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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2002

Commission File Number 1-11226

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Ordinary Shares, $0.01 par value per share, outstanding as of November 1, 2002:  90,578,712

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TOMMY HILFIGER CORPORATION
INDEX TO FORM 10-Q
September 30, 2002

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ITEM 1 - FINANCIAL STATEMENTS

TOMMY HILFIGER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

See Accompanying Notes to Condensed Consolidated Financial Statements

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See Accompanying Notes to Condensed Consolidated Financial Statements

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See Accompanying Notes to Condensed Consolidated Financial Statements

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TOMMY HILFIGER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(dollar amounts in thousands)

          Comprehensive income (loss) consists of net income (loss), foreign currency translation and unrealized gains and losses on hedging instruments and totaled $(354,385) for the six months ended September 30, 2002 and $139,518 for the fiscal year ended March 31, 2002.

See Accompanying Notes to Condensed Consolidated Financial Statements

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TOMMY HILFIGER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands, except per share amounts)
(Unaudited)

Note 1 - Basis of Presentation

          The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared by Tommy Hilfiger Corporation (“THC” or the “Company”; unless the context indicates otherwise, all references to the “Company” include THC and its subsidiaries) in a manner consistent with that used in the preparation of the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2002, as filed with the Securities and Exchange Commission (the “Form 10-K”).  Certain items contained in these statements are based on estimates.  In the opinion of management, the accompanying financial statements reflect all adjustments, which consist of only normal and recurring adjustments (except for the cumulative effect of the change in accounting principle and the deferred tax charge described in Note 3), necessary for a fair presentation of the financial position and results of operations and cash flows for the periods presented.  All significant intercompany accounts and transactions have been eliminated in consolidation.

          Operating results for the six-month period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2003, as the Company’s business is impacted by the general seasonal trends characteristic of the apparel and retail industries as well as other factors.  These unaudited financial statements should be read in conjunction with the financial statements included in the Form 10-K.

          The financial statements as of and for the six-month and three-month periods ended September 30, 2002 are unaudited.  The Condensed Consolidated Balance Sheet as of March 31, 2002, as presented, has been derived from the Consolidated Balance Sheet as of March 31, 2002 included in the Form 10-K.

Note 2 – Summary of Significant Accounting Policies

          For a description of the Company’s significant accounting policies, see Note 1 to the Consolidated Financial Statements included in the Form 10-K.  Additional information regarding the Company’s significant accounting policies is set forth below.

Cost of Goods Sold and Selling, General and Administrative Expense

          The Company includes in cost of goods sold all costs and expenses incurred prior to the receipt of finished goods at the Company’s distribution facilities.  These costs include, but are not limited to, product cost, inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs and internal transfer costs, as well as insurance, duty, brokers’ fees and consolidators’ fees.  In addition, certain costs in the Company’s Retail segment distribution network, such as the costs of shipping merchandise to Company-owned retail stores, are charged to cost of goods sold.  The Company includes in selling, general and administrative expenses costs incurred subsequent to the receipt of finished goods in the distribution centers, such as the cost of picking and packing goods for delivery to customers.  In addition, selling, general and administrative expenses include product design costs, selling and store service costs, marketing expenses and general and administrative expenses.

          The Company’s gross margins may not be directly comparable to those of its competitors, as income statement classifications of certain expenses may vary by company.

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          Net revenue from wholesale product sales is recognized upon the transfer of title and risk of ownership to customers.  Revenue is recorded net of discounts, as well as provisions for estimated returns, allowances and doubtful accounts.  Retail store revenue is recognized at the time of sale.  Licensing royalties and buying agency fees are recognized as earned.

          On a seasonal basis, the Company negotiates price adjustments with retailers as sales incentives or to partially reimburse them for the cost of certain promotions.  The Company estimates the cost of such adjustments on an ongoing basis considering historical trends, projected seasonal results and an evaluation of current economic conditions.  These costs are recorded as a reduction to net revenue.

Shipping and Handling Costs

          The Company reflects shipping and handling costs as a component of selling, general and administrative expenses in its consolidated statements of operations.  Shipping and handling costs approximated $25,756 and $24,147 for the six months ended September 30, 2002 and 2001, respectively, and $14,217 and $13,255 for the three months ended September 30, 2002 and 2001, respectively.  Amounts billed to customers that relate to shipping and handling on related sales transactions are de minimus.

Reclassification of Prior Year Balances

          Certain prior year amounts have been reclassified to conform to current year presentation. 

Note 3 – Goodwill and Intangible Assets

          On April 1, 2002, the Company adopted Financial Accounting Standards Board (“FASB”) Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”).  SFAS 142 requires that goodwill, including previously existing goodwill, and intangible assets with indefinite useful lives not be amortized but that they be tested for impairment at adoption and at least annually thereafter.  The Company performed its initial test upon adoption and will perform its annual impairment review during the fourth quarter of each fiscal year, commencing in the fourth quarter of fiscal year 2003.

