10-Q 1 ktb-20240330.htm 10-Q ktb-20240330
false2024Q1000176096512/3100017609652023-12-312024-03-3000017609652024-04-26xbrli:shares00017609652024-03-30iso4217:USD00017609652023-12-3000017609652023-04-01iso4217:USDxbrli:shares00017609652023-01-012023-04-0100017609652022-12-310001760965us-gaap:CommonStockMember2023-12-300001760965us-gaap:AdditionalPaidInCapitalMember2023-12-300001760965us-gaap:RetainedEarningsMember2023-12-300001760965us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-300001760965us-gaap:RetainedEarningsMember2023-12-312024-03-300001760965us-gaap:CommonStockMember2023-12-312024-03-300001760965us-gaap:AdditionalPaidInCapitalMember2023-12-312024-03-300001760965us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-312024-03-300001760965us-gaap:CommonStockMember2024-03-300001760965us-gaap:AdditionalPaidInCapitalMember2024-03-300001760965us-gaap:RetainedEarningsMember2024-03-300001760965us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-300001760965us-gaap:CommonStockMember2022-12-310001760965us-gaap:AdditionalPaidInCapitalMember2022-12-310001760965us-gaap:RetainedEarningsMember2022-12-310001760965us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001760965us-gaap:RetainedEarningsMember2023-01-012023-04-010001760965us-gaap:CommonStockMember2023-01-012023-04-010001760965us-gaap:AdditionalPaidInCapitalMember2023-01-012023-04-010001760965us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-04-010001760965us-gaap:CommonStockMember2023-04-010001760965us-gaap:AdditionalPaidInCapitalMember2023-04-010001760965us-gaap:RetainedEarningsMember2023-04-010001760965us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-010001760965us-gaap:SalesChannelThroughIntermediaryMembercountry:USus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-12-312024-03-300001760965ktb:LeeSegmentMemberus-gaap:SalesChannelThroughIntermediaryMembercountry:USus-gaap:OperatingSegmentsMember2023-12-312024-03-300001760965us-gaap:SalesChannelThroughIntermediaryMembercountry:USus-gaap:MaterialReconcilingItemsMember2023-12-312024-03-300001760965us-gaap:SalesChannelThroughIntermediaryMembercountry:US2023-12-312024-03-300001760965us-gaap:SalesChannelThroughIntermediaryMemberus-gaap:NonUsMemberus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-12-312024-03-300001760965ktb:LeeSegmentMemberus-gaap:SalesChannelThroughIntermediaryMemberus-gaap:NonUsMemberus-gaap:OperatingSegmentsMember2023-12-312024-03-300001760965us-gaap:SalesChannelThroughIntermediaryMemberus-gaap:MaterialReconcilingItemsMemberus-gaap:NonUsMember2023-12-312024-03-300001760965us-gaap:SalesChannelThroughIntermediaryMemberus-gaap:NonUsMember2023-12-312024-03-300001760965us-gaap:SalesChannelDirectlyToConsumerMemberus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-12-312024-03-300001760965ktb:LeeSegmentMemberus-gaap:SalesChannelDirectlyToConsumerMemberus-gaap:OperatingSegmentsMember2023-12-312024-03-300001760965us-gaap:MaterialReconcilingItemsMemberus-gaap:SalesChannelDirectlyToConsumerMember2023-12-312024-03-300001760965us-gaap:SalesChannelDirectlyToConsumerMember2023-12-312024-03-300001760965us-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-12-312024-03-300001760965ktb:LeeSegmentMemberus-gaap:OperatingSegmentsMember2023-12-312024-03-300001760965us-gaap:MaterialReconcilingItemsMember2023-12-312024-03-300001760965country:USus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-12-312024-03-300001760965ktb:LeeSegmentMembercountry:USus-gaap:OperatingSegmentsMember2023-12-312024-03-300001760965country:USus-gaap:MaterialReconcilingItemsMember2023-12-312024-03-300001760965country:US2023-12-312024-03-300001760965us-gaap:NonUsMemberus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-12-312024-03-300001760965ktb:LeeSegmentMemberus-gaap:NonUsMemberus-gaap:OperatingSegmentsMember2023-12-312024-03-300001760965us-gaap:MaterialReconcilingItemsMemberus-gaap:NonUsMember2023-12-312024-03-300001760965us-gaap:NonUsMember2023-12-312024-03-300001760965us-gaap:SalesChannelThroughIntermediaryMembercountry:USus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-01-012023-04-010001760965ktb:LeeSegmentMemberus-gaap:SalesChannelThroughIntermediaryMembercountry:USus-gaap:OperatingSegmentsMember2023-01-012023-04-010001760965us-gaap:SalesChannelThroughIntermediaryMembercountry:USus-gaap:MaterialReconcilingItemsMember2023-01-012023-04-010001760965us-gaap:SalesChannelThroughIntermediaryMembercountry:US2023-01-012023-04-010001760965us-gaap:SalesChannelThroughIntermediaryMemberus-gaap:NonUsMemberus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-01-012023-04-010001760965ktb:LeeSegmentMemberus-gaap:SalesChannelThroughIntermediaryMemberus-gaap:NonUsMemberus-gaap:OperatingSegmentsMember2023-01-012023-04-010001760965us-gaap:SalesChannelThroughIntermediaryMemberus-gaap:MaterialReconcilingItemsMemberus-gaap:NonUsMember2023-01-012023-04-010001760965us-gaap:SalesChannelThroughIntermediaryMemberus-gaap:NonUsMember2023-01-012023-04-010001760965us-gaap:SalesChannelDirectlyToConsumerMemberus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-01-012023-04-010001760965ktb:LeeSegmentMemberus-gaap:SalesChannelDirectlyToConsumerMemberus-gaap:OperatingSegmentsMember2023-01-012023-04-010001760965us-gaap:MaterialReconcilingItemsMemberus-gaap:SalesChannelDirectlyToConsumerMember2023-01-012023-04-010001760965us-gaap:SalesChannelDirectlyToConsumerMember2023-01-012023-04-010001760965us-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-01-012023-04-010001760965ktb:LeeSegmentMemberus-gaap:OperatingSegmentsMember2023-01-012023-04-010001760965us-gaap:MaterialReconcilingItemsMember2023-01-012023-04-010001760965country:USus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-01-012023-04-010001760965ktb:LeeSegmentMembercountry:USus-gaap:OperatingSegmentsMember2023-01-012023-04-010001760965country:USus-gaap:MaterialReconcilingItemsMember2023-01-012023-04-010001760965country:US2023-01-012023-04-010001760965us-gaap:NonUsMemberus-gaap:OperatingSegmentsMemberktb:WranglerSegmentMember2023-01-012023-04-010001760965ktb:LeeSegmentMemberus-gaap:NonUsMemberus-gaap:OperatingSegmentsMember2023-01-012023-04-010001760965us-gaap:MaterialReconcilingItemsMemberus-gaap:NonUsMember2023-01-012023-04-010001760965us-gaap:NonUsMember2023-01-012023-04-01ktb:segment0001760965us-gaap:OperatingSegmentsMember2023-12-312024-03-300001760965us-gaap:OperatingSegmentsMember2023-01-012023-04-010001760965us-gaap:CorporateNonSegmentMember2023-12-312024-03-300001760965us-gaap:CorporateNonSegmentMember2023-01-012023-04-010001760965us-gaap:ForeignLineOfCreditMember2024-03-300001760965us-gaap:ForeignLineOfCreditMember2023-12-300001760965us-gaap:ForeignLineOfCreditMember2023-04-010001760965us-gaap:RevolvingCreditFacilityMember2024-03-300001760965us-gaap:RevolvingCreditFacilityMember2023-12-300001760965us-gaap:RevolvingCreditFacilityMember2023-04-010001760965ktb:TermLoanMemberktb:TermLoanAFacilityMember2024-03-300001760965ktb:TermLoanMemberktb:TermLoanAFacilityMember2023-12-300001760965ktb:TermLoanMemberktb:TermLoanAFacilityMember2023-04-010001760965ktb:A4125SeniorNotesDue2029Memberus-gaap:SeniorNotesMember2021-11-18xbrli:pure0001760965ktb:A4125SeniorNotesDue2029Memberus-gaap:SeniorNotesMember2024-03-300001760965ktb:A4125SeniorNotesDue2029Memberus-gaap:SeniorNotesMember2023-12-300001760965ktb:A4125SeniorNotesDue2029Memberus-gaap:SeniorNotesMember2023-04