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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 October 2, 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
KONTOOR BRANDS, INC.
(Exact name of registrant as specified in its charter)
| | | | | |
North Carolina | 83-2680248 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
400 N. Elm Street
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 class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock, no par value | KTB | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
| | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The number of shares of Common Stock of the registrant outstanding as of October 29, 2021 was 57,317,473.
KONTOOR BRANDS, INC.
Table of Contents
Kontoor Brands, Inc. Q3 FY21 Form 10-Q 2
PART I — FINANCIAL INFORMATION
| | | | | | | | |
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) |
KONTOOR BRANDS, INC.
Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | September 2021 | | | December 2020 | | September 2020 |
ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash and equivalents | | $ | 215,442 | | | | $ | 248,138 | | | $ | 285,251 | |
Accounts receivable, net | | 269,874 | | | | 231,397 | | | 221,971 | |
Inventories | | 409,110 | | | | 340,732 | | | 432,280 | |
Prepaid expenses and other current assets | | 93,922 | | | | 81,413 | | | 81,781 | |
Total current assets | | 988,348 | | | | 901,680 | | | 1,021,283 | |
Property, plant and equipment, net | | 106,959 | | | | 118,897 | | | 122,739 | |
Operating lease assets | | 56,555 | | | | 60,443 | | | 71,075 | |
Intangible assets, net | | 14,975 | | | | 15,991 | | | 16,458 | |
Goodwill | | 212,503 | | | | 213,392 | | | 212,637 | |
| | | | | | | |
Other assets | | 233,842 | | | | 235,413 | | | 224,532 | |
TOTAL ASSETS | | $ | 1,613,182 | | | | $ | 1,545,816 | | | $ | 1,668,724 | |
LIABILITIES AND EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Short-term borrowings | | $ | 254 | | | | $ | 1,114 | | | $ | 148 | |
Current portion of long-term debt | | 18,125 | | | | 25,000 | | | 15,625 | |
Accounts payable | | 244,681 | | | | 167,240 | | | 207,564 | |
Accrued liabilities | | 218,058 | | | | 192,952 | | | 206,521 | |
Operating lease liabilities, current | | 23,480 | | | | 27,329 | | | 33,065 | |
Total current liabilities | | 504,598 | | | | 413,635 | | | 462,923 | |
Operating lease liabilities, noncurrent | | 36,329 | | | | 39,806 | | | 43,023 | |
| | | | | | | |
Other liabilities | | 114,088 | | | | 119,777 | | | 115,040 | |
Long-term debt | | 773,413 | | | | 887,957 | | | 1,021,710 | |
Commitments and contingencies | | | | | | | |
Total liabilities | | 1,428,428 | | | | 1,461,175 | | | 1,642,696 | |
Equity | | | | | | | |
Preferred Stock, no par value; shares authorized, 90,000,000; no shares outstanding at September 2021, December 2020 and September 2020 | | — | | | | — | | | — | |
Common Stock, no par value; shares authorized, 600,000,000; shares outstanding of 57,550,958 at September 2021; 57,254,611 at December 2020 and 57,070,368 at September 2020 | | — | | | | — | | | — | |
Additional paid-in capital | | 207,963 | | | | 172,297 | | | 161,297 | |
Retained earnings (accumulated deficit) | | 70,926 | | | | 7,151 | | | (12,472) | |
Accumulated other comprehensive loss | | (94,135) | | | | (94,807) | | | (122,797) | |
Total equity | | 184,754 | | | | 84,641 | | | 26,028 | |
TOTAL LIABILITIES AND EQUITY | | $ | 1,613,182 | | | | $ | 1,545,816 | | | $ | 1,668,724 | |
See accompanying notes to unaudited consolidated financial statements.
3 Kontoor Brands, Inc. Q3 FY21 Form 10-Q
KONTOOR BRANDS, INC.
Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September | | Nine Months Ended September |
| | | | | | | | | | | |
(In thousands, except per share amounts) | | 2021 | | | 2020 | | | 2021 | | | 2020 |
Net revenues | | $ | 652,298 | | | | $ | 583,222 | | | | $ | 1,794,825 | | | | $ | 1,436,974 | |
Costs and operating expenses | | | | | | | | | | | |
Cost of goods sold | | 362,735 | | | | 325,512 | | | | 978,558 | | | | 854,134 | |
Selling, general and administrative expenses | | 203,583 | | | | 174,846 | | | | 601,934 | | | | 521,935 | |
| | | | | | | | | | | |
Total costs and operating expenses | | 566,318 | | | | 500,358 | | | | 1,580,492 | | | | 1,376,069 | |
Operating income | | 85,980 | | | | 82,864 | | | | 214,333 | | | | 60,905 | |
Interest expense | | (7,156) | | | | (13,249) | | | | (26,588) | | | | (37,308) | |
Interest income | | 345 | | | | 283 | | | | 1,024 | | | | 1,255 | |
Other expense, net | | (676) | | | | (751) | | | | (1,073) | | | | (1,710) | |
Income before income taxes | | 78,493 | | | | 69,147 | | | | 187,696 | | | | 23,142 | |
Income taxes | | 15,080 | | | | 8,362 | | | | 36,183 | | | | (1,669) | |
Net income | | $ | 63,413 | | | | $ | 60,785 | | | | $ | 151,513 | | | | $ | 24,811 | |
Earnings per common share | | | | | | | | | | | |
Basic | | $ | 1.10 | | | | $ | 1.07 | | | | $ | 2.63 | | | | $ | 0.44 | |
Diluted | | $ | 1.07 | | | | $ | 1.05 | | | | $ | 2.56 | | | | $ | 0.43 | |
Weighted average shares outstanding | | | | | | | | | | | |
Basic | | 57,648 | | | | 57,007 | | | | 57,535 | | | | 56,938 | |
Diluted | | 59,282 | | | | 57,642 | | | | 59,180 | | | | 57,669 | |
See accompanying notes to unaudited consolidated financial statements.
Kontoor Brands, Inc. Q3 FY21 Form 10-Q 4
KONTOOR BRANDS, INC.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September | | Nine Months Ended September |
| | | | | | | | | | | |
(In thousands) | | 2021 | | | 2020 | | | 2021 | | | 2020 |
Net income | | $ | 63,413 | | | | $ | 60,785 | | | | $ | 151,513 | | | | $ | 24,811 | |
Other comprehensive (loss) income | | | | | | | | | | | |
Net change in foreign currency translation | | (6,572) | | | | 7,072 | | | | (9,586) | | | | (16,939) | |
Net change in defined benefit pension plans | | 4 | | | | (67) | | | | 67 | | | | (55) | |
Net change in derivative financial instruments | | 1,402 | | | | 1,496 | | | | 10,191 | | | | (26,105) | |
Total other comprehensive (loss) income, net of related taxes | | (5,166) | | | | 8,501 | | | | 672 | | | | (43,099) | |
Comprehensive income (loss) | | $ | 58,247 | | | | $ | 69,286 | | | | $ | 152,185 | | | | $ | (18,288) | |
See accompanying notes to unaudited consolidated financial statements.
