false--12-28Q2201900017609650.1428571429734500010549000111020000.01750.00750.0175P5YP7YP5Y0.000750.00339200012190002310004870001213300025612000337700013988000P9Y6M
0001760965
2018-12-30
2019-06-29
0001760965
2019-07-27
0001760965
2018-06-30
0001760965
2019-06-29
0001760965
2018-12-29
0001760965
2018-04-01
2018-06-30
0001760965
2019-03-31
2019-06-29
0001760965
2017-12-31
2018-06-30
0001760965
srt:AffiliatedEntityMember
2017-12-31
2018-06-30
0001760965
srt:AffiliatedEntityMember
2018-04-01
2018-06-30
0001760965
srt:AffiliatedEntityMember
2018-12-30
2019-06-29
0001760965
srt:AffiliatedEntityMember
2019-03-31
2019-06-29
0001760965
2017-12-30
0001760965
us-gaap:ParentMember
2018-06-30
0001760965
us-gaap:CommonStockMember
2018-03-31
0001760965
2017-12-31
2018-03-31
0001760965
us-gaap:ParentMember
2017-12-31
0001760965
us-gaap:ParentMember
2017-12-31
2018-03-31
0001760965
us-gaap:AdditionalPaidInCapitalMember
2018-06-30
0001760965
us-gaap:ParentMember
2018-04-01
2018-06-30
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-03-31
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-06-30
0001760965
2017-12-31
0001760965
us-gaap:ParentMember
2017-12-30
0001760965
us-gaap:AdditionalPaidInCapitalMember
2018-03-31
0001760965
us-gaap:CommonStockMember
2017-12-30
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2017-12-31
2018-03-31
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-04-01
2018-06-30
0001760965
us-gaap:ParentMember
2018-03-31
0001760965
us-gaap:CommonStockMember
2018-06-30
0001760965
us-gaap:RetainedEarningsMember
2018-03-31
0001760965
us-gaap:RetainedEarningsMember
2017-12-30
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2017-12-30
0001760965
us-gaap:AdditionalPaidInCapitalMember
2017-12-30
0001760965
2018-03-31
0001760965
us-gaap:RetainedEarningsMember
2018-06-30
0001760965
us-gaap:CommonStockMember
2019-03-30
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-03-31
2019-06-29
0001760965
us-gaap:ParentMember
2018-12-30
0001760965
us-gaap:CommonStockMember
2019-03-31
2019-06-29
0001760965
us-gaap:AdditionalPaidInCapitalMember
2019-03-30
0001760965
us-gaap:RetainedEarningsMember
2018-12-29
0001760965
us-gaap:ParentMember
2018-12-29
0001760965
us-gaap:CommonStockMember
2019-06-29
0001760965
2018-12-30
0001760965
us-gaap:AdditionalPaidInCapitalMember
2019-06-29
0001760965
2018-12-30
2019-03-30
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-06-29
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-12-30
2019-03-30
0001760965
us-gaap:RetainedEarningsMember
2019-03-31
2019-06-29
0001760965
us-gaap:RetainedEarningsMember
2019-06-29
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-12-29
0001760965
us-gaap:ParentMember
2019-06-29
0001760965
us-gaap:CommonStockMember
2018-12-29
0001760965
us-gaap:ParentMember
2018-12-30
2019-03-30
0001760965
2019-03-30
0001760965
us-gaap:ParentMember
2019-03-30
0001760965
us-gaap:ParentMember
2019-03-31
2019-06-29
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2019-03-30
0001760965
us-gaap:RetainedEarningsMember
2019-03-30
0001760965
us-gaap:AdditionalPaidInCapitalMember
2018-12-29
0001760965
us-gaap:AdditionalPaidInCapitalMember
2019-03-31
2019-06-29
0001760965
us-gaap:RetainedEarningsMember
2018-12-30
2019-03-30
0001760965
2019-05-17
2019-05-17
0001760965
2019-05-22
2019-05-22
0001760965
2019-06-29
2019-06-29
0001760965
srt:MaximumMember
us-gaap:EquipmentMember
2019-06-29
0001760965
srt:MinimumMember
us-gaap:LandAndBuildingMember
2019-06-29
0001760965
srt:MaximumMember
us-gaap:LandAndBuildingMember
2019-06-29
0001760965
srt:MinimumMember
us-gaap:EquipmentMember
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
country:US
us-gaap:SalesChannelThroughIntermediaryMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:WranglerMember
2018-12-30
2019-06-29
0001760965
country:US
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:LeeMember
2018-12-30
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherChannelRevenuesMember
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
us-gaap:NonUsMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:LeeMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:LeeMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2018-12-30
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2018-12-30
2019-06-29
0001760965
ktb:OtherChannelRevenuesMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:WranglerMember
2018-12-30
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:WranglerMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:WranglerMember
2018-12-30
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:WranglerMember
2018-12-30
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:LeeMember
2018-12-30
2019-06-29
0001760965
us-gaap:SalesChannelDirectlyToConsumerMember
2018-12-30
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:LeeMember
2018-12-30
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:WranglerMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:WranglerMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:LeeMember
2019-03-31
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
us-gaap:SalesChannelDirectlyToConsumerMember
2019-03-31
2019-06-29
0001760965
country:US
us-gaap:SalesChannelThroughIntermediaryMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:LeeMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2019-03-31
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:LeeMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:WranglerMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:LeeMember
2019-03-31
2019-06-29
0001760965
country:US
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:LeeMember
2019-03-31
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherChannelRevenuesMember
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2019-03-31
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:WranglerMember
2019-03-31
2019-06-29
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
ktb:OtherChannelRevenuesMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:WranglerMember
2019-03-31
2019-06-29
0001760965
us-gaap:NonUsMember
2019-03-31
2019-06-29
0001760965
2019-07-01
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:LeeMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
country:US
us-gaap:SalesChannelThroughIntermediaryMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:WranglerMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:LeeMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:LeeMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:WranglerMember
2017-12-31
2018-06-30
0001760965
ktb:OtherChannelRevenuesMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2017-12-31
2018-06-30
0001760965
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
2017-12-31
2018-06-30
0001760965
country:US
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:LeeMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:WranglerMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:WranglerMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:WranglerMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:LeeMember
2017-12-31
2018-06-30
0001760965
us-gaap:NonUsMember
2017-12-31
2018-06-30
0001760965
us-gaap:SalesChannelDirectlyToConsumerMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherChannelRevenuesMember
