37
/ ANNUAL REPORT 2019 – SECTION A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
9
C O N T E N T S
1 ..... P R I O R I T I E S
3 ..... L E T T E R T O S T O C K H O L D E R S
6 ..... Y E A R I N R E V I E W
12 ...... T O M M Y H I L F I G E R
16 ...... C A LV I N K L E I N
20 ...... H E R I TA G E B R A N D S
24 ...... C O R P O R AT E R E S P O N S I B I L I T Y
28 ...... D I R E C T O R S , O F F I C E R S , E X E C U T I V E S
& B R A N D M A N A G E M E N T
29 ...... O T H E R I N F O R M AT I O N
30 ...... G A A P T O N O N - G A A P R E C O N C I L I AT I O N S
33 ...... A N N U A L R E P O R T O N F O R M 1 0 - K
A B O U T P V H
PVH is one of the most admired fashion and lifestyle companies
in the world. We power brands that drive FASHION FORWARD –
for good. We manage a diversified brand portfolio, including the
CALVIN KLEIN, TOMMY HILFIGER, Van Heusen, IZOD, ARROW,
Warner’s, Olga and Geoffrey Beene brands, as well as the digital-centric
True&Co. intimates brand. We market a variety of goods under
these and other nationally and internationally known owned and
licensed brands. PVH has over 40,000 associates operating in more
than 40 countries and generated $9.9 billion in revenues in 2019.
That’s the Power of Us. That’s the POWER OF PVH.
V I S I O N
To be the most
admired fashion and
lifestyle company in
the world.
P U R P O S E
We power brands
that drive fashion
forward – for good.
P R I O R I T I E S
1 . D R I V E
4 . D E V E L O P
consumer engagement through innovative
designs and personalized brand and
shopping experiences that capture the
heart of the consumer.
a talented and skilled workforce that
embodies our values and an entrepreneurial
spirit, while empowering our associates to
design their future.
2 . E X PA N D
5 . D E L I V E R
our worldwide reach through organic
growth and acquisitions.
sustainable, profitable growth and generate
free cash flow to create long-term stockholder
value.
3 . I N V E S T
in and evolve how we operate by leveraging
technology and data to be dynamic, nimble
and forward-thinking.
VA L U E S
Individuality
Be you
Partnership
Work together
Passion
Inspire and innovate
Integrity
Do the right thing
Accountability
Own it
S T R AT E G I C P R I O R I T I E S – A N N U A L R E P O R T 2 0 1 9 /
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/ A N N U A L R E P O R T 2 0 1 9 – L E T T E R T O S T O C K H O L D E R S
L E T T E R T O
S T O C K H O L D E R S
Emanuel Chirico
Chairman and
Chief Executive Officer
2019 demonstrated the Power of
PVH. Inspired by our vision and
our purpose, we expanded our
international businesses, both
organically and through the strategic
acquisitions of licensed businesses,
further strengthened our senior
leadership team and deepened
our commitments to effect positive
change in our industry and the
world at large.
We power brands that drive fashion
forward – for good. In 2019, we built
upon our long-standing commitment
to corporate responsibility (“CR”) by
launching Forward Fashion, our vision
for the future that provides a new
level of ambition and transparency
across our CR platform and reinforces
our long-standing commitment to
sustainable business.
We invested in the consumer data
journey, digitization, our supply
chain and our talent, with an
emphasis on inclusion and diversity.
Our dedication to providing the
most desirable products and a
personalized consumer experience
helped us deepen our connection
with consumers. These important
investments continue to support the
transformation of our operations,
while allowing us to make faster and
more informed decisions to drive
long-term opportunities.
The year also presented us with
several headwinds – from a softening
consumer environment to geopolitical
challenges to some self inflicted
issues and ending with the onset of
the COVID-19 outbreak. We took
decisive actions by evolving CALVIN
KLEIN product assortments and in
addressing excess inventory levels
at Tommy Hilfiger North America
stemming from lower levels of
international tourists travelling to the
U.S., as well as weathered challenges
in the moderate segment of the
market where our Heritage Brands
business operates. While these issues
negatively impacted our financial
performance for the year, we believe
that our actions will position us
to deliver sustainable, profitable
future growth.
PVH has a long legacy of delivering
financial excellence and, in March
2020, we celebrated our 100-year
anniversary listed on the New York
Stock Exchange. This is truly an
incredible achievement, as we are
the first apparel company and one
of only 28 companies to reach this
milestone. Our success since our
founding almost 140 years ago speaks
to our resilience and ability to drive
transformation while successfully
managing our brands.
These characteristics will be critical
for PVH as we navigate 2020. As
we begin the year, the COVID-19
outbreak has become a pandemic,
impacting every major market in
which we operate, with temporary
store closings by us and our retail
partners across all regions. Our
people are demonstrating their
passion and dedication to PVH as
I write this, as most of our associates
around the world are working
remotely to continue to operate
our business through this difficult
time. While the pandemic is highly
dynamic and continues to unfold,
my confidence in PVH and its ability
to navigate this crisis is unwavering.
I believe that our core strengths –
our talent, our brands, our strong
fundamentals and balance sheet – will
continue to support us through the
uncertain time, and ultimately lead
us back to a healthy path of long-term
growth once the pandemic subsides.
L E T T E R T O S T O C K H O L D E R S – A N N U A L R E P O R T 2 0 1 9 /
3
By the Numbers
R E V E N U E S
($ in millions)
$9,909
$9,657
$8,915
G A A P E A R N I N G S
P E R S H A R E
$5.60
$9.65
$6.84
N O N - G A A P E A R N I N G S
P E R S H A R E 1
$9.54
$9.60
$7.94
2019
2018
2017
1 Figures exclude certain amounts that were deemed
non-recurring or non-operational. Refer to GAAP
to Non-GAAP Reconciliations on pages 30 and 31.
2 0 1 9 R E V E N U E S
by business
%
by region 1
%
48%
Tommy Hilfiger
37%
Calvin Klein
15%
Heritage Brands
43%
U.S.
37%
Europe
14%
Asia Pacific
6%
Americas
(excluding U.S.)
1 Europe includes the Middle East and Africa;
Asia Pacific includes Australia and New Zealand;
Americas (excluding U.S.) includes Canada, Mexico,
South America, Central America and the Caribbean.
2 0 1 9 F I N A N C I A L
P E R F O R M A N C E
The power of our diversified
business model helped us navigate
the challenges and mitigate some
of the pressure on our financial
performance. We executed against
our strategic priorities and
continued to invest in and evolve
our brands to capture the heart
of today’s consumer.
We grew revenues by 3% to $9.9
billion and delivered GAAP earnings
per share of $5.60 compared to
$9.65 in 2018. On a non-GAAP basis,
we posted earnings per share of
$9.54* (which included a negative
impact of $0.35 per share related
to foreign currency exchange rates)
as compared to $9.60* in 2018. While
these results were below our initial
expectations, performance in our
Europe business was a highlight,
as we continued to experience
outstanding results in our Tommy
Hilfiger business and we re-ignited
the CALVIN KLEIN brand’s
momentum.
Operating a business in these
uncertain times required us to
embrace change while preserving our
unique culture, and we took actions
to best position PVH for long-term
success. These included:
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/ A N N U A L R E P O R T 2 0 1 9 – L E T T E R T O S T O C K H O L D E R S
• Hiring Stefan Larsson into the newly
created role of President, PVH Corp.,
where he is overseeing PVH’s
branded businesses and regions,
with the Calvin Klein business
turnaround as his top focus area.
• Appointing Cheryl Abel-Hodges
as CEO of Calvin Klein, with an
immediate focus on overseeing the
product turnaround and driving
brand expansion, particularly
in Europe and Asia.
• Appointing Tom Chu as President,
PVH Asia Pacific, where he is
overseeing the expansion of
CALVIN KLEIN and TOMMY
HILFIGER across the region,
which is our largest long-term
market opportunity.
• Continuing the optimization of our
Heritage Brands portfolio, including
by streamlining operations, selling
our Speedo North America business
(which closed in April 2020), and
exiting businesses, such as DKNY
men’s apparel, that did not meet
our profitability requirements.
• Addressing challenges in the Tommy
Hilfiger North America business by
proactively taking markdowns to
right-size inventory levels, including
in response to lower levels of
international tourism into the U.S.
• Evolving to the new era of retail by
growing our digital commerce
penetration, expanding our
omni-channel capabilities and
reducing our retail store footprint.
* Figures exclude certain amounts that were deemed
non-recurring or non-operational. Refer to GAAP
to Non-GAAP Reconciliations on pages 30 and 31.
C A P T U R I N G
I N T E R N AT I O N A L
E X PA N S I O N
O P P O R T U N I T I E S
Powered by our brands’ strength,
relevance and recognition, we
continued to pursue our global
expansion efforts. We capitalized
on organic growth opportunities
internationally and acquired
two regional licensed businesses,
resulting in 9% revenue growth
outside the U.S.
“ We leveraged the
incredible power
of our brands to
capture international
expansion
opportunities.”
important markets over the long-
term by leveraging the power of
our regional operations.
• Navigating the brand opportunities in
Asia: While Asia experienced mixed
trends during 2019, we continued
to position our businesses for a
long-term trajectory of sustainable
top and bottom-line growth.
Our strong brand positioning and
talented teams drove the businesses
forward, despite the weakening
consumer environment in China,
protests in Hong Kong SAR, the
U.S.-China trade tensions, and the
COVID-19 outbreak coincident
with the start of the Lunar New
Year holiday. We have dramatically
increased our digital penetration
over the last several years to
reflect local market preferences
and provided more unique brand
experiences. We were pleased to
see a stabilization of business
trends in China during the fourth
quarter before the onset of the
COVID-19 outbreak and continue
to believe the region has significant
growth potential. Japan remained
a positive story, particularly for
TOMMY HILFIGER, and the
newly acquired Australia business
performed better than expected.
Highlights from 2019 include:
• Capitalizing on the European
opportunity: Europe outperformed
as our highest-growth region,
and our strong regional presence
is a key competitive advantage.
Performance for TOMMY
HILFIGER continued to be
exceptional. While the brand is
well-penetrated, with nearly $2.5
billion in revenues in Europe, it
continues to gain market share and
exhibit momentum across all major
countries, channels and categories.
We also further expanded the
CALVIN KLEIN lifestyle in Europe
beyond jeans and underwear,
and our apparel and accessories
businesses under the brand are
being met with an increasingly
strong consumer response.
We remain confident in the
business’s potential to achieve
at least $2 billion in revenues in
Europe over time.
• Acquiring regional licenses:
We completed two acquisitions
during the second quarter of
2019. The first was our acquisition
of Gazal Corporation Limited
(“Gazal”), which was our joint
venture partner for CALVIN KLEIN,
TOMMY HILFIGER, Van Heusen
and other brands in Australia and
New Zealand. The second was our
acquisition of the licensed Tommy
Hilfiger retail business in Central
and Southeast Asia. By taking
direct operating control of these
businesses, we believe we can
expand our brand presence and
market share in these strategically
Y E A R I N R E V I E W
2 01 9 H I G H L I G H T S
“ 2019 demonstrated the Power of PVH as we
expanded our international businesses, further
strengthened our senior leadership team
and deepened our commitments to effect positive
change in our industry and the world at large.”
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/ A N N U A L R E P O R T 2 0 1 9 – Y E A R I N R E V I E W
W I N T E R 2 0 1 9
FA L L 2 0 1 9
• PVH announces support for the Global Fashion Agenda’s
• CALVIN KLEIN marks 50-year anniversary with a CK50 capsule
CEO Agenda 2019
collection and marketing campaign featuring Justin Bieber and
• PVH enters a licensing agreement with NIKE, Inc. for the design,
his wife Hailey Bieber, among others
sourcing, marketing and worldwide distribution of NIKE-branded
• PVH signs The Fashion Pact, a coalition of fashion and textile
men’s underwear beginning Fall 2020
companies pledging to reduce the environmental impact
• TOMMY HILFIGER begins partnership with Zendaya as global
of the fashion industry
brand ambassador for Spring and Fall 2019
• CALVIN KLEIN names singer-actor Lay Zhang as its first-ever
S P R I N G / S U M M E R 2 0 1 9
Chinese global ambassador
• PVH re-certified as Great Place to Work in the U.S. for the
• PVH announces Forward Fashion, our new CR strategy along
second year
with 15 key targets
• PVH announces a $3 million, three-year grant extension
• Stefan Larsson appointed into the newly created role
with Save the Children
of President, PVH Corp.
• Cheryl Abel-Hodges appointed CEO of Calvin Klein
W I N T E R 2 0 2 0
• PVH supports LGBTQ rights through worldwide Pride celebrations
• PVH closes on two acquisitions:
– Acquires the Tommy Hilfiger retail business in Central and
Southeast Asia
– Acquires Gazal, our joint venture partner for CALVIN KLEIN,
TOMMY HILFIGER and Van Heusen in Australia and
New Zealand
• True&Co. expands to additional Target locations
• Calvin Klein and G-III enter into a license agreement for
CALVIN KLEIN JEANS women’s assortments in North America
• Tommy Hilfiger commits for all global design teams at its
Amsterdam headquarters to achieve 100% 3D apparel design
by its Spring 2022 collections
• CALVIN KLEIN and TOMMY HILFIGER launch Lunar New Year
capsule collections
• Tom Chu appointed as President, PVH Asia Pacific
• Received approval of our absolute greenhouse gas emission
reduction targets by the Science Based Targets initiative
• PVH ranked #16 on Newsweek magazine’s “America’s Most
Responsible Companies” list
• PVH listed on Fortune magazine’s “100 Best Workplaces
for Diversity” list
• PVH announces sale of Speedo North America business
Y E A R I N R E V I E W – A N N U A L R E P O R T 2 0 1 9 /
7
U S I N G O U R P L AT F O R M
T O I N S P I R E
C O N S U M E R S
Consumers today are looking to
express their individuality. We have
reflected this social paradigm by
enlisting a diverse representation
of brand ambassadors who appeal
to a wide range of consumers and
regional audiences. For TOMMY
HILFIGER, we leveraged our
successful partnership with Lewis
Hamilton and introduced Zendaya as
TOMMY HILFIGER’s female brand
ambassador beginning in Spring
2019, which was applauded for its
focus on inclusivity and its diverse
vision of beauty. We also increased
our use of regional influencers to
better serve each market’s needs,
including our partnerships catering
to Asia, featuring Shawn Yue for
TOMMY HILFIGER and Lay Zhang
for CALVIN KLEIN.
We continued to invest in and evolve
our industry-leading marketing
efforts to ignite brand heat, with a
focus on expanding our global social
media following, engagement and
earned media value. To celebrate
CALVIN KLEIN’s 50th anniversary,
we offered a limited-edition CK50
capsule collection and offered
curated experiences to reinforce
brand moments and drive product
engagement. Across all of our
platforms, we delivered consistent
messaging to enhance the consumer
journey.
Unique and differentiated product
continues to be a key value driver to
convert consumers and instill long-
lasting brand loyalty. We increased
our offerings of personalized
products, including Calvin Klein’s
#MYCALVINS CUSTOM collection;
our Pride collections for CALVIN
KLEIN, TOMMY HILFIGER, IZOD
and Speedo; and our Lunar New Year
product drops for CALVIN KLEIN
and TOMMY HILFIGER. Overall,
these capsule collections experienced
strong community engagement, with
elevated conversion, sell-throughs
and average unit retail prices.
The in-store experience remains
critically important for consumers.
We tested new experiential retail
concepts, launched pop-up shops
and expanded our presence to meet
the next generation of consumers
where they prefer to shop. One of
the highest profile store openings
of the year was the CALVIN KLEIN
store in Le Marais district of Paris,
which offers the most up-to-date store
features, including personalization
services, digital screens and tablets to
enhance the shopping experience.
Sustainability increasingly is top of
mind for consumers, and we are
seeking ways to produce more of
our products using environmentally
friendly processes, including our
efforts with TOMMY JEANS, which
included 100% recycled cotton denim
styles for Spring 2019. This was in
addition to utilizing low impact denim
finishing techniques at Calvin Klein
and reducing our use of plastics, while
also using more recycled materials
across our Heritage Brands divisions.
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/ A N N U A L R E P O R T 2 0 1 9 – L E T T E R T O S T O C K H O L D E R S
“ We made significant
investments to
ignite brand heat,
while also investing
in the next
generation of tools
and technologies.”
D R I V I N G B U S I N E S S
T R A N S F O R M AT I O N
W I T H I N V E S T M E N T S
As the global retail environment
continues transforming at a
rapid pace, so too are the tools
and technologies that can make
companies smarter, faster and better
equipped to enhance the consumer
experience. We continue to prioritize
investments that we believe will drive
sustainable growth and build new
capabilities for us to succeed in the
evolving retail landscape.
We made significant strides in the
consumer data journey, as we believe
that understanding our consumers
more thoroughly can help us build
more meaningful, longer-lasting
relationships. We enabled data-
driven marketing, allowing us to
personalize the consumer experience,
and we began to unlock the power
of consumer segmentation. As we
continue to expand upon our
capabilities and acquire more
consumer data, we believe that we
will be in a stronger position to better
target our consumers and optimize
our product mix, while also driving
higher conversion and more
frequent purchasing.
We continued to fuel our digital
capabilities by upgrading our digital
and mobile commerce sites to allow
more storytelling and improve our
site navigation. We increased our
digital penetration with our wholesale
partners, in addition to introducing
new brand events and activations to
gain market share. Omni-channel
was another focus area, and we
opened additional store locations
that featured RFID inventory
management, digital touch screens
and use of tablets.
Optimizing our supply chain, with a
focus on sustainability, remained
a top priority. Together with our
supply partners, we continued to
diversify our sourcing footprint across
Southeast Asia and into sub-Saharan
east Africa, including Ethiopia, which
became even more critical in light of
the protracted trade tensions between
the U.S. and China, including the
imposition of significant additional
tariffs on Chinese goods imported
into the U.S.
We focused on leveraging our use of
speed models, particularly for core
replenishment items. Our expanded
use of 3D capabilities for product
design, development and showrooms
reduces our needs for samples and
decreases the time to market, which
can help us improve markdown rates
and gross margins. Across all of
these initiatives, we maintained our
commitment to sustainability and
circularity by seeking to reduce waste
and pollution, as we recognize that
our business has a direct impact on
the environment and communities
where we operate.
L E T T E R T O S T O C K H O L D E R S – A N N U A L R E P O R T 2 0 1 9 /
9
“ I believe that we are well-positioned to
deliver sustainable, profitable long-term
growth, in addition to leading the fashion
industry towards a more responsible future.”
• Further solidifying our credit profile
• Repurchasing $325 million of stock.
through our senior credit facilities
refinancing.
• Successfully launching our first-ever
commercial paper program, giving
us access to another capital market,
while helping us lower our overall
cost of capital.
• Maintaining our steadfast focus
on working capital management,
as reflected by our inventory
levels, which ended the year
down 7% compared to 2018.
• Paying down $71 million of debt,
which brought our net leverage
ratio down to 1.8x*, which is within
our target leverage range.
We believe that the health of our
balance sheet, and our willingness
to use it as a strategic asset to
improve liquidity while navigating
these uncertain times, is a key
competitive advantage for PVH.
• Generating approximately $665
million in free cash flow*†, which we
deployed across many of our capital
allocation priorities.
† Free cash flow is a non-GAAP financial measure defined
as cash flow from operations less capital expenditures
and dividends.
* Figures exclude certain amounts that were deemed
non-recurring or non-operational. Refer to GAAP
to Non-GAAP Reconciliations on pages 30 and 31.
L E V E R AG I N G T H E
P O W E R O F O U R
B A L A N C E S H E E T
The health of our balance sheet
continues to be a key priority
and we were pleased with several
developments from the year:
• Achieving investment grade status
from Moody’s, which is consistent
with our rating from S&P.
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/ A N N U A L R E P O R T 2 0 1 9 – L E T T E R T O S T O C K H O L D E R S
We continue to manage our
businesses for the long-term but the
impact of the COVID-19 pandemic
will significantly weigh on our
businesses during 2020 and shape the
future of consumer spending and
the retail landscape. Our top priority
is the well-being of our associates
and business partners, their families
and local communities, and we
continue to follow health guidelines
and government protocols relating
to our store operations to mitigate
the spread of the virus. We are
taking decisive actions to help
us navigate this backdrop, from
enhancing our liquidity position
to making significant expense
reductions, including payroll
reductions and further managing
our inventories in response to
lower levels of consumer demand
as we come out of the pandemic.
While 2020 is certainly beginning
with significant global challenges,
CALVIN KLEIN and TOMMY
HILFIGER have exceptional brand
power and together with our business
model, I believe we have the ability
to navigate this environment.
As we harness the collective power
of PVH and execute on our key
value drivers over the next few years,
I believe that we are well-positioned
to deliver sustainable, profitable long-
term growth for our stockholders,
in addition to leading the fashion
industry towards a more sustainable
and responsible future.
Emanuel Chirico
Chairman and Chief Executive Officer
T H E P O W E R O F P V H
I feel so inspired to lead a company
that empowers its associates every
day to push new boundaries, drive
excitement and continue to win over
the hearts of consumers worldwide.
I truly believe that PVH is one of the
most admired fashion and lifestyle
companies in the world, driven by the
incredible talent and passion of our
people across the company.
Together, we received numerous
recognitions in 2019, including
placement on Fortune magazine’s
lists of “100 Best Workplaces for
Diversity” and “The World’s Most
Admired Companies,” in addition
to being ranked #12 on Barron’s list
of “100 Most Sustainable Companies
in America” and being re-certified
as a Great Place to Work in the U.S.
I am so proud to be recognized for
the positive impacts and inclusive
culture that we have all worked so
hard to create, which will help us
continue to secure and maintain
the best talent in the industry.
“ As TOMMY HILFIGER continues to
experience momentum, we believe that
there are significant opportunities for
long-term growth and margin expansion.”
The TOMMY HILFIGER brand
continued to experience momentum
in 2019. Brand health remained
strong, with increasing brand
awareness across Europe, Asia and
the Americas compared to 2018.
Consumer interest also continued
to grow, as searches of TOMMY
HILFIGER increased the most on
Google among our competitive
brands for the second year.
Revenues for Tommy Hilfiger rose
8% to $4.7 billion, as we deepened our
connections with our core consumers,
while at the same time converting
the next generation, by delivering
differentiated product assortments
and engaging consumer experiences.
While we experienced softness in
our North America retail business,
our international results were
outstanding, particularly in Europe,
where the brand continues to gain
market share and outperform the
broader apparel market.
We capitalized on TOMMY
HILFIGER’s international strength
by acquiring licensed businesses
in Central and Southeast Asia,
and in Australia and New Zealand.
With greater direct control, we
believe that we can further develop
the brand’s lifestyle positioning,
expand our distribution and offer
consumers a more immersive and
elevated brand experience in the
Asia Pacific region.
D R I V I N G I M PAC T
T H R O U G H C O N S U M E R
E N G AG E M E N T
I N I T I AT I V E S
The consumer is at the heart of
everything we do and we continued
to reinvent how to connect with
and inspire the TOMMY HILFIGER
consumer. We delivered exciting
activations that drove commercial sell-
outs and strengthened our consumers’
connection with the brand. This
includes the brand’s experiential
event in Berlin, where attendees were
able to browse and customize the
brand’s Spring 2019 TommyXLewis
collection. Tommy Hilfiger and Lewis
Hamilton also presented their Fall
2019 TommyXLewis collection, one
of their most successful commercial
collaborations to-date, at a one-night-
only event in Milan, which included
a 100% sell-out on a limited edition
golden hoodie that was released on
the day of the fashion show.
We continued to inject freshness
into our collections through
collaborations, including the
TommyXRossignol capsule collection,
which was designed with the
legendary ski brand, and the bold
TOMMY JEANS Coca-Cola® capsule
collection, a special re-edition of the
styles Mr. Tommy Hilfiger designed in
1986 to create the very first TOMMY
HILFIGER JEANS Coca-Cola®
Clothes collection.
Celebrity partnerships continued
to be a cornerstone of TOMMY
HILFIGER for consumer engagement
efforts, with Tommy Hilfiger using
a balance of global and regional
brand ambassadors. Beginning in
Spring 2019, actress, singer and
activist Zendaya joined as global
brand ambassador, further elevating
the brand’s profile and reach with
the female consumer. The Fall 2019
TOMMYNOW fashion show for
the TommyXZendaya collaboration
resulted in TOMMY HILFIGER being
the #1 most talked about fashion
brand on Twitter during New York
Fashion Week.
T O M M Y H I L F I G E R – A N N U A L R E P O R T 2 0 1 9 /
13
S T R E N G T H O F O U R
G L O B A L O P E R AT I O N S
Tommy Hilfiger delivered strong
revenue growth in 2019, driven
by exceptional performance in its
international operations, where
revenues rose 15%. Europe
continued to outperform our
expectations and our revenue in the
region reached nearly $2.5 billion,
driven by broad-based strength
across all channels of distribution
in key markets. We believe that we
can leverage our market-leading
position to further expand the brand
lifestyle into additional categories and
continue to gain share from regional
and global competitors.
Our business in the Asia Pacific
region was also a highlight. Our
business in Japan posted healthy
growth, driven by our investments
in products, marketing and the
overall consumer experience.
Outperformance in Australia was
experienced following the acquisition
of our business there.
While the consumer backdrop
in the Greater China region was
challenging, in part due to political
protests in Hong Kong SAR, the
on-going U.S.- China trade tensions
and the onset of the COVID-19
outbreak, we continue to believe
that there is a significant multi-
year opportunity as we expand our
category offerings, integrate the
acquired licensed business in Central
and Southeast Asia, and hone in
on the incredible brand power in
the region.
In North America, the wholesale
business continued to post positive
performance, particulary on the
digital channel. We capitalized on
China continues to be a strategically
important market for Tommy Hilfiger
and, with this in mind, we launched
the Fall 2019 collection with Shawn
Yue as our brand ambassador.
The partnership contributed to
Tommy Hilfiger’s outstanding
performance on Tmall for China’s
Single’s Day, where revenues rose
nearly 60% compared to the prior
year, driven by strong sell-through
of men’s apparel.
TA R G E T E D
I N V E S T M E N T S T O
D R I V E T H E C O N S U M E R
E X P E R I E N C E
As the retail landscape continues
its rapid transformation, Tommy
Hilfiger took further actions to
enhance the shopping environments
across all channels of distribution.
To drive the ultimate in-store
shopping experience, we opened
additional “Store of the Future”
locations globally. This included
opening the first Store of the Future
in Asia in Beijing in May 2019, with
the store becoming our second
best-selling full-price store in China.
We continued to merge the online
and offline experience by offering
features such as RFID scanning,
which allows consumers to easily
check for product availability, outfit
recommendations powered by
artificial intelligence, and smart size
guides to help consumers find their
perfect denim fit.
We also continued our journey
to drive digitization across the
business and build the online
TOMMY HILFIGER community by
reaching the next generation of
consumers. We launched tommy.com
websites in Greece, Peru and UAE,
which, together with our other
markets, drove over 30% digital
growth on our own sites.
Tommy Hilfiger also leveraged the
power of digital through its 3D
design capabilities, which are helping
the business reduce lead times
throughout the value chain. The
brand solidified its commitment to
3D design by announcing its goal for
100% of global sportswear apparel
collections to be designed using
3D technology by Spring 2022.
14 / A N N U A L R E P O R T 2 0 1 9 – T O M M Y H I L F I G E R
As we execute on these priorities and
continue to evolve with the consumer
as their needs and behaviors change,
we believe that we can deliver a strong
growth trajectory for the brand
globally over the long-term.
Accelerating
Consumer-Centric
Sustainability
Make it Possible
With hard work and a positive
outlook, anything is possible.
Tommy Hilfiger’s story is proof
that if you are determined, you
can create opportunity in the
face of any challenge. Today,
we face some of the biggest
challenges yet – from climate
change to inequality and
prejudice. One fashion brand
can’t change all of this. But we
will do everything in our power
to create fashion that wastes
nothing and welcomes all.
prize for developing solutions that
promote inclusivity and sustainability
in fashion.
Sustainability remained at the heart
of TOMMY HILFIGER, and we
increased our commitment to circular
brand principles with our launch of
100% recycled cotton denim styles
in the Spring 2019 TOMMY JEANS
collection. We continue to build on
our commitment to create fashion
that wastes nothing and welcomes all
through our Make it Possible strategy.
Highlights include an increased focus
on the use of sustainable cotton,
developing lower-impact denim and
setting new standards for producing
denim in a faster, more consistent and
more environmentally friendly way.
Looking ahead, we believe that
Tommy Hilfiger is well-positioned
to continue its path of long-term
growth. Once the COVID-19
pandemic subsides, we see significant
opportunities for us to expand our
revenues as we capitalize on the
regional and category opportunities
where the brand is underpenetrated,
including growing our presence
in Greater China and Australia.
Additionally, we see a significant
path forward to enhance Tommy
Hilfiger’s operating margins,
particularly in North America, as we
build meaningful connections with
consumers, while also delivering
excellent products at the right price/
value proposition.
the consumer demand for TOMMY
HILFIGER in North America by
beginning to expand our distribution
of sportswear beyond Macy’s to
accounts including Amazon, Belk and
Nordstrom. Over time, we believe that
these accounts will further diversify
the Tommy Hilfiger North America
business and will allow us to reach
a broader audience. However, the
retail side of the business experienced
softness, driven primarily by lower
levels of international tourists coming
to the U.S., which led to higher than
planned promotional activity.
Tommy Hilfiger’s global licensing
business was a positive story for the
year, demonstrating the underlying
strength of the brand. In particular,
the Tommy Hilfiger women’s business
for North America, which is operated
under a license to G-III Apparel
Group, Ltd., performed very well, with
healthy sell-throughs and significant
growth year-over-year.
O U R C O M M I T M E N T
T O I N C L U S I V I T Y
A N D C I R C U L A R I T Y
We recognize our power to make
positive contributions to our society
and the environment. This includes
our expansion of the Tommy Hilfiger
Adaptive line, particularly on
tommy.com and Amazon. To further
the impact of Tommy Hilfiger
Adaptive, we incorporated the line
into a celebrity collaboration for
the first time, with ten Fall 2019
TommyXZendaya styles available
with adaptive features in the U.S.
on tommy.com. Additionally, Tommy
Hilfiger deepened its commitment to
inclusion and diversity by launching
the second edition of its Fashion
Frontier Challenge, where two social
entrepreneurs were awarded a cash
“ We feel confident about the trajectory of
growth for Calvin Klein and continue to believe
that it has a substantial opportunity to drive revenue
growth and margin expansion over the long-term.”
Calvin Klein continued to ignite
brand heat during 2019. The CALVIN
KLEIN brand’s health remained
incredibly strong, with 80% global
awareness and over 32 million
followers across social media.
We capitalized on the brand’s global
appeal by expanding our lifestyle
offerings and pursuing international
growth opportunities. We also focused
on deepening our connection with
consumers by delivering compelling
products, engaging brand experiences
and providing a platform for
self-expression.
The Calvin Klein business posted
revenues of $3.7 billion, with strength
in our higher-margin international
operations, driven by continued
solid growth in Europe. We initiated
critical efforts to capitalize on
Calvin Klein’s significant multi-year
margin opportunity by identifying
operational efficiencies and managing
inventory levels more prudently,
particularly in North America.
We addressed product missteps from
2018 in our CALVIN KLEIN JEANS
assortments by improving the product
mix, increasing our penetration of
core denim styles and delivering
fashion product that was more
commercial. This was in addition
to effecting changes in the brand’s
leadership, as we promoted Cheryl
Abel-Hodges to the role of Chief
Executive Officer.
D R I V I N G G L O B A L
B R A N D E N G AG E M E N T
Calvin Klein continued to
deliver impact and spark cultural
conversations through engaging
marketing campaigns and consumer
activations, resulting in over $234
million of earned media value.
We celebrated five decades of iconic
brand history with a special capsule
collection, which was accompanied
by a marketing campaign featuring
Justin Bieber back in his CALVIN
KLEIN UNDERWEAR, alongside his
wife Hailey Bieber, musicians A$AP
Rocky and Troye Sivan, and models
Kendall Jenner and Liu Wen. Calvin
Klein hosted events across Europe
and Asia, and in Brazil, Mexico and
Peru as part of the celebration.
C A LV I N K L E I N – A N N U A L R E P O R T 2 0 1 9 /
17
Core to the brand purpose, we
created unique product moments,
including a CALVIN KLEIN Pride
capsule collection – a celebration
of self-expression, confidence and
inclusivity. The collection, which
featured jeans, underwear, swimwear
and accessories, was sold globally in
all channels. Products were highly
commercial and achieved strong
sell-throughs and higher average
order values online.
We continued to evolve our marketing
strategy, shifting to a digital and
video-first mindset by creating
branded content and curated
experiences to leverage across social
media. A highlight of the year was
CALVIN KLEIN ’s official sponsorship
of the Coachella Valley Music and
Arts Festival in California, where our
Spring 2019 campaign came to life
through an immersive experience that
offered festivalgoers the opportunity
to interact with both product and
branded content. The activation was
recognized by Brandweek with its
Constellation Award for best luxury/
fashion team.
Calvin Klein also continued to
leverage strategic influencer
partnerships by balancing global
and regional brand ambassadors.
Singer-actor Lay Zhang was named
CALVIN KLEIN ’s first-ever Chinese
global ambassador, underscoring the
significant long-term opportunity to
grow CALVIN KLEIN ’s footprint and
gain market share across the region.
In celebration of the partnership,
we hosted several experiential events,
including a surprise performance for
fans in Shanghai.
I N V E S T I N G I N C R I T I C A L
A R E A S T O D R I V E T H E
B U S I N E S S F O R WA R D
As the retail landscape continues
to evolve, Calvin Klein made key
investments to modernize its
capabilities and better capture the
heart of its consumer. The consumer
data journey was a top priority and we
enhanced our abilities to collect and
segment data, allowing us to deepen
our understanding of consumers
worldwide. As we leverage this
knowledge, we believe that we can
build more meaningful relationships
by personalizing the brand
experience, which, over time, can
lead to higher conversion and more
repeat purchasing.
Our digital-first efforts saw online
penetration increase across platforms,
with us experiencing a 30% increase
in visits and 14% sales growth across
our own sites globally. We continued
our partnerships with key pure play
and wholesale accounts online and
launched new offerings, including a
customizable offering on Tmall for
Chinese Valentine’s Day. Across all of
our efforts, we implemented a greater
focus on driving financial returns
and making our investments
more productive.
T H E P O W E R O F O U R
G L O B A L P L AT F O R M
Calvin Klein capitalized on the
power of its global business model,
continuing to expand the brand
across regions, product categories and
channels of distribution. The Calvin
Klein International segment posted
healthy revenue growth of 3% on top
of 2018’s outstanding results.
Performance in Europe was a
standout, as we continued to expand
our lifestyle offerings beyond our
largest categories, jeanswear and
underwear. The broad-based strength
across the business demonstrates the
strong consumer demand for CALVIN
KLEIN in Europe, solidifying our
belief that the Calvin Klein business
can ultimately double over time.
While China was a challenging market
for the first half of 2019, we were
pleased to see a stabilization in the
business there for the fourth quarter
(before the onset of the COVID-19
outbreak). With a focus on creating
more unique experiences, we used
local brand ambassadors and offered
specialized product assortments,
including a Lunar New Year capsule
collection. We continue to see notable
growth opportunities in Central and
Southeast Asia and Japan, as well as
in Australia and New Zealand
following our acquisition of Gazal.
We continue to believe that there
is a long-term opportunity to double
our Calvin Klein revenue in the
Asia Pacific region.
The Calvin Klein North America
business continued its path of
transformation. While revenues
declined 7%, it was largely tied to
the strategic decision to license
CALVIN KLEIN JEANS women’s
apparel in North America to G-III
Apparel Group, Ltd., as we believe
that they have the capabilities and
market expertise to capture the true
potential of the denim category for
the brand in this region. We remained
a key account for our wholesale
partners, driven by our strong brand
health and efforts to grow our
penetration of products sold in the
digital channel. This was alongside
our efforts to reduce our level of
clearance markdowns and focus on
enhancing store productivity at retail.
While the COVID-19 pandemic will
impact our results in 2020, we feel
confident about the trajectory of
growth for Calvin Klein over the
long-term and continue to believe
that, over time, it can grow global
retail sales, while at the same time
improving operating margins by
several hundred basis points.
We believe that the actions we took
in 2019 helped solidify the business’s
foundation, setting up a greater
opportunity to expand CALVIN
KLEIN across higher-margin
international markets and across
various product categories in the
future. As we continue to stay true
to CALVIN KLEIN ’s brand DNA
and drive brand heat, we believe that
we can generate a long-term path
of sustainable, profitable growth.
Accelerating
Consumer-Centric
Sustainability
Design a Future that
Defies the Status Quo
Together we will create the future
by defying the boundaries of
the past, by breaking the norms
that hold our communities back,
by reinventing how we do what
we do to make real, lasting
impact. Together we will defy
expectations and make fashion
a force for good.
C A LV I N K L E I N – A N N U A L R E P O R T 2 0 1 9 /
19
“ In our Heritage Brands business, we continue
to focus on enhancing our operating margins.”
During 2019, our Heritage Brands
business navigated the challenging
North American retail landscape,
with revenues declining 3%.
Changing consumer shopping habits
continued to impact consumer
spending. Moderate price point
businesses in particular, including all
of our Heritage Brands businesses,
felt pressure from department store
customers, who continued to push
for faster inventory turns, while also
committing to lower inventory
levels upfront.
Driven by these competitive dynamics,
we focused on our strategic priorities.
We pursued growth areas, including
the digital and mass channels.
We concentrated on the categories
where we maintain significant
market share positions – such as bras,
woven and knit shirts, and pants –
and introduced new products at a
compelling price/value proposition
such as dress shirts made of Supima
cotton. We also took measures to
streamline the business and enhance
our supply chain to position us for
enhanced margins in the future.
H E R I TA G E B R A N D S – A N N U A L R E P O R T 2 0 1 9 /
21
Our dress furnishings and sportswear
businesses experienced mixed
performance. We expanded our
popular franchises, including the
Van Heusen Flex collection, in
addition to woven shirts under the
Traveler and Never Tuck programs.
Amazon was our fastest growing
account for the year and the business
with them continued to perform.
However, the second half of the year
was more challenging, as higher
promotional activity and elevated
inventory levels in the moderate price
point segment negatively impacted
our performance.
In response to these competitive
pressures, we took measures to
optimize the Heritage Brands
business. We made the strategic
decision to sell our Speedo North
America business, which we acquired
as part of the Warnaco acquisition in
2013. We believe that this will allow
us to refocus resources in our core
businesses. We further streamlined
the licensed brands portfolio by
exiting businesses that did not meet
our profitability requirements,
including the DKNY men’s dress
furnishings and sportswear
businesses, and identified further
efficiencies across the business.
Our women’s intimates business
performed very well during the year.
We continued to experience success in
our top Warner’s franchises, including
the Cloud 9 collection, the No Side
Effects bra, and the wire-free Easy
Does It bra, which all offer comfort
and function. This was in addition to
launching new products, including
the Elements of Bliss collection, which
consists of wire-free bras, and the
Lace Escape collection of contour bras.
We also capitalized on opportunities
to expand distribution with key
accounts. At Walmart, we experienced
strong performance in Warner’s bras,
achieved higher average unit retail
prices in our panty assortments and
posted healthy digital growth as
we expanded our intimate apparel
offerings online. Target was another
positive story, as we rolled out our
True&Co. True Everybody offerings to
additional doors after a successful
Spring 2019 launch.
22
/ A N N U A L R E P O R T 2 0 1 9 – H E R I TA G E B R A N D S
We took additional measures to
enhance profitability by making
supply chain improvements, including
increased use of speed models and
expanding our core replenishment
programs. We continued to leverage
sourcing in sub-Saharan east Africa,
including Ethiopia, which offers
lower-cost and duty-free production.
Across all of our efforts, corporate
responsibility remained critically
important to our teams, and we
focused on innovating for circularity
and reducing our use of plastics.
Despite the challenges we faced in
2019, our Heritage Brands business
generates healthy free cash flows,
which we are able to redeploy across
the entire organization, in addition
to providing expense leverage across
our North American operations.
Additionally, we are focused on
driving enhanced operating margins
as we leverage our market share
positions, supply chain, manage
our inventory levels prudently,
and evaluate further measures to
streamline and optimize the portfolio.
Heritage Brands
Market Share
By Category as a Percentage of Total
Neckwear
Woven Shirts
Bras and Panties
Knit Shirts
Casual Pants
2019*
>50
13
10
8
5
*Based on percentage of 2019 unit volume in U.S. Department
and Chain Stores.
Accelerating
Consumer-Centric
Sustainability
Together in
Good Company
Our planet and people matter.
Highlighting and further
promoting the good, sustainable
work being done within each of
our brands, the Heritage Brands
corporate responsibility five-
point plan aligns with the greater
goals set forth within Forward
Fashion. By being thoughtful in
our design choices, development
solutions, and daily decisions
in running the business, we are
“Together in Good Company”
on our journey to a more
sustainable future.
C O R P O R AT E
C O R P O R AT E
R E S P O N S I B I L I T Y
R E S P O N S I B I L I T Y
2019 was a year of action, as we made
progress against our Forward Fashion
corporate responsibility strategy, which
was introduced in May 2019. Through
this ambitious agenda, we aim to reduce
our negative impacts to zero, increase
our positive impacts to 100% and
improve the over one million lives we
touch throughout our value chain: our
associates and supply chain workers,
their families and their communities.
We are prioritizing our impact on
these three strategic focus areas
where we believe we can have the most
transformative change. Within these
1 The Science Based Targets initiative is a collaboration
between CDP, World Resources Institute, WWF and the
United Nations Global Compact (“UNGC”).
2 The Paris Agreement is a United Nations-led agreement
among nations to limit the earth’s rising temperature
to fight climate change.
areas, we are focusing on 15 priorities,
each with a specific, measurable, and
time bound target for our business
to achieve.
Our values as an organization and
our longstanding commitment to
corporate responsibility have also been
instrumental in informing how we
navigate the recent COVID-19 global
crisis that is profoundly impacting
people, communities and businesses
across the world. We are working
closely with our suppliers and other
industry partners to find and implement
solutions for those affected, while
simultaneously planning ahead for
emerging social and environmental
needs. Our efforts to move our business
and the fashion industry towards a more
innovative and responsible future are
more important now than ever before.
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/ A N N U A L R E P O R T 2 0 1 9 – C O R P O R AT E R E S P O N S I B I L I T Y
We firmly believe that corporate
responsibility is linked to our
long-term success, and we were
proud to deliver several high-profile
achievements during the year:
• We signed the Fashion Pact,
a coalition of more than 30 global
fashion and textile companies
pledging to reduce the
environmental impact of the
fashion industry. The pact has
three key areas of focus: climate,
biodiversity and oceans.
• We received approval of our
absolute greenhouse gas (“GHG”)
emission reduction targets by the
Science Based Targets initiative1,
furthering our commitment to
a zero-carbon economy, in line
with the most ambitious level
of decarbonization set by the
Paris Agreement2;
• Our CEO was appointed to the
United Nations’ Global Compact
Board whose mission is to mobilize
a global movement of companies
and stakeholders as a force for good
to create a better world. With more
than 9,500 companies and 3,000
non-business signatories based in
over 160 countries, it is the largest
corporate sustainability initiative
in the world.
Forward Fashion – 15 Priorities
ZERO
R E D U C E N E G AT I V E
I M PA C T S T O Z E R O
100%
I N C R E A S E P O S I T I V E
I M PA C T S T O 1 0 0 %
1M+
I M P R O V E 1 M I L L I O N +
L I V E S A C R O S S O U R V A L U E C H A I N
Our products and business generate
zero waste, carbon emissions and
hazardous chemicals
Our products and packaging are
ethically and sustainably sourced
from suppliers who respect human
rights and are good employers
Our business invests in critical
community-level gender, health
and education initiatives, enabling
opportunity for generations to come
Eliminate carbon emissions
End waste
Eliminate hazardous chemicals
and microfibers
Innovate for circularity
Source ethically
Amplify worker voices
Promote safe workplaces
Advance living wages
Recruit ethically
Regenerate materials
Empower women
Foster inclusion & diversity
Develop talent
Provide access to water
Educate the future
Global Greenhouse Gas Inventory
MT CO2e
GHG Emissions by Scope
Scope 1 Emissions*
Scope 2 Emissions*
2018
35,039
93,839
2019
33,776
70,370
Total GHG Emissions
128,878
104,146
MT CO2e
Emission Source
Offices†
Retail
Warehouses^
Vehicles‡
12,203
92,807
21,046
2,822
9,857
71,315
19,894
3,080
Total GHG Emissions
128,878
104,146
* 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.
† Offices include emissions from showrooms.
^ Warehouses include emissions from distribution centers.
‡ Includes fugitive emissions from vehicle refrigerants.
• We worked alongside the Council
of Fashion Designers of America
to produce a research-based white
paper that examines the roles
of Inclusion and Diversity in the
fashion industry, with the goal
of beginning a meaningful
industry dialogue.
• We partnered with Fordham
University to create a hub for the
study of Corporate Responsibility.
The partnership will be focused
on enhancing sustainability
curriculum and convening global
thought leaders to develop students
into the conscientious business
leaders of tomorrow.
Forward Fashion is bigger than PVH.
Its goal is to achieve lasting change for
the fashion industry which cannot be
achieved alone. To realize our vision,
PVH engages other organizations
to help measure and share our
performance, improve how we design,
make and operate our business, and
innovate new solutions to achieve true
transformation at scale.
C O R P O R AT E R E S P O N S I B I L I T Y – A N N U A L R E P O R T 2 0 1 9 /
25
ancient and endangered forests
and spark a transition to next
generation solutions as they become
available, such as recycled textiles
in fabrics and helping advance
landscape level conservation
in high carbon value and
bio-diverse forests.
• Our Dress Furnishings business
committed to a pilot program to
adopt the use of 50% recycled content
polybags. This is part of our broader
goal for all PVH offices, distribution
centers and stores to achieve zero
waste and eliminate single-use
plastics by 2030.
• We advanced our circularity efforts
through a series of trainings on
the application of circular
principles in current and future
design and business practices,
as well as conducting a clothing
takeback pilot in the U.S., which is
helping us learn which garments
can be reused, refurbished, and
recycled to improve the circularity
of our products.
1 0 0 %
We strive for 100% of our products
and packaging to be ethically
and sustainably sourced and for
100% of our suppliers to respect
human rights and provide a fair
working environment. Recent
highlights include:
• Under the Transparency Pledge,
PVH has continued to increase our
level of detail and transparency.
We currently disclose all of our
Level 1 direct factories and key
fabric and trim suppliers and
include details such as facility
names, addresses, count of workers
and product type, fully aligned
with the Transparency Pledge.
• We joined 144 brands in the signing
of the American Apparel and
Footwear Association and Fair Labor
Association’s Commitment to
Responsible Recruitment, in which
brands pledge to work with their
global supply chains to create
conditions to alleviate the thousands
of dollars in recruitment fees
migrant workers often pay to gain
employment, leading to situations
of modern slavery and forced labor.
• We were named one of the two
leading companies by Platform
Living Wage Financials for our
efforts to advance living wage
payments for supply chain workers.
3 Canopystyle is a campaign based on the belief that the
fashion industry could help conserve the world’s remaining
ancient and endangered forests to the benefit of humanity,
as well as species such as orangutans and caribou.
