FAIR VALUE MEASUREMENTS

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 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.

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 are required to be remeasured at fair value on a recurring basis:



	11/3/13							2/3/13							10/28/12
	Level 1	Level 2		Level 3		Total		Level 1	Level 2		Level 3		Total		Level 1	Level 2		Level 3		Total
Assets:
Foreign currency forward exchange contracts	N/A	$	2,125	N/A		$	2,125	N/A	$	4,693	N/A		$	4,693	N/A	$	3,725	N/A		$	3,725
Interest rate contracts	N/A	2,314		N/A		2,314		N/A	N/A		N/A		N/A		N/A	N/A		N/A		N/A
Total Assets	N/A	$	4,439	N/A		$	4,439	N/A	$	4,693	N/A		$	4,693	N/A	$	3,725	N/A		$	3,725

Liabilities:
Foreign currency forward exchange contracts	N/A	$	9,245	N/A		$	9,245	N/A	$	13,460	N/A		$	13,460	N/A	$	2,687	N/A		$	2,687
Interest rate contracts	N/A	8,190		N/A		8,190		N/A	5,058		N/A		5,058		N/A	6,066		N/A		6,066
Contingent purchase price payments related to reacquisition of the perpetual rights to the Tommy Hilfiger trademarks in India	N/A	N/A		$	6,469	6,469		N/A	N/A		$	7,003	7,003		N/A	N/A		$	9,639	9,639
Total Liabilities	N/A	$	17,435	$	6,469	$	23,904	N/A	$	18,518	$	7,003	$	25,521	N/A	$	8,753	$	9,639	$	18,392

The fair value of the foreign currency forward exchange contracts 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 contracts are based on observable interest rate yield curves and represent the expected discounted cash flows underlying the financial instruments.

Pursuant to the agreement governing the reacquisition of the rights in India to the Tommy Hilfiger trademarks, the Company is required to make annual contingent purchase price payments based on a percentage of annual sales in excess of an agreed upon threshold of Tommy Hilfiger products in India for a period of five years (or, under certain circumstances, a period of six years) following the acquisition date. Such payments are subject to a $25,000 aggregate maximum and are due within 60 days following each one-year period. The first one-year period commenced on July 1, 2011. The Company made contingent annual purchase price payments of $429 and $185 during the third quarter of 2013 and 2012, respectively. The Company is required to remeasure this liability at fair value on a recurring basis and classifies this as a Level 3 measurement. The fair value of such contingent purchase price payments was determined using the discounted cash flow method, based on net sales projections for the Tommy Hilfiger apparel and accessories businesses in India, and was discounted using rates of return that account for the relative risks of the estimated future cash flows. Excluding the initial recognition of the liability for the contingent purchase price payments and payments made to reduce the liability, changes in the fair value are included within selling, general and administrative expenses.

The following table presents the change in the Level 3 contingent purchase price payment liability during the thirty-nine weeks ended November 3, 2013 and October 28, 2012:



	Thirty-Nine Weeks Ended
	11/3/13			10/28/12
Beginning Balance	$	7,003		$	9,559
Payments	(429		)	(185		)
Adjustments included in earnings	(105		)	265
Ending Balance	$	6,469		$	9,639

Additional information with respect to assumptions used to value the contingent purchase price payment liability as of November 3, 2013 is as follows:



Unobservable Inputs	Amount
Approximate compounded annual net sales growth rate	45.0	%
Approximate discount rate	20.0	%

A five percentage point increase or decrease in the discount rate would change the liability by approximately $1,000.

A five percentage point increase or decrease in the compounded annual net sales growth rate would change the liability by approximately $1,000.

There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.

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, plant and equipment and other long-lived assets) during the thirty-nine weeks ended November 3, 2013 and the thirty-nine weeks ended October 28, 2012, 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

Thirty-nine weeks ended 11/3/13	N/A	N/A	$	—	$	—	$	5,804
Thirty-nine weeks ended 10/28/12	N/A	N/A	$	—	$	—	$	259

Long-lived assets with a carrying amount of $4,643 were written down to a fair value of zero during the thirty-nine weeks ended November 3, 2013 in connection with the financial performance in certain of the Company’s retail stores. Fair value was determined based on the estimated discounted future cash flows associated with the assets using current sales trends and market participant assumptions. The impairment charge of $4,643 was included in selling, general and administrative expenses, of which $808 was recorded in the Calvin Klein North America segment, $220 was recorded in the Calvin Klein International segment, $3,121 was recorded in the Tommy Hilfiger North America segment and $494 was recorded in the Heritage Brands Retail segment.

Long-lived assets with a carrying amount of $1,161 were written down to a fair value of zero during the thirty-nine weeks ended November 3, 2013 in connection with the sale of substantially all of the assets of the Company’s Bass division. The impairment charge was included in selling, general and administrative expenses in the Heritage Brands Retail segment. Please see Note 4, “Assets Held for Sale,” for a further discussion.

Long-lived assets with a carrying amount of $259 were written down to a fair value of zero during the thirty-nine weeks ended October 28, 2012 in connection with the exit of a facility as part of the Company’s integration of Tommy Hilfiger. 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. The impairment charge was included in selling, general and administrative expenses in corporate expenses not allocated to any reportable segment.

In connection with the sale of substantially all of the assets of the Company’s Bass division, the Company guaranteed lease payments for principally all Bass retail stores under the current terms of noncancelable leases expiring on various dates through 2022. These guarantees include minimum rent payments and relate to leases that commenced prior to the sale of the Bass assets. In certain instances, the Company’s guarantee may remain in effect if an option is exercised to extend the term of the lease. The estimated fair value of these guarantee obligations as of November 3, 2013 is $4,373, which is included in accrued expenses and other liabilities in the Company’s Consolidated Balance Sheet. The Company classifies this as a Level 3 measurement. The fair value of such guarantee obligations was determined using the discounted cash flow method, based on the guaranteed lease payments, the estimated probability of lease extensions and estimates of the risk of default by the buyer of the Bass assets, and was discounted using rates of return that account for the relative risks of the estimated future cash flows. Please see Note 4, “Assets Held for Sale,” for a further discussion.

The carrying amounts and the fair values of the Company’s cash and cash equivalents, short-term borrowings and long-term debt as of November 3, 2013, February 3, 2013 and October 28, 2012 were as follows:



	11/3/13				2/3/13				10/28/12
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value

Cash and cash equivalents	$	542,533	$	542,533	$	892,209	$	892,209	$	276,630	$	276,630
Short-term borrowings	12,441		12,441		10,847		10,847		142,514		142,514
Long-term debt (including portion classified as current)	4,259,552		4,321,886		2,299,642		2,398,200		1,731,596		1,831,695

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. The Company classifies the measurement of its long-term debt as a Level 1 measurement.