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:WranglerMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:LeeMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:WranglerMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2018-04-01
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
us-gaap:SalesChannelDirectlyToConsumerMember
2018-04-01
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherChannelRevenuesMember
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:LeeMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:LeeMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:WranglerMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:WranglerMember
2018-04-01
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
country:US
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2018-04-01
2018-06-30
0001760965
country:US
us-gaap:SalesChannelThroughIntermediaryMember
2018-04-01
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:LeeMember
2018-04-01
2018-06-30
0001760965
ktb:OtherChannelRevenuesMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
country:US
ktb:WranglerMember
2018-04-01
2018-06-30
0001760965
us-gaap:NonUsMember
2018-04-01
2018-06-30
0001760965
country:US
2018-04-01
2018-06-30
0001760965
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
2018-04-01
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:SalesChannelDirectlyToConsumerMember
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
us-gaap:SalesChannelThroughIntermediaryMember
ktb:WranglerMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherChannelRevenuesMember
ktb:LeeMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
us-gaap:NonUsMember
ktb:LeeMember
2018-04-01
2018-06-30
0001760965
us-gaap:MaterialReconcilingItemsMember
us-gaap:NonUsMember
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
2019-05-17
0001760965
ktb:TermLoanBFacilityMember
ktb:TermLoanMember
us-gaap:BaseRateMember
2018-12-30
2019-06-29
0001760965
us-gaap:RevolvingCreditFacilityMember
2019-06-29
0001760965
ktb:TermLoanBFacilityMember
ktb:TermLoanMember
us-gaap:LondonInterbankOfferedRateLIBORMember
2018-12-30
2019-06-29
0001760965
ktb:TermLoanAFacilityMember
ktb:TermLoanMember
2019-05-17
0001760965
us-gaap:LetterOfCreditMember
2019-06-29
0001760965
ktb:TermLoanAFacilityMember
ktb:TermLoanMember
2019-06-29
0001760965
srt:MinimumMember
us-gaap:LondonInterbankOfferedRateLIBORMember
2018-12-30
2019-06-29
0001760965
us-gaap:RevolvingCreditFacilityMember
2019-05-17
0001760965
ktb:TermLoanBFacilityMember
ktb:TermLoanMember
2019-06-29
0001760965
us-gaap:ForeignLineOfCreditMember
2018-06-30
0001760965
us-gaap:ForeignLineOfCreditMember
2019-06-29
0001760965
ktb:TermLoanBFacilityMember
ktb:TermLoanMember
2019-05-17
0001760965
us-gaap:ForeignLineOfCreditMember
2018-12-29
0001760965
us-gaap:RevolvingCreditFacilityMember
2018-06-30
0001760965
us-gaap:RevolvingCreditFacilityMember
2018-12-29
0001760965
ktb:TermLoanAFacilityMember
ktb:TermLoanMember
us-gaap:LondonInterbankOfferedRateLIBORMember
2018-12-30
2019-06-29
0001760965
us-gaap:RevolvingCreditFacilityMember
2019-05-17
2019-05-17
0001760965
ktb:TermLoanAFacilityMember
ktb:TermLoanMember
us-gaap:BaseRateMember
2018-12-30
2019-06-29
0001760965
ktb:TermLoanBFacilityMember
ktb:TermLoanMember
2019-05-17
2019-05-17
0001760965
us-gaap:LondonInterbankOfferedRateLIBORMember
2018-12-30
2019-06-29
0001760965
ktb:TermLoanAFacilityMember
ktb:TermLoanMember
2019-05-17
2019-05-17
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2019-03-31
2019-06-29
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2019-03-31
2019-06-29
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2019-06-29
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2019-03-30
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2019-06-29
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2019-03-31
2019-06-29
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2019-03-30
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2019-03-30
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2019-06-29
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2017-12-31
2018-06-30
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2017-12-30
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2017-12-31
2018-06-30
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2017-12-31
2018-06-30
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2017-12-30
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2018-06-30
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-06-30
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-06-30
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2017-12-30
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-12-30
2019-06-29
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-12-30
2019-06-29
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-12-29
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2018-12-30
2019-06-29
0001760965
us-gaap:AccumulatedOtherComprehensiveIncomeMember
2018-12-30
2019-06-29
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-12-29
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2018-12-29
0001760965
us-gaap:ForeignExchangeContractMember
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2019-03-31
2019-06-29
0001760965
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2017-12-31
2018-06-30
0001760965
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-04-01
2018-06-30
0001760965
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-12-30
2019-06-29
0001760965
us-gaap:ForeignExchangeContractMember
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2017-12-31
2018-06-30
0001760965
us-gaap:ForeignExchangeContractMember
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-12-30
2019-06-29
0001760965
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2019-03-31
2019-06-29
0001760965
us-gaap:ForeignExchangeContractMember
us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-04-01
2018-06-30
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2018-03-31
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-04-01
2018-06-30
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-04-01
2018-06-30
0001760965
us-gaap:AccumulatedTranslationAdjustmentMember
2018-04-01
2018-06-30
0001760965
us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember
2018-03-31
0001760965
us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember
2018-03-31
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherMember
2018-12-30
2019-06-29
0001760965
us-gaap:CorporateNonSegmentMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherMember
2018-04-01
2018-06-30
0001760965
us-gaap:CorporateNonSegmentMember
2018-04-01
2018-06-30
0001760965
us-gaap:CorporateNonSegmentMember
2018-12-30
2019-06-29
0001760965
us-gaap:CorporateNonSegmentMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
2018-04-01
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
2017-12-31
2018-06-30
0001760965
us-gaap:OperatingSegmentsMember
ktb:OtherMember
2019-03-31
2019-06-29
0001760965
us-gaap:OperatingSegmentsMember
2018-12-30
2019-06-29
0001760965
us-gaap:FairValueInputsLevel2Member
2019-06-29
0001760965
us-gaap:FairValueInputsLevel3Member
2019-06-29
0001760965
