e10vq
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
     
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2010
Commission file number: 1-5256
 
V. F. CORPORATION
(Exact name of registrant as specified in its charter)
     
Pennsylvania   23-1180120
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. employer
identification number)
105 Corporate Center Boulevard
Greensboro, North Carolina 27408

(Address of principal executive offices)
(336) 424-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o (Do not check if a smaller reporting company)   Smaller reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ
On May 1, 2010, there were 110,105,590 shares of the registrant’s Common Stock outstanding.
 
 

 


 

VF CORPORATION
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 EX-31.1
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 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

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Part I — Financial Information
Item 1 — Financial Statements (Unaudited)
VF CORPORATION
Consolidated Statements of Income
(Unaudited)

(In thousands, except per share amounts)
                 
    Three Months Ended March  
    2010     2009  
Net Sales
  $ 1,730,086     $ 1,707,301  
Royalty Income
    19,793       18,173  
 
           
 
               
Total Revenues
    1,749,879       1,725,474  
 
           
 
               
Costs and Operating Expenses
               
Cost of goods sold
    932,203       996,640  
Marketing, administrative and general expenses
    594,416       567,386  
 
           
 
    1,526,619       1,564,026  
 
           
 
               
Operating Income
    223,260       161,448  
 
               
Other Income (Expense)
               
Interest income
    494       765  
Interest expense
    (20,499 )     (22,015 )
Miscellaneous, net
    6,423       1,249  
 
           
 
    (13,582 )     (20,001 )
 
           
 
               
Income Before Income Taxes
    209,678       141,447  
 
               
Income Taxes
    46,219       41,013  
 
           
 
               
Net Income
    163,459       100,434  
 
               
Net Loss Attributable to Noncontrolling Interests in Subsidiaries
    57       505  
 
           
 
               
Net Income Attributable to VF Corporation
  $ 163,516     $ 100,939  
 
           
 
               
Earnings Per Common Share Attributable to VF Corporation Common Stockholders
               
Basic
  $ 1.48     $ 0.92  
Diluted
    1.46       0.91  
 
               
Weighted Average Shares Outstanding
               
Basic
    110,259       109,992  
Diluted
    111,629       111,028  
 
               
Cash Dividends Per Common Share
  $ 0.60     $ 0.59  
 
               
See notes to consolidated financial statements.

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VF CORPORATION
Consolidated Balance Sheets
(Unaudited)

(In thousands, except share amounts)
                         
    March     December     March  
    2010     2009     2009  
ASSETS
                       
 
                       
Current Assets
                       
Cash and equivalents
  $ 718,634     $ 731,549     $ 276,428  
Accounts receivable, less allowance for doubtful accounts of:
    787,682       776,140       996,507  
March 2010 - $59,351; Dec. 2009 - $60,380;
                       
March 2009 - $49,177
                       
 
                       
Inventories:
                       
Finished products
    764,167       772,458       910,139  
Work in process
    69,515       70,507       75,832  
Materials and supplies
    118,500       115,674       132,102  
 
                 
 
    952,182       958,639       1,118,073  
 
                       
Other current assets
    189,088       163,028       230,251  
 
                 
Total current assets
    2,647,586       2,629,356       2,621,259  
 
                       
Property, Plant and Equipment
    1,602,996       1,601,608       1,558,857  
Less accumulated depreciation
    1,001,137       987,430       926,444  
 
                 
 
    601,859       614,178       632,413  
 
                       
Intangible Assets
    1,529,538       1,535,121       1,563,268  
 
                       
Goodwill
    1,363,059       1,367,680       1,437,682  
 
                       
Other Assets
    326,409       324,322       297,942  
 
                 
 
                       
 
  $ 6,468,451     $ 6,470,657     $ 6,552,564  
 
                 
 
                       
LIABILITIES AND STOCKHOLDERS’ EQUITY
                       
 
                       
Current Liabilities
                       
Short-term borrowings
  $ 48,525     $ 45,453     $ 287,873  
Current portion of long-term debt
    202,690       203,179       3,272  
Accounts payable
    296,437       373,186       323,536  
Accrued liabilities
    509,228       470,765       483,523  
 
                 
Total current liabilities
    1,056,880       1,092,583       1,098,204  
 
                       
Long-term Debt
    937,826       938,494       1,140,414  
 
                       
Other Liabilities
    648,879       626,295       739,777  
 
                       
Commitments and Contingencies
                       
 
                       
Stockholders’ Equity
                       
Common stock, stated value $1; shares authorized, 300,000,000; shares outstanding:
    109,981       110,285       110,276  
March 2010 - 109,980,912; Dec. 2009 - 110,285,132;
                       
March 2009 - 110,276,129
                       
Additional paid-in capital
    1,938,184       1,864,499       1,763,818  
Accumulated other comprehensive income (loss)
    (246,241 )     (209,742 )     (297,760 )
Retained earnings
    2,024,856       2,050,109       1,996,972  
Noncontrolling interests in subsidiaries
    (1,914 )     (1,866 )     863  
 
                 
 
                       
Total stockholders’ equity
    3,824,866       3,813,285       3,574,169  
 
                 
 
                       
 
  $ 6,468,451     $ 6,470,657     $ 6,552,564  
 
                 
See notes to consolidated financial statements.

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VF CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)

(In thousands)
                 
    Three Months Ended March  
    2010     2009  
Operating Activities
               
Net income
  $ 163,459     $ 100,434  
Adjustments to reconcile net income to cash provided (used) by operating activities:
               
Depreciation
    27,396       22,035  
Amortization of intangible assets
    9,978       9,102  
Other amortization
    3,695       3,311  
Stock-based compensation
    14,774       11,668  
Pension funding under expense
    10,324       18,338  
Other, net
    27,410       22,125  
Changes in operating assets and liabilities, net of acquisitions:
               
Accounts receivable
    (25,230 )     (152,542 )
Inventories
    3,867       27,282  
Other current assets
    (4,373 )     40,211  
Accounts payable
    (74,409 )     (109,748 )
Accrued compensation
    (31,548 )     (8,982 )
Accrued income taxes
    26,213       (3,858 )
Accrued liabilities
    58,312       (2,594 )
Other assets and liabilities
    (25,714 )     (12,145 )
 
           
 
               
Cash provided (used) by operating activities
    184,154       (35,363 )
 
               
Investing Activities
               
Capital expenditures
    (17,339 )     (16,983 )
Business acquisitions, net of cash acquired
    (29,111 )     (207,219 )
Software purchases
    (701 )     (1,840 )
Other, net
    (2,486 )     593  
 
           
 
               
Cash used by investing activities
    (49,637 )     (225,449 )
 
               
Financing Activities
               
Increase in short-term borrowings
    2,837       235,912  
Payments on long-term debt
    (1,061 )     (1,110 )
Purchase of Common Stock
    (118,001 )      
Cash dividends paid
    (66,224 )     (64,966 )
(Cost) proceeds from issuance of Common Stock, net
    52,394       (6,740 )
Tax benefits of stock option exercises
    1,669       (2,438 )
 
           
 
               
Cash provided (used) by financing activities
    (128,386 )     160,658  
 
               
Effect of Foreign Currency Rate Changes on Cash
    (19,046 )     (5,262 )
 
           
 
               
Net Change in Cash and Equivalents
    (12,915 )     (105,416 )
 
               
Cash and Equivalents — Beginning of Year
    731,549       381,844  
 
           
 
               
Cash and Equivalents — End of Period
  $ 718,634     $ 276,428  
 
           
See notes to consolidated financial statements.
               

