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PVH Corp.
200 Madison Avenue
New York, NY 10016
annualreport 2016
Letter to StockhoLderS
caLvin kLein
TABLE OF
CONTENTS
02
12
16
20
24
heritage BrandS
tommy hiLfiger
corporate
reSponSiBiLity
28
directorS, officerS,
executiveS &
Brand management
other information
29
30
gaap to non-gaap
reconciLiationS
revenueS
($ in millions)
$8,203 ($8,303
1 on a constant currency basis)
$8,020
$8,241
gaap earningS per Share
$6.79
$6.89
$5.27
non-gaap earningS per Share
$6.80
2 ($8.45
3 on a constant currency basis)
$7.05
$7.30
2
2
2016
2016 FX Impact
2015
2014
BY BUSINESS
2016 revenueS
($8,203 million)
BY REGION
4
8%
11%
29%
52%
Americas (excluding U.S.)
Asia Pacific
Europe
U.S.
19%
38%
43%
Calvin Klein
Heritage Brands
Tommy Hilfiger
free caSh fLow
($ in millions)
5
$643
$573
$469
2016
2015
2014
33
annuaL report
on form10-k
1 Figures exclude the impact of foreign currency. Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
2 Figures exclude certain amounts that were deemed non-recurring or non-operational. Refer to GAAP to Non-GAAP Reconciliations on
pages 30 and 31.
3 Figures exclude certain amounts that were deemed non-recurring or non-operational, as well as exclude the impact of foreign currency.
Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
4 Americas (excluding U.S.) includes Canada, Mexico, South America, Central America and the Caribbean; Europe includes the Middle
East and Africa; Asia Pacific includes Australia and New Zealand.
5 Free cash flow defined as cash flow from operations less capital expenditures, contingent payments to Mr. Klein and dividends.
Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
During a year of continued volatility in the retail environment, pvh
drove strong execution, while we continued to evolve our business
model. we empowered our teams to think creatively, capitalize
on new product and business opportunities and find innovative ways to
engage consumers. As a result, we experienced great momentum across our
businesses and delivered outstanding earnings per share results that exceeded
our guidance throughout the year.
Succeeding in the current business environment has required us to embrace
change and adopt new initiatives to ensure that our business model is
positioned for future success. In our industry, we see the convergence of
the digital and physical worlds and a shift in consumer buying habits. More
broadly, we are increasingly faced with geopolitical issues ranging from
potential U.S. trade and regulatory reform, potential U.S. tax reform (including
the spectre of border adjustment taxes), Brexit, national elections in key
European countries and continued foreign currency volatility against the U.S.
dollar. As one of the largest global apparel companies, we have been caught in
the crosshairs of many of these issues; however, we believe that our industry-
leading talent and long-term approach to managing the company will drive
our business forward.
During 2016, we continued to evolve our brands to maintain their relevance
with consumers. With CALVIN KLEIN nearly 50 years old and Tommy Hilfiger
over 30 years old, we continued to re-invest in key areas such as products,
marketing and talent. We had several high-profile announcements this
year, including the hiring of Raf Simons as Chief Creative Officer of Calvin
Klein in August 2016. With the brand in a very strong position prior to the
announcement, we felt that this was an opportune time to invest in CALVIN
KLEIN by putting all of the CALVIN KLEIN brands under one visionary for the
first time since before we bought the business in 2003. For Tommy Hilfiger,
Gigi Hadid was enlisted as our global brand ambassador for the womenswear
business beginning with the Fall 2016 collection. This strategic partnership
has been overwhelmingly successful to date and helped drive awareness
for the brand’s womenswear and accessories, which are key global growth
opportunities.
emanueL chirico
Chairman and Chief Executive Officer
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We encouraged associates
across the organization to
be forward-thinking, with
a focus on adapting to the evolving
consumer environment, enhancing
our brands and their competitive
positioning across product lines
and geographies, and adjusting
our procedures to make it easier
to initiate and effect change. As a
result, we actively diversified our
distribution of CALVIN KLEIN
and Tommy Hilfiger products into
specialty accounts in the U.S.
and Europe that have relevance
with younger generations, such as
Urban Outfitters and Topshop.
We also significantly increased
the social and digital reach of our
brands. We enhanced our own digital
commerce platforms, recalibrated
our relationships with our traditional
wholesale customers to account
for the growing digital component
of their businesses and expanded
our presence with pure play digital
commerce accounts. Across our
digital footprint, we worked closely
with our top wholesale partners
to better transform the online
consumer experience for each of
our brands.
In addition, we invested in our future
by evolving our supply chain, building
upon our operating platforms and
harnessing sustainable innovation
to enhance our efficiencies across
the organization. We continued to
embrace speed, as we worked to
reduce lead times, leverage the power
of data, and simplify processes in a
world that is becoming faster-
paced and more rewarding of
companies that are dynamic and
responsive. As we worked toward
these objectives, we remained
firmly committed to corporate
responsibility, as we recognize both
the opportunity and the responsibility
for business to take a lead role in
addressing pressing global issues.
Our corporate responsibility efforts
continued to focus on empowering
people, preserving the environment
and supporting our communities.
We believe corporate responsibility
helps strengthen our organization
by managing risk, maximizing
efficiencies and driving value in a
rapidly changing world. Through
our collective efforts, we seek to
create value for both society and
our business.
a year of
financiaL Strength
PVH delivered strong underlying
financial performance in 2016. Our
revenues again exceeded $8 billion
and we posted GAAP earnings per
share of $6.79 ($6.80* on a non-
GAAP basis), including a negative
impact of $1.65 per share related
to foreign currency exchange rates.
Importantly, we achieved these
results while continuing to invest in
our businesses, as we enhanced our
brand teams, products, marketing
campaigns and regional operating
platforms, including our systems.
Our international businesses were
a highlight, particularly in Europe,
as our Tommy Hilfiger business
continued to post what we believe
to be industry-leading performance.
* Figure excludes certain amounts that were deemed non-recurring or non-operational.
Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
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Our Calvin Klein Europe business
also saw dramatic growth in 2016
and significantly exceeded our
expectations. Our China businesses,
including our Tommy Hilfiger China
business, which we acquired in
April 2016, also performed well. We
attribute our international execution to
the solid brand foundations we have
built globally, driven by compelling
product offered at the right price/
value proposition and supported
by engaging marketing campaigns.
We are also proud of our ongoing
efforts to provide an exceptional
customer experience through in-store
and digital initiatives and consumer
engagement investments.
+ Figure excludes certain amounts that were deemed
non-recurring or non-operational, as well as excludes
the impact of foreign currency. Refer to GAAP to
Non-GAAP Reconciliations on pages 30 and 31.
Domestically, our performance was
marked by strength in our continuing
wholesale businesses and challenged
performance in our Calvin Klein
and Tommy Hilfiger outlet retail
businesses. Our brands were top
performers across our key wholesale
accounts in North America, capturing
market share from competitors. Our
Calvin Klein business performed
well in most product categories,
Tommy Hilfiger’s performance was
particularly strong on the men’s side,
and our Heritage Brands business
experienced improvements, driven by
the introduction of new technologies
and fabrications. This strength was
in contrast to our U.S. outlet
retail business, which continued
to experience weakness, largely
attributable to the sustained decrease
in international tourist traffic and
spending in our CALVIN KLEIN and
Tommy Hilfiger stores located in
tourist destination areas, resulting
from the strong U.S. dollar.
While we experienced foreign
currency headwinds, particularly
transactional pressures, our gross
margins expanded significantly,
due to our prudent inventory
management, higher average unit
retail prices, improved sourcing
capabilities and the benefit related
to expansion in our higher-margin
international businesses. At the same
time, our earnings before interest
and taxes rose 4% on a GAAP basis
and 12%+ on a non-GAAP and
constant currency basis.
2016 waS a year of exciting announcementS, aS we took actionS to
evoLve our BrandS from a BuSineSS and a creative Standpoint, whiLe aLSo
maintaining our unwavering commitment to corporate reSponSiBiLity.
June 2016
PVH forms manufacturing joint venture
in Hawassa Industrial Park in Ethiopia
January 2016
PVH University Launch:
Offering on-demand leadership
and development classes
apriL 2016
Tommy Hilfiger acquires remaining
stake in China joint venture
march 2016
PVH signs United Nations Women’s
Empowerment Principles
Summer 2016
Speedo Fit launches; U.S. Team Speedo
wins 12 Olympic medals
PVH launches 10 Corporate
Responsibility Commitments
auguSt 2016
Calvin Klein hires Raf Simons
as Chief Creative Officer
octoBer 2016
Emanuel Chirico receives
Lifetime Achievement Award
from CR Magazine
auguSt 2016
Van Heusen launches Flex Pant
faLL 2016
Gigi Hadid introduced as global
brand ambassador for Tommy Hilfiger
womenswear
novemBer 2016
PVH forms Mexico joint venture
The CEO
Water Mandate
decemBer 2016
PVH signs UN Global Compact
and CEO Water Mandate
hoLiday 2016
Tommy Hilfiger wholesale womenswear license
for U.S. and Canada launches with G-III
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Once again, we managed
our balance sheet efficiently
over the course of the
year, which was a key driver of our
outstanding 2016 results. Inventory
management and our ability to react
quickly in a fast-moving environment
continued to differentiate us and
help us capture market share.
We generated over $600 million
in free cash flow◊ during 2016,
which enabled us to acquire the
55% interest in our joint venture
for Tommy Hilfiger in China that
we did not already own. We believe
that this business has tremendous
growth potential as we capitalize
on the strong brand awareness
in China and leverage our well-
established platform in the region
from our Calvin Klein business. In
addition, we returned more than
$325 million to stockholders through
share repurchases and dividends,
while continuing to execute against
our strategic priorities. Looking
ahead, we will continue to utilize our
healthy balance sheet to make sound
investment decisions that we believe
will enhance stockholder returns.
our commitment
to the future
We believe that our diversified
business model, strong portfolio
of brands and industry-leading
talent position us well to deliver a
sustainable trajectory of long-term
growth. As we capitalize on the
organic opportunities that exist to
grow our brands across categories,
regions and distribution channels,
we believe that we can deliver strong
business results going forward.
Additionally, we continue to explore
licensed business buy-backs and
focus on our capital allocation
strategy, which we believe will create
long-term value for our stockholders.
While we are optimistic about our
future, we are aware that global
companies like PVH continue to face
the realities of geopolitical volatility,
trade, tax and regulatory changes,
foreign currency pressures and shifts
in consumer consumption patterns.
◊ Free cash flow defined as cash flow from operations less capital expenditures, contingent payments to Mr. Klein and dividends.
Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
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These challenges have required us
to adapt how we think and manage
our businesses to stay ahead of
our competition. However, I believe
that our organization has emerged
stronger than ever and our financial
performance demonstrates that our
efforts to date have been successful.
Beyond our earnings results,
I am most proud of the many
accomplishments that we achieved
across our organization and in
the communities in which we
work and live. We partnered with
the United Nations on several
initiatives, including signing the
Women’s Empowerment Principles,
which promotes gender equality
in the workplace, as well as the
UN Global Compact, which is
focused on implementing universal
sustainability principles. This is in
addition to our successful initiatives
on sustainability and corporate
responsibility within our businesses
and through our associates’
company-sponsored community
service and philanthropic activities.
Powered by our extraordinary team,
innovative mindset and global brand
stewardship, I have never been
more confident in the future we are
creating and I would like to thank
our associates worldwide for their
terrific efforts during 2016. I look
forward to another year of executing
on our strategic initiatives and
delivering value to our stockholders,
while successfully navigating the
continued uncertainty of the retail
environment.
emanuel chirico
Chairman and Chief Executive Officer
1
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4
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DrivE
Drive consumer engagement by investing
in product, marketing and in-store and
online experiences.
ExpAND
Expand CALVIN KLEIN and Tommy
Hilfiger’s worldwide reach and assume
more direct control over various
licensed businesses.
iNvEST
Invest in our global operating and digital
platforms to support our growth initiatives,
while making positive impacts where
we work and live.
DEvELOp
Develop and retain talent through career
development opportunities, while providing
an inclusive workplace where every
individual is valued.
GENErATE
Generate solid free cash flow to
drive sustainable long-term growth
and stockholder returns.
Our calvin klein business experienced compelling brand and
cultural relevancy in 2016. the year was characterized by strong
performance across regions and product lines, driven by continued
reinvestment in the brand and consistent execution at retail. We made
notable progress on our strategic priorities, which we believe will pave the
way for global expansion and long-term financial growth.
With the changing paradigm of retail, our teams continued to invest in
consumer engagement and an enhanced brand experience, as we believe
that our efforts to continually evolve the CALVIN KLEIN brand have been
fundamental to its success. One of our most notable announcements was
the hiring of Raf Simons as Chief Creative Officer in August 2016. With his
appointment, we see a significant opportunity to unify the CALVIN KLEIN
brands under one creative vision, as Raf leads the creative strategy for the
portfolio of CALVIN KLEIN brands globally, including design, marketing and
communications, and visual creative services. This marks the first time since
Mr. Klein was at the company that CALVIN KLEIN will be led by one creative
visionary. As Raf implements Calvin Klein’s new global creative strategy, we
believe that we will strengthen the brand’s premium positioning worldwide
and further commercialize the business, with a goal of achieving $10 billion
in global retail sales over the next few years.
Creatively, Calvin Klein had a tremendous year. With a focus on digital
consumer engagement, the successful #mycalvins social media campaign
was evolved into a 360° lifestyle campaign for Spring 2016. Its call-to-action,
“I _____ in #mycalvins,” continued through the Fall season and asked the
consumer “What do you do in yours?” The Spring and Fall 2016 campaigns
each featured a diverse group of pop culture influencers, including actors,
musicians, athletes, fashion icons and artists. Through the campaigns,
we took a significant step toward showcasing the “World of CALVIN KLEIN”
with each of the CALVIN KLEIN brands being featured together in a true
lifestyle presentation.
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Our CONTiNuED
rEiNvESTmENT iN
CALviN KLEiN pAvES
ThE wAy FOr GLOBAL
ExpANSiON AND
LONG-TErm FiNANCiAL
GrOwTh
Revenues for calvin klein
grew 7% (grew 9%° on a
constant currency basis).
We were pleased with the strength
and continuity of performance across
product categories. Earnings before
interest and taxes declined 19% on
a GAAP basis principally due to the
loss recorded on the deconsolidation
of our Mexico business in connection
with the formation of a joint venture
in Mexico. Earnings before interest
and taxes increased 11%+ on a
non-GAAP and constant currency
basis, despite a generally weak
consumer environment, driven by
our strong brand positioning, prudent
inventory management and the
outsized growth of our higher-margin
international businesses.
The Calvin Klein international
business experienced outstanding
performance, with revenues growing
12% (15%° on a constant currency
basis). Robust performance in Europe
drove results, as all local markets
experienced positive momentum,
particularly the U.K. and Germany,
due to our investments in marketing
and elevated product offerings,
along with the initiatives to expand
and enhance our distribution of
CALVIN KLEIN into new accounts
and regions and increasing our
penetration within existing doors.
While these measures have already
led to significant improvements in
Calvin Klein’s overall profitability, we
believe the opportunity exists to more
than double the size of the European
business over time, as the brand
remains underpenetrated relative
to its peers in the region.
We experienced momentum in China,
as Calvin Klein leveraged the brand’s
premium positioning to gain market
share amidst pressure in the luxury
sector, while some peers experienced
issues in the market. Regional results
were driven by healthy performance
across the jeans, underwear and
accessories categories, as well
as encouraging results from the
newer Calvin Klein Performance
business. While Hong Kong and
Korea experienced ongoing economic
headwinds, we were pleased to
see improving trends, as targeted
initiatives to drive traffic and cater to
local consumers are resonating.
The Calvin Klein North America
business posted 3% revenue growth
over 2015 due to strong performance
in the wholesale business, driven by
solid execution and strong consumer
response to product offerings,
including improving trends in our
jeanswear business. The business
performed well across our traditional
department store accounts and
benefited from efforts to enhance and
diversify distribution to a number of
key specialty stores and pure play
digital commerce retailers. In contrast
to the strong results at wholesale, the
U.S. outlet retail business remained
under pressure, as the stronger U.S.
° Figures exclude the impact of foreign currency. Refer to GAAP to non-GAAAP Reconciliations on pages 30 and 31.
+ Figure excludes certain amounts that were deemed non-recurring or non-operational, as well as excludes the impact of foreign currency.
Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
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dollar led to continued weakness in
traffic and consumer spending trends
in the business’s U.S. stores located
in international tourist locations.
During the year, we also made the
strategic decision to transition our
Mexico business to a joint venture in
partnership with Grupo Axo, S.A.P.I.
de C.V. along with the businesses
conducted in Mexico for our Tommy
Hilfiger, Warner’s, Olga and Speedo
brand names. We believe that Grupo
Axo will be a strong partner for us
as we seek to grow our Mexican
operations across our brands.
Advancing our digital strategy was a
top priority for Calvin Klein during the
year, as we continued to position all
of our businesses to succeed in the
rapidly changing retail environment.
Revenues grew over 30% across
our directly operated CALVIN KLEIN
digital sites globally, driven by site
elevation, increased product offerings
and investments in mobile. The
business also focused on growing its
penetration across the digital sites
operated by its wholesale customers
and pure play digital commerce
retailers, as this is a critical component
of its digital presence globally.
Calvin Klein also delivered strong
performance in its principal apparel
categories. Calvin Klein Underwear
continued to experience global
momentum, particularly in women’s,
and we believe that significant
opportunity still remains as we focus
on achieving a 50/50 split of men’s to
women’s product globally. Calvin Klein
Jeans continued its growth trajectory,
as the brand remains very strong in
Asia and Latin America and made
significant progress in Europe and
North America. Notably, the launch
of the Calvin Klein Jeans Sculpted
Jean resonated with consumers in
all regions. These two categories
achieved market share gains during
2016, demonstrating the power
“with the appointment of raf SimonS, CALVIN KLEIN
Began a momentouS new chapter in the Brand’S
hiStory. aS we continue to evoLve, thiS new
direction wiLL further Strengthen our premium
poSitioning worLdwide and pave the way for
Long-term gLoBaL growth.”
– Steven B. Shiffman
Chief Executive Officer, Calvin Klein
of the brand. As we continue to
grow jeans and underwear, we
believe that we can capitalize on
CALVIN KLEIN’s premium brand
positioning and consumer loyalty to
also grow the sportswear, accessories
and performance apparel product
categories, particularly in Asia
and Europe.
While the global consumer landscape
remains uncertain, we believe that
Calvin Klein is in a strong position
globally. We believe that we can
capitalize on the category
opportunities mentioned above,
while also expanding the brand’s
digital footprint, taking the European
business to the next level and
continuing to grow our businesses
in Asia. Additionally, under the
creative leadership of Raf Simons,
there are significant opportunities
to further commercialize the CALVIN
KLEIN brands and drive cross-
classification shopping through
design cohesiveness across all
product lines; this includes expanding
and enhancing CALVIN KLEIN 205
W39 NYC (formerly Calvin Klein
Collection) and leveraging the halo
that it provides to drive business
in the opening price point categories.
As the business executes on these
priorities, we are confident that
we can deliver a strong growth
trajectory for the brand globally over
the long-term.
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T
he Tommy Hilfiger brand’s health and relevance remained
exceptionally strong globally during 2016, as it solidified its status
as one of the world’s favorite american designer lifestyle brands.
The brand is experiencing momentum across all regions, as evidenced by
robust growth in digital sales globally, healthy performance in Europe and the
North America wholesale business, as well as strong performance in Asia.
Tommy Hilfiger introduced digital innovation throughout all areas of its business
in 2016 – from systems to wholesale processes to consumer-facing touch
points. We made investments in the business’s directly operated digital and
mobile platforms and advanced the digital businesses of its wholesale partners.
We also continued to roll out Tommy Hilfiger’s digital showrooms globally,
which have created a more engaging, integrated and seamless digitized
buying experience for our wholesale partners. Overall, these digital initiatives
drove revenue growth of nearly 30% year-over-year across all digital platforms.
We were pleased to see that the business’s digital efforts continue to be
recognized, as Tommy Hilfiger’s rank on the L2 Digital IQ index – Fashion
rose to #9 in 2016 out of 85 fashion brands from #12 in 2015.
LED By Our FOCuS ON iNNOvATiON, DiGiTAL
iNiTiATivES AND CONSumEr ENGAGEmENT,
TOmmy hiLFiGEr SOLiDiFiED iTS STATuS AS
ONE OF ThE wOrLD’S FAvOriTE AmEriCAN
DESiGNEr LiFESTyLE BrANDS
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Tommy Hilfiger experienced robust
performance in its international
business, as revenues grew 11%
(14%° on a constant currency basis).
Europe, the brand’s largest market,
continued to see strong momentum,
as comparable store sales grew 9%.
Strength was broad-based, with
growth across all major markets, as
the brand continues to experience
high levels of consumer awareness
and intent to purchase.
Strength in China also contributed to
Tommy Hilfiger’s 2016 performance.
We capitalized on opportunities to
grow the business by investing in
marketing, enhancing the in-store
and online experience and leveraging
the expertise of the PVH Asia Pacific
leadership team after completing
the acquisition of our China joint
venture partners’ interests in April.
Over time, we believe that we can
more than double the size of the
Tommy Hilfiger business in China,
as we open additional stores,
expand digital and pursue growth
categories, including tailored apparel,
underwear, performance apparel and
womenswear. We experienced other
achievements in Asia, as we saw an
improvement in our Japan business
and general strength across the Asia
Pacific region.
In North America, we experienced
positive selling trends at wholesale,
particularly on the men’s side,
as consumer appetite for the
brand remained strong across key
categories. We were particularly
pleased with our performance at
Macy’s, driven by strength across
nearly all of our category offerings.
We also made the strategic decision
to license our womenswear wholesale
business in the U.S. and Canada
to G-III Apparel Group, Ltd. We
believe that G-III will be able to
scale the business successfully
and profitably, given their strong
Global expansion continued
to be a key driver of our
strategy for the tommy
hilfiger business and we made
much progress on this initiative.
We continued to gain market share in
Europe, integrated the Tommy Hilfiger
China business (which we acquired
in April 2016) and transitioned the
Tommy Hilfiger business in Mexico
from a license to a joint venture in
November 2016, providing us with
more direct control over the business.
We will continue to identify other
regional growth opportunities for
Tommy Hilfiger, as we capitalize on
the strong global consumer appetite
for the brand and leverage the
established platforms that PVH has
in place globally.
Revenues for the Tommy Hilfiger
business grew 4%. Earnings before
interest and taxes increased 16%
on a GAAP basis and grew 18%+
on a non-GAAP and constant
currency basis compared to 2015.
This performance exceeded our
expectations, as our underlying
fundamentals remained healthy,
particularly driven by our international
businesses, including the addition
of the China business for part of the
year. We maintained a conservative
approach to inventory management
and delivered higher average unit
retail prices compared
to the prior year.
+ Figure excludes certain amounts that were deemed non-recurring or non-operational, as well as excludes the impact of foreign currency.
Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
° Figure excludes the impact of foreign currency. Refer to GAAP to Non-GAAP Reconciliations on pages 30 and 31.
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understanding of the North America
wholesale landscape and the female
department store consumer, as well
as the successful women’s wholesale
business they have built for Calvin
Klein. Our U.S. outlet retail business
remained under pressure, driven by
the significant decline in international
tourism and spending due to the
appreciation of the U.S. dollar against
major foreign currencies, resulting in
a 4% revenue decline for the Tommy
Hilfiger North America business.
Marketing and consumer engagement
continued to drive the Tommy Hilfiger
brand forward, with a dedicated focus
on our global growth categories,
which include women’s apparel and
accessories, underwear and men’s
tailored clothing.
One of the highest profile initiatives of
the year was the successful relaunch
of the global womenswear business
in the second half of the year.
The campaign featured millennial
supermodel Gigi Hadid as the global
ambassador for womenswear and
co-designer for the TommyXGigi
capsule collection. The partnership
enabled the brand to reach a new
female consumer by capitalizing
on Gigi’s impressive social media
following, which has surpassed 31
million Instagram followers.
The women’s relaunch debuted
at New York Fashion Week in
September 2016 where Tommy
Hilfiger took a leadership position
in the “Buy Now, Wear Now”
fashion week transformation with
#TOMMYNOW. The #TOMMYNOW
platform made the runway collection,
including TommyXGigi, immediately
available for purchase in all sales
channels in more than 70 countries,
including throughout our retail
partner network globally. Female
visitors to tommy.com aged 25-35
grew 75% year-over-year from the
initial launch in late August 2016
through December 2016, and the
#TOMMYNOW platform provided
a halo for all related categories,
particularly accessories, with double-
digit increases in sell-through for
womenswear achieved in all regions.
We also experienced success with
Tommy Jeans, our collection of
denim and related apparel offerings,
inspired by the brand’s iconic looks
from the ‘90s. Through this collection,
we expanded and improved the
line’s distribution to new accounts
including Urban Outfitters and ASOS.
On the men’s side, Tommy Hilfiger
continued its successful partnership
with Rafael Nadal, who serves
as global ambassador for Tommy
Hilfiger underwear, Tommy Hilfiger
Tailored and the Tommy Hilfiger Bold
fragrance.
We believe that Tommy Hilfiger is as
strong as ever on a global basis and
are optimistic about the brand’s path
forward. Our successful efforts to
enhance products, invest in digital,
and drive innovation and consumer
engagement give us confidence
that the business can achieve over
$8 billion in global retail sales by
2020. Additionally, we believe that
we can capitalize on the significant
organic growth opportunities that
exist, while also assuming more
direct control of various regions that
are currently licensed to deliver long-
term value for our stockholders.
“we are Bringing new Speed to our BuSineSS
modeL and increaSing conSumer-centricity By
inveSting in innovation and digitaLization in aLL
areaS. aS we further integrate end-to-end digitaL
SoLutionS acroSS our vaLue chain, we are opening
new wayS of Being aBLe to Serve our conSumerS
acroSS aLL touch pointS.”
– daniel grieder
Chief Executive Officer, Tommy Hilfiger Global and PVH Europe
We continued to deliver against our initiatives to improve
profitability in our heritage Brands business in 2016, despite
the challenging u.S. department store landscape. We adapted by
focusing on product differentiation, such as new technologies and fabrications
in many of our product lines. We also focused on digital commerce by growing
the online business of our Heritage Brands products with our traditional
wholesale partners and by expanding our relationships with pure play digital
commerce retailers. To achieve this, we realigned our teams and invested in
dedicated talent to better service these digital businesses, which drove positive
results. Across all of our businesses, inventory management was a critical
focus and we further leveraged our North American outlet store base to help
drive productivity of the overall business.
Revenues for the Heritage Brands business declined 10% year-over-year,
reflecting our previously announced rationalization initiatives to discontinue
various product lines that did not meet our profitability requirements, as well as
the exit from the Izod retail business in the third quarter of 2015.
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wE viEw Our hEriTAGE BrANDS BuSiNESS AS A KEy CASh CONTriBuTOr
TO pvh, whiCh ALLOwS uS TO rEiNvEST iN Our GrOwTh vEhiCLES
In our dress shirts business,
we saw an improvement in
profitability, driven by our
discontinuation of underperforming
licensed brands and prudent
inventory management. We continued
to see success with our Van Heusen
Flex Collar shirts and we leveraged
“flex” capabilities across other
branded shirt lines, as well as in
pants. The neckwear business
remained challenging, driven by
a shift to more casual business
attire, which we are addressing
by streamlining our business and
rationalizing certain product lines.
Our sportswear business experienced
headwinds, as we faced pressure
from the active-inspired trend. In
light of this, we remained focused
on achieving operational efficiencies
through our supply chain, including
SKU reductions and an emphasis
on core replenishment programs, as
well as speed initiatives. Our pants
business was a highlight, as Van
Heusen offered a Flex pant, to which
consumers responded well. We have
expanded the Van Heusen Flex Pant
to additional department store doors
for Spring 2017.
Our core intimates business
continued to post top line growth,
as we saw expansion in our key
product lines, including No Side
Effects, Cloud 9 and No Pinching,
No Problems. We sustained a healthy
level of profitability for the business,
driven by product innovation,
consumer insights and tailored
marketing. Additionally, our efforts to
strengthen our brand presentations
were successful, as Warner’s and
Olga experienced significant market
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share gains in the mass channel
and posted market share gains in
the department store channel for the
third consecutive year.
Speedo leveraged the brand’s
exposure from the 2016 Summer
Olympics to grow revenues during
2016. We expanded the brand’s
year-round relevance through Speedo
Fit, a program to promote awareness
for water-based fitness activities.
Goggles were a key focus area and
we continued to grow our leadership
in the category. Additionally, our
investments in the digital marketplace
paid dividends, with sales growing
double digits across speedousa.com
and our third party accounts. Despite
several bankruptcies in the sporting
goods space, Speedo continued to
diversify its distribution and appeal to
a wider range of consumers.
“in our heritage BrandS BuSineSSeS, we are
focuSing on product differentiation, digitaL
expanSion and SuppLy chain opportunitieS,
aS we Seek to drive the BuSineSS and return
to hiStoricaL LeveLS of profitaBiLity.”
– francis k. duane
Chief Executive Officer
Heritage Brands and North America Wholesale
Our Heritage Brands retail business
was a positive story for the year,
as consumers responded well
to our addition of IZOD Golf and
Warner’s product to the Van Heusen
product lines carried in the stores.
Accordingly, comparable store sales
rose 7%, while also posting improved
operating margins, yet still below
historical levels.
We view our Heritage Brands
business as a key contributor to PVH,
as it generates healthy cash flows and
allows us to reinvest in our growth
vehicles. Each of our heritage brands
has a unique history and position
in the marketplace and we believe
that we can capitalize on these
by maximizing their opportunities
and strengths. While the U.S. retail
environment remains a headwind, we
believe that we can return to historical
levels of profitability by continuing to
introduce innovative, new fabrications
and technologies and optimizing our
supply chain.
our chairman and ceo,
emanueL chirico, won CR
MAGAzINE’S reSponSiBLe
ceo “Lifetime achievement”
award in 2016, a teStament
to the great work and deep
commitment of our incrediBLe
and dedicated aSSociateS
around the worLd.
Corporate Responsibility (“CR”) is central to how we conduct business,
as we recognize both the opportunity and the responsibility for business
to take a lead role in addressing pressing global issues. We believe CR
helps strengthen our organization by managing risk, maximizing efficiencies
and driving value in a rapidly changing world. Through our collective efforts,
we seek to create value for both society and our business.
During 2016, we continued to evolve and strengthen our approach to CR by
launching our enhanced CR strategy, consisting of 10 core commitments
across three key focus areas: empowering people, preserving the environment,
and supporting communities. Our 10 commitments support 14 of the UN’s
17 Sustainable Development Goals, covering issues such as building safety,
chemical management, greenhouse gases, inclusion and diversity, and
supporting the needs of women and children. Further, our enhanced strategy
places a strong emphasis on the need to move beyond compliance to achieve
sustainable protection of the rights, dignity and livelihoods of the nearly one
million workers in PVH’s supply chain. We are also increasing our focus
on our environmental footprint and partnering with our suppliers to reduce
environmental impacts across our supply chain.
As the world continues to change rapidly, we maintain our unwavering
commitment to CR, as we believe that we can better drive progress in the areas
that matter most to our business, our industry and the world more broadly.
promote adherence to A SHAREd CoMMITMENT,
our code of conduct for BuSineSS partnerS,
and go Beyond compLiance to improve the LiveS
of workerS within our SuppLy chain.
In 2016, we celebrated the 25th anniversary of A Shared Commitment, our
code of conduct for our business partners, by signing the UN Global Compact.
We are committed to human rights and worker rights, safety and well-being.
We view factory assessments as the first step toward dialogue and continuous
improvement with our suppliers. During the year, we conducted approximately
2,150 CR assessments of Level 1^ suppliers and are evolving our assessment
program to include Level 2^ suppliers, with a greater focus on measuring
environmental impacts. We also continued to move beyond auditing of
compliance, completing over 500 capacity building activities and remediation
visits. Significantly, the Fair Labor Association re-accredited our program for
the third time, an affirmation of our human rights and labor law compliance
systems and procedures.
enSure Safe working conditionS for
workerS within our SuppLy chain
attract and retain worLd cLaSS taLent
By making pvh a great pLace to work
PVH consistently demonstrated strong performance in
achieving supplier remediation under the Accord for Fire
and Building Safety in Bangladesh, accelerating progress
on safety in our Bangladeshi suppliers’ factories. We have
helped to lead the way on rapid, effective remediation
among Accord members, which include over 200 apparel
brand owners, retailers and importers from 20 countries.
Nearly 90% of factory safety issues identified at our
suppliers’ factories by the Accord have been addressed.
We will continue to push for full remediation in all of our
Bangladeshi suppliers’ factories and will increase our
focus on empowering workers through health and safety
training and effective worker committees.
^ Level 1 suppliers include assembly and finishing factories, such as cut and sew and vertically-
integrated factories. Level 2 suppliers include raw material suppliers and wet processing units,
including fabric mills (weavers/knitters), dye houses, printers, laundry/wash/finishing units,
trim suppliers, embroidery units, converters/agents, molders and tanneries.
At PVH, we are committed to our core values – individuality,
partnership, passion, integrity and accountability – which
embody who we are as a company, guide our decisions and
inspire us. We believe that having top talent and exemplifying
these values is critical to our success; accordingly, we
continued to enhance our efforts to attract, retain and develop
our associates, while improving our PVH work environments.
In 2016, we formed several business resource groups,
including one supporting gender equality, to help contribute to
the success of the largest segment of our associate population
and our businesses. To emphasize this commitment, we signed
the UN’s Women’s Empowerment Principles during Women’s
History Month in March 2016, which seeks to promote gender
equality in the workplace. We also enhanced our recruiting
efforts by increasing our focus on corporate branding and
investing in additional talent management efforts in all of our
major offices. Our efforts to make PVH a great place to work
are being recognized, as PVH’s ranking on Fortune Magazine’s
“World’s Most Admired Companies” list rose to #3 in apparel in
2016, up from #4 the prior year.
inveSt in and Support pvh aSSociateS in reaching
their fuLL potentiaL in an incLuSive environment
where every individuaL iS vaLued
We expanded our in-class and online learning and development offerings
through PVH University, our global corporate university, in 2016. One of the most
popular courses was “Confronting Unconscious Bias.” This class, focused on
identifying unconscious bias and mitigating its impact in workplace interactions,
was completed by approximately 1,200 PVH leaders. Our online learning portal,
PVH U OnDemand, offers more than 2,000 courses to corporate associates
globally. Our associates appreciate the flexibility of learning anytime/anywhere
and invested more than 23,000 hours in online learning. Additionally, we
developed training programs focused on new and mid-level leaders and hosted a
series of “sold out” classes taught by our senior leaders on topics including CR,
finance and wholesale. Our efforts led to PVH University being recognized by
HR.com as one of the top three corporate universities in its Annual LEAD Awards.
practice reSponSiBLe chemicaLS management By reducing and phaSing out
hazardouS chemicaLS from our SuppLy chain By 2020
We introduced a standardized, risk-based approach to compliance testing in Fall 2016, focusing on the 11 priority
chemical classes we are working to eliminate from our supply chain by 2020. We began mapping all the Level 2
suppliers in our supply chain, the most chemical-intensive phase of production, to gain further insight into our
chemicals risks. These efforts are informing our chemical management and broader environmental strategies.
This year, we provided over 6,300 hours of chemical management training to Level 1 and Level 2 suppliers and
our supply chain teams, in line with our latest Restricted Substances List.
Safeguard and preServe water reSourceS to enSure continuity
and quaLity of water SuppLy for our BuSineSS and the community
We initiated in 2016 a water risk assessment with WWF International, to inform our global water strategy. We also signed the
UN’s CEO Water Mandate, alongside our Tommy Hilfiger business. The CEO Water Mandate is a multi-industry commitment
through which we commit to respect and report against six core principles on water stewardship. In conjunction with this,
we initiated efforts to conserve water in Ethiopia. Based on our efforts, we expect approximately 90% of water in Hawassa
Industrial Park (where we will be placing production) to be recycled, with the remaining 10% treated or evaporated. This
will ensure an ongoing supply of water for the park while conserving water for local communities and nature. Additionally,
Tommy Hilfiger continued its water stewardship program in the Taihu and Mekong River basins by working with suppliers,
industrial parks and local stakeholders to raise awareness on water risks in the area and the potential implications for
production in the region.
reduce the amount of packaging uSed in pvh
productS and work towardS zero materiaLS to
LandfiLL By uSing recycLaBLe materiaLS
We held our first Sustainable Packaging Summit in August 2016 to explore
insights, resources and solutions to reduce our on-product packaging and
use more recyclable and sustainable materials. We also calculated a global
packaging baseline, which will allow us to track our progress on sustainable
packaging over time. We have launched over 20 sustainable packaging
initiatives in our business divisions and are sharing best practices globally.
For example, the PVH dress shirts business now uses recyclable plastic trims
to package its shirts, resulting in 57% water savings and 51% energy savings
when compared to traditional PVC plastic.
Source raw materiaLS more SuStainaBLy to minimize
SociaL and environmentaL impactS aLong the SuppLy
chain
We analyzed our materials footprint to identify the volumes of all the materials
we use globally and the related risks. Our global materials strategy will initially
focus on cotton, which represents over two-thirds of our footprint, and animal-
derived materials. PVH has been focused on its raw materials use for several
years. For example, Tommy Hilfiger has been a member of the Better Cotton
Initiative since 2013 and, since then, it has sourced 10.1m kg of Better Cotton,
with Better Cotton now representing over 27% of Tommy Hilfiger’s cotton use
globally. We have been working on an animal welfare policy that we expect to
roll out in 2017.
meaSure and reduce pvh’S greenhouSe
gaS (“ghg”) emiSSionS By reducing energy
conSumption, increaSing energy efficiency
and utiLizing cLean energy Both in our
faciLitieS and acroSS our SuppLy chain
We calculated our second annual GHG footprint for Scope 1¥
and Scope 2¥ emissions, which totaled 148,726 metric tons.
The overall increase from 2015 is due to increased electricity
consumption and shifts in facilities across regions, including
adding stores in China to our portfolio. Notably, we reduced
our Scope 1 emissions, due to reductions from our truck fleet
and leased vehicles, as well as closing of North America stores,
some of which used natural gas. We also reduced our Scope 2
emissions in offices by increasing electricity efficiencies through
lighting measures and controls. We are working to establish
a global GHG reduction target to cut our global footprint for
Scope 1 and 2 emissions using science-based methodology and
a feasibility study. We also began developing GHG reduction
initiatives, with a focus on our retail and North American
operations. Importantly, we provided new levels of transparency
for investors by responding to the CDP Climate Change Survey
for the first time in 2016, achieving a B score.
GLOBAL GREENHOUSE GAS INVENTORY
mt co2e
ghg emissions by Scope
2015
2016
Scope 1 Emissions
Scope 2 Emissions
37,323
41,293
93,166 111,403
total ghg emissions
134,459 148,726
mt co2e
emission Source
1
Offices
Retail
Warehouses
Vehicles
3
2
2015
2016
16,194
13,909
97,240 112,123
19,874
18,800
2,820
2,225
total ghg emissions
134,459 148,726
1 Offices include emissions from showrooms.
2 Warehouses include emissions from distribution centers and
from our neckwear factory.
3 Includes fugitive emissions from vehicle refrigerants.
¥ Scope 1 includes direct GHG emissions from natural gas and combustion in boilers,
furnaces, and vehicles. Scope 2 includes indirect GHG emissions from consumption
of purchased electricity, heat or steam.
Support the needS of women and chiLdren By
creating Safe SpaceS, improving acceSS to education
and enhancing quaLity of Life
Through associate volunteerism and fundraising for local and regional
organizations, we are committed to our philanthropic mission to support the
needs of women and children around the world. During 2016, PVH contributed
nearly $25 million (including product contributions, cash contributions,
associate pledges, fundraising and retail consumer contributions).
We continued our global partnership with Save the Children, allocating
$1 million out of our $5 million Save the Children commitment to Youth
Employment programs in Sub-Saharan Africa. We also expanded our Save
the Children commitment to India, where we are supporting early education
for a targeted group of over 4,300 underprivileged children in Bangalore.
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DirECTOrS, OFFiCErS, ExECuTivES & BrAND mANAGEmENT
Directors
emanuel chirico
Chairman and Chief Executive Officer,
PVH Corp.
Director, Dick’s Sporting Goods, Inc.
Director since 2005
4
2,
mary Baglivo
Chief Marketing Officer/VP Global
Marketing, Northwestern University.
Director Host Hotels & Resorts, L.P.
Director since 2007
4
Brent callinicos
Chief Operating Officer and Chief
Financial Officer, Hyperloop Technologies
Inc. (d/b/a Hyperloop One), a company
leading the development of the
first operational hyperloop for the
transportation of people and cargo.
Director, Baidu, Inc.
Director since 2014
1
Juan r. figuereo
Executive Vice President and
Chief Financial Officer, Revlon, Inc.,
a global cosmetics, hair color, hair care
and hair treatments, beauty tools, men’s
grooming products, anti-perspirant
deodorants, fragrances, skincare and other
beauty care products company.
Director since 2011
3
Joseph B. fuller
Professor of Management Practice,
Harvard Business School;
Founder, Joseph Fuller, LLC,
a business consulting firm.
Director since 1991
1
v. James marino
Retired Chief Executive Officer,
Alberto Culver Company,
a personal care products company.
Director, Office Depot, Inc.
Director since 2007
4
geraldine (penny) mcintyre
Former Chief Executive Officer
of Sunrise Senior Living, LLC.,
a provider of senior living services.
Director since 2015
1
amy mcpherson
President and Managing Director,
Europe, Marriott International, Inc., the
world’s largest hotel company.
Director since 2017
2,
3
henry nasella
Partner and Co-Founder, LNK Partners,
a private equity investment firm.
Director since 2003
1
edward r. rosenfeld
Chairman (Director) and Chief Executive
Officer, Steven Madden, Ltd., a fashion
footwear and accessories company.
Director since 2014
2,
3
craig rydin
Operating Partner, LNK Partners, a private
equity investment firm; Former Chairman
of the Board of Directors, Yankee Holding
Corp.; Former Non-Executive Chairman,
The Yankee Candle Company, Inc.
Director, The Priceline Group Inc.
Director since 2006
2
Judith amanda Sourry knox
President, Global Foods Category
at Unilever, a personal care, foods,
refreshment and home care
consumer products company.
Director since 2016
1 Member, Audit & Risk Management Committee
2 Member, Compensation Committee
3 Member, Nominating, Governance & Management
Development Committee
4 Member, Corporate Responsibility Committee
Corporate Officers & Executives
emanuel chirico
Chairman and
Chief Executive Officer
david f. kozel
Executive Vice President,
Chief Human Resources Officer
michael a. Shaffer
Executive Vice President and
Chief Operating & Financial Officer
eileen mahoney
Executive Vice President,
Chief Information Officer
mark d. fischer
Executive Vice President,
General Counsel and Secretary
James w. holmes
Senior Vice President and Controller
dana m. perlman
Senior Vice President, Treasurer,
Business Development
and Investor Relations
melanie Steiner
Senior Vice President,
Chief Risk Officer
Brand Management
francis k. duane
Chief Executive Officer,
Heritage Brands and
North America Wholesale
daniel grieder
Chief Executive Officer,
Tommy Hilfiger Global
and PVH Europe
Steven B. Shiffman
Chief Executive Officer,
Calvin Klein
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9
OThEr iNFOrmATiON
Common Stock Transfer
Agent and Registrar
Wells Fargo Bank, N.A.
P.O. Box 64854
St. Paul, MN 55164-0854
Telephone: 1-800-468-9716
Website: www.shareowneronline.com
As of March 14, 2017, there were
670 holders of record of the Company’s
common stock
Stock Exchange
The Company’s common stock is listed on
the New York Stock Exchange under the
symbol “PVH.” Options on the Company’s
common stock are traded on the Chicago
Board Options Exchange.
Market Data
We obtained the market, competitive
position and similar data used throughout
this report from research, surveys or
studies conducted by third parties,
information provided by customers and
industry or general publications. Industry
publications and surveys generally state
that they have obtained information from
sources believed to be reliable but do not
guarantee the accuracy and completeness
of such information. While we believe that
each of these studies and publications and
all other information are reliable, we have
not independently verified such data and
we do not make any representation as to
the accuracy of such information.
Code of Ethics
The Company intends to post on its
corporate website any amendments to,
or waivers of, its Code of Ethics for
the Chief Executive Officer and Senior
Financial Officers that would otherwise
be reportable on a current report on
Form 8-K. Such disclosure would be
posted within four days following the
date of the amendment or waiver.
Corporate Website
www.pvh.com
Associates
The Company had approximately 35,000
associates as of January 29, 2017.
Trademarks
References in this Report to the brand
names CALVIN KLEIN, CALVIN KLEIN
205 W39 NYC, Calvin Klein Collection,
Tommy Hilfiger, Tommy Hilfiger Tailored,
Tommy Jeans, Van Heusen, IZOD,
Warner’s, Olga and Speedo and to
other brand names in this report are
to trademarks owned by us or licensed
to us by third parties and are identified
by italicizing or boldfacing the brand.
2017 Annual Meeting
The 2017 Annual Meeting of Stockholders
of PVH Corp. will be held at The Graduate
Center - City University of New York,
365 Fifth Avenue, Elebash Recital Hall,
Main Level, New York, New York on
Thursday, June 15, 2017 at 8:45 AM EDT.
Materials sent to stockholders relating
to the Annual Meeting are available at
www.pvhannualmeetingmaterials.com.
SEC Reports
the company’s annual report on form
10-k, quarterly reports on form 10-
q, current reports on form 8-k and
amendments thereto are available free
of charge on the company’s corporate
website. Requests for copies of such
reports can be made on the Company’s
corporate website or can be directed
to the attention of the Treasurer at the
Company’s principal office:
pvh corp.
200 Madison Avenue
New York, NY 10016-3903
(212) 381-3500
Forward-Looking Statements
This report contains “forward-looking
statements” (as defined in the U.S. Private
Securities Litigation Reform Act of 1995).
Most forward-looking statements contain
words that identify them as forward-
looking, such as “may”, “plan”, “seek”,
“will”, “expect”, “intend”, “estimate”,
“anticipate”, “believe”, “project”,
“opportunity”, “target”, “goal”, “growing”,
and “continue” or other words that relate
to future events, as opposed to past or
current events. By their nature, forward-
looking statements are not statements
of historical facts and involve risks and
uncertainties because they relate to
events and depend on circumstances
that may or may not occur in the future.
These statements give PVH’s current
expectation of future events or its future
performance and do not relate directly
to historical or current performance. As
such, PVH’s future results may vary from
any expectations or goals expressed in, or
implied by, the forward-looking statements
included in this presentation, possibly to a
material degree.
PVH cannot assure you that the
assumptions made in preparing any of
the forward-looking statements will prove
accurate or that any long-term financial
goals will be realized. All forward-looking
statements included in this report speak
only as of the date made and PVH
undertakes no obligation to update or
revise publicly any such forward-looking
statements.
PVH cautions you not to place undue
weight on forward-looking statements
pertaining to potential growth opportunities
and long-term financial goals. Actual
results may vary significantly from
these statements.
Corporate Responsibility
We publish an online report regarding
our Corporate Responsibility program.
The report is available at www.pvh.com/
responsibility. Questions regarding our CR
program may be directed to cr@pvh.com.
T
R
O
P
E
R
L
A
U
N
N
A
.
P
R
O
C
H
V
P
S
n
o
i
t
a
i
L
i
c
n
o
c
e
r
p
a
a
g
n
o
n
o
t
p
a
a
g
-
0
3
GAAp TO NON-GAAp rECONCiLiATiONS
(dollars and shares in millions, except per share data)
revenue – consolidated
$
8,203
gaap
adjustments1
non-gaap
foreign
exchange
impact
constant
currency
$
(100)
$
8,303
2016
revenue – Business data
Calvin Klein North America
Calvin Klein International
Calvin Klein
Tommy Hilfiger North America
Tommy Hilfiger International
Tommy Hilfiger
eBit – consolidated
eBit – Business data
Calvin Klein
Tommy Hilfiger
net income per
common Share calculation
Net Income (Loss)
Attributable to PVH Corp.
Total Shares for Diluted Net
Income per Common Share
$
$
$
1,690
1,445
3,135
1,563
1,948
3,511
789
334
464
$
(13)
(40)
(53)
(4)
(39)
(43)
$
1,703
1,485
3,188
1,567
1,987
3,554
939
483
476
$
$
(5)
(91)
73
$
$
794
$
(145)
425
391
$
(58)
(85)
$
$
$
549
$
(1)
$
550
81
81
Diluted Net Income per Common
Share Attributable to PVH Corp.
$
6.79
$
6.80
$
(1.65)
$
8.45
revenue – consolidated
$
8,020
2015
gaap
adjustments2
non-gaap
revenue – Business data
Calvin Klein North America
Calvin Klein International
Calvin Klein
Tommy Hilfiger North America
Tommy Hilfiger International
Tommy Hilfiger
eBit – consolidated
eBit – Business data
Calvin Klein
Tommy Hilfiger
net income per
common Share calculation
Net Income (Loss)
Attributable to PVH Corp.
Total Shares for Diluted Net
Income per Common Share
$
$
$
1,635
1,288
2,923
1,623
1,747
3,370
761
413
399
$
$
(81)
(21)
(3)
$
$
842
434
402
$
572
$
(14)
$
586
Diluted Net Income per Common
Share Attributable to PVH Corp.
$
6.89
83
83
$
7.05
P
V
H
C
O
R
P
.
A
N
N
U
A
L
R
E
P
O
R
T
-
g
a
a
p
t
o
n
o
n
g
a
a
p
r
e
c
o
n
c
i
L
i
a
t
i
o
n
S
3
1
GAAp TO NON-GAAp rECONCiLiATiONS
(dollars and shares in millions, except per share data)
net income per
common Share calculation
Net Income (Loss)
Attributable to PVH Corp.
Total Shares for Diluted Net
Income per Common Share
Diluted Net Income per Common
Share Attributable to PVH Corp.
$
5.27
83
2014
gaap
adjustments3
non-gaap
$
439
$
(169)
$
608
83
$
7.30
1 Adjustments for 2016 represent the elimination of (i) the costs incurred in connection with our integration of The Warnaco Group, Inc. (“Warnaco”)
and the related restructuring; (ii) the costs incurred in connection with the discontinuation of several licensed product lines in the Heritage Brands dress
furnishings business; (iii) the costs incurred in connection with the licensing to G-III Apparel Group, Ltd. of the Tommy Hilfiger womenswear wholesale
business in the U.S. and Canada (the “G-III license”), which resulted in the discontinuation of our directly operated Tommy Hilfiger North America
womenswear wholesale business in 2016; (iv) the costs incurred in connection with the restructuring associated with the new global creative strategy
for CALVIN KLEIN; (v) the noncash gain recorded to write-up our equity investment in TH Asia, Ltd. (“TH China”), our former joint venture for Tommy
Hilfiger in China, to fair value in connection with the acquisition of the 55% interest that we did not already own (the “TH China acquisition”); (vi) the
one-time costs recorded on our equity investment in TH China prior to the TH China acquisition closing; (vii) the costs incurred in connection with the
TH China acquisition, primarily consisting of noncash valuation adjustments and amortization of short-lived assets; (viii) the costs incurred in connection
with the amendment of our credit facility; (ix) the noncash costs recorded in connection with the deconsolidation of our subsidiary that principally operated
and managed our Calvin Klein business in Mexico in connection with the formation of a joint venture in Mexico to operate that and other businesses;
(x) the gain recorded in connection with a payment made to us to exit a Tommy Hilfiger flagship store in Europe; (xi) the costs incurred in connection with
the early termination of the license agreement for the Tommy Hilfiger men’s tailored clothing business in North America in order to consolidate under a
different licensee the men’s tailored businesses for all brands in North America; (xii) the recognized actuarial gain on retirement plans; (xiii) the tax effects
associated with the foregoing pre-tax items; and (xiv) the tax benefits associated with discrete items related to the resolution of uncertain tax positions.
2 Adjustments for 2015 represent the elimination of (i) the costs incurred in connection with our integration of Warnaco and the related restructuring;
(ii) the costs incurred in connection with the operation of and exit from the Izod retail business; (iii) the costs incurred principally in connection with the
discontinuation of several licensed product lines in the Heritage Brands dress furnishings business; (iv) the costs incurred in connection with the G-III
license; (v) the gain recorded on our equity investment in the parent company of the Karl Lagerfeld brand; (vi) the recognized actuarial gain on retirement
plans; (vii) the tax effects associated with the foregoing pre-tax items; and (viii) the tax benefits associated with discrete items related to the resolution of
uncertain tax positions and the impact of tax law and tax rate changes on deferred taxes.
3 Adjustments for 2014 represent the elimination of (i) the costs incurred in connection with our integration of Warnaco and the related restructuring;
(ii) the costs incurred in connection with our exit from the Izod retail business, including noncash impairment charges; (iii) the costs incurred in
connection with our exit from a discontinued product line in the Tommy Hilfiger Japan business; (iv) the impairment of certain Tommy Hilfiger stores
in North America; (v) the costs incurred related to the sale of our G.H. Bass & Co. business; (vi) the costs incurred in connection with the amendment
and restatement of our credit facility and the related redemption of our 7 3/8% senior notes due 2020; (vii) the net gain on the deconsolidation of certain
Calvin Klein subsidiaries in Australia and New Zealand and the previously consolidated Calvin Klein joint venture in India; (viii) the recognized actuarial
loss on retirement plans; (ix) the tax effects associated with the foregoing pre-tax items; and (x) the tax benefits associated with discrete items primarily
related to the resolution of uncertain tax positions and various Warnaco integration activities.
GAAp TO NON-GAAp rECONCiLiATiONS
Free Cash Flow (dollars in millions)
Cash Flow from Operations
Less:
Capital Expenditures
Contingent Payments to Mr. Klein
Dividends
Free Cash Flow
2014
2015
2016
$
789
$
900
$
955
257
51
12
469
$
264
51
12
573
$
247
53
12
$
643
We use non-GAAP financial measures to evaluate our operating performance and to discuss our business with investment institutions, our Board of
Directors and others. We believe these non-GAAP financial measures provide useful information to assist investors in evaluating the effectiveness of our
ongoing operations and underlying business trends and to facilitate a comparison of our current results against past and future results. While we believe
that these non-GAAP financial measures are useful in evaluating our business, this information should be viewed in addition to, and not in lieu of or
superior to, the comparable financial information calculated in accordance with GAAP. Please understand that these non-GAAP financial measures may
not be comparable to similarly titled measures reported by other companies.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 29, 2017
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 001-07572
PVH CORP.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
200 Madison Avenue, New York, New York
(Address of principal executive offices)
13-1166910
(I.R.S. Employer Identification No.)
10016
Zip Code
212-381-3500
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $1.00 par value
Name of Each Exchange
on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether 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
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
(do not check if a smaller
reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant (assuming,
for purposes of this calculation only, that the registrant’s directors and corporate officers are affiliates of the registrant) based upon the closing
sale price of the registrant’s common stock on July 31, 2016 (the last business day of the registrant’s most recently completed second quarter)
was $8,092,731,997.