us-gaap:FairValueInputsLevel1Member
2019-06-29
0001760965
us-gaap:FairValueInputsLevel1Member
2018-12-29
0001760965
us-gaap:FairValueInputsLevel3Member
2018-12-29
0001760965
us-gaap:FairValueInputsLevel2Member
2018-12-29
0001760965
us-gaap:SellingGeneralAndAdministrativeExpensesMember
2018-12-30
2019-06-29
0001760965
us-gaap:CostOfSalesMember
2018-12-30
2019-06-29
0001760965
us-gaap:SellingGeneralAndAdministrativeExpensesMember
2019-03-31
2019-06-29
0001760965
us-gaap:OtherRestructuringMember
2018-12-30
2019-06-29
0001760965
us-gaap:EmployeeSeveranceMember
2018-12-30
2019-06-29
0001760965
us-gaap:EmployeeSeveranceMember
2018-12-29
0001760965
us-gaap:EmployeeSeveranceMember
2019-06-29
0001760965
us-gaap:OtherRestructuringMember
2018-12-29
0001760965
us-gaap:OtherRestructuringMember
2019-06-29
0001760965
2018-12-30
2019-05-30
0001760965
2019-03-31
2019-05-30
0001760965
ktb:SourcingPayableMember
2018-12-29
0001760965
ktb:SourcingPayableMember
2018-06-30
0001760965
ktb:HedgingAgreementsMember
2018-12-29
0001760965
ktb:HedgingAgreementsMember
2018-06-30
0001760965
ktb:TradeAccountsReceivableSaleProgramsMember
2018-12-29
0001760965
ktb:TradeAccountsReceivableSaleProgramsMember
2018-06-30
0001760965
ktb:TransitionTaxRelatedToTheTaxActMember
2018-12-30
2019-06-29
0001760965
us-gaap:StockCompensationPlanMember
2018-12-30
2019-06-29
0001760965
ktb:CashDividendtoFormerParentMember
2018-12-30
2019-06-29
0001760965
ktb:TransitionTaxRelatedToTheTaxActMember
2017-12-31
2018-06-30
0001760965
us-gaap:PensionCostsMember
2018-12-30
2019-06-29
0001760965
ktb:GeneralFinancingActivitiesMember
2018-12-30
2019-06-29
0001760965
ktb:PurchasesFromParentMember
2018-12-30
2019-06-29
0001760965
ktb:CashDividendtoFormerParentMember
2017-12-31
2018-06-30
0001760965
ktb:PurchasesFromParentMember
2017-12-31
2018-06-30
0001760965
ktb:CorporateAllocationsMember
2017-12-31
2018-06-30
0001760965
ktb:CorporateAllocationsMember
2018-12-30
2019-06-29
0001760965
ktb:SalesToParentMember
2017-12-31
2018-06-30
0001760965
us-gaap:StockCompensationPlanMember
2017-12-31
2018-06-30
0001760965
us-gaap:PensionCostsMember
2017-12-31
2018-06-30
0001760965
ktb:OtherIncomeTaxMember
2018-12-30
2019-06-29
0001760965
ktb:GeneralFinancingActivitiesMember
2017-12-31
2018-06-30
0001760965
ktb:OtherIncomeTaxMember
2017-12-31
2018-06-30
0001760965
ktb:SalesToParentMember
2018-12-30
2019-06-29
0001760965
us-gaap:AccruedLiabilitiesMember
2019-06-29
0001760965
us-gaap:OtherCurrentAssetsMember
2019-06-29
0001760965
us-gaap:OtherAssetsMember
2019-06-29
0001760965
us-gaap:OtherLiabilitiesMember
2019-06-29
0001760965
us-gaap:ForeignExchangeContractMember
2019-05-17
2019-05-17
0001760965
us-gaap:CostOfSalesMember
2019-03-31
2019-06-29
0001760965
us-gaap:SalesRevenueNetMember
2019-03-31
2019-06-29
0001760965
us-gaap:OtherOperatingIncomeExpenseMember
2018-12-30
2019-06-29
0001760965
us-gaap:SalesRevenueNetMember
2018-12-30
2019-06-29
0001760965
us-gaap:OtherOperatingIncomeExpenseMember
2019-03-31
2019-06-29
0001760965
us-gaap:SubsequentEventMember
2019-07-23
2019-07-23
0001760965
us-gaap:RestrictedStockUnitsRSUMember
us-gaap:ScenarioForecastMember
2019-08-01
2019-08-31
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
xbrli:pure
UNITED STATES
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 June 29, 2019
or
|
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission file number: 001-38854
KONTOOR BRANDS, INC.
(Exact name of registrant as specified in its charter) |
| | |
North Carolina | | 83-2680248 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. employer identification number) |
|
| | | |
400 N. Elm Street | 27401 |
Greensboro | , | North Carolina
|
(Address of principal executive offices)
| (Zip Code) |
(336) 332-3400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: |
| | |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock, No Par Value | KTB | New York Stock Exchange |
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | | | | | |
| Large accelerated filer | | ☐ | | Accelerated filer | | ☐ |
| | | | |
| Non-accelerated filer | | ☑ | | Smaller reporting company | | ☐ |
| | | | | | | |
| | | | | Emerging growth company | | ☐ |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The number of shares of common stock, no par value, of the registrant outstanding as of July 27, 2019 was 56,879,295.
KONTOOR BRANDS, INC.
Table of Contents
Kontoor Brands, Inc. Q2 FY19 Form 10-Q 2
PART I — FINANCIAL INFORMATION
|
|
ITEM 1 — FINANCIAL STATEMENTS (UNAUDITED) |
KONTOOR BRANDS, INC.
Consolidated and Combined Balance Sheets
(Unaudited)
|
| | | | | | | | | | | | | |
(in thousands) | | June 2019 | | | December 2018 | | June 2018 |
ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash and equivalents | | $ | 76,687 |
| | | $ | 96,776 |
| | $ | 86,356 |
|
Accounts receivable, less allowance for doubtful accounts of $11,102 at June 2019, $10,549 at December 2018 and $7,345 at June 2018 | | 254,049 |
| | | 252,966 |
| | 262,525 |
|
Due from former parent, current | | — |
| | | 547,690 |
| | 553,976 |
|
Notes receivable from former parent | | — |
| | | 517,940 |
| | 546,740 |
|
Inventories | | 538,168 |
| | | 473,812 |
| | 491,836 |
|
Other current assets | | 79,397 |
| | | 52,014 |
| | 45,202 |
|
Total current assets | | 948,301 |
| | | 1,941,198 |
| | 1,986,635 |
|
Due from former parent, noncurrent | | — |
| | | 611 |
| | — |
|
Property, plant and equipment, net | | 131,727 |
| | | 138,449 |
| | 142,263 |
|
Operating lease assets | | 90,416 |
| | | — |
| | — |
|
Intangible assets, net | | 50,953 |
| | | 53,059 |
| | 55,263 |
|
Goodwill | | 213,761 |
| | | 214,516 |
| | 216,080 |
|
Other assets | | 153,044 |
| | | 110,632 |
| | 120,439 |
|
TOTAL ASSETS | | $ | 1,588,202 |
| | | $ | 2,458,465 |
| | $ | 2,520,680 |
|
LIABILITIES AND EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Short-term borrowings | | $ | 2,829 |
| | | $ | 3,215 |
| | $ | 5,062 |
|
Current portion of long-term debt | | 7,500 |
| | | — |
| | — |
|
Accounts payable | | 159,214 |
| | | 134,129 |
| | 136,620 |
|
Due to former parent, current | | — |
| | | 16,140 |
| | 59,424 |
|
Notes payable to former parent | | — |
| | | 269,112 |
| | 269,112 |
|
Accrued liabilities | | 177,582 |
| | | 194,228 |
| | 166,881 |
|
Operating lease liabilities, current | | 34,439 |
| | | — |
| | — |
|
Total current liabilities | | 381,564 |
| | | 616,824 |
| | 637,099 |
|
Operating lease liabilities, noncurrent | | 58,594 |
| | | — |
| | — |
|
Other liabilities | | 86,189 |
| | | 118,189 |
| | 115,894 |
|
Long-term debt | | 979,687 |
| | | — |
| | — |
|
Commitments and contingencies | |
| | |
| |
|
Total liabilities | | 1,506,034 |
| | | 735,013 |
| | 752,993 |
|
Equity | | | | | | | |
Common stock, no par value | | — |
| | | — |
| | — |
|
Additional paid-in capital | | 134,621 |
| | | — |
| | — |
|
Former parent investment | | — |
| | | 1,868,634 |
| | 1,908,986 |
|
Retained earnings | | 21,235 |
| | | — |
| | — |
|
Accumulated other comprehensive loss | | (73,688 | ) | | | (145,182 | ) | | (141,299 | ) |
Total equity | | 82,168 |
| | | 1,723,452 |
| | 1,767,687 |
|
TOTAL LIABILITIES AND EQUITY | | $ | 1,588,202 |
| | | $ | 2,458,465 |
| | $ | 2,520,680 |
|
See accompanying notes to unaudited consolidated and combined financial statements.