-010001760965ktb:TermLoanMemberktb:TermLoanAFacilityMember2021-11-182021-11-180001760965ktb:TermLoanMemberktb:TermLoanAFacilityMember2021-11-180001760965us-gaap:RevolvingCreditFacilityMember2021-11-182021-11-180001760965us-gaap:RevolvingCreditFacilityMember2021-11-180001760965ktb:TermLoanMemberktb:TermLoanAFacilityMember2023-12-312024-03-300001760965us-gaap:LetterOfCreditMember2024-03-300001760965srt:MaximumMember2023-12-312024-03-30ktb:election0001760965srt:MinimumMember2023-12-312024-03-300001760965us-gaap:FairValueInputsLevel1Member2024-03-300001760965us-gaap:FairValueInputsLevel2Member2024-03-300001760965us-gaap:FairValueInputsLevel3Member2024-03-300001760965us-gaap:ForeignExchangeContractMember2024-03-300001760965us-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeContractMember2024-03-300001760965us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMember2024-03-300001760965us-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel3Member2024-03-300001760965us-gaap:InterestRateSwapMember2024-03-300001760965us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwapMember2024-03-300001760965us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2024-03-300001760965us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel3Member2024-03-300001760965us-gaap:FairValueInputsLevel1Member2023-12-300001760965us-gaap:FairValueInputsLevel2Member2023-12-300001760965us-gaap:FairValueInputsLevel3Member2023-12-300001760965us-gaap:ForeignExchangeContractMember2023-12-300001760965us-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeContractMember2023-12-300001760965us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMember2023-12-300001760965us-gaap:ForeignExchangeContractMemberus-gaap:FairValueInputsLevel3Member2023-12-300001760965us-gaap:InterestRateSwapMember2023-12-300001760965us-gaap:FairValueInputsLevel1Memberus-gaap:InterestRateSwapMember2023-12-300001760965us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2023-12-300001760965us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel3Member2023-12-300001760965us-gaap:ForeignExchangeContractMember2023-04-010001760965us-gaap:ForeignExchangeContractMember2023-12-312024-03-300001760965us-gaap:InterestRateSwapMember2023-04-010001760965us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-03-300001760965us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-12-300001760965us-gaap:ForeignExchangeContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-04-010001760965us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2024-03-300001760965us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-12-300001760965us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2023-04-010001760965us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2024-03-300001760965us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2023-12-300001760965us-gaap:NondesignatedMemberus-gaap:ForeignExchangeContractMember2023-04-010001760965us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2024-03-300001760965us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2023-12-300001760965us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2023-04-010001760965us-gaap:AccruedLiabilitiesMember2024-03-300001760965us-gaap:AccruedLiabilitiesMember2023-12-300001760965us-gaap:AccruedLiabilitiesMember2023-04-010001760965us-gaap:OtherAssetsMember2024-03-300001760965us-gaap:OtherAssetsMember2023-12-300001760965us-gaap:OtherAssetsMember2023-04-010001760965us-gaap:OtherLiabilitiesMember2024-03-300001760965us-gaap:OtherLiabilitiesMember2023-12-300001760965us-gaap:OtherLiabilitiesMember2023-04-010001760965us-gaap:ForeignExchangeContractMember2023-01-012023-04-010001760965us-gaap:InterestRateSwapMember2023-12-312024-03-300001760965us-gaap:InterestRateSwapMember2023-01-012023-04-010001760965us-gaap:SalesMember2023-12-312024-03-300001760965us-gaap:SalesMember2023-01-012023-04-010001760965us-gaap:CostOfSalesMember2023-12-312024-03-300001760965us-gaap:CostOfSalesMember2023-01-012023-04-010001760965us-gaap:OtherNonoperatingIncomeExpenseMember2023-12-312024-03-300001760965us-gaap:OtherNonoperatingIncomeExpenseMember2023-01-012023-04-010001760965us-gaap:InterestExpenseMember2023-12-312024-03-300001760965us-gaap:InterestExpenseMember2023-01-012023-04-010001760965us-gaap:AccumulatedTranslationAdjustmentMember2024-03-300001760965us-gaap:AccumulatedTranslationAdjustmentMember2023-12-300001760965us-gaap:AccumulatedTranslationAdjustmentMember2023-04-010001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2024-03-300001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-12-300001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-04-010001760965us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2024-03-300001760965us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-12-300001760965us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-04-010001760965us-gaap:AccumulatedTranslationAdjustmentMember2023-12-312024-03-300001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-12-312024-03-300001760965us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-12-312024-03-300001760965us-gaap:AccumulatedTranslationAdjustmentMember2022-12-310001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2022-12-310001760965us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2022-12-310001760965us-gaap:AccumulatedTranslationAdjustmentMember2023-01-012023-04-010001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2023-01-012023-04-010001760965us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-01-012023-04-010001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-12-312024-03-300001760965us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-01-012023-04-010001760965us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ForeignExchangeContractMember2023-12-312024-03-300001760965us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:ForeignExchangeContractMember2023-01-012023-04-010001760965us-gaap:InterestRateContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-12-312024-03-300001760965us-gaap:InterestRateContractMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-01-012023-04-010001760965us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-12-312024-03-300001760965us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2023-01-012023-04-010001760965us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-12-312024-03-300001760965us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2023-01-012023-04-010001760965ktb:PerformanceBasedRestrictedStockUnitsMember2023-12-312024-03-300001760965ktb:PerformanceBasedRestrictedStockUnitsMember2023-01-012023-04-010001760965us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-12-312024-03-300001760965ktb:CorporateAndReconcilingItemsMember2023-12-312024-03-300001760965ktb:CorporateAndReconcilingItemsMember2023-01-012023-04-010001760965us-gaap:ShareBasedPaymentArrangementEmployeeMemberktb:PerformanceBasedRestrictedStockUnitsMemberus-gaap:SubsequentEventMember2024-04-012024-04-010001760965us-gaap:ShareBasedPaymentArrangementEmployeeMemberus-gaap:RestrictedStockUnitsRSUMemberus-gaap:SubsequentEventMember2024-04-012024-04-010001760965us-gaap:RestrictedStockUnitsRSUMemberus-gaap:SubsequentEventMembersrt:DirectorMemberus-gaap:ShareBasedPaymentArrangementNonemployeeMember2024-04-012024-04-010001760965us-gaap:DividendDeclaredMemberus-gaap:SubsequentEventMember2024-04-18

