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EX-4.1 - EX-4.1 - PVH CORP. /DE/ex4120112q10q.htm
EX-32.2 - EX-32.2 - PVH CORP. /DE/ex322pvh20112q.htm
EX-31.1 - EX-31.1 - PVH CORP. /DE/ex311pvh20112q.htm
EX-31.2 - EX-31.2 - PVH CORP. /DE/ex312pvh20112q.htm
EX-32.1 - EX-32.1 - PVH CORP. /DE/ex321pvh20112q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
 
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
July 31, 2011
 

OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
 
to
 


Commission File Number 001-07572
PVH CORP.
(Exact name of registrant as specified in its charter)

Delaware
 
13-1166910
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
200 Madison Avenue, New York, New York
 
10016
(Address of principal executive offices)
 
(Zip Code)

(212) 381-3500
(Registrant’s telephone number, including area code)

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.
Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x     Accelerated filer  o     Non-accelerated filer  o     Smaller reporting company  o
(do not check if a smaller
reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of outstanding shares of common stock, par value $1.00 per share, of the registrant as of August 30, 2011 was 67,555,092.

PVH CORP.
INDEX

PART I -- FINANCIAL INFORMATION

Item 1 - Financial Statements

PART II -- OTHER INFORMATION



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 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, the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) in connection with the acquisition of Tommy Hilfiger B.V. and certain affiliated companies, we borrowed significant amounts, may be considered to be highly leveraged, and will have to use a significant portion of our cash flows to service such indebtedness, as a result of which we might not have sufficient funds to operate our businesses in the manner we intend or have operated in the past; (iii) the levels of sales of our apparel, footwear and related products, both to our wholesale customers and in our retail stores, the levels of sales of our licensees at wholesale and retail, and the extent of discounts and promotional pricing in which we and our licensees and other business partners are required to engage, all of which can be affected by weather conditions, changes in the economy, fuel prices, reductions in travel, fashion trends, consolidations, repositionings and bankruptcies in the retail industries, repositionings of brands by our licensors and other factors; (iv) our plans and results of operations will be affected by our ability to manage our growth and inventory; (v) our operations and results could be affected by quota restrictions and the imposition of safeguard controls (which, among other things, could limit our ability to produce products in cost-effective countries that have the labor and technical expertise needed), the availability and cost of raw materials, our ability to adjust timely to changes in trade regulations and the migration and development of manufacturers (which can affect where our products can best be produced), changes in available factory and shipping capacity, wage and shipping cost calculation, and civil conflict, war or terrorist acts, the threat of any of the foregoing, or political and labor instability in any of the countries where our or our licensees’ or other business partners’ products are sold, produced or are planned to be sold or produced; (vi) disease epidemics and health related concerns, which could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny or embargoing of goods produced in infected areas, as well as reduced consumer traffic and purchasing, as consumers limit or cease shopping in order to avoid exposure or becoming ill; (vii) acquisitions and issues arising with acquisitions and proposed transactions, including without limitation, the ability to integrate an acquired entity into us with no substantial adverse affect on the acquired entity’s or our existing operations, employee relationships, vendor relationships, customer relationships or financial performance; (viii) the failure of our licensees to market successfully licensed products or to preserve the value of our brands, or their misuse of our brands; and (ix) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

We do not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimate regarding
revenue or cash flows, whether as a result of the receipt of new information, future events or otherwise.
    




PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

PVH Corp.
Consolidated Balance Sheets
(In thousands, except share and per share data)
 
July 31,
 
January 30,
 
August 1,
 
2011
 
2011
 
2010
 
UNAUDITED
 
AUDITED
 
UNAUDITED
ASSETS
 
 
 
 
 
Current Assets:
 
 
 
 
 
Cash and cash equivalents    
$
287,691

 
$
498,718

 
$
475,340

Trade receivables, net of allowances for doubtful accounts of $12,764, $11,105 and $12,426
402,736

 
433,900

 
293,057

Other receivables    
11,110

 
13,261

 
18,556

Inventories, net    
877,450

 
692,306

 
693,872

Prepaid expenses    
70,986

 
80,974

 
123,605

Other, including deferred taxes of $62,190, $61,793 and $28,909
90,869

 
91,054

 
62,229

Total Current Assets    
1,740,842

 
1,810,213

 
1,666,659

Property, Plant and Equipment, net    
426,367

 
404,577

 
394,929

Goodwill    
1,904,388

 
1,820,487

 
1,745,847

Tradenames    
2,406,767

 
2,342,467

 
2,290,028

Perpetual License Rights    
86,000

 
86,000

 
86,000

Other Intangibles, net    
172,582

 
172,562

 
188,261

Other Assets    
133,203

 
115,766

 
116,871

Total Assets    
$
6,870,149

 
$
6,752,072

 
$
6,488,595

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
Accounts payable    
$
351,748

 
$
316,920

 
$
315,432

Accrued expenses
517,463

 
539,670

 
428,947

Deferred revenue    
38,159

 
51,235

 
46,957

Short-term borrowings    
13,006

 
4,868

 
4,617

Current portion of long-term debt    
51,816

 

 

Total Current Liabilities    
972,192

 
912,693

 
795,953

Long-Term Debt    
2,090,062

 
2,364,002

 
2,491,635

Other Liabilities, including deferred taxes of $534,766, $511,878 and $511,076
1,096,690

 
1,032,833

 
1,037,544

Stockholders’ Equity:
 
 
 
 
 
Preferred stock, par value $100 per share; 150,000 total shares authorized    

 

 

Series A convertible preferred stock, par value $100 per share; 8,000 total shares authorized, issued and outstanding (with total liquidation preference of $200,000)
188,595

 
188,595

 
188,595

Common stock, par value $1 per share; 240,000,000 shares authorized; 67,798,396; 67,234,567 and 66,448,534 shares issued
67,798

 
67,235

 
66,449

Additional paid in capital - common stock    
1,337,328

 
1,301,647

 
1,253,246

Retained earnings    
959,034

 
840,072

 
693,393

Accumulated other comprehensive income (loss)    
174,386

 
55,744

 
(31,993
)
Less: 248,181; 168,893 and 96,401 shares of common stock held in treasury, at cost
(15,936
)
 
(10,749
)
 
(6,227
)
Total Stockholders’ Equity    
2,711,205

 
2,442,544

 
2,163,463

Total Liabilities and Stockholders’ Equity    
$
6,870,149

 
$
6,752,072

 
$
6,488,595


See accompanying notes.

1

PVH Corp.
Consolidated Statements of Operations
Unaudited
(In thousands, except per share data)

 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
July 31,
 
August 1,
 
July 31,
 
August 1,
 
2011
 
2010
 
2011
 
2010
Net sales    
$
1,227,730

 
$
1,011,439

 
$
2,484,716

 
$
1,542,127

Royalty revenue    
78,202

 
68,106

 
161,084

 
132,965

Advertising and other revenue    
28,512

 
23,723

 
57,828

 
47,220

Total revenue    
1,334,444

 
1,103,268

 
2,703,628

 
1,722,312

Cost of goods sold     
610,312

 
528,027

 
1,250,917

 
830,038

Gross profit    
724,132

 
575,241

 
1,452,711

 
892,274

Selling, general and administrative expenses    
590,653

 
524,637

 
1,182,555

 
811,837

Debt modification and extinguishment costs    

 
6,650

 
16,233

 
6,650

Other loss    

 
88,100

 

 
140,490

Income (loss) before interest and taxes     
133,479

 
(44,146
)
 
253,923

 
(66,703
)
Interest expense    
31,799

 
39,706

 
65,243

 
48,088

Interest income    
353

 
481

 
727

 
588

Income (loss) before taxes    
102,033

 
(83,371
)
 
189,407

 
(114,203
)
Income tax expense (benefit)    
35,304

 
(12,747
)
 
65,011

 
(15,966
)
Net income (loss)    
$
66,729

 
$
(70,624
)
 
$
124,396

 
$
(98,237
)
Basic net income (loss) per common share    
$
0.94

 
$
(1.07
)
 
$
1.75

 
$
(1.67
)
Diluted net income (loss) per common share    
$
0.92

 
$
(1.07
)
 
$
1.71

 
$
(1.67
)
Dividends declared per common share    
$
0.00

 
$
0.00

 
$
0.075

 
$
0.075


See accompanying notes.

2




PVH Corp.
Consolidated Statements of Cash Flows
Unaudited
(In thousands)
 
Twenty-Six Weeks Ended
 
July 31,
 
August 1,
 
2011
 
2010
OPERATING ACTIVITIES
 
 
 
Net income (loss)    
$
124,396

 
$
(98,237
)
Adjustments to reconcile to net cash provided by operating activities:
 
 
 
Losses on settlement of derivative instruments related to the acquisition of
   Tommy Hilfiger

 
140,490

Depreciation and amortization    
66,447

 
62,240

Deferred taxes    
8,910

 
(9,571
)
Impairment of long-lived assets
1,062

 

Stock-based compensation expense    
20,650

 
12,224

Debt modification and extinguishment costs    
16,233

 
6,650

Changes in operating assets and liabilities:
 
 
 
Trade receivables, net    
39,402

 
94,198

Inventories, net    
(171,853
)
 
(142,162
)
Accounts payable, accrued expenses and deferred revenue    
(12,257
)
 
101,999

Prepaid expenses    
5,653

 
(54,482
)
Other, net    
37,102

 
(16,418
)
Net cash provided by operating activities    
135,745

 
96,931

INVESTING ACTIVITIES(1)
 
 
 
Business acquisitions, net of cash acquired

 
(2,490,607
)
Investment in joint venture    
(14,850
)
 

Purchase of property, plant and equipment    
(73,899
)
 
(29,014
)
Contingent purchase price payments    
(25,305
)
 
(21,452
)
 Losses on settlement of derivative instruments related to the acquisition of
     Tommy Hilfiger

 
(140,490
)
Net cash used by investing activities    
(114,054
)
 
(2,681,563
)
FINANCING ACTIVITIES(1)
 
 
 
Proceeds from revolving credit facilities    
60,000

 

Payments on revolving credit facilities    
(60,000
)
 

Net proceeds from short-term borrowings    
8,138

 
4,617

Repayment of credit facilities    
(247,459
)
 
(100,000
)
Payment of debt modification costs
(10,634
)
 

Net proceeds from settlement of awards under stock plans    
11,561

 
6,732

Excess tax benefits from awards under stock plans    
4,238

 
3,482

Cash dividends    
(5,434
)
 
(4,652
)
Acquisition of treasury shares    
(5,187
)
 
(2,438
)
Net proceeds from common stock offering

 
364,860

Net proceeds from preferred stock issuance

 
188,595

Net proceeds from issuance of long-term debt

 
584,145

Net proceeds from credit facilities

 
1,825,223

Extinguishment of debt

 
(303,645
)
Net cash (used) provided by financing activities
(244,777
)
 
2,566,919

Effect of exchange rate changes on cash and cash equivalents    
12,059

 
12,171

Decrease in cash and cash equivalents    
(211,027
)
 
(5,542
)
Cash and cash equivalents at beginning of period    
498,718

 
480,882

Cash and cash equivalents at end of period    
$
287,691

 
$
475,340

(1) See Note 15 for information on noncash investing and financing transactions.

See accompanying notes.

3

PVH CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency and share amounts in thousands, except per share data)

1. GENERAL

The consolidated financial statements include the accounts of PVH Corp. and its subsidiaries (the “Company”). The Company’s fiscal years are based on the 52-53 week period ending on the Sunday closest to February 1 and are designated by the calendar year in which the fiscal year commences. References to a year are to the Company’s fiscal year, unless the context requires otherwise.

The accompanying unaudited consolidated financial statements have been prepared in accordance 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 should be made to the audited consolidated financial statements, including the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended January 30, 2011.

The preparation of 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 financial statements and accompanying notes. Actual results could differ materially from the estimates.

The results of operations for the thirteen and twenty-six weeks ended July 31, 2011 and August 1, 2010 are not necessarily indicative of those for a full fiscal year due, in part, to seasonal factors. The data contained in these financial statements are unaudited and are subject to year-end adjustments. However, in the opinion of management, all known adjustments (which consist only of normal recurring accruals) have been made to present fairly the consolidated operating results for the unaudited periods.

Certain reclassifications have been made to the consolidated financial statements and the notes thereto for the prior year periods to present that information on a basis consistent with the current year.

References to the brand names Calvin Klein Collection, ck Calvin Klein, Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, Bass, G.H. Bass & Co., ARROW, Geoffrey Beene, CHAPS, JOE Joseph Abboud, Kenneth Cole New York, Kenneth Cole Reaction, MICHAEL Michael Kors, DKNY and Timberland and to other brand names are to registered trademarks owned by the Company or licensed to the Company by third parties and are identified by italicizing the brand name.

2. INVENTORIES

Inventories related to the Company’s wholesale operations and international retail operations, comprised principally of finished goods, are stated at the lower of cost or market. Inventories related to the Company’s North American retail operations, comprised entirely of finished goods, are stated at the lower of average cost or market.

In the first quarter of 2011, the Company voluntarily changed its method of accounting for its United States retail apparel inventories that were previously on the last-in, first-out (“LIFO”) method to the weighted average cost method and for its United States wholesale inventories that were previously on the LIFO method to the first-in, first-out (“FIFO”) method. As a result, the Company no longer has any inventory valued based on LIFO.

The Company believes the change is preferable because (i) the FIFO and weighted average cost methods will provide more consistency across the Company and its segments, as only two inventory valuation methods will be applied as compared to three; (ii) the Company had experienced decreasing costs over the past several years, eliminating the reporting impact of LIFO; and (iii) the change will result in a more meaningful presentation of financial position, as the FIFO and weighted average cost methods reflect more recent costs in the consolidated balance sheet, and will improve comparability with the Company’s peers. 

The voluntary accounting change had no impact on the Company’s consolidated financial statements because the inventory valued under LIFO was at current cost for the past several years. As a result, retrospective application of the accounting change resulted in no adjustments to amounts previously reported on the Company’s consolidated financial statements.



4




3. ACQUISITIONS

Acquisition of Tommy Hilfiger

The Company acquired on May 6, 2010 all of the outstanding equity interests of Tommy Hilfiger B.V. and certain affiliated companies (collectively, “Tommy Hilfiger”). The results of Tommy Hilfiger’s operations have been included in the Company’s consolidated financial statements since that date. Tommy Hilfiger designs, sources and markets men’s, women’s and children’s sportswear and activewear, jeanswear and other products worldwide and licenses its brands worldwide over a broad range of products.

Fair Value of the Acquisition Consideration

The acquisition date fair value of the acquisition consideration paid, based on applicable exchange rates in effect on the closing date, consisted of the following:
Cash
$
2,485,776

Common stock (7,873 shares, par value $1.00 per share)
475,607

Total fair value of the acquisition consideration
$
2,961,383


Of the total $2,485,776 cash consideration paid, $2,483,258 was paid in the twenty-six weeks ended August 1, 2010.

The fair value of the 7,873 common shares issued was equal to the aggregate value of the shares at the closing market price of the Company’s common stock on May 5, 2010, the day prior to the closing. The value is not the same as the value of the shares as determined pursuant to the acquisition agreement, due to the fluctuation in the market price of the Company’s common stock between the date of the acquisition agreement and the date of the acquisition closing.

The Company funded the cash portion and related costs of the Tommy Hilfiger acquisition with cash on hand and the net proceeds of the following activities: (i) the sale on April 28, 2010 of 5,750 shares of the Company’s common stock; (ii) the issuances of an aggregate of 8 shares of Series A convertible preferred stock, which are convertible into 4,189 shares of the Company’s common stock, for an aggregate gross purchase price of $200,000; (iii) the issuance of $600,000 of 7 3/8% senior notes due 2020; and (iv) the borrowing of approximately $1,900,000 of term loans under new credit facilities.

The Company incurred certain pre-tax costs directly associated with the acquisition during the twenty-six weeks ended August 1, 2010, totaling approximately $52,000, which are included within selling, general and administrative expenses in its financial statements. The Company also recorded a loss of $140,490 during the twenty-six weeks ended August 1, 2010 associated with hedges against Euro to United States dollar exchange rates relating to the purchase price. During the twenty-six weeks ended August 1, 2010, the Company incurred costs totaling $28,920 associated with the issuance of the common and preferred shares related to the acquisition, which were deducted from the recognized proceeds of issuance within stockholders’ equity. During the same period the Company incurred costs totaling $70,512 associated with the issuance of debt related to the acquisition, a portion of which was written off in connection with the amendment and restatement of our senior secured credit facility during the first quarter of 2011. Please see Note 15, “Noncash Investing and Financing Transactions,” for a further discussion. The remaining costs are being amortized over the term of the related debt agreements.

Pro Forma Impact of the Transaction

The following table presents the Company’s pro forma consolidated results of operations for the thirteen and twenty-six weeks ended August 1, 2010 as if the acquisition and the related financing transactions had occurred on February 1, 2010 (the first day of its fiscal year ended January 30, 2011) instead of on May 6, 2010. The pro forma results were calculated applying the Company’s accounting policies and reflect: (i) the impact on depreciation and amortization based on what would have been charged related to the fair value adjustments to Tommy Hilfiger’s property, plant and equipment and the intangible assets recorded in connection with the acquisition; (ii) the impact on interest expense and interest income resulting from changes to the Company’s capital structure in connection with the acquisition; (iii) the impact on cost of goods sold resulting from acquisition date adjustments to the fair value of inventory; and (iv) the tax effects of the above adjustments. The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of Tommy Hilfiger. Accordingly, such pro forma amounts are not indicative of the results that actually would have occurred had the acquisition been completed on February 1, 2010, nor are they indicative of the future operating results of the combined company.


