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Defined Benefit Plans | 12 Months Ended
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Feb. 03, 2018
Defined Benefit Plan [Abstract] |
Defined Benefit Plans | Defined Benefit Plans The Company maintains defined benefit plans for certain employees primarily in the U.S. and Switzerland. In accordance with authoritative guidance for defined benefit pension and other postretirement plans, an asset for a plan’s overfunded status or a liability for a plan’s underfunded status is recognized in the consolidated balance sheets; plan assets and obligations that determine the plan’s funded status are measured as of the end of the Company’s fiscal year; and changes in the funded status of defined benefit postretirement plans are recognized in the year in which they occur. Such changes are reported in other comprehensive income (loss) as a separate component of stockholders’ equity. The Company’s pension obligations and related costs are calculated using actuarial concepts, within the authoritative guidance framework, and are considered Level 3 inputs as defined in Note 20. The Company uses the corridor approach to amortize unrecognized actuarial gains or losses over the average remaining service life of active participants. The life expectancy, estimated retirement age, discount rate, estimated future compensation and expected return on plan assets are important elements of expense and/or liability measurement. These critical assumptions are evaluated annually which enables expected future payments for benefits to be stated at present value on the measurement date. If actual results are not consistent with actuarial assumptions, the amounts recognized for the defined benefit plans could change significantly. Supplemental Executive Retirement Plan On August 23, 2005, the Board of Directors of the Company adopted a Supplemental Executive Retirement Plan (“SERP”) which became effective January 1, 2006. The SERP provides select employees who satisfy certain eligibility requirements with certain benefits upon retirement, termination of employment, death, disability or a change in control of the Company, in certain prescribed circumstances. In fiscal 2016, the SERP was amended in connection with Paul Marciano’s transition from Chief Executive Officer to Executive Chairman of the Board and Chief Creative Officer. This amendment effectively eliminated any future salary progression by finalizing compensation levels for future benefits. Mr. Marciano will continue to be eligible to receive SERP benefits in the future in accordance with the amended terms of the SERP. Subsequent to this amendment, there are no employees considered actively participating under the terms of the SERP. As a result, the Company included an actuarial gain of $11.4 million before taxes in accumulated other comprehensive income (loss) during fiscal 2016. In addition, the Company also recognized a curtailment gain of $1.7 million before taxes related to the accelerated amortization of the remaining prior service credit during fiscal 2016. As a non-qualified pension plan, no dedicated funding of the SERP is required; however, the Company has made periodic payments into insurance policies held in a rabbi trust to fund the expected obligations arising under the non-qualified SERP. The amount of any future payments into the insurance policies, if any, may vary depending on investment performance of the trust. The cash surrender values of the insurance policies were $64.5 million and $58.6 million as of February 3, 2018 and January 28, 2017, respectively, and were included in other assets in the Company’s consolidated balance sheets. As a result of changes in the value of the insurance policy investments, the Company recorded unrealized gains (losses) of $7.7 million, $6.9 million and ($1.8) million in other income and expense during fiscal 2018, fiscal 2017 and fiscal 2016, respectively. The Company also recorded realized gains of $0.7 million in other income resulting from payout on the insurance policies during fiscal 2016. The Company assumed a discount rate of approximately 3.5% for both of the years ended February 3, 2018 and January 28, 2017, as part of the actuarial valuation performed to calculate the projected benefit obligation, based on the timing of cash flows expected to be made in the future to the participants, applied to high quality yield curves. In fiscal 2016, the Company amended the SERP to effectively eliminate any future salary progression by finalizing compensation levels for future benefits. Prior to the amendment, compensation levels utilized in calculating the projected benefit obligation