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 March 30, 2024
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
kontoorlogotmpurplea16.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 April 26, 2024 was 55,829,679.



KONTOOR BRANDS, INC.
Table of Contents
 Page

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 2



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

KONTOOR BRANDS, INC.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)March 2024December 2023March 2023
ASSETS
Current assets
Cash and cash equivalents$215,059 $215,050 $52,677 
Accounts receivable, net 239,632 217,673 224,024 
Inventories501,341 500,353 660,089 
Prepaid expenses and other current assets104,208 110,808 102,757 
Total current assets1,060,240 1,043,884 1,039,547 
Property, plant and equipment, net110,304 112,045 104,999 
Operating lease assets56,268 54,812 55,116 
Intangible assets, net12,135 12,497 13,173 
Goodwill209,566 209,862 209,904 
Other assets212,924 212,339 220,831 
TOTAL ASSETS$1,661,437 $1,645,439 $1,643,570 
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings$ $ $7,255 
Current portion of long-term debt20,000 20,000 12,500 
Accounts payable187,200 180,220 163,871 
Accrued and other current liabilities163,251 171,414 197,203 
Operating lease liabilities, current22,187 21,003 21,241 
Total current liabilities392,638 392,637 402,070 
Operating lease liabilities, noncurrent37,016 36,753 32,472 
Other liabilities85,344 80,215 81,796 
Long-term debt759,246 763,921 827,944 
Total liabilities1,274,244 1,273,526 1,344,282 
Commitments and contingencies
Equity
Preferred Stock, no par value; shares authorized, 90,000,000; no shares outstanding at March 2024, December 2023 and March 2023
   
Common Stock, no par value; shares authorized, 600,000,000; shares outstanding of 55,691,516 at March 2024; 55,720,251 at December 2023 and 55,933,661 at March 2023
   
Additional paid-in capital284,301 273,197 251,108 
Retained earnings171,124 166,567 116,185 
Accumulated other comprehensive loss(68,232)(67,851)(68,005)
Total equity
387,193 371,913 299,288 
TOTAL LIABILITIES AND EQUITY$1,661,437 $1,645,439 $1,643,570 
See accompanying notes to unaudited consolidated financial statements.

3 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended March
(In thousands, except per share amounts)20242023
Net revenues $631,202 $667,123 
Costs and operating expenses
Cost of goods sold346,058 380,422 
Selling, general and administrative expenses200,714 191,752 
Total costs and operating expenses546,772 572,174 
Operating income84,430 94,949 
Interest expense(9,292)(10,273)
Interest income2,425 419 
Other expense, net(2,883)(2,226)
Income before income taxes74,680 82,869 
Income taxes15,173 16,573 
Net income$59,507 $66,296 
Earnings per common share
Basic$1.07 $1.19 
Diluted$1.05 $1.16 
Weighted average shares outstanding
Basic55,735 55,646 
Diluted56,739 56,940 
See accompanying notes to unaudited consolidated financial statements.



Kontoor Brands, Inc. Q1 FY24 Form 10-Q 4



KONTOOR BRANDS, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months Ended March
(In thousands)20242023
Net income$59,507 $66,296 
Other comprehensive (loss) income
Net change in foreign currency translation(2,523)8,323 
Net change in defined benefit pension plans(82)(35)
Net change in derivative financial instruments2,224 3,372 
Total other comprehensive (loss) income, net of related taxes(381)11,660 
Comprehensive income$59,126 $77,956 
See accompanying notes to unaudited consolidated financial statements.

5 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended March
(In thousands)20242023
OPERATING ACTIVITIES
Net income$59,507 $66,296 
Adjustments to reconcile net income to cash provided (used) by operating activities:
Depreciation and amortization9,505 9,127 
Stock-based compensation5,768 1,002 
Provision for doubtful accounts1,008 1,877 
Other1,614 2,642 
Changes in operating assets and liabilities:
Accounts receivable(24,620)2,851 
Inventories(1,441)(59,903)
Accounts payable7,807 (42,965)
Income taxes11,089 12,237 
Accrued and other current liabilities(11,869)(11,259)
Other assets and liabilities(1,900)5,473 
Cash provided (used) by operating activities56,468 (12,622)
INVESTING ACTIVITIES
Property, plant and equipment expenditures(4,491)(6,463)
Capitalized computer software(1,154)(5,483)
Other(787)149 
Cash used by investing activities(6,432)(11,797)
FINANCING ACTIVITIES
Borrowings under revolving credit facility
 178,000 
Repayments under revolving credit facility
 (128,000)
Repayments of term loan(5,000)(2,500)
Repurchases of Common Stock(20,105) 
Dividends paid(27,844)(26,808)
Shares withheld for taxes, net of proceeds from issuance of Common Stock(1,665)(3,619)
Other (57)
Cash (used) provided by financing activities(54,614)17,016 
Effect of foreign currency rate changes on cash and cash equivalents4,587 901 
Net change in cash and cash equivalents 9 (6,502)
Cash and cash equivalents – beginning of period215,050 59,179 
Cash and cash equivalents – end of period$215,059 $52,677 
See accompanying notes to unaudited consolidated financial statements.