5 Kontoor Brands, Inc. Q3 FY21 Form 10-Q
KONTOOR BRANDS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | Nine Months Ended September |
| | | | | |
(In thousands) | | 2021 | | | 2020 |
OPERATING ACTIVITIES | | | | | |
Net income | | $ | 151,513 | | | | $ | 24,811 | |
Adjustments to reconcile net income to cash provided by operating activities: | | | | | |
Depreciation and amortization | | 26,675 | | | | 24,384 | |
Stock-based compensation | | 29,211 | | | | 9,738 | |
Provision for doubtful accounts | | (130) | | | | 19,642 | |
| | | | | |
Other | | 7,601 | | | | (17,337) | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | (41,369) | | | | (16,250) | |
Inventories | | (70,648) | | | | 23,777 | |
Accounts payable | | 78,381 | | | | 58,534 | |
Income taxes | | 9,506 | | | | 4,406 | |
Accrued liabilities | | 28,864 | | | | 3,330 | |
Other assets and liabilities | | (10,252) | | | | (5,352) | |
Cash provided by operating activities | | 209,352 | | | | 129,683 | |
INVESTING ACTIVITIES | | | | | |
Property, plant and equipment expenditures | | (6,642) | | | | (16,481) | |
Capitalized computer software | | (23,536) | | | | (30,038) | |
Proceeds from sales of assets | | 95 | | | | 13,068 | |
Other | | (1,873) | | | | (3,651) | |
Cash used by investing activities | | (31,956) | | | | (37,102) | |
FINANCING ACTIVITIES | | | | | |
Borrowings under revolving credit facility | | — | | | | 512,500 | |
Repayments under revolving credit facility | | — | | | | (387,500) | |
Payment of deferred financing costs | | — | | | | (4,346) | |
Repayments of term loans | | (125,000) | | | | — | |
Repurchases of Common Stock | | (10,006) | | | | — | |
Dividends paid | | (69,068) | | | | (31,877) | |
Proceeds from issuance of Common Stock, net of shares withheld for taxes | | (2,209) | | | | (2,800) | |
Other | | (562) | | | | (885) | |
Cash (used) provided by financing activities | | (206,845) | | | | 85,092 | |
Effect of foreign currency rate changes on cash and cash equivalents | | (3,247) | | | | 770 | |
Net change in cash and cash equivalents | | (32,696) | | | | 178,443 | |
Cash and cash equivalents – beginning of period | | 248,138 | | | | 106,808 | |
Cash and cash equivalents – end of period | | $ | 215,442 | | | | $ | 285,251 | |
See accompanying notes to unaudited consolidated financial statements.
Kontoor Brands, Inc. Q3 FY21 Form 10-Q 6
KONTOOR BRANDS, INC.
Consolidated Statements of Equity (Deficit)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Equity | |
(In thousands, except per share amounts) | | Shares | | Amounts | | | | | |
| | | | | | | | | | | | |
Balance, December 2020 | | 57,255 | | | $ | — | | | $ | 172,297 | | | $ | 7,151 | | | $ | (94,807) | | | $ | 84,641 | | |
Net income | | — | | | — | | | — | | | 64,463 | | | — | | | 64,463 | | |
Stock-based compensation, net | | 259 | | | — | | | 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 2021 | | 57,514 | | | $ | — | | | $ | 186,769 | | | $ | 44,192 | | | $ | (96,697) | | | $ | 134,264 | | |
Net income | | — | | | — | | | — | | | 23,637 | | | — | | | 23,637 | | |
Stock-based compensation, net | | 118 | | | — | | | 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 2021 | | 57,632 | | | $ | — | | | $ | 198,776 | | | $ | 44,079 | | | $ | (88,969) | | | $ | 153,886 | | |
Net income | | — | | | — | | | — | | | 63,413 | | | — | | | 63,413 | | |
Stock-based compensation, net | | 104 | | | — | | | 9,187 | | | (3,508) | | | — | | | 5,679 | | |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (5,166) | | | (5,166) | | |
Dividends on Common Stock ($0.40 per share) | | — | | | — | | | — | | | (23,052) | | | — | | | (23,052) | | |
Repurchases of Common Stock | | (185) | | | — | | | — | | | (10,006) | | | — | | | (10,006) | | |
Balance, September 2021 | | 57,551 | | | $ | — | | | $ | 207,963 | | | $ | 70,926 | | | $ | (94,135) | | | $ | 184,754 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Equity (Deficit) | | |
| | | | | | |
(In thousands, except per share amounts) | | Shares | | Amounts | | | | | |
| | | | | | | | | | | | | |
Balance, December 2019 | | 56,812 | | | $ | — | | | $ | 150,673 | | | $ | (1,718) | | | $ | (79,698) | | | $ | 69,257 | | | |
Net loss | | — | | | — | | | — | | | (2,712) | | | — | | | (2,712) | | | |
Stock-based compensation, net | | 119 | | | — | | | 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 2020 | | 56,931 | | | $ | — | | | $ | 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 2020 | | 56,931 | | | $ | — | | | $ | 158,660 | | | $ | (72,251) | | | $ | (131,298) | | | $ | (44,889) | | | |
Net income | | — | | | — | | | — | | | 60,785 | | | — | | | 60,785 | | | |
Stock-based compensation, net | | 139 | | | — | | | 2,637 | | | (1,006) | | | — | | | 1,631 | | | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 8,501 | | | 8,501 | | | |
Balance, September 2020 | | 57,070 | | | $ | — | | | $ | 161,297 | | | $ | (12,472) | | | $ | (122,797) | | | $ | 26,028 | | | |
See accompanying notes to unaudited consolidated financial statements.
