Kontoor Brands, Inc.

NOTE 5 —ACCOUNTS RECEIVABLE

Allowance for Doubtful Accounts

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

(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.

11 Kontoor Brands, Inc. Q1 FY25 Form 10-Q

During the three months ended March 2025 and March 2024, the Company sold total trade accounts receivable of $348.2 million and $310.4 million, respectively. As of March 2025, December 2024 and March 2024, $214.8 million, $178.2 million and $223.9 million, respectively, of the sold trade accounts receivable 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 $2.5 million and $2.9 million for the three months ended March 2025 and March 2024, respectively. Net proceeds of this program are reflected as operating activities in the Company's statements of cash flows.

NOTE 6 —INVENTORIES

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

NOTE 7 —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 2025, December 2024 and March 2024, accounts payable included total outstanding balances of $44.5 million, $31.1 million and $28.7 million, respectively, due to suppliers that participate in the SCF programs.

NOTE 8 —SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-term Borrowings

At March 2025, December 2024 and March 2024, the Company had $19.3 million, $19.2 million and $23.9 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 wereno outstanding balances under these arrangements at March 2025, December 2024 and March 2024.

Long-term Debt

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

Credit Facilities

At March 2025, the Company was party to a senior secured Credit Agreement, as amended and restated on November 18, 2021 (the “Credit Agreement”), which provided for (i) afive-year $400.0 million term loan A facility (“Term Loan A”) and (ii) afive-year $500.0 million revolving credit facility (the “Revolving Credit Facility”), collectively referred to as “Credit Facilities,” with the lenders and agents party thereto.

Kontoor Brands, Inc. Q1 FY25 Form 10-Q 12

Term Loan A required quarterly repayments of $5.0 million through September 2026, and the remaining principal of $335.0 million was due at maturity in November 2026. Due to voluntary early repayments, including a $5.0 million voluntary early repayment during the three months ended March 2025, there were no future required quarterly repayments until September 2026. As discussed in "Refinancing of Credit Facilities" below, the Credit Facilities were refinanced subsequent to quarter-end in anticipation of the Helly Hansen Acquisition and the 2026 maturity date.

Term Loan A had an outstanding principal amount of $340.0 million, $345.0 million and $385.0 million at March 2025, December 2024 and March 2024, respectively, which was reported net of unamortized deferred financing costs. As of March 2025, interest expense on Term Loan A was being recorded at an effective annual interest rate of 5.6%, including the amortization of deferred financing costs and the impact of the Company's interest rate swap agreements.

The Revolving Credit Facility could be used to borrow funds in both U.S. dollar and certain non-U.S. dollar currencies, and had a $75.0 million letter of credit sublimit. As of March 2025, the Company hadno outstanding borrowings under the Revolving Credit Facility and $6.5 million of outstanding standby letters of credit issued on behalf of the Company, leaving $493.5 million available for borrowing against this facility.

The interest rate per annum applicable to borrowings under the Credit Facilities was 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 contained certain affirmative and negative covenants customary for financings of this type as well as customary events of default. In addition, the Credit Agreement contained financial covenants which required 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 totwo 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 2025, the Company was in compliance with all covenants and expected to maintain compliance with the applicable covenants for at least one year from the issuance of these financial statements.

Refinancing of Credit Facilities Subsequent to Quarter-End

On April 8, 2025, the Company completed a refinancing pursuant to which it amended and restated its Credit Agreement to provide for (i) afive-year $700.0 million term loan A facility (the "2025 Term Loan A-1") consisting of a $340.0 million initial term loan (the "2025 Initial Term Loan") and a $360.0 million delayed draw term loan (the "Delayed Draw Term Loan"), (ii) athree-year $300.0 million delayed draw term loan A facility (the "2025 Term Loan A-2") and (iii) afive-year $500.0 million revolving credit facility (the "2025 Revolving Credit Facility"), collectively referred to as the "2025 Credit Facilities," with the lenders and agents party thereto. Upon closing, the net proceeds from the 2025 Initial Term Loan were used to repay all of the $340.0 million principal amount outstanding under Term Loan A. The Delayed Draw Term Loan and the 2025 Term Loan A-2 may be drawn on or before September 18, 2025, to fund the Helly Hansen Acquisition. Refer to Note 2 to the Company's financial statements in this Form 10-Q for additional information related to the Helly Hansen Acquisition.