Number of shares of Common Stock outstanding as of March 14, 2017: 78,203,197
DOCUMENTS INCORPORATED BY REFERENCE
Document
Registrant’s Proxy Statement
for the Annual Meeting of
Stockholders to be held on June 15, 2017
Location in Form 10-K
in which incorporated
Part III
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Forward-
looking statements in this Annual Report on Form 10-K including, without limitation, statements relating to our future revenue,
earnings and cash flows, plans, strategies, objectives, expectations and intentions are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not be
anticipated, including, without limitation, (i) our plans, strategies, objectives, expectations and intentions are subject to change at
any time at our discretion; (ii) we may be considered to be highly leveraged and we use a significant portion of our cash flows to
service our indebtedness, as a result of which we might not have sufficient funds to operate our businesses in the manner we
intend or have operated in the past; (iii) the levels of sales of our apparel, footwear and related products, both to our wholesale
customers and in our retail stores, the levels of sales of our licensees at wholesale and retail, and the extent of discounts and
promotional pricing in which we and our licensees and other business partners are required to engage, all of which can be
affected by weather conditions, changes in the economy, fuel prices, reductions in travel, fashion trends, consolidations,
repositionings and bankruptcies in the retail industries, repositionings of brands by our licensors and other factors; (iv) our plans
and results of operations will be affected by our ability to manage our growth and inventory, including our ability to realize
benefits from acquisitions; (v) our operations and results could be affected by quota restrictions and the imposition of safeguard
controls (which, among other things, could limit our ability to produce products in cost-effective countries that have the labor
and technical expertise needed), the availability and cost of raw materials, our ability to adjust timely to changes in trade
regulations and the migration and development of manufacturers (which can affect where our products can best be produced),
changes in available factory and shipping capacity, wage and shipping cost escalation, civil conflict, war or terrorist acts, the
threat of any of the foregoing, or political and labor instability in any of the countries where our or our licensees’ or other
business partners’ products are sold, produced or are planned to be sold or produced; (vi) disease epidemics and health related
concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of
goods produced in infected areas, as well as reduced consumer traffic and purchasing, as consumers become ill or limit or cease
shopping in order to avoid exposure; (vii) acquisitions and divestitures and issues arising with acquisitions, divestitures and
proposed transactions, including, without limitation, the ability to integrate an acquired entity or business into us with no
substantial adverse effect on the acquired entity’s, the acquired business’s or our existing operations, employee relationships,
vendor relationships, customer relationships or financial performance, and the disposal of the net assets of a divested entity;
(viii) the failure of our licensees to market successfully licensed products or to preserve the value of our brands, or their misuse
of our brands; (ix) our results could be adversely affected by the strengthening of the United States dollar against foreign
currencies in which we transact significant levels of business; (x) our retirement plan expenses recorded throughout the year are
calculated using actuarial valuations that incorporate assumptions and estimates about financial market, economic and
demographic conditions, and differences between estimated and actual results give rise to gains and losses that are recorded
immediately in earnings, generally in the fourth quarter of the year; and (xi) other risks and uncertainties indicated from time to
time in our filings with the Securities and Exchange Commission.
We do not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any
estimate regarding revenue, earnings or cash flows, whether as a result of the receipt of new information, future events or
otherwise.
PVH Corp.
Form 10-K
For the Year Ended January 29, 2017
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits, Financial Statement Schedules
Form 10-K Summary
Signatures
Exhibit Index
Index to Financial Statements and Financial Statement Schedule
1
18
26
27
27
27
28
29
30
53
53
53
53
54
55
55
55
55
55
56
62
63
64
F-1
Item 1. Business
Introduction
PART I
Unless the context otherwise requires, the terms “we,” “our” or “us” refer to PVH Corp. and its subsidiaries.
Our fiscal years are based on the 52-53 week period ending on the Sunday closest to February 1 and are designated by
the calendar year in which the fiscal year commences. References to a year are to our fiscal year, unless the context requires
otherwise. Our 2016 year commenced on February 1, 2016 and ended on January 29, 2017; 2015 commenced on February 2,
2015 and ended on January 31, 2016; and 2014 commenced on February 3, 2014 and ended on February 1, 2015.
We obtained the market and competitive position data used throughout this report from research, surveys or studies
conducted by third parties (including, with respect to the brand rankings, the NPD Group/POS Tracking Service), information
provided by customers and industry or general publications. The United States department and chain store rankings to which
we refer in this report are on a unit basis. Industry publications and surveys generally state that they have obtained information
from sources believed to be reliable but do not guarantee the accuracy and completeness of such information. While we believe
that each of these studies and publications and all other information are reliable, we have not independently verified such data
and we do not make any representation as to the accuracy of such information.
References to the brand names CALVIN KLEIN, CALVIN KLEIN 205 W39 NYC, CK Calvin Klein, Calvin Klein Jeans,
Calvin Klein Underwear, Tommy Hilfiger, Hilfiger Collection, Tommy Hilfiger Tailored, Hilfiger Denim, Van Heusen, IZOD,
ARROW, Warner’s, Olga, Eagle, Speedo, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John,
MICHAEL Michael Kors, Michael Kors Collection and Chaps, and to other brand names in this report are to registered
trademarks owned by us or licensed to us by third parties and are identified by italicizing the brand name.
References to the acquisition of Warnaco refer to our February 13, 2013 acquisition of The Warnaco Group, Inc. and
its subsidiaries, which companies we refer to collectively as “Warnaco.”
References to the acquisition of Tommy Hilfiger refer to our May 6, 2010 acquisition of Tommy Hilfiger B.V. and
certain affiliated companies, which companies we refer to collectively as “Tommy Hilfiger.”
References to our acquisition of Calvin Klein refer to our February 2003 acquisition of Calvin Klein, Inc. and certain
affiliated companies, which companies we refer to collectively as “Calvin Klein.”
Company Overview
We are one of the largest apparel companies in the world, with a history going back over 135 years. We have over
30,000 associates operating in over 40 countries. Our brand portfolio consists of nationally and internationally recognized
brand names, including the global designer lifestyle brands CALVIN KLEIN and Tommy Hilfiger, as well as Van Heusen, IZOD,
ARROW, Warner’s, Olga and Eagle, which are owned brands, and Speedo, Geoffrey Beene, Kenneth Cole New York, Kenneth
Cole Reaction, Sean John, MICHAEL Michael Kors, Michael Kors Collection and Chaps, which are licensed, as well as
various other owned, licensed and private label brands. We design and market branded dress shirts, neckwear, sportswear,
jeanswear, performance apparel, intimate apparel, underwear, swim products, handbags, accessories, footwear and other related
products. Additionally, we license our owned brands over a broad range of products. We sell our brands at multiple price points
and in multiple channels of distribution and geographies. This enables us to offer products to a broad range of consumers, while
minimizing competition among our brands and reducing our reliance on any one demographic group, merchandise preference,
price point, distribution channel or region. During 2016, our directly operated businesses in North America consisted
principally of wholesale men’s dress shirts, neckwear and underwear sales under our owned and licensed brands; wholesale
men’s sportswear sales under our CALVIN KLEIN, Tommy Hilfiger, Van Heusen, IZOD and ARROW brands; wholesale
womenswear sales under our Tommy Hilfiger brand (through the fourth quarter of 2016, at which time the business was
licensed to a third party); wholesale men’s and women’s jeanswear sales under our CALVIN KLEIN and Tommy Hilfiger brands;
wholesale women’s intimate apparel sales under our Calvin Klein Underwear, Warner’s and Olga brands; wholesale swimwear,
footwear, swim accessories and related product sales under the Speedo brand; the operation of digital commerce sites under the
CALVIN KLEIN, Tommy Hilfiger and Speedo brands; and the operation of retail stores, principally in premium outlet centers,
primarily under our CALVIN KLEIN, Tommy Hilfiger and certain of our heritage brands. As of the end of 2015, our Heritage
1
Brands retail business primarily consisted of our Van Heusen stores but, beginning in 2015, we started offering a limited
selection of IZOD Golf, Warner’s and Speedo products in some of our Heritage Brands stores. A majority of our Heritage
Brands stores now offer a broad selection of Van Heusen men’s and women’s apparel with limited selections of these other
brands, some of which feature multiple brand names on the door signage. During 2016, our directly operated businesses outside
of North America consisted principally of our wholesale and retail sales in Europe, Japan and, beginning in April 2016, China
under our Tommy Hilfiger brands; our wholesale and retail sales in Europe, Asia and Latin America under our CALVIN KLEIN
brands; and the operation of digital commerce sites under the CALVIN KLEIN and Tommy Hilfiger brands. Our licensing
activities principally related to the licensing worldwide of our CALVIN KLEIN and Tommy Hilfiger trademarks for a broad
range of lifestyle products and for specific geographic regions.
On November 30, 2016, we formed a joint venture in Mexico in which we own a 49% economic interest (“PVH
Mexico”). The joint venture was formed by merging our wholly owned subsidiary that principally operated and managed our
Calvin Klein business in Mexico with a wholly owned subsidiary of Grupo Axo, S.A.P.I. de C.V. that distributes certain Tommy
Hilfiger brand products in Mexico. In connection with the formation of PVH Mexico, we deconsolidated our wholly owned
subsidiary (the “Mexico deconsolidation”).
On April 13, 2016, we completed the acquisition of the 55% of the ownership interests in TH Asia, Ltd. (“TH China”),
our former joint venture for Tommy Hilfiger in China, that we did not already own (the “TH China acquisition”). As a result of
the TH China acquisition, we now operate directly our Tommy Hilfiger business in this high-growth market.
On February 1, 2016, we entered into a licensing agreement with G-III Apparel Group, Ltd. (“G-III”) for the design,
production and wholesale distribution of Tommy Hilfiger womenswear in the United States and Canada (the “G-III license”),
which resulted in the discontinuation of our directly operated Tommy Hilfiger North America womenswear wholesale business
in the fourth quarter of 2016.
We exited our Izod retail business in the third quarter of 2015.
Our history of acquisitions has made us a more diversified global organization, with an extensive brand portfolio,
retail footprint and distribution network, and a large consumer base. Our acquisition of Warnaco in 2013 provided us with
direct control of Calvin Klein’s two largest apparel categories, jeanswear and underwear, and followed our transformative
acquisitions of Tommy Hilfiger in 2010 and Calvin Klein in 2003. We will continue to explore strategic acquisitions of licensed
businesses, trademarks and companies that we believe are additive to our overall business.
We aggregate our segments into three main businesses: (i) Calvin Klein, which consists of the Calvin Klein North
America and Calvin Klein International segments; (ii) Tommy Hilfiger, which consists of the Tommy Hilfiger North America
and Tommy Hilfiger International segments; and (iii) Heritage Brands, which consists of the Heritage Brands Wholesale and
Heritage Brands Retail segments. Note 19, “Segment Data,” in the Notes to Consolidated Financial Statements included in Item
8 of this report contains information with respect to revenue, income before interest and taxes and assets related to each
segment, as well as information regarding our revenue generated from foreign and domestic sources, and the geographic
locations where our net property, plant and equipment is held.
Our 2016 revenue was $8.2 billion, of which approximately 50% was generated outside of the United States. Our
global designer lifestyle brands, CALVIN KLEIN and Tommy Hilfiger, together generated over 80% of our revenue during 2016.
Company Information
We were incorporated in the State of Delaware in 1976 as the successor to a business begun in 1881. Our principal
executive offices are located at 200 Madison Avenue, New York, New York 10016; our telephone number is (212) 381-3500.
We make available at no cost, on our corporate website, our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Exchange Act as soon as reasonably practicable after we have electronically filed such material with the Securities and
Exchange Commission. We also make available at no cost, on our corporate website, our Code of Business Conduct and Ethics.
Our corporate website address is pvh.com.
2
Calvin Klein Business Overview
We believe Calvin Klein is one of the best known designer names in the world, exemplifying bold, progressive ideals
and a seductive, and often minimal, aesthetic. Global retail sales of products sold under the CALVIN KLEIN brands were
approximately $8.4 billion in 2016. The CALVIN KLEIN brands provide us with the opportunity to market products both
domestically and internationally at various price points, through multiple distribution channels and to different consumer
groups. Our tiered-brand strategy provides a focused, consistent approach to global brand growth and development that
preserves the brand’s prestige and image. The CALVIN KLEIN brands are:
• Calvin Klein By Appointment — a bespoke collection with distinct looks handcrafted and made to measure in New
York, New York. The launch is a new high luxury tier of product for us, available exclusively by appointment
beginning April 1, 2017.
• CALVIN KLEIN 205 W39 NYC (formerly Calvin Klein Collection) — our “halo” brand, under which men’s and
women’s high-end designer ready-to-wear and accessories, as well as items for the home, are sold. Representing pure,
refined luxury, distribution is through our wholesale partners across the globe (in stores and online) and our own
flagship store on Madison Avenue in New York, New York, as well as through our Company-operated digital
commerce sites.
• CK Calvin Klein (formerly Calvin Klein Platinum)— our “contemporary” brand, offering modern, sophisticated,
fashionable items including apparel and accessories. Offerings are sold in the wholesale channel through specialty and
department store partners (in stores and online) in various regions, as well as in free-standing stores and online in Asia.
Distribution for the line is in the United States (through our Company-operated digital commerce site) and growing
internationally across select markets.
• CALVIN KLEIN — our “master” brand includes offerings such as men’s and women’s sportswear, outerwear,
fragrance, accessories, footwear, performance apparel, men’s dress furnishings, women’s dresses, suits and handbags,
and items for the home. Distribution is primarily in North America through our wholesale partners (in stores and
online), our own stores, our Company-operated digital commerce sites and pure play digital commerce retailers, and is
expanding internationally in select markets.
• Calvin Klein Jeans — offerings under this label include men’s and women’s jeans and related apparel, which are
distributed worldwide, and accessories, which are distributed in Europe, Asia and Brazil. With roots in denim, it is the
casual expression of the CALVIN KLEIN brand and is known for its unique details and innovative washes. Distribution
is through our own stores, our wholesale partners (in stores and online), our Company-operated digital commerce sites
and pure play digital commerce retailers.
• Calvin Klein Underwear — as one of the world’s leading designer underwear brands for men and women, Calvin
Klein Underwear is known across the globe for provocative, cutting-edge products and marketing campaigns,
consistently delivering innovative designs with superior fit and quality. Offerings under this label include men’s and
women’s underwear, women’s intimates, sleepwear and loungewear. Distribution is through our own stores, our
wholesale partners (in stores and online), our Company-operated digital commerce sites and pure play digital
commerce retailers.
Raf Simons was appointed as Chief Creative Officer of Calvin Klein in August 2016, marking the implementation of
Calvin Klein’s new global creative strategy to unify all of the CALVIN KLEIN brands under one creative vision. Mr. Simons
oversees all aspects of design, global marketing and communications, and visual creative services.
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In 2016, over $330 million was spent globally in connection with the advertising, marketing and promotion of the
CALVIN KLEIN brands and approximately 45% of these expenses were funded by Calvin Klein’s licensees and other
authorized users of the brands. The global 360° marketing campaigns, which are designed to engage consumers through
provocative, modern, sensual and iconic lifestyle imagery, are integral to CALVIN KLEIN. Our efforts in this area were
recognized in 2016, with CALVIN KLEIN receiving the Fashion Media Awards Ad Campaign of the Year award. In addition,
CALVIN KLEIN was ranked #9 on the L2 Digital IQ Index: Luxury China in 2016 and #12 on the L2 Digital IQ Index: Fashion
in 2016, which ranks the digital competence of global fashion brands across site, digital marketing, social media, mobile and
tablet.
Through our Calvin Klein North America and Calvin Klein International segments, we sell CALVIN KLEIN products
in a variety of distribution channels, including:
• Wholesale — We operate wholesale businesses through which we distribute and sell CALVIN KLEIN products to third
party retailers and distributors (in stores and online) and to pure play digital commerce retailers. Given the various
price points at which products under the various CALVIN KLEIN brands are sold, we have a range of wholesale
customers. For example, within North America, our men’s dress shirts, neckwear and sportswear under the CALVIN
KLEIN brand are marketed at better price points and are distributed principally in better department and specialty store
retailers (in stores and online). Our CALVIN KLEIN 205 W39 NYC and CK Calvin Klein dress shirts are sold into the
more limited channels of luxury or premier department and specialty store retailers (in stores and online), as well as
through free-standing stores. Our Calvin Klein Jeans and Calvin Klein Underwear products are primarily distributed
through department stores, chain stores, shop-in-shop/concession locations, stores operated under retail licenses and/or
distributor agreements, digital commerce sites operated by key department store customers and pure play digital
commerce retailers.
• Retail — We operate retail businesses in North America, Europe, Asia and Latin America. CALVIN KLEIN 205 W39
NYC brand men’s and women’s high-end designer ready-to-wear and accessories collections are marketed through our
flagship store located in New York, New York and online through our Company-operated digital commerce sites.
Additionally, we market the Calvin Klein By Appointment brand bespoke product exclusively by appointment at the
flagship store in New York, New York. We operate full-price and outlet stores and concession locations in Europe,
Asia and Brazil, where we principally offer Calvin Klein Jeans, Calvin Klein Underwear and CALVIN KLEIN
accessory offerings. Our CALVIN KLEIN stores in the United States and Canada are located primarily in premium
outlet centers and offer men’s and women’s apparel and other products under the CALVIN KLEIN brand to
communicate the CALVIN KLEIN lifestyle. CALVIN KLEIN products are also sold through the digital commerce sites
we operate in approximately 35 countries.
• Licensing — We license the CALVIN KLEIN brands throughout the world for use in connection with a broad array of
product categories. In these arrangements, Calvin Klein combines its design, marketing and branding skills with the
specific manufacturing, distribution and geographic capabilities of its partners to develop, market and distribute these
goods, most of which are subject to our prior approval and continuing oversight. Calvin Klein has approximately 60
licensing and other arrangements across the CALVIN KLEIN brands. The arrangements generally are exclusive to a
territory or product category. Territorial licensees include our joint ventures in Australia, India and Mexico.
Calvin Klein’s key licensing partners, and the products and territories licensed, include:
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Licensing Partner
Product Category and Territory
CK Watch & Jewelry Co., Ltd.
(Swatch SA)
Men’s and women’s watches (worldwide) and men’s and women’s jewelry (worldwide,
including Japan beginning January 2016)
CK21 Holdings Pte. Ltd.
Men’s and women’s CK Calvin Klein apparel (Asia, excluding Japan)
Coty Inc.
Men’s and women’s fragrance, bath products and color cosmetics (worldwide)
DWI Holdings, Inc. /
Himatsingka Seide, Ltd.
Soft home bed and bath furnishings (United States, Canada, Mexico, Central America,
South America and India)
G-III
Men’s and women’s coats, swimwear and luggage, and women’s suits, dresses, sportswear,
active performancewear, handbags and small leather goods (United States, Canada and
Mexico with distribution for certain lines in Europe and elsewhere)
Jimlar Corporation / LF USA,
Inc.
Men’s, women’s and children’s footwear (United States, Canada, Mexico and certain other
jurisdictions for the CALVIN KLEIN and CK Calvin Klein lines and worldwide for the
CALVIN KLEIN 205 W39 NYC and Calvin Klein Jeans lines)
Marchon Eyewear, Inc.
Men’s and women’s optical frames and sunglasses (worldwide)
McGregor Industries, Inc. /
American Essentials, Inc.
Men’s and women’s socks and women’s tights (United States, Canada, Mexico, Central
and South America, Europe, Middle East and Asia, excluding Japan)
Onward Kashiyama Co. Ltd.
Men’s and women’s CK Calvin Klein apparel (Japan)
Peerless Delaware, Inc.
Men’s tailored clothing (United States, Canada and Mexico)
The results of our Calvin Klein wholesale, retail and licensing activities in the United States, Canada and Mexico, and
our proportionate share of the net income or loss of our investment in the joint venture in Mexico are reported in our Calvin
Klein North America segment. The results of our Calvin Klein wholesale, retail and licensing activities outside of North
America, and our proportionate share of the net income or loss of our investments in joint ventures in Australia and India are
reported in our Calvin Klein International segment.
Tommy Hilfiger Business Overview
We believe Tommy Hilfiger is one of the world’s leading designer lifestyle brands and is internationally recognized for
celebrating the essence of classic American cool style, featuring preppy with a twist designs. Global retail sales of products sold
under the Tommy Hilfiger brands were approximately $6.6 billion in 2016. Our Tommy Hilfiger business markets its products
under several brands in order to fully capitalize on its global appeal, as each brand varies in terms of price point, demographic
target and distribution. The Tommy Hilfiger brands offer a breadth of collections, including tailored clothing, sportswear,
denim, accessories, underwear and footwear, and consist of:
• Hilfiger Collection — this line represents the pinnacle of the Tommy Hilfiger product offerings and features its most
directional styles for women, blending the brand’s Americana styling with contemporary influences. The collection
targets 25 to 40 year-old consumers and includes designs that premiere on the runway during New York Fashion
Week. Hilfiger Collection is available globally at select Tommy Hilfiger stores, through our wholesale partners (in
stores and online), and through our Company-operated digital commerce sites.
•
Tommy Hilfiger Tailored — this line reflects the brand’s American menswear heritage in elevated, sophisticated styles
that are suitable for more formal occasions. From structured suiting to more relaxed tailoring, classics are modernized
with precision fit, premium fabrics, updated cuts, rich colors and luxurious details executed with the brand’s signature
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twist. Tommy Hilfiger Tailored targets 25 to 40 year-old consumers and is available globally at select Tommy
Hilfiger stores, through our wholesale partners (in stores and online) and through our Company-operated digital
commerce sites.
•
Tommy Hilfiger — our core line embodies the brand’s classic American cool spirit with a broad selection of designs
across more than 25 categories, including men’s, women’s and kids’ sportswear, footwear and accessories. With a
focus on the 25 to 40 year-old consumer, Tommy Hilfiger is internationally recognized for celebrating the essence of
classic American style with a fresh, modern twist inspired by pop culture — from fashion, art and music to sports and
entertainment. Products are sold domestically and internationally in our Tommy Hilfiger specialty and outlet stores and
through our wholesale partners (in stores and online), our Company-operated digital commerce sites and pure play
digital commerce retailers.
• Hilfiger Denim — this line brings authentic American denim with a modern edge to the global consumer, with
offerings that are more casual and trend-oriented than the Tommy Hilfiger label. Targeting the 18 to 30 year-old denim-
oriented consumer, the line focuses on premium denim separates, footwear, bags, accessories, eyewear and fragrance.
Products are primarily sold outside North America and can be purchased in our Tommy Hilfiger stores and through
our wholesale partners (in stores and online), our Company-operated digital commerce sites and pure play digital
commerce retailers.
Global marketing campaigns are integral to Tommy Hilfiger, with a focus on driving awareness, consistency and
relevancy across product lines and regions. Tommy Hilfiger engages consumers through comprehensive 360° marketing
campaigns and spent over $160 million on global marketing and communications efforts in 2016, with a particular focus on
innovative experiences and digital marketing initiatives. The global brand power and digital expertise of Tommy Hilfiger are
being recognized; in 2016, L2 ranked Tommy Hilfiger #9 on its 2016 Digital IQ Index: Fashion.
Through our Tommy Hilfiger North America and Tommy Hilfiger International segments, we sell Tommy Hilfiger
products in a variety of distribution channels, including:
•
•
•
Wholesale — The Tommy Hilfiger wholesale business consists of the distribution and sale of products in North
America, Europe and China under the Tommy Hilfiger brands to third party retailers and distributors (in stores and
online), franchisees and pure play digital commerce retailers. Tommy Hilfiger has, since 2008, made the majority of
its North American wholesale sales to Macy’s, Inc. (“Macy’s”), which is currently the exclusive department store
retailer for Tommy Hilfiger men’s sportswear in the United States. During 2016, we entered into the G-III license,
which resulted in the discontinuation of our directly operated Tommy Hilfiger North America womenswear wholesale
business in the fourth quarter of 2016. Tommy Hilfiger also has a wholesale business in Canada selling men’s
sportswear and dress furnishings, as well as accessories, to Hudson’s Bay Company, Canada’s leading department
store.
Retail — The Tommy Hilfiger retail business principally consists of the distribution and sale of Tommy Hilfiger
products in North America, Europe, Japan, and China through Company-operated full-price specialty and outlet stores,
as well as through Company-operated digital commerce sites. Tommy Hilfiger specialty stores consist of flagship
stores, which are generally larger stores situated in high-profile locations in major cities and are intended to enhance
local exposure of the brand, and anchor stores, which are located on high-traffic retail streets and in malls in secondary
cities and are intended to provide incremental revenue and profitability. Outlet stores in North America are primarily
located in premium outlet centers and carry specially designed merchandise that is sold at a lower price point than
merchandise sold in our specialty stores. Outlet stores operated by Tommy Hilfiger outside of North America are used
primarily to clear excess inventory from previous seasons at discounted prices and, to a lesser extent, carry specially
designed merchandise.
Licensing — We license the Tommy Hilfiger brands to third parties both for specific product categories and in certain
geographic regions, and generally on an exclusive basis. Tommy Hilfiger has over 25 license agreements. We provide
support to our licensing partners and seek to preserve the integrity of our brands by taking an active role in the design,
quality control, advertising, marketing and distribution of each licensed product, most of which are subject to our prior
approval and continuing oversight. Territorial licensees include our joint ventures in Australia, Brazil, India and
Mexico.
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Tommy Hilfiger’s key licensing partners, and the products and territories licensed, include:
Licensing Partner
Product Category and Territory
American Sportswear S.A.
Men’s, women’s and children’s sportswear, accessories and Hilfiger Denim distribution
(Central America and South America (excluding Brazil))
Aramis, Inc.
Fragrance, cosmetics, skincare products and toiletries (worldwide)
Dickson Concepts
(International) Limited
Men’s, women’s and children’s sportswear and Hilfiger Denim distribution (Hong Kong,
Macau, Malaysia, Singapore and Taiwan)
G-III
Men’s, women’s and juniors’ outerwear, luggage, women’s dresses and women’s apparel
(excluding intimates, sleepwear, loungewear, hats, scarves, gloves and footwear) (United
States and Canada)
GBG Youth Apparel LLC
Boys’ and girls’ apparel (United States, Canada, Puerto Rico and Guam (Macy’s stores
only)) and school uniforms (United States)
Hyundai G&F Co., Ltd.
Men’s, women’s and children’s sportswear and Hilfiger Denim distribution (South Korea)
Marcraft Clothes, Inc.
Men’s tailored clothing (United States and Canada) (We have announced that this category
will be licensed to Peerless Clothing International, Inc. beginning January 1, 2018)
MBF Holdings LLC
Men’s and women’s footwear (United States and Canada)
Movado Group, Inc. & Swissam
Products, Ltd.
Men’s and women’s watches and jewelry (worldwide, excluding Japan (except certain
customers))
Safilo Group S.P.A.
Men’s, women’s and children’s eyeglasses and non-ophthalmic sunglasses (worldwide,
excluding India)
The results of our Tommy Hilfiger wholesale, retail and licensing activities in the United States, Canada and Mexico,
and our proportionate share of the net income or loss of our investment in the joint venture in Mexico are reported in our
Tommy Hilfiger North America segment. The results of our Tommy Hilfiger wholesale, retail and licensing activities outside of
North America, and our proportionate share of the net income or loss of our investments in joint ventures in Australia, Brazil
and India are reported in our Tommy Hilfiger International segment.
Heritage Brands Business Overview
Our Heritage Brands business encompasses the design, sourcing and marketing of a varied selection of prominent
brand label dress shirts, neckwear, sportswear, swim products, intimate apparel, underwear and related apparel and accessories,
as well as the licensing of our Van Heusen, IZOD, ARROW, Warner’s and Olga brands for an assortment of products. The
Heritage Brands business also includes private label dress furnishings programs, particularly neckwear programs. We design,
source and market substantially all of these products on a brand-by-brand basis, targeting distinct consumer demographics and
lifestyles in an effort to minimize competition among our brands. We distribute our Heritage Brands products at wholesale
through national and regional department, chain, specialty, mass market, club, off-price and independent stores (in stores and
online) in the United States and Canada, as well as through select pure play digital commerce retailers. As a complement to our
wholesale business, which is our core business, we also market products directly to consumers through our Heritage Brands
stores, principally located in outlet centers throughout the United States and Canada. We currently sell our products online
through our directly operated digital commerce site for Speedo, through the digital commerce sites of our third party retail
partners and through select pure play digital commerce retailers.
Heritage Brands Wholesale. Our Heritage Brands Wholesale segment principally consists of:
• The design and marketing of men’s dress shirts and neckwear primarily to department, chain, specialty, mass market,
club and off-price retailers (in stores and online through select wholesale partners), as well as pure play digital
commerce retailers. We market both dress shirts and neckwear under brands including Van Heusen, ARROW, IZOD,
Eagle, Sean John, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, MICHAEL Michael Kors and
Michael Kors Collection. We also market dress shirts under the Chaps brand, among others. We also offer private label
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dress shirt and neckwear programs to retailers, primarily national department and mass market stores. Collectively, our
product offerings represent a sizeable portion of the domestic dress furnishings market.
We license certain of the brands under which we sell men’s dress shirts and neckwear. The following table provides
information with respect to the expiration of the licenses for the more significant brands (as determined based on 2016
sales volume):
Brand Name
Geoffrey Beene
Licensor
Geoffrey Beene, LLC
Expiration
December 31, 2021, with a right of
renewal (subject to certain conditions)
through December 31, 2028
Kenneth Cole New York and
Kenneth Cole Reaction
Kenneth Cole Productions (Lic),
Inc.
December 31, 2019
Chaps
The Polo/Lauren Company, LP
and PRL USA, Inc.
March 31, 2020
MICHAEL Michael Kors
Michael Kors, LLC
January 31, 2019, with a right of renewal
(subject to certain conditions) through
January 31, 2022
• The design and marketing of sportswear, including men’s sport shirts, sweaters, bottoms and outerwear, at wholesale,
principally under the IZOD, Van Heusen and ARROW brands primarily to department, chain, specialty, mass market,
club and off-price retailers, as well as pure play digital commerce retailers. We believe that we had some of the best-
selling brands in the men’s sport shirts category in United States department and chain stores in 2016.
• The design and marketing of certain men’s, women’s and children’s swimwear, pool and deck footwear and swim
related products and accessories, such as swim goggles, learn-to-swim aids, water-based fitness products and training
accessories under the Speedo trademark. The Speedo brand is exclusively licensed to us for North America and the
Caribbean in perpetuity from Speedo International Limited. We primarily distribute Speedo products through mass
market stores, sporting goods stores, team dealers, swim clubs, off-price stores, catalog retailers and digital commerce
sites, including Speedo’s speedousa.com digital commerce site and pure play digital commerce retailers.
• The design and marketing of women’s intimate apparel, shapewear and loungewear under the Warner’s and Olga
brands. Warner’s and Olga women’s intimate apparel is primarily distributed in the United States and Canada through
various retail channels, including department, chain, club, off-price and mass market retailers (in stores and online), as
well as pure play digital commerce retailers. Warner’s and Olga were the third and eighth best selling brands for bras
and panties in United States chain stores in 2016, respectively.
Heritage Brands Retail. Our Heritage Brands Retail segment consists of the operation of stores, primarily in outlet
centers throughout the United States and Canada. Our stores primarily offer Van Heusen men’s dress shirts, neckwear and
underwear, men’s and women’s suit separates, men’s and women’s sportswear, including woven and knit shirts, sweaters,
bottoms and outerwear, and men’s and women’s accessories. A limited selection of IZOD Golf, Warner’s and Speedo products
are also sold in some of our Heritage Brands stores.
Licensing. We license our heritage brands globally for a broad range of products through approximately 35 domestic
and 40 international license agreements covering approximately 160 territories. The arrangements generally are exclusive to a
territory or product category. Territorial licenses include our joint ventures in Australia and Mexico. We believe that licensing
provides us with a relatively stable flow of revenues with high margins and extends and strengthens our brands.
We grant licensing partners the right to manufacture and sell at wholesale specified products under one or more of our
brands. In addition, certain foreign licensees are granted the right to open retail stores under the licensed brand name. A
substantial portion of the sales by our domestic licensing partners is made to our largest wholesale customers. We provide
support to our licensing partners and seek to preserve the integrity of our brands by taking an active role in the design, quality
control, advertising, marketing and distribution of each licensed product, most of which are subject to our prior approval and
continuing oversight.
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Our heritage brands licensing partners, and the products and territories licensed by them, include:
Licensing Partner
Product Category and Territory
Arvind Lifestyle Brands LTD.
ARROW men’s and women’s dresswear, sportswear and accessories (India, Middle East,
Egypt, Ethiopia, Maldives, Nepal, Sri Lanka and South Africa); IZOD men’s and women’s
sportswear and accessories (India and Middle East)
ECCE
F&T Apparel LLC
ARROW men’s and women’s dresswear, sportswear and accessories (France, Switzerland
and Andorra)
Van Heusen and ARROW boys’ dress furnishings and sportswear; IZOD boys’ sportswear;
IZOD and ARROW boys’ and girls’ school uniforms; ARROW men’s tailored clothing;
IZOD boys’ tailored clothing (United States and Canada)
I.C.C. International Public
Company, Ltd.
ARROW men’s dress furnishings, tailored clothing, sportswear and accessories; ARROW
women’s dresswear and sportswear (Thailand, Myanmar, Laos, Cambodia and Vietnam)
Peerless Delaware, Inc.
Van Heusen and IZOD men’s tailored clothing (United States, Canada and Mexico)
Van Dale Industries, Inc.
IZOD women’s intimates and sleepwear; Warner’s and Olga women’s shapewear,
sleepwear, loungewear and athletic wear (United States and Canada)
Basic Resources, Inc.
Van Heusen and IZOD men’s and boy’s knit and woven underwear (United States and
Canada)
The results of our Heritage Brands wholesale and licensing activities and our proportionate share of the net income or
loss of our investment in joint ventures in Australia and Mexico are reported in our Heritage Brands Wholesale segment. The
results of our Heritage Brands retail activities are reported in our Heritage Brands Retail segment.
Our Business Strategy
We are one of the largest apparel companies in the world, with over $8.2 billion in revenues in 2016. We see
opportunity for growth as we employ our strategic initiatives across our organization. Our global growth strategies include:
• Driving consumer engagement by investing in our product, marketing and in-store and online experiences;
• Expanding CALVIN KLEIN’s and Tommy Hilfiger’s worldwide reach and assuming more direct control over various
licensed businesses;
•
Investing in our global operating and digital platforms to support our growth initiatives;
• Developing and retaining talent through career development opportunities, while providing an inclusive workplace
where every individual is valued;
• Generating solid free cash flow to drive sustainable long-term growth and stockholder returns; and
• Having a positive impact on the communities in which we live and work.
Calvin Klein Business
We believe significant growth opportunities exist to drive CALVIN KLEIN global retail sales further over time,
including:
• Enhancing CALVIN KLEIN’s global brand relevance and premium designer status worldwide through marketing
campaigns and consumer engagement initiatives designed to drive growth and further resonate with more youth-
minded consumers.
• Driving product improvement and expansion, particularly within apparel, accessories and women’s intimates.
Apparel — In Europe, our CALVIN KLEIN apparel assortments are underpenetrated compared to our Tommy
Hilfiger offerings. We believe that we can grow our European apparel sales, given CALVIN KLEIN’s strong
brand positioning and our proven success with Tommy Hilfiger in Europe.
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Accessories — We see opportunity to grow our handbag, small leather goods and accessories offerings across
our geographies with the largest opportunities existing in Asia and Europe, as Calvin Klein Accessories has a
very limited penetration in those markets.
Women’s Intimates — We believe that we can further expand and improve the performance of our women’s
intimates assortments, particularly as we leverage our strong positioning and brand awareness in men’s
underwear. To that end, we have been focused on improving our designs, detailing and quality. Fit has been
another key focus area, as we are adding extended women’s sizing and tailoring products and fit to
accommodate different regional markets. Additionally, our growth in logo product (including the Modern
Cotton collection) is helping us engage with youth-minded shoppers, which has been additive to the
existing Calvin Klein Underwear women’s customer base.
•
Pursuing growth channels, including digital commerce, specialty stores and travel retail, while opportunistically
opening specialized brick and mortar locations.
• Gaining greater control of the brand, as we continue to evolve from licensor to owner.
• Evolving our supply chain, including through our speed to market initiatives, to drive efficiencies and other benefits.
Tommy Hilfiger Business
We believe significant growth opportunities exist to drive further global retail sales of Tommy Hilfiger, including
through:
• Enhancing global brand relevance, with marketing campaigns and consumer engagement initiatives designed to drive
growth and reflect Tommy Hilfiger’s accessible luxury positioning and classic American cool aesthetic.
• Category expansion, particularly within womenswear and accessories, men’s tailored clothing, and underwear.
Womenswear and accessories —We believe that we can grow our womenswear assortments, including
accessories, globally as the Tommy Hilfiger brand remains underpenerated in this category. We see the
biggest opportunity in Asia, where the brand is significantly underpenetrated compared to our European or
North American businesses. Throughout 2016, we undertook several efforts to raise awareness of and to
support this business, including launching the global ambassadorship with Gigi Hadid and entering into the
G-III license to drive the North American womenswear wholesale business.
Men’s tailored clothing — We believe that we can grow this business as we leverage our core competencies
in dress furnishings and tailored apparel and expand internationally. In January 2017, we announced that the
license for the Tommy Hilfiger men’s tailored clothing business in North America with Marcraft Clothes,
Inc. will be terminated effective December 31, 2017. Beginning January 1, 2018, the license will move to
Peerless Clothing International, Inc. in order to consolidate our men’s tailored clothing businesses for all of
our brands in North America under one partner and drive the business forward.
Underwear — We see significant room to grow the Tommy Hilfiger underwear business, as we leverage our
Calvin Klein Underwear expertise with regards to fit, styling, sourcing and fabrics.
• Continuing regional expansion, particularly in Asia, as reflected by the TH China acquisition.
•
Pursuing growth through digital commerce.
• Evolving our supply chain, including through our speed to market initiatives, to drive efficiencies and other benefits.
Heritage Brands Business
Our Heritage Brands business is our original business, is where we developed our core competencies and is an
important complement to our global designer brand businesses. We believe that this business can continue to capture market
share and generate healthy cash flows as we execute against our key strategic initiatives, including:
• Brand management, as we are committed to designing and marketing quality, trend-right products that offer great
value to our customers.
• Leveraging and enhancing each division’s positioning in the market. This includes:
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Dress Furnishings — We operate the world’s largest dress shirt and neckwear business. We are focused on
maintaining and expanding our positioning as we introduce innovation, such as the Van Heusen Flex Collar,
and expand across channels.
Sportswear — We are focused on elevating our sportswear offerings through quality, detailing, fashion and
innovation, while also expanding our distribution across our wholesale partners, with an emphasis on driving
our digital sales penetration. We are focused on strengthening our position in the mid-tier department stores,
reinforcing the value equation for each brand and growing through cross-channel expansion.
Core Intimates — We see a healthy path of growth for Warner’s and believe that we can expand our
distribution, particularly within the mass market channel. We have enhanced our existing assortments,
particularly bras, with new technologies, solutions-based innovation and more comfortable products, along
with investing in new marketing campaigns and enhanced fixtures across our wholesale presentations.
Swimwear — We plan to continue to extend our product offerings of swimwear and swim products to a
wider audience. Speedo is on the cutting edge of technology and innovation in the competitive swimwear
arena and we are continually enhancing the product assortment to reflect the latest advancements. We see
potential to broaden the brand’s customer base and relevance beyond the competitive swimmer population to
reach more general fitness and recreational consumers.
• Maximizing distribution, particularly through wholesale partners (in store and online) and pure play digital commerce
retailers.
• Enhancing profitability by capitalizing on supply chain opportunities and maintaining a critical focus on inventory
management.
Other Strategic Opportunities
While we believe we have an attractive and diverse portfolio of brands with growth potential, we will continue to
explore acquisitions of companies or trademarks and licensing opportunities that we believe are additive to our overall
business. New license opportunities allow us to fill new product and brand portfolio needs. We take a disciplined approach to
acquisitions, seeking brands with broad consumer recognition that we can grow profitably and expand by leveraging our
infrastructure and core competencies and, where appropriate, by extending the brand through licensing.
Seasonality
Our business generally follows a seasonal pattern. Our wholesale businesses tend to generate higher levels of sales in
the first and third quarters, while our retail businesses tend to generate higher levels of sales in the fourth quarter. Royalty,
advertising and other revenue tends to be earned somewhat evenly throughout the year, although the third quarter has the
highest level of royalty revenue due to higher sales by licensees in advance of the holiday selling season. We expect this
seasonal pattern will generally continue.
Design
Our businesses depend on our ability to stimulate and respond to consumer tastes and demands, as well as on our
ability to remain competitive in the areas of quality and delivering a compelling price value proposition.
A significant factor in the continued strength of our brands is our in-house design teams. We form separate teams of
designers and merchandisers for each of our brands, creating a structure that focuses on the special qualities and identity of
each brand. These designers and merchandisers consider consumer taste and lifestyle and trends when creating a brand or
product plan for a particular season. Additionally, Calvin Klein and Tommy Hilfiger tailor products and fit for different regional
markets in order to appeal to local tastes, sizing differences or other preferences, while maintaining the cohesive creative vision
for each brand. The process from initial design to finished product varies greatly but generally spans six to ten months prior to
each retail selling season. Our product lines are developed primarily for two major selling seasons, Spring and Fall. However,
certain of our product lines offer more frequent introductions of new merchandise.
Calvin Klein implemented a new global creative strategy to unify all of the CALVIN KLEIN brands under one creative
vision during 2016. As part of this strategy, Raf Simons was appointed as Chief Creative Officer of Calvin Klein and is
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responsible for leading the creative strategy of the brand globally, as well as overseeing all aspects of design, global marketing
and communications, and visual creative services. Mr. Simons’ first collections for CALVIN KLEIN 205 W39 NYC were
presented in February 2017 at New York Fashion week and will be available for sale in Fall 2017. He also introduced Calvin
Klein By Appointment, a bespoke collection of distinct looks handcrafted and made to measure in New York, New York,
available exclusively by appointment. Mr. Simons’ team also controls design operations and product development for most
licensees and other strategic partners.
Tommy Hilfiger seeks to reinforce the premium positioning of the Tommy Hilfiger brands by taking a coordinated and
consistent worldwide approach to brand management. We believe that regional execution and adaptation helps us anticipate,
identify and respond more readily to changing consumer demand, fashion trends and local tastes or preferences. It also reduces
the importance of any one collection and enables the brand to appeal to a wider range of customers.
Product Sourcing
Our capabilities for worldwide procurement and sourcing enable us to deliver to our customers competitive, high
quality and low cost goods on a timely basis. We have an extensive established network of worldwide sourcing partners that
enables us to meet our customers’ needs in an efficient manner and not rely on any one vendor or factory or on vendors or
factories in any one country. Our products were produced in over 1,600 factories in over 50 countries during 2016. All but one
of these factories was operated by independent manufacturers, with most being located in Asia. The manufacturers of our
products are required to meet our quality, human rights, safety, environmental and cost requirements. We source finished
products and, to a lesser extent, raw materials and trim. Raw materials and trim include fabric, buttons, thread, labels and
similar components. Raw materials, trim, and production commitments are generally made two to six months prior to
production, and quantities are finalized at that time. We believe we are one of the largest users of shirting fabric in the world.
Finished products consist of manufactured and fully assembled products ready for shipment to our customers and our stores.
We believe that an ample number of alternative suppliers exist should we need to secure additional or replacement production
capacity and raw materials.
Our global supply chain teams, offices and buying agents enable us to monitor the quality of the goods manufactured
by, and the delivery performance of, our suppliers, and work with our global compliance teams to ensure the enforcement of
our human rights and labor standards and other code of conduct requirements through our ongoing extensive training, approval
and monitoring system. Our purchases from our suppliers are effected through individual purchase orders specifying the price,
quantity, delivery date and destination of the items to be produced. Sales are monitored regularly at both the retail and
wholesale levels and modifications in production can be made either to increase or reduce inventories. We look to establish
long-term supplier relationships in the appropriate locations throughout the world to meet our needs and we place our orders in
a manner designed to limit the risk that a production disruption at any one facility could cause a serious inventory problem,
while maximizing the business opportunity.
During the second quarter of 2016, we formed a joint venture, PVH Arvind Manufacturing Private Limited Company
(“PVH Ethiopia”), in Ethiopia with Arvind Limited (“Arvind”). PVH Ethiopia was formed to operate a manufacturing facility
that will produce finished products for us to distribute primarily in the United States. We expect the manufacturing facility to
begin operations in the first half of 2017.
In March 2017, we entered into agreements for a transaction to restructure our supply chain relationship with Li &
Fung Trading Limited (“Li & Fung”). The transaction establishes a new strategic partnership with Li & Fung to provide
services to us and also provides for the termination of our non-exclusive buying agency agreement with Li & Fung, pursuant to
which we are obligated to source certain Calvin Klein Jeans products and at least 54% of certain Tommy Hilfiger products
through Li & Fung. The transaction is expected to close July 1, 2017. Our Tommy Hilfiger business uses other third party
buying offices for a portion of its sourced products and has a small in-house sourcing team that places orders directly with
suppliers.
We are continuing to develop strategies and make investments in people and locations that enhance our ability to
provide our customers with timely product availability and delivery. We are evolving our supply chain and building upon our
operating platforms to enhance our efficiencies across the organization. Speed is a focus area across our company, as we have
taken measures to reduce our lead times, leverage data to enhance our operations and simplify our processes to create a more
dynamic and responsive business model, while increasing service levels, reducing inventory exposure and improving quality
and consumer value. We believe the enhancement of our supply chain efficiencies and working capital management through the
effective use of our distribution network and overall infrastructure will allow us to better control costs and provide improved
service to our customers.
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The global supply chain teams monitor and track the primary cost inputs to the finished product to ensure that we pay
the most appropriate cost for our finished goods. We continue to assess our manufacturing footprint to ensure we have the best
infrastructure to meet the needs of our global wholesale and retail businesses.
Corporate Responsibility
Corporate responsibility is central to how we conduct business, as we recognize both the opportunity and the
responsibility for businesses to take a lead role in addressing pressing global issues. We believe corporate responsibility helps
strengthen our organization by managing risk, maximizing efficiencies and driving value in a rapidly changing world. Through
our collective efforts, we seek to create value for both society and our business. Our corporate responsibility strategy is focused
on ten commitments across three key focus areas. The strategies support 14 of the United Nation’s 17 Sustainable Development
Goals, covering issues such as building safety, chemical management, greenhouse gases, inclusion and diversity, and
supporting the needs of women and children. The three key focus areas are:
• Empowering people — We believe that our people are the key to our future success. We are committed to investing in
talent, developing our people and expanding their career development opportunities, while providing an inclusive
environment where every individual is valued. We view people in our supply chain as an extension of our organization
and we are committed to partnering with our business partners to help protect their employees’ rights.
•
•
Preserving the environment — We recognize our responsibility to address environmental impacts across our value
chain, as well as the opportunity to maximize efficiencies and drive business value. This means reducing and phasing
out hazardous chemicals, safeguarding water resources, innovating towards more sustainable packaging, and sourcing
raw materials in a way that respects people, animals and the environment. In order to reduce our global greenhouse
gas emissions, we measure and analyze our impact and are establishing targets around reducing energy consumption,
increasing energy efficiency and utilizing clean energy.
Supporting communities — We are passionate about making a positive impact on the communities where we work and
live. We aim to support the needs of women and children by creating safe spaces, improving access to education and
enhancing their quality of life. We invest in local communities through partnerships with non-profit organizations,
associate volunteerism and contributions.
We issue an annual report on our corporate responsibility efforts, which can be found on our corporate website.
Warehousing, Distribution and Logistics
Our products are shipped from manufacturers to our wholesale and retail warehousing and distribution centers for
inspection, sorting, packing and shipment. Centers range in size and our main facilities are located in the United States in
Arkansas, California, Georgia, North Carolina, Pennsylvania and Tennessee; and internationally in the Netherlands, Canada,
China, Japan, Hong Kong, South Korea, Taiwan and Brazil. In North America, the two largest centers, located in Georgia and
North Carolina, use fully integrated and automated distribution systems, where the bar code scanning of merchandise and
cartons provide timely, accurate and instantaneous updates to the distribution system. Our warehousing and distribution centers
are designed to provide responsive service to our customers and our retail stores on a cost-effective basis. This includes the use
of various forms of electronic communications to meet customer needs, including advance shipping notices for certain
customers.
We believe that our investments in logistics and supply chain management allow us to respond rapidly to changes in
sales trends and consumer demands while enhancing inventory management. We believe our customers can better manage their
inventories as a result of our continuous analysis of sales trends, broad array of product availability and quick response
capabilities. Certain of our products can be ordered at any time through our EDI replenishment systems. For customers who
reorder these products, we generally ship these products within one to two days of order receipt. Our backlog of customer
orders totaled $1.377 billion and $1.364 billion as of January 29, 2017 and January 31, 2016, respectively.
The size of our order backlog depends upon a number of factors, including the timing of the market weeks for our
particular lines during which a significant percentage of our orders are received and the timing of the shipments, which varies
from year-to-year with consideration for holidays, consumer trends, concept plans, and the basic stock replenishment program’s
usage. As a consequence, a comparison of the size of our order backlog from period to period may not be meaningful, nor may
it be indicative of eventual shipments.
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Material Customers
Our largest customers account for significant portions of our revenue. Sales to our five largest customers were 21.3%
of our revenue in 2016, 22.2% of our revenue in 2015 and 21.8% of our revenue in 2014. No single customer accounted for
more than 10% of our revenue in 2016, 2015 or 2014.
Advertising and Promotion
Our marketing programs are an integral feature of our brands and their associated product offerings. Advertisements
generally portray a lifestyle rather than a specific item. We intend for each of our brands to be a leader in its respective market
segment, with strong consumer awareness and consumer loyalty. We believe that our brands are successful in their respective
segments because we have strategically positioned each brand to target a distinct consumer demographic. We design and
market our products to complement each other, satisfy lifestyle needs, emphasize product features important to our target
consumers and encourage consumer loyalty.
The largest component of our marketing programs is digital media, including our digital commerce platforms and
social media outlets, which allows us to to expand our reach to customers and enables us to provide timely information in an
entertaining fashion to consumers about our products, special events, promotions and store locations. In addition, we advertise
through print media (including fashion, entertainment/human interest, business, men’s, women’s and sports magazines and
newspapers), on television, through outdoor signage and through in-store point of sale materials, as well as participate in
cooperative advertising programs with our retail partners.
We also advertise our brands through sport sponsorships and product tie-ins. Three-time PGA Tour winner Scott
Piercy and 2015 PGA Tour champion David Lingmerth serve as brand ambassadors for IZOD Golf, which includes wearing
IZOD Golf apparel on-course. Speedo is endorsed by world-class swimmers, including Missy Franklin and Nathan Adrian.
These athletes exclusively wear Speedo products in competition, including throughout the 2016 Summer Olympics, and
participate in various promotional activities on behalf of the brand. We have an all-brand, regional sponsorship agreement with
the New York Giants, and CALVIN KLEIN has an ongoing sponsorship agreement with the Brooklyn Nets and the Barclays
Center.
With respect to our retail outlet operations, we generally rely upon local outlet mall developers to promote traffic for
their centers. Outlet center developers employ multiple formats, including signage (highway billboards, off-highway directional
signs, on-site signage and on-site information centers), print advertising (brochures, newspapers and travel magazines), direct
marketing (to tour bus companies and travel agents), radio and television advertising and special promotions.
We believe CALVIN KLEIN is one of the best known designer names in the world, exemplifying bold, progressive
ideals and a seductive, and often minimal, aesthetic. Its high-profile, often cutting-edge global advertising campaigns have
periodically garnered significant publicity, notoriety and conversation among customers and consumers, as well as within the
fashion industry, and have helped to establish and maintain the CALVIN KLEIN name and image. Calvin Klein has a dedicated
in-house advertising agency, with experienced creative and media teams that develop and execute a substantial portion of the
institutional consumer advertising for products under the CALVIN KLEIN brands and work closely with other Calvin Klein
departments and business partners to deliver a cohesive and aspirational brand message to the consumer. Calvin Klein
maintains multiple showroom facilities and sales offices in Europe, North and South America and Asia.
Creatively, CALVIN KLEIN had a tremendous year in 2016. With a focus on digital consumer engagement, the
successful #mycalvins concept was evolved into a 360° lifestyle campaign for Spring. Its call-to-action, “I _____ in
#mycalvins”, continued through the Fall season and asked the consumer “What do you do in yours?.” The Spring and Fall
campaigns each featured a diverse group of pop culture influencers, including actors, musicians, athletes, fashion icons and
artists. Through the campaigns, we took a significant step toward showcasing the “World of CALVIN KLEIN” with each of the
CALVIN KLEIN brands being featured together in a true lifestyle presentation, as opposed to a single classification-based
approach. Additionally, in January 2017, Calvin Klein debuted Calvin Klein By Appointment, a bespoke collection of distinct
looks handcrafted and made to measure in New York, New York. The collection is a new high luxury tier of product for us,
available exclusively by appointment beginning April 1, 2017. The launch was accompanied by a new advertising campaign,
which was featured on calvinklein.com, the brand’s official social media channels, and in print, digital and outdoor advertising
in New York, New York, Los Angeles, California, Paris, France, Milan, Italy, London, England, Tokyo, Japan, Hong Kong,
China and Seoul, South Korea.
Calvin Klein also has a dedicated in-house global communications team, which incorporates corporate
communications, public relations, celebrity dressing and special events. This group coordinates many global events to support
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the brand and business, including the Spring and Fall CALVIN KLEIN 205 W39 NYC runway shows, and oversees the dressing
of celebrities for events, award ceremonies and film premieres.
We believe that Tommy Hilfiger is one of the world’s leading designer lifestyle brands and is internationally
recognized for celebrating the essence of classic American cool style featuring preppy with a twist designs. Tommy Hilfiger
employs advertising, marketing and communications staff, including an in-house creative team, as well as outside agencies, to
implement its global marketing and communications strategy across all channels of distribution. The Tommy Hilfiger
marketing and communications team develops and coordinates Tommy Hilfiger advertising for all regions and product lines,
licensees and regional distributors. Advertisements for Tommy Hilfiger brand products appear primarily in fashion and lifestyle
magazines, newspapers, outdoor media and cinema and on television. The digital and online focus of marketing for the Tommy
Hilfiger brands is integral to its campaigns and continues to increase. Additionally, the marketing and communications team
coordinates personal appearances by Mr. Tommy Hilfiger, including at runway shows, brand events and flagship store openings
as part of its efforts. Tommy Hilfiger maintains multiple showroom facilities and sales offices in Europe, North and South
America and Asia, as well as innovative digital sales showrooms located in Tommy Hilfiger offices around the world that
enhance the sales experience for wholesale accounts.
Significant Tommy Hilfiger marketing campaigns are launched two times per year in Spring/Summer and Fall/Winter
to provide maximum consumer visibility of the new seasonal collections and to support sell-throughs. Marketing and consumer
engagement continued to drive the brand forward in 2016, particularly in support of the brand’s global growth categories,
including underwear, men’s tailored clothing and women’s apparel and accessories. One of the brand’s highest profile
campaigns was its Fall 2016 marketing campaign featuring Gigi Hadid as the global brand ambassador for womenswear. The
partnership was meaningful for Tommy Hilfiger, as it enabled the brand to capitalize on her impressive social media following,
which was in excess of 28 million followers as of January 2017. The marketing campaign was accompanied by the
TommyXGigi Capsule collection, which launched at New York Fashion Week in September 2016, along with the
#TOMMYNOW “Buy Now. Wear Now.” concept that made the runway collection immediately available for purchase across
all sales channels, including throughout our retail partner network globally. On the men’s side, Tommy Hilfiger continued its
successful partnership with Rafael Nadal, who serves as the global brand ambassador for Tommy Hilfiger underwear, Tommy
Hilfiger Tailored and the Tommy Hilfiger Bold fragrance.
In addition to offering a broad array of apparel and licensed products, our flagship digital commerce sites, Tommy
Hilfiger’s digital commerce site, tommy.com, and Calvin Klein’s digital commerce site, calvinklein.com, also serve as
marketing vehicles to complement the ongoing development of the Tommy Hilfiger and CALVIN KLEIN lifestyle brands,
respectively.
Our Heritage Brands business also utilizes marketing campaigns to support its new product launches. The Van Heusen
Flex Collection was supported by point of sale signage and print advertising to communicate the breadth of the collection and
key product features. We also continued to advertise the Warner’s No Side Effects bra on television during 2016, as this
collection continues to perform well. Additionally, Speedo Fit, a line of swimsuits and accessories targeted to recreational
athletes, was advertised on television and through online videos featuring Olympic swimmers during 2016.