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VF CORPORATION
Consolidated Statements of Stockholders’ Equity
(Unaudited)

(In thousands)
                                         
      VF Corporation Stockholders        
                    Accumulated                
            Additional     Other             Non-  
    Common     Paid-in     Comprehensive     Retained     controlling  
    Stock     Capital     Income (Loss)     Earnings     Interests  
Balance, December 2008
  $ 109,848     $ 1,749,464     $ (276,294 )   $ 1,972,874     $ 1,353  
Net income (loss)
                      461,271       (2,813 )
Common Stock dividends
                      (261,682 )      
Purchase of treasury stock
    (1,560 )                 (110,415 )      
Stock compensation plans, net
    1,977       115,035             (12,732 )      
Common Stock held in trust for deferred compensation plans
    20                   793        
Distributions to noncontrolling interests
                            (480 )
Foreign currency translation
                37,468             74  
Defined benefit pension plans
                25,021              
Derivative financial instruments
                510              
Marketable securities
                3,553              
 
                             
 
                                       
Balance, December 2009
    110,285       1,864,499       (209,742 )     2,050,109       (1,866 )
Net income (loss)
                      163,516       (57 )
Common Stock dividends
                      (66,224 )      
Purchase of treasury stock
    (1,500 )                 (116,501 )      
Stock compensation plans, net
    1,199       73,685             (5,780 )      
Common Stock held in trust for deferred compensation plans
    (3 )                 (264 )      
Foreign currency translation
                (63,526 )           9  
Defined benefit pension plans
                7,589              
Derivative financial instruments
                18,496              
Marketable securities
                942              
 
                             
 
                                       
Balance, March 2010
  $ 109,981     $ 1,938,184     $ (246,241 )   $ 2,024,856     $ (1,914 )
 
                             
See notes to consolidated financial statements.

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VF CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
Note A – Basis of Presentation
VF Corporation (and its subsidiaries, collectively known as “VF”) uses a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. For presentation purposes herein, all references to periods ended March 2010, December 2009 and March 2009 relate to the fiscal periods ended on April 3, 2010, January 2, 2010 and April 4, 2009, respectively.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and notes required by generally accepted accounting principles (“GAAP”) in the United States of America for complete financial statements. Similarly, the December 2009 consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal and recurring adjustments necessary to fairly present the consolidated financial position, results of operations and cash flows of VF for the interim periods presented. Operating results for the three months ended March 2010 are not necessarily indicative of results that may be expected for any other interim period or for the year ending January 1, 2011. For further information, refer to the consolidated financial statements and notes included in VF’s Annual Report on Form 10-K for the year ended December 2009 (“2009 Form 10-K”).
Certain prior year amounts, none of which are material, have been reclassified to conform with the 2010 presentation.
Note B – Changes in Accounting Policies
During the first quarter of 2010, VF adopted new accounting guidance issued by the Financial Accounting Standards Board (“FASB”) related to transfers of financial assets. This guidance modifies the requirements for derecognizing financial assets from a transferor’s balance sheet and requires additional disclosures about transfers of financial assets and any continuing involvement by the transferor. The new guidance did not have a significant impact on our operating results, financial condition or disclosures.
Also during the first quarter of 2010, VF adopted new accounting guidance for disclosures of fair value measurements. This guidance requires disclosures about transfers into and out of Levels 1 and 2 of the fair value hierarchy and separate disclosures about activity within Level 3 of the fair value hierarchy. The guidance also clarifies disclosures related to disaggregation of assets and liabilities and valuation techniques used to measure fair value.
Note C Acquisition
On March 10, 2010, VF completed the acquisition of its former 50%-owned joint venture that markets VansÒ branded products in the wholesale channel in Mexico. As part of this transaction, VF also acquired the VansÒ retail stores that had been operated by our joint venture partner (together with the wholesale business, “Vans Mexico”). The purchase price of these businesses was $31.0 million. The carrying value of our initial 50% investment, recorded in Other Assets, was $7.9 million at the acquisition date, which included the equity in net income of the investment to the date of acquisition. VF recognized a gain in Miscellaneous Income in the first quarter of $5.7 million from remeasuring its original 50% investment in the joint venture

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to fair value. Revenues and pretax earnings since the date of acquisition recognized in VF’s first quarter operating results were $2.6 million and $0.8 million (excluding the $5.7 million gain), respectively. Acquisition expenses included in VF’s results of operations were not significant. Vans Mexico is reported as part of the Outdoor & Action Sports Coalition.
Management has allocated the purchase price to acquired tangible and intangible assets and assumed liabilities based on their respective fair values at the acquisition date. Of the total value, $23.4 million was assigned to indefinite-lived intangible assets (trademarks) and amortizable intangible assets (customer relationships), and $16.8 million was assigned to goodwill, subject to possible refinement for income taxes during the second quarter. Goodwill arising from the acquisition related to growth prospects in Mexico, an experienced workforce and synergies with the VansÒ business in the United States. Pro forma operating results for periods prior to the acquisition date are not provided because the acquisition was not material to VF’s results of operations.
Note D – Sale of Accounts Receivable
In September 2009, VF entered into an agreement to sell selected trade accounts receivable, on a revolving basis, to a financial institution. The agreement covers the sale of up to $192.5 million of accounts receivable, at any point in time, on a nonrecourse basis. After the sale, VF continues to service and collect these accounts receivable on behalf of the financial institution but does not retain any other interests in the receivables. At the beginning of 2010, accounts receivable in the Consolidated Balance Sheet had been reduced by $74.2 million related to balances sold under this program. At the end of March 2010, accounts receivable had been reduced by $116.0 million related to balances sold under this program. During the first quarter, VF sold $202.9 million of accounts receivable at their stated amounts, less a funding fee of $0.3 million, which was recorded in Miscellaneous Expense. Net proceeds of this program are recognized in the Consolidated Statement of Cash Flows as part of the change in accounts receivable in cash provided by operating activities.
Note E Intangible Assets
                                         
            March 2010     December 2009  
    Weighted     Gross             Net     Net  
    Average     Carrying     Accumulated     Carrying     Carrying  
Dollars in thousands   Life *     Amount     Amortization     Amount     Amount  
Amortizable intangible assets:
                                       
Customer relationships
  19 years   $ 445,865     $ 86,939     $ 358,926     $ 361,039  
License agreements
  24 years     179,628       44,989       134,639       137,447  
Trademarks and other
  7 years     14,910       8,990       5,920       6,615  
 
                                   
 
                                       
Amortizable intangible assets, net
                            499,485       505,101  
 
                                       
Indefinite-lived intangible assets:
                                       
Trademarks
                            1,030,053       1,030,020  
 
                                   
 
                                       
Intangible assets, net
                          $ 1,529,538     $ 1,535,121  
 
                                   
 
*   Amortization of customer relationships – accelerated methods; license agreements – accelerated and straight-line methods; trademarks and other – accelerated and straight-line methods.

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Amortization of intangible assets for the first quarter of 2010 was $10.0 million. Estimated amortization expense for the remainder of 2010 is $29.8 million and for the years 2011 through 2014 is $37.4 million, $34.7 million, $33.1 million and $32.1 million, respectively.
Note F – Goodwill
                                                 
    Outdoor &                             Contemporary        
In thousands   Action Sports     Jeanswear     Imagewear     Sportswear     Brands     Total  
Balance, December 2009
  $ 574,879     $ 238,930     $ 56,703     $ 157,314     $ 339,854     $ 1,367,680  
2010 acquisition
    16,779                               16,779  
Adjustment to contingent consideration
    (78 )                             (78 )
Currency translation
    (14,934 )     (3,066 )                 (3,322 )     (21,322 )
 
                                   
 
                                               
Balance, March 2010
  $ 576,646     $ 235,864     $ 56,703     $ 157,314     $ 336,532     $ 1,363,059  
 
                                   
Balances at December 2009 are net of impairment charges recorded during 2009, as follows: Outdoor & Action Sports – $43.4 million and Sportswear – $58.5 million.
Note G – Pension Plans
VF’s net periodic pension cost contained the following components:
                 
    Three Months  
    Ended March  
In thousands   2010     2009  
Service cost – benefits earned during the year
  $ 4,083     $ 3,726  
Interest cost on projected benefit obligations
    19,108       17,950  
Expected return on plan assets
    (19,172 )     (13,379 )
Amortization of:
               
Actuarial losses
    11,372       15,131  
Prior service costs
    987       1,067  
 
           
 