The 2025 Term Loan A-1 is scheduled to be repaid in quarterly installments beginning in September 2026 at a rate of 0.625% of the total loan amount and increasing to a rate of 1.25% of the total loan amount beginning in September 2027, with the remaining principal due at maturity. The 2025 Term Loan A-2 is scheduled to be repaid in full at maturity.

The terms and conditions of the 2025 Credit Facilities, including applicable borrowing rates, are generally consistent with those of the existing Credit Facilities.

The Company entered into derivative financial instruments to mitigate some of the exposures to the volatility in interest rates, as discussed in Note 10 to the Company's financial statements in this Form 10-Q .

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 2025, December 2024 and March 2024, which is reported net of unamortized deferred financing costs. As of March 2025, interest expense on the Notes was being recorded at an effective annual interest rate of 4.3%, including the amortization of deferred financing costs.

13 Kontoor Brands, Inc. Q1 FY25 Form 10-Q

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 2025, the Company was in compliance with the Indenture and expects to maintain compliance with the applicable non-financial covenants for at least one year from the issuance of these financial statements.

Refer to Note 11 in the Company's 2024 Annual Report on Form 10-K for additional information regarding the Company’s debt obligations.

NOTE 9 —FAIR VALUE MEASUREMENTS

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

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

•Level 2 — Significant directly observable data (other than Level 1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data.

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

Recurring Fair Value Measurements

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

Kontoor Brands, Inc. Q1 FY25 Form 10-Q 14

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 2025, the carrying value of the Company's long-term debt was $735.6 million compared to a fair value of $704.3 million. At December 2024, the carrying value of the Company's long-term debt was $740.3 million compared to a fair value of $710.8 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 2025 and December 2024, their carrying values approximated fair value due to the short-term nature of these instruments.

NOTE 10 —DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Summary of Derivative Financial Instruments

The Company enters into derivative contracts with external counterparties on a recurring basis to hedge certain foreign currency transactions. The notional amount of these outstanding foreign currency exchange contracts was $283.1 million at March 2025, $303.0 million at December 2024 and $340.8 million at March 2024, 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.

The Company periodically enters into "floating to fixed" interest rate swap agreements to mitigate exposure to volatility in reference rates on the Company's future interest payments on indebtedness. Because these swap agreements meet the criteria for hedge accounting, all related gains and losses are deferred within accumulated other comprehensive loss ("AOCL") and are amortized through the swap maturity dates.

During 2019, the Company entered into "floating to fixed" interest rate swap agreements that had a notional amount of $300.0 million at March 2024, which matured on April 18, 2024. On September 9, 2024, the Company entered into new "floating to fixed" interest rate swap agreements (the "2024 Swap Agreements") that mature on August 18, 2029. The notional amount of the 2024 Swap Agreements was $150.0 million at March 2025 and December 2024.

In April 2025, the Company entered into new "floating to fixed" interest rate swap agreements for a notional amount of $550.0 million that mature on March 18, 2027 and April 18, 2027.

15 Kontoor Brands, Inc. Q1 FY25 Form 10-Q

The Company's outstanding derivative financial instruments entered into on a recurring basis 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 2025.

On February 19, 2025, the Company entered into foreign currency exchange contracts totaling $1.275 billion CAD to hedge the purchase price of the Helly Hansen Acquisition. These contracts were not designated as hedges, and were recorded at fair value in the Company's balance sheets. Refer to Note 2 to the Company's financial statements in this Form 10-Q for additional information related to the Helly Hansen Acquisition.

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

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:

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

Kontoor Brands, Inc. Q1 FY25 Form 10-Q 16

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:

Derivative Contracts Not Designated as Hedges

Any derivative contracts that are not designated as hedges are recorded at fair value in the Company's balance sheets, and changes in the fair values of these contracts are recognized directly in earnings. Derivative contracts not designated as hedges include the $1.275 billion CAD hedges associated with the Helly Hansen Acquisition and a limited number of cash flow hedges that were deemed ineffective and de-designated during the three months ended March 2025 and March 2024.