were derived from expected future compensation as outlined in employment contracts in effect at the time. The Company also considers recent updates to the mortality tables and mortality improvement scale published by the Society of Actuaries in developing its best estimate of the expected mortality rates for its plan participants. As of February 3, 2018, accumulated other comprehensive income (loss) included actuarial losses of $0.2 million that are expected to be amortized and recognized as a component of net periodic defined benefit pension cost in fiscal 2019. Aggregate benefits projected to be paid in the next five fiscal years are approximately $1.7 million in fiscal 2019, $3.7 million in fiscal 2020, $3.9 million in fiscal 2021, $3.9 million in fiscal 2022 and $3.9 million in fiscal 2023. Aggregate benefits projected to be paid in the following five fiscal years amount to $18.5 million. Foreign Pension Plans In certain foreign jurisdictions, primarily in Switzerland, the Company is required to guarantee the returns on Company sponsored defined contribution plans in accordance with local regulations. These plans are typically government-mandated defined contribution plans that provide employees with a minimum investment return, and as such, are treated under pension accounting in accordance with authoritative guidance. The minimum investment return for our Swiss pension plan was 1.00% and 1.25% during calendar 2017 and calendar 2016, respectively. Under the Swiss pension plan, both the Company and certain of its employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary. The Company’s contributions must be made in an amount at least equal to the employee’s contribution. Minimum employee contributions are based on the respective employee’s age, salary and gender. During fiscal 2016, the Swiss pension plan was amended to update the conversion rate for future periods. As a result, the projected benefit obligation and prior service cost were reduced by $0.2 million during fiscal 2016. As of February 3, 2018 and January 28, 2017, actuarial assumptions used by the Company to calculate the projected benefit obligation and the fair value of the plans assets related to its Swiss pension plan included discount rates of 0.60% and 0.50%, respectively, and expected returns on plan assets of 1.40% for both periods. As of February 3, 2018, accumulated other comprehensive income (loss) included actuarial losses of $0.4 million that are expected to be amortized and recognized as a component of net periodic defined benefit pension cost in fiscal 2019. The components of net periodic defined benefit pension cost to accumulated comprehensive income (loss) for fiscal 2018, fiscal 2017 and fiscal 2016 related to the Company’s defined benefit plans are as follows (in thousands):
| Year Ended February 3, 2018
| SERP |  | Foreign Pension Plans |  | Total
Service cost | $ | — |  |  | $ | 2,500 |  |  | $ | 2,500 |
Interest cost | 1,844 |  |  | 147 |  |  | 1,991 |
Expected return on plan assets | — |  |  | (244 | ) |  | (244 | )
Net amortization of unrecognized prior service credit | — |  |  | (27 | ) |  | (27 | )
Net amortization of actuarial losses | 151 |  |  | 311 |  |  | 462 |
Net periodic defined benefit pension cost | $ | 1,995 |  |  | $ | 2,687 |  |  | $ | 4,682 |
Unrecognized prior service credit charged to comprehensive income (loss) | $ | — |  |  | $ | (27 | ) |  | $ | (27 | )
Unrecognized net actuarial loss charged to comprehensive income (loss) | 151 |  |  | 311 |  |  | 462 |
Net actuarial losses | (1,092 | ) |  | (1,156 | ) |  | (2,248 | )
Foreign currency and other adjustments | — |  |  | (269 | ) |  | (269 | )
Related tax impact | 360 |  |  | 75 |  |  | 435 |
Total periodic defined benefit pension cost and other charges to other comprehensive income (loss) | (581 | ) |  | (1,066 | ) |  | (1,647 | )
Cumulative adjustment reclassified to retained earnings from adoption of new accounting guidance (1) | (1,435 | ) |  | — |  |  | (1,435 | )
Total periodic defined benefit pension cost and other charges to accumulated other comprehensive income (loss) | $ | (2,016 | ) |  | $ | (1,066 | ) |  | $ | (3,082 | )
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(1) | During the fourth quarter of fiscal 2018, the Company early adopted authoritative guidance which addresses certain stranded income tax effects in accumulated other comprehensive income (loss) resulting from the Tax Reform enacted in December 2017. As a result, the Company recorded a cumulative adjustment to increase retained earnings by $1.4 million with a corresponding reduction to accumulated other comprehensive income (loss) related to the Company’s SERP.
