VF Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

3 Months Ended

Jul. 03, 2021

Discontinued Operations and Disposal Groups [Abstract]

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.

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 the license of certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. As of March 28, 2020, the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria. 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 Operations and Consolidated Statements of Cash Flows, respectively, through the date of sale. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale.

On June 28, 2021, VF completed the sale of the Occupational Workwear business. The Company received proceeds of $616.5 million, net of cash sold, resulting in an estimated after-tax gain on sale of $145.6 million, which is included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statement of Operations for the three months ended June 2021, and is subject to working capital and other adjustments.

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 (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations were income of $170.3 million (including an estimated after-tax gain on sale of $145.6 million) and a loss of $7.9 million for the three months ended June 2021 and June 2020, respectively.

Under the terms of a transition services agreement, the Company will provide certain support services for periods generally up to 12 months from the closing date of the transaction.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the Occupational Workwear business that are included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statements of Operations:


	Three Months Ended June

(In thousands)	2021		2020
Net revenues	$	181,424	$	125,333
Cost of goods sold	117,193		101,470
Selling, general and administrative expenses	38,735		33,256

Interest income, net	194		293
Other income (expense), net	6		—
Income (loss) from discontinued operations before income taxes	25,696		(9,100)
Gain on the sale of discontinued operations before income taxes	133,571		—
Total income (loss) from discontinued operations before income taxes	159,267		(9,100)
Income tax benefit (a)	(11,006)		(1,229)
Income (loss) from discontinued operations, net of tax	$	170,273	$	(7,871)

(a)Income tax benefit for the three months ended June 2021 includes $12.0 million of deferred tax benefit related to capital and other losses realized upon the sale of the Occupational Workwear business.

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)	June 2021		March 2021		June 2020
Cash and equivalents	$	—	$	34,132	$	42,986
Accounts receivable, net	—		103,835		64,065
Inventories	—		245,227		258,632
Other current assets	—		8,208		10,027
Property, plant and equipment, net	—		49,394		46,697
Intangible assets, net	—		54,471		54,471
Goodwill	—		43,530		43,530
Operating lease right-of-use assets	—		43,220		39,452
Other assets	—		5,561		5,275

Total assets of discontinued operations	$	—	$	587,578	$	565,135


Accounts payable	$	—	$	59,965	$	27,810
Accrued liabilities	—		38,956		31,134
Operating lease liabilities	—		31,301		34,462
Other liabilities	—		3,863		2,284
Deferred income tax liabilities (a)	—		(8,828)		(4,407)
Total liabilities of discontinued operations	$	—	$	125,257	$	91,283

(a)Deferred income tax balances reflect VF's consolidated netting by jurisdiction