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

Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Dec. 28, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Summary of Derivative Financial Instruments

All of VF’s outstanding derivative financial instruments at December 2024 are foreign currency exchange forward 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 December 2024, $3.1 billion at March 2024 and $3.0 billion at December 2023, consisting primarily of contracts hedging exposures to the euro,

British pound, Canadian dollar, Swiss franc, Mexican peso, Chinese renminbi, Polish zloty, Swedish krona, South Korean won, and Japanese yen. These derivative contracts have maturities up to 20 months.

During the three months ended December 2024, VF settled interest rate swap contracts that were in place to hedge the cash flow risk of interest payments on the variable-rate DDTL Agreement. The DDTL was prepaid on October 4, 2024. The notional amount of VF's outstanding interest rate swap contracts was $500.0 million at March 2024 and December 2023.

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)	December 2024		March 2024		December 2023		December 2024		March 2024		December 2023
Derivatives Designated as Hedging Instruments:
Foreign exchange contracts	$	89,053	$	29,657	$	13,901	$	(26,667)	$	(39,639)	$	(63,897)
Interest rate contracts	—		2,335		1,737		—		—		—
Total derivatives designated as hedging instruments	89,053		31,992		15,638		(26,667)		(39,639)		(63,897)
Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	2,632		556		166		(161)		(595)		(803)
Total derivatives	$	91,685	$	32,548	$	15,804	$	(26,828)	$	(40,234)	$	(64,700)

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:


	December 2024				March 2024				December 2023

(In thousands)	Derivative Asset		Derivative Liability		Derivative Asset		Derivative Liability		Derivative Asset		Derivative Liability
Gross amounts presented in the Consolidated Balance Sheets	$	91,685	$	(26,828)	$	32,548	$	(40,234)	$	15,804	$	(64,700)
Gross amounts not offset in the Consolidated Balance Sheets	(8,918)		8,918		(11,322)		11,322		(15,011)		15,011
Net amounts	$	82,767	$	(17,910)	$	21,226	$	(28,912)	$	793	$	(49,689)

Derivatives are classified as current or noncurrent based on maturity dates, as follows:


(In thousands)		December 2024		March 2024		December 2023
Derivative Instruments	Balance Sheet Location
Foreign exchange contracts	Other current assets	$	80,981	$	26,366	$	12,261
Foreign exchange contracts	Accrued liabilities	(24,332)		(35,578)		(55,562)
Foreign exchange contracts	Other assets	10,704		3,847		1,806
Foreign exchange contracts	Other liabilities	(2,496)		(4,656)		(9,138)
Interest rate contracts	Other current assets	—		2,335		1,737

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 used interest rate swap contracts to hedge against a portion of the exposure related to its interest payments on its variable-rate debt, which was prepaid on October 4, 2024. The effects of cash flow hedging included in VF’s Consolidated Statements of Comprehensive Income (Loss) and Consolidated Statements of Operations are summarized as follows:


(In thousands)	Gain (Loss) on Derivatives Recognized in Accumulated OCL Three Months Ended December				Gain (Loss) on Derivatives Recognized in Accumulated OCL Nine Months Ended December

Cash Flow Hedging Relationships	2024		2023		2024		2023
Foreign exchange contracts	$	104,716	$	(71,398)	$	70,014	$	(42,049)
Interest rate contracts	13		(1,977)		301		5,829
Total	$	104,729	$	(73,375)	$	70,315	$	(36,220)


(In thousands)		Gain (Loss) Reclassified from Accumulated OCL into Net Income (Loss) Three Months Ended December				Gain (Loss) Reclassified from Accumulated OCL into Net Income (Loss) Nine Months Ended December

Cash Flow Hedging Relationships	Location of Gain (Loss)	2024		2023		2024		2023
Foreign exchange contracts	Net revenues	$	(9,580)	$	(794)	$	(21,762)	$	(220)
Foreign exchange contracts	Cost of goods sold	4,648		(2,697)		(9,479)		14,777
Foreign exchange contracts	SG&A expenses	166		833		(289)		3,141
Foreign exchange contracts	Other income (expense), net	(970)		536		(973)		(725)
Interest rate contracts	Interest expense	364		27		418		81
Interest rate contracts	Income (loss) from discontinued operations, net of tax	—		1,183		2,299		2,952
Total		$	(5,372)	$	(912)	$	(29,786)	$	20,006

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 nine months ended December 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 $8.3 million loss in cost of goods sold during the nine months ended December 2023. There were no material reclassifications in the other periods presented.

Other Derivative Information

At December 2024, accumulated OCL included $38.9 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.

Net Investment Hedge

The Company has designated its euro-denominated fixed-rate notes, which represented €2.0 billion in aggregate principal as of December 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 and nine-month periods ended December 2024, the Company recognized an after-tax gain of $108.6 million and $54.7 million, respectively, in other comprehensive income (loss) related to the net investment hedge transaction and an after-tax loss of $74.8 million and $19.3 million for the three and nine-month periods ended December 2023, respectively. Any amounts deferred in accumulated OCL will remain until the hedged investment is sold or substantially liquidated.