Trademarks
We own the CALVIN KLEIN, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner’s, Olga and Eagle brands, as well
as related trademarks (e.g., the interlocking “IZ” logo for IZOD and the Tommy Hilfiger flag logo and crest design) and lesser-
known names. These trademarks are registered for use in each of the primary countries where our products are sold and
additional applications for registration of these and other trademarks are made in jurisdictions to accommodate new marks, uses
in additional trademark classes or additional categories of goods or expansion into new countries.
We own the CALVIN KLEIN marks and derivative marks in all trademark classes and for all product categories
through our ownership of Calvin Klein and Warnaco. Calvin Klein and Warnaco together own the Calvin Klein Trademark
Trust (“the Trust”), which is the sole and exclusive title owner of substantially all registrations of the CALVIN KLEIN
trademarks. The sole purpose of the Trust is to hold these marks. Calvin Klein maintains and protects the marks on behalf of the
Trust pursuant to a servicing agreement. The Trust licenses to Calvin Klein and Warnaco on an exclusive, irrevocable, perpetual
and royalty-free basis the use of the marks.
Mr. Calvin Klein retains the right to use his name, on a non-competitive basis, with respect to his right of publicity,
unless those rights are already being used in the Calvin Klein business. Mr. Klein has also been granted a royalty-free
worldwide right to use the CALVIN KLEIN mark with respect to certain personal businesses and activities, such as motion
picture, television and video businesses, a book business, writing, speaking and teaching engagements, non-commercial
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photography, charitable activities and architectural and industrial design projects, subject to certain limitations designed to
protect the image and prestige of the CALVIN KLEIN brands and to avoid competitive conflicts.
Mr. Tommy Hilfiger is prohibited in perpetuity from using, or authorizing others to use, the Tommy Hilfiger marks
(except for the use by Mr. Hilfiger of his name personally and in connection with certain specified activities). In addition, we
are prohibited in perpetuity from selling products not ordinarily sold under the names of prestige designer businesses or
prestige global lifestyle brands without Mr. Hilfiger’s consent, from engaging in new lines of business materially different from
such types of lines of business without Mr. Hilfiger’s consent, or from disparaging or intentionally tarnishing the Tommy
Hilfiger-related marks or Mr. Hilfiger’s personal name.
Our trademarks are the subject of registrations and pending applications throughout the world for use on a variety of
apparel, footwear and related products, and we continue to expand our worldwide usage and registration of new and related
trademarks. In general, trademarks remain valid and enforceable as long as the marks continue to be used in connection with
the products and services with which they are identified and, as to registered tradenames, the required registration renewals are
filed. In markets outside of the United States, particularly those where products bearing any of our brands are not sold by us or
any of our licensees or other authorized users, our rights to the use of trademarks may not be clearly established.
Our trademarks and other intellectual property rights are valuable assets and we vigorously seek to protect them on a
worldwide basis against infringement. We are susceptible to others imitating our products and infringing on our intellectual
property rights. This is especially the case with respect to the CALVIN KLEIN and Tommy Hilfiger brands, as these brands
enjoy significant worldwide consumer recognition and their generally higher pricing provides significant opportunity and
incentive for counterfeiters and infringers. We have broad, proactive enforcement programs that we believe have been generally
effective in controlling the sale of counterfeit products in the United States and in major markets abroad.
Competition
The apparel industry is competitive as a result of its fashion orientation, mix of large and small producers, the flow of
domestic and imported merchandise and the wide diversity of retailing methods. We compete with numerous domestic and
foreign designers, brands, manufacturers and retailers of apparel, accessories and footwear, including, in certain circumstances,
the private label brands of our wholesale customers.
We compete primarily on the basis of style, quality, price and service. Our business depends on our ability to stimulate
consumer tastes and demands, as well as on our ability to remain competitive in these areas. We believe we are well-positioned
to compete in the apparel industry. Our diversified portfolio of brands and products and our use of multiple channels of
distribution have allowed us to develop a business that produces results that are not dependent on any one demographic group,
merchandise preference, distribution channel or geographic region. We have developed a portfolio of brands that appeal to a
broad spectrum of consumers. Our owned brands have long histories and enjoy high recognition and awareness within their
respective consumer segments. We develop our owned and licensed brands to complement each other and to generate strong
consumer loyalty. The CALVIN KLEIN and Tommy Hilfiger brands generally provide us with the opportunity to develop
businesses that target different consumer groups at higher price points and in higher-end distribution channels than our heritage
brands, as well as with significant global opportunities due to the worldwide recognition of the brands.
Imports and Import Restrictions
A substantial portion of our products is imported into the United States, Canada, Europe and Asia. These products are
subject to various customs laws, which may impose tariffs, as well as quota restrictions. Under the provisions of the World
Trade Organization (“WTO”) agreement governing international trade in textiles, known as the “WTO Agreement on Textiles
and Clothing,” the United States and other WTO member countries have eliminated quotas on textiles and apparel-related
products from WTO member countries. As a result, quota restrictions generally do not affect our business in most countries. We
are subject to numerous international trade agreements and regulations, such as the North American Free Trade Agreement,
Africa Growth & Opportunity Act, Central American Free Trade Agreement, Jordan Free Trade Agreement, Israel Free Trade
Agreement, Egypt Qualifying Industrial Zones, Colombia Free Trade Agreement, Peru Free Trade Agreement and other special
trade programs. Presently, a portion of our imported products is eligible for certain of these duty-advantaged programs. In
addition, each of the countries in which our products are sold has laws and regulations covering imports. Because the United
States and the other countries in which our products are manufactured and sold may impose, from time to time, new duties,
tariffs, surcharges, or other import controls or restrictions, including the imposition of a “safeguard quota,” or adjust presently
prevailing duty or tariff rates or levels, we maintain a program of intensive monitoring of import restrictions and opportunities.
We seek to minimize our potential exposure to import related risks through, among other measures, adjustments in product
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design and fabrication, shifts of production among countries and manufacturers and geographical diversification of our sources
of supply.
Environmental Matters
Our facilities and operations are subject to various environmental, health and safety laws and regulations. In addition,
we may incur liability under environmental statutes and regulations with respect to the contamination of sites that we own or
operate or previously owned or operated (including contamination caused by prior owners and operators of such sites, abutters
or other persons) and the off-site disposal of hazardous materials. We believe our operations are in compliance with the terms
of all applicable laws and regulations.
Employees
As of January 29, 2017, we employed approximately 18,800 persons on a full-time basis and approximately 15,700
persons on a part-time basis. Approximately 3% of our employees were represented for the purpose of collective bargaining by
five different unions in the United States. Additional persons, some represented by these five unions, are employed from time to
time based upon our manufacturing schedules and retailing seasonal needs. Our collective bargaining agreements generally are
for one to three-year terms. In some international markets, a significant percentage of employees are covered by governmental
labor arrangements. We believe that our relations with our employees are satisfactory.
Executive Officers of the Registrant
The following table sets forth the name, age and position of each of our executive officers:
Name
Age
Position
Emanuel Chirico
Michael A. Shaffer
Francis K. Duane
Daniel Grieder
Steven B. Shiffman
Mark D. Fischer
Dave Kozel
59 Chairman and Chief Executive Officer
54 Executive Vice President and Chief Operating & Financial Officer
60 Chief Executive Officer, Heritage Brands and North America Wholesale
55 Chief Executive Officer, Tommy Hilfiger Global and PVH Europe
59 Chief Executive Officer, Calvin Klein
55 Executive Vice President, General Counsel & Secretary
61 Executive Vice President, Chief Human Resources Officer
Mr. Chirico joined us as Vice President and Controller in 1993. Mr. Chirico was named Executive Vice President and
Chief Financial Officer in 1999, President and Chief Operating Officer in 2005, Chief Executive Officer in February 2006, and
Chairman of the Board in June 2007.
Mr. Shaffer has been employed by us since 1990. He served as Senior Vice President, Retail Operations immediately
prior to being named Executive Vice President, Finance in 2005, Executive Vice President and Chief Financial Officer in
March 2006, and Executive Vice President and Chief Operating & Financial Officer in February 2012.
Mr. Duane served as President of our Izod division from 1998 until 2001, was named Vice Chairman, Sportswear in
2001, Vice Chairman, Wholesale Apparel in March 2006, Chief Executive Officer, Wholesale Apparel in February 2012, and
Chief Executive Officer, Heritage Brands and North America Wholesale in February 2013.
Mr. Grieder has been employed by Tommy Hilfiger since 1997 (including time served with a predecessor
organization). He served as Chief Executive Officer, Tommy Hilfiger Europe from 2008 until 2014, prior to being named Chief
Executive Officer, Tommy Hilfiger Global and PVH Europe in July 2014.
Mr. Shiffman has been employed by us since 1992. Mr. Shiffman was named President & Chief Commercial Officer,
Calvin Klein Retail in 2009, Group President, Calvin Klein Global Licensing and Retail in 2013, and Chief Executive Officer,
Calvin Klein in July 2014.
Mr. Fischer joined us as Vice President, General Counsel & Secretary in 1999. He became Senior Vice President in
2007 and Executive Vice President in 2013.
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Mr. Kozel has been employed by us since 2003. He was promoted from Vice President to Senior Vice President in
2007 and to Executive Vice President in 2013.
Item 1A. Risk Factors
Our business is exposed to foreign currency exchange rate fluctuations and control regulations.
Our Calvin Klein and Tommy Hilfiger businesses each have substantial international components that expose us to
significant foreign exchange risk. Our Heritage Brands business also has international components but those components are
not significant to the business. Changes in exchange rates between the United States dollar and other currencies can impact our
financial results in two ways: a translation impact and a transaction impact. The translation impact refers to the impact that
changes in exchange rates can have on our financial results, as our operating results in local foreign currencies are translated
into United States dollars using an average exchange rate over the representative period. Accordingly, during times of a
strengthening United States dollar, particularly against the euro, the Brazilian real, the Japanese yen, the Korean won, the
British pound sterling, the Canadian dollar, the Mexican peso, the Indian rupee, the Russian ruble and the Chinese yuan
renminbi, our results of operations will be negatively impacted, as was the case during 2016 and which we expect, to a lesser
extent, in 2017, and during times of a weakening United States dollar, our results of operations will be favorably impacted.
The transaction impact on financial results is common for apparel companies operating outside the United States that
purchase goods in United States dollars, as is the case with most of our foreign operations. During times of a strengthening
United States dollar, our results of operations will be negatively impacted from these transactions as the increased local
currency value of inventory results in higher cost of goods sold in local currency when the goods are sold, as was the case
during 2016 and which we expect, to a lesser extent, in 2017, and during times of a weakening United States dollar, our results
of operations will be favorably impacted. We also have exposure to changes in foreign currency exchange rates related to
certain intercompany transactions and, to a lesser extent, SG&A expenses that are denominated in currencies other than the
functional currency of a particular entity. We currently use and plan to continue to use foreign currency forward exchange
contracts or other derivative instruments to mitigate the cash flow or market value risks associated with these inventory and
intercompany transactions, but we are unable to entirely eliminate these risks.
We are also exposed to market risk for changes in exchange rates for the United States dollar in connection with our
licensing businesses. Most of our license agreements require the licensee to report sales to us in the licensee’s local currency
but to pay us in United States dollars based on the exchange rate as of the last day of the contractual selling period. Thus, while
we are not generally exposed to exchange rate gains and losses between the end of the selling period and the date we collect
payment, we are exposed to exchange rate changes during and up to the last day of the selling period. In addition, certain of our
other foreign license agreements expose us to exchange rate changes up to the date we collect payment or convert local
currency payments into United States dollars. As a result, during times of a strengthening United States dollar, our foreign
royalty revenue will be negatively impacted, as was the case during 2016 and which we expect, to a lesser extent, in 2017, and
during times of a weakening United States dollar, our foreign royalty revenue will be favorably impacted.
We conduct business, directly or through licensees and other partners, in countries that are or have been subject to
exchange rate control regulations and have, as a result, experienced difficulties in receiving payments owed to us when due,
with amounts left unpaid for extended periods of time. Although the amounts to date have been immaterial to our results, as our
international businesses grow and if controls are enacted or enforced in additional countries, there can be no assurance that
such controls would not have a material and adverse effect on our business, financial condition or results of operations.
A substantial portion of our revenue and gross profit is derived from a small number of large wholesale customers
and the loss of any of these customers or significant financial difficulties in their businesses could substantially reduce our
revenue.
A few of our customers account for significant portions of our revenue. Sales to our five largest customers were 21.3%
of our revenue in 2016, 22.2% of our revenue in 2015 and 21.8% of our revenue in 2014. No single customer accounted for
more than 10% of our revenue in 2016, 2015 or 2014. In February 2017, Macy’s announced that it had closed 66 stores and
plans to close approximately 30 additional stores over the next several years and J. C. Penney Company, Inc. (“J. C. Penney”)
announced that it will close between 130 and 140 locations in 2017. These store closings may result in a decrease in the total
amount of purchases made by Macy’s and J. C. Penney, two of our five largest customers in 2016, and could have an adverse
effect on our United States wholesale business.
Tommy Hilfiger is party to an agreement with Macy’s providing for the exclusive department store distribution in the
United States of men’s sportswear under the Tommy Hilfiger brand. The term of this agreement ends on January 31, 2020. As a
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result of this strategic alliance, the success of Tommy Hilfiger’s North American men’s wholesale business is substantially
dependent on this relationship and on Macy’s ability to maintain and increase sales of Tommy Hilfiger products. In addition, our
United States men’s wholesale businesses may be affected by any operational or financial difficulties that Macy’s experiences,
including any deterioration in Macy’s overall ability to attract customer traffic or in its overall liquidity position.
We do not have long-term agreements with any of our customers, other than Tommy Hilfiger’s strategic alliance with
Macy’s, and purchases generally occur on an order-by-order basis. A decision by any of our major customers, whether
motivated by marketing strategy, competitive conditions, financial difficulties or otherwise, to decrease significantly the
amount of merchandise purchased from us or our licensing or other partners, or to change their manner of doing business with
us or our licensing or other partners, could substantially reduce our revenue and materially adversely affect our profitability.
During the past several years, the retail industry has experienced a great deal of consolidation and other ownership changes, as
well as management changes and store closing programs, and we expect such changes to be ongoing. In addition, store closings
by our customers, such as those described above, decrease the number of stores carrying our products, while the remaining
stores may purchase a smaller amount of our products and may reduce the retail floor space designated for our brands. In the
future, retailers may further consolidate, undergo restructurings or reorganizations, realign their affiliations or reposition their
stores’ target markets or marketing strategies. Any of these types of actions could decrease the number of stores that carry our
products or increase the ownership concentration within the retail industry. These changes could decrease our opportunities in
the market, increase our reliance on a smaller number of large customers and decrease our negotiating strength with our
customers. These factors could have a material adverse effect on our financial condition and results of operations.
We may not be able to continue to develop and grow our Calvin Klein and Tommy Hilfiger businesses in terms of
revenue and profitability.
A significant portion of our business strategy involves growing our Calvin Klein and Tommy Hilfiger businesses. Our
achievement of revenue and profitability growth from Calvin Klein and Tommy Hilfiger will depend largely upon our ability
to:
•
•
•
•
continue to maintain and enhance the distinctive brand identities of the CALVIN KLEIN and Tommy Hilfiger brands;
retain key employees at our Calvin Klein and Tommy Hilfiger businesses;
continue to maintain good working relationships with Calvin Klein’s and Tommy Hilfiger’s licensees;
continue to enter into new (or renew or extend existing) licensing agreements for the CALVIN KLEIN and Tommy
Hilfiger brands; and
•
continue to strengthen and expand the Calvin Klein and Tommy Hilfiger businesses.
We cannot assure you that we can successfully execute any of these actions or our growth strategy for these
businesses, nor can we assure you that the launch of any additional product lines or businesses by us or our licensees or that the
continued offering of these lines will achieve the degree of consistent success necessary to generate profits or positive cash
flow. Our ability to successfully carry out our growth strategy may be affected by, among other things, our ability to enhance
our relationships with existing customers to obtain additional selling space or add additional product lines, our ability to
develop new relationships with retailers, economic and competitive conditions, changes in consumer spending patterns and
changes in consumer tastes and style trends. If we fail to continue to develop and grow either the Calvin Klein or Tommy
Hilfiger business in terms of revenue and profitability, our financial condition and results of operations may be materially and
adversely affected.
Acquisitions may not be successful in achieving intended benefits, cost savings and synergies.
One component of our growth strategy has been to make acquisitions, such as the Calvin Klein, Tommy Hilfiger and
Warnaco acquisitions. Prior to completing any acquisition, our management team identifies expected synergies, cost savings
and growth opportunities but, due to legal and business limitations, we may not have access to all necessary information. The
integration process may be complex, costly and time-consuming. The potential difficulties of integrating the operations of an
acquired business and realizing our expectations for an acquisition, including the benefits that may be realized, include, among
other things:
•
•
failure to implement our business plan for the combined business;
delays or difficulties in completing the integration of acquired companies or assets;
19
•
•
•
•
•
•
•
•
•
•
•
•
higher than expected costs, lower than expected cost savings or a need to allocate resources to manage unexpected
operating difficulties;
unanticipated issues in integrating manufacturing, logistics, information, communications and other systems;
unanticipated changes in applicable laws and regulations affecting the acquired business;
unanticipated changes in the combined business due to potential divestitures or other requirements imposed by antitrust
regulators;
retaining key customers, suppliers and employees;
retaining and obtaining required regulatory approvals, licenses and permits;
operating risks inherent in the acquired business;
diversion of the attention and resources of management;
consumers’ failure to accept product offerings by us or our licensees;
assumption of liabilities not identified in due diligence;
the impact on our or an acquired business’ internal controls and compliance with the requirements under the Sarbanes-
Oxley Act of 2002; and
other unanticipated issues, expenses and liabilities.
We have completed acquisitions that have not performed as well as initially expected and cannot assure you that any
acquisition will not have a material adverse impact on our financial condition and results of operations.
Future economic conditions, including volatility in the financial and credit markets may adversely affect our
business.
Economic conditions in the past have adversely affected, and in the future may adversely affect, our business, our
customers and their businesses, and our financing and other contractual arrangements. Such conditions, among other things,
have resulted, and in the future may result, in financial difficulties leading to restructurings, bankruptcies, liquidations and
other unfavorable events for our customers, and may continue to cause such customers to reduce or discontinue orders of our
products or be unable to pay us for products they have purchased from us. Financial difficulties of customers may also affect
the ability of our customers to access credit markets or lead to higher credit risk relating to receivables from customers.
Future volatility in the financial and credit markets could make it more difficult for us to obtain financing or refinance
existing debt when the need arises or on terms that would be acceptable to us.
Our retail stores are heavily dependent on the ability and desire of consumers to travel and shop.
The vast majority of our retail stores are located away from major residential centers and, in many cases, are near
vacation destinations. As a result, reduced travel resulting from economic conditions, fuel shortages, increased fuel prices,
travel restrictions, travel concerns and other circumstances, including adverse weather conditions, disease epidemics and other
health-related concerns, war, terrorist attacks or the perceived threat of war or terrorist attacks could have a material adverse
effect on us, particularly if such events impact certain of our higher-volume retail locations. Additionally, during times of a
strengthening United States dollar, particularly against the euro, the Brazilian real, the Canadian dollar, the Mexican peso and
the Chinese yuan renminbi, as was the case during 2016 and which we expect for 2017, international tourism to the United
States could be (and, in 2016 was) reduced, as could the extent to which international tourists shop at our retail stores, which
could have a material adverse effect on our sales in our United States retail stores, which are material contributors of revenue
and profits. Other factors that could affect the success of our stores include:
•
•
•
•
the location of the mall or the location of a particular store within the mall;
the other tenants occupying space at the mall;
increased competition in areas where the malls are located; and
the amount of advertising and promotional dollars spent on attracting consumers to the malls.
20
The success of our Calvin Klein and Tommy Hilfiger businesses depends on the value of our “CALVIN KLEIN”
and “Tommy Hilfiger” brands, and if the value of either of those brands were to diminish, our business could be adversely
affected.
Our success depends on our brands and their value. The CALVIN KLEIN name is integral to the existing Calvin Klein
business, as well as to our strategies for continuing to grow and expand the business. The CALVIN KLEIN brands could be
adversely affected if Mr. Klein’s public image or reputation were to be tarnished. We have similar exposure with respect to the
Tommy Hilfiger brands. Mr. Hilfiger is closely identified with the Tommy Hilfiger brand and any negative perception with
respect to Mr. Hilfiger could adversely affect the Tommy Hilfiger brands. In addition, under Mr. Hilfiger’s employment
agreement, if his employment is terminated for any reason, his agreement not to compete with the Tommy Hilfiger business
will expire two years after such termination. Although Mr. Hilfiger could not use any Tommy Hilfiger trademark in connection
with a competitive business, his association with a competitive business could adversely affect the Tommy Hilfiger business.
Our level of debt could impair our financial condition and ability to operate.
We had outstanding as of January 29, 2017 an aggregate of $3.223 billion of indebtedness under our senior secured
credit facilities, our senior notes and our secured debentures. Our level of debt could have important consequences to investors,
including:
•
•
•
•
•
requiring a substantial portion of our cash flows from operations be used for the payment of interest on our debt, thereby
reducing the funds available to us for our operations or other capital needs;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate because
our available cash flow after paying principal and interest on our debt may not be sufficient to make the capital and other
expenditures necessary to address these changes;
increasing our vulnerability to general adverse economic and industry conditions because, during periods in which we
experience lower earnings and cash flow, we will be required to devote a proportionally greater amount of our cash flow
to paying principal and interest on our debt;
limiting our ability to obtain additional financing in the future to fund working capital, capital expenditures, acquisitions,
contributions to our pension plans and general corporate requirements;
placing us at a competitive disadvantage to other relatively less leveraged competitors that have more cash flow available
to fund working capital, capital expenditures, acquisitions, share repurchases, dividend payments, contributions to pension
plans and general corporate requirements; and
• with respect to any borrowings we make at variable interest rates, including under our senior secured credit facility,
leaving us vulnerable to increases in interest rates to the extent the borrowings are not subject to an interest rate swap
or interest rate cap agreement.
We primarily use foreign suppliers for our products and raw materials, which poses risks to our business
operations.
The majority of our apparel and footwear products are produced by and purchased or procured from independent
manufacturers located in countries in Europe, Asia (including China and the Indian subcontinent), the Middle East, South
America, the Caribbean, Central America and Africa. We believe that we are one of the largest users of shirting fabric in the
world. Although no single supplier or country is expected to be critical to our production needs, any of the following could
materially and adversely affect our ability to produce or deliver our products and, as a result, have a material adverse effect on
our business, financial condition and results of operations:
•
•
•
political, labor instability or military conflict involving any of the countries in which we, our contractors, or our suppliers
operate, which could cause a delay in the transportation of our products and raw materials to us and an increase in
transportation costs;
heightened terrorism security concerns, which could subject imported or exported goods to additional, more frequent or
more thorough inspections, leading to delays in deliveries or impoundments of goods for extended periods or could result
in decreased scrutiny by customs officials for counterfeit goods, leading to lost sales, increased costs for our anti-
counterfeiting measures and damage to the reputation of our brands;
a significant decrease in availability or increase in cost of raw materials or the inability to use raw materials produced in
a country that is a major provider due to political, human rights, labor, environmental, animal cruelty or other concerns;
21
•
•
•
a significant decrease in factory and shipping capacity or increase in demand for such capacity;
a significant increase in wage and shipping costs;
disease epidemics and health-related concerns, which could result in closed factories, reduced workforces, scarcity of
raw materials and scrutiny or embargoing of goods produced in infected areas;
• migration and development of manufacturers, which could affect where our products are or are planned to be
produced;
•
•
•
imposition of regulations, quotas and safeguards relating to imports and our ability to adjust timely to changes in trade
regulations, which, among other things, could limit our ability to produce products in cost-effective countries that have
the labor and expertise needed;
imposition of duties, taxes and other charges on imports; and
restrictions on transfers of funds out of countries where our foreign licensees are located.
Recently, members of the United States government have indicated their intentions to reform trade and tax regulations
related to the import of goods into the United States and significant changes seem likely. Proposed reforms include increased
tariffs on imported goods into the United States from certain countries where our goods are produced and a border adjustment
tax that would increase income taxes on the sales of imported goods in the United States. Substantially all of the products we
sell in the United States are imported. Therefore, while enactment of any such proposal is not certain, such changes, if enacted,
could have a material adverse effect on our business and results of operations.
If our manufacturers, or the manufacturers used by our licensees, fail to use legal and ethical business practices,
our business could suffer.
We require our manufacturers, and the manufacturers used by our licensees (and the licensees themselves), to operate
in compliance with applicable laws, rules and regulations regarding working conditions, employment practices and
environmental compliance. Additionally, we impose upon our business partners operating guidelines that require additional
obligations in those areas in order to promote ethical business practices, and our staff and third parties we retain for such
purposes periodically visit and monitor the operations of these independent parties to determine compliance. We are a signatory
of the Accord on Fire and Building Safety in Bangladesh to improve fire and building safety in Bangladesh’s apparel factories
and we continue to collaborate with factories, suppliers, industry participants and other engaged stakeholders to improve the
lives of our factory workers and others in our sourcing communities. However, we do not control our manufacturers or
licensees, or the manufacturers used by our licensees, or their labor, manufacturing and other business practices. If any of these
manufacturers (or licensees) violates labor, environmental, building and fire safety, or other laws or implements labor,
manufacturing or other business practices that are generally regarded as unethical in the United States, the shipment of finished
products to us could be interrupted, orders could be cancelled and relationships could be terminated. In addition, we could be
the focus of adverse publicity and our reputation could be damaged. Any of these events could have a material adverse effect on
our revenue and, consequently, our results of operations.
We are dependent on third parties to source and manufacture our products and any disruption in our relationships
with these parties or in their businesses may materially adversely affect our businesses.
We rely upon independent third parties for the vast majority of our apparel and footwear products. A manufacturer’s
failure to ship products to us in a timely manner or to meet required quality standards could cause us to miss the delivery date
requirements of our customers for those products. As a result, customers could cancel their orders, refuse to accept deliveries or
demand reduced prices. Any of these actions taken by our customers could have a material adverse effect on our revenue and,
consequently, our results of operations.
In addition, we are a party to a non-exclusive buying agency agreement with Li & Fung under which we are obligated
to source certain Calvin Klein Jeans products and at least 54% of certain Tommy Hilfiger products through Li & Fung (or pay a
penalty). Li & Fung is one of the world’s largest buying agencies for apparel and related goods and is our largest buying office
for Tommy Hilfiger products. The buying agency agreement with Li & Fung is terminable by us upon 12 months’ prior notice
for any reason and is terminable by either party (i) upon six months’ prior notice in the event of a material breach by the other
party and (ii) immediately upon the occurrence of certain bankruptcy or insolvency events relating to the other party. In March
2017, we entered into agreements for a transaction to restructure our supply chain relationship with Li & Fung. The transaction
establishes a new strategic partnership with Li & Fung to provide services to us and also provides for the termination of our
non-exclusive buying agency agreement with Li & Fung. The transaction is expected to close July 1, 2017. If the transaction
22
does not close, we will continue to be obligated under the non-exclusive buying agreement with Li & Fung described above.
We also use other third party buying offices for a portion of our sourcing for Tommy Hilfiger products and have retained a small
in-house sourcing team. Any interruption in the operations of Li & Fung or other buying offices, the failure of Li & Fung or
other buying offices to perform effectively their services for us, or the failure of us to realize the expected benefits of the
transaction described above, could result in material delays, reductions of shipments and increased costs. Furthermore, such
events could harm our wholesale and retail relationships. We may be unable to source products through other third parties in
sufficient quantities, if at all, on terms commercially acceptable to us and on a timely basis. Any disruption in our relationships
with our buying offices or in their businesses could have a material adverse effect on our cash flows, business, financial
condition and results of operations.
We are dependent on a limited number of distribution facilities. If one becomes inoperable, our business, financial
condition and operating results could be negatively impacted.
We operate a limited number of distribution facilities and also rely on certain independently operated distribution
facilities around the world to warehouse and ship products to our customers and perform related logistics services. Our ability
to meet the needs of our retail customers and of our own retail stores depends on the proper operation of our primary facilities.
If any of our primary facilities were to shut down or otherwise become inoperable or inaccessible for any reason, we could
have a substantial loss of inventory or disruptions of deliveries to our customers and our stores, incur significantly higher costs
or experience longer lead times associated with the distribution of our products during the time it takes to reopen or replace the
facility. This could adversely affect our business, financial condition and operating results.
A portion of our revenue is dependent on royalties and licensing.
The operating profit associated with our royalty, advertising and other revenue is significant because the operating
expenses directly associated with administering and monitoring an individual licensing or similar agreement are minimal.
Therefore, the loss of a significant licensing partner, whether due to the termination or expiration of the relationship, the
cessation of the licensing partner’s operations or otherwise (including as a result of financial difficulties of the partner), without
an equivalent replacement, could materially impact our profitability.
While we generally have significant control over our licensing partners’ products and advertising, we rely on our
licensing partners for, among other things, operational and financial controls over their businesses. Our licensing partners’
failure to successfully market licensed products or our inability to replace our existing licensing partners could materially and
adversely affect our revenue both directly from reduced royalty and advertising and other revenue received and indirectly from
reduced sales of our other products. Risks are also associated with our licensing partners’ ability to obtain capital, execute their
business plans, timely deliver quality products, manage their labor relations, maintain relationships with their suppliers, manage
their credit risk effectively and maintain relationships with their customers.
Our licensing business makes us susceptible to the actions of third parties over whom we have limited control.
We rely on our licensing partners to preserve the value of our brands. Although we attempt to protect our brands
through, among other things, approval rights over design, production quality, packaging, merchandising, distribution,
advertising and promotion of our products, we cannot assure you that we can control our licensing partners’ use of our licensed
brands. The misuse of our brands by a licensing partner could have a material adverse effect on our business, financial
condition and results of operations.
We may be unable to protect our trademarks and other intellectual property rights.
Our trademarks and other intellectual property rights are important to our success and our competitive position. We are
susceptible to others imitating our products and infringing on our intellectual property rights, especially with respect to the
CALVIN KLEIN and Tommy Hilfiger brands, as they enjoy significant worldwide consumer recognition and the generally
premium pricing of CALVIN KLEIN and Tommy Hilfiger brand products creates additional incentive for counterfeiters and
infringers. Imitation or counterfeiting of our products or infringement of our intellectual property rights could diminish the
value of our brands or otherwise adversely affect our revenue. We cannot assure you that the actions we take to establish and
protect our trademarks and other intellectual property rights will be adequate to prevent imitation of our products by others or
to prevent others from seeking to invalidate our trademarks or block sales of our products as a violation of their own
trademarks and intellectual property rights. In addition, we cannot assure you that others will not assert rights in, or ownership
of, trademarks and other intellectual property rights of ours or in marks that are similar to ours or marks that we license or
market or that we will be able to successfully resolve these types of conflicts to our satisfaction. In some cases, there may be
23
trademark owners who have prior rights to our marks because the laws of certain foreign countries may not protect intellectual
property rights to the same extent as do the laws of the United States. In other cases, there may be holders who have prior rights
to similar marks. For example, in the past we were involved in proceedings relating to a company’s claim of prior rights to the
IZOD mark in Mexico and to another company’s claim of prior rights to the CALVIN KLEIN mark in Chile. We are currently
involved in opposition and cancellation proceedings with respect to marks similar to some of our brands, both domestically and
internationally.
The success of our dress furnishings business is dependent on the strategies and reputation of our licensors.
Our business strategy is to offer our products on a multiple brand, multiple channel and multiple price point basis. This
strategy is designed to provide stability should market trends shift. As part of this strategy we license the names and brands of
recognized designers and celebrities, including Kenneth Cole, Michael Kors and Sean “Puff Daddy” Combs (Sean John). In
entering into these license agreements, we target our products towards certain market segments based on consumer
demographics, design, suggested pricing and channel of distribution in order to minimize competition between our own
products and maximize profitability. If any of our licensors determines to “reposition” a brand we license from them, introduce
similar products under similar brand names or otherwise change the parameters of design, pricing, distribution, target market or
competitive set, we could experience a significant downturn in that brand’s business, adversely affecting our sales and
profitability. In addition, as products may be personally associated with these designers and celebrities, our sales of those
products could be materially and adversely affected if any of those individual’s images, reputations or popularity were to be
negatively impacted.
We face intense competition in the apparel industry.
Competition is intense in the apparel industry. We compete with numerous domestic and foreign designers, brands,
manufacturers and retailers of apparel, accessories and footwear, some of which have greater resources than we do. In addition,
in certain instances, we compete directly with our wholesale customers as they also sell their own private label products in their
stores. We compete within the apparel industry primarily on the basis of:
•
anticipating and responding to changing consumer tastes and demands in a timely manner and developing attractive,
quality products;
• maintaining favorable brand recognition;
•
•
•
•
appropriately pricing products and creating an acceptable value proposition for customers;
providing strong and effective marketing support;
ensuring product availability and optimizing supply chain efficiencies with third party manufacturers and retailers; and
obtaining sufficient retail floor space and effective presentation of our products at retail.
The failure to compete effectively or to keep pace with rapidly changing markets could have a material adverse effect
on our business, financial condition and results of operations. In addition, if we misjudge the market for our products, we could
be faced with significant excess inventories for some products and missed opportunities for others.
Our profitability may decline as a result of increasing pressure on margins.
The apparel industry, particularly in the United States (our largest market), is subject to significant pricing pressure
caused by many factors, including intense competition, consolidation in the retail industry, pressure from retailers to reduce the
costs of products and changes in consumer demand. These factors may cause us to reduce our sales prices to retailers and
consumers, which could cause our profitability to decline if we are unable to appropriately manage inventory levels or offset
price reductions with sufficient reductions in product costs or operating expenses. This could have a material adverse effect on
our results of operations, liquidity and financial condition.
The loss of members of our executive management and other key employees could have a material adverse effect on
our business.
We depend on the services and management experience of our executive officers, who have substantial experience and
expertise in our business. We also depend on other key executives in various areas of our businesses and operations.
Competition for qualified personnel in the apparel industry is intense and competitors may use aggressive tactics to recruit our
key employees. The unexpected loss of services of one or more of these individuals could have a material adverse effect on us.
24
A significant shift in the relative sources of our earnings, adverse decisions of tax authorities or changes in tax
treaties, laws, rules or interpretations could have a material adverse effect on our results of operations and cash flow.
We have direct operations in many countries and the applicable tax rates vary by jurisdiction. As a result, our overall
effective tax rate could be materially affected by the relative level of earnings in the various taxing jurisdictions to which our
earnings are subject. In addition, the tax laws and regulations in the countries where we operate may be subject to change and
there may be changes in interpretation and enforcement of tax law. As a result, we may pay additional taxes if tax rates increase
or if tax laws, regulations or treaties in the jurisdictions where we operate are modified by the competent authorities in an
adverse manner.
In addition, various national and local taxing authorities periodically examine us and our subsidiaries. The resolution
of an examination or audit may result in us paying more than the amount that we may have reserved for a particular tax matter,
which could have a material adverse effect on our cash flows, business, financial condition and results of operations for any
affected reporting period.
We and our subsidiaries are engaged in a number of intercompany transactions. Although we believe that these
transactions reflect arm’s length terms and that proper transfer pricing documentation is in place, which should be respected for
tax purposes, the transfer prices and conditions may be scrutinized by local tax authorities, which could result in additional tax
liabilities.
If we are unable to fully utilize our deferred tax assets, our profitability could be reduced.
Our deferred income tax assets are valuable to us. These assets include tax loss and foreign tax credit carryforwards in
various jurisdictions. Realization of deferred tax assets is based on a number of factors, including whether there will be
adequate levels of taxable income in future periods to offset the tax loss and foreign tax credit carryforwards in jurisdictions
where such assets have arisen. Valuation allowances are recorded in order to reduce the deferred tax assets to the amount
expected to be realized in the future. In assessing the adequacy of our valuation allowances, we consider various factors
including reversal of deferred tax liabilities, forecasted future taxable income and potential tax planning strategies. These
factors could reduce the value of the deferred tax assets, which could have a material effect on our profitability.
We rely significantly on information technology. Our businesses could be adversely impacted if our computer
systems are disrupted or cease to operate effectively or if we are subject to a data security or privacy breach.
Our ability to effectively manage and operate our business depends significantly on information technology systems.
The failure of our systems to operate effectively or disruption in our systems could adversely impact our operations.
Additionally, any electronic or physical security breach involving the misappropriation, loss or other unauthorized disclosure of
confidential or personally identifiable information, including penetration of our network security, whether by us or by a third
party, could disrupt our business, severely damage our reputation and our relationships with our customers, expose us to risks
of litigation and liability and adversely affect our business and results of operations.
Volatility in securities markets, interest rates and other economic factors could substantially increase our defined
benefit pension costs and liabilities.
We have significant obligations under our defined benefit pension plans. The funded status of our pension plans is
dependent on many factors, including returns on invested plan assets and the discount rate used to measure pension obligations.
Unfavorable returns on plan assets, a lower discount rate or unfavorable changes in the applicable laws or regulations could
materially change the timing and amount of pension funding requirements, which could reduce cash available for our business.
Our operating performance also may be significantly impacted by the amount of expense recorded for our pension
plans. Pension expense recorded throughout the year is calculated using actuarial valuations that incorporate assumptions and
estimates about financial market, economic and demographic conditions. Differences between estimated and actual results give
rise to gains and losses that are recorded immediately in pension expense, generally in the fourth quarter of the year, which can
create volatility in our operating results.
Our balance sheet includes a significant amount of intangible assets and goodwill. A decline in the estimated fair
value of an intangible asset or of a reporting unit could result in an impairment charge recorded in our operating results,
which could be material.
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Goodwill and other indefinite-lived intangible assets are tested for impairment annually and between annual tests if an
event occurs or circumstances change that would indicate the carrying amount may be impaired. Also, we review our
amortizable intangible assets for impairment if an event occurs or circumstances change that would indicate the carrying
amount may not be recoverable. If the carrying value of an intangible asset or goodwill were to exceed its fair value, the asset
would be written down to its fair value, with the impairment charge recognized as a noncash expense in our operating results.
Adverse changes in future market conditions or weaker operating results compared to our expectations may impact our
projected cash flows and estimates of weighted average cost of capital, which could result in a potentially material impairment
charge if we are unable to recover the carrying value of our goodwill and other intangible assets.
As of January 29, 2017, we had approximately $3.470 billion of goodwill and $3.610 billion of trademarks and other
identifiable intangible assets on our balance sheet, which together represented 64% of our total assets. No impairment was
recorded in 2016 based on our annual goodwill impairment test.
Provisions in our certificate of incorporation and our by-laws and Delaware General Corporation Law could make
it more difficult to acquire us and may reduce the market price of our common stock.
Our certificate of incorporation and by-laws contain certain provisions, including provisions requiring supermajority
voting (80% of the outstanding voting power) to approve certain business combinations, permitting the Board of Directors to
fill vacancies on the Board and authorizing the Board of Directors to issue shares of preferred stock without approval of our
stockholders. These provisions could also have the effect of deterring changes of control.
In addition, Section 203 of the Delaware General Corporation Law imposes restrictions on mergers and other business
combinations between us and any holder of 15% or more of our common stock. The existence of this provision may have an
anti-takeover effect with respect to transactions not approved in advance by the Board of Directors.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
The general location, use, ownership status and approximate size of the principal properties that we occupied as of
January 29, 2017 are set forth below:
Location
Use
New York, New York
New York, New York
New York, New York
Corporate and Heritage Brands
administrative offices and showrooms
Calvin Klein administrative offices and
showrooms
Tommy Hilfiger administrative offices
and showrooms
Bridgewater, New Jersey
Corporate, finance and retail
administrative offices
Amsterdam, The
Netherlands
Venlo/Oud Gastal, The
Netherlands
Tommy Hilfiger and Calvin Klein
administrative offices, warehouse and
showrooms
Warehouse and distribution centers
McDonough, Georgia
Warehouse and distribution center
Jonesville, North Carolina Warehouse and distribution center
Irwindale, California
Warehouse and distribution center
Chattanooga, Tennessee
Warehouse and distribution center
Reading, Pennsylvania
Warehouse and distribution center
Los Angeles, California
Montreal, Canada
Hong Kong, China
Hawassa, Ethiopia
Neckwear administrative office,
warehouse and manufacturing facility
Administrative office, warehouses and
distribution centers
Corporate, Calvin Klein and Tommy
Hilfiger administrative offices
Manufacturing facility
Brinkley, Arkansas
Warehouse and distribution center
Dusseldorf, Germany
Tommy Hilfiger showrooms
Cypress, California
Speedo administrative offices
Ownership
Status
Approximate
Area in
Square Feet
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Owned
Owned
Leased
Leased
Leased
Leased
Owned
Leased
Leased
209,000
411,000
348,000
249,000
321,000
1,405,000
851,000
778,000
486,000
451,000
410,000
200,000
183,000
146,000
144,000
112,000
85,000
69,000
In addition, as of January 29, 2017, we leased certain other administrative/support offices and showrooms in various
domestic and international locations. We also leased and operated approximately 1,600 retail locations as of January 29, 2017
in the United States, Canada, Europe, Asia and Brazil.
Our Jonesville, North Carolina property is subject to a lien under our secured revolving credit facility.
Information with respect to minimum annual rental commitments under leases in which we are a lessee is included in
Note 16, “Leases,” in the Notes to Consolidated Financial Statements included in Item 8 of this report.
Item 3. Legal Proceedings
We are a party to certain litigations which, in management’s judgment based, in part, on the opinions of legal counsel,
will not have a material adverse effect on our financial position.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Certain information with respect to the market for our common stock, which is listed on the New York Stock
Exchange, and the dividends declared on our common stock appear in the Notes to Consolidated Financial Statements included
in Item 8 of this report under Note 13, “Stockholders’ Equity,” and under the heading “Selected Quarterly Financial Data-
Unaudited” on pages F-57 and F-58. See Note 8, “Debt,” in the Notes to Consolidated Financial Statements included in Item 8
of this report for a description of the restrictions to our paying dividends on our common stock. As of March 14, 2017, there
were 670 stockholders of record of our common stock. The closing price of our common stock on March 14, 2017 was $91.52.
ISSUER PURCHASES OF EQUITY SECURITIES
Period
(a) Total Number of
Shares (or Units)
Purchased(1)(2)
(b) Average Price Paid
per Share
(or Unit)(1)(2)
(c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs(1)
(d) Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs(1)
October 31, 2016 -
November 27, 2016
November 28, 2016 -
January 1, 2017
January 2, 2017 -
January 29, 2017
Total
___________________
186,598
$
107.94
186,400
$
127,833,521
434,518
313,561
934,677
$
92.78
92.14
95.59
433,879
87,578,659
312,811
933,090
$
58,748,475
58,748,475
(1) On June 1, 2015, we announced that our Board of Directors had authorized us to repurchase up to $500 million of our
outstanding common stock. The Board of Directors’ authorization was effective through June 3, 2018. On March 21,
2017, the Board of Directors authorized a $750 million increase to the program and extended it to June 3, 2020.
Repurchases under the program may be made from time to time over the period through open market purchases,
accelerated share repurchase programs, privately negotiated transactions or other methods, as we deem appropriate.
Purchases are made based on a variety of factors, such as price, corporate requirements and overall market conditions,
applicable legal requirements and limitations, restrictions under our debt arrangements, trading restrictions under our
insider trading policy and other relevant factors. The program may be modified by the Board of Directors, including to
increase or decrease the repurchase limitation or extend, suspend, or terminate the program, at any time, without prior
notice.
(2) Our 2006 Stock Incentive Plan provides us with the right to deduct or withhold, or require employees to remit to us, an
amount sufficient to satisfy any applicable tax withholding requirements applicable to stock-based compensation
awards. To the extent permitted, employees may elect to satisfy all or part of such withholding requirements by
tendering previously owned shares or by having us withhold shares having a fair market value equal to the minimum
statutory tax withholding rate that could be imposed on the transaction. Included in this table are shares withheld
during the fourth quarter of 2016 principally in connection with the settlement of vested restricted stock units to satisfy
tax withholding requirements, in addition to the shares repurchased as part of the stock repurchase program discussed
above.
The following performance graph and return to stockholders information shown below are provided pursuant to Item
201(e) of Regulation S-K promulgated under the Exchange Act. The graph and information are not deemed to be “filed” under
the Exchange Act or otherwise subject to liabilities thereunder, nor are they to be deemed to be incorporated by reference in any
filing under the Securities Act or Exchange Act unless we specifically incorporate them by reference.
The performance graph compares the yearly change in the cumulative total stockholder return on our common stock
against the cumulative return of the S&P 500 Index and the S&P 500 Apparel, Accessories & Luxury Goods Index for the five
fiscal years ended January 29, 2017.
28
Value of $100.00 invested after 5 years:
Our Common Stock
S&P 500 Index
S&P 500 Apparel, Accessories & Luxury Goods Index
Item 6. Selected Financial Data
$
$
$
118.58
194.26
79.75
Selected Financial Data appears under the heading “Five Year Financial Summary” on pages F-62 and F-63.
29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
The following discussion and analysis is intended to help you understand us, our operations and our financial
performance. It should be read in conjunction with our consolidated financial statements and the accompanying notes, which
are included elsewhere in this report.
We are one of the largest branded apparel companies in the world, with a history going back over 135 years. Our brand
portfolio consists of nationally and internationally recognized brand names, including CALVIN KLEIN, Tommy Hilfiger, Van
Heusen, IZOD, ARROW, Speedo (licensed in perpetuity for North America and the Caribbean from Speedo International Ltd.),
Warner’s, Olga and Eagle. We also license brands from third parties primarily for use on dress shirts and neckwear offered in
the United States and Canada.
Our business strategy is to sell our brands at multiple price points and in multiple channels of distribution and regions.
This enables us to offer products to a broad range of consumers, while minimizing competition among our brands and reducing
our reliance on any one demographic group, merchandise preference, price point, distribution channel or region. We also
license our brands to third parties and joint ventures for product categories and in jurisdictions where we believe our partners’
expertise can better serve our businesses.
Our revenue was $8.203 billion in 2016, of which approximately 50% was generated outside of the United States. Our
global designer lifestyle brands, Tommy Hilfiger and CALVIN KLEIN, together generated over 80% of our revenue.
RESULTS OF OPERATIONS
Operations Overview
We generate net sales from (i) the wholesale distribution to retailers, franchisees, licensees and distributors of dress
shirts, neckwear, sportswear, jeanswear, performance apparel, intimate apparel, underwear, swim products, handbags,
accessories, footwear and other related products under owned and licensed trademarks, including through digital commerce
sites operated by our wholesale partners and pure play digital commerce retailers, and (ii) the sale of certain of these products
through (a) approximately 1,600 Company-operated free-standing retail store locations worldwide under our CALVIN KLEIN,
Tommy Hilfiger and certain of our heritage brands, (b) over 1,150 Company-operated concessions/shop-in-shops worldwide
under our CALVIN KLEIN and Tommy Hilfiger trademarks, and (c) digital commerce sites in certain countries under our
CALVIN KLEIN and Tommy Hilfiger trademarks and in North America through our SpeedoUSA.com digital commerce site.
Additionally, we generate royalty, advertising and other revenue from fees for licensing the use of our trademarks.
On January 24, 2017, we announced that the license for the Tommy Hilfiger men’s tailored clothing business in North
America with Marcraft Clothes, Inc. will be terminated effective December 31, 2017 (the “TH men’s tailored license
termination”). Beginning January 1, 2018, the license will move to Peerless Clothing International, Inc. in order to consolidate
our men’s tailored businesses for all of our brands in North America under one partner. We recorded a pre-tax charge of $11
million in the fourth quarter of 2016 in connection with the TH men’s tailored license termination.
On November 30, 2016, we formed a joint venture in Mexico, PVH Mexico, in which we own a 49% economic
interest. The joint venture was formed by merging our wholly owned subsidiary that principally operated and managed our
Calvin Klein business in Mexico with a wholly owned subsidiary of Grupo Axo, S.A.P.I. de C.V. (“Grupo Axo”) that distributes
certain Tommy Hilfiger brand products in Mexico. In connection with the formation of PVH Mexico, we deconsolidated our
wholly owned subsidiary. We recorded a pre-tax noncash loss of $82 million in 2016 in connection with the Mexico
deconsolidation.
On June 29, 2016, we, along with Arvind formed a joint venture in Ethiopia, PVH Ethiopia, in which we own a 75%
interest. We have consolidated the joint venture in our consolidated financial statements. PVH Ethiopia was formed to operate a
manufacturing facility that will produce finished products for us for distribution primarily in the United States. We expect the
manufacturing facility will begin operations in the first half of 2017.
On June 20, 2016, we issued €350 million euro-denominated principal amount of 3 5/8% senior notes due July 15,
2024. Please see “Liquidity and Capital Resources” below for a further discussion.
30
On April 13, 2016, we completed the acquisition of the 55% of the ownership interests in TH China, our former joint
venture for Tommy Hilfiger in China, that we did not already own. As a result of the TH China acquisition, we now operate
directly our Tommy Hilfiger business in this high-growth market. The total consideration for the acquisition was $161 million
(including the elimination of a $3 million pre-acquisition receivable owed to us by TH China), net of cash acquired of $105
million. We recorded a net pre-tax gain of $70 million in 2016, including a noncash gain of $153 million to write-up our
existing equity investment to fair value and costs of $83 million, which were primarily noncash and related to valuation
adjustments and amortization of short-lived assets.
On February 1, 2016, we entered into a licensing agreement with G-III for the design, production and wholesale
distribution of Tommy Hilfiger womenswear in the United States and Canada, which resulted in the discontinuation of our
directly operated Tommy Hilfiger North America womenswear wholesale business in the fourth quarter of 2016. We recorded
pre-tax charges of $4 million and $3 million in 2016 and 2015, respectively, in connection with the G-III license.
We recorded pre-tax debt modification and extinguishment charges in 2016 and 2014 that totaled $16 million and $93
million, respectively.
We recorded pre-tax charges principally in connection with the acquisition of Warnaco and the related integration and
restructuring that totaled $10 million, $73 million and $146 million during 2016, 2015 and 2014, respectively.
We implemented initiatives to rationalize the Heritage Brands business, including the exit from our Izod retail business
(completed in the third quarter of 2015) and the discontinuation of several licensed product lines in the dress furnishings
business. We recorded pre-tax charges of $10 million in 2015 and $21 million in 2014, including $18 million of noncash
impairment charges, in connection with the operation of and exit from our Izod retail business. We recorded pre-tax charges of
$3 million and $17 million in 2016 and 2015, respectively, principally in connection with the discontinuation of several
licensed product lines in the dress furnishings business.
We expect to incur additional pre-tax charges of approximately $110 million during 2017, consisting of (i)
approximately $55 million in connection with the agreements entered into in March 2017 for a transaction, which is expected to
close July 1, 2017, to restructure our supply chain relationship with Li & Fung, which establishes a new strategic partnership
with Li & Fung to provide services to us and also provides for the termination of our non-exclusive buying agency agreement
with Li & Fung, pursuant to which we are obligated to source certain Calvin Klein Jeans products and at least 54% of certain
Tommy Hilfiger products through Li & Fung (the “Li & Fung termination”); (ii) approximately $25 million in connection with
the TH China acquisition, primarily consisting of noncash amortization of short-lived assets; (iii) approximately $20 million in
connection with the relocation of our Tommy Hilfiger office in New York, New York, including noncash depreciation expense;
and (iv) approximately $10 million in connection with the noncash settlement of certain benefit obligations related to our
retirement plans as a result of an annuity purchase for certain participants, under which such obligations were transferred to an
insurer.
Our Calvin Klein and Tommy Hilfiger businesses each have substantial international components that expose us to
significant foreign exchange risk. Amounts recorded in local foreign currencies are translated back to United States dollars
using an average exchange rate over the representative period. Our international revenue and earnings are unfavorably impacted
during times of a strengthening United States dollar against the foreign currencies in which we generate significant revenue and
earnings and favorably impacted during times of a weakening United States dollar against those currencies. In 2016,
approximately 50% of our revenue was subject to foreign currency translation. Beginning in the latter part of 2014, the United
States dollar strengthened against most major currencies, resulting in a negative impact on our results of operations for 2015
and 2016. To hedge against a portion of this exposure, we entered into several foreign currency option contracts during 2016.
These contracts represent our purchase of euro put/United States dollar call options. We currently expect the strength of the
United States dollar and resulting unfavorable impact on our revenue and earnings to continue in 2017, although to a lesser
degree than in 2015 and 2016. Additionally, there is a transaction impact on our financial results because inventory typically is
purchased in United States dollars by our foreign subsidiaries. As with translation, during times of a strengthening United
States dollar, our results of operations will be negatively impacted by these transactions as the increased local currency value of
inventory results in a higher local currency cost of goods when the goods are sold. We use foreign currency forward exchange
contracts to hedge against a portion of the exposure related to this transaction impact. The contracts cover at least 70% of the
projected inventory purchases in United States dollars by our foreign subsidiaries. These contracts are generally entered into 12
months in advance of the related inventory purchases. Therefore, the unfavorable impact of a strengthening United States dollar
on the cost of inventory purchases covered by these contracts may be realized in our earnings in the year following their
inception, as the underlying inventory hedged by the contracts is sold. As such, the unfavorable impact of a strengthening
United States dollar against most major currencies in the latter part of 2014 and through 2015, particularly the euro, negatively
31
impacted our gross margin during 2016, and is expected to have a negative impact, to a much lesser extent, on our earnings in
2017.
Retail comparable store sales discussed below refer to sales for retail stores that have been open for at least 12 months.
Sales for retail stores that are closed during the year are excluded from the calculation of retail comparable store sales. Sales for
retail stores that are either relocated, materially altered in size or closed for a certain number of consecutive days for renovation
are also excluded from the calculation of retail comparable store sales until such stores have been in their new location or in
their newly renovated state for at least 12 months. Sales from our Company-operated digital commerce sites are included within
retail comparable store sales for those businesses and regions that have operated the related digital commerce site for at least 12
months. Retail comparable store sales are based on comparable weeks and local currencies.
The following table summarizes our income statements in 2016, 2015 and 2014:
(Dollars in millions)
Net sales
Royalty revenue
Advertising and other revenue
Total revenue
Gross profit
% of total revenue
Selling, general and administrative expenses
% of total revenue
Debt modification and extinguishment costs
Other noncash gain, net
Equity in net income of unconsolidated affiliates
Income before interest and taxes
Interest expense
Interest income
Income before taxes
Income tax expense (benefit)
Net income
Less: Net loss attributable to redeemable non-controlling interest
Net income attributable to PVH Corp.
2016
2015
2014
$
$
7,791
321
91
8,203
4,370
53.3%
3,637
44.3%
16
71
0
789
121
6
674
125
549
0
549
$
$
7,605
325
90
8,020
4,162
51.9%
3,418
42.6%
—
—
17
761
117
4
647
75
572
—
572
$
$
7,849
300
92
8,241
4,327
52.5%
3,714
45.1%
93
—
10
530
144
5
391
(48)
439
0
439
Total Revenue
Total revenue was $8.203 billion in 2016, $8.020 billion in 2015 and $8.241 billion in 2014. The increase in revenue
of $183 million in 2016 as compared to 2015 was due principally to the net effect of the following items:
• The addition of an aggregate of $213 million of revenue attributable to our Calvin Klein North America and Calvin
Klein International segments, which included a reduction of approximately $53 million related to the impact of foreign
currency translation. Revenue in the Calvin Klein North America segment increased 3% (including a 1% negative
foreign currency impact) primarily driven by strong growth in the wholesale business, partially offset by a revenue
decrease due to the Mexico deconsolidation and a 4% decrease in comparable store sales, primarily driven by declines
in traffic and consumer spending in Calvin Klein’s United States stores located in international tourist locations.
