SUBSEQUENT EVENTS (UNAUDITED)

Warnaco Acquisition

The Company completed its acquisition of Warnaco on February 13, 2013. Warnaco designs, sources, markets, licenses and distributes a broad line of intimate apparel, sportswear and swimwear products worldwide. Warnaco’s products are sold under the Calvin Klein, Speedo, Chaps, Warner’s and Olga brand names. Ralph Lauren Corporation reacquired the Chaps license effective contemporaneously with the Warnaco acquisition.

The acquisition consolidated the Company’s direct global control of the Calvin Klein brand image and commercial decisions for the two largest Calvin Klein apparel categories—jeanswear and underwear. In addition, the Company believes the acquisition takes advantage of its and Warnaco’s complementary geographic platforms. Warnaco’s operations in Asia and Latin America will enhance the Company’s opportunities in these high-growth regions, and the Company will have the ability to leverage its expertise and infrastructure in North America and Europe to enhance the growth and profitability of Warnaco’s Calvin Klein jeanswear and underwear businesses in these regions. With a diversified brand portfolio and strong operations in every major consumer market around the world, the Company believes its business will be better balanced across geographies, channels of distribution, product categories and price points, and it will have the opportunity to realize revenue growth and enhanced profitability.

The Company acquired Warnaco for total consideration of approximately $3,147,850 as of the acquisition date. $2,181,127 was paid in cash and 7,679 shares of the Company’s common stock, par value $1.00 per share, were issued. In addition, the Company issued replacement stock awards related to employee stock-based compensation grants valued at approximately $40,000, which for accounting purposes are included in the total consideration. The value of the replacement stock awards, which remains subject to finalization, was determined based on the proportionate amount of the vesting period that had lapsed as of the acquisition date. The Company incurred during 2012 certain pre-tax costs associated with the acquisition, totaling $42,579, which are included within selling, general and administrative expenses in its Consolidated Income Statement. The Company expects to incur approximately $175,000 to $200,000 of additional pre-tax charges over the next four years, approximately $125,000 of which is expected to be incurred in 2013.

The Company funded the cash portion and related costs of the Warnaco acquisition and repaid a portion of its and Warnaco’s previously outstanding debt with the net proceeds of (i) the issuance of $700,000 of 4 1/2% senior notes due 2022; and (ii) the borrowing of $3,075,000 of term loans under a new senior secured credit facility, as more fully described below.

Pro Forma Impact of the Transaction

The following table presents the Company’s pro forma consolidated results of operations for the years ended February 3, 2013 and January 29, 2012 as if the acquisition and the related financing transactions had occurred on January 31, 2011 (the first day of its fiscal year ended January 29, 2012) instead of on February 13, 2013. The pro forma results were calculated applying the Company’s accounting policies and reflect (i) the impact on revenue, cost of goods sold and selling, general and administrative expenses resulting from the elimination of intercompany transactions; (ii) the impact on amortization expense based on what would have been charged related to the fair value adjustments to Warnaco’s intangible assets recorded in connection with the acquisition; (iii) the impact on interest expense resulting from changes to the Company’s capital structure in connection with the acquisition; (iv) the impact on cost of goods sold resulting from acquisition date adjustments to the fair value of inventory; (v) the impact on selling, general and administrative expenses resulting from the elimination of transaction costs related to the acquisition that were included in the Company’s results of operations for the year ended February 3, 2013; and (vi) 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 Warnaco. Accordingly, such pro forma amounts are not indicative of the results that actually would have occurred had the acquisition been completed on January 31, 2011, nor are they indicative of the future operating results of the combined company.



	Pro Forma Year Ended
	2/3/13		1/29/12
Total revenue	$	8,291,972	$	8,194,842
Net income	498,342		307,245

Allocation of Consideration Transferred

Due to the limited time since the date of the acquisition, the initial disclosure for this business combination is incomplete as of the date of this filing. As such, it is impracticable for the Company to make certain business combination disclosures at this time. The Company is unable to present the acquisition date fair value of and information related to assets acquired and liabilities assumed. The Company will provide this information in its Quarterly Report on Form 10-Q for the quarter ending May 5, 2013.

New Senior Secured Credit Facility

Simultaneously with and related to the closing of the Warnaco acquisition, the Company entered into new senior secured credit facilities (“the new facilities”), the proceeds of which were used to fund a portion of the acquisition of Warnaco and to repay a portion of the Company’s and Warnaco’s previously outstanding debt. The new facilities consist of a $1,700,000 United States dollar-denominated Term Loan A, a $1,375,000 United States dollar-denominated Term Loan B and senior secured revolving credit facilities in an aggregate principal amount of $750,000 (based on the applicable exchange rates on February 13, 2013), consisting of (a) a $475,000 United States dollar-denominated revolving credit facility, (b) a $25,000 United States dollar-denominated revolving credit facility available in United States dollars or Canadian dollars and (c) a €185,850 Euro-denominated revolving credit facility available in Euro, Pounds Sterling, Japanese Yen and Swiss Francs.