7 Kontoor Brands, Inc. Q3 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 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 third 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 September 2021, December 2020 and September 2020 correspond to the fiscal periods ended October 2, 2021, January 2, 2021 and September 26, 2020, respectively.
Impact of COVID-19 and Other Recent Developments
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 nine months ended September 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. Q3 FY21 Form 10-Q 8
KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 2 — REVENUES
Performance Obligations
As of September 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 nine months ended September 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) | | September 2021 | | | December 2020 | | September 2020 |
Accounts receivable, net | | $ | 269,874 | | | | $ | 231,397 | | | $ | 221,971 | |
Contract assets (a) | | 3,702 | | | | 5,769 | | | 4,385 | |
Contract liabilities (b) | | 2,118 | | | | 787 | | | 1,229 | |
(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 nine months ended September 2021, revenue recognized that was included in contract liabilities as of December 2020 was not significant. For the three and nine months ended September 2020, revenue of $0.2 million and $1.4 million, respectively, was recognized that was included in contract liabilities as of December 2019.
As of September 2021, the Company has contractual rights under its licensing agreements to receive $26.4 million of fixed consideration related to the future minimum guarantees through December 2026. 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 September 2021 | |
| | | | | | | | |
(In thousands) | Wrangler | | Lee | | Other | | Total | |
| | | | | | | |
Channel revenues | | | | | | | | |
U.S. Wholesale | $ | 344,277 | | | $ | 105,779 | | | $ | 2,226 | | | $ | 452,282 | | |
Non-U.S. Wholesale | 48,558 | | | 86,494 | | | 446 | | | 135,498 | | |
Direct-to-Consumer | 28,673 | | | 35,700 | | | 6 | | | 64,379 | | |
Other | — | | | — | | | 139 | | | 139 | | |
Total | $ | 421,508 | | | $ | 227,973 | | | $ | 2,817 | | | $ | 652,298 | | |
| | | | | | | | |
Geographic revenues | | | | | | | | |
U.S. | $ | 368,507 | | | $ | 121,951 | | | $ | 2,371 | | | $ | 492,829 | | |
International | 53,001 | | | 106,022 | | | 446 | | | 159,469 | | |
Total | $ | 421,508 | | | $ | 227,973 | | | $ | 2,817 | | | $ | 652,298 | | |
9 Kontoor Brands, Inc. Q3 FY21 Form 10-Q
KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 2020 | |
| | | | | | | | |
(In thousands) | Wrangler | | Lee | | Other | | Total | |
Channel revenues | | | | | | | | |
U.S. Wholesale | $ | 285,639 | | | $ | 105,757 | | | $ | 2,259 | | | $ | 393,655 | | |
Non-U.S. Wholesale | 35,724 | | | 70,555 | | | 1,124 | | | 107,403 | | |
Direct-to-Consumer | 25,266 | | | 38,128 | | | 8 | | | 63,402 | | |
Other | — | | | — | | | 18,762 | | | 18,762 | | |
Total | $ | 346,629 | | | $ | 214,440 | | | $ | 22,153 | | | $ | 583,222 | | |
| | | | | | | | |
Geographic revenues | | | | | | | | |
U.S. | $ | 307,512 | | | $ | 126,912 | | | $ | 21,029 | | | $ | 455,453 | | |
International | 39,117 | | | 87,528 | | | 1,124 | | | 127,769 | | |