5




 
Pro Forma Thirteen Weeks Ended 8/1/10  
 
Pro Forma Twenty-Six Weeks Ended 8/1/10  
Total revenue    
$
1,112,040

 
$
2,368,196

Net income    
38,712

 
98,757


Allocation of the Acquisition Consideration

The Company recorded in the first quarter of 2011 measurement period adjustments to the fair values of certain assets acquired and liabilities assumed in the Tommy Hilfiger acquisition as of the acquisition date, due to information that arose during the Company’s preparation of certain tax returns during the first quarter.

The Company has retrospectively adjusted the previously reported fair values to reflect these amounts as follows:

 
As Originally Reported in Form 10-K
 
Measurement Period Adjustments
 
As Retrospectively Adjusted   
Trade Receivables    
$
120,477

 
$

 
$
120,477

Inventories    
288,891

 

 
288,891

Prepaid Expenses    
24,029

 
(383
)
 
23,646

Other Current Assets    
81,307

 
45

 
81,352

Property, Plant and Equipment    
238,026

 

 
238,026

Goodwill    
1,255,862

 
15,967

 
1,271,829

Tradenames    
1,635,417

 

 
1,635,417

Other Intangibles    
172,069

 

 
172,069

Other Assets    
117,880

 
(7,175
)
 
110,705

Accounts Payable    
91,436

 

 
91,436

Accrued Expenses    
205,631

 
4,242

 
209,873

Other Liabilities    
675,508

 
4,212

 
679,720


Acquisition of Tommy Hilfiger Handbag License

On June 14, 2010, the Company entered into an agreement to reacquire from a licensee, prior to the expiration of the license, the rights to distribute Tommy Hilfiger handbags outside of the United States. The effective date of the transfer of the rights was December 31, 2010. In connection with this transaction, the Company made a payment of $7,349, based on the applicable exchange rate in effect on the acquisition date, to the former licensee during the second quarter of 2010.

4. INVESTMENT IN JOINT VENTURE

Pursuant to the terms of the agreement underlying the Company’s acquisition of Tommy Hilfiger from funds controlled by Apax Partners L.P. (“Apax”), the Company formed a joint venture in China with Apax, whereby the Company and Apax will each have a 45% share in the joint venture, with the remaining 10% owned by another party. The joint venture assumed direct control of the Tommy Hilfiger wholesale and retail distribution in China from the existing licensee, Dickson Concepts (International) Limited, on August 1, 2011. The Company made payments totaling $14,850 to the joint venture during the twenty-six weeks ended July 31, 2011 to contribute its 45% share of funding.



6

5. GOODWILL

The changes in the carrying amount of goodwill for the period ended July 31, 2011, by segment, were as follows:

 
Heritage Brand Wholesale Dress Furnishings
 
Heritage Brand Wholesale Sportswear
 
Calvin Klein Licensing
 
Tommy Hilfiger North America
 
Tommy Hilfiger International
 
Total
Balance as of January 30, 2011
 
 
 
 
 
 
 
 
 
 
 
Goodwill, gross    
$
70,589

 
$
84,553

 
$
304,924

 
$
198,501

 
$
1,161,920

 
$
1,820,487

Accumulated impairment losses    

 

 

 

 

 

Goodwill, net    
70,589

 
84,553

 
304,924

 
198,501

 
1,161,920

 
1,820,487

Contingent purchase price payments to Mr. Calvin Klein

 

 
22,157

 

 

 
22,157

Currency translation    

 

 
246

 

 
61,498

 
61,744

Balance as of July 31, 2011
 
 
 
 
 
 
 
 
 
 
 
Goodwill, gross    
70,589

 
84,553

 
327,327

 
198,501

 
1,223,418

 
1,904,388

Accumulated impairment losses    

 

 

 

 

 

Goodwill, net    
$
70,589

 
$
84,553

 
$
327,327

 
$
198,501

 
$
1,223,418

 
$
1,904,388


The Company is required to make contingent purchase price payments to Mr. Calvin Klein in connection with the Company’s acquisition in 2003 of all of the issued and outstanding stock of Calvin Klein, Inc. and certain affiliated companies (collectively, “Calvin Klein”). Such payments are based on 1.15% of total worldwide net sales, as defined in the agreement (as amended) governing the Calvin Klein acquisition, of products bearing any of the Calvin Klein brands and are required to be made with respect to sales made through February 12, 2018. A significant portion of the sales on which the payments to Mr. Klein are made are wholesale sales by the Company and its licensees and other partners to retailers.

6. RETIREMENT AND BENEFIT PLANS

The Company has five noncontributory defined benefit pension plans covering substantially all employees resident in the United States who meet certain age and service requirements. For those vested (after five years of service), the plans provide monthly benefits upon retirement based on career compensation and years of credited service. The Company also has for certain of such employees an unfunded non-qualified supplemental defined benefit pension plan, which provides benefits for compensation in excess of Internal Revenue Service earnings limits and requires payments to vested employees upon, or shortly after, employment termination or retirement. The Company refers to these six plans as its “pension plans.”

As a result of the Company’s acquisition of Tommy Hilfiger, the Company also has for certain members of Tommy Hilfiger’s domestic senior management a supplemental executive retirement plan (“SERP Plan”), which is an unfunded non-qualified supplemental defined benefit pension plan. Such plan is frozen and, as a result, participants do not accrue additional benefits.

In addition to the defined benefit pension plans described above, the Company has a capital accumulation program (“CAP Plan”), which is an unfunded non-qualified supplemental defined benefit plan covering four current and 16 retired executives. Under the individual participants’ CAP Plan agreements, the participants will receive a predetermined amount during the 10 years following the attainment of age 65, provided that prior to the termination of employment with the Company, the participant has been in the CAP Plan for at least 10 years and has attained age 55.

The Company also provides certain postretirement health care and life insurance benefits to certain retirees resident in the United States. Retirees contribute to the cost of this plan, which is unfunded. During 2002, the postretirement plan was amended to eliminate benefits for active participants who, as of January 1, 2003, had not attained age 55 and 10 years of service.

7





Net benefit cost related to the Company’s pension plans was recognized as follows:
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
 
 
 
 
 
 
 
 
Service cost, including plan expenses    
$
3,671

 
$
2,413

 
$
7,264

 
$
4,758

Interest cost    
4,870

 
4,537

 
9,591

 
8,922

Amortization of net loss    
2,076

 
1,921

 
4,620

 
3,790

Expected return on plan assets    
(5,514
)
 
(4,982
)
 
(11,061
)
 
(9,985
)
Amortization of prior service credit    
(16
)
 
(15
)
 
(31
)
 
(31
)
Total    
$
5,087

 
$
3,874

 
$
10,383

 
$
7,454



Net benefit cost related to the Company’s CAP Plan and SERP Plan was recognized as follows:

 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
 
 
 
 
 
 
 
 
Service cost, including plan expenses    
$
24

 
$
22

 
$
49

 
$
45

Interest cost    
452

 
463

 
905

 
696

Total    
$
476

 
$
485

 
$
954

 
$
741



Net benefit cost (credit) related to the Company’s postretirement plan was recognized as follows:

 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
 
 
 
 
 
 
 
 
Interest cost    
$
254

 
$
206

 
$
509

 
$
545

Amortization of net loss (gain)
7

 
(105
)
 
14

 

Amortization of prior service credit    
(205
)
 
(205
)
 
(409
)
 
(409
)
Total    
$
56

 
$
(104
)
 
$
114

 
$
136


7. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) was as follows:

 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
 
 
 
 
 
 
 
 
Net income (loss)
$
66,729

 
$
(70,624
)
 
$
124,396

 
$
(98,237
)
Foreign currency translation adjustments, net of tax (benefit) expense of $(821); $(310); $82 and $(622)
(52,253
)
 
49,143

 
119,076

 
48,630

Amortization of net loss (gain) and prior service credit related to pension and postretirement plans, net of tax expense of $715; $604; $1,610 and $1,267
1,147

 
992

 
2,584

 
2,083

Net unrealized and realized gain (loss) on effective hedges, net of tax benefit (expense) of $3,898; $(387); $4,135 and $(387)
12,012

 
(2,258
)
 
(3,018
)
 
(2,258
)
Comprehensive income (loss)
$
27,635

 
$
(22,747
)
 
$
243,038

 
$
(49,782
)


8




8. DEBT

Short-Term Borrowings

One of the Company’s subsidiaries has a Yen-denominated overdraft facility with a Japanese bank, which provides for borrowings of up to ¥1,000,000 (approximately $13,000 based on the Yen to United States dollar exchange rate on July 31, 2011) and is utilized to fund working capital. Borrowings under the facility are unsecured and bear interest at the one month Japanese inter-bank borrowing rate (“TIBOR”) plus 0.15%. Such facility renews automatically unless the Company gives notice of termination. The full amount of this facility was borrowed as of July 31, 2011. The weighted average interest rate on the funds borrowed at July 31, 2011 was 0.33%.

