from the current gross presentation to the net amounts as detailed in the following table:
|  | June 2016 |  |  | December 2015 |  |  | June 2015 |
In thousands |  | Derivative Asset |  |  | Derivative Liability |  |  | Derivative Asset |  |  | Derivative Liability |  |  | Derivative Asset |  |  | Derivative Liability |
Gross amounts presented in the Consolidated |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance Sheets |  | $ | 91,691 |  |  | $ | (33,451 | ) |  | $ | 105,791 |  |  | $ | (28,032 | ) |  | $ | 136,665 |  |  | $ | (56,829 | )
Gross amounts not offset in the Consolidated |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance Sheets |  |  | (20,145 | ) |  |  | 20,145 |  |  |  | (22,213 | ) |  |  | 22,213 |  |  |  | (52,154 | ) |  |  | 52,154 |
Net amounts |  | $ | 71,546 |  |  | $ | (13,306 | ) |  | $ | 83,578 |  |  | $ | (5,819 | ) |  | $ | 84,511 |  |  | $ | (4,675 | )
Derivatives are classified as current or noncurrent based on maturity dates, as follows:
In thousands |  | June 2016 |  |  | December 2015 |  |  | June 2015 |
Other current assets |  | $ | 78,021 |  |  | $ | 92,796 |  |  | $ | 122,749 |
Accrued liabilities |  |  | (27,329 | ) |  |  | (25,776 | ) |  |  | (49,522 | )
Other assets |  |  | 13,670 |  |  |  | 12,995 |  |  |  | 13,916 |
Other liabilities |  |  | (6,122 | ) |  |  | (2,256 | ) |  |  | (7,307 | )
Cash Flow Hedges VF uses derivative contracts primarily to hedge a portion of the exchange risk for its forecasted sales, purchases, production costs, operating costs and intercompany royalties. The effects of cash flow hedging included in VF’s Consolidated Statements of Income and Consolidated Statements of Comprehensive Income are summarized as follows:
In thousands |  | Gain (Loss) on Derivatives Recognized in OCI Three Months Ended June |  |  | Gain (Loss) on Derivatives Recognized in OCI Six Months Ended June |
Cash Flow Hedging Relationships |  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Foreign currency exchange |  | $ | 39,049 |  |  | $ | (21,576 | ) |  | $ | 23,266 |  |  | $ | 46,434 |
In thousands |  | Gain (Loss) Reclassified from Accumulated OCI into Income Three Months Ended June |  |  | Gain (Loss) Reclassified from Accumulated OCI into Income Six Months Ended June |
Location of Gain (Loss) |  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Net sales |  | $ | 2,284 |  |  | $ | (11,790 | ) |  | $ | (2,679 | ) |  | $ | (28,845 | )
Cost of goods sold |  |  | 20,772 |  |  |  | 22,123 |  |  |  | 64,609 |  |  |  | 41,491 |
Selling, general and administrative expenses |  |  | (1,535 | ) |  |  | — |  |  |  | (2,513 | ) |  |  | — |
Other income (expense), net |  |  | 624 |  |  |  | 6,139 |  |  |  | 2,127 |  |  |  | 12,974 |
Interest expense |  |  | (1,121 | ) |  |  | (1,069 | ) |  |  | (2,225 | ) |  |  | (2,122 | )
Total |  | $ | 21,024 |  |  | $ | 15,403 |  |  | $ | 59,319 |  |  | $ | 23,498 |
Derivative Contracts Not Designated as Hedges VF uses derivative contracts to manage foreign currency exchange risk on third-party accounts receivable and payable, as well as intercompany borrowings. These contracts are not designated as hedges, and are recorded at fair value in the Consolidated Balance Sheets. Changes in the fair values of these instruments are recognized directly in earnings. Gains or losses on these contracts largely offset the net transaction gains or losses on the related assets and liabilities. Following is a summary of these derivatives included in VF’s Consolidated Statements of Income:
In thousands Derivatives Not Designated as Hedges |  | Location of Gain (Loss) on Derivatives Recognized in Income |  | Gain (Loss) on Derivatives Recognized in Income Three Months Ended June |  |  | Gain (Loss) on Derivatives Recognized in Income Six Months Ended June |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Foreign currency exchange |  | Cost of goods sold |  | $ | (769 | ) |  | $ | — |  |  | $ | 735 |  |  | $ | — |
Foreign currency exchange |  | Other income (expense), net |  |  | 199 |  |  |  | (1,430 | ) |  |  | (1,086 | ) |  |  | (2,461 | )
Total |  |  |  | $ | (570 | ) |  | $ | (1,430 | ) |  | $ | (351 | ) |  | $ | (2,461 | )
Other Derivative Information There were no significant amounts recognized in earnings for the ineffective portion of any hedging relationships during the three and six-month periods ended June 2016 and June 2015. At June 2016, accumulated OCI included $60.2 million of pre-tax net deferred gains for foreign currency exchange contracts that are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on exchange rates in effect when outstanding derivative contracts are settled. VF entered into interest rate swap derivative contracts in 2011 and 2003 to hedge the interest rate risk for issuance of long-term debt due in 2021 and 2033, respectively. In each case, the contracts were terminated concurrent with the issuance of the debt, and the realized gain or loss was deferred in accumulated OCI. The remaining pre-tax net deferred loss in accumulated OCI was $25.0 million at June 2016, which will be reclassified into interest expense in the Consolidated Statements of Income over the remaining terms of the associated debt instruments. VF reclassified $1.2 million and $2.3 million of net deferred losses from accumulated OCI into interest expense in each of the three and six-month periods ended June 2016, respectively, and $1.0 million and $2.1 million for the three and six-month periods ended June 2015, respectively. VF expects to reclassify $4.6 million to interest expense during the next 12 months.

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=64837297&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=64837297&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration