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Description of Business

Kontoor Brands, Inc. ("Kontoor," the "Company," "we," "us" or "our") is a global lifestyle 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.

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 first quarter of the Company's fiscal year ending January 2, 2021 ("fiscal 2020"), which is a 53-week fiscal year. For presentation purposes herein, all references to periods ended March 2020, December 2019 and March 2019 correspond to the fiscal periods ended March 28, 2020, December 28, 2019 and March 30, 2019, respectively.

Spin-Off Transaction

On May 22, 2019, VF Corporation ("VF" or "former parent") completed the spin-off of its Jeanswear business (the "Separation"), which included the Wrangler^®, Lee^® and Rock & Republic^® brands, as well as the VF Outlet^TM business. Kontoor began to trade as a standalone public company (NYSE: KTB) on May 23, 2019. Accordingly, the Company’s financial statements for periods through the Separation date of May 22, 2019 were combined financial statements prepared on a "carve-out" basis as discussed below, and the Company’s financial statements for periods from May 23, 2019 were consolidated financial statements based on the reported results of Kontoor Brands, Inc. as a standalone company. The Company’s unaudited consolidated and combined financial statements for all periods presented are referred to throughout this document as “financial statements.”

Impact of COVID-19

During the first quarter of 2020, the novel coronavirus (“COVID-19”) pandemic has significantly impacted global economic conditions, as well as the Company's operations. Given the uncertainties of COVID-19 and the associated potential impact on future results of operations and liquidity, the Company implemented strategic actions to reduce expenses and enhance liquidity, including a $475.0 million draw on the Revolving Credit Facility (as defined in Note 6 to the Company's financial statements), temporary suspension of the payment of a dividend, targeted reductions in operating expenses and capital expenditures, temporary reduction of fees for the Board of Directors, reduction of payroll costs through restructuring, furloughs and temporary salary reductions, reduced production in owned manufacturing facilities, and focused management of working capital. 

Additionally, on May 5, 2020, the Company entered into an amendment to the Credit Agreement (as defined in Note 6 to the Company's financial statements) to provide relief for potential financial covenant compliance issues during future reporting periods. As of March 2020, the Company was in compliance with all covenants and expects to maintain compliance with the applicable financial covenants for at least one year from the issuance of these financial statements for the period ended March 2020. See Note 6 to the Company's financial statements for additional information.

The Company considered the impact of COVID-19 on the assumptions and estimates used when preparing these quarterly financial statements including, but not limited to, our allowance for credit losses, inventory valuations, liabilities for variable consideration, deferred tax valuation allowances, fair value measurements, asset impairment charges, the effectiveness of the Company’s hedging instruments, and expected compliance with financial covenants in our Credit Agreement. These assumptions and estimates may change as new events occur and additional information is obtained. If economic conditions caused by COVID-19 do not recover as currently estimated by management, such future changes may have an adverse impact on the Company's results of operations, financial position and liquidity.

Basis of Presentation - Interim 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 U.S. ("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 a standalone company for all periods presented. Additionally, operating results for the three months ended March 2020 are not necessarily indicative of results that may be expected for any other interim period or for fiscal 2020. The unaudited financial statements should be read in conjunction with the audited consolidated and combined financial statements for the fiscal year ended December 28, 2019 included in the Company's 2019 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission ("SEC") on March 11, 2020 ("2019 Annual Report on Form 10-K").

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Basis of Presentation - Carve Out Accounting

Through the Separation date in 2019, the Company's combined financial statements were prepared on a carve-out basis under GAAP, which reflected the historical financial position, results of operations and cash flows of the Company as historically managed within VF. The unaudited combined financial statements were derived from the consolidated financial statements and accounting records of VF.

The combined statement of operations included costs for certain centralized functions and programs provided and administered by VF that were charged directly to the Company. These centralized functions and programs included, but were 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, 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, such as stock-based compensation and pension. Allocations also included the cost of operating VF's corporate headquarters located in Greensboro, North Carolina.

Costs were 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 considered the basis on which the expenses were allocated to reasonably reflect the utilization of services provided to, or benefit received by, the Company during the period presented. However, the allocations may not reflect the expenses that would have been incurred if the Company had been a standalone company for the period presented.

The combined balance sheet included certain assets and liabilities that were historically held at the VF corporate level but were specifically identifiable or otherwise attributable to the Company. VF's third-party long-term debt and the related interest expense were not allocated to the Company as the Company was not the legal obligor of such debt.

All intracompany transactions were eliminated. All transactions between the Company and VF were included in the combined financial statements. For those transactions between the Company and VF that were historically settled in cash, the Company reflected such balances in the balance sheet within "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 were reflected in the balance sheet within "former parent investment" and in the statement of cash flows within "net transfers to former parent." Subsequent to the Separation, the Company continued to service commercial arrangements with VF, which included 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. None of these arrangements with VF have continued in 2020.

Income Taxes — Prior to the Separation, the Company's operations were included in VF’s U.S. federal consolidated and certain state income tax returns and certain foreign tax returns. For periods prior to the Separation, the income tax expense and deferred tax balances presented in the financial statements were calculated on a carve-out basis, which applied accounting guidance as if the Company filed its own tax returns in each jurisdiction and included tax losses and tax credits that may not reflect tax positions taken by VF. Certain tax attributes reported by the Company on a carve-out basis were not transferred to the Company as part of the Separation. These attributes primarily related to losses in certain Central America and South America jurisdictions.

Reclassifications

Certain prior year amounts in the Company's financial statements and related disclosures have been reclassified to conform with the current year presentation.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” and has since issued additional updates to provide further clarification. This guidance requires use of the current expected credit loss ("CECL") model, thus replacing the existing incurred credit loss model. The CECL model requires an entity to recognize an allowance for credit losses at each reporting period that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. The Company determined this guidance primarily applied to trade accounts receivable from customers and licensees, and adopted it on the first day of fiscal 2020 using the modified retrospective approach. There was no cumulative-effect adjustment to retained (deficit) earnings required upon adoption. See Note 4 to the Company's financial statements for additional disclosures on credit losses.

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," which modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. This guidance was adopted by the Company during the first quarter of 2020 using a prospective approach and did not have a significant impact on the Company's financial statement disclosures.

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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," which modifies the disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. This guidance was adopted by the Company during the first quarter of 2020 using a prospective approach and did not have a significant impact on the Company's financial statement disclosures.

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," which 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 was adopted by the Company during the first quarter of 2020 using a prospective approach and did not have a significant impact on the Company's financial statements as the new guidance is generally consistent with the Company's historical accounting policies.

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which amends and simplifies the accounting for income taxes by removing certain exceptions in existing guidance and providing new guidance to reduce complexity in certain areas. This guidance is effective for the Company beginning in the first quarter of 2021 with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its financial statements and related disclosures, which is not expected to be significant.

In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting,” which is intended to provide temporary optional expedients and exceptions for applying GAAP to contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective upon issuance and generally can be applied through December 31, 2022. The impact of this guidance on the Company's financial statements and related disclosures is not expected to be significant.

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.

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 that do not require disclosure of 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 March 2020, 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 months ended March 2020, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not significant.

Contract Balances

Accounts receivable represent the Company's unconditional right to receive consideration from a customer and are recorded at net invoiced amounts, less estimated allowances.

The Company's primary contract assets relate to sales-based royalty arrangements and the Company's primary contract liabilities relate to gift cards, loyalty programs and sales-based royalty arrangements.

The following table presents information about contract balances recorded in the Company's balance sheets:

(In thousands)		March 2020					December 2019				March 2019
Accounts receivable, net		$	213,080				$	228,459			$	299,328
Contract assets (a)		5,715					10,679				1,930
Contract liabilities (b)		1,690					1,775				1,995

^(a) Included within "prepaid expenses and other current assets" in the Company's balance sheets.

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^(b) Included within "accrued liabilities" in the Company's balance sheets.

For the three months ended March 2020 and March 2019, the Company recognized revenue of $1.1 million and $1.3 million that was included in contract liabilities as of December 2019 and December 2018, respectively. The changes in the contract asset and contract liability balances primarily result from timing differences between the Company's satisfaction of performance obligations and the customer's payment.

The Company has licensing agreements for its symbolic intellectual property, most of which include minimum guaranteed royalties. As of March 2020, the Company expects to recognize $24.6 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 2024. The variable consideration is not disclosed as a remaining performance obligation as the licensing arrangements qualify for the sales-based royalty exemption.

Disaggregation of Revenue

The following tables present revenues disaggregated 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 sales of our branded products in U.S.-based VF Outlet™ stores and digital sales via www.wrangler.com and www.lee.com.

The Other channel includes sales of third-party branded merchandise at VF Outlet™ stores 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 Branded Direct-to-Consumer channel discussed above. Prior to 2020, the Other channel also included transactions with VF for pre-Separation activities, none of which continued in 2020. These transactions included 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.

	Three Months Ended March 2020
(In thousands)	Wrangler				Lee				Other				Total
Channel revenues
U.S. Wholesale	$	236,282			$	92,578			$	4,061			$	332,921
Non-U.S. Wholesale	46,937				59,853				304				107,094
Branded Direct-To-Consumer	20,167				30,325				2				50,494
Other	—				—				13,989				13,989
Total	$	303,386			$	182,756			$	18,356			$	504,498
Geographic revenues
U.S.	$	252,584			$	107,968			$	18,052			$	378,604
International	50,802				74,788				304				125,894
Total	$	303,386			$	182,756			$	18,356			$	504,498

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	Three Months Ended March 2019
(In thousands)	Wrangler				Lee				Other				Total
Channel revenues
U.S. Wholesale	$	276,825			$	100,859			$	6,725			$	384,409
Non-U.S. Wholesale	68,655				100,896				—				169,551
Branded Direct-To-Consumer	24,455				39,776				—				64,231
Other	—				—				30,153				30,153
Total	$	369,935			$	241,531			$	36,878			$	648,344
Geographic revenues
U.S.	$	293,869			$	119,120			$	36,878			$	449,867
International	76,066				122,411				—				198,477
Total	$	369,935			$	241,531			$	36,878			$	648,344

The Company has two reportable segments:

•	Wrangler — Wrangler® branded denim, apparel and accessories.

•	Lee — Lee® branded denim, apparel and accessories.

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.

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. Prior to 2020, the Other category also included transactions with VF for pre-Separation activities, none of which continued in 2020. These transactions included 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 included in the Company's 2019 Annual Report on Form 10-K, except as noted 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 those functions.

Through the Separation date, the Company's statements of operations 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.

Corporate and other expenses and interest income and expense are not controlled by segment management and therefore are excluded from the measurement of segment profit.

