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LEASES | 6 Months Ended
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Sep. 28, 2019
Leases [Abstract] |
LEASES | LEASES VF determines if an arrangement is or contains a lease at contract inception and determines its classification as an operating or finance lease at lease commencement. The Company leases certain retail locations, office space, distribution facilities, machinery and equipment, and vehicles. While the substantial majority of these leases are operating leases, certain distribution centers and office spaces are finance leases. Leases for real estate typically have initial terms ranging from 3 to 15 years, generally with renewal options. Leases for equipment typically have initial terms ranging from 2 to 5 years and vehicle leases typically have initial terms ranging from 1 to 8 years. In determining the lease term used in the lease right-of-use asset and lease liability calculations, the Company considers various factors such as market conditions and the terms of any renewal or termination options that may exist. When deemed reasonably certain, the renewal and termination options are included in the determination of the lease term and calculation of the lease right-of-use assets and lease liabilities. Most leases have fixed rental payments. Many of the real estate leases also require additional variable payments for occupancy-related costs, real estate taxes and insurance, as well as other payments (i.e., contingent rent) owed when sales at individual retail store locations exceed a stated base amount. Variable lease payments are excluded from the measurement of the lease liability and are recognized in profit and loss in the period in which the event or conditions that triggers those payments occur. VF estimates the amount it expects to pay to the lessor under a residual value guarantee and includes it in lease payments used to measure the lease liability only for amounts probable of being owed by VF at the commencement date. VF calculates lease right-of-use assets and lease liabilities as the present value of lease payments over the lease term at commencement date. When readily determinable, the Company uses the implicit rate to determine the present value of lease payments, which generally does not happen in practice. As the rate implicit in the majority of the Company's leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, including the lease term, currency, country specific risk premium and adjustments for collateralized debt. Operating lease expense is recorded as a single lease cost on a straight-line basis over the lease term. For finance leases, right-of-use asset amortization and interest on lease liabilities are presented separately in the Consolidated Statements of Income. The Company assesses whether a sale leaseback transaction qualifies as a sale when the transaction occurs. For transactions qualifying as a sale, VF derecognizes the underlying asset and recognizes the entire gain or loss at the time of the sale. The corresponding lease entered into with the buyer-lessor is accounted for as an operating lease. During the six months ended September 2019, the Company entered into a sale leaseback transaction for certain office real estate and related assets. The transaction qualified as a sale, and thus the Company recognized a gain of $11.3 million resulting from the transaction during the six months ended September 2019. As of September 2019, the Company has signed certain distribution center leases that have not yet commenced but will create significant rights and obligations. The leases will commence in Fiscal 2020 and Fiscal 2021 and have lease terms of 15 years. Other leases signed that have not yet commenced are not individually significant. The Company does not have material subleases. The assets and liabilities related to operating and finance leases were as follows:
(In thousands) | Location in Consolidated Balance Sheet |  |  | September 2019 |
Assets: |  |  |  |  |
Operating lease assets | Operating lease right-of-use assets |  |  | $ | 1,263,903 |  |
Finance lease assets | Property, plant and equipment |  |  | 23,468 |  |
Total lease assets |  |  |  | $ | 1,287,371 |  |
Liabilities: |  |  |  |  |
Current |  |  |  |  |
Operating lease liabilities | Accrued liabilities |  |  | $ | 295,364 |  |
Finance lease liabilities | Current portion of long-term debt |  |  | 4,986 |  |
Noncurrent |  |  |  |  |
Operating lease liabilities | Operating lease liabilities |  |  | 1,028,363 |  |
Finance lease liabilities | Long-term debt |  |  | 26,278 |  |
Total lease liabilities |  |  |  | $ | 1,354,991 |  |
The components of lease costs were as follows:
(In thousands) |  | Three Months Ended September 2019 |  | Six Months Ended September 2019 |
Operating lease cost |  | $ | 108,969 |  |  | $ | 210,428 |  |
Finance lease cost – amortization of right-of-use assets |  | 1,063 |  |  | 2,032 |  |
Finance lease cost – interest on lease liabilities |  | 270 |  |  | 554 |  |
Short-term lease cost |  | 696 |  |  | 1,265 |  |
Variable lease cost |  | 29,785 |  |  | 57,986 |  |
Gain recognized from sale-leaseback transactions |  | — |  |  | (11,329 | ) |
Total lease cost |  | $ | 140,783 |  |  | $ | 260,936 |  |
Supplemental cash flow information related to leases was as follows:
(In thousands) |  | Six Months Ended September 2019 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows – operating leases |  | $ | 213,368 |  |
Operating cash flows – finance leases |  | 553 |  |
Financing cash flows – finance leases |  | 2,462 |  |
Right-of-use assets obtained in exchange for lease liabilities: |  |  |  |
Operating leases (a) |  | 225,851 |  |
Finance leases |  | — |  |
(a) | Excludes amounts recorded upon adoption of ASC 842.
