ASSETS HELD FOR SALE

On November 30, 2016, the Company and Grupo Axo, S.A.P.I. de C.V. (“Grupo Axo”) formed a joint venture (“PVH Mexico”) that licenses from wholly owned subsidiaries of the Company the rights to distribute in Mexico certain Calvin Klein, Tommy Hilfiger, Warner’s, Olga and Speedo brand products. The transaction had received regulatory approval earlier in November 2016. The joint venture 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 the wholly owned subsidiary of Grupo Axo that distributes certain Tommy Hilfiger brand products in Mexico. In connection with the formation of PVH Mexico, in which the Company acquired a 49% economic interest, the Company deconsolidated the Mexico business (the “Mexico deconsolidation”) in the fourth quarter and will account for its 49% interest under the equity method of accounting.

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 to reduce the carrying value of the Mexico business (including foreign currency translation adjustment losses of $47.2 million recorded in accumulated other comprehensive loss (“AOCL”)) to its estimated fair value, less costs to sell, of $70.3 million. The fair value of the Mexico business 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 loss is 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. The loss will be remeasured in connection with the closing of the transaction in the fourth quarter and will be impacted by many factors subsequent to October 30, 2016, including, but not limited to, fluctuations in the Mexican peso exchange rate and changes to the Mexico business’s balance sheet, revenues and income.

The assets and liabilities of the Mexico business classified as held for sale in 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

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 building had a carrying value of $14.7 million as of January 31, 2016, which was determined to be lower than the fair value, less costs to sell, and was included in the Calvin Klein International segment.

The Company completed the sale of the building on July 4, 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 selling, general and administrative expenses in the Company’s Consolidated Income Statement during the second quarter of 2016 and was included in the Calvin Klein International segment.