3 Kontoor Brands, Inc. Q2 FY19 Form 10-Q
KONTOOR BRANDS, INC.
Consolidated and Combined Statements of Income
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June | | | Six Months Ended June |
| | | | | | | | | | | |
(in thousands, except per share amounts) | | 2019 | | | 2018 | | | 2019 | | | 2018 |
Net revenues | | $ | 609,746 |
| | | $ | 663,856 |
| | | $ | 1,258,090 |
| | | $ | 1,333,519 |
|
Costs and operating expenses | | | | | | | | | | | |
Cost of goods sold | | 374,177 |
| | | 396,785 |
| | | 775,202 |
| | | 779,206 |
|
Selling, general and administrative expenses | | 182,049 |
| | | 191,337 |
| | | 404,173 |
| | | 386,171 |
|
Total costs and operating expenses | | 556,226 |
| | | 588,122 |
| | | 1,179,375 |
| | | 1,165,377 |
|
Operating income | | 53,520 |
| | | 75,734 |
| | | 78,715 |
| | | 168,142 |
|
Interest income from former parent, net | | 1,423 |
| | | 1,660 |
| | | 3,762 |
| | | 3,311 |
|
Interest expense | | (7,638 | ) | | | (416 | ) | | | (7,736 | ) | | | (781 | ) |
Interest income | | 1,408 |
| | | 1,386 |
| | | 2,831 |
| | | 2,668 |
|
Other expense, net | | (1,370 | ) | | | (1,241 | ) | | | (2,341 | ) | | | (2,438 | ) |
Income before income taxes | | 47,343 |
| | | 77,123 |
| | | 75,231 |
| | | 170,902 |
|
Income taxes | | 9,357 |
| | | 16,665 |
| | | 21,832 |
| | | 30,748 |
|
Net income | | $ | 37,986 |
| | | $ | 60,458 |
| | | $ | 53,399 |
| | | $ | 140,154 |
|
Earnings per common share | | | | | | | | | | | |
Basic | | $ | 0.67 |
| | | $ | 1.07 |
| | | $ | 0.94 |
| | | $ | 2.47 |
|
Diluted | | $ | 0.67 |
| | | $ | 1.07 |
| | | $ | 0.94 |
| | | $ | 2.47 |
|
Weighted average shares outstanding | | | | | | | | | | | |
Basic | | 56,648 |
| | | 56,648 |
| | | 56,648 |
| | | 56,648 |
|
Diluted | | 56,920 |
| | | 56,648 |
| | | 56,779 |
| | | 56,648 |
|
See accompanying notes to unaudited consolidated and combined financial statements.
Kontoor Brands, Inc. Q2 FY19 Form 10-Q 4
KONTOOR BRANDS, INC.
Consolidated and Combined Statements of Comprehensive Income
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June | | | Six Months Ended June |
| | | | | | | | | | | |
(in thousands) | | 2019 | | | 2018 | | | 2019 | | | 2018 |
Net income | | $ | 37,986 |
| | | $ | 60,458 |
| | | $ | 53,399 |
| | | $ | 140,154 |
|
Other comprehensive income, net of taxes | |
| | |
| | |
| | |
|
Foreign currency translation | |
| | |
| | |
| | |
|
Gains (losses) arising during the period | | 4,686 |
| | | (28,518 | ) | | | 5,444 |
| | | (18,817 | ) |
Defined benefit pension plans | |
|
| | |
|
| | |
|
| | |
|
|
Current period actuarial gains (losses) | | (14 | ) | | | — |
| | | (14 | ) | | | — |
|
Derivative financial instruments | |
|
| | |
|
| | |
|
| | |
|
|
Gains (losses) arising during the period | | (2,058 | ) | | | — |
| | | (2,058 | ) | | | — |
|
Reclassification to net income for (gains) losses realized | | (362 | ) | | | — |
| | | (362 | ) | | | — |
|
Total other comprehensive income (loss), net of taxes | | 2,252 |
| | | (28,518 | ) | | | 3,010 |
| | | (18,817 | ) |
Comprehensive income | | $ | 40,238 |
| | | $ | 31,940 |
| | | $ | 56,409 |
| | | $ | 121,337 |
|
See accompanying notes to unaudited consolidated and combined financial statements.
5 Kontoor Brands, Inc. Q2 FY19 Form 10-Q
KONTOOR BRANDS, INC.
Consolidated and Combined Statements of Cash Flows
(Unaudited)
|
| | | | | | | | | |
| | Six Months Ended June |
| | | | | |
(in thousands) | | 2019 | | | 2018 |
OPERATING ACTIVITIES | | | | | |
Net income | | $ | 53,399 |
| | | $ | 140,154 |
|
Adjustments to reconcile net income to cash provided (used) by operating activities: | | | | | |
Depreciation and amortization | | 16,025 |
| | | 16,089 |
|
Stock-based compensation | | 11,473 |
| | | 5,552 |
|
Provision for doubtful accounts | | 2,985 |
| | | 375 |
|
Other | | (1,068 | ) | | | (1,594 | ) |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | 4,355 |
| | | (17,425 | ) |
Inventories | | (69,655 | ) | | | (60,721 | ) |
Due from former parent | | 548,301 |
| | | (332,361 | ) |
Accounts payable | | 43,331 |
| | | (36,564 | ) |
Income taxes | | 5,692 |
| | | (4,286 | ) |
Accrued liabilities | | 230 |
| | | 20,009 |
|
Due to former parent | | (16,065 | ) | | | 21,393 |
|
Other assets and liabilities | | (18,852 | ) | | | (15,619 | ) |
Cash provided (used) by operating activities | | 580,151 |
| | | (264,998 | ) |
INVESTING ACTIVITIES | | | | | |
Capital expenditures | | (9,300 | ) | | | (13,035 | ) |
Repayments of notes receivable from former parent | | 517,940 |
| | | 1,000 |
|
Other, net | | 1,081 |
| | | 5,050 |
|
Cash provided (used) by investing activities | | 509,721 |
| | | (6,985 | ) |
FINANCING ACTIVITIES | | | | | |
Proceeds from issuance of long-term debt | | 1,050,000 |
| | | — |
|
Debt issuance costs | | (12,993 | ) | | | — |
|
Principal payments of long-term debt | | (50,000 | ) | | | — |
|
Repayment of notes payable from former parent | | (269,112 | ) | | | — |
|
Net transfers (to) from former parent | | (1,814,682 | ) | | | 279,859 |
|
Other, net | | (14,169 | ) | | | 675 |
|
Cash (used) provided by financing activities | | (1,110,956 | ) | | | 280,534 |
|
Effect of foreign currency rate changes on cash and cash equivalents | | 995 |
| | | (3,006 | ) |
Net change in cash and cash equivalents | | (20,089 | ) | | | 5,545 |
|
Cash and cash equivalents – beginning of period | | 96,776 |
| | | 80,811 |
|
Cash and cash equivalents – end of period | | $ | 76,687 |
| | | $ | 86,356 |
|
See accompanying notes to unaudited consolidated and combined financial statements.
