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DISCONTINUED OPERATIONS AND OTHER DIVESTITURES | 12 Months Ended
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Mar. 28, 2020
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS AND OTHER DIVESTITURES | DISCONTINUED OPERATIONS AND OTHER DIVESTITURES The Company continuously assesses the composition of its portfolio to ensure it is aligned with its strategic objectives and positioned to maximize growth and return to shareholders.
Discontinued Operations
Occupational Workwear Business On January 21, 2020, VF announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business is comprised primarily of the following brands and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also includes certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. During the three months ended March 2020, the Company determined the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria and expects to divest this business in the next twelve months. Accordingly, the Company has reported the results of the Occupational Workwear business and the related cash flows as discontinued operations in the Consolidated Statements of Income and Consolidated Statements of Cash Flows, respectively. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets. The results of the Occupational Workwear business were previously reported in the Work segment. The results of the Occupational Workwear business recorded in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income were income of $91.2 million (including goodwill and intangible asset impairment charges of $11.1 million), $119.0 million, $22.1 million and $84.8 million for the years ended March 2020 and 2019, the three months ended March 2018 and the year ended December 2017, respectively. Management performed quantitative impairment analysis over the Kodiak and Terra reporting unit goodwill and the indefinite-lived trademark intangible assets. Based on the analysis, management recorded a goodwill impairment charge of $6.1 million and an impairment charge of $5.0 million on the indefinite-lived intangible assets. Certain corporate overhead costs and segment costs previously allocated to the Occupational Workwear business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations. Jeans Business On May 22, 2019, VF completed the spin-off its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF Outlet TM business, into an independent, publicly traded company now operating under the name Kontoor Brands, Inc. ("Kontoor Brands") and trading under the symbol "KTB" on the New York Stock Exchange. The spin-off was effected through a distribution to VF shareholders of one share of Kontoor Brands common stock for every seven shares of VF common stock held on the record date of May 10, 2019. Accordingly, the Company has reported the results of the Jeans business and the related cash flows as discontinued operations in the Consolidated Statements of Income and Consolidated Statements of Cash Flows, respectively, and presented the related assets and liabilities as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date the spin-off was completed. In connection with the spin-off, Kontoor Brands entered into a credit agreement with respect to $1.55 billion in senior secured credit facilities consisting of a senior secured five-year $750.0 million term loan A facility, a senior secured seven-year $300.0 million term loan B facility and a five-year $500.0 million senior secured revolving credit facility (collectively, the "Kontoor Credit Facilities"). Prior to the effective date of the spin-off, Kontoor Brands incurred $1.05 billion of indebtedness under the Kontoor Credit Facilities, which was primarily used to fund a transfer of $906.1 million to VF and its subsidiaries, net of $126.8 million of cash received from VF. As a result of the spin-off, VF divested net assets of $54.9 million, including the indebtedness under the Kontoor Credit Facilities. Also included in the net assets divested was $75.3 million of net accumulated other comprehensive losses attributable to the Jeans business, primarily related to foreign currency translation. The results of the Wrangler®, Lee® and Rock & Republic® brands were previously reported in the Jeans segment, the results of the Wrangler® RIGGS brand were previously reported in the Work segment, and the results of the non-VF products sold in VF Outlet TM stores were previously reported in the Other category included in the reconciliation of segment revenues and segment profit. The results of the Jeans business recorded in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income were a loss of $40.9 million and income of $269.6 million, $110.1 million and $368.4 million in the years ended March 2020 and 2019, the three months ended March 2018 and the year ended December 2017, respectively. Certain corporate overhead costs and segment costs previously allocated to the Jeans business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations. The results of the Jeans business reported as discontinued operations include $59.5 million of separation and related expenses during the year ended March 2020. In connection with the spin-off of the Jeans business, the Company entered into several agreements with Kontoor Brands that govern