The following table presents a summary of derivatives not designated as hedges included in the Company's statements of operations:

Other Derivative Information

There were no significant amounts recognized in earnings for the ineffective portion of any hedging relationships during the three months ended March 2025 and March 2024.

At March 2025, AOCL included $5.1 million of pre-tax net deferred losses for foreign currency exchange contracts and interest rate swap agreements that are expected to be reclassified to earnings during the next 12 months. The amounts ultimately reclassified to earnings will depend on rates in effect when outstanding derivative contracts are settled.

17 Kontoor Brands, Inc. Q1 FY25 Form 10-Q

NOTE 11 —CAPITAL AND ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated Other Comprehensive Loss

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

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

Kontoor Brands, Inc. Q1 FY25 Form 10-Q 18

The following table presents reclassifications out of AOCL:

NOTE 12 —INCOME TAXES

The effective income tax rate for the three months ended March 2025 was 23.3% compared to 20.3% in the 2024 period. The three months ended March 2025 included a net discrete tax expense primarily related to an increase in valuation allowances in a foreign jurisdiction, partially offset by a discrete tax benefit related to stock-based compensation, the net impact of which increased the effective income tax rate by 1.9%. The three months ended March 2024 included a net discrete tax benefit primarily related to stock-based compensation which decreased the effective income tax rate by 1.0%. The effective tax rate without discrete items for the three months ended March 2025 was 21.4% compared to 21.3% in the 2024 period. The increase was primarily due to changes in our jurisdictional mix of earnings.

During the three months ended March 2025, the amount of net unrecognized tax benefits and associated interest increased by $0.4 million to $12.9 million. Management does not believe that the amount of unrecognized tax benefits will materially decrease within the next 12 fiscal months.

NOTE 13 —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:

19 Kontoor Brands, Inc. Q1 FY25 Form 10-Q

For the three months ended March 2025 and March 2024, animmaterial number of shares were excluded from the dilutive earnings per share calculations because the effect of their inclusion would have been anti-dilutive.

For the three months ended March 2025 and March 2024, a total of 0.5 million and 0.6 million shares, respectively, 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 14 —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:

NOTE 15 —RESTRUCTURING

Restructuring charges relate to costs associated with exit or disposal activities. During the three months ended March 2025 and March 2024, the Company incurred the following charges related to business optimization and actions to streamline and transfer select production within our internal manufacturing network:

The following table presents the classification of these restructuring costs in the Company's statements of operations:

The following table presents these restructuring costs by business segment:

Kontoor Brands, Inc. Q1 FY25 Form 10-Q 20

The following table presents activity in the restructuring accrual for the three-month period ended March 2025:

All of the $3.0 million restructuring accrual reported in the Company's balance sheet at March 2025 is expected to be paid out within the next 12 months and was classified within "accrued and other current liabilities." Of the $1.9 million restructuring accrual reported in the Company's balance sheet at December 2024, $1.8 million was classified within "accrued and other current liabilities," and the remaining $0.1 million was classified within "other liabilities."

NOTE 16 —SUBSEQUENT EVENTS

On April 1, 2025, the Company made its annual grant of equity awards to employees under the Kontoor Brands, Inc. 2019 Stock Compensation Plan, including approximately 155,000 shares of PRSUs and approximately 180,000 shares of time-based restricted stock units ("RSUs"). On May 1, 2025, the Company granted 19,000 shares of RSUs to nonemployee members of the Board of Directors.

On April 4, 2025, and April 30, 2025, the Company entered into new "floating to fixed" interest rate swap agreements. Refer to Note 10 to the Company's financial statements in this Form 10-Q for additional information.

On April 8, 2025, the Company refinanced its existing Credit Facilities. Refer to Note 8 to the Company's financial statements in this Form 10-Q for additional information.

On April 16, 2025, the Board of Directors declared a regular quarterly cash dividend of $0.52 per share of the Company's Common Stock. The cash dividend will be payable on June 20, 2025, to shareholders of record at the close of business on June 10, 2025.

As of April 28, 2025, the Company had received all required regulatory approvals related to the Helly Hansen Acquisition. Refer to Note 2 to the Company's financial statements in this Form 10-Q for additional information.

21 Kontoor Brands, Inc. Q1 FY25 Form 10-Q