Calvin Klein International segment revenue increased 12% (including a 3% negative foreign currency impact) due
principally to significant growth in Europe and China. Calvin Klein International segment comparable store sales
increased 6%.
• The net addition of $141 million of revenue attributable to our Tommy Hilfiger North America and Tommy Hilfiger
International segments, which included a reduction of approximately $43 million related to the impact of foreign
currency translation. Revenue in the Tommy Hilfiger North America segment decreased 4% principally due to a 9%
decline in comparable store sales, driven by weak traffic and consumer spending in Tommy Hilfiger’s United States
stores located in international tourist locations, and the discontinuation of our directly operated womenswear
32
wholesale business in the United States and Canada in connection with the G-III license. Tommy Hilfiger International
segment revenue increased 11% (including a 2% negative foreign currency impact) driven principally by strong
growth across Europe, including a 9% increase in comparable store sales, and the inclusion of the revenue of the China
business after completion of the TH China acquisition in April 2016.
• The reduction of an aggregate of $171 million of revenue attributable to our Heritage Brands Retail and Heritage
Brands Wholesale segments. The decrease was primarily due to the business rationalization initiatives discussed in the
section entitled “Operations Overview” above, partially offset by a 7% increase in comparable store sales.
The decrease in revenue of $221 million in 2015 as compared to 2014 was due principally to the net effect of the
following items:
• The net addition of $64 million of revenue attributable to our Calvin Klein North America and Calvin Klein
International segments, which included a reduction of approximately $199 million related to the impact of foreign
currency translation. Revenue in the Calvin Klein North America segment increased 5% (including a 3% negative
foreign currency impact). The Calvin Klein North America retail business experienced solid growth due to square
footage expansion in Company-operated stores, including the conversion of IZOD stores to Calvin Klein Accessory
and Calvin Klein Underwear stores, and a 2% increase in comparable store sales despite the decreased traffic and
consumer spending trends in Calvin Klein’s United States stores located in international tourist locations, while the
wholesale business experienced modest growth. Revenue in the Calvin Klein International segment decreased 2%
(including a 13% negative foreign currency impact). Revenue of the segment would have increased if not for the
negative foreign currency impact. This was attributable to the strong performance in Europe, where we experienced
growth in most markets, and an increase in Asia, partially due to the benefit of the Chinese New Year, as the first and
fourth quarters of fiscal 2015 included the peak wholesale selling seasons before the Chinese New Year, while fiscal
2014 did not include a peak selling season before the holiday. International comparable store sales increased 5%.
• The reduction of an aggregate of $212 million of revenue attributable to our Tommy Hilfiger North America and
Tommy Hilfiger International segments, which included a reduction of approximately $341 million related to the
impact of foreign currency translation resulting principally from a weaker euro. Revenue in the Tommy Hilfiger North
America segment decreased 1% (including a 2% negative foreign currency impact) due principally to a 5% decrease in
comparable store sales primarily as a result of the decline in traffic and consumer spending trends in Tommy Hilfiger’s
United States stores located in international tourist locations. Revenue in the Tommy Hilfiger International segment
decreased 10% (including a 15% negative foreign currency impact). Revenue of the segment would have increased if
not for the negative foreign currency impact, principally as a result of 8% comparable store sales growth in Europe and
a mid-single digit percentage increase in wholesale revenue.
• The reduction of an aggregate of $72 million of revenue attributable to our Heritage Brands Wholesale and Heritage
Brands Retail segments, as a 10% increase in comparable store sales in the Van Heusen retail business was more than
offset by the revenue decrease attributable to the business rationalization initiatives discussed in the section entitled
“Operations Overview” above.
We currently expect that revenue will increase 2% in 2017 compared to 2016, inclusive of a negative impact of
approximately 2% related to foreign currency translation. Negatively impacting revenue in 2017 as compared to 2016 are
decreases from (i) the Mexico deconsolidation, which resulted in us no longer recognizing revenues from a directly operated
business in Mexico, and (ii) the G-III license, which resulted in the discontinuation of our directly operated womenswear
wholesale business in the United States and Canada in the fourth quarter of 2016. Revenue for our Calvin Klein business is
projected to increase approximately 5% compared to 2016, inclusive of a negative impact of approximately 2% related to
foreign currency translation, as well as the negative impact of the Mexico deconsolidation. Revenue for our Tommy Hilfiger
business is expected to increase approximately 1% compared to 2016, inclusive of a negative impact of approximately 3%
related to foreign currency translation, as well as the negative impact of the G-III license. Revenue for our Heritage Brands
business is expected to decrease approximately 1% compared to 2016.
33
Gross Profit
Gross profit is calculated as total revenue less cost of goods sold and gross margin is calculated as gross profit divided
by total revenue. Included as cost of goods sold are costs associated with the production and procurement of product, such as
inbound freight costs, purchasing and receiving costs and inspection costs. Also included as costs of goods sold are the amounts
recognized on foreign currency forward exchange contracts as the underlying inventory hedged by such forward exchange
contracts is sold. Warehousing and distribution expenses are included in selling, general and administrative expenses. All of our
royalty, advertising and other revenue is included in gross profit because there is no cost of goods sold associated with such
revenue. As a result, our gross profit may not be comparable to that of other entities.
The following table shows our revenue mix between net sales and royalty, advertising and other revenue, as well as
our gross margin for 2016, 2015 and 2014:
Components of revenue:
Net sales
Royalty, advertising and other revenue
Total
Gross margin
2016
2015
2014
95.0%
5.0
100.0%
53.3%
94.8%
5.2
100.0%
51.9%
95.2%
4.8
100.0%
52.5%
Gross profit in 2016 was $4.370 billion, or 53.3% of total revenue, compared to $4.162 billion, or 51.9% of total
revenue, in 2015. The 140 basis point increase in gross margin was principally driven by (i) a favorable mix of business due to
revenue growth in our higher-margin Calvin Klein and Tommy Hilfiger businesses and revenue contraction in our lower-margin
Heritage Brands business, (ii) the addition of TH China, which achieved a significantly higher gross margin than the average
gross margin for our overall business, and (iii) gross margin improvements in our North American businesses, principally in the
second half of the year, due to decreased promotional selling resulting from lower inventory levels as compared to the prior
year. These increases were partially offset by the unfavorable impact of the stronger United States dollar on our international
businesses that purchase inventory in United States dollars, particularly our European businesses, as the increased local
currency value of inventory resulted in higher cost of goods in local currency when the goods were sold.
Gross profit in 2015 was $4.162 billion, or 51.9% of total revenue, compared to $4.327 billion, or 52.5% of total
revenue, in 2014. The 60 basis point decrease in gross margin was principally driven by (i) a decline in gross margin in the
Tommy Hilfiger North America segment due to the decline in traffic and consumer spending trends in our United States stores
located in international tourist locations, which drove more promotional selling compared to 2014, (ii) the stronger United
States dollar, which caused our Calvin Klein International and Tommy Hilfiger International segments, which generally carry
higher gross margins than our North American segments, to be translated to United States dollars at lower average exchange
rates, (iii) the stronger United States dollar, which further negatively impacted our international businesses that purchase
inventory in United States dollars, particularly the Tommy Hilfiger European business, as the increased local currency value of
inventory resulted in higher cost of goods in local currency when the goods were sold, and (iv) costs incurred principally in
connection with the discontinuation of several licensed product lines in the Heritage Brands dress furnishings business. These
declines were partially offset by overall gross margin improvements in our Calvin Klein European and Asian businesses as a
result of higher average unit retail selling prices, as well as an increase in our royalty, advertising and other revenue as a
percentage of total revenue, as there is no cost of goods sold associated with such revenue.
We currently expect that gross margin in 2017 will increase as compared to 2016 due to (i) the impact of expected
faster growth in our Calvin Klein International and Tommy Hilfiger International segments than in our North American
segments, as our International segments generally carry higher gross margins and (ii) gross margin improvements in our North
American businesses principally resulting from decreased promotional selling compared to 2016. We currently expect that these
gross margin increases will be partially offset by the unfavorable impact of the stronger United States dollar on our
international businesses that purchase inventory in United States dollars.
34
Selling, General and Administrative (“SG&A”) Expenses
Our SG&A expenses were as follows:
(Dollars in millions)
SG&A expenses
% of total revenue
2016
2015
2014
$
$
3,637
44.3%
$
3,418
42.6%
3,714
45.1%
SG&A expenses in 2016 were $3.637 billion, or 44.3% of total revenue, as compared to $3.418 billion, or 42.6% of
total revenue in 2015. The 170 basis point increase in SG&A expenses as a percentage of total revenue was principally
attributable to (i) the costs incurred in connection with the TH China acquisition, primarily consisting of noncash valuation
adjustments and amortization of short-lived assets, (ii) an unfavorable mix of business due to the revenue growth in our higher-
expense Calvin Klein and Tommy Hilfiger businesses and revenue contraction in our lower-expense Heritage Brands business,
and (iii) an increase in marketing expenditures and investments associated with the recent CALVIN KLEIN creative team
leadership changes. These increases were partially offset by (i) a reduction of costs incurred in connection with the Warnaco
integration and related restructuring compared to 2015 and (ii) a decrease in retirement plan expense resulting from an increase
in the actuarial gain recorded in 2016 compared to 2015 (please see Note 12, “Retirement and Benefit Plans” in the Notes to
Consolidated Financial Statements included in Item 8 of this report for a further discussion).
SG&A expenses in 2015 were $3.418 billion, or 42.6% of total revenue, as compared to $3.714 billion, or 45.1% of
total revenue in 2014. The 250 basis point decrease in SG&A expenses as a percentage of total revenue was principally
attributable to (i) a decrease due to lower retirement plan expense resulting from an actuarial gain in 2015, as compared to an
actuarial loss in 2014, (ii) a reduction of costs incurred in connection with the Warnaco integration and related restructuring
compared to 2014 and (iii) a decrease attributable to the results of our Calvin Klein International and Tommy Hilfiger
International segments, which generally carry higher SG&A percentages of total revenue than our North American segments,
being translated to United States dollars at lower average exchange rates. These decreases were partially offset by (i) the impact
of contraction in our lower-expense Heritage Brands business and (ii) an increase in corporate expenses mainly attributable to
associate-related benefits.
We currently expect that SG&A expenses as a percentage of total revenue in 2017 will increase compared to 2016 due
to (i) the impact of expected faster growth in our Calvin Klein International and Tommy Hilfiger International segments than in
our North American segments, as our International segments generally carry higher SG&A percentages of total revenue, (ii)
costs related to the Li & Fung termination and (iii) costs related to the relocation of our Tommy Hilfiger office in New York,
New York, including noncash depreciation expense. Additionally, our expectation of 2017 SG&A expenses includes a $10
million actuarial loss expected to be incurred in the first quarter associated with the noncash settlement of certain benefit
obligations related to our retirement plans as a result of an annuity purchase for certain participants, under which such
obligations were transferred to an insurer, while our 2016 SG&A expenses included a $39 million actuarial gain recorded in the
fourth quarter. These increases will be partially offset by lower costs expected to be incurred in 2017 as compared to 2016 in
connection with the TH China acquisition. Our actual 2017 SG&A expenses may be significantly different than our projections
because of expenses associated with our retirement plans. Retirement plan expenses recorded throughout the year are calculated
using actuarial valuations that incorporate assumptions and estimates about financial market, economic and demographic
conditions. Differences between estimated and actual results give rise to gains and losses that are recorded immediately in
earnings, generally in the fourth quarter of the year, which can create volatility in our operating results.
Debt Modification and Extinguishment Costs
We incurred costs totaling $16 million in 2016 in connection with the amendment of our senior secured credit
facilities. Please see the section entitled “Liquidity and Capital Resources” below for a further discussion.
We incurred costs totaling $93 million in 2014 in connection with the amendment and restatement of our senior
secured credit facilities and the related redemption of our 7 3/8% senior notes due 2020. Please see the section entitled
“Liquidity and Capital Resources” below for a further discussion.
35
Other Noncash Gain, Net
We recorded a pre-tax noncash gain of $153 million in 2016 to write-up our equity investment in TH China to fair
value in connection with the TH China acquisition. Please see Note 2, “Acquisitions,” in the Notes to Consolidated Financial
Statements included in Item 8 of this report for a further discussion.
We recorded a pre-tax noncash loss of $82 million in 2016 in connection with the Mexico deconsolidation. Please see
Note 5, “Investments in Unconsolidated Affiliates,” in the Notes to Consolidated Financial Statements included in Item 8 of this
report for a further discussion.
Equity in Net Income of Unconsolidated Affiliates
The equity in net income of unconsolidated affiliates decreased to $100,000 in 2016 compared to $17 million during
2015 and $10 million during 2014. These amounts relate to our share of income (loss) from our joint ventures for the Tommy
Hilfiger brand in China (the 55% that we did not own was acquired on April 13, 2016), India and Brazil, for the CALVIN
KLEIN brand in India, for the Tommy Hilfiger, CALVIN KLEIN and Van Heusen brands in Australia, and for the CALVIN
KLEIN, Tommy Hilfiger, Warner’s, Olga and Speedo brands in Mexico (since its formation on November 30, 2016). Also
included is our share of income (loss) from our investments in the parent company of the Karl Lagerfeld brand (“Karl
Lagerfeld”) and, beginning in the third quarter of 2016, in Gazal Corporation Limited (“Gazal”). Our investments in the
continuing joint ventures, Karl Lagerfeld and Gazal are being accounted for under the equity method of accounting. Please see
the section entitled “Investments in Unconsolidated Affiliates” within “Liquidity and Capital Resources” below for a further
discussion. The equity in net income of unconsolidated affiliates in 2016 included a one-time expense of $6 million recorded on
our equity investment in TH China prior to the acquisition closing. The equity in net income of unconsolidated affiliates in
2015 included a one-time gain of $2 million on our equity investment in Karl Lagerfeld.
Interest Expense, Net
Net interest expense increased to $115 million in 2016 from $113 million in 2015 as the positive impacts from debt
repayments made during 2016 and 2015 and the amendment of our senior secured credit facilities in the second quarter of 2016
were more than offset by the negative impact of the interest rate swap that commenced in February 2016 to convert a portion of
our variable rate debt under our term loans to fixed rate debt and the issuance of €350 million of 3 5/8% senior notes in June
2016. Please see the section entitled “Financing Arrangements” within “Liquidity and Capital Resources” below for a further
discussion.
Net interest expense decreased to $113 million in 2015 from $139 million in 2014 due to lower average debt balances
and the effect of the amendment and restatement of our senior secured credit facilities and the related redemption of our 7 3/8%
senior notes due 2020 in the first quarter of 2014. Please see the section entitled “Financing Arrangements” within “Liquidity
and Capital Resources” below for a further discussion.
Net interest expense in 2017 is currently expected to be approximately $120 million compared to $115 million in
2016, primarily due to the net impact of the issuance of €350 million of 3 5/8% senior notes in June 2016, partially of fset by
debt repayments made during 2016 and expected to be made in 2017 and the amendment of our senior secured credit facilities
in the second quarter of 2016.
Income Taxes
Income tax expense was as follows:
(Dollars in millions)
Income tax expense (benefit)
Income tax expense (benefit) as a % of pre-tax income
2016
2015
2014
$
$
125
18.6%
$
75
11.6%
(48)
(12.1)%
The effective income tax rate for 2016 was 18.6% compared with 11.6% in 2015 and (12.1)% in 2014. The volatility
in our effective income tax rate in the last three years is due in large part to adjustments to our liabilities for uncertain tax
positions.
36
The effective income tax rate for 2016 was lower than the United States statutory rate due to the benefit of overall
lower tax rates in certain international jurisdictions where we file tax returns. Also contributing to the lower effective income
tax rate for 2016 was the benefit of discrete items, including the lower tax rate applicable to the pre-tax gain recorded to write-
up our existing equity investment in TH China to fair value.
The effective income tax rate for 2015 was lower than the United States statutory rate principally due to the benefit of
lower tax rates in certain international jurisdictions where we file tax returns and the benefits primarily related to the favorable
resolution of uncertain tax positions and the impact of tax law and tax rate changes on deferred taxes, as well as the expiration
of the statute of limitations related to other uncertain tax positions.
The effective income tax rate in 2014 was a benefit to income principally due to a reduction of $94 million in our
estimate for uncertain tax positions, which provided a 24% benefit to our tax rate. This benefit resulted from the favorable
resolutions of uncertain tax positions in certain international jurisdictions, as well as the expiration of the statute of limitations
related to other uncertain tax positions.
We currently expect that our effective income tax rate in 2017 will be approximately 17%, which is lower than the
United States statutory rate principally due to the benefit of overall lower tax rates in certain international jurisdictions where
we file tax returns.
Our tax rate is affected by many factors, including the mix of international and domestic pre-tax earnings, discrete
events arising from specific transactions, and audits by tax authorities or the receipt of new information, any of which can cause
us to change our estimate for uncertain tax positions.
Redeemable Non-Controlling Interest
We have consolidated the results of PVH Ethiopia, in which we own a 75% interest, in our consolidated financial
statements. The net loss attributable to the redeemable non-controlling interest was immaterial for 2016. We currently expect
that the net loss attributable to the redeemable non-controlling interest for 2017 will be immaterial. Please refer to Note 6,
“Redeemable Non-Controlling Interests,” in the Notes to Consolidated Financial Statements included in Item 8 of this report
for a further discussion.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Summary
Cash and cash equivalents at January 29, 2017 was $730 million, an increase of $174 million from the amount at
January 31, 2016 of $556 million. The change in cash and cash equivalents included the impact of $390 million of net proceeds
from our issuance of €350 million principal amount of 3 5/8% senior notes in June 2016, of fset by (i) $350 million of debt
repayments, (ii) $315 million of common stock repurchases under the stock repurchase program, (iii) a $158 million payment
(net of cash acquired of $105 million) in connection with the TH China acquisition and (iv) a $100 million contribution to our
defined benefit pension plans. Cash flow in 2017 will be impacted by various factors in addition to those noted below in this
“Liquidity and Capital Resources” section, including expected debt repayments of at least $250 million and common stock
repurchases under the stock repurchase program of $200 million to $250 million in 2017.
As of January 29, 2017, approximately $395 million of cash and cash equivalents was held by international
subsidiaries whose undistributed earnings are considered permanently reinvested. Our intent is to continue to reinvest these
funds in international operations. If management decides at a later date, or is required under changes to United States tax law, to
repatriate these funds to the United States, we may be required to pay taxes on these amounts based on the then applicable
United States tax rates, net of foreign taxes already paid.
Operations
Cash provided by operating activities was $955 million in 2016 compared to $900 million in 2015. The increase in
cash provided by operating activities as compared to the prior year was primarily driven by changes in working capital,
principally favorable changes related to inventory and accrued expenses, partially offset by an increase in contributions to our
defined benefit pension plans.
37
Capital Expenditures
Our capital expenditures in 2016 were $247 million compared to $264 million in 2015. Capital expenditures in 2016
primarily included investments in new stores and store expansions, as well as continued investments in operations and
infrastructure, including system improvements. We currently expect that capital expenditures for 2017 will be approximately
$400 million, which includes a shift into 2017 of expenditures originally expected to occur in 2016. Capital expenditures in
2017 will primarily include expenditures related to the relocation of our Tommy Hilfiger office in New York, New York, as
well as significant investments in operations and infrastructure, including upgrading and enhancing our digital commerce
platforms and systems related to our supply chain and logistics operations.
Investments in Unconsolidated Affiliates
During the fourth quarter of 2016, we and Grupo Axo formed a joint venture, PVH Mexico, in which we own a 49%
economic interest. PVH Mexico licenses from certain of our wholly owned subsidiaries the rights to distribute and sell certain
CALVIN KLEIN, Tommy Hilfiger, Warner’s, Olga and Speedo brand products in Mexico. PVH Mexico was formed by merging
our wholly owned subsidiary that principally operated and managed the Calvin Klein business in Mexico (the “Mexico
business”) with a wholly owned subsidiary of Grupo Axo that distributes certain Tommy Hilfiger brand products in Mexico. In
connection with the formation of PVH Mexico, we deconsolidated the Mexico business and began accounting for our 49%
interest under the equity method of accounting in the fourth quarter of 2016. We made payments of $7 million to PVH Mexico
during 2016 to contribute our 49% share of the joint venture funding. Please see Note 5, “Investments in Unconsolidated
Affiliates,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion.
In 2014, we acquired an economic interest of approximately 10% in Karl Lagerfeld for $19 million. During 2016, a
third party acquired a minority stake in Karl Lagerfeld, diluting our economic interest to approximately 8%.
In 2013, we formed with Gazal a joint venture, PVH Brands Australia Pty. Limited (“PVH Australia”), in which we
own a 50% economic interest. PVH Australia has licensed from one of our subsidiaries since the first quarter of 2014 the rights
to distribute and sell certain CALVIN KLEIN brand products in Australia, New Zealand and other island nations in the South
Pacific. As part of the transaction, we contributed to PVH Australia our subsidiaries that were operating the Calvin Klein Jeans
businesses in Australia and New Zealand. In 2015, we completed a transaction in which the Tommy Hilfiger and Van Heusen
trademarks were licensed for certain product categories to subsidiaries of PVH Australia for use in Australia, New Zealand and,
in the case of Tommy Hilfiger, other island nations in the South Pacific. The Tommy Hilfiger trademarks had previously been
licensed to a third party and the Van Heusen trademarks had previously been licensed to Gazal. Additionally, subsidiaries of
PVH Australia license other trademarks for certain product categories. We made net payments of $21 million (of which $20
million was placed into an escrow account prior to the end of 2014) and $7 million to PVH Australia during 2015 and 2014,
respectively, to contribute our 50% share of the joint venture funding for the periods. We received a $1 million dividend from
PVH Australia during 2016.
During 2016, we acquired approximately 10% of Gazal’s outstanding capital stock, which is listed on the Australian
Securities Exchange, for $9 million.
In 2013, we acquired a 51% economic interest in a Calvin Klein joint venture in India, which is now known as Calvin
Klein Arvind Fashion Private Limited (“CK India”). CK India licenses from one of our subsidiaries the rights to the CALVIN
KLEIN trademarks in India for certain product categories. During the first quarter of 2014, Arvind purchased our prior joint
venture partners’ shares in CK India and, as a result of the entry into a shareholder agreement with different governing
arrangements between us and Arvind than those with our prior partners, we were no longer deemed to hold a controlling
interest in the joint venture. CK India was deconsolidated as a result and we began reporting our 51% interest as an equity
method investment in the first quarter of 2014. We made payments of $2 million and $4 million to CK India during 2016 and
2015, respectively, to contribute our 51% share of the joint venture funding for the periods.
In 2012, we formed a joint venture, Tommy Hilfiger do Brasil S.A. (“TH Brazil”), in Brazil, in which we own a 40%
economic interest. TH Brazil licenses from one of our subsidiaries the rights to the Tommy Hilfiger trademarks in Brazil for
certain product categories. We made payments of $2 million to TH Brazil in both 2016 and 2015 to contribute our 40% share of
the joint venture funding for the periods. During the third quarter of 2016, we issued a note receivable due April 2, 2017 to TH
Brazil for $12 million, of which $6 million was repaid during the fourth quarter of 2016. As of January 29, 2017, the interest
rate on the note was 13.00% and the outstanding balance, including accrued interest, was $7 million.
38
Loan to a Supplier
Wuxi Jinmao Foreign Trade Co., Ltd. (“Wuxi”), one of our finished goods inventory suppliers, has a wholly owned
subsidiary with which we entered into a loan agreement in 2016. Under the agreement, Wuxi’s subsidiary borrowed a principal
amount of $14 million for the development and operation of a fabric mill. Principal payments are due in semi-annual
installments through November 29, 2026. The outstanding principal balance of the loan bears interest at a rate of (i) 4.50% per
annum until the sixth anniversary of the closing date of the loan and (ii) a rate of LIBOR plus 4.00% thereafter. As of January
29, 2017, the outstanding balance, including accrued interest, was $14 million.
Acquisition of TH China
We acquired on April 13, 2016 the 55% of the ownership interests in TH China that we did not already own. Prior to
April 13, 2016, we accounted for our 45% interest in TH China under the equity method of accounting. We paid $158 million,
net of cash acquired of $105 million, as cash consideration for this transaction. Please see Note 2, “Acquisitions,” in the Notes
to Consolidated Financial Statements included in Item 8 of this report for further discussion.
Acquisition of Russia Franchisee
In 2014, we acquired for $4 million two Tommy Hilfiger stores in Russia from a former Tommy Hilfiger franchisee.
Acquisition of Ireland Franchisee
In 2014, we acquired for $3 million six Tommy Hilfiger stores in Ireland from a former Tommy Hilfiger franchisee.
Acquisition of Calvin Klein Performance Retail Businesses in Hong Kong and China
In 2014, we acquired for $7 million the Calvin Klein Performance retail businesses in Hong Kong and China from a
former CALVIN KLEIN sublicensee. The adjustment to the purchase price was finalized during 2015.
Tommy Hilfiger India Contingent Purchase Price Payments
We reacquired in 2011 the rights in India to the Tommy Hilfiger trademarks that had been subject to a perpetual license
previously granted to GVM International Limited. We are required to make annual contingent purchase price payments based
on a percentage of sales of Tommy Hilfiger products in India in excess of an agreed upon threshold during each of six
consecutive 12-month periods. Such payments are subject to a $25 million aggregate maximum and are due within 60 days
following each one-year period. We made contingent purchase price payments of approximately $1 million in each of 2016,
2015 and 2014. The estimated fair value of future contingent purchase price payments was $2 million as of January 29, 2017.
Calvin Klein Contingent Purchase Price Payments
In connection with our acquisition of Calvin Klein in 2003, we are obligated to pay Mr. Calvin Klein contingent
purchase price payments based on 1.15% of total worldwide net sales (as defined in the acquisition agreement, as amended) of
products bearing any of the CALVIN KLEIN brands with respect to sales made through February 12, 2018. A significant portion
of the sales on which the payments to Mr. Klein are made are wholesale sales by us and our licensees and other partners to
retailers. Such contingent purchase price payments totaled $53 million, $51 million and $51 million in 2016, 2015 and 2014,
respectively. Based upon current exchange rates, we currently expect that such payments will be approximately $54 million in
2017.
Dividends
Our common stock currently pays annual dividends totaling $0.15 per share. Dividends on common stock totaled $12
million in each of 2016, 2015 and 2014.
We currently project that cash dividends on our common stock in 2017 will be approximately $12 million based on
our current dividend rate, the number of shares of our common stock outstanding as of January 29, 2017, our estimate of stock
to be issued during 2017 under our stock incentive plans and our estimate of stock repurchases during 2017.
39
Acquisition of Treasury Shares
Our Board of Directors authorized a $500 million three-year stock repurchase program effective June 3, 2015. On
March 21, 2017, the Board of Directors authorized a $750 million increase to the program and extended it to June 3, 2020.
Repurchases under the program may be made from time to time over the period through open market purchases, accelerated
share repurchase programs, privately negotiated transactions or other methods, as we deem appropriate. Purchases are made
based on a variety of factors, such as price, corporate requirements and overall market conditions, applicable legal requirements
and limitations, restrictions under our debt arrangements, trading restrictions under our insider trading policy and other relevant
factors. The program may be modified by the Board of Directors, including to increase or decrease the repurchase limitation or
extend, suspend, or terminate the program, at any time, without prior notice.
During 2016 and 2015, we purchased 3.2 million shares and 1.3 million shares, respectively, of our common stock
under the program in open market transactions for $315 million and $126 million, respectively. The repurchased shares were
held as treasury stock and $59 million of the authorization remained available for future share repurchases as of January 29,
2017.
Treasury stock activity also includes shares that were withheld principally in conjunction with the settlement of vested
restricted stock, restricted stock units and performance share units to satisfy tax withholding requirements.
Sale of Assets
One of our European subsidiaries sold a building in Amsterdam, the Netherlands in 2016 for proceeds of €15 million
(approximately $17 million based on the exchange rate in effect on the date of the sale).
Financing Arrangements
Our capital structure was as follows:
(In millions)
Short-term borrowings
Current portion of long-term debt
Capital lease obligations
Long-term debt
Stockholders’ equity
January 29, 2017
19
$
—
16
3,197
4,804
January 31, 2016
26
$
137
15
3,032
4,552
In addition, we had $730 million and $556 million of cash and cash equivalents as of January 29, 2017 and
January 31, 2016, respectively.
Short-Term Borrowings
One of our Asian subsidiaries has a yen-denominated short-term line of credit and a yen-denominated overdraft
facility with a Japanese bank that together provide for borrowings of up to ¥2.200 billion (approximately $19 million based on
exchange rates in effect on January 29, 2017) and are utilized primarily to fund working capital needs. Borrowings under the
short-term line of credit bear interest at the one-month Tokyo interbank offered rate plus 0.15%. As of January 29, 2017, we
had $17 million of borrowings outstanding under these facilities. The weighted average interest rate on the funds borrowed at
January 29, 2017 was 0.19%. The maximum amount of borrowings outstanding under these facilities during 2016 was ¥2.000
billion (approximately $17 million based on exchange rates in effect on January 29, 2017).
One of our Asian subsidiaries has a won-denominated overdraft facility with a South Korean bank that provides for
borrowings of up to 3.500 billion (approximately $3 million based on exchange rates in effect on January 29, 2017) and is
utilized primarily to fund working capital needs. Borrowings under this facility are unsecured and bear interest at the South
Korean bank three-month certificate of deposit rate plus 1.50%. There were no borrowings outstanding under this facility as of
or during the year ended January 29, 2017.
40
One of our Asian subsidiaries has a United States dollar-denominated short-term revolving credit facility with a bank
that provides for borrowings of up to $10 million and is utilized primarily to fund working capital needs. Borrowings under this
facility bear interest at the one-month London interbank borrowing rate (“LIBOR”) plus 1.50%. At the end of each month,
amounts outstanding under this facility may be carried forward for additional one-month periods for up to one year. This
facility is subject to certain terms and conditions and may be terminated at any time at the discretion of the bank. There were no
borrowings outstanding under this facility as of or during the year ended January 29, 2017.
One of our European subsidiaries has a euro-denominated short-term revolving note and a euro-denominated overdraft
facility with a bank that together provide for borrowings of up to €40 million (approximately $43 million based on exchange
rates in effect on January 29, 2017) and are utilized primarily to fund working capital needs. Borrowings under the revolving
note bear interest at the one-month Euro Interbank Offered Rate (“EURIBOR”) plus 1.50%. There were no borrowings
outstanding under these facilities as of or during the year ended January 29, 2017.
One of our European subsidiaries has a United States dollar-denominated short-term line of credit facility with a bank
that provides for borrowings of up to $3 million and is utilized primarily to fund working capital needs. Borrowings under this
facility bear interest at 13.50%. As of January 29, 2017, we had $400,000 of borrowings outstanding under this facility, which
represented the maximum amount of borrowings outstanding under this facility during 2016.
One of our European subsidiaries has a United States dollar-denominated short-term line of credit facility with a
Turkish bank that provides for borrowings of up to $4 million and is utilized primarily to fund working capital needs.
Borrowings under this facility bear interest at the Turkish overnight lending rate plus 3.00%. As of January 29, 2017, we had $1
million of borrowings outstanding under this facility. The weighted average interest rate on the funds borrowed at January 29,
2017 was 13.50%. The maximum amount of borrowings outstanding under this facility during 2016 was $3 million.
One of our European subsidiaries has a Turkish lira-denominated short-term line of credit facility with a Turkish bank
that provides for borrowings of up to lira 3 million (approximately $1 million based on exchange rates in effect on January 29,
2017) and is utilized primarily to fund working capital needs. Borrowings under this facility bear interest at the Turkish
overnight lending rate plus 4.00%. As of January 29, 2017, we had no borrowings outstanding under this facility. The
maximum amount of borrowings outstanding under this facility during 2016 was equal to the maximum amount of borrowings
available under this facility.
One of our Latin American subsidiaries has a Brazilian real-denominated short-term revolving credit facility with a
Brazilian bank that provides for borrowings of up to R$25 million (approximately $8 million based on exchange rates in effect
on January 29, 2017) and is utilized primarily to fund working capital needs. Borrowings under this facility are unsecured.
There were no borrowings outstanding under this facility as of or during the year ended January 29, 2017.
We also have the ability to draw revolving borrowings under our senior secured credit facilities as discussed in the
section entitled “2016 Senior Secured Credit Facilities” below. As of January 29, 2017, we had no borrowings outstanding
under these facilities. The maximum amount of revolving borrowings outstanding under these facilities during 2016 was $15
million.
Capital Lease Obligations
Our cash payments for capital lease obligations totaled $7 million, $8 million and $9 million in 2016, 2015 and 2014,
respectively.
2014 Senior Secured Credit Facilities
On March 21, 2014, we entered into an amendment to our senior secured credit facilities (as amended, the “2014
facilities”). Among other things, the amendment provided for an additional $350 million principal amount of loans under the
Term Loan A facility and an additional $250 million principal amount of loans under the Term Loan B facility. On March 21,
2014, we borrowed the additional principal amounts described above and used the proceeds to redeem all of our outstanding 7
3/8% senior notes, as discussed below in the section entitled “7 3/8% Senior Notes Due 2020.” In connection with entering into
an amendment, we paid debt issuance costs of $13 million (of which $8 million was expensed as debt modification and
extinguishment costs and $5 million is being amortized over the term of the related debt agreement) and recorded additional
debt modification and extinguishment costs of $3 million to write-off previously capitalized debt issuance costs.
41
The 2014 facilities consisted of a $1.986 billion United States dollar-denominated Term Loan A facility, a $1.189
billion United States dollar-denominated Term Loan B facility and senior secured revolving credit facilities consisting of (a) a
$475 million United States dollar-denominated revolving credit facility, (b) a $25 million United States dollar-denominated
revolving credit facility available in United States dollars or Canadian dollars and (c) a €186 million euro-denominated
revolving credit facility available in euro, British pound sterling, Japanese yen or Swiss francs.
On May 19, 2016, we amended the 2014 facilities, as discussed in the following section.
2016 Senior Secured Credit Facilities
On May 19, 2016 (the “Amendment Date”), we entered into an amendment (the “Amendment”) to the 2014 facilities
(as amended by the Amendment, the “2016 facilities”). Among other things, the Amendment provided for (i) us to borrow an
additional $582 million principal amount of loans under the Term Loan A facility, (ii) the repayment of all outstanding loans
under the Term Loan B facility with the proceeds of the additional loans under the Term Loan A facility, and (iii) the
termination of the Term Loan B facility. In addition, the Amendment extended the maturity of the Term Loan A and the
revolving credit facilities from February 13, 2019 to May 19, 2021.
The 2016 facilities consist of a $2.347 billion United States dollar-denominated Term Loan A facility and the senior
secured revolving credit facilities consisting of (a) a $475 million United States dollar-denominated revolving credit facility, (b)
a $25 million United States dollar-denominated revolving credit facility available in United States dollars or Canadian dollars
and (c) a €186 million euro-denominated revolving credit facility available in euro, British pound sterling, Japanese yen or
Swiss francs. In connection with entering into the Amendment, we paid debt issuance costs of $11 million (of which $5 million
was expensed as debt modification costs and $6 million is being amortized over the term of the related debt agreement) and
recorded debt extinguishment costs of $11 million to write-off previously capitalized debt issuance costs.
The revolving credit facilities also include amounts available for letters of credit. As of January 29, 2017, we had $25
million of outstanding letters of credit. There were no borrowings outstanding under the revolving credit facilities. A portion of
each of the United States dollar-denominated revolving credit facilities is also available for the making of swingline loans. The
issuance of such letters of credit and the making of any swingline loan reduces the amount available under the applicable
revolving credit facility. So long as certain conditions are satisfied, we may add one or more term loan facilities or increase the
commitments under the revolving credit facilities by an aggregate amount not to exceed the sum of (1) the sum of (x) $1.350
billion plus (y) the aggregate amount of all voluntary prepayments of loans under the Term Loan A and the revolving credit
facilities (to the extent, in the case of voluntary prepayments of loans under the revolving credit facilities, there is an equivalent
permanent reduction of the revolving commitments) plus (z) an amount equal to the aggregate revolving commitments of any
defaulting lender (to the extent the commitments with respect thereto have been terminated) and (2) an additional unlimited
amount as long as the ratio of our senior secured net debt to consolidated adjusted earnings before interest, taxes, depreciation
and amortization (in each case calculated as set forth in the documentation relating to the 2016 facilities) would not exceed 3 to
1 after giving pro forma effect to the incurrence of such increase. The lenders under the 2016 facilities are not required to
provide commitments with respect to such additional facilities or increased commitments.
The terms of the Term Loan A facility require us to make quarterly repayments of amounts outstanding under the 2016
facilities, which commenced with the calendar quarter ended June 30, 2016. Such amounts equal 5.00% per annum of the
principal amount outstanding on the Amendment Date for the first eight calendar quarters following the Amendment Date,
7.50% per annum of the principal amount for the four calendar quarters thereafter and 10.00% per annum of the principal
amount for the remaining calendar quarters, in each case paid in equal installments and in each case subject to certain
customary adjustments, with the balance due on the maturity date of the Term Loan A facility.
We made payments of $350 million, $350 million and $425 million during 2016, 2015 and 2014, respectively, on our
term loans under the 2016 and 2014 facilities. As a result of the voluntary repayments we made, as of January 29, 2017 we are
not required to make a long-term debt repayment until September 2018. We had term loans outstanding of $2.040 billion, net of
original issue discounts and debt issuance costs, as of January 29, 2017.
Our obligations under the 2016 facilities are guaranteed by substantially all of our existing and future direct and
indirect United States subsidiaries, with certain exceptions. Obligations of the European borrower under the 2016 facilities are
guaranteed by us, substantially all of our existing and future direct and indirect United States subsidiaries (with certain
exceptions) and Tommy Hilfiger Europe B.V., a wholly owned subsidiary of ours. We and our United States subsidiary
guarantors have pledged certain of our assets as security for the obligations under the 2016 facilities.
42
The outstanding borrowings under the 2016 facilities are prepayable at any time without penalty (other than customary
breakage costs). The terms of the 2016 facilities require us to repay certain amounts outstanding thereunder with (a) net cash
proceeds of the incurrence of certain indebtedness, (b) net cash proceeds of certain asset sales or other dispositions (including
as a result of casualty or condemnation) that exceed certain thresholds, to the extent such proceeds are not reinvested or
committed to be reinvested in the business in accordance with customary reinvestment provisions, and (c) a percentage of
excess cash flow that exceeds the voluntary debt payments we have made during the applicable year, which percentage is based
upon our net leverage ratio during the relevant fiscal period.
The United States dollar-denominated borrowings under the 2016 facilities bear interest at a rate equal to an applicable
margin plus, as determined at our option, either (a) a base rate determined by reference to the greater of (i) the prime rate, (ii)
the United States federal funds rate plus 1/2 of 1.00% and (iii) a one-month adjusted Eurocurrency rate plus 1.00% or (b) an
adjusted Eurocurrency rate, calculated in a manner set forth in the 2016 facilities.
The Canadian dollar-denominated borrowings under the 2016 facilities bear interest at a rate equal to an applicable
margin plus, as determined at our option, either (a) a Canadian prime rate determined by reference to the greater of (i) the rate
of interest per annum that Royal Bank of Canada establishes at its main office in Toronto, Ontario as the reference rate of
interest in order to determine interest rates for loans in Canadian dollars to its Canadian borrowers and (ii) the sum of (x) the
average of the rates per annum for Canadian dollar bankers’ acceptances having a term of one month that appears on the
display referred to as “CDOR Page” of Reuters Monitor Money Rate Services as of 10:00 a.m. (Toronto time) on the date of
determination, as reported by the administrative agent (and if such screen is not available, any successor or similar service as
may be selected by the administrative agent), and (y) 0.75%, or (b) an adjusted Eurocurrency rate, calculated in a manner set
forth in the 2016 facilities.
The borrowings under the 2016 facilities in currencies other than United States dollars or Canadian dollars bear
interest at a rate equal to an applicable margin plus an adjusted Eurocurrency rate, calculated in a manner set forth in the 2016
facilities.
The current applicable margin with respect to the Term Loan A facility and each revolving credit facility is 1.50% for
adjusted Eurocurrency rate loans and 0.50% for base rate loans, respectively. After the date of delivery of the compliance
certificate and financial statements with respect to each of our fiscal quarters, the applicable margin for borrowings under the
Term Loan A facility and the revolving credit facilities is subject to adjustment based upon our net leverage ratio.
The 2016 facilities contain customary events of default, including but not limited to nonpayment; material inaccuracy
of representations and warranties; violations of covenants; certain bankruptcies and liquidations; cross-default to material
indebtedness; certain material judgments; certain events related to the Employee Retirement Income Security Act of 1974, as
amended; certain events related to certain of the guarantees by us and certain of our subsidiaries, and certain pledges of our
assets and those of certain of our subsidiaries, as security for the obligations under the 2016 facilities; and a change in control
(as defined in the 2016 facilities).
During the second quarter of 2014, we entered into an interest rate cap agreement for an 18-month term commencing
on August 18, 2014. The agreement was designed with the intended effect of capping the interest rate on an initial notional
amount of $514 million of our variable rate debt obligation under the 2014 facilities or any replacement facility with similar
terms. Under the terms of this agreement, the one-month LIBOR that we paid was capped at a rate of 1.50%. Therefore, the
maximum amount of interest that we would have paid on the then-outstanding notional amount was at the 1.50% capped rate,
plus the current applicable margin. The agreement expired on February 17, 2016.
During the second quarter of 2014, we entered into an interest rate swap agreement for a two-year term commencing
on February 17, 2016. The agreement was designed with the intended effect of converting an initial notional amount of $683
million of our variable rate debt obligation under the 2014 facilities or any replacement facility with similar terms, including
the 2016 facilities, to fixed rate debt. Such agreement remains outstanding with a notional amount of $925 million as of
January 29, 2017, and is now converting a portion of our variable rate debt obligation under the 2016 facilities to fixed rate
debt. Under the terms of the agreement for the then-outstanding notional amount, our exposure to fluctuations in the one-month
LIBOR is eliminated and we will pay a weighted average fixed rate of 1.924%, plus the current applicable margin.
During the second quarter of 2013, we entered into an interest rate swap agreement for a three-year term commencing
on August 19, 2013. The agreement was designed with the intended effect of converting an initial notional amount of $1.229
billion of our variable rate debt obligation under our previously outstanding facilities or any replacement facility with similar
terms, including the 2016 facilities, to fixed rate debt. Under the terms of the agreement for the then-outstanding notional
43
amount, our exposure to fluctuations in the one-month LIBOR was eliminated and we paid a fixed rate of 0.604%, plus the
current applicable margin. The agreement expired on August 17, 2016.
The notional amount of any outstanding interest rate swap will be adjusted according to a pre-set schedule during the
term of the applicable swap agreement such that, based on our projections for future debt repayments, our outstanding debt
under the Term Loan A facility is expected to always equal or exceed the combined notional amount of the then-outstanding
interest rate swaps.
The 2016 facilities also contain covenants that restrict our ability to finance future operations or capital needs, to take
advantage of other business opportunities that may be in our interest or to satisfy our obligations under our other outstanding
debt. These covenants restrict our ability to, among other things:
• incur or guarantee additional debt or extend credit;
• make restricted payments, including paying dividends or making distributions on, or redeeming or repurchasing, our
capital stock or certain debt;
• make acquisitions and investments;
• dispose of assets;
• engage in transactions with affiliates;
• enter into agreements restricting our subsidiaries’ ability to pay dividends;
• create liens on our assets or engage in sale/leaseback transactions; and
• effect a consolidation or merger, or sell, transfer, or lease all or substantially all of our assets.
The 2016 facilities require us to comply with certain financial covenants, including minimum interest coverage and
maximum net leverage. A breach of any of these operating or financial covenants would result in a default under the applicable
facility. If an event of default occurs and is continuing, the lenders could elect to declare all amounts then outstanding, together
with accrued interest, to be immediately due and payable, which would result in acceleration of our other debt. If we were
unable to repay any such borrowings when due, the lenders could proceed against their collateral, which also secures some of
our other indebtedness.
7 3/8% Senior Notes Due 2020
On May 6, 2010, we issued $600 million principal amount of 7 3/8% senior notes due May 15, 2020. On March 24,
2014, in connection with an amendment to our senior secured credit facilities discussed above in the section entitled “2014
Senior Secured Credit Facilities,” we redeemed all of our outstanding 7 3/8% senior notes and, pursuant to the indenture under
which the notes were issued, paid a “make whole” premium of $68 million to the holders of the notes. We also recorded costs
of $14 million to write-off previously capitalized debt issuance costs associated with these notes.
4 1/2% Senior Notes Due 2022
On December 20, 2012, we issued $700 million principal amount of 4 1/2% senior notes due December 15, 2022. We
paid $16 million of fees during 2013 in connection with the issuance of these notes, which are amortized over the term of the
notes. We may redeem some or all of these notes at any time prior to December 15, 2017 by paying a “make whole” premium
plus any accrued and unpaid interest. In addition, we may redeem some or all of these notes on or after December 15, 2017 at
specified redemption prices plus any accrued and unpaid interest. Our ability to pay cash dividends and make other restricted
payments is limited, in each case, over specified amounts as defined in the indenture governing the notes.
7 3/4% Debentures Due 2023
We have outstanding $100 million of debentures due November 15, 2023 that accrue interest at the rate of 7 3/4%.
Pursuant to the indenture governing the debentures, we must maintain a certain level of stockholders’ equity in order to pay
cash dividends and make other restricted payments, as defined in the indenture governing the debentures.
3 5/8% Euro Senior Notes Due 2024
On June 20, 2016, we issued €350 million euro-denominated principal amount of 3 5/8% senior notes due July 15,
2024. Interest on the notes is payable in euros. We paid €6 million (approximately $7 million based on exchange rates in ef fect
on the payment date) of fees during the second quarter of 2016 in connection with the issuance of these notes, which are
amortized over the term of the notes. We may redeem some or all of these notes at any time prior to April 15, 2024 by paying a
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“make whole” premium plus any accrued and unpaid interest. In addition, we may redeem some or all of these notes on or after
April 15, 2024 at their principal amount plus any accrued and unpaid interest.
As of January 29, 2017, we were in compliance with all applicable financial and non-financial covenants under our
financing arrangements.
As of January 29, 2017, our corporate credit was rated Ba1 by Moody’s with a stable outlook and our issuer credit was
rated BB+ by Standard & Poor’s with a stable outlook. In assessing our credit strength, we believe that both Moody’s and
Standard & Poor’s considered, among other things, our capital structure and financial policies as well as our consolidated
balance sheet, our historical acquisition activity and other financial information, as well as industry and other qualitative
factors.
Contractual Obligations
The following table summarizes, as of January 29, 2017, our contractual cash obligations by future period:
Description
(In millions)
Long-term debt(1)
Interest payments on long-term debt
Short-term borrowings
Operating and capital leases(2)
Inventory purchase commitments(3)
Minimum contractual royalty payments(4)
Non-qualified supplemental defined benefit plans(5)
Sponsorship and model payments(6)
Total contractual cash obligations
______________________
Payments Due by Period
Total
Obligations
2017
2018-2019
2020-2021
Thereafter
$
$
3,223
543
19
2,384
1,016
48
12
17
7,262
$
$
— $
109
19
462
1,016
15
1
8
1,630
$
289
196
—
729
—
24
3
8
1,249
$
$
1,760
157
—
491
—
8
2
1
2,419
$
$
1,174
81
—
702
—
1
6
—
1,964
(1) At January 29, 2017, we had outstanding $2.049 billion under a senior secured Term Loan A facility, which requires
mandatory payments through May 19, 2021 (according to the mandatory repayment schedules), $700 million of 4
1/2% senior unsecured notes due December 15, 2022, $100 million of 7 3/4% debentures due November 15, 2023 and
$374 million of 3 5/8% senior unsecured euro notes due July 15, 2024.
(2)
Includes retail store, warehouse, showroom, office and equipment operating leases, as well as capital leases. Retail
store operating leases generally provide for payment of direct operating costs in addition to rent. The obligation
amounts listed include future minimum lease payments and exclude such direct operating costs. Please see Note 16,
“Leases,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information.
(3) Represents contractual commitments that are enforceable and legally binding for goods on order and not received or
paid for as of January 29, 2017. Inventory purchase commitments also include fabric commitments with our suppliers,
which secure a portion of our material needs for future seasons. Substantially all of these goods are expected to be
received and the related payments are expected to be made within six months of our year end. This amount does not
include foreign currency exchange forward contracts that we have entered into to manage our exposure to exchange
rate changes with respect to certain of these purchases. Please see Note 10, “Derivative Financial Instruments,” in the
Notes to Consolidated Financial Statements included in Item 8 of this report for further information.
(4) Our minimum contractual royalty payments arise under numerous license agreements we have with third parties, each
of which has different terms. Agreements typically require us to make minimum payments to the licensors of the
licensed trademarks based on expected or required minimum levels of sales of licensed products, as well as additional
royalty payments based on a percentage of sales when our sales exceed such minimum sales. Certain of our license
agreements require that we pay a specified percentage of net sales to the licensor for advertising and promotion of the
licensed products, in some cases requiring a minimum amount to be paid. Any advertising payments, with the
exception of minimum payments to licensors, are excluded from the minimum contractual royalty payments shown in
the table. There is no guarantee that we will exceed the minimum payments under any of these license agreements.
However, given our projected sales levels for products covered under these agreements, we currently anticipate that
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future payments required under our license agreements on an aggregate basis will exceed the contractual minimums
shown in the table.
(5) We have an unfunded, non-qualified supplemental defined benefit plan covering certain retired executives under
which the participants will receive a predetermined amount during the 10 years following the attainment of age 65,
provided that prior to the termination of employment with us, the participant has been in such plan for at least 10 years
and has attained age 55.
(6) Represents payment obligations for sponsorships. We have agreements relating to our sponsorship of the Barclays
Center, the Brooklyn Nets and certain other professional sports teams and athletes and other similar sponsorships, as
well as agreements with models and stylists.
Not included in the above table are contingent purchase price payments we are obligated to pay Mr. Calvin Klein
based on 1.15% of total worldwide net sales, as defined in the agreement (as amended) governing the Calvin Klein acquisition,
of products bearing any of the CALVIN KLEIN brands. Such payments are required to be made with respect to sales made
through February 12, 2018. A significant portion of the sales on which the payments to Mr. Klein are made are wholesale sales
by us and our licensees and other partners to retailers. Such contingent purchase price payments totaled $53 million,
$51 million and $51 million in 2016, 2015 and 2014, respectively.
Not included in the above table are contingent purchase price payments we are obligated to pay GVM International
Limited into 2017 based on a percentage of sales of Tommy Hilfiger products in India in excess of an agreed upon threshold.
Such payments are subject to a $25 million aggregate maximum and are due within 60 days following each one-year period.
We made contingent purchase price payments of approximately $600,000 during each of 2016, 2015, and 2014. The estimated
fair value of future contingent purchase price payments was $2 million as of January 29, 2017.
Not included in the above table are contributions to our qualified defined benefit pension plans, or payments to
employees and retirees in connection with our unfunded supplemental executive retirement, supplemental pension and
postretirement health plans. Contractual cash obligations for these plans cannot be determined due to the number of
assumptions required to estimate our future benefit obligations, including return on assets, discount rate and future
compensation increases. The liabilities associated with these plans, together with the liability for the non-qualified
supplemental defined benefit plans included in the above table, are presented in Note 12, “Retirement and Benefit Plans,” in the
Notes to Consolidated Financial Statements included in Item 8 of this report. Currently, we do not expect to make any
material contributions to our pension plans in 2017. Our actual contributions may differ from our planned contributions due to
many factors, including changes in tax and other benefit laws, or significant differences between expected and actual pension
asset performance or interest rates.
Not included in the above table are $263 million of net potential cash obligations associated with uncertain tax
positions due to the uncertainty regarding the future cash outflows associated with such obligations. Please see Note 9, “Income
Taxes,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information related to
uncertain tax positions.
Not included in the above table are $22 million of asset retirement obligations related to leased office and retail store
locations due to the uncertainty of timing of future cash outflows associated with such obligations. Please see Note 21, “Other
Comments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information related
to asset retirement obligations.
Not included in the above table are obligations related to our non-exclusive buying agency agreement with Li & Fung
due to uncertainty of the timing and amounts of future cash outflows associated with such obligations. In March 2017, we
entered into agreements for a transaction to restructure our supply chain relationship with Li & Fung. The transaction
establishes a new strategic partnership with Li & Fung to provide services to us and also provides for the termination of our
non-exclusive buying agency agreement with Li & Fung, pursuant to which we are obligated to source certain Calvin Klein
Jeans products and at least 54% of certain Tommy Hilfiger products through Li & Fung. The transaction is expected to close
July 1, 2017.
Not included in the above table are contractual royalty obligations related to our perpetual license agreement with
Speedo International Limited. Under the terms of the agreement, our contractual minimum payments each year are $1 million,
which is subject to annual increases based on the Consumer Price Index.
46
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have a material current effect, or that are reasonably likely to
have a material future effect, on our financial position, changes in financial position, revenue, expenses, results of operations,
liquidity, capital expenditures or capital resources.
MARKET RISK
Financial instruments held by us as of January 29, 2017 include cash and cash equivalents, short-term borrowings,
long-term debt, foreign currency forward exchange and foreign currency option contracts and interest rate swap agreements.
Note 11, “Fair Value Measurements,” in the Notes to Consolidated Financial Statements included in Item 8 of this report
outlines the fair value of our financial instruments as of January 29, 2017. Cash and cash equivalents held by us are affected by
short-term interest rates, which are currently low. Due to the currently low rates of return we are receiving on our cash
equivalents, the potential for a significant decrease in short-term interest rates is low and, therefore, a further decrease would
not have a material impact on our interest income. However, there is potential for a more significant increase in short-term
interest rates, which could have a more material impact on our interest income. Given our balance of cash and cash equivalents
at January 29, 2017, the effect of a 10 basis point change in short-term interest rates on our interest income would be
approximately $700,000 annually. Borrowings under our 2016 facilities bear interest at a rate equal to an applicable margin
plus a variable rate. As such, our credit facilities expose us to market risk for changes in interest rates. We have entered into
interest rate swap agreements for the intended purpose of reducing our exposure to interest rate volatility. As of January 29,
2017, after taking into account the effect of our interest rate swap agreement that was in effect at such date, approximately 65%
of our long-term debt was at a fixed interest rate, with the remainder at variable interest rates. Given our debt position at
January 29, 2017, the effect of a 10 basis point change in interest rates on our interest expense would be approximately $1
million annually. Please see the section entitled “Liquidity and Capital Resources” above for a further discussion of our credit
facilities and interest rate swap agreements.
Our Calvin Klein and Tommy Hilfiger businesses each have substantial international components that expose us to
significant foreign exchange risk. Our Heritage Brands business also has international components, but those components are
not significant to the business. Changes in exchange rates between the United States dollar and other currencies can impact our
financial results in two ways: a translation impact and a transaction impact. The translation impact refers to the impact that
changes in exchange rates can have on our financial results, as our operating results in local foreign currencies are translated
into United States dollars using an average exchange rate over the representative period. Accordingly, the impact of a
strengthening United States dollar, particularly against the euro, the Brazilian real, the Japanese yen, the Korean won, the
British pound sterling, the Canadian dollar, the Mexican peso, the Indian rupee, the Russian ruble and the Chinese yuan
renminbi, will have a negative impact on our reported results of operations. To hedge against a portion of this exposure, we
entered into several foreign currency option contracts during 2016. These contracts represent our purchase of euro put/United
States dollar call options. The changes in the fair value of these foreign currency option contracts are recognized immediately
in earnings. This mitigates, to an extent, the effect of a strengthening United States dollar against the euro on the reporting of
our euro-denominated operating results. We expect reductions in revenue and, absent material changes in the fair value of these
foreign currency option contracts, in net income in 2017 due to the foreign exchange translation impact of approximately $150
million and $20 million, respectively, based on current exchange rates.