the relationship of the parties following the spin-off including the Separation and Distribution Agreement, the Tax Matters Agreement, the Transition Services Agreement, the VF Intellectual Property License Agreement and the Employee Matters Agreement. Under the terms of the Transition Services Agreement, the Company and Kontoor Brands agreed to provide each other certain transitional services including information technology, information management, human resources, employee benefits administration, supply chain, facilities, and other limited finance and accounting related services for periods up to 24 months. Payments and operating expense reimbursements for transition services are recorded within the reportable segments or within the corporate and other expenses line item, in the reconciliation of segment profit in Note 20, based on the function providing the service. Nautica® Brand Business During the three months ended December 2017, the Company reached the strategic decision to exit the Nautica® brand business, and determined that it met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of the Nautica® brand business and the related cash flows as discontinued operations in the Consolidated Statements of Income Consolidated Statements of Cash Flows, respectively. On April 30, 2018, VF completed the sale of the Nautica® brand business. The Company received proceeds of $285.8 million, net of cash sold, resulting in a final after-tax loss on sale of $38.2 million, which includes a decrease of $5.4 million and an increase of $18.1 million in the estimated loss on sale included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the year ended March 2019 and the three months ended March 2018, respectively. The year ended December 2017 includes a $25.5 million estimated loss on sale. The results of the Nautica® brand's North America business were previously reported in the former Sportswear segment, and the results of the Asia business were previously reported in the former Outdoor & Action Sports segment. The results of the Nautica® brand business recorded in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income were income of $0.8 million (including a $5.4 million decrease in the estimated loss on sale), a loss of $8.4 million (including an $18.1 million increase in the estimated loss on sale) and a loss of $95.2 million (including an estimated loss on sale of $25.5 million and a goodwill impairment charge of $104.7 million) for the year ended March 2019, the three months ended March 2018 and the year ended December 2017, respectively. Certain corporate overhead costs and segment costs previously allocated to the Nautica® brand business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations. In addition, the goodwill impairment charge recorded in the three months ended September 30, 2017 of $104.7 million related to the Nautica® reporting unit, previously excluded from the calculation of segment profit, was reclassified to discontinued operations. Under the terms of the transition services agreement, the Company provided certain support services for periods up to 12 months from the closing date of the transaction. Revenue and related expense items associated with the transition services were recorded in the Other category, and operating expense reimbursements were recorded within the corporate and other expenses line item, in the reconciliation of segment revenues and segment profit in Note 20. Licensing Business During the three months ended April 1, 2017, the Company reached the strategic decision to exit its Licensing Business, which comprised the Licensed Sports Group (“LSG”) and the JanSport® brand collegiate businesses. Accordingly, the Company has reported the results of the businesses and the related cash flows as discontinued operations in the Consolidated Statements of Income and Consolidated Statements of Cash Flows, respectively, through their respective dates of sale. LSG included the Majestic® brand and was previously reported within the former Imagewear segment. On April 28, 2017, VF completed the sale of the LSG business. The Company received proceeds of $213.5 million, net of cash sold, resulting in a final after-tax loss on sale of $4.1 million, which is included in the income from discontinued operations, net of tax line item in the Consolidated Statement of Income for the year ended December 2017. The LSG results recorded in the income from discontinued operations, net of tax line item in the Consolidated Statement of Income were a loss of $4.6 million (including the loss on sale of $4.1 million) for the year ended December 2017. During the three months ended December 2017, VF completed the sale of the assets associated with the JanSport® brand collegiate business, which was previously included within the former Outdoor & Action Sports segment. The Company received net proceeds of $1.5 million and recorded a final after-tax loss on sale of $0.2 million, which is included in the income from discontinued operations, net of tax line item in the Consolidated Statement of Income for the year ended December 2017. The JanSport® brand collegiate results recorded in the income from discontinued operations, net of tax line item in the Consolidated Statement of Income were a loss of $6.5 million (including