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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 July 3, 2021
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
ktb-20210703_g1.jpg
KONTOOR BRANDS, INC.
(Exact name of registrant as specified in its charter)
North Carolina83-2680248
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

400 N. Elm Street
Greensboro, North Carolina 27401
(Address of principal executive offices)

(336) 332-3400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, no par valueKTBNew 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 filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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 of the registrant outstanding as of July 30, 2021 was 57,663,976.



KONTOOR BRANDS, INC.
Table of Contents
 Page
3

Kontoor Brands, Inc. Q2 FY21 Form 10-Q 2



PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

KONTOOR BRANDS, INC.
Consolidated Balance Sheets
(Unaudited)
(In thousands)June 2021December 2020June 2020
ASSETS
Current assets
Cash and equivalents$175,628 $248,138 $256,276 
Accounts receivable, net 215,297 231,397 153,302 
Inventories403,249 340,732 432,925 
Prepaid expenses and other current assets82,127 81,413 77,374 
Total current assets876,301 901,680 919,877 
Property, plant and equipment, net109,487 118,897 124,939 
Operating lease assets63,036 60,443 76,780 
Intangible assets, net15,325 15,991 16,629 
Goodwill212,654 213,392 211,781 
Other assets241,042 235,413 222,762 
TOTAL ASSETS$1,517,845 $1,545,816 $1,572,768 
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings$918 $1,114 $310 
Current portion of long-term debt8,750 25,000 6,250 
Accounts payable198,697 167,240 108,745 
Accrued liabilities187,240 192,952 180,324 
Operating lease liabilities, current26,034 27,329 35,144 
Total current liabilities421,639 413,635 330,773 
Operating lease liabilities, noncurrent41,325 39,806 46,526 
Other liabilities118,733 119,777 109,895 
Long-term debt782,262 887,957 1,130,463 
Commitments and contingencies
Total liabilities1,363,959 1,461,175 1,617,657 
Equity
Preferred Stock, no par value; shares authorized, 90,000,000; no shares outstanding at June 2021, December 2020 and June 2020
   
Common Stock, no par value; shares authorized, 600,000,000; shares outstanding of 57,631,974 at June 2021; 57,254,611 at December 2020 and 56,930,737 at June 2020
   
Additional paid-in capital198,776 172,297 158,660 
Retained earnings (accumulated deficit) 44,079 7,151 (72,251)
Accumulated other comprehensive loss(88,969)(94,807)(131,298)
Total equity (deficit)
153,886 84,641 (44,889)
TOTAL LIABILITIES AND EQUITY$1,517,845 $1,545,816 $1,572,768 

See accompanying notes to unaudited consolidated financial statements.

3 Kontoor Brands, Inc. Q2 FY21 Form 10-Q


KONTOOR BRANDS, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended JuneSix Months Ended June
(In thousands, except per share amounts)2021202020212020
Net revenues $490,765 $349,254 $1,142,527 $853,752 
Costs and operating expenses
Cost of goods sold264,641 214,888 615,823 528,622 
Selling, general and administrative expenses190,947 156,161 398,351 347,089 
Total costs and operating expenses455,588 371,049 1,014,174 875,711 
Operating income (loss)35,177 (21,795)128,353 (21,959)
Interest expense(7,641)(13,120)(19,432)(24,059)
Interest income421 556 679 972 
Other income (expense), net45 (509)(397)(959)
Income (loss) before income taxes28,002 (34,868)109,203 (46,005)
Income taxes4,365 (1,606)21,103 (10,031)
Net income (loss)$23,637 $(33,262)$88,100 $(35,974)
Earnings (loss) per common share
Basic$0.41 $(0.58)$1.53 $(0.63)
Diluted$0.40 $(0.58)$1.49 $(0.63)
Weighted average shares outstanding
Basic57,612 56,931 57,478 56,903 
Diluted59,356 56,931 59,129 56,903 

See accompanying notes to unaudited consolidated financial statements.