The transaction impact on financial results is common for apparel companies operating outside the United States that
purchase goods in United States dollars, as is the case with most of our foreign operations. As with translation, during times of
a strengthening United States dollar, our results of operations will be negatively impacted from these transactions as the
increased local currency value of inventory results in higher cost of goods sold in local currency when the goods are sold. We
also have exposure to changes in foreign currency exchange rates related to certain intercompany transactions and, to a lesser
extent, SG&A expenses that are denominated in currencies other than the functional currency of a particular entity. We
currently use and plan to continue to use foreign currency forward exchange contracts or other derivative instruments to
mitigate the cash flow or market value risks associated with these inventory and intercompany transactions, but we are unable
to entirely eliminate these risks. We expect a reduction in net income in 2017 due to the foreign exchange transaction impact of
approximately $10 million, based on current exchange rates.
Included in the calculations of expense and liabilities for our pension plans are various assumptions, including return
on assets, discount rates, mortality rates and future compensation increases. Actual results could differ from these assumptions,
which would require adjustments to our balance sheet and could result in volatility in our future pension expense. Holding all
other assumptions constant, a 0.25% increase or decrease in the assumed discount rate would decrease or increase, respectively,
2017 net pension expense by approximately $25 million.
47
SEASONALITY
Our business generally follows a seasonal pattern. Our wholesale businesses tend to generate higher levels of sales in
the first and third quarters, while our retail businesses tend to generate higher levels of sales in the fourth quarter. Royalty,
advertising and other revenue tends to be earned somewhat evenly throughout the year, although the third quarter has the
highest level of royalty revenue due to higher sales by licensees in advance of the holiday selling season. We expect this
seasonal pattern will generally continue.
RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Guidance
The Financial Accounting Standards Board (“FASB”) issued in April 2015 an update to accounting guidance related to
debt issuance costs. The update requires debt issuance costs related to a recognized debt liability to be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts. We
adopted this update during the first quarter of 2016 on a retrospective basis, which resulted in decreases to prepaid expenses
and other assets of $8 million and $15 million, respectively, as of January 31, 2016 with corresponding decreases in long-term
debt.
The FASB issued in April 2015 an update to accounting guidance related to retirement benefits. This update provides a
practical expedient which allows a company with fiscal years that do not fall on a calendar month-end to measure defined
benefit plan assets and obligations using the month end that is closest to the company’s fiscal year end. If elected, this update
should be applied consistently from year to year for all plans. The update became effective for us in the first quarter of 2016.
Prospective application is required. We have not elected to change our measurement date under this update.
Accounting Guidance Issued But Not Adopted as of January 29, 2017
The FASB issued in May 2014 guidance that supersedes most of the current revenue recognition requirements. The
core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts
with customers are also required. In August 2015, the FASB approved a one year delay to the required adoption date of the
standard, which makes it effective for us no later than the first quarter of 2018, with adoption in 2017 permitted. In 2016, the
FASB issued several amendments to clarify various aspects of the implementation guidance. The new standard is required to be
applied retrospectively to each prior reporting period (full retrospective method) or retrospectively with the cumulative effect of
initially applying the standard recognized as an adjustment to opening retained earnings at the date of initial adoption (modified
retrospective method).
We formed a global, cross-functional project team to analyze the impacts of the guidance across all of our revenue
streams. This included review of current accounting policies and practices to identify potential differences that would result
from applying the guidance. The majority of our revenue is generated from sales of finished products, which will continue to be
recognized when control is transferred to the customer. Our assessment included an evaluation of the impact that the guidance
will have on our accounting for royalty and advertising revenue, loyalty programs and gift cards. Under the guidance, our
royalty and advertising revenue will continue to be recognized over time. However, we are still assessing the impact of
decisions reached by the FASB Transition Resource Group in November 2016 on the treatment of minimum guarantees in
licensing arrangements, which may affect the timing of our recognition of royalty and advertising revenue. For loyalty
programs, we record costs associated with such programs ratably as a cost of goods sold based on enrolled customers’
spending. Under the guidance, the revenue associated with the loyalty award will be initially deferred when the loyalty awards
are earned and recognized, along with the related cost of goods sold, as the loyalty awards are redeemed or expire. Revenue for
the unredeemed portion of gift cards, which is currently recognized when the likelihood of redemption becomes remote, will be
recognized under the guidance proportionately over the estimated customer redemption period, subject to the constraint that it
must be highly probable that a significant reversal of revenue will not occur. While our assessment of the impacts of the
guidance is still in process, the adoption of the guidance is not expected to have a material impact on our consolidated financial
statements. We plan to adopt the standard in the first quarter of 2018 using the modified retrospective method.
The FASB issued in July 2015 an update to accounting guidance to simplify the measurement of inventory. Currently,
all inventory is measured at the lower of cost or market. The update requires an entity to measure inventory within the scope of
48
the guidance at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary
course of business less reasonably predictable costs of completion, disposal and transportation. The update does not apply to
inventory measured using last-in, first-out or the retail inventory methods. This update will be effective for us in the first
quarter of 2017. Prospective adoption is required. The adoption is not expected to have a material impact on our consolidated
financial statements.
The FASB issued in January 2016 an update to accounting guidance for the recognition and measurement of financial
instruments. The update requires equity investments that are not accounted for under the equity method of accounting to be
measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements.
The update will be effective for us in the first quarter of 2018 with limited early adoption permitted. The adoption is not
expected to have any impact on our consolidated financial statements as we do not currently have such investments.
The FASB issued in February 2016 a new accounting standard on leases. The new standard, among other changes, will
require lessees to recognize a right-of-use asset and a lease liability in the balance sheet for most leases. The lease liability will
be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease
liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs (e.g.,
commissions). The guidance will be effective for us in the first quarter of 2019 with early adoption permitted. The adoption
will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period
presented. We are currently evaluating the standard to determine the impact of the adoption on our consolidated financial
statements but expect that it will result in a significant increase to our other assets and other liabilities.
The FASB issued in March 2016 an update to accounting guidance to simplify several aspects of accounting for share-
based payment award transactions, including the accounting for forfeitures, income taxes and statutory tax withholding
requirements, as well as classification of these transactions in the statement of cash flows. The update will be effective for us in
the first quarter of 2017. We have elected not to continue estimating expected forfeitures in determining compensation expense.
With respect to the accounting for income taxes, this update requires, on a prospective basis, recognition of excess tax benefits
and tax deficiencies (resulting from an increase or decrease in the fair value of an award from grant date to the vesting or
exercise date) in the provision for income taxes as a discrete item in the quarterly period in which they occur. Currently, excess
tax benefits or tax deficiencies are recognized in equity as a component of additional paid in capital. As such, the adoption of
this update is expected to impact our Consolidated Income Statements and Balance Sheets on a prospective basis. We
recognized, in equity, a tax deficiency of $7 million and a tax benefit of $5 million in 2016 and 2015, respectively. These
amounts may not be indicative of future amounts that may be recognized subsequent to the adoption of this update, as any
excess tax benefits or tax deficiencies recognized will be dependent upon unpredictable future events, including the timing of
exercises, the value realized upon the vesting or exercise of shares versus the fair value of the shares when they were granted
and applicable tax rates. In addition, these excess tax benefits and deficiencies will be classified as an operating activity in the
Consolidated Statement of Cash Flows instead of as a financing activity, and such classification will be applied on a
retrospective basis to all periods presented. The update also requires that the value of shares withheld from employees upon
vesting of stock awards in order to satisfy any applicable tax withholding requirements are to be presented within financing
activities in the Consolidated Statement of Cash Flows, which is consistent with our current presentation, and will therefore
have no impact to us.
The FASB issued in August 2016 an update to accounting guidance to clarify and provide specific guidance on how
certain cash receipts and cash payments are classified in the statement of cash flows with the objective of reducing existing
diversity in practice with respect to these items. Among the types of cash flows addressed are payments for costs related to debt
prepayments or extinguishments, payments of contingent consideration after a business combination and distributions from
equity method investees. The update will be effective for us in the first quarter of 2018, with early adoption permitted.
Retrospective adoption is required. Upon adoption, contingent purchase price payments that are currently classified as cash
flows from investing activities will be classified as cash flows from operating activities in our Consolidated Statements of Cash
Flows. Otherwise, the adoption of the update is not expected to have a material impact on our consolidated financial
statements.
The FASB issued in October 2016 an update to accounting guidance to simplify income tax accounting on
intercompany sales or transfers of assets other than inventory. The existing guidance requires entities to defer the income tax
effect of intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized. The update
requires companies to immediately recognize in their income statement the income tax effects of an intercompany sale or
transfer of an asset other than inventory. The update will be effective for us in the first quarter of 2018, with early adoption
permitted as of the beginning of an annual period. Entities are required to apply the update using a modified retrospective
approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. As of January 29, 2017,
we had deferred charges of $8 million related to intercompany sales and transfers of assets recorded in other assets. Upon
49
adoption of this update, other assets will be reduced by the then current amount of deferred charges with a corresponding
adjustment to opening retained earnings.
The FASB issued in November 2016 an update to accounting guidance to clarify and provide specific guidance on the
cash flow classifications and presentation of changes in restricted cash. The update requires that restricted cash be included
with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the
statement of cash flows. The update will be effective for us in the first quarter of 2018, with early adoption permitted.
Retrospective adoption is required. The adoption is not expected to have a material impact on our Consolidated Statement of
Cash Flows.
The FASB issued in January 2017 an update to accounting guidance to revise the definition of a business. The update
requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single
identifiable asset or a group of identifiable assets, the set of assets would not represent a business. Also, in order to be
considered a business, an acquisition would have to include an input and a substantive process that together significantly
contribute to the ability to produce outputs. Under the update, fewer sets of assets are expected to be considered businesses.
The update will be effective for us in the first quarter of 2018, with early adoption permitted. We will apply this update to
applicable transactions after the adoption date. The impact on our consolidated financial statements will depend on the facts
and circumstances of any specific future transactions.
The FASB issued in January 2017 an update to the accounting guidance to simplify the testing for goodwill
impairment. The update eliminates the requirement to calculate the implied fair value of goodwill to measure the amount of
impairment loss, if any, under the second step of the current goodwill impairment test. Under the update, the goodwill
impairment loss would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to
exceed the carrying amount of goodwill. The update will be effective for us in the first quarter of 2020, with early adoption
permitted for interim or annual goodwill impairment tests performed after January 1, 2017. Prospective adoption is required.
The adoption is not expected to have a material impact on our consolidated financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are based on the selection and application of significant accounting policies,
which require management to make significant estimates and assumptions. Our significant accounting policies are outlined in
Note 1, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of
this report. We believe that the following are the more critical judgmental areas in the application of our accounting policies
that currently affect our financial position and results of operations:
Sales allowances and returns—We have arrangements with many of our department and specialty store customers to
support their sales of our products. We establish accruals which, based on a review of the individual customer arrangements and
the expected performance of our products in their stores, we believe will be required to satisfy our sales allowance obligations.
We also establish accruals, which are based on historical data and authorized amounts, that we believe are necessary to provide
for sales allowances and inventory returns. It is possible that the accrual estimates could vary from actual results, which would
require adjustment to the allowance and returns accruals.
Inventories—Inventories are comprised principally of finished goods and are stated at the lower of cost or market.
Cost for principally all wholesale inventories in North America and certain wholesale and retail inventories in Asia and Latin
America is determined using the first-in, first-out method. Cost for all other inventories is determined using the weighted
average cost method. We review current business trends, inventory agings and discontinued merchandise categories to
determine adjustments which we estimate will be needed to liquidate existing clearance inventories and reduce inventories to
the lower of cost or market. We believe that all inventory writedowns required at January 29, 2017 have been recorded. If
market conditions were to change, it is possible that the required level of inventory reserves would need to be adjusted.
Asset impairments—During 2016, 2015 and 2014, we determined that the long-lived assets in certain of our retail
stores were not recoverable, which resulted in us recording impairment charges. In order to calculate the impairment charges,
we estimated the undiscounted future cash flows and the related fair value of each asset. The undiscounted future cash flows for
each asset were estimated using current sales trends and other factors. If different assumptions had been used for future sales
trends, the recorded impairment charges could have been significantly higher or lower. Note 11, “Fair Value Measurements,” in
the Notes to Consolidated Financial Statements included in Item 8 of this report includes a further discussion of the
circumstances surrounding the impairments and the assumptions related to the impairment charges.
50
Allowance for doubtful accounts—Trade receivables, as presented in our Consolidated Balance Sheets, are net of an
allowance for doubtful accounts. An allowance for doubtful accounts is determined through an analysis of the aging of accounts
receivable and assessments of collectibility based on historic trends, the financial condition of our customers and an evaluation
of economic conditions. Because we cannot predict future changes in economic conditions and in the financial stability of our
customers, actual future losses from uncollectible accounts may differ from our estimates and could impact our allowance for
doubtful accounts.
Income taxes—Deferred income tax balances reflect the effects of temporary differences between the carrying
amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are
actually paid or recovered. FASB guidance on accounting for income taxes requires that deferred tax assets be evaluated for
future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider
many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings
experience and expectations of future taxable income by taxing jurisdiction, the carryforward periods available to us for tax
reporting purposes and other relevant factors. The actual realization of deferred tax assets may differ significantly from the
amounts we have recorded.
During the ordinary course of business, there are many transactions and calculations for which the ultimate tax
determination is uncertain. Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain
tax positions. The first step is to evaluate the tax position for recognition by determining if available evidence indicates it is
more likely than not that the tax position will be fully sustained upon review by taxing authorities, including resolution of
related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount with a greater
than 50 percent likelihood of being realized upon ultimate settlement. For tax positions that are 50 percent or less likely of
being sustained upon audit, we do not recognize any portion of that benefit in the financial statements. We consider many
factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which
may not accurately anticipate actual outcomes. Our actual results could differ materially from our current estimates.
Goodwill and other intangible assets— Goodwill and other indefinite-lived intangible assets are tested for impairment
annually, at the beginning of the third quarter of each fiscal year, and between annual tests if an event occurs or circumstances
change that would indicate that it is more likely than not that the carrying amount may be impaired. Impairment testing for
goodwill is done at the reporting unit level. A reporting unit is defined as an operating segment or one level below the operating
segment, called a component. However, two or more components of an operating segment will be aggregated and deemed a
single reporting unit if the components have similar economic characteristics.
FASB guidance allows us to first assess qualitative factors to determine whether it is necessary to perform a more
detailed quantitative impairment test for goodwill and other indefinite-lived intangible assets. We may elect to bypass the
qualitative assessment and proceed directly to the quantitative test for any reporting unit or indefinite-lived intangible assets.
Qualitative factors that we consider as part of our assessment include a change in our market capitalization and its implied
impact on reporting unit fair value, industry and market conditions, macroeconomic conditions, trends in product costs and
financial performance of our businesses. If we perform the quantitative test for any reporting units or indefinite-lived intangible
assets, we generally use a discounted cash flow method to estimate fair value. The discounted cash flow method is based on the
present value of projected cash flows. Assumptions used in these cash flow projections are generally consistent with our
internal forecasts. The estimated cash flows are discounted using a rate that represents the weighted average cost of capital. The
weighted average cost of capital is based on a number of variables, including the equity-risk premium and risk-free interest
rate. Management believes the assumptions used for the impairment tests are consistent with those that would be utilized by a
market participant performing similar analysis and valuations. Adverse changes in future market conditions or weaker
operating results compared to our expectations may impact our projected cash flows and estimates of weighted average cost of
capital, which could result in a potential impairment charge if we are unable to recover the carrying value of our goodwill and
other intangible assets.
For the 2016 annual goodwill impairment test, we elected to first assess qualitative factors to determine whether it was
more likely than not that the fair value of any reporting unit was less than its carrying amount as a basis for determining
whether it was necessary to perform the two-step goodwill impairment test. In evaluating whether it was more likely than not
that the fair value of any reporting unit was less than its carrying amount, we assessed relevant events and circumstances
including, the change in our market capitalization and our implied impact on reporting unit fair value, industry and market
conditions, macroeconomic conditions, trends in product costs and financial performance of our businesses. After assessing
these events and circumstances, we determined that it was not more likely than not that the fair value of any reporting unit was
less than its carrying amount and concluded that the quantitative goodwill impairment test was not required.
51
During 2016, and subsequent to the 2016 annual goodwill impairment test, we formed a joint venture in Mexico by
merging our wholly owned subsidiary that principally operated and managed the Calvin Klein business in Mexico with a
wholly owned subsidiary of the joint venture partner, which resulted in the deconsolidation of our wholly owned subsidiary,
including goodwill assigned to the business. This transaction was a triggering event that indicated that the amount of remaining
goodwill allocated to the Calvin Klein North America Wholesale, Calvin Klein North America Retail and Heritage Brands
Wholesale reporting units could be impaired, prompting the need for us to perform a goodwill impairment test for these
reporting units in 2016. No goodwill impairment resulted from this interim test in 2016.
For the 2015 annual goodwill impairment test, we elected to bypass the qualitative assessment and proceeded directly
to the quantitative impairment test using a discounted cash flow method to estimate fair value. Our annual goodwill impairment
test during 2015 yielded estimated fair values in excess of the carrying amounts for all of our reporting units and therefore the
second step of the quantitative goodwill impairment test was not required.
During the fourth quarter of 2014, we announced our plan to exit the Izod retail business in 2015 (which was
completed in the third quarter of 2015). The decision to exit this business was a triggering event that indicated that the amount
of goodwill allocated to the Heritage Brands Retail reporting unit could be impaired, prompting the need for us to perform a
goodwill impairment test for this reporting unit in 2014. As a result of this interim test in 2014, the goodwill allocated to the
Heritage Brands Retail reporting unit was determined to be impaired and an impairment charge of $12 million was recorded in
selling, general and administrative expenses.
Indefinite-lived intangible assets not subject to amortization are tested for impairment annually, at the beginning of the
third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate that
the carrying amount may be impaired. FASB guidance allows us to first assess qualitative factors to determine whether it is
necessary to perform a more detailed quantitative impairment test for its indefinite-lived intangible assets. We may elect to
bypass the qualitative assessment and proceed directly to the quantitative impairment test. When performing the quantitative
test, an impairment loss is recognized if the carrying amount of the asset exceeds the fair value of the asset, which is generally
determined using the estimated discounted cash flows associated with the asset’s use. Intangible assets with finite lives are
amortized over their estimated useful lives and are tested for impairment along with other long-lived assets.
For the 2016 and 2015 annual impairment tests of certain indefinite-lived intangible assets, we elected to first assess
qualitative factors to determine whether it was more likely than not that the fair value of any asset was less than its carrying
amount. In performing this evaluation, we assessed relevant events and circumstances including industry and market
conditions, macroeconomic conditions, trends in product costs and financial performance of our businesses. After assessing
these events and circumstances, the Company determined that it was not more likely than not that the fair value of these certain
indefinite-lived intangible assets were less than their carrying amount and concluded that the quantitative impairment test was
not required. For certain other indefinite-lived intangible assets impairment tests, we elected to bypass the qualitative
assessment and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate fair
value. No impairment of indefinite-lived intangible assets resulted from any of our annual impairment tests in 2016 and 2015.
If different assumptions for our goodwill and other indefinite-lived intangible assets impairment tests had been
applied, significantly different outcomes could have resulted. There can be no assurance that the estimates and assumptions
used in our goodwill and indefinite-lived intangible assets impairment testing performed in 2016 will prove to be accurate
predictions of the future. For example, if general macroeconomic conditions deteriorate or otherwise vary from current
assumptions (including changes in the weighted average cost of capital), industry or market conditions deteriorate, business
conditions or strategies for a specific reporting unit change from current assumptions, including cost increases or loss of major
customers, our businesses do not perform as projected, or there is an extended period of a significant decline in our stock price,
this could be an indicator that the excess fair value of our reporting units could be lessened and the chance of an impairment of
goodwill and other indefinite-lived intangible assets could be raised.
Pension benefits—Included in the calculations of expense and liabilities for our pension plans are various
assumptions, including return on assets, discount rates, mortality rates and future compensation increases. During 2016 and
2014, we revised the mortality assumptions used to determine the benefit obligations of our pension plans based on recently
published mortality tables. These changes in life expectancy resulted in changes to the period for which we expect benefits to
be paid. In 2016, the decrease in life expectancy decreased our benefit obligations and future expense and in 2014, the increase
in life expectancy increased our benefit obligations and future expense. Note 12, “Retirement and Benefit Plans,” in the Notes
to Consolidated Financial Statements included in Item 8 of this report sets forth certain significant rate assumptions used in
performing calculations related to our pension plans. Actual results could differ from these assumptions, which would require
adjustments to our balance sheet and could result in volatility in our future pension expense. Holding all other assumptions
constant, a 1% increase or decrease in the assumed rate of return on assets would decrease or increase, respectively, 2017 net
52
benefit cost by approximately $6 million. Likewise, a 0.25% increase or decrease in the assumed discount rate would decrease
or increase, respectively, 2017 net periodic pension expense by approximately $25 million. Actuarial gains and losses are
recognized in our operating results in the year in which they occur. These gains and losses are measured at least annually at the
end of our fiscal year and, as such, are generally recorded during the fourth quarter of each year.
Stock-based compensation—Accounting for stock-based compensation requires measurement of compensation cost
for all stock-based awards at fair value on the date of grant and recognition of compensation over the service period for awards
expected to vest. We use the Black-Scholes-Merton option pricing model to determine the fair value of our stock options. This
model uses assumptions that include the risk-free interest rate, expected volatility, expected dividend yield and expected life of
the options. The fair value of restricted stock units is determined based on the quoted price of our common stock on the date of
grant. The fair value of our stock options and restricted stock units is recognized as expense over the service period, net of
estimated forfeitures. The fair value of contingently issuable performance shares that are not based on market conditions is
based on the quoted price of our common stock on the date of grant, reduced for the present value of any dividends expected to
be paid on our common stock during the performance cycle, as the contingently issuable performance shares do not accrue
dividends prior to the completion of the performance cycle. We record expense for contingently issuable performance shares
that are not based on market conditions based on our current expectations of the probable number of shares that will ultimately
be issued. The fair value of contingently issuable performance shares that are subject to market conditions is established using a
Monte Carlo simulation model. We record expense for the awards that are subject to market conditions ratably over the vesting
period, net of estimated forfeitures, regardless of whether the market condition is satisfied. We consider many factors when
estimating expected forfeitures, including types of awards, employee class and historical experience. The estimation of stock
awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current
estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. Actual results and
future estimates may differ substantially from our current estimates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information with respect to Quantitative and Qualitative Disclosures About Market Risk appears under the heading
“Market Risk” in Item 7.
Item 8. Financial Statements and Supplementary Data
See page F-1 of this report for a listing of the consolidated financial statements and supplementary data included in
this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Operating & Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our Chief
Executive Officer and Chief Operating & Financial Officer concluded that our disclosure controls and procedures were
effective as of the end of the period covered by this report. Disclosure controls and procedures are controls and procedures that
are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Operating & Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
53
Management’s Report on Internal Control over Financial Reporting
Management’s report on internal control over financial reporting and our independent registered public accounting
firm’s audit report on our assessment of our internal control over financial reporting can be found on pages F-59 and F-60.
Changes in Internal Control over Financial Reporting
We did not identify any changes in our internal control over financial reporting during the fourth quarter of the fiscal
year to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Item 9B. Other Information
Not applicable.
54
Item 10. Directors, Executive Officers and Corporate Governance
PART III
Information with respect to Directors of the Registrant is incorporated herein by reference to the section entitled
“Election of Directors” in our proxy statement for the Annual Meeting of Stockholders to be held on June 15, 2017.
Information with respect to compliance by our officers and directors with Section 16(a) of the Securities Exchange Act is
incorporated herein by reference to the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in our
proxy statement for the Annual Meeting of Stockholders to be held on June 15, 2017. Information with respect to our executive
officers is contained in the section entitled “Executive Officers of the Registrant” in Part I, Item 1 of this report. Information
with respect to the procedure by which security holders may recommend nominees to our Board of Directors and with respect
to our Audit & Risk Management Committee, our Audit Committee Financial Expert and our Code of Ethics for the Chief
Executive and Senior Financial Officers is incorporated herein by reference to the section entitled “Election of Directors” in our
proxy statement for the Annual Meeting of Stockholders to be held on June 15, 2017.
Item 11. Executive Compensation
Information with respect to Executive Compensation is incorporated herein by reference to the sections entitled
“Executive Compensation,” “Compensation Committee Report,” “Compensation Discussion and Analysis” and “Compensation
Committee Interlocks and Insider Participation” in our proxy statement for the Annual Meeting of Stockholders to be held on
June 15, 2017.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information with respect to the Security Ownership of Certain Beneficial Owners and Management and Equity
Compensation Plan Information is incorporated herein by reference to the sections entitled “Security Ownership of Certain
Beneficial Owners and Management” and “Equity Compensation Plan Information” in our proxy statement for the Annual
Meeting of Stockholders to be held on June 15, 2017.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information with respect to Certain Relationships and Related Transactions and Director Independence is incorporated
herein by reference to the sections entitled “Transactions with Related Persons,” “Election of Directors” and “Director
Compensation” in our proxy statement for the Annual Meeting of Stockholders to be held on June 15, 2017.
Item 14. Principal Accounting Fees and Services
Information with respect to Principal Accounting Fees and Services is incorporated herein by reference to the section
entitled “Ratification of the Appointment of Auditor” in our proxy statement for the Annual Meeting of Stockholders to be held
on June 15, 2017.
55
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)(1) See page F-1 for a listing of the consolidated financial statements included in Item 8 of this report.
(a)(2) See page F-1 for a listing of consolidated financial statement schedules submitted as part of this report.
(a)(3) The following exhibits are included in this report:
Exhibit
Number
2.1 Stock Purchase Agreement, dated December 17, 2002, among Phillips-Van Heusen Corporation, Calvin Klein,
Inc., Calvin Klein (Europe), Inc., Calvin Klein (Europe II) Corp., Calvin Klein Europe S.r.l., CK Service
Corp., Calvin Klein, Barry Schwartz, Trust for the Benefit of the Issue of Calvin Klein, Trust for the Benefit
of the Issue of Barry Schwartz, Stephanie Schwartz-Ferdman and Jonathan Schwartz (incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on December 20, 2002). The registrant
agrees to furnish supplementally a copy of any omitted schedules to the Commission upon request.
2.2 Agreement and Plan of Merger, dated as of October 29, 2012, by and among The Warnaco Group, Inc., PVH
Corp. and Wand Acquisition Corp. (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-
K, filed on November 2, 2012).
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 5 to our Annual Report on Form 10-K for
the fiscal year ended January 29, 1977); Amendment to Certificate of Incorporation, filed June 27, 1984
(incorporated by reference to Exhibit 3B to our Annual Report on Form 10-K for the fiscal year ended
February 3, 1985); Amendment to Certificate of Incorporation, filed June 2, 1987 (incorporated by reference
to Exhibit 3(c) to our Annual Report on Form 10-K for the fiscal year ended January 31, 1988); Amendment
to Certificate of Incorporation, filed June 1, 1993 (incorporated by reference to Exhibit 3.5 to our Annual
Report on Form 10-K for the fiscal year ended January 30, 1994); Amendment to Certificate of Incorporation,
filed June 20, 1996 (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the
period ended July 28, 1996); Certificate of Amendment of Certificate of Incorporation, filed June 29, 2006
(incorporated by reference to Exhibit 3.9 to our Quarterly Report on Form 10-Q for the period ended May 6,
2007); Certificate of Amendment of Certificate of Incorporation, filed June 23 2011 (incorporated by
reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on June 29, 2011).
3.2 Certificate of Designation of Series A Cumulative Participating Preferred Stock, filed June 10, 1986
(incorporated by reference to Exhibit A of the document filed as Exhibit 3 to our Quarterly Report on Form
10-Q for the period ended May 4, 1986).
3.3 Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock of Phillips-Van
Heusen Corporation (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on
February 26, 2003); Corrected Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of Phillips-Van Heusen Corporation, dated April 17, 2003 (incorporated by reference to
Exhibit 3.9 to our Annual Report on Form 10-K for the fiscal year ended February 2, 2003).
3.4 Certificate Eliminating Reference to Series B Convertible Preferred Stock from Certificate of Incorporation of
Phillips-Van Heusen Corporation, filed June 12, 2007 (incorporated by reference to Exhibit 3.10 to our
Quarterly Report on Form 10-Q for the period ended May 6, 2007).
3.5 Certificate Eliminating Reference To Series A Cumulative Participating Preferred Stock From Certificate of
Incorporation of Phillips-Van Heusen Corporation (incorporated by reference to Exhibit 3.2 to our Current
Report on Form 8-K, filed on September 28, 2007).
3.6 Certificate of Designations of Series A Convertible Preferred Stock of Phillips-Van Heusen Corporation
(incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed May 12, 2010).
3.7 Certificate Eliminating Reference to Series A Convertible Preferred Stock From Certificate of Incorporation of
PVH Corp. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on May 3,
2013).
3.8 By-Laws of PVH Corp., as amended through April 28, 2016 (incorporated by reference to Exhibit 3.1 to our
Current Report on Form 8-K, filed on May 3, 2016).
56
4.1 Specimen of Common Stock certificate (incorporated by reference to Exhibit 4.1 to our Quarterly Report on
Form 10-Q for the period ended July 31, 2011).
4.2 Indenture, dated as of November 1, 1993, between Phillips-Van Heusen Corporation and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.01 to our Registration Statement on Form S-3 (Reg.
No. 33-50751) filed on October 26, 1993); First Supplemental Indenture, dated as of October 17, 2002 to
Indenture dated as of November 1, 1993 between Phillips-Van Heusen Corporation and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.15 to our Quarterly Report on Form 10-Q for the
period ended November 3, 2002); Second Supplemental Indenture, dated as of February 12, 2002 to
Indenture, dated as of November 1, 1993, between Phillips-Van Heusen Corporation and The Bank of New
York, as Trustee (incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K, filed on
February 26, 2003); Third Supplemental Indenture, dated as of May 6, 2010, between Phillips-Van Heusen
Corporation and The Bank of New York Mellon (formerly known as The Bank of New York), as Trustee
(incorporated by reference to Exhibit 4.16 to our Quarterly Report on Form 10-Q for the period ended August
1, 2010); Fourth Supplemental Indenture, dated as of February 13, 2013 to Indenture, dated as of November
1, 1993, between PVH Corp. and The Bank of New York Mellon, as Trustee (incorporated by reference to
Exhibit 4.11 to our Quarterly Report on Form 10-Q for the period ended May 5, 2013).
4.3 Indenture, dated as of May 6, 2010, between Phillips-Van Heusen Corporation and U.S. Bank National
Association, as Trustee (incorporated by reference to Exhibit 4.15 to our Quarterly Report on Form 10-Q for
the period ended August 1, 2010).
4.4 First Supplemental Indenture, dated as of November 8, 2012, to Indenture dated as of May 6, 2010, between
PVH Corp. (formally known as Phillips-Van Heusen Corporation”) and U.S. Bank National Association, as
Trustee (incorporated by reference to Exhibit 4.9 to the Company’s Annual Report on Form 10-K for the
fiscal year ended February 3, 2013).
4.5 Indenture, dated as of December 20, 2012, between PVH Corp. and U.S. Bank National Association, as
Trustee (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed on December 20,
2012).
4.6 Indenture, dated as of June 20, 2016, between PVH Corp., U.S. Bank National Association, as Trustee,
Elavon Financial Services Limited, UK Branch, as Paying Agent and Authenticating Agent, and Elavon
Financial Services Limited, as Transfer Agent and Registrar (incorporated by reference to Exhibit 4.1 to our
Current Report on Form 8-K, filed on June 20, 2016).
*10.1 Phillips-Van Heusen Corporation Capital Accumulation Plan (incorporated by reference to our Current
Report on Form 8-K, filed on January 16, 1987); Phillips-Van Heusen Corporation Amendment to Capital
Accumulation Plan (incorporated by reference to Exhibit 10(n) to our Annual Report on Form 10-K for the
fiscal year ended February 2, 1987); Form of Agreement amending Phillips-Van Heusen Corporation Capital
Accumulation Plan with respect to individual participants (incorporated by reference to Exhibit 10(1) to our
Annual Report on Form 10-K for the fiscal year ended January 31, 1988); Form of Agreement amending
Phillips-Van Heusen Corporation Capital Accumulation Plan with respect to individual participants
(incorporated by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q for the period ended
October 29, 1995).
*10.2 Phillips-Van Heusen Corporation Supplemental Defined Benefit Plan, dated January 1, 1991, as amended and
restated effective as of January 1, 2005 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on
Form 10-Q for the period ended November 4, 2007).
*10.3 Phillips-Van Heusen Corporation Supplemental Savings Plan, effective as of January 1, 1991 and amended
and restated effective as of January 1, 2005 (incorporated by reference to Exhibit 10.4 to our Quarterly
Report on Form 10-Q for the period ended November 4, 2007).
*10.4 Phillips-Van Heusen Corporation 2003 Stock Option Plan, effective as of May 1, 2003, as amended through
September 21, 2006 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the
period ended October 29, 2006).
*10.5 Phillips-Van Heusen Corporation 2003 Stock Option Plan option certificate (incorporated by reference to
Exhibit 10.19 to our Annual Report on Form 10-K for the fiscal year ended January 30, 2005).
57
*10.6 Second Amended and Restated Employment Agreement, dated as of December 23, 2008, between Phillips-
Van Heusen Corporation and Emanuel Chirico (incorporated by reference to Exhibit 10.15 to our Annual
Report on Form 10-K for the fiscal year ended February 1, 2009); First Amendment to Second Amended and
Restated Employment Agreement, dated as of January 29, 2010, between Phillips-Van Heusen Corporation
and Emanuel Chirico (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for
the period ended May 2, 2010); Second Amendment to Second Amended and Restated Employment
Agreement, dated as of May 27, 2010, between Phillips-Van Heusen Corporation and Emanuel Chirico
(incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q for the period ended August
1, 2010); Third Amendment to Second Amended and Restated Employment Agreement, dated January 28,
2011, between Phillips-Van Heusen Corporation and Emanuel Chirico (incorporated by reference to Exhibit
10.1 to our Current Report on Form 8-K, filed January 28, 2011).
*10.7 Second Amended and Restated Employment Agreement, dated as of December 23, 2008, between Phillips-
Van Heusen Corporation and Francis K. Duane (incorporated by reference to Exhibit 10.19 to our Annual
Report on Form 10-K for the fiscal year ended February 1, 2009); First Amendment to Second Amended and
Restated Employment Agreement, dated as of January 29, 2010, between Phillips-Van Heusen Corporation
and Francis K. Duane (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for
the period ended May 2, 2010); Second Amendment to Second Amended and Restated Employment
Agreement, dated January 28, 2011, between Phillips-Van Heusen Corporation and Francis K. Duane
(incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed January 28, 2011).
*10.8 Second Amended and Restated Employment Agreement, dated as of December 23, 2008, between Phillips-
Van Heusen Corporation and P. Thomas Murry (incorporated by reference to Exhibit 10.28 to our Annual
Report on Form 10-K for the fiscal year ended February 1, 2009); First Amendment to Second Amended and
Restated Employment Agreement, dated as of January 29, 2010, between Calvin Klein, Inc. and Paul Thomas
Murry (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the period ended
May 2, 2010); Second Amendment to Second Amended and Restated Employment Agreement, dated January
28, 2011, between Calvin Klein, Inc. and Paul Thomas Murry (incorporated by reference to Exhibit 10.4 to
our Current Report on Form 8-K, filed January 28, 2011); Third Amended and Restated Employment
Agreement, dated as of July 1, 2013, between Calvin Klein, Inc. and Paul Thomas Murry
(incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the period ended August
4, 2013); Amendment to Third Amended and Restated Employment Agreement, dated as of March 24, 2014,
between Calvin Klein, Inc. and Paul Thomas Murry (incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K, filed March 25, 2014 (“Date of Report” of March 24, 2014)).
*10.9 Second Amended and Restated Employment Agreement, dated as of December 23, 2008, between Phillips-
Van Heusen Corporation and Michael Shaffer (incorporated by reference to Exhibit 10.30 to our Annual
Report on Form 10-K for the fiscal year ended February 1, 2009); First Amendment to Second Amended and
Restated Employment Agreement, dated January 28, 2011, between Phillips-Van Heusen Corporation and
Michael Shaffer (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed January
28, 2011).
10.10 Stock Purchase Agreement, dated as of December 20, 2005, by and among Warnaco, Inc., Fingen Apparel
N.V., Fingen S.p.A., Euro Cormar S.p.A. and Calvin Klein, Inc. (incorporated by reference to Exhibit 10.1 to
our Current Report on Form 8-K, filed on December 22, 2005).
*10.11 PVH Corp. Performance Incentive Bonus Plan, as amended and restated effective May 2, 2013 (incorporated
by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed June 26, 2013).
*10.12 PVH Corp. Long-Term Incentive Plan, as amended and restated effective May 2, 2013 (incorporated by
reference to Exhibit 10.2 to our Current Report on Form 8-K, filed June 26, 2013).
*10.13 PVH Corp. 2006 Stock Incentive Plan, as amended and restated effective April 26, 2012 (incorporated by
reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on June 25, 2012); PVH Corp. 2006 Stock
Incentive Plan, as amended and restated effective May 7, 2014 (incorporated by reference to Exhibit 10.2 to
our Quarterly Report on Form 10-Q for the period ended August 3, 2014); PVH Corp. 2006 Stock Incentive
Plan, as amended and restated effective April 30, 2015 (incorporated by reference to Exhibit 10.1 to our
Current Report on Form 8-K, filed on June 22, 2015).
*10.14 Form of Stock Option Agreement for Directors under the Phillips-Van Heusen Corporation 2006 Stock
Incentive Plan (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on June
16, 2006); Revised Form of Stock Option Agreement for Directors under the Phillips-Van Heusen
Corporation 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to our Quarterly Report on
Form 10-Q for the period ended May 6, 2007).
*10.15 Form of Stock Option Agreement for Associates under the Phillips-Van Heusen Corporation 2006 Stock
Incentive Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on April
11, 2007); Revised Form of Stock Option Agreement for Associates under the Phillips-Van Heusen
Corporation 2006 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to our Quarterly Report on
Form 10-Q for the period ended May 6, 2007).
58
*10.16 Form of Restricted Stock Unit Agreement for Associates under the Phillips-Van Heusen Corporation 2006
Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on
April 11, 2007); Revised Form of Restricted Stock Unit Agreement for Associates under the Phillips-Van
Heusen Corporation 2006 Corporation Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to our
Quarterly Report on Form 10-Q for the period ended May 6, 2007); Revised Form of Restricted Stock Unit
Award Agreement for Employees under the Phillips-Van Heusen Corporation 2006 Stock Incentive Plan,
effective as of July 1, 2008 (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q
for the period ended August 3, 2008); Revised Form of Restricted Stock Unit Award Agreement for
Associates under the Phillips-Van Heusen Corporation 2006 Stock Incentive Plan, effective as of September
24, 2008 (incorporated by reference to Exhibit 10.39 to our Annual Report on Form 10-K for the fiscal year
ended February 1, 2009).
*10.17 Form of Amendment to Outstanding Restricted Stock Unit Award Agreements with Associates under the
Phillips-Van Heusen Corporation 2006 Stock Incentive Plan, dated November 19, 2008 (incorporated by
reference to Exhibit 10.40 to our Annual Report on Form 10-K for the fiscal year ended February 1, 2009).
*10.18 Form of Performance Share Award Agreement under the Phillips-Van Heusen Corporation 2006 Stock
Incentive Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on May 8,
2007); Revised Form of Performance Share Award Agreement under the Phillips-Van Heusen Corporation
2006 Stock Incentive Plan, effective as of April 30, 2008 (incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q for the period ended May 4, 2008); Revised Form of Performance Share
Award Agreement under the Phillips-Van Heusen Corporation 2006 Stock Incentive Plan, effective as of
December 16, 2008 (incorporated by reference to Exhibit 10.42 to our Annual Report on Form 10-K for the
fiscal year ended February 1, 2009); Revised Form of Performance Share Award Agreement under the PVH
Corp. 2006 Stock Incentive Plan, effective as of April 25, 2012 (incorporated by reference to Exhibit 10.3 to
our Quarterly Report on Form 10-Q for the period ended April 29, 2012); Alternative Form of Performance
Share Unit Award Agreement under the PVH Corp. 2006 Stock Incentive Plan, effective as of May 1, 2013
(incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended May 5,
2013).
*10.19 Revised Form of Restricted Stock Unit Award Agreement for Directors under the Phillips-Van Heusen
Corporation 2006 Stock Incentive Plan, effective as of July 1, 2008 (incorporated by reference to Exhibit
10.5 to our Quarterly Report on Form 10-Q for the period ended August 3, 2008); Revised Form of
Restricted Stock Unit Award Agreement for Directors under the Phillips-Van Heusen Corporation 2006 Stock
Incentive Plan, effective as of September 24, 2008 (incorporated by reference to Exhibit 10.45 to our Annual
Report on Form 10-K for the fiscal year ended February 1, 2009); Revised Form of Restricted Stock Unit
Award Agreement for Directors under the Phillips-Van Heusen Corporation 2006 Stock Incentive Plan,
effective as of June 24, 2010 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-
Q for the period ended August 1, 2010).
*10.20 Form of Amendment to Outstanding Restricted Stock Unit Award Agreements with Directors under the
Phillips-Van Heusen Corporation 2006 Stock Incentive Plan, dated November 19, 2008 (incorporated by
reference to Exhibit 10.46 to our Annual Report on Form 10-K for the fiscal year ended February 1, 2009).
*10.21 Form of Restricted Stock Unit Agreement between Phillips-Van Heusen and Emanuel Chirico (incorporated
by reference to Exhibit 10.4 to our Current Report on Form 8-K, filed on July 1, 2009).
10.22 Credit and Guaranty Agreement, dated as of February 13, 2013, among PVH Corp., Tommy Hilfiger B.V.,
certain subsidiaries of PVH Corp., Barclays Bank PLC as Administrative Agent and Collateral Agent, Joint
Lead Arranger and Joint Lead Bookrunner, Merrill Lynch, Pierce, Fenner & Smith Incorporated as Co-
Syndication Agent, Joint Lead Arranger and Joint Lead Bookrunner, Citigroup Global Markets Inc. as Co-
Syndication Agent, Joint Lead Arranger and Joint Lead Bookrunner, Credit Suisse Securities (USA) LLC as
Co-Documentation Agent and Joint Lead Bookrunner, Royal Bank of Canada as Co-Documentation Agent,
and RBC Capital Markets as Joint Lead Bookrunner (incorporated by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the period ended May 5, 2013); First Amendment to Credit Agreement,
dated as of March 21, 2014, entered into by and among PVH Corp., PVH B.V. (formerly known as Tommy
Hilfiger B.V.), the Guarantors listed on the signature pages thereto, each Lender party thereto, each Lender
Counterparty party thereto, each Issuing Bank party thereto and Barclays Bank PLC, as administrative agent
and collateral agent (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the
period ended May 4, 2014); Second Amendment to Credit Agreement, dated as of May 19, 2016, entered into
by and among PVH Corp., PVH B.V., the Guarantors listed on the signature pages thereto, each Lender party
thereto, each Issuing Bank party thereto, the Swing Line Lender party thereto and Barclays Bank PLC, as
administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to our Quarterly Report
on Form 10-Q for the period ended July 31, 2016).
*10.23 Schedule of Non-Management Directors’ Fees, effective June 21, 2012 (incorporated by reference to Exhibit
10.1 to our Quarterly Report on Form 10-Q for the period ended July 29, 2012); Schedule of Non-
Management Directors’ Fees, effective June 16, 2016 (incorporated by reference to Exhibit 10.2 to our
Quarterly Report on Form 10-Q for the period ended July 31, 2016).
59
*10.24 Employment Agreement, dated as of May 6, 2010, between Tommy Hilfiger Group, B.V. and Fred Gehring
(incorporated by reference to Exhibit 10.47 to our Annual Report on Form 10-K for the fiscal year ended
January 30, 2011); Addendum to Employment Agreement, dated as of December 31, 2010, between Tommy
Hilfiger Group, B.V. and Fred Gehring (incorporated by reference to Exhibit 10.48 to our Annual Report on
Form 10-K for the fiscal year ended January 30, 2011); Amended and Restated Employment Agreement,
dated as of July 23, 2013, between PVH B.V. and Fred Gehring (incorporated by reference to Exhibit 10.4 to
our Quarterly Report on Form 10-Q for the period ended August 4, 2013); Amendment to Amended and
Restated Employment Agreement, dated as of December 23, 2013, between PVH B.V. and Fred Gehring
(incorporated by reference to Exhibit 10.33 to our Annual Report on Form 10-K for the fiscal year ended
February 2, 2014); Second Amendment to Amended and Restated Employment Agreement, dated as of May
23, 2014, between PVH B.V. and Fred Gehring (incorporated by reference to Exhibit 10.1 to our Current
Report on Form 8-K, filed on June 5, 2014); Third Amendment to Amended and Restated Employment
Agreement, dated as of July 31, 2015, between PVH B.V. and Fred Gehring (incorporated by reference to
Exhibit 10.2 to our Quarterly Report on Form 10-Q for the period ended August 2, 2015).
*10.25 Second Amended and Restated Employment Agreement, dated as of December 16, 2008, between Phillips-
Van Heusen Corporation and Steven B. Shiffman (incorporated by reference to Exhibit 10.25 to our Annual
Report on Form 10-K for the fiscal year ended February 1, 2015); First Amendment to Second Amended and
Restated Employment Agreement, dated as of March 31, 2011, between Phillips-Van Heusen Corporation
and Steven B. Shiffman (incorporated by reference to Exhibit 10.26 to our Annual Report on Form 10-K for
the fiscal year ended February 1, 2015); Second Amendment to Second Amended and Restated Employment
Agreement, dated as of June 1, 2013, between PVH Corp. and Steven B. Shiffman (incorporated by reference
to Exhibit 10.27 to our Annual Report on Form 10-K for the fiscal year ended February 1, 2015).
*10.26 Employment Contract, dated as of April 22, 2004, between Tommy Hilfiger Europe B.V. and Daniel Grieder
(incorporated by reference to Exhibit 10.28 to our Annual Report on Form 10-K for the fiscal year ended
February 1, 2015); Addendum to Contract of Employment, dated as of July 8, 2004, between Tommy
Hilfiger Europe B.V. and Daniel Grieder (incorporated by reference to Exhibit 10.29 to our Annual Report on
Form 10-K for the fiscal year ended February 1, 2015).
*10.27 Non-Competition and Non-Solicitation Agreement, dated as of March 10, 2010, between Phillips-Van
Heusen Corporation, Tommy Hilfiger Europe and Daniel Grieder (incorporated by reference to Exhibit 10.27
to our Annual Report on Form 10-K for fiscal year ended January 31, 2016).
*10.28 European Management Term Sheet, dated as of March 10, 2010, between Phillips-Van Heusen Corporation,
Tommy Hilfiger Europe and Daniel Grieder (incorporated by reference to Exhibit 10.28 to our Annual Report
on From 10-K for fiscal year ended January 31, 2016).
+21 PVH Corp. Subsidiaries.
+23 Consent of Independent Registered Public Accounting Firm.
+31.1 Certification of Emanuel Chirico, Chairman and Chief Executive Officer, pursuant to Section 302 of the
Sarbanes – Oxley Act of 2002.
+31.2 Certification of Michael Shaffer, Executive Vice President and Chief Operating & Financial Officer, pursuant
to Section 302 of the Sarbanes – Oxley Act of 2002.
+32.1 Certification of Emanuel Chirico, Chairman and Chief Executive Officer, pursuant to Section 906 of the
Sarbanes – Oxley Act of 2002, 18 U.S.C. Section 1350.
+32.2 Certification of Michael Shaffer, Executive Vice President and Chief Operating & Financial Officer, pursuant
to Section 906 of the Sarbanes – Oxley Act of 2002, 18 U.S.C. Section 1350.
+101.INS XBRL Instance Document
+101.SCH XBRL Taxonomy Extension Schema Document
+101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
+101.DEF XBRL Taxonomy Extension Definition Linkbase Document
+101.LAB XBRL Taxonomy Extension Label Linkbase Document
+101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
________________
+
Filed or furnished herewith.
60
*
Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this
report.
Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of
1934, or otherwise subject to the liability of that Section. Such exhibits shall not be deemed incorporated by reference
into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
(b) Exhibits: See (a)(3) above for a listing of the exhibits included as part of this report.
(c) Financial Statement Schedules: See page F-1 for a listing of the consolidated financial statement schedules submitted
as part of this report.
61
Item 16. Form 10-K Summary
None.
62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 24, 2017
PVH CORP.
By:
/s/ EMANUEL CHIRICO
Emanuel Chirico
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
/s/ EMANUEL CHIRICO
Emanuel Chirico
/s/ MICHAEL SHAFFER
Michael Shaffer
/s/ JAMES W. HOLMES
James W. Holmes
/s/ MARY BAGLIVO
Mary Baglivo
/s/ BRENT CALLINICOS
Brent Callinicos
/s/ JUAN FIGUEREO
Juan Figuereo
/s/ JOSEPH B. FULLER
Joseph B. Fuller
/s/ V. JAMES MARINO
V. James Marino
/s/ GERALDINE (PENNY) MCINTYRE
Geraldine (Penny) McIntyre
/s/ HENRY NASELLA
Henry Nasella
/s/ EDWARD ROSENFELD
Edward Rosenfeld
/s/ CRAIG RYDIN
Craig Rydin
/s/ JUDITH AMANDA SOURRY KNOX
Judith Amanda Sourry Knox
Title
Chairman and Chief Executive Officer
(Principal Executive Officer)
Executive Vice President and Chief Operating &
Financial Officer (Principal Financial Officer)
Senior Vice President and Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
63
Date
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
March 24, 2017
Exhibit Index
21
PVH Corp. Subsidiaries.
23
Consent of Independent Registered Public Accounting Firm.
31.1
31.2
32.1
32.2
Certification of Emanuel Chirico, Chairman and Chief Executive Officer, pursuant to Section 302 of the
Sarbanes – Oxley Act of 2002.
Certification of Michael Shaffer, Executive Vice President and Chief Operating & Financial Officer,
pursuant to Section 302 of the Sarbanes – Oxley Act of 2002.
Certification of Emanuel Chirico, Chairman and Chief Executive Officer, pursuant to Section 906 of the
Sarbanes – Oxley Act of 2002, 18 U.S.C. Section 1350.
Certification of Michael Shaffer, Executive Vice President and Chief Operating & Financial Officer,
pursuant to Section 906 of the Sarbanes – Oxley Act of 2002, 18 U.S.C. Section 1350.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
64
FORM 10-K-ITEM 15(a)(1) and 15(a)(2)
PVH CORP.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
15(a)(1) The following consolidated financial statements and supplementary data are included in Item 8 of this report:
Consolidated Income Statements—Years Ended January 29, 2017, January 31, 2016 and February
F-2
1, 2015
Consolidated Statements of Comprehensive Income (Loss)—Years Ended January 29, 2017,
January 31, 2016 and February 1, 2015
Consolidated Balance Sheets—January 29, 2017 and January 31, 2016
Consolidated Statements of Cash Flows—Years Ended January 29, 2017, January 31, 2016 and
February 1, 2015
Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Non-Controlling
Interest—Years Ended January 29, 2017, January 31, 2016 and February 1, 2015
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data - Unaudited
Management’s Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm
Five Year Financial Summary
F-3
F-4
F-5
F-6
F-7
F-57
F-59
F-60
F-62
15(a)(2) The following consolidated financial statement schedule is included herein:
Schedule II - Valuation and Qualifying Accounts
F-64
All other schedules for which provision is made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
F-1
PVH CORP.
CONSOLIDATED INCOME STATEMENTS
(In millions, except per share data)
Net sales
Royalty revenue
Advertising and other revenue
Total revenue
Cost of goods sold (exclusive of depreciation and amortization)
Gross profit
Selling, general and administrative expenses
Debt modification and extinguishment costs
Other noncash gain, net
Equity in net income of unconsolidated affiliates
Income before interest and taxes
Interest expense
Interest income
Income before taxes
Income tax expense (benefit)
Net income
Less: Net loss attributable to redeemable non-controlling interest
Net income attributable to PVH Corp.
Basic net income per common share attributable to PVH Corp.
Diluted net income per common share attributable to PVH Corp.
2016
7,791.4
320.6
91.1
8,203.1
3,832.8
4,370.3
3,636.7
15.8
71.3
0.1
789.2
120.9
5.9
674.2
125.5
548.7
(0.3)
549.0
6.84
6.79
$
$
$
$
2015
7,605.5
324.8
90.0
8,020.3
3,858.7
4,161.6
3,417.7
—
—
16.6
760.5
117.0
4.0
647.5
75.1
572.4
—
572.4
6.95
6.89
$
$
$
$
2014
7,849.1
300.5
91.6
8,241.2
3,914.5
4,326.7
3,713.6
93.1
—
9.9
529.9
143.5
5.0
391.4
(47.5)
438.9
(0.1)
439.0
5.33
5.27
$
$
$
$
See notes to consolidated financial statements.
F-2
PVH CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
2016
2015
2014
$
548.7
$
572.4
$
438.9
(21.2)
(234.3)
(545.7)
(0.2)
(0.3)
(0.6)
0.7
14.1
(6.6)
542.1
(0.3)
542.4
(53.1)
—
(287.7)
284.7
88.1
—
(458.2)
(19.3)
—
284.7
$
0.5
(19.8)
$
Net income
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax benefit of $(0.1), $(0.4)
and $(1.7)
Amortization of prior service credit related to pension and postretirement
plans, net of tax benefit of $(0.2), $(0.2) and $(0.3)
Net unrealized and realized gain (loss) related to effective cash flow hedges,
net of tax expense (benefit) of $1.2, $(8.4) and $5.6
Net gain on net investment hedge, net of tax expense of $8.6 in 2016
Total other comprehensive loss
Comprehensive income (loss)
Less: Comprehensive (loss) income attributable to redeemable non-controlling
interest
Total comprehensive income (loss) attributable to PVH Corp.
$
See notes to consolidated financial statements.
F-3
PVH CORP.
CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)
Current Assets:
Cash and cash equivalents
ASSETS
Trade receivables, net of allowances for doubtful accounts of $15.0 and $18.1
Other receivables
Inventories, net
Prepaid expenses
Other
Assets held for sale
Total Current Assets
Property, Plant and Equipment, net
Goodwill
Tradenames
Other Intangibles, net
Other Assets, including deferred taxes of $17.4 and $12.2
Total Assets
January 29,
2017
January 31,
2016
$
730.1
$
616.0
25.4
1,317.9
133.2
57.0
—
2,879.6
759.9
3,469.9
2,783.4
826.6
348.5
556.4
657.2
28.7
1,322.3
150.4
74.8
14.7
2,804.5
744.6
3,219.3
2,802.6
843.8
259.0
$ 11,067.9
$ 10,673.8
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Short-term borrowings
Current portion of long-term debt
Total Current Liabilities
Long-Term Debt
Other Liabilities, including deferred taxes of $877.7 and $836.4
Redeemable Non-Controlling Interest
Stockholders’ Equity:
Preferred stock, par value $100 per share; 150,000 total shares authorized
Common stock, par value $1 per share; 240,000,000 shares authorized; 83,923,184 and
83,545,818 shares issued
Additional paid in capital – common stock
Retained earnings
Accumulated other comprehensive loss
Less: 5,371,660 and 2,057,850 shares of common stock held in treasury, at cost
Total Stockholders’ Equity
$
682.6
$
832.4
30.7
19.1
—
1,564.8
3,197.3
1,499.3
2.0
—
83.9
2,866.2
3,098.0
(710.8)
(532.8)
4,804.5
636.1
696.3
32.3
25.9
136.6
1,527.2
3,031.7
1,562.6
—
—
83.5
2,822.5
2,561.2
(704.2)
(210.7)
4,552.3
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity
$ 11,067.9
$ 10,673.8
See notes to consolidated financial statements.