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 6



KONTOOR BRANDS, INC.
Consolidated Statements of Equity
(Unaudited)
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Equity
 (In thousands, except per share amounts)SharesAmounts
Balance, December 202355,720 $ $273,197 $166,567 $(67,851)$371,913 
Net income— — — 59,507 — 59,507 
Stock-based compensation, net309 — 11,209 (7,106)— 4,103 
Other comprehensive loss— — — — (381)(381)
Dividends on Common Stock ($0.50 per share)
— — — (27,844)— (27,844)
Repurchases of Common Stock(337)— (105)(20,000)— (20,105)
Balance, March 202455,692 $ $284,301 $171,124 $(68,232)$387,193 
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Equity
 (In thousands, except per share amounts)SharesAmounts
Balance, December 202255,517 $ $243,696 $86,726 $(79,665)$250,757 
Net income— — — 66,296 — 66,296 
Stock-based compensation, net417 — 7,412 (10,029)— (2,617)
Other comprehensive income— — — — 11,660 11,660 
Dividends on Common Stock ($0.48 per share)
— — — (26,808)— (26,808)
Balance, March 202355,934 $ $251,108 $116,185 $(68,005)$299,288 
See accompanying notes to unaudited consolidated financial statements.

7 Kontoor Brands, Inc. Q1 FY24 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."). The Company designs, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the brand names Wrangler® and Lee®. The Company's products are sold in the U.S. through mass merchants, specialty stores, department stores, company-operated stores and online, including digital marketplaces. The Company's products are also sold internationally, primarily in the Europe, Asia-Pacific and Non-U.S. Americas regions, through department, specialty, company-operated, concession retail and independently-operated partnership stores and online, including digital marketplaces.
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 December 28, 2024 ("fiscal 2024"), which is a 52-week fiscal year. For presentation purposes herein, all references to periods ended March 2024, December 2023 and March 2023 correspond to the fiscal periods ended March 30, 2024, December 30, 2023 and April 1, 2023, respectively.
Macroeconomic Environment and Other Recent Developments
Macroeconomic conditions impacting the Company include inflation, elevated interest rates, recessionary concerns and fluctuating foreign currency exchange rates, as well as continuing global supply chain issues and inconsistent economic results in China. These factors continue to contribute to uncertain global economic conditions and consumer spending patterns, which are impacting retailers' and the Company's operations. Additionally, the conflicts in Ukraine and the Middle East are causing disruption in the surrounding areas and greater uncertainty in the global economy. The Company considered the impact of these developments 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 7 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 the above conditions. 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 months ended March 2024 are not necessarily indicative of results that may be expected for any other interim period or for fiscal 2024. The unaudited financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's 2023 Annual Report on Form 10-K for the fiscal year ended December 30, 2023, as filed with the Securities and Exchange Commission on February 28, 2024 ("2023 Annual Report on Form 10-K").
Recently Adopted Accounting Standards
In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-04, "Disclosure of Supplier Finance Program Obligations," which requires entities that provide supplier finance programs in connection with the purchase of goods and services to disclose key terms of the programs, outstanding confirmed amounts as of period end, a description of where those obligations are presented in the balance sheets and an annual rollforward of obligations. This guidance was adopted by the Company during the first quarter of 2023, except for the requirement to include an annual rollforward of obligations which is effective beginning in 2024 and will be disclosed in our 2024 annual report on Form 10-K. Refer to Note 6 to the Company's financial statements for additional information related to our supply chain finance programs.
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which requires enhanced disclosures about significant segment expenses. This guidance is effective for annual disclosures in fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. This guidance requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact that adoption of this guidance will have on its financial statements and disclosures.

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 8



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which requires disclosure of specific categories and greater disaggregation within the income tax rate reconciliation, and disclosure of disaggregated income taxes paid. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its financial statements and disclosures.

NOTE 2 — REVENUES
Disaggregation of Revenue
The following tables present revenues disaggregated by channel and geography. Revenues from licensing arrangements are 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 sales from company-operated Wrangler® and Lee® branded full-price and outlet stores, online and international concession arrangements.
Other includes sales and licensing of Rock & Republic®, other company-owned brands and private label apparel.
Three Months Ended March 2024
(In thousands)WranglerLeeOtherTotal
Channel revenues
U.S. Wholesale$328,725 $119,147 $2,092 $449,964 
Non-U.S. Wholesale44,438 63,618  108,056 
Direct-to-Consumer36,331 36,678 173 73,182 
Total$409,494 $219,443 $2,265 $631,202 
Geographic revenues
U.S.$357,463 $132,283 $2,265 $492,011 
International52,031 87,160  139,191 
Total$409,494 $219,443 $2,265 $631,202 
Three Months Ended March 2023
(In thousands)WranglerLeeOtherTotal
Channel revenues
U.S. Wholesale$337,676 $135,299 $3,228 $476,203 
Non-U.S. Wholesale51,919 66,005 10 117,934 
Direct-to-Consumer33,552 39,345 89 72,986 
Total$423,147 $240,649 $3,327 $667,123 
Geographic revenues
U.S.$365,129 $149,690 $3,317 $518,136 
International58,018 90,959 10 148,987 
Total$423,147 $240,649 $3,327 $667,123 

9 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Contract Balances and Performance Obligations
The following table presents information about contract balances recorded in the Company's balance sheets:
(In thousands)March 2024December 2023March 2023
Accounts receivable, net$239,632 $217,673 $224,024 
Contract assets (a)
6,311 10,929 5,317 
Contract liabilities (b)
1,522 1,713 1,392 
(a) Included within "prepaid expenses and other current assets" in the Company's balance sheets.
(b) Included within "accrued and other current liabilities" in the Company's balance sheets.
For the three months ended March 2024 and March 2023, no significant revenue was recognized that was included in contract liabilities as of December 2023 and December 2022, respectively. For the three months ended March 2024, no significant revenue was recognized from performance obligations satisfied, or partially satisfied, in prior periods. As of March 2024, the Company has contractual rights under its licensing agreements to receive $85.2 million of fixed consideration related to the future minimum guarantees through December 2029.