Kontoor Brands, Inc. Q2 FY21 Form 10-Q 4



KONTOOR BRANDS, INC.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 Three Months Ended JuneSix Months Ended June
(In thousands)2021202020212020
Net income (loss)$23,637 $(33,262)$88,100 $(35,974)
Other comprehensive income (loss)
Net change in foreign currency translation4,068 3,199 (3,014)(24,011)
Net change in defined benefit pension plans(11)(17)63 12 
Net change in derivative financial instruments3,671 (1,018)8,789 (27,601)
Total other comprehensive income (loss), net of related taxes7,728 2,164 5,838 (51,600)
Comprehensive income (loss)$31,365 $(31,098)$93,938 $(87,574)

See accompanying notes to unaudited consolidated financial statements.


5 Kontoor Brands, Inc. Q2 FY21 Form 10-Q


KONTOOR BRANDS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
 Six Months Ended June
(In thousands)20212020
OPERATING ACTIVITIES
Net income (loss)$88,100 $(35,974)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization17,749 15,219 
Stock-based compensation20,660 7,160 
Provision for doubtful accounts783 18,012 
Other5,788 (18,346)
Changes in operating assets and liabilities:
Accounts receivable14,315 50,319 
Inventories(63,006)20,510 
Accounts payable31,822 (37,988)
Income taxes3,075 (1,810)
Accrued liabilities4,791 (9,760)
Other assets and liabilities(3,912)(2,915)
Cash provided by operating activities120,165 4,427 
INVESTING ACTIVITIES
Property, plant and equipment expenditures(3,320)(11,895)
Capitalized computer software(16,993)(25,605)
Other(902)(1,673)
Cash used by investing activities(21,215)(39,173)
FINANCING ACTIVITIES
Borrowings under revolving credit facility
 512,500 
Repayments under revolving credit facility
 (287,500)
Payment of deferred financing costs (4,346)
Repayments of term loans(125,000) 
Dividends paid(46,016)(31,877)
Proceeds from issuance of Common Stock, net of shares withheld for taxes663 (1,854)
Other(176)(718)
Cash (used) provided by financing activities(170,529)186,205 
Effect of foreign currency rate changes on cash and cash equivalents(931)(1,991)
Net change in cash and cash equivalents (72,510)149,468 
Cash and cash equivalents – beginning of period248,138 106,808 
Cash and cash equivalents – end of period$175,628 $256,276 

See accompanying notes to unaudited consolidated financial statements.

Kontoor Brands, Inc. Q2 FY21 Form 10-Q 6



KONTOOR BRANDS, INC.
Consolidated Statements of Equity (Deficit)
(Unaudited)

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Equity
 (In thousands, except per share amounts)SharesAmounts
Balance, December 202057,255 $ $172,297 $7,151 $(94,807)$84,641 
Net income— — — 64,463 — 64,463 
Stock-based compensation, net259 — 14,472 (4,458)— 10,014 
Other comprehensive loss— — — — (1,890)(1,890)
Dividends on Common Stock ($0.40 per share)
— — — (22,964)— (22,964)
Balance, March 202157,514 $ $186,769 $44,192 $(96,697)$134,264 
Net income— — — 23,637 — 23,637 
Stock-based compensation, net118 — 12,007 (698)— 11,309 
Other comprehensive income— — — — 7,728 7,728 
Dividends on Common Stock ($0.40 per share)
— — — (23,052)— (23,052)
Balance, June 202157,632 $ $198,776 $44,079 $(88,969)$153,886 

Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Equity
(Deficit)
 (In thousands, except per share amounts)SharesAmounts
Balance, December 201956,812 $ $150,673 $(1,718)$(79,698)$69,257 
Net loss— — — (2,712)— (2,712)
Stock-based compensation, net119 — 3,293 (2,682)— 611 
Other comprehensive loss— — — — (53,764)(53,764)
Dividends on Common Stock ($0.56 per share)
— — — (31,877)— (31,877)
Balance, March 202056,931 $ $153,966 $(38,989)$(133,462)$(18,485)
Net loss— — — (33,262)— (33,262)
Stock-based compensation, net— — 4,694 — — 4,694 
Other comprehensive income— — — — 2,164 2,164 
Balance, June 202056,931 $ $158,660 $(72,251)$(131,298)$(44,889)

See accompanying notes to unaudited consolidated financial statements.