               
Net periodic pension cost
  $ 16,378     $ 24,495  
 
           
During the first quarter, VF made contributions totaling $6.1 million to its defined benefit pension plans. VF currently anticipates making an additional $2.6 million of contributions during the remainder of 2010.
Note H – Business Segment Information
For internal management and reporting purposes, VF’s businesses are grouped principally by product categories, and by brands within those product categories. These groupings of businesses are referred to as “coalitions.” These coalitions are the basis for VF’s reportable segments. Financial information for VF’s reportable segments is as follows:

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    Three Months  
    Ended March  
In thousands   2010     2009  
Coalition revenues:
               
Outdoor & Action Sports
  $ 678,562     $ 618,272  
Jeanswear
    622,065       667,383  
Imagewear
    221,298       226,651  
Sportswear
    102,177       103,570  
Contemporary Brands
    104,089       89,589  
Other
    21,688       20,009  
 
           
 
               
Total coalition revenues
  $ 1,749,879     $ 1,725,474  
 
           
 
               
Coalition profit:
               
Outdoor & Action Sports
  $ 132,705     $ 88,595  
Jeanswear
    106,808       89,648  
Imagewear
    22,812       22,867  
Sportswear
    7,168       4,508  
Contemporary Brands
    8,452       15,414  
Other
    (1,225 )     (2,016 )
 
           
 
               
Total coalition profit
    276,720       219,016  
 
               
Corporate and other expenses
    (47,037 )     (56,319 )
Interest, net
    (20,005 )     (21,250 )
 
           
 
               
Income before income taxes
  $ 209,678     $ 141,447  
 
           
Operating results of the lucy business unit for 2009 have been reclassified from the Contemporary Brands Coalition to the Outdoor & Action Sports Coalition consistent with a change in internal management reporting beginning in 2010.
Note I — Capital and Comprehensive Income (Loss)
Common stock outstanding is net of shares held in treasury, and in substance retired. There were 15,518,019 treasury shares at March 2010, 13,943,457 at December 2009 and 12,383,868 at March 2009. The excess of the cost of treasury shares acquired over the $1 per share stated value of Common Stock is deducted from Retained Earnings. In addition, 244,069 shares of VF Common Stock at March 2010, 241,446 shares at December 2009, and 276,002 shares at March 2009 were held in connection with deferred compensation plans. These shares held for deferred compensation plans are treated for financial reporting purposes as treasury shares at a cost of $10.2 million, $11.0 million and $12.6 million at each of the respective dates.
There are 25,000,000 authorized shares of Preferred Stock, $1 par value, of which none are outstanding.
Other comprehensive income (“OCI”) consists of changes in assets and liabilities that are not included in Net Income under GAAP but are instead reported within a separate component of Stockholders’ Equity. VF’s comprehensive income was as follows:

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    Three Months  
    Ended March  
In thousands   2010     2009  
Net income
  $ 163,459     $ 100,434  
 
               
Other comprehensive income (loss):
               
Foreign currency translation
               
Losses arising during the period
    (74,763 )     (40,338 )
Less income tax effect
    11,237       3,777  
Defined benefit pension plans
               
Amortization of deferred actuarial losses
    11,372       15,131  
Amortization of prior service cost
    987       1,067  
Less income tax effect
    (4,770 )     (6,241 )
Derivative financial instruments
               
Gains arising during the period
    20,841       12,381  
Less income tax effect
    (8,030 )     (4,770 )
Reclassification to net income for (gains) losses realized
    9,247       (3,688 )
Less income tax effect
    (3,562 )     1,420  
Marketable securities
               
Gains (losses) arising during the period
    942       (205 )
 
           
 
               
Other comprehensive income (loss)
    (36,499 )     (21,466 )
 
           
 
               
Comprehensive income
    126,960       78,968  
 
               
Comprehensive loss attributable to noncontrolling interests
    48       490  
 
           
 
               
Comprehensive income attributable to VF Corporation
  $ 127,008     $ 79,458  
 
           
Accumulated OCI for 2010 is summarized as follows:
                                         
    Foreign   Defined   Derivative        
    Currency   Benefit   Financial   Marketable    
In thousands   Translation   Pension Plans   Instruments   Securities   Total
Balance, December 2009
  $ 59,671     $ (265,970 )   $ (6,180 )   $ 2,737     $ (209,742 )
Other comprehensive income (loss)
    (63,526 )     7,589       18,496       942       (36,499 )
 
                                       
 
                                       
Balance, March 2010
  $ (3,855 )   $ (258,381 )   $ 12,316     $ 3,679     $ (246,241 )
 
                                       
Note J – Stock-based Compensation
During the first three months of 2010, VF granted options for 1,283,874 shares of Common Stock at an exercise price of $74.85, equal to the fair market value of VF Common Stock on the date of grant. The options vest in equal annual installments over a three year period. The fair value of these options was estimated using a lattice valuation model for employee groups having similar exercise behaviors, with the

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following assumptions: expected volatility ranging from 24% to 39%, with a weighted average of 35%; expected term of 5.5 to 7.6 years; expected dividend yield of 3.7%; and risk-free interest rate ranging from 0.2% at six months to 3.7% at 10 years. The resulting weighted average fair value of these options at the date of grant was $18.42 per option.
Also during the first three months of 2010, VF granted 317,305 performance-based restricted stock units. Participants are eligible to receive shares of VF Common Stock at the end of a three year performance period. The actual number of shares that will be earned, if any, will be based on VF’s performance over that period. The grant date fair value of the restricted stock units was $71.91 per unit. In addition, VF granted 15,000 shares of restricted VF Common Stock with a fair value of $71.91 per share. These shares will vest in 2014, assuming continuation of employment by the grantee to that date.
Note K – Income Taxes
The effective income tax rate was 22.1% for the first quarter of 2010, compared with 29.0% in the comparable period of 2009. The lower rate in 2010 was due to a higher percentage of income in lower tax jurisdictions outside the United States and a $13.0 million tax benefit related to refund claims in a foreign jurisdiction. The effective tax rate for the full year 2009 was 29.9%, which included a 3.7% unfavorable impact from a goodwill impairment charge.
VF files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous states and foreign jurisdictions. In the United States, the Internal Revenue Service (“IRS”) completed its examination of tax years 2004, 2005 and 2006, and VF has appealed the results of those examinations to the IRS Appeals office. Tax years 2003 to 2008 are under examination by the State of Alabama, and tax years 2006 and 2007 are under examination by the State of California. VF is also currently subject to examination by various other taxing authorities. Management believes that some of these audits and negotiations will conclude during the next 12 months.
During the first quarter of 2010, the amount of unrecognized tax benefits increased by $8.3 million due primarily to tax positions taken in prior years. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits may decrease during the next 12 months by approximately $32.0 million due to settlements of audits, other settlements with tax authorities and expiration of statutes of limitations, of which $29.8 million would reduce income tax expense. In addition, VF intends to file refund claims in various tax jurisdictions during 2010, which could reduce income tax expense in 2010.

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Note L — Earnings Per Share
                 
    Three Months  
    Ended March  
In thousands, except per share amounts   2010     2009  
Earnings per share — basic:
               
Net income attributable to VF Corporation common stockholders
  $ 163,516     $ 100,939  
 
           
 
               
Weighted average Common Stock outstanding
    110,259       109,992  
 
           
 
               
Earnings per share attributable to VF Corporation common stockholders
  $ 1.48     $ 0.92  
 
           
 
               
Earnings per share — diluted:
               
Net income attributable to VF Corporation common stockholders
  $ 163,516     $ 100,939  
 
           
 
               
Weighted average Common Stock outstanding
    110,259       109,992  
Stock options and other dilutive securities
    1,370       1,036  
 
           
Weighted average Common Stock and dilutive securities outstanding
    111,629       111,028  
 
           
 
               
Earnings per share attributable to VF Corporation common stockholders
  $ 1.46     $ 0.91  
 
           
Outstanding options to purchase 3.8 million shares and 5.8 million shares of Common Stock were excluded from the computations of diluted earnings per share for the three months ended March 2010 and March 2009, respectively, because the effect of their inclusion would have been antidilutive. In addition, performance-based restricted stock units for the three month periods ended March 2010 and 2009 were excluded from the computation of diluted earnings per share because their performance factor is not known until the annual financial results are available.
Note M — Fair Value Measurements
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting standards establish a three-level hierarchy that distinguishes between (i) market data obtained or developed from independent sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value are classified in one of the following categories, in order of priority of observability and objectivity of pricing inputs:
  Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.
 