Long-Term Debt

The carrying amounts of the Company’s long-term debt were as follows:

 
7/31/11
 
8/1/10
 
 
 
 
Senior secured term loan A facility due 2016    
$
755,502

 
$
471,668

Senior secured term loan B facility due 2016    
686,765

 
1,320,374

7 3/8% senior unsecured notes due 2020    
600,000

 
600,000

7 3/4% debentures due 2023    
99,611

 
99,593

Total    
$
2,141,878

 
$
2,491,635

Less: Current portion of long-term debt    
51,816

 

Long-term debt    
$
2,090,062

 
$
2,491,635


As of July 31, 2011, the Company’s mandatory long-term debt repayments for the next five years were as follows:

Remainder of 2011
$
21,127

2012
70,943

2013
109,196

2014
176,139

2015
396,094

2016
668,768


As of July 31, 2011, after taking into account the interest rate swap and cap agreements discussed below, approximately 70% of the Company’s total debt was at a fixed rate or at a variable rate that was capped, with the remainder at variable rates that were uncapped.

Senior Secured Credit Facilities

On May 6, 2010, the Company entered into, and on March 2, 2011 amended and restated, a senior secured credit facility (“the amended facility”), which consists of a Euro-denominated term loan A facility, a United States dollar-denominated term loan A facility, a Euro-denominated term loan B facility, a United States dollar-denominated term loan B facility, a United States dollar-denominated revolving credit facility and two multi-currency (one United States dollar and Canadian dollar, and the other Euro, Japanese Yen and British Pound) revolving credit facilities. The amended facility provides reduced borrowing spreads, as well as additional flexibility with respect to the application of voluntary prepayments. The amended facility extends the maturity of the term loan A facilities and the revolving loan facilities from May 2015 to January 2016. The maturity of the term loan B facilities remains in May 2016.

In connection with the closing of the amended facility, the Company voluntarily prepaid $149,275 of borrowings with cash on hand. The revolving credit facilities remained undrawn upon the closing of the amended facility (with only letters of credit outstanding). The Company made additional payments totaling $98,184 during the second quarter of 2011.

The amended facility provides for borrowings equal to an aggregate of approximately $2,005,000 (based on applicable exchange rates on July 31, 2011), consisting of (i) an aggregate of approximately $1,540,000 of term loan facilities; and (ii) approximately $465,000 of revolving credit facilities, under which the Company had no revolving credit borrowings and

9




$147,213 of letters of credit outstanding as of July 31, 2011.

The terms of each of the term loan A and B facilities contain a mandatory repayment schedule on a quarterly basis. The outstanding borrowings under the amended facility are prepayable without penalty (other than customary breakage costs). The terms of the amended facility require the Company to repay certain amounts outstanding thereunder with (a) net cash proceeds of the incurrence of certain indebtedness, (b) net cash proceeds of certain asset sales or other dispositions (including as a result of casualty or condemnation) that exceed certain thresholds, to the extent such proceeds are not reinvested in the business in accordance with customary reinvestment provisions and (c) a percentage of excess cash flow, which percentage is based upon the Company’s leverage ratio during the relevant fiscal period.

The United States dollar-denominated borrowings under the amended facility bear interest at a rate equal to an applicable margin plus, as determined at the Company’s option, either (a) a base rate determined as the highest of (i) the prime rate, (ii) the United States federal funds rate plus 1/2 of 1% and (iii) a one-month adjusted Eurocurrency rate plus 1% (provided that, in the case of the term loan B facility, in no event will the base rate be less than 1.75%) or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the amended facility (provided that, in the case of the term loan B facility, in no event will the adjusted Eurocurrency rate be less than 0.75%).

Canadian dollar-denominated borrowings under the amended facility 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 average of the rates of interest per annum equal to the per annum rate of interest quoted, published and commonly known in Canada as the “prime rate” or which Royal Bank of Canada establishes at its main office in Toronto, Ontario as the reference rate of interest in order to determine interest rates for loans in Canadian dollars to its Canadian borrowers and (ii) the sum of (x) the average of the rates per annum for Canadian dollar bankers’ acceptances having a term of one month that appears on the Reuters Screen CDOR Page as of 10:00 a.m. (Toronto time) on the date of determination, as reported by the administrative agent (and if such screen is not available, any successor or similar service as may be selected by the administrative agent), and (y) 1%, or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the amended facility.

The borrowings under the amended facility in currencies other than United States dollars or Canadian dollars bear interest at a rate equal to an applicable margin plus an adjusted Eurocurrency rate, calculated in a manner set forth in the amended facility (provided that, in the case of the term loan B facility, in no event will the adjusted Eurocurrency rate be less than 0.75%).

The current applicable margins are (a) in the case of the United States dollar-denominated term loan A facility, 2.50% for adjusted Eurocurrency rate loans and 1.50% for base rate loans, as applicable, (b) in the case of the United States dollar-denominated term loan B facility, 2.75% for adjusted Eurocurrency rate loans and 1.75% for base rate loans, as applicable, (c) in the case of the Euro-denominated term loan A facility, 2.75%, (d) in the case of the Euro-denominated term loan B facility, 3.00% and (e) in the case of the revolving credit facilities, (x) for borrowings denominated in United States dollars, 2.50% for adjusted Eurocurrency rate loans and 1.50% for base rate loans, as applicable, (y) for borrowings denominated in Canadian dollars, 2.50% for adjusted Eurocurrency rate loans and 1.50% for Canadian prime rate loans, as applicable, and (z) for borrowings denominated in other currencies, 2.75%. After the date of delivery of the compliance certificate and financial statements with respect to the Company’s fiscal quarter ending July 31, 2011 and each subsequent quarter, the applicable margin for borrowings under the term loan A facilities and the revolving credit facilities will be adjusted depending on the Company’s leverage ratio.

On May 4, 2011, the Company entered into an interest rate swap agreement for a three-year term commencing on June 6, 2011. The agreement has been designed with the intended effect of converting an initial notional amount of $632,000 of the Company’s variable rate debt obligation under its United States dollar-denominated senior secured term loan A facility to fixed rate debt. The initial notional amount of $632,000 will be reduced according to a pre-set schedule during the term of the swap agreement such that, based on the Company’s projections for future debt repayments, the Company’s outstanding debt under the facility is expected to always exceed the then-outstanding notional amount of the swap. Under the terms of the agreement for the then-outstanding notional amount, the Company’s exposure to fluctuations in the three-month London inter-bank borrowing rate (“LIBOR”) is eliminated, and it will pay a fixed rate of 1.197%, plus the current applicable margin.

In addition, on May 4, 2011, the Company entered into an interest rate cap agreement for a 15-month term commencing on June 6, 2011. The agreement has been designed with the intended effect of capping the interest rate on an initial notional amount of €165,895 of the Company’s variable rate debt obligation under its Euro-denominated senior secured term loan A and B facilities. The initial notional amount of €165,895 will be reduced according to a pre-set schedule during the term of the agreement such that the Company’s outstanding debt under the facilities is expected to always exceed the notional amount of the cap agreement. Under the terms of this agreement, the three-month Euro inter-bank borrowing rate (“EURIBOR”) that the Company will pay is capped at a rate of 2%. Therefore, the maximum amount of interest that the Company will pay on the

10




notional amount will be at the 2% capped rate, plus the current applicable margin.

7 3/8% Senior Notes Due 2020

On May 6, 2010, the Company issued $600,000 principal amount of 7 3/8% senior notes due May 15, 2020. Interest on the 7 3/8% notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing November 15, 2010.

The Company may redeem some or all of these notes on or after May 15, 2015 at specified redemption prices. The Company may redeem some or all of these notes at any time prior to May 15, 2015 by paying a “make whole” premium. In addition, the Company may also redeem up to 35% of these notes prior to May 15, 2013, by paying a set premium, with the net proceeds of certain equity offerings. The Company’s ability to pay cash dividends and make other restricted payments is limited, in each case, over specified amounts as defined in the indenture governing the notes.

Prior Senior Secured Revolving Credit Facility

On May 6, 2010, the Company terminated its $325,000 secured revolving credit facility with JP Morgan Chase Bank, N.A., as the Administrative Agent and Collateral Agent, which was scheduled to expire in July 2012.