7 Kontoor Brands, Inc. Q2 FY21 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)

NOTE 1 — BASIS OF PRESENTATION
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."). We completed a spin-off transaction from VF Corporation ("VF" or "former parent") on May 22, 2019 (the "Separation") and began to trade as a standalone public company (NYSE: KTB) on May 23, 2019.
The Company designs, produces, procures, markets and distributes apparel and footwear, 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.
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 ending January 1, 2022 ("fiscal 2021"), which is a 52-week fiscal year. For presentation purposes herein, all references to periods ended June 2021, December 2020 and June 2020 correspond to the fiscal periods ended July 3, 2021, January 2, 2021 and June 27, 2020, respectively.
Impact of COVID-19
The novel coronavirus (“COVID-19”) pandemic continues to impact global economic conditions, as well as the Company's operations. 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 doubtful accounts, inventory valuations, liabilities for variable consideration, deferred tax valuation allowances, fair value measurements including asset impairment evaluations, the effectiveness of the Company’s hedging instruments, and expected compliance with all applicable financial covenants in our Credit Agreement (as defined in Note 6 to the Company's financial statements). These assumptions and estimates may change as new events occur and additional information is obtained regarding the impact of COVID-19. 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. Operating results for the three and six months ended June 2021 are not necessarily indicative of results that may be expected for any other interim period or for fiscal 2021. The unaudited financial statements should be read in conjunction with the audited consolidated and combined financial statements included in the Company's 2020 Annual Report on Form 10-K for the fiscal year ended January 2, 2021, as filed with the Securities and Exchange Commission ("SEC") on March 3, 2021 ("2020 Annual Report on Form 10-K").
Recently Adopted Accounting Standard
In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 and providing new guidance to reduce complexity in certain aspects of the current guidance. This guidance was adopted by the Company during the first quarter of 2021 and did not impact the Company’s financial statements or related disclosures.
Recently Issued Accounting Standard
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 was effective upon issuance and the Company may adopt the guidance and apply it prospectively to contract modifications made or relationships entered into or evaluated any time from the issuance date through December 31, 2022. The Company will continue to evaluate the impact that adoption of this guidance would have on its financial statements and related disclosures, which is not expected to be significant.



Kontoor Brands, Inc. Q2 FY21 Form 10-Q 8



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 — REVENUES
Performance Obligations
As of June 2021, there were no arrangements with any transaction price allocated to remaining performance obligations other than (i) contracts for which the Company has applied the practical expedients and (ii) fixed consideration related to future minimum guarantees. For the three and six months ended June 2021, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not significant.
Contract Balances
The following table presents information about contract balances recorded in the Company's balance sheets:
(In thousands)June 2021December 2020June 2020
Accounts receivable, net$215,297 $231,397 $153,302 
Contract assets (a)
4,694 5,769 3,113 
Contract liabilities (b)
674 787 1,688 
(a) Included within "prepaid expenses and other current assets" in the Company's balance sheets.
(b) Included within "accrued liabilities" in the Company's balance sheets.
For the three and six months ended June 2021, revenue recognized that was included in contract liabilities as of December 2020 was not significant. For the three and six months ended June 2020, revenue of $0.1 million and $1.2 million, respectively, was recognized that was included in contract liabilities as of December 2019.
As of June 2021, the Company has contractual rights under its licensing agreements to receive $27.0 million of fixed consideration related to the future minimum guarantees through December 2025. 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. Revenues from licensing arrangements have been included within the U.S. or Non-U.S. Wholesale channels, based on the respective region where the licensee sells the product. Direct-to-Consumer revenues include the distribution of our products via Wrangler® and Lee® branded full-price stores and Company-operated outlet stores globally, digital sales at www.wrangler.com and www.lee.com globally and concession retail locations internationally.
The Other channel primarily included sales of third-party branded merchandise at VF Outlet stores through the first quarter of 2021. During 2020, the Company decided to discontinue the sale of third-party branded merchandise in all VF Outlet stores, exit certain VF Outlet stores and convert all remaining locations to Lee Wrangler OutletTM and Lee Wrangler Clearance CenterTM retail stores. Sales of Wrangler® and Lee® branded products in our retail stores are not included in Other and are reported in the Direct-to-Consumer channel discussed above.
Three Months Ended June 2021
(In thousands)WranglerLeeOtherTotal
Channel revenues
U.S. Wholesale$245,200 $79,312 $2,434 $326,946 
Non-U.S. Wholesale41,071 55,690 805 97,566 
Direct-to-Consumer25,030 41,012 8 66,050 
Other  203 203 
Total$311,301 $176,014 $3,450 $490,765 
Geographic revenues
U.S.$266,146 $96,179 $2,645 $364,970 
International45,155 79,835 805 125,795 
Total$311,301 $176,014 $3,450 $490,765 


