Kontoor Brands, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

12 Months Ended

Jan. 02, 2021

The following table presents components of accounts receivable, net of allowance for doubtful accounts:


(In thousands)	December 2020		December 2019
Trade	$	242,451	$	230,588
Royalty and other	8,089		9,723
Total accounts receivable	250,540		240,311
Less: allowance for doubtful accounts	(19,143)		(11,852)
Accounts receivable, net	$	231,397	$	228,459

Allowance for Doubtful Accounts

The Company reviews the estimates used to calculate the allowance for doubtful accounts on a quarterly basis. At December 2020, the Company updated its evaluation of expected losses and related assumptions used in the allowance for doubtful accounts, including the impact of COVID-19.

The following table presents a rollforward of the allowance for doubtful accounts:


(In thousands)	Year Ended December 2020

Balance, December 2019	$	11,852

Provision for expected credit losses	18,338
Accounts receivable balances written off (1)	(11,877)
Other (2)	830
Balance, December 2020	$	19,143

(1) Accounts receivable balances written off against the allowance were primarily due to the bankruptcy of a major U.S. retail customer during the second quarter of 2020 as well as the impact of COVID-19.

(2) Other primarily includes the impact of foreign currency translation and recoveries of amounts previously written off, none of which were individually significant.

Sale of Trade Accounts Receivable

On April 1, 2019, the Company entered into an agreement with a financial institution to sell selected trade accounts receivable on a nonrecourse basis. Under this agreement, up to $377.5 million of the Company’s trade accounts receivable may be sold to the financial institution and remain outstanding at any point in time. The Company removes the sold balances from "accounts receivable, net" in its balance sheet at the time of sale. The Company does not retain any interests in the sold trade accounts receivable but continues to service and collect outstanding trade accounts receivable on behalf of the financial institution.

Prior to April 1, 2019, the Company had a separate agreement with VF, pursuant to which the Company’s trade accounts receivable were sold as part of VF’s agreement with a financial institution. Under this agreement, the Company did not retain any interests in the sold trade accounts receivable but continued to service and collect outstanding trade accounts receivable on behalf of VF. Prior to the Separation, the amount due from VF for these sales was separately reflected in the Company's balance sheet within "due from former parent." As discussed in Note 22 to the Company's financial statements, all amounts were settled at the Separation date.

During 2020, 2019 and 2018, the Company sold total trade accounts receivable of $981.9 million, $1,035.4 million and $1,057.0 million, respectively. As of December 2020 and December 2019, $127.1 million and $188.1 million, respectively, of the sold trade accounts receivable had been removed from the Company's balance sheets but remained outstanding with the financial institution.

The funding fees charged by the financial institution for these programs are reflected in the Company's statements of operations within "other expense, net" and were $2.0 million, $5.3 million and $5.1 million in 2020, 2019 and 2018, respectively. Net proceeds of these programs are reflected as operating activities in the Company's statements of cash flows.