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Excrept from filing document 2026-09-30

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
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Forward looking statements in this Quarterly Report on Form 10 Q 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
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 increased tariffs the increased tariffs scheduled to come into effect in December 2019 and the potential for additional increases in 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 that we absorb costs or try to pass costs onto consumers which could materially impact our 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 which could result in closed factories reduced workforces scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas as well as reduced consumer traffic and purchasing as consumers become ill or limit or cease shopping in order to avoid exposure 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
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
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 and its consolidated subsidiaries collectively the Company constitute a global apparel company with a brand portfolio consisting of nationally and internationally recognized trademarks including
The Company designs and markets branded dress shirts neckwear sportswear 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 References to the aforementioned and other brand names are to registered and common law trademarks owned by the Company or licensed to the Company by third parties and are identified by italicizing the brand name
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
week periods 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 the Company s fiscal year unless the context requires otherwise
The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States for interim financial information Accordingly they do not contain all disclosures required by accounting principles generally accepted in the United States for complete financial statements Reference is made to the Company s audited consolidated financial statements including the notes thereto included in the Company s Annual Report on Form 10 K for the year ended
The preparation of the interim 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 these estimates
are not necessarily indicative of those for a full fiscal year due in part to seasonal factors The data contained in these consolidated financial statements are unaudited and are subject to year end adjustments However in the opinion of management all known adjustments which were normal and recurring in nature have been made to present fairly the consolidated operating results for the unaudited periods
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
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
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
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
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
The Company sells gift cards to customers in its retail stores 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
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
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 These amounts include
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
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
The Company acquired on July 1 2019 the Tommy Hilfiger retail business in Central and Southeast Asia from the Company s previous licensee in these markets the TH CSAP acquisition As a result of the TH CSAP acquisition the Company now operates directly the Tommy Hilfiger retail business in these markets
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
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
brands along with other licensed and owned brands PVH Australia came under the Company s full control as a result of the acquisition The Company now operates directly the Tommy Hilfiger Calvin Klein and Van Heusen businesses in this region
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
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
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
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
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 liability for the mandatorily redeemable non controlling interest was
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
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
million which are subject to amortization on a straight line basis over 0 5 years and 10 0 years respectively The Company 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
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 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
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
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 into its financial statements Please see Note 4 Acquisitions for further discussion
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
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
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
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 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
The service cost component of net benefit cost is recorded in selling general and administrative SG A expenses and the other components of net benefit cost are recorded in non service related pension and postretirement income in the Company s Consolidated Income Statements
Currently the Company does not expect to make material contributions to the Pension Plans in 2019 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
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
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
Total debt repayments for the remainder of 2019 through 2024 exceed the total carrying amount of the Company s Term Loan A facilities 7 3 4 debentures due 2023 and 3 5 8 euro senior notes due 2024 as of
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
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
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
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
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
The terms of the TLA facilities require the Company to make quarterly repayments of amounts outstanding under the 2019 facilities commencing with the calendar quarter ending September 30 2019 Such required repayment amounts equal
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 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
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 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
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 the
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
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