4 Pack4Good is a campaign that works with large consumers of
forest products to eliminate ancient and endangered forests
from their cardboard and other paper packaging, while also
supporting the development of next generation solutions.
Z E R O
Our ambition is for our products
and business operations to generate
zero waste, zero carbon and zero
hazardous chemicals, and for our
products to be truly circular.
2019 key accomplishments include:
• Our CEO joined more than 75 U.S.
CEOs and labor leaders in signing
a collective statement supporting
the Paris Agreement to combat
climate change.
• We set a target to reduce our
Scope 3 GHG footprint by 30%
by 2030 after calculating our
GHG Scope 3 footprint for first time
in line with UN Fashion Charter for
Climate Change. Our Scope 3
footprint was about 2.7 million
metric tons of CO2 and measures
indirect emissions including those
generated from our supply chain,
third-party logistics and
distribution of goods.
• We launched our Forest Protection
Policy, alongside a formal
commitment to both the
CanopyStyle3 and Pack4Good4
initiatives to help save the world’s
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/ A N N U A L R E P O R T 2 0 1 9 – C O R P O R AT E R E S P O N S I B I L I T Y
and challenges along the way.
We will know we are successful when
every garment has a positive thread
of human rights, environmental
protection, inclusion and community
engagement running through it.
And when, as the world’s most
admired fashion and lifestyle
company, our work is driving
fashion forward – for good.
5 Developed by Gap Inc., P.A.C.E. is a women’s empowerment
training program designed to help female garment workers
excel in their personal and professional lives. The curriculum
covers soft skills such as communication and time management
skills, as well as issue-specific topics, such as financial and
legal literacy, general and reproductive health, and water,
sanitation, and hygiene.
• Almost 100% of our in-scope
• PVH is the first apparel company
factories completed the annual
to obtain a license for the P.A.C.E.5
Sustainable Apparel Coalition Higg
curriculum and technical training,
thus allowing us to implement
P.A.C.E. within our supply chain.
This program is one tool to help
us remove barriers to advancement
and create pathways for opportunity
and choice for women in our
supply chain.
• PVH was honored by the Women’s
Forum of New York for advancing
gender parity in the boardroom,
building upon our commitment
to Empower Women and create an
inclusive environment where every
individual is valued.
• PVH received a score of A- in CDP’s
water ranking for 2019, for acting with
transparency to protect the climate
and use water responsibly for the
health of future generations.
The CDP operates the global
environmental disclosure system,
supporting thousands of
companies, cities, states and
regions to measure and manage
their risks and opportunities on
environmental factors. Our score
earns PVH a spot in the Leadership
Band, confirming that we are
implementing best practices with
respect to water.
We are committed to making
challenging decisions, working
collaboratively to effect change
at scale, and sharing our lessons
Facility Environmental Module self-
assessment, which helps us assess
supplier facilities’ environmental
impact and measure performance.
• With a goal of alleviating audit
fatigue for our suppliers, we initiated
the transition from the use of
proprietary PVH brand CR assessment
to the adoption of the Social
and Labor Convergence Program
assessment, an industry wide data
collection tool that aims to create
an efficient and sustainable solution
for social audits, implementing
within facilities across India, China
and Sri Lanka.
1 M I L L I O N +
Our ambition is for PVH to improve
the over one million lives across our
value chain by enabling our associates
and workers, their families and their
communities to reach their full
potential. Key highlights from
2019 include:
• Announced a $3 million, three-
year grant extension with Save the
Children. Our pledge continues
PVH’s support of early childhood
development and early learning
programs in the U.S., China,
Bangladesh and India, as well as
youth employability programming
in Ethiopia.
• Signed the “Open to All” pledge
joining a nationwide campaign to
build awareness and understanding
about the importance of protecting
people from discrimination — and
to defend the principle that when
businesses open their doors to the
public, they should be Open to All.
D I R E C T O R S , O F F I C E R S , E X E C U T I V E S & B R A N D M A N AG E M E N T
3
Joseph B. Fuller
Professor of Management Practice
in Business Administration,
Harvard Business School; Visiting Fellow,
American Enterprise Institute;
Founder, Joseph Fuller, LLC,
a business consulting firm.
Director since 1991
2
V. James Marino
Retired Chief Executive Officer,
Alberto-Culver Company,
a personal care products company;
Director, Office Depot, Inc.
Director since 2007
1
Geraldine (Penny) McIntyre
Former Chief Executive Officer
of Sunrise Senior Living, LLC,
a provider of senior living services.
Director since 2015
2
Amy McPherson
Principal investor and consultant
to a children-focused media business;
Retired President and Managing
Director, Europe, Marriott
International, Inc., a global
lodging company.
Director since 2017
D I R E C T O R S
Emanuel Chirico
Chairman and Chief Executive Officer,
PVH Corp.; Director, Dick’s Sporting
Goods, Inc.
Director since 2005
1
Mary Baglivo
Chief Executive Officer/The Baglivo
Group, a brand strategy advisory
consultancy; Former Vice Chancellor
of Communications and Marketing,
Rutgers University; Director, Host Hotels
& Resorts, L.P. and Ruth’s Hospitality
Group, Inc.
Director since 2007
1
Brent Callinicos
Former Chief Operating and Chief
Financial Officer, Virgin Hyperloop
One, a privately held autonomous
transportation company; Former Chief
Financial Officer, Uber Technologies
Inc., an on-demand car service company;
Director, Baidu, Inc.
Director since 2014
2
Juan R. Figuereo
Venture Partner, Ocean Azul Partners,
an early stage venture capital fund;
Former 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, antiperspirant
deodorants, fragrances, skincare and
other beauty care products company;
Director, Deckers Outdoor Corporation.
Director since 2011
C O R P O R AT E O F F I C E R S & E X E C U T I V E S
Emanuel Chirico
Chairman and
Chief Executive Officer
Stefan Larsson
President
Michael A. Shaffer
Executive Vice President and
Chief Operating & Financial Officer
Mark D. Fischer
Executive Vice President,
General Counsel and Secretary
David F. Kozel
Executive Vice President,
Chief Human Resources Officer
James W. Holmes
Senior Vice President and Controller
3, 4
Henry Nasella
Partner and Co-Founder,
LNK Partners, a private equity
investment firm.
Director since 2003
2
Edward R. Rosenfeld
Chairman (Director) and Chief
Executive Officer, Steven Madden,
Ltd., a fashion footwear and
accessories company.
Director since 2014
3, 4
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 since 2006
3, 4
Judith Amanda Sourry Knox
Former President, Unilever North
America, a personal care, foods,
refreshment and home care consumer
products company.
Director since 2016
1 Member, Corporate Responsibility Committee
2 Member, Audit & Risk Management Committee
3 Member, Nominating, Governance & Management
Development Committee
4 Member, Compensation Committee
Dana M. Perlman
Treasurer, Senior Vice President,
Business Development
and Investor Relations
Melanie Steiner
Senior Vice President,
Chief Risk Officer
Eileen Mahoney
Executive Vice President,
Chief Information Officer
B R A N D M A N A G E M E N T
Francis K. Duane
Vice Chairman, PVH Corp.,
and Chief Executive Officer,
Heritage Brands
Daniel Grieder
Chief Executive Officer,
Tommy Hilfiger Global
and PVH Europe
Cheryl Abel-Hodges
Chief Executive Officer,
Calvin Klein
28
/ A N N U A L R E P O R T 2 0 1 9 – D I R E C T O R S , O F F I C E R S , E X E C U T I V E S & B R A N D M A N A G E M E N T
O T H E R I N F O R M AT I O N
T R A N S F E R
Agent and Registrar
Equiniti Trust Company
P.O. Box 64854
St. Paul, MN 55164-0854
Telephone: 1-800-468-9716
Website: www.shareowneronline.com
As of March 19, 2020, there were 562 holders
of record of the Company’s common stock.
S T O C K E X C H A N G E
The Company’s common stock is listed on
the New York Stock Exchange. The New York
Stock Exchange symbol is PVH. Options on
the Company’s common stock are traded on
the Chicago Board Options Exchange.
M A R K E T D ATA
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 U.S. 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.
C O D E O F E T H I C S
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.
F O R W A R D - L O O K I N G
S TAT E M E N T S
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 report,
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.
C O R P O R AT E
R E S P O N S I B I L I T Y
We publish a report regarding our
corporate responsibility program. The report
is available at www.responsibility.pvh.com.
Questions regarding our CR program may
be directed to cr@PVH.com.
C O R P O R AT E W E B S I T E
www.PVH.com
A S S O C I AT E S
The Company had over 40,000 associates
as of February 2, 2020.
T R A D E M A R K S
References in this Report to the brand
names CALVIN KLEIN, CALVIN KLEIN JEANS,
CALVIN KLEIN UNDERWEAR, TOMMY
HILFIGER, TOMMY JEANS, Van Heusen,
IZOD, ARROW, Warner’s, Speedo, Olga,
Geoffrey Beene and True&Co. 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 the brand.
2 0 2 0 A N N U A L M E E T I N G
As a result of the COVID-19 pandemic and
out of an abundance of caution for the health
and safety of our stockholders, directors
and associates, our Annual Meeting will
be a “virtual meeting”; it will be conducted
exclusively online via live webcast. We will
provide in our proxy materials information
regarding how to join the meeting. We intend
to return to in-person meetings in 2021.
S E C R E P O R T S
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 Senior
Vice President, Business Development
and Investor Relations at the Company’s
principal office:
PVH Corp.
200 Madison Avenue
New York, NY 10016-3903
(212) 381-3500
O T H E R I N F O R M AT I O N – A N N U A L R E P O R T 2 0 1 9 /
29
G A A P T O N O N - G A A P R E C O N C I L I AT I O N S
(in millions, except per share data)
Net Income per Common Share Calculation
Net Income Attributable to PVH Corp.
Total Shares for Diluted Net Income per Common Share
Diluted Net Income per Common Share Attributable to PVH Corp.
Net Income per Common Share Calculation
Net Income Attributable to PVH Corp.
Total Shares for Diluted Net Income per Common Share
Diluted Net Income per Common Share Attributable to PVH Corp.
Net Income per Common Share Calculation
Net Income per Common Share Calculation
Net Income Attributable to PVH Corp.
Net Income Attributable to PVH Corp.
Total Shares for Diluted Net Income per Common Share
Total Shares for Diluted Net Income per Common Share
Diluted Net Income per Common Share Attributable to PVH Corp.
Diluted Net Income per Common Share Attributable to PVH Corp.
2019
GAAP
Adjustments1
Non-GAAP
417
75
5.60
$
(294)
$
$
711
75
9.54
2018
GAAP
Adjustments2
Non-GAAP
$
4
746
77
9.65
$
$
742
77
9.60
2017
GAAP
Adjustments3
Non-GAAP
$
(86)
538
79
6.84
$
$
624
79
7.94
$
$
$
$
$
$
1 Adjustments for 2019 represent the elimination of (i) the costs incurred related to the restructuring associated with the strategic changes for our Calvin Klein
business announced in January 2019 (the “Calvin Klein restructuring”); (ii) the costs incurred in connection with the closure of our TOMMY HILFIGER flagship
and anchor stores in the United States (the “TH U.S. store closures”); (iii) the costs incurred in connection with the refinancing of our senior credit facilities;
(iv) the costs incurred related to the acquisition of the approximately 78% interest in Gazal Corporation Limited (“Gazal”) that we did not already own
(the “Australia acquisition”) and the acquisition of the Tommy Hilfiger retail business in Central and Southeast Asia from our previous licensee in that market
(the “TH CSAP acquisition”), primarily consisting of noncash valuation adjustments; (v) the noncash gain recorded to write up our equity investments in Gazal
and PVH Brands Australia Pty. Limited (“PVH Australia”) to fair value in connection with the Australia acquisition; (vi) the one-time costs recorded on our
equity investments in Gazal and PVH Australia prior to the Australia acquisition closing; (vii) the costs incurred in connection with the agreements to terminate
early the licenses for the global Calvin Klein and Tommy Hilfiger North America socks and hosiery businesses (the “Socks and Hosiery transaction”) in order
to consolidate the socks and hosiery businesses for all of our brands in North America in a newly formed joint venture, which began operations in December
2019, and to bring in-house the international Calvin Klein socks and hosiery wholesale businesses; (viii) the expense resulting from the remeasurement of our
mandatorily redeemable non-controlling interest recognized in connection with the Australia acquisition; (ix) the noncash loss related to the pending sale of the
Speedo North America business (the “Speedo transaction”) and the expected deconsolidation of the net assets of the business; (x) the recognized actuarial
loss on retirement plans; (xi) the discrete tax benefit related to the write-off of deferred tax liabilities in connection with the Speedo transaction; and (xii) the
tax effects associated with the other foregoing pre-tax items.
2 Adjustments for 2018 represent the elimination of (i) the costs incurred related to the acquisition of the 55% interest 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”), consisting of noncash amortization of short-lived assets;
(ii) the costs incurred related to the Calvin Klein restructuring; (iii) the recognized actuarial loss on retirement plans; (iv) the tax effects associated with the
foregoing pre-tax items; (v) the discrete net tax benefit recorded in connection with the U.S. Tax Cuts and Jobs Act of 2017 (the “U.S. Tax Legislation”); and
(vi) the discrete tax benefit related to the remeasurement of certain of our net deferred tax liabilities in connection with the legislation in the Netherlands,
which became effective on January 1, 2019.
3 Adjustments for 2017 represent the elimination of (i) the costs incurred related to the TH China acquisition, primarily consisting of noncash amortization
of short-lived assets; (ii) the costs incurred in connection with agreements to restructure our supply chain relationship with Li & Fung Trading Limited
(“Li & Fung”), under which we terminated our non-exclusive buying agency agreement with Li & Fung in 2017; (iii) the costs incurred in connection with the
relocation of the Tommy Hilfiger office in New York, including noncash depreciation expense; (iv) the costs in connection with the noncash settlement of
certain of our benefit obligations related to our retirement plans as a result of an annuity purchased for certain participants, under which such obligations were
transferred to an insurer; (v) the net costs incurred in connection with the consolidation within our warehouse and distribution network in North America, which
included a gain recorded on the sale of a warehouse and distribution center; (vi) the costs incurred in connection with an amendment to Mr. Tommy Hilfiger’s
employment agreement pursuant to which we made a cash buyout of a portion of the future payments to Mr. Hilfiger; (vii) the costs incurred in connection with
the early redemption of our $700 million 4 1/2% senior notes; (viii) the costs incurred in connection with the issuance of our €600 million 3 1/8% senior
notes; (ix) the recognized actuarial loss on retirement plans; (x) the tax effects associated with the foregoing pre-tax items; (xi) the tax benefits associated
with discrete items related to the resolution of uncertain tax positions; (xii) the discrete net tax benefit recorded in connection with the U.S. Tax Legislation;
and (xiii) the discrete tax benefit related to an excess tax benefit from the exercise of stock options by our Chairman and Chief Executive Officer.
30
/ A N N U A L R E P O R T 2 0 1 9 – G A A P T O N O N - G A A P R E C O N C I L I AT I O N S
G A A P T O N O N - G A A P R E C O N C I L I AT I O N S
Net Leverage Ratio (in millions)
GAAP Net Income Attributable to PVH Corp.
Pre-Tax Items Deemed Non-recurring or Non-operational
GAAP Interest and Taxes
GAAP Depreciation and Amortization
Interest Items Deemed Non-recurring or Non-operational
Non-GAAP EBITDA as presented
Gross Debt, Including Current Portion and Short-term Borrowings
Finance Lease Obligations
Total Debt
Cash and Cash Equivalents
Net Debt
Net Leverage Ratio
$
20191
417
381
144
324
(9)
$
1,257
$
$
$
2,775
15
2,790
503
2,286
1.8
1 Amounts that were deemed non-recurring or non-operational for 2019 were (i) the costs related to the Calvin Klein restructuring; (ii) the costs incurred in
connection with the TH U.S. store closures; (iii) the costs incurred in connection with the refinancing of our senior credit facilities; (iv) the costs related to the
Australia and TH CSAP acquisitions, primarily consisting of noncash valuation adjustments; (v) the noncash gain recorded to write up our equity investments
in Gazal and PVH Australia to fair value in connection with the Australia acquisition; (vi) the one-time costs recorded on our equity investments in Gazal and
PVH Australia prior to the Australia acquisition closing; (vii) the costs incurred in connection with the Socks and Hosiery transaction; (viii) the expense resulting
from the remeasurement of our mandatorily redeemable non-controlling interest recognized in connection with the Australia acquisition; (ix) the noncash loss
related to the Speedo transaction; and (x) the recognized actuarial loss on retirement plans.
G A A P T O N O N - G A A P R E C O N C I L I AT I O N S
Free Cash Flow (in millions)
Cash Flow from Operations
Less:
Capital Expenditures
Dividends
Free Cash Flow
2019
$
1,020
345
11
664
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.
G A A P T O N O N - G A A P R E C O N C I L I AT I O N S – A N N U A L R E P O R T 2 0 1 9 /
31
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 February 2, 2020
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 or other jurisdiction of incorporation or
organization)
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, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $1.00 par value
Trading Symbol
PVH
Name of Each Exchange
on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
______________________________
(Title of Class)
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 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 such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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 August 4, 2019 (the last business day of the registrant’s most recently completed second quarter)
was $5,921,209,861.
Number of shares of Common Stock outstanding as of March 19, 2020: 70,883,444
DOCUMENTS INCORPORATED BY REFERENCE
Document
Registrant’s Proxy Statement
for the Annual Meeting of
Stockholders to be held on June 18, 2020
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
ability to manage our growth and inventory, including our ability to realize benefits from acquisitions, such as the acquisitions
referenced in this Annual Report on Form 10-K; (v) quota restrictions, the imposition of safeguard controls and the imposition of
duties or tariffs on goods from the countries where we or our licensees produce goods under our trademarks, such as the recently
imposed tariffs and threatened increased tariffs on goods imported into the United States from China, any of which, among other
things, could limit the ability to produce products in cost-effective countries, or in countries that have the labor and technical
expertise needed, or require the Company to absorb costs or try to pass costs onto consumers, which could materially impact the
Company’s revenue and profitability; (vi) the availability and cost of raw materials; (vii) 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); (viii) 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 or 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; (ix) disease epidemics and health
related concerns, such as the current outbreak of COVID-19, which could result in (and, in the case of the COVID-19 outbreak,
has resulted in some of the following) supply chain disruptions due to closed factories, reduced workforces, scarcity of raw
materials and scrutiny or embargoing of goods produced in affected areas; closed stores, reduced consumer traffic and
purchasing, as consumers become ill or limit or cease shopping in order to avoid exposure, or governments impose mandatory
business closures, travel restrictions or the like to prevent the spread of disease; and market or other changes that could result in
noncash impairments of our goodwill and other intangible assets, operating lease right-of-use assets, and property, plant and
equipment; (x) 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 ability to operate effectively and profitably our continuing businesses after the
sale or other disposal of a subsidiary, business or the assets thereof; (xi) the failure of our licensees to market successfully
licensed products or to preserve the value of our brands, or their misuse of our brands; (xii) significant fluctuations of the United
States dollar against foreign currencies in which we transact significant levels of business; (xiii) 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, which can be significant, that are recorded immediately in earnings, generally in the fourth quarter of the year; (xiv) the
impact of new and revised tax legislation and regulations; and (xv) 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 February 2, 2020
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
Index to Financial Statements and Financial Statement Schedule
1
17
27
28
28
29
30
31
32
56
56
56
56
56
57
57
57
57
57
58
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 2019 year commenced on February 4, 2019 and ended on February 2, 2020; our 2018 year commenced on
February 5, 2018 and ended on February 3, 2019; and our 2017 year commenced on January 30, 2017 and ended on February
4, 2018.
References to the brand names TOMMY HILFIGER, HILFIGER COLLECTION, TOMMY HILFIGER TAILORED,
TOMMY JEANS, TOMMY SPORT, CALVIN KLEIN, CALVIN KLEIN 205 W39 NYC, CK CALVIN KLEIN, CALVIN KLEIN
JEANS, CALVIN KLEIN UNDERWEAR, CALVIN KLEIN PERFORMANCE, Van Heusen, IZOD, ARROW, Speedo, Warner’s,
Olga, True&Co., Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Unlisted, a Kenneth Cole Production,
MICHAEL Michael Kors, Michael Kors Collection, DKNY, Chaps, and to other brand names in this report are to registered and
common law 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 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 2010 acquisition of Tommy Hilfiger B.V. and
certain affiliated companies, which companies we refer to collectively as “Tommy Hilfiger.”
References to the 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.”
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.
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, PVH.com, 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 (“SEC”). All such filings are also available on the SEC’s website at sec.gov.
We also make available at no cost on PVH.com, the charters of the committees of our Board of Directors, as well as
our Corporate Governance Guidelines and Code of Business Conduct and Ethics.
Company Overview
We are one of the largest global apparel companies in the world. We have over 40,000 associates operating in more
than 40 countries and generated $9.9 billion in revenues in 2019. We manage a diversified brand portfolio, including TOMMY
HILFIGER, CALVIN KLEIN, Van Heusen, IZOD, ARROW, Warner’s, Olga and Geoffrey Beene brands, as well as the digital-
centric True&Co. intimates brand. We license brands from third parties, including Speedo (licensed in perpetuity for North
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America and the Caribbean), Kenneth Cole New York, Kenneth Cole Reaction, Unlisted, a Kenneth Cole Production,
MICHAEL Michael Kors, Michael Kors Collection, DKNY and Chaps. Our brand portfolio also consists of various other
owned, licensed and, to a lesser extent, private label brands. We entered into a definitive agreement on January 9, 2020 to sell
our Speedo North America business to Pentland Group PLC (“Pentland”), parent company of Speedo International Limited,
which licenses the Speedo brand to us, and we will no longer license the Speedo trademark upon closing of the sale (the
“Speedo transaction”). The Speedo transaction is expected to close in the first quarter of 2020, subject to customary closing
conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which has been received.
We design and market branded dress shirts, neckwear, sportswear (casual apparel), jeanswear, performance apparel,
intimate apparel, underwear, swimwear, swim products, handbags, accessories, footwear and other related products. Our brands
are positioned to sell globally at various price points and in multiple channels of distribution. 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, product category, price point, distribution channel or region. We also license the use of our trademarks to
third parties and joint ventures for product categories and in regions where we believe our licensees’ expertise can better serve
our brands. During 2019, our directly operated businesses in North America consisted principally of wholesale sales under our
TOMMY HILFIGER, CALVIN KLEIN, Van Heusen, IZOD, ARROW, Speedo, Warner’s, Olga and Geoffrey Beene trademarks;
the operation of digital commerce sites under the TOMMY HILFIGER, CALVIN KLEIN, Speedo, True&Co., Van Heusen and
IZOD trademarks and the styleBureau.com digital commerce site; and the operation of retail stores, principally in premium
outlet centers, primarily under our TOMMY HILFIGER, CALVIN KLEIN and certain of our heritage brands trademarks. Our
directly operated businesses outside of North America consisted principally of our wholesale and retail sales in Europe and the
Asia-Pacific region under our TOMMY HILFIGER trademarks; our wholesale and retail sales in Europe, the Asia-Pacific region
and Latin America under our CALVIN KLEIN trademarks; and the operation of digital commerce sites under the TOMMY
HILFIGER and CALVIN KLEIN trademarks. Our licensing activities principally related to the licensing worldwide of our
TOMMY HILFIGER and CALVIN KLEIN trademarks for a broad array of product categories and for use in numerous discrete
jurisdictions.
We have evolved from our 1881 roots to become a diversified global company through a combination of strategic
acquisitions, including the Calvin Klein, Tommy Hilfiger, and Warnaco acquisitions, and by successfully growing our brands
globally across all channels of distribution. We have also acquired several regional licensed businesses and will continue to
explore strategic acquisitions of licensed businesses, trademarks and companies that we believe are additive to our overall
business.
We entered into agreements on July 3, 2019 to terminate early the licenses for the global Calvin Klein and Tommy
Hilfiger North America socks and hosiery businesses (the “Socks and Hosiery transaction”) in order to consolidate the socks
and hosiery businesses for all of our brands in the United States and Canada in a newly formed joint venture, PVH Legwear
LLC (“PVH Legwear”), in which we own a 49% economic interest, and bring in-house the international Calvin Klein socks
and hosiery wholesale businesses. The Socks and Hosiery transaction closed on December 2, 2019. PVH Legwear was formed
with a wholly owned subsidiary of our former Heritage Brands socks and hosiery licensee. PVH Legwear licenses from us the
rights to distribute and sell TOMMY HILFIGER, CALVIN KLEIN, IZOD, Van Heusen and Warner’s socks and hosiery.
We acquired the Tommy Hilfiger retail business in Central and Southeast Asia from our previous licensee in that
market (the “TH CSAP acquisition”) on July 1, 2019. As a result of the TH CSAP acquisition, we now operate directly the
Tommy Hilfiger retail business in the Central and Southeast Asia market.
We acquired the approximately 78% ownership interests in Gazal Corporation Limited (“Gazal”) that we did not
already own (the “Australia acquisition”) on May 31, 2019. Prior to the closing, we, along with Gazal, jointly owned and
managed a joint venture, PVH Brands Australia Pty. Limited (“PVH Australia”), which licensed and operated businesses in
Australia, New Zealand and other parts of Oceania under the TOMMY HILFIGER, CALVIN KLEIN and Van Heusen brands,
along with other owned and licensed brands. PVH Australia came under our full control as a result of the Australia acquisition
and we now operate directly those businesses.
We entered into a licensing agreement on May 30, 2019 with G-III Apparel Group, Ltd. (“G-III”) for the design,
production and wholesale distribution of CALVIN KLEIN JEANS women’s jeanswear collections in the United States and
Canada (the “G-III license”), which resulted in the discontinuation of our directly operated Calvin Klein North America
women’s jeanswear wholesale business in 2019.
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We acquired the Geoffrey Beene tradename from Geoffrey Beene, LLC (“Geoffrey Beene”) on April 20, 2018. Prior to
the acquisition, we had licensed the rights to design, market and distribute Geoffrey Beene dress shirts and neckwear from
Geoffrey Beene.
We acquired True & Co., a direct-to-consumer intimate apparel digital commerce retailer, on March 30, 2017. This
acquisition enabled us to participate further in the fast-growing online channel and provided a platform to increase innovation,
data-driven decisions and speed in the way we serve our consumers across our channels of distribution.
We aggregate our reportable segments for purposes of discussion in this Report into three main businesses: (i) Tommy
Hilfiger, which consists of the Tommy Hilfiger North America and Tommy Hilfiger International segments; (ii) Calvin Klein,
which consists of the Calvin Klein North America and Calvin Klein International segments; and (iii) Heritage Brands, which
consists of the Heritage Brands Wholesale and Heritage Brands Retail segments. Note 21, “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, assets, depreciation and amortization, and capital expenditures related to each segment, as well as
information regarding our revenue generated by distribution channel and based on geographic location, and the geographic
locations where our net property, plant and equipment is held.
Our 2019 revenue was $9.9 billion, of which over 50% was generated outside of the United States. Our global
designer lifestyle brands, TOMMY HILFIGER and CALVIN KLEIN, together generated approximately 85% of our revenue
during 2019.
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 with a preppy twist. Global retail sales of products sold
under the TOMMY HILFIGER brands, including sales by our licensees, were approximately $9.2 billion in 2019. 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, product offerings, demographic target or distribution. The TOMMY HILFIGER brands consist of:
• HILFIGER COLLECTION — the pinnacle of the TOMMY HILFIGER product offerings, HILFIGER COLLECTION
blends the brand’s Americana heritage with contemporary influences and a playful fashion edge. The collection targets
25 to 40 year-old consumers. HILFIGER COLLECTION is available globally at select TOMMY HILFIGER stores,
through our wholesale partners (in stores and online) and on tommy.com.
•
•
•
•
TOMMY HILFIGER TAILORED — this line integrates sharp, sophisticated style with the TOMMY HILFIGER brand’s
American menswear heritage. From structured suiting to casual weekend wear, classics are modernized with precision
fit, premium fabrics, updated cuts, rich colors and luxe details, executed with the TOMMY HILFIGER brand’s
signature twist. The collection targets 25 to 40 year-old consumers. TOMMY HILFIGER TAILORED is available
globally at select TOMMY HILFIGER stores, through our wholesale partners (in stores and online) and on tommy.com.
TOMMY HILFIGER — our core line is globally recognized for bringing to life the classic American cool spirit at the
heart of the brand. The collection focuses on 25 to 40 year-old consumers with a broad selection of designs across
more than 25 categories, including men’s, women’s and children’s sportswear, footwear and accessories. TOMMY
HILFIGER is available globally in our TOMMY HILFIGER stores, through our wholesale partners (in stores and
online), through pure play digital commerce retailers and on tommy.com.
TOMMY JEANS — inspired by American denim classics with a modern, casual edge, TOMMY JEANS adds a youthful
energy and irreverent twist to the TOMMY HILFIGER brand’s heritage. The men’s and women’s collections focus on
premium denim and target 18 to 30 year-old consumers. TOMMY JEANS is available globally at select TOMMY
HILFIGER stores, TOMMY JEANS stores, through our wholesale partners (in stores and online), through pure play
digital commerce retailers and on tommy.com.
TOMMY SPORT — this line is engineered for performance and infused with the brand’s bold red, white and blue
heritage. Silhouettes evoke the classic American cool spirit of the TOMMY HILFIGER brand with unique details and
functional features. TOMMY SPORT is available globally at select TOMMY HILFIGER stores, through select
wholesale partners (in stores and online), through pure play digital commerce retailers and on tommy.com.
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Tommy Hilfiger’s global marketing and communications strategy is to build a consumer-centric, go-to-market
strategy that maintains the brand’s momentum, driving awareness, consistency and relevancy across product lines and regions.
We engage consumers through comprehensive 360° marketing campaigns, which have a particular focus on innovative
experiences and digital marketing initiatives. Marketing campaigns for the brand are focused on attracting a new generation of
consumers worldwide through a blend of global and regional brand ambassadors. Tommy Hilfiger spent over $200 million on
global marketing and communications efforts in 2019.
Through our Tommy Hilfiger North America and Tommy Hilfiger International segments, we sell TOMMY HILFIGER
products in a variety of distribution channels, including:
• Wholesale — principally consists of the distribution and sale of products in North America, Europe and the Asia-
Pacific region under the TOMMY HILFIGER brands. In North America, distribution is primarily through department
stores, warehouse clubs, and off-price and independent retailers, as well as digital commerce sites operated by the
department store customers and pure play digital commerce retailers. In Europe and the Asia-Pacific region,
distribution is through department and specialty stores, and digital commerce sites operated by department store
customers and pure play digital commerce retailers, as well as through distributors and franchisees.
• Retail — principally consists of the distribution and sale of products under the TOMMY HILFIGER brands in our
stores in North America, Europe and the Asia-Pacific region, as well as on the tommy.com sites we operate in over 30
countries. Our stores in North America are primarily located in premium outlet centers. In Europe and the Asia-Pacific
region, we operate full-price specialty and outlet stores, as well as select flagship stores and concession locations.
• Licensing — we license the TOMMY HILFIGER brands to third parties globally for a broad range of products through
approximately 25 license agreements. We provide support to our licensees 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. The arrangements generally are
exclusive to a territory or product category. Territorial licensees include our joint ventures in Brazil, India and Mexico.
Tommy Hilfiger’s key licensees, and the products and territories licensed, include:
Licensee
Product Category and Territory
American Sportswear S.A.
Men’s, women’s and children’s apparel, footwear and accessories (Central America,
South America (excluding Brazil) and the Caribbean)
F&T Apparel LLC & KHQ
Investment LLC
Children’s apparel, children’s underwear and sleepwear and boy’s tailored clothing
(United States and Canada)
G-III
Men’s and women’s outerwear, luggage and women’s apparel, dresses, suits and
swimwear (excluding intimates, sleepwear, loungewear, hats, scarves, gloves and
footwear) (United States and Canada)
Handsome Corporation
Men’s, women’s and children’s apparel, sportswear, socks and accessories and men’s
and women’s outerwear (South Korea)
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))
Peerless Clothing International, Inc. Men’s tailored clothing (United States and Canada)
Safilo Group S.P.A.
Men’s, women’s and children’s eyeglasses and non-ophthalmic sunglasses
(worldwide, excluding India)
Our Tommy Hilfiger North America segment includes 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
investments in our joint venture in Mexico and in PVH Legwear, in each case relating to the joint venture’s Tommy Hilfiger
businesses. Our Tommy Hilfiger International segment includes the results of our Tommy Hilfiger wholesale, retail and
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licensing activities outside of North America, and our proportionate share of the net income or loss of our investments in joint
ventures in Brazil and India relating to the joint ventures’ Tommy Hilfiger businesses.
Calvin Klein Business Overview
CALVIN KLEIN is a global lifestyle brand built on iconic essentials and powered by bold, progressive ideals. Global
retail sales of products sold under the CALVIN KLEIN brands, including sales by our licensees, were approximately $9.4 billion
in 2019. 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 growth and development that preserves the brand’s prestige and image. The
CALVIN KLEIN brands consist of:
• CK CALVIN KLEIN — our “contemporary” brand, offering modern, sophisticated items including apparel and
accessories. Distribution is in the Asia-Pacific region through select CALVIN KLEIN stores, select wholesale partners
(in stores and online) and calvinklein.com.
• CALVIN KLEIN — our “master” brand, offering men’s and women’s sportswear, swimwear, outerwear, fragrance,
accessories, footwear, men’s dress furnishings, women’s dresses, suits and handbags, and items for the home.
Distribution is primarily in North America, Europe and the Asia-Pacific region through our own stores, our wholesale
partners (in stores and online), pure play digital commerce retailers and on calvinklein.com.
• CALVIN KLEIN JEANS — the casual expression of the CALVIN KLEIN brand with roots in denim, offering men’s and
women’s jeanswear, related apparel and accessories. CALVIN KLEIN JEANS is known for its unique details and
innovative washes. Distribution is worldwide through our own stores, our wholesale partners (in stores and online),
pure play digital commerce retailers and on calvinklein.com.
• CALVIN KLEIN UNDERWEAR — known across the globe for provocative, cutting-edge products and marketing
campaigns and consistently delivering innovative designs with superior fit and quality. Offerings include men’s and
women’s underwear, women’s intimates, sleepwear and loungewear. Distribution is worldwide through our own
stores, our wholesale partners (in stores and online), pure play digital commerce retailers and on calvinklein.com.
• CALVIN KLEIN PERFORMANCE — built on the foundation of innovation, fit and function. Designs are fashion-
inspired and feature trend-driven, modern pieces that unite innovative fabric technology with classic American design
elements. Distribution is primarily in North America, Europe and the Asia-Pacific region through our own stores, our
wholesale partners (in stores and online), pure play digital commerce retailers and on calvinklein.com.
Over $365 million was spent globally in 2019 in connection with the advertising, marketing and promotion of the
CALVIN KLEIN brands and approximately 40% of these expenses were funded by Calvin Klein’s licensees and other
authorized users of the brands. Calvin Klein’s global marketing and communications strategy is to bring together all facets of
the consumer marketing experience. The CALVIN KLEIN brands continue to generate compelling brand and cultural relevancy
by continually evolving and driving consumer engagement. Marketing campaigns for the brand are focused on a truly digital
first, socially powered experience for consumers, through the use of global and regional brand ambassadors and experiential
events.
Through our Calvin Klein North America and Calvin Klein International segments, we sell CALVIN KLEIN products
in a variety of distribution channels, including:
• Wholesale — principally consists of the distribution and sale of products in North America, Europe, the Asia-Pacific
region and Brazil under the CALVIN KLEIN brands. In North America, distribution is primarily through warehouse
clubs, department and specialty stores, and off-price and independent retailers, as well as digital commerce sites
operated by department store customers and pure play digital commerce retailers. In Europe, the Asia-Pacific region
and Brazil, distribution is through department and specialty stores, and digital commerce sites operated by department
store customers and pure play digital commerce retailers, as well as through distributors and franchisees.
• Retail — principally consists of the distribution and sale of apparel, accessories and related products under the
CALVIN KLEIN brands in our stores in North America, Europe, the Asia-Pacific region and Brazil, as well as on the
calvinklein.com sites we operate in over 35 countries. Our stores in North America are primarily located in premium
outlet centers. In Europe, the Asia-Pacific region and Brazil, we operate full-price and outlet stores and concession
locations.
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• Licensing — we license the CALVIN KLEIN brands throughout the world 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 45 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 India and Mexico.
Calvin Klein’s key licensees, and the products and territories licensed, include:
Licensee
Product Category and Territory
CK21 Holdings Pte. Ltd.
Men’s and women’s CK CALVIN KLEIN apparel (Asia, excluding Japan)
CK Watch & Jewelry Co., Ltd.
(Swatch SA)
Men’s and women’s watches and jewelry (worldwide) *
Coty Inc.
Men’s and women’s fragrance, bath products and color cosmetics (worldwide)
Himatsingka Seide, Ltd.
Soft home bed and bath furnishings (United States, Canada, Mexico, Europe, Middle East,
Asia and India)
G-III
Women’s coats, suits, dresses, sportswear, jeanswear, active performancewear, handbags
and small leather goods, men’s coats, men’s and women’s luggage and men’s and
women’s swimwear (United States and Canada with luggage jurisdictions including
Europe, Asia and elsewhere)
Jimlar Corporation
Men’s and women’s footwear (various jurisdictions) *
Marchon Eyewear, Inc.
Men’s and women’s optical frames and sunglasses (worldwide)
Onward Kashiyama Co. Ltd.
Men’s and women’s CK CALVIN KLEIN apparel (Japan)
Peerless Clothing International
Inc.
Men’s tailored clothing (United States, Canada and Mexico)
*Licenses for these categories will be transitioning to new licensees in 2020.
Our Calvin Klein North America segment includes 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 investments in
our joint venture in Mexico and in PVH Legwear, in each case relating to the joint venture’s Calvin Klein businesses in North
America. Our Calvin Klein International segment includes 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 investment in our joint venture
in India relating to the joint venture’s Calvin Klein business.
Heritage Brands Business Overview
Our Heritage Brands business designs, sources and markets a varied selection of prominent brand label dress shirts,
neckwear, sportswear, swimwear, swim products, intimate apparel, underwear and related apparel and accessories, and licenses
certain of our brands for an assortment of products. The Heritage Brands business also offers private label dress furnishings
programs, particularly in neckwear. 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. Global retail
sales of products sold under our owned and licensed heritage brands, including sales by our licensees, were approximately $3.3
billion in 2019.
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Through our Heritage Brands Wholesale and Heritage Brands Retail segments, we sell heritage brands products in a
variety of distribution channels, including:
Wholesale — We principally distribute our Heritage Brands products at wholesale in the United States and Canada
through department, chain and specialty stores, warehouse clubs, and mass market, off-price and independent retailers (in stores
and online), as well as through pure play digital commerce retailers and, for Speedo products, through sporting goods stores,
team dealers and swimclubs. Products sold through this channel principally consist of:
• Men’s dress shirts and neckwear under brands including Van Heusen, IZOD, ARROW, Geoffrey Beene, Kenneth Cole
New York, Kenneth Cole Reaction, Unlisted, a Kenneth Cole Production, MICHAEL Michael Kors, Michael Kors
Collection and DKNY. We also market dress shirts under the Chaps brand, among others. We offer private label dress
shirt and neckwear programs to retailers, primarily national department stores and mass market retailers. We believe
our product offerings collectively 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 2019
sales volume):
Brand Name
MICHAEL Michael Kors and
Michael Kors Collection
Licensor(s)
Michael Kors, LLC and Michael
Kors (Switzerland) International
GmbH
Expiration
January 31, 2022
DKNY
Donna Karan Studio LLC
Terminated on December 31, 2019
Kenneth Cole New York,
Kenneth Cole Reaction and
Unlisted, a Kenneth Cole
Production
Chaps
Kenneth Cole Productions (Lic),
LLC and Kenneth Cole
Productions, Inc.
December 31, 2022, with a right of
renewal (subject to certain conditions)
through December 31, 2025
The Polo/Lauren Company, LP
and PRL USA, Inc.
March 31, 2023
• Men’s sportswear, including sport shirts, sweaters, bottoms and outerwear, principally under the Van Heusen, IZOD
and ARROW brands. IZOD and Van Heusen were the first and second best selling national brand men’s woven sport
shirts, respectively, in United States department and chain stores in 2019. We also produced men’s sportswear under a
license agreement for the DKNY brand as noted in the table above.
• Men’s, women’s and children’s swimwear, pool and deck footwear, and swim-related products and 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 will no longer license the Speedo trademark in conjunction with the
Speedo transaction, which is expected to close in the first quarter of 2020, subject to customary closing conditions.
• Women’s intimate apparel under the Warner’s and Olga brands and intimate apparel under the True&Co. brand.
Warner’s was the fourth best selling brand for bras and panties in United States department and chain stores in 2019.
True&Co. is primarily distributed in the United States through our TrueAndCo.com digital commerce site, and, to a
lesser extent, through a department store and a mass market retailer.
Retail — We also market products directly to consumers through our Heritage Brands stores, primarily located in
outlet centers throughout the United States and Canada. A majority of our stores offer a broad selection of Van Heusen men’s
and women’s apparel, along with a limited selection of our dress shirt and neckwear offerings, and IZOD and Warner’s
products. The majority of these stores feature multiple brand names on the store signage, with the remaining stores operating
under the Van Heusen name. We also sell our products in the United States through our directly operated digital commerce sites
for Speedo, True&Co., VanHeusen and IZOD, as well as our styleBureau.com site.
Licensing — We license our Van Heusen, IZOD, ARROW, Geoffrey Beene, Speedo, Warner’s and Olga brands globally
for a broad range of products through approximately 80 license agreements. We provide support to our licensees and seek to
preserve the integrity of our brands by taking an active role in the design, quality control, advertising, marketing and
7
distribution of each licensed product, most of which are subject to our prior approval and continuing oversight. The
arrangements generally are exclusive to a territory or product category. Territorial licenses include our joint venture in Mexico.
Our heritage brands licensees, and the products and territories licensed by them, include:
Licensee
Product Category and Territory
Arvind Fashions Limited
ARROW men’s and women’s dresswear, sportswear and accessories (India, Middle East,
Nepal and Sri Lanka)
Basic Resources, Inc.
Van Heusen and IZOD men’s and boys’ knit and woven underwear (United States and
Canada)
Five Star Blue, LLC
IZOD men’s denim, twill pants and shorts (United States, Canada and Mexico)
F&T Apparel LLC
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 Limited
ARROW men’s dress furnishings, tailored clothing, sportswear and accessories; ARROW
women’s dresswear and sportswear (Thailand, Myanmar, Laos, Cambodia and Vietnam)
Peerless Clothing International
Inc.
Van Heusen and IZOD men’s tailored clothing (United States, Canada and Mexico)
Eastman Dress Group Inc. (and
subsidiaries)
IZOD men’s, women’s and children’s footwear (United States, Canada and Mexico); Van
Heusen men’s and boys’ footwear (United States and Canada)
Our Heritage Brands Wholesale segment includes the results of our Heritage Brands wholesale and licensing
activities, the results of our directly operated digital commerce sites, and our proportionate share of the net income or loss of
our investments in our joint venture in Mexico and in PVH Legwear, in each case relating to the joint venture’s Heritage
Brands businesses. Our Heritage Brands Retail segment includes the results of our Heritage Brands stores.
Our Business Strategy
We see opportunities for long-term growth as we employ our strategic priorities across our organization. Our global
growth strategies include:
• Driving consumer engagement through innovative designs and personalized brand and shopping experiences that
capture the heart of the consumer.
Leveraging data driven marketing to deepen the relationships with our consumers through segmented product
assortments and personalized content.
• Expanding our worldwide reach through organic growth and acquisitions.
•
Investing in and evolving how we operate by leveraging technology and data to be dynamic, nimble and forward-
thinking.
Evolving our supply chain to adapt more quickly to change and reduce lead times.
• Developing a talented and skilled workforce that embodies our core values and an entrepreneurial spirit, while
empowering our associates to design their future.
• Delivering sustainable, profitable growth and generating free cash flow to create long-term stockholder value.
Our strategies are complemented by our purpose to power brands that drive fashion forward, for good.
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Tommy Hilfiger Business
We believe that we can continue to grow global retail sales of TOMMY HILFIGER product through a number of
initiatives, which include:
• Driving brand heat and conversion by delivering dynamic consumer engagement initiatives that include brand
ambassadors, capsule collections, consumer activations and experiential events.
• Delivering compelling products that reflect TOMMY HILFIGER’s accessible premium positioning and classic
American cool aesthetic, with a focus on sustainability and social innovation.
• Category expansion within womenswear, accessories, denim and underwear.
• Regional expansion, particularly in the Asia-Pacific region.
• Digitizing the complete brand experience, from design to our showrooms for wholesale customers, to our online and
in-store experiences.
Calvin Klein Business
We believe growth opportunities exist to drive further global retail sales of CALVIN KLEIN product and improvements
in the operating margin of our Calvin Klein business over time, including through:
• Reigniting the brand and driving conversion with consumer engagement initiatives that include brand ambassadors,
capsule collections, consumer activations and experiential events.
• Delivering compelling products that reflect CALVIN KLEIN’s accessible premium positioning and seductive aesthetic,
with a focus on sustainable product creation.
•
Product improvement and expansion, particularly within men’s and women’s sportswear, jeanswear, accessories and
women’s intimates.
• Regional expansion, particularly in Europe and the Asia-Pacific region.
•
•
Further digitizing the brand by growing online sales and expanding omni-channel capabilities.
Identifying operating efficiencies across the business to drive improvements in our operating margins.
Heritage Brands Business
Our Heritage Brands business represents our original business, where we developed our core competencies, and is an
important complement to our global designer brand businesses. In addition to capturing market share and generating healthy
cash flows, we will continue to look for further ways to optimize the Heritage Brands portfolio. Our strategic initiatives for our
Heritage Brands business include:
• Leveraging and enhancing each brand’s position in the market to drive market share gains, with a focus on the most
profitable brands.
• Delivering trend-right products at an attractive value proposition, with a focus on new technologies, features and
sustainability.
• Optimizing distribution, particularly in the mass market retailers and digital commerce, with a focus on driving
profitable volume.
• Enhancing profitability by optimizing our portfolio, capitalizing on supply chain opportunities, reducing costs and
maintaining a critical focus on inventory management.
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Other Strategic Opportunities
We believe we have an attractive and diverse portfolio of brands with growth potential. Nonetheless, we will continue
to explore strategic acquisitions of companies or trademarks and licensing opportunities that we believe are additive to our
overall business, including to address product category expertise and brand positioning and design perspective 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. Working capital requirements vary throughout the year to support these seasonal
patterns and business trends.
Design
Our business depends 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.
Our in-house design teams are significant contributors to the continued strength of our brands. Each of our branded
businesses employs its own teams of designers and merchandisers that develop products representing its brand’s aesthetics,
while also being mindful of consumers’ tastes, lifestyle needs and current fashion trends. To reflect consumer variances in each
of our regional markets, the businesses tailor their products and offerings to appeal to local tastes, fit differences or other
preferences, while maintaining the cohesive creative vision for each brand. Our teams have expanded their use of 3D design
technology to enhance our design capabilities, which reduces the need for samples early in the design process and the time
needed to bring products to market.
Product Sourcing
Our capabilities for worldwide procurement and sourcing enable us to deliver to our customers competitive and high
quality goods at an attractive value and 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 without relying on any one vendor or factory or on
vendors or factories in any one country. Our products were produced in over 1,200 factories in approximately 50 countries
during 2019. All but one of these factories were operated by independent manufacturers, with most being located in Asia.