F-4
PVH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization
Equity in net income of unconsolidated affiliates
Deferred taxes
Stock-based compensation expense
Impairment of long-lived assets
Actuarial (gain) loss on retirement and benefit plans
Debt modification and extinguishment costs
Net loss (gain) on deconsolidation of subsidiaries and joint venture
Impairment of goodwill
Gain to write-up equity investment in joint venture to fair value
Changes in operating assets and liabilities:
Trade receivables, net
Inventories, net
Accounts payable, accrued expenses and deferred revenue
Prepaid expenses
Employer pension contributions
Other, net
Net cash provided by operating activities
INVESTING ACTIVITIES(1)
Business acquisitions, net of cash acquired
Purchase of property, plant and equipment
Proceeds from sale of building
Contingent purchase price payments
Change in restricted cash
Investments in and advance to unconsolidated affiliates
Payment received on advance to unconsolidated affiliate
Loan to a supplier
Net cash used by investing activities
FINANCING ACTIVITIES(1)
Net (payments on) proceeds from short-term borrowings
Redemption of 7 3/8% senior notes, including make whole premium
Proceeds from 2016/2014 facilities, net of related fees
Repayment of Term Loan B in connection with amendment to 2014 facilities
Repayment of 2016/2014 facilities
Proceeds from 3 5/8% senior notes, net of related fees
Net proceeds from settlement of awards under stock plans
Excess tax benefits from awards under stock plans
Cash dividends
Acquisition of treasury shares
Payments of capital lease obligations
Contributions from non-controlling interest
Net cash used by financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
(1) See Note 18 for information on noncash investing and financing transactions.
See notes to consolidated financial statements.
F-5
2016
2015
2014
$
548.7
$
572.4
$
438.9
321.8
(0.1)
1.3
38.2
10.1
(39.1)
15.8
81.8
—
(153.1)
22.3
2.2
166.9
19.2
(100.0)
18.8
954.8
(157.7)
(246.6)
16.7
(53.7)
—
(32.0)
6.2
(13.8)
(480.9)
(6.8)
—
571.1
(582.0)
(350.0)
389.6
13.1
0.9
(12.2)
(322.1)
(7.0)
2.2
(303.2)
3.0
173.7
556.4
730.1
$
257.4
(16.6)
(8.7)
42.0
11.4
(20.2)
—
—
—
—
33.2
(96.2)
58.6
(21.3)
(1.5)
89.1
899.6
—
(263.8)
—
(51.3)
20.2
(26.6)
—
—
(321.5)
17.4
—
—
—
(350.0)
—
7.4
5.5
(12.5)
(138.4)
(7.8)
—
(478.4)
(22.6)
77.1
479.3
556.4
$
244.7
(9.9)
(31.0)
48.7
17.8
138.9
93.1
(8.0)
11.9
—
(17.4)
(71.7)
(41.7)
(12.6)
(2.7)
(9.9)
789.1
(13.5)
(255.8)
—
(51.7)
(10.5)
(26.2)
—
—
(357.7)
0.2
(667.6)
586.7
—
(425.5)
—
13.0
11.0
(12.5)
(11.1)
(8.7)
—
(514.5)
(30.8)
(113.9)
593.2
479.3
PVH CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND REDEEMABLE NON-CONTROLLING INTEREST
(In millions, except share and per share data)
Common Stock
Redeemable
Non-Controlling
Interest
Preferred
Stock
Shares
$1 par
Value
Additional
Paid In
Capital-
Common
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Treasury
Stock
Total
Stockholders’
Equity
Stockholders’ Equity
February 2, 2014
$
5.6
$
— 82,679,574
$
82.7
$
2,696.6
$
1,574.8
$
42.3
$
(61.2)
$
4,335.2
Net income attributable to PVH Corp.
Amortization of prior service credit related to pension and
postretirement plans, net of tax benefit of $(0.3)
Foreign currency translation adjustments, net of tax benefit
of $(1.7)
Net unrealized and realized gain related to effective cash
flow hedges, net of tax expense of $5.6
Total comprehensive loss attributable to PVH Corp.
Settlement of awards under stock plans
Tax benefits from awards under stock plans
Stock-based compensation expense
Cash dividends
Acquisition of 90,780 treasury shares
Net loss attributable to redeemable non-controlling interest
Foreign currency translation adjustments attributable to
redeemable non-controlling interest
Deconsolidation of CK India and elimination of related
non-controlling interest
February 1, 2015
Net income attributable to PVH Corp.
Amortization of prior service credit related to pension and
postretirement plans, net of tax benefit of $(0.2)
Foreign currency translation adjustments, net of tax benefit
of $(0.4)
Net unrealized and realized loss related to effective cash
flow hedges, net of tax benefit of $(8.4)
Total comprehensive income attributable to PVH Corp.
Settlement of awards under stock plans
Tax benefits from awards under stock plans
Stock-based compensation expense
Cash dividends
Acquisition of 1,454,368 treasury shares
January 31, 2016
Net income attributable to PVH Corp.
Amortization of prior service credit related to pension and
postretirement plans, net of tax benefit of $(0.2)
Foreign currency translation adjustments, net of tax benefit
of $(0.1)
Net unrealized and realized gain related to effective cash
flow hedges, net of tax expense of $1.2
Net gain on net investment hedge, net of tax expense of
$8.6
Total comprehensive income attributable to PVH Corp.
Settlement of awards under stock plans
Tax deficiency from awards under stock plans
Stock-based compensation expense
Cash dividends
Acquisition of 3,313,810 treasury shares
439.0
(12.5)
(0.6)
(546.3)
88.1
(11.1)
436,488
0.4
12.6
10.8
48.7
(0.1)
0.6
(6.1)
—
— 83,116,062
83.1
2,768.7
2,001.3
572.4
(416.5)
(72.3)
(0.3)
(234.3)
(53.1)
429,756
0.4
7.0
4.8
42.0
—
— 83,545,818
83.5
2,822.5
(12.5)
2,561.2
549.0
(704.2)
(138.4)
(210.7)
(0.2)
(21.2)
0.7
14.1
(322.1)
377,366
0.4
12.7
(7.2)
38.2
(12.2)
439.0
(0.6)
(546.3)
88.1
(19.8)
13.0
10.8
48.7
(12.5)
(11.1)
4,364.3
572.4
(0.3)
(234.3)
(53.1)
284.7
7.4
4.8
42.0
(12.5)
(138.4)
4,552.3
549.0
(0.2)
(21.2)
0.7
14.1
542.4
13.1
(7.2)
38.2
(12.2)
(322.1)
Acquisition date fair value of redeemable non-controlling
interest
Contributions from the minority shareholder
Net loss attributable to redeemable non-controlling interest
0.1
2.2
(0.3)
January 29, 2017
$
2.0
$
— 83,923,184
$
83.9
$
2,866.2
$
3,098.0
$
(710.8)
$
(532.8)
$
4,804.5
See notes to consolidated financial statements.
F-6
PVH CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business — PVH Corp. and its consolidated subsidiaries (collectively, the “Company”) constitute a global
apparel company whose brand portfolio consists of nationally and internationally recognized brand names, including CALVIN
KLEIN, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner’s, Olga and Eagle, which are owned, and Speedo, Geoffrey
Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John, MICHAEL Michael Kors, Michael Kors Collection and
Chaps, which are licensed, as well as various other owned, licensed and private label brands. The Company designs and
markets branded dress shirts, neckwear, sportswear, jeanswear, performance apparel, intimate apparel, underwear, swim
products, handbags, accessories, footwear and other related products and licenses its owned brands over a broad range of
Principles of Consolidation — The consolidated financial statements include the accounts of the Company. Intercompany
accounts and transactions have been eliminated in consolidation. Investments in entities that the Company does not control but
has the ability to exercise significant influence over are accounted for using the equity method of accounting. The Company’s
Consolidated Income Statements include its proportionate share of the net income or loss of these entities. Please see Note 5,
“Investments in Unconsolidated Affiliates,” for a further discussion. During the second quarter of 2016, the Company and
Arvind Limited (“Arvind”) formed a joint venture in Ethiopia, PVH Arvind Manufacturing Private Limited Company (“PVH
Ethiopia”), in which the Company owns a 75% interest. PVH Ethiopia is consolidated and the minority shareholder’s
proportionate share (25%) of the equity in this joint venture is accounted for as a redeemable non-controlling interest. The
Company acquired in 2013 a 51% economic interest in a Calvin Klein joint venture in India, which is now known as Calvin
Klein Arvind Fashion Private Limited (“CK India”). CK India was consolidated and the minority shareholder’s proportionate
share (49%) of the equity in this joint venture was accounted for as a redeemable non-controlling interest. During 2014, Arvind
purchased the Company’s prior joint venture partners’ shares in CK India and, as a result of the entry into a shareholder
agreement with different governing arrangements between the Company and Arvind than those with the Company’s prior
partners, the Company no longer was deemed to hold a controlling interest in the joint venture. CK India was deconsolidated as
a result and the Company began reporting its 51% interest as an equity method investment in the first quarter of 2014. Please
see Note 6, “Redeemable Non-Controlling Interests,” for a further
Use of Estimates — The preparation of the consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from the
estimates.
Fiscal Year — The Company uses a 52-53 week fiscal year ending on the Sunday closest to February 1. References to a
year are to the Company’s fiscal year, unless the context requires otherwise. Results for 2016, 2015 and 2014 represent the 52
weeks ended January 29, 2017, January 31, 2016 and February 1, 2015, respectively.
Cash and Cash Equivalents — The Company considers all highly liquid investments with original maturities of three
months or less when purchased to be cash equivalents. Cash equivalents also includes amounts due from third party credit card
processors for the settlement of customer debit and credit card transactions that are collectible in one week or less. The
Company’s balances of cash and cash equivalents at January 29, 2017 consisted principally of bank deposits and investments in
money market funds.
Accounts Receivable — Trade receivables, as presented in the Company’s Consolidated Balance Sheets, are net of returns
and allowances. An allowance for doubtful accounts is determined through an analysis of the aging of accounts receivable and
assessments of collectibility based on historic trends, the financial condition of the Company’s customers and an evaluation of
economic conditions. The Company writes off uncollectible trade receivables once collection efforts have been exhausted and
third parties confirm the balance is not recoverable. Costs associated with allowable customer markdowns and operational
chargebacks, net of the expected recoveries, are part of the provision for allowances included in accounts receivable. These
provisions result from seasonal negotiations, as well as historic deduction trends net of expected recoveries, and the evaluation
of current market conditions.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Goodwill and Other Intangible Assets — The Company assesses the recoverability of goodwill annually, at the beginning
of the third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate
that it is more likely than not that the fair value of the reporting unit may have been reduced below its carrying amount.
Impairment testing for goodwill is done at a reporting unit level. Under Financial Accounting Standards Board (“FASB”)
guidance for goodwill and intangible assets, a reporting unit is defined as an operating segment or one level below the operating
segment, called a component. However, two or more components of an operating segment will be aggregated and deemed a
single reporting unit if the components have similar economic characteristics.
FASB guidance allows the Company to first assess qualitative factors to determine whether it is necessary to perform the
more detailed two-step quantitative goodwill impairment test. The Company may elect to bypass the qualitative assessment and
proceed directly to the quantitative test for any reporting unit. The quantitative goodwill impairment test, if necessary, is a two-
step process. The first step is to identify the existence of a potential impairment by comparing the fair value of a reporting unit
(the fair value of a reporting unit is estimated using a discounted cash flow model) with its carrying amount, including
goodwill. If the fair value of a reporting unit exceeds its carrying amount, the reporting unit’s goodwill is considered not to be
impaired and performance of the second step of the quantitative goodwill impairment test is unnecessary. However, if the
carrying amount of a reporting unit exceeds its fair value, the second step of the quantitative goodwill impairment test is
performed to measure the amount of impairment loss to be recorded, if any. The second step of the quantitative goodwill
impairment test compares the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. If the
carrying amount of a reporting unit’s goodwill exceeds its implied fair value, an impairment loss is recognized in an amount
equal to that excess. The implied fair value of goodwill is determined using the same approach as employed when determining
the amount of goodwill that would be recognized in a business combination. That is, the fair value of the reporting unit is
allocated to all of its assets and liabilities as if the reporting unit had been acquired in a business combination and the fair value
was the purchase price paid to acquire the reporting unit.
For the 2016 annual goodwill impairment test, the Company elected to first assess qualitative factors to determine whether
it was more likely than not that the fair value of any reporting unit was less than its carrying amount as a basis for determining
whether it was necessary to perform the two-step goodwill impairment test. In evaluating whether it was more likely than not
that the fair value of any reporting unit was less than its carrying amount, the Company assessed relevant events and
circumstances including the change in the Company’s market capitalization and its implied impact on reporting unit fair value,
industry and market conditions, macroeconomic conditions, trends in product costs and financial performance of the
Company’s businesses. After assessing these events and circumstances, the Company determined that it was not more likely
than not that the fair value of any reporting unit was less than its carrying amount and concluded that the quantitative goodwill
impairment test was not required.
During 2016, and subsequent to the 2016 annual goodwill impairment test, the Company formed a joint venture in Mexico
by merging its wholly owned subsidiary that principally operated and managed the Calvin Klein business in Mexico with a
wholly owned subsidiary of the joint venture partner, which resulted in the deconsolidation of the Company’s wholly owned
subsidiary, including goodwill assigned to the business. This transaction was a triggering event that indicated that the amount of
remaining goodwill allocated to the Calvin Klein North America Wholesale, Calvin Klein North America Retail and Heritage
Brands Wholesale reporting units could be impaired, prompting the need for the Company to perform a goodwill impairment
test for these reporting units in 2016. No goodwill impairment resulted from this interim test in 2016.
For the 2015 annual goodwill impairment test, the Company elected to bypass the qualitative assessment and proceeded
directly to the quantitative impairment test using a discounted cash flow method to estimate fair value. The Company’s annual
goodwill impairment test during 2015 yielded estimated fair values in excess of the carrying amounts for all of the Company’s
reporting units and therefore the second step of the quantitative goodwill impairment test was not required.
During the fourth quarter of 2014, the Company announced its plan to exit the Izod retail business in 2015 (which was
completed in the third quarter of 2015). The decision to exit this business was a triggering event that indicated that the amount
of goodwill allocated to the Heritage Brands Retail reporting unit could be impaired, prompting the need for the Company to
perform a goodwill impairment test for this reporting unit in 2014. As a result of this interim test in 2014, the goodwill allocated
to the Heritage Brands Retail reporting unit was determined to be impaired and an impairment charge of $11.9 million was
recorded in selling, general and administrative expenses.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Indefinite-lived intangible assets not subject to amortization are tested for impairment annually, at the beginning of the
third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate that
the carrying amount may be impaired. FASB guidance allows the Company to first assess qualitative factors to determine
whether it is necessary to perform a more detailed quantitative impairment test for its indefinite-lived intangible assets. The
Company may elect to bypass the qualitative assessment and proceed directly to the quantitative impairment test. When
performing the quantitative test, an impairment loss is recognized if the carrying amount of the asset exceeds the fair value of
the asset, which is generally determined using the estimated discounted cash flows associated with the asset’s use. Intangible
assets with finite lives are amortized over their estimated useful lives and are tested for impairment along with other long-lived
assets.
For the 2016 and 2015 annual impairment tests of certain indefinite-lived intangible assets, the Company elected to first
assess qualitative factors to determine whether it was more likely than not that the fair value of any asset was less than its
carrying amount. In performing this evaluation, the Company assessed relevant events and circumstances including industry
and market conditions, macroeconomic conditions, trends in product costs and financial performance of the Company’s
businesses. After assessing these events and circumstances, the Company determined that it was not more likely than not that
the fair value of these certain indefinite-lived intangible assets were less than their carrying amount and concluded that the
quantitative impairment test was not required. For certain other indefinite-lived intangible assets impairment tests, the Company
elected to bypass the qualitative assessment and proceeded directly to the quantitative impairment test using a discounted cash
flow method to estimate fair value. No impairment of indefinite-lived intangible assets resulted from any of the Company’s
annual impairment tests in 2016 and 2015.
Asset Impairments — The Company reviews for and records impairment losses on long-lived assets (excluding goodwill
and other indefinite-lived intangible assets) in accordance with FASB guidance for the impairment or disposal of long-lived
assets. The Company records impairment losses when events and circumstances indicate that the assets might be impaired and
the carrying amount of the asset is not recoverable and exceeds its fair value. Please see Note 11, “Fair Value Measurements”
for a further discussion.
Inventories — Inventories are comprised principally of finished goods and are stated at the lower of cost or market. Cost
for principally all wholesale inventories in North America and certain wholesale and retail inventories in Asia and Latin
America is determined using the first-in, first-out method. Cost for all other inventories is determined using the weighted
average cost method. The Company reviews current business trends, inventory agings and discontinued merchandise categories
to determine adjustments that it estimates will be needed to liquidate existing clearance inventories and record inventories at the
lower of cost or market.
Inventory held on consignment by third parties totaled $19.6 million at January 29, 2017 and $19.1 million at January 31,
2016. The Company retains the title to its inventory stored at third party facilities.
Property, Plant and Equipment — Property, plant and equipment is stated at cost less accumulated depreciation.
Depreciation is generally provided over the estimated useful lives of the related assets on a straight-line basis. The range of
useful lives is principally as follows: Buildings and building improvements — 15-40 years; machinery, software and equipment
— 2-10 years; furniture and fixtures — 2-10 years; and fixtures located in third party customer locations (“shop-in-shops”) and
their related costs — 3-4 years. Leasehold improvements are depreciated using the straight-line method over the lesser of the
term of the related lease or the estimated useful life of the asset. In certain circumstances, contractual renewal options are
considered when determining the term of the related lease. Major additions and betterments are capitalized, and repairs and
maintenance are charged to operations in the period incurred. Depreciation expense totaled $228.4 million, $210.8 million and
$193.8 million in 2016, 2015 and 2014, respectively.
Leases — The Company leases retail locations, warehouses, showrooms, office space and equipment. Assets held under
capital leases are included in property, plant and equipment and are amortized over the lesser of the term of the related lease or
the estimated useful life of the asset. The Company accounts for rent expense under non-cancelable operating leases with
scheduled rent increases and rent holidays on a straight-line basis over the lease term. The Company determines the lease term
at the inception of a lease by assuming the exercise of those renewal options that are reasonably assured because of the
significant economic penalty that exists for not exercising those options. The excess of straight-line rent expense over
scheduled payments is recorded as a deferred liability. In addition, the Company receives build out contributions from landlords
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
primarily as an incentive for the Company to lease retail store space from the landlords. Such amounts are amortized as a
reduction of rent expense over the life of the related lease.
Revenue Recognition — Revenue from the Company’s wholesale operations is recognized at the time title to the goods is
passed and the risk of loss is transferred to customers. For sales by the Company’s retail stores, revenue is recognized when
goods are sold to consumers. Revenue from the Company’s digital commerce transactions is recognized at the estimated time of
delivery to the customer. Allowances for estimated returns and discounts are provided when sales are recorded. Royalty revenue
for licensees whose sales exceed contractual sales minimums, including licensee contributions toward advertising, is recognized
when licensed products are sold as reported by the Company’s licensees. For licensees whose sales do not exceed contractual
sales minimums, royalty revenue is recognized ratably based on contractual minimum requirements.
The Company sells gift cards to customers in its retail stores. The Company does not charge administrative fees on gift
cards nor do they expire. Upon the purchase of a gift card by a customer, a liability is established for the cash value of the gift
card. The liability is relieved and revenue is recognized when the gift card is redeemed by the customer or if the Company
determines that the likelihood of the gift card being redeemed is remote (also known as “gift card breakage”) and that it does
not have a legal obligation to remit the value of such unredeemed gift card to any jurisdiction. Gift card breakage was
immaterial in each of the last three years.
Sales Incentives — The Company uses certain sales incentive programs related to certain of the Company’s retail
operations, such as customer loyalty programs and the issuance of coupons. The Company’s loyalty programs are structured
such that customers receive specified amounts off of future purchases for a specified period of time after certain levels of
spending are achieved. Costs associated with the Company’s loyalty programs are recorded ratably as a cost of goods sold
based on enrolled customers’ spending. Costs associated with coupons are recorded as a reduction of revenue at the time of
coupon redemption.
Cost of Goods Sold and Selling, General and Administrative Expenses — Costs associated with the production and
procurement of product are included in cost of goods sold, including inbound freight costs, purchasing and receiving costs,
inspection costs and other product procurement related charges. Shipping and handling costs incurred by the Company
associated with digital commerce transactions are also included in cost of goods sold. Generally, all other expenses, excluding
interest and income taxes, are included in selling, general and administrative expenses, including warehousing and distribution
expenses, as the predominant expenses associated therewith are general and administrative in nature, including rent, utilities,
payroll and depreciation and amortization. Warehousing and distribution expenses, which are subject to exchange rate
fluctuations, totaled $246.5 million, $232.4 million and $250.4 million in 2016, 2015 and 2014, respectively.
Shipping and Handling Fees — Shipping and handling fees billed to customers are included in net sales.
Advertising — Advertising costs are expensed as incurred and are included in selling, general and administrative
expenses. Costs associated with cooperative advertising programs, under which the Company shares the cost of a customer’s
advertising expenditures, are treated as a reduction of revenue. Advertising expenses, which are subject to exchange rate
fluctuations, totaled $416.3 million, $376.6 million and $384.6 million in 2016, 2015 and 2014, respectively. Prepaid
advertising expenses recorded in prepaid expenses and other assets totaled $7.5 million and $2.9 million at January 29, 2017
and January 31, 2016, respectively.
Sales Taxes — The Company accounts for sales taxes and other related taxes on a net basis, excluding such taxes from
revenue.
Income Taxes — Deferred tax assets and liabilities are recognized for temporary differences between the tax bases of
assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply in the periods in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that
includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts
more likely than not to be realized.
Significant judgment is required in assessing the timing and amount of deductible and taxable items, evaluating tax
positions and in determining the income tax provision. The Company recognizes income tax benefits only when it is more
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
likely than not that the tax position will be fully sustained upon review by taxing authorities, including resolution of related
appeals or litigation processes, if any. If the recognition threshold is met, the Company measures the tax benefit at the largest
amount with a greater than 50 percent likelihood of being realized upon ultimate settlement. For tax positions that are 50
percent or less likely of being sustained upon audit, the Company does not recognize any portion of that benefit in the financial
statements. When the outcome of these tax matters changes, the change in estimate impacts the provision for income taxes in
the period that such a determination is made. The Company recognizes interest and penalties related to unrecognized tax
benefits in the Company’s income tax provision.
Financial Instruments — The Company has exposure to changes in foreign currency exchange rates related to anticipated
cash flows primarily associated with certain international inventory purchases. The Company periodically uses foreign currency
forward exchange contracts to hedge against a portion of this exposure. The Company also has exposure to interest rate
volatility related to its secured term loan facilities. The Company enters into interest rate swap and cap agreements to hedge
against a portion of this exposure. The Company records the foreign currency forward exchange contracts and interest rate
contracts at fair value in its Consolidated Balance Sheets, and does not net the related assets and liabilities. The fair value of the
foreign currency forward exchange contracts is measured as the total amount of currency to be purchased, multiplied by the
difference between (i) the forward rate as of the period end and (ii) the settlement rate specified in each contract. The fair value
of the interest rate contracts is based on observable interest rate yield curves and represents the expected discounted cash flows
underlying the financial instruments. Changes in fair value of the foreign currency forward exchange contracts primarily
associated with certain international inventory purchases and the interest rate contracts that are designated as effective hedging
instruments (collectively referred to as “cash flow hedges”) are recorded in equity as a component of accumulated other
comprehensive loss (“AOCL”). Any ineffectiveness in such cash flow hedges is immediately recognized in earnings. Cash
flows from such hedges are presented in the Consolidated Statements of Cash Flows in the same category as the items being
hedged.
The Company also has exposure to changes in foreign currency exchange rates related to the value of its investments in
foreign subsidiaries denominated in a currency other than the United States dollar. To hedge against a portion of this exposure,
the Company designates certain foreign currency borrowings issued in the United States as a net investment hedge of its
investments in certain of its foreign subsidiaries that use a functional currency other than the United States dollar. Changes in
fair value of the foreign currency borrowings designated as a net investment hedge are recorded in equity as a component of
AOCL. The Company evaluates the effectiveness of its net investment hedge as of the beginning of each quarter. Any
ineffectiveness in such net investment hedge is immediately recognized in earnings.
The Company records immediately in earnings changes in the fair value of hedges that are not designated as effective
hedging instruments (“undesignated contracts”). Undesignated contracts include all of the foreign currency forward exchange
contracts related to intercompany transactions and intercompany loans that are not of a long-term investment nature. Any gains
and losses that are immediately recognized in earnings on such contracts are largely offset by the remeasurement of the
underlying intercompany balances. Undesignated contracts also include foreign currency option contracts used to hedge against
changes in foreign currency exchange rates related to the translation of the earnings of the Company’s subsidiaries that use a
functional currency other than the United States dollar. The fair value of the foreign currency option contracts is estimated
based on external valuation models, which use the original strike price, current foreign currency exchange rates, the implied
volatility in foreign currency exchange rates and length of time to expiration as inputs. The Company does not use derivative or
non-derivative financial instruments for trading or speculative purposes. Please see Note 10, “Derivative Financial
Instruments” for a further discussion.
Foreign Currency Translation and Transactions — The consolidated financial statements of the Company are prepared in
United States dollars. If the functional currency of a foreign subsidiary is not the United States dollar, assets and liabilities are
translated to United States dollars at the exchange rates in effect at the applicable balance sheet date and revenue and expenses
are translated to United States dollars at the average exchange rate for the applicable period. Gains and losses on the revaluation
of intercompany loans made between foreign subsidiaries that are of a long-term investment nature are included in AOCL.
Gains and losses arising from transactions denominated in a currency other than the functional currency of a particular entity,
not including inventory purchases, are principally included in selling, general and administrative expenses and totaled a loss of
$4.7 million, $17.3 million and $49.8 million in 2016, 2015 and 2014, respectively. The transaction loss recorded in 2014
included a loss of $38.0 million on the revaluation of certain intercompany loans, which was mostly offset by a gain on
undesignated foreign currency forward exchange contracts. Please see Note 10, “Derivative Financial Instruments” for a further
discussion.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Balance Sheet Classification of Early Settlements of Long-Term Obligations — The Company classifies obligations
settled after the balance sheet date but prior to the issuance of the consolidated financial statements based on the contractual
payment terms of the underlying agreements.
Pension and Other Postretirement Plans — Employee pension benefits earned during the year, as well as interest on the
projected benefit obligations or accumulated benefit obligations, are accrued quarterly. Prior service costs and credits resulting
from changes in plan benefits are generally amortized over the average remaining service period of the employees expected to
receive benefits. The expected return on plan assets is recognized quarterly and determined by applying the assumed return on
assets to the actual fair value of plan assets adjusted for expected benefit payments, contributions and plan expenses. Actuarial
gains and losses are recognized in the Company’s operating results in the year in which they occur. These gains and losses are
measured at least annually at the end of the Company’s fiscal year and, as such, are generally recorded during the fourth quarter
of each year. Please see Note 12, “Retirement and Benefit Plans” for a further discussion of the Company’s pension and other
postretirement plans.
Stock-Based Compensation — The Company recognizes all share-based payments to employees and non-employee
directors, net of estimated forfeitures, as compensation expense in the consolidated financial statements based on their grant
date fair values. Please see Note 14, “Stock-Based Compensation” for a further discussion.
Recently Adopted Accounting Guidance — The FASB issued in April 2015 an update to accounting guidance related to
debt issuance costs. The update requires debt issuance costs related to a recognized debt liability to be presented in the balance
sheet as a direct deduction from the carrying amount of that debt liability, consistent with the presentation of debt discounts.
The Company adopted this update during the first quarter of 2016 on a retrospective basis, which resulted in decreases to
prepaid expenses and other assets of $8.1 million and $14.5 million, respectively, as of January 31, 2016 with corresponding
decreases in long-term debt.
The FASB issued in April 2015 an update to accounting guidance related to retirement benefits. This update provides a
practical expedient which allows a company with fiscal years that do not fall on a calendar month-end to measure defined
benefit plan assets and obligations using the month end that is closest to the company’s fiscal year end. If elected, this update
should be applied consistently from year to year for all plans. The update became effective for the Company in the first quarter
of 2016. Prospective application is required. The Company has not elected to change its measurement date under this update.
Accounting Guidance Issued But Not Adopted as of January 29, 2017 — The FASB issued in May 2014 guidance that
supersedes most of the current revenue recognition requirements. The core principle of the guidance is that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount,
timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. In August 2015, the
FASB approved a one year delay to the required adoption date of the standard, which makes it effective for the Company no
later than the first quarter of 2018, with adoption in 2017 permitted. In 2016, the FASB issued several amendments to clarify
various aspects of the implementation guidance. The new standard is required to be applied retrospectively to each prior
reporting period (full retrospective method) or retrospectively with the cumulative effect of initially applying the standard
recognized as an adjustment to opening retained earnings at the date of initial adoption (modified retrospective method).
The Company formed a global, cross-functional project team to analyze the impacts of the guidance across all of its
revenue streams. This included review of current accounting policies and practices to identify potential differences that would
result from applying the guidance. The majority of the Company’s revenue is generated from sales of finished products, which
will continue to be recognized when control is transferred to the customer. The Company’s assessment included an evaluation
of the impact that the guidance will have on the Company’s accounting for royalty and advertising revenue, loyalty programs
and gift cards. Under the guidance, the Company’s royalty and advertising revenue will continue to be recognized over time.
However, the Company is still assessing the impact of decisions reached by the FASB Transition Resource Group in November
2016 on the treatment of minimum guarantees in licensing arrangements, which may affect the timing of the Company’s
recognition of royalty and advertising revenue. For loyalty programs, the Company records costs associated with such programs
ratably as a cost of goods sold based on enrolled customers’ spending. Under the guidance, the revenue associated with the
loyalty award will be initially deferred when the loyalty awards are earned and recognized, along with the related cost of goods
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
sold, as the loyalty awards are redeemed or expire. Revenue for the unredeemed portion of gift cards, which is currently
recognized when the likelihood of redemption becomes remote, will be recognized under the guidance proportionately over the
estimated customer redemption period, subject to the constraint that it must be highly probable that a significant reversal of
revenue will not occur. While the Company’s assessment of the impacts of the guidance is still in process, the adoption of the
guidance is not expected to have a material impact on the Company’s consolidated financial statements. The Company plans to
adopt the standard in the first quarter of 2018 using the modified retrospective method.
The FASB issued in July 2015 an update to accounting guidance to simplify the measurement of inventory. Currently, all
inventory is measured at the lower of cost or market. The update requires an entity to measure inventory within the scope of the
guidance at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of
business less reasonably predictable costs of completion, disposal and transportation. The update does not apply to inventory
measured using last-in, first-out or the retail inventory methods. This update will be effective for the Company in the first
quarter of 2017. Prospective adoption is required. The adoption is not expected to have a material impact on the Company’s
consolidated financial statements.
The FASB issued in January 2016 an update to accounting guidance for the recognition and measurement of financial
instruments. The update requires equity investments that are not accounted for under the equity method of accounting to be
measured at fair value with changes recognized in net income and updates certain presentation and disclosure requirements. The
update will be effective for the Company in the first quarter of 2018 with limited early adoption permitted. The adoption is not
expected to have any impact on the Company’s consolidated financial statements as the Company does not currently have such
investments.
The FASB issued in February 2016 a new accounting standard on leases. The new standard, among other changes, will
require lessees to recognize a right-of-use asset and a lease liability in the balance sheet for most leases. The lease liability will
be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease
liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs (e.g.,
commissions). The guidance will be effective for the Company in the first quarter of 2019 with early adoption permitted. The
adoption will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest
period presented. The Company is currently evaluating the standard to determine the impact of the adoption on the Company’s
consolidated financial statements but expects that it will result in a significant increase to its other assets and other liabilities.
The FASB issued in March 2016 an update to accounting guidance to simplify several aspects of accounting for share-
based payment award transactions, including the accounting for forfeitures, income taxes and statutory tax withholding
requirements, as well as classification of these transactions in the statement of cash flows. The update will be effective for the
Company in the first quarter of 2017. The Company has elected not to continue estimating expected forfeitures in determining
compensation expense. With respect to the accounting for income taxes, this update requires, on a prospective basis, recognition
of excess tax benefits and tax deficiencies (resulting from an increase or decrease in the fair value of an award from grant date
to the vesting or exercise date) in the provision for income taxes as a discrete item in the quarterly period in which they occur.
Currently, excess tax benefits or tax deficiencies are recognized in equity as a component of Additional Paid in Capital. As
such, the adoption of this update is expected to impact the Company’s Consolidated Income Statements and Balance Sheets on
a prospective basis. The Company recognized, in equity, a tax deficiency of $7.2 million and a tax benefit of $4.8 million in
2016 and 2015, respectively. These amounts may not be indicative of future amounts that may be recognized subsequent to the
adoption of this update, as any excess tax benefits or tax deficiencies recognized will be dependent upon unpredictable future
events, including the timing of exercises, the value realized upon the vesting or exercise of shares versus the fair value of the
shares when they were granted and applicable tax rates. In addition, these excess tax benefits and deficiencies will be classified
as an operating activity in the Consolidated Statement of Cash Flows instead of as a financing activity, and such classification
will be applied on a retrospective basis to all periods presented. The update also requires that the value of shares withheld from
employees upon vesting of stock awards in order to satisfy any applicable tax withholding requirements are to be presented
within financing activities in the Consolidated Statement of Cash Flows, which is consistent with the Company’s current
presentation, and will therefore have no impact to the Company.
The FASB issued in August 2016 an update to accounting guidance to clarify and provide specific guidance on how
certain cash receipts and cash payments are classified in the statement of cash flows with the objective of reducing existing
diversity in practice with respect to these items. Among the types of cash flows addressed are payments for costs related to debt
prepayments or extinguishments, payments of contingent consideration after a business combination and distributions from
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
equity method investees. The update will be effective for the Company in the first quarter of 2018, with early adoption
permitted. Retrospective adoption is required. Upon adoption, contingent purchase price payments that are currently classified
as cash flows from investing activities will be classified as cash flows from operating activities in the Company’s Consolidated
Statements of Cash Flows. Otherwise, the adoption of the update is not expected to have a material impact on the Company’s
consolidated financial statements.
The FASB issued in October 2016 an update to accounting guidance to simplify income tax accounting on intercompany
sales or transfers of assets other than inventory. The existing guidance requires entities to defer the income tax effect of
intercompany transfers of assets until the asset has been sold to an outside party or otherwise recognized. The update requires
companies to immediately recognize in their income statement the income tax effects of an intercompany sale or transfer of an
asset other than inventory. The update will be effective for the Company in the first quarter of 2018, with early adoption
permitted as of the beginning of an annual period. Entities are required to apply the update using a modified retrospective
approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. As of January 29, 2017,
the Company had deferred charges of $7.5 million related to intercompany sales and transfers of assets recorded in other assets.
Upon adoption of this update, other assets will be reduced by the then current amount of deferred charges with a corresponding
adjustment to opening retained earnings.
The FASB issued in November 2016 an update to accounting guidance to clarify and provide specific guidance on the
cash flow classifications and presentation of changes in restricted cash. The update requires that restricted cash be included with
cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown in the statement of
cash flows. The update will be effective for the Company in the first quarter of 2018, with early adoption permitted.
Retrospective adoption is required. The adoption is not expected to have a material impact on the Company’s Consolidated
Statement of Cash Flows.
The FASB issued in January 2017 an update to accounting guidance to revise the definition of a business. The update
requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single
identifiable asset or a group of identifiable assets, the set of assets would not represent a business. Also, in order to be
considered a business, an acquisition would have to include an input and a substantive process that together significantly
contribute to the ability to produce outputs. Under the update, fewer sets of assets are expected to be considered businesses. The
update will be effective for the Company in the first quarter of 2018, with early adoption permitted. The Company will apply
the update to applicable transactions after the adoption date. The impact on the Company’s consolidated financial statements
will depend on the facts and circumstances of any specific future transactions.
The FASB issued in January 2017 an update to the accounting guidance to simplify the testing for goodwill impairment.
The update eliminates the requirement to calculate the implied fair value of goodwill to measure the amount of impairment loss,
if any, under the second step of the current goodwill impairment test. Under the update, the goodwill impairment loss would be
measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of
goodwill. The update will be effective for the Company in the first quarter of 2020, with early adoption permitted for interim or
annual goodwill impairment tests performed after January 1, 2017. Prospective adoption is required. The adoption is not
expected to have a material impact on the Company’s consolidated financial statements.
2. ACQUISITIONS
Acquisition of TH China
The Company acquired on April 13, 2016 the 55% of the ownership interests in TH Asia, Ltd. (“TH China”), its former
joint venture for Tommy Hilfiger in China, that it did not already own (the “TH China acquisition”). Prior to April 13, 2016, the
Company accounted for its 45% interest in TH China under the equity method of accounting. Since the completion of the TH
China acquisition, the results of TH China’s operations have been consolidated in the Company’s consolidated financial
statements.
TH China began operating the Tommy Hilfiger wholesale and retail distribution businesses in China in 2011 and held a
license from a subsidiary of the Company for the Tommy Hilfiger trademarks for use in connection with these businesses.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The carrying value of the Company’s 45% interest in TH China prior to the acquisition was $52.5 million. In connection
with the acquisition, this investment was remeasured to a fair value of $205.6 million, resulting in the recognition of a pre-tax
noncash gain of $153.1 million during the first quarter of 2016, which was included in other noncash gain, net in the
Company’s Consolidated Income Statement for the year ended January 29, 2017. Such fair value was estimated using future
operating cash flow projections that were discounted at a rate of 14.4%, which accounted for the relative risks of the estimated
future cash flows. Such fair value also included an estimated discount for a lack of marketability of 10.0%. The Company
classified this as a Level 3 fair value measurement due to the use of these significant unobservable inputs.
The acquisition date fair value of the consideration for the 55% interest that the Company did not already own was $265.8
million, consisting of $263.0 million paid in cash and the elimination of a $2.8 million pre-acquisition receivable owed to the
Company by TH China. Together with the fair value of the Company’s 45% interest, the total fair value of TH China was
$471.4 million. The estimated fair value of assets acquired and liabilities assumed included net assets of $102.2 million
(including $105.3 million of cash acquired), $110.6 million of other intangible assets and $258.6 million of goodwill. The
goodwill of $258.6 million was assigned to the Company’s Tommy Hilfiger International segment. Goodwill is not expected to
be deductible for tax purposes. Please see Note 7, “Goodwill and Other Intangible Assets,” for a further discussion. The
Company finalized the purchase price allocation during the fourth quarter of 2016.
Acquisition of Russia Franchisee
In 2014, the Company acquired for $4.3 million two Tommy Hilfiger stores in Russia from a former Tommy Hilfiger
franchisee. This transaction was accounted for as a business combination.
Acquisition of Ireland Franchisee
In 2014, the Company acquired for $3.1 million six Tommy Hilfiger stores in Ireland from a former Tommy Hilfiger
franchisee. This transaction was accounted for as a business combination.
Acquisition of Calvin Klein Performance Retail Businesses in Hong Kong and China
In 2014, the Company acquired for $6.7 million the Calvin Klein performance retail businesses in Hong Kong and China
from a former CALVIN KLEIN sublicensee. This transaction was accounted for as a business combination. The adjustment to
the purchase price was finalized during 2015.
3. ASSETS HELD FOR SALE
During 2015, one of the Company’s European subsidiaries entered into an agreement to sell a building in Amsterdam, the
Netherlands. The Company classified the building as held for sale in the fourth quarter of 2015 and ceased recording
depreciation on the building at that time. The building had a carrying value of $14.7 million as of January 31, 2016, which was
determined to be lower than the fair value, less costs to sell, and was included in the Calvin Klein International segment.
The Company completed the sale of the building on July 4, 2016 for proceeds of €15.0 million (approximately $16.7
million based on the exchange rate in effect on that date) and recorded a gain of $1.5 million, which represented the excess of
the proceeds, less costs to sell, over the carrying value on that date. The gain was recorded in selling, general and
administrative expenses in the Company’s Consolidated Income Statement during the second quarter of 2016 and was included
in the Calvin Klein International segment.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, was as follows:
(In millions)
Land
Buildings and building improvements
Machinery, software and equipment
Furniture and fixtures
Shop-in-shops
Leasehold improvements
Construction in progress
Property, plant and equipment, gross
Less: Accumulated depreciation
Property, plant and equipment, net
2016
2015
$
$
1.1
57.4
533.2
406.0
164.1
622.5
30.0
1,814.3
(1,054.4)
759.9
$
$
1.1
53.3
456.0
370.3
146.8
576.1
33.3
1,636.9
(892.3)
744.6
Construction in progress at January 29, 2017 and January 31, 2016 represents costs incurred for machinery, software and
equipment, furniture and fixtures and leasehold improvements not yet placed in use, principally related to the construction of
retail stores. Interest costs capitalized in construction in progress were immaterial during 2016, 2015 and 2014.
5. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Karl Lagerfeld
The Company acquired an economic interest of approximately 10% in the parent company of the Karl Lagerfeld brand
(“Karl Lagerfeld”) during 2014 for $18.9 million. During 2016, a third party acquired a minority stake in Karl Lagerfeld,
diluting the Company’s economic interest to approximately 8%. The Company has significant influence as defined under FASB
guidance with respect to this investment, which is being accounted for under the equity method of accounting.
PVH Australia
The Company formed a joint venture, PVH Brands Australia Pty. Limited (“PVH Australia”), in 2013 with Gazal
Corporation Limited (“Gazal”), in which the Company owns a 50% economic interest. PVH Australia has licensed from a
subsidiary of the Company since the first quarter of 2014 the rights to distribute and sell certain CALVIN KLEIN brand products
in Australia, New Zealand and other island nations in the South Pacific. As part of the transaction, the Company contributed to
PVH Australia its subsidiaries that were operating the Calvin Klein Jeans businesses in Australia and New Zealand (the
“Australia business”). In connection with this contribution, which took place on the first day of 2014, the Company
deconsolidated the contributed subsidiaries and recognized a net gain of $2.1 million during the first quarter of 2014, which was
recorded in selling, general and administrative expenses. The gain was measured as the difference between the fair value of the
Company’s 50% interest in PVH Australia and the carrying value of the net assets and cash contributed. The fair value of PVH
Australia was determined using the discounted cash flow method, based on net sales projections for the Calvin Klein business
in Australia, New Zealand and other island nations in the South Pacific, discounted using a rate of return that accounted for the
relative risks of the estimated future cash flows.
The Company completed a transaction in 2015 in which the Tommy Hilfiger and Van Heusen trademarks were licensed for
certain product categories to subsidiaries of PVH Australia for use in Australia, New Zealand and, in the case of Tommy
Hilfiger, other island nations in the South Pacific. The Tommy Hilfiger trademarks had previously been licensed to a third party
and the Van Heusen trademarks had previously been licensed to Gazal. Additionally, subsidiaries of PVH Australia license other
trademarks for certain product categories.
The Company made net payments of $21.0 million (of which $20.2 million was placed into an escrow account prior to the
end of 2014) and $7.3 million to PVH Australia during 2015 and 2014, respectively, to contribute its 50% share of the joint
venture funding for the periods. This investment is being accounted for under the equity method of accounting.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The Company received a $1.5 million dividend from PVH Australia during 2016.
Gazal
The Company acquired approximately 10% of the outstanding capital stock of Gazal, which is listed on the Australian
Securities Exchange, during the third quarter of 2016 for approximately $9.2 million. The Company has significant influence as
defined under FASB guidance with respect to this investment, which is being accounted for under the equity method of
accounting. Gazal is also the Company’s joint venture partner in PVH Australia.
CK India
The Company acquired a 51% economic interest in CK India in 2013. CK India licenses from a subsidiary of the
Company the rights to the CALVIN KLEIN trademarks in India for certain product categories. CK India was consolidated in the
Company’s financial statements during 2013. During the first quarter of 2014, Arvind purchased the Company’s prior joint
venture partners’ shares in CK India and, as a result of the entry into a shareholder agreement with different governing
arrangements between the Company and Arvind than those with the Company’s prior partners, the Company no longer was
deemed to hold a controlling interest in the joint venture. CK India was deconsolidated as a result and the Company began
reporting its 51% interest as an equity method investment in the first quarter of 2014. Please see Note 6, “Redeemable Non-
Controlling Interests,” for a further discussion.
The Company made payments of $1.5 million and $4.0 million to CK India during 2016 and 2015, respectively, to
contribute its 51% share of the joint venture funding for the periods.
TH Brazil
The Company formed a joint venture, Tommy Hilfiger do Brasil S.A. (“TH Brazil”), in Brazil in 2012, in which the
Company owns a 40% economic interest. TH Brazil licenses from a subsidiary of the Company the rights to the Tommy Hilfiger
trademarks in Brazil for certain product categories. This investment is being accounted for under the equity method of
accounting.
The Company made payments of $1.5 million and $1.6 million to TH Brazil during 2016 and 2015, respectively, to
contribute its 40% share of the joint venture funding for the periods.
The Company issued a note receivable due April 2, 2017 to TH Brazil during the third quarter of 2016 for $12.5 million,
of which $6.2 million was repaid during the fourth quarter of 2016. As of January 29, 2017, the interest rate on the note was
13.00% and the outstanding balance, including accrued interest, was $7.0 million.
TH India
The Company acquired in 2011 a 50% economic interest in a company that has since been renamed Tommy Hilfiger
Arvind Fashion Private Limited (“TH India”). TH India licenses from a subsidiary of the Company the rights to the Tommy
Hilfiger trademarks in India for certain product categories. This investment is being accounted for under the equity method of
accounting. Arvind, the Company’s joint venture partner in PVH Ethiopia and in CK India, is also the Company’s joint venture
partner in TH India.
TH China
The Company formed TH China as a joint venture in 2010. This investment was accounted for under the equity method of
accounting until April 13, 2016, on which date the Company acquired the 55% of the ownership interests in TH China that it
did not already own. Please see Note 2, “Acquisitions,” for a further discussion.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
PVH Mexico
The Company and Grupo Axo, S.A.P.I. de C.V. (“Grupo Axo”) formed a joint venture (“PVH Mexico”) in the fourth
quarter of 2016, in which the Company owns a 49% economic interest. PVH Mexico licenses from certain wholly owned
subsidiaries of the Company the rights to distribute and sell certain CALVIN KLEIN, Tommy Hilfiger, Warner’s, Olga and
Speedo brand products in Mexico. PVH Mexico was formed by merging the Company’s wholly owned subsidiary that
principally operated and managed the Calvin Klein business in Mexico (the “Mexico business”) with a wholly owned
subsidiary of Grupo Axo that distributes certain Tommy Hilfiger brand products in Mexico. In connection with the formation of
PVH Mexico, the Company deconsolidated the Mexico business (the “Mexico deconsolidation”) and began accounting for its
49% interest under the equity method of accounting in the fourth quarter of 2016.
In connection with the Mexico deconsolidation, the Company recorded a pre-tax noncash loss of $81.8 million in 2016
(including $56.7 million related to foreign currency translation adjustment losses previously recorded in AOCL) to write down
the net assets of the Mexico business to fair value. The loss was included in other noncash gain, net in the Company’s
Consolidated Income Statement for the year ended January 29, 2017. The fair value of the net assets of $64.3 million was
estimated as the fair value of the 49% interest in PVH Mexico that the Company acquired upon its formation, based on future
operating cash flow projections that were discounted at a rate of 15.0%, which accounted for the relative risks of the estimated
future cash flows. Such fair value also included an estimated discount for a lack of marketability of 10.0%. The Company
classified this as a Level 3 fair value measurement due to the use of these significant unobservable inputs.
The Company made payments of $7.3 million to PVH Mexico during 2016, to contribute its 49% share of the joint
venture funding for the period.
Total Investments in Unconsolidated Affiliates
Included in other assets in the Company’s Consolidated Balance Sheets as of January 29, 2017 and January 31, 2016 is
$180.0 million (of which $7.0 million is related to the note receivable due from TH Brazil) and $140.7 million (of which $52.9
million related to TH China), respectively, related to these investments in unconsolidated affiliates.
6. REDEEMABLE NON-CONTROLLING INTERESTS
PVH Ethiopia
During the second quarter of 2016, the Company and Arvind formed PVH Ethiopia in which the Company owns a 75%
interest. The Company has consolidated the joint venture in its consolidated financial statements. PVH Ethiopia was formed to
operate a manufacturing facility that will produce finished products for the Company for distribution primarily in the United
States. The Company expects the manufacturing facility will begin operations in the first half of 2017.
The shareholders agreement entered into by the parties to the joint venture (the “Shareholders Agreement”) contains a put
option under which Arvind can require the Company to purchase all of its shares in the joint venture during various future
periods as specified in the Shareholders Agreement. The first such period immediately precedes the ninth anniversary of the
date of incorporation of PVH Ethiopia. The Shareholders Agreement also contains call options under which the Company can
require Arvind to sell to the Company (i) all or a portion of its shares during various future periods as specified in the
Shareholders Agreement; (ii) all of its shares in the event of a change of control of Arvind; or (iii) all of its shares in the event
that Arvind ceases to hold at least ten percent of the outstanding shares. The Company’s first call option referred to in clause (i)
immediately follows the fifth anniversary of the date of incorporation of PVH Ethiopia. The put and call prices are the fair
market value of the shares on the redemption date based upon a multiple of the joint venture’s earnings before interest, taxes,
depreciation and amortization for the prior 12 months, less the joint venture’s net debt.
The fair value of the redeemable non-controlling interest (“RNCI”) as of the date of formation of the joint venture was
$0.1 million. The carrying amount of the RNCI is adjusted to equal the redemption amount at the end of each reporting period,
provided that this amount at the end of each reporting period cannot be lower than the initial fair value adjusted for the minority
shareholder’s share of net income or loss. Any adjustment to the redemption amount of the RNCI is determined after attribution
of net income of the RNCI and will be recognized immediately in retained earnings of the Company, since it is probable that the
RNCI will become redeemable in the future based on the passage of time. The carrying amount of the RNCI, which is also its
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
fair value, increased to $2.0 million as of January 29, 2017, principally attributable to additional contributions of $2.2 million
made by Arvind during 2016 for its proportionate share of the joint venture funding.
CK India
During the first quarter of 2014, CK India was deconsolidated, as discussed in Note 5, “Investments in Unconsolidated
Affiliates.” The Company recognized a net gain of $5.9 million in connection with the deconsolidation of CK India during the
first quarter of 2014 that was recorded in selling, general and administrative expenses in the Company’s Consolidated Income
Statement. The gain was measured as the difference between the fair value of the Company’s 51% interest in CK India and the
carrying value. The fair value of CK India was determined using the discounted cash flow method, based on net sales
projections for the Calvin Klein business in India and was discounted using a rate of return that accounted for the relative risks
of the estimated future cash flows.
7. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill, by segment (please see Note 19, “Segment Data,” for a further
discussion of the Company’s reportable segments), were as follows:
(In millions)
Balance as of February 1, 2015
Calvin
Klein
North
America
Calvin Klein
International
Tommy
Hilfiger
North
America
Tommy
Hilfiger
International
Heritage
Brands
Wholesale
Heritage
Brands
Retail
Total
Goodwill, gross
$ 705.4
$
859.6
$ 204.4
$
1,251.4
$
238.3
$
Accumulated impairment losses
Goodwill, net
Contingent purchase price payments
to Mr. Calvin Klein
Currency translation and other
Balance as of January 31, 2016
Goodwill, gross
Accumulated impairment losses
Goodwill, net
Contingent purchase price payments
to Mr. Calvin Klein
TH China acquisition
Mexico deconsolidation
Currency translation and other
Balance as of January 29, 2017
Goodwill, gross
Accumulated impairment losses
—
705.4
31.2
(8.6)
728.0
—
728.0
31.3
—
(20.5)
0.6
739.4
—
—
859.6
20.5
(38.6)
841.5
—
841.5
21.3
—
—
1.7
—
204.4
—
—
204.4
—
204.4
—
—
—
—
—
1,251.4
—
(43.0)
1,208.4
—
1,208.4
—
258.6
—
(41.2)
864.5
—
204.4
—
1,425.8
—
—
238.3
—
(1.3)
237.0
—
237.0
—
—
(1.0)
(0.2)
235.8
—
Goodwill, net
$ 739.4
$
864.5
$ 204.4
$
1,425.8
$
235.8
11.9
(11.9)
$3,271.0
(11.9)
— 3,259.1
—
—
51.7
(91.5)
11.9
(11.9)
3,231.2
(11.9)
— 3,219.3
—
—
—
—
52.6
258.6
(21.5)
(39.1)
11.9
(11.9)
3,481.8
(11.9)
$ — $3,469.9
The Company is required to make contingent purchase price payments to Mr. Calvin Klein in connection with the
Company’s acquisition in 2003 of all of the issued and outstanding stock of Calvin Klein, Inc. and certain affiliated companies
(collectively, “Calvin Klein”). Such payments are based on 1.15% of total worldwide net sales, as defined in the acquisition
agreement (as amended), of products bearing any of the CALVIN KLEIN brands and are required to be made with respect to
sales made through February 12, 2018. A significant portion of the sales on which the payments to Mr. Klein are made are
wholesale sales by the Company and its licensees and other partners to retailers.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The Company’s intangible assets consisted of the following:
January 29, 2017
January 31, 2016
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
(In millions)
Intangible assets subject to
amortization:
Customer relationships (1) (2)
Order backlog (1)
Reacquired license rights (1) (2)
Total intangible assets subject to
amortization
Indefinite-lived intangible assets:
Tradenames
Perpetual license rights
Reacquired perpetual license rights
$
296.7
$
24.6
524.7
846.0
2,783.4
203.9
10.2
(130.8) $
(24.6)
(78.1)
165.9
$
291.9
$
—
446.6
—
494.8
(108.7) $
—
(47.7)
183.2
—
447.1
(233.5)
612.5
786.7
(156.4)
630.3
—
—
—
2,783.4
2,802.6
203.9
10.2
203.1
10.4
3,016.1
$ 3,802.8
$
—
—
—
2,802.6
203.1
10.4
—
3,016.1
(156.4) $ 3,646.4
Total indefinite-lived intangible assets
2,997.5
Total intangible assets
$ 3,843.5
$
—
2,997.5
(233.5) $ 3,610.0
The gross carrying amount and accumulated amortization of certain intangible assets include the impact of changes in
foreign currency exchange rates.
(1) The change from January 31, 2016 to January 29, 2017 primarily related to intangible assets recorded in connection
with the TH China acquisition. The intangible assets as of the acquisition date amounted to $110.6 million and
included reacquired license rights of $72.0 million, order backlog of $26.2 million and customer relationships of $12.4
million, which are subject to amortization on a straight-line basis over 2.7 years, 0.8 years and 10.0 years, respectively,
and exchange rate fluctuations after the acquisition date.
(2) The change from January 31, 2016 to January 29, 2017 included decreases to customer relationships and reacquired
license rights for the net amounts of $3.3 million and $44.1 million, respectively, in connection with the Mexico
deconsolidation.
Amortization expense related to the Company’s amortizable intangible assets was $86.2 million and $40.3 million for
2016 and 2015, respectively.
Assuming constant foreign currency exchange rates and no change in the gross carrying amount of the intangible assets,
amortization expense for the next five years related to the Company’s amortizable intangible assets as of January 29, 2017 is
expected to be as follows:
(In millions)
Fiscal Year
Amount
2017
2018
2019
2020
2021
$
63.3
60.8
38.4
38.3
38.1
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
8. DEBT
Short-Term Borrowings
One of the Company’s Asian subsidiaries has a yen-denominated short-term line of credit and a yen-denominated
overdraft facility with a Japanese bank that together provide for borrowings of up to ¥2,200.0 million (approximately $19.1
million based on exchange rates in effect on January 29, 2017) and are utilized primarily to fund working capital needs.
