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

Annual report pursuant to Section 13 and 15(d)

REVENUES

REVENUES

12 Months Ended

Dec. 28, 2019

Revenue from Contract with Customer [Abstract]

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 December 2019, there were no arrangements with transaction price allocated to remaining performance obligations other than (i) contracts for which the Company has applied the practical expedients discussed above and (ii) fixed consideration related to future minimum guarantees.

For the year ended December 2019, revenue recognized from performance obligations satisfied, or partially satisfied, in prior periods was not material.

Contract Balances

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

Contract assets are rights to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time. Once the Company has an unconditional right to consideration under a contract, amounts are invoiced and contract assets are reclassified to "accounts receivable." The Company's primary contract assets relate to sales-based royalty arrangements.

Contract liabilities are recorded when a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional, before the transfer of a good or service to the customer, and thus represent the Company's obligation to transfer the good or service to the customer at a future date. The Company's primary contract liabilities relate to gift cards, loyalty programs and sales-based royalty arrangements.

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



(In thousands)	December 2019		December 2018
Accounts receivable, net	$	228,459	$	252,966
Contract assets ^(a)	10,679		2,841
Contract liabilities ^(b)	1,775		2,311


^(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.

The Company recognized revenue of $1.9 million in 2019 that was included in contract liabilities as of December 2018, and $1.7 million in 2018 that was included in contract liabilities as of December 2017. 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.

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. The Other channel also includes transactions with VF for pre-Separation activities, none of which will continue going forward. These transactions include 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.



	Year Ended December 2019


(In thousands)	Wrangler		Lee		Other		Total
Channel revenues
U.S. Wholesale	$	1,198,303	$	391,887	$	22,137	$	1,612,327
Non-U.S. Wholesale	213,905		314,882		1,585		530,372
Branded Direct-To-Consumer	105,904		175,507		27		281,438
Other	—		—		124,702		124,702
Total	$	1,518,112	$	882,276	$	148,451	$	2,548,839

Geographic revenues
U.S.	$	1,282,428	$	481,050	$	146,469	$	1,909,947
International	235,684		401,226		1,982		638,892
Total	$	1,518,112	$	882,276	$	148,451	$	2,548,839



	Year Ended December 2018

(In thousands)	Wrangler		Lee		Other		Total
Channel revenues
U.S. Wholesale	$	1,224,218	$	420,244	$	30,100	$	1,674,562
Non-U.S. Wholesale	263,675		357,471		—		621,146
Branded Direct-To-Consumer	114,313		182,528		—		296,841
Other	—		—		171,449		171,449
Total	$	1,602,206	$	960,243	$	201,549	$	2,763,998

Geographic revenues
U.S.	$	1,303,948	$	509,160	$	201,549	$	2,014,657
International	298,258		451,083		—		749,341
Total	$	1,602,206	$	960,243	$	201,549	$	2,763,998