senior notes due December 15 2027 Interest on the notes is payable in euros 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
were lower than the United States statutory income tax rate primarily due to i the favorable impact of a tax exemption on the noncash gain recorded to write up the Company s equity investments in Gazal and PVH Australia to fair value in connection with the Australia acquisition which resulted in a benefit to the Company s effective income tax rates for the thirteen and twenty six weeks ended August 4 2019 of
respectively partially offset by ii the tax on foreign earnings in excess of a deemed return on tangible assets of foreign corporations known as GILTI imposed by the United States Tax Cuts and Jobs Act of 2017 which more than offset the benefit of overall lower tax rates in certain international jurisdictions where the Company files tax returns
international jurisdictions each year A substantial amount of the Company s earnings comes from international operations particularly in the Netherlands and Hong Kong where income tax rates coupled with special rates levied on income from certain of the Company s jurisdictional activities are lower than the United States statutory income tax rate
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
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
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
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 foreign subsidiaries that use the euro as their functional currency Please see
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
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
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
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
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
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 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
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
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
The following table shows the fair value of the Company s non financial assets and liabilities that were required to be remeasured at fair value on a non recurring basis consisting of operating lease right of use assets and property plant and equipment during the
for further discussion of the Calvin Klein restructuring costs Fair value of the operating lease right of use assets was determined based on the discounted cash flows of estimated sublease income using market participant assumptions
Exit Activity Costs for further discussion of the Calvin Klein restructuring costs 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 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 quarter 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
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
the Company has granted under the 2006 Plan i service based stock options RSUs and restricted stock and ii contingently issuable PSUs and RSUs All restricted stock granted by the Company was fully vested at the end of 2015
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
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
year after the date of grant The underlying RSU award agreements excluding agreements for non employee director awards generally provide for accelerated vesting upon the award recipient s retirement as defined in the 2006 Plan The fair value of RSUs is equal to the closing price of the Company s common stock on the date of grant and is expensed over the RSUs vesting periods
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 the first quarter of 2019 and holders of the awards earned an aggregate of
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
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
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 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
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
In conjunction with the Australia acquisition 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
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 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 as of
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 2018 and the
Shares underlying contingently issuable awards that have not met the necessary conditions as of the end of a reporting period are not included in the calculation of diluted net income per common share for that period The Company had contingently issuable awards outstanding that did not meet the performance conditions as of
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
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
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 the 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
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
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 and concession locations in Europe Asia including the TH CSAP acquisition and since May 31 2019 Australia and international digital commerce sites which sell
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
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
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
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
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
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 as well as digital commerce sites operated by select wholesale partners and 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
com In addition since May 31 2019 this segment also 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 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
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
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 Holding B V and the results of PVH Ethiopia Please see
for further discussion Corporate expenses represent overhead operating expenses and include expenses for senior corporate management corporate finance information technology related to corporate infrastructure certain digital investments actuarial gains and losses on the Company s Pension Plans SERP Plans and Postretirement Plans which are generally recorded in the fourth quarter and gains and losses from changes in the fair value of foreign currency option contracts
million in connection with agreements the Company entered into in the second quarter of 2019 to terminate early the licenses for the global Calvin Klein and Tommy Hilfiger North America socks and hosiery businesses in conjunction with the Company s plan to consolidate the socks and hosiery business for all Company brands in North America in a newly formed joint venture which is expected to begin operations in December 2019 and to bring in house the international Calvin Klein socks and hosiery business Such costs were included in the Company s segments as follows
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
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
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