NOTE 3 — BUSINESS SEGMENT INFORMATION
The Company has two reportable segments:
Wrangler — Wrangler® branded denim, apparel, footwear and accessories.
Lee — Lee® branded denim, apparel, footwear and accessories.
The Company considers its chief executive officer to be its chief operating decision maker. The chief operating decision maker allocates resources and assesses performance based on the global brand operating results of Wrangler® and Lee®, which are the Company's operating and reportable segments.
In addition, we report an "Other" category to reconcile segment revenues and segment profit to the Company's operating results, but the Other category does not meet the criteria to be considered a reportable segment. Other includes sales and licensing of Rock & Republic®, other company-owned brands and private label apparel.
Accounting policies utilized for internal management reporting at the individual segments are consistent with those disclosed in the Company's 2023 Annual Report on Form 10-K. Corporate and other expenses, including certain restructuring and other transformation costs, 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 March
(In thousands)20242023
Segment revenues:
Wrangler$409,494 $423,147 
Lee219,443 240,649 
Total reportable segment revenues628,937 663,796 
Other revenues 2,265 3,327 
Total net revenues$631,202 $667,123 
Segment profit:
Wrangler$74,666 $71,107 
Lee35,094 39,573 
Total reportable segment profit$109,760 $110,680 
Corporate and other expenses(28,060)(18,064)
Interest expense(9,292)(10,273)
Interest income2,425 419 
(Loss) profit related to other revenues(153)107 
Income before income taxes$74,680 $82,869 

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 10



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 4 — ACCOUNTS RECEIVABLE
Allowance for Doubtful Accounts
The following table presents a rollforward of the allowance for doubtful accounts:
Three Months Ended March
(In thousands)20242023
Balance, December$7,215 $9,918 
Increase in provision for expected credit losses1,008 1,877 
Accounts receivable balances written off(238)(560)
Other (1)
(108)233 
Balance, March$7,877 $11,468 
(1) 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
The Company is party to 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 three months ended March 2024 and March 2023, the Company sold total trade accounts receivable of $310.4 million and $359.7 million, respectively. As of March 2024, December 2023 and March 2023, $223.9 million, $197.7 million and $256.3 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 $2.9 million and $3.0 million for the three months ended March 2024 and March 2023, 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)March 2024December 2023March 2023
Finished products$430,133 $421,051 $577,143 
Work-in-process31,064 35,722 32,857 
Raw materials40,144 43,580 50,089 
Total inventories$501,341 $500,353 $660,089 

NOTE 6 — SUPPLY CHAIN FINANCING
The Company facilitates voluntary Supply Chain Finance ("SCF") programs with its financial institutions that allow certain suppliers the option to sell or assign their rights to receivables due from the Company, enabling the suppliers to receive payment from the financial institutions sooner than our negotiated payment terms. At March 2024, December 2023 and March 2023, accounts payable included total outstanding balances of $28.7 million, $19.7 million and $23.9 million, respectively, due to suppliers that participate in the SCF programs.


11 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 7 — SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term Borrowings
At March 2024, December 2023 and March 2023, the Company had $23.9 million, $24.1 million and $24.9 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. There were no outstanding balances under these arrangements at March 2024 and December 2023, and $7.1 million of outstanding balances at March 2023. In addition, short-term borrowings included other debt of $0.2 million at March 2023, with no balance remaining at March 2024 and December 2023.
Long-term Debt
The following table presents the components of "long-term debt" as recorded in the Company's balance sheets:
(In thousands)March 2024December 2023March 2023
Revolving Credit Facility$ $ $50,000 
Term Loan A383,613 388,481 395,586 
4.125% Notes, due 2029
395,633 395,440 394,858 
Total long-term debt779,246 783,921 840,444 
Less: current portion(20,000)(20,000)(12,500)
Long-term debt, due beyond one year$759,246 $763,921 $827,944 
Credit Facilities
The Company is party to a senior secured Credit Agreement, as amended and restated on November 18, 2021 (the “Credit Agreement”), which provides for (i) a five-year $400.0 million term loan A facility (“Term Loan A”) and (ii) a five-year $500.0 million revolving credit facility (the “Revolving Credit Facility”), collectively referred to as “Credit Facilities,” with the lenders and agents party thereto.
Term Loan A requires quarterly repayments of $5.0 million through September 2026, and the remaining principal of $335.0 million is due at maturity in November 2026. Term Loan A had an outstanding principal amount of $385.0 million, $390.0 million, and $397.5 million at March 2024, December 2023 and March 2023, respectively, which is reported net of unamortized deferred financing costs. As of March 2024, interest expense on Term Loan A was being recorded at an effective annual interest rate of 4.3%, including the amortization of deferred financing costs and the impact of the Company’s interest rate swap.
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 2024, the Company had no outstanding borrowings under the Revolving Credit Facility and $6.7 million of outstanding standby letters of credit issued on behalf of the Company, leaving $493.3 million available for borrowing against this facility.
The interest rate per annum applicable to borrowings under the Credit Facilities is an interest rate benchmark elected by the Company based on the currency and term of the borrowing plus an applicable margin, as defined therein.
The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type as well as customary events of default. In addition, the Credit Agreement contains financial covenants which require compliance with (i) a total leverage ratio not to exceed 4.50 to 1.00 as of the last day of any test period, with an allowance for up to two elections to increase the limit to 5.00 to 1.00 in connection with certain material acquisitions, and (ii) a consolidated interest coverage ratio as of the last day of any test period to be no less than 3.00 to 1.00. As of March 2024, the Company was in compliance with all covenants and expects to maintain compliance with the applicable covenants for at least one year from the issuance of these financial statements.

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 12



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Senior Notes
On November 18, 2021, the Company entered into an indenture (the “Indenture”) by and among the Company and certain subsidiaries of the Company named as guarantors therein (the “Guarantors”), pursuant to which it issued $400.0 million of unsecured senior notes due November 2029 (the “Notes”) through a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act. The Notes bear interest at a fixed rate of 4.125% per annum, payable in cash in arrears on May 15 and November 15 of each year.
The Notes had an outstanding principal amount of $400.0 million at March 2024, December 2023 and March 2023, which is reported net of unamortized deferred financing costs. As of March 2024, interest expense on the Notes was being recorded at an effective annual interest rate of 4.3%, including the amortization of deferred financing costs.
The Notes are guaranteed on a senior unsecured basis by the Company’s existing and future domestic subsidiaries (other than certain excluded subsidiaries) that are borrowers under or guarantors of the Credit Facilities or certain other indebtedness. The Indenture governing the Notes contains customary negative covenants for financings of this type. The Indenture does not contain any financial covenants. As of March 2024, the Company was in compliance with the Indenture and expects to maintain compliance with the applicable covenants for at least one year from the issuance of these financial statements.
Refer to Note 11 in the Company's 2023 Annual Report on Form 10-K for additional information regarding the Company’s debt obligations.

NOTE 8 — FAIR VALUE MEASUREMENTS
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.

13 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
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 ValueLevel 1Level 2Level 3
March 2024
Financial assets:
Cash equivalents:
Money market funds$143,318 $143,318 $ $ 
Time deposits2,279 2,279   
Foreign currency exchange contracts18,553  18,553  
Interest rate swap agreements596  596  
Investment securities49,636 49,636   
Financial liabilities:
Foreign currency exchange contracts1,782  1,782  
Deferred compensation52,474  52,474  
 Fair Value Measurement Using
(In thousands)Total Fair ValueLevel 1Level 2Level 3
December 2023
Financial assets:
Cash equivalents:
Money market funds$145,554 $145,554 $ $ 
Time deposits2,283 2,283   
Foreign currency exchange contracts16,504  16,504  
Interest rate swap agreements3,253  3,253  
Investment securities46,250 46,250   
Financial liabilities:
Foreign currency exchange contracts5,121  5,121  
Deferred compensation49,139  49,139  
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 and are comprised of mutual funds that are valued based on quoted prices in active markets (Level 1). 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 2024, the carrying value of the Company's long-term debt was $779.2 million compared to a fair value of $740.1 million. At December 2023, the carrying value of the Company's long-term debt was $783.9 million compared to a fair value of $747.1 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 2024 and December 2023, their carrying values approximated fair value due to the short-term nature of these instruments.