  Level 2 — Fair value based on significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in

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    inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.
 
  Level 3 — Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.
The fair value measurement level for an asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.
The following table summarizes the classes of financial assets and financial liabilities measured and recorded at fair value on a recurring basis at the dates indicated:
                                 
            Fair Value Using:  
            Quoted Prices     Significant        
            in Active     Other     Significant  
    Total     Markets for     Observable     Unobservable  
    Fair     Identical Assets     Inputs     Inputs  
In thousands   Value     (Level 1)     (Level 2)     (Level 3)  
March 2010
                               
Financial assets:
                               
Cash equivalents — money market funds
  $ 429,659     $ 429,659     $     $  
Cash equivalents — time deposits
    85,036       85,036              
Derivative instruments
    31,130             31,130        
Investment securities
    190,485       150,265       40,220        
 
                               
Financial liabilities:
                               
Derivative instruments
    4,947             4,947        
Deferred compensation
    209,303             209,303        
 
                               
December 2009
                               
Financial assets:
                               
Cash equivalents — money market funds
  $ 372,516     $ 372,516     $     $  
Cash equivalents — time deposits
    81,554       81,554              
Derivative instruments
    8,536             8,536        
Investment securities
    182,306       140,872       41,434        
 
                               
Financial liabilities:
                               
Derivative instruments
    13,587             13,587        
Deferred compensation
    199,831             199,831        
Derivative instruments represent unrealized gains or losses on foreign currency forward exchange contracts, which are the differences between (i) the functional currency value of the foreign currency to be received or paid at the contracts’ settlement date and (ii) the functional currency value to be sold or purchased at the current forward exchange rate. Investment securities, consisting of mutual funds (classified as Level 1) and a separately managed fixed income fund (classified as Level 2), are purchased to offset a substantial portion of liabilities to participants in VF’s deferred compensation plans. Fair value of the separately managed fixed income fund included in investment securities is its daily net asset value. Fair value of liabilities under

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deferred compensation plans is the amount payable to participants, based on the fair value of participant-directed investment selections.
The carrying value of other financial assets and financial liabilities is their cost, which may differ from fair value. At March 2010 and December 2009, the carrying value of VF’s cash held as demand deposits, accounts receivable, life insurance contracts, short-term borrowings, accounts payable and accrued liabilities approximated their fair value. At March 2010 and December 2009, the carrying value of VF’s long-term debt, including the current portion, was $1,140.5 million and $1,141.7 million, respectively, compared with fair value of $1,178.7 million and $1,202.6 million at those dates. Fair value for long-term debt was estimated based on quoted market prices or values of comparable borrowings.
Note N — Derivative Financial Instruments and Hedging Activities
VF is exposed to risks in its ongoing business operations. Some of these risks are managed by using derivative financial instruments. Derivative financial instruments are contracts whose value is based on, or “derived” from, changes in the value of an underlying currency exchange rate, interest rate or other financial asset or index.
VF conducts business in many foreign countries and therefore is subject to movements in foreign currency exchange rates. Exchange rate fluctuations can have a significant effect on the translated U.S. dollar value of operating results and net assets denominated in foreign currencies. VF does not attempt to manage translation risk but does use derivative contracts to manage the exchange rate risk of specified cash flows or transactions denominated in foreign currencies. VF manages exchange rate risk on a consolidated basis, which allows exposures to be netted. Use of derivative financial instruments allows VF to reduce the overall exposure to risks in its cash flows and earnings, since gains and losses in the value of the derivative contracts offset losses and gains in the value of the underlying hedged exposures. In addition, in prior years VF had used derivatives in limited instances to hedge interest rate risk.
     Summary of derivative instruments — All of VF’s derivative instruments meet the criteria for hedge accounting at the inception of the hedging relationship. However, derivative instruments that are cash flow hedges of forecasted cash receipts are dedesignated as hedges near the end of their term and, accordingly, do not qualify for hedge accounting after the date of dedesignation. Fair value for derivative contracts outstanding at March 2010 and December 2009 totaled $922 million and $857 million, respectively, and consisted primarily of contracts hedging exposures to the euro, British pound, Mexican peso and Canadian dollar. Derivative contracts, consisting of forward exchange contracts, have maturities ranging from one month to 20 months. Amounts of outstanding derivatives in the following table are presented on an individual contract basis:
                                 
    Fair Value of Derivatives     Fair Value of Derivatives  
    with Unrealized Gains     with Unrealized Losses  
    March     December     March     December  
In thousands   2010     2009     2010     2009  
Foreign exchange contracts designated as hedging instruments
  $ 34,887     $ 11,183     $ 8,031     $ 16,769  
 
                               
Foreign exchange contracts not designated as hedging instruments
    43       560       716       25  
 
                       
 
                               
Total derivatives
  $ 34,930     $ 11,743     $ 8,747     $ 16,794  
 
                       

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The amounts above have been aggregated by counterparty for presentation in the Consolidated Balance Sheets and classified as current or noncurrent based on the derivatives’ maturity dates, as follows:
                 
In thousands   March 2010     December 2009  
Other current assets
  $ 28,881     $ 6,843  
Accrued current liabilities
    (4,107 )     (13,476 )
Other assets (noncurrent)
    2,249       1,693  
Other liabilities (noncurrent)
    (840 )     (111 )
     VF’s fair value hedge strategies and accounting policies — VF has a hedging program to reduce the risk that the future cash flows for firm commitments will be impacted by changes in foreign currency exchange rates. VF enters into derivative contracts to hedge intercompany loans between the United States and a foreign subsidiary or between two foreign subsidiaries having different functional currencies.
For a derivative instrument that is designated and qualifies as a fair value hedge (i.e., hedging the exposure to changes in the fair value of an asset or liability attributable to a particular risk), changes in the fair value of the derivative are recognized in earnings as an offset, on the same line, to the earnings impact of the underlying hedged item.
Following is a summary of the effects of fair value hedging relationships included in VF’s Consolidated Statements of Income:
                                         
In thousands   Location                        
    of Gain                   Location of   Gain (Loss)
    (Loss) on   Gain (Loss) on   Hedged Items   Gain (Loss)   on Related
Fair Value   Derivatives   Derivatives   in Fair Value   Recognized   Hedged Items
Hedging   Recognized   Recognized in   Hedge   on Related   Recognized in
Relationships   in Income   Income   Relationships   Hedged Items   Income
Quarter ended March 2010                                
Foreign exchange
  Miscellaneous Income (expense)   $ 7,033     Advances — intercompany   Miscellaneous Income (expense)   $ (7,042 )
 
                                       
Quarter ended March 2009                                
Foreign exchange
  Miscellaneous income (expense)   $ 10,868     Advances — intercompany   Miscellaneous income (expense)   $ (11,327 )
     VF’s cash flow hedge strategies and accounting policies — VF has a hedging program to reduce the variability of forecasted cash flows denominated in foreign currencies. VF uses derivative contracts to hedge a portion of the exchange risk for its forecasted inventory purchases and production costs and for its forecasted cash receipts arising from sales of inventory. In addition, VF hedges the receipt in the United States of forecasted intercompany royalties from its foreign subsidiaries.
For a derivative instrument that is designated and qualifies as a cash flow hedge (i.e., hedging the exposure to variability in expected cash flows attributable to a particular risk), periodic changes in the fair value of the effective portion of the derivative are reported as a component of OCI and deferred in Accumulated OCI in the balance sheet. The deferred derivative gain or loss is reclassified into earnings as an offset, on the same line, to the earnings impact of the underlying hedged transaction (e.g., in cost of goods sold when the hedged inventories are sold, or in net sales when the hedged item relates to cash receipts from forecasted sales). As