Tender for and Redemption of 2011 Notes and 2013 Notes

The Company commenced tender offers on April 7, 2010 for (i) all of the $150,000 outstanding principal amount of its notes due 2011; and (ii) all of the $150,000 outstanding principal amount of its notes due 2013. The tender offers expired on May 4, 2010. On May 6, 2010, the Company accepted for purchase all of the notes tendered and made payment to tendering holders and called for redemption all of the balance of its outstanding 7 1/4% senior notes due 2011 and all of the balance of its outstanding 8 1/8% senior notes due 2013. The redemption prices of the notes due 2011 and 2013 were 100.000% and 101.354%, respectively, of the outstanding aggregate principal amount of each applicable note, plus accrued and unpaid interest thereon to the redemption date. On May 6, 2010, the Company made an irrevocable cash deposit, including accrued and unpaid interest, to the trustee for the notes due 2011 and 2013. As a result, such notes were satisfied and effectively discharged as of May 6, 2010.

9. DERIVATIVE FINANCIAL INSTRUMENTS

The Company entered into foreign currency forward exchange contracts with respect to €1,300,000 during the first quarter of 2010 and €250,000 during the second quarter of 2010 in connection with the acquisition of Tommy Hilfiger to hedge against its exposure to changes in the exchange rate for the Euro, as a portion of the acquisition purchase price was payable in cash and denominated in Euros. Such foreign currency forward exchange contracts were not designated as hedging instruments. The Company settled these foreign currency forward exchange contracts at a loss of $140,490 (of which $88,100 was recorded in the second quarter of 2010) on May 6, 2010 in connection with the Company’s completion of the Tommy Hilfiger acquisition. Such loss is reflected in Other Loss in the Company’s Consolidated Statement of Operations.

The Company has exposure to changes in foreign currency exchange rates related to certain anticipated cash flows associated with international inventory purchases of Tommy Hilfiger. To help manage this exposure, the Company periodically uses foreign currency forward exchange contracts.

The Company also has exposure to interest rate volatility related to its senior secured term loan facilities. The Company has entered into an interest rate swap agreement and an interest rate cap agreement to hedge against this exposure. Please see Note 8, “Debt”, for a further discussion of these agreements.

The Company records the foreign currency forward exchange contracts, interest rate swap agreement and interest rate cap agreement (collectively referred to as “cash flow hedges”) at fair value in its Consolidated Balance Sheets. Changes in fair value of cash flow hedges that are designated as effective hedging instruments are deferred in equity as a component of Accumulated Other Comprehensive Income (Loss). The cash flows from such hedges are presented in the same category on the Consolidated Statement of Cash Flows as the item being hedged. Any ineffectiveness in such cash flow hedges is immediately recognized in earnings and no contracts were excluded from effectiveness testing. In addition, changes in the fair value of hedges that are not designated as effective hedging instruments are immediately recognized in earnings. The Company does not use derivative financial instruments for trading or speculative purposes.




11







The following table summarizes the fair value and presentation in the Consolidated Balance Sheets for the Company’s derivative financial instruments:

 
Asset Derivatives (Classified in Other Current Assets)
Liability Derivatives (Classified in Accrued Expenses and Other Liabilities)
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
Contracts designated as hedges:
 
 
 
 
 
 
 
Foreign currency forward exchange contracts    
$
88

 
$
3,766

 
$
21,340

 
$
9,473

Interest rate contracts
301

 

 
7,935

 

Total contracts designated as hedges
389

 
3,766

 
29,275

 
9,473

Undesignated contracts:
 
 
 
 
 
 
 
Foreign currency forward exchange contracts    
127

 

 
56

 

Total undesignated contracts
127

 

 
56

 

Total
$
516

 
$
3,766

 
$
29,331

 
$
9,473



At July 31, 2011, the notional amount of foreign currency forward exchange contracts outstanding was approximately $445,000. Such contracts expire between August 2011 and April 2013.

The following table summarizes the effect of the Company’s cash flow hedges designated as hedging instruments:

 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
 
Loss Reclassified from Accumulated Other Comprehensive Income into Expense (Effective Portion)             
 
Loss Recognized in Income on Derivatives (Ineffective Portion)
 
 
Location
 Amount
 
Location
 Amount
Thirteen Weeks Ended
7/31/11
 
8/1/10
 
 
7/31/11
 
8/1/10
 
 
7/31/11
 
8/1/10
Foreign currency forward exchange contracts    
$
1,203

 
$
(5,785
)
 
Cost of goods sold
$
(14,846
)
 
$
(3,914
)
 
Selling, general and administrative expenses
$

 
$
(6,106
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts    
(8,805
)
 

 
Interest expense
(870
)
 

 
 

 

Total    
$
(7,602
)
 
$
(5,785
)
 
 
$
(15,716
)
 
$
(3,914
)
 
 
$

 
$
(6,106
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Twenty-Six Weeks Ended
7/31/11
 
8/1/10
 
 
7/31/11
 
8/1/10
 
 
7/31/11
 
8/1/10
Foreign currency forward exchange contracts    
$
(23,663
)
 
$
(5,785
)
 
Cost of goods sold
$
(24,445
)
 
$
(3,914
)
 
Selling, general and administrative expenses
$

 
$
(6,106
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts    
(8,805
)
 

 
Interest expense
(870
)
 

 
 

 

Total    
$
(32,468
)
 
$
(5,785
)
 
 
$
(25,315
)
 
$
(3,914
)
 
 
$

 
$
(6,106
)


12





Accumulated Other Comprehensive Loss on foreign currency forward exchange contracts at July 31, 2011 of $13,350 is estimated to be reclassified in the next 12 months in the Consolidated Statements of Operations to costs of goods sold as the underlying inventory is purchased and sold. In addition, Accumulated Other Comprehensive Loss for interest rate contracts at July 31, 2011 of $4,646 is estimated to be reclassified to interest expense within the next 12 months.

The following table summarizes the effect of the Company’s foreign currency forward exchange contracts for inventory purchases that were not designated as hedging instruments:
 
Gain (Loss) Recognized in Income
 
Location
 
Amount
 
 
 
7/31/11
 
8/1/10
Thirteen Weeks Ended    
Selling, general and administrative expenses
 
$
202

 
$

Twenty-Six Weeks Ended    
Selling, general and administrative expenses
 
258

 



Please refer to Note 10, “Fair Value Measurements,” for disclosures on fair value measurements of the Company’s derivative financial instruments. The Company had no derivative financial instruments with credit risk related contingent features underlying the related contracts as of July 31, 2011.

10. FAIR VALUE MEASUREMENTS

Financial Accounting Standards Board (“FASB”) guidance for fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. It also establishes a three level hierarchy that prioritizes the inputs used to measure fair value. The three levels of the hierarchy are defined as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 – Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data.

Level 3 – Unobservable inputs reflecting the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability based on the best information available.

13




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 were required to be remeasured at fair value on a recurring basis during the twenty-six weeks ended July 31, 2011 and August 1, 2010, respectively:

 
 
     Fair Value Measurement Using      
 
 
July 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total Fair Value
Derivative instrument assets
 
 
 
 
 
 
 
 
Foreign currency forward exchange contracts    
 
N/A
 
$
215

 
N/A
 
$
215

  Interest rate contracts
 
N/A
 
301

 
N/A
 
301

  Total
 
N/A
 
$
516

 
N/A
 
$
516

Derivative instrument liabilities
 
 
 
 
 
 
 
 
Foreign currency forward exchange contracts    
 
N/A     
 
$
21,396

 
N/A
 
$
21,396

Interest rate contracts    
 
N/A     
 
7,935

 
N/A
 
7,935

Total    
 
N/A     
 
$
29,331

 
N/A
 
$
29,331

 
 
 
 
 
 
 
 
 
August 1, 2010
 
 
 
 
 
 
 
 
Derivative instrument assets
 
 
 
 
 
 
 
 
Foreign currency forward exchange contracts    
 
N/A     
 
$
3,766

 
N/A     
 
$
3,766

Derivative instrument liabilities
 
 
 
 
 
 
 
 
Foreign currency forward exchange contracts    
 
N/A     
 
$
9,473

 
N/A     
 
$
9,473


The fair value of the foreign currency forward exchange contracts related to inventory purchases 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 values of the interest rate swap and cap are based on observable interest rate yield curves and represent 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 nonrecurring basis (consisting of property and equipment and other long-lived assets) during the twenty-six weeks ended July 31, 2011, and the total impairments recorded as a result of the remeasurement process:

 
 
     Fair Value Measurement Using      
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Fair Value As Of Impairment Date
 
Total Impairments
 
 
 
 
 
 
 
 
 
 
 
Twenty-six weeks ended 7/31/11
 
N/A
 
N/A
 
$

 
$

 
$
1,062


Long-lived assets with a carrying amount of $1,062 were written down to a fair value of zero during the twenty-six weeks ended July 31, 2011 in connection with the Company’s negotiated early termination of its license to market sportswear under the Timberland brand. (Please see Note 13, “Activity Exit Costs,” for a further discussion.) Such assets were deemed to have no future use or economic benefit based on the Company’s analysis using market participant assumptions, and therefore no expected future cash flows.