We source finished products and, to a limited extent, raw materials and trim. Raw materials and trim include fabric,
buttons, thread, labels and similar components. Finished products consist of manufactured and fully assembled products ready
for shipment to our customers and our stores. Raw material, trim, and finished product commitments are generally made two to
six months prior to production. We believe we are one of the largest users of shirting fabric in the world. We believe that an
ample number of alternative suppliers exist should we need to secure additional or replacement production capacity and raw
materials.
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 seeking to
maximize the pricing opportunities.
The manufacturers of our products are required to meet our quality, human rights, safety, environmental and cost
requirements. 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. They also monitor and track the primary cost inputs to the finished product to ensure
that we pay the most appropriate cost for our finished goods.
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We continue to explore new areas of production that can grow with our businesses. Our country of origin strategy
provides a flexible approach to product sourcing, which enables us to maximize regional opportunities and mitigate our
potential exposure to risks associated with new duties, tariffs, surcharges, or other import controls or restrictions. While China
remains an important sourcing country for us, we have reduced our exposure to the country over time by growing our sourcing
base in other parts of Asia, as well as Africa. Many of these efforts have been with our existing factory partners. Additionally,
we began producing finished products in Ethiopia during 2017 to evolve our supply chain and become more dynamic.
Production is through a joint venture, PVH Arvind Manufacturing Private Limited Company (“PVH Ethiopia”), that we formed
with Arvind Limited (“Arvind”). The goods produced are primarily distributed in the United States through our Heritage
Brands business.
We also continue to develop strategies that can enhance the operational efficiency of our supply chain and unlock
gross margin opportunities. We have incorporated 3D technology to enhance our design capabilities, which reduce our lead
times, improve our planning abilities and eliminate the need for early samples in the design process. Speed is another critical
focus area across the Company. We have implemented various speed models, core replenishment and read and react capabilities
for select categories to enhance our operations and make our business model more dynamic and responsive, while also
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 control costs better and provide improved service to our customers.
Corporate Responsibility
As an industry leader and one of the largest branded apparel companies in the world, we recognize that we have a
responsibility to address our social and environmental impacts. Corporate responsibility is central to how we conduct business
and it is a crucial consideration embodied in all of the strategic business decisions that we make.
In 2019, we built upon our long-standing commitment to corporate responsibility by launching Forward Fashion, our
evolved vision for the future that provides a new level of ambition and transparency across our corporate responsibility
program and reinforces our long-standing commitment to sustainable business. Our Forward Fashion strategy supports the
standards released by the Global Fashion Agenda in its CEO Agenda 2019, which reflect global developments and focus on
climate change as a core priority. We are committed to the goals outlined in our Forward Fashion strategy and are taking action
in a number of ways, including joining key pledges and industry groups that align with our strategy.
Our three strategic focus areas are:
• Reduce negative impacts — Our ambition is for our products and business operations to generate zero waste, zero
carbon emissions and zero hazardous chemicals. This means protecting our environment by reducing energy use and
powering our business through renewable sources, diverting the waste we send to landfills, eliminating water pollution
from our wet processors, and fostering and harnessing innovation to design and manufacture products that eliminate
product waste.
•
•
Increase positive impacts — Our ambition is for 100% of our products and packaging to be ethically and sustainably
sourced from suppliers who respect human rights and are good employers.
Improve lives across our value chain — Our ambition is to improve the lives of the over one million people across our
value chain, focusing on education and opportunities for women and children, ensuring access to clean water,
investing in health and education initiatives, and continuing to champion inclusion and diversity.
We issue an annual report on our corporate responsibility efforts that 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, some of which are operated by
independent third parties, are located in the United States, the Netherlands, Canada, China, Japan, South Korea, Brazil and
Australia. Our warehousing and distribution centers are designed to provide responsive service to our customers and our retail
stores on a cost-effective basis.
Our backlog of customer orders totaled $1.693 billion and $1.652 billion as of February 2, 2020 and February 3, 2019,
respectively. The size of our order backlog depends upon a number of factors, including the timing of the market weeks for our
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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 usage of our basic stock
replenishment programs. 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.
Material Customers
Our largest customers account for significant portions of our revenue. Sales to our five largest customers were 18.4%
of our revenue in 2019 and 18.9% of our revenue in each of 2018 and 2017. No single customer accounted for more than 10%
of our revenue in 2019, 2018 or 2017.
Advertising and Promotion
Our marketing programs are an integral component of the success of our brands and the products offered under them.
We intend for each of our brands to be a leader in its respective market segment, with strong consumer awareness, relevance
and consumer loyalty. We believe that our brands are successful in their respective market segments because we have
strategically positioned each brand to target a distinct consumer demographic. Advertisements generally portray a lifestyle
representation of our category offerings rather than a specific item. We design and market our products to complement each
other, satisfy lifestyle needs, emphasize product features important to our target consumers, deliver a strong price/value
proposition and encourage consumer loyalty.
A significant component of our marketing programs is digital media, including our digital commerce platforms and
social media channels, which allow us to expand our reach to customers and enable us to provide timely information in an
entertaining fashion to consumers about our products, special events, promotions and store locations. Tommy Hilfiger’s digital
commerce site, tommy.com, and Calvin Klein’s digital commerce site, calvinklein.com, serve as marketing vehicles to
complement the ongoing development of the TOMMY HILFIGER and CALVIN KLEIN lifestyle brands, respectively, in
addition to offering a broad array of apparel and licensed products. We also operate five Heritage Brands digital commerce sites
in the United States: VanHeusen.com, IZOD.com, styleBureau.com, TrueAndCo.com and SpeedoUSA.com.
We also 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. In addition, we advertise our brands through sport
sponsorships and product tie-ins. We believe that our use of high-profile brand ambassadors and well-known social media
influencers across our marketing programs helps drive our brand awareness and cultural relevance.
With respect to our retail outlet stores, the majority of which are located in premium outlet centers in the United States
and Canada, we generally rely upon local outlet mall developers to promote traffic for their centers. Outlet center developers
employ multiple formats, including signage, print advertising, direct marketing, radio and television advertising, and special
promotions.
Tommy Hilfiger Business
We believe that TOMMY HILFIGER is one of the world’s leading lifestyle brands and is internationally recognized for
celebrating the essence of classic American cool style with a preppy twist. 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 social media outlets, 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 and brand events
as part of its efforts. Tommy Hilfiger maintains multiple showroom facilities and sales offices around the world. Nearly all of
its showrooms are digitized, offering a more engaging, integrated and seamless buying experience for its wholesale partners.
Celebrity partnerships continued to be a cornerstone of our TOMMY HILFIGER consumer engagement efforts in 2019
using a balance of global and regional brand ambassadors. TOMMY HILFIGER’s partnership with British Formula OneTM
racing driver and five-time Formula OneTM World Champion Lewis Hamilton, which began in 2018, continued to drive
momentum in 2019, including through an experiential event during Fall 2019 Milan Fashion Week, where consumers were able
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to experience the TOMMY HILFIGER fashion show and view the TommyXLewis collaborative collection on different platforms.
TOMMY HILFIGER also has a multi-year strategic partnership with four-time World Champions Mercedes-AMG Petronas
Motorsport as their Official Apparel Partner.
Tommy Hilfiger also delivered engaging partnerships geared toward the female consumer, enlisting Zendaya as a
brand ambassador beginning in Spring 2019, helping raise the brand’s profile. The collaboration continued through our
TOMMYNOW fashion show, starring TommyXZendaya in Fall 2019, which resulted in TOMMY HILFIGER being the #1 most
talked about fashion brand at New York Fashion Week on Twitter.
Calvin Klein Business
CALVIN KLEIN is a global lifestyle brand built on iconic essentials and powered by bold, progressive ideals. CALVIN
KLEIN continues to generate compelling brand and cultural relevancy by evolving and driving consumer engagement. The
CALVIN KLEIN brands are unified by a dedicated brand purpose with a focus on “defying the boundaries of self-expression.”
We established a Consumer Marketing Organization (the “CMO”) in 2019, which encompasses the business’s marketing,
communications, social media, celebrity dressing and special events, while also building personalized relationships and
tailoring the overall consumer experience through highly specialized teams. We believe that this enhanced marketing approach
will better meet our consumers’ needs as we adapt to their rapidly changing demands.
We celebrated five decades of iconic brand history with a special capsule collection in 2019, which was accompanied
by a marketing campaign featuring Justin Bieber back in his CALVIN KLEIN UNDERWEAR, alongside wife Hailey Bieber,
musicians A$AP Rocky and Troye Sivan, and models Kendall Jenner and Liu Wen. We hosted events across Europe, Asia,
Brazil, Mexico and Peru as part of the celebration. As well, core to the brand purpose, we created unique product moments,
including a CALVIN KLEIN Pride capsule collection — a celebration of self-expression, confidence and inclusivity. The
collection, which featured jeans, underwear, swimwear and accessories, was sold globally across all distribution channels.
We continued to evolve our marketing strategy, shifting to a digital and video-first mindset by creating branded
content and curated experiences to leverage across social media platforms. A highlight of 2019 was CALVIN KLEIN’s official
sponsorship of the Coachella Valley Music and Arts Festival in California, where our Spring 2019 campaign came to life
through an immersive experience offering the opportunity to interact with both product and branded content. The activation
was recognized by Brandweek with its Constellation Award for best luxury/fashion team.
Calvin Klein also continued to leverage strategic partnerships by balancing global and regional brand ambassadors.
Singer-actor Lay Zhang was named CALVIN KLEIN’s first-ever Chinese global ambassador, underscoring the significant long-
term opportunity to grow CALVIN KLEIN’s footprint and gain market share across the region. In collaboration with the
partnership, we hosted several experiential events, including a surprise performance for fans in Shanghai.
Heritage Brands Business
In our Heritage Brands business, we continued a partnership for Van Heusen with the UFC® that featured MMA fighter
Stephen Thompson as brand ambassador. We also continued our largest media campaign to-date for IZOD that features Green
Bay Packers quarterback Aaron Rodgers and comedian Colin Jost from Saturday Night Live.
We continue to promote our Heritage Brands business through sport sponsorships. Four-time PGA Tour winner Marc
Leishman serves as brand ambassador for IZOD Golf, which includes wearing IZOD Golf apparel on-course. Olympic gold
medalists and World No. 1 ranked men’s double tennis team, Bob and Mike Bryan continue to serve as brand ambassadors for
IZOD. In addition, we have an all-brand, regional sponsorship relationship with the New York Giants.
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Trademarks
We own the TOMMY HILFIGER, CALVIN KLEIN, Van Heusen, IZOD, ARROW, Warner’s, Olga, True&Co. and
Geoffrey Beene 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.
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.
We own the CALVIN KLEIN marks and derivative marks in all trademark classes and for all product categories
through our ownership of 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. 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, subject to certain
limitations designed to protect the image and prestige of the CALVIN KLEIN brands and to avoid competitive conflicts.
Our trademarks are the subject of registrations and pending applications throughout the world for use on a variety of
apparel, footwear and related products, as well as licensed product categories, 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 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 TOMMY HILFIGER and CALVIN KLEIN brands, as these brands
enjoy significant worldwide consumer recognition and their generally higher pricing (as compared to our heritage brands)
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, low barriers
to entry, the flow of domestic and imported merchandise and the wide diversity of retailing methods. We compete with
numerous domestic and foreign designers, brands owners, manufacturers and retailers of apparel, accessories and footwear,
including, in certain circumstances, the private label brands of our wholesale customers. Additionally, with the shift in
consumer shopping preferences driving growth in the digital channel, there are more companies in the apparel sector and an
increased level of transparency in pricing and product comparisons, which impacts purchasing decisions. As well, as consumers
are increasingly focused on circularity with respect to apparel, companies that enable consumers to rent or purchase pre-owned
apparel also impact purchasing decisions.
We believe we are well-positioned to compete in the apparel industry 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. 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 region. We have developed a portfolio of brands that appeals to a broad spectrum of consumers. Our
owned brands have long histories and enjoy high recognition and awareness within their respective consumer segments. We
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develop our owned and licensed brands to complement each other and to generate strong consumer loyalty. The worldwide
recognition of the TOMMY HILFIGER and CALVIN KLEIN brands generally provide us with significant global opportunities
and the opportunity to develop businesses that target different consumer groups at higher price points and in higher-end
distribution channels than our heritage brands.
Imports and Import Restrictions
A substantial portion of our products is imported into the United States, Canada, Europe, the Asia-Pacific region and
Latin America. These products are subject to various customs laws, which may impose tariffs, as well as quota restrictions. In
addition, each of the countries in which our products are sold has laws and regulations covering imports. The United States and
other countries in which our products are 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, therefore, maintain a program of intensive monitoring of import restrictions and developments. We seek to
minimize, where possible, our potential exposure to import related risks through, among other measures, adjustments in
product design and fabrication, shifts of production among countries, including consideration of countries with tariff preference
and free trade agreements, and manufacturers, and geographical diversification of our sources of supply. In some instances,
production of a specific product category (e.g., swim goggles), component parts or raw materials may be highly concentrated in
one country.
The United States and China are involved in a trade dispute that has seen the imposition in 2019 of significant
additional tariffs on the products we sell that are imported into the United States from China. Please see our risk factor “We
primarily use foreign suppliers for our products and raw materials, which poses risks to our business operations” in Item 1A,
“Risk Factors,” for further discussion.
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 and our compliance with these laws and regulations has not had, and is not expected to
have, a material effect on our capital expenditures, cash flows, earnings or competitive position.
Employees
As of February 2, 2020, we employed approximately 21,500 persons on a full-time basis and approximately 18,500
persons on a part-time basis. Approximately 2% of our employees were represented for the purpose of collective bargaining by
four different unions in the United States. Additional persons, some represented by these four unions, are employed from time
to time based upon our manufacturing schedules and retailing seasonal needs. Our collective bargaining agreements generally
are for 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 good.
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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
Stefan Larsson
Michael A. Shaffer
Francis K. Duane
Daniel Grieder
Cheryl Abel-Hodges
Mark D. Fischer
David F. Kozel
62 Chairman and Chief Executive Officer
45 President
57 Executive Vice President and Chief Operating & Financial Officer
63 Vice Chairman and Chief Executive Officer, Heritage Brands
58 Chief Executive Officer, Tommy Hilfiger Global and PVH Europe
56 Chief Executive Officer, Calvin Klein
58 Executive Vice President, General Counsel & Secretary
64 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 2006, and Chairman
of the Board in 2007.
Mr. Larsson joined us as President in 2019. From 2015 until 2017, Mr. Larsson was President and Chief Executive
Officer and a director of Ralph Lauren Corporation. From 2012 until 2015, he was the Global President of Old Navy, Inc., a
division of The Gap, Inc.
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 2006,
and Executive Vice President and Chief Operating & Financial Officer in 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 2006, Chief Executive Officer, Wholesale Apparel in 2012, Chief Executive
Officer, Heritage Brands and North America Wholesale in 2013, and Vice Chairman and Chief Executive Officer, Heritage
Brands in 2018. Mr. Duane will relinquish his title and duties as Vice Chairman and Chief Executive Officer, Heritage Brands
in June 2020, in advance of his retirement in February 2021.
Mr. Grieder has been employed by Tommy Hilfiger since 2004. 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.
Ms. Abel-Hodges has been employed by us since 2006. She served as President of our Izod division from 2009 until
2015, President, The Underwear Group from 2015 until 2018, was named Group President, Calvin Klein North America and
The Underwear Group in 2018, and Chief Executive Officer, Calvin Klein in 2019.
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.
Mr. Kozel served as Vice President, Human Resources from 2003 until 2007, was named Senior Vice President,
Human Resources in 2007, Executive Vice President, Human Resources in 2013, and Executive Vice President and Chief
Human Resources Officer in 2015.
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Item 1A. Risk Factors
The following risk factors should be read in conjunction with the other information set forth in this Annual Report on
Form 10-K when evaluating our business and the forward-looking statements contained within this report. The occurrence of
one or more of the circumstances or events described below could have a material adverse effect on our business, financial
condition or results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be
immaterial may occur or become material and may also adversely affect 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 18.4%
of our revenue in 2019 and 18.9% of our revenue in each of 2018 and 2017. No single customer accounted for more than 10%
of our revenue in 2019, 2018 or 2017. Collectively, Macy’s, Inc. (“Macy’s”) and J. C. Penney Corporation, Inc. (“J. C.
Penney”), two of our ten largest customers in 2019, have closed approximately 275 stores since 2016 and Macy’s announced
plans to close 125 additional stores over the next three years. These store closings have resulted and may continue to result in a
decrease in the total amount of purchases made by Macy’s and J. C. Penney. A continued decline in purchases made over the
next several years could have a materially adverse effect on our United States wholesale business.
We had an agreement with Macy’s pursuant to which Macy’s was the exclusive department store distributor in the
United States of men’s sportswear under the TOMMY HILFIGER brand; G-III, a licensee of the TOMMY HILFIGER brand, had
a similar arrangement with Macy’s for women’s sportswear under the TOMMY HILFIGER brand. As a result of these strategic
alliances, the success of Tommy Hilfiger’s North American men’s wholesale business and its licensed women’s wholesale
business with G-III were substantially dependent on these relationships and on the ability of Macy’s to maintain and increase
sales of TOMMY HILFIGER products. Both exclusive arrangements were terminated effective for the Spring 2019 selling
season. We cannot assure you that Macy’s will continue to order the same volume of TOMMY HILFIGER products from us, G-
III or our other TOMMY HILFIGER licensees, or that other department stores will purchase TOMMY HILFIGER products in
sufficient volume to offset any reduction in sales to Macy’s in the future. This could result in a decline in overall revenue and
have a material adverse effect on our results of operations.
We do not have long-term agreements with any of our customers 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. The retail industry’s recent history has seen a great deal of
consolidation, particularly in the United States, and other ownership changes, as well as management changes and store closing
programs, and we expect such changes to be ongoing. Store closing programs, 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 Tommy Hilfiger and Calvin Klein businesses.
A significant portion of our business strategy involves growing our Tommy Hilfiger and Calvin Klein businesses. Our
achievement of revenue and profitability growth from Tommy Hilfiger and Calvin Klein will depend largely upon our ability to:
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continue to maintain and enhance the distinctive brand identities of the TOMMY HILFIGER and CALVIN KLEIN
brands;
continue to maintain good working relationships with Tommy Hilfiger’s and Calvin Klein’s licensees;
continue to enter into new, or renew or extend existing, licensing agreements for the TOMMY HILFIGER and CALVIN
KLEIN brands; and
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continue to strengthen and expand the Tommy Hilfiger and Calvin Klein 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 the Tommy Hilfiger or Calvin Klein
business, our financial condition and results of operations may be materially adversely affected.
The success of our Tommy Hilfiger and Calvin Klein businesses depends on the value of our “TOMMY
HILFIGER” and “CALVIN KLEIN” 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 TOMMY HILFIGER name is integral to the existing Tommy
Hilfiger business, as well as to our strategies for continuing to grow and expand the business. Mr. Hilfiger, who remains active
in the business, 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. We also
have exposure with respect to the CALVIN KLEIN brands, which are integral to the existing Calvin Klein business and could be
adversely affected if Mr. Klein’s public image or reputation were to be tarnished.
Our business is heavily dependent on the ability and desire of consumers to travel and shop.
Reduced consumer traffic and purchasing, whether in our own retail stores or in the stores of our wholesale customers,
could have a material adverse effect on our financial condition and results of operations. Reductions could result from
economic conditions, fuel shortages, increased fuel prices, travel restrictions, travel concerns and other circumstances,
including adverse weather conditions, natural disasters, war, terrorist attacks or the perceived threat of war or terrorist attacks.
Disease epidemics and other health-related concerns, such as the current COVID-19 outbreak, also could result in (and, in the
case of the COVID-19 outbreak, has resulted in) closed stores, reduced consumer traffic and purchasing, as consumers become
ill or limit or cease shopping in order to avoid exposure, or governments impose mandatory business closures, travel restrictions
or the like to prevent the spread of disease. Additionally, political or civil unrests and demonstrations also could affect
consumer traffic and purchasing, as was the case with the recent protests in Hong Kong SAR.
Our U.S. retail store operations are a material contributor to our revenue and earnings. The majority of our United
States retail stores are located away from major residential centers or near vacation destinations, making travel a critical factor
in their success. These retail businesses historically also have had a significant portion of their revenue and earnings attributable
to sales to international tourists. In addition to the factors discussed above, international tourism to the United States could be
reduced, as could the extent to which international tourists shop at our retail stores, during times of a strengthening United
States dollar, particularly the euro, the Brazilian real, the Canadian dollar, the Mexican peso, the Korean won and the Chinese
yuan renminbi. A reduction in international tourist traffic or spending therefore could have a material adverse effect on our
financial condition and results of operations. In fact in 2019, we did experience a significant decrease in sales to international
tourists, which we believe was attributable in part to the strength of the United States dollar and which negatively impacted
sales and earnings for our Calvin Klein and Tommy Hilfiger retail businesses in the United States.
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Other factors that could affect the success of our stores include:
the location of the store or mall, including the location of a particular store within the mall;
the other tenants occupying space at the mall;
increased competition in areas where the stores are located;
the amount of advertising and promotional dollars spent on attracting consumers to the store or mall;
the changing patterns of consumer shopping behavior;
increased competition from online retailers; and
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the diversion of sales from our retail stores due to our digital commerce sites.
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 Tommy Hilfiger, Calvin Klein 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:
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failure to implement our business plan for the combined business;
delays or difficulties in completing the integration of acquired companies or assets;
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 applicable
regulation; and
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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 licensees and their businesses, and our financing and other contractual arrangements, including, for example, as
a result of the current COVID-19 outbreak. 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
licensees, may cause such customers to reduce or discontinue orders of our products and licensed products sold by our
licensees, and may result in customers being unable to pay us for products they have purchased from us and licensees being
unable to pay us for royalties owed to us. Financial difficulties of customers and licensees may also affect the ability of our
customers and licensees to access credit markets or lead to higher credit risk relating to receivables from customers and
licensees.
Future volatility in the financial and credit markets, including the recent volatility due, in part, to the current
COVID-19 outbreak, could make it more difficult for us to obtain financing or refinance existing debt when the need arises,
including upon maturity, which for our senior unsecured credit facilities is currently scheduled for April 2024, or on terms that
would be acceptable to us.
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Our business is exposed to foreign currency exchange rate fluctuations and control regulations.
Our Tommy Hilfiger and Calvin Klein 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 translational impact and a transactional impact.
The translational impact refers to the impact that changes in exchange rates can have on our results of operations and
financial position. The functional currencies of our foreign subsidiaries are generally the applicable local currencies. Our
consolidated financial statements are presented in United States dollars. The results of operations in local foreign currencies are
translated into United States dollars using an average exchange rate over the representative period and our assets and liabilities
in local foreign currencies are translated into United States dollars using the closing exchange rate at the balance sheet date.
Foreign exchange differences that arise from the translation of our foreign subsidiaries’ assets and liabilities into United States
dollars are recorded as foreign currency translation adjustments in other comprehensive (loss) income. Accordingly, our results
of operations and other comprehensive (loss) income will be unfavorably impacted during times of a strengthening United
States dollar, particularly against the euro, the Brazilian real, the Australian dollar, the Japanese yen, the Korean won, the
British pound sterling, the Canadian dollar and the Chinese yuan renminbi, and favorably impacted during times of a
weakening United States dollar against those currencies.
A transactional 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, our results of
operations will be unfavorably impacted during times of a strengthening United States dollar as the increased local currency
value of inventory results in a higher cost of goods in local currency when the goods are sold and favorably impacted during
times of a weakening United States dollar as the decreased local currency value of inventory results in a lower cost of goods 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 selling, general and administrative (commonly referred to as “SG&A”) expenses. 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 foreign exchange risk in connection with our licensing businesses. Most of our licensing
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 changes in
exchange rates during and up to the last day of the selling period. In addition, certain of our other foreign licensing agreements
expose us to changes in exchange rates 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, and during times of a weakening United States dollar, our foreign royalty revenue will be favorably impacted.
We also have exposure to changes in foreign currency exchange rates related to our €950 million aggregate principal
amount of euro-denominated senior notes. During times of a strengthening United States dollar against the euro, we could be
required to use a lower amount of our cash flows from operations to pay interest and make long-term debt repayments on our
euro-denominated senior notes, whereas during times of a weakening United States dollar against the euro, we could be
required to use a greater amount of our cash flows from operations to pay interest and make long-term debt repayments on these
notes.
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.
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Our level of debt could impair our financial condition and ability to operate.
We had outstanding as of February 2, 2020 an aggregate principal amount of $2.725 billion of indebtedness under our
senior unsecured credit facilities, our senior unsecured notes and our unsecured debentures. In March 2020, we increased our
aggregate borrowings outstanding under our senior unsecured revolving credit facilities, other short-term revolving credit
facilities and unsecured commercial paper note program from $50 million at February 2, 2020 to approximately $930 million,
in order to increase our cash position and preserve financial flexibility in responding to the impacts of the COVID-19 outbreak
on our business. Our level of debt could have important consequences to investors, including:
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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, such as during the current COVID-19 outbreak, 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 unsecured credit
facilities, leaving us vulnerable to increases in interest rates to the extent the borrowings are not subject to an interest
rate swap agreement.
In addition, our interest rate swap agreements as well as a portion of the borrowings under our senior unsecured credit
facilities that have variable interest rates are tied to the London Interbank Offered Rate (“LIBOR”). In July 2017, the Financial
Conduct Authority in the United Kingdom announced that it would phase out LIBOR as a benchmark by the end of 2021. It is
unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021, or whether
different benchmark rates used to price indebtedness will develop. We cannot predict the consequences and timing of these
developments, which could include an increase in interest expense and may also require the amendment of contracts that
reference LIBOR.
We primarily use foreign suppliers for our products and raw materials, which poses risks to our business
operations.
The majority of our apparel, footwear and accessories are produced by and purchased or procured from independent
manufacturers located in countries in Asia, South America, Europe, the Middle East, North America, Africa, Central America
and the Caribbean. Although no single supplier or country is or is expected to become 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:
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political or 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, including commodities (particularly cotton), or
the ability 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
a significant decrease in factory and shipping capacity or increase in demand for such capacity;
a significant increase in wage and shipping costs;
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natural disasters, which could result in closed factories and scarcity of raw materials;
disease epidemics and health related concerns, such as the current COVID-19 outbreak, which could result in (and in the
case of the COVID-19 outbreak, has resulted in certain of the following) 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
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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; and
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imposition of duties, taxes and other charges on imports.
The United States government imposed tariffs in 2019 and 2018 on a variety of imports from China into the United
States, including certain categories of apparel, footwear and accessories. These additional tariffs, which were included in a trade
agreement signed by the United States and China in January 2020, are not expected to be decreased, at least not in the near
term, and in the future the United States could impose additional tariffs or increase existing tariffs on goods imported from
China into the United States. China is the largest sourcing country of apparel, footwear and accessories for us globally and for
most of our licensees. We imported approximately $215 million of inventory into the United States from China in 2019.
Accordingly, any tariffs on apparel, footwear and accessories imported from China into the United States result in an increase in
our cost of goods sold for that product. We are looking at alternative sourcing options but we may not be able to shift
production of inventory bound for the United States from China to other countries. In addition, higher costs in sourcing from
other countries, including because others in the industry are looking to move production for the same reason, may make the
move price-prohibitive. We may not be able to pass the entire cost increase resulting from the tariffs onto consumers or could
choose not to. Any increase in prices to consumers could have an adverse impact on our direct sales to consumers, as well as
sales by our wholesale customers and our licensees. Any adverse impact on such sales or increase in our cost of goods sold
could have a material adverse effect on our business and results of operations.
If our manufacturers, the manufacturers used by our licensees, or our licensees themselves fail to use legal and
ethical business practices, our business could suffer.
We require our manufacturers, 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. We audit, or have third parties audit, the operations of these
independent parties to determine compliance. We were a member of the Accord on Fire and Building Safety in Bangladesh and
are a member of its successor, the mission of each of which is to improve fire and building safety in Bangladesh’s apparel
factories. We also 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, the
manufacturers used by our licensees, or our licensees themselves, 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, the shipment of finished
products to us could be interrupted, orders could be canceled and relationships could be terminated. Further, we could be
prohibited from importing goods by governmental authorities. 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 manufacturing of the vast majority of our apparel, footwear and
accessories. A manufacturer’s failure to ship products to us in a timely manner, which has occurred, and may occur in the
future, as a result of the current COVID-19 outbreak, 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.
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We use third party buying offices for a portion of our product sourcing. Any interruption in the operations of these
buying offices, or the failure of these buying offices to perform effectively their services for us, could result in material delays,
reductions of shipments and increased costs. Furthermore, such events could harm our wholesale and retail relationships. Any
disruption in our relationships with these 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 engage independently operated distribution facilities
around the world to warehouse and ship products to our customers and our retail stores, as well as perform related logistics
services. Our ability to meet the needs of our wholesale customers and of our 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,
including as a result of disease epidemics and other health-related concerns, such as the current COVID-19 outbreak, 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 materially and 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 licensee, whether due to the termination or expiration of the relationship, the cessation of the
licensee’s operations or otherwise (including as a result of financial difficulties of the licensee), without an equivalent
replacement, or a significant decline in our licensees’ sales, for example as occurred as a result of the current COVID-19
outbreak, could materially impact our profitability.
While we generally have significant control over our licensees’ products and advertising, we rely on them for, among
other things, operational and financial controls over their businesses. Our licensees’ failure to successfully market licensed
products or our inability to replace our existing licensees could materially and adversely affect our revenue both directly from
reduced royalty, advertising and other revenue received and indirectly from reduced sales of our other products. Risks are also
associated with our licensees’ 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 licensees 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 licensees’ use of our brands. The misuse of our brands
by a licensee 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
TOMMY HILFIGER and CALVIN KLEIN brands, as they enjoy significant worldwide consumer recognition and the generally
premium pricing of TOMMY HILFIGER and CALVIN KLEIN 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. We
cannot assure you that other third parties will not seek 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 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
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prior rights to similar trademarks. We have in the past been and currently are involved both domestically and internationally in
proceedings relating to a company’s claim of prior rights to some of our trademarks or marks similar to some of our brands.
We face intense competition in the apparel industry.
Competition is intense in the apparel industry. We compete with numerous domestic and foreign designers, brand
owners, manufacturers and retailers of apparel, accessories and footwear, some of which have greater resources than we do. We
also face increased competition from online retailers in the digital channel, which is characterized by low barriers to entry. In
addition, in certain instances, we compete directly with our wholesale customers, as they also sell their own private label
products in their stores and online. We compete within the apparel industry primarily on the basis of:
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anticipating and responding to changing consumer tastes, demands and shopping preferences in a timely manner and
developing attractive, quality products;
• maintaining favorable brand recognition and relevance, including through digital brand engagement and online and social
media presence;
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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 at retail and effective presentation of our products at retail, on digital commerce
sites operated by our department store customers and pure play digital commerce retailers, and on our digital commerce
sites.
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.
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 and changes
in consumer demand including, for example, as a result of the current COVID-19 outbreak. 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.
If we are unable to manage our inventory effectively and accurately forecast demand for our products, our results
of operations could be materially adversely affected.
We have made and continue to make investments in our supply chain management systems and processes that enable
us to respond more rapidly to changes in sales trends and consumer demands and enhance our ability to manage inventory.
However, we cannot assure you that we will be able to anticipate and respond successfully to changing consumer tastes and
style trends or economic conditions and, as a result, we may not be able to manage inventory levels to meet our future order
requirements. If we are unable to or fail to accurately forecast consumer demand, including, for example, as a result of the
current COVID-19 outbreak, we may experience excess inventory levels or a shortage of product required to meet demand.
Inventory levels in excess of consumer demand may result in inventory write-downs and the sale of excess inventory at
discounted prices, which could have a material adverse effect on the reputation of our brands and our profitability. If we
underestimate consumer demand for our products, we may not have sufficient inventories of product to meet consumer
requirements in a timely manner, which could result in lost revenues, as well as damage to our reputation and relationships.
We rely significantly on information technology. Our business and reputation could be adversely impacted if our
computer systems, or systems of our business partners and service providers, are disrupted or cease to operate effectively or if
we or they are subject to a data security or privacy breach.
Our ability to manage and operate our business effectively depends significantly on information technology systems,
including systems operated by third parties and us and systems that communicate with third parties, including website and mobile
applications through which we communicate with our consumers and our employees. We process, transmit, store and maintain
information about consumers, employees, and other individuals in the ordinary course of business, including through our digital
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commerce operations. This includes personally identifiable information protected under applicable laws and the collection and
processing of customers’ credit and debit card numbers and reliance on systems maintained by third parties with whom we contract
to provide payment processing. The failure of any system to operate effectively or disruption in these systems, which may occur
as a result of circumstances beyond our control including fire, natural disasters, power outages and systems disruptions, could
require significant remediation costs and adversely impact our operations.
We take, and require third party providers to take, measures to protect data but have no control over their efforts and are
limited in our ability to assess their systems and processes. Furthermore, while we invest, and believe our service providers invest,
considerable resources in protecting systems and information, we all are still subject to security events, including but not limited
to cybercrimes and cybersecurity attacks, such as those perpetrated by sophisticated and well-resourced bad actors attempting to
disrupt operations or access or steal data. Security events may not be detected for an extended period of time, which could compound
the scope and extent of the damages and problems. Such security events could disrupt our business, severely damage our reputation
and our relationship with consumers, and expose us to risks of litigation and liability, which may not be covered by insurance or
may result in costs in excess of the insurance coverage we maintain.
We regularly implement new systems and hardware and are currently undertaking a major multi-year SAP S/4
implementation to upgrade of our platforms and systems worldwide. The implementation of new software and hardware
involves risks and uncertainties that could cause disruptions, delays or deficiencies in the design, implementation or application
of these systems including:
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adversely impacting our operations;
increased costs;
disruptions in our ability to effectively source, sell or ship our products;
delays in collecting payments from our customers; and
adversely affecting our ability to timely report our financial results.
Our business, results of operations and financial condition could be materially adversely affected as a result of these
implementations. In addition, intended improvements may not be realized. Our business partners and service providers face the
same risks, which could also adversely impact our business and operations.
We are subject to data privacy and security laws and regulations, the number and complexity of which are
increasing globally. We may be the subject of enforcement or other legal actions despite our compliance efforts.
We collect, use, store, and otherwise process or rely upon access to data, including personally identifiable information,
of consumers, employees, and other individuals in the daily conduct of our business, including through our digital commerce
operations. There have been significant developments in the area of data privacy and cybersecurity law and regulation.
Significant new laws, such as the European Union’s General Data Protection Regulation, the Brazilian General Data Protection
Law and the California Consumer Privacy Act, are continuously being proposed and enacted around the world. These laws and
regulations have caused and could continue to cause us to change the way we operate, including in a less efficient manner, in
order to comply with local requirements. We have a privacy compliance program but our compliance efforts are not an
assurance that we will not be the subject of regulatory or other legal actions. We could expend significant management and
associate time and incur significant cost investigating and defending ourselves against the claims in any such matter, which
matters also could result in us being the subject of significant fines, judgments or settlements. In addition, any such claim could
give rise to significant reputational damage, whether or not we are ultimately successful in defending ourselves.
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.
25
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.
Moreover, there may be changes from time to time 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 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.
Volatility in securities markets, interest rates and other economic factors could increase substantially 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, which, for example, may result from recent market volatility due, in part, to the COVID-19
outbreak, 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. These
gains and losses can be significant and 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.
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 amount of our goodwill or another intangible asset 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, including, for
example, as a result of the current COVID-19 outbreak, 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.
26
As of February 2, 2020, we had approximately $3.678 billion of goodwill and $3.481 billion of other identifiable
intangible assets on our balance sheet, which together represented 53% of our total assets. No impairment was recorded in 2019
based on our annual goodwill and other indefinite-lived intangible assets impairment tests. However, during the fourth quarter
of 2019, we entered into a definitive agreement to sell our Speedo North America business, which prompted the need for us to
perform an interim impairment assessment of our Speedo perpetual license right. As a result of this interim test, the perpetual
license right was determined to be impaired and an impairment charge of $116.4 million was recorded. The Speedo transaction
was also a triggering event that prompted the need for us to perform an interim goodwill impairment test for the Heritage
Brands Wholesale reporting unit, the reporting unit that includes the Speedo North America business. No goodwill impairment
resulted from this interim test.
Our balance sheet includes a significant amount of long-lived assets in our retail stores, including operating lease
right-of-use assets and property, plant and equipment. A decline in the current and projected cash flows in our retail stores
could result in impairment charges, which could be material.
Long-lived assets, such as operating lease right-of-use assets and property, plant and equipment in our retail stores, are
tested for impairment if an event occurs or circumstances change that would indicate the carrying amount may not be
recoverable. If the carrying amount of a long-lived asset were to exceed its fair value, the asset would be written down to its fair
value and an 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, including, for example, as a result of the current
COVID-19 outbreak, 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 long-lived assets.
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 provisions requiring stockholders who seek to introduce proposals
at a stockholders meeting or nominate a person to become a director to provide us with advance notice and certain information,
as well as meet certain ownership criteria; permitting the Board of Directors to fill vacancies on the Board; and authorizing the
Board to issue shares of preferred stock without approval of our stockholders. These provisions could 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.
The United Kingdom’s withdrawal from the European Union could harm our business and financial results.
Voters in the United Kingdom approved a referendum to withdraw from the European Union (commonly referred to as
“Brexit”). The United Kingdom formally withdrew from the European Union on January 31, 2020 and is now in a period of
transition until December 31, 2020. During the transition period, the United Kingdom’s trading relationship with the European
Union is expected to remain largely the same while the two parties negotiate a trade agreement as well as other aspects of the
United Kingdom’s relationship with the European Union. The uncertainty surrounding the terms of the United Kingdom’s
future relationship with the European Union after December 31, 2020 and its consequences could adversely impact consumer
and investor confidence and the level of consumer purchases of discretionary items and retail products, including our products.
The eventual terms upon which the withdrawal occurs (which could leave the United Kingdom without a trade agreement with
the European Union) also could significantly disrupt the free movement of goods, services and people between the United
Kingdom and the European Union and may result in increased legal and regulatory complexities and higher costs of conducting
business in Europe. Volatility in the value of the British pound sterling, the euro and other European currencies could also
result. Any of these effects, among others, could adversely affect our business, results of operations and financial condition.
Item 1B. Unresolved Staff Comments
None.
27
Item 2. Properties
The general location, use, ownership status and approximate size of the principal properties that we occupied as of
February 2, 2020 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 and retail administrative offices
Banksmeadow, Australia
Milperra, Australia
Amsterdam, The Netherlands
Tommy Hilfiger, Calvin Klein and Heritage
Brands administrative offices, showrooms,
warehouse and distribution center
Warehouse and distribution center
Tommy Hilfiger and Calvin Klein
administrative offices, warehouse and
showrooms
Venlo/Oud Gastel, The Netherlands Warehouse and distribution centers
McDonough, Georgia
Palmetto, Georgia
Warehouse and distribution center
Warehouse and distribution center
Jonesville, North Carolina
Warehouse and distribution center
Montreal, Canada
Hong Kong SAR, China
Hawassa, Ethiopia
Dusseldorf, Germany
Cypress, California
Shanghai, China
Administrative offices, warehouse and
distribution center
Corporate, Tommy Hilfiger and Calvin Klein
administrative offices
Manufacturing facility
Tommy Hilfiger and Calvin Klein
administrative offices and showrooms
Speedo administrative offices
Tommy Hilfiger and Calvin Klein
administrative offices
Ownership
Status
Approximate
Area in
Square Feet
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
209,000
474,000
220,000
285,000
243,000 (1)
86,000 (1)
499,000
2,051,000
851,000
983,000
778,000
183,000
163,000
155,000
91,000
69,000 (2)
74,000
(1) We occupy properties in Australia since May 2019 in connection with the Australia acquisition.
(2) Our Speedo administrative offices in Cypress, California will no longer be occupied by us following the pending sale
of our Speedo North America business to Pentland, which is expected to close in the first quarter of 2020, subject to
customary conditions. Please see Note 4, “Assets Held For Sale,” in the Notes to Consolidated Financial Statements
included in Item 8 of this report for further discussion.
In addition, as of February 2, 2020, we leased certain other administrative offices and showrooms in various domestic
and international locations. We also leased and operated as of February 2, 2020 over 1,800 retail locations in the United States,
Canada, Europe, Asia-Pacific, and Brazil.
Information with respect to maturities of the Company’s lease liabilities in which we are a lessee is included in Note
17, “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.
28
Item 4. Mine Safety Disclosures
Not applicable.
29
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock is traded on the New York Stock Exchange under the symbol “PVH.” Certain information with
respect to the dividends declared on our common stock appear in the Consolidated Statements of Changes in Stockholders’
Equity and Redeemable Non-Controlling Interest included in Item 8 of this report. Please see Note 9, “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 19, 2020, there were 562 stockholders of record of our common stock.
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)
November 4, 2019 -
December 1, 2019
December 2, 2019 -
January 5, 2020
January 6, 2020 -
February 2, 2020
Total
___________________
333,392
$
381,889
307,761
1,023,042
$
97.47
102.92
98.67
99.87
332,451
$
752,514,829
381,441
713,255,373
304,259
1,018,151
$
683,257,019
683,257,019
(1) Our Board of Directors has authorized over time since 2015 an aggregate $2.0 billion stock repurchase program
through June 3, 2023, of which $750 million was authorized on March 26, 2019. 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, 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 2019 principally in connection with the settlement of 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.
30
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 February 2, 2020.
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
$
$
$
79.62
179.17
78.24
Selected Financial Data appears under the heading “Five Year Financial Summary” on pages F-70 and F-71.
31
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 global apparel companies in the world and, in March 2020, we marked our 100-year
anniversary as a listed company on the New York Stock Exchange. We manage a diversified brand portfolio, including TOMMY
HILFIGER, CALVIN KLEIN, Van Heusen, IZOD, ARROW, Speedo (licensed in perpetuity for North America and the
Caribbean), Warner’s, Olga, True&Co. and Geoffrey Beene. Our brand portfolio also consists of various other owned, licensed
and, to a lesser extent, private label brands. We entered into a definitive agreement on January 9, 2020 to sell our Speedo North
America business to Pentland and, upon closing of the sale, we will no longer license the Speedo trademark. The Speedo
transaction is expected to close in the first quarter of 2020. The closing is subject to customary closing conditions, including
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which has been received.
Our business strategy is to position our brands to sell globally at various price points and in multiple channels of
distribution. 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, product category, price point, distribution channel or region. We also
license the use of our trademarks to third parties and joint ventures for product categories and in regions where we believe our
licensees’ expertise can better serve our brands.
Our revenue was $9.9 billion in 2019, of which over 50% was generated outside of the United States. Our global
lifestyle brands, TOMMY HILFIGER and CALVIN KLEIN, together generated approximately 85% of our revenue.
RESULTS OF OPERATIONS
COVID-19 Outbreak
The COVID-19 outbreak is having a significant impact on our business, financial condition, cash flows and results of
operations in 2020.
Virus-related concerns, reduced travel, temporary store closures and government-imposed restrictions have resulted in
sharply reduced traffic and consumer spending trends and sales stoppages in our retail stores and in the stores of our wholesale
customers in virtually all key markets during the first quarter of 2020. In addition, our supply chain had been disrupted and may
experience future disruptions as a result of either closed factories or factories with reduced workforces. Our licensees’ sales and
their supply chain are also being negatively impacted by the COVID-19 outbreak, which in turn negatively impacts our royalty
revenue.
There is significant uncertainty about the duration and extent of the impact of the COVID-19 outbreak; however, there
will be a significant negative impact to our 2020 revenue and net income.
Further, our fourth quarter of 2019 earnings were negatively impacted compared to the prior year period by $22 million
of additional inventory reserves that we recorded in anticipation of the lower sales trends projected in 2020 as a result of the onset
of the COVID-19 outbreak.
Operations Overview
We generate net sales from (i) the wholesale distribution to retailers, franchisees, licensees and distributors of dress
shirts, neckwear, sportswear (casual apparel), jeanswear, performance apparel, intimate apparel, underwear, swimwear, 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 1,830 Company-operated free-standing retail store locations worldwide under our
TOMMY HILFIGER, CALVIN KLEIN and certain of our heritage brands trademarks, (b) approximately 1,500 Company-
operated shop-in-shop/concession locations worldwide under our TOMMY HILFIGER and CALVIN KLEIN trademarks, and (c)
digital commerce sites in over 30 countries under our TOMMY HILFIGER and CALVIN KLEIN trademarks and in the United
States through our directly operated digital commerce sites for Speedo, True&Co., Van Heusen, and IZOD, as well as our
32
styleBureau.com site. Additionally, we generate royalty, advertising and other revenue from fees for licensing the use of our
trademarks. We manage our operations through our operating divisions, which are presented as six reportable segments: (i)
Tommy Hilfiger North America; (ii) Tommy Hilfiger International; (iii) Calvin Klein North America; (iv) Calvin Klein
International; (v) Heritage Brands Wholesale; and (vi) Heritage Brands Retail.
We have entered into the following transactions that have impacted our results of operations and the comparability
among the years, including our 2020 expectations as compared to 2019, as discussed below:
• We entered into a definitive agreement on January 9, 2020 to sell our Speedo North America business to Pentland for
$170 million in cash, subject to a working capital adjustment, as described above. We recorded a pre-tax noncash loss
of $142 million in the fourth quarter of 2019 related to the Speedo transaction and expected deconsolidation of the net
assets of the business, consisting of (i) a noncash impairment of our perpetual license right for the Speedo trademark
and (ii) a noncash loss to reduce the carrying value of the business to its estimated fair value, less costs to sell.
• We entered into agreements on July 3, 2019 to terminate early the licenses for the global Calvin Klein and Tommy
Hilfiger North America socks and hosiery businesses in order to consolidate the socks and hosiery businesses for all of
our brands in the United States and Canada in a newly formed joint venture, PVH Legwear, in which we own a 49%
economic interest, and to bring in-house the international Calvin Klein socks and hosiery wholesale businesses. PVH
Legwear was formed with a wholly owned subsidiary of our former Heritage Brands socks and hosiery licensee, and
licenses from us the rights to distribute and sell TOMMY HILFIGER, CALVIN KLEIN, IZOD, Van Heusen and
Warner’s socks and hosiery beginning in December 2019. We recorded a pre-tax charge of $60 million during 2019 in
connection with these agreements.
• We completed the Australia and TH CSAP acquisitions in the second quarter of 2019. The Australia acquisition closed
on May 31, 2019. Prior to the closing, we, along with Gazal, jointly owned and managed a joint venture, PVH
Australia, which licensed and operated businesses under the TOMMY HILFIGER, CALVIN KLEIN and Van Heusen
brands, along with other owned and licensed brands. PVH Australia came under our full control as a result of the
Australia acquisition and we now operate directly those businesses. The aggregate net purchase price for the shares
acquired was $59 million, net of cash acquired and after taking into account the proceeds from the divestiture to a third
party of an office building and warehouse owned by Gazal in June 2019. We completed the TH CSAP acquisition on
July 1, 2019 for $74 million, as a result of which we now operate directly the Tommy Hilfiger retail business in the
Central and Southeast Asia market. Please see Note 3, “Acquisitions,” in the Notes to Consolidated Financial
Statements included in Item 8 of this report for further discussion.