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The following table presents financial information for the Company's reportable segments and (loss) income before income taxes:

		Three Months Ended March
(In thousands)		2020					2019
Segment revenues:
Wrangler		$	303,386				$	369,935
Lee		182,756					241,531
Total reportable segment revenues		486,142					611,466
Other revenues		18,356					36,878
Total net revenues		$	504,498				$	648,344
Segment profit:
Wrangler		$	33,863				$	23,665
Lee		973					17,633
Total reportable segment profit		$	34,836				$	41,298
Corporate and other expenses		(33,222		)			(13,989		)
Interest income from former parent, net		—					2,339
Interest expense		(10,939		)			(98		)
Interest income		416					1,423
Loss related to other revenues		(2,228		)			(3,085		)
(Loss) income before income taxes		$	(11,137	)			$	27,888

The Company is exposed to credit losses primarily through trade accounts receivable from customers and licensees which are generally short-term in nature. The Company maintains an allowance for doubtful accounts that will result from the inability of customers to make required payments of outstanding balances. In estimating this allowance, accounts receivable are evaluated on a pooled basis at each reporting date and aggregated on the basis of similar risk characteristics, including current and forecasted industry trends and economic conditions, aging status of accounts, and the financial strength and credit standing of customers, including payment and default history. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.

Upon adoption of the CECL accounting standard in fiscal 2020, the Company reviewed the estimates used to calculate the allowance for doubtful accounts as of December 28, 2019. Based on the current and expected conditions at that time, the Company determined that the allowance was sufficient and no transition adjustment was required. At March 2020, given the current and expected impact of COVID-19, the Company updated the assumptions used and recorded an increase in the allowance for doubtful accounts.

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

(In thousands)		Three Months Ended March 2020
Balance, December 2019		$	11,852
Provision for expected credit losses		9,339
Other (1)		(1,058		)
Balance, March 2020		$	20,133

⁽¹⁾ Other includes impact of foreign currency translation, accounts receivable balances written-off against the allowance 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 recurring, 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" 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.

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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 sheets within "due from former parent." Refer to Note 14 to the Company's financial statements for additional information.

During the three months ended March 2020 and March 2019, the Company sold total trade accounts receivable of $220.5 million and $245.0 million, respectively. As of March 2020 and December 2019, $164.4 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. As of March 2019, $286.8 million of the sold trade accounts receivable had been removed from "accounts receivable" and reflected in the Company's balance sheet within "due from former parent."

The following table presents components of inventories recorded in the Company's balance sheets:

(In thousands)		March 2020					December 2019				March 2019
Finished products		$	430,719				$	383,643			$	454,763
Work-in-process		24,176					34,783				37,872
Raw materials		33,855					39,675				26,371
Total inventories		$	488,750				$	458,101			$	519,006

Credit Facilities

On May 17, 2019, the Company entered into a $1.55 billion senior secured credit facility (the "Credit Agreement") under which it incurred $1.05 billion of indebtedness, the proceeds of which were used primarily to finance a cash transfer to VF in connection with the Separation. At inception, this facility consisted of a five-year $750.0 million term loan A facility (“Term Loan A”), a seven-year $300.0 million term loan B facility (“Term Loan B”) and a five-year $500.0 million revolving credit facility (the “Revolving Credit Facility”) (collectively, the “Credit Facilities”) with the lenders and agents party thereto.

The Credit Agreement contained certain affirmative and negative covenants customary for financings of this type, including maintenance of ratios as defined in the Credit Agreement for consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") to consolidated debt (the "Total Leverage Ratio") of 4.00 to 1.00 and EBITDA to consolidated interest expense (the "Consolidated Interest Coverage Ratio") of 3.00 to 1.00, both as measured over the most recent four consecutive fiscal quarters. As of March 2020, the Company was in compliance with all covenants.

On May 5, 2020, given the uncertainties of COVID-19 and the associated impact on future results of operations, the Company entered into an amendment to the Credit Agreement (the “Amendment”) to address potential covenant compliance issues during future reporting periods. The Amendment establishes a temporary relief period for the Company (the "Relief Period") for certain provisions regarding financial covenants including (i) increase of the maximum Total Leverage Ratio, (ii) addition of a minimum liquidity floor of $200.0 million, (iii) addition of a $250.0 million limit on available cash, and (iv) imposition of stricter limitations on investments, acquisitions, restricted payments (including dividends) and the incurrence of indebtedness. The Relief Period is effective until the earlier of (i) the date on which a compliance certificate is delivered for the Company's quarter ended June 2021 or (ii) the date on which a compliance certificate is delivered in respect of any previous fiscal quarter demonstrating that the Company is in full compliance with all financial covenants that were in effect prior to the Amendment and upon the Company's written notification to the administrative agent that the Relief Period should end on such date. For quarterly measurement periods subsequent to the Amendment, the Company is required to maintain a Total Leverage Ratio not to exceed 5.50 to 1.00, 5.50 to 1.00, 5.00 to 1.00 and 4.50 to 1.00 for the periods ended June 2020, September 2020, December 2020 and March 2021, respectively.