There were no non-financial assets or liabilities that were required to be remeasured at fair value on a non-recurring basis during the twenty-six week period ended August 1, 2010.

The carrying amounts and the fair values of the Company’s cash and cash equivalents, short-term borrowings and long-term debt for the periods ended July 31, 2011 and August 1, 2010 were as follows:


14




 
7/31/11
 
8/1/10
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
 
 

 
 

 
 

 
 

Cash and cash equivalents
$
287,691

 
$
287,691

 
$
475,340

 
$
475,340

Short-term borrowings
13,006

 
13,006

 
4,617

 
4,617 

Long-term debt (including portion classified as current)
2,141,878

 
2,191,572

 
2,491,635

 
2,522,577


The fair values of cash and cash equivalents and short-term borrowings approximate their carrying values 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.

11. STOCK-BASED COMPENSATION

The Company’s 2006 Stock Incentive Plan (the “2006 Plan”) was approved at the Company’s Annual Meeting of Stockholders held in June 2006 and its material terms were reapproved in June 2011. The 2006 Plan replaced the Company’s then-existing 1997, 2000 and 2003 Stock Option Plans. The 1997, 2000 and 2003 Stock Option Plans terminated on the date of such approval, other than with respect to outstanding options under those plans, which continue to be governed by the respective plan under which they were granted. 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 (“NQs”); (ii) incentive stock options (“ISOs”); (iii) stock appreciation rights; (iv) restricted stock; (v) restricted stock units (“RSUs”); (vi) performance shares; and (vii) 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, applicable performance period(s) and performance measure(s), and such other terms and conditions as the plan committee determines.

Through July 31, 2011, the Company has granted under the 2006 Plan: (i) service-based NQs and RSUs; (ii) contingently issuable performance shares; and (iii) RSUs that are intended to satisfy the performance-based condition for deductibility under Section 162(m) of the Internal Revenue Code. According to the terms of the 2006 Plan, for purposes of determining the number of shares available for grant, each share underlying a stock option award reduces the number available by one share and each share underlying an RSU or performance share award reduces the number available by three shares for awards made before April 29, 2009 and by two shares for awards made on or after April 29, 2009. The per share exercise price of options granted under the 2006 Plan cannot be less than the closing price of the common stock on the date of grant (the business day prior to the date of grant for awards granted prior to September 21, 2006).

The Company currently has service-based NQs and ISOs outstanding under its 1997, 2000 and 2003 Stock Option Plans. Such options were granted with an exercise price equal to the closing price of the common stock on the business day immediately preceding the date of grant.

Net income (loss) for the twenty-six weeks ended July 31, 2011 and August 1, 2010 included $20,650 and $12,224, respectively, of pre-tax expense related to stock-based compensation.

Options currently outstanding are generally cumulatively exercisable in four equal annual installments commencing one year after the date of grant. The vesting of options outstanding is also generally accelerated upon retirement (as defined in the applicable plan). Options are generally granted with a 10-year term.

The Company estimates the fair value of stock options granted at the date of grant using the Black-Scholes-Merton model. The estimated fair value of the options, net of estimated forfeitures, is expensed on a straight-line basis over the options’ vesting period.

15




The following summarizes the assumptions used to estimate the fair value of service-based stock options granted during the twenty-six weeks ended July 31, 2011 and August 1, 2010, respectively:

 
Twenty-Six Weeks Ended
 
7/31/11
 
8/1/10
Weighted average risk‑free interest rate    
2.62
%
 
2.99
%
Weighted average expected option term (in years)    
6.25

 
6.25

Weighted average expected volatility    
44.35
%
 
41.78
%
Expected annual dividends per share    
$
0.15

 
$
0.15

Weighted average estimated fair value per option    
$
29.81

 
$
26.45


The Company has continued to utilize the simplified method to estimate the expected term for its “plain vanilla” stock options granted due to a lack of relevant historical data resulting, in part, from changes in the pool of employees receiving option grants and changes in the vesting schedule of certain grants. The Company will continue to evaluate the appropriateness of utilizing such method.

Service-based stock option activity for the twenty-six weeks ended July 31, 2011 was as follows:

 
Options
 
Weighted Average Price Per Option
Outstanding at January 30, 2011
2,853

 
$
33.41

  Granted
195

 
65.16

  Exercised
340

 
34.02

  Cancelled

 

Outstanding at July 31, 2011
2,708

 
$
35.62

Exercisable at July 31, 2011
1,864

 
$
32.60


RSUs granted to employees generally vest in three annual installments (25%, 25% and 50%) commencing two years after the date of grant. Service-based RSUs granted to non-employee directors vest in four equal annual installments commencing one year after the date of grant for awards granted prior to 2010 and vest in full one year after the date of grant for awards granted during or after 2010. The underlying RSU award agreements generally provide for accelerated vesting upon the award recipient’s retirement (as defined in the 2006 Plan). The fair value of service-based RSUs is equal to the closing price of the Company’s common stock on the date of grant and is expensed, net of estimated forfeitures, on a straight-line basis over the RSUs’ vesting period.

RSU activity for the twenty-six weeks ended July 31, 2011 was as follows:


 
RSUs
 
Weighted Average Grant Date Fair Value
Non-vested at January 30, 2011
814

 
$
40.24

  Granted
241

 
68.45

  Vested
212

 
41.01

  Cancelled
16

 
53.13

Non-vested at July 31, 2011
827

 
$
48.03


The Company granted restricted stock to certain of Tommy Hilfiger’s management employees in connection with the Company’s acquisition of Tommy Hilfiger in the second quarter of 2010. The restricted stock is not subject to the 2006 Plan but its grant was approved by the Company’s Board of Directors. The shares of restricted stock are registered in the names of each such employee and are held in a third-party escrow account until they vest, at which time the stock will be delivered to the applicable employee. The restricted stock generally vests upon the second anniversary of the date of the closing of the acquisition.

16





The fair value of restricted stock is equal to the closing price of the Company’s common stock on the date of grant (the closing date of the acquisition) and is expensed, net of forfeitures, on a straight-line basis over the restricted stock’s vesting period.

Restricted stock activity for the twenty-six weeks ended July 31, 2011 was as follows:

 
Restricted Stock  
 
Weighted Average Grant Date Fair Value
Non-vested at January 30, 2011
350

 
$
60.41

  Granted

 

  Vested
14

 
60.41

Non-vested at July 31, 2011
336

 
$
60.41


The Company granted contingently issuable performance share awards to certain of the Company’s senior executives during the first quarter of 2011 subject to a performance period of two years. The Company granted contingently issuable performance share awards to all of the Company’s senior executives (other than senior executives of Tommy Hilfiger) during the second quarter of 2010 subject to a performance period of three years. The Company granted contingently issuable performance share awards to all then-executive officers of the Company during the first quarter of 2010 subject to a performance period of two years. The final number of shares that will be earned, if any, is contingent upon the Company’s achievement of goals for each of the performance periods based on both earnings per share growth and return on equity for the awards granted in 2011 and earnings per share growth for the awards granted in 2010 during the applicable performance cycle. Depending on the level of earnings per share achieved, up to a total number of 85 and 603 shares could be issued for all non-vested performance share awards granted in 2011 and 2010, respectively. The Company records expense for the contingently issuable performance shares ratably over each applicable vesting period based on fair value and the Company’s current expectations of the probable number of shares that will ultimately be issued. The fair value of the contingently issuable performance shares is equal to the closing price of the Company’s common stock on the date of grant, reduced for the present value of any dividends expected to be paid on the Company’s common stock during the performance cycle, as these contingently issuable performance shares do not accrue dividends prior to being earned.

Performance share activity for the twenty-six weeks ended July 31, 2011 was as follows:

 
     Performance Shares
 
Weighted Average Grant Date Fair Value
Non-vested at January 30, 2011
611

 
$
52.69

  Granted
85

 
71.26

  Vested

 

  Cancelled
8

 
50.73

Non-vested at July 31, 2011
688

 
$
55.00


The Company receives a tax deduction for certain transactions associated with its stock plan awards. The actual income tax benefits realized from these transactions for the twenty-six weeks ended July 31, 2011 and August 1, 2010 were $7,805 and $5,421, respectively. Of those amounts, $4,238 and $3,482, respectively, were reported as excess tax benefits. Excess tax benefits arise when the actual tax benefit resulting from a stock plan award transaction exceeds the tax benefit associated with the grant date fair value of the related stock award.