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discussed in the following section, cash flow hedges of forecasted cash receipts are dedesignated as hedges when the sale is recorded, and hedge accounting is not applied after that date.
Following is a summary of the effects of cash flow hedging relationships included in VF’s Consolidated Statements of Income:
                                         
In thousands                  
    Gain (Loss) on     Location of     Gain (Loss) Reclassified  
    Derivatives     Gain (Loss)     from Accumulated  
Cash Flow   Recognized in OCI-     Reclassified from     OCI into Income-  
Hedging   Quarter Ended March     Accumulated     Quarter Ended March  
Relationships   2010     2009     OCI into Income     2010     2009  
Foreign exchange
  $ 20,841     $ 12,381     Net sales   $ 969     $  
 
                  Cost of goods sold     6,954       1,197  
 
                  Miscellaneous income (expense)     1,295       2,462  
Interest rate
              Interest expense     29       29  
 
                             
 
                                       
Total
  $ 20,841     $ 12,381             $ 9,247     $ 3,688  
 
                             
Amounts recognized in earnings in the three months ended March 2010 and March 2009 for the ineffective portion of cash flow hedging relationships were not significant.
At March 2010, Accumulated OCI included $12.4 million of net deferred pretax gains for foreign exchange contracts that are expected to be reclassified to earnings during the next 12 months. Actual amounts to be reclassified to earnings will depend on exchange rates when currently outstanding derivative contracts are settled.
In addition, in 2003 VF entered into an interest rate swap derivative contract to hedge the interest rate risk for issuance of long-term debt due in 2033. The contract was terminated concurrent with the issuance of the debt, with the realized gain deferred in Accumulated OCI. The remaining pretax deferred gain of $2.7 million in Accumulated OCI at March 2010 will be reclassified into earnings over the remaining term of the debt.
     Derivative contracts not designated as hedges — As noted in the preceding section, cash flow hedges of forecasted cash receipts are dedesignated as hedges when the forecasted sale is recognized, and accordingly, hedge accounting is not applied after that date. These derivatives remain outstanding and serve as an economic hedge of foreign currency exposures related to the ultimate collection of the trade receivables. During the period hedge accounting is not applied, changes in the fair value of the derivative contracts are recognized in earnings. For the three months ended March 2010, VF recorded net losses of $0.8 million in Miscellaneous Income (Expense) for derivatives dedesignated as hedging instruments, effectively offsetting the net remeasurement gains on the related accounts receivable. There were no derivative contracts not designated as hedges in the first quarter of 2009.
Note O — Recently Issued Accounting Standards
New accounting guidance issued by the FASB but not effective until after March 2010 is not expected to have a significant effect on VF’s consolidated financial position, results of operations or disclosures.

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Note P — Subsequent Event
VF’s Board of Directors declared a quarterly cash dividend of $0.60 per share, payable on June 18, 2010 to shareholders of record on June 8, 2010.
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
     Highlights of the First Quarter of 2010
  Revenues grew to $1,749.9 million, an increase of 1% from the prior year quarter, with strengthening trends across our businesses.
 
  Our business in Asia continues to grow rapidly, with revenues up 31% in the quarter.
 
  Our direct-to-consumer business grew 23% in the quarter, driven by both new store openings and comp store revenue growth. The direct-to-consumer businesses of The North Faceâ, Vansâ, 7 for All Mankindâ, Kiplingâ, Nauticaâ, lucyâ and Napapijriâ brands each achieved strong revenue growth in the quarter.
 
  Gross margin reached a record 46.7%.
 
  Earnings per share increased by 60% to a record $1.46 from $0.91 in the prior year quarter. As anticipated, earnings per share benefitted from lower pension expense and foreign currency translation rates by $.05 and $.06, respectively, compared with the 2009 quarter. Also included in the current quarter was an $.11 per share tax credit as well as $.09 in restructuring expenses related primarily to actions to reduce product costs. (All per share amounts are presented on a diluted basis.)
 
  Our balance sheet remains strong with cash of $718.6 million, a debt to total capital ratio of 23.7% and a net debt to total capital ratio of 11.0%. VF has over $1.3 billion of available liquidity under committed bank credit lines. Long-term debt payments of $200.0 million are due in October 2010 with no other payments required until 2017.
 
  Inventories at March 2010 declined 15% from the prior year quarter, reflecting our continued focus on inventory reduction.
 
  Operating cash flow reached a first quarter record of $184.2 million.
 
  We purchased the remaining 50% equity interest of a joint venture that markets the Vans® brand in Mexico (“Vans Mexico”). See Note C to the Consolidated Financial Statements for more information.
 
  We repurchased 1.5 million shares of our Common Stock in the first quarter, utilizing our operating cash flow, and are on track to complete the repurchase of 3.0 million shares in the first half of 2010. We will continue to evaluate future share repurchases considering funding required for business acquisitions, our Common Stock price and levels of stock option exercises.

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Analysis of Results of Operations
     Consolidated Statements of Income
The following table presents a summary of the changes in our Total Revenues from 2009:
         
    First Quarter  
    2010  
    Compared  
In millions   with 2009  
Total revenues — 2009
  $ 1,725  
Impact of foreign currency translation
    38  
Organic growth
    (29 )
Acquisition in prior year (to anniversary date)
    13  
Acquisition in current year
    3  
 
     
 
       
Total revenues — 2010
  $ 1,750  
 
     
See the “Information by Business Segment” section below for a discussion of Total Revenue changes from the prior year period.
During the first quarter of 2010, approximately 34% of Total Revenues were in international markets. Foreign currency translation effects result from translating a foreign entity’s financial statements from its functional currency into the U.S. dollar, VF’s reporting currency. In translating foreign currencies into the U.S. dollar, a weaker U.S. dollar in relation to the functional currencies where VF conducts its international business (primarily the European euro countries) positively impacted revenue comparisons by $38 million in the first quarter of 2010, compared with the 2009 period. The weighted average translation rate for the euro was $1.38 per euro for the first three months of 2010, compared with $1.30 during the first three months of 2009.
The decline in organic revenues resulted from lower wholesale unit sales, especially in our jeanswear businesses. This decline was partially offset by higher volume at our owned retail stores from both new store openings and comp store increases.
The following table presents the percentage relationship to Total Revenues for components of our Consolidated Statements of Income:
                 
    First Quarter  
    2010     2009  
Gross margin (total revenues less cost of goods sold)
    46.7 %     42.2 %
Marketing, administrative and general expenses
    34.0       32.9  
 
           
 
               
Operating income
    12.8 %     9.4 %
 
           
The gross margin percentage in the first quarter of 2010 increased by 4.5% over the 2009 quarter. The components of this change were (i) 1.8% due to lower product costs, (ii) 0.9% from negative foreign currency transaction impacts in the first quarter of 2009 that did not recur in the 2010 quarter, (iii) 0.9% due to the changing mix of our business, including the growth of our direct-to-consumer business where gross margins