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The Company expects to maintain compliance with the applicable financial covenants for at least one year from the issuance of our financial statements for the period ended March 2020. If economic conditions caused by COVID-19 do not recover as currently estimated by management, this could impact the Company’s ability to maintain compliance with the applicable financial covenants and require the Company to seek additional amendments to the Credit Agreement. If the Company is not able to enter into such amendments, this would lead to an event of default which, if not cured timely, could require the Company to repay its outstanding debt. In that situation, the Company may not be able to generate sufficient liquidity, through new or refinanced debt, equity financing or asset sales, to repay its outstanding debt.

Short-term Borrowings

At March 2020, December 2019 and March 2019, the Company had $46.4 million, $47.8 million and $36.1 million, respectively, of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either the Company or the banks. Total outstanding balances under these arrangements were $3.5 million, $1.1 million and $8.4 million at March 2020, December 2019 and March 2019, respectively, and primarily consist of letters of credit that are non-interest bearing to the Company.

Long-term Debt

The following table presents the components of long-term debt as recorded in the Company's balance sheet:

(In thousands)		March 2020					December 2019
Revolving Credit Facility		$	475,000				$	—
Term Loan A		695,389					695,111
Term Loan B		218,347					218,158
Total long-term debt		1,388,736					913,269
Less: current portion		—					—
Long-term debt, due beyond one year		$	1,388,736				$	913,269

The Revolving Credit Facility may be used to borrow funds in both U.S. dollar and certain non-U.S. dollar currencies, and has a $75.0 million letter of credit sublimit. As of March 2020, the Company had $475.0 million of outstanding borrowings under the Revolving Credit Facility and $1.3 million of outstanding standby letters of credit issued on behalf of the Company, leaving $23.7 million available for borrowing against this facility. The outstanding borrowings under the Revolving Credit Facility as of March 2020 were the result of drawdowns taken by the Company as a precautionary measure to provide increased financial flexibility, strengthen the Company’s near-term cash position and provide additional funding for working capital in response to COVID-19, and were repaid at the closing of the Amendment in May 2020 to the extent required to comply with the available cash limitation.

The interest rate per annum applicable to the Revolving Credit Facility and Term Loan A is either a base rate plus a margin of 75 basis points or 175 basis points over the applicable LIBOR benchmark, at the Company's election. During the Relief Period, these rates will either be 225 basis points over the base rate or 325 basis points over the applicable LIBOR benchmark, at the Company’s election. The Company is also required to pay a facility fee to the lenders, currently equal to 30 basis points of the undrawn amount of the facility. During the Relief Period, this facility fee will be equal to 50 basis points of the undrawn amount of the facility. Outside of the Relief Period, these credit spreads and facility fees are subject to adjustments based on the Company's credit ratings.

Additionally, the interest rate per annum applicable to Term Loan B is either a base rate plus a margin of 325 basis points or 425 basis points over the applicable LIBOR benchmark, at the Company's election. The LIBOR rate for both loans is subject to a "floor" of 0%. Interest payments are due quarterly on both Term Loan A and Term Loan B.

Term Loan A had an outstanding principal amount of $700.0 million at March 2020 and December 2019, which is recorded net of unamortized debt issuance costs. As of March 2020, interest expense on this facility was being recorded at an effective annual interest rate of 3.2%, including the amortization of debt issuance costs and the impact of the Company’s interest rate swap agreements.

Term Loan B had an outstanding principal amount of $223.0 million at March 2020 and December 2019, which is recorded net of unamortized original issue discount and debt issuance costs. As of March 2020, interest expense on this facility was being recorded at an effective annual interest rate of 5.9%, including the amortization of original issue discount, debt issuance costs and the impact of the Company’s interest rate swap agreements.

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Certain assets and liabilities measured and reported at fair value are classified in a three-level hierarchy that prioritizes the inputs used in the valuation process. Categorization within the valuation hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The hierarchy is based on the observability and objectivity of the pricing inputs, as follows:

•	Level 1 — Quoted prices in active markets for identical assets or liabilities.

•

Level 2 — 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 inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

•	Level 3 — Prices or valuation techniques that require significant unobservable data inputs. These inputs would normally be the Company's own data and judgments about assumptions that market participants would use in pricing the asset or liability.

Recurring Fair Value Measurements

The following tables present financial assets and financial liabilities that are measured and recorded in the Company's financial statements at fair value on a recurring basis:

					Fair Value Measurement Using
(In thousands)	Total Fair Value				Level 1				Level 2				Level 3
March 2020
Financial assets:
Cash equivalents:
Money market funds	$	445,467			$	445,467			$	—			$	—
Time deposits	2,352				2,352				—				—
Foreign currency exchange contracts	6,988				—				6,988				—
Investment securities	51,133				46,185				4,948				—
Financial liabilities:
Foreign currency exchange contracts	15,080				—				15,080				—
Interest rate swap agreements	17,528				—				17,528				—
Deferred compensation	51,350				—				51,350				—

					Fair Value Measurement Using
(In thousands)	Total Fair Value				Level 1				Level 2				Level 3
December 2019
Financial assets:
Cash equivalents:
Money market funds	$	25,706			$	25,706			$	—			$	—
Time deposits	4,788				4,788				—				—
Foreign currency exchange contracts	5,563				—				5,563				—
Investment securities	59,922				56,437				3,485				—
Financial liabilities:
Foreign currency exchange contracts	2,795				—				2,795				—
Interest rate swap agreements	3,089				—				3,089				—
Deferred compensation	60,129				—				60,129				—

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The Company's cash equivalents include money market funds and short-term time deposits that approximate fair value based on Level 1 measurements. The fair value of derivative financial instruments, which consist of foreign currency exchange contracts and interest rate swap agreements, is determined based on observable market inputs (Level 2), including spot and forward exchange rates for foreign currencies and observable interest rate yield curves for interest rate swap agreements. Investment securities are held in the Company's deferred compensation plans as an economic hedge of the related deferred compensation liabilities. These investments are primarily comprised of mutual funds (Level 1) that are valued based on quoted prices in active markets and a separately managed fixed-income fund (Level 2) with underlying investments that are valued based on quoted prices for similar assets in active markets or quoted prices in inactive markets for identical assets. Liabilities related to the Company's deferred compensation plans are recorded at amounts due to participants, based on the fair value of the participants’ selection of hypothetical investments (Level 2).