          SFAS 142 provides new criteria for performing impairment tests on goodwill and intangible assets with indefinite useful lives.  Under SFAS 142, these assets are allocated to reporting units within the Company’s operating segments.  A comparison is then performed of the fair values of these assets with their carrying amounts.  Fair value is determined using primarily the discounted cash flow methodology and confirmed by market comparables.  This methodology differs from the Company’s previous policy, as permitted under accounting standards existing before the adoption of SFAS 142, of using undiscounted cash flows on a Company-wide basis to determine if these assets are recoverable.

          Upon adoption of SFAS 142 in the first quarter of fiscal year 2003, the Company recorded a one-time, non-cash, non-operating charge of $430,026, or $4.78 per share, to reduce the carrying value of its goodwill to fair value.  Such charge is reflected as a cumulative effect of change in accounting principle in the Condensed Consolidated Statements of Operations.

          Prior to April 1, 2002, the Company recorded deferred tax liabilities relating to the difference in the book and tax basis of intangible assets, principally trademark rights.  As a result of adopting SFAS 142, those deferred tax liabilities will no longer be used to support the realization of certain deferred tax assets.  Accordingly, the Company recorded a one-time, non-cash, deferred tax charge totaling $11,358, or $0.13 per share, in order to establish a valuation allowance against those deferred tax assets.  This charge was included in the Company’s provision for income taxes for the first quarter of fiscal year 2003.

          Prior to performing the review for impairment, SFAS 142 required that all of the Company’s recorded goodwill be assigned to the Company’s reporting units deemed to benefit from any acquisitions that it had made, including the reporting units that the Company owned prior to such acquisitions.  This differs from the previous accounting rules under which goodwill was assigned only to the businesses acquired.  The balance of goodwill as of March 31, 2002 in the table below reflects the assignment of goodwill as required by SFAS 142.

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          As of September 30, 2002 and March 31, 2002, the Company’s intangible assets and related accumulated amortization consisted of the following:

          The increase in the carrying value of the Company’s trademark rights from March 31, 2002 to September 30, 2002 was due to the changes in foreign currency exchange rates used to translate certain of these assets.

          The Company recorded amortization expense of $1,077 during the first six months of fiscal year 2003 compared to $1,047 on a pro forma basis during the first six months of fiscal year 2002, assuming the adoption of SFAS 142 as of April 1, 2001.  Based on the current amount of intangible assets subject to amortization, the estimated amortization expense for each of the succeeding five years is as follows:

Estimated Amortization Expense

          If acquisitions or dispositions occur in the future the above amounts may vary.

          The fiscal year 2002 historical results do not reflect the provisions of SFAS 142.  Had the Company adopted SFAS 142 on April 1, 2001, the historical net income and basic and diluted earnings per share (before the cumulative effect of the change in accounting principle) would have been changed as follows:

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Note 4 – Acquisition of European Licensee

          On July 5, 2001, the Company acquired all of the issued and outstanding shares of capital stock of T.H. International N.V., the owner of Tommy Hilfiger Europe B.V. (“TH Europe”), the Company’s European licensee, for a purchase price of $200,000 plus acquisition-related costs of $6,789 and assumed debt of $42,629 (such transaction being referred to herein as the “TH Europe Acquisition”).  The TH Europe Acquisition was funded using available cash.

          TH Europe was purchased from a company ultimately owned 70% by Sportswear Holdings Limited (“Sportswear”), 22.5% by Thomas J. Hilfiger and 7.5% by Joel J. Horowitz.  Sportswear was indirectly 50% owned by a company privately owned by members of the Chao family (including Silas K.F. Chou and Ronald K.Y. Chao) and 50% owned by a company in which Lawrence S. Stroll has an indirect beneficial ownership interest.  At the time of the TH Europe Acquisition, Messrs. Chou and Stroll were Co-Chairmen of the Board and Directors of the Company, Mr. Hilfiger was Honorary Chairman of the Board, Principal Designer and a Director of the Company, Mr. Horowitz was Chief Executive Officer, President and a Director of the Company and Mr. Chao was a Director of the Company.

          The TH Europe Acquisition has been accounted for under the purchase method of accounting and, accordingly, the operating results of the acquired companies are included in the consolidated results of the Company from the date of the acquisition.  The cash portion of the purchase price, including transaction costs, has been allocated as follows:

          The provisions of SFAS 142 requiring goodwill and indefinite-lived intangible assets to not be amortized were applied to the TH Europe Acquisition since it occurred after June 30, 2001.  See Note 3.