| Year Ended January 28, 2017
| SERP |  | Foreign Pension Plans |  | Total
Service cost | $ | — |  |  | $ | 1,544 |  |  | $ | 1,544 |
Interest cost | 1,839 |  |  | 87 |  |  | 1,926 |
Expected return on plan assets | — |  |  | (185 | ) |  | (185 | )
Net amortization of unrecognized prior service credit | — |  |  | (28 | ) |  | (28 | )
Net amortization of actuarial losses | 155 |  |  | 186 |  |  | 341 |
Net periodic defined benefit pension cost | $ | 1,994 |  |  | $ | 1,604 |  |  | $ | 3,598 |
Unrecognized prior service credit charged to comprehensive income (loss) | $ | — |  |  | $ | (28 | ) |  | $ | (28 | )
Unrecognized net actuarial loss charged to comprehensive income (loss) | 155 |  |  | 186 |  |  | 341 |
Net actuarial gains (losses) | 63 |  |  | (1,248 | ) |  | (1,185 | )
Foreign currency and other adjustments | — |  |  | (72 | ) |  | (72 | )
Related tax impact | (84 | ) |  | 105 |  |  | 21 |
Total periodic defined benefit pension cost and other charges to other comprehensive income (loss) and accumulated other comprehensive income (loss) | $ | 134 |  |  | $ | (1,057 | ) |  | $ | (923 | )
| Year Ended January 30, 2016
| SERP |  | Foreign Pension Plans |  | Total
Service cost | $ | — |  |  | $ | 1,622 |  |  | $ | 1,622 |
Interest cost | 1,986 |  |  | 69 |  |  | 2,055 |
Expected return on plan assets | — |  |  | (142 | ) |  | (142 | )
Net amortization of unrecognized prior service credit | (97 | ) |  | — |  |  | (97 | )
Net amortization of actuarial losses | 740 |  |  | 184 |  |  | 924 |
Curtailment gain | (1,651 | ) |  | — |  |  | (1,651 | )
Net periodic defined benefit pension cost | $ | 978 |  |  | $ | 1,733 |  |  | $ | 2,711 |
Unrecognized prior service credit charged to comprehensive income (loss) | $ | (97 | ) |  | $ | — |  |  | $ | (97 | )
Unrecognized net actuarial loss charged to comprehensive income (loss) | 740 |  |  | 184 |  |  | 924 |
Curtailment gain | (1,651 | ) |  | — |  |  | (1,651 | )
Net actuarial gains (losses) | 8,707 |  |  | (341 | ) |  | 8,366 |
Plan amendment | — |  |  | 167 |  |  | 167 |
Foreign currency and other adjustments | — |  |  | 274 |  |  | 274 |
Related tax impact | (2,945 | ) |  | (27 | ) |  | (2,972 | )
Total periodic defined benefit pension cost and other charges to other comprehensive income (loss) and accumulated other comprehensive income (loss) | $ | 4,754 |  |  | $ | 257 |  |  | $ | 5,011 |
Included in accumulated other comprehensive income (loss), before tax, as of February 3, 2018 and January 28, 2017 are the following amounts that have not yet been recognized in net periodic defined benefit pension cost (in thousands):
| Feb 3, 2018 |  | Jan 28, 2017
| SERP |  | Foreign Pension Plans |  | Total |  | SERP |  | Foreign Pension Plans |  | Total
Unrecognized prior service credit | $ | — |  |  | $ | (113 | ) |  | $ | (113 | ) |  | $ | — |  |  | $ | (140 | ) |  | $ | (140 | )
Unrecognized net actuarial loss | 9,454 |  |  | 4,889 |  |  | 14,343 |  |  | 8,513 |  |  | 3,775 |  |  | 12,288 |
Total included in accumulated other comprehensive loss | $ | 9,454 |  |  | $ | 4,776 |  |  | $ | 14,230 |  |  | $ | 8,513 |  |  | $ | 3,635 |  |  | $ | 12,148 |
The following table summarizes the funded status of the Company’s defined benefit plans and the amounts recognized in the Company’s consolidated balance sheets (in thousands):