Additionally, at March 2020, the carrying value of the Company's long-term debt was $1,388.7 million compared to a fair value of $1,141.0 million. At December 2019, the carrying value of the Company's long-term debt was $913.3 million compared to a fair value of $906.1 million. The fair value of long-term debt is a Level 2 estimate based on quoted market prices or values of comparable borrowings.

All other financial assets and financial liabilities are recorded in the Company's financial statements at cost. These other financial assets and financial liabilities include cash held as demand deposits, accounts receivable, short-term borrowings, accounts payable, and accrued liabilities. At March 2020 and December 2019, their carrying values approximated fair value due to the short-term nature of these instruments.

Nonrecurring Fair Value Measurements

Certain non-financial assets, primarily property, plant and equipment, operating lease assets, goodwill and intangible assets, are not required to be measured at fair value on a recurring basis and are reported at carrying value. However, these assets are required to be assessed for impairment when events or circumstances indicate that the carrying value may not be recoverable, and at least annually for goodwill and indefinite-lived intangible assets. In the event that an impairment is required, the asset is adjusted to fair value, using market-based assumptions. As a result of temporary retail store closures due to COVID-19, the Company assessed certain related assets for impairment as of March 2020. No significant impairment charges were recorded during the three months ended March 2020 or March 2019.

Summary of Derivative Financial Instruments

On April 24, 2019, the Company began entering into derivative contracts with external counterparties to hedge certain foreign currency transactions. The notional amount of all outstanding foreign currency exchange contracts was $318.0 million at March 2020 and $341.6 million at December 2019, consisting primarily of contracts hedging exposures to the euro, Mexican peso, Canadian dollar, British pound, Polish zloty and Swedish krona. Foreign currency exchange contracts have maturities up to 20 months.

On July 24, 2019, the Company entered into "floating to fixed" derivative agreements to mitigate exposure to volatility in LIBOR rates on the Company's future interest payments. The notional amount of the interest rate swap agreements was $400.0 million at March 2020 and $475.0 million at December 2019. Because these interest rate swap agreements meet the criteria for hedge accounting, all related gains and losses are deferred within accumulated other comprehensive loss ("AOCL") and are being amortized through April 18, 2024.

The Company's outstanding derivative financial instruments met the criteria for hedge accounting at the inception of the hedging relationship, although a limited number of foreign currency exchange contracts intended to hedge assets and liabilities are not designated as hedges for accounting purposes. At each reporting period, the Company assesses whether the hedging relationships continue to be highly effective in offsetting changes in cash flows of hedged items. If it was determined that the hedging relationship ceased to be highly effective, the Company would discontinue hedge accounting. All designated hedging relationships were determined to be highly effective as of March 2020.

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The following table presents the fair value of outstanding derivatives on an individual contract basis:

		Fair Value of Derivatives with Unrealized Gains										Fair Value of Derivatives with Unrealized Losses
(In thousands)		March 2020					December 2019					March 2020					December 2019
Derivatives designated as hedging instruments:
Foreign currency exchange contracts		$	5,717				$	5,199				$	(14,603	)			$	(2,690	)
Interest rate swap agreements		—					—					(17,528		)			(3,089		)
Derivatives not designated as hedging instruments:
Foreign currency exchange contracts		1,271					364					(477		)			(105		)
Total derivatives		$	6,988				$	5,563				$	(32,608	)			$	(5,884	)

The Company records and presents the fair value of all derivative assets and liabilities in the Company's balance sheets on a gross basis, even though certain of the derivative contracts are subject to master netting agreements. If the Company were to offset and record the asset and liability balances of its derivative contracts on a net basis in accordance with the terms of its master netting agreements, the amounts presented in the Company's balance sheets would be adjusted from the current gross presentation to the net amounts.

The following table presents a reconciliation of gross to net amounts for derivative asset and liability balances:

		March 2020									December 2019
(In thousands)		Derivative Asset				Derivative Liability					Derivative Asset				Derivative Liability
Gross amounts presented in the balance sheet		$	6,988			$	(32,608	)			$	5,563			$	(5,884	)
Gross amounts not offset in the balance sheet		(2,970		)		2,970					(1,133		)		1,133
Net amounts		$	4,018			$	(29,638	)			$	4,430			$	(4,751	)

The following table presents the location of derivatives in the Company's balance sheet, with current or noncurrent classification based on maturity dates:

(In thousands)		March 2020					December 2019
Other current assets		$	5,217				$	4,303
Accrued liabilities		(10,256		)			(2,058		)
Other assets		1,771					1,260
Other liabilities		(22,352		)			(3,826		)

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Cash Flow Hedges

The following tables present the effects of cash flow hedges included in the Company's statement of operations and statement of comprehensive (loss) income:

