FAIR VALUE MEASUREMENTS

6 Months Ended

Aug. 04, 2019

Notes to Financial Statements [Abstract]

FAIR VALUE MEASUREMENTS

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:

	8/4/19						2/3/19						8/5/18
(In millions)	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	$	40.5	N/A	$	40.5	N/A	$	24.8	N/A	$	24.8	N/A	$	27.5	N/A	$	27.5
Interest rate swap agreements	N/A	0.3		N/A	0.3		N/A	1.4		N/A	1.4		N/A	2.7		N/A	2.7
Total Assets	N/A	$	40.8	N/A	$	40.8	N/A	$	26.2	N/A	$	26.2	N/A	$	30.2	N/A	$	30.2
Liabilities:
Foreign currency forward exchange contracts	N/A	$	3.9	N/A	$	3.9	N/A	$	6.2	N/A	$	6.2	N/A	$	3.4	N/A	$	3.4
Interest rate swap agreements	N/A	7.0		N/A	7.0		N/A	2.8		N/A	2.8		N/A	0.1		N/A	0.1
Total Liabilities	N/A	$	10.9	N/A	$	10.9	N/A	$	9.0	N/A	$	9.0	N/A	$	3.5	N/A	$	3.5

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.

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 operating lease right-of-use assets and property, plant and equipment) during the twenty-six weeks ended August 4, 2019, 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
Operating lease right-of-use assets	N/A	N/A	$	16.8	$	16.8	$	77.0
Property, plant and equipment, net	N/A	N/A	—		—		10.8

Operating lease right-of-use assets with a carrying amount of $93.8 million were written down to a fair value of $16.8 million during the twenty-six weeks ended August 4, 2019 as a result of the closure during the first quarter of 2019 of the Company’s TOMMY HILFIGER flagship and anchor stores in the United States (the “TH U.S. store closures”) and the closure during the first quarter of 2019 of the Company’s CALVIN KLEIN flagship store on Madison Avenue in New York, New York in connection with the Calvin Klein restructuring (as defined in Note 17, “Exit Activity Costs”). Please see Note 17 for further discussion of the Calvin Klein restructuring costs. Fair value of the operating lease right-of-use assets was determined based on the discounted cash flows of estimated sublease income using market participant assumptions.

Property, plant and equipment with a carrying amount of $10.8 million was written down to a fair value of zero during the twenty-six weeks ended August 4, 2019 in connection with the TH U.S. store closures, the closure of the Company’s CALVIN KLEIN 205 W39 NYC brand (formerly Calvin Klein Collection), and the financial performance in certain of the Company’s retail stores, including certain CALVIN KLEIN stores affected by the realignment of the Calvin Klein creative direction globally. Please see Note 17, “Exit Activity Costs,” for further discussion of the Calvin Klein restructuring costs. Fair value of the Company’s property, plant and equipment was determined based on the estimated discounted future cash flows associated with the assets using sales trends and market participant assumptions.

The $87.8 million of impairment charges was included in SG&A expenses, of which $49.6 million was recorded in the Tommy Hilfiger North America segment, $32.6 million was recorded in the Calvin Klein North America segment and $5.6 million was recorded in the Calvin Klein 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:

	8/4/19				2/3/19				8/5/18
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	433.5	$	433.5	$	452.0	$	452.0	$	431.1	$	431.1
Short-term borrowings	183.2		183.2		12.8		12.8		85.4		85.4
Long-term debt (including portion classified as current)	2,784.2		2,949.6		2,819.4		2,853.7		2,893.5		2,955.4

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 quarter. 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.