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exceed those in our wholesale business, and (iv) 0.4% from improved profitability on distressed inventory sales.
The ratio of Marketing, Administrative and General Expenses as a percentage of Total Revenues in the first quarter of 2010 increased 1.1% over the 2009 quarter. The primary components of this change were (i) 0.5% from additional marketing investments and (ii) 0.3% due to the changing mix of business.
Interest expense decreased $1.5 million in the first quarter of 2010 from the comparable period in 2009 due to lower short-term borrowings, partially offset by higher short-term interest rates. Average interest-bearing debt outstanding totaled $1,187 million for the first three months of 2010 and $1,326 million for the comparable period of 2009. The weighted average interest rate on total outstanding debt was 6.7% for the first three months of 2010 and 6.4% for the comparable period of 2009.
In connection with the acquisition of Vans Mexico, VF recognized a gain of $5.7 million from remeasuring its previous 50% investment in the joint venture to fair value. This gain is included in Miscellaneous, Net in the Consolidated Statements of Income.
The effective income tax rate for the first quarter of 2010 was 22.0%, compared with 29.0% in the first quarter of 2009. The lower rate in the first quarter of 2010, compared with the prior year quarter, resulted primarily from a tax benefit related to refund claims in a foreign jurisdiction. We expect the 2010 annual effective tax rate, excluding the first quarter tax benefit, to be approximately 26%. The effective tax rate for the full year 2009 was 29.9%, which included a 3.7% unfavorable impact from a goodwill impairment charge.
Net Income Attributable to VF Corporation for the first quarter of 2010 increased to $163.5 million, compared with $100.9 million in the 2009 quarter. Earnings Per Share Attributable to VF Corporation increased to $1.46 per share from $0.91 per share. The increase resulted primarily from improved operating performance, as discussed in the “Information by Business Segment” section below. The first quarter of 2010 also benefited by (i) $0.11 per share due to the tax refund claims mentioned above, (ii) $0.06 from the impact of translating foreign currencies into a weaker U.S. dollar and (iii) $0.05 due to lower pension expense in our defined benefit pension plans. These benefits were partially offset by $0.09 in restructuring expenses related primarily to actions to reduce product costs.
     Information by Business Segment
VF’s businesses are grouped into product categories, and by brands within those product categories, for management and internal financial reporting purposes. These groupings of businesses within VF are referred to as “coalitions.” These coalitions are the basis for VF’s reportable business segments.
See Note H to the Consolidated Financial Statements for a summary of our results of operations by coalition, along with a reconciliation of Coalition Profit to Income Before Income Taxes. Operating results of the lucy business unit for 2009 have been reclassified from the Contemporary Brands Coalition to the Outdoor & Action Sports Coalition consistent with the change in internal management reporting beginning in 2010.
The following table presents a summary of the changes in our Total Revenues by coalition for the first quarter of 2010:

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    First Quarter  
    Outdoor &                             Contemporary        
In millions   Action Sports     Jeanswear     Imagewear     Sportswear     Brands     Other  
Total revenues — 2009
  $ 618     $ 667     $ 227     $ 104     $ 90     $ 20  
Impact of foreign currency translation
    21       15       1             1        
Organic growth
    37       (60 )     (7 )     (2 )           2  
Acquisition in prior year (to anniversary date)
                            13        
Acquisition in current year
    3                                
 
                                   
 
                                               
Total revenues — 2010
  $ 679     $ 622     $ 221     $ 102     $ 104     $ 22  
 
                                   
The following table presents a summary of the changes in our Coalition Profit by coalition for the first quarter of 2010:
                                                 
    First Quarter  
    Outdoor &                             Contemporary        
In millions   Action Sports     Jeanswear     Imagewear     Sportswear     Brands     Other  
Coalition profit — 2009
  $ 89     $ 90     $ 23     $ 5     $ 15     $ (2 )
Impact of foreign currency translation
    5       3                          
Operations
    39       14             2       (7 )     1  
 
                                   
 
                                               
Coalition profit — 2010
  $ 133     $ 107     $ 23     $ 7     $ 8     $ (1 )
 
                                   
     Outdoor and Action Sports:
                         
    First Quarter        
Dollars in millions   2010     2009     Percent Change  
Coalition revenues
  $ 679     $ 618       9.8 %
Coalition profit
    133       89       49.8 %
Operating margin
    19.6 %     14.3 %        
The increase in Coalition Revenues in the first quarter of 2010 was driven by global unit volume gains from the two largest brands in this Coalition, The North Faceâ and Vansâ, whose revenues increased by 9% and 20%, respectively. In addition, Coalition Revenues in our Americas businesses rose 11%, while international revenues were up 8%. Total direct-to-consumer revenues for our Outdoor & Action Sports businesses rose 28% in the quarter, with double-digit growth in our The North Faceâ, Vansâ, Kiplingâ, Napapijriâ and lucyâ brand retail businesses. We continued to open new retail stores and expand our e-commerce business within this Coalition in the first quarter of 2010.
Operating margin increased to a record first quarter level in 2010, despite a more than 20% increase in marketing and other brand-building investments. The increase in operating margin was driven by improved gross margin due to lower product costs, stronger retail performance and lower excess inventories coming into 2010.

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     Jeanswear:
                         
    First Quarter        
Dollars in millions   2010     2009     Percent Change  
Coalition revenues
  $ 622     $ 667       (6.8 )%
Coalition profit
    107       90       19.2 %
Operating margin
    17.2 %     13.4 %        
The decrease in Jeanswear Coalition Revenues was driven by unit volume declines, with approximately $20 million of the reduction resulting from programs in our U.S. mass market business that were discontinued in the second quarter of 2009 and approximately $15 million due to the exit of our mass market business in Europe. Our core Wranglerâ and Ridersâ businesses continue to perform strongly and gain share in U.S. mass market stores. In addition, revenues of our Leeâ brand in the U.S. rose 3% in the first quarter of 2010. Asia jeanswear revenues grew by 40%, and we achieved double digit growth in other international markets including Mexico, South America and Canada. European market conditions have stabilized but remain very challenging.
The improvement in operating margin in the first quarter of 2010 resulted from (i) lower product costs, particularly in our U.S. jeanswear businesses, (ii) lower excess inventories coming into 2010 and (iii) the 2009 exit of the European mass market business, which had operating margins that were well below the coalition average.
     Imagewear:
                         
    First Quarter        
Dollars in millions   2010     2009     Percent Change  
Coalition revenues
  $ 221     $ 227       (2.4 )%
Coalition profit
    23       23       (0.4 )%
Operating margin
    10.3 %     10.1 %        
Declines in Imagewear Coalition Revenues are lower than in recent quarters as economic conditions have gradually improved. Revenue declines in our Image division (occupational apparel and uniforms) and the Licensed Sports division (owned and licensed high profile sports and lifestyle apparel) were similar. Revenue trends are improving and operating margin remained stable.
     Sportswear:
                         
    First Quarter        
Dollars in millions   2010     2009     Percent Change  
Coalition revenues
  $ 102     $ 104       (1.3 )%
Coalition profit
    7       5       59.0 %
Operating margin
    7.0 %     4.4 %        

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Revenues in our Sportswear Coalition, which includes our Nauticaâ brand and Kiplingâ brand in North America, were relatively flat in the first quarter of 2010 compared with the 2009 quarter. Nauticaâ revenues declined slightly in the first quarter of 2010. However, our Kiplingâ brand revenues in the U.S. increased 33%, reflecting the successful launch of a new exclusive handbag and accessories program with Macy’s.
Higher operating margin in the first quarter of 2010 resulted from the improved performance of our Nauticaâ wholesale and retail businesses. The improvement in operating margin was driven by an increase in gross margin from (i) a higher proportion of retail revenues, which have higher gross margin than the coalition average, (ii) lower markdown activity in the department store channel and (iii) lower excess inventory coming into 2010.
     Contemporary Brands:
                         
    First Quarter        
Dollars in millions   2010     2009     Percent Change  
Coalition revenues
  $ 104     $ 90       16.2 %
Coalition profit
    8       15       (45.2 )%
Operating margin
    8.1 %     17.2 %        
The Contemporary Brands Coalition consists of our 7 For All Mankindâ, John Varvatosâ, Splendidâ and Ella Mossâ brands. The completion of the acquisition of the Splendidâ and Ella Mossâ brands in March 2009 contributed an incremental $13 million to revenues in the first quarter of 2010 compared with the 2009 quarter. Global 7 For All Mankindâ revenues increased in the 2010 quarter, with double-digit growth in the brand’s direct-to-consumer business reflecting both new store openings and comp store revenue increases.
Operating margin comparisons in the first quarter of 2010 were negatively impacted by 4.4% due to the favorable resolution of a value-added tax and duty matter during the first quarter of 2009 that did not repeat in the first quarter of 2010. The remainder of the decline in operating margin in the first quarter of 2010, compared with the prior year quarter, resulted from additional investments in new 7 For All Mankindâ retail stores in a seasonally low period of revenues. We expect double digit revenue growth in the Contemporary Brands Coalition starting in the second quarter and operating margin improvement to the mid-teen levels in the second half of the year.
     Other:
                         
    First Quarter        
Dollars in millions   2010     2009     Percent Change  
Revenues
  $ 22     $ 20       8.4 %
Profit (loss)
    (1 )     (2 )     (39.2 )%
Operating margin
    (5.6 )%     (10.1 )%        
The Other business segment includes the VF Outlet business, which is a group of VF-operated retail outlet stores in the United States that sell a broad selection of primarily excess quantities of VF products and other branded products. Revenues and profits of VF products are reported as part of the operating results of the applicable coalitions, while revenues and profits of non-VF products sold in these outlet stores are reported in this business segment.