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Note 5 – Debt Facilities

          As of September 30, 2002, the Company’s principal debt facilities consisted of $166,991 of 6.50% notes maturing on June 1, 2003 (the “2003 Notes”), $200,000 of 6.85% notes maturing on June 1, 2008 (the “2008 Notes”), $150,000 of 9% bonds maturing on December 1, 2031 which were issued in December 2001 (the “2031 Bonds”) and a revolving credit facility which expires on June 30, 2005 (the “Credit Facility”).  The 2003 Notes, the 2008 Notes and the 2031 Bonds (collectively, the “Notes”) were issued by Tommy Hilfiger U.S.A., Inc. (“TH USA”) and are fully and unconditionally guaranteed by THC.  The indenture under which the Notes were issued contains covenants that, among other things, restrict the ability of subsidiaries of THC to incur additional indebtedness, restrict the ability of THC and its subsidiaries to incur indebtedness secured by liens or enter into certain sale and leaseback transactions and restrict the ability of THC and TH USA to engage in mergers or consolidations.

          During the six month period ended September 30, 2002, the Company repurchased $58,009 principal amount of the 2003 Notes in open market transactions.  Cumulatively, through September 30, 2002, the Company has repurchased $83,009 of the $250,000 principal amount of 2003 Notes originally issued.

          The Credit Facility, which was entered into on June 28, 2002 and which is guaranteed by THC, consists of an unsecured $300,000 TH USA three-year revolving credit facility, of which up to $175,000 may be used for direct borrowings.  The Credit Facility is available for letters of credit, working capital and other general corporate purposes.  The Credit Facility replaced the $250,000 TH USA revolving credit facility which was scheduled to expire on March 31, 2003.  As of September 30, 2002, $120,294 of the available borrowings under the Credit Facility had been used to open letters of credit, including $55,169 for inventory purchased that are included in current liabilities and $65,125 related to commitments to purchase inventory.  There were no direct borrowings outstanding under the Credit Facility as of September 30, 2002.

          The Credit Facility contains a number of covenants that, among other things, restrict the ability of subsidiaries of THC to dispose of assets, incur additional indebtedness, create liens on assets, pay dividends or make other payments in respect of capital stock, make investments, loans and advances, engage in transactions with affiliates, enter into certain sale and leaseback transactions, engage in mergers or consolidations or change the businesses conducted by them.  The Credit Facility also restricts the ability of THC to create liens on assets or enter into certain sale and leaseback transactions.  Under the Credit Facility, subsidiaries of THC may not pay dividends or make other payments in respect of capital stock to THC that, in the aggregate, exceed 33% of the Company’s cumulative consolidated net income (commencing with the fiscal year ended March 31, 2002) plus $125,000, less certain

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          The Company was in compliance with all covenants in respect of the Notes and the Credit Facility as of, and for the twelve-month period ended, September 30, 2002. 

          Certain of the Company’s non-U.S. subsidiaries have separate credit facilities, totalling approximately $100,000 at September 30, 2002, for working capital or trade financing purposes.  In addition to short-term borrowings of $84,436, as of September 30, 2002 these subsidiaries were contingently liable for unexpired bank letters of credit of $16,821 related to commitments of these subsidiaries to suppliers for the purchase of inventory.  Borrowings under these credit facilities bear interest at variable rates which, on a weighted average annual basis, amounted to 5.16% and 5.77% as of, and for the six-month period ended, September 30, 2002, respectively.

          The Company’s credit facilities provide for issuance of letters of credit without restriction on cash balances.

Note 6 - Condensed Consolidating Financial Information

          The Notes discussed in Note 5 were issued by TH USA and are fully and unconditionally guaranteed by THC.  Accordingly, condensed consolidating balance sheets as of September 30, 2002 and March 31, 2002, and the related condensed consolidating statements of operations and cash flows for each of the six-month periods ended September 30, 2002 and 2001, are provided.  The operations of TH USA, excluding its subsidiaries, consist of the U.S. operations of certain wholesale divisions, together with TH USA corporate overhead charges not allocated to subsidiaries.  The non-guarantor subsidiaries of TH USA consist of the Company’s U.S. retail, licensing and other wholesale divisions, as well as the Company’s Canadian operations.  Such operations contributed net revenue of $590,134 and $583,180 for the six-month periods ended September 30, 2002 and 2001, respectively.  The other non-guarantor subsidiaries of THC are primarily those non-U.S. subsidiaries involved in investing and buying office operations, as well as the Company’s European operations.  These condensed consolidating financial statements have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information under which TH USA’s and THC’s results reflect 100% of the earnings of their respective subsidiaries in each of the years presented.  See Note 5 for a description of certain restrictions on the ability of subsidiaries of THC to pay dividends to THC.

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