Kontoor Brands, Inc. Q2 FY19 Form 10-Q 6
KONTOOR BRANDS, INC.
Consolidated and Combined Statements of Equity
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Common Stock | | Additional Paid-in Capital | | Former Parent Investment | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Equity |
| | | | | |
(in thousands) | | Shares | | Amounts | | | | |
Balance, December 2018 | | — |
| | $ | — |
| | $ | — |
| | $ | 1,868,634 |
| | $ | — |
| | $ | (145,182 | ) | | $ | 1,723,452 |
|
Adoption of new accounting standard (ASU 2016-02) | | — |
| | — |
| | — |
| | (2,713 | ) | | — |
| | — |
| | (2,713 | ) |
Net income | | — |
| | — |
| | — |
| | 15,413 |
| | — |
| | — |
| | 15,413 |
|
Foreign currency translation | | — |
| | — |
| | — |
| | — |
| | — |
| | 758 |
| | 758 |
|
Net transfers to former parent | | — |
| | — |
| | — |
| | (157,928 | ) | | — |
| | — |
| | (157,928 | ) |
Balance, March 2019 | | — |
| | $ | — |
| | $ | — |
| | $ | 1,723,406 |
| | $ | — |
| | $ | (144,424 | ) | | $ | 1,578,982 |
|
Net income | | — |
| | — |
| | — |
| | 16,751 |
| | 21,235 |
| | — |
| | 37,986 |
|
Stock-based compensation, net | | — |
| | — |
| | 1,879 |
| | — |
| | — |
| | — |
| | 1,879 |
|
Foreign currency translation | | — |
| | — |
| | — |
| | — |
| | — |
| | 4,686 |
| | 4,686 |
|
Defined benefit pension plans | | — |
| | — |
| | — |
| | — |
| | — |
| | (14 | ) | | (14 | ) |
Derivative financial instruments | | — |
| | — |
| | — |
| | — |
| | — |
| | (2,420 | ) | | (2,420 | ) |
Net transfers to former parent | | — |
| | — |
| | — |
| | (1,607,415 | ) | | — |
| | 68,484 |
| | (1,538,931 | ) |
Transfer of former parent investment to additional paid-in capital | | — |
| | — |
| | 132,742 |
| | (132,742 | ) | | — |
| | — |
| | — |
|
Issuance of common stock | | 56,648 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Balance, June 2019 | | 56,648 |
| | $ | — |
| | $ | 134,621 |
| | $ | — |
| | $ | 21,235 |
| | $ | (73,688 | ) | | $ | 82,168 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Common Stock | | Additional Paid-in Capital | | Former Parent Investment | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Equity |
| | | | | | |
(in thousands) | | Shares | | Amounts | | | | | |
Balance, December 2017 | | — |
| | $ | — |
| | — |
| | $ | 1,480,375 |
| | $ | — |
| | $ | (122,482 | ) | | $ | 1,357,893 |
|
Adoption of new accounting standard (ASU 2014-09) | | — |
| | — |
| | — |
| | 3,047 |
| | — |
| | — |
| | 3,047 |
|
Net income | | — |
| | — |
| | — |
| | 79,696 |
| | — |
| | — |
| | 79,696 |
|
Foreign currency translation | | — |
| | — |
| | — |
| | — |
| | — |
| | 9,701 |
| | 9,701 |
|
Net transfers from former parent | | — |
| | — |
| | — |
| | 113,445 |
| | — |
| | — |
| | 113,445 |
|
Balance, March 2018 | | — |
| | $ | — |
| | $ | — |
| | $ | 1,676,563 |
| | $ | — |
| | $ | (112,781 | ) | | $ | 1,563,782 |
|
Net income | | — |
| | — |
| | — |
| | 60,458 |
| | — |
| | — |
| | 60,458 |
|
Foreign currency translation | | — |
| | — |
| | — |
| | — |
| | — |
| | (28,518 | ) | | (28,518 | ) |
Net transfers from former parent | | — |
| | — |
| | — |
| | 171,965 |
| | — |
| | — |
| | 171,965 |
|
Balance, June 2018 | | — |
| | $ | — |
| | $ | — |
| | $ | 1,908,986 |
| | $ | — |
| | $ | (141,299 | ) | | $ | 1,767,687 |
|
See accompanying notes to unaudited consolidated and combined financial statements.
7 Kontoor Brands, Inc. Q2 FY19 Form 10-Q
KONTOOR BRANDS, INC.
Notes to Consolidated and Combined Financial Statements
(Unaudited)
NOTE 1 — BASIS OF PRESENTATION
Description of Business
Kontoor Brands, Inc. ("Kontoor," the "Company," "we," "us" or "our") is a global denim and casual apparel company headquartered in the United States ("U.S."). The Company designs, produces, procures, markets and distributes apparel primarily under the brand names Wrangler® and Lee®. The Company's products are sold in the U.S. through mass merchants, specialty stores, mid-tier and traditional department stores, company-operated stores and online. The Company's products are also sold internationally, primarily in Europe and Asia, through department, specialty, company-operated, concession retail and independently operated partnership stores and online. VF Outlet™ stores carry Wrangler® and Lee® branded products, as well as merchandise that is specifically purchased for sale in these stores.
Spin-Off Transaction
On May 22, 2019, VF Corporation ("VF" or "former parent") completed the spin-off of its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF OutletTM business. The spin-off transaction (the "Separation") was effected through a pro-rata distribution to VF shareholders of one share of Kontoor common stock for every seven shares of VF common stock held on the record date of May 10, 2019. Kontoor began to trade as a separate public company (NYSE: KTB) on May 23, 2019.
The Company incurred $1.05 billion of indebtedness under a newly structured third-party debt issuance, the proceeds of which were used primarily to finance a cash transfer to VF in connection with the Separation.
The Company entered into several agreements with VF that govern the relationship of the parties following the Separation, including the Separation and Distribution Agreement, the Tax Matters Agreement, the Transition Services Agreement, the Kontoor Intellectual Property License Agreement, the VF Intellectual Property License Agreement and the Employee Matters Agreement. Under the terms of the Transition Services Agreement, the Company and VF agreed to provide each other certain transitional services including information technology, information management, human resources, employee benefits administration, supply chain, facilities, and other limited finance and accounting related services for periods up to 18 months. The Company has also entered into certain commercial arrangements with VF. Revenues, expenses and operating expense reimbursements under these agreements are recorded within the reportable segments or within the corporate and other expenses line item, in the reconciliation of segment profit in Note 12, based on the nature of the arrangements.