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     Reconciliation of Coalition Profit to Income Before Income Taxes:
There are two types of costs necessary to reconcile total Coalition Profit, as discussed in the preceding paragraphs, to consolidated Income Before Income Taxes. These costs are (i) Corporate and Other Expenses, discussed below, and (ii) Interest, Net, which was discussed in the previous “Consolidated Statements of Income” section.
                         
    First Quarter        
Dollars in millions   2010     2009     Percent Change  
Corporate and Other Expenses
  $ (47 )   $ (56 )     (16.3 )%
Interest, Net
    (20 )     (21 )     (5.9 )%
Corporate and Other Expenses consists of corporate headquarters’ costs that are not allocated to the coalitions and other expenses related to but not allocated to the coalitions for internal management reporting. These expenses include the defined benefit pension plan cost other than service cost, development costs for management information systems, costs of maintaining and enforcing certain VF trademarks and miscellaneous consolidating adjustments.
The decrease in Corporate and Other Expenses in the first quarter of 2010 resulted from lower pension plan costs. Pension plans in the United States are centrally managed. Coalition Profit in the business units includes only the current year service cost component of pension expense. Other components of pension expense totaling $11.7 million in the first quarter of 2010 and $20.8 million for the comparable period in 2009, primarily representing amortization of deferred actuarial losses, were recorded in Corporate and Other Expenses.
Analysis of Financial Condition
     Balance Sheets
Accounts Receivable at March 2010 were 21% lower than the March 2009 balance due to (i) the sale of selected accounts receivable discussed in the “Liquidity and Cash Flows” section below and (ii) an improvement in days’ sales outstanding. Accounts Receivable at March 2010 were consistent with the balance at the end of 2009, with an increase in wholesale revenues at the end of the first quarter offset by an increase in accounts receivable balances sold under the sale agreement. See Note C to the Consolidated Financial Statements.
Inventories at March 2010 declined 15% compared with the March 2009 balance, reflecting our continued focus on inventory reduction while maintaining customer service levels during the economic downturn.
Other Current Assets at March 2010 and December 2009 declined from March 2009 due to lower deferred income taxes and a reduction in prepaid income taxes.
Property, Plant and Equipment was lower at March 2010 than at December 2009 and March 2009, resulting from depreciation expense in excess of capital spending during those periods.
Total Intangible Assets and Goodwill at March 2010 and December 2009 were lower than March 2009 due to the impairment charge taken in the fourth quarter of 2009 and amortization.

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Other Assets increased at March 2010 and December 2009 over March 2009 due to an increase in the value of investment securities held for VF’s deferred compensation plans, partially offset by lower deferred income taxes.
Short-term Borrowings at March 2010 consisted of $48.5 million under international borrowing agreements. Short-term borrowings fluctuate throughout the year in relation to working capital requirements and other investing and financing activities. Short-term Borrowings were lower at March 2010 compared with the prior year due to a higher cash balance at the beginning of the current year and higher cash generation in the 2010 quarter. See the “Liquidity and Cash Flows” section below for a discussion of these items.
Total Long-term Debt at March 2010, December 2009 and March 2009 were comparable. At March 2010 and December 2009, $200.0 million of notes, due October 1, 2010, were classified as Current Portion of Long-term Debt.
The decline in Accounts Payable from March 2009 to March 2010 was consistent with the decrease in inventory levels discussed above. In addition, the Accounts Payable balance at December 2009 was higher than March 2010 due to the timing of inventory purchases and payments to vendors at the end of 2009.
Accrued Liabilities at March 2010 were consistent with the March 2009 balance, with an increase in accrued income taxes from higher profitability in 2010 offset by payments of the obligations associated with the cost reduction actions taken in the fourth quarter of 2008. Accrued Liabilities increased from December 2009 to March 2010 due primarily to higher accrued income taxes.
Other Liabilities at March 2010 and December 2009 declined from March 2009 due to lower pension liabilities, partially offset by higher deferred income taxes and deferred compensation liabilities. Lower pension liabilities at March 2010 and December 2009 resulted from an improvement in the funded status of our defined benefit pension plans, primarily due to our contribution of $200.0 million to the domestic qualified pension plan in 2009.
     Liquidity and Cash Flows
The financial condition of VF is reflected in the following:
                         
    March     December     March  
Dollars in millions   2010     2009     2009  
Working capital
  $ 1,590.7     $ 1,536.8     $ 1,523.1  
 
                       
Current ratio
    2.5 to 1       2.4 to 1       2.4 to 1  
 
                       
Debt to total capital ratio
    23.7 %     23.7 %     28.6%  
For the ratio of debt to total capital, debt is defined as short-term and long-term borrowings, and total capital is defined as debt plus stockholders’ equity. Our ratio of net debt to total capital, with net debt defined as debt less cash and equivalents, was 11.0% at March 2010.
On an annual basis, VF’s primary source of liquidity is its cash flow from operations. Cash from operations is primarily dependent on the level of net income and changes in investments in inventories and other working capital components. Our cash flow from operations is typically lower in the first half of the year as we build working capital to service our operations in the second half of the year. Cash from operations is substantially higher in the fourth quarter of the year as we collect accounts receivable arising from our

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seasonally higher wholesale sales in the third quarter. In addition, cash flows from our direct-to-consumer businesses are significantly higher in the fourth quarter of the year.
For the first quarter ended March 2010, cash flow from operations was $184.2 million, compared with $35.4 million of cash used by operating activities in the comparable 2009 period. Cash flow from operations is primarily dependent on the level of Net Income, changes in accounts receivable, investments in inventories and other working capital changes. In addition to a $63.0 million increase in Net Income, the primary driver of improved operating cash flow in the first quarter of 2010 was the change in accounts receivable balances. There was a significant increase in accounts receivable balances during the first quarter of 2009 driven by the timing of sales and collection patterns, resulting in a cash outflow of $152.5 million in the period. This increase did not recur in the period from December 2009 to March 2010 due to the timing of sales and collection patterns. Also, additional accounts receivable were sold under our program in the first quarter of 2010, as discussed in the next paragraph.
During September 2009, VF entered into an agreement to sell selected trade accounts receivable, on a revolving basis, to a financial institution. This agreement, expanded in March 2010, covers the sale of up to $192.5 million of accounts receivable, at any point in time, on a nonrecourse basis. At the end of March 2010, accounts receivable in the Consolidated Balance Sheet were reduced by $116.0 million related to balances sold under the program, an increase of $41.8 million from the amounts sold as of the end of 2009.
We rely on our cash flow from operations to finance our ongoing operations. In addition, VF has liquidity from its available cash balances and debt capacity, supported by its strong credit rating. At the end of March 2010, $985.2 million was available for borrowing under VF’s $1.0 billion senior unsecured committed domestic revolving bank credit facility. There was $14.8 million of standby letters of credit issued under this agreement. We have not drawn down any funds under this facility. Also at the end of March 2010, €250 million (U.S. dollar equivalent of $337.2 million) was available for borrowing under VF’s senior unsecured committed international revolving bank credit facility.
Investing activities in the first quarter of 2010 included the Vans Mexico acquisition. The other significant investing activity in the first quarter of 2010 was capital spending, primarily related to the opening of new retail stores and distribution network costs. We expect that capital spending could reach $115 million for the full year 2010, which will be funded by operating cash flows.
At the end of the first quarter of 2010, VF’s long-term debt ratings were ‘A minus’ by Standard & Poor’s Ratings Services and ‘A3’ by Moody’s Investors Service, and commercial paper ratings were ‘A-2’ and ‘Prime-2’, respectively, by those rating agencies. Both agencies have a ‘stable’ outlook for VF. Existing long-term debt agreements do not contain acceleration of maturity clauses based solely on changes in credit ratings. However, for the $600.0 million of senior notes issued in 2007, if there were a change in control of VF and, as a result of the change in control, the notes were rated below investment grade by recognized rating agencies, then VF would be obligated to repurchase the notes at 101% of the aggregate principal amount of the notes, plus any accrued and unpaid interest.
During the first quarter of 2010, VF repurchased 1.5 million of its own shares at a cost of $118.0 million (average price of $78.67 per share). No shares were repurchased during the first quarter of 2009. The VF Board of Directors authorized the repurchase of 10.0 million additional shares in February 2010. Including this new authorization and the remaining balance of shares authorized for repurchase under a prior authorization, the total remaining authorization for share repurchase approved by the VF Board of Directors is 10.1 million shares as of the end of March 2010. We currently intend to purchase at least 3.0 million shares during 2010 and will continue to evaluate future share repurchases considering funding required for business acquisitions, our Common Stock price and levels of stock option exercises.

