ASSETS HELD FOR SALE

Deconsolidation of the Mexico Business

On November 30, 2016, the Company and Grupo Axo, S.A.P.I. de C.V. (“Grupo Axo”) formed a joint venture (“PVH Mexico”), in which the Company acquired a 49% economic interest. PVH Mexico licenses from wholly owned subsidiaries of the Company the rights to distribute in Mexico certain products under the CALVIN KLEIN, TOMMY HILFIGER, Warner’s, Olga and Speedo brands. PVH Mexico was formed by merging the Company’s wholly owned subsidiary that principally operated and managed the Calvin Klein business in Mexico (the “Mexico business”) with a wholly owned subsidiary of Grupo Axo that distributes certain TOMMY HILFIGER brand products in Mexico. In connection with the formation of PVH Mexico, the Company deconsolidated the Mexico business (the “Mexico deconsolidation”) and began accounting for its 49% interest under the equity method of accounting in the fourth quarter of 2016.

In advance of the Mexico deconsolidation, the Company classified the assets and liabilities of the Mexico business as held for sale as of October 30, 2016 and recorded a pre-tax noncash loss of $76.9 million during the third quarter of 2016 (including $47.2 million related to foreign currency translation adjustment losses recorded in accumulated other comprehensive loss (“AOCL”)) to write down the net assets of the Mexico business to its estimated fair value as of October 30, 2016. The fair value of the net assets of $70.3 million was estimated as the fair value of the 49% interest in PVH Mexico that the Company would acquire upon the formation of PVH Mexico, based on future operating cash flow projections that were discounted at a rate of 15.0%, which accounted for the relative risks of the estimated future cash flows. Such fair value also included an estimated discount for a lack of marketability of 10.0%. The Company classified this as a Level 3 fair value measurement due to the use of these significant unobservable inputs.

The $76.9 million loss was included in other noncash (loss) gain, net in the Company’s Consolidated Income Statements for the thirteen and thirty-nine weeks ended October 30, 2016. In connection with the closing of the transaction in the fourth quarter of 2016, the loss was remeasured in order to reduce the carrying value of the Mexico business to fair value as of November 30, 2016, resulting in an additional pre-tax noncash loss of $4.9 million recorded in the fourth quarter of 2016.

The assets and liabilities of the Mexico business classified as held for sale on the Company’s Consolidated Balance Sheet as of October 30, 2016 were principally included in the Calvin Klein North America segment and consisted of the following:



(In millions)
Assets held for sale:
Trade receivables	$	20.3
Other receivables	1.6
Inventories, net	22.4
Prepaid expenses	2.2
Other Current Assets	1.0
Property, Plant and Equipment, net	6.8
Goodwill	21.5
Other Intangibles, net	47.4
Other Noncurrent Assets	2.8
Allowance for reduction of assets held for sale	(76.9		)
Total assets held for sale	$	49.1

Liabilities related to assets held for sale:
Accounts payable	$	4.0
Accrued expenses	7.2
Other Noncurrent Liabilities	14.8
Total liabilities related to assets held for sale	$	26.0

Sale of Building in Amsterdam

During 2015, one of the Company’s European subsidiaries entered into an agreement to sell a building in Amsterdam, the Netherlands. The Company classified the building as held for sale in the fourth quarter of 2015 and ceased recording depreciation on the building at that time.

The Company completed the sale of the building in the second quarter of 2016 for proceeds of €15.0 million (approximately $16.7 million based on the exchange rate in effect on that date) and recorded a gain of $1.5 million, which represented the excess of the proceeds, less costs to sell, over the carrying value on that date. The gain was recorded in SG&A expenses in the Company’s Consolidated Income Statement during the second quarter of 2016 and was included in the Calvin Klein International segment.