In connection with the Australia and TH CSAP acquisitions, we recorded an aggregate net pre-tax gain of $83 million
during 2019, including (i) a noncash gain of $113 million to write up our existing equity investments in Gazal and
PVH Australia to fair value, partially offset by (ii) $21 million of pre-tax costs, primarily consisting of noncash
valuation adjustments and one-time expenses recorded on our equity investments in Gazal and PVH Australia prior to
the Australia acquisition closing, and (iii) a $9 million expense recorded in interest expense, net resulting from the
remeasurement of our mandatorily redeemable non-controlling interest that was recognized in connection with the
Australia acquisition.
• We entered into a licensing agreement on May 30, 2019 with G-III for the design, production and wholesale
distribution of CALVIN KLEIN JEANS women’s jeanswear collections in the United States and Canada, which resulted
in the discontinuation of our directly operated Calvin Klein North America women’s jeanswear wholesale business in
2019.
• We refinanced on April 29, 2019 our senior credit facilities and recorded pre-tax debt modification and extinguishment
charges of $5 million. Please see the section entitled “Liquidity and Capital Resources” below for further discussion.
• We closed our TOMMY HILFIGER flagship and anchor stores in the United States (the “TH U.S. store closures”) in
the first quarter of 2019 and recorded pre-tax costs of $55 million, primarily consisting of noncash lease asset
impairments. Please see Note 12, “Fair Value Measurements,” in the Notes to Consolidated Financial Statements
included in Item 8 of this report for further discussion of the noncash lease asset impairments.
• We announced on January 10, 2019 a restructuring in connection with strategic changes for our Calvin Klein business
(the “Calvin Klein restructuring”). The strategic changes included (i) the closure of the CALVIN KLEIN 205 W39 NYC
brand (formerly Calvin Klein Collection), (ii) the closure of the flagship store on Madison Avenue in New York, New
33
York (collectively with (i), the “CK Collection closure”), (iii) the restructuring of the Calvin Klein creative and design
teams globally, and (iv) the consolidation of operations for the men’s Calvin Klein Sportswear and Calvin Klein Jeans
businesses. All costs related to this restructuring were incurred by the end of 2019. We recorded pre-tax costs of $103
million during 2019 in connection with the Calvin Klein restructuring, consisting of a $30 million noncash lease asset
impairment resulting from the closure of the flagship store on Madison Avenue in New York, New York, $26 million
of contract termination and other costs, $26 million of severance, $9 million of other noncash asset impairments and
$13 million of inventory markdowns. We recorded pre-tax costs of $41 million in the fourth quarter of 2018,
consisting of $27 million of severance, $7 million of noncash asset impairments, $4 million of contract termination
and other costs and $2 million of inventory markdowns. Please see Note 18, “Exit Activity Costs,” in the Notes to
Consolidated Financial Statements included in Item 8 of this report for further discussion.
• We acquired on April 20, 2018 the Geoffrey Beene tradename from Geoffrey Beene for $17 million, of which $16
million was paid in cash. Prior to the acquisition, we had licensed the rights to design, market and distribute Geoffrey
Beene dress shirts and neckwear from Geoffrey Beene.
• We issued on December 21, 2017 €600 million euro-denominated principal amount of 3 1/8% senior notes due
December 15, 2027. We redeemed on January 5, 2018 our $700 million principal amount of 4 1/2% senior notes due
December 15, 2022 (using the proceeds of the senior notes due December 15, 2027) and recorded pre-tax debt
extinguishment charges of $24 million. Please see the section entitled “Liquidity and Capital Resources” below for
further discussion.
• We amended on December 20, 2017 Mr. Tommy Hilfiger’s employment agreement, pursuant to which we made a cash
buyout of a portion of the future payment obligation (the “Mr. Hilfiger amendment”). We recorded pre-tax charges of
$83 million in 2017 in connection with the amendment.
• We restructured our supply chain relationship with Li & Fung Trading Limited (“Li & Fung”) in a transaction that
closed on September 30, 2017. Our non-exclusive buying agency agreement with Li & Fung was terminated in
connection with this transaction (the “Li & Fung termination”). We recorded pre-tax charges of $54 million in 2017 in
connection with the termination.
• We acquired on September 1, 2017 the Tommy Hilfiger and Calvin Klein wholesale and concessions businesses in
Belgium and Luxembourg from a former agent (the “Belgian acquisition”) for $12 million. As a result of this
acquisition, we now operate directly our Tommy Hilfiger and Calvin Klein businesses in this region.
• We acquired on March 30, 2017 True & Co., a direct-to-consumer intimate apparel digital-centric retailer, for $28
million, net of $400,000 of cash acquired. This acquisition enabled us to participate further in the fast-growing online
channel and provided a platform to increase innovation, data-driven decisions and speed in the way we serve our
consumers across our channels of distribution.
• We completed the relocation of our Tommy Hilfiger office in New York in 2017 and recorded related pre-tax charges
of $19 million, including noncash depreciation expense.
• We purchased a group annuity in 2017 for certain participants of our retirement plans under which certain of our
benefit obligations were transferred to an insurer. We recorded a pre-tax loss of $9 million in connection with the
noncash settlement of such benefit obligations.
• We acquired on April 13, 2016 the 55% ownership interests in 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 market. We recorded pre-tax charges of $24 million and $27
million in 2018 and 2017, respectively, primarily consisting of noncash amortization of short-lived assets.
Our Tommy Hilfiger and Calvin Klein 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. Our results of operations in local foreign currencies are translated into United States dollars
using an average exchange rate over the representative period. Accordingly, our results of operations 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. Over 50% of our
2019 revenue was subject to foreign currency translation. The United States dollar strengthened against most major currencies
34
in the latter part of 2018 and in 2019, particularly the euro, which is the foreign currency in which we transact the most
business. As a result, our 2019 revenue and net income decreased by approximately $215 million and $25 million, respectively,
as compared to 2018 due to the impact of foreign currency translation. We currently expect a decrease in our revenue and net
income in 2020 as compared to 2019 due to the impact of foreign currency translation.
There is also a transactional impact on our financial results because inventory typically is purchased in United States
dollars by our foreign subsidiaries. As with translation, our results of operations will be unfavorably impacted during times of a
strengthening United States dollar, as the increased local currency value of inventory results in a higher cost of goods in local
currency when the goods are sold, and favorably impacted during times of a weakening United States dollar, as the decreased
local currency value of inventory results in a lower cost of goods in local currency when the goods are sold. We use foreign
currency forward exchange contracts to hedge against a portion of the exposure related to this transactional 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 impact of
fluctuations of the United States dollar on the cost of inventory purchases covered by these contracts may be realized in our
results of operations in the year following their inception, as the underlying inventory hedged by the contracts is sold. Our 2019
net income included a slight benefit as compared to 2018 as a result of this transactional impact. However, the unfavorable
impact of a strengthening United States dollar against most major currencies in the latter part of 2018 and in 2019, particularly
the euro, is expected to negatively impact our gross margin during 2020. Additionally, there is a transactional impact related to
changes in SG&A expenses as a result of fluctuations in foreign currency exchange rates. We currently expect a decrease in our
net income in 2020 as compared to 2019 due to the transactional impact.
Further, we have exposure to changes in foreign currency exchange rates related to our €950 million aggregate
principal amount of euro-denominated senior notes that we had issued in the United States. The strengthening of the United
States dollar against the euro would require us to use a lower amount of our cash flows from operations to pay interest and
make long-term debt repayments, whereas the weakening of the United States dollar against the euro would require us to use a
greater amount of our cash flows from operations to pay interest and make long-term debt repayments. We designated the
carrying amount of these euro-denominated senior notes that we had issued in the United States as net investment hedges of our
investments in certain of our foreign subsidiaries that use the euro as their functional currency. As a result, the remeasurement
of these foreign currency borrowings at the end of each period is recorded in equity.
Retail comparable store sales discussed below refer to sales from Company-operated retail stores that have been open
and operated by us for at least 12 months, as well as sales from Company-operated digital commerce sites for those businesses
and regions that have operated the related digital commerce site for at least 12 months. Sales from retail stores and Company-
operated digital commerce sites that are closed or shut down during the year are excluded from the calculation of retail
comparable store sales. Sales for retail stores that are relocated, materially altered in size or closed for a prolonged period of
time and sales from Company-operated digital commerce sites that are materially altered are also excluded from the calculation
of retail comparable store sales until such stores or sites have been in their new location or in their newly renovated state, as
applicable, for at least 12 months. Retail comparable store sales are based on local currencies and comparable weeks. As a
result of the 53rd week in 2017, the 2018 retail comparable store sales are more appropriately compared with the 52 week
period ended February 4, 2018 (which excludes for this purpose the first week of 2017). As such, all 2018 retail comparable
store sales are presented on this shifted basis.
35
The following table summarizes our income statements in 2019, 2018 and 2017:
(Dollars in millions)
Net sales
Royalty revenue
Advertising and other revenue
Total revenue
Gross profit
% of total revenue
SG&A
% of total revenue
Non-service related pension and postretirement cost
Debt modification and extinguishment costs
Other noncash loss, 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.
2019
2018
2017
$
$
9,400
380
129
9,909
5,388
54.4%
4,715
47.6%
90
5
29
10
559
120
5
444
29
415
(2)
417
$
$
9,154
376
127
9,657
5,308
55.0%
4,433
45.9%
5
—
—
21
892
121
5
776
31
745
(2)
746
$
$
8,439
366
109
8,915
4,894
54.9%
4,245
47.6%
3
24
—
10
632
128
6
510
(26)
536
(2)
538
Total Revenue
Total revenue was $9.909 billion in 2019, $9.657 billion in 2018 and $8.915 billion in 2017. Revenue in 2017 included
the benefit of a 53rd week. The increase in revenue of $252 million, or 3%, in 2019 as compared to 2018 was due principally to
the net effect of the following items:
• The net addition of an aggregate $367 million of revenue, or an 8% increase over the prior year, attributable to our
Tommy Hilfiger International and Tommy Hilfiger North America segments, which included a negative impact of
$129 million, or 3%, related to foreign currency translation. Tommy Hilfiger International segment revenue increased
15% (including a 5% negative foreign currency impact), driven principally by outperformance in Europe and the
addition of revenue resulting from the Australia and TH CSAP acquisitions. Tommy Hilfiger International comparable
store sales increased 9%, including a benefit of 4% from sales on our digital commerce sites. Revenue in our Tommy
Hilfiger North America segment decreased 1%, as growth in the North America wholesale business was more than
offset by a 6% decline in Tommy Hilfiger North America comparable store sales due to weakness in traffic and
consumer spending trends, especially in stores located in international tourist locations.
• The net reduction of an aggregate $63 million of revenue, or a 2% decrease compared to the prior year, attributable to
our Calvin Klein International and Calvin Klein North America segments, which included a negative impact of $85
million, or 2%, related to foreign currency translation. Calvin Klein International segment revenue increased 3%
(including a 4% negative foreign currency impact), as continued solid growth in Europe and the addition of revenue
resulting from the Australia acquisition were partly offset by the negative impacts of (i) softness experienced in Asia
due, in part, to the business disruptions caused by the protests in Hong Kong SAR and the trade tensions between the
United States and China and (ii) the reduction of revenue resulting from the CK Collection closure. Calvin Klein
International comparable store sales decreased 1%. Revenue in our Calvin Klein North America segment decreased
7%, driven by the effect of the G-III license and a 2% decrease in Calvin Klein North America comparable store sales
due to weakness in traffic and consumer spending trends, especially in stores located in international tourist locations.
• The reduction of an aggregate $52 million of revenue, or a 3% decrease compared the prior year, attributable to our
Heritage Brands Retail and Heritage Brands Wholesale segments, primarily due to weakness in the North America
wholesale business and a 2% decline in comparable store sales.
36
The increase in revenue of $742 million, or 8%, in 2018 as compared to 2017 was due principally to the effect of the
following items:
• The addition of an aggregate $451 million of revenue, or a 12% increase over the prior year, attributable to our Tommy
Hilfiger International and Tommy Hilfiger North America segments, which included the addition of $49 million, or
1%, related to the impact of foreign currency translation. Tommy Hilfiger International segment revenue increased
15% (including a 2% positive foreign currency impact), driven by strong performance across all regions and channels.
Tommy Hilfiger International comparable store sales increased 13%. Revenue in our Tommy Hilfiger North America
segment increased 6%, principally attributable to strength in the wholesale business and a 5% increase in Tommy
Hilfiger North America comparable store sales.
• The addition of an aggregate $270 million of revenue, or an 8% increase over the prior year, attributable to our Calvin
Klein International and Calvin Klein North America segments, which included the addition of $12 million related to
the impact of foreign currency translation. Calvin Klein International segment revenue increased 10%, driven by
growth in Europe and Asia. Calvin Klein International comparable store sales increased 5%. Revenue in our Calvin
Klein North America segment increased 5% primarily as a result of growth in the wholesale business and a 1%
increase in Calvin Klein North America comparable store sales.
• The addition of an aggregate $21 million of revenue, or a 1% increase over the prior year, attributable to our Heritage
Brands Retail and Heritage Brands Wholesale segments. Comparable store sales increased 1%.
There is significant uncertainty with respect to the impact of the COVID-19 outbreak on our business and the
businesses of our licensees and other business partners. We currently expect that revenue will decrease significantly in 2020
compared to 2019, inclusive of a negative impact related to foreign currency translation, primarily due to the negative impacts
to our businesses caused by the COVID-19 outbreak. Revenue in 2020 is also expected to decrease by approximately $150
million due to the aggregate net effect of reductions resulting from (i) the Speedo transaction, which is expected to close in the
first quarter of 2020, and (ii) the G-III license, which commenced in 2019, partially offset by an addition of revenue resulting
from (iii) the Australia and TH CSAP acquisitions, which closed in the second quarter of 2019.
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 cost 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 SG&A 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 2019, 2018 and 2017:
Components of revenue:
Net sales
Royalty, advertising and other revenue
Total
Gross margin
2019
2018
2017
94.9%
5.1
100.0%
54.4%
94.8%
5.2
100.0%
55.0%
94.7%
5.3
100.0%
54.9%
Gross profit in 2019 was $5.388 billion, or 54.4% of total revenue, as compared to $5.308 billion, or 55.0% of total
revenue, in 2018. The 60 basis point decrease in gross margin was principally driven by (i) a gross margin decline in our
Tommy Hilfiger North America business due to more promotional selling as compared to the prior year, (ii) the impact of
additional inventory reserves recorded in the fourth quarter of 2019 in anticipation of lower 2020 sales trends as a result of the
onset of the COVID-19 outbreak, (iii) short-lived noncash inventory valuation adjustments recorded in connection with the
Australia and TH CSAP acquisitions, and (iv) the negative impact of tariffs imposed on goods imported from China into the
United States. These decreases were partially offset by the favorable impact of faster growth in our Tommy Hilfiger
37
International and Calvin Klein International segments than in our North America segments, as our International segments
generally carry higher gross margins, as well as gross margin improvements realized in our Calvin Klein North America
business.
Gross profit in 2018 was $5.308 billion, or 55.0% of total revenue, as compared to $4.894 billion, or 54.9% of total
revenue, in 2017. The 10 basis point increase in gross margin was principally driven by (i) a favorable mix of business due to
faster growth in our Tommy Hilfiger International and Calvin Klein International segments than in our North America
segments, as our International segments generally carry higher gross margins, and (ii) gross margin improvement in our Tommy
Hilfiger business. Partially offsetting these increases were gross margin declines in our Calvin Klein and Heritage Brands
businesses principally due to more promotional selling.
We currently expect that gross margin in 2020 will decrease as compared to 2019 primarily due to (i) the need for
increased promotional selling and inventory liquidation as a result of the COVID-19 outbreak and (ii) 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 results in higher cost of goods in local currency
when the goods are sold. There is significant uncertainty with respect to the impact of the COVID-19 outbreak on our business
and the businesses of our licensees and other business partners.
SG&A Expenses
Our SG&A expenses were as follows:
(In millions)
SG&A expenses
% of total revenue
2019
2018
2017
$
$
4,715
47.6%
$
4,433
45.9%
4,245
47.6%
SG&A expenses in 2019 were $4.715 billion, or 47.6% of total revenue, as compared to $4.433 billion, or 45.9% of
total revenue in 2018. The 170 basis point increase in SG&A expenses as a percentage of total revenue was principally
attributable to (i) an increase in costs incurred in connection with the Calvin Klein restructuring, (ii) the costs incurred in
connection with the Socks and Hosiery transaction, and (iii) the costs incurred in connection with the TH U.S. store closures.
Also contributing to the increase was a change in the mix of business due to faster growth in our Tommy Hilfiger International
and Calvin Klein International segments than in our North America segments, as our International segments generally carry
higher SG&A expenses as percentages of total revenue.
SG&A expenses in 2018 were $4.433 billion, or 45.9% of total revenue, as compared to $4.245 billion, or 47.6% of
total revenue in 2017. The 170 basis point decrease in SG&A expenses as a percentage of total revenue was principally
attributable to the absence in 2018 of costs that were recorded in 2017 in connection with (i) the Mr. Hilfiger amendment, (ii)
the Li & Fung termination, and (iii) the relocation of our Tommy Hilfiger office in New York, including noncash depreciation
expense. Also contributing to the decrease was a leveraging of expenses in the Tommy Hilfiger business. These decreases were
partially offset by (i) a change in the mix of business due to faster growth in our Tommy Hilfiger International and Calvin Klein
International segments than in our North America segments, as our International segments generally carry higher SG&A
expenses as percentages of total revenue, (ii) the costs incurred in connection with the Calvin Klein restructuring and (iii) an
increase in corporate expenses due, in part, to investments in digital and information technology initiatives.
In light of the negative impacts on our business resulting from the COVID-19 outbreak, we are taking measures to
significantly reduce SG&A expenses in 2020. As such, we currently expect our SG&A expenses in 2020 will be significantly
lower as compared to 2019, including as a result of the reductions resulting from these measures and the absence in 2020 of
costs related to (i) the Calvin Klein restructuring, (ii) the Socks and Hosiery transaction and (iii) the TH U.S. store closures.
However, we expect our SG&A expenses as a percentage of total revenue in 2020 will increase as compared to 2019 primarily
due to a deleveraging of expenses driven by the expected decline in revenue resulting from the COVID-19 outbreak. There is
significant uncertainty with respect to the impact of the COVID-19 outbreak on our business and our SG&A expenses may be
subject to significant material change, including as a result of noncash impairments of our property, plant and equipment,
operating lease right-of-use assets, or goodwill and other intangible assets that we may recognize as a result of the COVID-19
outbreak.
38
Non-Service Related Pension and Postretirement Cost
Non-service related pension and postretirement cost in 2019 was $90 million as compared to $5 million in 2018. Non-
service related pension and postretirement cost in 2019 and 2018 included actuarial losses on our retirement plans of $98
million and $15 million, respectively. Please see Note 13, “Retirement and Benefit Plans,” in the Notes to Consolidated
Financial Statements included in Item 8 of this report for further discussion.
Non-service related pension and postretirement cost in 2018 was $5 million as compared to $3 million in 2017. Non-
service related pension and postretirement cost in 2018 included a $15 million actuarial loss on our retirement plans. Non-
service related pension and postretirement cost in 2017 included a $9 million loss recorded in connection with the noncash
settlement of certain of our benefit obligations related to our retirement plans as a result of a group annuity purchased for
certain participants under which such obligations were transferred to an insurer, as well as a $3 million actuarial loss on our
retirement plans. Please see Note 13, “Retirement and Benefit Plans,” in the Notes to Consolidated Financial Statements
included in Item 8 of this report for further discussion.
We currently expect that non-service related pension and postretirement (income) for 2020 will be approximately $15
million compared to non-service related pension and postretirement cost of $90 million in 2019. Our 2019 non-service related
pension and postretirement cost included a $98 million actuarial loss on our retirement plans recorded in the fourth quarter.
Non-service related pension and postretirement (income) cost 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 earnings,
generally in the fourth quarter of the year, which can create volatility in our results of operations. Our expectation of 2020 non-
service related pension and post-retirement income does not include the impact of an actuarial gain or loss. However, if recent
market volatility due, in part, to the COVID-19 outbreak continues, we may incur a significant actuarial loss in 2020 as a result
of the difference between actual and expected returns on plan assets or if there is a decline in discount rates. Our actual 2020
non-service related pension and postretirement (income) cost may be significantly different than our projections.
Debt Modification and Extinguishment Costs
We incurred costs totaling $5 million in 2019 in connection with the refinancing of our senior credit facilities. Please
see the section entitled “Liquidity and Capital Resources” below for further discussion.
We incurred costs totaling $24 million in 2017 in connection with the early redemption of our $700 million 4 1/2%
senior notes due December 15, 2022. Please see the section entitled “Liquidity and Capital Resources” below for further
discussion.
Other Noncash Loss, Net
We recorded a pre-tax noncash loss of $142 million in the fourth quarter of 2019 related to the Speedo transaction and
expected deconsolidation of the net assets of the Speedo North America business, consisting of a noncash impairment of our
perpetual license right for the Speedo trademark, and a noncash loss to reduce the carrying value of the business to its estimated
fair value, less costs to sell. Please see Note 4, “Assets Held For Sale,” in the Notes to Consolidated Financial Statements
included in Item 8 of this report for further discussion.
We recorded a pre-tax noncash gain of $113 million in the second quarter of 2019 to write up our equity investments
in Gazal and PVH Australia to fair value in connection with the Australia acquisition. Please see Note 3, “Acquisitions,” in the
Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion.
Equity in Net Income of Unconsolidated Affiliates
The equity in net income of unconsolidated affiliates was $10 million in 2019 as compared to $21 million in 2018 and
$10 million in 2017. These amounts relate to our share of income (loss) from PVH Australia (prior to acquiring it on May 31,
2019 through the Australia acquisition), our joint venture for the TOMMY HILFIGER, CALVIN KLEIN, Warner’s, Olga and
Speedo brands in Mexico, our joint ventures for the TOMMY HILFIGER brand in India and Brazil, our joint venture for the
CALVIN KLEIN brand in India, and our newly formed PVH Legwear joint venture for the TOMMY HILFIGER, CALVIN
KLEIN, IZOD, Van Heusen and Warner’s brands and other owned and licensed trademarks in the United States and Canada.
(PVH Legwear began operations in December 2019.) Also included is our share of income (loss) from our investments in Karl
Lagerfeld Holding B.V. (“Karl Lagerfeld”) and in Gazal (prior to acquiring it on May 31, 2019 through the Australia
39
acquisition). The equity in net income for 2019 decreased as compared to 2018, primarily due to having only a partial year of
income from our investments in Gazal and PVH Australia and one-time expenses of $2 million recorded on our equity
investments in Gazal and PVH Australia prior to the Australia acquisition closing. Our investments in the continuing joint
ventures and Karl Lagerfeld are being accounted for under the equity method of accounting. Subsequent to the closing of the
Australia acquisition, we began to consolidate the operations of Gazal and PVH Australia into our financial statements. Please
see the section entitled “Investments in Unconsolidated Affiliates” within “Liquidity and Capital Resources” below for further
discussion.
We currently expect that our equity in net income of unconsolidated affiliates for 2020 will include an increase in
income on our investment in PVH Legwear as compared to 2019, as we recognize a full year of income in 2020, offset by a
decrease in income on our investments due to the negative impact of the COVID-19 outbreak on our unconsolidated affiliates’
businesses in 2020.
Interest Expense, Net
Net interest expense decreased to $115 million in 2019 from $116 million in 2018 primarily due to lower interest rates
on our senior unsecured credit facilities as compared to 2018, partially offset by the $9 million loss on remeasurement of our
mandatorily redeemable non-controlling interest that was recognized in connection with the Australia acquisition. Please see
the section entitled “Financing Arrangements” within “Liquidity and Capital Resources” below for further discussion.
Net interest expense decreased to $116 million in 2018 from $122 million in 2017 primarily due to (i) the net impact
of the early redemption of our $700 million 4 1/2% senior notes in January 2018 and issuance of €600 million euro-
denominated 3 1/8% senior notes in December 2017 and (ii) the cumulative impact of long-term debt repayments made during
2018 and 2017, partially offset by an increase in short-term borrowings and interest rates as compared to 2017. Please see the
section entitled “Financing Arrangements” within “Liquidity and Capital Resources” below for further discussion.
We currently expect that net interest expense in 2020 will increase as compared to 2019. We have increased the
aggregate borrowings outstanding under our senior unsecured revolving credit facilities, other short-term revolving credit
facilities and unsecured commercial paper note program in 2020 to approximately $930 million in order to increase our cash
position and preserve financial flexibility in responding to the impacts of the COVID-19 outbreak on our business, and we
expect that we may further increase our borrowings under existing or new financing arrangements. There is significant
uncertainty with respect to the impact of the COVID-19 outbreak on our business and our interest expense may be subject to
further significant increase.
Income Taxes
Income tax expense (benefit) was as follows:
(Dollars in millions)
Income tax expense (benefit)
Income tax expense (benefit) as a % of pre-tax income
2019
2018
2017
$
$
29
6.5%
$
31
4.0%
(26)
(5.1)%
The United States Tax Cuts and Job Act of 2017 (the “U.S. Tax Legislation”) was enacted on December 22, 2017.
The U.S. Tax Legislation is comprehensive and significantly revised the United States tax code. The revisions that
significantly impact us are (i) the reduction of the corporate income tax rate from 35.0% to 21.0%, (ii) the imposition of a
one-time transition tax on earnings of foreign subsidiaries deemed to be repatriated, (iii) the implementation of a modified
territorial tax system, (iv) the introduction of a tax on foreign income in excess of a deemed return on tangible assets of
foreign corporations (known as “GILTI”) and a beneficial tax rate to be applied against foreign derived intangible income
(known as “FDII”) and (v) the introduction of a base erosion anti-abuse tax measure (known as “BEAT”) that taxes certain
payments between United States corporations and their subsidiaries.
We recorded a provisional net tax benefit of $53 million in the fourth quarter of 2017 in connection with the U.S.
Tax Legislation, consisting of a $265 million benefit primarily from the remeasurement of our net United States deferred tax
liabilities, partially offset by a $38 million valuation allowance on our foreign tax credits and a $174 million transition tax
on earnings of foreign subsidiaries deemed to be repatriated. In the fourth quarter of 2018, we completed our final analysis
of the impacts of the U.S. Tax Legislation and recorded a net tax benefit of $25 million to adjust the provisional amount
recorded in 2017, during the measurement period allowed by the Securities and Exchange Commission. The $25 million net
40
tax benefit included the release of a $26 million valuation allowance on our foreign tax credits, partially offset by a $2
million expense related to the remeasurement of our net United States deferred tax liabilities.
We file income tax returns in more than 40 international jurisdictions each year. A substantial amount of our
earnings are in international jurisdictions, particularly in the Netherlands and Hong Kong SAR, where income tax rates,
coupled with special rates levied on income from certain of our jurisdictional activities, are lower than the United States
statutory income tax rate, and reduced our consolidated effective income tax rate during 2019, 2018 and 2017. We expect to
benefit from these special rates until 2022. The reduction in the United States statutory income tax rate from 35.0% to
21.0% as a result of the U.S. Tax Legislation did not have a significant impact on our overall effective tax rate due to our
mix of earnings.
Our effective income tax rate for 2019 was lower than the 21.0% United States statutory income tax rate primarily due
to (i) the favorable impact on certain liabilities for uncertain tax positions resulting from the expiration of applicable statutes of
limitation and the settlement of a multi-year audit from an international jurisdiction, which together resulted in a benefit to our
effective income tax rate of 11.8%, and (ii) the favorable impact of a tax exemption on the noncash gain recorded to write-up
our existing equity investments in Gazal and PVH Australia to fair value in connection with the Australia acquisition, which
resulted in a 5.4% benefit to our effective income tax rate.
The effective income tax rate for 2019 was 6.5% compared with 4.0% in 2018. The 2019 effective income tax rate
was higher than the effective income tax rate for 2018 primarily due to (i) the absence of a 5.3% benefit to our 2018
effective income tax rate related to the remeasurement of certain of our net deferred tax liabilities in connection with the
legislation enacted in the Netherlands known as the “2019 Dutch Tax Plan” and (ii) the absence of a 3.2% benefit to our
2018 effective income tax rate related to the U.S. Tax Legislation, partially offset by (iii) a favorable change in our uncertain
tax positions activity of 8.1%, which includes the benefit to our 2019 effective income tax rate resulting from settlement of
a multi-year audit from an international jurisdiction. The variance between the 2019 and 2018 effective income tax rates is
also affected by the substantial change in our pre-tax income, which was $444 million in 2019 and $776 million in 2018. As
a result, the effect that discrete tax amounts have on the effective income tax rate in each year is not comparable.
Our effective income tax rate for 2018 was lower than the 21.0% United States statutory income tax rate primarily
due to (i) a $41 million benefit from the remeasurement of certain of our net deferred tax liabilities in connection with the
enactment of the 2019 Dutch Tax Plan, which resulted in a benefit to our effective income tax rate of 5.3%, (ii) the favorable
impact on certain liabilities for uncertain tax positions resulting from the expiration of applicable statutes of limitation,
which resulted in a benefit to our effective income tax rate of 3.7%, (iii) a net tax benefit of $25 million recorded in 2018 to
adjust the provisional amount recorded in 2017 in connection with the U.S. Tax Legislation, which resulted in a benefit to
our effective income tax rate of 3.2%, and (iv) the benefit of overall lower tax rates in certain international jurisdictions
where we file tax returns.
The effective income tax rate for 2018 was 4.0% compared with (5.1)% in 2017. The 2018 effective income tax rate
was higher than the effective income tax rate for 2017 primarily due to (i) a lower net benefit recorded in connection with the
U.S. Tax Legislation, which resulted in a 3.2% benefit to our 2018 effective income tax rate compared with a 10.4% benefit to
our 2017 effective income tax rate, (ii) an unfavorable change in our uncertain tax positions activity of 3.8%, and (iii) the
absence of a 3.0% benefit to our 2017 effective income tax rate resulting from an excess tax benefit from the exercise of stock
options by our Chairman and Chief Executive Officer. These unfavorable impacts to our effective income tax rate for 2018
were partially offset by a 5.3% benefit to our 2018 effective income tax rate from the remeasurement of certain of our net
deferred tax liabilities in connection with the 2019 Dutch Tax Plan.
As a result of the U.S. Tax Legislation, which reduced the United States statutory income tax rate from 35.0% to
21.0% effective January 1, 2018, our United States statutory income tax rate for 2017 was a blended rate of 33.7%. Our
effective income tax rate for 2017 was lower than the United States statutory income tax rate primarily due to (i) the provisional
net benefit of $53 million recorded in connection with the U.S. Tax Legislation, which resulted in a benefit to our 2017
effective income tax rate of 10.4%, (ii) the benefit of overall lower tax rates in certain international jurisdictions where we file
tax returns, and (iii) the overall benefit of certain discrete items, including the favorable impact on certain liabilities for
uncertain tax positions and an excess tax benefit from the exercise of stock options by our Chairman and Chief Executive
Officer, which resulted in benefits to our 2017 effective income tax rate of 7.5% and 3.0%, respectively.
Given the significant uncertainty with respect to the impact of the COVID-19 outbreak on our business and results of
operations, we are not able to estimate our effective income tax rate in 2020.
41
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 new regulations, as well as audits by tax authorities and the receipt of new
information, which can cause us to change our estimate for uncertain tax positions. Please see Note 10, “Income Taxes,” in the
Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion.
Redeemable Non-Controlling Interest
We have a joint venture in Ethiopia with Arvind Limited, in which we own a 75% interest. We consolidate the results
of PVH Ethiopia in our consolidated financial statements. PVH Ethiopia was formed to operate a manufacturing facility that
produces finished products for us for distribution primarily in the United States. The manufacturing facility began operations in
2017.
The net loss attributable to the redeemable non-controlling interest in PVH Ethiopia was immaterial in 2019, 2018 and
2017. We currently expect that the net loss attributable to the redeemable non-controlling interest for 2020 will also be
immaterial. Please see Note 7, “Redeemable Non-Controlling Interest,” in the Notes to Consolidated Financial Statements
included in Item 8 of this report for further discussion.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow Summary
Cash and cash equivalents at February 2, 2020 was $503 million, an increase of $51 million from the amount at
February 3, 2019 of $452 million. The change in cash and cash equivalents included the impact of (i) $325 million of common
stock repurchases under the stock repurchase program, (ii) $71 million of long-term debt repayments, (iii) a $59 million net
payment made in connection with the Australia acquisition, and (iv) a $74 million payment made in connection with the TH
CSAP acquisition.
Cash flow in 2020 will be impacted by various factors in addition to those noted below in this “Liquidity and Capital
Resources” section, including (i) mandatory long-term debt repayments of approximately $14 million, subject to exchange rate
fluctuations, (ii) common stock repurchases under the stock repurchase program of $111 million, which reflects stock
repurchases through March 2020 with no further repurchases planned for the remainder of 2020, and (iii) the expected proceeds
of $170 million, subject to a working capital adjustment, related to the Speedo transaction, which is expected to close in the
first quarter of 2020. In addition, in March 2020 we increased the aggregate borrowings outstanding under our senior unsecured
revolving credit facilities, other short-term revolving credit facilities and unsecured commercial paper note program to
approximately $930 million, in order to increase our cash position and preserve financial flexibility in responding to the impacts
of the COVID-19 outbreak on our business. Given the dynamic nature of the COVID-19 outbreak, our estimates of cash flows
in 2020 may be subject to material significant change, including as a result of the actual impact of the COVID-19 outbreak on
our 2020 earnings, additional borrowings under existing or new financing arrangements, excess inventories, delays in collection
of, or inability to collect on, certain trade receivables, and other working capital changes that we may experience as a result of
the COVID-19 outbreak.
As of February 2, 2020, approximately $405 million of cash and cash equivalents was held by international
subsidiaries. Our intent is to reinvest indefinitely substantially all of our earnings in foreign subsidiaries outside of the United
States. However, if management decides at a later date to repatriate these earnings to the United States, we may be required to
accrue and pay additional taxes, including any applicable foreign withholding tax and United States state income taxes. 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.
Operations
Cash provided by operating activities was $1.020 billion in 2019 compared to $852 million in 2018. The increase in
cash provided by operating activities as compared to the prior year was primarily driven by changes in working capital,
including a favorable change in trade receivables and inventories, partially offset by a decrease in net income as adjusted for
noncash charges.
In connection with our acquisition of Calvin Klein, we were 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
42
sales on which the payments to Mr. Klein were made were wholesale sales by us and our licensees and other partners to
retailers. Contingent purchase price payments totaled $16 million and $56 million in 2018 and 2017, respectively. The final
payment due to Mr. Klein was made in the second quarter of 2018.
Capital Expenditures
Our capital expenditures in 2019 were $345 million compared to $379 million in 2018. The capital expenditures in
2019 primarily related to (i) investments in new stores and store expansions, (ii) investments to upgrade and enhance our
operating, supply chain and logistics systems and our digital commerce platforms and (iii) the expansion of our warehouse and
distribution network in North America. We currently expect that capital expenditures for 2020 will decrease to approximately
$190 million and will include only certain minimum required expenditures in our retail stores and expenditures for projects
currently in progress, primarily related to (i) investments to support the multi-year upgrade of our platforms and systems
worldwide and (ii) enhancements to our warehouse and distribution network. Given the dynamic nature of the COVID-19
outbreak, our estimates of capital expenditures in 2020 may be subject to change. Our capital expenditures may differ
materially compared to our current expectations as a result.
Investments in Unconsolidated Affiliates
We own a 49% economic interest in our newly formed PVH Legwear joint venture. We made payments of $28 million
to PVH Legwear during 2019 to contribute our share of the joint venture funding.
We held an approximately 22% ownership interest in Gazal and a 50% ownership interest in PVH Australia until the
closing of the Australia acquisition on May 31, 2019. These investments were accounted for under the equity method of
accounting. We derecognized our equity investments in Gazal and PVH Australia and began to consolidate the operations of
Gazal and PVH Australia in our financial statements effective with the closing of the transaction. We received aggregate
dividends of $6 million, $8 million and $4 million from Gazal and PVH Australia during 2019, 2018 and 2017, respectively.
We acquired a 51% economic interest in a joint venture, Calvin Klein Arvind Fashion Private Limited (“CK India”) in
2013. We sold 1% of our interest for $400,000 in 2017, decreasing our economic interest in CK India to 50%. Prior to the sale,
we were not deemed to hold a controlling interest in CK India as the shareholders agreement provided the partners with equal
rights. CK India licenses from one of our subsidiaries the rights to the CALVIN KLEIN trademarks in India for certain product
categories. We made payments of $2 million to CK India during 2017 to contribute our share of the joint venture funding.
We own a 50% economic interest in a joint venture, Tommy Hilfiger Arvind Fashion Private Limited (“TH India”). TH
India licenses from one of our subsidiaries the rights to the TOMMY HILFIGER trademarks in India for certain product
categories. Arvind, our joint venture partner in PVH Ethiopia and CK India, is also our joint venture partner in TH India. We
made payments of $3 million to TH India during 2017 to contribute our share of the joint venture funding.
We formed with two other parties a joint venture, Tommy Hilfiger do Brasil S.A. (“TH Brazil”), in 2012, in which we
have a 40% economic interest. We acquired an approximately 1% additional interest for $300,000 in 2017, increasing our
economic interest in TH Brazil to approximately 41%. 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 $3 million to TH Brazil during 2017 to
contribute our share of the joint venture funding. We issued a note receivable to TH Brazil in 2016 for $12 million, of which $6
million was repaid in 2016 and the remaining balance, including accrued interest, was repaid in 2017.
We, along with Grupo Axo, S.A.P.I. de C.V., formed a joint venture (“PVH Mexico”) in 2016, 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
TOMMY HILFIGER, CALVIN KLEIN, Warner’s, Olga and Speedo brand products in Mexico. We received dividends of $7
million from PVH Mexico during 2019.
Payments made to contribute our share of the joint ventures funding and the repayment of the note receivable we
issued to TH Brazil were included in our net cash used by investing activities in our Consolidated Statements of Cash Flows for
the respective period. The dividends received from our investments in unconsolidated affiliates were included in our net cash
provided by operating activities in our Consolidated Statements of Cash Flows for the respective period.
43
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 beginning March 31, 2018 through September 30, 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) LIBOR plus 4.00%
thereafter. We received principal payments of $400,000 and $200,000 during 2019 and 2018, respectively. The outstanding
balance, including accrued interest, was $13 million and $14 million as of February 2, 2020 and February 3, 2019, respectively.
TH CSAP Acquisition
We completed the acquisition of the Tommy Hilfiger retail business in Central and Southeast Asia on July 1, 2019 for
$74 million. Please see Note 3, “Acquisitions,” in the Notes to Consolidated Financial Statements included in Item 8 of this
report for further discussion.
Australia Acquisition
We completed the Australia acquisition on May 31, 2019. This acquisition resulted in a net cash payment of $59
million, including (i) a payment of $118 million, net of cash acquired of $7 million, as cash consideration for the acquisition
and (ii) proceeds of $59 million related to the sale of an office building and warehouse owned by Gazal. Please see Note 3,
“Acquisitions,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion.
Acquisition of the Geoffrey Beene Tradename
We acquired the Geoffrey Beene tradename on April 20, 2018 for $17 million, of which $16 million was paid in cash.
Please see Note 3, “Acquisitions,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for
further discussion.
Acquisition of the Wholesale and Concessions Businesses in Belgium and Luxembourg
We completed the Belgian acquisition on September 1, 2017. We paid $12 million as cash consideration for this
transaction. Please see Note 3, “Acquisitions,” in the Notes to Consolidated Financial Statements included in Item 8 of this
report for further discussion.
Acquisition of True & Co.
We acquired True & Co. on March 30, 2017. We paid $28 million, net of $400,000 of cash acquired, as cash
consideration for this transaction. Please see Note 3, “Acquisitions,” in the Notes to Consolidated Financial Statements included
in Item 8 of this report for further discussion.
Speedo Transaction
We entered into a definitive agreement on January 9, 2020 to sell our Speedo North America business to Pentland for
$170 million in cash, subject to a working capital adjustment. The Speedo transaction is expected to close in the first quarter of
2020, subject to customary closing conditions. Please see Note 4, “Assets Held For Sale,” in the Notes to Consolidated
Financial Statements included in Item 8 of this report for further discussion.
Dividends
Our common stock has historically paid annual dividends, which totaled $0.15 per share in each of 2019, 2018 and
2017. Dividends on common stock totaled $11 million in 2019 and $12 million in each of 2018 and 2017.
We declared a $0.0375 per share dividend payable to our common stockholders of record as of March 4, 2020, in
respect of which we made dividend payments totaling approximately $3 million on March 31, 2020. We have suspended our
dividend policy in order to increase our cash position and preserve financial flexibility in responding to the impacts of the
COVID-19 outbreak on our business. If we were to pay cash dividends totaling $0.15 per share on our common stock in 2020,
such dividends would total approximately $11 million based on the number of shares of our common stock outstanding as of
44
February 2, 2020, our estimate of stock to be issued during 2020 under our stock incentive plans and our estimate of stock
repurchases during 2020.
Acquisition of Treasury Shares
Our Board of Directors has authorized over time since 2015 an aggregate $2.0 billion stock repurchase program
through June 3, 2023. 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, 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 2019, 2018 and 2017, we purchased approximately 3.4 million shares, 2.2 million shares and 2.2 million
shares, respectively, of our common stock under the program in open market transactions for $325 million, $300 million and
$250 million, respectively. Purchases of $500,000 were accrued for in the Consolidated Balance Sheet as of February 2, 2020.
Purchases of $2 million that were accrued for in the Consolidated Balance Sheet as of February 4, 2018 were paid in 2018. The
repurchased shares were held as treasury stock and $683 million of the authorization remained available for future share
repurchases as of February 2, 2020.
Treasury stock activity also includes shares that were withheld principally in conjunction with the settlement of
restricted stock units and performance share units to satisfy tax withholding requirements.
Mandatorily Redeemable Non-Controlling Interest
The Australia acquisition agreement provided for key members of Gazal and PVH Australia management to exchange
a portion of their interests in Gazal for approximately 6% of the outstanding shares in our previously wholly owned subsidiary
that acquired 100% of the ownership interests in the Australia business. We are obligated to purchase this 6% interest within
two years of the acquisition closing in two tranches as follows: tranche 1 – 50% of the shares one year after the closing, but the
holders had the option to defer half of this tranche to tranche 2; and tranche 2 – all remaining shares two years after the closing.
With respect to tranche 1, the holders elected not to defer their shares to tranche 2 and as a result we are obligated to purchase
all of the tranche 1 shares in the second quarter of 2020. The purchase price for the tranche 1 and tranche 2 shares is based on a
multiple of the subsidiary’s adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) less net debt as
of the end of the measurement year, and the multiple varies depending on the level of EBITDA compared to a target. The
liability for the mandatorily redeemable non-controlling interest was $33.8 million as of February 2, 2020 based on exchange
rates in effect on that date, of which $16.9 million is payable in the second quarter of 2020 for the purchase of the tranche 1
shares. Please see Note 3, “Acquisitions,” in the Notes to Consolidated Financial Statements included in Item 8 of this report
for further discussion.
Financing Arrangements
Our capital structure was as follows at the end of 2019 and 2018:
(In millions)
Short-term borrowings
Current portion of long-term debt
Finance lease obligations
Long-term debt
Stockholders’ equity
February 2, 2020
50
$
14
15
2,694
5,811
February 3, 2019
13
$
—
17
2,819
5,828
In addition, we had $503 million and $452 million of cash and cash equivalents as of February 2, 2020 and February 3,
2019, respectively.
Short-Term Borrowings
We have the ability to draw revolving borrowings under our senior unsecured credit facilities, as discussed in the
section entitled “2019 Senior Unsecured Credit Facilities” below. We had no borrowings outstanding under these facilities as of
45
February 2, 2020. The maximum amount of revolving borrowings outstanding under these facilities during 2019 was $378
million. We had $8 million outstanding under our prior senior secured credit facilities as of February 3, 2019 as discussed in the
section entitled “2016 Senior Secured Credit Facilities” below. The weighted average interest rate on the funds borrowed as of
February 3, 2019 was 4.45%.
Additionally, we have the availability to borrow under short-term lines of credit, overdraft facilities and short-term
revolving credit facilities denominated in various foreign currencies. These facilities, which now include a facility in Australia
as a result of the Australia acquisition, provided for borrowings of up to $132 million based on exchange rates in effect on
February 2, 2020 and are utilized primarily to fund working capital needs. We had $50 million and $5 million outstanding under
these facilities as of February 2, 2020 and February 3, 2019, respectively. The $50 million of borrowings outstanding as of
February 2, 2020 included borrowings under the facility in Australia. The weighted average interest rate on funds borrowed as
of February 2, 2020 and February 3, 2019 was 2.56% and 0.21%, respectively. The maximum amount of borrowings
outstanding under these facilities during 2019 was $99 million.
Commercial Paper
We established on November 5, 2019 an unsecured commercial paper note program in the United States primarily to
fund working capital needs. The program enables us to issue, from time to time, unsecured commercial paper notes with
maturities that vary but do not exceed 397 days from the date of issuance. We had no borrowings outstanding under the
commercial paper note program as of February 2, 2020. The maximum amount of borrowings outstanding under the program
during 2019 was $370 million.
The commercial paper program allows for borrowings of up to $675 million to the extent that we have borrowing
capacity under our United States dollar-denominated revolving credit facility, as discussed in the section entitled “2019 Senior
Unsecured Credit Facilities” below. Accordingly, the combined aggregate amount of (i) borrowings outstanding under the
commercial paper note program and (ii) the revolving borrowings outstanding under the United States dollar-denominated
revolving credit facility at any one time cannot exceed $675 million. The maximum aggregate amount of borrowings
outstanding under the commercial paper program and the United States dollar-denominated revolving credit facility during
2019 was $567 million, which reflects a brief period of higher aggregate borrowings at the time that we launched the
commercial paper program.
Finance Lease Obligations
Our cash payments for finance lease obligations totaled $5 million in each of 2019, 2018 and 2017.
2016 Senior Secured Credit Facilities
On May 19, 2016, we entered into an amendment to our senior secured credit facilities (as amended, the “2016
facilities”). We replaced the 2016 facilities with new senior unsecured credit facilities on April 29, 2019 as discussed in the
section entitled “2019 Senior Unsecured Credit Facilities” below. The 2016 facilities, as of the date they were replaced,
consisted of a $2.347 billion United States dollar-denominated Term Loan A facility and senior secured revolving credit
facilities consisting of (i) a $475 million United States dollar-denominated revolving credit facility, (ii) a $25 million United
States dollar-denominated revolving credit facility available in United States dollars and Canadian dollars and (iii) a €186
million euro-denominated revolving credit facility available in euro, British pound sterling, Japanese yen and Swiss francs.
2019 Senior Unsecured Credit Facilities
We refinanced the 2016 facilities on April 29, 2019 (the “Closing Date”) by entering into senior unsecured credit
facilities (the “2019 facilities”), the proceeds of which, along with cash on hand, were used to repay all of the outstanding
borrowings under the 2016 facilities, as well as the related debt issuance costs.