(In thousands)	Gain (Loss) on Derivatives Recognized in AOCL
Cash Flow Hedging Relationships		Three Months Ended March 2020
Foreign currency exchange contracts		$	(10,906	)
Interest rate swap agreements		(14,670		)
Total		$	(25,576	)

(In thousands)	Gain (Loss) Reclassified from AOCL into Income
Location of Gain (Loss)		Three Months Ended March 2020
Net revenues		$	(358	)
Cost of goods sold		3,741
Other expense, net		(4		)
Interest expense		(231		)
Total		$	3,148

During the three months ended March 2020, the Company determined that, due to a reduction in forecasted sales, it was probable that forecasted transactions of certain foreign currency cash flow hedges would no longer occur as originally expected. Accordingly, $0.4 million of gains related to the ineffective portion of these contracts were reclassified from AOCL into earnings. To minimize the future earnings impact of these over-hedged items, the Company executed offsetting non-designated trades through the same maturity dates.

Derivative Contracts Not Designated as Hedges

The Company uses derivative contracts to manage foreign currency exchange risk on certain accounts receivable and accounts payable. These contracts are not designated as hedges and are recorded at fair value in the Company's balance sheets. Changes in the fair values of these instruments are recognized directly in earnings. Gains or losses on these contracts largely offset the net transaction gains or losses on the related assets and liabilities.

The following table presents a summary of these derivatives included in the Company's statement of operations:

(In thousands)		Location of Gain (Loss) on Derivatives Recognized in Income			Gain (Loss) on Derivatives Recognized in Income
Derivatives Not Designated as Hedges					Three Months Ended March 2020
Foreign currency exchange contracts		Net revenues			$	4
		Cost of goods sold			(3,672		)
		Other expense, net			23
Total					$	(3,645	)

Other Derivative Information

At March 2020, AOCL included $5.7 million of pre-tax net deferred losses for foreign currency exchange contracts and interest rate swap agreements that are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on rates in effect when outstanding derivative contracts are settled.

The Company's comprehensive (loss) income consists of net (loss) income and specified components of other comprehensive (loss) income (“OCL”), which relate to changes in assets and liabilities that are not included in net (loss) income but are instead deferred and accumulated within a separate component of equity in the Company's balance sheets. The Company's comprehensive (loss) income is presented in the Company's statements of comprehensive (loss) income.

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The following table presents deferred components of AOCL in equity, net of related taxes:

(In thousands)			March 2020					December 2019				March 2019
Foreign currency translation			$	(111,328	)			$	(84,118	)		$	(144,424	)
Defined benefit pension plans			(2,272		)			(2,301		)		—
Derivative financial instruments			(19,862		)			6,721				—
Accumulated other comprehensive loss			$	(133,462	)			$	(79,698	)		$	(144,424	)

The following tables present changes in AOCL, net of related tax impact:

	Foreign Currency Translation				Defined Benefit Pension Plans				Derivative Financial Instruments
(In thousands)													Total
Balance, December 2019	$	(84,118	)		$	(2,301	)		$	6,721			$	(79,698	)
Other comprehensive loss before reclassifications	(27,210		)		—				(23,655		)		(50,865		)
Amounts reclassified from accumulated other comprehensive loss	—				29				(2,928		)		(2,899		)
Net other comprehensive (loss) income	(27,210		)		29				(26,583		)		(53,764		)
Balance, March 2020	$	(111,328	)		$	(2,272	)		$	(19,862	)		$	(133,462	)

	Foreign Currency Translation				Defined Benefit Pension Plans				Derivative Financial Instruments
(In thousands)													Total
Balance, December 2018	$	(145,182	)		$	—			$	—			$	(145,182	)
Other comprehensive income before reclassifications	758				—				—				758
Net other comprehensive income	758				—				—				758
Balance, March 2019	$	(144,424	)		$	—			$	—			$	(144,424	)

The following table presents reclassifications out of AOCL:

(In thousands)				Three Months Ended March
Details About Accumulated Other Comprehensive Loss Reclassifications		Affected Line Item in the Financial Statements
					2020					2019
Amortization of defined benefit pension plans:
Net deferred actuarial losses		Selling, general and administrative expenses			$	(38	)			$	—
Total before tax					(38		)			—
Tax benefit		Income taxes			9					—
Net of tax					(29		)			—
Gains (losses) on derivative financial instruments:
Foreign currency exchange contracts		Net revenues			$	(358	)			$	—
Foreign currency exchange contracts		Cost of goods sold			3,741					—
Foreign currency exchange contracts		Other expense, net			(4		)			—
Interest rate swap agreements		Interest expense			(231		)			—
Total before tax					3,148					—
Tax expense		Income taxes			(220		)			—
Net of tax					2,928					—
Total reclassifications for the period, net of tax					$	2,899				$	—

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The effective income tax rate for the three months ended March 2020 was 75.6% compared to 44.7% in the 2019 period. The three months ended March 2020 included a net discrete tax benefit of $7.7 million, primarily comprised of $6.3 million of tax benefit recognized due to the enactment of Swiss tax reform in the canton of Ticino and $0.9 million of tax benefit related to state tax return filings. The $7.7 million net discrete tax benefit in the three months ended March 2020 increased the effective income tax rate by 69.3%.