million which is subject to exchange rate fluctuation The Company has the right to seek recourse from the landlord for the full amount The guarantee expires on March 28 2022 The liability for this guarantee obligation was immaterial as of
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
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
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
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 As a result of the adoption the Company capitalized
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 The Company expects to incur additional costs to implement cloud computing arrangements during the remainder of 2019 and expects the implementation costs capitalized in its Consolidated Balance Sheet will increase accordingly
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
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
The Company records warehousing and distribution expenses which are subject to exchange rate fluctuations as a component of SG A expenses in its Consolidated Income Statements Warehousing and distribution expenses incurred in the
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 in the immediately preceding item of this report
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
We generate net sales from i the wholesale distribution to retailers franchisees licensees and distributors of dress shirts neckwear sportswear jeanswear performance apparel intimate apparel underwear swim products handbags accessories footwear and other related products under owned and licensed trademarks including through digital commerce sites operated by our wholesale partners and pure play digital commerce retailers and ii the sale of certain of these products through a approximately 1 825 Company operated freestanding retail store locations worldwide under our
com digital commerce sites 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 which impact our results of operations and comparability among the periods including our full year 2019 expectations as compared to full year 2018 as discussed in the section entitled Results of Operations below
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 conjunction with our plan to consolidate the socks and hosiery business for all of our brands in North America in a newly formed joint venture which is expected to begin operations in December 2019 and to bring in house the international Calvin Klein socks and hosiery business We recorded a pre tax charge of 60 million in the
women s jeanswear collections in the United States and Canada the G III license which will result in the discontinuation of our directly operated Calvin Klein North America women s jeanswear wholesale business in 2019
We completed two acquisitions in the second quarter of 2019 The first acquisition which closed on May 31 2019 was to acquire the approximately 78 interest in Gazal Corporation Limited Gazal that we did not already own the Australia acquisition 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 under the
brands along with other licensed and owned brands PVH Australia came under our full control as a result of the acquisition 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 The second was our acquisition on July 1 2019 of the Tommy Hilfiger retail business in Central and Southeast Asia from our previous licensee in that market the TH CSAP acquisition for 74 million Please see Note 4 Acquisitions in the Notes to Consolidated Financial Statements included in Part I Item 1 of this report for further discussion
including a noncash gain of 113 million to write up our existing equity investments in Gazal and PVH Australia to fair value partially offset by pre tax costs of 7 million 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 We expect to incur additional pre tax costs of approximately 18 million during the remainder of 2019 primarily consisting of noncash valuation adjustments
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
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
ii the closure of the flagship store on Madison Avenue in New York New 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 We recorded pre tax costs of 99 million in the
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 24 million of contract termination and other costs 24 million of severance 9 million of other noncash asset impairments and 13 million of inventory markdowns We expect to incur additional pre tax costs of approximately 6 million during the remainder of 2019 in connection with the Calvin Klein restructuring Please see
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 9 657 billion of revenue in 2018 was subject to foreign currency translation Based on current foreign currency exchange rates we expect a decrease in revenue of approximately 215 million or 2 and a decrease in net income of approximately 25 million in 2019 as compared to 2018 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 Additionally there is a transactional impact related to changes in selling general and administrative SG A expenses as a result of fluctuations in foreign currency exchange rates Based on current foreign currency exchange rates we expect a slight benefit to our net income in 2019 as compared to 2018 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 as 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 retail stores that have been open 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 certain number of consecutive days 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
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
The net addition of an aggregate 82 million of revenue or an 8 increase over the prior year period attributable to our Tommy Hilfiger International and Tommy Hilfiger North America segments which included a negative impact of 26 million
or 2 related to foreign currency translation Tommy Hilfiger International segment revenue increased 18 including a 4 negative foreign currency impact primarily driven by outperformance experienced in Europe and the addition of revenue resulting from the Australia acquisition Tommy Hilfiger International comparable store sales increased 9 Revenue in our Tommy Hilfiger North America segment decreased 5 driven by an 8 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 52 million of revenue or a 6 decrease over the prior year period attributable to our Calvin Klein International and Calvin Klein North America segments which included a negative impact of 18 million or 2 related to foreign currency translation and an aggregate net reduction of approximately 2 resulting from i the winding down of our directly operated women s jeanswear wholesale business in the United States and Canada in connection with the G III license ii the CK Collection closure and iii the addition of revenue resulting from the Australia acquisition Calvin Klein International segment revenue increased 1 including a 4 negative foreign currency impact driven by continued solid growth in Europe and revenue from the Australia acquisition partially offset by a reduction of revenue as a result of the CK Collection closure and softness experienced across China Calvin Klein International comparable store sales were flat Revenue in our Calvin Klein North America segment decreased 13 including a 1 negative foreign currency impact principally due to the effect of the G III license and a 3 decline 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