Lease terms and discount rates were as follows:
|  | September 2019 |
Weighted average remaining lease term: |  |  |
Operating leases |  | 5.59 years |  |
Finance leases |  | 13.51 years |  |
Weighted average discount rate: |  |  |
Operating leases |  | 2.50 | % |
Finance leases |  | 3.17 | % |
Maturities of operating and finance lease liabilities for the next five fiscal years (including the remainder of Fiscal 2020) and thereafter as of September 2019 were as follows:
(In thousands) |  | Operating Leases |  | Finance Leases |  | Total |
Remainder of 2020 |  | $ | 137,614 |  |  | $ | 2,512 |  |  | $ | 140,126 |  |
2021 |  | 384,214 |  |  | 6,532 |  |  | 390,746 |  |
2022 |  | 271,311 |  |  | 1,911 |  |  | 273,222 |  |
2023 |  | 198,459 |  |  | 1,626 |  |  | 200,085 |  |
2024 |  | 129,100 |  |  | 1,550 |  |  | 130,650 |  |
Thereafter |  | 305,434 |  |  | 23,496 |  |  | 328,930 |  |
Total lease payments |  | 1,426,132 |  |  | 37,627 |  |  | 1,463,759 |  |
Less: present value adjustment |  | 102,405 |  |  | 6,363 |  |  | 108,768 |  |
Present value of lease liabilities |  | $ | 1,323,727 |  |  | $ | 31,264 |  |  | $ | 1,354,991 |  |
The Company excluded approximately $283.5 million of leases (undiscounted basis) that have not yet commenced. These leases will commence beginning in Fiscal 2020 with lease terms of 2 to 15 years. Future minimum lease payments under operating leases with noncancelable lease terms in excess of one year from continuing operations as of March 2019, prior to the adoption of ASC 842, were as follows:
(In thousands) |  | Operating Leases
2020 |  | $ | 320,224 |
2021 |  | 287,829 |
2022 |  | 212,918 |
2023 |  | 154,920 |
2024 |  | 100,789 |
Thereafter |  | 251,228 |
Total lease payments |  | $ | 1,327,908 |
LEASES | LEASES VF determines if an arrangement is or contains a lease at contract inception and determines its classification as an operating or finance lease at lease commencement. The Company leases certain retail locations, office space, distribution facilities, machinery and equipment, and vehicles. While the substantial majority of these leases are operating leases, certain distribution centers and office spaces are finance leases. Leases for real estate typically have initial terms ranging from 3 to 15 years, generally with renewal options. Leases for equipment typically have initial terms ranging from 2 to 5 years and vehicle leases typically have initial terms ranging from 1 to 8 years. In determining the lease term used in the lease right-of-use asset and lease liability calculations, the Company considers various factors such as market conditions and the terms of any renewal or termination options that may exist. When deemed reasonably certain, the renewal and termination options are included in the determination of the lease term and calculation of the lease right-of-use assets and lease liabilities. Most leases have fixed rental payments. Many of the real estate leases also require additional variable payments for occupancy-related costs, real estate taxes and insurance, as well as other payments (i.e., contingent rent) owed when sales at individual retail store locations exceed a stated base amount. Variable lease payments are excluded from the measurement of the lease liability and are recognized in profit and loss in the period in which the event or conditions that triggers those payments occur. VF estimates the amount it expects to pay to the lessor under a residual value guarantee and includes it in lease payments used to measure the lease liability only for amounts probable of being owed by VF at the commencement date. VF calculates lease right-of-use assets and lease liabilities as the present value of lease payments over the lease term at commencement date. When readily determinable, the Company uses the implicit rate to determine the present value of lease payments, which generally does not happen in practice. As the rate implicit in the majority of the Company's leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, including the lease term, currency, country specific risk premium and adjustments for collateralized debt. Operating lease expense is recorded as a single lease cost on a straight-line basis over the lease term. For finance leases, right-of-use asset amortization and interest on lease liabilities are presented separately in the Consolidated Statements of Income. The Company assesses whether a sale leaseback transaction qualifies as a sale when the transaction occurs. For transactions qualifying as a sale, VF derecognizes the underlying asset and recognizes the entire gain or loss at the time of the sale. The corresponding lease entered into with the buyer-lessor is