The 2019 facilities consist of a $1.093 billion United States dollar-denominated Term Loan A facility (the “USD TLA
facility”), a €500 million euro-denominated Term Loan A facility (the “Euro TLA facility” and together with the USD TLA
facility, the “TLA facilities”) and senior unsecured revolving credit facilities consisting of (i) a $675 million United States
dollar-denominated revolving credit facility, (ii) a CAD $70 million Canadian dollar-denominated revolving credit facility
available in United States dollars or Canadian dollars, (iii) a €200 million euro-denominated revolving credit facility available
in euro, British pound sterling, Japanese yen, Swiss francs, Australian dollars and other agreed foreign currencies and (iv) a $50
million United States dollar-denominated revolving credit facility available in United States dollars or Hong Kong dollars. The
46
2019 facilities are due on April 29, 2024. In connection with the refinancing of our senior credit facilities, we paid debt issuance
costs of $10 million (of which $3 million was expensed as debt modification costs and $7 million is being amortized over the
term of the debt agreement) and recorded debt extinguishment costs of $2 million to write off previously capitalized debt
issuance costs.
Each of the senior unsecured revolving facilities, except for the $50 million United States dollar-denominated
revolving credit facility available in United States dollars or Hong Kong dollars, also include amounts available for letters of
credit and have a portion 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 senior unsecured term loan facilities or increase the commitments under the senior unsecured
revolving credit facilities by an aggregate amount not to exceed $1.5 billion. The lenders under the 2019 facilities are not
required to provide commitments with respect to such additional facilities or increased commitments.
We had loans outstanding of $1.570 billion, net of debt issuance costs and based on applicable exchange rates, under
the TLA facilities and $20 million of outstanding letters of credit under the senior unsecured revolving credit facilities as of
February 2, 2020. We had no borrowings outstanding under the senior unsecured revolving credit facilities as of February 2,
2020.
The terms of the TLA facilities require us to make quarterly repayments of amounts outstanding under the 2019
facilities, which commenced with the calendar quarter ended September 30, 2019. Such required repayment amounts equal
2.50% per annum of the principal amount outstanding on the Closing Date for the first eight calendar quarters following the
Closing Date, 5.00% per annum of the principal amount outstanding on the Closing Date for the four calendar quarters
thereafter and 7.50% per annum of the principal amount outstanding on the Closing Date 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 TLA facilities. The outstanding borrowings under the 2019 facilities are prepayable at any time without
penalty (other than customary breakage costs). Any voluntary repayments we make would reduce the future required repayment
amounts.
We made payments of $71 million on our term loans under the 2019 facilities and we repaid the 2016 facilities in
connection with the refinancing of the senior credit facilities during 2019. We made payments of $150 million and $250 million
during 2018 and 2017, respectively, on our term loans under the 2016 facilities.
The United States dollar-denominated borrowings under the 2019 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 effective rate plus 1/2 of 1.00% and (iii) a one-month reserve adjusted Eurocurrency rate plus
1.00% or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities.
The Canadian dollar-denominated borrowings under the 2019 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 as the reference rate of interest in order to determine interest rates
for loans in Canadian dollars to its Canadian borrowers and (ii) the average of the rates per annum for Canadian dollar bankers'
acceptances having a term of one month or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019
facilities.
Borrowings available in Hong Kong dollars under the 2019 facilities bear interest at a rate equal to an applicable
margin plus an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities.
The borrowings under the 2019 facilities in currencies other than United States dollars, Canadian dollars or Hong
Kong dollars bear interest at a rate equal to an applicable margin plus an adjusted Eurocurrency rate, calculated in a manner set
forth in the 2019 facilities.
The current applicable margin with respect to the TLA facilities and each revolving credit facility is 1.375% for
adjusted Eurocurrency rate loans and 0.375% for base rate or Canadian prime rate loans. The applicable margin for borrowings
under the TLA facilities and the revolving credit facilities is subject to adjustment (i) after the date of delivery of the
compliance certificate and financial statements, with respect to each of our fiscal quarters, based upon our net leverage ratio or
(ii) after the date of delivery of notice of a change in our public debt rating by Standard & Poor’s or Moody’s.
47
We entered into interest rate swap agreements designed with the intended effect of converting notional amounts of our
variable rate debt obligation to fixed rate debt. Under the terms of the agreements, for the outstanding notional amount, our
exposure to fluctuations in the one-month LIBOR is eliminated and we pay a fixed rate plus the current applicable margin. The
following interest rate swap agreements were entered into or in effect during 2019, 2018 and 2017:
(In millions)
Designation Date
Commencement Date
Initial Notional
Amount
Notional Amount
Outstanding as of
February 2, 2020
August 2019
February 2020
$
June 2019
June 2019
January 2019
November 2018
October 2018
June 2018
June 2017
July 2014
February 2020
June 2019
February 2020
February 2019
February 2019
August 2018
February 2018
February 2016
$
50
50
50
50
139
116
50
306
683
—
—
50
—
127
103
50
56
—
Fixed Rate
Expiration Date
1.1975%
February 2022
1.409%
1.719%
2.4187%
2.8645%
2.9975%
2.6825%
1.566%
1.924%
February 2022
July 2021
February 2021
February 2021
February 2021
February 2021
February 2020
February 2018
The notional amounts of the outstanding interest rate swaps that commenced in February 2018 and February 2019 are
adjusted according to pre-set schedules during the terms of the swap agreements such that, based on our projections for future
debt repayments, our outstanding debt under the USD TLA facility is expected to always equal or exceed the combined notional
amount of the then-outstanding interest rate swaps.
4 1/2% Senior Notes Due 2022
We had outstanding $700 million principal amount of 4 1/2% senior notes due December 15, 2022. We redeemed these
notes on January 5, 2018 in connection with the issuance of €600 million euro-denominated principal amount of 3 1/8% senior
notes due December 15, 2027, as discussed below. We paid a premium of $16 million to the holders of these notes in
connection with the redemption and recorded debt extinguishment costs of $8 million to write-off previously capitalized debt
issuance costs associated with these notes during 2017.
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%. The
debentures are not redeemable at our option prior to maturity.
3 5/8% Euro Senior Notes Due 2024
We have outstanding €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 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, 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.
3 1/8% Euro Senior Notes Due 2027
We issued on December 21, 2017 €600 million euro-denominated principal amount of 3 1/8% senior notes due
December 15, 2027. Interest on the notes is payable in euros. We paid €9 million (approximately $10 million based on
exchange rates in effect on the payment date) of fees during 2017 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 September 15, 2027 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 September 15, 2027 at their principal amount plus any accrued and unpaid interest.
Our financing arrangements contain financial and non-financial covenants and customary events of default. As of
February 2, 2020, we were in compliance with all applicable financial and non-financial covenants under our financing
arrangements.
48
As of February 2, 2020, our issuer credit was rated BBB- by Standard & Poor’s with a stable outlook and our
corporate credit was rated Baa3 by Moody’s with a stable outlook, and our commercial paper was rated A-3 by Standard &
Poor’s and P-3 by Moody’s. In assessing our credit strength, we believe that both Standard & Poor’s and Moody’s considered,
among other things, our capital structure and financial policies, our consolidated balance sheet, our historical acquisition
activity and other financial information, as well as industry and other qualitative factors.
Please see Note 9, “Debt,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for
further discussion of our debt.
Contractual Obligations
The following table summarizes, as of February 2, 2020, 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 finance leases(2)
Inventory purchase commitments(3)
Minimum contractual royalty payments(4)
Non-qualified supplemental defined benefit plan(5)
Information-technology, sponsorships and other
commitments(6)
Total contractual cash obligations
______________________
Payments Due by Period
Total
Obligations
2020
2021-2022
2023-2024
Thereafter
$
$
$
2,725
419
50
2,274
883
23
8
$
14
86
50
445
883
8
1
142
159
740
11
2
$
$
1,906
112
443
4
1
663
62
646
4
134
6,516
$
103
1,590
$
29
1,083
$
2
2,468
$
1,375
(1) At February 2, 2020, the outstanding principal balance under senior unsecured Term Loan A facilities was $1.575
billion, which requires mandatory payments through April 29, 2024 (according to the mandatory repayment
schedules). We also had outstanding $100 million of 7 3/4% debentures due November 15, 2023, $387 million of 3
5/8% senior unsecured euro notes due July 15, 2024 and $663 million of 3 1/8% senior unsecured euro notes due
December 15, 2027.
(2) We lease Company-operated freestanding retail store locations, warehouses, distribution centers, showrooms, office
space and a factory in Ethiopia, as well as certain equipment and other assets. Please see Note 17, “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 February 2, 2020. 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 in 2020. However, in light of the COVID-19 outbreak,
some of these orders may be canceled. This amount does not include foreign currency forward exchange contracts that
we have entered into to manage our exposure to exchange rate changes with respect to certain of these purchases.
Please see Note 11, “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.
49
(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)
Information-technology, sponsorships and other commitments represent future cash obligations related to (i)
information-technology related service agreements, (ii) sponsorship and advertising agreements, including agreements
relating to our sponsorship of the Barclays Center, the Brooklyn Nets, Mercedes-AMG Petronas Motorsport in
Formula OneTM racing and certain other professional sports teams and athletes and other similar sponsorships, as well
as agreements with celebrities, models and stylists and (iii) the mandatorily redeemable non-controlling interest that
was recognized in connection with the Australia acquisition, of which the portion related to tranche 1 shares is payable
in 2020 and has been included in the table above. Not included in the table above is the portion of the mandatorily
redeemable non-controlling interest related to the tranche 2 shares that is payable in 2021, due to the uncertainty
regarding the future cash outflows associated with this obligation. Please see Note 3, “Acquisitions,” in the Notes to
Consolidated Financial Statements included in Item 8 of this report for further discussion.
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 13, “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 2020. 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 $158 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 10,
“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 $36 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 23, “Other
Comments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further information related
to asset retirement obligations.
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.
50
MARKET RISK
Financial instruments held by us as of February 2, 2020 include cash and cash equivalents, short-term borrowings,
long-term debt, foreign currency forward exchange contracts and interest rate swap agreements. Note 12, “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 February 2, 2020. Cash and cash equivalents held by us are affected by short-term interest rates,
which are currently low. The potential for a significant decrease in short-term interest rates is low due to the currently low rates
of return we are receiving on our cash and cash equivalents 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 February 2, 2020, the effect
of a 10 basis point change in short-term interest rates on our interest income would be approximately $500,000 annually.
Borrowings under our 2019 facilities bear interest at a rate equal to an applicable margin plus a variable rate. As such, our 2019
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 February 2, 2020, after taking into account the effect
of our interest rate swap agreements that were in effect as of such date, approximately 55% of our long-term debt was at a fixed
interest rate, with the remainder at variable interest rates. Given our long-term debt position at February 2, 2020, the effect of a
10 basis point change in interest rates on our variable interest expense would be approximately $1 million annually. Please see
the section entitled “Liquidity and Capital Resources” above for further discussion of our credit facilities and interest rate swap
agreements.
Our Tommy Hilfiger and Calvin Klein 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. Over 50% of our $9.909 billion of revenue in 2019 was generated outside of the United States.
Changes in exchange rates between the United States dollar and other currencies can impact our financial results in two ways: a
translational impact and a transactional impact.
The translational impact refers to the impact that changes in exchange rates can have on our results of operations and
financial position. The functional currencies of our foreign subsidiaries are generally the applicable local currencies. Our
consolidated financial statements are presented in United States dollars. The results of operations in local foreign currencies are
translated into United States dollars using an average exchange rate over the representative period and the assets and liabilities
in local foreign currencies are translated into United States dollars using the closing exchange rate at the balance sheet date.
Foreign exchange differences that arise from the translation of our foreign subsidiaries’ assets and liabilities into United States
dollars are recorded as foreign currency translation adjustments in other comprehensive (loss) income. Accordingly, our results
of operations and other comprehensive (loss) income will be unfavorably impacted 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
Australian dollar, the Canadian dollar and the Chinese yuan renminbi, and favorably impacted during times of a weakening
United States dollar against those currencies.
Our 2019 revenues and net income decreased by approximately $215 million and $25 million, respectively, as
compared to 2018 due to the impact of foreign currency translation. We currently expect a decrease in our revenue and net
income in 2020 as compared to 2019 due to the impact of foreign currency translation.
In addition, in 2019 we recognized unfavorable foreign currency translation adjustments of $158 million within other
comprehensive (loss) income principally driven by a strengthening of the United States dollar against the euro of 4% since
February 3, 2019. Our foreign currency translation adjustments recorded in other comprehensive (loss) income are significantly
impacted by the substantial amount of goodwill and other intangible assets denominated in the euro, which represented 33% of
our $7.2 billion total goodwill and other intangible assets as of February 2, 2020. This translational impact was partially
mitigated by the change in the fair value of our net investment hedges discussed below.
A transactional 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, our results of
operations will be unfavorably impacted during times of a strengthening United States dollar as the increased local currency
value of inventory results in a higher cost of goods in local currency when the goods are sold and favorably impacted during
times of a weakening United States dollar as the decreased local currency value of inventory results in a lower cost of goods 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 SG&A expenses. 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
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inventory and intercompany transactions, but we are unable to entirely eliminate these risks. The foreign currency forward
exchange contracts cover at least 70% of the projected inventory purchases in United States dollars by our foreign subsidiaries.
We currently expect a decrease in our net income in 2020 as compared to 2019 due to the transactional impact.
Given our foreign currency forward exchange contracts outstanding at February 2, 2020, the effect of a 10% change in
foreign currency exchange rates against the United States dollar would result in a change in the fair value of these contracts of
approximately $105 million. Any change in the fair value of these contracts would be substantially offset by a change in the fair
value of the underlying hedged items.
In order to mitigate a portion of our exposure to changes in foreign currency exchange rates related to the value of our
investments in foreign subsidiaries denominated in the euro, we designated the carrying amount of our €950 million aggregate
principal amount of euro-denominated senior notes that we had issued in the United States as net investment hedges of our
investments in certain of our foreign subsidiaries that use the euro as their functional currency. The effect of a 10% change in
the euro against the United States dollar would result in a change in the fair value of the net investment hedges of
approximately $105 million. Any change in the fair value of the net investment hedges would be more than offset by a change
in the value of our investments in certain of our European subsidiaries. Additionally, during times of a strengthening United
States dollar against the euro, we would be required to use a lower amount of our cash flows from operations to pay interest
and make long-term debt repayments on our euro-denominated senior notes, whereas during times of a weakening United
States dollar against the euro, we would be required to use a greater amount of our cash flows from operations to pay interest
and make long-term debt repayments on these notes.
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 1% change in the assumed rate of return on assets would result in a change to 2020 net benefit
cost related to the pension plans of approximately $7 million. Likewise, a 0.25% change in the assumed discount rate would
result in a change to 2020 net benefit cost of approximately $45 million.
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. Working capital requirements vary throughout the year to support these seasonal
patterns and business trends.
RECENT ACCOUNTING PRONOUNCEMENTS
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 discussion of recently issued and adopted accounting standards.
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 experience, an evaluation of current sales trends and market
conditions, and authorized amounts, that we believe are necessary to provide for sales allowances and inventory returns. Our
historical accrual estimates have not differed materially from actual results. It is possible that the accrual estimates could vary
from actual results, which would require adjustment to the allowance and returns accruals.
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Inventories—Inventories are comprised principally of finished goods and are stated at the lower of cost or net
realizable value, except for certain retail inventories in North America that are stated at the lower of cost or market using the
retail inventory method. Cost for substantially all wholesale inventories in North America and certain wholesale and retail
inventories in Asia 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 aging and discontinued merchandise categories to
determine adjustments which we estimate will be needed to liquidate existing clearance inventories and record inventories at
either the lower of cost or net realizable value or the lower of cost or market using the retail inventory method, as applicable.
We believe that all inventory write-downs required at February 2, 2020 have been recorded. Our historical estimates of
inventory reserves have not differed materially from actual results. If market conditions were to change, including as a result of
the current COVID-19 outbreak, it is possible that the required level of inventory reserves would need to be adjusted.
Asset impairments—We determined during each of 2019, 2018 and 2017 that long-lived assets, primarily in certain of
our retail stores and shop-in-shops, were not recoverable, which resulted in us recording impairment charges. Additionally,
during 2019 we determined that certain operating lease right-of-use assets were impaired primarily as a result of the closure of
certain flagship and anchor stores in the United States. In order to calculate these impairment charges, we estimated the
undiscounted future cash flows and the related fair value of each asset. Undiscounted future cash flows were estimated using
current sales trends and other factors and, in the case of operating lease right-of-use assets, using estimated sublease income
assumptions. If different assumptions had been used, the recorded impairment charges could have been significantly higher or
lower. Note 12, “Fair Value Measurements,” in the Notes to Consolidated Financial Statements included in Item 8 of this report
includes further discussion of the circumstances surrounding the impairments and the assumptions related to the impairment
charges.
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. Deferred tax assets are 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 have differed materially in the past and could differ materially
in the future from our current estimates.
The U.S. Tax Legislation was enacted on December 22, 2017. The U.S. Tax Legislation is comprehensive and
significantly revised the United States tax code. Please see Note 10, “Income Taxes,” in the Notes to Consolidated Financial
Statements in Item 8 of this report for further discussion of the impacts of the U.S. Tax Legislation.
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.
53
We 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 units 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, a
change in our weighted average cost of capital, 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 our 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 indefinite-lived intangible assets. For goodwill, if the carrying amount of a reporting unit exceeds its fair
value, an impairment loss is recognized to the extent the carrying amount of the reporting unit’s goodwill exceeds the implied
fair value of the goodwill. For indefinite-lived intangible assets, an impairment loss is recognized to the extent the carrying
amount of the asset exceeds its fair value.
For the 2019 annual goodwill impairment test, we elected to bypass the qualitative assessment for all reporting units
and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate the fair value of our
reporting units. The annual goodwill impairment test during 2019 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. The reporting unit with the least excess fair value had an estimated fair value that exceeded its carrying amount by
15%. No impairment of goodwill resulted from our annual impairment test in 2019. In the fourth quarter of 2019, the Speedo
transaction was a triggering event that indicated that the amount of goodwill allocated to the Heritage Brands Wholesale
reporting unit, the reporting unit that includes the Speedo North America business, could be impaired, prompting the need to
perform an interim goodwill impairment test for this reporting unit. No goodwill impairment resulted from this interim test.
Please see Note 8, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements included in Item
8 of this report for further discussion.
For the 2018 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 the fair value of our reporting units. The
annual goodwill impairment test during 2018 yielded estimated fair values in excess of the carrying amounts for our reporting
units, all of which had fair values in excess of the carrying amounts by more than 50%, and therefore the second step of the
quantitative goodwill impairment test was not required. No impairment of goodwill resulted from our annual impairment test in
2018.
For the 2019 annual impairment test of all indefinite-lived intangible assets, except for the Australia reacquired
perpetual license rights, 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. For the Australia reacquired perpetual license rights, since only
a few months had passed since the acquisition on May 31, 2019 and the business had performed better than initially expected,
we determined qualitatively that it was not more likely than not that the fair value of these reacquired perpetual license rights
were less than the carrying amount and concluded that the quantitative impairment test was not required. The fair values of all
of our indefinite-lived intangible assets substantially exceed their carrying amounts, with the exception of the perpetual license
right related to our Speedo North America business, which had a fair value that exceeded its carrying amount by 3% at the
testing date. In the fourth quarter of 2019, the Speedo transaction was a triggering event that prompted the need to perform an
interim impairment test of this perpetual license right. As a result of this interim test, the perpetual license right was determined
to be impaired and an impairment charge of $116 million was recorded to other noncash loss, net in the Consolidated Income
Statement. Please see Note 4, “Assets Held For Sale,” in the Notes to Consolidated Financial Statements included in Item 8 of
this report for further discussion.
For the 2018 annual impairment test of all indefinite-lived intangible assets, except for the Geoffrey Beene tradename,
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. For the Geoffrey Beene tradename, since only a few months had passed since the
acquisition on April 20, 2018 and there had not been any significant changes in the business, we determined qualitatively that it
was not more likely than not that the fair value of this tradename was less than the carrying amount and concluded that the
54
quantitative impairment test was not required. No impairment of indefinite-lived intangible assets resulted from our annual
impairment tests in 2018.
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 2019 will prove to be accurate
predictions of the future. For example, if general macroeconomic conditions deteriorate or otherwise vary from current
assumptions (including those resulting in 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 and Benefit Plans—Pension and benefit plan expenses are recorded throughout the year based on calculations
using actuarial valuations that incorporate estimates and assumptions that depend in part on financial market, economic and
demographic conditions, including expected long-term rate of return on assets, discount rate and mortality rates. These
assumptions require significant judgment. Actuarial gains and losses, which occur when actual experience differs from our
actuarial assumptions, are recognized in the year in which they occur and could have a material impact on our operating results.
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.
The expected long-term rate of return on assets is based on historical returns and the level of risk premium associated
with the asset classes in which the portfolio is invested as well as expectations for the long-term future returns of each asset
class. The expected long-term rate of return for each asset class is then weighted based on the target asset allocation to develop
the expected long-term rate of return on assets assumption for the portfolio. The expected return on plan assets is recognized
quarterly and determined at the beginning of the year by applying the long-term expected rate of return on assets to the actual
fair value of plan assets adjusted for expected benefit payments, contributions and plan expenses. At the end of the year, the fair
value of the assets is remeasured and any difference between the actual return on assets and the expected return is recorded in
earnings as part of the actuarial gain or loss.
The discount rate is determined based on current market interest rates. It is selected by constructing a hypothetical
portfolio of high quality corporate bonds that matches the cash flows from interest payments and principal maturities of the
portfolio to the timing of benefit payments to participants. The yield on such a portfolio is the basis for the selected discount
rate. Service and interest cost is measured using the discount rate as of the beginning of the year, while the projected benefit
obligation is measured using the discount rate as of the end of the year. The impact of the change in the discount rate on our
projected benefit obligation is recorded in earnings as part of the actuarial gain or loss.
We revised during each of 2019 and 2018 the mortality assumptions used to determine our benefit obligations based
on recently published actuarial mortality tables. These changes in life expectancy resulted in changes to the period for which
we expect benefits to be paid. In 2019 and 2018, the decrease in life expectancy decreased our benefit obligations and future
expense.
We also periodically review and revise, as necessary, other plan assumptions such as rates of compensation increases,
retirement, and termination based on historical experience and anticipated future management actions. We have not historically
had significant adjustments to these assumptions.
Actual results could differ from our assumptions, which would require adjustments to our balance sheet and could
result in volatility in our future net benefit cost. Holding all other assumptions constant, a 1% change in the assumed rate of
return on assets would result in a change to 2020 net benefit cost related to the pension plans of approximately $7 million.
Likewise, a 0.25% change in the assumed discount rate would result in a change to 2020 net benefit cost of approximately $45
million.
Note 13, “Retirement and Benefit Plans,” in the Notes to Consolidated Financial Statements included in Item 8 of this
report sets forth certain significant rate assumptions and information regarding our target asset allocation, which are used in
performing calculations related to our pension plans.
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 cost over the service period for
55
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 actual forfeitures.
The fair value of contingently issuable performance shares that are subject to market conditions is established using a
Monte Carlo simulation model. Certain contingently issuable performance shares that are subject to market conditions are also
subject to a holding period of one year after the vesting date. For such awards, the grant date fair value is discounted for the
restriction of liquidity, which is calculated using the Chaffe model. We record expense for the awards that are subject to market
conditions ratably over the vesting period, net of actual forfeitures, regardless of whether the market condition is satisfied.
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 Chairman and 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 Chairman and 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 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
Chairman and Chief Executive Officer and Chief Operating & Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
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-65 and F-66.
Changes in Internal Control over Financial Reporting
We implemented internal controls in connection with our adoption of the new lease accounting standard in the first
quarter of 2019. There have been no other changes in our internal control over financial reporting during the period 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.
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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 18, 2020.
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 18, 2020. 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 18, 2020.
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 18, 2020.
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 18, 2020.
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 18, 2020.
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 18, 2020.
57
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.
3.1 Amended and Restated Certificate of Incorporation of PVH Corp. (incorporated by reference to Exhibit 3.1 to
our Current Report on Form 8-K, filed June 21, 2019).
3.2 By-Laws of PVH Corp., as amended through June 20, 2019 (incorporated by reference to Exhibit 3.2 to our
Current Report on Form 8-K, filed on June 21, 2019).
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 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).
4.4 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).
4.5 Indenture, dated as of December 21, 2017, between PVH Corp., U.S. Bank National Association, as Trustee,
Elavon Financial Services DAC, UK Branch, as Paying Agent and Authenticating Agent, and Elavon
Financial Services DAC, as Transfer Agent and Registrar (incorporated by reference to Exhibit 4.1 to our
Current Report on Form 8-K, filed on December 21, 2017).
+4.6 Description of Securities
58
*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 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).
*10.5 Third Amended and Restated Employment Agreement, dated as of May 20, 2019, between PVH Corp. and
Emanuel Chirico (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on
May 22, 2019).
*10.6 Employment Agreement, dated as of March 1, 2018, between PVH Corp. and Francis K. Duane
(incorporated by reference to Exhibit 10.8 to our Annual Report on Form 10-K for the fiscal year ended
February 4, 2018).
*10.7 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).
*10.8 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).
*10.9 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).
*10.10 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).
*10.11 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).
*10.12 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).
59
*10.13 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).
*10.14 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).
*10.15 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).
*10.16 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).
*10.17 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).
10.18 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).
60
10.19 Credit and Guaranty Agreement, dated as of April 29, 2019, among PVH Corp., PVH Asia Limited, PVH
B.V., certain subsidiaries of PVH Corp., Barclays Bank PLC as Administrative Agent, Joint Lead Arranger
and Joint Lead Bookrunner, Citibank, N.A. as Syndication Agent, Joint Lead Arranger and Joint Lead
Bookrunner, Merrill Lynch, Pierce, Fenner & Smith Incorporated as Syndication Agent, Joint Lead Arranger
and Joint Lead Bookrunner, JPMorgan Chase Bank, N.A. as Documentation Agent, Joint Lead Arranger and
Joint Lead Bookrunner, Royal Bank of Canada as Documentation Agent, MUFG Securities Americas Inc. as
Documentation Agent, US Bancorp as Documentation Agent, Wells Fargo Securities, LLC as Documentation
Agent and RBC Capital Markets, LLC as Joint Lead Arranger and Joint Lead Bookrunner (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended May 5, 2019).
*10.20 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).
*+10.21 Schedule of Non-Management Directors’ Fees, effective June 20, 2019.
*10.22 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).
*10.23 Employment Agreement, dated as of March 20, 2017, between PVH Europe B.V. and Daniel Grieder
(incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the period ended April
30, 2017).
*10.24 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).
*10.25 Employment Agreement, effective as of June 3, 2019, between PVH Corp. and Stefan Larsson (incorporated
by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on May 22, 2019).
*10.26 Amended and Restated Employment Agreement, dated as of December 16, 2008, between PVH Corp. and
Cheryl Abel-Hodges (formerly known as Cheryl Dapolito) (incorporated by reference to Exhibit 10.1 to our
Current Report on Form 8-K, filed on June 11, 2019). First Amendment to Amended and Restated
Employment Agreement, dated as of March 31, 2011, between PVH Corp. and Cheryl Abel-Hodges
(formerly known as Cheryl Dapolito) (incorporated by reference to Exhibit 10.2 to our Current Report on
Form 8-K, filed on June 11, 2019).
*10.27 Employment Agreement, dated as of February 14, 2020, between PVH Corp. and Cheryl Abel-Hodges
(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on February 14, 2020).
+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
61
+101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
________________
+
*
Filed or furnished herewith.
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.
62
Item 16. Form 10-K Summary
None.
63
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: April 1, 2020
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 R. FIGUEREO
Juan R. Figuereo
/s/ JOSEPH B. FULLER
Joseph B. Fuller
/s/ JUDITH AMANDA SOURRY KNOX
Judith Amanda Sourry Knox
/s/ V. JAMES MARINO
V. James Marino
/s/ GERALDINE (PENNY) MCINTYRE
Geraldine (Penny) McIntyre
/s/ AMY MCPHERSON
Amy McPherson
/s/ HENRY NASELLA
Henry Nasella
/s/ EDWARD R. ROSENFELD
Edward R. Rosenfeld
/s/ CRAIG RYDIN
Craig Rydin
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
Director
64
Date
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
April 1, 2020
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 February 2, 2020, February 3, 2019 and February
F-2
4, 2018
Consolidated Statements of Comprehensive Income—Years Ended February 2, 2020, February 3,
F-3
2019, and February 4, 2018
Consolidated Balance Sheets—February 2, 2020 and February 3, 2019
Consolidated Statements of Cash Flows—Years Ended February 2, 2020, February 3, 2019 and
February 4, 2018
Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Non-Controlling
Interest—Years Ended February 2, 2020, February 3, 2019 and February 4, 2018
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-4
F-5
F-6
F-7
F-63
F-65
F-66
F-70
15(a)(2) The following consolidated financial statement schedule is included herein:
Schedule II - Valuation and Qualifying Accounts
F-72
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
Non-service related pension and postretirement cost
Debt modification and extinguishment costs
Other noncash loss, 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.
2019
9,400.0
379.9
129.1
9,909.0
4,520.6
5,388.4
4,715.2
90.0
5.2
28.9
9.6
558.7
120.0
5.3
444.0
28.9
415.1
(2.2)
417.3
5.63
5.60
$
$
$
$
2018
9,154.2
375.9
126.7
9,656.8
4,348.5
5,308.3
4,432.8
5.1
—
—
21.3
891.7
120.8
4.7
775.6
31.0
744.6
(1.8)
746.4
9.75
9.65
$
$
$
$
2017
8,439.4
366.3
109.1
8,914.8
4,020.4
4,894.4
4,245.2
3.0
23.9
—
10.1
632.4
128.5
6.3
510.2
(25.9)
536.1
(1.7)
537.8
6.93
6.84
$
$
$
$
See notes to consolidated financial statements.
F-2
PVH CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
2019
2018
2017
$
415.1
$
744.6
$
536.1
(157.8)
(361.3)
561.3
(4.1)
101.8
29.7
(132.2)
282.9
(2.2)
285.1
$
73.1
(186.4)
558.2
(1.8)
560.0
$
(99.1)
(70.8)
391.4
927.5
(1.7)
929.2
Net income
Other comprehensive (loss) income:
Foreign currency translation adjustments
Net unrealized and realized (loss) gain related to effective cash flow hedges,
net of tax (benefit) expense of $(1.0), $3.2 and $0.1
Net gain (loss) on net investment hedges, net of tax expense (benefit) of $9.6,
$22.5 and $(28.7)
Total other comprehensive (loss) income
Comprehensive income
Less: Comprehensive loss attributable to redeemable non-controlling interest
Comprehensive income 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:
ASSETS
Cash and cash equivalents
Trade receivables, net of allowances for doubtful accounts of $21.1 and $21.6
Other receivables
Inventories, net
Prepaid expenses
Other
Assets held for sale
Total Current Assets
Property, Plant and Equipment, net
Operating Lease Right-of-Use Assets
Goodwill
Tradenames
Other Intangibles, net
Other Assets, including deferred taxes of $40.3 and $40.5
Total Assets
February 2,
2020
February 3,
2019
$
503.4
741.4
23.7
1,615.7
159.9
112.9
237.2
3,394.2
1,026.8
1,675.8
3,677.6
2,830.2
650.5
375.9
$ 13,631.0
$
452.0
777.8
26.0
1,732.4
168.7
81.7
—
3,238.6
984.5
—
3,670.5
2,863.7
705.5
400.9
$ 11,863.7
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Current portion of operating lease liabilities
Short-term borrowings
Current portion of long-term debt
Liabilities related to assets held for sale
Total Current Liabilities
Long-Term Portion of Operating Lease Liabilities
Long-Term Debt
Other Liabilities, including deferred taxes of $558.1 and $565.2
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; 85,890,276 and
85,446,141 shares issued
Additional paid in capital – common stock
Retained earnings
Accumulated other comprehensive loss
Less: 13,597,113 and 10,042,510 shares of common stock held in treasury, at cost
Total Stockholders’ Equity
Total Liabilities, Redeemable Non-Controlling Interest and Stockholders’ Equity
See notes to consolidated financial statements.
F-4
$
$
882.8
929.6
64.7
363.5
49.6
13.8
57.1
2,361.1
1,532.0
2,693.9
1,234.5
(2.0)
924.2
891.6
65.3
—
12.8
—
—
1,893.9
—
2,819.4
1,322.4
0.2
—
—
85.9
3,075.4
4,753.0
(640.1)
(1,462.7)
5,811.5
$ 13,631.0
85.4
3,017.3
4,350.1
(507.9)
(1,117.1)
5,827.8
$ 11,863.7
PVH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
OPERATING ACTIVITIES
Net income
Adjustments to reconcile to net cash provided by operating
Depreciation and amortization
Equity in net income of unconsolidated affiliates
Deferred taxes
Stock-based compensation expense
Impairment of long-lived assets
Actuarial loss on retirement and benefit plans
Settlement loss on retirement plans
Debt modification and extinguishment costs
Other noncash loss, net
Changes in operating assets and liabilities:
Trade receivables, net
Other receivables
Inventories, net
Accounts payable, accrued expenses and deferred revenue
Prepaid expenses
Employer pension contributions
Contingent purchase price payments to Mr. Calvin Klein
Other, net
Net cash provided by operating activities
INVESTING ACTIVITIES(3)
Acquisitions, net of cash acquired
Purchases of property, plant and equipment
Proceeds from sale of building
Investments in unconsolidated affiliates
Payment received on advance to unconsolidated affiliate
Net cash used by investing activities
FINANCING ACTIVITIES(2)
Net (payments on) proceeds from short-term borrowings
Proceeds from 2019 facilities, net of related fees
Repayment of 2016 facilities
Repayment of 2019 facilities
Proceeds from 3 1/8% senior notes, net of related fees
Redemption of 4 1/2% senior notes, including premium
Repayment of 2016/2014 facilities
Net proceeds from settlement of awards under stock plans
Cash dividends
Acquisition of treasury shares
Payments of finance lease liabilities
Tommy Hilfiger India contingent purchase price payments
Contributions from non-controlling interest
Net cash used by financing activities
2019
2018
2017
$
415.1
$
744.6
$
536.1
323.8
(9.6)
(72.9)
56.1
109.9 (2)
97.8
—
5.2
28.9
334.8
(21.3)
(113.3) (1)
56.2
17.9
15.0
—
—
—
324.9
(10.1)
(224.6) (1)
44.9
7.5
2.5
9.4
23.9
—
(17.1)
1.0
121.4
47.8
(14.4)
(0.7)
—
(72.0)
1,020.3
(192.4)
(345.2)
59.4
(27.7)
—
(505.9)
(151.4)
10.7
(212.1)
112.9
8.5
(10.0)
(15.9)
75.9
852.5
(15.9)
(379.5)
—
—
—
(395.4)
3.3
(11.7)
(163.5)
185.9
(41.0)
(0.3)
(55.6)
12.6
644.2
(40.1)
(358.1)
3.4
(14.2)
6.3
(402.7)
(12.1)
1,639.8
(1,649.3)
(70.6)
—
—
—
2.5
(11.3)
(345.1)
(5.5)
—
—
(451.6)
(11.4)
51.4
452.0
503.4
(6.7)
—
—
—
—
—
(150.0)
20.4
(11.6)
(325.2)
(5.4)
—
—
(478.5)
(20.5)
(41.9)
493.9
452.0
0.4
—
—
—
701.6
(715.8)
(250.0)
30.0
(11.9)
(259.1)
(5.1)
(0.8)
1.7
(509.0)
31.3
(236.2)
730.1
493.9
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) Includes the impact of the U.S. Tax Legislation in 2018 and 2017 and the impact of the 2019 Dutch Tax Plan in 2018.
Please see Note 10 for further information.
(2) Noncash impairment charge of $116.4 million related to the sale of the Speedo North America business is included in Other
$
$
$
noncash loss, net. Please see Note 4 for further information.
(3) Please see Note 20 for information on noncash investing and financing transactions.
See notes to consolidated financial statements.
F-5
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
Loss
Retained
Earnings
Treasury
Stock
Total
Stockholders’
Equity
Stockholders’ Equity
January 29, 2017
$
2.0
$
— 83,923,184
$
83.9
$
2,866.2
$
3,098.0
$
(710.8)
$
(532.8)
$
4,804.5
Net income attributable to PVH Corp.
Foreign currency translation adjustments
Net unrealized and realized loss related to effective cash
flow hedges, net of tax expense of $0.1
Net loss on net investment hedges, net of tax benefit of
$28.7
Comprehensive income attributable to PVH Corp.
Reclassification related to the adoption of accounting
guidance for certain tax effects in connection with the U.S.
Tax Legislation
Cumulative-effect adjustment related to the adoption of
accounting guidance for share-based payment award
transactions
Settlement of awards under stock plans
Stock-based compensation expense
Cash dividends ($0.15 per common share)
Acquisition of 2,300,657 treasury shares
Contributions from the minority shareholder
Net loss attributable to redeemable non-controlling interest
February 4, 2018
Net income attributable to PVH Corp.
Foreign currency translation adjustments
Net unrealized and realized gain related to effective cash
flow hedges, net of tax expense of $3.2
Net gain on net investment hedges, net of tax expense of
$22.5
Comprehensive income attributable to PVH Corp.
Cumulative-effect adjustment related to the adoption of
accounting guidance for revenue recognition
Cumulative-effect adjustment related to the adoption of
accounting guidance for income tax accounting on
intercompany sales or transfers of assets other than
inventory
Settlement of awards under stock plans
Stock-based compensation expense
Cash dividends ($0.15 per common share)
Acquisition of 2,370,193 treasury shares
Net loss attributable to redeemable non-controlling interest
February 3, 2019
Net income attributable to PVH Corp.
Foreign currency translation adjustments
Net unrealized and realized loss related to effective cash
flow hedges, net of tax benefit of $1.0
Net gain on net investment hedges, net of tax expense of
$9.6
Comprehensive income attributable to PVH Corp.
Cumulative-effect adjustment related to the adoption of
accounting guidance for leases
Settlement of awards under stock plans
Stock-based compensation expense
Cash dividends ($0.15 per common share)
Acquisition of 3,554,603 treasury shares
537.8
2.1
(0.8)
(11.9)
3,625.2
746.4
(1.9)
(8.0)
(11.6)
4,350.1
417.3
(3.1)
(11.3)
561.3
(99.1)
(70.8)
(2.1)
(260.6)
(321.5)
(793.4)
(361.3)
101.8
73.1
(323.7)
(507.9)
(1,117.1)
(157.8)
(4.1)
29.7
(345.6)
537.8
561.3
(99.1)
(70.8)
929.2
—
0.3
30.0
44.9
(11.9)
(260.6)
5,536.4
746.4
(361.3)
101.8
73.1
560.0
(1.9)
(8.0)
20.4
56.2
(11.6)
(323.7)
5,827.8
417.3
(157.8)
(4.1)
29.7
285.1
(3.1)
2.5
56.1
(11.3)
(345.6)
927,895
1.0
1.1
29.0
44.9
1.7
(1.7)
2.0
— 84,851,079
84.9
2,941.2
595,062
0.5
19.9
56.2
(1.8)
0.2
— 85,446,141
85.4
3,017.3
444,135
0.5
2.0
56.1
Net loss attributable to redeemable non-controlling interest
February 2, 2020
$
(2.2)
(2.0)
$
— 85,890,276
$
85.9
$
3,075.4
$
4,753.0
$
(640.1)
$ (1,462.7)
$
5,811.5
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 with a brand portfolio consisting of nationally and internationally recognized trademarks, including TOMMY
HILFIGER, CALVIN KLEIN, Van Heusen, IZOD, ARROW, Warner’s, Olga, True&Co. and Geoffrey Beene, which are owned, as
well as various other owned, licensed and, to a lesser extent, private label brands. The Company also licenses Speedo for North
America and the Caribbean in perpetuity from Speedo International Limited. The Company entered into a definitive agreement
on January 9, 2020 to sell its Speedo North America business to Pentland Group PLC (“Pentland”), the parent company of
Speedo International Limited, (the “Speedo transaction”). The Company will deconsolidate the net assets of the Speedo North
America business and no longer license the Speedo trademark upon closing of the sale, which is expected to occur in the first
quarter of 2020, subject to customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, which was received early in the first quarter of 2020.
The Company designs and markets branded dress shirts, neckwear, sportswear (casual apparel), jeanswear, performance
apparel, intimate apparel, underwear, swimwear, swim products, handbags, accessories, footwear and other related products and
licenses its owned brands globally over a broad array of product categories and for use in numerous discrete jurisdictions.
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 6,
“Investments in Unconsolidated Affiliates,” for further discussion. The Company and Arvind Limited (“Arvind”) have 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. Please see Note 7, “Redeemable Non-Controlling Interest,”
for further discussion.
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 2019, 2018 and 2017 represent the 52
weeks ended February 2, 2020, 52 weeks ended February 3, 2019 and 53 weeks ended February 4, 2018, 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 cash and cash equivalents at February 2, 2020 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, historical experience, and an evaluation of current market conditions.
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 carrying amount may be impaired. Impairment testing for goodwill is done at the
F-7
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.
The Company assesses qualitative factors to determine whether it is necessary to perform a 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 used 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 2019 annual goodwill impairment test, the Company elected to bypass the qualitative assessment for all reporting
units and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate the fair value
of its reporting units. The Company’s annual goodwill impairment test during 2019 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. The reporting unit with the least excess fair value had an estimated fair value that exceeded
its carrying amount by 15%. No impairment of goodwill resulted from the Company’s annual impairment test in 2019. In the
fourth quarter of 2019, the Speedo transaction was a triggering event that indicated that the amount of goodwill allocated to the
Heritage Brands Wholesale reporting unit, the reporting unit that includes the Speedo North America business, could be
impaired, prompting the need for the Company to perform an interim goodwill impairment test for this reporting unit. No
goodwill impairment resulted from this interim test.
For the 2018 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 the fair value of its reporting units.
The Company’s annual goodwill impairment test during 2018 yielded estimated fair values in excess of the carrying amounts
for the Company’s reporting units, all of which had fair values in excess of the carrying amounts by more than 50%, and
therefore the second step of the quantitative goodwill impairment test was not required. No impairment of goodwill resulted
from the Company’s annual impairment test in 2018.
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 it
is more likely than not that the carrying amount may be impaired. The Company assesses 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 when events and circumstances indicate that the assets might be impaired.
For the 2019 annual impairment test of all indefinite-lived intangible assets, except for the Australia reacquired perpetual
license rights, 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. For the Australia reacquired perpetual license rights, since only
a few months had passed since the acquisition on May 31, 2019 and the business had performed better than initially expected,
the Company determined qualitatively that it was not more likely than not that the fair value of these reacquired perpetual
license rights were less than the carrying amount and concluded that the quantitative impairment test was not required. The fair
values of all of the Company’s indefinite-lived intangible assets substantially exceed their carrying amounts, with the exception
of the Company’s perpetual license right related to its Speedo North America business, which had a fair value that exceeded its
F-8
carrying amount by 3% at the testing date. In the fourth quarter of 2019, the Speedo transaction was a triggering event that
prompted the need for the Company to perform an interim impairment test of this perpetual license right. As a result of this
interim test, the perpetual license right was determined to be impaired and an impairment charge of $116.4 million was
recorded in other noncash loss, net in the Company’s Consolidated Income Statement. Please see Note 4, “Assets Held For
Sale,” for further discussion.
For the 2018 annual impairment test of all indefinite-lived intangible assets, except for the Geoffrey Beene tradename, 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. For the Geoffrey Beene tradename, since only a few months had passed
since the acquisition on April 20, 2018 and there had not been any significant changes in the business, the Company determined
qualitatively that it was not more likely than not that the fair value of this tradename was less than the carrying amount and
concluded that the quantitative impairment test was not required. No impairment of indefinite-lived intangible assets resulted
from the Company’s annual impairment tests in 2018.
Asset Impairments — The Company reviews for impairment of long-lived assets (excluding goodwill and other indefinite-
lived intangible assets) when events and circumstances indicate that the assets might be impaired. The Company records an
impairment loss when the carrying amount of the asset is not recoverable and exceeds its fair value. Please see Note 12, “Fair
Value Measurements,” for further discussion.
Inventories — Inventories are comprised principally of finished goods and are stated at the lower of cost or net realizable
value, except for certain retail inventories in North America that are stated at the lower of cost or market using the retail
inventory method. Cost for substantially all wholesale inventories in North America and certain wholesale and retail inventories
in Asia 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 aging and discontinued merchandise categories to
determine adjustments that it estimates will be needed to liquidate existing clearance inventories and record inventories at either
the lower of cost or net realizable value or the lower of cost or market using the retail inventory method, as applicable.
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 to 40 years; machinery, software and
equipment — 2 to 10 years; furniture and fixtures — 2 to 10 years; and fixtures located in shop-in-shop/concession locations
and their related costs — 3 to 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 improvements that extend the useful life of the
asset are capitalized, and repairs and maintenance are charged to operations in the period incurred. Depreciation expense totaled
$275.0 million, $263.9 million and $252.2 million in 2019, 2018 and 2017, respectively.
Cloud Computing Arrangements — The Company incurs costs to implement cloud computing arrangements that are
hosted by a third party vendor. Implementation costs incurred during the application development stage of a project are
capitalized and amortized over the term of the hosting arrangement on a straight-line basis. The Company capitalized $16.6
million of costs incurred in 2019 to implement cloud computing arrangements, primarily related to digital and consumer data
platforms. Amortization expense totaled $0.9 million in 2019. Cloud computing costs of $15.7 million were included in prepaid
expenses and other assets in the Company’s Consolidated Balance Sheet as of February 2, 2020.
The Company’s policy for accounting for implementation costs incurred in a cloud computing arrangement that is a
service contract reflects changes made in 2019 following the adoption of the updated cloud computing guidance. Please see the
section “Recently Adopted Accounting Guidance” below for further discussion.
Leases — The Company leases retail locations, warehouses, distribution centers, showrooms, office space and a factory in
Ethiopia, as well as certain equipment and other assets. The Company recognizes right-of-use assets and lease liabilities at the
lease commencement date based on the present value of fixed lease payments over the expected lease term. Operating leases are
included in operating lease right-of-use assets, current portion of operating lease liabilities and long-term portion of operating
lease liabilities in the Company’s Consolidated Balance Sheet. Finance leases are included in property, plant and equipment,
net, accrued expenses and other liabilities in the Company’s Consolidated Balance Sheet. Please see Note 17, “Leases,” and the
section “Recently Adopted Accounting Guidance” below for further discussion.
F-9
Revenue Recognition — Revenue is recognized upon the transfer of control of products or services to the Company’s
customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those products or
services. Please see Note 2, “Revenue,” for further discussion.
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, as well as the amounts recognized on foreign currency forward
exchange contracts as the underlying inventory hedged by such forward exchange contracts is sold. Generally, all other
expenses, excluding non-service related pension and post retirement (income) costs, interest and income taxes, are included in
selling, general and administrative (“SG&A”) 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 $351.4 million,
$307.7 million and $272.6 million in 2019, 2018 and 2017, respectively.
Shipping and Handling Fees — Shipping and handling fees that are billed to customers are included in net sales. Shipping
and handling costs incurred by the Company are recorded in SG&A expenses.
Advertising — Advertising costs are expensed as incurred and are included in SG&A expenses. Advertising expenses,
which are subject to exchange rate fluctuations, totaled $509.7 million, $526.0 million and $501.3 million in 2019, 2018 and
2017, respectively. Prepaid advertising expenses recorded in prepaid expenses and other assets totaled $5.9 million and $7.3
million at February 2, 2020 and February 3, 2019, respectively. 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.
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 determining the income tax provision. The Company recognizes income tax benefits only when 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. 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.