9 Kontoor Brands, Inc. Q2 FY21 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Three Months Ended June 2020
(In thousands)WranglerLeeOtherTotal
Channel revenues
U.S. Wholesale$217,183 $33,194 $2,503 $252,880 
Non-U.S. Wholesale17,251 27,005  44,256 
Direct-to-Consumer17,221 25,767 1 42,989 
Other  9,129 9,129 
Total$251,655 $85,966 $11,633 $349,254 
Geographic revenues
U.S.$232,566 $44,119 $11,633 $288,318 
International19,089 41,847  60,936 
Total$251,655 $85,966 $11,633 $349,254 
Six Months Ended June 2021
(In thousands)WranglerLeeOtherTotal
Channel revenues
U.S. Wholesale$574,899 $203,894 $4,160 $782,953 
Non-U.S. Wholesale88,648 146,490 1,442 236,580 
Direct-to-Consumer46,576 75,778 13 122,367 
Other  627 627 
Total$710,123 $426,162 $6,242 $1,142,527 
Geographic revenues
U.S.$614,025 $234,411 $4,800 $853,236 
International96,098 191,751 1,442 289,291 
Total$710,123 $426,162 $6,242 $1,142,527 
Six Months Ended June 2020
(In thousands)WranglerLeeOtherTotal
Channel revenues
U.S. Wholesale$453,465 $125,772 $6,564 $585,801 
Non-U.S. Wholesale64,188 86,858 304 151,350 
Direct-to-Consumer37,388 56,092 3 93,483 
Other  23,118 23,118 
Total$555,041 $268,722 $29,989 $853,752 
Geographic revenues
U.S.$485,150 $152,087 $29,685 $666,922 
International69,891 116,635 304 186,830 
Total$555,041 $268,722 $29,989 $853,752 



Kontoor Brands, Inc. Q2 FY21 Form 10-Q 10



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 3 — BUSINESS SEGMENT INFORMATION
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 primarily includes other revenue sources, including sales and licensing of Rock & Republic® apparel. Other also included sales of third-party branded merchandise at VF Outlet stores through the first quarter of 2021. During 2020, the Company decided to discontinue the sale of third-party branded merchandise in all VF Outlet stores, exit certain VF Outlet stores and convert all remaining locations to Lee Wrangler OutletTM and Lee Wrangler Clearance CenterTM retail stores. Sales of Wrangler® and Lee® branded products in our retail stores are not included in Other and are reported in the respective segments discussed above.
Accounting policies utilized for internal management reporting at the individual segments are consistent with those in Note 1 to the Company's financial statements included in the Company's 2020 Annual Report on Form 10-K, except as noted below.
The Company has allocated costs for certain centralized functions and programs to the Wrangler and Lee 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.
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.
The following table presents financial information for the Company's reportable segments and income (loss) before income taxes:
 Three Months Ended JuneSix Months Ended June
(In thousands)2021202020212020
Segment revenues:
Wrangler$311,301 $251,655 $710,123 $555,041 
Lee176,014 85,966 426,162 268,722 
Total reportable segment revenues487,315 337,621 1,136,285 823,763 
Other revenues 3,450 11,633 6,242 29,989 
Total net revenues$490,765 $349,254 $1,142,527 $853,752 
Segment profit:
Wrangler$52,834 $28,938 $136,817 $62,801 
Lee18,491 (18,417)69,614 (17,444)
Total reportable segment profit$71,325 $10,521 $206,431 $45,357 
Corporate and other expenses(36,983)(26,348)(78,534)(59,570)
Interest expense(7,641)(13,120)(19,432)(24,059)
Interest income421 556 679 972 
Profit (loss) related to other revenues880 (6,477)59 (8,705)
Income (loss) before income taxes$28,002 $(34,868)$109,203 $(46,005)