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
was 1 288 billion or 54 5 of total revenue as compared to 1 297 billion or 55 6 of total revenue in the second quarter of the prior year The 110 basis point decrease in gross margin was primarily driven by a gross margin decline in our North America businesses principally due to more promotional selling in our Tommy Hilfiger and Heritage Brands businesses as compared to the second quarter of the prior year and inventory markdowns recorded in connection with the Calvin Klein restructuring
were 1 155 billion or 48 8 of total revenue as compared to 1 071 billion or 45 9 of total revenue in the second quarter of the prior year The 290 basis point increase in SG A expenses as a percentage of total revenue was principally attributable to costs incurred in connection with the Calvin Klein restructuring and the Socks and hosiery transaction
The equity in net income of unconsolidated affiliates was 1 million in the second quarter of 2019 as compared to 3 million in the second quarter of the prior year These amounts relate to our share of income loss from our PVH Australia joint venture prior to the Australia acquisition on May 31 2019 our joint venture for the
brand in India Also included is our share of loss income from our investments in Karl Lagerfeld Holding B V Karl Lagerfeld and in Gazal prior to the Australia acquisition on May 31 2019 The decrease in equity in net income of unconsolidated affiliates as compared to the prior year is primarily related to 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 results 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
Our effective income tax rate for the second quarter of 2019 was lower than the United States statutory income tax rate primarily due to i 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 benefit to our effective tax rate of 13 7 partially offset by ii the tax on foreign earnings in excess of a deemed return on tangible assets of foreign corporations known as GILTI imposed by the United States Tax Cuts and Jobs Act of 2017 the U S Tax Legislation which more than offset the benefit of overall lower tax rates in certain international jurisdictions where we file tax returns
Our effective income tax rate for the second quarter of 2018 was lower than the United States statutory income tax rate primarily due to the benefit of overall lower tax rates in certain international jurisdictions where we file tax returns
We file income tax returns in more than 40 international jurisdictions each year A substantial amount of our earnings comes from our international operations particularly in the Netherlands and Hong Kong 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
We have a joint venture in Ethiopia with Arvind Limited named PVH Manufacturing Private Limited Company PVH Ethiopia 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 net addition of an aggregate 118 million of revenue or a 6 increase over the prior year period attributable to our Tommy Hilfiger International and Tommy Hilfiger North America segments which included a negative impact of 83 million or 4 related to foreign currency translation Tommy Hilfiger International segment revenue increased 11 including a 6 negative foreign currency impact driven principally by outperformance in Europe and the addition of revenue resulting from the Australia acquisition Tommy Hilfiger International comparable store sales increased 9 Revenue in the Tommy Hilfiger North America segment decreased 2 driven 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 partially offset by growth in the North America wholesale business in the first quarter of 2019
The reduction of an aggregate 52 million of revenue or a 3 decrease over the prior year period attributable to our Calvin Klein International and Calvin Klein North America segments which included a negative impact of 54 million or 3 related to foreign currency translation Calvin Klein International segment revenue was flat including a 5 negative foreign currency impact as solid growth in Europe and the addition of revenue resulting from the Australia acquisition were more than offset by the negative impacts of foreign currency translation softness experienced across China and the reduction of revenue resulting from the CK Collection closure Calvin Klein International comparable store sales decreased 2 Revenue in the Calvin Klein North America segment decreased 6 driven by a 4 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 and the effect of the G III license
The net addition of an aggregate 7 million of revenue or a 1 increase over the prior year period attributable to our Heritage Brands Retail and Heritage Brands Wholesale segments Comparable store sales decreased 4
We currently expect that revenue will increase approximately 1 in 2019 compared to 2018 inclusive of a negative impact of approximately 2 related to foreign currency translation Revenue for the Tommy Hilfiger business is expected to increase approximately 5 compared to 2018 inclusive of a negative impact of approximately 3 related to foreign currency translation Revenue for the Calvin Klein business is expected to decrease approximately 2 compared to 2018 inclusive of a negative impact of approximately 2 related to foreign currency translation Revenue for the Heritage Brands business is expected to decrease approximately 1 compared to 2018 Our 2019 guidance reflects the addition of revenue resulting from the Australia and TH CSAP acquisitions that closed in the second quarter of 2019 and the impact of the CK Collection closure and the G III license These transactions are expected to result in a net addition to revenue of approximately 75 million in 2019
was 2 584 billion or 54 7 of total revenue as compared to 2 588 billion or 55 7 of total revenue in the twenty six week period of the prior year The 100 basis point decrease in gross margin was principally driven by a gross margin decline in our North America businesses principally due to more promotional selling as compared to the prior year period and inventory markdowns recorded in connection with the Calvin Klein restructuring