Borrowings under the short-term line of credit bear interest at the one-month Tokyo interbank offered rate plus 0.15%. As of
January 29, 2017, the Company had $17.4 million of borrowings outstanding under these facilities. The weighted average
interest rate on the funds borrowed at January 29, 2017 was 0.19%. The maximum amount of borrowings outstanding under
these facilities during 2016 was ¥2,000 million (approximately $17.4 million based on exchange rates in effect on January 29,
2017).
One of the Company’s Asian subsidiaries has a won-denominated overdraft facility with a South Korean bank that
provides for borrowings of up to 3,500.0 million (approximately $3.0 million based on exchange rates in effect on January
29, 2017) and is utilized primarily to fund working capital needs. Borrowings under this facility are unsecured and bear interest
at the South Korean bank three-month certificate of deposit rate plus 1.50%. There were no borrowings outstanding under this
facility as of or during the year ended January 29, 2017.
One of the Company’s Asian subsidiaries has a United States dollar-denominated short-term revolving credit facility with
a bank that provides for borrowings of up to $10.0 million and is utilized primarily to fund working capital needs. Borrowings
under this facility bear interest at the one-month London interbank borrowing rate (“LIBOR”) plus 1.50%. At the end of each
month, amounts outstanding under this facility may be carried forward for additional one-month periods for up to one year. This
facility is subject to certain terms and conditions and may be terminated at any time at the discretion of the bank. There were no
borrowings outstanding under this facility as of or during the year ended January 29, 2017.
One of the Company’s European subsidiaries has a euro-denominated short-term revolving note and a euro-denominated
overdraft facility with a bank that together provide for borrowings of up to €40.0 million (approximately $42.7 million based on
exchange rates in effect on January 29, 2017) and are utilized primarily to fund working capital needs. Borrowings under the
revolving note bear interest at the one-month Euro Interbank Offered Rate (“EURIBOR”) plus 1.50%. There were no
borrowings outstanding under these facilities as of or during the year ended January 29, 2017.
One of the Company’s European subsidiaries has a United States dollar-denominated short-term line of credit facility with
a bank that provides for borrowings of up to $3.4 million and is utilized primarily to fund working capital needs. Borrowings
under this facility bear interest at 13.50%. As of January 29, 2017, the Company had $0.4 million of borrowings outstanding
under this facility, which represented the maximum amount of borrowings outstanding under this facility during 2016.
One of the Company’s European subsidiaries has a United States dollar-denominated short-term line of credit facility with
a Turkish bank that provides for borrowings of up to $3.7 million and is utilized primarily to fund working capital needs.
Borrowings under this facility bear interest at the Turkish overnight lending rate plus 3.00%. As of January 29, 2017, the
Company had $1.3 million of borrowings outstanding under this facility. The weighted average interest rate on the funds
borrowed at January 29, 2017 was 13.50%. The maximum amount of borrowings outstanding under this facility during 2016
was $3.3 million.
One of the Company’s European subsidiaries has a Turkish lira-denominated short-term line of credit facility with a
Turkish bank that provides for borrowings of up to lira 2.6 million (approximately $0.7 million based on exchange rates in
effect on January 29, 2017) and is utilized primarily to fund working capital needs. Borrowings under this facility bear interest
at the Turkish overnight lending rate plus 4.00%. As of January 29, 2017, the Company had no borrowings outstanding under
this facility. The maximum amount of borrowings outstanding under this facility during 2016 was equal to the maximum
amount of borrowings available under this facility.
One of the Company’s Latin American subsidiaries has a Brazilian real-denominated short-term revolving credit facility
with a Brazilian bank that provides for borrowings of up to R$25.0 million (approximately $7.9 million based on exchange
rates in effect on January 29, 2017) and is utilized primarily to fund working capital needs. Borrowings under this facility are
unsecured. There were no borrowings outstanding under this facility as of or during the year ended January 29, 2017.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The Company also has the ability to draw revolving borrowings under its senior secured credit facilities as discussed in
the section entitled “2016 Senior Secured Credit Facilities” below. As of January 29, 2017, the Company had no borrowings
outstanding under these facilities. The maximum amount of revolving borrowings outstanding under these facilities during
2016 was $15.3 million.
Long-Term Debt
The carrying amounts of the Company’s long-term debt were as follows:
(In millions)
2016
2015
Senior secured Term Loan A facility due 2021
Senior secured Term Loan B facility
4 1/2% senior unsecured notes due 2022
7 3/4% debentures due 2023
3 5/8% senior unsecured euro notes due 2024
Total
Less: Current portion of long-term debt
Long-term debt
$
$
2,039.9
—
690.4
99.5
367.5
3,197.3
—
3,197.3
$
$
1,804.6
575.5
688.8
99.4
—
3,168.3
136.6
3,031.7
Please see Note 11, “Fair Value Measurements,” for the fair value of the Company’s long-term debt as of January 29,
2017 and January 31, 2016.
As of January 29, 2017, the Company’s mandatory long-term debt repayments for the next five years were as follows:
(In millions)
Fiscal Year
2017
2018
2019
2020
2021
$
Amount
—
68.7
220.1
234.7
1,525.8
Total debt repayments for the next five years exceed the carrying amount of the Company’s Term Loan A facility as of
January 29, 2017 because the carrying amount reflects the unamortized portions of debt issuance costs and the original issue
discounts.
As of January 29, 2017, after taking into account the effect of the Company’s interest rate swap agreements discussed in
the section below entitled “2016 Senior Secured Credit Facilities,” which were in effect as of such date, approximately 65% of
the Company’s long-term debt had a fixed interest rate, with the remainder at variable interest rates.
2014 Senior Secured Credit Facilities
On March 21, 2014, the Company entered into an amendment to its senior secured credit facilities (as amended, the “2014
facilities”). Among other things, the amendment provided for an additional $350.0 million principal amount of loans under the
Term Loan A facility and an additional $250.0 million principal amount of loans under the Term Loan B facility. On March 21,
2014, the Company borrowed the additional principal amounts described above and used the proceeds to redeem all of its
outstanding 7 3/8% senior notes, as discussed below in the section entitled “7 3/8% Senior Notes Due 2020.” In connection
with entering into an amendment, the Company paid debt issuance costs of $13.3 million (of which $8.0 million was expensed
as debt modification and extinguishment costs and $5.3 million is being amortized over the term of the related debt agreement)
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
and recorded additional debt modification and extinguishment costs of $3.2 million to write-off previously capitalized debt
issuance costs.
The 2014 facilities consisted of a $1,986.3 million United States dollar-denominated Term Loan A facility, a $1,188.6
million United States dollar-denominated Term Loan B facility and senior secured revolving credit facilities consisting of (a) a
$475.0 million United States dollar-denominated revolving credit facility, (b) a $25.0 million United States dollar-denominated
revolving credit facility available in United States dollars or Canadian dollars and (c) a € 185.9 million euro-denominated
revolving credit facility available in euro, British pound sterling, Japanese yen or Swiss francs.
On May 19, 2016, the Company amended the 2014 facilities, as discussed in the following section.
2016 Senior Secured Credit Facilities
On May 19, 2016 (the “Amendment Date”), the Company entered into an amendment (the “Amendment”) to the 2014
facilities (as amended by the Amendment, the “2016 facilities”). Among other things, the Amendment provided for (i) the
Company to borrow an additional $582.0 million principal amount of loans under the Term Loan A facility, (ii) the repayment
of all outstanding loans under the Term Loan B facility with the proceeds of the additional loans under the Term Loan A facility,
and (iii) the termination of the Term Loan B facility. In addition, the Amendment extended the maturity of the Term Loan A and
the revolving credit facilities from February 13, 2019 to May 19, 2021.
The 2016 facilities consist of a $2,347.4 million United States dollar-denominated Term Loan A facility and the senior
secured revolving credit facilities consisting of (a) a $475.0 million United States dollar-denominated revolving credit facility,
(b) a $25.0 million United States dollar-denominated revolving credit facility available in United States dollars or Canadian
dollars and (c) a € 185.9 million euro-denominated revolving credit facility available in euro, British pound sterling, Japanese
yen or Swiss francs. In connection with entering into the Amendment, the Company paid debt issuance costs of $10.9 million
(of which $4.6 million was expensed as debt modification costs and $6.3 million is being amortized over the term of the related
debt agreement) and recorded debt extinguishment costs of $11.2 million to write-off previously capitalized debt issuance costs.
The revolving credit facilities also include amounts available for letters of credit. As of January 29, 2017, the Company
had $24.6 million of outstanding letters of credit. There were no borrowings outstanding under the revolving credit facilities. A
portion of each of the United States dollar-denominated revolving credit facilities is also available for the making of swingline
loans. The issuance of such letters of credit and the making of any swingline loan reduces the amount available under the
applicable revolving credit facility. So long as certain conditions are satisfied, the Company may add one or more term loan
facilities or increase the commitments under the revolving credit facilities by an aggregate amount not to exceed the sum of (1)
the sum of (x) $1,350.0 million plus (y) the aggregate amount of all voluntary prepayments of loans under the Term Loan A and
the revolving credit facilities (to the extent, in the case of voluntary prepayments of loans under the revolving credit facilities,
there is an equivalent permanent reduction of the revolving commitments) plus (z) an amount equal to the aggregate revolving
commitments of any defaulting lender (to the extent the commitments with respect thereto have been terminated) and (2) an
additional unlimited amount as long as the ratio of the Company’s senior secured net debt to consolidated adjusted earnings
before interest, taxes, depreciation and amortization (in each case calculated as set forth in the documentation relating to the
2016 facilities) would not exceed 3 to 1 after giving pro forma effect to the incurrence of such increase. The lenders under the
2016 facilities are not required to provide commitments with respect to such additional facilities or increased commitments.
The terms of the Term Loan A facility require the Company to make quarterly repayments of amounts outstanding under
the 2016 facilities, which commenced with the calendar quarter ended June 30, 2016. Such amounts equal 5.00% per annum of
the principal amount outstanding on the Amendment Date for the first eight calendar quarters following the Amendment Date,
7.50% per annum of the principal amount for the four calendar quarters thereafter and 10.00% per annum of the principal
amount for the remaining calendar quarters, in each case paid in equal installments and in each case subject to certain
customary adjustments, with the balance due on the maturity date of the Term Loan A facility.
The Company made payments of $350.0 million, $350.0 million and $425.5 million during 2016, 2015 and 2014,
respectively, on its term loans under the 2016 and 2014 facilities. As a result of the voluntary repayments made by the
Company, as of January 29, 2017 the Company is not required to make a long-term debt repayment until September 2018. The
Company had term loans outstanding of $2,039.9 million, net of original issue discounts and debt issuance costs, as of January
29, 2017.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The Company’s obligations under the 2016 facilities are guaranteed by substantially all of its existing and future direct
and indirect United States subsidiaries, with certain exceptions. Obligations of the European borrower under the 2016 facilities
are guaranteed by the Company, substantially all of the Company’s existing and future direct and indirect United States
subsidiaries (with certain exceptions) and Tommy Hilfiger Europe B.V., one of the Company’s wholly owned subsidiaries. The
Company and its United States subsidiary guarantors have pledged certain of their assets as security for the obligations under
the 2016 facilities.
The outstanding borrowings under the 2016 facilities are prepayable at any time without penalty (other than customary
breakage costs). The terms of the 2016 facilities require the Company to repay certain amounts outstanding thereunder with (a)
net cash proceeds of the incurrence of certain indebtedness, (b) net cash proceeds of certain asset sales or other dispositions
(including as a result of casualty or condemnation) that exceed certain thresholds, to the extent such proceeds are not reinvested
or committed to be reinvested in the business in accordance with customary reinvestment provisions, and (c) a percentage of
excess cash flow that exceeds the voluntary debt payments the Company has made during the applicable year, which percentage
is based upon its net leverage ratio during the relevant fiscal period.
The United States dollar-denominated borrowings under the 2016 facilities bear interest at a rate equal to an applicable
margin plus, as determined at the Company’s option, either (a) a base rate determined by reference to the greater of (i) the prime
rate, (ii) the United States federal funds rate plus 1/2 of 1.00% and (iii) a one-month adjusted Eurocurrency rate plus 1.00% or
(b) an adjusted Eurocurrency rate, calculated in a manner set forth in the 2016 facilities.
The Canadian dollar-denominated borrowings under the 2016 facilities bear interest at a rate equal to an applicable margin
plus, as determined at the Company’s option, either (a) a Canadian prime rate determined by reference to the greater of (i) the
rate of interest per annum that Royal Bank of Canada establishes at its main office in Toronto, Ontario as the reference rate of
interest in order to determine interest rates for loans in Canadian dollars to its Canadian borrowers and (ii) the sum of (x) the
average of the rates per annum for Canadian dollar bankers’ acceptances having a term of one month that appears on the display
referred to as “CDOR Page” of Reuters Monitor Money Rate Services as of 10:00 a.m. (Toronto time) on the date of
determination, as reported by the administrative agent (and if such screen is not available, any successor or similar service as
may be selected by the administrative agent), and (y) 0.75%, or (b) an adjusted Eurocurrency rate, calculated in a manner set
forth in the 2016 facilities.
The borrowings under the 2016 facilities in currencies other than United States dollars or Canadian dollars bear interest at
a rate equal to an applicable margin plus an adjusted Eurocurrency rate, calculated in a manner set forth in the 2016 facilities.
The current applicable margin with respect to the Term Loan A facility and each revolving credit facility is 1.50% for
adjusted Eurocurrency rate loans and 0.50% for base rate loans, respectively. After the date of delivery of the compliance
certificate and financial statements with respect to each of the Company’s fiscal quarters, the applicable margin for borrowings
under the Term Loan A facility and the revolving credit facilities is subject to adjustment based upon the Company’s net
leverage ratio.
The 2016 facilities contain customary events of default, including but not limited to nonpayment; material inaccuracy of
representations and warranties; violations of covenants; certain bankruptcies and liquidations; cross-default to material
indebtedness; certain material judgments; certain events related to the Employee Retirement Income Security Act of 1974, as
amended; certain events related to certain of the guarantees by the Company and certain of its subsidiaries, and certain pledges
of the Company’s assets and those of certain of the Company’s subsidiaries, as security for the obligations under the 2016
facilities; and a change in control (as defined in the 2016 facilities).
During the second quarter of 2014, the Company entered into an interest rate cap agreement for an 18-month term
commencing on August 18, 2014. The agreement was designed with the intended effect of capping the interest rate on an initial
notional amount of $514.2 million of the Company’s variable rate debt obligation under the 2014 facilities or any replacement
facility with similar terms. Under the terms of this agreement, the one-month LIBOR that the Company paid was capped at a
rate of 1.50%. Therefore, the maximum amount of interest that the Company would have paid on the then-outstanding notional
amount was at the 1.50% capped rate, plus the current applicable margin. The agreement expired on February 17, 2016.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
During the second quarter of 2014, the Company entered into an interest rate swap agreement for a two-year term
commencing on February 17, 2016. The agreement was designed with the intended effect of converting an initial notional
amount of $682.6 million of the Company’s variable rate debt obligation under the 2014 facilities or any replacement facility
with similar terms, including the 2016 facilities, to fixed rate debt. Such agreement remains outstanding with a notional amount
of $925.1 million as of January 29, 2017, and is now converting a portion of the Company’s variable rate debt obligation under
the 2016 facilities to fixed rate debt. Under the terms of the agreement for the then-outstanding notional amount, the Company’s
exposure to fluctuations in the one-month LIBOR is eliminated and the Company will pay a weighted average fixed rate of
1.924%, plus the current applicable margin.
During the second quarter of 2013, the Company entered into an interest rate swap agreement for a three-year term
commencing on August 19, 2013. The agreement was designed with the intended effect of converting an initial notional amount
of $1,228.8 million of the Company’s variable rate debt obligation under the Company’s previously outstanding facilities or any
replacement facility with similar terms, including the 2016 facilities, to fixed rate debt. Under the terms of the agreement for the
then-outstanding notional amount, the Company’s exposure to fluctuations in the one-month LIBOR was eliminated and the
Company paid a fixed rate of 0.604%, plus the current applicable margin. The agreement expired on August 17, 2016.
The notional amount of any outstanding interest rate swap will be adjusted according to a pre-set schedule during the term
of the applicable swap agreement such that, based on the Company’s projections for future debt repayments, the Company’s
outstanding debt under the Term Loan A facility is expected to always equal or exceed the combined notional amount of the
then-outstanding interest rate swaps.
The 2016 facilities also contain covenants that restrict the Company’s ability to finance future operations or capital needs,
to take advantage of other business opportunities that may be in its interest or to satisfy its obligations under its other
outstanding debt. These covenants restrict its ability to, among other things:
• incur or guarantee additional debt or extend credit;
• make restricted payments, including paying dividends or making distributions on, or redeeming or repurchasing, the
Company’s capital stock or certain debt;
• make acquisitions and investments;
• dispose of assets;
• engage in transactions with affiliates;
• enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends;
• create liens on the Company’s assets or engage in sale/leaseback transactions; and
• effect a consolidation or merger, or sell, transfer, or lease all or substantially all of the Company’s assets.
The 2016 facilities require the Company to comply with certain financial covenants, including minimum interest coverage
and maximum net leverage. A breach of any of these operating or financial covenants would result in a default under the
applicable facility. If an event of default occurs and is continuing, the lenders could elect to declare all amounts then
outstanding, together with accrued interest, to be immediately due and payable, which would result in acceleration of its other
debt. If the Company were unable to repay any such borrowings when due, the lenders could proceed against their collateral,
which also secures some of the Company’s other indebtedness.
7 3/8% Senior Notes Due 2020
On May 6, 2010, the Company issued $600.0 million principal amount of 7 3/8% senior notes due May 15, 2020. On
March 24, 2014, in connection with an amendment to its senior secured credit facilities discussed above in the section entitled
“2014 Senior Secured Credit Facilities,” the Company redeemed all of its outstanding 7 3/8% senior notes and, pursuant to the
indenture under which the notes were issued, paid a “make whole” premium of $67.6 million to the holders of the notes. The
Company also recorded costs of $14.3 million to write-off previously capitalized debt issuance costs associated with these
notes.
4 1/2% Senior Notes Due 2022
On December 20, 2012, the Company issued $700.0 million principal amount of 4 1/2% senior notes due December 15,
2022. The Company paid $16.3 million of fees during 2013 in connection with the issuance of these notes, which are amortized
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
over the term of the notes. The Company may redeem some or all of these notes at any time prior to December 15, 2017 by
paying a “make whole” premium plus any accrued and unpaid interest. In addition, the Company may redeem some or all of
these notes on or after December 15, 2017 at specified redemption prices plus any accrued and unpaid interest. The Company’s
ability to pay cash dividends and make other restricted payments is limited, in each case, over specified amounts as defined in
the indenture governing the notes.
7 3/4% Debentures Due 2023
The Company has outstanding $100.0 million of debentures due November 15, 2023 that accrue interest at the rate of 7
3/4%. Pursuant to the indenture governing the debentures, the Company must maintain a certain level of stockholders’ equity in
order to pay cash dividends and make other restricted payments, as defined in the indenture governing the debentures.
3 5/8% Euro Senior Notes Due 2024
On June 20, 2016, the Company issued € 350.0 million euro-denominated principal amount of 3 5/8% senior notes due
July 15, 2024. Interest on the notes is payable in euros. The Company paid € 6.4 million (approximately $7.3 million based on
exchange rates in effect on the payment date) of fees during the second quarter of 2016 in connection with the issuance of these
notes, which are amortized over the term of the notes. The Company may redeem some or all of these notes at any time prior to
April 15, 2024 by paying a “make whole” premium plus any accrued and unpaid interest. In addition, the Company may
redeem some or all of these notes on or after April 15, 2024 at their principal amount plus any accrued and unpaid interest.
Substantially all of the Company’s assets have been pledged as collateral to secure the Company’s obligations under its
senior secured credit facilities, the 7 3/4% debentures due 2023 and contingent purchase price payments to Mr. Calvin Klein as
discussed in Note 7, “Goodwill and Other Intangible Assets.”
Interest paid was $109.8 million, $104.9 million and $141.7 million during 2016, 2015 and 2014, respectively.
9. INCOME TAXES
The domestic and foreign components of income (loss) before provision for income taxes were as follows:
(In millions)
Domestic
Foreign
Total
2016
2015
2014
$
$
60.9
613.3
674.2
$
$
117.5
530.0
647.5
$
$
(103.4)
494.8
391.4
Domestic income (loss) before provision for income taxes included an actuarial gain (loss) related to the Company’s
United States retirement plans of $39.1 million, $20.2 million and $(138.9) million in 2016, 2015 and 2014, respectively.
Taxes paid were $85.3 million, $91.5 million and $102.9 million in 2016, 2015 and 2014, respectively.
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The provision (benefit) for income taxes attributable to income consisted of the following:
(In millions)
Federal:
Current
Deferred
State and local:
Current
Deferred
Foreign:
Current
Deferred
Total
2016
2015
2014
$
$
(2.7) $
(9.3)
$
6.8
(4.1)
(2.4)
(0.9)
6.4
(22.2)
129.3
11.5
125.5
$
70.6
17.6
75.1
$
(35.4)
(54.8)
3.4
(4.3)
15.5
28.1
(47.5)
The provision (benefit) for income taxes for the years 2016, 2015 and 2014 was different from the amount computed by
applying the statutory United States federal income tax rate to the underlying income as follows:
Statutory federal tax rate
State and local income taxes, net of federal income tax benefit
Effects of international jurisdictions, including foreign tax credits
Change in estimates for uncertain tax positions
Change in valuation allowance
Other, net
Effective tax rate
2016
2015
2014
35.0 %
0.4 %
(12.9)%
(3.7)%
(0.1)%
(0.1)%
18.6 %
35.0 %
(1.3)%
(15.0)%
(7.6)%
(0.2)%
0.7 %
11.6 %
35.0 %
(1.1)%
(23.3)%
(24.0)%
1.1 %
0.2 %
(12.1)%
Effects of international jurisdictions, including foreign tax credits, reflected in the above table for 2016, 2015 and 2014
include not only those taxes at statutory income tax rates but also taxes at special rates levied on income from certain
jurisdictional activities. The Company expects to benefit from these special rates until 2023.
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The components of deferred income tax assets and liabilities were as follows:
(In millions)
Gross deferred tax assets
Tax loss and credit carryforwards
Employee compensation and benefits
Inventories
Accounts receivable
Accrued expenses
Other, net
Subtotal
Valuation allowances
Total gross deferred tax assets, net of valuation allowances
Gross deferred tax liabilities
Intangibles
Property, plant and equipment
Other, net
Total gross deferred tax liabilities
Net deferred tax liability
2016
2015
248.1
88.7
27.2
26.6
31.7
0.0
422.3
(43.9)
378.4
$
$
240.1
135.3
24.0
28.5
31.6
37.1
496.6
(43.8)
452.8
(1,157.0) $
(67.6)
(14.1)
(1,238.7) $
(860.3) $
(1,199.2)
(77.8)
—
(1,277.0)
(824.2)
$
$
$
$
$
At the end of 2016, the Company had on a tax effected basis approximately $286.3 million of net operating loss and tax
credit carryforwards available to offset future taxable income in various jurisdictions. This included net operating loss
carryforwards of approximately $19.5 million and $37.2 million for federal and various state and local jurisdictions,
respectively, and $28.9 million for various foreign jurisdictions. The Company also had federal and state tax credit and other
carryforwards of $200.7 million. The carryforwards expire principally between 2017 and 2037.
The Company does not provide for deferred taxes on the excess of financial reporting over tax basis on its investments in
all of its foreign subsidiaries that are essentially permanent in duration. The earnings that are permanently reinvested were
$2.6 billion as of January 29, 2017. It is not practicable to estimate the amount of tax that might be payable if these earnings
were repatriated due to the complexities associated with the hypothetical calculation.
Uncertain tax positions activity for each of the last three years was as follows:
(In millions)
Balance at beginning of year
Increases related to prior year tax positions
Decreases related to prior year tax positions
Increases related to current year tax positions
Lapses in statute of limitations
Effects of foreign currency translation
Balance at end of year
2016
2015
2014
$
$
226.8
2.8
(9.9)
52.0
(24.4)
(1.7)
245.6
$
$
244.5
4.3
(12.5)
40.0
(44.6)
(4.9)
226.8
$
$
485.7
16.8
(239.3)
38.2
(36.3)
(20.6)
244.5
In 2014, the Company resolved for $179.0 million an uncertain tax position related to European and United States transfer
pricing arrangements, for which it had previously recorded a liability of approximately $185.0 million.
The entire amount of uncertain tax positions as of January 29, 2017, if recognized, would reduce the future effective tax
rate under current accounting provisions.
Interest and penalties related to uncertain tax positions are recorded in the Company’s income tax provision. Interest and
penalties recognized in the Company’s Consolidated Income Statements for the years 2016, 2015 and 2014 totaled an expense
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
of $1.0 million, a benefit of $(0.9) million and a benefit of $(25.9) million, respectively. Interest and penalties accrued in the
Company’s Consolidated Balance Sheets as of January 29, 2017, January 31, 2016 and February 1, 2015 totaled $27.8 million,
$27.6 million and $28.6 million, respectively. The Company recorded its liabilities for uncertain tax positions principally in
accrued expenses and other liabilities in its Consolidated Balance Sheets.
The Company files income tax returns in the United States and in various foreign, state and local jurisdictions. With few
exceptions, examinations have been completed by tax authorities or the statute of limitations has expired for United States
federal, foreign, state and local income tax returns filed by the Company for years through 2005. It is reasonably possible that a
reduction of uncertain tax positions in a range of $45.0 million to $55.0 million may occur within 12 months of January 29,
2017.
10. DERIVATIVE FINANCIAL INSTRUMENTS
Cash Flow Hedges
The Company has exposure to changes in foreign currency exchange rates related to anticipated cash flows associated
with certain international inventory purchases. The Company periodically uses foreign currency forward exchange contracts to
hedge against a portion of this exposure.
The Company also has exposure to interest rate volatility related to its term loans under the 2016 facilities. The Company
has entered into interest rate swap agreements to hedge against a portion of this exposure. The Company had also entered into
an interest rate cap agreement, which expired on February 17, 2016. Please see Note 8, “Debt,” for a further discussion of the
Company’s facilities and these agreements.
The Company records the foreign currency forward exchange contracts and interest rate contracts at fair value in its
Consolidated Balance Sheets, and does not net the related assets and liabilities. Changes in fair value of the foreign currency
forward exchange contracts associated with certain international inventory purchases and the interest rate contracts that are
designated as effective hedging instruments (collectively referred to as “cash flow hedges”) are recorded in equity as a
component of AOCL. The cash flows from such hedges are presented in the same category in the Company’s Consolidated
Statements of Cash Flows as the items being hedged. No amounts were excluded from effectiveness testing. There was no
ineffective portion of cash flow hedges during 2016 and 2015.
Net Investment Hedge
The Company has exposure to changes in foreign currency exchange rates related to the value of its investments in
foreign subsidiaries denominated in a currency other than the United States dollar. To hedge against a portion of this exposure,
during the second quarter of 2016, the Company designated the carrying amount of its € 350.0 million euro-denominated
principal amount of 3 5/8% senior notes due 2024 (the “foreign currency borrowings”) that it had issued in the United States as
a net investment hedge of its investments in certain of its foreign subsidiaries that use the euro as their functional currency.
Please see Note 8, “Debt,” for a further discussion of the Company’s foreign currency borrowings.
The Company records the foreign currency borrowings at carrying value in its Consolidated Balance Sheets. The carrying
value of the foreign currency borrowings is remeasured at the end of each reporting period to reflect changes in the foreign
currency exchange spot rate. Since the foreign currency borrowings are designated as a net investment hedge, such
remeasurement is recorded in equity as a component of AOCL. As of January 29, 2017, the fair value and the carrying value of
the foreign currency borrowings designated as a net investment hedge were $384.1 million and $367.5 million, respectively.
The Company evaluates the effectiveness of its net investment hedge as of the beginning of each quarter. No amounts were
excluded from effectiveness testing. There was no ineffective portion of the net investment hedge during 2016.
Undesignated Contracts
The Company records immediately in earnings changes in the fair value of hedges that are not designated as effective
hedging instruments (“undesignated contracts”), including all of the foreign currency forward exchange contracts related to
intercompany transactions and intercompany loans that are not of a long-term investment nature. Any gains and losses that are
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
immediately recognized in earnings on such contracts are largely offset by the remeasurement of the underlying intercompany
balances.
In addition, the Company has exposure to changes in foreign currency exchange rates related to the translation of the
earnings of its subsidiaries denominated in a currency other than the United States dollar. To hedge against a portion of this
exposure, the Company entered into several foreign currency option contracts during 2016. These contracts represent the
Company’s purchase of euro put/United States dollar call options. In connection with the foreign currency option contracts, the
Company paid total cash premiums of $2.3 million during 2016.
The Company’s foreign currency option contracts are also undesignated contracts. As such, the changes in the fair value
of these foreign currency option contracts are recognized immediately in earnings. This mitigates the effect of a strengthening
United States dollar against the euro on the reporting of the Company’s euro-denominated earnings.
The Company does not use derivative or non-derivative financial instruments for trading or speculative purposes.
The following table summarizes the fair value and presentation of the Company’s derivative financial instruments in its
Consolidated Balance Sheets:
(In millions)
Contracts designated as cash flow hedges:
Foreign currency forward exchange contracts
(inventory purchases)
Interest rate contracts
Total contracts designated as cash flow hedges
Undesignated contracts:
Foreign currency forward exchange contracts
Foreign currency option contracts
Total undesignated contracts
Total
Assets
(Classified in Other Current
Assets and Other Assets)
2016
2015
Liabilities
(Classified in Accrued
Expenses and Other
Liabilities)
2016
2015
$
$
25.1
—
25.1
0.8
3.2
4.0
29.1
$
$
24.9
—
24.9
19.3
—
19.3
44.2
$
$
2.6
7.1
9.7
0.0
—
0.0
9.7
$
$
1.7
20.6
22.3
0.1
—
0.1
22.4
At January 29, 2017, the notional amount outstanding of foreign currency forward exchange contracts and foreign
currency option contracts was $954.0 million and $100.0 million, respectively. Such contracts expire principally between
February 2017 and April 2018.
The following table summarizes the effect of the Company’s hedges designated as cash flow and net investment hedging
instruments:
(In millions)
Gain (Loss)
Recognized in Other
Comprehensive Loss
2016
2015
Gain (Loss) Reclassified from
AOCL into Income (Expense)
Location
Amount
2015
2016
Foreign currency forward exchange contracts
(inventory purchases)
Interest rate contracts
Foreign currency borrowings (net investment hedge)
Total
$
$
2.4
1.4
22.7
26.5
$
$
36.3
(9.4)
—
26.9
Cost of goods
sold
Interest expense
N/A
$
$
14.0
(12.1)
—
1.9
$
$
92.1
(3.7)
—
88.4
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
A net gain in AOCL on foreign currency forward exchange contracts at January 29, 2017 of $32.3 million is estimated to
be reclassified in the next 12 months in the Company’s Consolidated Income Statement to costs of goods sold as the underlying
inventory hedged by such forward exchange contracts is sold. In addition, a net loss in AOCL for interest rate contracts at
January 29, 2017 of $7.0 million is estimated to be reclassified to interest expense within the next 12 months. Amounts
recognized in AOCL for foreign currency borrowings would be recognized in earnings only upon the sale or liquidation of the
hedged net investment.
The following table summarizes the effect of the Company’s undesignated contracts recognized in selling, general and
administrative expenses in its Consolidated Income Statements:
(In millions)
Foreign currency forward exchange contracts
Foreign currency option contracts
(Loss) Gain Recognized in
(Expense) Income
2016
2015
$
(1.2) $
0.9
4.7
—
The Company had no derivative financial instruments with credit risk-related contingent features underlying the related
contracts as of January 29, 2017.
11. FAIR VALUE MEASUREMENTS
FASB guidance for fair value measurements defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a three
level hierarchy that prioritizes the inputs used to measure fair value. The three levels of the hierarchy are defined as follows:
Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the
ability to access at the measurement date.
Level 2 – Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or
liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices
that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data.
Level 3 – Unobservable inputs reflecting the Company’s own assumptions about the inputs that market participants would
use in pricing the asset or liability based on the best information available.
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s
financial assets and liabilities that are required to be remeasured at fair value on a recurring basis:
(In millions)
Assets:
Foreign currency forward
exchange contracts
Foreign currency option
contracts
Total Assets
Liabilities:
Foreign currency forward
exchange contracts
Interest rate contracts
Contingent purchase price
payments related to
reacquisition of the perpetual
rights to the Tommy Hilfiger
trademarks in India
Total Liabilities
2016
2015
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
N/A
N/A
N/A
N/A
N/A
$
$
$
25.9
N/A
3.2
29.1
N/A
N/A
2.6
7.1
N/A
N/A
N/A
N/A
N/A
$
9.7
$
$
1.6
1.6
$
$
$
$
25.9
3.2
29.1
2.6
7.1
N/A
N/A
N/A
N/A
N/A
$
$
$
44.2
N/A
N/A
44.2
N/A
N/A
1.8
20.6
N/A
N/A
1.6
11.3
N/A
N/A
N/A
$
22.4
$
$
2.2
2.2
$
$
$
$
44.2
N/A
44.2
1.8
20.6
2.2
24.6
The fair value of the foreign currency forward exchange contracts is measured as the total amount of currency to be
purchased, multiplied by the difference between (i) the forward rate as of the period end and (ii) the settlement rate specified in
each contract. The fair value of the interest rate contracts is based on observable interest rate yield curves and represents the
expected discounted cash flows underlying the financial instruments. The fair value of the foreign currency option contracts is
estimated based on external valuation models, which use the original strike price, current foreign currency exchange rates, the
implied volatility in foreign currency exchange rates and length of time to expiration as inputs.
Pursuant to the agreement governing the reacquisition of the rights in India to the Tommy Hilfiger trademarks (which the
Company entered into in September 2011 in connection with its acquisition of its 50% ownership of TH India), the Company is
required to make annual contingent purchase price payments based on a percentage of sales of Tommy Hilfiger products in India
in excess of an agreed upon threshold during each of six consecutive 12-month periods. Such payments are subject to a $25.0
million aggregate maximum and are due within 60 days following each one-year period. The Company made annual contingent
purchase price payments of $0.6 million, $0.6 million, $0.6 million, $0.4 million and $0.2 million during 2016, 2015, 2014,
2013 and 2012, respectively. The Company is required to remeasure this liability at fair value on a recurring basis and classifies
this as a Level 3 measurement. The fair value of such liability was determined using the discounted cash flow method, based on
net sales projections for the Tommy Hilfiger apparel and accessories businesses in India, and was discounted using rates of
return that account for the relative risks of the estimated future cash flows. Excluding the initial recognition of the liability for
the contingent purchase price payments and payments made to reduce the liability, changes in the fair value are included within
selling, general and administrative expenses in the Company’s Consolidated Income Statements.
The following table presents the change in the Level 3 contingent purchase price payment liability during 2016 and 2015:
(In millions)
Balance at beginning of year
Payments
Adjustments included in earnings
Balance at end of year
$
$
2016
2015
4.0
(0.6)
(1.2)
2.2
$
2.2
(0.6)
—
1.6
$
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Additional information with respect to assumptions used to value the contingent purchase price payment liability as of
January 29, 2017 is as follows:
Unobservable Inputs
Amount
Approximate
compounded annual
net sales growth rate
Approximate
discount rate
35.0%
15.0%
A five percentage point increase or decrease in the discount rate or the compounded annual net sales growth rate would
result in an immaterial change to the liability.
There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.
The following table shows the fair value of the Company’s non-financial assets and liabilities that were required to be
remeasured at fair value on a nonrecurring basis (consisting principally of property, plant and equipment) during 2016, 2015
and 2014, and the total impairments recorded as a result of the remeasurement process:
(In millions)
Fair Value Measurement Using
2016
2015
2014
Level 1
Level 2
Level 3
N/A
N/A
N/A
N/A $
N/A $
N/A $
0.4
1.4
1.3
Fair Value
As Of
Impairment Date
0.4
$
1.4
$
1.3
$
$
$
$
Total
Impairments
10.1
11.4
29.7
Long-lived assets with carrying amounts of $10.5 million, $12.8 million and $13.3 million were written down to fair
values of $0.4 million, $1.4 million and $1.3 million during 2016, 2015 and 2014, respectively, in connection with the financial
performance in certain of the Company’s retail stores. Fair value was determined based on the estimated discounted future cash
flows associated with the assets using sales trends and market participant assumptions. The $10.1 million impairment charge
recorded in 2016 was included in selling, general and administrative expenses, of which $1.0 million was recorded in the
Calvin Klein North America segment, $3.7 million was recorded in the Calvin Klein International segment, $1.4 million was
recorded in the Tommy Hilfiger North America segment and $4.0 million was recorded in the Tommy Hilfiger International
segment. The $11.4 million impairment charge recorded in 2015 was included in selling, general and administrative expenses,
of which $2.0 million was recorded in the Calvin Klein North America segment, $3.1 million was recorded in the Calvin Klein
International segment and $6.3 million was recorded in the Tommy Hilfiger International segment. The $12.0 million
impairment charge recorded in 2014 was included in selling, general and administrative expenses, of which $0.1 million was
recorded in the Calvin Klein North America segment, $3.8 million was recorded in the Calvin Klein International segment, $3.4
million was recorded in the Tommy Hilfiger North America segment, $1.7 million was recorded in the Tommy Hilfiger
International segment and $3.0 million was recorded in the Heritage Brands Retail segment.
Long-lived assets with a carrying amount of $5.8 million and goodwill of $11.9 million were written down to a fair value
of zero during 2014 in connection with the exit from the Company’s Izod retail business. The impairment charge was included
in selling, general and administrative expenses in the Heritage Brands Retail segment.
The Company is deemed to have guaranteed lease payments for substantially all G. H. Bass & Co. (“Bass”) retail stores
included in the sale of substantially all of the assets of the Company’s Bass business in the fourth quarter of 2013 pursuant to
the terms of noncancelable leases expiring on various dates through 2022. These obligations deemed to be guaranteed include
minimum rent payments and relate to leases that commenced prior to the sale of the Bass assets. In certain instances, the
Company’s obligations remain in effect when an option is exercised to extend the term of the lease. The estimated fair value of
these obligations as of January 29, 2017 and January 31, 2016 was $1.1 million and $1.9 million, respectively, which was
included in accrued expenses and other liabilities in the Company’s Consolidated Balance Sheets. The Company classifies these
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
as Level 3 measurements. The fair value of such obligations was determined using the discounted cash flow method, based on
the lease payments, the estimated probability of lease extensions and estimates of the risk of default by the buyer of the Bass
assets, and was discounted using rates of return that account for the relative risks of the estimated future cash flows.
The carrying amounts and the fair values of the Company’s cash and cash equivalents, short-term borrowings and long-
term debt were as follows:
(In millions)
Cash and cash equivalents
Short-term borrowings
Long-term debt (including portion classified as current)
2016
2015
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$
$
730.1
19.1
3,197.3
$
730.1
19.1
3,248.7
$
556.4
25.9
3,168.3
556.4
25.9
3,190.5
The fair values of cash and cash equivalents and short-term borrowings approximate their carrying amounts due to the
short-term nature of these instruments. The Company estimates the fair value of its long-term debt using quoted market prices
as of the last business day of the applicable year. The Company classifies the measurement of its long-term debt as a Level 1
measurement. The carrying amounts of long-term debt reflect the unamortized portions of debt issuance costs and the original
issue discounts.
12. RETIREMENT AND BENEFIT PLANS
The Company has five qualified defined benefit pension plans as of January 29, 2017 covering substantially all employees
resident in the United States who meet certain age and service requirements. The plans provide monthly benefits upon
retirement generally based on career average compensation and years of credited service. Vesting in plan benefits generally
occurs after five years of service. The Company refers to these five noncontributory plans as its “Pension Plans.”
The Company also has for certain members of Tommy Hilfiger’s domestic senior management a supplemental executive
retirement plan, which is an unfunded non-qualified supplemental defined benefit pension plan. Such plan is frozen and, as a
result, participants do not accrue additional benefits. In addition, the Company has a capital accumulation program, which is an
unfunded non-qualified supplemental defined benefit plan. Under the individual participants’ agreements, the participants in
this plan will receive a predetermined amount during the 10 years following the attainment of age 65, provided that prior to the
termination of employment with the Company, the participant has been in the plan for at least 10 years and has attained age 55.
The Company also has for certain employees resident in the United States who meet certain age and service requirements an
unfunded non-qualified supplemental defined benefit pension plan, which provides benefits for compensation in excess of
Internal Revenue Service earnings limits and requires payments to vested employees upon, or shortly after, employment
termination or retirement. The Company refers to these three noncontributory plans as its “SERP Plans.”
The Company also provides certain postretirement health care and life insurance benefits to certain retirees resident in the
United States. Retirees contribute to the cost of this plan, which is unfunded. During 2002, the postretirement plan was
amended to eliminate the Company contribution, which partially subsidized benefits, for active participants who, as of January
1, 2003, had not attained age 55 and 10 years of service. As a result of the Company’s acquisition of The Warnaco Group, Inc.
(“Warnaco”) in 2013, the Company also provides certain postretirement health care and life insurance benefits to certain
Warnaco retirees resident in the United States. Retirees contribute to the cost of this plan, which is unfunded. This plan was
frozen on January 1, 2014. The Company refers to these two plans as its “Postretirement Plans.”
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Reconciliations of the changes in the projected benefit obligation (Pension Plans and SERP Plans) and the accumulated
benefit obligation (Postretirement Plans) for each of the last two years were as follows:
(In millions)
Balance at beginning of year
Service cost
Interest cost
Benefit payments
Benefit payments, net of retiree
contributions
Medicare subsidy
Actuarial gain
Balance at end of year
Pension Plans
SERP Plans
2016
2015
2016
2015
Postretirement Plans
2015
2016
$
$
651.7
24.4
29.8
(75.6)
—
—
(2.8)
627.5
$
$
734.8
29.9
27.8
(49.1)
—
—
(91.7)
651.7
$
$
88.6
4.3
3.9
(8.5)
—
—
(0.7)
87.6
$
$
98.5
5.6
3.7
(10.1)
—
—
(9.1)
88.6
$
$
15.8
—
0.5
—
(1.9)
0.0
(3.0)
11.4
$
$
18.1
—
0.6
—
(1.9)
0.0
(1.0)
15.8
In 2016 and 2015, benefit payments from the Pension Plans include lump sum payments, as certain vested participants,
whose employment has been terminated, were offered an opportunity to elect a lump sum payment of their accrued pension
benefit from the Pension Plans. Such payments totaling $44.8 million and $20.1 million were made in 2016 and 2015,
respectively, using assets from the Pension Plans. The lump sum payments resulted in settlements of the Company’s benefit
obligation. The actuarial gains in 2015 were due principally to increases in the discount rates.
Reconciliations of the fair value of the assets held by the Pension Plans and the funded status for each of the last two years
were as follows:
(In millions)
Fair value of plan assets at beginning of year
Actual return (loss), net of plan expenses
Benefit payments
Company contributions
Fair value of plan assets at end of year
Funded status at end of year
2016
2015
$
$
$
567.4
67.7
(75.6)
100.0
659.5
32.0
$
$
$
654.8
(39.8)
(49.1)
1.5
567.4
(84.3)
Amounts recognized in the Company’s Consolidated Balance Sheets were as follows:
(In millions)
Noncurrent assets
Current liabilities
Non-current liabilities
Net amount recognized
Pension Plans
SERP Plans
2016
2015
2016
2015
Postretirement Plans
2015
2016
$
$
32.6
—
(0.6)
32.0
$
$
— $
—
(84.3)
(84.3) $
— $
(8.5)
(79.1)
(87.6) $
— $
(7.5)
(81.1)
(88.6) $
— $
(1.5)
(9.9)
(11.4) $
—
(1.9)
(13.9)
(15.8)
Pre-tax amounts in AOCL that had not yet been recognized as components of net benefit cost in the Pension Plans, SERP
Plans and Postretirement Plans were immaterial as of January 29, 2017 and January 31, 2016.
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Pre-tax amounts in AOCL as of January 29, 2017 expected to be recognized as components of net benefit cost in 2017 in
the Pension Plans, SERP Plans and Postretirement Plans were immaterial.
The assets of the Pension Plans are invested with the objective of being able to meet current and future benefit payment
needs, while controlling future contributions. The assets of the Pension Plans are diversified among United States equities,
international equities, fixed income investments and cash. The strategic target allocation for the majority of the Pension Plans as
of January 29, 2017 was approximately 40% United States equities, 20% international equities and 40% fixed income
investments and cash. Equity securities primarily include investments in large-, mid- and small-cap companies located in the
United States and abroad. Fixed income securities include corporate bonds of companies from diversified industries, municipal
bonds, collective funds and United States Treasury bonds. Actual investment allocations may vary from the Company’s target
investment allocations due to prevailing market conditions.
F-36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
In accordance with the fair value hierarchy described in Note 11, “Fair Value Measurements,” the following tables show
the fair value of the total assets of the Pension Plans for each major category as of January 29, 2017 and January 31, 2016:
(In millions)
Asset Category
Equity securities:
United States equities(1)
International equities(1)
United States equity fund(2)
International equity funds(3)
Fixed income securities:
Government securities(4)
Corporate securities(4)
Short-term investment funds(5)
Total return mutual fund(6)
Subtotal
Other assets and liabilities(7)
Total
(In millions)
Asset Category
Equity securities:
United States equities(1)
International equities(1)
United States equity fund(2)
International equity funds(3)
Fixed income securities:
Government securities(4)
Corporate securities(4)
Short-term investment funds(5)
Total return mutual fund(6)
Subtotal
Other assets and liabilities(7)
Total
Fair Value Measurements as of
January 29, 2017(8)
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
Total
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
$
193.0
$
193.0
$
12.2
51.6
130.5
63.3
181.0
18.9
5.6
12.2
—
70.4
—
—
—
5.6
—
—
51.6
60.1
63.3
181.0
18.9
—
656.1
$
281.2
$
374.9
3.4
659.5
—
—
—
—
—
—
—
—
—
Fair Value Measurements as of
January 31, 2016(8)
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
Total
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
155.9
13.2
—
68.4
—
—
—
5.1
242.6
$
$
—
—
34.1
33.4
64.1
176.2
13.8
—
321.6
—
—
—
—
—
—
—
—
—
$
$
155.9
13.2
34.1
101.8
64.1
176.2
13.8
5.1
564.2
3.2
567.4
$
$
$
$
$
(1) Valued at the closing price or unadjusted quoted price in the active market in which the individual securities are traded.
(2) Valued at the net asset value of the fund, as determined by a pricing vendor or the fund family. The Company has the
ability to redeem this investment at net asset value within the near term and therefore classifies this investment within
Level 2. This commingled fund invests in United States large cap equities that track the Russell 1000 Index.
F-37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
(3) Valued at the net asset value of the funds, either as determined by the closing price in the active market in which the
individual fund is traded and classified within Level 1, or as determined by a pricing vendor or the fund family and
classified within Level 2. This category includes funds that invest in equities of companies outside of the United
States.
(4) Valued with bid evaluation pricing where the inputs are based on actual trades in active markets, when available, as
well as observable market inputs that include actual and comparable trade data, market benchmarks, broker quotes,
trading spreads and/or other applicable data.
(5) Valued at the net asset value of the funds, as determined by a pricing vendor or the fund family. The Company has the
ability to redeem these investments at net asset value within the near term and therefore classifies these investments
within Level 2. These funds invest in high-grade, short-term, money market instruments.
(6) Valued at the net asset value of the fund, as determined by the closing price in the active market in which the
individual fund is traded. This fund invests in both equity securities and fixed income securities.
(7) This category includes other pension assets and liabilities such as pending trades and accrued income.
(8) The Company uses third party pricing services to determine the fair values of the financial instruments held by the
Pension Plans. The Company obtains an understanding of the pricing services’ valuation methodologies and related
inputs and validates a sample of prices provided by the pricing services by reviewing prices from other pricing sources
and analyzing pricing data in certain instances. The Company has not adjusted any prices received from the third party
pricing services.
The Company believes that there are no significant concentrations of risk within the plan assets as of January 29, 2017.
In 2016, two of the Company’s Pension Plans had projected benefit obligations in excess of plan assets and one of the
Company’s Pension Plans had accumulated benefit obligations in excess of plan assets. In 2015, all of the Pension Plans had
projected benefit obligations and accumulated benefit obligations in excess of plan assets. The balances were as follows:
(In millions, except plan count)
Number of plans with projected benefit obligations in excess of plan assets
Aggregate projected benefit obligation
Aggregate fair value of related plan assets
Number of plans with accumulated benefit obligations in excess of plan assets
Aggregate accumulated benefit obligation
Aggregate fair value of related plan assets
2016
2015
2
34.6
34.0
1
3.3
3.1
$
$
$
$
5
651.7
567.4
5
610.7
567.4
$
$
$
$
F-38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The components of net benefit cost and other pre-tax amounts recognized in other comprehensive loss in each of the last
three years were as follows:
Net Benefit Cost Recognized in Selling, General and Administrative Expenses
(In millions)
2016
2015
2014
2016
2015
2014
2016
2015
2014
Pension Plans
SERP Plans
Postretirement Plans
Service cost, including
plan expenses
$
Interest cost
$
25.2
29.8
$
30.6
27.8
20.0
28.5
Actuarial (gain) loss
(35.4)
(10.1)
121.8
$
4.4
$
5.6
$
3.9
(0.7)
3.7
(9.1)
4.5
4.0
13.9
$ — $ — $ —
0.5
(3.0)
0.6
(1.0)
Expected return on plan
assets
Amortization of prior
service cost (credit)
Total
(35.9)
(42.5)
(43.5)
—
—
—
—
—
0.0
(16.3) $
0.0
5.8
0.0
$ 126.8
$
(0.1)
7.5
$
(0.1)
0.1
$
(0.1)
22.3
$
(0.3)
(2.8) $
(0.4)
(0.8) $
(0.8)
3.2
$
0.8
3.2
—
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss
Pension Plans
SERP Plans
Postretirement Plans
(In millions)
2016
2015
2014
2016
2015
2014
2016
2015
2014
Amortization of prior service
(cost) credit
$
(0.0) $
(0.0) $
(0.0) $
0.1
$
0.1
$
0.1
$
0.3
$
0.4
$
0.8
Currently, the Company does not expect to make any material contributions to the Pension Plans in 2017. The Company’s
actual contributions may differ from planned contributions due to many factors, including changes in tax and other benefit laws,
or significant differences between expected and actual pension asset performance or interest rates. The expected benefit
payments associated with the Pension Plans and SERP Plans, and expected benefit payments, net of retiree contributions,
associated with the Postretirement Plans are as follows:
(In millions)
Fiscal Year
Pension Plans
SERP Plans
$
2017
2018
2019
2020
2021
2022-2026
$
29.8
30.3
30.7
31.3
32.1
175.0
8.5
6.7
6.8
7.6
7.9
46.7
Postretirement Plans
1.5
$
1.4
1.3
1.2
1.1
4.2
The medical health care cost trend rate assumed for 2017 is 7.83% and is assumed to decrease by approximately 0.17%
per year through 2038. Thereafter, the rate assumed is 4.48%. If the assumed health care cost trend rate increased or decreased
by 1%, the aggregate effect on the service and interest cost components of the net postretirement benefit cost for 2016 and on
the accumulated postretirement benefit obligation at January 29, 2017 would be as follows:
(In millions)
Impact on service and interest cost
Impact on year end accumulated postretirement benefit obligation
1% Increase
0.0
$
0.7
1% Decrease
(0.0)
$
(0.6)
F-39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Significant weighted average rate assumptions used in determining the projected and accumulated benefit obligations at
the end of each year and benefit cost in the following year were as follows:
Discount rate (applies to Pension Plans and SERP Plans)
Discount rate (applies to Postretirement Plans)
Rate of increase in compensation levels (applies to Pension Plans)
Long-term rate of return on assets (applies to Pension Plans)
2016
2015
2014
4.59%
4.04%
4.27%
6.50%
4.72%
4.28%
4.22%
6.50%
3.94%
3.53%
4.28%
6.75%
To develop the expected weighted average long-term rate of return on assets assumption, the Company considered the
historical level of the risk premium associated with the asset classes in which the portfolio is invested and the expectations for
future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation
to develop the expected long-term rate of return on assets assumption for the portfolio.
The Company has savings and retirement plans and a supplemental savings plan for the benefit of its eligible employees
in the United States who elect to participate. The Company matches a portion of employee contributions to the plans. The
Company also has a defined contribution plan for certain employees associated with certain businesses acquired in the Tommy
Hilfiger acquisition, whereby the Company pays a percentage of the contribution for the employee. The Company’s
contributions to these plans were $19.7 million, $18.2 million and $20.3 million in 2016, 2015 and 2014, respectively.
13. STOCKHOLDERS’ EQUITY
Acquisition of Treasury Shares
The Company’s Board of Directors authorized a $500.0 million three-year stock repurchase program effective June 3,
2015. On March 21, 2017, the Board of Directors authorized a $750 million increase to the program and extended the program
to June 3, 2020. Repurchases under the program may be made from time to time over the period through open market
purchases, accelerated share repurchase programs, privately negotiated transactions or other methods, as the Company deems
appropriate. Purchases are made based on a variety of factors, such as price, corporate requirements and overall market
conditions, applicable legal requirements and limitations, restrictions under the Company’s debt arrangements, trading
restrictions under the Company’s insider trading policy and other relevant factors. The program may be modified by the Board
of Directors, including to increase or decrease the repurchase limitation or extend, suspend, or terminate the program, at any
time, without prior notice.
During 2016 and 2015, the Company purchased 3.2 million shares and 1.3 million shares, respectively, of its common
stock under the program in open market transactions for $315.1 million and $126.2 million, respectively. As of January 29,
2017, the repurchased shares were held as treasury stock and $58.7 million of the authorization remained available for future
share repurchases.
Treasury stock activity also includes shares that were withheld in conjunction with the settlement of vested restricted
stock, restricted stock units and performance share units to satisfy tax withholding requirements.
Common Stock Dividends
During each of 2016, 2015 and 2014, the Company paid four $0.0375 per share cash dividends on its common stock.
14. STOCK-BASED COMPENSATION
The Company grants stock-based awards under its 2006 Stock Incentive Plan (the “2006 Plan”). The 2006 Plan replaced
certain other prior stock option plans. These other plans terminated upon the 2006 Plan’s initial stockholder approval in June
2006. Shares issued as a result of stock-based compensation transactions generally have been funded with the issuance of new
shares of the Company’s common stock.
F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The Company may grant the following types of incentive awards under the 2006 Plan: (i) non-qualified stock options
(“NQs”); (ii) incentive stock options (“ISOs”); (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock units
(“RSUs”); (vi) performance shares; (vii) performance share units (“PSUs”); and (viii) other stock-based awards. Each award
granted under the 2006 Plan is subject to an award agreement that incorporates, as applicable, the exercise price, the term of the
award, the periods of restriction, the number of shares to which the award pertains, performance periods and performance
measures, and such other terms and conditions as the plan committee determines.
Through January 29, 2017, the Company has granted under the 2006 Plan (i) service-based NQs, RSUs and restricted
stock; (ii) contingently issuable PSUs; and (iii) RSUs that are intended to satisfy the performance-based condition for
deductibility under Section 162(m) of the Internal Revenue Code. According to the terms of the 2006 Plan, for purposes of
determining the number of shares available for grant, each share underlying a stock option award reduces the number available
by one share and each share underlying a restricted stock award, RSU or PSU reduces the number available by two shares. The
per share exercise price of options granted under the 2006 Plan cannot be less than the closing price of the common stock on the
date of grant.
Total shares available for grant at January 29, 2017 amounted to 7.0 million shares.
Net income for 2016, 2015 and 2014 included $38.2 million, $42.0 million and $48.7 million, respectively, of pre-tax
expense related to stock-based compensation, with recognized income tax benefits of $11.5 million, $10.7 million and $12.7
million, respectively.