11 Kontoor Brands, Inc. Q2 FY21 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 4 — ACCOUNTS RECEIVABLE
Allowance for Doubtful Accounts
The Company reviews the estimates used to calculate the allowance for doubtful accounts on a quarterly basis.

The following table presents a rollforward of the allowance for doubtful accounts:
Six Months Ended June
(In thousands)20212020
Balance, December$19,143 $11,852 
Provision for expected credit losses783 18,012 
Accounts receivable balances written off (1)
(4,119)(7,502)
Other (2)
(325)(713)
Balance, June$15,482 $21,649 
(1) Accounts receivable balances written off against the allowance were primarily due to the bankruptcy of a major U.S. retail customer during the second quarter of 2020, write-offs related to our India business during 2021 as well as the impact of COVID-19 during the 2021 and 2020 periods.
(2) Other primarily includes the impact of foreign currency translation and recoveries of amounts previously written off, none of which were individually significant.
Sale of Trade Accounts Receivable
On April 1, 2019, the Company entered into an agreement with a financial institution to sell selected trade accounts receivable on a nonrecourse basis. Under this agreement, up to $377.5 million of the Company’s trade accounts receivable may be sold to the financial institution and remain outstanding at any point in time. The Company removes the sold balances from "accounts receivable, net" in its balance sheet at the time of sale. The Company does not retain any interests in the sold trade accounts receivable but continues to service and collect outstanding trade accounts receivable on behalf of the financial institution.
During the six months ended June 2021 and June 2020, the Company sold total trade accounts receivable of $586.8 million and $405.8 million, respectively. As of June 2021, December 2020 and June 2020, $183.0 million, $127.1 million and $144.5 million, respectively, of the sold trade accounts receivable had been removed from the Company's balance sheets but remained outstanding with the financial institution.
The funding fees charged by the financial institution for this program are reflected in the Company's statements of operations within "other expense, net" and were $0.3 million and $0.9 million for the three and six months ended June 2021, respectively, and $0.3 million and $1.1 million for the three and six months ended June 2020, respectively. Net proceeds of this program are reflected as operating activities in the Company's statements of cash flows.

NOTE 5 — INVENTORIES
The following table presents components of inventories recorded in the Company's balance sheets:
(In thousands)June 2021December 2020June 2020
Finished products$342,276 $277,164 $367,361 
Work-in-process29,551 29,921 21,416 
Raw materials31,422 33,647 44,148 
Total inventories$403,249 $340,732 $432,925 

NOTE 6 — SHORT-TERM BORROWINGS AND LONG-TERM DEBT
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.

Kontoor Brands, Inc. Q2 FY21 Form 10-Q 12



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
The Credit Agreement contains 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") and EBITDA to consolidated interest expense (the "Consolidated Interest Coverage Ratio"). As of June 2021, the applicable maximum Total Leverage Ratio was 4.00 to 1.00 and the applicable minimum Consolidated Interest Coverage Ratio was 3.00 to 1.00, both as measured over the most recent four consecutive fiscal quarters. In addition, beginning with the fiscal year ended December 2020, the Company is subject to additional mandatory repayments on Term Loan B if excess cash flow, as defined in the Credit Agreement, exceeds a specified threshold. As of June 2021, the Company was in compliance with all applicable financial covenants and expects to maintain compliance with the applicable financial covenants for at least one year from the issuance of these financial statements.
Short-term Borrowings
At June 2021, December 2020 and June 2020, the Company had $36.0 million, $35.9 million and $46.4 million, of borrowing availability under international lines of credit with various banks, which are uncommitted and may be terminated at any time by either the Company or the banks. Short-term borrowings outstanding under these arrangements were $