The United States Tax Cuts and Jobs Act of 2017 (the “U.S. Tax Legislation”) was enacted on December 22, 2017. The
U.S. Tax Legislation is comprehensive and significantly revised the United States tax code. Please see Note 10, “Income
Taxes,” for further discussion of the U.S. Tax Legislation.
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 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 agreements to hedge against a portion of this
exposure. The Company records the foreign currency forward exchange contracts and interest rate swap agreements 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
swap agreements is based on observable interest rate yield curves and represents the expected discounted cash flows underlying
F-10
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 swap agreements 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”).
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 net investment hedges are recorded in equity as a component of
AOCL. The Company evaluates the effectiveness of its net investment hedges at inception and as of the beginning of each
quarter.
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 previously used by
the Company 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 was estimated based on external valuation models, which used the original strike price, then current foreign
currency exchange rates, the implied volatility in foreign currency exchange rates at the time and length of time to expiration as
inputs. All foreign currency option contracts expired in 2017.
The Company does not use derivative or non-derivative financial instruments for trading or speculative purposes. Cash
flows from the Company’s hedges are presented in the Consolidated Statements of Cash Flows in the same category as the
items being hedged. Please see Note 11, “Derivative Financial Instruments,” for 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 closing exchange rate 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 SG&A expenses and totaled a loss (gain) of $16.2 million,
$17.3 million and $(10.2) million in 2019, 2018 and 2017, respectively.
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 Benefit Plans — Employee pension benefits earned during the year, as well as interest on the projected
benefit obligations or accumulated benefit obligations, are accrued quarterly. The expected return on plan assets is recognized
quarterly and determined at the beginning of the year by applying the expected long-term rate of 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 include the difference
between the actual return on plan assets and the expected return that was recognized quarterly, as well as the change in the
projected benefit obligation caused by actual experience and updated actuarial assumptions differing from those assumptions
used to record service and interest cost throughout the year. Actuarial 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. The service cost
component of net benefit cost is recorded in SG&A expenses and the other components of net benefit cost are recorded in non-
service related pension and postretirement cost (income) in the Company’s Consolidated Income Statements. Please see Note
13, “Retirement and Benefit Plans,” for further discussion of the Company’s pension and benefit plans.
F-11
Stock-Based Compensation — The Company recognizes all share-based payments to employees and non-employee
directors, net of actual forfeitures, as compensation expense in the consolidated financial statements based on their grant date
fair values. Please see Note 14, “Stock-Based Compensation,” for further discussion.
Recently Adopted Accounting Guidance — The Financial Accounting Standards Board (“FASB”) issued in February 2016
new guidance on leases. The new guidance, among other changes, requires lessees to recognize a right-of-use asset and a lease
liability in the balance sheet for most leases, but retains an expense recognition model similar to the previous guidance. The
lease liability is measured at the present value of the fixed lease payments over the lease term and the right-of-use asset is
measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct
costs. The guidance also requires additional quantitative and qualitative disclosures. The Company adopted the guidance in the
first quarter of 2019 using the modified retrospective approach applied as of the period of adoption with a cumulative-effect
adjustment to opening retained earnings and as such, prior periods have not been restated. Upon adoption, the Company (i)
recognized operating lease right-of-use assets of $1.7 billion and lease liabilities of $1.9 billion, (ii) recorded a cumulative-
effect adjustment to retained earnings of $3.1 million and (iii) recorded other reclassification adjustments within its
Consolidated Balance Sheet related to, among other things, deferred rent.
The effects of the adoption on the Company’s Consolidated Balance Sheet as of February 3, 2019 were as follows:
(In millions)
Assets
Prepaid expenses
Operating Lease Right-of-Use Assets
Other Assets
Liabilities
Accrued expenses
Current portion of operating lease liabilities
Long-Term Portion of Operating Lease Liabilities
Other Liabilities
Stockholders’ Equity
Retained earnings
As Reported
2/3/19
Adjustments
Adjusted
2/3/19
$
168.7
$
(21.3)
$
—
400.9
891.6
—
—
1,322.4
1,708.2
(10.3)
(17.0)
350.5
1,514.1
(167.9)
147.4
1,708.2
390.6
874.6
350.5
1,514.1
1,154.5
4,350.1
(3.1)
4,347.0
The Company also elected the package of practical expedients permitted under the transition guidance, which allows the
Company not to reassess whether any existing contracts are or contain a lease, the lease classification for any existing leases,
and the capitalization of initial direct costs for any existing leases, as of the adoption date. The Company’s accounting for
finance leases (formerly called capital leases) remains substantially unchanged. The adoption of the guidance did not have a
material impact on the Company’s results of operations or cash flows. Please see Note 17, “Leases,” for additional disclosures
required by the guidance.
The FASB issued in August 2017 an update to accounting guidance to simplify the application of hedge accounting in
certain situations and allow companies to better align their hedge accounting with their risk management activities. The update
eliminates the requirement to separately measure and report hedge ineffectiveness and requires companies to recognize all
elements of hedge accounting that impact earnings in the same income statement line as the hedged item. The update also
simplifies the requirements for hedge documentation and effectiveness assessments and amends the presentation and disclosure
requirements. The Company adopted this update in the first quarter of 2019 using a modified retrospective approach, except for
the presentation and disclosure guidance, which is being applied on a prospective basis, as required. The adoption of this update
did not have any impact on the Company’s consolidated financial statements.
The FASB issued in August 2018 an update to accounting guidance related to implementation costs incurred in a cloud
computing arrangement that is a service contract. The update aligns the requirements for capitalizing implementation costs
incurred under such arrangements with the requirements for capitalizing costs incurred to develop or obtain internal-use
software. Under previous accounting guidance, the Company generally expensed the implementation costs incurred in
F-12
connection with a cloud computing arrangement that is a service contract. The Company early adopted this update in the first
quarter of 2019 using a prospective approach and, as a result, has capitalized $16.6 million of costs incurred in 2019 to
implement cloud computing arrangements, primarily related to digital and consumer data platforms. Such costs were included
in prepaid expenses and other assets in the Company’s Consolidated Balance Sheet.
Accounting Guidance Issued But Not Adopted as of February 2, 2020 — The FASB issued in June 2016 an update to
accounting guidance that introduces a new impairment model used to measure credit losses for certain financial assets measured
at amortized cost, including trade and other receivables. This update requires entities to record an allowance for credit losses
using a forward-looking expected loss impairment model that considers historical experience, current conditions, and
reasonable and supportable forecasts that affect collectibility, rather than the incurred loss model required under existing
guidance. The update will be effective for the Company in the first quarter of 2020. Entities are required to apply the update
using a modified-retrospective approach with a cumulative effect adjustment to opening retained earnings in the period of
adoption. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial
statements.
The FASB issued in December 2019 an update to accounting guidance to simplify the accounting for income taxes by
eliminating certain exceptions to the existing guidance and clarifying and amending certain guidance to reduce diversity in
practice. The update eliminates certain exceptions to the guidance related to the approach for intraperiod tax allocation, the
methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis
differences. The update also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates
and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The update will be effective for
the Company in the first quarter of 2021, with early adoption permitted. Most amendments in the update are required to be
adopted using a prospective approach, while other amendments must be adopted using a modified-retrospective approach or
retrospective approach. The Company is currently evaluating the update to determine the impact of the adoption on the
Company’s consolidated financial statements.
2. REVENUE
The Company generates revenue primarily from sales of finished products under its owned and licensed trademarks
through its wholesale and retail operations. The Company also generates royalty and advertising revenue from licensing the
rights to its trademarks to third parties. Revenue is recognized upon the transfer of control of products or services to the
Company’s customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those
products or services.
Product Sales
The Company generates revenue from the wholesale distribution of its products to traditional retailers (including for sale
through their digital commerce sites), pure play digital commerce retailers, franchisees, licensees and distributors. Revenue is
recognized upon transfer of control of goods to the customer, which generally occurs when title to goods is passed and risk of
loss transfers to the customer. Depending on the contract terms, transfer of control is upon shipment of goods to or upon receipt
of goods by the customer. Payment is typically due within 30 to 90 days. The amount of revenue recognized is net of returns,
sales allowances and other discounts that the Company offers to its wholesale customers. The Company estimates returns based
on an analysis of historical experience and specific customer arrangements and estimates sales allowances and other discounts
based on seasonal negotiations, historical experience and an evaluation of current market conditions.
The Company also generates revenue from the retail distribution of its products through its freestanding stores, shop-in-
shop/concession locations and digital commerce sites. Revenue is recognized at the point of sale in the stores and shop-in-shop/
concession locations and upon estimated time of delivery for sales through the Company’s digital commerce sites, at which
point control of the products passes to the customer. The amount of revenue recognized is net of returns, which are estimated
based on an analysis of historical experience. Costs associated with coupons are recorded as a reduction of revenue at the time
of coupon redemption.
The Company excludes from revenue taxes collected from customers and remitted to government authorities related to
sales of the Company’s products. Shipping and handling costs that are billed to customers are included in net sales.
F-13
Customer Loyalty Programs
The Company uses loyalty programs that offer customers of its retail businesses specified amounts off of future purchases
for a specified period of time after certain levels of spending are achieved. Customers that are enrolled in the programs earn
loyalty points for each purchase made.
Loyalty points earned under the customer loyalty programs provide the customer a material right to acquire additional
products and give rise to the Company having a separate performance obligation. For each transaction where a customer earns
loyalty points, the Company allocates revenue between the products purchased and the loyalty points earned based on the
relative standalone selling prices. Revenue allocated to loyalty points is recorded as deferred revenue until the loyalty points are
redeemed or expire.
Gift Cards
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. Gift card purchases by a customer are prepayments for products to be provided by the Company in the
future and are therefore considered to be performance obligations of the Company. Upon the purchase of a gift card by a
customer, the Company records deferred revenue for the cash value of the gift card. Deferred revenue is relieved and revenue is
recognized when the gift card is redeemed by the customer. The portion of gift cards that the Company does not expect to be
redeemed (referred to as “breakage”) is recognized proportionately over the estimated customer redemption period, subject to
the constraint that it must be probable that a significant reversal of revenue will not occur, if the Company determines that it
does not have a legal obligation to remit the value of such unredeemed gift cards to any jurisdiction.
License Agreements
The Company generates royalty and advertising revenue from licensing the rights to access its trademarks to third parties,
including the Company’s joint ventures. The license agreements are generally exclusive to a territory or product category, have
terms in excess of one year and, in most cases, include renewal options. In exchange for providing these rights, the license
agreements require the licensees to pay the Company a royalty and, in certain agreements, an advertising fee. In both cases, the
Company generally receives the greater of (i) a sales-based percentage fee and (ii) a contractual minimum fee for each annual
performance period under the license agreement.
In addition to the rights to access its trademarks, the Company provides ongoing support to its licensees over the term of
the agreements. As such, the Company’s license agreements are licenses of symbolic intellectual property and, therefore,
revenue is recognized over time. For license agreements where the sales-based percentage fee exceeds the contractual minimum
fee, the Company recognizes revenues as the licensed products are sold as reported to the Company by its licensees. For license
agreements where the sales-based percentage fee does not exceed the contractual minimum fee, the Company recognizes the
contractual minimum fee as revenue ratably over the contractual period.
Under the terms of the license agreements, payments are generally due quarterly from the licensees. The Company records
deferred revenue when amounts are received or receivable from the licensee in advance of the recognition of revenue.
As of February 2, 2020, the contractual minimum fees on the portion of all license agreements not yet satisfied totaled
$1.2 billion, of which the Company expects to recognize $291.5 million as revenue in 2020, $242.4 million in 2021 and $684.2
million thereafter.
F-14
Deferred Revenue
Changes in deferred revenue, which primarily relate to customer loyalty programs, gift cards and license agreements for
the years ended February 2, 2020 and February 3, 2019, were as follows:
(In millions)
Deferred revenue balance at beginning of period
Impact of adopting the new revenue standard
Net additions to deferred revenue during the period
Reductions in deferred revenue for revenue recognized during the period (1)
Deferred revenue balance at end of period
2019
2018
$
$
65.3
$
—
60.3
(60.9)
64.7
$
39.2
15.6
61.3
(50.8)
65.3
(1) Represents the amount of revenue recognized during the period that was included in the deferred revenue balance at the
beginning of the period, as adjusted in 2018 for the impact of adopting the new revenue standard, and does not contemplate
revenue recognized from amounts deferred during the period.
The Company also had long-term deferred revenue liabilities included in other liabilities in its Consolidated Balance
Sheets of $10.3 million and $2.3 million as of February 2, 2020 and February 3, 2019, respectively.
Optional Exemptions
The Company elected not to disclose the remaining performance obligations for contracts that have an original expected
term of one year or less and expected sales-based percentage fees for the portion of all license agreements not yet satisfied.
Please see Note 21, “Segment Data,” for information on the disaggregation of revenue by segment and distribution
channel.
3. ACQUISITIONS
TH CSAP Acquisition
The Company acquired on July 1, 2019 the Tommy Hilfiger retail business in Central and Southeast Asia from the
Company’s previous licensee in that market (the “TH CSAP acquisition”). As a result of the TH CSAP acquisition, the
Company now operates directly the Tommy Hilfiger retail business in the Central and Southeast Asia market.
The acquisition date fair value of the consideration paid was $74.3 million. The estimated fair value of the assets
acquired consisted of $63.9 million of goodwill and $10.4 million of other net assets. The goodwill of $63.9 million was
assigned as of the acquisition date to the Company’s Tommy Hilfiger International segment, which is the Company’s reporting
unit that is expected to benefit from the synergies of the combination. Goodwill is not expected to be deductible for tax
purposes. The Company is still in the process of finalizing the valuation of the assets acquired; thus, the allocation of the
acquisition consideration is subject to change.
Australia Acquisition
The Company acquired on May 31, 2019 the approximately 78% ownership interests in Gazal Corporation Limited
(“Gazal”) that it did not already own (the “Australia acquisition”). Prior to the Australia acquisition, the Company and Gazal
jointly owned and managed a joint venture, PVH Brands Australia Pty. Limited (“PVH Australia”), with each owning a 50%
interest. PVH Australia licensed and operated businesses in Australia, New Zealand and other parts of Oceania under the
TOMMY HILFIGER, CALVIN KLEIN and Van Heusen brands, along with other owned and licensed brands. PVH Australia
came under the Company’s full control as a result of the acquisition. The Company now operates directly those businesses.
Prior to May 31, 2019, the Company accounted for its approximately 22% interest in Gazal and its 50% interest in PVH
Australia under the equity method of accounting. Following the completion of the Australia acquisition, the results of Gazal and
PVH Australia have been consolidated in the Company’s consolidated financial statements.
F-15
Gain on Previously Held Equity Investments
The carrying values of the Company’s approximately 22% interest in Gazal and 50% interest in PVH Australia prior to the
acquisition were $16.5 million and $41.9 million, respectively. In connection with the acquisition, these investments were
remeasured to fair values of $40.1 million and $131.4 million, respectively, resulting in the recognition of an aggregate noncash
gain of $113.1 million during the second quarter of 2019, which was included in other noncash loss, net in the Company’s
Consolidated Income Statement.
The fair value of the Company’s investment in Gazal was determined using the trading price of Gazal’s common stock,
which was listed on the Australian Securities Exchange, on the date of the acquisition. The Company classified this as a Level 1
fair value measurement due to the use of an unadjusted quoted price in an active market. The fair value of Gazal included the
fair value of Gazal’s 50% interest in PVH Australia. As such, the Company derived the fair value of its investment in PVH
Australia from the fair value of Gazal by adjusting for (i) Gazal’s non-operating assets and net debt position and (ii) the
estimated future operating cash flows of Gazal’s standalone operations, which were discounted at a rate of 12.5% to account for
the relative risks of the estimated future cash flows. The Company classified this as a Level 3 fair value measurement due to the
use of significant unobservable inputs.
Mandatorily Redeemable Non-Controlling Interest
Pursuant to the terms of the acquisition agreement, key members of Gazal and PVH Australia management exchanged a
portion of their interests in Gazal for approximately 6% of the outstanding shares in the previously wholly owned subsidiary of
the Company that acquired 100% of the ownership interests in the Australia business. The Company is obligated to purchase
this 6% interest within two years of the acquisition closing in two tranches as follows: tranche 1 – 50% of the shares one year
after the closing, but the holders had the option to defer half of this tranche to tranche 2; and tranche 2 – all remaining shares
two years after the closing. With respect to tranche 1, the holders elected not to defer their shares to tranche 2 and as a result the
Company is obligated to purchase all of the tranche 1 shares in the second quarter of 2020. The purchase price for the tranche 1
and tranche 2 shares is based on a multiple of the subsidiary’s adjusted earnings before interest, taxes, depreciation and
amortization (“EBITDA”) less net debt as of the end of the measurement year, and the multiple varies depending on the level of
EBITDA compared to a target.
The Company recognized a liability of $26.2 million for the fair value of the 6% interest on the date of the acquisition,
which is being accounted for as a mandatorily redeemable non-controlling interest. The fair value of the liability was
determined using a Monte Carlo simulation model, which utilizes inputs, including the volatility of financial results, in order to
model the probability of different outcomes. The Company classified this as a Level 3 fair value measurement due to the use of
significant unobservable inputs. In subsequent periods, the liability for the mandatorily redeemable non-controlling interest is
adjusted each reporting period to its redemption value based on conditions that exist as of each subsequent balance sheet date.
The Company reflects any adjustment in the redemption value in interest expense in the Company’s Consolidated Income
Statement. The Company recorded a loss of $8.6 million in interest expense during 2019 in connection with the remeasurement
of the mandatorily redeemable non-controlling interest to its redemption value, which for tranche 1 reflects the amount
expected to be paid under the conditions specified in the terms of the acquisition agreement and for tranche 2 reflects the
amount that would be paid under the conditions specified in the terms of the acquisition agreement if settlement had occurred as
of February 2, 2020. The liability for the mandatorily redeemable non-controlling interest was $33.8 million as of February 2,
2020 based on exchange rates in effect on that date, of which $16.9 million was included in accrued expenses and $16.9 million
was included in other liabilities in the Company’s Consolidated Balance Sheet.
F-16
Fair Value of the Acquisition
The acquisition date fair value of the business acquired was $324.6 million, consisting of:
(In millions)
Cash consideration
Fair value of the Company’s investment in PVH Australia
Fair value of the Company’s investment in Gazal
Fair value of mandatorily redeemable non-controlling interest
Elimination of pre-acquisition receivable owed to the Company
Total acquisition date fair value of the business acquired
Allocation of the Acquisition Date Fair Value
$
$
124.7
131.4
40.1
26.2
2.2
324.6
The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
$
(In millions)
Cash and cash equivalents
Trade receivables
Inventories
Prepaid expenses
Other current assets
Assets held for sale
Property, plant and equipment
Goodwill
Intangible assets
Operating lease right-of-use assets
Total assets acquired
Accounts payable
Accrued expenses
Short-term borrowings
Current portion of operating lease liabilities
Long-term portion of operating lease liabilities
Deferred tax liability
Other liabilities
Total liabilities assumed
Total acquisition date fair value of the business acquired
$
6.6
15.1
89.9
1.3
3.5
58.8
18.4
65.9
222.2
56.4
538.1
14.4
22.5
50.5
10.9
43.9
69.6
1.7
213.5
324.6
Prior to the closing of the Australia acquisition, Gazal had entered into an agreement to sell an office building and
warehouse to a third party and, as such, the building was classified as held for sale on the acquisition date. The building was
subsequently sold to a third party and leased back to the Company in June 2019. Please see Note 17, “Leases,” for further
discussion of this sale-leaseback transaction.
The goodwill of $65.9 million was assigned as of the acquisition date to the Company’s Tommy Hilfiger International and
Calvin Klein International segments in the amounts of $56.8 million and $9.1 million, respectively, which include the
Company’s reporting units that are expected to benefit from the synergies of the combination. Goodwill will not be deductible
for tax purposes. The other intangible assets of $222.2 million consisted of reacquired perpetual license rights of $204.9
million, which are indefinite lived, order backlog of $0.3 million, which was amortized on a straight-line basis over 0.5 years,
and customer relationships of $17.0 million, which are being amortized on a straight-line basis over 10.0 years. The Company
F-17
is still in the process of finalizing the valuation of the assets and liabilities assumed; thus, the allocation of the acquisition date
fair value is subject to change.
Acquisition of the Geoffrey Beene Tradename
The Company acquired on April 20, 2018 the Geoffrey Beene tradename from Geoffrey Beene, LLC (“Geoffrey Beene”).
Prior to the acquisition, the Company licensed the rights to design, market and distribute Geoffrey Beene dress shirts and
neckwear from Geoffrey Beene.
The tradename was acquired for $17.0 million, consisting of $15.9 million paid in cash, $0.7 million of royalties prepaid
to Geoffrey Beene by the Company under the license agreement, and $0.4 million of liabilities assumed by the Company. The
transaction was accounted for as an asset acquisition.
Acquisition of the Wholesale and Concessions Businesses in Belgium and Luxembourg
The Company acquired on September 1, 2017 the Tommy Hilfiger and Calvin Klein wholesale and concessions
businesses in Belgium and Luxembourg from a former agent (the “Belgian acquisition”). As a result of the Belgian acquisition,
the Company now operates directly the Tommy Hilfiger and Calvin Klein businesses in this region.
The acquisition date fair value of the consideration paid was $12.0 million. The estimated fair value of assets acquired and
liabilities assumed consisted of $12.4 million of goodwill and $0.4 million of other net liabilities. The goodwill of $12.4 million
was assigned as of the acquisition date to the Company’s Tommy Hilfiger International and Calvin Klein International segments
in the amounts of $11.1 million and $1.3 million, respectively, which are the Company’s reporting units that are expected to
benefit from the synergies of the combination. Goodwill is not deductible for tax purposes. The Company finalized the purchase
price allocation in 2018.
Acquisition of True & Co.
The Company acquired on March 30, 2017 True & Co., a direct-to-consumer intimate apparel digital-centric retailer. This
acquisition enabled the Company to participate further in the fast-growing online channel and provided a platform to increase
innovation, data-driven decisions and speed in the way it serves its consumers across its channels of distribution.
The acquisition date fair value of the consideration paid was $28.5 million. The estimated fair value of assets acquired and
liabilities assumed consisted of $20.9 million of goodwill and $7.6 million of other net assets (including $7.3 million of
deferred tax assets and $0.4 million of cash acquired). The goodwill of $20.9 million was assigned as of the acquisition date to
the Company’s Calvin Klein North America, Calvin Klein International and Heritage Brands Wholesale segments in the
amounts of $5.4 million, $4.8 million and $10.7 million, respectively, which include the Company’s reporting units that are
expected to benefit from the synergies of the combination. For those reporting units that had not been assigned any of the assets
acquired or liabilities assumed in the acquisition, the amount of goodwill assigned was determined by calculating the estimated
fair value of such reporting units before and after the acquisition. Goodwill is not deductible for tax purposes. The Company
finalized the purchase price allocation in 2017.
4. ASSETS HELD FOR SALE
The Company entered into a definitive agreement on January 9, 2020 to sell its Speedo North America business to
Pentland, the parent company of Speedo International Limited, for $170.0 million in cash, subject to a working capital
adjustment. Speedo International Limited licenses the Speedo trademark to a subsidiary of the Company for perpetual use in
North America and the Caribbean. The Company will deconsolidate the net assets of the Speedo business and no longer license
the Speedo trademark upon closing of the sale, which is expected to occur in the first quarter of 2020, subject to customary
closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which was received
early in the first quarter of 2020.
The Company classified the assets and liabilities of the Speedo North America business as held for sale and recorded a
pre-tax noncash loss of $142.0 million during the fourth quarter of 2019 (including a $116.4 million noncash impairment
charge related to the Speedo perpetual license right) to reduce the carrying value of the Speedo North America business to its
estimated fair value, less costs to sell. The estimated fair value, less costs to sell, reflects the amount of consideration the
Company expects to receive upon closing of the transaction, inclusive of the working capital adjustment. The loss was recorded
F-18
in other noncash loss, net in the Company’s Consolidated Income Statement. The loss will be remeasured in connection with
the closing of the transaction and will be impacted by changes to the net assets of the Speedo North America business
subsequent to February 2, 2020.
The noncash impairment charge related to the Speedo perpetual license right was recorded to write down its carrying
value of $203.8 million to a fair value of $87.4 million, which was implied by the expected amount of consideration to be
received upon closing of the transaction. The Company classified this as a Level 3 fair value measurement due to the use of
significant unobservable inputs.
The Speedo transaction was also a triggering event that prompted the need for the Company to perform an interim
goodwill impairment test for its Heritage Brands Wholesale reporting unit. No goodwill impairment resulted from this interim
test.
The assets and liabilities of the Speedo North America business classified as held for sale in the Company’s Consolidated
Balance Sheet as of February 2, 2020 were included in the Heritage Brands Wholesale segment and consisted of the following:
(In millions)
Assets held for sale:
Trade receivables
Inventories, net
Prepaid expenses
Other current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Goodwill
Other intangibles, net (1)
Allowance for reduction of assets held for sale
Total assets held for sale
Liabilities related to assets held for sale:
Accounts payable
Accrued expenses
Current portion of operating lease liabilities
Long-term portion of operating lease liabilities
Other liabilities
Total liabilities related to assets held for sale
$
$
$
$
48.8
54.3
0.6
0.6
6.1
9.0
48.1
95.3
(25.6)
237.2
38.7
5.4
0.6
10.6
1.8
57.1
(1) Other intangibles, net includes a perpetual license right of $87.4 million and customer relationships of $7.9 million.
F-19
5. 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/concession locations
Leasehold improvements
Construction in progress
Property, plant and equipment, gross
Less: Accumulated depreciation
Property, plant and equipment, net
2019
2018
$
$
1.0
53.2
871.7
586.0
209.8
849.0
35.5
2,606.2
(1,579.4)
1,026.8
$
$
1.0
54.8
697.6
540.0
230.9
790.3
83.9
2,398.5
(1,414.0)
984.5
The increase in Machinery, software and equipment in 2019 primarily relates to software and other equipment that was
placed into service in 2019 in connection with the Company’s upgrade of and enhancements to its systems and digital
commerce platforms. Construction in progress at February 2, 2020 and February 3, 2019 represents costs incurred for
machinery, software and equipment, furniture and fixtures, and leasehold improvements not yet placed in use. Construction in
progress at February 2, 2020 and February 3, 2019 principally related to upgrades and enhancements to operating, supply chain
and logistics systems. Interest costs capitalized in construction in progress were immaterial during 2019, 2018 and 2017.
6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Included in other assets in the Company’s Consolidated Balance Sheets was $176.3 million as of February 2, 2020 and
$207.1 million as of February 3, 2019 related to the following investments in unconsolidated affiliates:
PVH Legwear
The Company and a wholly owned subsidiary of the Company’s former Heritage Brands socks and hosiery licensee
formed a joint venture, PVH Legwear LLC (“PVH Legwear”) in 2019, in which the Company owns a 49% economic interest.
PVH Legwear was formed in order to consolidate the Company’s socks and hosiery businesses for all Company brands in the
United States and Canada. PVH Legwear licenses from subsidiaries of the Company the rights to distribute and sell in these
countries TOMMY HILFIGER, CALVIN KLEIN, IZOD, Van Heusen and Warner’s socks and hosiery beginning in December
2019. Additionally, PVH Legwear sells socks and hosiery under other owned and licensed trademarks. This investment is being
accounted for under the equity method of accounting.
The Company made payments of $27.7 million to PVH Legwear during 2019 to contribute its share of the joint venture
funding.
Gazal and PVH Australia
Prior to May 31, 2019, the Company held an approximately 22% ownership interest in Gazal and a 50% ownership
interest in PVH Australia. These investments were accounted for under the equity method of accounting until the closing of the
Australia acquisition on May 31, 2019, on which date the Company derecognized its equity investments in Gazal and PVH
Australia and began to consolidate the operations of Gazal and PVH Australia in its financial statements. Please see Note 3,
“Acquisitions,” for further discussion.
The Company received dividends of $6.4 million, $7.6 million and $3.7 million from Gazal and PVH Australia during
2019, 2018, and 2017 respectively.
F-20
CK India
The Company acquired a 51% economic interest in a joint venture, Calvin Klein Arvind Fashion Private Limited (“CK
India”) in 2013. The Company sold 1% of its interest for $0.4 million in 2017, decreasing its economic interest in CK India to
50%. Prior to the sale, the Company was not deemed to hold a controlling interest in CK India as the shareholders agreement
provided the partners with equal rights. This investment is being accounted for under the equity method of accounting. CK
India licenses from a subsidiary of the Company the rights to the CALVIN KLEIN trademarks in India for certain product
categories.
The Company made payments of $1.6 million to CK India during 2017 to contribute its share of the joint venture funding.
TH India
The Company owns a 50% economic interest in a joint venture, 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 CK India, is also the Company’s joint venture partner in TH India.
The Company made payments of $2.7 million to TH India during 2017 to contribute its share of the joint venture funding.
TH Brazil
The Company acquired a 40% economic interest in a joint venture, Tommy Hilfiger do Brasil S.A. (“TH Brazil”) in 2012.
The Company acquired an approximately 1% additional interest for $0.3 million in 2017, increasing its economic interest in TH
Brazil to approximately 41%. 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 $2.5 million to TH Brazil during 2017 to contribute its share of the joint venture
funding.
The Company issued a note receivable to TH Brazil in 2016 for $12.5 million, of which $6.2 million was repaid in 2016
and the remaining balance, including accrued interest, was repaid in 2017.
PVH Mexico
The Company and Grupo Axo, S.A.P.I. de C.V. formed a joint venture (“PVH Mexico”) in 2016 in which the Company
owns a 49% economic interest. PVH Mexico licenses from certain subsidiaries of the Company the rights to distribute and sell
certain TOMMY HILFIGER, CALVIN KLEIN, Warner’s, Olga and Speedo brand products in Mexico. This investment is being
accounted for under the equity method of accounting.
The Company received dividends of $7.2 million from PVH Mexico during 2019.
Karl Lagerfeld
The Company owns an economic interest of approximately 8% in Karl Lagerfeld Holding B.V. (“Karl Lagerfeld”). The
Company is deemed to have significant influence with respect to this investment, which is being accounted for under the equity
method of accounting.
7. REDEEMABLE NON-CONTROLLING INTEREST
The Company and Arvind formed PVH Ethiopia, in which the Company owns a 75% interest, during 2016. The Company
consolidates PVH Ethiopia in its consolidated financial statements. PVH Ethiopia was formed to operate a manufacturing
facility that produces finished products for the Company for distribution primarily in the United States. The manufacturing
facility began operations in 2017.
F-21
The shareholders agreement governing PVH Ethiopia (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 PVH Ethiopia’s date of
incorporation. 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
10% 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 PVH Ethiopia’s EBITDA for the prior 12 months, less PVH Ethiopia’s net debt.
The fair value of the redeemable non-controlling interest (“RNCI”) as of the date of formation of PVH Ethiopia 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 or loss 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 as of
February 2, 2020 was $(2.0) million, which is greater than the redemption amount. The carrying amount decreased from $0.2
million as of February 3, 2019 as a result of a net loss attributable to the RNCI for 2019 of $2.2 million.
8. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill, by segment (please see Note 21, “Segment Data,” for further discussion
of the Company’s reportable segments), were as follows:
(In millions)
Balance as of February 4, 2018
Calvin
Klein
North
America
Calvin Klein
International
Tommy
Hilfiger
North
America
Tommy
Hilfiger
International
Heritage
Brands
Wholesale
Heritage
Brands
Retail
Total
Goodwill, gross
$ 780.2
$
942.0
$ 204.4
$
1,661.6
$
246.5
$
Accumulated impairment losses
Goodwill, net
Contingent purchase price payments
to Mr. Calvin Klein
Currency translation
Balance as of February 3, 2019
Goodwill, gross
Accumulated impairment losses
Goodwill, net
Australia acquisition
TH CSAP acquisition
Reclassification of goodwill to assets
held for sale
Currency translation
Balance as of February 2, 2020
—
780.2
1.0
(0.9)
780.3
—
780.3
—
—
—
0.1
—
942.0
0.7
(33.2)
909.5
—
909.5
9.1
—
—
(22.5)
—
204.4
—
—
204.4
—
204.4
—
—
—
—
—
1,661.6
—
(131.8)
1,529.8
—
1,529.8
56.8
63.9
—
(52.2)
Goodwill, gross
Accumulated impairment losses
780.4
—
896.1
—
204.4
—
1,598.3
—
—
246.5
—
—
246.5
—
246.5
—
—
(48.1)
—
198.4
—
Goodwill, net
$ 780.4
$
896.1
$ 204.4
$
1,598.3
$
198.4
11.9
(11.9)
$3,846.6
(11.9)
— 3,834.7
—
—
1.7
(165.9)
11.9
(11.9)
3,682.4
(11.9)
— 3,670.5
—
—
—
—
65.9
63.9
(48.1)
(74.6)
11.9
(11.9)
3,689.5
(11.9)
$ — $3,677.6
The goodwill acquired in the Australia and TH CSAP acquisitions was assigned as of the respective acquisition dates to
the Company’s reporting units that are expected to benefit from the synergies of the combinations.
F-22
The Company reclassified $48.1 million of goodwill to assets held for sale in the Company’s Consolidated Balance Sheet
as of February 2, 2020 in connection with the Speedo transaction. Please see Note 4, “Assets Held For Sale,” for further
discussion.
The Company was required to make contingent purchase price payments to Mr. Calvin Klein in connection with the
Company’s acquisition of all of the issued and outstanding stock of Calvin Klein, Inc. and certain affiliated companies. Such
payments were 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 were 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 were made were wholesale sales by the Company and its
licensees and other partners to retailers. All payments due to Mr. Klein under the agreement have been made.
The Company’s other intangible assets consisted of the following:
2019
2018
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
(In millions)
Intangible assets subject to
amortization:
Customer relationships (1)(2)
Reacquired license rights
Total intangible assets subject to
amortization
Indefinite-lived intangible assets:
Tradenames
Perpetual license right (2)
Reacquired perpetual license rights (1)
Total indefinite-lived intangible assets
$
289.9
$
502.5
792.4
2,830.2
—
209.2
3,039.4
Total other intangible assets
$ 3,831.8
$
(189.2) $
(161.9)
100.7
$
307.4
$
340.6
523.8
(186.1) $
(154.4)
121.3
369.4
(351.1)
441.3
831.2
(340.5)
490.7
—
—
—
2,830.2
2,863.7
—
209.2
203.8
11.0
3,078.5
$ 3,909.7
$
—
3,039.4
(351.1) $ 3,480.7
—
—
—
2,863.7
203.8
11.0
—
3,078.5
(340.5) $ 3,569.2
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 February 3, 2019 to February 2, 2020 included intangible assets recorded in connection with the
Australia acquisition. The intangible assets as of the acquisition date included reacquired perpetual license rights of
$204.9 million, which are indefinite-lived, and customer relationships of $17.0 million, which are being amortized on
a straight-line basis over 10.0 years, both of which were subject to exchange rate fluctuations after the acquisition date.
(2) The change from February 3, 2019 to February 2, 2020 included the intangible assets of the Company’s Speedo North
America business, consisting of customer relationships of $7.9 million and a perpetual license right of $203.8 million.
The Company recorded a $116.4 million noncash impairment charge related to the Speedo perpetual license right in
the fourth quarter of 2019 in connection with the Speedo transaction. The remaining perpetual license right of $87.4
million and the customer relationships of $7.9 million were reclassified to assets held for sale in the Company’s
Consolidated Balance Sheet as of February 2, 2020. Please see Note 4, “Assets Held For Sale,” for further discussion.
Amortization expense related to the Company’s intangible assets subject to amortization was $39.7 million and $62.8
million for 2019 and 2018, respectively. The decrease is primarily related to the reacquired license rights recorded in connection
with the acquisition of the 55% ownership interests in the Company’s former joint venture for TOMMY HILFIGER in China
that it did not already own (the “TH China acquisition”), which became fully amortized in 2018.
F-23
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 intangible assets subject to amortization as of February 2,
2020 is expected to be as follows:
(In millions)
Fiscal Year
Amount
2020
2021
2022
2023
2024
$
36.8
36.6
34.3
24.0
23.6
9. DEBT
Short-Term Borrowings
The Company has the ability to draw revolving borrowings under its senior unsecured credit facilities, as discussed in the
section entitled “2019 Senior Unsecured Credit Facilities” below. The Company had no borrowings outstanding under these
facilities as of February 2, 2020. The maximum amount of revolving borrowings outstanding under these facilities during 2019
was $378.4 million. The Company had $7.8 million outstanding under its prior senior secured credit facilities as of February 3,
2019 as discussed in the section entitled “2016 Senior Secured Credit Facilities” below. The weighted average interest rate on
the funds borrowed as of February 3, 2019 was 4.45%.
Additionally, the Company has the availability to borrow under short-term lines of credit, overdraft facilities and short-
term revolving credit facilities denominated in various foreign currencies. These facilities, which now include a facility in
Australia as a result of the Australia acquisition, provided for borrowings of up to $132.0 million based on exchange rates in
effect on February 2, 2020 and are utilized primarily to fund working capital needs. The Company had $49.6 million and $5.1
million outstanding under these facilities as of February 2, 2020 and February 3, 2019, respectively. The $49.6 million of
borrowings outstanding as of February 2, 2020 included borrowings under the facility in Australia. The weighted average
interest rate on funds borrowed as of February 2, 2020 and February 3, 2019 was 2.56% and 0.21%, respectively. The
maximum amount of borrowings outstanding under these facilities during 2019 was $99.5 million.
Commercial Paper
The Company established on November 5, 2019 an unsecured commercial paper note program in the United States
primarily to fund working capital needs. The program enables the Company to issue, from time to time, unsecured commercial
paper notes with maturities that vary but do not exceed 397 days from the date of issuance. The Company had no borrowings
outstanding under the commercial paper note program as of February 2, 2020. The maximum amount of borrowings
outstanding under the program during 2019 was $370.0 million.
The commercial paper program allows for borrowings of up to $675.0 million to the extent that the Company has
borrowing capacity under its United States dollar-denominated revolving credit facility, as discussed in the section entitled
“2019 Senior Unsecured Credit Facilities” below. Accordingly, the combined aggregate amount of (i) borrowings outstanding
under the commercial paper note program and (ii) the revolving borrowings outstanding under the United States dollar-
denominated revolving credit facility at any one time cannot exceed $675.0 million. The maximum aggregate amount of
borrowings outstanding under the commercial paper program and the United States dollar-denominated revolving credit facility
during 2019 was $567.0 million, which reflects a brief period of higher aggregate borrowings at the time that the Company
launched the commercial paper program.
F-24
Long-Term Debt
The carrying amounts of the Company’s long-term debt were as follows:
(In millions)
2019
2018
Senior unsecured Term Loan A facilities due 2024 (1)(2)
Senior secured Term Loan A facility due 2021
7 3/4% debentures due 2023
3 5/8% senior unsecured euro notes due 2024 (2)
3 1/8% senior unsecured euro notes due 2027 (2)
Total
Less: Current portion of long-term debt
Long-term debt
$
$
1,569.5
—
99.7
382.9
655.6
2,707.7
13.8
2,693.9
$
$
—
1,643.8
99.6
396.5
679.5
2,819.4
—
2,819.4
(1) The outstanding principal balance for the United States dollar-denominated Term Loan A facility and the euro-
denominated Term Loan A facility was $1,029.6 million and €493.8 million, respectively, as of February 2, 2020.
(2) The carrying amount of the Company’s euro-denominated Term Loan A facility and senior unsecured euro notes
includes the impact of changes in the exchange rate of the United States dollar against the euro.
Please see Note 12, “Fair Value Measurements,” for the fair value of the Company’s long-term debt as of February 2,
2020 and February 3, 2019.
As of February 2, 2020, the Company’s mandatory long-term debt repayments for the next five years were as follows:
(In millions)
Fiscal Year
2020
2021
2022
2023
2024
Amount (1)
13.8
39.0
102.9
223.4
1,682.9
(1) A portion of the Company’s mandatory long-term debt repayments are denominated in euro and subject to changes in
the exchange rate of the United States dollar against the euro.
Total debt repayments for the next five years exceed the total carrying amount of the Company’s Term Loan A facilities, 7
3/4% debentures due 2023 and 3 5/8% senior euro notes due 2024 as of February 2, 2020 because the carrying amount reflects
the unamortized portions of debt issuance costs and the original issue discounts.
As of February 2, 2020, after taking into account the effect of the Company’s interest rate swap agreements discussed in
the section entitled “2019 Senior Unsecured Credit Facilities,” which were in effect as of such date, approximately 55% of the
Company’s long-term debt had fixed interest rates, with the remainder at variable interest rates.
2016 Senior Secured Credit Facilities
On May 19, 2016, the Company entered into an amendment to its senior secured credit facilities (as amended, the “2016
facilities”). The Company replaced the 2016 facilities with new senior unsecured credit facilities on April 29, 2019 as discussed
in the section entitled “2019 Senior Unsecured Credit Facilities” below. The 2016 facilities, as of the date they were replaced,
consisted of a $2,347.4 million United States dollar-denominated Term Loan A facility and senior secured revolving credit
facilities consisting of (i) a $475.0 million United States dollar-denominated revolving credit facility, (ii) a $25.0 million United
States dollar-denominated revolving credit facility available in United States dollars and Canadian dollars and (iii) a €185.9
million euro-denominated revolving credit facility available in euro, British pound sterling, Japanese yen and Swiss francs.
F-25
2019 Senior Unsecured Credit Facilities
The Company refinanced the 2016 facilities on April 29, 2019 (the “Closing Date”) by entering into senior unsecured
credit facilities (the “2019 facilities”), the proceeds of which, along with cash on hand, were used to repay all of the outstanding
borrowings under the 2016 facilities, as well as the related debt issuance costs.
The 2019 facilities consist of a $1,093.2 million United States dollar-denominated Term Loan A facility (the “USD TLA
facility”), a €500.0 million euro-denominated Term Loan A facility (the “Euro TLA facility” and together with the USD TLA
facility, the “TLA facilities”) and senior unsecured revolving credit facilities consisting of (i) a $675.0 million United States
dollar-denominated revolving credit facility, (ii) a CAD $70.0 million Canadian dollar-denominated revolving credit facility
available in United States dollars or Canadian dollars, (iii) a €200.0 million euro-denominated revolving credit facility available
in euro, British pound sterling, Japanese yen, Swiss francs, Australian dollars and other agreed foreign currencies and (iv) a
$50.0 million United States dollar-denominated revolving credit facility available in United States dollars or Hong Kong
dollars. The 2019 facilities are due on April 29, 2024. In connection with the refinancing of the senior credit facilities, the
Company paid debt issuance costs of $10.4 million (of which $3.5 million was expensed as debt modification costs and $6.9
million is being amortized over the term of the debt agreement) and recorded debt extinguishment costs of $1.7 million to write
off previously capitalized debt issuance costs.
Each of the senior unsecured revolving facilities, except for the $50.0 million United States dollar-denominated revolving
credit facility available in United States dollars or Hong Kong dollars, also include amounts available for letters of credit and
have a portion 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 senior unsecured term loan facilities or increase the commitments under the senior
unsecured revolving credit facilities by an aggregate amount not to exceed $1,500.0 million. The lenders under the 2019
facilities are not required to provide commitments with respect to such additional facilities or increased commitments.
The Company had loans outstanding of $1,569.5 million, net of debt issuance costs and based on applicable exchange
rates, under the TLA facilities and $20.3 million of outstanding letters of credit under the senior unsecured revolving credit
facilities as of February 2, 2020. The Company had no borrowings outstanding under the senior unsecured revolving credit
facilities as of February 2, 2020.
The terms of the TLA facilities require the Company to make quarterly repayments of amounts outstanding under the
2019 facilities, which commenced with the calendar quarter ended September 30, 2019. Such required repayment amounts
equal 2.50% per annum of the principal amount outstanding on the Closing Date for the first eight calendar quarters following
the Closing Date, 5.00% per annum of the principal amount outstanding on the Closing Date for the four calendar quarters
thereafter and 7.50% per annum of the principal amount outstanding on the Closing Date 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 TLA facilities. The outstanding borrowings under the 2019 facilities are prepayable at any time without
penalty (other than customary breakage costs). Any voluntary repayments made by the Company would reduce the future
required repayment amounts.
The Company made payments of $70.6 million on its term loans under the 2019 facilities and repaid the 2016 facilities in
connection with the refinancing of the senior credit facilities during 2019. The Company made payments of $150.0 million and
$250.0 million during 2018 and 2017, respectively, on its term loans under the 2016 facilities.
The United States dollar-denominated borrowings under the 2019 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 effective rate plus 1/2 of 1.00% and (iii) a one-month reserve adjusted Eurocurrency
rate plus 1.00% or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities.
The Canadian dollar-denominated borrowings under the 2019 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 as the reference rate of interest in order to determine interest
rates for loans in Canadian dollars to its Canadian borrowers and (ii) the average of the rates per annum for Canadian dollar
F-26
bankers' acceptances having a term of one month or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the
2019 facilities.
Borrowings available in Hong Kong dollars under the 2019 facilities bear interest at a rate equal to an applicable margin
plus an adjusted Eurocurrency rate, calculated in a manner set forth in the 2019 facilities.
The borrowings under the 2019 facilities in currencies other than United States dollars, Canadian dollars or Hong Kong
dollars bear interest at a rate equal to an applicable margin plus an adjusted Eurocurrency rate, calculated in a manner set forth
in the 2019 facilities.
The current applicable margin with respect to the TLA facilities and each revolving credit facility is 1.375% for adjusted
Eurocurrency rate loans and 0.375% for base rate or Canadian prime rate loans. The applicable margin for borrowings under the
TLA facilities and the revolving credit facilities is subject to adjustment (i) after the date of delivery of the compliance
certificate and financial statements, with respect to each of the Company’s fiscal quarters, based upon the Company’s net
leverage ratio or (ii) after the date of delivery of notice of a change in the Company’s public debt rating by Standard & Poor’s
or Moody’s.
The Company entered into interest rate swap agreements designed with the intended effect of converting notional amounts
of its variable rate debt obligation to fixed rate debt. Under the terms of the agreements, for the outstanding notional amount,
the Company’s exposure to fluctuations in the one-month London interbank offered rate (“LIBOR”) is eliminated and the
Company pays a fixed rate plus the current applicable margin. The following interest rate swap agreements were entered into or
in effect during 2019, 2018 and 2017:
(Dollars in
millions)
Designation Date
Commencement Date
Initial Notional
Amount
Notional Amount
Outstanding as of
February 2, 2020
August 2019
February 2020
$
June 2019
June 2019
January 2019
November 2018
October 2018
June 2018
June 2017
July 2014
February 2020
June 2019
February 2020
February 2019
February 2019
August 2018
February 2018
February 2016
$
50.0
50.0
50.0
50.0
139.2
115.7
50.0
306.5
682.6
—
—
50.0
—
126.6
103.3
50.0
56.5
—
Fixed Rate
Expiration Date
1.1975%
February 2022
1.409%
1.719%
2.4187%
2.8645%
2.9975%
2.6825%
1.566%
1.924%
February 2022
July 2021
February 2021
February 2021
February 2021
February 2021
February 2020
February 2018
The notional amounts of the outstanding interest rate swaps that commenced in February 2018 and February 2019 are
adjusted according to pre-set schedules during the terms of the swap agreements such that, based on the Company’s projections
for future debt repayments, the Company’s outstanding debt under the USD TLA facility is expected to always equal or exceed
the combined notional amount of the then-outstanding interest rate swaps.
