Annual report pursuant to Section 13 and 15(d)

BUSINESS SEGMENT INFORMATION

v3.20.1
BUSINESS SEGMENT INFORMATION
 12 Months Ended
Dec. 28, 2019
Segment Reporting [Abstract]  
BUSINESS SEGMENT INFORMATION BUSINESS SEGMENT INFORMATION
The chief operating decision maker allocates resources and assesses performance based on a global brand view which determines the Company's operating segments. Operating segments are the basis for the Company's reportable segments, as described below:
•
Wrangler — Wrangler® branded denim, apparel and accessories.
•
Lee — Lee® branded denim, apparel and accessories.
In addition, we report an "Other" category in order to reconcile segment revenues and segment profit to the Company's operating results, but the Other category is not considered a reportable segment based on evaluation of aggregation criteria. Other includes sales of third-party branded merchandise at VF Outlet™ stores, sales and licensing of Rock & Republic® branded apparel, and sales of products manufactured for third-parties. Sales of Wrangler® and Lee® branded products at VF Outlet™ stores are not included in Other and are reported in the respective segments discussed above. The Other category also includes transactions with VF for pre-Separation activities, none of which will continue going forward. These transactions include sales of VF-branded products at VF Outlet™ stores, as well as sales to VF for products manufactured in our plants, use of our transportation fleet and fulfillment of a transition services agreement related to VF’s sale of its Nautica® brand business in mid-2018.
Accounting policies utilized for internal management reporting at the individual segments are consistent with those included in Note 1 to the Company's financial statements, except as noted below.
Through the Separation date, the Company's statements of income included costs for certain centralized functions and programs provided and administered by VF that were charged directly to VF's businesses, including the Company. These centralized functions and programs included, but were not limited to, information technology, human resources, accounting shared services, supply chain, insurance and the related benefits. These historical allocations were included in the measurement of segment profit below. In addition, for purposes of preparing these financial statements on a carve-out basis, a portion of VF's total corporate expenses were allocated to the Company. These expense allocations included the cost of corporate functions and resources provided by or administered by VF including, but not limited to, executive management, finance, accounting, legal, human resources and related benefit costs associated with such functions. Allocations also included the cost of operating VF's corporate headquarters located in Greensboro, North Carolina. These additional allocations were reported as "corporate and other expenses" in the table below.
After the Separation, as a standalone public company, the Company has allocated costs for certain centralized functions and programs to the Lee® and Wrangler® segments based on appropriate metrics such as usage or production of net revenues. These centralized functions and programs include, but are not limited to, information technology, human resources, supply chain, insurance and related benefit costs associated with such functions.
Corporate and other expenses, impairment charges, and interest income and expense are not controlled by segment management and therefore are excluded from the measurement of segment profit.
The following table presents financial information for the Company's reportable segments and income before income taxes:
 
 
Year Ended December
 
 
 
 
 
 
 
 
(In thousands)
 
2019
 
 
2018
 
2017
Segment revenues:
 
 
 
 
 
 
 
Wrangler
 
$
1,518,112

 
 
$
1,602,206

 
$
1,619,252

Lee
 
882,276

 
 
960,243

 
1,005,774

Total reportable segment revenues
 
2,400,388

 
 
2,562,449

 
2,625,026

Other revenues
 
148,451

 
 
201,549

 
205,080

Total net revenues
 
$
2,548,839

 
 
$
2,763,998

 
$
2,830,106

Segment profit:
 
 
 
 
 
 
 
Wrangler
 
$
215,008

 
 
$
265,981

 
$
280,257

Lee
 
68,214

 
 
92,756

 
107,246

Total reportable segment profit
 
$
283,222

 
 
$
358,737

 
$
387,503

Non-cash impairment of intangible asset (1)
 
(32,636
)
 
 
—

 
—

Corporate and other expenses
 
(90,117
)
 
 
(30,916
)
 
(32,676
)
Interest income from former parent, net
 
3,762

 
 
7,738

 
3,372

Interest expense
 
(35,787
)
 
 
(1,173
)
 
(1,263
)
Interest income
 
3,931

 
 
5,740

 
2,984

Profit (loss) related to other revenues
 
2,819

 
 
(48
)
 
(767
)
Income before income taxes
 
$
135,194

 
 
$
340,078

 
$
359,153


(1) Represents an impairment charge in the third quarter of 2019 related to the Rock & Republic® trademark. See Note 7 to the Company's financial statements.
Segment assets, for internal management purposes, are those used directly in or resulting from the operations of each business, which are accounts receivable and inventories. Segment assets included in the "Other" category represent balances related to the VF Outlet™
business and other corporate activities, and are provided for purposes of reconciliation as the "Other" category is not considered a reportable segment. Total expenditures for additions to long-lived assets are not disclosed as this information is not regularly provided to the chief operating decision maker at the segment level.
The following table presents assets (i.e. accounts receivable and inventories) for the Company's reportable segments and a reconciliation to total asset balances:
(In thousands)
 
December 2019
 
 
December 2018
Segment assets:
 
 
 
 
 
Wrangler
 
$
378,041

 
 
$
383,122

Lee
 
238,763

 
 
271,518

Total reportable segment assets
 
616,804

 
 
654,640

Other accounts receivable and inventories
 
69,756

 
 
72,138

Total segment assets
 
$
686,560

 
 
$
726,778

Cash and equivalents
 
106,808

 
 
96,776

Due from former parent, current
 
—

 
 
547,690

Notes receivable from former parent
 
—

 
 
517,940

Prepaid expenses and other current assets
 
84,235

 
 
52,014

Due from former parent, noncurrent
 
—

 
 
611

Property, plant, and equipment, net
 
132,192

 
 
138,449

Operating lease assets
 
86,582

 
 
—

Goodwill and intangible assets
 
230,129

 
 
267,575

Deferred income taxes
 
79,551

 
 
42,891

Other assets
 
111,099

 
 
67,741

Total assets
 
$
1,517,156

 
 
$
2,458,465


The following table presents supplemental information of net revenues by geographic area based on the location of the customer:
 
 
Year Ended December
 
 
 
 
 
 
 
 
(In thousands)
 
2019
 
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
U.S.
 
$
1,909,947

 
 
$
2,014,657

 
$
2,046,359

International
 
638,892

 
 
749,341

 
783,747

Total
 
$
2,548,839

 
 
$
2,763,998

 
$
2,830,106


One customer accounted for 34%, 32% and 33% of the Company's total net revenues in 2019, 2018 and 2017, respectively. Sales to this customer are included in both the Wrangler and Lee reportable segments.
The following table presents property, plant, and equipment by geographic location:
(In thousands)
 
December 2019
 
 
December 2018
Property, plant and equipment, net:
 
 
 
 
 
U.S.
 
$
74,084

 
 
$
80,551

International
 
58,108

 
 
57,898

Total
 
$
132,192

 
 
$
138,449