Business Segments and Geographic Information

6 Months Ended

Jul. 02, 2011

Business Segments and Geographic Information [Abstract]

Business Segments and Geographic Information

Note 6—Business Segments and Geographic Information

Business Segments: The Company operates in three business segments: (i) Sportswear Group; (ii) Intimate Apparel Group; and (iii) Swimwear Group, which groupings reflect the manner in which the Company’s business is managed and the manner in which the Company’s Chief Executive Officer, who is the chief operating decision maker (“CODM”), reviews the Company’s business.

Effective January 2, 2011, in conjunction with an evaluation of the Company’s overall group reporting and to reflect the manner in which the CODM currently evaluates the business, the Company revised its methodology for allocating certain corporate expenses (incurred in the U.S.) to the operating units in each of its business groups. The change in methodology resulted in an increase in the portion of corporate overhead allocated to the business groups for management reporting purposes as well as a change in the manner in which the corporate overhead is allocated between the domestic and international business units. Accordingly, the operating income (loss) for each group and Corporate/Other for the Three and Six Months Ended July 3, 2010 has been revised to conform to the current period presentation. The revision of the operating income (loss) for each group and Corporate/Other did not have any effect on the Company’s Consolidated Condensed Balance Sheets, Consolidated Condensed Statements of Operations or Consolidated Condensed Statements Cash Flows for any period presented in this Form 10-Q.

The Sportswear Group designs, sources and markets moderate to premium priced men’s and women’s sportswear under the Calvin Klein and Chaps^® brands. As of July 2, 2011, the Sportswear Group operated 513 Calvin Klein retail stores worldwide (consisting of 112 full-price free-standing stores, 54 outlet free-standing stores, 346 shop-in-shop/concession stores and, in the U.S., one on-line store). As of July 2, 2011, there were also 382 retail stores operated by third parties under retail licenses or distributor agreements.

The Intimate Apparel Group designs, sources and markets moderate to premium priced intimate apparel and other products for women and better to premium priced men’s underwear, sleepwear and loungewear under the Calvin Klein , Warner’s^®, Olga^® and Body Nancy Ganz/Bodyslimmers^® brand names. As of July 2, 2011, the Intimate Apparel Group operated 984 Calvin Klein retail stores worldwide (consisting of 89 full-price free-standing stores, 65 outlet free-standing stores and 829 shop-in-shop/concession stores and, in the U.S., one on-line store). As of July 2, 2011, there were also 204 Calvin Klein retail stores operated by third parties under retail licenses or distributor agreements.

The Swimwear Group designs, licenses, sources and markets mass market to premium priced swimwear, fitness apparel, swim accessories and related products under the Speedo^®, Lifeguard^® and Calvin Klein brand names. The Swimwear Group operates one on-line store in the U.S.

Information by business group is set forth below:

			Intimate
	Sportswear		Apparel		Swimwear		Group		Corporate /
	Group		Group		Group		Total		Other			Total
Three Months Ended July 2, 2011
Net revenues	$	286,289	$	226,443	$	78,655	$	591,387	$	—		$	591,387
Operating income (loss) (c) (d)		15,957		34,470		10,705		61,132		(8,533	)		52,599
Depreciation and amortization		9,583		4,899		683		15,165		315			15,480
Restructuring expense		1,974		1,480		1,187		4,641		313			4,954
Capital expenditures		6,782		1,353		89		8,224		547			8,771
Three Months Ended July 3, 2010
Net revenues	$	244,044	$	199,116	$	76,174	$	519,334	$	—		$	519,334
Operating income (loss) (a)		23,279		33,668		8,954		65,901		(10,583	)		55,318
Depreciation and amortization		6,962		4,004		569		11,535		716			12,251
Restructuring expense		549		160		445		1,154		—			1,154
Capital expenditures		6,147		2,320		76		8,543		1,063			9,606
Six Months Ended July 2, 2011
Net revenues	$	625,760	$	447,437	$	180,351	$	1,253,548	$	—		$	1,253,548
Operating income (loss) (c) (d)		54,557		65,007		24,773		144,337		(22,084	)		122,253
Depreciation and amortization		18,663		9,338		1,300		29,301		626			29,927
Restructuring expense		3,624		2,922		4,264		10,810		633			11,443
Capital expenditures		11,673		7,484		145		19,302		851			20,153
Six Months Ended July 3, 2010
Net revenues	$	550,390	$	393,058	$	164,050	$	1,107,498	$	—		$	1,107,498
Operating income (loss) (b)		72,525		66,424		20,915		159,864		(25,048	)		134,816
Depreciation and amortization		14,215		7,365		1,081		22,661		1,544			24,205
Restructuring expense		442		113		714		1,269		844			2,113
Capital expenditures		13,786		6,391		459		20,636		1,368			22,004
Balance Sheet
Total Assets:
July 2, 2011	$	984,604	$	519,956	$	153,689	$	1,658,249	$	206,039		$	1,864,288
January 1, 2011		995,475		381,371		154,831		1,531,677		121,595			1,653,272
July 3, 2010		888,449		365,800		137,915		1,392,164		123,887			1,516,051
Property, Plant and Equipment:
July 2, 2011	$	65,281	$	32,153	$	2,540	$	99,974	$	30,592		$	130,566
January 1, 2011		63,555		28,522		3,023		95,100		34,152			129,252
July 3, 2010		41,106		38,457		3,490		83,053		36,899			119,952