The 2019 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; and a change in control (as defined in the 2019 facilities).
The 2019 facilities require the Company to comply with customary affirmative, negative and 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 2019 facilities. 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 the Company’s other debt.
F-27
4 1/2% Senior Notes Due 2022
The Company had outstanding $700.0 million principal amount of 4 1/2% senior notes due December 15, 2022. The
Company redeemed these notes on January 5, 2018 in connection with the issuance of €600.0 million euro-denominated
principal amount of 3 1/8% senior notes due December 15, 2027, as discussed below. The Company paid a premium of $15.8
million to the holders of these notes in connection with the redemption and recorded debt extinguishment costs of $8.1 million
to write-off previously capitalized debt issuance costs associated with these notes during 2017.
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. The
debentures are not redeemable at the Company’s option prior to maturity.
The 7 3/4% debentures due 2023 include a “negative lien” covenant that generally requires the debentures to be secured
on an equal and ratable basis with secured indebtedness of the Company, as well as limits the Company’s ability to engage in
sale/leaseback transactions.
3 5/8% Euro Senior Notes Due 2024
The Company has outstanding €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 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.
The Company’s ability to create liens on the Company’s assets or engage in sale/leaseback transactions is restricted as set
forth in the indenture governing the notes.
3 1/8% Euro Senior Notes Due 2027
The Company issued on December 21, 2017 €600.0 million euro-denominated principal amount of 3 1/8% senior notes
due December 15, 2027. Interest on the notes is payable in euros. The Company paid €8.7 million (approximately $10.3 million
based on exchange rates in effect on the payment date) of fees during 2017 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
September 15, 2027 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 September 15, 2027 at their principal amount plus any accrued and unpaid interest.
The Company’s ability to create liens on the Company’s assets or engage in sale/leaseback transactions is restricted as set
forth in the indenture governing the notes.
As of February 2, 2020, the Company was in compliance with all applicable financial and non-financial covenants under
its financing arrangements.
Interest paid was $108.3 million, $114.6 million and $120.2 million during 2019, 2018 and 2017, respectively.
F-28
10. INCOME TAXES
The domestic and foreign components of (loss) income before income taxes were as follows:
(In millions)
Domestic
Foreign
Total
2019
2018
2017
$
$
(441.2) $
885.2
444.0
$
(5.3) $
780.9
775.6
$
(102.0)
612.2
510.2
The domestic loss before benefit for income taxes in 2019, 2018 and 2017 is primarily attributable to the domestic portion
of certain charges incurred in 2019, 2018 and 2017. Please see Note 21, “Segment Data,” for further discussion of these costs.
Taxes paid were $133.0 million, $138.4 million and $164.6 million in 2019, 2018 and 2017, respectively.
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
2019
2018
2017
(30.4)
(52.6) (1)
$
(30.5)
(53.2) (2)
$
51.7
(198.3) (2)
4.3
(16.5)
4.6
9.6
127.9
(3.8) (1)
28.9
$
170.2
(69.7) (3)
31.0
$
3.5
(7.8)
143.5
(18.5)
(25.9)
$
$
(1) Includes a $27.8 million benefit related to the write-off of deferred tax liabilities in connection with the pre-tax
noncash impairment of the Speedo perpetual license right, primarily in the United States. Please see Note 4, “Assets
Held For Sale,” for further discussion.
(2) Includes a $24.7 million benefit in 2018 and a $52.8 million benefit in 2017 related to the U.S. Tax Legislation.
(3) Includes a $41.1 million benefit related to the remeasurement of certain net deferred tax liabilities in connection with
the enactment of legislation in the Netherlands known as the “2019 Dutch Tax Plan,” which became effective on
January 1, 2019 and includes a gradual reduction of the corporate income tax rate by 2021.
F-29
The provision (benefit) for income taxes for the years 2019, 2018 and 2017 was different from the amount computed by
applying the statutory United States federal income tax rate to the underlying income as follows:
Statutory federal income tax rate (1)
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
One-time transition tax due to U.S. Tax Legislation
Remeasurement due to U.S. Tax Legislation
Tax on foreign earnings (U.S. Tax Legislation - GILTI and FDII)
Tax on Speedo transaction basis difference
Excess tax benefits related to stock-based compensation
Other, net
Effective income tax rate
2019
2018
2017
21.0 %
(2.4)%
(15.7)%
(11.8)% (2)
1.8 %
— %
— %
10.0 %
2.3 %
(0.2)%
1.5 %
6.5 %
21.0 %
0.5 %
(9.5)%
(3.7)%
(5.3)% (3)
— %
0.2 %
1.9 %
— %
(0.6)%
(0.5)%
4.0 %
33.7 %
(1.1)%
(20.3)%
(7.5)%
11.0 % (4)
34.0 %
(51.9)%
— %
— %
(2.8)% (5)
(0.2)%
(5.1)%
(1) The United States statutory federal income tax rate changed from 35.0% to 21.0%, effective January 1, 2018, as a
result of the U.S. Tax Legislation. The United States statutory federal income tax rate for 2017 is a blended rate of
33.7%.
(2) Includes the settlement of a multi-year audit from an international jurisdiction.
(3)
Includes the release of a $26.3 million valuation allowance on the Company’s foreign tax credits to adjust the
provisional amount recorded in 2017 as a result of the U.S. Tax Legislation.
(4) Includes the recognition of a $38.5 million provisional valuation allowance on the Company’s foreign tax credits as a
result of the U.S. Tax Legislation.
(5)
Includes an excess tax benefit from the exercise of stock options by the Company’s Chairman and Chief Executive
Officer.
The Company files income tax returns in more than 40 international jurisdictions each year. A substantial amount of the
Company’s earnings are in international jurisdictions, particularly in the Netherlands and Hong Kong SAR, where income tax
rates, coupled with special rates levied on income from certain of the Company’s jurisdictional activities, continue to be lower
than the United States statutory income tax rate. The effects of international jurisdictions, including foreign tax credits, reflected
in the above table for 2019, 2018 and 2017 included those taxes at statutory income tax rates and at special rates levied on
income from certain jurisdictional activities. The Company expects to benefit from these special rates until 2022.
The U.S. Tax Legislation enacted on December 22, 2017 significantly revised the United States tax code by, among other
things, (i) reducing the corporate income tax rate from 35.0% to 21.0%, effective January 1, 2018, (ii) imposing a one-time
transition tax on earnings of foreign subsidiaries deemed to be repatriated, (iii) implementing a modified territorial tax system,
(iv) introducing a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations (known as
“GILTI”) and a beneficial tax rate to be applied against foreign derived intangible income (known as “FDII”) and (v)
introducing a base erosion anti-abuse tax measure (known as “BEAT”) that taxes certain payments between United States
corporations and their subsidiaries.
The Company recorded a provisional net tax benefit of $52.8 million in the fourth quarter of 2017 in connection with the
U.S. Tax Legislation, consisting of a $265.0 million benefit primarily from the remeasurement of the Company’s net deferred
tax liabilities to the lower United States corporate income tax rate, partially offset by a $38.5 million valuation allowance on the
Company’s foreign tax credits and a $173.7 million transition tax on undistributed post-1986 earnings and profits of foreign
subsidiaries deemed to be repatriated.
F-30
The Company finalized its accounting related to the impacts of the U.S. Tax Legislation on the one-time transition tax
liability, deferred taxes, valuation allowances, state tax considerations, and any remaining outside basis differences in the
Company’s foreign subsidiaries during 2018. The analysis resulted in the Company recording an additional net tax benefit of
$24.7 million to adjust the provisional net tax benefit recorded in the fourth quarter of 2017 during the measurement period
allowed by the Securities and Exchange Commission. The net tax benefit included the release of a $26.3 million valuation
allowance on the Company’s foreign tax credits, partially offset by a $1.6 million expense related to the remeasurement of the
Company’s net deferred tax liabilities.
The GILTI provisions of the U.S. Tax Legislation impose a tax on foreign income in excess of a deemed return on
tangible assets of foreign corporations for tax years beginning after December 31, 2017. The guidance indicated that companies
must make a policy election to either record deferred taxes for basis differences expected to reverse as a result of the
GILTI provisions in future years or treat any taxes on GILTI inclusions as period costs when incurred. The Company completed
its analysis of the tax effects of the GILTI provisions in 2018 and elected to account for these tax effects as period costs when
incurred.
The components of deferred income tax assets and liabilities were as follows:
(In millions)
Gross deferred tax assets
Tax loss and credit carryforwards
Operating lease liabilities
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
Operating lease right-of-use assets
Property, plant and equipment
Derivative financial instruments
Other, net
Total gross deferred tax liabilities
Net deferred tax liability
2019
2018
$
$
$
$
$
232.5
407.6
110.9
39.7
20.3
26.5
—
837.5
(69.8)
767.7
$
$
(860.6) $
(357.2)
(46.2)
(12.8)
(8.7)
(1,285.5) $
(517.8) $
230.1
—
83.1
26.8
17.1
30.2
13.8
401.1
(62.6)
338.5
(825.3)
—
(33.6)
(4.3)
—
(863.2)
(524.7)
At the end of 2019, the Company had on a tax-effected basis approximately $238.9 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 $2.8 million and $47.1 million for federal and various state and local jurisdictions, respectively,
and $15.5 million for various foreign jurisdictions. The Company also had federal and state tax credit and other carryforwards
of $173.5 million. The carryforwards expire principally between 2020 and 2039.
Prior to the enactment of the U.S. Tax Legislation, the Company's undistributed foreign earnings were considered
permanently reinvested and, as such, United States federal and state income taxes were not previously recorded on these
earnings. As a result of the U.S. Tax Legislation, substantially all of the Company’s earnings in foreign subsidiaries generated
prior to the enactment of the U.S. Tax Legislation were deemed to have been repatriated and, as a result, the Company recorded
a one-time transition tax of $173.7 million in 2017. The Company's intent is to reinvest indefinitely substantially all of its
foreign earnings outside of the United States. However, if the Company decides at a later date to repatriate these earnings to the
United States, the Company may be required to accrue and pay additional taxes, including any applicable foreign withholding
F-31
tax and United States state income taxes. 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
2019
2018
2017
$
$
248.3
7.7
(15.8)
18.2
(36.0)
(2.5)
219.9
$
$
297.1
13.9
(24.9)
25.5
(54.7)
(8.6)
248.3
$
$
245.6
15.4
(10.3)
79.7
(46.3)
13.0
297.1
The entire amount of uncertain tax positions as of February 2, 2020, if recognized, would reduce the future effective tax
rate under current accounting guidance.
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 2019, 2018 and 2017 totaled a benefit of $15.0
million, an expense of $12.1 million and an expense of $0.9 million, respectively. Interest and penalties accrued in the
Company’s Consolidated Balance Sheets as of February 2, 2020 and February 3, 2019 totaled $25.2 million and $44.1 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. Most
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 2006. It is reasonably possible that a reduction of
uncertain tax positions in a range of $20.0 million to $40.0 million may occur within 12 months of February 2, 2020.
11. 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 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 2019 facilities. The Company
has entered into interest rate swap agreements to hedge against a portion of this exposure. Please see Note 9, “Debt,” for further
discussion of the 2019 facilities and these agreements.
The Company records the foreign currency forward exchange contracts and interest rate swap agreements at fair value in
its Consolidated Balance Sheets and does not net the related assets and liabilities. The foreign currency forward exchange
contracts associated with certain international inventory purchases and the interest rate swap agreements are designated as
effective hedging instruments (collectively, “cash flow hedges”). The changes in the fair value of the cash flow hedges are
recorded in equity as a component of AOCL. No amounts were excluded from effectiveness testing.
Net Investment Hedges
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,
the Company designated the carrying amounts of its €600.0 million euro-denominated principal amount of 3 1/8% senior notes
due 2027 and €350.0 million euro-denominated principal amount of 3 5/8% senior notes due 2024 (collectively, “foreign
currency borrowings”), that it had issued in the United States, as net investment hedges of its investments in certain of its
F-32
foreign subsidiaries that use the euro as their functional currency. Please see Note 9, “Debt,” for 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 net investment hedges, such
remeasurement is recorded in equity as a component of AOCL. The fair value and the carrying value of the foreign currency
borrowings designated as net investment hedges were $1,178.6 million and $1,038.5 million, respectively, as of February 2,
2020 and $1,098.3 million and $1,076.0 million, respectively, as of February 3, 2019. The Company evaluates the effectiveness
of its net investment hedges at inception and at the beginning of each quarter thereafter. No amounts were excluded from
effectiveness testing.
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
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 2017. These contracts represented the
Company’s purchase of euro put/United States dollar call options and Chinese yuan renminbi put/United States dollar call
options. All foreign currency option contracts expired in 2017.
The Company’s foreign currency option contracts were also undesignated contracts. As such, the changes in the fair value
of these foreign currency option contracts were immediately recognized in earnings.
The Company does not use derivative or non-derivative financial instruments for trading or speculative purposes. The
cash flows from the Company’s hedges are presented in the same category in the Company’s Consolidated Statements of Cash
Flows as the items being hedged.
The following table summarizes the fair value and presentation of the Company’s derivative financial instruments in its
Consolidated Balance Sheets:
(In millions)
Assets
Liabilities
2019
2018
2019
2018
Other
Current
Assets
Other
Assets
Other
Current
Assets
Other
Assets
Accrued
Expenses
Other
Liabilities
Accrued
Expenses
Other
Liabilities
Contracts designated as cash
flow hedges:
Foreign currency forward
exchange contracts (inventory
purchases)
Interest rate swap agreements
Total contracts designated as
cash flow hedges
Undesignated contracts:
Foreign currency forward
exchange contracts
$
21.4
$
0.1
21.5
1.5
Total
$
23.0
$
0.4
—
0.4
—
0.4
$
24.0
$
1.4
25.4
0.1
$
25.5
$
$
0.7
—
0.7
$
1.2
5.5
6.7
$
0.1
0.4
0.5
$
3.5
1.2
4.7
—
0.7
$
0.9
7.6
$
—
0.5
$
2.0
6.7
$
0.7
1.6
2.3
—
2.3
The notional amount outstanding of foreign currency forward exchange contracts was $1,308.1 million at February 2,
2020. Such contracts expire principally between February 2020 and June 2021.
F-33
The following tables summarize 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) Income
2019
2018
2017
Foreign currency forward exchange
contracts (inventory purchases)
Interest rate swap agreements
Foreign currency borrowings (net
investment hedges)
Total
$
$
22.4
(5.8)
39.3
55.9
$
$
$
97.1
(2.6)
95.6
190.1
$
(122.0)
3.2
(99.5)
(218.3)
Amount of Gain (Loss) Reclassified from AOCL into Income (Expense), Consolidated
Income Statement Location, and Total Amount of Consolidated Income Statement Line Item
(In millions)
Amount Reclassified
Location
Total Income Statement Amount
2019
2018
2017
2019
2018
2017
Foreign currency forward
exchange contracts
(inventory purchases)
Interest rate swap
agreements
Total
$
$
23.1
$
(11.6) $
(13.6)
(1.4)
1.1
21.7
$
(10.5) $
(6.2)
(19.8)
Cost of
goods sold
Interest
expense
$ 4,520.6
$ 4,348.5
$ 4,020.4
120.0
120.8
128.5
A net gain in AOCL on foreign currency forward exchange contracts at February 2, 2020 of $29.5 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 swap agreements
at February 2, 2020 of $5.4 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 substantially
complete liquidation of the hedged net investment.
The following table summarizes the effect of the Company’s undesignated contracts recognized in SG&A expenses in its
Consolidated Income Statements:
(In millions)
Foreign currency forward exchange contracts
Foreign currency option contracts
Gain (Loss) Recognized in Income (Expense)
2018
2019
2017
$
$
3.4
—
(1.5) $
—
(4.6)
(4.3)
The Company had no derivative financial instruments with credit risk-related contingent features underlying the related
contracts as of February 2, 2020.
F-34
12. FAIR VALUE MEASUREMENTS
In accordance with accounting principles generally accepted in the United States, fair value is defined 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. A three level hierarchy prioritizes the inputs used to measure fair value 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.
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
Interest rate swap agreements
Total Assets
Liabilities:
Foreign currency forward
exchange contracts
Interest rate swap agreements
Total Liabilities
2019
2018
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
N/A
N/A
N/A
N/A
N/A
N/A
$
$
$
$
23.3
0.1
23.4
2.2
5.9
8.1
N/A
N/A
N/A
N/A
N/A
N/A
$
$
$
$
23.3
0.1
23.4
2.2
5.9
8.1
N/A
N/A
N/A
N/A
N/A
N/A
$
$
$
$
24.8
1.4
26.2
6.2
2.8
9.0
N/A
N/A
N/A
N/A
N/A
N/A
$
$
$
$
24.8
1.4
26.2
6.2
2.8
9.0
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 swap agreements is based on observable interest rate yield curves and
represents the expected discounted cash flows underlying the financial instruments.
There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.
F-35
The following table shows the fair values of the Company’s non-financial assets and liabilities that were required to be
remeasured at fair value on a non-recurring basis (consisting of operating lease right-of-use assets, property, plant and
equipment, and other intangible assets) during 2019, 2018 and 2017, and the total impairments recorded as a result of the
remeasurement process:
(In millions)
Fair Value Measurement Using
2019
Operating lease right-of-use assets
Property, plant and equipment, net
Other intangible assets, net
2018
Property, plant and equipment, net
2017
Property, plant and equipment, net
Level 1
Level 2
Level 3
N/A
N/A
N/A
N/A $
N/A
N/A
N/A
N/A
N/A
N/A
14.5
—
87.4
0.6
0.6
Fair Value
As Of
Impairment Date
14.5
$
—
87.4
$
0.6
0.6
Total
Impairments
83.0
26.9
116.4
17.9
7.5
Operating lease right-of-use assets with a carrying amount of $97.5 million were written down to a fair value of $14.5
million during 2019 primarily as a result of the closure during the first quarter of 2019 of the Company’s TOMMY HILFIGER
flagship and anchor stores in the United States (the “TH U.S. store closures”) and the closure during the first quarter of 2019 of
the Company’s CALVIN KLEIN flagship store on Madison Avenue in New York, New York in connection with the Calvin Klein
restructuring (as defined in Note 18, “Exit Activity Costs”). Please see Note 18 for further discussion of the Calvin Klein
restructuring costs. The fair value of the Company’s operating lease right-of-use assets was determined based on the discounted
cash flows of estimated sublease income using market participant assumptions.
Property, plant and equipment with a carrying amount of $26.9 million was written down to a fair value of zero during
2019 primarily in connection with the TH U.S. store closures, the closure of the Company’s CALVIN KLEIN 205 W39 NYC
brand (formerly Calvin Klein Collection), and the financial performance in certain of the Company’s retail stores and shop-in-
shops, including certain CALVIN KLEIN stores affected by the realignment of the Calvin Klein creative direction globally.
Please see Note 18, “Exit Activity Costs,” for further discussion of the Calvin Klein restructuring costs. The fair value of the
Company’s property, plant and equipment was determined based on the estimated discounted future cash flows associated with
the assets using sales trends and market participant assumptions.
The Company’s perpetual license right for the Speedo trademark with a carrying amount of $203.8 million was written
down to a fair value of $87.4 million in the fourth quarter of 2019 in connection with the Speedo transaction. Please see Note 4,
“Assets Held For Sale,” for further discussion.
The $226.3 million of impairment charges in 2019 was recorded in the Company’s Consolidated Income Statement, of
which $109.9 million was included in SG&A expenses and $116.4 million was included in other noncash loss, net. The $226.3
million of impairment charges was recorded to the Company’s segments as follows: $118.6 million in the Heritage Brands
Wholesale segment, $50.0 million in the Tommy Hilfiger North America segment, $37.4 million in the Calvin Klein North
America segment, $13.1 million in the Calvin Klein International segment, $4.0 million in the Tommy Hilfiger International
segment, $0.1 million in the Heritage Brands Retail segment and $3.1 million was recorded in corporate expenses not allocated
to any reportable segments.
Property, plant and equipment with a carrying amount of $18.5 million was written down to a fair value of $0.6 million
during 2018 in connection with the financial performance in certain of the Company’s retail stores and shop-in-shops, and the
closure of the CALVIN KLEIN 205 W39 NYC brand. Please see Note 18, “Exit Activity Costs,” for further discussion. Fair value
of the Company’s retail stores and shop-in-shops was determined based on the estimated discounted future cash flows
associated with the assets using sales trends and market participant assumptions. The $17.9 million impairment charge was
included in SG&A expenses, of which $8.5 million was recorded in the Calvin Klein International segment, $5.1 million was
recorded in the Calvin Klein North America segment, $2.5 million was recorded in the Heritage Brands Wholesale segment,
F-36
$1.6 million was recorded in the Tommy Hilfiger International segment and $0.2 million was recorded in the Tommy Hilfiger
North America segment.
Property, plant and equipment with a carrying amount of $8.1 million was written down to a fair value of $0.6 million
during 2017 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 $7.5 million impairment charge was included in SG&A expenses, of which $3.4 million was recorded in the
Calvin Klein International segment, $1.9 million was recorded in the Tommy Hilfiger International segment, $1.8 million was
recorded in the Calvin Klein North America segment and $0.4 million was recorded in the Tommy Hilfiger North America
segment.
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)
2019
2018
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
$
$
503.4
49.6
2,707.7
$
503.4
49.6
2,869.7
$
452.0
12.8
2,819.4
452.0
12.8
2,853.7
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.
13. RETIREMENT AND BENEFIT PLANS
The Company, as of February 2, 2020, has five noncontributory qualified defined benefit pension plans 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 plans as its “Pension Plans.”
The Company also has three noncontributory unfunded non-qualified supplemental defined benefit pension plans,
including:
– A plan for certain current and former members of Tommy Hilfiger’s domestic senior management. The plan is frozen
and, as a result, participants do not accrue additional benefits.
– A capital accumulation program for certain current and former senior executives. Under the individual participants’
agreements, the participants in the program will receive a predetermined amount during the ten 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 ten years and has attained age 55.
– A plan for certain employees resident in the United States who meet certain age and service requirements that 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 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. As a result of the Company’s acquisition of The Warnaco Group, Inc. (“Warnaco”), 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 the applicable plan, both of which are unfunded and frozen. The Company refers to these two plans as
its “Postretirement Plans.”
F-37
Reconciliations of the changes in the projected benefit obligation (Pension Plans and SERP Plans) and the accumulated
benefit obligation (Postretirement Plans) were as follows:
(In millions)
Balance at beginning of year
Service cost, net of plan expenses
Interest cost
Benefit payments
Benefit payments, net of retiree
contributions
Actuarial loss (gain)
Balance at end of year
$
$
Pension Plans
SERP Plans
2019
2018
2019
2018
Postretirement Plans
2018
2019
651.0
31.2
27.9
(29.2)
—
149.2
830.1
$
$
648.0
31.4
26.0
(26.0)
—
(28.4)
651.0
$
$
99.2
5.8
4.3
(7.9)
—
23.1
124.5
$
$
96.9
5.8
3.9
(6.1)
—
(1.3)
99.2
$
$
$
8.4
—
0.3
—
(1.0)
0.5
8.2
$
10.5
—
0.4
—
(1.4)
(1.1)
8.4
The actuarial losses in 2019 were due principally to decreases in the discount rates. The actuarial gains in 2018 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 were as follows:
(In millions)
Fair value of plan assets at beginning of year
Actual return, net of plan expenses
Benefit payments
Company contributions
Fair value of plan assets at end of year
Funded status at end of year
2019
2018
$
$
$
$
636.8
112.9
(29.2)
0.7
721.2
$
(108.9) $
660.6
(7.8)
(26.0)
10.0
636.8
(14.2)
Amounts recognized in the Company’s Consolidated Balance Sheets were as follows:
(In millions)
Non-current assets
Current liabilities
Non-current liabilities
Net amount recognized
Pension Plans
SERP Plans
2019
2018
2019
2018
Postretirement Plans
2018
2019
$
$
$
1.7
—
(110.6)
(108.9) $
$
1.8
—
(16.0)
(14.2) $
— $
(9.3)
(115.2)
(124.5) $
— $
(7.4)
(91.8)
(99.2) $
— $
(1.1)
(7.1)
(8.2) $
—
(1.1)
(7.3)
(8.4)
F-38
The components of net benefit cost recognized were as follows:
(In millions)
Service cost
Interest cost
Actuarial loss (gain)
Expected return on plan
assets
Amortization of prior
service cost
Curtailment gain
Settlement loss
Total
Pension Plans
SERP Plans
Postretirement Plans
2019
2018
2017
2019
2018
2017
2019
2018
2017
$
$
33.5
27.9
74.2
$
33.7
26.0
17.4
$
27.3
25.7
(3.9)
5.8
4.3
23.1
(40.3)
(40.3)
(38.6)
—
—
—
0.1
—
—
0.1
(0.3)
9.4
—
—
—
—
$
5.8
$
3.9
(1.3)
—
—
—
—
4.5
3.8
6.1
—
—
—
—
$ — $ — $ —
0.3
0.5
—
—
—
—
0.4
(1.1)
—
—
—
—
(0.7) $
0.4
0.3
—
—
—
—
0.7
$
95.3
$
36.9
$
19.7
$
33.2
$
8.4
$
14.4
$
0.8
$
The service cost component of net benefit cost is recorded in SG&A expenses and the other components of net benefit
cost are recorded in non-service related pension and postretirement cost in the Company’s Consolidated Income Statements.
The actuarial losses in 2019 were due principally to decreases in the discount rates. For the Pension Plans, these losses
were partially offset by an actuarial gain as a result of the difference between the actual and expected returns on plan assets.
In 2017, the Company completed the purchase of a group annuity using assets from the Pension Plans. Under the group
annuity, the accrued pension obligations for approximately 4,000 retiree participants who had deferred vested benefits under the
Pension Plans were transferred to an insurer. As a result, the Company recognized a loss of $9.4 million, which was recorded in
non-service related pension and postretirement cost in the Company’s Consolidated Income Statement for 2017. The amount of
the pension benefit obligation settled was $65.3 million.
Amortization of prior service cost recognized in other comprehensive (loss) income for Pension Plans, SERP Plans, and
Postretirement Plans was immaterial during 2019, 2018 and 2017.
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 February 2, 2020 and February 3, 2019.
Pre-tax amounts in AOCL as of February 2, 2020 expected to be recognized as components of net benefit cost in 2020 in
the Pension Plans, SERP Plans and Postretirement Plans were immaterial.
The accumulated benefit obligation (Pension Plans and SERP Plans) were as follows:
(In millions)
2019
2018
2019
2018
Accumulated benefit obligation
$
751.3
$
598.9
$
99.9
$
81.5
Pension Plans
SERP Plans
F-39
In 2019, three of the Company’s Pension Plans had projected benefit obligations and accumulated benefit obligations in
excess of plan assets. In 2018, three of the Company’s Pension Plans had projected benefit obligations in excess of plan assets
and two of the Company’s Pension Plans had 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
2019
2018
3
811.9
701.3
3
733.3
701.3
$
$
$
$
3
634.7
618.8
2
38.5
38.0
$
$
$
$
In 2019 and 2018, all of the Company’s SERP Plans had projected benefit obligations and accumulated benefit obligations
in excess of plan assets as the plans are unfunded.
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)
Expected long-term rate of return on assets (applies to Pension Plans)
2019
2018
2017
3.15%
2.70%
4.23%
6.25%
4.35%
4.16%
4.24%
6.50%
4.08%
3.91%
4.24%
6.25%
To develop the expected 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.
The assets of the Pension Plans are invested with the objective of being able to meet current and future benefit payment
needs, while managing future contributions. The investment policy aims to earn a reasonable rate of return while minimizing
the risk of large losses. Assets are diversified by asset class in order to reduce volatility of overall results from year to year and
to take advantage of various investment opportunities. 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 February 2, 2020 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-40
In accordance with the fair value hierarchy described in Note 12, “Fair Value Measurements,” the following tables show
the fair value of the total assets of the Pension Plans for each major category as of February 2, 2020 and February 3, 2019:
(In millions)
Asset Category
Equity securities:
United States equities(2)
International equities(2)
United States equity fund(3)
International equity funds(4)
Fixed income securities:
Government securities(5)
Corporate securities(5)
Short-term investment funds(6)
Total return mutual fund(7)
Subtotal
Other assets and liabilities(8)
Total
(In millions)
Asset Category
Equity securities:
United States equities(2)
International equities(2)
United States equity fund(3)
International equity funds(4)
Fixed income securities:
Government securities(5)
Corporate securities(5)
Short-term investment funds(6)
Total return mutual fund(7)
Subtotal
Other assets and liabilities(8)
Total
Fair Value Measurements as of
February 2, 2020(1)
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
Total
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
$
$
$
$
$
182.2
10.7
66.3
135.1
74.0
225.9
18.6
6.9
719.7
1.5
721.2
182.2
10.7
—
65.4
—
—
—
6.9
265.2
$
$
— $
—
66.3
69.7
74.0
225.9
18.6
—
454.5
$
—
—
—
—
—
—
—
—
—
Fair Value Measurements as of
February 3, 2019(1)
Quoted Prices
In Active
Markets for
Identical Assets
(Level 1)
Total
Observable
Inputs
(Level 2)
Unobservable
Inputs
(Level 3)
$
170.9
$
170.9
$
— $
12.2
58.9
126.5
70.3
173.7
16.7
6.3
12.2
—
60.3
—
—
—
6.3
—
58.9
66.2
70.3
173.7
16.7
—
$
$
635.5
$
249.7
$
385.8
$
1.3
636.8
—
—
—
—
—
—
—
—
—
(1) 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 by reviewing prices from other sources. The Company has not
adjusted any prices received from the third party pricing services.
F-41
(2) Valued at the closing price or unadjusted quoted price in the active market in which the individual securities are
traded.
(3) 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.
(4) Valued at the net asset value of the fund, 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.
(5) 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.
(6) 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.
(7) Valued at the net asset value of this fund, as determined by the closing price in the active market in which the
individual fund is traded. This mutual fund invests in both equity securities and fixed income securities.
(8) This category includes other pension assets and liabilities such as pending trades and accrued income.
The Company believes that there are no significant concentrations of risk within the plan assets as of February 2, 2020.
Currently, the Company does not expect to make material contributions to the Pension Plans in 2020. The Company’s
actual contributions may differ from planned contributions due to many factors, including changes in tax and other laws, as well
as 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
$
2020
2021
2022
2023
2024
2025-2029
$
37.2
39.0
41.1
42.3
44.2
240.6
9.2
10.1
13.3
12.2
10.0
59.1
Postretirement Plans
1.0
$
1.0
0.9
0.8
0.7
2.7
A 1% change in the assumed medical health care cost trend rate for the Postretirement Plans would not have a material
impact on the Company’s net benefit cost for 2019 or the accumulated benefit obligation at February 2, 2020.
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 defined contribution plans for certain employees associated with certain businesses acquired in the Tommy
Hilfiger, Warnaco and Australia acquisitions, whereby the Company pays a percentage of the contribution for the employee.
The Company’s contributions to these plans were $29.9 million, $25.4 million and $22.1 million in 2019, 2018 and 2017,
respectively.
F-42
14. STOCK-BASED COMPENSATION
The Company grants stock-based awards under its 2006 Stock Incentive Plan (the “2006 Plan”). 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.
The Company may grant the following types of incentive awards under the 2006 Plan: (i) non-qualified stock options
(“stock options”); (ii) incentive stock options; (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. Awards granted under the 2006 Plan are
classified as equity awards, which are recorded in stockholders’ equity in the Company’s Consolidated Balance Sheets.
Through February 2, 2020, the Company has granted under the 2006 Plan (i) service-based stock options, RSUs and
restricted stock; and (ii) contingently issuable PSUs and RSUs. There was no restricted stock outstanding as of February 2,
2020.
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 an RSU or PSU award
reduces the number available by two shares. Total shares available for grant at February 2, 2020 amounted to 3.9 million shares.
Net income for 2019, 2018 and 2017 included $56.1 million, $56.2 million and $44.9 million, respectively, of pre-tax
expense related to stock-based compensation, with related recognized income tax benefits of $6.9 million, $8.9 million and $8.8
million, respectively.
The Company adopted in 2017 an update to accounting guidance that simplifies several aspects of accounting for share-
based payment award transactions, which resulted in the Company’s election to recognize forfeitures as they occur rather than
continue to estimate expected forfeitures in determining compensation expense. This accounting change was applied on a
modified retrospective basis and resulted in a cumulative-effect adjustment to decrease 2017 beginning retained earnings by
$0.8 million, with an offsetting increase to additional paid in capital of $1.1 million and an increase to deferred tax assets of
$0.3 million.
The Company receives a tax deduction for certain transactions associated with its stock-based plan awards. The actual
income tax benefits realized from these transactions in 2019, 2018 and 2017 were $8.8 million, $13.2 million and $27.2 million,
respectively. The tax benefits realized included discrete net excess tax benefits of $0.9 million, $4.9 million and $15.4 million
recognized in the Company’s provision for income taxes during 2019, 2018 and 2017, respectively.
Stock Options
Stock options granted to employees are generally exercisable in four equal annual installments commencing one year after
the date of grant. The underlying stock option award agreements generally provide for accelerated vesting upon the award
recipient’s retirement (as defined in the 2006 Plan). Such stock options are granted with a 10-year term and the per share
exercise price cannot be less than the closing price of the common stock on the date of grant.
The Company estimates the fair value of stock options at the date of grant using the Black-Scholes-Merton model. The
estimated fair value of the stock options granted is expensed over the stock options’ vesting periods.
F-43
The following summarizes the assumptions used to estimate the fair value of stock options granted during 2019, 2018 and
2017 and the resulting weighted average grant date fair value per stock option:
Weighted average risk-free interest rate
Weighted average expected stock option term (in years)
Weighted average Company volatility
Expected annual dividends per share
Weighted average grant date fair value per stock option
2019
2018
2017
2.15%
6.25
29.88%
0.15
37.14
$
$
2.78%
6.25
26.92%
0.15
51.66
$
$
2.10%
6.25
29.46%
0.15
33.50
$
$
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 stock option term. The expected stock option term represents the weighted average period of time that stock
options granted are expected to be outstanding, based on vesting schedules and the contractual term of the stock options.
Company volatility is based on the historical volatility of the Company’s common stock over a period of time corresponding to
the expected stock option term. Expected dividends are based on the Company’s common stock cash dividend rate at the date of
grant.
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 stock
option grants. The Company will continue to evaluate the appropriateness of utilizing such method.
Stock option activity for the year was as follows:
(In thousands, except years and per stock option data)
Outstanding at February 3, 2019
Granted
Exercised
Cancelled
Outstanding at February 2, 2020
Exercisable at February 2, 2020
Weighted
Average
Exercise
Price Per
Stock Option
107.81
$
111.92
77.92
119.83
109.25
$
$
106.11
Stock
Options
791
169
31
27
902
589
Weighted
Average
Remaining
Contractual
Life (Years)
6.1
Aggregate
Intrinsic Value
6,568
$
5.9
4.7
$
$
871
871
The aggregate grant date fair value of stock options granted during 2019, 2018 and 2017 was $6.3 million, $4.4 million
and $4.8 million, respectively.
The aggregate grant date fair value of stock options that vested during 2019, 2018 and 2017 was $6.5 million, $6.5 million
and $7.2 million, respectively.
The aggregate intrinsic value of stock options exercised during 2019, 2018 and 2017 was $1.3 million, $10.9 million and
$56.9 million, respectively.
At February 2, 2020, there was $4.4 million of unrecognized pre-tax compensation expense related to non-vested stock
options, which is expected to be recognized over a weighted average period of 1.8 years.
RSUs
RSUs granted to employees since 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
F-44
RSUs is equal to the closing price of the Company’s common stock on the date of grant and is expensed over the RSUs’ vesting
periods.
RSU activity for the year was as follows:
(In thousands, except per RSU data)
Non-vested at February 3, 2019
RSUs
Granted
Vested
Cancelled
Non-vested at February 2, 2020
Weighted Average
Grant Date
Fair Value Per RSU
122.97
$
110.03
116.25
123.93
117.28
$
847
612
350
113
996
The aggregate grant date fair value of RSUs granted during 2019, 2018 and 2017 was $67.3 million, $53.5 million and
$46.0 million, respectively. The aggregate grant date fair value of RSUs vested during 2019, 2018 and 2017 was $40.7 million,
$35.1 million and $28.7 million, respectively.
At February 2, 2020, there was $73.7 million of unrecognized pre-tax compensation expense related to non-vested RSUs,
which is expected to be recognized over a weighted average period of 1.8 years.
PSUs
Contingently issuable PSUs granted to certain of the Company’s senior executives since 2015 are 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 awards granted
in 2016, the three-year performance period ended during 2019 and holders of the awards earned an aggregate of 67,000 shares,
which was between the threshold and target levels. The Company records expense ratably over the applicable vesting period
regardless of whether the market condition is satisfied because the awards are subject to market conditions. The fair value of the
awards granted was established for each grant on the grant date using the Monte Carlo simulation model.
The following summarizes the assumptions used to estimate the fair value of PSUs granted during 2019, 2018 and 2017
and the resulting weighted average grant date fair value per PSU:
2019
2018
2017
Risk-free interest rate
Expected Company volatility
2.13%
30.25%
2.62%
29.78%
Expected annual dividends per share
$
0.15
Weighted average grant date fair value per PSU $
119.46
$
$
0.15
159.53
$
$
1.49%
31.29%
0.15
96.81
For certain of the awards granted, the after-tax portion of the award is subject to a holding period of one year after the
vesting date. For such awards, the grant date fair value was discounted 6.20% in 2019, 7.09% in 2018 and 12.67% in 2017 for
the restriction of liquidity, which was calculated using the Chaffe model.
F-45
PSU activity for the year was as follows:
(In thousands, except per PSU data)
Non-vested at February 3, 2019
Granted at target
Reduction due to market condition achieved below target
Vested
Cancelled
Non-vested at February 2, 2020
PSUs
Weighted
Average
Grant Date
Fair Value
Per PSU
194
72
10
67
8
181
$
$
106.76
119.46
87.16
87.16
117.27
119.63
The aggregate grant date fair value of PSUs granted during 2019, 2018 and 2017 was $8.6 million, $7.0 million and $7.0
million, respectively. The aggregate grant date fair value of PSUs that vested during 2019 and 2018 was $6.7 million and $4.6
million, respectively. No PSUs vested in 2017. PSUs in the above table are subject to market conditions. As such, the non-
vested PSUs are reflected at the target level, which is consistent with how expense will be recorded, regardless of the numbers
of shares that will actually be earned.
At February 2, 2020, there was $2.4 million of unrecognized pre-tax compensation expense related to non-vested PSUs,
which is expected to be recognized over a weighted average period of 2.1 years.
15. STOCKHOLDERS’ EQUITY
The Company’s Board of Directors has authorized over time since 2015 an aggregate $2.0 billion stock repurchase
program through June 3, 2023. 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, 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 2019, 2018 and 2017, the Company purchased 3.4 million shares, 2.2 million shares and 2.2 million shares,
respectively, of its common stock under the program in open market transactions for $325.0 million, $300.1 million and $250.4
million, respectively. As of February 2, 2020, the repurchased shares were held as treasury stock and $683.3 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 RSUs and PSUs to
satisfy tax withholding requirements.
F-46
16. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in AOCL, net of related taxes, by component:
(In millions)
Balance at January 29, 2017
Other comprehensive income (loss) before
reclassifications
Less: Amounts reclassified from AOCL
Other comprehensive income (loss)
Impact of the U.S. Tax Legislation (4)
Balance at February 4, 2018
Other comprehensive (loss) income before
reclassifications
Less: Amounts reclassified from AOCL
Other comprehensive (loss) income
Balance at February 3, 2019
Other comprehensive (loss) income before
reclassifications
Less: Amounts reclassified from AOCL
Other comprehensive loss
Balance at February 2, 2020
Foreign currency
translation
adjustments
Net unrealized and
realized gain (loss) on
effective cash flow
hedges
Total
$
$
$
$
(737.7)
$
26.9
$
(710.8)
490.5 (1)(2)
—
490.5
(2.2)
(249.4)
(288.2) (1)(3)
—
(288.2)
(537.6)
(128.1) (1)(3)
—
(128.1)
(665.7)
$
$
$
(116.0)
(16.9)
(99.1)
0.1
(72.1)
92.0
(9.8)
101.8
$
29.7
$
15.9
20.0
(4.1)
25.6
$
374.5
(16.9)
391.4
(2.1)
(321.5)
(196.2)
(9.8)
(186.4)
(507.9)
(112.2)
20.0
(132.2)
(640.1)
(1) Foreign currency translation adjustments included a net gain (loss) on net investment hedges of $29.7 million, $73.1
million and $(70.8) million in 2019, 2018 and 2017, respectively.
(2) Favorable foreign currency translation adjustments were principally driven by a weakening of the United States dollar
against the euro.
(3) Unfavorable foreign currency translation adjustments were principally driven by a strengthening of the United States
dollar against the euro.
(4) The stranded tax effects resulting from the U.S. Tax Legislation were reclassified from AOCL to retained earnings as a
result of the Company’s early adoption of an update to accounting guidance in the fourth quarter of 2017. The amount
of the reclassification was calculated based on the effect of the change in the United States federal corporate income
tax rate on the gross deferred tax amounts at the date of the enactment of the U.S. Tax Legislation related to items that
remained in AOCL at that time.
F-47
The following table presents reclassifications from AOCL to earnings:
(In millions)
Amount Reclassified from AOCL
2019
2018
2017
Affected Line Item in the
Company’s Consolidated
Income Statements
Realized gain (loss) on effective cash flow
hedges:
Foreign currency forward exchange contracts
(inventory purchases)
Interest rate swap agreements
Less: Tax effect
Total, net of tax
17. LEASES
23.1
(1.4)
1.7
20.0
(11.6)
1.1
(0.7)
(9.8)
(13.6)
(6.2)
(2.9)
(16.9)
$
$
$
Cost of goods sold
Interest expense
Income tax expense (benefit)
The Company leases approximately 1,830 Company-operated freestanding retail store locations across more than 35
countries, generally with initial lease terms of three to ten years. The Company also leases warehouses, distribution centers,
showrooms, office space and a factory in Ethiopia, generally with initial lease terms of ten to 20 years, as well as certain
equipment and other assets, generally with initial lease terms of one to five years.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of fixed
lease payments over the expected lease term. The Company uses its incremental borrowing rates to determine the present value
of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is
not readily determinable for the Company's leases. The Company's incremental borrowing rates are based on the term of the
lease, the economic environment of the lease, and the effect of collateralization. Certain leases include one or more renewal
options, generally for the same period as the initial term of the lease. The exercise of lease renewal options is generally at the
Company’s sole discretion and, as such, the Company typically determines that exercise of these renewal options is not
reasonably certain. As a result, the Company does not include the renewal option period in the expected lease term and the
associated lease payments are not included in the measurement of the right-of-use asset and lease liability. Certain leases also
contain termination options with an associated penalty. Generally, the Company is reasonably certain not to exercise these
options and as such, they are not included in the determination of the expected lease term. The Company recognizes operating
lease expense on a straight-line basis over the lease term.
Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes
lease expense for these leases on a straight-line basis over the lease term.
Leases generally provide for payments of nonlease components, such as common area maintenance, real estate taxes and
other costs associated with the leased property. For lease agreements entered into or modified after February 3, 2019, the
Company accounts for lease components and nonlease components together as a single lease component and, as such, includes
fixed payments of nonlease components in the measurement of the right-of-use assets and lease liabilities. Variable lease
payments, such as percentage rentals based on location sales, periodic adjustments for inflation, reimbursement of real estate
taxes, any variable common area maintenance and any other variable costs associated with the leased property are expensed as
incurred as variable lease costs and are not recorded on the balance sheet.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictions or
covenants.
In conjunction with the Australia acquisition in May 2019, the Company acquired an office building and warehouse
owned by Gazal. Prior to the acquisition, Gazal had entered into an agreement with a third party to sell the building and as such,
the building was classified as held for sale and recorded at its fair value less estimated costs to sell on the acquisition date.
Please see Note 3, “Acquisitions,” for further discussion. In June 2019, the Company completed the sale of the office building
and warehouse for $59.4 million, incurring costs of $1.0 million, and leased back the building without an option to repurchase.
F-48
No gain or loss was recognized on the transaction. The lease is classified as an operating lease with an initial lease term of five
years and includes three options to renew for a period of five years each. Exercise of these renewal options is not reasonably
certain and as a result, the Company recognized an operating lease right-of-use asset and operating lease liability based on the
initial term of the lease.
The components of the net lease cost were as follows:
(In millions)
Finance lease cost:
Line Item in the Company’s Consolidated Income Statement
2019
Amortization of right-of-use-assets SG&A expenses (depreciation and amortization)
Interest on lease liabilities
Interest expense
Total finance lease cost
Operating lease cost
Short-term lease cost
Variable lease cost
Less: sublease income
Total net lease cost
SG&A expenses
SG&A expenses
SG&A expenses
SG&A expenses
Supplemental balance sheet information related to leases was as follows:
(In millions)
Right-of-use assets:
Operating lease
Finance lease
Current lease liabilities:
Operating lease
Finance lease
Other lease liabilities:
Operating lease
Finance lease
Line Item in the Company’s Consolidated Balance Sheet
Operating lease right-of-use assets
Property, plant and equipment, net
Current portion of operating lease liabilities
Accrued expenses
Long-term portion of operating lease liabilities
Other liabilities
Supplemental cash flow information related to leases was as follows:
(In millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Non-cash transactions:
Right-of-use assets obtained in exchange for new operating lease liabilities
Right-of-use assets obtained in exchange for new finance lease liabilities
$
$
$
$
$
$
$
$
$
5.3
0.5
5.8
459.5
25.9
143.8
(0.4)
634.6
2019
1,675.8
12.6
1,688.4
363.5
4.6
368.1
1,532.0
9.9
1,541.9
2019
472.8
0.5
5.5
441.3
3.6
F-49
The following summarizes the weighted average remaining lease term and weighted average discount rate related to the
Company’s right-of-use assets and lease liabilities recorded on the balance sheet:
Weighted average remaining lease term (years):
Operating leases
Finance leases
Weighted average discount rate:
Operating leases
Finance leases
At February 2, 2020, the maturities of the Company’s lease liabilities were as follows:
2019
6.84
4.37
4.25%
3.11%
(In millions)
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: Interest
Total lease liabilities
Finance
Leases
Operating
Leases
Total
5.1
4.5
2.5
1.0
0.5
2.3
15.9
(1.4)
14.5
$
$
$
436.2
399.2
323.5
244.2
187.1
622.5
2,212.7
(317.2)
1,895.5
$
$
$
441.3
403.7
326.0
245.2
187.6
624.8
2,228.6
(318.6)
1,910.0
$
$
$
The Company’s lease liabilities exclude $45.0 million of future lease payment obligations related to leases for two new
warehouses and various retail store leases that were entered into but did not commence as of February 2, 2020. These leases
commence between February 2020 and September 2020 with initial lease terms of five to ten years.
Disclosures Related to Periods Prior to Adoption of the New Lease Accounting Guidance
The Company adopted the update to accounting guidance related to leases in 2019 using the modified retrospective
approach applied as of the period of adoption with a cumulative-effect adjustment to opening retained earnings and as such,
prior periods have not been restated. As a result, disclosures related to periods prior to adoption are presented under the
previous accounting guidance.
