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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 3 Months Ended
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Jun. 29, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES Summary of Derivative Financial Instruments VF’s outstanding derivative financial instruments include foreign currency exchange forward contracts and interest rate swap 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 all outstanding foreign currency exchange forward contracts were $3.1 billion at June 2024, $3.1 billion at March 2024 and $3.5 billion at June 2023, consisting primarily of contracts hedging exposures to the euro, British pound, Canadian dollar, Swiss franc, Mexican peso, Polish zloty, Swedish krona, South Korean won, Chinese renminbi and Japanese yen. These derivative contracts have maturities up to 20 months. The notional amount of VF's outstanding interest rate swap contracts was $500.0 million at June 2024, March 2024 and June 2023. These contracts hedge the cash flow risk of interest payments on VF's variable-rate delayed draw Term Loan ("DDTL") Agreement. 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 2024 |  |  | March 2024 |  | June 2023 |  |  | June 2024 |  |  | March 2024 |  | June 2023
Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | $ | 38,160 |  |  |  | $ | 29,657 |  |  | $ | 27,902 |  |  |  | $ | (27,436) |  |  |  | $ | (39,639) |  |  | $ | (74,050) |
Interest rate contracts |  | 1,690 |  |  |  | 2,335 |  |  | 4,582 |  |  |  | — |  |  |  | — |  |  | — |
Total derivatives designated as hedging instruments |  | 39,850 |  |  |  | 31,992 |  |  | 32,484 |  |  |  | (27,436) |  |  |  | (39,639) |  |  | (74,050) |
Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts |  | 1,507 |  |  |  | 556 |  |  | 404 |  |  |  | (142) |  |  |  | (595) |  |  | (7,978) |
Total derivatives |  | $ | 41,357 |  |  |  | $ | 32,548 |  |  | $ | 32,888 |  |  |  | $ | (27,578) |  |  |  | $ | (40,234) |  |  | $ | (82,028) |
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. If VF were to offset and record the asset and liability balances 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 2024 |  |  | March 2024 |  | June 2023
(In thousands) |  | Derivative Asset |  | Derivative Liability |  |  | Derivative Asset |  | Derivative Liability |  | Derivative Asset |  | Derivative Liability
Gross amounts presented in the Consolidated Balance Sheets |  | $ | 41,357 |  |  | $ | (27,578) |  |  |  | $ | 32,548 |  |  | $ | (40,234) |  |  | $ | 32,888 |  |  | $ | (82,028) |
Gross amounts not offset in the Consolidated Balance Sheets |  | (6,699) |  |  | 6,699 |  |  |  | (11,322) |  |  | 11,322 |  |  | (27,128) |  |  | 27,128 |
Net amounts |  | $ | 34,658 |  |  | $ | (20,879) |  |  |  | $ | 21,226 |  |  | $ | (28,912) |  |  | $ | 5,760 |  |  | $ | (54,900) |
Derivatives are classified as current or noncurrent based on maturity dates, as follows:
(In thousands) |  |  | June 2024 |  |  | March 2024 |  | June 2023
Derivative Instruments | Balance Sheet Location |  |  |  |  |  |  |
Foreign exchange contracts | Other current assets |  | $ | 33,562 |  |  |  | $ | 26,366 |  |  | $ | 26,145 |
Foreign exchange contracts | Accrued liabilities |  | (24,802) |  |  |  | (35,578) |  |  | (73,049) |
Foreign exchange contracts | Other assets |  | 6,105 |  |  |  | 3,847 |  |  | 2,161 |
Foreign exchange contracts | Other liabilities |  | (2,776) |  |  |  | (4,656) |  |  | (8,979) |
Interest rate contracts | Other current assets |  | 1,690 |  |  |  | 2,335 |  |  | — |
Interest rate contracts | Other assets |  | — |  |  |  | — |  |  | 4,582 |
Cash Flow Hedges VF primarily uses foreign currency exchange forward contracts to hedge a portion of the exchange risk for its forecasted sales, inventory purchases, operating costs and certain intercompany transactions, including sourcing and management fees and royalties. The Company also uses interest rate swap contracts to hedge against a portion of the exposure related to its interest payments on its variable-rate debt. The effects of cash flow hedging included in VF’s Consolidated Statements of Comprehensive Loss and Consolidated Statements of Operations are summarized as follows:
(In thousands) |  | Gain (Loss) on Derivatives Recognized in Accumulated OCL Three Months Ended June |  |  |
Cash Flow Hedging Relationships |  | 2024 |  |  | 2023 |  |  |  |  |  |
Foreign exchange contracts |  | $ | 19,501 |  |  |  | $ | (29,160) |  |  |  |  |  |  |
Interest rate contracts |  | 520 |  |  |  | 6,420 |  |  |  |  |  |  |
Total |  | $ | 20,021 |  |  |  | $ | (22,740) |  |  |  |  |  |  |
(In thousands) |  |  | Gain (Loss) Reclassified from Accumulated OCL into Net Loss Three Months Ended June |  |  |
Cash Flow Hedging Relationships | Location of Gain (Loss) |  | 2024 |  |  | 2023 |  |  |  |  |  |
Foreign exchange contracts | Net revenues |  | $ | (4,331) |  |  |  | $ | 1,090 |  |  |  |  |  |  |
Foreign exchange contracts | Cost of goods sold |  | (10,126) |  |  |  | 8,075 |  |  |  |  |  |  |
Foreign exchange contracts | Selling, general and administrative expenses |  | (408) |  |  |  | 1,301 |  |  |  |  |  |  |
Foreign exchange contracts | Other income (expense), net |  | (56) |  |  |  | (511) |  |  |  |  |  |  |
Interest rate contracts | Interest expense |  | 1,192 |  |  |  | 725 |  |  |  |  |  |  |
Total |  |  | $ | (13,729) |  |  |  | $ | 10,680 |  |  |  |  |  |  |
Derivative Contracts Not Designated as Hedges VF uses foreign currency exchange contracts to manage foreign currency exchange risk on third-party and intercompany accounts receivable and payable, as well as third-party and intercompany borrowings and interest payments. 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 losses or gains on the related assets and liabilities. In the case of derivative contracts executed on foreign currency exposures that are no longer probable of occurring, VF de-designates these hedges and the fair value changes of these instruments are also recognized directly in earnings. During the three months ended June 2023, certain derivative contracts were de-designated as the related hedged forecasted transactions were no longer deemed probable of occurring. Accordingly, the Company reclassified amounts from accumulated OCL and recognized an $8.4 million loss in cost of goods sold during the three months ended June 2023. Other Derivative Information A t June 2024, accumulated OCL included $4.0 million of pre-tax net deferred losses for foreign currency exchange contracts and a $1.7 million pre-tax deferred gain for interest rate swap contracts, which are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on exchange rates and interest rates in effect when outstanding derivative contracts are settled. Net Investment Hedge The Company has designated its euro-denominated fixed-rate notes, which represented €2.0 billion in aggregate principal as of June 2024, as a net investment hedge of VF’s investment in certain foreign operations. Because this debt qualified as a nonderivative hedging instrument, foreign currency transaction gains or losses of the debt are deferred in the foreign currency translation and other component of accumulated OCL as an offset to the foreign currency translation adjustments on the hedged investments. During the three-month periods ended June 2024 and June 2023, the Company recognized an after-tax gain of $10.8 million and an after-tax loss of $10.4 million, respectively, in OCL related to the net investment hedge transaction. Any amounts deferred in accumulated OCL will remain until the hedged investment is sold or substantially liquidated.

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- 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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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