Fiscal Year
The Company operates and reports using a 52/53 week fiscal year ending on the Saturday closest to December 31 of each year. Accordingly, this Form 10-Q presents the second quarter of the Company's fiscal year ended December 28, 2019 ("fiscal 2019"). For presentation purposes herein, all references to periods ended June 2019, December 2018 and June 2018 correspond to the fiscal periods ended June 29, 2019, December 29, 2018 and June 30, 2018, respectively.
Basis of Presentation - Unaudited Consolidated and Combined Financial Statements
The Company’s financial statements for periods through the Separation date of May 22, 2019 are combined financial statements prepared on a carve-out basis as discussed below. The Company’s financial statements for the period from May 23, 2019 through June 29, 2019 are consolidated financial statements based on the reported results of Kontoor Brands, Inc. as a standalone company. Accordingly, the second quarter of 2019 included consolidated and combined financial statements, whereas all prior periods included combined financial statements.
The Company’s unaudited consolidated and combined financial statements for all periods presented are referred to throughout this document as “financial statements.”
The accompanying unaudited interim 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 in the United States of America ("GAAP") for complete financial statements. In the opinion of management, the accompanying financial statements contain all normal and recurring adjustments necessary to fairly state the financial position, results of operations and cash flows of the Company for the interim periods presented. The financial statements may not be indicative of the Company's future performance and do not necessarily reflect what the financial position, results of operations, and cash flows would have been had it operated as an independent company for all periods presented. Additionally, operating results for the three and six months ended June 2019 are not necessarily indicative of results that may be expected for any other interim period or for fiscal 2019. The unaudited financial statements should be read in conjunction with the audited combined financial statements for the fiscal year ended December 29, 2018 included in our Registration Statement on Form 10, as amended and filed with the Securities and Exchange Commission on April 30, 2019 ("2018 Form 10").
Basis of Presentation - Prior to the Separation
Through the Separation date, the Company's combined financial statements are prepared on a "carve-out" basis. These accompanying unaudited combined financial statements reflect the historical financial position, results of operations and cash flows of the Company for the periods presented, through the Separation date, as historically managed within VF. The unaudited combined financial statements have been derived from the consolidated financial statements and accounting records of VF.
The combined statements of income include costs for certain centralized functions and programs provided and administered by VF that are charged directly to the Company. These centralized functions and programs include, but are not limited to, information technology, human resources, accounting shared services, supply chain and insurance.
In addition, for purposes of preparing these combined financial statements on a "carve-out" basis under U.S. GAAP, a portion of VF's total corporate expenses are allocated to the Company. These expense allocations include the cost of corporate functions and resources provided by or administered by VF including, but not
Kontoor Brands, Inc. Q2 FY19 Form 10-Q 8
KONTOOR BRANDS, INC.
Notes to Consolidated and Combined Financial Statements
(Unaudited)
limited to, executive management, finance, accounting, legal, human resources, and related benefit costs associated with such functions, such as stock-based compensation and pension. Allocations also include the cost of operating VF's corporate headquarters located in Greensboro, North Carolina.
Costs are allocated to the Company based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional revenues, cost of goods sold or square footage, as applicable. Management considers the basis on which the expenses have been allocated to reasonably reflect the utilization of services provided to, or benefit received by, the Company during the periods presented. However, the allocations may not reflect the expenses that would have been incurred if the Company had been a standalone company for the periods presented. Actual costs that may have been incurred if the Company had been a standalone company would depend on a number of factors, including the organizational structure, whether functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure.
The combined financial statements include certain assets and liabilities that have historically been held at the VF corporate level but are specifically identifiable or otherwise attributable to the Company. VF's third-party long-term debt and the related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of such debt.
All intracompany transactions are eliminated. All transactions between the Company and VF are included in these financial statements. For those transactions between the Company and VF that were historically settled in cash, the Company has reflected such balances in the balance sheets as "due from former parent" or "due to former parent." The aggregate net effect of transactions between the Company and VF that were not historically settled in cash are reflected in the balance sheets within "former parent investment" and in the statements of cash flows within "net transfers to former parent."
NOTE 2 — RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS
Recently Adopted Accounting Standards
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” an update that requires entities to record most leased assets and liabilities on the balance sheet, and also retains a dual model approach for assessing lease classification and recognizing expense. The FASB subsequently issued updates to provide clarification on specific topics, including adoption guidance, practical expedients and interim transition disclosure requirements. This guidance was adopted by the Company during the first quarter of fiscal 2019 utilizing the optional transition method, which resulted in a $2.7 million cumulative effect adjustment to beginning retained earnings for fiscal 2019. The adoption of these standards did not have a significant impact on the Company's statement of income and statement of cash flows. Refer to Note 3 of the Company's financial statements for additional information.
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities," an update that amends and simplifies certain aspects of hedge accounting rules to better portray the economic results of risk management activities in the financial statements. The FASB has subsequently issued updates to the standard to provide additional guidance on specific topics. This guidance was adopted by the Company during the first quarter of fiscal 2019 and did not have a significant impact on the Company's financial statements.
In February 2018, the FASB issued ASU 2018-02, "Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," an update that addresses the effect of the change in the U.S. federal corporate income tax rate due to the enactment of the Tax Act on items within accumulated other comprehensive income (loss). This guidance was adopted by the Company during the first quarter of fiscal 2019 and did not have a significant impact on the Company's financial statements.
In July 2018, the FASB issued ASU 2018-09, "Codification Improvements," an update that provides technical corrections, clarifications and other improvements across a variety of accounting topics. The transition and effective date guidance is based on the facts and circumstances of each update; however, many of them became effective for the Company at the beginning of fiscal 2019. The adoption of this guidance did not have a significant impact on the Company's financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. This guidance will be effective for the Company beginning in fiscal 2020. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on the consolidated and combined financial statements. The adoption of this guidance is not expected to have a significant impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement," an update that modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. This guidance will be effective for the Company beginning in fiscal 2020. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its financial statement disclosures. The adoption of this guidance is not expected to have a significant impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans," an update that modifies
9 Kontoor Brands, Inc. Q2 FY19 Form 10-Q
KONTOOR BRANDS, INC.
Notes to Consolidated and Combined Financial Statements
(Unaudited)
the disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. This guidance will be effective for the Company beginning in fiscal 2020. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its financial statement disclosures. The adoption of this guidance is not expected to have a significant impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract," an
update that aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance will be effective for the Company beginning in fiscal 2020. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on the consolidated and combined financial statements. The adoption of this guidance is not expected to have a significant impact on the Company's financial statements.
NOTE 3 — LEASES
The Company enters into operating leases for offices, operational facilities, retail locations, vehicles and other assets that expire at various dates through 2031. Leases for real estate typically have initial terms ranging from 3 to 15 years, generally with renewal options. Leases for equipment typically have initial terms ranging from 2 to 7 years. Most leases have fixed rentals, with many of the real estate leases requiring additional payments for real estate taxes and occupancy-related costs. These lease terms may include optional renewals, terminations or purchases, which are considered in the Company’s assessments when such options are reasonably certain to be exercised.