12. STOCKHOLDERS’ EQUITY

Common Stock Offering

The Company sold 5,750 shares of its common stock on April 28, 2010 for net proceeds after commissions, discounts and related fees and expenses totaling $364,860 during the first quarter of 2010, which were used to fund a portion of the purchase price and fees relating to the acquisition of Tommy Hilfiger. Of the 5,750 shares, a total of 5,250 shares were released from treasury and 500 shares were newly issued.


17

Series A Convertible Preferred Stock Issuance

On May 6, 2010, the Company completed the sale of an aggregate of 8 shares of Series A convertible preferred stock, par value $100.00 per share, for an aggregate gross purchase price of $200,000 and for net proceeds of $188,595 after related fees and expenses. The Series A convertible preferred stock has a liquidation preference of $25,000 per share and is convertible at a price of $47.74 into 4,189 shares of common stock. The conversion price was established in a definitive agreement, which formed a binding commitment with the preferred stockholders in March 2010, and is subject to equitable adjustment in the event of the Company taking certain actions, including stock splits, stock dividends, mergers, consolidations or other capital reorganizations. The Series A convertible preferred stock is not subject to mandatory redemption nor is it redeemable, in whole or in part, by the Company at its option or that of any holder. The holders of the Series A convertible preferred stock are entitled to vote and participate in dividends with the holders of the Company’s common stock on an as-converted basis.

Common Stock Issuance

On May 6, 2010, the Company issued 7,873 shares of its common stock, par value $1.00 per share, as part of the consideration paid to the former shareholders of Tommy Hilfiger in connection with the acquisition.

13. ACTIVITY EXIT COSTS

Tommy Hilfiger Integration and Exit Costs

In connection with the Company’s acquisition of Tommy Hilfiger in the second quarter of 2010 and the related integration, the Company incurred certain costs related to severance and termination benefits, long-lived asset impairments, inventory liquidations and lease/contract terminations, including costs associated with the exit of certain Tommy Hilfiger product categories. Such costs were as follows:
 
Total Expected to be Incurred
 
Incurred During the Thirteen Weeks Ended 7/31/11
 
Incurred During the Twenty-Six Weeks Ended 7/31/11
 
Cumulative Incurred to Date
Severance, termination benefits and other costs
$
33,167

 
$
1,661

 
$
11,374

 
$
31,167

Long-lived asset impairments
11,017

 

 

 
11,017

Inventory liquidation costs
4,736

 
2,153

 
2,153

 
4,736

Lease/contract termination and related costs
18,179

 
992

 
14,014

 
17,179

Total
$
67,099

 
$
4,806

 
$
27,541

 
$
64,099


Liabilities for severance and termination benefits and lease/contract termination costs recorded in connection with the acquisition and integration of Tommy Hilfiger were principally recorded in Accrued Expenses in the Company’s Consolidated Balance Sheets and were as follows:

 
Liability at 1/30/11  
 
Costs Incurred During the Twenty-Six Weeks
Ended 7/31/11
 
Costs Paid During the Twenty-Six Weeks Ended 7/31/11
 
Liability at 7/31/11
Severance, termination benefits and other costs
$
16,258

 
$
11,374

 
$
17,163

 
$
10,469

Lease/contract termination and related costs
3,165

 
14,014

 
9,440

 
7,739

Total
$
19,423

 
$
25,388

 
$
26,603

 
$
18,208


The charges for severance, termination benefits, lease/contract termination and other costs incurred during the twenty-six weeks ended July 31, 2011 and the remainder of charges expected to be incurred relate principally to selling, general and administrative expenses of the Company’s Tommy Hilfiger North America segment. Inventory liquidation costs incurred during the twenty-six weeks ended July 31, 2011 were included in cost of goods sold of the Company’s Tommy Hilfiger North America segment.

18





Timberland Exit Costs

The Company negotiated during the second quarter of 2011 an early termination of its license to market sportswear under the Timberland brand. In connection with this termination, which will become effective in 2012, the Company incurred certain costs related to severance and termination benefits, long-lived asset impairments, contract termination and other costs. Such costs were as follows:
 
Total Expected to be Incurred
 
Incurred During the Thirteen and Twenty-Six Weeks Ended 7/31/11
Severance, termination benefits and other costs
$
1,679

 
$
679

Long-lived asset impairments
1,062

 
1,062

Contract termination and related costs
4,909

 
4,909

Total
$
7,650

 
$
6,650


The charges incurred during the twenty-six weeks ended July 31, 2011 and the remainder of charges expected to be incurred relate principally to selling, general and administrative expenses of the Company’s Heritage Brands Wholesale Sportswear segment.

14. NET INCOME (LOSS) PER COMMON SHARE

The Company utilizes the two-class method of calculating basic net income (loss) per common share, as holders of the Company’s Series A convertible preferred stock participate in dividends with holders of the Company’s common stock. Net losses are not allocated to holders of the Series A convertible preferred stock.

The Company computed its basic and diluted net income (loss) per common share as follows:


19




 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
 
 
 
 
 
 
 
 
Net income (loss)
$
66,729

 
$
(70,624
)
 
$
124,396

 
$
(98,237
)
Less:
 
 
 
 
 
 
 
Common stock dividends paid to holders of Series A convertible preferred stock

 
(157
)
 
(314
)
 
(157
)
Allocation of income to Series A convertible preferred stock
(3,920
)
 

 
(7,008
)
 

Net income (loss) available to common stockholders for basic net income (loss) per common share
62,809

 
(70,781
)
 
117,074

 
(98,394
)
Add back:
 
 
 
 
 
 
 
Common stock dividends paid to holders of Series A convertible preferred stock

 

 
314

 

Allocation of income to Series A convertible preferred stock
3,920

 

 
7,008

 

Net income (loss) available to common stockholders for diluted net income (loss) per common share
$
66,729

 
$
(70,781
)
 
$
124,396

 
$
(98,394
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for basic net income (loss) per common share
67,129

 
65,875

 
66,964

 
59,077

Weighted average impact of dilutive securities
1,551

 

 
1,578

 

Weighted average impact of assumed convertible preferred stock conversion
4,189

 

 
4,189

 

Total shares for diluted net income (loss) per common share
72,869

 
65,875

 
72,731

 
59,077

 
 
 
 
 
 
 
 
Basic net income (loss) per common share
$
0.94

 
$
(1.07
)
 
$
1.75

 
$
(1.67
)
 
 
 
 
 
 
 
 
Diluted net income (loss) per common share
$
0.92

 
$
(1.07
)
 
$
1.71

 
$
(1.67
)

Potentially dilutive securities excluded from the calculation of diluted net income (loss) per common share were as follows:

 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
 
 
 
 
 
 
 
 
Weighted average antidilutive securities
396
 
4,565
 
320
 
4,588

Contingently issuable shares 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 (loss) per common share for that period. The Company had contingently issuable awards outstanding that did not meet the performance conditions as of July 31, 2011 and August 1, 2010 and, therefore, were excluded from the calculation of diluted net income (loss) per common share for the thirteen and twenty-six weeks ended July 31, 2011 and August 1, 2010. The maximum number of potentially dilutive shares that could be issued upon vesting for such awards was 657 and 700 as of July 31, 2011 and August 1, 2010, respectively. These amounts were also excluded from the computation of weighted average antidilutive securities. Conversion of the Series A convertible preferred stock into 4,051 and 2,026 weighted average common shares outstanding for the thirteen and twenty-six weeks ended August 1, 2010, respectively, was not assumed because the inclusion thereof would have been antidilutive. These amounts were also excluded from the computation of weighted average antidilutive securities.

15. NONCASH INVESTING AND FINANCING TRANSACTIONS

During the twenty-six weeks ended July 31, 2011 and August 1, 2010, the Company recorded increases to goodwill of $22,157 and $18,235, respectively, related to liabilities incurred for contingent purchase price payments to Mr. Calvin Klein. Such amounts are not due or paid in cash until 45 days subsequent to the Company’s applicable quarter end. As such, during the twenty-six weeks ended July 31, 2011 and August 1, 2010, the Company paid $25,305 and $21,452, respectively, in cash related to contingent purchase price payments to Mr. Calvin Klein that were recorded as additions to goodwill during the

20

periods the liabilities were incurred.

During the first quarter of 2011, the Company recorded a loss of $12,876 to write-off previously capitalized debt issuance costs in connection with the amendment and restatement of its senior secured credit facility.

During the second quarter of 2010, the Company issued 7,873 shares of its common stock valued at $475,607 in connection with the acquisition of Tommy Hilfiger.

During the second quarter of 2010, the Company recorded a loss of $3,005 to write-off previously capitalized debt issuance costs in connection with the extinguishment of its 7 1/4 % senior notes due 2011 and its 8 1/8 % senior notes due 2013.