Kontoor Brands, Inc. Q1 FY24 Form 10-Q 14



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 9 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Summary of Derivative Financial Instruments
The Company enters into derivative contracts with external counterparties to hedge certain foreign currency transactions. The notional amount of all outstanding foreign currency exchange contracts was $340.8 million at March 2024, $348.8 million at December 2023 and $321.3 million at March 2023, 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.
During 2019, the Company entered into "floating to fixed" interest rate swap agreements to mitigate exposure to volatility in reference rates on the Company's future interest payments. The notional amount of the interest rate swap agreements was $300.0 million at March 2024, December 2023 and March 2023. 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 the maturity date of April 18, 2024.
The Company's outstanding derivative financial instruments met the criteria for hedge accounting at the inception of the hedging relationship. 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 the Company determines that a specific hedging relationship has ceased to be highly effective, it discontinues hedge accounting. All designated hedging relationships were determined to be highly effective as of March 2024.
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
MarchDecemberMarchMarchDecemberMarch
(In thousands)202420232023202420232023
Derivatives designated as hedging instruments:
Foreign currency exchange contracts$18,553 $16,490 $20,361 $(1,710)$(5,098)$(2,914)
Interest rate swap agreements596 3,253 8,946    
Derivatives not designated as hedging instruments:
Foreign currency exchange contracts 14 16 (72)(23)(316)
Total derivatives$19,149 $19,757 $29,323 $(1,782)$(5,121)$(3,230)
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 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 2024December 2023March 2023
(In thousands)Derivative AssetDerivative LiabilityDerivative AssetDerivative LiabilityDerivative AssetDerivative Liability
Gross amounts presented in the balance sheet$19,149 $(1,782)$19,757 $(5,121)$29,323 $(3,230)
Gross amounts not offset in the balance sheet(1,417)1,417 (894)894 (1,449)1,449 
Net amounts$17,732 $(365)$18,863 $(4,227)$27,874 $(1,781)

15 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents the location of derivatives in the Company's balance sheets, with current or noncurrent classification based on maturity dates:
(In thousands)March 2024December 2023March 2023
Prepaid expenses and other current assets$17,016 $18,319 $18,046 
Accrued and other current liabilities(1,638)(4,009)(2,683)
Other assets2,133 1,438 11,277 
Other liabilities(144)(1,112)(547)
Cash Flow Hedges
The following tables present the pre-tax effects of cash flow hedges included in the Company's statements of operations and statements of comprehensive income:
Gain (Loss) on Derivatives Recognized in AOCL
(In thousands)Three Months Ended March
Cash Flow Hedging Relationships20242023
Foreign currency exchange contracts$10,146 $10,337 
Interest rate swap agreements74 (309)
Total$10,220 $10,028 
Gain (Loss) Reclassified from AOCL into Income
(In thousands)Three Months Ended March
Location of Gain (Loss)20242023
Net revenues$53 $(171)
Cost of goods sold5,291 5,992 
Other expense, net82 160 
Interest expense2,731 2,101 
Total$8,157 $8,082 
Other Derivative Information
Any contracts that are not designated as hedges are recorded at fair value in the Company's balance sheets. Changes in the fair values of derivative contracts not designated as hedges are recognized directly in earnings. There were no significant amounts recognized in earnings for the ineffective portion of any hedging relationships or changes in the fair values of derivative contracts not designated as hedges during the three months ended March 2024 and March 2023.
At March 2024, AOCL included $18.3 million of pre-tax net deferred gains 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.

NOTE 10 — CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS
Common Stock
During the three months ended March 2024, the Company repurchased 0.3 million shares of Common Stock for $20.0 million, including commissions, under its $300.0 million share repurchase program authorized by the Company's Board of Directors. All shares reacquired in connection with the repurchase program are treated as authorized and unissued shares upon repurchase.

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 16



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
Accumulated Other Comprehensive Loss
The following table presents deferred components of AOCL in equity, net of related taxes:
(In thousands)March 2024December 2023March 2023
Foreign currency translation$(93,580)$(91,057)$(99,139)
Defined benefit pension plans2,831 2,913 2,208 
Derivative financial instruments22,517 20,293 28,926 
Accumulated other comprehensive loss$(68,232)$(67,851)$(68,005)
The following tables present changes in AOCL, net of related tax impact:
Three Months Ended March 2024
(In thousands)Foreign Currency TranslationDefined Benefit Pension PlansDerivative Financial InstrumentsTotal
Balance, December 2023$(91,057)$2,913 $20,293 $(67,851)
Other comprehensive income (loss) due to gains (losses) arising before reclassifications(2,523) 9,688 7,165 
Reclassifications to net income of previously deferred (gains) losses (82)(7,464)(7,546)
Net other comprehensive income (loss)(2,523)(82)2,224 (381)
Balance, March 2024$(93,580)$2,831 $22,517 $(68,232)
Three Months Ended March 2023
(In thousands)Foreign Currency TranslationDefined Benefit Pension PlansDerivative Financial InstrumentsTotal
Balance, December 2022$(107,462)$2,243 $25,554 $(79,665)
Other comprehensive income (loss) due to gains (losses) arising before reclassifications8,323  10,292 18,615 
Reclassifications to net income of previously deferred (gains) losses (35)(6,920)(6,955)
Net other comprehensive income (loss)8,323 (35)3,372 11,660 
Balance, March 2023$(99,139)$2,208 $28,926 $(68,005)

17 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents reclassifications out of AOCL:
(In thousands)Three Months Ended March
Details About Accumulated Other Comprehensive Loss ReclassificationsAffected Line Item in the Financial Statements
20242023
Defined benefit pension plans:
Net change in deferred gains (losses) during the periodSelling, general and administrative expenses$93 $46 
Total before tax93 46 
Income taxesIncome taxes(11)(11)
Net of tax82 35 
Gains (losses) on derivative financial instruments:
Foreign currency exchange contractsNet revenues$53 $(171)
Foreign currency exchange contractsCost of goods sold5,291 5,992 
Foreign currency exchange contractsOther expense, net82 160 
Interest rate swap agreementsInterest expense2,731 2,101 
Total before tax8,157 8,082 
Income taxesIncome taxes(693)(1,162)
Net of tax7,464 6,920 
Total reclassifications for the period, net of tax$7,546 $6,955 

NOTE 11 — INCOME TAXES
The effective income tax rate for the three months ended March 2024 was 20.3% compared to 20.0% in the 2023 period. The three months ended March 2024 and March 2023 included a net discrete tax benefit primarily related to stock-based compensation which decreased the effective income tax rate by 1.0% and 0.2%, respectively. The effective tax rate without discrete items for the three months ended March 2024 was 21.3% compared to 20.2% in the 2023 period. The increase was primarily due to changes in our jurisdictional mix of earnings.
During the three months ended March 2024, the amount of net unrecognized tax benefits and associated interest increased by $0.5 million to $14.1 million. Management believes that it is reasonably possible that the amount of unrecognized tax benefits may decrease by $2.2 million within the next 12 fiscal months due to expiration of statutes of limitations, which would reduce income tax expense.

