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FAIR VALUE MEASUREMENTS | 3 Months Ended
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May 03, 2020
Notes to Financial Statements [Abstract] |
FAIR VALUE MEASUREMENTS | 12. 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:
| 5/3/20 |  |  |  |  |  |  |  | 2/2/20 |  |  |  |  |  |  |  | 5/5/19 |  |  |  |  |  |
(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 |  | $ | 42.4 |  |  | N/A |  | $ | 42.4 |  |  | N/A |  | $ | 23.3 |  |  | N/A |  | $ | 23.3 |  |  | N/A |  | $ | 37.8 |  |  | N/A |  | $ | 37.8 |
Interest rate swap agreements | N/A |  | — |  |  | N/A |  | — |  |  | N/A |  | 0.1 |  |  | N/A |  | 0.1 |  |  | N/A |  | 0.9 |  |  | N/A |  | 0.9 |
Total Assets | N/A |  | $ | 42.4 |  |  | N/A |  | $ | 42.4 |  |  | N/A |  | $ | 23.4 |  |  | N/A |  | $ | 23.4 |  |  | N/A |  | $ | 38.7 |  |  | N/A |  | $ | 38.7 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward exchange contracts | N/A |  | $ | 2.7 |  |  | N/A |  | $ | 2.7 |  |  | N/A |  | $ | 2.2 |  |  | N/A |  | $ | 2.2 |  |  | N/A |  | $ | 2.2 |  |  | N/A |  | $ | 2.2 |
Interest rate swap agreements | N/A |  | 13.5 |  |  | N/A |  | 13.5 |  |  | N/A |  | 5.9 |  |  | N/A |  | 5.9 |  |  | N/A |  | 3.6 |  |  | N/A |  | 3.6 |
Total Liabilities | N/A |  | $ | 16.2 |  |  | N/A |  | $ | 16.2 |  |  | N/A |  | $ | 8.1 |  |  | N/A |  | $ | 8.1 |  |  | N/A |  | $ | 5.8 |  |  | N/A |  | $ | 5.8 |
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 Company’s non-financial assets, which primarily consist of goodwill, other intangible assets, property, plant and equipment, and operating lease right-of-use assets, are not required to be measured at fair value on a recurring basis, and instead are reported at their carrying amount. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying amount may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial assets are assessed for impairment. If the fair value is determined to be lower than the carrying amount, an impairment charge is recorded to write down the asset to its fair value. As a result of the significant adverse impacts of the COVID-19 pandemic on its business, the Company determined that sufficient indicators existed to trigger the performance of an interim impairment analysis for certain of the Company’s non-financial assets as of May 3, 2020. The following tables show the fair values of the Company’s non-financial assets that were required to be remeasured at fair value on a non-recurring basis during the thirteen weeks ended May 3, 2020 and May 5, 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
5/3/2020 |  | Level 1 |  | Level 2 |  | Level 3 |  |  |  |
Property, plant and equipment, net |  | N/A |  | N/A |  | $ | 1.1 |  |  | $ | 1.1 |  |  | $ | 16.0 |
Goodwill |  | N/A |  | N/A |  | 652.6 |  |  | 652.6 |  |  | 879.0 |
Tradenames |  | N/A |  | N/A |  | 48.7 |  |  | 48.7 |  |  | 47.2 |
Other intangible assets, net |  | N/A |  | N/A |  | — |  |  | — |  |  | 7.3 |
Investments in unconsolidated affiliates |  | N/A |  | N/A |  | — |  |  | — |  |  | 12.3 |
5/5/2019 |  |  |  |  |  |  |  |  |  |
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 |  | — |  |  | — |  |  | 6.7 |
Property, plant and equipment with a carrying amount of $17.1 million was written down to a fair value of $1.1 million during the thirteen weeks ended May 3, 2020, primarily as a result of the adverse impacts the COVID-19 pandemic has had, and is expected to continue to have, on the Company’s retail stores with lease terms expiring by the end of fiscal 2021 with no intention of renewal, including temporary store closures and reduced traffic and consumer spending trends. 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. Goodwill with a carrying amount of $1,531.6 million was written down to a fair value of $652.6 million during the thirteen weeks ended May 3, 2020. Please see Note 7, “Goodwill and Other Intangible Assets,” for further discussion. Tradenames with a carrying amount of $95.9 million were written down to a fair value of $48.7 million during the thirteen weeks ended May 3, 2020. Please see Note 7, “Goodwill and Other Intangible Assets,” for further discussion. Other intangible assets with a carrying amount of $7.3 million were written down to a fair value of zero during the thirteen weeks ended May 3, 2020. Please see Note 7, “Goodwill and Other Intangible Assets,” for further discussion. The Company’s equity method investment in Karl Lagerfeld with a carrying amount of $12.3 million was written down to a fair value of zero during the thirteen weeks ended May 3, 2020. Please see Note 6, “Investments in Unconsolidated Affiliates,” for further discussion. The $961.8 million of impairment charges during the thirteen weeks ended May 3, 2020 were recorded in the Company’s Consolidated Statement of Operations, of which $933.5 million was included in goodwill and other intangible assets impairments, $16.0 million was included in SG&A expenses, and $12.3 million was included in equity in net (loss) income of unconsolidated affiliates. The $961.8 million of impairment charges was recorded to the Company’s segments as follows: $395.8 million in the Calvin Klein International segment, $293.1 million in the Calvin Klein North America segment, $249.6 million in the Heritage Brands Wholesale segment, $4.1 million in the Tommy Hilfiger North America segment, $3.8 million in the Heritage Brands Retail segment, $3.1 million in the Tommy Hilfiger International segment and $12.3 million was recorded in corporate expenses not allocated to any reportable segments. 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 thirteen weeks ended May 5, 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 (the “Calvin Klein restructuring”). 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 $6.7 million was written down to a fair value of zero during the thirteen weeks ended May 5, 2019 primarily in connection with the TH U.S. store closures and the closure of the Company’s CALVIN KLEIN 205 W39 NYC brand in connection with the Calvin Klein restructuring. 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 $83.7 million of impairment charges during the thirteen weeks ended May 5, 2019 were included in SG&A expenses, of which $48.6 million was recorded in the Tommy Hilfiger North America segment, $32.2 million was recorded in the Calvin Klein North America segment and $2.9 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:
| 5/3/20 |  |  |  | 2/2/20 |  |  |  | 5/5/19 |  |
(In millions) | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Cash and cash equivalents | $ | 800.7 |  |  | $ | 800.7 |  |  | $ | 503.4 |  |  | $ | 503.4 |  |  | $ | 494.3 |  |  | $ | 494.3 |
Short-term borrowings | 322.1 |  |  | 322.1 |  |  | 49.6 |  |  | 49.6 |  |  | 299.7 |  |  | 299.7 |
Long-term debt (including portion classified as current) | 2,867.8 |  |  | 2,759.6 |  |  | 2,707.7 |  |  | 2,869.7 |  |  | 2,790.4 |  |  | 2,907.7 |
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 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.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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