The Company issued to Mr. Calvin Klein a nine-year warrant to purchase 320 shares of the Company’s common stock at $28.00 per share in connection with the Company’s acquisition of Calvin Klein in 2003. 160 shares of such warrant were exercised and the underlying shares were issued during the twenty-six weeks ended August 1, 2010. The exercise price for these shares was satisfied through the Company’s withholding of 68 shares, which had a total fair market value that approximated the exercise price, from the shares that would have otherwise been issuable. The balance of 160 shares of such warrant were exercised and the underlying shares were issued during the third quarter of 2010.

16. SEGMENT DATA

The Company manages its operations through its operating divisions, which are aggregated into seven reportable segments:  (i) Heritage Brand Wholesale Dress Furnishings; (ii) Heritage Brand Wholesale Sportswear; (iii) Heritage Brand Retail; (iv) Calvin Klein Licensing; (v) Tommy Hilfiger North America; (vi) Tommy Hilfiger International; and (vii) Other (Calvin Klein Apparel).

Heritage Brand Wholesale Dress Furnishings Segment - This segment consists of the Company’s heritage brand wholesale dress furnishings division. This segment derives revenue primarily from marketing both dress shirts and neckwear under the brand names ARROW, IZOD, Kenneth Cole New York, Kenneth Cole Reaction, JOE Joseph Abboud, DKNY and MICHAEL Michael Kors, as well as dress shirts under the brand names Van Heusen, Geoffrey Beene and CHAPS. The Company markets these dress shirt and neckwear brands, as well as certain other owned and licensed brands and various private label brands, primarily to department, mid-tier department and specialty stores.

Heritage Brand Wholesale Sportswear Segment - The Company aggregates the results of its heritage brand wholesale sportswear divisions into the Heritage Brand Wholesale Sportswear segment. This segment derives revenue primarily from marketing men’s sportswear under the brand names Van Heusen, IZOD, Geoffrey Beene, ARROW and Timberland, and women’s sportswear under the brand name IZOD to department, mid-tier department and specialty stores. The Company negotiated during the second quarter of 2011 the early termination of its license to use the Timberland trademarks on men’s sportswear and will be ending the business in 2012.

Heritage Brand Retail Segment - The Company aggregates the results of its three heritage brand retail divisions into the Heritage Brand Retail segment. This segment derives revenue principally from operating retail stores, primarily in outlet centers in the United States, which sell apparel, footwear, accessories and related products under the brand names Van Heusen, IZOD, Bass and G.H. Bass & Co.

Calvin Klein Licensing Segment - The Company aggregates the results of its Calvin Klein licensing and advertising division into the Calvin Klein Licensing segment. This segment derives revenue principally from licensing and similar arrangements worldwide relating to the use by third parties of the brand names Calvin Klein Collection, ck Calvin Klein and Calvin Klein for a broad array of products and retail services. This segment also derives revenue from the Company’s Calvin Klein Collection wholesale business and from selling Calvin Klein Collection branded high-end collection apparel and accessories through the Company’s own full price Calvin Klein Collection retail store located in New York City, both of which the Company operates directly in support of the global licensing business.

Tommy Hilfiger North America Segment - The Company aggregates the results of its Tommy Hilfiger wholesale and retail divisions in North America into the Tommy Hilfiger North America segment. This segment derives revenue principally from (i) marketing Tommy Hilfiger branded apparel and related products at wholesale in the United States and Canada, primarily to department stores and through licensees; and (ii) operating retail stores in the United States and Canada and an e-commerce website, which sell Tommy Hilfiger branded apparel, accessories and related products.

Tommy Hilfiger International Segment - The Company aggregates the results of its Tommy Hilfiger wholesale and retail

21




divisions that operate outside of North America into the Tommy Hilfiger International segment. This segment derives revenue principally from (i) marketing Tommy Hilfiger branded apparel and related products at wholesale principally in Europe, primarily to department and specialty stores and franchise operators of Tommy Hilfiger stores, and through distributors and licensees; and (ii) operating retail stores and an e-commerce website in Europe and retail stores in Japan, which sell Tommy Hilfiger branded apparel, accessories and related products.

Other (Calvin Klein Apparel) Segment - The Company aggregates the results of its Calvin Klein apparel divisions into the Other (Calvin Klein Apparel) segment. This segment derives revenue from the Company’s marketing at wholesale of apparel and related products under the brand names Calvin Klein and ck Calvin Klein, primarily to department, mid-tier department and specialty stores, and at retail through the Company’s e-commerce website and Calvin Klein retail stores, which are primarily located in outlet centers in the United States.


22




The following tables present summarized information by segment:
 
 
Thirteen Weeks Ended
 
Twenty-Six Weeks Ended
 
 
7/31/11
 
8/1/10
 
7/31/11
 
8/1/10
Revenue – Heritage Brand Wholesale Dress Furnishings
 
 
 
 
 
 
 
 
Net sales    
 
$
123,771

 
$
102,928

 
$
258,460

 
$
235,099

Royalty revenue    
 
1,468

 
1,299

 
2,953

 
2,764

Advertising and other revenue    
 
414

 
637

 
818

 
1,016

Total    
 
125,653

 
104,864

 
262,231

 
238,879

 
 
 
 
 
 
 
 
 
Revenue – Heritage Brand Wholesale Sportswear
 
 
 
 
 
 
 
 
Net sales    
 
96,107

 
88,545

 
231,561

 
223,875

Royalty revenue    
 
2,707

 
2,624

 
5,148

 
5,101

Advertising and other revenue    
 
475

 
440

 
881

 
898

Total    
 
99,289

 
91,609

 
237,590

 
229,874

 
 
 
 
 
 
 
 
 
Revenue – Heritage Brand Retail
 
 
 
 
 
 
 
 
Net sales    
 
175,212

 
171,432

 
306,889

 
306,615

Royalty revenue    
 
1,239

 
1,185

 
2,537

 
2,368

Advertising and other revenue    
 
277

 
164

 
518

 
424

Total    
 
176,728

 
172,781

 
309,944

 
309,407

 
 
 
 
 
 
 
 
 
Revenue – Calvin Klein Licensing
 
 
 
 
 
 
 
 
Net sales    
 
7,993

 
5,701

 
15,435

 
14,655

Royalty revenue    
 
58,738

 
52,293

 
124,512

 
112,027

Advertising and other revenue    
 
24,258

 
20,449

 
50,257

 
42,849

Total    
 
90,989

 
78,443

 
190,204

 
169,531

 
 
 
 
 
 
 
 
 
Revenue – Tommy Hilfiger North America
 
 
 
 
 
 
 
 
Net sales    
 
293,760

 
256,144

 
561,397

 
256,144

Royalty revenue    
 
4,260

 
4,051

 
7,121

 
4,051

Advertising and other revenue    
 
2,005

 
833

 
3,291

 
833

Total    
 
300,025

 
261,028

 
571,809

 
261,028

 
 
 
 
 
 
 
 
 
Revenue – Tommy Hilfiger International
 
 
 
 
 
 
 
 
Net sales    
 
381,976

 
263,293

 
815,632

 
263,293

Royalty revenue    
 
9,790

 
6,654

 
18,813

 
6,654

Advertising and other revenue    
 
1,083

 
1,200

 
2,063

 
1,200

Total    
 
392,849

 
271,147

 
836,508

 
271,147

 
 
 
 
 
 
 
 
 
Revenue – Other (Calvin Klein Apparel)
 
 
 
 
 
 
 
 
Net sales    
 
148,911

 
123,396

 
295,342

 
242,446

Total    
 
148,911

 
123,396

 
295,342

 
242,446

 
 
 
 
 
 
 
 
 
Total Revenue
 
 
 
 
 
 
 
 
Net sales    
 
1,227,730

 
1,011,439

 
2,484,716

 
1,542,127

Royalty revenue    
 
78,202

 
68,106

 
161,084

 
132,965

Advertising and other revenue    
 
28,512

 
23,723

 
57,828

 
47,220

Total    
 
$
1,334,444

 
$
1,103,268

 
$
2,703,628

 
$
1,722,312



23




 
Thirteen Weeks Ended
 
 
Twenty-Six Weeks Ended
 
 
7/31/11
 
 
8/1/10
 
 
7/31/11
 
 
8/1/10
 
Income before interest and taxes – Heritage Brand Wholesale Dress Furnishings
$
14,086

 
 
$
7,059

 
 
$
34,518

 
 
$
25,519

 
 
 
 
 
 
 
 
 
 
 
 
 
(Loss) income before interest and taxes – Heritage Brand Wholesale Sportswear
(5,770
)
(2) 
 
7,194

 
 
7,912

(2) 
 
28,082

 
 
 
 
 
 
 
 
 
 
 
 
 
Income before interest and taxes – Heritage Brand Retail
15,234

 
 
16,794

 
 
19,761

 
 
25,478

 
 
 
 
 
 
 
 
 
 
 
 
 
Income before interest and taxes – Calvin Klein Licensing
43,461

 
 
39,350

 
 
77,603

 
 
76,333