FAIR VALUE MEASUREMENTS

In accordance with accounting principles generally accepted in the United States, fair value is defined 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. A three level hierarchy prioritizes the inputs used to measure fair value 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:



(In millions)	2017						2016
	Level 1	Level 2		Level 3	Total		Level 1	Level 2		Level 3		Total
Assets:
Foreign currency forward exchange contracts	N/A	$	1.5	N/A	$	1.5	N/A	$	25.9	N/A		$	25.9
Interest rate swap agreements	N/A	2.4		N/A	2.4		N/A	—		N/A		—
Foreign currency option contracts	N/A	N/A		N/A	N/A		N/A	3.2		N/A		3.2
Total Assets	N/A	$	3.9	N/A	$	3.9	N/A	$	29.1	N/A		$	29.1

Liabilities:
Foreign currency forward exchange contracts	N/A	$	67.4	N/A	$	67.4	N/A	$	2.6	N/A		$	2.6
Interest rate swap agreements	N/A	0.1		N/A	0.1		N/A	7.1		N/A		7.1
Contingent purchase price payments related to reacquisition of the perpetual rights to the TOMMY HILFIGER trademarks in India	N/A	N/A		N/A	N/A		N/A	N/A		$	1.6	1.6
Total Liabilities	N/A	$	67.5	N/A	$	67.5	N/A	$	9.7	$	1.6	$	11.3

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 value of the interest rate swap agreements is based on observable interest rate yield curves and represents the expected discounted cash flows underlying the financial instruments. The fair value of the foreign currency option contracts was estimated based on external valuation models, which used the original strike price, current foreign currency exchange rates, the implied volatility in foreign currency exchange rates and length of time to expiration as inputs.

Pursuant to the agreement governing the reacquisition of the rights in India to the TOMMY HILFIGER trademarks (which the Company entered into in September 2011 in connection with its acquisition of its 50% ownership in its joint venture for TOMMY HILFIGER in India), the Company was required to make annual contingent purchase price payments based on a percentage of sales of TOMMY HILFIGER products in India in excess of an agreed upon threshold during each of six consecutive 12-month periods, with the final payment made in the third quarter of 2017. The Company made annual contingent purchase price payments of $0.8 million, $0.6 million and $0.6 million during 2017, 2016 and 2015, respectively. The Company was required to remeasure this liability at fair value on a recurring basis and classified this as a Level 3 measurement. The fair value of such liability 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 were included within SG&A expenses in the Company’s Consolidated Income Statements.

The following table presents the change in the Level 3 contingent purchase price payment liability during 2017 and 2016:



(In millions)	2017			2016
Beginning Balance	$	1.6		$	2.2
Payments	(0.8		)	(0.6		)
Adjustments included in earnings	(0.8		)	—
Ending Balance	$	—		$	1.6

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 non-recurring basis (consisting of property, plant and equipment) during 2017, 2016 and 2015, and the total impairments recorded as a result of the remeasurement process:



(In millions)	Fair Value Measurement Using				Fair Value As Of Impairment Date		Total Impairments
	Level 1	Level 2	Level 3		Fair Value As Of Impairment Date		Total Impairments
2017	N/A	N/A	$	0.6	$	0.6	$	7.5
2016	N/A	N/A	0.4		0.4		10.1
2015	N/A	N/A	1.4		1.4		11.4

Long-lived assets with carrying amounts of $8.1 million, $10.5 million and $12.8 million were written down to fair values of $0.6 million, $0.4 million and $1.4 million during 2017, 2016 and 2015, respectively, 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 sales trends and market participant assumptions. The $7.5 million impairment charge recorded in 2017 was included in SG&A expenses, of which $1.8 million was recorded in the Calvin Klein North America segment, $3.4 million was recorded in the Calvin Klein International segment, $0.4 million was recorded in the Tommy Hilfiger North America segment and $1.9 million was recorded in the Tommy Hilfiger International segment. The $10.1 million impairment charge recorded in 2016 was included in SG&A expenses, of which $1.0 million was recorded in the Calvin Klein North America segment, $3.7 million was recorded in the Calvin Klein International segment, $1.4 million was recorded in the Tommy Hilfiger North America segment and $4.0 million was recorded in the Tommy Hilfiger International segment. The $11.4 million impairment charge recorded in 2015 was included in SG&A expenses, of which $2.0 million was recorded in the Calvin Klein North America segment, $3.1 million was recorded in the Calvin Klein International segment and $6.3 million was recorded in the Tommy Hilfiger International segment.

The carrying amounts and the fair values of the Company’s cash and cash equivalents, short-term borrowings and long-term debt were as follows:



(In millions)	2017				2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	493.9	$	493.9	$	730.1	$	730.1
Short-term borrowings	19.5		19.5		19.1		19.1
Long-term debt	3,061.3		3,140.9		3,197.3		3,248.7

The fair values of cash and cash equivalents and short-term borrowings approximate their carrying amounts 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 year. The Company classifies the measurement of its long-term debt as a Level 1 measurement. The carrying amounts of long-term debt reflect the unamortized portions of debt issuance costs and the original issue discounts.