For retail real estate leases, the Company does not typically include renewal options in the underlying lease term. For non-retail real estate leases, when renewal options are reasonably certain to be exercised, the Company includes the renewal options in the underlying lease term, up to a maximum of ten years. Renewals for all other leases are determined on a lease-by-lease basis.
Upon adoption of ASU 2016-02, the Company elected the package of practical expedients permitted under the new lease standard, which allows the Company to not reassess whether a contract contains a lease, how the lease is classified, and if initial direct costs can be capitalized. The Company elected to combine non-lease components with the related lease components for real estate, vehicles and other significant asset arrangements. The Company treats the combined items as a single lease component for accounting purposes. Lastly, the Company elected not to recognize a right-of-use asset and related lease liability for leases with a lease term of 12 months or less for all classes of underlying assets.
Certain of the Company’s leases contain fixed, indexed, or market-based escalation clauses which impact future payments. Certain arrangements contain variable payment provisions, such as payments based on sales volumes or amounts and mileage, or excess mileage. The Company’s leases typically contain customary covenants and restrictions.
The Company determines whether a contract is a lease at inception. This typically requires more judgment in storage and service arrangements where the Company must determine whether its rights to specific physical or production capacity may represent substantially all of the available capacity.
The Company measures right-of-use assets and related lease liabilities based on the present value of remaining lease payments, including in-substance fixed payments, the current payment amount when payments depend on an index or rate (e.g., inflation adjustments, market renewals), and the amount the Company believes is probable to be paid to the lessor under residual value guarantees, when applicable. Lease contracts may include fixed payments for non-lease components, such as maintenance, which are included in the measurement of lease liabilities for certain asset classes based on the Company’s election to combine lease and non-lease components.
As applicable borrowing rates are not typically implied within our lease arrangements, the Company discounts lease payments based on its estimated incremental borrowing rate at lease commencement, or modification, which is based on the Company’s estimated credit rating, the lease term at commencement and the contract currency of the lease arrangement.
Kontoor Brands, Inc. Q2 FY19 Form 10-Q 10
KONTOOR BRANDS, INC.
Notes to Consolidated and Combined Financial Statements
(Unaudited)
The following table presents the lease-related assets and liabilities recorded in the Company's balance sheet: |
| | | | |
(in thousands) | | June 2019 |
Assets | |
|
Operating lease assets, noncurrent | | $ | 90,416 |
|
Total lease assets | | $ | 90,416 |
|
| | |
Liabilities | |
|
Operating lease liabilities, current | | $ | 34,439 |
|
Operating lease liabilities, noncurrent | | 58,594 |
|
Total lease liabilities | | $ | 93,033 |
|
| | |
Weighted-average remaining lease term (in years) | |
|
Operating leases | | 4.08 |
|
Weighted-average discount rate | |
|
Operating leases | | 2.46 | % |
Lease costs
The following table presents certain information related to the lease costs for operating leases:
|
| | | | | | | | |
(in thousands) | | Three Months Ended June 2019 | | Six Months Ended June 2019 |
Operating lease cost | | $ | 11,343 |
| | $ | 18,956 |
|
Short-term lease cost (excluding leases of one month or less) | | 1,015 |
| | 1,506 |
|
Variable lease cost | | 735 |
| | 3,551 |
|
Total lease costs | | $ | 13,093 |
| | $ | 24,013 |
|
Rent expense associated with operating leases for the three and six months ended June 2018 totaled approximately $10.6 million and $21.2 million, respectively.
Other information
The following table presents supplemental cash flow information related to leases:
|
| | | | |
(in thousands) | | Six Months Ended June 2019 |
Cash paid for amounts included in the measurement of lease liabilities: | |
|
Operating cash flows impact - operating leases | | $ | 22,950 |
|
Right-of-use assets obtained in exchange for new operating leases | | $ | 23,446 |
|
11 Kontoor Brands, Inc. Q2 FY19 Form 10-Q
KONTOOR BRANDS, INC.
Notes to Consolidated and Combined Financial Statements
(Unaudited)
The following table reconciles maturities of operating lease liabilities as of June 2019 to the lease liabilities reflected in the Company's balance sheet:
|
| | | | |
(in thousands) | | Lease Obligations |
2019 (excluding the six months ended June 2019) | | $ | 29,732 |
|
2020 | | 29,141 |
|
2021 | | 17,358 |
|
2022 | | 8,285 |
|
2023 | | 5,379 |
|
Thereafter | | 9,647 |
|
Total future minimum lease payments | | 99,542 |
|
Less: amounts related to imputed interest | | (6,509 | ) |
Present value of future minimum lease payments | | 93,033 |
|
Less: operating lease liabilities, current | | (34,439 | ) |
Operating lease liabilities, noncurrent | | $ | 58,594 |
|
As of June 2019, the Company has entered into approximately $1.3 million of operating lease arrangements, on an undiscounted basis, that have not yet commenced. The Company continuously monitors and may negotiate contract amendments that include extensions or modifications to existing leases.
The following table presents the future minimum lease payments during the noncancelable lease terms as presented under ASC 840:
|
| | | | |
(in thousands) | | December 2018 |
2019 | | $ | 33,562 |
|
2020 | | 29,246 |
|
2021 | | 17,810 |
|
2022 | | 7,932 |
|
2023 | | 4,353 |
|
Thereafter | | 4,582 |
|
Total future minimum lease payments | | $ | 97,485 |
|
NOTE 4 — REVENUES
The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied based on the transfer of control of promised goods or services. The transfer of control typically occurs at a point in time based on consideration of when the customer has (i) an obligation to pay for, (ii) physical possession of, (iii) legal title to, (iv) risks and rewards of ownership of and (v) accepted the goods or services. The timing of revenue recognition within the wholesale channels occurs either on shipment or delivery of goods based on contractual terms with the customer. The timing of revenue recognition in the direct-to-consumer channels generally occurs at the point of sale within Company-operated or concession retail stores and either on shipment or delivery of goods for e-commerce transactions based on contractual terms with the customer. For finished products shipped directly to customers from our suppliers, the Company’s promise to the customer is a performance obligation to provide the specified goods and the Company has discretion in establishing pricing, and thus the Company is the principal in the arrangement and revenue is recognized on a gross basis at the transaction price.
The duration of contractual arrangements with our customers in the wholesale and direct-to-consumer channels is typically less than one year. Payment terms with customers are generally
between 30 and 60 days. The Company does not adjust the promised amount of consideration for the effects of a significant financing component as it is expected, at contract inception, that the period between the transfer of the promised good or service to the customer and the customer payment for the good or service will be one year or less.
The amount of revenue recognized in the wholesale and direct-to-consumer channels reflects the expected consideration to be received for providing the goods or services to the customer, which includes estimates for variable consideration. Variable consideration includes allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks and product returns. Estimates of variable consideration are determined at contract inception and reassessed at each reporting date, at a minimum, to reflect any changes in facts and circumstances. The Company utilizes the expected value method in determining its estimates of variable consideration, based on evaluations of specific product and customer circumstances, historical and anticipated trends and current economic conditions.