Total | $ | 346,629 | | | $ | 214,440 | | | $ | 22,153 | | | $ | 583,222 | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 2021 | |
| | | | | | | | |
(In thousands) | Wrangler | | Lee | | Other | | Total | |
| | | | | | | |
Channel revenues | | | | | | | | |
U.S. Wholesale | $ | 919,176 | | | $ | 309,673 | | | $ | 6,386 | | | $ | 1,235,235 | | |
Non-U.S. Wholesale | 137,206 | | | 232,984 | | | 1,888 | | | 372,078 | | |
Direct-to-Consumer | 75,249 | | | 111,478 | | | 19 | | | 186,746 | | |
Other | — | | | — | | | 766 | | | 766 | | |
Total | $ | 1,131,631 | | | $ | 654,135 | | | $ | 9,059 | | | $ | 1,794,825 | | |
| | | | | | | | |
Geographic revenues | | | | | | | | |
U.S. | $ | 982,532 | | | $ | 356,362 | | | $ | 7,171 | | | $ | 1,346,065 | | |
International | 149,099 | | | 297,773 | | | 1,888 | | | 448,760 | | |
Total | $ | 1,131,631 | | | $ | 654,135 | | | $ | 9,059 | | | $ | 1,794,825 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 2020 | |
| | | | | | | | |
(In thousands) | Wrangler | | Lee | | Other | | Total | |
Channel revenues | | | | | | | | |
U.S. Wholesale | $ | 739,104 | | | $ | 231,529 | | | $ | 8,823 | | | $ | 979,456 | | |
Non-U.S. Wholesale | 99,912 | | | 157,413 | | | 1,428 | | | 258,753 | | |
Direct-to-Consumer | 62,654 | | | 94,220 | | | 11 | | | 156,885 | | |
Other | — | | | — | | | 41,880 | | | 41,880 | | |
Total | $ | 901,670 | | | $ | 483,162 | | | $ | 52,142 | | | $ | 1,436,974 | | |
| | | | | | | | |
Geographic revenues | | | | | | | | |
U.S. | $ | 792,662 | | | $ | 278,999 | | | $ | 50,714 | | | $ | 1,122,375 | | |
International | 109,008 | | | 204,163 | | | 1,428 | | | 314,599 | | |
Total | $ | 901,670 | | | $ | 483,162 | | | $ | 52,142 | | | $ | 1,436,974 | | |
Kontoor Brands, Inc. Q3 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 before income taxes:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September | | Nine Months Ended September |
| | | | | | | | | | | |
(In thousands) | | 2021 | | | 2020 | | | 2021 | | | 2020 |
Segment revenues: | | | | | | | | | | | |
Wrangler | | $ | 421,508 | | | | $ | 346,629 | | | | $ | 1,131,631 | | | | $ | 901,670 | |
Lee | | 227,973 | | | | 214,440 | | | | 654,135 | | | | 483,162 | |
Total reportable segment revenues | | 649,481 | | | | 561,069 | | | | 1,785,766 | | | | 1,384,832 | |
Other revenues | | 2,817 | | | | 22,153 | | | | 9,059 | | | | 52,142 | |
Total net revenues | | $ | 652,298 | | | | $ | 583,222 | | | | $ | 1,794,825 | | | | $ | 1,436,974 | |
Segment profit: | | | | | | | | | | | |
Wrangler | | $ | 77,184 | | | | $ | 76,908 | | | | $ | 214,001 | | | | $ | 139,709 | |
Lee | | 42,969 | | | | 40,968 | | | | 112,583 | | | | 23,524 | |
Total reportable segment profit | | $ | 120,153 | | | | $ | 117,876 | | | | $ | 326,584 | | | | $ | 163,233 | |
Corporate and other expenses | | (35,051) | | | | (31,347) | | | | (113,585) | | | | (90,917) | |
Interest expense | | (7,156) | | | | (13,249) | | | | (26,588) | | | | (37,308) | |
Interest income | | 345 | | | | 283 | | | | 1,024 | | | | 1,255 | |
Profit (loss) related to other revenues | | 202 | | | | (4,416) | | | | 261 | | | | (13,121) | |
Income before income taxes | | $ | 78,493 | | | | $ | 69,147 | | | | $ | |