Annual report pursuant to Section 13 and 15(d)

TRANSACTIONS WITH FORMER PARENT

v3.20.1
TRANSACTIONS WITH FORMER PARENT
 12 Months Ended
Dec. 28, 2019
Related Party Transactions [Abstract]  
TRANSACTIONS WITH FORMER PARENT TRANSACTIONS WITH FORMER PARENT
Prior to the Separation, the Company's financial statements were prepared on a carve-out basis and were derived from the consolidated financial statements and accounting records of VF. The following discussion summarizes activity between the Company and VF.
Allocation of General Corporate Expenses
Prior to the Separation, the Company's statements of income included expenses for certain centralized functions and other programs provided and administered by VF that were charged directly to the Company. In addition, for purposes of preparing these financial statements on a carve-out basis, the Company was allocated a portion of VF's total corporate expenses. Refer to Note 1 to the Company's financial statements for a discussion of the methodology used to allocate corporate-related costs for purposes of preparing these financial statements on a carve-out basis.
Sales and Purchases To and From Former Parent
The Company's sales to VF were $14.1 million through the Separation date in 2019, and $51.0 million and $45.5 million in 2018 and 2017, respectively, which are included within "net revenues" in the Company's statements of income. The Company's cost of goods sold includes items purchased from VF totaling $0.5 million through the Separation date in 2019, and $2.1 million and $6.8 million in 2018 and 2017, respectively. At December 2019 and 2018, the aggregate amount of inventories purchased from VF that remained on the Company’s balance sheets was approximately $0.4 million and $0.8 million, respectively.
Notes To and From Former Parent
All notes to and from former parent were settled in connection with the Separation. At December 2018, the Company had notes receivable from former parent of $517.9 million with VF as the counterparty. The weighted-average interest rate for these notes was approximately 3.4% at December 2018.
At December 2018, the Company had notes payable to former parent of $269.1 million with VF as the counterparty. The weighted-average interest rate for these notes was approximately 3.4% at December 2018.
The Company recorded net interest income related to these notes of $3.8 million through the Separation date in 2019, and $7.7 million and $3.4 million in 2018 and 2017, respectively, which is reflected within "interest income from former parent, net" in the Company's statements of income.
Due To and From Former Parent
All amounts due to and from former parent were settled in connection with the Separation. Balances that were due to and from former parent were generated by (i) the sale of trade accounts receivable to VF, (ii) hedging agreements with VF, and (iii) sourcing payable to VF.
As discussed in Note 4 to the Company's financial statements, the Company sold certain of its trade accounts receivable to VF, who then sold them to a financial institution and periodically remitted cash back to the Company.
Prior to the Separation, the Company did not enter into derivative contracts with external counterparties. However, VF entered into derivative contracts with external counterparties to hedge certain foreign currency transactions with exposure to the euro, Mexican peso, Polish zloty, Canadian dollar, and other currencies. The Company entered into offsetting internal contracts with VF with maturities up to 20 months, and cash settled with VF on any asset or liability that arose under these contracts.
The following table presents components of due from former parent, current:
(In thousands)
 
December 2019
 
 
December 2018
Sale of trade accounts receivable
 
$
—

 
 
$
544,858

Hedging agreements with VF
 
—

 
 
2,832

 
 
$
—

 
 
$
547,690


The following table presents components of due from former parent, noncurrent:
(In thousands)
 
December 2019
 
 
December 2018
Hedging agreements with VF
 
$
—

 
 
$
611


The following table presents components of due to former parent, current:
(In thousands)
 
December 2019
 
 
December 2018
Sourcing payable
 
$
—

 
 
$
16,140


Net Transfers To and From VF
Net transfers to and from VF are included within "former parent investment" in the statements of equity.
The following table presents components of the transfers to and from VF:
(In thousands)
 
December 2019 (a)
 
 
December 2018
 
December 2017
General financing activities
 
$
(723,155
)
 
 
$
(32,498
)
 
$
(436,910
)
Corporate allocations
 
47,903

 
 
113,581

 
146,042

Stock-based compensation expense
 
9,582

 
 
14,894

 
13,021

Pension (benefit) costs
 
(2,246
)
 
 
6,260

 
6,748

Purchases from parent
 
3,193

 
 
998

 
2,357

Sales to parent
 
(13,988
)
 
 
(50,962
)
 
(45,483
)
Other income tax
 
10,863

 
 
64,150

 
97,121

Transition tax related to the Tax Act
 
3,937

 
 
5,716

 
110,562

Cash dividend to former parent
 
(1,032,948
)
 
 
—

 
—

Total net transfers to former parent
 
$
(1,696,859
)
 
 
$
122,139

 
$
(106,542
)
 
 
 
 
 
 
 
 
(a) Activity reflected through the Separation date.