We currently expect that gross margin for the full year 2019 will increase slightly as compared to 2018 primarily due to the impact of expected 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 largely offset by an expected gross margin decline in our Tommy Hilfiger North America business due to more promotional selling and an expected negative impact of tariffs imposed and expected to be imposed on goods imported from China into the United States
were 2 316 billion or 49 1 of total revenue as compared to 2 124 billion or 45 7 of total revenue in the twenty six week period of the prior year The 340 basis point increase in SG A expenses as a percentage of total revenue was attributable principally to costs incurred in connection with i the Calvin Klein restructuring ii the Socks and hosiery transaction and iii the TH U S store closures These increases were partially offset by overall lower operating expenses in our Calvin Klein business and the absence in 2019 of costs that were recorded in the twenty six weeks ended August 5 2019 in connection with the TH China acquisition consisting of noncash amortization of short lived assets
We currently expect that SG A expenses as a percentage of total revenue for the full year 2019 will increase as compared to 2018 due to i an increase in costs incurred and expected to be incurred in connection with the Calvin Klein restructuring ii costs incurred in connection with the TH U S store closures iii costs incurred in connection with the Socks and hosiery transaction and iv 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 These increases will be partially offset by the absence in 2019 of costs that were recorded in 2018 in connection with the TH China acquisition consisting of noncash amortization of short lived assets
We currently expect that non service related pension and postretirement income for the full year 2019 will be approximately 8 million compared to non service related pension and postretirement cost of 5 million in 2018 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 2018 non service related pension and postretirement cost included a 15 million actuarial loss on our retirement plans recorded in the fourth quarter Our expectation of 2019 non service related pension and post retirement income does not include the impact of an actuarial gain or loss However based on current market economic and demographic conditions we may incur a significant actuarial loss in the fourth quarter of 2019 if such conditions continue Our actual 2019 non service related pension and postretirement income cost may be significantly different than our projections
The equity in net income of unconsolidated affiliates was 5 million in the twenty six weeks ended August 4 2019 as compared to 7 million in the twenty six week period of the prior year These amounts relate to our share of income loss from our PVH Australia joint venture prior to the Australia acquisition on May 31 2019 our PVH Mexico joint venture and our joint ventures for the
brand in India Also included is our share of loss income from our investments in Karl Lagerfeld and in Gazal prior to the Australia acquisition on May 31 2019 The decrease in equity in net income of unconsolidated affiliates as compared to the prior year period is primarily related to 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 results 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 the full year 2019 will decrease as compared to 2018 as the income we recognized on our investments in Gazal and PVH Australia in 2019 was only for the portion of the year prior to the acquisition closing
Net interest expense for the full year 2019 is currently expected to be approximately 110 million compared to 116 million in 2018 Our expectation of 2019 net interest expense does not include the impact of any adjustments that may be recorded in the third and fourth quarters of 2019 to the redemption value of our liability for the mandatorily redeemable non controlling interest recognized in connection with the Australia acquisition Please see
Our effective income tax rate for the twenty six weeks ended August 4 2019 was lower than the United States statutory income tax rate primarily due to i 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 benefit to our effective tax rate of 8 5 partially offset by ii the GILTI tax imposed by the U S Tax Legislation which more than offset the benefit of overall lower tax rates in certain international jurisdictions where we file tax returns
Our effective income tax rate for the twenty six weeks ended August 5 2018 was lower than the United States statutory income tax rate primarily due to the benefit of overall lower tax rates in certain international jurisdictions where we file tax returns
We file income tax returns in more than 40 international jurisdictions each year A substantial amount of our earnings comes from our international operations particularly in the Netherlands and Hong Kong 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
We currently expect that our effective income tax rate for the full year 2019 will be in a range of 11 5 to 12 5 Our expectation that our effective income tax rate for the full year 2019 will be lower than the United States statutory income tax rate is principally due to the overall benefit of certain discrete items including the favorable impact on certain liabilities for uncertain tax positions and the 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 Our expectation that the effective income tax rate for the full year 2019 will increase compared to 4 0 for the full year 2018 is 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 enactment of legislation 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 the favorable impact of a tax exemption on the noncash gain recorded in 2019 to write up our existing equity investments in Gazal and PVH Australia to fair value
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 evaluation of new facts and information any of which can cause us to change our estimate for uncertain tax positions
of 452 million The change in cash and cash equivalents included the impact of i a 59 million net payment made in connection with the Australia acquisition ii a 74 million payment made in connection with the TH CSAP acquisition iii 115 million of borrowings outstanding under our senior unsecured revolving credit facilities and iv 125 million of common stock repurchases under the stock repurchase program The seasonality of our business results in significant fluctuations in our cash balance between fiscal year end and subsequent interim periods due to the timing of inventory purchases and peak sales periods Cash flow for the full year 2019 will be impacted by various factors in addition to those noted below in this Liquidity and Capital Resources section including i expected long term debt repayments of approximately 50 million and ii expected common stock repurchases under the stock repurchase program of approximately 300 million