(a)	reflects the allocation of $2,473 of corporate expenses to the Sportswear Group ($1,708), the Intimate Apparel Group ($895) and the Swimwear Group (($130)), respectively, during the Three Months Ended July 3, 2010 to conform to the presentation for the Three Months Ended July 2, 2011.
(b)	reflects the allocation of $4,955 of corporate expenses to the Sportswear Group ($3,404), the Intimate Apparel Group ($1,757) and the Swimwear Group (($206)), respectively, during the Six Months Ended July 3, 2010 to conform to the presentation for the Six Months Ended July 2, 2011.
(c)	includes a gain of $2,000 in the Intimate Apparel Group related to the sale and assignment of the Company’s Nancy Ganz® trademarks in Australia and New Zealand to the Company’s former licensee for cash consideration of $2,000.
(d)	includes a gain of $1,630 related to recovery of an insurance claim for a fire in a warehouse in Peru, attributable partly to the Sportswear Group and partly to the Intimate Apparel Group.

All inter-company revenues and expenses are eliminated in consolidation. Management does not include inter-company sales when evaluating segment performance. Each segment’s performance is evaluated based upon operating income after restructuring charges and allocations of corporate expenses but before corporate/other expenses.

The table below summarizes Corporate/Other expenses for each period presented:

	Three Months Ended						Six Months Ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
Unallocated corporate expenses (a)	$	7,891		$	11,713		$	20,065		$	25,599
Foreign exchange losses (gains)		383			(1,786	)		1,498			(2,819	)
Pension income		(369	)		(60	)		(738	)		(120	)
Restructuring expense		313			—			633			844
Depreciation and amortization of corporate assets		315			716			626			1,544
Corporate/other expenses	$	8,533		$	10,583		$	22,084		$	25,048

(a) the decrease in unallocated corporate expenses is related primarily to a reduction in amounts accrued for performance-based employee cash compensation and other employee compensation and benefits.

A reconciliation of operating income from operating groups to income from continuing operations before provision for income taxes is as follows:

	Three Months Ended						Six Months Ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
Operating income by operating groups	$	61,132		$	65,901		$	144,337		$	159,864
Corporate/other expenses		(8,533	)		(10,583	)		(22,084	)		(25,048	)
Operating income		52,599			55,318			122,253			134,816
Other (income) loss		(215	)		5,730			(859	)		7,550
Interest expense		3,460			4,259			6,156			9,237
Interest income		(810	)		(487	)		(1,556	)		(1,493	)
Income from continuing operations before provision for income taxes	$	50,164		$	45,816		$	118,512		$	119,522

Geographic Information: Net revenues summarized by geographic region are as follows:

	Three Months Ended
	July 2, 2011		%			July 3, 2010		%
Net revenues:
United States	$	250,645		42.4	%	$	261,964		50.4	%
Europe		128,093		21.7	%		99,831		19.2	%
Asia		113,785		19.2	%		83,492		16.1	%
Mexico, Central and South America		62,132		10.5	%		44,181		8.5	%
Canada		36,732		6.2	%		29,866		5.8	%
	$	591,387		100.0	%	$	519,334		100.0	%

	Six Months Ended
	July 2, 2011		%			July 3, 2010		%
Net revenues:
United States	$	535,788		42.7	%	$	532,714		48.1	%
Europe		296,562		23.8	%		257,133		23.3	%
Asia		240,561		19.2	%		180,565		16.3	%
Mexico, Central and South America		113,850		9.1	%		81,724		7.4	%
Canada		66,787		5.2	%		55,362		5.0	%
	$	1,253,548		100.0	%	$	1,107,498		100.0	%