The effective tax rate for the three months ended March 2019 included a net discrete tax expense of $1.2 million, primarily comprised of $2.8 million of net tax expense related to unrecognized tax benefits and interest, $2.2 million of tax benefit related to stock compensation, and $0.2 million of tax expense related to adjustments of previously recorded amounts based on final regulations for the transition tax. The $1.2 million net discrete tax expense in the three months ended March 2019 increased the effective income tax rate by 4.4%.

The effective income tax rate without discrete items for the three months ended March 2020 was 6.3% compared to 40.3% in the 2019 period. The reduction was primarily due to a higher percentage of income in lower tax rate jurisdictions and a reduction in losses incurred in certain foreign jurisdictions for which no related tax benefit was recognized.

The Company will file a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. The Company has not filed its initial consolidated U.S. federal income tax return; therefore, there are no open IRS examinations. However, the Company is currently subject to examination by various U.S. state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years and has concluded that the Company's provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on the Company’s financial statements. Management believes that some of these audits and negotiations will conclude in the next 12 months.

The computation of basic and diluted (loss) earnings per share ("EPS") is based on net (loss) income divided by the basic weighted average number of common shares and diluted weighted average number of common shares outstanding, respectively. On May 22, 2019, the Separation from VF was effected through a pro-rata distribution of one share of the Company's common stock for every seven shares of VF common stock held at the close of business on the record date of May 10, 2019. As a result, on May 23, 2019, the Company had 56,647,561 shares of common stock outstanding. This share amount was utilized for the calculation of basic and diluted earnings per share for all periods presented through the Separation date. After the Separation date, actual outstanding shares were used to calculate both basic and diluted weighted average number of common shares outstanding.

The following table presents the computation of basic and diluted EPS:

		Three Months Ended March
(In thousands, except per share amounts)		2020					2019
Net (loss) income		$	(2,712	)			$	15,413
Basic weighted average shares outstanding		56,875					56,648
Dilutive effect of stock-based awards		1,072					—
Diluted weighted average shares outstanding		57,947					56,648
(Loss) earnings per share:
Basic (loss) earnings per common share		$	(0.05	)			$	0.27
Diluted (loss) earnings per common share		$	(0.05	)			$	0.27

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The Company enters into operating leases for offices, operational facilities, retail locations, vehicles and other assets that expire at various dates through 2031. Most leases have fixed rentals, with many of the real estate leases requiring additional payments for real estate taxes and occupancy-related costs.

The following table presents supplemental cash flow and non-cash information related to leases:

(In thousands)		Three Months Ended March 2020					Three Months Ended March 2019
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows		$	11,556				$	10,641
Right-of-use assets obtained in exchange for new operating leases - non-cash activity		$	253				$	7,837

The Company incurs restructuring charges related to cost optimization of business activities, primarily related to severance and employee-related benefits. Of the $5.8 million of restructuring charges recognized during the three months ended March 2020, $5.3 million was reflected within "selling, general and administrative expenses" and $0.5 million within "cost of goods sold." Of the $22.8 million of restructuring charges recognized during the three months ended March 2019, $12.0 million was reflected within "selling, general and administrative expenses" and $10.8 million within "cost of goods sold."

All of the $6.5 million total restructuring accrual reported in the Company's balance sheet at March 2020 is expected to be paid out within the next 12 months and is classified within "accrued liabilities." All of the $2.2 million total restructuring accrual reported in the Company's balance sheet at December 2019 was classified within "accrued liabilities."

The following table presents the components of restructuring charges:

(In thousands)		Three Months Ended March 2020					Three Months Ended March 2019
Severance and employee-related benefits		$	5,795				$	13,157
Asset impairments		—					1,596
Inventory write-downs		—					4,403
Other		—					3,660
Total restructuring charges		$	5,795				$	22,816

The following table presents the restructuring costs by business segment:

(In thousands)		Three Months Ended March 2020					Three Months Ended March 2019
Wrangler		$	3,178				$	16,422
Lee		2,617					6,224
Other		—					170
Total		$	5,795				$	22,816

The following table presents activity in the restructuring accrual for the three-month period ended March 2020:

(In thousands)	Total
Accrual at December 2019	$	2,172
Charges	5,795
Cash payments	(1,371		)
Adjustments to accruals	(110		)
Accrual at March 2020	$	6,486

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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. 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. The following discussion summarizes activity between the Company and VF.

Sales and Purchases To and From Former Parent

The Company's sales to VF were $10.6 million for the three months ended March 2019, which were included within "net revenues" in the Company's statements of operations. The Company's cost of goods sold included items purchased from VF totaling $0.3 million for the three months ended March 2019. At March 2020, December 2019 and March 2019, the aggregate amount of inventories purchased from VF that remained on the Company's balance sheets was approximately $0.3 million, $0.4 million and $1.2 million, respectively.

Notes To and From Former Parent

All notes to and from former parent were settled in connection with the Separation. At March 2019, 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 3.7% at March 2019.

At March 2019, the Company had notes payable to former parent of $241.9 million, with VF as the counterparty. The weighted-average interest rate for these notes was approximately 3.7% at March 2019.

The Company recorded net interest income related to these notes of $2.3 million for the three months ended March 2019, which is reflected within "interest income from former parent, net" in the Company's statement of operations.