The Company receives a tax deduction for certain transactions associated with its stock plan awards. The actual income
tax benefits realized from these transactions were $6.6 million, $10.2 million and $20.1 million in 2016, 2015 and 2014,
respectively. Of those amounts, $0.9 million, $5.5 million and $11.0 million, respectively, were reported as excess tax benefits.
Excess tax benefits arise when the actual tax benefit resulting from a stock plan award transaction exceeds the tax benefit
associated with the grant date fair value of the related stock award.
Stock Options
Stock options currently outstanding are generally exercisable in four equal annual installments commencing one year after
the date of grant. The vesting of such options outstanding is also generally accelerated upon retirement (as defined in the 2006
Plan). Such options are granted with a 10-year term.
The Company estimates the fair value of stock options granted at the date of grant using the Black-Scholes-Merton model.
The estimated fair value of the options, net of estimated forfeitures, is expensed over the options’ vesting periods.
The following summarizes the assumptions used to estimate the fair value of service-based stock options granted during
2016, 2015 and 2014:
Weighted average risk-free interest rate
Weighted average expected option term (in years)
Weighted average Company volatility
Expected annual dividends per share
Weighted average grant date fair value per option
2016
2015
2014
1.45%
6.25
34.54%
0.15
35.62
$
$
1.54%
6.25
36.26%
0.15
40.20
$
$
2.15%
6.25
44.12%
0.15
56.21
$
$
The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding
to the expected option term. The expected option term represents the weighted average period of time that options granted are
expected to be outstanding, based on vesting schedules and the contractual term of the options. Company volatility is based on
the historical volatility of the Company’s common stock over a period of time corresponding to the expected option term.
Expected dividends are based on the Company’s common stock cash dividend rate at the date of grant.
F-41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The Company has continued to utilize the simplified method to estimate the expected term for its “plain vanilla” stock
options granted due to a lack of relevant historical data resulting, in part, from changes in the pool of employees receiving
option grants, mainly due to acquisitions. The Company will continue to evaluate the appropriateness of utilizing such method.
Service-based stock option activity for the year was as follows:
(In thousands, except years and per option data)
Outstanding at January 31, 2016
Granted
Exercised
Cancelled
Outstanding at January 29, 2017
Exercisable at January 29, 2017
Weighted
Average
Exercise
Price Per
Option
Options
1,443
237
201
13
1,466
1,009
$
$
$
70.79
99.59
66.05
108.65
75.74
61.90
Weighted
Average
Remaining
Contractual
Life (Years)
5.3
Aggregate
Intrinsic Value
26,643
$
5.3
3.9
$
$
34,996
34,996
As of January 29, 2017, any service-based stock options that were outstanding but not yet exercisable had an intrinsic
value of zero.
The aggregate grant date fair value of service-based options granted during 2016, 2015 and 2014 was $8.4 million, $7.0
million and $7.9 million, respectively.
The aggregate grant date fair value of service-based options that vested during 2016, 2015 and 2014 was $6.9 million,
$7.2 million and $9.8 million, respectively.
The aggregate intrinsic value of service-based options exercised was $6.9 million, $8.4 million and $15.6 million in 2016,
2015 and 2014, respectively.
At January 29, 2017, there was $12.1 million of unrecognized pre-tax compensation expense, net of estimated forfeitures,
related to non-vested stock options, which is expected to be recognized over a weighted average period of 1.6 years.
Restricted Stock Units
RSUs granted to employees in 2016 generally vest in four equal annual installments commencing one year after the date
of grant. Outstanding RSUs granted to employees prior to 2016 generally vest in three annual installments of 25%, 25% and
50% commencing two years after the date of grant. Service-based RSUs granted to non-employee directors vest in full one year
after the date of grant. The underlying RSU award agreements (excluding agreements for non-employee director awards)
generally provide for accelerated vesting upon the award recipient’s retirement (as defined in the 2006 Plan). The fair value of
RSUs is equal to the closing price of the Company’s common stock on the date of grant and is expensed, net of estimated
forfeitures, over the RSUs’ vesting periods.
F-42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
RSU activity for the year was as follows:
(In thousands, except per RSU data)
Non-vested at January 31, 2016
Granted
Vested
Cancelled
Non-vested at January 29, 2017
Weighted
Average
Grant Date
Fair Value
Per RSU
RSUs
653
394
159
76
812
$
$
111.61
98.29
108.88
108.61
105.96
The aggregate grant date fair value of RSUs granted during 2016, 2015 and 2014 was $38.8 million, $31.7 million and
$29.3 million, respectively. The aggregate grant date fair value of RSUs vested during 2016, 2015 and 2014 was $17.3 million,
$18.1 million and $18.5 million, respectively.
At January 29, 2017, there was $45.1 million of unrecognized pre-tax compensation expense, net of estimated forfeitures,
related to non-vested RSUs, which is expected to be recognized over a weighted average period of 1.7 years.
Performance Share Units
The Company granted contingently issuable PSUs to certain of the Company’s senior executives during 2013 and 2014
subject to the achievement of an earnings per share goal for the two-year performance period beginning with the year of grant
and a service period of one year beyond the certification of performance. For the awards granted in 2014, the two-year
performance period has ended and the holders did not earn any shares based on earnings per share growth over the performance
period. For the awards granted in 2013, the holders earned an aggregate of 26,000 shares, which were paid out in 2016. For
such awards, the Company recorded expense ratably over each applicable vesting period based on fair value and the Company’s
expectations of the probable number of shares to be issued. The fair value of these contingently issuable PSUs was equal to the
closing price of the Company’s common stock on the date of grant, reduced for the present value of any dividends expected to
be paid on the Company’s common stock during the performance cycle, as these contingently issuable PSUs did not accrue
dividends prior to the completion of the performance cycle.
In addition, the Company granted contingently issuable PSUs to certain of the Company’s executives during 2013 and to
certain of the Company’s senior executives during 2015 and 2016 subject to a three-year performance period. For such awards,
the final number of shares to be earned, if any, is contingent upon the Company’s achievement of goals for the applicable
performance period, of which 50% is based upon the Company’s absolute stock price growth during the applicable performance
period and 50% is based upon the Company’s total shareholder return during the applicable performance period relative to other
companies included in the S&P 500 as of the date of grant. For the awards granted in 2013, the performance period ended on
May 5, 2016 and the holders did not earn any shares, as the Company did not achieve either of the threshold performance levels
required for payout. The Company records expense ratably over the applicable vesting period, net of estimated forfeitures,
regardless of whether the market condition is satisfied because the awards are subject to market conditions. The fair value of the
awards granted in 2016 and 2015 was established for each grant on the grant date using the Monte Carlo simulation model,
which was based on the following assumptions:
Risk-free interest rate
Expected Company volatility
Expected annual dividends per share
$
Weighted average grant date fair value per PSU $
2016
2015
1.04%
28.33%
0.15
87.16
0.90%
29.10%
$
$
0.15
101.23
Certain of the awards granted in 2016 are subject to a holding period of one year after the vesting date. For such awards,
the grant date fair value was discounted 12.99% for the restriction of liquidity.
F-43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
PSU activity for the year was as follows:
(In thousands, except per PSU data)
Non-vested at January 31, 2016
Granted
Vested
Cancelled
Non-vested at January 29, 2017
PSUs
Weighted
Average
Grant Date
Fair Value
Per PSU
493
79
26
421
125
$
$
121.41
87.16
114.77
124.01
92.32
The aggregate grant date fair value of PSUs granted during 2016, 2015 and 2014 was $6.9 million, $4.6 million and $10.4
million, respectively. The aggregate grant date fair value of PSUs vested during 2016 and 2015 was $3.0 million and $4.8
million, respectively. No PSUs vested during 2014. PSUs in the above table and the aggregate grant date fair value amounts
reflect (i) PSUs subject to market conditions at the target level, which is consistent with how expense will be recorded,
regardless of the numbers of shares actually earned; and (ii) PSUs that are not subject to market conditions at the maximum
level.
At January 29, 2017, there was $7.1 million of unrecognized pre-tax compensation expense, net of estimated forfeitures,
related to non-vested PSUs, which is expected to be recognized over a weighted average period of 2.0 years.
15. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in AOCL, net of related taxes, by component:
(In millions)
Balance at February 1, 2015
Other comprehensive (loss) income
before reclassifications
Less: Amounts reclassified from AOCL
Other comprehensive loss
Balance at January 31, 2016
Other comprehensive (loss) income
before reclassifications
Less: Amounts reclassified from AOCL
Other comprehensive (loss) income
Balance at January 29, 2017
Foreign currency
translation
adjustments
Retirement
liability
adjustment
Net unrealized and
realized gain on
effective cash flow
hedges
Total
$
$
$
(496.2)
$
0.4
$
79.3
$
(416.5)
(234.3)
—
(234.3)
(730.5)
$
(63.8) (1)
(56.7) (2)
(7.1)
(737.6)
$
—
0.3
(0.3)
0.1
—
0.2
(0.2)
(0.1)
$
$
33.1
86.2
(53.1)
26.2
$
5.2
4.5
0.7
26.9
$
(201.2)
86.5
(287.7)
(704.2)
(58.6)
(52.0)
(6.6)
(710.8)
F-44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The following table presents reclassifications out of AOCL to earnings:
(In millions)
Realized gain (loss) on effective cash flow
hedges:
Foreign currency forward exchange contracts
(inventory purchases)
Interest rate contracts
Less: Tax effect
Total, net of tax
Amortization of retirement liability items:
Prior service credit
Less: Tax effect
Total, net of tax
Foreign currency translation adjustments:
Mexico deconsolidation
Less: Tax effect
Total, net of tax
Amount
Reclassified
from AOCL
Amount
Reclassified
from AOCL
2016
2015
Affected Line Item in the Company’s
Consolidated Income Statements
$
$
$
$
$
$
14.0
(12.1)
(2.6)
4.5
0.4
0.2
0.2
$
$
$
$
92.1
Cost of goods sold
Interest expense
Income tax expense
Selling, general and administrative expenses
Income tax expense
(3.7)
2.2
86.2
0.5
0.2
0.3
(56.7) (2) $
—
— Other noncash gain, net
— Income tax expense
(56.7)
$
—
(1) Foreign currency translation adjustment losses included a net gain on net investment hedge of $14.1 million.
(2) Foreign currency translation adjustment losses were reclassified from AOCL during the fourth quarter of 2016 in
connection with the Mexico deconsolidation. Please see Note 5, “Investments in Unconsolidated Affiliates,” for a
further discussion.
16. LEASES
The Company leases retail locations, warehouses, showrooms, office space, equipment and a factory in Ethiopia. The
leases, excluding equipment leases, generally provide for the payment of real estate taxes and certain other occupancy
expenses. Retail location leases generally are renewable and provide for the payment of percentage rentals based on location
sales and other costs associated with the leased property.
F-45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
At January 29, 2017, minimum annual rental commitments under non-cancelable leases were as follows:
(In millions)
2017
2018
2019
2020
2021
Thereafter
Total minimum lease payments
Less: Amount representing interest
Present value of net minimum capital lease payments
Capital
Leases
Operating
Leases
$
$
$
457.6
394.3
327.5
266.9
221.2
697.6
2,365.1
$
$
$
$
4.7
3.9
2.9
2.0
1.8
4.0
19.3
(2.9)
16.4
Total
462.3
398.2
330.4
268.9
223.0
701.6
2,384.4
The Company’s retail location leases represent $1,575.8 million of the total minimum lease payments. The Company’s
administrative offices and showrooms located in New York, New York represent $465.9 million of the total minimum lease
payments. The Company’s Europe headquarters and showrooms, the largest of which are located in Amsterdam, the
Netherlands, represent $114.2 million of the total minimum lease payments.
At January 29, 2017, aggregate future minimum rentals to be received under non-cancelable capital and operating
subleases were $2.1 million and $3.0 million, respectively.
Rent expense was as follows:
(In millions)
Minimum
Percentage and other
Less: Sublease rental income
Total
2016
2015
2014
$
$
437.0
143.0
(4.9)
575.1
$
$
413.8
146.7
(4.6)
555.9
$
$
434.5
158.8
(4.9)
588.4
The gross book value of assets under capital leases, which are classified within property, plant and equipment in the
Company’s Consolidated Balance Sheets, amounted to $30.1 million and $25.1 million as of January 29, 2017 and January 31,
2016, respectively. Accumulated amortization related to assets under capital leases amounted to $13.5 million and $10.1 million
as of January 29, 2017 and January 31, 2016, respectively. The Company includes amortization of assets under capital leases in
depreciation and amortization expense. The Company did not incur any expense in percentage rentals under capital leases
during the years ended January 29, 2017 and January 31, 2016.
F-46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
17. NET INCOME PER COMMON SHARE
The Company computed its basic and diluted net income per common share as follows:
(In millions, except per share data)
Net income attributable to PVH Corp.
Weighted average common shares outstanding for basic net income per common share
Weighted average impact of dilutive securities
Total shares for diluted net income per common share
Basic net income per common share attributable to PVH Corp.
Diluted net income per common share attributable to PVH Corp.
2016
2015
2014
$
549.0
$
572.4
$
439.0
80.2
0.7
80.9
6.84
6.79
$
$
82.4
0.7
83.1
6.95
6.89
$
$
82.4
0.9
83.3
5.33
5.27
$
$
Potentially dilutive securities excluded from the calculation of diluted net income per common share as the effect would
be anti-dilutive were as follows:
(In millions)
Weighted average potentially dilutive securities
2016
2015
2014
0.8
0.6
0.4
Shares underlying contingently issuable awards that have not met the necessary conditions as of the end of a reporting
period are not included in the calculation of diluted net income per common share for that period. The Company had
contingently issuable awards outstanding that did not meet the performance conditions as of January 29, 2017, January 31, 2016
and February 1, 2015 and, therefore, were excluded from the calculation of diluted net income per common share for each
applicable year. The maximum number of potentially dilutive shares that could be issued upon vesting for such awards was 0.3
million, 0.9 million and 0.9 million as of January 29, 2017, January 31, 2016 and February 1, 2015, respectively. These
amounts were also excluded from the computation of weighted average potentially dilutive securities in the table above.
18. NONCASH INVESTING AND FINANCING TRANSACTIONS
Omitted from the Company’s Consolidated Statement of Cash Flows for 2016 were capital expenditures related to
property, plant and equipment of $35.6 million, which will not be paid until 2017. The Company paid $24.5 million in cash
during 2016 related to property, plant and equipment that was acquired in 2015. This amount was omitted from the Company’s
Consolidated Statement of Cash Flows for 2015. The Company paid $17.0 million in cash during 2015 related to property, plant
and equipment that was acquired in 2014. This amount was omitted from the Company’s Consolidated Statement of Cash
Flows for 2014.
Omitted from purchases of property, plant and equipment in the Company’s Consolidated Statements of Cash Flows for
2016, 2015 and 2014 were $6.8 million, $4.3 million and $4.2 million, respectively, of assets acquired through capital leases.
Omitted from purchases of property, plant and equipment in the Company’s Consolidated Statement of Cash Flows for
2015 was $4.1 million of leasehold improvements paid for directly by the lessor as a lease incentive to the Company.
The Company recorded increases to goodwill of $52.6 million, $51.7 million and $50.5 million during 2016, 2015 and
2014, respectively, related to liabilities incurred for contingent purchase price payments to Mr. Calvin Klein. Such amounts are
not due or paid in cash until 45 days subsequent to the Company’s applicable quarter end. As such, during 2016, 2015 and
2014, the Company paid $53.1 million, $50.7 million and $51.1 million, respectively, in cash related to contingent purchase
price payments to Mr. Calvin Klein that were recorded as additions to goodwill during the periods the liabilities were incurred.
The Company completed during 2016 the acquisition of TH China. Included in the acquisition consideration was the
elimination of a $2.8 million pre-acquisition receivable owed to the Company by TH China.
F-47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The Company recorded during 2016 a loss of $11.2 million to write-off previously capitalized debt issuance costs in
connection with the amendment of its credit facilities.
The Company recorded during 2014 a loss of $17.5 million to write-off previously capitalized debt issuance costs in
connection with the amendment and restatement of its senior secured credit facilities and the related redemption of its 7 3/8%
senior notes due 2020.
Omitted from investments in unconsolidated affiliates in the Company’s Consolidated Statement of Cash Flows for 2016
was a noncash increase in the investment balance related to the Company’s PVH Mexico joint venture of $64.3 million
resulting from the deconsolidation of the Mexico business during 2016. Please see Note 5, “Investments in Unconsolidated
Affiliates” for further discussion.
Omitted from investments in unconsolidated affiliates in the Company’s Consolidated Statement of Cash Flows for 2014
were noncash increases in the investment balances related to the Company’s Calvin Klein Australia joint venture and Calvin
Klein India joint venture of $3.7 million and $6.2 million, respectively, resulting from the deconsolidation of the Australia
business and CK India during 2014. Please see Note 5, “Investments in Unconsolidated Affiliates,” and Note 6, “Redeemable
Non-Controlling Interests,” for further discussion.
19. SEGMENT DATA
The Company manages its operations through its operating divisions, which are presented as six reportable segments:
(i) Calvin Klein North America; (ii) Calvin Klein International; (iii) Tommy Hilfiger North America; (iv) Tommy Hilfiger
International; (v) Heritage Brands Wholesale; and (vi) Heritage Brands Retail.
Calvin Klein North America Segment - This segment consists of the Company’s Calvin Klein North America division.
This segment derives revenue principally from (i) marketing CALVIN KLEIN branded apparel and related products at
wholesale in North America, primarily to department and specialty stores and digital commerce sites operated by key
department store customers and pure play digital commerce retailers; (ii) operating retail stores, which are primarily
located in premium outlet centers in the United States and Canada, and digital commerce sites in North America, which sell
CALVIN KLEIN branded apparel, accessories and related products; and (iii) licensing and similar arrangements relating to
the use by third parties of the brand names CALVIN KLEIN, CALVIN KLEIN 205 W39 NYC and CK Calvin Klein for a
broad array of products and retail services in North America. This segment also includes, since December 2016, the
Company’s proportionate share of the net income or loss of its investment in its unconsolidated Calvin Klein foreign
affiliate in Mexico.
Calvin Klein International Segment - This segment consists of the Company’s Calvin Klein International division.
This segment derives revenue principally from (i) marketing CALVIN KLEIN branded apparel and related products at
wholesale principally in Europe, Asia and Brazil, primarily to department and specialty stores, digital commerce sites
operated by key department store customers and pure play digital commerce retailers, franchisees of CALVIN KLEIN,
distributors and licensees; (ii) operating retail stores and digital commerce sites in Europe, Asia and Brazil, which sell
CALVIN KLEIN branded apparel, accessories and related products; and (iii) licensing and similar arrangements relating to
the use by third parties of the brand names CALVIN KLEIN 205 W39 NYC, CK Calvin Klein and CALVIN KLEIN for a
broad array of products and retail services outside of North America. This segment also includes the Company’s
proportionate share of the net income or loss of its investments in unconsolidated Calvin Klein foreign affiliates in
Australia and India.
Tommy Hilfiger North America Segment - This segment consists of the Company’s Tommy Hilfiger North America
division. This segment derives revenue principally from (i) marketing Tommy Hilfiger branded apparel and related products
at wholesale in North America, primarily to department stores, principally Macy’s, Inc. and Hudson’s Bay Company, as
well as digital commerce sites operated by these department store customers and pure play digital commerce retailers; (ii)
operating retail stores, which are primarily located in premium outlet centers in North America, and digital commerce sites
in North America, which sell Tommy Hilfiger branded apparel, accessories and related products; and (iii) licensing and
similar arrangements relating to the use by third parties of the Tommy Hilfiger brand name for a broad array of products in
North America. This segment also includes, since December 2016, the Company’s proportionate share of the net income or
loss of its investment in its unconsolidated Tommy Hilfiger foreign affiliate in Mexico.
F-48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Tommy Hilfiger International Segment - This segment consists of the Company’s Tommy Hilfiger International
division. This segment derives revenue principally from (i) marketing Tommy Hilfiger branded apparel and related products
at wholesale principally in Europe and China, primarily to department and specialty stores, digital commerce sites operated
by key department store customers and pure play digital commerce retailers, franchisees of Tommy Hilfiger, distributors
and licensees; (ii) operating retail stores in Europe, China and Japan and international digital commerce sites, which sell
Tommy Hilfiger branded apparel, accessories and related products; and (iii) licensing and similar arrangements relating to
the use by third parties of the Tommy Hilfiger brand name for a broad array of products outside of North America. This
segment also includes the Company’s proportionate share of the net income or loss of its investments in unconsolidated
Tommy Hilfiger foreign affiliates in Brazil, India and Australia. This segment included the Company’s proportionate share
of the net income or loss of its investment in TH China until April 13, 2016, on which date the Company began to
consolidate the operations as a wholly owned subsidiary of the Company in conjunction with the TH China acquisition.
Please see Note 2, “Acquisitions,” for a further discussion.
Heritage Brands Wholesale Segment - This segment consists of the Company’s Heritage Brands Wholesale division.
This segment derives revenue primarily from the marketing to department, chain and specialty stores, digital commerce
sites operated by select wholesale partners and pure play digital commerce retailers in North America of (i) dress shirts and
neckwear under various owned and licensed brand names, including several private label brands; (ii) men’s sportswear
principally under the brand names Van Heusen, IZOD and ARROW; (iii) swimwear, fitness apparel, swim accessories and
related products under the brand name Speedo; and (iv) women’s intimate apparel under the brand names Warner’s and
Olga. This segment also includes the Company’s proportionate share of the net income or loss of its investments in its
unconsolidated Heritage Brands foreign affiliates in Australia and, since December 2016, in Mexico.
Heritage Brands Retail Segment - This segment consists of the Company’s Heritage Brands Retail division. This
segment derives revenue principally from operating retail stores, primarily located in outlet centers throughout the United
States and Canada, which primarily sell apparel, accessories and related products. The Company exited the Izod retail
business in the third quarter of 2015. As of the end of 2015, the Company’s Heritage Brands retail business primarily
consisted of its Van Heusen stores but, beginning in 2015, the Company started offering a limited selection of IZOD Golf,
Warner’s and Speedo products in some of its Heritage Brands stores. A majority of the Company’s Heritage Brands stores
now offer a broad selection of Van Heusen men’s and women’s apparel with limited selections of these other brands, some
of which feature multiple brand names on the door signage.
F-49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
The following tables present summarized information by segment:
(In millions)
Revenue – Calvin Klein North America
Net sales
Royalty revenue
Advertising and other revenue
Total
Revenue – Calvin Klein International
Net sales
Royalty revenue
Advertising and other revenue
Total
Revenue – Tommy Hilfiger North America
Net sales
Royalty revenue
Advertising and other revenue
Total
Revenue – Tommy Hilfiger International
Net sales
Royalty revenue
Advertising and other revenue
Total
Revenue – Heritage Brands Wholesale
Net sales
Royalty revenue
Advertising and other revenue
Total
Revenue – Heritage Brands Retail
Net sales
Royalty revenue
Advertising and other revenue
Total
Total Revenue
Net sales
Royalty revenue
Advertising and other revenue
Total(2)
2016
(1)
2015
(1)
2014
$ 1,513.0
131.7
45.2
1,689.9
$ 1,457.0
133.7
44.0
1,634.7
$ 1,391.1
115.6
44.1
1,550.8
1,346.2
72.9
26.2
1,445.3
1,502.4
48.9
12.0
1,563.3
1,899.4
44.5
3.6
1,947.5
1,271.6
20.3
3.9
1,295.8
258.8
2.3
0.2
261.3
1,183.4
78.2
26.3
1,287.9
1,567.6
42.4
12.7
1,622.7
1,693.6
49.3
3.9
1,746.8
1,387.6
19.0
2.9
1,409.5
316.3
2.2
0.2
318.7
1,198.8
78.6
30.6
1,308.0
1,595.6
30.2
10.0
1,635.8
1,886.1
56.2
3.7
1,946.0
1,425.1
17.2
2.7
1,445.0
352.4
2.7
0.5
355.6
7,791.4
320.6
91.1
$ 8,203.1
7,605.5
324.8
90.0
$ 8,020.3
7,849.1
300.5
91.6
$ 8,241.2
(1) Revenue was impacted by the strengthening of the United States dollar against foreign currencies in which the
Company transacts significant levels of business. Please see section entitled “Results of Operations” in Management’s
Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this report for a further
discussion.
(2) No single customer accounted for more than 10% of the Company’s revenue in 2016, 2015 or 2014.
F-50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
(In millions)
2016
(1)
2015
Income before interest and taxes – Calvin Klein North
America
$
123.9
Income before interest and taxes – Calvin Klein International
209.6
(3)(7)(9)
(7)(9)
Income before interest and taxes – Tommy Hilfiger North
America
Income before interest and taxes – Tommy Hilfiger
International
135.8
(4)
328.3
(5)(6)
$
226.4
186.6
173.9
224.7
(1)
(10)
(10)
2014
$
225.6
(13)
118.7
(13)(15)
242.9
261.2
Income before interest and taxes – Heritage Brands Wholesale
90.2
(7)
90.4
(10)(11)
96.6
(13)
Income (loss) before interest and taxes – Heritage Brands
Retail
Loss before interest and taxes – Corporate(2)
8.8
(107.4)
(7)(8)
(3.4)
(138.1)
(12)
(10)
(24.8)
(14)
(390.3)
(13)(16)
Income before interest and taxes
$
789.2
$
760.5
$
529.9
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Income (loss) before interest and taxes was significantly impacted by the strengthening of the United States dollar
against foreign currencies in which the Company transacts significant levels of business. Please see section
entitled “Results of Operations” in Management’s Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of this report for a further discussion.
Includes corporate expenses not allocated to any reportable segments, the Company’s proportionate share of the
net income or loss of its investment in Karl Lagerfeld and Gazal and the results of PVH Ethiopia. Corporate
expenses represent overhead operating expenses and include expenses for senior corporate management, corporate
finance, information technology related to corporate infrastructure and actuarial gains and losses from the
Company’s pension and other postretirement plans. Actuarial gains (losses) from the Company’s United States
pension and other postretirement plans totaled $39.1 million, $20.2 million and $(138.9) million in 2016, 2015
and 2014, respectively.
Income before interest and taxes for 2016 included a noncash loss of $81.8 million related to the Mexico
deconsolidation. Please see Note 5, “Investments in Unconsolidated Affiliates” for a further discussion.
Income before interest and taxes for 2016 included costs of $11.0 million associated with the early termination of
the license agreement for the Tommy Hilfiger men’s tailored clothing business in North America in order to
consolidate the men’s tailored businesses for all brands in North America under one partner (the “TH men’s
tailored license termination”).
Income before interest and taxes for 2016 included a gain of $18.1 million associated with a payment made to the
Company to exit a Tommy Hilfiger flagship store in Europe.
Income before interest and taxes for 2016 included a noncash gain of $153.1 million to write-up the Company’s
equity investment in TH China to fair value in connection with the TH China acquisition. Partially offsetting the
gain were acquisition related costs of $76.9 million, principally consisting of valuation adjustments and
amortization of short-lived assets, and a one-time cost of $5.9 million recorded on the Company’s equity
investment in TH China. Please see Note 2, “Acquisitions,” for a further discussion.
Income (loss) before interest and taxes for 2016 included costs of $9.8 million associated with the integration of
Warnaco and the related restructuring. Such costs were included in the Company’s segments as follows: $0.2
million in Calvin Klein North America; $2.6 million in Calvin Klein International; $0.4 million in Heritage
Brands Wholesale; and $6.6 million in corporate expenses not allocated to any reportable segments.
(8) Loss before interest and taxes for 2016 included costs of $15.8 million related to the Company’s amendment of its
credit facilities. Please see Note 8, “Debt,” for a further discussion.
F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
(9)
Income before interest and taxes for 2016 included costs of $5.5 million associated with the restructuring related
to the new global creative strategy for CALVIN KLEIN. Such costs were included in the Company’s segments as
follows: $2.7 million in Calvin Klein North America; and $2.8 million in Calvin Klein International.
(10) Income (loss) before interest and taxes for 2015 includes costs of $73.4 million associated with the integration of
Warnaco and the related restructuring. Such costs were included in the Company’s segments as follows: $8.3
million in Calvin Klein North America; $12.9 million in Calvin Klein International; $8.1 million in Heritage
Brands Wholesale and $44.1 million in corporate expenses not allocated to any reportable segments.
(11) Income before interest and taxes for 2015 included costs of $16.5 million principally related to the discontinuation
of several licensed product lines in the Heritage Brands dress furnishings business.
(12) Loss before interest and taxes for 2015 includes costs of $10.3 million related to the operation of and exit from the
Izod retail business.
(13) Income (loss) before interest and taxes for 2014 includes costs of $139.4 million associated with the integration of
Warnaco and the related restructuring. Such costs were included in the Company’s segments as follows: $14.0
million in Calvin Klein North America; $51.1 million in Calvin Klein International; $17.7 million in Heritage
Brands Wholesale and $56.6 million in corporate expenses not allocated to any reportable segments.
(14) Loss before interest and taxes for 2014 includes costs of $21.0 million associated with the exit from the
Company’s Izod retail business, the majority of which was noncash impairment charges.
(15) Income before interest and taxes for 2014 includes a net gain of $8.0 million associated with the deconsolidation
of certain Calvin Klein subsidiaries in Australia and the Company’s previously consolidated Calvin Klein joint
venture in India. Please see Note 5, “Investments in Unconsolidated Affiliates” and Note 6, “Redeemable Non-
Controlling Interests” for further discussion.
(16) Loss before interest and taxes for 2014 includes costs of $93.1 million associated with the Company’s amendment
and restatement of its credit facilities and the related redemption of its 7 3/8% senior notes due 2020. Please see
Note 8, “Debt,” for a further discussion.
Intersegment transactions primarily consist of transfers of inventory principally from the Heritage Brands Wholesale
segment to the Heritage Brands Retail segment, the Calvin Klein North America segment and the Tommy Hilfiger North
America segment. These transfers are recorded at cost plus a standard markup percentage. Such markup percentage on
ending inventory is eliminated principally in the Heritage Brands Retail segment, the Calvin Klein North America segment
and the Tommy Hilfiger North America Segment.
F-52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
(In millions)
Identifiable Assets
Calvin Klein North America(1)
Calvin Klein International
Tommy Hilfiger North America
Tommy Hilfiger International(2)
Heritage Brands Wholesale
Heritage Brands Retail
Corporate (3)
Total
Depreciation and Amortization
Calvin Klein North America
Calvin Klein International
Tommy Hilfiger North America
Tommy Hilfiger International (4)
Heritage Brands Wholesale
Heritage Brands Retail
Corporate
Total
Identifiable Capital Expenditures(5)
Calvin Klein North America
Calvin Klein International
Tommy Hilfiger North America
Tommy Hilfiger International
Heritage Brands Wholesale
Heritage Brands Retail
Corporate
Total
2016
2015
2014
$ 1,752.1
2,821.0
1,229.8
3,481.3
1,203.5
75.5
504.7
$ 11,067.9
$ 1,935.7
2,752.8
1,222.8
3,213.1
1,297.0
76.1
176.3
$ 10,673.8
$ 1,834.9
2,819.9
1,258.6
3,255.8
1,342.7
91.9
192.8
$ 10,796.6
$
$
$
$
47.6
70.5
35.3
139.2
15.6
5.4
8.2
321.8
39.3
79.5
26.9
82.0
14.1
7.0
8.9
257.7
$
$
$
$
43.3
61.1
35.4
87.0
15.3
5.2
10.1
257.4
55.1
70.6
36.1
83.2
14.6
4.4
7.3
271.3
$
$
$
$
38.0
58.6
31.9
87.4
14.6
7.2
7.0
244.7
52.1
49.9
38.9
93.2
10.2
8.2
6.7
259.2
(1)
(2)
Identifiable assets in 2016 included a net reduction of $125.6 million resulting from the Mexico deconsolidation.
Please see Note 5, “Investments in Unconsolidated Affiliates,” for a further discussion.
Identifiable assets in 2016 included a net increase of $387.3 million resulting from the TH China acquisition.
Please see Note 2, “Acquisitions,” for a further discussion.
(3) The increase in Corporate identifiable assets in 2016 is largely due to an increase in cash.
(4) Depreciation and amortization in 2016 included a $47.1 million increase in amortization resulting from the TH
China acquisition. Please see Note 2, “Acquisitions,” and Note 7, “Goodwill and Other Intangible Assets,” for
further discussion.
(5) Capital expenditures in 2016 included $35.6 million of accruals that will not be paid until 2017. Capital
expenditures in 2015 included $24.5 million of accruals that were not paid until 2016. Capital expenditures in
2014 included $17.0 million of accruals that were not paid until 2015.
F-53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
Property, plant and equipment, net based on the location where such assets are held, was as follows:
(In millions)
Domestic
Canada
Europe
Asia (2)
Other foreign (3)
Total
2016 (1)
2015 (1)
2014
$
$
412.8
31.0
230.5
66.8
18.8
759.9
$
$
419.1
31.8
221.6
57.9
14.2
744.6
$
$
388.6
38.3
230.2
53.1
15.5
725.7
(1) Property, plant and equipment, net was impacted by the strengthening of the United States dollar against certain
foreign currencies in which the Company transacts significant levels of business. Please see section entitled
“Results of Operations” in Management’s Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of this report for a further discussion.
(2) Property, plant and equipment, net as of January 29, 2017 included an increase resulting from the TH China
acquisition. Please see Note 2, “Acquisitions,” for a further discussion of the TH China acquisition.
(3) Property, plant and equipment, net as of January 29, 2017 included a net increase, consisting of an increase related
to PVH Ethiopia, partially offset by a decrease as a result of the Mexico deconsolidation. Please see Note 6,
“Redeemable Non-Controlling Interests”and Note 5, “Investments in Unconsolidated Affiliates,” for further
discussion of PVH Ethiopia and the Mexico deconsolidation, respectively.
Revenue, based on location of origin, was as follows:
(In millions)
Domestic
Canada
Europe
Asia(2)
Other foreign (3)
Total
2016 (1)
2015 (1)
$
$
4,226.6
484.5
2,372.7
910.4
208.9
8,203.1
$
$
4,406.2
454.2
2,130.8
785.3
243.8
8,020.3
$
$
2014
4,404.8
468.5
2,304.9
779.3
283.7
8,241.2
(1) Revenue was impacted by the strengthening of the United States dollar against foreign currencies in which the
Company transacts significant levels of business. Please see section entitled “Results of Operations” in
Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of
this report for a further discussion.
(2) Revenue in Asia in 2016 included an increase resulting from the TH China acquisition. Please see Note 2,
“Acquisitions,” for a further discussion of the TH China acquisition.
(3) Revenue in other foreign countries in 2016 included a decrease resulting from the Mexico deconsolidation. Please
see Note 5, “Investments in Unconsolidated Affiliates,” for a further discussion of the Mexico deconsolidation.
20. GUARANTEES
The Company is deemed to have guaranteed lease payments for substantially all Bass retail stores included in the sale of
substantially all of the assets of the Company’s Bass business in the fourth quarter of 2013 pursuant to the terms of
noncancelable leases expiring on various dates through 2022. These obligations deemed to be guaranteed include minimum rent
F-54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
payments and relate to leases that commenced prior to the sale of the Bass assets. In certain instances, the Company’s
obligations remain in effect when an option is exercised to extend the term of the lease. The maximum amount deemed to have
been guaranteed for all leases as of January 29, 2017 was $23.2 million and the Company has the right to seek recourse from
the buyer of the Bass assets for the full amount. The estimated fair value of these obligations as of January 29, 2017 and
January 31, 2016 was $1.1 million and $1.9 million, respectively, which was included in accrued expenses and other liabilities
in the Company’s Consolidated Balance Sheets. Please see Note 11, “Fair Value Measurements,” for a further discussion.
In connection with the Company’s investments in PVH Australia and CK India, the Company has guaranteed a portion of
the entities’ debt and other obligations. The maximum amount guaranteed as of January 29, 2017 was approximately $11.5
million, which is subject to exchange rate fluctuation. The guarantees are in effect for the entire terms of the respective
obligations. The estimated fair value of these guarantee obligations was immaterial as of January 29, 2017 and January 31,
2016, respectively.
The Company has certain other guarantees whereby it guaranteed the payment of amounts on behalf of certain other
parties, none of which are material individually or in the aggregate.
21. OTHER COMMENTS
Included in accrued expenses in the Company’s Consolidated Balance Sheets were certain incentive compensation
accruals of $96.1 million and $56.5 million as of January 29, 2017 and January 31, 2016, respectively, and certain wholesale
sales allowance accruals of $113.7 million and $112.6 million as of January 29, 2017 and January 31, 2016, respectively.
The Company’s asset retirement obligations are included in other liabilities in the Company’s Consolidated Balance
Sheets and relate to the Company’s obligation to dismantle or remove leasehold improvements from leased office, retail store or
warehouse locations at the end of a lease term in order to restore a facility to a condition specified in the lease agreement. The
Company records the fair value of the liability for asset retirement obligations in the period in which it is legally or
contractually incurred. Upon initial recognition of the asset retirement liability, an asset retirement cost is capitalized by
increasing the carrying amount of the asset by the same amount as the liability. In periods subsequent to initial measurement,
the asset retirement cost is recognized as expense through depreciation over the asset’s useful life. Changes in the liability for
the asset retirement obligations are recognized for the passage of time and revisions to either the timing or the amount of
estimated cash flows. Accretion expense is recognized in selling, general and administrative expenses for the impacts of
increasing the discounted fair value to its estimated settlement value.
The following table presents the activity related to the Company’s asset retirement obligations for each of the last two
years:
(In millions)
Balance at beginning of year
Business acquisitions
Liabilities incurred
Liabilities settled (payments)
Accretion expense
Revisions in estimated cash flows
Currency translation adjustment
Balance at end of year
2016
2015
$
$
17.9
0.4
3.9
(0.6)
0.4
(0.2)
0.0
21.8
$
$
16.2
—
4.4
(2.2)
0.4
(0.5)
(0.4)
17.9
The Company is a party to certain litigation which, in management’s judgment, based in part on the opinions of legal
counsel, will not have a material adverse effect on the Company’s financial position.
Wuxi Jinmao Foreign Trade Co., Ltd. (“Wuxi”), one of the Company’s finished goods inventory suppliers, has a wholly
owned subsidiary with which the Company entered into a loan agreement in 2016. Under the agreement, Wuxi’s subsidiary
borrowed a principal amount of $13.8 million for the development and operation of a fabric mill. Principal payments are due in
semi-annual installments through November 29, 2026. The outstanding principal balance of the loan bears interest at a rate of
F-55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
PVH CORP.
(i) 4.50% per annum until the sixth anniversary of the closing date of the loan and (ii) a rate of LIBOR plus 4.00% thereafter.
As of January 29, 2017, the outstanding balance, including accrued interest, of $13.9 million was included in other assets in the
Company’s Consolidated Balance Sheet.
22. SUBSEQUENT EVENTS (UNAUDITED)
Subsequent to January 29, 2017, the Company completed the purchase of a group annuity using assets from the Pension
Plans. Under the group annuity, the accrued pension obligations of approximately 4,000 select retiree participants who have
deferred vested benefits under the Pension Plans were transferred to an insurer. The amount of the pension benefit obligation
transferred was approximately $65.3 million.
On March 20, 2017, the Company entered into agreements for a transaction to restructure its supply chain relationship
with Li & Fung Trading Limited (“Li & Fung”). The transaction establishes a new strategic partnership with Li & Fung to
provide services to the Company and also provides for the termination of the Company’s non-exclusive buying agency
agreement with Li & Fung, pursuant to which the Company is obligated to source certain Calvin Klein Jeans products and at
least 54% of certain Tommy Hilfiger products through Li & Fung. The transaction is expected to close July 1, 2017. The
Company expects to incur one-time costs of approximately $55.0 million principally in connection with the termination of the
non-exclusive buying agency agreement.
F-56
PVH CORP.
SELECTED QUARTERLY FINANCIAL DATA - UNAUDITED
(In millions, except per share data)
The following table sets forth selected quarterly financial data (unaudited) for the corresponding thirteen week
periods of the fiscal years presented:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2016
2015
2016
2015
2016
2015
2016
2015
(1),(2),(3),(4),(5)
(11),(12),(13)
(1),(2),(6)
(11),(12),(13),(14)
(1),(3),(7),(8)
(11),(12),(13),(14)
(1),(3),(8),(9),(10)
(11),(12),(13),(14),(15),
(16)
Total revenue
$
1,917.8
$
1,879.3
$
1,933.3 $
1,864.0 $
2,244.3 $
2,164.5 $
2,107.7 $
2,112.5
Gross profit
1,006.9
985.6
1,033.8
1,002.1
1,191.6
1,101.0
1,138.0
1,072.9
Net income
attributable to
PVH Corp.
Basic net income
per common share
attributable to
PVH Corp.
Diluted net
income per
common share
attributable to
PVH Corp.
Price range of
stock per common
share
High
Low
231.6
114.1
90.5
102.2
126.2
221.9
100.7
134.2
2.85
1.38
1.12
1.24
1.58
2.69
1.27
1.64
2.83
1.37
1.11
1.22
1.56
2.67
1.26
1.63
100.00
68.96
113.84
93.80
103.36
118.27
115.40
120.67
114.88
82.10
102.12
92.83
87.12
88.71
96.16
64.16
(1) The first, second, third and fourth quarters of 2016 included pre-tax costs of $30.1 million, $20.3 million, $17.3
million and $15.1 million, respectively, associated with the TH China acquisition.
(2) The first and second quarters of 2016 included pre-tax costs of $7.5 million and $2.3 million, respectively,
associated with the integration of Warnaco and the related restructuring.
(3) The first, third and fourth quarters of 2016 included tax benefits of $5.8 million, $7.8 million and $1.1 million,
respectively, associated with discrete items related to the resolution of uncertain tax positions.
(4) The first quarter of 2016 included pre-tax costs of $5.5 million associated with the restructuring related to the
new global creative strategy for CALVIN KLEIN.
(5) The first quarter of 2016 included a pre-tax noncash gain of $153.1 million to write-up the Company’s equity
investment in TH China to fair value in connection with the TH China acquisition.
(6) The second quarter of 2016 included pre-tax costs of $15.8 million associated with the Company’s amendment
of its credit facilities.
(7) The third quarter of 2016 included a pre-tax gain of $18.1 million associated with a payment made to the
Company to exit a Tommy Hilfiger flagship store in Europe.
(8) The third and fourth quarters of 2016 included pre-tax noncash losses of $76.9 million and $4.9 million,
respectively, related to the Mexico deconsolidation.
(9) The fourth quarter of 2016 included pre-tax costs of $11.0 million associated with the TH men’s tailored license
termination.
(10) The fourth quarter of 2016 included a pre-tax actuarial gain of $39.1 million from the Company’s pension and
other postretirement plans.
F-57
(11) The first, second, third and fourth quarters of 2015 included pre-tax costs of $18.8 million, $13.1 million, $18.9
million and $22.6 million, respectively, associated with the integration of Warnaco and the related restructuring.
(12) The first, second, third and fourth quarters of 2015 included pre-tax costs of $0.5 million, $5.8 million, $2.8
million and $1.2 million, respectively, related to the operation of and exit from the Izod retail business.
(13) The first, second, third and fourth quarters of 2015 included tax benefits of $2.3 million, $0.7 million, $18.5
million and $1.8 million, respectively, associated with discrete items primarily related to the resolution of
uncertain tax positions.
(14) The second, third and fourth quarters of 2015 included pre-tax costs of $3.3 million, $13.1 million and $0.1
million, respectively, principally related to the discontinuation of several licensed product lines in the Heritage
Brands dress furnishings business.
(15) The fourth quarter of 2015 included a pre-tax actuarial gain of $20.2 million from the Company’s pension and
other postretirement plans.
(16) The fourth quarter of 2015 included tax benefits of $11.2 million associated with discrete items related to the
impact of enacted tax law and tax rate changes on deferred taxes.
F-58
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for the preparation and integrity of the consolidated financial statements
appearing in this Annual Report on Form 10-K. The consolidated financial statements were prepared in conformity with
accounting principles generally accepted in the United States and, accordingly, include certain amounts based on management’s
best judgments and estimates.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over
financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the
United States. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the underlying transactions, including the
acquisition and disposition of assets; (ii) provide reasonable assurance that the Company’s assets are safeguarded and
transactions are executed in accordance with management’s authorization and are recorded as necessary to permit preparation
of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United
States; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and
even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation
and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
The Audit & Risk Management Committee of the Company’s Board of Directors, composed solely of directors who are
independent in accordance with New York Stock Exchange listing standards, the Securities Exchange Act of 1934, the
Company’s Corporate Governance Guidelines and the Committee’s charter, meets periodically with the Company’s
independent auditors, the Company’s internal auditors and management to discuss internal control over financial reporting,
auditing and financial reporting matters. Both the independent auditors and the Company’s internal auditors periodically meet
alone with the Audit Committee and have free access to the Committee.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of January 29, 2017.
In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 framework). Based on management’s
assessment and those criteria, management believes that the Company maintained effective internal control over financial
reporting as of January 29, 2017.
The Company’s independent auditors, Ernst & Young LLP, a registered public accounting firm, are appointed by the
Audit & Risk Management Committee, subject to ratification by the Company’s stockholders. Ernst & Young LLP have audited
and reported on the consolidated financial statements of the Company and the effectiveness of the Company’s internal control
over financial reporting. The reports of the independent auditors are contained in this Annual Report on Form 10-K.
/s/ EMANUEL CHIRICO
/s/ MICHAEL SHAFFER
Emanuel Chirico
Chairman and Chief Executive Officer
March 24, 2017
Michael Shaffer
Executive Vice President and Chief
Operating & Financial Officer
March 24, 2017
F-59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of PVH Corp.
We have audited PVH Corp.’s internal control over financial reporting as of January 29, 2017, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). PVH Corp.’s management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included
in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, PVH Corp. maintained, in all material respects, effective internal control over financial reporting as of
January 29, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of PVH Corp. as of January 29, 2017 and January 31, 2016, and the related
consolidated income statements, statements of comprehensive income (loss), statements of changes in stockholders’ equity and
redeemable non-controlling interest and statements of cash flows for each of the three years in the period ended January 29,
2017 of PVH Corp. and our report dated March 24, 2017 expressed an unqualified opinion thereon.
New York, New York
March 24, 2017
/s/ ERNST & YOUNG LLP
F-60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of PVH Corp.
We have audited the accompanying consolidated balance sheets of PVH Corp. as of January 29, 2017 and January 31,
2016, and the related consolidated income statements, statements of comprehensive income (loss), statements of changes in
stockholders' equity and redeemable non-controlling interest and statements of cash flows for each of the three years in the
period ended January 29, 2017. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2).
These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of PVH Corp. at January 29, 2017 and January 31, 2016, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended January 29, 2017, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), PVH Corp.’s internal control over financial reporting as of January 29, 2017, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated March 24, 2017 expressed an unqualified opinion thereon.
New York, New York
March 24, 2017
/s/ ERNST & YOUNG LLP
F-61
PVH CORP.
FIVE YEAR FINANCIAL SUMMARY
(In millions, except per share data, percents and ratios)
Summary of Operations
Revenue
2016 (1)
2015 (2)
2014 (3)
2013 (4)
2012 (5)
$
8,203.1
$
8,020.3
$
8,241.2
$
8,186.4
$
6,043.0
Cost of goods sold, expenses and other income items
7,413.9
7,259.8
7,711.3
7,673.0
5,382.7
Income before interest and taxes
Interest expense, net
Income tax expense (benefit)
Net loss attributable to redeemable non-controlling interest
Net income attributable to PVH Corp.
Per Share Statistics
Basic net income per common share attributable to PVH
Corp.
Diluted net income per common share attributable to PVH
Corp.
Dividends paid per common share
Stockholders’ equity per common share
Financial Position
Current assets (6)
Current liabilities (including short-term borrowings and
current portion of long-term debt)
Working capital (6)
Total assets (6)
Capital leases
Long-term debt (6)
Stockholders’ equity
$
$
789.2
115.0
125.5
(0.3)
549.0
6.84
6.79
0.15
61.16
$
$
760.5
113.0
75.1
—
572.4
6.95
6.89
0.15
55.86
$
$
529.9
138.5
(47.5)
(0.1)
439.0
5.33
5.27
0.15
52.89
$
$
513.4
184.7
185.3
(0.1)
143.5
1.77
1.74
0.15
52.76
$
$
660.3
117.2
109.3
—
433.8
5.98
5.87
0.15
44.61
$
2,879.6
$
2,804.5
$
2,777.7
$
2,831.3
$
2,387.3
1,564.8
1,314.8
1,527.2
1,277.3
1,428.1
1,349.6
1,551.2
1,280.1
11,067.9
10,673.8
10,796.6
11,376.1
16.4
3,197.3
4,804.5
14.6
3,031.7
4,552.3
18.1
3,410.4
4,364.3
25.3
3,828.1
4,335.2
1,162.4
1,224.9
7,654.7
31.1
2,167.3
3,252.6
Other Statistics
Total debt to total capital (6)(7)
Net debt to net capital (6)(8)
Current ratio (6)
40.2%
34.2%
1.8
41.3%
36.8%
1.8
44.8%
41.2%
1.9
47.6%
43.6%
1.8
41.4%
30.2%
2.1
(1) 2016 includes (a) pre-tax costs of $9.8 million associated with the integration of Warnaco and related restructuring; (b) pre-tax costs
of $5.5 million associated with the restructuring related to the new global creative strategy for CALVIN KLEIN; (c) a pre-tax
noncash gain of $153.1 million to write up the Company’s equity investment in TH China to fair value in connection with the TH
China acquisition, partially offset by pre-tax acquisition costs of $76.9 million, principally consisting of valuation adjustments and
amortization of short-lived assets, and a one-time cost of $5.9 million recorded on the Company’s equity investment in TH China;
(d) pre-tax costs of $15.8 million associated with the Company’s amendment of its credit facilities; (e) a pre-tax loss of $81.8
million related to the Mexico deconsolidation; (f) a pre-tax gain of $18.1 million associated with a payment made to the Company
to exit a Tommy Hilfiger flagship store in Europe; (g) pre-tax costs of $11.0 million associated with the TH men’s tailored license
termination; (h) a pre-tax actuarial gain of $39.1 million on pension and other postretirement plans; and (i) discrete tax benefits of
$14.7 million related to the resolution of uncertain tax positions.
(2) 2015 includes (a) pre-tax costs of $73.4 million associated with the integration of Warnaco and the related restructuring; (b) pre-tax
costs of $10.3 million related to the operation of and exit from the Izod retail business; (c) pre-tax costs of $16.5 million principally
related to the discontinuation of several licensed product lines in the Heritage Brands dress furnishings business; (d) a pre-tax
actuarial gain of $20.2 million on pension and other postretirement plans; and (e) discrete tax benefits of $34.5 million primarily
related to the resolution of uncertain tax positions and the impact of enacted tax law and tax rate changes on deferred taxes.
(3) 2014 includes (a) pre-tax costs of $139.4 million associated with the integration of Warnaco and the related restructuring; (b) a net
gain of $8.0 million associated with the deconsolidation of certain Calvin Klein subsidiaries in Australia and the previously
consolidated Calvin Klein joint venture in India; (c) pre-tax costs of $93.1 million associated with the amendment and restatement
of the Company’s senior secured credit facilities and redemption of its 7 3/8% senior notes due 2020; (d) pre-tax costs of $21.0
million associated with the exit from the Izod retail business; (e) a pre-tax actuarial loss of $138.9 million on pension and other
F-62
postretirement plans; and (f) discrete tax benefits of $91.5 million primarily related to Warnaco integration activities and the
resolution of uncertain tax positions.
(4) 2013 includes (a) pre-tax costs of $469.7 million associated with the acquisition and integration of Warnaco and the related
restructuring; (b) pre-tax costs of $40.4 million associated with the debt modification and extinguishment; (c) pre-tax income of
$24.3 million due to the amendment of an unfavorable contract; (d) a pre-tax loss of $20.2 million associated with the sale of
substantially all of the assets of the Bass business; (e) a pre-tax actuarial gain of $52.5 million on pension and other postretirement
plans; (f) a net tax expense of $5.2 million associated with non-recurring discrete items related to the Warnaco acquisition; and (g) a
tax expense of $120.0 million related to an increase to a previously established liability for an uncertain tax position related to
European and United States transfer pricing arrangements.
(5) 2012 includes (a) pre-tax costs of $20.5 million associated with the integration of Tommy Hilfiger and the related restructuring; (b)
pre-tax costs of $42.6 million associated with the acquisition of Warnaco; (c) a pre-tax actuarial loss of $28.1 million on pension
and other postretirement plans; and (d) a tax benefit of $14.0 million resulting from the recognition of previously unrecognized net
operating loss assets and tax credits.
(6) Amounts have been adjusted to reflect the retrospective application of the FASB guidance related to debt issuance costs, which was
adopted by the Company in the first quarter of 2016. Please see Note 1, “Summary of Significant Accounting Policies” in the Notes
to Consolidated Financial Statements included in Item 8 of this report for a further discussion.
(7) Total capital equals total debt (including capital leases) plus stockholders’ equity.
(8) Net debt and net capital equal total debt (including capital leases) plus total capital reduced by cash.
F-63
PVH CORP.
VALUATION AND QUALIFYING ACCOUNTS
(In millions)
SCHEDULE II
Column A
Column B
Column C
Column D
Column E
Description
Year Ended January 29, 2017
Allowance for doubtful accounts
Allowance/accrual for operational
chargebacks and customer markdowns (a)
Total
Year Ended January 31, 2016
Allowance for doubtful accounts
Allowance/accrual for operational
chargebacks and customer markdowns (a)
Total
Year Ended February 1, 2015
Allowance for doubtful accounts
Allowance/accrual for operational
chargebacks and customer markdowns (a)
Total
Balance at
Beginning
of Period
Additions
Charged to
Costs and
Expenses
Additions
Charged to
Other
Accounts
Deductions (b)
Balance
at End
of Period
$
$
$
$
$
$
18.1
$
6.1
$
291.9
310.0
19.0
273.3
292.3
26.4
$
$
$
$
250.6
277.0
$
551.0
557.1
5.1
554.4
559.5
5.4
547.0
552.4
$
$
$
$
$
—
—
—
—
—
—
—
—
—
$
$
$
$
$
$
9.2 (c) $
15.0
553.4 (d)
562.6
$
289.5
304.5
6.0 (c) $
18.1
535.8
541.8
$
291.9
310.0
12.8 (c) $
19.0
524.3
537.1
$
273.3
292.3
(a) Contains activity associated with the wholesale sales allowance accrual included in accrued expenses. Please see Note
21, “Other Comments” for specified amounts.
(b) Includes changes due to foreign currency translation.
(c) Principally accounts written off as uncollectible, net of recoveries.
(d) Includes impact of Mexico deconsolidation.
F-64
About the Archives
The PVH Archives is a physical and digital resource for our associates,
created to preserve and protect all archival materials pertaining to PVH Corp.
and its portfolio of iconic brands.
Calvin Klein
Calvin Klein Women’s Collection, Spring 1986 advertisement
Tommy Hilfiger
“Today, it’s Tommy” print advertisement
Van Heusen
June 1951 advertisement
PVH Corp. utilized a printer that has Forest Stewardship Council® (FSC®) certification, uses soy-based inks exclusively and purchases carbon-neutral materials.
All of the papers used in this publication are Forest Stewardship Council® (FSC®) certified, manufactured using elemental chlorine-free (ECF) bleach,
use sustainable forestry initiative (SFI) certified sourcing, are acid free, and use recycled pulp that is processed chlorine-free (PCF).
The cover and text is printed on Sterling Gloss and contains 10% post-consumer recycled fiber.
The Form 10-K is printed on Domtar Lynx Opaque and contains 30% post-consumer waste fiber.
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PVH Corp.
200 Madison Avenue
New York, NY 10016
annualreport 2016