the loss on sale of $0.2 million) for the year ended December 2017. Certain corporate overhead and other costs previously allocated to the Licensing Business for segment reporting purposes did not qualify for classification within discontinued operations and have been reallocated to continuing operations. Under the terms of the transition services agreement, the Company provided certain support services for periods up to 24 months from the closing date of the transaction. Revenue and related expense items associated with the transition services were recorded in the Work segment, and operating expense reimbursements were recorded within the corporate and other expenses line item in the reconciliation of segment revenues and segment profit in Note 20. Summarized Discontinued Operations Financial Information The following table summarizes the major line items included for the Occupational Workwear business, the Jeans business, the Nautica® brand business and the Licensing Business that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income:
|  | Year Ended March |  | Three Months Ended March (Transition Period) |  | Year Ended December
(In thousands) |  | 2020 |  |  | 2019 |  | 2018 |  | 2017
Net revenues |  | $ | 1,199,524 |  |  |  | $ | 3,603,686 |  |  | $ | 958,262 |  |  | $ | 4,004,876 |
Cost of goods sold |  | 773,418 |  |  |  | 2,185,861 |  |  | 546,640 |  |  | 2,345,075 |
Selling, general and administrative expenses |  | 320,462 |  |  |  | 937,351 |  |  | 238,342 |  |  | 983,043 |
Impairment of goodwill and intangible assets |  | 11,100 |  |  |  | — |  |  | — |  |  | 104,651 |
Interest, net |  | 1,601 |  |  |  | 7,305 |  |  | 1,417 |  |  | 3,065 |
Other income (expense), net |  | (687 | ) |  |  | (3,600 | ) |  | (1,113 | ) |  | (4,125 | )
Income from discontinued operations before income taxes |  | 95,458 |  |  |  | 484,179 |  |  | 173,584 |  |  | 571,047 |
Gain (loss) on the sale of discontinued operations before income taxes |  | — |  |  |  | 4,589 |  |  | (18,065 | ) |  | (34,019 | )
Total income from discontinued operations before income taxes |  | 95,458 |  |  |  | 488,768 |  |  | 155,519 |  |  | 537,028 |
Income tax expense (a) |  | (45,155 | ) |  |  | (99,402 | ) |  | (31,701 | ) |  | (190,175 | )
Income from discontinued operations, net of tax |  | $ | 50,303 |  |  |  | $ | 389,366 |  |  | $ | 123,818 |  |  | $ | 346,853 |
(a) | Income tax expense for the year ended March 2020 includes additional tax expense on nondeductible transaction costs and uncertain tax positions related to the Jeans business. Income tax expense for the year ended December 2017 was impacted by $8.6 million of tax expense related to GAAP and tax basis differences for the LSG business. Additionally, the goodwill impairment charge and estimated loss on sale related to the Nautica® brand business for the year ended December 2017 were nondeductible for income tax purposes.
The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented.
(In thousands) |  | March 2020 |  |  | March 2019
Cash and equivalents |  | $ | 39,752 |  |  |  | $ | 140,785 |
Accounts receivable, net |  | 83,650 |  |  |  | 336,171 |
Inventories |  | 294,000 |  |  |  | 769,928 |
Other current assets |  | 6,701 |  |  |  | 53,008 |
Property, plant and equipment, net |  | 44,863 |  |  |  | 181,175 |
Intangible assets |  | 54,471 |  |  |  | 116,820 |
Goodwill |  | 43,530 |  |  |  | 263,200 |
Operating lease right-of-use assets |  | 38,941 |  |  |  | — |
Other assets |  | 5,231 |  |  |  | 78,417 |
Total assets of discontinued operations |  | $ | 611,139 |  |  |  | $ | 1,939,504 |
Short-term borrowings |  | $ | — |  |  |  | $ | 5,995 |
Accounts payable |  | 63,380 |  |  |  | 205,133 |
Accrued liabilities |  | 29,699 |  |  |  | 171,311 |
Operating lease liabilities |  | 35,867 |  |  |  | — |
Other liabilities |  | 2,270 |  |  |  | 85,033 |
Deferred income tax liabilities (a) |  | (4,435 | ) |  |  | (39,133 | )
Total liabilities of discontinued operations |  | $ | 126,781 |  |  |  | $ | 428,339 |
(a) | Deferred income tax balances reflect VF's consolidated netting by jurisdiction.
Other Divestitures
Reef® Brand Business During the three months ended September 29, 2018, the Company reached the decision to sell the Reef® brand business, which was included in the Active segment. VF signed a definitive agreement for the sale of the Reef® brand business on October 2, 2018, and completed the transaction on October 26, 2018. VF received cash proceeds of $139.4 million, and recorded a $14.4 million final loss on sale, which was included in the other income (expense), net line item in the Consolidated Statement of Income for the year ended March 2019. Van Moer Business During the three months ended September 29, 2018, the Company reached the decision to sell the Van Moer business, which was acquired in connection with the Williamson-Dickie business and included in the Work segment. VF completed the sale of the Van Moer business on October 5, 2018, and received cash proceeds of €7.0 million ($8.1 million). VF recorded a $22.4 million final loss on sale, which was included in the other income (expense), net line item in the Consolidated Statement of Income for the year ended March 2019.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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