Revenue from the sale of gift cards is deferred and recorded as a contract liability until the gift card is redeemed by the customer, factoring in breakage as appropriate, which considers whether the
Kontoor Brands, Inc. Q2 FY19 Form 10-Q 12
KONTOOR BRANDS, INC.
Notes to Consolidated and Combined Financial Statements
(Unaudited)
Company has a legal obligation to remit the value of the unredeemed gift card to any jurisdiction under unclaimed property regulations.
The VF Outlet™ stores maintain customer loyalty programs where customers earn rewards from qualifying purchases, which are redeemable for discounts on future purchases or other rewards. For its customer loyalty programs, the Company estimates the standalone selling price of the loyalty rewards and allocates a portion of the consideration for the sale of products to the loyalty points earned. The deferred amount is recorded as a contract liability, and is recognized as revenue when the points are redeemed or when the likelihood of redemption is remote.
The Company has elected to treat all shipping and handling activities as fulfillment costs and recognize the costs as "selling, general and administrative expenses" at the time the related revenue is recognized. Shipping and handling costs billed to customers are included in "net revenues." Sales taxes and value added taxes collected from customers and remitted directly to governmental authorities are excluded from the transaction price.
The Company has licensing agreements for its symbolic intellectual property, most of which include minimum guaranteed royalties. Royalty income is recognized as earned over the respective license term based on the greater of minimum guarantees or the licensees’ sales of licensed products at rates specified in the licensing contracts. Royalty income related to the minimum guarantees is recognized using a measure of progress with variable amounts recognized only when the cumulative earned royalty exceeds the minimum guarantees. As of June 2019, the Company expects to recognize $77.4 million of fixed consideration related to the future minimum guarantees in effect under its licensing agreements and expects such amounts to be recognized over time through December 2029. The variable consideration is not disclosed as a remaining performance obligation as the licensing arrangements qualify for the sales-based royalty exemption.
The Company has applied the practical expedient to recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.
Performance Obligations
Disclosure is required for the aggregate transaction price allocated to performance obligations that are unsatisfied at the end of a reporting period, unless the optional practical expedients are applicable. The Company elected the practical expedients to not disclose the transaction price allocated to remaining performance obligations for i) variable consideration related to sales-based royalty arrangements and ii) contracts with an original expected duration of one year or less.
As of June 2019, there were no arrangements with transaction price allocated to remaining performance obligations other than (i) contracts for which the Company has applied the practical expedients discussed above and (ii) fixed consideration related to future minimum guarantees.
For the three and six months ended June 2019, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.
Contract Balances
Accounts receivable represent the Company's unconditional right to receive consideration from a customer and are recorded at net invoiced amounts, less an estimated allowance for doubtful accounts.
Contract assets are rights to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time. Once the Company has an unconditional right to consideration under a contract, amounts are invoiced and contract assets are reclassified to "accounts receivable." The Company's primary contract assets relate to sales-based royalty arrangements.
Contract liabilities are recorded when a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional, before the transfer of a good or service to the customer, and thus represent the Company's obligation to transfer the good or service to the customer at a future date. The Company's primary contract liabilities relate to gift cards, loyalty programs and sales-based royalty arrangements.
The following table provides information about accounts receivable, contract assets and contract liabilities recorded in the Company's balance sheets:
|
| | | | | | | | | | | | | |
(in thousands) | | June 2019 | | | December 2018 | | June 2018 |
Accounts receivable, net | | $ | 254,049 |
| | | $ | 252,966 |
| | $ | 262,525 |
|
Contract assets (a) | | 2,529 |
| | | 2,841 |
| | 1,387 |
|
Contract liabilities (b) | | 2,787 |
| | | 2,311 |
| | 3,215 |
|
| |
(a) | Included in "other current assets" in the Company's balance sheets. |
| |
(b) | Included in "accrued liabilities" in the Company's balance sheets. |
The Company recognized revenue that was previously included in the contract liability balances of $0.2 million and $1.5 million for the three and six months ended June 2019, respectively, and $0.3 million and $1.5 million for the three and six months ended June 2018, respectively. The changes in the contract asset and contract liability balances primarily result from the timing differences between the Company's satisfaction of performance obligations and the customer's payment.
13 Kontoor Brands, Inc. Q2 FY19 Form 10-Q
KONTOOR BRANDS, INC.
Notes to Consolidated and Combined Financial Statements
(Unaudited)
Disaggregation of Revenue
The following tables disaggregate our revenues by channel and geography, which provides a meaningful depiction of how the nature, timing and uncertainty of revenues are affected by economic factors. Revenues from licensing arrangements have been included within the U.S. or Non-U.S. Wholesale channels, based on the respective region covered by the agreement. Branded Direct-to-Consumer revenues include the distribution of our products via concession retail locations internationally, Wrangler® and Lee® branded full-price stores globally and Company-owned outlet stores globally. The Branded Direct-to-Consumer channel also includes our branded products sold in our U.S.-based VF Outlet™ stores and our products that are marketed and distributed online via www.wrangler.com and www.lee.com. The Other channel includes (i) sales of VF-branded and third-party branded merchandise in our VF Outlet™ stores, (ii) sales to VF for products manufactured in our plants and use of our transportation fleet and (iii) revenues from fulfilling a transition services agreement related to VF's sale of its Nautica® brand business in mid-2018.
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 2019 |
| | | | | | | |
(in thousands) | Wrangler | | Lee | | Other | | Total |
Channel revenues |
| |
| |
| |
|
U.S. Wholesale | $ | 299,040 |
| | $ | 108,757 |
| | $ | 4,710 |
| | $ | 412,507 |
|
Non-U.S. Wholesale | 40,569 |
| | 56,845 |
| | 633 |
| | 98,047 |
|
Branded Direct-To-Consumer | 24,383 |
| | 41,306 |
| | 14 |
| | 65,703 |
|
Other | — |
| | — |
| | 33,489 |
| | 33,489 |
|
Total | $ | 363,992 |
| | $ | 206,908 |
| | $ | 38,846 |
| | $ | 609,746 |
|
| | | | | | | |
Geographic revenues |
| |
| |
| |
|
U.S. | $ | 317,831 |
| | $ | 130,795 |
| | $ | 38,002 |
| | $ | 486,628 |
|
International | 46,161 |
| | 76,113 |
| | 844 |
| | 123,118 |
|
Total | $ | 363,992 |
| | $ | 206,908 |
| | $ | 38,846 |
| | $ | 609,746 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 2018 |
| | | | | | | |
(in thousands) | Wrangler | | Lee | | Other | | Total |
Channel revenues |
| |
| |
| |
|
U.S. Wholesale | $ | 311,222 |
| | $ | 100,674 |
| | $ | 7,094 |
| | $ | 418,990 |
|
Non-U.S. Wholesale | 59,624 |
| | 73,076 |
| | 26 |
| | 132,726 |
|
Branded Direct-To-Consumer | 26,899 |
| | 44,023 |
| | 27 |
| | 70,949 |
|
Other | — |
| | — |
| | 41,191 |
| | |