approximately 396 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
The increase in cash provided by operating activities as compared to the prior year period was primarily driven by changes in working capital including a favorable change in trade receivables and inventories mostly 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
brands 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 us and our licensees and other partners to retailers Contingent purchase price payments totaled 16 million
We currently expect that capital expenditures for the full year 2019 will be approximately 400 million and will include expenditures primarily related to i investments in new stores and store expansions ii continued 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 to make payments of approximately 30 million in 2019 to contribute our 49 share of the funding to the new joint venture we formed in conjunction with the Socks and hosiery transaction which is expected to begin operations in December 2019
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
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
We completed the Australia acquisition on May 31 2019 Prior to this acquisition we had an approximately 22 interest in Gazal and a 50 interest in PVH Australia both of which were accounted for under the equity method of accounting This transaction 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
We currently project that cash dividends on our common stock for the full year 2019 will be approximately 11 million based on our current dividend rate the number of shares of our common stock outstanding as of
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
we purchased approximately 1 2 million shares and 900 000 shares respectively of our common stock under the program in open market transactions for 127 million and 137 million respectively Purchases of 2 million were accrued for in the Consolidated Balance Sheet as of
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
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 115 million outstanding under these facilities as of
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 134 million based on exchange rates in effect on
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
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 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
The terms of the TLA facilities require us to make quarterly repayments of amounts outstanding under the 2019 facilities commencing with the calendar quarter ending 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
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
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
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
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
senior notes due December 15 2027 Interest on the notes is payable in euros 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 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 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
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 our Annual Report on Form 10 K for the year ended
We adopted effective the first quarter of 2019 accounting guidance related to leases The guidance requires that we 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 current guidance Please see
in the Notes to Consolidated Financial Statements included in Part I Item 1 of this report for further discussion We also adopted effective the first quarter of 2019 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 we generally expensed the implementation costs incurred in connection with a cloud computing arrangement that is a service contract Please see
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
the effect of a 10 basis point change in short term interest rates on our interest income would be approximately 400 000 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
after taking into account the effect of our interest rate swap agreements that were in effect as of such date approximately 60 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
the effect of a 10 basis point change in interest rates on our variable interest expense would be approximately 1 million annually Please refer to Liquidity and Capital Resources in the Management s Discussion and Analysis section included in Part I Item 2 of this report 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 9 657 billion of revenue in 2018 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 Canadian dollar and the Chinese yuan renminbi and favorably impacted during times of a weakening United States dollar against those currencies
we recognized unfavorable foreign currency translation adjustments of 142 million within other comprehensive loss income principally driven by a strengthening of the United States dollar against the euro of 3 since
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 32 of our 7 5 billion total goodwill and other intangible assets as of
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 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
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 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 our euro denominated senior 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 2019 net benefit cost related to the pension plans of approximately 6 million Likewise a 0 25 change in the assumed discount rate would result in a change to 2019 net benefit cost of approximately 30 million
As of the end of the period covered by this report we carried out an evaluation under the supervision and with the participation of our management including our Chief Executive Officer and Chief Operating Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures Based upon that evaluation our Chief Executive Officer and Chief Operating Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 as amended is recorded processed summarized and reported within the time periods specified in the Securities and Exchange Commission s rules and forms and that such information is accumulated and communicated to our management including our Chief Executive Officer and Chief Operating Financial Officer as appropriate to allow timely decisions regarding required disclosure
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
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
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
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
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
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
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
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
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

Company Name	PVH CORP. /DE/ Vist SEC web-site
Category	MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS
Trading Symbol	PVH