ACQUISITIONS AND DIVESTITURES

Acquisition of Warnaco

The Company acquired on February 13, 2013 all of the outstanding equity interests in Warnaco. The results of Warnaco’s operations since that date are included in the Company’s consolidated financial statements. The businesses acquired with Warnaco design, source, market and distribute a broad line of intimate apparel, underwear, jeanswear and swim products worldwide under the Calvin Klein, Speedo, Warner’s and Olga brand names. Warnaco also sold men’s sportswear under the Chaps brand name. Ralph Lauren Corporation (“RLC”), the owner of the Chaps trademark, reacquired the Chaps license on February 14, 2013 as a result of the Company’s acquisition of Warnaco. Please see “Sale of Chaps Sportswear Assets” below for a further discussion.

Fair Value of the Acquisition Consideration

The acquisition date fair value of the acquisition consideration paid at closing totaled $3,137.1 million, which consisted of the following:



(In millions, except per share data)
Cash	$	2,180.0
Common stock (7.7 shares, par value $1.00 per share)	926.5
Warnaco employee replacement stock awards	39.8
Elimination of pre-acquisition liability to Warnaco	(9.2		)
Total fair value of the acquisition consideration	$	3,137.1

The fair value of the 7.7 million common shares issued was equal to the aggregate value of the shares at the closing market price of the Company’s common stock on February 12, 2013, the day prior to the closing. The value of the replacement stock awards was determined by multiplying the estimated fair value of the Warnaco awards outstanding at the time of the acquisition, reduced by an estimated value of awards to be forfeited, by the proportionate amount of the vesting period that had lapsed as of the acquisition date. Also included in the acquisition consideration was the elimination of a $9.2 million pre-acquisition liability to Warnaco.

The Company funded the cash portion and related costs of the Warnaco acquisition, repaid all outstanding borrowings under its previously outstanding senior secured credit facilities and repaid all of Warnaco’s previously outstanding long-term debt with the net proceeds of (i) the issuance of $700.0 million of 4 1/2% senior notes due 2022; and (ii) the borrowing of $3,075.0 million of term loans under new senior secured credit facilities.

Please see Note 8, “Debt,” Note 13, “Stockholders’ Equity,” and Note 14, “Stock-Based Compensation,” for further discussion of these aspects of the acquisition.

The Company incurred certain pre-tax costs directly associated with the acquisition, including short-lived noncash valuation adjustments and amortization, totaling approximately $170.0 million, of which approximately $43.0 million was recorded in 2012 and approximately $127.0 million was recorded during 2013. Please see Note 17, “Exit Activity Costs,” for further discussion of restructuring costs associated with the integration.

The operations acquired with Warnaco had total revenue of $2,085.1 million and a net loss, after noncash valuation adjustments and amortization and integration costs, of $(45.3) million for the period from the date of acquisition through February 2, 2014. These amounts are included in the Company’s results of operations for the year then ended.

Pro Forma Impact of the Transaction

The following table presents the Company’s pro forma consolidated results of operations for the year ended February 2, 2014, as if the acquisition and the related financing transactions had occurred on January 30, 2012 (the first day of its fiscal year ended February 3, 2013) 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 depreciation and amortization expense based on fair value adjustments to Warnaco’s property, plant and equipment and 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 elimination of transaction costs related to the acquisition that were included in the Company’s results of operations for the year ended February 2, 2014; and (vi) the tax effects of the above adjustments. The pro forma results do not include any realized or anticipated cost synergies or other effects of the 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 30, 2012, nor are they indicative of the future operating results of the combined company.



	Pro Forma
	Year Ended
(In millions)	2/2/14
Total revenue	$	8,249.4
Net income attributable to PVH Corp.	441.7

Acquisition of Russia Franchisee

In 2013, the Company acquired for $6.0 million three Tommy Hilfiger stores in Russia from a former Tommy Hilfiger franchisee. In 2014, the Company acquired for $4.3 million two additional Tommy Hilfiger stores in Russia from the same franchisee. These transactions were accounted for as business combinations.

Acquisition of Ireland Franchisee

In 2014, the Company acquired for $3.1 million six Tommy Hilfiger stores in Ireland from a former Tommy Hilfiger franchisee. This transaction was accounted for as a business combination.

Acquisition of Calvin Klein Performance Retail Businesses in Hong Kong and China

In 2014, the Company acquired for $6.7 million the Calvin Klein performance retail businesses in Hong Kong and China from a former Calvin Klein sublicensee. This transaction was accounted for as a business combination. The adjustment to the purchase price was finalized during 2015.

Sale of Chaps Sportswear Assets

As a result of the Company’s acquisition of Warnaco, RLC reacquired on February 14, 2013 the license for Chaps men’s sportswear that Warnaco held from affiliates of RLC. In connection with this transaction, the Company sold all of the assets of the Chaps sportswear business, which consisted principally of inventory, to RLC for gross proceeds of $18.3 million.

Sale of Bass Business

On November 4, 2013, the Company sold substantially all of the assets of its G.H. Bass & Co. (“Bass”) business. The Company completed the sale of these assets for gross proceeds of $49.2 million and recorded a loss of $16.0 million, which represented the excess of the carrying value of the assets over the proceeds received, plus transaction costs. This loss was principally included in selling, general and administrative expenses in the Company’s Consolidated Income Statement for the year ended February 2, 2014 and was included in the Heritage Brands Retail segment.

A small number of the Company’s Bass stores were excluded from the sale and were deemed to be impaired as of the end of the third quarter of 2013. The Company recorded a loss of $1.2 million related to the impaired stores. In addition, the Company recorded a gain of $3.3 million as a result of writing off certain liabilities in connection with the transaction. The Company also recognized costs related to severance and termination benefits for certain Bass employees, which totaled $1.9 million. The above-mentioned items were included in selling, general and administrative expenses in the Company’s Consolidated Income Statement for the year ended February 2, 2014 and were included in the Heritage Brands Retail segment.

In connection with the sale, the Company guaranteed lease payments for substantially all Bass retail stores included in the sale pursuant to the terms of noncancelable leases expiring on various dates through 2022. The estimated fair value of these guarantee obligations at the time of the sale was $4.4 million, which was recorded in the Heritage Brands Retail segment and was included in selling, general and administrative expenses in the Company’s Consolidated Income Statement for the year ended February 2, 2014. The estimated fair value of these guarantee obligations as of January 31, 2016 and February 1, 2015 was $1.9 million and $3.0 million, respectively, which was included in accrued expenses and other liabilities in the Company’s Consolidated Balance Sheets. Please see Note 11, “Fair Value Measurements,” and Note 21, “Guarantees,” for a further discussion.

In connection with the items outlined above, the Company recorded a net pre-tax loss of $20.2 million during 2013.