NOTE 12 — EARNINGS PER SHARE
The calculations of basic and diluted earnings per share ("EPS") are based on net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares outstanding, respectively.
The following table presents the calculations of basic and diluted EPS:
Three Months Ended March
(In thousands, except per share amounts)20242023
Net income$59,507 $66,296 
Basic weighted average shares outstanding55,735 55,646 
Dilutive effect of stock-based awards1,004 1,294 
Diluted weighted average shares outstanding56,739 56,940 
Earnings per share:
Basic earnings per share$1.07 $1.19 
Diluted earnings per share$1.05 $1.16 
For the three months ended March 2024 and March 2023, an immaterial number of shares were excluded from the dilutive earnings per share calculations because the effect of their inclusion would have been anti-dilutive.

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 18



KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
For both the three months ended March 2024 and March 2023, a total of 0.6 million shares of performance-based restricted stock units ("PRSUs"), were excluded from the calculations of diluted earnings per share as the units were not considered to be contingent outstanding shares.

NOTE 13 — LEASES
The Company enters into operating leases for retail stores, operational facilities, vehicles and certain equipment, with terms expiring at various dates through 2033. 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 operating leases:
Three Months Ended March
(In thousands)20242023
Cash paid for amounts included in the measurement of lease liabilities - operating cash flows$8,006 $7,639 
Right-of-use operating lease assets obtained in exchange for new operating leases - non-cash activity$2,698 $1,406 

NOTE 14 — RESTRUCTURING
During the three months ended March 2024, the Company incurred restructuring charges related to business optimization activities and actions to streamline and transfer select production within our internal manufacturing network.
Of the $4.6 million of restructuring charges recognized during the three months ended March 2024, $1.6 million were reflected within "selling, general and administrative expenses" and $3.0 million were reflected within "cost of goods sold." No restructuring charges were recognized during the three months ended March 2023.
Of the $2.4 million total restructuring accrual reported in the Company's balance sheet at March 2024, $1.7 million is expected to be paid out within the next 12 months and was classified within "accrued and other current liabilities," and the remaining $0.7 million was classified within "other liabilities." All of the $0.8 million restructuring accrual reported in the Company's balance sheet at December 2023 was classified within "accrued and other current liabilities."
The following table presents the components of restructuring charges:
Three Months Ended March
(In thousands)
20242023
Severance and employee-related benefits$1,981 $ 
Asset impairments168  
Inventory write-downs1,683  
Other779  
Total restructuring charges$4,611 $ 
The following table presents the restructuring costs by business segment:
Three Months Ended March
(In thousands)
20242023
Wrangler$3,249 $ 
Lee40  
Corporate and other1,322  
Total$4,611 $ 

19 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


KONTOOR BRANDS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
The following table presents activity in the restructuring accrual for the three-month period ended March 2024:
(In thousands)Total
Accrual at December 2023$827 
Charges2,760 
Cash payments(1,195)
Adjustments to accruals(16)
Currency translation(9)
Balance, March 2024$2,367 

NOTE 15 — SUBSEQUENT EVENTS
On April 1, 2024, the Company made its annual grant of equity awards under the Kontoor Brands, Inc. 2019 Stock Compensation Plan, including approximately 200,000 shares of PRSUs to employees, approximately 150,000 shares of time-based restricted stock units ("RSUs") to employees, and approximately 20,000 shares of RSUs to nonemployee members of the Board of Directors.
On April 18, 2024, the Board of Directors declared a regular quarterly cash dividend of $0.50 per share of the Company's Common Stock. The cash dividend will be payable on June 20, 2024, to shareholders of record at the close of business on June 10, 2024.

Kontoor Brands, Inc. Q1 FY24 Form 10-Q 20



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to provide readers of our financial statements with a narrative from management's perspective on our financial condition, results of operations and liquidity as well as certain other factors that may affect our future results. This section should be read in conjunction with the Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q.
The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in “Cautionary Statement On Forward-Looking Statements” included later in Part I, Item 2 of this Quarterly Report on Form 10-Q and in Part I, Item 1A "Risk Factors" in our 2023 Annual Report on Form 10-K.
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, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the brand names Wrangler® and Lee®. The Company's products are sold in the U.S. through mass merchants, specialty stores, department stores, company-operated stores and online, including digital marketplaces. The Company's products are also sold internationally, primarily in the Europe, Middle East and Africa ("EMEA"), Asia-Pacific ("APAC") and Non-U.S. Americas regions, through department, specialty, company-operated, concession retail and independently-operated partnership stores and online, including digital marketplaces.
Fiscal Year and Basis of Presentation
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 December 28, 2024 ("fiscal 2024"), which is a 52-week fiscal year. For presentation purposes herein, all references to periods ended March 2024, December 2023 and March 2023 correspond to the fiscal periods ended March 30, 2024, December 30, 2023 and April 1, 2023, respectively.
References to fiscal 2024 foreign currency amounts herein reflect the impact of changes in foreign exchange rates from the prior year comparable period and the corresponding impact on translating foreign currencies into U.S. dollars and on foreign currency-denominated transactions. The Company's most significant foreign currency translation exposure is typically driven by business conducted in euro-based countries, the Chinese yuan and the Mexican peso. However, the Company conducts business in other developed and emerging markets around the world with exposure to other foreign currencies.
Amounts herein may not recalculate due to the use of unrounded numbers.
Macroeconomic Environment and Other Recent Developments
Macroeconomic conditions impacting the Company include inflation, elevated interest rates, recessionary concerns and fluctuating foreign currency exchange rates, as well as continuing global supply chain issues and inconsistent economic results in China. These factors continue to contribute to uncertain global economic conditions and consumer spending patterns, which are impacting retailers' and the Company's operations. Additionally, the conflicts in Ukraine and the Middle East are causing disruption in the surrounding areas and greater uncertainty in the global economy.
Inflationary pressures have moderated in recent quarters, and although these pressures continue to impact us, current period results reflect favorability from lower product costs compared to the first quarter of 2023. However, the macroeconomic factors discussed above, primarily inflation, interest rates and recessionary concerns, continued to impact consumer spending patterns leading to retailer actions to proactively manage inventory levels, which impacted our results during the three months ended March 2024.
Recent disruptions to key trade routes, such as the Red Sea and Panama Canal, affected our global supply chain during the first quarter of 2024 but did not have a significant impact on first quarter results. Although we continue to proactively manage our shipping carriers and routes to minimize costs and delays, our results of operations will reflect higher freight costs during 2024.
The Company has responded to ongoing macroeconomic conditions by controlling expenses, adjusting pricing and proactively managing our global supply chain where possible. While we anticipate continued uncertainty related to the macroeconomic environment during 2024, we believe we are appropriately positioned to successfully manage through known operational challenges. We continue to closely monitor macroeconomic conditions, including consumer behavior and the impact of these factors on consumer demand.