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)	March 2019
Sale of trade accounts receivable	$	286,816
Hedging agreements with VF	4,266
Other	45
	$	291,127

The following table presents components of due from former parent, noncurrent:

(In thousands)	March 2019
Hedging agreements with VF	$	370

The following table presents components of due to former parent, current:

(In thousands)	March 2019
Sourcing payable	$	3,865

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Net Transfers To and From VF

Net transfers to and from VF are included within "former parent investment" in the statements of (deficit) equity.

The following table presents components of the transfers to and from VF:

(In thousands)	March 2019
General financing activities	$	(198,411	)
Corporate allocations	31,153
Stock-based compensation expense	7,685
Pension benefit	(629		)
Purchases from parent	700
Sales to parent	(10,611		)
Other income tax	8,248
Transition tax related to the Tax Act	3,937
Total net transfers to former parent	$	(157,928	)

Stock-based Compensation

On April 1, 2020, the Company granted equity awards under the Kontoor Brands, Inc. 2019 Stock Compensation Plan. Performance-based restricted stock units for approximately 530,000 shares were granted to employees and time-based restricted stock units for approximately 30,000 shares were granted to nonemployee members of the Board of Directors. At the grant date, total unrecognized compensation related to these equity awards was approximately $8.7 million that will be recognized as earned.

Credit Agreement Amendment

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•	Net revenues decreased 22% to $504.5 million compared to the three months ended March 2019, driven by decreases in all channels as discussed below.

•

U.S. Wholesale revenues decreased 13% compared to the three months ended March 2019, primarily due to the impact of COVID-19. The decrease was also impacted by planned revenue losses in the current year associated with certain lower margin lines of business, and proactive quality-of-sales programs initiated in 2019. These declines were partially offset by growth in our U.S. digital wholesale business. U.S. Wholesale revenues represented 66% of total revenues in the current period.

•

International revenues decreased 37% compared to the three months ended March 2019, primarily due to declines in the Non-U.S. Wholesale channel driven by the impact of COVID-19. The decrease was also impacted by planned revenue losses in the current year associated with proactive strategic quality-of-sales programs initiated during 2019, which included (i) the exit of unprofitable points of distribution in India, (ii) strategic actions to exit an underperforming country in Europe, and (iii) business model changes actioned by the Company. In addition, international revenues included a 2% unfavorable impact from foreign currency. International wholesale revenues represented 21% of total revenues in the current period.

•	Branded Direct-to-Consumer revenues decreased 21% on a global basis compared to the three months ended March 2019, primarily due to temporary closures of the Company's brick and mortar retail stores due to the impact of COVID-19. The global Branded Direct-to-Consumer channel represented 10% of total revenues in the current period.

•	Gross margin decreased 30 basis points to 37.8% compared to the three months ended March 2019, primarily due to increased inventory provisions and unfavorable geographic mix driven by the impact of COVID-19, offset by higher restructuring and Separation costs during the prior year period.

•	Selling, general & administrative expenses as a percentage of net revenues increased 350 basis points, primarily due to deleverage of fixed costs on lower revenues and increased allowances for doubtful accounts driven by the impact of COVID-19.

•	Net (loss) income decreased to $(2.7) million compared to $15.4 million for the three months ended March 2019, primarily due to the business results discussed above and the discrete benefit resulting from the enactment of the Swiss Tax Act.

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•	Revenues in the Americas region decreased 16%, primarily due to a 15% decrease in U.S. wholesale revenues resulting from the impact of COVID-19. Additionally, Non-U.S. Americas wholesale revenues decreased 33%, primarily due to business model changes initiated in 2019 within the CASA region. The declines were partially offset by growth in the U.S. digital wholesale business.

•	Revenues in the Asia-Pacific ("APAC") region decreased 58%, primarily due to the impact of COVID-19. The decrease was also impacted by our exit of unprofitable points of distribution in India initiated in 2019 and a 1% unfavorable impact from foreign currency.

•	Revenues in the Europe, Middle East and Africa ("EMEA") region decreased 25%, primarily due to the impact of COVID-19 and a 3% unfavorable impact from foreign currency.

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•

Revenues in the Americas region decreased 13%, primarily due to an 8% decrease in U.S. wholesale revenues resulting from the impact of COVID-19. The decrease was also impacted by planned exits or reduced sales of certain lower margin lines of business, and planned proactive quality-of-sales programs initiated in 2019. Non-U.S. Americas wholesale revenues decreased 41%, primarily due to the unfavorable impact of a shift in timing of shipments in Mexico out of the current period and a 2% unfavorable impact from foreign currency.

•	Revenues in the APAC region decreased 49%, primarily due to the impact of COVID-19. The decrease was also impacted by our exit of unprofitable points of distribution in India initiated in 2019.

•	Revenues in the EMEA region decreased 26%, primarily due to the impact of COVID-19. The decrease was also impacted by the ongoing impact of planned proactive quality-of-sales programs initiated in 2019, including the exit of an underperforming country in Europe and business model changes, and a 2% unfavorable impact from foreign currency.

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•	Retail store closures or reduced operating hours and/or decreased retail traffic;

•	Disruption to our distribution centers and our third-party manufacturing partners and other vendors, including through the effects of facility closures, reductions in operating hours, labor shortages, and real time changes in operating procedures, including for additional cleaning and disinfection procedures;

•	Impacts to our distribution and logistics providers’ ability to operate or increases in their operating costs. These supply chain effects may have an adverse effect on our ability to meet consumer demand, including digital demand, and could result in an increase in our costs of production and distribution, including increased freight and logistics costs and other expenses; and

•	Significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.

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