| February 3, 2018 |  | Jan 28, 2017
| SERP |  | Foreign Pension Plans |  | Total |  | SERP |  | Foreign Pension Plans |  | Total
Projected benefit obligation | $ | (54,760 | ) |  | $ | (26,409 | ) |  | $ | (81,169 | ) |  | $ | (53,521 | ) |  | $ | (19,986 | ) |  | $ | (73,507 | )
Plan assets at fair value (1) | — |  |  | 21,437 |  |  | 21,437 |  |  | — |  |  | 16,305 |  |  | 16,305 |
Net liability (2) | $ | (54,760 | ) |  | $ | (4,972 | ) |  | $ | (59,732 | ) |  | $ | (53,521 | ) |  | $ | (3,681 | ) |  | $ | (57,202 | )
________________________________________________________________________
(1) | The SERP is a non-qualified pension plan and hence the insurance policies are not considered to be plan assets. Accordingly, the table above does not include the insurance policies with cash surrender values of $64.5 million and $58.6 million as of February 3, 2018 and January 28, 2017, respectively.
(2) | The net liability was included in accrued expenses and other long-term liabilities in the Company’s consolidated balance sheets depending on the expected timing of payments.
A reconciliation of the changes in the projected benefit obligation for fiscal 2018 and fiscal 2017 is as follows (in thousands):
| Projected Benefit Obligation
| SERP |  | Foreign Pension Plans |  | Total
Balance at January 30, 2016 | $ | 53,443 |  |  | $ | 17,577 |  |  | $ | 71,020 |
Service cost | — |  |  | 1,544 |  |  | 1,544 |
Interest cost | 1,839 |  |  | 87 |  |  | 1,926 |
Actuarial (gains) losses | (63 | ) |  | 1,067 |  |  | 1,004 |
Contributions by plan participants | — |  |  | 1,805 |  |  | 1,805 |
Payments | (1,698 | ) |  | (2,416 | ) |  | (4,114 | )
Foreign currency and other adjustments | — |  |  | 322 |  |  | 322 |
Balance at January 28, 2017 | $ | 53,521 |  |  | $ | 19,986 |  |  | $ | 73,507 |
Service cost | — |  |  | 2,500 |  |  | 2,500 |
Interest cost | 1,844 |  |  | 147 |  |  | 1,991 |
Actuarial (gains) losses | 1,092 |  |  | 1,156 |  |  | 2,248 |
Contributions by plan participants | — |  |  | 2,315 |  |  | 2,315 |
Payments | (1,697 | ) |  | (1,373 | ) |  | (3,070 | )
Foreign currency and other adjustments | — |  |  | 1,678 |  |  | 1,678 |
Balance at February 3, 2018 | $ | 54,760 |  |  | $ | 26,409 |  |  | $ | 81,169 |
The SERP is a non-qualified pension plan and hence the insurance policies are not considered to be plan assets. Accordingly, the table below does not include the insurance policies with cash surrender values of $64.5 million and $58.6 million as of February 3, 2018 and January 28, 2017, respectively. A reconciliation of the changes in plan assets for the Foreign Pension Plans for fiscal 2018 and fiscal 2017 is as follows (in thousands):
| Plan Assets
Balance at January 30, 2016 | $ | 14,859 |
Actual return on plan assets | 4 |
Contributions by employer | 1,779 |
Contributions by plan participants | 1,805 |
Payments | (2,416 | )
Foreign currency and other adjustments | 274 |
Balance at January 28, 2017 | $ | 16,305 |
Actual return on plan assets | 244 |
Contributions by employer | 2,575 |
Contributions by plan participants | 2,315 |
Payments | (1,373 | )
Foreign currency and other adjustments | 1,371 |
Balance at February 3, 2018 | $ | 21,437 |

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