As of February 13, 2013, the full amounts of the term loans were drawn. The revolving credit facilities include amounts available for letters of credit. As of February 13, 2013, the Company had drawn no revolving credit borrowings and approximately $86,900 of letters of credit. A portion of each of the United States revolving credit facility and Canadian revolving credit facility is also available for the making of swingline loans. The issuance of such letters of credit and the making of any swingline loan reduces the amount available under the applicable revolving credit facility. So long as certain conditions are satisfied, the Company may add one or more term loan facilities or increase the commitments under the revolving credit facilities by an aggregate amount not to exceed the greater of (a) $750,000 and (b) $1,250,000 as long as the ratio of the Company’s senior secured net debt to consolidated adjusted earnings before interest, taxes, depreciation and amortization (in each case calculated as set forth in the documentation relating to the new facilities) would not exceed 3.00:1.00 after giving pro forma effect to the incurrence of such increase, plus, in either case, an amount equal to the aggregate revolving commitments of any defaulting lender (to the extent the commitments with respect thereto have been terminated). The lenders under the new facilities are not required to provide commitments with respect to such additional facilities or increased commitments.

The terms of each of Term Loan A and Term Loan B contain a mandatory repayment schedule on a quarterly basis, such that the total annual repayments are as follows:



	Term Loan
	A			B
Borrowings on February 13, 2013	$	1,700,000		$	1,375,000

Percentage required to be repaid for the annual period ending March 31:
2014	5		%	1		%
2015	5		%	1		%
2016	7.5		%	1		%
2017	10		%	1		%
2018	72.5		%	1		%
2019				1		%
2020				94		%

The outstanding borrowings under the new facilities are prepayable at any time without penalty (other than customary breakage costs). The terms of the new facilities require the Company to repay certain amounts outstanding thereunder with (a) net cash proceeds of the incurrence of certain indebtedness, (b) net cash proceeds of certain asset sales or other dispositions (including as a result of casualty or condemnation) that exceed certain thresholds, to the extent such proceeds are not reinvested or committed to be reinvested in the business in accordance with customary reinvestment provisions and (c) a percentage of excess cash flow, which percentage is based upon the Company’s net leverage ratio during the relevant fiscal period.

The United States dollar-denominated borrowings under the new facilities bear interest at a rate equal to an applicable margin plus, as determined at the Company’s option, either (a) a base rate determined by reference to the greater of (i) the prime rate, (ii) the United States federal funds rate plus 1/2 of 1.00% and (iii) a one-month adjusted Eurocurrency rate plus 1.00% (provided that, in the case of Term Loan B, in no event will the base rate be deemed to be less than 1.75%) or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the new facilities (provided that, in the case of Term Loan B, in no event will the adjusted Eurocurrency rate be deemed to be less than 0.75%).

Canadian dollar-denominated borrowings under the new revolving credit 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 rate of interest per annum that Royal Bank of Canada establishes at its main office in Toronto, Ontario as the reference rate of interest in order to determine interest rates for loans in Canadian Dollars to its Canadian borrowers and (ii) the sum of (x) the average of the rates per annum for Canadian Dollar bankers’ acceptances having a term of one month that appears on the display referred to as “CDOR Page” of Reuters Monitor Money Rate Services as of 10:00 a.m. (Toronto time) on the date of determination, as reported by the administrative agent (and if such screen is not available, any successor or similar service as may be selected by the administrative agent), and (y) 0.75%, or (b) an adjusted Eurocurrency rate, calculated in a manner set forth in the new facility.

The borrowings under the new revolving credit 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 new facility.

The initial applicable margins will be in the case of Term Loan A and the revolving credit facilities, 2.00% for adjusted Eurocurrency rate loans and 1.00% for base rate loans, as applicable. The applicable margins in the case of Term Loan B are fixed at 2.50% for adjusted Eurocurrency rate loans and 1.50% for base rate loans, respectively. After the date of delivery of the compliance certificate and financial statements with respect to the Company’s fiscal quarter ending May 5, 2013, the applicable margin for borrowings under Term Loan A and the revolving credit facilities will be adjusted based on the Company’s quarter end net leverage ratio.

The new facilities contain covenants that restrict the Company’s ability to finance future operations or capital needs, to take advantage of other business opportunities that may be in its interest or to satisfy its obligations under its other outstanding debt. These covenants restrict the Company’s ability to, among other things:


•	incur or guarantee additional debt or extend credit;


•	make restricted payments, including paying dividends or making distributions on, or redeeming or repurchasing, the Company’s capital stock or certain debt;


•	make acquisitions and investments;


•	dispose of assets;


•	engage in transactions with affiliates;


•	enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends;


•	create liens on the Company’s assets or engage in sale/leaseback transactions; and


•	effect a consolidation or merger, or sell, transfer, or lease all or substantially all of the Company’s assets.

The new facilities require the Company to comply with certain financial covenants, including minimum interest coverage and maximum net leverage, beginning with its fiscal quarter ending August 4, 2013. A breach of any of these operating or financial covenants would result in a default under the applicable facility. If an event of default occurs and is continuing, the lenders could elect to declare all amounts then outstanding, together with accrued interest, to be immediately due and payable which would result in acceleration of the Company’s other debt. If the Company was unable to repay any such borrowings when due, the lenders could proceed against their collateral, which also secures some of the Company’s other indebtedness.

Prior Senior Secured Credit Facility

On February 13, 2013, the Company terminated its previously outstanding amended facility and repaid all outstanding borrowings thereunder.