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Management’s Discussion and Analysis in our 2009 Form 10-K provided a table summarizing VF’s contractual obligations and commercial commitments at the end of 2009 that would require the use of funds. Since the filing of our 2009 Form 10-K, there have been no material changes, except as noted below, relating to VF’s contractual obligations and commercial commitments that will require the use of funds:
    Inventory purchase obligations representing binding commitments to purchase finished goods, raw materials and sewing labor in the ordinary course of business increased by approximately $320 million at the end of March 2010 due to the seasonality of our businesses.
Management believes that VF’s cash balances and funds provided by operating activities, as well as unused committed bank credit lines, additional borrowing capacity and access to equity markets, taken as a whole, provide (i) adequate liquidity to meet all of its current and long-term obligations when due, (ii) adequate liquidity to fund capital expenditures and to maintain our dividend payout policy and (iii) flexibility to meet investment opportunities that may arise.
Critical Accounting Policies and Estimates
We have chosen accounting policies that we believe are appropriate to accurately and fairly report VF’s operating results and financial position in conformity with generally accepted accounting principles (“GAAP”) in the United States. We apply these accounting policies in a consistent manner. Our significant accounting policies are summarized in Note A to the Consolidated Financial Statements included in our 2009 Form 10-K.
The application of these accounting policies requires that we make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, contingent assets and liabilities, and related disclosures. These estimates, assumptions and judgments are based on historical experience, current trends and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions and may retain outside consultants to assist in our evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known.
The accounting policies that involve the most significant estimates, assumptions and management judgments used in preparation of our consolidated financial statements, or are the most sensitive to change from outside factors, are discussed in Management’s Discussion and Analysis in our 2009 Form 10-K. There have been no material changes in these policies.
Cautionary Statement on Forward-Looking Statements
From time to time, we may make oral or written statements, including statements in this Quarterly Report, that constitute “forward-looking statements” within the meaning of the federal securities laws. These include statements concerning plans, objectives, projections and expectations relating to VF’s operations or economic performance, and assumptions related thereto. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting VF and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and actual results could differ materially from those expressed or implied in the forward-looking statements.
Potential risks and uncertainties that could cause the actual results of operations or financial condition of VF to differ materially from those expressed or implied by forward-looking statements in this Quarterly Report on Form 10-Q include the overall level of consumer spending on apparel; disruption and volatility in the

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global capital and credit markets; general economic conditions and other factors affecting consumer confidence; VF’s reliance on a small number of large customers; the financial strength of VF’s customers; changing fashion trends and consumer demand; increasing pressure on margins; VF’s ability to implement its growth strategy; VF’s ability to grow its international and direct-to-consumer businesses; VF’s ability to successfully integrate and grow acquisitions; VF’s ability to maintain the strength and security of its information technology systems; stability of VF’s manufacturing facilities and foreign suppliers; continued use by VF’s suppliers of ethical business practices; VF’s ability to accurately forecast demand for products; continuity of members of VF’s management; VF’s ability to protect trademarks and other intellectual property rights; maintenance of the value of VF’s brands by our licensees and distributors ; fluctuations in the price, availability and quality of raw materials and contracted products; foreign currency fluctuations; and legal, regulatory, political and economic risks in international markets. More information on potential factors that could affect VF’s financial results is included from time to time in VF’s public reports filed with the Securities and Exchange Commission, including VF’s Annual Report on Form 10-K.
Item 3 — Quantitative and Qualitative Disclosures about Market Risk
There have been no significant changes in VF’s market risk exposures from what was disclosed in Item 7A in our 2009 Form 10-K.
Item 4 — Controls and Procedures
Disclosure controls and procedures:
Under the supervision of our Chief Executive Officer and Chief Financial Officer, a Disclosure Committee comprising various members of management has evaluated the effectiveness of the disclosure controls and procedures at VF and its subsidiaries as of the end of the period covered by this Quarterly Report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded as of the Evaluation Date that such controls and procedures were effective.
Changes in internal control over financial reporting:
There have been no changes during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, VF’s internal control over financial reporting.
Part II — Other Information
Item 1A — Risk Factors
There have been no material changes to our risk factors from those disclosed in our 2009 Form 10-K.
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds
(c) Issuer purchases of equity securities:

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                    Total Number of     Maximum Number  
    Total     Weighed     Shares Purchased     of Shares that May  
    Number     Average     as Part of Publicly     Yet be Purchased  
    of Shares     Price Paid     Announced Plans     Under the Plan or  
Fiscal Period   Purchased     per Share     or Programs     Programs (1)  
January 3 — January 30, 2010
    5,500     $ 74.01       5,500       1,638,911  
January 31 — February 27, 2010
    386,300       76.32       386,300       11,252,611  
February 28 — April 3, 2010
    1,108,200       79.51       1,108,200       10,144,411  
 
                           
 
                               
Total
    1,500,000               1,500,000          
 
                           
 
(1)   The VF Board of Directors authorized the repurchase of 10.0 million additional shares in February 2010. During the quarter, 1,474,800 shares of Common Stock were purchased under open market transactions. In addition, VF purchased 25,200 shares of Common Stock in connection with VF’s deferred compensation plans. We will continue to evaluate future share purchases — considerations will include funding required for business acquisitions, our Common Stock price and levels of stock option exercises.
Item 6 — Exhibits
     
31.1
  Certification of the principal executive officer, Eric C. Wiseman, pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
31.2
  Certification of the principal financial officer, Robert K. Shearer, pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
32.1
  Certification of the principal executive officer, Eric C. Wiseman, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.2
  Certification of the principal financial officer, Robert K. Shearer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
101.INS
  XBRL Instance Document*
 
   
101.SCH
  XBRL Taxonomy Extension Schema Document*
 
   
101.CAL
  XBRL Taxonomy Extension Calculation Linkbase Document*
 
   
101.DEF
  XBRL Taxonomy Extension Definition Linkbase Document*
 
   
101.LAB
  XBRL Taxonomy Extension Label Linkbase Document*
 
   
101.PRE
  XBRL Taxonomy Extension Presentation Linkbase Document*
 
*   Furnished, not filed.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  V.F. CORPORATION
          (Registrant)
 
 
  By:   /s/ Robert K. Shearer    
    Robert K. Shearer   
    Senior Vice President and
Chief Financial Officer
(Chief Financial Officer) 
 
 
Date: May 12, 2010
         
     
  By:   /s/ Bradley W. Batten    
    Bradley W. Batten   
    Vice President - Controller
(Chief Accounting Officer) 
 

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