accounted for as an operating lease. During the six months ended September 2019, the Company entered into a sale leaseback transaction for certain office real estate and related assets. The transaction qualified as a sale, and thus the Company recognized a gain of $11.3 million resulting from the transaction during the six months ended September 2019. As of September 2019, the Company has signed certain distribution center leases that have not yet commenced but will create significant rights and obligations. The leases will commence in Fiscal 2020 and Fiscal 2021 and have lease terms of 15 years. Other leases signed that have not yet commenced are not individually significant. The Company does not have material subleases. The assets and liabilities related to operating and finance leases were as follows:
(In thousands) | Location in Consolidated Balance Sheet |  |  | September 2019 |
Assets: |  |  |  |  |
Operating lease assets | Operating lease right-of-use assets |  |  | $ | 1,263,903 |  |
Finance lease assets | Property, plant and equipment |  |  | 23,468 |  |
Total lease assets |  |  |  | $ | 1,287,371 |  |
Liabilities: |  |  |  |  |
Current |  |  |  |  |
Operating lease liabilities | Accrued liabilities |  |  | $ | 295,364 |  |
Finance lease liabilities | Current portion of long-term debt |  |  | 4,986 |  |
Noncurrent |  |  |  |  |
Operating lease liabilities | Operating lease liabilities |  |  | 1,028,363 |  |
Finance lease liabilities | Long-term debt |  |  | 26,278 |  |
Total lease liabilities |  |  |  | $ | 1,354,991 |  |
The components of lease costs were as follows:
(In thousands) |  | Three Months Ended September 2019 |  | Six Months Ended September 2019 |
Operating lease cost |  | $ | 108,969 |  |  | $ | 210,428 |  |
Finance lease cost – amortization of right-of-use assets |  | 1,063 |  |  | 2,032 |  |
Finance lease cost – interest on lease liabilities |  | 270 |  |  | 554 |  |
Short-term lease cost |  | 696 |  |  | 1,265 |  |
Variable lease cost |  | 29,785 |  |  | 57,986 |  |
Gain recognized from sale-leaseback transactions |  | — |  |  | (11,329 | ) |
Total lease cost |  | $ | 140,783 |  |  | $ | 260,936 |  |
Supplemental cash flow information related to leases was as follows:
(In thousands) |  | Six Months Ended September 2019 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |
Operating cash flows – operating leases |  | $ | 213,368 |  |
Operating cash flows – finance leases |  | 553 |  |
Financing cash flows – finance leases |  | 2,462 |  |
Right-of-use assets obtained in exchange for lease liabilities: |  |  |  |
Operating leases (a) |  | 225,851 |  |
Finance leases |  | — |  |
(a) | Excludes amounts recorded upon adoption of ASC 842.
Lease terms and discount rates were as follows:
|  | September 2019 |
Weighted average remaining lease term: |  |  |
Operating leases |  | 5.59 years |  |
Finance leases |  | 13.51 years |  |
Weighted average discount rate: |  |  |
Operating leases |  | 2.50 | % |
Finance leases |  | 3.17 | % |
Maturities of operating and finance lease liabilities for the next five fiscal years (including the remainder of Fiscal 2020) and thereafter as of September 2019 were as follows:
(In thousands) |  | Operating Leases |  | Finance Leases |  | Total |
Remainder of 2020 |  | $ | 137,614 |  |  | $ | 2,512 |  |  | $ | 140,126 |  |
2021 |  | 384,214 |  |  | 6,532 |  |  | 390,746 |  |
2022 |  | 271,311 |  |  | 1,911 |  |  | 273,222 |  |
2023 |  | 198,459 |  |  | 1,626 |  |  | 200,085 |  |
2024 |  | 129,100 |  |  | 1,550 |  |  | 130,650 |  |
Thereafter |  | 305,434 |  |  | 23,496 |  |  | 328,930 |  |
Total lease payments |  | 1,426,132 |  |  | 37,627 |  |  | 1,463,759 |  |
Less: present value adjustment |  | 102,405 |  |  | 6,363 |  |  | 108,768 |  |
Present value of lease liabilities |  | $ | 1,323,727 |  |  | $ | 31,264 |  |  | $ | 1,354,991 |  |
The Company excluded approximately $283.5 million of leases (undiscounted basis) that have not yet commenced. These leases will commence beginning in Fiscal 2020 with lease terms of 2 to 15 years. Future minimum lease payments under operating leases with noncancelable lease terms in excess of one year from continuing operations as of March 2019, prior to the adoption of ASC 842, were as follows:
(In thousands) |  | Operating Leases
2020 |  | $ | 320,224 |
2021 |  | 287,829 |
2022 |  | 212,918 |
2023 |  | 154,920 |
2024 |  | 100,789 |
Thereafter |  | 251,228 |
Total lease payments |  | $ | 1,327,908 |

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- Definition The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 842 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=77888251 + Details
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