At February 3, 2019, minimum annual rental commitments under noncancelable leases were as follows:
(In millions)
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments
Less: Amount representing interest
Present value of net minimum capital lease payments
Capital
Leases
Operating
Leases
Total
$
$
$
$
$
5.6
4.4
3.8
1.8
0.6
2.5
18.7
(2.2)
16.5
402.4
371.9
314.0
255.0
189.9
618.7
2,151.9
$
$
408.0
376.3
317.8
256.8
190.5
621.2
2,170.6
F-50
Aggregate future minimum rentals to be received under noncancelable capital and operating subleases were $0.6 million
and $0.2 million, respectively, at February 3, 2019.
Rent expense was as follows:
(In millions)
Minimum
Percentage and other
Less: Sublease rental income
Total
2018
2017
$
$
465.3
128.6
(1.4)
592.5
$
$
455.2
103.0
(1.8)
556.4
The gross book value of assets under finance leases, which were classified within property, plant and equipment in the
Company’s Consolidated Balance Sheet, amounted to $37.0 million as of February 3, 2019. Accumulated amortization related
to assets under finance leases amounted to $21.6 million as of February 3, 2019. The Company includes amortization of assets
under finance leases in depreciation and amortization expense. The Company did not incur any expense in percentage rentals
under finance leases during 2018 or 2017.
18. EXIT ACTIVITY COSTS
Calvin Klein Restructuring Costs
The Company announced on January 10, 2019 a restructuring in connection with strategic changes for its Calvin Klein
business (the “Calvin Klein restructuring”). The strategic changes included (i) the closure of the CALVIN KLEIN 205 W39 NYC
brand (formerly Calvin Klein Collection), (ii) the closure of the flagship store on Madison Avenue in New York, New York, (iii)
the restructuring of the Calvin Klein creative and design teams globally, and (iv) the consolidation of operations for the men’s
Calvin Klein Sportswear and Calvin Klein Jeans businesses. In connection with the Calvin Klein restructuring, the Company
recorded pre-tax costs during 2019 and 2018 as shown in the following table. All expected costs related to this restructuring
were incurred by the end of 2019.
(In millions)
Severance, termination benefits and other
employee costs
Long-lived asset impairments (1)
Contract termination and other costs
Inventory markdowns
Total
Costs Incurred
During 2018
Costs Incurred
During 2019
Cumulative
Costs Incurred
$
$
27.3
$
6.9
4.3
2.2
$
25.6
38.2
26.2
12.9
52.9
45.1
30.5
15.1
40.7
$
102.9
$
143.6
(1) Includes the impact of the closure of the flagship store on Madison Avenue in New York, New York in the first quarter of
2019.
Of the charges for severance, termination benefits and other employee costs, long-lived asset impairments and contract
termination and other costs incurred during 2019, $59.5 million relate to SG&A expenses of the Calvin Klein North America
segment and $30.5 million relate to SG&A expenses of the Calvin Klein International segment. Of the charges for inventory
markdowns incurred during 2019, $6.5 million relate to cost of goods sold of the Calvin Klein North America segment and $6.4
million relate to cost of goods sold of the Calvin Klein International segment. Of the charges for severance, termination benefits
and other employee costs, long-lived asset impairments and contract termination and other costs incurred during 2018, $18.9
million relate to SG&A expenses of the Calvin Klein North America segment and $19.6 million relate to SG&A expenses of the
Calvin Klein International segment. The charges for inventory markdowns incurred during 2018 were recorded in cost of goods
sold of the Company’s Calvin Klein International segment. Please see Note 21, “Segment Data,” for further discussion of the
Company’s reportable segments.
Please see Note 12, “Fair Value Measurements,” for further discussion of the long-lived asset impairments recorded during
2019 and 2018.
F-51
The liabilities at February 2, 2020 related to these costs were principally recorded in accrued expenses in the Company’s
Consolidated Balance Sheets and were as follows:
(In millions)
Liability at 2/3/19
Costs Incurred
During 2019
Costs Paid
During 2019
Liability at 2/2/20
Severance, termination benefits
and other employee costs
Contract termination and
other costs
Total
$
$
25.8
$
25.6
$
2.3
28.1
$
26.2
51.8
$
44.9
$
27.3
72.2
$
6.5
1.2
7.7
19. 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.
2019
2018
2017
$
417.3
$
746.4
$
537.8
74.2
0.4
74.6
5.63
5.60
$
$
76.5
0.8
77.3
9.75
9.65
$
$
77.6
1.0
78.6
6.93
6.84
$
$
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
2019
2018
2017
1.1
0.4
0.5
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 PSU awards outstanding that did not meet the performance conditions as of February 2, 2020, February 3,
2019 and February 4, 2018 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, 0.3 million and 0.1 million as of February 2, 2020, February 3, 2019 and February 4, 2018, respectively. These
amounts were also excluded from the computation of weighted average potentially dilutive securities in the table above.
20. NONCASH INVESTING AND FINANCING TRANSACTIONS
Omitted from the Company’s Consolidated Statement of Cash Flows for 2019 were capital expenditures related to
property, plant and equipment of $39.5 million, which will not be paid until 2020. The Company paid $43.7 million in cash
during 2019 related to property, plant and equipment that was acquired in 2018. This amount was omitted from the Company’s
Consolidated Statement of Cash Flows for 2018. The Company paid $41.9 million in cash during 2018 related to property, plant
and equipment that was acquired in 2017. This amount was omitted from the Company’s Consolidated Statement of Cash
Flows for 2017.
F-52
The Company completed the Australia acquisition during 2019. Omitted from the Company’s Consolidated Statement of
Cash Flows for 2019 was the following noncash acquisition consideration: (i) the issuance to key members of Gazal and PVH
Australia management of approximately 6% of the outstanding shares in the subsidiary of the Company that holds 100% of the
ownership interests in the Australia business, for which the Company recognized a $26.2 million liability on the date of the
acquisition and (ii) the elimination of a $2.2 million pre-acquisition receivable owed to the Company by PVH Australia. In
connection with the acquisition, the Company also remeasured its previously held equity investments in Gazal and PVH
Australia to fair value, resulting in noncash increases of $23.6 million and $89.5 million, respectively, to these equity
investment balances. Subsequent to the acquisition, the Company recorded a loss of $8.6 million during 2019 resulting from the
remeasurement of the liability for the 6% interest issued to key members of Gazal and PVH Australia management to its
redemption value as of February 2, 2020. The liability was $33.8 million as of February 2, 2020 based on exchange rates in
effect on that date.
Omitted from acquisition of treasury shares in the Company’s Consolidated Statements of Cash Flows for 2019 and 2017
were $0.5 million and $1.5 million, respectively, of shares repurchased under the stock repurchase program for which the trades
occurred but remained unsettled as of the end of the respective periods.
The Company recorded a loss of $1.7 million during 2019 to write-off previously capitalized debt issuance costs in
connection with the refinancing of its senior credit facilities.
Omitted from purchases of property, plant and equipment in the Company’s Consolidated Statements of Cash Flows for
2018 and 2017 were $6.0 million and $3.6 million, respectively, of assets acquired through finance leases. Please see Note 17,
“Leases,” for supplemental noncash transactions information related to finance leases during 2019.
The Company completed the acquisition of the Geoffrey Beene tradename during 2018. Omitted from acquisitions, net of
cash acquired in the Company’s Consolidated Statement of Cash Flows for 2018 was $0.7 million of acquisition consideration
related to royalties prepaid to Geoffrey Beene by the Company under the prior license agreement and $0.4 million of liabilities
assumed by the Company.
The Company recorded a loss of $8.1 million during 2017 to write-off previously capitalized debt issuance costs in
connection with the early redemption of its 4 1/2% senior notes due 2022.
21. SEGMENT DATA
The Company manages its operations through its operating divisions, which are presented as six reportable segments:
(i) Tommy Hilfiger North America; (ii) Tommy Hilfiger International; (iii) Calvin Klein North America; (iv) Calvin Klein
International; (v) Heritage Brands Wholesale; and (vi) Heritage Brands Retail.
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 the United States and Canada, primarily to department stores, warehouse clubs, and off-price and
independent retailers, as well as digital commerce sites operated by 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 a digital commerce site in the United States, 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 names for a broad array of product categories in North America. This segment also includes the
Company’s proportionate share of the net income or loss of its investment in its unconsolidated foreign affiliate in Mexico
relating to the affiliate’s Tommy Hilfiger business and, since December 2019, the Company’s proportionate share of the net
income or loss of its investment in its unconsolidated PVH Legwear affiliate relating to the affiliate’s Tommy Hilfiger
business.
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, Asia, and since May 31, 2019, Australia, primarily to department and specialty
stores, and digital commerce sites operated by department store customers and pure play digital commerce retailers, as well
as through distributors and franchisees; (ii) operating retail stores, concession locations and digital commerce sites in
Europe, Asia (including the TH CSAP acquisition) and, since May 31, 2019, Australia, which sell TOMMY HILFIGER
F-53
branded apparel, accessories and related products; and (iii) licensing and similar arrangements relating to the use by third
parties of the TOMMY HILFIGER brand names for a broad array of product categories outside of North America. This
segment also includes the Company’s proportionate share of the net income or loss of its investments in its unconsolidated
Tommy Hilfiger foreign affiliates in Brazil and India. This segment included the Company’s proportionate share of the net
income or loss of its investment in PVH Australia relating to its Tommy Hilfiger business until May 31, 2019, on which
date the Company completed the Australia acquisition and began to consolidate the operations of PVH Australia into its
financial statements. Please see Note 3, “Acquisitions,” for further discussion.
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 the United States and Canada, primarily to warehouse clubs, department and specialty stores, and off-price
and independent retailers, as well as digital commerce sites operated by department store customers and pure play digital
commerce retailers; (ii) operating retail stores, which are primarily located in premium outlet centers, and digital commerce
sites in the United States and Canada, 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 CALVIN KLEIN brand names for a broad
array of product categories in North America. This segment also includes the Company’s proportionate share of the net
income or loss of its investment in its unconsolidated foreign affiliate in Mexico relating to the affiliate’s Calvin Klein
business and, since December 2019, the Company’s proportionate share of the net income or loss of its investment in its
unconsolidated PVH Legwear affiliate relating to the affiliate’s Calvin Klein business.
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, Brazil and, since May 31, 2019, Australia, primarily to department and specialty
stores, and digital commerce sites operated by department store customers and pure play digital commerce retailers, as well
as through distributors and franchisees; (ii) operating retail stores, concession locations and digital commerce sites in
Europe, Asia, Brazil and since May 31, 2019, Australia, 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 CALVIN KLEIN
brand names for a broad array of product categories outside of North America. This segment also includes the Company’s
proportionate share of the net income or loss of its unconsolidated Calvin Klein foreign affiliate in India. This segment
included the Company’s proportionate share of the net income or loss of its investment in PVH Australia relating to its
Calvin Klein business until May 31, 2019, on which date the Company completed the Australia acquisition and began to
consolidate the operations of PVH Australia into its financial statements. Please see Note 3, “Acquisitions,” for 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, warehouse clubs, and
mass market, off-price and independent retailers (in stores and online), as well as pure play digital commerce retailers in
North America of (i) men’s 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)
women’s intimate apparel under the Warner’s, Olga and True&Co. brand; and (iv) men’s, women’s and children’s
swimwear, pool and deck footwear, and swim-related products and accessories under the Speedo trademark. On January 9,
2020, the Company entered into a definitive agreement to sell its Speedo North America business to Pentland. The Speedo
transaction is expected to close in the first quarter of 2020, subject to customary closing conditions. This segment also
derives revenue from Company operated digital commerce sites in the United States for Speedo, True&Co., Van Heusen,
and IZOD, as well as the Company’s styleBureau.com site. In addition, since May 31, 2019, this segment derives revenue
from the Heritage Brands business in Australia. As well, this segment includes the Company’s proportionate share of the
net income or loss of its investment in its unconsolidated foreign affiliate in Mexico relating to the affiliate’s Heritage
Brands business and, since December 2019, the Company’s proportionate share of the net income or loss of its investment
in its unconsolidated PVH Legwear affiliate relating to the affiliate’s Heritage Brands business. This segment included the
Company’s proportionate share of the net income or loss of its investment in PVH Australia relating to its Heritage Brands
business until May 31, 2019, on which date the Company completed the Australia acquisition and began to consolidate the
operations of PVH Australia into its financial statements. Please see Note 3, “Acquisitions,” for further discussion.
F-54
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. All of the Company’s Heritage Brands
stores offer a broad selection of Van Heusen men’s and women’s apparel, along with various of the Company’s dress shirt
and neckwear offerings, and IZOD and Warner’s products. The majority of these stores feature multiple brand names on the
store signage, with the remaining stores operating under the Van Heusen name.
F-55
The Company’s revenue by segment was as follows:
(In millions)
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 – 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 – 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)
2019
(1)
2018
(1)
2017
(1)
$ 1,540.2
84.1
23.6
1,647.9
$ 1,574.3
76.2
18.7
1,669.2
$ 1,482.2
68.9
16.7
1,567.8
2,994.2
49.8
19.8
3,063.8
1,467.0
148.9
53.8
1,669.7
1,896.7
74.1
27.3
1,998.1
1,248.5
19.2
4.2
1,271.9
253.4
3.8
0.4
257.6
2,599.7
52.7
22.9
2,675.3
1,599.9
143.6
49.8
1,793.3
1,827.9
78.9
31.1
1,937.9
1,293.2
20.5
3.7
1,317.4
259.2
4.0
0.5
263.7
2,268.0
47.8
9.6
2,325.4
1,511.3
146.4
50.1
1,707.8
1,645.0
80.0
28.8
1,753.8
1,274.4
19.5
3.5
1,297.4
258.5
3.7
0.4
262.6
9,400.0
379.9
129.1
$ 9,909.0
9,154.2
375.9
126.7
$ 9,656.8
8,439.4
366.3
109.1
$ 8,914.8
(1) Revenue was impacted by fluctuations of the United States dollar against foreign currencies in which the Company
transacts significant levels of business.
(2) No single customer accounted for more than 10% of the Company’s revenue in 2019, 2018 or 2017.
F-56
The Company’s revenue by distribution channel was as follows:
(In millions)
Wholesale net sales
Retail net sales
Net sales
Royalty revenue
Advertising and other revenue
2019
2018
2017
$ 5,066.9
$ 4,969.6
$ 4,504.3
4,333.1
9,400.0
379.9
129.1
4,184.6
9,154.2
375.9
126.7
3,935.1
8,439.4
366.3
109.1
Total
$ 9,909.0
$ 9,656.8
$ 8,914.8
The Company has not disclosed net sales by product category as it is impracticable to do so.
The Company’s income before interest and taxes by segment was as follows:
(In millions)
2019
(1)
2018
(1)
2017
(1)
Income before interest and taxes – Tommy Hilfiger North
America
$ 93.5
Income before interest and taxes – Tommy Hilfiger International
468.2
Income before interest and taxes – Calvin Klein North America
99.8
Income before interest and taxes – Calvin Klein International
153.3
(3)(4)
(5)
(3)(6)
(3)(5)(6)
(Loss) Income before interest and taxes – Heritage Brands
Wholesale
(84.9)
(5)(7)
Income before interest and taxes – Heritage Brands Retail
3.0
$ 233.8
$ 97.0
(10)
(11)
(11)
377.1
166.7
211.5
83.3
7.4
221.5
184.0
226.5
96.7
7.6
(12)(13)(14)
(10)(12)(13)
Loss before interest and taxes – Corporate(2)
(174.2)
(5)(8)(9)
(188.1)
(200.9)
(15)(16)
Income before interest and taxes
$ 558.7
$ 891.7
$ 632.4
(1)
(2)
(3)
(4)
Income (loss) before interest and taxes was impacted by fluctuations of the United States dollar against foreign
currencies in which the Company transacts significant levels of business.
Includes corporate expenses not allocated to any reportable segments, the Company’s proportionate share of the
net income or loss of its investments in Gazal (prior to the Australia acquisition closing) and Karl Lagerfeld, 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,
certain digital investments, certain corporate responsibility initiatives, actuarial gains and losses on the Company’s
Pension Plans, SERP Plans and Postretirement Plans, and gains and losses from changes in the fair value of
foreign currency option contracts. Actuarial losses on the Company’s Pension Plans, SERP Plans and
Postretirement Plans totaled $97.8 million, $15.0 million and $2.5 million in 2019, 2018 and 2017, respectively.
Income before interest and taxes for 2019 included costs of $59.8 million in connection with agreements the
Company entered into in 2019 to terminate early the licenses for the global Calvin Klein and Tommy Hilfiger
North America socks and hosiery businesses (the “Socks and Hosiery transaction”) in order to consolidate the
socks and hosiery businesses for all Company brands in North America in a newly formed joint venture, PVH
Legwear, which began operations in December 2019, and to bring in-house the international Calvin Klein socks
and hosiery wholesale businesses. Such costs were included in the Company’s segments as follows: $7.5 million
in Tommy Hilfiger North America, $25.5 million in Calvin Klein North America and $26.8 million in Calvin
Klein International.
Income before interest and taxes for 2019 included costs of $54.9 million incurred in connection with the TH U.S.
store closures, primarily consisting of noncash lease asset impairments. Please see Note 12, “Fair Value
Measurements,” for further discussion.
F-57
(5)
(6)
Income (loss) before interest and taxes for 2019 included costs of $19.3 million in connection with the Australia
and TH CSAP acquisitions, primarily consisting of noncash valuation adjustments, and one-time costs of $2.1
million recorded on the Company’s equity investments in Gazal and PVH Australia prior to the Australia
acquisition closing. Such costs were included in the Company’s segments as follows: $11.1 million in Tommy
Hilfiger International, $6.0 million in Calvin Klein International, $1.8 million in Heritage Brands Wholesale and
$2.5 million in corporate expenses not allocated to any reportable segments. Please see Note 3, “Acquisitions,” for
further discussion.
Income before interest and taxes for 2019 included costs of $102.9 million incurred in connection with the Calvin
Klein restructuring. Such costs were included in the Company’s segments as follows: $66.0 million in Calvin
Klein North America and $36.9 million in Calvin Klein International. Please see Note 18, “Exit Activity Costs,”
for further discussion.
(7) Loss before interest and taxes for 2019 included a noncash loss of $142.0 million in connection with the Speedo
transaction. Please see Note 4, “Assets Held For Sale,” for further discussion.
(8) Loss before interest and taxes for 2019 included a noncash gain of $113.1 million to write up the Company’s
equity investments in Gazal and PVH Australia to fair value in connection with the Australia acquisition. Please
see Note 3, “Acquisitions,” for further discussion.
(9) Loss before interest and taxes for 2019 included costs of $6.2 million related to the refinancing of the Company’s
senior credit facilities. Please see Note 9, “Debt,” for further discussion.
(10) Income before interest and taxes for 2018 and 2017 included costs of $23.6 million and $26.9 million,
respectively, associated with the TH China acquisition, primarily consisting of noncash amortization of short-lived
assets.
(11) Income before interest and taxes for 2018 included costs of $40.7 million incurred in connection with the Calvin
Klein restructuring. Such costs were included in the Company’s segments as follows: $18.9 million in Calvin
Klein North America and $21.8 million in Calvin Klein International. Please see Note 18, “Exit Activity Costs,”
for further discussion.
(12) Income before interest and taxes for 2017 included costs of $82.9 million incurred in connection with an
amendment to Mr. Tommy Hilfiger’s employment agreement pursuant to which the Company made a cash buyout
of a portion of the future payments to Mr. Hilfiger (the “Mr. Hilfiger amendment”). Such costs were included in
the Company’s segments as follows: $34.7 million in Tommy Hilfiger North America and $48.2 million in
Tommy Hilfiger International.
(13) Income before interest and taxes for 2017 included costs of $54.2 million associated with the agreements to
restructure the Company’s supply chain relationship with Li & Fung Trading Limited (“Li & Fung”), under which
the Company terminated its non-exclusive buying agency agreement with Li & Fung in 2017 (the “Li & Fung
termination”). Such costs were included in the Company’s segments as follows: $31.3 million in Tommy Hilfiger
North America and $22.9 million in Tommy Hilfiger International.
(14) Income before interest and taxes for 2017 included costs of $19.2 million associated with the relocation of the
Tommy Hilfiger office in New York, including noncash depreciation expense.
(15) Loss before interest and taxes for 2017 included costs of $23.9 million related to the early redemption of the
Company’s $700 million 4 1/2% senior notes due 2022. Please see Note 9, “Debt,” for further discussion.
(16) Loss before interest and taxes for 2017 included costs of $9.4 million related to the noncash settlement of certain
of the Company’s benefit obligations related to its Pension Plans as a result of an annuity purchased for certain
participants, under which such obligations were transferred to an insurer. Please see Note 13, “Retirement and
Benefit Plans,” for further discussion.
Intersegment transactions primarily consist of transfers of inventory principally from the Heritage Brands Wholesale
segment to the Heritage Brands Retail segment, the Tommy Hilfiger North America segment and the Calvin Klein 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 Tommy Hilfiger North America
segment and the Calvin Klein North America Segment.
F-58
The Company’s identifiable assets, depreciation and amortization, and identifiable capital expenditures by segment
were as follows:
(In millions)
Identifiable Assets(1)(2)(3)
Tommy Hilfiger North America
Tommy Hilfiger International
Calvin Klein North America
Calvin Klein International
Heritage Brands Wholesale
Heritage Brands Retail
Corporate
Total
Depreciation and Amortization
Tommy Hilfiger North America
Tommy Hilfiger International(4)
Calvin Klein North America
Calvin Klein International
Heritage Brands Wholesale
Heritage Brands Retail
Corporate
Total
Identifiable Capital Expenditures(5)
Tommy Hilfiger North America (6)
Tommy Hilfiger International
Calvin Klein North America
Calvin Klein International
Heritage Brands Wholesale
Heritage Brands Retail
Corporate
Total
2019
2018
2017
$ 1,599.0
4,888.6
1,932.3
3,428.9
1,075.3
128.4
578.5
$ 13,631.0
$ 1,330.5
3,949.3
1,817.9
3,114.9
1,178.1
86.6
386.4
$ 11,863.7
$ 1,276.5
4,047.3
1,836.9
3,138.0
1,123.5
81.6
381.9
$ 11,885.7
$
$
$
$
40.6
119.7
38.6
91.9
15.1
6.2
11.7
323.8
41.7
139.6
30.3
83.3
18.6
6.5
21.0
341.0
$
$
$
$
37.9
133.9
41.5
90.6
14.9
5.6
10.4
334.8
56.1
143.9
36.0
102.7
15.8
8.5
18.3
381.3
$
$
$
$
45.1
124.5
43.8
83.1
14.3
5.3
8.8
324.9
82.0
126.7
36.8
96.6
8.0
4.2
10.1
364.4
(1)
(2)
(3)
Identifiable assets included the impact of changes in foreign currency exchange rates.
Identifiable assets include the impact related to the adoption of accounting guidance for leases in 2019 using the
modified retrospective approach applied as of the period of adoption with a cumulative-effect adjustment to
opening retained earnings and as such, prior periods have not been restated. Upon adoption, the Company (i)
recognized operating lease right-of-use assets of $1.7 billion and lease liabilities of $1.9 billion, (ii) recorded a
cumulative-effect adjustment to retained earnings of $3.1 million and (iii) recorded other reclassification
adjustments within its Consolidated Balance Sheet related to, among other things, deferred rent. Please see Note
17, “Leases,” for further discussion.
Identifiable assets in 2019 included the impact of the Australia acquisition. Please see Note 3, “Acquisitions,” for
a further discussion.
(4) Depreciation and amortization in 2018 and 2017 included $24.6 million and $26.8 million, respectively, related to
the amortization of intangible assets recorded in connection with the TH China acquisition, which became fully
amortized in 2018.
(5) Capital expenditures in 2019 included $39.5 million of accruals that will not be paid until 2020. Capital
expenditures in 2018 included $43.7 million of accruals that were not paid until 2019. Capital expenditures in
2017 included $41.9 million of accruals that were not paid until 2018.
F-59
(6) Capital expenditures in 2017 included expenditures related to the relocation of the Company’s Tommy Hilfiger
office in New York, New York.
Property, plant and equipment, net based on the location where such assets are held, was as follows:
(In millions)
Domestic
Canada
Europe
Asia-Pacific(2)
Other foreign
Total
2019 (1)
2018 (1)
2017 (1)
$
$
525.8
25.3
375.6
87.6
12.5
1,026.8
$
$
500.5
28.8
362.7
73.4
19.1
984.5
$
$
449.2
30.0
325.5
73.8
21.3
899.8
(1) Property, plant and equipment, net included the impact of changes in foreign currency exchange rates.
(2) The Company completed the Australia acquisition in the second quarter of 2019. Please see Note 3,
“Acquisitions,” for further discussion.
Revenue, based on location of origin, was as follows:
(In millions)
Domestic
Canada
Europe
Asia-Pacific(2)
Other foreign
Total
2019 (1)
2018 (1)
2017 (1)
$
$
4,275.0
505.5
3,657.3
1,353.4
117.8
9,909.0
$
$
4,481.3
528.8
3,362.1
1,163.7
120.9
9,656.8
$
$
4,290.1
512.2
2,907.2
1,059.3
146.0
8,914.8
(1) Revenue was impacted by fluctuations of the United States dollar against foreign currencies in which the
Company transacts significant levels of business.
(2) The Company completed the Australia acquisition in the second quarter of 2019. Please see Note 3,
“Acquisitions,” for further discussion.
22. GUARANTEES
The Company is deemed to have guaranteed lease payments for substantially all G. H. Bass & Co. (“Bass”) retail stores
included in the 2013 sale of substantially all of the assets of the Company’s Bass business pursuant to the terms of
noncancelable leases expiring on various dates through 2022. The 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 maximum amount deemed to have
been guaranteed for all leases as of February 2, 2020 was $3.4 million and the Company has the right to seek recourse from the
buyer of the Bass assets for the full amount. The liability for the guaranteed lease payments was immaterial as of February 2,
2020 and February 3, 2019.
The Company has guaranteed a portion of the debt of one of its joint ventures in India. The maximum amount guaranteed
as of February 2, 2020 was approximately $11.2 million based on exchange rates in effect on that date. The guarantee is in
effect for the entire term of the debt. The liability for this guarantee obligation was immaterial as of February 2, 2020 and
February 3, 2019.
The Company has guaranteed to a financial institution the repayment of store security deposits in Japan paid to landlords
on behalf of the Company. The amount guaranteed as of February 2, 2020 was approximately $5.3 million based on exchange
rates in effect on that date. The Company has the right to seek recourse from the landlords for the full amount. The guarantees
F-60
expire between 2022 and 2025. The liability for these guarantee obligations was immaterial as of February 2, 2020 and
February 3, 2019.
The Company has guaranteed the payment of amounts on behalf of certain other parties, none of which are material
individually or in the aggregate.
23. OTHER COMMENTS
Included in accrued expenses in the Company’s Consolidated Balance Sheets were certain incentive compensation
accruals of $41.1 million and $99.4 million as of February 2, 2020 and February 3, 2019, respectively.
The Company’s asset retirement liabilities are included in accrued expenses and 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 SG&A 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 liabilities, included in accrued
expenses and other liabilities in the Company’s Consolidated Balance Sheets, 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
2019
2018
$
$
32.3
1.4
3.9
(2.2)
0.4
0.4
(0.5)
35.7
$
$
27.1
—
7.4
(1.7)
0.4
(0.1)
(0.8)
32.3
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 beginning March 31, 2018 through September 30, 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) LIBOR plus
4.00% thereafter. The Company received principal payments of $0.4 million and $0.2 million during 2019 and 2018,
respectively. The outstanding balance, including accrued interest, was $13.4 million and $13.8 million as of February 2, 2020
and February 3, 2019, respectively, and was included in other assets (current and non-current) in the Company’s Consolidated
Balance Sheets.
F-61
24. SUBSEQUENT EVENTS (UNAUDITED)
On March 11, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and recommended
containment and mitigation measures. COVID-19 continues to spread globally. Virus-related concerns, reduced travel,
temporary store closures and government-imposed restrictions have resulted in sharply reduced traffic and consumer spending
trends and sales stoppages in the Company’s retail stores in virtually all key markets during the first quarter of 2020. The
Company’s wholesale customers and licensees have been similarly impacted, which in turn negatively impacts the Company.
In addition, the Company’s supply chain and the supply chains of its licensees had been disrupted and may experience
future disruptions as a result of either closed factories or factories operating with reduced workforces.
The disruption is expected to be temporary but there is significant uncertainty about the duration and extent of the
impact of the COVID-19 outbreak. The related financial impact cannot be reasonably estimated at this time. However, the
Company expects a significant negative impact to its business, financial condition, cash flows and results of operations in 2020,
which may include non-cash asset impairments, excess inventory and difficulty collecting trade receivables, among other
things.
As a result, the Company has increased the aggregate borrowings outstanding under its senior unsecured revolving
credit facilities, other short-term revolving credit facilities and unsecured commercial paper note program to approximately
$930.0 million to increase its cash position and help preserve its financial flexibility.
F-62
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
2019
(1),(2),(3)
2018
(10)
2019
(1),(4),(5),(6)
2018
(10)
2019
(1),(4),(7)
2018
(10)
2019
2018
(4),(7),(8),(9)
(10),(11),(12),(13),
(14)
Total revenue
$
2,356.3
$
2,314.6
$
2,364.2 $
2,333.7 $
2,587.7 $
2,524.5 $
2,600.8
$
2,484.0
Gross profit
1,295.9
1,291.0
1,288.4
1,297.0
1,406.2
1,364.8
1,397.9
Net income (loss)
81.6
178.9
193.1
164.7
208.9
242.6
(68.5)
1,355.5
158.4
Net income (loss)
attributable to PVH
Corp.
Basic net income
(loss) per common
share attributable to
PVH Corp.
Diluted net income
(loss) per common
share attributable to
PVH Corp.
82.0
179.4
193.5
165.2
209.2
243.1
(67.4)
158.7
1.09
2.33
2.59
2.15
2.83
3.18
(0.93)
2.10
1.08
2.29
2.58
2.12
2.82
3.15
(0.93)
2.09
(15)
(1) The first, second and third quarters of 2019 included pre-tax costs of $70.3 million, $29.1 million and $3.5
million, respectively, associated with the Calvin Klein restructuring, of which $1.7 million and $11.2 million are
included in gross profit in the first and second quarters of 2019, respectively.
(2) The first quarter of 2019 included pre-tax costs of $54.9 million in connection with the TH U.S. store closures,
primarily consisting of noncash lease asset impairments.
(3) The first quarter of 2019 included pre-tax costs of $6.2 million related to the refinancing of the Company’s senior
credit facilities.
(4) The second, third and fourth quarters of 2019 included pre-tax costs of $4.8 million, $8.6 million and $5.9
million, respectively, associated with the Australia and TH CSAP acquisitions, of which $4.1 million, $6.5
million and $5.9 million, respectively, are included in gross profit.
(5) The second quarter of 2019 included a pre-tax noncash gain of $113.1 million to write up the Company’s equity
investments in Gazal and PVH Australia to fair value in connection with the Australia acquisition, as well as pre-
tax costs of $2.1 million on the Company’s equity investments in Gazal and PVH Australia prior to the Australia
acquisition closing.
(6) The second quarter of 2019 included pre-tax costs of $59.8 million associated with the Socks and Hosiery
transaction.
(7) The third and fourth quarters of 2019 included pre-tax interest expense of $2.6 million and $6.0 million,
respectively, resulting from the remeasurements of the mandatorily redeemable non-controlling interest that was
recognized in connection with the Australia acquisition.
(8) The fourth quarter of 2019 included a pre-tax actuarial loss of $97.8 million on the Company’s Pension Plans,
SERP Plans and Postretirement Plans.
(9) The fourth quarter of 2019 included a pre-tax noncash loss of $142.0 million, as well as a tax benefit of $27.8
million related to the write-off of deferred tax liabilities in connection with the Speedo transaction.
(10) The first, second, third and fourth quarters of 2018 included pre-tax costs of $6.9 million, $6.7 million, $6.3
million and $3.7 million, respectively, associated with the TH China acquisition.
F-63
(11) The fourth quarter of 2018 included pre-tax costs of $40.7 million associated with the Calvin Klein restructuring,
of which $2.2 million are included in gross profit.
(12) The fourth quarter of 2018 included a discrete tax benefit of $41.1 million related to the remeasurement of
certain net deferred tax liabilities in connection with the 2019 Dutch Tax Plan.
(13) The fourth quarter of 2018 included a discrete net tax benefit of $24.7 million related to the U.S. Tax Legislation.
(14) The fourth quarter of 2018 included a pre-tax actuarial loss of $15.0 million on the Company’s Pension Plans,
SERP Plans and Postretirement Plans.
(15) The diluted net loss per common share attributable to PVH Corp. in the fourth quarter of 2019 excluded
potentially dilutive securities because there was a net loss attributable to PVH Corp. in the fourth quarter and as
such, the inclusion of these securities would have been anti-dilutive.
F-64
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 February 2, 2020.
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 February 2, 2020.
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
April 1, 2020
Michael Shaffer
Executive Vice President and Chief
Operating & Financial Officer
April 1, 2020
F-65
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of PVH Corp.
Opinion on Internal Control Over Financial Reporting
We have audited PVH Corp.’s internal control over financial reporting as of February 2, 2020, 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). In our opinion, PVH Corp. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of February 2, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of February 2, 2020 and February 3, 2019, the related
consolidated income statements, statements of comprehensive income, 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 February 2,
2020, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated April 1,
2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’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 are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ Ernst & Young LLP
New York, New York
April 1, 2020
F-66
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of PVH Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of PVH Corp. (the Company) as of February 2, 2020 and
February 3, 2019, the related consolidated income statements, statements of comprehensive income, 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 February 2, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2)
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at February 2, 2020 and February 3, 2019, and the
results of its operations and its cash flows for each of the three years in the period ended February 2, 2020, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of February 2, 2020, 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 April 1, 2020 expressed an unqualified opinion thereon.
Adoption of ASU 2016-02
As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for
leases in the fiscal year ended February 2, 2020 due to the adoption of ASU 2016-02, Leases and associated amendments
(Topic 842), using the modified retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit and risk management committee of the
Company’s board of directors and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
F-67
Wholesale Sales Allowances
Description of the Matter
As discussed in Note 1 to the consolidated financial statements, the Company generates
revenue from the wholesale distribution of its products to traditional retailers (including for
sale through their digital commerce sites). The amount of revenue recognized is net of sales
allowances that the Company offers to its wholesale customers which are estimated based on
seasonal negotiations, historical experience and an evaluation of current market conditions.
Auditing management’s estimate of wholesale sales allowances was complex and
judgmental as it is sensitive to changes in future market or economic conditions and has a
direct, material impact on the amount of revenue recognized by the Company. There is also
significant estimation to establish sales allowances, based on the Company’s review of the
individual customer seasonal negotiations and the expected performance of the products in
the customers’ stores.
How we addressed the
matter in our audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
internal controls over the Company’s process to calculate the wholesale sales allowances,
including the consideration of historical experience and current as well as future market
conditions.
To test the estimate of wholesale sales allowances, we performed audit procedures that
included, among others, assessing methodologies and testing the significant assumptions
used by the Company to calculate the projected sales allowance dollars, including seasonal
customer negotiations and expected performance of the products. We compared the
significant assumptions used by management to current market and economic trends and
other relevant factors. We assessed the historical accuracy of management’s estimate and
performed sensitivity analyses of significant assumptions to evaluate the changes in the
estimate that would result from changes in the assumptions.
Valuation of Goodwill and Indefinite-Lived Intangibles
Description of the Matter
At February 2, 2020, the Company’s goodwill and indefinite-lived intangible assets totaled
$3.7 billion and $3.1 billion, respectively. As discussed in Note 1 of the consolidated
financial statements, goodwill and indefinite-lived intangible assets are qualitatively tested
and quantitatively tested, when necessary, for impairment at least annually.
Auditing management’s annual goodwill and indefinite-lived intangible assets impairment
test was complex and judgmental due to the significant estimation required to determine the
fair value of the reporting units and the fair value of the indefinite-lived intangible assets. In
particular, the fair value estimates were sensitive to significant assumptions such as the
weighted average cost of capital, revenue growth rate, forecast earnings before interest and
taxes and terminal growth rate, which are affected by expectations about future market or
economic conditions.
How we addressed the
matter in our audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s goodwill and indefinite-lived intangible assets impairment
review process, including controls over management’s review of the significant assumptions
described above.
To test the estimated fair value of the Company’s reporting units and indefinite-lived
intangible assets, we performed audit procedures that included, among others, assessing
methodologies and testing the significant assumptions discussed above and the underlying
data used by the Company in its analysis. We compared the significant assumptions used by
management to current industry and economic trends, changes to the Company’s business,
customer base or product mix and other relevant factors. We assessed the historical accuracy
of management’s estimates and performed sensitivity analyses of significant assumptions to
evaluate the changes in the fair value of the reporting units and indefinite-lived intangible
assets that would result from changes in the assumptions. In addition, we reviewed the
reconciliation of the fair value of the reporting units to the market capitalization of the
Company.
F-68
Accounting for Acquisition of Gazal
Description of the Matter
On May 31, 2019, the Company acquired for AUD180.5 million (approximately $124.7
million) the approximately 78% interest in Gazal Corporation Limited (Gazal) that it did not
already own. As discussed in Note 3 to the consolidated financial statements, PVH Australia
came under the Company’s full control as a result of the acquisition, and the transaction was
accounted for using the acquisition method of accounting for business combinations.
Auditing the Company’s accounting for its acquisition of Gazal was complex due to the
significant estimation uncertainty required by management to determine the fair value of the
Company’s previously held equity interests, the mandatorily redeemable non-controlling
interest and identified intangible assets, which consisted principally of reacquired license
rights of $204.9 million, which are indefinite lived, order backlog of $0.3 million and
customer relationships of $17.0 million. The significant estimation was primarily due to the
sensitivity of the respective fair values to underlying assumptions including the weighted
average cost of capital, revenue growth rate, revenue and operating expense volatility,
forecast earnings before interest and taxes and terminal growth rate. These assumptions
relate to the future performance of the acquired businesses, are forward-looking and could
be affected by future economic and market conditions.
How we addressed the
matter in our audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s process to determine the fair value of the previously held
equity interests, the mandatorily redeemable non-controlling interest and the identified
intangible assets. For example, we tested controls over management’s review of the
valuations, including the review of the valuation models and significant assumptions used in
the valuations.
To test the fair value of the previously held equity interests, the mandatorily redeemable
non-controlling interest and the identified intangible assets, our audit procedures included,
among others, evaluating the Company's use of valuation methodologies, evaluating the
prospective financial information and testing the completeness and accuracy of underlying
data. For example, we compared the significant assumptions to current industry, market and
economic trends, historical results of the acquired businesses and to other relevant factors.
We also performed sensitivity analyses of the significant assumptions to evaluate the change
in the fair values resulting from changes in the assumptions.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 1938.
New York, New York
April 1, 2020
F-69
PVH CORP.
FIVE YEAR FINANCIAL SUMMARY
(In millions, except per share data, percents and ratios)
Summary of Operations
Revenue
2019 (1)
2018 (2),(7)
2017 (3),(6),(7)
2016 (4),(6),(7)
2015 (5),(6),(7)
$
9,909.0
$
9,656.8
$
8,914.8
$
8,203.1
$
8,020.3
Cost of goods sold, expenses and other income items
9,350.3
8,765.1
8,282.4
7,413.9
7,259.8
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
Current liabilities (including short-term borrowings and
current portion of long-term debt)
Working capital
Total assets
Finance leases
Long-term debt
Stockholders’ equity
Other Statistics
Total debt to total capital (8)
Net debt to net capital (9)
Current ratio
558.7
114.7
28.9
(2.2)
417.3
5.63
5.60
0.15
80.39
$
$
891.7
116.1
31.0
(1.8)
746.4
9.75
9.65
0.15
77.29
$
$
632.4
122.2
(25.9)
(1.7)
537.8
6.93
6.84
0.15
71.73
$
$
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
$
3,394.2
$
3,238.6
$
3,030.8
$
2,879.6
$
2,804.5
2,361.1
1,033.1
1,893.9
1,344.7
1,871.6
1,159.2
1,564.8
1,314.8
1,527.2
1,277.3
13,631.0
11,863.7
11,885.7
11,067.9
10,673.8
14.5
2,693.9
5,811.5
16.5
2,819.4
5,827.8
16.0
3,061.3
5,536.4
16.4
3,197.3
4,804.5
14.6
3,031.7
4,552.3
32.3%
28.1%
1.4
32.8%
29.1%
1.7
35.9%
32.0%
1.6
40.2%
34.2%
1.8
41.3%
36.8%
1.8
(1)
(2)
(3)
2019 includes (a) pre-tax costs of $102.9 million associated with the Calvin Klein restructuring; (b) a pre-tax noncash loss of $142.0
million in connection with the Speedo transaction; (c) a pre-tax noncash gain of $113.1 million to write up the Company’s equity
investments in Gazal and PVH Australia to fair value in connection with the Australia acquisition, partially offset by pre-tax
acquisition related costs of $19.3 million associated with the Australia and TH CSAP acquisitions, consisting of noncash valuation
adjustments, and a one-time cost of $2.1 million recorded on the Company’s equity investments in Gazal and PVH Australia prior to
the Australia acquisition closing; (d) pre-tax costs of $59.8 million associated with the Socks and Hosiery transaction; (e) pre-tax
costs of $54.9 million associated with the TH U.S. store closures, primarily consisting of noncash lease asset impairments; (f) pre-
tax costs of $6.2 million associated with the refinancing of the Company’s senior credit facilities; (g) a pre-tax actuarial loss of
$97.8 million on the Company’s Pension Plans, SERP Plans and Postretirement Plans; (h) pre-tax interest expense of $8.6 million
resulting from the remeasurements of the mandatorily redeemable non-controlling interest that was recognized in connection with
the Australia acquisition; and (i) a discrete tax benefit of $27.8 million related to the write-off of deferred tax liabilities in
connection with the Speedo transaction.
2018 includes (a) pre-tax costs of $40.7 million associated with the Calvin Klein restructuring; (b) pre-tax costs of $23.6 million
associated with the TH China acquisition, consisting of noncash amortization of short-lived assets; (c) a pre-tax actuarial loss of
$15.0 million on the Company’s Pension Plans, SERP Plans and Postretirement Plans; (d) a discrete net tax benefit of $24.7 million
related to the U.S. Tax Legislation; and (e) a discrete tax benefit of $41.1 million related to the remeasurement of certain net
deferred tax liabilities in connection with the 2019 Dutch Tax Plan.
2017 includes (a) pre-tax costs of $82.9 million associated with the Mr. Hilfiger amendment; (b) pre-tax costs of $54.2 million
associated with the Li & Fung termination; (c) pre-tax costs of $23.9 million associated with the early redemption of the Company’s
$700 million 4 1/2% senior notes due 2022; (d) pre-tax costs of $26.9 million associated with the TH China acquisition, primarily
consisting of noncash amortization of short-lived assets; (e) pre-tax costs of $19.2 million associated with relocation of the Tommy
Hilfiger office in New York, including noncash depreciation expense; (f) pre-tax costs of $9.4 million associated with the noncash
F-70
(4)
settlement of certain of the Company’s benefit obligations related to its Pension Plans as a result of an annuity purchased for certain
participants, under which such obligations were transferred to an insurer; (g) a pre-tax actuarial loss of $2.5 million on the
Company’s Pension Plans, SERP Plans and Postretirement Plans; (h) a discrete net tax benefit of $52.8 million related to the U.S.
Tax Legislation; and (i) a discrete tax benefit of $15.2 million related to an excess tax benefit from the exercise of stock options by
the Company’s Chairman and Chief Executive Officer.
2016 includes (a) 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 related costs of $76.9 million, primarily
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; (b) pre-tax costs of $15.8 million associated with the Company’s amendment of its prior
2014 senior secured credit facilities; (c) a pre-tax noncash loss of $81.8 million recorded in connection with the deconsolidation of
the Mexico business; (d) 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; (e) pre-tax costs of $11.0 million associated with the TH men’s tailored license termination;
and (f) a pre-tax actuarial gain of $39.1 million on the Company’s Pension Plans, SERP Plans and Postretirement Plans.
(5) 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; and (d) a pre-tax
actuarial gain of $20.2 million on the Company’s Pension Plans, SERP Plans and Postretirement Plans.
(6) The Company adopted the update to accounting guidance related to revenue recognition in 2018 using a modified retrospective
approach to all contracts applied as of the period of adoption with a cumulative-effect adjustment to opening retained earnings and
as such, prior periods have not been restated. The adoption of the guidance did not have a material impact on the Company’s
consolidated financial statements as of and for the fiscal year ended February 3, 2019, including the Company’s Consolidated
Income Statement and Consolidated Balance Sheet, or on any individual caption therein.
(7) The Company adopted the update to accounting guidance related to leases in 2019 using the modified retrospective approach
applied as of the period of adoption with a cumulative-effect adjustment to opening retained earnings and as such, prior periods
have not been restated. Upon adoption, the Company (i) recognized operating lease right-of-use assets of $1.7 billion and lease
liabilities of $1.9 billion, (ii) recorded a cumulative-effect adjustment to retained earnings of $3.1 million and (iii) recorded other
reclassification adjustments within its Consolidated Balance Sheet related to, among other things, deferred rent. Please see Note 1,
“Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of this report
for further discussion.
(8) Total capital equals total debt (including finance leases) plus stockholders’ equity.
(9) Net debt equals total debt (including finance leases) reduced by cash. Net capital equals total capital reduced by cash.
F-71
PVH CORP.
VALUATION AND QUALIFYING ACCOUNTS
(In millions)
SCHEDULE II
Column A
Column B
Column C
Column D
Column E
Description
Year Ended February 2, 2020
Balance at
Beginning
of Period
Additions
Charged to
Costs and
Expenses
Additions
Charged to
Other
Accounts
Deductions (1)
Balance
at End
of Period
Allowance for doubtful accounts
$
21.6
$
5.7
$
— $
6.2 (2)
$
21.1
Allowance/accrual for operational
chargebacks and customer markdowns
Valuation allowance for deferred income
tax assets
Year Ended February 3, 2019
Allowance for doubtful accounts
Allowance/accrual for operational
chargebacks and customer markdowns
Valuation allowance for deferred income
tax assets
Year Ended February 4, 2018
226.8
529.3
62.6
17.1
—
—
535.9
9.9
220.2
69.8
$
21.1
$
14.2
$
— $
13.7 (2)
$
21.6
271.0
106.3
403.8
12.9
—
—
448.0
56.6
(3)
226.8
62.6
Allowance for doubtful accounts
$
15.0
$
7.5
$
— $
1.4 (2)
$
21.1
Allowance/accrual for operational
chargebacks and customer markdowns
Valuation allowance for deferred income
tax assets
289.5
498.2
(4)
43.9
64.3
—
1.9
516.7
3.8
271.0
106.3
(1)
Includes changes due to foreign currency translation.
(2) Principally accounts written off as uncollectible, net of recoveries.
(3)
Includes the release of a $26.3 million valuation allowance on the Company’s foreign tax credits to adjust the
provisional amount recorded in 2017 as a result of the U.S. Tax Legislation.
(4)
Includes the recognition of a $38.5 million provisional valuation allowance on the Company’s foreign tax credits as a
result of the U.S. Tax Legislation.
F-72
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).
PVH Corp.
200 Madison Avenue
New York, NY 10016
PVH.com