21 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


Business Overview
We continue to execute on our Horizon 2 multi-year strategic vision, "Catalyzing Growth," which outlines four growth catalysts: (i) expansion of our core U.S. Wholesale business, (ii) category extensions such as outdoor, workwear and t-shirts, (iii) geographic expansion of our Wrangler® and Lee® brands, and (iv) channel expansion focused on the digital platforms in our U.S. Wholesale and Direct-to-Consumer channels. We are focused on driving brand growth and delivering long-term value to our stakeholders including our consumers, customers, shareholders, suppliers and communities around the world.
In addition, our capital allocation strategy allows us the option to (i) pay down debt, (ii) provide for a superior dividend payout, (iii) effectively manage our share repurchase authorization and (iv) act on strategic investment opportunities that may arise.
During the first quarter of 2024, the Company incurred total restructuring and other transformation charges of $8.4 million related to business optimization activities and actions to streamline and transfer select production within our internal manufacturing network. In late 2023, we launched the planning phase of Project Jeanius, a comprehensive end-to-end business model transformation focused on simplifying the organization and creating significant investment capacity to accelerate growth and increase profitability. Certain of the restructuring and transformation costs incurred during the first quarter of 2024 related to Project Jeanius, and we anticipate additional costs in future periods as we execute on this multi-year initiative. Refer to Note 14 to the Company's financial statements for additional information related to restructuring charges.
FIRST QUARTER OF FISCAL 2024 SUMMARY
Net revenues decreased 5% to $631.2 million compared to the three months ended March 2023.
U.S. Wholesale revenues decreased 6% compared to the three months ended March 2023, and represented 71% of total revenues in the current period.
Non-U.S. Wholesale revenues decreased 8% compared to the three months ended March 2023, and represented 17% of total revenues in the current period.
Direct-to-Consumer revenues remained flat compared to the three months ended March 2023, and represented 12% of total revenues in the current period.
Gross margin increased 220 basis points to 45.2% compared to the three months ended March 2023.
Selling, general and administrative expenses as a percentage of net revenues increased to 31.8% compared to 28.7% for the three months ended March 2023.
Net income decreased 10% to $59.5 million compared to the three months ended March 2023.
Diluted earnings per share was $1.05 in the first quarter, compared to $1.16 in the same period last year.


Kontoor Brands, Inc. Q1 FY24 Form 10-Q 22



ANALYSIS OF RESULTS OF OPERATIONS
Consolidated Statements of Operations
The following table presents components of the Company's statements of operations:
 Three Months Ended March
(Dollars in thousands)20242023
Net revenues$631,202 $667,123 
Gross margin (net revenues less cost of goods sold)
$285,144 $286,701 
As a percentage of net revenues
45.2 %43.0 %
Selling, general and administrative expenses$200,714 $191,752 
As a percentage of net revenues
31.8 %28.7 %
Operating income$84,430 $94,949 
As a percentage of net revenues
13.4 %14.2 %
Additionally, the following table presents a summary of the changes in net revenues for the three months ended March 2024 as compared to March 2023:
(In millions)Three Months Ended March
Net revenues — 2023$667.1 
Operations(37.9)
Impact of foreign currency1.9 
Net revenues — 2024$631.2 
Three Months Ended March 2024 Compared to the Three Months Ended March 2023
Net revenues decreased 5%, driven by a 6% decrease in U.S. Wholesale revenues primarily attributable to retailer inventory management actions and a decrease in revenue from seasonal product. Non-U.S. Wholesale revenues decreased 8%, primarily driven by a decline in our EMEA wholesale business, partially offset by growth in our digital wholesale business and a 2% favorable impact from foreign currency. Global Direct-to-Consumer revenues remained flat with growth in e-commerce sales offset by declines in retail store sales.
Additional details on changes in net revenues for the three months ended March 2024 as compared to March 2023 are provided in the section titled “Information by Business Segment.”
Gross margin increased 220 basis points, primarily related to 410 basis points from lower product costs and favorable channel mix. This increase was partially offset by 100 basis points from pricing adjustments and product mix and 50 basis points due to restructuring and other transformation charges in the first quarter of 2024.
Selling, general and administrative expenses as a percentage of net revenues increased to 31.8% compared to 28.7% in the prior period, driven by $5.4 million of restructuring and other transformation charges in the first quarter of 2024, a $2.3 million increase in investments in our direct-to-consumer business and information technology and a $1.7 million increase in demand creation costs. These increases were partially offset by a $1.8 million decrease in distribution and freight costs.
The effective income tax rate for the three months ended March 2024 was 20.3% compared to 20.0% in the 2023 period. The three months ended March 2024 and March 2023 included a net discrete tax benefit primarily related to stock-based compensation which decreased the effective income tax rate by 1.0% and 0.2%, respectively. The effective tax rate without discrete items for the three months ended March 2024 was 21.3% compared to 20.2% in the 2023 period. The increase was primarily due to changes in our jurisdictional mix of earnings.


23 Kontoor Brands, Inc. Q1 FY24 Form 10-Q


Information by Business Segment
The Company's two reportable segments are Wrangler® and Lee®. Refer to Note 3 to the Company's financial statements for additional information.
The following tables present a summary of the changes in segment revenues and segment profit for the three months ended March 2024 as compared to the three months ended March 2023:
Segment Revenues:
Three Months Ended March
(In millions)WranglerLeeTotal
Segment revenues — 2023$423.1 $240.6 $663.8 
Operations(15.2)(21.5)(36.8)
Impact of foreign currency1.6 0.3 1.9 
Segment revenues — 2024$409.5 $219.4 $628.9 
Segment Profit:
Three Months Ended March
(In millions)WranglerLeeTotal
Segment profit — 2023$71.1 $39.6